[Title 7 CFR ]
[Code of Federal Regulations (annual edition) - January 1, 2005 Edition]
[From the U.S. Government Printing Office]



[[Page i]]



          7


          Parts 1940 to 1949

                         Revised as of January 1, 2005


          Agriculture
          
          


________________________

          Containing a codification of documents of general 
          applicability and future effect

          As of January 1, 2005
          With Ancillaries
                    Published by:
                    Office of the Federal Register
                    National Archives and Records
                    Administration
                    A Special Edition of the Federal Register

[[Page ii]]

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                            Table of Contents



                                                                    Page
  Explanation.................................................       v

  Title 7:
    Subtitle B--Regulations of the Department of Agriculture
          Chapter XVIII--Rural Housing Service, Rural 
          Business-Cooperative Service, Rural Utilities 
          Service, and Farm Service Agency, Department of 
          Agriculture                                                5
  Finding Aids:
      Table of CFR Titles and Chapters........................     605
      Alphabetical List of Agencies Appearing in the CFR......     623
      List of CFR Sections Affected...........................     633

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                     ----------------------------

                     Cite this Code: CFR
                     To cite the regulations in 
                       this volume use title, 
                       part and section number. 
                       Thus, 7 CFR 1940.301 
                       refers to title 7, part 
                       1940, section 301.

                     ----------------------------

[[Page v]]



                               EXPLANATION

    The Code of Federal Regulations is a codification of the general and 
permanent rules published in the Federal Register by the Executive 
departments and agencies of the Federal Government. The Code is divided 
into 50 titles which represent broad areas subject to Federal 
regulation. Each title is divided into chapters which usually bear the 
name of the issuing agency. Each chapter is further subdivided into 
parts covering specific regulatory areas.
    Each volume of the Code is revised at least once each calendar year 
and issued on a quarterly basis approximately as follows:

Title 1 through Title 16.................................as of January 1
Title 17 through Title 27..................................as of April 1
Title 28 through Title 41...................................as of July 1
Title 42 through Title 50................................as of October 1

    The appropriate revision date is printed on the cover of each 
volume.

LEGAL STATUS

    The contents of the Federal Register are required to be judicially 
noticed (44 U.S.C. 1507). The Code of Federal Regulations is prima facie 
evidence of the text of the original documents (44 U.S.C. 1510).

HOW TO USE THE CODE OF FEDERAL REGULATIONS

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    To determine whether a Code volume has been amended since its 
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Sections Affected (LSA),'' which is issued monthly, and the ``Cumulative 
List of Parts Affected,'' which appears in the Reader Aids section of 
the daily Federal Register. These two lists will identify the Federal 
Register page number of the latest amendment of any given rule.

EFFECTIVE AND EXPIRATION DATES

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inserted following the text.

OMB CONTROL NUMBERS

    The Paperwork Reduction Act of 1980 (Pub. L. 96-511) requires 
Federal agencies to display an OMB control number with their information 
collection request.

[[Page vi]]

Many agencies have begun publishing numerous OMB control numbers as 
amendments to existing regulations in the CFR. These OMB numbers are 
placed as close as possible to the applicable recordkeeping or reporting 
requirements.

OBSOLETE PROVISIONS

    Provisions that become obsolete before the revision date stated on 
the cover of each volume are not carried. Code users may find the text 
of provisions in effect on a given date in the past by using the 
appropriate numerical list of sections affected. For the period before 
January 1, 2001, consult either the List of CFR Sections Affected, 1949-
1963, 1964-1972, 1973-1985, or 1986-2000, published in 11 separate 
volumes. For the period beginning January 1, 2001, a ``List of CFR 
Sections Affected'' is published at the end of each CFR volume.

CFR INDEXES AND TABULAR GUIDES

    A subject index to the Code of Federal Regulations is contained in a 
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and Finding Aids. This volume contains the Parallel Table of Statutory 
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that volume.
    The Federal Register Index is issued monthly in cumulative form. 
This index is based on a consolidation of the ``Contents'' entries in 
the daily Federal Register.
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the revision dates of the 50 CFR titles.

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[[Page vii]]

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                              Raymond A. Mosley,
                                    Director,
                          Office of the Federal Register.

January 1, 2005.

[[Page ix]]



                               THIS TITLE

    Title 7--Agriculture is composed of fifteen volumes. The parts in 
these volumes are arranged in the following order: parts 1-26, 27-52, 
53-209, 210-299, 300-399, 400-699, 700-899, 900-999, 1000-1199, 1200-
1599, 1600-1899, 1900-1939, 1940-1949, 1950-1999, and part 2000 to end. 
The contents of these volumes represent all current regulations codified 
under this title of the CFR as of January 1, 2005.

    The Food and Nutrition Service current regulations in the volume 
containing parts 210-299, include the Child Nutrition Programs and the 
Food Stamp Program. The regulations of the Federal Crop Insurance 
Corporation are found in the volume containing parts 400-699.

    All marketing agreements and orders for fruits, vegetables and nuts 
appear in the one volume containing parts 900-999. All marketing 
agreements and orders for milk appear in the volume containing parts 
1000-1199. Part 900--General Regulations is carried as a note in the 
volume containing parts 1000-1199, as a convenience to the user.

    For this volume, Cheryl E. Sirofchuck was Chief Editor. The Code of 
Federal Regulations publication program is under the direction of 
Frances D. McDonald, assisted by Alomha S. Morris.

[[Page 1]]



                          TITLE 7--AGRICULTURE




                 (This book contains parts 1940 to 1949)

  --------------------------------------------------------------------

        SUBTITLE B--Regulations of the Department of Agriculture

                                                                    Part

chapter xviii--Rural Housing Service, Rural Business-
  Cooperative Service, Rural Utilities Service, and Farm 
  Service Agency, Department of Agriculture.................        1940

[[Page 3]]

  Subtitle B--Regulations of the Department of Agriculture (Continued)

[[Page 5]]



    CHAPTER XVIII--RURAL HOUSING SERVICE, RURAL BUSINESS-COOPERATIVE 
SERVICE, RURAL UTILITIES SERVICE, AND FARM SERVICE AGENCY, DEPARTMENT OF 
                               AGRICULTURE




  --------------------------------------------------------------------


  Editorial Note: Nomenclature changes to chapter XVIII appear at 61 FR 
1109, Jan. 16, 1996, and at 61 FR 2899, Jan. 30, 1996.

                    SUBCHAPTER H--PROGRAM REGULATIONS
Part                                                                Page
1940            General.....................................           7
1941            Operating loans.............................         119
1942            Associations................................         143
1943            Farm ownership, soil and water and 
                    recreation..............................         232
1944            Housing.....................................         291
1945            Emergency...................................         558
1946            [Reserved]
1948            Rural development...........................         573
1949            [Reserved]

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                    SUBCHAPTER H_PROGRAM REGULATIONS





PART 1940_GENERAL--Table of Contents




Subparts A-F [Reserved]

                     Subpart G_Environmental Program

Sec.
1940.301 Purpose.
1940.302 Definitions.
1940.303 General policy.
1940.304 Special policy.
1940.305 Policy implementation.
1940.306 Environmental responsibilities within the National Office.
1940.307 Environmental responsibilities within the State Office.
1940.308 Environmental responsibilities at the District and County 
          Office levels.
1940.309 Responsibilities of the prospective applicant.
1940.310 Categorical exclusions from National Environmental Policy Act 
          (NEPA) reviews.
1940.311 Environmental assessments for Class I actions.
1940.312 Environmental assessments for Class II actions.
1940.313 Actions that normally require the preparation of an 
          Environmental Impact Statement (EIS).
1940.314 Criteria for determining a significant environmental impact.
1940.315 Timing of the environmental review process.
1940.316 Responsible officials for the environmental review process.
1940.317 Methods for ensuring proper implementation of categorical 
          exclusions.
1940.318 Completing environmental assessments for Class II actions.
1940.319 Completing environmental assessments for Class I actions.
1940.320 Preparing EISs.
1940.321 Use of completed EIS.
1940.322 Record of decision.
1940.323 Preparing supplements to EIS's.
1940.324 Adoption of EIS or environmental assessment prepared by another 
          Federal Agency.
1940.325 FmHA or its successor agency under Public Law 103-354 as a 
          cooperating Agency.
1940.326 FmHA or its successor agency under Public Law 103-354 as a lead 
          Agency.
1940.327 Tiering.
1940.328 State Environmental Policy Acts.
1940.329 Commenting on other Agencies' EIS's.
1940.330 Monitoring.
1940.331 Public involvement.
1940.332 Emergencies.
1940.333 Applicability to planning assistance.
1940.334 Direct participation of State Agencies in the preparation of 
          FmHA or its successor agency under Public Law 103-354 EISs.
1940.335 Environmental review of FmHA or its successor agency under 
          Public Law 103-354 proposals for legislation.
1940.336 Contracting for professional services.
1940.337-1940.349 [Reserved]
1940.350 Office of Management and Budget (OMB) control number.

Exhibit A to Subpart G--Departmental Regulation
Exhibit B to Subpart G--Development and Implementation of Natural 
          Resource Management Guide
Exhibit C to Subpart G--Implementation Procedures for the Farmland 
          Protection Policy Act; Executive Order 11988, Floodplain 
          Management; Executive Order 11990, Protection of Wetlands; and 
          Departmental Regulation 9500-3, Land Use Policy
Exhibit D to Subpart G--Implementation Procedures for the Endangered 
          Species Act
Exhibit E to Subpart G--Implementation Procedures for the Wild and 
          Scenic Rivers Act
Exhibit F to Subpart G--Implementation Procedures for the Coastal 
          Barrier Resources Act
Exhibit G to Subpart G [Reserved]
Exhibit H to Subpart G--Environmental Assessment for Class II Actions
Exhibit I to Subpart G--Finding of No Significant Environmental Impact
Exhibit J to Subpart G--Locations and Telephone Numbers of Federal 
          Emergency Management Administration's Regional Offices
Exhibit K to Subpart G--Locations and Telephone Numbers of U.S. Fish and 
          Wildlife Service's Wetland Coordinators
Exhibit L to Subpart G--Exceptions to Restrictions of Coastal Barrier 
          Resources Act
Exhibit M to Subpart G--Implementation Procedures for the Conservation 
          of Wetlands and Highly Erodible Land Affecting Farmer Program 
          Loans and Loans to Indian Tribes and Tribal Corporations

Subpart H [Reserved]

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      Subpart I_Truth in Lending_Real Estate Settlement Procedures

1940.401 Truth in lending.
1940.402-1940.405 [Reserved]
1940.406 Real estate settlement procedures.

Subparts J-K [Reserved]

  Subpart L_Methodology and Formulas for Allocation of Loan and Grant 
                              Program Funds

1940.551 Purpose and general policy.
1940.552 Definitions.
1940.553-1940.554 [Reserved]
1940.555 Insured Farm Operating loan funds.
1940.556 Guaranteed Farm Operating loan funds.
1940.557 Insured Farm Ownership loan funds.
1940.558 Guaranteed Farm Ownership loan funds.
1940.559 Farmer Programs and Indian Land Acquisition appropriations not 
          allocated by State.
1940.560 Guarantee Rural Rental Housing Program.
1940.561-1940.562 [Reserved]
1940.563 Section 502 non-subsidized guaranteed Rural Housing (RH) loans.
1940.564 Section 502 subsidized guaranteed Rural Housing loans.
1940.565 Section 502 subsidized Rural Housing loans.
1940.566 Section 504 Housing Repair loans.
1940.567 Section 504 Housing Repair grants.
1940.568 Single Family Housing programs appropriations not allocated by 
          State.
1940.569-1940.574 [Reserved]
1940.575 Section 515 Rural Rental Housing (RRH) loans.
1940.576 Rental Assistance (RA) for new construction.
1940.577 Rental Assistance (RA) for existing projects.
1940.578 Housing Preservation Grant (HPG) program.
1940.579 Multiple Family Housing appropriations not allocated by State.
1940.580-1940.584 [Reserved]
1940.585 Community Facility loans.
1940.586-1940.587 [Reserved]
1940.588 Business and Industry Guaranteed and Direct Loans.
1940.589 Rural Business Enterprise Grants.
1940.590 [Reserved]
1940.591 Community Program Guaranteed loans.
1940.592 Community facilities grants.
1940.593 Rural Business Opportunity Grants.
1940.594-1940.600 [Reserved]

Exhibit A to Subpart L [Reserved]
Exhibit B to Subpart L--Section 515 Nonprofit Set Aside (NPSA)
Exhibit C to Subpart L--Housing in Underserved Areas

Subparts M-S [Reserved]

   Subpart T_System for Delivery of Certain Rural Development Programs

1940.951 General.
1940.952 [Reserved]
1940.953 Definitions.
1940.954 State participation.
1940.955 Distribution of program funds to designated States.
1940.956 State rural economic development review panel.
1940.957 State coordinator.
1940.958 Designated agency.
1940.959 Area plan.
1940.960 Federal employee panel members.
1940.961 Allocation of appropriated funds.
1940.962 Authority to transfer direct loan amounts.
1940.963 Authority to transfer guaranteed loan amounts.
1940.964 [Reserved]
1940.965 Processing project preapplications/applications.
1940.966-1940.967 [Reserved]
1940.968 Rural Economic Development Review Panel Grant (Panel Grant).
1940.969 Forms, exhibits, and subparts.
1940.970 [Reserved]
1940.971 Delegation of authority.
1940.972-1940.999 [Reserved]
1940.1000 OMB control number.

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

Subparts A-F [Reserved]



                     Subpart G_Environmental Program

    Source: 53 FR 36240, Sept. 19, 1988, unless otherwise noted.



Sec. 1940.301  Purpose.

    (a) This subpart contains the major environmental policies of the 
Farmers Home Administration (FmHA) or its successor agency under Public 
Law 103-354. It also provides the procedures and guidelines for 
preparing the environmental impact analyses required for a series of 
Federal laws, regulations, and Executive orders within one environmental 
document. The timing and use of this environmental document within the 
FmHA or its successor agency under Public Law 103-354 decision-making 
process is also outlined.
    (b) This subpart is intended to be consistent with the Council on 
Environmental Ouality's (CEQ) Regulations

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for Implementing the Procedural Provisions of the National Environmental 
Policy Act (NEPA), 40 CFR parts 1500-1508. CEQ's regulations will not be 
repeated in this subpart except when essential for clarification of 
important procedural or substantive points. Otherwise, citations to 
applicable sections of the regulations will be provided. The CEQ 
regulations will be available at all FmHA or its successor agency under 
Public Law 103-354 offices.
    (c) This subpart is designed to integrate the requirements of NEPA 
with other planning and environmental review procedures required by law, 
or by Agency practice, so that all such procedures run concurrently 
rather than consecutively. The environmental document, which results 
from the implementation of this subpart, provides on a project basis a 
single reference point for the Agency's compliance and/or implementation 
of the following requirements and policies:
    (1) The National Environmental Policy Act, 42 U.S.C. 4321;
    (2) Safe Drinking Water Act--Section 1424(e), 42 U.S.C. 300h;
    (3) Endangered Species Act, 16 U.S.C. 1531;
    (4) Wild and Scenic Rivers Act, 16 U.S.C. 1271;
    (5) The National Historic Preservation Act, 16 U.S.C. 470 (See 
subpart F of part 1901 of this chapter for more specific implementation 
procedures);
    (6) Archaeological and Historic Preservation Act, 16 U.S.C. 469 (See 
subpart F of part 1901 of this chapter for more specific implementation 
procedures);
    (7) Coastal Zone Management Act--Section 307(c) (1) and (2), 16 
U.S.C. 1456;
    (8) Farmland Protection Policy Act, subtitle I, Pub. L. 97-98;
    (9) Coastal Barrier Resources Act, Pub. L. 97-348;
    (10) Executive Order 11593, Protection and Enhancement of the 
Cultural Environment (See subpart F of part 1901 of this chapter for 
more specific implementation procedures);
    (11) Executive Order 11514, Protection and Enhancement of 
Environmental Quality;
    (12) Executive Order 11988, Floodplain Management;
    (13) Executive Order 11990, Protection of Wetlands;
    (14) Title 7, parts 1b and 1c, Code of Federal Regulations, 
Department of Agriculture's National Environmental Policy Act; Final 
Policies and Procedures;
    (15) Title 7, part 3100, Code of Federal Regulations, Department of 
Agriculture's Enhancement, Protection, and Management of the Cultural 
Environment (See subpart F of part 1901 of this chapter for more 
specific implementation procedures);
    (16) Title 7, part 658, Code of Federal Regulations, Department of 
Agriculture, Soil Conservation Service, Farmland Protection Policy;
    (17) Title 87, part 12, Code of Federal Regulations, Highly Erodible 
Land and Wetland Conservation;
    (18) Departmental Regulation 9500-3, Land Use Policy (See exhibit A 
of this subpart);
    (19) Departmental Regulation 9500-4, Fish and Wildlife Policy.
    (d) The primary objectives of this subpart are for the Agency to 
make better decisions by taking into account potential environmental 
impacts of proposed projects and by working with FmHA or its successor 
agency under Public Law 103-354 applicants, other Federal agencies, 
Indian tribes, State and local governments, and interested citizens and 
organizations in order to formulate actions that advance the program 
goals in a manner that will protect, enhance, and restore environmental 
quality. To accomplish these objectives, the identification of 
potentially significant impacts on the human environment is mandated to 
occur early in the Agency's planning and decisionmaking processes. 
Important decision points are identified. The completion of the 
environmental review process is coordinated with these decision points, 
and this review must be completed prior to the Agency's first major 
decision on whether or not to participate in the proposal. This early 
availability of the results of the environmental review process is 
intended to ensure that Agency decisions are based on an understanding 
of their environmental consequence, as well as the consequences of 
alternative courses of action.
    (e) Reducing delays, duplication of effort, and superfluous analyses 
are

[[Page 10]]

provided for in this subpart. FmHA or its successor agency under Public 
Law 103-354 environmental documents are to be supported by accurate 
analyses and will concentrate on the issues that are timely and relevant 
to the action in question, rather than amassing needless detail. Such 
documents and their preparation and review will be coordinated with 
other Federal or State agencies jointly participating in proposed 
actions or related actions, in order to avoid duplication of effort, and 
to achieve a coordinated and timely response.
    (f) Public involvement is desirable, and to facilitate public 
involvement, environmental documents will be available to interested 
citizens as early in the decisionmaking process as possible and before 
decisions are made. Provisions are included for citizens or interested 
parties to express their views and any concerns.
    (g) The FmHA or its successor agency under Public Law 103-354 
officials responsible for the environmental review process are 
identified.
    (h) The FmHA or its successor agency under Public Law 103-354 
actions covered by this subpart include:
    (1) Financial assistance to include grants, loans, and guarantees,
    (2) Subdivision approvals,
    (3) The management, leasing and sale of inventory property, and
    (4) Other major federal actions such as proposals for legislation 
and the issuance of regulations.



Sec. 1940.302  Definitions.

    Following is a list of definitions that apply to the implementation 
of this subpart. Please note that Sec. 1940.301(b) of this subpart 
refers to the Council on Environmental Quality's Regulations for 
Implementing the Procedural Provisions of the National Environmental 
Policy Act, 40 CFR parts 1500-1508. Consequently, the definitions 
contained in part 1508 of the Council's regulations apply to this 
subpart, as well as those listed below.
    (a) Emergency circumstance. One involving an immediate or imminent 
danger to public health or safety.
    (b) Environmental review documents. The documents required by this 
subpart for the purpose of documenting FmHA or its successor agency 
under Public Law 103-354's compliance with the environmental laws and 
regulations applicable to the FmHA or its successor agency under Public 
Law 103-354 actions covered in this subpart. These documents include:
    (1) Form FmHA or its successor agency under Public Law 103-3541940-
22, ``Environmental Checklist for Categorical Exclusions,''
    (2) Form FmHA or its successor agency under Public Law 103-354 1940-
21, ``Environmental Assessment of Class I Action,''
    (3) Environmental Assessment for Class II Actions (exhibit H of this 
subpart), and
    (4) Environmental Impact Statements (EIS).
    (c) Flood or flooding. A general and temporary condition of partial 
or complete inundation of land areas, from the overflow of inland and/or 
tidal waters, and/or the rapid accumulation or runoff of surface waters 
from any source. Two important classifications of floods are as follows.
    (1) A one-percent chance flood or based flood--A flood of a 
magnitude that occurs once every 100 years on the average. Within any 
one-year period there is one chance in 100 of the occurrence of such a 
flood. Most importantly, however, the cumulative risk of flooding 
increases with time. Statistically, there is about one chance in five 
that a flood of this magnitude will occur within a 20-year period, the 
length of time commonly defined as the useful life of a facility. Over a 
30-year period, the life of a typical mortgage, the probability of such 
a flood occurring increases to greater than one chance in four.
    (2) A 0.2-percent chance flood--A flood of a magnitude that occurs 
once every 500 years on the average. (Within any one-year period there 
is one chance in 500 of the occurrence of such a flood.) As with the 
one-percent chance flood, the cumulative risk of this flood occurring 
also increases with time.
    (d) Floodplains. Lowland and relatively flat areas adjoining inland 
and coastal waters, including flood-prone areas of offshore islands. At 
a minimum, floodplains consist of those

[[Page 11]]

areas subject to a one percent or greater chance of flooding in any 
given year. The term floodplain will be taken to mean the base 
floodplain, unless the action involves a critical action, in which case 
the critical action floodplain is the minimum floodplain of concern.
    (1) Base floodplain (or 100-year floodplain)--The area subject to 
inundation from a flood of a magnitude that occurs once every 100 years 
on the average (the flood having a one-percent chance of being equalled 
or exceeded in any given year).
    (2) Critical action floodplain (or 500-year floodplain)--The area 
subject to inundation from a flood of a magnitude that occurs once every 
500 years on the average (the flood having 0.2-percent chance of being 
equalled or exceeded in any given year).
    (e) Indirect impacts. Those reasonably foreseeable environmental 
impacts that result from the additional public facility, residential, 
commercial, or industrial development or growth that a federally 
financed project may cause, induce or accommodate. Consequently, 
indirect impacts often occur later in time than the construction of the 
Federal project and can be removed in distance from the construction 
site. For example, a water transmission line may be designed to serve 
additional residential development. The environmental impacts of that 
residential development represent an indirect impact of the federally 
funded water line. Those indirect impacts which deserve the greatest 
consideration include changes in the patterns of land use, population 
density or growth rate, and the corresponding changes to air and water 
quality and other natural systems.
    (f) Mitigation measure. A measure(s) included in a project or 
application for the purpose of avoiding, minimizing, reducing or 
rectifying identified, adverse environmental impacts. Examples of such 
measures include:
    (1) The deletion, relocation, redesign or other modifications of the 
project's elements;
    (2) The dedication to open space of environmentally sensitive areas 
of the project site, which would otherwise be adversely affected by the 
action or its indirect impacts;
    (3) Soil erosion and sedimentation plans to control runoff during 
land-disturbing activities;
    (4) The establishment of vegetative buffer zones between project 
sites and adjacent land uses;
    (5) Protective measures recommended by environmental and 
conservation agencies having jurisdiction or special expertise regarding 
the project's impacts;
    (6) Storm water management plans to control potential downstream 
flooding effects that would result from a project;
    (7) Zoning; and
    (8) Reuse of existing facilities as opposed to new construction.
    (g) No-action alternative. The alternative of not approving an 
application for financial assistance, a subdivision feasibility 
analysis, or an Agency proposal.
    (h) Practicable alternative. An alternative that is capable of 
attainment within the confines of relevant constraints. The test of 
practicability, therefore, depends upon the particulars of the situation 
under consideration and those constraints imposed by environmental, 
economic, legal, social and technological parameters. This test, 
however, is not limited by the temporary unavailability of sufficient 
financial resources to implement an alternative. That is, alternatives 
cannot be rejected solely on the basis of moderately increased costs. 
The range of alternatives that must be analyzed to determine if a 
practicable alternative exists includes the following three categories 
of alternatives:
    (1) Alternative project sites or designs,
    (2) Alternative projects with similar benefits as the proposed 
actions, and
    (3) The no-action alternative.
    (i) Preparer of Environmental Review Documents. The FmHA or its 
successor agency under Public Law 103-354 official who is responsible 
for reviewing the potential environmental impacts of the proposed action 
and for completing the appropriate environmental review document. Under 
the circumstances indicated, the following Agency positions and 
divisions will act as the preparer of

[[Page 12]]

the environmental review documents covered by this subpart.
    (1) County Office. When the approval official for the action under 
review is located at the County Office level, that official will 
prepare, as required, Environmental Checklist for Categorical Exclusions 
and Class I and Class II assessments.
    (2) District Office. When the approval official for the action under 
review is located at the District Office level, that official will 
prepare, as required, Environmental Checklist for Categorical Exclusions 
and Class I and Class II assessments or may delegate this responsibility 
to either:
    (i) The District Office staff member having primary responsibility 
for assembling the associated pre-application, application or other case 
materials, analyzing the materials and developing recommendations for 
the approval official, or
    (ii) A County Office staff member having the same responsibilities 
as the District Office member, if the action is initiated at the County 
Office level.
    (3) State Program Chief. For actions approved within the State 
Office, the Chief will prepare, as required, Environmental Checklist for 
Categorical Exclusions and Class I and II assessments or may delegate 
this responsibility to either:
    (i) The appropriate State Office Loan Specialist, if not the State 
Environmental Coordinator (SEC),
    (ii) An architect or engineer on the Chief's staff who is not the 
SEC, or
    (iii) A District or County Office staff member located within the 
office in which the action is initiated and having the responsibilities 
outlined in paragraph (i)(2)(i) of this section.
    (4) State Environmental Coordinator. EIS's for actions within the 
approval authority of County Supervisors, District Directors, and State 
Office officials.
    (5) Assistant Administrators for Programs. Checklists, assessments, 
and EIS's for all actions initiated within their program office.
    (6) Program Support Staff. Checklists, assessments, and EIS's that 
the Deputy Administrator for Program Operations requests be done.
    (j) Water resource project. Includes any type of construction which 
would result in either impacts on water quality and the beneficial uses 
that water quality criteria are designed to protect or any change in the 
free-flowing characteristics of a particular river or stream to include 
physical, chemical, and biological characteristics of the waterway. This 
definition encompasses construction projects within and along the banks 
of rivers or streams, as well as projects involving withdrawals from, 
and discharges into such rivers or streams. Projects which require Corps 
of Engineers dredge and fill permits are also water resource projects.



Sec. 1940.303  General policy.

    (a) FmHA or its successor agency under Public Law 103-354 will 
consider environmental quality as equal with economic, social, and other 
relevant factors in program development and decision-making processes.
    (b) In assessing the potential environmental impacts of its actions, 
FmHA or its successor agency under Public Law 103-354 will consult early 
with appropriate Federal, State, and local agencies and other 
organizations to provide decision-makers with both the technical and 
human aspects of environmental planning.
    (c) When adverse environmental impacts are identified, either direct 
or indirect, an examination will be made of alternative courses of 
action, including their potential environmental impacts. The objective 
of the environmental review will be to develop a feasible alternative 
with the least adverse environmental impact. The alternative of not 
proceeding with the proposal will also be considered particularly with 
respect to the need for the proposal.
    (d) If no feasible alternative exists, including the no-action 
alternative, measures to mitigate the identified adverse environmental 
impacts will be included in the proposal.
    (e) The performance of environmental reviews and the consideration 
of alternatives will be initiated as early as possible in the FmHA or 
its successor agency under Public Law 103-354 application review process 
so that the Agency will be in the most flexible

[[Page 13]]

and objective position to deal with these considerations.



Sec. 1940.304  Special policy.

    (a) Land use. (1) FmHA or its successor agency under Public Law 103-
354 recognizes that its specific mission of assisting rural areas, 
composed of farms and rural towns, goes hand-in-hand with protecting the 
environmental resources upon which these systems are dependent. Basic 
resources necessary to both farm and rural settlements include important 
farmlands and forestlands, prime rangelands, wetlands, and floodplains. 
The definitions of these areas are contained in the appendix to 
Departmental Regulation 9500-3, Land Use Policy, which is included as 
exhibit A of this subpart. For assistance in locating and defining 
floodplains and wetlands, the locations and telephone numbers of the 
Federal Emergency Management Administration's regional offices have been 
included as exhibit J of this subpart, and similar information for the 
U.S. Fish and Wildlife Service's Wetland Coordinators has been included 
as exhibit K of this subpart. Given the importance of these resources, 
as emphasized in the Departmental Regulation, Executive Order 11988, 
``Floodplain Management,'' and Executive Order 11990, ``Protection of 
Wetlands,'' it is FmHA or its successor agency under Public Law 103-
354's policy not to approve or fund any proposals that, as a result of 
their identifiable impacts, direct or indirect, would lead to or 
accommodate either the conversion of these land uses or encroachment 
upon them. The only exception to this policy is if the approving 
official determines that
    (i) There is no practicable alternative to the proposed action,
    (ii) The proposal conforms to the planning criteria identified in 
paragraph (a)(2) of this section, and
    (iii) The proposal includes all practicable measures for reducing 
the adverse impacts and the amount of conversion/encroachment.
    (A) For Farmer Program loans and guarantees, and loans to Indian 
Tribes and Tribal Corporations, exhibit M of this subpart imposes 
additional and more restrictive requirements regarding wetland and 
highly erodible land conservation.
    (B) Unless otherwise exempted by the provisions of exhibit M, the 
proceeds of any Farmer Program loan or loan to an Indian Tribe or Tribal 
Corporation made or guaranteed by FmHA or its successor agency under 
Public Law 103-354 cannot be used.
    (1) For a purpose that will contribute to excessive erosion of 
highly erodible land (as defined in exhibit M), or
    (2) For a purpose that will contribute to conversion of wetlands (as 
defined in exhibit M) to produce an agricultural commodity.
    (2) It is also recognized that unless carefully reviewed, some 
proposals designed to serve the needs of rural communities can adversely 
affect the existing economic base and settlement patterns of the 
community, as well as create development pressures on land and 
environmental resources essential to farm economies. An example of such 
a proposal might be the extension of utilities and other types of 
infrastructure beyond a community's existing settlement pattern and into 
important farmlands for the purpose of commercial or residential 
expansion, even though there is available space within the existing 
settlement pattern for such expansion. Not only may the loss of 
important farmlands unnecessarily result, but the community may be faced 
with the economic costs of providing public services to outlying areas, 
as well as the deterioration of its central business or commercial area; 
the latter may not be able to compete with the newer, outlying 
commercial establishments. These results are undesirable, and to avoid 
their occurrence, projects designed to meet rural community needs (i.e., 
residential, industrial, commercial, and public facilities) will not be 
approved unless the following conditions are met.
    (i) The project is planned and sited in a manner consistent with the 
policies of this section, the Farmland Protection Policy Act, and 
Departmental Regulation 9500-3 (exhibit A of this subpart).
    (ii) The project is not inconsistent with an existing comprehensive 
and enforceable plan that guides growth and

[[Page 14]]

reflects a realistic strategy for protecting natural resources, and the 
project is compatible, to the extent practicable, with State, unit of 
local government, and private programs and policies to protect farmland. 
(If no such plan or policies exist, there is no FmHA or its successor 
agency under Public Law 103-354 requirement that they either be prepared 
and adopted, as further specified in paragraph (a)(3) of this section.)
    (iii) The project will encourage long-term, economically viable 
public investment by fostering or promoting development patterns that 
ensure compact community development, that is, development that is 
limited to serving existing settlement patterns or is located in 
existing settlement patterns, e.g., the rehabilitation and renovation of 
existing structures, systems and neighborhoods; infilling of 
development; the provision of a range of moderate-to-high residential 
densities appropriate to local and regional needs. When these 
development patterns or types are not practicable, the development must 
be contiguous with the existing settlement pattern and provide for a 
range of moderate-to-high residential densities appropriate to local and 
regional needs. It is recognized that some FmHA or its successor agency 
under Public Law 103-354 Community Programs projects are designed to 
serve rural residents, such as rural water and waste disposal systems 
and, therefore, cannot be limited in service area to these areas 
contiguous with existing settlement patterns. These types of projects 
will be designed to primarily serve existing structures and rural 
residents in noncontiguous areas. Any additional capacity within the 
system will be limited to meet reasonable growth needs, and, to the 
extent practicable, be designed to meet such needs within existing 
settlements and areas contiguous to them.
    (3) The conditions specified in paragraph (a)(2) of this section 
should not be construed as advocating excessive densities, congestion, 
or loss of open space amenities within rural communities. Desirable 
living conditions can be obtained under these objectives, along with 
economic and social benefits for the community and the surrounding farm 
operations. Additionally, these conditions should not be construed as 
requiring localities to develop plans which contain the conditions. In 
any instance in which these planning conditions or criteria do not exist 
within the project area, project reviews will not be postponed until the 
criteria are adopted. Rather, projects will be reviewed and funding 
decisions made in light of a project's consistency with the contents of 
this subpart (excluding paragraph (a)(2)(ii) of this section, which 
would not be applicable).
    (b) Endangered species. FmHA or its successor agency under Public 
Law 103-354 will not authorize, fund, or carry out any proposal or 
project that is likely to
    (1) Jeopardize the continued existence of any plant or wildlife 
species listed by the Secretary of the Interior or Commerce as 
endangered or threatened; or
    (2) Destroy or adversely modify the habitats of listed species when 
such habitats have been determined critical to the species' existence by 
the Secretary of the Interior or Commerce, unless FmHA or its successor 
agency under Public Law 103-354 has been granted an exemption for such 
proposal by the Endangered Species Committee pursuant to paragraph (h) 
of section 7 of the Endangered Species Act.
    (c) Wild and scenic rivers. FmHA or its successor agency under 
Public Law 103-354 will not provide financial assistance or plan 
approval for any water resource project that would have a direct and 
adverse effect on the values for which a river has been either included 
in the National Wild and Scenic Rivers System or is designated for 
potential addition. Additionally, FmHA or its successor agency under 
Public Law 103-354 will not approve or assist developments (commercial, 
industrial, residential, farming or community facilities) located below 
or above a wild, scenic or recreational river area, or on any stream 
tributary thereto which will invade the area or unreasonably diminish 
the scenic, recreational, and fish and wildlife values present in the 
area.
    (d) Historic and cultural properties. As part of the environmental 
review process, FmHA or its successor agency under Public Law 103-354 
will identify

[[Page 15]]

any properties that are listed in, or may be eligible for, listing in 
the National Register of Historic Places and are located within the 
project's area of potential environmental impacts. Consultations will be 
undertaken with State Historic Preservation Officers and the Advisory 
Council on Historic Preservation, through the implementation of subpart 
F of part 1901 of this chapter, in order to determine the most 
appropriate course of action for protecting such identified properties 
or mitigating potential adverse impacts to them.
    (e) Coastal barriers. Under the requirements of the Coastal Barrier 
Resources Act, FmHA or its successor agency under Public Law 103-354 
will not provide financial assistance for any activity to be located 
within the Coastal Barrier Resources System unless
    (1) Such activity meets the criteria for an exception, as defined in 
section 6 of the Act, and
    (2) Consultation regarding the activity has been completed with the 
Secretary of the Interior.
    (f) Water and energy conservation. FmHA or its successor agency 
under Public Law 103-354 will encourage the conservation of water and 
energy in the development of its programs and policies and will 
encourage applicants to incorporate all economically feasible water and 
energy-saving features and designs within their proposals.
    (g) Intergovernmental initiatives on important land resources. On a 
broader scale, FmHA or its successor agency under Public Law 103-354 
will advocate, in cooperation with other USDA agencies (through the USDA 
State-level committee system), the retention of important farmlands and 
forestlands, prime rangeland, wetlands and floodplains whenever proposed 
conversions to other uses
    (1) Are caused or encouraged by actions or programs of a Federal 
Agency, or
    (2) Require licensing or approval by a Federal Agency, unless other 
needs clearly override the benefits derived from retention of such 
lands.
    (h) Water quality. FmHA or its successor agency under Public Law 
103-354 will not provide financial assistance to any activity that would 
either impair a State water quality standard, including designated and/
or existing beneficial uses that water quality criteria are designed to 
protect, or that would not meet antidegradation requirements.



Sec. 1940.305  Policy implementation.

    (a) Environmental impact analysis. The implementation of the 
environmental impact analysis requirements described in this subpart 
serves as the primary mechanism for FmHA or its successor agency under 
Public Law 103-354 as follows:
    (1) Incorporating environmental quality considerations into FmHA or 
its successor agency under Public Law 103-354 program and decision-
making processes,
    (2) Obtaining the views of the public and government agencies on 
potential environmental impacts associated with FmHA or its successor 
agency under Public Law 103-354 projects, and
    (3) Using all practicable means to avoid or to minimize any possible 
adverse environmental effects of FmHA or its successor agency under 
Public Law 103-354 actions.
    (b) Natural resource management. The State Director will develop a 
natural resource management guide. This guide will serve as an essential 
mechanism for implementing Sec. 1940.304 of this subpart; and, 
therefore, the guide must be consistent with and reflect the objectives 
and policies contained in Sec. 1940.304 of this subpart. At the same 
time, however, it must be tailored to take into account important State, 
regional, and local natural resource management objectives. The guide 
will be issued as a State Supplement for prior approval. The basic 
content, purposes, and uses of the guide are enumerated in exhibit B of 
this subpart and can be summarized as follows:
    (1) The guide will serve as a mechanism for assembling an inventory 
of the locations within the State of those natural resources, land uses, 
and environmental factors that have been specified by Federal, State and 
local authorities as deserving some degree of protection or special 
consideration;
    (2) The guide will summarize the various standards or types of 
Federal, State, or local protection that apply to

[[Page 16]]

the natural resources, land uses, and environmental factors listed in 
the inventory; and
    (3) Applications for individual projects must be reviewed for 
consistency with the guide.
    (c) Intergovernmental initiatives. When commenting on proposed 
Federal actions subject to environmental impact statements, FmHA or its 
successor agency under Public Law 103-354 commentors will focus on the 
consistency of these actions with the appropriate State natural resource 
management guide. A similar focus or element will be addressed in FmHA 
or its successor agency under Public Law 103-354's review of the 
Environmental Protection Agency's 201 Wastewater Management Plans.
    (d) Farmland Protection Policy Act and Departmental Regulation 9500-
3, Land Use Policy. The natural resource management guide serves as a 
tool for implementing the requirements of the Act and the Departmental 
Regulation at the broad level of implementing the Agency's programs at 
the State level. These requirements must also be followed in the review 
of applications for financial assistance or subdivision approval, as 
well as the disposal of real property. FmHA or its successor agency 
under Public Law 103-354's implementation procedures for the project 
review process are contained in exhibit C of this subpart.
    (e) Endangered Species. FmHA or its successor agency under Public 
Law 103-354 will implement the consultation procedures required under 
section 7 of the Endangered Species Act as specified in 50 CFR part 402. 
It is important to note that these consultation procedures apply to the 
disposal of real property and all FmHA or its successor agency under 
Public Law 103-354 applications for financial assistance and subdivision 
approval, including those applicants which are exempt from environmental 
assessments. FmHA or its successor agency under Public Law 103-354's 
implementation procedures are contained in exhibit D of this subpart.
    (f) Wild and scenic rivers. Each application for financial 
assistance or subdivision approval and the proposed disposal of real 
property will be reviewed to determine if it will affect a river or 
portion of it, which is either included in the National Wild and Scenic 
Rivers System, designated for potential addition to the system, or 
identified in the Nationwide Inventory prepared by the National Park 
Service (NPS) in the Department of the Interior (DOI). FmHA or its 
successor agency under Public Law 103-354's procedures for completing 
this review are contained in exhibit E of this subpart.
    (g) Historic and cultural properties. (1) As part of the 
environmental review process, FmHA or its successor agency under Public 
Law 103-354 will identify any properties that are listed in or may be 
eligible for listing in the National Register of Historic Places, and 
located within the area of potential environmental impact. 
Identification will consist of consulting the published lists of the 
National Register and formally contacting and seeking the comments of 
the appropriate State Historic Preservation Officer (SHPO). Since it is 
not always possible from the consultation with the SHPO to determine 
whether historic and cultural properties are present within the 
project's area of environmental impact, it may be necessary for FmHA or 
its successor agency under Public Law 103-354 to consult public records 
and other individuals and organizations, such as university 
archaeologists, local historical societies, etc. These latter 
discussions should take place before initiating a detailed site survey 
since they may provide reliable information that obviates the need for a 
survey. However, whenever insufficient information exists to document 
the presence or absence of potentially eligible National Register 
properties and where the potential for previously unidentified 
properties is recognized by FmHA or its successor agency under Public 
Law 103-354, the SHPO, or other interested parties, FmHA or its 
successor agency under Public Law 103-354 will conduct the necessary 
investigations to determine if such properties are present within the 
area of potential environmental impact. FmHA or its successor agency 
under Public Law 103-354 will involve the SHPO in the planning and 
formulation of any historic, cultural, architectural or archaeological 
testing,

[[Page 17]]

studies or surveys conducted to investigate the presence of such 
properties and will utilize persons with appropriate knowledge and 
experience.
    (2) If the information obtained, as a result of the consultation and 
investigations conducted by FmHA or its successor agency under Public 
Law 103-354, indicates the presence of an historic or cultural property 
within the area of potential environmental impact that, in the opinion 
of the SHPO and FmHA or its successor agency under Public Law 103-354, 
appear to meet the National Register Criteria (36 CFR 60.4), the 
property will be considered eligible for the National Register of 
Historic Places. If the SHPO and FmHA or its successor agency under 
Public Law 103-354 do not agree on the property's eligibility for the 
National Register or if the Secretary of the Interior or the Advisory 
Council on Historic Preservation so requests, FmHA or its successor 
agency under Public Law 103-354 will request a determination of 
eligibility from the Keeper of the National Register in accordance with 
36 CFR part 63. Consultations will be initiated with the SHPO and the 
Advisory Council on Historic Preservation in accordance with 36 CFR part 
800, through the implementation of subpart F of part 1901 of this 
chapter, to determine the most appropriate course of action to protect 
all National Register and eligible properties within the area of 
potential environmental impact.
    (3) Further instructions detailing the procedures to be followed in 
considering and protecting historic and cultural properties and the 
responsible Agency officials are contained in subpart F of part 1901 of 
this chapter. These procedures will be followed whenever a proposal, 
considered by FmHA or its successor agency under Public Law 103-354, has 
the potential to affect National Register or eligible properties.
    (h) Coastal barriers. In those States having coastal barriers within 
the Coastal Barrier Resources System, each application for financial 
assistance or subdivision approval, as well as the proposed disposal of 
real property, will be reviewed to determine if it would be located 
within the system, and, if so, whether the action must be denied on this 
basis or meets the Act's criteria for an exception. To accomplish the 
review, all affected State, District and County Offices will maintain a 
current set of maps, as issued by DOI, which depict those coastal 
barriers within their jurisdiction that have been included in the 
system. FmHA or its successor agency under Public Law 103-354's 
implementation procedures for accomplishing this review requirement and 
for consulting as necessary with DOI are contained in exhibit F of this 
subpart. The exceptions to the restrictions of the Coastal Barrier 
Resources Act are contained in exhibit L of this subpart.
    (i) Water and energy conservation. Water and energy conservation 
measures will be considered at both the program and project level in a 
manner consistent with program regulations.
    (j) Noise abatement. For purposes of assessing noise impacts and for 
determining the acceptability of housing sites in terms of their 
exposure to noise, FmHA or its successor agency under Public Law 103-354 
has adopted and follows the standards and procedures developed by the 
U.S. Department of Housing and Urban Development (HUD) and contained in 
24 CFR part 51 of subpart B entitled, ``Noise Abatement and Control.''
    (k) Water quality. Each application for financial assistance or 
subdivision approval and the proposed disposal of real property will be 
reviewed to determine if it would impair a State water quality standard 
or meet antidegradation requirements. When necessary, the proposed 
activity will be modified to protect water quality standards, including 
designated and/or existing beneficial uses that water quality criteria 
are designed to protect, and meet antidegradation requirements.



Sec. 1940.306  Environmental responsibilities within the National Office.

    (a) Administrator. The Administrator of FmHA or its successor agency 
under Public Law 103-354 has the direct responsibility for Agency 
compliance with all environmental laws, Executive orders, and 
regulations that apply to FmHA or its successor agency under

[[Page 18]]

Public Law 103-354's program and administrative actions. As such, the 
Administrator ensures that this responsibility is adequately delegated 
to Agency staff and remains informed on the general status of Agency 
compliance, as well as the need for any necessary improvements. The 
Administrator is also responsible for ensuring that the Agency's 
manpower and financial needs for accomplishing adequate compliance with 
this subpart are reflected and documented in budget requests for 
departmental consideration.
    (b) Deputy Administrator Program Operations. (1) The Deputy 
Administrator for Program Operations has the delegated overall Agency 
responsibility for developing and implementing environmental policies 
and compliance procedures, monitoring their effectiveness, and advising 
the Administrator on the status of compliance, to include 
recommendations for any necessary changes in this subpart. The incumbent 
is also responsible for developing and documenting, as part of the 
Agency's budget formulation process, the manpower and financial needs 
necessary to implement this subpart.
    (2) The specific responsibilities of the Deputy Administrator--
Program Operations are as follows:
    (i) Provide for the Agency an interdisciplinary approach to 
environmental impact analysis and problem resolution, as required by the 
CEQ regulations;
    (ii) Provide the leadership and technical expertise for the 
implementation of the Agency's environmental policies with special 
emphasis being placed on those policies relating to natural resource 
management, energy conservation, and orderly community development;
    (iii) Coordinate the implementation of this subpart with affected 
program offices;
    (iv) Provide policy direction and advice on the implementation of 
this subpart to Agency staff, particularly to SECs and technical support 
personnel within State Offices;
    (v) Consult and coordinate, as needed or upon request, with the 
Department's interagency committees dealing with environmental, land 
use, and historic preservation matters;
    (vi) Monitor the Agency's record in complying with this subpart;
    (vii) Provide training programs and materials for the Agency staff 
assigned the functions identified in this subpart;
    (viii) Review, as necessary, applications for funding assistance, 
proposed policies and regulations, and recommend their approval, 
disapproval, or modification after analyzing and considering their 
anticipated adverse environmental impacts, their benefits, and their 
consistency with the requirements of this subpart;
    (ix) Develop and direct Agency procedures for complying with 
environmental legislation, Executive orders, and regulations, including, 
but not limited to, those listed in Sec. 1940.301(c) of this subpart;
    (x) Maintain a position identified as the Senior Environmental 
Specialist (hereafter called the Environmental Specialist), who will 
serve as the responsible Agency official under the National 
Environmental Policy Act and the National Historic Preservation Act, 
maintain liaison on environmental matters with interested public groups 
and Federal agencies, and serve as the focal point for developing and 
coordinating the Agency's procedures for the requirements listed in 
Sec. 1940.301(c) of this subpart; and
    (xi) Review and evaluate legislative and administrative proposals in 
terms of their environmental impact.
    (c) Assistant Administrators for Programs. The Assistant 
Administrators for Programs will:
    (1) Ensure, as necessary, that environmental assessments and EISs 
for proposed program regulations are prepared by their staff;
    (2) Ensure that all proposed actions that fall under the 
requirements of this subpart, and that are submitted to the National 
Office for approval or concurrence, contain adequate analyses and 
documentation of their potential environmental impacts (Transfer of 
program funds from National Office to State Office control to enable the 
State Office to approve an application is not considered to be National 
Office approval of or concurrence in an application);

[[Page 19]]

    (3) Consider and include, in the development of program regulations, 
feasible policies and mechanisms that promote program goals in a manner 
that either enhances environmental quality or reduces unnecessary 
adverse environmental impacts; and
    (4) Designate one or more staff members to serve as a program 
environmental coordinator, having generally the same duties and 
responsibilities within the program office as the SEC has within the 
State Office (See Sec. 1940.307(b) of this subpart).



Sec. 1940.307  Environmental responsibilities within the State Office.

    (a) State Director. The State Director will:
    (1) Serve as the responsible FmHA or its successor agency under 
Public Law 103-354 official at the State Office level for ensuring 
compliance with the requirements of this subpart; and
    (2) Appoint one individual to serve as the SEC. Thereafter, the SEC 
will report directly to the State Director on the environmental matters 
contained in this subpart.
    (b) State Environmental Coordinator (SEC). The SEC will:
    (1) Act as advisor to the State Director on environmental matters 
and coordinate the requirements of this subpart;
    (2) Review those Agency actions which are not categorically excluded 
from this subpart (see Sec. Sec. 1940.311 and 1940.312 of this subpart) 
and which require the approval and/or clearance of the State Office and 
recommend to the approving official either project approval, 
disapproval, or modification after analyzing and considering the--
    (i) Anticipated adverse environmental impacts,
    (ii) The anticipated benefits, and
    (iii) The action's consistency with this subpart's requirements;
    (3) Represent the State Director at conferences and meetings dealing 
with environmental matters of a State Office nature;
    (4) Maintain liaison on State Office environmental matters with 
interested public groups and local, State, and other Federal agencies;
    (5) Serve as the State Director's alternate on State-level USDA 
committees dealing with environmental, land use and historic 
preservation matters;
    (6) Solicit, whenever necessary, the expert advice and assistance of 
other professional staff members within the State Office in order to 
adequately implement this subpart;
    (7) Provide technical assistance as needed on a project-by-project 
basis to State, District, and County Office staffs;
    (8) Develop controls for avoiding or mitigating adverse 
environmental impacts and monitor their implementation;
    (9) Provide assistance in resolving post-approval environmental 
matters at the State Office level;
    (10) Maintain records for those actions required by this subpart;
    (11) Coordinate for the State Director the development of the State 
Office natural resource management guide;
    (12) Provide direction and training to State, District, and County 
Office staffs on the requirements of this subpart; and
    (13) Coordinate for the State Director the monitoring of the State 
Office's compliance with this subpart and keep the State Director 
advised of the results of the monitoring process.
    (c) Program Chiefs. State Office Program Chiefs will:
    (1) Be responsible for the adequacy of the environmental impact 
reviews required by this subpart for all program actions to be approved 
at the State Office level or concurred in at that level;
    (2) Coordinate the above reviews as early as possible with the SEC, 
so that the latter can assist in addressing the resolution of any 
unresolved or difficult environmental issues in a timely manner; and
    (3) Incorporate into projects and actions measures to avoid or 
reduce potential adverse environmental impacts identified in 
environmental reviews.



Sec. 1940.308  Environmental responsibilities at the District and 
County Office levels.

    (a) The District Director will be responsible for carrying out the 
actions required by this subpart to be completed at the District Office 
level.
    (b) The County Supervisor will be responsible for carrying out the 
actions

[[Page 20]]

required by this subpart to be completed at the County Office level.
    (c) In discussing FmHA or its successor agency under Public Law 103-
354 assistance programs with potential applicants, District Directors 
and County Supervisors will inform them of the Agency's environmental 
requirements, as well as the environmental information needs and 
responsibilities that FmHA or its successor agency under Public Law 103-
354 applicants are expected to address. (See Sec. 1940.309 of this 
subpart.)



Sec. 1940.309  Responsibilities of the prospective applicant.

    (a) FmHA or its successor agency under Public Law 103-354 expects 
applicants and transferees (and in the case of the loan guarantee 
programs, borrowers and transferees) to consider the potential 
environmental impacts of their requests at the earliest planning stages 
and to develop proposals that minimize the potential to adversely impact 
the environment. Prospective applicants should contact County 
Supervisors or District Directors, as appropriate, to determine FmHA or 
its successor agency under Public Law 103-354's environmental 
requirements as soon as possible after they decide to pursue FmHA or its 
successor agency under Public Law 103-354 financial assistance.
    (b) As specified in paragraph (c) of this section, applicants for 
FmHA or its successor agency under Public Law 103-354 assistance will be 
required to provide information necessary to FmHA or its successor 
agency under Public Law 103-354 to evaluate their proposal's potential 
environmental impacts and alternatives to them. For example, the 
applicant will be required to provide a complete description of the 
project elements and the proposed site(s) to include location maps, 
topographic maps, and photographs when needed. The applicant will also 
be required to provide data on any expected gaseous, liquid and solid 
wastes to be produced, including hazardous wastes as defined by the 
Resource Conservation and Recovery Act or State law, and all permits 
and/or correspondence issued by the appropriate local, State, and 
Federal agencies which regulate treatment and disposal practices.
    (c) Form FmHA or its successor agency under Public Law 103-354 1940-
20, ``Request for Environmental Information,'' will be used for 
obtaining environmental information from applicants whose proposals 
require an environmental assessment under the requirements of this 
subpart. These same applicants must notify the appropriate State 
Historic Preservation Officer of the filing of the application and 
provide a detailed project description as specified in Item 2 of Form 
FmHA or its successor agency under Public Law 103-354 1940-20 and the 
FMI. If the applicant's proposal meets the definition of a Class II 
action as defined in Sec. 1940.312 of this subpart, all of Form FmHA or 
its successor agency under Public Law 103-354 1940-20 must be completed. 
If the applicant's proposal meets the definition of a Class I action as 
defined in Sec. 1940.311 of this subpart, the entire form need not be 
completed, but just the face of the form and categories (1), (2), (13), 
(15), (16), and (17) of Item 1b of the FMI. As an exception to the 
foregoing statement, an applicant for an action that is normally 
categorically excluded but requires a Class I assessment for any of the 
reasons stated in Sec. 1940.317(e) of this subpart is not required to 
complete Form FmHA or its successor agency under Public Law 103-354 
1940-20. Additionally, for Class I actions within the Farm Programs, a 
site visit by the FmHA or its successor agency under Public Law 103-354 
official completing the environmental assessment obviates the need for 
the applicant to complete any of the form, and the adoption by FmHA or 
its successor agency under Public Law 103-354 of a Soil Conservation 
Service (SCS) environmental assessment or evaluation for the action 
obviates the need to complete the form for either a Class I or Class II 
action.
    (d) Applicants will ensure that all required materials are current, 
sufficiently detailed and complete, and are submitted directly to the 
FmHA or its successor agency under Public Law 103-354 office processing 
the application. Incomplete materials or delayed submittals may 
seriously jeopardize consideration or postponement of a proposed action 
by FmHA or its successor agency under Public Law 103-354.

[[Page 21]]

    (e) During the period of application review and processing, 
applicants will not take any actions with respect to their proposed 
undertakings which are the subject of the application and which would 
have an adverse impact on the environment or limit the range of 
alternatives. This requirement does not preclude development by 
applicants of preliminary plans or designs or performance of other work 
necessary to support an application for Federal, State, or local permits 
or assistance. However, the development of detailed plans and 
specifications is discouraged when the costs involved inhibit the 
realistic consideration of alternative proposals.
    (f) Applicants are required to provide public notification and to 
fully cooperate in holding public information meetings as described in 
Sec. Sec. 1940.318(e), 1940.320 (c) and (g), and 1940.331 (b) and (c) 
of this subpart.
    (g) Any applicant that is directly and adversely affected by an 
administrative decision made by FmHA or its successor agency under 
Public Law 103-354 under this subpart may appeal that decision under the 
provisions of subpart B of part 1900 of this chapter.



Sec. 1940.310  Categorical exclusions from National Environmental Policy 
Act (NEPA) reviews.

    (a) General guidelines. The following actions have been determined 
not to have a significant impact on the quality of the human 
environment, either individually or cumulatively. They will not be 
subject to environmental assessments or impact statements. It must be 
emphasized that even though these actions are excluded from further 
environmental reviews under NEPA, they are not excluded from either the 
policy considerations contained in Sec. Sec. 1940.303 through 1940.305 
of this subpart or from compliance with other applicable local, State, 
or Federal environmental laws. Also, the actions preceded by an asterisk 
(*) are not excluded from further review depending upon whether in some 
cases they would be located within, or in other cases, potentially 
affect:
    (1) A floodplain,
    (2) A wetland,
    (3) Important farmlands, or prime forestlands or rangelands,
    (4) A listed species or critical habitat for an endangered species,
    (5) A property that is listed on or may be eligible for listing on 
the National Register of Historic Places,
    (6) An area within an approved State coastal zone management 
program,
    (7) A coastal barrier or a portion of a barrier within the Coastal 
Barrier Resources System,
    (8) A river or portion of a river included in, or designated for, 
potential addition to the Wild and Scenic Rivers System,
    (9) A sole source aquifer recharge area, or
    (10) A State water quality standard (including designated and/or 
existing beneficial uses and antidegradation requirements).
    (i) Whether location within one of the preceding resource areas is 
sufficient to require a further review or a potential impact to one of 
them must also be identified to require a review is determined by FmHA 
or its successor agency under Public Law 103-354's completion of Form 
FmHA or its successor agency under Public Law 103-354 1940-22 in 
accordance with the FMI and Sec. 1940.317 of this subpart.
    (ii) When the categorical exclusion classification is lost, as 
specified in Sec. 1940.317 of this subpart, the action must be reviewed 
under the requirements of paragraph (g) of that section. This 
requirement serves to implement Sec. 1508.4 of the CEQ regulations 
which requires Federal agencies to detect extraordinary circumstances in 
which a normally excluded action may have a significant environmental 
effect.
    (iii) Further guidance on the use of these exclusions is contained 
in Sec. 1940.317 of this subpart.
    (b) Housing assistance. *(1) The provision of financial assistance 
for the purchase of a single family dwelling or a multi-family project 
serving no more than four families, i.e. units;
    (2) The approval of an individual building lot that is located on a 
scattered site and either not part of a subdivision or within a 
subdivision not requiring FmHA or its successor agency under Public Law 
103-354's approval;
    *(3) Rehabilitation, replacement, or renovation of any existing 
housing

[[Page 22]]

units, with no expansion in the number of units;
    (4) Self-Help Technical Assistance Grants;
    *(5) The approval of a subdivision that consists of four or fewer 
lots and is not part of, or associated with, building lots or 
subdivisions;
    (6) Technical Supervisory Assistance Loans and Grants;
    (7) Weatherization of any existing housing unit(s), unless the 
property is listed in the National Register of Historic Places or may be 
eligible for listing, or is located either within the Coastal Barrier 
Resources System or in a listed or potentially eligible historic 
district, in which case the application will require a Class I 
assessment as specified in Sec. 1940.317(g) of this subpart;
    (8) The financing of housing construction or the approval of lots in 
a previously approved FmHA or its successor agency under Public Law 103-
354 subdivision provided that
    (i) The action is consistent with all previously adopted 
stipulations for the multi-family housing project or subdivision, and
    (ii) The FmHA or its successor agency under Public Law 103-354 
environmental impact review that was previously completed for the 
original application is still current with respect to applicable 
environmental requirements and conditions present at the site, and it 
assessed the lots or expansion for which approval is being requested;
    (9) The purchase of any existing, non-FmHA or its successor agency 
under Public Law 103-354 owned housing unit(s), unless the property is 
listed in the National Register of Historic Places or may be eligible 
for listing, or is located either within a 100-year floodplain, the 
Coastal Barrier Resources System, or in a listed or potentially eligible 
historic district, in which case the application will require a Class I 
assessment as specified in Sec. 1940.317(g) of this subpart; and
    (10) Appraisals of nonfarm tracts and small farms for rural housing 
loans.
    (c) Community and business programs and nonprofit national 
corporations loan and grant program. *(1) Financial assistance directed 
to existing businesses, facilities, and/or structures that does not 
involve new construction or large increases in employment; does not 
involve a facility that presently or previously produced or stored 
hazardous waste or disposed of hazardous waste on the facility's 
property; and does not result in the increased production of gaseous, 
liquid, or solid wastes, or a change in the type or content of such 
wastes as long as waste production, handling, treatment and disposal 
practices presently comply with applicable Federal, State and local 
regulations and there is no history of violations. If any of these waste 
production, handling, treatment, disposal or compliance criteria cannot 
be met, a Class I assessment must be initiated to include a narrative 
discussion of the types and quantities of wastes produced and the 
adequacy of the treatment, storage, and disposal practices, if the 
involved wastes meet the criteria for a Class I assessment contained in 
Sec. 1940.311(b)(3)(iii) of this subpart. If not, a Class II assessment 
must be completed.
    *(2) Projects that solely involve the acquisition, construction, 
reconstruction, renovation, or installation of facilities, structures or 
businesses, for replacement or restoration purposes, with minimal change 
in use, size, capacity, purpose or location from the original facility 
(e.g., replacement in-kind of utilities such as water or sewer lines and 
appurtenances, reconstruction of curbs and sidewalks, street repaving, 
and building modifications, renovations, and improvements);
    (3) Project management actions relating to invitation for bids, 
contract award, and the actual physical commencement of construction 
activities;
    (4) Financial assistance for a technical assistance grant under the 
nonprofit national corporation loan and grant program;
    (5) Projects that solely involve the purchase and installation of 
office equipment, public safety equipment, or motor vehicles; and
    (6) Amendments to approved projects meeting the criteria of 
paragraph (e)(2) of this section.
    (d) Farm programs. (1) Financial assistance for the purchase of an 
existing farm, or an enlargement to one, provided no shifts in land use 
are proposed

[[Page 23]]

beyond the limits stated in paragraphs (d) (10) and (11) of this 
section;
    (2) Financial assistance for the purchase of livestock and essential 
farm equipment, including crop storing and drying equipment, provided 
such equipment is not to be used to accommodate shifts in land use 
beyond the limits stated in paragraphs (d) (10) and (11) of this 
section;
    (3) Financial assistance for:
    (i) The payment of annual operating expenses, which does not cover 
activities specifically addressed in this section or Sec. 1940.311 or 
Sec. 1940.312 of this subpart;
    (ii) Family living expenses, and
    (iii) Refinancing debts;
    *(4) Financial assistance for the construction of essential farm 
dwellings and service buildings of modest design and cost, as well as 
repairs and improvements to them;
    (5) Financial assistance for onsite water supply facilities to serve 
a farm dwelling, farm buildings, and livestock needs;
    (6) Financial assistance for the installation or enlargement of 
irrigation facilities, including storage reservoirs, diversion dams, 
wells, pumping plants, canals, pipelines, and sprinklers designed to 
irrigate less than 80 acres, provided that neither a State water quality 
standard, a property listed or potentially eligible for listing on the 
National Register of Historic Places, a river or portion of a river 
included in, or designated for, potential addition to the Wild and 
Scenic Rivers System, nor a wetland is affected. If a wetland is 
affected, the application will fall under Class II as defined in Sec. 
1940.312 of this subpart. Potential effects to a water quality standard, 
an historic property or the Wild and Scenic Rivers System require that a 
review be initiated under a Class I assessment as specified in Sec. 
1940.317(g) of this subpart.
    (7) Financial assistance that solely involves the replacement or 
restoration of irrigation facilities, to include those facilities 
described in paragraph (d)(6) of this section, with minimal change in 
use, size, capacity, or location from the original facility(s) provided 
that neither a State water quality standard, a property listed or 
potentially eligible for listing on the National Register of Historic 
Places, a river or portion of a river included in or designated for 
potential addition to the Wild and Scenic Rivers System, nor a wetland 
is affected. If a wetland is affected, the application will fall under 
Class II as defined in Sec. 1940.312 of this subpart. Potential effects 
to a water quality standard, an historic property, or the Wild and 
Scenic Rivers System require that a Class I assessment be completed as 
specified in Sec. 1940.317(g) of this subpart. Also, to qualify for 
this exclusion, the facilities to be replaced or restored must have been 
used for similar irrigation purposes at least two out of the last three 
consecutive growing seasons. Otherwise, the action will be viewed as an 
installation of irrigation facilities.
    (8) Financial assistance for the development of farm ponds or lakes 
of no more than 5 acres in size, provided that, neither a State water 
quality standard, a property listed or potentially eligible for listing 
on the National Register of Historic Places, a river or portion of a 
river included in or designated for potential addition to the Wild and 
Scenic Rivers System, nor a wetland is affected. If a wetland is 
affected, the application will fall under Class II as defined in Sec. 
1940.312 of this subpart. Potential effects to a water quality standard, 
an historic property, or the Wild and Scenic Rivers System require that 
a review be initiated under a Class I assessment as specified in Sec. 
1940.317(g) of this subpart;
    *(9) Financial assistance for the conversion of:
    (i) Land in agricultural production to pastures or forests, or
    (ii) Pastures to forests;
    *(10) Financial assistance for land-clearing operations of no more 
than 15 acres, provided no wetlands are affected, and financial 
assistance for any amount of land involved in tree harvesting conducted 
on a sustained yield basis and according to a Federal, State or other 
governmental unit approved forestry management and marketing plan; and
    (11) Financial assistance for the conversion of no more than 160 
acres of pasture to agricultural production, provided that in a 
conversion to agricultural production no State water

[[Page 24]]

quality standard or wetlands are affected. If a wetland is affected, the 
application will fall under Class II as defined in Sec. 1940.312 of 
this subpart. If a water quality standard would be impaired or 
antidegradation requirement not met, a Class I assessment is required as 
specified in Sec. 1940.317(g) of this subpart.
    (e) General exclusions. (1) The award of financial assistance for 
planning purposes, management and feasibility studies, or environmental 
impact analyses;
    (2) For actions other than those covered by exhibit M of this 
subpart, loan-closing and servicing activities, transfers, assumptions, 
subordinations, construction management activities and amendments and 
revisions to approved projects, including the provision of additional 
financial assistance that do not alter the purpose, operation, location, 
or design of the project as originally approved;
    (3) The issuance of regulations and instructions, as well as 
amendments to them, describing administrative and financial procedures 
for processing, approving, and implementing the Agency's financial 
assistance programs;
    (4) Procurement activities for goods and services, routine facility 
operations, personnel actions, and other such management activities 
related to the operation of the Agency;
    (5) Reduction in force or employee transfers resulting from workload 
adjustments, reduced personnel or funding levels, skill imbalances, or 
other similar circumstances; and
    *(6) The lease or disposal of real property by FmHA or its successor 
agency under Public Law 103-354 whenever the transaction is either not 
controversial for environmental reasons or will not result in a change 
in use of the real property within the reasonably foreseeable future.



Sec. 1940.311  Environmental assessments for Class I actions.

    The Agency's proposals and projects that are not identified in Sec. 
1940.310 of this subpart as categorical exclusions require the 
preparation of an environmental assessment in order to determine if the 
proposal will have a significant impact on the environment. For purposes 
of implementing NEPA, the actions listed in this section are presumed to 
be major Federal actions. If an action has a potential to create a 
significant environmental impact, an EIS must be prepared. (In 
situations when there is clearly a potential for a significant impact, 
the EIS may be initiated directly without the preparation of an 
assessment.) It is recognized that many of the applications funded 
annually by FmHA or its successor agency under Public Law 103-354 
involve small-scale projects having limited environmental impacts. 
However, because on occasion they have the potential to create a 
significant impact, each must be assessed to determine the degree of 
impact. The scope and level of detail of an assessment for a small-scale 
action, though, need only be sufficient to determine whether the 
potential impacts are substantial and further analysis is necessary. 
Therefore, for the purpose of implementing NEPA, FmHA or its successor 
agency under Public Law 103-354 has classified its smaller scale 
approval actions as Class I actions. The format which will be used for 
accomplishing the environmental assessment of a Class I action is 
provided in Form FmHA or its successor agency under Public Law 103-354 
1940-21. An important aspect of this classification method is that it 
allows FmHA or its successor agency under Public Law 103-354's 
environmental review staff to concentrate most of its time and efforts 
on those actions having the potential for more serious or complex 
environmental impacts. Additional guidance on the application of NEPA to 
Class I actions is provided in Sec. 1940.319 of this subpart.
    (a) Housing assistance. If either of the following actions is an 
expansion of a previously approved FmHA or its successor agency under 
Public Law 103-354 housing project, see Sec. 1940.310(b)(8) of this 
subpart to determine if it meets the requirements for a categorical 
exclusion. In the case of an expansion for which an environmental 
assessment was not done for the original FmHA or its successor agency 
under Public Law 103-354 project, the size of the proposal for 
assessment purposes is determined by adding the number of units in the

[[Page 25]]

original project(s) to those presently being requested.
    (1) Financial assistance for a multi-family housing project, 
including labor housing which comprises at least 5 units, but no more 
than 25 units; and
    (2) Financial assistance for or the approval of a subdivision, as 
well as the expansion of an existing one which involves at least 5 lots 
but no more than 25 lots; and
    (3) Financial assistance for a housing preservation grant.
    (b) Community and business programs and nonprofit national 
corporations loan and grant program. Class I assessments will be 
prepared for the following categories:
    (1) Financial assistance for water and waste disposal facilities and 
natural gas facilities that meet all of the following criteria:
    (i) There will not be a substantial increase in the volume of 
discharge or the loading of pollutants from any existing or expanded 
sewage treatment facilities, or a substantial increase in an existing 
withdrawal from surface or ground waters. A substantial increase may be 
evidenced by an increase in hydraulic capacity or the need to obtain a 
new or amended discharge or withdrawal permit.
    (ii) There will not be either a new discharge to surface or ground 
waters or a new withdrawal from surface or ground waters such that the 
design capacity of the discharge or withdrawal facility exceeds 50,000 
gallons per day and provided that the potential water quality impacts 
are documented in a manner required for a Class II assessment and 
attached as an exhibit to the Class I assessment.
    (iii) From the boundaries listed below, there is no extension, 
enlargement or construction of interceptors, collection, transmission or 
distribution lines beyond a one-mile limit estimated from the closest 
point of the boundary most applicable to the proposed service area:
    (A) The boundary formed by the corporate limits of the community 
being served.
    (B) If there are developed areas immediately contiguous to the 
corporate limits of a community, the boundary formed by the limits of 
these developed areas.
    (C) If an unincorporated area is to be served, the boundary formed 
by the limits of the developed areas.
    (iv) The proposal is designed for predominantly residential use with 
other new or expanded users being small-scale commercial enterprises 
having limited secondary impacts.
    (v) For a proposed expansion of sewage treatment or water supply 
facilities, such expansions would serve a population that is no more 
than 20 percent greater than the existing population.
    (vi) The proposal is not controversial for environmental reasons, 
nor have relevant questions been raised regarding its environmental 
impact which cannot be addressed in a Class I assessment.
    (2) Financial assistance for group homes, detention facilities, 
nursing homes, or hospitals, providing a net increase in beds of not 
more than 25 percent or 25 beds, whichever is greater; and
    (3) Financial assistance for the construction or expansion of 
facilities, such as fire stations, real stores, libraries outpatient 
medical facilities, service industries, additions to manufacturing 
plants, office buildings, and wholesale industries, that:
    (i) Are confined to single, small sites; and
    (ii) Are not a source of substantial traffic generation; and
    (iii) Do not produce either substantial amounts of liquid or solid 
wastes or any of the following type(s) of wastes:
    (A) Gaseous, liquid, or solid waste that is hazardous toxic, 
radioactive, or odorous;
    (B) Either a liquid waste, whether or not disposed of on-site, that 
cannot be accepted by a publicly owned treatment works without first 
receiving pretreatment, or a liquid waste discharge that is a point 
source subject to a Federal, or State discharge permit; or
    (C) Gaseous waste or air pollutant that will be emitted either from 
a new source at a rate greater than one hundred tons per year or from an 
expanded

[[Page 26]]

source at a rate greater than twenty-five tons per year.
    (4) Financial assistance for a livestock-holding facility or feed-
lot meeting the criteria of Sec. 1940.311(c)(8) of this subpart.
    (c) Farm Programs. In completing environmental assessments for the 
following Class I actions and the Class II actions listed in Sec. 
1940.312(d), special attention will be given to avoiding a duplication 
of effort with other Department agencies, particularly SCS. For 
applications in which the applicant is receiving assistance from other 
agencies, technical assistance from SCS, for example, FmHA or its 
successor agency under Public Law 103-354 will request from that agency 
a copy of any applicable environmental review conducted by it and will 
adopt that review if the requirements of Sec. 1940.324 of this subpart 
are met. FmHA or its successor agency under Public Law 103-354 will work 
closely with the other Federal Agencies to supplement previous or 
ongoing reviews whenever they cannot be readily adopted.
    (1) Financial assistance for the installation or enlargement of 
irrigation facilities including storage reservoirs, diversion dams, 
wells, pumping plants, canals, pipelines, and sprinklers designed to 
irrigate at least 80 acres, but no more than 160 acres and provided that 
no wetlands are affected, in which case the application will fall under 
Class II as defined in Sec. 1940.312 of this subpart:
    (2) Financial assistance for the development of farm ponds or lakes 
of more than 5 acres in size, but no more than 10 acres, provided that 
no wetlands are affected. If wetlands are affected, the application will 
fall under Class II as defined in Sec. 1940.312 of this subpart;
    (3) Financial assistance for land-clearing operations encompassing 
over 15 acres, but no more than 35 acres, provided that no wetlands are 
affected. If wetlands are affected, the application will fall under 
Class II as defined in Sec. 1940.312 of this subpart;
    (4) Financial assistance for the construction of energy producing 
facilities designed for on-farm needs such as methane digestors and fuel 
alcohol production facilities;
    (5) Financial assistance for the conversion of more than 160 acres 
of pasture to agricultural production, but no more than 320 acres, 
provided that in a conversion to agricultural production no wetlands are 
affected, in which case the application will fall under Class II as 
defined in Sec. 1940.312 of this subpart;
    (6) Financial assistance to grazing associations;
    (7) Financial assistance for the use of a farm or portion of a farm 
for recreational purposes or nonfarm enterprises utilizing no more than 
10 acres, provided that no wetlands are affected. If wetlands are 
affected, the application will fall under Class II as defined in Sec. 
1940.312 of this subpart; and
    (8) Financial assistance for a livestock-holding facility or feedlot 
having a capacity of at least one-half of those listed in Sec. 
1940.312(c)(9) of this subpart. (If the facility is located near a 
populated area or could potentially violate a State water quality 
standard, it will be treated as a Class II action as required by Sec. 
1940.312(c)(10) of this subpart.)
    (d) General. (1) Any Federal action which is defined in Sec. 
1940.310 of this subpart as a categorical exclusion, but which is 
controversial for environmental reasons, or which is the subject of an 
environmental complaint raised by a government agency, interested group, 
or citizen;
    (2) Loan-closing and servicing activities, transfers, assumptions, 
subordinations, construction management activities, and amendments and 
revisions to all approved actions listed either in this section or 
equivalent in size or type to such actions and that alter the purpose, 
operation, location or design of the project as originally approved;
    (3) The lease or disposal of real property by FmHA or its successor 
agency under Public Law 103-354 which meets either the following 
criteria:
    (i) The lease or disposal may result in a change in use of the real 
property in the reasonably foreseeable future, and such change is 
equivalent in magnitude or type to either the Class I actions defined in 
this section or the categorical exclusions defined in Sec. 1940.310 of 
this subpart; or
    (ii) The lease or disposal is controversial for environmental 
reasons,

[[Page 27]]

and the real property is equivalent in size or type to either the Class 
I actions defined in this section or the categorical exclusions defined 
in Sec. 1940.310 of this subpart.



Sec. 1940.312  Environmental assessments for Class II actions.

    Class II actions are basically those which exceed the thresholds 
established for Class I actions and, consequently, have the potential 
for resulting in more varied and substantial environmental impacts. A 
more detailed environmental assessment is, therefore, required for Class 
II actions in order to determine if the action requires an EIS. The 
format that will be used for completing this assessment is included as 
exhibit H of this subpart. Further guidance on Class II actions is 
contained in Sec. 1940.318 of this subpart. Class II actions are 
presumed to be major Federal actions and are defined as follows:
    (a) Housing assistance. If either of the following actions is an 
expansion of a previously approved FmHA or its successor agency under 
Public Law 103-354 housing project, see Sec. 1940.310(b)(8) of this 
subpart to determine if it meets the requirements for a categorical 
exclusion, otherwise it is a Class II action.
    (1) Financial assistance for a multi-family housing project, 
including labor housing, which comprises more than 25 units; and
    (2) Financial assistance for, or the approval of, a subdivision as 
well as the expansion of an existing one, which involves more than 25 
lots.
    (b) Community and business programs and nonprofit national 
corporations loan and grant program. (1) Class II actions are those 
which either do not meet the criteria for a categorical exclusion as 
stated in Sec. 1940.311 of this subpart, or involve a livestock-holding 
facility or feedlot meeting the criteria for a Class II action as 
defined in paragraphs (c) (9) and (10) of this section; and
    (2) Non-technical assistance grant or loan guarantee under nonprofit 
national corporation loan and grant program.
    (c) Farm programs. In completing environmental assessments for the 
following actions, FmHA or its successor agency under Public Law 103-354 
will first determine if the applicant has sought technical assistance 
from the Soil Conservation Service (SCS). If not, the applicant will be 
requested to do so. Subsequently, an approved loan will be structured so 
as to be consistent with any conservation plan developed with the 
application by SCS. However, the FmHA or its successor agency under 
Public Law 103-354 approving official need not include an element of the 
conservation plan within the loan agreement if that official determines 
that the element is both nonessential to the accomplishment of the 
plan's objectives and so costly as to prevent the borrower from being 
able to repay the loan. The SCS environmental review will be adopted by 
FmHA or its successor agency under Public Law 103-354 if the 
requirements of Sec. 1940.324 of this subpart are met.
    (1) Financial assistance for the installation or enlargement of 
irrigation facilities including storage reservoirs, diversion dams, 
wells, pumping plants, canals, pipelines, and sprinklers either designed 
to irrigate more than 160 acres or that would serve any amount of 
acreage and affects a wetland;
    (2) Financial assistance for the development of farm ponds or lakes 
either larger than 10 acres in size or for any smaller size that would 
affect a wetland;
    (3) Financial assistance for land-clearing operations either 
encompassing more than 35 acres or affecting a wetland, if less than 35 
acres is involved;
    (4) Financial assistance for the construction or enlargement of 
aquaculture facilities;
    (5) Financial assistance for the conversion of more than 320 acres 
of pasture to agricultural production or for any smaller conversion of 
pasture to agricultural production that affects a wetland;
    (6) Financial assistance to an individual farmer or an association 
of farmers for water control facilities such as dikes, detention 
reservoirs, stream channels, and ditches;
    (7) Financial assistance for the use of a farm or portion of a farm 
for recreational purposes or nonfarm enterprises either utilizing more 
than 10

[[Page 28]]

acres or affecting a wetland, if less than 10 acres is involved.
    (8) Financial assistance for alteration of a wetland;
    (9) Financial assistance for a livestock-holding facility or feedlot 
located in a sparsely populated farming area having a capacity as large 
or larger than one of the following capacities; 1,000 slaughter steers 
and heifers; 700 mature dairy cattle (whether milkers or dry cows); 
2,500 swine; 10,000 sheep; 55,000 turkeys; 100,000 laying hens or 
broilers when facility has unlimited continuous flow watering systems; 
30,00 laying hens or broilers when facility has liquid manure handling 
system; 500 horses; and 1,000 animal units from a combination of 
slaughter steers and heifers, mature dairy cattle, swine, and sheep; 
(The term animal unit means a unit of measurement for any animal feeding 
operation calculated by adding the following numbers: the number of 
slaughter and feeder cattle multiplied by 1.0, plus the number of mature 
dairy cattle multiplied by 1.4, plus the number of swine weighing over 
25 kilograms (approximately 55 pounds) multiplied by 0.4, plus the 
number of sheep multiplied by 0.1, plus the number of horses multiplied 
by 2.0) and
    (10) Financial assistance for a livestock-holding facility or 
feedlot which either could potentially violate a State water quality 
standard or is located near a town or collection of rural homes which 
could be impacted by the facility, particularly with respect to noise, 
odor, visual, or transportation impacts and having a capacity of at 
least one-half of those listed in paragraph (c)(9) of this section.
    (d) General. (1) Any action which meets the numerical criteria or 
other restriction for a Class I action contained in Sec. 1940.311 of 
this subpart, but is controversial for environmental reasons. If the 
action is the subject of isolated environmental complaints or any 
questions or concerns that focus on a single impact, air quality, for 
example, the analysis of such a complaint or questions can be handled 
under the assessment format for a Class I action, Form FmHA or its 
successor agency under Public Law 103-354 1940-21, as explained in Sec. 
1940.319 of this subpart. When several potential impacts are questioned, 
however, the assessment format (exhibit H of this subpart) for a Class 
II action must be used to address these questions;
    (2) Loan-closing and servicing activities, transfers, assumptions, 
subordinations, construction management activities and amendments and 
revisions to all approved actions listed either in this section or 
equivalent in size or type to such actions and that alter the purpose, 
operation, location, or design of the project as originally approved;
    (3) The approval of plans and State Investment Strategies for Energy 
Impacted Areas, designated under section 601 Energy Impacted Area 
Development Assistance Program, as well as the applications for 
financial assistance (excluding the award of planning funds) for Energy 
Impact Areas;
    (4) Proposals for legislation as defined in CEQ's regulations, Sec. 
1508.17;
    (5) The issuance of regulations and instructions, as well as 
amendments to these, that described either the entities, proposals and 
activities eligible for FmHA or its successor agency under Public Law 
103-354 financial assistance, or the manner in which such proposals and 
activities must be located, constructed, or implemented; and
    (6) The lease or disposal of any real property by FmHA or its 
successor agency under Public Law 103-354 which either does not meet the 
criteria for a categorical exclusion as stated in Sec. 1940.310(e)(6) 
of this subpart or a Class I action as stated in Sec. 1940.311(d)(3) of 
this subpart.



Sec. 1940.313  Actions that normally require the preparation of an 
Environmental Impact Statement (EIS).

    The environmental assessment process will be used, as defined in 
this subpart, to identify on a case-by-case basis those actions for 
which the preparation of an EIS is necessary. Given the variability of 
the types and locations of actions taken by FmHA or its successor agency 
under Public Law 103-354, no groups or set of actions can be identified 
which in almost every case would require the preparation of an EIS.

[[Page 29]]



Sec. 1940.314  Criteria for determining a significant environmental 
impact.

    (a) EISs will be done for those Class I and Class II actions that 
are determined to have a significant impact on the quality of the human 
environment. The criteria for determining significant impacts are 
contained in Sec. 1508.27 of the CEQ regulations.
    (b) In utilizing the criteria for a significant impact, the 
cumulative impacts of other FmHA or its successor agency under Public 
Law 103-354 actions planned or recently approved in the proposal's area 
of environmental impact, other related or similarly located Federal 
actions, and non-federal related actions must be given consideration. 
This is particularly relevant for frequently recurring FmHA or its 
successor agency under Public Law 103-354 actions that on an individual 
basis may have relatively few environmental impacts but create a 
potential for significantly impacts on a cumulative basis. Housing 
assistance is one such example. Consequently, in reviewing proposals for 
subdivisions and multi-family housing sites, consideration must be given 
to the cumulative impacts of other federally assisted housing in the 
area, including FmHA or its successor agency under Public Law 103-354's. 
The boundaries of the area to be considered should be based upon such 
factors as common utility or public service districts, common 
watersheds, and common commuting patterns to central employment or 
commercial areas. Additionally, the criteria for significant impacts 
utilized by the other involved housing agency(s), (VA and HUD, for 
example) must be reviewed when there is a potential for cumulative 
impacts. FmHA or its successor agency under Public Law 103-354 will 
consult with HUD for determining a significant impact whenever the total 
of HUD and FmHA or its successor agency under Public Law 103-354 housing 
units being planned within a common area of environmental impact exceeds 
the HUD thresholds listed in its NEPA regulations. (See 24 CFR part 50.)
    (c) Because the environmental values and functions of floodplains 
and wetlands are of critical importance to man, and because these areas 
are often extremely sensitive to man-induced disturbances, actions which 
affect wetlands and floodplains will be considered to have a significant 
environmental impact whenever one or more of the following criteria are 
met:
    (1) The public health and safety are identifiably affected, that is, 
whenever the proposed action may affect any standards promulgated under 
the Safe Drinking Water Act (42 U.S.C. 300f et seq.), the Clean Water 
Act (33 U.S.C. 1251 et seq.) or similar State authorities.
    (2) The preservation of natural systems is identifiably affected, 
that is, whenever the proposed action or related activities may 
potentially create or induce changes in the existing habitat that may 
affect species diversity and stability (both flora and fauna and over 
the short and long term) or affect ecosystem productivity over the long 
term.
    (3) The proposal, if located or carried out within a floodplain, 
poses a greater than normal risk for flood-caused loss of life or 
property. Examples of such actions include facilities which produce, 
use, or store highly volatile, toxic, or water-reactive materials or 
facilities which contain occupants who may not be sufficiently mobile to 
avoid the loss of life or injury during flood and storm events (i.e., 
hospitals, nursing homes, schools).



Sec. 1940.315  Timing of the environmental review process.

    (a) The FmHA or its successor agency under Public Law 103-354 office 
to which a potential applicant would go to seek program information and 
request application materials will notify the applicant of the major 
environmental requirements applicable to the type of assistance being 
sought. Emphasis should be placed on describing FmHA or its successor 
agency under Public Law 103-354's natural resource management policies, 
the nature and purpose of the environmental impact assessment process, 
and the permissible actions of the applicant during this process.
    (b) When a preapplication is either filed by the applicant or 
required by FmHA or its successor agency under Public Law 103-354 for a 
project not categorically excluded, the prospective

[[Page 30]]

applicant will be requested to complete Form FmHA or its successor 
agency under Public Law 103-354 1940-20 at the time of the issuance of 
Form AD-622, ``Notice of Preapplication Review Action,'' or other notice 
inviting an application. Form AD-622 will clearly inform the applicant 
that during the period of application review, the applicant is to take 
no actions or incur any obligations which would either limit the range 
of alternatives to be considered or which would have an adverse effect 
on the environment, and that satisfactory completion of the 
environmental review process must occur prior to the issuance of the 
letter of conditions for Community Programs and prior to loan approval 
for all other programs where a preapplication is used. FmHA or its 
successor agency under Public Law 103-354 must make its environmental 
reviews simultaneously with other loan processing actions so that they 
are an integral part of the loan process. Whenever the potential for a 
major adverse environmental impact is recognized, such as issues 
pertaining to floodplains, wetlands, endangered species, or the need for 
an EIS, priority consideration will be given to resolving this issue by 
appropriate FmHA or its successor agency under Public Law 103-354 staff. 
Loan processing need not cease during this resolution period, but loan 
processing actions will not be taken that might limit alternatives to be 
considered or whose outcome may be affected by the environmental review. 
The environmental impact review (whether a categorical exclusion, 
environmental assessment or EIS) must be completed prior to the issuance 
of the letter of conditions for Community Programs, prior to issuance of 
a conditional commitment for the Business and Industry and Farmer 
Program Guaranteed Loan Programs, and either prior to loan approval or 
obligation of funds, whichever occurs first, for all other programs 
where a preapplication is used. As an exception, however, whenever an 
application must be submitted to the National Office for concurrence or 
approval, the environmental review must be completed prior to and 
included in the submission to the National Office. The environmental 
impact review is not completed by FmHA or its successor agency under 
Public Law 103-354 until all applicable public notices and associated 
review periods have been completed and FmHA or its successor agency 
under Public Law 103-354 has taken any necessary action(s) to address 
comments received. The exception to the provisions of this paragraph is 
contained in Sec. 1940.332 of this subpart.
    (c) When a preapplication is not filed, the prospective applicant 
will be required to complete Form FmHA or its successor agency under 
Public Law 103-354 1940-20 at the earliest possible time after FmHA or 
its successor agency under Public Law 103-354 is contacted for 
assistance but no later than when the application is filed with the 
appropriate FmHA or its successor agency under Public Law 103-354 
office. (For the exception to this statement as regards Farm Programs' 
Class I actions, see Sec. 1940.309(c) of this subpart.) FmHA or its 
successor agency under Public Law 103-354 will not consider the 
application to be complete, until FmHA or its successor agency under 
Public Law 103-354 staff have completed the environmental impact review, 
whether an assessment or EIS.
    (d) For those applications that meet the requirements of a 
categorical exclusion, Form FmHA or its successor agency under Public 
Law 103-354 1940-22 will be completed by FmHA or its successor agency 
under Public Law 103-354 as early as possible after receipt of the 
application. The application will not be considered complete until 
either the checklist is successfully completed or the need for any 
further environmental review is identified and completed.



Sec. 1940.316  Responsible officials for the environmental review process.

    (a) Approving official. With the exception of paragraph (b)(2) of 
this section, the FmHA or its successor agency under Public Law 103-354 
official responsible for executing the environmental impact 
determination and environmental findings for a Class I or Class II 
action will be the official having approval authority for the action as 
specified in subpart A of part 1901 of this chapter (available in any 
the

[[Page 31]]

Agency or its successor agency under Public Law 103-354 office).
    (b) State Office level. (1) When the approval official is at the 
State Office level, the responsible Program Chief will have the 
responsibility for preparing the appropriate environmental review 
document. Whenever the Chief delegates this responsibility in accordance 
with Sec. 1940.302(i) of this subpart, the Chief is responsible for 
reviewing the environmental document to ensure that it is adequate, that 
any deficiencies are corrected, and that it is signed by the preparer. 
When the document is satisfactory to the Chief, the Chief will sign it 
as the concurring official. When no delegation occurs, the Chief will 
sign as the preparer. If the environmental review document is either a 
Class I or Class II assessment, it must be provided to the SEC for 
review prior to being submitted to the approval official for final 
determinations. The SEC will review the assessment and provide 
recommendations to the approval official.
    (2) Whenever the preparer and the SEC do not concur on either the 
adequacy of the assessment or the recommendations reached, the State 
Director, whether or not the approving official, will make the final 
decision on the matter or matters in disagreement. The State Director 
will also make the final decision whenever a State Office approving 
official disagrees with the joint recommendations of the preparer and 
the SEC. In either case, should the State Director desire, the matter 
will be forwarded to the National Office for resolution. The Program 
Support Staff will coordinate its resolution with the appropriate 
Assistant Administrator. Failure of these parties to resolve the matter 
will require a final decision by the Administrator. The State Director 
should also request the assistance of the National Office on actions 
that are too difficult to analyze at the State Office level.
    (c) District or County Office level. The approval official for the 
action under review will be responsible for preparing the appropriate 
environmental review document and completing the environmental findings 
and impact determinations for Class I and Class II assessments, except 
in the circumstances outlined in paragraph (d) of this section. Whenever 
the approval official delegates the preparation of the environmental 
review in accordance with Sec. 1940.302(i) of this subpart, the 
approval official must, after exercising the same responsibilities 
assigned to the Program Chief as indicated in paragraph (b)(1) of this 
section, sign the environmental review document as the concurring 
official. Both District Directors and County Supervisors will contact, 
as needed, the SEC for technical assistance in preparing specific 
environmental review documents.
    (d) Multi-level review. When the approval official is at the County 
Office or District Office level but the action must be forwarded to the 
State Office for concurrence, the responsible Program Chief will perform 
the responsibilities of the concurring official with respect to the 
environmental review document and the SEC will review it, if a Class I 
or Class II assessment, in a similar manner as indicated in paragraph 
(b) of this section. Responsibilities similar to those of the Program 
Chief will exist for the District Director when the County Supervisor 
forwards an action to the District Office for concurrence.
    (e) Reservation of authority. The Administrator reserves the right 
to request a State Director to forward to the National Office for review 
and approval any action which is highly controversial for environmental 
reasons, involves the potential for unique or extremely complex 
environmental impacts or is of national, regional, or great local 
significance. State Directors have a similar right with respect to 
District and County Offices.



Sec. 1940.317  Methods for ensuring proper implementation of categorical 
exclusions.

    (a) The use of categorical exclusions exempts properly defined 
actions or proposals from the review requirements of NEPA. It does not 
exempt proposals from the requirements of other environmental laws, 
regulations or Executive orders. Each proposal must be reviewed to 
determine the applicability of other environmental requirements. 
Extraordinary circumstances may cause an application

[[Page 32]]

to lose its categorical exclusion and require a Class I environmental 
assessment, as further specified in paragraph (e) of this section. 
Section 1508.4 of CEQ's regulations state that ``any procedures under 
this section will provide for extraordinary circumstances in which a 
normally excluded action may have a significant environmental effect.'' 
For example, an application for approval of a subdivision of four lots 
is normally excluded from a NEPA review (see Sec. 1940.310(b)(5) of 
this subpart) but is not exempt from the requirements of Executive Order 
11990, ``Protection of Wetlands.'' In the processing of this 
application, FmHA or its successor agency under Public Law 103-354 must 
determine if a wetland is to be impacted. Assuming that the development 
of the proposed subdivision site necessitates the filling of 2 acres of 
wetland, such a potential wetland impact, under the requirements of 
Sec. 1940.310(a) of this subpart, represents an extraordinary 
circumstance that causes the application to lose its categorical 
exclusion. An environmental assessment for a Class I action must then be 
initiated. This assessment serves the purposes of providing for the 
extraordinary circumstance by analyzing the degree of potential impact 
and the need for further study as well as completing and documenting 
FmHA or its successor agency under Public Law 103-354's compliance with 
the Executive order. In this particular example, unless an alternative 
site could not be readily located and the approving official wanted to 
further pursue consideration of the application, the environmental 
assessment would determine that there was a significant impact and an 
EIS would be required. (See Sec. 1940.314 of this subpart.)
    (b) The approving official for an action will be responsible for 
ensuring that no action which requires an environmental assessment is 
processed as a categorical exclusion. In order to fulfill this 
responsibility, Form FmHA or its successor agency under Public Law 103-
354 1940-22 will be completed for those actions that would normally be 
categorically excluded and as further defined in paragraph (c) of this 
section. When Form FmHA or its successor agency under Public Law 103-354 
1940-22 must be prepared and the approving official delegates its 
preparation in accordance with Sec. 1940.302(i) of this subpart, the 
approving official must sign the form as the concurring official. If 
that approving official must, prior to approval, forward the action to a 
District or State Office for review, a second concurrence must be 
executed by the Program Chief or District Director, as determined by the 
level of review being conducted. The checklist is filed with the 
application and serves as FmHA or its successor agency under Public Law 
103-354's documentation of compliance with the environmental laws, 
regulations and Executive Orders listed on the checklist. Whenever the 
preparer is within the State Office or is in the National Office, the 
FmHA or its successor agency under Public Law 103-354 office where the 
processing of the application was initiated is responsible for providing 
sufficient site and project information in order to complete the 
checklist.
    (c) Form FmHA or its successor agency under Public Law 103-354 1940-
22 need not be completed for all categorical exclusions as defined in 
Sec. 1940.310 of this subpart but only for those listed below. This 
list identifies the exclusions by their subject heading and paragraph 
number within Sec. 1940.310 of this subpart. Additionally, for the 
housing assistance exclusion identified in Sec. 1940.310(b)(8), for 
farm programs exclusions listed in Sec. 1940.310(d)(2) and (3), and for 
community and business programs exclusions processed under Sec. 
1940.310(e)(2) of this subpart, a notation must be made in the docket 
materials or running record for the action by the processing official 
that the specific criteria of the applicable exclusion have been met for 
the action under review.
    (1) Housing assistance--(b), (1), (2), (3), (5), (7), and (9);
    (2) Community and Business Programs--(c) (1) and (2);
    (3) Farm Programs--(d) (1) through (11);
    (4) General exclusions--(e)(2), if action covered by exhibit M of 
the subpart, and (6).
    (d) In applying the definition of a categorical exclusion to a 
project activity, the preparer must consider the following two elements 
in addition to

[[Page 33]]

the specific project elements for which approval is requested.
    (1) If the application represents one of several phases of a larger 
proposal, the application will undergo the environmental review required 
for the elements or the size of the total proposal. For example, if 
approval of a four-lot subdivision is requested and the application 
evidences or the reviewer knows that additional phases are planned and 
will culminate in a 16-lot subdivision, the categorical exclusion does 
not apply and an environmental assessment for a Class I action must be 
initiated and must address the impact of developing 16 lots. Should the 
applicant subsequently apply for approval of any of these additional 
phases, no further environmental assessment will be required as long as 
the original assessment still accurately reflects the environmental 
conditions found at the project site and the surrounding areas.
    (2) If the application represents one segment of a larger project 
being funded by private parties or other government agencies, the size 
and elements of the entire project are used in determining the proper 
level of environmental assessment to be conducted by FmHA or its 
successor agency under Public Law 103-354. If an environmental 
assessment is required, it will address the environmental impacts of the 
entire project.
    (e) Under any one of the following circumstances, an action that is 
normally categorically excluded loses its classification as an exclusion 
and must be reviewed in the manner described in paragraph (g) of this 
section. The following listing corresponds to the list of land uses and 
environmental resources contained in part 2 of Form FmHA or its 
successor agency under Public Law 103-354 1940-22.
    (1) Wetlands--the proposed action:
    (i) Would be located adjacent to a wetland or a wetland is within 
the project site, and
    (ii) The action would affect the values and functions of the wetland 
by such means as converting, filling, draining, or directly discharging 
into it;
    (2) Floodplains--the proposed action:
    (i) Includes or involves an existing structure(s) located within a 
100-year floodplain (500-year floodplain if critical action), or
    (ii) Would be located within a 100-year floodplain (500-year 
floodplain if critical action) and would affect the values and functions 
of the floodplain by such means as converting, dredging, or filling or 
clearing the natural vegetation;
    (3) Wilderness (designated or proposed)--the proposed action:
    (i) Would be located in a wilderness area, or
    (ii) Would affect a wilderness area such as by being visible from 
the wilderness area;
    (4) Wild or Scenic River (proposed or designated or identified in 
the Department of the Interior's nationwide Inventory)--the proposed 
action:
    (i) Would be located within one-quarter mile of the banks of the 
river,
    (ii) Involves withdrawing water from the river or discharging water 
to the river via a point source, or
    (iii) Would be visible from the river;
    (5) Historical and Archeological Sites (listed on the National 
Register of Historic Places or which may be eligible for listing)--the 
proposed action:
    (i) Contains a historical or archeological site within the 
construction site, or
    (ii) Would affect a historical or archeological site;
    (6) Critical Habitat or Endangered/Threatened Species (listed or 
proposed)--the proposed action:
    (i) Contain a critical habitat within the project site,
    (ii) Is adjacent to a critical habitat, or
    (iii) Would affect a critical habitat or endangered/threatened 
species;
    (7) Coastal Barrier Included in Coastal Barrier Resources System--
the proposed action would be located within the Coastal Barrier 
Resources System;
    (8) Natural Landmark (listed on National Registry of Natural 
Landmarks)--the proposed action either:
    (i) Contains a natural landmark within the project site, or
    (ii) Would affect a natural landmark;
    (9) Important Farmlands--the proposed action would convert important 
farmland to a nonagricultural use(s) except when the conversion would 
result from the construction of on-farm

[[Page 34]]

structures necessary for farm operations;
    (10) Prime Forest Lands--the proposed action would convert prime 
forest land to another use(s), except when the conversion would result 
from the construction of on-farm structures necessary for farm 
operations;
    (11) Prime Rangelands--the proposed action would convert prime 
rangeland to another use(s) except when the conversion would result from 
the construction of on-farm structures necessary for farm operations;
    (12) Approved Coastal Zone Management Area--the proposed action 
would be located within such area and no agreement exists with the 
responsible State agency obviating the need for a consistency 
determination for the type of action under consideration;
    (13) Sole Source Aquifer Recharge Area--the proposed action would be 
located within such area and no agreement exists with the Environmental 
Protection Agency (EPA) obviating the need for EPA's review of the type 
of action under consideration; and
    (14) State Water Quality Standard--the proposed action would impair 
a water quality standard, including designated and/or existing 
beneficial uses, or would not meet applicable antidegradation 
requirements for point or nonpoint sources.
    (f) From the above paragraph (e), it should be noted that the 
location within the project site of any of the land uses and 
environmental resources identified in paragraphs (e) (1), (2), (9), 
(10), (11), (12), and (13) of this section is not sufficient for an 
action to lose its categorical exclusion. Rather, the land use or 
resource must be affected in the case of paragraphs (e) (1), (2), (9), 
(10), and (11) of this section. For paragraphs (e) (12), (13) and (14) 
of this section, further review and consultation can be avoided by 
written agreement with the responsible agency detailing the types of 
actions not requiring interagency review.
    (g) Whenever a categorical exclusion loses its status as an 
exclusion for any of the reasons stated in paragraph (e) of this 
section, the environmental impacts of the action must be reviewed 
through the preparation of a Class I assessment, Form FmHA or its 
successor agency under Public Law 103-354 1940-21. Not all of the 
procedural requirements for a Class I assessment apply in this limited 
case, however. The following exemptions exists:
    (1) No public notice provisions of this subpart apply.
    (2) The applicant does not complete Form FmHA or its successor 
agency under Public Law 103-354 1940-20.
    (3) The action does not require a Class II assessment should more 
than one important land resources be affected.



Sec. 1940.318  Completing environmental assessments for Class II actions.

    (a) The first step for the preparer (as defined in Sec. Sec. 
1940.302(i) and 1940.316 of this subpart) is to examine Form FmHA or its 
successor agency under Public Law 103-354 1940-20 submitted by the 
applicant to determine if it is complete, consistent, fully responsive 
to the items, signed, and dated. If not, it will be returned to the 
applicant with a request for necessary clarifications or additional 
data.
    (b) Once adequate data has been obtained, the assessment will be 
initiated in the format and manner described in exhibit H of this 
subpart. In completing the assessment, appropriate experts from State 
and Federal agencies, universities, local and private groups will be 
contacted as necessary for their views. In so doing, the preparer should 
communicate with these agencies or parties in the most appropriate and 
expeditious manner possible, depending upon the seriousness of the 
potential impacts and the need for formal documentation. Appropriate 
experts must be contacted whenever required by a specific provision of 
this subpart or whenever the preparer does not have sufficient data or 
expertise available within FmHA or its successor agency under Public Law 
103-354 to adequately assess the degree of a potential impact or the 
need for avoidance or mitigation. Comments from an expert must be 
obtained in writing whenever required by a specific provision of this 
subpart or the potential environmental impact is either controversial, 
complex, major, or apparently major. When correspondence is exchanged, 
it will be appended to the assessment. Oral discussions should be 
documented in the

[[Page 35]]

manner indicated in exhibit H of this subpart. On the other hand, there 
is no need for the preparer to seek expert views outside of the Agency 
when there is no specific requirement to do so and the preparer has 
sufficient expertise available within FmHA or its successor agency under 
Public Law 103-354 to assess the degree of the potential impact and the 
need for avoidance or mitigation.
    (c) At the earliest possible stage in the assessment process, the 
preparer will identify the Federal, State, and local parties which are 
carrying out related activities, either planned or under way. 
Discussions with the applicant and FmHA or its successor agency under 
Public Law 103-354 staff familiar with the project area should assist in 
this identification effort. If there is a potential for cumulative 
impacts, the preparer will consult with the involved agencies to 
determine the nature, timing and results of their environmental 
analysis. These consultations will be documented in the assessment and 
considered or adopted when making the environmental impact 
determination. (See Sec. 1940.324 of this subpart concerning adoption 
of assessments.) If it is determined that the cumulative impacts are 
significant, the preparer will further contact the involved Federal 
agencies and attempt to determine the lead Federal Agency as discussed 
in Sec. Sec. 1940.320(b) and 1940.326 of this subpart.
    (d) Consultations similar to those discussed in paragraph (c) of 
this section will also be undertaken with those Federal and State 
agencies which are directly involved in the FmHA or its successor agency 
under Public Law 103-354 action, either through the provision of 
financial assistance or the review and approval of a necessary plan or 
permit. For example, a construction permit from the U.S. Army Corps of 
Engineers may be required for a project. In such an instance, the 
environmental assessment cannot be completed until the preparer has 
either reviewed the other Agency's completed environmental analysis or 
consulted with the other Agency and is reasonably sure of the scope, 
content, and expected environmental impact determination of the 
forthcoming analysis and has so documented for the FmHA or its successor 
agency under Public Law 103-354 assessment this understanding. If the 
other Agency believes that the project will have a significant impact, a 
joint or lead impact statement will be prepared. If the other Agency 
does not believe a significant impact will occur, the preparer will 
consider this finding and its supporting analysis in completing the FmHA 
or its successor agency under Public Law 103-354 environmental impact 
determination. Guidance in adopting an environmental assessment prepared 
by another Federal Agency is provided in Sec. 1940.324 of this subpart.
    (e) For actions having a variety of complex or interrelated impacts 
that are difficult for the preparer to assess, consideration should be 
given to holding a public meeting in the manner described in Sec. 
1940.331(c) of this subpart. Such meetings should not be assumed as 
being limited to projects for which EISs are being prepared. Such a 
meeting can serve a useful purpose in better defining and identifying 
complex impacts, as well as locating expertise with respect to them. The 
results of a public meeting and the follow-up from it can also serve as 
a valuable tool in reaching an early understanding on the potential need 
for an EIS. When identified impacts are difficult to quantify (such as 
odor and visual and community impacts) or controversial, a public 
information meeting should be held near the project site and the local 
area's concern about it. Whenever held, it should be announced and 
organized in the manner described in Sec. 1940.331(c). However, a 
transcript of the meeting need not be prepared, but the preparer will 
make detailed notes for incorporation in the assessment. (See Sec. 
1940.331(c) of this subpart.)
    (f) Throughout this assessment process, the preparer will keep in 
mind the criteria for determining a significant environmental impact. If 
at any time in this process it is determined that a significant impact 
would result, the preparer will so notify the approving official. Those 
actions specified in Sec. 1940.320 of this subpart will then be 
initiated, unless the approving official disagrees with the preparer's 
recommended determination, in which

[[Page 36]]

case further review of the determination may be required as explained in 
Sec. 1940.316 (b), (d) and (e) of this subpart. As soon as possible 
after the need for an EIS is determined, the applicant will also be 
advised of this in writing, as well as reinformed of the limitations on 
its actions during the period that the EIS is being completed. (See 
Sec. 1940.309(e) of this subpart.) The applicant's failure to comply 
with these limitations will be considered as grounds for postponement of 
further consideration of the application until such problem is 
alleviated.
    (g) Similarly, throughout the assessment process, consideration will 
be given to incorporating mechanisms into the proposed action for 
reducing, mitigating, or avoiding adverse impacts. Examples of such 
mechanisms which are commonly referred to as mitigation measures include 
the deletion, relocation, redesign or other modifications of the project 
elements; the dedication of environmentally sensitive areas which would 
otherwise be adversely affected by the action or its indirect impacts; 
soil erosion and sedimentation plans to control runoff during land-
disturbing activities; the establishment of vegetative buffer zones 
between project sites and adjacent land uses; protective measures 
recommended by environmental and conservation agencies, including but 
not limited to interstate, international, Federal, State, area-wide, and 
local agencies having jurisdiction or special expertise regarding the 
action's impacts; and zoning. Mitigation measures must be tailored to 
fit the specific needs of the action, and they must also be practical 
and enforceable. Mitigation measures which will be taken must be 
documented in the assessment (Item XIX of exhibit H of this subpart), 
and include an analysis of their environmental impacts and potential 
effectiveness and placed in the offer of financial assistance as special 
conditions or in the implementation requirements when the action does 
not involve financial assistance. These measures will be consistent with 
the basic goal of the proposed action and developed in consultation with 
the appropriate program office.
    (h) As part of the assessment process, the preparer will initiate 
the consultation and compliance requirements for the environmental laws, 
regulations, and Executive orders specified in the assessment format. 
The assessment cannot be completed until compliance with these laws and 
regulations is appropriately documented. The project's failure to meet 
the requirements specified in Item 10b of Form FmHA or its successor 
agency under Public Law 103-354 1940-21 for a Class I action and Item 
XXIb of exhibit H of this subpart for a Class II action will result in 
postponement of further consideration of the application until such 
problem is alleviated.
    (i) When the preparer has completed the assessment, the related 
materials and correspondence utilized will be attached. The preparer 
will then either recommend to the approving official that the action has 
the potential for significantly affecting the quality of the human 
environment or will recommend that the action does not have this 
potential and, therefore, the preparation of an EIS is not necessary. 
(Item 10a of Form FmHA or its successor agency under Public Law 103-354 
1940-21 for Class I action and item XXIa of exhibit H of this subpart 
for a Class II action.) The recommended environmental findings will also 
be completed. (Item 10b of Form FmHA or its successor agency under 
Public Law 103-354 1940-21 for a Class I action and Item XXIb of exhibit 
H of this subpart for a Class II action.) In those instances specified 
in Sec. 1940.316, the assessment will then be forwarded to the 
concurring official and, as required, to the SEC for review. The 
concurring official will coordinate, as necessary, with the preparer any 
questions, concerns or clarifications and complete and document the 
review prior to the assessment being submitted to the approving official 
or the SEC. The SEC will coordinate with the concurring official in a 
similar fashion whenever the latter's review is required.
    (j) The approving official will review the environmental file and 
recommendations. The official will then

[[Page 37]]

execute the environmental impact determination and findings. If the 
conclusions reached are that there is no significant impact and there is 
compliance with the listed requirements, the format contained in exhibit 
I of this subpart will be used. If a significant impact is determined, 
the steps specified in Sec. 1940.320 of this subpart will be initiated 
for the preparation of the EIS. If a determination is made that the 
proposed action does not comply with the environmental requirements that 
are explained in this subpart and listed in Item 10b of Form FmHA or its 
successor agency under Public Law 103-354 1940-21 for a Class I action 
or Item XXIb of exhibit H of this subpart for a Class II action and 
there are no feasible alternatives (practicable alternatives when 
required by specific provisions of this subpart), modifications, or 
mitigation measures which could comply, the action will be denied or 
disapproved. If the approving official's determination or findings 
differ from the recommendations of the preparer, concurring official or 
the SEC, this difference will be addressed in the manner specified in 
Sec. 1940.316 of this subpart.
    (k) When there is no need for further review as discussed in 
paragraph (j) of this section and findings of compliance and a 
determination of no significant impact are reached, the assessment 
process is conditionally concluded. To conclude the assessment, the 
applicant will then be requested to provide public notification of these 
results as indicated in Sec. 1940.331(b)(3) of this subpart. The 
approving official will not approve the pending application for at least 
15 days from the date the notification is last published. If comments 
are received as a result of the notification, they will be included in 
the environmental assessment and considered. Any necessary changes 
resulting from this consideration will be made in the assessment, impact 
determinations, and findings. If the changes require further 
implementation steps, such as the preparation of an EIS, they will be 
undertaken. If there are no changes in the findings and determination 
steps, such as the preparation of an EIS, they will be undertaken. If 
there are no changes in the findings and determinations, the approving 
official may continue to process the application. The environmental 
documents, i.e., the assessment, related correspondence, Form FmHA or 
its successor agency under Public Law 103-354 1940-20, and the finding 
of no significant impact will be included with the approval documents 
which are assembled for review and clearance within the approving 
office.
    (l) Whenever changes are made to an action or comments or new or 
changed information relating to the action's potential environmental 
effects is received after the assessment is completed but prior to the 
action's approval, such change, comment, or information will be 
evaluated by the approving official to determine the impact on the 
completed assessment. Whenever the contents or findings of that 
assessment are affected, the assessment process for that action will be 
revised and any other related requirement of this subpart met. Changes 
to an action in terms of its location(s), design, purpose, or operation 
will normally require, at a minimum, modification of the original 
assessment to reflect such change(s) and the associated environmental 
impacts.
    (m) When comments are received after the action has been approved, 
the approving official will consider the environmental importance of the 
comments and the necessity and ability to amend both the action, with 
respect to the issue raised and the action's stage of implementation. 
The National Office may be consulted to assist in determining whether 
there are any remaining environmental requirements which need to be met 
under the specific circumstances. A similar procedure will be followed 
when new or changed information is received after project approval. 
Amendments and revisions to actions will be handled as specified in 
Sec. Sec. 1940.310 through 1940.313 of this subpart.



Sec. 1940.319  Completing environmental assessments for Class I actions.

    (a) As stated in this subpart, a main purpose of Form FmHA or its 
successor agency under Public Law 103-354 1940-21, is to provide a 
mechanism for reviewing actions with normally minimal impacts and for 
documenting a finding of no significant impact, as

[[Page 38]]

well as compliance determinations for other applicable environmental 
laws, regulations and policies. The second major purpose is to serve as 
a screening tool for identifying those Class I actions which have more 
than minimal impacts and which, therefore, require a more detailed 
environmental review.
    (b) The approach to reviewing a Class I action under the assessment 
format of Form FmHA or its successor agency under Public Law 103-354 
1940-21 is exactly the same as for a Class II action. The preparer (as 
defined in Sec. Sec. 1940.302(i) and 1940.316 of this subpart) must 
become familiar with the elements of the action, the nature of the 
environment to be affected, the relationship to any other Federal 
actions or related nonfederal actions, and the applicable environmental 
laws and regulations.
    (c) The data submission requirements placed on the applicant for a 
Class I action are not as extensive as for a Class II action. The 
requirements are limited to completing the face of Form FmHA or its 
successor agency under Public Law 103-354 1940-20, as well as categories 
(1), (2), (13), (15), (16), and (17) of Item 1b of the FMI, whenver a 
previously completed environmental analysis covering these categories is 
not available. Should it later be determined that the magnitude of the 
Class I action's impact warrants a more detailed assessment, the 
applicant will be required to submit the remaining items of the data 
request. Additionally, the circumstances under which FmHA or its 
successor agency under Public Law 103-354 does not require the 
submission of Form FmHA or its successor agency under Public Law 103-354 
1940-20 by an applicant whose proposed action requires a Class I 
assessment are specified in Sec. 1940.317(f) of this subpart.
    (d) The preparer must ensure that the data received from the 
applicant is complete, consistent, signed and dated before initiating 
the assessment. If it is not, the applicant will be required to make the 
necessary changes and clarifications. The reviewer must also ensure that 
the application properly meets the definition of a Class I action. 
Phased or segmented projects, as discussed in Sec. 1940.317(d) of this 
subpart, will be identified and the elements and the size of the entire 
project used to classify the action.
    (e) An important element of this assessment is to determine if the 
action affects an environmental resource which is the subject of a 
special Federal consultation or coordination requirement. Such resources 
are listed in the assessment format, Form FmHA or its successor agency 
under Public Law 103-354 1940-21, and include wetlands, floodplains, and 
historic properties, for example. If one of the listed resources is to 
be affected, the preparer must demonstrate the required compliance by 
accomplishing the review and coordination requirements for that 
resource. Documentation of the steps taken and coordination achieved 
will be attached. However, if more than one listed resource is to be 
affected, this will be viewed as the action having more than minimal 
impacts and the environmental assessment format for a Class II action 
will be initiated except if the action under review is an application 
for a Housing Preservation Grant.
    (f) Similarly in completing item 3, General Impacts of Form FmHA or 
its successor agency under Public Law 103-354 1940-21, the assessment 
format for a Class II action must be initiated if more than one category 
of impacts cannot be checked as minimal. If there is a single category 
which needs analysis, this can be accomplished by attaching an 
appropriate exhibit addressing the questions and issues for that impact, 
as specified in the environmental assessment format for a Class II 
action. See Sec. 1940.311(b)(1) of this subpart for when an attached 
discussion of water quality impacts is mandatory.
    (g) The comments of State, regional, and local agencies obtained 
through applicable permit reviews or the implementation of Executive 
Order 12372, Intergovernmental Review of Federal Programs, will be 
incorported into the assessment, if this review applies to the action. 
The receipt of negative comments of an environmental nature will warrant 
the initiation of a more detailed assessment under the format for a 
Class II action (exhibit H of this subpart). Also, the issue of 
controversy must be addressed, and if the action is

[[Page 39]]

controversial for environmental reasons, the environmental assessment 
format for a Class II action (exhibit H of this subpart) will be 
completed. However, if the action is the subject of isolated 
environmental complaints or any questions or concerns that focus on a 
single impact, air quality, for example, the analysis of such complaints 
or questions can be handled under the assessment format for a Class I 
action. This analysis will then be provided by the approving official to 
the party or parties which raised the matter with FmHA or its successor 
agency under Public Law 103-354. When several potential impacts are 
questioned, however, the more detailed assessment format will be 
accomplished to address these questions.
    (h) The potential cumulative impacts of this action, particularly as 
it relates to other FmHA or its successor agency under Public Law 103-
354 actions recently approved in the area or planned, will be analyzed. 
If the cumulative impact is not minimal and, for example, cumulatively 
exceeds the criteria and threshholds discussed in paragraphs (e), (f) 
and (g) of this section, the environmental assessment format for a Class 
II action will be completed. The actions of other Federal agencies and 
related nonfederal actions must also be assessed on this basis. When 
there is a Federal action involved, the environmental review conducted 
by that Agency will be requested and, if it sufficiently addresses the 
cumulative impact, can be utilized by the preparer as the FmHA or its 
successor agency under Public Law 103-354 assessment, assuming the 
impacts are not significant. (See Sec. 1940.324 of this subpart.) If 
the other Agency is doing or planning an EIS, the preparer will inform 
that Agency of our action and request to be a cooperating agency.
    (i) The preparer will have the responsibility of initiating the 
assessment format for a Class II action (exhibit H of this subpart) 
whenever the need is identified. This should be done as early as 
possible in the review process. The preparer should not complete the 
assessment for a Class I action when it is obvious that the assessment 
format for a Class II action will be needed. The preparer will simply 
start the more detailed assessment and inform the applicant of the 
additional data requirements.
    (j) Exhibit I will be completed by the approval official in the same 
instances for a Class I assessment as for a Class II assessment. 
However, public notification of FmHA or its successor agency under 
Public Law 103-354's finding of no significant environmental impact will 
not be required for a Class I assessment. Also, special provisions for 
completing a Class I assessment for an action that is normally 
categorically excluded but loses its classification as an exclusion are 
contained in Sec. 1940.317(g) of this subpart. With the exception of 
the two preceding sentences, all other procedural requirements of the 
assessment process, such as the timing of the assessment and the 
limitations on the applicant's actions, apply to a Class I assessment.



Sec. 1940.320  Preparing EISs.

    (a) Responsibility. Whenever the District Director or County 
Supervisor determines there is a need to prepare an EIS, the State 
Director will be notified. The EIS will be prepared at the State Office 
and the State Director will assume the responsibility for preparing it. 
The State will in turn notify the Administrator of these EISs, as well 
as those needed EISs identified by a State Office review. EISs will be 
prepared according to this section. The State Director will be 
responsible for actions initiated within the State. However, in so 
doing, the State Director will consult with the National Office to 
determine that the document meets the requirements of NEPA. State 
Directors will be responsible for issuing such EISs. However, unless 
delegated authority by the Administrator, based upon a demonstrated 
capability and experience in preparing EISs, the State Director will not 
issue the EIS until reviewed and approved by the Administrator.
    (b) Organizing the EIS process. Prior to initiating the scoping 
process outlined below, the preparer of the EIS will take several 
organizational steps to ensure that the EIS is properly coordinated and 
completed as efficiently as possible. To accomplish this, the

[[Page 40]]

below-listed parties need to be identified in advance; the list should 
be expanded as familiarity with the project increases. Those parties 
falling within the first four groups should be formally requested to 
serve as cooperating agencies. If any of these agencies appear to be a 
more appropriate lead agency than FmHA or its successor agency under 
Public Law 103-354 (using the criteria contained in Sec. 1501.5(c) of 
the CEQ regulations), consultations should be initiated with that agency 
to determine the lead agency. If difficulties arise in completing this 
determination, the National Office will be consulted for assistance. All 
of the parties identified below will be sent a copy of the notice of 
intent to prepare the EIS and an invitation to the scoping meeting, as 
discussed in paragraph (c) of this section.
    (1) All Federal and State agencies that are being requested to 
provide financial assistance for the project or related projects;
    (2) All Federal agencies that must provide a permit for the project 
should it be approved;
    (3) All Federal agencies that have a specific environmental 
expertise in major environmental issues identified to date;
    (4) The Agency responsible for the implementation of the State's 
environmental impact analysis requirement, if one has been enacted or 
promulgated by the State;
    (5) All Federal, State, and local agencies that will be requested to 
comment on the draft EIS;
    (6) All individuals and organizations that have expressed an 
interest in the project; and
    (7) National, regional, or local environmental organizations whose 
particular area of interest corresponds to the major impacts identified 
to date.
    (c) Scoping process. As soon as possible after a decision has been 
made to prepare an EIS, the following process will be initiated by the 
preparer for identifying the major issues to be addressed in the EIS and 
for developing a coordinated government approach to the preparation and 
review of the EIS.
    (1) The first step in this process will be the publication of a 
notice of intent to prepare the EIS. The notice will indicate that an 
EIS will be prepared and will briefly describe the proposed action and 
possible alternatives; state the name, address, and phone number of the 
preparer, indicating that this person can answer questions about the 
proposed action and the EIS; list any cooperating agencies, and include 
the date and time of the scoping meeting. If the latter information is 
not known at the time the notice of intent is prepared, it will be 
incorporated into a special notice, when available, and published and 
distributed in the same manner as the notice of intent. It will be the 
responsibility of the preparer of the EIS to inform the National Office 
of the need to publish a notice of intent which will coordinate the 
publication of the notice in the Federal Register. For requirements 
relating to the timing the publication of the notice of intent within 
the project area, as well as the applicant's responsibilities for the 
notice, see Sec. 1940.331(b) of this subpart.
    (2) A scoping meeting will be held. To the extent possible, the 
scoping meeting should be integrated with any other early planning 
meetings of the Agency or other involved agencies. The scoping meeting 
will be chaired by the preparer of the EIS and will be organized to 
accomplish the following major purposes (as well as other purposes 
listed in Sec. 1501.7 of the CEQ regulations).
    (i) Invite the participation of affected Federal, State, and local 
agencies, any affected Indian Tribe, the proponent of the action, and 
any interested parties including those who may disagree with the action 
for environmental reasons;
    (ii) Determine the scope and the significant issues to be analyzed 
in depth in the EIS;
    (iii) Identify and eliminate, from detailed study, the issues which 
are not significant or which have been covered by prior environmental 
review, narrowing the discussion of these issues in the statement to a 
brief presentation of why they will not have a significant effect on the 
human environment or providing a reference to their coverage elsewhere;
    (iv) Allocate assignments for preparation of the EIS among the lead 
and cooperating agencies, with the lead Agency retaining responsibility 
for the statement;

[[Page 41]]

    (v) Indicate any public environmental assessments and other EISs 
which are being or will be prepared that are related to, but are not 
part of, the scope of the impact statement under consideration;
    (vi) Identify other environmental review and consultation 
requirements so the lead and cooperating agencies may prepare other 
required analyses and studies concurrently with, and integrated with, 
the environmental impact statement; and
    (vii) Indicate the relationship between the timing of the 
preparation of environmental analyses and the Agency's tentative 
planning and decisionmaking schedule;
    (3) Minutes of the scoping meeting, including the major points 
discussed and decisions made, will be prepared and retained by the 
preparer of the EIS as part of the environmental file. The preparer will 
offer, during the scoping meeting, to send copies of the minutes to any 
interested party upon written request.
    (d) Interdisciplinary approach. The EIS will be prepared using an 
interdisciplinary approach that will ensure the integrated use of the 
natural and social sciences and the environmental design arts. The 
disciplines of the preparers will be appropriate to address the 
potential environmental impact associated with the project. This can be 
accomplished both in the information collection stage and the analysis 
stage by communication and coordination with environmental experts at 
local, State and Federal agencies (particularly cooperating agencies) 
and universities near the project site. When needed information or 
expertise is not readily available, these needs should be met through 
procurement contracts with qualified consulting firms. Consulting firms 
can be utilized to prepare the entire EIS or portions of it as specified 
in Sec. 1940.336 of this subpart.
    (e) Content and format of EIS. The EIS will be prepared in the 
format and manner described in part 1502 of the CEQ regulations. There 
is a great deal of specific guidance in that part which will not be 
repeated here.
    (f) Circulation of the EIS. FmHA or its successor agency under 
Public Law 103-354 will circulate for review and comment the draft and 
final EIS as broadly as possible. Therefore, it will be necessary for 
the preparer to have sufficient copies printed or reproduced for this 
purpose. In identifying the parties to receive a draft EIS, the same 
process should be utilized as is employed for inviting participants to 
the scoping meeting. (See paragraph (b) of this section.) Special 
emphasis should be given to transmitting the draft to those agencies 
with jurisdiction or expertise on the proposed action's major impacts, 
as well as those parties who have expressed an interest in the action. 
The final EIS will be provided to all parties that commented on the 
draft EIS.
    (g) Filing of the EIS. The Deputy Administrator for Program 
Operations or any State Director that has been delegated the authority 
to prepare an EIS must file the EIS with EPA in accordance with Sec. 
1506.9 of the CEQ regulations. The official filing date for an EIS is 
the day that it is received by EPA's Office of Federal Activities. 
Filing of the EIS cannot occur until copies of the EIS have been 
transmitted to commenting agencies and made available to the public. 
Transmittal of the EIS must, therefore, occur either prior to its being 
filed with EPA (received by EPA) or no later than close of business of 
the same day that it is filed.
    (h) Public information meetings. A public information meeting, as 
specified in Sec. 1940.331(c)(1) of this subpart, will be held near the 
project site to discuss and receive comments on the draft EIS.
    (i) Response to comments. The preparer of the EIS will respond to 
comments on the draft EIS as required by Sec. 1503.4 of the CEQ 
regulations. The major and most frequently raised issues during the 
public information meeting will also be identified and addressed.
    (j) Timing of review. The preparer of the EIS will be responsible 
for ensuring that the timing requirements for FmHA or its successor 
agency under Public Law 103-354 actions and the review periods for draft 
and final EISs are fully met (Sec. 1506.10 of CEQ regulations). 
Prescribed review periods are calculated from the date that EPA's Office 
of Federal activities publishes in the Federal Register a notice of 
availability for the EIS. Any request to reduce a prescribed review 
period will

[[Page 42]]

be made to EPA in accordance with Sec. 1506.10(d) of the CEQ 
regulations.



Sec. 1940.321  Use of completed EIS.

    (a) The final EIS will be a major factor in the Agency's final 
decision. Agency staff making recommendations on the action and the 
approving official will be familiar with the contents of the EIS and its 
conclusions and will consider these in formulating their respective 
positions with respect to the action. The final EIS and all comments 
received on the draft will accompany the proposal through the FmHA or 
its successor agency under Public Law 103-354 final clearance process. 
The alternatives considered by the approving official will be those 
addressed in the final EIS.
    (b) As part of this review process, the preparer of the EIS will 
complete the recommendations listed in Item XXIb and c of exhibit H of 
this subpart and provide them to the approving official prior to a final 
decision.



Sec. 1940.322  Record of decision.

    Upon completion of the EIS and its review within FmHA or its 
successor agency under Public Law 103-354 and before any action is taken 
on the decision reached on the proposal, the approving official will 
prepare, in consultation with the preparer of the EIS, a concise record 
of the decision which will be available for public review. The record 
will:
    (a) State the decision reached;
    (b) Certify that the timing requirements for the EIS process have 
been fully met;
    (c) Identify all alternatives considered in reaching the decision 
specifying the alternative or alternatives that were considered to be 
environmentally preferable and discuss the relevant factors 
(environmental, economic, technical, statuatory mission and, if 
applicable, national policy) that were considered in the decision;
    (d) State whether all practicable means to avoid or minimize 
environmental harm from the alternative selected have been adopted, and 
if not, why not; and
    (e) If any mitigation measures have been adopted, specify the 
monitoring and enforcement program that will be utilized.



Sec. 1940.323  Preparing supplements to EIS's.

    (a) Either the State Office or the National Office, as appropriate, 
will prepare supplements to either draft or final EIS's if:
    (1) A substantial change or changes occur in the proposed action and 
such changes are relevant to the environmental impacts previously 
presented; and
    (2) Significant new circumstances or information arise which are 
relevant to environmental concerns and bear on the proposed action or 
its impacts.
    (b) If the preparer of the draft or final EIS determines that the 
changes or new circumstances referenced in paragraph (a) of this section 
do not require the preparation of a supplemental EIS, the preparer will 
complete an environmental assessment for a Class II action which will 
document the reasons for this determination.
    (c) The preparer will be responsible for advising the approving 
official of the need for a supplement. The latter will make the Agency's 
formal determination in a manner consistent with Sec. 1940.316 of this 
subpart.
    (d) All of the requirements of this subpart that apply to the 
completion of an initial EIS apply to the completion of a supplement 
with the exception of the scoping process, which is optional. 
Additionally, if the approving official believes that there is a need 
for expedited or special procedures in the completion of a supplement, 
the approval of CEQ must first be obtained by the Administrator for any 
alternative procedures. The final supplement will be included in the 
project file or docket and used in the Agency's decisionmaking process 
in the same manner as a final EIS. (See Sec. 1940.321 of this subpart 
and in particular subparagraphs (f), (g), and (j) of that section as 
well as Sec. 1502.9(c)(4) of the CEQ regulations for associated 
circulation, filing, and timing requirements.)

[[Page 43]]



Sec. 1940.324  Adoption of EIS or environmental assessment prepared by 
another Federal Agency.

    (a) FmHA or its successor agency under Public Law 103-354 may adopt 
an EIS or portion thereof prepared by another Federal Agency after 
completion if:
    (1) An independent review of the document is conducted by the 
preparer of the FmHA or its successor agency under Public Law 103-354 
environmental review and it is concluded that the document meets the 
requirements of this subpart; and
    (2) If the actions covered in the EIS are substantially the same as 
those proposed by FmHA or its successor agency under Public Law 103-354 
and the environmental conditions in the project area have not 
substantially changed since its publication, FmHA or its successor 
agency under Public Law 103-354 will recirculate the EIS as a ``final'' 
and so notify the public as specified in Sec. 1940.331(b) of this 
subpart. The final EIS will contain an appropriate explanation of the 
FmHA or its successor agency under Public Law 103-354 involvement and 
will be sent to all parties who would typically receive a draft EIS 
published by FmHA or its successor agency under Public Law 103-354. If 
there are differences between the actions or the environmental 
conditions as discussed in the original EIS, that EIS will be updated to 
cover these differences and recirculated as a draft EIS with the public 
so notified. From that point, it will be reviewed and processed in the 
same manner as any other FmHA or its successor agency under Public Law 
103-354 EIS. For circulation, filing, and timing requirements, see 
paragraphs (f), (g), and (j) of Sec. 1940.320 of this subpart as well 
as Sec. Sec. 1506.3(c), 1506.9, and 1506.10 of the CEQ regulations.
    (b) If the adopted EIS is not final within the agency that prepared 
it, or if the action it assesses is the subject of a referral under part 
1504 of the CEQ regulations, or if the statement's adequacy is the 
subject of a judicial action which is not final, FmHA or its successor 
agency under Public Law 103-354 must so specify and provide an 
explanation in the recirculated EIS.
    (c) After recirculation (whether as a draft or final), the EIS will 
be reviewed and processed in the same manner as any other FmHA or its 
successor agency under Public Law 103-354 EIS.
    (d) FmHA or its successor agency under Public Law 103-354 may also 
adopt all or part of environmental assessments or environmental reviews 
prepared by other Federal agencies. In this case, only paragraph (a)(1) 
of this section applies. If the requirements of that paragraph can be 
met except for the fact that the Federal agency whose assessment is to 
be adopted has no preliminary public notice requirements similar to FmHA 
or its successor agency under Public Law 103-354's (see Sec. 
1940.331(b)(4) of this subpart), the assessment can be adopted without 
FmHA or its successor agency under Public Law 103-354 publishing a 
preliminary public notice. Additionally, when all of another Federal 
agency's assessment is adopted, without supplementation, for a Class II 
action and a finding of no significant environmental impact (exhibit I 
of this subpart) is reached by the proper FmHA or its successor agency 
under Public Law 103-354 official, no public notification of FmHA or its 
successor agency under Public Law 103-354's finding of no significant 
environmental impact is required if:
    (1) The other Federal agency or its designee published a similar 
finding in a newspaper of general circulation in the vicinity of the 
proposed action;
    (2) The other Federal agency's or its designee's public notice 
clearly described the action subject to the FmHA or its successor agency 
under Public Law 103-354 environmental review; and
    (3) The other Federal agency's or its designee's public notice was 
published less than eighteen months from the date FmHA or its successor 
agency under Public Law 103-354 adopted the assessment.



Sec. 1940.325  FmHA or its successor agency under Public Law 103-354 
as a cooperating Agency.

    (a) FmHA or its successor agency under Public Law 103-354 will serve 
as a cooperating Agency when requested to do so by the lead Agency for 
an action in which FmHA or its successor

[[Page 44]]

agency under Public Law 103-354 is directly involved or for an action 
which is directly related to a proposed FmHA or its successor agency 
under Public Law 103-354 action. An example of the latter would be a 
request from EPA to participate in an EIS covering its sewage treatment 
plans for a community, as well as the community's water system plans 
pending before FmHA or its successor agency under Public Law 103-354. A 
memorandum of understanding or other written correspondence will be 
developed with the lead agency in order to define FmHA or its successor 
agency under Public Law 103-354's role as the cooperating agency. The 
State Director will coordinate FmHA or its successor agency under Public 
Law 103-354's participation as a cooperating Agency for an action at the 
State Office level. The Administrator will have the same responsibility 
at the National Office level.
    (b) When requested to be a cooperating Agency on a basis other than 
that discussed above, the State Director will consider the expertise 
which FmHA or its successor agency under Public Law 103-354 could add to 
the particular EIS process in question and existing workload 
commitments. If a decision is made on either of these two bases not to 
participate as a cooperating Agency, a copy of the letter signed by the 
State Director or Administrator and so informing the lead Agency will be 
sent to CEQ.
    (c) As a cooperating Agency, FmHA or its successor agency under 
Public Law 103-354 will participate in the development and 
implementation of the scoping process. If requested by the lead Agency, 
provide the lead Agency with staff support and descriptive materials 
with respect to the analyses of the FmHA or its successor agency under 
Public Law 103-354 portion of the action(s) to be covered, review and 
comment on all preliminary draft materials prior to their circulation 
for public review and comment, and attend and participate in public 
meetings called by the lead Agency concerning the EIS.
    (d) The State Director will request the lead Agency to fully 
identify the Agency's involvement in all public documents and 
notifications.
    (e) FmHA or its successor agency under Public Law 103-354 will use 
the EIS as its own as long as FmHA or its successor agency under Public 
Law 103-354's comments and concerns are adequately addressed by the lead 
Agency and the final EIS is considered to meet the requirements of this 
subpart. It will be the responsibility of the preparer of the FmHA or 
its successor agency under Public Law 103-354 environmental review 
document to formally advise the approving official on these two points. 
The failure of the lead Agency's EIS to meet either of these 
stipulations will require FmHA or its successor agency under Public Law 
103-354 to follow the steps outlined in Sec. 1940.324 of this subpart 
prior to the approving official's decision on the FmHA or its successor 
agency under Public Law 103-354 action.



Sec. 1940.326  FmHA or its successor agency under Public Law 103-354 
as a lead Agency.

    (a) When other Federal agencies are involved in an FmHA or its 
successor agency under Public Law 103-354 action or related actions that 
require the preparation of an EIS, the preparer will consult with these 
agencies to determine a lead Agency for preparing the EIS. The criteria 
for making this determination will be those contained in Sec. 1505.5 of 
the CEQ regulations. If there is a failure to reach a determination 
within a reasonably short time after consultation is initiated, the 
National Office will be contacted. The assistance of CEQ will then be 
requested by the Administrator in order to conclude the determination of 
a lead Agency.
    (b) When acting as lead Agency, the FmHA or its successor agency 
under Public Law 103-354 preparer will request other Federal and State 
agencies to serve as cooperating agencies on the basis of the guidance 
provided in Sec. 1940.320(b) of this subpart. A memorandum of 
understanding or other written correspondence should be developed with a 
cooperating agency in order to define that agency's role in the 
preparation of the EIS.



Sec. 1940.327  Tiering.

    To the extent possible, FmHA or its successor agency under Public 
Law 103-

[[Page 45]]

354 may consider the concept of tiering in the preparation of 
environmental assessments and EISs. Tiering refers to the coverage of 
general matters in broader environmental impact statements, such as one 
done for a national program or regulation, with subsequent narrower 
statements or environmental analyses incorporating by reference the 
broader matters and concentrating on the issues specific to the action 
under consideration. Tiering can be used when the sequence of analysis 
is from the program level to site-specific actions taken under that 
program or from an initial EIS to a supplement which discusses the 
issues requiring supplementation.



Sec. 1940.328  State Environmental Policy Acts.

    (a) Numerous States have enacted environmental policy acts or 
regulations similar to NEPA, hereafter referred to as State NEPA's. It 
is important that FmHA or its successor agency under Public Law 103-354 
staff have an understanding of which States have such requirements and 
how they apply to applicant's proposals. It will be the responsibility 
of each State Director to determine the applicable State requirements 
and to establish a working relationship with the State personnel 
responsible for their implementation.
    (b) In processing projects located within States having State 
NEPA's, the preparer of the FmHA or its successor agency under Public 
Law 103-354 assessment will determine as early as possible in the 
assessment process whether the project falls under the requirements of 
the State NEPA. If it does, one of the following cases will exist and 
the appropriate actions specified will be taken.
    (1) The applicant has complied with the State's NEPA, and it was 
determined under the State's requirements that the proposed project 
would not result in sufficient potential impacts to warrant the 
preparation of an impact statement or other detailed environmental 
report required by the State NEPA. This finding or conclusion by the 
State will be considered in the FmHA or its successor agency under 
Public Law 103-354's review, and any supporting information used by the 
State will be requested. However, the State's finding can never be the 
total basis for FmHA or its successor agency under Public Law 103-354's 
environmental impact determination. An independent and thorough review 
in accordance with the requirements of this subpart must be conducted by 
the preparer.
    (2) The applicant has complied with the State NEPA, and it was 
determined under its implementing guidelines that a significant impact 
will result. This fact will be given great weight in the Agency's 
environmental determination. However, the State's definition of 
significant environmental impact may encompass a much lower threshold of 
impacts compared to FmHA or its successor agency under Public Law 103-
354's. In such a case, if the preparer does not believe that a 
significant impact will result under Agency guidelines for determining 
significant impacts, the environmental assessment will be prepared and 
include a detailed discussion with supporting information as to why the 
environmental reviewer's recommendation differs from that of the 
State's. However, the assessment cannot be completed until the State's 
impact statement requirements have been fulfilled by the applicant and 
the resulting impact statement has been reviewed by the preparer. An 
environmental impact determination will then be executed based upon the 
assessment and the statement.
    (c) It should be emphasized that at no time does the completion of 
an impact statement under the requirements of a State NEPA obviate the 
requirement for FmHA or its successor agency under Public Law 103-354 to 
prepare an impact statement. Consequently, as soon as it is clear to the 
preparer that the Agency will have to prepare a statement, every attempt 
should be made to accomplish the statement simultaneously with the 
State's. Coordination with State personnel is necessary so that data and 
expertise can be shared. In this manner, duplication of effort and the 
review periods for the separate statements can be minimized. This 
process clearly requires a close working relationship with the 
appropriate State personnel.

[[Page 46]]



Sec. 1940.329  Commenting on other Agencies' EIS's.

    (a) State Directors are authorized to comment directly on EIS's 
prepared by other Federal agencies. In so doing, comments should be as 
specific as possible. Any recommendations for the development of 
additional information or analyses should indicate why there is a need 
for the material.
    (b) Comments should concentrate on those matters of primary 
importance to FmHA or its successor agency under Public Law 103-354 and 
on areas of Agency expertise, such as rural planning and development. 
Any potential conflicts with FmHA or its successor agency under Public 
Law 103-354 programs, plans, or actions should be clearly identified. 
Special attention should be given to the relationship of the 
alternatives under study to the State Office's natural resource 
management guide and the objectives of the Department's land use 
regulation (exhibit A of this subpart). Copies of comments addressing 
land use questions will be provided to the appropriate chairman of the 
USDA State-level committee dealing with land use matters.
    (c) Whenever a State Director has serious concerns over the 
acceptability of the anticipated environmental impacts, the State 
Director will notify the Administrator.



Sec. 1940.330  Monitoring.

    (a) FmHA or its successor agency under Public Law 103-354 staff who 
normally have responsibility for the postapproval inspection and 
monitoring of approved projects will ensure that those measures which 
were identified in the preapproval stage and required to be undertaken 
in order to reduce adverse environmental impacts are effectively 
implemented.
    (b) This staff, as identified in paragraph (a) of this section, will 
review the action's approval documents and consult with the preparer of 
the action's environmental review document prior to making site visits 
or requesting project status reports in order to determine if there are 
environmental requirements to be monitored.
    (c) The preparer will directly monitor actions containing difficult 
or complex environmental special conditions.
    (d) Before certifying that conditions contained within offers of 
financial assistance have been fully met, the responsible monitoring 
staff will obtain the position of the preparer for those conditions 
developed as a result of the environmental review.
    (e) Whenever noncompliance with an environmental special condition 
is detected by FmHA or its successor agency under Public Law 103-354 
staff, the preparer and the SEC will be immediately informed. The 
approving official will then take appropriate steps, in consultation 
with the responsible program office, the SEC and preparer, to bring the 
action into compliance.



Sec. 1940.331  Public involvement.

    (a) Objective. The basic objective of FmHA or its successor agency 
under Public Law 103-354's public involvement process is threefold. It 
is to ensure that interested citizens can readily obtain knowledge of 
the environmental review status of FmHA or its successor agency under 
Public Law 103-354's funding applications, have the opportunity to input 
into this review process before decisions are made, and have access to 
the environmental documents supporting FmHA or its successor agency 
under Public Law 103-354 decisions.
    (b) Public notice requirements. (1) For projects that undergo the 
preparation of an environmental impact statement, the first element of 
formal public participation in the EIS process involves the publication 
of the notice of intent to prepare an EIS. The content of the notice of 
intent and its publication by FmHA or its successor agency under Public 
Law 103-354 in the Federal Register are explained in Sec. 1940.320 of 
this subpart. With respect to notification within the project area, the 
applicant will be requested to publish a copy of the notice of intent 
and the date of the scoping meeting in the newspaper of general 
circulation in the vicinity of the proposed action and in any local or 
community-oriented newspapers within the proposed action's area of 
environmental impact. The notice will be published in easily readable 
type in the nonlegal section of the newspaper(s). It

[[Page 47]]

will also be bilingual if the affected area is largely non-English 
speaking or bilingual. Individual copies of the notice will be sent by 
the applicant to the appropriate regional EPA office, any State and 
regional review agencies established under Executive Order 12372; the 
State Historic Preservation Officer; local radio stations and other news 
media; any State or Federal agencies planning to provide financial 
assistance to this or related actions or required to review permit 
applications for this action, any potentially affected Indian Tribe; any 
individuals, groups, local, State, and Federal agencies known to be 
interested in the project; affected property owners; and to any other 
parties that FmHA or its successor agency under Public Law 103-354 has 
identified to be so notified. It will also be posted at a readable 
location on the project site. The applicant will provide FmHA or its 
successor agency under Public Law 103-354 with a copy of the notice as 
it appeared in the newspaper(s), the date(s) published, and a list of 
all parties receiving an individual notice. Publication and individual 
transmittal of the notice for the scoping meeting will be accomplished 
at least 14 days prior to the date of the meeting.
    (2) Coincident with the distribution of either a draft or final EIS, 
a notice of the statement's availability will be published within the 
project area in the same manner as a notice of intent to prepare an EIS. 
FmHA or its successor agency under Public Law 103-354 will request EPA 
to publish in the Federal Register a notice of the statement's 
availability in accordance with EPA's requirements and pursuant to Sec. 
1506.10 of the CEQ regulations.
    (3) For Class II actions that are determined not to have a 
significant environmental impact, the Agency will require the applicant 
to publish a notification of this determination. This notice will be 
published in the same manner as a notice of intent to prepare an EIS but 
will appear for at least 3 consecutive days if published in a daily 
newspaper or otherwise in two consecutive publications. Individual 
copies will be sent to the same parties that are required to be sent a 
notice of intent, as specified in paragraph (b)(1) of this section, with 
the exception of local radio stations and other news media. Also, there 
is no requirement to post this notice on the project site. The applicant 
will provide FmHA or its successor agency under Public Law 103-354 with 
a copy of this notice, the dates the notice was published, and a list of 
all parties receiving an individual notice. This notification procedure 
does not apply to actions reviewed solely on the basis of a Class I 
assessment.
    (4) The public notice procedures for actions that will affect 
floodplains, wetlands, important farmlands, prime rangelands or prime 
forest lands are contained in exhibit C of this subpart. These 
procedures apply to actions that require either an EIS, Class II 
assessment or Class I assessment. However, whenever an action normally 
classified as a categorical exclusion requires a Class I assessment 
because of the potential impact to one of these important land 
resources, no public notice procedures apply in the course of completing 
the Class I assessment. When applicable to an action, as specified in 
exhibit C of this subpart, these public notice procedures can apply at 
two distinct stages. The first stage, a preliminary notice, applies to 
any of the five important land resources. The second stage, a final 
notice, is followed by a fifteen-day public review period and applies 
only to actions that will impact floodplains or wetlands. For Class II 
actions, this final notice procedure must be combined with any 
applicable finding of no significant environmental impact, which is 
described in paragraph (b)(3) of this section. Individual copies of the 
preliminary and final notices will be sent to the same parties that are 
required to be sent a notice of finding of no significant impact, as 
specified in paragraph (b)(3) of this section, with the following 
exception. Whenever property owners affected by proposed mitigation 
measures, such as proposed hook-up restrictions on portions of water or 
sewer lines that will traverse floodplains, are advised of these 
proposed measures in a preliminary notice, these property owners need 
not be sent copies of the final notice as long as the mitigation 
measures in the final notice are unchanged from the preliminary notice 
and no property

[[Page 48]]

owners raised objections or concerns over the mitigation measures.
    (5) The public notice requirements associated with holding a public 
information meeting are specified in paragraph (c) of this section.
    (c) Public information meetings. (1) Public information meetings 
will be held for an action undergoing an EIS as specified in Sec. 
1940.320 of this subpart. As part of the EIS process, a public 
information meeting will be held near the project site to discuss and 
receive comments on the draft EIS. It will be scheduled no sooner than 
15 days after the release of the draft EIS. It will be announced in the 
same manner as the scoping meeting, and the list of parties receiving an 
individual notification will also be developed in the same manner. The 
meeting will be chaired by the State Director or a designee and will be 
fully recorded so that a transcript can be produced. The applicant will 
be requested to assist in obtaining a facility for holding the meeting. 
To the extent possible, this meeting will be combined with public 
meetings required by other involved agencies.
    (2) Whenever a public information meeting is held as part of the 
completion of an environmental assessment, it will be scheduled, 
announced, and held in generally the same manner as a public information 
meeting for an EIS. However, a minimum of 7 days advance notice of the 
meeting is sufficient, and a transcript of the meeting will not be 
required. Rather a summary of the meeting to include the major issues 
raised will be prepared by the FmHA or its successor agency under Public 
Law 103-354 official who chaired the meeting.
    (d) Distribution of environmental documents. FmHA or its successor 
agency under Public Law 103-354 officials will promptly provide to 
interested parties, upon request, copies of environmental documents, 
including environmental assessments, draft and final environmental 
impact statements, and records of decision. Interested parties can 
request these materials from the appropriate State Director or approval 
official for project activities and from the Administrator on other 
activities subject to environmental review.



Sec. 1940.332  Emergencies.

    (a) Action Requiring EIS. When an emergency circumstance makes it 
necessary to take an action with significant environmental impact 
without observing the provisions of this subpart or the CEQ regulations, 
the Administrator will consult with CEQ about alternative arrangements 
before the proposed action is taken. It must be recognized that CEQ's 
regulations limit such arrangements to actions necessary to control the 
immediate impacts of the emergency. Other actions remain subject to NEPA 
review. For purposes of this subpart, an emergency circumstance is 
defined as one involving an immediate or imminent danger to public 
health or safety.
    (b) Action Not Requiring EIS. When an emergency circumstance makes 
it necessary to take an action with apparent non-significant 
environmental impact without observing the provisions of this subpart or 
the CEQ regulations, the Administrator will be so notified. The 
Administrator reserves the authority to waive or amend all procedural 
aspects of this subpart relating to the preparation of environmental 
assessments including but not limited to the applicant's submission of 
Form FmHA or its successor agency under Public Law 103-354 1940-20, 
public notice requirements and/or their associated comment periods, the 
timing of the assessment process, and the content of environmental 
review documents. Alternative arrangements will be established on a case 
by case basis taking into account the nature of the emergency and the 
time reasonably available to respond to it. These alternative 
arrangements will, to the extent possible, attempt to achieve the 
substantive requirements of this subpart such as avoiding impacts to 
important land resources, when practicable, and minimizing potential 
adverse environmental impacts. In all cases, the environmental findings 
and determinations required for Class I and Class II assessments must be 
executed by the appropriate FmHA or its successor agency under Public 
Law 103-354 officials prior to approval of the action and be based upon 
the best information available under the circumstances and the 
prescribed alternative arrangements.

[[Page 49]]

(Refer to paragraph (a) of this section should the approval official for 
the action determine that an EIS is necessary.) Additionally, all 
applicable consultation and coordination procedures required by law or 
regulation will be initiated with the appropriate Federal or State 
agency(s). Such procedures will be accomplished in the most expeditious 
manner possible and modified to the extent necessary and mutually 
agreeable between FmHA or its successor agency under Public Law 103-354 
and the affected agency(s). The provisions of this paragraph are limited 
to the same emergency circumstances and scope of action as specified in 
paragraph (a) of this section.



Sec. 1940.333  Applicability to planning assistance.

    The award of FmHA or its successor agency under Public Law 103-354 
funds for the purpose of providing technical assistance or planning 
assistance will not be subject to any environmental review. However, 
applicants will be expected to consider in the development of their 
plans and to generally document within their plans:
    (a) The existing environmental quality and the important 
environmental factors within the planning area, and
    (b) The potential environmental impacts on the planning area of the 
plan as well as the alternative planning strategies that were reviewed.



Sec. 1940.334  Direct participation of State Agencies in the preparation 
of FmHA or its successor agency under Public Law 103-354 EISs.

    FmHA or its successor agency under Public Law 103-354 may be 
assisted by a State Agency in the preparation of an EIS subject to the 
conditions indicated below. At no time, however, is FmHA or its 
successor agency under Public Law 103-354 relieved of its 
responsibilities for the scope, objectivity, and content of the entire 
statement of any other responsibility under NEPA.
    (a) The FmHA or its successor agency under Public Law 103-354 
applicant for financial assistance is a State Agency having statewide 
jurisdiction and responsibility for the proposed action;
    (b) FmHA or its successor agency under Public Law 103-354 furnishes 
guidance to the State Agency as to the scope and content of the impact 
statement and participates in the preparation;
    (c) FmHA or its successor agency under Public Law 103-354 
independently evaluates the statement and rectifies any major 
deficiencies prior to its circulation by the Agency as an EIS;
    (d) FmHA or its successor agency under Public Law 103-354 provides, 
early in the planning stages of the project, notification to and 
solicits the views of any land management entity (State or Federal 
Agency responsible for the management or control of public lands) 
concerning any portion of the project and its alternatives which may 
have significant impacts upon such land management entities; and
    (e) If there is any disagreement on the impacts addressed by the 
review process outlined in paragraph (d) of this section, FmHA or its 
successor agency under Public Law 103-354 prepares a written assessment 
of these impacts and the views of the land management entities for 
incorporation into the draft impact statement.



Sec. 1940.335  Environmental review of FmHA or its successor agency 
under Public Law 103-354 proposals for legislation.

    (a) As stated in Sec. 1940.312(d)(4) of this subpart, all FmHA or 
its successor agency under Public Law 103-354 proposals for legislation 
will receive an environmental assessment. The definition of such a 
proposal is contained in Sec. 1508.17 of the CEQ regulations.
    (b) The environmental assessment and, when necessary, the EIS will 
be prepared by the responsible Agency staff that is developing the 
legislation.
    (c) If an EIS is required, it will be prepared according to the 
requirements of Sec. 1506.8 of the CEQ Regulations.



Sec. 1940.336  Contracting for professional services.

    (a) Assistance from outside experts and professionals can be secured 
for the purpose of completing EIS, assessments, or portions of them. 
Such assistance will be secured according to

[[Page 50]]

the Federal and Agriculture Procurement Regulations contained in 
chapters 1 and 4 of title 48 of the Code of Federal Regulations.
    (b) The contractor will be selected by FmHA or its successor agency 
under Public Law 103-354 in consultation with any cooperating agencies. 
In order to avoid any conflict of interest, contractors competing for 
the work will be required to execute a disclosure statement specifying 
that they have no financial or other interest in the outcome of the 
project.
    (c) The Administrator will provide the State Director with a 
proposed scope of work for use in securing such professional services.
    (d) Applicants will not be required to pay the costs of these 
professional services.



Sec. Sec. 1940.337-1940.349  [Reserved]



Sec. 1940.350  Office of Management and Budget (OMB) control number.

    The collection of information requirements in this regulation has 
been approved by the Office of Management and Budget and has been 
assigned OMB control number 0575-0094.

      Exhibit A to Subpart G of Part 1940--Departmental Regulation

    Number: 9500-3.
    Subject: Land Use Policy.
    Date: March 22, 1983.
    OPI: Land Use Staff, Soil Conservation Service.

                                 Section

1. Purpose
2. Cancellation
3. Policy
4. Abbreviations
5. Definitions
6. Responsibilities
7. Appendix A

                               1. Purpose

    The Nation's farmlands, forest lands, rangelands, flood plains, and 
wetlands are unique natural resources providing food, fiber, wood, and 
water necessary for the continued welfare of the people of the United 
States and protection from floods. Each year, large amounts of these 
lands are converted to other uses. Continued conversion of the Nation's 
farmlands, forest lands, and rangelands may impair the ability of the 
United States to produce sufficient food, fiber, and wood to meet 
domestic needs and the demands of export markets. Continued conversion 
of the Nation's wetlands may reduce the availability of adequate 
supplies of suitable-quality water, indigenous wildlife species, and the 
productive capacity of the Nation's fisheries. Continued encroachments 
on flood plains decrease the natural flood-control capacity of these 
land areas, create needs for expensive manmade flood-control measures 
and disaster-relief activities, and endanger both lives and property.
    Land use allocation decisions are matters of concern to USDA. 
Decisions concerning land use arise from needs to accommodate needed 
growth and development; prevent unwarranted and costly sprawl; avoid 
unwarranted conversion of farm, range, and forest lands and wetlands 
from existing uses and unwarranted encroachment on flood plains; 
maintain and enhance agricultural and forest production capabilities; 
maintain wildlife, fish, and seafood habitat; provide or improve 
community services and facilities; assure appropriate environmental 
quality; and assure adequate supplies of suitable-quality water. These 
needs are highly interdependent and often compete with each other for 
the limited supply of available land and water.
    It is Departmental policy to promote land use objectives responsive 
to current and long-term economic, social, and environmental needs. This 
policy recognizes the rights and responsibilities of State and local 
governments for regulating the uses of land under their jurisdiction. It 
also reflects the Department's responsibility to (a) assure that the 
United States retains a farm, range, and forest land base sufficient to 
produce adequate supplies, at reasonable production costs of high-
quality food, fiber, wood, and other agricultural products that may be 
needed; (b) assist individual landholders and State and local 
governments in defining and meeting needs for growth and development in 
such ways that the most productive farm, range, and forest lands are 
protected from unwarranted conversion to other uses; and (c) assure 
appropriate levels of environmental quality.
    In accordance with the authority contained in 7 U.S.C. 1010 and 7 
U.S.C. 2204 and consistent with 7 CFR 2.19(f) and provisions of the 
Farmland Protection Policy Act, Subtitle I, Title XV, Pub. L. 97-98, the 
Department sets forth this statement of policy on land use.

                            2. Cancellations

    This regulation supersedes Secretary's Memorandum 9500-2 dated March 
10, 1982.

                                3. Policy

    Federal agencies, in implementing programs, make decisions that 
affect current

[[Page 51]]

and potential uses of land. The Department will:
    a. Promote and support planning procedures that allow landholders, 
interest groups, and State and local governments to have input at all 
appropriate stages of the decisionmaking process for public projects, 
programs, or activities; that recognize the rights and responsibilities 
of landholders in making private land use decisions; and that recognize 
the responsibility of governments in influencing how land may be used to 
meet public needs.
    b. Assure that programs of the agencies within the Department 
discourage the unwarranted conversion to other uses of prime and unique 
farmlands, farmlands of statewide or local importance, and prime 
rangelands, as defined in appendix A; the unwarranted alteration of 
wetlands or flood plains; or the unwarranted expansion of the peripheral 
boundaries of existing settlements.
    c. Manage both its land use-related programs and USDA-administered 
land in such manner as to (1) demonstrate leadership in meeting short- 
and long-term needs for growth and development, while assuring adequate 
supplies of needed food, fiber, and forest products; (2) assure 
appropriate levels of environmental quality and adequate supplies of 
water; and (3) discourage unwarranted expansion of peripheral boundaries 
of existing settlements. Whenever practicable, management of USDA-
administered lands shall be coordinated with the management of adjacent 
private and other public lands.
    d. Conduct multidisciplinary land use research and education 
programs responsive to identified State, local, and national needs and, 
when requested, assist State and local governments, citizens groups, and 
individual landholders in determining a alternative land use values, 
thereby enabling local officials to make judicious choices to meet 
growth and development needs and to protect the community's farm- and 
forest-related economic base.
    e. Assist landowners and State and Federal agencies in the 
reclamation of abandoned surface-mined lands. This reclamation will help 
eliminate safety, health, and environmental problems.
    f. Assist in planning for the extraction of coal and other 
nonrenewable resources in such manner as to facilitate restoration. This 
restoration would reestablish or enhance food, fiber, or forest 
productivity or contribute to other beneficial uses of the land as 
mining is completed in defined areas as sites.
    g. Advocate among Federal agencies:
    (1) The retention of important farmlands, rangelands, forest lands, 
and wetlands, whenever proposed conversions to other uses (a) are caused 
or encouraged by actions or programs of a Federal agency or (b) require 
licensing or approval by a Federal agency, unless other needs clearly 
override the benefits derived from retention of such lands; and
    (2) Actions that reduce the risk of flood loss and soil erosion; 
that minimize impacts of floods on human safety, health, and welfare; 
that preserve natural flood-control and other beneficial functions and 
values of wetlands and flood plains; and that reduce future need for 
expensive manmade flood-control systems, disaster-relief assistance, or 
Federal rehabilitation assistance in the event of flooding.

                            4. Abbreviations

    USDA--U.S. Department of Agriculture.
    NRE--Natural Resources and Environment Committee.

                             5. Definitions

    Complete definitions for the terms farmlands, forest lands, 
rangelands, wetlands, and flood plains are found in appendix A.

                           6. Responsibilities

    a. The Office of the Secretary is responsible for (1) encouraging, 
assisting, and coordinating efforts of other Federal departments and 
agencies to implement policies and procedures supportive of the 
objectives of this regulation; (2) resolving issues and acting on 
recommendations raised to the Secretary's Policy and Coordination 
Council by the Departmental committees; and (3) raising unresolved 
issues and recommending actions to the appropriate Cabinet Council.
    b. The NRE Committee, created under the Secretary's memorandum dated 
July 22, 1981, will provide departmentwide leadership for the 
implementation of this policy statement. In implementing this policy, 
the NRE Committee will:
    (1) Recommend Departmental guidelines to the Secretary and schedule 
reviews of each agency's procedures for implementation;
    (2) Monitor implementation of this policy;
    (3) Encourage, support, and provide guidance to State- and local-
level USDA committees in implementing this policy;
    (4) Coordinate the work of USDA agencies in carrying out the 
provisions of this regulation; and
    (5) Advise the Secretary annually as to progress and problems 
encountered.
    c. Each USDA agency will review and make the necessary 
administrative changes in existing and proposed rules, regulations, 
guides, practices, or policies and propose needed legislative changes to 
bring agency programs into compliance with the provisions of this 
regulation.
    d. Each USDA agency having programs that will be affected by this 
regulation shall develop implementing procedures, consistent with the 
guidelines provided by the NRE Committee, and shall provide to all 
offices of the agency copies of this policy statement,

[[Page 52]]

Departmental guidelines, and agency procedures to implement this policy.
    e. USDA agencies will encourage State and local governments and 
individual landholders to retain important farmlands, rangelands, forest 
lands, and wetlands and to avoid encroachments on flood plains when 
practicable alternatives exist to meet developmental needs. Appropriate 
agencies will assist State and local governments, citizens groups, and 
individual landholders in identifying options and determining 
alternative land use values as the basis for making judicious choices in 
meeting growth and development needs.
    f. USDA agencies will encourage other Federal, State, and local 
government agencies to exchange information on plans or projects that 
may impact on important farmlands, rangelands, forest lands, wetlalds, 
or flood plains and to involve appropriate USDA agencies early in the 
planning process. USDA agencies will participate in a timely manner at 
appropriate stages in the planning process on Federal or federally 
assisted projects or activities when requested. Where opportunity for 
such participation is not forthcoming, the Department may intercede, 
consistent with policy contained in this regulation, at appropriate 
stages in the decisionmaking process through review and comments on 
plans, as provided for in authorized administrative review procedures 
for such projects, activities, or actions.
    g. When land held either in public or private ownership will be 
directly affected by USDA actions, the implementing agency will notify 
the affected landholders at the earliest time practicable of the 
proposed action and provide such landholders an opportunity to review 
the elements of the action and to comment on the action's feasibility 
and alternatives to it.
    h. Agencies of USDA will assure that their actions, investments, and 
programs on non-Federal lands will conform, to the extent practicable, 
with the uses permitted under land use regulations adopted by State or 
local governments.
    i. When land use regulations or decisions are inconsistent with USDA 
policies and procedures for the protection of important farmlands, 
rangelands, forest lands, wetlands, or flood plains, USDA agencies shall 
not assist in actions that would convert these lands to other uses or 
encroach upon flood plains, unless (1) there is a demonstrated, 
significant need for the project, program, or facility, and (2) there 
are no practicable alternative actions or sites that would avoid the 
conversion of these lands or, if conversion is unavoidable, reduce the 
number of acres to be converted or encroached upon directly and 
indirectly.

                       7. Appendix A--Definitions

    The following definitions apply to this Departmental Regulation.

                       1. important farmlands \1\
---------------------------------------------------------------------------

    \1\ 7 CFR 657.5.
---------------------------------------------------------------------------

                         a. Prime Farmlands \1\

    (1) General Criteria. Prime farmland is land that has the best 
combination of physical and chemical characteristics for producing food, 
feed, forage, fiber, and oilseed crops and is also available for these 
uses (the land could be cropland, pastureland, rangeland, forest land, 
or other land, but not urban built-up land or water). It has the soil 
quality, growing season, and moisture supply needed to produce, 
economically, sustained high yields of crops when treated and managed, 
including water management, according to acceptable farming methods. In 
general, prime farmlands have an adequate and dependable water supply 
from precipitation or irrigation, a favorable temperature and growing 
season, acceptable acidity or alkalinity, acceptable salt and sodium 
content, and few or no rocks. They are permeable to water and air. Prime 
farmlands are not excessively erodible or saturated with water for a 
long period of time, and they either do not flood frequently or are 
protected from flooding. Examples of soils that qualify as prime 
farmland are Palouse silt loam, 0- to 7-percent slopes; Brookston silty 
clay loam, drained; and Tama silty clay loam, 0- to 5-percent slopes.
    (2) Specific Criteria. Prime farmlands must meet all the following 
criteria. Terms used in this section are defined in these USDA 
publications: ``Soil Taxonomy, Agriculture Handbook 436,'' ``Soil Survey 
Manual, Agriculture Handbook 18,'' ``Rainfall-Erosion Losses from 
Cropland, Agriculture Handbook 282,'' ``Wind Erosion Forces in the 
United States and Their Use in Predicting Soil Loss, Agriculture 
Handbook 346,'' and ``Saline and Alkali Soils, Agriculture Handbook 
60.''
    (a) The soils have:
    1. Aquic, udic, ustic, or xeric moisture regimes and sufficient 
available water capacity within a depth of 40 inches, or in the root 
zone (root zone is the part of the soil that is penetrated by plant 
roots) if the root zone is less than 40 inches deep, to produce the 
commonly grown cultivated crops (cultivated crops include but are not 
limited to grain, forage, fiber, oilseed, sugar beets, sugarcane, 
vegetables, tobacco, orchard, vineyard, and bush fruit crops) adapted to 
the region in 7 or more years out of 10; or
    2. Xeric or ustic moisture regimes in which the available water 
capacity is limited, but the area has a developed irrigation water 
supply that is dependable (a dependable water supply is one in which 
enough water is

[[Page 53]]

available for irrigation in 8 out of 10 years for the crops commonly 
grown) and of adequate quality; or
    3. Acidic or torric moisture regimes, and the area has a developed 
irrigation water supply that is dependable and of adequate quality; and
    (b) The soils have a temperature regime that is frigid, mesic, 
thermic, or hyperthermic (pergelic and cryic regimes are excluded). 
These are soils that, at a depth of 20 inches, have a mean annual 
temperature higher than 32 degrees Fahrenheit. In addition, the mean 
summer temperature at this depth in soils with an 0 horizon is higher 
than 47 degrees Fahrenheit; in soils that have no 0 horizon, the mean 
summer temperature is higher than 59 degrees Fahrenheit; and
    (c) The soils have a pH between 4.5 and 8.4 in all horizons within a 
depth of 40 inches or in the root zone if the root zone is less than 40 
inches deep; and
    (d) The soils either have no water table or have a water table that 
is maintained at a sufficient depth during the cropping season to allow 
cultivated crops common to the area to be grown; and
    (e) The soils can be managed so that in all horizons within a depth 
of 40 inches or in the root zone if the root zone is less than 40 inches 
deep, during part of each year the conductivity of the saturation 
extract is less than 4 mmhoc/cm and the exchangeable sodium percentage 
is less than 15; and
    (f) The soils are not flooded frequently during the growing season 
(less often than once in 2 years); and
    (g) The product of K (erodibility factor) times the percent slope is 
less than 2.0, and the product of I (soils erodibility) times C 
(climatic factor) does not exceed 60; and
    (h) The soils have a permeability rate of at least 0.06 inch per 
hour in the upper 20 inches, and the mean annual soil temperature at a 
depth of 20 inches is less than 59 degrees Fahrenheit or higher; and
    (i) Less that 10 percent of the surface layer (upper 6 inches) in 
these soils consists of rock fragments coarser than 3 inches.

                         b. Unique Farmland \1\
---------------------------------------------------------------------------

    \1\ See footnote 1 on previous page.
---------------------------------------------------------------------------

    (1) General Criteria. Unique farmland is land other than prime 
farmland that is used for the production of specific high-value food and 
fiber crops. It has the special combination of soil quality, location, 
growing season, and moisture supply needed to produce, economically, 
sustained high-quality and/or high yields of a specific crop when 
treated and managed according to acceptable farming methods. Examples of 
such crops are citrus, tree nuts, olives, cranberries, fruit, and 
vegetables.
    (2) Specific Characteristics. Unique farmland is used for a specific 
high-value food or fiber crop. It has a moisture supply that is adequate 
for the specific crop; the supply is from stored moisture, 
precipitation, or a developed irrigation system. It combines favorable 
factors of soil quality, growing season, temperature, humidity, air 
drainage, elevation, aspect, or other conditions, such as nearness to 
market, that favor the growth of a specific food or fiber crop.

       c. Additional Farmland of Statewide Importance 1

    This is land, in addition to prime and unique farmlands, that is of 
statewide importance for the production of food, feed, fiber, forage, 
and oilseed crops. Criteria for defining and delineating this land are 
to be determined by the appropriate State agency or agencies. Generally, 
additional farmlands of statewide importance include those that are 
nearly prime farmland and that economically produce high yields of crops 
when treated and managed according to acceptable farming methods. Some 
may produce as high a yield as prime farmlands if conditions are 
favorable. In some States, additional farmlands of statewide importance 
may include tracts of land that have been designated for agriculture by 
State law.

         d. Additional Farmland of Local Importance 1

    In some local areas, there is concern for certain additional 
farmlands for the production of food, feed, fiber, forage, and oilseed 
crops, even though these lands are not identified as having national or 
statewide importance. Where appropriate, these lands are to be 
identified by the local agency or agencies concerned.

                        2. prime forest lands \2\
---------------------------------------------------------------------------

    \2\ Prime Forest Land Definition and Criteria, U.S. Forest Service, 
May 26, 1977.
---------------------------------------------------------------------------

    Because of the multiple use of forested lands, several categories, 
e.g., timber, wildlife, and recreation, may be developed. For purposes 
of this regulation only, the following timberland definitions will 
apply.

                         a. Prime Timberland \2\

    Prime timberland is land that has soil capable of growing wood at 
the rate of 85 cubic feet or more/acre/year (at culmination of mean 
annual increment) in natural stands and is not in urban or built-up land 
uses or water. Generally speaking, this is land currently in forest, but 
does not exclude qualifying lands that could realistically be returned 
to forest. Delineation of these lands will be in accordance with 
national criteria.

[[Page 54]]

                        b. Unique Timberland \2\

    Unique timberlands are lands that do not qualify as prime timberland 
on the basis of producing less than 85 cubic feet/acre/year, but are 
growing sustained yields of specific high-value species or species 
capable of producing specialized wood products under a silvicultural 
system that maintains soil productivity and protects water quality. 
Delineation of these lands will be in accordance with national criteria.

                c. Timberland of Statewide Importance \2\

    This is land, in addition to prime and unique timberlands, that is 
of statewide importance for the growing of wood. Criteria for defining 
and delineating these lands are to be determined by State forestry 
planning committees or appropriate State organizations.

                 d. Timberlands of Local Importance \2\

    In some local areas, there is concern for certain additional forest 
lands for the growing of wood, even though these lands are not 
identified as having national or statewide importance. Where 
appropriate, these lands are to be identified by a local agency or 
agencies concerned.

                             3. wetlands \3\
---------------------------------------------------------------------------

    \3\ Definitions contained in Executive Orders 11988 and 11990.
---------------------------------------------------------------------------

    Wetlands are those areas that are inundated by surface or ground 
water with a frequency sufficient to support and, under normal 
circumstances, do or would support a prevalence of vegetative or aquatic 
life that requires saturated or seasonally saturated soil conditions for 
growth and reproduction. Wetlands generally include swamps, marshes, 
bogs, and similar areas, such as sloughs, potholes, wet meadows, river 
overflows, mudflats, and natural ponds.

                           4. flood plains \3\

    The term flood plain means the lowland and relatively flat areas 
adjoining inland and coastal waters, including floodprone areas of 
offshore islands, including, at a minimum, those that are subject to a 
1-percent or greater chance of flooding in any given year.

                         5. prime rangeland \4\
---------------------------------------------------------------------------

    \4\ USDA proposed definition for intradepartmental use only.
---------------------------------------------------------------------------

    Prime rangeland is rangeland which, because of its soil, climate, 
topography, vegetation, and location, has the highest quality or value 
for grazing animals. The (potential) natural vegetation is palatable, 
nutritious, and available to the kinds of herbivores common to the area.

 Exhibit B to Subpart G of Part 1940--Development and Implementation of 
                    Natural Resource Management Guide

    1. The State Director shall complete the natural resource management 
guide within 12 months from the effective date of this subpart and issue 
the guide as a State supplement after prior approval by the 
Administrator. A summary of the basic content, purposes, and uses of the 
guide is contained in Sec. 1940.305 of this subpart. The guide shall be 
prepared in draft form and be provided for review and comment to USDA 
agencies, appropriate Federal and State agencies, State and regional 
review agencies assigned the consulation requirements of Executive Order 
12372, as well as interested localities, groups, and citizens. Also at 
least one public information meeting shall be held on the draft which 
shall be followed by a 30-day period for the submission of public 
comments. Public notification of this meeting shall be made in the same 
manner as the notification process for a scoping meeting. (See Sec. 
1940.320(c) of this subpart). Additionally, the public shall be informed 
that copies of the draft guide will be made available from the State 
Office upon request. After completion of this public review, the draft 
will be revised as necessary in light of the comments received and 
provided as a final draft State Supplement to the Administrator for 
review and approval. Any concerns and comments of the Administrator will 
be addressed by the State Director and the guide completed. Upon the 
Administrator's approval and the fulfillment of the requirements of 
paragraph 4. of this exhibit, the natural resource management guide 
shall then become part of any program investment strategies developed by 
the State Director for the purpose of addressing the rural needs of the 
State. Although a 12-month period has been established for the 
completion of a natural resource management guide, this deadline is not 
to be construed as curtailing or postponing the implementation of 
existing environmental laws, regulations, Executive orders or the 
Departmental Regulation 9500-3, Land Use Policy, with respect to 
individual project reviews, nor giving anyone any rights or claims with 
respect to the completion or content of the guide.
    2. The natural resource management guide needs to be developed in 
full recognition of its role as an internal Agency planning tool and 
with sensitivity to the Agency's mission.
    3. After the Administrator approves the natural resource management 
guide, it will become effective 4 months from that date. This interim 
period shall be used to inform local, State, and Federal agencies, 
localities, organizations, and interested citizens of the content of the 
guide. In this manner, those

[[Page 55]]

parties intending to seek FmHA or its successor agency under Public Law 
103-354 assistance or to coordinate FmHA or its successor agency under 
Public Law 103-354 assistance programs with their own programs will be 
able to gain for their planning needs an understanding of our guide.
    4. Completed natural resource management guides shall be reviewed 
every 2 years and updated by the State Director to reflect newly 
identified geographical areas of concern or policy revisions at the 
lational, State, regional or local level. They will also be revised, as 
necessary, through appropriate guidance from the Administrator. 
Revisions shall be transmitted to the Administrator for postapproval and 
shall be considered approved if either no comments are raised by the 
Administrator within 30 days of receipt of the State Director's 
transmittal letter or the administrator specifically approves them 
before the 30 days expire. Public review of a revision will not be 
required. However, if in the opinion of the State Director the proposed 
revision will substantially change the previously adopted natural 
resource management guide, a public review shall be conducted of the 
revision in the same manner as that described in paragraph 1 of this 
exhibit for the development of the original guide. Such review shall 
occur prior to the transmittal of the revision to the Administrator. If 
the State Director believes that at the expiration of any 2-year review 
period there is need to update the guide, a statement to this effect 
shall be filed with the Administrator.
    5. The foundation for the natural resource management guide is the 
identification of the types of land uses or environmental factors 
deserving attention and their geographical location within the State. An 
inventory or listing shall be developed, therefore, of the important 
land uses within the State. This inventory will be accomplished by 
assembling existing data and information compiled by those Federal, 
State, and local agencies that have jurisdiction or expertise regarding 
the land uses or environmental factors. At a minimum, the inventory 
shall consist of available documents, listings, maps, or graphic 
materials describing the location of the following:
    a. National Register of Historic Places to include monthly 
supplements as designated by the Department of the Interior (DOI), and 
the State Historic Preservation Plans. This list is issued as a State 
supplement to subpart F or part 1901 of this chapter;
    b. Rivers designated as part of the Wild and Scenic Rivers System 
and rivers under study for inclusion in the system, as published by DOI;
    c. Important farmlands;
    d. Prime rangelands.
    e. Prime forestlands;
    f. Wetland inventory;
    g. Floodplain inventory as issued by the Federal Emergency 
Management Administration;
    h. Endangered Species and Critical Habitats as listed or proposed 
for listing by the Department of Commerce (DOC) and DOI;
    i. Sole source aquifer recharge areas as designated by the 
Environmental Protection Agency (EPA);
    j. Air Quality Control Regions as designated by EPA;
    k. National Registry of Natural Landmarks at published by DOI;
    l. Coastal Barrier Resources System;
    m. State inventories or planning documents identifying important 
land uses, particularly those not covered by the above items, such as 
wildlife refuges, important habitats, and areas of high water quality, 
or scenic or recreational value;
    n. Agricultural districts or other similar zoning classifications 
for agricultural land protection; and
    o. Coastal Zone Management Areas.
    6. The Administrator shall be responsible for assisting State 
Directors in obtaining listings and inventories of resources protected 
by Federal statutes and regulations. The State Director has the 
responsibility for assembling documents on important environmental 
resources or areas identified in State and substate laws, regulations, 
plans, and policies.
    7. Development of the inventory by the State Director will require 
consultation and assistance from a variety of agencies and experts. This 
consultation should begin with Department agencies and be accomplished 
through appropriate, State-level USDA committees. The objective should 
be to determine the land classification data that has been compiled and 
that which is in the process of being compiled either by USDA agencies 
or their counterparts at the state level. The Memorandum of 
Understanding executed in May 1979 between the Soil Conservation Service 
(SCS) and FmHA or its successor agency under Public Law 103-354 should 
be utilized as the basis for seeking SCS's assistance in this data 
collection effort. (See FmHA Instruction 2000-D, exhibit A, which is 
available in any FmHA or its successor agency under Public Law 103-354 
Office.) Direct contacts should then be made with State agencies, in 
particular with the appropriate office of State planning, to determine 
the availability of State inventories and State land use policies and 
priorities. Similar discussions should be held with substate regional 
planning agencies and clearinghouses with assistance being provided in 
this effort by District Directors. County Supervisors shall contact 
local officials and shall be responsible for being familiar with and for 
assembling similar inventories, land use policies, or protective 
requirements developed by the local government agencies

[[Page 56]]

within the supervisor's territorial jurisdiction.
    8. Another important element of the natural resource management 
guide shall be the examination of any major environmental impacts on the 
State or a substate area resulting from the cumulative effects of FmHA 
or its successor agency under Public Law 103-354-assisted project over 
the last several years. In this examination, particular emphasis should 
be given to the cumulative impacts of water resource projects such as 
irrigation systems. This should be done in consultation with experts 
within the appropriate State agencies and the U.S. Geological Survey. 
The housing programs should also be given a particular emphasis with 
respect to their cumulative impacts. More detailed guidance on the 
accomplishment of this cumulative impact section of the natural resource 
management guide, as well as the overall content of the guide, shall be 
provided by the Administrator. In preparing the State's natural resource 
management guide and in assembling inventories of critical resources, 
Agency staff should not lose sight of the basic purposes of this effort. 
The development of lengthy and complex guides and the amassing of huge 
inventories is not our goal. In the end, the material must be useable 
and serve as a tool for better decisionmaking. The basic purposes of 
this guide and inventory, then, are to provide a basis for developing 
comprehensive, statewide, rural development investment strategies that 
(i) do not conflict with Federal, State, and local mandates to preserve 
and protect important land and environmental resources, (ii) that do not 
create short- or long-term development pressures which would lead to the 
unnecessary conversion of these resources, and (iii) which effectively 
support and enhance Federal, State, and local plans to preserve these 
resources.

 Exhibit C to Subpart G of Part 1940--Implementation Procedures for the 
   Farmland Protection Policy Act; Executive Order 11988, Floodplain 
     Management; Executive Order 11990, Protection of Wetlands; and 
             Departmental Regulation 9500-3, Land Use Policy

    1. Background. The Subtitle I of the Agriculture and Food Act of 
1981, Pub. L. 97-98, created the Farmland Protection Policy Act. The Act 
requires the consideration of alternatives when an applicant's proposal 
would result in the conversion of important farmland to nonagricultural 
uses. The Act also requires that Federal programs, to the extent 
practicable, be compatible with State, local government, and private 
programs and policies to protect farmland. The Soil Conservation Service 
(SCS), as required by the Act, has promulgated implementation procedures 
for the Act at 7 CFR part 658 which are hereafter referred to as the SCS 
rule. This rule applies to all federal agencies. The Departmental 
Regulation 9500-3, Land Use Policy (the Departmental Regulation), also 
requires the consideration of alternatives but is much broader than the 
Act in that it addresses the conversion of land resources other than 
farmland. The Departmental Regulation is included as exhibit A to this 
subpart and affects only USDA agencies. For additional requirements that 
apply to some Farmer Program loans and guarantees and loans to an Indian 
Tribe or Tribal Corporation and that cover the conservation of wetlands 
and highly erodible land, see exhibit M of this subpart.
    2. Implementation. Each proposed lease or disposal of real property 
by FmHA or its successor agency under Public Law 103-354 and application 
for financial assistance or subdivision approval will be reviewed to 
determine if it would result in the conversion of a land resource 
addressed in the Act, Executive Orders, or Departmental Regulation and 
as further specified below. Those actions that are determined to result 
in the lease, disposal or financing of an existing farm, residential, 
commercial or industrial property with no reasonably foreseeable change 
in land use and those actions that solely involve the renovation of 
existing structures or facilities would require no further review.\1\ 
Since these actions have no potential to convert land uses, this finding 
would simply be made by the preparer in completing the environmental 
assessment for the action. Also, actions that convert important farmland 
through the construction of on-farm structures necessary for farm 
operations are exempt from the farmland protection provisions of this 
exhibit. For other actions, the following implementation steps must be 
taken:
---------------------------------------------------------------------------

    \1\ See special procedures in item 3 of this exhibit if the existing 
structure or real property is located in a floodplain or wetland.
---------------------------------------------------------------------------

    a. Determine whether important land resources are involved. The Act 
comes into play whenever there is a potential to affect important 
farmland. The Departmental Regulation covers important farmland as well 
as the following land resources: prime forest land, prime rangeland, 
wetlands and floodplains. Hereafter, these land resources are referred 
to collectively as important land resources. Definitions for these land 
resources are contained in the appendix to the Departmental Regulation. 
The SCS rule also defines important farmland for purposes of the Act. 
Since the SCS's definition of prime farmland differs from the 
Departmental Regulation's definition, both definitions must be

[[Page 57]]

used and if either or both apply, the provisions of this exhibit must be 
implemented. It is important to note the definition of important 
farmland in both the SCS rule and the Departmental Regulation because it 
includes not only prime and unique farmland but additional farmland that 
has been designated by a unit of State or local government to be of 
statewide or local importance and such designation has been concurred in 
by the Secretary acting through SCS. In completing the environmental 
assessment or Form FmHA or its successor agency under Public Law 103-354 
1940-22, ``Environmental Checklist For Categorical Exclusions,'' the 
preparer must determine if the project is either located in or will 
affect one or more of the land resources covered by the SCS rule or the 
Departmental Regulation. Methods for determining the location of 
important land resources on a project-by-project basis are discussed 
immediately below. As reflected several times in this discussion, SCS 
personnel can be of great assistance in making agricultural land and 
natural resource evaluation, particularly when there is no readily 
available documentation of important land resources within the project's 
area of environmental impact. It should be remembered that FmHA or its 
successor agency under Public Law 103-354 and SCS have executed a 
Memorandum of Understanding in order to facilitate site review 
assistance. (See FmHA Instruction 2000-D, exhibit A, available in any 
FmHA or its successor agency under Public Law 103-354 office.)
    (1) Important Farmland, Prime Forest Land, Prime Rangeland--The 
preparer of the environmental review document will review available SCS 
important farmland maps to determine if the general area within which 
the project is located contains important farmland. Because of the large 
scale of the important farmland maps, the maps should be used for 
general review purposes only and not to determine if sites of 40 acres 
or less contain important farmland. If the general area contains 
important farmland or if no important farmland map exists for the 
project area, the preparer of the environmental review will request 
SCS's opinion on the presence of important farmland by completing Form 
AD-1006, ``Farmland Conversion Impact Rating,'' according to its 
instructions, and transmitting it to the SCS local field office having 
jurisdiction over the project area. This request will also indicate that 
SCS's opinion is needed regarding the application to the project site of 
both definitions of prime farmland, the one contained within its rule 
and the one contained within the Departmental Regulation. SCS's opinion 
is controlling with respect to the former definition and advisory with 
respect to the latter. No request need be sent to SCS for an action 
meeting one of the exemptions contained in item number 2 of this 
exhibit.
    (2) Floodplain--Review the most current Flood Insurance Rate Map or 
Flood Insurance Study issued for the project area by the Federal 
Emergency Management Administration (FEMA). Information on the most 
current map available or how to obtain a map free of charge is available 
by calling FEMA's toll free number 800-638-6620. When more specific 
information is needed on the location of a floodplain, for example, the 
project site may be near the boundary of a floodplain; or for assistance 
in analyzing floodplain impacts, it is often helpful to contact FEMA's 
regional office staff. Exhibit J of this subpart contains a listing of 
these regional offices and the appropriate telephone numbers.
    If a FEMA floodplain map has not been prepared for a project area, 
detailed assistance is normally available from the following agencies: 
The U.S. Fish and Wildlife Service (FWS), SCS, Corps of Engineers, U.S. 
Geological Survey (USGS), or appropriate regional or State agencies 
established for flood prevention purposes.
    (3) Wetlands--FWS is presently preparing wetland maps for the 
nation. Each FWS regional office has a staff member called a Wetland 
Coordinator. These individuals can provide updated information 
concerning the status of wetland mapping by FWS and information on State 
and local wetland surveys. Exhibit K of this subpart contains a listing 
of Wetland Coordinators arranged by FWS regional office and geographical 
area of jurisdiction. If the proposed project area has not been 
inventoried, information can be obtained by using topographic and soils 
maps or aerial photographs. State-specific lists of wetland soils and 
wetland vegetation are also available from the FWS Regional Wetland 
coordinators. A site visit can disclose evidence of vegetation typically 
associated with wetland areas. Also, the assistance of FWS field staff 
in reviewing the site can often be the most effective means. Because of 
the unique wetland definition used in exhibit M of this subpart, SCS 
wetland determinations are required for implementing the wetland 
conservation requirements of that exhibit.
    b. Findings (1) Scope--Although information on the location and the 
classification of important land resources should be gathered from 
appropriate expert sources, as well as their views on possible ways to 
avoid or reduce the adverse effects of a proposed conversion, it must be 
remembered that it is FmHA or its successor agency under Public Law 103-
354's responsibility to weigh and judge the feasibility of alternatives 
and to determine whether any proposed land use change is in accordance 
with the implementation requirements of the Act and the Departmental 
Regulation. Consequently, after

[[Page 58]]

reviewing as necessary, the project site, applicable land classification 
data, or the results of consultations with appropriate expert agenices, 
the FmHA or its successor agency under Public Law 103-354 preparer must 
determine, as the second implementation step, whether the applicant's 
proposal:
    (a) Is compatible with State, unit or local government, and private 
programs and policies to protect farmland; and
    (b) Either will have no effect on important land resources; or
    (c) If there will be a direct or indirect conversion of such a 
resource, (i) whether practicable alternatives exist to avoid the 
conversion; and
    (d) If there are no alternatives, whether there are practicable 
measures to reduce the amount of the conversion.
    (2) Determination of No Effect-- If the preparer determines that 
there is no potential for conversion and that the proposal is 
compatible, this determination must be so documented in the 
environmental assessment for a Class II action or the appropriate 
compliance blocks checked in the Class I assessment or Checklist for 
Categorical Exclusions based on whichever document is applicable to the 
action being reviewed.
    (3) Determination of Effect or Incompatibility-- Whenever the 
preparer determines that an applicant's proposal may result in the 
direct or indirect conversion of an important land resource or may be 
incompatible with State, unit of local government, or private programs 
and policies to protect farmland, the following further steps must be 
taken.
    (a) Search for Practicable Alternatives \2\--In consultation with 
the applicant and the interested public, the preparer will carefully 
analyze the availability of practicable alternatives that avoid the 
conversion or incompatibility Possible alternatives include:
---------------------------------------------------------------------------

    \2\ When the action involves the disposal of real property 
determined not suitable for disposition to persons eligible for FmHA or 
its successor agency under Public Law 103-354's financial assistance 
programs, the consideration of alternatives is limited to those that 
would result in the best price.
---------------------------------------------------------------------------

    (i) The selection of an alternative site;
    (ii) The selection of an alternative means to meet the applicant's 
objectives; or
    (iii) The denial of the application, i.e., the no-action 
alternative.
    When the resource that may be converted is important farmland, the 
preparer will follow the Land Evaluation and Site Assessment (LESA) 
point system contained within the SCS rule in order to evaluate the 
feasibility of alternatives. When the proposed site receives a total 
score of less than 160 points, no additional sites need to be evaluated. 
Rather than use the SCS LESA point system, the State Director has the 
authority to use State or local LESA systems that have been approved by 
the governing body of such jurisdiction and the SCS state 
conservationist. After this authority is exercised, it must be used for 
all applicable FmHA or its successor agency under Public Law 103-354 
actions within the jurisdiction of that approved LESA system.
    (b) Inform the Public--The Department Regulation requires us in 
section 6, Responsibilities, to notify the affected landholders at the 
earliest time practicable of the proposed action and to provide them an 
opportunity to review the elements of the action and to comment on the 
action's feasibility and alternatives to it. This notification 
requirement only applies to Class I and Class II actions and not to 
categorical exclusions that lose their status as an exclusion for any of 
the reasons stated in Sec. 1940.317(e) of this subpart. The 
notification will be published and documented in the manner specified in 
Sec. 1940.331 of this subpart and will contain the following 
information:
    (i) A brief description of the application or proposal and its 
location;
    (ii) The type(s) and amount of important land resources to be 
affected;
    (iii) A statement that the application or proposal is available for 
review at an FmHA or its successor agency under Public Law 103-354 field 
office (specify the one having jurisdiction over the project area); and
    (iv) A statement that any person interested in commenting on the 
application or proposal's feasibility and alternatives to it may do so 
by providing such comments to FmHA or its successor agency under Public 
Law 103-354 within 30 days following the date of publication. (Specify 
the FmHA or its successor agency under Public Law 103-354 office 
processing the application or proposal for receipt of comments.)
    Further consideration of the application or proposal must be delayed 
until expiration of the public comment period. Consequently, publication 
of the notice as early as possible in the review process is both in the 
public's and the applicant's interest. Any comments received must be 
considered and addressed in the subsequent Agency analysis of 
alternatives and mitigation measures. It should be understood that 
scheduling a public information meeting is not required but may be 
helpful based on the number of comments received and types of issues 
raised.
    (c) Determine Whether Practicable Alternative Exists--(i) 
Alternative exists--If the preparer concludes that a practicable 
alternative exists, the preparer will complete step 2b(3)(e)(ii) of this 
exhibit and transmit the assessment for the approving official's review 
in the manner specified in Sec. 1940.316 of this subpart. If the 
findings of this review are similar to the preparer's recommendation, 
FmHA or its successor agency under

[[Page 59]]

Public Law 103-354 will inform the applicant of such findings and 
processing of the application will be discontinued. Should the applicant 
still desire to pursue the proposal, the applicant is certainly free to 
do so but not with the further assistance of FmHA or its successor 
agency under Public Law 103-354. Should the applicant be interested in 
amending the application to reflect the results of the alternative 
analysis, the preparer will work closely with the applicant to this end. 
Upon receipt of the amended application, the preparer must reinstitute 
this implementation process at that point which avoids the duplication 
of analysis and data collection undertaken in the original review 
process.
    If the results of the approving official(s) review differs from the 
preparer's recommendations, the former will ensure that the findings are 
appropriately documented in step 2b(3)(e)(ii) of this exhibit and any 
remaining consideration given to mitigation measures, step 2b(3)(d) of 
this exhibit.
    (ii) No Practicable Alternative Exists--On the other hand, if the 
preparer concludes that there is no practicable alternative to the 
conversion, the preparer must then continue with step 2b(3)(d) of this 
exhibit, immediately below.
    (d) Search for Mitigation Measures-- Once the preparer determines 
that there is no practicable alternative to avoiding the conversion or 
incompatibility, including the no-action alternative, all practicable 
measures for reducing the direct and indirect amount of the conversion 
must be included in the application. Some examples of mitigation 
measures would include reducing the size of the project which thereby 
reduces the amount of the important land resource to be converted. This 
is a particularly effective mitigation measure when the resource is 
present in a small area, as is often the case with wetlands or 
floodplains. A corresponding method of mitigation would be to maintain 
the project size or number of units but decrease the amount of land 
affected by increasing the density of use. Finally, mitigation can go as 
far as the selection of an alternative site. For example, in a housing 
market area composed almost entirely of important farmland, any new 
proposed subdivision site would result in conversion. However, a 
proposed site within or contiguous to an existing community has much 
less conversion potential, especially indirect potential, than a site a 
mile or two from the community. The LESA system can also be used to 
identify mitigation measures when the conversion of important farmland 
cannot be avoided.
    (e) Document Findings-- Upon completion of the above steps, a 
written summary of the steps taken and the reasons for the 
recommendations reached shall be included in the environmental 
assessment along with either one of the following recommendations as 
applicable. The following example assumes that important farmland is the 
affected resource and that the inappropriate phrase within the brackets 
would be deleted.
    (i) The application would result in the direct or indirect 
conversion of important farmland and (is/is not) compatible with State, 
unit of local government, or private programs and policies to protect 
farmland. It is recommended that FmHA or its successor agency under 
Public Law 103-354 determine, based upon the attached analysis, that 
there is no practicable alternative to this and that the application 
contains all practicable measures for reducing the amount of conversion 
(or limiting the extent of any identified incompatibility.)
    (ii) The application would result in direct or indirect conversion 
of important farmland and (is/is not) incompatible with State, unit of 
local government, or private programs and policies to protect farmland. 
It is recommended that FmHA or its successor agency under Public Law 
103-354 determine, based upon the attached analysis, that there is a 
practicable alternative to this action, and the processing of this 
application be discontinued.
    (f) Implement findings--The completed environmental assessment and 
the Agency's determination of compliance with the Act, the Departmental 
Regulation and Executive orders will be processed and made according to 
Sec. 1940.316 of this subpart. Whenever this determination is as stated 
in step 2b(3)(e)(i) above, the action will be so structured as to ensure 
that any recommended mitigation measures are accomplished. See Sec. 
1940.318(g) of this subpart. Whenever the determination is as stated in 
step 2b(3)(e)(ii) above, the applicant shall be so informed and 
processing of the application discontinued. Any further FmHA or its 
successor agency under Public Law 103-354 involvement will be as 
specified in Item 2b(3)(c)(i) of this exhibit.
    3. Special Procedures and Considerations When a Floodplain or 
Wetland Is the Affected Resource Under Executive Order 11988 and 11990. 
a. Scope. (1) Geographical Area--The geographical area that must be 
considered when a floodplain is affected varies with the type of action 
under consideration. Normally the implementation procedures beginning in 
Item 2a of this exhibit are required when the action will impact, 
directly or indirectly, the 100-year floodplain. However, when the 
action is determined by the preparer to be a critical action, the 
minimum floodplain of concern is the 500-year floodplain. A critical 
action is an action which, if located or carried out within a 
floodplain, poses a greater than normal risk for flood-caused loss of 
life or property. Critical actions include but are not limited to 
actions which create or extend the useful life of the following 
facilities:

[[Page 60]]

    (a) Those facilities which produce, use, or store highly volatile, 
flammable, explosive, toxic or water-reactive materials;
    (b) Schools, hospitals, and nursing homes which are likely to 
contain occupants who may not be sufficiently mobile to avoid the loss 
of life or injury during flood and storm events;
    (c) Emergency operation centers or data storage centers which 
contain records or services that any become lost or inoperative during 
flood and storm events; and
    (d) Multi-family housing facilities designed primarily (over 50 
percent) for handicapped individuals.
    (2) Threshold of Impact--The Executive orders differ from the Act 
and the Departmental Regulation in that the Executive orders' 
requirements apply not only to the conversion of floodplains or wetlands 
but to any impacts upon them. Impacts are defined as changes in the 
natural values and functions of a wetland or floodplain. Therefore, 
there would be an impact to a floodplain whenever either (a) the action 
or its related activities would be located within a floodplain, or (b) 
the action through its indirect impacts has the potential to result in 
development within a floodplain. The only exception to this statement is 
when the preparer determines that the locational impact is minor to the 
extent that the floodplain's or wetland's natural values and functions 
are not affected.
    b. Treatment of Existing Structures. (1) Non-FmHA or its Successor 
Agency under Public Law 103-354-Owned Properties--The Executive orders 
can apply to actions that are already located in floodplains or 
wetlands; that is, where the conversion has already occurred. The 
implementation procedures beginning in item 2a of this exhibit must be 
accomplished for any action located in a floodplain or wetland and 
involving either (a) the purchase of an existing structure or facility 
or (b) the rehabilitation, renovation, or adaptive reuse of an existing 
structure or facility when the work to be done amounts to a substantial 
improvement. A substantial improvement means any repair, reconstruction, 
or improvement of a structure the cost of which equals or exceeds 50 
percent of the market value of the structure either (a) before the 
improvement or repair is started, or (b) if the structure has been 
damaged, and is being restored, before the damage occurred. The term 
does not include (a) any project for improvement of a structure to 
comply with existing State or local health sanitary or safety code 
specifications which are solely necessary to assure safe living 
conditions or (b) any alteration of a structure listed on the National 
Register of Historic Places or a State Inventory of Historic Places.
    (2) FmHA or its Successor Agency under Public Law 103-354-Owned Real 
Property--The requirement in paragraph 3 b (1) immediately above also 
applies to any substantial improvements made to FmHA or its successor 
agency under Public Law 103-354-owned real property with the exception 
of the public notice requirements of this exhibit. Irrespective of any 
improvements, whenever FmHA or its successor agency under Public Law 
103-354 real property located in a floodplain or wetland is proposed for 
lease or sale, the official responsible for the conveyance must 
determine if the property can be safely used. If not, the property 
should not be sold or leased. Otherwise, the conveyance must specify 
those uses that are restricted under identified Federal, State, and 
local floodplains or wetlands regulations as well as other appropriate 
restrictions, as determined by the FmHA or its successor agency under 
Public Law 103-354 official responsible for the conveyance, to the uses 
of the property by the leasee or purchaser and any successors, except 
where prohibited by law. Appropriate restrictions will be developed in 
consultation with the U.S. Fish and Wildlife Service (FWS) as specified 
in the Memorandum of Understanding with FWS contained in subpart LL of 
part 2000 of this chapter. Applicable restrictions will be incorporated 
into quitclaim deeds with the consent and approval of the Regional 
Attorney, Office of the General Counsel. Upon application by the owner 
of any property so affected and upon determination by the appropriate 
FmHA or its successor agency under Public Law 103-354 official that the 
condition for which a deed restriction was imposed no longer exists, the 
restriction clause may be released. A listing of any restrictions shall 
be included in any notices announcing the proposed sale or lease of the 
property. At the time of first inquiry, prospective purchasers must be 
informed of the property's location in a floodplain or wetland and the 
use restrictions that will apply. A written notification to this effect 
must be provided to the prospective purchaser who must acknowledge the 
receipt of the notice. See Item 3 d of this exhibit and subpart C of 
part 1955 of this chapter for guidance on the proper formats to be used 
with respect to notices and deed restrictions. The steps and analysis 
conducted to comply with the requirements of this paragraph must be 
documented in the environmental review document for the proposed lease 
or sale.
    c. Mitigation measures. (1) Alternative Sites--As with the Act and 
the Departmental Regulation, the main focus of the review process must 
be to locate an alternative that avoids the impact to a floodplain or 
wetland. When this is not practicable, mitigation measures must be 
developed to reduce the impact which in the case of a floodplain or 
wetland can include finding another site, i.e., a safer site. The latter 
would be a site at a higher elevation within the floodplain and/or 
exposed to lower velocity floodflows.

