[Federal Register Volume 62, Number 162 (Thursday, August 21, 1997)]
[Rules and Regulations]
[Pages 44393-44404]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-22004]
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DEPARTMENT OF AGRICULTURE
Rural Housing Service
Rural Business-Cooperative Service
Rural Utilities Service
Farm Service Agency
7 CFR Part 1955
RIN 0560-AE88
Implementation of the Inventory Property Management Provisions of
the Federal Agriculture Improvement and Reform Act of 1996
AGENCIES: Rural Housing Service, Rural Business-Cooperative Service,
Rural Utilities Service, and Farm Service Agency, USDA.
ACTION: Interim rule with request for comments.
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SUMMARY: This implements provisions of the Federal Agriculture
Improvement and Reform Act of 1996 (1996 Act) that affect the farm
credit programs of the Farm Service Agency (FSA), formerly administered
by the Farmers Home Administration (FmHA). The provisions of this rule
affect the acquisition, management and disposal of inventory farm
property by FSA.
DATES: Effective August 21, 1997. Comments must be submitted by October
20, 1997.
ADDRESSES: Submit written comments to the Farm Credit Programs Loan
Servicing and Property Management Division, Farm Service Agency, United
Sates Department of Agriculture, Room 5449-S, Stop 0523, 1400
Independence Avenue, SW, Washington, DC 20013-0523.
FOR FURTHER INFORMATION CONTACT: James P. Fortner, Senior Realty
Specialist, Farm Service Agency; Telephone: 202-720-1976; Facsimile:
202-690-0949. E-mail: jfortner@wdc.fsa.usda.gov
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
The Farm Service Agency (FSA) certifies that this rule will not
have a significant impact on a substantial number of small entities as
defined in the Regulatory Flexibility Act, Pub. L. 96-534, as amended
(5 U.S.C. 601).
In addition, the Regulatory Flexibility Act is not applicable to
this rule since
[[Page 44394]]
the Farm Service Agency (FSA) is not required by 5 U.S.C. 553, or any
other provisions of law, to publish a notice of proposed rulemaking to
effect these administrative changes.
Environmental Impact Statement
This document has been reviewed in accordance with 7 CFR part 1940,
subpart G, Environmental Program. The issuing agencies have determined
that this action does not significantly 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.
The Unfunded Mandate Reform Act of 1995
Title II of the Unfunded Mandate Reform Act of 1995 (UMRA), Pub. L.
104-4, established requirements for Federal agencies to assess the
effects of their regulatory actions on State, local, and tribal
governments and the private sector. Under section 202 of the UMRA, FSA
generally must prepare a written statement, including a cost-benefit
assessment, for proposed and final rules with Federal mandates that may
result in expenditures to State, local, or tribal governments, in the
aggregate, or to 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 generally requires FSA 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.
This rule contains no Federal mandates (under 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 12988
This interim final rule has been reviewed under Executive Order
12998, 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 part
11 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.
Executive Order 12372
For reasons set forth in the Notice regarding 7 CFR part 3015,
subpart V (48 FR 29115, June 24, 1983), the programs within this rule
are not affected by Executive Order 12372.
Programs Affected
This rule does not affect any programs listed in the Catalog of
Federal Domestic Assistance.
Paperwork Reduction Act
The information collection requirements contained in this
regulation have been approved by OMB under the provisions of 44 U.S.C.
chapter 35 and have been assigned OMB control numbers 0575-0109 and
0575-0110 in accordance with the Paperwork Reduction Act of 1995 (44
U.S.C. 3507). This interim rule does not revise or impose any new
information collection or recordkeeping requirement from those approved
by OMB.
Discussion of the Interim Rule
On April 4, 1996, the 1996 Act was signed into law and required
certain provisions to be implemented either immediately or no later
than 90 days from the date of enactment. The specific changes to the
acquisition, management, and disposal of real and chattel property
which served as security for FSA farm credit programs loans are
discussed below:
Liquidation and Acquisition
The 1996 Act eliminated the Leaseback/Buyback program which
provided the former borrower and owner, the borrower's spouse or
children, stockholder in the corporation if the borrower and owner was
a corporation held exclusively by members of the same family, or the
previous operator with rights to lease back an acquired property for up
to 5 years with an option to purchase. Several changes were made by the
1996 Act in relationship to the voluntary conveyance of property by
Native American borrowers when new property is located within the
boundaries of an Indian reservation. Leaseback/buyback rights as well
as the regular leasing authority were eliminated for Native American
borrowers. See Sec. 638(1) of the 1996 Act which eliminated the
leaseback/buyback program, as well as most of the Agency's authority to
lease inventory property (previously contained in Sec. 335(e)(3) of the
Consolidated Farm and Rural Development Act) (CONACT) and to resolve
disputes over lease terms (previously contained in Sec. 335(e)(9) of
the CONACT).
Under the program provided by the 1996 Act, if the Native American
borrower and owner does not voluntarily convey the real property to
FSA, FSA will, not less than 30 days prior to the foreclosure sale of
the property, provide the Native American borrower and owner with the
option of (1) requiring FSA to assign the loan and security instruments
to the Secretary of the Interior, or (2) requiring FSA to assign the
loan and security instruments to the tribe having jurisdiction over the
reservation where the property is located pursuant to
Sec. 335(e)(1)(D)(v)(I)(bb) of the CONACT. If the Native American
borrower and owner require FSA to assign the loan and security
instruments to the Secretary of the Interior and the Secretary of the
Interior agrees to the assignment, pursuant to Sec. 335(e)(1)(D)(v)(aa)
the Secretary of Agriculture is released from all further
responsibility for collection of the loan.
If the Native American borrower and owner elect to require FSA to
assign the loan to the tribe, the tribe must assume the loan and the
loan terms will be restructured to be consistent with Indian Land
Acquisition Loans made pursuant to 25 U.S.C. Sec. 488 and the principal
amount will be the lesser of the fair market value of the property or
the outstanding principal and interest on the date of the assignment.
While the narrow language of Sec. 335(e)(1)(D)(v)(I)(bb) only provides
for the assignment of the loan to the tribe and could be interpreted as
releasing the Government's interest in the repayment of the loan, in
the context of the amendment made to Sec. 335(e)(1)(D) by the 1996 Act,
there is no indication that Congress intended for the Government to
release the Government's right to be repaid and in effect make a grant
to the tribe. Had Congress intended for the loan to be transferred to
the tribe with no repayment responsibility, language similar to the
language for assignment to the Secretary of the Interior could have
been used. We interpret Sec. 335(e)(1)(D)(v)(III) as requiring that, if
the loan is assigned to the tribe, it must be assumed by the tribe as
well.
Management
The 1996 Act eliminated FSA's ability to lease inventory farm
property except to those beginning farmers or ranchers who are selected
to purchase an inventory property but are unable to do so due to a lack
of Agency credit funds. Leases with beginning farmers or ranchers who
were selected to purchase an inventory property on a credit sale may
not exceed 18 months or the date that FSA credit assistance becomes
available, whichever is earlier.
We have added a paragraph asserting FSA's limited authority to
lease
[[Page 44395]]
property pursuant to Sec. 335(b) of the CONACT. While the statute is
not free from doubt because Sec. 638(2) of the 1996 Act limits leasing
to beginning farmers and ranchers, Sec. 335(b) was not repealed by the
1996 Act. It states as follows:
Except as provided in subsections (c) and (e), real property
administered under the provisions of this title may be operated or
leased by the Secretary for such period or periods as the Secretary may
deem necessary to protect the Government's investment therein.
Based on this authority as modified by the limitation that
inventory property should be sold within 105 days of acquisition, we
have provided limited authority to lease property upon the approval of
the Administrator when it is impossible to sell it.
Disposal
The 1996 Act placed new requirements on FSA to dispose of inventory
property. The definition of a beginning farmer contained in Sec. 640(1)
of the 1996 Act was amended to raise the maximum amount of farm or
ranch property that may be owned from 15 percent to 25 percent of the
median farm size in the county in which the property is located.
