[Federal Register: November 15, 2004 (Volume 69, Number 219)]
[Proposed Rules]
[Page 65546-65554]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr15no04-45]
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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 65546]]
DEPARTMENT OF AGRICULTURE
Rural Housing Service
Rural Business-Cooperative Service
Rural Utilities Service
Farm Service Agency
7 CFR Parts 1782, 1951, 1955, and 1956
RIN 0572-AB59
Servicing of Water Programs Loans and Grants
AGENCY: Rural Utilities Service, USDA.
ACTION: Proposed rule.
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SUMMARY: The Rural Utilities Service (RUS) proposes to consolidate and
amend the regulations utilized to service water and waste loan and
grant programs. The proposed rule will combine the water and waste loan
and grant servicing regulations found in 7 CFR parts 1951, 1955 and
1956 into one regulation. Unnecessary and burdensome requirements for
water and waste loan and grant servicing under the program will be
eliminated. The streamlining of the water and waste loan and grant
servicing regulation will allow RUS to provide better service to
entities needing assistance in resolving financial and economic
problems in their communities and in general improve the quality of
life in rural areas. Additionally, this rule proposes to implement
Section 6018 of the Farm Security and Rural Investment Act of 2002 (7
U.S.C. 1936a) for the Rural Business-Cooperative Service (RBS), Rural
Housing Service (RHS) and RUS.
DATES: Comments on the proposed rule must be received on or before
January 14, 2005.
ADDRESSES: You may submit comments by any of the following methods:
Federal eRulemaking Portal: Go to http://www.regulations.gov.
Follow the online instructions for submitting
comments.
Agency Web Site: http://www.usda.gov/rus/index2/Comments.htm.
Follow the instructions for submitting comments. E-mail: RUSComments@usda.gov. Include in the subject line
of the message ``7 CFR 1782.''
Mail: Addressed to Richard Annan, Acting Director, Program
Development and Regulatory Analysis, Rural Utilities Service, United
States Department of Agriculture, 1400 Independence Avenue, SW., STOP
1522, Washington, DC 20250-1522.
Hand Delivery/Courier: Addressed to Richard Annan, Acting
Director, Program Development and Regulatory Analysis, Rural Utilities
Service, United States Department of Agriculture, 1400 Independence
Avenue, SW., Room 5168-S, Washington, DC 20250-1522.
Instructions: All submissions received must include the agency name
and the subject heading ``7 CFR 1782''. All comments received must
identify the name of the individual (and the name of the entity, if
applicable) who is submitting the comment. All comments received will
be posted without change to http://www.usda.gov/rus/index2/Comments.htm
, including any personal information provided.
FOR FURTHER INFORMATION CONTACT: Anita O'Brien, Loan Specialist, Water
and Environmental Programs, Rural Utilities Service, Room 2230 South
Building, Stop 1570, 1400 Independence Ave., SW., Washington, DC 20250-
1570. Telephone: (202) 690-3789, FAX: (202) 690-0649, e-mail:
anita.obrien@usda.gov.
SUPPLEMENTARY INFORMATION:
Classification
Executive Order 12866
This proposed rule has been determined to be not significant for
purposes of Executive Order 12866 and, therefore, has not been reviewed
by the Office of Management and Budget (OMB).
Executive Order 12988
This proposed rule has been reviewed in accordance with Executive
Order 12988, Civil Justice Reform. RUS has determined that this
proposed rule meets the applicable standards provided in section 3 of
the Executive Order. In addition, all State and local laws and
regulations that are in conflict with this rule will be pre-empted; no
retroactive effect will be given to the rule; and in accordance with
sec. 212(e) of the Department of Agriculture Reorganization Act of 1994
(7 U.S.C. sec. 6912(e)), appeal procedures must be exhausted before an
action against the Department or its agencies may be initiated.
Regulatory Flexibility Act Certification
It has been determined that the Regulatory Flexibility Act is not
applicable to this rule since the Rural Utilities Service is not
required by 5 U.S.C. 551 et seq. or any other provision of law to
publish a notice of proposed rulemaking with respect to the subject
matter of this rule.
Information Collection and Recordkeeping Requirements
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C.
chapter 35), RUS is requesting comments on the collection of
information incorporated in this proposed rule. The reporting burden
will be transferred from nine existing regulations into regulation 1782
and where possible, the reporting burden will be reduced.
Title: Servicing of Water and Waste Programs.
Type of Request: New collection.
Abstract: RUS' Water and Environmental Programs (WEP) provide
financing and technical assistance for development and operation of
safe and affordable water supply systems and sewage and other waste
disposal facilities. WEP provides loans, guaranteed loans and grants
for water, sewer, storm water, and solid waste disposal facilities in
rural areas and towns of up to 10,000 people. The recipients of the
assistance covered by 7 CFR part 1782 must be public entities. These
can include municipalities, counties, special purpose districts;
federally designated Indian tribes, land corporations not operated for
profit, including cooperatives. The information, which is for the most
part financial in nature, is needed by the Agency to determine if
borrowers, based on their individual situations, qualify for the
various servicing options.
Estimate of Burden: Public reporting burden for this collection of
information is estimated to average 30 hours per response.
[[Page 65547]]
Respondents: Business or other for profit and non-profit
institutions, and state and local governments.
Estimated Number of Respondents: 2,000.
Estimated Number of Responses per Respondents: 1.35.
Estimated Total Annual Burden on Respondents: 80,976 hours.
The subject regulation is published for public review and comment.
Copies of this information collection can be obtained from Michele
Brooks, Program Development and Regulatory Analysis, Rural Utilities
Service. Telephone: (202) 690-1078.
Comments on this information collection must be received by January
14, 2005.
Comments are invited on: (a) Whether the proposed collection of
information is necessary for the proper performance of the functions of
the agency, including whether the information will have practical
utility; (b) the accuracy of the agency's estimate of the burden of the
proposed collection of information including the validity of the
methodology and assumptions used; (c) ways to enhance the quality,
utility, and clarity of the information to be collected; and (d) ways
to minimize the burden of the collection of information on respondents,
including the use of automated collection techniques or other forms of
information technology.
