[Federal Register: April 9, 2003 (Volume 68, Number 68)]
[Proposed Rules]
[Page 17316-17320]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr09ap03-21]
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DEPARTMENT OF AGRICULTURE
Farm Service Agency
Rural Housing Service
Rural Business-Cooperative Service
Rural Utilities Service
7 CFR Parts 762, 1941, 1943 and 1951
RIN 0560-AG81
2002 Farm Bill Regulations--Loan Eligibility Provisions
AGENCY: Farm Service Agency, USDA.
ACTION: Proposed rule.
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SUMMARY: The Farm Service Agency (FSA) proposes to amend the
regulations for direct and guaranteed farm operating loans (OL) to
implement the provision of the Farm Security and Rural Investment Act
of 2002 (2002 Act) relating to loan eligibility for applicants with
prior debt forgiveness resulting from a disaster or emergency
designated by the President. FSA is proposing that borrowers who are
current on an FSA loan at the onset of a Presidentially-declared
disaster or emergency, but who receive debt forgiveness on that loan
following the disaster, would be eligible for OL loan assistance if all
other regulatory requirements were met. FSA is also proposing to amend
the regulations for direct farm ownership (FO) loans to comply with the
2002 Act. FSA is proposing that applicants may qualify for a loan if
they participated in the business operations of a farm or ranch for at
least three of the past five years, rather than having operated a farm
or ranch for that length of time. This portion of the rule is intended
to make more borrowers eligible for FSA farm loan assistance. Finally,
FSA is proposing to amend regulations concerning reamortization of
amortized Shared Appreciation Agreement (SAA) recapture debt.
DATES: Comments on the rule must be received on or before June 9, 2003,
to be assured of consideration.
ADDRESSES: Submit written comments to the Director, Loan Making
Division, Farm Loan Programs, Farm Service Agency, United States
Department of Agriculture, STOP 0522, 1400 Independence Avenue, SW.,
Washington, DC 20250-0522.
FOR FURTHER INFORMATION CONTACT: Kathy Zeidler, Senior Loan Officer,
USDA, FSA, Farm Loan Programs, Loan Making Division, STOP 0522, 1400
Independence Avenue, SW., Washington, DC 20250-0522; telephone
[[Page 17317]]
(202) 720-5199; or e-mail kathy_zeidler@wdc.usda.gov. Comments on the
rule may be inspected by contacting Ms. Zeidler for arrangements during
normal business hours. Persons with disabilities who require
alternative means for communication (Braille, large print, audio tape,
etc.) should contact the USDA Target Center at (202) 720-2600 (voice
and TDD).
Notice and Comment
This rule is issued as a proposed rule. Upon completion of the
public comment period and consideration of the comments received, FSA
will issue a final rule addressing the comments, announcing the final
determination, and making the provisions effective.
Executive Order 12866
This rule has been determined to be not significant under Executive
Order 12866 and, therefore, has not been reviewed by the Office of
Management and Budget (OMB).
Federal Assistance Programs
The title and number of the Federal assistance programs, as found
in the Catalog of Federal Domestic Assistance, to which the rule
applies are:
10.406--Farm Operating Loans.
10.407--Farm Ownership Loans.
Regulatory Flexibility Act
In compliance with the Regulatory Flexibility Act (5 U.S.C. 601-
602), the undersigned has determined and certified by signature of this
document that this rule will not have a significant economic impact on
a substantial number of small entities. New provisions included in this
rule will not impact a substantial number of small entities to a
greater extent than large entities. Therefore, a regulatory flexibility
analysis was not performed.
Unfunded Mandates
This rule contains no Federal mandates under Title II of the
Unfunded Mandates Reform Act of 1995 (UMRA) for State, local, and
tribal governments or the private sector. Therefore, this rule is not
subject to the requirements of sections 202 and 205 of UMRA.
Executive Order 12988
This rule has been reviewed in accordance with Executive Order
12988. This rule preempts State laws that are inconsistent with it.
This rule is not retroactive. Before judicial action may be brought
concerning this rule, administrative remedies must be exhausted.
Environmental Assessment
The environmental impacts of this 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
on Environmental Quality (40 CFR parts 1500-1508), and the FSA
regulations for compliance with NEPA, 7 CFR parts 799, and 1940,
subpart G. FSA has completed an environmental evaluation and concluded
that 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 12372
This rule is not subject to the provisions of Executive Order
12372, which requires intergovernmental consultation with State and
local officials. See the notice related to 7 CFR part 3015 subpart V
published at 48 FR 29115 (June 24, 1983).
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
The Agency's information collection requirements, currently
approved under OMB control numbers 0560-0155, 0560-0157, and 0560-0167
are not affected by the proposed rule.
