An original borrower is released from liability when a loan is assumed
What the document says“``(10) Transfer and assumption.--Upon the transfer of property for which a guaranteed loan under this subsection was made, and the assumption of the guaranteed loan by an approved eligible borrower, the original borrower of a guaranteed loan under this subsection shall be relieved of liability with respect to the loan.'';”
The section replaces paragraph (10) of section 502(h) of the Housing Act of 1949 so that when a property is transferred and an approved eligible borrower assumes the guaranteed loan, the original borrower is released from liability. It also adds a new paragraph letting the mortgagee charge the assuming borrower a reasonable and customary processing fee, with the Secretary setting a maximum that may be indexed for inflation.
What the document actually says“``(10) Transfer and assumption.--Upon the transfer of property for which a guaranteed loan under this subsection was made, and the assumption of the guaranteed loan by an approved eligible borrower, the original borrower of a guaranteed loan under this subsection shall be relieved of liability with respect to the loan.'';”
A home with a backed loan can pass to a new owner. If an approved buyer takes on the loan, the first borrower is off the hook.
To assume a loan is to take it over on the same terms. The lender may charge the new borrower a fee. The farm agency sets the top fee.
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