July 2008

Farm Service Agency (FSA) farm loan borrowers who own real estate, apply for loan servicing and qualify to have their debt written down must sign a shared appreciation agreement (SAA).

The SAA allows the Government to recapture all or a portion of the amount written down if the real estate security increases in value during the term of the SAA. Recapture cannot exceed the amount of the write-down. Recapture is calculated as of the expiration date of the SAA, or sooner if one of the following occurs:

Recapture due under the SAA is 75 percent of the appreciation when one of the above events occurs within 4 years of receiving the write-down, and 50 percent of the appreciation after 4 years. If the amount of write-down is less than the appreciation calculated, the amount due is the write-down amount.

Appreciation of the property's value is determined by appraisal, with deductions for certain capital improvements made during the term of the agreement. The borrower may appeal the Agency appraisal by obtaining a technical appraisal review of the Agency's appraisal. The issue of the appeal will be the compliance of the Agency appraisal with the Uniform Standards of Professional Appraisal Practice. Once appreciation has been calculated, the borrower is required to pay the amount of recapture due.

In some instances, borrowers will be unable to pay the recapture amount or obtain financing to do so. In such cases, provided that the borrower can show a positive cash flow and meet other regulatory requirements, the recapture amount can be repaid over a period of up to 25 years at a special low interest rate.

For more information about FSA and its programs, visit your local FSA office or online at: http://www.fsa.usda.gov.

The U.S. Department of Agriculture (USDA) prohibits discrimination in all its programs and activities on the basis of race, color, national origin, age, disability, and where applicable, sex, marital status, familial status, parental status, religion, sexual orientation, genetic information, political beliefs, reprisal, or because all or part of an individual's income is derived from any public assistance program. (Not all prohibited bases apply to all programs.) Persons with disabilities who require alternative means for communication of program information (Braille, large print, audiotape, etc.) should contact USDA's TARGET Center at (202) 720-2600 (voice and TDD). To file a complaint of Discrimination, write to USDA, Director, Office of Civil Rights, 1400 Independence Avenue, SW., Washington, DC 20250-9410, or call (800) 795-3272 (voice) or (202) 720-6382 (TDD). USDA is an equal opportunity provider and employer.