[Federal Register Volume 76, Number 19 (Friday, January 28, 2011)]
[Rules and Regulations]
[Pages 5055-5058]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-1917]
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Rules and Regulations
Federal Register
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Federal Register / Vol. 76, No. 19 / Friday, January 28, 2011 / Rules
and Regulations
[[Page 5055]]
DEPARTMENT OF AGRICULTURE
Farm Service Agency
7 CFR Parts 761 and 766
RIN 0560-AI05
Loan Servicing; Farm Loan Programs
AGENCY: Farm Service Agency, USDA.
ACTION: Final rule.
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SUMMARY: The Farm Service Agency (FSA) is amending the Farm Loan
Programs (FLP) direct loan servicing regulations to implement
provisions of the Food, Conservation, and Energy Act of 2008 (the 2008
Farm Bill). This rule implements four amendments to the direct loan
servicing regulations. The first amendment further emphasizes
transitioning borrowers to private sources of credit in the shortest
time practicable. The second amendment amends the Homestead Protection
lease regulations by extending the right to purchase the leased
property to the lessee's immediate family when the lessee is a member
of a socially disadvantaged group. The third amendment amends the
account liquidation regulations to suspend certain loan acceleration
and foreclosure actions, including suspending interest accrual and
offsets, if a borrower has filed a claim of program discrimination that
has been accepted as valid by USDA and the borrower's account is at the
point of acceleration or foreclosure. The fourth amendment amends the
supervised bank account regulations to make the FSA regulations on
insurable account limits consistent with the regulations of the Federal
Deposit Insurance Corporation.
DATES: This rule is effective on February 28, 2011.
FOR FURTHER INFORMATION CONTACT: Michael C. Cumpton, Assistant to the
Director, Loan Servicing and Property Management Division, FSA, USDA;
telephone: (202) 690-4014. Persons with disabilities who require
alternative means for communications (Braille, large print, audio tape,
etc.) should contact the USDA Target Center at (202) 720-2600 (voice
and TDD).
SUPPLEMENTARY INFORMATION:
Background
This final rule implements multiple provisions of the 2008 Farm
Bill (Pub. L. 110-246) concerning loan servicing for FSA's direct loan
program. In general, FSA direct loans provide credit to farmers who are
unable to get credit elsewhere.
On August 7, 2009, FSA published the loan servicing proposed rule
(74 FR 39565-39569). As discussed below, FSA proposed three substantive
amendments and one conforming technical amendment in the proposed rule.
This final rule addresses the comments received on the proposed rule
and makes some minor revisions to the proposed language to address the
comments received. FSA received comments on the proposed rule from two
commenters; the comments addressed multiple provisions of the rule. The
commenters were a nonprofit organization and an FSA employee.
Summary of Amendments to the Loan Servicing Regulations
The amendments in this rule are made to 7 CFR part 761, ``General
Program Administration,'' which specifies provisions that apply to
multiple Farm Loan Programs, and to 7 CFR part 766, ``Direct Loan
Servicing--Special,'' which specifies the requirements and procedures
for direct loan servicing in special circumstances, primarily those
involving financially distressed borrowers.
One amendment promotes the goal of transitioning borrowers to
private credit. This rule clarifies and expands the requirements that
borrowers must meet, including training and planning activities, to
demonstrate that they are gaining the skills to transition to private
credit. These amendments are made to 7 CFR 761.1, ``Introduction,'' a
general introductory section to the farm loan regulations, and to 7 CFR
761.103, ``Farm Assessment,'' which describes how FSA assesses a
borrower's farming operation to determine credit counseling needs and
training needs. As discussed below, in response to a comment on the
proposed rule, FSA added additional clarity and detail to the
requirements.
A second amendment allows family members of lessees who are members
of a socially disadvantaged group to purchase properties under
Homestead Protection. This amendment, which is made to 7 CFR 766.154,
``Homestead Protection Leases,'' is specifically required by the 2008
Farm Bill. The purpose of the Homestead Protection program is to allow
borrowers who secured their loan with their principal residence to
continue to occupy that property through a lease or lease-purchase,
after it has come into the inventory of the Government after
foreclosure or voluntary conveyance. Before this amendment was made,
only the original lessee on a Homestead Protection lease-purchase
agreement had the option to purchase the property; this amendment
allows the lessee to designate a family member the right to exercise
that option.