Government Paperwork Elimination Act
FSA is committed to compliance with the Government Paperwork
Elimination Act and the Freedom to E-File Act, which require Government
agencies in general and FSA in particular to provide the option of
submitting information or transacting business electronically to the
maximum extent possible. The forms and other information collection
activities required for participation in the program are not yet fully
implemented for the public to conduct business with FSA electronically.
However, loan application forms are available electronically for
downloading through the USDA eForms Web site at http://www.sc.egov.usda.gov
.
Background
Section 5319 of the 2002 Act provides another exception to the
general rule prohibiting farm loans to borrowers who have received
prior debt forgiveness. Under this provision, FSA farm loan borrowers
who received debt forgiveness on not more than one occasion resulting
directly and primarily from a major disaster or emergency designated by
the President on or after April 4, 1996, under the Robert T. Stafford
Disaster Relief and Emergency Assistance Act (42 U.S.C. 5121 et seq.),
may be eligible for direct or guaranteed farm operating loans to pay
annual farm or ranch operating expenses. Note that while FSA makes
emergency loans also when emergencies are designated by the USDA
Secretary or FSA Administrator (physical loss loans only), only
Presidentially-designated emergencies trigger this exception. In
developing the proposed rule, FSA reasoned that if a borrower is
operating in an area where a disaster or emergency is designated by the
President, and the borrower is current on their FSA loan obligations
prior to the designation, any subsequent debt forgiveness can be
``directly and primarily'' attributed to the major disaster or
emergency. Therefore, the Agency is proposing that borrowers who are
current on FSA loans at the onset of a Presidentially-declared disaster
or emergency, but receive debt forgiveness on the loans within three
years following the disaster, fall within the legislative exception
and, therefore, would be eligible for OL loan assistance for paying
annual farm operating expenses if all other loan requirements were met.
The Agency specifically seeks comments on this issue.
Section 5001 of the 2002 Act revised an eligibility requirement for
FSA's direct FO loan program. Applicants may now be eligible for this
program if they participated in the business operations of a farm or
ranch for at least three years, rather than having operated a farm or
ranch for that length of time. FSA has in place a policy in its direct
OL program defining farm participation with regard to acceptable farm
experience and on-the-job training. Because this policy was already in
effect, it was expanded to cover the new participation requirement for
direct FO loans through administrative notice. The policy notice issued
to field offices clarified the participation requirement by stating
that applicants who: (1) Owned, managed, or operated a farm or ranch
business for at least three years worth of complete production and
[[Page 17318]]
marketing cycles; (2) have been employed as a farm manager or farm
management consultant for at least three years worth of complete
production and marketing cycles; or (3) participated in the operation
of a farm or ranch by being raised or working on a farm or ranch and
having had significant responsibility for the day-to-day decision-
making for at least three years' worth of complete production and
marketing cycles meet the participation requirement. This rule proposes
to amend FO regulations accordingly and to limit the three years of
participation to the five years prior to the date the loan application
is submitted. Only the last five years should be considered because
this is consistent with OL eligibility requirements, which specify that
applicants must have sufficient applicable educational and/or on-the-
job training or farming experience in managing and operating a farm or
ranch (one year's complete production and marketing cycle within the
last five years). Recent farming experience is a better indicator of
future success.
Section 5314 of the 2002 Act authorizes FSA to consider
reamortization of amortized SAA recapture debt for up to 25 years from
the date of the original amortization agreement when the borrower
becomes delinquent on this non-program debt. To be eligible for this
reamortization, the default must be due to circumstances beyond the
borrower's control, and the borrower must have acted in good faith in
attempting to repay the recapture amount. As this reamortization can be
considered even when a borrower has no outstanding FLP loans, or when
the SAA was triggered by all FSA loans being paid in full, FSA is
proposing to amend 7 CFR 1951.901, 1951.907, 1951.909, and 1951.914 to
comply with this requirement.
List of Subjects
7 CFR Part 762
General--Agriculture, Loan programs--Agriculture.
7 CFR Part 1941
Crops, Livestock, Loan programs--Agriculture, Rural areas, Youth.
7 CFR Part 1943
Crops, Loan programs--Agriculture, Recreation, Water resources.
7 CFR Part 1951
Account servicing, Credit, Debt restructuring, Loan programs--
Agriculture, Loan Programs--Housing and community development.
Accordingly, 7 CFR is revised as follows:
PART 762--GUARANTEED FARM LOANS
1. The authority citation for part 762 continues to read as
follows:
Authority: 5 U.S.C. 301, 7 U.S.C. 1989.
2. Amend Sec. 762.102(b) by adding a definition of
``Presidentially-designated emergency'' to read as follows:
Sec. 762.102 Abbreviations and definitions.
* * * * *
(b) Definitions.
* * * * *
Presidentially-designated emergency. A major disaster or emergency
designated by the President under the Robert T. Stafford Disaster
Relief and Emergency Assistance Act (42 U.S.C. 5121 et seq.)
