Disaster Set-Aside ProgramSecond Installment Set-Aside

DEPARTMENT OF AGRICULTURE

Farm Service Agency

7 CFR Part 1951

RIN 0560-AF59

Disaster Set-Aside Program--Second Installment Set-Aside

AGENCY: Farm Service Agency, USDA.

ACTION: Interim rule.

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SUMMARY: The Farm Service Agency (FSA) is amending the disaster set-

aside program requirement to allow farm borrowers to set aside portions

of payments that could not be made as scheduled due to a natural

disaster as declared by the President or Secretary of Agriculture

during 1998, or because of low commodity prices during 1998.

Applications for set-aside due to 1998 low commodity prices must be

received on or before August 31, 1999. Borrowers who have loans with

set-aside payments as of the publication date of this regulation may

set aside a second payment on the same loans if determined eligible

based on criteria established by this rule. To receive consideration

for a second set-aside due to a natural disaster, the borrower's

request must be received within 8 months from the date of the disaster

designation, in accordance with 7 CFR part 1945, subpart A. The impact

of these provisions will allow the agency to serve farmers who have

experienced losses due to a natural disaster or low commodity prices

during 1998 in an efficient and timely manner while helping them stay

in business.

EFFECTIVE DATE: The effective date for this rule is January 5, 1999.

Comments on this rule and on the information collections must be

submitted by March 8, 1999 to be assured consideration.

ADDRESSES: Submit written comments to Director, Farm Loan Programs,

Loan Servicing and Property Management Division, United States

Department of Agriculture, Farm Service Agency, STOP 0523, 1400

Independence Avenue, SW, Washington, DC 20250-0523.

FOR FURTHER INFORMATION CONTACT:

David Spillman, Branch Chief, United States Department of Agriculture,

Farm Service Agency, Farm Loan Programs, Loan Servicing and Property

Management Division, 1400 Independence Avenue, SW, STOP 0523,

Washington, D.C. 20250-0523; telephone (202) 720-0900; electronic mail:

[email protected].

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This rule has been determined to be significant and was reviewed by

the Office of Management and Budget under Executive Order 12866.

Regulatory Flexibility Act

In compliance with the Regulatory Flexibility Act (5 U.S.C. 601-

602), the undersigned has determined and certified by signature of this

document that this rule will not have a significant economic impact on

a substantial number of small entities. New provisions included in this

rule will not impact a substantial number of small entities to a

greater extent than large entities. Thus, large entities are subject to

these rules to the same extent as small entities. Therefore, a

regulatory flexibility analysis was not performed.

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 affect the quality of human environment, and

in accordance with the National Environmental Policy Act of 1969, Pub.

L. 91-190, an Environmental Impact Statement is not required.

Executive Order 12988

This rule has been reviewed in accordance with Executive Order

12988, 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 7 CFR parts

11 and 780 must be exhausted before bringing suit in court challenging

action taken under this rule.

Executive Order 12372

For reasons set forth in the Notice to 7 CFR part 3015, subpart V

(48 FR 29115, June 24, 1983), the programs within this rule are

excluded from the scope of E.O. 12372, which requires intergovernmental

consultation with State and local officials.

The Unfunded Mandates Reform Act of 1995

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Pub.

L. 104-4, requires Federal agencies to assess the effects of their

regulatory actions on State, local, and tribal governments or the

private sector of $100 million or more in any 1 year. When such a

statement is needed for a rule, section 205 of the UMRA requires FSA to

prepare a written statement, including a cost benefit assessment, for

proposed and final rules with ``Federal mandates'' that may result in

such expenditures 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 under Title II

of the UMRA, for State, local, and tribal governments or the private

sector. Thus, this rule is not subject to the requirements of sections

202 and 205 of UMRA.

[[Page 393]]

Paperwork Reduction Act of 1995

Approval of information collections requirements associated with

this regulation expired on August 31, 1998. A notice of request for

extension of currently approved information collections was published

on May 5, 1998. FSA has submitted a request for emergency reinstatement

of the information collections. Estimates for information collections

have been modified from those published on May 5, 1998, to reflect an

increase in requests which will be a result of the changes made by this

rule. Therefore, the agency is again seeking public comments on the

information collection estimates.