The third amendment sets a moratorium on foreclosure and loan
acceleration actions for borrowers with an accepted program
discrimination claim with the USDA Office of the Assistant Secretary
for Civil Rights, Office of Adjudication. This amendment will stop
foreclosure and loan acceleration actions for borrowers with an
accepted discrimination claim, including interest accruals and offsets,
while the discrimination claim is being resolved. This amendment adds a
new section, 7 CFR 766.358, ``Acceleration and Foreclosure Moratorium''
to 7 CFR part 766 subpart H, ``Loan Liquidation.''
In addition to the amendments required by the 2008 Farm Bill, this
rule implements a conforming amendment to comply with section 335(a) of
the Dodd-Frank Wall Street Reform and Consumer Protection Act (Pub. L.
111-203, July 21, 2010), which increased the maximum deposit insurance
amount for accounts insured by the Federal Deposit Insurance
Corporation (FDIC). This rule changes a reference to the limit on
insured accounts from $100,000 to ``the maximum amount insurable by the
Federal government,'' which means that the FLP regulations will remain
consistent with federal deposit insurance regulations, even if the FDIC
limit is revised again or authority for deposit insurance is
transferred to another Federal government entity. The
[[Page 5056]]
current FDIC limit is $250,000. This amendment is made to 7 CFR 761.51,
``Establishing a Supervised Bank Account.''
Discussion of Comments
The following provides a summary of the comments related to each
amendment, and FSA's response, including changes we are making to the
regulations in response to the comments.
Transitioning Borrowers to Private Credit
Comment: ``Borrower graduation requirements'' should be added to
the tools noted in 7 CFR 761.1 to assist borrowers in the transition to
private credit. Also, the new sentence clarifying the purpose of FSA
farm loan programs should be moved up a sentence.
Response: FSA agrees and has made the suggested changes.
Comment: ``Graduation plan'' should be added to the list of items
required as part of the farm assessment in 7 CFR 761.103(b).
Response: FSA agrees with the comment and has made the suggested
change. This change supports the concept of transitioning borrowers to
private commercial credit in the shortest period possible and
reinforces the importance of the graduation plan. We also added a
reference to Conservation Loans (CL), to clarify which requirements do
not apply to those loans. Conservation Loans are a new type of farm
loan, authorized by the 2008 Farm Bill, which may be used to implement
certain conservation practices. An inability to obtain commercial
credit is not a requirement for CL eligibility, so some of the
requirements that are intended to help borrowers transition to
commercial credit do not apply to CL.
Comment: ``Sufficient experience and training for a successful
transition to private commercial credit'' should be made part of the
training waiver requirements in 7 CFR 764.453.
Response: The proposed rule did not propose changes to 7 CFR
764.453. The suggested change is not consistent with the overall
objectives of the direct loan program, which include assisting
borrowers in obtaining training and experience needed to qualify for
commercial credit. The direct loan program requires that borrowers who
need additional training must complete that training during the term of
their direct loan, not as a condition to initially qualify for a loan.
A loan applicant who already had the experience and training sufficient
to make a successful transition to private credit would likely not need
and would therefore not be eligible for a direct loan. Therefore, FSA
is not amending the regulations in response to this comment.
Comment: FSA should reference the statutory requirement for
performance criteria and publish those criteria.
Response: The existing statutory requirements for performance
criteria are referenced in the preamble to the proposed rule.
Specifically, Section 5304 of the 2008 Farm Bill amends the
Consolidated Farm and Rural Development Act (7 U.S.C. 1981-2008r, the
Con Act) to add a section that requires the Secretary to establish a
plan and performance criteria that promote the goal of transitioning
borrowers to private commercial credit and other sources of credit in
the shortest time possible. As discussed in the preamble to the
proposed rule, FSA does not intend to publish additional detail about
the performance criteria in the regulations. Regulations set
requirements and benefits for the public; these performance criteria
are the internal procedures that FSA will use to evaluate its own
performance in transitioning borrowers to private credit.
