[Federal Register: September 21, 2009 (Volume 74, Number 181)]
[Rules and Regulations]
[Page 48005-48007]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr21se09-5]
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DEPARTMENT OF AGRICULTURE
Rural Utilities Service
7 CFR Part 1779
Rural Housing Service
7 CFR Part 3575
Rural Business--Cooperative Service
Rural Utilities Service
7 CFR Parts 4279 and 4280
Rural Business--Cooperative Service
Rural Housing Service
Rural Utilities Service
7 CFR Part 5001
[FR Doc. E8-29151]
RIN 0570-AA65
Rural Development Guaranteed Loans
AGENCIES: Rural Business--Cooperative Service, Rural Housing Service,
Rural Utilities Service, USDA.
ACTION: Interim final rule; withdrawal.
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SUMMARY: On December 17, 2008, USDA Rural Development published an
interim rule with request for comments establishing a unified
guaranteed loan platform for the enhanced delivery of four existing
Rural Development guaranteed loan programs--Community Facility; Water
and Waste Disposal; Business and Industry; and Renewable Energy Systems
and Energy Efficiency Improvement Projects. Having considered the
comments received on the interim rule and for the reasons explained
below, Rural Development is withdrawing the interim rule for Rural
Development Guaranteed Loans.
DATES: The interim final rule published on December 17, 2008 (73 FR
76698), delayed until February 17, 2009 (74 FR 2823), further delayed
until March 9, 2009 (74 FR 7179), further delayed until June 1, 2009
(74 FR 9759), and further delayed until October 1, 2009 (74 FR 25617)
is withdrawn as of September 21, 2009.
FOR FURTHER INFORMATION CONTACT: Mr. Michael Foore, Rural Development,
Business and Cooperative Programs, U.S. Department of Agriculture, 1400
Independence Avenue, SW., Stop 3201, Washington, DC 20250-3201; e-mail:
Michael.Foore@wdc.usda.gov; telephone (202) 690-4730.
SUPPLEMENTARY INFORMATION:
[[Page 48006]]
I. Background
On September 14, 2007, Rural Development proposed (72 FR 52618) to
combine four of its guaranteed loan programs into a unified regulatory
platform. These four regulations are Community Facility; Water and
Waste Disposal; Business and Industry; and Renewable Energy Systems and
Energy Efficiency Improvement Projects. The regulations for these four
programs developed over time and, in some aspects, independently of
each other. As a result, certain operational and administrative issues
associated with the utilization of Agency resources and risk management
developed when looking at all four program regulations as a whole as
well as individually. The intent of the interim rule was to eliminate
or mitigate these issues, enable the Agency, administratively, to
better manage its guaranteed loan making and servicing activities, and
to reduce the cost of operating the guaranteed loan programs.
In response to comments received on the proposed rule, Rural
Development made significant changes to the unified guaranteed loan
regulatory platform. Because of the level and number of changes made to
the proposed rule, Rural Development issued an interim rule, which was
published in the Federal Register on December 17, 2008 (73 FR 76698),
with request for comments, with an effective date of January 16, 2009.
Subsequent to the December 17, 2008 Federal Register notice, Rural
Development issued a series of notices delaying the effective date of
the interim rule (74 FR 2823, January 16, 2009; 74 FR 7179, February
13, 2009; 74 FR 9759, March 6, 2009; and 74 FR 25617, May 29, 2009)
such that the effective date was delayed to October 1, 2009. USDA Rural
Development identified the need for delaying the effective date of the
interim rule in each of these notices. Reasons cited included the
necessity for additional time in order to:
Make changes to accounting and financial control
information technology systems critical to the delivery of these
programs;
Prepare the best guidance for its field staff and to train
the field staff; and
Finish considering the public comments received during the
comment period for the interim rule as well as the public comments
received on delaying the effective date of the interim rule.
In light of the pending October 1, 2009, effective date for the
interim rule and the need to review of the interim rule, as described
in the January 20, 2009, memo from the Assistant to the President and
Chief of Staff, entitled ``Regulatory Review'', Rural Development
conducted a review of the interim rule and the comments received on it.
Rural Development received a total of 71 public comment letters at
various stages during the development of the interim rule--when it was
proposed, when it was published, and when its effective date was first
proposed to be extended. Comment letters were received from Rural
Development personnel, attorneys, financial institutions, trade groups,
lender associations, and individuals.
Comments on the proposed rule were made on both the proposed
guaranteed loan platform and on specific provisions contained in the
proposed rule. While a number of commenters stated that they
``commend'' or ``support'' the unified guaranteed loan platform, others
expressed strong concerns, with some suggesting that, if adopted as
proposed, the rule would impose unnecessary burden on both borrowers
and lenders, and could result in lenders not participating in the
program. Numerous comments were also received on specific proposed
requirements (e.g., the threshold level at which audited financial
statements would be required; inclusion of lines of credit as an
eligible loan purpose under the Business and Industry program). Many
commenters requested that the Agency continue the current policies
found in the current regulations, most frequently referring to the
Business and Industry regulations (7 CFR part 4279, subpart A and
subpart B, and 7 CFR 4287, subpart B). In many, if not most, instances,
the Agency agreed with the commenters and made revisions as reflected
in the interim rule.
