Streamlining of Regulations for Real Estate and Chattel Appraisals

DEPARTMENT OF AGRICULTURE

Farm Service Agency

7 CFR Parts 761 and 762

Rural Housing Service

Rural Business-Cooperative Service

Rural Utilities Service

Farm Service Agency

7 CFR Parts 1922, 1941, 1943, 1945, 1951, 1955, and 1965

RIN 0560-AF69

Streamlining of Regulations for Real Estate and Chattel

Appraisals

AGENCIES: Rural Housing Service, Rural Business-Cooperative Service,

Rural Utilities Service, Farm Service Agency, USDA.

ACTION: Final rule.

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SUMMARY: This action eliminates unnecessary and burdensome

administrative provisions and procedures from the Agency's regulations

governing real estate and chattel appraisals used in conjunction with

the Farm Loan Programs, and clarifies the requirement that Agency real

estate appraisals must comply with the guidelines and standards

contained in the Uniform Standards of Professional Appraisal Practice.

The changes to the regulations will allow for the use of appraisal

forms and reports based on industry formats rather than requiring the

use of specific Agency formats. This action will also move the core

appraisal regulations as part of the Agency's overall effort to

consolidate its regulations.

EFFECTIVE DATE: December 17, 1999.

FOR FURTHER INFORMATION CONTACT: Chris L. Greenwalt, Senior Loan

Officer, Program Development and Economic Enhancement Division USDA/

FSA/PDEED/STOP 0521, 1400 Independence Avenue, SW., Washington, DC

20250-0521, telephone (202) 690-0431, facsimile (202) 720-8474, e-mail:

Chris__G[email protected].

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This rule has been reviewed under Executive Order 12866, has been

determined to be not significant for the purposes of E.O. 12866, and,

therefore, has not been reviewed by the Office of Management and

Budget.

Executive Order 12372

The programs to which this Executive Order may apply are listed in

the Catalog of Federal Domestic Assistance under the following:

10.407 Farm Ownership Loans

10.421 Indian Tribes and Tribal Corporation Loans

Programs listed under the numbers 10.407 and 10.421 are subject to,

and have complied with, the provisions of Executive Order 12372. (See

the Notices related to 7 CFR 3015, subpart V, at 48 FR 29112, June 24,

1983; 49 FR 22675, May 31, 1984; and 50 FR 14088, April 10, 1985.)

Environmental Impact Statement

It is the determination of the issuing Agency that this action is

not a major Federal action significantly affecting the environment and,

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

L. 91-190, an Environmental Impact Statement has not been prepared.

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, as applicable, 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.

Regulatory Flexibility Act

The Farm Service Agency (FSA) certifies that this rule will not

have a significant impact on a substantial number of small entities as

defined under the Regulatory Flexibility Act, Pub. L. 96-534, as

amended (5 U.S.C. 601). No actions are being taken under this rule that

would favor large entities over small entities. According to the 1992

Census of Agriculture, 1.9 million farmers or over 99 percent of all

farms in the United States are small entities as defined by the Small

Business Administration (SBA). Under the SBA definition, few if any

large entities are operators of family-sized farms who would be

eligible for FSA credit. This rule is expected to result in the Agency

adopting industry standards for appraisals which should reduce the

costs of appraisals and afford faster completion time. Therefore, a

Regulatory Flexibility Analysis has not been prepared.

Paperwork Reduction Act of 1995

This rule does not contain reporting or record keeping requirements

subject to the Paperwork Reduction Act of 1995.

Unfunded Mandates Reform Act of 1995

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

establishes requirements for Federal agencies to assess the effects of

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

private sector. Under section 202 of the UMRA, agencies must prepare a

written statement, including a cost benefit analysis, before

promulgating a notice of proposed rulemaking that includes any Federal

mandates that may result in expenditures to State, local, and tribal

governments, in the aggregate, or to the private sector, of $100

million or more in any one year. When such a statement is needed for a

rule, section 205 of the UMRA generally requires agencies to identify

and consider a reasonable number of regulatory alternatives and adopt

the least costly, more cost effective or least burdensome alternative

that achieves the objectives of the rule.

The rule contains no Federal mandates (under the regulatory

provisions of 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 the UMRA.

Executive Order 12612

It has been determined that under section 6(a) of Executive Order

12612, Federalism, implications to warrant the preparation of a

Federalism Assessment. The provisions of this rule will not have a

substantial direct effect on States or their political subdivisions or

on the distribution of power and responsibilities among the various

levels of government.

Discussion of the Final Rule

This rule involves the farm loan programs formerly administered by

the Farmers Home Administration (FmHA). The Department of Agriculture

Reorganization Act of 1994, abolished FmHA on October 13, 1994, and its

Farmer Programs functions, now referred to as Farm Loan Programs, were

subsequently transferred by the Secretary to the Farm Service Agency

(FSA).

