[Federal Register Volume 64, Number 78 (Friday, April 23, 1999)]
[Rules and Regulations]
[Pages 19863-19865]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-10258]
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Rules and Regulations
Federal Register
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This section of the FEDERAL REGISTER contains regulatory documents
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Federal Register / Vol. 64, No. 78 / Friday, April 23, 1999 / Rules
and Regulations
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DEPARTMENT OF AGRICULTURE
Farm Service Agency
Rural Housing Service
Rural Business-Cooperative Service
Rural Utilities Service
7 CFR Part 1951
RIN 0560-AF80
Suspension of Collection of Recapture Amount for Borrowers With
Certain Shared Appreciation Agreements
AGENCY: Farm Service Agency, USDA.
ACTION: Interim rule.
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SUMMARY: The Farm Service Agency (FSA) is amending the shared
appreciation agreement requirements to allow certain Farm Loan Program
(FLP) borrowers with such agreements that end prior to December 31,
2000, to have the obligation to pay all or part of the recapture amount
due under the agreement suspended for up to 3 years. This rule will
allow those borrowers to suspend their obligation to pay the recapture
amount to give them time to recover from the current situation of
depressed commodity prices.
DATES: Effective April 23, 1999. Comments on this rule and on the
information collections must be submitted by June 22, 1999 to be
assured consideration.
ADDRESSES: Submit written comments to the Director, Farm Loan Programs,
Loan Servicing and Property Management Division, United States
Department of Agriculture, Farm Service Agency, STOP 0523, 1400
Independence Avenue, SW, Washington, DC 20250-0523.
FOR FURTHER INFORMATION CONTACT: David Spillman, Branch Chief, or
Veldon Hall, telephone (202) 720-0900; electronic mail: david
__spillman@wdc.fsa.usda..
SUPPLEMENTARY INFORMATION:
Executive Order 12866
This rule has been determined to be significant under Executive
Order 12866 and has been reviewed by the Office of Management and
Budget.
Regulatory Flexibility Act
In compliance with the Regulatory Flexibility Act (5 U.S.C. 601 and
602), the undersigned has determined and certified by signature of this
document that this rule will not have a significant economic impact on
a substantial number of small entities. New provisions included in this
rule will not impact a substantial number of small entities to a
greater extent than large entities. Therefore, a regulatory flexibility
analysis is not required and was not performed.
Environmental Impact Statement
This document has been reviewed in accordance with 7 CFR part 1940,
subpart G, ``Environmental Program.'' The issuing agency has determined
that this action does not affect the quality of human environment, and
in accordance with the National Environmental Policy Act of 1969, Pub.
L. 91-190, an Environmental Impact Statement is not required.
Executive Order 12988
This rule has been reviewed in accordance with Executive Order
12988, Civil Justice Reform. In accordance with this rule: (1) All
State and local laws and regulations that are in conflict with this
rule will be preempted; (2) no retroactive effect will be given to this
rule because it will not affect agreements, entered into prior to the
effective date of the rule, to pay the shared appreciation amount due
under a shared appreciation agreement; and (3) administrative
proceedings in accordance with 7 CFR parts 11 and 780 must be exhausted
before bringing suit in court challenging action taken under this rule.
This rule will only allow certain borrowers who are obligated to pay a
sum certain at the maturity date of the shared appreciation agreement
to delay that payment.
Executive Order 12372
For reasons set forth in the Notice related to 7 CFR part 3015,
subpart V (48 FR 29115, June 24, 1983), the programs within this rule
are excluded from the scope of E.O. 12372, which requires
intergovernmental consultation with State and local officials.
The Unfunded Mandates Reform Act of 1995
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Pub.
L. 104-4, requires Federal agencies to assess the effects of their
regulatory actions on State, local, and tribal governments or the
private sector of $100 million or more in any 1 year. When such a
statement is needed for a rule, section 205 of the UMRA requires FSA to
prepare a written statement, including a cost benefit assessment, for
proposed and final rules with ``Federal mandates'' that may result in
such expenditures for State, local, or tribal governments, in the
aggregate, or to the private sector. UMRA generally requires agencies
to consider alternatives and adopt the more cost effective or least
burdensome alternative that achieves the objectives of the rule.
