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17.9 MINERAL LEASES [7 CFR 3555.255 (a)]
Servicers must obtain approval from the Agency before consenting to the lease of mineral rights.
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A servicer may consent to the lease of mineral rights and subordinate its lien to the lessee’s rights and interests in the mineral activity provided the subordination of the guaranteed loan to a mineral lease does not entitle the leaseholder to any proceeds from the sale of the security property and the following are met:
x The security property will remain suitable as a residence;
x The lender’s security interest will not be adversely affected; and
x Rural Development’s environmental requirements are met.
If the proposed activity is likely to decrease the value of the security property, the servicer may consent to the lease under the following conditions:
x The borrower must assign 100 percent of the income from the lease to the
servicer;
x Proceeds will be utilized as a principal reduction to the loan; and
x The total rent to be paid is at least equal to the estimated decrease in the market
value of the security property.
If the proposed activity is not likely to decrease the value of the security property, the servicer may consent to the lease if:
x The borrower agrees to use any compensation received from the lessee to repair
any damage to the site or dwelling; or
x Assign the proceeds to the servicer to reduce the principal balance.
The servicer remains responsible for documenting their approval and oversight of the above activity and borrower request.