[Federal Register Volume 62, Number 189 (Tuesday, September 30, 1997)]
[Rules and Regulations]
[Pages 51007-51015]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-25934]
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FARM CREDIT ADMINISTRATION
12 CFR Parts 614 and 619
RIN 3052-AB64
Loan Policies and Operations; Definitions; Loan Underwriting
AGENCY: Farm Credit Administration.
ACTION: Final rule.
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SUMMARY: The Farm Credit Administration (FCA), through the FCA Board
(Board), issues a final rule amending its regulations relating to loan
underwriting in response to comments received from the Board's
initiative to reduce regulatory burden and in an effort to streamline
the regulations and set clear minimum regulatory standards where
appropriate. The Board's action eliminates unnecessary regulations,
requires each Farm Credit System (System or FCS) institution to adopt
loan underwriting policies and standards, and makes other changes to
the regulations governing prudent credit administration.
EFFECTIVE DATE: These regulations shall be effective upon the
expiration of 30 days during which either or both Houses of Congress
are in session. Notice of the effective date will be published in the
Federal Register.
FOR FURTHER INFORMATION CONTACT:
John J. Hays, Policy Analyst, Regulation Development Division, Office
of Policy Development and Risk Control, 703) 883-4498, TDD (703) 883-
4444;
or
Joy E. Strickland, Senior Attorney, Regulatory Enforcement Division,
Office of General Counsel, (703) 883-4020, TDD (703) 883-4444.
SUPPLEMENTARY INFORMATION: On April 15, 1996, the Board published
proposed amendments to the regulations relating to loan underwriting,
loan sale and purchase transactions, and the lending authority of
production credit associations (PCAs). The amendments were proposed
largely in furtherance of comments received on the Board's request for
public comment on the appropriateness of requirements that the FCA
regulations impose on the System. See 58 FR 34003 (June 23, 1993). The
FCA has addressed many of those comments in previous rulemakings. The
proposed amendments addressed the remaining regulatory burden issues
that relate to loan underwriting and the independent credit judgment
rule for loan sale and purchase transactions through agents. In
addition to responding to the regulatory burden comments, the FCA also
proposed other amendments to refocus regulatory requirements for loan
underwriting, make the regulations more understandable and useful to
the reader, set minimum regulatory standards, and make conforming
amendments.
The FCA received a total of 20 comments on the proposed amendments.
Seventeen (17) Farm Credit institutions and the Farm Credit Council
(FCC) submitted comments. The FCA also received comments from the
Appraisal Subcommittee of the Federal Financial Institutions
Examination Council, and the American Society of Farm Managers and
Rural Appraisers, Inc. (collectively, appraisal groups). In general,
all of the System commenters expressed support for the proposed
regulation and its goal of reducing regulatory burden. Most of the
System commenters also supported FCA's proposals to streamline the
regulations governing the bank/association relationship and place more
decision-making authority and accountability with direct lender
associations. One association commented favorably on the entire
proposal and suggested no changes. Other System commenters stated that
although the proposal is a large step toward reducing regulatory
burden, it did not reduce enough burden in certain areas. Also, some
banks and associations requested clarification of the proposed new
responsibilities of associations and the remaining areas of bank
direction and supervision of associations. The appraisal groups
commented that although they understood the FCA's reasons for the
proposed changes to Secs. 614.4245 and 614.4250, the changes were
inconsistent with the Uniform Standards of Professional Appraisal
Practice (USPAP). The appraisal groups suggested alternatives for the
FCA to achieve its objectives and ensure that appraisals remain in
compliance with USPAP.
Specific comments and changes to the proposed amendments will be
addressed in the section-by-section analysis of the comments that
follows. Except for changes noted in the section-by-section analysis,
the FCA adopts the proposed amendments as final. Specific comments
relating to proposed Sec. 614.4200(b), which contained requirements for
obtaining borrower financial statements, will be addressed in the
discussion of Subparts C and D--Bank/Association Lending Relationship
and General Loan Policies for Banks and Associations. In order to
provide readers with a guideline for the amended regulations, the
following is a list of changes this final rule will make to parts 614
and 619:
Subpart A--Lending Authorities
Secs. 614.4000 through 614.4050--Revised.
Subpart C--Bank/Association Lending Relationship
Secs. 614.4100, 614.4110, and 614.4130--No changes made.
Sec. 614.4120--Revised.
Secs. 614.4135 through 614.4145--Deleted.
Subpart D--General Loan Policies for Banks and Associations
Sec. 614.4150--Revised.
Sec. 614.4160--Deleted.
Sec. 614.4165--Revised.
Subpart E--Loan Terms and Conditions
Sec. 614.4200--Revised.
Secs. 614.4210 through 614.4230--Deleted.
Sec. 614.4231--Revised.
Secs. 614.4232 and 614.4233--No changes made.
Subpart F--Collateral Evaluation Requirements
Sec. 614.4245--Revised.
[[Page 51008]]
Subpart H--Loan Purchases and Sales
Sec. 614.4325--Revised.
Subpart J--Lending Limits
Sec. Sec. 614.4355 and 614.4358--Revised.
Subpart O--Banks for Cooperatives Financing International Trade
Sec. 614.4810--Revised.
Part 619--Definitions
Secs. 619.9165 and 619.9290--Removed.
I. Subpart A--Lending Authorities
The FCA received 12 comments on proposed Sec. 614.4040, which
codifies guidance that the FCA has provided to institutions regarding
loans made by PCAs that have amortization schedules longer than 7
years. The commenters were evenly split, with 6 commenters expressing
support for the proposal and 6 commenters objecting to the proposal.
The comments received in support of the proposal generally stated that
the provisions are appropriate for PCA lending and should not be
broadened or modified. Two PCA commenters noted that the proposal was
more than adequate to offer direction to direct lenders.
All except one of the commenters requesting modification of the
proposal generally believe that it is too restrictive. They object to
the proposed 15-year limitation on amortization periods for PCA loans
because they assert that the statutory 15-year limit applies only to
the term of the loan, not the loan amortization. Those commenters also
stated that the prohibition against a PCA making loans solely to
acquire real estate is without statutory basis and inconsistent with a
PCA's ability to take ``owned'' real estate as collateral. They
asserted their belief that the loan purpose restriction was implemented
only to minimize competition between System institutions. These
commenters suggested the following changes: (1) Apply the 15-year
amortization restriction only to loans with 7 to 10-year terms; (2)
delete any loan purpose restriction; and (3) clarify that the
authorizing policy is the bank's not the association's. One PCA
expressed agreement with the comments regarding the 15-year and loan
purpose restrictions, but differed from the foregoing comments by
urging that the authority for amortizing these loans should be through
association policy rather than bank policy and control. One jointly
managed PCA/Federal land bank association (FLBA) agreed with this PCA
commenter and suggested that bank approval should not be required for
association policies to exercise these authorities and that association
board policies on this issue need only comply with general policies and
standards of the funding bank.