This rule contains no Federal mandates, as defined under Title II
of the UMRA, for State, local, and tribal governments or the private
sector. Thus, this rule is not subject to the requirements of sections
202 and 205 of UMRA.
Paperwork Reduction Act of 1995
The amendments to 7 CFR part 1951 set forth in this interim rule
require a revision to the information collection requirements that were
previously approved by OMB under the provisions of chapter 35 of title
44 of the United States Code. Since this interim rule will be effective
as soon as it is published, FSA has submitted a request for emergency
approval of the information collections of this rule to OMB. Still, the
agency is seeking public comments on the information collection
estimates and subsequent revisions may be made based on the comments
received.
Title: 7 CFR 1951-S, Farmer Program Account Servicing Policies.
OMB Control Number: 0560-0161.
Expiration Date of Approval: March 31, 2001.
Type of Request: Extension and revision of a currently approved
information collection.
Abstract: The information collected under OMB Number 0560-0161, as
identified above, is needed for FSA to effectively administer the
regulations relating to the servicing of delinquent
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direct FSA farm loans. The information is collected by the loan
official in order to document the borrower's eligibility for specific
loan servicing actions. The reporting requirements imposed on the
public by the regulations contained in 7 CFR part 1951-S are necessary
to administer the loan program in accordance with statutory
requirements, are consistent with commonly performed lending practices,
and are necessary to protect the Government's financial interest.
This rule, which provides for the suspension of the borrower's
obligation to pay the recapture payment due under a shared appreciation
agreement in 1999 and 2000, will result in an information collection
burden for borrower's seeking such a suspension. Each borrower who
wishes to suspend a recapture payment obligation will be required to
request a suspension, read and sign a suspension agreement, and provide
cash flow projections documenting that they are unable to pay for 2
years subsequent to the suspension. The revision to the information
collection requirements approved under 0560-0161 also requests approval
of an existing requirement associated with this program. The currently
approved information collection contains no burden estimates for the
information collection requirements contained in 7 CFR 1951.914(e).
Specifically, paragraphs 1951.914(e)(1) and (8) require a borrower that
wishes to amortize the recapture due to present a feasible plan
documenting their ability to pay the recapture in installments plus
interest and to execute a promissory note for the amount due.
Estimate of Burden: Public reporting burden for this collection of
information is estimated to average 1.51 hours per response.
Respondents: Individuals or households, businesses or other for
profit and farms.
Estimated Number of Respondents: 9,453.
Estimated Number of Responses per Respondent: 1.
Estimated Total Annual Burden on Respondents: 14,309 hours.
Proposed topics for comment include: (a) Whether the collection of
information is necessary for the proper performance of the functions of
the agency, including whether the information will have practical
utility; (b) the accuracy of the agency's estimate of burden including
the validity of the methodology and assumptions used; (c) ways to
enhance the quality, utility and clarity of the information to be
collected; (d) ways to minimize the burden of the collection of
information on those who are to respond, including through the use of
appropriate automated, electronic, mechanical, or other technological
collection techniques or other forms of information technology.
Comments regarding this information collection should be sent to the
Desk Officer for Agriculture, Office of Information and Regulatory
Affairs, Office of Management and Budget, Washington, D.C. 20503 and to
David Spillman, Branch Chief, USDA, FSA, Farm Loan Programs Loan
Servicing Division, Farm Service Agency, USDA, 1400 Independence
Avenue, SW, STOP 0523, Washington, D.C. 20250-0523. A copy and
explanation of the information collection requirements of this rule may
be obtained from Mr. Spillman at the above address. Comments regarding
paperwork burden will be summarized and included in the request for OMB
approval of the information collection. All comments will also become a
matter of public record.
Federal Assistance Programs
These changes affect the following FSA programs as listed in the
Catalog of Federal Domestic Assistance.
