[Federal Register: August 21, 2003 (Volume 68, Number 162)]
[Proposed Rules]
[Page 50479-50481]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr21au03-17]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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[[Page 50479]]
DEPARTMENT OF AGRICULTURE
Farm Service Agency
Rural Housing Service
Rural Business-Cooperative Service
Rural Utilities Service
7 CFR Parts 1910, 1941 and 1965
RIN 0560-AH01
Revisions to Direct Farm Loan Programs Appraisal Regulations
AGENCY: Farm Service Agency, USDA.
ACTION: Proposed rule.
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SUMMARY: This rule proposes to amend the Farm Service Agency's (FSA)
regulations governing real estate and chattel appraisals. In the loan
making process, the rule proposes to allow FSA to obtain appraisals
after loan funds become available and the applicant is determined
eligible. Also, the rule proposes to increase the dollar threshold that
determines when a real estate appraisal is required. In loan servicing,
the rule proposes to raise the dollar threshold for real estate
appraisals in partial release situations, and allow the Agency to
release real estate security without appraising the retained real
estate in some cases. All these changes will reduce FSA's appraisal
costs and enhance the timeliness of program delivery of certain loan
making and servicing actions.
DATES: Comments on this rule must be received on or before October 20,
2003 to be given full consideration.
ADDRESSES: Written comments may be mailed to the Farm Service Agency,
U.S. Department of Agriculture, Farm Loan Programs, Loan Servicing and
Property Management Division, Attention: Director, 1400 Independence
Avenue, SW., STOP 0523, Washington, DC 20250-0523, or comments will be
accepted when submitted at http://www.regulations.gov. All written
comments received in connection with this rule will be available for
public inspection 8:15 a.m.-4:45 p.m., Eastern Standard Time, except
holidays, at 1250 Maryland Avenue, SW., Suite 500, Washington, DC
20024-0523.
FOR FURTHER INFORMATION CONTACT: Michael Cumpton, Senior Loan Officer,
Farm Service Agency; telephone: 202-690-4014; Facsimile: 202-690-0949;
E-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.
In this rule, FSA is proposing revisions to both loan making and
loan servicing regulations. In loan making, the Agency will not require
a real estate appraisal completed by a certified general appraiser when
real estate is used to secure an operating loan (OL) of less than
$50,000. This action will affect less than 5 percent of the OL's
processed per year, or approximately 720 applicants. This would result
in an annual savings to the Agency of approximately $540,000 ($750/
appraisal). In loan servicing, the Agency will increase the dollar
threshold for requiring a certified real estate appraisal from $10,000
to $25,000 when considering partial releases, subordinations,
exchanges, or other real estate servicing actions. The Agency estimates
that this will eliminate the need for approximately 150 certified real
estate appraisals, for a savings to the Agency annually of
approximately $112,500.
The Agency does not expect these changes to impose any additional
cost on the borrowers. In fact, the reduced need for appraisals should
benefit borrowers with increased timeliness of loan decisions by the
Agency. 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 Impact Statement
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 part 799, and part 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 12988
This rule has been reviewed in accordance with E.O. 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) no retroactive effect will be given to this rule; and
(3) administrative proceedings in accordance with 7 CFR part 11 must be
exhausted before bringing suit in court challenging action taken under
this rule unless those regulations specifically allow bringing suit at
an earlier time.
Executive Order 12372
For reasons set forth in the Notice to 7 CFR part 3015, subpart V
(48 FR 29115, June 24, 1983), the programs and activities within this
rule are excluded from the scope of Executive Order 12372, which
requires intergovernmental consultation with State and local officials.
[[Page 50480]]
Unfunded Mandates
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public
Law 104-4, requires Federal agencies to assess the effects of their
regulatory actions on State, local, and tribal governments or the
private sector. Agencies generally must prepare a written statement,
including a cost benefit analysis, for proposed and final rules with
``Federal mandates'' that may result in expenditures of $100 million or
more in any 1 year 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
proposed 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 proposed 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, the relationship between the national
government and the States, or the distribution of power and
responsibilities among the various levels of government. Nor does this
proposed rule impose substantial direct compliance costs on State and
local governments. Therefore, consultation with the States is not
required.
Paperwork Reduction Act
The amendments to 7 CFR Chapter XVIII contain no new information
collections that require approval under the Paperwork Burden Reduction
Act of 1995 for OMB control numbers 0560-0158, 0560-0162, and 0560-
0178.
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 Proposed Rule
This rule proposes to amend the regulations that govern the
requirement for appraisals for FSA Farm Loan Programs (FLP) direct
loans.
Application Processing
FSA proposes to remove the requirement for obtaining a real estate
or chattel appraisal as part of the application process in 7 CFR
1910.4(b)(21). Under existing regulations, when real estate is to be
taken as security, FSA usually obtains the appraisal by contracting
with a qualified appraiser, prior to approval of a loan. Chattel
appraisals are completed by FSA employees who have been adequately
trained and delegated chattel appraisal authority. The proposed rule
will allow FSA to approve loans with the condition that an acceptable
appraisal, which reflects at least adequate collateral for the loan,
will be obtained before the loan is closed. Therefore, FSA will not be
required to wait on a real estate appraisal and may conditionally
approve the loan.
