03-27046. Loan Payments and Collections

AGENCIES:

Rural Housing Service, Rural Business-Cooperative Service, Rural Utilities Service, and Farm Service Agency, USDA.

ACTION:

Final rule.

SUMMARY:

The Agencies are revising their internal loan payment and collections regulations to replace the current regulations. This action is necessary since existing regulations are obsolete and do not accurately reflect the current payment and collections methodologies employed by the Agencies. The intended effect is to simplify and update the regulations; update internal control procedures for safeguarding collections; remove references to the Concentration Banking System (CBS) procedures which were eliminated in November 1997; and to add procedures for new electronic payment methods that are currently in use by the Agencies (Preauthorized Debits, FedWire, Customer Initiated Payments, etc.). These amended regulations are to ensure the Agencies' field offices have current guidance on the payment and collection methods available and how to use them.

EFFECTIVE DATE:

October 28, 2003.

FOR FURTHER INFORMATION CONTACT:

Mark Huntley, Accountant, Office of the Deputy Chief Financial Officer, Policy and Internal Review Division, U.S. Department of Agriculture, STOP 33, PO Box 200011, St. Louis, MO 63120, telephone: [phone].

SUPPLEMENTARY INFORMATION:

Classification

This action is not subject to the provisions of Executive Order 12866 since it involves only internal Agency management. This action is not published for prior notice and comment under the Administrative Procedure Act since it involves only internal Agency management and publication for comment is unnecessary and contrary to the public interest.

Programs Affected

The catalog of Federal Domestic Assistance programs impacted by this action are as follows:

10.404—Emergency Loans

10.405—Farm Labor Housing Loans and Grants

10.406—Farm Operating Loans

10.407—Farm Ownership Loans

10.410—Very Low to Moderate Income Housing Loans

10.411—Rural Housing Site Loans and Self-Help Housing Land Development Loans

10.415—Rural Rental Housing Loans

10.417—Very Low-Income Housing Repair Loans and Grants

10.420—Rural Self-Help Housing Technical Assistance

10.421—Indian Tribes and Tribal Corporation Loans

10.427—Rural Rental Assistance Payments

10.760—Water and Waste Disposal Systems for Rural Communities

10.766—Community Facilities Loans and Grants

10.767—Intermediary Relending Program

10.768—Business and Industry Loans

10.770—Water and Waste Disposal Loans and Grants (Section 306C)

10.854—Rural Economic Development Loans and Grants

Intergovernmental Consultation

Programs with Catalog of Federal Domestic Assistance numbers 10.405, 10.407, 10.411, 10.415, 10.420, 10.421, 10.427, 10.760, 10.766, 10.767, 10.768, 10.770, and 10.854 are subject to the provisions of Executive Order 12372 which requires intergovernmental consultation with State and local officials.

Programs with Catalog of Federal Domestic Assistance numbers 10.404, 10.406, 10.410, and 10.417 are excluded from the scope of Executive Order 12372.

Civil Justice Reform

This final rule has been reviewed under Executive Order 12988, Civil Justice Reform. In accordance with this rule: (1) Unless otherwise specifically provided, 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 except as specifically prescribed in the rule; and (3) administrative proceedings of the National Appeals Division (7 CFR part 11) must be exhausted before litigation against the Department is instituted.

Paperwork Reduction Act

The information collection requirements contained in this rule have been approved by the Office of Management and Budget (OMB) under the provisions of 44 U.S.C. chapter 35 and were assigned OMB control number 0575-0184 in accordance with the Paperwork Reduction Act of 1995. No person is required to respond to a collection of information unless it displays a valid OMB control number. This rule does not impose any new information collection requirements from those approved by OMB.

Unfunded Mandates Reform Act

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Pub. L. 104-4, establishes requirements for Federal agencies to assess the effects of their regulatory actions on State, local, and tribal governments and the private sector. Under section 202 of the UMRA, the Agencies generally must prepare a written statement, including a cost-benefit analysis, for proposed and final rules with “Federal mandates” that may result in expenditures to State, local, or tribal governments, in the aggregate, or to the private sector, of $100 million or more in any one year. When such a statement is needed for a rule, section 205 of the UMRA generally requires the agencies to identify and consider a reasonable number of regulatory alternatives and adopt the least costly, more cost-effective, or least burdensome alternative that achieves the objectives of the rule.

This rule contains no Federal mandates (under the regulatory provisions of title II of the UMRA) for State, local, and tribal governments or the private sector. Thus, the rule is not subject to the requirements of section 202 and 205 of the UMRA.

Environmental Impact Statement

This document has been reviewed in accordance with 7 CFR part 1940, subpart G, “Environmental Program.” The Agencies have determined that this final action does not constitute a major Federal action significantly affecting the quality of human environment, and in accordance with the National Environmental Policy Act of 1969, 42 U.S.C. 4321 et seq., an Environmental Impact Statement is not required.

