
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 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.
