03-394. Farm Loan Programs Account Servicing Policies-Elimination of 30-Day Past-Due Period

AGENCY:

Farm Service Agency, USDA.

ACTION:

Proposed rule.

SUMMARY:

The Farm Service Agency (FSA) proposes to amend its regulations to eliminate the 30-day past-due period prior to a determination that the borrower is delinquent and clarify the use of the terms “delinquent” and “past due” with regard to direct loan servicing and offset. Because the regulation only allows debt writedown after a borrower becomes delinquent, this proposed change would allow Farm Loan Program (FLP) borrowers to receive debt writedown on the day after a missed payment, assuming all other primary loan servicing criteria are met, instead of waiting 31 days.

DATE:

Comments on this rule must be submitted by March 10, 2003, to be assured consideration.

ADDRESSES:

Submit written comments to 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. Comments will be available for public inspection weekdays from 8 a.m. to 4:15 p.m., eastern standard time, at the above address.

FOR FURTHER INFORMATION CONTACT:

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

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This rule has been determined to be significant and has been 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. This rule will allow borrowers in financial difficulty to work with the Agency to cure the delinquency at an earlier time. 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 part 11 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 most 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 under control numbers 0575-0119 and 0560-0161 according to the provisions of 44 U.S.C. chapter 35. The information collections currently approved by OMB under control number 0560-0171 include the amendment to 7 CFR part 1962 contained in this rule. The amendment to 7 CFR part 1965 contained in this rule requires no revision to the information collection requirements that were previously approved by OMB and assigned control number 0560-0158.

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 Proposed Rule

Currently, borrowers are considered “past-due” for 30 days after a scheduled FLP payment is not made, after which they are considered “delinquent”. This is not consistent with the terminology used by FSA Farm Programs (FP) where no “past-due” period exists prior to delinquency. For consistency, FSA proposes to amend 7 CFR part 1951, subparts C and S, 7 CFR part 1962, subpart A, and 7 CFR part 1965, subpart A to eliminate the 30-day “past-due” period prior to a borrower becoming delinquent. Because 7 CFR part 1951, subpart S only allows debt writedown after a borrower becomes delinquent, this change would allow FLP borrowers to receive debt writedown on the day after a missed payment, assuming all other primary loan servicing criteria are met, instead of waiting 31 days. This will allow servicing to be completed earlier with no additional loss to the government, as the additional accrued interest during the 30 day period is often simply added to the writedown which would have been calculated on the first day the account was “past-due”. This proposal also will change the definition of the word “delinquent” with regard to all servicing and offsets. The rule will not affect the “90 days past due” criteria that is currently used to determine initial notice of primary loan servicing under 7 CFR part 1951 subpart S, as this requirement is statutory (7 U.S.C. 1981d).

List of Subjects

7 CFR Part 1951

• Account servicing
• Credit
• Debt restructuring
• Loan programs—agriculture
• Loan programs-housing and community development

7 CFR Part 1962

• Agriculture
• Bankruptcy
• Loan programs-agriculture
• Loan programs-housing and community development

7 CFR Part 1965

• Loan programs-agriculture
• Loan programs-housing and community development
• Low and moderate income housing

 

• Accordingly,

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 C—Offsets of Federal Payments to USDA Agency Borrowers

2. Amend § 1951.102 to:

a. Revise paragraph (b)(6)

b. Revise the third sentence of paragraph (b)(13), to read as follows:

§ 1951.102

Administrative Offset.

* * * * *

(b) * * *

(6) Delinquent or past-due means a payment that was not made by the due date.

* * * * *

(13) * * * To be feasible the debt must exist and be 90 days past due or the borrower must be in default of other obligations to the Agency, which can be cured by the payment.

* * * * *

Subpart S—Farm Loan Programs Account Servicing Policies

3. Amend § 1951.906 by removing the definition of “Delinquent borrower” and adding in its place the definition of “Delinquent or past-due borrower”.

§ 1951.906

Definitions.

* * * * *

Delinquent or past-due borrower: A borrower who has failed to make all or part of a payment by the due date.

* * * * *

4. Amend the second sentence of § 1951.907 paragraph (c) to read as follows:

§ 1951.907

Notice of loan service programs.

* * * * *

(c) * * * FLP borrowers who are at least 90 days past due will be sent exhibit A of this subpart with Attachments 1 and 2 by certified mail, return receipt requested.* * *

* * * * *

PART 1962—PERSONAL PROPERTY

5. The authority citation for part 1962 continues to read as follows:

Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 42 U.S.C. 1480.

Subpart A—Servicing and Liquidation of Chattel Security

6. Amend § 1962.40 to revise the first sentence of paragraph (b)(2) to read as follows:

§ 1962.40

Liquidation.

* * * * *

(b) * * *

(2) In Farm Loan Programs loan cases, borrowers who are 90 days past due on their payments must receive exhibit A with attachments 1 and 2 or attachments 1, 3, and 4 of exhibit A of subpart S of part 1951 of this chapter in cases involving nonmonetary default.

* * * * *

PART 1965—REAL PROPERTY

7. The authority citation for part 1965 continues to read as follows:

Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 42 U.S.C. 1480.

Subpart A—Servicing of Real Estate Security for Farm Loan Programs Loans and Certain Note-Only Cases

8. Amend § 1965.26 to revise the first sentence of paragraph (b)(2) to read as follows:

§ 1965.26

Liquidation action.

* * * * *

(b) * * *

(2) In Farm Loan Programs loan cases, borrowers who are 90 days past due on their payments, must receive Exhibit A with attachments 1 and 2, or attachments 1, 3, and 4 of exhibit A of subpart S of part 1951 of this chapter in cases involving nonmonetary default.

* * * * *

Dated: December 31, 2002.

J.B. Penn,

Under Secretary for Farm and Foreign Agricultural Services.

Dated: January 3, 2003.

Thomas C. Dorr,

Under Secretary for Rural Development.