[Federal Register Volume 59, Number 203 (Friday, October 21, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-26160]
[[Page Unknown]]
[Federal Register: October 21, 1994]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF AGRICULTURE
Farmers Home Administration
7 CFR Part 1951
RIN 0575-AB85
Disaster Set-Aside Program
AGENCY: Farmers Home Administration, USDA.
ACTION: Interim final rule with request for comments.
-----------------------------------------------------------------------
SUMMARY: The Farmers Home Administration (FmHA) amends its Farmer
Programs servicing regulations by adding the Disaster Set-Aside (DSA)
Program. This program will be made available to Farmer Program
borrowers who operated a farm or ranch in a county where a disaster
occurred in 1993 and was declared/designated a disaster area in
accordance with FmHA regulations. Under this program, the distressed
borrower will have the opportunity to move the next scheduled FmHA
annual installment to the end of the loan term. The intended effect is
to service disaster victims in an efficient and timely manner while
keeping them in business.
DATES: Interim final rule effective October 21, 1994. Written comments
must be submitted on or before November 21, 1994.
ADDRESSES: Submit written comments, in duplicate, to the Office of the
Chief, Regulations Analysis and Control Branch, FmHA, USDA, Room 6348-
S, 14th Street and Independence Avenue, SW., Washington, DC 20250. All
written comments will be available for public inspection during regular
working hours at the above address.
FOR FURTHER INFORMATION CONTACT: Kimberly R. Laris, Loan Officer,
Farmer Programs Loan Servicing Division, Farmers Home Administration,
U.S. Department of Agriculture, South Building, 14th Street and
Independence Avenue, SW., Washington, DC 20250, Telephone (202) 720-
4572.
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 OMB.
Intergovernmental Consultation
For the reasons set forth in the final rule related to Notice 7
CFR, part 3015, subpart V (48 FR 29115, June 24, 1983), and FmHA
Instruction 1940-J, ``Intergovernmental Review of FmHA Programs and
Activities'' (December 23, 1983), Emergency Loans, Farm Ownership
Loans, and Farm Operating Loans are excluded, with the exception of
nonfarm enterprise activity, from the scope of Executive Order 12372,
which requires intergovernmental consultation with State and local
officials. The Soil and Water Loan Program, however, is subject to the
provisions of Executive Order 12372.
Programs Affected
These changes affect the following FmHA programs, as listed in the
Catalog of Federal Domestic Assistance:
10.404--Emergency Loans
10.406--Farm Operating Loans
10.407--Farm Ownership Loans
10.410--Low Income Housing Loans
10.416--Soil and Water Loans
Environmental Impact Statement
This document has been reviewed in accordance with 7 CFR, part
1940, subpart G, ``Environmental Program.'' FmHA has determined that
this 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 (Public Law 91-190), an
Environmental Impact Statement is not required.
Civil Justice Reform
This document has been reviewed in accordance with Executive Order
(E.O.) 12778. It is the determination of FmHA that this action does not
unduly burden the Federal Court System in that it meets all applicable
standards provided in section 2 of the E.O.
Paperwork Reduction Act
The information collection requirements contained in these
regulations have been approved by the Office of Management and Budget
(OMB) under the provisions of 44 U.S.C. Chapter 35 and have been
assigned OMB control number [0575-0163] in accordance with the
Paperwork Reduction Act of 1980 (44 U.S.C. 3507). The interim final
rule does not revise or impose any new information collection or
recordkeeping requirements from those approved by OMB.
Discussion of Interim Final Rule
FmHA has chosen to publish this regulation as an interim final rule
without first publishing a proposed rule due to the nature of the
program and the eligibility requirements involved. Eighty percent of
the 3,151 counties serviced by FmHA were declared disaster areas in
1993. Due to heavy flooding in the midwest and extreme droughts in the
South, considerably more borrowers were affected by disasters in 1993
than in any of the previous five years. This program will also help
those borrowers who are affected by the 1994 flood disaster in the
South if they were also affected by the previous disasters in 1993.
FmHA is considering extending this program in the future to assist
borrowers affected only by the 1994 disaster. In order to prevent
massive delinquencies and farm failures, borrowers in a crisis
situation must receive immediate financial assistance.