However, the Agency will use 25 percent of the mean rather than the
median farm size in this definition since median farm sizes are
unavailable in the Census of Agriculture. Inventory must be advertised
for sale no later than 15 days after acquisition by the Agency. Not
later than 75 days from the date of acquisition, the Agency will offer
to sell inventory property to qualified beginning farmers or ranchers
at the current market value based on a current appraisal. Based on the
statutory language contained in Sec. 638(2) of the 1996 Act which
provides a priority in the sale of inventory property only to beginning
farmers and ranchers, the Agency has removed the regulatory priorities
previously contained in Sec. 1955.107(f)(1). The previous priorities
were as follows: first priority to beginning farmers and ranchers who
were also socially disadvantaged applicants (SDA); second priority to
beginning farmers and ranchers; third priority to operators of not
larger than family-size farms who were also SDAs; fourth priority to
operators of not larger than family size farms who meet the Agency's
eligibility requirements and fifth priority to operators of not larger
than family size farms who are not eligible for Agency credit. Under
this interim rule, the only remaining priority is to beginning farmers
and ranchers who can purchase the property at the current market value
based on a current appraisal. If more than one qualified beginning
farmer or rancher submits an application to purchase an inventory
property, FSA will select a purchaser through a random selection
process. Appeal rights for participation in the random selection as a
qualified beginning farmer or rancher were eliminated by Sec. 638(2) of
the 1996 Act and replaced by an expedited review by the State Executive
Director that is administratively final. If inventory property is not
sold to a beginning farmer or rancher within 75 days from acquisition,
Sec. 638(2) of the 1996 Act requires FSA, not later than 30 days after
the 75-day period, to sell the property by means of a public sale, such
as a public auction or sealed bids, at the best price obtainable.
A transitional rule provides that properties under a lease upon
passage of the 1996 Act would be advertised for sale no later than 60
days after the lease expires and properties in inventory upon passage
of the 1996 Act, but not under a lease, would be advertised no later
than 60 days from April 4, 1996. The transitional rule was implemented
in Notice FC-37 which informed FSA county and State offices that
property in inventory and not leased before April 5, 1996, will be
offered for sale within 60 days of the enactment of the 1996 Act. The
Notice also stated that property then under the lease will be offered
for sale no later than 60 days after the lease expires. The
transitional rule for leased properties is also contained in
Sec. 1955.107(a) of this rule.
While section 638 of the 1996 Act by its terms applies to all
property acquired under the CONACT, and thus applies to non-FSA
programs, these programs rarely acquire or lease inventory property.
Therefore, compliance with the 1996 Act will be achieved by guidance
given on a case-by-case basis, rather than through published
procedures, by requiring program officials to immediately contact the
National Office whenever they acquire inventory property. See
Sec. 1955.108.
The 1996 Act modified how conservation easements are placed on
wetlands located on inventory property. Wetland conservation easements
will only be placed on those wetlands or converted wetlands located on
inventory property that were not considered as cropland on the date of
acquisition and were not used for farming at any time during the 5-year
period prior to acquisition. The 1996 Act also amended the process
whereby inventory property can be transferred to Federal or State
agencies for conservation purposes. The 1996 Act requires that, upon
receipt of a request for transfer, FSA must provide at least two public
notices, hold at least one public meeting if requested, and consult
with the Governor and at least one elected county official of the State
and county where the property requested for transfer is located.
List of Subjects in 7 CFR Part 1955
Foreclosure, Government property.
Chapter XVIII, Title 7, Code of Federal Regulations is amended as
follows:
PART 1955--PROPERTY MANAGEMENT
1. The authority citation for part 1955 continues to read as
follows:
Authority: 5 U.S.C. 301; 7 U.S.C. 1989; and 42 U.S.C. 1480.
Subpart A--Liquidation of Loans Secured by Real Estate and
Acquisition of Real and Chattel Property
2. Section 1955.3 is amended by removing the definition of
``Leaseback/Buyback Property.''
3. Section 1955.4(a) is amended by removing the word ``Assistant''
in the first sentence and adding in its place the word ``Deputy.''
4. Section 1955.9 is revised to read as follows:
Sec. 1955.9 Requirements for voluntary conveyance of real property
located within a federally recognized Indian reservation owned by a
Native American borrower-owner.
(a) The borrower-owner is a member of the tribe that has
jurisdiction over the reservation in which the real property is
located. An Indian tribe may also meet the borrower-owner criterion if
it is indebted for Farm Credit Programs loans.
(b) A voluntary conveyance will be accepted only after all
preacquisition primary and preservation servicing actions have been
considered in accordance with subpart S of part 1951 of this chapter.
(c) When all servicing actions have been considered under subpart S
of part 1951 of this chapter and a positive outcome cannot be achieved,
the following additional actions are to be taken:
(1) The county official will notify the Native American borrower-
owner and the tribe by certified mail, return receipt requested, and by
regular mail if the certified mail is not received, that:
(i) The borrower-owner may convey the real estate security to FSA
and FSA will consider acceptance of the property into inventory in
accordance with paragraph (d) of this section.
[[Page 44396]]
(ii) The borrower-owner must inform FSA within 60 days from receipt
of this notice of the borrower and owner's decision to deed the
property to FSA;
(iii) The borrower-owner has the opportunity to consult with the
Indian tribe that has jurisdiction over the reservation in which the
real property is located, or counsel, to determine if State or tribal
law provides rights and protections that are more beneficial than those
provided the borrower-owner under Agency regulations;
(2) If the borrower-owner does not voluntarily deed the property to
FSA, not later than 30 days before the foreclosure sale, FSA will
provide the Native American borrower-owner with the following options:
(i) The Native American borrower-owner may require FSA to assign
the loan and security instruments to the Secretary of the Interior. If
the Secretary of the Interior agrees to such an assignment, FSA will be
released from all further responsibility for collection of any amounts
with regard to the loans secured by the real property.
(ii) The Native American borrower-owner may require FSA to complete
a transfer and assumption of the loan to the tribe having jurisdiction
over the reservation in which the real property is located if the tribe
agrees to the assumption. If the tribe assumes the loans, the following
actions shall occur:
(A) FSA shall not foreclose the loan because of any default that
occurred before the date of the assumption.
(B) The assumed loan shall be for the lesser of the outstanding
principal and interest of the loan or the fair market value of the
property as determined by an appraisal.
(C) The assumed loan shall be treated as though it is a regular
Indian Land Acquisition Loan made in accordance with subpart N of part
1823 of this chapter.
(3) If a Native American borrower-owner does not voluntarily convey
the real property to FSA, not less than 30 days before a foreclosure
sale of the property, FSA will provide written notice to the Indian
tribe that has jurisdiction over the reservation in which the real
property is located of the following:
(i) The sale;
(ii) The fair market value of the property; and
(iii) The ability of the Native American borrower-owner to require
the assignment of the loan and security instruments either to the
Secretary of the Interior or the tribe (and the consequences of either
action) as provided in Sec. 1955.9(c)(2).
(4) FSA will accept the offer of voluntary conveyance of the
property unless a hazardous substance, as defined in the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, is
located on the property which will require FSA to take remedial action
to protect human health or the environment if the property is taken
into inventory. In this case, a voluntary conveyance will be accepted
only if FSA determines that it is in the best interests of the
Government to acquire title to the property.
(d) When determining whether to accept a voluntary conveyance of a
Native American borrower-owner's real property, the county official
must consider:
(1) The cost of cleaning or mitigating the effects if a hazardous
substance is found on the property. A deduction equal to the amount of
the cost of a hazardous waste clean-up will be made to the fair market
value of the property to determine if it is in the best interest of the
Government to accept title to the property. FSA will accept the
property if clear title can be obtained and if the value of the
property after removal of hazardous substances exceeds the cost of
hazardous waste clean-up.
(2) If the property is located within the boundaries of a federally
recognized Indian reservation, and is owned by a member of the tribe
with jurisdiction over the reservation, FSA will credit the Native
American borrower-owner's account based on the fair market value of the
property or the FSA debt against the property, whichever is greater.
