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

(b)  Loans insured under this section shall belimited by the provisions of sections 155-9 through 155-13 for purposes ofclass "A" through class "F"; provided that class"E" loans to food manufacturers shall not be subject to section155-10.

(c)  Interest charged on an insured loan madeunder the provisions of this section shall be determined by the department ofagriculture based on the market rate of interest charged by the private lenderfor similar type of loan.

(d)  When the application for an insured loanhas been approved by the department, the department shall issue to the lender aguaranty for that percentage of the loan on which it insures payment ofprincipal and interest.  The lender shall collect all payments from theborrower 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 theprincipal amount of the insured portion of the loan, at the time the loan isbooked, except for the following:

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

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

shall be paid.

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

(f)  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 the applicableinterest rate, where payment is collected from the borrower.

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

(h)  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.

(i)  The lender may reduce the percentage ofthe 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 c132, §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, c51, §5]