10.407--Farm Ownership Loans
Discussion of the Interim Rule
The Farm Service Agency (FSA) publishes this amendment to subpart S
of part 1951 for immediate affect because of the emergency nature of
the program and the eligibility requirements involved. Publication as a
proposed rule for notice and comment is impractical and contrary to the
public interest as discussed below.
In late 1988, the Agricultural Credit Act of 1987 amended Sec. 353
of the Consolidated Farm and Rural Development Act (Con Act) by
inserting subsection (e) (7 U.S.C. 2001(e)) to allow the Farmers Home
Administration (which later became part of FSA), to begin restructuring
debts with debt write-downs and entering into shared appreciation
agreements with borrowers. Under these agreements, a borrower is
required to make a recapture payment equal to a specified portion of
any appreciation in the value of the real estate between the date of
the agreement and the earlier of the following dates: (1) The date the
real estate securing the borrower's loan with the agency is sold, (2)
the repayment of the loan, (3) the date the borrower ceases farming
operations, or (4) the date 10 years after the borrower and the agency
entered into the agreement. The recapture payment is 75% of the
appreciation in the case of agreements that lasted 4 years or less and
50% of the appreciation in the case of all other agreements.
Many of these agreements have now matured. However, the prices for
many agricultural commodities for the 1998 crop are at depressed
levels. Such depressed prices are expected to continue for at least
another year. In certain cases, the prices farmers are receiving for
the agricultural commodities they produce have fallen by more than 50%
over the last 3 years. This situation has led to a substantial fall in
farm income across nearly all sectors of production agriculture. Thus,
a significant percentage of the approximately 3,300 borrowers with
shared appreciation agreements that are coming to an end during the
1999 and 2000 calendar years are not able to repay the recapture
amounts.
This rule will allow those borrowers to suspend their obligation to
pay the recapture amount to give them time to recover from the current
situation of depressed commodity prices. Accordingly, there is a good
cause to make the rule effective immediately upon publication. FSA will
accept public comments on the rule for 60 days after publication in the
Federal Register.
The shared appreciation agreement regulations codified at 7 CFR
1951.914, generally provide the procedures for the servicing of shared
appreciation agreements, including the procedure for determining and
collecting recapture amount of any appreciation in the secured real
estate.
The rule would amend the regulation by adding paragraph (h) to give
a borrower with a shared appreciation agreement that becomes due on or
before December 31, 2000, provided there has been no agreement for
payment of the recapture amount, a period of 30 days to apply for a 1
year suspension of the borrower's obligation to pay the recapture
amount if the borrower certifies in writing the inability to pay the
recapture amount. In order to protect the Government's lien position,
FSA must determine that its mortgage on the secured real estate will
not expire prior to the end of the suspension period plus an additional
3 years, or FSA must be advised that under State law the mortgage can
be extended for an additional 3 years.
A suspension may be renewed twice. At each renewal, the borrower
will receive a suspension limited to the portion of the recapture
amount FSA determines, based on a Farm and Home Plan, that the borrower
is still unable to pay at the time of the renewal request. The amount
of the recapture payment subject to a suspension will accrue
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interest at a rate equal to the applicable Federal borrowing interest
rate, as determined by the FSA Administrator.
Thirty days before the suspension period FSA will notify the
borrower that the suspension of the shared appreciation agreement will
end in the near future. This notification is separate and apart from
the notification required by Sec. 807 of the Agriculture, Rural
Development, Food and Drug Administration, and Related Agencies
Appropriations Act, 1999 (1999 Appropriations Act). Section 807 of the
1999 Appropriations Act requires FSA, beginning in fiscal year 2000, to
send an FLP borrower notice of the provisions of the agreement not
later than 12 months before the end of the term of a shared
appreciation agreement. Under additional FSA procedures all borrowers
whose agreements were due, even if the payment obligation is suspended,
were notified of the agreements' provisions in the timeframe required
by Sec. 807. The requirement in this regulation that borrowers be
notified 30 days before the end of the suspension is not intended to
apply under Sec. 807 of the 1999 Appropriations Act.
