Disaster Set-Aside Program

DEPARTMENT OF AGRICULTURE

Rural Housing and Community Development Service

Rural Business and Cooperative Development Service

Rural Utilities Services

Consolidated Farm Service Agency

7 CFR Part 1951

RIN 0560-A

Disaster Set-Aside Program

AGENCY: Rural Housing and Community Development Service, Rural Business

and Cooperative Development Service, Rural Utilities Service, and

Consolidated Farm Service Agency, USDA.

ACTION: Final rule.

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SUMMARY: The Consolidated Farm Service Agency (CFSA) is amending its

regulations to implement the ``Disaster Set-Aside (DSA) Program.'' This

rule makes the Disaster Set-Aside Program a permanent servicing option

available to all CFSA Farm Credit Programs borrowers affected by a

natural disaster. Under this program, the distressed borrower will have

the opportunity to move the next scheduled annual installment to the

end of the loan term. The intended effect is to service disaster

victims in an efficient and timely manner while keeping them in

business.

EFFECTIVE DATE: Final rule effective September 8, 1995.

FOR FURTHER INFORMATION CONTACT: Kimberly R. Laris, Loan Officer,

Consolidated Farm Service Agency, USDA, Farm Credit Programs Loan

Servicing and Property Management Division, Room 5449, 14th Street and

Independence Avenue SW., Washington, DC 20250-0774, Telephone (202)

720-1659.

SUPPLEMENTARY INFORMATION:

Classification

This 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.

Intergovernmental Consultation

For the reasons set forth in the final rule related to Notice 7

CFR, part 3015, subpart V (48 FR 29115, June 24, 1983), Emergency

Loans, Farm Ownership Loans, and Farm Operating Loans are excluded,

with the exception of nonfarm enterprise activity, from the scope of

Executive Order 12372, which requires intergovernmental consultation

with state and local officials. The Soil and Water Loan Program,

however, is subject to and has complied with the provisions of

Executive Order 12372.

Programs Affected

These changes affect the following credit programs as listed in the

Catalog of Federal Domestic Assistance:

10.404--Emergency Loans

10.406--Farm Operating Loans

10.407--Farm Ownership Loans

10.410--Low Income Housing Loans

10.418--Soil and Water Loans

Environmental Impact Statement

This document has been reviewed in accordance with 7 CFR part 1940,

subpart G, ``Environmental Program.'' The issuing agency has determined

that this action does not significantly affect the quality of the human

environment, and in accordance with the National Environmental Policy

Act of 1969, an Environmental Impact Statement is not required.

Civil Justice Reform

This final rule has been reviewed under Executive Order 12778,

Civil Justice Reform. In accordance with this rule: (1) All state and

local laws and regulations that are in conflict with this rule will be

preempted; (2) no retroactive effect will be given to this rule; and

(3) administrative proceedings in accordance with the regulations of

the agency at 7 CFR subpart B of part 1900 and any additional

regulations to be published by the Department of Agriculture to

implement the provisions of the National Appeals Division as mandated

by the Department of Agriculture Reorganization Act of 1994 must be

exhausted before bringing suit in court challenging action taken under

this rule unless those regulations specifically allow bringing suit at

an earlier time.

Paperwork Reduction Act

The information collection requirements contained in these

regulations have been previously approved by the Office of Management

and Budget (OMB) under the provisions of 44 U.S.C. chapter 35 and have

been assigned OMB control number 0575-

[[Page 46754]]

0163 in accordance with the Paperwork Reduction Act of 1980 (44 U.S.C.

3507). This final rule does not revise or impose any new information

collection or recordkeeping requirements from those approved by OMB.

Discussion of Final Rule

The DSA Program was made available to CFSA Farm Credit (FC)

Programs borrowers through an interim rule published in the Federal

Register (59 FR 53079) October 21, 1994, with a 30 day comment period

ending November 21, 1994. The program was designed to assist CFSA FC

borrowers who were financially distressed because of a natural disaster

that hit their area in 1993. The financial distress was nationwide due

to heavy flooding in the Midwest and extreme drought in the South. The

Agency estimated that considerably more borrowers were affected by

disasters in 1993 than in any of the previous five years. In order to

assist farmers suffering from delinquencies and possible farm failures,

the Agency developed this servicing tool, DSA, that could provide

immediate financial assistance without a massive amount of paperwork

and restrictive requirements.

