[Federal Register Volume 64, Number 136 (Friday, July 16, 1999)]
[Rules and Regulations]
[Pages 38297-38298]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-17799]
-----------------------------------------------------------------------
DEPARTMENT OF AGRICULTURE
Farm Service Agency
7 CFR Part 762
Rural Housing Service
Rural Business--Cooperative Service
Rural Utilities Service
Farm Service Agency
7 CFR Part 1980
RIN 0560-AF38
Implementation of Preferred Lender Program and Streamlining of
Guaranteed Farm Loan Programs Loan Regulations; Correction
AGENCIES: Rural Housing Service, Rural Business--Cooperative Service,
Rural Utilities Service, and Farm Service Agency, USDA.
ACTION: Correction to final regulations.
-----------------------------------------------------------------------
SUMMARY: This document corrects the amendatory language contained in
the final rule published February 12, 1999, (64 FR 7358) establishing
the regulations that govern the Farm Service Agency (FSA) guaranteed
farm loan program. These corrections are necessary to change some
erroneous references, clarify some provisions, and correct sections
that conflict with statute or other program requirements. The effect
will be to ensure the original intent of each provision is stated and
implemented correctly. This correction will apply retroactively to
those loans approved since the effective date of the final rule.
DATES: Effective on July 16, 1999.
FOR FURTHER INFORMATION CONTACT: Phillip Elder (202) 690-4012;
Electronic mail: phillip__elder@wdc.fsa.usda.gov.
SUPPLEMENTARY INFORMATION:
Background
The final rule being corrected by this publication was promulgated
under 7 CFR part 762 to replace the regulations under 7 CFR part 1980,
subparts A and B, as they pertain to the guaranteed farm loan programs
of FSA, to update and streamline program requirements, and to implement
a preferred lender program.
Need for Correction
As published, the final rule (64 FR 7358-7403) contains several
technical errors which may prove misleading and cause unintentional
results if not clarified.
Discussion of Changes
The corrections being made are described as follows:
(1) Section 762.122(a)(1) states, ``The total outstanding combined
Direct and Guaranteed FO and OL principal balance cannot exceed
$700,000 and,''. This conflicts with the combined direct and guaranteed
loan maximum of $900,000 provided by paragraph (a)(4) of Sec. 762.122.
Paragraph (a)(1) should read, ``The total outstanding combined
guaranteed FO and OL principal balance cannot exceed $700,000 and,''.
This change is consistent with the intended policy for loan limits as
discussed in the preamble of the final rule. Paragraph (a)(4) also
needs to be amended to refer to ``principal balance'' rather than
``balance'' for consistency and clarity.
(2) Section 762.122(c)(1) states, ``No guaranteed OL shall be made
to any loan applicant after the 15th year that a loan applicant, or any
individual signing the promissory note, first received direct or
guaranteed OL.'' Since the 15 year limit is based on the
[[Page 38298]]
number of years of actual loan assistance the borrower has received and
not the year in which the borrower ``first'' received loan assistance,
this section should state, ``No guaranteed OL shall be made to any loan
applicant after the 15th year that a loan applicant, or any individual
signing the promissory note, received a direct or guaranteed OL.'' This
change is consistent with former Agency policy under 7 CFR
Sec. 1980.175. No policy change was intended in the final rule.
(3) Section 762.145(e)(7), in the last sentence provides that an
interest assistance agreement will be canceled if a writedown is
approved. This provision was unintentionally retained from the previous
regulation and will be deleted. Cancellation of the interest assistance
agreement in the case of a writedown is not necessary due to changes in
the way the subsidy is calculated under Sec. 762.150. This cancellation
requirement conflicts directly with the second to last sentence of
Sec. 762.150(g)(3) which states that the interest assistance agreement
will not be canceled if a debt writedown is approved.
(4) Section 762.150(e)(2) provides requirements for the
continuation of interest assistance subsidy for the next year and
states, ``The loan will be eligible for the continuation of interest
assistance if a feasible plan, including interest assistance, can be
projected for the plan period.'' As written, this sentence provides a
minimum threshold for continuation without providing policy for subsidy
on multiple loans. Thus, this provision implies that subsidy may be
approved on multiple loans even if a positive cash flow is achieved
with subsidy applied to only one loan. This error may cause subsidy to
be awarded above the amount necessary to achieve a positive cash flow
and, therefore, increase the costs of the loan to the Government.