5. Section 1955.15(b)(3) is amended by revising the reference to
``Sec. 1955.137(e)'' in the first sentence to read ``Sec. 1955.137(c)''
and the reference to ``Sec. 1955.137(b)'' in the first sentence to read
``Sec. 1955.137(c).''
6. Exhibit G of subpart A is amended by removing the words ``County
Supervisor'' and ``State Director'' and adding in their place, the
words ``County Official'' and ``State Executive Director,''
respectively and by revising the heading of the exhibit and the first
paragraph to read as follows:
Exhibit G of Subpart A--Worksheet for Accepting a Voluntary Conveyance
of Farm Credit Program Security Property into Inventory
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(present owner/borrower)
Refer to Exhibit I in FmHA Instruction 1951-S for guidance in
estimating the incomes and expenses to be used in this exhibit. The
holding period to be used is 105 days (3.5 months).
* * * * *
7. Exhibit G-1 of subpart A is amended by removing the words
``County Supervisor'' and ``State Director'' and adding in their place
the words ``County Official'' and ``State Executive Director,''
respectively, and by revising the heading of the exhibit and the first
paragraph to read as follows:
Exhibit G-1 of Subpart A--Worksheet for Determining Farm Credit
Programs, Maximum Bid on Real Estate Property
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(present owner/borrower)
Refer to Exhibit I in FmHA Instruction 1951-S for guidance in
estimating the incomes and expenses to be used in this exhibit. The
holding period to be used is 105 days (3.5 months).
* * * * *
Subpart B--Management of Property
8. Section 1955.53 is amended by removing the definitions of
``Leaseback/Buyback Property'' and ``Socially disadvantaged applicant''
and by revising the definitions of ``Suitable property'' and ``Surplus
property'' to read as follows:
Sec. 1955.53 Definitions:
* * * * *
Suitable property. For FSA inventory property, real property that
can be used for agricultural purposes, including those farm properties
that may be used as a start up or add-on parcel of farmland. It also
includes a residence or other off-farm site that could be used as a
basis for a farming operation. For agencies other than FSA, real
property that could be used to carry out the objectives of the Agency's
loan program with financing provided through that program.
Surplus property. For FSA inventory property, real property that
cannot be used for agricultural purposes including nonfarm properties.
For other agencies, property that cannot be used to carry out the
objectives of financing available through the applicable loan program.
9. Section 1955.63 is amended by revising the introductory text and
paragraphs (a) and (b) to read as follows:
Sec. 1955.63 Suitability determination.
As soon as real property is acquired, a determination must be made
as to whether or not the property can be used for program purposes. The
suitability determination will be recorded in the running record of the
case file.
(a) Determination. Property which secured loans or was acquired
under the CONACT will be classified as suitable or surplus in
accordance with the definitions for``suitable'' and ``surplus''
[[Page 44397]]
found in Sec. 1955.53 of this subpart. For FSA property, the county
committee will make this determination. For other agencies, this
determination will be made by the State Director, or designee.
(b) Grouping and subdividing farm properties larger than family-
size. The county official will subdivide farm properties larger than
family-size whenever possible into parcels for the purpose of creating
one or more suitable farm properties. Properties may also be subdivided
to facilitate the granting or selling of a conservation easement or the
fee title transfer of portions of a property for conservation purposes.
Such land shall be subdivided into parcels of land the shape and size
of which are suitable for farming, the value of which shall not exceed
the direct farm ownership loan limit of $200,000 or the guaranteed farm
ownership loan limit of $300,000. The county official may also group
two or more individual properties into one or more suitable farm
properties. The environmental effects will also be considered pursuant
to subpart G of part 1940 of this chapter. Also refer to Sec. 1955.140
of subpart C of this part.
* * * * *
10. Section 1955.66 is revised to read as follows:
Sec. 1955.66 Lease of real property.
When inventory real property, except for FSA and MFH properties,
cannot be sold promptly, or when custodial property is subject to
lengthy liquidation proceedings, leasing may be used as a management
tool when it is clearly in the best interest of the Government. Leasing
will not be used as a means of deferring other actions which should be
taken, such as liquidation of loans in abandonment cases or repair and
sale of inventory property. Leases will provide for cancellation by the
lessee or the Agency on 30-day written notice unless Special
Stipulations in an individual lease for good reason provide otherwise.
If extensive repairs are needed to render a custodial property suitable
for occupancy, this will preclude its being leased since repairs must
be limited to those essential to prevent further deterioration of the
security in accordance with Sec. 1955.55(c) of this subpart. The
requirements of subpart G of part 1940 of this chapter will be met for
all leases.
(a) Authority to approve lease of property. (1) Custodial property.
Custodial property may be leased pending foreclosure with the servicing
official approving the lease on behalf of the Agency.
(2) Inventory property. Inventory property may be leased under the
following conditions. Except for farm property proposed for a lease
under the Homestead Protection Program, any property that is listed or
eligible for listing on the National Register of Historic Places may be
leased only after the servicing official and the State Historic
Preservation Officer determine that the lease will adequately ensure
the property's condition and historic character.
(i) SFH. SFH inventory will generally not be leased; however, if
unusual circumstances indicate leasing may be prudent, the county
official is authorized to approve the lease.
(ii) MFH. MFH projects will generally not be leased, although
individual living units may be leased under a management agreement.
After the property is placed under a management contract, the
contractor will be responsible for leasing the individual units in
accordance with subpart C of part 1930 of this chapter. In cases where
an acceptable management contract cannot be obtained, the District
Director may execute individual leases.
(iii) Farm property. (A) Any property which secures an insured loan
made under the CONACT and which contains a dwelling (whether located on
or off the farm) that is possessed and occupied as a principal
residence by a prior owner who was personally liable for a Farm Credit
Programs loan must first be considered for Homestead Protection in
accordance with subpart S of part 1951 of this chapter.
(B) Other than for Homestead Protection and except as provided in
paragraph (c), the county official may only approve the lease of farm
property to a beginning farmer or rancher who was selected through the
random selection process to purchase the property but is not able to
complete the purchase due to the lack of Agency funding.
(C) When the servicing official determines it is impossible to sell
farm property after advertising the property for sale and negotiating
with interested parties in accordance with Sec. 1955.107 of subpart C
of this part, farm property may be leased, upon the approval of the
Administrator, on a case-by-case basis. This authority cannot be
delegated. Any lease under this paragraph shall be for 1 year only, and
not subject to renewal or extension. If the servicing official
determines that the prospective lessee may be interested in purchasing
the property, the lease may contain an option to purchase.
(D) When a lease with an option to purchase is signed, the lessee
should be advised that FSA cannot make a commitment to finance the
purchase of the property.
(E) Chattel property will not normally be leased unless it is
attached to the real estate as a fixture or would normally pass with
the land.
(F) The property may not be used for any purpose that will
contribute to excessive erosion of highly erodible land or to
conversion of wetlands to produce an agricultural commodity. See
Exhibit M of subpart G of part 1940 of this chapter. All prospective
lessees of inventory property will be notified in writing of the
presence of highly erodible land, converted wetlands and wetland and
other important resources such as threatened or endangered species.
This notification will include a copy of the completed and signed Form
SCS-CPA-26, ``Highly Erodible Land and Wetland Conservation
Determination,'' which identifies whether the property contains wetland
or converted wetlands or highly erodible land. The notification will
also state that the lease will contain a restriction on the use of such
property and that the Agency's compliance requirements for wetlands,
converted wetlands, and highly erodible lands are contained in Exhibit
M of subpart G of part 1940 of this chapter. Additionally, a copy of
the completed and signed Form SCS-CPA-26 will be attached to the lease
and the lease will contain a special stipulation as provided on the FMI
to Form RD 1955-20, ``Lease of Real Property,'' prohibiting the use of
the property as specified above.
(iv) Organization property other than MFH. Only the State Director,
with the advice of appropriate National Office staff, may approve the
lease of organization property other than MFH, such as community
facilities, recreation projects, and businesses. A lease of utilities
may require approval by State regulatory agencies.
