02-4100. Farm Loan Programs Account Servicing Policies-Reduction of Amortized Shared Appreciation Recapture Amortization Rate

AGENCY:

Farm Service Agency, USDA.

ACTION:

Final rule.

SUMMARY:

The Farm Service Agency (FSA) is amending its regulations to reduce the amortization rate on Shared Appreciation Agreement recapture and clarify the references made to Shared Appreciation (SA) loans.

Pursuant to statutory mandate, the amortization rate on all future (SA) payment agreements will be the current Homestead Protection Program interest rate less 100 basis points (1 percent). In addition, the amortization rate on all SA payment agreements in existence as of October 28, 2000, will be similarly reduced.

Additionally, SA loans will now be referred to as SA amortized payments and the Promissory Notes used in the amortization of these amounts will be referred to as payment agreements. This change is being made to clarify the fact that SA agreements are an amortization of an existing debt which is not derived from obligated loan funds.

DATES:

Effective March 25, 2002.

FOR FURTHER INFORMATION CONTACT:

Michael Cumpton, 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, telephone [phone]; electronic mail: [e-mail].

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

In compliance with the Regulatory Flexibility Act (5 U.S.C. 601-602), 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 was not performed.

Environmental Evaluation

It is the determination of FSA that this action is not a major Federal action significantly affecting the environment. Therefore, in accordance with the National Environmental Policy Act of 1969, and 7 CFR part 1940, subpart G, 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 executive order: (1) All State and local laws and regulations that are in conflict with this rule will be preempted; (2) except as specifically stated in this rule, no retroactive effect will be given to this rule; and (3) administrative proceedings in accordance with 7 CFR parts 11 and 780 must be exhausted before seeking judicial review.

Executive Order 12372

For reasons contained 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) 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 and 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.

Executive Order 13132

The policies contained in this rule do not have any substantial direct effect on States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. Nor does this rule impose substantial direct compliance costs on State and local governments. Therefore, consultation with the States is not required.

Paperwork Reduction Act

The amendments to 7 CFR part 1951 contained in this rule require no revisions to the information collection requirements that were previously approved by OMB (0560-0161) under the provisions of 44 U.S.C. chapter 35.

Federal Assistance Programs

These changes affect the following FSA programs as listed in the Catalog of Federal Domestic Assistance:

10.404—Emergency Loans

10.406—Farm Operating Loans

10.407—Farm Ownership Loans

Discussion of the Final Rule

The Farm Service Agency (FSA) published a final rule on August 18, 2000, (65 FR 50401-50405) to change the amortization rate of the Shared Appreciation Agreement recapture amortization and reamortization from the Non-Program rate to the Homestead Protection Program rate. Section 818 of the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act, 2001, (2001 Appropriations Act) enacted on October 28, 2000, mandates that the amortization rate on all Shared Appreciation (SA) amortization agreements made after enactment will be reduced to the current Homestead Protection Program interest rate less 100 basis points (1 percent). This rate will be referred to as the SA amortization rate. In addition, section 818 of the 2001 Appropriations Act requires the interest rate on all SA amortizations existing as of the date of enactment of the 2001 Appropriations Act, to be reduced to the SA amortization rate as of that date. To comply with the 2001 Appropriations Act, FSA is publishing this final rule. The changes enacted herein were mandated by statute. The changes in terminology regarding SA amortized payments amounts are simply clarifications of the existing regulation. Therefore, notice and comment are impractical, unnecessary and contrary to the public interest and not required.

List of Subjects in 7 CFR Part 1951

• Account Servicing
• Credit
• Debt Restructuring
• 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.

2. Revise the heading for subpart S to read as follows:

Subpart S—Farm Loan Programs Account Servicing Policies

§ 1951.901

[Amended]

3. Revise the third sentence in § 1951.901 to read as follows:

* * * Shared Appreciation amortized payments (SA) may be reamortized under this subpart if the borrower also has outstanding FLP program loans.* * *

4. In § 1951.909 revise paragraph (e)(2)(vii)(D) and the third sentence of paragraph (e)(2)(viii)(A) to read as follows:

§ 1951.909

Processing primary loan service programs requests.

* * * * *

(e) * * *

(2) * * *

(vii) * * *

(D) SA payment agreements may not exceed 25 years from the date of the original amortized agreement.

* * * * *

(viii) * * *

(A) * * * SA payment agreements will be reamortized at the current SA amortization rate in effect on the date of approval or the rate on the original payment agreement, whichever is less.

* * * * *

5. In § 1951.914 revise paragraph (e) to read as follows:

§ 1951.914

Servicing shared appreciation agreements.

* * * * *

(e) Shared appreciation amortization. Shared appreciation may be amortized to a nonprogram amortized payment for borrowers who will continue with FSA on program loans. Shared appreciation will not be amortized if the amount is due because of acceleration, payment in full or satisfaction of the debt, or the borrower ceases farming. The amount due may be converted to an SA amortized payment under the following conditions:

(1) The borrower must have a feasible plan as defined in § 1951.906 including the SA amortized payment.

(2) The borrower must be unable to pay the shared appreciation, or obtain the funds elsewhere to pay the shared appreciation.

(3) [Reserved]

(4) [Reserved]

(5) The payment agreement term will be based on the borrower's repayment ability and the life of the security, not to exceed 25 years.

(6) The interest rate will be the SA amortization rate contained in RD Instruction 440.1 (available in any FSA office).

(7) A lien will be obtained on any remaining FSA security, or if there is no security remaining, the best lien obtainable on any other real estate or chattel property sufficient to secure the SA payment agreement, if available.

(8) The borrower will sign a payment agreement for each SA amortized payment established.

(9) [Reserved]

(10) [Reserved]

(11) If the borrower has no outstanding Farm Loan Program loans and becomes delinquent on the SA amortized payment, the SA payment agreement will be serviced in accordance with subpart J of this part. If the borrower has outstanding Farm Loan Programs loans, and becomes delinquent or financially distressed in accordance with § 1951.906, the SA amortized payment will be considered for reamortization in accordance with § 1951.909(e).

* * * * *

Signed in Washington, DC, on February 12, 2002.

J.B. Penn,

Under Secretary for Farm and Foreign Agricultural Services.