Extension of Right To Reacquire Homestead Property to Family Members
Comment: Why is this opportunity only provided for lessees who are
a member of a socially disadvantaged group, rather than all lessees? If
it's a good idea for one, it's a good idea for all.
Response: FSA cannot extend this opportunity to all lessees because
Section 5305 of the 2008 Farm Bill does not provide authority for us to
do so. FSA is merely implementing the statutory language approved by
Congress.
Out of Scope Comment
Comment: Oppose FSA's ``term limits'' on loans and the applicable
provisions should have been removed in the 2008 Farm Bill. Term limits
are arbitrary.
Response: This comment is outside the scope of this rule. FSA did
not propose changing the term limits in the proposed rule.
Miscellaneous Changes
This rule makes minor clarifying changes, which are not in response
to a comment on the provisions in the proposed rule, to make terms
consistent throughout the rule. For example, this rule consistently
uses the term ``lessee or designee'' to refer to a lessee utilizing a
lease-purchase option, rather than sometimes using that term and
sometimes using the term ``purchaser.'' This rule also adds references
to Conservation Loans where appropriate, to clarify which provisions do
not apply to those loans.
Executive Order 12866
The Office of Management and Budget (OMB) designated this rule as
not significant under Executive Order 12866 and, therefore, OMB has not
reviewed this final rule.
Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601-612), as amended by
the Small Business Regulatory Enforcement Fairness Act of 1996
(SBREFA), generally requires an agency to prepare a regulatory
flexibility analysis of any rule subject to the notice and comment
rulemaking requirements under the Administrative Procedure Act (5
U.S.C. 553) or any other statute, unless the agency certifies that the
rule will not have a significant economic impact on a substantial
number of small entities. FSA has determined that this rule will not
have a significant impact on a substantial number of small entities for
the reasons explained below. Thus, FSA has not prepared a regulatory
flexibility analysis.
All FSA direct loan borrowers and all farm entities affected by
this rule are small businesses according to U.S. Small Business
Administration small business size standards. 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 sizes of entities. The costs of compliance
with this rule are expected to be minimal. The foreclosure and loan
acceleration moratorium will reduce interest costs for some borrowers,
and should in no case increase costs for borrowers. No comments were
received on the proposed rule regarding disparate impact on small
entities. Therefore, FSA certifies that this rule will not have a
significant economic impact on a substantial number of small entities.
Environmental Review
The environmental impacts of this rule have been considered in a
manner consistent with the provisions of the National Environmental
Policy Act (NEPA, 42 U.S.C. 4321-4347), the regulations of the Council
on Environmental Quality (40 CFR parts 1500-1508), and FSA regulations
for compliance with NEPA (7 CFR part 799). The changes to the FLP
direct loan servicing program, required by the 2008 Farm Bill, that are
identified in this final rule are administrative in nature and can be
considered non-discretionary. Therefore, FSA has
[[Page 5057]]
determined that NEPA does not apply to this rule, and no environmental
assessment or environmental impact statement will be prepared.
Executive Order 12372
Executive Order 12372, ``Intergovernmental Review of Federal
Programs,'' requires consultation with State and local officials. The
objectives of the Executive Order are to foster an intergovernmental
partnership and a strengthened Federalism, by relying on State and
local processes for State and local government coordination and review
of proposed Federal Financial assistance and direct Federal
development. 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.
Executive Order 12988
This rule has been reviewed in accordance with Executive Order
12988, ``Civil Justice Reform.'' The provisions of this rule will not
have preemptive effect with respect to any State or local laws,
regulations, or policies that conflict with such provision or which
otherwise impede their full implementation. The rule will not have
retroactive effect. Before any judicial action may be brought regarding
this rule, all administrative remedies in accordance with 7 CFR part 11
must be exhausted.
Executive Order 13132
This rule has been reviewed under Executive Order 13132,
``Federalism.'' The policies contained in this rule do not have any
substantial direct effect on States, the relationship between the
Federal government and the States, or the distribution of power and
responsibilities among the various levels of government. Nor does this
final rule impose substantial direct compliance costs on State and
local governments. Therefore, consultation with the States is not
required.