A bank and a FLBA requested clarification of four issues regarding
the loan purpose restriction under Sec. 614.4040(a)(2): (1) Is the
purpose of the loan limited only to financing of facilities; (2) if
real estate is purchased along with a facility, must the real estate be
integral to the operation or can the real estate be separate,
unimproved land, such as two parcels that the seller will only sell
together; (3) if the real estate can be separate, is there a limit on
the value of the real estate versus the value of the facility; and (4)
can a PCA make a loan solely for the purchase of real estate if the PCA
has another production loan to the borrower?
With regard to the comment that Congress intended the 15-year
limitation to apply only to loan term, rather than loan amortization,
the FCA agrees, in part, with the commenters' interpretation of the
Farm Credit Act of 1971, as amended (Act), and its legislative history.
Under the Act, Federal land credit associations (FLCAs) have the
authority to make loans with terms of greater than 15 years, while PCAs
are limited to loan terms of less than 15 years. Although the 15-year
limitation technically applies only to a loan's term, rather than a
loan's amortization, 15 years is the outward limit of PCA loan-making
authority approved by Congress. The FCA concludes that the 15-year
limitation is consistent with the differing lending authorities of PCAs
and FLCAs and recognizes the importance of the Act's distinction
between long-term real estate lenders and short-and intermediate-term
lenders. Based on the outward limits placed on loan term and the
differences between PCA and FLCA lending authorities, the FCA continues
to believe that the 15-year limitation is appropriate and adopts the
limitation and the loan purpose restrictions as proposed. The FCA
clarifies that the loan purpose restriction only applies to loans
amortized for longer than the maximum loan term otherwise authorized
for PCAs in Sec. 614.4040(a)(1).
Since there is a possibility of competition between short- and
long-term lenders in some areas if PCAs amortize loans over periods
longer than their maximum authorized loan terms, the FCA believes that
System borrowers would be best served if the institutions affected by
this issue develop the policies to address it. Because both long- and
short-term lenders are represented at the bank level, the bank, through
its association directors and stockholders, is in the best position to
develop a policy that appropriately considers the needs of the
borrowers and the relationships and conditions existing in each
district. Therefore, the FCA adopts as final the requirement that
association authority to amortize loans under Sec. 614.4040(a)(2) is
pursuant to funding bank approval. The FCA also notes that, pursuant to
section 1.10 of the Act, bank approval continues to be required for PCA
authority to make loans with terms of more than 7, but not more than 10
years.
In response to the questions raised regarding the loan purpose
restriction in Sec. 614.4040(a)(2), the FCA concludes that the
amortization authority in Sec. 614.4040(a)(2) can be used for any
authorized purpose for PCA lending, with the exception that it may not
be used solely to finance the acquisition of unimproved real estate.
Although the restriction excludes loans for the purpose of purchasing
unimproved real estate (the real estate will be considered unimproved
even though it may include minimal improvements, such as fencing), the
authority in Sec. 614.4040(a)(2) clearly provides for the acquisition
of production facilities and the land upon which the facilities are
located. There are many types of loans that fall between these two
boundaries, including those addressed in the bank's questions. The FCA
believes that the institutions involved should establish reasonable
standards for judging compliance with the loan purpose restrictions for
the same reasons that it believes that authority for the amortization
period should be addressed in bank policy, i.e., it allows the
amortization authority to be best tailored to the needs of the
borrowers and the relationships between the institutions in each
district. Therefore each PCA's policy, subject to bank approval, for
implementing the authority in Sec. 614.4040(a)(2) should clearly state
under what circumstances such financing will occur. In response to the
bank's fourth question, however, PCAs are not authorized to finance the
acquisition of unimproved real estate under this authority solely
because they also have outstanding production or equipment loans to the
borrower.
Commenters also suggested two technical changes to
Sec. 614.4040(a)(2): (1) Change the point at which the underwriting
criteria must be met for refinancing from ``maturity'' to the time of
``refinancing'' because a loan may be refinanced prior to its maturity
date; and (2) change the term ``real estate'' to ``land'' to more
clearly authorize the financing of buildings. The FCA agrees that the
term ``refinance'' is more appropriate than ``maturity'' and has
[[Page 51009]]
amended the regulation accordingly. A borrower may wish to refinance a
loan prior to the maturity date, and any refinancing cannot extend the
ultimate repayment of the loan more than 15 years from the date of the
original loan. The FCA believes that the clarifications provided in the
previous paragraph should clear up any doubt that this authority may be
used to finance buildings and other facilities. Therefore, the FCA
adopts in final the term ``real estate'' as proposed.
The FCA also received 2 comments stating that the amended PCA
amortization authority could result in agricultural credit associations
(ACAs) having less authority to make short-and intermediate-term loans
than PCAs. Although the FCA agrees with the commenters that ACAs should
have at least the same authorities as PCAs, applying the provisions of
Sec. 614.4040(a)(2) to ACAs would have the unintended result of
unnecessarily restricting ACAs' authority. Since there are no
limitations in the Act on the length of amortizations for loans and the
existing requirement in Sec. 614.4220(c) that short-and intermediate-
term loans with maturities in excess of 7 years must be amortized over
the term of the loan will be deleted by this rule, there will be no
restrictions on amortizations of loans made by an ACA. As stated above,
the restriction on a PCA's amortization authority derives from the
Act's distinction between long-and short-term lenders. Because an ACA
may make short-, intermediate-, and long-term loans, there is no need
to restrict amortizations for ACA loans. Therefore, the FCA believes
that applying Sec. 614.4040(a)(2) would unnecessarily restrict ACA
lending and is not making the change requested.
II. Subparts C and D--Bank/Association Lending Relationship and General
Loan Policies for Banks and Associations
The FCA proposed to clarify the role of Farm Credit Banks (FCBs)
and agricultural credit banks (ACBs) in the supervision of
associations' credit operations. The FCA believes that autonomy in
association operations promotes accountability in many areas, including
prudent lending operations. Also, the FCA believes that each direct
lender, through its board of directors, should adopt and follow its own
policies and procedures for operations. As noted previously, most of
the commenters were in support of this change and philosophy. The final
rule deletes existing Secs. 614.4135, 614.4140, and 614.4145 as
proposed. However, in taking this action, the FCA recognizes the
continuing importance of general bank oversight of association credit
activities that may have a material impact on the bank and on the
association's ability to perform on its direct loan(s) from the bank.