FSA is revising the existing core appraisal regulations, loan

servicing regulations, and the loan making regulations regarding real

estate and chattel appraisals for several reasons. Most importantly,

these changes are being made to eliminate the

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requirements that specific Agency appraisal formats must be used for

real estate and chattel appraisals required under Farm Loan Programs.

This change removes unnecessary administrative burdens and increases

the tools available to FSA to complete real estate and chattel

appraisals. Elimination of requirements for the use of specific forms

for real estate and chattel appraisals provides FSA the opportunity to

expand the use of contract appraisers who do not now participate due to

the requirement that agency appraisals must be on Agency appraisal

forms.

The rule maintains the current requirement that real estate

appraisals must comply with the Uniform Standards of Professional

Appraisal Practice (USPAP), as developed by the Appraisal Standards

Board of the Appraisal Foundation, pursuant to the Financial

Institutions Reform, Recovery, and Enforcement Act of 1989, and as

applied to Federal agencies by Office of Management and Budget Circular

A-129. While the rule allows for different formats for chattel

appraisals, the rule maintains the current requirements regarding the

information that such appraisals contain.

The rule also eliminates the specific provisions regarding

appraisal of real property subject to an easement currently codified at

7 CFR 1922.209. This section is obsolete because it cross references

procedures at 7 CFR 1922.209 which was removed from part 1922 without a

replacement. Further, USPAP standards already adopted by FSA in its

current appraisal regulations codified at 7 CFR 1922.201 address the

issues regarding appraisals of real property that are subject to an

easement. Therefore, separate regulations on this subject are not

necessary.

The rule moves the core FSA appaisal regulations from 7 CFR part

1922 to 7 CFR part 761. This change is part of FSA's overall effort to

consolidate the Farm Loan Programs regulations that had been initially

promulgated by the former FmHA with FSA's other program regulations

into one range of parts in title 7 of the Code of Federal Regulations.

The rule also consolidates under Sec. 761.7 the current provisions

governing the use of existing real estate appraisals from the Operating

Loan Program (7 CFR 1941.25(a)(6)), Farm Ownership Loan Program (7 CFR

1943.25(c)(3)), and Emergency Loan Program (7 CFR 1945.175(c)(1)(iv))

to 7 CFR 761.7(d)).

The Agency is not seeking public comment regarding this rule,

because the rule does not change the standards applied to Agency

appraisals, it merely changes the location of the regulations in the

Code of Federal Regulations and makes a procedural change to allow the

use of any alternative appraisal format that complies with Agency

appraisal standards. Therefore, pursuant to 5 U.S.C. 552(b), the Agency

has concluded that it is unnecessary to seek public comment before

implementing this rule.

List of Subjects

7 CFR Part 761

Accounting, Accounting servicing, Loan programs--Agriculture, Real

Property-Appraisals, Rural areas.

7 CFR Part 762

Agriculture, Loan programs--Agriculture

7 CFR Part 1922

Loan programs--Agriculture, Real property-Appraisals, Rural areas

7 CFR Part 1941

Crops, Livestock, Loan programs--Agriculture, Rural areas, Youth

7 CFR Part 1943

Credit, Loan programs--Agriculture, Recreation, Water resources

7 CFR Part 1945

Agriculture, Disaster assistance, Loan programs--Agriculture

7 CFR Part 1951

Accounting servicing, Debt restructuring, Credit, Loan programs--

Agriculture

7 CFR Part 1955

Government property, Loan programs--Agriculture.

7 CFR Part 1965

Administrative practice and procedure, Foreclosure, Loan programs--

Agriculture, Rural areas.

For the reasons stated in the preamble, 7 CFR part 761 is added, 7

CFR part 1922 is removed and reserved, and 7 CFR parts 1941, 1943,

1945, 1951, 1955 and 1965 are amended as follows:

1. Add part 761 to read as follows:

PART 761--GENERAL AND ADMINISTRATIVE

Subpart A--General Provisions

Sec.

761.1-761.6 [Reserved]

761.7 Appraisals.

Authority: 7 U.S.C. 1989.

Sec. 761.1-761.6 [Reserved]

Sec. 761.7 Appraisals.

(a) General. This section describes Agency requirements for real

estate and chattel appraisals and reviews made in connection with the

making and servicing of direct and guaranteed Farm Loan Program loans

and nonprogram loans serviced under part 1951, subpart J of this

chapter.

(b) Definitions.

Administrative appraisal review means a review of an appraisal to

determine if the appraisal:

(1) Meets applicable Agency requirements; and

(2) Is accurate outside the requirements of standard 3 of USPAP.

Agency means the Farm Service Agency, including its employees and

state and area committee members, and any successor agency.