Executive Order 13175
This rule has been reviewed for compliance with Executive Order
13175, ``Consultation and Coordination with Indian Tribal
Governments.'' This Executive Order imposes requirements on the
development of regulatory policies that have tribal implications or
preempt tribal laws. The policies contained in this rule do not preempt
Tribal law. This rule was included in the October through December
2010, Joint Regional Consultation Strategy facilitated by USDA that
consolidated consultation efforts of 70 rules from the 2008 Farm Bill.
USDA sent senior level agency staff to seven regional locations and
consulted with Tribal leadership in each region on the rules. When the
consultation process is complete, USDA will analyze the feedback and
then incorporate any appropriate changes into the regulations through
rulemaking procedures.
USDA will respond in a timely and meaningful manner to all Tribal
government requests for consultation concerning this rule and will
provide additional venues, such as webinars and teleconferences, to
periodically host collaborative conversations with Tribal leaders and
their representatives concerning ways to improve this rule in Indian
country.
Unfunded Mandates
Title II of the Unfunded Mandate Reform Act of 1995 (UMRA, Pub. L.
104-4) requires Federal agencies to assess the effects of their
regulatory actions on State, local, or 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
rule contains no Federal mandates as defined by Title II of UMRA for
State, local, or tribal governments or for the private sector.
Therefore, this rule is not subject to the requirements of sections 202
and 205 of UMRA.
Federal Assistance Programs
The title and number of the Federal assistance programs, as found
in the Catalog of Federal Domestic Assistance, to which this rule
applies are:
10.099 Conservation Loans
10.404 Emergency Loans
10.406 Farm Operating Loans
10.407 Farm Ownership Loans
Paperwork Reduction Act
The amendments to 7 CFR parts 761 and 766 in this final rule
require no new collection or changes to the current information
collections approved by OMB under the control numbers 0560-0233 and
0560-0238.
E-Government Act Compliance
FSA is committed to complying with the E-Government Act, to promote
the use of the Internet and other information technologies to provide
increased opportunities for citizen access to Government information
and services, and for other purposes.
List of Subjects
7 CFR Part 761
Accounting, Loan programs--Agriculture, Rural areas.
7 CFR Part 766
Agriculture, Agricultural commodities, Credit, Livestock, Loan
programs--Agriculture.
For the reasons discussed above, this rule amends 7 CFR chapter VII
as follows:
PART 761--GENERAL PROGRAM ADMINISTRATION
0
1. The authority citation for part 761 continues to read as follows:
Authority: 5 U.S.C. 301 and 7 U.S.C. 1989.
Subpart A--General Provisions
0
2. In Sec. 761.1, amend paragraph (c) by adding a new third sentence
to read as follows:
Sec. 761.1 Introduction.
* * * * *
(c) * * * The programs are designed to allow those who participate
to transition to private commercial credit or other sources of credit
in the shortest period of time practicable through the use of
supervised credit, including farm assessments, borrower training,
market placement, and borrower graduation requirements.
* * * * *
Subpart B--Supervised Bank Accounts
0
3. In Sec. 761.51, revise paragraph (e), introductory text, to read as
follows:
Sec. 761.51 Establishing a supervised bank account.
* * * * *
(e) If the funds to be deposited into the account cause the balance
to exceed the maximum amount insurable by the Federal Government, the
financial institution must agree to pledge acceptable collateral with
the Federal Reserve Bank for the excess over the insured amount, before
the deposit is made.
* * * * *
Subpart C--Supervised Credit
0
4. In Sec. 761.103, revise paragraphs (a), (b)(9), and (b)(10), and
add paragraph (b)(11) to read as follows:
[[Page 5058]]
Sec. 761.103 Farm assessment.
(a) The Agency, in collaboration with the applicant, will assess
the farming operation to:
(1) Determine the applicant's financial condition, organizational
structure, and management strengths and weaknesses;
(2) Identify and prioritize training and supervisory needs; and
(3) Develop a plan of supervision to assist the borrower in
achieving financial viability and transitioning to private commercial
credit or other sources of credit in the shortest time practicable,
except for CL.