If the real estate is conveyed during the suspension period, the
recapture amount plus any applicable interest will become immediately
due and payable under the notice procedures explained in the notice to
the borrowers.
List of Subjects in 7 CFR Part 1951
Accounting, Credit, Loan programs-agriculture.
Accordingly, 7 CFR part 1951 is amended as follows:
PART 1951--SERVICING AND COLLECTIONS
1. The authority citation for part 1951 continues to read as
follows:
Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 31 U.S.C. 3716; 42
U.S.C. 1480.
Subpart S--Farmer Program Account Servicing Policies
2. Section 1951.914 is amended by revising the heading and
introductory text of paragraph (b) and by adding paragraph (h) to read
as follows:
Sec. 1951.914 Servicing of accounts restructured under Primary Loan
Service Program.
* * * * *
(b) Recapture under Shared Appreciation Agreements. Except as
provided in paragraph (h), recapture of any appreciation will take
place at the end of the term of the agreement, or sooner, if the
following occurs: * * *
* * * * *
(h) Suspension of Recapture Payment Obligation under a Shared
Appreciation Agreement.
(1) A borrower may request from a Farm Loan Program (FLP) servicing
official, a suspension of the obligation to pay the recapture amount
under a shared appreciation agreement, if:
(i) The shared appreciation agreement recapture payment is now due
but there has been no agreement to pay the recapture payment;
(ii) The 10 year term of the agreement ends on or before December
31, 2000;
(iii) The secured real estate has not yet been conveyed so that the
entire amount of the shared appreciation agreement recapture payment is
due;
(iv) The borrower has complied with the other terms of the
agreement;
(v) The borrower certifies in writing that the borrower is not able
to pay the recapture amount;
(vi) The agreement or the obligations thereunder have not been
accelerated and there are pending servicing rights under this subpart
still available to the borrower; and
(vii) The Agency's mortgage which secures the agreement remains in
effect for a period not less than the suspension period under this
paragraph plus 3 additional years or the Agency determines that the
mortgage can be extended for an additional 3 years beyond the
suspension period.
(2) A request for suspension of the obligation to pay the recapture
amount must be submitted in writing to the FLP servicing official after
the borrower has received notification of the recapture amount due by
the later of:
(i) 30 days after the borrower has received notification of the
recapture amount due; or
(ii) May 24, 1999.
(3) The term of the suspension of the obligation to pay the
recapture amount is 1 year.
(4) A suspension may be renewed by the Agency at the request of a
borrower in writing not more than twice. Prior to renewal of a
suspension, the Agency will determine, based on a Farm and Home Plan,
the portion of the recapture amount the borrower is still unable to
pay, or obtain credit to pay, from any other source (including
nonprogram loans from the Agency, in accordance with this part), the
suspension will be limited to such an amount. The Agency must also
determine that the conditions prescribed in paragraphs (h)(1)(i)
through (h)(1)(vi) are still met.
(5) The amount of the recapture payment suspended will accrue
interest at a rate equal to the applicable rate of interest of Federal
borrowing, as determined by the Agency.
(6) Thirty days before the end of the suspension period, the FLP
Servicing Official shall inform the borrower by letter of the suspended
amount, including accrued interest that is owed and the date such
payment is due.
(7) At the end of the suspension period, the borrower will be
obligated to pay the amount suspended, plus any accrued interest and
the borrower will be so notified.
(8) If the real estate that is the subject of the shared
appreciation agreement during the suspension period is conveyed, the
suspended amount, plus any accrued interest shall become immediately
due and payable by the borrower in accordance with the procedures
established under paragraph (c), except that an appraisal is not
required on the real estate.
Signed in Washington, DC, on April 20, 1999.
August Schumacher, Jr.,
Under Secretary for Farm and Foreign Agricultural Services.
[FR Doc. 99-10258 Filed 4-21-99; 8:45 am]
BILLING CODE 3410-05-P