Under the DSA program, distressed borrowers may be permitted to

move their next scheduled FC annual installment to the end of the loan

term to be paid with the final installment. In order to be determined

distressed, the borrower's net income must have been reduced as a

result of the disaster causing insufficient income to be available to

pay all family living and operating expenses, debts to other creditors,

and CFSA FC payments. As of June 30, 1995, 6,800 borrowers affected by

a 1993 disaster received DSA assistance.

Because of the overall success of the program and the many

favorable comments received from borrowers, farm advocacy groups and

others, the Agency has amended the regulation to allow DSA to be a

permanent servicing tool available to all CFSA FC borrowers affected by

a natural disaster.

Discussion of Revisions and Comments

In response to the interim rule, five respondents provided twenty-

one comments, two respondents being from farm advocacy groups and three

from employees within the Agency. Revisions were made for clarification

in answer to comments. The regulations have also been revised to remove

administrative procedures. These procedures will instead be available

in the agency's internal instructions. Forms and exhibits are available

in any CFSA local or state office.

Five comments were received in regard to extending the DSA program

to assist borrowers affected by disasters after 1993. Three of the

respondents recommended the program be available as a permanent

servicing option following all natural disasters while one respondent

recommended only extending the program to include 1994 disasters. Only

one respondent recommended the program end after assisting farmers

affected by the 1993 disasters. After careful consideration and

favorable public response from farm advocacy groups and borrowers, the

Agency has decided to make the DSA program available as a permanent

servicing option to all borrowers affected by a disaster. By making

this program available, the Agency believes that borrowers who would

not be able to obtain emergency loans under subpart D of part 1945 of

this chapter because of percent of loss or lack of collateral, or who

cannot receive servicing under subpart S of part 1951, may be able to

defer their FC payments in order to stay in business and avoid

liquidation. It is also feasible to conclude that if the FC

installments are set-aside, any Emergency loan the borrower is eligible

for and still needs could be used to pay other creditors or provide for

annual operating expenses. The Agency believes that borrowers eligible

for this program will receive immediate financial relief from their FC

payment obligations in a more expedient manner than under subpart S of

part 1951. For example, the application process is simple and easy,

unlike the primary loan servicing application under subpart S of part

1951 which requires extensive documentation by both the borrower and

the servicing official. There are no additional security requirements

to deter the borrower from requesting DSA and the Agency's position is

more secure as no debt is written off. Also, based on the actual number

of borrowers who received set-aside, the Agency was able to provide

financial assistance within a few days whereas under subpart S of part

1951, it takes an average of 90 days to process an application and

restructure a loan.

Because this program is promulgated pursuant to section 331A of the

Consolidated Farm and Rural Development Act (CONACT) (see discussion in

the interim rule at 59 Fed. Reg. 53080, October 21, 1994), the Agency

does not consider the program to be a primary loan service program as

defined in section 343(b)(3) of the CONACT, which would require the

program to be part of the 1951-S process. This would be

counterproductive to the purpose of the DSA program which is intended

to provide immediate financial relief for one installment only.

Moreover, this rule, like the interim rule in section 1951.957, states

that borrowers cannot receive both 1951-T and 1951-S servicing when

applications for both programs are pending. If DSA is granted, the one

delinquent installment eligible for set-aside is serviced and the

borrower is no longer delinquent. If 1951-S primary loan servicing is

provided, the delinquency is cured by restructuring with or without

debt writedown. At any event, as stated in section 1951.957(a)(2),

borrowers may resubmit an application in accordance with 1951-S of this

part for additional servicing after DSA has been received.

Since the DSA program will be made available to cover future

disasters, the Agency has imposed a limitation that restricts future

set-aside on a loan if there is already a payment still set-aside. If

the borrower received set-aside on three of four loans and later

requests set-aside because of another disaster, the borrower may only

receive set-aside on the loan that does not already have a payment set-

aside. If the set-aside is paid in full, or the loan with set-aside is

later restructured under subpart S of part 1951, the set-aside will no

longer exist and therefore the loan could again be considered for DSA

under future disasters. This limitation was imposed to restrict a

continual build up of payments being set-aside to the end of the loan

when restructuring the debt under subpart S of part 1951 would have

been the most effective servicing action.