[[Page 61]]

    (2) Nonstructural Mitigation Measures--Mitigation measures under the 
Executive orders are intended to serve the following three purposes: 
reduce the risks to human safety, reduce the possible damage to 
structures, and reduce the disruption to the natural values and 
functions of floodplains and wetlands. More traditional structural 
measures, such as filling in the floodplain, cannot accomplish these 
three purposes and, in fact, conflict with the third purpose. 
Nonstructural flood protection methods, consequently, must be given 
priority consideration. These methods are intended to preserve, restore, 
or imitate natural hydrologic conditions and, thereby, eliminate or 
reduce the need for structural alteration of water bodies or their 
associated floodplains and wetlands. Such methods may be either physical 
or managerial in character. Nonstructural flood protection methods are 
measures which:
    (a) Control the uses and occupancy of floodplains and wetlands, 
e.g., floodplain zoning and subdivision regulations;
    (b) Preserve floodplain and wetland values and functions through 
public ownership; e.g., fee title, easements and development rights;
    (c) Delay or reduce the amount of runoff from paved surfaces and 
roofed structures discharged into a floodway, e.g., construction of 
detention basins and use of flow restricting barriers on roofs;
    (d) Maintain natural rates of infiltration in developed or 
developing areas, e.g., construction of seepage or recharge basins and 
minimization of paved areas;
    (e) Protect streambanks and shorelines with vegetative and other 
natural cover, e.g., use of aquatic and water-loving woody plants;
    (f) Restore and preserve floodplain and wetland values and functions 
and protect life and property through regulation, e.g., flood-proofing 
building codes which require all structures and installations to be 
elevated on stilts above the level of the base flood; and
    (g) Control soil erosion and sedimentation, e.g., construction of 
sediment basins, stabilization of exposed soils with sod and 
minimization of exposed soil.
    (3) Avoid Filling in Floodplains--As indicated above, the Executive 
orders place a major emphasis on not filling in floodplains in order to 
protect their natural values and functions. Executive Order 11988 states 
``agencies shall, wherever practicable, elevate structures above the 
base flood level rather than filling in the land.''
    (d) Additional Notification Requirement. (1) Final Notice--Where it 
is not possible to avoid an impact to a floodplain or wetland and after 
all practicable mitigation measures have been identified and agreed to 
by the prospective applicant, a final notice of the proposed action must 
be published. This notice will either be part of the notice required for 
the completion of a Class II assessment or a separate notice if a Class 
I assessment or an EIS has been completed for the action. The notice 
will be published and distributed in the manner specified in Sec. 
1940.331 of this subpart and contain the following information.
    (a) A description of the proposd action, its location, and the 
surrounding area;
    (b) A description of the floodplain or wetland impacts and the 
mechanisms to be used to mitigate them;
    (c) A statement of why the proposed action must be located in a 
floodplain or a wetland;
    (d) A description of all significant facts considered in making this 
determination;
    (e) A statement indicating whether the actions conform to applicable 
State or local floodplain protection standards; and
    (f) A statement listing other involved agencies and individuals.
    (2) Private Party Notification--For all actions to be located in 
floodplains or wetlands in which a private party is participating as an 
applicant, purchaser, or financier, it shall be the responsibility of 
the approving official to inform in writing all such parties of the 
hazards associated with such locations.
    4. The Relationship of the Executive Orders to the National Flood 
Insurance Program. The National Flood Insurance Program establishes the 
floodplain management criteria for participating communities as well as 
the performance standards for building in floodplains so that the 
structure is protected against flood risks. As such, flood insurance 
should be viewed only as a financial mitigation measure that must be 
utilized only after FmHA or its successor agency under Public Law 103-
354 determines that there is no practicable alternative for avoiding 
construction in the floodplain and that all practicable mitigation 
measures have been included in the proposal. That is, for a proposal to 
be located in the floodplain, it is not sufficient simply to require 
insurance. The Agency's flood insurance requirements are explained in 
subpart B of part 1806 of this chapter (FmHA Instruction 426.2). It 
should be understood that an applicant proposing to build in the 
floodplain is not even eligible for FmHA or its successor agency under 
Public Law 103-354 financial assistance unless the project area is 
participating in the National Flood Insurance Program.

[53 FR 36262, Sept. 19, 1988]

 Exhibit D to Subpart G of Part 1940--Implementation Procedures for the 
                         Endangered Species Act

    1. FmHA or its successor agency under Public Law 103-354 shall 
implement the consultation procedures required under Section 7 of the 
Endangered Species Act as specified

[[Page 62]]

in 50 CFR 402. It is important to note that these consultation 
procedures apply to the disposal of real property by FmHA or its 
successor agency under Public Law 103-354 and to all FmHA or its 
successor agency under Public Law 103-354 applications for financial 
assistance and subdivision approval, including those applications which 
are exempt from environmental assessments. (See Sec. 1940.310.) Unless 
repeated in this paragraph, the definitions for the terms utilized are 
found in 50 CFR 402.02.
    2. State Directors shall ensure that State, District, and County 
Offices maintain current publications of listed and proposed species as 
well as critical habitats found in their respective jurisdictions.
    3. When an application to FmHA or its successor agency under Public 
Law 103-354 involves financial assistance or permit approval from 
another Federal agency(s), the FmHA or its successor agency under Public 
Law 103-354 reviewer shall work with the other Agency to determine a 
lead Agency for the consultation process. When FmHA or its successor 
agency under Public Law 103-354 is not the lead Agency, the reviewer 
shall ensure that the lead Agency informs the approporiate Area Manager, 
U.S. Fish and Wildlife Service (FWS), or Regional Director, National 
Marine Fisheries Service (NMFS), of FmHA or its successor agency under 
Public Law 103-354's involvement.
    4. Each disposal action, application for financial assistance or 
subdivision approval shall be reviewed by the FmHA or its successor 
agency under Public Law 103-354 official responsible for completing 
environmental assessments in order to determine if the proposal either 
may affect a listed species or critical habitat or is likely to 
jeopardize the continued existence of a proposed species or result in 
the destruction or adverse modification of a proposed critical habitat.
    a. For applications subject to environmental assessments, this 
review shall be accomplished as part of the assessment.
    b. For those applications that are excluded from an environmental 
assessment, this review shall be documented as part of Form FmHA or its 
successor agency under Public Law 103-354 1940-22, ``Environmental 
Checklist For Categorical Exclusions,'' and shall be accomplished as 
early as possible after receipt of the application and prior to approval 
of the application.
    c. For applications subject to an environmental impact statement, 
FmHA or its successor agency under Public Law 103-354 shall request from 
the Area Manager, FWS, and the Regional Director, NMFS, a list of the 
proposed and listed species that may be in the area of the proposal. 
Within 30 days, the FWS and NMFS will respond to FmHA or its successor 
agency under Public Law 103-354 with this list. FmHA or its successor 
agency under Public Law 103-354 shall then conduct, as part of the 
process of preparing the draft environmental impact statement, a 
biological assessment of these species to determine which species are in 
the area of the proposal and how they may be affected. This biological 
assessment should be completed within 180 days or a time mutually agreed 
upon between FmHA or its successor agency under Public Law 103-354 and 
FWS or NMFS. Upon completion of the biological assessment, if FmHA or 
its successor agency under Public Law 103-354 determines either that the 
proposal may affect a listed species or critical habitat or is likely to 
jeopardize the continued existence of proposed species or result in the 
destruction or adverse modification of proposed critical habitat, the 
formal consultation procedures shall be initiated as specified in 
paragraph 7b below. To the extent practical, these procedures shall be 
concluded and their results reflected in the draft EIS. For all draft 
EISs in which FmHA or its successor agency under Public Law 103-354 
determines there will be no effect upon a listed or proposed species or 
critical habitat and FWS or NMFS indicated the presence of such species 
upon the initial inquiry, a copy of the draft shall be provided to that 
agency for review and comment.
    5. As indicated in paragraph 4 above, the focus of this review 
process is to determine if the proposal will affect a listed species or 
critical habitat or is likely to jeopardize the continued existence of a 
proposed species or result in the destruction or adverse modification of 
a proposed critical habitat. Because this impact terminology is specific 
to the Act, it is important to understand its meaning.
    a. To jeopardize the continued existence of a species means to 
engage in a project which reasonably would be expected to reduce the 
reproduction, numbers, or distribution of a listed species to such an 
extent as to appreciably reduce the likelihood of the survival and 
recovery of that species in the wild. The level of reduction necessary 
to constitute jeopardy would be expected to vary among listed species.
    b. The destruction or adverse modification of a critical habitat 
means a direct or indirect alteration of critical habitat which 
appreciably diminishes the value of that habitat for survival and 
recovery of a listed species. Such alterations include but are not 
limited to those diminishing the following requirements for:
    (i) Space for individual and population growth and for normal 
behavior;
    (ii) Food, water, air, light, minerals, or other nutritional or 
physiological requirements;
    (iii) Cover or shelter;
    (iv) Sites for breeding, reproduction, or rearing of offspring; and

[[Page 63]]

    (v) Habitats that are protected from disturbances or are 
representative of the geographical distribution of listed species.
    6. It is also important to note that the consultation procedures 
differ when the subject of the consultation is a listed species or 
critical habitat as opposed to a proposed species or critical habitat. 
The latter are defined as those that the Secretary of Interior or 
Commerce are considering for listing and have so proposed through 
notification in the Federal Register. When listed species or critical 
habitats are invloved, FmHA or its successor agency under Public Law 
103-354 shall initiate formal consultation procedures whenever it 
determines that a proposed project may affect them, either beneficially 
or adversely. For proposed species or critical habitats, FmHA or its 
successor agency under Public Law 103-354 shall first determine if the 
proposed project is likely to jeopardize the continued existence of 
proposed species or result in the destruction or adverse modification of 
proposed critical habitat. Whenever this determination is made, FmHA or 
its successor agency under Public Law 103-354 shall confer with the 
appropriate agency identified in paragraph 7 of this exhibit and, in so 
doing, shall focus on (i) determining the status of the listing process, 
and (ii) attempting to cooperatively develop alternatives or measures 
for inclusion in the project that avoid or mitigate the identified 
adverse impacts. The results of this process shall be documented in the 
environmental review being done for the proposed project and, if this 
review is an environmental assessment, shall be an important factor in 
determining the need for an environmental impact statement. No action 
shall be taken by the approving official on the application unitl the 
requirement to confer on proposed species or critical habitat has been 
completed. Paragraphs 7 through 9 of this exhibit outline the formal 
consultation procedure for listed species or critical habitats.
    7. In initiating the review process for a project, the list of 
species and critical habitats, including proposed, shall be examined to 
determine the potential for impacts. Projects planned within established 
communities are less likely to affect listed or proposed species or 
their critical habitat. Projects to be located in remote areas, heavily 
forested areas and/or previously undisturbed areas are more likely to 
affect these species. For projects located in such areas, the reviewer 
shall, at a minimum, discuss the project's potential impact on listed or 
proposed species with officials of the appropriate State wildlife 
protection agency or the Area Manager, FWS, or the Regional Director, 
NMFS, as appropriate. The latter organization generally has 
responsibility for marine species. The specific list of species under 
NMFS's jurisdiction can be found at 50 CFR 222.23(a) and 227.4. Such 
discussions shall be considered as informal consultations and are not a 
substitute for the required consultation process outlined below.
    a. Whenever the reviewer, after reviewing the list and contacting 
appropriate experts, formally determines that the proposal will have no 
effect on a listed or proposed species or its critical habitat, these 
review procedures are completed, unless new information comes to light 
as discussed in paragraph 9 of this exhibit, or consultation is 
requested by the appropriate Area Manager, FWS, or Regional Director, 
NMFS.
    b. If the reviewer determines there may be an effect on a listed 
species or a critical habitat or is unable to make a clear 
determination, the reviewer shall so inform the SEC (assuming the 
reviewer is not the SEC). The latter shall either (i) convey a written 
request for consultation, along with available information to the 
appropriate Area Manager, FWS or Regional Director, NMFS, for the 
Federal region where the proposal will be carried out, or (ii) request 
Program Support Staff (PSS) to perform such consultation. FmHA or its 
successor agency under Public Law 103-354 shall initiate this formal 
consultation process and not the applicant. See paragraph 4.c. of this 
exhibit for initiating consultation where an environmental impact 
statement is being done for the application. Until the consultation 
process is completed, as outlined in 50 CFR 402.04, FmHA or its 
successor agency under Public Law 103-354 shall not approve the 
application. Should the need for consultation be identified after 
application approval, FmHA or its successor agency under Public Law 103-
354 shall refrain from making any irreversible or irretrievable 
commitment of resources which would foreclose the consideration of 
modifications or alternatives to the identified activity or program.
    8. Several possible responses may result from initiation of the 
formal consultation process with each requiring further specific 
actions.
    a. Whenever the Area Manager, FWS, or Regional Director, NMFS, 
informs FmHA or its successor agency under Public Law 103-354 that 
insufficient information exists to conclude the consultation process, 
the SEC with assistance as feasible from the FWS or NMFS and State 
sources of expertise shall then obtain additional information and 
conduct, as needed, biological surveys or studies to determine how the 
proposal may affect listed species or their critical habitat. The cost 
and performance of such studies shall be handled in the same manner as 
in the preparation of an Environmental Impact Statement. (See Sec. 
1940.336 of this subpart.)
    b. Whenever the Area Manager, FWS, or Regional Director, NMFS, 
responds that the proposal will either promote the conservation of a 
listed species or is not likely to jeopardize the continued existence of 
a listed

[[Page 64]]

or proposed species or result in the destruction or adverse modification 
of its critical habitat, the FmHA or its successor agency under Public 
Law 103-354 reviewer shall formally make a similar determination, 
attaching the response as documentation. This concludes the formal 
consultation process unless new information comes to light as discussed 
in paragraph 9 of this exhibit.
    c. Whenever the results of the consultation process include 
recommendations by the Area Manager, FWS, or Regional Director, NMFS, 
for modifications to the project which would enhance the conservation 
and protection of a listed species or its critical habitat, the State 
Director shall review these recommendations and require that they be 
incorporated into the project as either design changes or special 
conditions to the offer of assistance. If the State Director does not 
believe the recommendations can be so adopted, the Administrator shall 
be requested to review the recommendations and to assist in the further 
resolution of the matter.
    d. Whenever the appropriate Area Manager, FWS, or Regional Director, 
NMFS, determines that the proposal is likely to jeopardize the continued 
existence of a listed species or result in the destruction or adverse 
modification of its critical habitat, the FmHA or its successor agency 
under Public Law 103-354 applicant shall be so informed and the project 
denied on this basis. However, if the State Director believes that 
funding or approval of the application is (i) of national, regional, or 
great local significance, and (ii) that there are no reasonable and 
prudent alternatives to avoiding the listed species impact, the State 
Director can request the Administrator, through PSS, to review the 
proposal and the results of the consultation process. Based upon this 
review, the Administrator shall either inform the State Director that a 
request for an exemption from section 7 of the Endangered Species Act is 
not warranted and the application shall be denied or, if the 
Administrator believes it is warranted, shall request an exemption from 
the Endangered Species Committee established by section 7(e) of the Act. 
No action shall be taken by the State Director on the application until 
the Administrator informs the State Director of the results of the 
exemption request.
    9. Once completed, the consultation process shall be reinitiated by 
FmHA or its successor agency under Public Law 103-354 or upon request of 
the appropriate Area Manager, FWS, or Regional Director, NMFS, if:
    a. New information or modification of the proposal reveals impacts 
that may affect listed or proposed species or their habitats; or
    b. A new species is listed that may be affected by the proposal.
    10. In completing the above compliance procedures, particularly when 
consulting with the referenced agencies, formally or informally, the 
preparer of the environmental review document will request information 
on whether any Category I or Category II species may be present within 
the project area. These are candidate species; they are presently under 
consideration for listing under section 4 of the Endangered Species Act. 
Category I species are those for which FWS currently has substantial 
date on hand to support the biological appropriateness of proposing to 
list the species as endangered or threatened. Currently data are being 
gathered concerning essential habitat needs and, for some species, data 
concerning the precise boundaries of critical habitat designations. 
Development and publication of proposed rules on such species is 
anticipated. Category II comprises species for which information now in 
the possession of the FWS indicates that proposing to list the species 
as endangered or threatened is possibly appropriate but for which 
conclusive data on biological vulnerability and threat(s) are not 
currently available to presently support proposed rules. Whenever a 
Category I or II species may be affected, the preparer of the 
environmental review document will determine if the proposed project is 
likely to jeopardize the continued existence of the species. Whenever 
this determination is made, the same compliance procedures specified in 
paragraph 6 of this exhibit for a proposed species will be followed. The 
purpose of the requirements of this paragraph is to comply with the 
National Environmental Policy Act as well as Departmental Regulation 
9500-4, Fish and Wildlife Policy, which specifies that USDA agencies 
will avoid actions which may cause a species to become threatened or 
endangered.

[49 FR 3727, Jan. 30, 1984, as amended at 53 FR 36266, Sept. 19, 1988]

 Exhibit E to Subpart G of Part 1940--Implementation Procedures for the 
                       Wild and Scenic Rivers Act

    1. Each application for financial assistance or subdivision approval 
as well as the proposed disposal of real property by FmHA or its 
successor agency under Public Law 103-354 shall be reviewed to determine 
if it will affect a river or portion of it which is either included in 
the National Wild and Scenic Rivers System, designated for potential 
addition to the system, or identified in the Nationwide Inventory 
prepared by the National Park Service (NPS) in the Department of the 
Interior. The Nationwide Inventory identifies those river segments that, 
after preliminary review, appear to qualify for inclusion in the system. 
(For purposes of this subpart, river segments in the Nationwide 
Inventory

[[Page 65]]

shall be treated the same as segments within the system with the 
exception of paragraph 8.) For applications subject to environmental 
assessments, the review shall be accomplished as part of the assessment. 
For applications that are excluded from an environmental assessment, 
this review shall be documented as part of Form FmHA or its successor 
agency under Public Law 103-354 1940-22, ``Environmental Checklist For 
Categorical Exclusions,'' within the reviewing office and shall be 
accomplished as early as possible after receipt of the application and 
prior to approval of the application. The FmHA or its successor agency 
under Public Law 103-354 official responsible for completing the 
environmental assessment shall accomplish this review. (See Sec. 
1940.316 of this subpart.)
    2. In order to effectively implement this review, State Directors 
shall ensure that State, District and County Offices maintain current 
listings of rivers within their respective States that are included in 
or designated for potential addition to the system as well as those 
identified in the Nationwide Inventory prepared by NPS.
    3. For applications for water resources projects, as defined in 
Sec. 1940.302(i) of this subpart, the purpose of this review shall be 
to determine whether the proposal would have a direct and adverse effect 
on the values which served as the basis for the river's inclusion in the 
system or designation for potential addition. For other applications, 
the purpose of the review shall be to determine if the proposal would 
invade the river area or unreasonably diminish the scenic, recreational, 
and fish and wildlife values present in the area. To make these 
determinations, the reviewer shall consult with the appropriate regional 
office of NPS if the proposal (i) would be located within one-quarter 
mile of the banks of the river, (ii) involves withdrawing water from the 
river or discharging water to the river via a point source, or (iii) 
would be visible from the river. The appropriate regional office of the 
Forest Service (FS) shall be contacted under similar circumstances when 
the effected river is on FS lands. Consultation shall be initiated by a 
written request for comments on the potential impacts accompanied by a 
description of the project and its location. The reviewer shall consult 
in other instances when the likelihood of an impact on a river in the 
system is identified as part of the environmental review. When the 
reviewer determines there is no potential impact on such a river, the 
documentation of this determination concludes the review process, unless 
reinitiation is required under paragraph 10 of this exhibit. In all 
other cases, the review is completed as specified below in paragraphs 4 
through 9 of this exhibit.
    4. If the review is at the County or District Office level, the 
reviewer can request the State Director (see Sec. 1940.307 of this 
subpart) to perform the above consultation. The State Director can in 
turn make a similar request of the National Office. If not requested to 
perform the consultation for applications approvable at the County and 
District Office levels, the SEC shall be informed whenever NPS or FS 
advises that there is a potential for an adverse impact on a river 
within the system or that protective measures need to be included or 
designed into the proposal. In all cases, consultation shall be 
initiated by FmHA or its successor agency under Public Law 103-354 and 
not the applicant. Until consultation is complete, FmHA or its successor 
agency under Public Law 103-354 shall not approve the application. 
Should the need for consultation be identified after application 
approval, FmHA or its successor agency under Public Law 103-354 shall, 
if still within its power at the time of identification, refrain from 
making any irreversible or irretrievable commitments of resources which 
would foreclose the consideration of modifications or alternatives to 
the project.
    5. If NPS or FS advises there is no potential for an adverse effect 
as described in paragraph 3 of this exhibit, this review process is 
concluded, unless the need to reinitiate arises. (See paragraph 10 of 
this exhibit.)
    6. Whenever the results of the consultation process include 
recommendations by NPS or FS to modify the proposal in order to avoid an 
adverse effect, as described in paragraph 3 above, the State Director 
shall review these recommendations and require that they be incorporated 
into the project as either design changes or special conditions to the 
offer of assistance. If the State Director does not believe that the 
Regional Director's recommendations can be so adopted, the Administrator 
shall be requested to review the recommendations and to assist in the 
further resolution of the matter.
    7. If NPS or FS advises that the proposal will have an unavoidable 
adverse effect, as described in paragraph 3 of this exhibit, on a river 
segment which is either included in the National Wild and Scenic Rivers 
System or designated for potential addition to the system, the FmHA or 
its successor agency under Public Law 103-354 applicant will be informed 
by the reviewing office and the application denied on this basis. 
However, if the State Director disagrees with this determination, the 
State Director can request the Administrator to review the proposal and 
attempt to further resolve the matter. The specific reasons for 
disagreement along with supporting documentation must be included in 
such a request. Based upon a review of this request, the Administrator 
shall either inform the State Director that no further consultation is 
warranted and the application shall be denied or shall request the 
headquarters staff of NPS or FS to further review the matter. No action 
shall be taken

[[Page 66]]

by the State Director on the application until the Administrator informs 
the State Director of the results of this further review and 
consultation.
    8. If NPS or FS advises that the proposal will have an adverse 
effect, as described in paragraph 3 of this exhibit, on a river segment 
identified in the Nationwide Inventory, the reviewer shall further 
consult with NPS or FS in order to formulate adequate measures or 
modification to avoid or mitigate the potential adverse effect. The 
purposes of such measures or modifications is to ensure that the 
proposal does not effectively foreclose the designation of a wild, 
scenic, or recreational river segment. Once concurrence is reached and 
documented with NPS or FS regarding modifications, the State Director 
shall require that they be incorporated into the proposal as either 
design changes or special conditions to the offer of assistance. If the 
State Director is not able to reach an agreement with NPS or FS on 
appropriate modifications, the Administrator shall be requested to 
assist in the further resolution of the matter.
    9. If an application involves financial assistance or permit 
approval from another Federal Agency, the FmHA or its successor agency 
under Public Law 103-354 reviewer shall work with the other agency(s) to 
determine a lead Agency for the consultation process. When FmHA or its 
successor agency under Public Law 103-354 is not the lead Agency, the 
reviewer shall ensure that the lead Agency informs NPS or FS of FmHA or 
its successor agency under Public Law 103-354's involvement.
    10. Once completed, the consultation process shall be reinitiated by 
FmHA or its successor agency under Public Law 103-354 if new information 
or modification of the proposal reveals impacts to a river within the 
System or Nationwide Inventory.

 Exhibit F to Subpart G of Part 1940--Implementation Procedures for the 
                      Coastal Barrier Resources Act

    1. The Act applies to barrier islands that Congress has designated 
for inclusion in the Coastal Barrier Resources System. Since coastal 
barriers are only found in East and Gulf Coast States, no other State 
Offices fall under the requirements of the Act and, therefore, need be 
concerned with these implementation procedures.
    2. On coastal barriers that are included in the system, the Act 
prohibits any new expenditures or new financial assistance by the 
Federal Government. There are some limited exceptions that are contained 
in Section 6 of the Act and listed in exhibit L of this subpart. 
Consequently, all of the following actions must be reviewed by the 
environmental reviewer to determine if they would be located within the 
System: any application for financial assistance, any proposed direct 
expenditure of FmHA or its successor agency under Public Law 103-354 
funds for construction or maintenance purposes, any request for 
subdivision approval, and any proposed disposal of real property that 
includes any form of financial assistance or subsidy to the purchaser. 
The boundaries of the system can be determined by reviewing a series of 
maps passed with the legislation and distributed by the Department of 
the Interior. Each State Director is responsible for ensuring that those 
field offices having components of the system within their jurisdictions 
are aware of the system's boundaries therein.
    3. Exhibit L lists the six categories of exceptions, that is, those 
actions that may be taken within the system. No exception may be 
implemented, however, without first consulting with the Secretary of the 
Interior. It should also be noted that the sixth category is more 
limited than the first five. Besides meeting the consultation 
requirement for this sixth category, the sponsoring Agency must also 
determine whether the proposed exception is consistent with the purposes 
of the Act.
    4. For those actions that are reviewed and determined not to be 
within the System, the environmental reviewer must document this result 
by checking the appropriate compliance blocks on either Form FmHA or its 
successor agency under Public Law 103-354 1940-22, ``Environmental 
Checklist for Categorical Exclusions,'' or Form FmHA or its successor 
agency under Public Law 103-354 1940-21, ``Environmental Assessment for 
Class I actions,'' or by so stating this result in the environmental 
assessment for Class II Actions (exhibit H), depending upon whichever 
format is applicable to the action under review.
    5. For those actions that would be located within the system, one of 
the following two steps must be taken:
    a. If the environmental reviewer concludes that the action does not 
meet the criteria for an exception, as listed in exhibit L, the reviewer 
shall so inform the approving official and a final determination made in 
the manner indicated in Sec. 1940.316 of this subpart. If this 
determination is consistent with the environmental reviewer's 
conclusion, the action must be denied by the approving official and the 
affected applicant or party informed of the reason for denial. If it is 
determined that the action may qualify for an exception, the steps 
identified in Item b immediately below must be implemented prior to a 
decision on this question.
    b. If the environmental reviewer concludes that the proposed action 
may meet the exception criteria, the approving official must be so 
informed. Whenever the approving official agrees or makes a similar 
determination as a result of the review conducted in Item a immediately 
above, consultation shall be

[[Page 67]]

initiated with the Secretary of the Interior by either the State 
Director or the Administrator for a National Office activity. FmHA or 
its successor agency under Public Law 103-354 shall request the 
Secretary's views as to whether the exception criteria are met and shall 
provide the Secretary with the following information:
    (1) A detailed description of the action and its location;
    (2) A description of the affected environment within the System and 
the impacts of the proposed action;
    (3) The applicable exception criteria and FmHA or its successor 
agency under Public Law 103-354's reasons for believing they apply to 
this action; and
    (4) If a Section 6(a)(6) exception is claimed, FmHA or its successor 
agency under Public Law 103-354's reasons for believing the action to be 
consistent with the purposes of the Act.
    Should the Secretary concur in the exception criteria being met, 
that portion of the environmental assessment relating to compliance with 
the Act shall be completed and the corresponding documentation attached. 
Should the Secretary not concur, a final decision on the approval or 
denial of the action must be made by the Administrator.

             Exhibit G to Subpart G of Part 1940 [Reserved]

Exhibit H to Subpart G of Part 1940--Environmental Assessment for Class 
                               II Actions

    In completing this assessment, it is important to understand the 
comprehensive nature of the impacts which must be analyzed. 
Consideration must be given to all potential impacts associated with the 
construction of the project, its operation and maintenance, the 
operation of all identified primary beneficiaries, and the attainment of 
the project's major objectives, whether they be an increased housing 
stock, community improvement, economic development, or greater 
agricultural productivity. This last category, the attainment of the 
project's major objectives, often induces or supports changes in 
population densities, land uses, community services, transportation 
systems and resource consumption. The scope of the assessment is 
broadened even further when there are related activities involved. The 
impacts of these activities must also be assessed.
    The preparer will consult as indicated in Sec. 1940.318(b) of this 
subpart with appropriate experts from Federal, State, and local 
agencies, universities, and other organizations or groups whose views 
could be helpful in the assessment of potential impacts. In so doing, 
each discussion which is utilized in reaching a conclusion with respect 
to the degree of an impact will be summarized in the assessment as 
accurately as possible and include the name, title, phone number, and 
organization of the individual contacted, plus the date of contact. 
Related correspondence should be attached to the assessment.
    The FmHA or its successor agency under Public Law 103-354 
environmental assessment shall be prepared in the following format. It 
shall address the listed items and questions and contain as attachments 
the indicated descriptive materials, as well as the environmental 
information submitted by the applicant, Form FmHA or its successor 
agency under Public Law 103-354 1940-20, ``Request for Environmental 
Information.''
    The assessment has been designed to cover the wide variety of 
projects and environments with which the Agency deals. Consequently, not 
every issue or potential impact raised in the assessment may be relevant 
to each project. The purpose of the format is to give the preparer an 
understanding of a standard range of impacts, environmental factors, and 
issues which may be encountered. In preparing an assessment, each topic 
heading identified by a Roman numeral and each environmental factor 
listed under topic heading IV, such as air quality, for example, must be 
addressed.
    The amount of analysis and material that must be provided will 
depend upon the type and size of the project, the environment in which 
it is located, and the range and complexity of the potential impacts. 
The amount of analysis and detail provided, therefore, must be 
commensurate with the magnitude of the expected impact. The analysis of 
each environmental factor (i.e., water quality) must be taken to the 
point that a conclusion can be reached and supported concerning the 
degree of the expected impact with respect to that factor.
    For example, a small community center may not require detailed 
information on air emissions or solid waste management, but an 
industrial facility would. Similarly, an irrigation project for a 
farming operation would concentrate on such factors as water quality and 
fish and wildlife, rather than land use changes. The extension of a 
water or sewer system or the approval of a subdivision, on the other 
hand, would have to give close attention to all factors, with potential 
land use changes being a particularly important one.

                     I. Project Description and Need

    Identify the name, project number, location, and specific elements 
of the project along with their sizes, and, when applicable, their 
design capacities. Indicate the purpose of the project, FmHA or its 
successor agency under Public Law 103-354's position regarding the need 
for it, and the extent or area of land to be considered as the project 
site.

[[Page 68]]

            II. Primary Beneficiaries and Related Activities

    Identify any existing businesses or major developments that will 
benefit from the project and those which will expand or locate in the 
area because of the project. Specify by name, product, service, and 
operations involved.
    Identify any related activities which are defined as interdependent 
parts of a FmHA or its successor agency under Public Law 103-354 action. 
Such undertakings are considered interdependent parts whenever they 
either make possible or support the FmHA or its successor agency under 
Public Law 103-354 action or are themselves induced or supported by the 
FmHA or its successor agency under Public Law 103-354 action or another 
related activity. These activities may have been completed in the very 
recent past and are now operational, or they may reasonably be expected 
to be accomplished in the near future. Related activities may or may not 
be federally permitted or assisted. When they are, identify the involved 
Federal Agency(s).
    In completing the remainder of the assessment, it must be remembered 
that the impacts to be addressed are those which stem from the project, 
the primary beneficiaries, and the related activities.

                    III. Description of Project Area

    Describe the project site and its present use. Describe the 
surrounding land uses; indicate the directions and distances involved. 
The extent of the surrounding land to be considered depends on the 
extent of the impacts of the project, its related activities, and the 
primary beneficiaries. Unique or sensitive areas must be pointed out. 
These include residential, schools, hospitals, recreational, historical 
sites, beaches, lakes, rivers, parks, floodplains, wetlands, dunes, 
estuaries, barrier islands, natural landmarks, unstable soils, steep 
slopes, aquifer recharge areas, important farmlands and forestlands, 
prime rangelands, endangered species habitats or other delicate or rare 
ecosystems.
    Attach adequate location maps of the project area, as well as (1) a 
U.S. Geological Survey ``15 minute'' (``7\1/2\ minute,'' if available,) 
topographic map which clearly delineates the area and the location of 
the project elements, (2) the Department of Housing and Urban 
Development's floodplain map(s) for the project area, (3) site photos, 
(4), if completed, a standard soil survey for the project, and (5), if 
available, an aerial photograph of the site. When necessary for 
descriptive purposes or environmental analysis, include land use maps or 
other graphic information. All graphic materials shall be of high 
quality resolution.

                        IV. Environmental Impact

    1. Air Quality. Discuss, in terms of the amounts and types of 
emissions to be produced, all aspects of the project including 
beneficiaries' operations and known indirect effects (such as increased 
motor vehicle traffic) which will affect air quality. Indicate the 
existing air quality in the area. Indicate if topographical or 
meteorological conditions hinder or affect the dispersal of air 
emissions. Evaluate the impact on air quality given the types and 
amounts of projected emissions, the existing air quality, and 
topographical and meterological conditions. Discuss the project's 
consistency with the State's air quality implementation plan for the 
area, the classification of the air quality control region within which 
the project is located, and the status of compliance with air quality 
standards within that region. Cite any contacts with appropriate experts 
and agencies which must issue necessary permits.
    2. Water Quality. Discuss, in terms of amounts and types of 
effluents, all aspects of the project including primary beneficiaries' 
operations and known indirect effects which will affect water quality. 
Indicate the existing water quality of surface and/or underground water 
to be affected. Evalute the impacts of the project on this existing 
water quality. Indicate if an aquifer recharge area is to be adversely 
affected. If the project lies within or will affect a sole source 
aquifer recharge area as designated by EPA, contact the appropriate EPA 
regional office to determine if its review is necessary. If it is, 
attach the results of its review.
    Indicate the source and available supply of raw water and the extent 
to which the additional demand will affect the raw water supply. 
Describe the wastewater treatment system(s) to be used and indicate 
their capacity and their adequacy in terms of the degree of treatment 
provided. Discuss the characteristics and uses of the receiving waters 
for any sources of discharge. If the treatment systems are or will be 
inadequate or overloaded, describe the steps being taken for necessary 
improvements and their completion dates. Compare such dates to the 
completion date of the FmHA or its successor agency under Public Law 
103-354 project. Analyze the impacts on the receiving water during any 
estimated period of inadequate treatment.
    Discuss the project's consistency with the water quality planning 
for the area, such as EPA's Section 208 area-wide waste treatment 
management plan. Discuss the project's consistency with applicable State 
water quality standards to include a discussion of whether or not the 
project would either impair any such standard or fail to meet 
antidegradation requirements for point or

[[Page 69]]

nonpoint sources. Describe how surface runoff is to be handled and the 
effect of erosion on streams.
    Evaluate the extent to which the project may create shortages for or 
otherwise adversely affect the withdrawal capabilities of other present 
users of the raw water supply, particularly in terms of possible human 
health, safety, or welfare problems.
    For projects utilizing a groundwater supply, evaluate the potential 
for the project to exceed the safe pumping rate for the aquifer to the 
extent that it would (1) adversely affect the pumping capability of 
present users, (2) increase the likelihood of brackish or saltwater 
intrusion, thereby decreasing water quality, or (3) substantially 
increase surface subsidence risks.
    For projects utilizing a surface water supply, evaluate the 
potential for the project to (1) reduce flows below the minimum required 
for the protection of fish and wildlife or (2) reduce water quality 
standards below those established for the stream classification at the 
point of withdrawal or the adjacent downstream section.
    Cite contacts with appropriate experts and agencies that must issue 
necessary permits.
    3. Solid Waste Management. Indicate all aspects of the project 
including primary beneficiaries' operations, and known indirect effects 
which will necessitate the disposal of solid wastes. Indicate the kinds 
and expected quantities of solid wastes involved and the disposal 
techniques to be used. Evaluate the adequacy of these techniques 
especially in relationship to air and water quality. Indicate if 
recycling or resource recovery programs are or will be used. Cite any 
contacts with appropriate experts and agencies that must issue necessary 
permits.
    4. Land Use. Given the description of land uses as previously 
indicated, evaluate (a) the effect of changing the land use of the 
project site and (b) how this change in land use will affect the 
surrounding land uses and those within the project's area of 
environmental impact. Particularly address the potential impacts to 
those unique or sensitive areas discussed under Section III, Description 
of Project Area, which are not covered by the specific analyses required 
in Sections V-XI. Describe the existing land use plan and zoning 
restrictions for the project area. Evaluate the consistency of the 
project and its impacts on these plans. For all actions subject to the 
requirements of exhibit M of this subpart indicate (a) whether or not 
highly erodible land, wetland or converted wetland is present, (b) if 
any exemption(s) applies to the requirements of exhibit M, (c) the 
status of the applicant's eligibility for an FmHA or its successor 
agency under Public Law 103-354 loan under exhibit M and (d) any steps 
the applicant must take prior to loan approval to retain or retain its 
eligibility. Attach a completed copy of Form SCS-CPA-26, ``Highly 
Erodible Land and Wetland Conservation Determination,'' for the action.
    5. Transportation. Describe available facilities such as highways 
and rail. Discuss whether the project will result in an increase in 
motor vehicle traffic and the existing roads' ability to safely 
accommodate this increase. Indicate if additional traffic control 
devices are to be installed. Describe new traffic patterns which will 
arise because of the project. Discuss how these new traffic patterns 
will affect the land uses described above, especially residential, 
hospitals, schools, and recreational. Describe the consistency of the 
project's transportation impacts with the transportation plans for the 
area and any air quality control plans. Cite any contact with 
appropriate experts.
    6. Natural Environment. Indicate all aspects of the project 
including construction, beneficiaries' operations, and known indirect 
effects which will affect the natural environment including wildlife, 
their habitats, and unique natural features. Cite contacts with 
appropriate experts. If an area listed on the National Registry of 
Natural Landmarks may be affected, consult with the Department of 
Interior and document these consultations and any agreements reached 
regarding avoidance or mitigation of potential adverse impacts.
    7. Human Population. Indicate the number of people to be relocated 
and arrangements being made for this relocation. Discuss how impacts 
resulting from the project such as changes in land use, transportation 
changes, air emissions, noise, odor, etc. will affect nearby residents 
and users of the project area and surrounding areas. Discuss whether the 
proposal will accommodate any population increases and, if so, describe 
the potential impacts of these increases on the area's public and 
community services such as schools, health care, social services, and 
fire protection. Cite contacts with appropriate experts.
    8. Construction. Indicate the potential effects of construction of 
the project on air quality, water quality, noise levels, solid waste 
disposal, soil erosion and siltation. Describe the measures that will be 
employed to limit adverse effects. Give particular consideration to 
erosion, stream siltation, and clearing operations.
    9. Energy Impacts. Indicate the project's and its primary 
beneficiaries' effects on the area's existing energy supplies. This 
discussion should address not only the direct energy utilization, but 
any major indirect utilization resulting from the siting of the project. 
Describe the availability of these supplies to the project site. Discuss 
whether the project will utilize a large share of the remaining capacity 
of an energy supply or will create a shortage of such supply. Discuss 
any steps to be taken to conserve energy.

[[Page 70]]

    10. Discuss any of the following areas which may be relevant: noise, 
vibrations, safety, seismic conditions, fire-prone locations, radiation, 
and aesthetic considerations. Cite any disucssion with appropriate 
experts.

                     V. Coastal Zone Management Act*
---------------------------------------------------------------------------

    * Complete only if coastal or Great Lakes State.
---------------------------------------------------------------------------

    Indicate if the project is within or will impact a coastal area 
defined as such by the State's approved Coastal Zone Management Program. 
If so, consult with the State agency responsible for the Program to 
determine the project's consistency with it. The results of this 
coordination shall be included in the assessment and considered in 
completing the environmental impact determination and environmental 
findings (Item XXI below).

    VI. Compliance With Advisory Council on Historic Preservation's 
                               Regulations

    In this Section, the environmental reviewer shall detail the steps 
taken to comply with the above regulations as specified in subpart F of 
part 1901 of this chapter. First, indicate that the National Register of 
Historic Places, including its monthly supplements, has been reviewed 
and whether there are any listed properties located within the area to 
be affected by the project. Second, indicate the steps taken such as 
historical/archeological surveys to determine if there are any 
properties eligible for listing located within the affected area. 
Summarize the results of the consultation with the State Historic 
Preservation Officer (SHPO) and attach appropriate documentation of the 
SHPO's views. Discuss the views of any other experts contacted. Based 
upon the above review process and the views of the SHPO, state whether 
or not an eligible or listed property will be affected.
    If there will be an effect, discuss all of the steps and protective 
measures taken to complete the advisory Council's regulations. Describe 
the affected property and the nature of the effect. Attach to the 
assessment the results of the coordination process with the Advisory 
Council on Historic Preservation.

           VII. Compliance With the Wild and Scenic Rivers Act

    Indicate whether the project will affect a river or portion of it 
which is either included in the National Wild and Scenic Rivers System 
or designated for potential addition to the system. This analysis shall 
be conducted through discussions with the appropriate regional office of 
the National Park Service or the Forest Service when its lands are 
involved, as well as the appropriate State agencies having 
implementation authorities. See exhibit E for specific implementation 
instructions for this Act. A summary of discussions held or any required 
formal coordination shall be included in the assessment and considered 
in completing the environmental impact determination and environmental 
findings (Item XXI below).

            VIII. Compliance With the Endangered Species Act

    Indicate whether the project will either (1) affect a listed 
endangered or threatened species or critical habitat or (2) adversely 
affect a proposed critical habitat for an endangered or threatened 
species or jeopardize the continued existence of a proposed endangered 
or threatened species. This analysis will be conducted in consultation 
with the Fish and Wildlife Service and the National Marine Fisheries 
Service, when appropriate. Any formal or informal consultations 
conducted with these agencies as well as any State wildlife protection 
agency will also address impacts to Category I and Category II species. 
See exhibit D of this subpart for specific implementation instructions.
    The results of any required coordination shall be included in the 
assessment along with any completed biological opinion and mitigation 
measures to be required for the project. These factors shall be 
considered in completing the environmental impact determination.

  IX. Compliance With Farmland Protection Policy Act and Departmental 
                   Regulation 9500-3, Land Use Policy

    Indicate whether the project will either directly or indirectly 
convert an important land resource(s) identified in the Act or 
Departmental Regulation, other than floodplains or wetlands which should 
be addressed below in Item X of this exhibit. If a conversion may 
result, determine if there is a practicable alternative to avoiding it. 
If there is no such alternative, determine whether all practicable 
mitigation measures are included in the project. Document as an 
attachment these determinations and the steps taken to inform the 
public, locate alternatives, and mitigate potential adverse impacts. See 
exhibit C of this subpart for specific implementation guidance.

  X. Compliance With Executive Order 11988, Floodplain Management, and 
              Executive Order 11990, Protection of Wetlands

    Indicate whether the project is either located within a 100-year 
floodplain (500-year floodplain for a critical action) or a wetland or 
will impact a floodplain or wetland. If so, determine if there is a 
practicable alternative project or location. If there is no such 
alternative, determine whether all practicable mitigation measures are 
included in the project and document as an attachment these 
determinations and the steps taken to

[[Page 71]]

inform the public, locate alternatives, and mitigate potential adverse 
impacts. See the U.S. Water Resources Council's Floodplain Management 
Guidelines for more specific guidance as well as exhibit C of this 
subpart.

            XI. Compliance With Coastal Barrier Resources Act

    Indicate whether the project is located within the Coastal Barrier 
Resources System. If so, indicate whether or not the project meets an 
exception criteria under the Act and the results of any consultation 
with the Secretary of the Interior regarding its qualification as an 
exception. See exhibit F of this subpart for specific implementation 
instructions as well as exhibit L for a listing of the exception 
criteria. (Those States not having any components of the system within 
their jurisdiction need not reference this item in their assessments.)

                   XII. State Environmental Policy Act

    Indicate if the proposed project is subject to a State environmental 
policy act or similar regulation. Summarize the results of compliance 
with these requirements and attach available documentation. (See Sec. 
1940.328 of this subpart for further guidance.)

       XIII. Consultation Requirements of Executive Order 12372, 
              Intergovernmental Review of Federal Programs

    Attach the comments of State, regional, or local agencies (if this 
review process is required for the project) and respond to all comments 
that deal with the subject matters discussed in this assessment format 
or are otherwise of an environmental nature.

       XIV. Environmental Analysis of Participating Federal Agency

    Indicate if another Federal Agency is participating in the project 
either through the provision of additional funds, a companion project, 
or a permit review authority. Summarize the results of the involved 
Agency's environmental impact analysis and attach available 
documentation. (See Sec. 1940.318(d) of this subpart for further 
guidance.)

                         XV. Reaction to Project

    Discuss any negative comments or public views raised about the 
project and the consideration given to these comments. Indicate whether 
a public hearing or public information meeting has been held either by 
the applicant or FmHA or its successor agency under Public Law 103-354 
to include a summary of the results and any objections raised. Indicate 
any other examples of the community's awareness of the project, such as 
newspaper articles or public notifications.

                         XVI. Cumulative Impacts

    Summarize the cumulative impacts of this project and the related 
activities. Give particular attention to land use changes and air and 
water quality impacts. Summarize the results of the environmental impact 
analysis done for any of these related activities and/or your discussion 
with the sponsoring agencies. Attach available documentation of the 
analysis.

                          XVII. Adverse Impact

    Summarize the potential adverse impacts of the proposal as pointed 
out in the above analysis.

                           XVIII. Alternatives

    Discuss the feasibility of alternatives to the project and their 
environmental impacts. These alternatives should include (a) alternative 
locations, (b) alternative designs, (c) alternative projects having 
similar benefits, and (d) no project. If alternatives have been fully 
discussed above in any of Items VI through X, simply reference that 
discussion.

                        XIX. Mitigation Measures

    Describe any measures which will be taken or required by FmHA or its 
successor agency under Public Law 103-354 to avoid or mitigate the 
identified adverse impacts. Analyze the environmental impacts and 
potential effectiveness of the mitigation measures. Such measures shall 
be included as special requirements or provisions to the offer of 
financial assistance or other appropriate approval document, if this 
action does not involve financial assistance.

 XX. Consistency With FmHA or Its Successor Agency Under Public Law 103-
                       354 Environmental Policies

    Discuss the project's consistencies and inconsistencies with the 
Agency's environmental policies and the State Office's Natural Resource 
Management Guide. See Sec. Sec. 1940.304 and 1940.305 for a discussion 
of these policies and exhibit B for a discussion of the guide.

                    XXI. Environmental Determinations

    The following recommendations shall be completed:
    a. Based on an examination and review of the foregoing information 
and such supplemental information attached hereto, I recommend that the 
approving official determine that this project will have () a 
significant effect on the quality of the human environment and an 
Environmental Impact Statement must be prepared; will not have 
() a significant effect on the quality of the human 
environment.

[[Page 72]]

    b. I recommend that the approving official make the following 
compliance determinations for the below-listed environmental 
requirements.

 
 Not in compliance         In compliance
 
                     .  ...................  .  Clean Air Act.
                     .  ...................  .  Federal Water Pollution
                                                 Control Act.
                     .  ...................  .  Safe Drinking Water Act--
                                                 Section 1424(e).
                     .  ...................  .  Endangered Species Act.
                     .  ...................  .  Coastal Barrier
                                                 Resources Act.
                     .  ...................  .  Coastal Zone Management
                                                 Act--Section 307(c) (1)
                                                 and (2).
                     .  ...................  .  Wild and Scenic Rivers
                                                 Act.
                     .  ...................  .  National Historic
                                                 Preservation Act.
                     .  ...................  .  Archeological and
                                                 Historic Preservation
                                                 Act.
                     .  ...................  .  Subpart B, Highly
                                                 Erodible Land
                                                 Conservation
                     .  ...................  .  Subpart C, Wetland
                                                 Conservation, of the
                                                 Food Security Act.
                     .  ...................  .  Executive Order 11988,
                                                 Floodplain Management.
                     .  ...................  .  Executive Order 11990,
                                                 Protection of Wetlands.
                     .  ...................  .  Farmland Protection
                                                 Policy Act.
                     .  ...................  .  Departmental Regulation
                                                 9500-3, Land Use
                                                 Policy.
                     .  ...................  .  State Office Natural
                                                 Resource Management
                                                 Guide.
 

    c. I have reviewed and considered the types and degrees of adverse 
environmental impacts identified by this assessment. I have also 
analyzed the proposal for its consistency with FmHA or its successor 
agency under Public Law 103-354 environmental policies, particularly 
those related to important farmland protection, and have considered the 
potential benefits of the proposal. Based upon a consideration and 
balancing of these factors, I recommend from an environmental standpoint 
that the project

------ be approved.
------ not be approved because of the attached reasons.
Signature of preparer*__________________________________________________
---------------------------------------------------------------------------

    *See Sec. 1940.316 of this subpart for listing of officials 
responsible for preparing assessment.
---------------------------------------------------------------------------

Date____________________________________________________________________
Title___________________________________________________________________
State Environmental Coordinator's Review (When required by Sec. 
1940.316 of this subpart)
    I have reviewed this environmental assessment and supporting 
documentation. Following are my positions regarding its adequacy and the 
recommendations reached by the preparer. For any matter in which I do 
not concur, my reasons are attached as exhibit ----.

 
   Do not concur               Concur
 
                     .  ...................  .  Adequate Assessment.
                     .  ...................  .  Environmental Impact
                                                 Determination.
                     .  ...................  .  Compliance
                                                 Determinations.
                     .  ...................  .  Project Recommendation.
 

Signature of State Environmental Coordinator____________________________
Date____________________________________________________________________

[49 FR 3727, Jan. 30, 1984, as amended at 53 FR 36266, Sept. 19, 1988]

     Exhibit I to Subpart G of Part 1940--Finding of No Significant 
                          Environmental Impact

SUBJECT: Finding of No Significant Environmental Impact and Necessary 
          Environmental Findings for (insert name, location, and any 
          identification number of project).
TO: Project File.

    The attached environmental assessment has been completed for the 
subject proposal by the FmHA or its successor agency under Public Law 
103-354 environmental reviewer. After reviewing the assessment and the 
supporting materials attached to it, I find that the subject proposal 
will not significantly affect the quality of the human environment. 
Therefore, the preparation of an environmental impact statement is not 
necessary.
    I also find that the assessment properly documents the proposal's 
status of compliance with the environmental laws and requirements listed 
therein.

    Insert signature and title of approving official as specified in 
Sec. 1940.316 of this subpart. --------(Date).

[49 FR 3727, Jan. 30, 1984, as amended at 53 FR 36266, Sept. 19, 1988]

Exhibit J to Subpart G of Part 1940--Locations and Telephone Numbers of 
     Federal Emergency Management Administration's Regional Offices

------------------------------------------------------------------------
  Federal region           Location           FTS No.*   Commercial No.
------------------------------------------------------------------------
I................  Boston, MA..............   223-4741    (617) 223-4741
II...............  New York, NY............   264-8980    (212) 264-8980
III..............  Philadelphia, PA........   597-9416    (215) 597-9416

[[Page 73]]

 
IV...............  Atlanta, GA.............   257-2400    (404) 881-2400
V................  Chicago, IL.............   353-1500    (312) 353-1500
VI...............  Dallas, TX..............   749-9201    (817) 387-5811
VII..............  Kansas City, MO.........   758-5912    (816) 374-5912
VIII.............  Denver, CO..............   234-2553    (303) 234-2553
IX...............  San Francisco, CA.......   556-8794    (415) 556-8794
X................  Seattle, WA.............   396-0284    (206) 481-8800
------------------------------------------------------------------------
*This is the main number for the regional office. For floodplain
  information, ask for the Natural and Technological Hazards Division.

Exhibit K to Subpart G of Part 1940--Locations and Telephone Numbers of 
          U.S. Fish and Wildlife Service's Wetland Coordinators

    The U.S. Fish and Wildlife Service (FWS) is presently preparing the 
National Wetlands Inventory. Each regional office of the FWS has named a 
staff member as a Wetland Coordinator. These individuals can provide 
updated information concerning existing State and local wetland surveys 
and Federal inventories. Listed below are the FWS regional offices and 
their areas of responsibility.

                                Region I

Portland, OR--FTS 429-6154; Commercial (503) 231-6154.
Areas Covered: California, Hawaii, Idaho, Nevada, Oregon, Washington, 
U.S. Pacific Trust, Territories and Possessions.

                                Region II

Albuquerque, NM--FTS 474-3152; Commercial (505) 766-2914.
Areas Covered: Arizona, New Mexico, Oklahoma, Texas.

                               Region III

Twin Cities, MN--FTS 725-3593; Commercial (612) 725-3593.
Areas Covered: Illinois, Indiana, Michigan, Minnesota, Ohio, Wisconsin.

                                Region IV

Atlanta, GA--FTS 242-6343; Commercial (404) 221-6343.
Areas Covered: Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, 
Mississippi, North Carolina, Panama Canal Zone, Puerto Rico, South 
Carolina, Tennessee, Virgin Islands.

                                Region V

Newton Corner, MA--FTS 829-9379; Commercial (617) 965-5100, Ext. 379.
Areas Covered: Connecticut, Delaware, District of Columbia, Maine, 
Maryland, Massachusetts, New Hampshire, New Jersey, New York, 
Pennsylvania, Rhode Island, Vermont, Virginia, West Virginia.

                                Region VI

Denver, CO--FTS 234-5586; Commercial (303) 234-5586.
Areas Covered: Colorado, Iowa, Kansas, Missouri, Montana, Nebraska, 
North Dakota, South Dakota, Utah, Wyoming.

                           Alaska Area Office

Anchorage, AK--Commercial (907) 263-3403.

                             National Office

St. Petersburg, FL--FTS 826-3624; Commercial (813) 893-3624.

   Exhibit L to Subpart G of Part 1940--Exceptions to Restrictions of 
                      Coastal Barrier Resources Act

                          Section 6 Exceptions*
---------------------------------------------------------------------------

    *Quoted from section 6 of the Act, Pub. L. 97-348.
---------------------------------------------------------------------------

    (a) Notwithstanding section 5, the appropriate Federal officer, 
after consultation with the Secretary, may make Federal expenditures or 
financial assistance available within the Coastal Barrier Resources 
System for--
    (1) Any use or facility necessary for the exploration, extraction, 
or transportation of energy resources which can be carried out only on, 
in, or adjacent to coastal water areas because the use or facility 
requires access to the coastal water body;
    (2) The maintenance of existing channel improvements and related 
structures, such as jetties, and including the disposal of dredge 
materials related to such improvements;
    (3) The maintenance, replacement, reconstruction, or repair, but not 
the expansion, of publicly owned or publicly operated roads, structures, 
or facilities that are essential links in a larger network or system;
    (4) Military activities essential to national security;
    (5) The construction, operation, maintenance, and rehabilitation of 
Coast Guard facilities and access thereto; and
    (6) Any of the following actions or projects, but only if the making 
available of expenditures or assistance therefor is consistent with the 
purposes of this Act:
    (A) Projects for the study, management, protection and enhancement 
of fish and wildlife resources and habitats, including, but not limited 
to, acquisition of fish and wildlife habitats and related lands, 
stabilization projects for fish and wildlife habitats, and recreational 
projects.
    (B) The establishment, operation, and maintenance of air and water 
navigation aids and devices, and for access thereto.
    (C) Projects under the Land and Water Conservation Fund Act of 1965 
(16 U.S.C.

[[Page 74]]

4601-4 through 11) and the Coastal Zone Management Act of 1972 (16 
U.S.C. 1452 et seq.).
    (D) Scientific research, including but not limited to aeronautical, 
atmospheric, space, geologic, marine, fish and wildlife and other 
research, development and applications.
    (E) Assistance for emergency actions essential to the saving of 
lives and the protection of property and the public health and safety, 
if such actions are performed pursuant to sections 305 and 306 of the 
Disaster Relief Act of 1974 (42 U.S.C. 5145 and 5146) and section 1362 
of the National Flood Insurance Act of 1968 (42 U.S.C. 4103) and are 
limited to actions that are necessary to alleviate the emergency.
    (F) The maintenance, replacement, reconstruction, or repair, but not 
the expansion, of publicly owned or publicly operated roads, structures, 
or facilities.
    (G) Nonstructural projects for shoreline stabilization that are 
designed to mimic, enhance, or restore natural stabilization systems.
    (b) For purposes of subsection (a)(2), a channel improvement or a 
related structure shall be treated as an existing improvement or an 
existing related structure only if all, or a portion, of the moneys for 
such improvement or structure was appropriated before the date of the 
enactment of this Act.

 Exhibit M to Subpart G of Part 1940--Implementation Procedures for the 
   Conservation of Wetlands and Highly Erodible Land Affecting Farmer 
    Program Loans and Loans to Indian Tribes and Tribal Corporations

    1. Background. This exhibit implements the requirements of Subtitle 
B, Highly Erodible Land Conservation, and Subtitle C, Wetland 
Conservation, of Title XII of the Food Security Act of 1985, Pub. L. 99-
198. The purposes of these Subtitles are to: Reduce soil loss due to 
wind and water erosion; protect the Nation's long term capability to 
produce food and fiber; reduce sedimentation; improve water quality; 
assist in preserving the Nation's wetlands; create better habitat for 
fish and wildlife through improved food and cover; and curb production 
of surplus commodities by removing certain incentives for persons to 
produce agricultural commodities on highly erodible land or converted 
wetland.
    2. Applicability. The provisions of this exhibit apply to insured 
and guaranteed Farmer Program loans and loans to Indian Tribes and 
Tribal Corporations, subordinations, transfers and assumptions of such 
loans and leases and credit sales of inventory property. For the purpose 
of this exhibit, ``Farmer Program loans'' means Farm Operating Loans, 
Farm Ownership Loans, Emergency Loans, and Soil and Water Loans. As used 
in this exhibit, the word loan is meant to include guarantee as well. 
Applicant means an applicant for either an insured or guaranteed loan 
and borrower means a recipient of either an insured or guaranteed loan.
    3. FmHA or its successor agency under Public Law 103-354 prohibited 
activities. Unless otherwise exempted by the provisions of this exhibit, 
the proceeds of any Farmer Program loan or loan to an Indian Tribe or 
Tribal Corporation made or guaranteed by FmHA or its successor agency 
under Public Law 103-354 will not be used either (a) for a purpose that 
will contribute to excessive erosion of highly erodible land, or (b) for 
a purpose that will contribute to conversion of wetlands to produce an 
agricultural commodity. (See Sec. 12.2(a)(1) of subpart A of part 12 of 
subtitle A of title 7, which is attachment 1 of this exhibit and is 
available in any FmHA or its successor agency under Public Law 103-354 
office, for the definition of an agricultural commodity.) Consequently, 
any applicant proposing to use loan proceeds for an activity 
contributing to either such purpose, will not be eligible for the 
requested loan. Any borrower that uses loan proceeds in a manner that 
contributes to either such purpose will be in default on the loan.
    a. U.S. Department of Agriculture (USDA) definitions. In 
implementing this exhibit, FmHA or its successor agency under Public Law 
103-354 will use the USDA's definitions of the terms found at Sec. 12.2 
of subpart A of part 12 of subtitle A of title 7 (attachment 1 of this 
exhibit which is available in any FmHA or its successor agency under 
Public Law 103-354 office).
    b. Highly erodible land conservation. FmHA or its successor agency 
under Public Law 103-354 will conclude that excessive erosion of highly 
erodible land results or would result whenever (1) a field on which 
highly erodible land is predominant, as determined by the Soil 
Conservation Service (SCS), is or would be used to produce an 
agricultural commodity without conformance to a conservation system 
approved either by SCS or the appropriate conservation district, as 
evidenced by a statement from SCS, and (2) such field is not exempt from 
the provisions of this exhibit.
    c. Wetland conservation. FmHA or its successor agency under Public 
Law 103-354 will conclude that a conversion of wetlands to produce an 
agricultural commodity has occurred or will occur whenever, as 
determined by SCS, (1) a wetland has or will be drained, dredged, 
filled, leveled, or otherwise manipulated (including any activity that 
results in impairing or reducing the flow, circulation, or reach of 
water) that makes possible the production of an agricultural commodity 
without further application of the manipulations described herein if (a) 
such production

[[Page 75]]

would not have been possible but for such action and (b) before such 
action such land was wetland and was neither highly erodible land nor 
highly erodible cropland; and (2) neither the affected wetland nor the 
activity affecting the wetland is exempt from the provisions of this 
exhibit.
    d. Use of loan proceeds. To use loan proceeds for a purpose that 
contributes to either the excessive erosion of highly erodible land or 
the conversion of wetlands to produce an agricultural commodity means 
that loan proceeds will or have been used in a way that contributes to 
either excessive erosion of highly erodible land or the conversion of 
wetlands to produce an agricultural commodity by paying the costs of any 
of the following:
    (1) The purchase of the affected land;
    (2) Necessary planning, feasibility, or design studies;
    (3) Obtaining any necessary permits;
    (4) The purchase, contract, lease or renting of any equipment or 
materials necessary to carry out the land modification or conversion to 
include all associated operational costs such as fuel and equipment 
maintenance costs;
    (5) Any labor costs;
    (6) The planting, cultivating, harvesting, or marketing of any 
agricultural commodity produced on nonexempt highly erodible land to 
include any associated operational or material costs such as fuel, seed, 
fertilizer, and pesticide costs;
    (7) Within the crop year in which the wetland conversion was 
completed plus the next ten crop years thereafter, the planting, 
cultivating, harvesting, or marketing of any agricultural commodity 
produced on the affected land to include any associated operational or 
materials costs such as fuel, seed, fertilizer and pesticide costs; or
    (8) For the same time period as in subparagraph 3d(7) above, any 
costs associated with using for on-farm purposes an agricultural 
commodity grown on the affected land.
    (9) Additionally, if loan proceeds will be or have been substituted 
to pay other costs at anytime during the life of the loan so that non-
loan funds can be used to pay any of the above costs, it is deemed that 
loan proceeds will be or have been used for a purpose that contributes 
to the prohibited activities described in this paragraph.
    4. Prohibited activities under other USDA financial assistance 
programs. Unless otherwise exempted, a person becomes ineligible for a 
variety of USDA financial assistance programs if that person produces in 
any crop year an agricultural commodity on either a field on which 
highly erodible land is predominant or a converted wetland. This 
ineligibility extends to any commodity produced during the crop year 
that the prohibited action occurs. The programs for which the person 
would be ineligible include price support payments, farm storage 
facility loans, disaster payments, crop insurance, payments made for the 
storage of an agricultural commodity, and payments received under a 
Conservation Reserve Program Contract. Farmer Program applicants and 
borrowers and applicants for, and borrowers of, loans to Indian Tribes 
and Tribal Corporations, therefore, can be affected not only by the FmHA 
or its successor agency under Public Law 103-354 prohibited activities 
but also by the broad USDA sweep of the Subtitles B and C restrictions. 
Should such an applicant rely or plan to rely on any of these other USDA 
financial assistance programs as a source of funds to repay its FmHA or 
its successor agency under Public Law 103-354 loan(s) and then fail to 
meet the other program(s)' eligibility criteria related to wetland or 
highly erodible land conservation, repayment ability to FmHA or its 
successor agency under Public Law 103-354 or the lender of and FmHA or 
its successor agency under Public Law 103-354 guaranteed loan may be 
jeopardized. Consequently, those applicants who are applying for a loan 
and those borrowers who receive a loan after the effective date of 
Subtitles B and C, as designated in part 12 of subtitle A of title 7, 
and who include in their projected sources of repayment, potential funds 
from any USDA program subject to some form of Subtitle B or C 
restrictions will have to demonstrate as part of their applications, and 
for borrowers, as part of their farm plan of operation, their ability to 
meet the other program(s)' eligibility criteria. Failure to meet the 
criteria will require the applicant or borrower either to document an 
alternative, equivalent source of revenues or, if possible, agree to 
undertake any steps necessary to gain eligibility for the other 
program(s). See paragraph 6 of this exhibit for a discussion of such 
steps.
    5. Applicant's responsibilities.
    a. Required information. Every applicant for a Farmer Program loan 
or a loan to an Indian Tribe or Tribal Corporation will be required to 
provide the following information and, as applicable, certification as 
part of the application for financial assistance. An application will 
not be considered to be complete until this information and 
certification are provided to FmHA or its successor agency under Public 
Law 103-354. Once an applicant has provided FmHA or its successor agency 
under Public Law 103-354 with information from SCS on the presence of 
any highly erodible land, wetland, or converted wetland this information 
need not be provided again for a subsequent loan unless there is either 
a change in the property upon which FmHA or its successor agency under 
Public Law 103-354 loan proceeds will be applied or a change in the 
previous information, such as a change in the status of an exemption. 
There is a continuing responsibility

[[Page 76]]

on FmHA or its successor agency under Public Law 103-354 borrowers using 
other USDA financial assistance programs for repayment purposes to 
provide the County Supervisor with an executed copy of any similar 
certification required by the other USDA agency at the time of each 
required certification.
    (1) A statement from the SCS indicating whether or not the 
applicant's farm property or properties contain either highly erodible 
land, wetland, or converted wetland and, if so, whether or not the 
applicant qualifies for a particular exemption to the provisions of this 
exhibit and as further detailed in paragraph 11 below. The property or 
properties will be listed and described in accordance with the 
Agriculture Stabilization and Conservation Service's (ASCS) farm records 
system. SCS's execution of Form SCS-CPA-26, ``Highly Erodible Land and 
Wetland Conservation Determination,'' is necessary to meet this 
information requirement.
    (2) If either highly erodible land, wetland, or converted wetland is 
present, the applicant's properly executed original or carbon copy of 
Form AD-1026, ``Highly Erodible Land and Wetland Conservation 
Certification.''
    b. Required actions. If at any time during the application review 
process any of the information or basis for an applicant's certification 
changes, the applicant (or the lender in the case of a guaranteed loan) 
must immediately notify FmHA or its successor agency under Public Law 
103-354. If an applicant intends to produce an agricultural commodity on 
a nonexempt field on which highly erodible land is predominant, the 
applicant must develop a conservation system approved by SCS or the 
appropriate conservation district, demonstrate that it is or will be in 
compliance with the system at the time the field is to be used, and 
provide SCS's concurrence with this position.
    6. FmHA or its successor agency under Public Law 103-354's 
application review. The FmHA or its successor agency under Public Law 
103-354 County Supervisor will review the information provided by the 
applicant from SCS regarding the presence of any highly erodible land, 
wetland, or converted wetland and any possible exemptions and take the 
actions warranted by the presence of one or more of the circumstances 
described below. In carrying out these actions, FmHA or its successor 
agency under Public Law 103-354 will consider the technical decisions 
rendered by the SCS and the ASCS, as assigned to these agencies by 
subparts A, B, and C of part 12 of subtitle A of title 7 and further 
explained in this exhibit, to be final and controlling in the remaining 
FmHA or its successor agency under Public Law 103-354 decisionmaking 
process for this exhibit. It must also be understood that the definition 
of a wetland used by SCS in implementing this exhibit applies only to 
this exhibit and not to other wetland protection provisions of subpart G 
of part 1940.
    a. No highly erodible land, wetland, or converted wetland present. 
The requested loan can be approved under the provisions of this exhibit 
and, except for documenting this result in accordance with paragraph 8 
of this exhibit, no further action is required.
    b. Converted wetland present. The County Supervisor will consult 
with the applicant (and lender, in the case of a guaranteed loan) and 
the appropriate local office of the ASCS in order to determine if the 
converted wetland qualifies for the exemption specified in subparagraph 
c (1) of paragraph 11 of this exhibit. If so, no further action is 
necessary with respect to the converted wetland except for documenting 
the result. If the converted wetland does not qualify for an exemption, 
the County Supervisor will complete one or both of the following steps 
as the identified circumstances dictate.
    (1) Step one. Review both the date that the wetland was converted 
and the proposed use of loan proceeds in order to determine if loan 
proceeds will be used for a prohibited activity as defined in 
subparagraph d of paragraph 3 of this exhibit. If not, the County 
Supervisor will so document this as specified in paragraph 8 of this 
exhibit; complete step two immediately below; and, if an insured loan 
will be approved, notify the applicant in writing, coincident with the 
transmittal of Form FmHA or its successor agency under Public Law 103-
354 1940-1, ``Request For Obligation of Funds,'' and by using Form 
Letter 1940-G-1, ``Notification of The Requirements of exhibit M of FmHA 
Instruction 1940-G,'' that the loan approval instruments will contain 
compliance requirements affecting the applicant's converted wetland. If 
loan proceeds will be used for a prohibited activity, the applicant (and 
lender, in the case of a guaranteed loan) will be advised of the 
applicant's ineligibility for the FmHA or its successor agency under 
Public Law 103-354 loan being requested. The applicant (and lender, in 
the case of a guaranteed loan) will be advised of any modifications to 
the application that could cure the ineligibility. Not growing an 
agricultural commodity on the converted wetland would cure the 
ineligibility, but the substitution of non-FmHA or its successor agency 
under Public Law 103-354 funds to grow an agricultural commodity on the 
converted wetland would not.
    (2) Step two. The County Supervisor will review the applicant's 
sources of loan repayment to determine if they include funds from a USDA 
financial assistance program(s) subject to wetland conservation 
restrictions. If so, the County Supervisor will implement the actions in 
subparagraph e of this paragraph.
    c. Highly erodible land or wetland present. The County Supervisor 
will discuss with the

[[Page 77]]

applicant (and lender, in the case of a guaranteed loan) and review the 
intended uses of the FmHA or its successor agency under Public Law 103-
354 loan proceeds as evidenced in any relevant application materials.
    (1) Proceeds to be used for prohibited activity. If proceeds would 
be used for a prohibited activity, the applicant (and lender, in the 
case of a guaranteed loan) will be advised of its ineligibility for the 
FmHA or its successor agency under Public Law 103-354 loan. The 
applicant (and lender, in the case of a guaranteed loan) will be 
informed of any modifications to its application that could cure the 
ineligibility, including financially feasible eligible loan purposes 
that could be helpful in implementing a conservation plan or installing 
a conservation system, should either be an appropriate cure. 
Substitution of non-FmHA or its successor agency under Public Law 103-
354 monies to accomplish the prohibited activity would not cure the 
ineligibility, but actual elimination of the activity from the 
applicant's farm plan of operation would.
    (2) Proceeds not to be used for a prohibited activity. If loan 
proceeds are not planned to be used for a prohibited activity, the 
County Supervisor will perform the following tasks:
    (a) Document the above determination in the applicant's file as 
specified in paragraph 8 of this exhibit.
    (b) If an insured loan will be approved and the requirements of 
subparagraph c (2)(c) of this paragraph do not apply, notify the 
applicant in writing, coincident with the transmittal of Form FmHA or 
its successor agency under Public Law 103-354 1940-1, ``Request For 
Obligation of Funds,'' and by using Form Letter 1940-G-1, ``Notification 
of The Requirements of Exhibit M of FmHA Instruction 1940-G,'' that the 
loan approval instruments will contain compliance requirements affecting 
the applicant's highly erodible land and/or wetland.
    (c) Review the term of the proposed loan and take the following 
actions, as applicable.
    (i) Loan term exceeds January 1, 1990, but not January 1, 1995. If 
the term of the proposed loan expires within this period and the 
applicant intends to produce an agricultural commodity on highly 
erodible land that is exempt from the restrictions of this exhibit until 
either 1990 or two years after the SCS has completed a soil survey for 
the borrower's land, whichever is later, the County Supervisor will 
determine if it is financially feasible for the applicant, prior to loss 
of the exemption, to actively apply a conservation plan approved by SCS 
or the appropriate conservation district. See Sec. 12.23 of subpart A 
of part 12 of subtitle A of title 7, which is attachment 1 of this 
exhibit and is available in any FmHA or its successor agency under 
Public Law 103-354 office, for a definition of actively applying a 
conservation plan. Prior to loan approval, the applicant, the lender, 
(if a guaranteed loan is involved), FmHA or its successor agency under 
Public Law 103-354 and SCS will resolve any doubts as to what extent 
production would be able to continue under application of a conservation 
plan and as to the financial implications on loan repayment ability from 
both the potential costs of actively applying the conservation plan and 
the potential loss of revenues from any reduced acreage production base. 
The loan approval official will determine the financial implications of 
actively applying a conservation plan to the applicant's highly erodible 
land by developing a projected farm plan of operation or other farm 
financial projections that reflect adequate repayment on the full 
scheduled installments for all debt obligations at the time the 
conservation plan is being actively applied. If in making this 
determination, loan repayment ability cannot be demonstrated, FmHA or 
its successor agency under Public Law 103-354 will deny the loan 
application. If loan repayament ability can be demonstrated and an 
insured loan will be approved, the applicant will be advised in writing, 
coincident with the transmittal of Form FmHA or its successor agency 
under Public Law 103-354 1940-1, ``Request For Obligation of Funds,'' 
and using Form Letter 1940-G-1, ``Notification of The Requirements of 
Exhibit M of FmHA Instruction 1940-G,'' that the loan approval 
instruments will contain compliance requirements affecting the 
applicant's highly erodible land. The applicant will also be advised 
that a statement from the SCS issued prior to either January 1, 1990, or 
two years after the SCS has completed a soil survey of the applicant's 
land (whichever is later) and stating that the applicant is actively 
applying an approved conservation plan will be considered adequate 
demonstration of compliance on the highly erodible land affected by the 
1990 deadline.
    (ii) Loan term exceeds January 1, 1995. If the term of the proposed 
loan would exceed this date and the borrower intends to produce an 
agricultural commodity on highly erodible land that is exempt from the 
restrictions of the exhibit up until that date (see subparagraph b (4) 
of paragraph 11 of this exhibit) the County Supervisor will determine if 
it is financially feasible for the applicant, after January 1, 1985, to 
produce an agricultural commodity on the highly erodible land in 
compliance with a conservation system approved by SCS or the appropriate 
conservation district. Prior to loan approval, the applicant, the lender 
(if a guaranteed loan is involved), FmHA or its successor agency under 
Public Law 103-354 and SCS will resolve any doubts as to what extent 
production would be able to continue under a conservation system and as 
to the financial implications on loan repayment ability from both the 
potential costs of the conservation

[[Page 78]]

system and the potential loss of revenues from any reduced acreage 
production base. The loan approval official will determine the financial 
implications of compliance with a conservation system using the 
financial projection method(s) indicated in subparagraph c (2)(c)(i) of 
this paragraph. If loan repayment ability cannot be demonstrated, the 
application will be denied. If loan repayment ability can be 
demonstrated and an insured loan will be approved, the applicant will be 
advised in writing, coincident with the transmittal of Form 1940-1, 
``Request for Obligation of Funds,'' and using Form Letter 1940-G-1, 
``Notification of The Requirements of Exhibit M of FmHA Instruction 
1940-G,'' that the loan approval instruments will contain compliance 
requirements affecting the applicant's highly erodible land. The 
applicant will also be advised that a statement from SCS issued prior to 
January 1, 1995, and stating that the applicant is in compliance with an 
approved conservation system will be considered adequate demonstration 
of compliance.
    (d) Implement the actions in subparagraph e of this paragraph if the 
applicant plans to repay a portion of the loan with funds from a USDA 
financial assistance program subject to wetland or highly erodible land 
conservation restrictions.
    d. Highly erodible land present that was or is planted in alfalfa. 
If the applicant plans to cultivate highly erodible land for the purpose 
of producing an agricultural commodity and that highly erodible land 
during each of the 1981 to 1985 crop years was planted in alfalfa in a 
crop rotation determined by SCS to be adequate for the protection of 
highly erodible land, the applicant is exempt until June 1, 1988, from 
the requirement to fully implement an approved conservation system on 
the highly erodible land. The County Supervisor, following procedures 
similar to those indicated in subparagraph c (2)(c)(i) of this 
paragraph, will determine if it is financially feasible for the 
applicant to apply a conservation system to the highly erodible land 
prior to the loss of the exemption on June 1, 1988. If loan repayment 
ability cannot be demonstrated, the application will be denied. If loan 
repayment ability can be demonstrated and an insured loan will be 
approved, the applicant will be advised in writing that the loan 
approval instruments will contain compliance requirements affecting the 
applicant's highly erodible land. The applicant will also be advised 
that a statement from SCS issued prior to June 1, 1988 and stating that 
the applicant is in compliance with an approved conservation system will 
be considered adequate demonstration of compliance with this 
requirement.
    e. Highly erodible land, wetland, or converted wetland present and 
applicant intends to use the USDA financial assistance program(s), 
including crop insurance, to repay FmHA or its successor agency under 
Public Law 103-354 loan. The County Supervisor will consult with the 
applicant (and lender, in the case of a guaranteed loan) and the other 
USDA agency(s) to determine if the applicant is eligible for the 
latter's financial assistance. If not eligible, the applicant will have 
to demonstrate that an alternative source(s) of repayment will be 
available in order for further processing of the application to proceed.
    7. Required provisions in loan approval documents.
    a. Insured loans.
    (1) Promissory Notes. For all loans to which this exhibit applies, 
all promissory notes must contain the provision indicated below: (Form 
FmHA or its successor agency under Public Law 103-354 1940-17, 
``Promissory Note,'' has been revised so that the language will no 
longer be inserted as an addendum, but the following provision must be 
inserted as an addendum to Form FmHA or its successor agency under 
Public Law 103-354 440-22, ``Promissory Note (Association or 
Organization),'' if the loan is being made to an Indian Tribe or a 
Tribal Corporation.)

     ``Addendum for Highly Erodible Land and Wetland Conservation''

    Addendum to promissory note dated ---------------- in the amount of 
$------------ at an annual interest rate of ---- percent. This agreement 
supplements and attaches to the above note.
    Borrower recognizes that the loan described in this note will be in 
default should any loan proceeds be used for a purpose that will 
contribute to excessive erosion of highly erodible land or to the 
conversion of wetlands to produce an agricultural commodity, as further 
explained in 7 CFR part 1940, subpart G, exhibit M. If (1) the term of 
the loan exceeds January 1, 1990, but not January 1, 1995, and (2) 
Borrower intends to produce an agricultural commodity on highly erodible 
land that is exempt from the restrictions of exhibit M until either 
January 1, 1990 or two years after the U.S. Soil Conservation Service 
(SCS) has completed a soil survey for the Borrower's land, whichever is 
later, the Borrower further agrees that, prior to the loss of the 
exemption from the highly erodible land conservation restrictions found 
in 7 CFR part 12, Borrower must demonstrate that Borrower is actively 
applying on that land which has been determined to be highly erodible a 
conservation plan approved by the SCS or the appropriate conservation 
district in accordance with SCS's requirements. Furthermore, if the term 
of the loan exceeds January 1, 1995, Borrower further agrees that 
Borrower must demonstrate prior to January 1, 1995, that any production 
after that date of an agricultural commodity on highly erodible land 
will be done in compliance with a conservation system approved by SCS or

[[Page 79]]

the appropriate conservation district in accordance with SCS's 
requirements.
________________________________________________________________________
(Name of Borrower)
________________________________________________________________________
(Signature of Executive Official)
________________________________________________________________________
(Signature of Attesting Official)

    (2) Mortgages, deeds of trust and security agreements. State 
Directors will consult with the Office of General Counsel and ensure 
that for all loans to which this exhibit applies a covenant is included 
in all mortgages, deeds of trust, and security agreements which reads as 
indicated below. Form FmHA or its successor agency under Public Law 103-
354 440-15, ``Security Agreement (Insured Loans to Individuals),'' and 
Form FmHA or its successor agency under Public Law 103-354 440-4, 
``Security Agreement (Chattels and Crops),'' have been revised 
accordingly. Equivalent forms required in State supplements must be 
similarly revised.

                   [For mortgages or deeds of trust:]

    ``Borrower further agrees that the loan(s) secured by this 
instrument will be in default should any loan proceeds be used for a 
purpose that will contribute to excessive erosion of highly erodible 
land or to the conversion of wetlands to produce an agricultural 
commodity, as further explained in 7 CFR part 1940, subpart G, exhibit 
M.''

                       [For security agreements:]

    ``Default shall also exist if any loan proceeds are used for a 
purpose that will contribute to excessive erosion of highly erodible 
land or to the conversion of wetlands to produce an agricultural 
commodity, as further explained in 7 CFR part 1940, subpart G, exhibit 
M.''
    b. Guaranteed loans.
    (1) Form FmHA or its successor agency under Public Law 103-354 449-
14, ``Conditional Commitment for Guarantee,'' and Form FmHA or its 
successor agency under Public Law 103-354 1980-15, ``Conditional 
Commitment for Contract of Guarantee (Line of Credit).'' These forms 
must contain a condition that includes the following provisions:
    (a) Informs the lender that FmHA or its successor agency under 
Public Law 103-354's commitment is conditioned upon loan proceeds not 
being used for a purpose that will contribute to excessive erosion of 
highly erodible land or to the conversion of wetlands to produce an 
agricultural commodity, as explained in this exhibit;
    (b) Informs the lender of the lender's monitoring responsibilities 
under paragraph 10 of this exhibit; and;
    (c) Requires the lender, for all borrowers having highly erodible 
land, wetland, or converted on their farm properties, to include 
provisions in its loan instruments similar to those contained in 
subparagraphs a (1) and (2) of this paragraph.
    (2) Lender's loan and security instruments. These instruments must 
be modified as specified in subparagraph b(1)(c) of this paragraph.
    8. Required FmHA or its successor agency under Public Law 103-354 
documentation. The actions taken and determinations made by FmHA or its 
successor agency under Public Law 103-354 to comply with the provisions 
of this exhibit will be documented as part of the environmental review 
of the application. All actions subject to this exhibit will undergo at 
a minimum the completion of Form FmHA or its successor agency under 
Public Law 103-354 1940-22, ``Environmental Checklist for Categorical 
Exclusions.'' On the reverse of this form, the preparer will document as 
applicable (a) whether or not highly erodible land, wetland, or 
converted wetland is present, (b) if any exemption(s) applies, (c) the 
status of the applicant's eligibility for an FmHA or its successor 
agency under Public Law 103-354 loan under this exhibit, and (d) any 
steps the applicant must take prior to loan approval to retain or regain 
its eligibility. If the application under review meets the definition of 
a Class I action as defined in Sec. 1940.311 of this subpart, the above 
documentation will be included as an exhibit to Form FmHA or its 
successor agency under Public Law 103-354 1940-21, ``Environmental 
Assessment for Class I Action.'' If the application meets the definition 
of a Class II action as defined in Sec. 1940.312 of this subpart, the 
required documentation will be included within the Class II assessment 
under the discussion of land use impacts. See paragraph IV.4. of exhibit 
H of this subpart. Once an applicant's farm property has undergone an 
environmental review covering the provisions of this exhibit, the County 
Supervisor reviewing a subsequent loan request need not require the 
applicant to obtain further site information from SCS as long as there 
is no change in the farm property to be affected or any applicable 
exemptions.
    9. Borrowers' responsibilities. In addition to complying with any 
loan requirements resulting from FmHA or its successor agency under 
Public Law 103-354's implementation of this exhibit, a borrower must 
within ten days of receipt inform, in writing, the lender of a 
guaranteed loan and the County Supervisor for an insured loan of any 
ineligibility determinations received from other USDA agencies for 
violations of wetland or highly erodible land conservation restrictions. 
A borrower also has the responsibility to consult with the lender or 
County Supervisor, as applicable, if at any time the borrower is 
uncertain as to the borrower's duties and responsibility under the loan 
provisions.

[[Page 80]]

    10. FmHA or its successor agency under Public Law 103-354 and lender 
monitoring. As an element of insured loan servicing, to include 
development of a farm plan of operation for an upcoming crop year, 
scheduled farm visits, or other contracts with borrowers, FmHA or its 
successor agency under Public Law 103-354 staff will review and analyze 
the borrower's compliance with the provisions of this exhibit and any 
related loan requirements. If at anytime FmHA or its successor agency 
under Public Law 103-354 becomes aware of the borrower's violation of 
these provisions or related loan requirements, the borrower will be 
informed that the affected loan(s) is in default. In addition to 
directly monitoring borrowers, the County Supervisor will receive and 
review the monitoring results of other USDA agencies having restrictions 
on wetland and highly erodible land conservation. Whenever these results 
indicate that a borrower may have violated the loan conditions, the 
County Supervisor will further analyze the matter and respond, as 
indicated in this paragraph, should a violation be determined. Lenders 
of FmHA or its successor agency under Public Law 103-354 guaranteed 
loans must also monitor compliance as part of their servicing 
responsibilities.
    11. Exemptions and determining their applicability. Following is a 
list of exemptions from the provisions of this exhibit as well a 
description of how FmHA or its successor agency under Public Law 103-354 
will apply the exemptions to a proposed loan or activity under a loan. 
This list is intended to provide guidance on implementing the exemptions 
contained in subparts A, B, and C of part 12 of subtitle A of title 7 
(attachment 1 of this exhibit which is available in any FmHA or its 
successor agency under Public Law 103-354 office) and does not modify or 
limit any of those exemptions.
    a. Exemption from wetland and highly erodible land conservation. Any 
loan which was closed prior to December 23, 1985, or any loan for which 
either Form FmHA or its successor agency under Public Law 103-354 1940-
1, ``Request for Obligation of Funds,'' Form FmHA or its successor 
agency under Public Law 103-354 449-14, ``Conditional Commitment for 
Guarantee,'' or Form FmHA or its successor agency under Public Law 103-
354 1980-15, ``Conditional Commitment for Contract of Guarantee (Line of 
Credit),'' was executed prior to December 23, 1985, is exempt from the 
provisions of this exhibit.
    b. Exemptions from highly erodible land conservation. The following 
exemptions exist from the restrictions on highly erodible land 
conservation. Whenever the County Supervisor is required to consult with 
another USDA agency in applying these exemptions, the County 
Supervisor's review of a properly completed Form SCS-CPA-26 will be 
considered adequate consultation if the needed information is presented 
on the form and no questions are raised by the FmHA or its successor 
agency under Public Law 103-354 review.
    (1) Any land upon which an agricultural commodity was planted before 
December 23, 1985, is exempt for that particular planting. The County 
Supervisor will consult with the appropriate local ASCS office in 
applying this exemption and the ASCS determination is controlling for 
purposes of this exhibit.
    (2) Any land planted with an agricultural commodity during a crop 
year beginning before December 23, 1985, is exempt for that particular 
planting. FmHA or its successor agency under Public Law 103-354 will 
consult with the ASCS State Executive Director and the latter's position 
will be controlling in determining the date that the crop year began.
    (3) Any land that during any one of the crop years of 1981 through 
1985 was either (a) cultivated to produce an agricultural commodity, or 
(b) set aside, diverted or otherwise not cropped under a program 
administered by USDA to reduce production of an agricultural commodity, 
is exempt until the later of January 1, 1990, or the date that is two 
years after the date that the SCS has completed a soil survey of the 
land. To apply this exemption, the County Supervisor will consult with 
ASCS to determine from the latter's records whether or not the land was 
cultivated or set aside during the required period. The ASCS 
determination will be controlling. However, the date of completion for 
any SCS soil survey will be determined by SCS and used by the County 
Supervisor.
    (4) Beginning on January 1, 1990, or two years after SCS has 
completed a soil survey for the land, whichever is later, and extending 
to January 1, 1995, any land that qualified for the exemption in 
subparagraph b (3) of this paragraph is further exempt if a person is 
actively applying to it a conservation plan that is based on the local 
SCS technical guide and properly approved by the appropriate SCS 
conservation district or the SCS. To apply this exemption as well as the 
exemptions specified in subparagraphs b (5), (6), (7), and (8) of this 
paragraph, the County Supervisor will consult with the appropriate local 
SCS office and the SCS position will be controlling.
    (5) Highly erodible land within a conservation district and under a 
conservation system that has been approved by a conservation district 
after the district has determined that the conservation system is in 
conformity with technical standards set forth in the SCS technical guide 
for such district is exempt.
    (6) Highly erodible land not within a conservation district but 
under a conservation system determined by SCS to be adequate for the 
production of a specific agricultural commodity or commodities on any 
highly

[[Page 81]]

erodible land is exempt for the production of that commodity or 
commodities.
    (7) Highly erodible land that is planted in reliance on a SCS 
determination that such land was not highly erodible is exempt. The 
exemption is lost, however, for any agricultural commodity planted after 
SCS determines that such land is highly erodible land.
    (8) Highly erodible land planted or to be planted in an agricultural 
commodity that was planted in alfalfa during each of the 1981 and 1985 
crop years in a crop rotation determined by SCS to be adequate for the 
protection of highly erodible land is exempt until June 1, 1988, from 
the requirement that the highly erodible land be planted in compliance 
with an approved conservation system.
    c. Exemptions from wetland conservation. The following exemptions 
exist from the restrictions on wetland conservation. Whenever the County 
Supervisor is required to consult with another USDA agency in applying 
these exemptions, the County Supervisor's review of a properly completed 
Form SCS-CPA-26 will be considered adequate consultation if the needed 
information is presented on the form and no questions are raised by the 
FmHA or its successor agency under Public Law 103-354 review.
    (1) A converted wetland is exempt if the conversion of such wetland 
was completed or commenced before December 23, 1985. The County 
Supervisor will consult with ASCS whose determination as to when 
conversion of a wetland commenced will be final for FmHA or its 
successor agency under Public Law 103-354 purposes. Additionally, the 
County Supervisor will request evidence of ASCS's consultation with the 
U.S. Fish and Wildlife Service on each commenced determination reached 
for an FmHA or its successor agency under Public Law 103-354 applicant 
or borrower. SCS will determine if a wetland is a converted wetland 
using the criteria contained in Sec. 12.32 of subpart C of part 12 of 
subtitle A of title 7 (attachment 1 of this exhibit which is available 
in any FmHA or its successor agency under Public Law 103-354 office). 
Under these criteria, however, a converted wetland determined to be 
exempt may not always remain exempt. The criteria include the provision 
that if crop production is abandoned on a converted wetland and the land 
again meets the wetland criteria, that land has reverted to a wetland 
and is no longer exempt. For purposes of FmHA or its successor agency 
under Public Law 103-354 inventory farm properties, crop production will 
be considered to have been abandoned on a converted wetland either at 
the earlier of the time the former owner so abandoned crop production or 
at the time FmHA or its successor agency under Public Law 103-354 caused 
crop production to be abandoned after the property came into FmHA or its 
successor agency under Public Law 103-354's inventory. While in its 
inventory FmHA or its successor agency under Public Law 103-354 will not 
lease the converted wetland for the purpose of producing an agricultural 
commodity. Whether or not the wetland criteria are met on the abandoned 
land will be determined by SCS immediately before FmHA or its successor 
agency under Public Law 103-354's lease or sale of the property.
    (2) The following are not considered to be a wetland under the 
provisions of this exhibit: (a) An artificial lake, pond, or wetland 
created by excavating or diking non-wetland to collect and retain water 
for purposes such as water for livestock, fish production, irrigation 
(including subsurface irrigation), a settling basin, colling, rice 
production, or flood control; (b) a wet area created by a water delivery 
system, irrigation, irrigation system, or application of water for 
irrigation and (c) lands in Alaska identified by SCS as having a 
predominance of permafrost soils. The County Supervisor will consult 
with SCS regarding the application of this exemption as well as the 
remaining exemptions in this paragraph and the SCS position will be 
controlling.
    (3) A wetland is exempt if the production of an agricultural 
commodity is possible (a) as a result of a natural condition, such as 
drought, and (b) without action by the producer that destroys a natural 
wetland characteristic. This exemption is lost whenever condition (a) or 
(b) no longer exists.
    (4) Production of an agricultural commodity on a converted wetland 
is exempt is SCS determines that the effect of such action, individually 
and in connection with all other similar actions authorized in the area 
by USDA agencies, on the hydrological and biological aspect of wetland 
is minimal.
    12. Appeals. Any applicant or borrower that is directly and 
adversely affected by an administrative decision made by FmHA or its 
successor agency under Public Law 103-354 under this exhibit may appeal 
that decision under the provisions of subpart B of part 1900 of this 
chapter (see especially Sec. 1900.55).
    13. Working with other USDA agencies.
    a. Coordination. FmHA or its successor agency under Public Law 103-
354 State Directors will consult with SCS State Conservationists and 
ASCS State Executive Directors to assess and coordinate loan processing 
workloads in order to minimize delays in responding to FmHA or its 
successor agency under Public Law 103-354 requests for site information 
or for the application of the exemptions contained in paragraph 11 of 
this exhibit. State Directors will ensure that FmHA or its successor 
agency under Public Law 103-354 field staff understand and can use the 
ASCS farm records system and will request ASCS training as needed. Also, 
management systems for sharing the information discussed in subparagraph 
b of this paragraph will be established.

[[Page 82]]

    b. Information exchange. FmHA or its successor agency under Public 
Law 103-354 State Directors will develop with ASCS State Executive 
Directors a system for FmHA or its successor agency under Public Law 
103-354 to routinely receive notification whenever a violation has 
occurred under ASCS's wetland and highly erodible land conservation 
restrictions. FmHA or its successor agency under Public Law 103-354 
State Directors will in turn provide to any interested USDA agency the 
following information:
    (1) Upon request, copies of site information or exemption decision 
made by SCS for FmHA or its successor agency under Public Law 103-354 
application reviews;
    (2) Upon request, copies of exemption decisions made by FmHA or its 
successor agency under Public Law 103-354; and
    (3) Notice of any violations of the provisions of this exhibit 
identified by FmHA or its successor agency under Public Law 103-354 as a 
result of the monitoring activities identified in paragraph 10 of this 
exhibit.
    14. Relationship of the requirements of this exhibit to the wetland 
protection requirements of exhibit C of this subpart. The provisions of 
this exhibit determine (a) whether or not an applicant for a Farmer 
Program insured or guaranteed loan or a loan to an Indian Tribe or 
Tribal Corporation is eligible to be considered for such a loan, and (b) 
whether or not a recipient of such a loan is properly using the loan 
proceeds with respect to the requirements of this exhibit. On the other 
hand, the requirements in exhibit C of this subpart regarding wetland 
protection cover all FmHA or its successor agency under Public Law 103-
354 loan and grant programs and address not questions of eligibility but 
the potential environmental impacts of a proposed action on a wetland 
and alternatives to the action. Consequently, those applications covered 
by this exhibit and which may be approved under this exhibit must also 
meet the requirements of exhibit C of this subpart. For example, an 
application covered by this exhibit (M) that proposed to convert a 
wetland into a tree farm would be exempt from this exhibit (M) because 
trees are not an agricultural commodity, i.e., there is no conversion in 
order to produce an agricultural commodity. However, before FmHA or its 
successor agency under Public Law 103-354 could make the loan, the 
requirements of exhibit C of this subpart would have to be met to 
include an FmHA or its successor agency under Public Law 103-354 finding 
that no practicable alternative exists to the conversion of the wetland. 
In summary, any proposed wetland conversion that is not prohibited by 
this exhibit (M) must next meet the requirements of exhibit C of this 
subpart before FmHA or its successor agency under Public Law 103-354 
approval of the requested financial assistance could be provided.

[53 FR 7333, Mar. 8, 1988, as amended at 53 FR 14778, April 26, 1988]

Subpart H [Reserved]



      Subpart I_Truth in Lending_Real Estate Settlement Procedures

    Source: 48 FR 4, Jan. 3, 1983, unless otherwise noted.



Sec. 1940.401  Truth in lending.

    (a) General. This section provides instructions for compliance with 
the Truth in Lending Act, as implemented by Regulation Z of the Federal 
Reserve System, to assure that individual Rural Housing (RH) applicants 
are informed of:
    (1) The cost and terms of credit, and
    (2) Their right to cancel certain credit transactions resulting in a 
lien or mortgage on their home.
    (b) Scope. This section applies to all individuals who apply for 
loans, assumptions, or credit sales (hereafter described as 
transactions) for household purposes.
    (1) Special rules for the right to cancel transactions not for 
purchase, acquisition or initial construction of a home broaden the 
scope of this section to include individuals who have an ownership 
interest in, and reside in as a principal dwelling, property which will 
be security for a mortgage, even though they may not execute the 
promissory note or assumption agreement. Such persons have the right to 
receive credit disclosures and the notice of the right to cancel and may 
cancel the transaction.
    (2) This section does not apply to:
    (i) Applicants who are corporations, associations, cooperatives, 
public bodies, partnerships, or other organizations;
    (ii) Individual applicants for multiple family housing transactions 
(rural rental or labor housing), unless for a two-family dwelling in 
which the applicants will reside, and other business and commercial type 
loans; or
    (iii) Applicants involved in credit transactions primarily for 
agricultural purposes.

[[Page 83]]

    (c) Disclosure of the cost and terms of credit--(1) Form and 
content. Form FmHA or its successor agency under Public Law 103-354 
1940-41, ``Truth in Lending Disclosure Statement,'' will be used to 
provide the following required disclosures:
    (i) Annual percentage rate;
    (ii) Finance charge;
    (iii) Amount financed;
    (iv) Total of payments;
    (v) Total sale price (required for credit sales only);
    (vi) Payment schedule;
    (vii) A separate itemization of the amount financed, if the 
applicant requests it. Normally this required disclosure will have been 
met in transactions subject to the Real Estate Settlement Procedures Act 
(RESPA) by providing the applicant with Form FmHA or its successor 
agency under Public Law 103-354 440-58, ``Estimate of Settlement 
Costs'';
    (viii) The lender's identity;
    (ix) Prepayment or late payment penalties;
    (x) Security interest;
    (xi) Insurance requirements;
    (xii) Assumption policy; and
    (xiii) Referral to other loan documents.
    (2) Timing, use of estimates and required redisclosure. (i) In 
transactions for the purchase or construction of a home subject to 
RESPA, Form FmHA or its successor agency under Public Law 103-354 1940-
41, completed using ``good faith'' estimates based on the best 
information available, will be delivered or placed in the mail to the 
applicant no later than three (3) business days after receipt of a 
written application in the County Office.
    (ii) In transactions not subject to RESPA, such as RH Section 502 
transactions for repairs or refinancing or RH Section 504 transactions, 
Form FmHA or its successor agency under Public Law 103-354 1940-41, 
completed using the actual terms of the transaction, will be delivered 
to each applicant (and in transactions which are subject to 
cancellation, each non-applicant with the right to cancel) at the time 
of loan approval.
    (iii) In the event of a change in rates and terms between the time 
of initial disclosure and closing, whereby the annual percentage rate 
varies by more than one-eighth of one percent, redisclosure must be 
made. This may be done by entering the changes on all copies of the 
initial Form FmHA or its successor agency under Public Law 103-354 1940-
41, or by preparing a new Form FmHA or its successor agency under Public 
Law 103-354 1940-41. When required, redisclosure may be made at the time 
the transaction is approved or at the time of the change, but the form 
must be delivered to the applicant before the signing of the promissory 
note or assumption agreement.
    (3) Special instructions for assumption, reamortization, refinancing 
and multiple transactions. (i) Assumptions, within the scope of 
paragraph (b) of this section, at new rates and terms or of existing 
obligations which were for purchase, acquisition or initial construction 
of a residence, require new credit disclosure before the assumption 
occurs. Since assumptions are not subject to RESPA, early disclosure is 
not required.
    (ii) Reamortization, as described in 7 CFR part 3550, when the 
borrower is in default or delinquent, does not require new credit 
disclosure. In all other cases reamortization requires new credit 
disclosure.
    (iii) Refinancing of debts in accordance with 7 CFR part 3550, 
though not subject to RESPA or early disclosure, does require credit 
disclosure at the time the transaction is approved.
    (iv) Multiple transactions.
    (A) When a subsequent loan is financed along with another 
transaction and both transactions require credit disclosure, a separate 
Form FmHA or its successor agency under Public Law 103-354 1940-41 will 
be prepared for each transaction.
    (B) Transactions with multiple advances will be treated as one 
transaction for the purpose of credit disclosure, in accordance with the 
Forms Manual Insert (FMI) for Form FmHA or its successor agency under 
Public Law 103-354 1940-41.
    (d) Notice of the right to cancel. The right to cancel applies only 
to transactions within the scope of paragraph (b) of this section, which 
are not for purchase, acquisition or initial construction of and which 
result in a

[[Page 84]]

mortgage on an individual's principal residence, such as RH Section 502 
transactions for refinancing, repairs or rehabilitation or RH Section 
504 transactions.
    (1) Form and Content. Form FmHA or its successor agency under Public 
Law 103-354 1940-43, ``Notice of Right to Cancel'', will be used to 
notify individuals of their right to cancel those transactions, within 
the scope of paragraphs (b) and (d) of this section, which result in a 
mortgage on their principal residence except when the transaction is for 
its purchase or initial construction. This notice will identify the 
transaction and disclose the following:
    (i) The acquisition of a security interest in the individual's 
principal residence.
    (ii) The individual's right to cancel the transaction.
    (iii) How to exercise the right to cancel the transaction, with a 
form for that purpose.
    (iv) The effects of cancellation.
    (v) The date the cancellation period expires.
    (2) Timing. (i) Two copies of Form FmHA or its successor agency 
under Public Law 103-354 1940-43, and one copy of Form FmHA or its 
successor agency under Public Law 103-354 1940-41, in accordance with 
the FMI's, will be given to each individual entitled to cancel, not 
later than loan closing.
    (ii) Any entitled individual may cancel the transaction until 
midnight of the third business day following whichever of the following 
events occurs last:
    (A) The date the transaction is closed.
    (B) The date Truth in Lending credit disclosures were made.
    (C) The date notice of the right to cancel was received.
    (3) Disbursement of funds. In a transaction subject to cancellation 
funds will not be disbursed, other than to a designated attorney or 
title insurance company preparatory to closing, until:
    (i) Forms FmHA 1940-43 have been given to the appropriate 
individuals,
    (ii) The three-day cancellation period has expired, and
    (iii) The loan approval official is reasonably assured that the 
transaction has not been cancelled. This assurance may be obtained by:
    (A) Waiting a reasonable period of time after the expiration of the 
cancellation period to allow for the delivery of a mailed notice, or
    (B) Obtaining a written statement from each individual entitled to 
cancel that the right has not been exercised.
    (iv) This delay in disbursing funds may be waived in cases of a 
bonafide personal financial emergency, which must be met within the 
cancellation period, when the individual submits a signed and dated 
statement describing the nature of the emergency and waiving the right 
to cancel. Such a statement must be signed by all individuals entitled 
to cancel.
    (4) Effects of cancellation. (i) When an individual cancels a 
transaction, the mortgage securing the transaction becomes void and the 
borrower will not be liable for any amount, including any finance 
charge.
    (ii) Within twenty (20) calendar days after receipt of a notice of 
cancellation the loan approval official will:
    (A) Notify all interested parties of the cancellation;
    (B) Return, and/or request the return of any money or property given 
to anyone in connection with the transaction; and
    (C) Take the necessary action to terminate the mortgage.
    (iii) Once evidence has been presented to the borrower that the 
mortgage has been terminated, the borrower must return any funds 
advanced by FmHA or its successor agency under Public Law 103-354 to the 
FmHA or its successor agency under Public Law 103-354 County Office or 
surrender any property at his/her residence within twenty (20) calendar 
days.
    (e) Advertisements. An advertisement is defined as a commercial 
message in any medium that promotes, directly or indirectly, a credit 
transaction. Advertisements for credit sales of Government inventory 
property, within the scope of paragraph (b) of this section, are subject 
to the following requirements.
    (1) If an advertisement states specific credit terms, it shall state 
only those terms that actually are or will be arranged or offered.

[[Page 85]]

    (2) If an advertisement states a rate of finance charge, it shall 
state the rate as an annual percentage rate, using that term.
    (3) Terms requiring additional disclosures.
    (i) If any of the following terms is set forth in an advertisement:
    (A) The amount or percentage of any down payment,
    (B) The number of payments or period of repayment,
    (C) The amount of any payment, or
    (D) The amount of any finance charge,
    (ii) The advertisement must also state:
    (A) The amount or percentage of down payment,
    (B) The terms of repayment, and
    (C) The annual percentage rate, using that term.

[48 FR 4, Jan. 3, 1983, as amended at 60 FR 55123, Oct. 27, 1995; 67 FR 
78328, Dec. 24, 2002]



Sec. Sec. 1940.402-1940.405  [Reserved]



Sec. 1940.406  Real estate settlement procedures.

    (a) General. This section provides the instructions for compliance 
with the Real Estate Settlement Procedures Act (RESPA), as amended, and 
Regulation X of the Department of Housing and Urban Development.
    (b) Scope. (1) This section applies to loans and credit sales, 
including Section 502 Rural Housing, 1-4 family Rural Rental Housing, 1-
4 family Labor Housing, and Farm Ownership involving tracts of less than 
25 acres, whether made to an individual, corporation, partnership, 
association or other entity, which meet the following requirements:
    (i) The proceeds of the loan or the credit extended are used in 
whole or in part to finance the purchase and transfer of title of the 
property to be mortgaged by the borrower, and
    (ii) The loan or credit sale is secured by a first lien covering 
real estate on which is located a structure designed principally for the 
occupancy of from 1-4 families, or on which a structure designed 
principally for the occupancy of from 1-4 families is to be constructed 
using proceeds of the loan.
    (2) Exempt transactions include:
    (i) Loans for repairs, improvements, or refinancing if the proceeds 
are not used to finance the purchase of the property.
    (ii) Loans to finance the construction of a 1-4 family structure if 
the tract of land is already owned by the applicant/borrower.
    (iii) Assumptions or transfers.
    (c) Action required. (1) The information booklet entitled 
``Settlement Costs'' will either be given to the applicant at the time 
the completed application is received, or mailed to the applicant no 
later than three (3) business days after receipt of the application in 
the County Office.
    (i) Form FmHA or its successor agency under Public Law 103-354 440-
58, ``Estimate of Settlement Costs,'' is to be used to provide a ``good 
faith'' statement of estimated closing costs. Form FmHA or its successor 
agency under Public Law 103-354 440-58 will be completed by the County 
Supervisor and mailed or delivered to the applicant with the Settlement 
Costs booklet. Costs will vary between geographic areas; therefore, 
information supplied on this form must be based upon (A) the County 
Supervisor's best estimate of charges the borrower will pay for each 
service in connection with the transaction, or (B) a range of charges at 
which such service is available to the borrower from all providers in 
the area.
    (ii) Form FmHA or its successor agency under Public Law 103-354 440-
58 does not replace Truth in Lending forms. Appropriate forms listed in 
Sec. 1940.401 will be used for Truth in Lending purposes.
    (2) Form FmHA or its successor agency under Public Law 103-354 1940-
59, ``Settlement Statement,'' will be completed as indicated in the form 
and FMI by the designated attorney or title company for all transactions 
described in paragraph (b) of this section. The purpose of this form is 
to provide a uniform settlement statement prescribed by RESPA.
    (i) During the business day immediately preceding the date of 
settlement, the closing agent, if requested by

[[Page 86]]

the applicant, must permit the applicant to inspect the settlement 
statement, completed for those items which are then known to the closing 
agent.
    (ii) A copy will be given to both the borrower and seller at the 
time of closing or settlement or will be mailed as soon as practicable 
if the borrower or seller are not present at closing.

Subparts J-K [Reserved]



  Subpart L_Methodology and Formulas for Allocation of Loan and Grant 
                              Program Funds

    Source: 50 FR 24180, June 10, 1985, unless otherwise noted.



Sec. 1940.551  Purpose and general policy.

    (a) The purpose of this subpart is to set forth the methodology and 
formulas by which the Administrator of the Farmers Home Administration 
(FmHA) or its successor agency under Public Law 103-354 allocates 
program funds to the States. (The term State means any of the States of 
the United States, the Commonwealth of Puerto Rico, any territory or 
possession of the United States, or the Western Pacific Areas.)
    (b) The formulas in this subpart are used to allocate program loan 
and grant funds to State Offices so that the overall mission of the 
Agency can be carried out. Considerations used when developing the 
formulas include enabling legislation, congressional direction, and 
administration policies. Allocation formulas ensure that program 
resources are available on an equal basis to all eligible individuals 
and organizations.
    (c) The actual amounts of funds, as computed by the methodology and 
formulas contained herein, allocated to a State for a funding period are 
distributed to each State Office by an exhibit to this subpart. The 
exhibit is available for review in any FmHA or its successor agency 
under Public Law 103-354 State Office. The exhibit also contains 
clarifications of allocation policies and provides further guidance to 
the State Directors on any suballocation within the State. FmHA or its 
successor agency under Public Law 103-354 will publish a Notice of 
Availability of Rural Housing funds in the Federal Register each year.

[49 FR 3727, Jan. 30, 1984, as amended at 53 FR 26229, July 12, 1988; 55 
FR 29560, July 20, 1990; 56 FR 66960, Dec. 27, 1991]



Sec. 1940.552  Definitions.

    (a) Amount available for allocation. Funds appropriated or otherwise 
made availiable to the Agency for use in authorized programs. On 
occasion, the allocation of funds to States may not be practical for a 
particular program due to funding or administrative constraints. In 
these cases, funds will be controlled by the National Office.
    (b) Basic formula criteria, data source and weight. Basic formulas 
are used to calculate a basic state factor as a part of the methodology 
for allocating funds to the States. The formulas take a number of 
criteria that reflect the funding needs for a particular program and 
through a normalization and weighting process for each of the criteria 
calculate the basic State Factor (SF). The data sources used for each 
criteria is believed to be the most current and reliable information 
that adequately quantifies the criterion. The weight, expressed as a 
percentage, gives a relative value to the importance of each of the 
criteria.
    (c) Basic formula allocation. The result of multiplying the amount 
available for allocation less the total of any amounts held in reserve 
or distributed by base or administrative allocation times the basic 
State factor for each State. The basic formula allocation (BFA) for an 
individual State is equal to:

BFA=(Amount available for allocation-NO reserve-Total base and 
          administrative allocations)xSF.

    (d) Transition formula. A formula based on a proportional amount of 
previous year allocation used to maintain program continuity by 
preventing large fluctuations in individual State allocations. The 
transition formula limits allocation shifts to any particular State in 
the event of changes from year to year of the basic formula, the basic 
criteria, or the weights given the criteria. The transition formula 
first checks whether the current year's

[[Page 87]]

basic formula allocation is within the transition range (+ or -
percentage points of the proportional amount of the previous year's 
BFA).
[GRAPHIC] [TIFF OMITTED] TC14NO91.000


If the current year's State BFA is not within this transition range, the 
State formula allocation is changed to the amount of the transition 
range limit closest to the BFA amount. After having performed this 
transition adjustment for each State, the sum of the funds allocated to 
all States will differ from the amount of funds available for BFA. This 
difference, whether a positive or negative amount, is distributed to all 
States receiving a formula allocation by multiplying the difference by 
the SF. The end result is the transition formula allocation. The 
transition range will not exceed 40% (20%), but 
when a smaller range is used it will be stated in the individual program 
section.
    (e) Base allocation. An amount that may be allocated to each State 
dependent upon the particular program to provide the opportunity for 
funding at least one typical loan or grant in each FmHA or its successor 
agency under Public Law 103-354 State, District, or County Office. The 
amount of the base allocation may be determined by criteria other than 
that used in the basic formula allocation such as agency historic data.
    (f) Administrative allocations. Allocations made by the 
Administrator in cases where basic formula criteria information is not 
available. This form of allocation may be used when the Administrator 
determines the program objectives cannot be adequately met with a 
formula allocation.
    (g) Reserve. An amount retained under the National Office control 
for each loan and grant program to provide flexibility in meeting 
situations of unexpected or justifiable need occurring during the fiscal 
year. The Administrator may make distributions from this reserve to any 
State when it determined necessary to meet a program need or agency 
objective. The Administrator may retain additional amounts to fund 
authorized demonstration programs. When such demonstration programs 
exist, the information is outlined in exhibit A of this subpart 
(available in any FmFA State Office).
    (h) Pooling of funds. A technique used to ensure that available 
funds are used in an effective, timely and efficient manner. At the time 
of pooling those funds within a State's allocation for the fiscal year 
or portion of the fiscal year, depending on the type of pooling, that 
have not been obligatedf by the State are placed in the National Office 
reserve. The Administrator will establish the pooling dates for each 
affected program.
    (1) Mid-year: This pooling addresses the need to partially 
redistribute funds based on use/demand. Mid-year pooling occurs near the 
midpoint of the fiscal year.
    (2) Year-end: This pooling is used to ensure maximum use of program 
funds on a national basis. Year-end pooling usually occurs near the 
first of August.
    (3) Emergency: The Administrator may pool funds at any time that it 
is determined the conditions upon which the initial allocation was based 
have changed to such a degree that it is necessary to pool funds in 
order to efficiently carry out the Agency mission.
    (i) Availability of the allocation. Program funds are made available 
to the Agency on a quarterly basis. In the high demand programs, it is 
necessary that specific instructions by given to the State Offices 
regarding the amount which is available for obligation during each 
quarter.

[[Page 88]]

    (j) Suballocation by the State Director. Dependent upon the 
individual program for which funds are being allocated, the State 
Director may be directed or given the option of suballocating the State 
allocation to District or County Offices. When suballocating the State 
Director may retain a portion of the funds in a State Office reserve to 
provide flexibility in situations of unexpected or justified need. When 
performing a suballocation the State Director will use the same formula, 
criteria and weights as used by the National Office.
    (k) Other documentation. Additional instructions given to field 
offices regarding allocations.

[49 FR 3727, Jan. 30, 1984, as amended at 53 FR 26229, July 12, 1988]



Sec. Sec. 1940.553-1940.554  [Reserved]



Sec. 1940.555  Insured Farm Operating loan funds.

    (a) Amount available for allocations. See Sec. 1940.552(a) of this 
subpart.
    (b) Basic formula criteria, data source and weight. See Sec. 
1940.552(b) of this subpart. The criteria, data source and weight are:
    (1) A = Farm operators with sales of $2,500 to $39,999 and less than 
200 days work off farm. Source: U.S. Census of Agriculture. 15%
    (2) B = Farm operators with sales of $40,000 or more and less than 
200 days work off farm. Source: U.S. Census of Agriculture. 35%
    (3) C = Tenant farm operators. Source: U.S. Census of Agriculture. 
20%
    (4) D = Three year average net farm income. Source: USDA Economic 
Research Service. 15% This criterion is the inverse of the division of 
the State mean net farm income by the National mean net farm income. 
This inverse is used because the need for assistance is inversely 
proportional to the level of net income. Limits of .5 and 1.5 are placed 
in this result to limit the influence on the allocation.
    (5) E=Value of farm nonreal estate assets. Source: USDA Economic 
Research Service. 15%


The basic allocation formula is a two-step process. In step one, each 
criterion is converted to that State's percentage of a National total, 
multiplied by the weighting factor and summed to arrive at a State 
Factor: Aa + Bb + Cc + Dd +Ee = STATE FACTOR where A, B, C, D, and E 
represent selected Criteria expressed as a State Percentage of the U.S. 
total and a, b, c, d, and e represent the Weight expressed as a 
percentage, given to the selected criterion. The weight assigned each 
criterion is constant for all States. The State Factor represents the 
percentage of the total allocation by basic formulas that a State is to 
receive and is the sum of the weighted criteria percentage for each 
State. The basic formula allocation is the final step.
    (c) Basic formula allocation. See Sec. 1940.552(c) of this subpart.
    (d) Transition formula. See Sec. 1940.552(d) of this subpart. Not 
used.
    (e) Base allocation. See Sec. 1940.552(e) of this subpart. 
Jurisdictions receiving administrative allocations do not receive base 
allocations.
    (f) Administrative allocations. See Sec. 1940.552(f) of this 
subpart. Jurisdictions participating in the formula allocation process 
do not receive administrative allocations.
    (g) Reserve. See Sec. 1940.552(g) of this subpart.
    (h) Pooling of funds. See Sec. 1940.552(h) of this subpart.
    (i) Availability of the allocation. See Sec. 1940.552(i) of this 
subpart.
    (j) Subobligation by the State Director. See Sec. 1940.552(j) of 
this subpart. Suballocations by the State Director are optional.
    (k) Other documentation. See Sec. 1940.552(k) of this subpart.



Sec. 1940.556  Guaranteed Farm Operating loan funds.

    (a) Amount available for allocations. See Sec. 1940.552(a) of this 
subpart.
    (b) Basic formula criteria, data source and weight. See Sec. 
1940.552(b) of this subpart. The criteria, data source and weight are:
    (1) A = Farm operators with sales of $2,500 to $39,999 and less than 
200 days work off farm. Source: U.S. Census of Agriculture. 15%
    (2) B = Farm operators with sales of $40,000 or more and less than 
200 days work off farm. Source: U.S. Census of Agriculture. 35%

[[Page 89]]

    (3) C = Tenant farm operators. Source: U.S. Census of Agriculture. 
20%
    (4) D = Three year average net farm income. Source: USDA Economic 
Research Service. 15%. This criterion is the inverse of the division of 
the State mean net farm income by the National mean net farm income. 
This inverse is used because the need for assistance is inversely 
proportional to the level of net income. Limits of .5 and 1.5 are placed 
in this result to limit the influence on the allocation.
    (5) E = Value of farm nonreal estate assets. Source: USDA Economic 
Research Service. 15%

The basic allocation formula is a two-step process. In step one, each 
criterion is converted to the State's percentage of a National total, 
multiplied by the weighting factor and summed to arrive at a State 
Factor: Aa + Bb + Cc + Dd + Ee = State Factor Where A, B, C, D, and E 
represent selected Criteria expressed as a State Percentage of the U.S. 
total and a, b, c, d, and e represent Weight expressed as a percentage, 
given to the selected criterion. The weight assigned each criterion is 
constant for all States. The State Factor represents the percentage of 
the total allocation by basic formulas that a State is to receive and is 
the sum of the weighted criteria percentage for each State. The basic 
formula allocation is the final step.
    (c) Basic formula allocation. See Sec. 1940.552(c) of this subpart.
    (d) Transition formula. See Sec. 1940.552(d) of this subpart. Not 
used.
    (e) Base allocation. See Sec. 1940.552(e) of this subpart. 
Jurisdictions receiving administrative allocations do not receive base 
allocations.
    (f) Administrative allocations. See Sec. 1940.552(f) of this 
subpart. Jurisdictions participating in the formula allocation process 
do not receive administrative allocations.
    (g) Reserve. See Sec. 1940.552(g) of this subpart.
    (h) Pooling of funds. See Sec. 1940.552(h) of this subpart.
    (i) Availability of the allocation. See Sec. 1940.552(i) of this 
subpart.
    (j) Suballocation by the State Director. See Sec. 1940.552(j) of 
this subpart. Suballocations by the State Director are optional.
    (k) Other Documentation. See Sec. 1940.552(k) of this subpart.



Sec. 1940.557  Insured Farm Ownership loan funds.

    (a) Amount available for allocations. See Sec. 1940.552(a) of this 
subpart.
    (b) Basic formula criteria, data source and weight. See Sec. 
1940.552(b) of this subpart. The criteria, data source and weight are:
    (1) A = Farm operators with sales of $2,500 to $39,999 and less than 
200 days work off farm. Source: U.S. Census of Agriculture. 15%
    (2) B = Farm operators with sales of $40,000 or more and less than 
200 days work off farm. Source: U.S. Census of Agriculture. 35%
    (3) C = Tenant farm operations. Source: U.S. Census of Agriculture. 
25%
    (4) D = Three-year average net farm income. Source: USDA Economic 
Research Service. 15%. This criterion is the inverse of the division of 
the State mean net farm income by the National mean net farm income. 
This inverse is used because the need for assistance is inversely 
proportional to the level of net income. Limits of .5 and 1.5 are placed 
in this result to limit the influence of the allocation.
    (5) E = Value of farm real estate assets. Source: USDA Economic 
Research Service. 10%.


The basic allocation formula is a two-step process. In step one, each 
criterion is converted to that State's percentage of a National total, 
multiplied by the weighting factor and summed to arrive at a State 
Factor: Aa + Bb + Cc + Dd +Ee = State Factor where A, B, C, D, and E 
represent selected Criteria expressed as a State Percentage of the U.S. 
total and a, b, c, d, and e represent Weight expressed as a percentage, 
given to the selected criterion. The weight assigned each criterion is 
constant for all States. The State Factor represents the percentage of 
the total allocation by basic formulas that a State is to receive and is 
the sum of the weighted criteria percentage for each State. The basic 
formula allocation is the final step.

[[Page 90]]

    (c) Basic formula allocation. See Sec. 1940.552(c) of this subpart.
    (d) Transition formula. See Sec. 1940.552(d) of this subpart. The 
transition range is plus or minus 15%.
    (e) Base allocation. See Sec. 1940.552(e) of this subpart. 
Jurisdictions receiving administrative allocations do not receive base 
allocations.
    (f) Administrative allocations. See Sec. 1940.552(f) of this 
subpart. Jurisdictions participating in the formula allocation process 
do not receive administrative allocations.
    (g) Reserve. See Sec. 1940.552(g) of this subpart.
    (h) Pooling of funds. See Sec. 1940.522(h) of this subpart.
    (i) Availability of the allocation. A portion of the allocation will 
be targeted to the State's rural socially disadvantaged population. The 
amount of the targeted funds for each state is equal to the State's 
rural socially disadvantaged population divided by the State's total 
rural population multiplied by the State's total fiscal year Insured 
Farm Ownership allocation. Source of data is U.S. Census 1980.
    (j) Suballocation by the State Director. See Sec. 1940.552(j) of 
this subpart. Suballocations by the State Director are optional.
    (k) Other documentation. See Sec. 1940.552(k) of this subpart.

[49 FR 3727, Jan. 30, 1984, as amended at 53 FR 26229, July 12, 1988]



Sec. 1940.558  Guaranteed Farm Ownership loan funds.

    (a) Amount available for allocation. See Sec. 1940.552(a) of this 
subpart.
    (b) Basic formula criteria, data source and weight. See Sec. 
1940.552(b) of this subpart. The criteria, data source and weight are:
    (1) A = Farm operators with sales of $2,500 to $39,999 and less than 
200 days work off farm. Source: U.S. Census of Agriculture. 15%
    (2) B = Farm operators with sales of $40,000 or more and less than 
200 days work off farm. Source: U.S. Census of Agriculture. 35%
    (3) C = Tenant farm operations. Source: U.S. Census of Agriculture. 
25%
    (4) D = Three year average net farm income. Source: USDA Economic 
Research Service. 15%. This criterion is the inverse of the division of 
the State mean net farm income by the National mean net farm income. 
This inverse is used because the need for assistance is inversely 
proportional to the level of net income. Limits of .5 and 1.5 are placed 
in this result to limit the influence on the allocation.
    (5) E = Value of farm real estate assets. Source: USDA Economic 
Research Service. 10%


The basic allocation formula is a two-step process. In step one, each 
criterion is converted to that State's percentage of a National total, 
multiplied by the weighting factor and summed to arrive at a State 
Factor: Aa + Bb + Cc +Dd + Ee = State Factor where A, B, C, D, and E 
represent selected Criteria expressed as a State Percentage of the U.S. 
total and a, b, c, d, and e represent the Weight expressed as a 
percentage, given to the selected criterion. The weight assigned each 
criterion is constant for all States. The State Factor represents the 
percentage of the total allocation by basic formulas that a State is to 
receive and is the sum of the weighted criteria percentage for each 
State. The basic formula allocation is the final step.
    (c) Basic formula allocation. See Sec. 1940.552(c) of this subpart.
    (d) Transition formula. See Sec. 1940.552(d) of this subpart. Not 
used.
    (e) Base allocation. See Sec. 1940.552(e) of this subpart. 
Jurisdictions receiving administrative allocations do not receive base 
allocations.
    (f) Administrative allocations: See Sec. 1940.552(f) of this 
subpart. Jurisdictions participating in the formula allocation process 
do not have administrative allocations.
    (g) Reserve. See Sec. 1940.552(g) of this subpart.
    (h) Pooling of funds. See Sec. 1940.552(h) of this subpart.
    (i) Availability of the allocation. See Sec. 1940.552(i) of this 
subpart.
    (j) Suballocation by the State Director. See Sec. 1940.552(j) of 
this subpart. Suballocations by the State Director are optional.
    (k) Other documentation. See Sec. 1940.552(k) of this subpart.

[[Page 91]]



Sec. 1940.559  Farmer Programs and Indian Land Acquisition appropriations 
not allocated by State.

    (a) Emergency Disaster. State allocations are not made since it is 
impossible to predict occurrences. Obligating documents may be submitted 
to the Finance Office as loans are approved in designated areas. This 
type loan is available only in areas designated as disaster areas. 
Designations may be by a single county, multiple of counties or areas, 
depending upon scope and severity.
    (b) Soil and Water. Funds are not allocated to States. Program size 
does not permit equitable distribution. Obligation of funds are on a 
first-come, first-served basis, subject to availability.

[49 FR 3727, Jan. 30, 1984, as amended at 53 FR 26229, July 12, 1988]



Sec. 1940.560  Guarantee Rural Rental Housing Program.

    When funding levels are under $100,000,000, all funds will be held 
in a National Office reserve and made available administratively in 
accordance with the Notice of Funding Availability (NOFA) and program 
regulations. When program levels are sufficient for a nationwide 
program, funds are allocated based upon the following criteria and 
weights.
    (a) Amount available for allocations. See Sec. 1940.552(a) of this 
subpart.
    (b) Basic formula criteria, data source and weight. See Sec. 
1940.552(b) of this subpart .
    Each factor will receive a weight respectively of 40%, 40% and 20%. 
The criteria used in the basic formula are:
    (1) State's percentage of National rural population,
    (2) State's percentage of the National number of rural households 
between 50 and 115 percent of the area median income, and
    (3) State's percentage of National average cost per unit. Data 
source for the first two of these criterion are based on the latest 
census data available. The third criterion is based on the cost per unit 
data using the applicable maximum per unit dollar amount limitations 
under section 207(c) of the National Housing Act, which can be obtained 
from the Department of Housing and Urban Development. The percentage 
representing each criterion is multiplied by the weight assigned and 
totaled to arrive at a State factor.

State Factor = (criterion No. 1 x weight of 40%)+ (criterion No. 1 x 
    weight of 40%)+ (criterion No. 1 x weight of 20%)

    (c) Basic formula allocation. See Sec. 1940.552(c).
    (d) Transition formula. See Sec. 1940.552(d).
    (e) Base allocation. See Sec. 1940.552(e). Jurisdictions receiving 
administrative allocations do not receive base allocations.
    (f) Administrative allocations. See Sec. 1940.552(f). Jurisdictions 
receiving formula allocations do not receive administrative allocations.
    (g) Reserve. See Sec. 1940.552(g).
    (h) Pooling of funds. See Sec. 1940.552(h).
    (i) Availability of the allocation. See Sec. 1940.552(i).
    (j) Suballocation by the State Director. See Sec. 1940.552(j).
    (k) Other documentation. Not applicable.

[63 FR 39458, July 22, 1998]



Sec. Sec. 1940.561-1940.562  [Reserved]



Sec. 1940.563  Section 502 non-subsidized guaranteed Rural Housing 
(RH) loans.

    (a) Amount available for allocations. See Sec. 1940.552(a) of this 
subpart.
    (b) Basic formula criteria, data source and weight. See Sec. 
1940.552 (b) of this subpart. The criteria used in the basic formula 
are:
    (1) State's percentage of the National number of rural occupied 
substandard units,
    (2) State's percentage of the National rural population in places of 
less than 2,500 population,
    (3) State's percentage of the national number of rural households 
between 80 and 100 percent of the area median income, and
    (4) State's percentage of the national number of rural renter 
households paying more than 35 percent of income for rent.

Data source for each of these criteria is based on the latest census 
data available. Each criterion is assigned a specific weight according 
to its relevance in determining need. The percentage

[[Page 92]]

representing each criterion is multiplied by the weight factor and 
summed to arrive at a basic State factor (SF) as follows:

SF = (criterion 1 x weight of 30%) + (criterion 2 x weight of 10%) + 
    (criterion 3 x weight of 30%) + (criterion 4 x weight of 30%)

    (c) Basic formula allocation. See Sec. 1940.552(c) of this subpart.
    (d) Transition formula. See Sec. 1940.552(d) of this subpart. The 
percentage range used for Section 502 guaranteed RH loans is plus or 
minus 15.
    (e) Base allocation. See Sec. 1940.552(e) of this subpart. 
Jurisdictions receiving administrative allocations do not receive base 
allocations.
    (f) Administrative allocations. See Sec. 1940.552(f) of this 
subpart. Jurisdictions receiving formula allocations do not receive 
administrative allocations.
    (g) Reserve. See Sec. 1940.552(g) of this subpart.
    (h) Pooling of funds. See Sec. 1940.552(h) of this subpart.
    (1) Mid-year: If used in a particular fiscal year, available funds 
unobligated as of the pooling date are pooled and redistributed based on 
the formula used to allocate funds initially.
    (2) Year-end: Pooled funds are placed in a National Office reserve 
and are available as determined administratively.
    (i) Availability of the allocation. See Sec. 1940.552(i) of this 
subpart.
    (j) Suballocation by the State Director. See Sec. 1940.552(j) of 
this subpart. Annually, the Administrator will advise State Director's 
whether or not suballocation within the State Office jurisdiction will 
be required for the guaranteed Housing program.
    (k) Other documentation. Not applicable.

[56 FR 10509, Mar. 13, 1991]



Sec. 1940.564  Section 502 subsidized guaranteed Rural Housing loans.

    (a) Amount available for allocations. See Sec. 1940.552(a) of this 
subpart.
    (b) Basic formula criteria, data source and weight. See Sec. 
1940.552(b) of this subpart. The criteria used in the basic formula are:
    (1) State's percentage of the National number of rural occupied 
substandard units,
    (2) State's percentage of the National rural population in places of 
less than 2,500 population,
    (3) State's percentage of the national number of rural households 
below 80 percent of the area median income, and
    (4) State's percentage of the national number of rural renter 
households paying more than 35 percent of income for rent.

Data source for each of these criteria is based on the latest census 
data available. Each criterion is assigned a specific weight according 
to its relevance in determining need. The percentage representing each 
criterion is multiplied by the weight factor and summed to arrive at a 
basic State factor (SF) as follows:

SF = (criterion 1 x weight of 30%) + (criterion 2 x weight of 10%) + 
    (criterion 3 x weight of 30%) + (criterion 4 x weight of 30%)

    (c) Basic formula allocation. See Sec. 1940.552(c) of this subpart.
    (d) Transition formula. See Sec. 1940.552(d) of this subpart. The 
percentage range used for section 502 guaranteed RH loans is plus or 
minus 15.
    (e) Base allocation. See Sec. 1940.552(e) of this subpart. 
Jurisdictions receiving administrative allocations do not receive base 
allocations.
    (f) Administration allocations. See Sec. 1940.552(f) of this 
subpart. Jurisdictions receiving formula allocations do not receive 
administrative allocations.
    (g) Reserve. See Sec. 1940.552(g) of this subpart.
    (h) Pooling of funds. See Sec. 1940.552(h) of this subpart.
    (1) Mid-year: If used in a particular fiscal year, available funds 
unobligated as of the pooling date are pooled and redistributed based on 
the formula used to allocate funds initially.
    (2) Year-end: Pooled funds are placed in a National Office reserve 
and are available as determined administratively.
    (i) Availability of the allocation. See Sec. 1940.552(i) of this 
subpart.
    (j) Suballocation by the State Director. See Sec. 1940.552(j) of 
this subpart. Annually, the Administrator will advise

[[Page 93]]

State Director's whether or not suballocation within the State Office 
jurisdiction will be required for the guaranteed Housing program.
    (k) Other documentation. Not applicable.

[56 FR 10509, Mar. 13, 1991]



Sec. 1940.565  Section 502 subsidized Rural Housing loans.

    (a) Amount available for allocations. See Sec. 1940.552(a) of this 
subpart.
    (b) Basic formula criteria, data source and weight. See Sec. 
1940.552(b) of this subpart. The criteria used in the basic formula are:
    (1) State's percentage of the National number of rural occupied 
substandard units,
    (2) State's percentage of the National rural population,
    (3) State's percentage of the National rural population in places of 
less than 2,500 population,
    (4) State's percentage of the National number of rural households 
between 50 and 80 percent of the area median income, and
    (5) State's percentage of the National number of rural households 
below 50 percent of the area median income.

Data source for each of these criteria is based on the latest census 
data available. Each criterion is assigned a specific weight according 
to its relevance in determining need. The percentage representing each 
criterion is multiplied by the weight factor and summed to arrive at a 
basic State factor (SF)

SF = (criterion 1 x weight of 25%) + (criterion 2 x weight of 10%) + 
    (criterion 3 x weight of 15%) + (criterion 4 x weight of 30%) + 
    (criterion 5 x weight of 20%)

    (c) Basic formula allocation. See Sec. 1940.552(c) of this subpart.
    (d) Transition formula. See Sec. 1940.552(d) of this subpart. The 
percentage range used for Section 502 subsidized RH loans is plus or 
minus 15.
    (e) Base allocation. See Sec. 1940.552(e) of this subpart. 
Jurisdictions receiving administrative allocations do not receive base 
allocations.
    (f) Administrative allocations. See Sec. 1940.552(f) of this 
subpart. Jurisdictions receiving formula allocations do not receive 
administrative allocations.
    (g) Reserve. See Sec. 1940.552(g) of this subpart.
    (h) Pooling of funds. See Sec. 1940.552(h) of this subpart.
    (1) Mid-year: If used in a particular fiscal year, available funds 
unobligated as of the pooling date are pooled and redistributed based on 
the formula used to allocate funds initially.
    (2) Year-end: Pooled funds are placed in a National Office reserve 
and are available as determined administratively.
    (i) Availability of the allocation. See Sec. 1940.552(i) of this 
subpart.
    (j) Suballocation by the State Director. See Sec. 1940.552(j) of 
this subpart. The State Director will suballocate funds to the District 
Offices and may, at his/her option, suballocate to the County Offices. 
The State Director will use the same basic formula criteria, data source 
and weight for suballocating funds within the State as used by the 
National Office in allocating to the States as described in Sec. 
1940.565 (b) and (c) of this section. The suballocations to District or 
County Offices will not be reduced or restricted unless written approval 
is received from the National Office in response to a written request 
from the State Director. The State Director's request must include the 
reasons for the requested action (e.g., high housing inventory and/or 
high housing delinquency).
    (k) Other documentation. The percentage distribution of funds to the 
States by income levels is based on prevailing legislation.



Sec. 1940.566  Section 504 Housing Repair loans.

    (a) Amount available for allocations. See Sec. 1940.552(a) of this 
subpart.
    (b) Basic formula criteria, data source and weight. See Sec. 
1940.552(b). The criteria used in the basic formula are:
    (1) State's percentage of the National number of rural occupied 
substandard units, and
    (2) State's percentage of the National number of rural households 
below 50 percent of area median income.


Data source for each of these criteria is based on the latest census 
data available. Each criterion is assigned a specific weight according 
to its relevance in determining need. The percentage

[[Page 94]]

representing each criterion is multiplied by the weight factor and 
summed to arrive at a basic State factor (SF).

SF = (criterion No. 1 x weight of 50%) + (criterion No. 2 x weight of 
    50%)

    (c) Basic formula allocation. See Sec. 1940.552(c) of this subpart.
    (d) Transition formula. See Sec. 1940.552(d) of this subpart. The 
percentage range used for section 504 Housing Repair Loans is plus or 
minus 15.
    (e) Base allocation. Not used.
    (f) Administrative allocations. See Sec. 1940.552(f) of this 
subpart. Jurisdictions receiving formula allocations do not receive 
administrative allocations.
    (g) Reserve. See Sec. 1940.552(g) of this subpart.
    (h) Pooling of funds. See Sec. 1940.552(h) of this subpart.
    (1) Mid-year: If used in a particular fiscal year, available funds 
unobligated as of the pooling date are pooled and redistributed based on 
the formula used to allocate funds initially.
    (2) Year-end: Pooled funds are placed in a National Office reserve 
and are available as determined administratively.
    (i) Availability of the allocation. See Sec. 1940.552(i) of this 
subpart.
    (j) Suballocation by the State Director. See Sec. 1940.552(j) of 
this subpart. At the option of the State Director, section 504 loan 
funds may be suballocated to the District Offices. When performing a 
suballocation, the State Director will use the same basic formula 
criteria, data source and weight for suballocating funds within the 
State as used by the National Office in allocating to the States as 
described in Sec. 1940.566 (b) and (c) of this section.
    (k) Other documentation. Not applicable.



Sec. 1940.567  Section 504 Housing Repair grants.

    (a) Amount available for allocations. See Sec. 1940.552(a) of this 
subpart.
    (b) Basic formula criteria, data source and weight. See Sec. 
1940.552(b) of this subpart. The criteria used in the basic formula are:
    (1) State's percentage of the National number of rural occupied 
substandard units,
    (2) State's percentage of the National rural population 62 years and 
older, and
    (3) State's percentage of the National number of rural households 
below 50 percent of area median income.


Data source for each of these criteria is based on the latest census 
data available. Each criterion is assigned a specific weight according 
to its relevance in determining need. The percentage representing each 
criterion is multiplied by the weight factor and summed to arrive at a 
basic State factor (SF).

SF = (criterion No. 1 x weight of 33\1/3\%) + (criterion No. 2 x weight 
    of 33\1/3\%) + (criterion No. 3 x weight of 33\1/3\%)

    (c) Basic formula allocation. See Sec. 1940.552(c) of this subpart.
    (d) Transition formula. See Sec. 1940.552(d) of this subpart. The 
percentage range used for section 504 Housing Repair grants is plus or 
minus 15.
    (e) Base allocation. Not used.
    (f) Administrative allocations. See Sec. 1940.552(f) of this 
subpart. Jurisdictions receiving formula allocations do not receive 
administrative allocations.
    (g) Reserve. See Sec. 1940.552(g) of this subpart.
    (h) Pooling of funds. See Sec. 1940.552(h) of this subpart.
    (1) Mid-year: If used in a particular fiscal year, available funds 
unobligated as of the pooling date are pooled and redistributed based on 
the formula used to allocate funds initially.
    (2) Year-end: Pooled funds are placed in a National Office reserve 
and are available as determined administratively.
    (i) Availability of the allocation. See Sec. 1940.552(i) of this 
subpart.
    (j) Suballocation by the State Director. See Sec. 1940.552(j) of 
this subpart. At the option of the State Director, section 504 grant 
funds may be suballocated to the District Offices. When performing a 
suballocation, the State Director will use the same basic formula 
criteria, data source and weight for suballocating funds within the 
State as used by the National Office in allocating to the States as 
described in Sec. 1940.567 (b) and (c) of this section.
    (k) Other documentation. Not applicable.

[[Page 95]]



Sec. 1940.568  Single Family Housing programs appropriations not 
allocated by State.

    The following program funds are kept in a National Office reserve 
and are available as determined administratively:
    (a) Section 523 Self-Help Technical Assistance Grants.
    (b) Section 523 Land Development Fund.
    (c) Section 524 Rural Housing Site Loans.
    (d) Section 509 Compensation for Construction Defects.
    (e) Section 502 Nonsubsidized Funds.



Sec. 1940.569-1940.574  [Reserved]



Sec. 1940.575  Section 515 Rural Rental Housing (RRH) loans.

    (a) Amount available for allocations. See Sec. 1940.552(a) of this 
subpart.
    (b) Basic formula criteria, data source and weight. See Sec. 
1940.552(b) of this subpart.
    The criteria used in the basic formula area:
    (1) State's percentage of National rural population,
    (2) State's percentage of National number of rural occupied 
substandard units, and
    (3) State's percentage of National rural families with incomes below 
the poverty level.


Data source for each of these criterion is based on the latest census 
data available. Each criterion is assigned a specific weight according 
to its relevance in determining need. The percentage representing each 
criterion is multiplied by the weight assigned and summed to arrive at a 
State factor (SF).

SF = (criterion No. 1 x weight of 33\1/3\%) + (criterion No. 2 x weight 
    of 33\1/3\%) + (criterion No. 3 x weight of 33\1/3\%)

    (c) Basic formula allocation. See Sec. 1940.552(c) of this subpart.
    (d) Transition formula. See Sec. 1940.522(d) of this subpart.
    (e) Base allocation. See Sec. 1940.552(e) of this subpart. 
Jurisdictions receiving administrative allocations do not receive base 
allocations.
    (f) Administrative allocations. See Sec. 1940.552(f) of this 
subpart. Jurisdictions receiving formula allocations do not receive 
administrative allocations.
    (g) Reserve. See Sec. 1940.552(g) of this subpart.
    (h) Pooling of funds. See Sec. 1940.552(h) of this subpart.
    (i) Availability of the allocation. See Sec. 1940.552(i) of this 
subpart.
    (j) Suballocation by the State Director. See Sec. 1940.552(j) of 
this subpart.
    (k) Other documentation. Not applicable.

[53 FR 26229, July 12, 1988]



Sec. 1940.576  Rental Assistance (RA) for new construction.

    (a) Amount available for allocations. See Sec. 1940.552(a) of this 
subpart.
    (b) Basic formula criteria, data source and weight. See Sec. 
1940.575(b) of this subpart.
    (c) Basic formula allocation. See Sec. 1940.552(c) of this subpart.
    (d) Transition formula. See Sec. 1940.552(d) of this subpart.
    (e) Base allocation. See Sec. 1940.552(e) of this subpart.
    (f) Administrative allocations. See Sec. 1940.552(f) of this 
subpart. Jurisdictions receiving formula allocations do not receive 
administrative allocations.
    (g) Reserve. See Sec. 1940.552(g) of this subpart.
    (h) Pooling of funds. See Sec. 1940.552(h) of this subpart.
    (i) Availability of the allocation. See Sec. 1940.552(i) of this 
subpart.
    (j) Suballocation by the State Director. See Sec. 1940.552(j) of 
this subpart.
    (k) Other documentation. Not applicable.

[53 FR 26229, July 12, 1988]



Sec. 1940.577  Rental Assistance (RA) for existing projects.

    (a) Amount available for allocations. See Sec. 1940.552(a) of this 
subpart. RA appropriated for existing projects will first be used to 
replace contracts expiring each fiscal year and for the first few months 
of the following fiscal year. This is done to assure continued RA 
funding. RA units not needed for replacement purposes will be used for 
existing multiple family housing projects experiencing servicing 
problems.

[[Page 96]]

    (b) Basic formula criteria, data source and weight. No formula or 
weighted criteria is used to allocate replacement RA. The basic 
allocation for replacement RA will be made based on the following:
    (1) Criteria. This allocation is based on the estimated need to 
replace RA contracts expiring from the depletion of funds.
    (2) Date source. The most accurate and current information available 
from FmHA or its successor agency under Public Law 103-354 computerized 
data sources.
    (c) Basic formula allocation. While no formula will be used, the 
basic allocation will be made to each State according to the need 
determined using the basic criteria.
    (d) Transition formula. Not applicable.
    (e) Base allocation. Not applicable.
    (f) Administrative allocation. Not applicable.
    (g) Reserve. See Sec. 1940.552(g) of this subpart. The National 
Office maintains a reserve adequate to compensate for the differences 
between actual and projected replacement activity. Units will be 
administratively distributed for existing housing to either satisfy 
previously unidentified replacement needs or address servicing 
situations. Units will be distributed to any State when the 
Administrator determines that additional allocations are necessary and 
appropriate.
    (h) Pooling of funds. See Sec. 1940.552(h) of this subpart. Units 
will be pooled at the Administrator's discretion.
    (i) Obligation of the allocation. See Sec. 1940.552(i) of this 
subpart.
    (j) Suballocation by the State Director. See Sec. 1940.552(j) of 
this subpart.
    (k) Other documentation. Not applicable.

[49 FR 3727, Jan. 30, 1984, as amended at 53 FR 26229, July 12, 1988]



Sec. 1940.578  Housing Preservation Grant (HPG) program.

    (a) Amount available for allocations. See Sec. 1940.552(a) of this 
subpart.
    (b) Basic formula criteria, data source and weight. See Sec. 
1940.575(b) of this subpart.
    (c) Basic formula allocation. See Sec. 1940.552(c) of this subpart.
    (d) Transition formula. See Sec. 1940.552(d) of this subpart.
    (e) Base allocation. See Sec. 1940.552(e) of this subpart.
    (f) Administrative allocations. See Sec. 1940.552(f) of this 
subpart.
    (g) Reserve. See Sec. 1940.552(g) of this subpart.
    (h) Pooling of funds. See Sec. 1940.552(h) of this subpart. Funds 
may be pooled after all HPG applications have been received and HPG fund 
demand by State has been determined. Pooled funds will be combined with 
the National Office reserve to fund eligible projects. Remaining HPG 
funds will be available for distribution for use under the Section 504 
program.
    (i) Availability of the allocation. See Sec. 1940.552(i) of this 
subpart.
    (j) Suballocation by the State Director. Not applicable.
    (k) Other documentation. Funds for the HPG program will be available 
for a limited period each fiscal year. Due to the requirements by law to 
allocate funds on a formula basis to all States and to have a 
competitive selection process for HPG project selection, FmHA or its 
successor agency under Public Law 103-354 will announce opening and 
closing dates for receipt of HPG applications. After the closing date, 
FmHA or its successor agency under Public Law 103-354 will review and 
evaluate the proposals, adjust State allocations as necessary to comply 
with the law and program demand, and redistribute remaining unused HPG 
resources for use under Section 504 (as required by statute).

[53 FR 26229, July 12, 1988]



Sec. 1940.579  Multiple Family Housing appropriations not allocated 
by State.

    Funds are not allocated to States. The following program funds are 
kept in a National Office reserve and are available as determined 
administratively:
    (a) Section 514 Farm Labor Housing Loans.
    (b) Section 516 Farm Labor Housing Grants.

[64 FR 24480, May 6, 1999]

[[Page 97]]



Sec. Sec. 1940.580-1940.584  [Reserved]



Sec. 1940.585  Community Facility loans.

    (a) Amount available for allocations. See Sec. 1940.552(a) of this 
subpart.
    (b) Basic formula criteria, data source and weight. See Sec. 
1940.552(b) of this subpart.
    (1) The criteria used in the basic formula are:
    (i) State's percentage of national rural population--50 percent.
    (ii) State's percentage of national rural population with incomes 
below the poverty level--25 percent.
    (iii) State's percentage of national nonmetropolitan unemployment--
25 percent.
    (2) Data source for each of these criterion is based on the latest 
census data available. Each criterion is assigned a specific weight 
according to its relevance in determining need. The percentage 
representing each criterion is multiplied by the weight factor and 
summed to arrive at a State factor (SF). The SF cannot exceed .05.

SF = (criterion (b)(1)(i) x 50 percent) + (criterion (b)(1)(ii) x 25 
    percent) + (criterion (b)(1)(iii) x 25 percent)

    (c) Basic formula allocation. See Sec. 1940.552(c) of this subpart. 
States receiving administrative allocations do not receive formula 
allocations.
    (d) Transition formula. See Sec. 1940.552(d) of this subpart. The 
percentage range for the transition formula equals 30 percent (15%).
    (e) Base allocation. See Sec. 1940.552(e) of this subpart. States 
receiving administrative allocations do not receive base allocations.
    (f) Administrative allocation. See Sec. 1940.552(f) of this 
subpart. States participating in the formula base allocation procedures 
do not receive administrative allocations.
    (g) Reserve. See Sec. 1940.552(g) of this subpart. States may 
request funds by forwarding a completed copy of guide 26 of subpart A of 
part 1942 of this chapter (available in any FmHA or its successor agency 
under Public Law 103-354 office), to the National Office. Generally, a 
request for additional funds will not be honored unless the State has 
insufficient funds to obligate the loan requested.
    (h) Pooling of funds. See Sec. 1940.552(h) of this subpart. Funds 
are generally pooled at mid-year and year-end. Pooled funds will be 
placed in the National Office reserve and will be made available 
administratively.
    (i) Availability of the allocation. See Sec. 1940.552(i) of this 
subpart. The allocation of funds is made available for States to 
obligate on an annual basis although the Office of Management and Budget 
apportions it to the Agency on a quarterly basis.
    (j) Suballocation by the State Director. See Sec. 1940.552(j) of 
this subpart. State Director has the option to suballocate to District 
Offices.
    (k) Other documentation. Not applicable.

[50 FR 24180, June 10, 1985, as amended at 58 FR 54485, Oct. 22, 1993]



Sec. Sec. 1940.586-1940.587  [Reserved]



Sec. 1940.588  Business and Industry Guaranteed and Direct Loans.

    (a) Amount available for allocations. See Sec. 1940.552(a) of this 
subpart.
    (b) Basic formula criteria, data source and weight. See Sec. 
1940.552(b) of this subpart.
    (1) The criteria used in the basic formula are:
    (i) State's percentage of national rural population--50 percent.
    (ii) State's percentage of national rural population with incomes 
below the poverty level--25 percent.
    (iii) State's percentage of national nonmetropolitan unemployment--
25 percent.
    (2) Data source for each of these criterion is based on the latest 
census data available. Each criterion is assigned a specific weight 
according to its relevance in determining need. The percentage 
representing each criterion is multiplied by the weight factor and 
summed to arrive at a State factor (SF). The SF cannot exceed .05.

SF = (criterion (b)(1)(i) x 50 percent) + (criterion (b)(1)(ii) x 25 
    percent) + (criterion (b)(1)(iii) x 25 percent)

    (c) Basic formula allocation. See Sec. 1940.552(c) of this subpart.
    (d) Transition formula. The transition formula is not used for B&I 
Guaranteed and Direct Loans.

[[Page 98]]

    (e) Base allocations. See Sec. 1940.552(e) of this subpart. 
Jurisdictions receiving administrative allocations do not receive base 
allocations.
    (f) Administrative allocations. See Sec. 1940.552(f) of this 
subpart. Jurisdictions receiving formula allocations do not receive 
initial administrative allocations.
    (g) Reserve. See Sec. 1940.552(g). States may request reserve funds 
from the B&I reserve when all of the state allocation has been obligated 
or will be obligated to the project for which the request is made.
    (h) Pooling of funds. See Sec. 1940.552(h). Funds are pooled near 
fiscal year-end. Pooled funds will be placed in a reserve and made 
available on a priority basis to all States.
    (i) Availability of the allocation. See Sec. 1940.552(i) of this 
subpart. There is a 6-day waiting period from the time project funds are 
reserved to the time they are obligated.
    (j) Suballocation by the State Director. Suballocation by the State 
Director is authorized for this program.

[50 FR 24180, June 10, 1985, as amended at 58 FR 54486, Oct. 22, 1993; 
68 FR 14528, Mar. 26, 2003]



Sec. 1940.589  Rural Business Enterprise Grants.

    (a) Amount available for allocations. See Sec. 1940.552(a) of this 
subpart.
    (b) Basic formula criteria, data source and weight. See Sec. 
1940.552(b) of this subpart.
    (1) The criteria used in the basic formula are:
    (i) State's percentage of national rural population--50 percent.
    (ii) State's percentage of national rural population with incomes 
below the poverty level--25 percent.
    (iii) State's percentage of national nonmetropolitan unemployment--
25 percent.
    (2) Data source for each of these criterion is based on the latest 
census data available. Each criterion is assigned a specific weight 
according to its relevance in determining need. The percentage 
representing each criterion is multiplied by the weight factor and 
summed to arrive at a State factor (SF). The SF cannot exceed .05.

SF = (criterion (b)(1)(i) x 50 percent) + (criterion (b)(1)(ii) x 25 
    percent) + (criterion (b)(1)(iii) x 25 percent)

    (c) Basic formula allocation. See Sec. 1940.552(c) of this subpart.
    (d) Transition formula. See Sec. 1940.552(d) of this subpart. The 
percentage range for the transition equals 30 percent (15%).
    (e) Base allocation. See Sec. 1940.552(e) of this subpart.
    (f) Administrative allocation. Not used.
    (g) Reserve. See Sec. 1940.552(g).
    (h) Pooling of funds. See Sec. 1940.552(h). Funds are pooled near 
fiscal year-end. Pooled funds will be placed in the National Office 
reserve and will be made available administratively.
    (i) Availability of the allocation. See Sec. 1940.552(i) of this 
subpart. The allocation of funds is made available for States to 
obligate on an annual basis although the Office of Management and Budget 
apportions funds to the Agency on a quarterly basis.
    (j) Suballocation by the State Director. See Sec. 1940.552(j) of 
this subpart. State Director has the option to suballocate to District 
Offices.

[53 FR 26230, July 12, 1988, as amended at 57 FR 33099, July 27, 1992; 
58 FR 54486, Oct. 22, 1993; 68 FR 14528, Mar. 26, 2003; 69 FR 5264, Feb. 
4, 2004]



Sec. 1940.590  [Reserved]



Sec. 1940.591  Community Program Guaranteed loans.

    (a) Amount available for allocations. See Sec. 1940.552(a) of this 
subpart.
    (b) Basic formula criteria, data source and weight. See Sec. 
1940.552(b) of this subpart.
    (1) The criteria used in the basic formula are:
    (i) State's percentage of national rural population--50 percent.
    (ii) State's percentage of national rural population with incomes 
below the poverty level--25 percent.
    (iii) State's percentage of national nonmetropolitan unemployment--
25 percent.
    (2) Data source for each of these criterion is based on the latest 
census data available. Each criterion is assigned a specific weight 
according to its relevance in determining need. The percentage 
representing each criterion

[[Page 99]]

is multiplied by the weight factor and summed to arrive at a State 
factor (SF). The SF cannot exceed .05.

SF = (criterion (b)(1)(i) x 50 percent) + (criterion (b)(1)(ii) x 25 
    percent) + (criterion (b)(1)(iii) x 25 percent)

    (c) Basic formula allocation. See Sec. 1940.552(c) of this subpart. 
States receiving administrative allocations do not receive formula 
allocations.
    (d) Transition formula. The transition formula for Community Program 
Guaranteed loans is not used.
    (e) Base allocation. See Sec. 1940.552(e) of this subpart. States 
receiving administrative allocations do not receive base allocations.
    (f) Administrative allocation. See 1940.552(f) of this subpart. 
States participating in the formula base allocation procedures do not 
receive administrative allocations.
    (g) Reserve. See Sec. 1940.522(g) of this subpart. States may 
request funds by forwarding a request following the format found in 
guide 26 of subpart A of part 1942 of this chapter (available in any 
FmHA or its successor agency under Public Law 103-354 office), to the 
National Office. Generally, a request for additional funds will not be 
honored unless the State has insufficient funds from the State's 
allocation to obligate the loan requested.
    (h) Pooling of funds. See Sec. 1940.522(h) of this subpart. Funds 
are generally pooled at mid-year and year-end. Pooled funds will be 
placed in the National Office reserve and will be made available 
administratively.
    (i) Availability of the allocation. See Sec. 1940.552(i) of this 
subpart. The allocation of funds is made available for States to 
obligate on an annual basis although the Office of Management and Budget 
apportions it to the Agency on a quarterly basis.
    (j) Suballocation by State Director. See Sec. 1940.552(j) of this 
subpart. State Director has the option to suballocate to District 
Offices.
    (k) Other documentation. Not applicable.

[55 FR 11134, Mar. 27, 1990, as amended at 58 FR 54486, Oct. 22, 1993]



Sec. 1940.592  Community facilities grants.

    (a) Amount available for allocations. See Sec. 1940.552(a).
    (b) Basic formula criteria, data source, and weight. See Sec. 
1940.552(b).
    (1) The criteria used in the basic formula are:
    (i) State's percentage of National rural population--50 percent.
    (ii) State's percentage of National rural population with income 
below the poverty level--50 percent.
    (2) Data source for each of these criterion is based on the latest 
census data available. Each criterion is assigned a specific weight 
according to its relevance in determining need. The percentage 
representing each criterion is multiplied by the weight factor and 
summed to arrive at a State factor (SF).

SF (criterion (b)(1)(i) x 50 percent) + (criterion (b)(1)(ii) x 50 
    percent)

    (c) Basic formula allocation. See Sec. 1940.552(c). States 
receiving administrative allocations do not receive formula allocations.
    (d) Transition formula. The transition formula for Community 
Facilities Grants is not used.
    (e) Base allocation. See Sec. 1940.552(e). States receiving 
administrative allocations do not receive base allocations.
    (f) Administrative allocation. See Sec. 1940.552(f). States 
participating in the formula base allocation procedures do not receive 
administrative allocations.
    (g) Reserve. See Sec. 1940.552(g).
    (h) Pooling of funds. See Sec. 1940.522(h). Funds will be pooled at 
midyear and yearend. Pooled funds will be placed in the National Office 
reserve and will be made available administratively.
    (i) Availability of the allocation. See Sec. 1940.552(i).
    (j) Suballocation by State Director. See Sec. 1940.552(j).
    (k) Other documentation. Not applicable.

[62 FR 16468, Apr. 7, 1997]



Sec. 1940.593  Rural Business Opportunity Grants.

    (a) Amount available for allocations. See Sec. 1940.552(a).
    (b) Basic formula criteria, data source, and weight. See Sec. 
1940.552(b).

[[Page 100]]

    (1) The criteria used in the basic formula are:
    (i) State's percentage of national rural population--50 percent.
    (ii) State's percentage of national rural population with incomes 
below the poverty level--25 percent.
    (iii) State's percentage of national nonmetropolitan unemployment--
25 percent.
    (2) The data source for each criterion is based on the latest census 
data available. The percentage representing each criterion is multiplied 
by the weight factor and added to arrive at a State Factor (SF). The SF 
cannot exceed .05.

SF = (criterion (b)(1)(i) x 50 percent) +
(criterion (b)(1)(ii) x 25 percent) +
(criterion (b)(1)(iii) x 25 percent)

    (c) Basic formula allocation. See Sec. 1940.552(c).
    (d) Transition formula. The transition formula is not used for Rural 
Business Opportunity Grants (RBOG).
    (e) Base allocation. See Sec. 1940.552(e).
    (f) Administrative allocation. The administrative allocation is not 
used for RBOG.
    (g) Reserve. See Sec. 1940.552(g).
    (h) Pooling of funds. See Sec. 1940.552(h). Funds are pooled near 
fiscal year-end. Pooled funds will be placed in the National Office 
reserve and will be made available administratively.
    (i) Availability of the allocation. See Sec. 1940.552(i). The 
allocation of funds is made available to States on an annual basis.
    (j) Suballocation by the State Director. Suballocation by the State 
Director is authorized for this program.

[68 FR 14528, Mar. 26, 2003; 68 FR 17153, Apr. 8, 2003]



Sec. Sec. 1940.594-1940.600  [Reserved]

             Exhibit A to Subpart L of Part 1940 [Reserved]

  Exhibit B to Subpart L of Part 1940--Section 515 Nonprofit Set Aside 
                                 (NPSA)

    I. Objective: To provide eligible nonprofit entities with a 
reasonable opportunity to utilize section 515 funds.
    II. Background: The Cranston-Gonzalez National Affordable Housing 
Act of 1990 established the statutory authority for the section 515 NPSA 
funds.
    III. Eligible entities. Amounts set aside shall be available only 
for nonprofit entities in the State, which may not be wholly or 
partially owned or controlled by a for-profit entity. An eligible entity 
may include a partnership, including a limited partnership, that has as 
its general partner a nonprofit entity or the nonprofit entity's for-
profit subsidiary which will be receiving low-income housing tax credits 
authorized under section 42 of the Internal Revenue Code of 1986. For 
the purposes of this exhibit, a nonprofit entity is an organization 
that:
    A. Will own an interest in a project to be financed under this 
section and will materially participate in the development and the 
operations of the project; and
    B. Is a private organization that has nonprofit, tax exempt status 
under section 501(c)(3) or section 501(c)(4) of the Internal Revenue 
Code of 1986; and
    C. Has among its purposes the planning, development, or management 
of low-income housing or community development projects; and
    D. Is not affiliated with or controlled by a for-profit 
organization; and
    E. May be a consumer cooperative, Indian tribe or tribal housing 
authority.
    IV. Nondiscrimination. FmHA or its successor agency under Public Law 
103-354 reemphasizes the nondiscrimination in use and occupancy, and 
location requirements of Sec. 1944.215 of subpart E of part 1944 of 
this chapter.
    V. Amount of Set Aside. See Attachment 1 of this exhibit (available 
in any FmHA or its successor agency under Public Law 103-354 State 
Office):
    A. Small State Allocation Set Aside (SSASA). The allocation for 
small States has been reserved and combined to form the SSASA, as shown 
in Attachment 1 of this exhibit (available in any FmHA or its successor 
agency under Public Law 103-354 State Office). The definition of small 
State is included in Attachment 1 of this exhibit (available in any FmHA 
or its successor agency under Public Law 103-354 State Office).
    B. Large State Allocation Set Aside (LSASA). The allocation for 
large States has been reserved in the amounts shown in Attachment 1 of 
this exhibit (available in any FmHA or its successor agency under Public 
Law 103-354 State Office). The definition of large State is included in 
Attachment 1 of this exhibit (available in any FmHA or its successor 
agency under Public Law 103-354 State Office).
    C. NPSA Rental Assistance (RA). NPSA RA has been reserved in the 
National Office as shown in Attachment 1 of this exhibit (available in 
any FmHA or its successor agency under Public Law 103-354 State Office).

[[Page 101]]

    VI. Access to NPSA funds and RA. RA is available and may be 
requested, as needed, with eligible loan requests. NPSA funds and RA 
should be requested by the State Director using a format similar to 
Attachment 2 of this exhibit (available in any FmHA or its successor 
agency under Public Law 103-354 State Office). Funds are available as 
follows:
    A. SSASA: The SSASA is available to any SSASA State on a first-come-
first-served basis until pooling. See Attachment 3 of this exhibit 
(available in any FmHA or its successor agency under Public Law 103-354 
State Office) for information regarding pooling.
    B. LSASA: LSASA states may request LSASA funds up to the amount the 
state contributed to LSASA until pooling. See Attachment 3 of this 
exhibit (available in any FmHA or its successor agency under Public Law 
103-354 State Office) for information regarding pooling.
    VII. General Information on priority/processing of Preapplications.
    A. Preapplications/applications for assistance from eligible 
nonprofit entities under this subpart must continue to meet all loan 
making requirements of subpart E of part 1944 of this chapter.
    B. A separate processing list will be maintained for NPSA loan 
requests.
    C. The State Director may issue Form AD-622, ``Notice of 
Preapplication Review Action'', requesting a formal application to the 
highest ranking preapplication(s) from eligible nonprofit entities 
defined in paragraph III of this exhibit as follows:
    1. LSASA. In LSASA States, AD-622s may not exceed 150 percent of the 
amount the State contributed to the LSASA. No single Form AD-622 may 
exceed the amount of funds the State contributed to LSASA.
    2. SSASA. In SSASA States, AD-622s should not exceed the greater of 
$750,000 or 150 percent of the amount the State contributed to the 
SSASA; except that the State Director in a SSASA State may request 
authorization to issue a Form AD-622, in an amount in excess of $750,000 
if additional funds are necessary to finance an average-size proposal 
based upon average construction costs in the state. For example, if the 
average size proposal currently being funded in the state is 24 units, 
and the average construction cost in the state is $35,000 per unit, the 
state may request authorization to issue an AD-622 for $840,000. The 
State Director will submit such requests to the National Office 
including data reflecting average size/cost projects in the State. No 
single Form AD-622 may exceed the amount of funds the State may receive 
from SSASA.
    D. All AD-622s issued for proposals to be funded from NPSA will be 
subject to the availability of NPSA funds. Form AD-622 should contain 
the following or similar language: ``This Form AD-622 is issued subject 
to the availability of Nonprofit Set-Aside (NPSA) funds.''
    E. If a preapplication requesting NPSA funds has sufficient priority 
points to compete with non-NPSA loan requests based upon the District or 
State allocation (as applicable), the preapplication will be maintained 
on both the NPSA and non-NPSA rating/ranking lists.
    F. Provisions for providing preference to loan requests from 
nonprofits is contained in Sec. 1944.231 of subpart E of part 1944 of 
this chapter. Limited partnerships, with a nonprofit general partner, do 
not qualify for nonprofit preference.
    VIII. Exception authority. The Administrator, or his/her designee, 
may, in individual cases, make an exception to any requirements of this 
exhibit which are not inconsistent with the authorizing statute, if he/
she finds that application of such requirement would adversely affect 
the interest of the Government or adversely affect the intent of the 
authorizing statute and/or Rural Rental Housing program or result in an 
undue hardship by applying the requirement. The Administrator, or his/
her designee, may exercise this authority upon the request of the State 
Director, Assistant Administrator for Housing, or Director of the Multi-
Family Housing Processing Division. The request must be supported by 
information that demonstrates the adverse impact or effect on the 
program. The Administrator, or his/her designee, also reserves the right 
to change pooling dates, establish/change minimum and maximum fund usage 
from NPSA, or restrict participation in the set aside.

[58 FR 38950, July 21, 1993]

    Effective Date Note: At 69 FR 69104, Nov. 26, 2004, Exhibit B to 
subpart L of part 1940 was amended by revising paragraphs IV., VII.A., 
and VII.F., effective Feb. 24, 2005. For the convenience of the user the 
revised text is set forth as follows:

  Exhibit B to Subpart L of Part 1940--Section 515 Nonprofit Set Aside 
                                 (NPSA)

                                * * * * *

    IV. Nondiscrimination. Rural Development reemphasizes the 
nondiscrimination in use and occupancy and location requirements of 7 
CFR 3560.104.

                                * * * * *

    VII. * * *
    A. Preapplications/applications for assistance from eligible 
nonprofit entities under this subpart must continue to meet all loan

[[Page 102]]

making requirements of 7 CFR part 3560, subpart B.

                                * * * * *

    F. Provisions for providing preference to loan requests from 
nonprofit organizations is contained in 7 CFR 3560.56. Limited 
partnerships, with a nonprofit general partner, do not qualify for 
nonprofit preference.

    Exhibit C to Subpart L of Part 1940--Housing in Underserved Areas

                              I. Objective

    A. To improve the quality of affordable housing by targeting funds 
under Rural Housing Targeting Set Aside (RHTSA) to designated areas that 
have extremely high concentrations of poverty and substandard housing 
and have severe, unmet rural housing needs.
    B. To provide for the eligibility of certain colonias for rural 
housing funds.

                             II. Background

    The Cranston-Gonzalez National Affordable Housing Act of 1990 
(herein referred to as the ``Act'') requires that Farmers Home 
Administration (FmHA) or its successor agency under Public Law 103-354 
set aside section 502, 504, 514, 515, and 524 funds for assistance in 
targeted, underserved areas. An appropriate amount of section 521 new 
construction rental assistance (RA) is set aside for use with seciton 
514 and 515 loan programs. Under the Act, certain colonias are now 
eligible for FmHA or its successor agency under Public Law 103-354 
housing assistance.

                              III. Colonias

    A. Colonia is defined as any identifiable community that:
    1. Is in the State of Arizona, California, New Mexico or Texas;
    2. Is in the area of the United States within 150 miles of the 
border between the United States and Mexico, except that the term does 
not include any standard metropolitan statistical area that has a 
population exceeding 1 million;
    3. Is designated by the State or county in which it is located as a 
colonia;
    4. Is determined to be a colonia on the basis of objective criteria, 
including lack of potable water supply, lack of adequate sewage systems, 
and lack of decent, safe, and sanitary housing; and
    5. Was in existence and generally recognized as a colonia before 
November 28, 1990.
    B. Requests for housing assistance in colonias have priority as 
follows:
    1. When the State did not obligate its allocation in one or more of 
its housing programs during the previous 2 fiscal years (FYs), priority 
will be given to requests for assistance, in the affected program(s), 
from regularly allocated funds, until an amount equal to 5 percent of 
the current FY program(s) allocation is obligated in colonias. This 
priority takes precedence over other processing priority methods.
    2. When the State did obligate its allocation in one or more of its 
housing programs during the previous 2 FYs, priority will be given to 
requests for assistance, in the affected program(s), from RHTSA funds, 
until an amount equal to 5 percent of the current FY program(s) 
allocation is obligated in colonias. This priority takes precedence over 
other processing priority methods.
    C. Colonias may access pooled RHTSA funds as provided in paragraph 
IV G of this exhibit.

                                IV. RHTSA

    A. Amount of Set Aside. Set asides for RHTSA, from the current FY 
allocations, are established in attachment 1 of this exhibit (available 
in any FmHA or its successor agency under Public Law 103-354 State 
Office).
    B. Selection of Targeted Counties--1. Eligibility. Eligible counties 
met the following criteria: (1) 20 percent or more of the county 
population is at, or below, poverty level; (2) 10 percent or more of the 
occupied housing units are substandard; and (3) the average funds 
received on a per capita basis in the county, during the previous 5 FYs, 
were more than 40 percent below the State per capita average during the 
same period. Data from the most recent available Census was used for all 
three criteria, with criteria (2) and (3) based on the FmHA or its 
successor agency under Public Law 103-354 rural area definition.
    2. Selection. The Act requires that 100 of the most underserved 
counties be initially targeted for RHTSA funds. In establishing the 100 
counties, those with 28 percent or more of their population at, or 
below, poverty level and 13 percent or more of their occupied housing 
units substandard, have preference. If less than 100 counties meet this 
criteria, the remaining counties meeting the criteria in paragraph IV B 
1 of this exhibit will be ranked, based upon a total of their 
substandard housing and poverty level percentages. The highest-ranking 
counties are then selected until the list reaches 100. The remaining 
counties are eligible for pool funds only.
    C. State RHTSA Levels. In the section 502, 504, and 515 programs, 
each State's RHTSA level will be based on its number of eligible 
counties, with each county receiving a pro rata share of the total funds 
available. In order to ensure that a meaningful amount of assistance is 
available to each State, minimum funding levels may be established. When 
minimum levels are established, they

[[Page 103]]

are set forth on Attachment 1 of this exhibit (available in any FmHA or 
its successor agency under Public Law 103-354 State Office).
    D. Use of Funds. To maximize the assistance to targeted counties, 
allocated program funds should be used in addition to RHTSA funds, where 
possible. The State Director has the discretion to determine the most 
effective delivery of RHTSA funds among the targeted counties within 
his/her jurisdiction. The 100 counties listed in attachment 2 of this 
exhibit (available in any FmHA or its successor agency under Public Law 
103-354 State Office) are eligible for RHTSA funding consideration 
immediately. Colonias are also eligible for RHTSA funds as described in 
paragraph III of this exhibit.
    E. National Office RHTSA Reserve. A limited National Office reserve 
is available on an individual case basis when the State is unable to 
fund a request from its regular or RHTSA allocation. The amount of the 
reserve, and the date it can be accessed and any conditions thereof, if 
applicable, are contained in attachment 1 of this exhibit (available in 
any FmHA or its successor agency under Public Law 103-354 State Office).
    F. Requests for Funds and RA. All RHTSA funds are reserved in the 
National Office and requests for these funds and/or RA units must be 
submitted by the State Director, using the applicable format shown on 
attachment 4 or 5 of this exhibit (available in any FmHA or its 
successor agency under Public Law 103-354 State Office). The State 
Director is responsible for notifying the Director of Single Family 
Housing Processing Division (SFHPD) or Multi-Family Housing Processing 
Division (MFHPD) of any RHTSA funds and RA units authorized, but not 
obligated, by RHTSA pooling date.
    G. Pooling. Unused RHTSA funds and RA will be pooled. Pooling dates 
and any pertinent information thereof are available on attachment 1 of 
this exhibit (available in any FmHA or its successor agency under Public 
Law 103-354 State Office). Pooled funds will be available on a first-
come, first-served basis to all eligible colonias and all counties 
listed on attachments 2 and 3 of this exhibit (available in any FmHA or 
its successor agency under Public Law 103-354 State Office). Pooled 
RHTSA funds will remain available until the year-end pooling date.
    H.-I. [Reserved]
    J. Requests for Assistance. Requests for assistance in targeted 
counties must meet all loan making requirements of the applicable 
program Instructions, except as modified for colonias in paragraph III 
of this exhibit. For section 515, States may:
    1. Issue Form AD-622, ``Notice of Preapplication Review Action,'' up 
to 150 percent of the amount shown in attachment 1 of this exhibit 
(available in any FmHA or its successor agency under Public Law 103-354 
State Office).
    2. All AD-622s issued for applicants in targeted counties will be 
annotated, in Item 7, under ``Other Remarks,'' with the following: 
``Issuance of this AD-622 is contingent upon receiving funds from the 
Rural Housing Targeting Set Aside (RHTSA). Should RHTSA funds be 
unavailable, or the county in which this project will be located is no 
longer considered a targeted county, this AD-622 will no longer be 
valid. In these cases, the request for assistance will need to compete 
with other preapplications in non-targeted counties, based upon its 
priority point score.''

                              V. [Reserved]

[57 FR 3924, Feb. 3, 1992]

Subparts M-S [Reserved]



   Subpart T_System for Delivery of Certain Rural Development Programs

    Source: 57 FR 11559, Apr. 6, 1992, unless otherwise noted.



Sec. 1940.951  General.

    This subpart sets forth Farmers Home Administration (FmHA) or its 
successor agency under Public Law 103-354 policies and procedures for 
the delivery of certain rural development programs under a rural 
economic development review panel established in eligible States 
authorized under sections 365, 366, 367, and 368 of the Consolidated 
Farm and Rural Development Act (7 U.S.C. 1921 et seq.), as amended.
    (a) If a State desires to participate in this pilot program, the 
Governor of the State may submit an application to the Under Secretary 
for Small Community and Rural Development, U.S. Department of 
Agriculture, room 219-A, Administration Building, Washington, DC 20250 
in accordance with Sec. 1940.954 of this subpart.
    (b) The Under Secretary shall designate not more than five States in 
which to make rural economic development review panels applicable during 
any established time period for the purpose of reviewing and ranking 
applications submitted for funding under certain rural development 
programs. The following time periods have been

[[Page 104]]

established for participation in this pilot program:

First period--Balance of fiscal year (FY) 1992 to September 30, 1993;
Second period--October 1, 1993 to September 30, 1994;
Third period--October 1, 1994 to September 30, 1995; and
Fourth period--October 1, 1995 to September 30, 1996.

    The State will be bound by the provisions of this pilot program only 
during the established time period(s) for which the State is designated. 
If a designated State does not remain an eligible State during the 
established time period(s) for which the State was designated, the State 
will not be eligible to participate in this program and cannot revert to 
the old ranking and applicant selection process.
    (c) Assistance under each designated rural development program shall 
be provided to eligible designated States for qualified projects in 
accordance with this subpart.
    (d) Federal statutes provide for extending FmHA or its successor 
agency under Public Law 103-354 financially supported programs without 
regard to race, color, religion, sex, national origin, marital status, 
age, familial status, or physical/mental handicap (provided the 
participant possesses the capacity to enter into legal contracts.)



Sec. 1940.952  [Reserved]



Sec. 1940.953  Definitions.

    For the purpose of this subpart:
    Administrator. The Administrator of FmHA or its successor agency 
under Public Law 103-354.
    Area plan. The long-range development plan developed for a local or 
regional area in a State.
    Designated agency. An agency selected by the Governor of the State 
to provide the panel and the State Coordinator with support for the 
daily operation of the panel.
    Designated rural development program. A program carried out under 
sections 304(b), 306(a), or subsections (a) through (f) and (h) of 
section 310B of the Consolidated Farm and Rural Development Act (7 
U.S.C. 1926(a)), as amended, or under section 1323 of the Food Security 
Act of 1985, for which funds are available at any time during the FY 
under such section, including, but not limited to, the following:
    (1) Water and Waste Disposal Insured or Guaranteed Loans;
    (2) Development Grants for Community Domestic Water and Waste 
Disposal Systems;
    (3) Technical Assistance and Training Grants;
    (4) Emergency Community Water Assistance Grants;
    (5) Community Facilities Insured and Guaranteed Loans;
    (6) Business and Industry Guaranteed Loans;
    (7) Industrial Development Grants;
    (8) Intermediary Relending Program;
    (9) Drought and Disaster Relief Guaranteed Loans;
    (10) Disaster Assistance for Rural Business Enterprises;
    (11) Nonprofit National Rural Development and Finance Corporations.
    Designated State. A State selected by the Under Secretary, in 
accordance with Sec. 1940.954 of this subpart, to participate in this 
program.
    Eligible State. With respect to a FY, a State that has been 
determined eligible in accordance with Sec. 1940.954 (e) of this 
subpart.
    Nondesignated State. A State that has not been selected to 
participate in this pilot program.
    Qualified project. Any project: (1) For which the designated agency 
has identified alternative Federal, State, local or private sources of 
assistance and has identified related activities in the State; and
    (2) To which the Administrator is required to provide assistance.
    State. Any of the fifty States.
    State coordinator. The officer or employee of the State appointed by 
the Governor to carry out the activities described in Sec. 1940.957 of 
this subpart.
    State Director. The head of FmHA or its successor agency under 
Public Law 103-354 at the local level charged with administering 
designated rural development programs.
    State rural economic development review panel or ``panel''. An 
advisory panel that meets the requirements of Sec. 1940.956 of this 
subpart.

[[Page 105]]

    Under Secretary. In the U.S. Department of Agriculture, the Under 
Secretary for Small Community and Rural Development.



Sec. 1940.954  State participation.

    (a) Application. If a State desires to participate in this pilot 
program, the Governor may submit an original and one copy of Standard 
Form (SF) 424.1, ``Application for Federal Assistance (For Non-
construction),'' to the Under Secretary. The five States designated by 
the Under Secretary to participate in the first established time period 
will be selected from among applications received not later than 60 
calendar days from the effective date of this subpart. If a designated 
State desires to participate in additional time periods, applications 
are not required to be resubmitted; however, the Governor must notify 
the Under Secretary, in writing, no later than July 31 of each FY, and 
the State must submit evidence of eligibility requirements each FY in 
accordance with Sec. 1940.954 (e)(2) of this subpart. Beginning in FY 
1993, applications must be submitted to the Under Secretary no later 
than July 31 if a State desires to be selected to fill vacancies that 
occur when designated States do not roll over into another established 
time period. States should include the following information with SF 
424.1:
    (1) A narrative signed by the Governor including reasons for State 
participation in this program and reasons why a project review and 
ranking process by a State panel will improve the economic and social 
conditions of rural areas in the State. The narrative will also include 
the time period(s) for which the State wishes to participate.
    (2) A proposal outlining the method for meeting all the following 
eligibility requirements and the timeframes established for meeting each 
requirement:
    (i) Establishing a rural economic development review panel in 
accordance with Sec. 1940.956 of this subpart. When established, the 
name, title, and address of each proposed member should be included and 
the chairperson and vice chairperson should be identified.
    (ii) Governor's proposed designation of a State agency to support 
the State coordinator and the panel. The name, address, and telephone 
number of the proposed agency's contact person should be included.
    (iii) Governor's proposed selection of a State coordinator in 
accordance with Sec. 1940.957 of this subpart, including the title, 
address, and telephone number.
    (iv) Development of area development plans for all areas of the 
State that are eligible to receive assistance from designated rural 
development programs.
    (v) The review and evaluation of area development plans by the panel 
in accordance with Sec. 1940.956 of this subpart.
    (vi) Development of written policy and criteria used by the panel to 
review and evaluate area plans in accordance with Sec. 1940.956 of this 
subpart.
    (vii) Development of written policy and criteria the panel will use 
to evaluate and rank applications in accordance with Sec. 1940.956 of 
this subpart.
    (3) Preparation of a proposed budget that includes 3 years 
projections of income and expenses associated with panel operations. If 
funds from other sources are anticipated, sources and amounts should be 
identified.
    (4) Development of a financial management system that will provide 
for effective control and accountability of all funds and assets 
associated with the panel.
    (5) A schedule to coordinate the submission, review, and ranking 
process of preapplications/applications in accordance with Sec. 
1940.956(a) of this subpart.
    (6) Other information provided by the State in support of its 
application.
    (b) Selecting States. The Under Secretary will review the 
application and other information submitted by the State and designate 
not more than five States to participate during any established time 
period.
    (c) Notification of selection. (1) The Under Secretary will notify 
the Governor of each State whether or not the State has been selected 
for further consideration in this program. If a State has been selected, 
the notification will include the additional information that the 
Governor must submit to the Under Secretary in order for the State to 
meet eligibility requirements in accordance with paragraph (d) of this 
section.

[[Page 106]]

    (2) A copy of the notification to the Governor will be submitted to 
the Administrator along with a copy of the State's application and other 
material submitted in support of the application.
    (d) Determining State eligibility. (1) The Governor will provide the 
Under Secretary with evidence that the State has complied with the 
eligibility requirements of paragraph (a)(2) of this section not later 
than September 1, 1992, for the first established time period and not 
later than September 1 for each of the remaining established time 
periods.
    (2) The Under Secretary will review the material submitted by the 
Governor in sufficient detail to determine if a State has complied with 
all eligibility requirements of this subpart. The panel will not begin 
reviewing and ranking applications until the Governor has been notified 
in writing by the Under Secretary that the State has been determined 
eligible and is designated to participate in this program. A copy of the 
notification will be sent to the Administrator. The Under Secretary's 
decision is not appealable.
    (e) Eligibility requirements. (1) With respect to this subpart, the 
Under Secretary may determine a State to be an eligible State provided 
all of the following apply not later than October 1 of each FY:
    (i) The State has established a rural economic development review 
panel that meets the requirements of Sec. 1940.956 of this subpart;
    (ii) The Governor has appointed an officer or employee of the State 
government to serve as State coordinator to carry out the 
responsibilities set forth in Sec. 1940.957 of this subpart; and
    (iii) The Governor has designated an agency of the State government 
to provide the panel and State coordinator with support for the daily 
operation of the panel.
    (2) If a State is determined eligible initially and desires to 
participate in additional time periods established for this program, the 
Governor will submit documents and information not later than September 
1 of each subsequent FY in sufficient detail for the Under Secretary to 
determine, prior to the beginning of the additional time period, that 
the State is still in compliance with all eligibility requirements of 
this subpart.



Sec. 1940.955  Distribution of program funds to designated States.

    (a) States selected to participate in the first established time 
period will receive funds from designated rural development programs 
according to applicable program regulations until the end of FY 1992, if 
necessary for States to have sufficient time to meet the eligibility 
requirements of this subpart, and to be designated to participate in 
this program. No funds will be administered under this subpart to an 
ineligible State.
    (b) If a State becomes an eligible State any time prior to the end 
of FY 1992, any funds remaining unobligated from a State's FY 1992 
allocation, may be administered under this subpart.
    (c) Beginning in FY 1993 and for each established time period 
thereafter, all designated rural development program funds received by a 
designated State will be administered in accordance with Sec. Sec. 
1940.961 through 1940.965 of this subpart, provided the State is 
determined eligible prior to the beginning of each FY in accordance with 
Sec. 1940.954 of this subpart. No assistance will be provided under any 
designated rural development program in any designated State that is not 
an eligible State.



Sec. 1940.956  State rural economic development review panel.

    (a) General. In order for a State to become or remain an eligible 
State, the State must have a rural economic development panel that meets 
all requirements of this subpart. Each designated State will establish a 
schedule whereby the panel and FmHA or its successor agency under Public 
Law 103-354 will coordinate the submission, review, and ranking process 
of preapplications/applications. The schedule will be submitted to the 
Under Secretary for concurrence and should consider the following:
    (1) Timeframes should assure that applications selected for funding 
from the current FY's allocation of funds can be processed by FmHA or 
its successor agency under Public Law 103-354 and funds obligated prior 
to the July 15

[[Page 107]]

pooling established in Sec. 1940.961(c) of this subpart;
    (2) Initial submission of preapplications/applications from FmHA or 
its successor agency under Public Law 103-354 to the panel and any 
subsequent submissions during the first year;
    (3) How often during each FY thereafter should FmHA or its successor 
agency under Public Law 103-354 submit preapplications/applications to 
the panel for review and ranking;
    (4) Number of working days needed by the panel to review and rank 
preapplications/applications;
    (5) Number of times during the FY the panel will submit a list of 
ranked preapplications/applications to FmHA or its successor agency 
under Public Law 103-354 for funding consideration;
    (6) Consider the matching of available loan and grant funds to 
assure that all allocated funds will be used;
    (7) How to consider ranked preapplications/applications at the end 
of the FY that have not been funded; and
    (8) How to consider requests for additional funds needed by an 
applicant to complete a project that already has funds approved; i.e., 
construction bid cost overrun.
    (b) Duties and responsibilities. The panel is required to advise the 
State Director on the desirability of funding applications from funds 
available to the State from designated rural development programs. In 
relation to this advice, the panel will have the following duties and 
responsibilities:
    (1) Establish policy and criteria to review and evaluate area plans 
and to review and rank preapplications/applications. (i) Area plan. The 
panel will develop a written policy and criteria to use when evaluating 
area plans. The criteria to be used when evaluating area plans will 
assure that the plan includes, as a minimum, the technical information 
included in Sec. 1940.959 of this subpart. The criteria will be in 
sufficient detail for the panel to determine that the plan is 
technically and economically adequate, feasible, and likely to succeed 
in meeting the stated goals of the plan. The panel will give weight to 
area-wide or regional plans and comments submitted by intergovernmental 
development councils or similar organizations made up of local elected 
officials charged with the responsibility for rural area or regional 
development. A copy of the policy and evaluating criteria will be 
provided to FmHA or its successor agency under Public Law 103-354.
    (ii) Applications. The panel will annually review the policy and 
criteria used by the panel to evaluate and rank preapplications/
applications in accordance with this subpart. The panel will assure that 
the policy and criteria are consistent with current rural development 
needs, and that the public has an opportunity to provide input during 
the development of the initial policy and criteria. The Governor will 
provide a copy of the initial policy and criteria established by the 
panel when submitting evidence of eligibility in accordance with Sec. 
1940.954 of this subpart. Annually, thereafter, and not later than 
September 1 of each FY, the State coordinator will send the Under 
Secretary evidence that the panel has reviewed the established policy 
and criteria. The State coordinator will also send the Under Secretary a 
copy of all revisions.
    (A) The policy and criteria used to rank applications for business 
related projects will include the following, which are not necessarily 
in rank order:
    (1) The extent to which a project stimulate rural development by 
creating new jobs of a permanent nature or retaining existing jobs by 
enabling new small businesses to be started, or existing businesses to 
be expanded by local or regional area residents who own and operate the 
businesses.
    (2) The extent to which a project will contribute to the enhancement 
and the diversification of the local or regional area economy.
    (3) The extent to which a project will generate or retain jobs for 
local or regional area residents.
    (4) The extent to which a project will be carried out by persons 
with sufficient management capabilities.
    (5) The extent to which a project is likely to become successful.
    (6) The extent to which a project will assist a local or regional 
area overcome severe economic distress.

[[Page 108]]

    (7) The distribution of assistance to projects in as many areas as 
possible in the State with sensitivity to geographic distribution.
    (8) The technical aspects of the project.
    (9) The market potential and marketing arrangement for the projects.
    (10) The potential of such project to promote the growth of a rural 
community by improving the ability of the community to increase the 
number of persons residing in the community and by improving the quality 
of life for these persons.
    (B) The policy and criteria used to rank preapplications/
applications for infrastructure and all other community facility-type 
projects will include the following which are not necessarily in rank 
order:
    (1) The extent to which the project will have the potential to 
promote the growth of a rural community by improving the quality of life 
for local or regional residents.
    (2) The extent to which the project will affect the health and 
safety of local or regional area residents.
    (3) The extent to which the project will improve or enhance cultural 
activities, public service, education, or transportation.
    (4) The extent to which the project will affect business 
productivity and efficiency.
    (5) The extent to which the project will enhance commercial business 
activity.
    (6) The extent to which the project will address a severe loss or 
lack of water quality or quantity.
    (7) The extent to which the project will correct a waste collection 
or disposal problem.
    (8) The extent to which the project will bring a community into 
compliance with Federal or State water or waste water standards.
    (9) The extent to which the project will consolidate water and waste 
systems and utilize management efficiencies in the new system.
    (2) Review and evaluate area plans. Each area plan submitted for a 
local or regional area will be reviewed and evaluated by the panel. 
After an area plan has been reviewed and evaluated in accordance with 
established policy and criteria:
    (i) The panel will accept any area plan that meets established 
criteria unless the plan is incompatible with any other area plan for 
that area that has been accepted by the panel; or
    (ii) The panel will return any area plan that is technically or 
economically inadequate, not feasible, is unlikely to be successful, or 
is not compatible with other panel-accepted area plans for that area. 
When an area plan is returned, the panel will include an explanation of 
the reasons for the return and suggest alternative proposals.
    (iii) The State coordinator will notify the State Director, in 
writing, of the panel's decision on each area plan reviewed.
    (3) Review and rank preapplications/applications. The panel will 
review, rank, and transmit a ranked list of preapplications/applications 
according to the schedule prepared in accordance with paragraph (a) of 
this section, and the following:
    (i) Review preapplications/applications. The panel will review each 
preapplication/application for assistance to determine if the project to 
be carried out is compatible with the area plan in which the project 
described in the preapplication/application is proposed, and either:
    (A) Accept any preapplication/application determined to be 
compatible with such area plan; or
    (B) Return to the State Director any preapplication/application 
determined not to be compatible with such area plan. The panel will 
notify the applicant when preapplication/applications are returned to 
the State Director.
    (ii) Rank preapplications/applications. The panel will rank only 
those preapplications/applications that have been accepted in accordance 
with paragraph (b)(3)(i)(A) of this section. The panel will consider the 
sources of assistance and related activities in the State identified by 
the designated agency. Applications will be ranked in accordance with 
the written policy and criteria established in accordance with paragraph 
(b)(1)(ii) of this section and the following:

[[Page 109]]

    (A) Priority ranking for projects addressing health emergencies. In 
addition to the criteria established in paragraph (b)(1)(ii) of this 
section, preapplications/applications for projects designed to address a 
health emergency declared so by the appropriate Federal or State agency, 
will be given priority by the panel.
    (B) Priority based on need. If two or more preapplications/
applications ranked in accordance with this subpart are determined to 
have comparable strengths in their feasibility and potential for growth, 
the panel will give priority to the applications for projects with the 
greatest need.
    (C) If additional ranking criteria for use by a panel are required 
in any designated rural development program regulation, the panel will 
give consideration to the criteria when ranking preapplications/
applications submitted under that program.
    (iii) Transmit list of ranked preapplications/applications. After 
the preapplications/applications have been ranked, the panel will submit 
a list of all preapplications/applications received to the State 
coordinator. The list will clearly indicate each preapplication/
application accepted for funding and will list preapplications/
applications in the order established for funding according to priority 
ranking by the panel. The list will not include a preapplication/
application that is to be returned to the applicant in accordance with 
paragraph (b)(3)(i)(B) of this section. The State coordinator will send 
a copy of the list to the State Director for further processing of the 
preapplication/application in accordance with Sec. 1940.965 of this 
subpart. Once the panel has ranked and submitted the list to FmHA or its 
successor agency under Public Law 103-354 and the State Director has 
selected a preapplication/application for funding, the preapplication/
application selected will not be replaced with a preapplication/
application received at a later date that may have a higher ranking.
    (4) Public availability of list. If requested, the State coordinator 
will make the list of ranked preapplications/applications available to 
the public and will include a brief explanation and justification of why 
the project preapplications/applications received their priority 
ranking.
    (c) Membership. (1) Voting members. The panel will be composed of 
not more than 16 voting members who are representatives of rural areas. 
The 16 voting members will include the following:
    (i) One of whom is the Governor of the State or the person 
designated by the Governor to serve on the panel, on behalf of the 
Governor, for that year;
    (ii) One of whom is the director of the State agency responsible for 
economic and community development or the person designated by the 
director to serve on the panel, on behalf of the director, for that 
year:
    (iii) One of whom is appointed by a statewide association of banking 
organizations;
    (iv) One of whom is appointed by a statewide association of 
investor-owned utilities;
    (v) One of whom is appointed by a statewide association of rural 
telephone cooperatives;
    (vi) One of whom is appointed by a statewide association of 
noncooperative telephone companies;
    (vii) One of whom is appointed by a statewide association of rural 
electric cooperatives;
    (viii) One of whom is appointed by a statewide association of health 
care organizations;
    (ix) One of whom is appointed by a statewide association of existing 
local government-based planning and development organizations;
    (x) One of whom is appointed by the Governor of the State from 
either a statewide rural development organization or a statewide 
association of publicly-owned electric utilities, neither of which is 
described in any of paragraphs (c)(1)(iii) through (ix);
    (xi) One of whom is appointed by a statewide association of 
counties;
    (xii) One of whom is appointed by a statewide association of towns 
and townships, or by a statewide association of municipal leagues, as 
determined by the Governor;
    (xiii) One of whom is appointed by a statewide association of rural 
water districts;
    (xiv) The State director of the Federal small business development 
center

[[Page 110]]

or, if there is no small business development center in place with 
respect to the State, the director of the State office of the Small 
Business Administration;
    (xv) The State representative of the Economic Development 
Administration of the Department of Commerce; and
    (xvi) One of whom is appointed by the State Director from among the 
officers and employees of FmHA or its successor agency under Public Law 
103-354.
    (2) Nonvoting members. The panel will have not more than four 
nonvoting members who will serve in an advisory capacity and who are 
representatives of rural areas. The four nonvoting members will be 
appointed by the Governor and include:
    (i) One from names submitted by the dean or the equivalent official 
of each school or college of business, from colleges and universities in 
the State;
    (ii) One from names submitted by the dean or the equivalent official 
of each school or college of engineering, from colleges and universities 
in the State;
    (iii) One from names submitted by the dean or the equivalent 
official, of each school or college of agriculture, from colleges and 
universities in the State; and
    (iv) The director of the State agency responsible for extension 
services in the State.
    (3) Qualifications of panel members appointed by the Governor. Each 
individual appointed to the panel by the Governor will be specially 
qualified to serve on the panel by virtue of the individual's technical 
expertise in business and community development.
    (4) Notification of selection. Each statewide organization that 
selects an individual to represent the organization on the panel must 
notify the Governor of the selection.
    (5) Appointment of members representative of statewide organization 
in certain cases. (i) If there is no statewide association or 
organization of the entities described in paragraph (c)(1) of this 
section, the Governor of the State will appoint an individual to fill 
the position or positions, as the case may be, from among nominations 
submitted by local groups of such entities.
    (ii) If a State has more than one of any of the statewide 
associations or organizations of the entities described in paragraph 
(c)(1) of this section, the Governor will select one of the like 
organizations to name a member to serve during no more than one 
established time period. Thereafter, the Governor will rotate selection 
from among the remaining like organizations to name a member.
    (d) Failure to appoint panel members. The failure of the Governor, a 
Federal agency, or an association or organization described in paragraph 
(c) of this section, to appoint a member to the panel as required under 
this subpart, shall not prevent a State from being determined an 
eligible State.
    (e) Panel vacancies. A vacancy on the panel will be filled in the 
manner in which the original appointment was made. Vacancies should be 
filled prior to the third panel meeting held after the vacany occurred. 
The State coordinator will notify the State Director, in writing, when 
the vacancy is filled or if the vacancy will not be filled.
    (f) Chairperson and vice chairperson. The panel will select two 
members of the panel who are not officers or employees of the United 
States to serve as the chairperson and vice chairperson of the panel. 
The term shall be for 1 year.
    (g) Compensation to panel members. (1) Federal members. Except as 
provided in Sec. 1940.960 of this subpart, each member of the panel who 
is an officer or employee of the Federal Government may not receive any 
compensation or benefits by reason of service on the panel, in addition 
to that which is received for performance of such officer or employee's 
regular employment.
    (2) NonFederal members. Each nonfederal member may be compensated by 
the State and/or from grant funds established in Sec. 1940.968 of this 
subpart.
    (h) Rules governing panel meetings. (1) Quorum. A majority of voting 
members of the panel will constitute a quorum for the purpose of 
conducting business of the panel.
    (2) Frequency of meetings. The panel will meet not less frequently 
than quarterly. Frequency of meetings should be often enough to assure 
that applications are reviewed and ranked for funding in a timely 
manner.

[[Page 111]]

    (3) First meeting. The State coordinator will schedule the first 
panel meeting and will notify all panel members of the location, date, 
and time at least seven days prior to the meeting. Subsequent meetings 
will be scheduled by vote of the panel.
    (4) Records of meetings. The panel will keep records of the minutes 
of the meetings, deliberations, and evaluations of the panel in 
sufficient detail to enable the panel to provide interested agencies or 
persons the reasons for its actions.
    (i) Federal Advisory Committee Act. The Federal Advisory Committee 
Act shall not apply to any State rural economic development review 
panel.
    (j) Liability of members. The members of a State rural economic 
development review panel shall not be liable to any person with respect 
to any determination made by the panel.



Sec. 1940.957  State coordinator.

    The Governor will appoint an officer or employee of State government 
as State coordinator in order for a State to become and remain an 
eligible State under this subpart. The State coordinator will have the 
following duties and responsibilities:
    (a) Manage, operate, and carry out the instructions of the panel;
    (b) Serve as liaison between the panel and the Federal and State 
agencies involved in rural development;
    (c) Coordinate the efforts of interested rural residents with the 
panel and ensure that all rural residents in the State are informed 
about the manner in which assistance under designated rural development 
programs is provided to the State pursuant to this subpart, and if 
requested, provide information to State residents; and
    (d) Coordinate panel activities with FmHA or its successor agency 
under Public Law 103-354.



Sec. 1940.958  Designated agency.

    The Governor will appoint a State agency to provide the panel and 
the State coordinator with support for the daily operation of the panel. 
In addition to providing support, the designated agency is responsible 
for identifying:
    (a) Alternative sources of financial assistance for project 
preapplications/applications reviewed and ranked by the panel, and
    (b) Related activities within the State.



Sec. 1940.959  Area plan.

    Each area plan submitted to the panel for review in accordance with 
Sec. 1940.956 of this subpart shall identify the geographic boundaries 
of the area and shall include the following information:
    (a) An overall development plan for the area with goals, including 
business development and infrastructure development goals, and time 
lines based on a realistic assessment of the area, including, but not 
limited to, the following:
    (1) The number and types of businesses in the area that are growing 
or declining;
    (2) A list of the types of businesses that the area could 
potentially support;
    (3) The outstanding need for water and waste disposal and other 
public services or facilities in the area;
    (4) The realistic possibilities for industrial recruitment in the 
area;
    (5) The potential for development of tourism in the area;
    (6) The potential to generate employment in the area through 
creation of small businesses and the expansion of existing businesses; 
and
    (7) The potential to produce value-added agricultural products in 
the area.
    (b) An inventory and assessment of the human resources of the area, 
including, but not limited to, the following:
    (1) A current list of organizations in the area and their special 
interests;
    (2) The current level of participation of area residents in rural 
development activities and the level of participation required for 
successful implementation of the plan;
    (3) The availability of general and specialized job training in the 
area and the extent to which the training needs of the area are not 
being met;

[[Page 112]]

    (4) A list of area residents with special skills which could be 
useful in developing and implementing the plan; and
    (5) An analysis of the human needs of the area, the resources in the 
area available to meet those needs, and the manner in which the plan, if 
implemented, would increase the resources available to meet those needs.
    (c) The current degree of intergovernmental cooperation in the area 
and the degree of such cooperation needed for the successful 
implementation of the plan.
    (d) The ability and willingness of governments and citizens in the 
area to become involved in developing and implementing the plan.
    (e) A description of how the governments in the area apply budget 
and fiscal control processes to the plan. This process is directed 
toward costs associated with carrying out the planned development. When 
plans are developed, the financial condition of all areas covered under 
the plan should be fully recognized and planned development should 
realistically reflect the area's immediate and long-range financial 
capabilities.
    (f) The extent to which public services and facilities need to be 
improved to achieve the economic development and quality of life goals 
of the plan. At a minimum, the following items will be considered:
    (1) Law enforcement;
    (2) Fire protection;
    (3) Water, sewer, and solid waste management;
    (4) Education;
    (5) Health care;
    (6) Transportation;
    (7) Housing;
    (8) Communications; and
    (9) The availability of and capability to generate electric power.
    (g) Existing area or regional plans are acceptable provided the plan 
includes statements that indicate the degree to which the plan has met 
or is meeting all the requirements in paragraphs (a) through (f) of this 
section.



Sec. 1940.960  Federal employee panel members.

    (a) The State Director will appoint one FmHA or its successor agency 
under Public Law 103-354 employee to serve as a voting member of the 
panel established in Sec. 1940.956(c)(1) of this subpart.
    (b) The Administrator may appoint, temporarily and for specific 
purposes, personnel from any department or agency of the Federal 
Government as nonvoting panel members, with the consent of the head of 
such department or agency, to provide official information to the panel. 
The member(s) appointed shall have expertise to perform a duty described 
in Sec. 1940.956(b) of this subpart that is not available among panel 
members.
    (c) Federal panel members will be paid per diem or otherwise 
reimbursed by the Federal Government for expenses incurred each day the 
employee is engaged in the actual performance of a duty of the panel. 
Reimbursement will be in accordance with Federal travel regulations.



Sec. 1940.961  Allocation of appropriated funds.

    (a) Initial allocations. (1) Each FY, from sums appropriated for 
direct loans, loan guarantees, or grants for any designated rural 
development program, funds will be allocated to designated States in 
accordance with FmHA Instruction subpart L of part 1940, exhibit A, 
attachment 4, of this chapter (available in any FmHA or its successor 
agency under Public Law 103-354 State or District Office).
    (2) Each FY, and normally within 30 days after the date FmHA or its 
successor agency under Public Law 103-354 receives an appropriation of 
designated rural development program funds, the Governor of each 
designated State will be notified of the amounts allocated to the State 
under each designated program for such FY. The Governor will also be 
notified of the total amounts appropriated for the FY for each 
designated rural development program.
    (3) The State Director will fund projects from a designated State's 
allocation of funds, according to appropriate program regulations giving 
great weight to the order in which the preapplications/applications for 
projects are ranked and listed by the panel in accordance with Sec. 
1940.956(b)(3) of this subpart.

