|Legal Opinion Summary|
|Topic:||Participations: Is a Federal land credit association authorized to buy servicing rights and a participation interest in a pool of long-term agricultural loans from a non-Farm Credit System lender?|
A federal land credit association (FLCA) asked whether it was authorized to buy the servicing rights and a participation interest in a pool of long-term agricultural loans from a non-Farm Credit System (FCS) lender. The lender wants to sell its entire interest in these loans, and the FLCA on expects other FCS associations to purchase the remaining participation shares. OGC concluded that nothing in the Farm Credit Act (Act) or FCA regulations precludes the association from buying the participation interest.
Section 1.5(12)(C) of the Act (12 U.S.C. § 2013(12)(C)) allows FLCAs to participate with non-FCS lenders in loans the associations are authorized to make. This authority is carried forward in FCA’s regulations at 12 C.F.R. § 614.4030(b)(1). FCA regulations require a non-FCS lender to retain an interest in the loan or pool of loans only if the non-FCS lender will continue servicing the loan. The Act does not limit two or more FCS institutions from collectively buying participation interests in 100 percent of the pool of loans to eligible borrowers.
(July 30, 1999)