PUBLIC LAW 104-127—APR. 4, 1996 110 STAT. 1085 SEC. 602. PURPOSES OF LOANS. (a) IN GENERAL.—Section 303 of the Consolidated Farm and Rural Development Act (7 U.S.C. 1923) is amended to read as follows: "SEC. 303. PURPOSES OF LOANS. "(a) ALLOWED PURPOSES. — "(1) DIRECT LOANS.— ^A farmer or rancher may use a direct loan made under this subtitle only for— "(A) acquiring or enlarging a farm or ranch; "(B) making capital improvements to a farm or ranch; "(C) paying loan closing costs related to acquiring, enlarging, or improving a farm or ranch; or "(D) paying for activities to promote soil and water conservation and protection described in section 304 on a farm or ranch. "(2) GUARANTEED LOANS. — ^A farmer or rancher may use a loan guaranteed under this subtitle only for— "(A) acquiring or enlarging a farm or ranch; "(B) making capital improvements to a farm or ranch; "(C) paying loan closing costs related to acquiring, enlarging, or improving a farm or ranch; "(D) paying for activities to promote soil and water conservation and protection described in section 304 on a farm or ranch; or " (E) refinancing indebtedness. "(b) PREFERENCES.—In making or guaranteeing a loan under this subtitle for purchase of a farm or ranch, the Secretary shall give preference to a person who— "(1) has a dependent family; "(2) to the extent practicable, is able to make an initial down payment on the farm or ranch; or "(3) is an owner of livestock or farm or ranch equipment that is necessary to successfully carry out farming or ranching operations. " (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 subtitle unless the farmer or rancher has, or agrees to obtain, hazard insurance on any real property to be acquired or improved with the loan. "(2) DETERMINATION.—Not later than 180 days after the date of enactment of this subsection, the Secretary shall determine the appropriate level of insurance to be required under paragraph (1).". (b) TRANSITIONAL PROVISION.— Section 303(c)(1) of the Consoli- 7 USC 1923 note, dated Farm and Rural Development Act shall not apply until the Secretary of Agriculture makes the determination required by section 303(c)(2) of the Act. SEC. 603. SOIL AND WATER CONSERVATION AND PROTECTION. Section 304 of the Consolidated Farm and Rural Development Act (7 U.S.C. 1924) is amended— (1) by striking subsections (b) and (c); (2) by striking "SEC. 304. (a)(1) Loans" and inserting the following:
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