§ 1942. Purposes of loans

(a) In general
A direct loan may be made under this subchapter only for—
(1) paying the costs incident to reorganizing a farm or ranch for more profitable operation;
(2) purchasing livestock, poultry, or farm or ranch equipment;
(3) purchasing feed, seed, fertilizer, insecticide, or farm or ranch supplies, or to meet other essential farm or ranch operating expenses, including cash rent;
(4) financing land or water development, use, or conservation;
(5) paying loan closing costs;
(6) assisting a farmer or rancher in changing the equipment, facilities, or methods of operation of a farm or ranch to comply with a standard promulgated under section 655 of title 29 or a standard adopted by a State under a plan approved under section 667 of title 29, if the Secretary determines that without assistance under this paragraph the farmer or rancher is likely to suffer substantial economic injury in complying with the standard;
(7) training a limited-resource borrower receiving a loan under section 1934 of this title in maintaining records of farming and ranching operations;
(8) training a borrower under section 2006a of this title;
(9) refinancing the indebtedness of a borrower, if the borrower—
(A) has refinanced a loan under this subchapter not more than 4 times previously; and
(B)
(i) is a direct loan borrower under this chapter at the time of the refinancing and has suffered a qualifying loss because of a natural disaster declared by the Secretary under this chapter or a major disaster or emergency designated by the President under the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5121 et seq.); or
(ii) is refinancing a debt obtained from a creditor other than the Secretary; or
(10) providing other farm, ranch, or home needs, including family subsistence.
(b) Guaranteed loans
A loan may be guaranteed under this subchapter only for—
(1) paying the costs incident to reorganizing a farm or ranch for more profitable operation;
(2) purchasing livestock, poultry, or farm or ranch equipment;
(3) purchasing feed, seed, fertilizer, insecticide, or farm or ranch supplies, or to meet other essential farm or ranch operating expenses, including cash rent;
(4) financing land or water development, use, or conservation;
(5) refinancing indebtedness;
(6) paying loan closing costs;
(7) assisting a farmer or rancher in changing the equipment, facilities, or methods of operation of a farm or ranch to comply with a standard promulgated under section 655 of title 29 or a standard adopted by a State under a plan approved under section 667 of title 29, if the Secretary determines that without assistance under this paragraph the farmer or rancher is likely to suffer substantial economic injury due to compliance with the standard;
(8) training a borrower under section 2006a of this title; or
(9) providing other farm, ranch, or home needs, including family subsistence.
(c) Hazard insurance requirement
(1) In general
After the Secretary makes the determination required by paragraph (2), the Secretary may not make a loan to a farmer or rancher under this subchapter unless the farmer or rancher has, or agrees to obtain, hazard insurance on the property to be acquired with the loan.
(2) Determination
Not later than 180 days after April 4, 1996, the Secretary shall determine the appropriate level of insurance to be required by paragraph (1).
(d) Private reserve
(1) In general
Notwithstanding any other provision of this chapter, the Secretary may reserve a portion of any loan made under this subchapter to be placed in an unsupervised bank account that may be used at the discretion of the borrower for the basic family needs of the borrower and the immediate family of the borrower.
(2) Limit on size of the reserve
The size of the reserve shall not exceed the least of—
(A) 10 percent of the loan;
(B) $5,000; or
(C) the amount needed to provide for the basic family needs of the borrower and the borrower’s immediate family for 3 calendar months.