It is for this purpose and by the authority granted the Secretary
under the Consolidated Farm and Rural Development Act (CONACT), section
331A (7 U.S.C. 1981a), FmHA has made available the Disaster Set-Aside
Program. As provided in section 331A, the Secretary has the authority
to defer principal and interest at the request of the borrower on any
outstanding loan made, insured, or held by the Secretary under the
CONACT, subject to the borrower showing that due to circumstances
beyond his/her control, he/she is temporarily unable to continue making
payments when due without unduly impairing his/her standard of living.
The set-aside program is designed to assist borrowers in financial
distress who operated a farm or ranch in a county where a disaster
occurred in 1993 and was declared/designated a disaster area as set
forth in subpart A of part 1945 of this chapter.
Under this program, farmer programs borrowers can receive immediate
financial relief from their FmHA payment obligations in a more
expedient manner than under subpart S of part 1951. For example, the
application process is simple and easy, unlike the primary loan
servicing application under subpart S of part 1951 which requires
extensive documentation by both the borrower and the servicing
official. There are no additional security requirements to deter the
borrower from requesting debt set-aside. On the average, the borrower's
installments can be set-aside the same day he/she makes the request,
whereas under subpart S of part 1951, it takes an average of 90 days to
process an application and restructure a loan.
To comply with the statute, the borrower must be temporarily unable
to make the payment being set-aside because of circumstances beyond
his/her control. This is demonstrated by requiring that the borrower
must have operated a farm or ranch during 1993 in which a disaster
occurred and the county was declared/designated a disaster area, or a
contiguous county, as set forth in subpart A of part 1945 of this
chapter; that the borrower be current or not more than 1 installment
behind on any and all farmer program loans, which would assure that all
payments prior to the disaster were paid or the loan restructured; that
if no other payments have been due on the loan, the projected farm plan
for the disaster year shows that the payment could have been paid under
normal conditions; and that the borrower's actual records for the
disaster year must show that, because of the disaster, the borrower's
projected income was reduced to an amount that would prevent payment of
all family living and operating expenses and paying amounts due FmHA
and/or other creditors.
FmHA projects that approximately 60,000 borrowers affected by 1993
disasters will request assistance under the set-aside program. Of these
borrowers, the majority have installments that came due January 1,
1994. If these installments are not paid by January 1, 1995, or
otherwise set-aside, the borrower will be two installments behind and
will no longer be eligible to receive disaster set-aside assistance.
Borrowers more than one payment behind will be able to receive more
assistance through FmHA's loan servicing program under subpart S of
part 1951 of this chapter than through the debt set-aside program.
However, borrowers who cannot obtain servicing through subpart S of
part 1951 of this chapter may be able to cure their delinquency with
set-aside assistance alone. The set-aside program will be better for
some borrowers than servicing through subpart S of part 1951 of this
chapter since the set-aside will be a faster process, eligibility
requirements are easier to meet, paperwork is less, and some borrowers'
financial distress can be resolved with only one payment deferred. The
program will allow some borrowers to use sources other than FmHA to
maintain their farm operation and allow them to work out their
financial difficulty over the next year or so. Other borrowers may
prefer to use the year to voluntarily liquidate. This regulation will,
therefore, provide options to prevent the foreclosure of borrowers in
both of these instances. However, borrowers who are not eligible for
the DSA program, or who need more extensive servicing, will still have
the opportunity to be considered for FmHA's primary loan servicing
program as set forth in subpart S of part 1951 of this chapter.
The set-aside program allows eligible borrowers to move one FmHA
annual installment for each loan to the end of the loan term, thereby
quickly eliminating the immediate financial stress. The installment
set-aside may be the one due immediately after the disaster or, if that
installment is paid to the neglect of other creditors or family living
and operating expenses, then the next scheduled installment may be set-
aside. Borrowers who received primary loan servicing after the disaster
will not be eligible for the disaster set-aside, as restructuring of
the account already resolved the financial distress for the current and
next production/marketing period. Borrowers whose farmer program loans
have been accelerated will also not be eligible for disaster set-aside
as their financial situation is much more severe than the borrower who
is only one installment behind. These type of borrowers have already
been processed through 1951-S primary and preacquisition preservation
loan servicing resulting in no servicing granted. The disaster set-
aside program cannot offer more favorable options than those provided
in subpart S of part 1951.
