Implementation of the Direct and Guaranteed Loan Making Provisions of the Federal Agricultural Improvement Act of 1996: Correction

DEPARTMENT OF AGRICULTURE

Farm Service Agency

Rural Housing Service

Rural Business--Cooperative Service

Rural Utilities Service

7 CFR Parts 1910, 1941, 1943, 1945, and 1980

RIN 0560-AE87

Implementation of the Direct and Guaranteed Loan Making

Provisions of the Federal Agricultural Improvement Act of 1996:

Correction

AGENCY: Farm Service Agency, USDA.

ACTION: Interim rule, correction; and correcting amendments.

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SUMMARY: This document contains corrections to the interim regulations

that were published Monday, March 3, 1997 (62 FR 9351-59). Technical

corrections are also made to CFR sections not originally included in

the interim rule. The regulations pertained to the loan making

provisions of the Farm Service Agency (FSA) farm loan programs.

EFFECTIVE DATE: The corrections to the interim rule and the correcting

amendments are effective May 27, 1997.

FOR FURTHER INFORMATION CONTACT: Steven R. Bazzell, Senior Loan

Officer, Farm Service Agency. Telephone: 202-720-3889; facsimile: 202-

690-1117; or e-mail: [email protected]

SUPPLEMENTARY INFORMATION:

Background

The interim final regulations, which are the subject of these

corrections, implemented the direct and guaranteed FSA farm loan making

provisions of the Federal Agricultural Improvement Act of 1996 (Act).

The public comment period ended on May 2, 1997.

Need for Correction

As published, the interim final regulations contain errors that

either conflict with the Act, are misleading or are in need of

clarification. Conflicts with the statutory language of the Act require

some corrections not originally included in the interim rule published

on March 3, 1997. Those corrections are as follows: (a) Section 1910.5

of 7 CFR part 1910, subpart A, is corrected by incorporating a

provision that renders an applicant ineligible for most types of FSA

loan assistance when they have received debt forgiveness. (b) Section

1943.13 of 7 CFR part 1943, subpart A, is corrected by removing

references to the ``sale of acquired property'' and ``credit sales'' to

socially disadvantaged applicants, since this is eliminated by the Act.

(c) Section 1980.106 of 7 CFR part 1980, subpart B, is corrected by

removing a reference to ``non-farm enterprises'' contained in the

``farm'' definition because non-farm enterprises are no longer financed

by the Agency under the Act.

List of Subjects

7 CFR Part 1910

Application processing, Loan programs-agriculture.

7 CFR Part 1941 and 1943

Applicant eligibility, Beginning farmers and ranchers, Loan

programs-agriculture.

7 CFR Part 1945

Disaster assistance, Loan programs-agriculture.

7 CFR Part 1980

Beginning farmers and ranchers, Loan guarantees, Loan programs-

agriculture.

Accordingly, 7 CFR chapter XVIII is corrected by making the

following correcting amendments:

PART 1910--GENERAL

1. The authority citation for part 1910 continues to read as

follows:

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

Subpart A--Receiving and Processing Applications

2. Section 1910.5 is amended by revising the introductory text of

paragraph (c) as set forth below and removing paragraph (c)(6).

Sec. 1910.5 Evaluating applications.

* * * * *

(c) When the applicant, including any members of an entity

applicant, caused the Agency a loss by receiving debt forgiveness, they

are ineligible for assistance in accordance with applicable program

eligibility regulations. If the debt forgiveness is cured by repayment

of the Agency's loss, the Agency may still consider the debt

forgiveness in determining the applicant's creditworthiness. The

following circumstances do not automatically indicate an unacceptable

credit history:

* * * * *

PART 1941--OPERATING LOANS

3. The authority citation for part 1941 continues to read as

follows:

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

Subpart A--Operating Loan Policies, Procedures, and Authorizations

4. Section 1941.12, paragraphs (a)(8), (a)(11), (b)(9) and (b)(12)

are revised to read as follows:

Sec. 1941.12 Eligibility requirements.

* * * * *

(a) * * *

(8) Have not executed a promissory note for a direct OL loan in

more than 6 different calendar years prior to the calendar year that

the requested direct OL loan will close. This eligibility restriction

applies to anyone who signs the promissory note. Youth loans are not

counted as direct OL loans for the purpose of this paragraph.

* * * * *

(11) Not be delinquent on any Federal debt. This restriction will

not apply if the Federal delinquency is cured on or before the loan

closing date.

(b) * * *

(9) Have no member of the business entity who has executed a

promissory note for direct OL loans in more than 6 different calendar

years prior to the calendar year that the requested direct OL loan will

close. This eligibility restriction applies to anyone who signs the

promissory note. Youth loans are not counted as direct OL loans for the

purpose of this paragraph.

* * * * *

(12) Not be delinquent on any Federal debt. This restriction will

not apply if the Federal delinquency is cured on or before the loan

closing date. This eligibility restriction applies to the entity and

all of its members.

* * * * *

Sec. 1941.16 [Corrected]

5. Section 1941.16(i)(2) is amended by removing the word ``owned''

and adding the word ``owed'' in its place.