One respondent recommended that attorneys for borrowers in

bankruptcy be notified of the DSA program with a copy to the borrower.

The Agency did not adopt this comment. The letter sent to the borrower

is for information only. It is not specifically addressed to the

borrower nor does it require the borrower to do anything that if not

done, will cause the Agency to liquidate. Furthermore, borrowers in

bankruptcy are not serviced under this subpart while under court

jurisdiction. Agency regulations for servicing borrowers who have filed

bankruptcy petitions are found in subpart A of part 1962.

One respondent suggested that the regulation and the informational

letter be clarified to state that if a determination cannot be made

based on the borrower's actual records, the borrower may have to

provide evidence that all expenses and/or debts could not

[[Page 46755]]

be paid as projected. The same respondent suggested that for borrowers

whose crop is not harvested until the following year, that actual

records for both the disaster year and the year in which the income is

received be submitted to the Agency. The Agency adopted the first

comment by adding a statement that other information may be requested

by the servicing official when needed to make an eligibility

determination. Instances when other information may be needed are when

the borrower did not have a plan already prepared for the disaster year

or the disaster affected the following year's production in which a

plan or actual records for that year may be needed. No changes were

made as a result of the second comment since the regulation already

requires the borrower to provide actual records for the production/

marketing period in which the disaster occurred. This requirement

should cover those commodities produced in one year and marketed the

next. The Agency has also clarified in the eligibility requirements

that consideration may be given to loss of income in the following year

as a result of the disaster causing insufficient income to pay all

expenses and debts for that year. An example may be that the borrower's

feed was destroyed causing the borrower to purchase poorer quality feed

which in turn caused a decrease in milk production.

Two respondents recommended the regulation be clarified to state

that the borrower must have been a borrower at the time of the disaster

and continued to be a borrower to the present time. Another respondent

recommended that set-aside only be granted on loans outstanding at the

time of the disaster. The Agency has adopted these suggestions by

requiring that the borrower must have been a borrower and the loan

being set-aside must have been outstanding at the time of the disaster.

This clarification further enforces the intent of the program to assist

borrowers who were affected by a disaster and were unable to make their

payments; or if they were able to make their FC payments, they could

not pay all their other creditors. If a borrower was not a borrower at

the time of the disaster, then there were no payments to the Agency

that could not be paid as a result of the disaster. If the Agency made

a loan to the borrower after the disaster, a feasible farm and home

plan would have been developed in order for the Agency to approve a

loan and the affects of the disaster should have already been taken

into consideration when the plan was developed. It is not the Agency's

intent to make a loan to a borrower and then turn around and set-aside

the first installment unless the loan was made prior to the disaster.

The Agency has also clarified that borrowers paying under a debt

settlement adjustment in accordance with subpart B of part 1956 are not

eligible for DSA as these such borrowers are liquidating their debt,

not continuing with it.

One respondent recommended that the regulation clarify that

borrowers in bankruptcy who are still under court jurisdiction are

considered in non-monetary default and are not eligible for the DSA

program. The Agency has adopted this recommendation by clarifying that

borrowers in bankruptcy or under court jurisdiction are considered in

nonmonetary default. Borrowers under a confirmed plan who are still

under court jurisdiction may obtain similar type servicing with a

modification of their bankruptcy plan through the bankruptcy court as

set forth in subpart A of part 1962. The Agency chose to exclude

borrowers in bankruptcy from this subpart's servicing because the

intent of the program was to expedite the servicing process to resolve

the borrower's immediate financial distress. If the borrower is in

bankruptcy, court approval is needed, thereby causing additional delays

in servicing the borrower.

One respondent recommended an exception to allow borrowers who were

restructured after the disaster to receive DSA if the restructure did

not take into account the impact of the reduction in income or increase

in expenses caused by the disaster. In other words, the impact was not

known until harvest season and therefore the restructure did not cure

the borrower's financial distress caused by the disaster. While this

comment may be well taken since the DSA program was not available until

October 21, 1994, these borrowers situations should have already been

resolved through the exception authority or considered for 1951-S

servicing. Therefore, the Agency did not revise its regulations to

incorporate this specific exception. Because the Agency believes that

there will be few of these cases in the future, it prefers to rely on

its general exception authority contained in section 1951.959 for those

few cases which may arise.