Send comments regarding this information collection requirement to
Michele Brooks, Program Development and Regulatory Analysis, USDA,
Rural Utilities Service, 1400 Independence Ave., SW., Room 5166, Stop
1522, Washington, DC 20250-1522.
Comments are best assured of having full effect if OMB receives
them within 30 days of publication in the Federal Register. All
comments will be summarized, included in the request for OMB approval,
and will become a matter of public record.
National Environmental Policy Act Certification
The Administrator of RUS has determined that this proposed rule
will not significantly affect the quality of the human environment as
defined by the National Environmental Policy Act of 1969 (42 U.S.C.
4321 et seq.). Therefore, this action does not require an environmental
impact statement or assessment.
Catalog of Federal Domestic Assistance
The program described by this proposed rule is listed in the
Catalog of Federal Domestic Assistance Programs under numbers (1)
10.760--Water and Waste Disposal System for Rural Communities, (2)
10.761--Technical Assistance and Training Grants, (3) 10.762--Solid
Waste Management Grants (4) 10.763--Emergency Community Assistance
Grants, and (5) 10.770--section 306C Water and Waste Loans and Grants.
This catalog is available on a subscription basis from the
Superintendent of Documents, the United States Government Printing
Office, Washington, DC 20402-9325, telephone number (202) 512-1800.
Executive Order 12372
This program is listed in the Catalog of Federal Domestic
Assistance under numbers (1) 10.760--Water and Waste Disposal (WWD)
System for Rural Communities, (2) 10.763--Emergency Community
Assistance Grants, and (3) 10.770--Water and Waste Loans and Grants
(section 306C), and is subject to the provisions of Executive Order
12372 which requires intergovernmental consultation with State and
local officials.
Unfunded Mandates
This rule contains no Federal mandates (under the regulatory
provision of title II of the Unfunded Mandates Reform Act of 1995) for
State, local, and tribal governments or the private sector. Therefore,
this rule is not subject to the requirements of section 202 and 205 of
the Unfunded Mandates Reform Act.
Executive Order 13132, Federalism
The policies contained in this proposed 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
proposed rule impose substantial direct compliance costs on state and
local governments. Therefore, consultation with states is not required.
Background
RUS' water and waste program is administered by Water and
Environmental Programs (WEP). The water and waste loan and grant
programs are authorized by various sections of the Consolidated Farm
and Rural Development Act (7 U.S.C. 1921 et seq.), as amended. The
regulations for these programs have not been completely reviewed for
many years. The 1994 streamlining and reorganization of the Department
of Agriculture provided an opportunity to review and rewrite the water
and waste loan and grant servicing regulations. A task force was formed
for that purpose. The aim of the task force was to make the regulations
easier to understand, eliminate unnecessary requirements, and continue
to protect the interest of the U. S. taxpayer. The program provides
loan servicing options for communities facing financial problems.
Servicing options should result in reasonable user costs for rural
residents, rural businesses, and other rural users. Additionally, in
order to provide uniformity, servicing provisions for grants are
addressed in the Departmental Grant Regulations listed cited in 1782.7.
Major changes are:
1. Combines servicing regulations found in 7 CFR parts 1951, 1955
and 1956 into one regulation.
2. The field staff is provided with more authority to service water
and waste loans and grants.
3. The application process for servicing actions has been
streamlined to reduce unnecessary paperwork and improve service to the
rural communities. There will be fewer regulations and the number of
pages in the Code of Federal Regulations will be greatly reduced.
4. The functions of the former Farmers Home Administration (FmHA)
and the Rural Development Administration (RDA) relating to the water
and waste loan and grant programs authorized by various sections of the
Consolidated Farm and Rural Development Act, (7 U.S.C. 1926(a)), have
been transferred to RUS based on the Department of Agriculture
Reorganization Act of 1994, 7 U.S.C. 6942. Therefore in order to
enhance the delivery of borrower services and better assist the public,
RUS is simplifying and rewriting regulations originally published by
FmHA and RDA. All parts pertaining to the water and waste loan program
will be moved into 7 CFR part 1782. This action will have no effect on
the Rural Housing Services (RHS) community facilities loan program, as
this action makes no policy changes in the regulation with the
exception of implementing section 6018 of the Farm Security and Rural
Investment Act of 2002 (7 U.S.C. 1936a). The following programs are
affected by these amendments: (1) Water and Waste Disposal Loans and
Grants, (2) Watershed loans and advances, (3) Resource Conservation and
Development loans, (4) Technical Assistance and Training grants, (5)
Emergency Community Assistance grants, (6) Solid Waste Management
grants, and (7) Section 306C Water and Waste Facility Loans and Grants
to Alleviate Health Risks.
[[Page 65548]]
5. Implement Sec. 6018 of the Farm Security and Rural Investment
Act of 2002. This change will allow the borrower or grant recipient to
use property (real and personal) purchased or improved with the loan or
grant funds or proceeds from the sale of property (real and personal)
purchased with such funds, for another project or activity. The RUS
proposes to include language to implement this provision in 7 CFR
1782.23. These provisions will also be applicable to the RBS and RHS
programs by adding Sec. 1951.218 to 7 CFR part 1951, subpart E.
The Regulations
RUS has completed a consolidation of regulations affecting WEP
loans and grants. Prior to this rule becoming effective, WEP borrowers
were affected, in part, by the following regulations:
7 CFR part 1951, subpart A--Account Servicing Policies.
7 CFR part 1951, subpart D--Final Payment on Loans.
7 CFR part 1951, subpart E--Servicing of Community and Direct
Business Programs Loans and Grants.
7 CFR part 1951, subpart F--Analyzing Credit Needs and Graduation
of Borrowers.
7 CFR part 1951, subpart O--Servicing Cases Where Unauthorized
Loan(s) or Other Financial Assistance Was Received--Community and
Insured Business Programs.
7 CFR part 1955, subpart A--Liquidation of Loans Secured by Real
Estate and Acquisition of Real and Chattel Property.
7 CFR part 1955, subpart B--Management of Property.
7 CFR part 1955, subpart C--Disposal of Inventory Property.
7 CFR part 1956, subpart C--Debt Settlement--Community and Business
Programs.