[[Page 113]]

    (b) Reserve. A percentage of the National Office reserve established 
in subpart L of part 1940 of this chapter will be used to establish a 
reserve for designated States that is separate and apart from that of 
nondesignated States. The percent reserved will be based upon the same 
criteria used in subpart L of part 1940 of this chapter to allocate 
program funds.
    (c) Pooling. (1) On July 15 of each FY, and from time to time 
thereafter during the FY, as determined appropriate, unobligated funds 
will be pooled from among the designated States. Pooled funds will be 
made a part of the reserve established for designated States and will 
revert to National Office control.
    (2) Funds pooled from designated States can be requested by 
designated States, pursuant to subsection (d) of this section. The 
designated States' pool; however, will not be available to nondesignated 
States until September 1 of each year.
    (d) Request for funds. (1) Designated States may request designated 
States' reserve funds, and funds for other designated rural development 
programs controlled by the National Office, as shown in FmHA Instruction 
subpart L of part 1940, exhibit A, attachment 4, of this chapter, in 
accordance with applicable program regulations.
    (2) Designated States may request funds from the nondesignated 
reserve account when:
    (i) All allocated and reserve funds to designated states have been 
used, or
    (ii) Sufficient funds do not remain in any designated State 
allocation and in the designated States' reserve account to fund a 
project.



Sec. 1940.962  Authority to transfer direct loan amounts.

    (a) Transfer of funds. If the amounts allocated to a designated 
State for direct Water and Waste Disposal or Community Facility loans 
for a FY are not sufficient to provide the full amount requested for a 
project in accordance with this subpart, the State Director may transfer 
part or all of the funds allocated to the State, from one program to 
another, subject to paragraphs (b) and (c) of this section.
    (b) Limitation on amounts transferred. (1) Amounts transferred 
within a designated State. The amount of direct loan funds transferred 
from a program under this section shall not exceed the amount left 
unobligated after obligating the full amount of assistance requested for 
each project that ranked higher in priority on the panel's list.
    (2) Amounts transferred on a National basis. The amount of direct 
loan funds transferred in a FY, among the designated States, from a 
program under this subpart (after accounting for any offsetting 
transfers into such program) shall not exceed $9 million, or an amount 
otherwise authorized by law.
    (c) National Office concurrence. The State Director may transfer 
direct loan funds authorized in this section, after requesting and 
receiving concurrence from the National Office. If permitted by law, the 
National Office will concur in requests on a first-come-first-served 
basis.



Sec. 1940.963  Authority to transfer guaranteed loan amounts.

    (a) Transfer of funds. If the amounts allocated to a designated 
State for guaranteed Water and Waste Disposal, Community Facility, or 
Business and Industry loans for a FY are not sufficient to provide the 
full amount requested for a project in accordance with this subpart, the 
State Director may transfer part or all of the funds allocated to the 
State, from one program to another, subject to paragraphs (b) and (c) of 
this section.
    (b) Limitation on amounts transferred. The amount of guaranteed loan 
funds transferred from a program under this section shall not exceed the 
amount left unobligated after obligating the full amount of assistance 
requested for each project that ranked higher in priority on the panel's 
list.
    (c) National Office concurrence. The State Director may transfer 
guaranteed loan funds authorized in this section, after requesting and 
receiving concurrence from the National Office. If permitted by law, the 
National Office will concur in requests on a first-come-first-served 
basis.

[[Page 114]]



Sec. 1940.964  [Reserved]



Sec. 1940.965  Processing project preapplications/applications.

    Except for the project review and ranking process established in 
this subpart, all requests for funds from designated rural development 
programs will be processed, closed, and serviced according to applicable 
FmHA or its successor agency under Public Law 103-354 regulations, 
available in any FmHA or its successor agency under Public Law 103-354 
office.
    (a) Preapplications/applications. All preapplications/applications 
on hand that have not been selected for further processing will be 
submitted initially to the panel for review and ranking. 
Preapplications/applications on hand that had been selected for further 
processing prior to the time a State was selected to participate in this 
program may be funded by FmHA or its successor agency under Public Law 
103-354 without review by the panel. Pre ap pli ca tions/applications 
selected for further processing by FmHA or its successor agency under 
Public Law 103-354 will not exceed the State's previous year's funding 
level. The State Director will provide the State coordinator a list of 
preapplications/applications that are in process and will be considered 
for funding without review by the panel. This list will be provided at 
the same time preapplications/applications are initially submitted to 
the State coordinator in accordance with paragraph (d) of this section.
    (b) FmHA or its successor agency under Public Law 103-354 review. 
Pre ap pli ca tions/applications will be reviewed in sufficient detail 
to determine eligibility and, if applicable, determine if the applicant 
is able to obtain credit from other sources at reasonable rates and 
terms. Normally, within 45 days after receiving a complete pre ap pli ca 
tion/application, FmHA or its successor agency under Public Law 103-354 
will notify the applicant of the eligibility determination. A copy of 
all notifications will be sent to the State coordinator.
    (c) Applicant notification. The notification to eligible applicants 
will contain the following statements:

    Your application has been submitted to the State coordinator for 
review and ranking by the State rural economic development review panel. 
If you have questions regarding this review process, you should contact 
the State coordinator. The address and telephone number are: (insert).
    You will be notified at a later date of the decision reached by the 
panel and whether or not you can proceed with the proposed project.
    You are advised against incurring obligations which cannot be 
fulfilled without FmHA or its successor agency under Public Law 103-354 
funds.


These statements should be included in notifications to applicants with 
pre ap pli ca tions/applications on hand that had not been selected for 
further processing prior to the time a State was selected to participate 
in this program.
    (d) Information to State coordinator. FmHA or its successor agency 
under Public Law 103-354 will forward a copy of the preapplication/
application and other information received from the applicant to the 
State coordinator according to a schedule prepared in accordance with 
Sec. 1940.956(a) of this subpart. The State coordinator will be advised 
that no further action will be taken on preapplications/applications 
until they have been received and ranked by the panel, and a priority 
funding list has been received from the State. Applications forwarded to 
the State coordinator will be reviewed and ranked for funding in 
accordance with Sec. 1940.956 of this subpart.
    (e) The FmHA or its successor agency under Public Law 103-354 review 
of priority funding list. FmHA or its successor agency under Public Law 
103-354 will review the list of ranked applications received from the 
State coordinator and determine if projects meet the requirements of the 
designated rural development program under which the applicant seeks 
assistance. Any project that does not meet program regulations will be 
removed from the list. Applicants will be notified of the decision 
reached by the panel and whether or not the applicant should proceed 
with the project. FmHA or its successor agency under Public Law 103-354 
will provide a copy of all notifications to the State coordinator. The 
decisions of the panel are not appealable.

[[Page 115]]

    (f) Obligation of funds. FmHA or its successor agency under Public 
Law 103-354 will provide funds for projects whose application remains on 
the list, subject to available funds. Consideration will be given to the 
order in which the applications were ranked and prioritized by the 
panel. If FmHA or its successor agency under Public Law 103-354 proposes 
to provide assistance to any project without providing assistance to all 
projects ranked higher in priority by the panel than the project to be 
funded, 10 days prior to requesting an obligation of funds, the State 
Director will submit a report stating reasons for funding such lower 
ranked project to the following:
    (1) Panel.
    (2) National Office. The National Office will submit a copy of the 
notification to:
    (i) Committee on Agriculture of the House of Representatives, 
Washington, DC.
    (ii) Committee on Agriculture, Nutrition, and Forestry of the 
Senate, Washington, DC.



Sec. Sec. 1940.966-1940.967  [Reserved]



Sec. 1940.968  Rural Economic Development Review Panel Grant (Panel 
Grant).

    (a) General. Panel Grants awarded will be made from amounts 
appropriated for grants under any provision of section 306(a) of the 
CONACT (7 U.S.C 1926(a)), not to exceed $100,000 annually to each 
eligible State. This section outlines FmHA or its successor agency under 
Public Law 103-354's policies and authorizations and sets forth 
procedures for making grants to designated States for administrative 
costs associated with a State rural economic development review panel.
    (b) Objective. The objective of the Panel Grant program is to make 
grant funds available annually to each designated State to use for 
administrative costs associated with the State rural economic 
development review panels meeting requirements of Sec. 1940.956 of this 
subpart.
    (c) Authorities, delegations, and redelegations. The State Director 
is responsible for implementing the authorities in this section and to 
issue State supplements redelegating these authorities to appropriate 
FmHA or its successor agency under Public Law 103-354 employees. Grant 
approval authorities are contained in subpart A of part 1901 of this 
chapter.
    (d) Joint funds. FmHA or its successor agency under Public Law 103-
354 grant funds may be used jointly with funds furnished by the grantee 
or grants from other sources.
    (e) Eligibility. A State designated by the Under Secretary to 
participate in this program is eligible to receive not more than 
$100,000 annually under this section. A State must become and remain an 
eligible State in order to receive funds under this section.
    (f) Purpose. Panel Grant funds may be used to pay for reasonable 
administrative costs associated with the panel, including, but not 
limited to, the following:
    (1) Travel and lodging expenses;
    (2) Salaries for State coordinator and support staff;
    (3) Reasonable fees and charges for professional services necessary 
for establishing or organizing the panel. Services must be provided by 
individuals licensed in accordance with appropriate State accreditation 
associations;
    (4) Office supplies, and
    (5) Other costs that may be necessary for panel operations.
    (g) Limitations. Grant funds will not be used to:
    (1) Pay costs incurred prior to the effective date of the grant 
authorized under this subpart;
    (2) Recruit preapplications/applications for any designated rural 
development loan or grant program or any loan or grant program;
    (3) Duplicate activities associated with normal execution of any 
panel member's occupation;
    (4) Fund political activities;
    (5) Pay costs associated with preparing area development plans;
    (6) Pay for capital assets; purchase real estate, equipment or 
vehicles; rent, improve, or renovate office space; or repair and 
maintain State or privately owned property;
    (7) Pay salaries to panel members; or
    (8) Pay per diem or otherwise reimburse panel members unless 
distance traveled exceed 50 miles.

[[Page 116]]

    (h) Other considerations. (1) Equal opportunity requirements. Grants 
made under this subpart are subject to title VI of the Civil Rights Act 
of 1964 as outlined in subpart E of part 1901 of this chapter.
    (2) Environmental requirements. The policies and regulations 
contained in subpart G of part 1940 of this chapter apply to grants made 
under this subpart.
    (3) Management assistance. Grantees will be provided management 
assistance as necessary to assure that grant funds are used for eligible 
purposes for the successful operation of the panel. Grants made under 
this subpart will be administered under and are subject to the U.S. 
Department of Agriculture regulations, 7 CFR, parts 3016 and 3017, as 
appropriate.
    (4) Drug-free work place. The State must provide for a drug-free 
workplace in accordance with the requirements of FmHA Instruction 1940-M 
(available in any FmHA or its successor agency under Public Law 103-354 
office). Just prior to grant approval, the State must prepare and sign 
Form AD-1049, ``Certification Regarding Drug-Free Workplace Requirements 
(Grants) Alternative I--For Grantees Other Than Individuals.''
    (i) Application processing. (1) The State Director shall assist the 
State in application assembly and processing. Processing requirements 
should be discussed during an application conference.
    (2) After the Governor has been notified that the State has been 
designated to participate in this program and the State has met all 
eligibility requirements of this subpart, the State may file an original 
and one copy of SF 424.1 with the State Director. The following 
information will be included with the application:
    (i) State's financial or in-kind resources, if applicable, that will 
maximize the use of Panel Grant funds;
    (ii) Proposed budget. The financial budget that is part of SF 424.1 
may be used, if sufficient, for all panel income and expense categories;
    (iii) Estimated breakdown of costs, including costs to be funded by 
the grantee or from other sources;
    (iv) Financial management system in place or proposed. The system 
will account for grant funds in accordance with State laws and 
procedures for expending and accounting for its own funds. Fiscal 
control and accounting procedures of the State must be sufficient to 
permit preparation of reports required by Federal regulations and permit 
the tracing of funds to a level of expenditures adequate to establish 
that grant funds are used solely for authorized purposes;
    (v) Method to evaluate panel activities and determine if objectives 
are met;
    (vi) Proposed Scope-of-Work detailing activities associated with the 
panel and time frames for completion of each task, and
    (vii) Other information that may be needed by FmHA or its successor 
agency under Public Law 103-354 to make a grant award determination.
    (3) The applicable provisions of Sec. 1942.5 of subpart A of part 
1942 of this chapter relating to preparation of loan dockets will be 
followed in preparing grant dockets. The docket will include at least 
the following:
    (i) Form FmHA or its successor agency under Public Law 103-354 400-
4, ``Assurance Agreement;''
    (ii) Scope-of-work prepared by the applicant and approved by FmHA or 
its successor agency under Public Law 103-354;
    (iii) Form FmHA or its successor agency under Public Law 103-354 
1940-1, ``Request for Obligation of Funds,'' with exhibit A, and
    (iv) Certification regarding a drug-free workplace in accordance 
with FmHA Instruction 1940-M (available in any FmHA or its successor 
agency under Public Law 103-354 office).
    (j) Grant approval, obligation of funds, and grant closing. (1) The 
State Director will review the application and other documents to 
determine whether the proposal complies with this subpart.
    (2) Exhibit A (available from any FmHA or its successor agency under 
Public Law 103-354 State Office), shall be attached to and become a 
permanent part of Form FmHA or its successor agency under Public Law 
103-354 1940-A and the following paragraphs

[[Page 117]]

will appear in the comment section of that form:

    The Grantee understands the requirements for receipt of funds under 
the Panel Grant program. The Grantee assures and certifies that it is in 
compliance with all applicable laws, regulations, Executive Orders, and 
other generally applicable requirements, including those set out in FmHA 
or its successor agency under Public Law 103-354 7 CFR, part 1940, 
subpart T, and 7 CFR, parts 3016 and 3017, including revisions through 
------ (date of grant approval). The Grantee further agrees to use grant 
funds for the purposes outlined in the Scope-of-Work approved by FmHA or 
its successor agency under Public Law 103-354. Exhibit A is incorporated 
as a part hereof.

    (3) Grants will be approved and obligated in accordance with the 
applicable parts of Sec. 1942.5(d) of subpart A of part 1942 of this 
chapter.
    (4) An executed copy of the Scope-of-Work will be sent to the State 
coordinator on the obligation date, along with a copy of Form FmHA or 
its successor agency under Public Law 103-354 1940-1 and the required 
exhibit. FmHA or its successor agency under Public Law 103-354 will 
retain the original of Form FmHA or its successor agency under Public 
Law 103-354 1940-1 and the exhibit.
    (5) Grants will be closed in accordance with the applicable parts of 
subpart A of part 1942 of this chapter, including Sec. 1942.7. The 
grant is considered closed on the obligation date.
    (6) A copy of Form FmHA or its successor agency under Public Law 
103-354 1940-1, with the required exhibit, and the Scope-of-Work will be 
submitted to the National Office when funds are obligated.
    (7) If the grant is not approved, the State coordinator will be 
notified in writing of the reason(s) for rejection. The notification 
will state that a review of the decision by FmHA or its successor agency 
under Public Law 103-354 may be requested by the State under subpart B 
of part 1900 of this chapter.
    (k) Fund disbursement. Grant funds will be disbursed on a 
reimbursement basis. Requests for funds should not exceed one advance 
every 30 days. The financial management system of the State shall 
provide for effective control and accountability of all funds, property, 
and assets.
    (1) SF 270, ``Request for Advance or Reimbursement,'' will be 
completed by the State coordinator and submitted to the State Director 
not more frequently than monthly.
    (2) Upon receipt of a properly completed SF 270, the State Director 
will request funds through the Automated Discrepancy Processing System. 
Ordinarily, payment will be made within 30 days after receipt of a 
properly prepared request for reimbursement.
    (3) States are encouraged to use minority banks (a bank which is 
owned by at least 50 percent minority group members) for the deposit and 
disbursement of funds. A list of minority owned banks can be obtained 
from the Office of Minority Business Enterprises, Department of 
Commerce, Washington, DC 20230.
    (l) Title. Title to supplies acquired under this grant will vest, 
upon acquisition, in the State. If there is a residual inventory of 
unused supplies exceeding $5,000 in total aggregate fair market value 
upon termination or completion of the grant awarded, and if the supplies 
are not needed for any other federally sponsored programs, the State 
shall compensate FmHA or its successor agency under Public Law 103-354 
for its share.
    (m) Costs. Costs incurred under this grant program are subject to 
cost principles established in Office of Management and Budget Circular 
A-87.
    (n) Budget changes. Rebudgeting within the approval direct cost 
categories to meet unanticipated requirements which do not exceed 10 
percent of the current total approved budget shall be permitted. The 
State shall obtain prior approval from the State Director for any 
revisions which result in the need for additional funding.
    (o) Programmatic changes. The State shall obtain prior written 
approval from the State Director for any change to the scope or 
objectives for which the grant was approved or for contracting out or 
otherwise obtaining services of a third party to perform activities 
which are central to the purposes of the grant. Failure to obtain prior 
approval of changes to the scope can result in

[[Page 118]]

suspension or termination of grant funds.
    (p) Financial reporting. SF 269, ``Financial Status Report,'' and a 
Project Performance Report are required on a quarterly basis. The 
reports will be submitted to the State Director not later than 30 days 
after the end of each quarter. A final SF 269 and Project Performance 
Report shall be due 90 days after the expiration or termination of grant 
support. The final report may serve as the last quarterly report. The 
State coordinator will constantly monitor performance to ensure that 
time schedules are met, projected work by time periods is accomplished, 
and other performance objectives are achieved. Program outlays and 
income will be reported on an accrual basis. Project Performance Reports 
shall include, but not be limited to, the following:
    (1) A comparison of actual accomplishments to the objectives 
established for that period;
    (2) Reasons why established objectives were not met;
    (3) Problems, delays, or adverse conditions which will affect the 
ability to meet the objectives of the grant during established time 
periods. This disclosure must include a statement of the action taken or 
planned to resolve the situation; and
    (4) Objectives and timetable established for the next reporting 
period.
    (q) Audit requirements. Audit reports will be prepared and submitted 
in accordance with Sec. 1942.17(q)(4) of subpart A of part 1942 of this 
chapter. The audit requirements only apply to the year(s) in which grant 
funds are received. Audits must be prepared in accordance with generally 
accepted government auditing standards using publication, ``Standards 
for Audits of Governmental Organizations, Programs, Activities and 
Functions.''
    (r) Grant cancellation. Grants which have been approved and funds 
obligated may be cancelled by the grant approval official in accordance 
with Sec. 1942.12 of subpart A of part 1942 of this chapter. The State 
Director will notify the State coordinator that the grant has been 
cancelled.
    (s) Grant servicing. Grants will be serviced in accordance with 
subparts E and O of part 1951 of this chapter.
    (t) Subsequent grants. Subsequent grants will be processed in 
accordance with the requirements of this subpart for each additional 
time period a State is designated to participate in this program.



Sec. 1940.969  Forms, exhibits, and subparts.

    Forms, exhibits, and subparts of this chapter (all available in any 
FmHA or its successor agency under Public Law 103-354 office) referenced 
in this subpart, are for use in establishing a State economic 
development review panel and for administering the Panel Grant program 
associated with the panel.



Sec. 1940.970  [Reserved]



Sec. 1940.971  Delegation of authority.

    The authority authorized to the State Director in this subpart may 
be redelegated.



Sec. Sec. 1940.972-1940.999  [Reserved]



Sec. 1940.1000  OMB control number.

    The collection of information requirements contained in this 
regulation has been approved by the Office of Management and Budget and 
assigned OMB control number 0575-0145. Public reporting burden for this 
collection of information is estimated to vary from 30 minutes to 48 
hours per response with an average of 4 hours per response, including 
the time for reviewing instructions, searching existing data sources, 
gathering and maintaining the data needed, and completing and reviewing 
the collection of information. Send comments regarding this burden 
estimate or any other aspect of this collection of information, 
including suggestions for reducing this burden, to Department of 
Agriculture, Clearance Officer, OIRM, Room 404-W, Washington, DC 20250; 
and to the Office of Information and Regulatory Affairs, Office of 
Management and Budget, Washington, DC 20503.

[[Page 119]]



PART 1941_OPERATING LOANS--Table of Contents




    Subpart A_Operating Loan Policies, Procedures, and Authorizations

Sec.
1941.1 Introduction.
1941.2 Objectives.
1941.3 Management assistance.
1941.4 Definitions.
1941.5 [Reserved]
1941.6 Credit elsewhere.
1941.7-1941.10 [Reserved]
1941.11 Applications.
1941.12 Eligibility requirements.
1941.13 Rural youth.
1941.14-1941.15 [Reserved]
1941.16 Loan purposes.
1941.17 Loan limitations.
1941.18 Rates and terms.
1941.19 Security.
1941.20-1941.22 [Reserved]
1941.23 General provisions.
1941.24 [Reserved]
1941.25 Appraisals.
1941.26-1941.28 [Reserved]
1941.29 Relationship between FSA loans, direct and guaranteed.
1941.30-1941.31 [Reserved]
1941.32 Catastrophic Risk Protection (CAT) insurance requirement.
1941.33 Loan approval or disapproval.
1941.34 [Reserved]
1941.35 Actions after loan approval.
1941.36-1941.37 [Reserved]
1941.38 Loan closing.
1941.39-1941.41 [Reserved]
1941.42 Loan servicing.
1941.43-1941.49 [Reserved]
1941.50 State supplements.

Exhibit A to Subpart A--Processing Guide--Insured Operating Loans
Exhibit B to Subpart A [Reserved]
Exhibit C to Subpart A--Controlled Substance

               Subpart B_Closing Loans Secured by Chattels

1941.51 Purpose.
1941.52-1941.53 [Reserved]
1941.54 Promissory note.
1941.55-1941.56 [Reserved]
1941.57 Security instruments.
1941.58-1941.59 [Reserved]
1941.60 Purchase money security interest.
1941.61-1941.62 [Reserved]
1941.63 Lien search.
1941.64-1941.66 [Reserved]
1941.67 Additional requirements for perfecting security interests.
1941.68-1941.70 [Reserved]
1941.71 Fees.
1941.72-1941.74 [Reserved]
1941.75 Retention and use of security agreements.
1941.76-1941.78 [Reserved]
1941.79 Future advance and after-acquired property clauses.
1941.80-1941.83 [Reserved]
1941.84 Title clearance and closing requirements.
1941.85-1941.87 [Reserved]
1941.88 Insurance.
1941.89-1941.91 [Reserved]
1941.92 Check delivery.
1941.93 [Reserved]
1941.94 Supervised bank accounts.
1941.95 [Reserved]
1941.96 Changes in use of loan funds.

    Authority: 5 U.S.C. 301 and 7 U.S.C. 1989.

    Source: 43 FR 55883, Nov. 29, 1978, unless otherwise noted.



    Subpart A_Operating Loan Policies, Procedures, and Authorizations

    Source: 53 FR 35684, Sept. 14, 1988, unless otherwise notes.

    Editorial Note: Nomenclature changes to subpart A appear at 68 FR 
7696, Feb. 18, 2003.



Sec. 1941.1  Introduction.

    This subpart contains regulations for making initial and subsequent 
direct Operating (OL) and Youth (OL-Y) loans. OL loans may be made to 
eligible farmers and ranchers and entities that will manage and operate 
not larger than family farms. Youth loans may be made to rural youth to 
conduct modest projects in connection with their participation in 4-H, 
Future Farmers of America, and similar organizations. It is the policy 
of Farm Service Agency (FSA) or its successor agency under Public Law 
103-354 to make loans to any qualified applicant without regard to race, 
color, religion, sex, national origin, marital status, age or physical/
mental handicap provided the applicant can execute a legal contract. Any 
processing or servicing activity conducted pursuant to this subpart 
involving authorized assistance to Agency or its successor agency under 
Public Law 103-354 employees, members of their families, known close 
relatives, or business or close personal associates, is subject to the 
provisions of subpart D of part 1900 of this chapter. Applicants for 
this assistance are required to identify any known relationship or 
association with an Agency

[[Page 120]]

or its successor agency under Public Law 103-354 employee. See exhibit A 
of subpart A of part 1943 of this chapter for making OL loans to 
entrymen on unpatented public lands. Agency or its successor agency 
under Public Law 103-354 forms are available in any Agency or its 
successor agency under Public Law 103-354 office.

[53 FR 35684, Sept. 14, 1988, as amended at 58 FR 226, Jan. 5, 1993; 58 
FR 48282, Sept. 15, 1993; 61 FR 35925, July 9, 1996; 68 FR 7696, Feb. 
18, 2003]



Sec. 1941.2  Objectives.

    The basic objective of the OL loans program is to provide credit and 
management assistance to farmers and ranchers to become operators of 
family-sized farms or continue such operations when credit is not 
available elsewhere. FmHA or its successor agency under Public Law 103-
354 assistance enables family-farm operators to use their land, labor 
and other resources and to improve their living and financial conditions 
so that they can obtain credit elsewhere. The objective of the OL loan 
program for rural youth is to provide credit for rural youths to 
establish and operate income-producing projects of modest size in 
connection with their participation in 4-H clubs, Future Farmers of 
America, and similar organizations.



Sec. 1941.3  Management assistance.

    As provided in subpart B of part 1924 of this chapter, management 
assistance will be provided to all borrowers to the extent necessary to 
achieve the objectives of the loan.



Sec. 1941.4  Definitions.

    As used in this subpart, the following definitions apply:
    Additional security. Any security beyond that which is required to 
adequately secure the loan.
    Agency. The Farm Service Agency, its county and State committees and 
their personnel, and any successor agency.
    Approval official. A field official who has been delegated loan and 
grant approval authorities within applicable loan programs, subject to 
the dollar limitation contained in tables available in any FmHA or its 
successor agency under Public Law 103-354 office.
    Beginning farmer or rancher. A beginning farmer or rancher is an 
individual or entity who:
    (a) Meets the loan eligibility requirements for OL loan assistance 
in accordance with Sec. 1941.12 of this subpart.
    (b) Has not operated a farm or ranch, or who has operated a farm or 
ranch for not more than 10 years. This requirement applies to all 
members of an entity.
    (c) Will materially and substantially participate in the operation 
of the farm or ranch.
    (1) In the case of a loan made to an individual, individually or 
with the immediate family, material and substantial participation 
requires that the individual provide substantial day-to-day labor and 
management of the farm or ranch, consistent with the practices in the 
county or State where the farm is located.
    (2) In the case of a loan made to an entity, all members must 
materially and substantially participate in the operation of the farm or 
ranch. Material and substantial participation requires that the members 
provide some amount of the management, or labor and management necessary 
for day-to-day activities, such that if the members did not provide 
these inputs, operation of the farm or ranch would be seriously 
impaired.
    (d) Agrees to participate in any loan assessment, borrower training, 
and financial management programs required by FmHA or its successor 
agency under Public Law 103-354 regulations.
    (e) Except for OL loan purposes, does not real farm or ranch 
property or who, directly or through interests in family farm entities, 
owns real farm or ranch property, the aggregate acreage of which does 
not exceed 30 percent of the average farm or ranch acreage of the farms 
or ranches in the county where the property is located. If the farm is 
located in more than one county, the average farm acreage of the county 
where the applicant's residence is located will be used in the 
calculation. If the applicant's residence is not located on the farm or 
if the applicant is an entity, the average farm acreage of the

[[Page 121]]

county where the major portion of the farm is located will be used. The 
average county farm or ranch acreage will be determined from the most 
recent Census of Agriculture developed by the U.S. Department of 
Commerce, Bureau of the Census. State Directors will publish State 
supplements containing the average farm or ranch acreage by county.
    (f) Demonstrates that the available resources of the applicant and 
spouse (if any) are not sufficient to enable the applicant to enter or 
continue farming or ranching on a viable scale.
    (g) In the case of an entity:
    (1) All the members are related by blood or marriage.
    (2) All the stockholders in a corporation are eligible beginning 
farmers or ranchers.
    Borrower. An individual or entity which has outstanding obligations 
to the FmHA or its successor agency under Public Law 103-354 under any 
Farmer Programs loan(s), without regard to whether the loan has been 
accelerated. A borrower includes all parties liable for the FmHA or its 
successor agency under Public Law 103-354 debt, including collection-
only borrowers, except for debtors whose total loans and accounts have 
been voluntarily or involuntarily foreclosed or liquidated, or who have 
been discharged of all FmHA or its successor agency under Public Law 
103-354 debt.
    Cooperative. An entity which has farming as its purpose and whose 
members have agreed to share the profits of the farming enterprise. The 
entity must be recognized as a farm cooperative by the laws of the 
State(s) in which the entity will operate a farm.
    Corporation. For the purpose of this regulation, a private domestic 
corporation created and organized under the laws of the State(s) in 
which the entity will operate a farm.
    Cosigner. A party who joins in the execution of a promissory note to 
assure its repayment. The cosigner becomes jointly and severally liable 
to comply with the terms of the note. In the case of an entity 
applicant, the cosigner cannot be a member, partner, joint operator, or 
stockholder of the entity.
    Entity. Cooperative, corporation, partnership, joint operation, 
trust, or limited liability company.
    Family farm. A farm which:
    (a) Produces agricultural commodities for sale in sufficient 
quantities so that it is recognized in the community as a farm rather 
than a rural residence.
    (b) Provides enough agricultural income by itself, including rented 
land, or together with any other dependable income, to enable the 
borrower to:
    (1) Pay necessary family and operating expenses;
    (2) Maintain essential chattel and real property; and
    (3) Pay debts.
    (c) Is managed by:
    (1) The borrower when a loan is made to an individual.
    (2) The members responsible for operating the farm when a loan is 
made to an entity.
    (d) Has a substantial amount of the labor requirements for the farm 
enterprise provided by:
    (1) The borrower and family members for a loan made to an 
individual.
    (2) The members responsible for operating the farm, along with the 
families of these individuals, for a loan made to an entity.
    (e) May use a reasonable amount of full-time hired labor and 
seasonal labor during peakload periods.
    Farm. A tract or tracts of land, improvements, and other 
appurtenances considered to be farm property which is used or will be 
used in the production of crops or livestock, including the production 
of fish under controlled conditions, for sale in sufficient quantities 
so that the property is recognized as a farm rather than a rural 
residence. It may also include a residence which, although physically 
separate from the farm acreage, is ordinarily treated as part of the 
farm in the local community.
    Feasible plan. A feasible plan is a plan based upon the applicant/
borrower's records that show the farming operation's actual production 
and expenses. These records will be used along with realistic 
anticipated prices, including farm program payments when available, to 
determine that the income from the farm operation, along with any other 
reliable off farm income, will

[[Page 122]]

provide the income necessary for an applicant/borrower to at least be 
able to:
    (a) Pay all operating expenses and all taxes which are due during 
the projected farm budget period;
    (b) Meet necessary payments on all debts; and
    (c) Provide living expenses for the family members of an individual 
borrower or a wage for the farm operator in the case of an entity 
borrower which is in accordance with the essential family needs. Family 
members include the individual borrower of farm operator in the case of 
an entity, and the immediate members of the family who reside in the 
same household.
    Financially viable operation. A financially viable operation is one 
which, with FmHA or its successor agency under Public Law 103-354 
assistance, is projected to improve its financial condition over a 
period of time to the point that the operator can obtain commercial 
credit without further FmHA or its successor agency under Public Law 
103-354 direct or guaranteed assistance. Such an operation must generate 
sufficient income to: Meet annual operating expenses and debt payments 
as they become due, meet basic family living expenses to the extent they 
are not met by dependable nonfarm income, provide for replacement of 
capital items, and provide for long-term financial growth. This 
definition only applies when considering a term limit waiver under Sec. 
1941.12.
    Fish. Any aquatic gilled animal commonly known as ``fish,'' as well 
as mollusks or crustaceans (or other invertebrates) produced under 
controlled conditions (that is, feeding, tending, harvesting, and such 
other activities as are necessary to properly raise and market the 
products) in ponds, lakes, streams, or similar holding areas.
    Joint operation. Individuals who have agreed to operate a farm or 
farms together as a business unit. The real and personal property is 
owned separately or jointly by the individuals. A husband and wife who 
want to apply for a loan together will be considered a joint operation.
    Limited resources applicant. An applicant who is a farmer or rancher 
and is an operator of a small or family farm (a small farm is a marginal 
family farm), including a new operator, with a low income who 
demonstrates a need to maximize farm or ranch income. A limited resource 
applicant must meet the eligibility requirements for a farm ownership or 
operating loan but, due to low income, cannot pay the regular interest 
rate on such loans. Due to the complex nature of the problems facing 
this applicant, special help will be needed and more supervisory 
assistance will be required to assure reasonable prospects for success. 
The applicant may face such problems as underdeveloped managerial 
ability, limited eduction, low-producing farm due to lack of development 
or improved production practices and other related factors. The 
applicant will not have nor expect to obtain, without the special help 
and a low-interest loan, the income needed to have a reasonable standard 
of living when compared to other residents of the community.
    Majority interest. Any individual or combination of individuals 
owning more than a 50 percent interest in a cooperative, corporation, 
joint operation, or partnership.
    Nonfarm enterprise. Any nonfarm business enterprise, including 
recreation, which is closely associated with the farm operation and 
located on or adjacent to the farm and provides income to supplement 
farm income. This may include, but is not limited to, such enterprises 
as raising earthworms, exotic birds, tropical fish, dogs, and horses for 
nonfarm purposes, welding shops, road stands, boarding horses and riding 
stables.
    Partnership. An entity consisting of individuals who have agreed to 
operate a farm. This entity must be recognized as a partnership by the 
laws of the State(s) in which the partnership will operate a farm and 
must be authorized to own both real and personal property and to incur 
debt in its own name.
    Presidentially-designated emergency. A major disaster or emergency 
designated by the President under the Robert T. Stafford Disaster Relief 
and Emergency Assistance Act (42 U.S.C. 5121 et seq.).
    Primary security. Any real estate and/or chattel security which is 
required to adequately secure the loan. This is not to be confused with 
``basic security,''

[[Page 123]]

as defined in Sec. 1962.4 of subpart A of part 1962 of this chapter.
    Related by blood or marriage. As used in this subpart, individuals 
who are connected to one another as husband, wife, parent, child, 
brother, or sister.
    Rural youth. A person who has reached the age of 10 but has not 
reached the age of 21 and does not reside in any city or town with a 
population of more than 10,000 inhabitants.
    Rural youth projects. Modest projects initiated, developed, and 
carried out by rural youths participating in 4-H or Future Farmers of 
America, or similar organizations. Projects must produce enough income 
to meet expenses and debt repayment.
    Security. Property of any kind subject to a real or personal 
property lien. Any references to collateral or security property shall 
be considered a reference to the term ``security.''
    State or United States. The United States itself, any of the fifty 
States, the Commonwealth of Puerto Rico, the Virgin Islands of the 
United States, Guam, American Samoa, and the Commonwealth of the 
Northern Mariana Islands.

[53 FR 35684, Sept. 14, 1988, as amended at 58 FR 26680, May 5, 1993; 58 
FR 48283, Sept. 15, 1993; 61 FR 35925, July 9, 1996; 62 FR 9353, Mar. 3, 
1997; 68 FR 7696, Feb. 18, 2003; 69 FR 5262, Feb. 4, 2004]



Sec. 1941.5  [Reserved]



Sec. 1941.6  Credit elsewhere.

    The applicant shall certify in writing on the appropriate forms, and 
the County Supervisor shall verify and document, that adequate credit is 
not available, with or without a guarantee or subordination, to finance 
the applicant's actual needs at reasonable rates and terms, taking into 
consideration prevailing private and cooperative rates and terms in the 
community in or near where the applicant resides for loans for similar 
purposes and periods of time.
    (a) If the County Supervisor receives letters or other written 
evidence from a lender(s) indicating that the applicant is unable to 
obtain satisfactory credit, this will be included in the loan docket.
    (b) If the applicant cannot qualify for the needed credit from the 
lender(s) contacted, but one or more of them has indicated they would 
provide credit with an FmHA or its successor agency under Public Law 
103-354 guarantee, or the County Supervisor determines that the 
applicant can obtain a guaranteed loan, the applicant will be advised to 
file an application with that lender(s) so that a guaranteed OL request 
can be processed by the lender(s) for consideration by FmHA or its 
successor agency under Public Law 103-354.
    (c) Property and interest in property owned and income received by 
an individual applicant, or an entity applicant and all of its members 
as individuals will be considered and used by an applicant in obtaining 
credit from other sources.
    (d) Applicants and borrowers will be encouraged to supplement 
operating loans with credit from other credit sources to the extent 
economically feasible and in accordance with sound financial management 
practices.

[43 FR 55883, Nov. 29, 1978, as amended at 68 FR 7697, Feb. 18, 2003]



Sec. Sec. 1941.7-1941.10  [Reserved]



Sec. 1941.11  Applications.

    Applications will be received and processed as provided in subpart A 
of part 1910 of this chapter, with consideration given to the 
requirements in exhibit M of subpart G of part 1940 of this chapter.



Sec. 1941.12  Eligibility requirements.

    In accordance with the Food Security Act of 1985 (Pub. L. 99-198), 
after December 23, 1985, if an individual or any member of an entity is 
convicted under Federal or State law of planting, cultivating, growing, 
producing, harvesting, or storing a controlled substance (see 21 CFR 
part 1308, which is exhibit C of this subpart and is available in any 
FmHA or its successor agency under Public Law 103-354 office, for the 
definition of ``controlled substance'') prior to loan approval in any 
crop year, the individual or entity shall be ineligible for a loan for 
the crop year in which the individual or member of the entity was 
convicted and the four succeeding crop years. Applicants will attest on

[[Page 124]]

Form FmHA or its successor agency under Public Law 103-354 410-1, 
``Application for FmHA Services,'' that as individuals or that its 
members, if an entity, have not been convicted of such crime after 
December 23, 1985. A decision to reject an application for this reason 
is not appealable. In addition, the following requirements must be met:
    (a) An individual must:
    (1) Be a citizen of the United States, a United States non-citizen 
national, or a qualified alien under applicable Federal immigration 
laws. United States non-citizen nationals and qualified aliens must 
provide the appropriate documentation as to their immigration status as 
required by the United States Department of Homeland Security, Bureau of 
Citizenship and Immigration Services.
    (2) Possess the legal capacity to incur the obligations of the loan.
    (3) Except for youth loans, have sufficient applicable educational 
and/or on the job training or farming experience in managing and 
operating a farm or ranch (1 year's complete production and marketing 
cycle within the last 5 years) which indicates the managerial ability 
necessary to assure reasonable prospects of success in the proposed plan 
of operation.
    (4) Be unable to obtain sufficient credit elsewhere to finance 
actual needs at reasonable rates and terms, taking into consideration 
prevailing private and cooperative rates and terms in the community in 
or near which the applicant resides for loans for similar purposes and 
periods of time.
    (5) Except for youth loans, be the owner-operator or tenant-operator 
of not larger than a family farm after the loan is closed. In the case 
of a limited resource applicant see Sec. 1941.4 of this subpart.
    (6)(i) Have not executed a promissory note for a direct OL loan in 
more than 6 different calendar years prior to the calendar year that the 
requested direct OL loan will close. This eligibility restriction 
applies to anyone who signs the promissory note. Youth loans are not 
counted as direct OL loans for the purpose of this paragraph. This 
limitation does not apply to farmers or ranchers when their land is 
subject to the jurisdiction of an Indian tribe, the loan is secured by 
one or more security instruments subject to the jurisdiction of Indian 
tribe, and the test for credit requirement in Sec. 1941.6 is met. On a 
case-by-case basis, a one-time waiver to this eligibility restriction 
may also be granted for a period of two years if the following 
conditions are met:
    (A) The applicant has a financially viable operation;
    (B) The applicant applied for commercial credit from at least two 
commercial sources;
    (C) The applicant was unable to obtain a commercial loan (including 
an Agency-guaranteed loan); and
    (D) The applicant has successfully completed, or will complete 
within one year, borrower training.
    (ii) This determination is not subject to administrative appeal.
    (7) Transition rule. An applicant is eligible for new direct OL 
loans for 3 additional years if as of April 4, 1996, the applicant, or 
anyone who will execute the promissory note, had direct OL loans closed 
in 4 or more separate years prior to the year in which the new direct OL 
loan is closed. The 4 previous years' direct OL loans, as well as the 3 
additional years of new direct OL loans, may be in non-consecutive 
years.
    (8) Agency loss. (i) Except as provided in paragraph (a)(8)(ii) of 
this section, the applicant, and anyone who will execute the promissory 
note, has not caused the Agency a loss by receiving debt forgiveness on 
all or a portion of any direct or guaranteed loan made under the 
authority of the CONACT by debt write-down or write-off; compromise, 
adjustment, reduction, or charge-off under the provisions of section 331 
of the CONACT; discharge in bankruptcy; or through payment of a 
guaranteed loss claim.
    (ii) The applicant may receive a direct OL loan to pay annual farm 
and ranch operating and family living expenses, provided the applicant 
meets all other requirements for the loan, if the applicant and anyone 
who will execute the promissory note:
    (A) Received a write-down under section 353 of the CONACT;

[[Page 125]]

    (B) Is current on payments under a confirmed reorganization plan 
under chapter 11, 12, or 13 of title 11 of the United States Code; or
    (C) Received debt forgiveness on not more than one occasion after 
April 4, 1996, resulting directly and primarily from a Presidentially-
designated emergency for a county or contiguous county in which the 
applicant operates. Only applicants who were current on all existing 
direct and guaranteed FSA loans prior to the beginning date of the 
incidence period of a Presidentially-designated emergency and received 
debt forgiveness on that debt within three years after the designation 
of such emergency meet this exception.
    (9) Not be delinquent on any non-tax Federal debt or FSA guaranteed 
debt. This restriction will not apply if the Federal delinquency is 
cured on or before the loan closing date.
    (b) An entity must:
    (1) Be unable to obtain sufficient credit elsewhere to finance 
actual needs at reasonable rates and terms, taking into account 
prevailing private and cooperative rates and terms in or near the 
community for loans for similar purposes and periods of time. This 
applies to the entity and all of its members, as individuals.
    (2) Be controlled by farmers or ranchers engaged primarily and 
directly in farming or ranching in the United States, after the loan is 
made.
    (3) Be the owner-operator or tenant-operator of not larger than a 
family farm after the loan is closed.
    (4) Consist of members who are individuals and not entities.
    (5) If the members holding a majority interest are related by blood 
or marriage, they must meet the following requirements:
    (i) The majority interest of the entity must be held by members who 
are citizens of the United States, United States non-citizen nationals, 
or qualified aliens under applicable Federal immigration laws. United 
States non-citizen nationals and qualified aliens must provide the 
appropriate documentation as to their immigration status as required by 
the United States Department of Homeland Security, Bureau of Citizenship 
and Immigration Services.
    (ii) They must have sufficient applicable educational and/or on the 
job training or farming experience in managing and operating a farm or 
ranch (1 year's complete production and marketing cycle within the last 
5 years) which indicates the managerial ability necessary to assure 
reasonable prospects of success in the proposed plan of operation.
    (iii) At least one member must operate the family farm.
    (iv) The entity must operate the farm and be authorized to do so in 
the State(s) in which the farm is located.
    (6) If the members holding a majority interest are not related by 
blood or marriage:
    (i) The requirements of paragraphs (b)(5)(i), (ii) and (iv) of this 
section must be met.
    (ii) They and the entity itself must operate the family farm.
    (7) If applying as a limited resource applicant, as defined in Sec. 
1941.4 of this subpart:
    (i) The requirements of paragraphs (b)(5)(i), (ii) and (iv) of this 
section must be met by the entity and all its members.
    (ii) The entity and all the members must own or operate a small or 
family farm and at least one member must operate the farm.
    (8) If each member's ownership interest does not exceed the family 
farm definition limits, their collective interests can exceed the family 
farm definition limits only if:
    (i) all of the members of the entity are related by blood or 
marriage,
    (ii) all of the members are or will be operators of the entity, and
    (iii) The majority interest holders of the entity meet the 
requirements of paragraphs (b)(5)(i), (ii) and (iv) of this section.
    (9)(i) Have no member of the entity who has executed a promissory 
note for direct OL loans closed in more than 6 different calendar years 
prior to the calendar year that the requested direct OL loan will close. 
This eligibility restriction applies to anyone who signs the promissory 
note. Youth loans are not counted as direct OL loans for the purpose of 
this paragraph. This limitation does not apply to farmers or ranchers 
when their land is subject to

[[Page 126]]

the jurisdiction of an Indian tribe, the loan is secured by one or more 
security instruments subject to the jurisdiction of an Indian tribe, and 
the test for credit requirement in Sec. 1941.6 is met. On a case-by-
case basis, a one-time waiver to this eligibility restriction may also 
be granted for a period of two years if the following conditions are 
met:
    (A) The applicant has a financially viable operation;
    (B) The applicant applied for commercial credit from at least two 
commercial sources;
    (C) The applicant was unable to obtain a commercial loan (including 
an Agency-guaranteed loan); and
    (D) The applicant has successfully completed, or will complete 
within one year, borrower training.
    (ii) This determination is not subject to administrative appeal.
    (10) Transition rule. An applicant is eligible for new direct OL 
loans for 3 additional years if as of April 4, 1996, the applicant, or 
anyone who will execute the promissory note, had direct OL loans closed 
in 4 or more separate years prior to the year in which the new direct OL 
is closed. The 4 previous years' OL loans, as well as the 3 additional 
years of new direct OL loans, may be in non-consecutive years.
    (11) Agency loss. (i) Except as provided in paragraph (b)(11)(ii) of 
this section, the applicant, and anyone who will execute the promissory 
note, has not caused the Agency a loss by receiving debt forgiveness on 
all or a portion of any direct or guaranteed loan made under the 
authority of the CONACT by debt write-down or write-off; compromise, 
adjustment, reduction, or charge-off under the provisions of section 331 
of the CONACT; discharge in bankruptcy; or through payment of a 
guaranteed loss claim.
    (ii) The applicant may receive a direct OL loan to pay annual farm 
and ranch operating and family living expenses, provided the applicant 
meets all other requirements for the loan, if the applicant and anyone 
who will execute the promissory note:
    (A) Received a write-down under section 353 of the CONACT;
    (B) Is current on payments under a confirmed reorganization plan 
under chapter 11, 12, or 13 of title 11 of the United States Code; or
    (C) Received debt forgiveness on not more than one occasion after 
April 4, 1996, resulting directly and primarily from a Presidentially-
designated emergency for a county or contiguous county in which the 
applicant operates. Only applicants who were current on all existing 
direct and guaranteed FSA loans prior to the beginning date of the 
incidence period of a Presidentially-designated emergency and received 
debt forgiveness on that debt within three years after the designation 
of such emergency meet this exception.
    (12) Not be delinquent on any non-tax Federal debt or FSA guaranteed 
debt. This restriction will not apply if the Federal delinquency is 
cured on or before the loan closing date. This eligibility restriction 
applies to the entity and all of its members.
    (c) Borrower training. Except for applicants for youth loans, all 
applicants must agree to meet the training requirements of Sec. 1924.74 
of subpart B of part 1924 of this chapter unless a waiver is granted in 
accordance with that section. In the case of an entity, any individual 
member holding a majority interest in the operation or who is operating 
the farm must agree to complete the training or qualify for the waiver 
on behalf of the entity. However, if one entity member is solely 
responsible for financial or production management, then only that 
entity member will be required to complete the training in that area for 
the entity or qualify for a partial waiver. If the financial and 
production functions of the farming operation are shared, the knowledge 
and skills of the individual(s) with the responsibility of production 
and/or financial management of the operation will be considered in the 
aggregate for granting a waiver or requiring that training be completed. 
If a waiver is not granted, these individuals will be required to 
complete the training in accordance with their responsibilities. If the 
applicant has previously been required to obtain training, the applicant 
must be enrolled in

[[Page 127]]

and attending, or have satisfactorily completed, the training required.

[53 FR 35684, Sept. 14, 1988, as amended at 55 FR 21527, May 25, 1990; 
56 FR 3971, Feb. 1, 1991; 58 FR 69199, Dec. 30, 1993; 62 FR 9354, Mar. 
3, 1997; 62 FR 28618, May 27, 1997; 68 FR 7697, Feb. 18, 2003; 68 FR 
62223, Nov. 3, 2003; 69 FR 5262, Feb. 4, 2004]



Sec. 1941.13  Rural youth.

    If otherwise eligible, a rural youth who applies for an OL loan must 
be recommended by a project advisor such as a 4-H club advisor, 
vocational teacher, home economics teacher, county extension agent, or 
other organizational sponsor or advisor. In addition, a youth who has 
not reached the age of majority under State law must obtain a written 
recommendation from a parent or guardian. All recommendations will be 
filed with the application in the borrower's case file.



Sec. Sec. 1941.14-1941.15  [Reserved]



Sec. 1941.16  Loan purposes.

    An applicant who obtained a write-down under direct or guaranteed 
loan authorities is restricted to the purposes listed under paragraphs 
(c), (g), and (h) of this section. An applicant who qualifies for a Low-
Documentation operating loan under Sec. 1910.4(c)(1)(iii)(A) of subpart 
A of part 1910 may use loan funds for all authorized loan purposes 
except paragraph (i) of this section. An applicant who qualifies for a 
Lo-Doc loan under Sec. 1910.4(c)(1)(iii)(B) 7 CFR may only use the loan 
funds for purposes listed under paragraphs (c) and (h) of this section. 
All other eligible applicants may request OL funds for any of the 
following purposes:
    (a) Payment of costs associated with reorganizing a farm or ranch to 
improve its profitability.
    (b) Purchase of livestock, including poultry, and farm or ranch 
equipment, including quotas and bases, and cooperative stock for credit, 
production, processing or marketing purposes.
    (c) Payment of annual operating expenses, examples of which include, 
but are not exclusively limited to feed, seed, fertilizer, pesticides, 
farm or ranch supplies, cooperative stock, and cash rent.
    (d) Payment of costs associated with land and water development for 
conservation or use purposes.
    (e) Payment of loan closing costs.
    (f) Payment of costs associated with complying with Federal or 
State-approved standards under the Occupational Safety and Health Act of 
1970 (29 U.S.C. 655 and 667). This purpose is limited to applicants who 
demonstrate that compliance with the standards will cause them 
substantial economic injury.
    (g) Payment of training costs required or recommended by the Agency.
    (h) Payment of farm, ranch, or home needs, including family 
subsistence. A portion of the loan is available to the borrower for use 
outside of a supervised bank account. This portion is the lesser of:
    (1) 10 percent of the OL loan;
    (2) $5,000; or
    (3) The amount needed to meet the subsistence needs of the family 
for a 3-month period.
    (i) Refinancing debts if the applicant has had direct or guaranteed 
OL loans refinanced (refinanced does not mean restructured) 4 times or 
less and one of the following conditions is met:
    (1) The need for refinancing was caused by a qualifying disaster 
declared by the President or designated by the Secretary; or
    (2) The debts to be refinanced are owed to a non-USDA creditor.

[62 FR 9354, Mar. 3, 1997; 62 FR 28618, May 27, 1997, as amended 66 FR 
1573, Jan. 9, 2001]



Sec. 1941.17  Loan limitations.

    An OL loan will not be approved:
    (a) If the total outstanding insured OL principal balance, including 
the new loan, owed by the applicant will exceed $200,000 at loan 
closing.
    (b) If the total outstanding youth loan principal balance will 
exceed $5,000 at loan closing.
    (c) For the purchase of real estate, making principal payments on 
real estate, or refinancing of any debts incurred for the purchase of 
real estate.
    (d) For any purpose that will contribute to excessive erosion of 
highly erodible land or to convert wetlands to produce an agricultural 
commodity as further explained in exhibit M of subpart G of part 1940 of 
this chapter.

[[Page 128]]

Refer to subpart LL of part 2000 of this chapter, ``Memorandum of 
Understanding Between FmHA or its successor agency under Public Law 103-
354 and the U.S. Fish and Wildlife Service,'' for assistance in 
implementation.
    (e) If the purpose of the loan is to finance a nonfarm enterprise.

[53 FR 35684, Sept. 14, 1988, as amended at 58 FR 48286, Sept. 15, 1993; 
62 FR 9354, Mar. 3, 1997; 68 FR 62224, Nov. 3, 2003]



Sec. 1941.18  Rates and terms.

    (a) Rates. Upon request of the applicant, the interest rate charged 
by the Agency or its successor agency under Public Law 103-354 will be 
the lower of the interest rates in effect at the time of loan approval 
or loan closing. If an applicant does not indicate a choice, the loan 
will be closed at the interest rate in effect at the time of loan 
approval. Interest rates are specified in exhibit B of the Agency 
Instruction 440.1 (available in the Agency or its successor agency under 
Public Law 103-354 office) for the type of assistance involved. A lower 
rate may be established for a limited resource applicant subject to the 
following:
    (1) An applicant will receive the lower rate provided:
    (i) The applicant meets the conditions of the definition for a 
limited resource applicant set forth in Sec. 1941.4 of this subpart.
    (ii) The Farm and Home Plan and/or Nonagricultural Enterprise 
Analysis, when appropriate, indicates that installments at the higher 
rate, along with other debts, cannot be paid during the period of the 
plan.
    (2) A borrower with Limited Resource interest rates will be reviewed 
each year at the time the analysis is conducted (see Sec. 1924.55 of 
subpart B of part 1924 of this chapter) and at any time a servicing 
action such as consolidation, rescheduling or deferral is taken to 
determine what interest rate should be charged. The rate may be 
increased in increments of whole numbers until it reaches the current 
regular interest rate for the loan at the time of the rate increase. 
(See Sec. 1951.25 of subpart A of part 1951 of this chapter.)
    (b) Terms. (1) The final maturity date for each loan cannot exceed 7 
years from the date of the promissory note. The first installment must 
be scheduled for payment within 18 months of loan closing.
    (2) Loan funds used to pay annual operating expenses or bills 
incurred for such purposes for the crop year being financed will 
normally be scheduled for payment within 12 months, but no later than 18 
months, from the date the loan is closed when marketing plans extend 
beyond 12 months. When an OL loan for annual production purposes is 
scheduled for repayment in one installment, the installment must fall 
due no later than 18 months from the date of loan closing. Individual 
marketing circumstance may warrant repayment schedules which are longer 
than 18 months. Such factors as establishing a new enterprise, 
developing a farm, purchasing feed while feed crops are being 
established, marketing plans, or during recovery from a disaster or 
economic reverses, can be considered as reasons for a longer repayment 
period on loans for annual operating purposes. When longer than normal 
repayment terms are used for annual operating purposes, crops and/or 
livestock produced for sale will not be considered sufficient security. 
The County Supervisor may use Form FmHA or its successor agency under 
Public Law 103-354 440-9, ``Supplementary Payment Agreement,'' for 
borrowers who receive substantial income from which payment is to be 
made before their installment due date.
    (3) Advances for purposes other than annual operating expenses will 
be scheduled for payment over the minimum period necessary considering 
the applicant's ability to pay and the useful life of the security, but 
not in excess of 7 years.
    (4) When conditions warrant, installment scheduled in accordance 
with paragraph (b)(3) of this section may include equal, unequal, or 
balloon installments. In each case warranting balloon installments, 
there must be adequate collateral for the loan at the time the balloon 
payment is due. Circumstances which warrant balloon installments are 
factors such as establishing a new enterprise, developing a farm, 
purchasing feed while crops are being established or during recovery 
from a disaster, or economic reverses.

[[Page 129]]

In no case will annual crops be used as the sole collateral securing a 
balloon installment. A loan with a balloon installment must be 
adequately secured by hard security, which may include foundation stock, 
farm equipment and/or real estate. The amount of the balloon installment 
should not exceed that which the borrower could reasonably expect to pay 
during a maximum additional 7-year period.

[53 FR 35684, Sept. 14, 1988, as amended at 55 FR 21527, May 25, 1990; 
57 FR 18676, Apr. 30, 1992; 57 FR 37400, Aug. 19, 1992; 61 FR 35925, 
July 9, 1996; 68 FR 62224, Nov. 3, 2003]



Sec. 1941.19  Security.

    Primary security must be available for the loan. Any additional 
security available up to and including 150 percent of the loan amount 
also will be taken. Security in excess of 150 percent of the loan amount 
will only be taken when it is not practical to separate the property, 
i.e., same type of livestock (dairy cows, brood sows). In cases when a 
loan is being made in conjunction with a servicing action, the security 
requirements as stated in subpart S of part 1951 of this chapter will 
prevail. In unusual cases, the loan approval official may require a 
cosigner in accordance with Sec. 1910.3 (d) of subpart A of part 1910 
of this chapter or a pledge of security from a third party. A pledge of 
security is preferable to a cosigner.
    (a) Chattels. (1) The loan must be secured by a first lien on all 
property or products acquired, produced, or refinanced with loan funds.
    (2) If the security for the loan under paragraph (a)(1) of this 
section is not at least equal to 150 percent of the loan amount, the 
best lien obtainable will be taken on other chattel security owned by 
the applicant, if available, up to the point that security for the loan 
at least equals 150 percent of the loan amount.
    (i) When there are several alternatives available (cattle, 
machinery), any one of which will meet the security requirements of this 
section, the approval official generally has the discretion to select 
the best alternative for obtaining security.
    (ii) When alternatives exist and the applicant has a preference as 
to the property to be taken for security, however, the approval official 
will honor the preference so long as the requirements of paragraphs 
(a)(1) and (2) of this section are met.
    (3) To comply with the 150 percent requirement, security values will 
be established as follows:
    (i) For the purposes of loan making only, the security value of the 
crop and/or livestock production is presumed to be 100 percent of the 
amount loaned for annual operating and family living expenses listed on 
Form FmHA or its successor agency under Public Law 103-354 431-2, ``Farm 
and Home Plan,'' or other acceptable plan of operation.
    (ii) The specific livestock and/or equipment to be taken as 
security, along with the value of the security, will be documented in 
the case file. This information will be obtained from values established 
in accordance with Sec. 1941.25 of this subpart.
    (b) Real estate. The loan approval official will require a lien on 
all or part of the applicant's real estate as security when chattel 
security alone is not at least equal to 150 percent of the amount of the 
loan. Different lien positions on real estate are considered separate 
and identifiable collateral. Real estate taken as security, along with 
its value established in accordance with Sec. 1941.25 of this subpart, 
will be documented in the case file. If the applicant disagrees with the 
values established, FmHA or its successor agency under Public Law 103-
354 will accept an appraisal from the applicant, obtained at the 
applicant's expense, if the appraisal meets all FmHA or its successor 
agency under Public Law 103-354 requirements.
    (1) Security may also include assignments of leases or leasehold 
interests having mortgageable value, revenues, royalties from mineral 
rights, patents and copyrights, and pledges of security by third 
parties.
    (2) Advice on obtaining security will be received from OGC when 
necessary.
    (c) Exceptions. The County Supervisor will clearly document in the 
file when security is not taken for any of the following reasons:
    (1) A lien will not be taken on property when it will prevent the 
applicant, or members of an entity applicant,

[[Page 130]]

from obtaining operating credit from other sources.
    (2) A lien will not be taken on property that could have significant 
environmental problems/costs (e.g., known or suspected underground 
storage tanks or hazardous wastes, contingent liabilities, wetlands, 
endangered species, historic properties). Guidance is provided in part 
II, item H of exhibit A of FmHA Instruction 1922-E (available in any 
FmHA or its successor agency under Public Law 103-354 office) as to the 
action to be taken when the appraiser indicates that the property is 
subject to any hazards, detriments or limiting conditions.
    (3) A lien will not be taken on property that cannot be made subject 
to a valid lien.
    (4) A lien will not be taken on the applicant's personal residence 
and appurtenances, when the residence is located on a separate parcel 
and the farm tract(s) being used for collateral, in addition to any 
crops or chattels, meet the security requirement of at least equal to 
150 percent of the loan.
    (5) A lien will not be taken on subsistence livestock; cash or 
special cash collateral accounts to be used for the farming operation or 
for necessary living expenses; all types of retirement accounts; 
personal vehicles necessary for family living or farm operating 
purposes; household goods; and small tools and small equipment, such as 
hand tools, power lawn mowers, and other similar items not needed for 
security purposes.
    (6) When title to a livestock or crop enterprise is held by a 
contractor under a written contract or the enterprise is to be managed 
by the applicant under a share lease or share agreement, an assignment 
of all or part of the applicant's share of the income will be taken. A 
form approved by OGC will be used to obtain the assignment.
    (7) A lien will not be taken on timber or the marginal land for a 
loan for planting softwood timber trees on marginal land in conjunction 
with a softwood timber (ST) loan.
    (d) Assignment on income in Uniform Commercial Code (UCC) States. 
The County Supervisor will determine whether or not such an assignment 
will be taken. In UCC States, an assignment of livestock or crop income 
constitutes a security agreement on income. The share lease, share 
agreement, or contract will be described specifically as ``Contract 
Rights'' or ``Contract Rights in Livestock or Crops,'' (or as 
``Accounts'' or ``Accounts in Livestock or Crops,'' if required by a 
State supplement), and so forth, in paragraph 1(b) of the financing 
statement.
    (e) Insurance. See Sec. 1941.88 of subpart B of this part for 
insurance requirements.
    (f) Special security requirements. When OL loans are made to 
eligible entities that consist of members who are presently indebted for 
an OL loan(s) as individual(s), or when OL loans are made to eligible 
individuals who are members of an entity which is presently indebted for 
an OL loan(s), security must consist of:
    (1) Chattel and/or real estate security that is separate and 
identifiable from the security pledged to the Agency for any other farm 
credit programs direct or guaranteed loan(s).
    (2) Different lien positions on real estate are considered separate 
and identifiable collateral.
    (3) The outstanding amount of loans made may not exceed the value of 
the collateral used.

[53 FR 35684, Sept. 14, 1988, as amended at 54 FR 47959, Nov. 20, 1989; 
56 FR 67480, Dec. 31, 1991; 57 FR 18676, Apr. 30, 1992; 59 FR 22961, May 
4, 1994; 59 FR 25799, May 18, 1994; 61 FR 35925, July 9, 1996]



Sec. Sec. 1941.20-1941.22  [Reserved]



Sec. 1941.23  General provisions.

    (a) Compliance requirements. The following will apply as 
appropriate:
    (1) Environmental assessments and statements. Subpart G of part 1940 
of this chapter should be referred to for these requirements. The State 
Environmental Coordinator should be consulted for assistance in 
preparing any required statements.
    (2) Equal opportunity and nondiscrimination requirements. In 
accordance with title V of Pub. Law 93-495, the Equal Credit Opportunity 
Act, FmHA or its successor agency under Public Law 103-354 will not 
discriminate against any applicant on the basis

[[Page 131]]

of race, color, religion, sex, national origin, marital status, age or 
physical/mental handicap provided the applicant can execute a legal 
contract, with respect to any aspect of a credit transaction.
    (3) National Historic Preservation Act of 1966. If a loan will 
affect any district, site, building, structure, or object that has been 
included in the National Register of Historic Places as maintained by 
the Department of Interior in accordance with the National Historic 
Preservation Act of 1966, or if the undertaking may affect properties 
having scientific, prehistorical, historical, or archaeological 
significance, the provisions of subpart F of part 1901 of this chapter 
will apply.
    (b) Other considerations. (1) FmHA or its successor agency under 
Public Law 103-354 employees will not guarantee repayment of advances 
from other credit sources, either personally or on behalf of applicants, 
borrowers, or FmHA or its successor agency under Public Law 103-354.
    (2) An applicant will be advised that compliance with all applicable 
special laws and regulations is required.
    (3) An applicant must have acceptable tenure arrangements. Unless 
the loan approval official determines otherwise, each applicant will 
obtain a satisfactory written lease. A copy of the lease will be filed 
in the County Office case file.

[53 FR 35684, Sept. 14, 1988, as amended at 68 FR 62224, Nov. 3, 2003]



Sec. 1941.24  [Reserved]



Sec. 1941.25  Appraisals.

    (a) Except as provided in paragraph (a)(5) of this section, real 
estate appraisals will be completed by an FmHA or its successor agency 
under Public Law 103-354 employee, or a contractor authorized to make 
farm appraisals. Chattel and real estate appraisals will be made on 
forms in accordance with Sec. 761.7 of this title and, in the case of 
an appraisal of mineral rights' the appropriate Agency form (available 
in each Agency State Office) or other format that contains the same 
information, to determine market value and borrower equity in the 
following instances:
    (1) When an initial loan is made, a chattel appraisal is required on 
all chattel property owned by the applicant, and on chattel property to 
be acquired when the item can be specifically identified.
    (2) When a subsequent loan is made, a chattel appraisal is required 
when:
    (i) Refinancing chattel debt.
    (ii) The existing chattel appraisal is more than 2 years old.
    (3) A real estate appraisal is not required when real estate is 
taken as additional security, as defined in Sec. 1941.4 of this 
subpart. However, the County Supervisor will document in the running 
record the estimated market value of the additional security and the 
basis for the estimate.
    (4) A real estate appraisal is required when real estate is taken as 
primary security, as defined in Sec. 1941.4, and the amount of the loan 
to be secured by the real estate exceeds $50,000.
    (5) Other real estate appraisals completed by other State-certified 
general appraisers may be used providing such appraisals meet the 
ethics, competency, departure provisions, etc., and Sections I and II of 
the Uniform Standards of Professional Appraisal Practices, and contain a 
mineral rights appraisal as set out in paragraph (a) of this section. 
Prior to acceptance, the appraisal must have an acceptable desk review 
(technical) completed by an FmHA or its successor agency under Public 
Law 103-354 designated review appraiser.
    (6) A new real estate appraisal is not required if the latest 
appraisal report available is not over 1 year old, unless the approval 
official requests a new appraisal, or unless significant changes in the 
market value of real estate have occurred in the area within the 1-year 
period.
    (b) Real estate appraiser qualifications. The contractor, when he/
she is not the appraiser, is responsible for substantiating the 
appraiser's qualifications. The contractor will obtain FmHA or its 
successor agency under Public Law 103-354's concurrence that the 
appraiser has the necessary qualifications and experience before the 
contractor will utilize the appraiser in any appraisal work. The 
contractor/appraiser

[[Page 132]]

completing the report must be State-certified general.

[53 FR 35684, Sept. 14, 1988, as amended at 57 FR 18676, Apr. 30, 1992; 
58 FR 26680, May 5, 1993; 58 FR 48286, Sept. 15, 1993; 59 FR 16772, Apr. 
8, 1994; 59 FR 25800, May 18, 1994; 64 FR 62568, Nov. 17, 1999; 69 FR 
30999, June 2, 2004]



Sec. Sec. 1941.26-1941.28  [Reserved]



Sec. 1941.29  Relationship between FSA loans, direct and guaranteed.

    (a) An eligible emergency loan (EM) applicant's total credit needs 
will be satisfied under the EM loan authorities, to the extent possible, 
before OL loan assistance is considered.
    (b) A direct OL may be made to a guaranteed loan borrower provided 
the requirements of 7 CFR 761.8 and all other loan requirements are met.
    (c) An direct OL loan may be made to refinance a guaranteed OL loan 
when the following conditions are met:
    (1) The circumstances resulting in the need to refinance were beyond 
the borrower's control.
    (2) Refinancing is in the best interest of the Government and the 
borrower.
    (3) The guaranteed OL loan must be completely paid off at the time 
the direct OL loan is closed.

[53 FR 36240, Sept. 19, 1988, as amended at 55 FR 21527, May 25, 1990; 
58 FR 44747, Aug. 25, 1993; 66 FR 7568, Jan. 24, 2001]



Sec. Sec. 1941.30-1941.31  [Reserved]



Sec. 1941.32  Catastrophic Risk Protection (CAT) insurance requirement.

    Applicants must comply with the CAT insurance requirement no later 
than loan closing by either:
    (1) Obtaining at least the CAT level of coverage, if available, for 
each crop of economic significance as defined by the Federal Crop 
Insurance Corporation, or,
    (2) By waiving eligibility of emergency crop loss assistance in 
connection with the uninsured crop. FSA emergency (EM) loss loan 
assistance is not considered emergency crop loss assistance for the 
purpose of the crop insurance waiver on the uninsured crop.

[62 FR 9355, Mar. 3, 1997]



Sec. 1941.33  Loan approval or disapproval.

    (a) Loan approval authority. Initial and subsequent loans may be 
approved as authorized by subpart A of part 1901 of this chapter, 
provided the total direct operating loan principal balance at loan 
closing does not exceed $200,000.
    (b) Loan approval action. (1) The loan approval official must 
approve or disapprove applications within the deadlines set out in Sec. 
1910.4 of subpart A of part 1910 of this chapter. The loan approval 
official is responsible for reviewing the docket to determine whether 
the proposed loan complies with established policies and all pertinent 
regulations. When reviewing the docket and before approving the loan, 
the loan approval official will determine that:
    (i) The Agency has certified the applicant eligible,
    (ii) Funds are requested for authorized purposes,
    (iii) The proposed loan is based on a feasible farm operating plan.
    (iv) The security is adequate,
    (v) Necessary supervision is planned, and
    (vi) All other pertinent requirements have been met or will be met.
    (2) When approving the loan, the approval official will:
    (i) Indicate on all copies of Form FmHA or its successor agency 
under Public Law 103-354 1940-1, ``Request for Obligation of Funds,'' 
any conditions required by Agency or its successor agency under Public 
Law 103-354 regulations that must be met for loan closing;
    (ii) Specify all security requirements;
    (iii) Indicate special conditions or agreements needed with prior 
lienholders when appropriate;
    (iv) Indicate that approval is subject to satisfactory title 
evidence when required, if such evidence has not been obtained; and
    (v) Send a signed copy of Form FmHA or its successor agency under 
Public Law 103-354 1940-1 to the borrower on the date of loan approval.
    (c) Loan disapproval. The loan approval official must approve or 
disapprove applications within 60 days after receiving a complete 
application, as set out in Sec. 1910.4 of subpart A of part 1910 of 
this chapter. The following

[[Page 133]]

actions will be taken when a loan is disapproved:
    (1) The reasons for disapproval will be indicated on Form FmHA or 
its successor agency under Public Law 103-354 1940-1 by the loan 
approval official. The reasons may be in a letter or the running record 
if this form has not been completed. Suggestions of how to remedy the 
disapprovals should be included.
    (2) The County Supervisor will notify the applicant in writing of 
the action taken, and include any suggestions that could result in 
favorable action. The applicant will be notified, in writing, of the 
opportunity to appeal.
    (3) Items furnished by the applicant during docket processing will 
be returned.
    (4) The County Supervisor will notify any other interested parties 
of the disapproval.

[53 FR 35664, Sept. 14, 1988, as amended at 54 FR 11366, Mar. 20, 1989; 
57 FR 18676, Apr. 30, 1992; 58 FR 48282, Sept. 15, 1993; 61 FR 35925, 
July 9, 1996; 68 FR 62224, Nov. 3, 2003]



Sec. 1941.34  [Reserved]



Sec. 1941.35  Actions after loan approval.

    (a) Requesting check. If the County Supervisor is reasonably certain 
that the loan can be closed within 20 working days from the date of the 
check, loan funds may be requested at the time of loan approval through 
the State Office terminal system. If funds are not requested when the 
loan is approved, advances in the amount needed will be requested 
through the County Office computer terminal system. Each advance will be 
limited to an amount which can be used promptly, usually within 60 days 
from the date of the check. Loan funds must be provided to the 
applicant(s) within 15 days after loan approval, unless the applicant(s) 
agrees to a longer period. If no funds are available within 15 days of 
loan approval, funds will be provided to the applicant as soon as 
possible and within 15 days after funds become available, unless the 
applicant(s) agrees to a longer period. If a longer period is agreed 
upon by the applicant(s), the same will be documented in the case file 
by the County Supervisor.
    (b) Cancellation of loan check and/or obligation. If, for any 
reason, a loan check or obligation will be canceled, the County 
Supervisor will notify the State Office and the Finance Office of loan 
cancellation by using Form 1940-10, ``Cancellation of U.S. Treasury 
Check and/or Obligation.'' If a check received in the County Office is 
to be canceled, the check will be returned as prescribed in FmHA 
Instruction 2018-D (available in any FmHA or its successor agency under 
Public Law 103-354 office).
    (c) Cancellation of advances. When an advance is to be cancelled the 
County Supervisor must take the following actions:
    (1) Complete and distribute Form FmHA or its successor agency under 
Public Law 103-354 1940-10.
    (2) When necessary, prepare and excute a subsitute promissory note 
reflecting the revised total of the loan and the revised repayment 
schedule. When it is not necessary to obtain a substitute promissory 
note, the County Supervisor will show on Form FmHA or its successor 
agency under Public Law 103-354 440-57 the revised amount of the loan 
and the revised repayment schedule.
    (d) Increase or decrease in loan amount. If it becomes necessary to 
increase or decrease the amount of the loan prior to closing, the County 
Supervisor will request that all distributed docket forms be returned to 
the County Office for reprocessing unless the change is minor and 
replacement forms can be promptly completed and submitted.

[53 FR 35684, Sept. 14, 1988, as amended at 54 FR 39727, Sept. 28, 1989; 
59 FR 54788, Nov. 2, 1994]



Sec. Sec. 1941.36-1941.37  [Reserved]



Sec. 1941.38  Loan closing.

    Operating loans will be closed in accordance with subpart B of part 
1941 of this chapter.



Sec. Sec. 1941.39-1941.41  [Reserved]



Sec. 1941.42  Loan servicing.

    Loans will be serviced in accordance with subpart A of part 1962 of 
this chapter and/or subpart S of part 1951 of this chapter.

[[Page 134]]



Sec. Sec. 1941.43-1941.49  [Reserved]



Sec. 1941.50  State supplements.

    State supplements will be issued as necessary to implement this 
subpart.

Exhibit A to Subpart A of Part 1941--Processing Guide--Insured Operating 
                                  Loans

    This exhibit outlines the basic steps involved in processing a loan 
application and identifies the FmHA or its successor agency under Public 
Law 103-354 forms which should be considered for use at each step.
    Consult the appropriate Forms Manual Insert (FMI) for instructions 
for completion, distribution, and procedural references for each form.

                         Application Processing

                         a. applicant interview

    Review applicant's proposed plan of operation in view of authorized 
loan purposes and limitations on loans.
    Begin running case record.
    Provide applicant with FmHA or its successor agency under Public Law 
103-354 forms to be completed and returned which are needed to determine 
eligibility. Be sure applicant understands the purposes of the forms and 
knows who must complete them.
    Advise applicant of other information that must be given to FmHA or 
its successor agency under Public Law 103-354.
    When appropriate, have applicant contact other creditors as possible 
credit sources for financing, or participating in the financing, of the 
proposed operation.
    The following FmHA or its successor agency under Public Law 103-354 
forms will be made available to the applicant or will be used by the 
County Supervisor. Forms designated with an ``x'' are always required 
and those designated with an ``*'' are to be used when appropriate.

------------------------------------------------------------------------
            Form No                            Name
------------------------------------------------------------------------
410-1.........................  Application for FHA Services.....    (x)
1910-5........................  Request for Verification of          (*)
                                 Employment.
410-9.........................  Statement Required by the Privacy    (*)
                                 Act.
410-10........................  Privacy Act Statement to             (*)
                                 References.
1910-11.......................  Applicant Certification, Federal     (x)
                                 Collection Policies for Consumer
                                 or Commercial Debts.
431-1.........................  Long-Time Farm and Home Plan.....    (*)
431-2.........................  Farm and Home Plan...............    (x)
431-4.........................  Business Analysis--                  (*)
                                 Nonagricultural Enterprise.
440-32........................  Request for Statement of Debts       (*)
                                 and Collateral.
1940-51.......................  Crop-Share-Cash Farm Lease.......    (*)
1940-53.......................  Cash Farm Lease..................    (*)
1940-55.......................  Livestock-Share-Farm Lease.......    (*)
1940-56.......................  Annual Supplement to Farm Lease..    (*)
------------------------------------------------------------------------

                             b. field visit

    Notify applicant of planned visit and its purpose.
    Evaluate the resources available to the applicant and determine 
whether or not they adequately fulfill the requirements of the proposed 
plan of operation.
    Obtain information needed to complete required appraisals (chattel 
and real estate).
    Hold landlord-tenant meeting, if necessary, to reach an agreement on 
the terms of the lease, resolve any problems, etc.; record in running 
case record.
    Determine security requirements and record in running case record.
    The following FmHA or its successor agency under Public Law 103-354 
forms will be used as appropriate:

------------------------------------------------------------------------
            Form No.                             Name
------------------------------------------------------------------------
440-13                           Report of lien search..............   *
440-21                           Appraisal of chattel property......   *
1922-1                           Appraisal report-farm tract........   *
1922-2                           Supplemental report-irrigation,       *
                                  drainage, levee, and minerals.
1922-3                           Map of property....................   *
1922-10                          Appraiser's worksheet-farm tract...   *
2006-9                           Notice of visit or meeting.........   *
------------------------------------------------------------------------

                      c. eligibility determination

    Obtain all needed application forms, and other information from the 
applicant; assist the applicant in completing these forms and in 
obtaining needed information, as necessary.
    Request copy of deed or other evidence of title, when needed.
    Schedule meeting with county committee, review application and 
determine eligibility.
    Inform applicant of the results of committee action.
    The following FmHA or its successor agency under Public Law 103-354 
forms will be used as appropriate in accomplishing the above actions:

------------------------------------------------------------------------
           Form No.                           Name
------------------------------------------------------------------------
403-1........................  Debt Adjustment Agreement.........    (*)
440-2........................  County Committee Certification or     (x)
                                Recommendation.
------------------------------------------------------------------------

                           Docket Preparation

    Obtain all information from the applicant, prior lienholder(s), 
landlord(s), etc., needed for the loan docket to be prepared.
    Check to make sure all security requirements have been met or will 
be met by loan closing.
    Prepare a loan narrative, for running record.

[[Page 135]]

    The following FmHA or its successor agency under Public Law 103-354 
forms will be completed and utilized as necessary in preparing the loan 
docket for approval:

------------------------------------------------------------------------
           Form No.                           Name
------------------------------------------------------------------------
400-4.........................  Assurance Agreement.............     (*)
1927-8........................  Agreement with Prior Lienholder.     (*)
1940-1........................  Request for Obligation of Funds.     (*)
440-4.........................  Security Agreement (Chattels and     (*)
                                 Crops).
440-9.........................  Supplementary Payment Agreement.     (*)
1940-20.......................  Request For Environmental            (*)
                                 Information.
440-25/440A25.................  Financing Statement.............     (*)
440-26........................  Consent and Subordination            (*)
                                 Agreement.
1940-21, 1940-22, or Exhibit    Environmental Review............     (*)
 H, Subpart G of Part 1940.
441-5.........................  Subordination Agreement.........     (*)
441-8.........................  Assignment of Proceeds from the      (*)
                                 Sale of Products.
441-10........................  Nondisturbance Agreement........     (*)
441-12........................  Agreement for Disposition of         (*)
                                 Jointly Owned Property.
441-13........................  Division of Income and               (*)
                                 Nondisturbance Agreement.
441-17........................  Certification of Obligation to       (*)
                                 Landlord.
441-18........................  Consent to Payment of Proceeds       (*)
                                 from Sale of Farm Products.
441-25........................  Assignment of Proceeds from the      (*)
                                 Sale of Dairy Products and
                                 Release of Security Interest.
------------------------------------------------------------------------

                        Loan Approval and Closing

                            a. loan approval

    File financing statement or chattel mortgage, and obtain a lien 
search.
    Request preliminary title opinion when appropriate.
    Record loan closing conditions in the running record.
    Execute and distribute all forms necessary for loan approval.

                             b. loan closing

    Request needed legal services.
    Arrange for loan closing by county office, escrow agent, designated 
attorney, or other authorized loan closing agent; furnish loan closing 
agent with appropriate instructions, forms, and other needed information 
for loan closing.
    The following FmHA or its successor agency under Public Law 103-354 
forms will be used by the County Office in addition to those forms 
listed under docket preparation which must be executed by the borrower 
or other party:

------------------------------------------------------------------------
            Form No.                           Name
------------------------------------------------------------------------
400-6..........................  Compliance Statement............    (*)
402-1..........................  Deposit Agreement...............    (*)
402-2..........................  Statement of Deposits and           (*)
                                  Withdrawals.
427-1 (State)..................  Real Estate Mortgage or Deed of     (*)
                                  Trust for ----------.
1927-9.........................  Preliminary Title Opinion.......    (*)
1940-17........................  Promissory Note.................    (x)
------------------------------------------------------------------------


(7 U.S.C. 1989; 42 U.S.C. 1480; 5 U.S.C. 301; sec. 10, Pub. L. 93-357, 
88 Stat. 392; 7 CFR 2.23; 7 CFR 2.70)

[43 FR 55883, Nov. 29, 1978]

    Editorial Note: For Federal Register citations affecting exhibit A 
to subpart A of part 1941, see the List of CFR Sections Affected, which 
appears in the Finding Aids section of the printed volume and on GPO 
Access.

             Exhibit B to Subpart A of Part 1941 [Reserved]

        Exhibit C to Subpart A of Part 1941--Controlled Substance

    (Note: Exhibit C referenced in this subpart is available in any FmHA 
or its successor agency under Public Law 103-354 office.)

[53 FR 35684, Sept. 14, 1988]



               Subpart B_Closing Loans Secured by Chattels



Sec. 1941.51  Purpose.

    This subpart prescribes Farmers Home Administration (FmHA) or its 
successor agency under Public Law 103-354 policies, procedures, and 
authorizations for closing direct loans secured by chattels. These loans 
are considered closed on the date the promissory note is executed.

[43 FR 55883, Nov. 29, 1978, as amended at 58 FR 48282, Sept. 15, 1993]



Sec. Sec. 1941.52-1941.53  [Reserved]



Sec. 1941.54  Promissory note.

    (a) Executing the note. Form FmHA or its successor agency under 
Public Law 103-354 1940-17, ``Promissory Note,'' will be executed and 
dated following receipt of the loan check in the county office and prior 
to the first withdrawal of loan funds from the supervised bank account 
or delivery of the loan check to the borrower.
    (b) Signatures--(1) Individuals. Only the applicant is required to 
sign the promissory note. Any other signatures

[[Page 136]]

needed to assure the required security will be obtained as provided in 
State supplements. A cosigner will be required only when it has been 
determined that the applicant cannot possibly meet the repayment 
requirements for the loan request. Persons who are minors (except a 
youth obtaining a youth loan), mental incompetents, or noncitizens will 
not execute a promissory note. Except when a person has pledged only 
property as security for a loan, the purpose and effect of signing a 
promissory note or other evidence of indebtedness for a loan made or 
insured by FmHA or its successor agency under Public Law 103-354 is to 
incur individual personal liability regardless of any State law to the 
contrary. A youth executing a promissory note shall incur full personal 
liability for the indebtedness evidenced by such note.
    (2) Entities. The promissory note(s) will be executed so as to 
evidence liability of the entity as well as individual liability of all 
members of the entity.

[43 FR 55883, Nov. 29, 1978, as amended at 51 FR 13448, Apr. 21, 1986; 
53 FR 35691, Sept. 14, 1988; 58 FR 48286, Sept. 15, 1993; 68 FR 7697, 
Feb. 18, 2003]



Sec. Sec. 1941.55-1941.56  [Reserved]



Sec. 1941.57  Security instruments.

    Security instruments referred to in this subpart are financing 
statements, security agreements, chattel mortgages, and similar lien 
instruments. To obtain a security interest in chattels and crops in 
States which have adopted the Uniform Commercial Code (UCC), both a 
financing statement and a security agreement are required, although only 
the financing statement must be filed or recorded in public records. See 
paragraph (g) of this section for filing or recording instructions. In 
Louisiana a Chattel Mortgage and Crop Pledge or Crop Pledge, as 
appropriate, is required to obtain a security interest in chattels and 
crops.
    (a) Executing security instruments by borrowers. State supplements 
will be issued, as necessary, to carry out the provisions of this 
paragraph. In order to close the loan and obtain the desired lien, 
security instruments will be executed by appropriate entity officials, 
on behalf of an entity borrower. Any other signatures needed to assure 
the required security will be obtained as provided in State supplements. 
A cosigner will be required only when it has been determined that the 
applicant cannot possibly meet the security requirements for the loan 
request.
    (b) Undivided interests. An applicant obtaining a loan to finance an 
undivided interest in security or to refinance debts on an undivided 
interest in such property will secure the loan with a lien on the 
undivided interest in the property. All individuals having an undivided 
interest in the security will execute Form FmHA or its successor agency 
under Public Law 103-354 441-12, ``Agreement for Disposition of Jointly-
Owned Property'', unless a written agreement to the same affect as this 
form has already been signed.
    (c) Security instrument forms. (1) Form FmHA or its successor agency 
under Public Law 103-354 440-25, ``Financing Statement,'' or Form FmHA 
or its successor agency under Public Law 103-354 440A-25, ``Financing 
Statement (Carbon-Interleaved)''; and Form FmHA or its successor agency 
under Public Law 103-354 440-4, ``Security Agreement (Chattels and 
Crops),'' will be used to obtain security interests in chattel property 
in States which have adopted the Uniform Commercial Code (UCC), unless a 
State supplement requires the use of other forms.
    (2) Form FmHA or its successor agency under Public Law 103-354 440-4 
LA, ``Chattel Mortgage and Crop Pledge (Louisiana),'' or Form FmHA or 
its successor agency under Public Law 103-354 440-4A LA, ``Crop Pledge 
(Louisiana),'' will be used in the State of Louisiana.
    (3) Other forms will be used as provided in State supplements in 
Puerto Rico, Guam, American Samoa and the Northern Mariana Islands.
    (d) Taking security instruments--(1) Financing statement. A 
financing statement is effective for 5 years from the date of filing and 
as long thereafter as it is continued by filing a continuation 
statement.
    (i) Initial loan. A financing statement will be required for every 
initial loan except when a filed financing statement covering the 
applicants property

[[Page 137]]

is still effective, covers all types of chattel property that will serve 
as security for the initial loan, and describes the land on which crops 
and fixtures are or will be located.
    (ii) Subsequent loan. A financing statement will not be required 
unless the filed financing statement is not effective, does not cover 
all types of chattel property that will serve as security for the 
subsequent loan, or does not describe the land on which crops or 
fixtures are or will be located. If the loan debt is being secured for 
the first time, however, the procedure for securing initial loans stated 
in paragraph (d)(1)(i) of this section will be followed.
    (2) Security Agreements--(i) Initial loan. When an initial loan is 
made to an applicant, including to a paid-in-full borrower, a new 
security agreement will be required in all cases. The security agreement 
will be executed not later than the first withdrawal of loan funds from 
the supervised bank account or delivery of the loan check to the 
borrower.
    (ii) Subsequent loan. An additional security agreement will be 
required if property which is to serve as security for the debt is not 
described either specifically or in the printed form of the previous 
security agreement, or if an additional agreement it is needed to obtain 
or maintain a security interest in crops.
    (A) An additional security agreement may also be executed to reflect 
significant changes in security.
    (B) An additional security agreement is not necessary if the 
existing security agreement covers all types of chattels that will serve 
as security for the subsequent loan, describes the land on which the 
crops or fixtures are or will be located, and was executed within 1 year 
before the crops which are offered as security became growing crops.

When determined necessary by OGC, a State supplement will be issued to 
further explain when a security agreement covering crops will be 
required.
    (e) Describing collateral in security instruments. (1) Financing 
statements describe certain types of collateral. If items of collateral 
not covered in the printed form of the financing statement are to serve 
as security, they should be described by type or specifically 
identified.
    (2) Generally, animals, birds, fish, etc., should be described by 
groups in the security agreement. The serial or other identification 
numbers of major items of equipment should be listed in the security 
agreement. If a security interest is to be taken in property such as 
inventory, supplies, recreation or other nonfarm equipment, or fixtures 
which cannot be readily described under the column headings of items 2 
or 3 of Form FmHA or its successor agency under Public Law 103-354 440-
4, an appropriate description of such property will be inserted in item 
2 or 3 below the other property, without regard to the column headings.
    (3) The advice of the Office of the General Counsel (OGC) will be 
obtained as to how to describe in financing statements and security 
agreements items such as grazing permits, milk bases, and membership or 
stock in cooperative associations. The property to be described in 
security instruments should be reconciled with any existing security 
instruments and with Form FmHA or its successor agency under Public Law 
103-354 462-1, ``Record of the Disposition of Security Property.''
    (4) After the initial security agreement is executed, and after the 
borrower obtains all the property which FmHA or its successor agency 
under Public Law 103-354 wants specifically described, by item, in the 
security agreement, a new security agreement will be executed.
    (f) Executing security instruments by County Office employees. The 
County Supervisor and any County Office employee authorized by the 
County Supervisor may execute on behalf of the Government any legal 
instruments necessary to obtain or preserve security for loans. This 
includes financing statements, security agreements, chattel mortgages 
and similar lien instruments, as well as severance agreements, consent 
and subordination agreements, affidavits and acknowledgments.
    (g) Filing or recording security instruments. (1) Ordinarily, in 
States which have adopted the UCC, financing statements may be delivered 
by hand or mailed to the filing officers for filing

[[Page 138]]

or recording when the loan is approved. However, when this is not 
practical, the financing statement may be filed at a later date, but not 
later than the first withdrawal of loan funds from the supervised bank 
account or delivery of the loan check to the borrower. If crops or other 
property of the borrower are located or will be located in a State other 
than that of the borrower's residence, the County Office servicing the 
loan will contact the County Office in the other State for information 
as to the security instruments to be used and the place(s) of filing or 
recording in the other State. The financing statement will be filed or 
recorded as required by State supplements.
    (2) Security agreements will not be filed or recorded unless 
required by State supplements. Form FmHA or its successor agency under 
Public Law 103-354 440-4 LA or Form FmHA or its successor agency under 
Public Law 103-354 440-4A LA will be filed or recorded in Louisiana as 
provided by State supplements.

[43 FR 55883, Nov. 29, 1978, as amended at 50 FR 27415, July 3, 1985; 51 
FR 13448, Apr. 21, 1986; 53 FR 35691, Sept. 14, 1988; 68 FR 7697, Feb. 
18, 2003]



Sec. Sec. 1941.58-1941.59  [Reserved]



Sec. 1941.60  Purchase money security interest.

    A purchase money security interest will take priority over an 
earlier perfected security interest if a security agreement is taken and 
a financing statement is filed before the purchaser receives possession 
of the property or within 10 days thereafter, subject to the following 
limitations:
    (a) Motor vehicles. For motor vehicles required to be licensed, any 
action necessary to obtain perfection in the particular State, such as 
having the security interest noted on the certificate of title, must be 
taken before the purchaser receives possession or within 10 days. In 
some States, it is not necessary to file a financing statement to 
perfect a security interest in such motor vehicles; however, FmHA or its 
successor agency under Public Law 103-354 will always require both a 
security agreement and a financing statement. A State supplement will be 
issued, if necessary to set out the procedure for obtaining a lien on a 
motor vehicle, motorboat, or any special type of security.
    (b) Farm equipment. A purchase money security interest in farm 
equipment costing $2,500 or less (other than fixtures or motor vehicles 
required to be licensed), will take priority over an earlier perfected 
security interest if a security agreement is obtained, even though a 
financing statement is not executed or filed. FmHA or its successor 
agency under Public Law 103-354, however, will always file a financing 
statement. State supplements will be issued, as necessary, to further 
explain the requirements for complying with this section.
    (c) Inventory. A purchase money security interest in inventory will 
take priority over an earlier perfected security interest, provided:
    (1) A security agreement is taken and a financing statement is filed 
not later than the time the purchaser receives possession of the 
property, and
    (2) Before the purchaser takes possession of the property, written 
notice is given to the party holding the earlier perfected interest that 
the purchase money creditor has acquired or expects to acquire a 
purchase money security interest in the inventory, which must by 
described by item or type. When determined necessary by OGC, a State 
supplement will be issued to further explain the requirements for 
perfecting a purchase money security interest in inventory.
    (d) Fixtures. A security interest taken in goods before they become 
fixtures has priority over a security interest in the real estate to 
which they are attached. A security interest taken in goods after they 
become fixtures is valid against all persons later acquiring an interest 
in the real estate. It is not valid against persons who had an interest 
in the real estate when the goods become fixtures, unless they execute a 
consent disclaimer or Form FmHA or its successor agency under Public Law 
103-354 440-26, ``Consent and Subordination Agreement''.
    (e) Crops. A security interest taken in crops not more than 3 months 
before the crops are planted or otherwise become growing crops, has 
priority over

[[Page 139]]

an earlier perfected security interest, if the obligation underlying the 
earlier interest was due more than 6 months before the crops became 
growing crops.

[43 FR 55883, Nov. 29, 1978, as amended at 54 FR 47959, Nov. 20, 1989]



Sec. Sec. 1941.61-1941.62  [Reserved]



Sec. 1941.63  Lien search.

    (a) Required lien searches. (1) A lien search will be obtained at a 
time that assures that the security instruments give the Government the 
required security, usually at the time the financing statement (mortgage 
or crop pledge in Louisiana) is filed or recorded. Lien searches may be 
obtained after the financing statement is filed, but never after the 
delivery of the loan check or the first withdrawal of loan funds from 
the supervised bank account. Form FmHA or its successor agency under 
Public Law 103-354 440-13, ``Report of Lien Search,'' or other lien 
search forms will be used.
    (2) Under the UCC, lien searches are necessary in making subsequent 
loans if an additional financing statement is required; i.e., when crops 
or fixtures to be taken as security are or will be located on land not 
described in the existing financing statement, or when property not 
covered by the financing statement is to be taken as security for the 
loan.
    (3) Lien searches also may be obtained in connection with processing 
applications when the County Supervisor determines such searches are 
necessary on an individual case basis.
    (4) Although a lien search is not always required for youths who are 
minors (as defined in State supplements), the County Supervisor may 
determine that a search is necessary to assure the Government obtains 
the required security interest.
    (b) Responsibility for obtaining lien searches. (1) Applicants 
should obtain and pay for lien searches. FmHA or its successor agency 
under Public Law 103-354 County Office employees may make lien searches 
(at no cost to the applicant) in exceptional cases, such as when no 
other person is available to provide such a service, or when experience 
has shown that using the service available would lead to an undue delay 
in closing the loan and the delay would cause undue hardship to the 
borrower.
    (2) The State Director will issue a State supplement setting forth 
the requirements for lien searches, including the records to be searched 
and the periods to be covered.
    (3) The applicant should be informed of County Clerks, local 
attorneys or other persons who will conduct lien searches at a 
reasonable cost. The applicant will select the lien searcher. The cost 
of a lien search can be paid from the proceeds of loan checks.



Sec. Sec. 1941.64-1941.66  [Reserved]



Sec. 1941.67  Additional requirements for perfecting security interests.

    If necessary because of provisions in State statutes, leases, land 
purchase contracts, or real estate mortgages commonly in use, State 
Directors will issue State supplements which tell how to obtain a 
subordination agreement, certification of obligation to landlord, 
disclaimer, and consent and subordination agreement to perfect security 
interest.
    (a) Form FmHA or its successor agency under Public Law 103-354 441-
5, ``Subordination Agreement.'' This form will be used if a 
subordination agreement is required by FmHA or its successor agency 
under Public Law 103-354 on crops, livestock, farm equipment, or other 
chattels. If Form FmHA or its successor agency under Public Law 103-354 
441-5 is not legally sufficient, a form recommended by OGC will be used. 
The time to be covered by the subordination agreement generally will be 
equal to the repayment period of the loan or for the unexpired period of 
the lease if the borrower is a tenant, but as a minimum will be for the 
year for which the loan is made.
    (b) Form FmHA or its successor agency under Public Law 103-354 441-
17, ``Certification of Obligation To Landlord.'' This form may be used 
instead of obtaining a subordination agreement if:
    (1) It appears that the applicant is not financially obligated to 
the landlord except for rent for the lease year and will not incur other 
obligations to the landlord during that year, and
    (2) A State supplement authorizing the use of Form FmHA or its 
successor

[[Page 140]]

agency under Public Law 103-354 441-17 in such cases has been issued.
    (c) Form FmHA or its successor agency under Public Law 103-354 440-
26, ``Consent and Subordination Agreement.'' Unless otherwise provided 
by a State supplement, this form rather than a severance agreement will 
be used in UCC States when a security interest is taken in property 
after it has become a fixture.
    (1) If a debt on an item which has already become a fixture is being 
refinanced, consent and subordination agreements will be signed before 
releasing loan funds to the creditor. In all other cases in which a 
security interest is being taken on an item that already has become a 
fixture, consent and subordination agreements will be signed no later 
than the time of loan closing.
    (2) Consent and subordination agreements will be taken only in those 
cases in which the fixture is placed on the real estate before the 
financing statement and security agreement covering the fixture have 
been executed, or before the financing statement is filed, or before the 
request for obligation of funds is signed by the loan approving 
official.

[43 FR 55883, Nov. 29, 1978, as amended at 54 FR 47959, Nov. 20, 1989]



Sec. Sec. 1941.68-1941.70  [Reserved]



Sec. 1941.71  Fees.

    The borrower will pay all fees for filing or recording financing 
statements, mortgages, or other legal instruments and will pay all 
notary and lien search fees incident to loan transactions. Payment will 
be made from personal funds or from the proceeds of the loan. Whenever 
FmHA or its successor agency under Public Law 103-354 employees accept 
cash to pay for filing or recording fees or for the cost of making a 
lien search, Form FmHA or its successor agency under Public Law 103-354 
440-12, ``Acknowledgment of Payment for Recording, Lien Search, and 
Releasing Fees,'' will be executed. FmHA or its successor agency under 
Public Law 103-354 employees will make it clear to the borrower that any 
fee so accepted is not received by the Government as a payment on the 
borrower's debt, but is accepted only for paying the recording, filing, 
or lien search fees on behalf of the borrower.



Sec. Sec. 1941.72-1941.74  [Reserved]



Sec. 1941.75  Retention and use of security agreements.

    Original executed security agreements will not be altered or 
destroyed, and will remain in the case file when new security agreements 
are taken. Changes in security property will be noted only on the work 
copy. When an additional security agreement covering all collateral for 
the debt is taken, the work copy of the previous security agreement may 
be destroyed.



Sec. Sec. 1941.76-1941.78  [Reserved]



Sec. 1941.79  Future advance and after-acquired property clauses.

    The future advance and after-acquired property clauses of security 
agreements will be considered valid in all respects in UCC States unless 
otherwise provided in a State supplement.
    (a) Future advance clause. A properly prepared, executed, and filed 
or recorded FmHA or its successor agency under Public Law 103-354 
financing statement and a properly prepared and executed FmHA or its 
successor agency under Public Law 103-354 security agreement give FmHA 
or its successor agency under Public Law 103-354 a security interest in 
the property described. This security interest covers future loans, 
advances, and expenditures, as well as any other FmHA or its successor 
agency under Public Law 103-354 debts evidenced by notes and any 
advances or expenditures for debts evidenced by such notes. However, 
when a borrower's indebtedness is paid in full, a new security agreement 
must be taken in all cases to secure an initial loan made following the 
payment in full.
    (b) After-acquired property clause. After a security interest is 
acquired in certain property, any property (except fixtures) acquired 
which is of the same type as that described in the financing statement 
and security agreement will also serve as security for the debt. The 
after-acquired property clause in the security agreement will encumber 
crops grown on the land described in

[[Page 141]]

the security agreement and financing statement, provided the crops are 
planted or otherwise become growing crops within 1 year of the execution 
date of the security agreement, or within such other period as provided 
in a State supplement. FmHA or its successor agency under Public Law 
103-354 after-acquired security interests take priority over other 
security interests perfected after the FmHA or its successor agency 
under Public Law 103-354 financing statement is filed, except as stated 
in Sec. 1941.60.
    (c) State supplements. A State supplement concerning future advance 
and after-acquired property clauses will set forth requirements for 
filing or recording security instruments in that State. This will assist 
County Supervisors in other States who request such information in 
accordance with Sec. 1941.57(g). A State supplement will also be issued 
when OGC determines that it is needed to reflect any amendments made to 
a State's UCC.



Sec. Sec. 1941.80-1941.83  [Reserved]



Sec. 1941.84  Title clearance and closing requirements.

    (a) For loans over $10,000, title clearance is required when real 
estate is taken as primary security.
    (b) For loans of $10,000 or less, and loans for which real estate is 
taken as primary security, a certification of ownership and verification 
of equity in real estate is required. Certification of ownership may be 
in the form of a notarized affidavit which is signed by the applicant, 
names the record owner of the real estate in question and lists the 
balances due on all known debts against the real estate. Whenever the 
County Supervisor is uncertain of the record owner or debts against the 
estate security, a title search will be required.
    (c) Title clearance is not required when real estate is taken as 
additional security, as defined in Sec. 1941.4 of this subpart.
    (d) When real estate is taken as primary security, as defined in 
Sec. 1941.4 of this subpart, title clearance and loan closing 
requirements will be carried out in accordance with subpart B of part 
1927 of this chapter.
    (e) If any prior liens against the real estate offered as security 
contain provisions (such as future advance clauses not limited to a 
specific amount) that could jeopardize either the security position of 
the Government or the applicant's ability to meet the obligations of the 
prior liens and FmHA or its successor agency under Public Law 103-354 
loan, the prior lienholders involved must agree in writing, before the 
loan is closed, to modify, waive, or subordinate such objectionable 
provisions.
    (f) If a lien is to be taken on real estate which is already subject 
to a lien, and if State law allows a prior lienholder to foreclose on a 
loan (under power of sale or otherwise) without notifying a junior 
lienholder of the foreclosure proceedings, the prior lienholders must 
agree, in writing, to give FmHA or its successor agency under Public Law 
103-354 advance notice of all foreclosure proceedings and of any 
assignment of the mortgage.
    (g) Each real estate lien will be taken on Form FmHA or its 
successor agency under Public Law 103-354 1927-1 (State), ``Real Estate 
Mortgage or Deed of Trust for ------------,'' unless a state supplement 
requires the use of another form.
    (h) If the real estate offered as security is held under a purchase 
contract, the following conditions must exist:
    (1) The applicant must be able to provide a mortgageable interest in 
the real estate.
    (2) The applicant and the purchase contract holder must agree, in 
writing, that any insurance proceeds received to compensate for real 
estate losses will be used only to replace or repair the damaged real 
estate. If necessary, the applicant will negotiate with the purchase 
contract holder to arrive at a new contract without any provisions 
objectionable to either FmHA or its successor agency under Public Law 
103-354 or the lender.
    (3) If a satisfactory contract of sale cannot be negotiated or if 
the purchase contract holder refuses to agree to apply the insurance 
proceeds toward the repair or replacement of the real estate and wants 
to retain some of the proceeds as an extra payment on the balance owned, 
the applicant will make

[[Page 142]]

every effort to refinance the existing purchase contract.
    (4) The purchase contract must not be subject to summary 
cancellation on default and must not contain any other provisions which 
might jeopardize either the Government's security position or the 
borrower's ability to repay the loan.
    (5) The contract holder must agree, in writing, to give the 
Government notice of any breach by the purchaser, and must also agree to 
give the Government the option to rectify the conditions which amount to 
a breach within 30 days. The 30 days begin to run on the day the 
Government receives the written notice of the breach.

[51 FR 13448, Apr. 21, 1986, as amended at 56 FR 67480, Dec. 31, 1991; 
58 FR 26680, May 5, 1993]



Sec. Sec. 1941.85-1941.87  [Reserved]



Sec. 1941.88  Insurance.

    (a) Catastrophic Risk Protection (CAT) insurance requirement. 
Applicants must obtain at least the CAT level of crop insurance of 
coverage for each crop of economic significance, as defined by the 
Federal Crop Insurance Corporation, if such coverage is offered. The 
applicant can meet this requirement by either:
    (1) Obtaining at least the CAT level of coverage or,
    (2) Waiving eligibility for emergency crop loss assistance in 
connection with the uninsured crop. EM loss loan assistance is not 
considered emergency crop loss assistance for purposes of this waiver.
    (b) Crops. Crop insurance is a good management tool. Loan approval 
officials will, therefore, during the loan making process, encourage all 
borrowers who grow crops to obtain and maintain Federal Crop Insurance 
Corporation (FCIC) crop insurance or multi-peril crop insurance, if it 
is available.
    (1) When OL loan funds are to be used as the primary source of 
financing for the ensuing year's crop production expenses, and such 
crop(s) will serve as security for the loan, and crop insurance is 
purchased by the borrower, FmHA or its successor agency under Public Law 
103-354 requires and ``Assignment of Indemnity'' on the borrower's crop 
insurance policy(ies).
    (2) When FmHA or its successor agency under Public Law 103-354 is 
not the primary lender for annual crop production expenses, but has or 
will have a security interest in the crop(s), and the applicant has 
purchased or will purchase crop insurance, an ``Assignment of 
Indemnity'' is taken by FmHA or its successor agency under Public Law 
103-354, if the primary lender chooses not to do so.
    (3) When the payment of crop insurance premiums is not required 
until after harvest, the premiums may be paid by releasing insured 
crop(s) sale proceeds, but not withstanding the limits in Sec. Sec. 
1962.17 and 1962.29(b) of subpart A of part 1962 of this chapter. If the 
borrower's crop losses are sufficient to warrant an indemnity payment, 
the premium due will be deducted by the insurance carrier from such 
payment.
    (c) Chattels and real estate. Chattel property that secures OL loans 
must be covered by hazard insurance unless the Agency determines that 
coverage is not readily available or the benefit of the coverage is less 
than its cost. When insured, chattel property must at least be covered 
at its tax or cost depreciated value, whichever is less. Real property 
must be covered by general hazard and flood insurance in accordance with 
subparts A and B of part 1806 of this chapter.
    (d) Public liability and property damage. Borrowers should be 
advised of the possibilities of incurring liability and encouraged to 
obtain public liability and property damage insurance, including 
insurance on a customer's property in the custody of the borrower.
    (e) Mortgage clause. When insurance is required on property serving 
as security, Form FmHA or its successor agency under Public Law 103-354 
426-2, ``Property Insurance Mortgage Clause (Without Contribution),'' or 
a standard mortgage clause in general use in the area will be attached 
to or printed in the policy and will show the United States of America 
(Farmers Home Administration or its successor agency

[[Page 143]]

under Public Law 103-354) as mortgagee or secured party.

[43 FR 55883, Nov. 29, 1978, as amended at 47 FR 33486, Aug. 3, 1982; 53 
FR 35691, Sept. 14, 1988; 58 FR 26680, May 5, 1993; 62 FR 9355, Mar. 3, 
1997; 62 FR 28618, May 27, 1997]



Sec. Sec. 1941.89-1941.91  [Reserved]



Sec. 1941.92  Check delivery.

    The County Supervisor will receive and deliver loan checks. On 
receipt of a loan check, and after arrangements have been completed for 
loan closing, the applicant will be promptly notified on Form FmHA or 
its successor agency under Public Law 103-354 440-8, ``Notice of Check 
Delivery.'' Loan funds will be disbursed in accordance with subpart A of 
part 1902 of this chapter.

[43 FR 55883, Nov. 29, 1978, as amended at 58 FR 26681, May 5, 1993]



Sec. 1941.93  [Reserved]



Sec. 1941.94  Supervised bank accounts.

    If a supervised bank account is required, loan funds will be 
deposited following loan closing. Supervised bank accounts will be 
established in accordance with subpart A of part 1902 of this chapter.

[53 FR 35692, Sept. 14, 1988]



Sec. 1941.95  [Reserved]



Sec. 1941.96  Changes in use of loan funds.

    (a) Approval of changes. County Supervisors, or their delegates, are 
authorized to approve changes in the purposes for which loan funds are 
to be used provided:
    (1) The change is consistent with authorities, policies and 
limitations for making loans, and
    (2) The change will not adversely affect either the workings of an 
on-going operation or the Government's interest.
    (b) Recording changes. When changes are made in the use of loan 
funds, the installments on Form FmHA or its successor agency under 
Public Law 103-354 1940-17, ``Promissory Note,'' will not be revised. 
When funds loaned for the purchase of capital goods are to be used for 
annual recurring production expenses, the funds will be repaid in 
accordance with the terms for such uses in subpart A of this part. 
Appropriate changes with respect to the repayments will be made in table 
K of Form FmHA or its successor agency under Public Law 103-354 431-2, 
``Farm and Home Plan,'' also on Form FmHA or its successor agency under 
Public Law 103-354 1962-1, ``Agreement for the Use of Proceeds/Release 
of Chattel Security,'' and initialed by the borrower. Appropriate 
notations will be made in the ``Supervisory and Servicing Actions'' 
section of the Management System Card.

[43 FR 55883, Nov. 29, 1978, as amended at 45 FR 16166, Mar. 13, 1980; 
53 FR 35692, Sept. 14, 1988; 54 FR 47959, Nov. 20, 1989]



PART 1942_ASSOCIATIONS--Table of Contents




                   Subpart A_Community Facility Loans

Sec.
1942.1 General.
1942.2 Processing applications.
1942.3 Preparation of appraisal reports.
1942.4 Borrower contracts.
1942.5 Application review and approval.
1942.6 Preparation for loan closing.
1942.7 Loan closing.
1942.8 Actions subsequent to loan closing.
1942.9 Planning, bidding, contracting, and constructing.
1942.10-1942.11 [Reserved]
1942.12 Loan cancellation.
1942.13 Loan servicing.
1942.14 Subsequent loans.
1942.15 Delegation and redelegation of authority.
1942.16 State supplements and guides.
1942.17 Community facilities.
1942.18 Community facilities--Planning, bidding, contracting, 
          constructing.
1942.19 Information pertaining to preparation of notes or bonds and bond 
          transcript documents for public body applicants.
1942.20 Community Facility Guides.
1942.21 Statewide nonmetropolitan median household income.
1942.22-1942.49 [Reserved]
1942.50 OMB control number.

Subpart B [Reserved]

Subpart C_Subpart C_Fire and Rescue and Other Small Community Facilities 
                                Projects

1942.101 General.
1942.102 Nondiscrimination.
1942.103 Definitions.
1942.104 Application processing.
1942.105 Environmental review.

[[Page 144]]

1942.106 Intergovernmental review.
1942.107 Priorities.
1942.108 Application docket preparation and review.
1942.109-1942.110 [Reserved]
1942.111 Applicant eligibility.
1942.112 Eligible loan purposes.
1942.113 Rates and terms.
1942.114 Security.
1942.115 Reasonable project costs.
1942.116 Economic feasibility requirements.
1942.117 General requirements.
1942.118 Other Federal, State, and local requirements.
1942.119 Professional services and borrower contracts.
1942.120-1942.121 [Reserved]
1942.122 Actions prior to loan closing and start of construction.
1942.123 Loan closing.
1942.124-1942.125 [Reserved]
1942.126 Planning, bidding, contracting, constructing, procuring.
1942.127 Project monitoring and fund delivery.
1942.128 Borrower accounting methods, management reports and audits.
1942.129 Borrower supervision and servicing.
1942.130-1942.131 [Reserved]
1942.132 Subsequent loans.
1942.133 Delegation and redelegation of authority.
1942.134 State supplements and guides.
1942.135-1942.149 [Reserved]
1942.150 OMB control number.

Subparts D-F [Reserved]

Subpart G_Rural Business Enterprise Grants and Television Demonstration 
                                 Grants

1942.301 Purpose.
1942.302 Policy.
1942.303 Authorities, delegation, and redel-egation.
1942.304 Definitions.
1942.305 Eligibility and priority.
1942.306 Purposes of grants.
1942.307 Limitations on use of grant funds.
1942.308 Regional Commission grants.
1942.309 [Reserved]
1942.310 Other considerations.
1942.311 Application processing.
1942.312 [Reserved]
1942.313 Plan to provide financial assistance to third parties.
1942.314 Grants to provide financial assistance to third parties, 
          television demonstration projects, and technical assistance 
          programs.
1942.315 Docket preparation and Letter of Conditions.
1942.316 Grant approval, fund obligation and third party financial 
          assistance.
1942.317-1942.320 [Reserved]
1942.321 Subsequent grants.
1942.322-1942.347 [Reserved]
1942.348 Exception authority.
1942.349 Forms, guides, and attachments.
1942.350 OMB control number.

Guide 1 to Subpart G--Project Management Agreement Between the --------
          -- Regional Commission and the Farmers Home Administration or 
          Its Successor Agency Under Public Law 103-354, Department of 
          Agriculture
Guide 2 to Subpart G--Resolution

Subpart H [Reserved]

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



                   Subpart A_Community Facility Loans

    Source: 50 FR 7296, Feb. 22, 1985, unless otherwise noted.



Sec. 1942.1  General.

    (a) This subpart outlines the policies and procedures for making and 
processing insured loans for Community Facilities except fire and rescue 
and other small essential community facility loans and water and waste 
disposal facilities. This subpart applies to Community Facilities loans 
for fire and rescue and other small essential community facility loans 
only as specifically provided for in subpart C of this part. Water and 
waste loans are provided for in part 1780 of this title. The Agency 
shall cooperate fully with State and local agencies in making loans to 
assure maximum support to the State strategy for rural development. 
State Directors and their staffs shall maintain coordination and liaison 
with State agency and substate planning districts. Funds allocated for 
use under this subpart are also for the use of Indian tribes within the 
State, regardless of whether State development strategies include Indian 
reservations within the State's boundaries. Indians residing on such 
reservations must have equal opportunity to participate in the benefits 
of these programs as compared with other residents of the State. Federal 
statues provide for extending Agency financial programs without regard 
to race, color, religion, sex, national origin, marital status, age, or 
physical/mental handicap. The participants must possess the capacity to 
enter into legal contracts under State

[[Page 145]]

and local statutes. Any processing or servicing activity conducted 
pursuant to this subpart involving authorized assistance to Agency 
employees, members of their families, known close relatives, or business 
or close personal associates, is subject to the provisions of subpart D 
of part 1900 of this chapter. Applicants for this assistance are 
required to identify any known relationship or association with an 
Agency employee.
    (b) Indian tribes on Federal and State reservations and other 
Federally recognized Indian tribes are eligible to apply for and are 
encouraged to participate in this program. Such tribes might not be 
subject to State and local laws or jurisdiction. However, any 
requirements of this subpart that affect applicant eligibility, the 
adequacy of FmHA or its successor agency under Public Law 103-354's 
security or the adequacy of service to users of the facility and all 
other requirements of this subpart must be met.
    (c) Loans sold without insurance by FmHA or its successor agency 
under Public Law 103-354 to the private sector will be serviced in the 
private sector and will not be serviced under this subpart. The 
provisions of this subpart are not applicable to such loans. Future 
changes to this subpart will not be made applicable to such loans.
    (d) The District Office will normally be the entry point for 
preapplications and serve as a local point. Applications will be filed 
with the District Office and loans will be processed to the maxium 
extent possible by the District Office staff. The applicant's governing 
body should designate one person to coordinate the activities of its 
engineer, architect, attorney, and any other professional employees and 
to act as contact person during loan processing. FmHA or its successor 
agency under Public Law 103-354 personnel should make every effort to 
involve the applicant's contact person when meeting with the applicant's 
professional consultants and/or agents. The State Office staff will 
monitor community programs loanmaklng and servicing, and will provide 
assistance to District Office personnel to the extent necessary to 
assure that the activities are being accomplished in an orderly manner 
consistent with FmHA or its successor agency under Public Law 103-354 
regulations.

[50 FR 7296, Feb. 22, 1985, as amended at 52 FR 38908, Oct. 20, 1987; 52 
FR 43725, Nov. 16, 1987; 52 FR 47097, Dec. 11, 1987; 57 FR 21193, May 
19, 1992; 58 FR 226, Jan. 5, 1993; 62 FR 33510, June 19, 1997; 68 FR 
65830, Nov. 24, 2003]



Sec. 1942.2  Processing applications.

    (a) Preapplications. (1) The District Office may handle initial 
inquiries and provide basic information about the program. They are to 
provide the preappllcation, SF 424.2, ``Application for Federal 
Assistance (For Construction).'' The District Director will assist 
applicants as needed in completing SF 424.2, and in filing written 
notice of intent and priority recommendation with the appropriate 
clearinghouse. The District Director will inform the applicant that it 
may be necessary to apply for credit from commercial sources. It will be 
explained that if credit for the project is available from commercial 
sources at reasonable rates and terms the applicant is not eligible for 
FmHA or its successor agency under Public Law 103-354 financing. The 
District Director will meet with the applicant, whenever appropriate to 
discuss FmHA or its successor agency under Public Law 103-354 
preapplication processing. Guidance and assistance will be provided by 
the State Director, as needed, for orderly application processing. The 
District Director will determine that the preapplication is property 
completed and fully reviewed. The District Director will then forward to 
the State Director:
    (i) Eligibility determination and recommendations.
    (ii) One copy of SF 424.2.
    (iii) State intergovernmental review comments and recommendations 
(clearinghouse comments).
    (iv) Priority recommendations.
    (v) Supporting documentation necessary to make an eligibility 
determination such as financial statements, audits, or copies of 
organizational documents or existing debt instruments. The District 
Director will advise applicants on what documents are necessary. 
Applicants should not be required to expend significant amounts

[[Page 146]]

of money or time developing supporting documentation at the 
preapplication stage.
    (2) The State Director will review each SF 424.2 along with other 
information that is deemed necessary to determine whether financing from 
commercial sources at reasonable rates and terms is available. If credit 
elsewhere is indicated, the State Director will instruct the District 
Director to so inform the applicant and recommend the applicant apply to 
commercial sources for financing. Projects may be funded jointly with 
other lenders provided the requirements of Sec. 1942.17 (g) of this 
subpart are met. Joint financing occurs when two or more lenders make 
separate loans to supply the funds required by one applicant for a 
project.
    (i) In order to provide a basis for referral of preapplications of 
only those applicants who may be able to finance projects through 
commercial sources, State Directors should maintain liaison with 
representatives of banks, investment bankers, financial advisors, and 
other lender representatives in the State. State Directors with their 
assistance, should maintain criteria for determining preapplications 
which should be referred to commercial lenders. A list of lender 
representatives interested in receiving such referrals should be 
maintained.
    (ii) The State Director shall maintain a working relationship with 
the State Office or official that has been designated as the single 
point of contact for the intergovernmental review process and give full 
consideration to their comments when selecting preapplications to be 
processed.
    (iii) The State Director will review the District Director's 
eligibility determination and recommendations in sufficient time for the 
District Director's use in preparing and issuing Form AD-622.
    (iv) Form AD-622 will be prepared by the District Director within 
forty-five (45) calendar days from receipt of the preapplication by FmHA 
or its successor agency under Public Law 103-354, stating the results of 
the review action. The original will be signed and delivered to the 
applicant with a copy to the State Director.
    (3) For preapplications eligible for FmHA or its successor agency 
under Public Law 103-354 funding which have the necessary priority to 
compete with similar preapplications, FmHA or its successor agency under 
Public Law 103-354 will issue Form AD-622 inviting an application 
containing the following statement:

    You are advised against taking any actions or incurring any 
obligations which would either limit the range of alternatives to be 
considered, or which would have an adverse effect on the environment. 
Satisfactory completion of the environmental review process must occur 
prior to the issuance of the letter of conditions.

    (4) The following statement must be added to Form AD-622 when 
notifying preapplicants who are eligible, but do not have the priority 
necessary for further consideration at this time:

    You are advised against incurring obligations which would limit the 
range of alternatives to be considered, or which cannot be fulfilled 
without FmHA or its successor agency under Public Law 103-354 funds 
until the funds are actually made available. Therefore, you should 
refrain from such actions as initiating engineering and legal work, 
taking actions which would have an adverse effect on the environment, 
taking options on land rights, developing detailed plans and 
specifications, or inviting construction bids until notified by Farmers 
Home Administration (FmHA) or its successor agency under Public Law 103-
354 to proceed.

    (b) Environmental review. Environmental requirements will be 
documented in accordance with subpart G of part 1940 of this chapter and 
submitted to the State Director. Starting with the earliest discussions 
with prospective applicants or review of preapplications and continuing 
throughout application processing, environmental issues must be 
considered. This should provide flexibility to consider alternatives to 
the project and develop methods to mitigate identified adverse 
environmental impacts. Documentation of the appropriate environmental 
review should be completed as soon as possible; however, the State 
Director will ensure that the appropriate environmental review is 
completed prior to issuing the letter of conditions.

[[Page 147]]

    (c) Applications. The District Director should assist the applicant 
in application assembly and processing.
    (1) State Directors should have applications in process representing 
approximately 150 percent of the current State allocation.
    (2) The application docket will include SF 424.2, and related forms, 
materials, and information. The application will be assembled in 
accordance with guide 15 of this subpart or State guides developed under 
Sec. 1942.16 of this subpart.
    (3) When an applicant is notified to proceed with an application, 
the District Director should arrange for a conference with the applicant 
to provide copies of appropriate appendices and forms; furnish guidance 
necessary for orderly application processing; and to initiate a 
processing checklist for establishing a time schedule for completing 
items using Form FmHA or its successor agency under Public Law 103-354 
1942-39, ``Processing Check List (Other Than Public Bodies),'' or Form 
FmHA or its successor agency under Public Law 103-354 1942-40, 
``Processing Check List (Public Bodies),'' or other checklist adopted 
for use in the State. The District Director will confirm decisions made 
at this conference by letter to the applicant and by a copy of the 
processing checklist. The original and a copy of the processing 
checklist will be retained in the District Office and a copy will be 
forwarded to the State Office. The original and copy of the checklist 
retained in the District Office will be kept current as application 
processing actions are taken. The copy will be sent to the State Office 
to use in updating its copy of this form. The State Office will then 
return the District Office's copy. As the application is being 
processed, and the need develops for additional conferences, the 
District Director will arrange with the applicant for such conference to 
extend and update the processing checklist.
    (d) Review of decision. If at any time prior to loan approval it is 
decided that favorable action will not be taken on a preapplication or 
application, the District Director will notify the applicant in writing 
of the reasons why the request was not favorably considered. The 
notification to the applicant will state that a review of this decision 
by FmHA or its successor agency under Public Law 103-354 may be 
requested by the applicant under subpart B of part 1900 of this chapter. 
The following statement will also be made on all notifications of 
adverse action.

    The Federal Equal Credit Opportunity Act prohibits creditors from 
discriminating against credit applicants on the basis of race, color, 
religion, national origin, sex, marital status, age (provided that the 
applicant has the capacity to enter into a binding contract); because 
all or part of the applicant's income is derived from any public 
assistance program; or because the applicant has in good faith exercised 
any right under the Consumer Credit Protection Act. The Federal agency 
that administers compliance with this law is the Federal Trade 
Commission, Equal Credit Opportunity, Washington, DC 20580.

    (e) Joint funding. FmHA or its successor agency under Public Law 
103-354 may finance projects jointly with funds from other sources, such 
as, commercial/private lenders, Federal agencies, State and local 
Governments, etc. Other departments, agencies, and executive 
establishments of the Federal Government may participate and provide 
financial and technical assistance jointly with FmHA or its successor 
agency under Public Law 103-354 to any applicant to whom FmHA or its 
successor agency under Public Law 103-354 is providing assistance. The 
amount of participation by the other department, agency, or executive 
establishment shall only be limited by its authorities except that any 
limitation on joint participation itself is superseded by section 125 of 
Pub. L. 95-334 (Section 347, Consolidated Farm and Rural Development 
Act, as amended).

[50 FR 7296, Feb. 22, 1985, as amended at 53 FR 6786, Mar. 3, 1988; 54 
FR 47197, Nov. 13, 1989; 55 FR 13503 and 15304, Apr. 11, 1990; 57 FR 
21194, May 19, 1992; 61 FR 6309, Feb. 20, 1996]



Sec. 1942.3  Preparation of appraisal reports.

    When the loan approval official requires an appraisal, Form FmHA or 
its successor agency under Public Law 103-354 422-10, ``Appraisal 
Report--Water and Waste Disposal Systems,'' may be used with appropriate 
supplements. Form FmHA or its successor agency

[[Page 148]]

under Public Law 103-354 442-10 may be modified as appropriate or other 
appropriate format may be used for facilities other than water and waste 
disposal. Appraisal reports prepared for use in connection with the 
purchase of existing essential community facilities or when required by 
Sec. 1942.17 (g)(2)(iii)(B)(2), (g)(3)(iii)(B)(2), and (j)(4) of this 
subpart, may be prepared by the FmHA or its successor agency under 
Public Law 103-354 engineer/architect or, if desired by the State 
Director, some other qualified appraiser. The loan approval official may 
require an applicant to provide an appraisal prepared by an independent 
qualified appraiser; however, the loan approval official must determine 
that the appraised value shown in such reports reflects the present 
market value.

[50 FR 7296, Feb. 22, 1985, as amended at 53 FR 6786, Mar. 3, 1988]



Sec. 1942.4  Borrower contracts.

    The State Director will, with assistance as necessary by the Office 
of the General Counsel (OGC), concur in agreements between borrowers and 
third parties such as contracts for professional and technical services 
and contracts for the purchase of water or treatment of waste. State 
Directors are expected to work closely with representatives of 
engineering and architectural societies, bar associations, commercial 
lenders, accountant associations, and others in developing standard 
forms of agreements, where needed, and other such matters in order to 
expedite application processing, minimize referrals to OGC, and resolve 
problems which may arise.



Sec. 1942.5  Application review and approval.

    (a) Procedures for review. Ordinarily FmHA or its successor agency 
under Public Law 103-354 staff review will proceed as applications are 
being developed. An overall review of the applicant's financial status, 
including a review of all assets and liabilities, will be a part of the 
docket review process by the staff and approval officials. The 
engineering/architect reports and associated data are to be reviewed by 
the FmHA or its successor agency under Public Law 103-354 staff engineer 
or architect, as appropriate, as soon as available but prior to the 
District Director's completion of the project summary. During the review 
the District Director in all cases will make certain that no low income 
or minority community within the service area has been omitted or 
discouraged from participating in the proposed project. The District 
Director will also determine how the service area was defined to assure 
that gerrymandering of specific communities or areas has not occurred. 
The findings should be documented in the running record. Prior to 
presenting the assembled application to the approval official, the 
assembled application ordinarily will be processed in the following 
sequence:
    (1) The Rural Development manager will complete the project summary, 
including written analysis and recommendations, and will prepare a draft 
letter of conditions listing all the requirements that the applicant 
must agree to meet within a specific time.
    (i) Requirements listed in letters of conditions will include the 
following unless inappropriate due to the particular type of funding or 
entity involved: Maximum amount of loan and/or grant which may be 
considered, scheduling of payments, term of loan and any deferment of 
principal which may be allowed, reserve requirements, compliance with 
section 504 of the Rehabilitation Act of 1973, number of users (members) 
and verification required, contributions rates and charges, interim 
financing, disbursement of funds, security requirements, graduation 
requirements, debt collection policies execution of Form FmHA or its 
successor agency under Public Law 103-354 1910-11, ``Application 
Certification, Federal Collection Policies for Consumer or Commercial 
Debts,'' organization, business operations, insurance and bonding 
(including applicant/borrower and contractor), construction contract 
documents and bidding, accounts, records, and audit reports required 
(including requirements of OMB Circulars A-128 and A-110), adoption of 
Form FmHA or its successor agency under Public Law 103-354 1942-47, 
``Loan Resolution (Public Resolution),'' for public bodies or Form FmHA 
or its successor agency under

[[Page 149]]

Public Law 103-354 1942-9, ``Loan Resolution (Security Agreement),'' for 
other than public bodies, closing instructions, and other requirements.
    (ii) Each letter of conditions will contain the following 
paragraphs:

    This letter establishes conditions which must be understood and 
agreed to by you before further consideration may be given to the 
application. Any changes in the project cost, source of funds, scope of 
services, or any other significant changes in the project or applicant 
must be reported to and approved by FmHA or its successor agency under 
Public Law 103-354 by written amendment to this letter. Any changes not 
approved by FmHA or its successor agency under Public Law 103-354 shall 
be cause for discontinuing processing of the application.
    This letter is not to be considered as loan approval or as 
representation to the availability of funds. The docket may be completed 
on the basis of a loan not to exceed $------.
    If FmHA or its successor agency under Public Law 103-354 makes the 
loan, you may make a written request that the interest rate be the lower 
of the rate in effect at the time of loan approval or the time of loan 
closing. If you do not request the lower of the two interest rates, the 
interest rate charged will be the rate in effect at the time of loan 
approval. The loan will be considered approved on the date a signed copy 
of Form FmHA or its successor agency under Public Law 103-354 1940-1, 
``Request for Obligation of Funds,'' is mailed to you. If you want the 
lower of the two rates, your written request should be submitted to FmHA 
or its successor agency under Public Law 103-354 as soon as practical. 
In order to avoid possible delays in loan closing such a request should 
ordinarily be submitted at least 30 calendar days before loan closing.
    Please complete and return the attached Form FmHA or its successor 
agency under Public Law 103-354 1942-46, ``Letter of Intent to Meet 
Conditions,'' if you desire that further consideration be given your 
application.

    (iii) Rural Development Managers may add the following:

    If the conditions set forth in this letter are not met within ------ 
days from the date hereof, FmHA or its successor agency under Public Law 
103-354 reserves the right to discontinue the processing of the 
application.

    (2) The State staff engineer or architect, as appropriate, will 
include a written analysis and recommendations on the project summary.
    (3) The Chief, Community Programs or Community and Business 
Programs, will review the assembled application and include in the 
project summary a written analysis and recommendations, including the 
availability of other credit and other eligibility determinations. The 
draft letter of conditions will be reviewed and any necessary 
modifications made.
    (b) Project requiring National Office review. Prior National Office 
review is required for certain proposals (See subpart A of part 1901 of 
this chapter).
    (1) The Rural Development Manager should assemble applications for 
the National Office review in the following order from top to bottom and 
forward them to the State Director for review and recommedation prior to 
submission to the National Office:
    (i) Transmittal memorandum including:
    (A) Recommendation.
    (B) Date of expected obligation.
    (C) Any unusual circumstances.
    (ii) Copies of the following:
    (A) Proposed letter of conditions.
    (B) Applicable State Intergovernmental review comments (FmHA 
Instruction 1940-J, available in any FmHA or its successor agency under 
Public Law 103-354 office).
    (C) Community Facilities Project Summary.
    (D) Preliminary architectural or engineering report.
    (E) Form FmHA or its successor agency under Public Law 103-354 442-
3, ``Balance Sheet,'' or a financial statement or audit that includes a 
balance sheet.
    (F) For other essential community facility loan applicants whose 
proposals do not meet the assured income or tax based security 
requirements of Sec. 1942.17 (g)(2)(iii) and (g)(3)(iii) of this 
subpart, financial information for the last five years of operation will 
be submitted if available. The type of financial information to be 
submitted should be determined based on what is available and the 
following order of preference:
    (1) Complete audits;
    (2) Unaudited financial statements including balance sheets and 
statements of income and expenses;
    (3) Lists of income and expenses.
    (G) For other essential community facility loans secured under 
paragraph

[[Page 150]]

(b)(1)(ii)(F) of this section, submit a detailed explanation of the 
proposed security; evidence that the application cannot be processed and 
the loan secured under paragraph (b)(1)(ii)(F) of this section; evidence 
supporting the efforts by the applicant in persuading appropriate public 
bodies to provide the proposed facility and services and the results, 
and comments of the Regional Attorney concurring in the applicants' 
legal authority to give the proposed security.
    (H) Financial Feasibility Report when required by Sec. 1942.17 
(h)(1).
    (I) Proposed lease agreements, management agreements, or other 
agreements when facility management will be provided by other than the 
applicant.
    (J) Other forms and documents on which there are specific questions.
    (K) Environmental impact analysis and documentation.
    (2) For applications to be reviewed in the State or field, at least 
those items in paragraph (b)(1)(ii) of this section, should be 
available.
    (c) For all applications. All letters of conditions will be 
addressed to the applicant, signed by the Rural Development Manager or 
other Agency representative designated by the State Director, and 
delivered to the applicant. Upon signing the letter of conditions, the 
Rural Development Manager will send two copies of the letter of 
conditions and two copies of the project summary to the State Director. 
The State Director will immediately send one copy of the project summary 
and a copy of the letter of conditions to the National Office, 
Attention: Community Programs. The Rural Development Manager, with 
assistance as needed from the State Office, will discuss the 
requirements of the letter of conditions with the applicant's 
representatives and afford them an opportunity to execute Form RD 1942-
46.
    (1) The letter of conditions should not ordinarily be issued unless 
the State Director expects to have adequate funds in the State 
allocation to fund the project within the next 12 months based on 
historic allocations or other reliable projections.
    (2) If the applicant declines to execute Form FmHA or its successor 
agency under Public Law 103-354 1942-46, the Rural Development Manager 
will immediately notify the State Director and provide complete 
information as to the reasons for such declination.
    (3) If the applicant accepts the letter of conditions, the Rural 
Development Manager will forward the executed Form RD 1942-46 and a 
signed and an unsigned copy of Form RD 1940-1 to the State Director.
    (d) Loan approval and obligating funds. Loans will be approved under 
this subpart and subpart A of part 1901 of this chapter (available in 
any FmHA or its successor agency under Public Law 103-354 office). The 
loan will be considered approved on the date the signed copy of Form 
FmHA or its successor agency under Public Law 103-354 1940-1 is mailed 
to the applicant. The State Director or designee may request an 
obligation of funds when available within their State allocation and 
according to the following:
    (1) Form FmHA or its successor agency under Public Law 103-354 1940-
1, authorizing funds to be reserved, may be executed by the loan 
approval official providing the applicant has the legal authority to 
contract for a loan and to enter into required agreements and has signed 
Form FmHA or its successor agency under Public Law 103-354 1940-1.
    (2) If approval was concurred in by the National Office, a copy of 
the concurring memorandum will be attached to the original of Form FmHA 
or its successor agency under Public Law 103-354 1940-1.
    (3) The State Director or designee will request an obligation of 
loan and/or grant funds via the FmHA or its successor agency under 
Public Law 103-354 Field Office terminal system after signing Form FmHA 
or its successor agency under Public Law 103-354 1940-1. The requesting 
official will furnish security identification as necessary. The 
requesting official will record the date, time of request, and their 
initials on the original Form FmHA or its successor agency under Public 
Law 103-354 1940-1.
    (4) The obligation date and date the applicant is notified of loan 
and/or grant approval is six working days from the date funds are 
reserved unless

[[Page 151]]

an exception is granted by the National Office.
    (5) Immediately after verifying that funds have been reserved, 
utilizing the FmHA or its successor agency under Public Law 103-354 
Field Office terminal system status inquiry function, the State Director 
or designee will notify by telephone, the Legislative Affairs and Public 
Information Staff in the National Office as required by FmHA Instruction 
2015-C, ``Announcement of Approval of Loans, Grants, or Guaranteed Loans 
for Rural Project,'' (available in any FmHA or its successor agency 
under Public Law 103-354 State Office).
    (6) Loan approval and applicant notification will be accomplished by 
the State Director or designee by mailing to the applicant on the 
obligation date a copy of Form FmHA or its successor agency under Public 
Law 103-354 1940-1 which has been previously signed by the applicant and 
loan approval official. The date the applicant is notified is also the 
date the interest rate at loan approval is established. The State 
Director or designee will record the date of applicant notification and 
the interest rate in effect at that time on the original of Form FmHA or 
its successor agency under Public Law 103-354 1940-1 and include it as a 
permanent part of the District Director project file with a copy placed 
in the State Office file.
    (7) If a transfer of obligation of funds is necessary, complete Form 
FmHA or its successor agency under Public Law 103-354 450-10, ``Advice 
of Borrower's Change of Address, Name, Case Number, or Loan Number,'' 
and process via the FmHA or its successor agency under Public Law 103-
354 Field Office terminal system. An obligation of funds established for 
an applicant may be transferred to a different (substituted) applicant 
provided:
    (i) The substituted applicant is eligible to receive the assistance 
approved for the original applicant; and
    (ii) The substituted applicant bears a close and genuine 
relationship to the original applicant (such as two organizations that 
are controlled by the same individuals); and
    (iii) The need for and scope of the project and the purpose(s) for 
which FmHA or its successor agency under Public Law 103-354 funds will 
be used remain substantially unchanged.

[50 FR 7296, Feb. 22, 1985, as amended at 50 FR 33332, Aug. 19, 1985; 50 
FR 43378, Oct. 25, 1985; 53 FR 6787, Mar. 3, 1988; 54 FR 47196-47197, 
Nov. 13, 1989; 63 FR 16089, Apr. 2, 1998; 67 FR 60584, Sept. 27, 2002; 
67 FR 63019, Oct. 9, 2002]



Sec. 1942.6  Preparation for loan closing.

    (a) Obtaining closing instructions. Completed dockets will be 
reviewed by the State Director. The information required by OGC will be 
transmitted to OGC with a request for closing instructions. Upon receipt 
of the closing instructions from OGC, the State Director will forward 
them along with any appropriate instructions to the District Director. 
Upon receipt of closing instructions, the District Director will discuss 
with the applicant and its architect or engineer, attorney, and other 
appropriate representatives, the requirements contained therein and any 
actions necessary to proceed with closing.
    (b) Verification of users and other funds. (1) In connection with a 
loan for a utility type project to be secured by a pledge of user fees 
or revenues, the District Director will authenticate the number of users 
prior to loan closing or the commencement of construction, whichever 
occurs first. Such individual will review each signed user agreement and 
check evidence of cash contributions. If during the review any 
indication is received that all signed users may not connect to the 
system, there will be such additional investigation made as deemed 
necessary to determine the number of users who will connect to the 
system. The District Director will record the determination in a 
memorandum to the State Director.
    (2) In all cases the availability and amounts of other funds to be 
used in the project will be verified by FmHA or its successor agency 
under Public Law 103-354.
    (c) Initial compliance review. An initial compliance review should 
be completed under subpart E of part 1901 of this chapter.
    (d) Ordering loan checks. Checks will not be ordered until:

[[Page 152]]

    (1) The applicant has complied with approval conditions and closing 
instructions, except for those actions which are to be completed on the 
date of loan closing or subsequent thereto; and
    (2) The applicant is ready to start construction or funds are needed 
to pay interim financing obligations.
    (e) Multiple advances of FmHA or its successor agency under Public 
Law 103-354 funds. When FmHA or its successor agency under Public Law 
103-354 provides loan funds during the construction period using interim 
(temporary) instruments described in Sec. 1942.19(g) of this subpart, 
the following action will be taken prior to the issuance of the 
permanent instruments:
    (1) The Finance Office will be notified of the anticipated date for 
retirement of the interim instruments and issuance of permanent 
instruments of debt.
    (2) The Finance Office will prepare a statement of account including 
accrued interest through the proposed date of retirement and also show 
the daily interest accrual. The statement of account and the interim 
financing instruments will be forwarded to the District Director.
    (3) The District Director will collect interest through the actual 
date of the retirement and obtain the permanent instrument(s) of debt in 
exchange for the interim financing instruments. The permanent 
instruments and the cash collection will be forwarded to the Finance 
Office immediately, except that for promissory notes and single 
instrument bonds fully registered as to principal and interest, the 
original will be retained in the District Office and a copy will be 
forwarded to the Finance Office. In developing the permanent 
instruments, the sequence of preference set out in Sec. 1942.19(e) of 
this subpart will be followed.

[50 FR 7296, Feb. 22, 1985, as amended at 53 FR 6787, Mar. 3, 1988; 53 
FR 26589, July 14, 1988]



Sec. 1942.7  Loan closing.

    Loans will be closed in accordance with the closing instructions 
issued by the OGC and Sec. 1942.17(o) of this subpart and as soon as 
possible after receiving the check.
    (a) Authority to execute, file, and record legal instruments. 
District Office employees are authorized to execute and file or record 
any legal instruments necessary to obtain or preserve security for 
loans. This includes, as appropriate, mortgages and other lien 
instruments, as well as affidavits, acknowledgments, and other 
certificates.
    (b) Preparation of mortgages. Unless otherwise required by State law 
or unless an exception is approved by the State Director with advice of 
the OGC, only one mortgage will be taken even though the indebtedness is 
to be evidenced by more than one instrument.
    (c) Source of funds for insured loans. All loans will be made from 
the Rural Development Insurance Fund (RDIF).
    (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 Sec. 1942.17(p)(6) of this subpart.
    (e) Loan checks. Whenever a loan check is received, lost, or 
destroyed, the District Director will take appropriate actions outlined 
in FmHA Instruction 2018-D (available in any FmHA or its successor 
agency under Public Law 103-354 office). Checks which cannot be 
delivered within a reasonable amount of time (no more than 20 calendar 
days) will be handled in accordance with FmHA Instruction 2018-D.
    (f) Supervised bank accounts. Supervised bank accounts will be 
handled under subpart A of part 1902 of this chapter.

[50 FR 7296, Feb. 22, 1985, as amended at 53 FR 6787, Mar. 3, 1988; 59 
FR 54788, Nov. 2, 1994; 68 FR 61331, Oct. 28, 2003]



Sec. 1942.8  Actions subsequent to loan closing.

    (a) Mortgages. Real estate or chattel mortages or security 
instruments will be delivered to the recording office for recordation or 
filing, as appropriate. A copy of such instruments will be delivered to 
the borrower. The original instrument, if returnable after recording or 
filing, will be retained in the borrower's case folder.
    (b) Notes and bonds. When the debt instrument is a promissory note 
or single instrument bond fully registered as to

[[Page 153]]

principal and interest, a conformed copy will be sent to the Finance 
Office immediately after loan closing and the original instrument will 
be stored in the District Office. When other types of bonds are used, 
the original bond(s) will be forwarded to the Finance Office immediately 
after loan closing.
    (c) Multiple advances--bond(s). When temporary paper, such as bond 
anticipation notes or interim receipts, is used to conform with the 
multiple advance requirement, the original temporary paper will be 
forwarded to the Finance Office after each advance is made to the 
borrower. The borrower's case number will be entered in the upper 
righthand corner of such paper by the District Office. The permanent 
debt instrument(s) should be forwarded to the Finance Office as soon as 
possible after the last advance is made except that for promissory notes 
and single instrument bonds fully registered as to principal and 
interest, the original will be retained in the District Office and a 
copy will be forwarded to the Finance Office.
    (d) Bond registration record. Form FmHA or its successor agency 
under Public Law 103-354 442-28, ``Bond Registration Book,'' may be used 
as a guide to assist borrowers in the preparation of a bond registration 
book in those cases where a registration book is required and a book is 
not provided in connection with the printing of the bonds.
    (e) Disposition of title evidence. All title evidence other than the 
opinion of title, mortgage title insurance policy, and water stock 
certificates will be returned to the borrower when the loan has been 
closed.
    (f) Material for State Office. When the loan has been closed, the 
District Director will submit to the State Director:
    (1) The complete docket; and
    (2) A statement covering information other than the completion of 
legal documents showing what was done in carrying out loan closing 
instructions.
    (g) State Office review of loan closing. The State Director will 
review the District Director's statement concerning loan closing, the 
security instruments, and other documents used in closing to determine 
whether the transaction was closed properly. All material submitted by 
the District Director, including the executed contract documents (if 
required by OGC) with the certification of the borrower's attorney, 
along with a statement by the State Director that all administrative 
requirements have been met, will be referred to OGC for post-closing 
review. OGC will review the submitted material to determine whether all 
legal requirements have been met. OGC's review of FmHA or its successor 
agency under Public Law 103-354's standard forms will be only for proper 
execution thereof, unless the State Director brings specific questions 
or deviations to the attention of OGC. It is not expected that facility 
development including construction will be held up pending receipt of 
the opinion from OGC. When the opinion from OGC is received, the State 
Director will advise the District Director of any deficiencies that must 
be corrected and return all material that was submitted for review.
    (h) Safeguarding bond shipments. FmHA or its successor agency under 
Public Law 103-354 personnel will follow the procedures for safeguarding 
mailings and deliveries of bonds and coupons outlined in FmHA 
Instruction 2018-E (available in any FmHA or its successor agency under 
Public Law 103-354 office), whenever they mail or deliver these items.
    (i) Water stock certificates. Water stock certificates will be filed 
in the loan docket in the District Office.

[50 FR 7296, Feb. 22, 1985, as amended at 53 FR 6787, Mar. 3, 1988]



Sec. 1942.9  Planning, bidding, contracting, and constructing. [See 
Sec. Sec. 1942.17(p) and 1942.18]

    (a) Review of construction plans and specifications. All plans and 
specifications will be submitted as soon as available to the State 
Office for review and comments.
    (b) Contract approval. The State Director or designee is responsible 
for approving all construction contracts using legal advice and guidance 
of OGC as necessary. The use of a contracting method under Sec. 
1942.18(l) of this subpart exceeding $100,000 must be concurred in by 
the National Office. Procurement under Sec. 1942.18(l) of this subpart 
will

[[Page 154]]

not be considered when an FmHA or its successor agency under Public Law 
103-354 grant is involved. When an applicant requests such concurrence, 
the State Director will submit the following to the National Office:
    (1) State Director's and FmHA or its successor agency under Public 
Law 103-354 engineer/architect's comments and recommendations, and when 
noncompetitive negotiation is proposed, submit an evaluation of previous 
work of the proposed construction firm.
    (2) Regional attorney's opinion and comments regarding the legal 
adequacy of the proposed procurement method and proposed contract 
documents.
    (3) Copy of owner's written request and description of the 
procurement method proposed.
    (4) Copy of the proposed contract.
    (c) Bid irregularities. Any irregularities in the bids received or 
other matters pertaining to the contract award having legal implications 
will be cleared with OGC before the State Director consents to the 
contract award.
    (d) Noncompliance. State Directors, upon receipt of information 
indicating borrowers or their officers, employees, or agents are not 
performing in compliance with Sec. 1942.18(j)(1) of this subpart, may 
request the Regional Office of the Inspector General (OIG) to 
investigate the matter and provide a report. The State Director is 
responsible for resolving the issue.

[50 FR 7296, Feb. 22, 1985, as amended at 53 FR 6787, Mar. 3, 1988]



Sec. Sec. 1942.10-1942.11  [Reserved]



Sec. 1942.12  Loan cancellation.

    Loans which have been approved and obligations which have been 
established may be canceled before closing as follows:
    (a) Form FmHA or its successor agency under Public Law 103-354 1940-
10, ``Cancellation of U.S. Treasury Check and/or Obligation.'' The 
District Director or State Director may prepare and execute Form FmHA or 
its successor agency under Public Law 103-354 1940-10 in accordance with 
the Forms Manual Insert (FMI). If the check has been received or is 
subsequently received in the District Office, the District Director will 
return it as prescribed in FmHA Instruction 2018-D (available in any 
FmHA or its successor agency under Public Law 103-354 office).
    (b) Notice of cancellation. If the docket has been forwarded to OGC, 
that office will be notified of the cancellation by a copy of Form FmHA 
or its successor agency under Public Law 103-354 1940-10. Any 
application for title insurance, if ordered, will be canceled. The 
borrower's attorney and engineer/architect, if any, should be notified 
of the cancellation. The District Director may provide the borrower's 
attorney and engineer/architect with a copy of the notification to the 
applicant. The State Director will notify the Director of Legislative 
Affairs and Public Information by telephone or electronic mail and give 
the reasons for such cancellation.

[50 FR 7296, Feb. 22, 1985, as amended at 53 FR 26589, July 14, 1988; 54 
FR 39727, Sept. 28, 1989; 59 FR 54788, Nov. 2, 1994]



Sec. 1942.13  Loan servicing.

    Loans will be serviced under subpart E of part 1951 of this chapter.



Sec. 1942.14  Subsequent loans.

    Subsequent loans will be processed under this subpart.



Sec. 1942.15  Delegation and redelegation of authority.

    The State Director is responsible for implementing the authorities 
in this subpart and for issuing State supplements redelegating 
authorities. Loan and grant approval authority is in subpart A of part 
1901 of this chapter. Except for loan and grant approval authority, 
District Directors may redelegate their duties to qualified staff 
members.



Sec. 1942.16  State supplements and guides.

    State Directors will obtain National Office clearance for all State 
supplements and guides under FmHA Instruction 2006-B (available in any 
FmHA or its successor agency under Public Law 103-354 office).
    (a) State supplements. State Directors may supplement this subpart 
to meet State and local laws and regulations

[[Page 155]]

and to provide for orderly application processing and efficient service 
to applicants. State supplements shall not contain any requirements 
pertaining to bids, contract awards, and materials more restrictive than 
those in Sec. 1942.18 of this subpart.
    (b) State guides. State Directors may develop guides for use by 
applicants if the guides to this subpart are not adequate. State 
Directors may prepare guides for items needed for the application; items 
necessary for the docket; and items required prior to loan closing or 
start of construction.



Sec. 1942.17  Community facilities.

    (a) General. This section includes information and procedures 
specifically designed for use by applicants, including their 
professional consultants and/or agents who provide such assistance and 
services as architectural, engineering, financial, legal, or other 
services related to application processing and facility planning and 
development. This section is made available as needed for such use. It 
includes FmHA or its successor agency under Public Law 103-354 policies 
and requirements pertaining to loans for community facilities. It 
provides applicants with guidance for use in proceeding with their 
application. FmHA or its successor agency under Public Law 103-354 shall 
cooperate fully with appropriate State agencies to give maximum support 
of the State's strategies for development of rural areas.
    (b) Eligibility. Financial assistance to areas or communities 
adjacent to, or closely associated with, nonrural areas is limited by 
Sec. 1942.17(c) of this subpart.
    (1) Applicant. (i) A public body, such as a municipality, county, 
district, authority, or other political subdivision of a state.
    (A) Loans for water or waste disposal facilities will not be made to 
a city or town with a population in excess of 10,000 inhabitants, 
according to the latest decennial Census of the United States.
    (B) Loans for essential community facilities will not be made to a 
city or town with a population in excess of 20,000 inhabitants according 
to the latest decennial Census of the United States.
    (ii) An organization operated on a not-for-profit basis, such as an 
association, cooperative, and private corporation. Applicants organized 
under the general profit corporation laws may be eligible if they 
actually will be operated on a not-for-profit basis under their charter, 
bylaws, mortgage, or supplemental agreement provisions as may be 
required as a condition of loan approval. Essential community facility 
applicants other than utility-type must have significant ties with the 
local rural community. Such ties are necessary to ensure to the greatest 
extent possible that a facility under private control will carry out a 
public purpose and continue to primarily serve rural areas. Ties may be 
evidenced by items such as:
    (A) Association with or controlled by a local public body or bodies, 
or broadly based ownership and controlled by members of the community.
    (B) Substantial public funding through taxes, revenue bonds, or 
other local Government sources, and/or substantial voluntary community 
funding, such as would be obtained through a community-wide funding 
campaign.
    (iii) Indian tribes on Federal and State reservations and other 
Federally recognized Indian tribes.
    (2) Facility. (i) Facilities must be located in rural areas, except 
for utility-type services such as water, sewer, natural gas, or 
hydroelectric, serving both rural and non-rural areas. In such cases, 
FmHA or its successor agency under Public Law 103-354 funds may be used 
to finance only that portion serving rural areas, regardless of facility 
location.
    (ii) Essential community facilities must primarily serve rural 
areas.
    (iii) For water or waste disposal facilities, the terms rural and 
rural area will not include any area in any city or town with a 
population in excess of 10,000 inhabitants, according to the latest 
decennial Census of the United States.
    (iv) For essential community facilities, the terms rural and rural 
area will not include any area in any city or town with a population in 
excess of 20,000 inhabitants, according to the latest decennial Census 
of the United States.

[[Page 156]]

    (3) Credit elsewhere. Applicants must certify in writing and FmHA or 
its successor agency under Public Law 103-354 shall determine and 
document that the applicant is unable to finance the proposed project 
from their own resources or through commercial credit at reasonable 
rates and terms.
    (4) Legal authority and responsibility. Each applicant must have or 
will obtain the legal authority necessary for constructing, operating, 
and maintaining the proposed facility or service and for obtaining, 
giving security for, and repaying the proposed loan. The applicant shall 
be responsible for operating, maintaining, and managing the facility, 
and providing for its continued availability and use at reasonable rates 
and terms. This responsibility shall be exercised by the applicant even 
though the facility may be operated, maintained, or managed by a third 
party under contract, management agreement, or written lease. Leases may 
be used when this is the only feasible way to provide the service and is 
the customary practice. Management agreements should provide for at 
least those items listed in guide 24 of this subpart (available in any 
FmHA or its successor agency under Public Law 103-354 office). Such 
contracts, management agreements, or leases must not contain options or 
other provisions for transfer of ownership.
    (5) Refinancing FmHA or its successor agency under Public Law 103-
354 debt. FmHA or its successor agency under Public Law 103-354 shall 
require an agreement that if at any time it shall appear to the 
Government that the borrower is able to refinance the amount of the 
indebtedness then outstanding, in whole or in part, by obtaining a loan 
for such purposes from responsible cooperative or private credit 
sources, at reasonable rates and terms for loans for similar purposes 
and periods of time, the borrower will, upon request of the Government, 
apply for and accept such loan in sufficient amount to repay the 
Government and will take all such actions as may be required in 
connection with such loan.
    (6) Expanded eligibility for timber-dependent communities in Pacific 
Northwest. In the Pacific Northwest, defined as an area containing 
national forest covered by the Federal document entitled, ``Forest Plan 
for a Sustainable Economy and a Sustainable Environment,'' dated July 1, 
1993; the population limits contained Sec. 1942.17(b) are expanded to 
include communities with not more than 25,000 inhabitants until 
September 30, 1998, if:
    (i) Part or all of the community lies within 100 miles of the 
boundary of a national forest covered by the Federal document entitled, 
``Forest Plan for a Sustainable Economy and a Sustainable Environment,'' 
dated July 1, 1993; and
    (ii) The community is located in a county in which at least 15 
percent of the total primary and secondary labor and proprietor income 
is derived from forestry, wood products, or forest-related industries 
such as recreation and tourism.
    (c) Priorities--(1) Truly rural areas. FmHA or its successor agency 
under Public Law 103-354 program assistance will be directed toward 
truly rural areas and rural communities. Normally, priority will not be 
given to preapplications for projects that will serve other than truly 
rural areas. Truly rural areas are areas other than densely settled 
areas or communities adjacent to, or closely associated with, a city or 
town with a population exceeding 10,000 residents for water or waste 
disposal assistance, or 20,000 residents for essential community 
facility assistance. When determining whether a rural area or rural 
community is adjacent to, or closely associated with, a city or town 
with a population exceeding 10,000 residents for water and waste 
disposal, or 20,000 residents for essential community facility 
assistance, minor open spaces such as those created by physical or legal 
barriers, commercial or industrial development, parks, areas reserved 
for convenience or appearance, or narrow strips of cultivated land, will 
be disregarded. An area or community shall be considered adjacent to or 
closely related with a nonrural area when it constitutes for general, 
social, and economic purposes a single community having a contiguous 
boundary.
    (2) Project selection process. The following paragraphs indicate 
items and conditions which must be considered in

[[Page 157]]

selecting preapplications for further development. When ranking eligible 
preapplications for consideration for limited funds, FmHA or its 
successor agency under Public Law 103-354 officials must consider the 
priority items met by each preapplication and the degree to which those 
priorities are met, and apply good judgement.
    (i) Preapplications. The preapplication and supporting information 
submitted with it will be used to determine the proposed project's 
priority for available funds.
    (ii) State Office review. All preapplications will be reviewed and 
scored and Form AD-622, ``Notice of Preapplication Review Action,'' 
issued within the time limits in Sec. 1942.2(a)(2)(iv) of this subpart. 
When considering authorizing the development of an application for 
funding, the State Director should consider the remaining funds in the 
State allocation, and the anticipated allocation of funds for the next 
fiscal year as well as the amount of time necessary to complete that 
application. Applicants whose preapplications are found to be ineligible 
will be so advised. These applicants will be given adverse notice 
through Form AD-622 and advised of their appeal rights under subpart B 
of part 1900 of this chapter. Those applicants with eligible lower 
scoring preapplications which obviously cannot be funded within an 
eighteen month period of time, and are not within 150 percent of the 
State's allocation, should be notified that funds are not available; and 
requested to advise whether they wish to have their preapplication 
maintained in an active file for future consideration. The State 
Director may request an additional allocation of funds from the National 
Office for such preapplications. Such requests will be considered along 
with all others on hand.
    (iii) Selection priorities. The priorities described below will be 
used by the State Director to rate preapplications. The priorities 
should be applied to water and waste disposal or community facilities 
preapplications as directed. The format found in part I of guide 26 of 
this subpart should be followed in scoring each preapplication. A copy 
of the score sheet should be placed in the case file for future 
reference.
    (A) Population priorities. The following priorities apply to both 
Water and Waste Disposal and Community Facilities preapplications. 
Points will be distributed as indicated.
    (1) The proposed project is located in a rural community having a 
population not in excess of 2,500--25 points.
    (2) The proposed project is located in a rural community having a 
population not in excess of 5,500--20 points. (Points under this 
priority should not be assigned to a preapplication if points were 
assigned under paragraph (c)(2)(iii) (A)(1) of this section.)
    (B) Health priorities. Points will be distributed as indicated.
    (1) Water and Waste Disposal preapplications only. The proposed 
project is:
    (i) Needed to alleviate the sudden unexpected diminution or 
deterioration of a water supply, or to meet health or sanitary standards 
which pertain to a community's water supply--25 points.
    (ii) Required to correct an inadequate waste disposal system due to 
unexpected occurrences, or to meet health or sanitary standards which 
pertain to a community's waste disposal system--25 points.
    (2) Community Facility preapplication only. The proposed project is 
required either to correct a health or sanitary problem, or to meet a 
health or sanitary standard--25 points.
    (C) Income priorities. The following priorities apply to both Water 
and Waste Disposal and Community Facilities preapplications. Points will 
be distributed as indicated. The median income of the population to be 
served by the proposed facility is:
    (1) Less than the poverty line for a family of four, as defined in 
Section 673(2) of the Community Services Block Grant Act (42 U.S.C. 
9902(2)), or less than 80 percent of the statewide nonmetropolitan 
median household income--25 points.
    (2) Equal to or more than the poverty line and between 80% and 100%, 
inclusive, of the State's nonmetropolitan median household income--20 
points.
    (D) Other factors. Points will be distributed as indicated.

[[Page 158]]

    (1) Water and Waste Disposal preapplications only. The proposed 
project will: merge ownership, management, and operation of smaller 
facilities providing for more efficient management and economical 
service; and/or enlarge, extend, or otherwise modify existing facilities 
to provide service to additional rural residents--10 points.
    (2) Community Facilities preapplications only. The purpose of the 
proposed project is to construct, enlarge, extend or otherwise improve 
the following types of facilities. (Select only the factor most 
applicable to the proposed project.)
    (i) Public safety--10 points. (Examples include police services and 
fire, rescue and ambulance services as authorized by subpart C of this 
part 1942.)
    (ii) Health care--5 points. (Examples include clinics, nursing 
homes, convalescent facilities, and hospital projects designed to make 
the facility conform with life/safety codes, medicare and medicaid 
requirements, and minor expansions needed to meet the immediate 
requirements of the community. Points under this authority should not be 
awarded to a preapplication if points were awarded under Sec. 
1942.17(c)(2)(iii)(B)(2) of this subpart.)
    (3) Water and Waste Disposal and Community Facilities 
preapplications.
    (i) Applicant is a public body or Indian tribe--5 points.
    (ii) Project is located in a ``truly rural area'' as described in 
Sec. 1942.17(c)(1) of this subpart--10 points.
    (iii) Amount of joint financing committed to the project is:
    (a) 20% or more private, local or state funds except federal funds 
channeled through a state agency--10 points.
    (b) 5%-19% private, local or state funds except federal funds 
channeled through a state agency--5 points.
    (E) In certain cases the State Director may assign up to 15 points 
to a preapplication, in addition to those that may be scored under 
paragraphs (c)(2)(iii) (A) through (D), of this section. These points 
are primarily intended to address an unforeseen exigency or emergency, 
such as the loss of a community facility due to accident or natural 
disaster or the loss of joint financing if FmHA or its successor agency 
under Public Law 103-354 funds are not committed in a timely fashion. 
However, the points may also be awarded to projects in order to improve 
compatibility/coordination between FmHA or its successor agency under 
Public Law 103-354's and other agencies' selection systems and to assist 
those projects that are the most cost effective. A written justification 
must be prepared and placed in the project file each time the State 
Director assigns these points.
    (iv) Results of State Office review. After completing the review, 
the State Director will normally select the eligible preapplications 
with the highest scores for further processing. In cases where 
preliminary cost estimates indicate that an eligible, high scoring 
preapplication is unfeasible or would require an amount of funding from 
FmHA or its successor agency under Public Law 103-354 that exceeds 
either 25 percent of a State's current annual allocation or an amount 
greater than that remaining in the State's allocation, the State 
Director may instead select the next lower scoring preapplication(s) for 
futher processing provided the high scoring applicant is notified of 
this action and given an opportunity to revise the proposal and resubmit 
it. If it is found that there is no effective way to reduce costs, the 
State Director, after consultation with applicant, may submit a request 
for an additional allocation of funds for the proposed project to the 
National Office. The request should be submitted during the fiscal year 
in which obligation is anticipated. Such request will be considered 
along with all others on hand. A written justification must be prepared 
and placed in the project file when an eligible preapplication with a 
higher rating is not selected for further processing. The State Director 
will notify the District Director of the results of the review action. 
The State Director will return the preapplication information with an 
authorization for the District Director to prepare and issue Form AD-622 
in accordance with Sec. 1942.2(a)(2)(iv) of this subpart. Priority will 
be given to those preapplications and applications for funding which 
meet criteria in

[[Page 159]]

Sec. 1942.17(c)(2)(iii)(A) (1) or (2); and the criteria in Sec. 
1942.17(c) (2)(iii)(B)(1) (i) or (ii) or (B)(2) of this subpart.
    (v) Application development. Applications should be developed 
expeditiously following good management practices. Applications that are 
not developed in a reasonable period of time taking into account the 
size and complexity of the proposed project may be removed from the 
State's active file. Applicants will be consulted prior to taking such 
action.
    (vi) Project obligations. To ensure efficient use of resources, 
obligations should occur in a timely fashion throughout the fiscal year. 
Projects may be obligated as their applications are completed and 
approved.
    (vii) Requests for additional funding. All requests for additional 
allocations of funds submitted to the National Office must follow the 
formats found in parts I and II of guide 26. In selecting projects for 
funding at the National Office level, additional points may be scored 
based on the priority assigned to the project by the State Office. These 
points will be scored in the manner shown below. Only the three highest 
priority projects can score points. In addition, the Administrator may 
assign up to 15 additional points to account for items such as 
geographic distribution of funds and emergency conditions caused by 
economic problems or natural disasters.

------------------------------------------------------------------------
                        Priority                              Points
------------------------------------------------------------------------
1.......................................................               5
2.......................................................               3
3.......................................................               1
------------------------------------------------------------------------

    (viii) Cost overruns. A preapplication may receive consideration for 
funding before others at the State Office level or at the National 
Office level, if funds are not available in the State Office, when it is 
a subsequent request for a previously approved project which has 
encountered cost overruns due to high bids or unexpected construction 
problems that cannot be reduced by negotiations, redesign, use of bid 
alternatives, rebidding or other means.
    (d) Eligible loan purposes. (1) Funds may be used:
    (i) To construct, enlarge, extend, or otherwise improve water or 
waste disposal and other essential community facilities providing 
essential service primarily to rural residents and rural businesses. 
Rural businesses would include facilities such as educational and other 
publicly owned facilities.
    (A) Water or waste disposal facilities include water, sanitary 
sewerage, solid waste disposal, and storm waste-water facilities.
    (B) Essential community facilities are those public improvements 
requisite to the beneficial and orderly development of a community 
operated on a nonprofit basis including but not limited to:
    (1) Health services;
    (2) Community, social, or cultural services;
    (3) Transportation facilities, such as streets, roads, and bridges;
    (4) Hydroelectric generating facilities and related connecting 
systems and appurtenances, when not eligible for Rural Electrification 
Administration (REA) financing;
    (5) Supplemental and supporting structures for other rural 
electrification or telephone systems (including facilities such as 
headquarters and office buildings, storage facilities, and maintenance 
shops) when not eligible for Rural Electrification Administration 
financing;
    (6) Natural gas distribution systems; and
    (7) Industrial park sites, but only to the extent of land 
acquisition and necessary site preparation, including access ways and 
utility extensions to and throughout the site. Funds may not be used in 
connection with industrial parks to finance on-site utility systems, or 
business and industrial buildings.
    (C) Otherwise improve includes but is not limited to the following:
    (1) The purchase of major equipment, such as solid waste collection 
trucks and X-ray machines, which will in themselves provide an essential 
service to rural residents;
    (2) The purchase of existing facilities when it is necessary either 
to improve or to prevent loss of service;
    (3) Payment of tap fees and other utility connection charges as 
provided in utility purchase contracts prepared under Sec. 1942.18(f) 
of this subpart.

[[Page 160]]

    (ii) To construct or relocate public buildings, roads, bridges, 
fences, or utilities, and to make other public improvements necessary to 
the successful operation or protection of facilities authorized in 
paragraph (d)(1)(i) of this section.
    (iii) To relocate private buildings, roads, bridges, fences, or 
utilities, and other private improvements necessary to the successful 
operation or protection of facilities authorized in paragraph (d)(1)(i) 
of this section.
    (iv) To pay the following expenses, but only when such expenses are 
a necessary part of a loan to finance facilities authorized in 
paragraphs (d)(1)(i), (d)(1)(ii) and (d)(1)(iii) of this section.
    (A) Reasonable fees and costs such as legal, engineering, 
architectural, fiscal advisory, recording, environmental impact 
analyses, archeological surveys and possible salvage or other mitigation 
measures, planning, establishing or acquiring rights.
    (B) Interest on loans until the facility is self-supporting, but not 
for more than three years unless a longer period is approved by the 
National Office; interest on loans secured by general obligation bonds 
until tax revenues are available for payment, but not for more than two 
years unless a longer period is approved by the National Office; and 
interest on interim financing, including interest charges on interim 
financing from sources other than FmHA or its successor agency under 
Public Law 103-354.
    (C) Costs of acquiring interest in land; rights, such as water 
rights, leases, permits, rights-of-way; and other evidence of land or 
water control necessary for development of the facility.
    (D) Purchasing or renting equipment necessary to install, maintain, 
extend, protect, operate, or utilize facilities.
    (E) Initial operating expenses for a period ordinarily not exceeding 
one year when the borrower is unable to pay such expenses.
    (F) Refinancing debts incurred by, or on behalf of, a community when 
all of the following conditions exist:
    (1) The debts being refinanced are a secondary part of the total 
loan;
    (2) The debts are incurred for the facility or service being 
financed or any part thereof;
    (3) Arrangements cannot be made with the creditors to extend or 
modify the terms of the debts so that a sound basis will exist for 
making a loan.
    (G) Prepay costs for which FmHA or its successor agency under Public 
Law 103-354 grant funds were obligated provided there is:
    (1) No conflict with the loan resolution, State statutes, or any 
other loan requirements; and
    (2) Full documentation showing that:
    (i) Loan funds will only be utilized on a temporary basis; and
    (ii) All FmHA or its successor agency under Public Law 103-354 loan 
funds are restored at a later date for purpose(s) for which they were 
obligated.
    (v) To pay obligations for construction incurred before loan 
approval. Construction work should not be started and obligations for 
such work or materials should not be incurred before the loan is 
approved. However, if there are compelling reasons for proceeding with 
construction before loan approval, applicants may request FmHA or its 
successor agency under Public Law 103-354 approval to pay such 
obligations. Such requests may be approved if FmHA or its successor 
agency under Public Law 103-354 determines that:
    (A) Compelling reasons exist for incurring obligations before loan 
approval; and
    (B) The obligations will be incurred for authorized loan purposes; 
and
    (C) Contract documents have been approved by FmHA or its successor 
agency under Public Law 103-354; and
    (D) All environmental requirements applicable to FmHA or its 
successor agency under Public Law 103-354 and the applicant have been 
met; and
    (E) The applicant has the legal authority to incur the obligations 
at the time proposed, and payment of the debts will remove any basis for 
any mechanic, material, or other liens that may attach to the security 
property. FmHA or its successor agency under Public Law 103-354 may 
authorize payment of such obligations at the time of loan closing. FmHA 
or its successor agency under Public Law 103-354's authorization to pay 
such obligations,

[[Page 161]]

however, is on the condition that it is not committed to make the loan; 
it assumes no responsibility for any obligations incurred by the 
applicant; and the applicant must subsequently meet all loan approval 
requirements. The applicant's request and FmHA or its successor agency 
under Public Law 103-354 authorization for paying such obligations shall 
be in writing. If construction is started without FmHA or its successor 
agency under Public Law 103-354 approval, post approval in accordance 
with this section may be considered.
    (2) Funds may not be used to finance:
    (i) On-site utility systems or business and industrial buildings in 
connection with industrial parks.
    (ii) Facilities to be used primarily for recreation purposes.
    (iii) Community antenna television services or facilities.
    (iv) Electric generation or transmission facilities or telephone 
systems, except as provided in paragraph (d)(1)(i)(B)(4), or 
(d)(1)(i)(B)(5) of this section; or extensions to serve a particular 
essential community facility as provided in paragraph (d)(1)(ii) or 
(d)(1)(iii) of this section.
    (v) Facilities which are not modest in size, design, and cost.
    (vi) Loan or grant finder's fees.
    (vii) Projects located within the Coastal Barriers Resource System 
that do not qualify for an exception as defined in section 6 of the 
Coastal Barriers Resource Act, Pub. L. 97-348.
    (viii) New combined sanitary and storm water sewer facilities.
    (ix) That portion of a water and/or waste disposal facility normally 
provided by a business or industrial user.
    (e) Facilities for public use. All facilities financed under the 
provisions of this subpart shall be for public use.
    (1) Utility-type service facilities will be installed so as to serve 
any user within the service area who desires service and can be feasibly 
and legally served. Applicants and borrowers must obtain written 
concurrence of the FmHA or its successor agency under Public Law 103-354 
prior to refusing service to such user. Upon failure to provide service 
which is reasonable and legal, such user shall have direct right of 
action against the applicant/borrower. A notice of the availability of 
this service should be given by the applicant/borrower to all persons 
living within the area who can feasibly and legally be served by the 
phase of the project being financed.
    (i) If a mandatory hookup ordinance will be adopted, the required 
bond ordinance or resolution advertisement will be considered adequate 
notification.
    (ii) When any portion of the income will be derived from user fees 
and a mandatory hookup ordinance will not be adopted, each potent user 
will be afforded an opportunity to request service by signing a Users 
Agreement.


Those declining service will be afforded an opportunity to sign a 
statement to such effect. FmHA or its successor agency under Public Law 
103-354 has guides available for these purposes in all FmHA or its 
successor agency under Public Law 103-354 offices.
    (2) In no case will boundaries for the proposed service area be 
chosen in such a way that any user or area will be excluded because of 
race, color, religion, sex, marital status, age, handicap, or national 
origin.
    (3) This does not preclude:
    (i) Financing or constructing projects in phases when it is not 
practical to finance or construct the entire project at one time; and
    (ii) Financing or constructing facilities where it is not 
economically feasible to serve the entire area, provided economic 
feasibility is determined on the basis of the entire system and not by 
considering the cost of separate extensions to or parts thereof; the 
applicant publicly announces a plan for extending service to areas not 
initially receiving service from the system; and potential users located 
in the areas not to be initially served receive written notice from the 
applicant that service will not be provided until such time as it is 
economically feasible to do so, and
    (iii) Extending services to industrial areas when service is made 
available to users located along the extensions.
    (4) The State Director will determine that, when feasibly and 
legally possible, inequities within the proposed project's service area 
for the same type service proposed (i.e., water or waste disposal) will 
be remedied by the owner on or before completion of the project

[[Page 162]]

that includes FmHA or its successor agency under Public Law 103-354 
funding. Inequities are defined as flagrant variations in availability, 
adequacy or quality of service. User rate schedules for portions of 
existing systems that were developed under different financing, rates, 
terms or conditions, as determined by the State Director, do not 
necessarily constitute inequities.
    (5) Before a loan is made to an applicant other than a public body, 
for other than utility type projects, the articles of incorporation or 
loan agreement will include a condition similar to the following:

    In the event of dissolution of this corporation, or in the event it 
shall cease to carry out the objectives and purposes herein set forth, 
all business, property, and assets of the corporation shall go and be 
distributed to one or more nonprofit corporations or public bodies as 
may be selected by the board of directors of this corporation and 
approved by at least 75 percent of the users or members to be used for, 
and devoted to, the purpose of a community facility project or other 
purpose to serve the public welfare of the community. In no event shall 
any of the assets or property, in the event of dissolution thereof, go 
or be distributed to members, directors, stockholders, or others having 
financial or managerial interest in the corporation either for the 
reimbursement of any sum subscribed, donated or contributed by such 
members or for any other purposes, provided that nothing herein shall 
prohibit the corporation from paying its just debts.

    (f) Rates and terms--(1) General. Each loan will bear interest at 
the rate prescribed in RD Instruction 440.1, exhibit B (available in any 
Rural Development office). The interest rates will be set by Rural 
Development at least for each quarter of the fiscal year. All rates will 
be adjusted to the nearest one-eighth of 1 percent. The applicant may 
submit a written request prior to loan closing that the interest rate 
charged on the loan be the lower of the rate in effect at the time of 
loan approval or the rate in effect at the time of loan closing. If the 
interest rate is to be that in effect at loan closing, the interest rate 
charged on a loan involving multiple advances of Rural Development 
funds, using temporary debt instruments, shall be that in effect on the 
date when the first temporary debt instrument is issued. If no written 
request is received from the applicant prior to loan closing, the 
interest rate charged on the loan will be the rate in effect at the time 
of loan approval.
    (2) Poverty line rate. The poverty line interest rate will not 
exceed 5 per centum per annum. The provisions of paragraph (f)(2)(i) of 
this section do not apply to health care and related facilities that 
provide direct health care to the public. Otherwise, all loans must 
comply with the following conditions:
    (i) The primary purpose of the loan is to upgrade existing 
facilities or construct new facilities required to meet applicable 
health or sanitary standards. Documentation will be obtained from the 
appropriate regulatory agency with jurisdiction to establish the 
standard, to verify that a bonafide standard exists, what that standard 
is, and that the proposed improvements are needed and required to meet 
the standard; and
    (ii) The median household income of the service area is below the 
poverty line for a family of four, as defined in section 673(2) of the 
Community Services Block Grant Act (42 U.S.C. 9902(2)), or below 80 
percent of the Statewide nonmetropolitan median household income.
    (3) Intermediate rate. The intermediate interest rate will be set at 
the poverty line rate plus one-half of the difference between the 
poverty line rate and the market rate, not to exceed 7 percent per 
annum. It will apply to loans that do not meet the requirements for the 
poverty line rate and for which the median household income of the 
service area is below the poverty line or not more than 100 percent of 
the nonmetropolitan median household income of the State.
    (4) Market rate. The market interest rate will be set using as 
guidance the average of the Bond Buyer Index for the four weeks prior to 
the first Friday of the last month before the beginning of the quarter. 
The market rate will apply to all loans that do not qualify for a 
different rate under paragraph (f)(2) or (f)(3) of this section. It may 
be adjusted as provided in paragraph (f)(5) of this section.
    (5) Prime farmland. For essential community facilities loans, the 
rate indicated by paragraphs (f)(2), (f)(3) or (f)(4) of this section 
will be increased by two

[[Page 163]]

per centum per annum if the project being financed will involve the use 
of, or construction on, prime or unique farmland in accordance with FmHA 
Instruction 440.1, exhibits B and J (available in any FmHA or its 
successor agency under Public Law 103-354 office).
    (6) Income determination. The income data used to determine median 
household income should be that which most accurately reflects the 
income of the service area. The service area is that area reasonably 
expected to be served by the facility being financed by FmHA or its 
successor agency under Public Law 103-354. The median household income 
of the service area and the nonmetropolitan median household income of 
the State will be determined from income data from the most recent 
decennial census of the U.S. If there is reason to believe that the 
census data is not an accurate representation of the median household 
income within the area to be served, the reasons will be documented and 
the applicant may furnish, or FmHA or its successor agency under Public 
Law 103-354 may obtain, additional information regarding such median 
household income. Information will consist of reliable data from local, 
regional, State or Federal sources or from a survey conducted by a 
reliable impartial source. The nonmetropolitan median household income 
of the State may only be updated on a national basis by the FmHA or its 
successor agency under Public Law 103-354 National Office. This will be 
done only when median household income data for the same year for all 
Bureau of the Census areas is available from the Bureau of the Census or 
other reliable sources. Bureau of the Census areas would include areas 
such as: Counties, County Subdivisions, Cities, Towns, Townships, 
Boroughs, and other places.
    (7) Repayment terms. The loan repayment period shall not exceed the 
useful life of the facility, State statute or 40 years from the date of 
the note(s) or bond(s), whichever is less. Where FmHA or its successor 
agency under Public Law 103-354 grant funds are used in connection with 
an FmHA or its successor agency under Public Law 103-354 loan, the loan 
will be for the maximum term permitted by this subpart, State statute, 
or the useful life of the facility, whichever is less, unless there is 
an exceptional case where circumstances justify making an FmHA or its 
successor agency under Public Law 103-354 loan for less than the maximum 
term permitted. In such cases, the reasons must be fully documented. In 
all cases, including those in which the FmHA or its successor agency 
under Public Law 103-354 is jointly financing with another lender, the 
FmHA or its successor agency under Public Law 103-354 payments of 
principal and interest should approximate amortized installments.
    (i) Principal payments may be deferred in whole or in part for a 
period not to exceed 36 months following the date the first interest 
installment is due. If for any reason it appears necessary to permit a 
longer period of deferment, the State Director may authorize such 
deferment with the prior approval of the National Office. Deferments of 
principal will not be used to:
    (A) Postpone the levying of taxes or assessments.
    (B) Delay collection of the full rates which the borrower has agreed 
to charge users for its services as soon as major benefits or the 
improvements are available to those users.
    (C) Create reserves for normal operation and maintenance.
    (D) Make any capital improvements except those approved by FmHA or 
its successor agency under Public Law 103-354 determined to be essential 
to the repayment of the loan or to the obtaining of adequate security 
thereof.
    (E) Accelerate the payment of other debts.
    (ii) Payment date. Loan payments will be scheduled to coincide with 
income availability and be in accordance with State law. If consistent 
with the foregoing, monthly payments will be required and will be 
enumerated in the bond, other evidence of indebtedness, or other 
supplemental agreement. However, if State law only permits principal 
plus interest (P&I) type bonds, annual or semiannual payments will be 
used. Insofar as practical monthly payments will be scheduled one full 
month following the date of loan closing; or semiannual or annual 
payments will be

[[Page 164]]

scheduled six or twelve full months, respectively, following the date of 
loan closing or any deferment period. Due dates falling on the 29th, 
30th or 31st day of the month will be avoided.
    (g) Security. Loans will be secured by the best security position 
practicable in a manner which will adequately protect the interest of 
FmHA or its successor agency under Public Law 103-354 during the 
repayment period of the loan. Specific requirements for security for 
each loan will be included in a letter of conditions.
    (1) Joint financing security. For projects utilizing joint 
financing, when adequate security of more than one type is available, 
the other lender may take one type of security with FmHA or its 
successor agency under Public Law 103-354 taking another type. For 
projects utilizing joint financing with the same security to be shared 
by FmHA or its successor agency under Public Law 103-354 and another 
lender, FmHA or its successor agency under Public Law 103-354 will 
obtain at least a parity position with the other lender. A parity 
position is to ensure that with joint security, in the event of default, 
each lender will be affected on a proportionate basis. A parity position 
will conform with the following unless an exception is granted by the 
National Office:
    (i) Terms. It is not necessary for loans to have the same repayment 
terms to meet the parity requirements. Loans made by other lenders 
involved in joint financing with FmHA or its successor agency under 
Public Law 103-354 for facilities should be scheduled for repayment on 
terms similar to those customarily used in the State for financing such 
facilities.
    (ii) Use of trustee or other similar paying agent. The use of a 
trustee or other similar paying agent by the other lender in a joint 
financing arrangement is acceptable to FmHA or its successor agency 
under Public Law 103-354. A trustee or other similar paying agent will 
not normally be used for the FmHA or its successor agency under Public 
Law 103-354 portion of the funding unless required to comply with State 
law. The responsibilities and authorities of any trustee or other 
similar paying agent on projects that include FmHA or its successor 
agency under Public Law 103-354 funds must be clearly specified by 
written agreement and approved by the FmHA or its successor agency under 
Public Law 103-354 State Director and Regional Attorney. FmHA or its 
successor agency under Public Law 103-354 must be able to deal directly 
with the borrower to enforce the provisions of loan and grant agreements 
and perform necessary servicing actions.
    (iii) Regular payments. In the event adequate funds are not 
available to meet regular installments on parity loans, the funds 
available will be apportioned to the lenders based on the respective 
current installments of principal and interest due.
    (iv) Disposition of Property. Funds obtained from the sale or 
liquidation of secured property or fixed assets will be apportioned to 
the lenders on the basis of the pro rata amount loaned, but not to 
exceed their respective outstanding balances; provided, however, funds 
obtained from such sale or liquidation for a project that included FmHA 
or its successor agency under Public Law 103-354 grant funds will be 
apportioned as may be required by the grant agreement.
    (v) Protective advances. Protective advances are payments made by a 
lender for items such as insurance or taxes, to protect the financial 
interest of the lender, and charged to the borrower's loan account. To 
the extent consistent with State law and customary lending practices in 
the area, repayment of protective advances made by either lender, for 
the mutual protection of both lenders, should receive first priority in 
apportionment of funds between the lenders. To ensure agreement between 
lenders, efforts should be made to obtain the concurrence of both 
lenders before one lender makes a protective advance.
    (2) Public bodies. Loans to such borrowers will be evidenced by 
notes, bonds, warrants, or other contractual obligations as may be 
authorized by relevant State statutes and by borrower's documents, 
resolutions, and ordinances.
    (i) Utility-type facilities such as water and sewer systems, natural 
gas

[[Page 165]]

distribution systems, electric systems, etc., will be secured by:
    (A) The full faith and credit of the borrower when the debt is 
evidenced by general obligation bonds; and/or
    (B) Pledges of taxes or assessments; and/or
    (C) Pledges of facility revenue and, when it is the customary 
financial practice in the State, liens will be taken on the interest of 
the applicant in all land, easements, rights-of-way, water rights, water 
purchase contracts, water sales contracts, sewage treatment contracts, 
and similar property rights, including leasehold interest, used or to be 
used in connection with the facility whether owned at the time the loan 
is approved or acquired with loan funds; and/or
    (D) In those cases involving water and waste disposal projects where 
there is a substantial number of other than full-time users and facility 
costs result in a higher than reasonable rate for such full-time users, 
the loan will be secured by the full faith and credit of the borrower or 
by an assignment or pledge of taxes or assessments from public bodies or 
other organizations having the authority to issue bonds or pledge such 
taxes or assessments.
    (ii) Solid waste systems. The type of security required will be 
based on State law and what is determined adequate to protect the 
interest of the United States during the repayment period of the loan.
    (iii) Other essential community facilities other than utility type, 
such as those for public health and safety, social, and cultural needs 
and the like will meet the following security requirements:
    (A) Such loans will be secured by one or a combination of the 
following and in the following order of preference:
    (1) General obligation bonds.
    (2) Assessments.
    (3) Bonds which pledge other taxes.
    (4) Bonds pledging revenues of the facility being financed when such 
bonds provide for the mandatory levy and collection of taxes in the 
event revenues later become insufficient to properly operate and 
maintain the facility and to retire the loan.
    (5) Assignment of assured income which will be available for the 
life of the loan, from such sources as insurance premium rebates, income 
from endowments, irrevocable trusts, or commitments from industries, 
public bodies, or other reliable sources.
    (6) Liens on real and chattel property when legally permissible and 
an assignment of the borrowers income from applicants who have been in 
existence and are able to present evidence of a financially successful 
operation of a similar facility for a period of time sufficient to 
indicate project success. National Office concurrence is required when 
the applicant has been in existence for less than five years or has not 
operated on a financially successful basis for five years immediately 
prior to loan application.
    (7) Liens on real and chattel property when legally permissible and 
an assignment of income from an organization receiving Health and Human 
Services (HHS) operating grants under the ``Memorandum of Understanding 
Between Health Resources and Services Administration, U.S. Department of 
Health and Human Services and Farmers Home Administration or its 
successor agency under Public Law 103-354, U.S. Department of 
Agriculture'' (see FmHA Instruction 2000-T, available in any FmHA or its 
successor agency under Public Law 103-354 office.)
    (8) Liens on real and chattel property when legally permissible and 
an assignment of income from an organization proposing a facility whose 
users receive reliable income from programs such as social security, 
supplemental security income (SSI), retirement plans, long-term 
insurance annuities, medicare or medicaid. Examples are homes for the 
handicapped or institutions whose clientele receive State or local 
government assistance.
    (9) When the applicant cannot meet the criteria in paragraph 
(g)(2)(iii)(A) (1) through (8) of this section, such proposals may be 
considered when all the following are met:
    (i) The applicant is a new organization or one that has not operated 
the type of facility being proposed.
    (ii) There is a demonstration of exceptional community support such 
as substantial financial contributions, and aggressive leadership in the 
formation of the organization and proposed

[[Page 166]]

project which indicates a commitment of the entire community.
    (iii) The State Director has determined that adequate and dependable 
revenues will be available to meet all operation expenses, debt 
repayment, and the required reserve.
    (iv) Prior National Office review and concurrence is obtained.
    (B) Real estate and chattel property taken as security in accordance 
with paragraphs (g)(2)(iii)(A) (6) through (9) of this section:
    (1) Ordinarily will include the property that is used in connection 
with the facility being financed; and
    (2) Will have an as-developed present market value determined by a 
qualified appraiser equal to or exceeding the amount of the loan to be 
obtained plus any other indebtedness against the proposed security; and
    (3) May have one of the lien requirements deleted when the loan 
approval official determines that the loan will be adequately secured 
with a lien on either the real estate or chattel property.
    (C) When security is not available in accordance with paragraphs 
(g)(2)(iii)(A) (1) through (5) of this section and State law precludes 
securing the loan with liens on real or chattel property, the loan will 
be secured in the best manner consistent with State law and customary 
security taken by private lenders in the State, such as revenue bonds, 
and any other security the loan approval official determines necessary 
for a sound loan. Such loans will otherwise meet the requirements of 
(g)(2)(iii)(A) (6) through (9) of this section as appropriate.
    (3) Other-than-public bodies. Loans to other-than-public body 
applicants will be secured as follows:
    (i) Utility-type facilities eligible for FmHA or its successor 
agency under Public Law 103-354 assistance under paragraph (d) of this 
section such as water and sewer systems, natural gas distribution 
systems, electric systems, etc., will be secured as follows:
    (A) Assignments of borrower income will be taken and perfected by 
filing, if legally permissable; and
    (B) A lien will be taken on the interest of the applicant in all 
land, easements, rights-of-way, water rights, water purchase contracts, 
water sales contracts, sewage treatment contracts and similar property 
rights, including leasehold interest, used, or to be used in connection 
with the facility whether owned at the time the loan is approved or 
acquired with loan funds. In unusual circumstances where it is not 
feasible to obtain a lien on such land (such as land rights obtained 
from Federal or local government agencies, and from railroads) and the 
loan approval official determines that the interest of FmHA or its 
successor agency under Public Law 103-354 otherwise is secured 
adequately, the lien requirement may be omitted as to such land rights.
    (C) When the loan is approved or the acquisition of real property is 
subject to an outstanding lien indebtedness, the next highest priority 
lien obtainable will be taken if the loan approval official determines 
that the loan is adequately secured.
    (D) Other security. Promissory notes from individuals, stock or 
membership subscription agreements, individuals member's liability 
agreements, or other evidences of debt, as well as mortgages or other 
security instruments encumbering the private property of members of the 
association may be pledged or assigned to FmHA or its successor agency 
under Public Law 103-354 as additional security in any case in which the 
interest of FmHA or its successor agency under Public Law 103-354 will 
not be otherwise adequately protected.
    (E) In those cases where there is a substantial number of other than 
full-time users and facility costs result in a higher than reasonable 
rate for such full-time users, the loan will be secured by an assignment 
or pledge of general obligation bonds, taxes, or assessments from public 
bodies or other organizations having the authority to issue bonds or 
pledge such taxes, or assessments.
    (ii) Solid waste systems. The type of security required will be 
based on State law and what is determined adequate to protect the 
interest of the United States during the repayment period of the loan.
    (iii) Essential community facilities other than utility type such as 
those for public health and safety, social, and

[[Page 167]]

cultural needs and the like will meet the following security 
requirements:
    (A) Such loans will be secured by one or a combination of the 
following and in the following order of preference:
    (1) An assignment of assured income that will be available for the 
life of the loan, from sources such as insurance premium rebates, income 
from endowments, irrevocable trusts, or commitments from industries, 
public bodies, or other reliable sources.
    (2) Liens on real and chattel property with an assignment of income 
from applicants who have been in existence and are able to present 
evidence of a financially successful operation of a similar facility for 
a period of time sufficient to indicate project success. National Office 
concurrence is required when the applicant has been in existence for 
less than five years or has not operated on a financially successful 
basis for at least the five years immediately prior to loan application.
    (3) Liens on real and chattel property and an assignment of income 
from an organization receiving HHS operating grants under the 
``Memorandum of Understanding Between Health Resources and Services 
Administration, U.S. Department of Health and Human Services and Farmers 
Home Administration or its successor agency under Public Law 103-354, 
U.S. Department of Agriculture'' (see FmHA Instruction 2000-T, available 
in any FmHA or its successor agency under Public Law 103-354 office).
    (4) Liens on real and chattel property when legally permissible and 
an assignment of income from an organization proposing a facility whose 
users receive reliable income from programs such as social security, 
supplemental security income (SSI), retirement plans, long-term 
insurance annuities, medicare or medicaid. Examples are homes for the 
handicapped or institutions whose clientele receive State or local 
government assistance.
    (5) When the applicant cannot meet the criteria in paragraphs 
(g)(3)(iii)(A) (1) through (4) of this section, such proposals may be 
considered when all the following are met:
    (i) The applicant is a new organization or one that has not operated 
the type of facility being proposed.
    (ii) There is a demonstration of exceptional community support such 
as substantial financial contributions, and aggressive leadership in the 
formation of the organization and proposed project which indicates a 
commitment of the entire community.
    (iii) The State Director has determined that adequate and dependable 
revenues will be available to meet all operation expenses, debt 
repayment, and the required reserve.
    (iv) Prior National Office review and concurrence is obtained.
    (6) Additional security may be taken as determined necessary by the 
loan approval official.
    (B) Real estate and chattel property taken as security:
    (1) Ordinarily will include the property that is used in connection 
with the facility being financed; and
    (2) Will have an as-developed present market value determined by a 
qualified appraiser equal to or exceeding the amount of the loan to be 
obtained plus any other indebtedness against the proposed security; and
    (3) May have one of the lien requirements deleted when the loan 
approval official determines that the loan will be adequately secured 
with a lien on either the real estate or the chattel property.
    (h) Economic feasibility requirements. All projects financed under 
the provisions of this section must be based on taxes, assessments, 
revenues, fees, or other satisfactory sources of revenues in an amount 
sufficient to provide for facility operation and maintenance, a 
reasonable reserve, and debt payment. An overall review of the 
applicant's financial status, including a review of all assets and 
liabilities, will be a part of the docket review process by the FmHA or 
its successor agency under Public Law 103-354 staff and approval 
official. If the primary use of the facility is by business and the 
success or failure of the facility is dependent on the business, then 
the economic viability of that business must be assessed. The number of 
users for a rural business will be based on equivalent dwelling units, 
which is the level of service provided to a typical rural residential 
dwelling.

[[Page 168]]

    (1) Financial feasibility reports. All applicants will be expected 
to provide a financial feasibility report prepared by a qualified firm 
or individual. These financial feasibility reports will normally be:
    (i) Included as part of the preliminary engineer/architectural 
report using guides 6 through 10 as applicable; or
    (ii) Prepared by a qualified firm or individual not having a direct 
interest in the management or construction of the facility using guide 5 
when:
    (A) The project will significantly affect the applicant's financial 
operations and is not a utility-type facility but is dependent on 
revenues from the facility to repay the loan; or
    (B) It is specifically requested by FmHA or its successor agency 
under Public Law 103-354.
    (2) Applicants for loans for utility-type facilities dependent on 
users fees for debt payment shall base their income and expense forecast 
on realistic user estimates in accordance with the following:
    (i) In estimating the number of users and establishing rates or fees 
on which the loan will be based for new systems and for extensions or 
improvements to existing systems, consideration should be given to the 
following:
    (A) An estimated number of maximum initial users should not be used 
when setting user fees and rates since it may be several years before 
all residents in the community will need the services provided by the 
system. In establishing rates a realistic number of initial users should 
be employed.
    (B) User agreements from individual vacant property owners will not 
be considered when determining project feasibility unless:
    (1) The owner has plans to develop the property in a reasonable 
period of time and become a user of the facility; and
    (2) The owner agrees in writing to make a monthly payment at least 
equal to the proportionate share of debt service attributable to the 
vacant property until the property is developed and the facility is 
utilized on a regular basis. A bond or escrowed security deposit must be 
provided to guarantee this monthly payment and to guarantee an amount at 
least equal to the owner's proportionate share of construction costs. If 
a bond is provided, it must be executed by a surety company that appears 
on the Treasury Department's most current list (Circular 570, as 
amended) and be authorized to transact business in the State where the 
project is located. The guarantee shall be payable jointly to the 
borrower and the Farmers Home Administration or its successor agency 
under Public Law 103-354; and
    (3) Such guarantee will mature not later than 4 years from the date 
of execution and will be finally due and payable upon default of a 
monthly payment or at maturity, unless the property covered by the 
guarantee has been developed and the facility is being utilized on a 
regular basis.
    (C) Income from other vacant property owners will be considered only 
as extra income.
    (ii) Realistic user estimates will be established as follows:
    (A) Meaningful potential user cash contributions. Potential user 
cash contributions are required except:
    (1) For users presently receiving service, or
    (2) Where FmHA or its successor agency under Public Law 103-354 
determines that the potential users as a whole in the applicant's 
service area cannot make cash contributions, or
    (3) Where State statutes or local ordinances require mandatory use 
of the system and the applicant or legal entity having such authority 
agrees in writing to enforce such statutes, or ordinances.
    (B) The amount of cash contributions required in paragraph 
(h)(2)(ii)(A) of this section will be set by the applicant and concurred 
in by FmHA or its successor agency under Public Law 103-354. 
Contribtions should be an amount high enough to indicate sincere 
interest on the part of the potential user, but not so high as to 
preclude service to low income families. Contributions ordinarily should 
be an amount approximating one year's minimum user fee, and shall be 
paid in full before loan closing or commencement of construction, 
whichever occurs first. Once economic feasibility is ascertained based

[[Page 169]]

on a demonstration of meaningful potential user cash contributions, the 
contribution, membership fee or other fees that may be imposed are not a 
requirement of FmHA or its successor agency under Public Law 103-354 
under this section. However, borrowers do have an additional 
responsibility relating to generating sufficient revenues as set forth 
in paragraph (n)(2)(iii) of this section.
    (C) Enforceable user agreement. Except for users presently receiving 
service, an enforceable user agreement with a penalty clause is required 
unless State statutes or local ordinances require mandatory use of the 
system and the applicant or legal entity having such authority agrees in 
writing to enforce such statutes or ordinances.
    (iii) In those cases where all or part of the borrower's debt 
payment revenues will come from user fees, applicants must provide a 
positive program to encourage connection by all users as soon as service 
is available. The program will be available for review and approval by 
FmHA or its successor agency under Public Law 103-354 before loan 
closing or commencement of construction, whichever occurs first. Such a 
program shall include:
    (A) An aggressive information program to be carried out during the 
construction period. The borrower should send written notification to 
all signed users at least three weeks in advance of the date service 
will be available, stating the date users will be expected to have their 
connections completed, and the date user charges will begin.
    (B) Positive steps to assure that installation services will be 
available. These may be provided by the contractor installing the 
system, local plumbing companies, or local contractors.
    (C) Aggressive action to see that all signed users can finance their 
connections. This might require collection of sufficient user 
contributions to finance connections. Extreme cases might necessitate 
additional loan funds for this purpose; however, loan funds should be 
used only when absolutely necessary and when approved by FmHA or its 
successor agency under Public Law 103-354 prior to loan closing.
    (3) Utility-type facilities for new developing communities or areas. 
Developers are normally expected to provide utility-type facilities in 
new or developing areas and such facilities shall be installed in 
compliance with appropriate State statutes and regulations. FmHA or its 
successor agency under Public Law 103-354 financing will be considered 
to an eligible applicant in such cases when failure to complete 
development would result in an adverse economic condition for the rural 
area (not the community being developed); the proposal is necessary to 
the success of an area development plan; and loan repayment can be 
assured by:
    (i) The applicant already having sufficient assured revenues to 
repay the loan; or
    (ii) Developers providing a bond or escrowed security deposit as a 
guarantee sufficient to meet expenses attributable to the area in 
question until a sufficient number of the building sites are occupied 
and connected to the facility to provide enough revenues to meet 
operating, maintenance, debt service, and reserve requirements. Such 
guarantees from developers will meet the requirements in paragraph 
(h)(2)(i)(B) of this section; or
    (iii) Developers paying cash for the increased capital cost and any 
increased operating expenses until the developing area will support the 
increased costs; or
    (iv) The full faith and credit of a public body where the debt is 
evidenced by general obligation bonds; or
    (v) The loan is to a public body evidenced by a pledge of tax 
assessments; or
    (vi) The user charges can become a tax lien upon the property being 
served and income from such lien can be collected in sufficient time to 
be used for its intended purposes.
    (i) Reserve requirements. Provision for the accumulation of 
necessary reserves over a reasonable period of time will be included in 
the loan documents and in assessments, tax levies, or rates charged for 
services. In those cases where statutes providing for extinguishing 
assessment liens of public bodies when properties subject to such liens 
are sold for delinquent State or

[[Page 170]]

local taxes, special reserves will be established and maintained for the 
protection of the borrower's assessment lien.
    (1) General obligation or special assessment bonds. Ordinarily, the 
requirements for reserves will be considered to have been met if general 
obligation or other bonds which pledge the full faith and credit of the 
political subdivision are used, or special assessment bonds are used, 
and if such bonds provide for the annual collection of sufficient taxes 
or assessments to cover debt service, operation and maintenance, and a 
reasonable amount for emergencies and to offset the possible nonpayment 
of taxes or assessments by a percentage of the property owners, or a 
statutory method is provided to prevent the incurrence of a deficiency.
    (2) Other than general obligation or special assessment bonds. Each 
borrower will be required to establish and maintain reserves sufficient 
to assure that loan installments will be paid on time, for emergency 
maintenance, for extensions to facilities, and for replacement of short-
lived assets which have a useful life significantly less than the 
repayment period of the loan. It is expected that borrowers issuing 
bonds or other evidences of debt pledging facility revenues as security 
will ordinarily plan their reserve to provide for a total reserve in an 
amount at least equal to one average loan installment. It is also 
expected the ordinarily such reserve will be accumulated at the rate of 
at least one-tenth of the total each year until the desired level is 
reached.
    (j) General requirements--(1) Membership authorization. For 
organizations other than public bodies, the membership will authorize 
the project and its financing except that the State Director may, with 
the concurrence of OGC, accept the loan resolution without such 
membership authorization when State statutes and the organization's 
charter and bylaws do not require such authorization; and
    (i) The organization is well established and is operating with a 
sound financial base; or
    (ii) For utility-type projects the members of the organization have 
all signed an enforceable user agreement with a penalty clause and have 
made the required meaningful user cash contribution, except for members 
presently receiving service or when State statutes or local ordinances 
require mandatory use of the facility.
    (2) Planning, bidding, contracting, constructing. (See Sec. 
1942.18).
    (3) Insurance and fidelity bonds. The purpose of FmHA or its 
successor agency under Public Law 103-354's insurance and fidelity bond 
requirements is to protect the government's financial interest based on 
the facility financed. The requirements below apply to all types of 
coverage determined necessary. The National Office may grant exceptions 
to normal requirements when appropriate justification is provided 
establishing that it is in the best interest of the applicant/borrower 
and will not adversely affect the government's interest.
    (i) General. (A) Applicants must provide evidence of adequate 
insurance and fidelity bond coverage by loan closing or start of 
construction, whichever occurs first. Adequate coverage in accordance 
with this section must then be maintained for the life of the loan. It 
is the responsibility of the applicant/borrower and not that of FmHA or 
its successor agency under Public Law 103-354 to assure that adequate 
insurance and fidelity bond coverage is maintained.
    (B) Insurance and fidelity bond requirements by FmHA or its 
successor agency under Public Law 103-354 shall normally not exceed 
those proposed by the applicant/borrower if the FmHA or its successor 
agency under Public Law 103-354 loan approval or servicing official 
determines that proposed coverage is adequate to protect the 
government's financial interest. Applicants/borrowers are encouraged to 
have their attorney, consulting engineer/architect, and/or insurance 
provider(s) review proposed types and amounts of coverage, including any 
deductible provisions. If the FmHA or its successor agency under Public 
Law 103-354 official and the applicant/borrower cannot agree on the 
acceptability of coverage proposed, a decision will be made by the State 
Director.
    (C) The use of deductibles, i.e., an initial amount of each claim to 
be paid by the applicant/borrower, may be allowed

[[Page 171]]

by FmHA or its successor agency under Public Law 103-354 providing the 
applicant/borrower has financial resources which would likely be 
adequate to cover potential claims requiring payment of the deductible.
    (D) Borrowers must provide evidence to FmHA or its successor agency 
under Public Law 103-354 that adequate insurance and fidelity bond 
coverage is being maintained. This may consist of a listing of policies 
and coverage amounts in yearend reports submitted with management 
reports required under Sec. 1942.17(q)(2) or other documentation. The 
borrower is responsible for updating and/or renewing policies or 
coverage which expire between submissions to FmHA or its successor 
agency under Public Law 103-354. Any monitoring of insurance and 
fidelity bond coverage by FmHA or its successor agency under Public Law 
103-354 is solely for the benefit of FmHA or its successor agency under 
Public Law 103-354, and does not relieve the applicant/borrower of its 
obligation under the loan resolution to maintain such coverage.
    (ii) Fidelity bond. Applicants/borrowers will provide fidelity bond 
coverage for all persons who have access to funds. Coverage may be 
provided either for all individual positions or persons, or through 
``blanket'' coverage providing protection for all appropriate employees 
and/or officials. An exception may be granted by the State Director when 
funds relating to the facility financed are handled by another entity 
and it is determined that the entity has adequate coverage or the 
government's interest would otherwise be adequately protected.
    (A) The amount of coverage required by FmHA or its successor agency 
under Public Law 103-354 will normally approximate the total annual debt 
service requirements for the FmHA or its successor agency under Public 
Law 103-354 loans.
    (B) Form FmHA or its successor agency under Public Law 103-354 440-
24, ``Position Fidelity Schedule Bond'' may be used. Similar forms may 
be used if determined acceptable to FmHA or its successor agency under 
Public Law 103-354. Other types of coverage may be considered acceptable 
if it is determined by FmHA or its successor agency under Public Law 
103-354 that they fulfill essentially the same purpose as a fidelity 
bond.
    (iii) Insurance. The following types of coverage must be maintained 
in connection with the project if appropriate for the type of project 
and entity involved:
    (A) Property insurance. Fire and extended coverage will normally be 
maintained on all structures except as noted in paragraphs 
(j)(3)(iii)(A) (1) and (2) below. Ordinarily, FmHA or its successor 
agency under Public Law 103-354 should be listed as mortgagee on the 
policy when FmHA or its successor agency under Public Law 103-354 has a 
lien on the property. Normally, major items of equipment or machinery 
located in the insured structures must also be covered. Exceptions:
    (1) Reservoirs, standpipes, elevated tanks, and other structures 
built entirely of noncombustible materials if such structures are not 
normally insured.
    (2) Subsurface lift stations except for the value of electrical and 
pumping equipment therein.
    (B) Liability and property damage insurance, including vehicular 
coverage.
    (C) Malpractice insurance. The need and requirements for malpractice 
insurance will be carefully and thoroughly considered in connection with 
each health care facility financed.
    (D) Flood insurance. Facilities located in special flood- and 
mudslide-prone areas must comply with the eligibility and insurance 
requirements of subpart B of part 1806 of this chapter (FmHA Instruction 
426.2).
    (E) Worker's compensation. The borrower will carry worker's 
compensation insurance for employees in accordance with State laws.
    (4) Acquisition of land, easements, water rights, and existing 
facilities. Applicants are responsible for acquisition of all property 
rights necessary for the project and will determine that prices paid are 
reasonable and fair. FmHA or its successor agency under Public Law 103-
354 may require an appraisal by an independent appraiser or FmHA or its 
successor agency under Public Law 103-354 employee.