Based on past experience, the Agency has found that a borrower
needs a minimum of one to two years to recover from a disaster.
Therefore, in order for an installment to be set-aside, the term
remaining on the loan must equal or exceed two years from the date on
which the installment set-aside was due. This requirement automatically
eliminates all one-year loans and any loans that will mature in less
than two years. Borrowers with less than two years remaining on the
loan will receive greater benefit from the servicing options available
under subpart S of part 1951 of this chapter as restructuring could
possibly provide longer repayment terms for the entire debt.
The set-aside amount will include unpaid interest and any principal
that would be credited to the borrower's account as if the payment were
paid on the due date. This amount will not exceed the annual scheduled
installment being set-aside minus any portion of the installment paid
prior to the set-aside addendum being signed. The unpaid interest is
set-aside in order that the remaining amortized installments can be
credited properly to principal and interest. Interest will continue to
accrue on any principal amount set-aside at the same rate charged on
the non-set-aside portion of the note. The amount set-aside, including
interest accrual on any principal set-aside, will be due on or before
the final due date of the loan. The interest amount set-aside will not
accrue interest, as permitted by section 331A of the CONACT.
Borrowers who apply for both set-aside and 1951-S servicing, must
choose which program they wish to accept. Borrowers cannot choose both
because the options are overlapping servicing tools geared toward
borrower financial stability. The program not chosen will automatically
be withdrawn once the borrower either signs the set-aside addendum or
the promissory note(s) restructured under 1951-S, whichever is
applicable. This assures the borrower's eligibility for the program
chosen prior to the other request being withdrawn. If the set-aside
program is chosen and any 1951-S request is withdrawn, the borrower
will not lose any future servicing rights under subpart S of part 1951
of this chapter. The borrower may re-apply for 1951-S servicing at any
time after the set-aside addendum is signed. However, if a borrower is
offered servicing under subpart S of part 1951 of this chapter while
waiting for notice of eligibility for the set-aside and the time limits
for 1951-S servicing expire without timely response by the borrower,
the borrower will lose the rights to 1951-S servicing.
The Agency anticipates that circumstances may arise beyond the
borrower's control that could warrant restructuring the debt prior to
the next scheduled installment coming due. In these cases, since the
set-aside brings the account current, the borrower may be considered
for a writedown or net recovery buyout as set forth in subpart S of
part 1951 and/or granted assistance in accordance with Sec. 1941.14 of
subpart A of part 1941 of this chapter only if the set-aside is
reversed and the addendum cancelled. If the set-aside is reversed, the
account will reflect the current payment status as if the payment had
never been set-aside.
In the case of entity borrowers, all members of the entity liable
for the debt must apply for set-aside in order for FmHA to consider the
application. This procedure is consistent with that under subpart S of
part 1951.
The set-aside program will be available only until July 1, 1995.
This timeframe will provide those borrowers who have already made their
payment that was due after the disaster ample time to determine if the
loss they incurred from the disaster will affect their repayment
ability for the following year.
List of Subjects in 7 CFR Part 1951
Account servicing, Credit, Loan programs--Agriculture, Loan
programs--Housing and community development, Low and moderate income
housing loans--Servicing, Debt restructuring.
Accordingly, part 1951, 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: 7 U.S.C. 1989; 42 U.S.C. 1480; 5 U.S.C. 301, 7 CFR
2.23 and 2.70.
2. Subpart T of part 1951, consisting of Secs. 1951.951 through
1951.1000, is added to read as follows:
Subpart T--Disaster Set-Aside Program
Sec.
1951.951 Purpose.
1951.952 General.
1951.953 Notification and request for DSA.
1951.954-1951.956 [Reserved]
1951.957 Eligibility determination and processing.
1951.958 Supervision and servicing of borrowers with DSA.
1951.959 Exception authority.
1951.960-1951.999 [Reserved]
1951.1000 OMB control number.
Subpart T--Disaster Set-Aside Program
Sec. 1951.951 Purpose.