(b) Selection of lessees for other than farm property. When the
property to be leased is residential, a special effort will be made to
reach prospective lessees who might not otherwise apply because of
existing community patterns. A lessee will be selected considering the
potential as a program applicant for purchase of the property (if
property is suited for program purposes) and ability to preserve the
property. The leasing official may require verification of income or a
credit report (to be paid for by the prospective lessee) as he or she
deems necessary to assure payment ability and creditworthiness of the
prospective lessee.
(c) Selection of lessees for FSA property. FSA inventory property
may only be leased to an eligible beginning
[[Page 44398]]
farmer or rancher who was selected to purchase the property through the
random selection process in accordance with Sec. 1955.107(a)(2)(ii) of
subpart C of this part. The applicant must have been able to
demonstrate a feasible farm plan and Agency funds must have been
unavailable at the time of the sale. Any applicant determined not to be
a beginning farmer or rancher may request that the State Executive
Director conduct an expedited review in accordance with
Sec. 1955.107(a)(2)(ii) of subpart C of this part.
(d) Property securing Farm Credit Programs loans located within an
Indian Reservation. (1) State Executive Directors will contact the
Bureau of Indian Affairs Agency supervisor to determine the boundaries
of Indian Reservations and Indian allotments.
(2) Not later than 90 days after acquiring a property, FSA will
afford the Indian tribe having jurisdiction over the Indian reservation
within which the inventory property is located an opportunity to
purchase the property. The purchase shall be in accordance with the
priority rights as follows:
(i) To a member of the Indian tribe that has jurisdiction over the
reservation within which the real property is located;
(ii) To an Indian corporate entity;
(iii) To the Indian tribe.
(3) The Indian tribe having jurisdiction over the Indian
reservation may revise the order of priority and may restrict the
eligibility for purchase to:
(i) Persons who are members of such Indian tribe;
(ii) Indian corporate entities that are authorized by such Indian
tribe to purchase lands within the boundaries of the reservation; or
(iii) The Indian tribe itself.
(4) If any individual, Indian corporate entity, or Indian tribe
covered in paragraphs (d)(1) and (d)(2) of this section wishes to
purchase the property, the county official must determine the
prospective purchaser has the financial resources and management skills
and experience that is sufficient to assure a reasonable prospect that
the terms of the purchase agreement can be fulfilled.
(5) If the real property is not purchased by any individual, Indian
corporate entity or Indian tribe pursuant to paragraphs (d)(1) and
(d)(2) of this section and all appeals have concluded, the State
Executive Director shall transfer the property to the Secretary of the
Interior if they are agreeable. If present on the property being
transferred, important resources will be protected as outlined in
Secs. 1955.137 and 1955.139 of subpart C of this part.
(6) Properties within a reservation formerly owned by entities and
non-tribal members will be treated as regular inventory that is not
located on an Indian Reservation and disposed of pursuant to this part.
(e) Lease amount. Inventory property will be leased for an amount
equal to that for which similar properties in the area are being leased
or rented (market rent). Inventory property will not be leased for a
token amount.
(1) Farm property. To arrive at a market rent amount, the county
official will make a survey of lease amounts of farms in the immediate
area with similar soils, capabilities, and income potential. The
income-producing capability of the property during the term of the
lease must also be considered. This rental data will be maintained in
an operational file as well as in the running records of case files for
leased inventory properties. While cash rent is preferred, the lease of
a farm on a crop-share basis may be approved if this is the customary
method in the area. The lessee will market the crops, provide FSA with
documented evidence of crop income, and pay the pro rata share of the
income to FSA.
(2) SFH property. The lease amount will be the market rent unless
the lessee is a potential program applicant, in which case the lease
amount may be set at an amount approximating the monthly payment if a
loan were made (reflecting payment assistance, if any) calculated on
the basis of the price of the house and income of the lessee, plus \1/
12\ of the estimated real estate taxes, property insurance, and
maintenance which would be payable by a homeowner.
(3) Property other than farm or SFH. Any inventory property other
than a farm or single-family dwelling will generally be leased for
market rent for that type property in the area. However, such property
may be leased for less than market rent with prior approval of the
Administrator.
(f) Property containing wetlands or located in a floodplain or
mudslide hazard area. Inventory property located in areas identified by
the Federal Insurance Administration as special flood or mudslide
hazard areas will not be leased or operated under a management contract
without prior written notice of the hazard to the prospective lessee or
tenant. If property is leased by FSA, the servicing official will
provide the notice, and if property is leased under a management
contract, the contractor must provide the notice in compliance with a
provision to that effect included in the contract. The notice must be
in writing, signed by the servicing official or the contractor, and
delivered to the prospective lessee or tenant at least one day before
the lease is signed. A copy of the notice will be attached to the
original and each copy of the lease. Property containing floodplains
and wetlands will be leased subject to the same use restrictions as
contained in Sec. 1955.137(a)(1) of subpart C of this part.
(g) Highly erodible land. If farm inventory property contains
``highly erodible land,'' as determined by the NRCS, the lease must
include conservation practices specified by the NRCS and approved by
FSA as a condition for leasing.
(h) Lease of FSA property with option to purchase. A beginning
farmer or rancher lessee will be given an option to purchase farm
property. Terms of the option will be set forth as part of the lease as
a special stipulation.
(1) The lease payments will not be applied toward the purchase
price.
(2) The purchase price (option price) will be the advertised sales
price as determined by an appraisal prepared in accordance with subpart
E of part 1922 of this chapter.
(3) For inventory properties leased to a beginning farmer or
rancher applicant, the term of the lease shall be the earlier of:
(i) A period not to exceed 18 months from the date that the
applicant was selected to purchase the inventory farm, or
(ii) The date that direct, guaranteed, credit sale or other Agency
funds become available for the beginning farmer or rancher to close the
sale.
(4) Indian tribes or tribal corporations which utilize the Indian
Land Acquisition program will be allowed to purchase the property for
its market value less the contributory value of the buildings, in
accordance with subpart N of part 1823 of this chapter.
(i) Costs. The costs of repairs to leased property will be paid by
the Government. However, the Government will not pay costs of utilities
or any other costs of operation of the property by the lessee. Repairs
will be obtained pursuant to subpart B of part 1924 of this chapter.
Expenditures on custodial property as limited in Sec. 1955.55 (c) (2)
of this subpart will be charged to the borrower's account as
recoverable costs.
(j) Security deposit. A security deposit in at least the amount of
one month's rent will be required from all lessees of SFH properties.
The security deposit for farm property should be determined by
considering only the improvements or facilities which might be subject
to misuse or abuse during the term of the lease. For all other types of
property, the
[[Page 44399]]
leasing official may determine whether or not a security deposit will
be required and the amount of the deposit.
(k) Lease form. Form RD 1955-20 approved by OGC will be used by the
agency to lease property.
(l) Lease income. Lease proceeds will be remitted according to
subpart B of part 1951 of this chapter.
(1) Custodial property. The proceeds from a lease of custodial
property will be applied to the borrower's account as an extra payment
unless foreclosure proceedings require that such payments be held in
suspense.
(2) Inventory property. The proceeds from a lease of inventory
property will be applied to the lease account.
11. Exhibit B of subpart B is revised to read as follows.
Exhibit B--Notification of Tribe of Availability of Farm Property for
Purchase
(To Be Used By Farm Service Agency to Notify Tribe)
From: County official
To: (Name of Tribe and address)
Subject: Availability of Farm Property for Purchase
[To be Used within 90 days of acquisition]
Recently the Farm Service Agency (FSA) acquired title to
________ acres of farm real property located within the boundaries
of your Reservation. The previous owner of this property was
________. The property is available for purchase by persons who are
members of your tribe, an Indian Corporate entity, or the tribe
itself. Our regulations provide for those three distinct priority
categories which may be eligible; however, you may revise the order
of the priority categories and may restrict the eligibility to one
or any combination of categories. Following is a more detailed
description of these categories:
1. Persons who are members of your Tribe. Individuals so
selected must be able to meet the eligibility criteria for the
purchase of Government inventory property and be able to carry on a
family farming operation. Those persons not eligible for FSA's
regular programs may also purchase this property as a Non-Program
loan on ineligible rates and terms.
