[Federal Register: September 25, 2003 (Volume 68, Number 186)]
[Rules and Regulations]
[Page 55299-55304]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr25se03-1]
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Rules and Regulations
Federal Register
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[[Page 55299]]
DEPARTMENT OF AGRICULTURE
Rural Housing Service
Rural Business-Cooperative Service
Rural Utilities Service
Farm Service Agency
7 CFR Part 1951
RIN 0560-AG56
Prompt Disaster Set-Aside Consideration and Primary Loan
Servicing Facilitation
AGENCY: Farm Service Agency, USDA.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: Farm Service Agency (FSA) is amending its regulations for the
Disaster Set-Aside (DSA) program to provide a disaster set-aside more
quickly to those who can most benefit from the program. The changes
also will reduce the Government's risk associated with the delay in
debt collection by adding security requirements.
DATES: This rule is effective on October 27, 2003.
FOR FURTHER INFORMATION CONTACT: Michael Cumpton, Farm Loan Programs,
Loan Servicing and Property Management Division, United States
Department of Agriculture, Farm Service Agency, STOP 0523, 1400
Independence Avenue, SW., Washington, DC 20250-0523, telephone (202) 690-4014; electronic mail: mike_cumpton@wdc.usda.gov.
SUPPLEMENTARY INFORMATION:
Executive Order 12866
This rule has been determined to be not significant and has not
been reviewed by the Office of Management and Budget under Executive
Order 12866.
Regulatory Flexibility Act
In accordance with the Regulatory Flexibility Act, 5 U.S.C. 601,
the Agency has determined that there will not be a significant economic
impact on a substantial number of small entities. All Farm Service
Agency direct loan borrowers and all entities affected by this rule are
small businesses according to the North American Industry
Classification System, and the United States Small Business
Administration. There is no diversity in size of the entities affected
by this rule and the costs to comply with it are the same for all
entities. FSA stated its finding in the proposed rule at 67 FR 41869,
June 20, 2002, that the rule will not have a significant economic
impact on a substantial number of small entities, and received no
comments on this finding.
In the U.S. there are 86,000 FSA direct farm loan borrowers. In
this final rule FSA is streamlining the Disaster Set-Aside (DSA)
program, which postpones one delinquent loan installment to the end of
the loan term. This rule somewhat limits the DSA program by increasing
the security requirements, tightening the application timeframes and
authorizing the program only for borrowers whose financial stress was
caused by a designated natural disaster. While borrowers whose
financial stress had been caused by low commodity prices had at one
time been eligible for the DSA program, this authority applied only to
low commodity prices in 1999, with an application deadline of August
31, 2000. This rule removes the low commodity price assistance aspect
of the program. However, this authority previously expired on its own
terms on August 31, 2000.
While the effect of these rule changes is to make fewer individuals
eligible for the DSA program, the small entities affected by these
changes may be eligible to receive more extensive debt restructuring
known as Primary Loan Servicing (PLS), including reduced interest rates
and debt writedown, to alleviate financial stress from designated
natural disasters and/or low commodity prices. In FY 2002, 5,000 farm
borrowers received PLS, the Agency's statutorily mandated debt
restructuring tool. The DSA program, which is regulatory only, was used
for only 834 farms. With these changes, FSA estimates that 10 percent
of these farms may no longer receive DSA assistance. However, without
DSA assistance, the farms may then qualify for more wide ranging
assistance under the PLS Program. The Agency estimates that the costs
of applying for PLS may be greater than applying for DSA. However,
Agency employees routinely assist farmers applying for PLS assistance,
and the assistance that may be received will more than offset the
costs. The eligibility standards for the two programs are similar.
However, PLS assistance will more probably result in a farm becoming a
viable small business. Therefore, the costs of compliance from this
rule are deemed not significant. Accordingly, pursuant to section
605(b) of the Regulatory Flexibility Act, 5 U.S.C. 605(b), the Agency
certifies that this rule will not have a significant economic impact on
a substantial number of small entities.