Previously, the Agency required, at a minimum, a positive cash flow
(with a 10-percent margin) to be eligible for continuation of the
subsidy. The 10 percent margin requirement was removed. The Agency
intended to prohibit subsidy when it was not required to achieve a 10
percent margin but failed to state this expressly. Under the corrected
rule, the Agency will, at a maximum, continue to provide subsidy to as
many loans as necessary in a multiple loan situation to achieve a
positive cash flow for the plan period. Thus, the first sentence of
Sec. 762.150(e)(2) is removed and two sentences are inserted in its
place to state, ``The loan will be eligible for continuation of
interest assistance if the cash flow budget projects a feasible plan
with interest assistance applied. However, in the case of multiple
loans with interest assistance, subsidy can be applied only to as many
loans as necessary to achieve a positive cash flow for the plan
period.''
(5) Section 762.150(g)(4) is also erroneous due to changes made in
the annual review procedure for interest assistance. This paragraph
limits the timing of rescheduling and deferral of loans with interest
assistance to the claim date or anniversary date of the agreement.
Those limits were imposed due to the effect of restructuring actions on
the annual calculation of subsidy. The formula for this calculation has
been simplified under this section, so this restriction is no longer
necessary. Thus, the last three sentences of Sec. 762.150(g)(4) are
removed as a conforming change.
(6) The final rule published February 12, 1999, contained the
following erroneous cross references to other sections within the rule
that are corrected by this rule:
(A) Sections 762.106(g)(2)(ix) and 762.160(a)(2)(ii) refer to
Sec. 762.146(c)(7) but should refer to Sec. 762.144(c)(7).
(B) Section 762.150(g)(7), in the last sentence refers to
Sec. 762.145(b)(3)(v) but should refer to Sec. 762.143(b)(3)(v).
Correction of Publication
Accordingly, the final rule published in the Federal Register, FR
Doc. 99-3256, (64 FR 7358) on February 12, 1999, is corrected as
follows:
1. At 64 FR 7384, in the first column, Sec. 762.106(g)(2)(ix) is
corrected to read as follows:
Sec. 762.106 Preferred and certified lender programs.
* * * * *
(g) * * *
(2) * * *
(ix) Failure to comply with the reimbursement requirements of
Sec. 762.144(c)(7).
* * * * *
2. At 64 FR 7386, in the second column, Secs. 762.122(a)(1),
(a)(4), and (c)(1) are corrected to read as follows:
Sec. 762.122 Loan limitations.
(a) * * *
(1) The total outstanding combined guaranteed FO and OL principal
balance cannot exceed $700,000 and,
* * * * *
(4) The total combined outstanding direct and guaranteed FO and OL
principal balance cannot exceed $900,000.
* * * * *
(c) * * *
(1) No guaranteed OL shall be made to any loan applicant after the
15th year that a loan applicant, or any individual signing the
promissory note, received a direct or guaranteed OL.
* * * * *
3. At 64 FR 7395, in the first column, Sec. 762.145(e)(7) is
corrected by removing the last sentence.
4. At 64 FR 7400, in the second column, Sec. 762.150(e)(2) is
corrected to read as follows:
Sec. 762.150 Interest assistance program.
* * * * *
(e) * * *
(2) The loan will be eligible for continuation of interest
assistance if the cash flow budget projects a feasible plan with
interest assistance applied. However, interest assistance can be
applied only to as many loans as necessary to achieve a positive cash
flow for the plan period. If the cash flow budget indicates that the
borrower requires a level of interest assistance greater than 4 percent
to project a feasible plan, then the Agency will deny the continuation
of interest assistance. Interest assistance will be reduced to zero
during that period. See Sec. 762.102(b) for the definition of feasible
plan.
5. At 64 FR 7401, in the first column, Sec. 762.150(g)(4) is
corrected by removing the last three sentences.
6. At 64 FR 7401, in the first column, the last sentence of
Sec. 762.150(g)(7) is corrected by removing ``Sec. 762.145(b)(3)(v)''
and adding ``Sec. 762.143(b)(3)(v)'' in its place.
7. At 64 FR 7401, in the second column, Sec. 762.160(a)(2)(ii) is
corrected to read as follows:
Sec. 762.160 Sale, assignment and participation.
(a) * * *
(2) * * *
(ii) The lender has not complied with the reimbursement
requirements of Sec. 762.144(c)(7), except when the 180 day
reimbursement or liquidation requirement has been waived by the Agency.
* * * * *
Signed at Washington, DC on July 7, 1999.
August Schumacher Jr.,
Under Secretary for Farm and Foreign Agricultural Services.
Jill Long Thompson,
Under Secretary for Rural Development.
[FR Doc. 99-17799 Filed 7-15-99; 8:45 am]
BILLING CODE 3410-05-P