[[Page 172]]

    (i) Title for land, rights-of-way, easements, or existing 
facilities. The applicant must certify and provide a legal opinion 
relative to the title to rights-of-way and easements. Form FmHA or its 
successor agency under Public Law 103-354 442-21, ``Rights-of-Way 
Certificate,'' and Form FmHA or its successor agency under Public Law 
103-354 442-22, ``Opinion of Counsel Relative to Rights-of-Way,'' may be 
used.
    (A) Rights-of-way and easements. Applicants are responsible for and 
will obtain valid, continuous and adequate rights-of-way and easements 
needed for the construction, operation, and maintenance of the facility. 
Form FmHA or its successor agency under Public Law 103-354 442-20, 
``Right-of-Way Easement,'' may be used. When a site is for major 
structures for utility-type facilities such as a reservoir or pumping 
station and the applicant is able to obtain only a right-of-way or 
easement on such a site rather than a fee simple title, the applicant 
will furnish a title report thereon by the applicant's attorney showing 
ownership of the land and all mortgages or other lien defects, 
restrictions, or encumbrances, if any. It is the responsibility of the 
applicant to obtain and record such releases, consents or subordinations 
to such property rights from holders of outstanding liens or other 
instruments as may be necessary for the construction, operation, and 
maintenance of the facility and give FmHA or its successor agency under 
Public Law 103-354 the required security.
    (B) Title for land or existing facilities. Title to land essential 
to the successful operation of facilities or title to facilities being 
purchased, must not contain any restrictions that will adversely affect 
the suitability, successful operation, security value, or 
transferability of the facility. Title opinions must be provided by the 
applicant's attorney. The opinions must be in sufficient detail to 
assess marketability of the property. Form FmHA or its successor agency 
under Public Law 103-354 1927-9, ``Preliminary Title Opinion,'' and Form 
FmHA or its successor agency under Public Law 103-354 1927-10, ``Final 
Title Opinion,'' may be used to provide the required title opinions. If 
other forms are used they must be reviewed and approved by FmHA or its 
successor agency under Public Law 103-354 and OGC.
    (1) In lieu of receiving title opinions from the applicant's 
attorney, the applicant may use a title insurance company. If a title 
insurance company is used, the company must provide FmHA or its 
successor agency under Public Law 103-354 a title insurance binder, 
disclosing all title defects or restrictions, and include a commitment 
to issue a title insurance policy. The policy should be in an amount at 
least equal to the market value of the property as improved. The title 
insurance binder and commitment should be provided to FmHA or its 
successor agency under Public Law 103-354 prior to requesting closing 
instructions. FmHA or its successor agency under Public Law 103-354 will 
be provided a title insurance policy which will insure FmHA or its 
successor agency under Public Law 103-354's interest in the property 
without any title defects or restrictions which have not been waived by 
FmHA or its successor agency under Public Law 103-354.
    (2) The loan approval official may waive title defects or 
restrictions, such as utility easements, that do not adversely affect 
the suitability, successful operation, security value, or 
transferability of the facility. If the District Director is the loan 
approval official and is unable to waive the defect or restriction, the 
title opinion or title insurance binder will be forwarded to the State 
Director. If the State Director, with the advice of the OGC, determines 
that the defect or restriction cannot be waived, the defect or 
restriction must be removed.
    (ii) Water rights. When legally permissible, an assignment will be 
taken on water rights owned or to be acquired by the applicant. The 
following will be furnished as applicable:
    (A) A statement by the applicant's attorney regarding the nature of 
the water rights owned or to be acquired by the applicant (such as 
conveyance of title, appropriation and decree, application and permit, 
public notice and appropriation and use).
    (B) A copy of a contract with another company or municipality to 
supply water; or stock certificates in another

[[Page 173]]

company which represents the right to receive water.
    (iii) Land purchase contract: (A) A land purchase contract (known in 
some areas as a contract for deed) is an agreement between two or more 
parties which obligates the purchaser to pay the purchase price, gives 
the purchaser the rights of immediate possession, control, and 
beneficial use of the property, and entitles the purchaser to a deed 
upon paying all or a specified part of the purchase price.
    (B) Applicants may obtain land through land purchase contracts when 
all of the following conditions are met:
    (1) The applicant has exhausted all reasonable means of obtaining 
outright fee simple title to the necessary land.
    (2) The applicant cannot obtain the land through condemnation.
    (3) There are not other suitable sites available.
    (4) National Office concurrence is obtained in accordance with 
paragraph (j)(4)(iii)(D)(2) of this section.
    (C) The land purchase contract must provide for the transfer of 
ownership by the seller without any restrictions, liens or other title 
defects. The contract must not contain provisions for future advances 
(except for taxes, insurance, or other costs needed to protect the 
security), summary cancellations, summary forfeiture, or other clauses 
that may jeopardize the Government's interest or the purchaser's ability 
to pay the FmHA or its successor agency under Public Law 103-354 loan. 
The contract must provide that if the purchaser fails to make payment 
that FmHA or its successor agency under Public Law 103-354 will be given 
at least 90 days written notice with an option to cure the default 
before the contract can be cancelled, terminated or foreclosed. Then 
FmHA or its successor agency under Public Law 103-354 must have the 
option of making the payment and charging it to the purchaser's account, 
making the payment and taking over the ownership of the purchase 
contract, or taking any other action necessary to protect the 
Government's interest.
    (D) Prior to loan closing or the beginning of construction, 
whichever occurs first, the following actions must be taken in the order 
listed below:
    (1) The land purchase contract and any appropriate title opinions 
must be reviewed by the Regional Attorney to determine if they are 
legally sufficient to protect the interest of the Government.
    (2) The land purchase contract, the Regional Attorney's comments, 
and the State Director's recommendations must be submitted to the 
National Office for concurrence.
    (3) The land purchase contract must be recorded.
    (5) Lease agreements. Where the right of use or control of real 
property not owned by the applicant/borrower is essential to the 
successful operation of the facility during the life of the loan, such 
right will be evidenced by written agreements or contracts between the 
owner(s) of the property and the applicant/borrower. Lease agreements 
shall not contain provisions for restricted use of the site of facility, 
forfeiture or summary cancellation clauses and shall provide for the 
right to transfer and lease without restriction. Lease agreements will 
ordinarily be written for a term at least equal to the term of the loan. 
Such lease contracts or agreements will be approved by the FmHA or its 
successor agency under Public Law 103-354 loan approval official with 
the advice and counsel of the Regional Attorney, OGC, as to the legal 
sufficiency of such documents. A copy of the lease contract or agreement 
will be included in the loan docket.
    (6) Notes and bonds. Notes and bonds will be completed on the date 
of loan closing except for the entry of subsequent multiple advances 
where applicable. The amount of each note will be in multiples of not 
less than $100. The amount of each bond will ordinarily be in multiples 
of not less than $1,000.
    (i) Form FmHA or its successor agency under Public Law 103-354 440-
22, ``Promissory Note (Association or Organization),'' will ordinarily 
be used for loans to nonpublic bodies.
    (ii) Section 1942.19 contains instructions for preparation of notes 
and bonds evidencing indebtedness of public bodies.

[[Page 174]]

    (7) Environmental requirements. Environmental requirements will be 
documented by FmHA or its successor agency under Public Law 103-354 in 
accordance with subpart G part 1940 of this chapter. The applicant will 
provide any information required.
    (8) Health care facilities. The applicant will be responsible for 
obtaining the following documents:
    (i) A statement from the responsible State agency certifying that 
the proposed health care facility is not inconsistent with the State 
Medical Facilities Plan.
    (ii) A statement from the responsible State agency or regional 
office of the Department of Health and Services certifying that the 
proposed facility meets the standards in Sec. 1942.18(d)(4).
    (9) Public information. Applicants should inform the general public 
regarding the development of any proposed project. Any applicant not 
required to obtain authorization by vote of its membership or by public 
referendum, to incur the obligations of the proposed loan or grant, will 
hold at least one public information meeting. The public meeting must be 
held after the preapplication is filed and not later than loan approval. 
The meeting must give the citizenry an opportunity to become acquainted 
with the proposed project and to comment on such items as economic and 
environmental impacts, service area, alternatives to the project, or any 
other issue identified by FmHA or its successor agency under Public Law 
103-354. The applicant will be required, at least 10 days prior to the 
meeting, to publish a notice of the meeting in a newspaper of general 
circulation in the service area, to post a public notice at the 
applicant's principal office, and to notify FmHA or its successor agency 
under Public Law 103-354. The applicant will provide FmHA or its 
successor agency under Public Law 103-354 a copy of the published notice 
and minutes of the public meeting. A public meeting is not normally 
required for subsequent loans which are needed to complete the financing 
of the project.
    (10) Service through individual installation. Community owned water 
or waste disposal systems may provide service through individual 
installations or small clusters of users within the applicant's service 
area. When individual installations or small clusters are proposed, the 
loan approval official should consider items such as: quantity and 
quality of the individual installations that may be developed; cost 
effectiveness of the individual facility compared with the initial and 
long term user cost on a central system; health and pollution problems 
attributable to individual facilities; operational or management 
problems peculiar to individual installations; and permit and regulatory 
agency requirements.
    (i) Applicants providing service through individual facilities must 
meet the eligibility requirements in Sec. 1942.17(b).
    (ii) FmHA or its successor agency under Public Law 103-354 must 
approve the form of agreement between the owner and individual users for 
the installation, operation and payment for individual facilities.
    (iii) If taxes or assessments are not pledged as security, owners 
providing service through individual facilities must obtain security as 
necessary to assure collection of any sum the individual user is 
obligated to pay the owner.
    (iv) Notes representing indebtedness owed the owner by a user for an 
individual facility will be scheduled for payment over a period not to 
exceed the useful life of the individual facility or the loan, whichever 
is shorter. The interest rate will not exceed the interest rate charged 
the owner on the FmHA or its successor agency under Public Law 103-354 
indebtedness.
    (v) Owners providing service through individual or cluster 
facilities must obtain:
    (A) Easements for the installation and ingress to and egress from 
the facility; and
    (B) An adequate method for denying service in the event of 
nonpayment of user fees.
    (11) Funds from other sources. FmHA or its successor agency under 
Public Law 103-354 loan funds may be used along with or in connection 
with funds provided by the applicant or from other sources. Since 
``matching funds'' is not a requirement for FmHA or its successor agency 
under Public Law 103-354

[[Page 175]]

loans, shared revenues may be used with FmHA or its successor agency 
under Public Law 103-354 funds for project construction.
    (k) Other Federal, State, and local requirements. Each application 
shall contain the comments, necessary certifications and recommendations 
of appropriate regulatory or other agency or institution having 
expertise in the planning, operation, and management of similar 
facilities. Proposals for facilities financed in whole or in part with 
FmHA or its successor agency under Public Law 103-354 funds will be 
coordinated with appropriate Federal, State, and local agencies in 
accordance with the following:
    (1) Compliance with special laws and regulations. Except as provided 
in paragraph (k)(2) of this section applicants will be required to 
comply with Federal, State, and local laws and any regulatory commission 
rules and regulations pertaining to:
    (i) Organization of the applicant and its authority to construct, 
operate, and maintain the proposed facilities;
    (ii) Borrowing money, giving security therefore, and raising 
revenues for the repayment thereof;
    (iii) Land use zoning; and
    (iv) Health and sanitation standards and design and installation 
standards unless an exception is granted by FmHA or its successor agency 
under Public Law 103-354.
    (2) Compliance exceptions. If there are conflicts between this 
subpart and state or local laws or regulatory commission regulations, 
the provisions of this subpart will control.
    (3) State Pollution Control or Environmental Protection Agency 
Standards. Water and waste disposal facilities will be designed, 
installed, and operated in such a manner that they will not result in 
the pollution of water in the State in excess of established standards 
and that any effluent will conform with appropriate State and Federal 
Water Pollution Control Standards. A certification from the appropriate 
State and Federal agencies for water pollution control standards will be 
obtained showing that established standards are met.
    (4) Consistency with other development plans. FmHA or its successor 
agency under Public Law 103-354 financed facilities will not be 
inconsistent with any development plans of State, multijurisdictional 
areas, counties, or municipalities in which the proposed project is 
located.
    (5) State agency regulating water rights. Each FmHA or its successor 
agency under Public Law 103-354 financed facility will be in compliance 
with appropriate State agency regulations which have control of the 
appropriation, diversion, storage and use of water and disposal of 
excess water. All of the rights of any landowners, appropriators, or 
users of water from any source will be fully honored in all respects as 
they may be affected by facilities to be installed.
    (6) Civil Rights Act of 1964. All borrowers are subject to, and 
facilities must be operated in accordance with, title VI of the Civil 
Rights Act of 1964 and subpart E of part 1901 of this chapter, 
particularly as it relates to conducting and reporting of compliance 
reviews. Instruments of conveyance for loans and/or grants subject to 
the Act must contain the covenant required by Sec. 1901.202(e) of 
subpart E of part 1901 of this chapter.
    (7) Title IX of the Education Amendments of 1972. No person in the 
United States shall, on the basis of sex, be excluded from participation 
in, be denied the benefits of, or be subjected to discrimination under 
any education program or education activity receiving FmHA or its 
successor agency under Public Law 103-354 financial assistance except as 
otherwise provided for in the Education Amendments of title IX. The FmHA 
or its successor agency under Public Law 103-354 State Director will 
provide guidance and technical assistance to carry out the intent of 
this paragraph.
    (8) Section 504 of the Rehabilitation Act of 1973. Under section 504 
of the Rehabilitation Act of 1973, as amended (29 U.S.C. 794), no 
handicapped individual in the United States shall, solely by reason of 
their handicap, be excluded from participation in, be denied the 
benefits of, or be subjected to discrimination under any program or 
activity receiving FmHA or its successor agency under Public Law 103-354 
financial assistance.

[[Page 176]]

    (9) Age Discrimination Act of 1975. This Act provides that no person 
in the United States shall on the basis of age, be excluded from 
participation in, be denied the benefits of, or be subjected to 
discrimination under any program or activity receiving Federal financial 
assistance. This Act also applies to programs or activities funded under 
the State and Local Fiscal Assistance Act of 1972 (31 U.S.C. 1221 et. 
seq.). This Act does not apply to: (i) age distinctions contained in 
Federal, State or local statutes or ordinances adopted by an elected, 
general purpose legislative body which provide benefits or assistance 
based on age; (ii) establish criteria for participation in age-related 
terms; (iii) describe intended beneficiaries or target groups in age-
related terms; and, (iv) any employment practice of any employer, 
employment agency, labor organization, or any labor-management joint 
apprenticeship training program except for any program or activity 
receiving Federal financial assistance for public service employment 
under the Comprehensive Employment and Training Act of 1974 (CETA) (29 
U.S.C. 801 et. seq.).
    (l) Professional services and contracts related to the facility--(1) 
Professional services. Applicants will be responsible for providing the 
services necessary to plan projects including design of facilities, 
preparation of cost and income estimates, development of proposals for 
organization and financing, and overall operation and maintenance of the 
facility. Professional services of the following may be necessary: 
Engineer, architect, attorney, bond counsel, accountant, auditor, 
appraiser, and financial advisory or fiscal agent (if desired by 
applicant). Contracts or other forms of agreement between the applicant 
and its professional and technical representatives are required and are 
subject to FmHA or its successor agency under Public Law 103-354 
concurrence. Form FmHA or its successor agency under Public Law 103-354 
1942-19, ``Agreement for Engineering Services,'' may be used when 
appropriate. Guide 20, ``Agreement for Engineering Services (FmHA or its 
successor agency under Public Law 103-354/EPA--Jointly Funded 
Projects)'' may be used on projects jointly funded by FmHA or its 
successor agency under Public Law 103-354 and EPA. Guide 14 may be used 
in the preparation of the legal services agreement.
    (2) Bond counsel. Unless otherwise provided by Sec. 1942.19(b), 
public bodies are required to obtain the service of recognized bond 
counsel in the preparation of evidence of indebtedness.
    (3) Contracts for other services. Contracts or other forms of 
agreements for other services including management, operation, and 
maintenance will be developed by the applicant and presented to FmHA or 
its successor agency under Public Law 103-354 for review and approval. 
Management agreements should provide at least those items in guide 24.
    (4) Fees. Fees provided for in contracts or agreements shall be 
reasonable. They shall be considered to be reasonable if not in excess 
of those ordinarily charged by the profession for similar work when FmHA 
or its successor agency under Public Law 103-354 financing is not 
involved.
    (m) Applying for FmHA or its successor agency under Public Law 103-
354 loans--(1) Preapplication. Applicants desiring loans will file SF 
424.2 and comments from the appropriate A-95 clearinghouse agency 
normally with the appropriate FmHA or its successor agency under Public 
Law 103-354 County Office. The County Supervisor will immediately 
forward all documents to the District Office. The District Director has 
prime responsibility for all community program loan making and servicing 
activities within the District.
    (2) Preapplication review. Upon receipt of the preapplication, FmHA 
or its successor agency under Public Law 103-354 will tentatively 
determine eligibility including the likelihood of credit elsewhere at 
reasonable rates and terms and availability of FmHA or its successor 
agency under Public Law 103-354 loan funds. The determination as to 
availability of other credit will be made after considering present 
rates and terms available for similar proposals (not necessarily based 
upon rates and terms available from FmHA or its successor agency under 
Public Law 103-354); the repayment potential of the applicant; long-term 
cost to the applicant; and average user or other

[[Page 177]]

charges. In those cases where FmHA or its successor agency under Public 
Law 103-354 determines that loans at reasonable rates and terms should 
be available from commercial sources, FmHA or its successor agency under 
Public Law 103-354 will notify the applicant so that it may apply for 
such financial assistance. Such applicants may be reconsidered for FmHA 
or its successor agency under Public Law 103-354 loans upon their 
presenting satisfactory evidence of inability to obtain commercial 
financing at reasonable rates and terms.
    (3) Incurring obligations. Applicants should not proceed with 
planning nor obligate themselves for expenditures until authorized by 
FmHA or its successor agency under Public Law 103-354.
    (4) Results of preapplication review. After FmHA or its successor 
agency under Public Law 103-354 has reviewed the preapplication material 
and any additional material that may be requested, Form AD-622 will be 
sent to the applicant. Ordinarily the review will not exceed 45 days.
    (5) Application conference. Before starting to assemble the 
application and after the applicant selects its professional and 
technical representatives, it should arrange with FmHA or its successor 
agency under Public Law 103-354 for an application conference to provide 
a basis for orderly application assembly. FmHA or its successor agency 
under Public Law 103-354 will provide applicants with a list of 
documents necessary to complete the application. Guide 15 may be used 
for this purpose. Applications will be filed with the District Office.
    (6) Application completion and assembling. This is the 
responsibility of the applicant with guidance from FmHA or its successor 
agency under Public Law 103-354. The applicant may utilize their 
professional and technical representatives or other competent sources.
    (7) Review of decision. If an application is rejected, the applicant 
may request a review of this decision under subpart B of part 1900 of 
this chapter.
    (n) Actions prior to loan closing and start of construction--(1) 
Excess FmHA or its successor agency under Public Law 103-354 loan and 
grant funds. If there is a significant reduction in project cost, the 
applicant's funding needs will be reassessed before loan closing or the 
start of construction, whichever occurs first. In such cases applicable 
FmHA or its successor agency under Public Law 103-354 forms, the letter 
of conditions, and other items will be revised. Decreases in FmHA or its 
successor agency under Public Law 103-354 funds will be based on revised 
project costs and current number of users, however, other factors 
including FmHA or its successor agency under Public Law 103-354 
regulations used at the time of loan/grant approval will remain the 
same. Obligated loan or grant funds not needed to complete the proposed 
project will be deobligated.
    (2) Loan resolutions. Loan resolutions will be adopted by both 
public and other-than-public bodies using Form FmHA or its successor 
agency under Public Law 103-354 1942-47, ``Loan Resolution (Public 
Bodies),'' or Form FmHA or its successor agency under Public Law 103-354 
1942-9, ``Loan Resolution (Security Agreement).'' These resolutions 
supplement other provisions in this subpart. The applicant will agree:
    (i) To indemnify the Government for any payments made or losses 
suffered by the Government on behalf of the association. Such 
indemnification shall be payable from the same source of funds pledged 
to pay the bonds or any other legally permissible source.
    (ii) To comply with applicable local, State and Federal laws, 
regulations, and ordinances.
    (iii) To provide for the receipt of adequate revenues to meet the 
requirements of debt service, operation and maintenance, establishment 
of adequate reserves, and to continually operate and maintain the 
facility in good condition. Except for utility-type facilities, free 
service use may be permitted. If free services are extended no 
distinctions will be made in the extension of those services because of 
race, color, religion, sex, national origin, marital status, or physical 
or mental handicap.
    (iv) To acquire and maintain such insurance coverage including 
fidelity bonds, as may be required by the Government.

[[Page 178]]

    (v) To establish and maintain such books and records relating to the 
operation of the facility and its financial affairs and to provide for 
required audit thereof in such a manner as may be required by the 
Government and to provide the Government without its request, a copy of 
each such audit and to make and forward to the Government such 
additional information and reports as it may, from time to time, 
require.
    (vi) To provide the Government at all reasonable times, access to 
all books and records relating to the facility and access to the 
property of the system so that the Government may ascertain that the 
association is complying with the provisions hereof and of the 
instruments incident to the making or insuring of the loan.
    (vii) To provide adequate service to all persons within the service 
area who can feasibly and legally be served and to obtain FmHA or its 
successor agency under Public Law 103-354's concurrence prior to 
refusing new or adequate services to such persons. Upon failure of the 
applicant to provide services which are feasible and legal, such person 
shall have a direct right of action against the applicant organization.
    (viii) To have prepared on its behalf and to adopt an ordinance or 
resolution for the issuance of its bonds or notes or other debt 
instruments or other such items and in such forms as are required by 
State statutes and as are agreeable and acceptable to the Government.
    (ix) To refinance the unpaid balance, in whole or in part, of its 
debt upon the request of the Government if at any time it should appear 
to the Government that the association is able to refinance its bonds by 
obtaining a loan for such purposes from responsible cooperative or 
private sources at reasonable rates and terms.
    (x) To provide for, execute, and comply with Form FmHA or its 
successor agency under Public Law 103-354 400-4, ``Assurance 
Agreement,'' and Form FmHA or its successor agency under Public Law 103-
354 400-1, ``Equal Opportunity Agreement,'' including an ``Equal 
Opportunity Clause,'' which is to be incorporated in or attached as a 
rider to each construction contract and subcontract in excess of 
$10,000.
    (xi) To place the proceeds of the loan on deposit in a manner 
approved by the Government. Funds may be deposited in institutions 
insured by the State or Federal Government as invested in readily 
marketable securities backed by the full faith and credit of the United 
States. Any income from these accounts will be considered as revenues of 
the system.
    (xii) Not to sell, transfer, lease, or otherwise encumber the 
facility or any portion thereof or interest therein, and not to permit 
others to do so, without the prior written consent of the Government.
    (xiii) Not to borrow any money from any source, enter into any 
contract or agreement, or incur any other liabilities in connection with 
making enlargements, improvements or extensions to, or for any other 
purpose in connection with the facility (exclusive of normal 
maintenance) without the prior written consent of the Government if such 
undertaking would involve the source of funds pledged to repay the debt 
to FmHA or its successor agency under Public Law 103-354.
    (xiv) That upon default in the payments of any principal and accrued 
interest on the bonds or in the performance of any covenant or agreement 
contained herein or in the instruments incident to making or insuring 
the loan, the Government, at its option, may:
    (A) Declare the entire principal amount then outstanding and accrued 
interest, due and payable;
    (B) For the account of the association (payable from the source of 
funds pledged to pay the bonds or notes or any other legally 
permissiable source), incur and pay reasonable expenses for repair, 
maintenance and operation of the facility and such other reasonable 
expenses as may be necessary to cure the cause of default; and/or
    (C) Take possession of the facility, repair, maintain and operate, 
or otherwise dispose of the facility. Default under the provisions of 
the resolution

[[Page 179]]

or any instrument incident to the making or insuring of the loan may be 
construed by the Government to constitute default under any other 
instrument held by the Government and executed or assumed by the 
association and default under any such instrument may be construed by 
the Government to constitute default hereunder.
    (3) Interim financing. In all loans exceeding $50,000, where funds 
can be borrowed at reasonable interest rates on an interim basis from 
commercial sources for the construction period, such interim financing 
will be obtained so as to preclude the necessity for multiple advances 
of FmHA or its successor agency under Public Law 103-354 funds. Guide 1 
or guide 1a, as appropriate, may be used to inform the private lender of 
FmHA or its successor agency under Public Law 103-354's commitment. When 
interim commercial financing is used, the application will be processed, 
including obtaining construction bids, to the stage where the FmHA or 
its successor agency under Public Law 103-354 loan would normally be 
closed, that is immediately prior to the start of construction. The FmHA 
or its successor agency under Public Law 103-354 loan should be closed 
as soon as possible after the disbursal of all interim funds. Interim 
financing may be for a fixed term provided the fixed term does not 
extend beyond the time projected for completion of construction. For 
this purpose, a fixed term is when the interim lender cannot be repaid 
prior to the end of the stipulated term of the interim instruments. When 
an FmHA or its successor agency under Public Law 103-354 Water and Waste 
Disposal grant is included, any interim financing involving a fixed term 
must be for the total FmHA or its successor agency under Public Law 103-
354 loan amount. Multiple advances may be used in conjunction with 
interim commercial financing when the applicant is unable to obtain 
sufficient funds through interim commercial financing in an amount equal 
to the loan. The FmHA or its successor agency under Public Law 103-354 
loan proceeds (including advances) will be used to retire the interim 
commercial indebtedness. Before the FmHA or its successor agency under 
Public Law 103-354 loan is closed, the applicant will be required to 
provide FmHA or its successor agency under Public Law 103-354 with 
statements from the contractor, engineer, architect, and attorney that 
they have been paid to date in accordance with their contracts or other 
agreements and, in the case of the contractor, that any suppliers and 
subcontractors have been paid. If such statements cannot be obtained, 
the loan may be closed provided:
    (i) Statements to the extent possible are obtained;
    (ii) The interest of FmHA or its successor agency under Public Law 
103-354 can be adequately protected and its security position is not 
impaired; and
    (iii) Adequate provisions are made for handling the unpaid accounts 
by withholding or escrowing sufficient funds to pay such claims.
    (4) Obtaining closing instructions. After loan approval, the 
completed docket will be reviewed by the State Director. The information 
required by OGC will be transmitted to OGC with request for closing 
instructions. Upon receipt of the closing instructions from OGC, the 
State Director will forward them along with any appropriate instructions 
to the District Director. Upon receipt of closing instructions, the 
District Director will discuss with the applicant and its architect or 
engineer, attorney, and other appropriate representatives, the 
requirements contained therein and any actions necessary to proceed with 
closing.
    (5) Applicant contribution. An applicant contributing funds toward 
the project cost shall deposit these funds in its construction account 
on or before loan closing or start of construction, whichever occurs 
first. Project costs paid prior to the required deposit time with 
applicant funds shall be appropriately accounted for.
    (6) Evidence of and disbursement of other funds. Applicants 
expecting funds from other sources for use in completing projects being 
partially financed with FmHA or its successor agency under Public Law 
103-354 funds will present evidence of the commitment of these funds 
from such other sources. This evidence will be available

[[Page 180]]

before loan closing, or the start of construction, whichever occurs 
first. Ordinarily, the funds provided by the applicant or from other 
sources will be disbursed prior to the use of FmHA or its successor 
agency under Public Law 103-354 loan funds. If this is not possible, 
funds will be disbursed on a pro rata basis. FmHA or its successor 
agency under Public Law 103-354 funds will not be used to pre-finance 
funds committed to the project from other sources.
    (o) Loan closing--(1) Closing instructions. Loans will be closed in 
accordance with the closing instructions issued by OGC.
    (2) Obtaining insurance and fidelity bonds. Required property 
insurance policies, liability insurance policies, and fidelity bonds 
will be obtained by the time of loan closing or start of construction, 
whichever occurs first.
    (3) Distribution of recorded documents. The originals of the 
recorded deeds, easements, permits, certificates of water rights, 
leases, or other contracts and similar documents which are not to be 
held by FmHA or its successor agency under Public Law 103-354 will be 
returned to the borrower. The original mortgage(s) and water stock 
certificates, if any, if not required by the recorder's office will be 
retained by FmHA or its successor agency under Public Law 103-354.
    (4) Review of loan closing. In order to determine that the loan has 
been properly closed the loan docket will be reviewed by the State 
Director and OGC.
    (p) Project monitoring and fund delivery during construction--(1) 
Coordination of funding sources. When a project is jointly financed, the 
State Director will reach any needed agreement or understanding with the 
representatives of the other source of funds on distribution of 
responsibilities for handling various aspects of the project. These 
responsibilities will include supervision of construction, inspections 
and determinations of compliance with appropriate regulations concerning 
equal employment opportunities, wage rates, nondiscrimination in making 
services or benefits available, and environmental compliance. If any 
problems develop which cannot be resolved locally, complete information 
should be sent to the National Office for advice.
    (2) Multiple advances. In the event interim commercial financing is 
not legally permissible or not available, multiple advances of FmHA or 
its successor agency under Public Law 103-354 loan funds are required. 
An exception to this requirement may be granted by the National Office 
when a single advance is necessitated by State law or public exigency. 
Multiple advances will be used only for loans in excess of $50,000. 
Advances will be made only as needed to cover disbursements required by 
the borrower over a 30-day period. Advances should not exceed 24 in 
number nor extend longer than two years beyond loan closing. Normally, 
the retained percentage withheld from the contractor to assure 
construction completion will be included in the last advance.
    (i) Section 1942.19 contains instructions for making multiple 
advances to public bodies.
    (ii) Advances will be requested by the borrower in writing. The 
request should be in sufficient amounts to pay cost of construction, 
rights-of-way and land, legal, engineering, interest, and other expenses 
as needed. The applicant may use Form FmHA or its successor agency under 
Public Law 103-354 440-11, ``Estimate of Funds Needed for 30 Day Period 
Commencing ------,'' to show the amount of funds needed during the 30-
day period.
    (iii) FmHA or its successor agency under Public Law 103-354 loan 
funds obligated for a specific purpose, such as the paying of interest, 
but not needed at the time of loan closing will remain in the Finance 
Office until needed unless State statutes require all funds to be 
delivered to the borrower at the time of closing. Loan funds may be 
advanced to prepay costs under paragraph (d)(1)(iv)(G) of this section. 
If all funds must be delivered to the borrower at the time of closing to 
comply with State statutes, funds not needed at loan closing will be 
handled as follows:
    (A) Deposited in an appropriate borrower account, such as the debt 
service account, or
    (B) Deposited in a supervised bank account under paragraph (p)(3)(i) 
of this section.

[[Page 181]]

    (3) Use and accountability of funds--(i) Supervised bank account. 
FmHA or its successor agency under Public Law 103-354 loan funds and any 
funds furnished by the applicant/borrower to supplement the loan 
including contributions to purchase major items of equipment, machinery, 
and furnishings may be deposited in a supervised bank account if 
determined necessary as provided in subpart A of part 1902 of this 
chapter. When FmHA or its successor agency under Public Law 103-354 has 
a Memorandum of Understanding with another agency that provides for the 
use of supervised bank accounts, or when FmHA or its successor agency 
under Public Law 103-354 is the primary source of funds for a project 
and has determined that the use of a supervised bank account is 
necessary, project funds from other sources may also be deposited in the 
supervised bank account. FmHA or its successor agency under Public Law 
103-354 shall not be accountable to the source of the other funds nor 
shall FmHA or its successor agency under Public Law 103-354 undertake 
responsibility to administer the funding program of the other entity. 
Supervised bank accounts should not be used for funds advanced by an 
interim lender.
    (ii) Other than supervised bank account. If a supervised bank 
account is not used, arrangements will be agreed upon for the prior 
concurrence by FmHA or its successor agency under Public Law 103-354 of 
the bills or vouchers upon which warrants will be drawn, so that the 
payments from loan funds can be controlled and FmHA or its successor 
agency under Public Law 103-354 records kept current. If a supervised 
bank account is not used, use Form FmHA or its successor agency under 
Public Law 103-354 402-2, ``Statement of Deposits and Withdrawals,'' or 
similar form to monitor funds. Periodic reviews of nonsupervised 
accounts shall be made by FmHA or its successor agency under Public Law 
103-354 at the times and in the manner as FmHA or its successor agency 
under Public Law 103-354 prescribes in the conditions of loan approval. 
State laws regulating the depositories to be used shall be complied 
with.
    (iii) Use of minority owned banks. Applicants are encouraged to use 
minority banks (a bank which is owned at least 50 percent by minority 
group members) for the deposit and disbursement of funds. A list of 
minority owned banks can be obtained from the Office of Minority 
Business Enterprise, Department of Commerce, Washington, DC 20230 and is 
also available in all FmHA or its successor agency under Public Law 103-
354 offices.
    (4) Development inspections. The District Director will be 
responsible for monitoring the construction of all projects being 
financed, wholly or in part, with FmHA or its successor agency under 
Public Law 103-354 funds. Technical assistance will be provided by the 
State Director's staff. Project monitoring will include construction 
inspections and a review of each project inspection report, each change 
order and each partial payment estimate and other invoices such as 
payment for engineering/architectural and legal fees and other materials 
determined necessary to effectively monitor each project. These 
activities will not be performed on behalf of the applicant/borrower, 
but are solely for the benefit of FmHA or its successor agency under 
Public Law 103-354 and in no way are intended to relieve the applicant/
borrower of corresponding obligations to conduct similar monitoring and 
inspection activities. Project monitoring will include periodic 
inspections to review partial payment estimates prior to their approval 
and to review project development in accordance with plans and 
specifications. Each inspection will be recorded using Form FmHA or its 
successor agency under Public Law 103-354 1924-12, ``Inspection 
Report.'' The original Form FmHA or its successor agency under Public 
Law 103-354 1924-12 will be filed in the project case folder and a copy 
furnished to the State Director. The State Director will review 
inspection reports and will determine that the project is being 
effectively monitored. The District Director is authorized to review and 
accept partial payment estimates prepared by the contractor and approved 
by the borrower, provided the consulting engineer or architect, if one 
is being utilized for the project, has approved the estimate and 
certified that

[[Page 182]]

all material purchased or work performed is in accordance with the plans 
and specifications, or if a consulting engineer or architect is not 
being utilized, the District Director has determined that the funds 
requested are for authorized purposes. If there is any indication that 
construction is not being completed in accordance with the plans and 
specifications or that any other problems exist, the District Director 
should notify the State Director immediately and withhold all payments 
on the contract.
    (5) Payment for construction. Each payment for project costs must be 
approved by the borrower's governing body. Payment for construction must 
be for amounts shown on payment estimate forms. Form FmHA or its 
successor agency under Public Law 103-354 1924-18, ``Partial Payment 
Estimate,'' may be used for this purpose or other similar forms may be 
used with the prior approval of the State Director or designee. However, 
the State Director or designee cannot require a greater reporting burden 
than is required by Form FmHA or its successor agency under Public Law 
103-354 1924-18. Advances for contract retainage will not be made until 
such retainage is due and payable under the terms of the contract. The 
review and acceptance of project costs, including construction partial 
payment estimates by FmHA or its successor agency under Public Law 103-
354, does not attest to the correctness of the amounts, the quantities 
shown, or that the work has been performed under the terms of agreements 
or contracts.
    (6) Use of remaining funds. Funds remaining after all costs incident 
to the basic project have been paid or provided for will not include 
applicant contributions. Applicant contributions will be considered as 
funds initially expended for the project. Funds remaining, with 
exception of applicant contributions, may be considered in direct 
proportion to the amount obtained from each source. Remaining funds will 
be handled as follows:
    (i) Agency loan and/or grant funds. Remaining funds may be used for 
purposes authorized by paragraph (d) of this section, provided the use 
will not result in major changes to the facility design or project and 
that the purposes of the loan and/or grant remains the same.
    (A) On projects that only involve an FmHA or its successor agency 
under Public Law 103-354 loan and no FmHA or its successor agency under 
Public Law 103-354 grant, funds that are not needed will be applied as 
an extra payment on the FmHA or its successor agency under Public Law 
103-354 indebtedness unless other disposition is required by the bond 
ordinance, resolution, or State statute.
    (B) On projects that involve an FmHA or its successor agency under 
Public Law 103-354 grant, all remaining FmHA or its successor agency 
under Public Law 103-354 funds will be considered to be grant funds up 
to the full amount of the grant. Grant funds not expended under 
paragraph (p)(6)(i) of this section will be deobligated.
    (ii) Funds from other sources. Funds remaining from other sources 
will be handled according to rules, regulations and/or the agreement 
governing their participation in the project.
    (q) Borrower accounting methods, management reporting and audits--
(1) Accounting methods and records--(i) Method of accounting and 
financial statements. Financial statements must be prepared on the 
accrual basis of accounting unless State statutes or regulatory agencies 
provide otherwise, or an exception is made by FmHA or its successor 
agency under Public Law 103-354. This requirement is for accrual basis 
financial statements and not for accrual basis accounting systems. 
Organizations may keep their books on an accounting basis other than 
accrual and then make adjustments so that the financial statements are 
presented on the accrual basis.
    (ii) Approval requirement. Before loan closing or start of 
construction, whichever is first, each borrower shall provide to, and 
obtain approval from the FmHA or its successor agency under Public Law 
103-354 loan approval official for its accounting and financial 
reporting system, including the agreement with its auditor, if an 
auditor is required.
    (iii) Records. Form FmHA or its successor agency under Public Law 
103-354 1930-5, ``Bookkeeping System--Small

[[Page 183]]

Borrower,'' may be used by small organizations as a method of recording 
and maintaining accounting transactions.
    (iv) Record retention. Each borrower shall retain all records, 
books, and supporting material for 3 years after the issuance of the 
audit reports and financial statements. Upon request, this material will 
be made available to FmHA or its successor agency under Public Law 103-
354, the Comptroller General, or to their representatives.
    (2) Management reports. These reports will furnish the management 
with a means of evaluating prior decisions and serve as a basis for 
planning future operations and financial conditions. In those cases 
where revenues from multiple sources are pledged as security for an FmHA 
or its successor agency under Public Law 103-354 loan, two reports will 
be required; one for the project being financed by FmHA or its successor 
agency under Public Law 103-354 and one combining the entire operation 
of the borrower. In those cases where FmHA or its successor agency under 
Public Law 103-354 loans are secured by general obligation bonds or 
assessments and the borrower combines revenues from all sources, one 
management report combining all such revenues will suffice. The 
following management data will be submitted by the borrower to the FmHA 
or its successor agency under Public Law 103-354 District Director.
    (i) Financial information. (A) Form FmHA or its successor agency 
under Public Law 103-354 442-2, ``Statement of Budget, Income and 
Equity,'' which includes Schedule 1, ``Statement of Budget, Income and 
Equity'' and Schedule 2, ``Projected Cash Flow.''
    (B) Prior to the beginning of each fiscal year, two copies, with 
data entered in column three only of Schedule 1, page one, ``Annual 
Budget'' and all of Schedule 2, will be submitted to the District 
Director. Twenty (20) days after the end of each of the first three 
quarters of each year, two copies with all information furnished on 
Schedule 1 will be submitted. For the fourth quarter of each year, 
submit together with the year-end financial requirements of paragraphs 
(q) (4) and (5) of this section. More frequent submissions may be 
required by FmHA or its successor agency under Public Law 103-354 when 
necessary. The submission dates to the District Director will be 90 days 
following year-end for audited statements and 60 days following year-end 
for unaudited statements. The fourth quarter submission may serve the 
dual purpose of management report and year-end financial requirement for 
Statement of Income.
    (ii) Additional information. (A) A list of the names and addresses 
of all members of the governing body as appropriate, also indicating the 
officers and their terms of office, will be included with the other 
information required at the end of the year.
    (B) Borrowers delinquent on payment to FmHA or its successor agency 
under Public Law 103-354 or experiencing financial problems, will 
develop a positive action plan to resolve financial problems. The plan 
will be reviewed with FmHA or its successor agency under Public Law 103-
354 and updated at least quarterly. Guide 22 may be used for developing 
a positive action plan.
    (3) Substitute for management reports. When FmHA or its successor 
agency under Public Law 103-354 loans are secured by the general 
obligation of the public body or tax assessments which total 100 percent 
of the debt service requirements, the State Director may authorize an 
annual audit to substitute for other management reports if the audit is 
received within 90 days following the period covered by the audit.
    (4) Audits. All audits are to be performed in accordance with 
generally accepted government auditing standards (GAGAS), using the 
publication, ``Standards for Audit of Governmental Organizations, 
Programs, Activities and Functions,'' developed by the Comptroller 
General of the United States in 1981, and any subsequent revisions. In 
addition, the audits are also to be performed in accordance with various 
Office of Management and Budget (OMB) Circulars and FmHA or its 
successor agency under Public Law 103-354 requirements as specified in 
the separate sections of this subpart.
    (i) Audits based upon Federal financial assistance received. The 
following requirements shall apply to audits of the

[[Page 184]]

years in which funds are received by the borrower.
    (A) Local governments and Indian tribes. These organizations are to 
be audited in accordance with this subpart and OMB Circular A-128, with 
copies of the audits being forwarded by the borrower to the FmHA or its 
successor agency under Public Law 103-354 District Director and the 
appropriate Federal cognizant agency. The Circular is available in any 
FmHA or its successor agency under Public Law 103-354 office. For years 
in which an audit is not required by OMB Circular A-128, see paragraph 
(q)(4)(ii) of this section.
    (1) Cognizant agency. (i) ``Cognizant agency'' means the Federal 
agency assigned by OMB to carry out the responsibilities described in 
OMB Circular A-128. Within the Department of Agriculture (USDA), OIG is 
designated as the cognizant agency.
    (ii) Cognizant agency assignments. Smaller borrowers not assigned a 
cognizant agency by OMB should contact the Federal agency that provided 
the most funds. When USDA is designated as the cognizant agency or when 
it has been determined by the borrower that FmHA or its successor agency 
under Public Law 103-354 provided the major portion of Federal financial 
assistance, the appropriate USDA OIG Regional Inspector General shall be 
contacted. FmHA or its successor agency under Public Law 103-354 and the 
borrower shall coordinate all proposed audit plans with appropriate USDA 
OIG. A list of OIG contact persons is attached to FmHA Instruction 1942-
A as exhibit B (available in any FmHA or its successor agency under 
Public Law 103-354 office).
    (2) Audit requirements. It is not intended that audits required by 
this subpart be separate and apart from audits performed in accordance 
with State and local laws. To the extent feasible, the audit work should 
be done in conjunction with those audits.
    (i) Local governments and Indian tribes that receive $100,000 or 
more a year in Federal financial assistance shall have an audit for that 
year in accordance with OMB Circular A-128.
    (ii) Local governments and Indian tribes that receive between 
$25,000 and $100,000 a year in Federal financial assistance shall have 
an audit made in accordance with OMB Circular A-128 or in accordance 
with FmHA or its successor agency under Public Law 103-354 audit 
requirements. This is an option of the local government or Indian tribe. 
If the election is made to have an audit performed in accordance with 
FmHA or its successor agency under Public Law 103-354 requirements, the 
audit shall be in accordance with paragraph (q)(4)(i)(B) of this 
section.
    (iii) Local governments and Indian tribes that receive less then 
$25,000 a year in Federal financial assistance shall be exempt from both 
OMB Circular A-128 audits and FmHA or its successor agency under Public 
Law 103-354 audit requirements, except for those based upon annual gross 
income which may apply in paragraph (q)(4)(ii) of this section. However, 
any audits performed shall be governed by the requirements prescribed by 
State or local law or regulation.
    (iv) Public hospitals and public colleges and universities may be 
excluded from OMB Circular A-128 audit requirements. However, in this 
case audits shall be made in accordance with paragraph (q)(4)(i)(B) of 
this section.
    (3) Fraud, abuse, and illegal acts. If the auditor becomes aware of 
any indication of fraud, abuse, or illegal acts in FmHA or its successor 
agency under Public Law 103-354 financed projects, prompt written notice 
shall be given to the appropriate USDA OIG Regional Inspector General 
and the District Director.
    (B) Nonprofit organizations and others. These organizations are to 
be audited in accordance with FmHA or its successor agency under Public 
Law 103-354 requirements and OMB Circular A-110, ``Uniform Requirements 
for Grants to Universities, Hospitals, and Other Nonprofit 
Organizations.'' These requirements also apply to public hospitals and 
public colleges and universities if they are excluded from the audits of 
paragraph (q)(4)(i)(A) of this section.
    (1) Audits shall be annual unless otherwise prohibited and supplied 
to the FmHA or its successor agency under Public Law 103-354 District 
Director as soon as possible but in no case later than 150 days 
following the period covered by the audit.

[[Page 185]]

    (2) Audit requirements. (i) Borrowers which receive $25,000 or more 
a year in Federal financial assistance shall have an audit. Also, refer 
to paragraph (q)(4)(ii) of this section for additional audit 
requirements.
    (ii) Borrowers which receive less than $25,000 a year in Federal 
financial assistance shall be exempt from audits except for the audits 
based upon annual gross income which may apply in paragraph (q)(4)(ii) 
of this section.
    (iii) Indications of fraud, abuse and illegal acts shall be 
processed in accordance with paragraph (q)(4)(i)(A)(3) of this section.
    (ii) Audits based upon annual gross income. The following annual 
gross income audit reguirements shall apply to all borrowers (local 
government, Indian tribes, and nonprofit organizations) for all years 
except the ones in which there is an audit requirement based upon the 
amount of Federal assistance received as required by paragraphs 
(q)(4)(i)(A) and (q)(4)(i)(B) of this section. Audits shall be on an 
annual basis unless otherwise prohibited and shall be supplied to FmHA 
or its successor agency under Public Law 103-354 as soon as possible but 
in no case later than 150 days following the period covered by the 
audit.
    (A) Gross annual income of $500,000 or more and an unpaid loan 
balance exceeding $100,000. (1) Local governments and Indian tribes 
shall have audits made in accordance with State or local law or 
regulation or regulatory agency requirements. If no such requirements 
exist, audits shall be made in accordance with OMB Circular A-110 and 
paragraphs (q)(4)(i)(B)(1) and (2)(iii) of this section.
    (2) All other organizations shall have audits in accordance with OMB 
Circular A-110 and paragraph (q)(4)(i)(B)(1) and (2)(iii) of this 
section.
    (B) Gross annual income of less than $500,000. For borrowers that 
have a gross annual income of less than $500,000, the requirements for 
audits shall be at the discretion of the State Director. However, when 
audits are required, they shall be in accordance with paragraph 
(q)(4)(ii)(A) of this section.
    (5) Borrowers exempt from audits. All borrowers who are exempt from 
audits, will, within 60 days following the end of each fiscal year, 
furnish the FmHA or its successor agency under Public Law 103-354 with 
annual financial statements, consisting of a verification of the 
organization's balance sheet and statement of income and expense by an 
appropriate official of the organization. Forms FmHA 442-2 and 442-3 may 
be used. For borrowers using Form FmHA or its successor agency under 
Public Law 103-354 442-2, the dual purpose of fourth quarter management 
reports, when required, and annual statements of income will be met with 
this one submission.
    (r) FmHA or its successor agency under Public Law 103-354 actions 
for borrower supervision and servicing--(1) Management assistance and 
management reports. Management assistance will be based on such factors 
as observation of borrower operations and review of the periodic 
financial reports. The amount and type of assistance provided will be 
that needed to assure borrower success and compliance with its 
agreements with FmHA or its successor agency under Public Law 103-354.
    (i) The District Director is responsible for obtaining all 
management report data from the borrower, promptly reviewing it and 
making any necessary recommendations to the borrower within 40 calendar 
days. However, after receiving management reports for borrowers whose 
FmHA or its successor agency under Public Law 103-354 indebtedness 
exceeds $1,000,000 and for delinquent and problem case borrowers, the 
District Director will forward them with comments to the State Director 
for review.
    (ii) District Director reviews of borrower operations. (A) A review 
of the borrower's total operational and management practices, including 
records and accounts to be maintained, will be made between the 
beginning of the ninth and the end of the eleventh full month of the 
first year of operation. A report will be made to the State Director by 
sending a copy of Form FmHA or its successor agency under Public Law 
103-354 442-4, ``District Director Report.'' Earlier reviews will be 
made when needed to resolve operational and management problems that may 
arise.

[[Page 186]]

    (B) Subsequent reviews will be made for all delinquent and other 
borrowers having financial problems and reported to the State Director 
by a copy of Form FmHA or its successor agency under Public Law 103-354 
442-4. These borrowers will adopt a positive action plan (see guide 22). 
The plan will be reviewed quarterly by the District Director until the 
delinquency is eliminated or other servicing actions are recommended.
    (C) The District Director may, after the end of the borrower's third 
fiscal year of operation, exempt it from submitting management reports 
provided it:
    (1) Is current on its loan payments.
    (2) Is meeting the conditions of its agreements with FmHA or its 
successor agency under Public Law 103-354.
    (3) Has demonstrated its ability to successfully operate and manage 
the organization and has not obtained subsequent loans in the last 3 
years which have significantly altered the scope of the project.
    (4) Has the State Director's written concurrence for all borrowers 
whose FmHA or its successor agency under Public Law 103-354 indebtedness 
exceeds $1,000,000.
    (D) Borrowers qualifying for this exemption will still be required 
to submit a copy of their audits or annual financial statements.
    (E) Ordinarily and exception will not be made to the requirement for 
the borrower to submit a copy of its annual budget.
    (F) The District Director or State Director may reinstate the 
requirements for submission of periodic management reports for those 
borrowers who became delinquent or otherwise are not carrying out their 
agreements with FmHA or its successor agency under Public Law 103-354 or 
require more frequent submission of management reports. This requirement 
will be reinstated for borrowers receiving a subsequent loan which will 
significantly alter the scope of the project.
    (G) The District Director may accept management reports which are 
not prepared on page 1 of Form FmHA or its successor agency under Public 
Law 103-354 442-2 Schedule 1 but contain like information. However, page 
2 of this form must be used by all borrowers required to furnish 
management reports.
    (iii) The State Director is responsible for:
    (A) The review of the District Director's submission for all 
borrowers whose indebtedness exceeds $1,000,000. The State Director will 
forward comments to the District Director in order that a response, if 
necessary, can be sent to the borrower within 40 calendar days after the 
borrower's submission of its management reports.
    (B) The review of all delinquent and problem case borrower 
management reports. Ordinarily, review findings and instructions 
regarding further management assistance will be determined, and provided 
to the District Office within 20 calendar days of submission for 
delinquent and problem borrowers.
    (C) Forwarding to the National Office copies of review findings, 
instructions for further assistance, and positive action plans on 
delinquent borrowers and borrowers experiencing financial problems, at 
same time the findings and instructions are provided to the District 
Office.
    (2) Audits and financial statements--(i) The District Director is 
responsible for obtaining all audit reports and financial statements 
from the borrower. Those received from borrowers whose FmHA or its 
successor agency under Public Law 103-354 indebtedness exceeds 
$1,000,000 and from delinquent and problem case borrowers will be 
promptly reviewed and forwarded to the State Director with appropriate 
comments.
    (ii) The District Director is responsible for the review of audits 
and financial statements and for recommendations and instructions for 
borrower assistance. For borrowers required to have audits, in 
accordance with paragraph (q)(4)(i)(A) of this section, the District 
Director is also responsible for any necessary follow up required 
because of audit resolution items received from the cognizant agencies.
    (iii) The State Director is responsible for the review of audits of 
borrowers whose indebtedness exceeds $1,000,000

[[Page 187]]

and delinquent and problem case borrowers. The State Director may 
recommend to the District Director any necessary actions to be taken.
    (3) Security inspections. A representative of the borrower will 
ordinarily accompany the District Director during each inspection.
    (i) Post construction inspection. The District Director will inspect 
each facility between the beginning of the ninth and the end of the 
eleventh full month of the first year of operation. This will normally 
coincide with the District Director's review of the borrower's total 
operational and management practices described in paragraph 
(r)(1)(ii)(A) of this section. The results of this inspection will be 
reported to the State Director on Form FmHA or its successor agency 
under Public Law 103-354 1924-12. Earlier inspections will be made when 
operational or other problems indicate a need. The State Director will 
provide guidance to the District Director to assure that action will be 
taken to correct project deficiencies.
    (ii) Subsequent inspections. The District Director will make 
subsequent inspections of borrower security property and facilities 
during each third year after the post construction inspection. The 
results of this inspection will be reported to the State Director on 
Form FmHA or its successor agency under Public Law 103-354 1924-12.
    (iii) Special inspections. The District Director may request, or the 
State Director may determine, the need for a member of the State staff 
to make certain security inspections. In such cases, the State Director 
will detail a staff member to make such inspections.
    (iv) Follow-up inspections. If any inspection discloses deficiencies 
or exceptions, or otherwise indicates a need for subsequent inspections 
prior to the third year, the State Director will prescribe the type and 
frequency of follow-up inspections. These inspections will be made until 
all deficiencies and exceptions have been corrected.
    (4) Civil rights compliance reviews will be performed under subpart 
E of part 1901 of this chapter for the life of the loan.
    (5) Other loan servicing actions will be in accordance with subparts 
E and O of part 1951 of this chapter.

[50 FR 7296, Feb. 22, 1985]

    Editorial Note: For Federal Register citations affecting Sec. 
1942.17, see the List of CFR Sections Affected, which appears in the 
Finding Aids section of the printed volume and on GPO Access.

    Effective Date Note: At 69 FR 69104, Nov. 26, 2004, Sec. 1942.17 
was amended by removing paragraph (q)(1)(iii), and redesignating 
paragraph (q)(1)(iv) as (q)(1)(iii), effective Feb. 24, 2005.



Sec. 1942.18  Community facilities--Planning, bidding, contracting, 
constructing.

    (a) General. This section is specifically designed for use by owners 
including the professional or technical consultants and/or agents who 
provide assistance and services such as architectural, engineering, 
inspection, financial, legal or other services related to planning, 
bidding, contracting, and constructing community facilities. These 
procedures do not relieve the owner of the contractual obligations that 
arise from the procurement of these services. For this section, an owner 
is defined as an applicant, borrower, or grantee.
    (b) Technical services. Owners are responsible for providing the 
engineering or architectural services necessary for planning, designing, 
bidding, contracting, inspecting, and constructing their facilities. 
Services may be provided by the owner's ``in house'' engineer or 
architect or through contract, subject to FmHA or its successor agency 
under Public Law 103-354 concurrence. Architects and engineers must be 
licensed in the State where the facility is to be constructed.
    (c) Preliminary reports. Preliminary architectural and engineering 
reports must conform with customary professional standards. Preliminary 
report guidelines for water, sanitary sewer, solid waste, storm sewer, 
and other essential community facilities are available from FmHA or its 
successor agency under Public Law 103-354.
    (d) Design policies. Facilities financed by FmHA or its successor 
agency under Public Law 103-354 will be designed and constructed in 
accordance with sound

[[Page 188]]

engineering and architectural practices, and must meet the requirements 
of Federal, State and local agencies.
    (1) Natural resources. Facility planning should be responsive to the 
owner's needs and should consider the long-term economic, social and 
environmental needs as set forth in this section. FmHA or its successor 
agency under Public Law 103-354's environmental considerations are under 
subpart G of part 1940 of this chapter.
    (i) Floodplains and wetlands. Facilities must avoid, to the extent 
possible, the long- and short-term adverse impacts associated with the 
occupancy and modification of floodplains and wetlands, and avoid direct 
or indirect support of floodplain and wetland development whenever there 
is a practicable alternative. This subject is more fully discussed in 
Executive Order 11988, Executive Order 11990, and Water Resources 
Council's Floodplain Management Guidelines (43 FR 6030) which is 
available in all FmHA or its successor agency under Public Law 103-354 
offices. Facilities located in special flood and mudslide prone areas 
must comply with FmHA or its successor agency under Public Law 103-354's 
eligibility and insurance requirements in subpart B of part 1806 of this 
chapter (FmHA Instruction 426.2).
    (ii) Coastal Zone Management. Facilities shall be designed and 
constructed in a manner consistent with approved State management 
programs, under the Coastal Zone Management Act of 1972 (Pub. L. 92-583 
section 307 (c)(1) and (2)) as supplemented by the Department of 
Commerce regulations 15 CFR part 930.
    (iii) Wild and Scenic Rivers. Facilities shall be designed and 
constructed in order that designated wild and scenic rivers be preserved 
in free-flowing condition and that they and their immediate environments 
be protected for the benefit and enjoyment of present and future 
generations under the Wild and Scenic Rivers Act of 1978 (Pub. L. 95-
625).
    (iv) Endangered species. Facilities shall be designed and 
constructed in a manner to conserve, to the extent practicable, the 
various endangered and threatened species of fish or wildlife and 
plants, and will not jeopardize their continued existence and will not 
result in destruction or modification of the habitat of species in the 
Endangered Species Act of 1973 (Pub. L. 93-205).
    (2) Historic preservation. Facilities should be designed and 
constructed in a manner which will contribute to the preservation and 
enhancement of sites, structures, and objects of historical, 
architectural, and archaeological significance. All facilities must 
comply with the National Historic Preservation Act of 1966 (16 U.S.C 
470) as supplemented by 36 CFR part 800 and Executive Order 11593, 
``Protection and Enhancement of the Cultural Environment.'' subpart F of 
part 1901 of this chapter sets forth procedures for the protection of 
Historic and Archaeological Properties.
    (3) Architectural barriers. All facilities intended for or 
accessible to the public or in which physically handicapped persons may 
be employed or reside must be developed in compliance with the 
Architectural Barriers Act of 1968 (Pub. L. 90-480) as implemented by 
the General Services Administration regulations 41 CFR 101-19.6 and 
section 504 of the Rehabilitation Act of 1973 (Pub. L. 93-112) as 
implemented by 7 CFR parts 15 and 15b.
    (4) Health Care Facilities. The proposed facility must meet the 
minimum standards for design and construction contained in the American 
Institute of Architects Press Publication No. ISBN 0-913962-96-1, 
``Guidelines for Construction and Equipment of Hospital and Medical 
Facilities,'' 1987 Edition. The facility must also meet the life/safety 
aspects of the 1985 edition of the National Fire Protection Association 
(NFPA) 101 Life Safety Code, or any subsequent code that may be 
designated by the Secretary of HHS. All publications referenced in this 
section are available in all FmHA or its successor agency under Public 
Law 103-354 State Offices. Under Sec. 1942.17(j)(8)(ii) of this 
subpart, a statement by the responsible regulatory agency that the 
facility meets the above standards will be required. Any exceptions must 
have prior National Office concurrence.
    (5) Energy conservation. Facility design should consider cost 
effective energy saving measures or devices.

[[Page 189]]

    (6) Lead base paints. Lead base paints shall not be used in 
facilities designed for human habitation. Owners must comply with the 
Lead Base Paints Poisoning and Prevention Act of 1971 (42 U.S.C. 4801) 
and the National Consumer Health Information and Health Promotion Act of 
1976 (Pub. L. 94-317) with reference to paint specifications used 
according to exhibit H of subpart A of part 1924 of this chapter.
    (7) Fire protection. Water facilities must have sufficient capacity 
to provide reasonable fire protection to the extent practicable.
    (8) Growth capacity. Facilities must have sufficient capacity to 
provide for reasonable growth to the extent practicable.
    (9) Water conservation. Owners are encouraged, when economically 
feasible, to incorporate water conservation practices into a facility's 
design. For existing water systems, evidence must be provided showing 
that the distribution system water losses do not exceed reasonable 
levels.
    (10) Water quality. All water facilities must meet the requirements 
of the Safe Drinking Water Act (Pub. L. 93-523) and provide water of a 
quality that meets the current Interim Primary Drinking Water 
Regulations (40 CFR part 141).
    (11) Combined sewers. New combined sanitary and storm water sewer 
facilities will not be financed by FmHA or its successor agency under 
Public Law 103-354. Extensions to existing combined systems can only be 
financed when separate systems are impractical.
    (12) Compliance. All facilities must meet the requirements of 
Federal, State, and local agencies having the appropriate jurisdiction.
    (13) Dam safety. Projects involving any artificial barrier which 
impounds or diverts water, or the rehabilitation or improvement of such 
a barrier, should comply with the provisions for dam safety as discussed 
in the Federal Guidelines for Dam Safety (Government Printing Office 
stock No. 041-001-00187-5) as prepared by the Federal Coordinating 
Council for Science, Engineering and Technology.
    (14) Pipe. All pipe used shall meet current American Society for 
Testing Materials (ASTM) or American Water Works Association (AWWA) 
standards.
    (15) Water system testing. For new water systems or extensions to 
existing water systems, leakage shall not exceed 10 gallons per inch of 
pipe diameter per mile of pipe per 24 hours when tested at 1\1/2\ times 
the working pressure or rated pressure of the pipe, whichever is 
greater.
    (16) Metering devices. Water facilities financed by FmHA or its 
successor agency under Public Law 103-354 will have metering devices for 
each connection. An exception to this requirement may be granted by the 
FmHA or its successor agency under Public Law 103-354 State Director 
when the owner demonstrates that installation of metering devices would 
be a significant economic detriment and that environmental consideration 
would not be adversely affected by not installing such devices.
    (17) Seismic safety. (i) All new building construction shall be 
designed and constructed in accordance with the seismic provisions of 
one of the following model building codes or the latest edition of that 
code providing an equivalent level of safety to that contained in latest 
edition of the National Earthquake Hazard Reduction Program's (NEHRP) 
Recommended Provisions for the Development of Seismic Regulations for 
New Building (NEHRP Provisions):
    (A) 1991 International Conference of Building Officials (ICBO) 
Uniform Building Code;
    (B) 1993 Building Officials and Code Administrators International, 
Inc. (BOCA) National Building Code; or
    (C) 1992 Amendments to the Southern Building Code Congress 
International (SBCCI) Standard Building Code.
    (ii) The date, signature, and seal of a registered architect or 
engineer and the identification and date of the model building code on 
the plans and specifications will be evidence of compliance with the 
seismic requirements of the appropriate building code.
    (e) Construction contracts. Contract documents must be sufficiently 
descriptive and legally binding in order to accomplish the work as 
economically and expeditiously as possible.

[[Page 190]]

    (1) Standard construction contract documents are available from FmHA 
or its successor agency under Public Law 103-354. When FmHA or its 
successor agency under Public Law 103-354's standard construction 
contract documents are used, it will normally not be necessary for the 
Office of the General Counsel (OGC) to perform a detailed legal review. 
If the construction contract documents utilized are not in the format of 
guide forms previously approved by FmHA or its successor agency under 
Public Law 103-354, OGC's review of the construction contract documents 
will be obtained prior to their use.
    (2) Contract review and approval. The owner's attorney will review 
the executed contract documents, including performance and payment 
bonds, and will certify that they are adequate, and that the persons 
executing these documents have been properly authorized to do so. The 
contract documents, bids bonds, and bid tabulation sheets will be 
forwarded to FmHA or its successor agency under Public Law 103-354 for 
approval prior to awarding. All contracts will contain a provision that 
they are not in full force and effect until they have been approved by 
FmHA or its successor agency under Public Law 103-354. The FmHA or its 
successor agency under Public Law 103-354 State Director or designee is 
responsible for approving construction contracts with the legal advice 
and guidance of the OGC when necessary.
    (3) Separate contracts. Arrangements which split responsibility of 
contractors (separate contracts for labor and material, extensive 
subcontracting and multiplicity of small contracts on the same job), 
should be avoided whenever it is practical to do so. Contracts may be 
awarded to suppliers or manufacturers for furnishing and installing 
certain items which have been designed by the manufacturer and delivered 
to the job site in a finished or semifinished state such as 
perfabricated buildings and lift stations. Contracts may also be awarded 
for material delivered to the job site and installed by a patented 
process or method.
    (f) Utility purchase contracts. Applicants proposing to purchase 
water or other utility service from private or public sources shall have 
written contracts for supply or service which are reviewed and approved 
by the FmHA or its successor agency under Public Law 103-354 State 
Director or designee. To the extent practical, FmHA or its successor 
agency under Public Law 103-354 review and approval of such contracts 
should take place prior to their execution by the owner. Form FmHA or 
its successor agency under Public Law 103-354 442-30, ``Water Purchase 
Contract,'' may be used when appropriate. If the FmHA or its successor 
agency under Public Law 103-354 loan will be repaid from system 
revenues, the contract will be pledged to FmHA or its successor agency 
under Public Law 103-354 as part of the security for the loan. Such 
contracts will:
    (1) Include a commitment by the supplier to furnish, at a specified 
point, an adequate quantity of water or other service and provide that, 
in case of shortages, all of the supplier's users will proportionately 
share shortages. If it is impossible to obtain a firm commitment for 
either an adequate quantity or sharing shortages proportionately, a 
contract may be executed and approved provided adequate evidence is 
furnished to enable FmHA or its successor agency under Public Law 103-
354 to make a determination that the supplier has adequate supply and/or 
treatment facilities to furnish its other users and the applicant for 
the foreseeable future; and
    (i) The supplier is subject to regulations of the Federal Energy 
Regulatory Commission or other Federal or State agency whose 
jurisdiction can be expected to prevent unwarranted curtailment of 
supply; or
    (ii) A suitable alternative supply could be arranged within the 
repayment ability of the borrower if it should become necessary; or
    (iii) Prior approval is obtained from the National Office. The 
following information should be submitted to the National Office:
    (A) Transmittal memorandum including:
    (1) Alternative supplies considered; and
    (2) Recommendations and comments; and
    (3) Any other necessary supporting information.

[[Page 191]]

    (B) Copies of the following:
    (1) Proposed letter of conditions; and
    (2) Form FmHA or its successor agency under Public Law 103-354 442-
7, ``Operating Budget''; and
    (3) Form FmHA or its successor agency under Public Law 103-354 442-
3, ``Balance Sheet''; and
    (4) Preliminary Engineering Report; and
    (5) Proposed Contract.
    (C) Owner and FmHA or its successor agency under Public Law 103-354 
engineer's comments and recommendations.
    (D) Documentation and statement from the supplier that it has an 
adequate supply and treatment facilities available to meet the needs of 
its users and the owner for the foreseeable future.
    (2) Set out the ownership and maintenance responsibilities of the 
respective parties including the master meter if a meter is installed at 
the point of delivery.
    (3) Specify the initial rates and provide some kind of escalator 
clause which will permit rates for the association to be raised or 
lowered proportionately as certain specified rates for the supplier's 
regular customers are raised or lowered. Provisions may be made for 
altering rates in accordance with the decisions of the appropriate State 
agency which may have regulatory authority.
    (4) Run for a period of time which is at least equal to the 
repayment period of the loan. State Directors may approve contracts for 
shorter periods of time if the supplier cannot legally contract for such 
period, or if the owner and supplier find it impossible or impractical 
to negotiate a contract for the maximum period permissible under State 
law, provided:
    (i) The supplier is subject to regulations of the Federal Energy 
Regulatory Commission or other Federal or State agency whose 
jurisdiction can be expected to prevent unwarranted curtailment of 
supply; or
    (ii) The contract contains adequate provisions for renewal; or
    (iii) A determination is made that in the event the contract is 
terminated, there are or will be other adequate sources available to the 
owner that can feasibly be developed or purchased.
    (5) Set out in detail the amount of connection or demand charges, if 
any, to be made by the supplier as a condition to making the service 
available to the owner. However, the payment of such charges from loan 
funds shall not be approved unless FmHA or its successor agency under 
Public Law 103-354 determines that it is more feasible and economical 
for the owner to pay such a connection charge than it is for the owner 
to provide the necessary supply by other means.
    (6) Provide for a pledge of the contract to FmHA or its successor 
agency under Public Law 103-354 as part of the security for the loan.
    (7) Not contain provisions for:
    (i) Construction of facilities which will be owned by the supplier. 
This does not preclude the use of money paid as a connection charge for 
construction to be done by the supplier.
    (ii) Options for the future sale or transfer. This does not preclude 
an agreement recognizing that the supplier and owner may at some future 
date agree to a sale of all or a portion of the facility.
    (g) Sewage treatment and bulk water sales contracts. Owners entering 
into agreements with private or public parties to treat sewage or supply 
bulk water shall have written contracts for such service and all such 
contracts shall be subject to FmHA or its successor agency under Public 
Law 103-354 concurrence. Paragraph (f) of this section should be used as 
a guide to prepare such contracts.
    (h) Performing construction. Owners are encouraged to accomplish 
construction through contracts with recognized contractors. Owners may 
accomplish construction by using their own personnel and equipment 
provided the owners possess the necessary skills, abilities and 
resources to perform the work and provided a licensed engineer or 
architect prepares design drawings and specifications and inspects 
construction and furnishes inspection reports as required by paragraph 
(o) of this section. For other than utility-type facilities, inspection 
services may be provided by individuals as approved by the FmHA or its 
successor agency

[[Page 192]]

under Public Law 103-354 State Director. In either case, the 
requirements of paragraph (j) of this section apply. Payments for 
construction will be handled under Sec. 1942.17(p)(5) of this part.
    (i) Owner's contractual responsibility. This subpart does not 
relieve the owner of any contractual responsibilities under its 
contract. The owner is responsible for the settlement of all 
contractural and administrative issues arising out of procurements 
entered into in support of a loan or grant. These include, but are not 
limited to: source evaluation, protests, disputes, and claims. Matters 
concerning violation of laws are to be referred to the local, State, or 
Federal authority as may have jurisdiction.
    (j) Owner's procurement regulations. Owner's procurement regulations 
must comply with the following standards:
    (1) Code of conduct. Owners shall maintain a written code or 
standards of conduct which shall govern the performance of their 
officers, employees or agents engaged in the award and administration of 
contracts supported by FmHA or its successor agency under Public Law 
103-354 funds. No employee, officer or agent of the owner shall 
participate in the selection, award, or administration of a contract 
supported by FmHA or its successor agency under Public Law 103-354 funds 
if a conflict of interest, real or apparent, would be involved. Examples 
of such conflicts would arise when: the employee, officer or agent; any 
member of their immediate family; their partner; or an organization 
which employs, or is about to employ, any of the above; has a financial 
or other interest in the firm selected for the award.
    (i) The owner's officers, employees or agents shall neither solicit 
nor accept gratuities, favors or anything of monetary value from 
contractors, potential contractors, or parties of subagreements.
    (ii) To the extent permitted by State or local law or regulations, 
the owner's standards of conduct shall provide for penalties, sanctions, 
or other disciplinary actions for violations of such standards by the 
owner's officers, employees, agents, or by contractors or their agents.
    (2) Maximum open and free competition. All procurement transactions, 
regardless of whether by sealed bids or by negotiation and without 
regard to dollar value, shall be conducted in a manner that provides 
maximum open and free competition. Procurement procedures shall not 
restrict or eliminate competition. Examples of what are considered to be 
restrictive of competition include, but are not limited to: Placing 
unreasonable requirements on firms in order for them to qualify to do 
business; noncompetitive practices between firms; organizational 
conflicts of interest; and unnecessary experience and bonding 
requirements. In specifying material(s), the owner and its consultant 
will consider all materials normally suitable for the project 
commensurate with sound engineering practices and project requirements. 
For a water or waste disposal facility, FmHA or its successor agency 
under Public Law 103-354 shall consider fully any recommendation made by 
the loan applicant or borrower concerning the technical design and 
choice of materials to be used for such a facility. If FmHA or its 
successor agency under Public Law 103-354 determines that a design or 
material, other than those that were recommended should be considered by 
including them in the procurement process as an acceptable design or 
material in the water or waste disposal facility, FmHA or its successor 
agency under Public Law 103-354 shall provide such applicant or borrower 
with a comprehensive justification for such a determination. The 
justification will be documented in writing.
    (3) Owner's review. Proposed procurement actions shall be reviewed 
by the owner's officials to avoid the purchase of unnecessary or 
duplicate items. Consideration should be given to consolidation or 
separation of procurement items to obtain a more economical purchase. 
Where appropriate, an analysis shall be made of lease versus purchase 
alternatives, and any other appropriate analysis to determine which 
approach would be the most economical. To foster greater economy and 
efficiency, owners are encouraged to enter into State and local 
intergovernmental

[[Page 193]]

agreements for procurement or use of common goods and services.
    (4) Solicitation of offers, whether by competitive sealed bids or 
competitive negotiation, shall:
    (i) Incorporate a clear and accurate description of the technical 
requirements for the material, product, or service to be procured. The 
description shall not, in competitive procurements, contain features 
which unduly restrict competition. The description may include a 
statement of the qualitative nature of the material, product or service 
to be procured, and when necessary shall set forth those minimum 
essential characteristics and standards to which it must conform if it 
is to satisfy its intended use. Detailed product specifications should 
be avoided if at all possible. When it is impractical or uneconomical to 
make a clear and accurate description of the technical requirements, a 
``brand name or equal'' description may be used to define the 
performance or other salient requirements of a procurement. The specific 
features of the named brands which must be met by offerors shall be 
clearly stated.
    (ii) Clearly specify all requirements which offerors must fulfill 
and all other factors to be used in evaluating bids or proposals.
    (5) Small, minority, and women's businesses and labor surplus area 
firms. (i) affirmative steps should be taken to assure that small and 
minority businesses are utilized when possible as sources of supplies, 
equipment, construction and services. Affirmative steps shall include 
the following:
    (A) Include qualified small and minority businesses on solicitation 
lists.
    (B) Assure that small and minority businesses are solicited whenever 
they are potential sources.
    (C) When economically feasible, divide total requirements into 
smaller tasks or quantities so as to permit maximum small and minority 
business participation.
    (D) Where the requirement permits, establish delivery schedules 
which will encourage participation by small and minority businesses.
    (E) Use the services and assistance of the Small Business 
Administration and the Office of Minority Business Enterprise of the 
Department of Commerce.
    (F) If any subcontracts are to be let, require the prime contractor 
to take the affirmative steps in paragraphs (j)(5)(i) (A) through (E) of 
this section.
    (ii) Owners shall take similar appropriate affirmative action in 
support of women's businesses.
    (iii) Owners are encouraged to procure goods and services from labor 
surplus areas.
    (iv) Owners shall submit a written statement or other evidence to 
FmHA or its successor agency under Public Law 103-354 of the steps taken 
to comply with paragraphs (j)(5)(i) (A) through (F), (j)(5)(ii), and 
(j)(5)(iii) of this section.
    (6) Contract pricing. Cost plus a percentage of cost method of 
contracting shall not be used.
    (7) Unacceptable bidders. The following will not be allowed to bid 
on, or negotiate for, a contract or subcontract related to the 
construction of the project:
    (i) An engineer or architect as an individual or firm who has 
prepared plans and specifications or who will be responsible for 
monitoring the construction;
    (ii) Any firm or corporation in which the owner's architect or 
engineer is an officer, employee, or holds or controls a substantial 
interest;
    (iii) The governing body's officers, employees, or agents;
    (iv) Any member of the immediate family or partners in paragraphs 
(j)(7)(i), (j)(7)(ii), or (j)(7)(iii) of this section; or
    (v) An organization which employs, or is about to employ, any person 
in paragraph (j)(7)(i), (j)(7)(ii), (j)(7)(iii) or (j)(7)(iv) of this 
section.
    (8) Contract award. Contracts shall be made only with responsible 
parties possessing the potential ability to perform successfully under 
the terms and conditions of a proposed procurement. Consideration shall 
include but not be limited to matters such as integrity, record of past 
performance, financial and technical resources, and accessibility to 
other necessary resources. Contracts shall not be made with parties who 
are suspended or debarred.

[[Page 194]]

    (k) Procurement methods. Procurement shall be made by one of the 
following methods: small purchase procedures; competitive sealed bids 
(formal advertising); competitive negotiation; or noncompetitive 
negotiation. Competitive sealed bids (formal advertising) is the 
preferred procurement method for construction contracts.
    (1) Small purchase procedures. Small purchase procedures are those 
relatively simple and informal procurement methods that are sound and 
appropriate for a procurement of services, supplies or other property, 
costing in the aggregate not more than $10,000. If small purchase 
procedures are used for a procurement, written price or rate quotations 
shall be obtained from an adequate number of qualified sources.
    (2) Competitive sealed bids. In competitive sealed bids (formal 
advertising), sealed bids are publicly solicited and a firm-fixed-price 
contract (lump sum or unit price) is awarded to the responsible bidder 
whose bid, conforming with all the material terms and conditions of the 
invitation for bids, is lowest, price and other factors considered. When 
using this method the following shall apply:
    (i) At a sufficient time prior to the date set for opening of bids, 
bids shall be solicited from an adequate number of qualified sources. In 
addition, the invitation shall be publicly advertised.
    (ii) The invitation for bids, including specifications and perinent 
attachments, shall clearly define the items or services needed in order 
for the bidders to properly respond to the invitation under paragraph 
(j)(4) of this section.
    (iii) All bids shall be opened publicly at the time and place stated 
in the invitation for bids.
    (iv) A firm-fixed-price contract award shall be made by written 
notice to that responsible bidder whose bid, conforming to the 
invitation for bids, is lowest. When specified in the bidding documents, 
factors such as discounts and transportation costs shall be considered 
in determining which bid is lowest.
    (v) Any or all bids may be rejected by the owner when it is in their 
best interest.
    (3) Competitive negotiation. In competitive negotiations, proposals 
are requested from a number of sources and the Request for Proposal is 
publicized. Negotiations are normally conducted with more than one of 
the sources submitting offers. Competitive negotiation may be used if 
conditions are not appropriate for the use of formal advertising and 
where discussions and bargaining with a view to reaching agreement on 
the technical quality, price, other terms of the proposed contract and 
specifications may be necessary. If competitive negotiation is used for 
a procurement, the following requirements shall apply:
    (i) Proposals shall be solicited from an adequate number of 
qualified sources to permit reasonable competition consistent with the 
nature and requirements of the procurement. The Request for Proposal 
shall be publicized and reasonable requests by other sources to compete 
shall be honored to the maximum extent practicable.
    (ii) The Request for Proposal shall identify all significant 
evaluation factors, including price or cost where required, and their 
relative importance.
    (iii) The owner shall provide mechanisms for technical evaluation of 
the proposals received, determination of responsible offerors for the 
purpose of written or oral discussions, and selection for contract 
award.
    (iv) Award may be made to the responsible offeror whose proposal 
will be most advantageous to the owner, price and other factors 
considered. Unsuccessful offerors should be promptly notified.
    (v) Owners may utilize competitive negotiation procedures for 
procurement of architectural/engineering and other professional 
services, whereby competitors' qualifications are evaluated and the most 
qualified competitor is selected, subject to negotiations of fair and 
reasonable compensation.
    (4) Noncompetitive negotiation. Noncompetitive negotiation is 
procurement through solicitation of a proposal from only one source, or 
after solicitation of a number of sources competition is determined 
inadequate. Noncompetitive negotiation may be used when the award of a 
contract is not feasible under small purchase, competitive sealed bids 
(formal advertising) or

[[Page 195]]

competitive negotiation procedures. Circumstances under which a contract 
may be awarded by noncompetitive negotiations are limited to the 
following:
    (i) The item is available only from a single source; or
    (ii) There exists a public exigency or emergency and the urgency for 
the requirement will not permit a delay incident to competitive 
solicitation; or
    (iii) After solicitation of a number of sources, competition is 
determined inadequate; or
    (iv) No acceptable bids have been received after formal advertising; 
or
    (v) The procurement of architectural/engineering and other 
professional services.
    (vi) The aggregate amount does not exceed $50,000.
    (5) Additional procurement methods. Additional innovative 
procurement methods may be used by the owner with prior written approval 
of the FmHA or its successor agency under Public Law 103-354 National 
Office.
    (l) Contracting methods. The services of the consulting engineer or 
architect and the general construction contractor shall normally be 
procured from unrelated sources in accordance with paragraph (j)(7) of 
this section. Procurement methods which combine or rearrange design, 
inspection or construction services (such as design/build or 
construction management) may be used with FmHA or its successor agency 
under Public Law 103-354 written approval. If the contract amount 
exceeds $100,000, National Office prior concurrence must be obtained 
under Sec. 1942.9(b) of this subpart. This method cannot be used when 
an FmHA or its successor agency under Public Law 103-354 grant is 
involved. The owner should request FmHA or its successor agency under 
Public Law 103-354 approval by providing at least the following 
information to FmHA or its successor agency under Public Law 103-354:
    (1) The owner's written request to use an unconventional contracting 
method with a description of the proposed method.
    (2) A proposed scope of work describing in clear, concise terms the 
technical requirements for the contract. It should include items such 
as:
    (i) A nontechnical statement summarizing the work to be performed by 
the contractor and the results expected.
    (ii) The sequence in which the work is to be performed and a 
proposed construction schedule.
    (3) A proposed firm-fixed-price contract for the entire project 
which provides that the contractor shall be responsible for:
    (i) Any extra cost which may result from errors or omissions in the 
services provided under the contract.
    (ii) Compliance with all Federal, State, and local requirements 
effective on the contract execution date.
    (4) Where noncompetitive negotiation is proposed, an evaluation of 
the contractor's performance on previous similar projects in which the 
contractor acted in a similar capacity.
    (5) A detailed listing and cost estimate of equipment and supplies 
not included in the construction contract but which are necessary to 
properly operate the facility.
    (6) Evidence that a qualified construction inspector who is 
independent of the contractor has or will be hired.
    (7) Preliminary plans and outline specifications. However, final 
plans and specifications must be completed and reviewed by FmHA or its 
successor agency under Public Law 103-354 prior to the start of 
construction.
    (8) The owner's attorney's opinion and comments regarding the legal 
adequacy of the proposed contract documents and evidence that the owner 
has the legal authority to enter into and fulfill the contract.
    (m) Contracts awarded prior to preapplications. Owners awarding 
construction or other procurement contracts prior to filing a pre-
application with FmHA or its successor agency under Public Law 103-354 
must comply with the following:
    (1) Evidence. Provide conclusive evidence that the contract was 
entered into without intent to circumvent the requirements of FmHA or 
its successor agency under Public Law 103-354 regulations. The evidence 
will consist of at least the following:
    (i) The lapse of a reasonable period of time between the date of 
contract award and the date of filing the preapplication which clearly 
indicates

[[Page 196]]

an irreconcilable failure of previous financial arrangements; or
    (ii) A written statement explaining initial plans for financing the 
project and reasons for failure to obtain the planned credit.
    (2) Modifications. Modify the outstanding contract to conform with 
the provisions of this subpart. Where this is not possible, 
modifications will be made to the extent practicable and, as a minimum, 
the contract must comply with all State and local laws and regulations 
as well as statutory requirements and executive orders related to the 
FmHA or its successor agency under Public Law 103-354 financing. When 
all construction is complete and it is impracticable to modify the 
contracts, the owner must provide the certification required by 
paragraph (m)(4) of this section.
    (3) Consultant's certification. Provide a certification by an 
engineer or architect that any construction performed complies fully 
with the plans and specifications.
    (4) Owner's certification. Provide a certification by the owner that 
the contractor has complied with all statutory and executive 
requirements related to FmHA or its successor agency under Public Law 
103-354 financing for construction already performed even though the 
requirements may not have been included in the contract documents.
    (n) Contract provisions. In addition to provisions defining a sound 
and complete contract, any recipient of FmHA or its successor agency 
under Public Law 103-354 funds shall include the following contract 
provisions or conditions in all contracts:
    (1) Remedies. Contracts other than small purchases shall contain 
provisions or conditions which will allow for administrative, 
contractual, or legal remedies in instances where contractors violate or 
breach contract terms, and provide for such sanctions and penalties as 
may be appropriate. A realistic liquidated damage provision should also 
be included.
    (2) Termination. All contracts exceeding $10,000, shall contain 
provisions for termination by the owner including the manner by which it 
will be affected and the basis for settlement. In addition, such 
contracts shall describe conditions under which the contract may be 
terminated for default as well as conditions when the contract may be 
terminated because of circumstances beyond the control of the 
contractor.
    (3) Surety. In all contracts for construction or facility 
improvements awarded exceeding $100,000, the owner shall require bonds, 
a bank letter of credit or cash deposit in escrow assuring performance 
and payment, each in the amount of 100 percent of the contract cost. The 
surety will normally be in the form of performance bonds and payment 
bonds; however, when other methods of surety may be necessary, bid 
documents must contain provisions for such alternative types of surety. 
The use of surety other than performance bonds and payment bonds 
requires concurrence by the National Office after submission of a 
justification by the State Director together with the proposed form of 
escrow agreement or letter of credit. For contracts of lesser amounts, 
the owner may require surety. When a surety is not provided, contractors 
will furnish evidence of payment in full for all materials, labor, and 
any other items procured under the contract. Form FmHA or its successor 
agency under Public Law 103-354 1924-10, ``Release by Claimants,'' and 
Form FmHA or its successor agency under Public Law 103-354 1924-9, 
``Certificate of Contractor's Release,'' may be obtained at the local 
FmHA or its successor agency under Public Law 103-354 office and used 
for this purpose. The United States, acting through the Farmers Home 
Administration or its successor agency under Public Law 103-354, will be 
named as co-obligee on all surety unless prohibited by State law. 
Companies providing performance bonds and payment bonds must hold a 
certificate of authority as an acceptable surety on Federal bonds as 
listed in Treasury Circular 570 as amended and be legally doing business 
in the State where the facility is located.
    (4) Equal Employment Opportunity. All contracts awarded in excess of 
$10,000 by owners shall contain a provision requiring compliance with 
Executive

[[Page 197]]

Order 11246, entitled, ``Equal Employment Opportunity,'' as amended by 
Executive Order 11375, and as supplemented by Department of Labor 
regulations 41 CFR part 60.
    (5) Anti-kickback. All contracts for construction shall include a 
provision for compliance with the Copeland ``Anti-Kickback'' Act (18 
U.S.C. 874). This Act provides that each contractor shall be prohibited 
from inducing, by any means, any person employed in the construction, 
completion, or repair of public work, to give up any part of the 
compensation to which they are otherwise entitled. The owner shall 
report all suspected or reported violations to FmHA or its successor 
agency under Public Law 103-354.
    (6) Records. All negotiated contracts (except those of $2,500 or 
less) awarded by owners shall include a provision to the effect that the 
owner, FmHA or its successor agency under Public Law 103-354, the 
Comptroller General of the United States, or any of their duly 
authorized representatives, shall have access to any books, documents, 
papers, and records of the contractor which are directly pertinent to a 
specific Federal loan program for the purpose of making audits, 
examinations, excerpts, and transcriptions. Owners shall require 
contractors to maintain all required records for three years after 
owners make final payments and all other pending matters are closed.
    (7) State Energy Conservation Plan. Contracts shall recognize 
mandatory standards and policies relating to energy efficiency which are 
contained in the State energy conservation plan issued in compliance 
with the Energy Policy and Conservation Act (Pub. L. 94-163).
    (8) Change orders. The construction contract shall require that all 
contract change orders be approved in writing by FmHA or its successor 
agency under Public Law 103-354.
    (9) FmHA or its successor agency under Public Law 103-354 
concurrence. All contracts must contain a provision that they shall not 
be effective unless and until the FmHA or its successor agency under 
Public Law 103-354 State Director or designee concurs in writing.
    (10) Retainage. All construction contracts shall contain adequate 
provisions for retainage. No payments will be made that would deplete 
the retainage nor place in escrow any funds that are required for 
retainage nor invest the retainage for the benefit of the contractor. 
The retainage shall not be less than an amount equal to 10 percent of an 
approved partial payment estimate until 50 percent of the work has been 
completed. If the job is proceeding satisfactory at 50 percent 
completion, further partial payments may be made in full, however, 
previously retained amounts shall not be paid until construction is 
substantially complete. Additional amounts may be retained if the job is 
not proceeding satisfactorily, but in no event shall the total retainage 
be more than 10 percent of the value of the work completed.
    (11) Other compliance requirements. Contracts in excess of $100,000 
shall contain a provision which requires compliance with all applicable 
standards, orders, or requirements issued under section 306 of the Clean 
Air Act (42 U.S.C. 1857(h)), section 508 of the Clean Water Act (33 
U.S.C. 1368), Executive Order 11738, and Environmental Protection Agency 
(EPA) regulations 40 CFR part 15, which prohibit the use under non-
exempt Federal contracts, grants or loans of facilities included on the 
EPA List of Violating Facilities. The provision shall require reporting 
of violations to FmHA or its successor agency under Public Law 103-354 
and to the U.S. Environmental Protection Agency, Assistant Administrator 
for Enforcement. Solicitations and contract provisions shall include the 
requirements of 40 CFR part 15.4(c) as set forth in guide 18 of this 
subpart which is available in all FmHA or its successor agency under 
Public Law 103-354 offices.
    (o) Contract administration. Owners shall be responsible for 
maintaining a contract administration system to monitor the contractors' 
performance and compliance with the terms, conditions, and 
specifications of the contracts.
    (1) Preconstruction conference. Prior to beginning construction, the 
owner will schedule a preconstruction conference where FmHA or its 
successor agency under Public Law 103-354 will review the planned 
development with the

[[Page 198]]

owner, its architect or engineer, resident inspector, attorney, 
contractor(s), and other interested parties. The conference will 
thoroughly cover applicable items included in Form FmHA or its successor 
agency under Public Law 103-354 1924-16, ``Record of Preconstruction 
Conference,'' and the discussion and agreements will be documented. Form 
FmHA or its successor agency under Public Law 103-354 1924-16 may be 
used for this purpose.
    (2) Monitoring reports. Each owner will be required to monitor and 
provide reports to FmHA or its successor agency under Public Law 103-354 
on actual performance during construction for each project financed, or 
to be financed, in whole or in part with FmHA or its successor agency 
under Public Law 103-354 funds to include:
    (i) A comparison of actual accomplishments with the construction 
schedule established for the period. The partial payment estimate may be 
used for this purpose.
    (ii) A narrative statement giving full explanation of the following:
    (A) Reasons why established goals were not met.
    (B) Analysis and explanation of cost overruns or high unit costs and 
how payment is to be made for the same.
    (iii) If events occur between reports which have a significant 
impact upon the project, the owner will notify FmHA or its successor 
agency under Public Law 103-354 as soon as any of the following 
conditions are met:
    (A) Problems, delays, or adverse conditions which will materially 
affect the ability to attain program objectives or prevent the meeting 
of project work units by established time periods. This disclosure shall 
be accompanied by a statement of the action taken, or contemplated, and 
any Federal assistance needed to resolve the situation.
    (B) Favorable developments or events which enable meeting time 
schedules and goals sooner than anticipated or producing more work units 
than originally projected or which will result in cost underruns or 
lower unit costs than originally planned and which may result in less 
FmHA or its successor agency under Public Law 103-354 assistance.
    (3) Inspection. Full-time resident inspection is required for all 
construction unless a written exception is made by FmHA or its successor 
agency under Public Law 103-354 upon written request of the owner. 
Unless otherwise agreed, the resident inspector will be provided by the 
consulting architect/engineer. Prior to the preconstruction conference, 
the architect/engineer will submit a resume of qualifications of the 
resident inspector to the owner and to FmHA or its successor agency 
under Public Law 103-354 for acceptance in writing. If the owner 
provides the resident inspector, it must submit a resume of the 
inspector's qualifications to the project architect/engineer and FmHA or 
its successor agency under Public Law 103-354 for acceptance in writing 
prior to the preconstruction conference. The resident inspector will 
work under the general supervision of the project architect/engineer. A 
guide format for preparing daily inspection reports (Guide 11 of this 
subpart) and Form FmHA or its successor agency under Public Law 103-354 
1924-18, ``Partial Payment Estimate,'' are available on request from 
FmHA or its successor agency under Public Law 103-354.
    (4) Inspector's daily diary. The resident inspector will maintain a 
record of the daily construction progress in the form of a daily diary 
and daily inspection reports as follows:
    (i) A complete set of all daily construction records will be 
maintained and the original set furnished to the owner upon completion 
of construction.
    (ii) All entries shall be legible and shall be made in ink.
    (iii) Daily entries shall include but not be limited to the date, 
weather conditions, number and classification of personnel working on 
the site, equipment being used to perform the work, persons visiting the 
site, accounts of substantive discussions, instructions given to the 
contractors, directions received, all significant or unusual happenings 
involving the work, any delays, and daily work accomplished.
    (iv) The daily entries shall be made available to FmHA or its 
successor agency under Public Law 103-354 personnel and will be reviewed 
during project inspections.

[[Page 199]]

    (5) Prefinal inspections. A prefinal inspection will be made by the 
owner, resident inspector, project architect or engineer, 
representatives of other agencies involved, the District Director and a 
FmHA or its successor agency under Public Law 103-354 State Office staff 
representative, preferably the State Staff architect or engineer. 
Prefinal inspections may be made without FmHA or its successor agency 
under Public Law 103-354 State Office staff participation if the State 
Director or a designee determines that the facility does not utilize 
complicated construction techniques, materials or equipment for 
facilities such as small fire stations, storage buildings or minor 
utility extensions, and that an experienced District Office staff 
representative will be present. The inspection results will be recorded 
on Form FmHA or its successor agency under Public Law 103-354 1924-12, 
``Inspection Report,'' and a copy provided to all appropriate parties.
    (6) Final inspection. A final inspection will be made by FmHA or its 
successor agency under Public Law 103-354 before final payment is made.
    (7) Change is development plans. (i) Changes in development plans 
may be approved by FmHA or its successor agency under Public Law 103-354 
when requested by owners, provided:
    (A) Funds are available to cover any additional costs; and
    (B) The change is for an authorized loan purpose; and
    (C) It will not adversely affect the soundness of the facility 
operation or FmHA or its successor agency under Public Law 103-354's 
security; and
    (D) The change is within the scope of the contract.
    (ii) Changes will be recorded on Form FmHA or its successor agency 
under Public Law 103-354 1924-7, ``Contract Change Order,'' or, other 
similar forms may be used with the prior approval of the State Director 
or designee. Regardless of the form, change orders must be approved by 
the FmHA or its successor agency under Public Law 103-354 State Director 
or a designated representative.
    (iii) Changes should be accomplished only after FmHA or its 
successor agency under Public Law 103-354 approval on all changes which 
affect the work and shall be authorized only by means of contract change 
order. The change order will include items such as:
    (A) Any changes in labor and material and their respective cost.
    (B) Changes in facility design.
    (C) Any decrease or increase in quantities based on final 
measurements that are different from those shown in the bidding 
schedule.
    (D) Any increase or decrease in the time to complete the project.
    (iv) All changes shall be recorded on chronologically numbered 
contract change orders as they occur. Change orders will not be included 
in payment estimates until approved by all parties.

[50 FR 7296, Feb. 22, 1985, as amended at 52 FR 8035, Mar. 13, 1987; 53 
FR 6791, Mar. 3, 1988; 54 FR 14334, Apr. 11, 1989; 54 FR 18883, May 3, 
1989; 61 FR 65156, Dec. 11, 1996]



Sec. 1942.19  Information pertaining to preparation of notes or bonds 
and bond transcript documents for public body applicants.

    (a) General. This section includes information for use by public 
body applicants in the preparation and issuance of evidence of debt 
(bonds, notes, or debt instruments, herein referred to as bonds). This 
section is made available to applicants as appropriate for application 
processing and loan docket preparation.
    (b) Policies related to use of bond counsel. Preparation of the 
bonds and the bond transcript documents will be the responsibility of 
the applicant. Public body applicants will obtain the services and 
opinion of recognized bond counsel with respect to the validity of a 
bond issue, except as provided in (b) (1) through (3) below. The 
applicant normally will be represented by a local attorney who will 
obtain the assistance of a recognized bond counsel firm which has 
experience in municipal financing with such investors as investment 
dealers, banks, and insurance companies.
    (1) Issues of $250,000 or less. At the option of the applicant for 
issues of $250,000 or less, bond counsel may be used for the issuance of 
a final opinion only and not for the preparation of the bond transcript 
and other documents

[[Page 200]]

when the applicant, FmHA or its successor agency under Public Law 103-
354, and bond counsel have agreed in advance as to the method of 
preparation of the bond transcript documents. Under such circumstances 
the applicant will be responsible for the preparation of the bond 
transcript documents.
    (2) Issues of $50,000 or less. At the option of the applicant and 
with the prior approval of the FmHA or its successor agency under Public 
Law 103-354 State Director, the applicant need not use bond counsel if:
    (i) The amount of the issue does not exceed $50,000 and the 
applicant recognizes and accepts the fact that processing the 
application may require additional legal and administrative time.
    (ii) There is a significant cost saving to the applicant 
particularly with reference to total legal fees after determining what 
bond counsel would charge as compared with what the local attorney will 
charge without bond counsel.
    (iii) The local attorney is able and experienced in handling this 
type of legal work.
    (iv) The applicant understands that, if it is required by FmHA or 
its successor agency under Public Law 103-354 to refinance its loan 
pursuant to the statutory refinancing requirements, it will probably 
have to obtain at its expense a bond counsel's opinion at that time.
    (v) All bonds will be prepared in accordance with this regulation 
and will conform as nearly as possible to the preferred methods of 
preparation stated in paragraph (e) of this section but still be 
consistent with State law.
    (vi) Many matters necessary to comply with FmHA or its successor 
agency under Public Law 103-354 requirements such as land rights, 
easements, and organizational documents will be handled by the 
applicant's local attorney. Specific closing instructions will be issued 
by the Office of the General Counsel of the U.S. Department of 
Agriculture for the guidance of FmHA or its successor agency under 
Public Law 103-354.
    (3) For loans of less than $500,000. The applicant shall not be 
required to use bond counsel in a straight mortgage-note situation where 
competitive bidding is not required for the sale of the debt instrument, 
unless a complicated financial situation exists with the applicant. In 
addition, if there is a known backlog in a particular OGC regional 
office the applicant will be advised of such backlog and it will be 
suggested to the applicant that the appointment of bond counsel may be 
more expeditious. However, it will be the decision of the applicant 
whether or not to appoint bond counsel. The applicant must comply with 
(b)(2) (iii) through (vi) of this section.
    (c) Bond transcript documents. Any questions with respect to FmHA or 
its successor agency under Public Law 103-354 requirements should be 
discusesd with the FmHA or its successor agency under Public Law 103-354 
representatives. The bond counsel (or local counsel where no bond 
counsel is involved) is required to furnish at least two complete sets 
of the following to the applicant, who will furnish one complete set to 
FmHA or its successor agency under Public Law 103-354:
    (1) Copies of all organizational documents.
    (2) Copies of general incumbency certificate.
    (3) Certified copies of minutes or excerpts therefrom of all 
meetings of the applicant's governing body at which action was taken in 
connection with the authorization and issuance of the bonds.
    (4) Certified copies of documents evidencing that the applicant has 
complied fully with all statutory requirements incident to calling and 
holding of a favorable bond election, if such an election is necessary 
in connection with bond issuance.
    (5) Certified copies of the resolution or ordinances or other 
documents, such as the bond authorizing resolutions or ordinance and any 
resolution establishing rates and regulating the use of the improvement, 
if such documents are not included in the minutes furnished.
    (6) Copies of official Notice of Sale and affidavit of publication 
of Notice of Sale where a public sale is required by State statute.
    (7) Specimen bond, with any attached coupons.

[[Page 201]]

    (8) Attorney's no-litigation certificate.
    (9) Certified copies of resolutions or other documents pertaining to 
the bond award.
    (10) Any additional or supporting documents required by bond 
counsel.
    (11) For loans involving multiple advances of FmHA or its successor 
agency under Public Law 103-354 loan funds a preliminary approving 
opinion of bond counsel (or local counsel if no bond counsel is 
involved) if a final unqualified opinion cannot be obtained until all 
funds are advanced. The preliminary opinion for the entire issue shall 
be delivered on or before the first advance of loan funds and state that 
the applicant has the legal authority to issue the bonds, construct, 
operate and maintain the facility, and repay the loan subject only to 
changes during the advance of funds such as litigation resulting from 
the failure to advance loan funds, and receipt of closing certrificates.
    (12) Preliminary approving opinion, if any, and final unqualified 
approving opinion of recognized bond counsel (or local counsel if no 
bond counsel is involved) including opinion regarding interest on bonds 
being exempt from Federal and any State income taxes. On approval of the 
Administrator, a final opinion may be qualified to the extent that 
litigation is pending relating to Indian claims that may affect title to 
land or validity of the obligation. It is permissible for such opinions 
to contain language referring to the last sentence of section 306(a)(1) 
or to section 309A(h) of the Consolidated Farm and Rural Development Act 
[7 U.S.C. 1926(a)(1) or 1929a(h)], and providing that if the bonds 
evidencing the indebtedness in question are required by the Federal 
Government and sold on an insured basis from the Agriculture Credit 
Insurance Fund, or the Rural Development Insurance Fund, the interest on 
such bonds will be included in gross income for the purpose of the 
Federal income tax statutes.
    (d) Interim financing from commercial sources during construction 
period for loans of $50,000 or more. In all cases where it is possible 
for funds to be borrowed at current market interest rates on an interim 
basis from commercial sources, such interim financing will be obtained 
so as to preclude the necessity for multiple advances of FmHA or its 
successor agency under Public Law 103-354 funds.
    (e) Permanent instruments for FmHA or its successor agency under 
Public Law 103-354 loans to repay interim commercial financing. FmHA or 
its successor agency under Public Law 103-354 loans will be evidenced by 
the following types of instruments chosen in accordance with the 
following order of preference:
    (1) First preference--Form FmHA or its successor agency under Public 
Law 103-354 440-22, ``Promissory Note (Association or Organization)''. 
If legally permissible use Form FmHA or its successor agency under 
Public Law 103-354 440-22 for insured loans.
    (2) Second preference--single instruments with amortized 
installments. If Form FmHA or its successor agency under Public Law 103-
354 440.22 is not legally permissible, use a single instrument providing 
for amortized installments. Show the full amount of the loan on the face 
of the document and provide for entering the date and amount of each 
FmHA or its successor agency under Public Law 103-354 advance on the 
reverse thereof or on an attachment to the instrument. Form FmHA or its 
successor agency under Public Law 103-354 440-22 should be followed to 
the extent possible. When principal payment is deferred, no attempt 
should be made to compute in dollar terms the amount of interest due on 
these installment dates. Rather the instrument should provide that 
``interest only'' is due on these dates. The appropriate amortized 
installment computed as follows will be shown due on the installment 
date thereafter.
    (i) Annual payments--Subtract the due date of the last annual 
interest only installment from the due date of the final installment to 
determine the number of annual payments applicable. When there are no 
interest only installments, the number of annual payments will equal the 
number of years over which the loan is amortized. Then multiply the 
amount of the note by the applicable amortization factor shown in FmHA 
or its successor agency under

[[Page 202]]

Public Law 103-354 Amortization Tables and round to the next higher 
dollar. Example of Computation of Annual Payment:

Date of Loan Closing: 7-5-1976
Amount of Loan: $100,000.00
Interest Rate: 5%
Amortization Period: 40 years
Interest Only Installments: 7-5-1977 and 7-5-1978
First Regular Installment: 7-5-1979
Final Installment: 7-5-2016
Computation:
2016 - 1978 = 38 annual payments
$100,000.00 x .05929 = $5,929.00 annual payment due

    (ii) Semiannual payments--Multiply by two the number of years 
between the due date of the last annual interest only installment and 
the due date of the final installment to determine the correct number of 
semiannual periods applicable. When there are no interest only 
installments, multiply by two the number of years over which the loan is 
amortized. Then multiply the amount of the note by the applicable 
amortization factor shown in FmHA or its successor agency under Public 
Law 103-354 Amortization Tables and round to the next higher dollar. 
Example of Computation of Semiannual Payment:

Date of Loan Closing: 7-5-1976
Amount of Loan: $100,000.00
Interest Rate: 5%
Amortization Period: 40 years
Interest Only Installments: 7-5-1977 and 7-5-1978
First Regular Installment: 7-5-1979
Final Installment: 7-5-2016
Computation:
2016 - 1978 = 38 x 2 = 76 semiannual periods
$100,000.00 x .02952 = $2,952.00 semiannual payment due

    (iii) Monthly payments--Multiply by twelve the number of years 
between the due date of the last annual interest only installment and 
the final installment to determine the number of monthly payments 
applicable. When there are no interest only installments, multiply by 
twelve the number of years over which the loan is amortized. Then 
multiply the amount of the note by the applicable amortization factor 
shown in FmHA or its successor agency under Public Law 103-354 
Amortization Tables and round to the next higher dollar. Example of 
Computation of Monthly Payment:

Date of Loan Closing: 7-5-1976
Amount of Loan: $100,000.00
Interest Rate: 5%
Amortization Period: 40 years
Interest Only Installments: 7-5-1977 and 7-5-1978
First Regular Installment: 7-5-1979
Final Installment: 7-5-2016
Computation:
2016 - 1978 = 38 x 12 = 456 monthly payments
$100,000.00 x .00491 = $491.00 monthly payment due

    (3) Third preference--single instrument with installments of 
principal plus interest. If a single instrument with amortized 
installments is not legally permissible, use a single instrument 
providing for installments of principal plus interest accrued on the 
unmatured principal balance. The principal should be in an amount best 
adapted to making principal retirement and interest payments which 
closely approximate equal installments of combined interest and 
principal as required by the first two preferences.
    (i) The repayment terms concerning interest only installments 
described in paragraph (e)(2) of this section, ``Second perference'' 
applies.
    (ii) The instrument shall contain in substance the following 
provisions:
    (A) A statement of principal maturities and due dates.
    (B) Payments made on indebtedness evidenced by this instrument shall 
be applied to the interest due through the next installment due date and 
the balance to principal in accordance with the terms of the bond. 
Payments on delinquent accounts will be applied in the following 
sequence:
    (1) Billed delinquent interest,
    (2) Past due interest installments,
    (3) Past due principal installments,
    (4) Interest installment due, and
    (5) Principal installment due.

Extra payments and payments made from security depleting sources shall 
be applied to the principal last to come due or as specified in the bond 
instrument.
    (4) Fourth preference--serial bonds with installments of principal 
plus interest. If instruments described under the first, second, and 
third preferences are not legally permissible, use serial bonds

[[Page 203]]

with a bond or bonds delivered in the amount of each advance. Bonds will 
be delivered in the order of their numbers. Such bonds will conform with 
the minimum requirements of paragraph (h) of this section. Rules for 
application of payments on serial bonds will be the same as those for 
principal installment single bonds as set out in the preceding paragraph 
(e)(3) of this section.
    (f) Multiple advances of FmHA or its successor agency under Public 
Law 103-354 funds using permanent instruments. Where interim financing 
from commercial sources is not available, FmHA or its successor agency 
under Public Law 103-354 loan proceeds will be disbursed on an ``as 
needed by borrower'' basis in amounts not to exceed the amount needed 
during 30-day periods.
    (g) Multiple advances of FmHA or its successor agency under Public 
Law 103-354 funds using temporary debt instrument. When none of the 
instruments described in paragraph (e) of this section are legally 
permissible or practical, a bond anticipation note or similar temporary 
debt instrument may be used. The debt instrument will provide for 
multiple advance of FmHA or its successor agency under Public Law 103-
354 loan funds and will be for the full amount of the FmHA or its 
successor agency under Public Law 103-354 loan. The instrument will be 
prepared by bond counsel (or local counsel if bond counsel is not 
involved) and approved by the State Director and OGC. At the same time 
FmHA or its successor agency under Public Law 103-354 delivers the last 
advance, the borrower will deliver the permanent bond instrument and the 
canceled temporary instrument will be returned to the borrower. The 
approved debt instrument will show at least the following:
    (1) The date from which each advance will bear interest.
    (2) The interest rate.
    (3) A payment schedule providing for interest on outstanding 
principal at least annually.
    (4) A maturity date which shall be no earlier than the anticipated 
issuance date of the permanent instrument(s).
    (h) Minimum bond specifications. The provisions of this paragraph 
are minimum specifications only, and must be followed to the extent 
legally permissible.
    (1) Type and denominations. Bond resolutions or ordinances will 
provide that the instrument(s) be either a bond representing the total 
amount of the indebtedness or serial bonds in denominations customarily 
accepted in municipal financing (ordinarily in multiples of not less 
than $1000). Single bonds may provide for repayment of principal plus 
interest or amortized installments; amortized installments are 
preferable from the standpoint of FmHA or its successor agency under 
Public Law 103-354. Coupon bonds will not be used unless required by 
State statute.
    (i) To compute the value of each coupon when the bond denomination 
is consistent:
    (A) Multiply the amount of the loan or advance by the interest rate 
and divide the product by 365 days.
    (B) Multiply the daily accrual factor determined in (A) by the 
number of days from the date of advance or last installment date to the 
next installment date.
    (C) Divide the interest computed in (B) by the number of bonds 
securing the advance; this is the individual coupon amount.
    (ii) to compute the value of each coupon when the bond denomination 
varies:
    (A) Multiply the denomination of the bond by the interest rate and 
divide the product by 365 days.
    (B) Multiply the daily accrual factor determined in (A) by the 
number of days from the date of advance or last installment date to the 
next installment due date; this is the individual coupon amount.
    (2) Bond registration. Bonds will contain provisions permitting 
registration as to both principal and interest. Bonds purchased by FmHA 
or its successor agency under Public Law 103-354 will be registered in 
the name of ``United States of America, Farmers Home Administration or 
its successor agency under Public Law 103-354,'' and will remain so 
registered at all times while the bonds are held or insured by the 
United States. The address of FmHA or its successor agency under Public 
Law 103-354 for registration purposes will be

[[Page 204]]

that of the appropriate FmHA or its successor agency under Public Law 
103-354 State Office.
    (3) Size and quality. Size of bonds and coupons should conform to 
standard practice. Paper must be of sufficient quality to prevent 
deterioration through ordinary handling over the life of the loan.
    (4) Date of bond. Bonds will preferably be dated as of the day of 
delivery, however, may be dated another date at the option of the 
borrower and subject to approval by FmHA or its successor agency under 
Public Law 103-354. If the date of delivery is other than the date of 
the bond, the date of delivery will be stated in the bond. In all cases, 
interest will accrue from the date of delivery of the funds.
    (5) Payment date. Loan payments will be scheduled to coincide with 
income availability and be in accordance with State law. If consistent 
with the foregoing, monthly payments will be required and will be 
enumerated in the bond, other evidence of indebtedness, or other 
supplemental agreement. However, if State law only permits principal 
plus interest (P&I) type bonds, annual or semiannual P&I bonds will be 
used. Insofar as practical monthly payments will be scheduled one full 
month following the date of loan closing; or semiannual or annual 
payments will be scheduled six or twelve full months, respectively, 
following the date of loan closing or any deferment period. Due dates 
falling on the 29th, 30th or 31st day of the month will be avoided.
    (6) [Reserved]
    (7) Redemptions. Bonds should contain customary redemption 
provisions, subject, however, to unlimited right of redemption without 
premium of any bonds held by FmHA or its successor agency under Public 
Law 103-354 except to the extent limited by the provisions under the 
``Third Preference'' and ``Fourth Preference'' in paragraph (e) of this 
section.
    (8) Additional revenue bonds. Parity bonds may be issued to complete 
the project. Otherwise, parity bonds may not be issued unless the net 
revenues (that is, unless otherwise defined by the State statute, gross 
revenues less essential operation and maintenance expense) for the 
fiscal year preceding the year in which such parity bonds are to be 
issued, were 120 percent of the average annual debt service requirements 
on all bonds then outstanding and those to be issued; provided, that 
this limitation may be waived or modified by the written consent of 
bondholders representing 75 percent of the then outstanding principal 
indebtedness. Junior and subordinate bonds may be issued in accordance 
with the loan agreement.
    (9) Scheduling of FmHA or its successor agency under Public Law 103-
354 payments when joint financing is involved. In all cases in which 
FmHA or its successor agency under Public Law 103-354 is participating 
with another lender in the joint financing of the project to supply 
funds required by one applicant, the FmHA or its successor agency under 
Public Law 103-354 payments of principal and interest should approximate 
amortized installments.
    (10) Precautions. The following types of provisions in debt 
instruments should be avoided.
    (i) Provisions for the holder to manually post each payment to the 
instrument.
    (ii) Provisions for returning the permanent or temporary debt 
instrument to the borrower in order that it, rather than FmHA or its 
successor agency under Public Law 103-354, may post the date and amount 
of each advance or repayment on the instrument.
    (iii) Defeasance provisions in loan or bond resolutions. When a bond 
issue is defeased, a new issue is sold which supersedes the contractual 
provisions of the prior issue, including the refinancing requirement and 
any lien on revenues. Since defeasance in effect precludes FmHA or its 
successor agency under Public Law 103-354 from requiring graduation 
before the final maturity date, it represents a violation of the 
statutory refinancing requirement, therefore it is disallowed.
    (iv) Provisions that amend convenants contained in Forms FmHA 1942-
47, ``Loan Resolution (Public Bodies),'' or FmHA 1942-9, ``Loan 
Resolution Security Agreement.''
    (11) Multiple Loan Instruments. The following will be adhered to 
when preparing debt instruments:

[[Page 205]]

    (i) When more than one loan type is used in financing a project, 
each type of loan will be evidenced by a separate debt instrument or 
series of debt instruments.
    (ii) Loan funds obligated in different fiscal years and those 
obligated with different interest rates or terms in the same fiscal year 
will be evidenced by separate debt instruments.
    (iii) Loan funds obligated for the same loan type in the same fiscal 
year at the same interest rate and term may be combined in the same debt 
instrument; provided the borrower has been notified on Form FmHA or its 
successor agency under Public Law 103-354 1940-1, ``Request for 
Obligation of Funds'', of the action.
    (i) Bidding by FmHA or its successor agency under Public Law 103-
354. Bonds offered for public sale shall be offered in accordance with 
State law, in such a manner to encourage public bidding. FmHA or its 
successor agency under Public Law 103-354 will not submit a bid at the 
advertised sale unless required by State law, nor will reference to FmHA 
or its successor agency under Public Law 103-354's rates and terms be 
included. If no acceptable bid is received, FmHA or its successor agency 
under Public Law 103-354 will negotiate the purchase of the bonds.

[50 FR 7296, Feb. 22, 1985, as amended at 53 FR 6791, Mar. 3, 1988; 54 
FR 18883, May 3, 1989; 56 FR 29168, June 26, 1991; 68 FR 61331, Oct. 28, 
2003]



Sec. 1942.20  Community Facility Guides.

    (a) The following documents are attached and made part of this 
subpart and may be used by FmHA or its successor agency under Public Law 
103-354 officials in administering this program.
    (1) Guide 1 and 1a--Guide Letter for Use in Informing Private Lender 
of FmHA or its successor agency under Public Law 103-354's Commitment.
    (2) Guide 2--Water Users Agreement.
    (3) Guide 3--Service Declination Statement.
    (4) Guide 4--Bylaws.
    (5) Guide 5--Financial Feasibility Report.
    (6) Guide 6--Preliminary Architectural Feasibility Report.
    (7) Guide 7--Preliminary Engineering Report Water Facility.
    (8) Guide 8--Preliminary Engineering Report Sewerage Systems.
    (9) Guide 9--Preliminary Engineering Report Solid Waste Disposal 
Systems.
    (10) Guide 10--Preliminary Engineering Report Storm Waste-Water 
Disposal.
    (11) Guide 11--Daily Inspection Report.
    (12) Guide 12--Memorandum of Understanding Between the Economic 
Development Administration--Department of Commerce and the Farmers Home 
Administration or its successor agency under Public Law 103-354--
Department of Agriculture Pertaining to EDA Public Works Projects 
Assisted by an FmHA or its successor agency under Public Law 103-354 
Loan.
    (13) Guide 13--Memorandum of Understanding Between the Economic 
Development Administration--Department of Commerce and the Farmers Home 
Administration or its successor agency under Public Law 103-354--
Department of Agriculture Regarding Supplementary Grant Assistance for 
the Construction of Public Works and Development Facilities.
    (14) Guide 14--Legal Services Agreement.
    (15) Guide 15--Community Facility Borrower's Application.
    (16) Guide 16--Community Facility Loan Docket.
    (17) Guide 17--Construction Contract Documents--Short Form.
    (18) Guide 18--FmHA or its successor agency under Public Law 103-354 
Supplemental General Conditions.
    (19) Guide 19--Construction Contract Documents.
    (20) Guide 20--Agreement for Engineering Services (FmHA or its 
successor agency under Public Law 103-354/EPA Jointly Funded Projects).
    (21) Guide 21--Review of Audit Reports.
    (22) Guide 22--Delinquent Accounts Positive Action Plan.
    (23) Guide 23--Agreement for Joint Use of Electric System Poles.
    (24) Guide 24--Minimum Suggested Contents of Management Agreements.
    (25) Guide 25--Joint Policy Statement Between EPA and FmHA or its 
successor agency under Public Law 103-354.

[[Page 206]]

    (26) Guide 26--Community Programs Project Selection Criteria.
    (27) Exhibit A--Circular No. A-128.
    (28) Exhibit B--Department of Agriculture Regional Inspector General 
(OIG).
    (b) These guides and exhibits are for use by FmHA or its successor 
agency under Public Law 103-354 officials, applicants and applicant's 
officials and/or agents on certain matters related to the planning, 
development, and operation of essential community facilities which 
involve the use of loans and/or grants from FmHA or its successor agency 
under Public Law 103-354. This includes activities related to applying 
for and obtaining such financial assistance. These guides and exhibits 
are not published in the Federal Register, however, they are available 
in any FmHA or its successor agency under Public Law 103-354 office.

[50 FR 7296, Feb. 22, 1985, as amended at 53 FR 6787, Mar. 3, 1988]



Sec. 1942.21  Statewide nonmetropolitan median household income.

    Statewide nonmetropolitan median household income means the median 
household income of the State's nonmetropolitan counties and portions of 
metropolitan counties outside of cities, towns or places, of 50,000 or 
more population.

[69 FR 65519, Nov. 15, 2004]



Sec. Sec. 1942.22-1942.49  [Reserved]



Sec. 1942.50  OMB control number.

    The reporting and recordkeeping requirements contained in this 
regulation have been approved by the Office of Management and Budget 
(OMB) and have been assigned OMB control number 0575-0015. Public 
reporting burden for this collection of information is estimated to vary 
from five minutes to 15 hours per response, with an average of 2.7 hours 
per response, including time for reviewing instructions, searching 
existing data sources, gathering and maintaining the data needed, and 
completing and reviewing the collection of information. Send comments 
regarding this burden estimate or any other aspect of this collection of 
information, including suggestions for reducing this burden to the 
Department of Agriculture, Clearance Officer, OIRM, Ag Box 7630, 
Washington, DC 20250; and to the Office of Management and Budget, 
Paperwork Reduction Project (OMB 0575-0015), Washington, DC 
20503.

[60 FR 11019, Mar. 1, 1995]

Subpart B [Reserved]



 Subpart C_Fire and Rescue and Other Small Community Facilities Projects

    Source: 52 FR 43726, Nov. 16, 1987, unless otherwise noted.



Sec. 1942.101  General.

    This subpart provides the policies and procedures for making and 
processing insured Community Facilities (CF) loans for facilities that 
will primarily provide fire or rescue services and other small essential 
community facility projects and applies to fire and rescue and other 
Community Facilities loans for projects costing $300,000 and under. Any 
processing or servicing activity conducted pursuant to this subpart 
involving authorized assistance to Rural Development employees, members 
of their families, known close relatives, or business or close personal 
associates, is subject to the provisions of subpart D of part 1900 of 
this chapter. Applicants for this assistance are required to identify 
any known relationship or association with a Rural Development employee. 
Community Facilities loans for other types of facilities, and those 
costing in excess of $300,000, are defined in subpart A of this part.

[68 FR 65830, Nov. 24, 2003]



Sec. 1942.102  Nondiscrimination.

    (a) Federal statutes provide for extending Farmers Home 
Administration (FmHA) or its successor agency under Public Law 103-354 
financial programs without regard to race, color, religion, sex, 
national origin, marital status, age, or physical/mental handicap. The 
participants must possess the capacity to enter into legal contracts 
under State and local statutes.
    (b) Indian tribes on Federal and State reservations and other 
Federally recognized Indian tribes are eligible to apply

[[Page 207]]

for and are encouraged to participate in this program. Such tribes might 
not be subject to State and local laws or jurisdiction. However, any 
requirements of this subpart that affect applicant eligibility, the 
adequacy of FmHA or its successor agency under Public Law 103-354's 
security or the adequacy of service to users of the facility and all 
other requirements of this subpart must be met.



Sec. 1942.103  Definitions.

    Agency. The Rural Housing Service (RHS), an agency of the U.S. 
Department of Agriculture.
    Approval official. An official who has been delegated loan or grant 
approval authorities within applicable programs, subject to certain 
dollar limitations.
    Construction. The act of building or putting together a facility 
that is a part of, or physically attached to, real estate. This does not 
include procurement of major equipment even though the equipment may be 
custom built to meet the owner's requirements.
    Owner. An applicant or borrower.
    Processing office. The office designated by the State program 
official to accept and process applications for Community Facilities 
projects.
    Regional Attorney or OGC. The head of a Regional Office of the 
General Counsel (OGC).
    Small Community Facilities projects. Community Facilities loans 
costing $300,000 and under.

[68 FR 65830, Nov. 24, 2003]



Sec. 1942.104  Application processing.

    (a) General. Prospective applicants should request assistance by 
filing SF 424.2, ``Application for Federal Assistance (For 
Construction),'' with the Local or Area Rural Development Office. When 
practical, approval officials should meet with prospective applicants 
before an application is filed to discuss eligibility and Rural 
Development requirements and processing procedures. Throughout loan 
processing, Rural Development should confer with applicant officials as 
needed to ensure that applicant officials understand the current status 
of the processing of their application, what steps and determinations 
are necessary, and what is required from them. Rural Development should 
assist the applicant as needed and generally try to develop and maintain 
a cooperative working relationship with the applicant.
    (b) Unfavorable decision. If, at any time prior to loan approval, it 
is decided that favorable action will not be taken on an application, 
the approval official will notify the applicant, in writing, of the 
reasons why the request was not favorably considered. The notification 
to the applicant will state that a review of this decision by Rural 
Development may be requested by the applicant in accordance with subpart 
B of part 1900 of this chapter. The following statement will also be 
made on all notifications of adverse action:

    The Federal Equal Credit Opportunity Act prohibits creditors from 
discriminating against credit applicants on the basis of race, color, 
religion, national origin, sex, marital status, age (provided that the 
applicant has the capacity to enter into a binding contract); because 
all or part of the applicant's income is derived from any public 
assistance program; or because the applicant has in good faith exercised 
any right under the Consumer Credit Protection Act. The Federal agency 
that administers compliance with this law is the Federal Trade 
Commission, Equal Credit Opportunity, Washington, DC 20580.

[52 FR 43726, Nov. 16, 1987, as amended at 54 FR 47197, Nov. 13, 1989; 
55 FR 13504, Apr. 11, 1990; 68 FR 65830, Nov. 24, 2003; 68 FR 69001, 
Dec. 11, 2003]



Sec. 1942.105  Environmental review.

    FmHA or its successor agency under Public Law 103-354 must conduct 
and document an environmental review for each proposed project in 
accordance with subpart G of part 1940 of this chapter. The review 
should be completed as soon as possible after receipt of an application. 
The loan approving official must determine an adequate environmental 
review has been completed before requesting an obligation of funds.



Sec. 1942.106  Intergovernmental review.

    (a) Loans under this subpart are subject to intergovernmental review 
in accordance with subpart J of part 1940 of this chapter.
    (b) State intergovernmental review agencies that have selected 
community

[[Page 208]]

facility loans as a program they want to review may not be interested in 
reviewing proposed loans for fire and rescue facilities. In such cases, 
the State Director should obtain a letter from the State single point of 
contact exempting fire and rescue loans from intergovernmental 
consultation review. A copy of the letter should be placed in the case 
file for each fire and rescue facility application in lieu of completing 
the intergovernmental review process.
    (c) When an application is filed and adverse comments are not 
expected, the District Director should proceed with application 
processing pending intergovernmental review. The loan should not be 
obligated until any required review process has been completed.
    (d) Funds allocated for use under this subpart are also for the use 
of eligible Indian tribes within the State, regardless of whether State 
development strategies include Indian reservations. Eligible Indian 
tribes must have equal opportunity to participate in the program as 
compared with other residents of the State.

[52 FR 43726, Nov. 16, 1987, as amended at 61 FR 6309, Feb. 20, 1996]



Sec. 1942.107  Priorities.

    (a) Eligible applications must be selected for processing in 
accordance with Sec. 1942.17(c) of subpart A of this part 1942.
    (b) The District Director must score each eligible application in 
accordance with Sec. 1942.17(c)(2)(iii) of subpart A of this part 1942. 
The District Director must then notify the State Director of the score, 
proposed loan amount, and other pertinent data. The State Director 
should determine as soon as possible if the project has sufficient 
priority for further processing and notify the District Director. 
Normally, this consultation should be handled by telephone and 
documented in the running record.
    (c) Applicants who appear eligible but do not have the priority 
necessary for further consideration at this time should be notified that 
funds are not available, requested to advise whether they wish to have 
their application maintained for future consideration and given the 
following notice:

    You are advised against incurring obligations which would limit the 
range of alternatives to be considered, or which cannot be fulfilled 
without FmHA or its successor agency under Public Law 103-354 funds 
until the funds are actually made available. Therefore, you should 
refrain from such actions as initiating engineering and legal work, 
taking actions which would have an adverse effect on the environment, 
taking options on land rights, developing detailed plans and 
specifications, or inviting construction bids until notified by Farmers 
Home Administration (FmHA) or its successor agency under Public Law 103-
354 to proceed.



Sec. 1942.108  Application docket preparation and review.

    (a) Guides. Application dockets should be developed in accordance 
with Sec. 1942.2(c) of subpart A of this part 1942.
    (b) [Reserved]
    (c) Budgets. All applicants must complete Form FmHA or its successor 
agency under Public Law 103-354 442-7, ``Operating Budget,'' except as 
provided in this paragraph. Applicants with annual incomes not exceeding 
$100,000 may, with concurrence of the District Director, use Form FmHA 
or its successor agency under Public Law 103-354 1942-52, ``Cash Flow 
Projection,'' instead of Form FmHA or its successor agency under Public 
Law 103-354 442-7. Projections should be provided for the current year 
and each year thereafter until the facility is expected to have been in 
operation for a full year and a full annual installment paid on the 
loan.
    (d) Letter of conditions. The District Director should prepare and 
issue a letter of conditions in accordance with Sec. 1942.5 (a)(1) and 
(c) of subpart A of this part 1942.
    (e) Organizational review. As early in the application process as 
practical, the approval official should obtain copies of organization 
documents from each applicant and forward them through the State Office 
to the Regional Attorney for review and comments. The Regional 
Attorney's comments should be received and considered before obligation 
of funds.
    (f) National Office review. Applications that require National 
Office review will

[[Page 209]]

be submitted in accordance with Sec. 1942.5(b) of subpart A of this 
part 1942.
    (g) State Office review. The State Office must monitor fire and 
rescue and other small community facility project loanmaking and 
servicing and provide guidance, assistance, and training as necessary to 
ensure the activities are accomplished in an orderly manner consistent 
with the Agency's regulations. The processing office should request 
advice and assistance from the State Office as needed. The State 
Director may require all or part of a specific application docket to be 
submitted to the State Office for review at any time. The State Director 
may determine that one or more of the processing office staffs do not 
have adequate training and expertise to routinely complete application 
dockets without State Office review. In such cases, the State Director 
should establish guidelines by memorandum or by State supplement to the 
subpart for the necessary State Office reviews.
    (h) Loan approval and fund obligation. Loans must be approved and 
obligated in accordance with Sec. 1942.5(d) of subpart A of this part 
1942 and subpart A of part 1901 of this chapter.

[52 FR 43726, Nov. 16, 1987, as amended at 54 FR 47197, Nov. 13, 1989; 
67 FR 60854, Sept. 27, 2002; 68 FR 65830, Nov. 24, 2003]



Sec. Sec. 1942.109-1942.110  [Reserved]



Sec. 1942.111  Applicant eligibility.

    (a) General. Loans under this subpart are subject to the provisions 
of Sec. 1942.17(b) of subpart A of this part 1942.
    (b) Credit elsewhere determinations. The approval official must 
determine whether financing from commercial sources at reasonable rates 
and terms is available. If credit elsewhere is indicated, the approval 
official should inform the applicant and recommend the applicant apply 
to commercial sources for financing. To provide a basis for referral of 
only those applicants who may be able to finance projects through 
commercial sources, approval officials should maintain liaison with 
representatives of lenders in the area. The State Director should keep 
approval officials informed regarding lenders outside the area who might 
make loans in the area. Approval officials should maintain criteria for 
determining applications that should be referred to commercial lenders 
and maintain a list of lender representatives interested in receiving 
such referrals.
    (c) Public use. Loans under this subpart are subject to the 
provisions of Sec. 1942.17(e) of subpart A of this part 1942.

[52 FR 43726, Nov. 16, 1987, as amended at 68 FR 65830, Nov. 24, 2003]



Sec. 1942.112  Eligible loan purposes.

    (a) Funds may be used:
    (1) To construct, enlarge, extend, or otherwise improve essential 
community facilities primarily providing fire or rescue services 
primarily to rural residents and rural business. Rural businesses would 
include facilities such as educational and other publicly owned 
facilities. ``Otherwise improve'' includes but is not limited to the 
following:
    (i) The purchase of major equipment, such as fire trucks and 
ambulances, which will, in themselves, provide an essential service to 
rural residents.
    (ii) The purchase of existing facilities when it is necessary either 
to improve or to prevent a loss of service.
    (iii) The construction or development of an essential community 
facility requisite to the beneficial and orderly development of a 
community operated on a nonprofit basis in accordance with Sec. 
1942.17(d) of this subpart. This subpart includes those projects meeting 
the definition of a small community facility project.
    (2) To pay the following expenses, but only when such expenses are a 
necessary part of a loan to finance facilities authorized in paragraph 
(a)(1) of this section:
    (i) Reasonable fees and costs such as legal, engineering, 
architectural, fiscal advisory, recording, environmental impact 
analyses, archaeological surveys and possible salvage or other 
mitigation measures, planning, establishing or acquiring rights.
    (ii) Interest on loans until the facility is self-supporting but not 
for more than 3 years unless a longer period is

[[Page 210]]

approved by the National Office; interest on loans secured by general 
obligation bonds until tax revenues are available for payment, but not 
for more than 2 years unless a longer period is approved by the National 
Office; and interest on interim financing, including interest charges on 
interim financing from sources other than FmHA or its successor agency 
under Public Law 103-354.
    (iii) Costs of acquiring interest in land, rights such as water 
rights, leases, permits, rights-of-way, and other evidence of land or 
water control necessary for development of the facility.
    (iv) Purchasing or renting equipment necessary to install, maintain, 
extend, protect, operate, or utilize facilities.
    (v) Initial operating expenses for a period ordinarily not exceeding 
1 year when the borrower is unable to pay such expenses.
    (vi) Refinancing debts incurred by, or on behalf of, a community 
when all of the following conditions exist:
    (A) The debts being refinanced are a secondary part of the total 
loan;
    (B) The debts are incurred for the facility or service being 
financed or any part thereof; and
    (C) Arrangements cannot be made with the creditors to extend or 
modify the terms of the debts so that a sound basis will exist for 
making a loan.
    (3) To pay obligations for construction or procurement incurred 
before loan approval. Construction work or procurement actions should 
not be started and obligations for such work or materials should not be 
incurred before the loan is approved. However, if there are compelling 
reasons for proceeding with construction or procurement before loan 
approval, applicants may request FmHA or its successor agency under 
Public Law 103-354 approval to pay such obligations. Such requests may 
be approved if FmHA or its successor agency under Public Law 103-354 
determines that:
    (i) Compelling reasons exist for incurring obligations before loan 
approval; and
    (ii) The obligations will be incurred for authorized loan purposes; 
and
    (iii) Contract documents have been approved by FmHA or its successor 
agency under Public Law 103-354; and
    (iv) All environmental requirements applicable to FmHA or its 
successor agency under Public Law 103-354 and the applicant have been 
met; and
    (v) The applicant has the legal authority to incur the obligations 
at the time proposed, and payment of the debts will remove any basis for 
any mechanic, material or other liens that may attach to the security 
property. FmHA or its successor agency under Public Law 103-354 may 
authorize payment of such obligations at the time of loan closing. FmHA 
or its successor agency under Public Law 103-354's authorization to pay 
such obligations, however, is on the condition that it is not committed 
to make the loan; it assumes no responsibility for any obligations 
incurred by the applicant; and the applicant must subsequently meet all 
loan approval requirements. The applicant's request and FmHA or its 
successor agency under Public Law 103-354 authorization for paying such 
obligations shall be in writing. If construction or procurement is 
started without FmHA or its successor agency under Public Law 103-354 
approval, post approval in accordance with this section may be 
considered.
    (b) Funds may not be used to finance:
    (1) Facilities which are not modest in size, design, and cost.
    (2) Loan finder's fees.
    (3) Projects located within the Coastal Barriers Resource system 
that do not qualify for an exception as defined in section 6 of the 
Coastal Barriers Resource Act, Pub. L. 97-348.

[52 FR 43726, Nov. 16, 1987, as amended at 57 FR 21195, May 19, 1992; 68 
FR 65831, Nov. 24, 2003]



Sec. 1942.113  Rates and terms.

    Rates and terms for loans under this subpart are as set out in Sec. 
1942.17(f) of subpart A of this part 1942.



Sec. 1942.114  Security.

    Specific requirements for security for each loan will be included in 
the letter of conditions. Loans must be secured by the best security 
position practicable, in a manner which will adequately protect the 
interest of FmHA

[[Page 211]]

or its successor agency under Public Law 103-354 during the repayment 
period of the loan, and in accordance with the following;
    (a) Security must include one of the following:
    (1) A pledge of revenue and a lien on all real estate and major 
equipment purchased or developed with the FmHA or its successor agency 
under Public Law 103-354 loan; or
    (2) General obligation bonds or bonds pledging other taxes.
    (b) Additional security may be required as determined necessary by 
the loan approval official. In determining the need for additional 
security the loan approval official should carefully consider:
    (1) The estimated market value of real estate and equipment 
security.
    (2) The adequacy and dependability of the applicant's revenues, 
based on the applicant's financial records, the project financial 
feasibility report, and the project budgets.
    (3) The degree of community commitment to the project, as evidenced 
by items such as active broad based membership, aggressive leadership, 
broad based fund drives, or contributions by local public bodies.
    (c) Additional security may include, but is not limited to, the 
following:
    (1) Liens on additional real estate or equipment.
    (2) A pledge of revenues from additional sources.
    (3) An assignment of assured income in accordance with Sec. 
1942.17(g)(3)(iii)(A)(1) of subpart A of this part 1942.
    (d) Review and approval or concurrence in the State Office is 
required if the security will not include a pledge of taxes and the 
applicant cannot provide evidence of the financially successful 
operation of a similar facility for the 5 years immediately prior to 
loan application.
    (e) Review and concurrence in the National Office is required if the 
security will not include a pledge of taxes, the applicant cannot 
provide evidence of the financially successful operation of a similar 
facility for the 5 years immediately prior to loan application, and the 
amount of the loan will exceed $250,000.
    (f) Loans under this subpart are subject to the provisions of Sec. 
1942.17(g)(1) of subpart A of this part 1942, regarding security for 
projects utilizing joint financing.

[52 FR 43726, Nov. 16, 1987; 52 FR 47097, Dec. 11, 1987]



Sec. 1942.115  Reasonable project costs.

    Applicants are responsible for determining that prices paid for 
property rights, construction, equipment, and other project development 
are reasonable and fair. FmHA or its successor agency under Public Law 
103-354 may require an appraisal by an independent appraiser or FmHA or 
its successor agency under Public Law 103-354 employee.



Sec. 1942.116  Economic feasibility requirements.

    All projects financed under this section must be based on taxes, 
assessments, revenues, fees, or other satisfactory sources of revenues 
in an amount sufficient to provide for facility operation and 
maintenance, a reasonable reserve, and debt payment. An overall review 
of the applicant's financial status, including a review of all assets 
and liabilities, will be a part of the docket review process by the FmHA 
or its successor agency under Public Law 103-354 staff and approval 
official. All applicants will be expected to provide a financial 
feasibility report. These financial feasibility reports will normally 
be:
    (a) Included as part of the preliminary engineer/architectural 
report using guide 6 to subpart A of this part 1942 (available in any 
FmHA or its successor agency under Public Law 103-354 Office), or
    (b) Prepared by the applicant using Form FmHA or its successor 
agency under Public Law 103-354 1942-54, ``Applicant's Feasibility 
Report.''



Sec. 1942.117  General requirements.

    (a) Reserve requirements. Loans under this subpart are subject to 
the provisions of Sec. 1942.17 (i) of subpart A of this part 1942.
    (b) Membership authorization. The membership of organizations other 
than public bodies must authorize the project and its financing except 
the

[[Page 212]]

District Director may, with the concurrence of the State Director (with 
advice of OGC as needed), accept the loan resolution without such 
membership authorization when State statutes and the organization 
charter and bylaws do not require such authorization.
    (c) Insurance and bonding. Loans under this subpart are subject to 
the provisions of Sec. 1942.17(j)(3) of subpart A of this part 1942.
    (d) Acquisition of land and rights. Loans under this subpart are 
subject to the provisions of Sec. 1942.17(j)(4) of subpart A of this 
part 1942.
    (e) Lease agreements. Loans under this subpart are subject to the 
provisions of Sec. 1942.17(j)(5) of subpart A of this part 1942.
    (f) Notes and bonds. Loans under this subpart are subject to the 
provisions of Sec. Sec. 1942.17(j)(6) and 1942.19 of subpart A of this 
part 1942.
    (g) Public Information. Loans under this subpart are subject to the 
provisions of Sec. 1942.17 (j)(9) of subpart A of this part 1942.
    (h) Joint funding. Loans under this subpart are subject to the 
provisions of Sec. Sec. 1942.2 (e) and 1942.17 (j)(11) of subpart A of 
this part 1942.



Sec. 1942.118  Other Federal, State, and local requirements.

    (a) Loans under this subpart are subject to the provisions of Sec. 
1942.17 (k) of subpart A of this part 1942.
    (b) An initial compliance review should be completed under subpart E 
of part 1901 of this chapter.



Sec. 1942.119  Professional services and borrower contracts.

    (a) Loans under this subpart are subject to the provisions of Sec. 
1942.17 (l) of subpart A of this part 1942.
    (b) The District Director will, with assistance as necessary by the 
State Director and OGC, concur in agreements between borrowers and third 
parties such as contracts for professional and technical services. The 
State Director may require State Office review of such documents in 
accordance with Sec. 1942.108 (g) of this subpart. State Directors are 
expected to work closely with representatives of engineering and 
architectural societies, bar associations, commercial lenders, 
accountant associations, and others in developing standard forms of 
agreements, where needed, and other matters to expedite application 
processing, minimize referrals to OGC, and resolve problems which may 
arise. Standard forms should be reviewed by and approved by OGC.



Sec. Sec. 1942.120-1942.121  [Reserved]



Sec. 1942.122  Actions prior to loan closing and start of construction.

    (a) Excess FmHA or its successor agency under Public Law 103-354 
loan funds. Loans under this subpart are subject to the provisions of 
Sec. 1942.17 (n)(1) of subpart A of this part 1942.
    (b) Loan resolutions. Loans under this subpart are subject to the 
provisions of Sec. 1942.17 (n)(2) of subpart A of this part 1942.
    (c) Interim financing. Loans under this subpart are subject to the 
provisions of Sec. 1942.17 (n)(3) of subpart A of this part 1942.
    (d) Applicant contribution. Loans under this subpart are subject to 
the provisions of Sec. 1942.17 (n)(5) of subpart A of this part 1942 
this chapter.
    (e) Evidence of and disbursement of other funds. Loans under this 
subpart are subject to the provisions of Sec. 1942.17 (n)(6) of subpart 
A of this part 1942.
    (f) Assurance agreement. All applicants must execute Form FmHA or 
its successor agency under Public Law 103-354 400-4, ``Assurance 
Agreement,'' at or before loan closing.



Sec. 1942.123  Loan closing.

    (a) Ordering loan checks. Checks will not be ordered until:
    (1) Form FmHA or its successor agency under Public Law 103-354 440-
57, ``Acknowledgement of Obligated Funds/Check Request,'' has been 
received from the Finance Office.
    (2) The applicant has complied with approval conditions and any 
closing instructions, except for those actions which are to be completed 
on the date of loan closing or subsequent thereto.
    (3) The applicant is ready to start construction or funds are needed 
to pay interim financing obligations.
    (b) Public bodies and Indian tribes. (1) After loan approval the 
completed docket will be reviewed by the State

[[Page 213]]

Director. The information required by OGC will be transmitted to OGC 
with a request for closing instructions. Upon receipt of the closing 
instructions from OGC, the State Director will forward them along with 
any appropriate instructions to the District Director. Upon receipt of 
closing instructions, the District Director will discuss with the 
applicant and its architect or engineer, attorney, and other appropriate 
representatives, the requirements contained therein and any actions 
necessary to proceed with closing.
    (2) Loans will be closed in accordance with the closing instructions 
issued by OGC and Sec. 1942.19 of subpart A of this part 1942.
    (c) Organizations other than public bodies and Indian tribes. 
District Directors are authorized to close loans to organizations other 
than public bodies and Indian tribes without closing instructions from 
OGC. State Directors, in consultation with OGC, should develop standard 
closing procedures and forms as needed. Assistance with loan closing and 
a certification regarding the validity of the note and mortgage or other 
debt instruments should be provided by the applicant's attorney. 
Appropriate title opinion or title insurance is required as provided in 
Sec. 1942.17 (j)(4)(i)(B) of subpart A of this part 1942.
    (d) Authority to execute, file, and record legal instruments. 
District Office employees are authorized to execute and file or record 
any legal instruments necessary to obtain or preserve security for 
loans. This includes, as appropriate, mortgages and other lien 
instruments, as well as affidavits, acknowledgements, and other 
certificates.
    (e) Mortgages. Unless otherwise required by State law or unless an 
exception is approved by the State Director with advice of the OGC, only 
one mortgage will be taken even though the indebtedness is to be 
evidenced by more than one instrument. The real estate or chattel 
mortgages or security instruments will be delivered to the recording 
office for recordation or filing, as appropriate. A copy of such 
instruments will be delivered to the borrower. The original instrument, 
if returnable after recording or filing, will be retained in the 
borrower's case folder.
    (f) Notes and bonds. When the debt instrument is a note or single 
instrument bond fully registered as to principal and interest a 
conformed copy will be sent to the Finance Office immediately after loan 
closing and the original instrument will be stored in the District 
Office. When other types of bonds are used, the original bond(s) will be 
forwarded to the Finance Office immediately after loan closing.
    (g) Disposition of title evidence. All title evidence other than the 
opinion of title and mortgage title insurance policy, will be returned 
to the borrower when the loan has been closed.
    (h) Multiple advances. When temporary paper, such as bond 
anticipation notes or interim receipts, is used to conform with the 
multiple advance requirement, the original temporary paper will be 
forwarded to the Finance Office after each advance is made to the 
borrower. The borrower's case number will be entered in the upper right-
hand corner of such paper by the Distict Office. The permanent debt 
instrument(s) should be forwarded to the Finance Office as soon as 
possible after the last advance is made, except that for notes and 
single instrument bonds fully registered as to principal and interest 
the original will be retained in the District Office and a copy will be 
forwarded to the Finance Office. The following actions will be taken 
prior to issuance of the permanent instruments:
    (1) The Finance Office will be notified of the anticipated date for 
the retirement of the interim instruments and the issuance of permanent 
instruments of debt.
    (2) The Finance Office will prepare a statement of account including 
accrued interest through the proposed date of retirement and also show 
the daily interest accrual. The statement of account and the interim 
financing instruments will be forwarded to the District Director.
    (3) The District Director will collect interest through the actual 
date of the retirement and obtain the permanent instrument(s) of debt in 
exchange for the interim financing instruments. The permanent 
instruments and the cash

[[Page 214]]

collection will be forwarded to the Finance Office immediately, except 
that for notes and single instrument bonds fully registered as to 
principal and interest the original will be retained in the District 
Office and a copy will be forwarded to the Finance Office. In developing 
the permanent instruments, the sequence of preference set out Sec. 
1942.19(e) of subpart A of this part 1942 will be followed.
    (i) Bond registration record. Form FmHA or its successor agency 
under Public Law 103-354 442-28, ``Bond Registration Book,'' may be used 
as a guide to assist borrowers in the preparation of a bond registration 
book in those cases where a registration book is required and a book is 
not provided in connection with the printing of the bonds.
    (j) Loan checks. Whenever a loan check is received, lost, or 
destroyed, the District Director will take the appropriate actions 
outlined in FmHA Instruction 2018-D (available in any FmHA or its 
successor agency under Public Law 103-354 office). Checks which cannot 
be delivered within a reasonable amount of time (no more than 20 
calendar days) will be handled in accordance with FmHA Instruction 2018-
D (available in any FmHA or its successor agency under Public Law 103-
354 office.)
    (k) Safeguarding bond shipments. FmHA or its successor agency under 
Public Law 103-354 personnel will follow the procedures for safeguarding 
mailings and deliveries of bonds and coupons outlined in FmHA 
Instruction 2018-E (available in any FmHA or its successor agency under 
Public Law 103-354 office), whenever they mail or deliver these items.
    (l) Review of loan closing. When the loan has been closed, the 
District Director will submit the completed loan closing documents and a 
statement showing what was done in closing the loan to the State 
Director. The State Director will review the documents and the District 
Director's statement to determine whether the transaction was closed 
properly. For loans to public bodies or Indian tribes the State Director 
will forward all documents, along with a statement that all 
administrative requirements have been met, to the Regional Attorney. The 
Regional Attorney will review the submitted material to determine 
whether all legal requirements have been met. The Regional Attorney 
should review FmHA or its successor agency under Public Law 103-354 
standard forms only for proper execution, unless the State Director 
brings attention to specific questions. Facility development should not 
be held up pending receipt of the Regional Attorney opinion. When the 
review of the State Director has been completed, and for public bodies 
and Indian tribes the Regional Attorney's opinion has been received, the 
State Director must advise the District Director of any deficiencies 
that must be corrected and return all material that was submitted for 
review.
    (m) Loan cancellation. Loans under this subpart are subject to the 
provisions of Sec. 1942.12 of subpart A of this part 1942.

[52 FR 43726, Nov. 16, 1987, as amended at 59 FR 54788, Nov. 2, 1994]



Sec. Sec. 1942.124-1942.125  [Reserved]



Sec. 1942.126  Planning, bidding, contracting, constructing, procuring.

    (a) General. This section provides procedures and requirements for 
planning, bidding, contracting, constructing and procuring facilities 
financed under this subpart. These procedures do not relieve the owner 
of contractual obligations that arise from procurement of services.
    (b) Technical services. Owners are responsible for providing the 
engineering or architectural services necessary for planning, designing, 
bidding, contracting, inspecting and constructing their facilities. 
Services may be provided by the owner's ``in-house'' engineer or 
architect or through contract, subject to FmHA or its successor agency 
under Public Law 103-354 concurrence. Architects and engineers must be 
licensed in the State where the facility is to be located.
    (1) Preliminary reports. A preliminary architectural or engineering 
report conforming with customary professional standards is required for 
all construction, except that FmHA or its successor agency under Public 
Law 103-354 may waive the requirement for a

[[Page 215]]

preliminary architectural/engineering report or accept a brief report if 
the cost of the construction does not exceed $100,000. Guide 6 to 
subpart A of this part 1942 (available in any FmHA or its successor 
agency under Public Law 103-354 office) may be used.
    (2) Final reports. Detailed final plans and specifications are 
required for all construction and must receive FmHA or its successor 
agency under Public Law 103-354 concurrence. When negotiated procurement 
is used for construction costing not more than $100,000 the final plans 
and specifications may be provided by the contractor who submits the 
successful proposal. The plans and specifications must be prepared by or 
under the supervision of an architect or engineer who is licensed in the 
State where the facility is to be located and should include all 
materials and work to be provided under the contract. Some work and 
material may be omitted from the contract provided the owner furnishes 
detailed cost estimates for whatever is needed to fully complete the 
facility and will complete the facility in accordance with paragraph (e) 
of this section and the small purchase procedures set out in Sec. 
1942.18(k)(1) of subpart A of this part 1942. In such cases, FmHA or its 
successor agency under Public Law 103-354 may determine that it is not 
necessary to require the applicant to hire a consulting architect/
engineer; however, if a second contract that does not qualify for small 
purchase procedures is needed to complete the facility, the owner must 
provide for an architect/engineer to design the entire facility. When 
the contractor provides the plans and specifications, the contract will 
be considered a design/build procurement method under Sec. 1942.18(1) 
of subpart A of this part 1942.
    (3) Major equipment. An architect/engineer is not required for major 
equipment if FmHA or its successor agency under Public Law 103-354 
determines the owner has the ability to develop an adequate request for 
proposal and evaluate the proposals received or can obtain adequate 
assistance from other sources, such as State or Federal agencies or 
trade associations.
    (c) Design policies. Facilities financed by FmHA or its successor 
agency under Public Law 103-354 must be designed and constructed in 
accordance with sound engineering and architectural practices, and must 
meet the requirements of Federal, State and local agencies. All 
facilities intended for or accessible to the public or in which 
physically handicapped persons may be employed or reside must be 
developed in compliance with the Architectural Barriers Act of 1968 
(Pub. L. 90-480) as implemented by the General Services Administration 
regulations 41 CFR 101-19.6 and section 504 of the Rehabilitation Act of 
1973 (Pub. L. 93-112) as implemented by 7 CFR parts 15 and 15b.
    (d) Construction contracts. Contract documents must be sufficiently 
descriptive and legally binding to accomplish the work as economically 
and expeditiously as possible.
    (1) Standard construction contract documents. When standard 
construction contract documents available from FmHA or its successor 
agency under Public Law 103-354 are used, or when the amount of the 
contract does not exceed $100,000, it will normally not be necessary for 
the Regional Attorney to perform a detailed legal review. If 
construction contract documents used are not in the format of guide 
forms approved by FmHA or its successor agency under Public Law 103-354, 
and the contract amount exceeds $100,000, the Regonal Attorney must 
review the documents before their use.
    (2) Contract review and approval. The owner's attorney will review 
executed contract documents, including performance and payment bonds, 
and certify that they are adequate, legal and binding, and that the 
persons executing the documents have been authorized to do so. The 
contract documents, bid bonds, and bid tabulation sheets will be 
forwarded to FmHA or its successor agency under Public Law 103-354 for 
approval prior to awarding. All contracts will contain a provision that 
they are not in full force and effect until they have been approved by 
FmHA or its successor agency under Public Law 103-354. The FmHA or its 
successor agency under Public Law 103-354 District Director is 
responsible for approving construction contracts with advice and 
guidance of the State Director and Regional Attorney when necessary.

[[Page 216]]

    (3) Separate contracts. Arrangements which split responsibility of 
contractors (separate contracts for labor and material, extensive 
subcontracting and multiplicity of small contracts on the same job) 
should be avoided whenever it is practical to do so. Contracts may be 
awarded to suppliers or manufacturers for furnishing and installing 
certain items which have been designed by the manufacturer and delivered 
to the job site in a finished or semifinished state such as 
prefabricated buildings. Contracts may also be awarded for material 
delivered to the job site and installed by a patented process or method.
    (e) Performing construction. Owners are encouraged to accomplish 
construction through contracts with recognized contractors. Owners may 
accomplish construction by using their own personnel and equipment 
provided the owners possess the necessary skills, abilities and 
resources to perform the work and provided a licensed engineer or 
architect prepares design drawings and specifications and inspection is 
provided in accordance with paragraph (l)(3) of this section.
    (f) Owner's contractual responsibility. Loans under this subpart are 
subject to the provisions of Sec. 1942.18(i) of subpart A of this part 
1942.
    (g) Owner's procurement regulations. Loans under this subpart are 
subject to the provisions of Sec. 1942.18(j) of subpart A of this part 
1942.
    (h) Procurement methods. Unless the FmHA or its successor agency 
under Public Law 103-354 National Office gives prior written approval of 
another method, procurement must be made by one of the following 
methods:
    (1) Small purchase procedures as provided in Sec. 1942.18(k)(1) of 
subpart A of this part 1942.
    (2) Competitive sealed bids as provided in Sec. 1942.18(k)(2) of 
subpart A of this part 1942. Competitive sealed bids is the preferred 
procurement method of construction projects, except for buildings 
costing $100,000 or less when the owner desires to use a 
``preengineered'' or ``packaged'' building.
    (3) Competitive negotiation as provided in Sec. 1942.18(k)(3) of 
subpart A of this part 1942. Competitive negotiation is the preferred 
procurement method of buildings not exceeding $100,000 in cost when the 
owner desires to use a ``pre- engineered'' or ``packaged'' building and 
for major equipment.
    (4) Noncompetitive negotiation as provided in Sec. 1942.18(k)(4) of 
subpart A of this part 1942.
    (i) Contracting methods. Loans under this subpart are subject to the 
provisions of Sec. 1942.18(1) of subpart A of this part 1942.
    (j) Contracts awarded prior to preapplications. Loans under this 
subpart are subject to the provisions of Sec. 1942.18(m) of subpart A 
of this part 1942.
    (k) Construction Contract provisions. Construction contracts for 
loans under this subpart are subject to the provisions of Sec. 
1942.18(n) of subpart A of this part 1942. Construction contracts for 
loans under this subpart are also subject to the provisions of Sec. 
1901.205 of subpart E of part 1901 of this chapter, regarding 
nondiscrimination in construction, except that guides 18 and 17 or 19 to 
subpart A of this part 1942 of this chapter will normally be used 
instead of Form FmHA or its successor agency under Public Law 103-354 
1924-5, ``Invitation for Bid (Construction Contract),'' and Form FmHA or 
its successor agency under Public Law 103-354 1924-6, ``Construction 
Contract.'' When guide 18 is used with a design/build type contract, 
section 4, ``Conflict of Interest,'' may need revision.
    (l) Construction contract administration. Owners shall be 
responsible for maintaining a contract administration system to monitor 
the contractors' performance and compliance with the terms, conditions, 
and specifications of the contracts.
    (1) Preconstruction conference. Prior to beginning construction the 
owner will schedule a preconstruction conference where FmHA or its 
successor agency under Public Law 103-354 will review the planned 
development with the owner, its architect or engineer, project 
inspector, attorney, contractor(s), and other interested parties. The 
conference will thoroughly cover applicable items included in Form FmHA 
or its successor agency under Public Law 103-354 1924-16, ``Record of 
Preconstruction Conference,'' and the

[[Page 217]]

discussions and agreements will be documented. Form FmHA or its 
successor agency under Public Law 103-354 1924-16 may be used for this 
purpose.
    (2) Monitoring reports. Each owner will be required to monitor and 
provide reports to FmHA or its successor agency under Public Law 103-354 
on actual performance during construction for each project financed, or 
to be financed, in whole or in part with FmHA or its successor agency 
under Public Law 103-354 funds. The reports are to include:
    (i) A comparison of actual accomplishments with the construction 
schedule established for the period. The partial payment estimate may be 
used for this purpose.
    (ii) A narrative statement giving full explanation of the following:
    (A) Reasons why established goals were not met.
    (B) Analysis and explanation of cost overruns or high unit costs and 
how payment is to be made for the same.
    (iii) If events occur between reports which have a significant 
impact upon the project, the owner will notify FmHA or its successor 
agency under Public Law 103-354 as soon as any of the following 
conditions are known:
    (A) Problems, delays, or adverse conditions which will materially 
affect the ability to attain program objectives or prevent the meeting 
of project work units by established time periods. This disclosure shall 
be accompanied by a statement of the action taken, or contemplated, and 
any Federal assistance needed to resolve the situation.
    (B) Favorable developments or events which enable meeting time 
schedules and goals sooner than anticipated or producing more work units 
than originally projected or which will result in cost underruns or 
lower unit costs than originally planned and which may result in less 
FmHA or its successor agency under Public Law 103-354 assistance.
    (3) Inspection. The borrower must provide for inspection of all 
construction. When the borrower enters into an agreement for technical 
services with an engineer/architect, the agreement should provide for 
general engineering/architectural inspection of the construction work. 
When no such agreement exists, or FmHA or its successor agency under 
Public Law 103-354 or the borrower determines the inspection services of 
the engineer/architect may not be sufficient, the owner must provide a 
project inspector. Prior to the preconstruction conference, the borrower 
must submit a r[eacute]sum[eacute] of qualifications of the project 
inspector to FmHA or its successor agency under Public Law 103-354 for 
acceptance in writing. The project inspector will be responsible for 
making inspections necessary to protect the borrower's interest and for 
providing written inspection reports to the borrower with copies to the 
FmHA or its successor agency under Public Law 103-354 District Director. 
guide 11 of subpart A of this part 1942 (available in any FmHA or its 
successor agency under Public Law 103-354 office) may be used as a guide 
format for inspection reports. For new buildings, additions to existing 
buildings, and rehabilitation of existing buildings, the project 
inspector should make inspections at the following stages of 
construction and at other stages of construction as determined by the 
District Director and the borrower. Inspections by FmHA or its successor 
agency under Public Law 103-354 are solely for its benefit as lender.
    (i) An initial inspection should be made just prior to or during the 
placement of concrete footings or monolithic footings and floor slabs. 
At this point, foundation excavations are complete, forms or trenches 
and steel are ready for concrete placement and the subsurface 
installation is roughed in. If the building design does not include 
concrete footings the initial inspection should be made just after or 
during the placement of poles or other foundation materials.
    (ii) An inspection should be made when the building is enclosed, 
structural members are still exposed, roughing in for heating, plumbing 
and electrical work is in place and visible, and wall insulation and 
vapor barriers are installed.
    (iii) A final inspection should be made when all development of the 
structure has been completed and the structrure is ready for its 
intended use.
    (4) Prefinal inspections. A prefinal inspection will be made by the 
owner,

[[Page 218]]

project inspector, owner's architect or engineer, representatives of 
other agencies involved, and the District Director. The inspection 
results will be recorded on Form FmHA or its successor agency under 
Public Law 103-354 1924-12, ``Inspection Report,'' and a copy provided 
to all interested parties, including the FmHA or its successor agency 
under Public Law 103-354 State Director.
    (5) Final inspection. A final inspection will be made by FmHA or its 
successor agency under Public Law 103-354 before final payment is made.
    (6) Changes in development plans. (i) Changes in development plans 
may be approved by FmHA or its successor agency under Public Law 103-354 
when requested by owners, provided:
    (A) Funds are available to cover any additional costs; and
    (B) The change is for an authorized loan purpose; and
    (C) It will not adversely affect the soundness of the facility 
operation or FmHA or its successor agency under Public Law 103-354's 
security; and
    (D) The change is within the scope of the contract; and
    (E) Any applicable requirements of subpart G of part 1940 of this 
chapter have been met.
    (ii) Changes will be recorded on Form FmHA or its successor agency 
under Public Law 103-354 1924-7, ``Contract Change Order,'' or other 
similar forms may be used with the prior approval of the District 
Director. Regardless of the form, change orders must be approved by the 
FmHA or its successor agency under Public Law 103-354 District Director.
    (iii) Changes should be accomplished only after FmHA or its 
successor agency under Public Law 103-354 approval on all changes which 
affect the work and shall be authorized only by means of contract change 
order. The change order will include items such as:
    (A) Any changes in labor and material and their respective cost.
    (B) Changes in facility design.
    (C) Any decrease or increase in quantities based on final 
measurements that are different from those shown in the bidding 
schedule.
    (D) Any increase or decrease in the time to complete the project.
    (iv) All changes shall be recorded on chronologically numbered 
contract change orders as they occur. Change orders will not be included 
in payment estimates until approved by all parties.

[52 FR 43726, Nov. 16, 1987; 52 FR 47097, Dec. 11, 1987]



Sec. 1942.127  Project monitoring and fund delivery.

    (a) Coordination of funding sources. When a project is jointly 
financed, the District Director will reach any needed agreement or 
understanding with the representatives of the other source of funds on 
distribution of responsibilities for handling various aspects of the 
project. These responsibilities will include supervision of 
construction, inspections and determination of compliance with 
appropriate regulations concerning equal employment opportunities, wage 
rates, nondiscrimination in making services or benefits available, and 
environmental compliance. If any problems develop which cannot be 
resolved locally, complete information should be sent to the State 
Office for advice.
    (b) Multiple advances. Loans under this subpart are subject to the 
provisions of Sec. 1942.17 (p)(2) of subpart A of this part 1942.
    (c) Use and accountability of funds. Loans under this subpart are 
subject to the provisions of Sec. 1942.17 (p)(3) of subpart A of this 
part 1942.
    (d) Development inspections. Loans under this subpart are subject to 
the provisions of Sec. 1942.17(p)(4) of subpart A of this part 1942.
    (e) Payment for project costs. Each payment for project costs must 
be approved by the borrower's governing body.
    (1) Construction. Payment for construction must be for amounts shown 
on payment estimate forms. Form FmHA or its successor agency under 
Public Law 103-354 1924-18, ``Partial Payment Estimate,'' may be used 
for this purpose or other similar forms may be used with the prior 
approval of the District Director. However, the District Director cannot 
require more reporting burden than is required by Form FmHA or its 
successor agency under Public Law 103-354 1924-18. Advances for contract 
retainage will not

[[Page 219]]

be made until such retainage is due and payable under the terms of the 
contract. The review and acceptance of project cost, including 
construction partial payment estimates, by FmHA or its successor agency 
under Public Law 103-354 does not attest to the correctness of the 
amounts, the quantities shown, or that the work has been performed under 
the terms of agreements or contracts.
    (2) Major equipment. Payment for major equipment should generally 
coincide with delivery of the usable equipment, along with any necessary 
title or certifications, to the borrower. Borrowers may not use FmHA or 
its successor agency under Public Law 103-354 loan funds to make 
deposits on equipment not ready for delivery. If a borrower purchases a 
truck chassis from one supplier and another supplier will complete the 
development of a fire or rescue vehicle, FmHA or its successor agency 
under Public Law 103-354 may release funds to pay for the chassis when 
title to the chassis is transferred to the borrower.
    (f) Use of remaining funds. Loans under this subpart are subject to 
the provisions of Sec. 1942.17 (p)(6) of subpart A of this part 1942.

[52 FR 43726, Nov. 16, 1987; 52 FR 47097, Dec. 11, 1987]



Sec. 1942.128  Borrower accounting methods, management reports and audits.

    (a) Loans under this subpart are subject to the provisions of Sec. 
1942.17(q) of subpart A of this part 1942 except as provided in this 
section.
    (b) Borrowers with annual incomes not exceeding $100,000 may, with 
concurrence of the District Director, use Form FmHA or its successor 
agency under Public Law 103-354 1942-53, ``Cash Flow Report,'' instead 
of page one of schedule one and schedule two of Form FmHA or its 
successor agency under Public Law 103-354 442-2, ``Statement of Budget, 
Income, and Equity.'' When used for budgeting, the cash statement should 
be projected for the upcoming fiscal year. When used for quarterly or 
annual reports, the cash flow report should include current year 
projections and actual data for the prior year, the quarter just ended, 
and the current year to date.



Sec. 1942.129  Borrower supervision and servicing.

    Loans under this subpart are subject to the provisions of Sec. 
1942.17(r) of subpart A of this part 1942 and subpart E of part 1951 of 
this chapter.



Sec. Sec. 1942.130-1942.131  [Reserved]



Sec. 1942.132  Subsequent loans.

    Subsequent loans will be processed under this subpart.



Sec. 1942.133  Delegation and redelegation of authority.

    Loan approval authority is in subpart A of part 1901 of this 
chapter. State Directors may delegate approval authority to District 
Directors to approve fire and rescue loans regardless of whether 
authority to approve other community facility loans is delegated. Except 
for loan approval authority, District Directors may redelegate their 
duties to qualified staff members.



Sec. 1942.134  State supplements and guides.

    State Directors will obtain National Office clearance for all State 
supplements and guides under FmHA Instruction 2006-B (available in any 
FmHA or its successor agency under Public Law 103-354 Office).
    (a) State supplements. State Directors may supplement this subpart 
to meet State and local laws and regulations and to provide for orderly 
application processing and efficient service to applicants. State 
supplements shall not contain any requirements pertaining to bids, 
contract awards, and materials more restrictive than those in this 
subpart.
    (b) State guides. State Directors may develop guides for use by 
applicants if the guides to this subpart and subpart A of part 1942 are 
not adequate. State Directors may prepare guides for items needed for 
the application; items necessary for the docket; and items required 
prior to loan closing or construction starts.

[[Page 220]]



Sec. Sec. 1942.135-1942.149  [Reserved]



Sec. 1942.150  OMB control number.

    The collection of information requirements in this regulation have 
been approved by the Office of Management and Budget and have been 
assigned OMB control number 0575-0120.

Subparts D-F [Reserved]



Subpart G_Rural Business Enterprise Grants and Television Demonstration 
                                 Grants

    Authority: 7 U.S.C. 1989; delegation of authority by the Secretary 
of Agriculture, 7 CFR 2.23; delegation of authority by the Assistant 
Secretary for Rural Development, 7 CFR 2.70; 5 U.S.C. 301.

    Source: 45 FR 73637, Nov. 6, 1980, unless otherwise noted.



Sec. 1942.301  Purpose.

    This subpart outlines Farmers Home Administration (FmHA) or its 
successor agency under Public Law 103-354 policies and authorizations 
and sets forth procedures for making grants to finance and facilitate 
development of private business enterprises. Any processing or servicing 
activity conducted pursuant to this subpart involving authorized 
assistance to FmHA or its successor agency under Public Law 103-354 
employees, members of their families, known close relatives, or business 
or close personal associates, is subject to the provisions of subpart D 
of part 1900 of this chapter. Applicants for this assistance are 
required to identify any known relationship or association with an FmHA 
or its successor agency under Public Law 103-354 employee.

[53 FR 30247, Aug. 11, 1988, as amended at 58 FR 226, Jan. 5, 1993]



Sec. 1942.302  Policy.

    (a) The grant program will be used to support the development of 
small and emerging private business enterprises in rural areas.
    (b) FmHA or its successor agency under Public Law 103-354 officials 
will maintain liaison with officials of other federal, state, regional 
and local development agencies to coordinate related programs to achieve 
rural development objectives.
    (c) FmHA or its successor agency under Public Law 103-354 officials 
shall cooperate with appropriate State agencies in making grants that 
support State strategies for rural area development.
    (d) Funds allocated for use in accordance with this subpart are also 
to be considered for use of Indian tribes within the State regardless of 
whether State development strategies include Indian reservations within 
the State's boundaries. Indians residing on such reservations must have 
equal opportunity along with other rural residents to participate in the 
benefits of these programs. This includes equal application of outreach 
activities of FmHA or its successor agency under Public Law 103-354 
County and District Offices.

[53 FR 30247, Aug. 11, 1988]



Sec. 1942.303  Authorities, delegation, and redelegation.

    The State Director is responsible for implementing the authorities 
contained in this subpart and to issue State supplements redelegating 
these authorities to appropriate FmHA or its successor agency under 
Public Law 103-354 employees. Grant approval authorities are contained 
in subpart A of part 1901 of this chapter.



Sec. 1942.304  Definitions.

    Project. For rural business enterprise grants, the result of the use 
of program funds, i.e., a facility whether constructed by the applicant 
or a third party from a loan made with grant funds, technical 
assistance, startup operating costs, or working capital. A revolving 
fund established in whole or in part with grant funds will also be 
considered a project for the purpose of Intergovernmental and 
Environmental Review under Sec. 1942.310 (b) and (c), of this subpart 
as well as the specific uses of the revolving funds. For television 
demonstration grants, television programming developed on issues of 
importance to farmers and rural residents.
    Regional Commission grants. Grants made from funds made available to 
FmHA or its successor agency under Public Law 103-354 by the Appalachian

[[Page 221]]

Regional Commission (ARC) or other Federal Regional Commissions 
designated under title V of the Public Works and Economic Development 
Act of 1965.
    Rural and Rural Area. Any area other than a city or town that has a 
population of greater than 50,000 inhabitants and the urbanized area 
contiguous and adjacent to such a city or town according to the latest 
decennial census of the United States.
    Rural Business Enterprise (RBE) grants. Grants made to finance and 
facilitate development of small and emerging private business 
enterprises in rural areas. Grants are made from FmHA or its successor 
agency under Public Law 103-354 funds under authority of the 
Consolidated Farm and Rural Development Act, as amended, sec. 310B(c) (7 
U.S.C. 1932).
    Small and emerging private business enterprise. Any private business 
which will employ 50 or fewer new employees and has less than $1 million 
in projected gross revenues.
    Technical Assistance. A function performed for the benefit of a 
private business enterprise and which is a problem solving activity, 
such as market research, product and/or service improvement, feasibility 
study, etc.
    Television demonstration program. Grants made for television 
programming developed to demonstrate the effectiveness of providing 
information on agriculture and other issues of importance to farmers and 
other rural residents. Grants are made from FmHA or its successor agency 
under Public Law 103-354 funds under authority of the Consolidated Farm 
and Rural Development Act, as amended, sec. 310B(j) (7 U.S.C. 1932).

[57 FR 33099, July 27, 1992, as amended at 66 FR 27014, May 16, 2001; 67 
FR 77908, Dec. 20, 2002]



Sec. 1942.305  Eligibility and priority.

    (a) Eligibility. (1) RBE grants may be made to public bodies and 
private nonprofit corporations serving rural areas. Public bodies 
include States, counties, cities, townships, and incorporated town and 
villages, boroughs, authorities, districts, and Indian tribes on Federal 
and State reservations and other Federally recognized Indian Tribal 
groups in rural areas.
    (2) The end result of the project must finance or develop a small 
and emerging private business enterprise. The small business receiving 
assistance must meet the definition contained in Sec. 1942.304. 
However, if the small and emerging private business enterprise is an 
eligible nonprofit entity or other tax-exempt organization located in a 
city, town or unincorporated area with a population of 5,000 or less and 
has a principal office on land of an existing or former Native American 
reservation, the small and emerging private business enterprise is 
exempt from meeting the definition contained in Sec. 1942.304.
    (3) Regional Commission Grant applicants must meet eligibility 
requirements of the Regional Commission and also of the Agency, in 
accordance with paragraph (a)(1) of this section, for the Agency to 
administer the Regional Commission Grant under this subpart.
    (4) Television demonstration grants may be made to statewide, 
private, nonprofit, public television systems whose coverage is 
predominantly rural. An eligible applicant must be organized as a 
private, nonprofit, public television system, licensed by the Federal 
Communications Commission, and operated statewide and within a coverage 
area that is predominantly rural.
    (b) Project selection process. The following paragraphs indicate 
items and conditions which must be considered in selecting RBE 
applications for further development. When ranking eligible RBE 
applications for consideration for limited funds, FmHA or its successor 
agency under Public Law 103-354 officials must consider the priority 
items met by each RBE application and the degree to which those 
priorities are met, and apply good judgment. Due to the small number of 
applicants eligible for television demonstration grants, such applicants 
will not compete for priority points against RBE applicants.
    (1) Applications. The application and supporting information 
submitted with it will be considered in determining the proposed 
project's priority for available funds.
    (2) State Office review. All applications will be reviewed and 
scored for

[[Page 222]]

funding priority. Eligible applicants that cannot be funded should be 
advised by the State Director that funds are not available, and 
requested to advise whether they wish to have their application 
maintained in an active file for future consideration.
    (3) Selection priorities. The priorities described below will be 
used by the State Director to rate applications. Points will be 
distributed as indicated in paragraphs (b)(3) (i) through (iv) of this 
section. A copy of the score sheet should be placed in the case file for 
future reference.
    (i) Population. Proposed project(s) will primarily be located in a 
community of (1) between 15,000 and 25,000 population--5 points, (2) 
between 5,000 and 15,000 population--10 points, (3) under 5,000 
population--15 points.
    (ii) Economic conditions. (A) Proposed project(s) will primarily be 
located in areas where the unemployment rate (1) exceeds the State rate 
by 25% or more--20 points, (2) exceeds the State rate by less than 25%--
10 points, (3) is equal to or less than the State rate--0 points.
    (B) Proposed project(s) will primarily be located in areas where 
Median Household Income (MHI) as prescribed by section 673(2) of the 
Community Services Block Grant Act (42 U.S.C. 9902(2)) for a family of 4 
for the State is: (1) Less than poverty line--25 points, (2) more than 
poverty line but less than 85% of State MHI--15 points, (3) between 85% 
and 100% of State MHI--10 points, (4) equal or greater than State MHI--0 
points.
    (iii) Experience. Applicant has evidence of at least 5 years of 
successful experience in the type of activity proposed in the 
application for funds under this subpart. Evidence of successful 
experience may be (1) a description of experience supplied and certified 
by the applicant, or (2) a letter of support from appropriate local 
elected officials explaining the applicant's experience. Experience--10 
points
    (iv) Other. (A) Applicant has evidence that small business 
development will occur by startup or expansion as a result of the 
activities to be carried out under the grant. Written evidence of 
commitment by small business must be provided to FmHA or its successor 
agency under Public Law 103-354--25 points.
    (B) Applicant has evidence of substantial commitment of funds from 
nonfederal sources for proposed project. An authorized representative of 
the source organization of the nonfederal funds must provide evidence 
that the funds are available and will be used for the proposed project. 
More than 50 percent of the project costs from nonfederal sources--15 
points; more than 25 percent, but less than 50 percent of project costs 
from nonfederal sources--10 points; between 5 percent and 25 percent of 
project costs from nonfederal sources--5 points.
    (C) For a grant to establish a revolving fund, the applicant 
provides evidence to FmHA or its successor agency under Public Law 103-
354 through loan applications or letters from businesses that the loans 
are needed by small emerging businesses in the proposed project area--25 
points.
    (D) The anticipated development, expansion, or furtherance of 
business enterprises as a result of the proposed project will create 
and/or save jobs associated with the affected businesses. The number of 
jobs must be evidenced by a written commitment from the business to be 
assisted. One job per each $10,000 or less in grant funds expended--10 
points. One job per each $25,000 to $10,000 in grant funds expended--5 
points.
    (E) The proposed grant project is consistent with, and does not 
duplicate, economic development activities for the project area under an 
existing community or economic development plan covering the project 
area. If no local plan is in existence for the project area, an areawide 
plan may be used. The plan used must be adopted by the appropriate 
governmental officials/entities as the area's community or economic 
development plan. Appropriate plan references and copies of appropriate 
sections of the plan, as well as evidence of plan adoption by 
appropriate governmental officials, should be provided to FmHA or its 
successor agency under Public Law 103-354. Project is reflected in a 
plan--5 points.
    (F) Grant projects utilizing funds available under this subpart of 
less than $100,000--25 points, $100,000 to

[[Page 223]]

$200,000--15 points, more than $200,000 but not more than $500,000--10 
points.
    (G) The project will assist a small and emerging private business 
enterprise as described in Sec. 1942.305 (a)(2) of this subpart--10 
points.
    (v) Discretionary. In certain cases, when a grant is an initial 
grant for funding under this subpart and is not more than $500,000, FmHA 
or its successor agency under Public Law 103-354 may assign up to 50 
points in addition to those that may be assigned in paragraphs (b)(3)(i) 
through (iv) of this section. Use of these points must include a written 
justification, such as geographic distribution of funds, criteria which 
will result in substantial employment improvement, mitigation of 
economic distress of a community through the creation or saving of jobs, 
or emergency situations. For grants of less than $100,000--50 points; 
$100,000 to $200,000--30 points; more than $200,000, but not more than 
$500,000--20 points.

[50 FR 7296, Feb. 22, 1985, as amended at 53 FR 30247, Aug. 11, 1988; 55 
FR 134, Jan. 3, 1990; 57 FR 33099, July 27, 1992; 57 FR 35627, Aug. 10, 
1992; 67 FR 77908, Dec. 20, 2002]



Sec. 1942.306  Purposes of grants.

    (a) Grant funds may be used to finance and/or develop small and 
emerging private business enterprises in rural areas including, but not 
limited to, the following:
    (1) Acquisition and development of land, easements and rights-of-
way.
    (2) Construction, conversion, enlargement, repairs or modernization 
of buildings, plants, machinery, equipment, access streets and roads, 
parking areas, utilities, and pollution control and abatement 
facilities.
    (3) Loans for startup operating cost and working capital.
    (4) Technical assistance for private business enterprises.
    (5) Reasonable fees and charges for professional services necessary 
for the planning and development of the project including packaging. 
Services must be provided by individuals licensed in accordance with 
appropriate State accreditation associations.
    (6) Refinancing of debts exclusive of interest incurred by or on 
behalf of an association before an application for a grant when all of 
the following exist:
    (i) The debts were incurred for the facility or part thereof or 
service to be installed or improved with the grant, and
    (ii) Arrangements cannot be made with the creditors to extend or 
modify the terms of the existing debt.
    (7) Providing financial assistance to third parties through a loan.
    (8) Training, when necessary, in connection with technical 
assistance.
    (9) Production of television programs to provide information on 
issues of importance to farmers and rural residents.
    (10) Create, expand, and operate rural distance learning networks or 
rural learning programs, that provide educational instruction or job 
training instruction related to potential employment or job advancement 
for adult students.
    (b) Grants, except grants for television demonstration programs, may 
be made only when there is a reasonable prospect that they will result 
in development of small and emerging private business enterprises.
    (c) FmHA or its successor agency under Public Law 103-354 grant 
funds may be used jointly with funds furnished by the grantee or from 
other sources including FmHA or its successor agency under Public Law 
103-354 loan funds. Pursuant to Pub. L. 95-334, other departments, 
agencies, and executive establishments of the Federal Government may 
participate and provide financial and technical assistance jointly with 
FmHA or its successor agency under Public Law 103-354. The amount of 
participation by the other department, agency, or executive 
establishment shall only be limited by its authorities other than 
authorities which impose restrictions on joint financing.

[50 FR 7296, Feb. 22, 1985, as amended at 53 FR 30248, Aug. 11, 1988; 57 
FR 33100, July 27, 1992; 59 FR 26587, May 23, 1994]



Sec. 1942.307  Limitations on use of grant funds.

    (a) Funds will not be used:
    (1) To produce agriculture products through growing, cultivation and 
harvesting either directly or through horizontally integrated livestock 
operations except for commercial nurseries,

[[Page 224]]

timber operations or limited agricultural production related to 
technical assistance projects.
    (2) To finance comprehensive areawide type planning. This does not 
preclude the use of grant funds for planning for a given project.
    (3) For loans by grantees when the rates, terms and charges for 
those loans are not reasonable or would be for purposes not eligible 
under Sec. 1942.306 of this subpart.
    (4) For programs operated by cable television systems.
    (5) To fund a part of a project which is dependent on other funding 
unless there is a firm commitment of the other funding to ensure 
completion of the project.
    (6) To pay for technical assistance as defined in this subpart which 
duplicates assistance provided to implement an action plan funded by the 
Forest Service (FS) under the National Forest-Dependent Rural 
Communities Economic Diversification Act for 5 continuous years from the 
date of grant approval by the FS. To avoid duplicate assistance, the 
grantee shall coordinate with FS and Rural Business-Cooperative Service 
(RBS) to ascertain if a grant has been made in a substantially similar 
geographical or defined local area in a State for technical assistance 
under the above program. The grantee will provide documentation to FS 
and RBS regarding the contact with each agency. Under its program, the 
FS assists rural communities dependent upon national forest resources by 
establishing rural forestry and economic diversification action teams 
which prepare action plans. Action plans are intended to provide 
opportunities to promote economic diversification and enhance local 
economies dependent upon national forest resources.
    (b) At least 51 percent of the outstanding interest in the project 
has membership or is owned by those who are either citizens of the 
United States or reside in the United States after being legally 
admitted for permanent residence.

[53 FR 30248, Aug. 11, 1988, as amended at 55 FR 135, Jan. 3, 1990; 57 
FR 33100, July 27, 1992; 60 FR 52839, Oct. 11, 1995]



Sec. 1942.308  Regional Commission grants.

    (a) Grants are sometimes made by Federal Regional Commissions for 
projects eligible for FmHA or its successor agency under Public Law 103-
354 assistance. FmHA or its successor agency under Public Law 103-354 
has agreed to administer such funds in accordance with FmHA or its 
successor agency under Public Law 103-354 regulations and the 
requirements of the commission.
    (b) The transfer of funds from a Regional Commission to FmHA or its 
successor agency under Public Law 103-354 will be based on specific 
applications determined to be eligible for an authorized purpose in 
accordance with the requirements of FmHA or its successor agency under 
Public Law 103-354 and the Regional Commission.
    (c) ARC is authorized under the Appalachian Regional Development Act 
of 1965 (40 U.S.C. 1-405), as amended, to serve the Appalachian region. 
ARC grants are handled in accordance with the ARC Agreement which 
applies to all ARC grants administered by the Agency. Therefore, a 
separate Project Management Agreement between the Agency and ARC is not 
needed for each ARC grant.
    (d) Other Federal Regional Commissions are those authorized under 
title V of the Public Works and Economic Development Act of 1965. Grants 
by these commissions are handled in accordance with a separate Project 
Management Agreement between the respective Regional Commission and FmHA 
or its successor agency under Public Law 103-354 for each Commission 
grant administered by FmHA or its successor agency under Public Law 103-
354 (Guide 1 of this subpart). The agreement should be prepared by the 
FmHA or its successor agency under Public Law 103-354 State Director and 
the appropriate Commission official when the State Director receives a 
notice from the Commission of the amount of the grant to be made.

[45 FR 73637, Nov. 6, 1980, as amended at 62 FR 33510, June 19, 1997]

[[Page 225]]



Sec. 1942.309  [Reserved]



Sec. 1942.310  Other considerations.

    (a) Civil rights compliance requirements. All grants made under this 
subpart are subject to the requirements of title VI of the Civil Rights 
Act of 1964, which prohibits discrimination on the bases of race, color, 
and national origin as outlined in subpart E of part 1901 of this 
chapter. In addition, the grants made under this subpart are subject to 
the requirements of section 504 of the Rehabilitation Act of 1973, which 
prohibits discrimination on the basis of handicap, the requirements of 
the Age Discrimination Act of 1975, which prohibits discrimination on 
the basis of age and title III of the Americans with Disabilities Act, 
Public Law 101-336, which prohibits discrimination on the basis of 
disability by private entities in places of public accommodations. When 
FmHA or its successor agency under Public Law 103-354 is administering a 
Federal Regional Commission grant and no FmHA or its successor agency 
under Public Law 103-354 RBE/television demonstration grant funds are 
involved, the Federal Regional Commission may make its own determination 
of compliance with the above Acts, unless FmHA or its successor agency 
under Public Law 103-354 is designated compliance review 
responsibilities. FmHA or its successor agency under Public Law 103-354 
shall in all cases be made aware of any findings of discrimination or 
noncompliance with the requirements of the above Acts.
    (b) Environmental requirements--(1) General applicability. Unless 
specifically modified by this section, the requirements of subpart G of 
part 1940 of this chapter apply to this subpart. FmHA or its successor 
agency under Public Law 103-354 will give particular emphasis to 
ensuring compliance with the environmental policies contained in 
Sec. Sec. 1940.303 and 1940.304 in subpart G of part 1940 of this 
chapter. Although the purpose of the grant program established by this 
subpart is to improve business, industry and employment in rural areas, 
this purpose is to be achieved, to the extent practicable, without 
adversely affecting important environmental resources of rural areas 
such as important farmlands and forest lands, prime rangelands, wetlands 
and floodplains. Prospective recipients of grants, therefore, must 
consider the potential environmental impacts of their applications at 
the earliest planning stages and develop plans, grants and projects that 
minimize the potential to adversely impact the environment.
    (2) Technical assistance. The application for a technical assistance 
project is generally excluded from FmHA or its successor agency under 
Public Law 103-354's environmental review process by Sec. 
1940.310(e)(1) of subpart G of part 1940 of this chapter. However, as 
further specified in Sec. 1940.330 of subpart G of part 1940 of this 
chapter, the grantee for a technical assistance grant, in the process of 
providing technical assistance, must consider the potential 
environmental impacts of the recommendations provided to the recipient 
of the technical assistance.
    (3) Applications for Direct Construction Project. The application by 
a potential grantee who intends to directly use grant funds for a 
nontechnical assistance project, such as a construction project, shall 
be reviewed and processed under the applicable requirements of subpart G 
of part 1940 of this chapter.
    (4) Applications for Grants to Provide Financial Assistance to Third 
Party Recipients. As part of the preapplication, the applicant must 
provide a complete Form FmHA or its successor agency under Public Law 
103-354 1940-20, ``Request for Environmental Information,'' for each 
project specifically identified in its plan to provide financial 
assistance to third parties who will undertake eligible projects with 
such assistance. FmHA or its successor agency under Public Law 103-354 
will review the preapplication, supporting materials and any required 
Forms FmHA 1940-20 and initiate a Class II assessment for the 
preapplication. This assessment will focus on the potential cumulative 
impacts of the projects as well as any environmental concerns or 
problems that are associated with individual projects and that can be 
identified at this time from the information submitted. Because FmHA or 
its successor agency under Public Law 103-

[[Page 226]]

 354's approval of this type of grant application does not constitute 
FmHA or its successor agency under Public Law 103-354's commitment to 
the use of grant funds for any identified third party projects (see 
Sec. 1942.316 of this subpart), no public notification requirements for 
a Class II assessment will apply to the preapplication. After the grant 
is approved, each third party project to be assisted under the grant 
will undergo the applicable environmental review and public notification 
requirements in subpart G of part 1940 of this chapter, prior to FmHA or 
its successor agency under Public Law 103-354 providing its consent to 
the grantee to assist the third party project. If the preapplication 
reflects only one specific project which is specifically identified as 
the third party recipient for financial assistance, FmHA or its 
successor agency under Public Law 103-354 may perform the appropriate 
environmental assessment in accordance with the requirements of subpart 
G of part 1940 of this chapter, and forego initiating a Class II 
assessment with no public notification. However, the applicant must be 
advised that if the recipient or project changes after the grant is 
approved, the project to be assisted under the grant will undergo the 
applicable environmental review and public notification requirements in 
subpart G of part 1940 of this chapter.
    (5) Combined Applications. Whenever an applicant files a 
preapplication that includes a direct construction project and a plan to 
provide financial assistance to third parties who will undertake 
eligible projects, the following environmental requirements will apply.
    (i) The proposed direct construction project(s) will be reviewed 
under the requirements of paragraph (b)(3) of this section prior to 
authorization of the application.
    (ii) The plan to provide financial assistance to thrid parties will 
be reviewed and processed under the requirements of paragraph (b)(4) of 
this section. Additionally, the Class II assessment required for the 
plan shall address and analyze the cumulative impacts of all proposed 
projects, direct or third party, identified within the preapplication.
    (c) Excess capacity or transfer of employment. (1) If a proposed 
grant is for more than $1 million and will increase direct employment by 
more than 50 employees, the applicant will be requested to provide a 
written indication to FmHA or its successor agency under Public Law 103-
354 which will enable FmHA or its successor agency under Public Law 103-
354 to determine that the proposal will not result in a project which is 
calculated to, or likely to, result in:
    (i) The transfer of any employment or business activity from one 
area to another (this limitation shall not prohibit assistance for the 
expansion of an existing business entity through the establishment of a 
new branch, affiliate, or subsidiary of such entity if the expansion 
will not result in an increase in the unemployment in the area of 
original location or in any other area where such entity conducts 
business operations unless there is reason to believe that such 
expansion is being established with the intention of closing down the 
operations of the existing business entity in the area of its original 
location or in any other area where it conducts such operations), or
    (ii) An increase in the production of goods, materials, or 
commodities or the availability of services or facilities in the area, 
when there is not sufficient demand for such goods, materials, 
commodities, services, or facilities, to employ the efficient capacity 
of existing competitive commercial or industrial enterprises, unless 
such financial or other assistance will not have an adverse effect upon 
existing competitive enterprises in the area. The applicant's written 
indication will consist of a resolution from the applicant and Form FmHA 
or its successor agency under Public Law 103-354 449-22, ``Certificate 
of Non-Relocation and Market and Capacity Information Report,'' from 
each existing and future occupant of the site. The applicant may use 
guide 2 of this subpart as an example in preparing the resolution. 
Future occupants of the site must be certified by Department of Labor 
(DOL) as outlined in paragraph (c)(3) of this section for a period of 3 
years after the initial certification by DOL.

[[Page 227]]

    (2) The State Director will check each document for completeness and 
accuracy and, submit nine copies of each to the National Office for 
forwarding to DOL. The submittal to the National Office should be 
accompanied by a cover memorandum giving the amount and purpose of the 
grant. Information should not be submitted directly to DOL from the 
applicant or the State Office.
    (3) Grants shall not be made if the Secretary of Labor certifies 
within 30 days after the matter has been submitted by the Secretary of 
Agriculture that the provisions of Sec. 1942.310(c)(1) of this subpart 
have not been complied with. Information for obtaining this 
certification will be submitted in writing by the applicant to FmHA or 
its successor agency under Public Law 103-354. The information will be 
submitted to DOL by the FmHA or its successor agency under Public Law 
103-354 National Office. Grant approval may be given and funds may be 
obligated subject to the DOL certification being received provided FmHA 
or its successor agency under Public Law 103-354 has made its own 
separate determinations of (c)(1)(i) and (ii) of this section when the 
project is in excess of $1 million and affects over 50 employees.
    (4) When a grant is being administered for a Federal Regional 
Commission and no FmHA or its successor agency under Public Law 103-354 
grant funds are being used, the requirements for DOL determinations may 
be waived upon written request from the Commission. If the Commission so 
desires, the request will be included in the letter from the Commission 
to FmHA or its successor agency under Public Law 103-354 that gives 
notice of transfer of funds and conditions under which the funds are to 
be made available to the grantee. In such cases the letter of conditions 
from FmHA or its successor agency under Public Law 103-354 to the 
grantee will not include the requirement for DOL determinations.
    (d) Management assistance. Grant recipients will be supervised as 
necessary to assure that projects are completed in accordance with 
approved plans and specifications and that funds are expended for 
approved purposes. Grants made under this subpart will be administered 
under and are subject to 7 CFR part 3015, 7 CFR part 3016, and 7 CFR 
part 3017, as appropriate, and established FmHA or its successor agency 
under Public Law 103-354 guidelines.
    (e) National Historic Preservation Act of 1966. All projects will be 
in compliance with the National Historic Preservation Act of 1966 in 
accordance with subpart F of part 1901 of this chapter.
    (f) Uniform Relocation and Real Property Acquisition Policies Act. 
All projects must comply with the requirements set forth in title 7, 
subtitle A, part 21 of the Code of Federal Regulation.
    (g) Floodplains and wetlands. All projects must comply with 
Executive Order 11988 ``Floodplain Management'' and Executive Order 
119900 ``Protection of Wetlands.''
    (h) Flood or mudslide hazard area precautions. If the grantee 
financed project is in a flood or mudslide area, then flood or mudslide 
insurance must be provided.
    (i) Termination of Federal requirements. Once the grantee has 
provided assistance to projects from a revolving fund, in an amount 
equal to the grant provided by FmHA or its successor agency under Public 
Law 103-354, the requirements imposed on the grantee shall not be 
applicable to any new projects thereafter financed from the revolving 
fund. Such new projects shall not be considered as being derived from 
Federal funds.

(7 U.S.C. 1989; 42 U.S.C. 1480; 5 U.S.C. 301; sec. 10, Pub. L. 93-357, 
88 Stat. 392; 7 CFR 2.23; 7 CFR 2.70)

[45 FR 73637, Nov. 6, 1980, as amended at 47 FR 54423, Dec. 3, 1982; 49 
FR 3760, Jan. 30, 1984; 53 FR 30248, Aug. 11, 1988; 55 FR 135, Jan. 3, 
1990; 57 FR 33100, 33101, July 27, 1992]



Sec. 1942.311  Application processing.

    (a) Preapplications and applications. (1) The application review and 
approval procedures outlined in Sec. 1942.2 of subpart A of part 1942 
of this chapter will be followed as appropriate. The State Director 
should assist the applicant in application assembly and processing. The 
applicant shall use SF 424.1, ``Application for Federal Assistance (For 
Non-Construction),'' or SF 424.2, ``Application for Federal Assistance 
(For

[[Page 228]]

Construction),'' as applicable, when requesting financial assistance 
under this program.
    (2) Each application for assistance will be carefully reviewed in 
accordance with the priorities established in Sec. 1942.305(b)(3) of 
this subpart. A priority rating will be assigned to each application. 
Applications selected for funding will be based on the priority rating 
assigned each application and the total funds available. All 
applications submitted for funding should contain sufficient information 
to permit FmHA or its successor agency under Public Law 103-354 to 
complete a thorough priority rating.
    (b) Review of decision. When the District Director is informed that 
favorable action will not be taken on a preapplication or application, 
the applicant will be notified in writing of the reasons why the request 
was not favorably considered. The notification to the applicant will 
state that a review of this decision by FmHA or its successor agency 
under Public Law 103-354 may be requested by the applicant in accordance 
with subpart B of part 1900 of this chapter.

[45 FR 73637, Nov. 6, 1980, as amended at 50 FR 33332, Aug. 19, 1985; 53 
FR 30249, Aug. 11, 1988; 55 FR 135, Jan. 3, 1990; 57 FR 33101, July 27, 
1992]



Sec. 1942.312  [Reserved]



Sec. 1942.313  Plan to provide financial assistance to third parties.

    (a) For applications involving establishment of a revolving fund to 
provide financial assistance to third parties the applicant shall 
develop a plan which outlines the purpose and administration of the 
fund. The plan will include:
    (1) Planned projects to be financed.
    (2) Sources of all non RBE funds.
    (3) Amount of technical assistance (if any).
    (4) Purpose of the loans.
    (5) Number of jobs to be created/saved with each project.
    (6) Project priority and length of time involved in completion of 
each project.
    (7) Other information required by the State Office.
    (b) Each third party project receiving funds will be reviewed for 
eligibility. When the applicant does not have a list of projects to be 
completed, the applicant should advise the FmHA or its successor agency 
under Public Law 103-354 at the time a preapplication is submitted.

[55 FR 135, Jan. 3, 1990, as amended at 57 FR 33101, July 27, 1992]



Sec. 1942.314  Grants to provide financial assistance to third parties, 
television demonstration projects, and technical assistance programs.

    For applications involving a purpose other than a construction 
project to be owned by the applicant, the applicant shall develop a 
Scope of Work. The Scope of Work will be used to measure the performance 
of the grantee. As a minimum, the Scope of Work should contain the 
following:
    (a) The specific purposes for which grant funds will be utilized, 
i.e., Technical Assistance, Revolving Fund, etc.
    (b) Timeframes or dates by which action surrounding the use of funds 
will be accomplished.
    (c) Who will be carrying out the purpose for which the grant is made 
(key personnel should be identified).
    (d) How the grant purposes will be accomplished.
    (e) Documentation regarding the availability and amount of other 
funds to be used in conjunction with the funds from the RBE/television 
demonstration program.
    (f) For grants involving a revolving fund the scope of work should 
include those items listed in paragraphs (a) through (e) of this section 
as well as the following:
    (1) Information which will establish/identify the need for the 
revolving loan fund.
    (2) Financial statements which will demonstrate the financial 
ability of the applicant to administer the revolving loan fund. As a 
minimum the financial statements will include:
    (i) Balance sheet
    (ii) Income statement
    (3) Detail on the applicants experience in operating a revolving 
loan fund.
    (g) For technical assistance and television demonstration program 
projects, the scope of work should include a budget based on the budget 
contained

[[Page 229]]

in the application, modified or revised as appropriate, which includes 
salaries, fringe benefits, consultant costs, indirect costs, and other 
appropriate direct costs for the project.

[55 FR 135, Jan. 3, 1990, as amended at 57 FR 33101, July 27, 1992]



Sec. 1942.315  Docket preparation and Letter of Conditions.