The FCA proposed a new regulation, Sec. 614.4150, to address credit
supervision by each institution's board of directors and to require
that loan policies and underwriting standards must be adopted by each
direct lending institution. The FCA received six comment letters on
proposed Sec. 614.4150. The commenters sought clarification of the term
``measurable standards'' in Sec. 614.4150(g) and stated that loan
underwriting standards should not include specific ratios, such as debt
coverage and liquidity, on which to base each loan decision. The
commenters also felt that while there is support for measurable
standards, documenting each loan not in compliance with each standard
(Sec. 614.4150(i)) is unduly burdensome. They contend that standards
should be applicable only to the primary portion of the loan portfolio
or a majority of the industry or market that the lender finances and
that the focus should be on documenting those loans in significant
noncompliance with the standards as a whole. The FCC also suggested
alternative language for Sec. 614.4150(i) to encompass this philosophy.
The commenters are concerned that Sec. 614.4150(i) requires that a
single set of standards be applicable to all loans. In response, the
FCA does not intend to require institutions to establish specific
ratios that necessarily apply to all loans. It may be prudent to apply
distinct ratios to differing loans. In developing standards, each
direct lender is expected to identify the similar types of loans in
their portfolios, based on such items as similar operations, sources of
repayment, collateral, and economic or geographic characteristics, and
to establish loan underwriting standards tailored to address the
strengths and weaknesses of each type of loan and the institution's
ability to absorb the risk posed by such loans. Such standards should
include ratios, measures, scoring, and other specific credit evaluation
tools appropriate to the portion of the portfolio being addressed and
the institution's risk-bearing capacity. In addition to specific
standards, general lending guidelines that have applicability to
different types of loans can be useful in identifying risk and may be
necessary for unusual loans that do not fit within any of the lenders'
primary lending areas. A number of things will affect the level of
detail in standards, such as the importance of loan type to the
institution's portfolio and the level of risk in the type of loan, and
the regulations do not prescribe a set formula.
Regarding documentation of noncompliance with the loan underwriting
standards, the regulation requires that whenever a loan does not meet
any of the standards established for that type of loan, the reason for
making an exception to the standards and accepting the loan must be
documented. The FCA believes that this documentation is critical on an
individual loan basis and any burden that arises from this
documentation is outweighed by the importance of the documentation to
sound credit administration. The amount of loans that may require
documentation of noncompliance and the detail of such documentation
will vary according to the standards developed by each institution, and
any burden of such documentation can be reduced by well-tailored,
specific standards. Therefore, the FCA believes the requirements of
Sec. 614.4150 (g) and (i) are appropriate and adopts them as proposed
with minor syntactical changes to paragraph (g).
The commenters also noted that proposed Sec. 614.4150(h) does not
entirely serve the purpose of existing Sec. 614.4160(e) because a
loan's structure should be determined not only by the loan's purpose,
as required by Sec. 614.4150(h), but also by the terms, conditions, and
collateral, which are referenced in existing Sec. 614.4160(e). The FCA
has revised paragraph (h) to state that loan terms and conditions must
be appropriate for the loan. Use of the term ``loan'' includes the
requirement that the terms and conditions must be appropriate for the
purpose of the loan and any other relevant criteria of the loan, such
as collateral. The commenters also requested clarification that
underwriting standards do not have to be included in the policies
adopted by the institutions' boards of directors pursuant to
Sec. 614.4150. The FCA clarifies that loan underwriting standards must
be adopted pursuant to board policies but are not required to be
contained in board policies.
An FCB commenter asserted that the regulations should not be
interpreted to prohibit banks from establishing ``bright line'' credit
standards for associations in general financing agreements (GFAs).
Further, the bank asserts that as long as the FCA approves GFAs, it can
review any ``bright line'' standards for appropriateness through that
avenue. If, on the other hand, the FCA removes the banks' ``regulatory
authority'' to establish credit standards for direct lenders, the FCA
should eliminate its
[[Page 51010]]
approval of GFAs and make clear that the GFAs can include bank approval
of association credit standards and/or compliance with bank collateral
requirements. The FCC requested clarification about the apparent
conflict between the proposal and section 2.4(a) of the Act, which
appears to say that PCAs are required to make loans under standards
approved by the bank. Association commenters requested clarification
that banks do not have to approve association lending policies.
In response to the comments regarding what should be included in
GFAs, it is the FCA's general belief that banks can establish credit
criteria for associations as appropriate to reflect the risks in the
direct loans. This issue will be addressed in revisions to the
regulations governing GFAs 1. The provisions of this
regulation reflect the FCA's views that detailed underwriting standards
for direct lender loans are the responsibility of that lender.
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\1\ The FCA published proposed amendments to the regulations
governing GFAs on March 24, 1997 (62 FR 13842).
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Some commenters questioned whether Sec. 614.4150 conflicts with the
provisions of section 1.5(17) of the Act. Section 1.5(17) of the Act
authorizes banks to adopt standards for lending. Nothing in the revised
regulation prohibits the banks from continuing to adopt standards for
making direct loans to direct lender associations and for FLBA lending.
Some comments also questioned whether Sec. 614.4150 is consistent with
section 2.4(a) of the Act. In response, the banks will continue to
develop standards appropriate to ensure repayment of the direct loan,
which in turn helps ensure the safety and soundness of all of the
institutions in the district. The FCA believes that section 2.4(a)
neither requires that banks prescribe detailed association lending
standards nor prohibits associations from adopting standards to govern
their own lending operations. Therefore, the FCA believes that
Sec. 614.4150 is consistent with the Act.
The FCA received comments from the FCC and nine institutions
regarding the proposed requirements for obtaining borrower financial
statements in Sec. 614.4200(b). Most of the commenters urged deleting
all of proposed paragraph (b) except the first sentence. The commenters
strongly believe that even though the financial statement provision was
a significant reduction over existing requirements, the proposal did
not go far enough. They asserted that the proposal was inconsistent
with the FCA regulatory philosophy statement, the FCA Board Chairman's
remarks in the FCA's 1995 annual report, Congressional intent in the
Act, proposed Sec. 614.4150, and the FCA's role as an arms-length
regulator. They also asserted that the proposal was not necessary for
safety and soundness. According to the commenters, this provision of
the regulation micro-manages this one aspect of lending operations,
which is in stark contrast with the overall objective of the proposed
regulation to put loan underwriting in the hands of direct lenders.