Abstract

The FSA is authorized by the Consolidated Farm and Rural

Development Act, as amended (7 U.S.C. 1921 et seq.), or other Acts, and

the regulations promulgated thereunder, to solicit the information

requested on this paperwork burden. The information requested is

necessary for FSA to determine eligibility for credit or other

financial assistance and service borrower's loans.

Estimate of Burden: Public reporting burden for this collection of

information is estimated to average 31 minutes per response.

Respondents: Individuals or households, businesses or other for

profit and farms.

Estimated number of respondents: 16,300.

Estimated number of responses per respondent: 3.9.

Estimated total annual burden on respondents: 33,399 hours.

The Agency is soliciting comments on the burden of all of the above

subparts regarding: (a) Whether the collection of information is

necessary for the proper performance of the functions of the Agency,

including whether the information will have practical utility; (b) the

accuracy of the Agency's estimate of burden including the validity of

the methodology and assumptions used; (c) ways to enhance the quality,

utility and clarity of the information to be collected; (d) ways to

minimize the burden of the collection of information on those who are

to respond, including through the use of appropriate automated,

electronic, mechanical, or other technological collection techniques or

other forms of information technology. These comments should be sent to

Desk Officer for Agriculture, Office of Information and Regulatory

Affairs, Office of Management and Budget, Washington, D.C. 20503 and to

David Spillman, Branch Chief, USDA, FSA, Farm Loan Programs, Loan

Servicing Division, 1400 Independence Avenue, SW., Stop 0523,

Washington, DC 20250-0523. Copies of the information collections may be

obtained from Mr. Spillman at the above address. All comments will

become a matter of public record.

Federal Assistance Programs

These changes affect the following FSA programs as listed in the

Catalog of Federal Domestic Assistance.

10.404--Emergency Loans

10.406--Farm Operating Loans

10.407--Farm Ownership Loans

Discussion of the Interim Rule

The Farm Service Agency (FSA) publishes this amendment to subpart T

of part 1951 without prior notice and comment because of the emergency

nature of the program and the eligibility requirements involved.

Publication as a proposed rule for notice and comment is impractical

and contrary to the public interest as discussed below.

The Disaster Set-Aside (DSA) program was first made available to

FSA Farm Loan Programs (FLP) borrowers beginning October 21, 1994,

because of the heavy flooding in the Midwest and extreme drought in the

South. Since that time approximately 15,000 borrowers have received DSA

assistance. The overall success of the program can be attributed to the

relatively small amount of paperwork required in applying for and

processing DSA requests. DSA gives FLP borrowers a chance to recover

from their losses without having to incur additional debt to pay

creditors or liquidate essential assets. The cost to the Government is

substantially less under this servicing program than any other, as no

debt is written off, no appraisal costs are incurred as under subpart S

of part 1951, and no liquidation costs are incurred.

Many borrowers have received a previous writedown of debt under

subpart S of part 1951, thereby making them ineligible for additional

debt forgiveness and farm loans, in certain cases, under Sec. 373 of

the Consolidated Farm and Rural Development Act. The expansion of the

program to permit a second debt set-aside or a set-aside due to 1998

declared disasters or low commodity prices, therefore, is needed

immediately to prevent irreparable financial harm to those adversely

affected, an estimated 11,424, farmers. While there is justification

for the rule to become effective immediately after publication, FSA

will accept public comments on the rule for 60 days for consideration

when the rule is made final.

7 CFR 1951.954, generally provides that each loan can only have one

set-aside installment outstanding. A borrower could receive DSA again

only if the existing set-aside installment were paid in full, or

canceled through restructuring under subpart S of part 1951. This rule

will allow borrowers who were affected by low commodity prices in 1998,

or by a natural disaster in a county declared a major disaster by the

President or Secretary during 1998, to have a second installment set

aside without the first set-aside installment being paid in full or

canceled. Borrowers who farmed in counties contiguous to the disaster

area also may be eligible for the second installment set-aside.

This rule will allow such borrowers to receive immediate financial

relief from their FLP obligations in a more expedient manner than under

subpart S of part 1951. When the borrower pays any portion of the set-

aside installments in the future, the payment will be applied to the

oldest installment set-aside.

Applications from borrowers affected by low commodity prices during

1998 must be received by August 31, 1999. Borrowers affected by a

natural disaster declared by the President or Secretary during 1998

must apply within 8 months of the designation.