Environmental Evaluation
The environmental impacts of this proposed rule have been
considered in accordance with the provisions of the National
Environmental Policy Act of 1969 (NEPA), 42 U.S.C. 4321 et seq., the
regulations of the Council of Environmental Quality (40 CFR Parts 1500-
1508), and the FSA regulations for compliance with NEPA, 7 CFR part
1940, subpart G. FSA completed an environmental evaluation and
concluded the rule requires no further environmental review. No
extraordinary circumstances or other unforeseeable factors exist which
would require preparation of an environmental assessment or
environmental impact statement. A copy of the environmental evaluation
is available for inspection and review upon request.
Executive Order 12988
This rule has been reviewed in accordance with Executive Order
12988, Civil Justice Reform. In accordance with this Executive Order:
(1) All State and local laws and regulations that are in conflict with
this rule will be preempted; (2) except as specifically stated in this
rule, no retroactive effect will be given to this rule; and (3)
administrative proceedings in accordance with 7 CFR part 11 must be
exhausted before seeking judicial review.
[[Page 55300]]
Executive Order 12372
For reasons contained in the notice related to 7 CFR part 3015,
subpart V (48 FR 29115, June 24, 1983), the programs within this rule
are excluded from the scope of E.O. 12372, which requires
intergovernmental consultation with State and local officials.
The Unfunded Mandates Reform Act of 1995
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA)
requires Federal agencies to assess the effects of their regulatory
actions on State, local, and tribal governments or the private sector
of $100 million or more in any 1 year. When such a statement is needed
for a rule, section 205 of the UMRA requires FSA to prepare a written
statement, including a cost and benefit assessment, for proposed and
final rules with ``Federal mandates'' that may result in such
expenditures for State, local, or tribal governments, in the aggregate,
or to the private sector. UMRA generally requires agencies to consider
alternatives and adopt the more cost effective or least burdensome
alternative that achieves the objectives of the rule.
This rule contains no Federal mandates, as defined under title II
of the UMRA, for State, local, and tribal governments or the private
sector. Thus, this rule is not subject to the requirements of sections
202 and 205 of UMRA.
Executive Order 13132
The policies contained in this rule do not have any substantial
direct effect on States, on the relationship between the national
government and the States, or on the distribution of power and
responsibilities among the various levels of government. Nor does this
rule impose substantial direct compliance costs on State and local
governments. Therefore, consultation with the States is not required.
Paperwork Reduction Act
Notice of this information collection package was published in a
Proposed rule (67 FR 41869, June 20, 2002) under the provisions of 44
U.S.C. chapter 35. The information collections required for this
regulation have been assigned OMB control number 0560-0164. The
Information Collections associated with this rule have been approved by
OMB until May 31, 2006.
Federal Assistance Programs
These changes affect the following FSA programs as listed in the
Catalog of Federal Domestic Assistance:
10.404--Emergency Loans
10.406--Farm Operating Loans
10.407--Farm Ownership Loans
Discussion of the Final Rule
In response to the proposed rule published June 20, 2002 (67 FR
41869-41872), a total of nine comments were received from FSA
employees, farm interest groups, and state government officials.
Comments and suggestions focused primarily on the timeframes for DSA
application submission and processing. However, most aspects of the
proposed rule did receive comments with some commentors disagreeing
with all changes. Instead they recommended changes that would expand
the program into multiple set-asides on each loan without requiring a
designated disaster. All comments were considered and will be
addressed. Many of the comments have been adopted. The Agency's
obligation to offer and consider eligibility for primary loan
servicing, required by statute (section 331D of the Consolidated Farm
and Rural Development Act (CONACT)) and 7 CFR part 1951, subpart S, as
the applicable method for resolving delinquent account servicing is
being considered in the final rule. The public comments are summarized
as follows:
Timeframe for Complete DSA Application and Processing of DSA
Since DSA is not required by statute, the Agency must ensure that
it does not hinder the statutory primary loan servicing requirements
which are codified in 7 CFR part 1951, subpart S. To ensure the future
viability of farming operations, save borrower equity and reduce
Government losses, FSA proposed to amend the requirements for DSA to
require that:
(1) DSA applications must be made prior to the borrower becoming
delinquent on the loans;
(2) DSA will not be authorized if the borrower has already
submitted an application for primary loan servicing; and
(3) Only primary loan servicing will be considered when a borrower
becomes 90 days past due.
