Proposed Related Services; Real Estate Brokerage, Farm Management, and Mineral Management

FARM CREDIT ADMINISTRATION

Proposed Related Services; Real Estate Brokerage, Farm

Management, and Mineral Management

AGENCY: Farm Credit Administration.

ACTION: Notice; request for public comment.

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SUMMARY: The Farm Credit Administration (FCA or Agency), by the Farm

Credit Administration Board (Board), requests public comment on an

inquiry by a Farm Credit System (System or FCS) institution for

approval to offer Real Estate Brokerage, Farm Management, and Mineral

Management service programs as authorized ``Related Services.'' The

requested services are being published for a 60-day public comment

period prior to the FCA acting on a request to offer such services.

DATES: Comments must be submitted to the FCA within September 15, 1995.

ADDRESSES: Comments should be mailed or delivered (in triplicate) to

Patricia W. DiMuzio, Associate Director, Regulation Development, Office

of Examination, Farm Credit Administration.

FOR FURTHER INFORMATION CONTACT:

Linda C. Sherman, Policy Analyst, Regulation Development, Office of

Examination, Farm Credit Administration, McLean, VA 22102-5090, (703)

883-4498, TDD (703) 883-4444,

or

Gary K. Van Meter, Senior Attorney, Administrative Law and Enforcement

Division, Office of General Counsel, Farm Credit Administration,

McLean, VA 22102-5090, (703) 883-4020, TDD (703) 883-4444.

SUPPLEMENTARY INFORMATION: On June 15, 1995, the FCA Board voted to

adopt final regulations on related services at 12 CFR part 618. (See 60

FR 34090, June 30, 1995.) Under title I, section 1.12; title II,

sections 2.5 and 2.12 (15); and title III, section 3.7 of the Farm

Credit Act of 1971, as amended (the Act), the FCA is responsible for

promulgating regulations governing the offering and administering of

technical assistance, financial assistance, and financially related

services (hereinafter referred to as ``related services'') by System

banks and associations. The statute authorizes System institutions to

provide financial and technical assistance to borrowers, applicants,

and members and make available to them related services appropriate to

their on-farm, aquatic and cooperative operations under regulations

prescribed by the FCA.

Related service, as defined in Sec. 618.8000(c) (see 60 FR 34090,

June 30, 1995), means ``any service or activity provided by a System

bank or association that is appropriate to the recipient's on-farm,

aquatic, or cooperative operations, including control of related

financial matters.'' The FCA notes that, should the requested service

be authorized, farm-related businesses or persons eligible for rural

housing loans would not be eligible unless they otherwise satisfy the

eligibility criteria for related services in Sec. 618.8005.

The revised regulation at Sec. 618.8000 requires a prior

determination that any new services, not previously authorized and

placed on the Related Services List (RS List), are legally authorized

and do not present excessive risk to the requesting institution or the

System as a whole. In order to evaluate safety and soundness risks, the

submitting institution must be specific in its request as to what types

of services will be provided and, if necessary, what controls would be

appropriate to address potential risks.

The following services would be provided to persons eligible to

receive such services from the Farm Credit System under Sec. 618.8005:

Real Estate Brokerage Services: The applicant would offer real

estate brokerage services to buyers or sellers (or both parties) of

agricultural property. Commissions on sales transactions of property

would be competitive with other brokerage services in the service

territory. Key factors of the program would include the following:

Location of sales professionals throughout proposed service territory;

national and regional advertising; complete auction services; large

network of qualified buyers; recommended pricing strategies for

clients; prompt and efficient sales closings; and suggestions for

assistance with financial structuring for purchasers.

Farm Management Services: Regional teams of professionals familiar

with the market would provide a full complement of farm land services

to all types of agricultural land owners in the service territory,

subject to eligibility constraints. Farm management includes defining

ownership goals, identifying problems, analyzing alternatives and

making recommendations for achieving business goals. Farm managers

would present the customer with a full spectrum of lease or custom

farming alternatives and help the owner decide how to ultimately get

the best return on the owner's assets. Key factors of the service would

include developing a comprehensive farm operating plan, securing

operators/renters and negotiating leases, providing property reporting

including annual budgets and projections, periodic inspections of crop

programs and conservation measures, analysis of government programs,

formulation and implementation of capital improvement and repairs, and

handling commodity sales.

Mineral Management Services: The applicant would provide

professional mineral management services to eligible customers.

Marketing techniques would be utilized to maximize lease bonuses and

assure that energy companies are aware of the clients' unleased/

available mineral acreage. Key factors of the service include

supervision and management of mineral assets, collection and processing

of revenue from producing assets, property evaluation, unitization,

review and payment of taxes, review and tracking of authorizations for

expenses, lease evaluation and negotiation, lease payment record

maintenance, review of lease and other mineral-related agreements,

processing division orders and assignments, and regular property

reviews for each account.

Because of the complex nature of these proposed services, the FCA

solicits public comment prior to acting on the request, in accordance

with the guidelines recently adopted in

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Sec. 618.8010(c)(3). The Agency believes that its evaluation of the

proposal will be aided by public comment on issues raised by the

proposal. Specifically, the FCA requests comments on the risks inherent

in offering these services, such as the potential for conflicts of

interest and liability or environmental concerns, particularly in

regard to providing such services to borrowers with distressed loans.

The Agency also requests comments on the potential benefits to farmers,

how the provider ensures that services are provided to eligible

entities, feasibility and appropriateness of such services for Farm

Credit institutions, the impact of such services on the lending

function, and any other pertinent issues. In addition, the FCA requests

commenters to consider what Systemwide issues might be raised by a

decision to authorize such services.

The FCA also requests commenters to propose how they believe

identified concerns might be mitigated. Commenters should bear in mind

that the identified concerns could also be addressed by the FCA's

standard of conduct regulations, or by applicable State laws and

regulations, licensing requirements, and industry ethical standards, or

in appropriate circumstances, by requiring pertinent disclosure or

anti-tying requirements for certain services. Additionally, internal

controls could be adopted that limit the amount of risk taken on by an

institution offering such services.

The FCA has concluded that some of the conflict of interest or

liability concerns might be addressed by offering any or all of the

services through a service corporation and requests comment on the

following issues:

(a) What, if any, limits should there be on board structure or

composition?

(b) If necessary, how should the amount of capital a bank can

invest in the service corporation be limited?

(c) Are there any organizational or procedural constraints or

limits that may be appropriate?

In its evaluation of the proposed services, the FCA will focus on

systemic issues rather than on institution or program-specific factors.

If the FCA authorizes the above-related services, any System bank or

association may develop a program and subsequently offer the related

service(s) to eligible recipients, subject to any special conditions or

limitations imposed by the FCA. The Agency may, at the time of

approval, impose such special conditions or limitations on any approved

service as the FCA in its sole discretion may deem necessary or

appropriate to ensure safety and soundness or compliance with law or

regulation. These programs would be subject to review during the

examination process.

Dated: July 11, 1995.

Floyd Fithian,

Secretary, Farm Credit Administration Board.

[FR Doc. 95-17433 Filed 7-14-95; 8:45 am]

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