The primary benefit to FSA is one of cost savings. As previously
discussed, existing procedures require that an appraisal be obtained
prior to loan approval. Because availability of loan funds is subject
to Congressional appropriations, all FSA farm loans are approved
subject to the availability of funds. When appropriation levels are
inadequate to meet loan demand, approved applications are held until
funding becomes available. Sometimes, a year or more may pass before
loan funds become available for an applicant, particularly in the farm
ownership (FO) loan program. In such cases, the real estate appraisal
purchased prior to loan approval is outdated when funding becomes
available, and FSA must purchase a new appraisal. Thus, FSA pays for
two real estate appraisals for one loan. Under this proposed rule, FSA
will not purchase an appraisal until funds are available for the loan,
thus, eliminating the need for second appraisals and the costs
associated with them. While delays in funding can occur, the appraisal
requirement will not cause any additional delay in most loan closings
as loan funds are usually available without delay. On the Agency's,
``Request for Obligations of Funds,'' applicants will agree that the
15-working day loan closing requirement may be exceeded to obtain the
necessary appraisals. FSA will endeavor to minimize any delays. This
change does not affect FSA's responsibility for ordering and funding
the cost of real estate and chattel appraisals for loan making
purposes.
Operating Loan Real Estate Appraisal Limits
FSA proposes to amend 7 CFR 1941.25 to require that a real estate
appraisal be obtained when real estate is taken as primary security for
an operating loan (OL) and the amount of the loan to be secured by the
real estate exceeds $50,000. The section currently provides no
threshold dollar amount. FSA has determined that OL loans of $50,000 or
less generally constitute less risk than larger loans due to the
relatively small dollar amount involved. In addition, operations with
credit needs in this range are normally not complex. Loan officials
will no longer have to wait for an appraisal in such cases before
conducting a loan analysis and making a credit decision. Therefore,
applicants will receive loan funds on a more timely basis. This
revision adds consistency with the existing Low Documentation policy
for operating loans of $50,000 or less, reduces the number of real
estate appraisals required, and reduces FSA's real estate appraisal
expenses.
Real Estate Security Servicing
FSA proposes to increase the transaction amount triggering the need
for a real estate appraisal referenced in 7 CFR 1965.13(d), from
$10,000 to $25,000. This will reduce the number of appraisals required
by the Agency when borrowers wish to sell some portion of their real
estate. Also, FSA is currently required to appraise the real property
retained when processing a partial release. This measure ensures that
the property retained by the borrower, after the sale, is not adversely
affected by the loss of the tract sold (such as when the sale removes
access to a paved road). The proposed rule would eliminate this
requirement in most cases as this determination can usually be made
without an appraisal. FSA may still obtain an appraisal on the property
to be sold or retained when necessary to protect the government's
financial interests.
List of Subjects
Part 1910
Agriculture, Credit, Loan programs--housing and community
development, Low and moderate income housing, Sex discrimination.
Part 1941
Crops, Livestock, Loan programs--agriculture, Rural areas, Youth.
Part 1965
Foreclosure, Credit, Loan programs--agriculture, Loan programs--
housing and community development, Rural areas.
Accordingly, 7 CFR chapter XVIII is proposed to be amended as
follows:
PART 1910--GENERAL
1. The authority citation for part 1910 continues to read as
follows:
Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 42 U.S.C. 1480.
[[Page 50481]]
Subpart A--Receiving and Processing Applications
2. In Sec. 1910.4 revise paragraph (b) by removing paragraph 21
and redesignating paragraph 22 as paragraph 21.
3. In Sec. 1910.4 revise paragraph (j)(1)(i) to read as follows:
Sec. 1910.4 Processing applications.
* * * * *
(j) * * *
(1) * * *
(i) Receipt by the applicant of a signed copy of the Agency's
request for obligation of funds on the appropriate Agency form is
written notice of loan approval and any conditions that must be met
prior to loan closing. Loan approval conditions may include, but are
not limited to, obtaining required real estate and chattel appraisals.
* * * * *
PART 1941--OPERATING LOANS
4. The authority citation for part 1941 continues to read as
follows:
Authority: 5 U.S.C. 301 and 7 U.S.C. 1989.
Subpart A--Operating Loan Policies, Procedures, and Authorizations
5. Revise Sec. 1941.25 paragraph (a)(4) to read as follows:
Sec. 1941.25 Appraisals.
(a) * * *
(4) A real estate appraisal is required when real estate is taken
as primary security, as defined in Sec. 1941.4, and the amount of the
loan to be secured by the real estate exceeds $50,000.
* * * * *
PART 1965--REAL ESTATE
6. The authority citation for part 1965 continues to read as
follows:
Authority: 5 U.S.C. 301, 7 U.S.C. 1989 and 42 U.S.C. 1480.
Subpart A--Servicing of Real Estate Security for Farm Loan Programs
Loans and Certain Note-Only Cases
7. In Sec. 1965.13 revise introductory paragraph (d) to read as
follows:
Sec. 1965.13 Consent by partial release or otherwise to sale,
exchange or other disposition of a portion of or interest in security,
except leases.
* * * * *
(d) Appraisals. A new appraisal report for the security to be
transferred or released will be obtained in accordance with Sec. 761.7
of this title as necessary to protect the financial interests of the
Government or when the transaction involves more than $25,000. A new
appraisal report for the security to be retained will be obtained in
accordance with that section as necessary to protect the financial
interests of the Government. Appraisal reports under this section may
show the present market value of the property being transferred or
released and the property being retained on a single appraisal report
or on separate appraisal reports. The value of rights to mining
products, gravel, oil, gas, coal or other minerals will be specifically
included as a part of the appraised value of the real estate security.
* * * * *
Signed in Washington, DC, on August 14, 2003.
J.B. Penn,
Under Secretary for Farm and Foreign Agricultural Services.
[FR Doc. 03-21422 Filed 8-20-03; 8:45 am]
BILLING CODE 3410-05-P