All nine commentors indicated that the requirement for a DSA
application to be complete prior to the borrower becoming past due
allows inadequate time for disaster declarations and borrower
consideration of servicing options. One commentor stated that a
borrower's need for DSA could span two or more years and that primary
loan servicing is cumbersome and time consuming. This respondent did
not indicate what timeframe would be appropriate. The Agency notes
however, that this amount of time would well exceed all statutory
timeframes for the servicing of delinquent loans. Two commentors
indicated that the deadline to submit a DSA application should be
extended until the borrower is 90 days past due. This suggestion was
accepted and adopted in sections 1951.952 and 1951.954(a)(5) of the
final rule.
All commentors also felt that some flexibility should be allowed
for processing DSA applications after FSA provides delinquent borrowers
with initial notification of primary loan servicing and during the
processing of the Primary Loan Servicing (PLS) application. It was
stated that this would allow the borrower to choose between servicing
options and several comments were submitted on this section of the
rule. One commentor objected to the affirmative statement made in the
rule that the ``DSA will not be used to circumvent the servicing
available under subpart S of this part.'' Two comments also indicated
that borrowers should have some type of ``safety net'' beyond a strict
deadline, if FSA does not meet its time limit for processing a DSA
application. One commentor believed that a 120 day time limit should be
imposed with SED consideration required beyond that point. In
evaluating all the above comments, it must also be considered that PLS
is dictated by statute and FSA and the borrower must meet certain
timeframes. However, after consideration of these comments, we believe
that the extension of the DSA timeframes is warranted. Therefore, to
address the PLS processing timeframes and DSA application deadline
issues, the final rule provides that DSA consideration may continue
until a complete PLS application must be submitted. This will require
that DSA consideration and closing be completed prior to the borrower
becoming 165 days past due. (FSA notifies a borrower 15 days after the
borrower is 90 days past due of all PLS options, and the borrower then
has 60 days to submit a complete PLS application. 15 + 90 + 60 = 165).
In sections 1951.954(a)(5) and 1951.954(a)(6) of 7 CFR, timeframes for
both the borrower and the Agency have been lengthened accordingly
beyond those proposed to ensure that adequate time exists for
application submission, processing and completion.
Additional Security Requirements
Additional security requirements were proposed to ensure the
availability of collateral throughout the term of the loan if the
borrower is not current at the time of the DSA. This is consistent with
the requirements of 7 CFR 1951.910(b) and, since payments can be set
aside for
[[Page 55301]]
the full term of the loan (which could be up to 40 years on a real
estate loan or 15 years on a chattel loan), it is essential that the
Government take all measures possible to ensure the continued adequacy
and availability of security during the entire term of the loan.
Three commentors disagreed with the requirement for additional
security while five others supported the requirement. Two commentors
disagreed because they believed this would add psychological burden on
the borrowers in a time of natural disaster. This comment related
mainly to the proposed short timeframes which coincided with the
occurrence of a disaster. The final rule lengthens these timeframes to
allow the borrowers ample time to be considered for DSA without
interfering with statutory requirements regarding PLS. However, the
same commentors believed that the security requirement would adversely
affect other creditors and local communities by circumventing lien
priority considerations and payments to other creditors. The Agency
believes that the rule has no effect on lien priorities. State laws
will continue to govern perfected liens. Also, Agency regulations
requiring the release of normal income proceeds for essential family
living or farm operating expenses remain unchanged. Finally, commentors
felt that local Agency officials would abuse their discretion in the
determination of required security. In drafting this rule the Agency
included specific security requirements in section 1951.957(b)(4) which
lessen the possibility that local offices will abuse their discretion.
However, the rule allows enough flexibility in security requirements to
minimize disruptions to the farm operation while protecting the Agency
from an inordinate amount of financial risk.
Two of the supportive commentors advocated reducing the additional
security requirement to a maximum of 150 percent of the outstanding
loan amount (although one of the two thought the requirement for
additional security should include non-delinquent borrowers). Another
supporter wanted to use the 150 percent requirement but increase the
amount required to 150 percent of the total debt (including prior
liens) on the residence instead of just the FSA debt. After considering
these comments, the additional security requirements contained in
section 1951.957(b)(4) will not be revised. These requirements are the
same as the existing security requirements for delinquent borrowers
serviced under the primary loan servicing program contained in 7 CFR
1951.910(b). That regulation requires that delinquent borrowers provide
the best lien obtainable on all assets that the borrower owns but
adopts the exclusions contained in 7 CFR 1941.19(c). Generally items
excluded from the FLP security are real or chattel property which would
prevent the borrower from obtaining credit from other sources; could
subject the Agency to additional costs as creditor; or are used for
subsistence purposes. These security requirements and their exceptions
have been contained in FPL's regulations since 1992 and are well
understood by borrowers and FLP employees. Adopting these security
requirements in the 1951-T process will assure consistency in FPL's
loan servicing programs.