List of Subjects in 7 CFR Part 1951

Accounting, Credit, Disaster assistance, Loan programs-agriculture,

Loan programs-housing and community development, Low and moderate

income housing.

Accordingly, 7 CFR part 1951 is amended as follows:

PART 1951-SERVICING AND COLLECTIONS

1. The authority citation for part 1951 continues to read as

follows:

Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 31 U.S.C. 3716; 42

U.S.C. 1480.

Subpart T--Disaster Set-Aside Program

2. Section 1951.951 is amended by revising the second sentence to

read as follows:

Sec. 1951.951 Purpose.

* * * The DSA program is available to Farm Loan Program (FLP)

borrowers, as defined in subpart S of this part, who suffered losses as

a result of a natural disaster or low commodity prices in specified

years. * * *

[[Page 394]]

3. Section 1951.952 is amended by revising the first and second

sentences to read as follows:

Sec. 1951.952 General.

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

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

move the scheduled annual installment for each eligible FLP 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 or low

commodity prices that occurred in specified years and avoid foreclosure

by the Government. * * *

4. Section 1951.953 is amended by revising paragraph (b) to read as

follows:

Sec. 1951.953 Notification and request for DSA.

* * * * *

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

request a DSA within 8 months from the date the disaster was

designated, in accordance with 7 CFR part 1945, subpart A. Applications

for set-aside or second installment set-aside due to low commodity

prices in 1998 must be received on or before August 31, 1999.

* * * * *

5. Section 1951.954 is amended by revising paragraphs (a)(1),

(a)(5), (a)(7), (b)(2), (b)(4), and (b)(5) to read as follows:

Sec. 1951.954 Eligibility and loan limitation requirements.

(a) * * *

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

designated a disaster area as contained in 7 CFR part 1945, subpart A,

or a county contiguous to such an area, and must have been a borrower

and operated the farm or ranch at the time of the low commodity prices

or disaster period.

(ii) If the borrower is applying for a second installment to be set

aside based on a declared disaster, the borrower must have operated in

a county declared a major disaster by the President or the Secretary

during 1998. Borrowers who farmed in a county contiguous to a county

that was declared a disaster area also may be eligible for a second

installment set-aside.

(iii) All FLP borrowers may apply for an installment to be set

aside based on low commodity prices during 1998. County location, or

proximity to a disaster declared county is not a consideration when the

DSA is justified by low commodity prices.

(iv) A borrower cannot have more than two installments set aside on

any loan.

* * * * *

(5) As a direct result of the declared disaster or the 1998 low

commodity prices, sufficient income was not available to pay all family

living and operating expenses, debts to other creditors, and FSA. This

determination will be based on the borrower's actual production, income

and expense records for the disaster or affected 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 a disaster. Consideration will also be given to insufficient

income for the next production and marketing period following the

affected year if the borrower establishes that production will be

reduced or expenses increased as a result of the disaster or the 1998

low commodity prices.

* * * * *

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

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

the disaster or the low commodity prices occurred.

(b) * * *

(2)(i) Except as provided in paragraph (b)(2)(ii), only one unpaid

installment for each FLP loan may be set-aside. If there is an

installment remaining set-aside from a previous disaster, the loan is

not eligible for another DSA.

(ii) For disaster declarations during 1998, or low commodity prices

in 1998, borrowers who already have one installment set aside from a

previous disaster may set aside a second installment.

(iii) If all set-asides are paid in full, or cancelled through

restructuring under subpart S of this part, the set-aside will no

longer exist and the loan may be considered for DSA.

* * * * *

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

borrower was unable to pay FSA from the production and marketing period

in which the disaster or low commodity prices occurred. However, if the

installment due immediately after the disaster was paid, but other

creditors and expenses were not, the amount set-aside will be the

lessor of the amount the borrower is unable to pay other creditors and

expenses, rounded up to the nearest whole installment, or the next FLP

installment due.

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

scheduled annual installment due immediately after the disaster or low

commodity prices occurred, unless that installment is paid, then the

next scheduled annual installment may be set-aside.

* * * * *

Signed in Washington, DC, on December 30, 1998.

Dallas R. Smith,

Acting Under Secretary for Farm and Foreign Agricultural Services.

[FR Doc. 99-115 Filed 1-4-99; 8:45 am]

BILLING CODE 3410-05-M