All of the above mentioned regulations include regulatory
provisions of other programs of the former FmHA such as farm loans,
business and industrial loans, single family housing, and multi-family
housing. RUS is consolidating all regulatory actions in the above
mentioned regulations which affect WEP loan and grant servicing into
one new regulation--7 CFR part 1782. This consolidated regulation will
clarify for our borrowers and grantees, the available servicing tools
and the requirements to utilize these tools.
Additionally, RUS proposes to remove all administrative processes
from the regulations, leaving only regulatory actions that impact the
public. This streamlining will make the regulation more concise and
much easier to read and understand. The Agency will issue a Staff
Instruction that will include the administrative portion, which
outlines the Agency's internal processing procedures. The Staff
Instruction will be available to the public upon request at no cost.
Conclusion
RUS believes the consolidation and streamlining of the regulations
for this program will maximize the ability of the Borrowers to use and
understand the available servicing tools under this program. This
consolidation is consistent with the Administration's efforts to
streamline Government functions, improve the efficiency and
effectiveness of Government activities, and strive to be more borrower
friendly. This effort will enable the Agency to reduce regulations,
streamline Agency operations and provide servicing assistance with
fewer staff resources.
List of Subjects
7 CFR Part 1782
Accounting, Appeal procedures, Auditing, Debts, Delinquency, Grant
programs--Agriculture, Insurance, Loan programs--Agriculture.
7 CFR Part 1951
Accounting, Credit, Grant programs--Agriculture, Loan Programs--
Agriculture, Low and moderate-income housing loans--Rent subsidies,
reporting, and recordkeeping requirements, Rural areas.
7 CFR Part 1955
Government property, Government property management, Surplus
government property.
7 CFR Part 1956
Accounting, Loan programs--Agriculture, Rural areas.
Therefore, chapters XVII and XVIII of title 7, Code of Federal
Regulations are proposed to be amended as follows:
CHAPTER XVII--RURAL UTILITIES SERVICE, DEPARTMENT OF AGRICULTURE
1. Part 1782 is added to read as follows:
PART 1782--SERVICING OF WATER AND WASTE PROGRAMS
Sec.
1782.1 Purpose.
1782.2 Objectives.
1782.3 Definitions.
1782.4 Availability of forms and regulations.
1782.5 Nondiscrimination.
1782.6 [Reserved].
1782.7 Grants.
1782.8 Payments.
1782.9 Environmental requirements.
1782.10 Audit requirements.
1782.11 Refinancing requirements.
1782.12 Sale or exchange of security property.
1782.13 Transfer of Security and Assumption of Loans.
1782.14 Protection of Service Areas--7 U.S.C. 1926(b).
1782.15 Mergers and consolidations.
1782.16 Defeasance of RUS indebtedness.
1782.17 Subordination of security or parity lien.
1782.18 [Reserved].
1782.19 Third party agreements.
1782.20 Debt Settlement.
1782.21 [Reserved]
1782.22 Exception authority.
1782.23 Use of Rural Development Loans and Grants for Other
Purposes.
1782.24--1782.99 [Reserved].
1782.100 OMB Control Number.
Authority: 5 U.S.C. 301; 7 U.S.C. 1981; 16 U.S.C. 1005.
Sec. 1782.1 Purpose.
This part outlines the Rural Utilities Service's (RUS) policies and
procedures for servicing direct and insured Water and Waste Disposal
loans and grants; Watershed loans and advances; Resource Conservation
and Development loans; Technical Assistance and Training grants;
Emergency Community Water Assistance grants; Solid Waste Management
grants; and section 306C WWD loans and grants.
Sec. 1782.2 Objectives.
Loan and grant servicing is provided by RUS in order to assist
recipients in complying with the established objectives and
requirements for loans and grants, repaying loans on schedule, acting
in accordance with any necessary agreements, and protecting RUS'
financial interest. Servicing by RUS includes, but is not limited to,
the review of budgets, management reports, audits and financial
statements; performing security inspections; providing, arranging or
recommending technical assistance; evaluating environmental impacts of
proposed actions by the Borrower; and performing civil rights
compliance and graduation reviews.
Sec. 1782.3 Definitions.
Acceleration. A written notice informing the borrower that the
total unpaid principal and interest is due and payable immediately.
Adjustment. Satisfaction of a debt, including release of liability,
when acceptance by the agency is conditioned upon completion of payment
of the adjusted amount at a specific time or times; with or without the
payment of
[[Page 65549]]
any consideration when the adjustment offer is approved. An adjustment
is not a final settlement until all payments under the adjustment
agreement have been made.
Administrator. Administrator of RUS.
Agency. RUS or any employee acting on its behalf in accordance with
appropriate delegations of authority.
Assumption of debt. Agreement by one party to legally bind itself
to pay the debt incurred by another.
Borrower. Recipient of RUS or predecessor agency loan assistance.
Cancellation. Final discharge of debt with a release of liability.
Chargeoff. Write off of a debt and termination of servicing
activity without release of liability. A Chargeoff is a decision upon
the part of the Agency to remove debt from Agency receivables; however,
future payments may be received.
Compromise. Satisfaction of a debt including a release of liability
by accepting a lump-sum payment of less than the total amount owed.
Defeasance. Defeasance is the use of invested proceeds from a new
bond issue to repay outstanding bonds in accordance with the repayment
schedule of the outstanding bonds. The new issue supersedes the
contractual agreements from the prior issue.
Disposition of facility. Relinquishing control of a facility to
another entity.
False information. Information, known to be incorrect, provided
with the intent to obtain benefits which would not have been obtainable
based on correct information.
Government. The United States of America acting through the RUS,
USDA. USDA and RUS may be used interchangeably throughout this part.
Grantee. Recipient of RUS or predecessor agency grant assistance,
technical assistance, or services.
Letter of Conditions. A written document that describes the
conditions which the borrower and/or grantee must meet for funds to be
advanced and the loan and/or grant to be closed.
Liquidation. To satisfy a debt through the sale of a borrower's
assets and discharge of liabilities.
Parity Lien. A lien having an equal lien position to another
lender's lien on a borrower's asset.
Reasonable rates and terms. Commercial rates and terms borrowers
are expected to pay when borrowing for similar purposes and periods of
time.