Submission of Historical Information
While two commentors supported the historical information
requirements and development of a farm business plan, three other
commentors disagreed with the requirement for submission of 5 years of
financial records, including records from the time period of the
disaster. Although clarified, these requirements were contained in the
previous regulation by 7 CFR 1951.953(c)(2) and 1951.954(a)(6). Section
1951.953(c)(2) of the proposed rule simply clarified these
requirements, which ensures that cash flow projections are supported by
adequate historical data. This policy is consistent with FSA's current
loan making (7 CFR 1910.4(b)(6)) and loan servicing regulations (7 CFR
1951.906, definition of a feasible plan) which generally require
production and expense records for the previous five years, if the
borrower has been farming during that time period.
Submission of Information as Required for Agency Consideration
Two commentors do not agree with the requirement that the borrower
provide ``any documentation required to support the cash flow
projection.'' However, this language is in section 1951.954(a)(6) of
the current regulation. It is essential for the development of an
accurate farm business plan, as the Agency has no way to foresee any
and all financial and production aspects of all operations that could
need assistance. This language simply allows FSA to obtain
documentation on aspects of an operation that are unique and cannot be
foreseen or codified in the regulation. In order to ensure the future
viability of the farming operation, save borrower equity, and reduce
government losses, eligibility requirements for DSA continue to require
borrowers to develop a cash flow projection. The authority to request
applicable documentation will, therefore, be retained.
Elimination of Legacy Language Regarding Low Commodity Prices and
Second DSA
The proposed rule stated that language referring to past authority
which allowed DSA due to low commodity prices and a second DSA for that
purpose would be removed. Two commentors believe that this authority
should be retained. One commentor supported the removal of the low
commodity price language but preferred that the use of the words
``natural disaster'' be changed to ``disaster'' to allow FSA discretion
on its use for economic disasters. FSA's current regulation at 7 CFR
1951.953 provides authorization for the DSA program for economic
disasters based on low commodity prices through 1999 only, and requires
that applications for that program be received by August 31, 2000.
Because this aspect of the DSA program has expired, FSA in implementing
the final rule will be deleting an expired authority. FSA believes that
adverse economic conditions are more appropriately serviced through the
statutorily mandated loan servicing program contained in 7 CFR part
1951, subpart S. That regulation, in section 1951.909(c)(1)(iv),
authorizes a sequenced loan servicing program, starting with the least
costly rescheduling/reamortization program through the most costly debt
writedown program which allows debt restructuring of the present value
of the loans to the net recovery value of the security and any non-
essential assets, when adverse economic factors, not limited to an
individual case, such as low market prices for agricultural commodities
as compared to production costs reduce repayment ability. If FSA
believes an additional regulatory program for economic disasters is
required in future years, it will reactivate the 1951-T authority
through the rulemaking process.
Limitation of Installments on Which DSA Can Be Used
The proposed rule stated that the amount that may be setaside would
be limited to the amount the borrower is unable to pay the Agency from
the production and marketing period in which the disaster occurred. It
further limited DSA to the first scheduled annual installment due
immediately after the disaster occurred. Three
[[Page 55302]]
commentors disagreed with this provision and stated that this would not
always allow a borrower to get a DSA if the disaster occurred late in
the year or the disaster declaration was delayed. Because the process
of declaring a disaster can be lengthy, FSA has modified the final rule
in section 1951.954(b)(3) to allow the set-aside of either the first or
second installment due after the disaster occurred.
Limitation of DSA to Borrowers Who Are Unable To Pay FSA Debt
The proposed rule stated that the amount set-aside would be limited
to the amount that the borrower is unable to pay the Agency. Payments
to other creditors were not considered. Three commentors disagreed with
this provision and stated that this could cause a borrower to wait
until the last minute to pay the FSA debt as the amount of other debt
could not be set aside. However, as noted above, provisions of 7 CFR
part 1962, subpart A, require the release of normal income security
proceeds for essential family living and farm operating expenses until
the account is accelerated. Lien priorities remain unchanged. Thus,
funds due FSA can be released to other creditors for these purposes.