    (a) The applicable provisions of Sec. 1942.5 of subpart A of part 
1942 of this chapter relating to preparation of loan dockets will be 
followed in preparing grant dockets.
    (b) The State Director or the State Director's designated 
representative will prepare a Letter of Conditions outlining the 
conditions under which the grant will be made. It will include those 
matters necessary to assure that the proposed development is completed 
in accordance with approved plans and specifications, that grant funds 
are expended for authorized purposes, and that the terms of the Scope of 
Work and requirements as prescribed in parts 3015 and 3016 of 7 CFR are 
complied with. The Letter of Conditions will be addressed to the 
applicant, signed by the State Director or other designated FmHA or its 
successor agency under Public Law 103-354 representative, and mailed or 
handed to appropriate applicant officials. Each Letter of Conditions 
will contain the following paragraphs.

    ``This letter established conditions which must be understood and 
agreed to by you before further consideration may be given to the 
application.''
    ``This letter is not to be considered as grant approval nor as a 
representation as to the availability of funds. The docket may be 
completed on the basis of a grant not to exceed $------.''
    ``Please complete and return the attached Form FmHA or its successor 
agency under Public Law 103-354 1942-46, `Letter of Intent to Meet 
Conditions,' if you desire further consideration be given your 
application.''

    Other items in the Letter of Conditions should include those 
relative to: Maximum amount of grant, contributions, final plans and 
specifications, construction contract documents and bidding, required 
project audit, evidence of compliance with all applicable Federal, 
State, and local requirements, closing instructions, DOL certifications, 
compliance with any required environmental mitigation measures, and 
other requirements including those of Regional Commissions when a grant 
is being made by a Regional Commission.

[50 FR 7296, Feb. 22, 1985, as amended at 53 FR 30249, Aug. 11, 1988; 57 
FR 33101, July 27, 1992]



Sec. 1942.316  Grant approval, fund obligation and third party financial 
assistance.

    (a) Grant approval. FmHA or its successor agency under Public Law 
103-354 State Directors are authorized to approve grants made in 
accordance with this subpart and subpart A of part 1901 of this chapter.
    (b) Fund obligation and approval announcement. Funds will be 
obligated and approval announcement made in accordance with the 
provisions of Sec. 1942.5(d) of subpart A of part 1942 of this chapter.
    (c) Third party financial assistance. Approval of a grant to an 
applicant who will use grant funds to provide financial assistance to a 
third party does not constitute approval of the projects financed by the 
grantee. The review, approval and disbursement of funds for specific 
projects financed by grantees will be completed in accordance with 
applicable sections of this subpart.

[45 FR 73637, Nov. 6, 1980, as amended at 47 FR 36413, Aug. 20, 1982; 53 
FR 30250, Aug. 11, 1988]



Sec. Sec. 1942.317-1942.320  [Reserved]



Sec. 1942.321  Subsequent grants.

    Subsequent grants will be processed in accordance with this subpart.



Sec. Sec. 1942.322-1942.347  [Reserved]



Sec. 1942.348  Exception authority.

    The Administrator may, in individual cases, make an exception to any 
requirement or provision of this subpart which is not inconsistent with 
the authorizing statute, an applicable law or decision of the 
Comptroller General, if the Administrator determines that application of 
the requirement or provision would adversely affect the Government's 
interest and show how the

[[Page 230]]

adverse impact will be eliminated or minimized if the exception is made.

[55 FR 135, Jan. 3, 1990]



Sec. 1942.349  Forms, guides, and attachments.

    Guides 1 and 2 of this subpart, Attachment 1 and Forms referenced 
(all available in any Rural Development office) are for use in 
administering RBE/television demonstration grants.

[62 FR 33510, June 19, 1997]



Sec. 1942.350  OMB control number.

    The collection of information requirements in this regulation have 
been approved by the Office of Management and Budget and have been 
assigned OMB control number 0575-0132. Public reporting burden for this 
collection of information is estimated to vary from one-half to 40 hours 
per response, with an average of 1.8 hours per response including time 
for reviewing instruction, searching existing data sources, gathering 
and maintaining the data needed, and completing and reviewing the 
collection of information. Send comments regarding this burden estimate 
or any other aspect of the collection of information, including 
suggestions for reducing this burden, to Department of Agriculture, 
Clearance Officer, OIRM, room 404-W, Washington, DC 20250; and to the 
Office of Information and Regulatory Affairs, Office of Management and 
Budget, Washington, DC 20503.

[57 FR 33101, July 27, 1992]

Guide 1 to Subpart G of Part 1942--Project Management Agreement Between 
the -------- Regional Commission and the Farmers Home Administration or 
Its Successor Agency Under Public Law 103-354, Department of Agriculture

(Grantee)_______________________________________________________________
County,_________________________________________________________________
Page No.________________________________________________________________
I. Introduction
    A. The ---------- Regional Commission is providing a (basic or 
supplemental) grant for (purpose) ---------- to (grantee) ----------, 
and the U.S. Department of Agriculture, Farmers Home Administration 
(FmHA) or its successor agency under Public Law 103-354 has approved and 
will administer that grant. The FmHA or its successor agency under 
Public Law 103-354 has determined that funds (can or cannot) be made 
available under its funding program for this fiscal year for the 
project. The project does meet all the requisites for assistance under 
section 310(B) of the Consolidated Farm and Rural Development Act, as 
amended (7 USC 1926). In order to accomplish these purposes, the ------
---- Regional Commission's Federal Cochairman and the FmHA or its 
successor agency under Public Law 103-354 State Director hereby enter 
into this Memorandum of Understanding which is in accordance with the 31 
USC 686.
    B. This agreement is intended to cover the application phase, 
construction phase, and final audit.
II. General
    A. Project Cost
    The project costs for the purposes of this agreement shall include 
the costs of construction, technical services, legal services, land 
acquisition, permits and rights-of-way, interest during construction and 
contingencies.
    B. Grant
    The ---------- Regional Commission shall make a (basic or 
supplemental) grant of $------ up to but not exceeding ----% of the 
total cost of the project. These funds will be transferred to the 
Treasury Account of the Farmers Home Administration or its successor 
agency under Public Law 103-354 by Standard Form 1151, ``Nonexpenditure 
Transfer Authorization.''
    C. The undersigned FmHA or its successor agency under Public Law 
103-354 State Director on behalf of FmHA or its successor agency under 
Public Law 103-354, in concurring to this Project Management Agreement, 
hereby assures the Federal Cochairman that:
    1. The estimated cost of the project is reasonable and the (basic or 
supplemental) grant, with the funds to be supplied by the applicant, 
are, in its judgment, sufficient to complete the project.
    2. The funds to be supplied by the applicant are available or FmHA 
or its successor agency under Public Law 103-354 is reasonably satisfied 
that the applicant has the capability of supplying such funds.
    3. FmHA or its successor agency under Public Law 103-354 is 
reasonably satisfied that the facility will be properly and efficiently 
administered, operated, and maintained and that the applicant will 
provide sufficient funds to assure the successful and continuing 
operation of the facility.
    D. The (grantee) ---------- is subject to Executive Order 11246 and 
will be required

[[Page 231]]

to evidence compliance by execution of the following:
    1. Equal Opportunity Agreement--Form FmHA or its successor agency 
under Public Law 103-354 400-1
    2. Nondiscrimination Agreement--Form FmHA or its successor agency 
under Public Law 103-354 400-4
    E. The (grantee) ---------- shall execute assurances of 
nonrelocation. (If applicable.)
III. Construction Management
    A. The forms and format for the documents shall conform to the 
requirements in subpart A of part 1942 of this chapter. Generally, the 
following items shall be included:
    1. Contract Documents
    2. Specifications
    3. Plans
    B. FmHA or its successor agency under Public Law 103-354 will 
approve the plans and specifications.
    C. FmHA or its successor agency under Public Law 103-354 will obtain 
a certification of adequacy from the Federal Environmental Protection 
Agency (include only when applicable).
    D. FmHA or its successor agency under Public Law 103-354 will obtain 
a non-pollution certificate from the (state) ---------- (agency) ------
---- (include only when applicable).
    E. FmHA or its successor agency under Public Law 103-354 will make 
monthly inspections.
    F. Contract change orders will not become effective until approved 
by FmHA or its successor agency under Public Law 103-354.
    G. Final inspection will be conducted by FmHA or its successor 
agency under Public Law 103-354.
IV. Financial Management
    A. Financial management of the project shall be according to subpart 
A of part 1942 of this chapter.
    B. FmHA or its successor agency under Public Law 103-354 will 
provide the ---------- Regional Commission with a copy of the audit 
report.
    C. If actual costs fall below the costs on which the grant was 
calculated, the Federal and non-Federal shares will be reduced 
proportionately.
    D. FmHA or its successor agency under Public Law 103-354 will 
conform to the financial reporting requirements for transferred funds as 
required by the attached copy of ``Reporting of Funds Transfer by 
Participating Agencies.''
V. Compensation
    Services rendered by FmHA or its successor agency under Public Law 
103-354 for the processing and administration of Commission grants in 
cases where neither FmHA or its successor agency under Public Law 103-
354 loan nor grant funds are involved shall be on a reimbursable basis. 
Reimbursement will be based on five percent of the amount of the grant 
up to $50,000 and an additional one percent of any amount over the first 
$50,000 of the Commission grant. The full amount of the reimbursement 
will be transferred to FmHA or its successor agency under Public Law 
103-354 at the time the grant funds are transferred to FmHA or its 
successor agency under Public Law 103-354.
VI. No provision in this agreement shall abrogate the legal requirements 
          of administrative responsibilities as set forth in the 
          Consolidated Farm and Rural Development Act or section 509 of 
          the Public Works and Economic Development Act of 1965, as 
          amended.
For the ---------- Regional Commission
(name)__________________________________________________________________
Federal Cochairman______________________________________________________
------------, 197--
For the Farmers Home Administration or its successor agency under Public 
Law 103-354, USDA
(name)__________________________________________________________________
State Director__________________________________________________________
------------, 197--

              Guide 2 to Subpart G of Part 1942--Resolution

    Whereas the ------------ (hereinafter called public body) desires to 
obtain financial assistance from the Farmers Home Administration or its 
successor agency under Public Law 103-354, United States Department of 
Agriculture, pursuant to section 310 B of the Consolidated Farm and 
Rural Development Act, for the purpose of providing ------------ 
(describe briefly the nature of the project) ------------ (herein 
referred to as the facility) and as a condition to and in consideration 
of receiving financial assistance from the Farmers Home Administration 
or its successor agency under Public Law 103-354 this resolution is 
being adopted.
    Therefore, in consideration of the premises the public body agrees 
as follows:
    1. No private business enterprises shall be allowed to use or occupy 
the facility if such use or occupancy would be calculated to, or is 
likely to, result in the transfer from one area to another of any 
employment or business activity provided by operations of the private 
business enterprises. This limitation shall not be construed to prohibit 
use and enjoyment of the facility by such private business entity 
through the establishment of a new branch, affiliate, or subsidiary if 
the establishment of such branch, affiliate, or subsidiary will not 
result in the increase in unemployment in the area of original location 
(or in any other area where such entity conducts business operations), 
unless there

[[Page 232]]

is reason to believe that such branch, affiliate, or subsidiary is being 
established with the intention of closing down the operations of the 
existing business entity in the area of its original location (or in any 
other area where it conducts such operation).
    2. No private business enterprises shall be allowed to use or occupy 
the facilities if such use or occupancy would be calculated to, or is 
likely to, result in an increase in the production of goods, materials, 
or commodities, or the availability of services or facilities in the 
area, where there is not sufficient demand for such goods, materials, 
commodities, services or facilities to employ the sufficient capacity of 
existing competitive commercial or industrial enterprises, unless such 
financial or other assistance will not have an adverse affect upon 
existing competitive enterprises in the area.
    3. Prior to allowing the use or occupancy of the facilities by any 
private business enterprise, the public body shall clear such use or 
occupancy with the Manpower Administration, Department of Labor, 
Washington, DC, by submitting information required by the Department of 
Labor for certification under the Act. This information shall be 
submitted to Farmers Home Administration or its successor agency under 
Public Law 103-354 for transmittal to the Department of Labor. The 
public body agrees to make no final commitment with any private business 
enterprise regarding such use or occupancy if the Department of Labor 
issues a negative certification under the Act. The public body shall 
obtain prior clearance in this matter for a period of three years after 
the date of an affirmative certification by the Department of Labor on 
the application for financial assistance now pending before the Farmers 
Home Administration or its successor agency under Public Law 103-354.
    This resolution shall be in force and effect immediately.
    The voting was yeas ----, nays ----, absent ----.
(Name of public body)___________________________________________________
by (Name and Title)_____________________________________________________

                              Certification

    I the undersigned as (Secretary) (Town Clerk) of the ---------- do 
hereby certify that the foregoing resolution was duly adopted at a 
meeting of ---------- duly called and held on the ---- day of ------ 
19--, and that such resolution has not been rescinded or amended in any 
way. Dated this ---- day of ------, 19--.

(Seal)

                       (Town Clerk) (Secretary) of

Subpart H [Reserved]



PART 1943_FARM OWNERSHIP, SOIL AND WATER AND RECREATION--Table of Contents




     Subpart A_Direct Farm Ownership Loan Policies, Procedures, and 
                             Authorizations

Sec.
1943.1 Introduction.
1943.2 Objectives.
1943.3 Management assistance.
1943.4 Definitions.
1943.5 [Reserved]
1943.6 Credit elsewhere.
1943.7 For the State of Hawaii--FO loans on leasehold interest on real 
          property.
1943.8-1943.9 [Reserved]
1943.10 Preference.
1943.11 Receiving and processing applications.
1943.12 Farm ownership loan eligibility requirements.
1943.13 Outreach program for applicants/borrowers who are members of 
          socially disadvantaged groups.
1943.14 Downpayment FO loan program for beginning farmers or ranchers.
1943.15 [Reserved]
1943.16 Loan purposes.
1943.17 Loan limitations.
1943.18 Rates and terms.
1943.19 Security.
1943.20-1943.22 [Reserved]
1943.23 General provisions.
1943.24 Special requirements.
1943.25 Options, planning, and appraisals.
1943.26 Planning and performing farm development.
1943.27 Relationship with other lenders.
1943.28 FmHA or its successor agency under Public Law 103-354 loans 
          simultaneous with other lenders.
1943.29 Relationship between FSA loans, direct and guaranteed.
1943.30-1943.32 [Reserved]
1943.33 Loan approval or disapproval.
1943.34 Requesting title service.
1943.35 Action after loan approval.
1943.36-1943.37 [Reserved]
1943.38 Loan closing actions.
1943.39-1943.41 [Reserved]
1943.42 Servicing.
1943.43 Subsequent FO loans.
1943.44 Subordinations.
1943.45-1943.49 [Reserved]
1943.50 State supplements.

Exhibit A to Subpart A--Farmers Home Administration or Its Successor 
          Agency Under Public Law 103-354 Loans to Entrymen on 
          Unpatented Public Lands
Exhibit B to Subpart A--Target Participation Rates for Farmers Home 
          Adminstration (FmHA) or Its Successor Agency Under Public Law 
          103-354 Direct Farm Ownership (FO) Loans

[[Page 233]]

          to Members of Socially Disadvantaged Groups

     Subpart B_Direct Soil and Water Loan Policies, Procedures, and 
                             Authorizations

1943.51 Introduction.
1943.52 Objectives.
1943.53 Management assistance.
1943.54 Definitions.
1943.55 [Reserved]
1943.56 Credit elsewhere.
1943.57 Preference.
1943.58-1943.60 [Reserved]
1943.61 Receiving and processing applications.
1943.62 Soil and water loan eligibility requirements.
1943.63-1943.65 [Reserved]
1943.66 Loan purposes.
1943.67 Loan limitations.
1943.68 Rates and terms.
1943.69 Security.
1943.70-1943.72 [Reserved]
1943.73 General provisions.
1943.74 Special requirements.
1943.75 Options, planning, and appraisals.
1943.76 Planning and performing development.
1943.77 Relationship with other lenders.
1943.78-1943.82 [Reserved]
1943.83 Loan approval or disapproval.
1943.84 Requesting title service.
1943.85 Action after loan approval.
1943.86-1943.87 [Reserved]
1943.88 Loan closing actions.
1943.89-1943.91 [Reserved]
1943.92 Servicing.
1943.93 Subsequent SW loans.
1943.94 Subordinations.
1943.95-1943.99 [Reserved]
1943.100 State supplements.

Exhibit A to Subpart B--Memorandum of Understanding Between the Bureau 
          of Reclamation, Department of the Interior and the Farmers 
          Home Administration or Its Successor Agency Under Public Law 
          103-354, Department of Agriculture

   Subpart C_Small Farmer Outreach Training and Technical Assistance 
                                 Program

1943.101 General.
1943.102 Objectives.
1943.103 Project period.
1943.104 Definitions.
1943.105 Eligible entities.
1943.106-1943.110 [Reserved]
1943.111 Process for consideration.
1943.112-1943.114 [Reserved]
1943.115 Authorized use of funds.
1943.116-1943.125 [Reserved]
1943.126 Other applicable Federal statutes and regulations that apply.
1943.127 Fund disbursement.
1943.128 Financial management systems and reporting requirements.
1943.129-1943.135 [Reserved]
1943.136 Standards of conduct for employees of recipient.
1943.137 Monitoring compliance and penalty for noncompliance.
1943.138-1943.140 [Reserved]
1943.141 Nondiscrimination.
1943.142 Environmental requirements.
1943.143-1943.150 [Reserved]

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

    Source: 43 FR 55895, Nov. 29, 1978, unless otherwise noted.



     Subpart A_Direct Farm Ownership Loan Policies, Procedures, and 
                             Authorizations

    Source: 53 FR 35692, Sept. 15, 1988, unless otherwise noted.

    Editorial Note: Nomenclature changes to subpart A appear at 68 FR 
7697, Feb. 18, 2003.



Sec. 1943.1  Introduction.

    This subpart contains regulations for making initial and subsequent 
direct Farm Ownership (FO) loans. FO loans may be made to eligible 
farmers and ranchers, and entities that will manage and operate not 
larger than family farms. It is the policy of Farm Service Agency (FSA) 
or its successor agency under Public Law 103-354 to make loans to any 
qualified applicant without regard to race, color, religion, sex, 
national origin, marital status, age or physical/mental handicap 
provided the applicant can execute a legal contract. Any processing or 
servicing activity conducted pursuant to this subpart involving 
authorized assistance to FmHA or its successor agency under Public Law 
103-354 employees, members of their families, known close relatives, or 
business or close personal associates, is subject to the provisions of 
subpart D of part 1900 of this chapter. Applicants for this assistance 
are required to identify any known relationship or association with an 
FmHA or its successor agency under Public Law 103-354 employee. See 
exhibit A of this subpart for making FP loans to entrymen on unpatented 
public lands.

[53 FR 35692, Sept. 15, 1988, as amended at 58 FR 227, Jan. 5, 1993; 58 
FR 48282, Sept. 15, 1993; 61 FR 35925, July 9, 1996; 68 FR 7697, Feb. 
18, 2003]

[[Page 234]]



Sec. 1943.2  Objectives.

    The basic objective of the FO loan program is to provide credit and 
management assistance to eligible farmers and ranchers to become owners-
operators of family-sized farms or to continue such operations when 
credit is not available elsewhere. Agency or its successor agency under 
Public Law 103-354 assistance enables family-farm operators to use their 
land, labor and other resources, and to improve their living and 
financial conditions so that they can obtain credit elsewhere.

[53 FR 35692, Sept. 15, 1988, as amended at 61 FR 35925, July 9, 1996]



Sec. 1943.3  Management assistance.

    Supervision will be provided borrowers to the extent necessary to 
achieve the objectives of the loan and to protect the interests of the 
Government in accordance with subpart B of part 1924 of this chapter. 
Such assistance consists of farm, home and nonfarm planning, 
recordkeeping; analyzing the farm and any nonfarm business; and giving 
management advice.



Sec. 1943.4  Definitions.

    As used in this subpart, the following definitions apply:
    Additional security. Any security beyond that which is required to 
adequately secure the loan.
    Agency. The Farm Service Agency, its country and State committees 
and their personnel, and any successor agency.
    Approval official. A field official who has been delegated loan and 
grant approval authorities within applicable loan programs, subject to 
the dollar limitations contained in tables available in any FmHA or its 
successor agency under Public Law 103-354 office.
    Beginning farmer or rancher. A beginning farmer or rancher is an 
individual or entity who:
    (a) Meets the loan eligibility requirements for FO loan assistance 
in accordance with Sec. 1943.12 of this subpart.
    (b) Has not operated a farm or ranch, or who has operated a farm or 
ranch for not more than 10 years. This requirement applies to all 
members of an entity.
    (c) Will materially and substantially participate in the operation 
of the farm or ranch.
    (1) In the case of a loan made to an individual, individually or 
with the immediate family, material and substantial participation 
requires that the individual provide substantial day-to-day labor and 
management of the farm or ranch, consistent with the practices in the 
county or State where the farm is located.
    (2) In the case of a loan made to an entity, all members must 
materially and substantially participate in the operation of the farm or 
ranch. Material and substantial participation requires that the 
individual provides some amount of the management, or labor and 
management necessary for day-to-day activities, such that if the 
individual did not provide these inputs, operation of the farm or ranch 
would be seriously impaired.
    (d) Agrees to participate in any loan assessment, borrower training, 
and financial management programs required by FmHA or its successor 
agency under Public Law 103-354 regulations.
    (e) Except for OL loan purposes, does not own real farm or ranch 
property or who, directly or through interests in family farm entities, 
owns real farm or ranch property, the aggregate acreage of which does 
not exceed 30 percent of the average farm or ranch acreage of the farms 
or ranches in the county where the property is located. If the farm is 
located in more than one county, the average farm acreage of the county 
where the applicant's residence is located will be used in the 
calculation. If the applicant's residence is not located on the farm or 
if the applicant is an entity, the average farm acreage of the county 
where the major portion of the farm is located will be used. The average 
county farm or ranch acreage will be determined from the most recent 
Census of Agriculture developed by the U.S. Department of Commerce, 
Bureau of the Census. State Directors will publish State supplements 
containing the average farm or ranch acreage by county.
    (f) Demonstrates that the available resources of the applicant and 
spouse (if any) are not sufficient to enable the

[[Page 235]]

applicant to enter or continue farming or ranching on a viable scale.
    (g) In the case of an entity:
    (1) All the members are related by blood or marriage.
    (2) All the stockholders in a corporation are qualified beginning 
farmers or ranchers.
    Borrower. An individual or entity which has outstanding obligations 
to the FmHA or its successor agency under Public Law 103-354 under any 
Farmer Programs loan(s), without regard to whether the loan has been 
accelerated. A borrower includes all parties liable for the FmHA or its 
successor agency under Public Law 103-354 debt, including collection-
only borrowers, except for debtors whose total loans and accounts have 
been voluntarily or involuntarily foreclosed or liquidated, or who have 
been discharged of all FmHA or its successor agency under Public Law 
103-354 debt.
    Cooperative. An entity which has farming as its purpose and whose 
members have agreed to share the profits of the farming enterprise. The 
entity must be recognized as a farm cooperative by the laws of State(s) 
in which the entity will operate a farm.
    Corporation. For the purposes of this regulation, a private domestic 
corporation created and organized under the laws of the State(s) in 
which the entity will operate a farm.
    Cosigner. A party who joins in the execution of a promissory note to 
assure its repayment. The cosigner becomes jointly and severally liable 
to comply with the terms of the note. In the case of an entity 
applicant, the cosigner cannot be a member, partner, joint operator, or 
stockholder of the entity.
    Entity. Cooperative, corporation, partnership, joint operation, 
trust, or limited liability company.
    Family farm. A farm which:
    (a) Will produce agricultural commodities for sale in sufficient 
quantities so that it is recognized in the community as a farm rather 
than a rural residence.
    (b) Will provide enough agricultural income by itself, including 
rented land, or together with any other dependable income, to enable the 
borrower to:
    (1) Pay necessary family and operating expenses;
    (2) Maintain essential chattel and real property; and
    (3) Pay debts.
    (c) Is managed by:
    (1) The borrower, when a loan is made to an individual.
    (2) The members responsible for operating the farm when a loan is 
made to a cooperative, corporation, partnership, or joint operation.
    (d) Has a substantial amount of the labor requirements for the farm 
enterprise provided by:
    (1) The borrower and any family member for a loan made to an 
individual.
    (2) The members responsible for operating the farm, along with the 
families of these individuals, for a loan made to an entity.
    (e) May require a reasonable amount of full-time hired labor and 
seasonal labor during peakload periods.
    Farm. A tract or tracts of land, improvements and other 
appurtenances considered to be farm property which is used or will be 
used in the production of crops or livestock, including the production 
of fish under controlled conditions, for sale in sufficient quantities 
so that the property is recognized as a farm rather than a rural 
residence. It may also include a residence which, although physically 
separate from the farm acreage, is ordinarily treated as a part of the 
farm in the local community.
    Feasible plan. A feasible plan is a plan based upon the applicant/
borrower's records that show the farming operation's actual production 
and expoenses. These records will be used along with realistic 
anticipated prices, including farm program payments when available, to 
determine that the income from the farming operation, along with any 
other reliable off farm income, will provide the income necessary for an 
applicant/borrower to at least be able to:
    (a) Pay all operating expenses and all taxes which are due during 
the projected farm budget period.
    (b) Meet necessary payments of all debts.

[[Page 236]]

    (c) Provide living expenses for the family members of an individual 
borrower or a wage for the farm operator in the case of a cooperative, 
corporation, partnership or joint operation borrower which is in 
accordance with the essential family needs. Family members include the 
individual borrower or farm operator in the case of an entity, and the 
immediate members of the family which resides in the same household.
    Fish farming. The production of fish, mollusks or crustaceans (or 
other invertebrates) under controlled conditions in ponds, lakes, 
streams, or similar holding areas. This involves feeding, tending, 
harvesting and other activities as are necessary to properly raise and 
market the products.
    Joint operation. Individuals that have agreed to operate a farm or 
farms together as a business unit. The real and personal property is 
owned separately or jointly by the individuals. A husband and wife who 
want to apply for a loan together will be considered a joint operation.
    Limited resource applicant. An applicant who is a farmer or rancher 
and is an owner or operator of a small or family farm (a small farm is a 
marginal family farm), including a new owner or operator, with a low 
income who demonstrates a need to maximize farm or ranch income. A 
limited resource applicant must meet the eligibility requirements for a 
farm ownership or operating loan, but due to low income, cannot pay the 
regular interest rate on such loans. Due to the complex nature of the 
problems facing this applicant, special help will be needed and more 
supervisory assistance will be required to assure reasonable prospects 
for success. The applicant may face such problems as underdeveloped 
managerial ability, limited education, low-producing farm due to lack of 
development or improved production practices and other related factors. 
The applicant will not have nor expect to obtain, without the special 
help and low-interest loan, the income needed to have a reasonable 
standard of living when compared to other residents of the community.
    Majority interest. Any individual or a combination of individuals 
owning more than a 50 percent interest in a cooperative, corporation, 
joint operation or partnership.
    Market value. The amount which a willing buyer would pay a willing 
but not forced seller in a completely voluntary sale.
    Mortgage. Any form of security interest or lien upon any rights or 
interest in real property of any kind. In Louisiana and Puerto Rico the 
term mortgage also refers to any security interest in chattel property.
    Nonfarm enterprise. Any nonfarm business enterprise, including 
recreation, which is closely associated with the farm operations and 
located on or adjacent to the farm and provides income to supplement 
farm income. This may include, but is not limited to, such enterprises 
as raising earthworms, exotic birds, tropical fish, dogs and horses for 
nonfarm purposes, welding shops, roadside stands, boarding horses and 
riding stables.
    Participated in the business operations of a farm or ranch. An 
applicant has participated in the business operations of a farm or ranch 
if the applicant has:
    (1) Been the owner, manager or operator of a farm business for the 
year's complete production and marketing cycle as evidenced by tax 
returns, FSA farm records or similar documentation;
    (2) Been employed as a farm manager or farm management consultant 
for the year's complete production and marketing cycle; or
    (3) Participated in the operation of a farm by virtue of being 
raised on a farm or having worked on a farm with significant 
responsibility for the day-to-day decisions for the year's complete 
production and marketing cycle, which may include selection of seed 
varieties, weed control programs, input suppliers, or livestock feeding 
programs or decisions to replace or repair equipment.
    Partnership. An entity consisting of individuals who have agreed to 
operate a farm. The entity must be recognized as a partnership by the 
laws of the State(s) in which the entity will operate a farm and the 
entity must be authorized to own both real and personal property and to 
incur debts in its own name.

[[Page 237]]

    Primary security. Any real estate and chattel security which is 
required to adequately secure the loan. This is not to be confused with 
basic security, as defined in Sec. 1962.4 of subpart A of part 1962 of 
this chapter.
    Related by blood or marriage. As used in this subpart, individuals 
who are connected to one another as husband, wife, parent, child, 
brother or sister.
    Security. Property of any kind subject to a real or personal 
property lien. Any reference to collateral or security property shall be 
considered a reference to the term security.
    Socially disadvantaged applicant (SDA). An applicant who is a member 
of a socially disadvantaged group whose members have been subjected to 
racial, ethnic, or gender prejudice because of their identity as a 
member of a group, without regard to their individual qualities. For 
entity SDA applicants, the majority interest in the entity must be held 
by socially disadvantaged individuals. The Agency has identified 
socially disadvantaged groups as Women, Blacks, American Indians, 
Alaskan Natives, Hispanics, Asians, and Pacific Islanders.
    State Beginning Farmer program. Any program that is carried out by 
or under contract with a State and designed to assist persons in 
obtaining the financial assistance necessary to establish and/or 
maintain viable farming or ranching operations.
    State or United States. The United States itself, each of the 
several States, the Commonwealth of Puerto Rico, the Virgin Islands of 
the United States, Guam, American Samoa, and the Commonwealth of the 
Northern Mariana Islands.
    Undivided right. An undivided right of title, or a title to an 
undivided portion of an estate, that is owned by one of two or more 
tenants in common or joint tenants before division.

[53 FR 35692, Sept. 15, 1988, as amended at 57 FR 19524, May 7, 1992; 58 
FR 26681, May 5, 1993; 58 FR 48287, Sept. 15, 1993; 58 FR 58648, Nov. 3, 
1993; 61 FR 35925, July 9, 1996; 62 FR 9355, Mar. 3, 1997; 62 FR 28619, 
May 27, 1997; 68 FR 7698, Feb. 18, 2003; 68 FR 62224, Nov. 3, 2003; 69 
FR 5263, Feb. 4, 2004]



Sec. 1943.5  [Reserved]



Sec. 1943.6  Credit elsewhere.

    The applicant shall certify in writing on the appropriate forms, and 
the County Supervisor shall verify and document, that adequate credit 
elsewhere is not available, with or without a guarantee or a 
subordination, to finance the applicant's actual needs at reasonable 
rates and terms, taking into consideration prevailing private and 
cooperative rates and terms in the community in or near where the 
applicant resides for loans for similar purposes and periods of time.
    (a) If the County Supervisor receives letters or other written 
evidence from a lender(s) indicating that the applicant is unable to 
obtain satisfactory credit, these will be included in the loan docket.
    (b) If the applicant cannot qualify for the needed credit from the 
lenders contacted, but one or more of them has indicated they would 
provide credit with an FmHA or its successor agency under Public Law 
103-354 guarantee or the County Supervisor determines that the applicant 
can obtain a guaranteed loan, the applicant will be advised to file an 
application with that lender(s) so that a guaranteed FO loan request can 
be processed by the lender for consideration by FmHA or its successor 
agency under Public Law 103-354.
    (c) Property and interests in property owned and income received by 
an individual applicant, or an entity applicant and all of its members 
as individuals, will be considered and used by an applicant in obtaining 
credit from other sources.
    (d) Applicants and borrowers will be encouraged to supplement farm 
ownership loans with credit from other credit sources to the extent 
economically feasible and in accordance with sound financial management 
practices.

[53 FR 35692, Sept. 15, 1988, as amended at 68 FR 7698, Feb. 18, 2003]



Sec. 1943.7  For the State of Hawaii--FO loans on leasehold interest on 
real property.

    The term owner-operator as used in this subpart shall include in the 
State of Hawaii the lessee-operator of real property in any case in 
which the

[[Page 238]]

County Supervisor determines that such real property cannot be acquired 
in fee simple by the lessee-operator. The leasehold must provide 
adequate security for the loan. A leasehold is the right to use property 
for a specific period of time under conditions provided in a lease 
agreement. The determination of value will be made by an appraisal of 
the present market value of the leasehold by an FmHA or its successor 
agency under Public Law 103-354 employee designated to appraise farm 
real estate. The terms and conditions of the lease must be such as to 
allow the lessee-operator to have a reasonable probability of 
accomplishing the objectives and repayment of the loan. The FmHA or its 
successor agency under Public Law 103-354 Hawaii State Office will issue 
an amendment to its State supplement for this subpart providing the 
necessary requirements (including forms) for obtaining the required 
security. The amendment to the State supplement and forms, and any 
revisions to them, but have prior National Office approval before being 
issued.



Sec. Sec. 1943.8-1943.9  [Reserved]



Sec. 1943.10  Preference.

    (a) In addition to the preference established in subpart A of part 
1910 of this chapter, an application for a loan for land purchase from 
an applicant who (1) has a dependent family, or (2) is an owner of 
livestock and farm implements necessary to successfully carry on farming 
operations, or (3) is able to make down payments will be given 
preference over one from an applicant who does not meet any of these 
criteria.
    (b) The portion of a State's farm ownership (FO) loan fund 
allocation designated for applicants who are members of socially 
disadvantaged groups will be used exclusively to assist them in 
purchasing farmland. However, this requirement does not preclude the use 
of the State's regular allocation of FO funds for loans for other 
authorized FO loan purposes to applicants who are members of socially 
disadvantaged groups. (See exhibit B of this subpart, ``Target 
Participation Rates for Farmers Home Administration (FmHA) or its 
successor agency under Public Law 103-354 Direct Farm Ownership (FO) 
Loans and Acquired Property Outreach Program for Members of Socially 
Disadvantaged Groups''.)

[53 FR 35692, Sept. 15, 1988, as amended at 55 FR 21527, May 25, 1990]



Sec. 1943.11  Receiving and processing applications.

    Applications for FO loans will be received and processed as provided 
in subpart A of part 1910 of this chapter, with consideration given to 
the requirements in exhibit M of subpart G of part 1940 of this chapter. 
Socially disadvantaged individuals will be provided the technical 
assistance necessary when applying for FO loans or other assistance to 
acquire inventory farmland. Such assistance shall include, but not be 
limited to, completion of application and farm and home planning.

[55 FR 21528, May 25, 1990]



Sec. 1943.12  Farm ownership loan eligibility requirements.

    In accordance with the Food Security Act of 1985 (Pub. L. 99-198), 
after December 23, 1985, if an individual or any member of an entity is 
convicted under Federal or State law of planting, cultivating, growing, 
producing, harvesting or storing a controlled substance (see 21 CFR part 
1308, which is exhibit C to subpart A of part 1941 of this chapter and 
is available in any FmHA or its successor agency under Public Law 103-
354 office, for the definition of controlled substance) prior to loan 
approval in any crop year, the individual or entity shall be ineligible 
for a loan for the crop year in which the individual or member, 
stockholder, partner or joint operator of the entity was convicted and 
the four succeeding crop years. Applicants will attest on Form FmHA or 
its successor agency under Public Law 103-354 410-1, ``Applications for 
FmHA or its successor agency under Public Law 103-354 Services,'' that 
as individuals or that its members, if an entity, have not been 
convicted of such crime after December 23, 1985. In addition, the 
following requirements must be met:
    (a) An individual must:

[[Page 239]]

    (1) Be a citizen of the United States, a United States non-citizen 
national, or a qualified alien under applicable Federal immigration 
laws. United States non-citizen nationals and qualified aliens must 
provide the appropriate documentation as to their immigration status as 
required by the United States Department of Homeland Security, Bureau of 
Citizenship and Immigration Services.
    (2) Possess the legal capacity to incur the obligations of the loan.
    (3) Have sufficient applicable educational and/or on the job 
training or farming experience in managing a farm or ranch which 
indicates the managerial ability necessary to assure reasonable 
prospects of success in the proposed plan of operation.
    (4) Be unable to obtain sufficient credit elsewhere to finance 
actual needs at reasonable rate and terms, taking into consideration 
prevailing private and cooperative rates and terms in the community in 
or near which the applicant resides for loans for similar purposes and 
periods of time.
    (5) Be the owner-operator of not larger than a family farm after the 
loan is closed (in the case of a limited resource applicant see Sec. 
1943.4 of this subpart).
    (6) Have participated in the business operations of a farm or ranch 
for at least 3 years out of the 10 years prior to the date the 
application is submitted and satisfy at least one of the following 
conditions:
    (i) Meet the definition of a beginning farmer or rancher.
    (ii) The applicant, or anyone who will execute the promissory note, 
has not had direct FO loans outstanding for more than a total of 10 
years prior to the date that the new FO loan is closed.
    (iii) Have never received a direct FO loan.
    (7) Transition rule. This applies to applicants with direct FO loans 
outstanding on April 4, 1996.
    (i) If the applicant, or anyone who executed the promissory note, 
had direct FO loans outstanding for less than 5 years, the applicant is 
eligible for new direct FO loans through April 4, 2006.
    (ii) If the applicant, or anyone who executed the promissory note, 
had direct FO loans outstanding for 5 years or more, those parties are 
eligible for new direct FO loans through April 4, 2001.
    (8) Have not caused the Agency a loss by receiving debt forgiveness 
on all or a portion of any direct or guaranteed loan made under the 
authority of the Consolidated Farm and Rural Development Act (CONACT) by 
debt-write down, write-off, compromise provisions of section 331 of the 
CONACT, adjustment, reduction, charge-off or discharge in bankruptcy or 
through any payment of a guaranteed loss claim under the same 
circumstances.
    (9) Not be delinquent on any non-tax Federal debt or FSA guaranteed 
debt. This restriction will not apply if the Federal delinquency is 
cured on or before the loan closing date.
    (b) A cooperative, corporation, partnership, or joint operation 
must:
    (1) Be unable to obtain sufficient credit elsewhere to finance 
actual needs at reasonable rates and terms, taking into account 
prevailing private and cooperative rates and terms in or near the 
community for loans for similar purposes and periods of time. This 
applies to the entity and all of its members as individuals.
    (2) Be controlled by farmers or ranchers engaged primarily and 
directly in farming or ranching in the United States, after the loan is 
made.
    (3) Be the owner-operator of not larger than a family farm after the 
loan is closed (except for limited resource applicants and as provided 
for in paragraph (b)(7) of this section) and consist of members who are 
individuals and not cooperative(s), corporations(s), partnership(s) or 
joint operation(s).
    (4) If the members holding a majority interest are related by blood 
or marriage, they must meet the following requirements:
    (i) For an entity applicant, the majority interest of the entity 
must be held by members who are United States citizens, United States 
non-citizen nationals, or qualified aliens under applicable Federal 
immigration laws. United States non-citizen nationals and qualified 
aliens must provide the appropriate documentation as to their

[[Page 240]]

permanent immigration status as required by the United States Department 
of Homeland Security, Bureau of Citizenship and Immigration Services.
    (ii) They must have sufficient applicable educational and/or on the 
job training or farming experience in managing a farm or ranch which 
indicates the managerial ability necessary to assure reasonable 
prospects of success in the proposed plan of operation.
    (iii) At least one member must operate the family farm.
    (iv) The entity must own and operate the farm and be authorized to 
do so in the State(s) in which the farm is located.
    (5) If the members holding a majority interest are not related by 
blood or marriage:
    (i) The requirements of paragraphs (b)(4)(i), (ii) and (iv) of this 
section must be met.
    (ii) They and the entity itself must own and operate the family 
farm.
    (6) If applying as a limited resource applicant, as defined in Sec. 
1943.4 of this subpart:
    (i) The requirements of paragraphs (b)(4)(i), (ii) and (iv) of this 
section must be met by the entity applicant and all its members.
    (ii) The entity and all the members must own or operate a small or 
family farm; and at least one member must operate the farm.
    (7) If each member's ownership interest does not exceed the family 
farm definition limits, their collective interests can exceed the family 
farm definition limits only if:
    (i) All of the members of the entity are related by blood or 
marriage,
    (ii) All of the members are or will be operators of the entity, and
    (iii) The majority interest holders of the entity meet the 
requirements of paragraphs (b)(4)(i), (ii) and (iv) of this section.
    (8) Have one or more members, constituting a majority interest in 
the business entity, who have participated in the business operations of 
a farm or ranch for at least 3 years out of the 10 years prior to the 
date the application is submitted and satisfy at least one of the 
following conditions:
    (i) Meet the definition of a beginning farmer or rancher.
    (ii) The applicant, or anyone who will execute the promissory note, 
has not had direct FO loans outstanding for more than a total of 10 
years prior to the date that the new FO loan is closed.
    (iii) Have never received a direct FO loan.
    (9) Transition rule. This applies to business entity applicants with 
direct FO loans outstanding on April 4, 1996.
    (i) If the applicant, or anyone who executed the promissory note, 
had direct FO loans outstanding for less than 5 years, the applicant is 
eligible for new direct FO loans through April 4, 2006.
    (ii) If the applicant, or anyone who executed the promissory note, 
had direct FO loans outstanding for 5 years or more, those parties are 
eligible for new direct FO loans through April 4, 2001.
    (10) Have not caused the Agency a loss by receiving debt forgiveness 
on all or a portion of any direct or guaranteed loan made under the 
authority of the Consolidated Farm and Rural Development Act (CONACT) by 
debt-write down, write-off, compromise provisions of section 331 of the 
CONACT, adjustment, reduction, charge-off or discharge in bankruptcy or 
through any payment of a guaranteed loss claim under the same 
circumstances.
    (11) Not be delinquent on any non-tax Federal debt or FSA guaranteed 
debt. This restriction will not apply if the Federal delinquency is 
cured on or before the loan closing date. This eligibility restriction 
applies to the entity and all of its members.
    (c) Borrower training. The applicant must agree to meet the training 
requirements of Sec. 1924.74 of subpart B of part 1924 of this chapter 
unless a waiver is granted in accordance with that section. In the case 
of a cooperative, corporation, partnership, or joint operation, any 
individual member holding a majority interest in the operation or who is 
operating the farm must agree to complete the training or qualify for 
the waiver on behalf of the entity. However, if one entity member is 
solely responsible for financial or production management, then only 
that entity member will be required to complete the training in that 
area for the entity

[[Page 241]]

or qualify for a partial waiver. If the financial and production 
functions of the farming operation are shared, the knowledge and skills 
of the individual(s) with the responsibility of production and/or 
financial management of the operation will be considered in the 
aggregate for granting a waiver or requiring that training be completed. 
If a waiver is not granted, these individuals will be required to 
complete the training in accordance with their responsibilities. If the 
applicant has previously been required to obtain training, the applicant 
must be enrolled in and attending, or have satisfactorily completed, the 
training required.

[53 FR 35692, Sept. 15, 1988, as amended at 55 FR 21528, May 25, 1990; 
56 FR 3972, Feb. 1, 1991; 58 FR 69199, Dec. 30, 1993; 62 FR 9355, Mar. 
3, 1997; 62 FR 28619, May 27, 1997; 68 FR 7698, Feb. 18, 2003; 68 FR 
62224, Nov. 3, 2003; 69 FR 5263, Feb. 4, 2004]



Sec. 1943.13  Outreach program for applicants/borrowers who are members 
of socially disadvantaged groups.

    The purpose of this section is to establish procedures and 
responsibilities for carrying out the Farmers Home Administration (FmHA) 
or its successor agency under Public Law 103-354 Farm Ownership (FO) 
Direct Loan and Acquired Property Outreach Program to Applicants/ 
Borrowers who are members of socially disadvantaged groups.
    (a) Policy. The FmHA or its successor agency under Public Law 103-
354 FO Loan Outreach Program is a concerted effort to:
    (1) Surface and correct problems and obstacles that prevent the 
participation of members of socially disadvantaged groups in the FO loan 
program.
    (2) Target direct FO loan funds to members of socially disadvantaged 
groups to ensure they are provided access to FO loan funds, as outlined 
in exhibit B of this subpart.
    (3) Provide pamphlets, publications and general information on the 
direct FO loan program to members of socially disadvantaged groups.
    (4) Provide assistance to members of socially disadvantaged groups 
to assure that the application process is expedient and complete. 
Assistance will be provided to borrowers of socially disadvantaged 
groups through special farm initiatives to assure that sound operating 
procedures are implemented to enhance the borrower's chances for 
successfully achieving the objectives of the direct FO loan program.
    (b) Field action. The State Director shall designate the Farmer 
Programs Chief to coordinate the Farmers Home Administration (FmHA) or 
its successor agency under Public Law 103-354 Farm Ownership (FO) Loan 
Outreach Program to members of socially disadvantaged groups. The 
State's Civil Rights Coordinator will act as a resource person for this 
program. The Farmer Programs Chief will:
    (1) Maintain close liaison with local, State and national 
organizations serving social disadvantaged groups to ascertain the 
reasons for the lack of participation of members of socially 
disadvantaged groups in FmHA or its successor agency under Public Law 
103-354 direct FO loan program.
    (2) Work closely with County Supervisors, District Directors, and 
National Office officials to remove obstacles and solve problems 
relating to the making of direct FO loans and credit sales to members of 
socially disadvantaged groups.
    (3) Attend meetings of local, State, and Federal Governments and 
private organizations concerned with the economic and social development 
of members of socially disadvantaged groups.
    (4) Train members of socially disadvantaged groups, interested 
individuals and groups involved with socially disadvantaged activities, 
in the packaging of applications and distribution of materials for use 
in the direct FO loan and credit sale programs.
    (5) Provide pamphlets and publications on the direct FO loan and 
credit sale program.
    (6) Initiate special media outreach activities to inform members of 
socially disadvantaged groups of the availability of acquired farmland 
and of targeted and non-targeted direct FO loan funds.
    (i) Information must be provided to community and farm oriented 
organizations, agriculture colleges, other USDA agencies and community 
leaders who are active in the farming area.
    (ii) Newspaper articles, radio announcements and public television

[[Page 242]]

broadcasts will be used to publicize the FmHA or its successor agency 
under Public Law 103-354 Farm Ownership (FO) Direct Loan and Acquired 
Property Outreach Program to members of socially disadvantaged groups. 
State Directors and required to publicize the program at least twice 
annually in a newspaper most used by members of socially disadvantaged 
groups. This effort will be monitored by the National Office through 
Coordinated Assessment Reviews (CARs) and special planned visits to 
selected States.
    (c) Reports. (1) State Directors will keep the Assistant 
Administrator, Farmer Programs, advised of any problems encountered in 
carrying out the FmHA or its successor agency under Public Law 103-354 
Farm Ownership (FO) Direct Loan and Acquired Property Outreach Program 
to Members of Socially Disadvantaged Groups which prevent their 
participation in this program.
    (2) Each State Director will make a semi-annual memorandum report to 
the Assistant Administrator, Farmer Programs, on May 1 and September 30 
of each fiscal year on the Farm Ownership (FO) Direct Loan and Acquired 
Property Outreach Program to members of Socially Disadvantaged Groups. 
The report will summarize accomplishments on the items set forth in 
Sec. 1943.13(b) of this subpart. The following should also be included 
in the report:
    (i) The State and County of each direct FO loan and credit sale made 
to applicant/borrowers who are members of socially disadvantaged groups.
    (ii) Number of applications for direct initial and subsequent FO 
loans and credit sales received during the period.
    (iii) Number of direct initial and subsequent FO loans and credit 
sales approved during the period.
    (iv) Number of applications on hand for direct initial and 
subsequent FO loans and credit sales at the end of the reporting 
periods.
    (v) Number of announcements placed in local newspapers, on radio and 
public television.
    (vi) Amount of each initial and subsequent direct FO loans and 
credit sales approved during the reporting periods.
    (vii) Total dollar value of direct initial and subsequent FO loans 
and credit sales approved during the reporting periods.

[53 FR 35692, Sept. 15, 1988, as amended at 57 FR 19524, May 7, 1992; 62 
FR 28619, May 27, 1997]



Sec. 1943.14  Downpayment FO loan program for beginning farmers or 
ranchers.

    (a) Objectives. The basic objective of the downpayment FO loan 
program is to provide credit and assistance to eligible beginning 
farmers or ranchers to become owner-operators of family-size farms, 
including inventory farm property. Supervision will be provided 
borrowers to the extent necessary to achieve the objectives of the loan 
and to protect the interests of the Government in accordance with 
subpart B of part 1924 of this chapter.
    (b) Eligibility requirements. Applicants must meet the ``beginning 
farmer or rancher'' definition in Sec. 1943.4 of this subpart to 
qualify for a downpayment loan.
    (c) Loan purposes. Loans may be made to provide an amount equal to 
40 percent of the purchase price or appraised value, whichever is lower, 
of the farm or ranch to be acquired, unless the applicant requests a 
lesser amount. The remaining balance of the purchase price or appraised 
value, whichever is lower, not to exceed 50 percent, may be guaranteed 
by the Agency.
    (d) Loan limitations. In addition to the loan limitations stated in 
Sec. 1943.17 of this subpart, the loan will not be approved if:
    (1) The applicant cannot provide at least 10 percent of the purchase 
price of the farm or ranch.
    (2) The purchase price or appraised value, whichever is lower, 
exceeds $250,000.
    (3) Financing provided by FmHA or its successor agency under Public 
Law 103-354 and other credit exceeds 90 percent of the purchase price or 
appraised value, whichever is lower.
    (4) The other financing for the balance of the purchase price is 
amortized for less than 30 years and/or a balloon payment is scheduled 
within the 15 years of the Agency loan.
    (e) Rates and terms--(1) Interest rate. Interest rates are specified 
in exhibit B of FmHA Instruction 440.1 (available in

[[Page 243]]

any FmHA or its successor agency under Public Law 103-354 office). The 
interest rate for beginning farmer or rancher downpayment loans shall be 
4 percent.
    (2) Terms of loans. (i) Each loan made under this section shall be 
amortized over a period of 15 years or less, at the option of the 
borrower.
    (ii) Loans under this section shall be repaid in equal annual 
installments.
    (f) Security. (1) Each loan will be secured by a lien on the 
property being acquired with loan funds. Security requirements under 
Sec. 1943.19 of this subpart do not apply under this section.
    (2) FmHA or its successor agency under Public Law 103-354's secured 
interest in the farm or ranch being acquired will be junior only to the 
party providing the financing for the balance of the purchase price to 
the applicant.
    (3) The borrower must agree to obtain permission from the County 
Supervisor prior to granting any additional security interest in the 
farm or ranch as stated in Sec. 1965.16 of subpart A of part 1965 of 
this chapter.
    (g) Relationship between FmHA or its successor agency under Public 
Law 103-354 and a State Beginning Farmer program. State Directors are 
delegated authority to execute a Memorandum of Understanding (MOU) with 
any State expressing an interest in coordinating financial assistance to 
beginning farmers or ranchers. The MOU must be executed within 60 days 
of the State notifying the State Director in writing of such interest, 
and will be developed in accordance with FmHA Guide Letter 1943-A-1 
(available in any FmHA or its successor agency under Public Law 103-354 
office). Under the MOU, FmHA or its successor agency under Public Law 
103-354 will agree to provide qualified beginning farmers or ranchers 
with a downpayment loan under this section and/or a guarantee of the 
balance of the purchase price provided by the State program. This 
agreement will be subject to applicable law, loan approval requirements, 
and the availability of funds. FmHA or its successor agency under Public 
Law 103-354 will not charge a fee to obtain or retain a guarantee in 
connection with any joint funding under the MOU. If any changes are made 
to the MOU, the Regional Office of the General Counsel (OGC) will be 
consulted prior to signing the MOU. States will send copies of signed 
MOUs to the attention: Director, Farmer Programs Loan Making Division, 
National Office.
    (h) Program outreach. The State Director shall be responsible for 
publicizing the Downpayment FO Loan program, with special emphasis on 
Socially Disadvantaged Individuals, and facilitating the transfer of 
retirees farms or ranchers to eligible FO applicants within the 
respective State. Program outreach will include:
    (1) Maintaining close liaison and attending meetings with local, 
State and national organizations serving the agricultural community.
    (2) Providing information to community and farm oriented 
organizations, agriculture colleges, other USDA Agencies and community 
leaders who are active in the farming area.
    (3) Use of newspaper articles, radio announcements, and/or public 
television announcements.

[58 FR 48287, Sept. 15, 1993, as amended at 68 FR 7698, Feb. 18, 2003]



Sec. 1943.15  [Reserved]



Sec. 1943.16  Loan purposes.

    Loan funds may only be used to:
    (a) Acquire or enlarge a farm or ranch. Examples of items that the 
Agency may authorize the use of FO funds for include, but are not 
limited to, the purchase of easements, the applicant's portion of land 
being subdivided, purchase of cooperative stock, appraisal and survey 
fees, and participation in special FO loan programs of this subpart. 
Down payments are authorized as a loan purpose subject to the following:
    (1) A deed is obtained and the transaction is properly documented by 
debt and security instruments.
    (2) Any prior liens meet the FO security requirements for the 
Agency's junior lien position.
    (3) For contract purchases, purchase contracts must properly 
obligate the buyer and seller to fulfill the terms of the contract, 
provide the buyer with possession, control and beneficial use of the 
property, and entitle the buyer to marketable title upon fulfillment of

[[Page 244]]

the contract terms. The deed must be held in trust by a bonded agent 
until transferred to the buyer. Upon buyer's default, the seller must 
give the Agency written notice of the default and a reasonable 
opportunity to cure the default. Any sums advanced by the Agency must be 
repaid by the borrower.
    (b) Make capital improvements. Examples of items that the Agency may 
authorize the use of FO funds for include, but are not limited to, the 
construction, purchase and improvement of farm dwellings, service 
buildings, and facilities that can be made fixtures to the real estate. 
In the case of leased property, the borrower must have a lease to ensure 
use of the improvement over its useful life or to ensure that the 
borrower receives compensation for any remaining economic life upon 
termination of the lease.
    (c) Promote soil and water conservation and protection. Examples 
include the correction of well-defined, hazardous environmental 
conditions, and the construction or installation of tiles, terraces, and 
waterways.
    (d) Pay closing costs.
    (e) Refinance a bridge loan if the following conditions are met:
    (1) The applicant obtained the loan to be refinanced to purchase a 
farm after a direct FO was approved;
    (2) Direct FO funds were not available to fund the loan at the time 
of approval;
    (3) The loan to be refinanced is temporary financing; and
    (4) The loan was made by a commercial or cooperative lender.

[62 FR 9356, Mar. 3, 1997, as amended at 62 FR 28619, May 27, 1997; 68 
FR 7698, Feb. 18, 2003]



Sec. 1943.17  Loan limitations.

    (a) An FO loan will not be approved if:
    (1) The total outstanding direct FO, Soil and Water (SW) or 
Recreation (RL) loan principal balance including the new loan owed by 
the applicant will exceed the lesser of $200,000 or the market value of 
the farm or other security.
    (2) The noncontiguous character of a farm containing two or more 
tracts is such that an efficient farming operation cannot be conducted 
due to the distance between tracts or due to inadequate rights-of-way or 
public roads between tracts.
    (3) The limitation found in Sec. 1943.29 (b) of this subpart is 
exceeded.
    (b) Loans my not be made for any purpose that will contribute to 
excessive erosion of highly erodible land or to the conversion of 
wetlands to produce an agricultural commodity, as further explained in 
exhibit M to subpart G of part 1940 of this chapter. Refer to FmHA 
Instruction 2000-LL, ``Memorandum of Understanding Between FmHA or its 
successor agency under Public Law 103-354 and U.S. Fish and Wildlife 
Service,'' for assistance in implementation.
    (c) The purpose of the loan is to finance a nonfarm enterprise.

[53 FR 35692, Sept. 15, 1988, as amended at 58 FR 48282, 48288, Sept. 
15, 1993; 59 FR 25800, May 18, 1994; 62 FR 9356, Mar. 3, 1997; 68 FR 
62224, Nov. 3, 2003]



Sec. 1943.18  Rates and terms.

    (a) Terms of loans. Each loan will be scheduled for repayment over a 
period not to exceed 40 years from the date of the note or such shorter 
period as may be necessary to assure the loan will be adequately 
secured, taking into account the probable depreciation of the security. 
The loan approval official will also consider the repayment ability of 
the applicant, as reflected in the completed Form FmHA or its successor 
agency under Public Law 103-354 431-2, ``Farm and Home Plan,'' or other 
similar plan of operation acceptable to FmHA or its successor agency 
under Public Law 103-354, when setting the term. In any case, there must 
be an interest payment scheduled at least annually in accordance with 
the FMI for Form FmHA or its successor agency under Public Law 103-354 
1940-17, ``Promissory Note.'' Loans may have reduced annual installments 
scheduled, of at least partial interest, for the first five years.
    (b) Interest rate. Upon request of the applicant, the interest rate 
charged by FmHA or its successor agency under Public Law 103-354 will be 
the lower of the interest rates in effect at the time of loan approval 
or loan closing. If the applicant does not indicate a choice, the loan 
will be closed at the interest

[[Page 245]]

rate in effect at the time of loan approval. Interest rates are 
specified in exhibit B of FmHA Instruction 440.1 (available in any FmHA 
or its successor agency under Public Law 103-354 office) for the type of 
assistance involved. A lower rate is established in this exhibit for a 
limited resource applicant subject to the following:
    (1) The applicant meets the conditions of the definition for a 
limited resource applicant set forth in Sec. 1943.4 of this subpart.
    (2) The farm business plan shows that installments at the higher 
rate, along with other debts, cannot be paid during the period of the 
plan.
    (3) A borrower with limited resource interest rates will be reviewed 
each year at the time the analysis is conducted (see Sec. 1924.55 of 
subpart B of part 1924 of this chapter) and at any time a servicing 
action such as reamortization or deferral is taken to determine what 
interest rate should be charged. The rate may be increased in increments 
of whole numbers until it reaches the current regular interest rate for 
the loan at the time of the rate increase. (See Sec. 1951.25 subpart A 
of part 1951 of this chapter.)
    (c) Interest rate with joint financing. When the applicant obtains 
financing from a private lender equivalent to 50 percent or more of the 
total funds needed, the interest rate on the direct FO loan will be 
fixed at a rate determined by the Agency Administrator but at not less 
than 4 percent for the term of the loan. The current rate is available 
in FSA offices.

[53 FR 35692, Sept. 15, 1988, as amended at 57 FR 18677, Apr. 30, 1992; 
61 FR 35925, July 9, 1996; 62 FR 9356, Mar. 3, 1997]



Sec. 1943.19  Security.

    Each FO loan will be secured by real estate. Chattels and/or other 
security will only be taken as security as set forth in paragraphs (b) 
and (c) of this section. The total amount of security required will be 
the lesser of either 150 percent of the loan amount, or all real estate 
owned by the applicant. A loan will be considered adequately secured 
when the real estate security for the loan is at least equal to the loan 
amount. Security in excess of 150 percent of the loan amount will only 
be taken when it is not practical to separate the property, i.e., a 
tract of land. All security taken, along with the value of the security, 
will be documented in the case file. This information will be obtained 
from values established in accordance with Sec. 1943.25 of this 
subpart. If the applicant disagrees with the real estate values 
established, FmHA or its successor agency under Public Law 103-354 will 
accept an appraisal from the applicant, obtained at the applicant's 
expense, if the appraisal meets all FmHA or its successor agency under 
Public Law 103-354 requirements. In cases when a loan is being made in 
conjunction with a servicing action, the security requirements as stated 
in subpart S of part 1951 of this chapter will prevail. In unusual 
cases, the loan approval official may require a cosigner in accordance 
with Sec. 1910.3(d) of subpart A of part 1910 of this chapter or a 
pledge of security from a third party. A pledge of security is 
preferable to a cosigner.
    (a) Real estate security. (1) A mortgage will be taken on all real 
estate acquired, or improved with FO funds, and by any additional real 
estate security needed to meet the requirements of this section.
    (2) Security will also include items which are considered part of 
the farm and ordinarily pass with the title to the farm such as, but not 
limited to, assignments of leases or leasehold interests having 
mortgageable value, water rights, easements, rights-of-way, revenues, 
and royalties from mineral rights.
    (3) A first lien is required on real estate, when available. In 
addition, loans will be secured by a junior lien on real estate 
provided:
    (i) Prior lien instruments do not contain provisions for future 
advances (except for taxes, insurance, other costs needed to protect the 
security, or reasonable foreclosure costs), cancellation, summary 
forfeiture, or other clauses that may jeopardize the Government's 
interest or the applicant's ability to pay the FO loan unless any such 
undesirable provisions are limited, modified, waived or subordinated 
insofar as the Government is concerned.

[[Page 246]]

    (ii) Agreements are obtained from prior lienholders to give notice 
of foreclosure to FmHA or its successor agency under Public Law 103-354 
whenever State law or other arrangements do not require such a notice. 
Any agreements needed will be obtained as provided in subpart B of part 
1927 of this chapter, except as modified by the ``Memorandum of 
Understanding-FCA-FmHA or its successor agency under Public Law 103-
354,'' FmHA Instruction 2000-R (available in any FmHA or its successor 
agency under Public Law 103-354 office).
    (4) Advice on obtaining security will be received from OGC when 
necessary.
    (5) The designated attorney, title insurance company, or the OGC 
will furnish advice on obtaining security when a life estate is 
involved.
    (6) Any loan of $10,000 or less may be secured by the best lien 
obtainable without title clearance or legal service as required in 
subpart B of part 1927 of this chapter provided the County Supervisor 
believes from a search of the County records that the applicant can give 
a mortgage on the farm. This exception to title clearance will not apply 
when:
    (i) The loan is made simultaneously with that of another lender.
    (ii) Land is to be purchased.
    (iii) This provision conflicts with program regulations of any other 
FmHA or its successor agency under Public Law 103-354 loan being made 
simultaneously with the FO loan.
    (7) The Departments of Agriculture and Interior have agreed that 
FmHA or its successor agency under Public Law 103-354 loans may be made 
to Native Americans and secured by real estate when title is held in 
trust or restricted status. When security is so taken on real estate 
held in trust or restricted status:
    (i) The applicant will request the Bureau of Indian Affairs (BIA) to 
furnish Title Status Reports to the County Supervisor; and
    (ii) The BIA approval will be obtained on the mortgage after it has 
been signed by the applicant and any other party whose signature is 
required.
    (b) Chattel security. Ordinarily, FO loans will not be secured by 
chattels. However, loans will be secured by chattels as follows:
    (1) A first lien will be taken on equipment or fixtures purchased 
with loan funds whenever such property cannot be included in the real 
estate lien and the best lien obtainable on all real estate does not 
provide primary security for the loan.
    (2) Chattel security will be obtained when the best lien obtainable 
on all real estate does not provide primary security for the loan.
    (3) The same collateral may be used to secure two or more loans 
made, direct or guaranteed, to the same borrower. Therefore, junior 
liens on chattels may be taken when there is enough equity in the 
property. However, when possible, a first lien on selected chattel items 
should be obtained.
    (4) Chattel security liens will be obtained and kept effective, as 
provided in subpart A of part 1962 of this chapter.
    (c) Other security. (1) A pledge of real estate by a third party may 
be taken as security when the best lien obtainable on all real estate 
does not provide primary security for the loan.
    (2) Other property may be taken as security when the best lien 
obtainable on all real estate does not provide primary security for the 
loan. Examples of such security include but are not limited to cash 
surrender value of life insurance, securities, patents and copyrights, 
and membership or stock in cooperatives and associations.
    (d) Exceptions. The County Supervisor will clearly document in the 
file when security is not taken for any of the following reasons:
    (1) A lien will not be taken on property that could have significant 
environmental problems/costs (e.g., known or suspected underground 
storage tanks or hazardous wastes, contingent liabilities, wetlands, 
endangered species, historic properties). Guidance is provided in part 
II, item H of exhibit A of FmHA Instruction 1922-E (available in any 
FmHA or its successor agency under Public Law 103-354 office) as to the 
action to be taken when the appraiser indicates that the property is 
subject to any hazards, detriments or limiting conditions.

[[Page 247]]

    (2) A lien will not be taken on property that cannot be made subject 
to a valid lien.
    (3) A lien will not be taken on the applicant's personal residence 
and appurtenances, when the residence is located on a separate parcel 
and the farm tract being financed, improved, or otherwise used for 
collateral provides primary security for the loan(s).
    (4) A lien will not be taken on subsistence livestock; cash or 
special cash collateral accounts to be used for the farming operation or 
for necessary family living expenses; all types of retirement accounts; 
personal vehicles necessary for family living or farm operating 
purposes; household goods; and small tools and small equipment, such as 
hand tools, power lawn mowers, and other similar items not needed for 
security purposes.
    (5) A lien will not be taken on marginal land, including timber, 
when a softwood timber (ST) loan is secured by such land.
    (e) State supplements. Each State will supplement this section to 
provide instructions on forms and other requirements to be met in order 
to obtain the required security. In each State where loans will be made 
to Indians holding title to land in trust or restricted status, FmHA or 
its successor agency under Public Law 103-354 and BIA will decide on a 
way to exchange necessary information, and the procedure to be followed 
will be set out in a State supplement.
    (f) Special security requirements. When FO loans are made to 
eligible entities that consist of members who are presently indebted for 
an FO loan(s) as individual(s) or when FO loans are made to eligible 
individuals who are members of an entity which is presently indebted for 
an FO loan(s), security must consist of:
    (1) Chattel and/or real estate security that is separate and 
identifiable from the security pledged to FmHA or its successor agency 
under Public Law 103-354 for any other farmer program direct or 
guaranteed loans.
    (2) Different lien positions on real estate are considered separate 
and identifiable collateral.
    (3) The outstanding amount of loans made may not exceed the value of 
the collateral used.
    (g) Same security. Except as provided in paragraph (f) of this 
section, when an FO loan (direct or guaranteed) is made to a borrower 
who has other FmHA or its successor agency under Public Law 103-354 
loans, the same real estate collateral may secure more than one loan so 
long as the outstanding loan amount does not exceed the total value of 
the security.

[53 FR 35692, Sept. 15, 1988, as amended at 57 FR 18677, Apr. 30, 1992; 
59 FR 22961, May 4, 1994; 59 FR 25800, May 18, 1994; 62 FR 9356, Mar. 3, 
1997]



Sec. Sec. 1943.20-1943.22  [Reserved]



Sec. 1943.23  General provisions.

    (a) Flood or mudslide hazard areas. Flood or mudslide hazards will 
be evaluated whenever the farm to be financed is located in special 
flood or mudslide prone areas as designated by the Federal Emergency 
Management Agency (FEMA). Subpart B of part 1806 of this chapter (FmHA 
Instruction 426.2) as well as subpart G of part 1940 of this chapter 
will be complied with when loan funds are used to construct or improve 
buildings located in such areas. This will not prevent making loans on 
farms if the farmstead is located in a flood or mudslide prone area and 
funds are not included for building improvements. However, buildings 
will need to meet the standards set out in Sec. 1943.24 of this 
subpart. The flood or mudslide hazard will be recognized in the 
appraisal report. When land development or improvements such as dikes, 
terraces, fences, and intake structures are planned to be located in 
special flood or mudslide prone areas, loan funds may be used subject to 
the following:
    (1) The Corps of Engineers or the Soil Conservation Service (SCS) 
will be consulted concerning:
    (i) Likelihood of flooding.
    (ii) Probability of flood damage.
    (iii) Recommendation on special design and specifications needed to 
minimize flood and mudslide hazards.
    (2) FmHA or its successor agency under Public Law 103-354 
representatives will evaluate the proposal and record the decision in 
the loan docket

[[Page 248]]

in accordance with subpart G of part 1940 of this chapter.
    (b) Civil rights. The provisions of subpart E of part 1901 of this 
chapter will be complied with on all loans made which involve:
    (1) Funds used to finance nonfarm enterprises and recreation 
enterprises. Applicants will sign Form FmHA or its successor agency 
under Public Law 103-354 400-4, ``Nondiscrimination Agreement,'' in 
these cases.
    (2) Any development financed by FmHA or its successor agency under 
Public Law 103-354 that will be performed by a contract or subcontract 
of more than $10,000.
    (c) Protection of historical and archaeological properties. If there 
is any evidence to indicate the property to be financed has historical 
or archaeological value, the provisions of subpart F of part 1901 of 
this chapter apply.
    (d) Environmental requirements. See subpart G of part 1940 of this 
chapter for applicable environmental requirements including subpart LL 
of part 2000 of this chapter for assistance in implementation.
    (e) Real Estate Settlement Procedures Act. The provisions of the 
Real Estate Settlement Procedures Act outlined in Sec. 1940.406 of 
subpart I of part 1940 apply when FO funds are used involving tracts of 
less than 25 acres, if:
    (1) Any part of the loan is used to purchase all or part of the land 
to be mortgaged, and
    (2) The loan is secured by a first lien on the property where a 
dwelling is located.
    (f) Equal Credit Opportunity Act. In accordance with title V of Pub. 
L. 93-495, the Equal Credit Opportunity Act, the FmHA or its successor 
agency under Public Law 103-354 will not discriminate against any 
applicant on the basis of sex or marital status with respect to any 
aspect of a credit transaction.
    (g) Compliance with special laws and regulations. (1) Applicants 
will be required to comply with applicable Federal, State and local laws 
and regulations governing building construction, diverting, 
appropriating, and using water, including use for domestic purposes; 
installing facilities for draining land; and making changes in the use 
of the land affected by zoning regulations.
    (2) State Directors and Farmer Programs Staff members will consult 
with SCS, U.S. Geological Survey, State Geologist or Engineer, or any 
board having official functions relating to water use or farm drainage 
requirements and restrictions for water and drainage development. State 
supplements will be issued to provide guidelines which:
    (i) State all requirements to be met, including the acquisition of 
water rights.
    (ii) Define areas where development of ground water for irrigation 
is not recommended.
    (iii) Define areas where land drainage is restricted.

[53 FR 35692, Sept. 15, 1988, as amended at 62 FR 9356, Mar. 3, 1997]



Sec. 1943.24  Special requirements.

    (a) Determining whether a farm will permit a feasible plan. The 
County Supervisor is responsible for making a preliminary determination 
as to whether a loan should be made on the farm. This determination will 
be based on a personal inspection of the farm and an evaluation of such 
factors as productivity of the land; location, conditions, and adequacy 
of the buildings; approximate value of the farm, roads, schools, 
markets, or other community facilities; tax rates; and adequacy of the 
water supply. A decision also will be made on the suitability of the 
farm for a specialized farm operation, and development needed to make it 
acceptable for the planned operation of the farm.
    (b) Dwellings and other essential buildings. (1) Buildings adequate 
for the planned operation of the farm must be available for the 
applicant's use after the loan is made. The necessary buildings will be 
located on the applicant's farm. Exceptions of this requirement are 
when:
    (i) The applicant already owns an adequate, decent, safe, and 
sanitary dwelling, suitable for the family's needs, and located close 
enough to the farm so the farm may be operated successfully, it will not 
be necessary to provide a dwelling on the farm.
    (ii) The applicant has a long-term lease on acceptable rented 
buildings that are adjacent to or near the farm, or the applicant 
occupies suitable

[[Page 249]]

buildings which the applicant will eventually inherit or be permitted to 
purchase from a relative.
    (iii) The farm does not have an adequate dwelling and the applicant 
owns a suitable mobile home which will be used as the applicant's home, 
the applicant will not be required to build a dwelling. A mobile home 
will not be considered to add value to the farm but FO funds may be used 
to finance anchoring the home.
    (2) When loan funds are needed for a dwelling and an applicant is 
eligible for a Rural Housing (RH) loan, it will be processed 
simultaneously with the FO loan. However, in such cases if a small 
amount is needed for dwelling improvements, FO funds may be used. 
Dwellings financed with RH funds will meet the requirements for such 
loans as provided in subpart A of part 1944 of this chapter.
    (c) Land and facility development. Development needed to make the 
farm ready for a successful operation will be planned during loan 
processing. The plans should provide for completing the development at 
the earliest practicable date. Recommendations of representatives of the 
Forest Service, Soil Conservation Service, State Agricultural Extension 
Service, and State Planning and Development Agency or local planning 
groups should be included in the development plan and the Farm and Home 
Plan. In planning such development with the applicant, the County 
Supervisor will encourage the applicant to use any cost-sharing 
assistance that may be available through any source such as the 
Agricultural Stabilization and Conservation Service (ASCS) programs.
    (d) Insurance. (1) Insurance must be obtained on any property 
acquired with, or serving as primary security on an FO loan in 
accordance with subpart A of part 1806 of this chapter.
    (2) Applicants must comply with the catastrophic risk protection 
insurance (CAT) requirement by either:
    (i) Obtaining at least the available CAT level of coverage for each 
crop of economic significance, as defined by the Federal Crop Insurance 
Corporation, or
    (ii) Waiving eligibility for emergency crop loss assistance in 
connection with the uninsured crop. FSA emergency (EM) loss loan 
assistance is not considered emergency crop loss assistance for the 
purpose of the crop insurance waiver on the uninsured crop.
    (3) See Sec. 1943.23(a) of this subpart for information about flood 
or mudslide hazard areas.
    (e) Income from other than owned acreage. When loan soundness 
depends on income from other sources in addition to income from owned 
land, it will be necessary to determine that:
    (1) There is reasonable assurance that any rented land which the 
applicant depends on will be available; and/or
    (2) Any off-farm employment the applicant depends on is likely to 
continue.
    (f) Life estates. When life estates are involved, loans may be made:
    (1) To both the life estate holder and the remainderman, provided:
    (i) Both have a legal right to occupy and operate the farm;
    (ii) Both are eligible for the loan; and
    (iii) Both parties sign the note and mortgage.
    (2) To the remainderman only, provided;
    (i) The remainderman has a legal right to occupy and operate the 
farm; and
    (ii) The lien instrument is signed by the remainderman, life estate 
holder, and any other party having any interest in the security.
    (3) To the life estate holder only, provided:
    (i) There is no legal restriction placed on a life estate holder who 
occupies and operates a farm; and
    (ii) The lien instrument is signed by the life estate holder, 
remainderman, and any other party having any interest in the security.
    (g) Farm or residence situated in different counties. If a farm is 
situated in more than one State, county or parish, the loan will be 
processed and serviced in the State, county or parish in which the 
borrower's residence on the farm is located. However, if the borrower's 
residence is not situated on the farm, the FO loan will be serviced by 
the County Office serving the county in which the farm or a major 
portion of the farm is

[[Page 250]]

located unless otherwise approved by the State Director.
    (h) Subdivision of large tracts of farmland, other than FmHA or its 
successor agency under Public Law 103-354 inventory farms, into family 
farm units. County Supervisors should investigate any large tract that 
is offered for sale to determine the feasibility of making FO loans to 
enable several applicants to acquire the tract. In considering the 
feasibility of a tract for subdivision into family farms, the following 
are some of the factors that must be considered:
    (1) Productivity of the land and its suitability for operation as a 
family farm;
    (2) Cost of the land and improvements;
    (3) Accessibility to roads, markets, schools, right-of-way, 
easements, and other services.
    (4) Disposition or omission of any part of the tract that is not 
suitable; and
    (5) The number of eligible applicants in the area.
    (i) Liens junior to the FmHA or its successor agency under Public 
Law 103-354 lien. A loan will not be approved if a lien junior to the 
FmHA or its successor agency under Public Law 103-354 lien is likely to 
be taken simultaneously with or immediately subsequent to the loan 
closing to secure any debt the borrower may have at the time of loan 
closing or any debt that may be incurred in connection with the FO loan, 
such as for a portion of the purchase price of the farm or money 
borrowed from others for payments on debts abainst the farm, unless the 
total debt against the security would be within its market value.
    (j) Graduation of FO borrowers. If, at any time, it appears that the 
borrower may be able to obtain a refinancing loan from a cooperative or 
private credit source at reasonable rates and terms, comparable to those 
for loans for similar purposes and periods of time prevailing in the 
area, the borrower will, upon request, apply for and accept such 
financing. A borrower paying a rate of interest less than the market 
rate wil be expected to pay the current rate when able to do so.

[53 FR 35692, Sept. 15, 1988, as amended at 57 FR 18678, Apr. 30, 1992; 
58 FR 26681, May 5, 1993; 59 FR 25801, May 18, 1994; 62 FR 9356, Mar. 3, 
1997]



Sec. 1943.25  Options, planning, and appraisals.

    (a) Optioning land. an applicant is responsible for obtaining 
options on real property bought. Form FmHA or its successor agency under 
Public Law 103-354 440-34, ``Option to Purchase Real Property,'' should 
be used if possible. Other forms may be used if acceptable to all 
parties concerned and to FmHA or its successor agency under Public Law 
103-354. When an FmHA or its successor agency under Public Law 103-354 
form is not used, a provision should be included which makes the option 
contingent upon the FmHA or its successor agency under Public Law 103-
354 making a loan to the buyer.
    (1) The County Supervisor should advise the applicant to have an 
understanding with the seller on such items as:
    (i) Land description and number of acres;
    (ii) Buildings and fixtures included in the transaction. The 
applicant should determine the condition of property attached to the 
land and the working condition of any fixtures with movable parts;
    (iii) Minerals and the effect any mineral reservation has on the 
land value and operating it as a farm;
    (iv) Access to the land or any part of it;
    (v) The party responsible for taxes and insurance; and
    (vi) The party who will receive the income from the land during the 
crop year of the transaction.
    (2) The applicant shoud decide if the applicant wants the option 
recorded and is responsible for paying any recording fees.
    (b) Farm business plans will be completed as provided in subpart B 
of part 1924.
    (c) Appraisals. (1) Except as provided in paragraph (c)(2) of this 
section, real estate appraisals will be completed on forms in accordance 
with Sec. 761.7 of this title, and in the case of an appraisal of

[[Page 251]]

residential real estate, the appropriate Agency form (available in each 
Agency State Office) or other format that contains the same information, 
by a designated FmHA or its successor agency under Public Law 103-354 
real property appraiser, or FmHA or its successor agency under Public 
Law 103-354 State-certified general contract real property appraiser. 
Appraisals are necessary when real estate is taken as primary security, 
as defined in Sec. 1943.4 of this subpart, and when loans are serviced 
in accordance with subpart S of part 1951 of this chapter. Real estate 
appraisals are not required when real estate is taken as additional 
security, as defined in Sec. 1943.4 of this subpart. However, the 
County Supervisor will document in the running record the estimated 
market value of the additional security and the basis for the estimate.
    (2) Other real estate appraisals completed by other State-certified 
general appraisers may be used providing such appraisals meet the 
ethics, competency, departure provisions, etc., and sections I and II of 
the Uniform Standards of Professional Appraisal Practices, and contain a 
mineral rights appraisal as set out in paragraph (c)(4) of this section. 
Prior to acceptance, the appraisal must have an acceptable desk review 
(technical) completed by an FmHA or its successor agency under Public 
Law 103-354 designated review appraiser.
    (3) Real estate appraisals will be completed as provided in Sec. 
761.7 of this title. The rights to mining products, gravel, oil, gas, 
coal, or other minerals will be considered a portion of the security for 
Farmer Programs loans and will be specifically included as a part of the 
appraised value of the real estate securing the loans using Form FmHA or 
its successor agency under Public Law 103-354 1922-11, ``Appraisal for 
Mineral Rights'' or other format that contains the same information.
    (4) The value of stock required to be purchased by Federal Land Bank 
(FLB) borrowers may be added to the recommended market value of the real 
estate, provided:
    (i) An assignment is obtained on the stock, or
    (ii) An agreement is obtained which provides that:
    (A) The value of the stock at the time the FLB loan is satisfied 
will be applied on the FLB loan, or
    (B) The stock refund check is made payable to the borrower and FmHA 
or its successor agency under Public Law 103-354, or
    (C) The stock refund check is made payable to the borrower and 
mailed to the County Supervisor.
    (iii) The total of the stock value and the recommended market value 
of real estate is indicated in the comments section of the appraisal 
report.
    (5) In the case of nonreal estate security the following items 
apply:
    (i) Form FmHA or its successor agency under Public Law 103-354 440-
21, ``Appraisal of Chattel Property,'' will be used.
    (ii) The property which will serve as security will be described in 
sufficient detail so it can be identified.
    (iii) Its current market value, or if appropriate, the current cash 
value will be determined.

[53 FR 35692, Sept. 15, 1988, as amended at 54 FR 47959, Nov. 20, 1989; 
58 FR 26681, May 5, 1993; 59 FR 16773, Apr. 8, 1994; 62 FR 9356, Mar. 3, 
1997; 64 FR 62568, Nov. 17, 1999]



Sec. 1943.26  Planning and performing farm development.

    The development work will be planned and completed in accordance 
with subpart A of part 1924 of this chapter. The provisions of subpart E 
of part 1901 of this chapter will be met in connection with FO loans 
involving recreational enterprises and the construction of buildings.



Sec. 1943.27  Relationship with other lenders.

    An applicant will be requested to obtain credit from another source 
when information indicates such credit is available. When another lender 
will not make a loan for the total needs of the applicant but is willing 
to participate with an FO loan, consideration will be given to a 
participation loan. FmHA or its successor agency under Public Law 103-
354 employees may not guarantee, personally or for FmHA or its successor 
agency under Public Law 103-354, repayment of advances made from other 
credit sources. However, lenders

[[Page 252]]

may be assured that lien priorities will be recognized.



Sec. 1943.28  FmHA or its successor agency under Public Law 103-354 
loans simultaneous with other lenders.

    (a) FmHA Guide Letter 1943-A-1 (available in any FmHA or its 
successor agency under Public Law 103-354 office), will serve as a guide 
in executing MOUs with State Beginning Farmer programs by which FO loans 
will be made simultaneously with loans by any State Beginning Farmer 
program. Subpart R of part 2000 of this chapter, ``Memorandum of 
Understanding FHA or its successor agency under Public Law 103-354-
FCA,'' (available in any FmHA or its successor agency under Public Law 
103-354 office) will serve as a guide in processing FO loans to be made 
simultaneously with loans by FLB to a common applicant. State Directors 
may work out agreements for simultaneous loans with long-term lenders 
other than FLBs for eligible loan purposes. Such an agreement should 
prohibit future advances by the first mortgage holder except for taxes, 
property insurance, reasonable maintenance expenditures, and reasonable 
foreclosure costs, but should not prohibit subsequent FmHA or its 
successor agency under Public Law 103-354 loans. It should also cover 
items such as appraisal methods, title clearances, loan closing, the 
disbursement of funds and, when appropriate, advance notice of 
foreclosure. It may also cover other items considered necessary or 
advisable for a sound FmHA or its successor agency under Public Law 103-
354 junior lien loan.
    (b) The County Supervisor and the other lender's representative 
should maintain a close working relationship in processing loans to a 
mutual applicant or borrower. When an FO loan is made at the same time 
as a loan from another lender, that lender's lien will have priority 
over the FmHA or its successor agency under Public Law 103-354 lien 
unless otherwise agreed upon. The lender's lien priority can cover the 
following in addition to principal and interest: advances for payment of 
taxes, property insurance, reasonable maintenance to protect the 
security, and reasonable foreclosure costs including attorney's fees.

[53 FR 35692, Sept. 15, 1988, as amended at 58 FR 48288, Sept. 15, 1993]



Sec. 1943.29  Relationship between FSA loans, direct and guaranteed.

    (a) Direct FO loans may be made simultaneously with other FmHA or 
its successor agency under Public Law 103-354 loans, and to borrowers 
presently indebted to FmHA or its successor agency under Public Law 103-
354, when the loan limits will not be exceeded and all requirements of 
the loans involved will be met.
    (b) A direct FO may be made to a guaranteed loan borrower provided 
the requirements of 7 CFR 761.8 and all other loan requirements are met.
    (c) A borrower may use the same collateral to secure two or more 
loans, direct or guaranteed, under this subpart except that the 
outstanding amount of such loans may not exceed the total value of the 
collateral so used.

[53 FR 35692, Sept. 15, 1988, as amended at 55 FR 21528, May 25, 1990; 
58 FR 44747, Aug. 25, 1993; 58 FR 48282, 48288, Sept. 15, 1993; 61 FR 
35925, July 9, 1996; 66 FR 7568, Jan. 24, 2001]



Sec. Sec. 1943.30-1943.32  [Reserved]



Sec. 1943.33  Loan approval or disapproval.

    (a) Loan approval authority. Initial and subsequent loans may be 
approved as authorized by subpart A of part 1901 of this chapter 
provided:
    (1) The total debt including the loan(s) being made (unpaid 
principal and past due interest) against the security will not exceed 
the market value of the security.
    (2) No significant changes have been made in the development plan 
considered by the appraiser when real estate will be taken as security.
    (b) Loan approval action. (1) The loan approval official must 
approve or disapprove applications within the deadlines set out in Sec. 
1910.4 of subpart A of part 1910 of this chapter. The loan approval 
official is responsible for reviewing the docket to determine whether 
the proposed loan complies with established policies and all pertinent 
regulations. When reviewing the docket, the

[[Page 253]]

loan approval official will determine that:
    (i) The Agency has certified the applicant eligible.
    (ii) Funds are requested for authorized purposes.
    (iii) The proposed loan is based on a feasible plan. Planning forms 
other than Form FmHA or its successor agency under Public Law 103-354 
431-2 may be used when they provide the necessary information.
    (iv) The security is adequate.
    (v) Necessary supervision is planned, and
    (vi) All other pertinent requirements have been met or will be met.
    (2) [Reserved]

[53 FR 35692, Sept. 15, 1988, as amended at 57 FR 18678, Apr. 30, 1992; 
61 FR 35926, July 9, 1996]



Sec. 1943.34  Requesting title service.

    (a) Title clearance will be obtained as provided in subpart B of 
part 1927 of this chapter, when required by the Agency.
    (b) When the loan is approved, the applicant will arrange with the 
seller to take possession of the land that is being acquired.

[53 FR 35692, Sept. 15, 1988, as amended at 54 FR 47959, Nov. 20, 1989; 
56 FR 67481, Dec. 31, 1991; 68 FR 62224, Nov. 3, 2003]



Sec. 1943.35  Action after loan approval.

    (a) Requesting check. If the County Supervisor is reasonably certain 
that the loan can be closed within 20 working days from the date of the 
check, loan funds may be requested at the time of loan approval through 
the field office terminal system. If funds are not requested when the 
loan is approved, advances in the amount needed will be requested 
through the field office terminal system. Loan funds must be provided to 
the applicant(s) within 15 days after loan approval, unless the 
applicant(s) agrees to a longer period. If no funds are available within 
15 days of loan approval, funds will be provided to the applicant as 
soon as possible and within 15 days after funds become available, unless 
the applicant agrees to a longer period. If a longer period is agree 
upon by the applicant(s), the same will be documented in the case file 
by the County Supervisor.
    (1) When all loan funds can be disbursed at, or within 30 days 
after, loan closing of if the amount of funds that cannot be disbursed 
does not exceed $5,000, the total amount of the loan will be requested 
in a single advance.
    (2) When loans funds cannot be disbursed as outlined in paragraph 
(a)(1) of this section, the amount needed to meet the immediate needs of 
the borrower will be requested through the field office terminal system. 
The amount of each advance should meet the needs of borrowers as much as 
possible, so that the amount in the supervised bank account will be kept 
at a minimum. The Finance Office will continue to supply Form FmHA or 
its successor agency under Public Law 103-354 440-57 until the entire 
loan has been disbursed. The County Supervisor should tell the borrower 
to notify the County Office of amounts needed on a timely basis to avoid 
delays in receiving loan checks.
    (b) Handling loan checks. (1) When the loan check or the borrower's 
personal funds are to be deposited in the designated loan closing 
agent's escrow account, this will be done no later than the date of loan 
closing. If loan funds or the borrower's personal funds are to be 
deposited in a supervised bank account, this will be done in accordance 
with subpart A of part 1902 of this chapter as soon as possible, but in 
no case later than the first banking day following the date of loan 
closing.
    (2) If a loan check is received and the loan cannot be closed within 
20 working days from the date of the check, the County Supervisor will 
take appropriate action in accordance with FmHA Instruction 2018-D, a 
copy of which may be obtained from any FmHA or its successor agency 
under Public Law 103-354 office. The applicant must agree to a delayed 
loan closing and the same will be documented in the case file by the 
County Supervisor.
    (3) When a check is returned and the loan will be closed at a 
subsequent date, another check will be requested in accordance with FmHA 
Instruction 2018-D.
    (c) Cancellation of loan. If, for any reason a loan check or 
obligation will be cancelled:

[[Page 254]]

    (1) The County Supervisor will notify the State Office of loan 
cancellation by using Form FmHA or its successor agency under Public Law 
103-354 1940-10, ``Cancellation of U.S. Treasury Check and/or 
Obligation.'' The County Office will send a copy of Form FmHA or its 
successor agency under Public Law 103-354 1940-10 to the designated 
attorney, Regional Attorney, or the title insurance company 
representative providing loan closing instructions to indicate that the 
loan has been canceled. If a check received in the County Office is to 
be canceled, the check will be returned as prescribed in FmHA 
Instruction 2018-D (available in any FmHA or its successor agency under 
Public Law 103-354 office).
    (2) Interested parties will be notified of the cancellation as 
provided in subpart B of part 1927 of this chapter.
    (d) Cancellation of advances. When an advance is to be cancelled, 
the County Supervisor must take the following actions;
    (1) Complete and distribute Form FmHA or its successor agency under 
Public Law 103-354 1940-10 in accordance with the FMI.
    (2) When necessary, prepare and execute a substitute promissory note 
reflecting the revised total of the loan and the revised repayment 
schedule. When it is not possible to obtain a substitute promissory 
note, the County Supervisor will show on Form FmHA or its successor 
agency under Public Law 103-354 440-57 the revised amount of the loan 
and the revised repayment schedule.
    (e) Increase or decrease in amount of loan. If it becomes necessary 
to increase or decrease the amount of the loan prior to loan closing, 
the County Supervisor will request that all distributed docket forms be 
returned to the County Office and reprocessed unless the change is minor 
and replacement forms can readily be completed and submitted. In the 
latter case, a memorandum will be attached to the revised forms and sent 
to the State Office.

[53 FR 35692, Sept. 15, 1988, as amended at 54 FR 39727, Sept. 28, 1989; 
56 FR 67481, Dec. 31, 1991; 59 FR 54788, 54789, Nov. 2, 1994]



Sec. Sec. 1943.36-1943.37  [Reserved]



Sec. 1943.38  Loan closing actions.

    When a loan closing date has been agreed upon, the County Supervisor 
will notify the borrower and the seller, if any, of the loan closing 
date. The following appropriate actions will be taken in connection 
with, and after, loan closing.
    (a) Real estate mortgage loans. When a loan is to be secured by a 
real estate mortgage, it will be closed in accordance with the 
applicable provisions of subpart B of part 1927 of this chapter except 
as modified for loans of $10,000 or less in Sec. 1943.19 (a)(6).
    (b) Loans involving chattel or other nonreal estate security. All 
chattel security instruments will be signed and filed as prescribed in 
subpart B of part 1941 of this chapter for operating loans. The 
following forms will be used for chattel security:
    (1) Form FmHA or its successor agency under Public Law 103-354 440-
15, ``Security Agreement (Insured Loans to Individuals).''
    (2) Form FmHA or its successor agency under Public Law 103-354 440-
25, ``Financing Statement'' or, when authorized, Form FmHA or its 
successor agency under Public Law 103-354 440-A25, ``Financing 
Statement.''
    (3) State forms may be used if national forms are not legally 
acceptable. Such forms will require OGC and National Office clearance.
    (c) Applicant's financial condition. The County Supervisor will 
review with the applicant the financial statement which was prepared at 
the time the docket was developed. If there have been significant 
changes in the applicant's financial condition, the financial statement 
will be revised and initialed by the applicant and the County 
Supervisor. When an applicant's financial condition has changed to the 
extent that it appears that the loan would be unsound or improper, the 
loan will not be closed. If a revised loan docket is needed to meet loan 
requirments or determine loan soundness, it will be developed and 
submitted to the appropriate loan approval official.

[[Page 255]]

    (d) Loan approval conditions. The County Supervisor will inform the 
applicant of any loan approval conditions that need to be met. These 
conditions will usually be included in the notice informing the 
applicant of the loan closing date. The loan will not be closed if the 
applicant is unable to meet loan approval conditions.
    (e) Change in the use of funds planned for refinancing. (1) County 
Supervisors are authorized to:
    (i) Transfer funds planned to be used for refinancing specific debts 
to other debts when there is a need to do so, and
    (ii) Transfer funds planned to be used for other purposes to pay 
small deficiencies in estimates for refinancing debts, providing there 
are sufficient remaining funds to complete any land purchase and planned 
development.
    (2) A revised docket will be developed when:
    (i) The total amount of debts to be refinanced has increased in such 
an amount that planned loan purposes cannot be carried out, and
    (ii) The applicant is unable to make up any deficiencies from other 
resources.
    (f) Assignment of income from real estate to be mortgaged. Income to 
be received by the borrower from royalties, leases, or other existing 
agreements under which the value of the real estate security will be 
reduced will be assigned and disposed of in accordance with subpart A of 
part 1965 of this chapter, including provisions for written consent of 
any prior lienholder. When the County Supervisor deems it advisable, 
assignments also may be taken on all or a portion of income to be 
derived from nondepleting sources such as income from bonus payments or 
annual delay rentals. Such income will be assigned and disposed of in 
accordance with subpart A of part 1965 of this chapter.
    (1) For assignment of income, Form FmHA or its successor agency 
under Public Law 103-354 443-16, ``Assignment of Income from Real Estate 
Security,'' will be used, except if it is legally inadequate in a State 
it may be adapted to that State with the approval of the OGC or an 
authorized State Form may be used instead.
    (2) The County Supervisor, upon the advice of the designated 
attorney, escrow agent, title insurance company, or the OGC, as 
appropriate, may require acknowledgment and recordation of the 
assignment. Any cost incident thereto will be paid by the borrower.
    (3) At the time Form FmHA or its successor agency under Public Law 
103-354 443-16 is executed, appropriate notations will be made on Form 
FmHA or its successor agency under Public Law 103-354 1905-1, 
``Management System Card--Individual,'' to insure that the proceeds, or 
the specified portions of the proceeds assigned to FmHA or its successor 
agency under Public Law 103-354 from the transactions, are remitted at 
the proper time.
    (g) Preparation of the note. Form FmHA or its successor agency under 
Public Law 103-354 1940-17, ``Promissory Note,'' will be used and 
completed in accordance with the FMI.
    (1) Separate notes will be prepared for any other FmHA or its 
successor agency under Public Law 103-354 loan made simultaneously with 
the FO loan. The notes will be completed as provided in the appropriate 
loan regulation and FMI.
    (2) All FmHA or its successor agency under Public Law 103-354 notes 
to be secured by real estate can be described in the same mortgage.
    (3) The promissory note will be signed as follows:
    (i) Individuals. Only the applicant(s) will sign the note as a 
borrower. If the co-signer is needed (see Sec. 1910.3(e) of subpart A 
of part 1910 of this chapter), the co-signer will also sign the note. 
Any other signatures needed to assure the required security will be 
obtained as provided in State supplements. Persons who are minors or 
mental incompetents will not execute a promissory note. Except when a 
person has pledged only property as security for a loan, the purpose and 
effect of signing a promissory note or other evidence of indebtedness 
for a loan made or insured by FmHA or its successor agency under Public 
Law 103-354 is to incur individual personal liability regardless of any 
State law to the contrary.

[[Page 256]]

    (ii) Entities. The promissory note(s) will be executed so as to 
evidence liability of the entity as well as individual liability of all 
member(s) or stockholder(s) in the entity.
    (h) Supplementary payment agreement. Form FmHA or its successor 
agency under Public Law 103-354 440-9, ``Supplementary Payment 
Agreement,'' should be used for each applicant who regularly (such as 
weekly, monthly, or quarterly) receives substantial income from an off-
farm source, a nonfarm enterprise, or from farming.
    (i) Obtaining insurance. The applicant will be informed of the 
insurance requirements set forth in Sec. 1943.24(d) of this subpart.
    (j) Effective time of loan closing. An FO loan is considered closed 
when the mortgage is filed for record.
    (k) Distribution of documents after loan closing. The County 
Supervisor should review the forms and closing actions. Corrective 
action should be taken when necessary.
    (1) Real estate mortgage.
    (i) When the original recorded instrument is returned to County 
Office:
    (A) File the original in the County Office file, and
    (B) Give a copy to the borrower.
    (ii) When the original is retained by recorder:
    (A) File a conformed copy in County Office file, and
    (B) Give a conformed copy to the borrower.
    (iii) The County Supervisor will provide copies that may be needed 
in some cases for interested third parties.
    (2) Deeds.
    (i) Give the original to borrower, and
    (ii) Retain one copy to file.
    (3) Title insurance policies.
    (i) File the mortgage title policy in the County Office file, and
    (ii) Give the Owner's title policy, if one is obtained, to the 
borrower.
    (4) Water stock certificates or similar collateral will be retained 
in the County Office file.
    (5) Abstracts of title.
    (i) Return to the borrower, except that when they were obtained from 
a third party with understanding they will be returned, the abstracts 
will be sent to the third party. A memorandum receipt will be obtained 
when abstracts are delivered to the third party.
    (ii) Form FmHA or its successor agency under Public Law 103-354 140-
4, ``Transmittal of Documents'' will be used and a receipted copy kept 
in the County Office. The FMI should be followed for preparing this 
form.

[53 FR 35692, Sept. 15, 1988, as amended at 56 FR 67481, Dec. 31, 1991; 
57 FR 18678, Apr. 30, 1992; 58 FR 48288, Sept. 15, 1993; 59 FR 25801, 
May 18, 1994; 68 FR 7698, Feb. 18, 2003]



Sec. Sec. 1943.39-1943.41  [Reserved]



Sec. 1943.42  Servicing.

    FO loans will be serviced in accordance with subpart A of part 1965 
of this chapter and/or subpart S of part 1951 of this chapter. Chattel 
security for FO loans will be serviced in accordance with subpart A of 
part 1962 of this chapter and/or subpart S of part 1951 of this chapter.



Sec. 1943.43  Subsequent FO loans.

    A subsequent FO loan is a loan made to a borrower who is currently 
in debt for an FO loan.
    (a) A subsequent loan may be made for the same purpose and under the 
same conditions as an initial loan.
    (b) The subsequent loan will be processed in the same manner as an 
initial loan.
    (c) A new real estate mortgage will not be necessary provided:
    (1) All the land which will serve as security for the loan is 
described on the present real estate mortgage and
    (2) The real estate mortgage has a future advance clause and a State 
supplement provides authority for using such a clause and
    (3) The required lien priority is obtained with the existing 
mortgage and future advance clause.



Sec. 1943.44  Subordinations.

    Subordinations in favor of other lenders will be processed in 
accordance with subpart A of part 1965 of this chapter.



Sec. Sec. 1943.45-1943.49  [Reserved]



Sec. 1943.50  State supplements.

    State supplements will be issued as necessary to implement this 
subpart.

[[Page 257]]

Exhibit A to Subpart A of Part 1943--Farmers Home Administration or Its 
     Successor Agency Under Public Law 103-354 Loans to Entrymen on 
                         Unpatented Public Lands

    I. GENERAL: This exhibit provides additional policies and procedures 
applicable to (1) insured Farmers Home Administration (FmHA) or its 
successor agency under Public Law 103-354 loans to homestead and 
desertland entrymen which are to be secured by real estate, and (2) 
taking of real estate mortgages on entries to secure Farm Ownership, 
Soil and Water, Individual Recreation, Operating, Emergency, Single 
Family Housing, and Farm Labor Housing loans in connection with loan 
making and servicing.
    A. Authority. The authorizations contained in this exhibit clarify 
security and servicing for loans to entrymen and are based on Public Law 
361. Attachment 1 is a Memorandum of Understanding between the 
Department of the Interior and the Department of Agriculture and 
outlines the general procedures to be followed when loans are made to 
entrymen. Reference to Guaranteed Loans in the Memorandum of 
Understanding is not applicable.
    B. Cooperation Between the Department of Agriculture and the 
Department of the Interior. The extension of financial assistance and 
taking of real estate mortgages authorized in paragraph I A will be 
facilitated through the cooperation of the FmHA or its successor agency 
under Public Law 103-354, the Bureau of Land Management (BLM), and the 
Bureau of Reclamation (BR), as provided in the Memorandum of 
Understanding.
    C. Special Policies Applicable to Dwellings, Land Improvement and 
Ownership. An FmHA or its successor agency under Public Law 103-354 loan 
will not be made to an applicant who lacks the capital or who cannot 
obtain credit to provide (1) any required habitable dwellings within the 
statutory period specified in pargraph I D for the establishment of 
residence, and (2) land development sufficient for success but in no 
case less than that necessary to meet the entry requirements. The Notice 
of Allowance of Entry is adequate to meet the ownership requirement 
until the patent is issued.
    D. Patent Requirements. All entrymen will be expected to keep in 
contact with appropriate officials of the BLM, and BR and comply with 
pertinent laws and regulations of these Agencies relating to the 
issuance of patents for homestead or desertland entries. When 
applicable, reclamation proof must be filed by the borrower at the 
earliest possible date. Likewise, FmHA or its successor agency under 
Public Law 103-354 personnel concerned with making and securing FmHA or 
its successor agency under Public Law 103-354 loans to entrymen should 
acquaint themselves with BLM and BR representatives and keep informed of 
their regulations relating to the issuance of patents for homestead or 
desertland entries, including but not limited to the following:
    1. RESIDENCE AND DEVELOPMENT REQUIREMENTS. A homestead entryman must 
established residence upon the tract entered within 6 months after date 
of the entry unless an extension of time is allowed and must maintain a 
residence there for 3 years. The entryman should notify the authorized 
officer of the BLM upon establishing residence. When an FmHA or its 
successor agency under Public Law 103-354 loan is made for any purpose, 
the requirements of the applicable FmHA or its successor agency under 
Public Law 103-354 regulations must be met. Likewise any residence or 
development requirements of BLM or BR will be met.
    2. FINAL PROOF. Specific requirements for final proof for homestead 
entrymen is found in 43 CFR 2515.7 and final proof for desertland 
entrymen is found in 43 CFR 2521.6.
    a. Homestead Entryman: Final proof must be filed within 5 years from 
the date of allowance of entry. A patent will not be issued until the 
entryman has submitted final proof. Final proof must show that (1) a 
habitable dwelling is on the land at the time proof is submitted, (2) 
residence requirements have been met, (3) the improvements are of such 
character as to show good faith, and (4) the entryman is a citizen of 
the United States. When the entryman is ready to submit final proof the 
entryman should notify the BR and request instructions regarding the 
procedure to be followed.
    b. Desertland Entryman: Final proof must be made within 4 years from 
the date of entry. General requirements of the BLM that must be met 
include: (1) Filing a map at the initiation of the entry showing the 
method of irrigation and the proposed source of water supply, (2) an 
annual expenditure for 3 years of not less than $1 for each acre in the 
necessary development of the land, (3) filing a map at the end of the 
third year showing the character and extent of improvements, and (4) 
yearly proof of expenditures containing statements of two or more 
credible witnesses who have knowledge that the expenditures were made.
    The County Supervisor should consult the BLM official for any 
additional requirements of the entryman such as preparing a notice of 
intention to make final proof, publication of final proof and submission 
of final proof.
    3. RECLAMATION PROOF. Reclamation proof for homestead entryman may 
be submitted with, or at any time after, the submission of homestead 
proof. In additon to the final homestead proof mentioned in paragraph I 
D 2, the filing of reclamation proof is required as a condition for 
obtaining a patent to any entry within a reclamation

[[Page 258]]

project. Reclamation proof must show reclamation and cultivation of at 
least one-half of the irrigable area in the entry for 2 years 
immediately preceding the date of submission of proof and the payment of 
all reclamation charges due at that time. Reclamation proof, in proper 
form, must be submitted to the official in charge of the project 
accompanied by the payment of final homestead commissions.
    II. LOAN PROCESSING: When making an FmHA or its successor agency 
under Public Law 103-354 loan to be secured by the entryman's land, 
existing FmHA or its successor agency under Public Law 103-354 policies, 
procedures, and loan authorities applicable to the particular type of 
loan will be met, except as follows:
    A. Applications. 1. APPLICATIONS FROM ENTRYMEN NOT IN A FEDERAL 
RECLAMATION PROJECT. An application for an FmHA or its successor agency 
under Public Law 103-354 loan from an entryman with respect to public 
land not within a Federal reclamation project will be considered only 
after the entryman has selected a farm and received the Notice of 
Allowance of Entry from BLM. The original or a copy of the document 
showing allowance of entry must be attached to Form FmHA or its 
successor agency under Public Law 103-354 410-1, ``Application for FmHA 
or its successor agency under Public Law 103-354 Services.''
    2. APPLICATIONS FROM ENTRYMEN IN A FEDERAL RECLAMATION PROJECT. An 
application for an FmHA or its successor agency under Public Law 103-354 
loan from an entryman with respect to public land within a Federal 
reclamation project will not be considered until after the entryman has 
received a Certificate of Eligibility from BR and has selected a farm. 
If at the time of making application the entryman has received the 
Notice of Allowance of Entry from BLM, he will attach the original or a 
copy of such document to Form FmHA or its successor agency under Public 
Law 103-354 410-1. If the entryman has not received the Notice of 
Allowance of Entry, a copy of the Certificate of Eligibility must be 
attached to the FmHA or its successor agency under Public Law 103-354 
application. However, the docket will not be approved until the original 
or a copy of the document showing Notice of Allowance of Entry has been 
received from the applicant and placed in the loan docket.
    3. SUPPLEMENTAL INFORMATION ON APPLICANT. At the time of making 
application for an FmHA or its successor agency under Public Law 103-354 
loan to be secured by real estate, the entryman may be requested to 
authorize the FmHA or its successor agency under Public Law 103-354 to 
obtain from BLM or BR any available information concerning the 
entryman's application for homestead, desertland, or reclamation entry 
for use by the FmHA or its successor agency under Public Law 103-354 in 
determining the entryman's eligibility for the loan as provided in the 
Memorandum of Understanding.
    B. Special Items in Development of Loan Dockets for Loans to be 
Secured by the Entryman's Land. Loan dockets for loans to entrymen will 
be prepared and distributed in accordance with the applicable FmHA or 
its successor agency under Public Law 103-354 regulations, except as 
modified by this paragraph.
    1. DEVELOPMENT PLAN. An extra copy of Form FmHA or its successor 
agency under Public Law 103-354 1924-1, ``Farm Development Plan'' will 
be prepared and sent to BLM in each case. When the entryman's farm is 
located in a Federal reclamation project, any development items listed 
on Form FmHA or its successor agency under Public Law 103-354 1924-1 
must be consistent with the overall plans for development of the 
reclamation project. Consequently, when Form FmHA or its successor 
agency under Public Law 103-354 1924-1 provides for the leveling of land 
or the installation of farm distribution and surface drainage systems 
another extra copy will be prepared and sent to the Reclamation Project 
Officer as soon as the County Supervisor determines that there is a 
reasonable likelihood that the loan will be made. If Form FmHA or its 
successor agency under Public Law 103-354 1924-1 conflicts with the 
overall BR plans for the development of the Federal reclamation project, 
officials of the BR will so advise the County Supervisor. The processing 
of the loan will not be delayed while awaiting such advice from BR but 
the FmHA or its successor agency under Public Law 103-354 loan will not 
be closed until Form FmHA or its successor agency under Public Law 103-
354 1924-1 is revised to make it consistent with the BR plans. The 
County Supervisor will advise the Project Officer or Authorized Officer 
in writing whenever changes are made in the plans approved by the FmHA 
or its successor agency under Public Law 103-354.
    C. Title Clearance. 1. The entryman applicant will be required to 
furnish and pay for a certified statement prepared by a qualified title 
examiner or abstractor or as otherwise required by a State supplement 
which will include finding with respect to any outstanding land leveling 
contracts and any other claims of any kind on record against the entry. 
This certified statement will be included in the loan docket. Where 
there is an outstanding land leveling contract, the applicant's copy of 
such contract also will be included in the loan docket and returned to 
the borrower when the loan is closed.
    2. The State Director, upon advice from the Office of the General 
Counsel, will inform the County Supervisor regarding the

[[Page 259]]

acceptable form of certified statement required in paragraph II C 1.
    D. Loan Closing. Except as provided by this exhibit, FmHA or its 
successor agency under Public Law 103-354 loans will be closed in 
accordance with the applicable FmHA or its successor agency under Public 
Law 103-354 regulation.
    1. REAL ESTATE MORTGAGE FORMS. Whenever the entry is located within 
a Federal reclamation project two extra copies of Form FmHA or its 
successor agency under Public Law 103-354 1927-1, ``Real Estate 
Mortgage,'' will be prepared. If the entry is not within a Federal 
reclamation project, one extra copy of the real estate mortgage will be 
prepared. After the loan has been closed, a conformed copy of the real 
estate mortgage will be sent to BLM and, if the entry is located in a 
Federal reclamation project, a conformed copy of the mortgage also will 
be sent to the BR. The entryman's serial number which appears on the 
original document showing Notice of Allowance of Entry will be typed on 
the original, and the conformed copies of the Mortgage for BLM and BR 
will indicate the date and place of recordation and the book and page 
numbers.
    2. COUNTY OFFICE RECORD OF ALLOWANCE OF ENTRY. When the loan is 
closed a copy will be made of the original document showing Notice of 
Allowance of Entry for the borrower's county office case folder, unless 
a copy was funished. The County Supervisor will sign the following 
certification which will be typed on this copy:
    ``I hereby certify that this is an exact copy of the Notice of 
Allowance of Entry issued by the BLM to -------------------- (Entryman's 
Name) residing at -------------------- (Entryman's Address)''
________________________________________________________________________
                                                       County Supervisor
    When the original document showing allowance of entry is furnished, 
it will be returned to the borrower.
    3. ENTRIES REQUIRED ON MANAGEMENT SYSTEM CARDS. Upon closing the 
loan, the County Supervisor will enter a notation on the borrower's 
Management System Card (Form FmHA or its successor agency under Public 
Law 103-354 405-1) as to the date when the borrower must submit final 
proof to the BLM in fulfillment of the requirements to obtain a patent. 
If residence has not been established, a notation also will be made on 
the Management System Card of the date such residence must be commenced. 
It will be the responsibility of the County Supervisor to follow through 
to see that the borrower completes these actions.
    III. MORTGAGE ON REAL ESTATE FOR ADDITIONAL SECURITY. When it is 
deemed advisable to take a mortgage on the homestead or desertland entry 
as additional security or to otherwise protect the interests of the FmHA 
or its successor agency under Public Law 103-354, a real estate mortgage 
will be taken on such entry. The mortgage will be taken as authorized in 
subpart A of part 1965 of this chapter (FmHA Instruction 465.1). In such 
a case, a copy of the real estate mortgage will be sent to BLM and, if 
the farm is located in a Federal reclamation project, a copy of the 
mortgage also will be sent to the BR.
    IV. DEFAULT AND DISPOSAL OF UNITS: The County Supervisor will 
coordinate with the local BLM and BR representatives and keep the State 
Director currently advised on any cases in default or where default is 
anticipated. The State Director will be guided by Attachment I and 
advice of the Office of the General Counsel in fulfilling FmHA or its 
successor agency under Public Law 103-354's responsibilities for 
disposal of any units on which a patent has not been issued. Units on 
which a patent has been issued will be serviced by applicable FmHA or 
its successor agency under Public Law 103-354 procedures.

                              attachment i

 Memorandum of Understanding Between the Department of Agriculture and 
 the Department of the Interior Relating to Financial Assistance by the 
  Farmers Home Administration or Its Successor Agency Under Public Law 
                   103-354 to Entrymen on Public Lands

                     part i--purpose and definitions

    A. Purpose. The purpose of this memorandum is to outline the general 
procedure to be followed by the Farmers Home Administration (FHA) or its 
successor agency under Public Law 103-354, the Bureau of Land Management 
(BLM), and the Bureau of Reclamation (BR), when FHA or its successor 
agency under Public Law 103-354 extends financial assistance to entrymen 
on unpatented public lands, including public land in reclamation 
projects.
    B. Definitions. Unless otherwise indicated in this memorandum:
    (1) The term unit will be used to describe an adequate family farm, 
less than adequate family farm, a portion of a farm or any other tract 
of land.
    (2) The term FHA also includes its insured lenders and guaranteed 
lenders.
    (3) The term outstanding balance includes (a) the unpaid 
indebtedness under the FHA or its successor agency under Public Law 103-
354 mortgage, (b) any unpaid costs owed to BR for construction by it of 
a special distribution system to serve a unit where such costs have been 
allocated to the unit as a separate item, and (c) any portion of an SW 
association loan made by FHA or its successor agency under Public Law 
103-354 for construction of a domestic water system to serve the unit 
and secured by a lien on the unit. It does not include any portion of an

[[Page 260]]

SW association loan made by the FHA or its successor agency under Public 
Law 103-354 for construction of a domestic water system to serve the 
unit and not secured by a lien on the unit, nor project construction 
costs charged to the unit.
    (4) Pub. L. 361, 81st Congress (7 U.S.C. 1006a and 1006b), is 
referred to as ``Pub. L. 361.'' It applies to Farm Ownership (FO), 
Operating (OL), Soil and Water Conservation (SW) loans made to 
individuals and Recreation (RL) loans to individuals under the 
Consolidated Farm and Rural Development Act of 1972 (7 U.S.C. 1921) and 
prior laws. It does not apply to Emergency (EM) loans made under that 
act or prior laws, nor to Housing (RH) loans made under Title V of the 
Housing Act of 1949 (42 U.S.C. 1471), or to any other loans made or 
administered by FHA or its successor agency under Public Law 103-354.
    (5) Pub. L. 419 (86 Stat. 675) amended Pub. L. 361 to add desertland 
entrymen as eligible for the same loans as indicated in (4) above.
    (6) The term Project Officer refers to the BR Officer who may 
properly hold the requisite responsibility for the project or area in 
question.
    (7) The term authorized officer refers to the BLM Officer to whom 
has been delegated the required responsibility for the area in question.
    (8) The term County Supervisor means County Supervisor for FHA or 
its successor agency under Public Law 103-354.
    (9) The term State Director means State Director for FHA or its 
successor agency under Public Law 103-354.

                       part ii--general provisions

    A. FHA or its successor agency under Public Law 103-354 regulations 
will govern making and servicing FHA or its successor agency under 
Public Law 103-354 loans, including the taking of mortgages as 
additional security for existing FHA or its successor agency under 
Public Law 103-354 loans.
    B. In connection with applications for FHA or its successor agency 
under Public Law 103-354 loans or credit sales to eligible applicants, 
the Project Officer of BR or the authorized officer of BLM, upon written 
request of the County Supervisor, will furnish the following:
    1. Written consent to make the applicant an FHA or its successor 
agency under Public Law 103-354 loan or to secure an existing FHA or its 
successor agency under Public Law 103-354 loan.
    2. Any information which BR or BLM has concerning the applicant, 
provided, in the case of BR information, the request has the following 
authorizations attached to it:
Date------------, 19--
    I hereby authorize the Bureau of Reclamation to make available to 
the Farmers Home Administration or its successor agency under Public Law 
103-354 any information the Bureau may have concerning my transactions 
with it. This information may be used by the Farmers Home Administration 
or its successor agency under Public Law 103-354 in determining my 
eligibility and qualifications for a loan, and is to be treated as 
confidential.
    (Type name of applicant below signature)

 signed_________________________________________________________________
                                                             (applicant)

 signed_________________________________________________________________
                                                                (spouse)
    3. A statement of account, showing the applicant's outstanding 
balance if there is a debt owed to BR (principal balance, accrued unpaid 
interest, and daily interest accrual rate, any other charges and any 
unpaid special distribution system costs, and the amount, delinquent).
    4. A report on any development and residence requirements which have 
not been completed and on eligibility of the unit for water, including 
full information on the status of any excess land.
    5. Advice as to whether the applicant is in default because of 
failure to pay water charges, or because of breach of any other 
agreements with the Bureau of Reclamation.
    C. A homestead or desertland entryman on public land not in a 
reclamation project may apply to the County Supervisor for an FHA or its 
successor agency under Public Law 103-354 loan when his entry has been 
allowed. The original or a copy of the Notice of Allowance of Entry from 
BLM must be attached to the application for a loan from FHA or its 
successor agency under Public Law 103-354. Upon request of the County 
Supervisor, the authorized officer of the BLM, to the extent applicable 
will furnish any information that office has with respect to the 
applicant entryman.
    An applicant for a homestead on a reclamation project likewise may 
apply to the County Supervisor for an FHA or its successor agency under 
Public Law 103-354 loan when he has received from the BR a Certificate 
of Eligibility and has selected a unit. A copy of the Certificate of 
Eligibility must be attached to the application for a loan from the FHA 
or its successor agency under Public Law 103-354 unless the unit has 
been entered, in which case the Notice of Allowance of Entry will be 
attached to the application for a loan. Each application for such a loan 
filed by an entryman will be processed in substantially the same manner 
as other application of a similar character, including the preparation 
of the loan docket, certifications by the FHA or its successor agency 
under Public Law 103-354 County Committee, and approval by the duly 
authorized loan approving official. If any conflict exists between the 
development plans of FHA or its successor agency under Public Law 103-
354

[[Page 261]]

and BR or BLM, the difference must be reconciled prior to loan closing. 
A copy of the Notice of Allowance of the Entry will be required in the 
loan docket before a loan is closed.
    D. Upon closing of a loan to an entryman, when real estate security 
is taken, the County Supervisor will send copies of the real estate 
mortgage to the authorized officer of BLM, and to BR if appropriate. The 
County Supervisor will indicate on the mortgage the date such instrument 
was filed for record and the entryman's homestead or desertland entry 
serial number. Copies of these instruments will serve as notification to 
BLM or BR that a loan has been made by FHA or its successor agency under 
Public Law 103-354 and may be used in connection with the servicing of 
such loans as indicated herein.

                        part iii--loan servicing

    A. If the entryman-borrower repays his indebtedness in full to FHA 
or its successor agency under Public Law 103-354 before a patent is 
issued to him by BLM, the County Supervisor will promptly notify the BLM 
authorized officer of the release of the mortgage lien.
    B. When final homestead or desertland entry proof or homestead proof 
and reclamation proof submitted by an entryman-borrower is accepted by 
the BLM and a patent is issued before BLM is notified of the full 
repayment of the indebtedness to FHA or its successor agency under 
Public Law 103-354, the patent issued will make reference to the FHA or 
its successor agency under Public Law 103-354 mortgage as follows:
    ``This patent is issued subject to the rights of the United States 
under a certain mortgage or deed of trust executed by ------ and ------
-------- under date of ----------------, 19 ----, recorded in Book ----
--, Page ---------- of the records of the Recorder of Deeds for --------
--.''
    In such cases, if the patent is issued to a person other than the 
mortgager or the purchaser at foreclosure of the mortgage, there shall 
also be inserted after the recital of recordation of the mortgage the 
following words: ``Which the patentee assumes and agrees to pay.''
    C. Upon issuance of the patent to the entryman-borrower, the 
authorized officer of BLM will notify the State Director that the patent 
has been issued and mailed to the entryman-borrower. Upon such 
notification, the County Supervisor will advise the entryman-borrower to 
record the patent promptly in the real estate records in the county in 
which his unit is located, and will check the records to determine that 
the recordation has been accomplished. The issuance of the patent will 
terminate any further relationship between BLM and FHA or its successor 
agency under Public Law 103-354 insofar as the entryman-borrower is 
concerned.
    D. In the event that an entryman-borrower has not submitted Final 
Proof within the statutory period from the date of allowance of his 
entry, BLM will send to the County Supervisor a copy of the Notice of 
Expiration of the statutory period of entry when it is mailed to the 
entryman-borrower. The copy of the notice will be used by the County 
Supervisor in urging the entryman-borrower to submit final proof with 
appropriate explanation of his failure to do so before the expiration of 
the statutory period.

                            part iv--defaults

    When an entryman-borrower is in default in the terms of his mortgage 
to FHA or its successor agency under Public Law 103-354, in complying 
with requirements to obtain a patent, or in meeting the requirements to 
make reclamation proof, the following procedures will apply:
    A. Default on Mortgage. BLM will issue a decision canceling any 
entry upon which there is an FHA or its successor agency under Public 
Law 103-354 mortgage when so requested in writing by the State Director. 
FHA or its successor agency under Public Law 103-354 may request a 
cancellation whenever any default occurs in the terms, conditions, 
covenants, and obligations contained in the mortgage. Included among the 
terms, conditions, covenants, and obligations in the mortgage taken by 
FHA or its successor agency under Public Law 103-354 will be the 
provision that the entryman-borrower must comply with the legal and 
administrative regulations for the issuance of a patent and, if the 
entry is located in a reclamation project, with the legal and 
administrative regulations for making reclamation proof.
    1. The State Director will furnish the authorized officer of BLM 
with an explanation of the need for cancellation. When the entry is 
located in a reclamation project, the State Director also will notify 
the BR Regional Director and furnish him with an explanation of the need 
for cancellation.
    2. The BR Regional Director may request the State Director to 
reconsider the necessity for cancellation of the entry when (a) BR can 
furnish information which may not have been considered by FHA or its 
successor agency under Public Law 103-354, (b) there is an outstanding 
contract between BR and the entryman borrower for the repayment of 
charges for land leveling, or (c) the entryman-borrower has not made 
reclamation proof. If such a request is made, a copy will be furnished 
to the BLM which shall suspend action on the FHA or its successor agency 
under Public Law 103-354 request

[[Page 262]]

until further notified by the FHA or its successor agency under Public 
Law 103-354. Ordinarily, BR will not request a reconsideration of the 
necessity for cancellation unless there appears to be a reasonable basis 
upon which a solution can be worked out so that the entryman-borrower 
may retain possession of his unit.
    3. If BR does not ask the State Director to reconsider his request 
to cancel within 30 days, BLM will issue a decision cancelling the 
entry.
    4. If BR asks for a reconsideration of the request to cancel, it 
will furnish the State Director immediately new information which it 
believes should be considered by FHA or its successor agency under 
Public Law 103-354 in reaching a decision. When FHA or its successor 
agency under Public Law 103-354 has reached a final decision, it will 
notify the BLM and the BR of the decision reached. Within 30 days after 
receiving notice of the final decision of the State Director that the 
entry should be canceled, BLM will notify the entryman-borrower of the 
cancellation of his entry in accordance with the usual procedure. A copy 
of the notice of the cancellation will be mailed to the State Director 
at the same time.
    B. Default in Meeting Entry Requirements. If BLM proposes to take 
any action toward cancellation of an entryman-borrower's entry, it will 
notify the State Director and the BR Regional Director if the unit is 
located in a reclamation project, in writing at least 30 days before any 
action is commenced. The notification will be accompanied by an 
explanation as to why cancellation will be made. Within the 30-day 
period either or both FHA or its successor agency under Public Law 103-
354 and BR may present any new information for the consideration of the 
BLM in reaching a decision to, or not to, cancel the entry. When BLM has 
reached a final decision, it will inform the State Director and the BR 
Regional Director.
    C. Default in Meeting Reclamation Requirements. In the event BR 
intends to recommend cancellation of an entryman-borrower's entry, the 
Superintendent of the Reclamation Project will notify the State Director 
in writing at least 30 days before such recommendation is to be 
submitted to BLM for cancellation. The notification will be accompanied 
by an explanation as to why cancellation of entry is to be requested. 
FHA or its successor agency under Public Law 103-354 may request a 
reconsideration of BR's intended recommendation to cancel within the 30-
day period and will furnish any new information which it believes should 
be considered by BR when reaching a final decision. When BR has reached 
a final decision, it will notify the State Director.

     part v--disposal of units after cancellation or relinquishment

    After cancellation or relinquishment of an entry upon land on which 
FHA or its successor agency under Public Law 103-354 holds a mortgage, 
such land shall be opened to re-entry only to persons eligible for an 
original entry, and eligible for an FHA or its successor agency under 
Public Law 103-354 loan unless the FHA or its successor agency under 
Public Law 103-354 Loan is paid in full. Any unit disposed of hereunder 
shall be subject to the outstanding balance owed to FHA or its successor 
agency under Public Law 103-354 and BR, or to that portion of the 
outstanding balance as agreed upon by the FHA or its successor agency 
under Public Law 103-354 and BR or BLM, as appropriate, if the entryman 
is eligible for an FHA or its successor agency under Public Law 103-354 
loan.
    A. One Year Limit. Under Pub. L. 361, BLM or BR can permit a new 
entry only during one year after cancellation or relinquishment of the 
old entry where the FHA or its successor agency under Public Law 103-354 
mortgage is subject to Pub. L. 361 (FO, OL, and SW). In other cases such 
as RH and EM, the one-year limitation does not apply, but BLM or BR will 
nevertheless arrange for a new entry within the one-year period if it is 
practicable to do so.
    B. Custody and Expenses. While BLM or BR has disposal authority it 
will assume custodial responsibility for the unit, but the County 
Supervisor and the Project Officer will determine the actions necessary 
to protect the interests of both FHA or its successor agency under 
Public Law 103-354 and BLM or BR. Any expenses incurred for protection 
of FHA or its successor agency under Public Law 103-354's interest will 
be paid by FHA or its successor agency under Public Law 103-354 and 
added to the mortgage debt.
    C. Disposal of Units--1. Within a Reclamation Project. As soon as 
possible, after cancellation or relinquishment, FHA or its successor 
agency under Public Law 103-354 will make an appraisal to determine the 
value of the property and will report its findings to BR on appropriate 
FHA or its successor agency under Public Law 103-354 appraisal forms. 
The State Director and the BR Regional Director after receipt of the 
report by BR will jointly participate in determining the amount of 
indebtedness owed to the United States which shall be required in 
accordance with the existing law to be paid and the terms under which 
repayment will be made.
    a. BR will, thereafter, for that particular unit, proceed to inform 
the public of the availability of the unit in accordance with its 
established procedures. However, before BR issues a Certificate of 
Eligibility to any applicant for re-entry it will submit to the County 
Supervisor (a) a list of the names of

[[Page 263]]

the applicants who can qualify for a Certificate of Eligibility and the 
order in which such applicants shall be considered, and (b) the 
information submitted by each of the qualified applicants in support of 
his application for the entry.
    b. The County Supervisor and the County Committee will examine the 
list and the information to determine which of the applicants are 
eligible for an FHA or its successor agency under Public Law 103-354 
loan. The list of any documentary information furnished will be returned 
to BR with a written statement setting forth the names in the list which 
are eligible for FHA or its successor agency under Public Law 103-354 
assistance. Upon receiving such information from FHA or its successor 
agency under Public Law 103-354, BR will proceed to select, in 
accordance with established procedures, from among the applicants 
determined to be eligible for a Certificate of Eligibility and an FHA or 
its successor agency under Public Law 103-354 loan, one applicant but 
not to exceed two alternate applicants, to whom the unit may be awarded 
upon qualifying to assume the indebtedness.
    c. BR will issue a Certificate of Eligibility to the selected 
applicant. The Certificate of Eligibility will be sent to the FHA or its 
successor agency under Public Law 103-354 County Supervisor who will 
instruct the applicant to file his Certificate of Eligibility and 
application for entry with BLM which will issue a Notice of Allowance of 
Entry if the applicant is qualified to make entry. The applicant will be 
allowed to occupy the unit when he has received the Notice of Allowance 
of Entry and has completed arrangements to assume the required amount of 
indebtedness owed to FHA or its successor agency under Public Law 103-
354 or to refinance such indebtedness. FHA or its successor agency under 
Public Law 103-354 will send a copy of the assumption agreement or note 
and mortgage, if any, executed by the new occupant to BR and BLM.
    d. FHA or its successor agency under Public Law 103-354 may permit 
an eligible person to whom the unit is awarded to assume that part of 
the indebtedness determined to be within the value of the property.
    2. Units Not Within a Reclamation Project. As soon as possible, 
after cancellation or relinquishment, FHA or its successor agency under 
Public Law 103-354 will make an appraisal to determine the value of the 
property and to determine the amount of indebtedness owed on FHA or its 
successor agency under Public Law 103-354 loans that is to be paid by 
the new entryman. The FHA or its successor agency under Public Law 103-
354 will report the amount of the FHA or its successor agency under 
Public Law 103-354 debt to be assumed to the BLM.
    a. The BLM will, thereafter, for that particular entry, proceed to 
inform the public of the availability of the land in accordance with its 
established procedures. BLM will, following the opening of the land to 
application, submit to the County Supervisor (a) a list of the names of 
the applicants who can qualify for the allowance and the order in which 
such applicants shall be considered, and (b) the information submitted 
by each of the applicants in support of his application.
    b. Thereafter the FHA or its successor agency under Public Law 103-
354 will select from the list the first applicant for the entry who can 
qualify for an FHA or its successor agency under Public Law 103-354 
loan.
    c. FHA or its successor agency under Public Law 103-354 will then 
notify BLM of the applicant selected. The authorized Officer will, as 
soon as possible after notification, issue the Notice of Allowance. The 
Allowance of Entry or an attachment thereto will show that entry is 
conditioned upon payment or assumption of the FHA or its successor 
agency under Public Law 103-354 debt. A copy of appropriate notice will 
be mailed to the State Director.
    d. Upon receipt of the Notice of Allowance of Entry by the 
applicant, FHA or its successor agency under Public Law 103-354 will 
instruct him to occupy the unit and will complete arrangements for him 
to assume or refinance the indebtedness or the part thereof determined 
to be within the value of the property. FHA or its successor agency 
under Public Law 103-354 will send a copy of the assumption agreement or 
note and the mortgage, if any, executed by the new occupant to BLM.
    e. FHA or its successor agency under Public Law 103-354 may permit 
an eligible person to whom the unit is awarded to assume that part of 
the indebtedness determined to be within the value of the property.
    D. Disposal of Units By Farmers Home Administration or its successor 
agency under Public Law 103-354. 1. If no entry is allowed within one 
year after cancellation or relinquishment of a prior entry on which FHA 
or its successor agency under Public Law 103-354 holds a mortgage and 
the property was security for an FHA or its successor agency under 
Public Law 103-354 loan subject to Pub. L. 361 even though it also was 
security for a loan not subject to that law, FHA or its successor agency 
under Public Law 103-354 will dispose of the unit in accordance with the 
FHA or its successor agency under Public Law 103-354 regulations. If the 
unit is located on a reclamation project, such disposition shall be 
subject, however, to outstanding reclamation charges on the land due the 
United States.
    2. If the property cannot be sold immediately, the FHA or its 
successor agency under Public Law 103-354 will arrange for a lease or 
caretaker agreement as necessary to protect the Government's interests.

[[Page 264]]

    3. When FHA or its successor agency under Public Law 103-354 
prepares to sell a unit, it will also advise BLM or BR, as appropriate, 
of the name of the purchaser and will request issuance of a patent to 
the purchaser. If the unit is in a reclamation project. BR will furnish, 
as soon as possible to FHA or its successor agency under Public Law 103-
354, information concerning any outstanding reclamation charges on the 
land due the United States.
    4. The sale may be for cash or on credit. In the event the sale is 
on credit, FHA or its successor agency under Public Law 103-354 will 
furnish a copy of the mortgage to BLM or BR, as appropriate, which shall 
make reference, in any patent issued thereafter, to the outstanding 
mortgage of FHA or its successor agency under Public Law 103-354.
    This memorandum of understanding supersedes the earlier memorandum 
of understanding signed on February 17, 1950, and March 25, 1950, 
respectively, by the Secretaries of Agriculture and Interior.

    Approved:
                                                         Jack O. Horton,
                                    Assistant Secretary of the Interior.

    Date: October 22, 1974.

    Approved:
                                                          William Erwin,
                                     Assistant Secretary of Agriculture.

    Date: December 16, 1974.

[43 FR 55895, Nov. 29, 1978, as amended at 51 FR 4136, Feb. 3, 1986; 52 
FR 8035, Mar. 13, 1987; 56 FR 67481, Dec. 31, 1991]

  Exhibit B to Subpart A of Part 1943--Target Participation Rates for 
Farmers Home Administration (FmHA) or Its Successor Agency Under Public 
  Law 103-354 Direct Farm Ownership (FO) Loans to Members of Socially 
                          Disadvantaged Groups

                               I. General

    The Farmers Home Administration (FmHA) or its successor agency under 
Public Law 103-354 is statutorily required to establish target 
participation rates for providing direct Farm Ownership (FO) loan funds 
to members of socially disadvantaged groups. These rates are established 
to ensure that members of socially disadvantaged groups are provided 
access to direct FO loan funds to purchase suitable farmland. The target 
participation rate established for each state, and each county within 
the state, is based on the proportion of minority rural population to 
the total rural population in the state, and for each county within the 
state.

                   II. Implementation Responsibilities

    States will meet their target participation rates in use of direct 
FO loan funds as provided in this exhibit. The targeted portion of a 
state's fiscal year direct FO allocation, as outlined in exhibit A of 
subpart L of part 1940 of this chapter, will be used exclusively to 
enable members of socially disadvantaged groups to purchase suitable 
farmland. Additional funds will be available from the National Office 
Reserve to enable States to obligate loans for socially disadvantaged 
applicants should their targeted allocation be insufficient. This 
requirement does not prohibit States from using their allocation of 
regular direct FO funds for making loans to members of socially 
disadvantaged groups.

                         III. Other Information

    The National Office will provide each State Director with a list of 
the target participation rates for each county by October 1 of each 
year. State Directors shall make available to each County and District 
Office the county(ies) target participation rates. State Directors will 
make every effort to provide the greater amount of direct FO loan funds 
to counties having the larger socially disadvantaged population.

                      Total U.S. Participation Rate
------------------------------------------------------------------------
                                                               Target
                                                           Participation
                          State                                 rate
                                                             (percent)
------------------------------------------------------------------------
Alabama..................................................            21
Alaska...................................................            34
Arizona..................................................            39
Arkansas.................................................            13
California...............................................            20
Colorado.................................................            11
Connecticut..............................................             3
Delaware.................................................            17
Florida..................................................            14
Georgia..................................................            20
Hawaii...................................................            68
Idaho....................................................             6
Illinois.................................................             2
Indiana..................................................             1
Iowa.....................................................             1
Kansas...................................................             3
Kentucky.................................................             3
Louisiana................................................            25
Maine....................................................             1
Maryland.................................................            14
Massachusetts............................................             2
Michigan.................................................             3
Minnesota................................................             2
Mississippi..............................................            37
Missouri.................................................             2
Montana..................................................             8
Nebraska.................................................             2
Nevada...................................................            12
New Hampshire............................................             1
New Jersey...............................................             8
New Mexico...............................................            57
New York.................................................             3
North Carolina...........................................            21
North Dakota.............................................             5
Ohio.....................................................             2

[[Page 265]]

 
Oklahoma.................................................            12
Oregon...................................................             5
Pennsylvania.............................................             2
Rhode Island.............................................             2
South Carolina...........................................            34
South Dakota.............................................             9
Tennessee................................................             6
Texas....................................................            22
Utah.....................................................             7
Vermont..................................................             1
Virginia.................................................             2
Washington...............................................             7
West Virginia............................................             3
Wisconsin................................................             2
Wyoming..................................................             7
      U.S. Total.........................................            10
------------------------------------------------------------------------


[57 FR 19524, May 7, 1992]



     Subpart B_Direct Soil and Water Loan Policies, Procedures, and 
                             Authorizations

    Source: 53 FR 35706, Sept. 15, 1988, unless otherwise noted.



Sec. 1943.51  Introduction.

    This subpart contains regulations for making initial and subsequent 
direct Soil and Water (SW) loans. It is the policy of Farmers Home 
Administration (FmHA) or its successor agency under Public Law 103-354 
to make loans to any qualified applicant without regard to race, color, 
religion, sex, national origin, marital status, age or physicial/mental 
handicap provided the applicant can execute a legal contract. Any 
processing or servicing activity conducted pursuant to this subpart 
involving authorized assistance to FmHA or its successor agency under 
Public Law 103-354 employees, members of their families, known close 
relatives, or business or close personal associates, is subject to the 
provisions of subpart D of part 1900 of this chapter. Applicants for 
this assistance are required to identify any known relationship or 
association with an FmHA or its successor agency under Public Law 103-
354 employee. See exhibit A of subpart A of this part for making SW 
loans to entrymen on unpatented public lands. See subpart R of part 2000 
of this chapter (available in any FmHA or its successor agency under 
Public Law 103-354 office) for the Memorandum of Understanding between 
the Farm Credit Administration (FCA) and the FmHA or its successor 
agency under Public Law 103-354.

[53 FR 35706, Sept. 15, 1988, as amended at 58 FR 227, Jan. 5, 1993; 58 
FR 48282, Sept. 15, 1993]



Sec. 1943.52  Objectives.

    The basic objective of the SW loan program is to provide credit and 
management assistance to eligible farmers and ranchers when credit is 
not available elsewhere. FmHA or its successor agency under Public Law 
103-354 assistance enables farm and ranch operators to use their land 
resources to improve their financial conditions so that they can obtain 
credit elsewhere.



Sec. 1943.53  Management assistance.

    Supervision will be provided borrowers to the extent necessary to 
achieve loan objectives and protect the Government's interest, in 
accordance with subpart B of part 1924 of this chapter.



Sec. 1943.54  Definitions.

    Additional security. Any security beyond that which is required to 
adequately secure the loan.
    Approval official. A field official who has been delegated loan and 
grant approval authorities within applicable loan programs, subject to 
the dollar limitations contained in tables available in any FmHA or its 
successor agency under Public Law 103-354 office.
    Beginning farmer or rancher. A beginning farmer or rancher is an 
individual or entity who:
    (a) Meets the loan eligibility requirements for SW loan assistance 
in accordance with Sec. 1943.62 of this subpart.
    (b) Has not operated a farm or ranch, or who has operated a farm or 
ranch for not more than 10 years. This requirement applies to all 
members of an entity.
    (c) Will materially and substantially participate in the operation 
of the farm or ranch.
    (1) In the case of a loan made to an individual, individually or 
with the immediate family, material and substantial participation 
requires that the individual provide substantial day-to-day

[[Page 266]]

labor and management of the farm or ranch, consistent with the practices 
in the county or State where the farm is located.
    (2) In the case of a loan made to an entity, all members must 
materially and substantially participate in the operation of the farm or 
ranch. Material and substantial participation requires that the 
individual provides some amount of the management, or labor and 
management necessary for day-to-day activities, such that if the 
individual did not provide these inputs, operation of the farm or ranch 
would be seriously impaired.
    (d) Agrees to participate in any loan assessment, borrower training, 
and financial management programs required by FmHA or its successor 
agency under Public Law 103-354 regulations.
    (e) Does not own real farm or ranch property or who, directly or 
through interests in family farm entities owns real farm or ranch 
property, the aggregate acreage of which does not exceed 15 percent of 
the average farm or ranch acreage of the farms or ranches in the county 
where the property is located. If the farm is located in more than one 
county, the average farm acreage of the county where the applicant's 
residence is located will be used in the calculation. If the applicant's 
residence is not located on the farm or if the applicant is an entity, 
the average farm acreage of the county where the major portion of the 
farm is located will be used. The average county farm or ranch acreage 
will be determined from the most recent Census of Agriculture developed 
by the U.S. Department of Commerce, Bureau of the Census. State 
Directors will publish State supplements containing the average farm or 
ranch acreage by county.
    (f) Demonstrates that the available resources of the applicant and 
spouse (if any) are not sufficient to enable the applicant to enter or 
continue farming or ranching on a viable scale.
    (g) In the case of an entity:
    (1) All the members are related by blood or marriage.
    (2) All the stockholders in a corporation are qualified beginning 
farmers or ranchers.
    Borrower. An individual or entity which has outstanding obligations 
to the FmHA or its successor agency under Public Law 103-354 under any 
Farmer Programs loan(s), without regard to whether the loan has been 
accelerated. A borrower includes all parties liable for the FmHA or its 
successor agency under Public Law 103-354 debt, including collection-
only borrowers, except for debtors whose total loans and accounts have 
been voluntarily or involuntarily foreclosed or liquidated, or who have 
been discharged of all FmHA or its successor agency under Public Law 
103-354 debt.
    Cooperative. An entity which has farming as its purpose and whose 
members have agreed to share the profits of the farming enterprise. The 
entity must be recognized as a farm cooperative by the laws of the 
State(s) in which the entity will operate a farm.
    Corporation. For the purposes of this regulation, a private domestic 
corporation created and organized under the laws of the State(s) in 
which the entity will operate a farm.
    Cosigner. A party who joins in the execution of a promissory note to 
assure its repayment. The cosigner becomes jointly and severally liable 
to comply with the terms of the note.In the case of an entity applicant, 
the cosigner cannot be a member, partner, joint operator, or stockholder 
of the entity.
    Farm. A tract or tracts of land, improvements, and other 
appurtenances considered to be farm property which is used or will be 
used in the production of crops or livestock, including the production 
of fish under controlled conditions, for sale in sufficient quantitites 
so that the property is recognized as a farm rather than a rural 
residence. The term farm also includes any such land and improvements 
and facilities used in a nonfarm enterprise. It may also include a 
residence which, although physicially separate from the farm acreage, is 
ordinarily treated as a part of the farm in the local community.
    Feasible plan. A feasible plan is a plan based upon the applicant/
borrower's records that show the farming operation's actual production 
and expenses. These records will be used along with realistic 
anticipated prices, including

[[Page 267]]

farm program payments when available, to determine that the income from 
the farming operation, along with any other reliable off-farm income, 
will provide the income necessary for the applicant/borrower to at least 
be able to:
    (a) Pay all operating expenses and all taxes which are due during 
the projected farm budget period.
    (b) Meet necessary payments on all debts, except as provided in 
Sec. 1941.14 of subpart A of part 1941 of this chapter, for annual 
production loans or subordinations made to delinquent borrowers.
    (c) Provide living expenses for the family members of an individual 
borrower or a wage for the farm operator in the case of a cooperative, 
corporation, partnership or joint operation borrower which is in 
accordance with essential family needs. Family members include the 
individual borrower or farm operator in the case of an entity, and the 
immediate members of the family which resides in the same household.
    Fish farming. The production of fish, mollusks, or crustaceans (or 
other invertebrates) under controlled conditions in ponds, lakes, 
streams, or similar holding areas. This involves feeding, tending, 
harvesting and other activities as are necessary to properly raise and 
market the products.
    Indefinite parole. To verify that applicants other than citizens are 
legally admitted to the U.S. on the indefinite parole, such applicants 
must provide their Form I-94, ``Immigration on Indefinite Parole'' card.
    Joint operation. Individuals that have agreed to operate a farm or 
farms together as a business unit. The real and personal property is 
owned separately or jointly by the individuals. A husband and wife who 
want to apply for a loan together will be considered a joint operation.
    Leasehold. A right to use farm property for a specific period of 
time under conditions provided for in a lease agreement.
    Limited resource applicant. An applicant who is a farmer or rancher 
and is an owner or operator of a farm, including a new owner or 
operator, with a low income who demonstrates a need to maximize farm or 
ranch income. A limited resource applicant must meet the eligibility 
requirements for a soil and water loan, but due to low income, cannot 
pay the regular interest rate on such loans. Due to the complex nature 
of the problems facing this applicant, special help will be needed and 
more supervisory assistance will be required to assure reasonable 
prospects for success. The applicant may face such problems as 
underdeveloped managerial ability, limited education, low-producing farm 
due to lack of development or improved production practices and other 
related factors. The applicant cannot develop a feasible plan at regular 
interest rates and at the maximum loan terms. The use of limited 
resource interest rates is restricted to those loan purposes denoted in 
Sec. 1943.66 (a)(1) through (a)(5) of this subpart.
    Majority interest. Any individual or a combination of individuals 
owning more than a 50 percent interest in a cooperative, corporation, 
partnership or joint operation.
    Mortgage. Any form of security interest or lien upon any rights or 
interest in real property of any kind. In Louisiana and Puerto Rico the 
term mortgage also refers to any security interest in chattel property.
    Partnership. An entity consisting of individuals who have agreed to 
operate a farm. The entity must be recognized as a partnership by the 
laws of the State(s) in which the entity will operate a farm and must be 
authorized to own both real and personal property and to incur debts in 
its own name.
    Primary security. Any real estate and/or chattel security which is 
required to adequately secure the loan. This is not to be confused with 
basic security, as defined in Sec. 1962.4 of subpart A of part 1962 of 
this chapter.
    Security. Property of any kind subject to a real or personal 
property lien. Any reference to collateral or security property shall be 
considered a reference to the term security.
    State or United States. The United States itself, each of the 
several States, the Commonwealth of Puerto Rico, the Virgin Islands of 
the United States, Guam, American Samoa, and

[[Page 268]]

the Commonwealth of the Northern Mariana Islands.

[53 FR 35706, Sept. 15, 1988, as amended at 58 FR 15072, Mar. 19, 1993; 
58 FR 26681, May 5, 1993; 58 FR 48288, Sept. 15, 1993; 62 FR 9356, Mar. 
3, 1997]



Sec. 1943.55  [Reserved]



Sec. 1943.56  Credit elsewhere.

    The applicant shall certify in writing on the appropriate forms, and 
the County Supervisor shall verify and document, that adequate credit 
elsewhere is not available, with or without a guarantee or 
subordination, to finance the applicant's actual needs at reasonable 
rates and terms, taking into consideration prevailing private and 
cooperative rates and terms in the community in or near where the 
applicant resides for loans for similar purposes and periods of time.
    (a) If the County Supervisor receives letters or other written 
evidence from a lender(s) indicating the applicant is unable to obtain 
satisfactory credit, these will be included in the loan docket.
    (b) If the applicant cannot qualify for the needed credit from the 
lenders contacted, but one or more of them has indicated they would 
provide credit with an FmHA or its successor agency under Public Law 
103-354 guarantee, or the County Supervisor determines that the 
applicant can obtain a guaranteed loan, the applicant will be advised to 
file an application with that lender(s) so that a guaranteed SW loan 
request can be processed by the lender for consideration by FmHA or its 
successor agency under Public Law 103-354.
    (c) Property and interest in property owned and income received by 
an individual applicant; and cooperative and its members, as 
individuals; a corporation and its stockholders, as individuals; a 
partnership and it partners, as individuals; and a joint operation and 
its joint operators, as individuals; will be considered and used by an 
applicant in obtaining credit from other sources.



Sec. 1943.57  Preference.

    Priority will be given to otherwise qualified applicants requesting 
assistance for soil and water conservation and protection purposes 
denoted in Sec. 1943.66(a) of this subpart who use loan funds to build 
conservation structures or establish conservation practices on highly 
erodible land to comply with part 12 of this title (see attachment 1 of 
exhibit M of subpart G of part 1940 of this chapter which is available 
in any FmHA or its successor agency under Public Law 103-354 office).

[58 FR 15072, Mar. 19, 1993]



Sec. Sec. 1943.58-1943.60  [Reserved]



Sec. 1943.61  Receiving and processing applications.

    Applications will be received and processed as provided in subpart A 
of part 1910 of this chapter, with consideration given to the 
requirements in exhibit M of subpart G of part 1940 of this chapter.



Sec. 1943.62  Soil and water loan eligibility requirements.

    In accordance with the Food Security Act of 1985 (Pub. L. 99-198), 
after December 23, 1985, if an individual or any member, stockholder, 
partner, or joint operator of an entity is convicted under Federal or 
State law of planting, cultivating, growing, producing, harvesting, or 
storing a controlled substance (see 21 CFR part 1308, which is exhibit C 
of subpart A of part 1941 of this chapter and is available in any FmHA 
or its successor agency under Public Law 103-354 office, for the 
definition of controlled substance) prior to loan approval in any crop 
year, the individual or entity shall be ineligible for a loan for the 
crop year in which the individual or member, stockholder, partner, or 
joint operator of the entity was convicted and the four succeeding crop 
years. Applicants will attest on Form FmHA or its successor agency under 
Public Law 103-354 410-1, ``Application for FmHA or its successor agency 
under Public Law 103-354 Services,'' that as individuals or that its 
members, if an entity, have not been convicted of such crime after 
December 23, 1985. In addition, the following requirements must be met:
    (a) An individual must:
    (1) Be a citizen of the United States (see Sec. 1943.54 of this 
subpart for the definition of United States) or an alien lawfully 
admitted to the United States for

[[Page 269]]

permanent residence under the Immigration and Nationality Act. Aliens 
must provide Forms I-151 or I-551, ``Alien Registration Receipt Card.'' 
Indefinite parolees are not eligible. If the authenticity of the 
information shown on the alien's identification document is questioned, 
the County Supervisor may request the Immigration and Naturalization 
Service (INS) to verify the information appearing on the alien's 
identification card by completing INS Form G-641, ``Application for 
Verification of Information from Immigration and Naturalization 
Records,'' obtainable from the nearest INS District. (See exhibit B of 
subpart A of part 1944 of this chapter.) Mail the completed form to INS. 
The payment of a service fee by FmHA or its successor agency under 
Public Law 103-354 to INS is waived by inserting in the upper right hand 
corner of INS Form G-641, the following: ``INTERAGENCY LAW ENFORCEMENT 
REQUEST.'' There is no U.S. citizenship restriction on loans made for 
waste pollution abatement and control facilities under Sec. 1943.66(b) 
of this subpart.
    (2) Possess the legal capacity to incur the obligations of the loan.
    (3) Have sufficient applicable educational and/or on the job 
training or farming experience in managing and operating a farm or ranch 
(1 year's complete production and marketing cycle within the last 5 
years), which indicates the managerial ability necessary to assure 
reasonable prospects of success in the proposed plan of operation. There 
is no education or experience restriction on loans made for waste 
pollution abatement and control facilities under Sec. 1943.66(b) of 
this subpart.
    (4) Have the character (emphasizing credit history, past record of 
debt repayment and reliability), and industry necessary to carry out the 
proposed operation. Past record of debt repayment will not be cause for 
a determination that the applicant/borrower is not eligible if an honest 
attempt has been made to make the payments.
    (5) Honestly endeavor to carry out the applicant's/borrower's 
undertakings and obligations. This would include, but is not limited to, 
providing current, complete and truthful information when applying for 
assistance and making every reasonable effort to meet the conditions and 
terms of the proposed loan.
    (6) Be unable to obtain sufficient credit elsewhere to finance 
actual needs at reasonable rates and terms, taking into consideration 
prevailing private and cooperative rates and terms in the community in 
or near which the applicant resides for loans for similar proposes and 
periods of time.
    (7) Be the owner or operator of not larger than a family farm after 
the loan is closed, when loan funds are used for soil and water 
conservation and protection purposes as defined in Sec. 1943.66 (a)(1) 
through (a)(5) of this subpart. There is no farm size restriction on 
loans made for waste pollution abatement and control facilities under 
Sec. 1943.66(b) of this subpart.
    (8) If a tenant, has a satisfactory written lease for a sufficient 
period of time and under terms that will enable the operator to obtain 
reasonable returns on the improvements to be made with the SW loan. In 
addition, the lease or separate agreement should provide for 
compensating the tenant for any remaining value of the improvements upon 
termination of the lease.
    (b) A cooperative, corporation, partnership or joint operation must:
    (1) Have the character (emphasizing credit history, past record of 
debt repayment and reliability), and industry necessary to carry out the 
proposed operation. This requirement also must be met by the individual 
members, stockholders, partners or joint operators, Past record of debt 
repayment will not be cause for a determination that the applicant/
borrower is not eligible if an honest attempt has been made to make the 
payments.
    (2) Honestly try to carry out the applicant's/borrower's 
undertakings and obligations. This would include, but is not limited to, 
providing current, complete and truthful information when applying for 
assistance, and making every reasonable effort to carry out the 
conditions and terms of the proposed loan. This requirement also must be 
met by the individual members, stockholders, partners, or joint 
operators.

[[Page 270]]

    (3) Consist of members, stockholders, partners, or joint operators 
holding a majority interest who are citizens of the United States (see 
Sec. 143.54 of this subpart for the definition of United States), or 
aliens lawfully admitted to the United States for permanent residence 
under the Immigration and Nationality Act. Aliens must provide Forms I-
151 or I-551. Indefinite parolees are not eligible. If the authenticity 
of the information shown on the alien's identification document is 
questioned, the County Supervisor may request the Immigration and 
Naturalization Service (INS) to verify the information appearing on the 
alien's identification card by completing INS Form G-641, obtainable 
from the nearest INS District. (See exhibit B of subpart A of part 1944 
of this chapter.) Mail the completed form to INS. The payment of a 
service fee by FmHA or its successor agency under Public Law 103-354 to 
INS is waived by inserting in the upper right hand corner of INS Form G-
641, the following: ``INTERAGENCY LAW ENFORCEMENT REQUEST.'' There is no 
U.S. citizenship restriction on loans made for waste pollution abatement 
and control facilities under Sec. 1943.66(b) of this subpart.
    (4) Have sufficient applicable education and/or on the job training 
or farming experience in managing and operating a farm or ranch (1 
year's complete production and marketing cycle within the last 5 years), 
which indicates the managerial ability necessary to assure reasonable 
prospects of success in the proposed plan of operation. There is no 
education or experience restriction on loans made for waste pollution 
abatement and control facilities under Sec. 1943.66(b) of this subpart.
    (5) Be authorized to own and/or operate a farm in the State(s) in 
which the farm is located.
    (6) Be unable to obtain sufficient credit elsewhere, either as an 
entity or as individual members, stockholders, partners, or joint 
operators, to finance actual needs at reasonable rates and terms taking 
into account prevailing private and cooperative rates and terms in or 
near the community for loans for similar proposes and periods of time.
    (7) Be controlled by individuals engaged primarily and directly in 
farming or ranching in the United States after the loan is made.
    (8) Be the owner or operator of not larger than a family farm after 
the loan is closed, when loan funds are used for soil and water 
conservation and protection purposes as defined in Sec. 1943.66 (a)(1) 
through (a)(5) of this subpart. There is no farm size restriction on 
loans made for waste pollution abatement and control facilities under 
Sec. 1943.66(b) of this subpart.
    (9) If a tenant, has a satisfactory written lease for a sufficient 
period of time, and under terms that will enable the applicant to obtain 
reasonable returns on the improvements made with the loan. In addition, 
the lease or separate agreement should provide for compensating the 
tenant for any remaining value of the improvements upon termination of 
the lease.
    (10) Consist of members, stockholders, partners, or joint operators, 
who are individuals and not corporation(s), partnership(s), 
cooperative(s) or joint operation(s).
    (11) When loan funds will be used for soil and water conservation 
and protection purposes (Sec. 1943.66 (a)(1) through (a)(5) of this 
subpart), and the members, stockholders, partners, or joint operators 
holding a majority interest are related by blood or marriage, the 
requirements of Sec. 1943.12(b)(5), (b)(7) (if limited resource 
applicant), and (b)(8) of subpart A of part 1943 of this chapter will 
apply.
    (12) When loan funds will be used for soil and water conservation 
and protection purposes, and the members, stockholders, partners, or 
joint operators holding a majority interest are not related by blood or 
marriage, the requirements of Sec. 1943.12(b)(6) of subpart A of part 
1943 of this chapter will apply.
    (c) Borrower training. The applicant must agree to meet the training 
requirements of Sec. 1924.74 of subpart B of part 1924 of this chapter 
unless a waiver is granted in accordance with that section. In the case 
of a cooperative, corporation, partnership, or joint operation, any 
individual member, stockholder, partner, or joint operator holding a 
majority interest in the operation or who is operating the farm

[[Page 271]]

must agree to complete the training or qualify for the waiver on behalf 
of the entity. However, if one entity member is solely responsible for 
financial or production management, then only that entity member will be 
required to complete the training in that area for the entity or qualify 
for a partial waiver. If the financial and production functions of the 
farming operation are shared, the knowledge and skills of the 
individual(s) with the responsibility of production and/or financial 
management of the operation will be considered in the aggregate for 
granting a waiver or requiring that training be completed. If a waiver 
is not granted, these individuals will be required to complete the 
training in accordance with their responsibilities. If the applicant has 
previously been required to obtain training, the applicant must be 
enrolled in and attending, or have satisfactorily completed, the 
training required.

[53 FR 35706, Sept. 15, 1988, as amended at 56 FR 3972, Feb. 1, 1991; 58 
FR 15072, Mar. 19, 1993; 58 FR 69199, Dec. 30, 1993]



Sec. Sec. 1943.63-1943.65  [Reserved]



Sec. 1943.66  Loan purposes.

    Loans that are consistent with all Federal, State, and local 
environmental quality standards may be made to:
    (a) Pay costs for construction, materials, supplies, equipment, and 
services related to, soil and water conservation and protection 
purposes, such as:
    (1) Installation of conservation structures, including terraces, sod 
waterways, permanently vegetated stream borders and filter strips, 
windbreaks (tree or grass), shelterbelts, and living snow fences.
    (2) Establishment of forest cover for sustained yield timber 
management, erosion control, or shelter belt purposes.
    (3) Establishment or improvement of permanent pasture.
    (4) The conversion to and maintenance of sustainable agriculture 
production systems, as described by Department technical guides and 
handbooks.
    (5) Payment of costs to build conservation structures or establish 
conservation practices on highly erodible land to comply with a 
conservation plan in accordance with part 12 of this title (see 
attachment 1 of exhibit M of subpart G of part 1940 of this chapter 
which is available in any FmHA or its successor agency under Public Law 
103-354 office).
    (6) Other purposes consistent which plans for soil and water 
conservation, integrated farm management, water quality protection and 
enhancement, and wildlife habitat improvement.
    (7) The following items/purposes related to conservation and 
protection purposes and water quality are authorized:
    (i) Sodding, subsoiling, land leveling, liming, and fencing.
    (ii) Fertilizer and seed used in connection with a soil conservation 
practice or to establish or improve permanent vegetation.
    (iii) Gasoline, oil, and equipment rental or hire connected with 
establishing or completing the development.
    (iv) Reasonable expenses incidental to obtaining, planning, closing, 
and making the loan, such as fees for legal, engineering or other 
technical services and first year insurance premiums which are required 
to be paid by the borrower and which cannot be paid from other funds. 
Loan funds may also be used to pay the borrower's share of Social 
Security taxes for labor hired by the borrower in connection with making 
any planned improvements.
    (v) Purchase or repair of special-purpose equipment, such as 
terracing, land leveling, and ditching equipment, provided:
    (A) Such equipment is needed and will facilitate the completion or 
maintenance of the planned improvement, and
    (B) The cost of the equipment plus the other costs related to 
improvement will not be more than if performed by a contractor or by 
another method.
    (vi) Acquire a source of water to be used on land the applicant 
owns, will acquire, or operates including:
    (A) The purchase of water stock or membership in an incorporated 
water users association.
    (B) The acquisition of a water right through appropriation, 
agreement, permit, or decree.

[[Page 272]]

    (C) The acquisition of water supply or right, and the land on which 
it is presently being used, when the water supply or right cannot be 
purchased without the land, provided:
    (1) The value of the land without the water supply or right is only 
an incidental part of the title price, and
    (2) The water supply will be transferred to, and used more 
effectively on, other land owned or operated by the applicant.
    (vii) Purchase land or an interest therein for sites or rights-of-
way and easements upon which a water or drainage facility will be 
located.
    (viii) Pay that part of the cost of facilities, improvements, and 
``practices'' which will be paid for in connection with participation in 
programs administered by agencies such as the Agricultural Stabilization 
and Conservation Service (ASCS) or the Soil Conservation Service (SCS) 
only when such costs cannot be covered by purchase orders or assignments 
to material suppliers or contractors. If loan funds are advanced and the 
portion of the payment for which the funds were advanced is likely to 
exceed $1,000, the applicant will assign the payment to the FmHA or its 
successor agency under Public Law 103-354.
    (ix) Provide water supply facilities for dwellings and farm 
buildings, including such facilities as wells, pumps, farmstead 
distribution systems, and home plumbing.
    (x) Pay costs of land and water development, use, and conservation 
essential to the applicant's farm, subject to the following:
    (A) Such a loan may be made on land with defective title owned by 
the applicant or on land in which the applicant owns an undivided 
interest providing:
    (1) The amount of funds used on such land is limited to $25,000,
    (2) There is adequate security for the loan, and
    (3) The tract is not included in the appraisal report.
    (B) Such a loan may be made on land leased by the applicant 
providing:
    (1) The terms of the lease are such that there is reasonable 
assurance the applicant will have use of the improvement over its useful 
life,
    (2) A written lease provides for payment to the tenant or assignee 
for any remaining value of the improvement if the lease is terminated, 
and
    (3) There is adequate security for the loan.
    (b) Pay the costs of meeting Federal, State, or local requirements 
for agricultural, animal, or poultry waste pollution abatement and 
control facilities, including construction, modification, or relocation 
of the farm or farm structures, if necessary, to comply with such 
pollution abatement requirements.

[58 FR 15073, Mar. 19, 1993]



Sec. 1943.67  Loan limitations.

    An SW loan will not be approved if:
    (a) The loan being made exceeds the lesser of the value of the farm 
or other security for the loan, or $50,000.
    (b) The total outstanding insured SW, Farm Ownership (FO) or 
Recreation (RL) loan principal balance including the new loan owned by 
the applicant will exceed the lesser of $200,000, or the market value of 
the farm or other security.
    (c) The noncontiguous character of a farm containing two or more 
tracts is such that an efficient farming operation and nonfarm 
enterprise cannot be conducted due to the distance between tracts or due 
to inadequate rights-of-way or public records between tracts.
    (d) The limitation found in Sec. 1943.79 (c) of this subpart is 
exceeded.
    (e) The loan is made for any purpose that will contribute to 
excessive erosion of highly erodible land or to the conversion of 
wetlands to produce an agricultural commodity, as further explained in 
exhibit M of subpart G of part 1940 of this chapter. Refer to FmHA 
Instruction 2000-LL (available in any FmHA or its successor agency under 
Public Law 103-354 Office) for assistance in implementation.

[53 FR 35706, Sept. 15, 1988, as amended at 58 FR 15074, Mar. 19, 1993]



Sec. 1943.68  Rates and terms.

    (a) Terms of loan. Each loan will be scheduled for repayment over a 
period not to exceed 40 years from the date of the note or such shorter 
period as may be necessary to assure the loan will be

[[Page 273]]

adequately secured, taking into account the probable depreciation of the 
security. The loan approval official will also consider the repayment 
ability of the applicant, as reflected in the completed Form FmHA or its 
successor agency under Public Law 103-354 431-2, ``Farm and Home Plan,'' 
or other similar plan of operation acceptable to FmHA or its successor 
agency under Public Law 103-354 when setting the terms. In any case, 
there must be an interest payment scheduled at least annually in 
accordance with the FMI for FmHA 1940-17, ``Promissory Note.'' Loans may 
have reduced annual installments scheduled, of least partial interest, 
for the first five years.
    (b) Reamortization. When the loan approval official determines that 
reamortization will assist in the orderly collection of any SW loan, the 
loan approval official may take such action under subpart S of part 1951 
of this chapter.
    (c) Interest rate. Upon request of the applicant, the interest rate 
charged by FmFA will be the lower of the interest rates in effect at the 
time of loan approval or loan closing. If an applicant does not indicate 
a choice, the loan will be closed at the interest rate in effect at the 
time of loan approval. Interest rates are specified in exhibit B of FmHA 
Instruction 440.1 (available in any FmHA or its successor agency under 
Public Law 103-354 office) for the type of assistance involved. A lower 
rate may be established in this exhibit for a limited resource applicant 
when loan funds are being used for soil and water conservation and 
protection purposes denoted in Sec. 1943.66 (a)(1) through (a)(5) of 
this subpart, subject to the following;
    (1) The applicant meets the conditions of the definition for a 
limited resource applicant set forth in Sec. 1943.54 of this subpart.
    (2) The Farm and Home Plan and Business Analysis--Nonagricultural 
Enterprise form, when appropriate, indicates that installments at the 
higher rate, along with other debts, cannot be paid during the period of 
the plan.

[53 FR 35706, Sept. 15, 1988, as amended at 58 FR 15074, Mar. 19, 1993]



Sec. 1943.69  Security.

    Each SW loan will be secured by real estate, chattels, leaseholds, 
or a combination of these. Chattels and/or leaseholds, however, will 
only be taken as security as set forth in paragraphs (c) and (d) of this 
section. The total amount of security required will be the lesser of 
either 150 percent of the loan amount, or all real estate owned by the 
applicant. A loan will be considered adequately secured when the real 
estate security for the loan is at least equal to the loan amount. 
Security in excess of 150 percent of the loan amount will only be taken 
when it is not practical to separate the property, i.e., a tract of 
land. The specific items of security, along with the value of the 
security, will be documented in the case file. This information will be 
obtained from values established in accordance with Sec. 1943.75 of 
this subpart. If the applicant disagrees with the values established, 
FmHA or its successor agency under Public Law 103-354 will accept an 
appraisal from the applicant, obtained at the applicant's expense, if 
the appraisal meets all FmHA or its successor agency under Public Law 
103-354 requirements. In cases, when a loan is being made in conjunction 
with a servicing action, the security requirements as stated in subpart 
S of part 1951 of this chapter will prevail. In unusual cases, the loan 
approval official may require a cosigner in accordance with Sec. 1910.3 
(d) of subpart A of part 1910 of this chapter or a pledge of security 
from a third party. A pledge of security is preferable to a cosigner.
    (a) Real estate security. (1) A mortgage will be taken on all real 
estate refinanced or improved with SW funds, and by any additional real 
estate security needed to meet the requirements of this section.
    (2) Security will also include items which are considered part of 
the farm and ordinarily pass with the title to the farm such as, but not 
limited to, assignments of leases or leasehold interests having 
mortgageable value, water rights, easements, rights-of-way, revenues, 
and royalties from mineral rights.
    (3) A first lien is required on real estate, when available. In 
addition, loans

[[Page 274]]

will be secured by a junior lien on real estate provided:
    (i) Prior lien instruments do not contain provisions for future 
advances (except for taxes, insurance, other costs needed to protect the 
security, or reasonable foreclosure costs), cancellation, summary 
forfeiture, or other clauses that may jeopardize the Government's 
interest or the applicant's ability to pay the SW loan unless any such 
undesirable provisions are limited, modified, waived or subordinated 
insofar as the Government is concerned.
    (ii) Agreements are obtained from prior lienholders to give notice 
of foreclosure to FmHA or its successor agency under Public Law 103-354 
whenever State law or other arrangements do not require such a notice. 
Any agreements needed will be obtained as provided in subpart B of part 
1927 of this chapter, except as modified by the ``Memorandum of 
Understanding-FCA-FmHA or its successor agency under Public Law 103-
354,'' FmHA Instruction 2000-R (available in any FmHA or its successor 
agency under Public Law 103-354 office).
    (4) Advice on obtaining security will be received from OGC when 
necessary.
    (5) The designated attorney, title insurance company, or OGC will 
furnish advice on obtaining security when a life estate is involved.
    (6) Any loan of $10,000 or less may be secured by the best lien 
obtainable without title clearance or legal services as required in 
subpart B of part 1927 of this chapter, provided the County Supervisor 
believes from a search of the County records that the applicant can give 
a mortgage on the farm. This exception to title clearance will not apply 
when:
    (i) The loan is made simultaneously with that of another lender.
    (ii) This provision conflicts with program regulations of any other 
FmHA or its successor agency under Public Law 103-354 loan being made 
simultaneously with the SW loan.
    (7) The Departments of Agriculture and Interior have agreed that 
FmHA or its successor agency under Public Law 103-354 loans may be made 
to Native Americans and secured by real estate when title is held in 
trust or restricted status. When security is so taken on real estate 
held in trust or restrictive status:
    (i) The applicant will request the Bureau of Indian Affairs (BIA) to 
furnish Title Status Reports to the County Supervisor; and
    (ii) The BIA approval will be obtained on the mortgage after it has 
been signed by the applicant and any other party whose signature is 
required.
    (b) Exceptions. The County Supervisor will clearly document in the 
file when security is not taken for any of the following reasons:
    (1) A lien will not be taken on property that could have significant 
environmental problems/costs (e.g., known or suspected underground 
storage tanks or hazardous wastes, contingent liabilities, wetlands, 
endangered species, historic properties). Guidance is provided in part 
II, item H of exhibit A of FmHA Instruction 1922-E (available in any 
FmHA or its successor agency under Public Law 103-354 office) as to the 
action to be taken when the appraiser indicates that the property is 
subject to any hazards, detriments or limiting conditions.
    (2) A lien will not be taken on property that cannot be made subject 
to a valid lien.
    (3) A lien will not be taken on the applicant's personal residence 
and appurtenances, when the residence is located on a separate parcel 
and the farm tract being financed, refinanced, improved, or otherwise 
used for collateral provides primary security for the loan(s).
    (4) A lien will not be taken on subsistence livestock; cash or 
special cash collateral accounts to be used for the farming operation or 
for necessary family living expenses; all types of retirement accounts; 
personal vehicles necessary for family living and farm operating 
purposes; household goods; and small tools and small equipment, such as 
hand tools, power lawn mowers, and other similar items not needed for 
security purposes.
    (5) A lien will not be taken on marginal land, including timber, 
when a softwood timber (ST) loan is secured by such land.
    (c) Chattel security. Ordinarily, SW loans will not be secured by 
chattels.

[[Page 275]]

However, loans will be secured by chattels as follows:
    (1) A first lien will be taken on equipment or fixtures bought with 
loan funds whenever such property cannot be included in the real estate 
lien and the best lien obtainable on all real estate will be taken and 
does not provide primary security for the loan.
    (2) Chattel security will be obtained when real estate will not 
provide primary security for the loan and the best lien obtainable has 
been taken on all real estate.
    (3) When a loan is made only for the purchase of shares of water 
stock, such stock will be pledged or assigned as security for the loan.
    (4) If there is no real estate security available and a lien is 
taken on chattels only, the loan cannot be over $100,000 and must be 
scheduled for repayment within 20 years or the useful life of the 
security, whichever is less.
    (5) Chattel security will be obtained and kept effective as notice 
to third parties as provided in subpart B of part 1941 and subpart A of 
part 1962 of this chapter.
    (d) Loans secured by leaseholds. A loan will be secured by a 
mortgage on the leasehold if it has negotiable value and is able to be 
mortgaged, subject to the following:
    (1) The unexpired term of the lease should extend beyond the 
repayment period of the loan for a period sufficient to ensure the 
objectives of the loan will be achieved. If the loan repayment period is 
equal to or greater than the period covered by the lease, the borrower 
must provide other security to secure the loan or the lessor must agree 
in writing to compensate the borrower for any unexhausted value of the 
improvements when the lease expires or is terminated.
    (2) The lessor must have good and marketable title to the real 
estate, which may be subject to a prior lien, or the lessor must have 
signed a contract to purchase the real estate. The contract to sell and 
the lien instruments must not contain covenants, such as short 
redemption periods or rights to cancel, which may jeopardize the 
Government's security. Any provisions which may jeopardize the 
Government's security must be limited, modified, waived or subordinated 
in favor of the Government.
    (3) With respect to achieving the purpose of the loan, obtaining 
adequate security and being able to service the loan and enforce its 
rights, the Government, as holder of a mortgage upon a lease or 
leasehold interest, must be in a position substantially as good as if it 
held a second mortgage on the real estate. Besides the lessor's consent 
to the SW mortgage on the leasehold interest, FmHA or its successor 
agency under Public Law 103-354 should consider whether or not:
    (i) There is reasonable security of tenure. The borrower's interest 
should not be subject to summary forfeiture or cancellation.
    (ii) The right to foreclose the SW mortgage and sell without 
restrictions would adversely affect the salability or market value of 
the security.
    (iii) FmHA or its successor agency under Public Law 103-354 has a 
right to bid at a foreclosure sale or to accept voluntary conveyance in 
lieu of foreclosure.
    (iv) FmHA or its successor agency under Public Law 103-354 has the 
right, after acquiring the leasehold through foreclosure or voluntary 
conveyance in lieu of foreclosure, or in event of abandonment by the 
borrower, to occupy the property or sublet it, and to sell it for cash 
or credit. In case of a credit sale, the FmHA or its successor agency 
under Public Law 103-354 should take a vendor's mortgage with rights 
similar to those under the original SW mortgage.
    (v) The borrower has the right, in the event of default or inability 
to continue with the lease and the SW loan, to transfer the leasehold, 
subject to the SW mortgage, to an eligible transferee who will assume 
the SW debt.
    (vi) Advance notice will be given to FmHA or its successor agency 
under Public Law 103-354 of the lessor's intention to cancel, terminate 
or foreclose upon the lease. Such advance notice should be long enough 
to permit FmHA or its successor agency under Public Law 103-354 to 
ascertain the amount of delinquencies, the total amount of the lessor's 
and any other prior interest, the market value of the leasehold interest 
and, if litigation is involved, to

[[Page 276]]

refer the case with a report of the facts to the United States Attorney 
for appropriate action.
    (vii) There are express provisions covering the question of FmHA or 
its successor agency under Public Law 103-354's obligation to pay unpaid 
rental or other charges accrued at the time it acquires possession of 
the property or title to the leasehold, and those which become due 
during FmHA or its successor agency under Public Law 103-354's occupancy 
or ownership, pending further servicing or liquidation.
    (viii) There are any necessary provisions to assure fair 
compensation to the lessee for any part of the premises taken by 
condemnation.
    (ix) Any other provisions are necessary to obtain an interest which 
can be mortgaged.
    (4) A State supplement will be issued in any State in which real 
estate or chattel liens may be taken on leasehold interests in farmland 
and recorded so as to protect the mortgagee.
    (5) The following language or similar language which, in the opinion 
of OGC or the designated attorney, is legally adequate, will be inserted 
on the lien instrument:

    ``All Borrower's right, title, and interest in and to the leasehold 
estate for a term of ---- years beginning on ----, 19--, created and 
established by a certain Lease dated ----------, 19--, executed by ----
-------- as lessor(s), recorded on ----, 19--, in Book ----, page ---- 
of the ---- Records of said County and State, and any renewals and 
extensions thereof, and all Borrower's right, title, and interest in and 
to said Lease, covering the following real estate:'' (To be inserted 
just before the legal description.)

This additional covenant will be inserted in the mortgage:

    Borrower will pay when due all rents and any and all other charges 
required by said Lease, will comply with all other requirements of said 
Lease, and will not surrender or relinquish without the Government's 
written consent, any of the Borrower's right, title or interest in or to 
said leasehold estate or under said Lease while this instrument remains 
in effect.

    (e) State supplements. Each State will supplement this section to 
provide instructions on forms to be completed and other requirements to 
be met in order to obtain the required security. In each State where 
loans will be made to Indians holding title to land in trust or 
restricted status, FmHA or its successor agency under Public Law 103-354 
and BIA will decide on a way to exchange necessary information, and the 
procedure to be followed will be set out in a State supplement.
    (f) Special security requirements. When SW loans are made to 
eligible entities that consist of members, stockholders, partners or 
joint operators who are presently indebted for an SW loan(s) as 
individual(s) or when SW loans are made to eligible individuals, who are 
members, stockholders, partners or joint operators of an entity which is 
presently indebted for an SW loan(s), security must consist of:
    (1) Chattel and/or real estate security that is separate and 
identifiable from the security pledged to FmHA or its successor agency 
under Public Law 103-354 for any other farmer program insured or 
guaranteed loans.
    (2) Different lien positions on real estate are considered separate 
and identifiable collateral.
    (3) The outstanding amount of loans made may not exceed the value of 
the collateral used.
    (g) Same security. Except as provided in paragraph (f) of this 
section, when an SW loan (insured or guaranteed) is made to a borrower 
who has other FmHA or its successor agency under Public Law 103-354 
loans, the same real estate collateral may secure more than one loan so 
long as the outstanding loan amount does not exceed the total value of 
the security.

[53 FR 35706, Sept. 15, 1988, as amended at 57 FR 18678, 18679, Apr. 30, 
1992; 59 FR 22962, May 4, 1994; 59 FR 25801, May 18, 1994]



Sec. Sec. 1943.70-1943.72  [Reserved]



Sec. 1943.73  General provisions.

    (a) Flood and mudslide hazard areas. Flood and mudslide hazards will 
be evaluated whenever the farm to be financed is located in special 
flood or mudslide prone areas as designated by the Federal Emergency 
Management Administration (FEMA). Subpart B of part 1806 of this chapter 
(FmHA instruction 426.2) as well as subpart G of part 1940 of this 
chapter will be complied with when loan funds are used to

[[Page 277]]

construct, modify, or relocate buildings in such areas. This will not 
prevent making loans on farms when the farmstead is located in a flood 
or mudslide prone area and if funds are not included in the loan for 
building improvements. However, the hazard will need to be noted in the 
appraisal report. When land development or improvements such as dikes, 
terraces, fences, and intake structures are planned to be located in 
special flood or mudslide prone areas, loan funds may be used subject to 
the following:
    (1) The Corps of Engineers or the Soil Conservation Service (SCS) 
will be consulted concerning:
    (i) Likelihood of flooding.
    (ii) Probability of flood damage.
    (iii) Recommendations on special design and specifications needed to 
minimize flood and mudslide hazards.
    (2) FmHA or its successor agency under Public Law 103-354 
representatives will evaluate the proposal and record the decision in 
the loan docket in accordance with subpart G of part 1940 of this 
chapter.
    (b) Civil rights. The provisions of subpart E of part 1901 of this 
chapter will be complied with on all loans made which involve any 
development financed by FmHA or its successor agency under Public Law 
103-354 that will be performed by a contract or subcontract of more than 
$10,000.
    (c) Protection of historical and archaeological properties. If there 
is any evidence to indicate the property to be financed has historical 
or archaeological value, the provisions of subpart F of part 1901 of 
this chapter apply.
    (d) Environmental requirements. See subpart G of part 1940 of this 
chapter for applicable environmental requirements. Refer to FmHA 
Instruction 2000-LL (available in any FmHA or its successor agency under 
Public Law 103-354 office) for assistance in implementation.
    (e) Equal Credit Opportunity Act. In accordance with title V of Pub. 
L 93-495, the Equal Credit Opportunity Act, the FmHA or its successor 
agency under Public Law 103-354 will not discriminate against any 
applicant on the basis of sex or marital status, with respect to any 
aspect of a credit transaction.
    (f) Compliance with Special Laws and Regulations. (1) Applicants 
will be required to comply with applicable Federal, State and local laws 
and regulations governing construction; diverting, appropriating, and 
using water including use for domestic purposes; and making changes in 
the use of land affected by zoning regulations.
    (2) State Directors and Farmer Programs Staff members will consult 
with SCS, U.S. Geological Survey, State Geologist or Engineer, or any 
board having official functions relating to water use and restrictions 
for water development. State supplements will be issued to provide 
guidelines which:
    (i) State all requirements to be met, including the acquisition of 
water rights.
    (ii) Define areas where development of ground water for irrigation 
is not recommended.
    (3) Applicants will comply with all local laws and regulations, and 
will obtain any special licenses or permits needed for nonfarm, 
recreation, specialized or fish farming enterprises.

[53 FR 35706, Sept. 15, 1988, as amended at 57 FR 18679, Apr. 30, 1992; 
58 FR 15074, Mar. 19, 1993]



Sec. 1943.74  Special requirements.

    (a) Land development. When possible, recommendations for land 
development will be obtained from the Forest Service, State Agricultural 
Extension Service, and the Soil Conservation Service and included in the 
development plan, and in the farm and home plans. In planning such 
development with the applicant, the County Supervisor will encourage the 
applicant to use any cost-sharing assistance that may be available 
through any source such as the Agricultural Stabilization and 
Conservation Service (ASCS) program.
    (b) Technical assistance. Applicants are responsible for obtaining 
all the technical assistance required in connection with an SW loan, 
such as that needed to plan, construct, or establish the improvement or 
facility to be financed.
    (c) Loans for irrigation purposes. Evidence or documentation of the 
following should be obtained when loan funds are to be used for 
irrigation purposes:

[[Page 278]]

    (1) The land to be irrigated is suitable for irrigation.
    (2) The applicant has a right to use water for irrigation.
    (3) The water is suitable to use for irrigation and is available in 
sufficient quantities to irrigate a specified amount of land.
    (4) If irrigation specialists have prepared any feasibility studies, 
copies of these studies have been submitted to FmHA or its successor 
agency under Public Law 103-354.
    (d) Insurance. (1) Insurance will be obtained on buildings and other 
property as provided in subpart A of part 1806 of this chapter (FmHA 
Instruction 426.1) on real estate taken as primary security, as defined 
in Sec. 1943.54 of this subpart. Property insurance will not be 
required when real estate is taken as additional security, as defined in 
Sec. 1943.54 of this subpart.
    (2) See Sec. 1943.73(a) of this subpart for information about flood 
and mudslide hazard areas.
    (3) Chattel security should be insured against hazards customarily 
insured against in the area if the loss of such security would 
jeopardize the interests of the Government.
    (e) Life estates. When life estates are involved, loans may be made:
    (1) To both the life estate holder and the remainderman, provided:
    (i) Both have a legal right to occupy and operate the farm; and
    (ii) Both are eligible for the loan; and
    (iii) Both parties sign the note and mortgage
    (2) To the remainderman only, provided:
    (i) The remainderman has a legal right to occupy and operate the 
farm; and
    (ii) The lien instrument is signed by the remainderman, life estate 
holder, and any other party having any interest in the security.
    (3) To the life estate holder only, provided:
    (i) There is no legal restriction placed on a life estate holder who 
occupies and operates a farm; and
    (ii) The lien instrument is signed by the life estate holder, 
remainderman, and any other party having any interest in the security.
    (f) Liens junior to the FmHA or its successor agency under Public 
Law 103-354 lien. A loan will not be approved if a lien junior to the 
FmHA or its successor agency under Public Law 103-354 lien is likely to 
be taken simultaneously with or immediately subsequent to the loan 
closing to secure any debt the borrower may have at the time of loan 
closing or any debt that may be incurred in connection with the SW loan, 
unless the total debt against the security would be within its market 
value.
    (g) Graduation of SW borrowers. If, at any time, it appears that the 
borrower may be able to obtain a refinancing loan from a cooperative or 
private credit source at reasonable rates and terms, comparable to those 
for loans for similar purposes and periods of time prevailing in the 
area the borrower will, upon request, apply for and accept such 
financing.

[53 FR 35706, Sept. 15, 1988, as amended at 58 FR 26681, May 5, 1993]



Sec. 1943.75  Options, planning, and appraisals.

    (a) Options. An applicant is responsible for obtaining options on 
real property. Form FmHA or its successor agency under Public Law 103-
354 440-34, ``Option to Purchase Real Property,'' may be used. Other 
forms may be used if acceptable to all parties concerned and to FmHA or 
its successor agency under Public Law 103-354. When an FmHA or its 
successor agency under Public Law 103-354 form is not used, a provision 
should be included which makes the option contingent upon FmHA or its 
successor agency under Public Law 103-354 making a loan to the buyer.
    (b) Planning. Farm and Home Plans and nonagricultural enterprise 
plans, when appropriate, will be completed as provided in subpart B of 
part 1924 of this chapter.
    (c) Appraisals. (1) Except as provided in paragraph (c)(2) of this 
section, real estate appraisals will be completed on forms in accordance 
with Sec. 761.7 of this title, and in the case of an appraisal of 
residential real estate, the appropriate Agency form (available in each 
Agency

[[Page 279]]

State Office ) or other format that contains the same information, by a 
designated FmHA or its successor agency under Public Law 103-354 real 
property appraiser, or FmHA or its successor agency under Public Law 
103-354 State-certified general contract real property appraiser. 
Appraisals are necessary when real estate is taken as primary security, 
as defined in Sec. 1943.4 of this subpart, and when loans are serviced 
in accordance with subpart S of part 1951 of this chapter. Real estate 
appraisals are not required when real estate is taken as additional 
security, as defined in Sec. 1943.4 of this subpart. However, the 
County Supervisor will document in the running record the estimated 
market value of the additional security and the basis for the estimate.
    (2) Other real estate appraisals completed by other State-certified 
general appraisers may be used providing such appraisals meet the 
ethics, competency, departure provisions, etc., and sections I and II of 
the Uniform Standards of Professional Appraisal Practices, and contain a 
mineral rights appraisal as set out in paragraph (c)(4) of this section. 
Prior to acceptance, the appraisal must have an acceptable desk review 
(technical) completed by an FmHA or its successor agency under Public 
Law 103-354 designated review appraiser.
    (3) Real estate appraisals will be completed as provided in Sec. 
761.7 of this title. The rights to mining products, gravel, oil, gas, 
coal, or other minerals will be considered a portion of the security for 
Farmer Programs loans and will be specifically included as a part of the 
appraised value of the real estate securing the loans using Form FmHA or 
its successor agency under Public Law 103-354 1922-11, ``Appraisal for 
Mineral Rights'' or other format that contains the same information.
    (4) The value of stock required to be purchased by Federal land Bank 
(FLB) borrowers may be added to the recommended market value of the 
security, provided:
    (i) An assignment is obtained on the stock, or
    (ii) An assignment is obtained which provided that:
    (A) The value of the stock at the time the FLB loan is satisfied 
will be applied on the FLB loan, or
    (B) The stock refund check is made payable to the borrower and FmHA 
or its successor agency under Public Law 103-354, or
    (C) The stock refund check is made payable to the borrower and 
mailed to the County Supervisor.
    (iii) The total of the stock value and the recommended market value 
of real estate is indicated in the comments section of the appraisal 
report.
    (5) In the case of nonreal estate security, the following items 
apply:
    (i) Form FmHA or its successor agency under Public Law 103-354 440-
21, ``Appraisal of Chattel Property,'' will be used.
    (ii) The property which will serve as security will be described in 
sufficient detail so it can be identified.
    (iii) The current market value or, if appropriate, the current cash 
value will be determined.

[53 FR 35706, Sept. 15, 1988, as amended at 58 FR 48289, Sept. 15, 1993; 
59 FR 16773, Apr. 8, 1994; 64 FR 62568, Nov. 17, 1999]



Sec. 1943.76  Planning and performing development.

    The development work will be planned and completed in accordance 
with part 1924, subpart A of this chapter.



Sec. 1943.77  Relationship with other lenders.

    (a) An applicant will be requested to obtain credit from another 
source when information indicates such credit is available. When another 
lender will not make a loan for the total needs of the applicant but is 
willing to participate with an SW loan, consideration will be given to a 
participation loan. FmHA or its successor agency under Public Law 103-
354 employees may not guarantee, personally or for FmHA or its successor 
agency under Public Law 103-354, repayment of advances made from other 
credit sources. However, lenders may be assured that lien priorities 
will be recognized.
    (b) The County Supervisor and the other lender's representative 
should maintain a close working relationship

[[Page 280]]

in processing loans to a mutual applicant or borrower. When an SW loan 
is made at the same time as a loan from another lender, that lender's 
lien will have priority over the FmHA or its successor agency under 
Public Law 103-354 lien unless otherwise agreed upon. The lender's lien 
priority can cover the following in addition to principal and interest: 
Advances for payment of taxes, property insurance, reasonable 
maintenance to protect the security, and reasonable foreclosure costs 
including attorney's fees.



Sec. Sec. 1943.78-1943.82  [Reserved]



Sec. 1943.83  Loan approval or disapproval.

    (a) Loan approval authority. Initial and subsequent loans may be 
approved as authorized by subpart A of part 1901 of this chapter, 
provided:
    (1) Section 1943.67 of this subpart, containing loan limitations, is 
not violated.
    (2) No significant changes have been made in the development plan 
considered by the appraiser when real estate will be taken as security.
    (b) Loan approval action. (1) The loan approval official must 
approve or disapprove applications within the deadlines set out in Sec. 
1910.4 of subpart A of part 1910 of this chapter. The loan approval 
official is responsible for reviewing the docket to determine whether 
the proposed loan complies with established policies and all pertinent 
regulations. When reviewing the docket, the loan approval official will 
determine that:
    (i) The Agency has certified the applicant eligible;
    (ii) Funds are requested for authorized purposes;
    (iii) The proposed loan is based upon a feasible plan. Planning 
forms other than Form FmHA or its successor agency under Public Law 103-
354 432-2, ``Farm and Home Plan'' may be used when they provide the 
necessary information.
    (iv) The security is adequate;
    (v) Necessary supervision is planned; and
    (vi) All other pertinent requirements have been met or will be met.
    (2) [Reserved]

[53 FR 35706, Sept. 15, 1988, as amended at 55 FR 21530, May 25, 1990; 
57 FR 18679, Apr. 30, 1992; 61 FR 35926, July 9, 1996]



Sec. 1943.84  Requesting title service.

    When the loan is approved and real estate will serve as security, 
the County Supervisor will request the applicant to obtain title 
clearance as provided in subpart B of part 1927 of this chapter, when 
required if this has not been done. If an option is involved, the 
applicant will sign and send to the seller Form FmHA or its successor 
agency under Public Law 103-354 440-35, ``Acceptance of Option,'' or 
other suitable forms.

[53 FR 35706, Sept. 15, 1988, as amended at 56 FR 67481, Dec. 31, 1991]



Sec. 1943.85  Action after loan approval.

    (a) Requesting check. If the County Supervisor is reasonably certain 
that the loan can be closed within 20 working days from the date of the 
check, loan funds may be requested at the time of loan approval through 
the field office terminal system. If funds are not requested when the 
loan is approved, advances in the amount needed will be requested 
through the field office terminal system. Loan funds must be provided to 
the applicant(s) within 15 days after loan approval, unless the 
applicant(s) agrees to a longer period. If no funds are available within 
15 days of loan approval, funds will be provided to the applicant as 
soon as possible and within 15 days after funds become available, unless 
the applicant agrees to a longer period. If a longer period is agreed 
upon by the applicant(s), the same will be documented in the case file 
by the County Supervisor.
    (1) When all loan funds can be disbursed at, or within 30 days after 
loan closing or if the amount of funds that cannot be disbursed does not 
exceed $5,000, the total amount of the loan will be requested in a 
single advance.
    (2) When loan funds cannot be disbursed as outlined in paragraph 
(a)(1) of this section, the amount needed to meet the immediate needs of 
the borrower will be requested through the field office terminal system. 
The amount of each advance should meet

[[Page 281]]

the needs of the borrower as much as is possible, so the amount in the 
supervised bank account will be kept to a minimum. The Finance Office 
will continue to supply Form FmHA or its successor agency under Public 
Law 103-354 440-57 until the entire loan has been disbursed. The County 
Supervisor should tell the borrower to notify the County Office of 
amounts needed on a timely basis to avoid delays in receiving loan 
checks.
    (b) Handling loan checks. (1) When the loan check or the borrower's 
personal funds are to be deposited in the designated loan closing 
agent's escrow account, this will be done no later than the date of loan 
closing. If loan funds or the borrower's personal funds are to be 
deposited in a supervised bank account, this will be done in accordance 
with subpart A of part 1902 of this chapter as soon as possible, but in 
no case later than the first banking day following the date of loan 
closing.
    (2) If a loan check is received and the loan cannot be closed within 
20 working days from the date of the check, the County Supervisor will 
take appropriate action in accordance with FmHA Instruction 2018-D, 
(available in any FmHA or its successor agency under Public Law 103-354 
office). The applicant must agree to a delayed loan closing and the same 
will be documented in the case file by the County Supervisor.
    (3) When a check is returned and the loan will be closed at a 
subsequent date, another check will be requested in accordance with FmHA 
Instruction 2018-D, a copy of which may be obtained as stated in 
paragraph (b)(2) of this section.
    (c) Cancellation of loan. If, for any reason a loan check or 
obligation will be cancelled, the County Supervisor will take the 
following actions:
    (1) The County Supervisor will notify the State Office of loan 
cancellation by using Form FmHA or its successor agency under Public Law 
103-354 1940-10, ``Cancellation of U.S. Treasury Check and/or 
Obligation.'' The County Office will send a copy of Form FmHA or its 
successor agency under Public Law 103-354 1940-10 to the designated 
attorney, Regional Attorney, or the title insurance company 
representative providing loan closing instructions to indicate the loan 
has been canceled. If a check received in the County Office is to be 
canceled, the check will be returned as prescribed in FmHA Instruction 
2018-D (available in any FmHA or its successor agency under Public Law 
103-354 office).
    (2) Interested parties will be notified of the cancellation as 
provided in subpart B of part 1927 of this chapter.
    (d) Cancellation of advances. When an advance is to be cancelled the 
County Supervisor must take the following actions:
    (1) Complete and distribute Form FmHA or its successor agency under 
Public Law 103-354 194-10 in accordance with the FMI.
    (2) When necessary, prepare and execute a substitute promissory note 
reflecting the revised total of the loan and the revised repayment 
schedule. When it is not possible to obtain a substitute promissory 
note, the County Supervisor will show on Form FmHA or its successor 
agency under Public Law 103-354 440-57 the revised amount of the loan 
and the revised repayment schedule.
    (e) Increase or decrease in amount of loan. If it becomes necessary 
to increase or decrease the amount of the loan prior to loan closing, 
the County Supervisor will request that all distributed docket forms be 
returned to the County Office and reprocessed unless the change is minor 
and replacement forms can readily be completed and submitted. In the 
latter case, a memorandum explaining the change will be attached to the 
revised forms and sent to the Finance Office.

[53 FR 35706, Sept. 15, 1988, as amended at 54 FR 39727, Sept. 28, 1989; 
56 FR 67481, Dec. 31, 1991; 59 FR 54788, Nov. 2, 1994]



Sec. Sec. 1943.86-1943.87  [Reserved]



Sec. 1943.88  Loan closing actions.

    When a loan closing date has been agreed upon, the County Supervisor 
will notify the borrower of the loan closing date. The following 
appropriate actions will be taken in connection with, and after loan 
closing:
    (a) Real estate mortgage loans. When a loan is to be secured by a 
real estate mortgage, it will be closed in accordance with the 
applicable provisions of

[[Page 282]]

subpart B of part 1927 of this chapter except as modified for loans of 
$10,000 or less in paragraph 1943.69(a)(6).
    (b) Loans involving chattel or other nonreal estate security. All 
chattel security instruments will be signed and filed as prescribed in 
subpart B of part 1941 of this chapter for Operating loans. The 
following forms will be used for chattel security:
    (1) Form FmHA or its successor agency under Public Law 103-354 440-
15, ``Security Agreement (Insured Loans to Individuals).''
    (2) Form FmHA or its successor agency under Public Law 103-354 440-
25, ``Financing Statement,'' or, when authorized, Form FmHA or its 
successor agency under Public Law 103-354 440-A25, ``Financing 
Statement.''
    (3) State forms may be used if National forms are not legally 
acceptable. Such forms will require OGC and National Office clearance.
    (c) Applicant's financial condition. The County Supervisor will 
review with the applicant the financial statement which was prepared at 
the time the docket was developed. If there have been significant 
changes in the applicant's financial condition, the financial statement 
will be revised and initialed by the applicant and the County 
Supervisor. When an applicant's financial condition has changed to the 
extent that it appears the loan would be unsound or improper, the loan 
will not be closed. If a revised loan docket is needed to meet loan 
requirements or determine loan soundness, it will be developed and 
submitted to the appropriate loan approval official.
    (d) Loan approval conditions. The County Supervisor will inform the 
applicant of any loan approval conditions that need to be met. These 
conditions will usually be included in the notice informing the 
applicant of the loan closing date. The loan will not be closed if the 
applicant is unable to meet loan approval conditions.
    (e) Change in the use of funds planned for refinancing. (1) County 
Supervisors are authorized to:
    (i) Transfer funds planned to be used for refinancing specific debts 
to other debts when there is a need to do so; and
    (ii) Transfer funds planned to be used for other purposes to pay 
small deficiencies in estimates for refinancing debts, providing there 
are sufficient remaining funds to complete any land purchase and planned 
development.
    (2) A revised docket will be developed when:
    (i) The total amount of debts to be refinanced has increased in such 
an amount that planned loan purposes cannot be carried out; and
    (ii) The applicant is unable to make up any deficiencies from other 
resources.
    (f) Assignment of income from real estate to be mortgaged. Income to 
be received by the borrower from royalties, leases, or other existing 
agreements under which the value of the real estate security will be 
reduced will be assigned and disposed of in accordance with subpart A of 
part 1965 of this chapter, including provisions for written consent of 
any prior lienholder. When the County Supervisor deems it advisable, 
assignments also may be taken on all or a portion of income to be 
derived from nondepleting sources such as income from bonus payments or 
annual delay rentals. Such income will be assigned and disposed of in 
accordance with subpart A of part 1965 of this chapter.
    (1) For assignment of income, Form FmHA or its successor agency 
under Public Law 103-354 443-16, ``Assignment of Income from Real Estate 
Security,'' will be used, except, if it is legally inadequate in a 
State, it may be adapted to that State with the approval of the OGC or 
an authorized State form may be used instead.
    (2) The County Supervisor, upon the advice of the designated 
attorney, escrow agent, title insurance company, or the OGC, as 
appropriate, may require acknowledgment and recordation of the 
assignment. Any cost incident thereto will be paid by the borrower.
    (3) At the time Form FmHA or its successor agency under Public Law 
103-354 443-16 is executed, appropriate notations will be made on Form 
FmHA or its successor agency under Public Law 103-354 1905-1, 
``Management System Card--Individual,'' to insure the proceeds, or the 
specified portion of the proceeds assigned to FmHA or its successor 
agency under Public Law 103-354

[[Page 283]]

from the transactions are remitted at the proper time.
    (g) Preparation of the note. Form FmHA or its successor agency under 
Public Law 103-354 1940-17, ``Promissory Note,'' will be used and 
completed in accordance with the FMI.
    (1) Separate notes will be prepared for any other FmHA or its 
successor agency under Public Law 103-354 Loan made simultaneously with 
the SW loan. The notes will be completed as provided in the appropriate 
loan regulation and FMI.
    (2) All FmHA or its successor agency under Public Law 103-354 notes 
to be secured by real estate can be described in the same mortgage.
    (3) The promissory note will be signed as follows:
    (i) Individuals. Only the applicant(s) will sign the note as a 
borrower. If a co-signer is needed (see Sec. 1910.3(e) of subpart A of 
part 1910 of this chapter), the co-signer will also sign the note. Any 
other signatures needed to assure the required security will be obtained 
as provided in State supplements. Persons who are minors or mental 
incompetents will not execute a promissory note. Except when a person 
has pledged only property as security for a loan, the purpose and effect 
of signing a promissory note or other evidence of indebtedness for a 
loan made or insured by FmHA or its successor agency under Public Law 
103-354 is to incur individual personal liability regardless of any 
State law to the contrary.
    (ii) Cooperatives or corporations. The promissory note(s) will be 
executed so as to evidence liability of the entity as well as individual 
liability of all member(s) or stockholder(s) in the entity.
    (iii) Partnerships or joint operations. The note will be executed by 
the partner or joint operator authorized to sign for the entity, and all 
partners in a partnership or joint operators in the joint operation, as 
individuals.
    (h) Supplementary payment agreement. Form FmHA or its successor 
agency under Public Law 103-354 440-9, ``Supplementary Payment 
Agreement,'' should be used for each applicant who regularly (such as 
weekly, monthly, or quarterly) receives substantial income from an off-
farm source, a nonfarm enterprise, or from farming.
    (i) Obtaining insurance. The applicant will be informed of the 
insurance requirements set forth in Sec. 1943.74(d) of this subpart.
    (j) Effective time of loan closing. An SW loan is considered closed 
when the mortgage is filed for record.
    (k) Distribution of documents after loan closing. The County 
Supervisor should review the forms and closing actions. Corrective 
action should be taken when necessary.
    (1) Real estate mortgages:
    (i) When the original recorded instrument is returned to the County 
Office:
    (A) File the original in the County Office file, and
    (B) Give a copy to the borrower.
    (ii) When the original is retained by recorder:
    (A) File a conformed copy in County Office file, and
    (B) Give a conformed copy to the borrower.
    (iii) The County Supervisor will provide copies that may be needed 
in some cases for interested third parties.
    (2) Deeds:
    (i) Give the original to the borrower, and
    (ii) Retain one copy to file.
    (3) Title insurance policies:
    (i) File the Mortgagee title policy in the County Office file, and
    (ii) Give the owner's title policy, if one is obtained, to the 
borrower.
    (4) Water stock certificates or similar collateral will be retained 
in the County Office file.
    (5) Abstracts of title:
    (i) Return to the borrower, except when they were obtained from a 
third party with the understanding they would be returned, the abstracts 
will be sent to the third party. A memorandum receipt will be obtained 
when abstracts are delivered to the third party.
    (ii) Form FmHA or its successor agency under Public Law 103-354 140-
4, ``Transmittal of Documents,'' will be used and a receipted copy kept 
in the County Office. The FMI should be followed for preparing this 
form.