2. Indian corporate entities. You may restrict eligible Indian
corporate entities to those authorized by your Tribe to purchase
lands within the boundaries of your Reservation. These entities also
must meet the basic eligibility criteria established for the type of
assistance granted.
3. The Tribe itself is also considered eligible to exercise
their right to purchase the property. If available, Indian Land
Acquisition funds may be used or the property financed as a Non-
Program loan on ineligible rates and terms.
We are requesting that you notify the local FSA county office of
your selection or intentions within 45 days of receipt of this
letter, regarding the purchase of this real estate. If you have
questions regarding eligibility for any of the groups mentioned
above, please contact our office. If the Tribe wishes to purchase
the property, but is unable to do so at this time, contact with the
FSA county office should be made.
Sincerely,
County official
Subpart C--Disposal of Inventory Property
12. Section 1955.102 is amended by revising the fifth sentence to
read as follows:
Sec. 1955.102 Policy.
* * * Examples are: (RH) property; detached Labor Housing or Rural
Rental Housing units may be sold as SFH units; or SFH units may be sold
as a Rural Rental Housing project. * * *
13. Section 1955.103 is amended by removing the number ``15'' and
replacing it with the number ``25'' in the first sentence of paragraph
(5) of the definition of ``Beginning farmer or rancher,'' by removing
the definitions for ``Agricultural production unit,'' ``Cropland,''
``Forage production area,'' ``Leaseback/Buyback,'' ``Leaseback/Buyback
Property,'' ``Marketable agricultural production unit comparable to
that acquired,'' and ``Previous operator,'' and by revising the
definitions of ``Suitable property'' and ``Surplus property'' to read
as follows:
Sec. 1955.103 Definitions.
* * * * *
Suitable property. For FSA inventory property, real property that
can be used for agricultural purposes, including those farm properties
that may be used as a start-up or add-on parcel of farmland. It would
also include a residence or other off-farm site that could be used as a
basis for a farming operation. For Agencies other than FSA, real
property that could be used to carry out the objectives of the Agency's
loan programs with financing provided through that program.
Surplus property. For FSA inventory property, real property that
cannot be used for agricultural purposes including nonfarm properties.
For other agencies, property that cannot be used to carry out the
objectives of financing available through the applicable loan program.
Sec. 1955.105 [Amended]
14. Section 1955.105 is amended by removing the words ``Leaseback/
Buyback and,'' removing the word ``are'' and replacing it with the word
``is'' in the last sentence of paragraph (a) and revising the reference
``Sec. 1955.137(f)'' to read ``Sec. 1955.137(d)'' in paragraph (d).
15. Section 1955.106 is amended by revising paragraphs (a) and (c)
to read as follows:
Sec. 1955.106 Disposition of farm property.
(a) Rights of previous owner and notification. Before property
which secured a Farm Credit Programs loan is taken into inventory, the
FSA county official will advise the borrower-owner of Homestead
Protection rights (see subpart S of part 1951 of this chapter.)
* * * * *
(c) Nonprogram (NP) borrowers. Nonprogram (NP) borrowers are not
eligible for Homestead Protection provisions as set forth in subpart S
of part 1951 of this chapter. When it is determined that all conditions
of Sec. 1951.558(b) of subpart L of part 1951 of this chapter have been
met, loans for unauthorized assistance will be treated as authorized
loans and will be eligible for homestead protection.
16. Section 1955.107 is revised to read as follows:
Sec. 1955.107 Sale of FSA property (CONACT).
FSA inventory property will be advertised for sale in accordance
with the provisions of this subpart. If a request is received from a
Federal or State agency for transfer of a property for conservation
purposes, the advertisement should be conditional on that possibility.
Real property will be managed in accordance with the provisions of
subpart B of this part until sold.
(a) Suitable Property. Not later than 15 days from the date of
acquisition, the Agency will advertise suitable property for sale. For
properties currently under a lease, except leases to beginning farmers
and ranchers under Sec. 1955.66(a)(2)(iii) of subpart B of this part,
the property will be advertised for sale not later than 60 days after
the lease expires or is terminated. There will be a preference for
beginning farmers or ranchers. The advertisement will contain a
provision to lease the property to a beginning farmer or rancher for up
to 18 months should FSA credit assistance not be available at the time
of sale. The first advertisement will not be required to contain the
sales price but it should inform potential beginning farmer or rancher
applicants that applications will be accepted pending completion of the
advertisement process. When possible, the sale of suitable FSA property
should be handled by county officials. Farm property will be advertised
for sale by publishing, as a minimum, two weekly advertisements in at
least two newspapers that are widely circulated in the area in which
the farm is located. Consideration will be given to advertising
inventory properties in major farm publications. Either Form
[[Page 44400]]
RD 1955-40 or Form RD 1955-41, ``Notice of Sale,'' will be posted in a
prominent place in the county. Maximum publicity should be given to the
sale under guidance provided by Sec. 1955.146 of this subpart and care
should be taken to spell out eligibility criteria. Tribal Councils or
other recognized Indian governing bodies having jurisdiction over
Indian reservations (see Sec. 1955.103 of this subpart) shall be
responsible for notifying those parties in Sec. 1955.66(d)(2) of
subpart B of this part.
(1) Price. Property will be advertised for sale for its appraised
market value based on the condition of the property at the time it is
made available for sale. The market value will be determined by an
appraisal made in accordance with subpart E of part 1922 of this
chapter. Property contaminated with hazardous waste will be appraised
``as improved'' which will be used as the sale price for advertisement
to beginning farmers or ranchers.
(2) Selection of purchaser. After homestead protection rights have
expired, suitable farmland must be sold in the priority outlined in
this paragraph. When farm inventory property is larger than family
size, the property will be subdivided into suitable family size farms
pursuant to Sec. 1955.140 of this subpart.
(i) Sale to Beginning Farmers/Ranchers. Not later than 75 days from
the date of acquisition, FSA will sell suitable farm property, with a
priority given to applicants who are classified as beginning farmers or
ranchers, as defined in Sec. 1955.103 of this subpart, as of the time
of sale.
(ii) Random selection. The county official will first determine
whether applicants meet the eligibility requirements of a beginning
farmer or rancher. For applicants who are not determined to be
beginning farmers or ranchers, they may request that the State
Executive Director provide an expedited review and determination of
whether the applicant is a beginning farmer or rancher for the purpose
of acquiring inventory property. This review shall take place not later
than 30 days after denial of the application. The State Executive
Director's review decision shall be final and is not administratively
appealable. When there is more than one beginning farmer or rancher
applicant, the Agency will select by lot by placing the names in a
receptacle and drawing names sequentially. Drawn offers will be
numbered and those drawn after the first drawn name will be held in
suspense pending sale to the successful applicant. The random selection
drawing will be open to the public, and applicants will be advised of
the time and place.
(iii) Notification of applicants not selected to purchase suitable
farmland. When the Agency selects an applicant to purchase suitable
farmland, in accordance with this paragraph, all applicants not
selected will be notified in writing that they were not selected. The
outcome of the random selection by lot is not appealable if such
selection is conducted in accordance with this subpart.
(3) Credit sale procedure. Subject to the availability of funds,
credit sale to program applicants will be processed as follows:
(i) The interest rate charged by the Agency will be the lower of
the interest rates in effect at the time of loan approval or closing.
(ii) The loan limits for the requested type of assistance are
applicable to a credit sale to an eligible applicant.
(iii) Title clearance and loan closing for a credit sale and any
subsequent loan to be closed simultaneously must be the same as for an
initial loan except that:
(A) Form RD 1955-49, ``Quitclaim Deed,'' or other form of
nonwarranty deed approved by the Office of the General Counsel (OGC)
will be used.
(B) The buyer will pay attorney's fees and title insurance costs,
recording fees, and other customary fees unless they are included in a
subsequent loan. A subsequent loan may not be made for the primary
purpose of paying closing costs and fees.