Rural Development. The mission area of the Under Secretary for
Rural Development. Rural Development State and local offices administer
the water and waste programs on behalf of RUS.
Rural Utilities Service (RUS). An Agency of the USDA established
pursuant to section 232 of the Department of Agriculture Reorganization
Act of 1994 (Pub. L. 103-354).
Servicing office. The USDA office which maintains the official file
of the borrower or grantee and is responsible for the routine servicing
of the loan and grant account.
Servicing official. A USDA official who has been delegated loan and
grant approval and servicing authorities subject to any dollar
limitations within applicable programs.
Settlement. Compromise, adjustment, cancellation, or chargeoff of a
debt owed USDA. The term ``settlement'' is used for convenience in
referring to compromise, adjustment, cancellation, or chargeoff action,
individually or collectively.
Subordination agreement. A formal agreement whereby RUS permits
another lender to have a senior or prior lien position on a borrower's
assets to facilitate the borrower's obtaining financing from another
source of credit. A subordinate lien position is an inferior or junior
lien position.
USDA. United States Department of Agriculture.
Unliquidated obligations. Obligated loan or grant funds that have
not been advanced.
Voluntary conveyance. A method by which title to security is
voluntarily transferred to the Government.
Sec. 1782.4 Availability of forms and regulations.
Information about the availability of forms, regulations,
bulletins, and procedures referenced in this chapter are available in
any office of the USDA/Rural Development or RUS, United States
Department of Agriculture, Washington, DC 20250-1500 or at the Web site
http://www.usda.gov/rus/water.
Sec. 1782.5 Nondiscrimination.
Each instrument of conveyance required for a transfer, assumption,
sale of facility, or other servicing action under this subpart will
comply with Title VI of the Civil Rights Act of 1964, Title IX of the
Education Amendments of 1972, section 504 of the Rehabilitation Act of
1973, and other similarly worded Federal statutes and regulations
issued pursuant thereto that prohibits discrimination on the basis of
race, color, national origin, handicap, religion, age, or sex in
programs or activities receiving Federal financial assistance. Such
provisions apply for as long as the property continues to be used for
the same or similar purposes for which the Federal assistance was
extended, or for so long as the purchaser owns it, whichever is later.
Sec. 1782.6 [Reserved]
Sec. 1782.7 Grants.
Servicing actions relating to RUS grants are governed by the
provisions of 7 CFR parts 3015, 3016, 3017, 3018, 3019, 3021, and 3052
as applicable, and Executive Order (E.O.) 12803. Grantees remain
responsible for property acquired with grant funds in accordance with
terms of a grant agreement and applicable regulations.
Sec. 1782.8 Payments.
Payments will be applied in accordance with the terms of the debt
instrument. Information on non-typical payments can be obtained from
the Servicing official or office. All new borrowers will use pre-
authorized debits as required in their Letter of Conditions.
Sec. 1782.9 Environmental requirements.
Servicing actions involving subordination and lease or sale of RUS
owned property will be reviewed for compliance with 7 CFR part 1794 as
required in Sec. 1794.3. The appropriate environmental review will be
completed prior to approval of the servicing action.
Sec. 1782.10 Audit requirements.
Audits for loans will be required in accordance with Sec. 1780.47
of this title. If the borrower becomes delinquent or is experiencing
problems, the servicing official will require an audit or other
documentation deemed necessary to resolve the delinquency. The
provisions of 7 CFR part 3052 address audit requirements for recipients
of federal grants.
Sec. 1782.11 Refinancing requirements.
If at any time it appears to the Government that the borrower is
able to refinance the amount of the indebtedness then outstanding, in
whole or in part, by obtaining a loan for such purposes from
responsible cooperative or private credit sources, at reasonable rates
and terms, the borrower will, upon request of the Government, apply for
and accept such loan in sufficient amount to repay the Government and
will take all such actions as may be required in connection with such
loan.
Sec. 1782.12 Sale or exchange of security property.
A cash sale of all or a portion of a borrower's assets or an
exchange of security property may be approved subject to the conditions
set forth in this section.
[[Page 65550]]
(a) Approval conditions. Approval may be given when the servicing
official determines that:
(1) The consideration is for the full amount of the debt or the
present fair market value as determined by an appraisal completed by a
qualified Rural Development employee or an independent appraiser as
determined appropriate by the approval official;
(2) The sale or exchange will not prevent carrying out the purpose
of the loan;
(3) The remaining property is adequate security for the loan and
the transaction will not adversely affect RUS' security position;
(4) If the property to be sold or exchanged will be used for
similar purposes that the loan was made, the purchaser will:
(i) Execute Form RD 400-4, ``Assurance Agreement.'' The instrument
of conveyance will contain the civil rights covenant referenced in 7
CFR 1901.202(e); and
(ii) Provide RUS with a written agreement assuming all rights and
obligations of the original borrower, and
(5) Proceeds remaining after paying any reasonable and necessary
selling expenses are to be used for one or more of the following
purposes:
(i) To pay RUS debt, pay on debts secured by a prior lien, and pay
on debts secured by a parity or subsequent lien if it is to RUS'
advantage;
(ii) To purchase or acquire property more suited to the borrower's
needs, providing RUS security position is maintained; and
(iii) To develop or enlarge the facility if necessary to improve
the borrower's debt-paying ability, place the operation on a sounder
financial basis, or further the loan objectives and purposes.
(b) Sale of assets financed with RUS grants. The requirements for
the sale or disposition of assets financed with RUS grants are
determined by the terms of the grant agreement, 7 CFR parts 3015, 3016,
and 3019, and E.O. 12803, as applicable.
(c) Release from liability. If a borrower can no longer meet the
objectives of the loan, the property may be sold. If the full amount of
the borrower's debt is paid or assumed, the State Director may release
the borrower from liability.
Sec. 1782.13 Transfer of Security and Assumption of Loans.
It is RUS policy to approve transfers and assumptions to
transferees that will continue the original purpose of the loan.