Commenters asserted that the thresholds for obtaining financial
statements should not be set by regulation. Instead the standards
should be set by each direct lender institution according to the
institution's financial position, capital strength, risk-bearing
ability, credit quality, portfolio, and operations of the individual
institutions and borrowers (as applicable). The commenters contend that
in this way safety and soundness will be better measured because
standards will be developed on an institution-specific basis.
In addition, the commenters noted that a regulation requiring
institutions to request financial statements at loan origination for
all loans above a set threshold limits the institutions' ability to use
credit scoring with creditworthy customers. They urged that a
borrower's total lending relationship, if quite large, should not
prevent the use of credit scoring on small transactions. Also,
obtaining financial statements at each material servicing action is
vague and could be costly to the System, especially where actions such
as release of collateral pose no risk to the lender. The commenters
also asserted that requesting financial statements can cause problems
in enforcement. They stated that in their experience, very few
borrowers respond to requests, requiring considerable time and money on
the institution's part to obtain the statements, and that it has been
especially difficult to enforce a financial statement submission
requirement if a borrower meets all other loan obligations. Finally,
the commenters stated that the requirement can needlessly drive away
good borrowers and create a competitive disadvantage.
One commenter suggested that if the FCA maintains a requirement
regarding financial statements, the requirement should only apply to
adversely classified loans above $100,000. Another stated that if the
requirement is maintained, ``material servicing action'' should be
changed to ``any servicing action that materially increases the
borrower's access to credit, reduces the institution's collateral
protection, or otherwise materially increases the institution's risk
position.'' Also, the threshold should be changed to $250,000. This
commenter also urged changing ``less than acceptable'' to
``Substandard, Doubtful, and Loss.'' Finally, one PCA commenter
supported the proposal and believes that the requirements for financial
statements are appropriate.
After careful consideration of the issues surrounding borrower
financial statements and the comments received on the proposed
regulation, the FCA concludes that requiring each direct lender to
develop standards for obtaining financial statements and other
financial information is appropriate. The FCA does not adopt proposed
Sec. 614.4200(b) and, instead, incorporates the substance of the first
sentence of this paragraph into the loan underwriting standards
required by Sec. 614.4150. This relocation reflects the decision to
treat this issue as a loan underwriting standard rather than as loan
terms and conditions. Section 614.4150(a) now requires that an
institution's policies and procedures must prescribe the minimum
supporting credit and financial information necessary and the frequency
for collection of such information.
The final regulation requires that each institution include in its
policies and procedures how and when to obtain and use financial
information, including financial statements, to determine
creditworthiness for repayment of loans. The policies must be specific
as to when collection of items such as balance sheets, income
statements, and statements of cashflows will be required and must
address the times for their collection, such as at loan inception, when
taking servicing actions, and periodically during the term of the loan.
The requirements for setting parameters of when to obtain and use
financial information must take into consideration basic criteria
including, but not limited to, loan size, loan type, loan
classification, frequency of payment, source of repayment, applicant's
operation, and capital position and risk bearing capacity of the
institution. The FCA will evaluate and determine the appropriateness of
each institution's policies and procedures on lending practices,
including collection of financial information, during the examination
process.
As noted in the preamble to the proposed regulations, there are no
industrywide standards for the size or complexity of loans warranting
current and complete financial information. However, prudent credit
practices dictate that risk be assessed in each
[[Page 51011]]
loan. The FCA continues to believe that the best method for assessing
risk in certain loans is through analysis of items such as a balance
sheet and income statement and considers the absence of information
necessary to document loan performance expectations to be an unsafe and
unsound lending practice. The FCA also notes that the approach for
addressing the collection and use of financial statements in credit
analysis in this final rule is consistent with the approach taken by
other Federal financial institution regulatory agencies.
Finally, the FCA notes the commenters' concerns regarding potential
reluctance of some borrowers to submit financial statements and
requiring them to do so. However, the FCA believes that for loans where
prudent lending dictates obtaining and evaluating financial statements,
the safety and soundness benefits to the institution outweigh the
potential negative reactions of borrowers. Thus, adequate controls for
enforcing institution policies regarding obtaining financial statements
are expected with implementation of this regulation.
Other than the changes previously noted to paragraphs (a), (h), and
(i), the FCA adopts Sec. 614.4150 as proposed. The FCA also notes that
in instances where direct lending authority has not been transferred to
the FLBAs, the banks must develop lending policies and standards that
all FLBAs within their respective districts must follow in making
credit decisions for the bank. Additionally, in certain circumstances
where loss exposure accrues to individual FLBAs through loss-sharing
agreements with the FCB, loan policies and standards may be needed by
FLBAs to augment and supplement those established by their supervisory
banks.
The FCA received three comments on proposed Sec. 614.4165, which
requires that bank lending policies give special consideration to the
credit needs of young, beginning, and small farmers, ranchers, and
producers or harvesters of aquatic products. The commenters recommended
revising existing paragraph (e) to place the responsibilities for
grouping specialized enterprises according to risk with the direct
lender, whether bank or association. The FCA agrees with the comment
and has revised existing paragraph (e) (now redesignated as paragraph
(c)) to place the responsibility for grouping specialized enterprises
with direct lenders, rather than with the banks, consistent with other
changes in this final rule. Commenters were also concerned that the
proposed changes in the regulation will result in additional regulatory
burden by increasing reporting requirements. They requested
clarification of narrative reporting requirements, asked whether
definitions will be in call reports, and asked how the changes will
reflect the requirements for special enterprises. In response to the
commenters, the FCA clarifies that the reporting requirements, which
are statutory, will not change as a result of the final amendments to
Sec. 614.4165. The amendments merely eliminate the duplication and
inconsistencies that exist between the call reports and regulations.
Also, necessary definitions will continue to be included in the call
reports as they are now and may be modified as the young, beginning,
and small farmer lending environment changes. Therefore, other than the
changes noted to redesignated paragraph (c), the amendments to
Sec. 614.4165 are adopted as proposed.
III. Subpart E--Loan Terms and Conditions
The FCA received two comments on proposed Sec. 614.4200(a)(1). The
commenters suggested that the FCA change the language to refer solely
to a ``written document or documents,'' because loan terms and
conditions may be set forth in more than one document. The FCA
recognizes that terms and conditions may be included in more than one
document and to alleviate any confusion, amends Sec. 614.4200(a)(1) to
refer to a ``written document or documents.'' However, the FCA
continues to list sample documents in the regulation and reiterates
that the list is illustrative only, and does not require that terms and
conditions be set forth in any particular written document.