Therefore, this limitation will be retained. It further insures that
the amount of debt that is set-aside is minimized, and the resulting
balloon payment and interest accrual to the borrowers account are also
minimized.
Elimination of Cost Recoverable Set-Aside
The proposed rule would eliminate the set-aside of cost recoverable
items. These costs, such as property taxes, are the borrower's
responsibility but may have been paid by the Government to protect its
lien position. Non-payment of such costs is a violation of loan
agreements, including the Promissory Note, and places the account in
nonmonetary default, requiring the account to be serviced in accordance
with 7 CFR 1951.907(d). Two commentors disagreed with this proposal and
stated that farm advocates are concerned that it can take over a year
for a non-monetary default to be ``removed from a borrower's record''
even after it is paid. Failure to comply with borrower training
requirements was stated as an example. However, the proposed rule deals
specifically with cost recoverables, and cost recoverables do not
include borrower training requirements. One commentor agreed with the
proposal and suggested it be made part of the eligibility requirements
instead of the limitations.
Based on the adverse affect on the Agency caused by a borrower's
failure to pay the recoverable cost item, and the Agency's continuing
need to service these items either by payment or costly servicing under
7 CFR 1951, subpart S, the final rule adopts the proposed rule.
Elimination of Language Regarding Interest Accrual
Two commentors indicated that the last sentence in section
1951.954(b)(5) as proposed duplicates the language already in sections
1951.957(b)(2) and 1951.957(b)(3). However, they preferred the due date
being expressed as ``with the final installment'' instead of the
current language ``on or before the final due date.'' The duplicative
language is removed. However, the Agency believes that all borrowers
with a DSA would be well served to pay the set-aside as soon as
possible to eliminate additional interest and reduce the final balloon
payment even if this occurs prior to the final installment coming due.
Therefore, the current language in section 1951.957(b)(3) is retained.
Eligibility Regarding Post-Disaster Primary Loan Servicing
Presently, section 1951.954(a)(11) limits set-aside to those
borrowers who have not been restructured using primary loan servicing
since the disaster. One commentor indicated that the criteria should be
changed to limit eligibility to those who have not been restructured
since the disaster designation. Since PLS restructures debt using the
latest information from a borrower, and any recent disaster, whether
designated or not, would be considered in restructuring loans if it
impacted the borrower's operations, no change from existing policy is
required.
DSA Notification
While borrower notification of DSA is not contained in the CFR (it
is addressed in the Agency internal Instruction section 1951.953), four
comments were received indicating some interest in the topic. At
present, the Agency provides notification, to any non-accelerated
borrower who has not been restructured after a disaster and who may be
eligible for DSA, of all disaster designations in effect in that county
or a contiguous county in any quarter in which a new designation is
established. Two commentors appeared to favor regular quarterly
notification to the public about all designations in effect, and stated
that the Agency's notification process should be codified in the CFR.
However, one of the other commentors stated that an initial
notification with no quarterly notification would be adequate. Another
commentor favored the initial notification but did not express any
opinion regarding the quarterly notification requirements. Based on the
range of the four comments received, the Agency has decided that this
procedural requirement will not be published in the CFR. The Agency's
notification policy is available upon request at any local office.
Also, a fact sheet on the DSA program including the notification, is
contained on the FSA webpage at: http://www.fsa.usda.gov/pas/publications/facts/html/debtset02.htm.
Additional guidance to Agency
employees on notification will be considered when the Agency
instruction is revised.
DSA Expansion
While not specifically addressed in the proposed rule, two
commentors indicated that they would favor multiple set-asides on each
loan without restructuring and a DSA program for guaranteed loans. The
Agency understands the commentors desire to have as many avenues as
possible to correct defaults. However, these suggestions exceed the
scope of what FSA considered in the proposed rule, and adopting these
comments would increase the risk of loss on direct loans. Guaranteed
loans are serviced by private lenders under 7 CFR 762 and not by FSA.