Assistant Administrator written concurrence is required when the
transfer exceeds the State Director's loan approval authority. The
transfer will be approved in accordance with the following
requirements:
(a) General requirements for transferees. The fulfillment of the
following requirements for transfers will be determined by the approval
official, in his or her discretion:
(1) The transferees must meet the eligibility requirements of 7 CFR
1780.7 and provide the same information required in 7 CFR Part 1780,
subpart B for application processing.
(2) The transfer will not be disadvantageous to the Government as
determined by the approval official.
(3) If the RUS debt(s) exceeds the present market value of the
security as determined by an appraisal, the transferee will assume an
amount at least equal to the present market value.
(4) RUS must concur in plans for disposition of funds in any
reserve account, including project construction bank accounts. A
reserve account may be considered as a transferable asset.
(5) The transferee will assume all of the borrower's
responsibilities regarding loans. The transferee will also agree to
accept the original loan conditions plus any conditions set forth by
RUS with regard to the transfer.
(6) A current appraisal will be completed to establish the present
market value of the security when the full debt is not being assumed.
(7) There must be no lien, judgement, or similar claims of other
parties against the RUS security being transferred unless the
transferee is willing to accept such claims. RUS must also determine
that the claims will not prevent the transferee from repaying the RUS
debt, meeting all operating and maintenance costs, and maintaining
required reserves. The written consent of any other lienholder will be
obtained where required.
(8) A letter of conditions establishing requirements to be met in
connection with the transfer will be issued, and the transferee will be
required to execute Form RD 1942-46, ``Letter of Intent to Meet
Conditions,'' prior to closing of the transfer.
(9) The transferee will obtain insurance according to RUS
requirements.
(10) The effective date of the transfer is the date the transfer is
closed, which is the same date Form RD 1951-15, ``Community Programs
Assumption Agreement,'' or other appropriate assumption agreement,
which is executed and delivered by all necessary parties.
(11) Title to all assets will be conveyed from the transferor to
the transferee unless all parties concerned, including RUS, agree upon
other arrangements. All instruments of conveyance will contain the
necessary nondiscrimination covenant as referred to in Sec. 1782.5.
(12) If the transfer and assumption is to one or more members of
the borrower's organization, there must not be a loss to the
Government.
(13) The State Director is authorized to approve transfers to
eligible transferees at the same interest rate as on the borrower's
note(s) or bond(s). The maturity of the debt instrument for the assumed
debt may not exceed the lesser of the repayment period authorized in 7
CFR 1780.13(e) for a ``new'' loan or the expected life of the facility.
(14) RUS National Office concurrence is required for transfers not
in compliance with paragraphs (a)(1) through (14) of this section.
(b) Loan requirements for eligible transferees. If a loan is
evidenced and secured by a note and lien on real or chattel property,
Form RD 1951-15, or other appropriate assumption agreement will be
executed by the transferee. If a bond secures a loan, transfer
documents will be developed by bond counsel and approved by Office of
the General Counsel, USDA (OGC).
(1) Loans being transferred and assumed may be combined when the
security is the same, new terms are being provided, a new debt
instrument will be issued, and the loans have the same interest rate
and are for the same purpose. If applicable, 7 CFR 1780.94(l) will
govern the preparation of any new debt instruments required.
(2) A loan may be made in connection with a transfer if the
transferee meets all eligibility and other requirements for the kind of
loan being made. Such a loan will be considered as a separate loan, and
must be evidenced by a separate debt instrument. However, it is
permissible to have one authorizing loan resolution or ordinance if
permitted by State statutes.
(3) Any development funds remaining in a bank account that are not
refunded to RUS will be transferred to a bank account for the
transferee. This will occur simultaneously with the closing of the
transfer and the funds will be used in completing planned development.
(c) Release from liability. Transferors may be released from
liability when their debt is paid in full or when the debt is settled
in accordance with Sec. 1782.20 of this part.
(d) Transfer of facility financed with RUS grants. The requirements
for the sale or disposition of assets financed with RUS grants are
determined by the terms of the grant agreement, 7 CFR
[[Page 65551]]
parts 3015, 3016, and 3019, and E.O. 12803, as applicable.
Sec. 1782.14 Protection of Service Areas--7 U.S.C. 1926(b).
(a) 7 U.S.C. 1926(b) was enacted to protect the service area of RUS
borrowers with outstanding loans, or those loans sold in the sale of
assets authorized by the ``Joint Resolution Making Continuing
Appropriations for the Fiscal Year 1987, Pub. L. 99-591, 100 Stat. 3341
(1986),'' from loss of users due to actions or activities of other
entities in the service area of the RUS financed system. Without this
protection, other entities could extend service to users within the
service area and thereby undermine the purpose of the congressionally
mandated water and waste loan and grant programs; and jeopardize the
borrower's ability to repay its RUS debt.
(b) Responsibility for initiating action in response to those
actions prohibited by 7 U.S.C. 1926(b) rests with the borrower.
Sec. 1782.15 Mergers and consolidations.
Mergers and consolidations will be processed the same as a transfer
and assumption, although approvals by RUS will give consideration to
the differences under the applicable law regarding the type of
transaction under consideration. Mergers occur when two or more
entities combine in such a manner that only one remains in existence.
Consolidations occur when two or more entities combine to form a new
consolidated entity, and the original entities cease to exist. In both
mergers and consolidations, the surviving or emerging entity acquires
the assets and assumes the liabilities of the entity or entities that
ceased to exist.
Sec. 1782.16 Defeasance of RUS indebtedness.
Defeasance, or amending outstanding loan instruments and agreements
to permit defeasance of RUS debt instruments, is not authorized.
Sec. 1782.17 Subordination of security or parity lien.
In order for RUS to agree to either a subordination or to a parity
lien position, the borrower must submit a written request to the
servicing office.
(a) The written request for parity or subordination must contain
the following items:
(1) An explanation of the purpose of the request for parity or
subordination; amount of loan for which parity or subordination is
requested; description of security property; type of security
instrument; name, and address of financial institution requesting the
transaction; and other information determined necessary by the
servicing official to evaluate the request.
(2) Current financial statements or an audit, if available or
determined necessary by the servicing official.
(3) An annual operating budget which projects income and expenses
for a typical year's operation. If construction is involved, the budget
must be projected through the first full year of operation following
completion of the planned improvements.