The FCA also received three comments on Sec. 614.4200(c)(1)
regarding the security requirements for long-term real estate loans. An
ACA commented that the proposed requirement that collateral taken to
secure long-term real estate mortgages must consist primarily of
agricultural real estate limits a System institution's ability to serve
diversified agriculture and creditworthy customers. It asserted that
properties in metropolitan areas, such as nurseries and properties
purchased for the purpose of farming in the future, have high non-
agricultural or commercial values, often over the agricultural value of
the property. An FCB commenter supported the concept of the proposed
amendment but stated that rather than focusing on the value of the
collateral, the amount of agricultural collateral required should be
based on the amount of the loan. The bank suggests that a better
approach to preserve the rural focus of System lending is to require
that the amount of money that may be loaned on the non-agricultural
collateral cannot exceed the amount that could be loaned on the
agricultural collateral. Finally, the commenter suggested that the FCA
add ``buildings or improvements thereto'' after ``agricultural land''
because such improvements add value to the land.
The FCA believes that the requirement that the primary collateral
must be more than 50 percent agricultural or rural land is consistent
with the mandate in section 1.7(a)(1) of the Act that FCS institutions
make real estate mortgage loans in rural areas. The FCA also recognizes
and supports the position that lenders should take the maximum
collateral possible and appropriate to ensure safe and sound lending.
In order to clarify Sec. 614.4200(b)(1), the FCA is specifying in the
regulation that the collateral taken to meet the loan-to-value
limitation in Sec. 614.4200(b)(1) must be primarily agricultural or
rural property. If collateral is available in addition to the
collateral taken to meet the loan-to-value requirement, the lender can,
and is strongly encouraged to, take any additional collateral that
appropriately secures the loan. There is no requirement that this
additional collateral be agricultural or rural property. In response to
the commenters' questions, if the value of the non-agricultural or non-
rural property taken as additional collateral is greater than the value
of the collateral taken to meet the loan-to-value limitation, the
excess value of such additional collateral will not result in a
violation of this section.
Regarding the suggestion to add the words ``buildings and
improvements'' after ``agricultural land,'' the FCA interprets the term
``agricultural land'' to include any buildings and improvements that
have been made to the land and modifies proposed Sec. 614.4200(c)(1)
(now paragraph (b)(1)) to reference ``agricultural land and
improvements made thereto.'' Such improvements are normally considered
in establishing the value of the land for collateral purposes.
The FCA received a comment that institutions should have the
authority to take a second lien on property serving as primary
collateral to meet the loan-to-value ratio for agricultural loans, as
long as the lender also holds the first lien on the property. Similar
authority was proposed in Sec. 614.4200(c)(4) for rural home loans, and
the commenter stated that it should apply to agricultural loans as
well. According to the commenter, having a second lien on property
while already holding a first
[[Page 51012]]
lien to collateralize another loan results in the same level of
security for the lender as having only a first lien position in another
piece of property. Also, the commenter stated that the security
requirements in the Act are the same for both rural home loans and
agricultural loans. The FCA agrees with the commenters that the first
lien loan security requirements in the Act are the same for all real
estate mortgage loans. Therefore, the FCA amends Sec. 614.4200(b)(1) to
authorize lenders to take a second lien interest in real property if
the lender already holds a first lien interest in the property, because
the effective result of both liens is a first lien on the property.
Except for this change, the clarification of agricultural land, and the
changes previously discussed regarding relocating requirements for
collection of financial information to Sec. 614.4150 (and the
redesignation of paragraphs as a result), Sec. 614.4200 is adopted as
proposed.
IV. Subpart F--Collateral Evaluation Requirements
The FCA received comments from two appraisal groups and four System
institution commenters regarding proposed modifications to
Secs. 614.4245 and 614.4250. The appraisal groups concurred that there
is a need to simplify the appraisal process in low-risk, small loan
programs, but thought that the amendments proposed were not the best
way to accomplish the simplification. The appraisal groups suggested
that the USPAP contains sufficient flexibility to meet the collateral
evaluation needs of small loan programs. They further suggested that if
the use of limited appraisals under USPAP rule 1 and summary and
restricted reports under rule 2 are not sufficient, the FCA could
specify appropriate additional departures in regulations, which would
allow appraisers to use the USPAP jurisdictional exception.
Since the publication of the collateral evaluation regulations in
1995, the FCA has received several requests to review those
regulations, because institutions have asserted that certain provisions
are potentially burdensome. The FCA proposed amendments to
Secs. 614.4245 and 614.4250 in an attempt to address those concerns.
After reviewing the comments on the proposed amendments and
reconsidering the requirements of the regulations and comments received
on the collateral evaluation regulation subsequent to publication, the
FCA has decided to withdraw the majority of the proposed amendments to
Secs. 614.4245 and 614.4250 and modify others.
The FCA believes that the departure provisions of USPAP are
sufficient to meet the needs of System institutions in their small loan
programs and encourages institutions to follow those provisions in
developing small loan programs. Once those provisions are implemented,
the FCA will consider whether modifications to the regulations are
necessary to create a jurisdictional exception.2 The FCA
also welcomes institutions to contact the FCA for guidance in using the
USPAP departure provisions in small loan programs.
---------------------------------------------------------------------------
\2\ A jurisdictional exception is intended to provide a saving
or severability clause intended to preserve the balance of USPAP if
one or more of the parts of USPAP are determined to be contrary to
the law or public policy of a jurisdiction. FCA would have to
establish a jurisdictional exception by regulation.
---------------------------------------------------------------------------
The FCA received comments from System institutions to withdraw the
$100,000 loan size limitation on small loan programs referenced in the
proposed amendment to Sec. 614.4245 and provide more flexibility for
small real estate loans and loans for the purchase of new equipment and
vehicles. The FCA agrees with the commenters that a $100,000 blanket
limitation for all small loan programs is not appropriate. Regarding
added flexibility, the FCA believes that the institutions can make use
of the USPAP provisions mentioned above for both small real estate
loans and loans for the purchase of new equipment and vehicles and that
changes are not necessary. Therefore, the FCA withdraws the proposed
amendments to Sec. 614.4250. The FCA adopts as final the proposed
amendments to Sec. 614.4245(d), except that the word ``modified,'' the
reference to Sec. 614.4250(b), and the limitation that small loan
programs consist of loans of $100,000 or less are removed and the term
``minimum information program'' is added in place of small loan
program. With regard to these changes, the FCA notes that institutions
with minimum information programs must set the parameters of those
programs in their policies and loan underwriting standards. Such
parameters should include, but are not necessarily limited to,
portfolio limitations, maximum loan size, collateral requirements, and
information required for documentation of repayment capacity.