3. Amend Sec. 762.120 by revising paragraph (a) to read as
follows:
Sec. 762.120 Loan applicant eligibility.
* * * * *
(a) Agency loss. (1) Except as provided in paragraph (a)(2) of this
section, the loan applicant, and anyone who will execute the promissory
note, has not caused the Agency a loss by receiving debt forgiveness on
all or a portion of any direct or guaranteed loan made under the
authority of the CONACT by debt write-down or write-off; compromise,
adjustment, reduction, or charge-off under the provisions of section
331 of the CONACT; discharge in bankruptcy; or through payment of a
guaranteed loss claim on:
(i) More than three occasions on or prior to April 4, 1996; or
(ii) Any occasion after April 4, 1996.
(2) The applicant may receive a guaranteed OL to pay annual farm
and ranch operating and family living expenses, provided the applicant
meets all other requirements for the loan, if the applicant and anyone
who will execute the promissory note:
(i) Received a write-down under section 353 of the CONACT;
(ii) Is current on payments under a confirmed bankruptcy plan; or
(iii) Received debt forgiveness on not more than one occasion after
April 4, 1996, resulting directly and primarily from a Presidentially-
designated emergency for the county in which the applicant operates.
Only applicants who were current on all existing direct and guaranteed
FSA loans prior to the onset of a Presidentially-designated emergency
and received debt forgiveness on that debt within three years after the
onset of such emergency meet this exception.
* * * * *
PART 1941--OPERATING LOANS
4. The authority citation for part 1941 continues to read as
follows:
Authority: 5 U.S.C. 301; 7 U.S.C. 1989.
Subpart A--Operating Loan Policies, Procedures and Authorizations
5. Amend Sec. 1941.4 by adding a definition of ``Presidentially-
designated emergency'' to read as follows:
Sec. 1941.4 Definitions.
* * * * *
Presidentially-designated emergency. A major disaster or emergency
designated by the President under the Robert T. Stafford Disaster
Relief and Emergency Assistance Act (42 U.S.C. 5121 et seq.).
* * * * *
6. Amend Sec. 1941.12 by revising paragraphs (a)(8) and (b)(11) to
read as follows:
Sec. 1941.12 Eligibility requirements.
* * * * *
(a) * * *
(8) Agency loss. (i) Except as provided in paragraph (a)(8)(ii) of
this section, the loan applicant, and anyone who will execute the
promissory note, has not caused the Agency a loss by receiving debt
forgiveness on all or a portion of any direct or guaranteed loan made
under the authority of the CONACT by debt write-down or write-off;
compromise, adjustment, reduction, or charge-off under the provisions
of section 331 of the CONACT; discharge in bankruptcy; or through
payment of a guaranteed loss claim.
(ii) The applicant may receive a direct OL loan to pay annual farm
and ranch operating and family living expenses, provided the applicant
meets all other requirements for the loan, if the applicant and anyone
who will execute the promissory note:
(A) Received a write-down under section 353 of the CONACT;
(B) Is current on payments under a confirmed bankruptcy plan; or
(C) Received debt forgiveness on not more than one occasion after
April 4, 1996, resulting directly and primarily from a Presidentially-
designated emergency for the county in which the applicant operates.
Only applicants who were current on all existing direct and guaranteed
FSA loans prior to the onset of a Presidentially-designated emergency
and received debt forgiveness on that debt within three
[[Page 17319]]
years after the onset of such emergency meet this exception.
* * * * *
(b) * * *
(11) Agency loss. (i) Except as provided in paragraph (b)(11)(ii)
of this section, the loan applicant, and anyone who will execute the
promissory note, has not caused the Agency a loss by receiving debt
forgiveness on all or a portion of any direct or guaranteed loan made
under the authority of the CONACT by debt write-down or write-off;
compromise, adjustment, reduction, or charge-off under the provisions
of section 331 of the CONACT; discharge in bankruptcy; or through
payment of a guaranteed loss claim.
(ii) The applicant may receive a direct guaranteed OL loan to pay
annual farm and ranch and operating and family living expenses,
provided the applicant meets all other requirements for the loan, if
the applicant and anyone who will execute the promissory note,
(A) Received a write-down under section 353 of the CONACT;
(B) Is current on payments under a confirmed bankruptcy plan; or
(C) Received debt forgiveness on not more than one occasion after
April 4, 1996, resulting directly and primarily from a Presidentially-
designated emergency for the county in which the applicant operates.
Only applicants who were current on all existing direct and guaranteed
FSA loans prior to the onset of a Presidentially-designated emergency
and received debt forgiveness on that debt within three years after the
onset of such emergency meet this exception.
