RD Instruction 1927-B
§ 1927.57(b) (Con.)
(7) Describing notes in mortgages. In most cases, only the note(s) for the new loan(s) needs to be described when a subsequent loan is made and a subsequent mortgage is taken unless the title insurance company or attorney providing the final title opinion determines it necessary to describe existing agency notes in the subsequent mortgage.
(8) Determining due date of final installments. The "Due Date of Final Installment" as shown in the mortgage, is determined by adding the number of years over which the loan is payable to the date of the promissory note: for example, if the note is dated March 30, 1987, and the final payment is due and payable 20 years from that date, the "Due Date of Final Installment" is March 30, 2007.
(9) Alteration of mortgage form. An agency mortgage form may be altered pursuant to a State Supplement having prior approval of the National Office, or in a special case, to comply with the terms of loan approval prescribed in accordance with program instructions. No other alterations in the printed mortgage forms will be made without prior approval of the National Office. Any changes made by deletion, substitution, or addition (excluding filling in blanks) will be initialed in the margin by all persons signing the mortgage.
(10) Special requirements imposed by program instructions. Some program instructions require that the mortgage forms be modified. In such cases, either OGC or the approval official will modify the agency mortgage form as specified. The closing agent will make sure that the modification has been made prior to execution of the mortgage.
(11) Mortgages on leasehold estates. When the agency’s security interest is a leasehold estate, unless State law or State Supplement otherwise provides, the Form RD 1927-1 (State) or Form RD 1927-7 (State), or Form RD 3550-14 will be modified as follows: (Revised 06-21-06, PN 399.)
(i) In the space provided on the mortgage for the description of the real property security, the leasehold estate and the land covered by the lease must be described. The following language must be used unless modified by a State Supplement:
RD Instruction 1927-B
§ 1927.57(b)(11)(i) (Con.)
"All of borrower's right, title, and interest in and to a leasehold estate for an original term of ___years, commencing on ________, 19 __, created and established by and between ____________as lessor and owner and ___________ as lessee, including any extensions and renewals thereof, a copy of which lease was recorded or filed in book ____, page ____, as instrument number ______, in the Office of the (e.g., County Clerk), for the aforesaid county and State and covering the following real property: ________."
(ii) Immediately preceding the covenant starting with the words "should default," the following covenant will be added:
"( ) Borrower covenants and agrees to pay when due all rents and any and all other charges required by said lease, to comply with all other requirements of said lease, and not to surrender or relinquish, without the Government's prior written consent, any of borrower's right, title, or interest in or to said leasehold estate or under said lease while this mortgage remains of record."
(12) Mortgages on land purchase contract. When the agency security interest is on a borrower's interest in a land purchase contract, OGC will provide language used to modify the Form RD 1927-1 (State) or Form RD 1927-7 (State), or Form RD 3550-14. (Revised 06-21-06, PN 399.)
(13) Legal description. The legal description on the mortgage should be taken directly from the title insurance commitment or the title abstract to insure accuracy of the legal description.
(c) Preparation of the promissory note. The closing agent will make sure that Form RD 1940-16, “Promissory Note,” for agency originated loans (or assumption agreement) is completed in accordance with the Forms Manual Insert (FMI) and executed. The approval official will determine who is to execute the promissory note, including cosigners, if necessary, in accordance with program instructions and provide the closing agent with the names of these individuals. If the applicant is a corporation, partnership, or trust, the approval official will provide the name(s) and title(s) of the individual(s) executing the promissory note on behalf of the entity. The closing agent will determine if any additional signatures are required on the promissory note or assumption agreement in order for the policy of title insurance or final title opinion to provide that the agency has the required lien priority subject only to exceptions approved by the agency.
(04-22-96) SPECIAL PN
RD Instruction 1927-B
(d) Preparation of protective instruments. The closing agent will properly prepare, complete, and approve releases and curative documents necessary for title clearance and closing, in recordable form and record them if required.
(1) Prior lienholder's agreement. If any liens (other than agency liens or tax liens to local governmental authorities) or security agreements (hereafter called "liens"), with priority over the agency's mortgage will remain against the real property securing the loan, the lienholders must execute, in recordable form, agreements containing all of the following provisions unless prior approval for different provisions has been obtained from the National Office:
(i) The prior lienholder shall agree not to declare the lien in default or accelerate the indebtedness secured by the prior lien for a specific period of time after notice to the agency. The agreement must:
(A) Provide that the specified period of time will not commence until the lienholder gives written notice of the borrower's default and the prior lienholder's intention to accelerate the indebtedness to the agency office servicing the loan,
(B) Include the address of the agency servicing office,
(C) Give the agency the option to cure any monetary default by paying the amount of the borrower's delinquent payments to the prior lienholder, or pay the obligation in full and have the lien assigned to the agency, and
(D) Provide that the prior lienholder will not declare the lien in default for any nonmonetary reason if the agency commences liquidation proceedings against the property and thereafter acquires the property.