V. Subpart H--Loan Purchases and Sales
The FCA received three comments, two from associations and one from
the FCC, regarding the proposed restrictions in Sec. 614.4325 on the
funding bank serving as an agent for an association in purchasing
loans. The commenters stated that restricting the funding bank from
acting as an association's agent limits the System's potential for
cooperating on a regional or national basis to serve rural America.
They offered trade credit projects and other situations in which the
FCA has said that the use of credit scoring is appropriate as examples
of projects that would be impeded if the funding bank were prohibited
from serving as an association's agent. The commenters also noted that
the restriction is inconsistent with the FCA's recognition of direct
lender associations' autonomy and responsibility for their own lending
operations. Further, it is the commenters' belief that there are
different relationships between banks and associations in different
districts, and the FCA should not impinge on those relationships by
regulation. Finally, the commenters suggested that if the FCA is
unwilling to remove the restriction entirely, the FCA should adopt the
position that the funding bank can be an association's agent, but the
association has the authority to terminate the agency relationship with
a 90-day notice to the bank.
In response to the commenters, the FCA notes that the restriction
on a funding bank serving as an association's agent may appear
inconsistent with the philosophy the FCA has adopted in these loan
underwriting regulations that associations adopt their own lending
standards and oversee their lending operations. However, the
relationship between a funding bank and its associations can result in
unequal bargaining positions between banks and associations and create
conflicts with an association's ability to hold its agent, the funding
bank, responsible for acting in the association's best interest. Thus,
notwithstanding potential inconsistencies with association autonomy,
the FCA believes it is necessary to take steps to minimize any damages
caused by these conflicts. As suggested by the commenters, one way to
minimize problems is to require institutions to include in the agency
agreement a provision authorizing an association to terminate the
agreement with notice to the funding bank. The FCA agrees with the
commenters, but believes that termination alone would not be sufficient
to remedy the damages caused by a bank's failure to act appropriately
if an association has purchased loans prior to terminating the agency
agreement. As a result, the FCA withdraws the proposed prohibition in
Sec. 614.4325 against a funding bank serving as an association's agent.
The final regulation contains a provision for termination of the agency
agreement
[[Page 51013]]
with no more than a 60-day notice to the bank, and in addition,
requires a provision in the agreement that the bank would be required
to purchase from the association any loans that the association, in its
sole discretion, determines do not comply with the terms of the agency
agreement or the association's loan underwriting standards. The added
provision will provide a remedy to an association injured by a bank's
breach of the agency agreement and minimize any possible effect of an
unequal bargaining position between a bank and an association. In
addition, although the commenters suggested 90 days, the FCA believes
that a shorter time period for the notice provides greater flexibility
for an association to act in situations in which the association
believes that the bank may not be acting in its interest. Further, 60
days should give banks sufficient notice to make any arrangements
necessary as result of termination of the agency agreement. In
addition, the parties may, by mutual agreement, specify a notice period
of less than 60 days. Other than withdrawing the funding bank
restriction and adding the termination and damages provisions, the FCA
adopts the amendments to subpart H as proposed.
Finally, except where previously noted in this supplementary
information, the proposed amendments, including the many conforming
amendments within subparts A, C, H, J, and Q of part 614 and in part
619, are adopted as final without change.
List of Subjects
12 CFR Part 614
Agriculture, Banks, banking, Flood insurance, Foreign trade,
Reporting and recordkeeping requirements, Rural areas.
12 CFR Part 619
Agriculture, Banks, Banking, Rural areas.
For the reasons stated in the preamble, parts 614 and 619 of
chapter VI, title 12 of the Code of Federal Regulations are amended to
read as follows:
PART 614--LOAN POLICIES AND OPERATIONS
1. The authority citation for part 614 continues to read as
follows:
Authority: 42 U.S.C. 4012a, 4104a, 4101b, 4106, and 4128; Secs.
1.3, 1.5, 1.6, 1.7, 1.9, 1.10, 2.0, 2.2, 2.3, 2.4, 2.10, 2.12, 2.13,
2.15, 3.0, 3.1, 3.3, 3.7, 3.8, 3.10, 3.20, 3.28, 4.12, 4.12A, 4.13,
4.13B, 4.14, 4.14A, 4.14C, 4.14D, 4.14E. 4.18, 4.18A, 4.19, 4.36,
4.37, 5.9, 5.10, 5.17, 7.0, 7.2, 7.6, 7.7, 7.8, 7.12, 7.13, 8.0, 8.5
of the Farm Credit Act (12 U.S.C. 2011, 2013, 2014, 2015, 2017,
2018, 2019, 2071, 2073, 2074, 2075, 2091, 2093, 2094, 2096, 2121,
2122, 2124, 2128, 2129, 2131, 2141, 2149, 2183, 2184, 2199, 2201,
2202, 2202a, 2202c, 2202d, 2202e, 2206, 2206a, 2207, 2219a, 2219b,
2243, 2244, 2252, 2279a, 2279a-2, 2279b, 2279b-1, 2279b-2, 2279f,
2279f-1, 2279aa, 2279aa-5); sec. 413 of Pub. L. 100-233, 101 Stat.
1568, 1639.
Subpart A--Lending Authorities
2. Section 614.4000 is amended by removing the words ``agricultural
credit association of a Federal land credit association'' and adding in
its place, the words ``agricultural credit association or a Federal
land credit association'' in the introductory text of paragraph (f),
and revising paragraph (a) to read as follows:
Sec. 614.4000 Farm Credit Banks.
(a) Long-term real estate lending. Except to the extent such
authorities are transferred pursuant to section 7.6 of the Act, Farm
Credit Banks are authorized, subject to the requirements in
Sec. 614.4200 of this part, to make real estate mortgage loans with
maturities of not less than 5 years nor more than 40 years and
continuing commitments to make such loans.
* * * * *
3. Section 614.4010 is amended by removing the reference
``Sec. 614.4230'' and adding in its place, the reference
``Sec. 614.4200'' in paragraphs (d)(1) and (d)(2); and revising
paragraph (a) to read as follows:
Sec. 614.4010 Agricultural credit banks.