[53 FR 35706, Sept. 15, 1988, as amended at 56 FR 67481, Dec. 31, 1991; 
57 FR 18679, Apr. 30, 1992; 58 FR 48289, Sept. 15, 1993; 59 FR 25801, 
May 18, 1994]

[[Page 284]]



Sec. Sec. 1943.89-1943.91  [Reserved]



Sec. 1943.92  Servicing.

    SW loans will be serviced in accordance with subpart A of part 1965 
of this chapter. Chattel security for SW loans will be serviced in 
accordance with subpart A of part 1962 of this chapter. Bureau of 
Reclamation (BR) loans made during the period August 19, 1977, through 
September 30, 1977, will be serviced in the same manner as Soil and 
Water loans. See exhibit A of this subpart, ``Memorandum of 
Understanding Between the Bureau of Reclamation, Department of the 
Interior, and the Farmers Home Administration or its successor agency 
under Public Law 103-354, Department of Agriculture,'' for additional 
information on these loans.



Sec. 1943.93  Subsequent SW loans.

    A subsequent SW loan is a loan made to a borrower who is currently 
in debt for an SW loan.
    (a) Subsequent loan may be made for the same purposes and under the 
same conditions as an initial loan.
    (b) The subsequent loan will be processed in the same manner as an 
initial loan.
    (c) A new real estate mortgage will not be necessary provided:
    (1) All the land which will serve as security for the loan is 
described on the present real estate mortgage; or
    (2) The real estate mortgage has a future advance clause and a State 
supplement provides authority for using such a clause; or
    (3) The required lien priority is obtained with the existing 
mortgage and future advance clause.



Sec. 1943.94  Subordinations.

    Subordinations in favor of other lenders will be processed in 
accordance with subpart A of part 1965 of this chapter.



Sec. Sec. 1943.95-1943.99  [Reserved]



Sec. 1943.100  State supplements.

    State supplements will be issued as necessary to implement this 
subpart.

Exhibit A to Subpart B of Part 1943--Memorandum of Understanding Between 
 the Bureau of Reclamation, Department of the Interior and the Farmers 
 Home Administration or Its Successor Agency Under Public Law 103-354, 
                        Department of Agriculture

    Whereas, under section 8 of the 1977 Drought Emergency Act (P.L. 95-
18), hereafter referred to as ``the Act,'' the Bureau of Reclamation 
(BR) is authorized to make loans to irrigators for the purpose of 
undertaking construction, management, conservation activities, or the 
acquisition and transportation of water, which can be expected to have 
an effect in mitigating losses and damages resulting from the 1976-1977 
drought period;
    Whereas, the Farmers Home Administration (FmHA) or its successor 
agency under Public Law 103-354 has an existing soil and water program 
(SW) authorized by section 304 of the Consolidated Farm and Rural 
Development Act for loans to individuals that accomplish purposes 
similar to those in the Act;
    Whereas, it is more efficient and in the best interests of the 
United States, and in accordance with section 6 of the Act, for BR to 
procure the services of FmHA or its successor agency under Public Law 
103-354 pursuant to the terms of the Economy Act of 1932 (31 U.S.C. 686) 
to make and service loans to individual irrigators as authorized by the 
Act.
    Now therefore the parties agree:
    1. For purposes of this Memorandum the term irrigators shall mean 
any person or legal entity who holds a valid existing water right for 
irrigation purposes within the Federal reclamation projects. Federal 
reclamation projects means any project constructed or funded under 
Federal reclamation law and specifically including projects having 
approved loans under the Small Reclamation Projects Act of 1956, as 
amended.
    2. FmHA or its successor agency under Public Law 103-354 shall make 
and service loans to individual irrigators as authorized by the Act 
pursuant to its SW program and applicable FmHA or its successor agency 
under Public Law 103-354 regulations except as modified hereby.
    3. The loans shall be only for the purposes relating specifically to 
irrigation and set forth in FmHA Instruction 443.2, IVA1, A8, B1, B2, 
and C. The loans shall be interest free. Loans for water acquisition and 
transportation shall be repaid over a period not to exceed 5 years. 
Other loans shall be repaid over a period not to exceed 5 years except 
such loans which generate benefits which are usable beyond 1977 shall be 
repaid within a

[[Page 285]]

period which shall be the shorter of the estimated useful life of the 
facilities or the reasonable payment capacity of the irrigator but in no 
event to exceed 40 years. All loans shall be obligated not later than 
September 30, 1977, and any construction related to any loan must be 
completed by November 30, 1977.
    4. Services rendered by FmHA or its successor agency under Public 
Law 103-354 pursuant to this Memorandum of Understanding shall be on a 
nonreimbursable basis to the irrigator. For services rendered, BR shall 
pay to FmHA or its successor agency under Public Law 103-354 a charge of 
5 percent of principal of each loan. BR directs that FmHA or its 
successor agency under Public Law 103-354 disburse such service charge 
to itself directly upon the closing of each loan.
    5. Three million dollars shall be transferred to FmHA or its 
successor agency under Public Law 103-354 by Standard Form 1151, which 
amount shall be available for construction, management, and conservation 
activities. An additional sum of $5 million may be made available upon 
request of FmHA or its successor agency under Public Law 103-354 for the 
acquisition and transportation of water.
    6. Monthly Report: FmHA or its successor agency under Public Law 
103-354 shall submit a Standard Form 133, ``Report on Budget 
Execution'', in accordance with OMB Circular A-34, to the Bureau of 
Reclamation, Washington, D.C. 20240, attention code 370.
    7. Accomplishment: FmHA or its successor agency under Public Law 
103-354 shall submit to the Bureau of Reclamation, Washington, D.C. 
20240, attention code 400, a complete report on expenditures and 
accomplishments under this Memorandum on January 16, 1978.
    Date of June 29, 1977.

Bureau of Reclamation, Department of the Interior,

R. Keith Higginson,
Commissioner.

    Dated: July 15, 1977.

Farmers Home Administration or its successor agency under Public Law 
103-354, Department of Agriculture,

Marty Holleran,
for Gordon Cavanaugh,
Administrator.

                               attachment

      Amendatory-Memorandum of Understanding Between the Bureau of 
      Reclamation, Department of the Interior and the Farmers Home 
    Administration or Its Successor Agency Under Public Law 103-354, 
                        Department of Agriculture

    WHEREAS, the Bureau of Reclamation (BR) and the Farmers Home 
Administration (FmHA) or its successor agency under Public Law 103-354 
consummated a Memorandum of Understanding on July 15, 1977, whereby BR 
would procure the services of FmHA or its successor agency under Public 
Law 103-354 pursuant to the terms of the Economy Act of 1932 (31 U.S.C. 
686) to make and service loans to individual irrigators as authorized by 
section 8 of the 1977 Drought Emergency Act (Pub. L. 95-18); and
    WHEREAS, item 3 of that Memorandum of Understanding provides in part 
that all loans shall be obligated not later than September 30, 1977, and 
any construction related to any loan must be completed by November 30, 
1977; and
    WHEREAS, Pub. L. 95-107, enacted on August 17, 1977, amends Pub. L. 
95-18 to accomplish, among other things, an extension of the time for 
completing construction activities under the authorities of Pub. L. 95-
18 from November 30, 1977, to January 31, 1978.
    NOW THEREFORE the parties agree that the date November 30, 1977, in 
the last sentence of item 3 of the Memorandum of Understanding executed 
by BR on June 29, 1977, and FmHA or its successor agency under Public 
Law 103-354 on July 15 1977, be revised to January 31, 1978, so that the 
sentence will read, ``All loans shall be obligated not later than 
September 30, 1977, and any construction related to any loan must be 
completed by January 31, 1978.''
    Date of September 6, 1977.

Bureau of Reclamation, Department of the Interior,

R. Keith Higginson,
Commissioner.

Farmers Home Administration or its successor agency under Public Law 
103-354, Department of Agriculture,

Gordon Cavanaugh,
Administrator.

    September 7, 1977.



   Subpart C_Small Farmer Outreach Training and Technical Assistance 
                                 Program

    Source: 59 FR 66443, Dec. 27, 1994, unless otherwise noted.



Sec. 1943.101  General.

    This subpart provides procedures for administration of the Small 
Farmer Outreach Training and Technical Assistance Program whereby an 
1890 or other eligible educational institution or community-based 
organization as referenced in Sec. 1943.105 of this subpart, also 
referred to as the recipient, enters into a grant, cooperative, or other

[[Page 286]]

agreement with the Farm Service Agency (FSA)to provide outreach, 
training, and technical assistance to members of socially disadvantaged 
groups to own and operate farms and ranches and to participate in 
agricultural programs.



Sec. 1943.102  Objectives.

    To meet the objectives of the program referenced in paragraphs (a) 
and (b) of this section, FSA will fund grant agreements, cooperative 
agreements, or enter into Memorandums of Understanding (MOU) with 
recipients as referenced in Sec. 1943.105 of this subpart, for Small 
Farmer Outreach Training and Technical Assistance Projects which are 
determined to meet the objectives of the program:
    (a) The long-term objective of the Small Farmer Outreach Training 
and Technical Assistance Program is to keep small farmers, especially 
those who are members of socially disadvantaged groups, on the farm and 
strengthen the rural economy.
    (b) An immediate objective of the Small Farmer Outreach Training and 
Technical Assistance Program is to encourage and assist members of 
socially disadvantaged groups to own and operate farms and ranches and 
to participate in agricultural programs.



Sec. 1943.103  Project period.

    A cooperative agreement or other agreement will specify a project 
for a period generally of 5 years, with an option for renewal up to the 
5-year period, subject to the availability of funds or termination of 
the project by mutual agreement or for cause.



Sec. 1943.104  Definitions.

    For the purpose of the Small Farmer Outreach Training and Technical 
Assistance Program, the following definitions are applicable:
    Agricultural programs. Eligible programs shall include, but are not 
limited to, one or more of the following programs: Agricultural 
conservation program, programs comprising the environmental conservation 
acreage reserve program (ECARP), conservation technical assistance 
program, emergency conservation program, forestry incentives program, 
Great Plains Conservation Program, integrated farm management option 
program, price support and production adjustment programs, rural 
environmental conservation program, soil survey program, and water bank 
program; also the farm loan programs (farm ownership, operating, soil 
and water, and emergency loans) of the FSA.
    Awarding official. The Administrator of the FSA or designee.
    Community-based organization. Those nonprofit, nongovernment 
organizations with a well defined constituency that includes all or part 
of a particular community, e.g., communities consisting of socially 
disadvantaged farmers and ranchers. Socially disadvantaged farmers and 
ranchers must play a role in the development and implementation of any 
program or project undertaken by the organization.
    Cooperative agreement. The same meaning as grant, except that, at 
the time a cooperative agreement is awarded, substantial involvement is 
anticipated between FSA, acting for the Federal Government, and the 
recipient during performance under the agreement. (Refer to exhibit A of 
FmHA Instruction 1943-C (available in any State office).)
    Grant. For purposes of this regulation, an award by FSA, acting for 
the Federal Government, of money to the recipient with the following 
characteristics:
    (1) The principal purpose of the award is to accomplish a public 
purpose authorized by statute, rather than acquisition, by purchase, 
lease, or barter, of property or services for the direct benefit or use 
of the Federal Government; and
    (2) At the time an award is made, no substantial involvement is 
anticipated between FSA, acting for the Federal Government, and the 
recipient.
    Memorandum of Understanding (MOU). For purposes of this regulation, 
a documented plan between FSA and the recipient or recipients for 
carrying out their separate activities in a project of mutual interest. 
When an understanding is reached as to the area of operations and duties 
to be performed by the parties concerned, each party directs its own 
activities and utilizes its own resources. An MOU is not a

[[Page 287]]

fund obligation document since it does not directly involve a financial 
assistance transaction.
    Project. The total activities within the scope of the program as 
identified in the MOU, grant, cooperative or other agreement.
    Project Director. The individual who is responsible for the project, 
as designated by the recipient in the project proposal and approved by 
the awarding official. The project director will devote full time to the 
administration of the project.
    Project period. The total time approved by the awarding official for 
conducting the proposed project as outlined in an approved project 
proposal or the approved portions thereof and as specified in the 
cooperative or other agreement.
    Recipient. For purposes of this subpart, an entity as defined in 
Sec. 1943.105 of this subpart that has entered into an MOU, grant, or 
cooperative or other agreement with FSA.
    Socially disadvantaged farmer or rancher. A farmer or rancher who is 
a member of a socially disadvantaged group. (For entity applicants, the 
majority interest has to be held by socially disadvantaged individuals.)
    Socially disadvantaged group. A group whose members have been 
subject to racial, ethnic, or gender prejudice because of their identity 
as members of a group without regard to their individual qualities. 
Socially disadvantaged groups consist of Women, African-Americans, 
Native Americans, Alaskan Natives, Hispanics, Asians, and Pacific 
Islanders.



Sec. 1943.105  Eligible entities.

    (a) FSA will consider proposals only from:
    (1) 1890 Land-Grant Colleges, including Tuskegee University.
    (2) Indian tribal community colleges.
    (3) Alaska native cooperative colleges.
    (4) Hispanic-serving post-secondary educational institutions.
    (5) Other post-secondary educational institutions with demonstrated 
experience in providing agricultural education or other agriculturally-
related services to socially disadvantaged farmers or ranchers in their 
region.
    (6) Any community-based organization that:
    (i) Has demonstrated experience in providing agricultural education 
or other agriculturally-related services to socially disadvantaged 
farmers and ranchers;
    (ii) Provides documentary evidence of its past experience in working 
with socially disadvantaged farmers and ranchers during the 2 years 
preceding its application for assistance; and
    (iii) Does not engage in activities prohibited under Section 
501(c)(3) of the Internal Revenue Code of 1986.
    (b) In addition to those entities referenced in paragraph (a) of 
this section, an applicant must:
    (1) Have adequate financial resources for performance and the 
necessary experience, organizational and technical qualifications, and 
facilities or a firm commitment, arrangement, or ability to obtain same 
(including any to be obtained through subagreement(s));
    (2) Have the ability to comply with the proposed or required 
completion schedule for the project;
    (3) Have an adequate financial management system and audit 
procedures that provide efficient and effective accountability and 
control of all funds, property, and other assets;
    (4) Have a satisfactory record of performance, including, in 
particular, any prior performance under grants, contracts, or 
cooperative agreements from the Federal Government; and
    (5) Otherwise be qualified and eligible to receive funding for a 
grant agreement, cooperative agreement, or other agreement under the 
applicable laws and regulations.



Sec. Sec. 1943.106-1943.110  [Reserved]



Sec. 1943.111  Process for consideration.

    (a) A program solicitation will be published in the Federal Register 
and such other publication(s) as deemed appropriate, as early as 
practicable every 5 years that funds will be available for new project 
use and at other appropriate times.
    (b) The project proposal must contain the following information:
    (1) Background and need for the project. Explain the circumstances

[[Page 288]]

which necessitate a Small Farmer Outreach Training and Technical 
Assistance Project within the State to serve small farmers, especially 
members of socially disadvantaged groups.
    (2) Objectives and goals proposed to meet the objectives. Clearly 
state the objectives of the project, which should be in line with the 
objectives of the program stated in Sec. 1943.102 of this subpart, and 
explain the goals proposed to meet the objectives.
    (3) Statement of Work, including staffing. Describe the plan of 
action for meeting the objective of the Small Farmer Outreach Training 
and Technical Assistance Program and the necessary staffing.
    (4) Proposed budget. (i) Submit a proposed budget for each of the 5 
years, showing line-by-line cost items for the proposed project. Include 
any in-kind contributions to be provided.
    (ii) Show all funding sources and itemize costs by the following 
line items: personnel costs, equipment, material and supplies, travel, 
and all other costs.
    (iii) Salaries of project personnel who will be working on the 
project may be requested in proportion to the effort that they will 
devote to the project.
    (iv) Funds may be requested under any of the line items listed above 
provided that the item or source for which support is requested is 
identified as necessary for successful conduct of the project, is 
allowable under the authorizing legislation and applicable Federal cost 
principles, and is not prohibited under any applicable Federal statute.
    (5) Identification of personnel. Incorporate into the proposal the 
resumes of all anticipated personnel, including the Project Director. 
Also discuss the experience, qualifications, and availability of all 
personnel, including the Project Director, to direct and carry out the 
project.
    (c) The State Office will review the proposal and forward the 
proposal to the National Office Project Manager, within 15 days of 
receipt, with the State Office's recommendations.
    (d) The National Office will make a preliminary review of the 
proposal and reserves the right to return it to the State Office with 
any questions or comments to be clarified by the 1890 or other eligible 
educational institution or community-based organization. A time period 
for resubmission will be specified.
    (e) All proposals from entities eligible for funding under Sec. 
1943.105 of this subpart shall be evaluated for funding consideration. 
To assist in the evaluation and obtain the best possible balance of 
viewpoints for funding consideration, a proposal review panel will be 
used. The proposal review panel will be selected and organized to 
provide maximum expertise and objective judgment in the evaluation of 
proposals. The proposal review panel will use Form FmHA or its successor 
agency under Public Law 103-354 1943-2, ``EVALUATION--Small Farmer 
Outreach Training and Technical Assistance Program,'' to evaluate each 
proposal. The proposal review panel will evaluate each proposal against 
the five criteria using the following scale: Highly Responsive (5); 
Fully Responsive (3); Marginally Responsive (1); and Not Responsive (0). 
The criteria used by the proposal review panel and the criteria weights 
are:
    (1) Feasibility and Policy Consistency (3.5). Degree to which the 
proposal clearly describes its objective and evidences a high level of 
feasibility and consistency with United States Department of Agriculture 
(USDA) policy and FSA mission.
    (2) Institutional Commitment (3.5). Degree to which the institution 
or organization is committed to the project, as shown by funds, in-kind 
services, or historical success in meeting the objectives of the 
program.
    (3) Number of Counties and Farmers Served (3.5). Degree to which the 
proposal reflects collaborative approaches in meeting with other 
agencies or organizations to enhance the objectives of the program. 
Also, the areas and number of farmers who would benefit from the 
services offered.
    (4) Socially Disadvantaged Applicants--Outreach (3.5). Degree to 
which the proposal contains efforts to reach persons identified as 
socially disadvantaged farmers and ranchers in designated counties.

[[Page 289]]

    (5) Preparatory Features--Statement of Work (6.0). Degree to which 
the proposal reflects special innovative features to attract, interest, 
and improve the economical and social conditions of socially 
disadvantaged farmers and ranchers.
    (f) The final decision to award is at the discretion of the awarding 
official. The awarding official shall consider the ranking, comments, 
and recommendations from the proposal review panel and any pertinent 
information before deciding which applications to approve and the order 
of approval. The awarding official will notify in writing entities whose 
proposals are rejected. In accordance with Sec. 1900.55 of subpart B of 
part 1900 of this chapter, appeal rights will be provided only to those 
entities identified as eligible under Sec. 1943.105 of this subpart.
    (g) After a decision regarding funding is made, FSA and the 
recipient which is selected will enter into a grant or cooperative 
agreement. The awarding official will notify the recipient of approval 
and inform them of the necessary documents needed to execute the 
agreement. If no funding is involved, FSA and the recipient will enter 
into an MOU.



Sec. Sec. 1943.112-1943.114  [Reserved]



Sec. 1943.115  Authorized use of funds.

    Any funds authorized under this subpart will be used solely for the 
operation and administration of the Small Farmer Outreach Training and 
Technical Assistance Program specifically for the project under the 
cooperative or other agreement. There is no other authorized use of the 
funds. Eligible costs are limited to those line items specified in Sec. 
1943.111 (b)(4) of this subpart.



Sec. Sec. 1943.116-1943.125  [Reserved]



Sec. 1943.126  Other applicable Federal statutes and regulations that 
apply.

    Several other Federal statutes and regulations apply to proposals 
considered for review or cooperative and other agreements awarded under 
the program. These include, but are not limited to the following:
    (a) 7 CFR part 1b--USDA Implementation of the National Environmental 
Policy Act;
    (b) 7 CFR part 3--USDA implementation of OMB Circular A-129 
regarding debt collection;
    (c) 7 CFR part 1.1--USDA implementation of the Freedom of 
Information Act;
    (d) 7 CFR part 15, Subpart A--USDA implementation of Title VI of the 
Civil Rights Act of 1964;
    (e) 7 CFR part 3015--USDA Uniform Federal Assistance Regulations, 
implementing OMB Directives (i.e., Circular Nos. A-110, A-21, and A-122) 
and incorporating provisions of 31 U.S.C. 6301-6308 (formerly, the 
Federal Grant and Cooperative Agreement Act of 1977, Public Law No. 95-
224), as well as general policy requirements applicable to recipients of 
Departmental financial assistance;
    (f) 7 CFR part 3016--USDA Uniform Administrative Requirements for 
Grants and Cooperative Agreements to State and Local Governments;
    (g) 7 CFR part 3017, as amended--USDA implementation of 
Governmentwide Debarment and Suspension (nonprocurement) and 
Governmentwide Requirements for Drug-Free Workplace (Grants);
    (h) 7 CFR part 3018--USDA implementation of New Restrictions on 
Lobbying. Imposes prohibitions and requirements for disclosure and 
certification related to lobbying on recipients of Federal contracts, 
grants, cooperative agreements, and loans;
    (i) 29 U.S.C. 794, Section 504--Rehabilitation Act of 1973, and 7 
CFR part 15B (USDA implementation of the statute), prohibiting 
discrimination based upon physical or mental handicap in Federally 
assisted programs; and
    (j) 35 U.S.C. 200 et seq.--Bayh-Dole Act, controlling allocation of 
rights to inventions made by employees of small business firms and 
domestic nonprofit organizations, including universities, in Federally 
assisted programs (implementing regulations are contained 37 CFR part 
401).



Sec. 1943.127  Fund disbursement.

    The method of payment will be by reimbursement by Treasury check, 
and payment will be requested on Standard Form (SF) 1034, ``Public 
Voucher for Purchases and Services Other Than

[[Page 290]]

Personal,'' or SF-270, ``Request for Advance or Reimbursement,'' 
whichever is applicable. Payments will be processed in accordance with 7 
CFR parts 3015 and 3016.



Sec. 1943.128  Financial management systems and reporting requirements.

    (a) Recipients must comply with standards for the financial 
management and reporting and program performance reporting found in 7 
CFR parts 3015 and 3016.
    (b) Recipients must provide to the State Office quarterly financial 
and program performance reports. The reports are due 30 days after the 
reporting period, and an original and two copies of each report will be 
submitted. The financial report will be presented on SF-269A, 
``Financial Status Report,'' and the financial and program performance 
reports will be prepared in accordance with 7 CFR parts 3015 and 3016.
    (c) The program performance report should also address progress on 
the activities under each of the areas of Outreach, Training, and 
Technical Assistance, as stipulated in the cooperative agreement or 
other agreement.
    (d) Within 30 days after receipt, the State Office will forward the 
reports to the National Office Project Manager, with the State Office's 
comments and recommendations.



Sec. Sec. 1943.129-1943.135  [Reserved]



Sec. 1943.136  Standards of conduct for employees of recipient.

    (a) Recipients must establish safeguards to prevent employees, 
consultants, or members of governing bodies from using their positions 
for purposes that are, or give the appearance of being, motivated by a 
desire for private financial gain for themselves or others such as those 
with whom they have family, business, or other ties. Therefore, 
recipients receiving financial support must have written policy 
guidelines on conflict of interest and the avoidance thereof. These 
guidelines should reflect State and local laws and must cover financial 
interests, gifts, gratuities and favors, nepotism, and other areas such 
as political participation and bribery. These rules must also indicate 
the conditions under which outside activities, relationships, or 
financial interests are proper or improper, and provide for notification 
of these kinds of activities, relationships, or financial interests to a 
responsible and objective recipient official. For the requirements of a 
code of conduct applicable to procurements under grants and cooperative 
agreements, see the procurement standards prescribed by 7 CFR 3015.181.
    (b) The rules of conduct must contain a provision for prompt 
notification of violations to a responsible and objective recipient 
official and must specify the type of administrative action that may be 
taken against an individual for violations.
    (c) A copy of the rules of conduct must be given to each officer, 
employee, board member, and consultant of the recipient who is working 
on the FSA financed project, and the rules must be enforced to the 
extent permissible under State and local law or to the extent to which 
the recipient determines it has legal and practical enforcement 
capacity. The rules need not be formally submitted and approved by the 
awarding official; however, they must be made available for review upon 
request, for example, during a site visit.



Sec. 1943.137  Monitoring compliance and penalty for noncompliance.

    (a) FSA monitoring. FSA will monitor compliance of the Small Farmer 
Outreach Training and Technical Assistance projects through the reports 
received in accordance with Sec. 1943.128 of this subpart, through 
information received from field offices and the public, and may include 
on-site visits to observe the operation and administration of the 
program.
    (b) Audits. Recipients are subject to the audit requirements of 7 
CFR parts 3015 and 3016. An audit report will be submitted to the State 
Office annually in accordance with OMB Circular A-128, A-110, or A-133, 
whichever is applicable. The State Office will forward the audit to the 
National Office Project Manager, within 30 days after receipt, with the 
State Office's comments and recommendations.

[[Page 291]]

    (c) Penalty for noncompliance. If the Administrator determines that 
a Small Farmer Outreach Training and Technical Assistance project does 
not meet or no longer meets the objective of the program, that there has 
been a violation of the cooperative or other agreement, that reporting 
requirements are not being met, or that funds are not being used only 
for the operation and administration of the Small Farmer Outreach 
Training and Technical Assistance Program, the awarding official is 
authorized to impose any penalties or sanctions established in 7 CFR 
parts 3015 and 3016. Penalties may include withholding payments, 
suspension of the cooperative agreement or other agreement, or 
termination for cause. If a penalty for noncompliance is enforced, the 
reason(s) will be stated in a letter to the recipient along with appeal 
rights pursuant to subpart B of part 1900 of this chapter.



Sec. Sec. 1943.138-1943.140  [Reserved]



Sec. 1943.141  Nondiscrimination.

    The policies and regulations contained in subpart E of part 1901 of 
this chapter apply to grants and other agreements made under this 
subpart.



Sec. 1943.142  Environmental requirements.

    The policies and regulations contained in subpart G of part 1940 of 
this chapter apply to grants and other agreements made under this 
subpart.



Sec. Sec. 1943.143-1943.150  [Reserved]



PART 1944_HOUSING--Table of Contents




Subpart A [Reserved]

             Subpart B_Housing Application Packaging Grants

Sec.
1944.51 Objective.
1944.52 Definitions.
1944.53 Grantee eligibility.
1944.54-1944.61 [Reserved]
1944.62 Authorized representative of the applicant.
1944.63 Authorized use of grant funds.
1944.64-1944.65 [Reserved]
1944.66 Administrative requirements.
1944.67 Ineligible activities.
1944.68 [Reserved]
1944.69 Agency point of contact.
1944.70 Targeting of HAPG funds to States.
1944.71 Term of grant.
1944.72 Application packaging orientation and training.
1944.73 Package submission.
1944.74 Debarment or suspension.
1944.75 Exception authority.
1944.76-1944.99 [Reserved]
1944.100 OMB control number.

Exhibit A to Subpart B [Reserved]
Exhibit B to Subpart B--Housing Application Packaging Grant (HAPG) Fee 
          Processing
Exhibit C to Subpart B--Requirements for Housing Application Packages
Exhibit D to Subpart B--Designated Counties for Housing Application 
          Packaging Grants

Subpart C [Reserved]

 Subpart D_Farm Labor Housing Loan and Grant Policies, Procedures, and 
                             Authorizations

1944.151 Purpose.
1944.152 Objective.
1944.153 Definitions.
1944.154 Priorities for tenants' occupancy.
1944.155 Responsibility for LH processing and servicing.
1944.156 General loan/grant processing requirements.
1944.157 Eligibility requirements.
1944.158 Loan and grant purposes.
1944.159 Rates and terms.
1944.160 Off-farm loan limits.
1944.161-1944.162 [Reserved]
1944.163 Conditions under which an LH grant may be made.
1944.164 Limitations and conditions.
1944.165-1944.167 [Reserved]
1944.168 Security requirements.
1944.169 Technical, legal, and other services.
1944.170 Preapplication requirements and processing.
1944.171 Preparation of completed loan and/or grant docket.
1944.172 [Reserved]
1944.173 Loan and grant approval--delegation of authority.
1944.174 Distribution of loan and/or grant approval documents.
1944.175 Actions subsequent to loan and/or grant approval.
1944.176 Loan and/or grant closing.
1944.177 Coding loans and grants as to initial or subsequent.
1944.178 Complaints regarding discrimination in use and occupancy of 
          Labor housing.
1944.179-1944.180 [Reserved]
1944.181 Loan servicing.
1944.182 Rental assistance.
1944.183 Exception authority.
1944.184-1944.199 [Reserved]

[[Page 292]]

1944.200 OMB control number.

Exhibit A to Subpart D--Labor Housing Loan and Grant Application 
          Handbook
Exhibit A-1 to Subpart D--Information To Be Submitted by Organizations 
          and Associations of Farmers for Labor Housing Loan or Grant
Exhibit A-2 to Subpart D--Information To Be Submitted by Individuals, 
          Farm owners and Family Farm Corporations or Partnerships for 
          Labor Housing Loans
Exhibit A-3 to Subpart D--Labor Housing Construction Guidelines
Exhibit A-4 to Subpart D--Survey of Existing Labor Housing
Exhibit A-5 to Subpart D--Statement of Budget and Cash Flow
Exhibit B to Subpart D--Management Plans
Exhibit C to Subpart D--Loan Resolution
Exhibit D to Subpart D--Loan Agreement
Exhibit E to Subpart D--Loan and Grant Resolution
Exhibit F to Subpart D--Labor Housing Grant Agreement
Exhibit G to Subpart D--Legal Service Agreement
Exhibit H to Subpart D--Information Pertaining to Preparation of Notes 
          or Bonds and Bond Transcript Documents for Public Body 
          Applicants
Exhibit I to Subpart D--Guide Letter for Use in Informing Interim Lender 
          of FmHA or Its Successor Agency Under Public Law 103-354's 
          Commitment
Exhibit J to Subpart D [Reserved]
Exhibit K to Subpart D--Loan Agreement
Exhibit K-1 to Subpart D
Exhibit L to Subpart D [Reserved]
Exhibit M to Subpart D

  Subpart E_Rural Rental and Rural Cooperative Housing Loan Policies, 
                     Procedures, and Authorizations

1944.201 General.
1944.202 Objective.
1944.203-1944.204 [Reserved]
1944.205 Definitions.
1944.206-1944.210 [Reserved]
1944.211 Eligibility requirements.
1944.212 Loan and grant purposes.
1944.213 Limitations.
1944.214 Rates and terms.
1944.215 Special conditions.
1944.216-1944.220 [Reserved]
1944.221 Security.
1944.222 Technical, legal, and other services.
1944.223 Supplemental requirements for manufactured home project 
          development.
1944.224 Supplemental requirements for congregate housing and group 
          homes.
1944.225-1944.227 [Reserved]
1944.228 Ranking of rural places based on greatest need for Section 515 
          housing.
1944.229 Establishing the list of designated places for which Section 
          515 applications will be invited.
1944.230 Application submission deadline and availability of funds.
1944.231 Processing loan requests.
1944.232 Rental Assistance (RA) from sources other than FmHA or its 
          successor agency under Public Law 103-354.
1944.233 Participation with other funding sources.
1944.234 Actions prior to loan approval.
1944.235 Actions subsequent to loan approval.
1944.236 Loan closing.
1944.237 Subsequent loans.
1944.238 Prohibition against prepayment.
1944.239 Complaints regarding discrimination in use and occupancy of RRH 
          and RCH.
1944.240 Exception authority.
1944.241-1944.245 [Reserved]
1944.246 Loan approval.
1944.247-1944.249 [Reserved]
1944.250 OMB control number.

Exhibit A to Subpart E--How to Bring Rental and Cooperative Housing to 
          Your Town
Exhibit A-1 to Subpart E--Legal Services Agreement (For Cooperative or 
          Other Nonprofit Organizations)
Exhibit A-2 to Subpart E--Survey of Existing Rental Housing
Exhibit A-3 to Subpart E--Rental Housing Survey
Exhibit A-4 to Subpart E--Cooperative Housing Survey
Exhibit A-5 to Subpart E--Housing Survey Summary
Exhibit A-6 to Subpart E--Housing Allowances for Utilities and Other 
          Public Services
Exhibit A-7 to Subpart E--Information To Be Submitted With a Loan 
          Request for a Rural Rental Housing (RRH) or a Rural 
          Cooperative Housing (RCH) Loan
Exhibit A-8 to Subpart E--Outline of Professional Market Study
Exhibit A-9 to Subpart E--Additional Information To Be Submitted for 
          Rural Rental Housing (RRH) and Rural Cooperative Housing (RCH) 
          Loan Requests
Exhibit A-10 to Subpart E [Reserved]
Exhibit A-11 to Subpart E--Processing Guidelines for Loans for Equity To 
          Avert Prepayment
Exhibit B to Subpart E--Guide Letter For Use in Informing Interim Lender 
          of FmHA or Its Successor Agency Under Public Law 103-354's 
          Commitment
Exhibit C to Subpart E--Articles of Incorporation for Rental or 
          Cooperative Organizations (Not for Profit)
Exhibit D to Subpart E--Bylaws (Except Cooperative)
Exhibit D-1 to Subpart E--Bylaws (Cooperative)

[[Page 293]]

Exhibit E to Subpart E--Support Services for Congregate Housing and 
          Group Homes
Exhibit F to Subpart E--Qualifications of an Adviser to the Board
Exhibit F-1 to Subpart E--Relationship of Adviser to Members
Exhibit G to Subpart E--Adviser Responsibilities
Exhibit H to Subpart E--Limited Equity Agreement
Exhibit I to Subpart E--Subscription Agreement
Exhibit J to Subpart E--Occupancy Agreement

              Subpart F_Congregate Housing Services Program

1944.251 Purpose.
1944.252 Definitions.
1944.253 Notice of funding availability, application process and 
          selection.
1944.254 Program costs.
1944.255 Eligible supportive services.
1944.256 Eligibility for services.
1944.257 Service coordinator.
1944.258 Professional assessment committee.
1944.259 Participatory agreement.
1944.260 Cost distribution.
1944.261 Program participant fees.
1944.262 Grant agreement and administration.
1944.263 Eligibility and priority for 1978 Act recipients.
1944.264 Evaluation of Congregate Housing Services Programs.
1944.265 Reserve for supplemental adjustment.
1944.266 Other Federal requirements.

Subparts G-H [Reserved]

             Subpart I_Self-Help Technical Assistance Grants

1944.401 Objective.
1944.402 Grant purposes.
1944.403 Definitions.
1944.404 Eligibility.
1944.405 Authorized use of grant funds.
1944.406 Prohibited use of grant funds.
1944.407 Limitations.
1944.408 [Reserved]
1944.409 Executive Order 12372.
1944.410 Processing preapplications, applications, and completing grant 
          dockets.
1944.411 Conditions for approving a grant.
1944.412 Docket preparation.
1944.413 Grant approval.
1944.414 [Reserved]
1944.415 Grant approval and other approving authorities.
1944.416 Grant closing.
1944.417 Servicing actions after grant closing.
1944.418 [Reserved]
1944.419 Final grantee evaluation.
1944.420 Extension or revision of the grant agreement.
1944.421 Refunding of an existing grantee.
1944.422 Audit and other report requirements.
1944.423 Loan packaging and 502 RH application submittal.
1944.424 Dwelling construction and standards.
1944.425 Handling and accounting for borrower loan funds.
1944.426 Grant closeout.
1944.427 Grantee self-evaluation.
1944.428-1944.449 [Reserved]
1944.450 OMB control number.

Exhibit A to Subpart I--Self-Help Technical Assistance Grant Agreement
Exhibit B to Subpart I--Evaluation Report of Self-Help Technical 
          Assistance (TA) Grants
Exhibit B-1 to Subpart I--Instructions for Preparation of Evaluation 
          Report of Self-Help Technical Assistance Grants
Exhibit B-2 to Subpart I--Breakdown of Construction Development for 
          Determining Percentage Construction Completed
Exhibit B-3 to Subpart I--Pre-Construction and Construction Phase 
          Breakdown
Exhibit C to Subpart I--Amendment to Self-Help Technical Assistance 
          Grant Agreement
Exhibit D to Subpart I--Self-Help Technical Assistance Grant 
          Predevelopment Agreement
Exhibit E to Subpart I--Guidance for Recipients of Self-Help Technical 
          Assistance Grants (Section 523 of Housing Act of 1949)
Exhibit F to Subpart I--Site Option Loan to Technical Assistance 
          Grantees

Subpart J [Reserved]

          Subpart K_Technical and Supervisory Assistance Grants

1944.501 General.
1944.502 Policy.
1944.503 Objectives.
1944.504-1944.505 [Reserved]
1944.506 Definitions.
1944.507-1944.509 [Reserved]
1944.510 Applicant eligibility.
1944.511 [Reserved]
1944.512 Authorized representative of the applicant.
1944.513 [Reserved]
1944.514 Comprehensive TSA grant projects.
1944.515 [Reserved]
1944.516 Grant purposes.
1944.517 [Reserved]
1944.518 Term of grant.
1944.519 [Reserved]

[[Page 294]]

1944.520 Ineligible activities.
1944.521 [Reserved]
1944.522 Equal opportunity requirements.
1944.523 Other administrative requirements.
1944.524 [Reserved]
1944.525 Targeting of TSA funds to States.
1944.526 Preapplication procedure.
1944.527 [Reserved]
1944.528 Preapplication submission deadline.
1944.529 Project selection.
1944.530 [Reserved]
1944.531 Applications submission.
1944.532 [Reserved]
1944.533 Grant approval and announcement.
1944.534 [Reserved]
1944.535 Cancellation of an approved grant.
1944.536 Grant closing.
1944.537 [Reserved]
1944.538 Extending and revising grant agreements.
1944.539 [Reserved]
1944.540 Requesting TSA checks.
1944.541 Reporting requirements.
1944.542 [Reserved]
1944.543 Grant monitoring.
1944.544 [Reserved]
1944.545 Additional grants.
1944.546 [Reserved]
1944.547 Management assistance.
1944.548 Counseling consent by FmHA or its successor agency under Public 
          Law 103-354 single family housing borrowers.
1944.549 Grant evaluation, closeout, suspension, and termination.
1944.550 [Reserved]

Exhibit A to Subpart K--Grant Agreement--Technical and Supervisory 
          Assistance
Exhibit B to Subpart K--Administrative Instructions for State Offices 
          Regarding Their Responsibilities in the Administration of the 
          Technical and Supervisory Assistance Grant Program
Exhibit C to Subpart K--Instructions for District Offices Regarding 
          Their Responsibilities in the Administration of the Technical 
          and Supervisory Assistance Grant Program
Exhibit D to Subpart K--Amendment to Technical and Supervisory 
          Assistance Grant Agreement
Exhibit E to Subpart K--Guide Letter to Delinquent FmHA or Its Successor 
          Agency Under Public Law 103-354 Single Family Housing Loan 
          Borrowers

  Subpart L_Farmers Home Administration or Its Successor Agency Under 
        Public Law 103-354 Tenant Grievance and Appeals Procedure

1944.551 Purpose.
1944.552 Definitions.
1944.553 Exceptions.
1944.554 Reasons for grievance and appeal.
1944.555 Settlement of grievances and appeals.
1944.556 Procedure for obtaining a hearing.
1944.557 Procedures governing the hearing.
1944.558 Decision of the hearing officer or hearing panel.
1944.559 Responsibilities of the FmHA or its successor agency under 
          Public Law 103-354 District Director.
1944.560-1944.599 [Reserved]
1944.600 OMB control number.

Exhibit A to Subpart L--Summary of Meeting

Subpart M [Reserved]

                  Subpart N_Housing Preservation Grants

1944.651 General.
1944.652 Policy.
1944.653 Objective.
1944.654 Debarment and suspension--drug-free workplace.
1944.655 [Reserved]
1944.656 Definitions.
1944.657 Restrictions on lobbying.
1944.658 Applicant eligibility.
1944.659 Replacement housing.
1944.660 Authorized representative of the HPG applicant and FmHA or its 
          successor agency under Public Law 103-354 point of contact.
1944.661 Individual homeowners-- eligibility for HPG assistance.
1944.662 Eligibility of HPG assistance on rental properties or co-ops.
1944.663 Ownership agreement between HPG grantee and rental property 
          owner or co-op.
1944.664 Housing preservation and replacement housing assistance.
1944.665 Supervision and inspection of work.
1944.666 Administrative activities and policies.
1944.667 Relocation and displacement.
1944.668 Term of grant.
1944.669 [Reserved]
1944.670 Project income.
1944.671 Equal opportunity requirements and outreach efforts.
1944.672 Environmental requirements.
1944.673 Historic preservation and replacement housing requirements and 
          procedures.
1944.674 Public participation and intergovernmental review.
1944.675 Allocation of HPG funds to States and unused HPG funds.
1944.676 Preapplication procedures.
1944.677 [Reserved]
1944.678 Preapplication submission deadline.
1944.679 Project selection criteria.
1944.680 Limitation on grantee selection.
1944.681 Application submission.
1944.682 Preapplication/application review, grant approval, and 
          requesting HPG funds.

[[Page 295]]

1944.683 Reporting requirements.
1944.684 Extending grant agreement and modifying the statement of 
          activities.
1944.685 [Reserved]
1944.686 Additional grants.
1944.687 [Reserved]
1944.688 Grant evaluation, closeout, suspension, and termination.
1944.689 Long-term monitoring by grantee.
1944.690 Exception authority.
1944.691-1944.699 [Reserved]
1944.700 OMB control number.

Exhibit A to Subpart N--Housing Preservation Grant Agreement
Exhibit B to Subpart N--Amendment to Housing Preservation Grant 
          Agreement
Exhibit C to Subpart N [Reserved]
Exhibit D to Subpart N--Project Selection Criteria-Outline Rating Form
Exhibit E to Subpart N--Guide for Quarterly Performance Report

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

Subpart A [Reserved]



             Subpart B_Housing Application Packaging Grants

    Source: 58 FR 58643, Nov. 3, 1993, unless otherwise noted.



Sec. 1944.51  Objective.

    This subpart states the policies and procedures for making grants 
under section 509 of the Housing Act of 1949, as amended (42 U.S.C. 
1479). Grants reimburse eligible organizations for part or all of the 
costs of conducting, administering, and coordinating an effective 
housing application packaging program in colonias and designated 
counties. Eligible organizations will aid very low- and low-income 
individuals and families in obtaining benefits from Federal, State, and 
local housing programs. The targeted groups are very low- and low-income 
families without adequate housing who will receive priority for 
recruitment and participation and nonprofit organizations able to 
propose rental or housing rehabilitation assistance benefitting such 
families. These funds are available only in the areas defined in exhibit 
D of this subpart. Participants will assist very low- and low-income 
families in solving their housing needs. One way of assisting is to 
package single family housing applications for families wishing to buy, 
build, or repair houses for their own use. Another way is to package 
applications for organizations wishing to develop rental units for lower 
income families. The intent is to make Farmers Home Administration 
(FmHA) or its successor agency under Public Law 103-354 housing 
assistance programs available to very low- and low-income rural 
residents in colonias and designated counties. FmHA or its successor 
agency under Public Law 103-354 will reimburse eligible organizations 
packaging loan/grant applications without discrimination because of 
race, color, religion, sex, national origin, age, familial status, or 
handicap if such an organization has authority to contract.



Sec. 1944.52  Definitions.

    References in this subpart to County, District, State, National and 
Finance Offices, and to County Supervisor, District Director, State 
Director, and Administrator refer to FmHA or its successor agency under 
Public Law 103-354 offices and officials and should be read as prefaced 
by FmHA or its successor agency under Public Law 103-354. Terms used in 
this subpart have the following meanings:
    Colonias. As defined in exhibit C of subpart L of part 1940 of this 
chapter.
    Complete application package (hereafter called package). The package 
submitted to the appropriate FmHA or its successor agency under Public 
Law 103-354 office which is considered acceptable in accordance with 
exhibit C of this subpart.
    Cost reimbursement. Amount determined by the Administrator that 
equals the customary and reasonable costs incurred in preparing a 
package for a loan or grant. These amounts are included in exhibit B of 
this subpart.
    Designated counties. These counties are listed in exhibit D of this 
subpart. Using the most recent published census data, the counties meet 
the following criteria:
    (1) Twenty percent or more of the county population is at or below 
the poverty level; and
    (2) Ten percent or more of the occupied housing units are 
substandard.
    Organization. Any of the following entities which are legally 
authorized to

[[Page 296]]

work in designated counties and/or colonias and are:
    (1) A State, State agency, or unit of general local government or;
    (2) A private nonprofit organization or corporation that is owned 
and controlled by private persons or interests, is organized and 
operated for purposes other than making gains or profits for the 
corporation, and is legally precluded from distributing any gains or 
profits to its members.
    Packager. Any eligible organization which is reimbursed with Housing 
Application Packaging Grants (HAPG) funds.
    Technical assistance. Any assistance necessary to carry out housing 
efforts by or for very low- and low-income individuals/families to 
improve the quality and/or quantity of housing available to meet their 
needs. Such assistance must include, but is not limited to:
    (1) Contacting and assisting very low- and low-income families in 
need of adequate housing by:
    (i) Implementing an organized outreach program using available media 
and personal contacts;
    (ii) Explaining available housing programs and alternatives to 
increase the awareness of very low- and low-income families and to 
educate the community as to the benefits from improved housing;
    (iii) Assisting very low- and low-income families in locating 
adequate housing; and
    (iv) Developing and packaging loan/grant applications for new 
construction and/or rehabilitation, or repair of existing housing.
    (2) Contacting and assisting eligible applicants to develop multi-
family housing loan/grant applications for new construction, 
rehabilitation, or repair to serve very low- and low-income families.



Sec. 1944.53  Grantee eligibility.

    An eligible grantee is an organization as defined in Sec. 1944.52 
of this subpart and has received a current ``Certificate of Training'' 
pertaining to the type of application being packaged. In addition, the 
grantee must:
    (a) Have the financial, legal, and administrative capacity to carry 
out the responsibilities of packaging housing applications for very low- 
and low-income applicants. To meet this requirement it must have the 
necessary background and experience with proven ability to perform 
responsibly in the field of housing application packaging, low-income 
housing development, or other business or administrative ventures which 
indicate an ability to perform responsibly in this field of housing 
application packaging.
    (b) Legally obligate itself to administer grant funds, provide 
adequate accounting of the expenditure of such funds, and comply with 
FmHA or its successor agency under Public Law 103-354 regulations.
    (c) If the organization is a private nonprofit corporation, be a 
corporation that:
    (1) Is organized under State and local laws.
    (2) Is qualified under section 501(c)(3) of the Internal Revenue 
Code of 1986.
    (3) Has as one of its purposes assisting very low- and low-income 
families to obtain affordable housing.



Sec. Sec. 1944.54-1944.61  [Reserved]



Sec. 1944.62  Authorized representative of the applicant.

    RHS or its successor agency under Public Law 103-354 will deal only 
with authorized representatives designated by the applicant. The 
authorized representatives must have no pecuniary interest in the award 
of the architectural or construction contracts, the purchase of 
equipment, or the purchase of the land for the housing site.

[58 FR 58643, Nov. 3, 1993, as amended at 61 FR 39851, July 31, 1996]



Sec. 1944.63  Authorized use of grant funds.

    Grant funds may only be used to reimburse a packager for delivered 
packages. Payment will be made for each complete package received and 
accepted in accordance with exhibit C of this subpart.

[[Page 297]]



Sec. Sec. 1944.64-1944.65  [Reserved]



Sec. 1944.66  Administrative requirements.

    The following policies and regulations apply to grants made under 
this subpart:
    (a) Grantees must comply with all provisions of the Fair Housing Act 
of 1988 and subpart E of part 1901 of this chapter which states in part, 
that no person in the United States shall, on the grounds of race, 
color, national origin, sex, religion, familial status, handicap, or 
age, be excluded from participating in, be denied the benefits of, or be 
subject to discrimination in connection with the use of grant funds.
    (b) The policies and regulations contained in FmHA Instruction 1940-
Q (available in any Agency Office), Departmental Regulation 2400-5, and 
7 CFR part 3018 apply to grantees under this subpart.
    (c) Grantees should be aware of the policies and regulations 
contained in subpart G of part 1940 of this chapter. They will supply 
needed information requested by the local Agency Office in connection 
with the loan/grant application.
    (d) The grantee will retain records for three years from the date 
Standard Form (SF)-269A, ``Financial Status Report (Short Form),'' is 
submitted. These records will be accessible to RHS and other Federal 
officials in accordance with 7 CFR part 3015.
    (e) Annual audits will be completed if the grantee has received more 
than $25,000 of Federal assistance in the year in which HAPG funds were 
received. These audits will be due 13 months after the end of the fiscal 
year in which funds were received.
    (1) States, State agencies, or units of general local government 
will complete an audit in accordance with 7 CFR parts 3015 and 3016 and 
OMB Circular A-128.
    (2) Nonprofit organizations will complete an audit in accordance 
with 7 CFR part 3015 and OMB Circular A-133.
    (f) Performance reports, as required, will be submitted in 
accordance with 7 CFR part 3015.

[58 FR 58643, Nov. 3, 1993, as amended at 61 FR 39851, July 31, 1996]



Sec. 1944.67  Ineligible activities.

    The packager may not charge fees or accept compensation or 
gratuities directly or indirectly from the very low- and low-income 
families being assisted under this program. The packager may not 
represent or be associated with anyone else, other than the applicant, 
who may benefit in any way in the proposed transaction. If the packager 
is compensated for this service from other sources, then the packager is 
not eligible for compensation from this source except as permitted by 
Agency. Grantees who are funded to do Self-Help Housing, may not be 
reimbursed for packaging applications for participation in the Self-Help 
Housing effort.

[58 FR 58643, Nov. 3, 1993, as amended at 61 FR 39851, July 31, 1996]



Sec. 1944.68  [Reserved]



Sec. 1944.69  Agency point of contact.

    Grantees must submit packages to the appropriate Agency office 
serving the designated county and/or colonias. Packages for Single 
Family Housing loans/grants are submitted to the appropriate County 
Office. All other packages are submitted to the appropriate District 
Office. The applicable forms required to develop a package can be 
obtained in any District or County Office. Packagers should coordinate 
their packaging activity with the appropriate District and County 
Offices.

[58 FR 58643, Nov. 3, 1993, as amended at 61 FR 39851, July 31, 1996]



Sec. 1944.70  Targeting of HAPG funds to States.

    (a) HAPG funds will be distributed administratively by the 
Administrator to achieve the success of the program. Allocations will be 
distributed to States as set forth in Attachment 2 of exhibit A of 
subpart L of part 1940 of this chapter.
    (b) The State Director will determine based on the housing funds 
available and the personnel available, how many applications can be 
processed for each program during the fiscal year in each Agency office 
serving a designated county and/or colonias. The number of applications 
will be published in the

[[Page 298]]

advertisement required under Sec. 1944.72 of this subpart.

[58 FR 58643, Nov. 3, 1993, as amended at 61 FR 39851, July 31, 1996]



Sec. 1944.71  Term of grant.

    (a) For Single Family Housing loans/grants, HAPG funds will be 
specifically available for designated counties. Packages may be 
submitted after the annual housing application packaging orientation and 
training is held. The grant period will end when sufficient packages are 
received for each designated county or colonia or on September 30, of 
the fiscal year, whichever is earlier. The State Director must send 
notification, in the form of a letter, to all packagers who attended the 
packaging orientation and training that the number of applications 
specified in the advertisement required under Sec. 1944.72 of this 
subpart have been received. Any packages submitted after this date will 
be paid for only if the grantee can demonstrate the package was prepared 
in good faith and prior to receipt of the above notification.
    (b) For Multi-Family Housing loans/grants, HAPG funds will be 
available for designated areas or colonias to the extent specified in 
FmHA or its successor agency under Public Law 103-354's advertisement. 
Preapplications approved in one fiscal year, for which grant funds were 
obligated, may have the balance disbursed in a later fiscal year when 
the application is submitted and approved.



Sec. 1944.72  Application packaging orientation and training.

    Agency approval officials will orient and train organizations on how 
to package. A newspaper advertisement will be published by Agency 
offices serving designated counties and/or colonias after October 1. The 
advertisement will announce that application packaging services are 
being requested and specify the date of the certification training. All 
eligible organizations may attend this training. This date will be no 
more than 30 days after the advertisement appears in the newspaper and 
no later than December 31 of any year. The advertisement will include 
the estimated number of packages needed by loan type, i.e., Single 
Family, Multi-Family, etc. Exhibit A of this subpart (available in any 
Agency office) is an example of an appropriate advertisement. 
``Certificates of Training'' as required under Sec. 1944.53 of this 
subpart will be signed by the State Director and given after completion 
of the training. Efforts will be made by the appropriate Agency office 
to complete this training process and certify packagers as quickly as 
possible. Grantees must attend this training each year in order to 
qualify for assistance.

[58 FR 58643, Nov. 3, 1993, as amended at 61 FR 39851, July 31, 1996]



Sec. 1944.73  Package submission.

    (a) When submitting its first package to an FmHA or its successor 
agency under Public Law 103-354 office, in addition to the item in 
paragraph (b) of this section and the information set forth in exhibit C 
of this subpart, the organization must submit the following. A file of 
these documents will be established in the FmHA or its successor agency 
under Public Law 103-354 office and retained in accordance with FmHA 
Instruction 2033-A (available in any FmHA or its successor agency under 
Public Law 103-354 office).
    (1) Proof of their nonprofit status under section 501(c)(3) or 
section 501(c)(4) of the Internal Revenue Code of 1986 or of their 
existence as a state agency or unit of general local government legally 
authorized to work in the designated county and/or colonias. If the FmHA 
or its successor agency under Public Law 103-354 approval official is in 
doubt about the legal status of the organization, the evidence will be 
sent to the State Director. The State Director may, if needed, submit 
the above documents with any comments or questions to the Office of 
General Counsel (OGC) for an opinion as to whether the applicant is a 
legal organization of the type required by these regulations.
    (2) An original and copy of Forms FmHA 400-1, ``Equal Opportunity 
Agreement,'' and FmHA 400-4, ``Assurance Agreement.''
    (3) A copy of a current ``Certificate of Training'' pertaining to 
the type of application package submitted.

[[Page 299]]

    (b) All packages must contain a signed statement which states, 
``Neither the organization nor any of its employees have charged, 
received or accepted compensation from any source other than FmHA or its 
successor agency under Public Law 103-354 for packaging this application 
and are not associated with or represent anyone other than the applicant 
in this transaction.''
    (c) Form SF-270, ``Request for Advance or Reimbursement'' will be 
submitted with each application package for the amount authorized for 
the specific loan type in exhibit B of this subpart.
    (d) The FmHA or its successor agency under Public Law 103-354 
approval official will review each package for completeness, accuracy, 
and conformance to program policy and regulations. Cost reimbursement 
will be made in accordance with exhibit B of this subpart. Packagers 
that submit ``incomplete'' packages for sections 502 and 504 loans/
grants will be sent a letter within 5 working days after submission of 
the ``incomplete'' package advising of additional information needed. 
Payment will be held until all the information is received. Packagers 
for sections 502 loans and 504 loans/grants will not be paid for 
packages submitted on applicants who are obviously ineligible for the 
programs. For example, a grantee would not be reimbursed for submitting 
a package for a section 502 loan applicant with an adjusted income 
exceeding the limits of Appendix 9 of HB-1-3550 (available in any Rural 
Development office) or who already owns adequate housing. Likewise, a 
grantee would not be reimbursed for submitting an package for a section 
504 loan/grant when the adjusted family income exceeds the very low-
income limits of Appendix 9 of HB-1-3550 (available in any Rural 
Development office) or when the applicant does not own and occupy his/
her property, or for a section 504 grant when the applicant is not 62 
years of age or older.
    (e) Submissions for sections 514/516, 515, and 524 loans/grants will 
be reviewed and, if incomplete, a letter sent within 15 working days 
advising of additional information required.
    (f) Form SF-269A, will be submitted within 15 days of the end of the 
fiscal year.

[58 FR 58643, Nov. 3, 1993, as amended at 67 FR 78328, Dec. 24, 2002]



Sec. 1944.74  Debarment or suspension.

    Certified packagers whose actions or acts warrant they not be 
allowed to participate in the program are to be investigated in 
accordance with Sec. 1940.606 (c) or FmHA Instruction 1940-M (available 
in any FmHA or its successor agency under Public Law 103-354 office).



Sec. 1944.75  Exception authority.

    The Administrator may, in individual cases, make an exception to any 
requirement or provision of this subpart which is not inconsistent with 
the authorizing statute or other applicable law if the Administrator 
determines that the Government's interest would be adversely affected. 
The Administrator will exercise this authority only at the request of 
the State Director and recommendation of the Deputy Administrator, 
Single Family Housing. Requests for exceptions must be in writing by the 
State Director and supported with documentation to explain the adverse 
effect on the Government's interest and/or impact on the applicant, 
borrower, or community, proposed alternative courses of action, and show 
how the adverse effect will be eliminated or minimized if the exception 
is granted.

[58 FR 58643, Nov. 3, 1993, as amended at 67 FR 78328, Dec. 24, 2002]



Sec. Sec. 1944.76-1944.99  [Reserved]



Sec. 1944.100  OMB control number.

    The reporting and recordkeeping requirements contained in this 
regulation have been approved by the Office of Management and Budget and 
have been assigned OMB control number 0575-0157. Public reporting burden 
for this collection of information is estimated to vary from 30 minutes 
to five hours per response, with an average of 3 hours per response 
including time for

[[Page 300]]

reviewing instruction, searching existing data sources, gathering and 
maintaining the data needed, and completing and reviewing the collection 
of information. Send comments regarding this burden estimate or any 
other aspect of this collection of information, including suggestions 
for reducing this burden, to Department of Agriculture, Clearance 
Officer, OIRM, Room 404-W, Washington, DC 20250; and to the Office of 
Management and Budget, Paperwork Reduction Project (OMB 0575-
0157), Washington, DC 20503.

             Exhibit A to Subpart B of Part 1944 [Reserved]

Exhibit B to Subpart B of Part 1944--Housing Application Packaging Grant 
                          (HAPG) Fee Processing

    The Farmers Home Administration (FmHA) or its successor agency under 
Public Law 103-354 approval official will execute and distribute Form 
FmHA or its successor agency under Public Law 103-354 1940-1, ``Request 
for Obligation of Funds,'' in accordance with the Forms Manual Insert 
(FMI). HAPG funds will be used for the fees except as otherwise noted in 
paragraphs II (A) and (B) of this exhibit. Funds for all loan and/or 
grant application packages will be paid as follows.
    I. For all Single Family Housing loans (Sections 502, 504, and 514 
(``on'' farm labor housing only) of the Housing Act of 1949, checks will 
be ordered when complete application packages as defined in Sec. 
1944.73 of this subpart and exhibit C of this subpart are received. The 
fees are as follows:
    (A) Section 502 Single Family Housing Loans--$500
    (B) Section 504 Rural Housing Loans and Grants--$500
    (C) Section 514 ``On'' Farm Labor Housing Loans--$500

    II. For all Multi-Family Housing loans and grants (sections 514/516, 
515, 524, and 533 of the Housing Act of 1949), the entire amount of the 
fee coming from HAPG funds will be obligated when the packager has met 
all the requirements of the preapplication stage, however, payments will 
be made in accordance with the following schedules:

    (A) Sections 514/516 Farm Labor Housing Loans and Grants

    ``Off'' farm labor housing loans/grants--fees paid in accordance 
with the schedule for section 515 Rural Rental Housing loans.

    (B) Section 515 Rural Rental Housing Loans.

    (1) The scale for packaging fees is based on the percentage of the 
total development cost as follows:

Up to $400,000--1.6 percent

    For additional amounts between:

$400,001 and $800,000--add 1.2 percent
$800,001 and $1,200,000--add 1.0 percent
$1,200,001 and $1,600,000--add .7 percent
$1,600,001 and $2,000,000--add .5 percent
Over $2,000,001--No additional amount

    (2) Twenty-five percent paid from HAPG funds when Form AD-622, 
``Notification of Preapplication Review Action,'' is sent inviting 
submission of a complete application.
    (3) Twenty percent paid from HAPG funds when a complete application 
is filed including plans and specifications.
    (4) The 55 percent balance paid when the loan is approved. Funds for 
this 55 percent will be drawn from loan funds in accordance with Sec. 
1944.212(j) of subpart E of 1944 of this chapter for Section 515 loans 
and Sec. 1944.158(i) of subpart D of part 1944 of this chapter for 
Section 514 loans.
    (C) Section 524 Rural Housing Site Loans--total fee is 1 percent of 
the loan amount payable in two installments.
    (1) Thirty percent paid after FmHA or its successor agency under 
Public Law 103-354's review of the preapplication under Sec. 
1822.271(a) of subpart G of part 1822 of this chapter (paragraph XI A of 
FmHA Instruction 444.8).
    (2) Seventy percent paid upon the completion of the docket in 
accordance with Sec. 1822.271(c) of subpart G of part 1822 of this 
chapter (paragraph XI C of FmHA Instruction 444.8).
    (D) Section 533 Housing Preservation Grants--total fee is 2 percent 
of the grant amount paid in two installments.
    (1) Forty percent will be paid when the Form AD-622, inviting 
submission of a complete application, is sent.
    (2) Sixty percent will be paid after grant closes.

    Effective Date Note: At 69 FR 69104, Nov. 26, 2004, Exhibit B to 
subpart B of part 1944 was amended by revising paragraph II.(B)(4), 
effective Feb. 24, 2005. For the convenience of the user the revised 
text is set forth as follows:

Exhibit B to Subpart B of Part 1944--Housing Application Packaging Grant 
                          (HAPG) Fee Processing

                                * * * * *

    II. * * *
    (B) * * *
    (4) The 55 percent balance paid when the loan is approved. Funds for 
this 55 percent will be drawn from loan funds in accordance with 7 CFR 
3560.53 (o).

[[Page 301]]

     Exhibit C to Subpart B of Part 1944--Requirements for Housing 
                          Application Packages

    A package will consist of the following requirements for the 
respective program.
    A. Section 502--Complete applications packages will be submitted in 
accordance with the requirements of 7 CFR part 3550. The package must 
also include the following:

Form FmHA or its successor agency under Public Law 103-354 410-9--
``Statement Required by the Privacy Act.''
Form FmHA or its successor agency under Public Law 103-354 1910-11--
``Applicant Certification Federal Collection Policies for Consumer or 
Commercial Debts.''
Form FmHA or its successor agency under Public Law 103-354 1944-3--
``Budget and/or Financial Statement.''

    B. Section 504--Complete application packages will be submitted in 
accordance with 7 CFR part 3550. The package must include the forms 
listed in paragraph A of this exhibit and the following:
    The appropriate Agency application form for Rural Housing assistance 
(non-farm tract) (available in any Rural Development office).
    The appropriate Agency form to request verification of employment 
(available in any Rural Development office).
    The appropriate Agency Rural Housing Loan application package 
(available in any Rural Development office).
    Evidence of ownership in accordance with 7 CFR part 3550.
    Cost estimates or bid prices for removal of health or safety hazards 
in accordance with 7 CFR part 3550.
    C. Section 514/516--Complete application packages will be submitted 
in accordance with exhibit A-1 of subpart D of part 1944 of this 
chapter.
    D. Section 515--Complete application packages will be submitted in 
accordance with the requirements of exhibit A-7 of subpart E of part 
1944 of this chapter.
    E. Section 524--Complete application packages will be submitted in 
accordance with Sec. 1822.271(a) of subpart G of part 1822 of this 
chapter (paragraph XI A of FmHA Instruction 444.8). After Farmers Home 
Administration or its successor agency under Public Law 103-354's review 
and as instructed, the application should be completed in accordance 
with Sec. 1822.271(c) of subpart G of part 1822 of this chapter 
(paragraph XI C of FmHA Instruction 444.8).
    F. Section 533--Complete application packages will be submitted in 
accordance with the requirements of subpart N of part 1944 of this 
chapter.

[58 FR 58643, Nov. 3, 1993, as amended at 67 FR 78328, Dec. 24, 2002]

    Effective Date Note: At 69 FR 69104, Nov. 26, 2004, Exhibit C to 
subpart B of part 1944 was revised, effective Feb. 24, 2005. For the 
convenience of the user the revised text is set forth as follows:

     Exhibit C to Subpart B of Part 1944--Requirements for Housing 
                          Application Packages

    A package will consist of the following requirements for the 
respective program.
    A. Section 502--Complete application packages will be submitted in 
accordance with the requirements of 7 CFR part 3550. The package must 
also include the following:

Form RD 410-9--``Statement Required by the Privacy Act''
Form RD 1910-11--``Applicant Certification Federal Collection Policies 
for Consumer or Commercial Debts''
Form RD 1944-3--``Budget and/or Financial Statement''

    B. Section 504--Complete application packages will be submitted in 
accordance with 7 CFR part 3550. The package must include the forms 
listed in paragraph A. of this exhibit and the following:
    The appropriate Agency application form for Rural Housing assistance 
(non-farm tract) (available in any Rural Development office).
    The appropriate Agency form to request verification of employment 
(available in any Rural Development office).
    The appropriate Agency Rural Housing Loan application package 
(available in any Rural Development office).
    Evidence of ownership in accordance with 7 CFR part 3550.
    Cost estimates or bid prices for removal of health or safety hazards 
in accordance with 7 CFR part 3550.
    C. Section 514/516--Complete application packages will be submitted 
in accordance with the Notice of Funding Availability that will be 
published in the Federal Register each Fiscal Year.
    D. Section 515--Complete application packages will be submitted in 
accordance with the Notice of Funding Availability that will be 
published in the Federal Register each Fiscal Year.
    E. Section 524--Complete application packages will be submitted in 
accordance with Sec. 1822.271(a) of subpart G of part 1822 of this 
chapter (paragraph XI.A. of RD Instruction 444.8). After Rural 
Development's review and as instructed, the application should be 
completed in accordance with Sec. 1822.271(c) of subpart G of part 1822 
of this chapter (paragraph XI.C. of RD Instruction 444.8).
    F. Section 533--Complete application packages will be submitted in 
accordance with the requirements of subpart N of part 1944 of this 
chapter.

[[Page 302]]

  Exhibit D to Subpart B of Part 1944--Designated Counties for Housing 
                      Application Packaging Grants

Alabama (13): Barbour County, Bibb County, Choctaw County, Clarke 
County, Conecuh County, Dallas County, Greene County, Hale County, 
Lowndes County, Marengo County, Perry County, Sumter County, and Wilcox 
County.
Alaska (5): Bethel Census Area, Dillingham Census Area, Nome Census 
Area, Wade Hampton Census Area, and Yukon-Koyukuk Census Area.
Arizona (8): Apache County, Coconino County, Graham County, La Paz 
County, Navajo County, Pinal County, Santa Cruz County, and Yuma County.
Arkansas (5): Crittenden County, Lee County, Newton County, St. Francis 
County, and Searcy County.
California (3): Fresno County, Imperial County, and Tulare County.
Colorado (1): Conejos County.
Florida (2): Gadsden County and Jefferson County.
Georgia (22): Baker County, Burke County, Calhoun County, Clay County, 
Dooly County, Early County, Greene County, Hancock County, Jenkins 
County, Marion County, Meriwether County, Mitchell County, Quitman 
County, Randolph County, Stewart County, Talbot County, Taliaferro 
County, Terrell County, Twiggs County, Warren County, Washington County, 
and Webster County.
Idaho (1): Madison County.
Kentucky (25): Breathitt County, Casey County, Clay County, Clinton 
County, Clinton County, Elliott County, Estill County, Fleming County, 
Jackson County, Knott County, Knox County, Lawrence County, Lee County, 
Leslie County, Lewis County, Lincoln County, McCreary County, Magoffin 
County, Morgan County, Owsley County, Perry County, Powell County, 
Robertson County, Rockcastle County, Wayne County, and Wolfe County.
Louisiana (10): East Carroll Parish, East Feliciana Parish, Plaquemines 
Parish, Red River Parish, St. Helena Parish, St. James Parish, St. 
Martin Parish, St. Mary Parish, Terrebonne Parish, and West Feliciana 
Parish.
Mississippi (27): Attala County, Benton County, Bolivar County, 
Claiborne County, Coahoma County, Greene County, Holmes County, 
Humphreys County, Issaquena County, Jasper County, Jefferson County, 
Jefferson Davis County, Kemper County, Leflore County, Madison County, 
Marshall County, Noxubee County, Panola County, Quitman County, Sharkey 
County, Sunflower County, Tallahatchie County, Tate County, Tunica 
County, Walthall County, Washington County, and Yazoo County.
Montana (2): Big Horn County and Glacier County.
New Mexico (11): Catron County, Chaves County, Cibola County, Dona Ana 
County, Luna County, McKinley County, Mora County, Rio Arriba County, 
Sandoval County, San Juan County, and San Miguel County.
North Carolina (4): Bertie County, Halifax County, Hyde County, and 
Warren County.
North Dakota (3): Benson County, Rolette County, and Sioux County.
Ohio (1): Vinton County.
South Carolina (6): Clarendon County, Dillon County, Fairfield County, 
Lee County, Marlboro County, and Williamsburg County.
South Dakota (9): Bennett County, Buffalo County, Corson County, Dewey 
County, Jackson County, Mellette County, Shannon County, Todd County, 
and Ziebach County.
Tennessee (2): Fayette County and Hancock County.
Texas (45): Atascosa County, Brooks County, Caldwell County, Cameron 
County, Castro County, Cochran County, Crosby County, Culberson County, 
Dawson County, Deaf Smith County, Dimmit County, Duval County, Ector 
County, Edwards County, El Paso County, Frio County, Gaines County, 
Grimes County, Hale County, Hidalgo County, Hudspeth County, Jim Hogg 
County, Jim Wells County, Karnes County, Kinney County, Kleberg County, 
La Salle County, Marion County, Matagorda County, Maverick County, 
Medina County, Nueces County, Pecos County, Presidio County, Reeves 
County, San Jacinto County, San Patricio County, Starr County, Terry 
County, Uvalde County, Val Verde County, Webb County, Willacy County, 
Zapata County, and Zavala County.
Utah (1): San Juan County.
Virginia (4): Brunswick County, Lee County, Northampton County, and 
Scott County.
Washington (2): Ferry County and Yakima County.
West Virginia (4): Calhoun County, Clay County, Webster County, and Wirt 
County.
Wisconsin (1): Menominee County.
Puerto Rico (77): Adjuntas, Aguada, Aguadilla, Aguas Buenas, Aibonito, 
Anasco, Arecibo, Arroyo, Barceloneta, Barranquitas, Bayamon, Cabo Rojo, 
Caguas, Camuy, Canovanas, Carolina, Cayey, Ceiba, Ciales, Cidra, Coamo, 
Comerio, Corozal, Culebra, Dorado, Fajardo, Florida, Guanica, Guayama, 
Guayanilla, Guaynabo, Gurabo, Hatillo, Hormigueros, Humacao, Isabela, 
Jayuya, Juana Diaz, Juncos, Lajas, Lares, Las Marias, Las Piedras, 
Loiza, Luquillo, Manati, Maricao, Maunabo, Mayaguez, Moca, Morovis, 
Naguabo, Noranjito, Orocovis, Patillas, Penuelas, Ponce, Quebradillas, 
Rincon, Rio Grande, Sabana

[[Page 303]]

Grande, Salinas, San German, San Juan, San Lorenzo, San Sebastian, Santa 
Isabel, Toa Alta, Toa Baja, Trujillo Alto, Utuado, Vega Alta, Vega Baja, 
Vieques, Villalba, Yabucoa, and Yauco.
Virgin Islands (2): St. Croix Island and St. Thomas Island.
Western Pacific Territories (5): American Samoa, Federated States of 
Micronesia, Marshall Islands, Northern Marianas, and Palau.

Subpart C [Reserved]



 Subpart D_Farm Labor Housing Loan and Grant Policies, Procedures, and 
                             Authorizations

    Source: 45 FR 47655, July 16, 1980, unless otherwise noted.

    Effective Date Note: At 69 FR 69105, Nov. 26, 2004, Subpart D was 
removed and reserved, effective Feb. 24, 2005.



Sec. 1944.151  Purpose.

    This subpart contains the policies and procedures and delegates 
authority for making initial and subsequent insured loans under section 
514 and grants under section 516 of the Housing Act of 1949, to provide 
housing and related facilities for domestic farm labor. This subpart 
also contains the policies and procedures for making grants under 
section 516 to encourage the development of farm labor housing. Any 
processing or servicing activity conducted pursuant to this subpart 
involving authorized assistance to Rural Housing Service (RHS) 
employees, members of their families, known close relatives, or business 
or close personal associates, is subject to the provisions of subpart D 
of part 1900 of this chapter. Applicants for this assistance are 
required to identify any known relationship or association with an RHS 
employee.

[67 FR 66310, Oct. 31, 2002]



Sec. 1944.152  Objective.

    The basic objective of the Farmers Home Administration (FmHA) or its 
successor agency under Public Law 103-354 in making domestic Farm Labor 
Housing (LH) loans is to provide decent, safe, and sanitary housing for 
domestic farm labor to be located in areas where a need for farm labor 
exists and in making LH grants where there is a pressing need for such 
facilities in the area for farm laborers and there is a reasonable doubt 
that the housing can be provided without the grant assistance.

[56 FR 28472, June 21, 1991]



Sec. 1944.153  Definitions.

    Agency. The Rural Housing Service, an agency of the U.S. Department 
of Agriculture which administers section 514 loans and section 516 
grants.
    Applicant. The applicant for or the recipient of an LH loan or 
grant.
    Association of farmers. Two or more farmers acting as a single legal 
entity. Association members may include the individual members of 
farming partnerships or corporations.
    Board and directors. Includes the governing body and members of the 
governing body of an organization.
    Construct or repair. To construct new structures or facilities, or 
to acquire, relocate, or repair or improve existing structures or 
facilities.
    Development cost. Includes the cost of constructing, purchasing, 
improving, altering, or repairing new or existing housing and related 
facilities, buying household furnishings, and purchasing or improving 
the necessary land. It includes necessary architectural, engineering, 
legal fees and charges, and other appropriate technical and professional 
fees and charges. It does not include fees, charges, or commissions such 
as payments to brokers, negotiators, or other persons for the referral 
of prospective applicants or solicitations of loans. For all types of LH 
applicants, other than the individual farmowners, family farm 
corporation and partnerships, and associations of farmers, the 
development cost may include initial operating expenses of up to 2 
percent of the permitted costs.
    Domestic farm laborer. A person who receives a ``substantial portion 
of his or her income'' performing farm labor employment (not self-
employed) in the United States, Puerto Rico, or the Virgin Islands and 
either is a citizen of the United States or resides in the United 
States, Puerto Rico, or the Virgin Islands after being legally admitted 
for permanent residence. This definition may include the immediate 
family

[[Page 304]]

members residing with such a person. (See the definition for Self-
employed in this section and/or exhibit L of this subpart which is 
available in any Rural Housing Service office.)
    Familial status. (See subpart E of part 1944 of this chapter or 
exhibit B of subpart C of part 1930 of this chapter.)
    Family farm corporation or partnership. A private corporation or 
partnership in which at least 90 percent of the stock or interest is 
owned and controlled by members of the same family. These family members 
must be related by blood or law. If more than three separate households 
are supported by the farming operation, the family farm corporation or 
partnership must be:
    (1) Legally organized and authorized to own and operate a farm 
business within the State,
    (2) Legally able to carry out the purposes of the loan, and
    (3) Prohibited from the sale or transfer of 90 percent of the stock 
or interest to other than family members by either the articles of 
incorporation, bylaws or by agreement between the stockholders or 
partners and the corporation or partnership.
    Farm. A tract or tracts of land, improvements, and other 
appurtenances considered to be farm property which is used or will be 
used in the production of crops or livestock, including the production 
of fish under controlled conditions, for sale in sufficient quantities 
so that the property is recognized as a farm rather than a rural 
residence. It may also include a residence which, although physically 
separate from the farm acreage, is ordinarily treated as part of the 
farm in the local community.
    Farm labor. For purposes of this subpart, farm labor includes 
services in connection with cultivating the soil, raising or harvesting 
any agriculture or aquaculture commodity; or in catching, netting, 
handling, planting, drying, packing, grading, storing, or preserving in 
its unmanufactured state any agriculture or aquaculture commodity; or 
delivering to storage, market, or a carrier for transportation to market 
or to processing any agricultural or aquacultural commodity.
    Farm Labor Contractor. Any person--other than an agriculture 
employer, an agricultural association, or an employee of an agriculture 
employer or agriculture association--who, for any money or other 
valuable consideration paid or promised to be paid, recruits, solicits, 
hires, employs, furnishes, or transports any year round or migrant farm 
laborer.
    Farm owner. A natural person or persons who are the owners of a 
``farm'' as this term is further defined in this section.
    Farmer. A person who is actually involved in day to day on-site 
operations of a farm and who devotes a substantial amount of time to 
personal participation in the conduct of the operation of a ``farm''.
    Home base. A home base State is a State which the farm laborer 
claims as his/her domicile.
    Household furnishings. Such basic durable items as stoves, 
refrigerators, drapes, drapery rods, tables, chairs, dressers, and beds. 
Items such as bedding, linens, dishes, silverware, and cooking utensils 
are not included in this definition.
    Housing. New or existing structures which are or will be suitable 
for decent, safe and sanitary dwelling use by domestic farm labor. 
``Housing'' may include household furnishings and related facilities 
where appropriate.
    HUD. The U.S. Department of Housing and Urban Development.
    Individual. A natural person. It may include the spouse.
    Individual with handicap. (See exhibit B of subpart C of part 1930 
of this chapter.)
    LH. Farm Labor Housing.
    LH fund(s). May include either loan or grant monies or both in this 
subpart.
    Local broad-based nonprofit organization. An organization, public or 
private, that operates in one employment area and which:
    (1) Is incorporated with the State, Puerto Rico, or Virgin Islands, 
or a federally recognized Indian Tribe;
    (2) Is organized and operated on a nonprofit basis;
    (3) Is legally precluded from distributing any profits or dividends 
to its members or any private individual during its corporate lifetime;

[[Page 305]]

    (4) Is not grower oriented (majority of board must be nonfarmers);
    (5) Pledges to administer the housing as a community service in the 
interest of the whole community, regardless of race, color, national 
origin, sex, religion, age, handicap, and marital or familial status;
    (6) Has at least 25 members for projects with a total development 
cost of up to $100,000 and additional members for projects costing more 
than $100,000; and
    (7) Has a membership reflecting a variety of interests of the area 
where the housing will be located.
    Members and membership. Includes stockholders and stock when 
appropriate.
    MFH. Multi-Family Housing.
    Migrant agricultural laborers. Agricultural laborers and family 
dependents who establish a temporary residence while performing 
agriculture work at one or more locations away from the place he/she 
calls home or home base. (This does not include day-haul agricultural 
workers whose travels are limited to work areas within one day of their 
work locations.)
    Mortgage. May include any appropriate form of security instrument.
    NOFA. Notice of Funds Availability.
    Nonprofit organization of farmworkers. A nonprofit organization 
which is incorporated with the State, Puerto Rico, or the Virgin 
Islands, which has local representation in the membership, and whose 
membership is composed of at least 51 percent farmworkers.
    Off-Farm Labor Housing. Housing for farm laborers regardless of the 
farm where they work.
    On-Farm Labor Housing. Housing for farm laborers specific to the 
farm where they work.
    Organization. A broad-based nonprofit organization, a nonprofit 
organization of farmworkers, federally recognized Indian Tribe, or an 
agency or Political subdivision of State or local government.
    Promissory note. May include a bond or other evidence of 
indebtedness.
    Regional or statewide broad-based nonprofit organization. Any 
organization that operates or plans to operate in more than one 
employment area, that provides or is planning to provide labor housing 
to those areas and that meets the following criteria in addition to 
those in paragraphs (1) through (6) under the definition for ``local 
broad-based nonprofit organization:''
    (1) The membership of the organization must be broadly 
representative of the region or state by having representation from 
either the counties or employment areas in which it provides or is 
planning to provide labor housing; and
    (2) The membership must include at least eight (8) members from the 
employment area to be served by the project who represent a variety of 
interests of the employment area. If the project is located in a 
community or dependent upon a community for essential services, at least 
four of the eight members must be residents of that community.
    Related facilities. Includes community rooms or buildings, 
cafeterias, dining halls, infirmaries, child care facilities, assembly 
halls, and other essential service facilities such as central heating, 
sewerage, lighting systems, clothes washing facilities, trash disposal 
and safe domestic water supply. All related facilities must be 
reasonably necessary for proper use of the housing as dwellings for 
domestic farm labor occupants.
    Retired or disabled domestic farm laborer. A ``retired domestic farm 
laborer'' is a person who is at least 55 years of age and who has spent 
the last 5 years prior to retirement as a domestic farm laborer or spent 
the majority of the last 10 years prior to retirement as a domestic farm 
laborer (self-certification and employer affidavits may be used as a 
last resort). A ``disabled domestic farm laborer'' is a person who is 
determined to have an impairment which is expected to be of long-
continued, indefinite duration, and substantially impedes the person's 
ability to earn a livelihood from farm labor (as certified by a licensed 
physician) and who is a domestic farm laborer prior to disability.
    RHS. Rural Housing Service.
    Seasonal housing. Described in exhibit I of subpart A of part 1924 
of this chapter.

[[Page 306]]

    Self-employed. The determination of self-employed farm laborers is 
in accordance with the Common Law test used by the Internal Revenue 
Service to determine an employer-employee relationship. The Common Law 
Rules Factors are included in exhibit L of this subpart and are 
available for review in any Rural Housing Service Office. Exhibit L of 
this subpart is provided for situations when it is not clear an 
employer-employee relationship exists for eligible farm labor. The 
eligibility determination and use of the Common Law Rules Factors may be 
referred to the Loan Official or State Director for resolution.
    Subsequent LH loan or grant. A loan or grant to an applicant or 
borrower to complete the units planned with the initial loan or grant.
    Substantial portion of income. That portion of income received which 
has been derived from farm labor performed by a farm laborer as defined 
in this section.
    (1) To determine if income is considered substantial, the measure to 
be used will be:
    (i) For housing rented to farm laborers and owned by public bodies 
and public or private nonprofit organizations when charging rent:
    (A) Actual dollars earned from farm labor by domestic farm laborers 
other than migrant farmworkers must equal at least 65 percent of the 
annual income limits indicated for the Standard Federal regions, as 
stated in Appendix 9 of HB-1-3550 (which is available in any Rural 
Development office). For migrant farmworkers living in seasonal housing 
the actual dollars earned from farm labor by a domestic farm laborer 
must equal at least 50 percent of annual limits as shown in exhibit J of 
this subpart.
    (B) An alternate measure for determining substantial portion of 
income when actual earnings are not available may be the duration of 
time a farm laborer worked on a farm as a domestic farm worker during 
the preceding 12 months. In order to be considered as substantial the 
farm laborer must have worked at least 110 whole days in farm work. For 
purposes of this section one whole day is the equivalent of at least 7 
hours. When using a period of more than one year, a yearly average 
amounting to at least 110 days per year must be computed.
    (ii) For housing owned by a farmer, family farm partnership, family 
farm corporation, or an association of farmers which was initially 
provided on a nonrental basis, substantial portion of income is earned 
down housing is provided by the owner as part of employment compensation 
for farm labor.
    (2) When a natural disaster has occurred, such as a drought, flood, 
freeze, etc., figures for the last full year of work will be used to 
determine substantial portion of income under paragraph (1) of this 
definition.
    (3) The tenant who qualifies as a domestic farm laborer in order to 
reside or continue to reside in any project with a nonrestrictive farm 
labor clause in the mortgage covenants (see Sec. 1944.176(d) (5) of 
this subpart) must not have adjusted annual income which exceeds the 
moderate income limit as shown in exhibit C of subpart A of part 1944 of 
this chapter (which is available in any FmHA or its successor agency 
under Public Law 103-354 office), for the appropriate household size and 
appropriate geographical area. Tenants residing in housing which was 
initially rent free without the non-restrictive labor clause in the 
mortgage covenants (i.e. on-farm site projects where the tenant must 
work for the farm owner) need not certify income (see paragraph (1)(ii) 
of this definition), and need not be low or moderate income tenants in 
order to be eligible to occupy a unit.
    (i) Income for purposes of this subpart is defined under the terms 
annual income (describing inclusive and exempted income), adjusted 
annual income, and adjusted monthly income in paragraph II of exhibit B 
of subpart C of part 1930 of this chapter.
    (ii) For servicing purposes, an exception to the moderate income 
rule is permitted in accordance with paragraph VI of exhibit B of 
subpart C of part 1930 of this chapter.
    Technical assistance. The provision of services by an entity with 
farm labor housing and real estate development capacity to an applicant 
entity who lacks such a capacity. Such assistance may include, but is 
not limited to:

[[Page 307]]

    (1) Performing outreach efforts to inform and recruit potential LH 
applicants.
    (2) Conducting site searches, negotiating and executing property 
acquisitions, and resolving planning and zoning issues.
    (3) Preparing market analyses, feasibility analyses, and financial 
proformas.
    (4) Packaging LH loan and grant applications, as well as 
applications from other funding sources.
    (5) Estimating construction costs and providing oversight during 
construction periods.
    Variety of interests. To meet the representation of a variety of 
interests in a broad-based nonprofit organization, members should be 
actively affiliated with or participating in civic, business, 
agricultural, or service organizations in their community; members' 
previous and current occupations may be considered in this 
determination. Individual members may represent multiple interests as 
well.

[56 FR 28472, June 21, 1991, as amended at 57 FR 59903, Dec. 17, 1992; 
58 FR 40951, July 30, 1993; 64 FR 24480, May 6, 1999; 67 FR 66310, Oct. 
31, 2002; 67 FR 78328, Dec. 24, 2002]



Sec. 1944.154  Priorities for tenants' occupancy.

    (a) Tenant occupancy in labor housing is prioritized in the 
following order:
    (1) First priority is to be given to eligible farm laborer 
households based upon percent of total earnings from farm labor in the 
following ranked categories: 71 to 100 percent; 51 to 70 percent; 26 to 
50 percent; and less than 25 percent.
    (i) For LH units without Rental Assistance, occupancy priority 
within each ranking category is according to the household's income, 
very-low, low-, then moderate.
    (ii) For LH units with Rental Assistance, tenant occupancy priority 
is given to all eligible very-low income farm worker households by 
ranked category, then to low income farm worker households by ranked 
category. Moderate income may be served when there are no very-low or 
low-income eligible farm workers on the waiting lists, again by ranked 
category.
    (2) Second priority is given to retired or disabled farm laborer 
households who were in the local farm market area at the time of 
retirement or becoming disabled. Occupancy priority will be by paragraph 
(a)(1) (i) or (ii) of this section without the farm income ranking 
category.
    (3) Third priority is to be given to other retired or disabled farm 
laborer households. Occupancy priority will be by paragraph (a)(1) (i) 
or (ii) of this section without the farm income ranking category.
    (b) When there is a diminished need for housing by persons or 
families in the above categories, such units may be made available to 
persons or families eligible for occupancy under the section 515, Rural 
Rental Housing program. Section 515 tenants may occupy the labor housing 
until such time the units are again needed by persons or families 
eligible under paragraph (a) of this section. As the basis for FmHA or 
its successor agency under Public Law 103-354's approval or disapproval 
of a borrower's determination of diminished need, the borrower must 
submit to FmHA or its successor agency under Public Law 103-354 a 
current analysis of need and demand, identical to the market survey 
required of applicants in exhibit A-I of this subpart. The borrower's 
determination and the State Director's recommendation should be 
forwarded to the National Office for concurrence.
    (c) For additional guidance on occupancy and rental assistance, 
refer to FmHA Instruction 1930-C, exhibit B VI of this subpart, Renting 
Procedures, and exhibit E of this subpart, Rental Assistance Program. 
The Agency is required by statute to provide affordable housing to 
eligible farm workers and their families as a first program priority and 
to provide Rental Assistance as a second program priority. If it appears 
there is conflict in FmHA Instructions concerning the housing of an 
eligible Domestic or Migrant Farm Worker, document the problem and 
consult the District Director. If necessary, the problem may be referred 
to the State Office and/or the National Office for resolution.

[[Page 308]]

    (d) Tenant Occupancy records. (1) For tenants of housing owned by 
farm borrowers, rent is not charged and employment related occupancy 
restrictions do apply (reference Sec. 1944.164(h) for additional 
guidance). The borrower shall have each tenant execute a verification of 
occupancy and farm labor on exhibit K-1, Verification of Domestic Farm 
Labor and Occupancy in Rent Free Housing, on initial occupancy of the 
dwelling unit. The borrower shall retain the properly completed forms 
and make them available for FmHA or its successor agency under Public 
Law 103-354 Inspection only for the current tenant(s) and to supplement 
the annual reporting requirements required in the loan agreement. If the 
housing is not occupied on a year-round basis, then the report should 
list the names of the migrants or seasonal farmworkers attached to 
exhibit K-1.
    (2) For tenants of housing when rent is charged and employment 
restrictions do not apply (reference Sec. 1944.164(h) for additional 
guidance). The borrower shall be guided by the procedures referenced in 
paragraph (c) of this section.
    (e) Ineligible occupants. (1) For housing owned by farm borrowers. 
Ineligible occupants are immediate relatives of the borrower(s) and 
anyone who is not employed in domestic farm labor, as defined in Sec. 
1944.153 of this subpart. Normally, occupancy of labor housing owned by 
farm borrowers is restricted to employees of the farmer or is governed 
by an employment contract with the farmer. Occupancy of housing owned by 
farm borrowers, regardless of the site (on-farm or in town), may be 
occupied by ineligibles with the permission of the State Director.
    (2) For housing owned by organizations. Ineligible occupants are 
defined in exhibit B of subpart C of part 1930 of this chapter.

[56 FR 28473, June 21, 1991, as amended at 57 FR 59904, Dec. 17, 1992]



Sec. 1944.155  Responsibility for LH processing and servicing.

    All LH loan and/or LH grant application processing and servicing is 
the responsibility of the FmHA or its successor agency under Public Law 
103-354 District Director with redelegation authority for on-farm labor 
housing loans.

[57 FR 59904, Dec. 17, 1992]



Sec. 1944.156  General loan/grant processing requirements.

    (a) Timeliness. All applicants will be informed of a decision 
regarding their request for assistance within a reasonable timeframe 
established by RHS. If RHS cannot provide an eligibility determination 
within a reasonable timeframe, the applicant will be notified when the 
determination will be made. A request for assistance may be withdrawn at 
any time by the applicant. RHS may return a request for assistance for 
failure of the applicant to provide the necessary underwriting 
information within a reasonable time period established by RHS.
    (b) Unlawful determination. The federal Equal Credit Opportunity Act 
prohibits creditors from discriminating against credit applicants based 
on race, color, religion, national origin, sex, marital status, age 
(provided that the applicant has the capacity to enter into a binding 
contract), or because all or part of the applicant's income derives from 
any public assistance program. Department of Agriculture regulations 
provide that no agency, officer, or employee of the United States 
Department of Agriculture shall exclude from participation in, deny the 
benefits of, or subject to discrimination any person based on race, 
color, religion, sex, age, handicap, or national origin under any 
program or activity administered by such agency, officer, or employee. 
The Fair Housing Act prohibits discrimination in real estate-related 
transactions, or in the terms and conditions of such a transaction, 
because of race, color, religion, sex, handicap, familial status, or 
national origin. If an applicant or borrower believes he or she has been 
discriminated against for any of these reasons, that person can write 
the Secretary of Agriculture, Washington, DC 20250. Applicants also 
cannot be denied a loan because the applicant has in good faith 
exercised his or her rights under the Consumer Credit Protection Act. If 
an applicant believes he or she was denied a loan for

[[Page 309]]

this reason, the applicant should contact the Federal Trade Commission, 
Washington, DC 20580.
    (c) Taxpayer identification. All applicants must provide their 
taxpayer identification number. The taxpayer identification number for 
individuals who are not businesses is their Social Security Number.

[61 FR 59777, Nov. 22, 1996]



Sec. 1944.157  Eligibility requirements.

    (a) Eligibility of applicant for an LH loan. To be eligible for an 
LH loan the applicant must:
    (1) Be a farmowner, family farm partnership, family farm 
corporation, or an association of farmers whose farming operations 
demonstrate a need for farm labor housing, or an organization, as these 
terms are defined in Sec. 1944.153, which will own the housing and 
operate it on a nonprofit basis; or a nonprofit limited partnership in 
which the general partner is a nonprofit entity.
    (2) Except for State and local public agencies, or a political 
subdivision thereof, be unable to provide the necessary housing from 
their own resources and be unable to obtain the necessary credit from 
any other source upon terms and conditions they could reasonably be 
expected to fulfill. If an association of farmers or family farm 
corporation or partnership, the individual members, individually and 
jointly, must be unable to provide the necessary housing by utilizing 
their own resources and be unable, by pledging their personal liability, 
to obtain other credit that would enable them to provide housing for 
farm workers at rental rates they can afford to pay. The individual 
resources of family farm corporation or partnership members with less 
than a ten percent corporate or partnership interest need not be 
considered.

The State Director may make an exception to the requirement that an 
individual farmowner, family farm corporation, family farm partnership 
or an association be unable to obtain the necessary credit elsewhere 
when all of the following conditions exist:
    (i) There is a need in the area for housing for domestic farmworkers 
who are migrants and that applicant will provide such housing;
    (ii) There are no qualified State or political subdivisions or 
public or private nonprofit organizations currently available or likely 
to become available within a reasonable period of time that are willing 
and able to provide the housing; and
    (iii) The interest rate for such loans is in accordance with subpart 
A of part 1810 of this chapter (FmHA Instruction 440.1).
    (3) Provide from its own resources the borrower contribution 
required by Sec. 1944.160 and have sufficient initial operating capital 
to pay costs such as property and liability insurance premiums, fidelity 
bond premiums if required, utility hookup deposits, maintenance 
equipment, movable furnishings and equipment, printing lease forms, and 
other initial expenses. LH loans made to nonprofit organizations and to 
State or local public agencies or political subdivisions thereof may 
include up to 2 percent of the development cost for initial operating 
expenses.
    (4) After the loan is made, have income sufficient to pay operating 
expenses, make necessary capital replacements, make the payments on the 
loan and other authorized debts, and accumulate reasonable reserves as 
required.
    (5) Possess the legal and actual capacity, character, ability, and 
experience to carry out the undertakings and obligations required for 
the loan, including the obligation to maintain and operate the housing 
and related facilities for the purpose for which the loan is made. 
Organizations operating in more than one local area will be required to 
indicate their ability to provide local management and supervision of 
the day-to-day operation of the housing project.
    (6) Intend to use the housing for labor to be used in the farming 
operations of the applicant or farming operations of its members if an 
individual farmowner, family farm corporation or partnership, or an 
association of farmers.
    (7) Own the housing and related land or become the owner when the 
loan is

[[Page 310]]

closed. An owner may include, in addition to the owner of full 
marketable title, a lessee of a tract of land owned by a State, 
political subdivision, public body or public agency, or Indian tribal 
lands which are not available for purchase. It may also include a lease 
of land when the State Director determines that long-term leasing of 
sites by nonpublic bodies is a well established practice and such 
leaseholds are fully marketable in the area, provided:
    (i) The applicant is unable to obtain fee title to the property.
    (ii) A recorded mortgage constituting a valid and enforceable lien 
on the applicant's leasehold will be given as security.
    (iii) The amount of the labor housing (LH) loan against the property 
will not exceed the maximum security value or Maximum Debt Limit (MDL) 
determined in accordance with subpart E, or subparts B and C of part 
1922 of this chapter, as appropriate.
    (iv) The unexpired term of the lease on the date of loan approval is 
at least 25 percent longer than the repayment period of the loan and 
rental charged for the lease should not exceed the rate charged for 
similar leases in the area.
    (v) The borrower's interest may not be subject to summary 
foreclosure or cancellation.
    (vi) The lease must:
    (A) Not restrict the right to foreclose the LH mortgage or to 
transfer the lease.
    (B) Permit FmHA or its successor agency under Public Law 103-354 to 
bid at foreclosure sale or to accept voluntary conveyance of the 
security in lieu of foreclosure.
    (C) Permit FmHA or its successor agency under Public Law 103-354 
after acquiring the leasehold through foreclosure, or voluntary 
conveyance in lieu of foreclosure, or in event of abandonment by the 
borrower, to occupy the property, or to sublet the property and to sell 
the leasehold for cash or credit.
    (D) Permit the borrower, in the event of default or inability to 
continue with the lease and the LH loan, to transfer the leasehold, 
subject to the LH mortgage, to a transferee with assumption of the LH 
debt and grant obligation.
    (vii) The advice of the Office of the General Counsel (OGC) will be 
obtained as to legal sufficiency of the lease. When the State Director 
is uncertain as to whether a loan can be made on a leasehold, the 
request should be submitted to the National Office for evaluation and 
instructions.
    (8) If it is a private broad-based nonprofit organization or a 
nonprofit organization of farmworkers, meet the following additional 
requirements:
    (i) In the event of its dissolution, be legally bound to transfer 
its net assets to a nonprofit organization of a similar type or a public 
body for use for domestic farm labor housing or other public purposes if 
the need for farm labor housing no longer exists.
    (ii) Responsibility for management of the housing must be vested in 
the applicant's board of directors.
    (A) A broad-based nonprofit organization must be governed by a board 
of directors of not less than five members who are experienced in such 
fields as real estate management, finance, or related businesses and who 
will not be users of the farm workers housed in the project.
    (B) A nonprofit organization of farmworkers must have representation 
on the board from the area where the housing is located. Directors may 
be elected who are not members of the organization but are experienced 
in such fields as real estate management, finance, or related businesses 
provided member directors represent a majority of the board.
    (iii) Be prohibited from requiring or preventing employment on any 
particular farm or farms as a condition of occupancy.
    (iv) Except for an organization of farmworkers, be certified as 
exempt from Federal income taxation.
    (9) Be an individual farmowner who is a citizen of the United 
States, the Commonwealth of Puerto Rico, the Virgin Islands, the 
territories and possessions of the United States, or the trust territory 
of the Pacific Islands or residents in one of the foregoing areas after 
being legally admitted for permanent residence or an indefinite parole. 
If the applicant is an organization, other than a State or political 
subdivision, the majority of the members and

[[Page 311]]

controlling interests must be individuals who meet the citizenship 
requirements for individual farmowners as stated above.
    (b) Eligibility of applicant for an LH grant. To be eligible for an 
LH grant the applicant must meet the applicable requirements in Sec. 
1944.157 (a) and:
    (1) Be an organization, as defined in Sec. 1944.153 with an assured 
life over a period of years sufficient to carry out the purpose of 
providing low-rent housing for domestic farm labor. This should not be 
less than the anticipated useful life of the project as suitable housing 
for domestic farm labor, assuming proper maintenance and repair of the 
property. Ordinarily, this should not be less than 50 years.
    (2) When the grant is closed, be the owner (as defined in this 
subpart) of the housing and related facilities, including the site.
    (3) Be unable to provide the necessary housing from its own 
resources, including any power to levy taxes, assessments, or charges, 
and be unable to obtain the necessary credit through an LH loan or from 
other sources upon terms and conditions the applicant could reasonably 
be expected to fulfill.
    (4) Possess the legal and actual capacity, ability, and experience 
to incur and carry out the undertakings and obligations required, 
including the obligations to maintain and operate the housing and 
related facilities for the purpose for which the grant is made.
    (5) Legally obligate itself not to divert income from the housing to 
any other business, enterprise, or purpose.
    (c) Eligibility of applicant for an LH technical assistance grant. 
To be eligible for an LH technical assistance grant, the applicant must:
    (1) Be a private or public nonprofit agency;
    (2) Have the knowledge, ability, technical expertise, or practical 
experience necessary to develop and package loan and grant applications 
for LH under the section 514 and 516 programs; and,
    (3) Possess the ability to exercise leadership, organize work, and 
prioritize assignments to meet work demands in a timely and cost 
efficient manner. The grantee may arrange for other nonprofit agencies 
to provide services on its behalf; however, RHS will expect the grantee 
to provide the overall management necessary to ensure the objectives of 
the grant are met. Nonprofit agencies acting on behalf of the grantee 
must also meet the above stated eligibility requirements.
    (d) Authorized representative of applicant. FmHA or its successor 
agency under Public Law 103-354 will deal only with the applicant or its 
bona fide representative and technical advisers. The authorized 
representative of the applicant must be a person who has no pecuniary 
interest in the award of the architectural or construction contracts, 
management contracts, the purchase of equipment, or the purchase of land 
for the housing site.

[45 FR 47655, July 16, 1980, as amended at 48 FR 7159, Feb. 18, 1983; 48 
FR 44762, Sept. 30, 1983; 50 FR 8590, Mar. 4, 1985; 56 FR 28474, June 
21, 1991; 58 FR 44753, Aug. 25, 1993; 64 FR 24480, May 6, 1999; 67 FR 
66310, Oct. 31, 2002]



Sec. 1944.158  Loan and grant purposes.

    LH loans and grants may be made to qualified applicants to:
    (a) Build, buy, improve or repair housing as defined in Sec. 
1944.153(b).
    (b) Purchase and improve the necessary land on which the housing 
will be located.
    (1) The cost of land purchased with loan or grant funds may not 
exceed its present market value in its present condition. Present market 
value will be determined by a current appraisal in accordance with 
subpart B of part 1922 of this chapter.
    (2) Loan or grants funds will not be used to buy land from a member 
of an applicant-organization, or from another organization in which any 
member of the applicant-organization has an interest, without prior 
approval of the State Director. In granting this approval the State 
Director should be sure that the purchase price does not exceed the 
present market value.
    (3) Loan or grant funds may not be used to acquire land in excess of 
that needed for the housing, including related facilities, except when 
the applicant cannot acquire only the needed land at a fair price, can 
justify the acquisition, agrees to sell the excess land as soon as 
practicable and apply proceeds on the loan, and has legal authority to 
acquire and administer the land.

[[Page 312]]

    (c) Develop and install water supply, sewage disposal, streets, 
storm water retention facilities or areas, and heat and light systems 
necessary in connection with the housing. If the facilities are located 
offsite, the following requirements must be met:
    (1) The applicant will hold the title to the facility or have a 
legally assured adequate right to use of the facility for at least the 
life of the loan or grant and such title or right can be transferred to 
any subsequent owner of the site.
    (2) The facilities are provided for the exclusive use of the LH 
project or funds are limited to the prorated part of the total cost of 
the facility according to the use and benefit to the project. The 
applicant will agree in writing to the application of extra payments on 
the LH loan of any subsequent collection by the applicant from other 
users or beneficiaries of the facility.
    (3) Adequate security can be obtained with or without a mortgage 
based on the offsite facilities.
    (d) Construct other related facilities in connection with the 
housing such as:
    (1) Maintenance workshop and storage facilities.
    (2) Recreation center including lounge if the project is large 
enough to justify such a facility.
    (3) Central cooking and dining facilities when the project is large 
enough to justify such services.
    (4) Small infirmary for emergency care only when justified.
    (5) Laundry room and equipment, including clotheslines, if not 
provided in the individual units.
    (6) Appropriate outdoor recreational facilities and other facilities 
to meet essential needs.
    (7) Child day care facilities when needed and feasible.
    (8) Trash retention areas if necessary.
    (9) Outdoor lighting in pedestrian areas where use is anticipated 
after sunset.
    (e) Construct office and living quarters for the resident manager 
and other operating personnel if needed and advantageous to the project 
and the Government.
    (f) Purchase and install ranges, refrigerators, drapes, drapery 
rods, clothes washers, and clothes dryers. If individual washer and 
dryer hookups are provided, clothes washers and clothes dryers may be 
installed in individual rental units only if the inclusion of such items 
in individual units is needed and is customary in the area for the type 
of housing involved and is consistent with the requirement that the 
construction be undertaken in an economical manner and not constitute 
elaborate or extravagant items. Otherwise, the clothes washers and 
clothes dryers must be installed in a central laundry room. The number 
of washers and dryers must be adequate to serve the tenant needs. 
Whenever practical, this equipment should be attached to the real 
property in a manner to prevent easy removal.
    (g) Purchase and install essential equipment which upon installation 
becomes a part of the real estate.
    (h) Provide landscaping, foundation planting, seeding or sodding of 
lawns, and necessary facilities related to buildings such as walks, 
yards, fences, parking areas, and driveways.
    (i) Provide loan/grant funds to enable a nonprofit group or public 
body to be reimbursed for technical assistance received from a nonprofit 
organization, with housing and/or community development experience, to 
assist the nonprofit applicant entity in the development and packaging 
of its loan/grant docket and project.
    (1) Loan and grant funds may also be used to reimburse any 
appropriate and necessary legal, architectural, engineering, technical, 
and professional fees.
    (2) Costs incurred by the nonprofit applicant entity for development 
and packaging of its own loan/grant docket and project may also be 
reimbursed. Any costs incurred by the entity for its own formation and 
incorporation are not reimbursable.
    (3) The amount to be reimbursed for developing and packaging the 
loan/grant docket and project are limited by the total development cost 
(excluding initial operating and capital expenses). Reimbursed costs may 
range from 2 to 4 percent of total development costs and should reflect 
costs that are reasonable and typical for the area. In no

[[Page 313]]

case will the Agency reimburse in excess of 4 percent.
    (4) The packaging costs are not required to be considered a part of 
the security value of the project.
    (5) Related project costs as listed in Sec. 1944.169 of this 
subpart are not included as a part of the costs for development and 
packaging of the loan/grant docket and project.
    (j) Pay interest which will accrue during the estimated construction 
period if interim financing is used [or if loan will be closed using 
multiple advances on daily interest accrual (DIAS) with annual 
installment and deferred principal]. In the case of multiple advances 
when the loan is closed on a predetermined amortization schedule system 
(PASS) or on DIAS with monthly installments, loan funds will not be used 
for construction interest. Accrued interest during the construction 
period will be capitalized when construction is substantially complete 
and the project is ready for full operation.
    (k) Pay normal charges necessary to obtain interim financing.
    (l) Pay initial operating expenses up to 2 percent of the 
development cost for any type applicant except an individual farmowner, 
family farm corporation or partnership, or an association of farmers.
    (m) Pay for related costs incurred in compliance with the Uniform 
Relocation Assistance and Real Property Acquisition Act of 1970 and in 
accordance with Sec. 1944.164(q) of this subpart.
    (n) To make advances in accordance with Sec. 1965.217 (d) of 
subpart E of part 1965 of this chapter to nonprofit corporations and 
public agencies to avert prepayment of the loan.
    (o) Encourage the development of farm labor housing. RHS may award 
``technical assistance'' grants to eligible private and public nonprofit 
agencies. These grant recipients will, in turn, assist other 
organizations obtain loans and grants for the construction of farm labor 
housing. Technical assistance services may not be funded under both this 
paragraph and paragraph (i) of this section. In addition, technical 
assistance may not be funded by RHS when an identity of interest exists 
between the technical assistance provider and the loan or grant 
applicant. Requests for Proposals (RFP) may be periodically published in 
the Federal Register by RHS inviting eligible nonprofit organizations to 
submit LH technical assistance grant proposals. RFPs will contain the 
amount of available funding, the method of allocating or distributing 
funds, where to submit proposals, proposal requirements, the deadline 
for the submission of proposals, the selection criteria, and the grant 
agreement to be entered into between RHS and the grantee.

[45 FR 47655, July 16, 1980, as amended at 50 FR 8590, Mar. 4, 1985; 58 
FR 38923, July 21, 1993; 60 FR 4070, Jan. 20, 1995; 67 FR 66311, Oct. 
31, 2002]



Sec. 1944.159  Rates and terms.

    (a) Amortization period. Each loan will be scheduled for payment in 
installments within a period, not to exceed 33 years, as may be 
necessary to assure that the loan will be adequately secured, taking 
into account the probable depreciation of the security.
    (b) Interest rate. Upon request of the applicant, the interest rate 
charged by FmHA or its successor agency under Public Law 103-354 will be 
the lower of the interest rates in effect at the time of loan approval 
or loan closing. If an applicant does not indicate a choice, the loan 
will be closed at the interest rate in effect at the time of loan 
approval. Interest rates are specified in exhibit B of FmHA Instruction 
440.1 (available in any FmHA or its successor agency under Public Law 
103-354 office).
    (c) Amortization schedule. LH loans, including subsequent loans 
closed after May 1, 1985, must be on PASS if the project has year-round 
occupancy and monthly income. LH loans requiring annual installments due 
to seasonal income may be closed on the daily interest accrual system 
(DIAS) with monthly or annual payments. All loans on any project 
receiving a subsequent loan on or after May 1, 1985, must be converted 
to PASS if the subsequent loan is on PASS. Accounting and processing 
payments for PASS loans will be handled under subpart K of part 1951 of 
this chapter.

[45 FR 47655, July 16, 1980, as amended at 50 FR 8591, Mar. 4, 1985; 51 
FR 6734, Feb. 26, 1986]

[[Page 314]]



Sec. 1944.160  Off-farm loan limits.

    (a) For all applicants, including its members, who will be receiving 
any benefits from Low-Income Housing Tax Credits (LIHTC), the amount of 
the RHS loan will be limited to no more than 95 percent of the total 
development cost or 95 percent of the security value, whichever is less.
    (b) For all applicants, including its members, not receiving any 
benefits from LIHTC, who are nonprofit entities or State or local public 
agencies, the amount of the RHS loan will be limited to the total 
development cost or the security value, whichever is less, plus the 2 
percent initial operating capital.
    (c) For all other applicants, including its members, not receiving 
any benefits from LIHTC, the amount of the RHS loan will be limited to 
no more than 97 percent of the development cost or the security value, 
whichever is less.

[64 FR 24480, May 6, 1999]



Sec. Sec. 1944.161-1944.162  [Reserved]



Sec. 1944.163  Conditions under which an LH grant may be made.

    A grant may be made to an eligible applicant only when all of the 
following requirements can be met:
    (a) The applicant will contribute at least one-tenth of the total 
development cost, obtained from its own resources, including any power 
to levy taxes, assessments, or charges, with funds from other sources, 
or with an LH loan. The applicant's contribution must be available at 
the time of grant closing. If an LH loan is needed, the applicant will 
file an application for a combination loan and grant at the same time.
    (b) The housing and related facilities will fulfill a pressing need 
in the area in which the housing is or will be located and there is 
reasonable doubt that such housing can be provided without the grant.
    (1) The applicant will furnish FmHA or its successor agency under 
Public Law 103-354 factual evidence of fulfilling a pressing need. This 
need will be documented in accordance with exhibits A-1 or A-2 of this 
subpart, as applicable, and using exhibit A-4 as a guideline if 
appropriate.
    (2) When appropriate, the District Director may check with sources 
such as the State Department of Labor, Bureau of Employment Security, 
and other reliable sources to verify the information submitted.
    (3) If, after evaluating the information furnished by the applicant 
and additional information that may be provided, the District Director 
determines that the housing will fulfill a pressing need and that a 
reasonable doubt exists that the housing can be provided without the 
grant, the District Director will prepare a narrative statement to 
support these conclusions.
    (c) The housing will be constructed in accordance with exhibit A-3 
of this subpart.
    (d) The housing will be constructed in an economical manner and will 
not be of elaborate or extravagant design or material.
    (e) The housing must be durable and suitable for year round use 
unless the need for such housing is seasonal and year-round occupancy is 
not practical and will not be needed. Construction of seasonal farm 
labor housing will be permitted upon a finding of persistent need for 
migrant farmworker housing in the area and such housing will be used 
solely by migrant farmworkers while they are away from their residence. 
Seasonal farm labor housing that will be occupied for six months or less 
per year by migrant farmworkers while they are away from their 
residence, will be constructed in accordance with exhibit I to subpart A 
of part 1924. Farm labor housing that is to be occupied less than year-
round but more than six months shall be in substantial conformance with 
and be easily convertible to the applicable development standards as 
required by Sec. 1924.5(d)(1) of subpart A of part 1924 of this 
chapter. Such projects that are to be occupied less than year-round but 
more than six months may be approved after review of the savings in 
construction costs, the plan for conversion to full compliance with 
development standards and the long term need for such housing.
    (f) Housing will be constructed and designed with the consideration 
given to selecting the most economic, energy

[[Page 315]]

efficient heating (and cooling, if applicable) systems including, but 
not limited to, insulation in excess of the requirements of exhibit D of 
subpart A of part 1924 of this chapter (FmHA Instruction 1924-A, exhibit 
D); active/passive solar design; building orientation; and sun control 
measures.

[45 FR 47655, July 16, 1980, as amended at 47 FR 28086, June 29, 1982; 
52 FR 8036, Mar. 13, 1987]



Sec. 1944.164  Limitations and conditions.

    (a) Limitations on use of loan and grant funds. Among the purposes 
for which loan and grant funds will not be used are the following:
    (1) Providing housing for the members of the immediate family of the 
applicant when the applicant is an individual farmowner, family farm 
corporation, or partnership, or an association of farmers. (Immediate 
family in this instance includes mother, father, brothers, sisters, sons 
and daughters of applicant(s) and spouse.)
    (2) Housing, related facilities, or household furnishings which are 
elaborate or extravagant in design or material.
    (3) Refinancing debts of the applicant.
    (4) Moveable-type furnishings or equipment except household 
furnishings as defined in Sec. 1944.153(c).
    (5) Payment of any fees, charges, or commissions to any broker, 
negotiator, or other person for the referral of a prospective applicant 
or solicitation of the loan.
    (6) Payment of any fee, salary, commission, profit, or compensation 
to an applicant, or any officer, director, trustee, stockholder, member, 
or agent of the applicant, except as provided in Sec. 1944.158(i).
    (b) Maximum amount of grant. The amount of any grant may not exceed 
the lesser of:
    (1) Ninety percent of the total development cost; or
    (2) That portion of the total cash development cost which exceeds 
the sum of any amount the applicant can provide from its own resources 
plus the amount of a loan which the applicant will be able to repay, 
with interest, from income from rentals which low-income farmworker 
families can be reasonably expected to be able to pay. The availability 
of rental assistance and HUD section 8 subsidies will be considered in 
determining the rentals that farmworkers will pay.
    (c) Advance of grant funds. The times for requesting Treasury Checks 
representing LH grant funds and depositing such checks in the 
applicant's supervised bank account will be determined in accordance 
with Sec. 1944.175. When other funds to help finance the labor housing 
are being supplied by the applicant from its own resources or from a 
loan, such other funds will be used before a grant check is requested 
from the Treasury or deposited in or disbursed from the supervised bank 
account, as appropriate to comply with Sec. 1944.175.
    (d) Obligations incurred before loan or grant closing. When the 
applicant files an application for a loan or grant, the Loan Official 
will advise the applicant that construction must not be started and 
obligations for work materials or land must not be incurred or made 
before the loan or grant is closed, and that it is the policy of RHS not 
to permit loan or grant funds to be used to pay such obligations or 
reimburse the applicant for such payments. If, nevertheless, the 
applicant incurs expenses or makes payments for such purposes before the 
loan or grant is closed, the State Director may authorize the use of 
loan or grant funds to pay such expenses or reimburse the applicant only 
when the State Director finds that all the following conditions exist:
    (1) The expenses were incurred:
    (i) After the applicant filed a written application for a loan with 
RHS; or
    (ii) before the date of application as part of a predevelopment loan 
specifically intended as interim financing from a public agency or 
nonprofit organization and prior concurrence of the National Office is 
obtained; or
    (iii) before the date of application as part of a development loan 
made to a State or local public agency specifically intended as 
temporary financing and prior concurrence of the National Office is 
obtained.
    (2) The applicant is unable to pay such expenses from its own 
resources or from credit from other sources, and failure to authorize 
the use of loan or

[[Page 316]]

grant funds to pay such expenses or reimburse the applicant would impair 
the applicant's financial position.
    (3) The expenses were incurred or payments were made for authorized 
loan and grant purposes.
    (4) Contracts, materials, construction and any land purchase meet 
FmHA or its successor agency under Public Law 103-354 standards.
    (5) Payment of the expenses will remove any liens which have 
attached and any basis for liens that may attach to the property on 
account of such expenses.
    (e) Grant resolution. A resolution will be adopted by the 
applicant's Board of Directors and a certified copy included in the 
grant docket before a grant is approved.
    (1) For a grant accompanied by an LH loan, the form of resolution 
attached as exhibit E to this subpart will be used with any necessary 
changes required or approved by OGC. For a grant not accompanied by an 
LH loan, the form of resolution will be provided or approved by the 
National Office, following exhibit E as closely feasible.
    (2) The form of resolution to be adopted by the applicant will 
contain policy and procedural requirements which should be read and be 
fully understood by the applicant's Board of Directors and officers. 
Included in the resolution will be provisions authorizing FmHA or its 
successor agency under Public Law 103-354 to prescribe requirements 
regarding the operation of the housing and related facilities and other 
provisions including the following:
    (i) The rentals charged domestic farm labor will not exceed such 
amounts as are approved by FmHA or its successor agency under Public Law 
103-354 after considering the income of the occupants and the necessary 
costs of operation, debt service, and adequate maintenance of the 
housing.
    (ii) The housing will be maintained at all times in a safe and 
sanitary condition in accordance with standards prescribed by State and 
local law, and as required by FmHA or its successor agency under Public 
Law 103-354.
    (iii) In granting occupancy of the housing an absolute priority will 
be given at all times to domestic farm labor.
    (3) The resolution will also authorize the appropriate officers of 
the applicant to execute a ``Labor Housing Grant Agreement,'' in the 
format of exhibit F of this subpart. If changes are required in exhibit 
F they must be approved by OGC.
    (f) Conditional obligations to repay grants. The obligations 
incurred by the applicant as a condition of the grant will be in 
accordance with exhibit F of this subpart.
    (g) Loan resolution or loan agreement. (1) An organization will have 
its Board of Directors adopt a loan resolution and furnish a certified 
copy for the loan docket before loan approval. The resolution will be 
substantially in the format of exhibit C of this subpart. Any necessary 
changes must be approved by OGC.
    (2) All other loan applicants of this subpart will execute a loan 
agreement in substantially the same format as exhibit D of this subpart 
(for rental units) or exhibit K of this subpart (for non-rental units). 
Any necessary changes must be approved by OGC.
    (h) Restrictions on conditions of occupancy. No organizational 
borrower, other than an association of farmers or family farm 
corporation or partnership will be permitted to require that an occupant 
work on any particular farm or for any particular owner or interest as a 
condition of occupancy of the housing. Tenant selection should be in 
accordance with exhibit B of subpart C of part 1930 of this chapter. No 
borrower will discriminate, or permit discrimination by any agent, 
lessee, or other operator in the use or occupancy of the housing or 
related facilities because or race, color, religion sex, age, handicap, 
marital or familial status or National origin. Each borrower will comply 
with subpart E of part 1901 of this chapter and prepare and submit HUD 
Form 935.2, ``Affirmative Fair Housing Marketing Plan,'' which is 
available in any FmHA or its successor agency under Public Law 103-354 
Office.

[[Page 317]]

    (i) Supervisory assistance. Supervision will be provided borrowers 
to the extent necessary to achieve the objectives of the loan and to 
protect the interests of the Government. The provision of subpart C of 
part 1930 of this chapter (FmHA Instruction 1930-C) will be followed.
    (j) Location of housing. (1) Multifamily type housing designed for 
year-round occupancy will meet the location requirements as explained in 
exhibit A-3 of this subpart.
    (2) Single family type housing designed for year-round occupancy, as 
explained in exhibit A-3 of this subpart, will be located:
    (i) On plotted lots within a subdivision which complies with all 
local requirements and is developed in accordance with subpart C of part 
1924 of this chapter; or
    (ii) On scattered sites located to meet the location requirements of 
subpart C of part 1924 of this chapter and 7 CFR part 3550.
    (3) Housing designed for seasonal occupancy, whether single family 
or multifamily type housing may be located on the farm as long as it is 
not located near farm service buildings and will be situated to allow 
for possible conversion to full-year occupancy should the need for 
migrant farmworkers in the area change.
    (k) International review. Intergovernmental consultation should be 
carried out in accordance with 7 CFR part 3015 subpart V, 
``Intergovernmental Review of Department of Agriculture Programs and 
Activities'' for 25 units or more. See FmHA Instruction 1940-J, 
available in any FmHA or its successor agency under Public Law 103-354 
office.
    (l) Guidelines for preparing environmental assessments and 
environmental impact statements. All projects shall comply with subpart 
G of part 1940 of this chapter.
    (m) Guidelines for projects affecting floodplains. The provisions of 
the National Flood Insurance Act of 1968 as amended by the Flood 
Disaster Protection Act of 1973 apply to FmHA or its successor agency 
under Public Law 103-354 authorities permitting financing of LH now 
located in or to be located in special flood or mudslide prone areas as 
designated by the Federal Emergency Management Agency. Subpart B of part 
1806 of this chapter (FmHA Instruction 426.2) applies. It should be 
emphasized, however, that FmHA or its successor agency under Public Law 
103-354's response to floodplain development is not limited to the Flood 
Insurance Program. Pursuant to Executive Order 11988, ``Floodplain 
Management,'' FmHA or its successor agency under Public Law 103-354 
shall not fund any housing projects which impact a floodplain unless 
there is no practicable alternative siting of the project. Applicants, 
therefore, should concentrate in the early planning stages of this 
proposal to locating sites which do not impact floodplains. See subpart 
G of part 1940 of this chapter for applicable environmental 
requirements.
    (n) LH loans to American Indians secured by trust or restricted 
land. Loans to individuals will be secured by a mortgage on the 
leasehold interest held by the applicant. The leasehold interest must 
meet the conditions of 7 CFR part 3550. Loans to tribes or tribal 
corporations will be secured in accordance with Sec. Sec. 1823.409 and 
1823.414(a) of subpart N of part 1823 of this chapter (FmHA Instruction 
442.11, paragraphs IX and XIV A).
    (o) Refinancing LH loans. Each borrower must agree to refinance the 
unpaid balance of the LH loan at the request of FmHA or its successor 
agency under Public Law 103-354 whenever it appears to FmHA or its 
successor agency under Public Law 103-354 that the borrower is unable to 
obtain a loan from responsible cooperative or private credit sources at 
rates and terms which FmHA or its successor agency under Public Law 103-
354 considers reasonable, and still rent the units to eligible occupants 
at rental rates within their payment ability. The refinancing of an LH 
loan must comply with the restrictions indicated in Sec. 1944.176(d)(2) 
of this subpart. The provisions of subpart E of part 1965 of this 
chapter must be followed before the State Director or other designated 
official can approve or accept prepayment or refinancing of the FmHA or 
its successor agency under Public Law 103-354 loan.
    (p) Restrictive-use provisions for LH loans. The acceptance of a 
farm labor housing loan will make the borrower

[[Page 318]]

subject to the restrictive-use provisions contained in exhibit A-1 of 
subpart E of part 1965 of this chapter.
    (q) Uniform Relocation Assistance and Real Property Acquisition Act 
of 1970. Compliance with the requirements of this Act applies to public 
bodies and agencies which have the power of eminent domain and/or 
condemnation. It will be the responsibility of the applicant to provide 
assistance required for relocation of displaced persons from the site on 
which a LH project will be located. FmHA or its successor agency under 
Public Law 103-354 loan funds may be increased to cover costs incurred 
in the relocation of displaced persons from the site over and above the 
appraised value of the property. Until national FmHA or its successor 
agency under Public Law 103-354 instructions are published the 
Department regulations found at part 21 of this chapter should be 
followed and the National Office should be consulted for guidance in 
developing an LH loan for a project affected by this Act. However, the 
following should be considered:
    (1) Generally, sites which will involve relocation of displaced 
persons should not be considered if alternative sites are available.
    (2) For the purpose of determining the appraisal value of the site 
to be acquired in respect to LH projects which involve relocation of 
displaced persons, the designated FmHA or its successor agency under 
Public Law 103-354 multiple family housing appraiser or such other 
agency designated appraiser shall be used.

[45 FR 47655, July 16, 1980, as amended at 46 FR 61990, Dec. 21, 1981; 
48 FR 29121, June 24, 1983; 49 FR 3762, Jan. 30, 1984; 52 FR 19301, May 
22, 1987; 55 FR 6244, Feb. 22, 1990; 57 FR 59904, Dec. 17, 1992; 58 FR 
38923, July 21, 1993; 64 FR 24480, May 6, 1999; 67 FR 78328, Dec. 24, 
2002]



Sec. Sec. 1944.165-1944.167  [Reserved]



Sec. 1944.168  Security requirements.

    (a) General. Each loan will be secured to adequately protect the 
financial interest of the Government in the loan during its repayment 
period. The amount of the loan may not exceed the value of the security 
for the loan as determined by an appraisal, less the unpaid principal 
balance, plus past due interest of any prior liens that will or will 
likely exist against the security after the loan is closed. If the State 
Director determines it necessary or advisable to encumber household 
furnishings purchased with loan funds, the State Director will, with the 
advice of OGC, issue appropriate instructions setting forth the manner 
in which household furnishings will be secured.
    (b) Loan to an organization or an association of farmers. (1) A loan 
to an organization or association of farmers which can give a real 
estate mortgage will be secured by a mortgage on good and marketable 
title to the real estate including the housing, the related facilities, 
and the site, subject to any exceptions that may be waived as provided 
in subpart B of part 1927 of this chapter.
    (2) If a first mortgage cannot be obtained, a junior mortgage may be 
taken provided:
    (i) The prior mortgage as affected by the State law does not contain 
such provisions for future advances, payment schedules, forfeiture or 
cancellation, foreclosure without adequate notice to junior lienholders, 
or other matters which may jeopardize FmHA or its successor agency under 
Public Law 103-354's security position or the borrower's ability to pay 
the loan; or
    (ii) Such provisions are satisfactorily limited, modified waived, or 
subordinated.
    (3) If it is impossible for an applicant which is a public or quasi-
public organization to give a real estate mortgage, the security to be 
taken will be determined by the National Office upon the recommendation 
of the State Director. The State Director should consult OGC as to 
whether the proposed security is legally permissible
    (4) In individual cases, additional security may be advisable to 
ensure that the loan objectives will be carried out. For example, to 
provide for more effective management and operation, one or more of the 
following types of security may be required.
    (i) A mortgage on other real estate owned by the applicant.
    (ii) A pledge, assignment, mortgage, or other security interest in 
income from the housing.

[[Page 319]]

    (iii) A cosigner on the promissory note, letter of credit, 
endorsements, assessments, user agreements, personal liability 
agreements, or membership subscription agreements.
    (5) As a general policy, personal liability will be required of the 
members of an association of farmers.
    (c) Loan to an individual farmowner or family farm corporation or 
partnership. For every loan to an individual farm owner or family farm 
corporation or partnership, a real estate mortgage will be taken on the 
farm, whenever practicable, in accordance with subpart B of part 1927 of 
this chapter. However, if requested by the applicant, a mortgage may be 
taken on the units and at least enough land to clearly provide adequate 
security for the loan as determined by an appraisal. In such cases, the 
loan must meet the following conditions:
    (1) If the tract to be mortgaged is covered by a prior lien which 
also applies to other land, the tract to be given as security must 
either:
    (i) Be released from the prior lien or subordinated to permit a 
first lien for the LH loan, or
    (ii) Provide adequate security for the entire prior lien debt and 
the LH loan and comply with 7 CFR part 3550.
    (2) Personal liability will be required of all stockholders or 
partners.

[45 FR 47655, July 16, 1980, as amended at 46 FR 61990, Dec. 21, 1981; 
56 FR 67482, Dec. 31, 1991; 67 FR 78328, Dec. 24, 2002]



Sec. 1944.169  Technical, legal, and other services.

    (a) Appraisals. (1) An appraisal is required when real estate is 
taken as security. The appraisal must be made in accordance with the 
Uniform Standards of Professional Appraisal Practices (available in any 
Rural Development office).
    (2) If the loan includes funds for purchasing household furnishings 
or equipment which will not become part of the real estate, a narrative 
type appraisal, identifying the items, will be prepared by the employee 
preparing the real estate appraisal. The value placed on such 
furnishings will be based on comparable selling prices in the area.
    (b) Architectural and engineering services. Housing and related 
facilities will be planned and designed to meet the needs of the type of 
occupants who will likely occupy it. A written contract for 
architectural or engineering services will be required as outlined in 
subpart A of part 1924 of this chapter.
    (c) Construction and development policies--(1) Planning and 
construction. Housing and related facilities will be planned in 
accordance with subpart A of part 1924 of this chapter and exhibit A-3 
of this subpart. Construction and development will be performed in 
accordance with subpart A of part 1924 of this chapter.
    (2) Labor standards provisions. Construction financed with the 
assistance of an LH grant will be subject to the provisions of the 
Davis-Bacon and related acts, and the regulations implementing those 
acts published by the Department of Labor regulations at 29 CFR parts 1, 
3, and 5.
    (3) Compliance with local codes and regulations. Planning 
construction, and operation of housing finance with the LH loan or grant 
will conform with all applicable Federal, State, and local laws, 
ordinances, codes, and regulations governing such matters as zoning, 
construction, heating, plumbing, electrical installation, fire 
prevention, health and safety, and sanitation. If there are no local or 
State codes and regulations governing these matters, the State Director 
will issue appropriate guidelines to insure that the facilities meet all 
FmHA or its successor agency under Public Law 103-354 requirements.
    (4) Land use objectives. Location of projects shall, to the extent 
practicable, result in the preservation of Important Farmlands and 
Forestlands, Prime Rangeland and Wetlands. State Directors will assure 
that FmHA or its successor agency under Public Law 103-354 actions, 
investments, and programs on non-Federal lands are consistent with State 
and local land use plans and programs to the extent practicable. In 
carrying this out, State Directors will:
    (i) Attempt to integrate departmental and State and local land use 
policies and programs.
    (ii) Identify and minimize to the extent practicable adverse 
environmental, economic, and social effects of FmHA or its successor 
agency under

[[Page 320]]

Public Law 103-354 projects and programs.
    (iii) Provide landholders and other concerned people information 
about the alternatives to, and the associated environmental, social, and 
economic implications of proposed actions.
    (iv) Refrain from enabling others to irreversibly convert these 
lands or encroaching or enabling other encroachments on flood plains 
unless there are no practicable alternatives.
    (v) In unusual circumstances when the State Director is unable to 
make a determination regarding land classification, the State Director 
will request assistance from the Chief of the Natural Resources 
Conservation Service in Washington, DC.
    (d) Optioning of land. If a loan or grant includes funds to purchase 
real estate, an acceptable option to purchase or purchase agreement will 
be included in the application. After the loan is approved, the District 
Director will have Form FmHA or its successor agency under Public Law 
103-354 440-35, ``Acceptance of Option,'' or other appropriate form of 
acceptance, completed, signed, and mailed to the seller.
    (e) Insurance. The State Director will determine the minimum amounts 
and types of insurance the applicant will carry.
    (1) Fire and extended coverage will be required on all buildings 
included in the security for the loan in accordance with subpart A of 
part 1806 of this chapter (FmHA Instruction 426.1).
    (2) Suitable Workman's Compensation Insurance will be carried by the 
applicant for all its employees.
    (3) The applicant will be advised of the possibility of incurring 
liability and encouraged, or may be required when appropriate, to obtain 
liability insurance.
    (f) Title clearance and legal services. When the applicant is an 
organization, or has special title or loan closing problems, title 
clearance and legal services will be obtained in accordance with 
instructions from the OGC. In other cases, the provisions of subpart B 
of part 1927 of this chapter regarding title clearance and legal 
services apply.
    (g) Use of and accountability for loan and grant funds. Loan and 
grant funds and any funds furnished by the borrower for authorized 
purposes will be deposited and handled in accordance with subpart A of 
part 1902 of this chapter.
    (1) Funds furnished by the borrower for the purchase of special 
equipment and furnishings to be used in connection with the project, for 
which loan or grant funds could not be used, should not be deposited in 
the supervised bank account with loan or grant funds.
    (2) For all organizations collateral will be pledged by the 
financial institution for any loan or grant funds or borrower 
contribution in accordance with Sec. 1902.7 of this chapter.
    (3) Funds may be disbursed from the supervised bank account only for 
authorized loan or grant purposes.
    (h) Bond counsel. All public bodies offering bonds as security for 
the LH loan are required to obtain the services of recognized bond 
counsel in the preparation of evidence of indebtedness in accordance 
with Sec. 1942.19 of subpart A of part 1942 of this chapter except as 
provided in paragraph 1 of exhibit H of this subpart.
    (i) Surety bonding and fidelity coverage. (1) The provisions of 
subpart A of part 1924 of this chapter pertaining to surety bonds are 
applicable to LH loans and grants.
    (2) If the applicant is an organization, it will provide fidelity 
coverage for any personnel entrusted with the receipt, custody, and 
disbursement of any project monies, securities, or readily saleable 
personal property other than money or securities. Fidelity coverage will 
be in force as soon as there are assets in the organization in 
accordance with the provisions described at paragraph XV A of exhibit B 
of subpart C of part 1930 of this chapter.
    (j) Contracts for legal services. On projects requiring extensive 
legal services, the applicant will be required to have a written 
contract for these services. All such contracts will be subject to 
review and approval by FmHA or its successor agency under Public Law 
103-354 and, therefore, should be submitted to FmHA or its successor 
agency under Public Law 103-354 before execution by the applicant. 
Contracts will provide for the types of service to be performed and the 
amount of the fees to be paid, either in lump-sum on the completion

[[Page 321]]

of all services or in installments as services are performed. ``Legal 
Service Agreement,'' exhibit G of this subpart, may be used.

[45 FR 47655, July 16, 1980, as amended at 46 FR 36112, July 14, 1981; 
48 FR 7159, Feb. 18, 1983; 56 FR 67482, Dec. 31, 1991; 58 FR 40951, July 
30, 1993; 58 FR 44752, Aug. 25, 1993; 61 FR 56116, Oct. 31, 1996; 64 FR 
24480, May 6, 1999]



Sec. 1944.170  Preapplication requirements and processing.

    A two-stage application process is used. In stage one, applicants 
submit a preapplication, which is used to determine preliminary 
eligibility and feasibility. Preapplications selected for further 
processing will be invited to submit an application. The preapplication 
consists of SF-424.2, ``Application for Federal Assistance (For 
Construction)'' and the information listed in exhibit A-1 or A-2 of this 
subpart, as applicable. Preapplications for off-farm new construction 
loans and grants will be accepted and processed in accordance with this 
section when NOFA is announced in the Federal Register. Applicants are 
advised to read the notice carefully for any restrictions on loan or 
grant amounts. Preapplications for repair and rehabilitation of existing 
off-farm LH units and new units of on-farm housing may be submitted any 
time during the year and will be processed on a first-come, first-served 
basis in accordance with subpart L of part 1940 of this chapter.
    (a) Preapplications for new units in off-farm facilities. (1) The 
Agency will publish NOFA annually in the Federal Register with deadlines 
for submitting preapplications. The notice will include the amount of 
funds available, any limit on the amount of individual loan and grant 
requests, any limit on the amount of funds that any one State may 
receive, and the loan scoring criteria.
    (2) The preapplication must be submitted in accordance with NOFA and 
consists of SF-424.2, ``Application for Federal Assistance (For 
Construction)'', and the information required by exhibit A-1 of this 
subpart. The preapplication will be used by the Agency to determine 
preliminary eligibility and to score and rank proposals.
    (b) Preliminary eligibility assessment of preapplications received 
in response to NOFA. The Agency will make a preliminary eligibility 
assessment using the following criteria:
    (1) The preapplication was received by the submission deadline 
specified in NOFA;
    (2) The preapplication is complete as specified in NOFA;
    (3) The applicant is an eligible entity and is not currently 
debarred, suspended, or delinquent on any Federal debt; and
    (4) The proposal is for authorized purposes.
    (c) Scoring and ranking off-farm preapplications. The Agency will 
score and rank off-farm preapplications for new units that meet the 
criteria of paragraph (b) of this section.
    (1) The following criteria will be used to score project proposals:
    (i) The presence and extent of leveraged assistance, including 
donated land, for the units that will serve program-eligible tenants, 
calculated as a percentage of the RHS total development cost (TDC). RHS 
TDC excludes non-RHS eligible costs such as a developer's fee. Leveraged 
assistance includes, but is not limited to, funds for hard construction 
costs, Section 8 or other non-RHS tenant subsidies, and state or federal 
funds. A minimum of ten percent leveraged assistance is required to earn 
points. (0 to 20 points)
    (A) To count as leveraged funds for purpose of the selection 
criteria:
    (1) A commitment of funds must be received within a timeframe that 
permits processing of the loan request within the current funding cycle 
(the latest commitment date for leveraged funds will be announced in 
NOFA); and
    (2) If RHS RA is being provided, the interest cost to the project 
using leveraged loan funds may not exceed the cost of 100 percent LH 
loan financing.
    (B) For donated land to be scored as leveraged assistance, all of 
the following conditions must be met.
    (1) Based on a preliminary review, the land is suitable and meets 
Agency requirements. Final site acceptance is subject to a completed 
environmental review.

[[Page 322]]

    (2) Site development costs do not exceed what they would be to 
purchase and develop an alternative site.
    (3) The overall cost of the project is reduced by the donation of 
the land.
    (C) Points for leveraged assistance will be awarded in accordance 
with the following table. Percentages will be rounded to the nearest 
whole number, rounding up at .50 and above and down at .49 and below. 
For example, 25.50 becomes 26; 25.49 becomes 25. If the total percentage 
of leveraged assistance is less than ten percent, and it includes 
donated land, two points will be awarded for the donated land.

------------------------------------------------------------------------
                        Percentage                             Points
------------------------------------------------------------------------
75 or more................................................           20
60-74.....................................................           18
50-59.....................................................           16
40-49.....................................................           12
30-39.....................................................           10
20-29.....................................................            8
10-19.....................................................            5
0-9.......................................................            0
Donated land in proposals with less than ten percent total            2
 leveraged assistance.....................................
------------------------------------------------------------------------

    (ii) The loan request is in support of an Agency initiative 
announced in NOFA. (10 points)
    (iii) Seasonal, temporary, or migrant housing. (5 points for up to 
and including 50 percent of the units; 10 points for 51 percent or more)
    (iv) For Fiscal Year 1999 and Fiscal Year 2000 funding cycles, 
outstanding applications or requests that were issued an AD-622, 
``Notice of Preapplication Review Action,'' inviting a formal 
application, or had been reviewed and authorized by the National Office 
prior to October 29, 1998. (15 points)
    (2) The Agency will rank preapplications by point score. For point-
score ties within the State, rank order will be determined by giving 
first preference to the application with the greatest actual percentage 
of leveraged assistance. In case of further same-State ties, rank order 
will be determined by lottery.
    (d) Selection of preapplications for further processing. (1) States 
will make a preliminary eligibility and feasibility assessment, score 
and rank the preapplications, and provide this information to the 
National Office with their review comments.
    (2) The National Office will rank the preapplications nationwide. In 
case of point-score ties in the National ranking, first preference will 
be given to a preapplication to develop units in a state that does not 
have existing RHS-financed off-farm LH units; second preference to a 
preapplication from a State that has not yet been selected in the 
current funding cycle. In the event there are multiple preapplications 
in either category, one preapplication from each State (the highest 
State-ranked) will compete by computer-based random lottery. If 
necessary, the process will be completed until all same-pointed 
preapplications are selected or funds are exhausted.
    (3) The Agency will not select a preapplication for a new LH loan in 
an area with competing or problem projects when:
    (i) The Agency has selected another LH proposal in the same market 
area for further processing;
    (ii) A previously authorized or approved Agency, HUD, or similar 
assisted MFH project in the same market area serving farmworkers has not 
been completed or reached its projected occupancy level; or
    (iii) An existing Agency, HUD, or similar assisted MFH project in 
the same market area serving farmworkers is experiencing high vacancy 
levels, unless such vacancy is planned as part of the occupancy cycle of 
a seasonally-operated migrant farmworker facility.
    (4) If any selected preapplications cannot meet the processing 
deadlines established by the Agency to enable processing and fund 
obligation within the current funding cycle, or if requested leveraged 
funds are not committed within the timeframe established in NOFA, the 
Agency will select the next ranked preapplication for processing.
    (e) Notification to applicants. States will notify all applicants of 
the results of the selection process.
    (1) Applicants selected for further processing will be notified and 
processed in accordance with this section and Sec. 1944.171.
    (2) Project proposals not selected for further processing, including 
incomplete proposals or those that failed to meet NOFA requirements, or 
those

[[Page 323]]

that could not be reached because of insufficient funds, will be 
returned to the applicant with the reason they were not selected.
    (f) Actions by State Director. (1) If the applicant is an 
organization adopting without change the ``Articles and Bylaws'' 
prescribed by State supplements, the preapplication need not be 
submitted to OGC.
    (2) In all other cases involving loans or grants to organizations, 
the docket, with any questions or comments of the State Director, will 
be submitted to OGC for a preliminary opinion as to whether the 
applicant and the proposed loan meet or can meet the requirements of 
State law and this subpart.
    (3) An original and one copy of the appropriate environmental review 
document required by subpart G of part 1940 of this chapter must be 
completed prior to submitting the docket to the National Office for 
review.
    (4) In cases not receiving a National Office review, the following 
statement is to be added to the Form AD-622: ``You are advised against 
taking any actions or incurring any obligations which would either limit 
the range of alternatives to be considered, or which would have an 
adverse effect on the environment. Satisfactory completion of the 
environmental review process in accordance with subpart G of part 1940 
of this chapter must occur prior to loan approval. The issuance of this 
review action does not constitute site approval.''
    (5) Determining amount of grant. (i) General. The State Director 
will determine the amount the applicant can obtain from other sources, 
including an LH loan, and the amount of the grant to be made, within the 
limits set forth in Sec. 1944.164(b). The State Director will make this 
determination after thoroughly analyzing the information in the docket 
and receiving authorization from the National Office.
    (ii) Method of determining amount of grant. (A) The State Director 
will examine the income of the project based on the estimated rental 
charges and operating costs of the housing when in full operation to 
determine the soundness of the operations. When there is any doubt as to 
the probable soundness due to unrealistic planning of income or 
operating expenses, or for other reasons, the housing project and its 
operation will be discussed with the applicant to determine changes 
which can be made to correct the deficiencies.
    (B) When a sound plan of operation has been agreed upon, the State 
Director will determine the amount of funds that can be expected to be 
available from other sources, including a LH loan. The State Director 
will also determine the amount of income available for loan repayments 
after allowing for reasonable and necessary maintenance costs, payments 
on debts of the applicant, and the orderly accumulation of an adequate 
reserve.
    (C) The amount of the grants will be the difference between the 
amount of funds to be provided in accordance with paragraph 
(f)(5)(ii)(A) of this section, plus any funds available from the 
applicant's own resources and the total development cost of the project. 
In no case, however, may the amount of the grant exceed 90 percent of 
the total development cost.
    (6) When the State Director considers it necessary, any 
preapplication may be sent to the National Office for evaluation and 
instructions.

[48 FR 200, Jan. 4, 1983, as amended at 53 FR 36267, Sept. 19, 1988; 55 
FR 13503, Apr. 11, 1990; 55 FR 25077, June 20, 1990; 58 FR 40951, July 
30, 1993; 61 FR 39851, July 31, 1996; 64 FR 24480, May 6, 1999]



Sec. 1944.171  Preparation of completed loan and/or grant docket.

    (a) Information needed. If the applicant has been requested to file 
an application, SF 424.2 (for application submission), and the 
additional information as outlined in exhibit A-1 or A-2, as applicable, 
will be submitted to the District Director.
    (b) District Director's responsibility. As the information for the 
loan docket is being developed, the District Director will work closely 
with the applicant. The District Director will review and verify the 
information furnished for correctness, adequacy, and completeness. The 
District Director will determine that the market survey is adequate and 
that the market survey report is accurate. The District Director will 
evaluate the manner in which the applicant plans to conduct its business

[[Page 324]]

and financial affairs and comment on the adequacy of the management.
    (c) County Committee certification. County Committees will not be 
used to review LH loan and/or grant applications.
    (d) Assembly, review, and distribution of complete loan and/or grant 
docket items. When all items required for the complete loan and/or grant 
docket have been furnished, they will be examined thoroughly by the FmHA 
or its successor agency under Public Law 103-354 official who will 
approve the loan and/or grant to make sure they are properly and 
accurately prepared and are complete in all aspects, including dates and 
signatures. The loan and/or grant docket items will be assembled in the 
following order for distribution after approval:

----------------------------------------------------------------------------------------------------------------
                        Name of form or     Total No.     Signed by                                  Copy for
      Form No.              document        of copies      borrower        Number for docket         borrower
----------------------------------------------------------------------------------------------------------------
Exhibit A-1 (or       Information to be             2  0                1-O                      1-C
 exhibit A-2) \2\.     Submitted for
                       Labor Housing (LH)
                       Loan or Grant.
                      Memorandum from the           1  ...............  1-O                      ...............
                       National Office
                       authorizing
                       development of
                       loan docket and
                       loan or grant
                       approval if
                       required by Sec.
                       1944.170(c).\2\
AD-622..............  Notice or                     3  ...............  2-C                      1-O
                       Preapplication
                       Review Action.
SF 424.2............  Application for               3  1                2-O and 1C               1-C
                       Federal Assistance
                       ((For
                       Construction) (for
                       application
                       submission).
1910-11.............  Applicant                     2  1                1-O                      1-C
                       Certification,
                       Federal Collection
                       Policies for
                       Consumer or
                       Commercial Debts.
Exhibit A-1 (or       Information to be             2  0                1-O                      1-C
 exhibit A-2) \2\.     Submitted for an
                       LH Loan or Grant.
FmHA 1944-50........  Multiple Family               1  ...............  1-0                      ...............
                       Housing Borrower/
                       Project
                       Characteristics.
FmHA 1944-51........  Multiple Family               3  3-0 & 2C         1-0                      1
                       Housing
                       obligation--Fund
                       Analysis.
FmHA 400-1..........  Equal Opportunity             2  ...............  1-O                      1-C
                       Agreement.
FmHA 400-3 \2\......  Notice to                     3  ...............  2-O and 1C               1-C
                       Contractors and
                       Applicants.
FmHA 400-4..........  Assurance Agreement           2  1                1                        1
FmHA 400-6 \2\......  Compliance                    3  ...............  2-O and 1C               1-C
                       Statement.
HUD 935.2...........  Affirmative Fair              2  ...............  2-O and 1C               ...............
                       Housing Marketing
                       Plan.
                      Evidence of Legal             2  1                1-O                      1-C
                       Authority (copies
                       or citation of
                       specific
                       provisions of
                       State constitution
                       and statutory
                       authority).\2\
                      Appraisal report              1  ...............  1-O                      ...............
                       with attachments.
FmHA 1940-20 \2\....  Request for                   1  1                1-O                      ...............
                       Environmental
                       Information.
FmHA 1940-21........  Environmental                 1  ...............  1-O                      ...............
                       Assessment For
                       Class I Actions.
FmHA 1940-22 \2\....  Environmental                 1  ...............  1-O                      1
                       Checklist For
                       Categorical
                       Exclusions.
Exhibit H Subpart G   Class II                      1  ...............  1-O                      1
 of Part 1940 \2\.     Environmental
                       Assessment.
FmHA 426-1..........  Valuation of                  1  ...............  1-O                      ...............
                       Buildings.
FmHA 440-9 \2\......  Supplementary                 2  1                1-O                      1-C
                       Payment Agreement.
---------------------
 
 Other Loan Docket Items. Preliminary Title Opinion or a title insurance binder, and a copy of deed, purchase
 contract, or other instrument of ownership, or an option.
----------------------------------------------------------------------------------------------------------------
 
                      Proof of                      2  1                1-O                      1-C
                       Organization
                       (certified copy of
                       charter or
                       articles of
                       incorporation) \1\.
                      Certified copies of           2  1                1-O                      1-C
                       bylaws or
                       regulations \1\.
                      List of names and             2  1                1-O                      1-C
                       addresses of
                       officers,
                       directors, and
                       members and
                       membership
                       interest held by
                       each.\1\
                      Certified copy of             1  1                1-O                      1-C
                       Loan Resolution
                       \1\.
                      Loan Agreement \2\.           2  1                1-O                      1-C

[[Page 325]]

 
                      Survey of land                2  1                1-O                      1-C
                       given as security,
                       plans,
                       specifications,
                       cost estimates,
                       and proposed
                       manner of
                       construction.\2\
Exhibit A-5 \2\.....  Statement of Budget           2  1                1-O                      1-C
                       and cash flow.
FmHA 431-2 \2\......  Farm and Home Plan.           2  1                1-O                      1-C
---------------------
 
 When applicable, include copy of lease or occupancy agreement to be used, report of lien search, option or
 foreclosure notice agreement, and items of information concerning prior mortgage(s). For subsequent loans made
 in conjunction with transfers to nonprofit corporations or public agencies to avert prepayment, follow the
 additional directions in Sec. 1965.65(f) of subpart B of part 1965 of this chapter. For advances made to
 nonprofit corporations or public agencies to avert prepayment, follow the directions in Sec. 1965.217 of
 subpart E of part 1965 of this chapter.
----------------------------------------------------------------------------------------------------------------
\1\ When applicant is an organization.
\2\ When applicable.

    (e) Submission of docket to State Office. (1) The loan and/or grant 
docket needing State Office approval, including comments and 
recommendations by the District Director, will be submitted to the State 
Office. The State Director will prepare and include in the docket a 
memorandum to the District Director which will either require additional 
information if the material submitted is inadequate or will set forth 
the conditions of loan approval. The proposed conditions of loan 
approval must indicate if construction will be financed by multiple 
advances or interim financing if the loan will be closed on DIAS or 
PASS, and when the payment will be made, if an annual payment is 
indicated due to seasonal income.
    (i) Loans for multiple advance construction on PASS or DIAS monthly 
installments will include the cost of construction less the cost of 
interest during construction. To determine the recommended loan amount 
the District Director should determine the authorized loan amount 
including construction interest, then subtract the estimated 
construction interest from the loan amount. Interest during construction 
will be capitalized as authorized in Sec. 1944.158 (j) of this subpart.
    (ii) Loans for interim financed construction may include the cost of 
interest during construction as authorized in Sec. 1944.158 (j) of this 
subpart.
    (iii) Loans for multiple advance construction on DIAS, with annual 
installment and deferred principal payments, may include the cost of 
interest during construction as authorized in Sec. 1944.158 (j).
    (2) The advice of the Office of the General Counsel (OGC) should be 
obtained for all loans and/or grants to organizations and associations 
of farmers and their comments included in the memorandum to the State 
Director. If the State Director determines that the loan and/or grant 
should be approved, the State Director will approve the loan and/or 
grant and sign the memorandum to the District Director as required by 
paragraph (e)(1) of this section.
    (f) Submission of docket to National Office. The final loan and/or 
grant docket need not be submitted to the National Office unless 
required by an authorizing memorandum resulting from compliance with 
Sec. 1944.170.
    (g) Announcement. When it is determined that a loan and/or grant can 
be approved, project information will be prepared in accordance with 
FmHA Instruction 2015-C which is available in the FmHA or its successor 
agency under Public Law 103-354 State and National Offices.
    (h) Establishing borrower/project data. Prior to loan approval, the 
State Director, District Director or a designee will input into the 
accounting system through field office terminals, the information 
contained in Form FmHA or its successor agency under Public Law 103-354 
1944-50.

[45 FR 47655, July 16, 1980, as amended at 47 FR 36414, Aug. 20, 1982; 
49 FR 3762, Jan. 30, 1984; 50 FR 8591, Mar. 4, 1985; 54 FR 29332, July 
12, 1989; 55 FR 13503, Apr. 11, 1990; 58 FR 38923, July 21, 1993]

[[Page 326]]



Sec. 1944.172  [Reserved]



Sec. 1944.173  Loan and grant approval--delegation of authority.

    The State Director and District Director are authorized to approve 
loans and/or grants in accordance with this subpart and subpart A of 
part 1901 of this chapter. The State Director may delegate loan or grant 
approval in writing to State Office employees other than District 
Directors. No LH grant may be approved by the State Director without the 
prior consent of the National Office.
    (a) Action before loan or grant approval. The loan or grant approval 
official is responsible for reviewing the docket to determine that the 
proposed loan and/or grant complies with all pertinent regulations, 
instructions, and directives. In making this review, the approval 
official will determine that:
    (1) The applicant is eligible.
    (2) The funds are requested for authorized purposes.
    (3) The proposed loan or grant is sound.
    (4) The security is adequate for the loan.
    (5) All preapproval requirements have been met.
    (6) Compliance with title VI of the Civil Rights Act will be met.
    (7) All other requirements will be met.
    (b) Approval of loan or grant. When a loan or grant is approved:
    (1) The approving official will prepare and sign Form FmHA or its 
successor agency under Public Law 103-354 1944-51 in an original and one 
copy. The State Director, District Director or a designee will record 
the obligation of loan and/or grant funds for the project through a 
field office terminal in accordance with the FMI for Form FmHA or its 
successor agency under Public Law 103-354 1944-51 and the MFH User 
Procedure.
    (2) The individual obligating the loan or grant will record the date 
and time of the obligation and sign Form FmHA or its successor agency 
under Public Law 103-354 1944-51 in accordance with the FMI.
    (3) The obligation date of loan and/or grant funds will be confirmed 
through use of field terminals the following work day.
    (4) The Finance Office will mail the State Office Form FmHA or its 
successor agency under Public Law 103-354 1944-57, ``MFH Acknowledgement 
of Obligated Funds/Check Request,'' confirming the reservation of funds 
with the obligation date inserted as required by the FMI for Form FmHA 
or its successor agency under Public Law 103-354 1944-57. Form FmHA or 
its successor agency under Public Law 103-354 1944-57 will be prepared 
and distributed in accordance with the FMI.
    (5) Form FmHA or its successor agency under Public Law 103-354 1944-
51 will not be mailed to the Finance Office unless there is an excessive 
time period in which the terminals are not operable. Immediately after 
confirming the reservation of funds for not-for-profit organizations and 
public bodies, through use of the terminal operating station, the State 
Director will call the Information Division in the National Office as 
required by subpart C of part 2015 of this chapter. Notice of approval 
to the applicant will be accomplished by mailing the applicant's signed 
copy of Form FmHA or its successor agency under Public Law 103-354 1944-
51 on the obligation date. The State Director, District Director or a 
designee will record the actual date of applicant notification on the 
original of Form FmHA or its successor agency under Public Law 103-354 
1944-51 and include the original of the form as a permanent part of the 
District Office project file with a copy in the State Office file.
    (6) Determine the maximum rental rates to be charged domestic farm 
labor for occupancy of the housing, and advise the applicant, in 
writing, of these maximum rates. In determining the maximum rental rates 
due consideration must be given to the income and earning capacity of 
the prospective occupants of the housing and the cost of operating and 
maintaining such housing. As a general guide, the rental charges should 
not exceed 25 percent of the occupant families' estimated adjusted 
annual income.
    (c) Disapproval of or adverse action on a loan or grant. When a loan 
and/or

[[Page 327]]

grant is disapproved or if adverse action is taken, the reasons for such 
action will be shown on the original Form FmHA or its successor agency 
under Public Law 103-354 1944-51. Form FmHA or its successor agency 
under Public Law 103-354 1944-51 will be initialed and dated. The 
District Director will notify the applicant in writing of the 
disapproval of or adverse action on the loan or grant and the reasons 
therefore and advise them of their right to appeal in accordance with 
subpart B of part 1900 of this chapter. The disapproved docket will then 
be handled in accordance with Form FmHA or its successor agency under 
Public Law 103-354 Instruction 2033-A which is available in any FmHA or 
its successor agency under Public Law 103-354 office. Any appeals as a 
result of disapproval or adverse action will be handled in accordance 
with subpart B of part 1900 of this chapter.

[45 FR 47655, July 16, 1980, as amended at 50 FR 8591, Mar. 4, 1985]



Sec. 1944.174  Distribution of loan and/or grant approval documents.

    For a loan to an organization, or in special cases, the approved 
loan or grant docket, including any title evidence, will be sent to OGC 
by the State Office for preparation of closing instructions and any 
special legal documents required for closing. The original executed, 
witnessed loan and grant resolution, or a certified copy of the required 
loan and grant resolution must be supplied by the applicant in time to 
be included in the loan or grant docket. If applicable, the docket will 
also include the proposed grant agreement for OGC review. No docket will 
be considered which fails to include such a required resolution or 
proposed agreement. OGC will route the docket, including closing 
instructions and any such legal documents, to the District Office 
through the State Office for review and for inclusion of any further 
instructions needed in closing the loan.

[45 FR 47655, July 16, 1980, as amended at 47 FR 54423, Dec. 3, 1982]



Sec. 1944.175  Actions subsequent to loan and/or grant approval.

    (a) Interim financing from commercial sources. Interim financing may 
be used when a loan or combination loan and grant exceeds $50,000 
provided funds can be borrowed at reasonable interest rates from 
commercial sources for the construction period. When interim commercial 
financing is used:
    (1) The docket will be processed to the stage where the FmHA or its 
successor agency under Public Law 103-354 loan or combination loan and 
grant would normally be closed. FmHA or its successor agency under 
Public Law 103-354 loan or combination loan and grant funds will be 
obligated before the applicant proceeds with the final arrangements for 
interim commercial financing.
    (2) The State Director or District Director may deliver a copy of 
Form FmHA or its successor agency under Public Law 103-354 1944-57 as 
evidence of FmHA or its successor agency under Public Law 103-354 
commitment, if necessary, or a letter stating that funds in specified 
amounts have been obligated and will be available to retire the interim 
financing if the applicant complies with the approval conditions. See 
exhibit I of this subpart for a sample letter that may be used.
    (3) FmHA or its successor agency under Public Law 103-354 will 
undertake similar functions as if FmHA or its successor agency under 
Public Law 103-354 funds had been advanced from the standpoint of 
approving construction contracts and the monitoring of construction.
    (4) The supervised bank account will normally not be used for funds 
obtained through interim commercial financing. However, the District 
Director will approve Form FmHA or its successor agency under Public Law 
103-354 1924-18, ``Partial Payment Estimate,'' to insure that funds are 
used for authorized purposes.
    (5) When the interim financing funds have been expended, the FmHA or 
its successor agency under Public Law 103-354 loan or combination loan 
and grant will be closed and permanent instruments will be issued to 
evidence the FmHA or its successor agency under Public Law 103-354 
indebtedness. The FmHA or its successor agency under Public Law 103-354 
loan or combination loan and grant proceeds will be used to

[[Page 328]]

retire the interim commercial indebtedness.
    (6) Before the FmHA or its successor agency under Public Law 103-354 
loan or combination loan and grant is closed, the applicant will be 
required to provide the district Director with statements from the 
contractor(s), engineer, and attorney that they have been paid in full 
in accordance with their contracts or other agreements and that there 
are no unpaid obligations outstanding in connection with the 
construction of the project. See in addition Sec. 1924.6 of subpart A 
of part 1924.
    (b) Multiple advances of LH loan and/or grant funds. In the event 
FmHA or its successor agency under Public Law 103-354 provides grant 
only assistance, or if interim commercial financing is not available for 
a loan or combination loan and grant in excess of $50,000, multiple 
advances will be used subject to the following:
    (1) When relatively large amounts of funds are to be expended for 
purchases of real estate or for other reasons at the time of closing, 
separate checks for such purposes may be ordered and endorsed by the 
borrower to the seller or other appropriate party. This will preclude 
the necessity for depositing such funds in the supervised bank account 
and reduce the amount of required collateral.
    (2) Except as indicated in paragraph (b)(1) of this section, 
advances will be made only as needed to cover disbursements required by 
the borrower for a 30-day period. Normally, the advances should not 
exceed 24 in number or extend longer than 2 years beyond loan closing. 
The retained percentage withheld from the contract or to assure that 
construction will be completed in accordance with the contract documents 
will ordinarily be included in the last advance. Advances will be 
requested in sufficient amounts to insure that ample funds will be on 
hand to pay costs of construction, land purchase, legal, engineering, or 
architectural costs, interest when authorized, and other expenses, as 
needed. The borrower will prepare Form FmHA or its successor agency 
under Public Law 103-354 440-11, ``Estimate of Funds Needed for 30-day 
Period Commencing ------,'' modified as needed, to show the amount of 
funds required during the 30-day period. This form will be approved by 
the District Director. After the District Director determines that the 
estimates prepared by the borrower are adequate, the District Director 
will indicate the amount on Form FmHA or its successor agency under 
Public Law 103-354 1944-57 in accordance with the FMI and request the 
amount through field office terminals in accordance with MFH User 
Procedures. As an example, for a loan and/or grant of $100,000, the 
advances may be made as follows: Assuming that the loan and/or grant 
will be closed on July 1, the borrower will complete Form FmHA or its 
successor agency under Public Law 103-354 440-11 in sufficient time so 
that the funds will be available on, the day of loan closing. The 
estimates should be broken down for the first advance in a manner 
similar to the following:

Construction.................................................    $30,000
Land acquisition.............................................      5,000
Architectural................................................      4,000
Legal........................................................      1,000
                                                              ----------
 Total.......................................................     40,000
 


An advance in the amount of $40,000 would then be available on July 1, 
the date of loan closing. The second advance will also be based on the 
borrower's estimate prepared on Form FmHA or its successor agency under 
Public Law 103-354 440-11, and will be prepared in sufficient time so 
that the estimate of funds might be broken down as follows:

Construction.................................................    $20,000
Architectural................................................      1,000
                                                              ----------
 Total.......................................................     21,000
 


The amount will be indicated on Form FmHA or its successor agency under 
Public Law 103-354 1944-57 and requested through field office terminals. 
The same procedure will be followed for each advance until the project 
is completed.
    (3) Any deviation from the multiple advance procedure must have the 
prior approval of the National Office.
    (c) Requesting a check. When loan approval conditions can be met, 
including any real estate lien required, and a date for loan closing has 
been agreed

[[Page 329]]

upon, the District Director will determine the amount of funds needed in 
accordance with either paragraphs (a) or (b) of this section. The 
District Director's delegate will then order the loan and/or grant check 
through the field office terminal so that it will be available on or 
just before the date set for loan closing.
    (d) Increase or decrease in the amount of the loan. If it becomes 
necessary for the amount of the loan and/or grant to be increased or 
decreased before loan closing, the loan approval official or District 
Director will request that all distributed docket forms be returned to 
the District Office. The loan docket will be revised accordingly and 
reprocessed.
    (e) [Reserved]
    (f) Handling the loan or grant check. The loan or grant check will 
be handled in accordance with FmHA Instruction 2018-D, which is 
available in any FmHA or its successor agency under Public Law 103-354 
office and subpart A of part 1902 of this chapter.
    (g) Property insurance. Buildings will be insured in accordance with 
subpart A of part 1806 of this chapter (FmHA Instruction 426.1).

[45 FR 47655, July 16, 1980, as amended at 47 FR 36414, Aug. 20, 1982; 
50 FR 8592, Mar. 4, 1985; 52 FR 8036, Mar. 13, 1987; 53 FR 26590, July 
14, 1988; 54 FR 39728, Sept. 28, 1989; 56 FR 67482, Dec. 31, 1991; 59 FR 
54788, 54789, Nov. 2, 1994; 68 FR 61331, Oct. 28, 2003]



Sec. 1944.176  Loan and/or grant closing.

    (a) Applicable instructions. LH loans and/or grants will be closed 
in accordance with applicable provisions of subpart B of part 1927 of 
this chapter and State supplements. Loan dockets for an organization and 
loan dockets for an individual in special cases will be sent to OGC for 
additional closing instructions. A family farm corporation or 
partnership or an association of farmers applicant may use its attorney 
to close the loan in accordance with applicable loan closing 
instructions provided the attorney is not a member, officer, director, 
trustee, stockholder, or partner of the applicant entity. Nonprofit 
organizations may use an attorney who is a member of their organization. 
The cost incurred by the organization for legal services must be 
reasonable and competitive for the area.
    (b) LH grant agreement. An LH grant agreement, prepared and 
authorized as provided in Sec. 1944.164(e), will be dated and executed 
by the applicant on the date of grant closing. The executed agreement 
will be filed with the mortgage or other security instrument in the 
County Office case file.
    (c) LH loan agreement. A LH loan agreement, prepared and authorized 
as provided in Sec. 1944.164 (g) of this subpart will be dated and 
executed by the applicant on the date of loan approval. The executed 
agreement will be filed with the mortgage or other security instrument 
in the District Office case file.
    (d) Mortgage. Unless the OGC determines the Form to be 
inappropriate, real estate mortgage Form FmHA or its successor agency 
under Public Law 103-354 1927-1 (state), ``Real Estate Mortgage for ----
--,'' will be used. For loans and/or grants to organizations, Form FmHA 
or its successor agency under Public Law 103-354 1927-1 will be modified 
as prescribed by or with the advice of the OGC with respect to the name, 
address, and other identification of the borrower, style of execution, 
acknowledgement, and any other provisions.
    (1) The mortgage or other instrument will contain the following 
covenant:

    ``The property described herein was obtained or improved through 
Federal financial assistance. This property is subject to the provisions 
of Title VI of the Civil Rights Act of 1964 and the regulations issued 
pursuant thereto for so long as the property continues to be used for 
the same or similar purpose for which financial assistance was extended 
or for so long as the purchaser owns it, whichever is longer.''

    (2) For all LH loans, the restrictive-use provisions contained in 
exhibit A-1 of subpart E of part 1965 of this chapter will be included 
in the mortgage.
    (3) When a loan resolution or loan agreement is used, an additional 
paragraph will be included in the mortgage to read as follows:

    ``This instrument also secures the obligations and covenants of 
Borrower set forth in Borrower's Loan Resolution (Loan Agreement) of 
(Date), which is hereby incorporated herein by reference.''


[[Page 330]]


    (4) When the borrower is an organization the mortgage will include 
the following provision:

    ``Borrower will not require any occupant of the housing or related 
facilities, as a condition of occupancy, to work or be employed on any 
particular farm or other place, or work for or be employed by any 
particular person, firm, or interest.''

    (5) For a grant made at the same time as an LH loan, the mortgage 
securing the loan will contain a provision making it also secure the 
applicant's obligations under the LH grant agreement. For a grant not 
made at the same time as an LH loan, the type of security instrument 
will be determined by the National Office based upon the State 
Director's recommendation and the advice of OGC.
    (e) Promissory note. (1) Form FmHA or its successor agency under 
Public Law 103-354 1944-52, ``Multiple Family Housing Promissory Note,'' 
will be used for all LH loans except those secured by bonds. Payments on 
LH loans will be scheduled on a monthly or annual basis in accordance 
with the expected schedule of income from the project. If periodic 
payments are desired on an annual note they may be scheduled on Form 
FmHA or its successor agency under Public Law 103-354 440-9.
    (2) The note will be dated the date of loan closing as authorized in 
subpart B of part 1927 of this chapter.
    (3) In the case of multiple advances on PASS or DIAS monthly 
installments, payments will be deferred for the period of construction 
and any remaining period until the project is operational. When 
construction is substantially complete and/or the project is ready for 
full operation or interest plus principal reaches the ``Maximum Debt 
Limit (MDL) at Amortization Effective Date (AED),'' the accrued interest 
on advances will be capitalized establishing a new loan amount. The MDL 
at AED will be established according to Sec. 1944.157(a)(7)(iii) of 
this subpart. The borrower's payment of principal and interest will be 
established according to the FMI, for Form FmHA or its successor agency 
under Public Law 103-354 1944-52, ``Multiple Family Housing Promissory 
Note.'' At loan closing the Finance Office will be notified of the 
projected AED and the MDL at AED on Form FmHA or its successor agency 
under Public Law 103-354 1944-57. When the MDL at AED is reached or the 
loan is fully advanced, Finance Office will:
    (i) Capitalize the construction interest. When there is a remaining 
obligation balance, the remaining obligation will be cancelled by the 
Finance Office.
    (ii) Notify the District Office of the new loan amount and the 
borrower's scheduled loan payment.
    (iii) Prepare and forward to the District Office Form FmHA or its 
successor agency under Public Law 103-354 1944-7, ``Multiple Family 
Housing Interest Credit and Rental Assistance Agreement'' if RA has been 
obligated for the project.
    (iv) The District Office will complete Forms FmHA 1944-52 and FmHA 
1944-7 according to the FMI's.
    (4) Deferred principal payments may be permitted up to 2 years when 
determined to be necessary and advisable. Accrued interest must be paid 
annually when the loan is closed on DIAS; however, smaller than regular 
payments of principal or no payments of principal may be provided for 
the first and second installments after loan closing.
    (5) The promissory note(s) will be signed in accordance with subpart 
B of part 1927 of this chapter and any supplemental instructions from 
OGC.
    (6) After loan closing the original note and copies will be 
distributed according to the FMI. The loan closing information will be 
transmitted via the field office terminals when the loan is closed with 
a promissory note.
    (7) For a loan to a public body, the forms of obligation will be 
determined in accordance with exhibit H to this of subpart.
    (f) Recorded mortgage. When the real estate mortgage is returned by 
the recording official, the District Director will retain the original 
in the borrower's case folder. If the original is retained by the 
recording official for the county records, a conformed copy including 
the recording data showing the date and place of recordation and book 
and page number will be prepared and filed in the borrower's case 
folder. A copy of the mortgage, conformed as to all matters except the 
recording date, will be delivered to the borrower.

[[Page 331]]

    (g) Date of closing--establishment of account. (1) An LH loan and/or 
grant is considered closed when the security instrument is filed of 
record or, if no security instrument is filed of record, when the loan 
or grant funds are deposited in the supervised bank account or otherwise 
made available to the borrower after the borrower executes and delivers 
the note and any other required instruments.
    (2) After the loan and/or grant is closed, the account and case 
folder will be established in accordance with applicable FmHA or its 
successor agency under Public Law 103-354 regulations (FmHA Instruction 
1905-A which is available in any FmHA or its successor agency under 
Public Law 103-354 office and FmHA Instruction 2033-A which is available 
in the FmHA or its successor agency under Public Law 103-354 State and 
National Offices.)

[45 FR 47655, July 16, 1980 as amended at 50 FR 8592, Mar. 4, 1985; 51 
FR 12308, Apr. 10, 1986; 52 FR 24288, June 30, 1987; 56 FR 67482, Dec. 
31, 1991; 57 FR 59904, Dec. 17, 1992; 58 FR 38923, July 21, 1993]



Sec. 1944.177  Coding loans and grants as to initial or subsequent.

    A borrower may obtain financing for more than one project. Each 
project will be coded as an initial loan or grant when the total number 
of units are built or purchased at one place at one time. A subsequent 
loan or grant will be so coded when an additional loan or grant is 
necessary to complete the units planned with the initial loan or grant. 
As an example, the borrower may obtain initial loans or grant for more 
than one project in the same district, in different counties under the 
same District Office jurisdiction, or in more than one District Office 
jurisdiction. Codes to be used will be in accordance with the FMI for 
Forms FmHA 1944-51 and FmHA 1944-57.

[45 FR 47655, July 16, 1980 as amended at 50 FR 8593, Mar. 4, 1985]



Sec. 1944.178  Complaints regarding discrimination in use and occupancy 
of Labor housing.

    Any tenant or prospective tenant seeking occupancy or use of LH or 
related facilities who believes he/she has been discriminated against 
because of age, race, color, religion, sex, marital or familial status, 
handicap or National origin may file a complaint in person with, or by 
mail to the Office of Fair Housing and Equal Opportunity, Department of 
Housing and Urban Development (HUD), Washington, DC, 20410, or any HUD 
Office, or to the Secretary of Agriculture, Washington, DC. If the 
complaint is made to an FmHA or its successor agency under Public Law 
103-354 county, district or State office, it must be directed to the 
Director of Equal Opportunity Staff, National Office, by the FmHA or its 
successor agency under Public Law 103-354 employee in charge of that 
office. When a complaint is sent to FmHA or its successor agency under 
Public Law 103-354-EOS by a county or district office, the State 
Director will be made aware of the complaint.
    (a) Personnel in FmHA or its successor agency under Public Law 103-
354 field offices will provide assistance to the aggrieved party when 
filling out required forms and filing a complaint.
    (b) Each complaint must contain the following information:
    (1) The name and address of the respondent.
    (2) The name and address of the aggrieved person.
    (3) A description and the address of the dwelling which is involved, 
if appropriate.
    (4) A concise statement of the facts, including pertinent dates, 
constituting the alleged discriminatory housing practice.
    (c) Participants in FmHA or its successor agency under Public Law 
103-354's housing program failing to comply with the requirements of 
title VIII, as amended of the Civil Rights Act of 1968, and the 
respective Affirmative Fair Housing Marketing Plan will make themselves 
liable to sanction authorized by law, regulations, agreements, rules 
and/or policies governing the program pursuant to which the application 
was made. All complaints will be handled in accordance with prescribed 
procedure.

[55 FR 6244, Feb. 22, 1990]

[[Page 332]]



Sec. Sec. 1944.179-1944.180  [Reserved]



Sec. 1944.181  Loan servicing.

    (a) For general purposes, LH loans and grants will be serviced in 
accordance with this subpart B of part 1924, subpart C of part 1930, and 
subpart D of part 1944 of this chapter. Requests for rent increases will 
be processed in accordance with exhibit C of subpart C of part 1930 of 
this chapter for nonprofit organizations.
    (b) For special servicing of LH loans when the Loan Agreement was 
waived. There will be many instances where the loan agreement was waived 
because of a loan agreement waiver provision in this regulation that was 
in effect for more than 10 years. As a result of regulation change, the 
State Director shall notify all LH loan farm borrowers within 180 days 
of the effective date of this regulation, that such labor housing 
borrowers will be:
    (1) Requested to sign a loan agreement;
    (2) Required to report tenant occupancy, at least annually 
(reference exhibit K-1 of this subpart); and
    (3) Provided with exhibit K-1 of this subpart.
    (i) The above action need not be completed: If there is existing 
servicing action where a management agreement exists and such agreement 
is sufficient to satisfy the notification items, or; If there is a pre-
existing loan agreement, and paragraphs (b) (2) and (3) of this section 
are addressed. If the existing loan agreement does not include annual 
occupancy reporting, then the borrower must be notified in accordance 
with paragraphs (b) (2) and (3) of this section.
    (ii) [Reserved]
    (c) All special servicing needs for LH loans to farm borrowers 
should be incorporated in a management agreement in addition to a loan 
agreement. Examples of special servicing needs are: When the housing is 
temporarily not needed for farm laborers; When rent is being charged; 
When occupied by ineligibles, or; When farmers share housing costs with 
the borrower in exchange for the occupant(s) labor. The use of a 
management agreement is not limited to the examples cited. Whenever the 
management agreement is for a purpose unrelated to agriculture, the 
farmer should understand that the housing should be returned to the 
original loan purpose as soon as practical. A final consideration in 
loan servicing should be to sell the Labor Housing outside of the 
program when the farmer can no longer use the housing in his farming 
operation.

[57 FR 59904, Dec. 17, 1992, as amended at 68 FR 61331, Oct. 28, 2003]



Sec. 1944.182  Rental assistance.

    Rental assistance may be provided to eligible tenants in LH projects 
in accordance with exhibit E of subpart C of part 1930 of this chapter. 
Income will be verified for LH tenants requesting rental assistance from 
all easily identifiable sources by using Form FmHA or its successor 
agency under Public Law 103-354 1910-5, ``Request for Verification of 
Employment.'' Income or portions of income from sources that are not 
known or not easily contacted will be verified from the best information 
obtainable. This may include copies of payroll records, tenant's own 
records, contacts with individuals who may be knowledgeable of the 
tenant's income, or, if no other verifiable data is available, a 
notarized affidavit from the tenant attesting to his/her previous year's 
income. The borrower and tenant will execute Form FmHA or its successor 
agency under Public Law 103-354 1944-8, ``Tenant Certification.'' The 
borrower will be expected to certify only that the income is correctly 
stated based on the best information available. The borrower will be 
expected to have the tenants that occupy the project year round and do 
not have easily verifiable income report monthly income to enable 
accurate income certification at the end of one year of occupancy.

[45 FR 47655, July 16, 1980, as amended at 45 FR 70777, Oct. 27, 1980; 
48 FR 6697, Feb. 15, 1983; 50 FR 16056, Apr. 24, 1985; 51 FR 27670, Aug. 
1, 1986]



Sec. 1944.183  Exception authority.

    The Administrator of the Farmers Home Administration or its 
successor agency under Public Law 103-354 may, in individual cases, make 
an exception to any requirements of this subpart not required by the 
authorizing statute if

[[Page 333]]

the Administrator finds that application of such requirement would 
adversely affect the interest of the Government, the immediate health or 
safety of the tenants or the community. The Administrator will exercise 
the authority only at the request of the State Director. The State 
Director will submit the request supported by data: demonstrating the 
adverse impact; identifying the particular requirement involved; showing 
proper alternative courses of action; and, identifying how the adverse 
impact will be eliminated.



Sec. Sec. 1944.184-1944.199  [Reserved]



Sec. 1944.200  OMB control number.

    The reporting and recordkeeping requirements contained in this 
regulation have been approved by the Office of Management and Budget and 
have been assigned OMB control number 0575-0045. Public reporting burden 
for this collection of information is estimated to vary from 5 minutes 
to 150 hours per response, with an average of 11 hours per response 
including time for reviewing instructions, searching existing data 
sources, gathering and maintaining the data needed, and completing and 
reviewing the collection of information. Send comments regarding this 
burden estimate or any other aspect of this collection of information, 
including suggestions for reducing this burden, to Department of 
Agriculture, Clearance Officer, OIRM, room 404-W, Washington, DC 20250; 
and to the Office of Management and Budget, Paperwork Reduction Project 
(OMB 0575-0045), Washington, DC 20503.

[57 FR 59905, Dec. 17, 1992]

   Exhibit A to Subpart D of Part 1944--Labor Housing Loan and Grant 
                          Application Handbook

                              Introduction

    The section 514 Labor Housing loan and section 516 Labor Housing 
grant programs are administered by the Rural Development's Rural Housing 
Service (RHS), herein referred to as the Agency. Interested parties are 
advised to contact any Rural Development office processing Labor Housing 
(LH) loans and grants to obtain information on program and application 
requirements prior to developing an application. Notice of Funds 
Availability (NOFA) for off-farm facilities will be announced annually 
in the Federal Register, along with application requirements and the 
deadline for applying. Requests received during the application period 
will be selected competitively, based on the objective selection 
criteria in the regulation and announced in the NOFA. Applications for 
on-farm facilities are accepted any time during the year and are funded 
on a first-come, first-served basis, based on the availability of funds.
    Payments for technical assistance incurred by a nonprofit group or 
public body applicant entity for developing and packaging an application 
will be reimbursed with loan and grant funds. If the services are 
performed, the proceeds will be limited and must be documented. The 
reimbursable costs should be negotiated and approved by the Agency in 
advance of the applicant entity's process of packaging and developing a 
pre application. Based upon what is typical in the area, the Agency will 
respond in writing approving the packaging plan and a range of costs in 
advance.
    Applicants should also be aware that rental assistance (RA) 
subsidies are available to eligible projects to reduce rents for very 
low- and low-income farmworkers. RA may be used in conjunction with LH 
grants to develop feasible LH projects to meet local farmworker housing 
needs. When at all possible, applicants should consider the use of RA in 
lieu of a full 90% grant for LH projects with year-round occupancy.

[45 FR 47655, July 16, 1980, as amended at 51 FR 27670, Aug. 1, 1986; 60 
FR 4070, Jan. 20, 1995; 64 FR 24482, May 6, 1999]

 Exhibit A-1 to Subpart D of Part 1944--Information To Be Submitted by 
  Organizations and Associations of Farmers for Labor Housing Loan or 
                                  Grant

   I. Information to be submitted with SF 424.2 (for pre application 
                              submission).

                             a. eligibility.

    1. Financial Statement--A current, dated, and signed financial 
statement showing assets and liabilities with information on the 
repayment schedule and status of all debts. If the applicant is an 
association of farmers, a current financial statement will also be 
required from each member who holds an interest in the association in 
excess of 10 percent. If the applicant is a limited partnership, 
financial statements are required from each general partner who holds an 
interest in the organization, and from each limited partner who will 
have 10 percent or more ownership. The financial statement must reflect 
sufficient financial capacity to meet the initial operating capital 
requirements. Loan or grant funds may be used to provide

[[Page 334]]

the required initial operating capital for nonprofit entities and State 
or local public agencies. If the applicant is a limited partnership, the 
financial statement must also demonstrate sufficient capacity to meet 
the applicant's equity contribution.
    2. All applicants, except State and local public agencies, must 
provide evidence that they are unable to obtain credit from other 
sources. Letters from credit institutions who normally provide real 
estate loans in the area should be obtained and these letters should 
indicate the rates and terms upon which a loan might be provided.
    3. If a Labor Housing (LH) grant is requested, the applicant should 
provide a statement on their projected use of Rental Assistance (RA) and 
their need for a LH grant. This statement should include preliminary 
estimates of the rents required with and without a grant and the 
relative need for a grant if RA is provided to supplement market rents 
for eligible farmworkers. [LH grants and RA are not available to 
associations of farmers; LH grants are not available to limited 
partnerships.]
    4. A statement of the applicant's experience in operating LH or 
other rental housing. If the applicant's experience is limited, 
additional information should be provided to indicate how the applicant 
plans to compensate for this limited experience. (i.e., obtaining 
assistance and advice of a management firm, non-profit group, public 
agency, or other organization which is experienced in rental management 
and will be available on a continuous basis).
    5. A brief statement explaining the applicant's proposed method of 
operation and management. This does not have to be a full-fledged 
management plan, as outlined by exhibit B of this subpart; however, it 
should generally explain how the applicant proposes to operate the 
facility. (i.e., on-site manager, contracting for management services, 
etc.).
    6. Applicants must provide a copy of or an accurate citation to the 
special provisions of State law under which the applicant is or is to be 
organized, a copy of the applicant's charter, Articles of Incorporation, 
bylaws, and other basic authorizing documents; names, occupations, and 
addresses of the applicant's members, directors, and officers; and, if a 
member or subsidiary of another organization, its name, address, and 
principal business.

                           b. need and demand.

    A preliminary survey should be conducted to identify the supply and 
demand for LH in the market area. The market area must be clearly 
identified and may include only the area from which tenants can 
reasonably be drawn for the proposed project. The applicant must provide 
documentation to justify need within the intended market area. The 
market survey should address or include the following items:
    1. The annual income level of farmworker families in the area and 
the probable income of those farmworkers who are most apt to occupy the 
proposed unit.
    2. A realistic estimate of the number of farmworkers who are home-
based in the area and the number of farmworkers who normally migrate 
into the area. Information on migratory workers should indicate the 
average number of months the migrants reside in the area and an 
indication of what type of family groups are represented by the migrants 
(i.e., single individuals as opposed to families). Much of this 
information may be available from the local office of the Rural Manpower 
Services section of the Department of Employment Services.
    3. General information concerning the type of labor intensive crops 
grown in the area and prospects for continued demand for farm laborers 
(i.e., prospects for mechanization, etc.). Information may be available 
from the local U.S. Department of Agriculture (USDA) Cooperative, State, 
Research, Education and Extension Service office or from the Farm 
Service Agency.
    4. The overall occupancy rate for comparable rental units in the 
area and rents charged and customary rental practices for these units 
(i.e., will they rent to large families, do they require annual leases, 
etc.). This information may be available from census data, local 
planning organizations, or local housing authorities.
    5. The number, condition, adequacy, ownership and rental rates for 
units currently used or available to farmworkers. This information may 
be available from local farmworker advocacy groups, Rural Manpower 
Services, or social service agencies.
    6. A description of the units proposed, including number, type, 
size, rental rates, amenities such as carpets and drapes, related 
facilities such as a laundry room or community room and other facilities 
providing supportive services in connection with the housing and the 
needs of the prospective tenants such as a health clinic or day care 
facility; estimated development timeline; estimated total development 
cost and applicant contribution. If the application includes leveraged 
funds, include documentation of the dollar amount, source, and 
commitment status.

    Note: The market survey is one of the most important determinates of 
the overall feasibility of the proposed project. Therefore, the 
applicant may wish to do a more detailed study of the market in 
accordance with item II J below. Endorsement of the proposal by 
community leaders will not be required.


[[Page 335]]



                      c. environmental information.

    The applicant will complete Form RD 1940-20, ``Request for 
Environmental Information,'' along with a description of anticipated 
environmental issues or concerns.

               d. affirmative fair housing marketing plan.

    Each applicant will prepare and submit HUD 935.2, ``Affirmative Fair 
Housing Marketing Plan,'' where they propose developing five (5) or more 
units. The plan will reflect that occupancy is not limited to their 
employees and they will not discriminate on the basis of race, color, 
sex, age, handicap, marital or familial status or National origin in 
regard to the occupancy or use of these units.

                       e. additional information.

    1. Evidence of site control such as an option or sales contract; a 
map and description of the proposed site, including the availability of 
water, sewer, and utilities, and proximity to community facilities and 
services such as shopping, schools, transportation, doctors, dentists, 
and hospitals.
    2. Preliminary plans and specifications, including plot plans, 
building layouts, and type of construction and materials.
    3. A supportive services plan describing services that will be 
provided on-site or made available to tenants through cooperative 
agreements with service providers in the community, such as a health 
clinic or day care facility. Off-site services must be accessible and 
affordable to farmworkers and their families. Letters of intent from 
service providers are acceptable documentation at the preapplication 
stage.

     II. Information to be submitted with SF 424.2 (for application 
                              submission).

    A. After the applicant has received the signed SF 424.2 authorizing 
the applicant to proceed to develop a final application, the applicant 
and the applicant's architect should meet with the FmHA or its successor 
agency under Public Law 103-354 architect/engineer and other officials 
responsible for loan processing. During this preprocessing meeting, FmHA 
or its successor agency under Public Law 103-354 will discuss the 
services which the applicant's architect will be expected to provide and 
will also explain the items needed to complete the final application 
such as Form FmHA or its successor agency under Public Law 103-354 1940-
20, ``Request for Environmental Information,'' if not previously 
submitted in the pre application stage.
    If after the preprocessing meeting the applicant believes that the 
Labor Housing (LH) project can be developed within the guidelines 
required by FmHA or its successor agency under Public Law 103-354, the 
following information should be submitted with SF 424.2:
    B. If applicable, evidence of compliance with 7 CFR part 3015 
subpart V, ``Intergovernmental Review of Department of Agriculture 
Programs and Activities.'' See FmHA Instruction 1940-J, available in any 
FmHA or its successor agency under Public Law 103-354 office.
    C. Proposed contracts for architectural, engineering, and legal 
services as applicable. FmHA or its successor agency under Public Law 
103-354 approval of these contracts should be obtained before execution 
of the contract.
    D. A plot plan and detailed preliminary drawings and specifications 
prepared in accordance with subpart A of part 1924 of this chapter. 
Exhibit A-3 provides FmHA or its successor agency under Public Law 103-
354's general philosophy and standards concerning the construction of LH 
facilities.
    E. A detailed cost breakdown of the project for items such as land 
purchase, right-of-ways, building construction, equipment, utility 
connections, on-site improvements, architectural and/or engineering 
services, and legal services. Also, if applicable, the cost breakdown 
should include the costs incurred for the development and packaging of 
its own application. These costs may range from 2 to 4 percent of total 
development cost (excluding initial operating and capital expenses) and 
should reflect costs that are reasonable and typical for the area. Costs 
in excess of 4 percent will not be reimbursed. If an LH grant is 
proposed, construction will be subject to the provisions of the Davis-
Bacon and related Acts. LH grant applications should, therefore, obtain 
a copy of the Department of Labor regulations (29 CFR part 5), which 
contain the applicable labor standards provisions.
    F. Satisfactory evidence of review and approval of the proposed 
housing, including compliance with zoning requirements by State and 
local officials, as required by applicable State or local laws, 
ordinances, or regulations.
    G. If not already provided in the pre application submittal, a map 
of the proposed site showing the location of the site in relation to 
available facilities such as schools, shopping, churches, hospitals, 
etc. In addition, supporting information should be provided indicating 
that essential utilities such as sewer, water, electricity, etc., will 
be available to the project. (See exhibit A-3 for FmHA or its successor 
agency under Public Law 103-354's general requirements for location of 
LH facilities).
    H. A description of and justification for any related facilities 
such as community or multi-purpose type buildings, cafeterias, dining 
halls, infirmaries, child care facilities, etc. To be included for 
funding by FmHA or its successor agency under Public Law 103-

[[Page 336]]

354, the facilities should not be of extravagant design and their size 
must be commensurate with the needs of the farmworkers who will occupy 
the housing facility. Any long-term agreements which are contemplated 
with other agencies for services such as manpower training, migrant 
health services, child care, and education programs should be explained 
and included as justification for the related facilities.
    I. A detailed market analysis addressing in detail the pre 
application information required under item I B above, ``Need and 
Demand,'' should be conducted in accordance with the following:
    1. The market area (i.e., the area from which tenants can reasonably 
be drawn for the project) should be clearly identified.
    2. Adequate existing units which are currently available or which 
could become available should be surveyed and information obtained and 
recorded in a format similar to exhibit A-4.
    3. Individual farmworkers and farmworker groups should be contacted 
and their ideas obtained concerning the type of housing which would gain 
the greatest acceptance. (This information may not seem important at the 
outset of the loan if there is a pressing need for LH, however, to 
assure a long-term demand for the project, consideration should be given 
to the views of the prospective tenants).
    4. The above items should then be correlated to arrive at a 
realistic estimate of the total need for units, type of units, estimated 
occupancy, maximum rental rates which can be charged for the units, and 
the type of amenities or related facilities which should be provided.
    J. Proposed, detailed operating budgets for: (1) The first year of 
operation, and (2) a typical year's operation. The overall percentage of 
occupancy should be based upon the data collected in the market 
analysis. Operating costs should be realistic and should reflect 
somewhat higher than normal maintenance costs and an allowance for the 
establishment of a reserve as required by the loan agreement. The budget 
should be prepared in a format similar to exhibit A-5.
    K. A management plan which includes the applicable items of exhibit 
B.
    L. When the loan is to be secured by a junior real estate lien, 
certain agreements will be required from prior lien holders. The local 
or State FmHA or its successor agency under Public Law 103-354 Official 
will provide the applicable agreements.
    M. An option to purchase or other evidence of ability to purchase or 
evidence of ownership for the proposed site.

                  III. Submission of final application.

    When the final application is assembled it should be submitted to 
the local FmHA or its successor agency under Public Law 103-354 District 
Office for review and submission to the State Office. As soon as a final 
decision to approve the loan is reached, the applicant will be notified 
and advised to proceed with the preparation of final plans and 
specifications, contract documents, and other items needed to close the 
loan. The applicant should not proceed with bid advertisement or 
contract awards until advised to proceed by FmHA or its successor agency 
under Public Law 103-354.

[45 FR 47655, July 16, 1980, as amended at 48 FR 29121, June 24, 1983; 
49 FR 3762, Jan. 30, 1984; 53 FR 36268, Sept. 19, 1988; 55 FR 6245, Feb. 
22, 1990; 55 FR 13503 and 13504, Apr. 11, 1990; 60 FR 4070, Jan. 20, 
1995; 61 FR 56116, Oct. 31, 1996; 64 FR 24482, May 6, 1999]

 Exhibit A-2 to Subpart D of Part 1944--Information To Be Submitted by 
Individuals, Farmowners and Family Farm Corporations or Partnerships for 
                           Labor Housing Loans

  I. Information to be submitted by Individuals, Farmowners and Family 
        Farm Corporation or Partnerships for Labor Housing Loans.

    A. Financial Statement. Show assets and liabilities of the 
applicant, each individual farmer, and each farming partnership or 
corporation of which the individuals are members. Each statement must be 
signed and dated. Financial statements of family farm corporation or 
partnership members with less than a ten percent corporate or 
partnership interest need not be submitted to FmHA or its successor 
agency under Public Law 103-354.
    B. Other Credit. All applicants must provide evidence that they are 
unable to obtain credit from other sources. Applicants should attach 
letters showing what rates, terms and conditions are available for the 
project from private credit sources. In seeking other credit, the assets 
and personal liability of each of the members must be offered if the 
applicant is a family farm corporation or partnership.
    C. Experience. Describe the experience of each member in owning or 
operating labor or rental housing. If limited, describe other business 
experience.
    D. Operation. Describe the proposed operation of the housing and its 
relationship to the farm operation. Include the proposed method of 
tenant selection, unit maintenances, determining rental charges (if 
any), payment of utilities, etc.
    E. Need. Describe the farming operations in which the laborers to be 
housed in the units will be used. Include acreages of each crop or 
details of other operations. Discuss present laborers and their living 
arrangements and

[[Page 337]]

the number and condition of labor housing now provided.
    F. Continuing Need. Discuss any possible changes in mechanization or 
shifts to other farm products that might decrease the need for labor 
housing in the future.
    G. Proposed Security. If a mortgage is not being given on the entire 
farm, explain why not and describe the sites proposed as security. 
Attach a map showing the site locations, shopping areas, schools, 
doctors, hospitals, nearest public water and sewer system, and school 
bus stop.
    H. Proposed Project. Describe the housing proposed to be bought or 
built (specify which) and the estimated cost. If building sites are to 
be purchased, show the cost of each. Attach any options available. List 
any other expenses expected. Show the total cost, the loan requested, 
and the applicant contribution.
    I. Environmental Information. The District Office will advise the 
application of the applicability of FmHA or its successor agency under 
Public Law 103-354's environmental requirements under subpart G of part 
1940 of this chapter which are primarily based on the size of the 
proposed project. If the pre application must go to the National Office 
for approval, the applicant will complete Form FmHA or its successor 
agency under Public Law 103-354 1940-20, ``Request for Environmental 
Information.'' The District Office will provide assistance and guidance 
to the applicant in completing this form.
    J. Each applicant will prepare and submit HUD 935.2, ``Affirmative 
Fair Housing Marketing Plan'', where they propose developing five (5) or 
more units. The plan will reflect that occupancy is limited to their 
employees and that they will not discriminate on the basis of race, 
color, sex, age, handicap, marital or familial status or National 
origin.

     II. Information to be submitted with SF 424.2 (for application 
                              submission).

    A. Supplemental. Any information requested to clarify or augment 
information supplied earlier with the pre application.
    B. Site. Options to purchase or a copy of deeds and mortgages on 
sites already owned.
    C. Surveys. When needed to identify the site, a current survey 
showing boundaries, geographical features, access to public roads, and 
public utility location.
    D. Plans, Specifications, and Proposed Contracts. Attach one copy of 
each complete set of building plans and specifications and a bid or 
contract for construction. A complete site plan is also required.
    E. Environmental Information. If not submitted with the pre 
application, the applicant will complete Form FmHA or its successor 
agency under Public Law 103-354 1940-20, ``Request for Environmental 
Information.''

[45 FR 47655, July 16, 1980, as amended at 49 FR 3762, Jan. 30, 1984; 53 
FR 36268, Sept. 19, 1988; 55 FR 6245, Feb. 22, 1990; 55 FR 13503 and 
13504, Apr. 11, 1990]

   Exhibit A-3 to Subpart D of Part 1944--Labor Housing Construction 
                               Guidelines

                            I. Introduction:

    This exhibit provides the Farmers Home Administration or its 
successor agency under Public Law 103-354's (FmHA's) general guidelines 
and policies concerning the planning, location, and construction of 
housing for farmworkers. The type of housing should be in accordance 
with the needs of the prospective tenants. Multi-family type units are 
encouraged whenever possible; however, when planning units for 
farmworker families, lower density building design and layout is 
normally desirable. Housing should be designed in such a manner that it 
will be decent, safe, sanitary, and modest in size and cost. Actual 
plans, specifications, and contract documents should be prepared in 
accordance with subpart A of part 1924.

             II. Types of housing and appropriate standards

    a. Single-family type housing is defined as an individual or a group 
of individual single family detached dwelling units. These type units 
should meet the following standards:
    1. All sites shall be planned and constructed in accordance with 
subpart C of part 1924 of this chapter.
    2. All planning and construction other than seasonal farm labor 
housing and housing to be occupied more than six months but less than 
year-round shall be in conformance with the applicable development 
standard as required by Sec. 1924.5(d)(1) of subpart A of part 1924 of 
this chapter and applicable state and local codes.
    b. Multi-family type housing is defined as a project or a number of 
projects encompassing a building or buildings containing more than one 
dwelling unit and may include mixtures of detached and multi-unit 
structures in a project. These type units should meet the following 
standards:
    1. All housing designed for year-round occupancy will be planned in 
compliance with the applicable development standard and will be 
compatible with conventional rental type housing.
    2. Housing for seasonal occupancy (less than six months) shall be 
designed and constructed in accordance with exhibit I to subpart A of 
part 1924 of this chapter.

[[Page 338]]

    3. Housing to be occupied more than six months but less than year-
round shall be designed and constructed in substantial conformance with 
and be easily converted to the applicable development standard 
requirements for year-round housing.
    4. All planning and construction should be in conformance with 
applicable State and local codes.

[44 FR 59212, Oct. 15, 1979, as amended at 45 FR 39794, June 12, 1980; 
47 FR 28086, June 29, 1982; 52 FR 8036, Mar. 13, 1987; 52 FR 19302, May 
22, 1987]

[[Page 339]]

 Exhibit A-4 to Subpart D of Part 1944--Survey of Existing Labor Housing
[GRAPHIC] [TIFF OMITTED] TC06SE91.000


[[Page 340]]



      Exhibit A-5 to Subpart D of Part 1944--Statement of Cash Flow
[GRAPHIC] [TIFF OMITTED] TC06SE91.001


[[Page 341]]


[GRAPHIC] [TIFF OMITTED] TC06SE91.002


[44 FR 59214, Oct. 15, 1979, as amended at 48 FR 56174, Dec. 19, 1983]

          Exhibit B to Subpart D of Part 1944--Management Plans

    The management of a rental project, regardless of the type of 
tenants, is one of the most, if not the most, important determinants of 
the success or failure of a proposed project.
    The management plan, therefore, as the primary management charter 
should constitute a comprehensive description of the detailed policies 
and procedures to be followed in managing the project and should as a 
minimum address the following items:
    1. Staffing. The number, qualifications required, and duties of all 
personnel who will

[[Page 342]]

be hired to operate the project. Equal employment opportunity should be 
provided and special consideration should be given to hiring Spanish-
speaking persons if warranted by the expected occupancy. Roles and 
responsibilities of owner and of manager should be specified.
    2. Marketing. The marketing efforts or techniques which will be used 
to obtain initial rent up and occupancy of future vacancies (i.e. 
advertisement, contacts with social service agencies, local farmers, 
etc.). Definite dates for opening and closing of the project will be 
spelled out for projects constructed for seasonal purposes.
    3. Tenant selection. Domestic farm workers must be given absolute 
priority in renting available units. Other selection criteria should be 
specifically outlined in the management plan. Arbitrary restrictions as 
to family size, age of children, or other similar items are prohibited, 
however, the size of unit assigned to a family should be commensurate 
with its needs. Rejected tenant applications should be maintained for a 
minimum of 1 year and applicants must be advised in writing of the 
reasons for rejection.
    4. Ineligible tenants. Units can be rented to other than farm 
workers when they are not needed by farm workers (i.e., during the off 
season), however, the leases must be on a short-term basis, normally not 
exceeding 30 days, and ineligible tenants must be advised that they will 
have to vacate the units if an eligible farm worker becomes available. 
To avoid future problems, occupancy by ineligibles should be avoided if 
at all possible. Written permission to rent to ineligibles must be 
obtained from the District Director before allowing the ineligible 
tenant to occupy LH projects.
    5. Lease or occupancy agreement. A copy of any proposed lease or 
occupancy agreement should be submitted with the plan. The lease or 
occupancy agreement should clearly outline the responsibilities of the 
tenant and landlord.
    6. Counseling services. Pre- and post-occupancy counseling services, 
which will be provided to tenants by borrowers to acquaint them with the 
project or otherwise assist them should be thoroughly explained.
    7. Collection of rent. The system which will be used in the 
collection of rent must be outlined including proper provisions for the 
internal control and security of cash collections, followup on overdue 
accounts, persons responsible for collections, recordkeeping, and 
conditions for the return of security deposits, if required.
    8. Evictions. The plan should spell out the specific reasons which 
warrant eviction and the steps which will be taken to resolve problems 
before eviction, including provisions for appeal. Voluntary compliance 
with the lease or occupancy agreement should be emphasized and every 
effort should be made to utilize the benefits available through local 
social service agencies and other community organizations.
    9. Maintenance and repairs. A schedule for preventive maintenance 
and the procedure for handling service requests from individual tenants, 
including procedures for the handling of emergency repairs on a 24 hour 
basis, should be outlined. Management plans for projects constructed for 
seasonal occupancy will include provisions for off-season maintenance 
and security.
    10. Records and reports. The type of recordkeeping system which will 
be established and the person or persons who will be responsible for 
keeping records and submitting required reports to FmHA or its successor 
agency under Public Law 103-354. Subpart C of 1930 of this chapter (FmHA 
Instruction 1930--C) outlines the reports required and the formats for 
these reports. This Instruction is available from the local District 
Office.
    11. Fidelity bonds. Bonding should be provided for all persons 
entrusted with the receipt, custody, and disbursement of funds and 
custody of other negotiable or readily salable personal property. The 
amount of the bond should be at least equal to the maximum amount of 
money or property which the individual will have control of at any one 
time.
    12. Tenant councils. Tenant councils should be encouraged and should 
be given an input into proposed changes in lease agreements, staff 
selection, eviction, and in some cases tenant selection and other 
management decisions which have a bearing on the tenant's overall 
situation. Provisions should also be outlined for the democratic 
election of tenant councils.
    13. Rent increases. Requested or proposed rent increases should be 
handled in accordance with exhibit C of subpart C of part 1930 of this 
chapter.
    14. Non-discrimination. The plan should address the policy of non-
discrimination in tenant selection and employee hiring in accordance 
with Form FmHA or its successor agency under Public Law 103-354 400-4, 
``Assurance Agreement,'' and the affirmative action planned in the 
recruitment of employees and tenants.
    15. Other items. Any other items which have a bearing on the 
operation and management of the project.
    16. The management plan must be signed and dated by the borrower or 
the borrower's authorized representative.

