Can Our Association Do That? FCA Adopts New Rule for Farm Credit Subsidiaries

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The Farm Credit Administration has adopted a new final rule governing the ownership and use of unincorporated business entities (UBEs) by Farm Credit System institutions. It applies to investments by System institutions in limited partnerships, limited liability partnerships, limited liability companies and other unincorporated business entities allowed under state law.

Unusual and Complex Collateral -

Prior to the adoption of the new UBE Rule, member institutions looked to FCA Book Letter BL-057 for guidance in using state-chartered business entities for lending related purposes, such as holding title to real estate owned property. That Book Letter was limited to instances in which a member institution was foreclosing on real estate collateral and did not want to take title directly due to complex and unusual situations which may expose the institution to risks beyond those commonly associated with loans, or to administering the liquidation of collateral for syndicated loans involving multiple lending institutions.

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