(a) Long-term real estate lending. Except to the extent such
authorities are transferred pursuant to section 7.6 of the Act,
agricultural credit banks are authorized, subject to the requirements
of Sec. 614.4200, to make real estate mortgage loans with maturities of
not less than 5 years nor more than 40 years and continuing commitments
to make such loans.
* * * * *
Sec. 614.4020 [Amended]
4. Section 614.4020 is amended by removing the reference
``614.4230'' and adding in its place, the reference ``614.4200'' in
paragraphs (a)(1) and (a)(2).
5. Section 614.4030 is amended by revising paragraph (a) to read as
follows:
Sec. 614.4030 Federal land credit associations.
(a) Long-term real estate lending. Federal land credit associations
are authorized, subject to the requirements of Sec. 614.4200, to make
real estate mortgage loans with maturities of not less than 5 years nor
more than 40 years and continuing commitments to make such loans.
* * * * *
6. Section 614.4040 is amended by removing paragraph (b);
redesignating paragraphs (c) and (d) as new paragraphs (b) and (c),
respectively; removing the reference ``paragraph (c)(2)'' and adding in
its place, the reference ``paragraph (b)(2)'' in newly designated
paragraph (b)(1); and by revising paragraph (a) to read as follows:
Sec. 614.4040 Production credit associations.
(a) Loan terms. (1) Production credit associations are authorized
to make or guarantee loans and other similar financial assistance for
the following terms:
(i) Not more than 7 years
(ii) More than 7 years, but not more than 10 years, subject to
authorization in policies approved by the funding bank
(iii) Not more than 15 years to producers or harvesters of aquatic
products for major capital expenditures, including but not limited to
the purchase of vessels, construction or purchase of shore facilities,
and similar purposes directly related to the producing or harvesting
operation
(2) Subject to policies approved by the funding bank, production
credit associations may amortize loans over a period greater than the
loan terms authorized under paragraph (a)(1) of this section, provided
that:
(i) The loan is amortized over a period not to exceed 15 years
(ii) The loan may be refinanced only if the lender determines, at
the time of refinancing, that the loan meets its loan policy and
underwriting criteria;
(iii) Any refinancing may not extend repayment beyond 15 years from
the date of the original loan; and
(iv) The loan is not being made solely for the purpose of acquiring
unimproved real estate; and
(3) Short-and intermediate-term loans shall be made with maturities
that are appropriate for the purpose and underlying collateral of the
loan and that comply with an institution's loan underwriting standards
adopted pursuant to Sec. 614.4150 and the general requirements of
Sec. 614.4200 of this part.
* * * * *
7. Section 614.4050 is amended by adding introductory text and by
revising paragraphs (a) and (b) to read as follows:
Sec. 614.4050 Agricultural credit associations.
Agricultural credit associations are authorized to make or
guarantee, subject
[[Page 51014]]
to the requirements of Sec. 614.4200 of this part:
(a) Long-term real estate mortgage loans with maturities of not
less than 5 nor more than 40 years, and continuing commitments to make
such loans; and
(b) Short-and intermediate-term loans and provide other similar
financial assistance for a term of not more than 10 years (15 years for
aquatic producers and harvesters).
* * * * *
Subpart C--Bank/Association Lending Relationship
Sec. 614.4120 [Amended]
8. Section 614.4120 is amended by removing the words ``the factors
set forth in Secs. 614.4150 and 614.4160'' and adding in their place,
the words ``the loan underwriting policies and standards adopted
pursuant to Sec. 614.4150'' in the last sentence of paragraph (a).
Secs. 614.4135, 614.4140, and 614.4145 [Removed]
9. Sections 613.4135, 613.4140, and 614.4145 are removed.
Subpart D--General Loan Policies for Banks and Associations
Secs. 614.4150, 614.4160, 614.4170 [Removed]
10. Sections 614.4150, 614.4160, and 614.4170 are removed.
11. New section 614.4150 is added to read as follows:
Sec. 614.4150 Lending policies and loan underwriting standards.
Under the policies of its board, each institution shall adopt
written standards for prudent lending and shall issue written policies,
operating procedures, and control mechanisms that reflect prudent
credit practices and comply with all applicable laws and regulations.
Written policies and procedures shall, at a minimum, prescribe:
(a) The minimum supporting credit and financial information,
frequency for collection of information, and verification of
information required in relation to loan size, complexity and risk
exposure
(b) The procedures to be followed in credit analysis
(c) The minimum standards for loan disbursement, servicing and
collections
(d) Requirements for collateral and methods for its administration
(e) Loan approval delegations and requirements for reporting to the
board
(f) Loan pricing practices
(g) Loan underwriting standards that include measurable standards:
(1) For determining that an applicant has the operational,
financial, and management resources necessary to repay the debt from
cashflow
(2) That are appropriate for each loan program and the
institution's risk-bearing ability; and
(3) That consider the nature and type of credit risk, amount of the
loan, and enterprise being financed
(h) Requirements that loan terms and conditions are appropriate for
the loan; and
(i) Such other requirements as are necessary for the professional
conduct of a lending organization, including documentation for each
loan transaction of compliance with the loan underwriting standards or
the compensating factors or extenuating circumstances that establish
repayment of the loan notwithstanding the failure to meet any one or
more loan underwriting standard.
12. Section 614.4165 is amended by removing paragraphs (b) and (c);
redesignating paragraphs (d) and (e) as new paragraphs (b) and (c)
respectively; and revising paragraph (a) and the last sentence of newly
designated paragraph (c) to read as follows:
Sec. 614.4165 Special credit needs.
(a) The board of each direct lender institution shall adopt
policies to establish programs to provide credit and related services
to young, beginning, and small farmers, ranchers, and producers or
harvesters of aquatic products.
* * * * *
(c) * * * Where such programs are authorized, the direct lender
institution board shall adopt appropriate policies that define criteria
for the selection of specialized high-risk enterprises.
Subpart E--Loan Terms and Conditions
13. Section 614.4200 is revised to read as follows:
Sec. 614.4200 General requirements.
(a) Terms and conditions. (1) The terms and conditions of each loan
made by a Farm Credit bank or association shall be set forth in a
written document or documents, such as a loan agreement, promissory
note, or other instrument(s) appropriate to the type and amount of the
credit extension, in order to establish loan conditions and performance
requirements. Copies of all documents executed by the borrower in
connection with the closing of a loan made under titles I or II of the
Act shall be provided to the borrower at the time of execution and at
any time thereafter that the borrower requests additional copies.