(4) A copy of the proposed security instrument.
(5) A certification from the borrower that the RUS debt cannot be
refinanced at reasonable rates and terms.
(6) An appraisal, when the primary security is real estate or
determined necessary by the servicing official in order to determine
the adequacy of loan security or repayment ability.
(7) A certification that any development work will comply with
subpart C of part 1780 of this chapter.
(8) Requests for a subordination of security are subject to the
appropriate environmental review as required by Sec. 1794.3 of this
chapter.
(b) Requests for parity or subordination must comply with
requirements of paragraph (a) of this section, requirements as
specified in the bond or loan documents, the requirements as specified
in Sec. 1780.94(i) of this chapter, and as provided in applicable
State law.
(c) Proposals for tax exempt issues will be considered for parity
only.
(d) Once the borrower has met all of the requirements in paragraphs
(a), (b) and (c) of this section and the proposal is determined to be
in the Government's interest, RUS will then grant approval of the
borrower's request for parity or subordination.
Sec. 1782.18 [Reserved]
Sec. 1782.19 Third party agreements.
The State Director may authorize third party operation,
maintenance, and management of an RUS financed facility. The borrower's
attorney must review the contract, management agreement, written lease
or other third party agreement and issue an opinion to the agency as to
their legal sufficiency. The borrower shall retain the legal authority
necessary for owning, constructing, operating and maintaining the
facility.
Sec. 1782.20 Debt settlement.
Pursuant to 7 U.S.C. 1981 this section prescribes policies for debt
settlement of Water and Waste Disposal Loans; Watershed loans and
advances; Resource Conservation and Development loans; and 306(c) Water
and Waste Facility loans.
(a) General requirements for debt settlement. (1) The debt or any
extension thereof on which settlement is requested must be due and
payable. The debt will be due and payable either under the terms of the
note or other instrument, or by acceleration, unless the debt is to be
cancelled without application under paragraph (e)(2) of this section or
charged off under paragraph (f) of this section.
(2) Normally, all security will be disposed of prior to the date of
application for debt settlement unless it is necessary to abandon
security through the debt settlement process. In such cases, debt
settlement may proceed if the servicing official determines that
further collection efforts would be ineffective, uneconomical, and not
in the best interests of the Government.
(3) Debtors will not be permitted to sell security and use the
proceeds as part or all of a compromise/adjustment debt settlement
offer.
(4) Request for debt settlement will consist of Form RD 1956-1
``Application For Settlement of Indebtedness,'' current financial
information, description and estimated market value of collateral, and
status of operation (i.e. number of users, compliance with
environmental issues, etc.).
(5) OGC advice on compliance with State or Federal statutes that
may affect the debt settlement action must be requested.
(b) Debts ineligible for settlement. Debts will not be settled if:
(1) Referral to OIG and/or to OGC is contemplated or pending
because of suspected criminal violation, or
(2) Civil action to protect the interest of the Government is
contemplated or pending, or
(3) An investigation for suspected fiscal irregularity is
contemplated or pending, or
(4) The debtor requests settlement of a claim that has been
referred to or a judgment obtained by the United States Attorney. The
settlement offer and any related payment must be submitted directly to
the United States Attorney for consideration.
(c) Types of debt settlement. Typically, debt settlement will be
accomplished through compromise/adjustment, chargeoff, or cancellation.
Any debt remaining after the security has been liquidated, by sale or
transfer, will be cancelled if there are no other assets from which to
collect the debt. The servicing official will proceed with
[[Page 65552]]
advice from OGC and the National Office, as required.
(d) Compromise and adjustment. Debts may be compromised or adjusted
and security retained by the debtor, provided:
(1) The debtor is unable to pay the indebtedness in full, and
(2) The debtor has offered an amount equal to the present fair
market value of all security or facility financed, and
(3) The debtor has offered any additional amount that the debtor is
able to pay.
(e) Cancellation. Nonjudgment debts, regardless of the amount, may
be cancelled with or without application by the debtor.
(1) With application by the debtor. Debts may be cancelled upon
application of the debtor, subject to the following conditions:
(i) The servicing official furnishes a favorable recommendation
concerning the cancellation;
(ii) There is no known security for the debt and the debtor has no
other assets from which the debt could be collected;
(iii) The debtor is unable to pay any part of the debt and has no
reasonable prospect of being able to do so; and
(iv) The debt or any extension thereof is due and payable under the
terms of the note or other instrument, or due to acceleration by
written notice prior to the date of application.
(2) Without application by debtor. Debts may be cancelled upon a
favorable recommendation of the servicing official in the following
instances:
(i) Debtors discharged in bankruptcy. If there is no security for
the debt, debts discharged in bankruptcy shall be cancelled by the use
of Form RD 1956-1. A copy of the Bankruptcy Court's Discharge Order
must be attached.
(ii) Impractical to obtain debtor's signature. Debts may be
cancelled if it is impractical to obtain a signed application and the
requirements of paragraphs (e)(1) of this section are met. Form RD
1956-1 will document the specific reason(s) why it was impossible or
impracticable to obtain the signature of the debtor. If the debtor
refused to sign the application, the reason(s) should be documented.
(f) Chargeoff. (1) Judgment debts. Judgment debts, regardless of
the amount, may be charged off without the debtor's signature upon a
favorable recommendation of the servicing official provided:
(i) The United States Attorney's file is closed, and
(ii) The requirements of paragraph (e)(2)(ii) of this section, if
applicable, have been met, or 2 years have elapsed since any
collections were made on the judgment. The debtor must also have no
equity in the property subject to the lien or upon which a lien can be
obtained.
(2) Nonjudgment debts. Debts that cannot be settled under other
sections of this part may be charged off without the debtor's signature
upon a favorable recommendation of the servicing official in the
following instances:
(i) When OGC advises in writing that the claim is legally without
merit, or that evidence necessary to prove the claim in court cannot be
provided; or
(ii) When there is no known security for the debt, the debtor has
no other assets from which the debt could be collected, and the debtor:
(A) Is unable to pay any part of the debt and has no reasonable
prospect of being able to do so; or
(B) Is able to pay part or all of the debt but refuses to do so,
and OGC provides an opinion to the effect that the Government cannot
enforce collection of a significant amount from assets or income.
