§ 1942. — Purposes of loans.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 7USC1942]
TITLE 7--AGRICULTURE
CHAPTER 50--AGRICULTURAL CREDIT
SUBCHAPTER II--OPERATING LOANS
Sec. 1942. Purposes of loans
(a) In general
A direct loan may be made under this subchapter only for--
(1) paying the costs incident to reorganizing a farm or ranch
for more profitable operation;
(2) purchasing livestock, poultry, or farm or ranch equipment;
(3) purchasing feed, seed, fertilizer, insecticide, or farm or
ranch supplies, or to meet other essential farm or ranch operating
expenses, including cash rent;
(4) financing land or water development, use, or conservation;
(5) paying loan closing costs;
(6) assisting a farmer or rancher in changing the equipment,
facilities, or methods of operation of a farm or ranch to comply
with a standard promulgated under section 655 of title 29 or a
standard adopted by a State under a plan approved under section 667
of title 29, if the Secretary determines that without assistance
under this paragraph the farmer or rancher is likely to suffer
substantial economic injury in complying with the standard;
(7) training a limited-resource borrower receiving a loan under
section 1934 of this title in maintaining records of farming and
ranching operations;
(8) training a borrower under section 2006a of this title;
(9) refinancing the indebtedness of a borrower, if the
borrower--
(A) has refinanced a loan under this subchapter not more
than 4 times previously; and
(B)(i) is a direct loan borrower under this chapter at the
time of the refinancing and has suffered a qualifying loss
because of a natural disaster declared by the Secretary under
this chapter or a major disaster or emergency designated by the
President under the Robert T. Stafford Disaster Relief and
Emergency Assistance Act (42 U.S.C. 5121 et seq.); or
(ii) is refinancing a debt obtained from a creditor other
than the Secretary; or
(10) providing other farm, ranch, or home needs, including
family subsistence.
(b) Guaranteed loans
A loan may be guaranteed under this subchapter only for--
(1) paying the costs incident to reorganizing a farm or ranch
for more profitable operation;
(2) purchasing livestock, poultry, or farm or ranch equipment;
(3) purchasing feed, seed, fertilizer, insecticide, or farm or
ranch supplies, or to meet other essential farm or ranch operating
expenses, including cash rent;
(4) financing land or water development, use, or conservation;
(5) refinancing indebtedness;
(6) paying loan closing costs;
(7) assisting a farmer or rancher in changing the equipment,
facilities, or methods of operation of a farm or ranch to comply
with a standard promulgated under section 655 of title 29 or a
standard adopted by a State under a plan approved under section 667
of title 29, if the Secretary determines that without assistance
under this paragraph the farmer or rancher is likely to suffer
substantial economic injury due to compliance with the standard;
(8) training a borrower under section 2006a of this title; or
(9) providing other farm, ranch, or home needs, including family
subsistence.
(c) Hazard insurance requirement
(1) In general
After the Secretary makes the determination required by
paragraph (2), the Secretary may not make a loan to a farmer or
rancher under this subchapter unless the farmer or rancher has, or
agrees to obtain, hazard insurance on the property to be acquired
with the loan.
(2) Determination
Not later than 180 days after April 4, 1996, the Secretary shall
determine the appropriate level of insurance to be required by
paragraph (1).
(d) Private reserve
(1) In general
Notwithstanding any other provision of this chapter, the
Secretary may reserve a portion of any loan made under this
subchapter to be placed in an unsupervised bank account that may be
used at the discretion of the borrower for the basic family needs of
the borrower and the immediate family of the borrower.
(2) Limit on size of the reserve
The size of the reserve shall not exceed the least of--
(A) 10 percent of the loan;
(B) $5,000; or
(C) the amount needed to provide for the basic family needs
of the borrower and the borrower's immediate family for 3
calendar months.
(Pub. L. 87-128, title III, Sec. 312, Aug. 8, 1961, 75 Stat. 310; Pub.
L. 87-703, title IV, Sec. 401(4), Sept. 27, 1962, 76 Stat. 632; Pub. L.
90-488, Sec. 8, Aug. 15, 1968, 82 Stat. 771; Pub. L. 92-419, title I,
Secs. 120(b), 121, Aug. 30, 1972, 86 Stat. 665; Pub. L. 95-113, title
XIV, Sec. 1448(b), Sept. 29, 1977, 91 Stat. 1012; Pub. L. 95-334, title
I, Sec. 115, Aug. 4, 1978, 92 Stat. 425; Pub. L. 96-438, Sec. 1(3), Oct.
13, 1980, 94 Stat. 1871; Pub. L. 99-198, title XIII, Secs. 1306, 1307,
Dec. 23, 1985, 99 Stat. 1521; Pub. L. 101-624, title XVIII,
Sec. 1818(b), Nov. 28, 1990, 104 Stat. 3830; Pub. L. 102-237, title V,
Sec. 501(b), Dec. 13, 1991, 105 Stat. 1866; Pub. L. 102-552, title V,
Sec. 516(f)(1)(A), (2), Oct. 28, 1992, 106 Stat. 4137, 4138; Pub. L.
104-127, title VI, Sec. 612(a), Apr. 4, 1996, 110 Stat. 1087.)
References in Text
For definition of ``this chapter'', referred to in subsecs.