[44 FR 59199, Oct. 15, 1979, as amended at 45 FR 70738, Oct. 27, 1980; 
47 FR 28086, June 29, 1982; 58 FR 40951, July 30, 1993]

[[Page 343]]

          Exhibit C to Subpart D of Part 1944--Loan Resolution

               (lh insured loan to nonprofit corporation)

    LOAN RESOLUTION OF --------------, 19--

 RESOLUTION OF THE BOARD OF DIRECTORS OF ---------------- PROVIDING FOR 
   BORROWING $-------- TO FINANCE HOUSING AND RELATED FACILITIES FOR 
   DOMESTIC FARM LABOR, THE COLLECTION, HANDLING, AND DISPOSITION OF 
  INCOME, THE ISSUANCE OF INSTALLMENT PROMISSORY NOTE AND REAL ESTATE 
                SECURITY INSTRUMENT, AND RELATED MATTERS

 Whereas________________________________________________________________
(herein referred to as ``Corporation'') is a nonprofit corporation duly 
organized and operating under (authorizing State statute) --------------
----

The Board of Directors of the Corporation (herein referred to as the 
``board'') has decided to provide certain housing and related facilities 
for domestic farm labor;

The board has determined that the Corporation is unable to provide such 
housing and facilities with its own resources or to obtain from other 
sources for such purpose sufficient credit upon terms and conditions 
which the Corporation could reasonably be expected to fulfill;
    Be it resolved:
    1. Application for Loan. The Corporation shall apply for and obtain 
a domestic farm labor housing loan (herein called ``the loan'') of $---- 
through the facilities of the United States of America acting through 
the Farmers Home Administration or its successor agency under Public Law 
103-354, United States Department of Agriculture (herein called ``the 
Government'') pursuant to title V of the Housing Act of 1949. The loan 
shall be used solely for the specific eligible purposes for which it is 
approved by the Government, in order to provide housing and related 
facilities for domestic farm labor. Such housing and facilities and the 
land constituting the site are herein called ``the housing.''
    2. Execution of Loan Instruments. To evidence the loan the 
Corporation shall issue a promissory note (herein referred to as ``the 
note''), signed by its President and attested by its Secretary, with its 
corporate seal affixed thereto, for the amount of the loan, payable in 
installments over a period of ---------- years, bearing interest at the 
rate of 1 percent per annum, and containing other terms and conditions 
prescribed by the Government. To secure the note or any indemnity or 
other agreement required by the Government, the President and Secretary 
are hereby authorized to execute a real estate security instrument 
giving a lien upon the housing and upon such other real property of the 
Corporation as the Government shall require, including an assignment or 
security interest in the rents and profits as collateral security to be 
enforceable in the event of any default by the Corporation, and 
containing other terms and conditions prescribed by the Government. The 
President and Secretary are further authorized to execute any other 
security instruments and other instruments and documents required by the 
Government in connection with the making or insuring of the loan. The 
indebtedness and other obligations of the Corporation under the note, 
the related security instruments, and any related agreements are herein 
called the ``loan obligations.''
    3. Equal Opportunity and Nondiscrimination Provisions. The borrower 
will comply with (a) any undertakings and agreements required by the 
Government pursuant to Executive Order 11063 regarding nondiscrimination 
in the use and occupancy of housing; (b) Farmers Home Administration or 
its successor agency under Public Law 103-354 Form FmHA or its successor 
agency under Public Law 103-354 400-1 entitled ``Equal Opportunity 
Agreement,'' including an ``Equal Opportunity Clause,'' to be 
incorporated in or attached as a rider to each construction contract the 
amount of which exceeds $10,000 and any part of which is paid for with 
funds from the loan, (c) Farmers Home Administration or its successor 
agency under Public Law 103-354 Form FmHA or its successor agency under 
Public Law 103-354 400-4, entitled ``Nondiscrimination Agreement (Under 
Title VI, Civil Rights Act of 1964),'' a copy of which is attached 
hereto and made a part hereof, and any other undertakings and agreements 
required by the Government pursuant to lawful authority.
    4. Supervised Bank Account. The proceeds of the note and the amount 
of $-------- to be contributed by the Corporation from its own funds and 
used for eligible loan purposes shall be deposited in a ``supervised 
bank account'' as required by the Government.\1\ Amounts in the 
supervised bank account exceeding $100,000 shall be secured by the 
financial institution in advance in accordance with the U.S. Treasury 
Department Circular No. 176. As provided by the terms of the agreement 
creating the supervised bank account, all funds therein shall, until 
duly expended, collaterally secure the loan obligations. Withdrawals 
from the supervised bank account by the Corporation shall be made only 
on checks signed by the ------------ of the Corporation and 
countersigned by the County Supervisor of the Farmers Home 
Administration or its successor agency under

[[Page 344]]

Public Law 103-354, and only for the specific loan purposes approved in 
writing by the Government. The Corporation's share of any liquidated 
damages or other monies paid by defaulting contractors or their sureties 
shall be deposited in the supervised bank account to assure completion 
of the project. When all approved items eligible for payment with loan 
funds are paid in full, any balance remaining in the supervised bank 
account shall be applied on the note as an ``extra payment'' as defined 
in the regulations of the Farmers Home Administration or its successor 
agency under Public Law 103-354, and the supervised bank account shall 
be closed.
---------------------------------------------------------------------------

    \1\ Only loan funds, and borrower's funds to be used for an eligible 
loan purpose, may be deposited in the supervised bank account.
---------------------------------------------------------------------------

    5. Accounts for Housing Operations and Loan Servicing. The 
Corporation shall establish on its books the following accounts, which 
shall be maintained so long as the loan obligations remain unsatisfied: 
A General Fund Account, an Operation and Maintenance Account, a Debt 
Service Account, and a Reserve Account. Funds in said accounts shall be 
deposited in a bank or banks insured by the Federal Deposit Insurance 
Corporation, except for any portion invested in readily marketable 
obligations of the United States as authorized by Section 9. The 
Treasurer of the Corporation shall execute a fidelity bond, with a 
surety company approved by the Government, in an amount not less than 
the estimated maximum amount of such funds to be held in said accounts 
at any one time. The United States of America shall be named as co-
obligee, and the amount of the bond shall not be reduced without the 
prior written consent of the Government. The Corporation in its 
discretion may at any time establish and utilize additional accounts to 
handle any funds not covered by the provisions of this resolution.
    6. General Fund Account. By the time the loan is closed the 
Corporation shall from its own funds deposit in the General Fund Account 
the amount of $----------. All income and revenue from the housing shall 
upon receipt be immediately deposited in the General Fund Account. The 
Corporation may also in its discretion at any time deposit therein other 
funds, not otherwise provided for by this resolution, to be used for any 
of the purposes authorized in section 7, 8, or 9. Funds in the General 
Fund Account shall be used only as authorized in said sections and, 
until so used, shall be held by the Corporation in trust for the 
Government as security for the loan obligations.
    7. Operation and Maintenance Account. Not later than the 15th of 
each month, out of the General Fund Account shall be transferred to the 
Operation and Maintenance Account, sufficient amounts to enable the 
Corporation to pay from the Operation and Maintenance Account the 
actual, reasonable, and necessary current expenses, for the current 
month and the ensuing month, of operating and maintaining the housing 
not otherwise provided for. Current expenses may include, in addition to 
expenses occurring or becoming due monthly, monthly accumulations of 
proportionate amounts for the payment of items which may become due 
either annually or at irregular intervals, such as taxes and insurance, 
normal repair and replacement of furnishings and equipment reasonably 
necessary for operation of the housing. Current expenses may also 
include initial purchase and installation of such furnishings and 
equipment with any funds deposited in and transferred from the General 
Fund Account which are not proceeds of the loan or income or revenue 
from the housing.
    8. Debt Service Account. Each month, immediately after the transfer 
to the Operation and Maintenance Account provided for in section 7, or 
after it is determined that no such transfer is called for, any balance 
remaining in the General Fund Account, or so much thereof as may be 
necessary, shall be transferred to the Debt Service Account until the 
amount in the Debt Service Account equals the amount of the next 
installment due on the loan. Funds in the Debt Service Account shall be 
used only for payments on the loan obligations and, until so used, shall 
be held by the Corporation in trust for the Government as security 
therefor.
    9. Reserve Account. (a) Immediately after each transfer to the Debt 
Service Account as provided in section 8, any balance in the General 
Fund Account shall be transferred to the Reserve Account. Funds in the 
Reserve Account may be used only as authorized in this resolution and 
until so used shall be held by the Corporation in trust as security for 
the loan obligations. Transfers at a rate not less than $-------- \2\ 
annually shall be made to the Reserve Account until the amount in the 
Reserve Account reaches the sum of $-------- \3\ and shall be resumed at 
any time when necessary, because of disbursements from the Reserve 
Account, to restore it to said sum. Of such sum, at least 50 percent 
shall be maintained on a cash basis, referred to herein as the ``cash 
reserve.'' After the cash reserve reaches the required 50 percent of 
said sum, all or any portion of the balance of said sum may, at the 
option of the Corporation, consist of an amount, referred to herein as 
the ``prepayment reserve,'' by which the Corporation is ``ahead of 
schedule'' as defined in the regulations of the

[[Page 345]]

Farmers Home Administration or its successor agency under Public Law 
103-354. Funds in the cash reserve shall be deposited in a separate bank 
account or accounts insured by the Federal Deposit Insurance Corporation 
or invested in readily marketable obligations of the United States, the 
earnings on which shall accrue to the Reserve Account.
---------------------------------------------------------------------------

    \2\ In most cases this figure should be one-tenth of the aggregate 
sum specified later in the sentence and indicated by footnote 3.
    \3\ The amount to be inserted will usually be about 10 percent of 
the value of the buildings and related facilities financed wholly or 
partially with the loan.
---------------------------------------------------------------------------

    (b) With the prior consent of the Government, funds in the Reserve 
Account may be used by the Corporation--
    (1) To meet payments due on the loan obligations in the event the 
amount in the Debt Service Account is not sufficient for the purpose.
    (2) To pay costs of repairs or replacements to the housing caused by 
catastrophe or long-range depreciation which are not current expenses 
under section 7.
    (3) To make improvements or extensions to the housing.
    (4) For other purposes desired by the Corporation which in the 
judgment of the Government likely will promote the loan purposes without 
jeapordizing collectibility of the loan or impairing the adequacy of the 
security, or will strengthen the security, or will facilitate, improve, 
or maintain the orderly collectibility of the loan.
    (c) Any amount in the Reserve Account which exceeds the aggregate 
sum specified in subsection (a), and is not agreed between the 
Corporation and the Government to be used for purposes authorized in 
subsection 9(b) shall be applied promptly on the loan obligations.
    10. Regulatory Covenants. So long as the loan obligations remain 
unsatisfied, the Corporation shall--
    (a) Impose and collect such fees, assessments, rents, and charges 
that the income of the Corporation will be sufficient at all times for 
operation and maintenance of the housing, payments on the loan 
obligations, and maintenance of the accounts herein provided for.
    (b) Maintain complete books and records relating to the 
Corporation's financial affairs, cause such books and records to be 
audited at the end of each fiscal year, promptly furnish the Government 
without request a copy of each audit report, and permit the Government 
to inspect such books and records at all reasonable times.
    (c) If required or permitted by the Government, revise the accounts 
herein provided for, or establish new accounts, to cover handling and 
disposition of income from and payment of expenses attributable to the 
housing or to any other property securing the loan obligations, and 
submit to the Government regular and special reports concerning the 
housing or the Corporation's financial affairs.
    (d) Unless the Government gives prior consent--
    (1) Not use or permit use of the housing for any purpose other than 
as housing and related facilities for domestic farm labor.
    (2) Not enter into any contract or agreement for improvements or 
extensions to the housing or other property securing the loan 
obligations.
    (3) Not cause or permit voluntary dissolution of the Corporation, 
nor merge or consolidate with any other organization, nor cause or 
permit any transfer or encumberance of title to the housing or any part 
thereof or interest therein, by sale, mortgage, lease, or otherwise, nor 
engage in any other new business, enterprise, or venture than operation 
of the housing.
    (4) Not cause or permit the issuance or transfer of any stock, 
borrow any money, nor incur any liability aside from current expenses as 
defined in section 7.
    (e) Submit the following to the Government for prior review and 
approval not less than ---- days before the effective dates, unless 
approval is waived by the Government:
    (1) Annual budgets and operating plans.
    (2) Statements of management policy and practice, including 
eligibility criteria and implementing rules for occupancy of the 
housing.
    (3) Proposed rents and charges and other terms of rental agreements.
    (4) Rates of compensation to officers and employees of the 
Corporation payable from or chargeable to any account provided for in 
this resolution.
    (f) If required by the Government, modify and adjust any matters 
covered by clause (e) of this section.
    (g) Comply with all its agreements and obligations in or under the 
note, security instrument, and any related agreement executed by the 
Corporation in connection with the loan.
    (h) Not alter, amend, or repeal without the Government's consent 
this resolution or the bylaws or articles of incorporation of the 
Corporation, which shall constitute parts of the total contract between 
the Corporation and the Government relating to the loan obligations.
    (i) Do other things as may be required by the Government in 
connection with the operation of the housing, or with any of the 
Corporation's operations or affairs which may affect the housing, the 
loan obligations, or the security.
    11. Refinancing of Loan. If at any time it appears to the Government 
that the Corporation is able to obtain a loan upon reasonable terms and 
conditions to refinance the loan obligations then outstanding, upon 
request from the Government the Corporation will apply for, take all 
necessary actions to obtain, and accept such refinancing loan and will 
use the proceeds for said purpose.
    12. General Provisions.

[[Page 346]]

    (a) It is expressly understood and agreed that any loan made will be 
administered subject to the limitations of the authorizing act of 
Congress and related regulations, and that any rights granted to the 
Government herein or elsewhere may be exercised by it in its sole 
discretion to carry out the purposes of the loan, enforce such 
limitations, and protect the Government's financial interest in the loan 
and the security.
    (b) The provisions of this resolution are representations to the 
Government to induce the Government to make a loan to the Corporation as 
aforesaid. If the Corporation should fail to comply with or perform any 
provision of this resolution or any requirement made by the Government 
pursuant to this resolution, such failure shall constitute default as 
fully as default in payment of amounts due on the loan obligations. In 
the event of such failure, the Government at its option may declare the 
entire amount of the loan obligations immediately due and payable, and, 
if such entire amount is not paid forthwith, may take possession of and 
operate the housing and proceed to foreclose its security and enforce 
all other available remedies.
    (c) Upon request by the Government the Corporation will permit 
representatives of the Government to inspect and make copies of any of 
the records of the Corporation pertaining to this loan. Such inspection 
and copying may be made during regular office hours of the Corporation, 
or any other time the Corporation and the Government finds convenient.
    (d) Any provisions of this resolution may be waived by the 
Government in its sole discretion, or changed by agreement between the 
Government and the Corporation, after this resolution becomes 
contractually binding, to any extent such provisions could legally have 
been foregone, or agreed to in amended form, by the Government 
initially.
    (e) Any notice, consent, approval, waiver, or agreement must be in 
writing.
    (f) This resolution may be cited in the security instrument and any 
other instruments or agreements as the ``Loan Resolution of (date of 
this resolution) -------------- 19----.''

________________________________________________________________________
________________________________________________________________________
________________________________________________________________________

                               Certificate

    The undersigned, --------------------, the Secretary of the 
Corporation identified in the foregoing Loan Resolution, hereby 
certifies that the foregoing is a true copy of a resolution duly adopted 
by the board of directors on ---------------------- 19----, which has 
not been altered, amended, or repealed.
    --------------------
    (Date)
    --------------------
    (Secretary)

[44 FR 59199, Oct. 15, 1979, as amended at 46 FR 36112, July 14, 1981]

           Exhibit D to Subpart D of Part 1944--Loan Agreement

                     (lh insured loan to individual)

    1. Parties and Terms Defined. This agreement dated ------------ of 
the Undersigned ----------------------------------------, herein called 
``Borrower'' whether one or more, whose post office address is --------
--------------------------------, with the United States of America 
acting through the Farmers Home Administration or its successor agency 
under Public Law 103-354, United States Department of Agriculture, 
herein called ``the Government,'' is made in consideration of a loan, 
herein called ``the loan,'' to Borrower in the amount of $------------ 
made or insured, or to be made or insured by the Government pursuant to 
title V of the Housing Act of 1949 to provide housing and related 
facilities for domestic farm laborers. Such housing and related 
facilities, together with the site, may be referred to herein as ``the 
housing.'' The indebtedness and other obligations of Borrower under the 
note evidencing the loan, the related security instrument, and any 
related agreement are herein called the ``loan obligations.''
    2. Equal Opportunity and Nondiscrimination Provisions. The borrower 
will comply with (a) any undertakings and agreements required by the 
Government pursuant to Executive Order 11063 regarding nondiscrimination 
in the use and occupancy of housing, (b) Farmers Home Administration or 
its successor agency under Public Law 103-354 Form FmHA or its successor 
agency under Public Law 103-354 400-1 entitled ``Equal Opportunity 
Agreement,'' including an ``Equal Opportunity Clause'' to be 
incorporated in or attached as a rider to each construction contract the 
amount of which exceeds $10,000 and any part of which is paid for with 
funds from the loan, (c) Farmers Home Administration or its successor 
agency under Public Law 103-354 Form FmHA or its successor agency under 
Public Law 103-354 400-4, entitled ``Nondiscrimination Agreement (Under 
Title VI, Civil Rights Act of 1964),'' a copy of which is attached 
hereto and made a part hereof, and any other undertakings and agreements 
required by the Government pursuant to lawful authority.
    3. Supervised Bank Account. The proceeds of the note and the amount 
of $------------ to be contributed by the borrower from its own funds 
and used for eligible loan purposes

[[Page 347]]

shall be deposited in a ``supervised bank account'' as required by the 
Government.\1\ Amounts in the supervised bank account exceeding $100,000 
shall be secured by the financial institution in advance in accordance 
with U.S. Treasury Department Circular No. 176. As provided therein 
shall, until duly expended, collaterally secure the loan obligations. 
Withdrawals from the supervised bank account by the borrower shall be 
made only on checks signed by the ---------------- of the borrower and 
countersigned by a representative of the Farmers Home Administration or 
its successor agency under Public Law 103-354, and only for the specific 
loan purposes approved in writing by the Government. The borrower's 
share of any liquidated damages or other monies paid by defaulting 
contractors or their sureties shall be deposited in the supervised bank 
account to assure completion of the project. When all approved items 
eligible for payment with loan funds are paid in full, any balance 
remaining in the supervised bank account shall be applied on the note as 
an ``extra payment'' as defined in the regulations of the Farmers Home 
Administration or its successor agency under Public Law 103-354, and the 
supervised bank account shall be closed.
---------------------------------------------------------------------------

    \1\ In most cases this figure should be one-tenth of the aggregate 
sum specified later in the sentence as indicated by footnote 2.
---------------------------------------------------------------------------

    4. Accounts for Housing Operations and Loan Servicing. Borrower 
shall establish on his books the following accounts, which shall be 
maintained so long as the loan obligations remain unsatisfied: A General 
Fund Account, an operation and Maintenance Account, a Debt Service 
Account, and a Reserve Account. Funds in said accounts shall be 
deposited in a bank or banks insured by the Federal Deposit Insurance 
Corporation, except for any portion invested in readily marketable 
obligations of the United States as authorized by section 8(a).
    5. General Fund Account. By the time the loan is closed Borrower 
shall from his own funds deposit in the General Fund Account the amount 
of $----------------. All income and revenue from the housing shall upon 
receipt be immediately deposited in the General Fund Account. Borrower 
may also in his discretion at any time deposit therein other funds, not 
otherwise provided for by this agreement, to be used for any of the 
purposes authorized in sections 6, 7, or 8. Funds in the General Fund 
Account shall be used only as authorized in said sections and, until so 
used, shall be held by Borrower in trust for the Government as security 
for the loan obligations.
    6. Operation and Maintenance Account. Not later than the 15th of 
each month out of the General Fund Account shall be transferred to the 
Operation and Maintenance Account sufficient amounts to enable Borrower 
to pay from the Operation and Maintenance Account the actual, 
reasonable, and necessary current expenses, for the current month and 
the ensuing month, of operating and maintaining the housing not 
otherwise provided for. Current expenses may include, in addition to 
expenses occurring or becoming due monthly, monthly accumulations of 
proportionate amounts for the payment of items which may become due 
either annually or at irregular intervals, such as taxes, insurance, and 
normal repair and replacement of furnishings and equipment reasonably 
necessary for operation of the housing. Current expenses may also 
include initial purchase and installation of such furnishings and 
equipment with any funds deposited in and transferred from the General 
Fund Account which are not proceeds of the loan or income or revenue 
from the housing.
    7. Debt Service Account. Each month, immediately after the transfer 
to the Operation and Maintenance Account provided for in section 6, or 
after it is determined that no such transfer is called for, any balance 
remaining in the General Fund Account, or so much thereof as may be 
necessary, shall be transferred to the Debt Service Account until the 
amount in the Debt Service Account equals the amount of the next 
installment due on the loan. Funds in the Debt Service Account shall be 
used only for payments on the loan obligations and, until so used, shall 
be held by Borrower in trust for the Government as security therefor.
    8. Reserve Account.
    (a) Immediately after each transfer to the Debt Service Account as 
provided in section 7, any balance in the General Fund Account shall be 
transferred to the Reserve Account. Funds in the Reserve Account may be 
used only as authorized in this agreement and until so used shall be 
held by the Borrower in trust as security for the loan obligations. 
Transfers at a rate not less than $----------------\1\ annually shall be 
made to the Reserve Account until the amount in the Reserve Account 
reaches the sum of $------------\2\ and shall be resumed at any time 
when necessary, because of disbursements from the Reserve Account, to 
restore it to said sum. Of such sum, at least 50 percent shall be 
maintained on a cash basis, referred to herein as the ``cash reserve.'' 
After the cash reserve reaches the required 50 percent of said sum, all 
or any portion of the balance of said sum may, at the option of 
Borrower, consist of an amount, referred to as the ``prepayment 
reserve,'' by which Borrower is ``ahead of schedule'' as defined in

[[Page 348]]

the regulations of the Farmers Home Administration or its successor 
agency under Public Law 103-354. Funds in the cash reserve shall be 
deposited in a separate bank account or accounts insured by the Federal 
Deposit Insurance Corporation or invested in readily marketable 
obligations of the United States, the earnings on which shall accrue to 
the Reserve Account.
---------------------------------------------------------------------------

    \2\ The amount to be inserted will usually be about 10 percent of 
the value of the buildings and related facilities financed wholly or 
partially with the loan.
---------------------------------------------------------------------------

    (b) With the prior consent of the Government, funds in the Reserve 
Account may be used by Borrower--
    (1) To meet payments due on the loan obligations in the event the 
amount in the Debt Service Account is not sufficient for the purpose.
    (2) To pay costs of repairs or replacements to the housing caused by 
catastrophe or long-range depreciation which are not current expenses 
under section 6.
    (3) To make improvements or extensions to the housing.
    (4) For other purposes desired by Borrower which in the judgment of 
the Government likely will promote the loan purposes without 
jeopardizing collectibility of the loan or impairing the adequacy of the 
security, or will strengthen the security, or will facilitate, improve, 
or maintain the orderly collectibility of the loan.
    (5) For any purpose desired by Borrower, provided Borrower 
determines that after such disbursement (a) the amount in the Reserve 
Account will be not less than that required by subsection 8(a) to be 
accumulated by that time, and (b) during the next 12 months the amount 
in the Reserve Account will likely not fall below that required to be 
accumulated by the end of such period.
    (c) Any amount in the Reserve Account which exceeds the aggregate 
sum specified in subsection 8(a) and is not agreed between the borrower 
and the Government to be used for purposes authorized in subsection 8(a) 
shall be applied promptly on the loan obligations.
    9. Regulatory Covenants. So long as the loan obligations remain 
unsatisfied, Borrower shall--
    (a) Impose and collect such fees, assessments, rents, and charges 
that his income will be sufficient at all times for operation and 
maintenance of the housing, payments on the loan obligations, and 
maintenance of the accounts herein provided for.
    (b) Maintain complete books and records relating to his financial 
affairs, cause such books and records to be audited at the end of each 
fiscal year, promptly furnish the Government without request a copy of 
each audit report, and permit the Government to inspect such books and 
records at all reasonable times.
    (c) If required by the Government, revise the accounts herein 
provided for, or establish new accounts, to cover handling and 
disposition of income from and payment of expenses attributable to the 
housing or to any other property securing the loan obligations, and 
submit regular and special reports concerning the housing or Borrower's 
financial affairs.
    (d) Unless the Government gives prior consent--
    (1) Not use the housing for any purpose other than as labor housing 
and related facilities for domestic farm laborers.
    (2) Not enter into any contract or agreement for improvements or 
extensions to the housing or other property securing the loan 
obligations.
    (3) Not cause or permit the transfer or encumbrance of title to the 
housing or any part thereof or interest therein, by sale, mortgage, 
lease, or otherwise.
    (e) Submit the following to the Government for prior review and 
approval not less than -------- days before the effective dates.
    (1) Annual budgets and operating plans, including proposed rents and 
charges and other terms of rental agreements for occupancy and 
compensation to employees chargeable as operating expenses of the 
housing.
    (2) Statements of management policy and practice, including 
eligibility criteria and implementing rules for occupancy of the 
housing.
    (f) If required by the Government, modify and adjust any matters 
covered by clause (e) of this section.
    (g) Do other things as may be required by the Government in 
connection with the operation of the housing or with any of Borrower's 
operations or affairs which may affect the housing, the loan 
obligations, or the security.
    10. Refinancing of Loan. If at any time it appears to the Government 
that Borrower is able to obtain a loan upon reasonable terms and 
conditions to refinance the loan obligations then outstanding, upon 
request from the Government, Borrower will apply for, take all necessary 
actions to obtain, and accept such refinancing loan and will use the 
proceeds for said purpose.
    11. General Provisions.
    (a) It is understood and agreed by Borrower that any loan made or 
insured will be administered subject to the limitations of the 
authorizing act of Congress and related regulations, and that any rights 
granted to the Government herein or elsewhere may be exercised by it in 
its sole discretion to carry out the purposes of the loan, enforce such 
limitations, and protect the Government's financial interest in the loan 
and the security.
    (b) Borrower shall also comply with all covenants and agreements set 
forth in the note, security instrument, and any related agreements 
executed by Borrower in connection with the loan.
    (c) The provisions of this agreement are representations to the 
Government to induce the Government to make or insure a loan to Borrower 
as aforesaid. If Borrower should

[[Page 349]]

fail to comply with or perform any provision of this agreement or any 
requirement made by the Government pursuant hereto, such failure shall 
constitute default as fully as default in payment of amounts due on the 
loan. In the event of such failure, the Government at its option may 
declare the entire amount of the loan obligations immediately due and 
payable and, if such entire amount is not paid forthwith, may take 
possession of and operate the housing and proceed to foreclose its 
security and enforce all other available remedies.
    (d) Upon request by the Government the Borrower will permit 
representatives of the Government to inspect and make copies of any of 
the records of the Borrower pertaining to this loan. Such inspection and 
copying may be made during regular office hours of the Borrower, or any 
other time the Borrower and the Government finds convenient.
    (e) Any provisions of this agreement may be waived by the 
Government, or changed by agreement between the Government and Borrower 
to any extent such provisions could legally have been foregone, or 
agreed to in any amended form, by the Government initially. Any notice, 
consent, approval, waiver, or agreement must be in writing.
    (f) This agreement may be cited in the security instrument and other 
instruments or agreements as the ``Loan Agreement of (date of this 
agreement)---------------- 19------.''
Witness_________________________________________________________________
Borrower________________________________________________________________
Witness_________________________________________________________________
Borrower________________________________________________________________

[44 FR 59199, Oct. 15, 1979, as amended at 46 FR 36112, July 14, 1981]

     Exhibit E to Subpart D of Part 1944--Loan and Grant Resolution

        (labor housing loan and grant to a nonprofit corporation)

    Loan and Grant Resolution of --------, 19---- Resolution of the 
Board of Directors of ------------------ providing for obtaining 
financial assistance in the amount $---------- to aid in financing 
federally defined low-rent housing and related facilities for low-income 
domestic farm labor, and related matters. Whereas ----------------------
-------------------- (herein referred to as the ``Corporation'') is 
organized and operating under and the board of (authorizing State 
statute) -------------------------------------- directors of the 
Corporation has determined that--
    (a) The Corporation should provide low-rent housing and related 
facilities for low-income domestic farm labor, as defined in title V of 
the Housing Act of 1949.
    (b) The estimated total cash development cost of such housing and 
facilities amounts to $----------.
    (c) For such purpose the Corporation is able to furnish from its own 
resources $----------.
    (d) The Corporation will need financial assistance in the amount of 
$---------- which the Corporation is unable to obtain from other sources 
for such purpose upon terms and conditions which the Corporation could 
reasonably be expected to fulfill.
    (e) Of such amount of needed financial assistance the Corporation 
will be able to repay, with interest at 1% per annum, the amount of $--
-------- over a repayment period of------ years, if the balance of $----
------ is made available to the Corporation as a grant.
    (f) The housing and related facilities will fulfill a pressing need 
in the area in which they are or will be located.
    (g) The housing and facilities cannot be provided without the aid of 
a grant in the amount stated above:

Therefore Be It Resolved:

    1. Application for Loan and Grant. The Corporation shall apply to 
the United States of America, acting through the Farmers Home 
Administration or its successor agency under Public Law 103-354, United 
States Department of Agriculture (herein called ``the Government'') for 
a loan of $---------- and a grant of $----------, pursuant to Title V of 
the Housing Act of 1949. Such loan may be insured by the Government. The 
loan and the grant shall be used only for the specific eligible purposes 
approved by the Government, in order to provide low-rent housing and 
related facilities for low-income domestic farm labor. Such housing and 
facilities and the land constituting the site may be referred to herein 
as the ``housing.''
    2. Execution of Loan and Grant Instruments. To evidence the loan the 
Corporation shall issue a promissory note (herein referred to as ``the 
Note''), signed by its President and attested by its Secretary, with its 
corporate seal affixed thereto, for the amount of the loan, payable in 
installments over a period of------ years, bearing interest at a rate 
not to exceed ---- percent per annum, and containing other terms and 
conditions prescribed by the Government. To evidence the obligations of 
the grant, the Corporation shall execute an instrument in the form 
attached hereto entitled ``Labor Housing Grant Agreement'' and referred 
to herein as the ``Grant Agreement,'' evidencing terms and conditions 
upon which the grant is made by the Government and the obligations of 
the Corporation with respect thereto. To secure the note and/or all 
other obligations and agreements of the Corporation with respect to the 
loan and the grant, as required by the

[[Page 350]]

Government, the President and the Secretary are hereby authorized to 
execute a security instrument giving a lien upon or security interest in 
the housing and such other property as the Government shall require, 
including an assignment of or security interest in the rents and profits 
as collateral security to be enforceable in the event of any default by 
the Corporation. The President and the Secretary are further authorized 
to execute any other security and other instruments, agreements, and 
documents required by the Government for the loan or grant. The 
indebtedness and other obligations of the Corporation under the note, 
Grant Agreement, this resolution, the security instrument, and any other 
instruments and agreements related to the loan or grant are herein 
called the ``loan and grant obligations.''
    3. Equal Employment Opportunity under Construction Contracts and 
Nondiscrimination in the Use of Occupancy and Housing and in Any Other 
Benefits of the Loan or Grant. The President and the Secretary are 
hereby authorized and directed to execute on behalf of the Corporation 
(a) any undertakings and agreements required by the Government regarding 
nondiscrimination in the use and occupancy of housing, (b) Farmers Home 
Administration or its successor agency under Public Law 103-354 Form 
FmHA or its successor agency under Public Law 103-354 400-1, ``Equal 
Opportunity Agreement,'' involving an Equal Opportunity Clause to be 
incorporated in or attached as a rider to each construction contract 
which exceeds $10,000 in amount and is paid for in whole or in part with 
loan or grant funds, and (c) Farmers Home Administration or its 
successor agency under Public Law 103-354 Form FmHA or its successor 
agency under Public Law 103-354 400-4, ``Nondiscrimination Agreement 
(Under Title VI, Civil Rights Act of 1964),'' a copy of which is 
attached hereto and made a part hereof.
    4. Supervised Bank Account. The proceeds of the loan and grant and 
the amount of $---------- to be contributed by the Corporation from its 
own funds and used for approved eligible purposes shall be deposited in 
a ``supervised bank account'' as required by the Government.\1\ Amounts 
in the supervised bank account exceeding $100,000 shall be secured by 
the financial institution in advance in accordance with U.S. Treasury 
Department Circular No. 176. As provided by the terms of the agreement 
creating the supervised bank account, all funds therein shall, until 
duly expended, collaterally secure the loan and grant obligations. 
Withdrawals from the supervised bank account by the Corporation shall be 
made only on checks signed by the ------------------ of the Corporation 
and countersigned by the County Supervisor or other authorized official 
of the Farmers Home Administration or its successor agency under Public 
Law 103-354, and only for the specific eligible purposes approved in 
writing by the Government. The Corporation's share of any liquidated 
damages or other monies paid by defaulting contractors of their sureties 
shall be deposited in the supervised bank account to assure completion 
of the project. When all approved items eligible for payment with loan 
or grant funds are paid in full, any balance remaining in the supervised 
bank account shall be treated as a refund of loan and grant funds in the 
same ratio as that between the amounts of the loan and grant, and the 
supervised bank account shall be closed.
---------------------------------------------------------------------------

    \1\ Only loan or grant funds, and borrower's funds to be used for an 
eligible loan or grant purpose, may be deposited in the supervised bank 
account.
---------------------------------------------------------------------------

    5. Accounts for Housing Operations and Loan Servicing. The 
Corporation shall establish on its books the following accounts, which 
shall be maintained so long as the loan or grant obligations continue: A 
General Fund Account, an Operation and Maintenance Account, a Debt 
Service Account, and a Reserve Account. Funds in said accounts shall be 
deposited in a bank or banks insured by the Federal Deposit Insurance 
Corporation, except for any portion invested in readily marketable 
obligations of the United States as authorized by section 9. The 
Treasurer of the Corporation shall execute a fidelity bond, with a 
surety company approved by the Government, in an amount not less than 
the estimated maximum amount of such funds to be held in said accounts 
at any one time. The United States of America shall be named as co-
obligee, and the amount of the bond shall not be reduced without the 
prior written consent of the Government. The Corporation in its 
discretion may at any time establish and utilize additional accounts to 
handle any funds not covered by the provisions of this resolution.
    6. General Fund Account. By the time the loan and grant are closed 
the Corporation shall from its own funds deposit in the General Fund 
Account the amount of $----------. All income and revenue from the 
housing shall upon receipt be immediately deposited in the General Fund 
Account. The Corporation may also in its discretion at any time deposit 
therein other funds, not otherwise provided for by this resolution, to 
be used for any of the purposes authorized in sections 7, 8, or 9. Funds 
in the General Fund Account shall be used only as authorized in said 
sections and, until so used, shall be held by the Corporation in trust 
for the Government as security for the loan and grant obligations.
    7. Operation and Maintenance Account. Not later than the 15th of 
each month, out of the General Fund Account shall be transferred to the 
Operation and Maintenance Account,

[[Page 351]]

sufficient amounts to enable the Corporation to pay from the Operation 
and Maintenance Account the actual, reasonable, and necessary current 
expenses, for the current month and the ensuing month, of operating and 
maintaining the housing not otherwise provided for. Current expenses may 
include, in addition to expenses occurring or becoming due monthly, 
monthly accumulations of proportionate amounts for the payment of items 
which may become due either annually or at irregular intervals, such as 
taxes and insurance and normal repair and replacement of furnishings and 
equipment reasonably necessary for operation of the housing. Current 
expenses may also include initial purchase and installation of such 
furnishings and equipment with any funds deposited in and transferred 
from the General Fund Account which are not proceeds of the loan and, 
unless the Government gives prior written consent, are not income or 
revenue from the housing.
    8. Debt Service Account. Each month, immediately after the transfer 
to the Operation and Maintenance Account provided for in section 7, or 
after it is determined that no such transfer is called for, any balance 
remaining in the General Fund Account, or so much thereof as may be 
necessary, shall be transferred to the Debt Service Account until the 
amount in the Debt Service Account equals the amount of the next 
installment due on the loan. Funds in the Debt Service Account shall be 
used only for payments on the loan obligations while they continue and, 
until so used, shall be held by the Corporation in trust for the 
Government as security for the loan and grant obligations.
    9. Reserve Account. (a) Immediately after each transfer to the Debt 
Service Account as provided in section 8, any balance in the General 
Fund Account shall be transferred to the Reserve Account. Funds in the 
Reserve Account may be used only as authorized in this resolution and 
until so used shall be held by the Corporation in trust as security for 
the loan and grant obligations. Transfers at a rate not less than $----
------,\2\ annually shall be made to the Reserve Account until the 
amount in the Reserve Account reaches the sum of $----------\3\ and 
shall be resumed at any time when necessary, because of disbursements 
from the Reserve Account, to restore it to said sum. Of such sum, at 
least 50 percent shall be maintained on a cash basis, referred to herein 
as the ``cash reserve.'' After the cash reserve reaches the required 50 
percent of said sum, all or any portion of the balance of said sum may, 
at the option of the Corporation, consist of an amount, referred to 
herein as the ``prepayment reserve,'' by which the Corporation is 
``ahead of schedule'' as defined in the regulations of the Farmers Home 
Administration or its successor agency under Public Law 103-354. Funds 
in the cash reserve shall be deposited in a separate bank account or 
accounts insured by the Federal Deposit Insurance Corporation or 
invested in readily marketable obligations of the United States, the 
earnings on which shall accrue to the Reserve Account.
---------------------------------------------------------------------------

    \2\ In most cases this figure should be one-tenth of the aggregate 
sum specified later in the sentence as the total amount of the Reserve 
Account.
    \3\ The amount to be inserted will usually be about 10 percent of 
the value of the buildings and related facilities financed wholly or 
partially with the loan and grant.
---------------------------------------------------------------------------

    (b) With the prior consent of the Government, funds in the Reserve 
Account may be used by the Corporation--
    (1) To meet payments due on the loan obligations in the event the 
amount in the Debt Service Account is not sufficient for the purpose.
    (2) To pay costs of repairs or replacements to the housing caused by 
catastrophe or long-range depreciation which are not current expenses 
under section 7.
    (3) To make improvements or extensions to the housing.
    (4) For other purposes desired by the Corporation which in the 
judgment of the Government likely will promote the loan or grant 
purposes without jeopardizing collectibility of the loan or impairing 
the adequacy of the security, or will strengthen the security, or will 
facilitate, improve, or maintain the orderly collectibility of the loan.
    (c) Any amount in the Reserve Account which exceeds the sum 
specified in sub-section (a), and is not agreed between the Corporation 
and the Government to be used for purposes authorized in subsection (b) 
shall be applied promptly on the loan obligations.
    10. Regulatory Covenants. So long as the loan or grant obligations 
continue, the Corporation shall--
    (a) Impose and collect such fees, assessments rents, and charges 
that the income of the Corporation will be sufficient at all times for 
operation and maintenance of the housing payments on the loan 
obligations, and maintenance of the accounts herein provided for.
    (b) Maintain complete books and records relating to the 
Corporation's financial affairs, cause such books and records to be 
audited at the end of each fiscal year, promptly furnish the Government 
without request a copy of each audit report, and permit the Government 
to inspect such books and records at all reasonable times.
    (c) If required or permitted by the Government, revise the accounts 
herein provided for, or establish new accounts to cover handling and 
disposition of income from the payment of expenses attributable to the

[[Page 352]]

housing or to any other property securing the loan or grant obligations, 
and submit to the Government regular and special reports concerning the 
housing or the Corporation's financial affairs, including any 
information required by the Government regarding income of the occupants 
of the housing.
    (d) Unless the Government gives prior consent--
    (1) Not use or permit use of the housing for any purpose other than 
as low-rent housing and related facilities for low-income domestic farm 
labor, as those terms are defined by the Government.
    (2) Not enter into any contract or agreement for improvements or 
extensions to the housing or other property securing the loan or grant 
obligations.
    (3) Not cause or permit voluntary dissolution of the Corporation, 
nor merge or consolidate with any other organization, nor transfer or 
encumber title to the housing or any part thereof or interest therein, 
by sale, mortgage, lease, or other conveyance or encumbrance, nor engage 
in any other new business, enterprise, or venture than operation of the 
housing.
    (4) Not borrow any money, nor incur any liability aside from current 
expenses as defined in Section 7.
    (e) Submit the following to the Government for prior review not less 
then ------ days before the effective dates:
    (1) Annual budgets and operating plans.
    (2) Statements of management policy and practice including 
eligibility criteria and implementing rules for occupancy of the 
housing.
    (3) Proposed rents and charges and other terms of rental agreements 
for occupancy of the housing.
    (4) Rates of compensation to officers and employees of the 
Corporation payable from or chargeable to any account provided for in 
this resolution.
    (f) If required by the Government, modify and adjust any matters 
covered by clause (e) of this section.
    (g) Comply with all its agreements and obligations in or under this 
resolution, the note, Grant Agreement, security instrument, and any 
related agreement executed by the Corporation in connection with the 
loan or grant.
    (h) Not alter, amend, or repeal without the Government's consent 
this resolution or the bylaws or articles of incorporation of the 
Corporation, which shall constitute parts of the total contract between 
the Corporation and the Government relating to the loan and grant 
obligations.
    (i) Do other things as may be required by the Government in 
connection with the operation of the housing, or with any of the 
Corporation's operations or affairs which may affect the housing, the 
loan or grant obligations, or the security.
    11 Refinancing of Loan. If at any time it appears to the Government 
that the Corporation is able to obtain a loan upon reasonable terms and 
conditions to refinance the loan obligations then outstanding, upon 
request from the Government, the Corporation will apply for, take all 
necessary actions to obtain, and accept such refinancing loan and will 
use the proceeds for said purpose.
    12 General Provisions. (a) It is understood and agreed by the 
Corporation that any loan or grant will be administered subject to the 
limitations of the authorizing act of Congress and related regulations, 
and that any rights granted to the Government herein or elsewhere may be 
exercised by it in its sole discretion to carry out the purposes of the 
loan and grant, enforce such limitations, and protect the Government's 
financial interest in the loan and grant and the security.
    (b) The provisions of this resolution are representations of the 
Corporation to induce the Government to make or insure a loan or make a 
grant to the Corporation as aforesaid. If the Corporation should fail to 
comply with or perform any of its loan or grant obligations, such 
failure shall constitute default as fully as default in payment of 
amounts due on the loan obligations. In the event of default, the 
Government at its option may declare the entire amount of the loan and 
grant obligations immediately due and payable and, if such entire amount 
is not paid forthwith, may take possession of and operate the housing 
and proceed to foreclose its security and enforce all other available 
remedies.
    (c) Upon request by the Government the corporation will permit 
representatives of the Government to inspect and make copies of any of 
the records of the corporation pertaining to the financial assistance. 
Such inspection and copying may be made during regular office hours of 
the corporation, or any other time the corporation and the Government 
finds convenient.
    (d) Any provisions of this resolution may be waived by the 
Government in its sole discretion, or changed by agreement between the 
Government and the Corporation, after this resolution becomes 
contractually binding, to any extent such provisions could legally have 
been foregone, or agreed to in amended form, by the Government 
initially.
    (e) Any notice, consent, approval, waiver, or agreement must be in 
writing.
    (f) This resolution may be cited in the security instrument and 
elsewhere as the ``Loan and Grant Resolution of (date of this 
resolution) ------------------ 19----.''

                               Certificate

    The undersigned, ------------------, the Secretary of the 
corporation identified in the foregoing resolution, hereby certifies 
that the foregoing is a true copy of a resolution duly adopted by the 
board of directors

[[Page 353]]

on ------------------ 19----, which has not been altered, amended, or 
repealed.
Date____________________________________________________________________
Secretary_______________________________________________________________
[SEAL]

[44 FR 59199, Oct. 15, 1979, as amended at 46 FR 36112, July 14, 1981]

   Exhibit F to Subpart D of Part 1944--Labor Housing Grant Agreement

    THIS AGREEMENT dated ------------, 19----,
between--_______________________________________________________________
________________________________________________________________________
which is organized and operating under
________________________________________________________________________
------------------ (Authorizing statute)
herein called ``Grantee,'' and the United States of America acting 
through the Farmers Home Administration or its successor agency under 
Public Law 103-354, Department of Agriculture, herein called 
``Grantor,'' WITNESSETH:
    Whereas Grantee has determined to undertake a project of 
acquisition, construction, enlargement and/or capital improvement of a 
Labor Housing Project to serve domestic farm laborers at an estimated 
cost of $---------- and has duly authorized the undertaking of such 
project.
    Grantee is able to finance not more than $---------- of the 
development costs through revenues, charges, taxes or assessments, or 
funds otherwise available to Grantee resulting in a reasonable rental 
rate.
    Said sum of $---------- has been committed to and by Grantee for 
such project development costs.
    Grantor has agreed to grant the Grantee a sum not to exceed $------
---- subject to the terms and conditions established by the Grantor. 
Provided, however, that the proportionate share of any grant funds 
actually advanced and not needed for grant purposes shall be returned 
immediately to the Grantor. The Grantor may terminate the grant in 
whole, or in part, at any time before the date of completion, whenever 
it is determined that the Grantee has failed to comply with the 
conditions of the grant.
    Now therefore, in consideration of said grant by Grantor to Grantee, 
to be made pursuant to Section 516 of the Housing Act of 1949 for the 
purpose only of defraying a part not to exceed ---- percent of the 
development costs, as defined by applicable Farmers Home Administration 
or its successor agency under Public Law 103-354 instructions.
    Grantee agrees that Grantee will:
    A. Cause said project to be constructed within the total sums 
available to it, including said grant, in accordance with the project 
plans and specifications and any modifications thereof prepared by 
Grantee and approved by Grantor.
    B. Permit periodic inspection of the construction by a 
representative of Grantor during construction.
    C. Manage, operate and maintain the project, including these units 
if less than the whole of said project, continuously in an efficient and 
economic manner.
    D. Make services of said project available within its capacity to 
all domestic farm laborers in borrowers/grantees service area without 
discrimination because of race, color, religion, sex, age, handicap, 
marital or familial status, or National origin at reasonable rental 
rates, whether for one or more types of units, adopted by resolution 
dated ---- 19 ----, as may be revised from time to time by Grantee. The 
initial rental rates must be approved by the Grantor. Thereafter, 
Grantee may not make changes to the rental rate structure without prior 
authorization from the Grantor.
    E. Adjusts its operating costs and service charges from time to time 
to provide for adequate operation and maintenance, emergency repair 
reserves, obsolescence reserves, debt service and debt service reserves.
    F. Provide Grantor with such periodic reports as it may require and 
permit periodic inspection of its operations by a representative of the 
Grantor.
    G. To execute Form FmHA or its successor agency under Public Law 
103-354 400-1, ``Equal Opportunity Agreement,'' and to execute Form 400-
4, ``Assurance Agreement,'' and to execute any other agreements required 
by Grantor which Grantee is legally authorized to execute. If any such 
form has been executed by Grantee as a result of a loan being made to 
Grantee by Grantor contemporaneously with the making of this grant, 
another form of the same type need not be executed in connection with 
this grant.
    H. Upon any default under its representations or agreements set 
forth in this instrument, Grantee, at the option and demand of Grantor, 
will repay to Grantor forthwith the original principal amount of the 
grant stated hereinabove, with interest at the rate of 5 percentum per 
annum from the date of the default. Default by the Grantee will 
constitute termination of the grant thereby causing cancellation of 
Federal assistance under the grant. The Provisions of this Grant 
agreement may be enforced by Grantor, at its option and without regard 
to prior waivers by it of previous defaults of Grantee, by judicial 
proceedings to require specific performance of the terms of this Grantee 
Agreements or by such other proceedings in law or equity, in either 
Federal or State courts, as may be deemed necessary by Grantor to assure 
compliance with the provisions of this Grant Agreement and the laws and 
regulations under which this grant is made.

[[Page 354]]

    I. Return immediately to Grantor, as required by the regulations of 
Grantor, any grant funds actually advanced and not needed by Grantee for 
approved purposes.
    J. Use the real property including land, land improvements, 
structures, and appurtenances thereto, for authorized purposes of the 
grant as long as needed.
    1. Title to real property shall vest in the recipient subject to the 
condition that the Grantee shall use the real property for the 
authorized purpose of the original grant as long as needed.
    2. The Grantee shall obtain approval by the Grantor agency for the 
use of the real property in other projects when the Grantee determines 
that the property is no longer needed for the original grant purposes. 
Use in other projects shall be limited to those under other Federal 
grant programs or programs that have purposes consistent with those 
authorized for support by the Grantor.
    3. When the real property is no longer needed as provided in 1 and 2 
above, the Grantee shall request disposition instructions from the 
Grantor agency or its sucessor Federal agency. The Grantor agency shall 
observe the following rules in the disposition instructions.
    (a) The Grantee may be permitted to retain title after it 
compensates the Federal Government in an amount computed by applying the 
Federal percentage of participation in the cost of the original project 
to the fair market value of the property.
    (b) The Grantee may be directed to sell the property under 
guidelines provided by the Grantor agency and pay the Federal Government 
an amount computed by applying the Federal percentage of participation 
in the cost of the original project to the proceeds from sale (after 
deducting actual and reasonable selling and fix-up expenses, if any, 
from the sales proceeds). When the Grantee is authorized or required to 
sell the property, proper sales procedures shall be established that 
provide for competition to the extent practicable and result in the 
highest possible return.
    (c) The Grantee may be directed to transfer title to the property to 
the Federal Government provided that in such cases the Grantee shall be 
entitled to compensation computed by applying the Grantee's percentage 
of participation in the cost of the program or project to the current 
fair market value of the property.
    This Grant Agreement covers the following described real property 
(use continuation sheets as necessary).
    K. Abide by the following conditions pertaining to nonexpendable 
personal property which is furnished by the Grantor or acquired wholly 
or in part with grant funds. Nonexpendable personal property means 
tangible personal property having a useful life of more than one year 
and an acquisition cost of $300 or more per unit. A Grantee may use its 
own definition of nonexpend able personal property provided that such 
definition would at least include all tangible personal property as 
defined above.
    1. Use of nonexpendable property.
    (a) The Grantee shall use the property in the project for which it 
was acquired as long as needed. When no longer needed for the original 
project, the Grantee shall use the property in connection with its other 
Federally sponsored activities, if any, in the following order of 
priority:
    (1) Activities sponsored by the FmHA or its successor agency under 
Public Law 103-354.
    (2) Activities sponsored by other Federal agencies.
    (b) During the time that nonexpendable personal property is held for 
use on the project for which it was acquired, the Grantee shall make it 
available for use on other projects if such other use will not interfere 
with the work on the project for which the property was originally 
acquired. First preference for such other use shall be given to FmHA or 
its successor agency under Public Law 103-354 sponsored projects. Second 
preference will be given to other Federally sponsored projects.
    2. Disposition of nonexpendable property. When the Grantee no longer 
needs the property as provided in paragraph (a) above, the property may 
be used for other activities in accordance with the following standards:
    (a) Nonexpendable property with a unit acquisition cost of less than 
$1000. The Grantee may use the property for other activities without 
reimbursement to the Federal Government or sell the property and retain 
the proceeds.
    (b) Nonexpendable personal property with a unit acquisition cost of 
$1000 or more. The Grantee may retain the property for other uses 
provided that compensation is made to the original Grantor agency or its 
successor. The amount of compensation shall be computed by applying the 
percentage of Federal participation in the cost of the original project 
or program to the current fair market value of the property. If the 
Grantee has no need for the property and the property has further use 
value, the Grantee shall request disposition instructions from the 
original Grantor agency.
    The Grantor agency shall determine whether the property can be used 
to meet the agency's requirements. If no requirement exists within the 
agency, the availability of the property shall be reported, in 
accordance with the guidelines of the Federal Property Management 
Regulations (FPMR), to the General Services Administration by the 
Grantor agency to determine whether a requirement for the property 
exists in other Federal agencies. The Grantor agency shall issue 
instructions to the Grantee no later

[[Page 355]]

than 120 days after the Grantee request and the following procedures 
shall govern:
    (1) If so instructed or if disposition instructions are not issued 
within 120 calendar days after the Grantee's request, the Grantee shall 
sell the property and reimburse the Grantor agency an amount computed by 
applying to the sales proceeds the percentage of Federal participation 
in the cost of the original project or program. However, the Grantee 
shall be permitted to deduct and retain from the Federal share $100 or 
ten percent of the proceeds, whichever is greater, for the Grantee's 
selling and handling expenses.
    (2) If the Grantee is instructed to ship the property elsewhere the 
Grantee shall be reimbursed by the benefitting Federal agency with an 
amount which is computed by applying the percentage of the Grantee 
participation in the cost of the original grant project or program to 
the current fair market value of the property, plus any reasonable 
shipping or interim storage costs incurred.
    (3) If the Grantee is instructed to otherwise dispose of the 
property, the Grantee shall be reimbursed by the Grantor agency for such 
costs incurred in its disposition.
    3. The Grantee's property management standards for nonexpendable 
personal property shall also include:
    (a) Property records which accurately provide for: a description of 
the property; manufacturer's serial number or other identification 
number; acquisition date and cost; source of the property; percentage 
(at the end of budget year) of Federal participation in the cost of the 
project for which the property was acquired; location, use and condition 
of the property and the date the information was reported; and ultimate 
disposition data including sales price or the method used to determine 
current fair market value if the Grantee reimburses the Grantor for its 
share.
    (b) A physical inventory of property shall be taken and the results 
reconciled with the property records at least once every two years to 
verify the existence, current utilization, and continued need for the 
property.
    (c) A control system shall be in effect to insure adequate 
safeguards to prevent loss, damage, or theft of the property. Any loss, 
damage, or theft of nonexpendable property shall be investigated and 
fully documented.
    (d) Adequate maintenance procedures shall be implemented to keep the 
property in good condition.
    (e) Proper sales procedures shall be established for unneeded 
property which would provide for competition to the extent practicable 
and result in the highest possible return.
    This Grant Agreement covers the following described nonexpendable 
property (use continuation sheets as necessary).
    L. Provide Financial Management Systems which will include:
    1. Accurate, current, and complete disclosure of the financial 
results of each grant. Financial reporting will be on an accrual basis.
    2. Records which identify adequately the source and application of 
funds for grant-supported activities. Those records shall contain 
information pertaining to grant awards and authorizations, obligations, 
unobligated balances, assets, liabilities, outlays, and income.
    3. Effective control over and accountability for all funds, property 
and other assets. Grantees shall adequately safeguard all such assets 
and shall assure that they are used solely for authorized purposes.
    4. Accounting records supported by source documentation.
    M. Retain financial records, supporting documents, statistical 
records, and all other records pertinent to the grant for a period of at 
least three years after grant closing except that the records shall be 
retained beyond the three-year period if audit findings have not been 
resolved. Microfilm copies may be substituted in lieu of original 
records. The Grantor and the Comptroller General of the United States, 
or any of their duly authorized representatives, shall have access to 
any books, documents, papers, and records of the Grantee's government 
which are pertinent to the specific grant program for the purpose of 
making audits, examinations, excerpts and transcripts.
    N. Provide information as requested by the Grantor to determine the 
need for and complete any necessary Environmental Impact Statements.
    O. Provide an audit report prepared in sufficient detail to allow 
the Grantor to determine that funds have been used in compliance with 
the proposal, any applicable laws and regulations and this Agreement.
    P. Agree to account for and to return to Grantor interest earned on 
grant funds pending their disbursement for program purposes when the 
Grantee is a unit of local government. States and agencies or 
instrumentalities of states shall not be held accountable for interest 
earned on grant funds pending their disbursement.
    Q. Not encumber, transfer or dispose of the property or any part 
thereof, furnished by the Grantor or acquired wholly or in part with 
Grantor funds without the written consent of the Grantor except as 
provided in item J above.
    R. To include in all contracts for construction or repair a 
provision for compliance with the Copeland ``Anti-Kick Back'' Act (18 
U.S.C. 874) as supplemented in Department of Labor regulations (29 CFR, 
part 3). The Grantee shall report all suspected or reported violations 
to the Grantor.

[[Page 356]]

    S. Pay all laborers and mechanics employed by contractors and 
subcontractors wages at rates not less than those prevailing on similar 
construction in the locality as determined by the Secretary of Labor in 
accordance with the Davis-Bacon Act, as amended (40 U.S.C. 276a-276a-5).
    T. In construction contracts in excess of $2,000 and in other 
contracts in excess of $2,500 which involve the employment of mechanics 
or laborers, to include a provision for compliance with Sections 103 and 
107 of the Contract Work Hours and Safety Standards Act (40 U.S.C. 327-
330) as supplemented by Department of Labor regulations (29 CFR, part 
5).
    U. To include in all contracts in excess of $100,000 a provision 
that the contractor agrees to comply with all the requirements of 
Section 114 of the Clean Air Act (42 U.S.C. Sec. 1875C-9) and Section 
308 of the Water Pollution Control Act specified in Section 114 of the 
Clean Air Act and Section 308 of the Water Pollution Control Act and all 
regulations and guidelines issued thereunder after the award of the 
contract. Such regulations and guidelines can be found in 40 CFR 15.4 
and 40 FR 17126 dated April 16, 1975. In so doing the Contractor further 
agrees:
    1. As condition for the award of contract to notify the Owner of the 
receipt of any communication from the Environmental Protection Agency 
(EPA) indicating that a facility to be utilized in the performance of 
the contract is under consideration to be listed on the EPA list of 
Violating Facilities. Prompt notification is required prior to contract 
award.
    2. To certify that any facility to be utilized in the performance of 
any nonexempt contractor subcontract is not listed on the EPA list of 
Violating Facilities. Prompt notification is required prior to contract 
award.
    3. To include or cause to be included the above criteria and the 
requirements in every nonexempt subcontract and that the Contractor will 
take such action as the Government may direct as a means of enforcing 
such provisions.
    As used in these paragraphs the term facility means any building, 
plan, installation, structure, mine, vessel or other floating craft, 
location, or site of operations, owned, leased, or supervised by a 
Grantee, cooperator, contractor, or subcontractor, to be utilized in the 
performance of a grant, agreement, contract, subgrant, or subcontract. 
Where a location or site of operation contains or includes more than one 
building, plant, installation, or structure, the entire location shall 
be deemed to be a facility except where the Director, Office of Federal 
Activities, Environmental Protection Agency, determines that independent 
facilities are co-located in one geographical area.
    Grantor agrees that it: A. Will make available to Grantee for the 
purpose of this Agreement not to exceed $---------- which it will 
advance to Grantee to meet not to exceed ---- percent of the development 
costs of the project in accordance with the actual needs of Grantee as 
determined by Grantor.
    B. Will assist Grantee, within available appropriations, with such 
technical assistance as Grantor deems appropriate in planning the 
project and coordinating the plan with local official comprehensive 
plans and with any State or area plans for the area in which the project 
is located.
    C. At its sole discretion and at any time may give any consent, 
deferment, subordination, release, satisfaction, or termination of any 
or all of Grantee's grant obligations, with or without available 
consideration, upon such terms and conditions as Grantor may determine 
to be (1) advisable to further the purpose of the grant or to protect 
Grantor's financial interest therein and (2) consistent with both the 
statutory purposes of the grant and the limitations of the statutory 
authority under which it is made.

                      Termination of This Agreement

    This agreement may be terminated for cause in the event of default 
on the part of the Grantee as provided in paragraph I above or for 
convenience of the Grantor and Grantee prior to the date of completion 
of the grant purpose. Termination for convenience will occur when both 
the Grantee and Grantor agree that the continuation of the project will 
not produce beneficial results commensurate with the further expenditure 
of funds.
    In witness whereof Grantee on the date first above written has 
caused these presence to be executed by its duly authorized
________________________________________________________________________
and attested and its corporated seal affixed by its duly authorized
________________________________________________________________________
ATTEST:
By______________________________________________________________________
 (Title)
By______________________________________________________________________
 (Title)
United States of America, Farmers Home Administration or its successor 
agency under Public Law 103-354
By______________________________________________________________________
 (Title)

[44 FR 59199, Oct. 15, 1979, as amended at 55 FR 6245, Feb. 22, 1990]

      Exhibit G to Subpart D of Part 1944--Legal Service Agreement

    Agreement made this ------------------ day of ------------------, 
19----
between the ------------------,
hereinafter called the owners, and ------------,
hereinafter called the attorney, witnesseth:

[[Page 357]]

    Whereas the owners intent to form a corporation, hereinafter called 
the corporation, to construct and operate a labor housing project in
Town____________________________________________________________________
County__________________________________________________________________
State___________________________________________________________________
and to obtain a loan from the Farmers Home Administration or its 
successor agency under Public Law 103-354 to finance the construction, 
and the attorney agrees to perform all legal services necessary to 
incorporate the Corporation, and to perform all other customary legal 
services necessary to the organization, financing, construction, and 
initial operation of the proposed rural rental housing project, such 
services to include but not to be restricted to the following:
    1. Prepare and file necessary incorporating papers and supervise and 
assist in taking other necessary or incidental actions to create the 
Corporation and authorize it to finance, construct, and operate the 
proposed housing project.
    2. Prepare for, and furnish advice and assistance to the owners, and 
to the Board of Directors and officers of the Corporation, in connection 
with (a) notices and conduct of meetings; (b) preparation of minutes of 
meetings; (c) preparation and adoption of necessary resolutions in 
connection with the authorization, financing, construction, and initial 
operation of a rural rental housing project; (d) necessary construction 
contracts; (e) preparation of adoption of bylaws and related documents; 
(f) any other action necessary for organizing the Corporation or 
financing, constructing, and initially operating the proposed housing 
project.
    3. Review of construction contract, bid-letting procedure, and 
surety and performance bonds.
    4. Examination of real estate titles and preparation, review, and 
recording of deeds and any other instruments.
    5. Cooperation with the architect employed by the owners or the 
Corporation in connection with preparation of survey sheets, easements, 
and any other necessary title documents, construction contracts, and 
other instruments.
    6. Rendering of legal opinions as required by the owners or the 
Corporation or the Farmers Home Administration or its successor agency 
under Public Law 103-354, United States Department of Agriculture.
    7. Owners agree to pay to the attorney for professional services in 
accordance with this agreement, as follows:
________________________________________________________________________
________________________________________________________________________
The fees to be payable in the following manner and at the following 
times:
________________________________________________________________________
________________________________________________________________________
The attorney states and agrees that of the above total fees, ----------
---------- represents fees for services in connection with the 
organization and incorporation of the Corporation.
    The owners and the attorney further covenant and agree that, if upon 
organization and incorporation the Corporation fails or refuses to adopt 
and ratify this Agreement by appropriate resolution within ------ days, 
this Agreement shall terminate and owners shall be liable only for 
payment for legal services rendered in connection with such organization 
and incorporation.
    Signed this -------------------- day of --------------------, 19--
--.
Attorney:_______________________________________________________________
Owners:_________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________

[44 FR 59199, Oct. 15, 1979]

     Exhibit H to Subpart D of Part 1944--Information Pertaining to 
 Preparation of Notes or Bonds and Bond Transcript Documents for Public 
                             Body Applicants

    This exhibit includes information for use by public body applicants 
in the preparation and issuance of evidences of debt (``bonds'' or 
``debt instruments''). This information is made available to applicants 
as appropriate for application processing and loan docket preparation.
    (1) Policies. (i) This exhibit outlines the policies of the Farmers 
Home Administration (FmHA) or its successor agency under Public Law 103-
354 with respect to preparation and issuance of evidences of debt 
(hereinafter sometimes referred to as ``bonds'' or ``debt 
instruments'').
    (ii) Preparation of the bonds and the bond transcript documents will 
be the responsibility of the applicant. Public body applicants will 
obtain the services and opinion of recognized Bond Counsel with respect 
to the validity of a bond issue. The applicant normally will be 
represented by a local attorney who will obtain the assistance of a 
recognized Bond Counsel firm which has had experience in municipal 
financing with such investors as investment dealers, banks, and 
insurance companies.
    (iii) At the option of the applicant for issues of $250,000 or less, 
Bond Counsel may be used for the issuance of a final opinion only and 
not for the preparation of the other documents and of the bond docket 
when the applicant, FmHA or its successor agency under Public Law 103-
354, and Bond Counsel have agreed in advance as to the method of

[[Page 358]]

preparation of the bond transcript documents. Under such circumstances 
the applicant will be responsible for the preparation of the bond 
transcript documents.
    (iv) At the option of the applicant and with the prior approval from 
the National Office of FmHA or its successor agency under Public Law 
103-354, for issues of $50,000 or less, the applicant need not use Bond 
Counsel if:
    (A) The amount of the issue does not exceed $50,000 and the 
applicant recognizes and accepts the fact that processing the 
application may require additional legal and administrative time.
    (B) There is a significant cost saving to the applicant particularly 
with reference to total legal fees after determining what Bond Counsel 
would charge as compared with what the local attorney will charge 
without Bond Counsel.
    (C) The local attorney is able and experienced in handling this type 
of legal work.
    (D) The applicant understands that, if it is required by FmHA or its 
successor agency under Public Law 103-354 to refinance its loan pursuant 
to the statutory refinancing requirements, it will probably have to 
obtain at its expense a Bond Counsel's opinion at that time.
    (E) All bonds will be prepared in accordance with this regulation 
and will conform as nearly as possible to accepted methods of 
preparation of similar bonds in the area.
    (F) Many matters necessary to comply with FmHA or its successor 
agency under Public Law 103-354 requirements such as land rights, 
easements, and organizational documents will be handled by the 
applicant's local attorney. Specific closing instructions in addition to 
any requirements of Bond Counsel will be issued by the Office of the 
General Counsel of the U.S. Department of Agriculture for the guidance 
of FmHA or its successor agency under Public Law 103-354.
    (2) Bond transcript documents. Any questions with respect to FmHA or 
its successor agency under Public Law 103-354 requirements should be 
discussed with local FmHA or its successor agency under Public Law 103-
354 representatives. Bond Counsel is required to furnish at least two 
complete sets of the following to the applicant, who will furnish one 
complete set to FmHA or its successor agency under Public Law 103-354:
    (i) Copies of all organizational documents.
    (ii) Copies of general incumbency certificate.
    (iii) Certified copies of minutes or excerpts therefrom of all 
meetings of the applicant's governing body at which action was taken in 
connection with the authorization and issuance of the bonds.
    (iv) Certified copies of documents evidencing that the applicant has 
complied fully with all statutory requirements incident to calling and 
holding of a favorable bond election, if such an election is necessary 
in connection with bond issuance.
    (v) Certified copies of the resolutions or ordinances or other 
documents, such as the bond authorizing resolution or ordinance and any 
resolution establishing rates and regulating the use of the improvement, 
if such documents are not included in the minutes furnished.
    (vi) Copies of official Notice of Sale and affidavit of publication 
of Notice of Sale where a public sale is required by State statute.
    (vii) Specimen bond, with any attached coupons.
    (viii) Attorney's no-litigation certificate.
    (ix) Certified copies of resolutions or other documents pertaining 
to the bond award.
    (x) Any additional or supporting documents required by Bond Counsel.
    (xi) For loans involving multiple advances of FmHA or its successor 
agency under Public Law 103-354 loan funds, a preliminary approving 
opinion of Bond Counsel if a final unqualified opinion cannot be 
obtained until all funds are advanced. The preliminary opinion for the 
entire issue shall be delivered on or before the first advance of loan 
funds and state that the applicant has the legal authority to issue the 
bonds, construct, operate and maintain the facility, and repay the loan 
subject only to changes during the advance of funds such as litigation 
resulting from the failure to advance loan funds, and receipt of closing 
certificates.
    (xii) Preliminary approving opinion, if any, and final unqualified 
approving opinion of recognized Bond Counsel including opinion regarding 
interest on bonds being exempt from Federal and any State income taxes. 
On approval of the Administrator, a final opinion may be qualified to 
the extent that litigation is pending relating to Indian claims that may 
affect title to land or validity of the obligation.
    (3) Interim financing from commercial sources during construction 
period for loans of $50,000 or more. In all cases where it is possible 
for funds to be borrowed at reasonable interest rates on an interim 
basis from commercial sources, such interim financing will be obtained 
so as to preclude the necessity for multiple advances of FmHA or its 
successor agency under Public Law 103-354 funds.
    (4) Permanent instruments for FmHA or its successor agency under 
Public Law 103-354 loans to repay interim commercial financing. Such 
loans will be evidenced by one of the types of instruments in the order 
of preference shown in paragraph (a)(5) of this exhibit.
    (5) Multiple advances of FmHA or its successor agency under Public 
Law 103-354 funds using permanent instruments. Where interim financing 
from commercial sources is not available, FmHA or its successor agency 
under Public Law 103-354 loan proceeds will be disbursed on an ``as 
needed by borrower''

[[Page 359]]

basis in amounts not to exceed the amount needed during 30-day periods. 
FmHA or its successor agency under Public Law 103-354 loans will be 
evidenced by the following types of instruments chosen in accordance 
with the following order of preference:
    (i) First preference--Form 1944-52. If legally permissible, use Form 
FmHA or its successor agency under Public Law 103-354 1944-52, 
``Multiple Family Housing Promissory Note.''
    (ii) Second preference--single instrument with amortized 
installments. If Form FmHA or its successor agency under Public Law 103-
354 1944-52 is not legally permissible, use a single instrument showing 
on the face the full amount of the loan and providing for amortized 
installments with provisions for entering the date and amount of each 
FmHA or its successor agency under Public Law 103-354 advance on the 
reverse thereof or an attachment to the instrument. Form FmHA or its 
successor agency under Public Law 103-354 1944-52 should be followed to 
the extent possible. The first amortized payment will be due one 
amortized payment period following the AED.
    See the FMI for Form FmHA or its successor agency under Public Law 
103-354 1944-52 for specific instructions.
    (iii) Third preference--single instrument with installments of 
principal plus interest. If a single amortized installment instrument is 
not legally permissible, use a single instrument providing for specified 
installments of principal plus accrued interest. The principal should be 
in an amount best adapted to making principal retirement and interest 
payments which closely approximate equal installments of combined 
interest and principal as required by the first two preferences.
    (A) The repayment terms described in paragraph (a)(5)(ii) of this 
exhibit ``Second preference'' apply.
    (B) The instruments shall contain in substance the following 
provisions:
    (1) A statement of principal maturities and due dates.
    (2) Payments made on indebtedness evidenced by this instrument, 
regardless of when made, shall be applied first to interest due through 
the date of payment and next to principal except that payments made from 
security depleting sources shall, after payment of interest to the 
payment date, be applied to the principal last to become due under the 
instrument and shall not affect the obligation of the borrower to pay 
the remaining installments as scheduled.
    (iv) Fourth preference. If instruments described under the first, 
second, and third preferences are not legally permissible, use serial 
bonds with a bond or bonds delivered in the amount of each advance. 
Bonds will be delivered in the order of their numbers. Such bonds will 
conform with the minimum requirements of paragraph (7) of this exhibit. 
Rules for application of payments on serial bonds will be the same as 
those for principal installment single bonds as set out in the preceding 
paragraph (5)(iii) of this exhibit.
    (6) Multiple advances of FmHA or its successor agency under Public 
Law 103-354 funds using temporary debt instrument. When none of the 
instruments described in paragraph (5) of this exhibit are legally 
permissable or practical, a bond anticipation note or similar temporary 
debt instrument may be used. The debt instrument will provide for 
multiple advance of FmHA or its successor agency under Public Law 103-
354 loan funds and will be for the full amount of the FmHA or its 
successor agency under Public Law 103-354 loan. The instrument will be 
prepared by Bond Counsel and approved by the State Director and OGC. At 
the same time FmHA or its successor agency under Public Law 103-354 
delivers the last advance, the borrower will deliver the permanent bond 
instrument to FmHA or its successor agency under Public Law 103-354 to 
replace the temporary debt instrument and the canceled temporary 
instrument will be delivered to the borrower. The approved debt 
instrument will show at least the following:
    (i) The date from which each advance will bear interest.
    (ii) The interest rate.
    (iii) A payment schedule providing for interest on outstanding 
principal at least annually.
    (iv) A maturity date which shall be no earlier than the anticipated 
issuance date of the permanent instrument(s).
    (7) Minimum bond specifications. The provisions of paragraph (7) are 
of this exhibit minimum specifications only, and must be followed to the 
extent legally permissible.
    (i) Type and denominations. Bond resolutions or ordinances will 
provide that the instrument(s) be either a bond representing the total 
amount of the indebtedness or Serial bonds in denominations customarily 
accepted in municipal financing (ordinarily in multiples of not less 
than $1,000). Single bonds may provide for either repayment of principal 
plus interest or amortized installments; amortized installments are 
preferable from the standpoint of FmHA. Coupon bonds will not be used 
unless required by statute.
    (ii) Bond registration. Bonds will contain provisions permitting 
registration as to both principal and interest. Bonds purchased by FmHA 
will be registered in the name of ``United States of America, Farmers 
Home Administration, or its successor agency under Public Law 103-354'' 
and will remain so registered at all times while the bonds are held or 
insured by the United States. The address of FmHA for registration 
purposes will be that of the FmHA or its successor agency under Public 
Law 103-354 Finance office.
    (iii) Size and quality. Size of bonds and coupons should conform to 
standard practice.

[[Page 360]]

Paper must be of sufficient quality to prevent deterioration through 
ordinary handling over the life of the loan.
    (iv) Date of bonds. Bonds will be dated as of the day of delivery.
    (v) Payment date. Insofar as loan payments are consistent with 
income availability, applicable State statutes, and commercial customs 
in the preparation of bonds or other evidence of indebtedness, they 
should be scheduled on a monthly basis either in the bond or other 
evidence of indebtedness or through the use of a supplemental agreement. 
Such requirements will be accomplished not later than the time of loan 
closing. When monthly payments are required, such payments will be 
scheduled beginning one full month following the date of loan closing or 
the end of any approved deferment period. Subsequent monthly payments 
will be scheduled each full month thereafter. In those cases where 
evidence of indebtedness calls for annual or semiannual payments, they 
will be scheduled beginning six or twelve full months, respectively 
following the date of loan closing or the end of any approved deferment 
period. Subsequent payments will be scheduled each sixty or twelfth full 
month respectively, thereafter. When the evidence of indebtedness is 
dated the 29th, 30th, or 31st day of a month, the payment date will be 
scheduled the 28th day of the month. Borrowers scheduled to make monthly 
payments will be given a monthly payment card jacket at the time of loan 
closing. These borrowers will submit payment directly to the Finance 
Office.
    (vi) Place of payment. Payments on bonds purchased by FmHA or its 
successor agency under Public Law 103-354 should be submitted to the 
FmHA or its successor agency under Public Law 103-354 Finance Office by 
the borrower.
    (vii) Redemptions. Bonds should contain customary redemption 
provisions, subject, however, to unlimited right of redemption without 
premium of any bonds held by FmHA or its successor agency under Public 
Law 103-354 except to the extent limited by the provisions under the 
``Third Preference'' and ``Fourth Preference'' in paragraph (5) of this 
exhibit.
    (viii) Additional revenue bonds. Parity bonds may be issued to 
complete the project. Otherwise, parity bonds may not be issued unless 
the net revenues (that is, unless otherwise defined by the State 
statute, gross revenues less essential operation and maintenance 
expense) for the fiscal year preceding the year in which such parity 
bonds are to be issued were 120 percent of the average annual debt 
service requirements on all bonds then outstanding and those to be 
issued; provided, that this limitation may be waived or modified by the 
written consent of bondholders representing 75 percent of the then 
outstanding principal indebtedness. Junior and subordinate bonds may be 
issued without restriction.
    (ix) Scheduling of FmHA or its successor agency under Public Law 
103-354 payments when joint financing is involved. In all cases in which 
FmHA or its successor agency under Public Law 103-354 is participating 
with another lender in the joint financing of the project to supply 
funds required by one applicant, the FmHA or its successor agency under 
Public Law 103-354 payments of principal and interest should approximate 
amortized installments.
    (x) Precautions. The following types of provisions in debt 
instruments should be avoided.
    (A) Provisions for the holder to manually post each payment to the 
instrument.
    (B) Provisions for returning the permanent or temporary debt 
instrument to the borrower in order that it, rather than FmHA or its 
successor agency under Public Law 103-354, may post the date and amount 
of each advance or repayment on the instrument.
    (8) Bidding by FmHA or its successor agency under Public Law 103-
354. Where a public bond sale is required by State statutes, FmHA or its 
successor agency under Public Law 103-354 will not normally submit a bid 
at the advertised sale unless State statutes require a bid to be 
submitted. Preferably FmHA or its successor agency under Public Law 103-
354 will negotiate the purchase with the applicant subsequent to the 
advertised sale if no acceptable bid is received. In those cases where 
FmHA or its successor agency under Public Law 103-354 is required to 
bid, the bid will be made at the applicable FmHA or its successor agency 
under Public Law 103-354 interest rate.

[44 FR 59199, Oct. 15, 1979, as amended at 50 FR 8593, Mar. 4, 1985]

 Exhibit I to Subpart D of Part 1944--Guide Letter for Use in Informing 
  Interim Lender of FmHA or Its Successor Agency Under Public Law 103-
                            354's Commitment

Name and Address of Private Lender______________________________________
________________________________________________________________________
________________________________________________________________________
Dear------------------------:

                           (For Organizations)

    Reference is made to a request from the (Smith Housing Assoc.) 
through (John Smith) its President, for interim financing from your firm 
to construct a rental housing facility at the interest rate and terms 
and conditions agreed upon as reflected in the attached letter.

                            (For Individuals)

    Reference is made to a request from (John Jones) for interim 
financing from your firm

[[Page 361]]

to construct a rental housing facility at the interest rate and terms 
and conditions agreed upon as reflected in the attached letter.
    This letter is to confirm certain understandings on behalf of the 
Farmers Home Administration (FmHA) or its successor agency under Public 
Law 103-354.
    Final drawings, specifications, and all other contracts documents 
have been prepared and approved, and the applicant is prepared to 
commence construction. It has been determined by the applicant and the 
Farmers Home Administration or its successor agency under Public Law 
103-354 that the conditions of loan closing can be met. Funds have been 
obligated for the project, as evidenced by the attached copy of Form 
FmHA or its successor agency under Public Law 103-354 1944-57, `Multiple 
Family Housing Acknowledgement of Obligated Funds/Check Request.'
    The applicant has been required by FmHA or its successor agency 
under Public Law 103-354 to deposit $------------ with your firm to be 
utilized prior to any interim loan funds. The applicant has proposed and 
FmHA or its successor agency under Public Law 103-354 has agreed that 
you may first advance any applicant funds on deposit, and then advance 
the proceeds of the interim loan in accordance with the terms and 
conditions stated in your attached letter, as needed to pay for 
construction and other authorized and legally eligible expenses incurred 
by the applicant. It is understood, however, that advances of both the 
applicant's funds and the interim loan funds will be made only upon 
presentation of proper statements and partial payment estimates prepared 
by the builder, and approved for payment by the consulting architect, 
the applicant, and the FmHA or its successor agency under Public Law 
103-354 District Director.
    We have scheduled the Farmers Home Administration or its successor 
agency under Public Law 103-354 loan to be closed when construction to 
be financed with loan funds is substantially complete in accordance with 
the FmHA or its successor agency under Public Law 103-354 approved 
contract documents, drawings and specifications (except for minor punch 
list items), and the applicant provides evidence indicating that there 
are no unpaid obligations outstanding in connection with the project. At 
that time, funds not exceeding the FmHA or its successor agency under 
Public Law 103-354 loan amount will be available to pay off the amount 
of loan advances your lending institution has made for authorized 
approved purposes, including accrued interest to the date of closing.
    FmHA or its successor agency under Public Law 103-354 cannot provide 
you with an unconditional letter of commitment guaranteeing FmHA or its 
successor agency under Public Law 103-354 loan closing. Factors such as 
noncompletion, default, unacceptable workmanship, and marked deviation 
from approved drawings and specifications could prevent the FmHA or its 
successor agency under Public Law 103-354 loan from being closed.
    These problems can be minimized by making a thorough review of the 
[contract documents,]* drawings and specifications, evaluating the 
qualifications and past performance of the builder, and obtaining an 
adequate corporate surety bond guaranteeing both payment and 
performance.
    The following are additional safeguards to help assure FmHA or its 
successor agency under Public Law 103-354 loan closing:
    1. We invite you or your representatives to accompany FmHA or its 
successor agency under Public Law 103-354 personnel during construction 
inspections so that at least 3 or 4 joint inspections at critical points 
during construction (including the final inspection), can be made to 
help assure that construction is proceeding in accordance with the FmHA 
or its successor agency under Public Law 103-354 approved drawings and 
specifications.
    2. FmHA or its successor agency under Public Law 103-354 will 
maintain its commitment in the amount of the obligated loan funds for a 
reasonable period of time after the expiration of any specified 
completion dates, provided work on the project is progressing 
satisfactorily and any identified problems have been resolved.
    3. FmHA or its successor agency under Public Law 103-354 will not 
arbitrarily abandon your lending institution in the event of default. 
Should the contractor default, FmHA or its successor agency under Public 
Law 103-354 will attempt to provide financial assistance to the 
applicant in accordance with our administrative procedures and lending 
requirements, provided a new contractor can complete the project for a 
total cost within the security value of the project. If this is not 
possible, or should the FmHA or its successor agency under Public Law 
103-354 loan applicant become unable or unwilling to continue with the 
project, FmHA or its successor agency under Public Law 103-354 also will 
attempt to provide financial assistance to any eligible applicant 
(subject to the availability of funds, our administrative procedures, 
and our lending requirements), to purchase the completed project from 
your lending institution.
    4. FmHA or its successor agency under Public Law 103-354 is aware 
that circumstances, such as subsurface ground conditions and change 
orders necessitated by required changes in the work to be performed, may 
cause cost increases after FmHA or its successor agency under Public Law 
103-354 loan approval and the obligation of FmHA or its successor agency 
under Public Law 103-354 loan funds. It is a general practice for

[[Page 362]]

FmHA or its successor agency under Public Law 103-354 to make subsequent 
loans when necessary to help cover these eligible costs, provided 
additional loan funds are available, the change orders were approved by 
FmHA or its successor agency under Public Law 103-354, the increased 
costs are legitimate and are for authorized loan purposes, and the total 
cost of the project is within its security value.
    Your assistance to the applicant is appreciated.
    Sincerely,
                                                         State Director.

[44 FR 59199, Oct. 15, 1979, as amended at 50 FR 8593, Mar. 4, 1985]

             Exhibit J to Subpart D of Part 1944 [Reserved]

           Exhibit K to Subpart D of Part 1944--Loan Agreement

   (lh insured loan to farm borrowers to provide housing for the farm 
                     borrower's farming operations)

    A. General provisions:
    1. This agreement is entered into
    ---------------- (Date).
    2. This agreement is between ------------
(borrower's name whether one or more), whose mailing address is --------
----, and the United States of America, acting through the Farmers Home 
Administration or its successor agency under Public Law 103-354, United 
States Department of Agriculture (the Government).
    3. This agreement is made in return
for receiving Labor Housing (LH)
loan assistance from the Government
totaling $------------ as evidenced by a
Promissory Note dated ------------.
This assistance is made with the understanding that housing is to be 
provided to Domestic Farm Laborers on a rent free basis. Any rents 
collected without the written consent of the Government are the 
responsibility of the borrower and shall be refunded by the borrower to 
the tenants.
    4. The borrower agrees to comply with Government regulations 
governing the LH loan program.
    5. This agreement is in addition to any other agreements entered 
into with the Government, such as any promissory note, mortgage or deed 
of trust, loan approval requirements, etc.
    B. Rent and Occupancy.
    Occupancy of the housing will be limited to domestic farmworkers or 
migrant farmworkers as defined by the Government, unless the Government 
gives prior written approval for other occupancy, except that in no case 
will a member of the borrower's immediate family occupy the housing.
    The borrower agrees:
    1. To meet the LH loan objectives by providing decent, safe, and 
sanitary housing for eligible tenants;
    2. To provide the housing rent free to eligible farmworker tenants;
    3. To get the Government's prior approval before collecting utility 
charges (i.e. electricity, fuel, water, waste disposal, etc.) or 
requiring a refundable damage deposit or cleaning fee from tenants;
    4. To get the Government's prior approval if there is a need to 
permit occupancy by tenants who are not working in the borrower's 
farming operation or not normally eligible to occupy the housing unit; 
and
    5. To get the Government's prior approval if there is a need to 
charge rent to tenants or change any existing rents. To provide a 
management plan, which meets requirements set out in Government 
regulations, whenever rents are charged to tenants. The management plan 
will describe how the housing operation will be conducted.
    C. Recordkeeping.
    The borrower agrees:
    1. To provide the Government financial information as required by 
Government regulations;
    2. To provide annual verification of employment of eligible tenants 
as occupancy changes, not less than once per year; and
    3. To keep information required by Government regulations and make 
the information available for Government inspection, to include tenant 
nonrent affidavits.
    D. Compliance with Federal, State, and Local Laws and Regulations.
    The borrower agrees to comply with applicable Federal, State, and 
local laws and regulations, including but not limited to, the following:
    1. To provide equal housing opportunities to tenants;
    2. To operate the housing in a safe environment;
    3. To maintain comprehensive property insurance on the property 
taken as security;
    4. To pay taxes and assessments on the property taken as security; 
and
    5. To make the security property available for inspection by the 
Government.
    E. Disposition of LH Security Property.
    The borrower agrees:
    1. Not to sell or otherwise dispose of property taken as security 
for the LH loan without the Government's prior written approval;
    2. Not to sell or enter into any business arrangement which may 
potentially or actually place the housing operation under the management 
or control of another party without the prior approval of the 
Government; and
    3. To prohibit any liens to be taken on the security property 
without the prior approval of the Government.
    F. Enforcement Considerations.

[[Page 363]]

    The. borrower understands that any violation of the terms of this 
agreement may enable the Government to declare the note immediately due 
and payable and may adversely affect the borrower's ability to obtain 
other Government loans or grants.
    G. General Provisions.
    This agreement may be cited in the
security instrument and other
Instruments or agreements as the
``Loan Agreement of ------------ 19--.''
(date of this instrument)

    H. Signature(s).

Signature of Borrower

Witness

Signature of Borrower

Witness

[57 FR 59905, Dec. 17, 1992]

                  Exhibit K-1 to Subpart D of Part 1944

Date____________________________________________________________________
    SUBJECT: Verification of Domestic Farm Labor and Occupancy in Rent 
Free Housing

----------------(borrower's name or the farm's business name)

    On------------, --, I/We became the occupant(s) of the rent free 
dwelling owned by the above named borrower. The dwelling is provided as 
a condition of my farm labor employment.
    If the rent free status changes, I/we will notify the Farmers Home 
Administration or its successor agency under Public Law 103-354 at:

------------------------ Office
------------------------ Phone number
------------------------
------------------------

------------------------, occupant
------------------------
------------------------

    Distribution:

    Original to occupant.
    1 copy for borrower's records to be kept available for inspection 
upon request by Farmers Home Administration or its successor agency 
under Public Law 103-354 for all current tenants.

[57 FR 59905, Dec. 17, 1992]

             Exhibit L to Subpart D of Part 1944 [Reserved]

                   Exhibit M to Subpart D of Part 1944

          market rent determination for labor housing projects

    I. Objective. The objective of this exhibit is to provide guidance 
for a market rent determination for Labor Housing (LH) when the 
farmworker is not required to live on the farm (Sec. 1944.176(d)(5) of 
this subpart) or when it is necessary to determine a rent for farmer 
owned housing.
    II. Purpose. When an eligible farmworker becomes ineligible because 
of above-moderate-income and has been granted permission to continue 
residing in the unit in accordance with paragraph VI B 5 or 6 of exhibit 
B of subpart C of part 1930 of this chapter, then an appropriate rent 
must be formulated that must not exceed the market rent for the local 
area as determined in accordance with the provisions set out in this 
exhibit.
    III. Determination. Whenever a market rent determination is required 
for one or more LH resident(s), the market rent will be computed by 
using the most recently approved Form FmHA or its successor agency under 
Public Law 103-354 1930-7, ``Statement of Budget and Cash Flow,'' and 
substituting a new debt service computation based on the project's 
development cost. The amortization factor for the Farm Labor Housing-
State Director Exception interest rate as published in FmHA Instruction 
440.1 (available in any FmHA or its successor agency under Public Law 
103-354 office) will be used with a 33 year term. The rate used for 
amortization for debt service in the market rent budget should be 
rounded down to the nearest eighth of a percent. For example, 9.95 
percent would be rounded to 9.875. The market rent is computed on a 
basis of the project's initial development cost and subsequent loans and 
grants. In contrast, the ``basic'' rent debt service is computed 1 
percent loans offset by the construction grants.
    The market rent determination, one set, will remain in place for the 
project; therefore, the determination must be recorded in a narrative 
statement which must be filed with the Promissory Note.
    IV. Limitations. If the market rent determined in the proceeding 
paragraph is found to exceed the conventional market rents in the area 
(within an approximate 48 kilometer or (30 mile) radius or the effective 
market area or other appropriate geographical or local boundary) by more 
than $20, then the LH market rent will be limited to the prevailing 
market rent. Prevailing market rents may be determined from such sources 
as recent Rural Rental Housing Market studies or recent area classified 
advertisements (within the last two months), documented, and adjusted 
for comparability. Documentation should be similar to the information 
found in exhibit A-4 of this subpart, with the advertisements attached. 
The adjustment for comparability should consider unit size, bedroom mix, 
age, and amenities. This rental determination is not intended to survey 
housing used exclusively for farm labor rental housing, but to determine 
a fair conventional market rent for an

[[Page 364]]

above-moderate-income farmworker and family.

[57 FR 59906, Dec. 17, 1992]



  Subpart E_Rural Rental and Rural Cooperative Housing Loan Policies, 
                     Procedures, and Authorizations

    Source: 53 FR 2159, Jan. 26, 1988, unless otherwise noted.

    Effective Date Note: At 69 FR 69105, Nov. 26, 2004, Subpart E was 
removed and reserved, effective Feb. 24, 2005.



Sec. 1944.201  General.

    This subpart sets forth the policies and procedures and delegates 
authority for making Rural Rental Housing (RRH) and Rural Cooperative 
Housing (RCH) loans under sections 515 and 521 of the Housing Act of 
1949. Any processing or servicing activity conducted pursuant to this 
subpart involving authorized assistance to FmHA or its successor agency 
under Public Law 103-354 employees, members of their families, known 
close relatives, or business or close personal associates, is subject to 
the provisions of subpart D of part 1900 of this chapter. Applicants for 
this assistance are required to identify any known relationship or 
association with an FmHA or its successor agency under Public Law 103-
354 employee.

[56 FR 2232, Jan. 22, 1991, as amended at 58 FR 227, Jan. 5, 1993]



Sec. 1944.202  Objective.

    The basic objective of RRH and RCH loans is to provide eligible 
persons with economically designed and constructed rental or cooperative 
housing and related facilities suited to their living requirements.

[56 FR 2232, Jan. 22, 1991]



Sec. Sec. 1944.203-1944.204  [Reserved]



Sec. 1944.205  Definitions.

    Accessible. When used in respect to the public and common use area 
of a building containing covered multi-family dwellings, means that 
these areas of the building can be approached, entered, and used by 
individuals with handicaps.
    Adviser to the board. An individual or organization who will work 
with and provide guidance to a cooperative board.
    Agency. The Rural Housing Service within the Rural Development 
mission area of the U.S. Department of Agriculture or its successor 
agency which administers Section 515 loans and Section 521 rental 
assistance.
    Amortization effective date (AED). A date established by the 
accounting system on which advanced principal and any accrued interest 
is combined and amortized to establish a schedule of payments. This date 
is always the first day of a month.
    Articles of incorporation. A document filed with a government agency 
containing information about the organization's structure and operation.
    Board and directors. The governing body and members of the governing 
body of an organization.
    Bylaws. Rules adopted by an organization to govern the conduct of 
its affairs.
    Census Designated Place (CDP). An unincorporated population center 
identified by the Census Bureau.
    Community. Cities, towns, boroughs, villages and unincorporated 
places which have the characteristics of an incorporated area and are 
easily identifiable as established concentrations of inhabited dwellings 
located in rural areas as defined in 7 CFR part 3550.
    Congregate housing. Residential housing, for persons or families who 
are elderly, have handicaps or disabilities, consisting of private 
apartments and central dining facilities in which a number of specific 
pre-established services are provided to tenants (short of those 
services provided by a health care facility that provides health related 
care and services recognized by the medicaid program). Tenants requiring 
additional services not provided by the facility will acquire them or 
provide for them with their own financial, familial or social resources.
    Consolidated Plan. A plan developed by a community or state 
addressing community planning and development that is used to support 
requests for assistance from the Department of Housing and Urban 
Development.

[[Page 365]]

    Consumer cooperative. A corporation which:
    (1) Is organized under the cooperative laws of a State or Federally 
recognized Indian tribe;
    (2) Will own and operate the housing on a cooperative basis solely 
for the benefit of the members;
    (3) Will operate at cost and, for this purpose, any patronage 
refunds accruing to members as defined in Sec. 1944.205 of this subpart 
will not be considered gains or profits; and
    (4) Will restrict membership in the housing to eligible persons and, 
to any extent the cooperative and FmHA or its successor agency under 
Public Law 103-354 permit, to others in special circumstances.
    Dealer-contractor. A person, firm, partnership or corporation in the 
business of selling and servicing manufactured homes and developing 
sites for manufactured homes for persons who purchase such homes for 
purposes other than resale. Dealer-contractors will be qualified as 
shown in 7 CFR part 3550, except all processing will be handled by the 
servicing official rather than the County Supervisor.
    Development cost. The cost of constructing, purchasing, improving, 
altering, or repairing housing and related facilities and the value or 
cost of purchasing and improving the necessary land. Costs that can be 
paid for with RRH and RCH loan funds are detailed in Sec. 1944.212 of 
this subpart.
    Dwelling unit. A residence for a family of one or more persons, and 
includes, in addition to those that would normally come to mind, units 
in which sleeping accommodations are provided but toileting or cooking 
facilities are shared, such as dormitories or shelters for the homeless.
    Elderly (Senior Citizen). A person who is a least 62 years old. The 
term elderly (senior citizen) also means individuals with handicaps or 
disabilities as separately defined in this section, regardless of age.
    Elderly family. A household where the tenant, cotenant, member or 
comember (individual) is a least 62 years old, disabled, or handicapped 
as defined separately in this section. An elderly family may include a 
person(s) younger than 62 years of age who is essential to the care and 
well-being of the person who is elderly, disabled, and/or handicapped. 
(To receive an elderly family deduction, the person who is elderly, or 
has disabilities or handicaps must be the tenant, cotenant, member or 
comember.)
    Elderly household. A household where the tenant or co-tenant is at 
least 62 years of age, handicapped, or disabled as defined in Sec. 
1944.205(h) of this subpart. An elderly household may include a 
person(s) younger than 62 years of age who is essential to the elderly, 
handicapped, or disabled person's care and well-being. (To receive an 
elderly household deduction, the elderly, handicapped, or disabled 
person must be the tenant or cotenant.)
    Eligible tenants or cooperative members. Persons who are elderly, or 
have handicaps or disabilities and very low-, low-, or moderate-income 
households or any combination thereof as planned for the project and 
shown on the applicant's loan resolution or loan agreement and who meet 
the eligibility requirements of exhibit B to subpart C of part 1930 of 
this chapter. In the case of cooperative housing projects, all members 
must have a very low, low, or moderate income except that any member who 
is admitted as an eligible member of the cooperative may not 
subsequently be deprived of his/her membership or tenancy by reason of 
no longer meeting the income eligibility requirements as outlined in 7 
CFR 3550.53.
    EZ/EC. Empowerment Zone or Enterprise Community.
    Familial status. One or more individuals (who have not attained the 
age of 18) being domiciled with:
    (1) A parent or another person having legal custody of such 
individual or individuals; or
    (2) The designee of such parent or other person having such custody, 
with the written permission of such parent or other person, or a person 
who is pregnant or is in the process of securing legal custody of any 
individual who has not attained the age of 18 years.
    Gains or profits. For the purpose of the patronage capital refund, 
gains and profits do not include dividends payable on stock which is 
nonvoting, limited as to the amount of dividends that

[[Page 366]]

can be paid thereon and limited as to liquidation value in the event of 
corporate dissolution.
    Group home. Housing that is occupied by tenants who are elderly, or 
have handicaps, or disabilities sharing living space within a rental 
unit in which a group home resident assistant may be required.
    Household. One or more persons who maintain or will maintain 
residency in one rental or cooperative unit, but not including a 
resident assistant or chore service worker.
    HUD. The U.S. Department of Housing and Urban Development.
    Individual. A natural person.
    Individual with disability. A person is considered disabled if the 
person meets the criteria of either of the following:
    (1) The person has an inability to engage in any substantial gainful 
activity, but with use of auxiliary aids apparatus can otherwise 
participate in gainful activity, by reason of any medically determinable 
physical or mental impairment where the disability:
    (i) Has lasted or can be expected to last for a continuous period of 
not less than 12 months, or which can be expected to result in death, 
and
    (ii) Substantially impedes the ability to live independently, and
    (iii) Is of such a nature that such ability could be improved by 
more suitable housing conditions, or
    (iv) In the case of a sight impaired person who is at least 55 years 
old (within the meaning of sight impairment as determined in section 223 
of The Social Security Act), is unable, because of the sight impairment, 
to engage in substantial gainful activity in which he/she has previously 
engaged with some regularity over a substantial period of time.
    (v) Receipt of veteran's benefits or Social Security Disability 
Payments for disability, whether service oriented or otherwise, does not 
automatically establish disability.
    (2) The person has a developmental disability; a severe, chronic 
disability which:
    (i) Is attributable to a mental or physical impairment or 
combination of mental and physical impairment; and
    (ii) Was manifested before age 22; and
    (iii) Is likely to continue indefinitely; and
    (iv) Results in substantial functional limitations in three or more 
of the following areas of major life activity:
    (A) Self-care;
    (B) Receptive and expressive language;
    (C) Learning;
    (D) Mobility;
    (E) Self-direction;
    (F) Capacity for independent living; and
    (G) Economic self-sufficiency.
    (v) Reflects the person's need for a combination and sequence of 
special, interdisciplinary, or generic care or treatment, or for other 
services which are of lifelong or extended duration and are individually 
planned and coordinated.
    Individual with handicap. (1) A person with a physical or mental 
impairment that:
    (i) Is expected to be of long-continued and indefinite duration: and
    (ii) Substantially impedes the person or is of such a nature that 
the person's ability to live independently could be improved by more 
suitable housing conditions.
    (2) The term handicap further means, with respect to a person, a 
physical or mental impairment which substantially limits one or more 
major life activities; a record of such an impairment; or being regarded 
as having such an impairment. This term does not include current illegal 
use of or addiction to a controlled substance. As used in this 
definition:
    (i) Physical or mental impairment includes:
    (A) Any physiological disorder or condition, cosmetic disfigurement, 
or anatomical loss affecting one or more of the following body systems: 
neurological; musculoskeletal; special senses organs; respiratory, 
including speech organs; cardiovascular; reproductive; digestive; 
genito-urinary; hemic and lymphatics; skin; and endocrine; or
    (B) Any mental or psychological disorder, such as mental 
retardation, organic brain syndrome, emotional or mental illness, and 
special learning disabilities. The term physical or mental impairment 
includes, but is not limited

[[Page 367]]

to, such diseases and conditions as orthopedic, visual, speech and 
hearing impairments, cerebral palsy, autism, epilepsy, muscular 
dystrophy, multiple sclerosis, cancer, heart disease, diabetes, human 
immunodeficiency virus (HIV) infection, acquired immunodeficiency 
syndrome (AIDS), mental retardation, emotional illness, drug addiction 
(other than addiction caused by current, illegal use of a controlled 
substance) and alcoholism.
    (ii) Major life activities means functions such as caring for one's 
self, performing manual tasks, walking, seeing, hearing, speaking, 
breathing, learning and working.
    (iii) Has a record of such an impairment means has a history of, or 
has been misclassified as having a mental or physical impairment that 
substantially limits one or more of major life activities.
    (iv) Is regarded as having an impairment means:
    (A) Has a physical or mental impairment that does not substantially 
limit one or more major life activities but that is treated by another 
person as constituting such a limitation;
    (B) Has a physical or mental impairment that substantially limits 
one or more major life activities only as a result of the attitudes of 
others toward such impairment; or
    (C) Has one of the impairments defined in paragraphs (2)(i)(A) and 
(2)(i)(B) of this definition but is treated by another person as having 
such an impairment.
    Initial operating capital. Cash to pay for costs such as property 
and liability insurance premiums, fidelity coverage premiums if an 
organization, utility hookup deposits, maintenance equipment, movable 
furnishings and equipment, printing lease forms, and other initial 
operating expenses. The initial operating capital will be at least 2 
percent of the total development cost of the project.
    Interested parties. Any person who has or will have a pecuniary 
interest in the project or activities for which the applicant is seeking 
assistance. Persons with a pecuniary interest in the project or activity 
shall include but not be limited to any developers, contractors, and 
consultants involved in the application for assistance under this title 
or the planning, development, or implementation of the project or 
activity. Residency of an individual in housing for which assistance is 
being sought shall not, by itself, be considered a pecuniary interest.
    LIHTC. Low-income housing tax credits.
    Limited equity. The amount of funds which have accumulated in the 
cooperative member's patronage capital account (defined in Sec. 
1944.205) and as described in exhibit H of this subpart.
    Limited partnership. A partnership consisting of one or more general 
partners who are jointly and severally responsible for conducting the 
business of the partnership, and one or more special partners 
contributing cash in a specific amount as capital to the common stock, 
who are not liable for the debts for the partnership beyond the funds 
contributed.
    Limited profit basis. An individual or organization applicant who, 
in order to obtain interest credit assistance, will agree to limit the 
amount of profit to be obtained. Applicants operating on this basis will 
be permitted to receive a return on their initial investment in 
accordance with the requirements outlined in Sec. 1944.215 of this 
subpart. The applicant will legally obligate itself to regulate rents, 
charges, rate or return, and methods of operation.
    Loans to build or acquire new units. Any initial or subsequent loan 
made on or after December 15, 1989, to build or acquire new RRH units. 
Loans under this category may not be prepaid for the term of the 
mortgage.
    Low-income household. A household having an adjusted annual income 
within the maximum low-income limit stated in Appendix 9 of HB-1-3550 
(available in any Rural Development office).
    Management reserve. That portion of the cooperative occupancy charge 
which is designated for payment of professional management services.
    Manufactured home (unit). A dwelling unit which is built to conform 
with the Federal Manufactured Home Construction and Safety Standards and 
Farmers Home Administration (FmHA) or its successor agency under Public 
Law 103-

[[Page 368]]

354 thermal requirements. Manufactured homes are described further in 
exhibit J of subpart A of part 1924 of this chapter.
    Manufactured home project. A parcel(s) of land located in the same 
community which contain two or more manufactured home units one each 
parcel for rental or cooperative member occupancy and operated under one 
management plan with one loan agreement/resolution. For a cooperative 
housing project, the parcels of land must be in the same neighborhood 
and in a clustered configuration.
    Maximum debt limit (MDL). The maximum amount that FmHA or its 
successor agency under Public Law 103-354 will lend for a project based 
on the appraised value or total development cost, whichever is less, 
multiplied by 95, 97, or 102 percent in accordance with Sec. 
1944.213(b) of this subpart.
    Member. A person who has executed documents pertaining to a 
cooperative housing type of living arrangement and has committed 
himself/herself to upholding the cooperative concept.
    MFH. Multi-Family Housing.
    Moderate-income household. A household having an adjusted annual 
income within the maximum moderate-income limit stated in Appendix 9 of 
HB-1-3550 (available in any Rural Development office).
    Modification. Any change to the public or common use areas of a 
building or any change to a dwelling unit to comply with handicap 
accessibility.
    NOFA. Notice of funds availability.
    Occupancy agreement. A contract setting forth the rights and 
obligations or the cooperative member and the cooperative, including the 
amount of the monthly occupancy charge and the other terms under which 
the member will occupy the housing. An example of the agreement is in 
exhibit J of this subpart.
    OGC. The Regional Attorney or the Attorney in Charge in the field 
office of the Office of the General Counsel (OGC) of the United States 
Department of Agriculture.
    Organization. A private nonprofit corporation, profit corporation, 
consumer cooperative, association, State, or local public agency, trust, 
partnership, or limited partnership.
    Other government assistance. Any related assistance from the Federal 
Government, a State, or a unit of general local government, or any 
agency or instrumentality thereof. Such related assistance shall include 
but not be limited to any loan, grant, guarantee, insurance, payment, 
rebate, subsidy, credit, tax benefit, or any other form of direct or 
indirect assistance.
    Owner-builder. A qualified builder-applicant who has experience and 
has demonstrated the ability and capability to build a RRH project.
    Patronage capital refund. Amounts received by the cooperative in 
excess of operating costs and expenses which have been assigned to 
members' patronage capital accounts each year of membership in the 
cooperative.
    Pecuniary Interest. Financial concern or financial gain.
    Private nonprofit corporation. A corporation which:
    (1) Is controlled by private persons or interests;
    (2) Is organized and operated for purposes other than making gains 
or profits for the corporation or its members;
    (3) Is legally precluded from distributing to its members any gains 
or profits during its existence; and
    (4) In the event of its dissolution, is legally bound to transfer 
its net assets to a nonprofit corporation of a similar type or to a 
public corporation which will operate the housing for the same or 
similar purposes.
    Project. The total number of rental or cooperative housing units 
that are operated under one management plan with one loan agreement/
resolution.
    Public use areas. Interior or exterior rooms or spaces of a building 
that are made available to the general public.
    RCH. Rural Cooperative Housing.
    REAP. Rural Economic Area Partnership.
    Resident assistant. A person(s) residing in a tenant's housing unit 
who is essential to the well-being and care of person(s) who are 
elderly, or have handicaps or disabilities residing in the unit but is 
not obligated for the person's financial support and would not be living 
in the unit except to provide the needed support services. While the 
resident assistant may be a family member, the resident assistant may

[[Page 369]]

not be a dependent for tax purposes and is not subject to the 
eligibility requirements of a tenant or member. A resident assistant is 
not a chore service worker. A resident assistant may function in any 
type of housing affected by this subpart.
    RHS. Rural Housing Service.
    RRH. Rural Rental Housing.
    Rural area. Open country or rural places as defined in Sec. 3550.10 
of this title.
    Rural rental housing. Structures in a rural area which are or will 
be suitable for, and available to, eligible tenants on a rental basis 
for dwelling use. The structures may include related facilities where 
appropriate.
    Section 515. Section 515 of title V of the Housing Act of 1949 (42 
U.S.C. 1485 et seq.).
    Security value. The present market value of the real estate offered 
as security for the loan as determined by the loan approval official 
less the unpaid principal balance plus past due interest on any other 
liens against it. Other liens will include any prior liens and Junior 
liens to be or likely to be taken or subordinated at or immediately 
after loan closing.
    Service agreement. A written agreement between the borrower and 
service provider detailing the specific service to be provided, the cost 
of the service and length of time the service will be provided.
    Service plan. A written plan describing how services will be 
provided to a FmHA or its successor agency under Public Law 103-354 
financed project. At a minimum, the plan must specify the services to be 
provided, the frequency of the services, who will provide the services, 
how tenants will be advised of the availability of services, and the 
staff needed to provide the services.
    Servicing office. FmHA or its successor agency under Public Law 103-
354 servicing office or other place designated by the FmHA or its 
successor agency under Public Law 103-354 State Director where loan 
requests are processed.
    Servicing official. FmHA or its successor agency under Public Law 
103-354 servicing official or other FmHA or its successor agency under 
Public Law 103-354 staff member designated by the State Director to be 
responsible for processing loan requests.
    State Agency. The Agency within a State that has been given the 
responsibility to allocate low-income tax credits.
    Subscription agreement: The initial contract between the prospective 
cooperative member and the cooperative specifying the terms of 
application for membership and the amount of the membership fee 
contributed by the member. An example of the agreement is in exhibit I 
of this subpart.
    Very low-income household. A household having an adjusted annual 
income within the maximum very low-income limit stated in Appendix 9 of 
HB-1-3550 (available in any Rural Development office).

[56 FR 2232, Jan. 22, 1991; 56 FR 47376, Sept. 19, 1991, as amended at 
56 FR 66960, Dec. 27, 1991; 58 FR 40951, July 30, 1993; 58 FR 44263, 
Aug. 20, 1993; 59 FR 6886, 6897, Feb. 14, 1994; 62 FR 25066, May 7, 
1997; 62 FR 67222, Dec. 23, 1997; 67 FR 78328, Dec. 24, 2002]



Sec. Sec. 1944.206-1944.210  [Reserved]



Sec. 1944.211  Eligibility requirements.

    (a) Eligibility of applicant. To be eligible for an RCH or RCH loan, 
the applicant must:
    (1) Be a citizen of the United States or a legally admitted alien 
for permanent residence in the United States; an organization as defined 
in Sec. 1944.205 of this subpart; or an American Indian tribe, band, 
group, or nation (including Alaskan Indians, Aleuts, Eskimos, and any 
Alaskan native village), which is considered an eligible recipient under 
the Indian Self-Determination and Education Assistance Act (Pub. L. 93-
638) or under the State and Local Fiscal Assistance Act of 1972 (Pub. L. 
92-512).
    (2) Be unable to obtain the necessary credit from private or 
cooperative sources on terms and conditions that allow establishment of 
rent or occupancy charges within the payment ability of eligible tenants 
or members.
    (i) For an individual, the assets of both the applicant and spouse 
will be considered.
    (ii) For nonprofit organizations, the assets of the individual 
members will not be considered.

[[Page 370]]

    (3) Have the ability and intention to maintain and operate the 
housing for the purposes for which the loan is made.
    (4) With the exception of a nonprofit organization, consumer 
cooperative or public body, provide from its own resources the borrower 
contribution required by Sec. 1944.213 (b) of this subpart. This 
contribution must be in the form of cash, land, or a combination 
thereof.
    (5) Own the housing and related land or become the owner when the 
loan is closed. In addition to the owner of full marketable title, an 
owner may be a lessee of a tract of land owned by a nonpublic body, 
State, political subdivision, public body, or public agency, or American 
Indian tribal lands which are not available for purchase. The State 
Director must determine that leaseholds are fully marketable in the 
area. The following conditions must be met when considering leasehold 
interests:
    (i) A recorded mortgage constituting a valid and enforceable lien on 
the applicant's leasehold will be given as security.
    (ii) The amount of the RRH or RCH loan against the property will not 
exceed the estimated market value determined in accordance with subpart 
B of part 1922 of this chapter (available in any FmHA or its successor 
agency under Public Law 103-354 office).
    (iii) The unexpired term of the lease on the date of loan approval 
must be at least 25 percent longer than the repayment period of the loan 
and rent charged for the lease does not exceed the rate being paid for 
similar leases in the area.
    (iv) The borrower's interest must not be subject to summary 
foreclosure or cancellation.
    (v) The lease must:
    (A) Not restrict the right to foreclose the RRH or RCH mortgage or 
to transfer the lease.
    (B) Permit FmHA or its successor agency under Public Law 103-354 to 
bid at a foreclosure sale or to accept voluntary conveyance of the 
security in lieu of foreclosure.
    (C) Permit FmHA or its successor agency under Public Law 103-354 to 
occupy or sublet the property and sell the leasehold for cash or credit 
if the leasehold is acquired through foreclosure (or voluntary 
conveyance in lieu of foreclosure), or if the borrower abandons the 
property.
    (D) Permit the borrower, in the event of default or inability to 
continue with the lease and the loan, to transfer the leasehold, subject 
to the RRH or RCH mortgage, to a transferee with the assumption of the 
RRH or RCH debt.
    (vi) The advice of OGC will be obtained as to legal sufficiency of 
the lease. When the State Director is uncertain as to whether a loan can 
be made on a leasehold, he/she should request National Office evaluation 
and instruction.
    (6) Have or be able to obtain the initial operating capital and 
other assets needed for a sound loan. Loans made to nonprofit 
organizations, consumer cooperatives, and to State or local public 
agencies may include up to 2 percent of the development cost for initial 
operating expenses.
    (i) The applicant will provide a detailed list of all materials and 
equipment needed to be funded by the initial operating capital 
including, but not limited to, property and liability insurance 
premiums, fidelity bond premiums when the applicant is an organization, 
utility hook-up charges and deposits, maintenance and other equipment, 
lease forms, furnishings, loan payments that may become due during 
construction, purchase of office equipment and furniture, community room 
furnishings, other movable equipment and furnishings, congregate items 
referenced in Sec. 1944.224 of this subpart, advertising expenses, 
management fees, etc. The list will be approved by the servicing office 
based upon similar projects in the State. The initial 2 percent 
operating and maintenance (O&M) expenses, plus any amounts needed for 
these items above the 2 percent, must be provided in cash.
    (ii) The O&M cash will be deposited into the general operating 
account in accordance with the provisions of the loan agreement or loan 
resolution. FmHA or its successor agency under Public Law 103-354 will 
be provided with documentation of the deposit prior to the start of 
construction or loan closing (whichever is first) and

[[Page 371]]

such funds will be used for authorized purposes only.
    (iii) If the borrower provided the initial 2 percent operating 
capital from its own funds, the State Director may, in accordance with 
subpart C of part 1930 of this chapter, authorize the borrower to make a 
one-time withdrawal from project funds. The borrower must request in 
writing the withdrawal after 2 years, but before 5 full (12-month) 
borrower fiscal years of operation.
    (7) Possess the ability, experience, and the legal and financial 
capacity to incur and carry out the obligations required for the loan.
    (8) Agree to comply with all FmHA or its successor agency under 
Public Law 103-354 requirements, such as those set forth in the loan 
resolution, loan agreement, the form of note, the mortgage and FmHA or 
its successor agency under Public Law 103-354 regulations.
    (9) Provide necessary management to assure the successful operation 
of the project. Management services may be provided by the applicant, a 
management firm or an agent. Management will be handled in accordance 
with exhibit B to subpart C of part 1930 of this chapter.
    (10) In the case of a private nonprofit organization:
    (i) If operating in one community and its trade area, meet the 
following additional requirements for an RRH loan:
    (A) The organization must maintain a broadly-based membership 
reflecting a variety of interests in the community. The organization 
should have at least 25 members. The number of members may be decreased 
for projects with less than 25 units.
    (B) Each member must be limited to one vote in the affairs of the 
organization.
    (C) A majority of the members must reside in the community or the 
trade area where the housing will be located.
    (D) At least five of the members must be recognized as leaders in 
civic, governmental, fraternal, religious, and other community 
organizations of the community where the housing will be located.
    (E) There must be at least five people on the board of directors and 
they must be selected by a procedure that insures that the interests of 
minorities and women are adequately represented.
    (F) The directors must be members of the organization.
    (G) The organization should adopt articles of incorporation and 
bylaws substantially conforming to the model articles and bylaws set 
forth in exhibits C and D, modified as appropriate in accordance with 
State law. The State Director, with the assistance of OGC, may develop a 
model set of articles of incorporation and bylaws for the State which 
are consistent with exhibits C and D and publish an appropriate State 
supplement.
    (ii) If operating in more than one community or on a county or 
regional basis and providing or planning to provide rental housing in 
more than one community, meet the following requirements in addition to 
those in paragraph (a)(10)(i) of this section, with the exception of 
(a)(10)(i)(C) of this section:
    (A) The membership base should be representative of the area being 
served with at least five members representing a variety of interests 
from each community where the housing will be located.
    (B) The organization's articles of incorporation and bylaws must 
include the requirements outlined in paragraph (a)(10)(ii)(A) of this 
section.
    (11) In the case of transfers of projects to nonprofit corporations 
which receive subsequent loans to avert prepayment, meet the 
requirements of Sec. 1965.216 (c) of subpart E of part 1965 of this 
chapter.
    (12) In the case of a cooperative:
    (i) Each member must be limited to one vote in the affairs of the 
Cooperative.
    (ii) The number of directors must not be less than 5, or whatever is 
allowable under State law.
    (13) In the case of a limited partnership:
    (i) The general partners must be able to meet the financial 
requirements of Sec. 1944.211(a)(4) of this subpart if the partnership 
is not able to when the loan request is filed.

[[Page 372]]

    (ii) The general partners must maintain a minimum 5 percent 
financial interest in the partnership. For this purpose, the minimum 5 
percent requirement will be deemed to have been met if the general 
partner has a minimum 5 percent interest in the residuals or refinancing 
proceeds. The general partner will not be required to have a minimum 5 
percent interest in current profits, losses, and cash distributions of 
the partnership. For example, an agreement where the general partners 
have such a 5 percent interest in a limited partnership and receive only 
1 percent of the profits while the limited partners receive 99 percent 
of the profits would be allowable.
    (iii) The partnership must agree that new general partners can be 
brought into the organization only with the prior written consent of 
FmHA or its successor agency under Public Law 103-354.
    (14) Be willing to honor the long-term commitment associated with 
receipt of a section 515 loan. Borrowers or principals of borrower 
organizations who sell or transfer loans less than 5 years old will not 
be considered eligible for further participation in the program as 
borrowers or principals (i.e., a general partner in a limited 
partnership) for at least 5 years from the date of the loan or 
assumption closing. The State Director may make an exception to this 
provision only if the transfer or sale meets the hardship provisions of 
Sec. 1965.65(a)(4) of subpart B of part 1965 and the applicant meets 
all other eligibility requirements.
    (15) Meet the following requirements if the applicant, including the 
principals, has prior or existing RHS debts and is applying for a new or 
subsequent loan or requesting incentives to preclude prepayment. 
Applicants who do not meet these requirements will be rejected for 
failure to meet the applicable provisions of this section, as well as 
Sec. 1965.213(c)(2)(i) of subpart E of part 1965 of this chapter, if 
applicable.
    (i) The applicant, including the principals, must be in compliance 
with existing debts in accordance with all legal and regulatory 
requirements and agreements, including the Promissory Note, Loan 
Agreement, and mortgage, all applicable local, state, and federal laws, 
and must provide regular financial and other required reports within 
required timeframes; or, if the applicant fails to meet any of these 
requirements, has an approved workout plan in effect that meets the 
provisions of paragraph (a)(15)(ii) of this section.
    (ii) An applicant or principal with an approved workout plan in 
effect to correct deficiencies in an existing RHS debt may be considered 
for eligibility if the applicant or principal has been in compliance 
with the provisions of the workout plan for 6 months. The State Director 
may waive this requirement for borrowers who have acted in good faith 
but are in noncompliance through circumstances beyond their control, 
including substantial local economic downturn, natural disaster, 
assuming responsibility for a troubled loan through substitution of the 
general partners, or assuming a loan with an existing workout plan.
    (iii) Applicants and principals must be in compliance with the 
provisions of the Civil Rights Act of 1964 (in accordance with their 
Form RD 400-4, ``Assurance Agreement'') and all other civil rights laws. 
If the Agency has reasonable grounds, based on a substantiated 
complaint, the Agency's own investigation, or otherwise, to believe that 
the representations of an applicant or borrower as to civil rights 
compliance are in some material respect untrue or are not being honored, 
assistance may be deferred or denied.
    (iv) Applicants or principals who have been debarred but whose 
debarment period has expired will be considered for eligibility subject 
to all requirements of this section.
    (v) Applicants, including principals, who have been determined 
ineligible by one state may not be determined eligible by another State 
until the problems have been corrected or workout plans are in effect in 
all States in which the applicant or principal is operating.
    (b) Authorized representative of an applicant. FmHA or its successor 
agency under Public Law 103-354 will deal only with the applicant or its 
authorized representative and the representative's technical advisers. 
An authorized representative of a nonprofit applicant must have no 
pecuniary interest in the

[[Page 373]]

award of the architectural or construction contracts, the purchase of 
equipment or the purchase of the land for the housing site.

[53 FR 2159, Jan. 26, 1988, as amended at 53 FR 7491, Mar. 9, 1988; 54 
FR 14336, Apr. 11, 1989; 56 FR 2235, Jan. 22, 1991; 58 FR 38924, July 
21, 1993; 58 FR 40952, July 30, 1993; 59 FR 6886, Feb. 14, 1994; 62 FR 
25065, 25074, May 7, 1997]



Sec. 1944.212  Loan and grant purposes.

    RRH and RCH loans may be made to qualified applicants to:
    (a) Construct new housing.
    (b) Purchase and rehabilitate existing buildings only when the loan 
for such purchase and rehabilitation does not exceed by 5 percent the 
loan for new construction in the same area and when moderate or 
substantial modifications, repairs or improvements to the structures are 
necessary to meet the requirements of decent, safe, and sanitary living 
units.
    (1) All rehabilitation work to be performed must be classified as 
either moderate or substantial rehabilitation as defined in exhibit K of 
subpart A to part 1924 of this chapter.
    (2) The structure to be rehabilitated must be physically and 
structurally sound enough to afford maximum safety (including fire 
safety) to the residents of the structure after rehabilitation.
    (3) Rehabilitation must be planned and accomplished so that the 
resulting housing will:
    (i) Meet the applicable development standards as provided for in 
Sec. 1924.5(d)(1) of subpart A of part 1924 of this chapter and any 
applicable historic preservation requirements.
    (ii) Create a suitable and appealing living environment and be 
substantially equivalent to new construction in quality and livability.
    (4) The applicant must submit complete plans and specifications for 
rehabilitation for FmHA or its successor agency under Public Law 103-
354's review and acceptance.
    (5) The rehabilitated project must generally meet the provisions of 
Sec. 1944.215(b) of this subpart.
    (6) When the downtown location of a rehabilitation project dictates 
such, a portion of the structure (such as part of the ground floor and 
basement) can be designated for commercial use on a lease basis. Loan 
funds, however, cannot be used to finance any cost associated with the 
commercial space. In order to determine the correct loan amount for the 
residential portion of such a structure, the following guidelines will 
apply:
    (i) The applicant must supply a complete cost breakdown for 
purchasing and rehabilitating the entire structure into its joint 
residential/commercial use.
    (ii) The costs that can be easily and appropriately identified as 
being part of either the commercial or residential portion of the 
structure should be separated.
    (iii) The costs which cannot be easily and appropriately isolated 
(such as the cost associated with repair or renovation of a boiler, the 
value of the structure ``as is,'' and certain mechanical or electrical 
components that will benefit both commercial and residential tenants or 
members will be prorated between the two uses based on the percentage of 
equipment load (example--central boiler or air conditioning) which would 
be necessary for each portion of the structure.
    (iv) For the purposes of the loan limitations in Sec. 1944.213(b) 
(1) and (2) of this subpart, the term development cost means the 
development costs associated with or prorated to the residential use of 
the structure, and the term security value is the security value of the 
project exclusive of the value contributed to the land and structure(s) 
by the commercial space. The capitalization approach to value is one 
means by which FmHA or its successor agency under Public Law 103-354 may 
establish the value contributed by the commercial space.
    (v) The applicant must rely on other sources of financing for all 
costs associated with or prorated to the commercial space, given the 
FmHA or its successor agency under Public Law 103-354 security 
requirements of Sec. 1944.221 of this subpart.
    (7) The applicant may not lease any authorized commercial space 
without the prior written consent of the State Director. Prior to loan 
closing, the advice of OGC will be obtained as to any

[[Page 374]]

modifications needed in the mortgage, loan agreement or loan resolution 
to enforce this requirement. The State Director may not consent to any 
lease unless:
    (i) The lease contains a provision by which the lessee agrees to 
vacate the premises if FmHA or its successor agency under Public Law 
103-354 withdraws its consent to the lease.
    (ii) The proposed use of the leased space has a mutually supportive 
relationship to the needs of the residential tenants or member and to 
the use of the residential portion of the structure.
    (iii) The terms of the lease and the proposed use of the leased 
space do not jeopardize the interests of the tenants or members of the 
project or the continued use of the residential portion of the 
structure.
    (iv) The lease has been reviewed by OGC and found to be legally 
sufficient and in compliance with the requirements of this subpart.
    (c) Purchase and improve the necessary land on which the housing 
will be located.
    (1) Loan funds used to purchase land may not exceed the estimated 
market value of the site in its present condition as shown by a current 
appraisal in accordance with FmHA Instruction 1922-B (available in any 
FmHA or its successor agency under Public Law 103-354 office).
    (2) With prior written approval of the State Director, loan funds 
may be used to buy land from a member of a broadly-based nonprofit 
applicant/organization.
    (3) Loan funds may be used to acquire land in excess of that needed 
for the housing, including related facilities, only when:
    (i) The applicant cannot acquire only the needed land at a fair 
price, can justify the acquisition, agrees to sell the land as soon as 
practicable and apply proceeds on the loan, and has legal authority to 
acquire and administer the land; and
    (ii) The cost of the excess land is a reasonable portion of the 
loan; and
    (iii) The site density requirements of Sec. 1944.215(a)(6) of this 
subpart are met.
    (d) Develop and install streets, a water supply, and sewage 
disposal, heating, cooling, and light systems necessary in connection 
with the housing. If the facilities are located offsite, the following 
requirements must be met:
    (1) The applicant will hold the title to the facility or have a 
legal right to use the facility for a period of at least 25 percent 
longer than the life of the loan and the title or right can be 
transferred to any subsequent owner of the site.
    (2) The facilities are provided for the exclusive use of the project 
or funds are limited to the prorated part of the total cost of the 
facility according to the use and benefits to the project. The applicant 
will agree in writing to the application, as extra payments on the loan, 
of any subsequent collection by the borrower from other users or 
beneficiaries of the facility.
    (3) Adequate security can be obtained with or without a mortgage 
based on the offsite facilities.
    (e) Develop other related facilities in connection with the housing 
such as:
    (1) Maintenance workshop and storage facilities.
    (2) Recreation center when the project is large enough to justify 
the facility. In all projects, passive recreation (such as outdoor 
seating) for elderly rental projects and active facilities (such as tot 
lots) for family projects will be provided.
    (3) Central cooking and dining in congregate and group living 
housing when the project is large enough to justify them to supplement 
the kitchen facilities in each unit. All equipment purchased with loan 
funds for the central cooking and dining facilities, such as stoves, 
refrigerators, ovens, dish washing machines and steam tables, should be 
attached to the land or buildings in a manner regarded in law as part of 
the real estate.
    (4) Space for a small infirmary for emergency care only when 
justified by the size of the project. An infirmary will not be justified 
if facilities for emergency care expected to be needed by the tenants 
are readily accessible elsewhere.
    (f) Construct office and living quarters for the resident manager 
and other operating personnel if the facilities would be to the 
advantage of the

[[Page 375]]

project and the Government. The State Director should make a 
determination and the justification will be included in the docket.
    (g) Purchase and install ranges, refrigerators, drapes, blinds/
shades, drapery rods, and clothes washers and dryers. Laundry facilities 
are required in all projects and clothes washers and dryers should be 
provided in a central laundry room. Normally, a minimum of one washer 
and dryer should be provided for every 8 to 12 units in a project. 
Clothes washers and dryers may not be installed in individual units if 
the installation is not customary in the area for the size of project 
and type of housing involved. In any case, both central and individual 
laundry facilities will not be provided in a single project.
    (h) Provide landscaping, seeding or sodding of lawns, and other 
necessary facilities related to buildings such as walks, yards, fences, 
parking areas, and driveways.
    (i) Pay related costs such as fees and charges for market studies, 
tax credit application, legal (costs pertaining to the closing of the 
FmHA or its successor agency under Public Law 103-354 loan only), 
archeological, architectural, engineering, environmental, and other 
appropriate technical and professional services. The fees and charges 
may be paid to an applicant or officer, director, trustee, stockholder, 
member, or agent of the applicant provided those fees and charges are 
reasonable and typical for the area and are earned and the identity of 
interest is disclosed. Legal, technical, and professional fees do not 
include the costs incurred in the formation or incorporation of the 
limited profit applicant, costs of syndication, or the payment of a loan 
packaging or development fee.
    (j) Provide loan funds to enable a nonprofit group or public body to 
pay fees for technical assistance received from a nonprofit 
organization, with housing and/or community development experience, to 
assist it in the formation or incorporation and development and 
packaging of its loan docket and project, as well as legal, technical 
and professional fees incurred in the formation or incorporation of the 
applicant entity.
    (1) Fees can also be provided to pay the nonprofit applicant entity 
for packaging of its loan docket and project, but not to include the 
formation and incorporation of the entity.
    (2) The amount to be paid for packaging of the loan docket and 
project should not exceed 1% of the FmHA or its successor agency under 
Public Law 103-354 loan or whatever is reasonable and typical for the 
area.
    (3) Related project costs as listed in Sec. 1944.222 of this 
subpart are not included as a part of the fee for packaging of the loan 
docket and project.
    (k) Provide loan funds to pay for the cost of educational programs 
for the board of directors both before and after incorporation of the 
cooperative.
    (l) Pay construction interest as follows:
    (1) In the case of multiple advances, loan funds will not be used to 
pay construction interest. Accrued interest during construction will be 
capitalized when construction is substantially complete, loan funds are 
fully advanced and the project is ready for full operation or when 
advances plus accrued interest reach the maximum debt limit (MDL). When 
requested by the borrower, each month the servicing official will 
provide the borrower monthly computations of the amount of interest that 
is accruing during the construction period.
    (2) In the case of interim financed construction, interest accrued 
and customary charges necessary to obtain interim financing may be 
included in the loan amount.
    (m) Purchase housing from an interim lender that holds fee simple 
title to an RRH project upon which construction commenced pursuant to 
Sec. 1944.235(c)(1) and after issuance of a letter of commitment to the 
interim lender in accordance with exhibit B of this subpart, when all of 
the following conditions exist.
    (1) The interim lender holds title to the property because the 
original RRH applicant for whom funds were obligated will not or cannot 
continue with the project after a letter such as that shown in exhibit B 
to this subpart was issued.
    (2) The owner of the property is the interim lender to whom FmHA or 
its

[[Page 376]]

successor agency under Public Law 103-354 issued a letter such as that 
shown in exhibit B to this subpart for the construction of the project.
    (3) The project is substantially complete (see Sec. 
1944.235(c)(1)(vi) of this subpart), all work has been satisfactorily 
completed in a workmanlike manner in accordance with the originally 
approved drawings, specifications and contract documents, and is in 
compliance with subparts A and C of part 1924 of this chapter.
    (4) There are no unpaid obligations outstanding in connection with 
the project.
    (5) All other requirements of this subpart have been met.
    (n) Pay for related costs incurred in compliance with the Uniform 
Relocation Assistance and Real Property Acquisition Act of 1970 and in 
accordance with Sec. 1944.215(t) of this subpart.
    (o) Contruct demonstration projects involving innovative housing 
units and systems which do not meet existing published standards, rules, 
regulations, or policies, but do meet the intent of providing decent, 
safe, and sanitary rural housing. Only the Administrator may authorize 
loan funds to be used for this purpose.
    (p) Finance the conversion of section 502 units in inventory to a 
section 515 project, in accordance with requirements of this subpart and 
subpart C of part 1955 of this chapter. Loans for this purpose can be 
made only to public agencies and private nonprofit organizations. Units 
should be repaired or rehabilitated prior to conversion to section 515 
housing. To facilitate a cooperative's self-maintenance plan, the use of 
502 inventory houses will be considered only if the units are located in 
the same subdivision and in a clustered configuration.
    (q) Grants for advances to nonprofit corporations or public agencies 
for costs to develop an application package or close a loan to purchase 
a project to avert prepayment. Such grants shall not exceed $10,000 and 
shall be administered in accordance with Sec. 1965.217 (d) of subpart E 
of part 1965 of this chapter.

[53 FR 2159, Jan. 26, 1988, as amended at 54 FR 14336, Apr. 11, 1989; 55 
FR 26644, June 29, 1990; 55 FR 29560, July 20, 1990; 56 FR 2235, Jan. 
22, 1991; 56 FR 66960, Dec. 27, 1991; 58 FR 38924, July 21, 1993; 59 FR 
6887, 6897, Feb. 14, 1994; 62 FR 25074, May 7, 1997]



Sec. 1944.213  Limitations.

    (a) Loan limits. The Agency must certify that assistance provided 
any housing project is not more than is necessary to make the project 
affordable to potential tenants and the Government. The applicant must 
disclose, during each stage of the process, all other assistance 
proposed for the project, including all other government assistance as 
defined in Sec. 1944.205.
    (1) Fee norms. RHS has established the fee norms below for purposes 
of analysis. The total of the three fees may not exceed 21 percent.
    (i) Builder's profit: up to 10% of the construction contract.
    (ii) General overhead: up to 4% of the construction contract.
    (iii) General requirements: up to 7 % of the construction contract.
    (2) Other fee norms. (i) RHS has established the new construction 
and rehabilitation fee norm for a developer's fee at up to 15% of the 
total development cost authorized for tax credit purposes. (A 
developer's fee is not an authorized Section 515 loan purpose.)
    (ii) For transfer proposals that include acquisition costs, RHS has 
established the developer's fee on the acquisition costs at up to 8% of 
the acquisition costs only when authorized by the state agency and only 
for tax credit purposes. (A developer's fee is not an authorized Section 
515 loan purpose.)
    (3) Analysis of loan requests to determine the minimum amount of 
assistance. (i) The fee structure of the state agency administering low-
income housing tax credits will be used in the RHS analysis of the 
amount of assistance that is necessary for a proposal.
    (ii) In all cases where the results of an analysis indicate that 
there will be excess assistance (defined as more than the lesser of 
$25,000 or 1 percent of the total development cost as authorized by the 
state agency), RHS will consult with the applicant, as well as with the

[[Page 377]]

state agency, to strive to reach an agreement for reducing the excess 
assistance.
    (iii) In the event that excess assistance is not reduced through an 
agreement with the applicant and state agency, RHS will adjust the 
amount of equity contribution by the amount of excess assistance 
(through the reduction of the loan) to ensure that assistance provided 
is not more than is necessary to provide affordable housing after taking 
into account assistance from all Federal, state and local sources.
    (b) State Director's loan limitation. The amount of the RRH loan(s) 
on each project (including principal and interest on all existing and 
proposed loans) is limited to the maximum amount of the State Director's 
loan approval authority unless the National Office provides prior 
written authorization. To request authorization, the State Director must 
submit the loan request and all information required in Sec. 
1944.231(h) of this subpart to the National Office, Attention: Multi-
Family Housing Processing Division (MFHPD). This must be done before 
notice is given to the applicant indicating that the loan has been 
determined eligible and/or feasible. Each loan will also be subject to 
the following additional requirements:
    (1) For all applicants, including its members, who will be receiving 
any benefits from Low Income Housing Tax Credits (LIHTC), the amount of 
the RRH loan(s) will be limited to no more than 95 percent of the 
development cost or 95 percent of the security value, whichever is less.
    (2) For all applicants, including its members, not receiving any 
benefits from LIHTC, who are comprised solely of nonprofits, consumer 
cooperatives, State or local public agencies, the amount of the loan(s) 
will be limited to the development cost or the security value of each 
project, whichever is less, plus the 2 percent initial operating capital 
and/or the relocation costs incurred as indicated in Sec. 1944.215(v) 
of this subpart. Grants made in accordance with Sec. 1944.212(q) of 
this subpart are not included in the preceding limitations.
    (3) For all other applicants, including its members, not receiving 
any benefits from LIHTC, the amount of the RRH loan(s) will be limited 
to no more than 97 percent of the development cost or 97 percent of the 
security value, whichever is less.
    (4) The examples set forth in exhibit A-13 of this subpart 
(available in any FmHA or its successor agency under Public Law 103-354 
office) provide clarity in determining the proper loan amount for 
various types of loans.
    (5) For equity loans to avert prepayment, the amount of the RRH 
equity loan will be limited to no more than the difference between 90 
percent of current value of the project as appraised as conventional 
unsubsidized housing and current unpaid balance(s).
    (6) For all applicants, the amount of the loan after capitalized 
construction interest is considered will not exceed the loan limits in 
paragraphs (b)(1), (2), and (3) of this section. However, Predetermined 
Amortization Schedule System (PASS) loans closed with multiple advances 
may exceed that amount when an additional amount is permitted to allow 
interest to be capitalized to the first of the following month.
    (7) All applicants must agree in writing to provide funds from their 
own resources to pay any cost for completing planned construction after 
the MDL is reached.
    (c) Limitations on use of loan funds. Loans will not be made for:
    (1) Specialized equipment for training and therapy.
    (2) Commercial facilities except essential service-type facilities 
for tenants or members when such facilities are not conveniently 
available.
    (3) Housing to serve primarily temporary and transient residents.
    (4) Nursing homes, special care facilities, or institutional-type 
homes.
    (5) Operating capital for a central dining facility or any items 
which do not become affixed to the real estate security, such as special 
portable equipment, furnishings, kitchen ware, dining ware, eating 
utensils, movable tables, and chairs, etc.
    (6) Facilities contrary to cost containment measures defined in 
Sec. 1944.215 (a) of this subpart.
    (7) Refinancing debts of the applicant except:

[[Page 378]]

    (i) As authorized in Sec. Sec. 1944.235(c) and 1944.213(d)(1) of 
this subpart; or
    (ii) When a nonprofit organization or a State or local public agency 
applicant already owns land on which a lien exists and a subordination 
or release cannot be obtained and the applicant does not have the 
financial resources necessary to obtain a release of the existing 
lien(s). In this situation, loan funds may be used to obtain a release 
of the land needed for the site of the proposed project. The amount of 
funds used for such purposes will be limited to the amount necessary to 
obtain the release but will not exceed this ``as is'' value of the land 
as determined in accordance with FmHA Instruction 1922-B (available in 
any FmHA or its successor agency under Public Law 103-354 office).
    (8) Payment of any fee, charge or commission to any broker, 
negotiator or other person for the referral of a prospective applicant 
or solicitation of a loan.
    (9) Payment of any fee, salary, commission, profit, or compensation 
to an applicant or to any officer, director, trustee, stockholder, 
member, or agent of an applicant except as provided in Sec. 1944.212(j) 
of this subpart.
    (10) Land which the applicant or a member of an applicant/
organization owns or land which is owned by any other organization in 
which any member of the applicant/organization has an interest, or has 
had an interest within the last 3 years, including any commission due on 
the sale thereof, except as authorized in Sec. 1944.212(c)(2) of this 
subpart.
    (11) Compensation to an applicant for value of land contributed in 
excess of the initial contribution as required by paragraph (b) of this 
section.
    (d) Obligations incurred before loan closing. When an applicant 
files a loan request, the servicing official will advise the applicant 
not to start construction or incur any indebtedness until the loan is 
closed, except for those cases involving interim financing; the 
guidelines outlined in Sec. 1944.235(c)(1) of this subpart and the 
environmental requirements of part 1940, subpart G, of this chapter will 
then apply. During the period of review and processing, applicants will 
not take any actions with respect to their applications which would have 
an adverse impact on the environment or limit the choice of reasonable 
alternatives. This requirement does not preclude the applicant from 
developing preliminary plans or designs or performing other work 
necessary to support an application for Federal, State, or local permits 
or assistance. If the applicant incurs debts for work, materials, land 
purchase, or other authorized fees and charges before the loan is 
closed, the State Director may authorize the use of loan funds to pay 
the debts when all of the following conditions exist and debts were 
authorized in writing by FmHA or its successor agency under Public Law 
103-354 prior to their being incurred (market studies will be exempt 
from this requirement):
    (1) The debts were incurred:
    (i) After the applicant filed a written loan request for a loan with 
FmHA or its successor agency under Public Law 103-354;
    (ii) Prior to the date of loan request as part of a predevelopment 
loan specifically intended as temporary financing from a public agency 
or nonprofit organization and the State Director secures prior 
concurrence from the National Office; or
    (iii) Prior to the date of application as part of a development loan 
made to a State or local public agency specifically intended as 
temporary financing and the State Director secures prior concurrence 
from the National Office.
    (2) The applicant is unable to pay the debts from its own resources 
or to obtain credit from other sources and failure to authorize the use 
of loan funds to pay the debts would impair the applicant's financial 
position.
    (3) The debts were incurred for eligible loan purposes.
    (4) Contracts, materials, construction, and any land purchased meet 
FmHA or its successor agency under Public Law 103-354 standards and 
requirements.
    (5) Payment of the debts will remove any liens which have attached 
and any basis for liens that may attach to the property on account of 
such debts.
    (e) Limitations on cost increases. After loan approval of a project 
involving

[[Page 379]]

new construction or major rehabilitation:
    (1) No increase in per unit development cost will be approved, 
whether the circumstance causing the cost increase occurs before, 
during, or after the construction period, unless these conditions were 
unforeseen factors beyond the owner's control and the increase in cost 
was approved by FmHA or its successor agency under Public Law 103-354 in 
writing before the expense was incurred. (In case of an emergency, the 
requirement that the cost be approved by FmHA or its successor agency 
under Public Law 103-354 in writing before the expense is incurred is 
waived as long as the servicing official is notified by the next working 
day.) Such costs are:
    (i) Design changes required by FmHA or its successor agency under 
Public Law 103-354 or State or local government having jurisdiction over 
the development of the project; or
    (ii) Changes in financing approved by FmHA or its successor agency 
under Public Law 103-354.
    (2) Any cost increase which cannot be approved for funding by FmHA 
or its successor agency under Public Law 103-354 must be satisfied by 
the owner from its own resources. Whenever there is doubt as to the 
resulting effect of a cost increase upon per unit development cost, the 
cost increase request may be conditionally approved provided:
    (i) The owner agrees in writing to provide any funds necessary in 
excess of its initial contribution and the loan amount to complete the 
project; and
    (ii) The owner furnishes surety that guarantees payment under the 
assurance agreement in the form of a surety bond, unconditional and 
irrevocable letter of credit or cash which is put into an interest or 
noninterest bearing supervised bank account. Such funds will not result 
in a lien on the project or its operating income.
    (3) Under no circumstances will a cost increase request be approved 
without concurrent agreement between FmHA or its successor agency under 
Public Law 103-354 and the applicant/borrower as to how the cost 
increase will be funded.
    (f) New loans in areas with RHS, the Department of Housing and Urban 
Development (HUD), or similar type rental housing assistance. (1) 
Definitions. As used in this paragraph only.
    (i) Similar type rental housing assistance. Housing assistance 
provided by a Federal, State or local agency or other entity which 
provides very-low or low income housing assistance. Vouchers or tenant-
based Section 8 assistance are not considered similar rental housing 
assistance. The State Director will determine if similar type rental 
housing assistance is available within his/her jurisdiction and will 
coordinate efforts under this paragraph.
    (ii) Market area. See exhibit A-8 of this subpart. When a difference 
in opinion exists in the market area determined by FmHA or its successor 
agency under Public Law 103-354 personnel, the applicant, market 
analyst, HUD, or similar type rental housing provider, for the purposes 
of this paragraph, the market area established by FmHA or its successor 
agency under Public Law 103-354 personnel will prevail.
    (2) Applicability. A request for an RRH/RCH loan to develop 
additional housing units (regardless of type) in the same market area 
with an FmHA or its successor agency under Public Law 103-354, HUD, 
LIHTC or similar rental housing assistance project will not be 
determined eligible/feasible, authorized, or approved when any of the 
following conditions exist:
    (i) Another RRH or RCH loan request in the same market area has been 
selected for further processing; or
    (ii) A previously authorized/approved FmHA or its successor agency 
under Public Law 103-354, HUD, LIHTC or similar type rental housing 
assistance project in the same market area has not been completed or 
reached its projected occupancy level. For example, a recently completed 
FmHA or its successor agency under Public Law 103-354 project is 85 
percent occupied, reflecting a 15 percent vacancy. The Form FmHA or its 
successor agency under Public Law 103-354 1930-7, ``Multiple Family 
Housing Project Budget,'' approved when this loan was obligated 
indicated a proposed vacancy rate of 10 percent. In this case, another 
project

[[Page 380]]

could not be authorized until the recently completed project reached and 
sustained a 90 percent occupancy level; or
    (iii) An existing FmHA or its successor agency under Public Law 103-
354, HUD, LIHTC or similar type rental housing assistance project in the 
same market area is experiencing high vacancies. The State Director, 
without authority to redelegate, will determine a reasonable vacancy 
rate for this purpose on a state, district or regional basis. Generally, 
a high vacancy rate would be in the 5 to 10 percent range. For the 
purpose of this paragraph, a high vacancy rate due to documented 
mismanagement will not be considered as a reason to defer processing a 
viable loan request provided there is an adequate market for the 
existing and proposed units. In addition, substandard units or excessive 
nonmarketable efficiency apartments would not be a reason to defer a 
viable loan request; or
    (iv) A request for a Servicing Market Rate Rent (SMR), or similar 
servicing tool, as defined in subpart C of part 1930 of this chapter in 
the same market is pending, or in effect and still needed; or
    (v) The need in the market area is for additional rental assistance 
(RA) or similar subsidy and not for additional housing units. This can 
be evidenced by similar rental housing in the market area in which 
tenants are experiencing rent overburden; existing projects in the 
market area which are experiencing vacancies due to lack of RA, Section 
8 or similar subsidy; high vacancies in conventionally financed 
apartments or other circumstances where the market needs affordable 
housing but not additional housing.
    (3) Status. When a loan proposal or project exists in the market 
area which meets any of the criteria in paragraph (f)(2) of this 
section, loan requests in the same market area will be returned to the 
applicant in accordance with Sec. 1944.231. This does not affect the 
processing of loan requests in other market areas.
    (4) Exceptions--(i) Categorical. A group home for persons with 
disabilities is exempt from the provisions of paragraph (f)(2) of this 
section when existing housing in the market area is not available or 
insufficient for their needs.
    (ii) Other. In unusual circumstances where there is a compelling 
need for additional housing in a market area, the State Director may 
request an exception to the provisions of paragraph (f)(2) of this 
section, to the Assistant Administrator, Housing. Circumstances in which 
an exception would be considered include, but are not limited to: A 
colonia, or market area which is located within a county, designated 
under the Rural Housing Targeted Set Aside (RHTSA) defined in exhibit C 
to subpart L to part 1940 of this chapter; a market area where an 
applicant/borrower is only constructing a small fraction of the units 
(generally less than 25 percent) proposed by the original market 
analysis; or a market area which is in need of housing as the result of 
a natural disaster which destroyed existing similar rental housing 
units. The State Director will submit a request for exception to the 
Assistant Administrator, Housing, with clear documentation to support 
the request. The Assistant Administrator, Housing, may authorize an 
exception at the request of the State Director or Director, MFH/PD.

[53 FR 2159, Jan. 26, 1988, as amended at 53 FR 7491, Mar. 9, 1988; 54 
FR 14337, Apr. 11, 1989; 55 FR 26644, June 29, 1990; 55 FR 29558 and 
29561, July 20, 1990; 56 FR 2236, Jan. 22, 1991; 56 FR 66960, Dec. 27, 
1991; 58 FR 44263, Aug. 20, 1993; 59 FR 6887, Feb. 14, 1994; 62 FR 
25065, 25066, May 7, 1997; 62 FR 67222, Dec. 23, 1997]



Sec. 1944.214  Rates and terms.

    (a) Interest. Upon request of the borrower, the interest rate 
charged by FmHA or its successor agency under Public Law 103-354 will be 
the lower of the interest rates in effect at the time of loan approval 
or loan closing. If an applicant does not indicate a choice at the time 
of loan approval, the loan will be closed at the interest rate in effect 
at the time of loan approval. Interest rates are specified in exhibit B 
of FmHA Instruction 440.1 (available in any FmHA or its successor agency 
under Public Law 103-354 office).
    (b) Amortization period. Each loan will be scheduled for payment 
within a period that is necessary to assure that

[[Page 381]]

the loan will be adequately secured, taking into account the probable 
depreciation of the security. The payment period will not exceed 30 
years; however, if necessary to ensure affordability, the loan may be 
amortized for a period not to exceed 50 years.

[53 FR 2159, Jan. 26, 1988, as amended at 62 FR 67222, Dec. 23, 1997]



Sec. 1944.215  Special conditions.

    (a) Cost containment. To achieve affordable rents and occupancy 
rates (not considering rental assistance or similar subsidies), all 
development costs will be economical in nature and not include costs for 
unnecessary or elaborate design features. Cost containment is not to be 
interpreted as accepting poor design or cheap construction. Projects 
must provide the features and amenities necessary for the lifestyles of 
the tenants and members. Consideration must be given to the cost/benefit 
ratio when evaluating, recommending, or requiring specific design 
features or construction techniques. Life cycle cost analysis will be 
employed to determine the types of materials which will reduce 
operation/maintenance costs even though their initial costs are higher. 
Operation and maintenance costs factored into proposed operating budgets 
will be adjusted accordingly. The following guidelines are to be 
followed when developing projects:
    (1) Each State architect/engineer (A/E) will compile and maintain 
data on costs of all projects. Total project estimates will be compared 
with estimates available through the Marshall & Swift computer program. 
These estimates, along with the line item costs recorded in FmHA or its 
successor agency under Public Law 103-354's Automated Multi-Housing 
Accounting System (AMAS) cost tracking system, will be used to establish 
a benchmark for future project costs. Any proposal that exceeds these 
costs must be carefully evaluated for possible cost reductions. The 
borrower will be responsible for resolving the differences in cost to 
bring the project into line with the lesser of the cost tracking system 
or Marshall & Swift estimates. Final determinations must be realistic, 
interrelated to maintenance and operation costs, and based upon local 
conditions and common sense. The State will consider circumstances such 
as high land costs, remote rural areas, etc., which could present a 
problem in achieving such an alignment of costs. The AMAS cost tracking 
system will be used to record both estimates and actual line item costs. 
At the time the estimates are being examined by FmHA or its successor 
agency under Public Law 103-354, the percentages for builder's profit, 
general overhead, and general requirements will be calculated to 
determine if they are within the allowable percentages established in 
accordance with Sec. 1944.213(a)(1)(iii) and (a)(1)(iv). They will again 
be calculated at the time the final estimates are submitted to FmHA or 
its successor agency under Public Law 103-354. Estimated amounts in 
excess of the allowable percentages will be reduced to the appropriate 
percentage. Once the final estimates are approved by FmHA or its 
successor agency under Public Law 103-354, payment of builder's profit, 
general overhead, and general requirements will not exceed the estimated 
amounts.
    (2) The elimination or reduction of unnecessary delays in 
application processing can contribute to cost containment through lower 
interest and other business expenses on land, inventory, tests, design 
studies, etc. When reasonable processing timeframes are established, 
known and followed, appropriate time can be planned for preparing 
quality application and construction documents. This can result in 
better instructions to the builder, fewer errors and lower construction 
costs.
    (3) Most materials and systems are available in a range of qualities 
and prices. The construction documents will be carefully reviewed for 
specifications that require qualities or grades higher than necessary. 
These specifications will be accepted only if fully justified and no 
reasonable alternatives are available.
    (4) Designs which employ standard building material dimensions and 
reduce waste will be used.
    (5) Sites will require a minimum amount of site development work. 
The State Director may authorize a site requiring higher than normal 
site development costs only if:

[[Page 382]]

    (i) The proposed site and site development costs are less than the 
cost of the normal site and site development costs; or
    (ii) There are no other sites available in the market area with a 
lower combined cost.
    (6) All project site densities (units per acre) will be within the 
following ranges, regardless of site conditions unless local zoning 
requirements dictate otherwise:

------------------------------------------------------------------------
                                                        Minimum  Maximum
------------------------------------------------------------------------
One-story buildings...................................       10       14
Two-story buildings...................................       14       18
Three or more story buildings.........................       18       22
------------------------------------------------------------------------

    (i) For example: A 24-unit project composed of two-story buildings 
must have a site of at least 1.3 acres. FmHA or its successor agency 
under Public Law 103-354 will finance the purchase and development of 
larger sites, but not more than 1.7 acres. Ranges for projects with a 
mixture of building heights can be interpolated.
    (ii) An exception may be made to this provision only if the site in 
question is the only site available in the market area and its size, 
shape, or condition makes a portion of the site unsuitable for building. 
An exception to this requirement must be granted by the State Director 
or a designee. The applicant must provide written documentation that no 
other sites are available.
    (7) Sound judgment and common sense must also be used in 
construction inspections and final acceptance of projects. Field staff 
involved in these activities must be careful not to impose additional or 
unreasonable requirements on the builder that will increase construction 
costs. States should consider hiring enough construction inspectors to 
provide more than the required inspections and to allow multiple 
unscheduled and unannounced visits. The State Office may also, with 
National Office authorization, contract for inspection services to deter 
deviations from the FmHA or its successor agency under Public Law 103-
354-accepted construction documents. Prefinal and final inspections must 
be conducted by qualified FmHA or its successor agency under Public Law 
103-354 personnel.
    (8) Buildings will not include numerous wall and roof breaks, 
unusual designs requiring excessive corners and foundation off-sets, or 
that require more exterior entrances than absolutely necessary. Designs 
will not be considered acceptable that place dining facilities in 
structures attached to the main building when these amenities can be 
less expensively included within the main structure.
    (9) Buildings will not include roof slopes less than 3/12 nor 
greater than 6/12 unless otherwise required by local authorities or in 
order to accommodate severe weather conditions.
    (10) The use of repeat designs will be required from applicants 
whose architects have designed projects previously approved by FmHA or 
its successor agency under Public Law 103-354. This does not mean 
``cloned'' projects are required throughout the State and/or region. 
When a repeat design is being used in the same community, the exterior 
facade (such as color, siding material, etc.) must be noticeably changed 
except in the case of subsequent phases. The State Office architect will 
ensure that sufficient differences are included in the proposed plans 
which will preclude the appearance of ``cloned'' designs. 
``Predesigned'' buildings must fit the basic existing contours of the 
proposed site.
    (11) The following facilities are considered nonessential and will 
not be included in the loan unless required by local codes or 
ordinances:
    (i) Garages/covered parking;
    (ii) Bay/box/picture or similar type windows;
    (iii) Fireplaces;
    (iv) Community room furniture;
    (v) Sliding glass/atrium or similar type doors;
    (vi) Materials atypical for the area;
    (vii) Atriums/solariums;
    (viii) Saunas;
    (ix) Whirlpools;
    (x) Gyms (facilities to accommodate physical exercises may be 
included in elderly projects without regard to this restriction); and
    (xi) Swimming pools.
    (12) Other design features which will only be accepted if determined 
customary for the area are:

[[Page 383]]

    (i) Patios/balconies (minimum size which will accommodate 
handicapped accessibility);
    (ii) Washer and dryer hookups in individual units; and
    (iii) Washers and dryers in individual units.
    (13) The following is a list of allowable amenities according to the 
type of units:

----------------------------------------------------------------------------------------------------------------
                                          Family             Elderly           Congregate          Group home
----------------------------------------------------------------------------------------------------------------
Active outdoor recreation.........  Yes...............  No...............  No................  Yes
Carpet............................  Yes...............  Yes..............  Yes...............  Yes
Central laundry facilities........  Yes...............  Yes..............  Yes...............  Yes
Community rooms...................  No................  Yes..............  Yes...............  Yes
Dishwashers.......................  No................  No...............  Yes \1\...........  \1\ Yes
Drapes/blinds/shades..............  Yes...............  Yes..............  Yes...............  Yes
Elevators for 2-story elderly.....  No................  Yes..............  Yes...............  No
Garbage disposals.................  No................  No...............  Yes \1\...........  \1\ Yes
Lawn sprinklers--financing will
 depend on geographic area.
----------------------------------------------------------------------------------------------------------------
\1\ In central kitchens only.

    (14) Total on-site parking spaces per living unit will be within the 
following ranges unless otherwise required by local authorities:

    Note: Additional spaces for visitors, staff, or health care workers 
may be provided.

------------------------------------------------------------------------
     Family            Elderly          Congregate            Group
------------------------------------------------------------------------
  Min      Max      Min      Max       Min       Max      Min      Max
------------------------------------------------------------------------
  1.0      1.5      0.5      1.0      0.25       1.0     0.25      0.5
------------------------------------------------------------------------

    (15) Management, maintenance, and community rooms should be in 
accordance with Guide 2 of subpart A of part 1924 of this chapter 
(available in any FmHA or its successor agency under Public Law 103-354 
office). Laundry rooms should be no larger than necessary to accommodate 
equipment, circulation (including handicapped accessibility) and areas 
for sorting and folding clothes.
    (b) Type of housing. All housing will be designed to:
    (1) Be economically constructed and not of elaborate design or 
materials. All new construction will conform with the applicable 
development standards of Sec. 1924.5(d)(1) of subpart A of part 1924 of 
this chapter. The gross square foot living area of new units will be 
within the ranges listed below. Living area is defined as: All enclosed 
space for the unit (except unfinished storage space for outdoor items 
and space needed for heating and/or cooling equipment) and measured from 
the exterior surface of the framing of exterior walls and the center 
line of interior party or corridor walls. States should establish ranges 
within these dimensions to be commensurate with unit sizes in the local 
market. For example, when conventional units in the market are at the 
low end of FmHA or its successor agency under Public Law 103-354's range 
scale, FmHA or its successor agency under Public Law 103-354 will also 
build a comparably smaller unit.

------------------------------------------------------------------------
                                                               Minimum/
                                                                maximum
                        Type of unit                            living
                                                               area (sq.
                                                                 ft.)
------------------------------------------------------------------------
0-Bedroom Unit..............................................  350-500
1-Bedroom Unit..............................................  500-650
2-Bedroom Unit..............................................  650-800
3-Bedroom Unit..............................................  800-950
4-Bedroom Unit..............................................  950-1100
------------------------------------------------------------------------

    (i) An additional 100 to 120 square feet of living area may be added 
to the 4-bedroom unit guideline for each bedroom in excess of four. 
Floor areas for living and dining rooms should comply with Guide 2 of 
subpart A of part 1924 of this chapter (available in any FmHA or its 
successor agency under Public Law 103-354 office). The maximum square 
footage in congregate housing units will not exceed 110 percent of the 
minimum square footages listed above.
    (ii) In townhouse units where living area is on two floor levels of 
the unit, the maximum gross square footage of living area may be 
exceeded by up to 70 square feet, but only to the extent necessary to 
accommodate interior stairways.
    (iii) Room sizes must be in compliance with the applicable 
development standard. Minimum room sizes may be determined by the 
minimum areas in Guide 2 of subpart A of part 1924 of this

[[Page 384]]

chapter (available in any FmHA or its successor agency under Public Law 
103-354 office).
    (iv) Additional area to accommodate energy conserving and solar 
heating elements such as vestibules, heat sinks, solar greenhouses, 
solar heat storage devices and the like may be allowed in excess of the 
stated maximum size guidelines. However, such devices, if included, must 
be justified on a cost effective basis.
    (2) Consist of multi-unit type housing with two or more units and 
appropriate related facilities except for the conversion of section 502 
inventory housing as covered in Sec. 1944.212(p) of this subpart, 
manufactured homes and group homes. Single family structures may be 
considered for cooperative housing projects if economically feasible.
    (3) Be residential in character and be designed to meet the needs of 
eligible tenants or members. Generally, structures should not be more 
than three stories high. However, low-rise structures with elevators can 
be considered when the following conditions exist:
    (i) There is a serious shortage of suitable building sites, the 
number of units needed cannot be built due to lack of space on available 
suitable sites and other building sites are not available.
    (ii) Land costs are such that one- to three-story construction would 
result in a unit cost and rental/occupancy rates in excess of what 
eligible tenants and members can afford.
    (iii) The number of stories proposed for the structure is compatible 
with other rental structures in the community. If there are no other 
low-rise rental structures in the community, the proposed structure must 
be in character with surrounding structures.
    (iv) The cost of the units should compare favorably with one- to 
three-story construction financed with RRH loans. If the costs are 
higher, the loan will not be approved until the FmHA or its successor 
agency under Public Law 103-354 State architect or engineer has reviewed 
the plans, specifications and cost data to assure that further cost 
savings cannot be achieved without sacrificing the quality and 
serviceability of the housing.
    (v) Elevators will be provided in accordance with the applicable 
development standards. If elevators are included, the subsoil conditions 
of the site must be adequate for the installation of elevators and 
sufficient service personnel must be available in the area for service 
and repair work.
    (4) Provide kitchen and bath facilities consistent with the size of 
the unit. For example, units with three or less bedrooms typically can 
be designed with one bath. However, townhouse units with three or more 
bedrooms where living area is on two floors may contain bath facilities 
on both levels. Kitchen facilities are required in all units; however, 
in congregate housing, some or all of the units may have limited 
facilities, such as a cooktop with a small oven and refrigerator.
    (5) Give maximum consideration to energy conservation measures and 
practices. To keep operating costs at a minimum, units should be 
individually metered for utilities unless adequate justification is 
provided to show that it would be infeasible.
    (6) Meet the needs of tenants with handicaps in rental projects. At 
least 5 percent of the units in the project or one unit, whichever is 
greater, must be accessible to or adaptable for persons with physical 
handicaps. The percentage of the units provided may be modified if an 
applicant shows, through information obtained from a State, local or 
independent agency or organization serving people with handicaps, that a 
different percentage of accessible or adaptable units is appropriate. 
However, at least one accessible unit will be provided. Adaptable units 
must be constructed in accordance with the Uniform Federal Accessibility 
Standards, sections 4.34.3 through 4.34.6.
    (7) For covered dwellings, handicap accessibility requirements will 
be met as set forth in section 504 of the Rehabilitation Act of 1973 and 
the Fair Housing Act.
    (c) Deferred principal payments. (1) When construction is funded by 
multiple advances from FmHA or its successor agency under Public Law 
103-354, principal payments on the loan will be deferred for the period 
of construction.
    (2) When an interim financed loan is closed other than the first day 
of the

[[Page 385]]

month, principal payments will be deferred for the remaining period of 
the month in which the loan is closed.
    (3) When construction is substantially complete and the project is 
ready for full operation, or the total of principal advances plus 
accrued interest reaches the MDL, interest on the advances will be 
accrued to the Amortization Effective Date (AED) and will be 
capitalized, establishing a new principal (loan) amount.
    (4) At loan obligation, the MDL will be established according to 
Sec. 1944.213(a) of this subpart. When the final advance on the loan is 
issued or the MDL is reached, the Finance Office will:
    (i) Accrue interest on all advances through the last day of the 
month and capitalize the interest as of the AED. When there is a 
remaining obligation balance, it will be canceled by the Finance Office.
    (ii) Establish the new loan amount and the borrower's monthly 
payments computed over the remaining term of the loan.
    (5) The District Office will:
    (i) Contact the applicant and complete Form FmHA or its successor 
agency under Public Law 103-354 1944-52, ``Multiple Family Housing 
Promissory Note.''
    (ii) Implement Form FmHA or its successor agency under Public Law 
103-354 1944-7, ``Multiple Family Housing Interest Credit and Rental 
Assistance Agreement,'' at AED or when the project is substantially 
complete and ready for full operation, whichever is later.
    (d) Refinancing Loans. Each borrower, except those borrower(s) whose 
loans to build or acquire new units were made pursuant to contracts 
entered into on or after December 15, 1989, must agree to refinance the 
unpaid balance of the loan when requested by the Agency. The rates and 
terms of the refinanced loan must be considered reasonable by the Agency 
to enable the borrower to offer the units to eligible tenants and 
members at rates within their payment ability. The refinancing of a loan 
must comply with the restrictions indicated in Sec. 1944.236(b)(5) of 
this subpart, subpart F of part 1951, and subpart E of part 1965 of this 
chapter.
    (e) Loan resolution or loan agreement. The loan resolution or loan 
agreement contains provisions of policy and procedure which should be 
carefully read, fully understood by the applicant, and executed by the 
applicant prior to loan approval. If any provisions are not appropriate 
to a particular case, proposed substitute language must be approved by 
FmHA or its successor agency under Public Law 103-354 and OGC. Subpart C 
of part 1930 of this chapter provides for the maintenance of certain 
accounts and the pledge of housing income as security. It contains 
regulatory provisions governing and giving FmHA or its successor agency 
under Public Law 103-354 power to impose requirements regarding the 
housing and related operations of the applicant. All sections and 
requirements determined applicable by OGC will form part of any other 
loan resolution or agreement that may be submitted by the applicant. 
These are:
    (1) Form FmHA or its successor agency under Public Law 103-354 1944-
33, ``Loan Agreement.''
    (2) Form FmHA or its successor agency under Public Law 103-354 1944-
34, ``Loan Agreement.''
    (3) Form FmHA or its successor agency under Public Law 103-354 1944-
35, ``Loan Resolution.''
    (f) Cooperative management. Consideration must be given to the 
special conditions of a cooperative housing structure concerning 
management. The following forms of management will be recognized for 
cooperative housing.
    (1) Self-management. The primary management objective for small 
housing cooperatives. To achieve this, education and training efforts 
should be an on-going part of their early years of operation. 
Accordingly, modest educational costs will be permitted in the budget as 
a subheading under management expenses. It is understood that, in the 
beginning, it may be necessary to obtain some outside services, such as 
a bookkeeper. If so, then partial self-management can be considered. It 
will be necessary for a qualified nonmember (individual or organization) 
to advise the board during the formative years of the cooperative. 
Exhibits F and G to this subpart will be used as a

[[Page 386]]

guide for determining the qualifications of the adviser.
    (2) Partial self-management. Certain management and/or supervisory 
services contracted from a technical service organization, housing 
authority, or management firm, etc. If this additional assistance does 
not enable the cooperative to manage itself, then the ultimate solution 
will have to be contract management.
    (3) Contract management. Professional services contracted for the 
day-to-day supervision of cooperative operations. The board of directors 
would develop the policies which would then be administered by the 
management agent.
    (g) Cooperative membership fee. Cooperative housing is a form of 
homeownership. In order to promote a commitment from prospective 
members, cooperatives will require a membership fee. The membership fee 
established by the board of directors will be equal to one month's 
occupancy charge. Once the fee has been established, that amount will be 
uniformly applied to all members. Members unable to pay a cash 
membership fee should be permitted to make monthly payments without 
interest, until the membership fee is paid; however, a cash payment of 
at least $25 should be required at occupancy. The period of payment on 
the membership fee should not exceed 12 months.
    (h) Cooperative limited equity. (1) RCH loans will only be made to 
cooperatives which limit the accumulation of equity. The limitations are 
designed to maintain unit availability for low-income people. In 
addition, all prospective members must have received, prior to becoming 
an actual member, a statement of the objectives of the cooperative, 
debts and a declaration describing limited equity and what it will mean 
to them. Exhibit H of this subpart will be used for this purpose. 
Limited equity is further described in ``A Guide to Cooperative 
Housing'' Which is to be given to prospective members.
    (2) Inflation equity which accrues on cooperative property is not 
considered part of members' limited equity and will not be taken from 
the project when a member vacates the project.
    (i) Interest credits and rental assistance (RA). (1) Borrowers may 
receive interest credits if they meet the requirements outlined in 
exhibit B of subpart C to part 1930 of this chapter.
    (2) RA may be provided to eligible tenants and members in eligible 
projects in accordance with exhibit E to subpart C of part 1930 of this 
chapter.
    (3) At least 95 percent of RA units available for newly constructed 
projects must be used to assist very low-income tenants and members. Up 
to 5 percent can be used for low-income tenants and members.
    (4) Cooperative members must have sufficient incomes to pay their 
management reserve charge. RA will not be used for this purpose. 
Management reserve charge is further described in exhibit A to this 
subpart.
    (j) Nondiscrimination in use and occupancy. The borrower will not 
discriminate or permit discrimination by any agent, lessee or other 
operator in the use or occupancy of the housing or related facilities 
because of race, color, religion, age, sex, marital or familial status, 
mental or physical handicap (tenants must possess the capacity to enter 
into a legal contract), or national origin, in accordance with subpart E 
of part 1901 of this chapter.
    (k) Eligibility for occupancy. Loans will be made on the basis of 
the housing being occupied by eligible tenants and members as defined in 
Sec. 1944.205 of this subpart. Eligible tenants and members must meet 
the requirements of exhibit B of subpart C of part 1930 of this chapter.
    (l) Tenant and member certification. Initial certification and 
recertifications will be executed on Form FmHA or its successor agency 
under Public Law 103-354 1944-8, ``Tenant Certification,'' in accordance 
with exhibit B to subpart C of part 1930 of this chapter.
    (m) Supervision of borrowers. Supervision will be provided borrowers 
under subpart C of part 1930 and subpart B of part 1965 of this chapter.
    (n) Establishing profit base on initial investment. Applicants 
agreeing to operate on a limited profit basis will be

[[Page 387]]

permitted a return not to exceed 8 percent per annum on their initial 
investment determined at the time of loan approval. For equity loans to 
avert prepayment, the rate of return and equity position may be set in 
accordance with Sec. 1965.213 of subpart E of part 1965 of this 
chapter. This amount will be reflected in the loan agreement or loan 
resolution and will not be changed once it is determined. The initial 
investment may exceed the required contribution in Sec. 1944.213(b) of 
this subpart and a return allowed on the excess investment if:
    (1) Cash contributions made by the applicant from the applicant's 
own resources, which, when added to the loan and grant amounts from all 
sources, do not exceed the security value of the project. Proceeds 
received by the applicant from the syndication of low-income housing tax 
credits (LIHTC) and contributed to the project may be considered funds 
from the applicant's own resources for the portion of the proceeds which 
exceeds:
    (i) the allowable developer's fee determined by the State Agency 
administering the LIHTC, and
    (ii) the amounts expected to be contributed to the transaction, as 
determined by the State Agency administering the LIHTC.
    (2) The value of the building site or essential related facilities 
contributed by the applicant up to the amount which, when added to the 
loan and grant amounts from all sources, is not in excess of the 
security value of the project. An appraisal will be completed in 
accordance with applicable RHS regulations. Value of the applicant's 
contribution will be determined on an ``as is'' basis less liens against 
the property.
    (3) Borrowers receiving incentives to avert prepayment may have the 
amount of borrower equity redefined to include the difference between 
the value used in determining the incentives and the balance of all 
loans, including the equity loan, if any. Redefined equity may be 
received only as a part of an incentive offer developed under Sec. 
1965.213 of subpart E of part 1965 of this chapter.
    (o) Intergovernmental review. FmHA or its successor agency under 
Public Law 103-354 will consider comments received in accordance with 7 
CFR part 3015, ``Intergovernmental Review of Department of Agriculture 
Programs and Activities,'' when making decisions on loan applications. 
(See FmHA Instruction 1940-J, available in any FmHA or its successor 
agency under Public Law 103-354 office.)
    (p) Guidelines for preparing environmental assessments and 
environmental impact statements. All projects will comply with subpart G 
of part 1940 of this chapter.
    (q) National flood insurance. The provisions of the National Flood 
Insurance Act of 1968, as amended by the Flood Disaster Protection Act 
of 1973 and Executive Order 11988, are applicable to FmHA or its 
successor agency under Public Law 103-354 authorities permitting 
financing of housing now located in, or to be located in, special flood 
or mudslide-prone areas as designated by the Federal Emergency 
Management Administration (FEMA). Subpart B of part 1806 of this chapter 
(FmHA Instruction 426.2) and subpart G of part 1940 of this chapter will 
apply.
    (r) Location of housing. (1) The location of the project should 
expand the supply of decent, safe, and sanitary housing for very low-, 
low- and moderate-income elderly persons, persons with disabilities, and 
families in a nondiscriminatory way. The location should promote a 
greater choice of housing opportunities in the housing market area.
    (2) Project locations are to promote equal access for the inclusion 
of all groups regardless of race, color, religion, sex, national origin, 
age, marital status, physical or mental disability, or familial status, 
thereby opening up nonsegregated housing opportunities for minorities.
    (3) Except as otherwise permitted by paragraph (r)(6) of this 
section, housing projects must be located in residential areas as part 
of established rural communities where essential public facilities (such 
as schools, hospitals and generally central water and sewer systems) and 
services (such as shopping, medical, and pharmaceutical) are readily 
available in close and convenient proximity to the site. Public 
facilities

[[Page 388]]

and services must be adequate to support the needs of the tenants and 
members and the housing project. (See FmHA Instruction 1922-B which is 
available in any FmHA or its successor agency under Public Law 103-354 
office.)
    (4) In order to provide housing at the lowest cost possible, 
preference in accordance with Sec. 1944.231 of this subpart will be 
given to loan requests in which specific tracts of land will be donated 
by States, units of local government, public bodies, and nonprofit 
organizations, provided the following conditions are met:
    (i) The land is suitable for the proposed housing and meets the site 
criteria of this paragraph (r) and the environmental requirements of 
part 1940, subpart G, of this chapter; and
    (ii) Site development costs of the donated site do not exceed the 
cost of purchasing an alternative site and the site development costs 
for the alternative site. For example, if the site development costs of 
the donated site are $50,000 and purchasing an alternative site would 
cost $20,000 and $15,000 to develop, donation of the site would not be 
cost effective or qualify for preference; and
    (iii) Due to no land cost, the overall cost of the project has been 
reduced compared to similar type projects; and
    (iv) The donor of the site has owned the site for at least 1 year. 
The State Director may waive the 1-year restriction when it is clearly 
documented that the donation of the land was not intended to circumvent 
the provisions of this paragraph; and
    (v) A return on investment is not paid to the borrower for the value 
of the donated land nor is the value of the land considered as part of 
the borrower's contribution; and
    (vi) There is no identity of interest between the donor of site 
(including any members of the donor entity) and the applicant for the 
loan (including any members of the applicant entity); or
    (vii) In cases where there is an identity of interest between the 
donor of the site (including any members of the donor entity) and the 
applicant for the loan (including any members of the applicant entity), 
the applicant meets the requirements of Sec. 1944.231(e) of this 
subpart.
    (5) Noncontiguous rental sites. (i) Noncontiguous sites within the 
same community may be considered if feasible. Each site must meet all 
FmHA or its successor agency under Public Law 103-354 site criteria and 
an appraisal must be made on each site in accordance with subpart B to 
part 1922 of this chapter (available in any FmHA or its successor agency 
under Public Law 103-354 office). The units must be managed under one 
management plan with one loan agreement/resolution.
    (ii) If a small community cannot support a project containing enough 
units to make it cost effective or in cases involving conversion of 502 
inventory units, FmHA or its successor agency under Public Law 103-354 
will consider a project which includes more than one site in the same or 
different communities. The State Office and applicant must mutually 
agree that the location of the sites will not adversely effect the 
efficiency of management and servicing of the projects. The requirements 
of paragraph (r)(5)(i) of this section will also apply.
    (6) FmHA or its successor agency under Public Law 103-354 will 
consider financing new construction or the purchase and rehabilitation 
of existing structures (in accordance with Sec. 1944.212(b) of this 
subpart) located in the downtown business areas of rural communities 
that have established a comprehensive strategy for meeting their 
community development and housing needs. That strategy must include the 
redevelopment, rehabilitation, restoration or revitalization of the 
downtown business area. The proposed project site must be located within 
the downtown business redevelopment/revitalization area and the 
following conditions must be met:
    (i) Essential public facilities (such as schools, hospitals and 
generally central water and sewer systems) and services (such as 
shopping, medical and pharmaceutical) must be readily available in close 
and convenient proximity to the site and must be adequate to support the 
needs of the tenants and members and the housing project.

[[Page 389]]

    (ii) The community must have an official short-term community 
development and housing plan which sets forth its comprehensive strategy 
for meeting identified community development and housing needs. The plan 
will include the need for eliminating and preventing economic decay, 
slums or blight; the need of benefiting the lower-income population; or 
other community development needs having a particular urgency. The 
strategy should include a community-wide component which describes the 
development strategy of the governing body, the major objectives the 
governing body seeks to accomplish, the priorities it has established, 
the factors taken into account in selecting areas for treatment and the 
anticipated public and private sources of funds necessary to conduct the 
treatment of each area selected. In addition, the plan should contain 
the following component strategies:
    (A) Neighborhood revitalization: The strategy for alleviating 
physical deterioration, maintaining viable neighborhoods and stimulating 
investment to upgrade neighborhoods affected by blight and 
deterioration.
    (B) Housing: The community-wide strategy to improve housing 
conditions and to meet the housing assistance needs that have been 
identified. Reference to any current Department of Housing and Urban 
Development approved housing assistance plan would be helpful as part of 
this component strategy.
    (C) Economic development: The strategy for attracting private 
investment in the business community and for solving the critical 
problems which may be the result of a stagnating or declining tax base 
or from population outmigration.
    (iii) Evidence must be presented from the local governing body 
verifying that the community has adopted, through resolution or other 
official act, the community development and housing plan referenced in 
paragraph (r)(6)(ii) of this section. A copy of the adopted plan should 
be made available to FmHA or its successor agency under Public Law 103-
354. While it is not necessary that the downtown redevelopment/
revitalization area be formally designated as an urban renewal or other 
similar area, evidence supporting a local determination that the 
downtown business area meets the criteria established in the community 
development and housing plan must be maintained in the locality's 
records. Documentation received from the local governing body must also 
identify the site or structure involved in the applicant's proposal as 
part of or essential to the downtown redevelopment/revitalization area.
    (iv) Evidence must be presented to FmHA or its successor agency 
under Public Law 103-354 verifying the intended commitment of public and 
private resources which will be available for completing any other 
integrally related redevelopment/revitalization activities being 
undertaken in the downtown business area along with the applicant's 
proposed project.
    (v) Prior review and concurrence must be received from the National 
Office before the State Director or servicing official authorizes the 
applicant to develop a complete application. All of the information 
required in paragraph (r)(6) of this section must be provided by the 
applicant before National Office review.
    (7) The property for which a loan is made must be located in a rural 
area as defined in 7 CFR 3550.10. However, if the area where the site is 
located has changed from rural to nonrural in accordance with the most 
current official census figures, loan requests received before the date 
the area was determined nonrural will be processed as expeditiously as 
possible and loans closed if the applicants are otherwise eligible. Such 
loans must still be eligible and feasible, and processed in accordance 
with Sec. 1944.231 of this subpart.
    (s) Clean Air Act and Water Pollution Control Act Requirements. When 
the contract exceeds $100,000, the contractor will comply with all 
applicable standards, orders or requirements issued under section 306 of 
the Clean Air Act (42 U.S.C. 1857(h)), section 508 of the Clean Water 
Act (33 U.S.C. 1368), Executive Order 11738, and Environmental 
Protection Agency (EPA) regulations 40 CFR part 15 which prohibit the

[[Page 390]]

awarding of nonexempt Federal contracts, grants or loans to facilities 
included on EPA's list of violating facilities. The contractor will 
report violations to the EPA.
    (t) Concurrence with construction contracts. A construction contract 
between the borrower and contractor for development of a project will 
contain a provision that it is not in full force and effect until the 
State Director concurs in writing in the form, content and execution of 
the contract. Before loan closing or before the start of construction, 
whichever occurs first, the State Director or his/her delegate will 
concur with the contract form, content and execution by including the 
following paragraph at the end of the contract:

    ``The Farmers Home Administration or its successor agency under 
Public Law 103-354, as a potential lender or insurer of funds to defray 
the costs of this contract, and without liability for any payments 
thereunder, hereby concurs with the form, content, and execution of this 
contract.''

Date____________________________________________________________________

Farmers Home Administration or its successor agency under Public Law 
103-354

By:_____________________________________________________________________

Title:__________________________________________________________________

    (u) Historic preservation requirements. The servicing official must 
take the necessary action to assure that the applicant will comply with 
the provisions of subpart F of part 1901 of this chapter. This 
regulation concerns compliance with the National Historic Preservation 
Act of 1966, the Archeological and Historic Preservation Act of 1974 
(Public Law 93-291), and Executive Order 11593 dated May 13, 1971.
    (v) Uniform Relocation Assistance and Real Property Acquisition Act 
of 1970. Public bodies and agencies which have the power of eminent 
domain and/or condemnation must comply with the requirements of this 
Act. The applicant must provide assistance for relocation of displaced 
persons from a site on which a project will be located. RHS loan funds 
may be increased over and above the appraised value of the property to 
cover costs incurred in the relocation of displaced persons. Until 
instructions are published by the National Office, the Department 
regulations found at part 21 of this title should be followed and the 
National Office should be consulted for guidance in developing an RRH or 
RCH loan for a project affected by this Act. Generally, if there are 
alternative sites of equal quality which meet the Agency's requirements, 
the site with the least relocation impact will be selected.
    (w) Rental assistance (RA) and market feasibility. (1) As evidence 
of market feasibility, an applicant that proposes a project which is 
expected to use RHS RA units will only be required to demonstrate that a 
market exists for tenants or members eligible for the RA.
    (2) To evidence market feasibility for projects which are expected 
to use RA from sources other than RHS, applicants will be required to 
demonstrate that:
    (i) The assistance will be provided for at least 5 years.
    (ii) A market exists for persons and families eligible for the 
assistance. The amount of the RA to be provided must be considered when 
determining the number of families that would be income eligible for the 
project.
    (iii) For the term of the loan remaining after RA is no longer 
available, an adequate rental market exists for the project without the 
assistance.
    (iv) During the term of the RA contract, the provider will make 
available the amounts required at least annually.
    (3) Feasibility for projects receiving tax credits will require a 
more extensive examination since tax credits are predicated on renting 
to very-low income persons. Applicants choosing to apply for tax credits 
will be responsible for identifying the amount of tax credits it 
anticipates requesting from the State, as well as the income percentage 
on which the credits will be based, and the percentage of units targeted 
for tax credit eligible persons. The market study must substantiate the 
presence of persons whose incomes would qualify for tax credits who 
cannot afford the basic rent and those persons whose incomes are tax 
credit eligible but who are still able to afford the basic rent.
    (x) Civil Rights Impact Analysis. It is the policy within the Rural 
Development mission area to ensure that the consequences of any proposed 
project

[[Page 391]]

approval do not negatively or disproportionately affect program 
beneficiaries by virtue of race, color, sex, national origin, religion, 
age, disability, or marital or familial status. To ensure compliance 
with these objectives, the RHS approval official will complete Form RD 
2006-38, ``Civil Rights Impact Analysis Certification.''

[56 FR 65981, Dec. 20, 1991, as amended at 58 FR 38924, July 21, 1993; 
58 FR 40953, July 30, 1993; 58 FR 44265, Aug. 20, 1993; 59 FR 6887, 
6897, Feb. 14, 1994; 59 FR 49346, Sept. 28, 1994; 61 FR 39851, July 31, 
1996; 62 FR 25067, 25075, May 7, 1997]



Sec. Sec. 1944.216-1944.220  [Reserved]



Sec. 1944.221  Security.

    (a) Mortgage. Each loan will be secured in a manner that adequately 
protects the financial interest of the Government. A first mortgage will 
be taken on the property purchased or improved with the loan, except as 
indicated in paragraphs (a)(1) and (a)(3) of this section and, for 
projects that are funded jointly by RHS and other sources, as indicated 
in Sec. 1944.233(f).
    (1) A second mortgage will be taken on a site developed with prior 
loan(s) when a subsequent loan is made to complete or finish out units 
on the site or when a second initial loan is made to develop units on a 
contiguous site.
    (2) Personal liability will not be required for the members or 
stockholders of any corporation or trust or any partners in a limited 
partnership. Personal liability will be required of all members of other 
partnerships. For limited partnerships, the State Director will obtain 
the advice of the Regional Attorney as to any modifications needed in 
the promissory note and mortgage.
    (3) If it is impossible or inadvisable for an applicant which is a 
public or quasi-public organization to give a real estate mortgage, the 
security to be taken will be determined by the National Office upon the 
recommendation of the State Director. The State Director should consult 
OGC as to whether the proposed security is legally permissible.
    (b) Financing statement. To secure the FmHA or its successor agency 
under Public Law 103-354 loan, each borrower will execute Form FmHA or 
its successor agency under Public Law 103-354 440-25, ``Financing 
Statement,'' and a security agreement at loan closing pledging all 
revenue from the housing project. This includes any FmHA or its 
successor agency under Public Law 103-354 RA payments State or private 
RA payments and/or rent or occupancy payments.
    (c) If a bond is used in lieu of a promissory note to evidence a 
loan, it must be sent to the National Office for review prior to loan 
closing. OGC must also review the proposed bond.

[53 FR 2159, Jan. 26, 1988, as amended at 56 FR 2238, Jan. 22, 1991; 62 
FR 25075, May 7, 1997]



Sec. 1944.222  Technical, legal, and other services.

    (a) Appraisals. When real estate is taken as security, the property 
will be appraised without regard to such factors as race, color, 
religion, sex, handicap, marital or familial status, or National origin, 
and it is unlawful to use an appraisal where the person knows, or 
reasonably should know, that the appraiser improperly took into 
consideration the factors indicated above. Appraisals for FmHA or its 
successor agency under Public Law 103-354 will be done by the multiple 
housing appraiser or a designated contract appraiser authorized to make 
real estate appraisals. If security involves less than five rental 
units, the property will be appraised under subpart C of part 1922 of 
this chapter. For security involving five or more rental units, the 
appraisal will be made under FmHA Instruction 1922-B (available in any 
State or servicing office). Form FmHA or its successor agency under 
Public Law 103-354 1922-7, ``Appraisal Report for Multi-Unit Housing,'' 
will be completed to show the depreciated replacement value of all the 
buildings existing or to be constructed on the property to be taken as 
security.
    (b) Architectural and engineering services. (1) Housing and related 
facilities will be planned and developed in accordance with subparts A 
and C of part 1924 of this chapter. The housing will be designed to meet 
the needs of the types of persons who will likely occupy it.

[[Page 392]]

    (2) A written contract for architectural services will be required 
as outlined in subpart A of part 1924 of this chapter.
    (c) Construction and development policies. Construction and 
development will be performed in accordance with subpart A of part 1924 
of this chapter (FmHA Instruction 1924-A), available in any FmHA or its 
successor agency under Public Law 103-354 office.
    (d) Compliance with Federal, State and local codes, regulations and 
ordinances. Planning, construction and operation of housing financed 
with an RRH or RCH loan will conform with applicable laws, ordinances, 
codes and regulations (including any licensing required governing such 
matters as construction, heating, plumbing, electrical installation, 
fire prevention, health, sanitation, use and occupancy).
    (e) Contracts for legal services. On projects requiring extensive 
legal services, the applicant must have a written contract if loan funds 
will be use for these services. All contracts will be subject to review 
and concurrence by FmHA or its successor agency under Public Law 103-354 
and should be submitted to FmHA or its successor agency under Public Law 
103-354 before execution by the applicant. Contracts will provide for 
the types of services to be performed and the amount of the fees to be 
paid, either in lump-sum on the completion of all services or in 
installments as services are performed.
    (f) How to apply for a rural rental or rural cooperative housing 
loan. Exhibit A may be used as a guide for applicants applying for 
loans. Extra copies may be obtained from FmHA or its successor agency 
under Public Law 103-354.
    (g) Optioning of land. If a loan includes funds to purchase real 
estate, the applicant must obtain an option on the parcel to be 
purchased from the current owner of public record. Form FmHA or its 
successor agency under Public Law 103-354 440-34, ``Option to Purchase 
Real Property,'' or other option form with provisions acceptable to FmHA 
or its successor agency under Public Law 103-354 and the applicant may 
be used. When an option form other than Form FmHA or its successor 
agency under Public Law 103-354 440-34 is used, a provision should be 
included indicating that it is contingent upon FmHA or its successor 
agency under Public Law 103-354 making a loan to the buyer.
    (h) Title clearance and legal services. When the applicant is an 
organization or an individual with special title or loan closing 
problems, title clearance and legal services will be obtained in 
accordance with instructions from OGC. In other cases, the provisions of 
subpart A of part 1944 and 7 CFR part 3550 of this chapter regarding 
title clearance and legal services will apply.
    (i) Use of and accountability for loan funds. Loan funds and any 
funds furnished by the borrower for eligible loan purposes may be 
deposited in accordance with the loan agreement or loan resolution and 
the provisions of subpart A to part 1902 and subpart C to part 1930. 
Collateral for deposit of funds will be pledged in accordance with Sec. 
1902.7 of subpart A of part 1902 of this chapter. Funds furnished by the 
borrower for the purchase of special equipment and furnishings to be 
used in connection with the project, for which loan funds cannot be 
used, should not be deposited in the supervised bank account with loan 
funds. Withdrawals of funds from the supervised bank account may be made 
only for eligible loan purposes.
    (j) Insurance. The loan approval official will determine the minimum 
amounts and types of insurance the applicant will carry.
    (1) Fire and extended coverage will be required on all buildings 
included in the security for the loan in accordance with subpart A of 
part 1806 of this chapter (FmHA Instruction 426.1) and subpart C of part 
1930 of this chapter.
    (2) Suitable worker's compensation insurance will be carried by the 
applicant for all its employees.
    (3) The applicant will be advised of the possibility of incurring 
liability and encouraged or required, when appropriate, to obtain 
liability insurance.
    (4) Flood insurance will be required on all buildings located in or 
to be located in special flood or mudslide prone areas in accordance 
with subpart B of part 1806 (FmHA Instruction 426.2).
    (k) Surety bonding and fidelity coverage. (1) The provisions of 
subpart A of part 1924 of this chapter pertaining to

[[Page 393]]

surety bonds are applicable to RRH and RCH loans. When interim financing 
is used during the construction period, the decision concerning whether 
or not to require surety bonds is the interim lender's. If the interim 
lender decides not to require surety bonds, a bond waiver is not 
required from the National Office.
    (2) If the applicant is an organization, it will see that fidelity 
coverage is in place on any personnel entrusted with the receipt, 
custody and disbursement of any project monies, securities, or readily 
salable property other than money or securities. Fidelity coverage will 
be in force as soon as there are assets in the organization in 
accordance with the provisions described at paragraph XV A of exhibit B 
of subpart C of part 1930 of this chapter.
    (l) Previous participation certification. All principals and 
affiliates are required to submit a properly completed Form HUD-2530/
FmHA 1944-37, ``Previous Participation Certification.'' Architects and 
attorneys who have any interest in the project other than an arms length 
fee arrangement for professional services are also considered 
principals. The forms will be completed and processed in accordance with 
instructions attached to the form.

[53 FR 2159, Jan. 26, 1990, as amended at 55 FR 6245, Feb. 22, 1990; 55 
FR 26644, June 29, 1990; 55 FR 35895, Sept. 4, 1990; 56 FR 2238, Jan. 
22, 1991; 58 FR 40953, July 30, 1993; 58 FR 44265, Aug. 20, 1993; 59 FR 
6890 and 6896-6897, Feb. 14, 1994; 67 FR 67328, Dec. 24, 2002]



Sec. 1944.223  Supplemental requirements for manufactured home project 
development.

    This section includes additional provisions that apply to the making 
of loans for manufactured home rental and cooperative project 
development. This section will apply in addition to all other applicable 
requirements contained elsewhere in this subpart. All references in this 
subpart to projects and housing for rent to eligible tenants will also 
mean the rental of sites with manufactured homes within a rental project 
development.
    (a) Eligible projects. When a loan is closed on a manufactured home 
project, the borrower will have constructed and completed, pursuant to a 
commitment given in accordance with Sec. 1944.235(c)(2) of this 
subpart, such project designed principally for rental or cooperative use 
for manufactured homes, and conforming to the development, installation 
and set-up requirements of exhibit J to subpart A of part 1924 of this 
chapter.
    (1) The borrower must be the first owner purchasing the manufactured 
homes for purposes other than resale.
    (2) The project must include two or more continguous sites with 
dwelling units. Each manufactured home unit must not have been 
previously occupied as a residence or for any other purpose and be less 
than 1 year old from date of manufacture.
    (3) A project is not eligible if the purpose of the loan is to 
refinance the project, except as provided in Sec. 1944.212(l) of this 
subpart.
    (4) A loan may be made to rehabilitate manufactured home units of an 
existing project only if the units to be rehabilitated are currently 
financed by FmHA or its successor agency under Public Law 103-354 under 
this subpart.
    (5) An eligible project may include the purchase of the real 
property of an existing project which will be redeveloped with the 
placement of new, previously unoccupied, manufactured homes conforming 
to the development, installation and set-up requirements of exhibit J to 
subpart A of part 1924 of this chapter.
    (b) Loan limitations. The maximum loan amount will be determined in 
accordance with Sec. 1944.213 of this subpart as applicable.
    (c) Rates and terms. The amortization period of each loan will not 
exceed the economic life of the security, taking into account probable 
depreciation. However, under no circumstance will the amortization 
period for a loan made under this section exceed 30 years from the date 
of the promissory note.
    (d) Security. A mortgage or deed of trust will be taken on the 
entire property purchased or improved with the loan. The encumbered 
property must be covered under a standard real estate title insurance 
policy or attorney's title opinion that identifies the project 
(including the manufactured homes) as

[[Page 394]]

real property and insures or indemnifies against any loss if the 
manufactured home is determined not to be part of the real property. The 
property must be taxed as real estate by the jurisdiction where the 
project is located if such taxation is permitted under applicable law 
when the loan is closed.
    (e) Property requirements. (1) Construction and development of the 
project, including related facilities constructed or erected on the 
security property, will be in accordance with Sec. 1944.222(d) of this 
subpart and exhibit J to subpart A of part 1924 of this chapter.
    (2) Manufactured home projects will be designed to provide for a 
desirable residential environment. Innovative and imaginative design is 
encouraged. Stylized patterns and monotony will be avoided. All property 
improvements will relate to the individual characteristics of the land. 
The project, including structures, streets, and all site improvements, 
should be harmoniously, efficiently and conveniently arranged in 
relation to the topography and the shape of the property.
    (3) The borrower will not use or permit the use of any portion of 
the security property for demonstrating mobile home models for sale 
promotion purposes.
    (4) The manufactured home, when placed on site, will have floor 
space area of not less than 400 square feet, and a width of 12 feet or 
more for single wide and 20 feet or more for a double wide unit. The 
unit must:
    (i) Be placed on a site-built permanent foundation that meets or 
exceeds applicable requirements of the FmHA or its successor agency 
under Public Law 103-354 adopted standards which are identified in 
exhibit J to subpart A of part 1924 of this chapter or other building 
codes approved by FmHA or its successor agency under Public Law 103-354.
    (ii) Be permanently attached to the foundation by anchoring devices 
adequate to resist all loads identified in exhibit J to subpart A of 
part 1924 of this chapter or other building codes approved by FmHA or 
its successor agency under Public Law 103-354.
    (iii) Be constructed in compliance with Rural Development thermal 
performance construction standards as specified in Exhibit D to subpart 
A of part 1924 of this chapter. The unit must have an affixed label as 
specified in 7 CFR part 3550 indicating that the unit is constructed to 
Rural Development thermal requirements for the appropriate winter degree 
days.
    (iv) Be constructed in compliance with applicable standards and 
manuals adopted by FmHA or its successor agency under Public Law 103-354 
as evidenced in part A, paragraph V of exhibit J to subpart A of part 
1924 of this chapter. All units must conform to the HUD ``Federal 
Manufactured Home Construction and Safety Standards,'' and be identified 
by an affixed certification label according to exhibit J to subpart A of 
part 1924 of this chapter.
    (f) Special warranty requirements. The general contractor or 
dealercontractor, as applicable, must provide a warranty in accordance 
with the provisions of Sec. 1924.9(d) of subpart A of part 1924 of this 
chapter.
    (1) The warranty will provide that the manufactured homes, 
foundations, positioning and anchoring of the units to their permanent 
foundations, and all contracted improvements are constructed in 
substantial conformity with applicable approved plans and 
specifications.
    (2) The warranty will also include provisions that the manufactured 
homes sustained no hidden damage during transportation and, for double-
wide units, that the sections were properly joined and sealed.
    (3) The general contractor or dealer-contractor must warrant that 
the manufacturer's warranty is in addition to and not in derogation of 
all other warranties, rights and remedies that the borrower may have.
    (4) The seller of the manufactured homes will deliver to the 
borrower the manufacturer's warranty. The warranty will identify the 
units by serial number.

[53 FR 2159, Jan. 26, 1988, as amended at 55 FR 29561, July 20, 1990; 56 
FR 2239, Jan. 22, 1991; 67 FR 78328, Dec. 24, 2002]

[[Page 395]]



Sec. 1944.224  Supplemental requirements for congregate housing and 
group homes.