One respondent recommended that borrowers who received a confirmed

bankruptcy plan after the disaster and are no longer under court

jurisdiction should not be eligible for DSA as this is similar to a

borrower being restructured under subpart S of part 1951. The Agency

did not adopt this comment because generally speaking it has been the

Agency's policy to recognize that the Bankruptcy Code provides entirely

different relief than the Agency's regulations. For example, section

1951.909(e)(4)(vi) states that a writedown received in bankruptcy will

not count toward a borrower's lifetime limit of one writedown nor will

it count in the $300,000 per borrower limit.

Three respondents recommended the Agency allow up to the third

annual installment to be set-aside in the event the borrower has

already paid the installment due after the disaster and the very next

installment. The Agency understands the concerns of the respondents.

The regulation was published in late October 1994 with borrowers being

notified soon thereafter. By this date, many borrowers who were

affected by the disaster had already paid their installment due after

the 1993 disaster, such as their January 1, 1994 installment, and

because they were on an assignment to pay periodic payments throughout

the year such as from milk production or hog sales, their January 1,

1995 installment was paid or almost paid by the time the regulation was

issued. The same is true for borrowers not on an assignment who paid

early in the year from production sales. It is understandable that even

though the FC payments were paid, they still may not have been able to

pay their other creditors because of the loss they suffered from the

1993 disaster. Borrowers not on an assignment or who did not pay early

received full benefit of the DSA program because the income they

received was paid to other creditors instead of paying their FC

payments. Therefore, in order to provide all borrowers recovering from

a disaster with the same opportunity to apply and receive DSA, the

Agency has revised the regulations to allow borrowers who were affected

by a disaster in 1994 to set-aside the next installment due, up to the

third installment due after the disaster occurred. For all disasters

thereafter, only the installment due immediately after the disaster or

the very next one after that will be set-aside.

Two respondents recommended that the regulation be clarified to

limit the amount set-aside to the amount the borrower cannot pay or by

how much the borrower needs set-aside to develop a feasible cash flow

for the next year. This is consistent with subpart B of part 1924 in

which the borrower must pay the FC payments if able to do so, and

subpart A of part 1962 for required use of security proceeds. The

Agency has adopted this comment by limiting the amount to be set-aside

by the lesser of the amount the borrower was unable to pay CFSA during

the production/

[[Page 46756]]

marketing period in which the disaster occurred, or the amount the

borrower was unable to pay other creditors and/or expenses, rounded up

to the nearest whole installment. Expenses which the borrower is unable

to pay may include the following year's operating and family living

expenses if the income or commodities lost from the disaster year would

have been used for these purposes, or if normal income security from

the disaster year is approved for release under subpart A of part 1962

or otherwise authorized under subpart B of part 1924 for these

purposes. Under no circumstances will a portion of the installment be

set-aside leaving a balance still due. The portion not set-aside must

be paid by the borrower on or before the date exhibit A to FmHA

Instruction 1951-T (available in any CFSA local or state office) is

signed.

One respondent recommended that the regulation be revised to allow

for at least 30 days for the borrower to sign the addendum instead of

up to 30 days. This would allow the Agency some flexibility in cases

where the Agency's approval is contingent upon the borrower doing

something to be eligible, such as paying a portion of the FC payments

from proceeds that may not be available until after the 30 day period

expires. The Agency has adopted this comment by revising the regulation

to allow the County Supervisor to provide for a longer period of time

to sign the addendum not to exceed 90 days under extenuating

circumstances.

Two comments were received from one respondent to revise the

addendum to only state the total amount set-aside on the loan since the

Agency's accounting system does not allow the servicing official to

calculate the amount of principal and interest that can be set-aside,

and to state that if the borrower receives set-aside, the borrower's

primary and preservation loan servicing application will be withdrawn,

instead of just the primary loan servicing application. The Agency has

adopted these comments.