(iv) Property sold on credit sale may not be used for any purpose
that will contribute to excessive erosion of highly erodible land or to
the conversion of wetlands to produce an agricultural commodity, see
Exhibit M of subpart G of part 1940 of this chapter. All prospective
buyers will be notified in writing as a part of the property
advertisement of the presence of highly erodible land and wetlands on
inventory property.
(b) Surplus Property and Suitable Property not sold to a Beginning
Farmer or Rancher. Except where a lessee is exercising the option to
purchase under the Homestead Protection provision of subpart S of part
1951 of this chapter, surplus property will be offered for public sale
by sealed bid or auction within 15 days from the date of acquisition in
accordance with Sec. 1955.147 or Sec. 1955.148 of this subpart.
Suitable farm property which has been advertised for sale to a
beginning farmer or rancher in accordance with Sec. 1955.107 (a) of
this subpart but has not sold within 75 days from the date of
acquisition will be offered for public sale by sealed bid or auction to
the highest bidder as provided in paragraph (b)(1) of this section. All
prospective buyers will be notified in writing as a part of the
property advertisement of the presence of highly erodible land,
converted wetlands, floodplains, wetlands, or other special
characteristics of the property that may limit its use or cause an
easement to be placed on the property.
(1) Advertising surplus property. FSA will advertise surplus
property for sale by sealed bid or auction within 15 days from the date
of acquisition or, for those suitable properties not sold to beginning
farmers or ranchers in accordance with the provisions or paragraph (a)
of this section, within 75 days of the date of acquisition.
(2) Sale by sealed bid or auction. Surplus real estate must be
offered for public sale by sealed bid or auction and must be sold no
later than 105 days from the date of acquisition to the highest bidder.
Preference will be given to a cash offer which is at least *percent of
the highest offer requiring credit. (*Refer to Exhibit B of RD
Instruction 440.1 (available in any Agency office) for the current
percentage.) Equally acceptable sealed bid offers will be decided by
lot.
(3) Negotiated sale. If no acceptable bid is received through the
sealed bid or auction process, the State Executive Director will sell
surplus property at the maximum price obtainable without further public
notice by negotiation with interested parties, including all previous
bidders. The rates and terms offered for a credit sale through
negotiation will be within the limitations established in paragraph (b)
(4) of this section. A sale made through negotiation will require a bid
deposit of not less than 10 percent of the negotiated price in the form
of a cashier's check, certified check, postal or bank money order, or
bank draft payable to FSA. Preference will be given to a cash offer
which is at least * percent of the highest offer requiring credit.
[*Refer to Exhibit B of RD Instruction 440.1 (available in any Agency
office) for the current percentage.] Equally acceptable offers will be
decided by lot.
(4) Rates and terms. Subject to the availability of funds, rates
and terms for Homestead Protection will be in accordance with subpart S
of part 1951 of this chapter. Sales of suitable property offered to
program eligible applicants will be on rates and terms provided in
subpart A of part 1943 of this chapter. Surplus property and suitable
property which has not been sold to program eligible applicants will be
offered for cash or on ineligible terms
[[Page 44401]]
in accordance with subpart J of part 1951 of this chapter. The State
Executive Director will determine the loan terms for surplus property
within these limitations. A credit sale made on ineligible terms will
be closed at the interest rate in effect at the time the credit sale
was approved. After extensive sales efforts where no acceptable offer
has been received, the State Executive Director may request the
Administrator to permit offering surplus property for sale on more
favorable rates and terms; however, the terms may not be more favorable
than those legally permissible for eligible borrowers. Surplus property
will be offered for sale for cash or terms that will provide the best
net return for the Government. The term of financing extended may not
be longer than the period for which the property will serve as adequate
security. All credit sales on ineligible terms will be identified as NP
loans.
17. Section 1955.108 is revised to read as follows:
Sec. 1955.108 Sale of (CONACT) property other than FSA property.
Program officials will immediately contact the National Office
whenever they acquire real property to obtain further instructions on
the time frames and procedures for advertising and disposing of such
property.
Sec. 1955.109 [Amended]
18. Section 1955.109 is amended by adding the word ``FSA'' before
the word ``applicants'' in the second sentence of paragraph (a) and by
removing the words ``Farmer Credit Programs'' and adding in their place
the word ``FSA'' in the third sentence of paragraph (a).
Sec. 1955.122 [Amended]
19. Section 1955.122 is amended by removing paragraph (b) and
redesignating paragraphs (c) through (g) as paragraphs (b) through (f),
respectively.
Sec. 1955.130 [Amended]
20. Section 1955.130 is amended by adding the words ``and surplus
FSA'' before ``CONACT'' in the heading and revising the reference
``Sec. 1955.106'' to read ``Sec. 1955.107'' in paragraph (c)(5), and
revising the heading ``Surplus CONACT'' to read ``Suitable and Surplus
Non-FSA CONACT'' and revising the reference ``Sec. 1955.107'' to read
``Sec. 1955.108'' in paragraph (c)(6).
21. Section 1955.137 is revised to read as follows:
Sec. 1955.137 Real property located in special areas or having special
characteristics.
(a) Real property located in flood, mudslide hazard, wetland or
Coastal Barrier Resources System (CBRS). (1) Use restrictions.
Executive Order 11988, ``Floodplain Management,'' and Executive Order
11990, ``Protection of Wetlands,'' require the conveyance instrument
for inventory property containing floodplains or wetlands which is
proposed for lease or sale to specify those uses that are restricted
under identified Federal, State and local floodplains or wetlands
regulations as well as other appropriate restrictions. The restrictions
shall be to the uses of the property by the lessee or purchaser and any
successors, except where prohibited by law. Applicable restrictions
will be incorporated into quitclaim deeds in a format similar to that
contained in Exhibits H and I of RD Instruction 1955-C (available in
any Agency office). A listing of all restrictions will be included in
the notices required in paragraph (a)(2) of this section.
(2) Notice of hazards. Acquired real property located in an
identified special flood or mudslide hazard area as defined in, subpart
B of part 1806 of this chapter will not be sold for residential
purposes unless determined by the county official or district director
to be safe (that is, any hazard that exists would not likely endanger
the safety of dwelling occupants).
(3) Limitations placed on financial assistance. (i) Financial
assistance is limited to property located in areas where flood
insurance is available. Flood insurance must be provided at closing of
loans on program-eligible and nonprogram (NP)-ineligible terms.
Appraisals of property in flood or mudslide hazard areas will reflect
this condition and any restrictions on use. Financial assistance for
substantial improvement or repair of property located in a flood or
mudslide hazard area is subject to the limitations outlined in,
paragraph 3b (1) and (2) of Exhibit C of subpart G of part 1940.
(ii) Pursuant to the requirements of the Coastal Barrier Resources
Act (CBRA) and except as specified in paragraph (a)(3)(v) of this
section, no credit sales will be provided for property located within a
CBRS where:
(A) It is known that the purchaser plans to further develop the
property;
(B) A subsequent loan or any other type of Federal financial
assistance as defined by the CBRA has been requested for additional
development of the property;
(C) The sale is inconsistent with the purpose of the CBRA; or
(D) The property to be sold was the subject of a previous financial
transaction that violated the CBRA.
(iii) For purposes of this section, additional development means
the expansion, but not maintenance, replacement-in-kind,
reconstruction, or repair of any roads, structures or facilities. Water
and waste disposal facilities as well as community facilities may be
repaired to the extent required to meet health and safety requirements,
but may not be improved or expanded to serve new users, patients or
residents.
(iv) A sale which is not in conflict with the limitations in
paragraph (a)(3)(ii) of this section shall not be completed until the
approval official has consulted with the appropriate Regional Director
of the U.S. Fish and Wildlife Service and the Regional Director concurs
that the proposed sale does not violate the provisions of the CBRA.
(v) Any proposed sale that does not conform to the requirements of
paragraph (a)(3)(ii) of this section must be forwarded to the
Administrator for review. Approval will not be granted unless the
Administrator determines, through consultation with the Department of
Interior, that the proposed sale does not violate the provisions of the
CBRA.
