§155-5.5  Loans guaranteed by thedepartment.  (a)  The department of agriculture may guarantee up to ninetyper cent of the principal balance of a loan, plus interest due thereon, made toa qualified farmer, qualified food manufacturer, or cooperative by a privatelender; provided that at no time shall the aggregate amount of the State'sliability, contingent or otherwise, on loans guaranteed under this section andsections 155-5, 155-6, and 155-6.5 exceed $10,000,000.

(b)  Loans guaranteed under this section shallbe limited by the provisions of sections 155-9 through 155-13 for purposes ofclasses "A", "B", "C", and "E";provided that class "E" loans to food manufacturers shall not besubject to section 155-10.  No class "D" and "F" loansshall be made under this section.

(c)  Loans made under this section shall not besubject to the restrictions in section 155-3.

(d)  Interest charged on a guaranteed loan madeunder this section shall not be more than two percentage points above the primerate charged by the lender.

(e)  When the application for a guaranteed loanhas been approved by the department, the department shall issue to the lender aguaranty for that percentage of the loan on which it guarantees payment ofprincipal and interest.  The lender shall collect all payments from theborrower and otherwise service the loan.

(f)  In return for the department's guaranty,the lender shall remit a one-time insurance fee of two per cent on theprincipal amount of the guaranteed portion of the loan, at the time the loan isbooked, except that for the following loans a reduced fee of one per cent shallbe paid:

(1)  Loans of $75,000 or less with a maturityexceeding twelve months;

(2)  All guaranteed loans with a maturity of twelvemonths or less.

This fee may be paid by the borrower as a cost forthe loan.

(g)  When any installment of principal andinterest has been due for sixty days and has not been paid by the borrower, thedepartment shall issue, on request of the lender, a check for the percentage ofthe overdue payment guaranteed, thereby acquiring a division of interest in thecollateral pledged by the borrower in proportion to the amount of the payment. The department shall be reimbursed for any amounts so paid plus interest at theapplicable rate, where payment is collected from the borrower.

(h)  Under conditions specified in departmentrules, the lender may request that a portion or all of the guaranteedpercentage of the principal balance of the loan be converted to a participatingshare held by the department subject to section 155-6.

(i)  Should the lender deem that foreclosureproceedings are necessary to collect moneys due from the borrower, it shall sonotify the department.  Within thirty days of the notification, the departmentmay elect to request an assignment of the loan on payment in full to the lenderof the principal balance and interest due.  Foreclosure proceedings shall beheld in abeyance in the interim.

(j)  The lender may reduce the percentage ofthe principal balance guaranteed under this section at any time. [L 1999, c148, §2; am L 2000, c 51, §6]