The Agency also added another condition for cancelling and

reversing DSA. The interim rule required cancellation when the borrower

is later restructured with primary loan servicing. It also allowed for

reversal of the DSA prior to the first scheduled annual installment

coming due after the DSA is granted when a writedown, buyout, or

operating loan assistance is needed. This rule requires cancellation

when it is determined that the DSA was unauthorized because it was not

provided in accordance with these regulations. If the Agency cancels

DSA because the assistance was unauthorized, borrowers will be notified

of the reasons for the decision, and provided with an opportunity to

appeal. By reserving the authority to cancel DSA when it is

unauthorized, the Agency is clarifying inherent Government authority to

reverse transactions which are not in accordance with existing law. The

Agency has discovered several instances of unauthorized assistance

under the interim rule. It is in the public interest to correct these

errors.

The Agency has also removed all reference to the 1993 disaster year

from this rule since the time period for borrowers affected by a 1993

disaster has passed. (The interim rule allowed until July 1, 1995 to

apply). Borrowers affected by a 1994 disaster through the date the

final rule is published will have 8 months from the date they are

notified of DSA to apply. For all future disasters, borrowers will have

8 months from the date the county is designated a disaster area, which

is consistent with the time period to apply for an Emergency Loan in

accordance with subpart A of part 1945.

List of Subjects in 7 CFR Part 1951

Account servicing, Credit, Loan programs--Agriculture, Loan

programs--Housing and community development, Low and moderate income

housing loans--Servicing, Debt restructuring.

Accordingly, part 1951, Chapter XVIII, title 7, Code of Federal

Regulations is amended as follows:

PART 1951--SERVICING AND COLLECTIONS

1. The authority citation for part 1951 is revised to read as

follows:

Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 42 U.S.C. 1480.

2. Subpart T, Secs. 1951.951 through 1951.1000, is revised to read

as follows:

PART 1951--SERVICING AND COLLECTIONS

Subpart T--Disaster Set-Aside Program

Sec.

1951.951 Purpose.

1951.952 General.

1951.953 Notification and request for DSA.

1951.954 Eligibility and loan limitation requirements.

1951.955 -1951.956 [Reserved]

1951.957 Eligibility determination and processing.

1951.958 Cancellation and reversal of DSA.

1951.959 Exception authority.

1951.960 -1951.999 [Reserved]

1951.1000 OMB control number.

Subpart T--Disaster Set-Aside Program

Sec. 1951.951 Purpose.

This subpart sets forth the policies and procedures for the

Disaster Set-Aside (DSA) Program. The DSA program is available to Farm

Credit (FC) Programs borrowers, as defined in subpart S of this part,

who suffered losses as a result of a natural disaster. FC loans that

may be serviced under this subpart include Farm Ownership (FO),

Operating (OL), Soil and Water (SW), Emergency (EM), Economic Emergency

(EE), Special Livestock (SL), Economic Opportunity (EO), Softwood

Timber (ST), Recreation (RL), and Rural Housing loans for farm service

buildings (RHF). Nonprogram (NP) farm type loans may be serviced under

this subpart for borrowers who also have FC loans.

Sec. 1951.952 General.

DSA is a program whereby borrowers who are current or not more than

one installment behind on any and all FC loans may be permitted to move

one scheduled annual installment for each eligible FC loan to the end

of the loan term. The intent of this program is to relieve some of the

borrower's immediate financial stress caused by the disaster and avoid

foreclosure by the Government. DSA is not intended to circumvent the

servicing available under subpart S of this part.

Sec. 1951.953 Notification and request for DSA.

(a) Notification. The Consolidated Farm Service Agency (CFSA)

servicing office will notify FC borrowers of the availability of DSA

and how to apply within 30 days from the date the servicing office is

notified of the disaster designation as determined in accordance with

subpart A of part 1945. Only FC borrowers who were borrowers at the

time of the disaster and operated a farm or ranch in a county

designated a disaster area or contiguous county will be notified. Those

borrowers whose FC loan has been accelerated, restructured after the

disaster, or who only have NP loans will not be notified. Notification

of the DSA program will not affect the notification requirements

contained in subpart S of this part.

(b) Deadline to apply. All FC borrowers liable for the debt must

request DSA within 8 months from the date the disaster was designated,

except borrowers affected by a disaster occurring in years 1994 and

1995 where counties or contiguous counties were designated prior to the

date of this subpart will have 8 months from the

[[Page 46757]]

date of DSA notification. Borrowers may only be considered for DSA one

time for each disaster.

(c) Information needed to apply.