This subpart sets forth the policies and procedures for
establishing and implementing the Disaster Set-Aside (DSA) Program. The
DSA program is available to Farmer Programs (FP) borrowers, as defined
in subpart S of this part, who suffered losses as a result of a 1993
disaster. FP loans that may be serviced under this subpart include Farm
Ownership (FO), Operating (OL), Soil and Water (SW), Emergency (EM),
Economic Emergency (EE), Special Livestock (SL), Economic Opportunity
(EO), Softwood Timber (ST), Recreation (RL), and Rural Housing loans
for farm service buildings (RHF). Nonprogram (NP) farm type loans may
be serviced under this subpart for borrowers who also have FP loans. FP
borrowers have until July 1, 1995, to request disaster set-aside and
submit a complete application. Partial applications will not be
acceptable. Requests received after July 1, 1995, will not be accepted.
Sec. 1951.952 General.
DSA is a program whereby borrowers who are current or not more than
one installment behind on any and all FP loans may be permitted to move
one Farmers Home Administration (FmHA) scheduled annual installment(s)
for each eligible FP loan to the end of the loan term. The intent of
this program is to relieve some of the borrower's immediate financial
stress caused by the disaster and avoid foreclosure by the Government.
Sec. 1951.953 Notification and request for DSA.
(a) Notification. The County Supervisor will use Form Letter 1951-
T-1 to notify FP borrowers of the availability of the DSA program and
how to apply. All FP borrowers, as defined in Sec. 1951.906 of subpart
S of this part, who have not been accelerated and who operated a farm
or ranch in a county during 1993 in which a disaster occurred and was
declared/designated as a disaster area or contiguous county, as set
forth in subpart A of part 1945 of this chapter, will be notified
within 10 days of the effective date of this subpart. However, those
borrowers whose FP loan(s) has been accelerated, or restructured after
a 1993 disaster, will not be notified under this paragraph.
Notification of the DSA program will not affect the notification
requirements set forth in subpart S of this part.
(b) Request for DSA. All FP borrower liable for the debt must
provide the County Office with the information described in paragraphs
(b) (1) and (2) of this section on or before July 1, 1995 to request
DSA. Borrowers may only be considered for DSA one time.
(1) A written request for DSA signed by all parties liable for the
debt, and
(2) Actual production, income, and expense figures for the
production/marketing period in which the 1993 disaster occurred, unless
this information is already in the borrower case file.
(c) Eligibility requirements. The County Supervisor will determine
whether the borrower meets the following eligibility requirements:
(1) The borrower's FP loan(s) has not been accelerated.
(2) The borrower operated a farm or ranch in a county declared/
designated a disaster area as set forth in subpart A of part 1945 of
this chapter or a county contiguous to such an area based on a 1993
disaster. The borrower must have been operating the farm or ranch at
the time of the disaster.
(3) The borrower has acted in good faith as defined in
Sec. 1951.906 of subpart S of this part.
(4) All nonmonetary defaults have been resolved. This means that
even though the borrower has acted in good faith, he/she may still be
in default for reasons, such as, but not limited to: no longer farming,
prior lienholder foreclosure, bankruptcy, not properly maintaining
chattel and real estate security, not properly accounting for the sale
of security as agreed, or not
carrying out any other agreements made with FmHA.
(5) The borrower is current or not more than one installment behind
on any and all FP loans at the time the scheduled installment(s) will
be set-aside as reflected on the Finance Office 540 or 582 status
reports.
(6) The borrower's projected income for the disaster year was
reduced as a result of the disaster, causing insufficient income
available to pay all family living and operating expenses, debts to
other creditors, and FmHA. This determination will be based on the
borrower's actual production and income and expense records for the
disaster year.
(7) The term remaining on the loan(s) receiving DSA equals or
exceeds 2 years from the due date of the installment being set-aside.
(8) All FP and NP farm type loans will be current after the
scheduled installments are set-aside.