(b) * * *
(9) Supervisory plan, except for streamlined CL;
(10) Training plan; and
(11) Graduation plan, except for CL.
* * * * *
PART 766--DIRECT LOAN SERVICING--SPECIAL
0
5. The authority citation for part 766 is revised to read as follows:
Authority: 5 U.S.C. 301 and 7 U.S.C. 1989.
Subpart D--Homestead Protection Program
0
6. In Sec. 766.154, revise paragraph (c) to read as follows:
Sec. 766.154 Homestead Protection Leases.
* * * * *
(c) Lease-purchase options. (1) The lessee may exercise in writing
the purchase option and complete the homestead protection purchase at
any time prior to the expiration of the lease provided all lease
payments are current.
(2) If the lessee is a member of a socially disadvantaged group,
the lessee may designate a member of the lessee's immediate family
(that is, parent, sibling, or child) (designee) as having the right to
exercise the option to purchase.
(3) The purchase price is the market value of the property when the
option is exercised as determined by a current appraisal obtained by
the Agency.
(4) The lessee or designee may purchase homestead protection
property with cash or other credit source.
(5) The lessee or designee may receive Agency program or non-
program financing provided:
(i) The lessee or designee has not received previous debt
forgiveness;
(ii) The Agency has funds available to finance the purchase of
homestead protection property;
(iii) The lessee or designee demonstrates an ability to repay such
an FLP loan; and
(iv) The lessee or designee is otherwise eligible for the FLP loan.
* * * * *
Subpart H--Loan Liquidation
0
7. Add Sec. 766.358 to read as follows:
Sec. 766.358 Acceleration and foreclosure moratorium.
(a) Notwithstanding any other provisions of this subpart, borrowers
who file or have filed a program discrimination complaint that is
accepted by USDA Office of Adjudication or successor office (USDA), and
have been serviced to the point of acceleration or foreclosure on or
after May 22, 2008, will not have their account accelerated or
liquidated until such complaint has been resolved by USDA or closed by
a court of competent jurisdiction. This moratorium applies only to
program loans made under subtitle A, B, or C of the Act (for example,
CL, FO, OL, EM, SW, or RL). Interest will not accrue and no offsets
will be taken on these loans during the moratorium. Interest accrual
and offsets will continue on all other loans, including, but not
limited to, non-program loans.
(1) If the Agency prevails on the program discrimination complaint,
the interest that would have accrued during the moratorium will be
reinstated on the account when the moratorium terminates, and all
offsets and servicing actions will resume.
(2) If the borrower prevails on the program discrimination
complaint, the interest that would have accrued during the moratorium
will not be reinstated on the account unless specifically required by
the settlement agreement or court order.
(b) The moratorium will begin on:
(1) May 22, 2008, if the borrower had a pending program
discrimination claim that was accepted by USDA as valid and the account
was at the point of acceleration or foreclosure on or before that date;
or
(2) The date after May 22, 2008, when the borrower has a program
discrimination claim accepted by USDA as valid and the borrower's
account is at the point of acceleration or foreclosure.
(c) The point of acceleration under this section is the earliest of
the following:
(1) The day after all rights offered on the Agency notice of intent
to accelerate expire if the borrower does not appeal;
(2) The day after all appeals resulting from an Agency notice of
intent to accelerate are concluded if the borrower appeals and the
Agency prevails on the appeal;
(3) The day after all appeal rights have been concluded relating to
a failure to graduate and the Agency prevails on any appeal;
(4) Any other time when, because of litigation, third party action,
or other unforeseen circumstance, acceleration is the next step for the
Agency in servicing and liquidating the account.
(d) A borrower is considered to be in foreclosure status under this
section anytime after acceleration of the account.
(e) The moratorium will end on the earlier of:
(1) The date the program discrimination claim is resolved by USDA
or
(2) The date that a court of competent jurisdiction renders a final
decision on the program discrimination claim if the borrower appeals
the decision of USDA.
Signed in Washington, DC, on January 21, 2011.
Jonathan W. Coppess,
Administrator, Farm Service Agency.
[FR Doc. 2011-1917 Filed 1-27-11; 8:45 am]
BILLING CODE 3410-05-P