Executive Order 13132, Federalism

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.

Discussion of Final Rule

In November 1997 Rural Development discontinued using the Concentration Banking System (CBS). CBS was a collection system in which Rural Development field offices would deposit loan payments and collections they received in Treasury Limited Accounts (TLA's) at local banks. Daily, the concentrator bank (Mercantile Bank in St. Louis, MO) would sweep all local bank TLA's and deposit the funds with Treasury. Rural Development field offices would send the detailed loan payment information to the Rural Development Finance Office (FO) in St. Louis, MO. The FO would reconcile the detailed loan payment data with the deposit information and credit the borrower accounts for the payment.

In September 1997, Rural Development implemented the Rural Housing Service wholesale lockbox system. The wholesale lockbox significantly reduced collections received in field offices and it was determined that CBS was no longer cost effective to continue operating. In addition, since 1997, Rural Development has expanded its use of electronic collection methods (e.g., Preauthorized Debits, Customer Initiated Payments, FedWire, etc.).

The Farm Service Agency (FSA) payment collection policies are established in internal agency handbooks. While collections under some FSA programs were processed according to 7 CFR 1951, subpart B, prior to the USDA Reorganization Act, FSA no longer utilizes this subpart.

List of Subjects

7 CFR Part 1902

• Accounting
• Banks, banking
• Grant programs—Housing and community development
• Loan programs—Agriculture
• Loan programs—Housing and community development

7 CFR Part 1930

• Accounting
• Administrative practice and procedure
• Grant programs—Housing and community development
• Loan programs—Housing and community development
• Low and moderate income housing
• Reporting and recordkeeping requirements

7 CFR Part 1942

• Community development
• Community facilities
• Loan programs—Housing and community development
• Loan security
• Rural areas
• Waste treatment and disposal—Domestic
• Water supply—Domestic

7 CFR Part 1944

• Farm labor housing
• Grant programs—Housing and community development
• Loan programs—Housing and community development
• Low and moderate income housing—Rental
• Migrant labor
• Mobile homes
• Mortgages
• Nonprofit organizations
• Public housing
• Rent subsidies
• Rural housing
• Subsidies

7 CFR Part 1948

• Business and industry
• Coal
• Community development
• Community facilities
• Energy
• Grant programs—Housing and community development
• Housing
• Nuclear energy
• Planning
• Rural areas
• Transportation

7 CFR Part 1951

• Accounting
• Account servicing
• Credit
• Financial institutions
• Foreclosure
• Government acquired property
• Loan programs—Agriculture
• Loan programs—Housing and community development
• Low and moderate income housing loans—Servicing
• Mortgages
• Reporting requirements
• Rural areas
• Sale of government acquired property
• Surplus government property

7 CFR Part 1955

• Government acquired property
• Government property management
• Sale of government acquired property
• Surplus government property

7 CFR Part 1956

• Accounting
• Loan programs—Agriculture
• Rural areas

7 CFR Part 1962

• Crops
• Government property
• Livestock
• Loan programs—Agriculture
• Rural areas

7 CFR Part 1965

• Administrative practice and procedure

7 CFR Part 1980

• Loan programs—Business and industry—Rural development assistance
• Rural areas

7 CFR Part 2045

• Personnel, volunteers

For the reasons set forth in the preamble, chapter XVIII, title 7, Code of Federal Regulations is amended as follows:

PART 1902—SUPERVISED BANK ACCOUNTS

1. The authority citation for part 1902 revised to read as follows:

Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 7 U.S.C. 6991, et seq.; 42 U.S.C. 1480; Reorganization Plan No. 2 of 1953 (5 U.S.C. App.).

Subpart A—Disbursement of Loan, Grant, and Other Funds

§ 1902.8

[Removed and Reserved]

2. Section 1902.8 is removed and reserved.

Subpart C—[Removed and Reserved]

3. Subpart C of part 1902 consisting of §§ 1902.101 through 1902.150 is removed and reserved.

PART 1930—GENERAL

4. The authority citation for part 1930 continues to read as follows:

Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 16 U.S.C. 1005

Subpart C—Management and Supervision of Multiple Family Housing Borrowers and Grant Recipients

5. In exhibit H the introductory text of paragraph IX is revised to read as follows:

Exhibit H to Subpart C of Part 1930—Interest Credits on Insured Rural Rental Housing and Rural Cooperative Housing Loans

* * * * *

IX Project Payments: With each payment made, the borrower will complete Form RD 1944-29. The agency representative will transmit the payments to the Finance Office.

* * * * *

PART 1942—ASSOCIATIONS

6. The authority citation for part 1942 continues to read as follows:

Authority: 5 U.S.C. 301; 7 U.S.C. 1932; 7 U.S.C. 1989; and 16 U.S.C. 1005.

