FCA Legal Opinion Summary

Legal Opinion Summary
Topic:	Territorial Concurrence: Must an association obtain territorial concurrence when a new borrower located outside the association’s chartered territory assumes an existing loan to a borrower inside the association's territory?
ID Number:	00-04
Issue Date:	06/07/2000

An association asked about the applicability of territorial concurrence restrictions under 12 C.F.R. § 614.4070 in the context of loan assumptions. OGC concluded that territorial concurrence is not required when a loan is assumed by a person outside the association's chartered territory.

Section 614.4070(b) provides, in relevant part, that an association “may lend to a borrower headquartered outside its territory to finance eligible borrower operations that are conducted partially within its territory and partially outside its territory only if the concurrence of Farm Credit institutions providing similar credit for the territories in which the operations are conducted is obtained.” Similarly, § 614.4070(c) provides that an association “may finance eligible borrower operations conducted wholly outside its chartered territory, provided . . . the lending institution shall obtain concurrence of all Farm Credit institutions providing similar credit in the territory(ies) in which the operation being financed is conducted.”

OGC concluded that these provisions can be fairly read to refer only to a new or refinanced extension of credit. These restrictions do not apply when a person assumes a loan, because the association has already extended the credit. Therefore, as long as the loan documents so permit, any person may assume a loan without regard to the territorial concurrence restrictions of § 614.4070. If an association wants to extend new credit to a person who assumes a loan, however, it must comply with the territorial concurrence restrictions of § 614.4070.

(June 7, 2000)