(2) The terms and conditions of all loans shall be adequately
disclosed in writing to the borrower not later than loan closing. For
loans made under titles I and II of the Act, the institution shall
provide prompt written notice of the approval of the loan.
(3) Applicants shall be provided notification of the action taken
on each credit application in compliance with the requirements of 12
CFR 202.9.
(b) Security. (1) Long-term real estate mortgage loans must be
secured by a first lien interest in real estate, except that the loans
may be secured by a second lien interest if the institution also holds
the first lien on the property. No funds shall be advanced, under a
legally binding commitment or otherwise, if the outstanding loan
balance after the advance would exceed 85 percent (or 97 percent as
provided in section 1.10(a) of the Act) of the appraised value of the
real estate, except that a loan on which private mortgage insurance is
obtained may exceed 85 percent of the appraised value of the real
estate to the extent that the loan amount in excess of 85 percent is
covered by such insurance. The real estate that is used to satisfy the
loan-to-value limitation must be comprised primarily of agricultural or
rural property, including agricultural land and improvements thereto, a
farm-related business, a marketing or processing operation, a rural
residence, or real estate used as an integral part of an aquatic
operation.
(2) Notwithstanding the requirements of paragraph (b)(1) of this
section, the lending institution may advance funds for the payment of
taxes or insurance premiums with respect to the real estate, reschedule
loan payments, grant partial releases of security interests in the real
estate, and take other actions necessary to protect the lender's
collateral position. Any action taken that results in exceeding the
loan-to-value limitation shall be in accordance with a policy of the
institution's board of directors and adequately documented in the loan
file.
(3) Short- and intermediate-term loans may be secured or unsecured
as the documented creditworthiness of the borrower warrants.
(4) In addition to the requirements in paragraph (b)(1) of this
section, a long-term, non-farm rural home loan, including a revolving
line of credit, shall be secured by a first lien on the property,
except that it may be secured by a second lien if the institution also
holds the first lien on the property. A short- or intermediate-term
loan on a rural home, including a revolving line of credit, must be
secured by a lien on the
[[Page 51015]]
property unless the financing is provided exclusively for repairs,
remodeling, or other improvements to the rural home, in which case the
loan may be secured by other property or unsecured if warranted by the
documented creditworthiness of the borrower.
(5) Except as provided in Sec. 614.4231, loans made under title III
of the Act may be secured or unsecured, as appropriate for the purpose
of the loan and the documented creditworthiness of the borrower.
Secs. 614.4210, 614.4220, 614.4222, 614.4230 [Removed]
14. Sections 614.4210, 614.4220, 614.4222, and 614.4230 are
removed.
15. Section 614.4231 is revised to read as follows:
Sec. 614.4231 Certain seasonal commodity loans to cooperatives.
Loans on certain commodities that are part of government programs
shall comply with the criteria established for those programs. Security
taken on program commodities shall be consistent with prudent lending
practices and ensure compliance with the government program. The bank
shall provide for periodic review by bank officials of any custodial
activities and shall provide notice to the custodians that their
activities are subject to review and examination by the Farm Credit
Administration.
Subpart F--Collateral Evaluation Requirements
16. Section 614.4245 is amended by adding a new paragraph (d) to
read as follows:
Sec. 614.4245 Collateral evaluation policies.
* * * * *
(d) An institution's board of directors may adopt specific
collateral evaluation requirements, consistent with the regulations in
this subpart, for loans designated as part of a minimum information
program.
Subpart H--Loan Purchases and Sales
17. Section 614.4325 is amended by removing the reference
``Sec. 614.4160'' and adding in its place, the words ``the loan
underwriting standards adopted pursuant to Sec. 614.4150'' in the
fourth sentence of paragraph (e); revising paragraph (a)(1); and adding
new paragraph (h) to read as follows:
Sec. 614.4325 Purchase and sale of interests in loans.
(a) * * *
(1) Interests in loans means ownership interests in the principal
amount, interest payments, or any aspect of a loan transaction and
transactions involving a pool of loans, including servicing rights.
* * * * *
(h) Transactions through agents. Transactions pertaining to
purchases of loans, including the judgment on creditworthiness, may be
performed through an agent, provided that:
(1) The institution establishes the necessary criteria in a written
agency agreement that outlines, at a minimum, the scope of the agency
relationship and obligates the agent to comply with the institution's
underwriting standards;
(2) The institution periodically reviews the agency relationship to
determine if the agent's actions are in the best interest of the
institution;
(3) The agent must be independent of the seller or intermediate
broker in the transaction; and
(4) If an association's funding bank serves as its agent, the
agency agreement must provide that:
(i) The association can terminate the agreement upon no more than
60 days notice to the bank;
(ii) The association may, in its discretion, require the bank to
purchase from the association any interest in a loan that the
association determines does not comply with the terms of the agency
agreement or the association's loan underwriting standards.
Subpart J--Lending Limits
Sec. 614.4355 [Amended]
18. Section 614.4355 is amended by removing the word ``seasonal''
and adding in its place, the word ``commodity'' the second place it
appears in paragraphs (a)(6) and (b)(1) respectively, and in paragraph
(a)(8).
Sec. 614.4358 [Amended]
19. Section 614.4358 is amended by removing the words ``on the
credit factors set forth in Sec. 614.4160'' and adding in their place,
the words ``under the loan underwriting standards adopted pursuant to
Sec. 614.4150'' in paragraph (a)(1)(ii).
Subpart O--Banks for Cooperatives Financing International Trade
Sec. 614.4810 [Amended]
20. Section 614.4810 is amended by removing the words ``credit
factors listed in Sec. 614.4160'' and adding in their place, the words
``the loan underwriting standards adopted pursuant to Sec. 614.4150''
in paragraph (b).
PART 619--DEFINITIONS
21. The authority citation for part 619 continues to read as
follows:
Authority: Secs. 1.7, 2.4, 4.9, 5.9, 5.12, 5.17, 5.18, 7.0, 7.6,
7.7, 7.8 of the Farm Credit Act (12 U.S.C. 2015, 2075, 2160, 2243,
2246, 2252, 2253, 2279a, 2279b, 2279b-1, 2279b-2).
Secs. 619.9165 and 619.9290 [Removed]
22. Sections 619.9165 and 619.9290 are removed.
Dated: September 24, 1997.
Floyd Fithian,
Secretary, Farm Credit Administration Board.
[FR Doc. 97-25934 Filed 9-29-97; 8:45 am]
BILLING CODE 6705-01-P