(1) A written request for DSA signed by all parties liable for the

debt; and

(2) Actual production, income, and expense records for the

production and marketing period in which the disaster occurred. Other

information may be requested by the servicing official when needed to

make an eligibility determination.

Sec. 1951.954 Eligibility and loan limitation requirements.

(a) Eligibility requirements. The following requirements must be

met to be eligible for DSA:

(1) The borrower must have operated a farm or ranch in a county

designated a disaster area or a county contiguous to such an area. The

borrower must have been a borrower and operated the farm or ranch at

the time of the disaster.

(2) The borrower must have acted in good faith as defined in

Sec. 1951.906 of subpart S of this part.

(3) All nonmonetary defaults must have been resolved. This means

that even though the borrower has acted in good faith, the borrower may

still be in default for reasons, such as, but not limited to: no longer

farming, prior lienholder foreclosure, bankruptcy or under court

jurisdiction, not properly maintaining chattel and real estate

security, not properly accounting for the sale of security, or not

carrying out any other agreement made with the Agency.

(4) The borrower must be current or not more than one installment

behind on any and all FC loans at the time the scheduled installment

will be set-aside. Borrowers paying under a debt settlement adjustment

agreement in accordance with subpart B of part 1956 are not eligible.

(5) As a direct result of the disaster, sufficient income was not

available to pay all family living and operating expenses, debts to

other creditors, and CFSA. This determination will be based on the

borrower's actual production and income and expense records for the

disaster year and any other records required by the servicing official.

Compensation received for losses shall be considered as well as

increased expenses incurred because of the disaster. Consideration will

also be given to insufficient income for the next production and

marketing period following the disaster if the borrower establishes

that production will be reduced or expenses increased as a result of

the disaster.

(6) After the scheduled installments are set-aside, all FC and NP

farm type loans must be current.

(7) The borrower's FC loan has not been accelerated nor has the

borrower's debt been restructured under subpart S of this part since

the disaster occurred.

(b) Loan limitation requirements.

(1) The loan must have been outstanding at the time of the

disaster.

(2) Only one unpaid installment for each FC loan may be set-aside.

If there is an installment still set-aside from a previous disaster,

the loan is not eligible for DSA. If the set-aside is later paid in

full, or cancelled through restructuring under subpart S of part 1951,

the set-aside will no longer exist and therefore the loan may be

considered for DSA under future disasters.

(3) The term remaining on the loan receiving DSA equals or exceeds

2 years from the due date of the installment being set-aside.

(4) The amount set-aside shall be limited to the lesser of the

amount the borrower is unable to pay CFSA from the production and

marketing period in which the disaster occurred, or the amount the

borrower is unable to pay other creditors and/or expenses rounded up to

the nearest whole installment. Expenses which the borrower is unable to

pay may include the following year's operating and family living

expenses if the income or commodities lost from the disaster year would

have been used for these purposes, or if normal income security from

the disaster year is approved for release under subpart A of 7 CFR part

1962 or otherwise authorized under subpart B of 7 CFR part 1924 for

these purposes. Under no circumstances will a portion of the

installment be set-aside leaving a balance still due. The portion not

set-aside must be paid by the borrower on or before the date exhibit A

of FmHA Instruction 1951-T (available in any CFSA office) is signed.

(5) The installment that may be set-aside is limited to the first

scheduled annual installment due immediately after the disaster

occurred, unless that installment is paid, then the next scheduled

annual installment after that may be set-aside. For borrowers affected

by a 1994 disaster who already paid both of these installments, the

third scheduled installment to come due after the disaster may be set-

aside.

(6) The amount set-aside will be the unpaid balance remaining on

the installment at the time the borrower signs exhibit A of FmHA

Instruction 1951-T (available in any CFSA office.) This amount will

include the unpaid interest and any principal that would be credited to

the account as if the installment were paid on the due date taking into

consideration any payments applied to principal and interest since the

due date. Recoverable cost items charged to FO, SW, and RHF loans may

be set-aside with the annual installment. Cost items identified with a

loan number different from the parent loan cannot be set-aside.

Secs. 1951.955-1951.956 [Reserved]

Sec. 1951.957 Eligibility determination and processing.

(a) Eligibility determination. Upon receipt of a DSA request, the

County Supervisor will determine whether the borrower meets the

requirements set forth in 1951.954. Approval shall be contingent upon

the borrower's continuing eligibility through the signing of Exhibit A.