Farm Loan Programs (FLP) loans refers to Farm Ownership (FO), Soil

and Water (SW), Recreation (RL), Economic Opportunity (EO), Operating

(OL), Emergency (EM), Economic Emergency (EE), Softwood Timber (ST),

and Rural Housing loans for farm service buildings (RHF).

Technical appraisal review means a review of an appraisal to

determine if such appraisal meets the requirements of USPAP pursuant to

standard 3 of USPAP.

USPAP (Uniform Standards of Professional Appraisal Practice) means

standards governing the preparation, reporting, and reviewing of

appraisals established by the Appraisal Foundation pursuant to the

Financial Institutions Reform, Recovery, and Enforcement Act of 1989.

(c) Appraisal standards. (1) Real estate. Real estate appraisals,

technical appraisal reviews of real estate appraisals, and their

respective forms must comply with the standards contained in USPAP, as

well as applicable Agency regulations and procedures for the specific

Farm Loan Program activity involved. A current copy of USPAP along with

other applicable appraisal procedures and regulations is available for

review in each Agency State Office.

(2) Chattel. An appraisal of chattel property may be completed on

an applicable Agency form (available in each Agency State Office) or

other format containing the same information.

(d) Use of an existing real estate appraisal. The Agency may use an

existing real estate appraisal to reach loan making or servicing

decisions if:

(2) The Agency determines the appraisal meets the requirements of

this section and applicable Agency loan making or servicing

requirements;

(3) The appraisal was completed within the previous 12 months; and

[[Page 62568]]

(4) Current market values have remained stable since the appraisal

was complete.

(e) Appraisal reviews. (1) Real estate appraisals. With respect to

a real estate appraisal, the Agency may conduct a technical appraisal

review or an administrative appraisal review, or both.

(2) Chattel appraisals. With respect to a chattel appraisal, the

Agency may conduct an administrative appraisal review.

PART 762--GURANTEED FARM LOANS

2. The authority citation for part 762 continues to read as

follows:

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

Sec. 762.127 [Amended]

3. Amend Sec. 762.127 to remove the second sentence in introductory

text of paragraph (d).

PART 1922 [Removed and Reserved]

4. Remove and reserve part 1922.

PART 1941--OPERATING LOANS

5. The authority citation for part 1941 is revised to read as

follows:

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

Sec. 1941.25 [Amended]

6. Amend Sec. 1941.25 to remove the second sentence of the

introductory text in paragraph (a) ``Forms FmHA 440-21, `Appraisal of

Chattel Property,' FmHA 1922-1, `Appraisal Report-Farm Tract' and FmHA

1922-11, `Appraisal for Mineral Rights', respectively'' and add in its

place ``forms in accordance with Sec. 761.7 of this title and, in the

case of an appraisal of mineral rights' the appropriate Agency form

(available in each Agency State Office) or other format that contains

the same information''.

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.

Sec. 1943.25 [Amended]

8. Amend Sec. 1943.25 as follows:

a. Remove from paragraph (c)(1) ``Forms FmHA 1922-1 or FmHA 1922-8,

`Uniform Residential Appraisal Report,' for farm real estate or

residential farm real estate, respectively'' and add in its place

``forms in accordance with Sec. 761.7 of this title, and in the case of

an appraisal of residential real estate, the appropriate Agency form

(available in each Agency State Office) or other format that contains

the same information'';

b. Remove paragraph (c)(3);

c. Redesignate paragraphs (c)(4), (c)(5), and (c)(6) as paragraphs

9c)(3), (c)(4), and (c)(5), respectively.

d. Remove from the first sentence in newly designated paragraph

(c)(3) ``subpart E of part 1922 of this chapter'' and add in its place

``Sec. 761.7 of this title'';

e. Add at the end of the last sentence before the period of newly

designated paragraph (c)(3) ``or other format that contains the same

information''; and

Sec. 1943.75 [Amended]

9. Amend Sec. 1943.75 as follows:

a. Remove from paragraph (c)(1) ``Forms FmHA 1922-1 or FmHA 1922-8,

`Uniform Residential Appraisal Report' for farm real estate or

residential farm real estate, respectively'' and add in its place

``forms in accordance with Sec. 761.7 of this title, and in the case of

an appraisal of residential real estate, the appropriate Agency form

(available in each Agency State Office ) or other format that contains

the same information'';

b. Remove paragraph (c)(3);

c. Redesignate paragraphs (c)(4), (c)(5), and (c)(6) as paragraphs

(c)(3), (c)(4), and (c)(5), respectively.

d. Remove from the first sentence in newly designated paragraph

(c)(3) ``supart E of part 1922 of this chapter'' and add in its place

``Sec. 761.7 of this title'';

e. Add at the end of the last sentence before the period of newly

designated paragraph (c)(3) ``or other format that contains the same

information''; and

PART 1945--EMERGENCY

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

follows:

Authority: 5 U.S.C. 301, 7 U.S.C. 1989, and 42 U.S.C. 1980.

