§155-5  Loans insured by the department. 
(a)  The department of agriculture may insure up to ninety per cent of the
principal balance of a loan, plus interest due thereon, made to a qualified
farmer, qualified new farmer, or qualified food manufacturer by a private
lender who is unable to otherwise lend the applicant sufficient funds at
reasonable rates; provided that at no time shall the aggregate amount of the
State's liability, contingent or otherwise, on loans insured under this section
and section 155-6 exceed $10,000,000.



(b)  Loans insured under this section shall be
limited by the provisions of sections 155-9 through 155-13 for purposes of
class "A" through class "F"; provided that class
"E" loans to food manufacturers shall not be subject to section
155-10.



(c)  Interest charged on an insured loan made
under the provisions of this section shall be determined by the department of
agriculture based on the market rate of interest charged by the private lender
for similar type of loan.



(d)  When the application for an insured loan
has been approved by the department, the department shall issue to the lender a
guaranty for that percentage of the loan on which it insures payment of
principal and interest.  The lender shall collect all payments from the
borrower and otherwise service the loan.



(e)  In return for the department's guaranty,
the lender shall remit a one-time insurance fee of two per cent on the
principal amount of the insured portion of the loan, at the time the loan is
booked, except for the following:



(1)  On loans of $75,000 or less with a maturity
exceeding twelve months, a reduced fee of one per cent; and



(2)  On all guaranteed loans with a maturity of twelve
months or less, a reduced fee of one per cent;



shall be paid.



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



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



(g)  Under conditions specified in regulations
of the department, the lender may request that a portion or all of the
guaranteed percentage of the principal balance of the loan be converted to a
participating share held by the department subject to section 155-6.



(h)  Should the lender deem that foreclosure
proceedings are necessary to collect moneys due from the borrower, it shall so
notify the department.  Within thirty days of the notification, the department
may elect to request an assignment of the loan on payment in full to the lender
of the principal balance and interest due.  Foreclosure proceedings shall be
held in abeyance in the interim.



(i)  The lender may reduce the percentage of
the principal balance insured under this section at any time. [L 1959, c 278,
pt of §1; am L Sp 1959 2d, c 1, §25; am L 1961, c 104, §1(c), (d), (e) and c
132, §2; Supp, §102-5; HRS §155-5; am L 1968, c 53, §3; am L 1976, c 234, §1;
am L 1979, c 222, §5; am L 1989, c 222, §1; am L 1995, c 79, §1; am L 2000, c
51, §5]