In commenting on the interim rule, most commenters were still very
concerned about the effect of the interim rule on lenders and
borrowers, urging Rural Development to either withdraw the rule or to
further delay its effective date until substantial improvements could
be made. Concerns expressed included, but were not limited to:
Because the interim rule is a new program with new
procedures, Rural Development staff and commercial lenders will spend
significant time and effort re-learning programs that are currently
well-understood and fluently operated. Thus, at a time when additional
funding will be available through the forthcoming stimulus and disaster
funds, implementing the interim rule could endanger a successful
program and impede delivery of funds.
The interim rule adds unnecessary confusion and complexity
to the delivery of these programs, creating not only a confusing
regulatory maze for borrowers to navigate in order to access program
funds provided in the 2008 Farm Bill, but a tremendous drag on Rural
Development and lender productivity at a time when all efforts should
be directed to delivering stimulus funds.
The interim rule could significantly curtail the ability
of these programs to maintain continuous operation because all loan
guarantees will halt until such time as there is a new ``supply'' of
approved lenders. This is not appropriate customer service given the
current economic downturn when the programs are most needed and the
additional economic stimulus funding authority.
As noted previously, several commenters concurred with the general
goals of unified platform for guaranteed loans, which include
streamlining the regulatory framework of these programs, minimizing the
time and effort of dealing with separate sets of regulations and
requirements, and making them easier to use for lenders and borrowers.
Implemented correctly, such a reorganization could free up agency
personnel to spend their time in more constructive pursuits to enhance
the administration and effectiveness of these programs. One commenter
encouraged Rural Development to implement this program without
substantial changes to the process that is currently in place, with
several commenters encouraging Rural Development to work with the
lending community to improve program delivery.
Based on its review of the interim rule and its consideration of
the comments received, Rural Development has determined that a better
alternative exists to the implementation of its guaranteed loan
programs than would be achieved under the interim rule. While Rural
Development supports a ``common regulatory platform'' as a desirable
structure, it now believes the platform found in 7 CFR part 5001 is not
the best approach. In general, Rural Development believes that the
platform created under 7 CFR part 5001 is ``too broad'' in its scope,
attempting to provide for programs whose primary focus includes both
commercial lending activities (i.e., business and industry and
renewable energy) and community development activities (i.e., community
facilities and water and waste).
Further, Rural Development believes that implementing 7 CFR part
5001 would impose excessive and burdensome requirements on lenders by
requiring them to seek approval to do business with the Agency and
submit summaries of their lending policies as
[[Page 48007]]
well as on non traditional lenders. Such provisions would discourage
the participation of many lenders in the program, which would
jeopardize the utilization of funds in these programs. Rural
Development agrees with the commenters that this is of particular
concern in light of the need of Rural Development's Rural Business--
Cooperative Service to process the applications for Business and
Industry Loan Guarantees funded with American Recovery and Reinvestment
Act (Recovery Act) funds pursuant to the Notice of Funds Availability
published on July 24, 2009 (74 FR 36649).
Instead, Rural Development believes that it is better to narrow the
scope of a common regulatory platform to the activities associated with
its commercial lending activities. In doing so, Rural Development will
be able to shift the focus of the common regulatory platform from a
broad array of guaranteed loan activities to those commercial lending
activities associated with its Business Program, including renewable
energy.
Focusing on commercial lending activities within its Business
Program provides Rural Development the option of developing a common
regulatory structure based on its current Business and Industry
guaranteed loan regulations (7 CFR part 4279, subparts A and B, and 7
CFR part 4287, subpart B) and on its current Rural Energy for America
Program regulation (7 CFR part 4280, subpart B) and incorporating the
Biorefinery Assistance guaranteed loan program into this regulatory
structure. By adopting, leveraging, and refining these existing
regulations, Rural Development believes that this approach to
developing a common regulatory structure for its commercial lending
activities is preferable to implementing 7 CFR Part 5001 for several
reasons, as suggested by the commenters, including, but not necessarily
limited to:
In contrast to 7 CFR part 5001, the framework of the
current Business and Industry Loan Guarantee regulations is well
established with stakeholders and has a proven program delivery track
record.
Implementing 7 CFR part 5001 would require both lenders
and Rural Development staff to be re-trained in order to learn a new
system. Because such a complete overhaul of the Business Program
regulations is not required, it is not appropriate to burden the Rural
Development staff to learn and implement a completely new system.
Implementing 7 CFR part 5001 would impede Business Program
funding utilization. The lack of familiarity with the interim rule
would cause a 60 to 90 day standstill in program delivery at a time
when the program level is at record levels. Furthermore, implementation
of the interim rule will seriously impede the Administration's
initiative to use Recovery Act funds to improve the Nation's economy.
In summary, based on its review and re-examination of 7 CFR Part
5001 and the comments received, Rural Development takes the position
that, with some refinement and enhancement, a common regulatory
structure for guaranteed loans utilizing the current Business Program
regulations will result in a better and more efficient regulatory
structure than would be achieved through the implementation of 7 CFR
part 5001.
II. Withdrawal of Interim Rule
Accordingly, the interim final rule published on December 17, 2008
(73 FR 76698), delayed until February 17, 2009, (74 FR 2823), further
delayed until March 9, 2009 (74 FR 7179), further delayed until June 1,
2009 (74 FR 9759), and further delayed until October 1, 2009 (74 FR
25617) is withdrawn as of September 21, 2009.
Dated: September 14, 2009.
Dallas Tonsager,
Under Secretary.
[FR Doc. E9-22527 Filed 9-18-09; 8:45 am]
BILLING CODE 3410-XY-P