(9) The borrower's FP loan(s) was not restructured under subpart S
of this part after the 1993 disaster.
Secs. 1951.954-1951.956 [Reserved]
Sec. 1951.957 Eligibility determination and processing.
(a) Eligibility determination. Upon receipt of a DSA request, the
County Supervisor will determine whether the borrower meets the
eligibility requirements set forth in Sec. 1951.953(c) of this subpart
and notify the borrower of the results within 30 days from the date of
the DSA request. The file shall contain documentation to reflect the
date of request and the date the borrower was notified and the addendum
signed.
(1) The borrower shall be provided up to 30 days to sign Exhibit A
of this subpart, (available in any FmHA Office). If Exhibit A is not
signed within 30 days and prior to the borrower becoming more than one
installment behind, the DSA request will be withdrawn and the borrower
notified of their rights to an appeal review in accordance with subpart
B of part 1900 of this chapter. Note: If borrower becomes more than one
installment behind, he/she is no longer eligible.
(2) Pending requests for primary loan servicing will continue to be
considered as set forth in subpart S of this part. However, borrowers
cannot accept servicing under both programs.
(i) Borrowers determined eligible for the DSA program and primary
loan servicing in accordance with subpart S of this part will be
required to choose between the two program requests. The choice will be
noted in the borrower case file and initialed by the borrower.
(ii) Borrowers may choose to proceed with the DSA program prior to
a decision being made for primary loan servicing such as in cases where
a decision will not be available on the primary loan servicing
application prior to the borrower becoming more than one installment
behind.
(iii) The application for the program not chosen will automatically
be withdrawn at the time the installment(s) is set-aside or the loan(s)
restructured, whichever is applicable. This voluntary withdrawal is not
appealable.
(iv) By signing Exhibit A of this subpart, (available in any FmHA
Office), the borrower agrees to the withdrawal of any pending request
for primary loan servicing. The borrower may resubmit a request at any
time according to subpart S of this part.
(b) Processing. Installments will be set-aside as set forth in this
paragraph.
(1) All borrowers liable for the debt will sign Exhibit A of this
subpart, (available in any FmHA Office), for each loan installment set-
aside. Exhibit A may be modified with the assistance of the Office of
the General Counsel to comply with individual State laws.
(2) Only one unpaid installment for each FP loan may be set-aside.
(i) The installment set-aside will be the first scheduled annual
installment due immediately after the disaster occurred, or if that
installment is paid current, the next scheduled annual installment.
Set-aside will not be granted on the loan if both of these installments
are paid current.
(ii) The amount set-aside will not exceed the annual scheduled
installment being set-aside minus any portion of that installment paid
prior to Exhibit A of this subpart, (available in any FmHA Office),
being signed by the borrower. This amount will include the unpaid
interest and any principal that would be credited to the account as if
the installment were paid on the due date.
(iii) Recoverable cost items charged to FO, SW, and RHF loans may
be set-aside with the annual installment. Cost items identified with a
loan number different from the parent loan cannot be set-aside.
(3) Interest will accrue on any principal amount set-aside at the
same rate charged the non-set-aside portion. Interest will not accrue
on the interest portion set-aside.
(4) The amount set-aside, including interest accrual on any
principal set-aside, will be due on or before the final due date of the
loan.
(5) There are no additional security requirements attached to the
DSA program. All existing security instruments will remain in effect.
(6) The original Exhibit A of this subpart, (available in any FmHA
Office), will be stapled to the respective original promissory note or
assumption agreement filed in the County Office operational file. A
copy will be stapled to the copy of the promissory note or assumption
agreement filed in position 2 of the borrower's case file.
(7) Exhibit A of this subpart, (available in any FmHA Office), will
be used as the source document to process the DSA through the Automated
Discrepancy Processing System (ADPS). Until automation capabilities are
implemented, Exhibit A should be placed in a pending file and the
borrower's account flagged ``51-S.'' The Finance Office borrower
account status reports will reflect the amount(s) set-aside for each
loan.
(8) The National Automated Tracking System (AGCREDIT) will be
utilized to document the notification and servicing scheme associated
with this subpart.