(1) The borrower has up to 30 days to sign exhibit A of FmHA

Instruction 1951-T (available in any CFSA office), for each loan

installment set-aside. The County Supervisor may provide for a longer

period of time not to exceed 90 days under extenuating circumstances,

including but not limited to situations where the Agency's approval is

contingent upon the borrower doing something to be eligible, such as

paying a portion of the FC payments from proceeds that may not be

available until after the 30 day period.

(2) Pending requests for primary loan servicing will continue to be

considered in accordance with subpart S of this part. However,

borrowers are not eligible for servicing under both programs. The

application for the program not received will automatically be

withdrawn at the time the installment is set-aside or the loan

restructured, whichever is applicable. The automatic withdrawal is not

appealable because the borrower is no longer delinquent. If the

borrower again becomes delinquent or in financial distress, or requests

primary loan servicing, the borrower will be notified or the request

processed in accordance with subpart S of this part.

(b) Processing.

(1) [Reserved.]

(2) Interest will accrue on any principal amount set-aside at the

same rate charged the non-set-aside portion. Interest will not accrue

on the interest portion set-aside. Limited resource interest rate

changes will affect the principal set-aside.

(3) The amount set-aside, including interest accrual on any

principal set-aside, will be due on or before the final due date of the

loan.

(4) There are no additional security requirements attached to the

DSA program. All existing security instruments will remain in effect.

[[Page 46758]]

(5) [Reserved.]

(6) [Reserved.]

(7) Payments applied to the amount set-aside will be applied first

to interest and then principal.

(c) Adverse determination. If the borrower becomes more than one

installment behind on any FC loan while processing the DSA request, or

while an appeal is being considered, and the second installment cannot

be paid current prior to exhibit A of FmHA Instruction 1951-T

(available in any CFSA office) being signed, the DSA request will be

denied.

Sec. 1951.958 Cancellation and reversal of DSA.

(a) Reasons for cancellation. The set-aside may be reversed and

exhibit A of FmHA Instruction 1951-T cancelled under the following

described situations:

(1) The loan is later restructured with primary loan servicing,

(the total unpaid balance must be restructured);

(2) If prior to the first scheduled installment due date after set-

aside, the servicing official determines that the current borrower, if

delinquent, would qualify for a writedown or net recovery buyout in

accordance with subpart S of part 1951, or operating loan assistance in

accordance with Sec. 1941.14 of subpart A of 7 CFR part 1941; or

(3) When it has been determined that the borrower was provided

unauthorized DSA assistance. (The set-aside will be cancelled after all

appeal rights are exhausted. The set-aside will be removed from the

account and the payment terms of the original promissory note will be

retained as if DSA was never granted. Borrowers financially distressed

or delinquent after reversal of the set-aside will be serviced in

accordance with subpart S of this part).

(b) Reserved.

Sec. 1951.959 Exception authority.

The Administrator may, in individual cases, make an exception to

any requirement or provision of this subpart which is not inconsistent

with the authorizing statute or other applicable law if it is

determined that application of the requirement or provision would

adversely affect the Government's interest. The Administrator will

exercise this authority upon the request of the State Director with the

recommendation of the Deputy Administrator for Farm Credit Programs, or

upon request initiated by the Deputy Administrator for Farm Credit

Programs.

Secs. 1951.960-1951.999 [Reserved]

Sec. 1951.1000 OMB control number.

The collection of information requirements in this regulation have

been approved by the Office of Management and Budget and assigned OMB

control number 0575-0163. Public reporting burden for this collection

of information is estimated to be 15 minutes per response, including

time for reviewing instructions, searching existing data sources,

gathering and maintaining the data needed, and completing and reviewing

the collection of information. Send comments regarding this burden

estimate or any other aspect of this collection of information,

including suggestions for reducing this burden, to Department of

Agriculture, Clearance Office OIRM, Room 404-W, Washington DC 20250;

and to the Office of Management and Budget, Paperwork Reduction Project

(OMB# 0575-0163), Washington, DC 20503.

Dated: August 31, 1995.

Eugene Moos,

Under Secretary, Farm and Foreign Agricultural Services.

[FR Doc. 95-22228 Filed 9-7-95; 8:45 am]

BILLING CODE 3410-07-U