7 C.F.R. § 765.153 – Application of payments.

(a) Regular payments. A regular payment is credited to a scheduled installment on program and non-program loans. Regular payments are applied to loans in the following order:
1. (1) Annual operating loan;
2. (2) Delinquent FLP installments, paying least secured loans first;
3. (3) Non-delinquent FLP installments due in the current production cycle in order of security priority, paying least secured loans first;
4. (4) Any future installments due.
(b) Extra payments. An extra payment is not credited to a scheduled installment and does not relieve the borrower's responsibility to make scheduled loan installments, but will reduce the borrower's FLP indebtedness. Extra payments are applied to FLP loans in order of lien priority except for refunds of unused loan funds, which shall be applied to the loan for which the funds were advanced.