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Understanding the Assignment of Guaranteed Portion in Loan Agreements
Definition & meaning
The assignment of guaranteed portion refers to the process where a lender transfers their right to receive payments on a guaranteed loan to another party. This typically occurs in exchange for a payment equal to the guaranteed principal of the loan. The lender retains the unguaranteed portion of the loan and may receive a servicing fee from the new party, known as the assignee, to manage the loan and handle payment processing as per a written agreement. This assignment can be transferred or sold multiple times.
Table of content
Legal use & context
This term is commonly used in the context of agricultural loans, particularly those guaranteed by the Farm Service Agency (FSA). It is relevant in financial and administrative law, especially in transactions involving loans and guarantees. Users may encounter this term when dealing with loan agreements or when considering the sale or transfer of loan rights. Legal templates from US Legal Forms can assist individuals in drafting necessary documents related to these transactions.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
Example 1: A bank holds a guaranteed loan for a farmer. The bank decides to sell the guaranteed portion of the loan to an investor while retaining the unguaranteed portion. The investor pays the bank the guaranteed principal amount and receives the right to payments from the farmer.
Example 2: A lender assigns the guaranteed portion of a loan to another financial institution, which then collects payments from the borrower and pays a servicing fee to the original lender. (hypothetical example)
Comparison with related terms
Term
Definition
Key Differences
Guaranteed Loan
A loan backed by a government agency.
The loan is guaranteed, while the assignment refers to transferring the right to receive payments.
Loan Assignment
The transfer of the entire loan obligation to another party.
Assignment of guaranteed portion specifically refers to the guaranteed part of the loan.
Common misunderstandings
What to do if this term applies to you
If you are involved in a loan that may be assigned, review your loan agreement carefully. It may be beneficial to consult with a legal professional to understand your rights and obligations. Additionally, you can explore US Legal Forms for templates that can help you navigate the assignment process effectively.
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