Lenders utilize the guaranteed program because servicing actions are
the lenders' option. FSA does not dictate to lenders how to service the
loans, and current guaranteed loan regulations already provide many
options including deferral and debt writedown. Further, our experience
with lenders indicates that these options provide all the tools that
commercial lenders would realistically ever use in servicing the
account. Thus, these changes are not under consideration, and they will
not be included in the final rule.
Second Set-Aside Payment Application
Two commentors stated that the instructions on payment application
when a borrower has obtained two set-asides should be retained for
those borrowers that have received two set-asides in the past. As some
existing borrowers do have two set-asides, this language will be
retained in section 1951.957(b)(7). However, section 1951.954(a)(2)
makes it clear that present authority is limited to setting aside one
installment on each loan.
List of Subjects in 7 CFR Part 1951
Accounting, Credit, Disaster assistance, Loan programs-agriculture,
[[Page 55303]]
Loan programs-housing and community development, Low and moderate
income housing.
0
Accordingly, 7 CFR part 1951 is amended as follows:
PART 1951-SERVICING AND COLLECTIONS
0
1. The authority citation for part 1951 continues to read as follows:
Authority: 5 U.S.C. 301; 7 U.S.C. 1932 Note; 7 U.S.C. 1989; 31
U.S.C. 3716; 42 U.S.C. 1480.
Subpart T--Disaster Set-Aside Program
0
2. Amend Sec. 1951.951 by revising the second sentence to read as
follows:
Sec. 1951.951 Purpose.
* * * The DSA program is available to Farm Loan Program (FLP)
borrowers, as defined in subpart S of this part, who suffered losses as
a result of a natural disaster. * * *
0
3. Revise Sec. 1951.952 to read as follows:
Sec. 1951.952 General.
DSA is a program whereby borrowers who are current or less than 90
days past due on all FLP loans, may apply to move the scheduled annual
installment for each eligible FLP loan to the end of the loan term. The
intent of this program is to relieve some of the borrower's immediate
financial stress caused by a natural disaster. DSA will not be used to
circumvent the servicing available under subpart S of this part.
0
4. Revise Sec. 1951.953 to read as follows:
Sec. 1951.953 Notification and request for DSA.
(a) [Reserved]
(b) Deadline to apply. Subject to Sec. 1951.954(a)(5), all FLP
borrowers liable for the debt must request DSA within 8 months from the
date the natural disaster was designated in accordance with 7 CFR part
1945, subpart A.
(c) Information needed for a complete application. (1) A written
request for DSA signed by all parties liable for the debt;
(2) Actual production, income, and expense records for the past
five years, including the production and marketing period in which the
natural disaster occurred; and
(3) Other information requested by the servicing official when
needed to make an eligibility determination.
0
5. Revise Sec. 1951.954 to read as follows:
Sec. 1951.954 Eligibility and loan limitation requirements.
(a) Eligibility requirements. The following requirements must be
met to be eligible for DSA:
(1) The borrower must have:
(i) Operated a farm or ranch in a county designated a natural
disaster area or a contiguous county as provided in 7 CFR part 1945,
subpart A, and
(ii) Been a borrower and operated the farm or ranch at the time of
the disaster period.
(2) A borrower cannot have more than one installment set aside
under the DSA program on each loan. If all previously approved set-
asides are paid in full, or cancelled through restructuring under
subpart S of this part, the set-aside will no longer exist and the loan
may again be considered for DSA.
(3) The borrower must have acted in good faith as defined in Sec.
1951.906 of subpart S of this part and the borrowers inability to make
the upcoming scheduled FSA payments must be for reasons which are not
within the borrower's control.
(4) All nonmonetary defaults must have been resolved. This means
that even though the borrower has acted in good faith, the borrower may
still be in default for reasons, such as, but not limited to: no longer
farming; prior lienholder foreclosure; bankruptcy or under court
jurisdiction; not properly maintaining chattel and real estate
security; not properly accounting for the sale of security; or not
carrying out any other agreement made with the Agency.
(5) The borrower must be current or less than 90 days past due on
all FLP loans at the time the application for DSA is complete.
Borrowers paying under a debt settlement adjustment agreement in
accordance with subpart B of part 1956 of this chapter are not
eligible.
(6) The borrower must not be 165 or more days past due when Exhibit
A of Agency Instruction 1951-T (available in any FSA office) is
executed.