Subpart A—Community Facility Loans

7. Section 1942.7(d) is revised to read as follows:

§ 1942.7

Loan closing.

* * * * *

(d) Unused funds. Obligated funds planned for project development which remain after all authorized costs have been provided for will be disposed of in accordance with § 1942.17(p)(6) of this subpart.

* * * * *

§ 1942.19

[Amended]

8. Paragraph (h)(6) of section 1942.19 is removed and reserved.

PART 1944—HOUSING

9. The authority citation for part 1944 continues to read as follows:

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

Subpart D—Farm Labor Housing Loan and Grant Policies, Procedures, and Authorizations

§ 1944.175

[Amended]

10. Paragraph (e) of section 1944.175 is removed and reserved.

§ 1944.181

[Amended]

11. Paragraph (b)(3)(ii) of section 1944.181 is removed and reserved.

Subpart I—Self Help Technical Assistance Grants

12. Section 1944.426(a)(1) is revised to read as follows:

§ 1944.426

Grant closeout.

(a) * * *

(1) The grantee will immediately refund to Rural Development any balance of grant funds that are not committed for the payment of authorized expenses.

* * * * *

PART 1948—RURAL DEVELOPMENT

13. The authority citation for part 1948 continues to read as follows:

Authority: 5 U.S.C. 301, 7 U.S.C. 1932 note.

Subpart B—Section 601 Energy Impacted Area Development Assistance Program

14. Section 1948.90(b)(4) is revised to read as follows:

§ 1948.90

Land transfers.

* * * * *

(b) * * *

(4) Proceeds derived from the sale of land acquired or developed through the use of a grant provided under this subpart must be divided between the grantee and Rural Development on a pro rata basis. A grantee may not recover its cost from sale proceeds to the exclusion of Rural Development. The amount to be returned to Rural Development is to be computed by applying the percentage of the Rural Development grant participation in the total cost of the project to the proceeds from the sale.

* * * * *

PART 1951—SERVICING AND COLLECTIONS

15. The authority citation for part 1951 continues to read as follows:

Authority: 5 U.S.C. 301; 7 U.S.C. 1932 Note; 7 U.S.C. 1989; 31 U.S.C. 3716; 42 U.S.C. 1480.

Subpart A—Account Servicing Policies

§ 1951.6

[Removed and Reserved]

16. Section 1951.6 is removed and reserved.

Subpart B—[Removed and Reserved]

17. Subpart B consisting of §§ 1951.51 through 1951.55 is removed and reserved.

Subpart E—Servicing of Community and Direct Business Programs Loans and Grants

18. The introductory text of section 1951.221 is revised to read as follows:

§ 1951.221

Collections, payments and refunds.

Payments and refunds are handled in accordance with the following:

* * * * *

Subpart J—Management and Collection of Nonprogram (NP) Loans

19. The first sentence of section 1951.455(e) is revised to read as follows:

§ 1951.455

NP loan making for Single Family Housing (SFH) and farm property (real and chattel).

* * * * *

(e) Downpayment. A downpayment must be collected at closing. * * *

* * * * *

Subpart K—Predetermined Amortization Schedule System (PASS) Account Servicing

§ 1951.506

[Amended]

20. Paragraphs (b) and (c) of section 1951.506 are removed and reserved.

PART 1955—PROPERTY MANAGEMENT

21. The authority citation for part 1955 continues to read as follows:

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

Subpart B—Management of Property

22. Section 1955.55(e) is revised to read as follows:

§ 1955.55

Taking abandoned real or chattel property into custody and related actions.

* * * * *

(e) Income and costs. Income received from the property will be applied to the borrower's account as an extra payment. Expenditures will be charged to the borrower's account as a recoverable cost.

* * * * *

23. In section 1955.62 the introductory text of paragraph (b)(1) is revised to read as follows:

§ 1955.62

Removal and disposition of nonsecurity personal property from inventory real property.

* * * * *

(b) * * *

(1) If a reasonable amount can likely be realized by the agency from sale of the personal property, it may be sold at public sale. Items under lien will be sold first and the proceeds up to the amount of the lien paid to the lienholders less a pro rata share of the sale expenses. Proceeds from sale of items not under lien and proceeds in excess of the amount due a lienholder will be remitted and applied in the following order:

* * * * *

24. In section 1955.66 the introductory text of paragraph (l) is revised to read as follows:

§ 1955.66

Lease of real property.

* * * * *

(l) Lease income. Lease proceeds will be applied as follows:

* * * * *

Subpart C—Disposal of Inventory Property

25. Section 1955.109(c) is revised to read as follows:

§ 1955.109

Processing and closing (CONACT).