Sec. 1945.169 [Amended]

11. In Sec. 1945.169 remove from paragraph (p)(1)(iii) ``in the

comments section of Form FmHA or its successor agency under Public Law

103-354 1922-1, `Appraisal Report-Farm Tract' '' and add in its place

``on the real estate appraisal''.

Sec. 1945.175 [Amended]

12. Amend Sec. 1945.175 as follows:

a. Remove from the introductory text to paragraph (c)(1) ``Forms

FmHA 1922-or FmHA 1922-8, `Uniform Residential Appraisal Report' for

farm real estate or residential farm real estate, respectively'' and

add in its place ``forms in accordance with Sec. 761.7 of this title,

and in the case of an appraisal of residential real estate' the

appropriate Agency form (available in each Agency State Office) or

other format that contains the same information'';

b. Add at the end before the period of paragraph (c)(1)(ii) ``or

other format that contains the same information'';

c. Remove paragraph (c)(1)(iv); and

d. Redesignate paragraphs (c)(1)(v) as paragraph (c)(1)(iv).

PART 1951--SERVICING AND COLLECTION

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

follows:

Authority: 5 U.S.C. 301, 7 U.S.C. 1932 Note, 7 U.S.C. 1989, 42

U.S.C. 1480.

14. Amend Sec. 1951.909 as follows:

a. Remove from the second sentence of paragraph (f)(1) ``subpart E

of part 1922 of this chapter'' and add in its place ``Sec. 761.7 of

this title''; and

b. Revise paragraph (i)(3)(ii) to read as follows:

Sec. 1951.909 Processing primary loan service programs requests.

* * * * *

(i) * * *

(3) * * *

(ii) The appraisal report must conform to Sec. 761.7 of this title

for real estate and chattels.

* * * * *

Sec. 1951.910 [Amended]

15. In Sec. 1951.910 remove from the third sentence of paragraph

(a)(1) ``subpart E of part 1922 of this chapter'' and add in its place

``Sec. 761.7 of this title''.

PART 1955--PROPERTY MANAGEMENT

16. The authority citation for part 1955 continues to read as

follows:

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

Sec. 1955.10 [Removed]

17. In Sec. 1955.10 remove from the fourth sentence of the

introductory text of paragraph (e) ``subpart E of part 1922 of this

chapter'' and add in its place ``Sec. 761.7 of this title''.

18. In Sec. 1955.66 revise paragraph (h)(2) to read as follows:

Sec. 1955.66 Lease of real property.

* * * * *

(h) * * *

(2) The purchase price (option price) will be the advertised sales

price as determined by an appraisal prepared in accordance with

Sec. 761.7 of this title.

* * * * *

[[Page 62569]]

Sec. 1955.107 [Amended]

19. In Sec. 1955.107 remove from the second sentence of paragraph

(a)(1) ``subpart E of part 1922 of this chapter'' and add in its place

``Sec. 761.7 of this title''.

PART 1965--REAL PROPERTY

20. The authority citation for part 1965 continues to read as

follows:

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

Sec. 1965.12 [Amended]

21. In Sec. 1965.12 remove from the first and second sentences of

paragraph (e) ``subpart E of part 1922 of this chapter'' and add in its

place ``Sec. 761.7 of this title''.

Sec. 1965.13 [Amended]

22. In Sec. 1965.13 remove from the first sentence of paragraph (d)

``subpart E of part 1922 of this chapter'' and add in its place

``Sec. 761.7 of this title''.

Sec. 1965.25 [Amended]

23. In Sec. 1965.25 remove from paragraph (d)(1) ``subpart E of

part 1922 of this chapter'' and add in its place ``Sec. 761.7 of this

title''.

Sec. 1965.26 [Amended]

24. In Sec. 1965.26 remove from the second sentence of paragraph

(a)(2) ``subpart E of part 1922 of this chapter'' and add in its place

``Sec. 761.7 of this title''.

Sec. 1965.27 [Amended]

25. Amend Sec. 1965.27 as follows:

a. Remove from paragraph (g)(5) ``Forms FmHA or its successor

agency under Public Law 103-354 1922-1 or FmHA or its successor agency

under Public Law 103-354 1922-8, as appropriate,'' and add in its place

``Real estate appraisals meeting the requirements of 761.7 of this

title''; and

b. Remove from the fourth sentence of paragraph (h)(1) ``subpart E

of part 1922 of this chapter'' and add in its place ``Sec. 761.7 of

this title''.

Signed in Washington, D.C., on October 21, 1999.

August Schumacher, Jr.,

Under Secretary for Farm and Foreign Agricultural Services.

[FR Doc. 99-28371 Filed 11-16-99 8:45 am]

BILLING CODE 3410-05-M