[Federal Register Volume 63, Number 150 (Wednesday, August 5, 1998)]
[Rules and Regulations]
[Pages 41713-41715]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-20914]
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DEPARTMENT OF AGRICULTURE
Rural Housing Service
Rural Business-Cooperative Service
Rural Utilities Service
Farm Service Agency
7 CFR Part 1951
RIN 0572-AB23
Servicing of Community and Insured Business Programs Loans and
Grants
AGENCIES: Rural Housing Service; Rural-Business Cooperative Service;
Rural Utilities Service; and Farm Service Agency, USDA.
ACTION: Final rule.
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SUMMARY: The Rural Utilities Service (RUS) hereby amends the
regulations utilized to service loans and grants. The final rule will
permit loan reamortization with interest rate adjustment for eligible
delinquent borrowers. The final rule will provide debt relief to
troubled borrowers and encourage these organizations to remain in
operation and resume scheduled loan payments. The final rule will also
provide RUS greater flexibility to service problem loans and permit a
viable, cost effective alternative to debt write-offs.
EFFECTIVE DATE: August 5, 1998.
FOR FURTHER INFORMATION CONTACT: John Purcell, Rural Utilities Service,
Stop 1570, 1400 Independence Ave. SW, Washington, DC 20250, telephone
(202) 720-9634.
SUPPLEMENTARY INFORMATION:
Classification
This rule has been determined to be not significant for purposes of
Executive Order 12866 and, therefore, has not been reviewed by the
Office of Management and Budget.
Regulatory Flexibility Act
Pursuant to Sec. 605(b) of the Regulatory Flexibility Act, 5 U.S.C.
605(b), the head of the Agencies certify that this rule will not have a
significant economic impact on a substantial number of small entities.
Intergovernmental Review
This program is listed in the Catalog of Federal Domestic
Assistance under number 10.760, Water and Waste Disposal Systems for
Rural Communities, subject to the provisions of Executive Order 12372
which requires intergovernmental consultation with State and local
officials.
Environmental Impact Statement
This action has been reviewed in accordance with 7 CFR part 1940,
subpart G, ``Environmental Program.'' It has been determined that the
action does not constitute a major Federal action significantly
affecting the quality of the human environment and in accordance with
the National Environmental Policy Act of 1969, Pub. L. 91-190, an
Environmental Impact Statement is not required.
Civil Justice Reform
This regulation has been reviewed under Executive Order 12988,
Civil Justice Reform. When this regulation is adopted: (1) unless
otherwise specifically provided 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 except as specifically
prescribed in the rule; and (3) administrative proceedings of the
National Appeals Division (7 CFR part 11) must be exhausted before
bringing suit.
Paperwork Reduction Act
In accordance with the Paperwork Reduction Act (44 U.S.C. 3507),
the information collection requirements included in this rule have been
[[Page 41714]]
approved through 7 CFR part 1951, subpart E. The assigned OMB number is
0575-0066. This rule does not revise or impose any new information
collection or recordkeeping requirements from those approved by the
Office of Management and Budget.
National Performance Review
This regulatory action is being taken as part of the National
Performance Review program to eliminate unnecessary regulations and
improve those that remain in force.
Unfunded Mandate Reform Act
Title II of the Unfunded Mandate Reform Act of 1995 (UMRA), Pub. L.
104-4, establishes 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, the
Agency generally must prepare a written statement, including a cost-
benefit analysis, for proposed and final rules with ``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 the Agency 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 the regulatory
provisions of Title II of the UMRA) for State, local, and tribal
governments or the private sector. Thus today's rule is not subject to
the requirements of sections 202 and 205 of the UMRA.
Discussion
The Rural Utilities Service was formed in connection with the
reorganization of programs administered by the former Farmers Home
Administration and the former Rural Development Administration. As
currently written, 7 CFR part 1951, subpart E does not permit loan
reamortization with interest rate adjustment on outstanding loans.
Accordingly, RUS is unable to provide an interest rate adjustment to
borrowers that become seriously delinquent on their loan payments. This
final rule will provide debt relief to troubled borrowers and encourage
these organizations to remain in operation and resume scheduled loan
payments. The final rule will also provide RUS greater flexibility to
service problem loans and permit a viable, cost effective alternative
to debt write-offs.
Comments on the Proposed Rule
RUS published the proposed rule in the Federal Register on June 2,
1997, (62 FR 29678) and asked for written comments on or before August
1, 1997. The Agency received two comments from the public review
process. All comments were considered when preparing the final rule. No
changes have been made to the proposed rule as a result of the comments
received. Responses to comments are listed according to corresponding
sections of the rule and are as follows:
1. Sec. 1951.223(d)--Define what a ``seriously delinquent''
borrower represents.
Agency Response: The Agency made no change. The Agency believes the
causes and circumstances attributed to borrower delinquencies will vary
significantly and the number of borrowers to qualify under this rule
will be limited. The Agency believes it would be prohibitive to include
specific criteria for defining ``seriously delinquent''.
