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Legal Opinion Summary
Topic:Disclosure of Loan Documents: May Farm Credit System associations provide only unsigned photocopies of loan documents to borrowers?
ID Number:01-03
Issue Date:05/16/2001

A farm credit bank (FCB) asked if FCA regulations allowed Farm Credit System associations to provide unsigned photocopies of loan documents to borrower(s) at the time of loan execution. The FCB also asked if one obligor on a multiple borrower loan might be treated as the legal representative of all obligors on a note for disclosure purposes. OGC concluded that Section 4.13A of the Farm Credit Act (Act) and 12 C.F.R. 618.8325 require associations to provide signed copies of loan documents at loan closing to all obligors.

Section 4.13A of the Act (12 U.S.C. 2200) states that “qualified lenders shall provide their borrowers, at the time of execution of loans, copies of all documents signed by the borrower, and at any time thereafter, on a borrower’s request.” OGC concluded that the plain language of the Act and the remedial nature of this “borrowers’ rights” provision require that signed copies of loan documents be given to borrowers. FCA regulations implementing section 4.13A of the Act state that the “lender shall provide a copy of all loan documents to the borrower or the borrower’s legal representative at the execution of the loan.” 12 C.F.R. 618.8325. FCA’s regulations state that loan execution occurs when the parties have entered into an enforceable contract or agreement. See 12 C.F.R. 618.8325(a) (emphasis added). Thus, only after an enforceable contract has been entered into, i.e., after execution of the loan documents, can a lender provide the required documents to the borrower. At that point, the loan documents, necessarily, have been signed.

Regarding the second question, OGC determined that the terms ‘agent’ and ‘legal representative’ have specific legal meaning under general principles of law. Absent formal recognition by the obligors on a multiple borrower loan that one obligor is the legal representative for all obligors, the two terms may not be used interchangeably for purposes of the regulation. Therefore, signed copies of loan closing documents must be provided to all primary obligors or their legal representatives.

May 16, 2001