(9) The loan(s) will be considered current after the installment(s)
is set-aside and, therefore, debt writedown or net recovery buyout may
not be subsequently approved under subpart S of this part, and loans
may not be made under Sec. 1941.14 of subpart A of part 1941 of this
chapter, unless the set-aside is reversed as set forth in
Sec. 1951.958(b)(2) of this subpart or the borrower becomes delinquent
on the non-set-aside portion.
(c) Adverse determination. Borrowers who do not meet the
requirements for the DSA program will be notified of their appeal
rights in accordance with subpart B of part 1900 of this chapter. If
the borrower becomes more than one installment behind on any FP loan
while processing the DSA request, or while an appeal is being
considered, and the second installment cannot be paid current prior to
Exhibit A of this subpart, (available in any FmHA Office), being
signed, the DSA request will be denied and/or any associated appeal
request withdrawn. Being denied set-aside based on the failure to meet
the not-more-than-one-installment-behind requirement is not an
appealable issue, but is reviewable. The letter to the borrower will
describe in full detail all the reasons for the adverse decision.
Borrowers denied DSA will continue to be serviced in accordance with
subpart S of this part.
Sec. 1951.958 Supervision and servicing of borrowers with DSA.
(a) Supervision. Borrower supervision will continue as set forth in
subpart B of part 1924 of this chapter.
(b) Servicing. FP loans will continue to be serviced in accordance
with the appropriate servicing regulations.
(1) Payments applied to the amount set-aside will be processed as a
miscellaneous payment on Form FmHA 451-2, ``Schedule of Remittances.''
(2) The set-aside will be reversed and Exhibit A of this subpart,
(available in any FmHA Office), cancelled if, prior to the first
scheduled installment due date after set-aside, the current borrower
needs a writedown in order to develop a feasible plan or a net recovery
buyout in accordance with subpart S of this part or loan assistance set
forth in Sec. 1941.14 of subpart A of part 1941 of this chapter. The
Finance Office must be notified by memorandum of the set-aside reversal
prior to the time assistance is granted. A copy of the memorandum will
be attached to Exhibit A and remain stapled to the promissory note or
assumption agreement as indicated in Sec. 1951.957(b)(6) of this
subpart.
(3) In cases not covered by paragraph (b)(2) of this section, the
set-aside will be considered automatically cancelled whenever a program
loan receives primary loan servicing.
(4) Releases of normal income security will continue as set forth
in subpart A of part 1962 of this chapter.
Sec. 1951.959 Exception authority.
The Administrator may, in individual cases, make an exception to
any requirement or provision of this subpart or address any omission of
this subpart which is not inconsistent with the authorizing statute or
other applicable law if it is determined that application of the
requirement or provision or failure to take action in the case of an
omission would adversely affect the Government's interest. The
Administrator will exercise this authority upon the request of the
State Director with the recommendation of the Assistant Administrator
for Farmer Programs, or upon request initiated by the Assistant
Administrator for Farmer Programs. Requests for exception must be made
in writing and supported with documentation to explain the adverse
effect and proposed alternative courses of action, and to show how the
adverse effect will be eliminated or minimized if the exception is
granted.
Secs. 1951.960-1951.999 [Reserved]
Sec. 1951.1000 OMB control number.
The collection of information requirements in this regulation have
been approved by the Office of Management and Budget and assigned OMB
control number 0575-0163. Public reporting burden for this collection
of information is estimated to be 15 minutes per response, including
time for reviewing instructions, searching existing data sources,
gathering and maintaining the data needed, and completing and reviewing
the collection of information. Send comments regarding this burden
estimate or any other aspect of this collection of information,
including suggestions for reducing this burden, to Department of
Agriculture, Clearance Office OIRM, Room 404-W, Washington D.C. 20250;
and to the Office of Management and Budget, Paperwork Reduction Project
(OMB# 0575-0163), Washington, D.C. 20503.
Dated: August 26, 1994.
Bob Nash,
Under Secretary, Small Community and Rural Development.
[FR Doc. 94-26160 Filed 10-20-94; 8:45 am]
BILLING CODE 3410-07-U