(b) Wetlands located on FSA inventory property. Perpetual wetland
conservation easements (encumbrances in deeds) to protect and restore
wetlands or converted wetlands that exist on suitable or surplus
inventory property will be established prior to sale of such property.
The provisions of paragraphs (a) (2) and (3) of this section also
apply, as does paragraph (a)(1) of this section insofar as floodplains
are concerned. This requirement applies to either cash or credit sales.
Similar restrictions will be included in leases of inventory properties
to beginning farmers or ranchers. Wetland conservation easements will
be established as follows:
(1) All wetlands or converted wetlands located on FSA inventory
property which were not considered cropland on the date the property
was acquired and were not used for farming at any time during the
period beginning on the date 5 years before the property was acquired
and ending on the date the property was acquired will receive a wetland
conservation easement.
(2) All wetlands or converted wetlands located on FSA inventory
property that were considered cropland on the date the property was
acquired or were used for farming at any time during the period
beginning on the date 5 years before the property was acquired and
ending on the date the property was acquired will not receive a wetland
conservation easement.
[[Page 44402]]
(3) The following steps should be taken in determining if
conservation easements are necessary for the protection of wetlands or
converted wetland on inventory property:
(i) NRCS will be contacted first to identify the wetlands or
converted wetlands and wetland boundaries of each wetland or converted
wetland on inventory property.
(ii) After receiving the wetland determination from NRCS, the FSA
county committee will review the determination for each inventory
property and determine if any of the wetlands or converted wetlands
identified by NRCS were considered cropland on the date the property
was acquired or were used for farming at any time during the period
beginning on the date 5 years before the property was acquired and
ending on the date the property was acquired. Property will be
considered to have been used for farming if it was primarily used for
agricultural purposes including but not limited to such uses as
cropland, pasture, hayland, orchards, vineyards and tree farming.
(iii) After the county committee has completed their determination
of whether the wetlands or converted wetlands located on an inventory
property were used for cropland or farming, the U.S. Fish and Wildlife
Service (FWS) will be contacted. Based on the technical considerations
of the potential functions and values of the wetlands on the property,
FWS will identify those wetlands or converted wetlands that require
protection with a wetland conservation easement along with the
boundaries of the required wetland conservation easement. FWS may also
make other recommendations if needed for the protection of important
resources such as threatened or endangered species during this review.
(4) The wetland conservation easement will provide for access to
other portions of the property as necessary for farming and other uses.
(5) The appraisal of the property must be updated to reflect the
value of the land due to the conservation easement on the property.
(6) Easement areas shall be described in accordance with State or
local laws. If State or local law does not require a survey, the
easement area can be described by rectangular survey, plat map, or
other recordable methods.
(7) In most cases the FWS shall be responsible for easement
management and administration responsibilities for such areas unless
the wetland easement area is an inholding in Federal or State property
and that entity agrees to assume such responsibility, or a State fish
and wildlife agency having counterpart responsibilities to the FWS is
willing to assume easement management and administration
responsibilities. The costs associated with such easement management
responsibilities shall be the responsibility of the agency that assumes
easement management and administration.
(8) County officials are encouraged to begin the easement process
before the property is taken into inventory, if possible, in order to
have the program completed before the statutory time requirement for
sale.
(c) Historic preservation. (1) Pursuant to the requirements of the
National Historic Preservation Act and Executive Order 11593,
``Protection and Enhancement of the Cultural Environment,'' the Agency
official responsible for the conveyance must determine if the property
is listed on or eligible for listing on the National Register of
Historic Places. (See subpart F of part 1901 of this chapter for
additional guidance.) The State Historic Preservation Officer (SHPO)
must be consulted whenever one of the following criteria are met:
(i) The property includes a structure that is more than 50 years
old.
(ii) Regardless of age, the property is known to be of historical
or archaeological importance; has apparent significant architectural
features; or is similar to other Agency properties that have been
determined to be eligible.
(iii) An environmental assessment is required prior to a decision
on the conveyance.
(2) If the result of the consultations with the SHPO is that a
property may be eligible or that it is questionable, an official
determination must be obtained from the Secretary of the Interior.
(3) If a property is listed on the National Register or is
determined eligible for listing by the Secretary of Interior, the
Agency official responsible for the conveyance must consult with the
SHPO in order to develop any necessary restrictions on the use of the
property so that the future use will be compatible with preservation
objectives and which does not result in an unreasonable economic burden
to public or private interest. The Advisory Council on Historic
Preservation must be consulted by the State Director or State Executive
Director after the discussions with the SHPO are concluded regardless
of whether or not an agreement is reached.
(4) Any restrictions that are developed on the use of the property
as a result of the above consultations must be made known to a
potential bidder or purchaser through a notice procedure similar to
that in Sec. 1955.13(a)(2) of this subpart.
(d) Highly erodible farmland. (1) The FSA county official will
determine if any inventory property contains highly erodible land as
defined by the NRCS and, if so, what specific conservation practices
will be made a condition of a sale of the property.
(2) If the county official does not concur in the need for a
conservation practice recommended by NRCS, any differences shall be
discussed with the recommending NRCS office. Failure to reach an
agreement at that level shall require the State Executive Director to
make a final decision after consultation with the NRCS State
Conservationist.
(3) Whenever NRCS technical assistance is requested in implementing
these requirements and NRCS responds that it cannot provide such
assistance within a time frame compatible with the proposed sale, the
sale arrangements will go forward. The sale will proceed, conditioned
on the requirement that a purchaser will immediately contact (NRCS)
have a conservation plan developed and comply with this plan. The
county official will monitor the borrower's compliance with the
recommendations in the conservation plan. If problems occur in
obtaining NRCS assistance, the State Executive Director should consult
with the NRCS State Conservationist.
(e) Notification to purchasers of inventory property with
reportable underground storage tanks. If the Agency is selling
inventory property containing a storage tank which was reported to the
Environmental Protection Agency (EPA) pursuant to the provisions of
Sec. 1955.57 of subpart B of this part, the potential purchaser will be
informed of the reporting requirement and provided a copy of the report
filed by the Agency.
(f) Real property that is unsafe. If the Agency has in inventory,
real property, exclusive of any improvements, that is unsafe, that is
it does not meet the definition of ``safe'' as contained in
Sec. 1955.103 of this subpart and which cannot be feasibly made safe,
the State Director or State Executive Director will submit the case
file, together with documentation of the hazard and a recommended
course of action to the National Office, ATTN: appropriate Deputy
Administrator, for review and guidance.
(g) Real property containing hazardous waste contamination. All
inventory property must be inspected for hazardous waste contamination
either through the use of a preliminary hazardous waste site survey or
[[Page 44403]]
Transaction Screen Questionnaire. If possible contamination is noted, a
Phase I or II environmental assessment will be completed per the advice
of the State Environmental Coordinator.
22. Section 1955.139 is amended by revising the introductory text
of paragraph (a)(3) and paragraph (c) to read as follows:
Sec. 1955.139 Disposition of real property rights and title to real
property.
(a) * * *
(3) For FSA properties only, easements, restrictions, development
rights or similar legal rights may be granted or sold separately from
the underlying fee or sum of all other rights possessed by the
Government if such conveyances are for conservation purposes and are
transferred to a State, a political subdivision of a State, or a
private nonprofit organization. Easements may be granted or sold to a
Federal agency for conservation purposes as long as the requirements of
Sec. 1955.139(c)(2) of this subpart are followed. If FSA has an
affirmative responsibility such as protecting an endangered species as
provided for in paragraph (a)(3(v) of this section, the requirements in
Sec. 1955.139(c) of this subpart do not apply.
* * * * *
(c) Transfer of FSA inventory property for conservation purposes.
(1) In accordance with the provisions of this paragraph, FSA may
transfer, to a Federal or State agency for conservation purposes (as
defined in paragraph (a)(3)(i) of this section), inventory property, or
an interest therein, meeting any one of the following three criteria
and subject only to the homestead protection rights of all previous
owners having been met.