Subpart B--Closing Loans Secured by Chattels

Sec. 1941.88 [Corrected]

6. In Sec. 1941.88(c), the first sentence is amended by removing

the word ``more'' and adding the word ``less'' in its place.

[[Page 28619]]

PART 1943--FARM OWNERSHIP, SOIL AND WATER AND RECREATION

7. The authority citation for part 1943 continues to read as

follows:

Authority: 5 U.S.C. 301, and 7 U.S.C. 1989.

Subpart A--Direct Farm Ownership Loan Policies, Procedures and

Authorizations

Sec. 1943.4 [Corrected]

8. Section 1943.4(e) is amended by adding ``Except for OL loan

purposes,'' at the beginning of the first sentence.

9. Section 1943.12 (a)(11) and (b)(11) is revised to read as

follows:

Sec. 1943.12 Farm ownership loan eligibility requirements.

* * * * *

(a) * * *

(11) Not be delinquent on any Federal debt. This restriction will

not apply if the Federal delinquency is cured on or before the loan

closing date.

(b) * * *

(11) Not be delinquent on any Federal debt. This restriction will

not apply if the Federal delinquency is cured on or before the loan

closing date. This eligibility restriction applies to the entity and

all of its members.

* * * * *

Sec. 1943.13 [Corrected]

10. Section 1943.13 is amended by:

a. Removing from the introductory text of paragraph (a) and (b) the

words ``and Acquired Property.''

b. Removing paragraph (a)(2).

c. Redesignating paragraphs (a)(3), (4) and (5) as paragraphs

(a)(2), (3) and (4), respectively.

d. Removing the phrase ``and credit sale'' and removing the word

``programs'' and adding the word ``program'' in its place in paragraph

(a)(1) and newly designated paragraph (a)(3).

e. Removing the phrase ``and acquired farmland'' and removing the

word ``programs'' and adding the word ``program'' in its place in

paragraph (b)(1).

Sec. 1943.16 [Corrected]

11. Section 1943.16, paragraph (b) is amended by adding a new

sentence at the end of the paragraph to read, ``In the case of leased

property, the borrower must have a lease to ensure use of the

improvement over its useful life or to ensure that the borrower

receives compensation for any remaining economic life upon termination

of the lease.

PART 1945--EMERGENCY

12. The authority citation for part 1945 continues to read as

follows:

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

Subpart D--Emergency Loan Policies, Procedures, and Authorizations

Sec. 1945.167 [Corrected]

13. Section 1945.167, paragraph (a) is amended by revising the last

sentence to read, ``Chattel property must have been covered at the tax

or cost depreciated value, whichever is less, when such insurance was

readily available and the benefit of the coverage (the lesser of the

property's tax or cost depreciated value) was greater than the cost of

the insurance.''

Sec. 1945.175 [Corrected]

14. Section 1945.175 is amended by adding the word ``not'' after

the word ``chattels'' in the second to the last sentence of paragraph

(c)(3), and by revising the last sentence to read, ``Chattels that the

applicant did not own on the date set forth in paragraph (c)(2) of this

section will be appraised at the present market value.''

PART 1980--GENERAL

15. The authority citation for part 1980 continues to read as

follows:

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

Subpart B--Farmer Program Loans

Sec. 1980.106 [Corrected]

16. Section 1980.106 is corrected by removing the second sentence

of the definition of a ``Farm.''

17. Section 1980.174, paragraph (a) introductory text is revised to

read as follows:

Sec. 1980.174 Percentage of guarantee.

* * * * *

(a) The maximum percentage of guarantee is 90 percent, except in

the following situations when lenders will be provided a 95 percent

guarantee:''

* * * * *

Sec. 1980.175 [Corrected]

18. Section 1980.175 is amended by:

a. Revising the third and fourth sentences of paragraph (b) to

read, ``Further, the applicant, and anyone who will execute the

promissory note, cannot be delinquent on any federal debt. This

restriction will not apply if the Federal delinquency is cured on or

before the loan closing date.''

b. Amending the first sentence of paragraph (c)(2)(ii) by adding

after the word ``creditors'' the phrase ``or the lender.''

c. Revising the first sentence of paragraph (d)(1) to read, ``No

guaranteed OL loan shall be made to any applicant after the 15th year

that an applicant, or any individual signing the promissory note,

received direct or guaranteed OL loans.''

Sec. 1980.180 [Corrected]

19. Section 1980.180 is amended by:

a. Removing the last sentence of paragraph (a).

b. Removing the word ``Agency'' and adding the word ``lender'' in

its place in the last two sentences of paragraph (c)(1).

c. Adding the phrase ``FO or OL'' after the word ``authorized'' in

paragraph (c)(5).

Sec. 1980.190 [Corrected]

20. Section 1980.190(e) is amended by removing the phrase ``but not

more than 90 percent'' and adding the phrase, ``but not more than that

allowed under applicable program regulations'' in its place.

Signed at Washington, D.C., on May 16, 1997.

Richard O. Newman,

Acting Administrator, Farm Service Agency.

[FR Doc. 97-13702 Filed 5-23-97; 8:45 am]

BILLING CODE 3410-05-P