Sec. 1782.21 [Reserved]
Sec. 1782.22 Exception authority.
The Administrator may, in individual cases, make an exception to
any requirement or provision of this part which is not inconsistent
with the authorizing statute or other applicable law and is determined
to be in the Government's interest. Requests for exceptions must be
made in writing by the State Director and supported with documentation
to explain the adverse effect on the Government's interest, propose
alternative course(s) of action, and show how the adverse affect will
be eliminated or minimized if the exception is granted. The exception
decision will be documented in writing, signed by the Administrator,
and retained in the files.
Sec. 1782.23 Use of Rural Development Loans and Grants for other
purposes.
(a) If, after making a loan or a grant, the Administrator
determines that the circumstances under which the loan or grant was
made have sufficiently changed to make the project or activity for
which the loan or grant was made available no longer appropriate, the
Administrator may allow the borrower or grantee to use property (real
and personal) purchased or improved with the loan or grant funds, or
proceeds from the sale of property (real and personal) purchased with
such funds, for another project or activity that:
(1) Will be carried out in the same area as the original project or
activity;
(2) Meets the criteria for a loan or grant described in section
381E(d) of the Consolidated Farm and Rural Development Act, as amended;
and
(3) Satisfies such additional requirements as are established by
the Administrator.
(b) If the new use of the property is under the authority of
another USDA Agency Administrator, the other Administrator will be
consulted on whether the new use will meet the criteria of the other
program. Since the new project or activity must be carried out in the
same area as the original project or activity, a new rural area
determination will not be necessary.
(c) Borrowers and grantees that wish to use the proceeds for other
purposes may make their request through the appropriate Rural
Development State Office. Permission to use this option will be
exercised on a case-by-case-basis on applications submitted through the
State Office to the Administrator for consideration. If the proposal is
approved, the Administrator will issue a memorandum to the State
Director outlining the conditions necessary to complete the
transaction.
Sec. 1782.24-1782.99 [Reserved]
Sec. 1782.100 OMB Control Number.
The information collection requirements in this part are approved
by the Office of Management and Budget (OMB) and assigned OMB Control
Number 0572-XXXX.
CHAPTER XVIII--RURAL HOUSING SERVICE, RURAL BUSINESS--COOPERATIVE
SERVICE, RURAL UTILITIES SERVICE, AND FARM SERVICE AGENCY, DEPARTMENT
OF AGRICULTURE.
PART 1951--SERVICING AND COLLECTIONS
2. The authority citation for part 1951 continues to read as
follows:
Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 42 U.S.C. 1480.
Subpart A--Account Servicing Policies
3. Amend Sec. 1951.1 by adding the following sentence to the end
of the section:
Sec. 1951.1 Purpose.
* * * This subpart does not apply to Water and Waste Programs of
the Rural Utilities Service, Watershed loans, or Resource Conservation
and Development loans, which are serviced under part 1782 of this
title.
Subpart D--Final Payment on Loans
4. Revise Sec. 1951.151 to read as follows:
[[Page 65553]]
Sec. 1951.151 Purpose.
This subpart prescribes authorizations, policies and procedures of
the Farm Service Agency (FSA), Rural Housing Service (RHS), and Rural
Business--Cooperative Service (RBS), herein referred to as ``Agency,''
for processing final payment of all loans. This subpart does not apply
to direct Single Family Housing customers of the RHS. This subpart does
not apply to Water and Waste Programs of the Rural Utilities Service,
Watershed loans, Resource Conservation and Development loans, which are
serviced under part 1782 of this title.
Subpart E--Servicing of Community and Direct Business Programs
Loans and Grants
5. Revise Sec. 1951.201 to read as follows:
Sec. 1951.201 Purposes.
This subpart prescribes the Rural Development mission area
policies, authorizations, and procedures for servicing Community
Facility loans and grants; Rural Business Enterprise/Television
Demonstration grants; Association Recreation loans; Direct Business
loans; Economic Opportunity Cooperative loans; Rural Renewal loans;
Energy Impacted Area Development Assistance Program grants; National
Nonprofit Corporation grants; System for Delivery of Certain Rural
Development Programs panel grants; and Rural Cooperative Development
Grants in subpart F of part 4284 of this title. Rural Development State
Offices act on behalf of the Rural Business-Cooperative Service, and
the Farm Service Agency as to loan and grant programs formerly
administered by the Farmers Home Administration and the Rural
Development Administration. Loans sold without insurance to the private
sector will be serviced in the private sector and will not be serviced
under this subpart. The provisions of this subpart are not applicable
to such loans. Future changes to this subpart will not be made
applicable to such loans. This subpart does not apply to Water and
Waste Programs of the Rural Utilities Service, Watershed loans, and
Resource Conservation and Development Loans, which are serviced under
part 1782 of this title.
6. Add Sec. 1951.218 to read as follows:
Sec. 1951.218 Use of Rural Development Loans and Grants for other
purposes.
(a) If, after making a loan or a grant, the Administrator
determines that the circumstances under which the loan or grant was
made have sufficiently changed to make the project or activity for
which the loan or grant was made available no longer appropriate, the
Administrator may allow the loan borrower or grant recipient to use
property (real and personal) purchased or improved with the loan or
grant funds, or proceeds from the sale of property (real and personal)
purchased with such funds, for another project or activity that:
(1) Will be carried out in the same area as the original project or
activity;
(2) Meets the criteria for a loan or grant described in section
381E(d) of the Consolidated Farm and Rural Development Act, as amended;
and
(3) Satisfies such additional requirements as are established by
the Administrator.
(b) For the purpose of this section, Administrator means the
Administrator of the Rural Housing Service or Rural Business-
Cooperative Service that has the delegated authority to administer the
loan or grant program that covers the property or the proceeds from the
sale property proposed to be used in another way.
(c) If the new use of the property is under the authority of
another Administrator, the other Administrator will be consulted on
whether the new use will meet the criteria of the other program. Since
the new project or activity must be carried out in the same area as the
original project or activity, a new rural area determination will not
be necessary.