(i) A predominance of the land being transferred has marginal value
for agricultural production. This is land that NRCS has determined to
be either highly erodible or generally not used for cultivation, such
as soils in classes IV, V, VII or VIII of NRCS's Land Capability
Classification, or
(ii) A predominance of land is environmentally sensitive. This is
land that meets any of the following criteria:
(A) Wetlands, as defined in Executive Order 11990 and USDA
Regulation 9500.
(B) Riparian zones and floodplains as they pertain to Executive
Order 11988.
(C) Coastal barriers and zones as they pertain to the Coastal
Barrier Resources Act or Coastal Zone Management Act.
(D) Areas supporting endangered and threatened wildlife and plants
(including proposed and candidate species), critical habitat, or
potential habitat for recovery pertaining to the Endangered Species
Act.
(E) Fish and wildlife habitats of local, regional, State or Federal
importance on lands that provide or have the potential to provide
habitat value to species of Federal trust responsibility (e.g.,
Migratory Bird Treaty Act, Anadromous Fish Conservation Act).
(F) Aquifer recharges areas of local, regional, State or Federal
importance.
(G) Areas of high water quality or scenic value.
(H) Areas containing historic or cultural property; or
(iii) A predominance of land with special management importance.
This is land that meets the following criteria:
(A) Lands that are in holdings, lie adjacent to, or occur in
proximity to, Federally or State-owned lands or interest in lands.
(B) Lands that would contribute to the regulation of ingress or
egress of persons or equipment to existing Federally or State-owned
conservation lands.
(C) Lands that would provide a necessary buffer to development if
such development would adversely affect the existing Federally or
State-owned lands.
(D) Lands that would contribute to boundary identification and
control of existing conservation lands.
(2) When a State or Federal agency requests title to inventory
property, the State Executive Director will make a preliminary
determination as to whether the property can be transferred.
(3) If a decision is made by the State Executive Director to deny a
transfer request by a Federal or State agency, the requesting agency
will be informed of the decision in writing and informed that they may
request a review of the decision by the FSA Administrator.
(4) When a State or Federal agency requests title to inventory
property and the State Executive Director determines that the property
is suited for transfer, the following actions must be taken prior to
approval of the transfer:
(i) At least two public notices must be provided. These notices
will be published in a newspaper with a wide circulation in the area in
which the requested property is located. The notice will provide
information on the proposed use of the property by the requesting
agency and request any comments concerning the negative or positive
aspects of the request. A 30-day comment period should be established
for the receipt of comments.
(ii) If requested, at least one public meeting must be held to
discuss the request. A representative of the requesting agency should
be present at the meeting in order to answer questions concerning the
proposed conservation use of the property. The date and time for a
public meeting should be advertised.
(iii) Written notice must be provided to the Governor of the State
in which the property is located as well as at least one elected
official of the county in which the property is located. The
notification should provide information on the request and solicit any
comments regarding the proposed transfer. All procedural requirements
in paragraph (c) (3) of this section must be completed in 75 days.
(5) Determining priorities for transfer or inventory lands.
(i) A Federal entity will be selected over a State entity.
(ii) If two Federal agencies request the same land tract, priority
will be given to the Federal agency that owns or controls property
adjacent to the property in question or if this is not the case, to the
Federal agency whose mission or expertise best matches the conservation
purposes for which the transfer would be established.
(iii) In selecting between State agencies, priority will be given
to the State agency that owns or controls property adjacent to the
property in question or if that is not the case, to the State agency
whose mission or expertise best matches the conservation purpose(s) for
which the transfer would be established.
(6) In cases where land transfer is requested for conservation
purposes that would contribute directly to the furtherance of
International Treaties or Plans (e.g., Migratory Bird Treaty Act or
North American Waterfowl Management Plan), to the recovery of a listed
endangered species, or to a habitat of National importance (e.g.,
wetlands as addressed in the Emergency Wetlands Resources Act),
priority consideration will be given to land transfer for conservation
purposes, without reimbursement, over other land disposal alternatives.
(7) An individual property may be subdivided into parcels and a
parcel can be transferred under the requirements of this paragraph as
long as the remaining parcels to be sold make up a viable sales unit,
suitable or surplus.
23. Section 1955.140 is revised to read as follows:
Sec. 1955.140 Sale in parcels.
(a) Individual property subdivided. An individual property, other
than Farm Credit Programs property, may be offered for sale as a whole
or subdivided into parcels as determined by the State Director. For MFH
property, guidance will be requested from the National Office for all
properties other than RHS
[[Page 44404]]
projects. When farm inventory property is larger than a family-size
farm, the county official will subdivide the property into one or more
tracts to be sold in accordance with Sec. 1955.107 of this subpart.
Division of the land or separate sales of portions of the property,
such as timber, growing crops, inventory for small business
enterprises, buildings, facilities, and similar items may be permitted
if a better total price for the property can be obtained in this
manner. Environmental effects should also be considered pursuant to
subpart G of part 1940 of this chapter. Any applicable State laws will
be set forth in a State supplement and will be complied with in
connection with the division of land. Subdivision of acquired property
will be reported on Form RD 1955-3C, ``Acquired Property--
Subdivision,'' in accordance with the FMI.
(b) Grouping of individual properties. The county official for FCP
cases, and the State Director for all other cases, may authorize the
combining of two or more individual properties into a single parcel for
sale as a suitable program property.
24. Section 1955.148 is revised to read as follows:
Sec. 1955.148 Auction sales.
This section provides guidance on the sale of all inventory
property by auction, except FSA real property. Before an auction, the
State Director, with the advice of the National Office for
organizational property, will determine and document the minimum sale
price acceptable. In determining a minimum sale price, the State
Director will consider the length of time the property has been in
inventory, previous marketing efforts, the type property involved, and
potential purchasers. Program financing will be offered on sales of
program and property. For NP property, credit may be offered to
facilitate the sale. Credit, however, may not exceed the market value
of the property nor may the term exceed the period for which the
property will serve as adequate security. For program property sales,
no preference will be given to program purchasers. The State Director
will also consider whether an Agency employee will conduct an auction
or whether the services of a professional auctioneer are necessary due
to the complexity of the sale.
When the services of a professional auctioneer are advisable, the
services will be procured by contract in accordance with RD Instruction
2024-A (available in any Agency Office). Chattel property may be sold
at public auction that is widely advertised and held on a regularly
scheduled basis without solicitation. Form RD 1955-46 will be used for
auction sales. At the auction, successful bidders will be required to
make a bid deposit. For program and suitable property, the bid deposit
will be the same as outlined in Sec. 1955.130(e)(1) of this subpart.
For NP property sales, a bid deposit of 10 percent is required.
Deposits will be in the form of cashier's check, certified check,
postal or bank money order or bank draft payable to the Agency, cash or
personal checks may be accepted when deemed necessary for a successful
auction by the person conducting the auction. Where credit sales are
authorized, all notices and publicity should provide for a method of
prior approval of credit and the credit limit for potential purchasers.
This may include submission of letters of credit or financial
statements prior to the auction. The auctioneer should not accept a bid
which requests credit in excess of the market value. When the highest
bid is lower than the minimum amount acceptable to the Agency,
negotiations should be conducted with the highest bidder or in turn,
the next highest bidder or other persons to obtain an executed bid at
the predetermined minimum. Upon purchaser's default, the approval
official will remit the bid deposit as a Miscellaneous Collection
according to RD Instruction 1951-B (available in any agency office).
The bid deposit will be remitted only when the bidder defaults;
otherwise it will be used at closing towards a down payment or closing
costs, as applicable. The closing will be conducted in accordance with
the procedures prescribed in this subpart for the type property and
program involved.
Dated: June 30, 1997.
James W. Schroeder,
Acting Under Secretary for Farm and Foreign Agricultural Services.
Dated: July 8, 1997.
Jill Long Thompson,
Under Secretary for Rural Development.
[FR Doc. 97-22004 Filed 8-20-97; 8:45 am]
BILLING CODE 3410-05-P