* * * * *

(c) Form of payment. Payments at closing will be in the form of cash, cashier's check, certified check, postal or bank money order, or bank draft made payable to the Agency.

* * * * *

26. Section 1955.117(d) is revised to read as follows:

§ 1955.117

Processing credit sales on program terms (housing).

* * * * *

(d) Downpayment. When a downpayment is made, it will be collected at closing.

* * * * *

27. In section 1955.118 paragraphs (a) and (b)(4) are revised to read as follows:

§ 1955.118

Processing cash sales or MFH credit sales on NP terms.

(a) Cash sales. Cash sales will be closed by the servicing official collecting the purchase price (less any earnest money deposit or bid deposit) and delivering the deed to the purchaser.

(b) * * *

(4) Downpayment. A downpayment of not less than 10 percent of the purchase price is required at closing.

* * * * *

§ 1955.120

[Amended]

28. The last sentence in section 1955.120 is removed.

29. Section 1955.122(e) is revised to read as follows:

§ 1955.122

Method of sale (chattel).

* * * * *

(e) Negotiated sale. Perishable acquired items and crops (except timber) and chattels for which no acceptable bid was received from auction or sealed bid methods may be sold by direct negotiation for the best price obtainable. No public notice is required to negotiate with interested parties including prior bidders. Justification for the use of this method of sale will be documented.

* * * * *

30. Section 1955.123(b) is revised to read as follows:

§ 1955.123

Sale procedures (chattel).

* * * * *

(b) Receipt of payment. Payment will be by cashier's check, certified check, postal or bank money order or personal check (not in excess of $500) made payable to the agency. Cash may be accepted if it is not possible for one of these forms of payment to be used. Third party checks are not acceptable. If full payment is not received at the time of sale, the offer will be documented by Form RD 1955-45 or Form RD 1955-46 where the chattel is sold jointly with real estate by regular sale.

* * * * *

31. Section 1955.130(e)(2) is revised to read as follows:

§ 1955.130

Real estate brokers.

* * * * *

(e) * * *

(2) Offeror default. When a contract is cancelled due to offeror default, the earnest money will be delivered to and retained by the agency as full liquidated damages.

* * * * *

§ 1955.139

[Amended]

32. In section 1955.139 the last sentence in paragraph (a)(2) and the second sentence in paragraph (a)(3)(iv) are removed.

33. The first sentence of Section 1955.147(e) is revised to read as follows:

§ 1955.147

Sealed bid sales.

* * * * *

(e) Failure to close. If a successful bidder fails to perform under the terms of the offer, the bid deposit will be retained as full liquidated damages. * * *

* * * * *

§ 1955.148

[Amended]

34. In Section 1955.148 the last three sentences are removed.

PART 1956—DEBT SETTLEMENT

35. The authority citation for part 1956 continues to read as follows:

Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 31 U.S.C. 3711; 42 U.S.C. 1480.

Subpart B—Debt Settlement-Farm Loan Programs and Multi-Family Housing

§ 1956.85

[Amended]

36. Paragraph (a)(2) of section 1956.85 is removed and reserved.

Subpart C—Debt Settlement—Community and Business Programs

§ 1956.139

[Amended]

37. Paragraph (b) of section 1956.139 is removed and reserved:

§ 1956.143

[Amended]

38. Paragraph (g)(2) of section 1956.143 is removed and reserved.

PART 1962—PERSONAL PROPERTY

39. 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

§ 1962.49

[Amended]

40. Paragraph (e)(3)(ii) of section 1962.49 is removed and reserved.

PART 1965—REAL PROPERTY

41. 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 B—Security Servicing for Multiple Housing Loans

42. Section 1965.61(a) is revised to read as follows:

§ 1965.61

General loan servicing requirements.

(a) Payments. Payments will be handled in accordance with subpart A of part 1951 of this chapter, and subparts D and E of part 1944 of this chapter.

* * * * *

PART 1980—GENERAL

43. The authority citation for part 1980 is revised to read as follows:

Authority: 7 U.S.C. 1989.

Subpart E—Business and Industrial Loan Program

§ 1980.461

[Removed and Reserved]

44. Section 1980.461 is removed and reserved.

PART 2045—GENERAL

45. The authority citation for part 2045 is revised to read as follows:

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

Subpart JJ—Rural Development—Utilization of Gratuitous Services

46. The last sentence of section 2045.1754(c) is revised to read as follows:

§ 2045.1754

Scope of gratuitous services performed.

* * * * *

(c) * * * Such persons, except Construction Inspectors may, when under direct supervision of County Supervisors, act as Collection Officers and be allowed to use receipt books.

Dated: October 16, 2003.

Thomas C. Dorr,

Under Secretary, Rural Development.

Dated: October 10, 2003.

J.B. Penn,

Under Secretary for Farm and Foreign Agricultural Service.