* * * * *
PART 1943--FARM OWNERSHIP, SOIL AND WATER AND RECREATION
7. The authority citation for part 1943 continues to read as
follows:
Authority: 5 U.S.C. 301, 7 U.S.C. 1989.
Subpart A--Direct Farm Ownership Loan Policies, Procedures, and
Authorizations
8. Amend Sec. 1943.4 by adding a definition of ``participated in
the business operations of a farm or ranch'' to read as follows:
Sec. 1943.4 Definitions.
* * * * *
Participated in the business operations of a farm or ranch. An
applicant has participated in the business operations of a farm or
ranch if the applicant has:
(1) Been the owner, manager or operator of a farm business for the
year's complete production and marketing cycle as evidenced by tax
returns, FSA farm records or similar documentation;
(2) Been employed as a farm manager or farm management consultant
for the year's complete production and marketing cycle; or
(3) Participated in the operation of a farm by virtue of being
raised on a farm or worked on farm with significant responsibility for
the day-to-day decisions for the year's complete production and
marketing cycle.
* * * * *
9. Amend Sec. 1943.12 by revising the introductory text in
paragraphs (a)(6) and (b)(8) to read as follows:
Sec. 1943.12 Farm ownership loan eligibility requirements.
(a) * * *
(6) Have participated in the business operations of a farm or ranch
for at least 3 years out of the 5 years prior to the date the
application is submitted and satisfy at least one of the following
conditions:
* * * * *
(b) * * *
(8) Have one or more members, constituting a majority interest in
the business entity, who have participated in the business operations
of a farm or ranch for at least 3 years out of the 5 years prior to the
date the application is submitted and satisfy at least one of the
following conditions:
* * * * *
PART 1951--SERVICING AND COLLECTIONS
10. The authority citation for part 1951 is revised 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 S--Farm Loan Programs Account Servicing Policies
11. Amend Sec. 1951.901 by revising the third sentence to read as
follows:
Sec. 1951.901 Purpose.
* * * Shared Appreciation amortized payments (SA) may be
reamortized in accordance with Sec. Sec. 1951.907(e), 1951.909(c)(6)
and 1951.909(e)(2).
* * * * *
12. In Sec. 1951.907, revise the second and third sentences of
paragraph (c), introductory text, redesignate paragraph (e) as (f) and
add a new paragraph (e) to read as follows:
Sec. 1951.907 Notice of loan service programs.
* * * * *
(c) * * * If the borrower submits an incomplete application, see
paragraph (f) of this section for procedures on requesting additional
information. Delinquent borrowers who have also violated their loan
agreements with the agency will be handled in accordance with paragraph
(f) of this section. * * *
* * * * *
(e) The Agency will notify delinquent NP borrowers who have only SA
amortization agreements that all items in paragraph (f)(5) of this
section, with the exception of Attachment 2 or 4 of exhibit A and
information for conservation contracts or debt settlement, must be
submitted within 60 days or the account will be accelerated. If a
complete application has not been submitted within 30 days, one
additional notice will be sent to the NP borrower indicating the
remaining information needed and the last day which it can be
submitted.
* * * * *
13. Amend Sec. 1951.909 by adding a new paragraph (c)(6) to read
as follows:
Sec. 1951.909 Processing primary loan service program requests.
* * * * *
(c) * * *
(6) Non-Program borrowers who have only SA amortization agreements
must meet the eligibility requirement in paragraph (c)(1) of this
section, have acted in good faith in attempting to repay the recapture
amount, and develop a feasible plan. Borrowers who do not meet the
eligibility or feasibility requirements of this section will be
notified of the adverse decision, and the account will be liquidated
according to subpart J of this part.
* * * * *
14. Amend Sec. 1951.914 by revising paragraphs (e), introductory
text, and (e)(11) to read as follows:
Sec. 1951.914 Servicing shared appreciation agreements.
* * * * *
(e) Shared appreciation amortization. Shared appreciation due under
this section may be amortized to a nonprogram amortized payment unless
the amount is due because of acceleration or the borrower ceases
farming. The amount due may be amortized as an SA amortized payment
under the following conditions:
* * * * *
(11) If a borrower with an SA amortized payment also has
outstanding Farm Loan Program loan(s) and becomes delinquent or
financially distressed in accordance with Sec. 1951.906 or if a
borrower with an SA amortized
[[Page 17320]]
payment has no outstanding Farm Loan Program loans and becomes
delinquent on the SA amortized payment, the SA payment agreement may be
reamortized in accordance with Sec. 1951.909.
* * * * *
Dated: March 24, 2003.
J.B. Penn,
Under Secretary for Farm and Foreign Agricultural Services.
Dated: April 1, 2003.
Thomas C. Dorr,
Under Secretary for Rural Development.
[FR Doc. 03-8646 Filed 4-8-03; 8:45 am]
BILLING CODE 3410-05-P