(d) Borrowers and grantees that wish to take advantage of this
option may make their request through the appropriate Rural Development
State Office. Permission to use this option will be exercised on a
case-by-case-basis on applications submitted through the State Office
to the Administrator for consideration. If the proposal is approved,
the Administrator will issue a memorandum to the State Director
outlining the conditions necessary to complete the transaction.
Subpart F--Analyzing Credit Needs and Graduation of Borrowers
6. Revise Sec. 1951.251 to read as follows:
Sec. 1951.251 Purpose.
This subpart prescribes the policies to be followed when analyzing
a direct borrower's need for continued Agency supervision, further
credit, and graduation. All loan accounts will be reviewed for
graduation in accordance with this subpart, with the exception of
Guaranteed, Rural Development Loan Funds, and Rural Rental Housing
loans made to build or acquire new units pursuant to contracts entered
into on or after December 15, 1989, and Intermediary Relending Program
loans. The term ``Agency'' used in this subpart refers to the Farm
Service Agency (FSA) (including its county and State committees and
their personnel), Rural Housing Service (RHS), or Rural Business-
Cooperative Service (RBS), depending upon the loan program discussed
herein. This subpart does not apply to RHS direct single family housing
(SFH) customers. In addition, this subpart does not apply to Water and
Waste Programs of the Rural Utilities Service, Watershed loans,
Resource Conservation and Development loans, which are serviced under
part 1782 of this title.
Subpart O--Servicing Cases Where Unauthorized Loan(s) or Other
Financial Assistance Was Received--Community and Insured Business
Programs
7. Revise Sec. 1951.701 to read as follows:
Sec. 1951.701 Purpose.
This subpart prescribes the policies and procedures for servicing
Community and Business Program loans and/or grants made by Rural
Development when it is determined that the borrower or grantee was not
eligible for all or part of the financial assistance received in the
form of a loan, grant, or subsidy granted, or any other direct
financial assistance. It does not apply to guaranteed loans. Loans sold
without insurance by the Rural Development to the private sector will
be serviced in the private sector and will not be serviced under this
subpart. The provisions of this subpart are not applicable to such
loans. Future changes to this subpart will not be made applicable to
such loans. This subpart does not apply to Water and Waste Programs of
the Rural Utilities Service, Watershed loans, and Resource Conservation
and Development Loans, which are serviced under part 1782 of this
title.
PART 1955--PROPERTY MANAGEMENT
8. The authority citation for part 1955 continues to read as
follows:
Authority: 5 U.S.C. 301; 7 U.S.C. 1989; and 42 U.S.C. 1480.
Subpart A--Liquidation of Loans Secured by Real Estate and
Acquisition of Real and Chattel Property
9. Revise Sec. 1955.1 to read as follows:
[[Page 65554]]
Sec. 1955.1 Purpose.
This subpart delegates authority and prescribes procedures for the
liquidation of loans to individuals and to organizations as identified
in Sec. 1955.3. It pertains to the Farm Credit programs of the Farm
Service Agency (FSA), Multi-Family Housing (MFH) and Community
Facilities (CF) programs of the Rural Housing Service (RHS), and direct
programs of the Rural Business-Cooperative Service (RBS). Guaranteed
RBS loans are liquidated upon direction from the Deputy Administrator,
Business Programs, RBS. This subpart does not apply to RHS single
family housing loans or to CF loans sold without insurance in the
private sector. These CF loans will be serviced in the private sector
and future revisions to this subpart no longer apply to such loans. In
addition, this subpart does not apply to Water and Waste Programs of
the Rural Utilities Service, Watershed loans, Resource Conservation and
Development loans, which are serviced under part 1782 of this title.
Subpart B--Management of Property
10. Revise the introductory text of Sec. 1955.51 to read as
follows:
Sec. 1955.51 Purpose.
This subpart delegates authority and prescribes policies and
procedures for the Rural Housing Service (RHS), Rural Business-
Cooperative Service (RBS), and Farm Service Agency (FSA), herein
referred to as ``Agency,'' and references contained in this subpart to
the Farmers Home Administration (FmHA) are synonymous with ``Agency.''
This subpart does not apply to RHS single family housing loans or
community program loans sold without insurance to the private sector.
These community program loans will be serviced by the private sector
and future revisions and this subpart no longer apply to such loans. In
addition, this subpart does not apply to Water and Waste Programs of
the Rural Utilities Service, Watershed loans, Resource Conservation and
Development loans, which are serviced under part 1782 of this title.
This subpart does cover:
* * * * *
Subpart C--Disposal of Inventory Property
11. Revise Sec. 1955.101 to read as follows:
Sec. 1955.101 Purpose.
This subpart delegates program authority and prescribes policies
and procedures for the sale of inventory property including real
estate, related real estate rights and chattels. It also covers the
granting of easements and rights-of-way on inventory property. Credit
sales of inventory property to ineligible (nonprogram (NP)) purchasers
will be handled in accordance with subpart J of part 1951 of this
chapter, except Community and Business Programs (C&BP) and Multi-Family
Housing (MFH) which will be handled in accordance with this subpart. In
addition, credit sales of Single-Family Housing (SFH) properties
converted to MFH will be handled in accordance with this subpart. This
subpart does not apply to SFH inventory property. In addition, this
subpart does not apply to Water and Waste Programs of the Rural
Utilities Service, Watershed loans, Resource Conservation and
Development loans, which are serviced under part 1782 of this title.
PART 1956--DEBT SETTLEMENT
12. The authority citation for part 1956 continues to read as
follows:
Authority: 5 U.S.C. 301; 7 U.S.C. 1981; 31 U.S.C 3711; 42 U.S.C.
1480.
Subpart C--Debt Settlement--Community and Business Programs
13. Amend Sec. 1956.101 by adding the following sentence to the
end of the section:
Sec. 1956.101 Purpose.
* * * In addition, this subpart does not apply to Water and Waste
Programs of the Rural Utilities Service, Watershed loans, Resource
Conservation and Development loans, which are serviced under part 1782
of this title.
Dated: October 7, 2004.
Gilbert Gonzalez,
Acting Under Secretary, Rural Development.
[FR Doc. 04-25247 Filed 11-12-04; 8:45 am]
BILLING CODE 3410-15-P