(a)(9)(B)(i) and (d)(1), see note set out under section 1921 of this
title.
The Robert T. Stafford Disaster Relief and Emergency Assistance Act,
referred to in subsec. (a)(9)(B)(i), is Pub. L. 93-288, May 22, 1974, 88
Stat. 143, as amended, which is classified principally to chapter 68
(Sec. 5121 et seq.) of Title 42, The Public Health and Welfare. For
complete classification of this Act to the Code, see Short Title note
set out under section 5121 of Title 42 and Tables.
Amendments
1996--Pub. L. 104-127 amended section generally, substituting
present provisions for provisions outlining purposes of loans made under
this subchapter, authorizing loans to rural area residents to operate
small business enterprises, authorizing loans for pollution abatement
and control projects in rural areas and providing for limitations on
such loans, and authorizing creation, from loan funds, of nonsupervised
bank accounts to be used at discretion of borrower for necessary family
living expenses.
1992--Subsec. (a). Pub. L. 102-552, Sec. 516(f)(2), repealed
amendment by Pub. L. 102-237, Sec. 501(b). See 1991 Amendment note
below.
Pub. L. 102-552, Sec. 516(f)(1)(A), made technical correction to
directory language of Pub. L. 101-624, Sec. 1818(b). See 1990 Amendment
note below.
1991--Subsec. (a). Pub. L. 102-237, Sec. 501(b), which directed the
substitution of ``systems (for purposes of this subchapter, the term
`solar energy' means energy derived from sources (other than fossil
fuels) and technologies included in the Federal Nonnuclear Energy
Research and Development Act of 1974) (42 U.S.C. 5901 et seq.), (12)
training in maintaining records of farming and ranching operations for
limited resource borrowers receiving loans under section 1934 of this
title, and (13) borrower training under section 2006a of this title.''
for `` `systems.' and all that follows'', could not be executed because
``systems.'' does not appear in subsec. (a) was repealed by Pub. L. 102-
552, Sec. 516(f)(2). See Construction of 1991 Amendment note below.
1990--Subsec. (a). Pub. L. 101-624, Sec. 1818(b), as amended by Pub.
L. 102-552, Sec. 516(f)(1)(A), added cl. (13).
1985--Subsec. (a). Pub. L. 99-198, Sec. 1306, added cl. (12).
Subsec. (e). Pub. L. 99-198, Sec. 1307, added subsec. (e).
1980--Subsec. (a). Pub. L. 96-438 added cl. (11).
1978--Subsec. (a). Pub. L. 95-334, struck out ``individual'' after
``title, to''.
1977--Subsec. (a). Pub. L. 95-113 inserted parenthetical provision
extending the section to include farm equipment which utilizes solar
energy and inserted definition of ``solar energy''.
1972--Subsec. (a). Pub. L. 92-419, Secs. 120(b), 121(1), (2),
substituted ``section 1941(a) for ``section 1941'', designated existing
provisions as subsec. (a), and added cl. (10).
Subsecs. (b) to (d). Pub. L. 92-419, Sec. 121(3), added subsecs. (b)
to (d).
1968--Pub. L. 90-488 struck out from cl. (4) the concluding phrase,
``including recreational uses and facilities'', added cls. (5) and (6),
and redesignated former cls. (5) to (7) as (7) to (9), respectively.
1962--Pub. L. 87-703 authorized, in cl. (4), loans to be made for
recreational uses and facilities.
Effective Date of 1996 Amendment
Section 612(b) of Pub. L. 104-127 provided that: ``Section 312(c)(1)
of the Consolidated Farm and Rural Development Act [7 U.S.C. 1942(c)(1)]
shall not apply until the Secretary of Agriculture makes the
determination required by section 312(c)(2) of the Act.'' [The
Secretary's determination relating to hazard insurance under this
provision was contained in interim rules published Mar. 3, 1997, and
effective Mar. 24, 1997, see 62 F.R. 9351.]
Amendment by Pub. L. 104-127 effective 90 days after Apr. 4, 1996,
see section 663(b) of Pub. L. 104-127, set out as a note under section
1922 of this title.
Effective Date of 1992 Amendment
Section (f)(1)(B) of Pub. L. 102-552 provided that: ``The amendment
made by subparagraph (A) [amending this section] shall take effect as if
included in the Food, Agriculture, Conservation, and Trade Act of 1990
[Pub. L. 101-624] at the time such Act became law.''
Effective Date of 1977 Amendment
Amendment by Pub. L. 95-113 effective Oct. 1, 1977, see section 1901
of Pub. L. 95-113, set out as a note under section 1307 of this title.
Transfer of Functions
Powers, duties, and assets of agencies, offices, and other entities
within Department of Agriculture relating to rural development functions
transferred to Rural Development Administration by section 2302(b) of
Pub. L. 101-624.
Construction of 1991 Amendment
Section 516(f)(2) of Pub. L. 102-552 provided that: ``Subsection (b)
of section 501 of the Food, Agriculture, Conservation, and Trade Act
Amendments of 1991 (Public Law 102-237; 105 Stat. 1866) [amending this
section] is repealed. The Consolidated Farm and Rural Development Act (7
U.S.C. 1921 et seq.) shall be applied and administered as if such
subsection had never become law.''
Section Referred to in Other Sections
This section is referred to in sections 1991, 1992, 2008f of this
title.