(7) As a direct result of the designated natural disaster, the
borrower does not have sufficient income available to pay all family
living and operating expenses, other creditors, and FSA. This
determination will be based on the borrower's actual production, income
and expense records for the disaster or affected year and any other
records required by the servicing official. Compensation received for
losses shall be considered as well as increased expenses incurred
because of the disaster.
(8) For the next business accounting year, the borrower must
develop a positive cash flow projection showing that the borrower will
at least be able to pay all operating expenses and taxes due during the
year, essential family living expenses and meet scheduled payments on
all debts, including FLP debts. The cash flow projection must be
prepared in accordance with 7 CFR 1924.56. The borrower will provide
any documentation required to support the cash flow projection.
(9) After the amount for each loan is set-aside, all FLP and NP
farm type loans of the borrower must be current.
(10) The borrower's FLP loans have not been accelerated.
(11) The borrower's FLP loans have not been restructured under
subpart S of this part since the natural disaster occurred.
(b) Loan limitation requirements. (1) The loan must have been
outstanding at the time of the natural disaster.
(2) The term remaining on the loan receiving DSA equals or exceeds
2 years from the due date of the installment being set-aside.
(3) The installment that may be set-aside is limited to the first
or second scheduled annual installment due after the disaster occurred
and the amount may not exceed the installment set-aside.
(4) The amount set-aside may not exceed the amount the borrower was
unable to pay FSA due to the disaster. Borrowers are required to pay
any portion of an installment that they are able to pay.
(5) The amount set-aside will equal the unpaid balance remaining on
the installment at the time the borrower signs Exhibit A of Agency
Instruction 1951-T (available in any FSA office.) This amount will
include the unpaid interest and any principal that would be credited to
the account as if the installment were paid on the due date taking into
consideration any payments applied to principal and interest since the
due date. Recoverable cost items may not be set aside and the account
must be serviced in accordance with Sec. 1951.907(d).
0
6. Amend Sec. 1951.957 by revising paragraphs (a) and (b)(4) to read
as follows.
Sec. 1951.957 Eligibility determination and processing.
(a) Eligibility determination. (1) Within 30 days of a complete DSA
application, the Agency official will determine if the borrower meets
the requirements set forth in Sec. 1951.954. Approval shall be
contingent upon the borrower's continuing eligibility through the
signing of Exhibit A of Agency Instruction 1951-T (available in any FSA
office).
[[Page 55304]]
(2) The borrower has 45 days to sign Exhibit A of Agency
Instruction 1951-T (available in any FSA office) for each loan
installment set-aside approved. Subject to Sec. 1951.954(a)(6), the
Agency may provide for a longer period of time under extenuating
circumstances, such as where the Agency's approval is contingent upon
the borrower paying a portion of the FLP payments from proceeds that
may not be immediately available.
(b) * * *
(4) If the borrower is not current on all FLP loans when Exhibit A
of Agency Instruction 1951-T (available in any FSA office) is executed,
the borrower, and all obligors in the case of an entity, must execute
and provide to the Agency a best lien obtainable on all of their assets
except:
(i) When taking a lien on such property will prevent the borrower
from obtaining credit from other sources;
(ii) When the property could have significant environmental
problems or costs;
(iii) When the Agency cannot obtain a valid lien;
(iv) When the property is the borrower's personal residence and
appurtenances; provided:
(A) They are located on a separate parcel; and
(B) The real estate that serves as collateral for the Agency loan
plus crops and chattels are valued at greater than or equal to 150
percent of the unpaid balance due on the loan.; or
(v) When the property is subsistence livestock, cash, special
collateral accounts the borrower uses for the farming operation or for
necessary living expenses, retirement accounts, personal vehicles
necessary for family living or farm operating purposes, household goods
and small tools and small equipment such as hand tools and lawn mowers,
and other similar items.
* * * * *
Sec. 1951.1000 [Removed and reserved]
0
7. Remove and reserve Sec. 1951.1000.
Signed in Washington, DC, on September 17, 2003.
J.B. Penn,
Under Secretary for Farm and Foreign Agricultural Services.
[FR Doc. 03-24177 Filed 9-24-03; 8:45 am]
BILLING CODE 3410-05-P