2. Sec. 1951.223(d)(1)(ii)--Define what ``experiencing severe
financial problems'' represents.
Agency Response: The Agency made no change. The Agency believes the
financial conditions and the degree of financial impact varies
significantly between borrowers. Therefore, it would be prohibitive to
include specific criteria.
3. Sec. 1951.223 (d)(2)(i)--Define what a ``reasonable amount of
cash or cash reserves represents.
Agency Response: The Agency made no change. The Agency believes the
financial resources necessary to adequately operate a water and
wastewater facility vary significantly. Therefore, it would be
prohibitive to include specific criteria.
4. Sec. 1951.223 (d)(2)(ii)--The Agency should determine if the
original interest rate can be restored if financial conditions improve;
and the interest rate reduction should be for a limited period of time.
Agency Response: The Agency made no change. The Agency has a loan
provision that requires borrowers to refinance their RUS debt with
commercial or private credit if financial conditions permit. Each
borrower's financial condition is reviewed on a regular basis and those
financially able to refinance their RUS debt are requested to do so.
5. Sec. 1951.223(d)(3)--Does an eligible borrower have to comply
with the health or sanitary standards and median household income
conditions for poverty rate loans?
Agency Response: The Agency made no change. Borrowers that qualify
for an interest rate adjustment under this rule will not have to comply
with the stated criteria for poverty interest rates.
6. Sec. 1951.223(d)(3)--Include provision to review borrowers
financial condition and restore original interest rate if a borrower's
financial conditions permit.
Agency Response: The Agency made no change. The Agency has a loan
provision that requires borrowers to refinance their RUS debt with
commercial or private credit if financial conditions permit. Each
borrower's financial condition is reviewed on a regular basis and those
financially able to refinance their RUS debt are requested to do so.
List of Subjects in 7 CFR Part 1951
Accounting, Grant programs-housing and community development,
Reporting and recordkeeping requirements, Rural areas.
Accordingly, Chapter XVIII, title 7, Code of Federal Regulations is
amended as follows:
PART 1951--SERVICING AND COLLECTIONS
1. The authority citation for part 1951 continues to read as
follows:
Authority: 5 U.S.C. 301; 7 U.S.C. 1981; 42 U.S.C. 1480.
Subpart E--Servicing of Community and Direct Business Programs
Loans and Grants
2. Section 1951.223(d) is added to read as follows:
Sec. 1951.223 Reamortization.
* * * * *
(d) Reamortization with interest rate adjustment--Water and waste
borrowers only. A borrower that is seriously delinquent in loan
payments may be eligible for loan reamortization with interest rate
adjustment. The purpose of loan reamortization with interest rate
adjustment is to provide relief for a borrower that is unable to
service the outstanding loan in accordance with its existing terms and
to enhance recovery on the loan. A borrower must meet the conditions of
this subpart to be considered eligible for this provision.
(1) Eligibility determination. The State Director, Rural
Development, may submit to the Administrator for approval an adjustment
in the rate of interest charged on outstanding loans only for those
borrowers who meet the following requirements:
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(i) The borrower has exhausted all other servicing provisions
contained in this subpart;
(ii) The borrower is experiencing severe financial problems;
(iii) Any management deficiencies must have been corrected or the
borrower must submit a plan acceptable to the State Office to correct
any deficiencies before an interest rate adjustment may be considered;
(iv) Borrower user rates must be comparable to similar systems. In
addition, the operating expenses reported by the borrower must appear
reasonable in relation to similar system expenses;
(v) The borrower has cooperated with Rural Development in exploring
alternative servicing options and has acted in good faith with regard
to eliminating the delinquency and complying with its loan agreements
and agency regulations; and
(vi) The borrower's account must be delinquent at least one annual
debt payment for 180 days.
(2) Conditions of approval. All borrowers approved for an
adjustment in the rate of interest by the Administrator shall agree to
the following conditions:
(i) The borrower shall agree not to maintain cash or cash reserves
beyond what is reasonable at the time of interest rate adjustment to
meet debt service, operating, and reserve requirements.
(ii) A review of the borrower's management and business operations
may be required at the discretion of the State Director. This review
shall be performed by an independent expert who has been recommended by
the State Director and approved by the National Office. The borrower
must agree to implement all recommendations made by the State Director
as a result of the review.
(iii) If requested, a copy of the latest audited financial
statements or management report must be submitted to the Administrator.
(3) Reamortization. At the discretion of the Administrator, the
interest rate charged on outstanding loans of eligible borrowers may be
adjusted to no less than the poverty interest rate and the term of the
loans may be extended up to a new 40 year term or the remaining useful
life of the facility, whichever is less.
Dated: June 18, 1998.
Jill Long Thompson,
Under Secretary Rural Development.
[FR Doc. 98-20914 Filed 8-4-98; 8:45 am]
BILLING CODE 3410-XV-U