    This section includes additional provisions that apply to the making 
of loans for congregate housing and group homes. It will apply in 
addition to all other applicable requirements contained elsewhere in 
this subpart. Congregate housing and group homes are types of section 
515 RRH that require a broader commitment from applicants to ensure that 
needed and desired services will be provided when requested by 
prospective tenants. The concept may not be desired or feasible in all 
market areas. Congregate housing is unique and has many components. It 
is not merely an elderly housing project with services. It must be 
designed and managed to meet the needs of aging tenants. The management 
of congregate housing requires supervision of support services and more 
interaction and consultation with tenants. We strongly recommend that 
applicants who have not dealt with this type of housing obtain 
assistance from organizations or individuals who have experience in 
planning and designing congregate housing.
    (a) Congregate housing. Congregate housing will create an 
environment that will assist individuals who request services to 
maintain their independence longer by making available nutritious meals 
and other services that can help enhance their independence. Congregate 
housing will also help people who need some services to extend an 
independent lifestyle.
    (1) Eligible tenants. Eligible tenants are described in Sec. 
1944.205 of this subpart and paragraph VI A of exhibit J of subpart C of 
part 1930 of this chapter.
    (2) Design criteria. Applicants must pay particular attention to the 
layout of the structure and the effect of design elements on project 
management and ongoing operations. Applicants should engage the services 
of an architect experienced in congregate design. The initial planning 
of congregate housing should include input on design considerations from 
project management to prevent the potential long-term affects of poorly 
conceived design on operations. Congregate housing must be planned and 
developed in accordance with subparts A and C of part 1924 of this 
chapter. In addition, it must meet the following design criteria:
    (i) Applicants must pay particular attention to the site 
requirements contained in Sec. 1944.215(r) of this subpart. Congregate 
housing should be located as close to services and shopping as possible, 
considering the availability of affordable residential sites. The time 
it takes to reach services is also important especially when considering 
potential medical emergencies.
    (ii) Facilities needed to accommodate the services described in 
Sec. 1944.224 (a)(5) of this subpart must be designed in accordance 
with acceptable practices. Specific design guidelines are provided in 
chapter 1 of guide 2 of subpart A of part 1924 of this chapter. These 
facilities may be larger than necessary to meet the tenants' 
requirements if they are needed in the community and other sources of 
funds are available to pay a pro rata share of the cost.
    (iii) The design must accommodate the needs of the individuals the 
housing is designed to serve. The walkways and corridors between living 
units and the support service facilities must be safe, comfortable and 
minimal in length. Handrails that comply with the Uniform Federal 
Accessibility Standards must be provided on at least one side of all 
public corridors.
    (iv) Areas used by the tenants will be separated as much as possible 
from areas needed for delivery of food and supplies and other building 
services. Interior spaces and finish materials must be residential in 
character and designed to help prevent tenants from becoming disoriented 
within the building(s).
    (v) Emergency lighting must be provided in every public space, 
corridor, stairway, elevator and other means of egress.
    (vi) The entrances to all living units must be on a route accessible 
to individuals with handicaps. Living units accessible only via exterior 
steps or interior stairs will not be acceptable.
    (vii) The size of rooms and spaces in the living units must be 
comparable to units provided in other housing for the elderly. Kitchen 
facilities must be provided in all living units and include, as

[[Page 396]]

a minimum, a cooktop, oven, sink, refrigerator and a food preparation 
surface.
    (viii) The bathroom and one bedroom in each living unit, and any 
public toilet rooms, must be furnished with an emergency call system 
that is appropriate for the size and management of the housing facility.
    (3) Limitation on use of loan funds. Loan funds cannot be used for:
    (i) Items which do not become affixed to the real estate security, 
such as special portable equipment, furnishings, kitchen bars, dining 
ware, eating utensils, movable tables and chairs, etc. Congregate 
housing projects require additional items that will not become affixed 
to the real estate. Developers are responsible for ensuring that these 
items are made available to the project. The initial operating capital 
can be used for these items in accordance with Sec. 1944.211(a)(6)(i) 
of this subpart.
    (ii) Specialized equipment for training and therapy.
    (iii) Operating capital for a central dining facility.
    (4) Management of congregate projects. Applicants must meet the 
provisions of exhibit J of subpart C of part 1930 of this chapter in 
managing congregate housing and are encouraged to review exhibit J 
before completing a loan application. In addition to the elements of 
managing a typical RRH project, congregate housing requires increased 
management experience and skills. Delivery of services, counseling with 
tenants, and the decisionmaking process of tenant selection add a unique 
dimension to prudent management. The success or failure of a project 
will rely heavily upon management's specialized management and marketing 
skills and abilities and delivery of services. Applicants who are not 
experienced with congregate housing must seek assistance from 
organizations or individuals experienced with congregate issues in 
developing the management and servicing plans. A separate plan detailing 
the delivery of services must be submitted with the loan request. If the 
applicant will be the service provider, it must also submit separate 
budgets for operation and maintenance of the project and services.
    (5) Support services. Exhibit E of this subpart must be addressed in 
planning services. Adequate services must be offered to assist tenants 
in living independently and be reasonably priced to ensure affordability 
by very low- and low-income tenants of the tenant base as defined in 
part 1930, subpart C, exhibit J, paragraph V, of this chapter. A wide 
variety of services may be offered; however, the following services must 
be provided:
    (i) Meals. Since some tenants will depend on the meal service as 
their only sustenance, at least one cooked meal a day, 7 days a week, 
must be provided. There may be cases where the meal provider does not 
furnish meals on a daily basis. On days the meal provider does not 
furnish meals, an alternate source must provide meals to tenants who are 
not inclined to prepare their own meals. The following conditions apply 
to meals:
    (A) To ensure that the meals are wholesome and meet the needs of 
individual tenants, a professionally trained dietitian or nutritionist 
must be involved in planning the menus.
    (B) The feasibility of sustained meal service may be dependent on 
the number of people who elect to use it. Congregate housing borrowers 
should actively solicit tenant participation in the meal service if the 
economic feasibility of the service depends on user charges.
    (C) If the entity that operates the service is eligible to accept 
food stamps under the regulations of the Food and Nutrition Service 
(FNS) of the United States Department of Agriculture (USDA), the entity 
must be authorized by FNS to accept food stamps from tenants for the 
purchase of meals.
    (ii) Transportation. Transportation must be provided to the project 
on a fixed schedule based on tenant needs. Applicants are encouraged to 
work with public and private transportation sources to develop a 
dependable and economical method for providing this service. If these 
sources cannot provide adequate transportation, the applicant must 
develop a project-sponsored transportation system.
    (iii) Housekeeping. Housekeeping services must be provided to 
tenants who request assistance in keeping their

[[Page 397]]

units clean. Light housekeeping tasks, such as dusting, vacuuming, floor 
washing, bathroom cleaning and laundry for bedding, generally should be 
provided on a weekly basis. Heavier tasks, such as oven cleaning, window 
cleaning and drapery cleaning, should be provided periodically.
    (iv) Personal services. Limited nonmedical personal services must be 
made available to tenants who request them. Personal services can 
include such items as assistance with personal hygiene, nutrition 
counseling and general health screening. They do not include recurring 
medical assistance such as dispensing medication or constant medical 
supervision. Space may be included in the project for a small beauty 
shop and health screening area. Applicants may want to consider 
contracting for personal services to assure their continued and 
dependable availability to tenants.
    (v) Recreation/social. Recreational and social activities must be 
offered to tenants to encourage interest in a variety of areas. Areas 
such as hobby and craft classes, special dinners and wellness exercise 
classes could be considered.
    (6) Service providers. Service must be provided at a cost that can 
be afforded by very low-, low- and moderate-income tenants. Applicants 
should explore as many service providers as possible to ensure services 
at the most reasonable cost. Applicants must research alternative 
service providers since the original provider may be unable to furnish 
service in the future. If feasible, project management should be 
consulted concerning alternative service providers since they may have 
experience with available sources in the area. Documentation concerning 
alternative services must be submitted as part of the loan request. 
Alternative sources must be documented even if the applicant plans to 
use onsite personnel for services. The availability of services from 
alternative sources can enhance a proposal's feasibility since long-term 
services are crucial to the success of congregate housing.
    (7) General service requirements. Applicants must provide a plan 
which addresses the long-term availability of assistance from service 
providers. As a part of the loan request, applicants must provide a 
letter of commitment from each service provider detailing its ability 
and willingness to provide services. This letter must identify the type, 
scope, cost, term and any licensing requirements of services that will 
be provided to the project. If a local agency on aging will provide a 
service, the commitment can be contingent on the agency maintaining its 
level of funding. In these cases, it is imperative that applicants 
document the availability of alternative sources as required in 
1944.224(a)(6) of this section. As a part of the final application, 
applicants must provide a service agreement detailing the information 
contained in the letter of commitment. Initial service agreements must 
be effective for at least 1 year after the project becomes operational. 
Subsequent agreements must be effective for at least 1 year. Applicants 
should refer to paragraph V D of exhibit J of subpart C of part 1930 for 
further guidance.
    (8) Services provided to people who are not tenants of FmHA or its 
successor agency under Public Law 103-354 financed congregate housing. 
If the meal facility serves people who are not tenants of the project, 
the applicant must obtain a lease from the service provider and require 
payment sufficient to cover the annual operating expenses, debt service 
and reserve account attributable to the portion of increased space that 
is in excess of the needs of tenants in the project. In most cases, this 
will be a negligible amount that the meal provider can afford to pay. 
Applicants should refer to paragraph VIII B of exhibit J of subpart C of 
part 1930 of this chapter for further guidance.
    (b) Group homes. Group homes will provide housing in a residential 
environment for individuals capable of caring for themselves in the 
basic functions of everyday living but otherwise need the direction and/
or assistance of a trained resident assistant. Group homes may be 
designed for individuals who are elderly, have handicaps, or 
disabilities as defined in Sec. 1944.205 of this subpart. Appropriate 
common areas and facilities should be included to encourage 
participation by the tenants under the direction of a staff person in

[[Page 398]]

sharing the meal preparation, housekeeping, social and recreational 
activities within the home. It is not the goal of group homes to provide 
housing for tenants requiring constant medical attention. The following 
conditions are applicable to group homes:
    (1) A group home is generally designed as a single household 
dwelling; however, it can also be a small multi-unit structure. Specific 
design guidelines are provided in chapter 1 of guide 2 of subpart A of 
part 1924 of this chapter. In addition, group homes must meet the 
following design criteria:
    (i) The potential decreasing physical and mental capabilities of 
tenants must be considered in the design.
    (ii) Interior spaces and finish materials must be residential in 
character.
    (iii) Emergency lighting must be provided in every corridor, 
stairway and other means of egress.
    (iv) The entrances to all living units must be on a route accessible 
to handicapped persons.
    (2) Prospective tenants must be evaluated to determine if they meet 
the essential eligibility requirements to reside in a group home. 
Applicants should be guided by paragraph VI B 1 b of exhibit J of 
subpart C of part 1930 of this chapter.
    (3) A group may limit occupancy to a specific group of tenants. For 
example, a group home may limit occupancy to eligible elderly tenants, 
developmentally disabled people, or mentally impaired tenants. Refer to 
exhibit J of subpart C of part 1930 of this chapter for additional 
information.
    (4) A group home may be associated with another organization, such 
as a workshop for the developmentally disabled. However, it must be a 
separate entity and able to function without being dependent on another 
organization.
    (5) Applicants must show that adequate support services needed by 
the tenants will be available on a continual long range basis. Support 
services can be provided by the project or by a State or local public 
agency. A nonprofit organization with an estimated ongoing service 
program also may be deemed capable of providing support services.
    (6) Food stamps must be accepted from tenants as part of their 
contribution for meals in accordance with 1944.224 (a)(5)(C) of this 
section.
    (7) A legal guardian (an individual) may execute a lease agreement 
on behalf of a tenant in a group home when that tenant does not possess 
the legal capacity to enter into a legal contract with the project 
owner.
    (8) Instructions on how to determine the per unit rental rates for 
group homes are stipulated in exhibit J of subpart C of part 1930 of 
this chapter.
    (c) Market studies for congregate housing and group homes. In 
addition to the requirements of exhibit A-7 of this subpart, the 
following are applicable to market studies for congregate housing and 
group homes:
    (1) Market studies must address the need for housing with services. 
Local agencies on aging and other groups familiar with the elderly can 
be a valuable source of information on the needs and wants of elderly 
people in the market area. Applicants can conduct a mail-out survey to 
age and income qualified elderly people if information is not available 
from other sources.
    (2) An expanded market area may be considered only when the 
additional communities are part of the trade area and are so rural that 
they cannot support development of a congregate or group home facility. 
If an expanded market area is proposed, the market study must establish 
conclusively that the community will be able to draw enough tenants from 
the market area to ensure feasibility of the project. The market study 
must clearly identify the expanded area and contain separate information 
on the additional communities. If used, mail-out surveys must clearly 
address the probability of respondents relocating to the proposed site.
    (3) Market studies should include income information from the local 
social security office since many elderly people are dependent on social 
security and/or supplemental security income. This information will 
assist in determining if proposed tenants would have sufficient income 
to afford the services provided by the project.
    (4) Demand for congregate housing generally is displayed by elderly 
people

[[Page 399]]

who are older than 70 years. Therefore, the market study must contain 
demographic information particular to those over the age of 62 and those 
over 70 years old. The study must also address the growth trends of 
people who are over 85 years old.
    (5) Market studies must include information concerning alternative 
service providers as required in paragraph (a)(6) of this section.
    (d) Compliance with other laws. Congregate housing and group homes 
must meet all applicable Federal, State and local laws, statutes, codes 
and/or ordinances pertaining to these types of housing and the services 
provided.

[55 FR 26644, June 29, 1990, as amended at 58 FR 38925, July 21, 1993; 
58 FR 40953, July 30, 1993; 59 FR 6890, Feb. 14, 1994; 62 FR 25065, 
25067, May 7, 1997]



Sec. Sec. 1944.225-1944.227  [Reserved]



Sec. 1944.228  Ranking of rural places based on greatest need for Section 
515 housing.

    The Agency will rank rural places based on greatest need for Section 
515 housing in accordance with this section. Places may be incorporated 
population centers such as cities, boroughs, towns, and villages; or 
unincorporated population centers identified by the Census Bureau (known 
as Census Designated Places (CDPs)). States must be consistent state-
wide in their use of place types that are included in the list of 
designated places. Ranking will be based on the following:
    (a) Qualifies as a rural area in accordance with 7 CFR 3550.10.
    (b) Lacks mortgage credit for borrowers in accordance with 
Sec. 1944.211(a)(2).
    (c) Demonstrates a need for multi-family housing based on the 
following factors, with equal weight given to each. Data for this 
purpose will be provided to States by the National Office from the most 
recent rural place data obtained from the Census Bureau. If Census data 
is not available for an eligible rural place, the State may request 
authority from the National Office to include the place on the list of 
designated places established in accordance with Sec. 1944.229, 
provided the place meets the requirements of Sec. 1944.229(b) and it 
can be demonstrated that there is a high need for assisted multi-family 
housing based on information obtained from reliable local or state 
sources. The State may request authority from the National Office to use 
other state-wide data if it is objective and consistent with the Housing 
Act of 1949, as amended.
    (1) The incidence of poverty, measured by determining households 
below 30 percent of the county rural median income.
    (2) The existence of substandard housing, measured by determining 
the number of occupied housing units that lack complete plumbing or have 
more than one occupant per room.
    (3) The lack of affordable housing, measured by determining 
households below 30 percent of county rural median income paying more 
than 30 percent of income in rent.

[62 FR 25067, May 7, 1997, as amended at 62 FR 67222, Dec. 23, 1997]



Sec. 1944.229  Establishing the list of designated places for which 
Section 515 applications will be invited.

    States will compile a list of designated places for which Section 
515 applications will be invited, in accordance with the provisions of 
this section and the ranking process described in Sec. 1944.228. 
Inclusion on the list of designated places does not indicate that market 
need and demand has been established; this will be a loan feasibility 
determination. Once placed on the list of designated places, places will 
be considered equal, with no regard to their ranking on the ranking list 
or order of selection. In exceptional circumstances, there may be an 
instance when a place with an urgent need for multi-family housing is 
not reflected in the ranking process in Sec. 1944.228; for example, a 
place that has had a substantial increase in income-eligible population 
since the most recent decennial Census data because of a new industry, a 
place that has experienced a loss of affordable housing because of a 
natural disaster, or a community within the limits of an Indian 
reservation or tribal alloted or trust land with a demonstrated need for 
multifamily housing. With concurrence from the National Office, the 
State may include

[[Page 400]]

the place on the list of designated places.
    (a) Establishing the number of designated places. Initially, the 
number of designated places may equal up to 10 percent of the state's 
total eligible rural places ranked in accordance with Sec. 1944.228, 
but must equal, in all cases, at least 10 places. For example, in a 
state with 1,000 total rural places, the State may designate up to 10 
percent, or 100 places. However, in a state with 60 total rural places, 
the State would use the minimum number of 10 places, since 10 percent of 
60 equals 6. In states where 10 percent equals more than the minimum 
number of 10, consideration in determining the number of places to 
include on the list should be given to the size and population of the 
state, funding levels, and the potential for leveraging. If warranted by 
funding levels, the Administrator may authorize in NOFA the selection of 
designated places up to 20 percent of the States' total rural places.
    (1) States may designate a higher number of places than 10 percent 
or the minimum 10 places to reach high-need areas in accordance with 
paragraph (c)(3) of this section.
    (2) States that anticipate high loan activity because of leveraging 
may designate a number of places higher than 10 percent or the minimum 
10 places with the concurrence of the National Office.
    (b) Requirements for inclusion on the list of designated places. 
Places selected for the list of designated places:
    (1) Must have 250 or more households as a minimum feasibility 
threshold for multi-family housing, or, for Indian reservations, must 
have 250 or more households within the boundaries of the reservation; 
and
    (2) May not have any of the ``build and fill'' conditions described 
in Sec. 1944.213(f)(2). Places thus identified will be deferred for 
inclusion on the current year's list of designated places. Deferred 
places will be reviewed annually and, at such time that the ``build and 
fill'' conditions no longer exist, will be considered for inclusion on 
the list for the next fiscal year in accordance with this section. To 
the extent practicable, States will consult with HUD and other state or 
local agencies or entities that provide very low- or low-income rental 
housing to determine places where loan proposals have been approved or 
are in process.
    (c) Selection of designated places. Places meeting the requirements 
of paragraph (b) of this section will be selected from the ranking list 
as follows:
    (1) At least 80 percent of the State's total designated places must 
be selected in rank order from the list.
    (2) With concurrence from the National Office, up to 20 percent of 
the State's designated places may be selected for geographic diversity. 
For example, in a state with 1,000 total rural places, the State has 
elected to select designated places equal to the maximum 10 percent, or 
100 places. Of the 100 places, at least 80 percent, or 80 places, must 
be selected from the places that meet the requirements of paragraph (b) 
of this section in order of their ranking; up to 20 percent, or 20 
places, may be selected for geographic diversity. Places selected for 
geographic diversity must be the highest ranked place in each geographic 
division designated by the State, which must correspond with established 
State divisions, such as districts, regions, or servicing areas.
    (3) In addition to the designated places selected in accordance with 
paragraphs (c)(1) and (c)(2) of this section, States may designate the 
following high need areas for multi-family housing:
    (i) Places identified in the state Consolidated Plan or similar 
state plan or needs assessment report.
    (ii) EZ/ECs, Indian reservations or communities located within the 
boundaries of tribal allotted or trust land, colonias, or REAP 
communities.
    (d) Length of designation. Places will remain on the list of 
designated places for 3 years or until a loan request is selected for 
funding or the community is otherwise deferred for other ``build and 
fill'' conditions, whichever occurs first. Places that are deferred 
before the end of the 3-year designation period will be reviewed 
annually for potential inclusion on the next year's list of designated 
places. A place may be removed from the list prior to the end of the 3-
year designation period because of a substantial loss of income-eligible

[[Page 401]]

population or an increase in the affordable rental housing supply, for 
example, a place that experiences the closing of a military base or 
other major employer.
    (e) List of designated places. A list of designated places may be 
obtained by contacting the State Office or any Rural Development office 
in the state.
    (f) Partnership designated place list. States with an active 
leveraging program and formal partnership agreement with the state 
agency may establish a partnership designated place list consisting of 
places identified by the partnership as high need areas based on 
criteria consistent with the Agency's and the state's authorizing 
statutes. The partnership agreement and partnership designated place 
list must have the concurrence of the Administrator. Ranking and 
selection of loan requests for places on the partnership designated 
place list will be in accordance with Sec. 1944.231(b)(3)(iii) and 
Sec. 1944.231 (b)(6) of this subpart.

[62 FR 25067, May 7, 1997, as amended at 62 FR 67222, Dec. 23, 1997]



Sec. 1944.230  Application submission deadline and availability of funds.

    (a) Application submission and funding cycle. Dates governing the 
submission and funding cycle of Section 515 loan requests will be 
published annually in the Federal Register and may be obtained from any 
Rural Development office.
    (b) Availability of funds. The amount of funds available for each 
State, as well as any limits on the amount of individual loan requests, 
will be published as a notice annually in the Federal Register.

[62 FR 25068, May 7, 1997]



Sec. 1944.231  Processing loan requests.

    (a) Actions by the applicant. Loan requests may be submitted for 
designated areas when the availability of funds is announced. The loan 
request will consist of an application form prescribed by the Agency and 
the items listed in exhibit A-7 of this subpart. If an application is 
selected, the applicant will be required to provide the additional items 
required by exhibit A-9 of this subpart within the timeframes 
established by the Agency.
    (b) Actions by the Agency--(1) Actions by the Agency on loan 
requests received. Loan requests received after the deadline announced 
in the Federal Register will not be considered for funding in that 
funding cycle and will be returned to the applicant.
    (2) Review and scoring of loan requests. Loan requests will be 
reviewed:
    (i) To determine if the loan request is complete and includes the 
additional information required in NOFA;
    (ii) To determine if the request is for an authorized purpose; and
    (iii) To establish a point score based on the following factors:
    (A) The presence and extent of leveraged assistance for the units 
that will serve RHS income-eligible tenants at basic rents comparable to 
those if RHS provided full financing. Eligible types of leveraged 
assistance include loans and grants from other sources, contributions 
from the borrower above the required contribution indicated by the 
Sources and Uses Comprehensive Evaluation, and tax abatements or other 
savings in operating costs provided that, at the end of the abatement 
period when the benefit is no longer available, the basic rents are 
comparable to or lower than the basic rents if RHS provided full 
financing. Scoring will be based on the presence and extent of leveraged 
assistance for each loan request compared to the other loan requests 
being reviewed, computed as a percentage of the total development cost 
of the units that will serve RHS income-eligible tenants. A total 
monetary value will be determined for leveraged assistance such as tax 
abatements or services in order to compare such items equitably with 
leveraged funds. As part of the loan application, the applicant must 
include specific information on the source and value of the services for 
this purpose. Proposals will then be ranked in order of the percent of 
leveraged funds and assigned a point score accordingly. Loan proposals 
that include secondary funds from other sources that have been requested 
but have not yet been committed will be processed as follows: the 
proposal will be scored based on the

[[Page 402]]

requested funds: Provided, that the applicant includes evidence of a 
filed application for the funds; and the funding date of the requested 
funds will permit processing of the loan request in the current funding 
cycle, or, if the applicant does not receive the requested funds, will 
permit processing of the next highest ranked proposal in the current 
year. The Agency will issue a conditional commitment to the applicant 
with a specific deadline for providing a commitment of funds from the 
other source. If the deadline is not met, the application will be 
returned as incomplete and the next ranked proposal will be processed. 
(0 to 20 points)
    (B) The loan request is for units to be developed in a colonia, 
tribal land, EZ/EC, or REAP community, or in a place identified in the 
state Consolidate Plan or state needs assessment as a high need 
community for multi-family housing. (20 points)
    (C) The loan request is in support of a National Office initiative 
announced in NOFA. (20 points)
    (D) The loan request is in support of an optional factor developed 
by the State that promotes compatibility with special housing 
initiatives in conjunction with state-administered housing programs such 
as HOME funds or low income housing tax credits.
    A factor thus developed cannot duplicate factors already included in 
this paragraph and must be provided to the National Office prior to the 
funding cycle for concurrence and inclusion in NOFA. (20 points)
    (E) The loan request includes donated land meeting the provisions of 
Sec. 1944.215(r)(4). (5 points)
    (3) Point score ties and ranking of loan requests. Loan requests 
will be ranked in order of highest point score or, where there are point 
score ties, in order of highest point score and number assigned as 
follows:
    (i) If one of the same-pointed requests is from an entity meeting 
the requirements of paragraph (e) of this section, it will be denoted 
with a 1 following the point score. If two or more are from 
entities meeting these requirements, a lottery will be held. The first 
drawn request will be denoted 1, the second drawn 2, 
etc.
    (ii) After all requests from entities meeting the requirements of 
paragraph (e) of this section have been numbered, the next sequential 
number will be assigned to a loan request from an entity not meeting the 
requirements of paragraph (e) of this section. If there are two or more 
requests from entities not meeting the requirements of paragraph (e) of 
this section, a lottery will be held and each request numbered in the 
order it is drawn, beginning with the next sequential number.
    (iii) States with a partnership designated place list developed in 
accordance with Sec. 1944.229(f) of this subpart, will score and rank 
loan requests as follows:
    (A) All loan requests (including those for places on the partnership 
designated place list) will be reviewed and scored together as one 
group, following the process described in paragraph (b)(2) of this 
section.
    (B) Using the point score and rank order established in accordance 
with paragraphs (b)(3)(i) and (b)(3)(ii) of this section, two separate 
ranking lists will be formed: the RHS ranking list will consist of loan 
requests for places on the State's designated place list; the 
partnership ranking list will consist of loan requests for places on the 
partnership designated place list. Selection of loan requests for 
further processing will be in accordance with paragraph (b)(6) of this 
section.
    (4) Preliminary eligibility and feasibility review. In order of 
ranking, a preliminary review of eligibility and feasibility will be 
made on the highest ranked requests, including:
    (i) A review of the preliminary plans and cost estimates.
    (ii) A market feasibililty review, including the Agency's review of 
the market, a review of HUD's (and similar lender's, if applicable) 
feedback on the market area, and a review to ensure compliance with the 
``build and fill'' provisions of Sec. 1944.213(f).
    (iii) A site visit and preliminary review to determine if the site 
criteria of Sec. 1944.215(r) can be met.
    (iv) A review of the Affirmative Fair Housing Marketing Plan.
    (v) Analysis of a current (within 6 months) credit report.

[[Page 403]]

    (5) Selection of loan requests for further processing. The Agency 
will select loan requests for further processing from loan requests 
determined preliminarily eligible and feasible, in ranking order, taking 
into consideration the amount of available funds.
    (i) If any selected loan requests are later withdrawn, rejected, or 
delayed for a period of time that will not permit funding in the current 
funding cycle, the Agency will select additional loan requests in 
ranking order as funding levels permit. For this purpose, the State may 
keep the next highest ranked loan request until it is determined that 
all selected loan requests will be funded. Applicants whose loan 
requests are held for this purpose will be advised that their loan 
request was not selected but ranked sufficiently high to be retained in 
the event a selected request is withdrawn or rejected in the current 
funding cycle.
    (ii) Loan requests not funded in the funding cycle, including 
incomplete requests, or requests not meeting the requirements of exhibit 
A-7 of this subpart or NOFA, will be returned to the applicant with the 
reason it was not considered.
    (6) Selection of loan requests for further processing for States 
with a partnership ranking list. States with a partnership ranking list 
developed in accordance with paragraph (b)(3)(iii) of this section, will 
use the following process:
    (i) Loan requests must first be selected in rank order from the RHS 
ranking list that, based on total development cost (TDC), are 
proportionate to the State's RHS allocation amount.
    (ii) After loan requests have been selected in accordance with 
paragraph (b)(6)(i) of this section, remaining RHS funds must be used 
for the next highest scoring loan requests (or point score and tie-
breaker number assigned in accordance with paragraph (b)(3) of this 
section), regardless of whether they are on the RHS ranking list or the 
partnership ranking list.
    (c) Additional requirements for selected loan requests. For selected 
loan requests, the applicant must provide the additional information 
required by exhibit A-9 of this subpart and any additional State 
requirements within the timeframes established by the Agency. If the 
applicant fails to meet established timeframes, the Agency may grant an 
extension if the delay appears reasonable and granting the extension 
will still permit funding of the loan request in the current funding 
cycle.
    (d) Site rejections. Site rejections will be handled as follows:
    (1) Applicants will be given 15 calendar days from the date of the 
Agency's site rejection letter to submit a new site option. If the 
applicant appeals the decision but submits a new site option within 15 
days, the new site option will be accompanied by a copy of their letter 
to the National Appeals Division withdrawing their appeal request. If 
the new site is acceptable, processing will continue. If the new site is 
not acceptable, the loan request will be rejected.
    (2) If the applicant does not submit a new site option within 15 
days, and has appealed the Agency's decision, the Agency will not delay 
processing of loan requests in other market areas pending the outcome of 
the appeal. The next ranked loan request, within available funding 
limits, will be selected for further processing.
    (3) If the applicant prevails in the appeal, the loan request will 
be considered in the next funding cycle. The applicant will be given the 
opportunity to amend their loan request consistent with NOFA.
    (e) Nonprofit or public body preference. Preference in ranking loan 
requests will be provided to an entity that meets all of the following 
conditions:
    (1) Is a local nonprofit organization, public body, or Indian Tribe 
whose principal purposes include the planning, development, and 
management of low-income housing;
    (2) Is exempt from Federal income taxes under section 501(c)(3) or 
501(c)(4) of the Internal Revenue Code (26 U.S.C. 501(c)(3) or 
501(c)(4));
    (3) Is not wholly or partially owned or controlled by a for-profit 
or limited-profit type entity;
    (4) Whose members, or the entity, do not share an identity of 
interest with a for-profit or limited-profit type entity;
    (5) Is not co-venturing with another entity; and

[[Page 404]]

    (6) The entity or its members will not be receiving any direct or 
indirect benefits pursuant to LIHTC.
    (f) RCH loan requests. (1) Loan requests for RCH assistance will be 
processed in the order in which a complete loan request was received.
    (2) All loan requests for RCH assistance will be reviewed for 
eligibility and feasibility. In cases where the proposal is not eligible 
or feasible, the proposal will be rejected. Proposals which appear 
eligible and feasible will be forwarded to the National Office for 
review and authorization.
    (3) If authorized by the National Office, the State will notify the 
applicant that the proposal appears eligible and feasible. The applicant 
will be requested to provide the additional information required by 
exhibit A-9 of this subpart and any additional State requirements.
    (4) If funds are not available in the current funding cycle, the 
loan request will be considered for funding in the next funding cycle.
    (g) General guidance on processing requests for Multi-Family Housing 
(MFH) Assistance. (1) All applicants must provide their taxpayer 
identification number. The taxpayer identification number for 
individuals who are not businesses is their Social Security Number.
    (2) A loan request for MFH assistance may be withdrawn upon written 
request of the applicant at any time. The Agency may withdraw a loan 
request for failure of an applicant to provide necessary information to 
process a request for assistance should the applicant fail to respond to 
a written request which provides the applicant with a reasonable time 
period to submit the information.

[62 FR 25068, May 7, 1997, as amended at 62 FR 67223, Dec. 23, 1997]



Sec. 1944.232  Rental Assistance (RA) from sources other than FmHA or 
its successor agency under Public Law 103-354.

    RA from sources other than FmHA or its successor agency under Public 
Law 103-354 may be used in new or existing RRH projects upon National 
Office authorization. FmHA or its successor agency under Public Law 103-
354 will consider authorizing such private RA (PRA) proposals which 
offer RA in the same general dollar amount and terms in which FmHA or 
its successor agency under Public Law 103-354 RA is calculated and 
granted. PRA proposals will be in the form of a memorandum of 
understanding (MOU) between the provider and FmHA or its successor 
agency under Public Law 103-354.
    (a) Provisions of MOU. FmHA or its successor agency under Public Law 
103-354 may consider entering into an MOU with other providers of RA 
such as State or local public entities, profit or nonprofit 
organizations, individuals, or other providers acceptable to FmHA or its 
successor agency under Public Law 103-354. The MOU will be executed 
between FmHA or its successor agency under Public Law 103-354 and the 
provider prior to the appropriate official issuing an AD-622 for new 
projects. At a minimum, the MOU must contain the following provisions:
    (1) Reason for providing PRA and its intended purpose.
    (2) The length of time PRA will be provided.
    (3) Actions to be taken at the end of the PRA proposal to minimize 
impact on tenants losing PRA and avoid displacement.
    (4) A copy of the proposed PRA agreement, which is the instrument of 
agreement involving the tenant, owner, and provider of assistance. FmHA 
or its successor agency under Public Law 103-354 will not be a party to 
the PRA agreement nor have any responsibilities under the agreement. The 
PRA agreement must state that:
    (i) The payments should be paid directly to the tenants or a 
separate project operating account for this purpose. The tenants must be 
advised of the amount and source of the assistance through the lease or 
a supplement to the lease.
    (ii) Sufficient funds will be set aside in a way that assures 
availability of PRA for the life of the PRA agreement, which must be for 
a minimum of 5 years. The method of supplying the funds must be clearly 
set forth and acceptable to FmHA or its successor agency under Public 
Law 103-354.
    (b) Documentation. (1) Documentation must be provided that the PRA 
is needed in the market area.

[[Page 405]]

    (2) The provider must provide FmHA or its successor agency under 
Public Law 103-354 with reasonable assurances that tenants receiving the 
PRA will not be displaced when the PRA expires.
    (3) In accordance with Sec. 1944.215(w)(2)(ii) of this subpart, it 
must be demonstrated that for the term of the loan remaining after PRA 
is no longer available, an adequate rental market exists for the project 
without the assistance.
    (4) For complexes with LIHTC, if the PRA term is less than the LIHTC 
compliance periods, the marketability of the PRA units must be further 
demonstrated by either:
    (i) Demonstrating that there are sufficient households within the 
LIHTC income limits to support the units without rent overburden; or
    (ii) The applicant's certification that the targeted percentage of 
LIHTC units (not the minimum set-aside option) does not include the PRA 
units, so that the units will be marketable to households in all FmHA or 
its successor agency under Public Law 103-354 income ranges.
    (c) Review and recommendations. The documentation, the MOU, and the 
PRA agreement will be submitted to the servicing official for review. If 
acceptable, the servicing official will submit the proposal for similar 
review to the State Office and submission to the National Office. 
Proposals forwarded to the National Office will contain the 
recommendations of the District and State Director.

[58 FR 44272, Aug. 20, 1993, as amended at 59 FR 6897, Feb. 14, 1994]



Sec. 1944.233  Participation with other funding sources.

    In order to develop the maximum number of affordable housing units 
and promote partnerships with states, local communities, and other 
partners with similar housing goals, RHS participation loans are 
encouraged.
    Apartment complexes developed with participation funds may serve 
lower income households exclusively (RHS very-low and low income-
eligible households; LIHTC income-eligible households) or may be 
marketed to households with mixed incomes. The following will apply:
    (a) RHS loan and rental assistance (RA) participation. (1) RHS may 
participate with loan funds only, or with both RA and loan funds, as 
provided in paragraphs (a)(2) and (a)(3) of this section.
    (2) If RHS RA is being provided, RHS loan participation should equal 
at least ten percent of the project's total development cost unless 
authorization for a lower percentage of participation is obtained from 
the National Office in accordance with Sec. 1944.240.
    (3) RHS RA may be provided on any unit where the basic rent does not 
exceed what the basic rent would have been on that unit if RHS provided 
full financing. The number of RHS RA units available for participation 
loans is limited and established annually through subpart L of part 1940 
of this chapter.
    (b) General conditions. (1) The number of units that will serve RHS 
income-eligible tenants must equal or exceed the number of units 
financed by RHS, determined by dividing the RHS loan amount by the 
State's average new construction cost.
    (2) The total funds provided by all sources may not exceed what is 
necessary to make the project feasible in accordance with 
Sec. 1944.213(a).
    (3) The total debt from all sources is limited to the State 
Director's loan approval authority unless written authorization is 
obtained from the National Office in accordance with Sec. 1944.213(b).
    (4) The complex will be operated and managed in compliance with RHS 
requirements and regulations.
    (5) If Low Income Housing Tax Credits are anticipated on a 
proportion of units higher than the percentage receiving RA or similar 
tenant subsidy, the market study must clearly reflect a need and market 
for units without deep subsidy. It is not the intent of RHS to provide 
servicing RA in the future nor can RHS provide RA on units which have 
basic rents higher than those if RHS had provided full financing.
    (c) Design requirements. Complexes must comply with the provisions 
of Sec. Sec. 1944.215 and 1944.222.
    (1) Design features such as patios or balconies, washers and dryers, 
and garbage disposals may be included if they

[[Page 406]]

are customary for the area and needed for marketability.
    (2) Mixed income complexes may include nonessential common 
facilities such as swimming pools provided:
    (i) The facility is not financed with RHS funds,
    (ii) The complex is able to support the facility's operating and 
maintenance costs through collection of a user fee from tenants who 
subscribe to the service, and
    (iii) The facility is designed and operated with appropriate 
safeguards for tenant health and safety.
    (d) Borrower contribution and return on investment. (1) The minimum 
required borrower contribution will be based on the RHS loan amount and 
determined in accordance with Sec. 1944.213(b).
    (2) For limited profit borrowers, additional funds exceeding the 
minimum required contribution that are provided from the borrower's own 
resources (not loans or grants from other sources) may be included in 
the borrower's initial investment, for purposes of determining return on 
investment, as provided in Sec. 1944.215(n).
    (3) A loan from the borrower to the project may be considered, 
provided the loan proposal meets all conditions of this section and the 
loan to the project is from the borrower's own resources. LIHTC proceeds 
may be considered the borrower's own resources as provided in 
Sec. 1944.215(n)(1).
    (e) Reserve requirements. RHS reserve requirements (the annual 
reserve requirement and the fully funded reserve amount) will be 
determined on a case-by-case basis, taking into consideration the 
reserve requirements of the other participating lenders, so that the 
aggregate fully funded reserve amount established by RHS and the other 
lenders equals at least 10 percent of the project's total development 
cost (TDC) or appraised value, whichever is greater. For example, if the 
other lenders do not have reserve requirements, RHS will establish its 
reserve requirements to meet the full aggregate amount (at least 10 
percent of the TDC or appraised value of the project, whichever is 
greater), regardless of the RHS loan amount. On the other hand, if the 
other lenders have aggregate reserve requirements equal to or higher 
than the minimum 10 percent of TDC or appraised value required by RHS, 
and the amount is sufficient to meet project needs based on its capital 
improvement plan, it may not be necessary for RHS to establish 
additional reserve requirements. Reserve requirements and procedures for 
reserve withdrawals should be agreed upon by all lenders and included in 
the intercreditor or participation agreement referenced in paragraph (g) 
of this section.
    (f) Security requirements. (1) RHS will take a first or parity lien 
in all instances where the Agency's participation is 50 percent or more.
    (2) If RHS participation is less than 50 percent, every effort 
should be made to obtain a parity lien position. If a parity lien cannot 
be negotiated, an exception may be requested to accept a second lien 
position in accordance with Sec. 1944.240. The State Director will 
submit requests to accept a second lien position to the Deputy 
Administrator, Multi-Family Housing with comments and recommendations.
    (3) RHS will take a first lien on project revenue from rent or 
occupancy payments; RHS, State, or private RA payments; and operating 
and reserve accounts.
    (g) Participation agreement. RHS will enter into a participation (or 
intercreditor) agreement with the other lenders that clearly defines 
each party's relationship and responsibilities to the others.

[62 FR 25075, May 7, 1997, as amended at 62 FR 67223, Dec. 23, 1997]



Sec. 1944.234  Actions prior to loan approval.

    Prior to loan approval the application will be reviewed for 
continued eligibility. The applicant may be required to submit updated 
information at that time.

[62 FR 25076, May 7, 1997]



Sec. 1944.235  Actions subsequent to loan approval.

    (a) Precommitment or closing actions. After loan approval, the loan 
docket will be processed to the stage where a construction loan would 
normally be

[[Page 407]]

closed prior to the start of construction. During this processing, the 
following actions should be taken:
    (1) FmHA or its successor agency under Public Law 103-354 will 
obtain closing instructions from OGC in accordance with the requirements 
of subpart B of part 1927 of this chapter and Sec. Sec. 1944.236(a) and 
1944.236(b)(4) of this subpart.
    (2) Ensure that the servicing office has on file evidence that a 
deposit has been made to the general operating account of an amount of 
initial operating capital sufficient to cover the expected start-up 
costs.
    (3) The applicant will provide evidence indicating the terms and 
final arrangements for interim financing.
    (4) The applicant will certify as to the availability or non 
availability of other government assistance as defined in Sec. 1944.205 
of this subpart immediately prior to loan closing. If other government 
assistance becomes available prior to loan closing, the loan amount will 
be decreased in accordance with paragraph (e)(3) of this section.
    (b) Transfer of obligations. The transfer of fund obligations may 
occur only when:
    (1) Organizational entity remains the same. The entity remains 
legally the same but a substitution of the members occurs. All or part 
of the membership may change as long as eligibility is not affected. The 
project site location and market must remain the same.
    (2) Organizational entity changes. The membership and their 
interests remain identical, the project site location and market are the 
same, but the legal entity changes.
    (3) Monetary default by original applicant/entity. An obligation may 
be transferred to any person or applicant eligible to receive an RRH 
loan when the original applicant/entity is in monetary default which has 
or may result in foreclosure by the interim lender, and:
    (i) The applicant/entity assuming the obligation, or the interim 
lender, removes any liens filed against the property;
    (ii) There have been no deviations from the FmHA or its successor 
agency under Public Law 103-354 approved plans and specifications;
    (iii) The transferee will not be composed of any principals of the 
transferor;
    (iv) The transfer will be in the best interest of the FmHA or its 
successor agency under Public Law 103-354 and prospective tenants;
    (v) The applicant/entity and all members thereof whose obligations 
are transferred will not be considered eligible for further 
participation in the RRH program for at least 5 years from the date of 
the transfer of the FmHA or its successor agency under Public Law 103-
354 loan obligation; and
    (vi) Prior approval is obtained from the National Office.
    (c) Financing during the construction period--(1) Interim financing. 
When the amount of the loan exceeds $50,000, the applicant may obtain 
interim financing from commercial or public sources for the construction 
period if it can be obtained at reasonable interest rates, fees, and 
terms, and in the best financial interests of the Government. Interim 
financing will be obtained to preclude the necessity for multiple 
advances of FmHA or its successor agency under Public Law 103-354 funds. 
The interim lender must be authorized to operate in the State in which 
the project will be located and must have an established record of 
providing financing to entities other than FmHA or its successor agency 
under Public Law 103-354-financed projects. Since the interim lender is 
responsible for inspecting construction along with FmHA or its successor 
agency under Public Law 103-354, the borrowing entity (including any of 
its identity of interest entities) cannot provide interim financing to 
its own project. Interim financing will be used subject to the 
following:
    (i) FmHA or its successor agency under Public Law 103-354 will 
proceed as if FmHA or its successor agency under Public Law 103-354 
funds had been advanced from the standpoint of approving construction 
contracts, inspection of construction and assuring compliance with 
applicable equal opportunity and nondiscrimination.
    (ii) The guide letter shown as exhibit B of this subpart will be 
used to inform

[[Page 408]]

a proposed interim lender that a specified amount of funds have been 
obligated and will be available to retire the interim financing if the 
applicant complies with the approval conditions, the builder's 
performance is acceptable and all construction bills are paid.
    (iii) Since FmHA or its successor agency under Public Law 103-354's 
commitment to the applicant is contingent upon acceptable performance by 
the builder and payment of all construction bills, the interim lender 
should be advised of the additional risk involved if the builder is 
unable to provide, or the interim lender does not require a payment and 
performance bond. Although partial payments to the builder constructing 
the project by the contract method of construction must be made in 
accordance with the approved construction contract, the interim lender 
should not be permitted to make disbursements of more than 90 percent of 
the value of acceptable work in place.
    (iv) Any cash for land purchase or development that is to be 
furnished by the applicant in fulfillment of the applicant's 
contribution requirement in Sec. 1944.213(b) of this subpart must be 
placed on deposit with the interim lender and disbursed prior to any 
disbursement of interim loan funds. Obligations incurred prior to loan 
closing and the start of construction will be handled in accordance with 
Sec. 1944.213(d) of this subpart.
    (v) A supervised bank account need not be established for funds 
obtained through interim financing except for any small amounts held to 
complete construction so loan funds can be fully advanced and AED can be 
established. However, in order to assure that funds are requested and 
used for authorized purposes, requests for partial payments will be 
submitted through the servicing official on Form FmHA or its successor 
agency under Public Law 103-354 1924-18, ``Partial Payment Estimate,'' 
or other professionally recognized form containing the certifications of 
the architect, applicant and FmHA or its successor agency under Public 
Law 103-354 representative shown on Form FmHA or its successor agency 
under Public Law 103-354 1924-18. For recordkeeping purposes, Form FmHA 
or its successor agency under Public Law 103-354 402-2, ``Statement of 
Deposits and Withdrawals,'' should be used to record the deposit of 
applicant funds for construction with the interim lender and payments of 
estimates where FmHA or its successor agency under Public Law 103-354 
has approved the estimate.
    (vi) When the project is substantially complete, the FmHA or its 
successor agency under Public Law 103-354 loan may be scheduled for 
closing. A project is substantially complete when it is possible, in 
accordance with any contract documents, applicable State or local codes 
or ordinances and the FmHA or its successor agency under Public Law 103-
354 approved drawings and specifications, to permit safe and convenient 
occupancy and use of the buildings. Upon substantial completion, the 
owner's architect must issue a dated and signed statement certifying to 
substantial completion. The owner's architect will also prepare and 
verify a punch list of any minor items of development that need to be 
corrected and completed.
    (vii) The FmHA or its successor agency under Public Law 103-354 loan 
may be closed, permanent instruments issued to evidence the FmHA or its 
successor agency under Public Law 103-354 indebtedness and FmHA or its 
successor agency under Public Law 103-354 loan funds used to retire the 
interim indebtedness when the project is substantially complete and all 
bills have been paid. To evidence that there are no unpaid obligations 
outstanding in connection with the project, the applicant must submit to 
the servicing official, at or prior to loan closing, signed statements 
from the contractor, architect, engineer and attorney indicating that 
obligations for material, labor or services have been paid in full in 
accordance with their contracts or other agreements, less any funds 
withheld for minor punch list items. Form FmHA or its successor agency 
under Public Law 103-354 1924-10, ``Release by Claimants,'' or other 
similar form may be used for this purpose. If these statements cannot be 
obtained, the loan may be closed if all of the following can be met:
    (A) Statements to the extent possible are obtained.

[[Page 409]]

    (B) The interests of FmHA or its successor agency under Public Law 
103-354 can be adequately protected and its security position is not 
impaired.
    (C) Adequate provisions are made for paying the unpaid accounts by 
withholding or escrowing sufficient funds to pay such claims or 
obtaining a release bond.
    (viii) Because interest rates can fluctuate between the time 
construction estimates are finalized and completion of construction, any 
excess funds remaining from interim financing will be returned on the 
FmHA or its successor agency under Public Law 103-354 loan. Also, 
interim funds remaining because of early completion of construction will 
be returned. The leftover interest may be used for certain other 
eligible loan purposes critical to the completion of the project which 
were unknown to the applicant and contractor at the time the loan was 
approved, provided prior National Office concurrence is obtained.
    (2) Multiple advances of loan funds. If interim financing is not 
available and the applicant supplies such evidence, multiple advances 
will be used subject to the following:
    (i) In cases where relatively large amounts of funds are to be 
expended for purchases of real estate or for other reasons at the time 
of closing, separate checks for these purposes may be ordered and 
endorsed by the borrower to the seller or other appropriate party. This 
will preclude the necessity for depositing these loan funds in the 
supervised bank account and reduce the amount of required collateral.
    (ii) Except as indicated in paragraph (c)(2)(i) of this section, 
advances will be made only as needed to cover disbursements required by 
the borrower for a 30-day period. Normally, there should be no more than 
24 advances. These advances should generally be used within 2 years of 
loan closing. The retained percentage withheld from the contract to 
assure that construction will be completed in accordance with the 
contract documents will ordinarily be included in the last advance. 
Advances will be requested in sufficient amounts to insure that ample 
funds will be on hand to pay costs of construction, land purchase, 
legal, engineering or architectural costs, interest and other expenses 
as needed. The borrower will prepare Form FmHA or its successor agency 
under Public Law 103-354 440-11, ``Estimate of Funds Needed for 30-day 
Period Commencing --------------,'' modified as needed, to show the 
amount of funds required during the 30-day period. This form will be 
approved by the servicing official or his/her designee.
    (iii) After it is determined that the estimate prepared by the 
borrower is adequate, the advance will be requested through field office 
terminals in accordance with the MFH user procedure. As an example, for 
a loan of $100,000, the advances may be made as follows: Assuming that 
the loan will be closed on July 1, the borrower will complete Form FmHA 
or its successor agency under Public Law 103-354 440-11 in sufficient 
time so that the funds will be available on the day of loan closing. The 
estimates should be broken down for the first advance in a manner 
similar to the following:

Construction.................................................    $30,000
Land Acquisition.............................................      5,000
Architectural................................................      4,000
Legal........................................................      1,000
                                                              ----------
    Total....................................................    $40,000
 

    An advance of $40,000 would then be available on July 1, the date of 
loan closing.
    (iv) The second advance is also based on the borrower's estimate 
prepared on Form FmHA or its successor agency under Public Law 103-354 
440-11 which must be prepared in sufficient time so that the estimated 
amount of funds will be available on August 1. This estimate of funds 
might be broken down as follows:

Construction.................................................    $20,000
Architectural................................................      1,000
                                                              ----------
    Total....................................................    $21,000
 

    (v) When the project is substantially complete in accordance with 
Sec. 1944.235(c)(i)(vi), schedule final payment to the contractor for 
disbursement. Withhold funds over the amount needed to cover the costs 
for correcting or completing the minor items identified from the 
contractor's final payment in accordance with the requirements of 
subpart A to part 1924 of this chapter until full performance. Any

[[Page 410]]

funds withheld should be deposited in the supervised bank account so the 
loan can be fully advanced and AED can be established.
    (vi) If funds remain after the loan is fully disbursed and AED has 
been reached, they must be put into a supervised bank account. The funds 
cannot be returned on the loan to be drawn later since AMAS will treat 
as a refund.
    (vii) Any deviation from the multiple advance procedure must have 
the prior approval of the National Office.
    (d) Requesting the check. When loan approval conditions can be met, 
including any real estate lien required, and a date for FmHA or its 
successor agency under Public Law 103-354 loan closing has been agreed 
upon, the servicing official will determine the amount of funds needed 
in accordance with paragraph (c)(1) or (c)(2) of this section. The 
servicing official his/her designee will then order the loan check 
through field office terminals so that it will be available on or just 
before the date set for loan closing.
    (e) Increase or decrease in the amount of the loan. (1) If it is 
necessary to increase the amount of the loan within the same fiscal year 
but before loan closing, the loan approving official or servicing 
official will request that all distributed docket forms be returned to 
the servicing office. The loan docket will be revised accordingly and 
reprocessed provided no funds have been disbursed. The State Office, 
through a field office terminal, must deobligate the existing obligation 
and enter the new amount to be obligated.
    (2) If it is necessary to increase the amount of the loan in the 
next fiscal year but before loan closing, the servicing official must 
process a subsequent loan for the amount of increase.
    (3) If it is necessary to decrease the amount of the loan before 
closing, the deobligation will be processed through field office 
terminals.
    (f) Cancellation of the loan. Loans may be canceled after approval 
and before loan closing in accordance with instructions on the Form 
Manual Insert (FMI) for Form FmHA or its successor agency under Public 
Law 103-354 1944-53, ``Multiple Family Housing Cancellation of U.S. 
Treasury Check and/or Obligation.''
    (1) Treasury check method. If the loan check is received in the 
servicing office, the servicing official will return the check as 
prescribed in FmHA Instruction 2018-D (available in any FmHA or its 
successor agency under Public Law 103-354 office), except if the check 
was issued by the National Finance Center (NFC). If the check was issued 
by NFC, cancel under FmHA Instruction 2024-A (available in any FmHA or 
its successor agency under Public Law 103-354 office).
    (2) Notification. Notify all interested parties of cancellation as 
provided in subpart B of part 1927 of this chapter.
    (g) Handling the loan check. The loan check will be handled in 
accordance with FmHA Instruction 2018-D (available in any FmHA or its 
successor agency under Public Law 103-354 office and subpart A of part 
1902 of this chapter.
    (h) Preoccupancy conference. To promote proper planning for initial 
rent-up and occupancy, the servicing official will meet with the 
applicant and management firm, if any, 90 to 120 days prior to the 
construction completion date. Among the items that should be discussed 
are the advertisement of available units, the affirmative fair housing 
marketing practices, tenant eligibility and tenant selection criteria. 
The same effort to achieve adequate marketing results will be required 
for RCH loans except that its completion will be necessary at the loan 
request stage.
    (1) The servicing official will review the applicant's marketing 
plan to determine that it is complete and all supplemental information 
is provided. If the plan needs to be modified before marketing activity 
begins, approval must be granted from the official authorized to approve 
the loan. The servicing official will review the approved operating 
budget to determine if it is still adequate for the initial operating 
period. If it is not adequate, the budget and rent schedule will be 
revised by the borrower and approved by the loan approval official.
    (2) The servicing official should be assured that the applicant will 
sincerely direct marketing activity in an

[[Page 411]]

effort to attract applications for housing from all groups in the market 
area determined least likely to apply for the available housing. If it 
is anticipated that applications for housing may result in a 
concentration of occupancy by race, color, religion, sex or national 
origin, outreach efforts will be extended to persons who would not be 
expected to apply for the housing. The efforts will be conducted for a 
reasonable period of time prior to the normal period for receipt of 
applications and commencing not less than 90 days prior to project 
completion.
    (3) Prior to initial occupancy by any person, the servicing official 
and the applicant will reconvene to assess implemented marketing 
activity by thoroughly reviewing the marketing plan, and the extent of 
achievement of plan objectives. If original marketing concepts prove to 
be less than effective and/or if there are changes in the housing 
market, the applicant may be required to modify the marketing plan for 
the project. If the servicing official determines that the applicant is 
in noncompliance with the plan and a modification to the plan is not 
warranted, the matter will be referred to the FmHA or its successor 
agency under Public Law 103-354 Administrator, attention Equal 
Opportunity Staff Director, through the State civil rights coordinator.

[53 FR 2159, Jan. 26, 1988, as amended at 53 FR 26590, July 14, 1988; 54 
FR 39728, Sept. 28, 1989; 55 FR 29561, July 20, 1990; 56 FR 2240, Jan. 
22, 1991; 56 FR 67483, Dec. 31, 1991; 57 FR 36590, Aug. 14, 1992; 58 FR 
40953, July 30, 1993; 58 FR 44272, Aug. 20, 1993; 59 FR 6890, 6896-6897, 
Feb. 14, 1994; 59 FR 54788, 54789, Nov. 2, 1994; 62 FR 25065, May 7, 
1997]



Sec. 1944.236  Loan closing.

    (a) Applicable regulations. RRH loans will be closed in accordance 
with subpart B of part 1927 of this chapter and any State supplements. 
Loan dockets for organizations and, in special cases, dockets for 
individuals will be sent through the State Office to OGC for closing 
instructions. A profit or limited profit organization or individual 
applicant may use any designated attorney or title insurance company to 
close the loan in accordance with the applicable loan closing 
instructions if the attorney or title insurance company and its 
principals or employees are not members, officers, directors, trustees, 
stockholders or partners of the applicant entity. Nonprofit 
organizations may use a designated attorney who is a member of their 
organization if the cost is in accordance with Sec. 1944.212(j) of this 
subpart.
    (b) Mortgage. Unless OGC determines the Form to be inappropriate, 
Form FmHA or its successor agency under Public Law 103-354 1927-1 
(state), ``Real Estate Mortgage for ------,'' will be used. For loans to 
organizations, Form FmHA or its successor agency under Public Law 103-
354 1927-1 will be modified as prescribed by or with the advice of OGC 
with respect to the name, address, and other identification of the 
borrower, the style of execution and the acknowledgement.
    (1) The mortgage or other instrument will contain the following 
covenant:

    The property described herein was obtained or improved through 
Federal financial assistance. This property is subject to the provisions 
of Title VI of the Civil Rights Act of 1964 and the Rehabilitation Act 
of 1973 and the regulations issued pursuant thereto for as long as the 
property continues to be used for the same or similar purpose for which 
financial assistance was extended or for as long as the purchaser owns 
it, whichever is longer.

    (2) When a loan resolution or loan agreement is used, include an 
additional paragraph in the mortgage to read as follows:

    This instrument also secures the obligations and convenants of 
borrower set forth in borrower's Loan Resolution (Loan Agreement) of 
(Date), which is hereby incorporated herein by reference.

    (3) For a loan to an individual when a loan agreement is not used, 
additional paragraphs will be included in the mortgage to read as 
follows:
    (i) ``Occupancy of the housing and related facilities on the 
property will be limited to eligible tenants as defined in the 
regulations of the Farmers Home Administration or its successor agency 
under Public Law 103-354 unless the Government gives prior written 
approval to other occupancy.''
    (ii) ``As required by the Government: Borrower will permit the 
Government to inspect and examine the operation

[[Page 412]]

of the housing and the books, records, and operations of borrower; 
submit regular and special reports pertinent to the purpose of the loan 
or the Government's financial interest; subject rents and charges and 
other terms of rental agreements with tenants of the housing, and 
compensation to employees connected with its operation, to prior 
approval by the Government, or to adjustment at the direction of the 
Government when necessary in its judgment to carry out the purpose of 
the loan or protect its financial interests; and comply with any other 
requirements which in the discretion of the Government are reasonably 
appropriate to the purpose of the loan or protection of the Government's 
interests. Revenue from the housing will be first used to pay operation 
and maintenance costs of such housing and to make adequate provision to 
meet required payments as they become due on the FmHA or its successor 
agency under Public Law 103-354 rural rental housing loan.''
    (4) For a loan to a limited partnership, the following nonrecourse 
language should be inserted, subject to modification by the OGC:

    No partner, either general or limited, will have any personal 
liability for the payment of all or any part of the indebtedness.

    (5) For all section 515 RRH and RCH loans used to build or acquire 
new units made pursuant to a contract entered into on or after December 
15, 1989, the following language will be included in the mortgage:

    The borrower and any successors in interest agree to use the housing 
for the purpose of housing people eligible for occupancy as provided in 
section 515 of title V of the Housing Act of 1949, and FmHA or its 
successor agency under Public Law 103-354 regulations then in effect 
during the full term of this mortgage. No eligible person occupying the 
housing will be required to vacate nor any eligible person denied 
occupancy for housing prior to the close of such period because of a 
prohibited change in the use of the housing. A tenant or person wishing 
to occupy the housing may seek enforcement of this provision as well as 
the Government.

    (6) For the following categories of loans, the language set forth in 
exhibit A-1 or A-2, as appropriate, of subpart E of part 1965 of this 
chapter will be included in the mortgage instead of the language 
contained in paragraph (b)(5) of this section:
    (i) Equity loans made to avert prepayment.
    (ii) Subsequent loans to nonprofit organizations or public agencies 
made in conjunction with transfers to avert prepayment.
    (iii) Subsequent loans for any purpose other than to build or 
acquire new units.
    (7) Additional guidance on closing transfers and loans to nonprofit 
corporations and public agencies to avert prepayment is contained in 
Sec. 1965.217(e) of subpart E of part 1965 of this chapter.
    (c) Promissory note. (1) Form FmHA or its successor agency under 
Public Law 103-354 1944-52, ``Multiple Housing Promissory Note,'' will 
be used. Regular amortized payments for principal and interest will be 
scheduled on a monthly basis. Instruction for preparation in the FMI for 
the note will be followed.
    (2) The amount to be shown on the note will be obligated amount as 
shown on Form FmHA or its successor agency under Public Law 103-354 
1944-51, ``Multiple Family Housing Obligation-Fund Analysis.'' The note 
will be dated the date of loan closing except as authorized in subpart B 
of part 1927 of this chapter. If the first day of the month falls on 
Saturday, Sunday or a holiday, the note may be dated the first, loan 
closing will be the last working day prior to the first and the closing 
documents will be filed on the first working day following the first.
    (3) Payments on loans will be scheduled on the note in accordance 
with the FMI and as provided in Sec. 1944.215(c) of this subpart.
    (4) The note(s) will be signed in accordance with the FMI and 
subpart B of part 1927 of this chapter.
    (5) All loans will be closed on PASS as described in subpart K of 
part 1951 of this chapter. If the loan is a subsequent loan, all other 
loans on the project must be converted to PASS.
    (6) All loans to be secured by revenue bonds or other forms of 
security other than a real estate mortgage or deed of trust will be sent 
to the National Office

[[Page 413]]

prior to loan approval with all necessary information for review and 
further instructions.
    (d) Recorded mortgage. When the real estate mortgage is returned by 
the recording official, the servicing official will retain the original 
in the borrower's case folder. If the original is retained by the 
recording official for the county records, a conformed copy, including 
the recording data showing the date and place of recordation and book 
and page number, will be prepared and filed in the borrower's case 
folder. A copy of the mortgage, conformed as to all matters except the 
recording date, will be delivered to the borrower.
    (e) Date of closing--establishment of account. (1) A loan is 
considered closed when the security instrument is filed of record or, if 
no security instrument is record, when the loan funds are deposited in 
the supervised bank account or otherwise made available to the borrower 
after the borrower executes and delivers the note any and other required 
instruments.
    (2) After the loan is closed, the account and case folder will be 
established at the servicing office following the requirements of FmHA 
Instructions 1905-A and 2033-A (available in any FmHA or its successor 
agency under Public Law 103-354 office).

[53 FR 2159, Jan. 26, 1988, as amended at 56 FR 2240, Jan. 22, 1991; 56 
FR 67483, Dec. 31, 1991; 58 FR 38925, July 21, 1993; 59 FR 6890, 6896-
6897, Feb. 14, 1994]



Sec. 1944.237  Subsequent loans.

    (a) A subsequent loan is made to an applicant/borrower to complete, 
improve, repair, and/or make modifications to the project initially 
financed by FmHA or its successor agency under Public Law 103-354, or 
for equity and/or other purposes when authorized by the provisions of 
subpart E of part 1965 of this chapter to avert prepayment. A subsequent 
loan to develop additional units must compete for funding in accordance 
with Sec. 1944.231 of this subpart. Other subsequent loan requests do 
not have to compete for funding.
    (b) If the designation of an area changed from rural to nonrural 
after the initial FmHA or its successor agency under Public Law 103-354 
loan was made, a subsequent loan can be made, only to make necessary 
improvements and repairs to the property or for equity and other 
purposes when necessary to avert prepayment.
    (c) In case where the loan is to complete the original housing under 
the initial FmHA or its successor agency under Public Law 103-354 loan:
    (1) If the applicant/borrower provided an initial investment greater 
than required under the initial FmHA or its successor agency under 
Public Law 103-354 loan, the excess may be credited toward the required 
amount of the initial investment of the subsequent loan per Sec. 
1944.213 (b) of this subpart; the applicant/borrower should only be 
required to put up additional funds for this purpose if needed. The same 
applies to initial Operating and Maintenance (O and M) requirements.
    (2) If the initial investment and 2 percent O and M amounts are 
sufficient to cover only the initial FmHA or its successor agency under 
Public Law 103-354 loan, the applicant/borrower must provide the 
additional respective amounts to cover the subsequent loan. The 2 
percent O and M amounts must be in the form of cash as described in 
Sec. 1944.211 (a)(6) of this subpart. The required amount of the 
initial investment is described in Sec. 1944.213 (b) of this subpart.
    (d) If the loan is to repair and/or improve an existing project 
which has been in operation for some time, then:
    (1) The applicant/borrower should not be required to provide the 
initial 2 percent O and M amount since its purpose is to cover project 
start-up costs.
    (2) The applicant/borrower must provide the initial investment per 
Sec. 1944.213(b) of this subpart unless it provided more than the 
required initial investment when the loan was made. When the applicant/
borrower has more than the required amount invested in the initial loan, 
the excess may be credited toward the required investment for the 
subsequent loan. The applicant/borrower should be required to contribute 
additional funds only if needed. The applicant/borrower will not be 
given consideration for any increased equity or value that the property 
may have since the date of the initial FmHA or its successor agency 
under Public Law 103-354 loan.

[[Page 414]]

    (e) Subsequent loans, other than those made to a nonprofit 
corporation or public agency to avert prepayment, will be subject to the 
restrictive-use provisions contained in exhibit A-1 of subpart E of part 
1965 of this chapter. Subsequent loans made to nonprofit organizations 
or public agencies to avert prepayment will be subject to the 
restrictive-use provisions contained in exhibit A-2 of subpart E of part 
1965 of this chapter. The required restrictive-use language for 
subsequent loans shall be appended to the mortgage referencing all notes 
for the applicable term, beginning on loan closing. The advice of OGC 
shall be obtained to carry out the requirements of this paragraph.
    (f) For additional requirements in closing quality loans to avert 
prepayment, see exhibit A-11 of this subpart.
    (g) For additional requirements in closing subsequent loans to 
nonprofit corporations and public agencies made in conjunction with 
transfers to avert prepayment, see Sec. 1965.65(f) of subpart B of part 
1965 of this chapter.

[53 FR 2159, Jan. 26, 1988, as amended at 53 FR 7492, Mar. 9, 1988; 53 
FR 13245, April 22, 1988; 56 FR 2241, Jan. 22, 1991; 58 FR 38925, July 
21, 1993; 58 FR 44273, Aug. 20, 1993; 59 FR 6890, Feb. 14, 1994; 62 FR 
25069, May 7, 1997]



Sec. 1944.238  Prohibition against prepayment.

    The Agency shall not accept an offer to prepay, or request 
refinancing of any loan made to build or acquire new units made or 
insured under section 515 pursuant to a contract entered into on or 
after December 15, 1989 regardless of the fact the borrower has received 
previous RRH loans on the project. For purposes of this requirement, the 
date a ``contract is entered into'' is the date on which the Form FmHA 
or its successor agency under Public Law 103-354 1944-51 is mailed or 
delivered to the applicant/borrower.

[55 FR 29562, July 20, 1990, as amended at 58 FR 38925, July 21, 1993]



Sec. 1944.239  Complaints regarding discrimination in use and occupancy 
of RRH and RCH.

    Any tenant/member or prospective tenant/member seeking occupancy or 
use of RRH, RCH or related facilities who believes he/she has been 
discriminated against because of age, race, color, religion, sex, 
familial status, handicap or national origin may file a complaint in 
person with, or by mail to the Office of Fair Housing and Equal 
Opportunity, Department of Housing and Urban Development (HUD), 
Washington, DC, 20410, or any HUD office, or to the Administrator, FmHA 
or its successor agency under Public Law 103-354, USDA, Washington, DC 
20250. If a complaint is made to an FmHA or its successor agency under 
Public Law 103-354 County, District or State Office, it must be directed 
to the Director of Equal Opportunity Staff (EOS), National Office, by 
the FmHA or its successor agency under Public Law 103-354 employee in 
charge of that office. When a complaint is sent to FmHA or its successor 
agency under Public Law 103-354-EOS by a county or servicing office, the 
State Director will be made aware of the complaint.
    (a) Personnel in FmHA or its successor agency under Public Law 103-
354 field offices will provide assistance to the aggrieved party when 
filling out required forms and filing a complaint.
    (b) Each complaint must contain the following information:
    (1) The name and address of the respondent.
    (2) The name and address of the aggrieved person.
    (3) A description and the address of the dwelling which is involved, 
if appropriate.
    (4) A concise statement of the facts, including pertinent dates, 
constituting the alleged discriminatory housing practice.
    (c) Participants in FmHA or its successor agency under Public Law 
103-354's housing program failing to comply with the requirements of 
Title VIII of the Civil Rights Act of 1968, as amended by the Fair 
Housing Amendments Act of 1988, and the respective Affirmative Fair 
Housing Marketing Plan will make themselves liable to sanction 
authorized by law, regulations, agreements, rules and/or policies 
governing the program pursuant to which the application was made. 
Victims of discriminatory housing practices may seek reparations from 
HUD or by private lawsuit.

[[Page 415]]

    (d) All complaints will be handled in accordance with prescribed 
procedure.

[56 FR 2241, Jan. 22, 1991, as amended at 58 FR 40954, July 30, 1993; 59 
FR 6896, Feb. 14, 1994]



Sec. 1944.240  Exception authority.

    The Administrator may, in individual cases, make an exception to any 
requirements of this subpart not required by the authorizing statute if 
he/she finds that application of such requirement would adversely affect 
the interest of the Government or adversely affect the accomplishment of 
the purposes of the program or result in undue hardship by applying the 
requirement. The Administrator may exercise the authority at the request 
of the State Director. The State Director will submit the request 
supported by data that demonstrates the adverse impact, citing the 
particular requirement involved and recommending proper alternative 
course(s) of action, and outlining how the adverse impact could be 
mitigated. Exception to any requirement may also be initiated by the 
Assistant Administrator for Housing.

[56 FR 2241, Jan. 22, 1991]



Sec. Sec. 1944.241-1944.245  [Reserved]



Sec. 1944.246  Loan approval.

    (a) Authority. Loans will be approved in accordance with this 
subpart and subpart A of part 1901. The State Director may redelegate 
loan approving authority in writing to State Office employees.
    (b) Loan approval action--(1) Responsibilities of loan approving 
official. The loan approving official is responsible for reviewing the 
docket to determine that the proposed loan complies with established 
policies and all pertinent regulations. In making this review, the loan 
approving official will determine that:
    (i) The applicant is eligible and has legal authority to contract 
for a loan and enter into the required statements.
    (ii) The location of the housing meets the requirements outlined in 
Sec. 1944.215(p) of this subpart.
    (iii) The funds are requested for authorized purposes.
    (iv) The proposed loan is sound.
    (v) The security is adequate.
    (vi) All preapproval requirements have been met, including the 
applicant's execution of Form FmHA or its successor agency under Public 
Law 103-354 400-4.
    (vii) For projects with four or less units, the State Director has 
taken the necessary action to comply with Sec. 1944.406 of subpart I of 
part 1940 of this chapter.
    (viii) All other requirements will be met.
    (2) Approval or disapproval of a loan--(i) Approval. Before the loan 
approving official executes documents evidencing loan approval, a 
complete review of the proposed management and rental procedures must be 
made to assure compliance with title VI of the civil Rights Act of 1964 
and the Rehabilitation Act of 1973. If the loan approving official is 
assured of compliance, he/she may execute the loan approval documents. 
When a loan is approved, Form FmHA or its successor agency under Public 
Law 103-354 1944-51 will be completed according to the instructions on 
the Forms Manual Insert. The approving official will insert a statement 
in block 48 of Form FmHA or its successor agency under Public Law 103-
354 1944-51 advising the applicant that the amount of the loan may 
decrease if other government assistance as defined in Sec. 1944.205 of 
this subpart becomes available to the applicant before loan closing.
    (ii) Disapproval. If a loan is disapproved after the docket has been 
developed, the reason for the action will be shown on the original Form 
FmHA or its successor agency under Public Law 103-354 1944-51 and the 
form will be initialed and dated. The servicing official will notify the 
applicant of the reasons for disapproval. The disapproved docket will 
then be handled in accordance with subpart A of part 2033 of this 
chapter. If disapproval is not at the applicant's request or by mutual 
agreement, the applicant will be notified that it may request a further 
review of the decision in accordance with subpart B of part 1900 of this 
chapter.
    (3) OGC closing instructions. For a loan to an organization, or an 
individual in special cases, the approved docket, including any title 
evidence,

[[Page 416]]

will be sent through the State Office to OGC for preparation of closing 
instructions and any special legal documents required for closing. A 
certified copy of a loan resolution or the original executed witnessed 
loan agreement must be supplied by the applicant in time to be included 
in the docket. No docket will be considered which does not include the 
required resolution or agreement. The OGC will route the docket, 
including closing instructions and any legal documents, to the servicing 
office through the State Office.

[55 FR 29562, July 20, 1990, as amended at 59 FR 6896-6897, Feb. 14, 
1994]



Sec. Sec. 1944.247-1944.249  [Reserved]



Sec. 1944.250  OMB control number.

    The reporting and recordkeeping requirements contained in this 
regulation have been approved by the Office of Management and Budget and 
have been assigned OMB control number 0575-0047. Public reporting burden 
for this collection of information is estimated to vary from 15 minutes 
to 40 hours per response, with an average of 6.4 hours per response 
including time for reviewing instructions, searching existing data 
sources, gathering and maintaining the data needed, and completing and 
reviewing the collection of information. Send comments regarding this 
burden estimate or any other aspect of this collection of information, 
including suggestions for reducing this burden, to the Department of 
Agriculture, Clearance Officer, OIRM, room 404-W, Washington, DC 20250; 
and to the Office of Management and Budget, Paperwork Reduction Project 
(OMB 0575-0047), Washington, DC 20503.

[56 FR 2241, Jan. 22, 1991, as amended at 58 FR 44273, Aug. 20, 1993]

Exhibit A to Subpart E of Part 1944--How To Bring Rental and Cooperative 
                          Housing to Your Town

 I. Introduction
 II. Applying for a Loan
 III. Review of the Preapplication
 IV. Developing the Loan Docket
 V. Review of the Complete Docket
 VI. Construction
 VII. Open House
 VIII. Exhibits

    A-1 Legal Service Agreement
    A-2 Survey of Existing Rental Housing
    A-3 Rental Housing Survey
    A-4 Cooperative Housing Survey
    A-5 Housing Survey Summary
    A-6 Housing Allowances for Utilities and Other Public Services
    A-7 Information to be Submitted with Preapplication for a Rural 
Rental Housing (RRH) and a Rural Cooperative Housing (RCH) Loan
    A-8 Outline of Professional Market Study
    A-9 Administrative Process for Combining FmHA or its successor 
agency under Public Law 103-354 Assistance with Low-Income Housing Tax 
Credits
    A-10 Information to be Submitted with Application for a Rural Rental 
Housing (RRH) and a Rural Cooperative Housing (RCH) Loan.

                             I. Introduction

    A. Most areas in rural America need more adequate rental housing. 
Some people with modest incomes live in impoverished housing that is 
cold in the winter and hot in the summer because adequate housing at a 
reasonable rent is not available. Other households that prefer to rent 
have the choice of either commuting many miles to work or living in the 
substandard rental housing that is available in small rural communities. 
To help reduce this rental housing shortage, the Farmers Home 
Administration (FmHA) or its successor agency under Public Law 103-354 
finances rental housing in rural communities.
    B. To augment the choice of living accommodations available to 
modest income persons, FmHA or its successor agency under Public Law 
103-354 also provides financing for cooperative-type housing units. 
Although this kind of housing units is appropriate only to a particular 
group of persons, it also serves to help reduce the existing housing 
shortage in rural communities. Nonprofit organizations, other types of 
organizations and individuals may qualify for these housing loans. 
Information about the loans is available at the local FmHA or its 
successor agency under Public Law 103-354 office.
    C. This handbook will assist interested persons and groups in 
applying for a rural rental or cooperative housing loan. It also briefly 
explains requirements regarding the construction and operation of the 
housing.
    D. The basic guidelines in this handbook apply to all applicants; 
however, some procedural requirements will vary depending on the size of 
the project being proposed and the type of applicant/borrower. However, 
in no instance will different policies, practices or procedures be 
utilized in the evaluation or in determination of the creditworthiness 
of any organization or person(s) in connection with the provision of any 
RRH or RCH loan or other financial assistance for a project or other 
financial assistance which is secured by residential real estate because 
of race,

[[Page 417]]

color, religion, sex, handicap, marital or familial status, age, or 
National origin.
    E. The objective of the FmHA or its successor agency under Public 
Law 103-354 housing loan program is to provide credit for housing that 
serves the needs of eligible very low-, low-, and moderate-income 
permanent residents.
    F. Successful housing depends on the existence of the following 
three important conditions:
    1. There must be a need for the housing to be built.
    2. The housing must fit the needs of prospective tenants or 
cooperative members from the standpoint of location, design and cost.
    3. The applicant for a loan must provide adequate information to 
FmHA or its successor agency under Public Law 103-354 to show that these 
basic conditions can be met.

                         II. Applying for a Loan

    A. An individual, organization, or group organizing to provide 
housing may contact any Rural Development office processing Section 515 
loan requests to obtain information and necessary forms. The Section 515 
program is administered by Rural Development's Rural Housing Service 
(RHS).
    B. Each funding cycle, RHS will publish in the Federal Register a 
notice of the availability of funds (NOFA) for Section 515 loans and a 
list of designated places (communities) for which loan requests may be 
submitted. The list of designated places is also available from any 
Rural Development office processing Section 515 loan requests. 
Designated places are rural places identified by RHS as having the 
greatest potential need for Section 515 housing. Except in unusual 
circumstances, places are designated for a period of three years or 
until a loan has been selected for funding, whichever occurs first.
    C. Applicants must submit a loan request by the deadline announced 
in the Federal Register, and available in any Rural Development office, 
to be considered in the funding cycle. Section III of this exhibit 
provides information on the loan review and selection process. In 
addition, applicants are advised to read this subpart, which provides 
detailed information on the Section 515 program.
    D. The loan request consists of SF-424.2, ``Application for Federal 
Assistance (For Construction),'' the supporting material or information 
listed in exhibit A-7 of this subpart, and any additional information 
required in NOFA. This information will enable the Agency to determine:
    1. The eligibility of the applicant;
    2. The feasibility (economic, environmental, and architectural) of 
the proposed housing;
    3. That prospective cooperative members have read and understand 
their responsibilities as outlined in ``What is Cooperative Housing?'' 
(available in any Rural Development office) before agreeing to a 
cooperative housing project;
    4. Whether the proposed housing can appropriately be financed by 
RHS; and
    5. Its Civil Rights impact.
    E. This information usually can be furnished by the applicant 
without hiring extensive professional services. However, fees for 
professional packaging services rendered to a nonprofit organization can 
be made a part of loan development costs.

                     III. Review of the Loan Request

    A. Loan requests received by the deadline announced in the NOFA will 
be reviewed, scored, and ranked based on the loan selection criteria 
announced in the NOFA. Requests that rank sufficiently high will be 
reviewed for eligibility and feasibility.
    B. Upon completion of the loan review process, applicants will be 
advised of RHS' decision. Applicants whose loan requests are selected 
for further processing will be notified of the additional steps that 
need to be taken. Loan requests not selected for further processing in 
the current funding cycle will be returned to the applicant.

                     IV. Developing the Loan Docket

    A. When a loan request is selected for further processing, the 
servicing official will review the items required in exhibit A-9. The 
amount of information required will vary based on the complexity and 
size of the proposed project. The servicing official will also provide 
forms and guides to assist the applicant in recording required 
information. Some of the guides are included as exhibits in this 
handbook. The applicant is responsible for providing the information 
required. The servicing official will assemble this information and 
complete the docket.
    B. The following information will be helpful in developing a loan 
docket. The first two items are applicable only to nonprofit 
organizations. The other items apply to any applicant. In addition, the 
requirements of exhibit A-7 of this subpart must be met when developing 
a loan request and the requirements of exhibit A-9 must be met for loan 
requests selected for further processing.
    1. Getting organized if applicant is a nonprofit organization and 
has not adopted articles of incorporation and bylaws. a. Steering 
committee or sponsor. The group may choose a steering committee or, in 
the case of a cooperative, a sponsor to act for it. An attorney will 
usually be required to advise the organization on incorporation and 
assist in developing the loan application. The steering committee, or 
sponsor, should select an attorney who is interested in the proposed 
housing and will render the necessary services promptly for a reasonable 
fee.

[[Page 418]]

    b. Articles of incorporation and bylaws. FmHA or its successor 
agency under Public Law 103-354 has developed model articles of 
incorporation and bylaws for nonprofit organizations. The steering 
committee, or sponsor, should arrange for the servicing official to meet 
with the attorney. The servicing official will give the attorney copies 
of the FmHA or its successor agency under Public Law 103-354 model 
articles of incorporation and bylaws and explain FmHA or its successor 
agency under Public Law 103-354 requirements. Separate bylaws have been 
developed for cooperatives and for rental housing organizations.
    c. Attorney's fees. Reasonable attorney's fees may be included in 
the FmHA or its successor agency under Public Law 103-354 loan. A 
written agreement between the applicant and attorney is required. See 
exhibit A-1 for a sample copy of an agreement.
    d. Board of directors. The steering committee, or sponsor, usually 
selects the incorporators for the corporation. The board of directors is 
responsible for conducting the corporation's business, including 
obtaining the loan and providing overall management after the housing is 
completed.
    2. Obtaining broadly based membership for rental housing. a. A 
nonprofit corporation applying for a loan must have and maintain a 
broadly based local membership, including leaders in the community, 
representing a variety of interests in the community. The members may be 
individuals or organizations but each member is limited to one vote.
    b. The purpose of the broadly based membership requirement is to 
obtain community support, provide enough members to be able to rotate 
officers and members of the board of directors, protect the Government's 
financial interest as mortgagee and provide assurance that the housing 
will be a success and the purpose of the loan carried out.
    c. In RRH loans made to nonprofit organizations and public bodies, 
there is no profit incentive. The term of the loan may be for as long as 
30 years, with an amortization period not to exceed 50 years. Therefore, 
factors such as the prospect for continuous competent management and 
supervision, maintenance and adequate community support for the housing 
project over the expected life of the loan are important.
    d. A membership list showing the names and addresses of each member 
should be maintained by the secretary of the organization.
    (1) Number of members required. The organization should have at 
least 25 members. The number of members may be decreased for projects 
with less than 25 units.
    (2) Contributions by members. Nonprofit corporations may require a 
membership fee or ask prospective members for a contribution. This is 
the method often used by nonprofit corporation applicants to raise 
initial operating capital. However, no such fee or contribution can 
entitle a member or prospective member to a preference in occupancy of 
the housing.
    3. Cooperative membership. a. Only those persons who will reside in 
the cooperative housing will be members of the cooperative. The 
composition of the board of directors will be drawn from that 
membership, initially by appointment and later by election from the 
general membership. The board should be composed of at least 5 members.
    b. The board of directors, with assistance from the adviser to the 
board (discussed in a later section), will devise the rules and 
regulations under which the cooperative will operate. Additionally, the 
board will be responsible for management of the cooperative.
    c. A membership list showing the names and addresses of each member 
will be maintained by the secretary of the cooperative.
    d. Cooperative membership will require the deposit of a membership 
fee by each member as outlined in Sec. 1944.215(g) of this subpart. The 
fee will be retained by the cooperative for as long as the person 
remains a member of the cooperative. The fee will be refunded to the 
person when membership is terminated.
    4. The applicant should communicate with officials of the community 
early in the development of the proposal to explain the benefits of the 
proposed housing to the community. This meeting will serve to remove the 
uncertainty of the impact of the housing on the community and may aid in 
a timely processing of the loan request. The support of community 
officials is helpful in obtaining environmental clearances, possible 
zoning changes, favorable taxation, etc.
    5. Initial operating capital. a. All applicants must have enough 
inital operating capital to get started. When justified, FmHA or its 
successor agency under Public Law 103-354 may include these funds in a 
loan made to a consumer cooperative, nonprofit organization or public 
body. Initial operating capital should be sufficient to pay such costs 
as property and liability insurance premiums, fidelity coverage premiums 
when the applicant is an organization, utility hook-up charges and 
deposits, maintenance and other equipment, lease forms, furnishings, 
loan payments that may become due during construction and other initial 
expenses.
    b. At least 2 percent of the total development cost of the project 
is required for initial operation and maintenance costs. The applicant 
can determine the amount required by working out a detailed budget of 
income and expenses for the period of time until the housing is ready 
for occupancy and income will be available. The actual budget may 
indicate that more than 2 percent is needed.

[[Page 419]]

    6. Analysis of market to determine demand for rental housing. a. 
Applicants should discuss with the servicing official the type of market 
analysis that will be needed. Applicants must comply with paragraph II 
of exhibit A-7 when preparing market information.
    b. Exhibits A-2 and A-3 are sample forms which may be modified by 
the applicant to assist in the assembly of the information for the 
market analysis.
    7. Planning to serve the market. a. Planning the housing to serve 
the market in the community involves more than obtaining a blueprint of 
the building. It requires a careful evaluation of conditions in the 
community and careful planning to assure that the result will be good 
housing designed for independent living at a cost eligible tenants can 
afford. Well planned housing is:
    (1) Convenient, attractive, safe and comfortable.
    (2) Easily maintained.
    (3) Located where tenants or members can have easy access to the 
goods and services they require for daily living.
    (4) Planned to meet all codes, regulations, and acceptable 
construction practices.
    (5) Priced within an affordable range of its prospective tenants and 
members.
    (6) Energy efficient and complies with FmHA or its successor agency 
under Public Law 103-354's thermal performance standards.
    b. The servicing official and State Office architect can provide 
information that will help the applicant in planning the housing.
    8. Selecting an architect. a. The services of an architect are 
required for all housing projects which have more than four units. The 
cost of a registered architect/engineer may be included in the loan.
    b. Before anything more than schematic drawings are prepared, the 
applicant and its architect, the FmHA or its successor agency under 
Public Law 103-354 architect/engineer and the servicing official should 
arrange a meeting. This meeting will acquaint the applicant's architect 
with the purposes of the housing and FmHA or its successor agency under 
Public Law 103-354's requirements. This will be helpful in eliminating 
misunderstandings. Among the topics that should be discussed are:
    (1) Objectives of the housing program.
    (2) Design requirements that will produce good housing at reasonable 
cost.
    (3) Stages at which FmHA or its successor agency under Public Law 
103-354 must review plans and specifications.
    (4) Services the architect will be expected to perform.
    (5) Agreement between architect and applicant.
    9. Selecting a site. a. The location of the housing is an important 
part of planning to serve the market. Occupants should have easy access 
to required services. A desirable residential setting within a rural 
community is essential.
    b. Site cost is also important. The total cost of the site, 
including the cost of improvements and the price of the land, must be 
considered. Both may be included in the loan. However, loan funds made 
available to purchase land may not exceed the present market value of 
the land in its present condition as determined by an FmHA or its 
successor agency under Public Law 103-354 appraisal.
    c. Before buying a site, the applicant should consult the architect 
to determine the suitability of the site for the proposed housing. The 
applicant must consider the site requirements detailed in paragraph III 
of exhibit A-7 of this instruction. The applicant should not enter into 
any firm agreement to buy a site with the expectation of receiving an 
FmHA or its successor agency under Public Law 103-354 loan without 
consulting with the servicing official and prior to the Agency's 
completion of the environmental impact review.
    10. Drawings, specifications and cost estimates. The size, 
complexity and cost of housing projects can vary from a duplex located 
on a small building lot to a complex of buildings located on a site 
containing several acres. The applicant must provide drawings and 
specifications in accordance with paragraph IV of exhibit A-7 of this 
subpart.
    11. Budgets. a. The initial budget should cover the period from the 
date the first construction expenses are incurred until the end of the 
applicant's first fiscal year following completion of the housing. After 
the final cost estimate has been made and the amount of the loan needed 
has been determined, a budget for a typical year should be developed.
    b. This budget should be based on a typical annual operation after 
the project is occupied. Budgeting is an important part of the 
management. The applicant should spend enough time working on it to 
assure that the estimates are realistic. Budgets will be required each 
year until the FmHA or its successor agency under Public Law 103-354 
loan is repaid in full. The budget serves several purposes including:
    (1) Helps determine rental or occupancy rates.
    (2) Indicates financial soundness.
    (3) Serves as a guide for paying expenses.
    c. Form FmHA or its successor agency under Public Law 103-354 1930-
7, ``Multiple Family Housing Project Budget,'' and its accompanying 
exhibit A-6 of this subpart are a sample budget form and utility 
allowance form.
    12. Loan resolution or loan agreement. When the applicant is a 
corporation or an individual applying for a loan above certain amounts, 
a copy of the required loan resolution or loan agreement should be 
obtained

[[Page 420]]

from and discussed with the servicing official before the loan docket is 
developed. Among other things, this document outlines how the income 
from the housing is to be used. These requirements should be understood 
at the time the budget is developed.
    13. Rental management plan. A detailed management plan will be 
developed which will outline the basic policies and procedures to be 
followed and the duties of the officers and employees. The applicant 
must manage the project in accordance with the requirements of subpart C 
to part 1930 of this chapter.
    14. Rental manager and caretaker. a. A comprehensive management 
program is essential to the successful operation of the project. A 
carefully written plan should be developed in accordance with exhibit B 
of FmHA Instruction 1930-C.
    b. The use of an onsite manager should be based on the size of the 
project. The manager should be readily available to the tenants. The 
manager might be one of the tenants or a member of the board of 
directors of a nonprofit corporation. The manager's duties should be 
specified in the management plan.
    c. The board of directors of a corporation is responsible for 
overall supervision and management of all its affairs. The board should 
delegate actual operating and management responsibility to committees or 
individuals and meet often enough to see that enterprise is being 
managed successfully.
    15. Cooperative self-management. a. The success of cooperative 
housing will depend on how well the members are able to manage the 
cooperative themselves with assistance from the adviser to the board. 
The cooperative must first develop and designate those areas of 
responsibilities to be delegated to committees, a list of the 
committees, and the functions of the committees. A copy of this 
information will be provided to each prospective member.
    b. It will be necessary for the proposed board of directors to 
become familiar with how a cooperative is supposed to work before it is 
able to successfully assume the responsibilities of running the 
cooperative. This can best be achieved by participating in programs 
designed for the express purpose of educating potential board members. 
The prospective board members will be expected to take part in such a 
training program.
    c. Participation on committees by members will be on a voluntary 
basis. However, if it appears a committee does not have sufficient 
numbers for it to adequately operate, then additional members will be 
expected to volunteer their time and talents. Thus, participation on 
committees is voluntary up to a point. If a member has experience in a 
particular area, that member should be encouraged to join the committee 
which will benefit from his/her experience. The cooperative will need a 
total commitment from the membership in order to assure success of self-
management. Examples of the types of committees which may be considered 
are:
    (1) Maintenance
    (2) Groundskeeping
    (3) Communications
    (4) Budget and finance
    (5) Rules
    (6) Recreation
    (7) Home service
    d. If the cooperative is not successful in managing itself, 
professional management will be hired by the cooperative.
    16. Occupancy policies. a. Applicants should review carefully the 
occupancy requirements with the servicing official. Particular attention 
should be given to the following requirements:
    (1) The housing must be open to all eligible persons regardless of 
race, color, religion, sex, handicap, familial status, age, or national 
origin.
    (2) The incomes of tenants and the initial incomes of cooperative 
members must be within the maximum income limits approved by FmHA or its 
successor agency under Public Law 103-354.
    b. Additional guidance concerning occupancy in congregate housing 
projects can be found in exhibit J of subpart C of part 1930 of this 
chapter.
    17. Cooperative board of directors. The board will essentially be 
the backbone of the cooperative structure. In this capacity it will be 
responsible for establishing the policies and procedures which will 
govern the operation of the cooperative and for enforcing those policies 
and procedures. The board will be composed of members of the cooperative 
with the same interests and concerns as the general membership. For 
instance, instituting an increase in the occupancy rates or terminating 
a member's right to cooperative ownership because of serious repeated 
violations of cooperative rules and regulations will be the types of 
actions which are taken by the board. The members of the board will be 
affected by these same decisions since they must adhere to the same 
rules and regulations as the rest of the cooperative community.
    18. Adviser to the board. Resident(s) of the community who is not a 
member of the cooperative will serve as an adviser to the board during 
the period of formation and until the board of directors has effectively 
demonstrated its ability to manage the cooperative. At that time, the 
adviser will maintain close contact with the cooperative and provide 
advice and assistance as needed. The adviser may also be an 
organization; however, one specific individual will have sole contact 
with the board to eliminate confusion and to prevent one person from 
countermanding another's instructions. The adviser will closely monitor 
the cooperative for at least 2 years after it becomes its own manager. 
This time

[[Page 421]]

may vary, depending on the circumstances. The adviser must be very 
carefully selected to ensure that adequate guidance is given to the 
board. The adviser must be able to meet certain criteria in order to 
provide the best possible counsel. The Qualifications of an Adviser to 
the Board, Relationship of Adviser to Members, and Adviser 
Responsibilities, found at exhibits E, E-1, and F of this subpart, 
should be used in evaluating potential advisers. While it may not be 
possible to find some one individual or individuals who can meet all the 
requirements outlined, the criteria should be used as guides in 
determining the best candidate. FmHA or its successor agency under 
Public Law 103-354 will provide counsel to the cooperative during the 
interview period and must approve the selection of the individual(s). We 
recognize the adviser will require compensation for services rendered, 
however, the amount paid should not severely limit the amount of 
patronage capital accruing to the members.
    19. Management reserve. The board's ability to manage the 
cooperative will determine whether members will receive equity from 
membership in the cooperative. A set rate for professional management 
will be assessed each month as part of the occupancy rate and will be 
maintained in a separate reserve account. If the cooperative is 
successful at managing its own affairs during the year, the amount 
accumulated in the reserve will be assigned equally to each member at 
the end of the year as patronage capital. This same procedure will be 
followed each year, allowing a buildup of patronage capital. If 
professional management is hired by the cooperative to correct 
deficiencies which have arisen from poor self-management, further 
accumulations to the management account will then be used to pay for 
professional management and the amount being accrued to the members' 
patronage capital account will be suspended. If the amount being 
accumulated for management is not sufficient to meet the needs, 
occupancy rates will be increased to cover the expense of management. 
When the cooperative begins to again manage itself, the assessment for 
the management reserve will resume as previously stated. Any other 
income remaining at the end of the year will also be assigned as 
patronage capital. Assignment from both of these sources must be 
accomplished in accordance with the IRS ruling concerning patronage 
distribution. Careful records must be kept to track the monthly amount 
being contributed by each member to the management reserve account so 
that the cooperative will know how much patronage capital the member is 
entitled to should membership be terminated prior to the end of the 
fiscal year. FmHA or its successor agency under Public Law 103-354 
rental assistance proceeds are not to be used to make the member's 
contribution to the management reserve account. Therefore, the member 
must have sufficient income from which to make this payment. If it 
becomes necessary to hire full-time professional management, then the 
management fee will be considered part of the shelter cost and thus 
eligible for RA. FmHA or its successor agency under Public Law 103-354 
will assist the adviser to the board in determining if and when 
professional management will be hired in lieu of self-management. In the 
event the adviser and FmHA or its successor agency under Public Law 103-
354 are unable to reach an agreement regarding the hiring of 
professional management, the ultimate decision will rest with FmHA or 
its successor agency under Public Law 103-354. Compensation paid to the 
adviser will be shared by members through the deduction of equal amounts 
from their management reserve payments.
    20. Rules and regulations. The rules and regulations for tenants and 
members should be developed by the applicant and a copy included in the 
loan docket.
    21. Lease or occupancy agreement. The applicant should develop an 
application form for occupancy and a lease or occupancy agreement form 
in accordance with the requirements of subpart C of part 1930 of this 
chapter. Exhibit J of this subpart is to be used as a guide for 
developing an occupancy agreement. Copies of these forms should be 
included in the loan docket.
    22. Affirmative fair housing marketing. In order to promote proper 
planning for initial rent-up and occupancy, the servicing official will 
meet with the applicant after loan approval, preferably at the 
preconstruction and/or the prerent-up or preoccupancy conference to 
discuss the Affirmative Fair Housing Marketing Plan or other similar 
agreement approved for the project. In the case of a cooperative, the 
servicing official will discuss the Plan at the loan request stage.

                    V. Review of the Complete Docket

    A. When the applicant has developed the complete loan docket, it 
should furnish and discuss the information with the servicing official. 
SF 424.2, the information and materials listed in exhibit A-9 plus FmHA 
or its successor agency under Public Law 103-354 forms provided by the 
servicing official become the loan docket.
    B. If the docket is submitted to the State Office for consideration, 
the State Director will indicate any special requirements that need to 
be met before loan approval or loan closing.
    C. Commercial financing should be used for projects during the 
interim construction period if available at reasonable rates and terms, 
FmHA or its successor agency under Public Law 103-354 can make a 
conditional commitment to the interim lender that will loan the funds to 
finance the construction of

[[Page 422]]

the project. The commitment will be conditioned upon acceptable 
performance by the builder and payment of all construction bills. After 
the conditions have been met, the FmHA or its successor agency under 
Public Law 103-354 loan will be closed to pay the interim construction 
indebtedness. Draws on interim loan funds will be made only as needed 
and will require the joint approval of the applicant and the FmHA or its 
successor agency under Public Law 103-354 servicing official.
    D. In other cases FmHA or its successor agency under Public Law 103-
354 can make advances of loan funds for construction, the note and 
mortgage will be signed by the applicant and the loan funds deposited in 
a joint bank account at loan closing. The loan funds are disbursed from 
the bank account as needed. Checks on the account must be signed by the 
borrower and countersigned by the FmHA or its successor agency under 
Public Law 103-354 servicing official.

                            VI. Construction

    The start of construction is the first physical sign that the 
housing will become a reality. The construction period is a most 
critical period of time.
    A. Competitive bidding. 1. Competitive bidding is recommended and 
may be required by FmHA or its successor agency under Public Law 103-354 
in some cases. If required, the State Director's letter sent after the 
loan is authorized will instruct the servicing official to have the 
applicant or its architect complete the necessary bid documents.
    2. The applicant and the architect should invite competent 
contractors to bid on the housing. If bids are within the estimates, the 
successful bidder will be selected and the contract for construction 
will be awarded. During construction, a qualified FmHA or its successor 
agency under Public Law 103-354 representative and the applicant and its 
architect will inspect the work to protect their respective interests in 
the project. Payment will be made from the FmHA or its successor agency 
under Public Law 103-354 loan funds, or interim loan funds, according to 
provisions in the contract.
    B. Construction without competitive bidding. When competitive 
bidding is not required, the loan docket will include reliable cost 
estimates or a firm offer to build from a builder selected by the 
applicant. A contract concurred with by FmHA or its successor agency 
under Public Law 103-354 will be executed by the applicant and the 
contractor. If full architectural services are obtained by the 
applicant, inspection of the work will be performed by the architect's 
staff. The applicant and FmHA or its successor agency under Public Law 
103-354 will inspect the construction to protect their respective 
interests in the project. Payments will be made to the contractor in 
accordance with the terms of the contract.
    C. Starting construction. Construction should not be started until 
the FmHA or its successor agency under Public Law 103-354 loan is closed 
or the FmHA or its successor agency under Public Law 103-354 commitment 
has been made to the interim lender.

                             VII. Open House

    Promotion of the housing availability should start at least 90 days 
prior to completion. The applicant may want to create interest in the 
housing and build up the list of prospective tenants or members by 
having a dedication ceremony. This will attract attention and remind the 
local residents of what the housing means to the community. This is 
especially recommended for housing developed by nonprofit corporations.

                             VIII. Exhibits

    The following exhibits may be used when applicable and, if 
necessary, adapted to meet the specific needs of applicants.

Exhibit
    A-1 Legal Services Agreement
    A-2 Survey of Existing Rental Housing
    A-3 Rental Housing Survey
    A-4 Cooperative Housing Survey
    A-5 Housing Survey Summary
    A-6 Housing Allowances for Utilities and Other Public Services
    A-7 Information to be Submitted with a Loan Request for a Rural 
Rental Housing (RRH) or a Rural Cooperative Housing (RCH) Loan
    A-8 Outline of Professional Market Study
    A-9 Additional Information to be Submitted for Rural Rental Housing 
(RRH) and Rural Cooperative Housing (RCH) Loan Requests
    A-10 [Reserved]
    A-11 Processing Guidelines for Loans for Equity to Avert Prepayment
    A-12 Market Study Checklist (Available in Any FmHA or Its Successor 
Agency Under Public Law 103-354 Office)
    A-13 Work Sheet for Loan Calculation (Available in Any FmHA or Its 
Successor Agency Under Public Law 103-354 Office)
    A-14 Information To Be Submitted for Subsequent Loans (Available in 
Any FmHA or Its Successor Agency Under Public Law 103-354 Office)

[56 FR 2241, Jan. 22, 1991; 56 FR 47376, Sept. 19, 1991, as amended at 
58 FR 40954, July 30, 1993; 59 FR 6891, 6897, Feb. 14, 1994; 62 FR 
25065, 25069, May 7, 1997; 62 FR 67223, Dec. 23, 1997]

[[Page 423]]

  Exhibit A-1 to Subpart E of Part 1944--Legal Services Agreement (For 
              Cooperative or Other Nonprofit Organizations)

    Agreement made this ------ day of ----------------, 19---- between 
the --------------------, hereinafter called the (owner) (board of 
directors), and --------------------, hereinafter called the attorney, 
witnesseth:
    Whereas the (owner) (board of directors) intend to form a 
cooperative or other nonprofit corporation, hereinafter called the 
(corporation) (cooperative), to construct and operate a rural housing 
project in
________________________________________________________________________
(Town) (County) (State)
and to obtain a loan from the Farmers Home Administration or its 
successor agency under Public Law 103-354 to finance the construction, 
and the attorney agrees to perform all legal services necessary to 
incorporate the (corporation) (cooperative), and to perform all other 
customary legal services necessary to the organization, financing, 
construction, and initial operating of the proposed rural housing 
project, such services to include but not to be restricted to the 
following:
    1. Prepare and file incorporating papers and supervise and assist in 
taking other necessary or incidental actions to create the (corporation) 
(cooperative) and authorize it to finance, construct, and operate and 
proposed housing project.
    2. Prepare for and furnish advice and assistance to the owner, or to 
the board of directors and officers of the corporation, in connection 
with (a) notices and conduct of meetings; (b) preparation of minutes of 
meetings; (c) preparation of adoption of necessary resolutions in 
connection with the authorization, financing, construction, and initial 
operation of a rural housing project; (d) special tax treatment 
applicable to housing cooperatives; (e) necessary construction 
contracts; (f) preparation of adoption of bylaws and related documents; 
(g) any other action necessary for organizing the (corporation) 
(cooperative) or financing, constructing, and initially operating the 
proposed housing project.
    3. Review construction contract, bid-letting procedure, and surety 
and performance bonds.
    4. Examine real estate titles and prepare, review and record deeds 
and any other instruments.
    5. Cooperate with the architect employed by the (owner) (board of 
directors) in connection with preparation of survey sheets, easements, 
and any other necessary title documents, construction contracts, and 
other instruments.
    6. Render legal opinions as required by the (owner) (board of 
directors) or the Farmers Home Administration or its successor agency 
under Public Law 103-354, United States Department of Agriculture.
    7. (Owner) (board of directors) agree to pay the attorney for 
professional services in accordance with this agreement, as follows:
________________________________________________________________________
________________________________________________________________________
The fees to be payable in the following manner and at the following 
times:
________________________________________________________________________
________________________________________________________________________
The attorney states and agrees that of the above total fees, ----------
--, represents fees for services in connection with the organization and 
incorporation of the (corporation) (cooperative).
    The (owner) (board of directors) and the attorney further covenant 
and agree that, if upon organization and incorporation, the 
(corporation) (cooperative) fails or refuses to adopt and ratify this 
agreement by appropriate resolution within ------ days, this agreement 
shall terminate and (owner) (board of directors) shall be liable only 
for payment for legal services rendered in connection with such 
organization and incorporation.
    Signed this ------ day of ------------ 19 ----.
Attorney:_______________________________________________________________
(Owner)
(board of directors)
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________

[56 FR 2245, Jan. 22, 1991]

Exhibit A-2 to Subpart E of Part 1944--Survey of Existing Rental Housing

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                              No. of
                   Name                       units       BR mix    Type    Year built   Rent   Vacancies   Location               Amenities
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                           ...........  .........  ......  ...........  ......  .........  .........  Drapes
                                                                                                                      Carpet
                                                                                                                      Central cooling
                                                                                                                      Dishwasher
                                                                                                                      Garbage disposal
                                                                                                                      TV cable
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 424]]

      Exhibit A-3 to Subpart E of Part 1944--Rental Housing Survey

(SAMPLE)

    A rental housing project is being planned for (name of community.) 
The project would provide comfortable living at monthly rental rates of 
(Indicate proposed basic rent by number of bedrooms.) Your opinion on 
the following will help us to determine whether such a project is 
practical. This information does not obligate you in any way.
    1. What age group are you in? 62 or over [ ] 50-61 [ ] 35-49 [ ] 
Under 35 [ ]
    2. Are you or members of the household handicapped or impaired and 
in need of specially designed housing arrangements? yes [ ] no [ ]
    3. Number of person(s) in your household: ------.
    4. Approximate annual income from all sources including any social 
security pension, payments made on behalf of minor children, public 
assistance, etc.: $------.
    5. Do you own ( ) or rent ( ) present residence?
    6. Do you live in house ( ) apartment ( ) room ( ) mobile home ( ) 
on a farm ( ) in town ( )?
    7. Is your present housing modern ( ) not modern, but adequate ( ) 
inadequate ( ). If inadequate, in what respect? ------.
    8. What amount of monthly rent do you pay with utilities included? 
$------.
    9. Would you pay 30 percent of your monthly income for modern 
housing for your family? yes ( ) no ( )
    10. Would you be willing to move in if an apartment were available--
----, 19----? yes ( ) no ( )
    11. Do you have a car? No, 1, 2, 3 (circle)

Name____________________________________________________________________
Address_________________________________________________________________
 (including city/town)
Telephone Number________________________________________________________
Location of employment__________________________________________________

                   For Elderly and Congregate Housing

    12. Number of meals you would like prepared for you per day ------
    13. What other services would you like to have available to you?

 
                                             Yes               No
 
a. Housekeeping services............  ................  ................
b. Personal care services...........  ................  ................
c. Social and recreational            ................  ................
 activities services.
d. Linen and laundry services.......  ................  ................
e. Health and medical related         ................  ................
 services.
f. Beauty and barber services.......  ................  ................
g. Transportation or access services  ................  ................
h. Other (specify)..................  ................  ................
 

    14. List any hobbies or organizational membership you have.

    Note to Applicant: This sample survey form is for your use in 
evaluating the need for new rental units in the community and its market 
area. You should be prepared to explain the methodology of the survey 
since FmHA or its successor agency under Public Law 103-354 will be 
spotchecking the respondents' answers. How the survey is performed can 
influence the outcome; therefore, it is encumbent upon you to see that 
the manner in which it is conducted is suitable and acceptable to FmHA 
or its successor agency under Public Law 103-354. For instance, 
compensation being paid to someone for survey work should not be 
dependent upon the number of respondents who would be willing to move 
into the project. The survey should be based on a random sampling of 
persons now residing in the market area. Things to avoid are surveying 
from the telephone book listing or a door-to-door canvass of a certain 
segment of the community. We want the development of rental units to be 
based upon actual circumstances prevailing in the market area in order 
that the housing development will present a secure and economical living 
arrangement for the persons in need of the housing.

    Exhibit A-4 to Subpart E of Part 1944--Cooperative Housing Survey

BEFORE ATTEMPTING TO ANSWER THESE QUESTIONS, PLEASE READ THE GUIDELINES 
FOR UNDERSTANDING THE PRINCIPLES OF COOPERATIVE HOUSING. NOW TAKE TIME 
TO ANSWER THE FOLLOWING QUESTIONS AS HONESTLY AS YOU CAN.
    (Circle yes or no)
    1. Are you willing to share the responsibilities required of a 
cooperative member?
    yes -------- no--------

    2. If asked, will you serve on the board of directors or on a 
committee?
    yes -------- no--------

    3. Are you willing to help in maintaining the cooperaive property?
    yes -------- no--------

    4. Do you now have a better idea of what cooperative housing really 
is?
    yes -------- no--------

    5. Do you want to ask more about the cooperative before deciding 
whether to join?
    yes -------- no--------

    6. If the answer to question 5 is ``yes,'' will you come to an 
information meeting to be held in town?

[[Page 425]]

    yes -------- no--------

    7. Have you answered the questions truthfully? Did you answer ``no'' 
to any of questions 1, 2, or 3? If so, this type of housing is not for 
you. If you are interested, please go on to complete the second portion 
of this survey.
    1. How many persons in your household?
adults__________________________________________________________________
children________________________________________________________________
    2. Approximate annual income from all sources: $------------
    3. Are you or members of the household handicapped or impaired and 
in need of specifically designed housing arrangements?
    yes -------- no--------

    4. An informal meeting is scheduled for ------ a.m./p.m., on ------
------, 19----, for the purpose of discussing a proposed ---- -unit 
cooperative planned for this community. At that time a representative of 
the cooperative will be on hand to answer other questions you may have.
    So that we may know how many persons to expect at the meeting, we 
ask that you give us your name, address, and phone number.

NAME____________________________________________________________________
ADDRESS_________________________________________________________________
________________________________________________________________________
PHONE___________________________________________________________________

[56 FR 2245, Jan. 22, 1991]

      Exhibit A-5 to Subpart E of Part 1944--Housing Survey Summary

(SAMPLE)

------------------------------------------------------------------------
                                          Age--Head of household
                                 ---------------------------------------
              Item                  62 or
                                    over    50 to 61  35 to 49  Under 35
------------------------------------------------------------------------
Handicapped:
  Yes...........................  ........  ........  ........  ........
  No............................  ........  ........  ........  ........
Household Size (Bedrooms
 Needed):
  1 or 2 persons (1 bedroom)....  ........  ........  ........  ........
  3 to 4 persons (2 bedrooms)...  ........  ........  ........  ........
  5 to 6 persons (3 bedrooms)...  ........  ........  ........  ........
  7 to 8 persons (4 bedrooms)...  ........  ........  ........  ........
Annual Income:
------------------------------------------------------------------------


[53 FR 2159, Jan. 26, 1988. Redesignated and amended at 56 FR 2245, 
2246; 56 FR 65985, Dec. 20, 1991]

Exhibit A-6 to Subpart E of Part 1944--Housing Allowances For Utilities 
                        And Other Public Services

Effective Date__________________________________________________________

________________________________________________________________________
Name of Borrower

________________________________________________________________________
Location and Identification of Project

                                 Part I

----------------------------------------------------------------------------------------------------------------
                                                                    Monthly dollar allowances
              Utility or service               -----------------------------------------------------------------
                                                   O-BR       1-BR       2-BR       3-BR       4-BR       5-BR
----------------------------------------------------------------------------------------------------------------
Heating:
  a. Natural Gas..............................  .........  .........  .........  .........  .........  .........
  b. Bottle Gas...............................  .........  .........  .........  .........  .........  .........
  c. Electric.................................  .........  .........  .........  .........  .........  .........
  d. Oil......................................  .........  .........  .........  .........  .........  .........
Air Conditioning..............................  .........  .........  .........  .........  .........  .........
Cooking:
  a. Natural Gas..............................  .........  .........  .........  .........  .........  .........
  b. Bottle Gas...............................  .........  .........  .........  .........  .........  .........
  c. Electric.................................  .........  .........  .........  .........  .........  .........
Other electric lighting, refrigeration, etc...  .........  .........  .........  .........  .........  .........
Water Heating:
  a. Natural Gas..............................  .........  .........  .........  .........  .........  .........
  b. Bottle Gas...............................  .........  .........  .........  .........  .........  .........
  c. Electric.................................  .........  .........  .........  .........  .........  .........
  d. Oil......................................  .........  .........  .........  .........  .........  .........
Water.........................................  .........  .........  .........  .........  .........  .........
Sewer.........................................  .........  .........  .........  .........  .........  .........
Trash Collection..............................  .........  .........  .........  .........  .........  .........
Other (specify)...............................  .........  .........  .........  .........  .........  .........
Total allowance...............................  .........  .........  .........  .........  .........  .........
(Round to next highest dollar)................  .........  .........  .........  .........  .........  .........
----------------------------------------------------------------------------------------------------------------

Prepared by:
Borrower or Agent
Title
Signature

[[Page 426]]

Date

Approved by Farmers Home Administration or its successor agency under 
Public Law 103-354

Name____________________________________________________________________
Title___________________________________________________________________
Signature_______________________________________________________________
Date____________________________________________________________________

                                 Part II

                                 Block A

To:_____________________________________________________________________
 Name of Tenant

________________________________________________________________________
Address of Tenant

No. of Bedrooms_________________________________________________________

    You will be billed directly for utilities and service charges. Block 
B sets forth the allowances credited in your rent for the payment of 
utilities. You may be billed for more or less than shown in Block B 
depending on your use of utilities

________________________________________________________________________
Signature of Borrower or Agent

________________________________________________________________________
 (Date)

                                 Block B

------------------------------------------------------------------------
Allowance for utilities and services billed directly to and paid    Per
                            by tenant                              month
------------------------------------------------------------------------
Heating.........................................................       $
Air Conditioning................................................  ......
Cooking.........................................................  ......
Other Electric..................................................  ......
Water Heating...................................................  ......
Water...........................................................  ......
Sewer...........................................................  ......
Trash Collection................................................  ......
Other (Specify).................................................  ......
Total (Round to next highest dollar)............................  ......
------------------------------------------------------------------------

Instructions for Preparation and Use of Housing Allowances for Utilities 
                        and Other Public Services

    I. General. These instructions are for completing exhibit A-5 for 
the establishment and use of approved utility allowances for tenants. 
The objective will be to establish allowances at levels that will apply 
to the majority of the households assigned to the specified size unit.
    II. Determining allowances.
    A. Existing construction. The borrower will provide information 
which shows the utility bills and fees for public services which have 
been charged to units in the project in previous years. If possible, 
this historical data should cover a period of at least 24 months and 
should show billings to all types and sizes of units in the project. If 
data is not available on the specific project, data from similar 
projects may be substituted. Consideration should be given to making 
proper adjustments in the data caused by some tenants' excessive use of 
utilities. Current rate schedules and known rate increases will be used 
to estimate utility allowances. The following local sources should be 
contacted as appropriate:
    1. Electric utility suppliers.
    2. Natural gas utility suppliers
    3. Water and sewer suppliers.
    4. Fuel oil and bottle gas suppliers.
    5. Public service commissions.
    6. Real estate and property management firms.
    7. State and local agencies including public housing authorities.
    In cases where a project uses a single meter for more than one 
living unit or where a single fuel supply or heating or cooling plant is 
used for more than one unit, the following factors will be used to 
determine the pro rata share of utility costs or public service fees per 
living unit:

------------------------------------------------------------------------
                         Size of unit                            Factor
------------------------------------------------------------------------
0-BR.........................................................        0.5
1-BR.........................................................        0.7
2-BR.........................................................        0.9
3-BR.........................................................        1.1
4-BR.........................................................        1.4
5-BR.........................................................        1.6
------------------------------------------------------------------------

    Example: An 8-plex structure containing four 1-bedroom apartments 
and four 2-bedroom apartments has an average annual consumption of 
42,000 kilowatt-hours of electricity. Allowance per unit is calculated 
as follows:

Four (one-bedroom) @ .7..........................................   =2.8
Four (two-bedroom) @ .9..........................................   =3.6
                                                                  ------
    Total........................................................    6.4
 

Total use total of factors ---- x cost per kilowatt-hour (kwh)-average 
billing (assume $.04 per kwh)
42,000/6.4x.04=262.50
unit factorxaverage billing=-unit allowance
(one bedroom)/.7x262.50=$183.75/yr.
(two bedroom)/.9x262.50=$236.25/yr.

    B. New construction. The applicant, with assistance from its 
architect, mechanical engineer or other heating and cooling system 
specialists, will provide heating and cooling load calculations for each 
type and size of unit. Heating and/or cooling costs will be calculated 
from these load factors using current rate schedules and known rate 
increases. Procedures described in the American Society of Heating, 
Refrigeration and Air Conditioning Engineers ``Handbook of 
Fundamentals,'' the National Association of Homebuilders ``Insulation 
Manual Home, Apartments,'' or other recognized authority may be used.
    General appliance and lighting loads and fees for public services 
should be estimated using data from the local utility companies

[[Page 427]]

and from other sources listed in paragraph II A above.
    C. Type of allowance.
    1. Separate heating and cooling allowances will be estimated for the 
various types of multiple family housing financed by FmHA or its 
successor agency under Public Law 103-354 in the project. For example, 
separate allowances may be needed for duplexes, row or townhouses, or 
for garden and low and medium rise apartments. In addition to 
establishing different heating and cooling allowances for various types 
of structures, attention should be given to different allowances for 
water depending on whether the tenants will have responsibility for lawn 
care.
    2. Allowances for air-conditioning will be established only for 
projects in which the owner furnishes a central air-conditioning system 
or other type unit as a part of the permanent equipment.
    3. The cost of gas and electricity varies according to amounts 
consumed as shown on the appropriate rate schedules of the supplier. It 
is not possible to compute exactly the cost of electricity for any given 
function without knowing the total electrical usage for a unit. However, 
because neither the borrower nor the tenants know beforehand what the 
combination of utilities for any unit rented will be, it will be 
necessary to approximate the allowances for each function (e.g., 
heating, cooking, etc.) as follows: For electricity, the rates used for 
lighting, refrigeration and appliances should be from the top of the 
rate schedule or the higher unit costs. Allowances for electric cooling, 
water heating and space heating should be computed from the middle or 
lower steps in the rate schedules. Similarly, allowances for gas used 
for water heating and cooking should be computed using rates from the 
top of the rate schedule and for heating from the lower steps.
    III. Preparation by borrower or applicant.
    A. Applicable projects. Except for projects operating on a profit 
basis, exhibit A-5 will be completed in an original and three copies in 
all instances where the tenants pay utilities or authorized services 
directly. When the borrower pays all utilities, part I of exhibit A-5 
may also be required as part of the budget submitted for any new project 
if the loan approval official determines it is needed to properly 
evaluate projected utility costs. This form will establish the 
allowances for all size units in the project. The allowances will be 
adequate for all utilities and any authorized services which are or will 
be payable directly by the tenants, except telephone and cable TV. The 
forms will be signed by the borrower. The original and two copies of the 
form will be submitted to FmHA or its successor agency under Public Law 
103-354. Backup data and necessary documentation should be included with 
the submission.
    B. Submission of supporting data to FmHA or its successor agency 
under Public Law 103-354. The applicant will submit to FmHA or its 
successor agency under Public Law 103-354 adequate data to justify the 
utility allowances for the project. The data will include the following:
    1. Completed exhibit A-5.
    2. List of local sources contacted for information and copies of any 
data provided by such sources.
    3. Any data on allowances already established for the area.
    4. Complete narrative statement and computations on method used in 
arriving at the allowances.
    IV. Actions by FmHA or its successor agency under Public Law 103-
354. If FmHA or its successor agency under Public Law 103-354 finds the 
allowances acceptable, the approval portion of part I will be completed. 
The servicing official will keep a copy for the servicing office file 
and return the original to the borrower. If the proposed utility 
allowance is unacceptable, the borrower will be requested to revise the 
data and resubmit it for further consideration.
    V. Subsequent action by borrower. After approval by FmHA or its 
successor agency under Public Law 103-354, the borrower will complete 
part II of exhibit A-5 and provide copies for each tenant paying 
utilities directly by attaching it to the lease entered into by the 
borrower and tenant. The form will provide the household with the amount 
of allowance for each utility and service which is to be paid by the 
tenant. If all utilities and services are paid by the borrower, exhibit 
A-5 need not be attached to the lease.

[53 FR 2159, Jan. 26, 1988. Redesignated at 56 FR 2245, Jan. 22, 1991; 
56 FR 65985, Dec. 20, 1991; 58 FR 40954, July 30, 1993; 59 FR 6896-6897, 
Feb. 14, 1994]

Exhibit A-7 to Subpart E of Part 1944--Information To Be Submitted With 
 a Loan Request for a Rural Rental Housing (RRH) or a Rural Cooperative 
                           Housing (RCH) Loan

    The following information is to be submitted with SF 424.2:
    I. Eligibility.
    A. Financial Statements for Rental Projects--Each applicant must 
submit a current, signed, and dated financial statement. The financial 
statement must reflect sufficient financial capacity to meet the 
applicant's equity capital and initial operating capital requirements. 
Applicants may contribute cash, free and clear title to the building 
site, or a combination of both as an equity contribution. The initial 
operating capital must be furnished in cash.

[[Page 428]]

    (1) For a corporation (other than a nonprofit corporation) or a 
trust, financial statements will be required from each member, 
stockholder or beneficiary who holds an interest in the organization in 
excess of 10 percent.
    (2) For a partnership, financial statements will be required from 
each general partner who holds an interest in the organization.
    (3) A financial statement will be required for limited partners in a 
limited partnership who will have 10 percent or more ownership.
    (4) For applicants that are not legally organized at the time of 
filing the loan request, financial statements will be required from all 
of the proposed parties in proportion to the proposed ownership interest 
of each part. However, the applicant must be legally organized prior to 
loan approval and must submit financial statements.
    (5) For cases in which financial statements are required from an 
individual, the financial statements must also include the financial 
interest and signature of the spouse.
    (6) When the applicant and/or general partner(s) have multiple 
applications pending and/or when the State Director is uncertain of the 
applicant's ability to provide the necessary borrower contribution 
required by Sec. 1944.213 (b) of this subpart, 2 percent initial 
capital contribution and/or other assets needed for a sound loan, the 
State Director may request the applicant to submit additional financial 
information relative to its financial position.
    (7) All financial statements submitted must contain the following 
statement immediately preceding the signature line:
    (A) In new projects in which the loan has not been closed:
    I/we certify the above is a true and accurate reflection of my/our 
financial condition as of the date stated herein. This statement is 
given for the purpose of inducing the United States of America to make a 
loan or to enable the United States of America to make a determination 
of continued eligibility of the applicant for a loan as requested in the 
loan application of which this statement is a part.
    (B) For projects in which the loan has been closed and the applicant 
has been formed:
    I/we certify the above is a true and accurate reflection of my/our 
financial condition as of the date stated herein. This statement is 
given for the purpose of enabling the United States of America to make a 
determination of continued eligibility of the borrower organization for 
a loan as requested in the application of which this statement is a 
part.
    B. Financial Statements for Cooperative Members--Each prospective 
member must provide a statement of monthly income and expenses showing 
the repayment of debts and whether those payments are current. The 
statement must indicate that the person will have the financial ability 
to meet the monthly occupancy rate requirement, while still meeting 
other monetary obligations. FmHA Form 1944-38, ``Application for 
Cooperative Housing Assistance,'' may be used for this purpose. (See FMI 
for preparation instructions.)
    C. The names and addresses of persons who have expressed an interest 
in becoming members of the cooperative. Signature and date evidencing 
this interest from each person will be obtained to fully document the 
need for the cooperative housing. This certification should contain a 
statement that the prospective member understands the cooperative type 
of organization and the time and effort each member must spend in its 
operating and maintenance.
    D. For all cooperative projects containing over four units, the 
applicant must submit an Affirmative Fair Housing Marketing Plan for 
approval in accordance with Sec. 1901.203 of subpart E to part 1901 of 
this chapter. The plan must be prepared in a complete, meaningful, 
responsive and detailed manner.
    E. Evidence Concerning the Test for Other Credit--Applicants must be 
unable to obtain other credit at rates and terms that will allow a unit 
rent or occupancy charge within the payment ability of the occupants. 
Based upon a review of the applicant's financial condition, the 
servicing official may require the applicant to provide documentation 
regarding the availability of other credit.
    F. Statement of applicant's experience in operating rental housing 
and related business, including a statement on the proposed method of 
operation and management.
    G. For an Organization Applicant--A copy of, or an accurate citation 
to, the specific provisions of State law under which the applicant is, 
or is to be organized; a certified copy of the applicant's actual, or a 
copy of the applicant's proposed charter, articles of incorporation, 
bylaws, partnership agreement, certification of limited partnership, or 
other basic authorizing documents; the names and addresses of the 
applicant's members, directors and officers; and, if a member of a 
subsidiary of another organization, its name, address, and principal 
business, if available.
    H. Farmers Home Administration (FmHA) or its successor agency under 
Public Law 103-354 requires that applicants disclose identities of 
interest that will exist in the development of the proposed housing. 
Forms FmHA 1944-30, ``Identity of Interest (IOI) Disclosure 
Certificate,'' and 1944-31, ``Identity of Interest (IOI) Qualification 
Form,'' (available in any FmHA or its successor agency under Public Law 
103-354 office) will be completed and submitted as part of the loan 
request package.
    I. The social security or tax identification number will be required 
in all cases. The loan will be denied for refusal to furnish the

[[Page 429]]

required social security or tax identification number.
    (1) In the case of an individual, the social security number of the 
applicant must be provided. The spouse's social security number must 
also be provided when they have joint responsibility for the loan.
    (2) In the case of a partnership, the tax identification number of 
the partnership must be provided if available and also the social 
security numbers of all the general partners and their spouses.
    (3) In the case of a limited partnership, the tax identification 
number of the limited partnership is required. The social security 
number of all the general partners and their spouses should be secured 
if possible.
    (4) In the case of a company, corporation or nonprofit organization, 
the tax identification number of the organization is required. The 
social security number of the officers should be secured if possible.
    (5) If an organization does not have a tax identification number, 
the social security number of one of the officers must be used.
    J. All known principals and affiliates are required to submit a 
properly completed Form HUD 2530/FmHA 1944-37, ``Previous Participation 
Certification.'' Architects and attorneys who have any interest in the 
project other than an arms length fee arrangement for professional 
services are also considered principals. The form will be completed and 
processed according to the instructions attached to the form.
    II. Need and demand.
    A. Economic justification, the number of units, and the type of 
facility (family, elderly, congregate, mixed, group home, or 
cooperative) will be based on the housing need and demand of eligible 
prospective tenants or members who are permanent residents of the 
community and its surrounding trade area. Since the intent of the 
program is to provide housing for the eligible permanent residents of 
the community, temporary residents of a community (such as college 
students in a college town, military personnel stationed at a military 
installation within the trade area, or others not claiming their current 
residence as their legal domicile) may not be included in determining 
need and project size. Similarly, homeowners may not be included in 
determining need and project size. The market study must include a 
discussion of the current market for single family houses and how sales, 
or the lack of sales, will affect the demand for elderly rental units. 
The market study may discuss how elderly homeowners may reinforce the 
need for rental housing, but only as a secondary market and not as the 
primary market. The market study must assess need and demand for both 
family and elderly renter households. The conclusions of the market 
study must be provided to the community by the applicant, through direct 
contact with community officials whenever possible. The type of complex 
(family, elderly, etc.) that is proposed by the applicant must reflect 
the greater proportionate need and demand of the community, that is, the 
share or percentage of the community's total rental units that are 
designated for the elderly will be compared to the community's share of 
elderly households, and the share of total rental units for families 
will be compared to the share of family households in the community. 
(For mixed complexes, the unit mix must reflect the proportionate need 
of each household type.) In unusual circumstances, where there is a 
compelling need for a complex type that does not represent the greater 
proportionate need (i.e., family vs. elderly need), the State Director 
may consider granting an exception to this requirement. At least one of 
the following conditions must be met in order to consider an exception: 
the community's or State's housing plan indicates that the greater 
immediate need is for the complex type of the smaller proportionate need 
and the plan includes a specific proposal to address the housing needs 
of the other household type; the complex has the support of a public 
community forum represented by diverse interests; or the units are 
needed due to an emergency or hardship situation, for example, a loss of 
housing caused by a natural disaster. The circumstances for the 
exception must be documented in the casefile. The bedroom mix of the 
proposed units must reflect the need in the market area based on renter 
household size and the bedroom mix of existing units. Market feasibility 
for the proposed units will be determined by RHS based on the market 
information provided by the applicant (requirements are described in 
section II.E. of this exhibit), RHS' knowledge of the market area and 
judgment concerning the need for new units, RHS' experience with the 
housing market in the State and local area, and the U.S. Department of 
Housing and Urban Development's (HUD's) or similar lender's analysis of 
market feasibility for the proposed units.
    B. The applicant must provide a schedule of the proposed rental or 
occupancy rates and, for congregate housing proposals, a separate 
schedule listing the proposed cost of any nonshelter service to be 
provided.
    C. For proposals where the applicant is requesting Low-Income 
Housing Tax Credits (LIHTC), the applicant must provide the number of 
LIHTC units and the maximum LIHTC incomes and rents by unit size. This 
information will determine the levels of incomes in the market area 
which will support the basic rents while also qualifying the borrower 
for tax credits.

[[Page 430]]

    D. For Rural Cooperative Housing (RCH) proposals, market feasibility 
will be evidenced by the names and addresses of prospective members who 
have definitely affirmed their intention of becoming cooperative members 
in the proposed project. In the event some persons cannot be accepted 
for membership for financial or other reasons, the cooperative should 
obtain more names than the number of proposed units in order to assure 
adequate feasibility coverage. Exhibit A-4 of this subpart contains a 
Cooperative Housing Survey form which may be used for this purpose.
    E. For Rural Rental Housing (RRH) proposals, except as permitted by 
section II. G. of this exhibit, a professional market study is required. 
The qualifications of the person preparing the market study should 
include some housing or demographic experience. The following 
requirements apply:
    (1) A table of contents, the analyst's statement of qualifications, 
and a certification of the accuracy of the study must be included.
    (2) Market analysts must affirm that they will receive no fees which 
are contingent upon approval of the project by RHS, before or after the 
fact, and that they will have no interest in the housing project. An 
analyst with an identity of interest with the developer will need to 
fully disclose the nature of the identity.
    (3) The analyst must personally visit the market area and project 
site and must certify to same in the market study. Failure to do so may 
result in the denial of further participation by the analyst in the 
Section 515 program.
    (4) A detailed study based upon data obtained from census reports, 
state or county data centers, individual employers, industrial 
directories, and other sources of local economic and housing information 
such as newspapers, realtors, apartment owners and managers, community 
groups, and chambers of commerce is required. Exhibit A-8 of this 
subpart details the specific information which professional market 
studies are required to provide. The study must be presented in clear, 
understandable language. Negative as well as positive market trends must 
be disclosed and discussed. Statistical data must be accompanied by 
analytical text which explains the data and its significance to the 
proposed housing. Mathematical calculations must be expressed in actual 
numbers and may be accompanied by percentages. Each table or section 
must identify the source of the data. A brief statement of the 
methodology used in the study should be included in the foreword and in 
other sections where necessary for clarity. RHS personnel will utilize 
the market study checklist found at exhibit A-12 of this subpart 
(available in any Rural Development office) as a means of measuring 
market study credibility.
    (5) The market study will include:
    a. A complete description of the proposed site and its location with 
respect to city boundary lines, residential developments, employment 
centers, and transportation; the location and description of available 
services and facilities and their distances from the site; a discussion 
of the site's desirability and marketability based on its location in 
the community, adjacent land uses, traffic conditions, air or noise 
pollution, and the location of competitive housing units; and a 
description of the site in terms of its size, accessibility, and 
terrain.
    b. Pertinent employment data, including the name and location of 
each major employer within the community and market area, its product or 
service, number of employees and salary range, commute times and 
distances, and the year the employer was established at the location. If 
income data cannot be obtained from individual employers, salary 
information for the community can be obtained from the state employment 
commission.
    c. Population data required by exhibit A-8 of this subpart, 
including population figures by year, number and percentage of increase 
or decrease, and population characteristics by age.
    d. Household data required by exhibit A-8 of this subpart, including 
number of households by year, tenure (owner or renter), age, income 
groups, and number of persons per household.
    e. Building permits issued and demolitions by year by single unit 
dwelling and multiple unit dwelling. In nonreporting jurisdictions, this 
information may be substituted with the number of requests for electric 
service connections, number of water or sewer hookups, etc., obtained 
from local suppliers.
    f. Housing stock by tenure and vacancy rates for total number of 
units, one-unit buildings, two- or more-unit buildings, mobile homes, 
and number lacking some or all plumbing facilities.
    g. A survey of existing rental housing by name, location, year 
built, number of units, amenities, bedroom mix, type (family, elderly, 
etc.), rental rates, and rental subsidies if any.
    h. A projection of housing need and demand and the analyst's 
recommendation for the number, type, and size of units, based on the 
number of RHS and LIHTC income-eligible renter households, the existing 
comparable housing supply and vacancy rates, the absorption rate of 
recently completed units, the number of comparable units currently 
proposed or under construction, and current and projected economic 
conditions.
    F. For congregate housing proposals with central dining area or 
housing involving a group living arrangement, a narrative statement from 
local, state, or federal government agencies supporting the current and

[[Page 431]]

long-range need for the facilities in the community and its trade area 
is required.
    G. For RRH proposals of 12 or fewer units, the State Director may 
authorize the use of a market survey to establish market feasibility on 
a case-by-case basis. This authority may be used when there is evidence 
of strong market demand, for example, very low vacancy rates and long 
waiting lists in existing assisted or comparable rental units. The 
casefile must be documented accordingly. Exhibits A-2, A-3, and A-5 of 
this subpart may be used for the market survey.
    III. Site.
    A. Size of tract and a plot map identifying its boundaries.
    B. A map showing the location and other supporting information on 
the neighborhood and existing facilities, such as distance to shopping 
areas, churches, schools, available transportation, drainage, 
santitation facilities, water supply and access to essential services 
such as doctors, dentists, pharmacies and hospitals. The map should also 
show significant features such as main highways, railroads, rivers and 
lakes. The use of property surrounding the site should also be 
indicated.
    C. The applicant will provide evidence of having control of the 
proposed site either by ownership or by executing an option to buy with 
the current owner of public record.
    D. Appropriate zoning or evidence of capability to be appropriately 
zoned.
    IV. General description of the housing planned. A brief narrative 
description of the housing planned should include the following items:
    A. The type of project and structures proposed, such as garden 
apartments for elderly and handicapped persons; townhouses for low- and 
moderate-income persons; congregate housing for senior citizens and 
handicapped persons, or housing designed for cooperative living.
    B. The size of each type of rental unit measured in square feet of 
living area.
    C. The size and type of other facilities to be included in the 
project, such as laundry rooms, storage spaces, etc., and a 
justification for any related facilities to be financed wholly or in 
part by RHS funds.
    D. The total number of units and the number of each type of unit 
proposed.
    E. The type of construction proposed and the method of construction, 
i.e., owner/builder, negotiated bid or public bid.
    F. A detailed cost breakdown of the project on Form FmHA or its 
successor agency under Public Law 103-354 1924-13, ``Estimate and 
Certificate of Actual Cost,'' will be prepared and submitted by all 
applicants. In addition to completing the individual line items, the 
cost of items such as rights-of-way, equipment, and utility connections 
must be included and identified with the Form FmHA or its successor 
agency under Public Law 103-354 1924-13. Off-site improvements and the 
method of prorating the cost between eligible and noneligible loan items 
must be provided with the Form FmHA or its successor agency under Public 
Law 103-354 1924-13. The cost breakdown must also separately show items 
not included in the loan, such as furnishings, equipment, and the 
noneligible off-site improvements. The trade item cost breakdowns must 
be updated just prior to loan approval.
    G. Type of utilities such as water, sewer, gas and electricity and 
whether each is publicly, community or individually owned.
    H. The comments and recommendations of any professional consultants 
regarding on- or off-site conditions that could affect the proposed 
project should be submitted, if available. Any comments addressing an 
adverse condition should include recommended corrective actions. Any 
special regulation waivers or variances that may be necessary should 
also be identified.
    I. Schematic design drawings should be included with the narrative 
description and contain, as a minimum:
    (1) Site plan, including significant ground contour lines.
    (2) Floor plans of each living unit type and other type spaces.
    (3) Building exterior elevations.
    (4) Typical building exterior wall section.
    J. A plot plan showing the relationship of the proposed structures, 
the property lines, streets, utility lines, alleys and adjacent 
structures and their uses. It should also show proposed off-street 
parking for the tenants or members and their visitors. Other facilities, 
such as private and public walks, private drives and recreation areas on 
and off the property, laundry drying areas, and garbage and refuse 
holding areas which are sufficient for the period between collections in 
the neighborhood should be shown.
    V. The applicant must submit a signed statement agreeing to pay cost 
overruns from its own resources.
    VI. Form RD 1940-20, ``Request for Environmental Information.''
    VII. Disclosures by Applicants.
    (A) Applicants will submit information regarding any other 
government assistance as defined in Sec. 1944.205 of this subpart from 
the Federal Government, a State, or a unit of general local government, 
or any agency or instrumentality thereof, that is expected to be made 
available with respect to the project for which the applicant is 
seeking.
    (B) The applicant will submit the names of any interested parties as 
defined in Sec. 1944.205 of this subpart.
    (C) The applicant will also submit a report detailing the expected 
sources and uses of funds that are to be made available for the project.
    (D) The disclosures required in paragraphs (A)-(C) will be updated 
within 30 days of any

[[Page 432]]

substantial change during the period of the application process.

    VIII. For congregate housing proposals. Applicants must submit 
information on the services to be provided in accordance with exhibit E 
of this subpart.

[53 FR 2159, Jan. 26, 1988, as amended at 53 FR 7492, Mar. 9, 1988; 53 
FR 36268, Sept. 19, 1988; 54 FR 14337, Apr. 11, 1989; 55 FR 13503, Apr. 
11, 1990; 55 FR 26647, June 29, 1990; 55 FR 29558, and 29562, July 20, 
1990. Redesignated and amended at 56 FR 2245, 2246, Jan. 22, 1991; 56 FR 
65985, Dec. 20, 1991; 59 FR 6891, Feb. 14, 1994; 62 FR 25065, 25070, 
25076, May 7, 1997; 62 FR 67223, Dec. 23, 1997]

 Exhibit A-8 to Subpart E of Part 1944--Outline of Professional Market 
                                  Study

    Market studies which do not address all segments of this outline 
will not be considered acceptable and may adversely affect the 
processing of pre applications. Preapplications with unacceptable market 
studies may be returned, deferred, or rejected, as determined 
appropriate by the servicing office.
    The following information is to be used by analysts in the 
preparation of market studies for the Section 515 housing program. It 
generally contains the type and depth of information which Farmers Home 
Administration (FmHA) or its successor agency under Public Law 103-354 
requires for evaluating the feasibility of prospective housing 
developments. The analyst will be expected to provide sufficient 
quantitative data (such as census tables), primary data (such as survey 
of existing comparables), and qualitative data (such as local contacts 
in the community) to support the conclusions reached. The analyst may 
present any other discussions and/or data which will help support the 
complete analysis of the market.
    The outline provides for the demonstration of historical trends and 
allows the analyst to project into the 2 years beyond the last actual 
year of record. Additional guidance is offered in individual segments of 
the outline. You will need to provide a statement of your experience and 
why you think you are qualified to prepare such a study.
    Determination of need and demand will be derived for prospective 
rental tenants only from: (1) Persons migrating into the area, (2) 
persons dwelling in family units who desire to move into their own units 
(elderly living with family members will only be considered if evidence 
of their interest in moving into the project is furnished with the 
market study), (3) conservative estimate (not to exceed 20 percent) of 
households living in substandard rental housing, (4) demolition of 
rental stock, (5) allowance for a 5 percent vacancy rate, and (6) 
conservative estimate (not to exceed 20 percent) of households 
experiencing rent overburden provided the analyst has made a 
determination there are sufficient households in the market area to 
occupy any rental units vacated by those lower income persons who choose 
to move into the proposed project from the existing units. Substandard 
is defined as (1) Units lacking complete plumbing and (2) overcrowded 
(1.01 or more persons per room).
    For proposed congregate projects, the analyst will be responsible 
for researching the current need for, and usage of, services in the 
market area. The types of services being used, the provider of the 
services, and their location will be included.
    Homeowners will not be included in the determination of need and 
demand for rental units. The analyst will discuss the current market for 
single family houses and how sales, or the lack of, will affect the 
demand for elderly rental units. If the economic conditions reflect a 
trend toward normal selling times for houses in the market area, then 
the discussion should point to how elderly homeowners may reinforce the 
need, but only as a secondary market and not as the primary market.
    A statement, with signature, certifying that the analyst (including 
an individual under contract to the analyst's company) actually traveled 
to and physically surveyed the community where the proposed project will 
be located is also required.

                         I. Market Area--General

    The market area will be the community where the project will be 
located and only those outlying rural areas which will be impacted by 
the project (excluding all other established communities). Except in 
specific cases of congregate housing projects where an expanded market 
may be justified, the market area will not include the entire county (or 
parish, township, or other subdivision). Any deviation from this 
definition must be coordinated with the servicing office. The market 
area must be realistic. The criteria for selection should be described 
by the analyst. A map showing the market area will be required. The 
following is an example of a market area description:
    A. Based on an analysis of population and housing development 
patterns, major employers and commuting patterns, the effective market 
area for the subject proposal is defined to include all of (Name), 35 
percent of (Name) and 25 percent of (Name) census divisions. This area 
is shown on Map 2 following Table 4 (page 11) in Section II of this 
report. In 1980, this geographic market area contained an estimated 
6,350 persons (6.1 percent of the county total of 103,829 persons). 
During the 1970's decade, the overall market area experienced growth of 
1,253 persons (representing 13.5 percent of total gains in the county). 
In 1990, the (Name) market area population of 7,603 represented 6.7 
percent of

[[Page 433]]

the county population of 113,086. (See Table 4 and Map 2 in Section II 
for details.)
    B. The effective market area for the subject proposal includes the 
town of (Name) and a portion of the unincorporated areas to the east and 
south. The (Name) River forms a natural barrier restricting development 
to the west. Housing development and population growth have occurred 
along major transportation corridors, particularly Interstate 81 and 
U.S. 11 between (Name) and (Name). Secondary growth has occurred along 
State Roads 63 and 68 to the northwest and southeast of (Name). The 
Interstate Industrial Park, with 16 employers providing 999 jobs, is 
centrally located within the market area.

                                II. Site

    This section will contain a full description of the site, its 
position in the community and location with respect to residential 
support services.
    A. The proposed site is located in the eastern section of (Town) on 
(Major Thoroughfare). The area surrounding the site is predominantly 
comprised of modest single family dwellings. The terrain is gently 
sloped, with grass, oak trees, and some shrubs.
    B. The site is currently zoned for commercial business and is 
currently owned by a local car dealer.
    C. The site is approximately .3 mile east of the heart of town which 
contains a grocery store, drugstore, restaurants, banking facilities, 
the post office, and town hall. Other shopping is available .2 mile 
south at (Town) Plaza.
    D. The medical clinic, which provides services of an osteopath, X-
ray technician, a physician's assistant, and a nurse, is approximately 
.8 mile north of this site. This clinic is open daily and also provides 
24-hour emergency service. The nearest hospitals are (Large Town) and 
(Town).
    E. All public services are available at the site.
    F. Photographs of the site are required.
    G. Communities suitable for multi-family projects may have certain 
smaller businesses necessary for the day-to-day living convenience of 
the tenants and to supplement the employment base. For example, these 
may include, but not be limited to, pharmacy, restaurants and fast food 
establishments, grocery and department stores, hardware and sundries, 
etc. A representative number of these businesses are to be listed (by 
name) and location with respect to the proposed site.
Name of business and street address

________________________________________________________________________

________________________________________________________________________

________________________________________________________________________

                    III. Demographic Characteristics

    A. Economic profile.
    1. Labor force and employment trends between 1980 and the present 
year. This will provide current year estimates and projected changes at 
the county level.
    Civilian Labor Force and Employment Trends and Forecasts, ----------
---- County, 1980-19----

------------------------------------------------------------------------
                                                  1990   19--\1\   19--
------------------------------------------------------------------------
Civilian Labor Force \2\.......................
  Unemployment.................................
    Rate of Unemployment.......................
  Employment...................................
Change in Total Employment.....................
------------------------------------------------------------------------


Number__________________________________________________________________

                                 Percent

------------------------------------------------------------------------
                                           Total  Annual   Total  Annual
------------------------------------------------------------------------
1980-1990...............................
1990-19--...............................
19---19-- (2-year projection)...........
------------------------------------------------------------------------
\1\ Preliminary--based on monthly data through ----------.
\2\ Data based on place of residence.

                                 Source

    2. Employment data. In order to determine how employment affects the 
market area, it will be necessary to show the number of employed persons 
for a 3-year period up to the current year, the increase and/or decrease 
and the percentage of unemployed at the county level. The employment 
figures can be obtained from the State Employment Commission.

                                 Example

County__________________________________________________________________

------------------------------------------------------------------------
                                                            Unemployment
                  Year                     Number   Change        %
------------------------------------------------------------------------
19--....................................
19--....................................
19--....................................
19-- (through current year).............
------------------------------------------------------------------------

                                 Source

    3. Major employers. This section will contain information pertinent 
to an analysis of the economic stability of the town. The major 
employers within the town and market area, the product or service 
offered by each employer, location of employer, and year each employer 
was established are types of data FmHA or its successor agency under 
Public Law 103-354 will need to evaluate. It is also important to know 
if the larger employers intend to increase or decrease

[[Page 434]]

number of employees in the immediate future or if there have been any 
significant recent changes in number of employees.

                                 Example

----------------------------------------------------------------------------------------------------------------
                                                                                                         Year
                 Employer                        Product/Service                  Location           Established
----------------------------------------------------------------------------------------------------------------
Washington Aircraft......................   Crop Dusting..............  Town.......................       1957
----------------------------------------------------------------------------------------------------------------

    In addition, the study will include the number of employees and 
average weekly salary listed in the place of work employment data for 
the classification groups of manufacturing; construction; trade; 
services; transportation, communications, and utilities (TCU); finance, 
insurance, and real estate (FIRE); and government.
    4. Employment outside of county. The analyst will give the 
percentage of persons employed inside the county and driving times, if 
appropriate.

                                 Source

    B. Demographic profile.
    1. Population. The analyst will need to show population changes 
between 1980 and 1990, the reasons for the changes, the current year 
estimate and projected change. This information will be provided for the 
town, the market area, and the county. Any change in the County 
subdivisions (CCD, Township, Election District, etc.) between census 
years will have to be explained. These are to be shown in numeric 
characters as well as percentages.

                                 Example

------------------------------------------------------------------------
                                           Total               Annual
              Year              ----------------------------------------
                                     No.       Change   %    Change   %
------------------------------------------------------------------------
1980...........................
1990...........................
19-- (current estimate)........
------------------------------------------------------------------------
Projected: 19-- (2 years)

    2. Age characteristics.

------------------------------------------------------------------------
                         Town, 1980-1990           County, 1980-1990
        Age        -----------------------------------------------------
                      1980     1990    Change    1980     1990    Change
------------------------------------------------------------------------
Under 18..........
19-34.............
35-54.............
55-61.............
62-74.............
75-84.............
85+...............
------------------------------------------------------------------------

    3. Households. A breakdown by town, market area, and county for last 
2 census years, a current year estimate and a projection to the year the 
housing would be built (24 months) will have to be illustrated so that 
household formations can be tracked. This data will tell us what portion 
of a housing demand is being created by an increase in numbers of new 
households.

----------------------------------------------------------------------------------------------------------------
                                                           In group
              Year*               ---------------------------------------------------------      Persons per
                                       Population          Quarters          Households           household
----------------------------------------------------------------------------------------------------------------
1980.............................
1990.............................
19--.............................
----------------------------------------------------------------------------------------------------------------
Projected: 19-- (2 years)

    4. Households by Size/Type/Age of Members (elderly and congregate 
projects).

------------------------------------------------------------------------
                                                          Market
                                                 -----------------------
                                                   Town   Area   County
------------------------------------------------------------------------
Households with:
1 or more age 60 years and over.................
  1 person household............................
  2 or more persons (family)....................
  2 or more persons (nonfamily).................
1 or more age 65 and over.......................
  1 person household............................
  2 or more persons (family)....................
  2 or more persons (nonfamily).................
------------------------------------------------------------------------

    5. Household type and relationship--Persons 65+ (elderly and 
congregate projects).

[[Page 435]]



------------------------------------------------------------------------
                                                          Market
                                                 -----------------------
                                                   Town   Area   County
------------------------------------------------------------------------
Total...........................................
  In Households.................................
  In Family Households..........................
    Householder.................................
    Spouse......................................
    Other Relatives.............................
    Nonrelatives................................
  In Nonfamily Households.......................
    Male Householder............................
    Living Alone................................
    Not Living Alone............................
    Female Householder..........................
    Living Alone................................
    Not Living Alone............................
    Nonrelatives................................
  In Group Quarters.............................
    Institution (persons).......................
    Other Persons in Group Quarters.............
------------------------------------------------------------------------

    6. Households by tenure. This section is one of the more important 
aspects of the market analysis. This information will enable FmHA or its 
successor agency under Public Law 103-354 to more closely pinpoint the 
number of households which would comprise the target group of its 
evaluation. If the projected percentage of renters exceeds the historic 
percentage of renters, the analyst will have to explain why there is an 
increase. The information will be provided for town, market area, and 
county.

                                 Example

----------------------------------------------------------------------------------------------------------------
                                    Total
             Year                households         Owner          Percent         Renter           Percent
----------------------------------------------------------------------------------------------------------------
1980.........................
1990.........................
Estimate: 19 --..............
Projected: 19 -- (2 years)...
----------------------------------------------------------------------------------------------------------------

    7. Households by size. The study will provide number of households 
by household size for the town, market area, and county.
    8. Tenure by age. Tenure by age of householder for town, market 
area, and county (elderly and congregate projects).

------------------------------------------------------------------------
                                      Owner        Renter       Total
------------------------------------------------------------------------
55-64...........................
65-74...........................
75 years +......................
------------------------------------------------------------------------

    9. Households by income group. With the advent of Low Income Housing 
Tax Credits (LIHTC), we have found that more emphasis must be placed on 
analyzing persons whose incomes qualify for LIHTC. This means families 
who earn 60 percent or less of the median income as established by the 
U. S. Department of Housing and Urban Development (HUD). Therefore, 
feasibility for projects expecting to receive tax credits will also be 
based on the incomes required to support the tax credits. This could 
mean a level of incomes either slightly lower or higher than FmHA or its 
successor agency under Public Law 103-354 very low-incomes. For those 
tax credit units occupied by low-income families, the monthly gross rent 
cannot exceed 30 percent of the family income. Gross rent includes 
utilities, but excludes payments of rental assistance by Federal, State, 
and local entities. The applicant will be responsible for notifying FmHA 
or its successor agency under Public Law 103-354 and the market analyst 
of the amount of tax credits being requested, the income percentage on 
which the credits will be based, and the percentage of project units 
targeted for tax credit eligible persons. In those cases where less than 
100 percent of the units will be designated for tax credit eligible 
persons, the incomes needed to support the non-LIHTC units will need to 
be analyzed. Income data will be shown for total and renter households. 
This information will be presented as follows: (It is recommended that 
decile distribution of incomes be obtained from HUD. Other sources are 
acceptable and must be identified.)
Incomes Needed to Support Proposed Rents + Utilities (without LIHTC):

------------------------------------------------------------------------
    1-Bedroom          2-Bedroom          3-Bedroom         4-Bedroom
------------------------------------------------------------------------
$------            $------            $------           $------
------------------------------------------------------------------------

Number of Tax Credit Units Requested for Project:
________________________________________________________________________
Percentage of Units to be Designated for Tax Credit Eligible Persons:
-------- ------ ------ ------
Tax Credit Eligible Incomes: (based on 50% [ ] or 60% [ ] of income)
$------ $------ $------ $------
Tax Credit Eligible Rents:
$------ $------ $------ $------
Proposed Project Rents:
$------ $------ $------ $------

                           Town or Market Area

[[Page 436]]



----------------------------------------------------------------------------------------------------------------
                                               All households                        Renter households
     Household income groups      ------------------------------------------------------------------------------
                                         Number              Percent             Number             Percent
----------------------------------------------------------------------------------------------------------------
Less than $000...................
$000-$000........................
$000-$000........................
$000-$000........................
$000-$000........................
    Total........................
    Median.......................
Elderly Household Income Groups:
Less than $......................
$000-$000........................
$000-$000........................
$000-$000........................
$000-$000........................
    Total........................
----------------------------------------------------------------------------------------------------------------

    Incomes of those eligible to live in the proposed project, 
considering tax credits and availability of rental assistance (RA):
$000-$000
$000-$000

                                 Source

                                 County

----------------------------------------------------------------------------------------------------------------
                                               All households                        Renter households
     Household income groups      ------------------------------------------------------------------------------
                                         Number              Percent             Number             Percent
----------------------------------------------------------------------------------------------------------------
Less than $000...................
$000-$000........................
$000-$000........................
$000-$000........................
$000-$000........................
    Total........................
    Median.......................
Elderly Household Income Groups:
Less than $......................
$000-$000........................
$000-$000........................
$000-$000........................
$000-$000........................
    Total........................
----------------------------------------------------------------------------------------------------------------

    Incomes of those eligible to live in the proposed project, 
considering tax credits and availability of RA:
$000-$000
$000-$000

                                 Source

                        C. Housing supply profile

    1. Building permits issued for the last 10 years. The Housing Units 
Authorized by Building Permits and Public Contracts (C-40 Construction 
Report), furnished by the Bureau of the Census, provides a list of 
permits issued in all reporting jurisdictions. This publication is 
printed monthly and annually. If available, the number of units which 
have been demolished over the last 5 years will be needed.

                                 Example

----------------------------------------------------------------------------------------------------------------
                                                 Town                                     County
                              ----------------------------------------------------------------------------------
             Year                 Single                                    Single
                                  family      Multifamily     Demol.        family      MultiFamily     Demol.
----------------------------------------------------------------------------------------------------------------
19------.....................
19------.....................
19------.....................
19------.....................
    Through current year.....
----------------------------------------------------------------------------------------------------------------


[[Page 437]]

    2. Housing stock. The study must include the number of units within 
the town and county (where available), both single family and multi-
family, the number of mobile homes by tenure, along with the number of 
substandard units by tenure, based on the most recent census data. 
Occasionally, a situation will exist within a community where a number 
of detached single family homes are standing vacant. How this condition 
may affect the rental market must be evaluated and discussed.

                                 Example

                        Inventory Change Profile

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                       Mobile home
                                             Single family                 Multifamily         ---------------------------------------------------------
                                                                                                            Own                          Rent
--------------------------------------------------------------------------------------------------------------------------------------------------------
1980 Stock..........................  ...........................  ...........................  ...........................  ...........................
1990 Stock..........................  ...........................  ...........................  ...........................  ...........................
--------------------------------------------------------------------------------------------------------------------------------------------------------


------------------------------------------------------------------------
                                           Annual            Percent
------------------------------------------------------------------------
Change in Number of Units...........
------------------------------------------------------------------------

    3. Existing rental housing. The analyst must determine where the 
proposed project will fit into the present housing stock. To accomplish 
this, the analyst will survey the existing units and will discuss how 
they (a) would be comparable with the proposed project in overall 
appeal; (b) are less than desirable because of the age factor or upkeep; 
(c) are inconveniently located; (d) do not provide the appropriate 
bedroom mix for the community need, etc.
    4. Details of existing stock.
    a. Additional narrative which describes the rental stock and 
provides tenant characteristics may be included. The survey will include 
both subsidized and nonsubsidized rentals. In those communities 
containing too many rental properties to list, all subsidized and a 
representative number of conventional projects will be included. Those 
conventional projects which have rent levels comparable to the proposed 
project will be listed. Because elderly persons may reside in family 
designated projects, the analyst will need to list all existing units 
and not just the existing elderly units. Photographs of the comparables 
are required.
    b. The analyst will explore the availability of individual Section 8 
certificates with the local housing authority since they can be used on 
any project to bring the existing rents into an affordable range. For 
instance, 10 to 15 available Section 8 certificates in a community could 
have an influence on the determination for new units and the number 
should be reduced to correspond to this availability. However, before 
automatically reducing the number of proposed units to match the number 
of available Section 8 units, the reason the certificates are available 
must be explored, (e.g., owners of non-Government subsidized units will 
not accept the certificates). (The bedroom sizes which the certificates 
cover must match the prospective bedroom sizes in the proposed project 
bedroom mix.)
    c. The information needed in the survey must include the 
characteristics shown below. In conjunction with the survey, the analyst 
is expected to discuss the reasons for extended vacancies, either in 
individual developments or in the community in general. The data needed 
are:

Name of Project
No. of Units
Bedroom Mix
Amenities: (if available)
Drapes
Carpet
Type (i.e., family, elderly)
Year Built
Rent levels
Vacancies
Location
Central Cooling
Dishwasher
Garbage Disposal
TV Cable

                      IV. Housing Demand Forecasts

    The analyst must give a projection of the housing needs for a 
specified forecast period. The information should include the following 
as a minimum:

------------------------------------------------------------------------
                                                             Market area
               Sources of demand                Town renter     renter
------------------------------------------------------------------------
New Households (from the most recent census        --------     --------
 year plus 2-year projection).................
.20 of Households in Substandard Rental Units.    +--------    +--------
Plus Demolition of Rental Stock...............    +--------    +--------
.20 of Households Experiencing Rent Overburden    +--------    +--------
Plus Vacancy (.05 of New Household Growth)....    +--------    +--------
Total demand..................................     --------     --------
Number of Total Demand Determined Income           --------     --------
 Eligible (tax credit eligible, if applicable)
Less Number of Units in Planning Stage (FmHA/     ---------    ---------
 HUD).........................................
Net Demand....................................     --------     --------
------------------------------------------------------------------------


[[Page 438]]

    If a penetration percentage is used in the study analysis, explain 
how that particular percentage was chosen.

                       Recommended Number by Unit
------------------------------------------------------------------------
              Size                   One       Two      Three     Four
------------------------------------------------------------------------
                                    ------    ------    ------    ------
------------------------------------------------------------------------

    Names and positions of individuals in the community who provided 
information for the study:

______________________________________________________

______________________________________________________

______________________________________________________

______________________________________________________


[59 FR 6892, Feb. 14, 1994, as amended at 59 FR 49346, Sept. 28, 1994]

  Exhibit A-9 to Subpart E of Part 1944--Additional Information To Be 
 Submitted for Rural Rental Housing (RRH) and Rural Cooperative Housing 
                           (RCH) Loan Requests

    1. Drawings and specifications, including any cost containment 
considerations and special design features for elderly or handicapped 
persons.
    2. Updated cost estimates on Form FmHA or its successor agency under 
Public Law 103-354 1924-13, ``Estimate and Certificate of Actual Cost,'' 
will be submitted by all applicants, along with the updated estimates of 
associated costs specified in exhibit A-7 of this subpart.
    3. Information on the method of construction, the proposed 
contractor if a construction contract is to be negotiated, and the 
architectural, engineering and legal services included in the proposal.
    4. Satisfactory evidence of review and approval of the proposed 
housing by applicable State and local officials whose approval is 
required by State or local laws, ordinances or regulations. This could 
be an indication of approval to proceed with the development of the 
project rather than final approval of plans and specifications.
    5. If more than 12 months have transpired since the market analysis 
was completed, the State Director may require that it be updated if he/
she determines it necessary.
    6. For all projects containing over four units, the applicant must 
submit an Affirmative Fair Housing Marketing Plan for approval in 
accordance with Sec. 1901.203 of subpart E to part 1901 of this 
chapter. The plan must be prepared in a complete, meaningful, responsive 
and detailed manner.
    7. If more than 90 days have transpired since the applicant 
submitted the dated financial statement, the State Director may require 
a new one if he/she determines it necessary.
    8. If there is any change in related assistance available to the 
applicant from other government agencies or in the interested parties as 
defined in Sec. 1944.205 of this subpart, it must be disclosed at this 
time.
    9. Detailed operating budgets showing a schedule of proposed rental 
rates for the first year's operation and a typical year's operation. The 
first year's budget should show that the applicant has sufficient 
operating capital on hand or sufficient planned income to pay all 
operating costs and meet scheduled payments on debts during the planning 
and construction period prior to occupancy. The typical year's budget 
should show there will be ample income to pay essential operating costs, 
meet required debt payments and permit accumulation of required 
reserves. Form FmHA or its successor agency under Public Law 103-354 
1930-7, ``Multiple Family Housing Project Budget,'' and exhibit A-5 of 
this subpart (or similar forms) may be used for this purpose. The 
operating budgets should be updated if necessary just prior to loan 
approval.
    a. The initial budgets should include an allowance of 10 percent for 
vacancies, nonpayment of rent and contingency expenses. The allowance in 
subsequent year budgets may be adjusted to be consistent with the actual 
past experience in vacancy, nonpayment of rent and contingency needed 
for the project.
    b. The budgets should provide for accumulating a reserve at the rate 
of 1 percent per annum of the amount of the loan until a minimum reserve 
equal to 10 percent of the loan is reached. Budgets should not include 
an additional item for depreciation since the reserve account is to 
provide funds for this purpose.
    c. All applicable taxes, including Federal and State income taxes, 
should be included in the budgets and separately identified. If the 
applicant considers itself tax-exempt, evidence of exemption must be 
included in the loan docket before the loan is closed. An eligible 
nonprofit organization should ordinarily be able to qualify for Federal 
income tax exemption under section 501(c) (4) of the Internal Revenue 
Code.
    10. The applicant will submit all proposed agreements for 
architectural, engineering, and legal services.
    11. A statement in narrative form outlining the proposed manner of 
management of the housing, such as whether by owner or by hired 
management firm or agent. Experience and other factors pertaining to the 
qualifications of the manager should be set forth and will be taken into 
consideration. If management will be performed by a hired management 
firm or agent, a copy of the proposed management agreement should be

[[Page 439]]

submitted. It must contain the clause stating that it is not in full 
force and effect until approved by FmHA or its successor agency under 
Public Law 103-354.
    12. A management plan which sets forth clear and concise statements 
of policy concerning management and operation of the project in 
accordance with the requirements of paragraph V of exhibit B of subpart 
C to part 1930 of this chapter. Copies of the proposed application for 
occupancy, sample waiting lists, lease or rental agreement, and rules 
and regulations governing administration, occupancy and pet policies 
should be included. The management plan must be submitted in writing and 
the applicant must certify that it is in compliance with the 
requirements of subpart C to part 1930 of this chapter.
    13. A schedule of any separate charges for the use of any related 
facilities and, in the case of congregate housing, a schedule of any 
separate charges for nonshelter services (such as meals, personal care 
and housekeeping). These schedules should be supported by appropriate 
operating budgets for services to be provided.
    14. A satisfactory survey of the land to be given as security 
prepared by a licensed surveyor will be included in the loan docket. If 
necessary, a new survey will be obtained.
    15. Form FmHA or its successor agency under Public Law 103-354 1910-
11, ``Applicant Certification, Federal Collection Policies for Consumer 
or Commercial Debts.''
    16. [Reserved]
    17. Comments must be submitted in accordance with 7 CFR, part 3015, 
subpart V, ``Intergovernmental Review of Department of Agriculture 
Programs and Activities.'' See RD Instruction 1940-J (available in any 
Rural Development office).

[53 FR 2159, Jan. 26, 1988, as amended at 53 FR 36268, Sept. 19, 1988; 
54 FR 29332, July 12, 1989; 55 FR 13503, Apr. 11, 1990; 55 FR 29563, 
July 20, 1990. Redesignated at 56 FR 2245; 56 FR 65985, Dec. 20, 1991; 
59 FR 6896, Feb. 14, 1994; 62 FR 25070, May 7, 1997; 62 FR 67224, Dec. 
23, 1997]

            Exhibit A-10 to Subpart E of Part 1944 [Reserved]

Exhibit A-11 to Subpart E of Part 1944--Processing Guidelines for Loans 
                     for Equity To Avert Prepayment

    To apply for an equity loan to avert prepayment, the borrower should 
submit the following items in accordance with exhibit A-6 of this 
subpart and this exhibit:
    1. Form SF-424.2 with a narrative discussion of the borrower's 
equity loan request,
    2. Current Financial Statement,
    3. Proposed budget showing anticipated rents to cover revised 
financing package, including updated figures on required reserve 
contributions and return on investment (if any),
    4. Data on current tenants' income, rents and RA, and incomes of 
those on the waiting list to show that new rents will not displace or 
prevent occupancy by eligible tenants, unless sufficient RA is made 
available.

[58 FR 38925, July 21, 1993]

 Exhibit B to Subpart E of Part 1944--Guide Letter For Use in Informing 
  Interim Lender of FmHA or Its Successor Agency Under Public Law 103-
                            354's Commitment

(Name and Address of Private Lender)

________________________________________________________________________

________________________________________________________________________

Dear Mr./Ms.:___________________________________________________________

(For Organizations)
    Reference is made to a request from the
(Smith Housing Assoc.)
________________________________________________________________________
through
(John Smith),
________________________________________________________________________
its President, for interim financing from your firm to construct a 
housing facility at the interest rate and terms and conditions agreed 
upon as reflected in the attached letter.
(For Individuals)
    Reference is made to a request for
(John Jones)
________________________________________________________________________
for interim financing from your firm to construct a rental housing 
facility at the interest rate and terms and conditions agreed upon as 
reflected in the attached letter.
    This letter is to confirm certain understandings on behalf of the 
Farmers Home Administration (FmHA) or its successor agency under Public 
Law 103-354.
    Final drawings, specifications and all other contract documents have 
been prepared and approved, and the applicant is prepared to start 
construction. The applicant and FmHA or its successor agency under 
Public Law 103-354 have determined that the conditions of loan closing 
can be met. Funds have been obligated for the project.
    FmHA or its successor agency under Public Law 103-354 has required 
the applicant to deposit $-------- with your firm to be used before any 
interim loan funds. The applicant has proposed and FmHA or its successor 
agency under Public Law 103-354 has agreed that you may first advance 
any applicant funds on deposit, and then advance the proceeds of the 
interim loan in accordance with the terms and conditions stated in your 
attached letter to pay for construction and

[[Page 440]]

other authorized and legally eligible expenses incurred by the 
applicant. It is understood, however, that advances of both the 
applicant's funds and the interim loan funds will be made only upon 
presentation of proper statements and partial payment estimates proposed 
by the builder and approved for payment by the consulting architect, 
applicant and FmHA or its successor agency under Public Law 103-354 
servicing official.
    We have scheduled the FmHA or its successor agency under Public Law 
103-354 loan to be closed when construction to be financed with loan 
funds is substantially complete in accordance with the FmHA or its 
successor agency under Public Law 103-354 approved (contract documents), 
drawings and specifications, (except for minor punch list items), and 
the applicant provides evidence and a signed certification indicating 
that there are no unpaid obligations outstanding in connection with the 
project. At that time, funds not exceeding the FmHA or its successor 
agency under Public Law 103-354 loan amount will be available to pay off 
the amount of loan advances your lending institution has made for 
authorized approved purposes, including accrued interest to the date of 
closing.
    FmHA or its successor agency under Public Law 103-354 cannot provide 
you with an unconditional letter of commitment guaranteeing FmHA or its 
successor agency under Public Law 103-354 loan closing. Factors such as 
noncompletion, default, unacceptable workmanship and marked deviation 
from approved drawings and specifications could prevent the FmHA or its 
successor agency under Public Law 103-354 loan from being closed.
    These problems can be minimized by making a thorough review of the 
[contract documents] \1\ and drawings and specifications, evaluating the 
qualifications and past performance of the builder, and obtaining an 
adequate corporate surety bond guaranteeing both payment and 
performance. If the builder is unable to provide a surety bond, we 
suggest that your lending institution consider making advances for 
partial payments to the builder [in accordance with the provisions of 
the construction contract] \1\ based upon no less than 60 percent and no 
more than 90 percent of the value of acceptable work in place, less the 
aggregate of previous payments.
---------------------------------------------------------------------------

    \1\ These words may be omitted for projects constructed by the 
owner-builder method of construction with a construction contract.
---------------------------------------------------------------------------

    The following are additional safeguards to help assure FmHA or its 
successor agency under Public Law 103-354 loan closing:
    1. We invite you or your representatives to accompany FmHA or its 
successor agency under Public Law 103-354 personnel during construction 
inspections so that at least three or four joint inspections at critical 
points during construction, including the final inspection, can be made 
to help assure that construction is proceeding in accordance with the 
FmHA or its successor agency under Public Law 103-354 approved drawings 
and specifications.
    2. FmHA or its successor agency under Public Law 103-354 will 
maintain its commitment in the amount of the obligated loan funds for a 
reasonable period of time after the expiration of any specified 
completion dates provided work on the project is progressing 
satisfactorily and any identified problems have been resolved.
    3. FmHA or its successor agency under Public Law 103-354 will not 
arbitrarily abandon your lending institution in the event of default. If 
the contractor defaults, FmHA or its successor agency under Public Law 
103-354 will attempt to provide financial assistance to the applicant in 
accordance with our administrative procedures and lending requirements 
if a new contractor can complete the project for a total cost within the 
security value of the project. If this is not possible or if the FmHA or 
its successor agency under Public Law 103-354 loan applicant becomes 
unable or unwilling to continue with the project, FmHA or its successor 
agency under Public Law 103-354 will attempt to provide financial 
assistance to any eligible applicant (subject to the availability of 
funds, our administrative procedures, and our lending requirements) to 
purchase the completed project from your lending institution.
    4. FmHA or its successor agency under Public Law 103-354 is aware 
that circumstances such as subsurface ground conditions and change 
orders necessitated by required changes in the work to be performed may 
cause cost increases after FmHA or its successor agency under Public Law 
103-354 loan approval and the obligation of FmHA or its successor agency 
under Public Law 103-354 loan funds. When justified, FmHA or its 
successor agency under Public Law 103-354 may make subsequent loans when 
necessary to help cover the eligible costs, provided additional loan 
funds are available, the change orders were approved by FmHA or its 
successor agency under Public Law 103-354, the increased costs are 
legitimate and are for authorized loan purposes, and the total cost of 
the project is within its security value.
Your assistance to the applicant is appreciated.

Sincerely,

________________________________________________________________________
State Director

[53 FR 2159, Jan. 26, 1988, as amended at 56 FR 2247, Jan. 22, 1991; 59 
FR 6897, Feb. 14, 1994]

[[Page 441]]

   Exhibit C to Subpart E of Part 1944--Articles of Incorporation for 
          Rental or Cooperative Organizations (Not for Profit)

    We, the undersigned, incorporators, hereby associate ourselves 
together to form and establish a (corporation) (cooperative) not for 
profit under the laws of the State of ------------.
    First: The name of the (corporation) (cooperative) is
________________________________________________________________________
    Second: The location of its principal place of business in this 
State is ------------, ------------ County.
    Third: The location of its registered office in this State is ------
------, ------------ County.
    Fourth: The name and address of its resident agent in this State is 
------------ County.
    Fifth: This (corporation) (cooperative) is organized not for profit 
under , ------------------ and the objects and purposes to be transacted 
and carried on are to promote the general social welfare of the 
community and for that purpose:
    To acquire, construct, provide, and operate (rental) (cooperative) 
housing and related facilities suited to the special needs and living 
requirements of eligible occupants as determined by FmHA or its 
successor agency under Public Law 103-354 regulations, without regard to 
race, color, religion, sex, age, handicap, marital or familial status or 
national origin;
    To acquire, improve, and operate any real or personal property or 
interest or right herein or appurtenant thereto;
    To sell, convey, assign, mortgage, lease any real and personal 
property;
    To borrow money and to execute such evidence of indebtedness and 
such contracts, agreements, and instruments as may be necessary, and to 
execute and deliver any mortgage, deed of trust, assignment of income, 
or other security instrument in connection therewith; and to do all 
things necessary and appropriate for carrying out and exercising the 
foregoing purposes and powers.
    Sixth: The number of directors shall be prescribed in the bylaws, 
but shall not be less than five nor more than nine.\1\
---------------------------------------------------------------------------

    \1\ If the statute under which the cooperative housing project is to 
be incorporated will permit, it is preferable to state here the minimum 
number of directors. The actual number can then be stated in the bylaws 
which are more easily amended if it becomes necessary to change the 
number.
---------------------------------------------------------------------------

    Seventh: The (corporation) (cooperative) formed hereby shall have no 
capital stock. It shall be composed of members rather than shareholders. 
The conditions and regulations of membership and the rights or other 
privileges of the classes of members shall be determined and fixed by 
the bylaws.
    Eighth: (Rental only) The corporation is not organized for pecuniary 
profit and shall have no power to declare dividends. No part of its net 
earnings shall inure to the benefit of any member, director, or 
individual. The balance, if any, of all money received by the 
corporation from its operations, after payment in full of all operating 
expenses, debts, and obligations of the corporation of whatsoever kind 
and nature as they become due shall be used to make advance payments on 
a ------------ owed by the corporation, to lower the lease-rental charge 
to occupants of the housing, to provide additional housing and related 
facilities, or for some related purpose.
    Eighth: (Cooperative only) The cooperative is not organized for 
pecuniary profit and shall have no power to declare dividends. The 
balance, if any, of all money received by the cooperative from its 
operations, after payment in full of all operating expenses, debts, and 
obligations of the cooperative of whatsoever kind and nature as they 
become due, shall accumulate in an interest-bearing account but be 
equally assigned to each member as patronage capital.
    Ninth: The name and place of residence (post office address) of each 
of the incorporators and initial directors until the first annual 
meeting:

Incorporators
________________________________________________________________________
________________________________________________________________________
Directors
________________________________________________________________________
________________________________________________________________________
    Tenth: (Rental only) In the event of dissolution of this 
corporation, or in the event it shall cease to carry out the objectives 
and purposes herein set forth, all business, property, and assets of the 
corporation shall go and be distributed to one or more such nonprofit 
corporations or municipal corporations as may be selected by the board 
of directors of this corporation, to be used for and devoted to the 
purpose of carrying on a nonprofit housing project for such rural 
residents or other purposes to promote the general social welfare of the 
community. In no event shall any of the assets or property, in the event 
of dissolution thereof, go or be distributed to members, either for the 
reimbursement of any sum subscribed, donated, or contributed by such 
members or for any other purposes, provided that nothing herein shall 
prohibit the corporation from paying its just debts.
    Tenth: (Cooperative only) In the event of dissolution of this 
cooperative, or in the event it shall cease to carry out the objectives 
and purposes herein set forth, all business, property, and assets of the 
cooperative, except members' patronage capital and

[[Page 442]]

membership fees, shall be used for providing low income rental housing 
or other purposes to promote the general welfare of the community. In no 
event shall any of the assets or property, in the event of dissolution 
thereof, go or be distributed to members, except that the membership fee 
and money accrued to members in their patronage capital accounts shall 
be paid to members prior to conversion or satisfaction of the 
Government's debt.
    Eleventh: (Cooperative only) At any time prior to dissolution the 
member wishes to terminate membership in the cooperative, money which 
has accrued in the member's patronage capital account and the member's 
membership fee shall be paid to the member provided the member's 
occupancy account is not delinquent and that any other charges to which 
the member is liable are paid.
    Twelfth: The duration of the existence of this corporation shall be 
perpetual.\1\
---------------------------------------------------------------------------

    \1\ Duration should be perpetual, or long enough to cover the period 
of the loan plus 5 years.
---------------------------------------------------------------------------

    IN TESTIMONY WHEREOF, We have here unto subscribed our names on ----
------ 19 ------.
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
(Insert acknowledgement or other form if required by State law.)

[56 FR 2247, Jan. 22, 1991]

    Exhibit D to Subpart E of Part 1944--Bylaws (Except Cooperative)

(Sample)

                                Bylaws of

                         A Nonprofit Corporation

                                Article I

                                 Office

    Section 1.01. Principal Office.
    The principal office of the corporation in the State of ------------
, shall be located at ------------, County of ------------ Section 1.02. 
Registered Office and Agent. The corporation shall have and continuously 
maintain in the State of ------------ a registered office and a 
registered agent whose office is identical with such registered office.

                               Article II

                                 Members

    Section 2.01. Eligibility for membership.
    The corporation shall have one class of members. Members may be 
individuals or organizations. Any legally competent person of good 
reputation who resides in the town of ------------ or in the surrounding 
trade area, applies for membership, and pays the required membership fee 
shall be eligible.
    Section 2.02. Approval of Applications.
    All applications for membership shall be approved at: (1) Any 
special or regular meeting of the board of directors, when a quorum is 
present, by a majority vote of the board members or (2) by a majority 
vote of the existing membership present at any annual or special meeting 
held in accordance with Article III herein.

    Section 2.03. Voting Rights.
    Each member shall be entitled to one vote on each matter submitted 
to a vote of the members.
    Section 2.04. Termination of Membership.
    A member may be suspended or expelled, for cause, by the vote of not 
less than three-fourths of the members present at a meeting of the 
members, provided notice of such proposed action shall have been duly 
given in the notice of meeting and provided the member has been informed 
in writing of the charges preferred against the member at least ten days 
before such meeting. The members shall be given an opportunity to be 
heard at such meeting. The members of the board, by a majority vote of 
those present at any regularly constituted meeting, may terminate the 
membership of any member who becomes ineligible for membership and may 
suspend or expel any member who shall be in default with respect to any 
financial obligation to the corporation.
    Section 2.05. Resignation.
    Any member may resign by filing a written resignation with the 
secretary.
    Section 2.06. Reinstatement.
    Upon written request signed by a former member and filed with the 
secretary, the board may reinstate such former member to membership upon 
such terms as the board may deem appropriate.
    Section 2.07. Transfer of Membership.
    Membership in this corporation is not transferable or assignable.
    Section 2.08. Membership--Fees.
    The membership fee shall be $------------ or such other amount as 
may be fixed by the members at any annual meeting or at any special 
meeting called for the purpose. No person shall attain membership before 
paying the treasurer the membership fee.

    Section 2.09. Membership--Liability for Corporation's Obligations.
    Fully paid members shall not be liable for any debts or obligations 
of the corporation and shall not be subject to any assessment; but the 
members at any annual meeting or at any special meeting called for the 
purpose, may fix reasonable annual dues to become effective after not 
less than 30 days' notice to all members of such action.
    Section 2.10. Membership--Minimum Number.

[[Page 443]]

    The board will make all reasonable efforts to maintain a broad 
community-wide membership of not less than 25 members at any time.
    Section 2.11. Membership--Residence.
    A majority of the members shall be residents of the community where 
the housing is or will be located.

                               Article III

                          Meetings of Members.

    Section 3.01. Annual Meeting.
    An annual meeting of the members shall be held at ------------, on 
the ------------ of the month of ------------ each year, beginning with 
the year 19----, at the hour of -------- o'clock, for the purpose of 
electing directors and for the transaction of such other business as may 
come before the meeting. If the day fixed for the annual meeting shall 
be a legal holiday in said State, such meeting shall be held on the next 
succeeding business day. If the election of directors shall not be held 
on the day designated herein for any annual meeting, or at any 
adjournment thereof, the board shall cause the election to be held at a 
special meeting of the members as soon thereafter as convenient.
    Section 3.02. Special Meetings.
    Special meetings of the members may be called by the president, the 
board, or not less than one-tenth of the members.
    Section 3.03 Place of Meeting.
    The board of directors may designate any place within or not more 
than ---- miles from ------ as the place for an annual meeting or for 
any special meeting called by the board. If no designation is made or if 
a special meeting be otherwise called, the place of meeting shall be the 
registered office of the corporation in said State.
    Section 3.04. Notice of Meetings.
    Written or printed notice stating the place, day, and hour of any 
meeting of members shall be delivered either personally or by mail, to 
each member entitled to vote at such meeting, not less than seven or 
more than thirty days before the date of such meeting, by or at the 
direction of the president, or the secretary, or the officers or persons 
calling the meeting. In case of a special meeting or when required by 
statute of these bylaws, the purpose or purposes for which the meeting 
is called shall be stated in the notice. If mailed, the notice of a 
meeting shall be deemed to be delivered when deposited in the United 
States mail addressed to the member at the address as it appears on the 
records of the corporation, with postage thereon prepaid.
    Section 3.05. Informal Action by Members.
    Any action required by law to be taken at a meeting of the members, 
or any action which may be taken at a meeting of the members, may be 
taken without a meeting upon written consent or approval of all the 
members, setting forth the action so taken.
    Section 3.06. Quorum.
    At such meeting, a quorum shall consist of 30 percent of the 
members, or twice the number of directors, whichever is greater. If a 
quorum is not present at any meeting of members, a majority of the 
members present may adjourn the meeting from time to time without 
further notice.
    Section 3.07. Proxies.
    (a) At any meeting of the members, a member entitled to vote may 
vote by proxy executed in writing by the member. No proxy shall be valid 
after eleven months from the date of its execution. A proxy may be 
canceled by notice executed by the member with like formality and 
delivered to the secretary.
    (b) At each meeting of the members, every member shall be entitled 
to vote in person or by proxy and shall be entitled to cast one vote. 
The votes for directors shall be by ballot. Only the person in whose 
name membership is standing in the books of the corporation on the day 
of such meeting shall be entitled to vote in person or by proxy.
    (c) For any person to represent a member by proxy, such person must 
submit a power of attorney to the secretary of the board for examination 
at least one hour before the time of meeting. When the secretary has 
certified the power of attorney is in good order, the proxy holder shall 
have the right to do any and all things which might be done by the 
member were the member present in person, which right shall include the 
establishment of a quorum and the organizing of any meeting.

                               Article IV

                           Board of Directors

    Section 4.01. General Powers.
    The affairs of the corporation shall be managed by its board of 
directors.
    Section 4.02. Number, Tenure, and Qualifications.
    The number of directors shall be ------. The directors elected at 
the annual meeting to succeed the directors named in the Articles of 
Incorporation shall be elected for staggered terms of three, two, and 
one year. As the terms of such directors expire, their successors shall 
be elected for terms of three years and until their successors are 
elected and have qualified. Directors shall be members of the 
corporation and residents of the community where the housing is or will 
be located. Of the total number of directors, at least five must be 
among the leaders in such community.
    Section 4.03. Regular Meetings.
    A regular annual meeting of the board shall be held, without other 
notice than these bylaws, immediately after and at the same place as the 
annual meeting of the

[[Page 444]]

members. The board may provide by resolution the time and place, within 
or not more than ------ miles from -------- for holding of additional 
regular meetings of the board without other notice than such resolution.
    Section 4.04. Special Meetings.
    Special meetings of the board may be called by or at the request of 
the president and shall be called by the secretary at the request of any 
two directors. The authorized person or persons calling a special 
meeting of the board may fix any place within or not more than ------ 
miles from -------- as the place for holding such meeting.
    Section 4.05. Notice.
    Notice of any special meeting of the board shall be given at least 
two days previously thereto by written notice delivered personally, or 
four days notice sent by mail or telegram, to each director at the 
director's address as shown by the records of the corporation. If 
mailed, such notice shall be deemed to be delivered when deposited in 
the United States mail in a sealed envelope so addressed, with postage 
thereon prepaid. If notice be given by telegram, such notice shall be 
deemed to be delivered when the telegram is delivered to the telegraph 
company. Any director may waive notice of any meeting. The attendance of 
a director at any meeting shall constitute a waiver of notice of such 
meeting, except where a director attends a meeting for the express 
purpose of objecting to the transaction of any business because the 
meeting is not lawfully called or convened. The business to be 
transacted at the meeting need not be specified in the notice or waiver 
of notice of such meeting, unless specifically required by law or these 
bylaws.
    Section 4.06. Quorum.
    A majority of the board shall constitute a quorum for the 
transaction of business at any meeting of the board; but if less than a 
majority of the directors are present at said meeting, a majority of the 
directors present may adjourn the meeting from time to time without 
further notice.
    Section 4.07. Manner of Acting.
    The act of a majority of the directors present at a meeting at which 
a quorum is present shall be the act of the board, unless the act of a 
greater number is required by law or by these bylaws. The board may also 
act by written consent of all the directors of the corporation setting 
forth the action taken.
    Section 4.08. Vacancies.
    Any vacancy occurring in the board shall be filled by the board 
until the next meeting of the members and until a successor has been 
elected by the members to fill a vacancy. Such person shall be elected 
for the unexpired term of office of the predecessor in office.
    Section 4.09. Compensation.
    Directors shall not receive any compensation for their services as 
directors.
    Section 4.10. Director--Absence From Meetings.
    Any director who is absent from ------ consecutive meetings without 
excuse satisfactory to the board shall be deemed to have surrendered the 
office as director.
    Section 4.11. Directors--Residuary Powers.
    The board shall have the powers and duties necessary or appropriate 
for the administration of the affairs of the corporation. All powers of 
the corporation except those specifically granted or reserved to the 
members by law, the articles of incorporation, or these bylaws shall be 
vested to the board.
    Section 4.12. Directors--Removal From Office.
    A director may be removed from office, for cause, by the vote of not 
less than three-fourths of the members present at a meeting of the 
members, provided notice of such proposed action shall have been duly 
given in the notice of the meeting and provided the director has been 
informed in writing of the charges preferred against the director at 
least 10 days before such meeting. The director involved shall be given 
an opportunity to be heard at such meeting. Any vacancy created by the 
removal of a director shall be filled by a majority vote, which may be 
taken at the same meeting at which such removal takes place.

                                Article V

                                Officers

    Section 5.01. Officers.
    The officers of the corporation shall be a president, a vice 
president, a secretary, and a treasurer. The board may elect or appoint 
such other officers as it shall deem desirable, such officers to have 
the authority and perform the duties prescribed, from time to time, by 
the board. The offices of secretary and treasurer may be combined and 
held by one person.
    Section 5.02. Election and Term of Office.
    (a) The officers of the corporation specified in Section 5.01 shall 
be elected from the membership of the board by the board at its annual 
meeting or as soon thereafter as feasible. New offices may be created 
and filled at any meeting of the board. Each officer shall hold office 
until the next annual election of directors and until a successor shall 
have been duly elected and shall have qualified.
    (b) The term of office shall be one year. Election of officers shall 
take place at the annual board meeting and shall be by ballot cast by 
qualified directors. A plurality of votes cast shall elect.
    Section 5.03. Removal.
    Any officer elected or appointed by the board may be removed by the 
board by two-thirds vote of the remaining directors whenever in its 
judgment the best interests of the corporation would be served thereby, 
but

[[Page 445]]

such removal shall be without prejudice to the contract rights, if any, 
of the officer so removed.
    Section 5.04. Vacancies.
    A vacancy in any office because of death, resignation, removal, 
disqualification, or otherwise, may be filled by the board by majority 
vote for the unexpired portion of the term.
    Section 5.05. President.
    The president shall be the principal executive officer of the 
corporation and shall in general supervise and control all the business 
and affairs of the corporation. The president shall preside at all 
meetings of the members and of the board. The president may sign, with 
attestation of the secretary or any other proper officer of the 
corporation authorized by the board, any deeds, mortgages, bonds, 
contracts, or other instruments which the board authorizes to be 
executed, except in cases where the signing and execution thereof shall 
be expressly delegated by the board of these bylaws or statutes to some 
other officer or agent of the corporation and in general shall perform 
all duties incident to the office of president and such other duties as 
may be prescribed by the board from time to time.
    Section 5.06. Vice President.
    In the absence of the president or in the event of an inability or 
refusal to act, the vice president shall perform the duties of the 
president and, when so acting, shall have all the powers of and be 
subject to all restrictions upon the president. Any vice president shall 
perform such other duties as from time to time may be assigned by the 
president of the board.
    Section 5.07. Treasurer.
    The treasurer shall give a bond for the faithful discharge of duties 
in such sum and with such surety or sureties as the board shall 
determine. The treasurer shall have charge and custody of and be 
responsible for all funds and securities of the corporation; receive and 
give receipts for moneys due and payable to the corporation from any 
source whatsoever, deposit all such moneys in the name of the 
corporation in such banks, trust companies, or other depositories as 
shall be selected in accordance with the provisions of Article VIII of 
these bylaws; and in general perform all duties incident to the office 
of treasurer and such other duties as from time to time may be assigned 
by the president or the board.
    Section 5.08. Secretary.
    The secretary shall keep the minutes of the meeting of the members 
and the board in one or more books provided for that purpose, see that 
all notices are duly given in accordance with the provisions of these 
bylaws or as required by law; be custodian of and see that the seal of 
the corporation is affixed to all documents the execution of which on 
behalf of the corporation under its seal is duly authorized in 
accordance with the provisions of these bylaws; keep a register of the 
post office address of each member, which shall be furnished to the 
secretary by such member; and in general perform all duties incident to 
the office of secretary and such other duties as from time to time may 
be assigned by the president or the board.

                               Article VI

                            Order of Business

    Section 6.01. Order of Business.
    The order of business at any regular or special meeting of the 
members or the board shall be:
    (a) Reading and approval of any unapproved minutes.
    (b) Reports of officers and committees.
    (c) Unfinished business.
    (d) New business.
    (e) Adjournment.
    Section 6.02. Parliamentary Procedure.
    On questions of parliamentary procedure not covered in these bylaws, 
a ruling by the president shall prevail.

                               Article VII

                                Committee

    Section 7.01. Committees of Directors.
    The board of directors, by resolution adopted by a majority of the 
directors in office, may designate one or more committees, each of which 
shall consist of one or more directors, which committees, to the extent 
provided in said resolution, shall have and exercise the authority of 
the board in the management of the corporation; but the designation of 
such committees and the delegation thereto of authority shall not 
operate to relieve the board, or any individual director, of any 
responsibility imposed upon the board, or any individual director, by 
law.
    Section 7.02. Other committees.
    Other committees not having and exercising the authority of the 
board in the management of the corporation may be designated by a 
resolution adopted by a majority of the directors present at a meeting 
at which a quorum is present. Except as otherwise provided in such 
resolution, members of each such committee shall be members of the 
corporation, and the president of the corporation shall appoint the 
member thereof. Any member thereof may be removed by the person or 
persons authorized to appoint such member whenever in their judgment the 
best interest of the corporation shall be served by such removal.
    Section 7.03. Term of Office.
    Each member of a committee shall continue as such until the next 
annual meeting of the members of the corporation and until a successor 
is appointed, unless the committee shall be sooner terminated, or unless

[[Page 446]]

such member to be removed from such committee, or unless such member 
shall cease to qualify as a member thereof.
    Section 7.04. Chairman.
    One member of each committee shall be appointed chairman by the 
persons authorized to appoint the members thereof.
    Section 7.05. Vacancies.
    Vacancies in the membership of any committee may be filled by 
appointments made in the same manner as provided in the case of the 
original appointments.
    Section 7.06. Quorum.
    Unless otherwise provided in the resolution of the board of 
directors designating a committee, a majority of the whole committee 
shall constitute a quorum and the act of a majority of the members 
present at a meeting at which a quorum is present shall be the act of 
the committee.
    Section 7.07. Rules.
    Each committee may adopt rules for its own government not 
inconsistent with these bylaws or with rules adopted by the board of 
directors.

                              Article VIII

                 Contracts, Checks, Deposits, and Funds

    Section 8.01. Contracts.
    The board may authorize any officer or officers, agent or agents of 
the corporation, in addition to the officers so authorized by these 
bylaws, to enter into any contract or execute and deliver any instrument 
in the name of and on behalf of the corporation; and such authority may 
be general or confined to specific instance.
    Section 8.02. Checks, Drafts, etc.
    All checks, drafts, or orders for the payment of money, notes, or 
other evidence of indebtedness issued in the name of the corporation 
shall be signed by the officer or officers, agent or agents of the 
corporation, and in a manner as shall from time to time be determined by 
resolution of the board. In the absence of determination by the board, 
these instruments shall be signed by the treasurer and countersigned by 
the president of the corporation.
    Section 8.03. Deposits.
    All funds of the corporation shall be deposited from time to time to 
the credit of the corporation in such banks, trust companies or other 
depositories as the board may select.
    Section 8.04. Gifts.
    The board may accept on behalf of the corporation any contribution, 
gift, bequest, or devise for the general purposes or for any special 
purposes of the corporation.

                               Article IX

                       Certificates of Membership

    Section 9.01. Certificates of Membership.
    The board may provide for the issuance, and determine the form of 
certificates evidencing membership in the corporation. Such certificates 
shall be signed by the president and the secretary, sealed with the seal 
of the corporation, and consecutively numbered. The name and address of 
each member and the date of issuance of the certificate shall be entered 
on the records of the corporation. If any certificate becomes lost, 
mutilated or destroyed, a new certificate may be issued upon such terms 
and conditions as the board may determine.
    Section 9.02. Issuance of Certificates.
    When a member has been elected to membership and has paid any dues 
that may then be required, a certificate of membership shall be issued 
in his or her name and delivered to the member by the secretary.

                                Article X

                            Books and Records

    The corporation shall keep correct and complete books and records of 
account and shall keep minutes of the proceedings of its members, the 
board, and committees having any of the authority of the board of 
directors, and shall keep at the registered or principal office a record 
giving the names and addresses of the members. All books and records of 
the corporation may be inspected by any member, or member's agent or 
attorney, for any proper purposes at any reasonable time. The board 
shall cause an audit of the records of the corporation to be made each 
year by a competent auditor.

                               Article XI

                               Fiscal Year

    The fiscal year of the corporation shall begin on the first day of 
January and end on the last day of December in each year.

                               Article XII

                                  Seal

    The board shall provide a corporate seal, which shall be in the form 
of a circle and shall have inscribed thereon the name of the corporation 
and the words, ``corporate seal.''

                              Article XIII

                            Waiver of Notice

    Whenever any notice is required to be given under the provisions of 
the statutes of said State or the articles of incorporation or the 
bylaws of the corporation, a waiver thereof in writing signed by the 
person or persons entitled thereto, whether before or after the time 
stated therein, shall be deemed equivalent to the giving of such notice.

[[Page 447]]

                               Article XIV

                      Repeal or Amendment of Bylaws

    Section 14.01. These bylaws may be repealed or amended by a majority 
vote of the members present at any annual meeting of the members, or at 
any special meeting of the members called for such purpose, at which a 
quorum is present: provided, however, no such action shall change the 
purposes of the corporation so as to impair its rights and powers under 
the laws of said State, or to waive any requirements of bond or any 
provision for the safety and security of the property and funds of the 
corporation or its members or to deprive any member without any express 
assent of rights, privileges, or immunities then existing. Notice of any 
amendment to be offered at any meeting shall be given not less than 7 
nor more than 30 days before such meeting and shall set forth such 
amendment.

                     KNOW ALL MEN BY THESE PRESENTS:

    That the undersigned secretary of the corporation identified in the 
foregoing bylaws does hereby certify that the foregoing bylaws were duly 
adopted by the members of said corporation, as bylaws of said 
corporation, on the ------ day of ------, 19------ at a duly called and 
constituted meeting of the members, and that they do now constitute the 
bylaws of said corporation.
________________________________________________________________________

 Secretary

(Corporate Seal)

[53 FR 2159, Jan. 26, 1991, as amended at 56 FR 2248, Jan. 22, 1991]

       Exhibit D-1 to Subpart E of Part 1944--Bylaws (Cooperative)

                                Bylaws of

________________________________________________________________________
 (a nonprofit cooperative corporation)

                                Article I

                                 Office

    Section 1.01. Principal office. The principal place of business of 
the cooperative in the State of ---------- shall be located at --------
----, County of ----------.
    Section 1.02. Registered office and agent.

                               Article II

                                 Members

    Section 2.01. Eligibility for membership during cooperative's 
formation. Any natural person who is approved by the cooperative under 
its rules and regulations by the board of directors shall be eligible 
for membership, provided that he/she executes a Subscription Agreement 
and Occupancy Agreement in the usual form employed by the cooperative 
covering a specific unit in the housing project.
    Section 2.02. Approval of Applications for Membership after the 
cooperative's formation.
    All applications for membership received after the cooperative has 
been established and in operation shall be approved at any special or 
regular meeting of the board of directors, when a quorum is present, by 
a majority vote of the board members.
    Section 2.03. Membership certificates. The board may provide for the 
issuance, and determine the form of, certificates evidencing membership 
in the cooperative. Such certificates shall state that the cooperative 
is organized under the laws of the State of ------------, the 
cooperative's lien rights against such membership as set forth in these 
Bylaws, shall be signed by the president and the secretary, sealed with 
the seal of the cooperative, and consecutively numbered. The name and 
address of each member and the date of cooperative. If a certificate 
becomes lost, mutilated, or destroyed, a new certificate may be issued 
upon such terms and conditions as the board may determine.
    Section 2.04. Lien. The cooperative shall have a lien on the 
outstanding memberships in order to secure payment of any sums which 
shall be due or become due from the holders for any reason whatsoever, 
including any sums due under any occupancy agreements.
    Section 2.05. Voting rights. Each member shall be entitled to one 
vote on each matter submitted to a vote of the members.\1\
---------------------------------------------------------------------------

    \1\ In the case of joint membership, each member shall be entitled 
to cast a one-half vote.
---------------------------------------------------------------------------

    Section 2.06. Patronage capital. All funds accruing to the 
cooperative during the year, above and beyond the costs and expenses of 
operating the cooperative, shall be assigned to each member on the books 
of the cooperative as patronage capital at the end of each fiscal year. 
These patronage capital funds may not be removed from the patronage 
capital account except in payment to members upon termination of 
membership. Any member not wishing to renew the Occupancy Agreement will 
be entitled to receive the patronage capital assigned to the member on 
the books of the cooperative. Likewise, members terminated because of 
violation of these bylaws may receive his/her patronage capital pursuant 
to provisions of section 2.07.
    Section 2.07. Termination of membership. A member may be suspended 
or expelled, for violation of rules set forth in the Occupancy Agreement 
or these bylaws, by the vote of not less than a majority of the board of 
directors, provided the member has been informed in writing of the 
charges preferred against the member at least ten days before such 
meeting. However, the cooperative shall

[[Page 448]]

not evict any member except by judicial action pursuant to State or 
local law and in accordance with the requirements of the Farmers Home 
Administration or its successor agency under Public Law 103-354 Tenant 
Grievance and Appeals Procedure. The member shall be given an 
opportunity to be heard at such meeting. Upon termination of membership 
rights under the Occupancy Agreement, the member shall be required to 
deliver promptly to the cooperative his/her membership certificate and 
Occupancy Agreement endorsed as required by the cooperative. The 
retiring member then shall be entitled to receive the amount determined 
in accordance with the provisions of section 2.10 less the following 
amounts (the determination of such amounts by the cooperative to be 
conclusive):
    a. Any amounts due to the cooperative from the member under the 
Occupancy Agreement;
    b. The cost or estimate cost of all deferred maintenance, including 
painting, redecorating, floor finishing, and such repairs and 
replacements as are deemed necessary by the cooperative to place the 
dwelling unit in suitable condition for another occupancy; and
    c. Legal and other expenses incurred by the cooperative in 
connection with the default of such member. In the event the retiring 
member fails, within a 10-day period after demand, to deliver to the 
cooperative his endorsed membership certificate, the membership 
certificate shall be deemed to be canceled and may be reissued by the 
cooperative to a new member.
    Section 2.08. Resignation. Any member may choose not to renew the 
Occupancy Agreement by notifying the cooperative 4 months in advance of 
the renewal date.
    Section 2.09. Transfer of membership. Membership in this cooperative 
is not transferable or assignable except to the cooperative unless, upon 
death of a member, his/her membership in the cooperative passes by will 
or intestate distribution to a member of the immediate family. This is 
conditioned upon the person's eligibility and approval for membership 
according to FmHA or its successor agency under Public Law 103-354 
regulations and by his/her assuming in writing the terms of the 
Subscription Agreement and Occupancy Agreement within 60 days after 
member's death and payment of such debts.
    Section 2.10. Transfer value. Whenever a membership is transferred 
to the cooperative, the term transfer value shall mean the sum of:
    a. The membership fee paid by the member on the books of the 
cooperative, and
    b. The amount of the patronage capital which has accrued to the 
member during his/her period of membership as shown on the books of the 
cooperative.
    Section 2.11. Subscription fees. All subscription funds shall be 
deposited promptly without deduction in a special account or accounts of 
the cooperative as escrow or trustee for the subscribers membership. 
These funds shall not be corporate funds, but shall be held solely for 
the benefit of the subscribers until transferred to the account of the 
cooperative as hereinafter provided. Such special account or accounts 
shall be established with a banking institution where deposits are 
insured by an agency of the Federal Government. Such funds shall be 
subject to withdrawal, or transfer to the account of the cooperative, or 
disbursed in a manner directed by the cooperative only upon 
certification by the president and secretary of the cooperative that:
    (a) The subscription agreement of a named applicant has been 
terminated pursuant to its terms and such withdrawal is required to 
repay the amount paid by him under such agreement; or
    (b) A sufficient number of applicants for -------- dwelling units 
has not been established and such withdrawal is required to repay 
established applicants the amounts paid by them; or
    (c) Applicants for -------- dwelling units have signed subscription 
agreements, have been approved as to their eligibility by the board of 
directors, and have made at least a downpayment on their subscription 
(membership) fee. If these requirements have been met and the mortgage 
loan has been scheduled for closing, the entire amount of the funds in 
the subscription escrow account may be transferred to the cooperative 
which shall at that time deliver membership certificates to all members.

                               Article III

                          Meetings of Members.

    Section 3.01. Annual meeting. An annual meeting of the members shall 
be held at ------------ on the -------- of the month of ---------- each 
year, beginning with the year 19-------- at the hour of -------- 
o'clock, ??m., for the purpose of electing directors and for the 
transaction of such other business as may come before the meeting. If 
the day fixed for the annual meeting shall be a legal holiday in said 
State, such meeting shall be held on the next succeeding business day. 
If the election of directors shall not be held on the day designated 
herein for any annual meeting, or at any adjournment thereof, the board 
shall cause the election to be held at a special meeting of the members 
as soon thereafter as convenient.
    Section 3.02. Special meetings. Special meetings of the members may 
be called by the president, the board or not less than one-fourth of the 
members.
    Section 3.03. Place of meeting. The board of directors may designate 
any place within or

[[Page 449]]

not more than -------- miles from ------------ as the place for an 
annual meeting or for any special meeting called by the board.,
    Section 3.04. Notice of meetings. Written or printed notice stating 
the place, day, and hour of any meeting of members shall be delivered 
either personally or by mail, to each member entitled to vote at such 
meeting, not less than ten or more than twenty days before the date of 
such meeting, by or at the direction of the president, or the Secretary, 
or the officers or persons calling the meeting. In case of a special 
meeting or when required by statute of these bylaws, the purpose or 
purposes for which the meeting is called shall be stated in the notice. 
If mailed, the notice of a meeting shall be deemed to be delivered when 
deposited in the United States mail addressed to the member at the 
address as it appears on the records of the cooperative, with postage 
thereon prepaid.
    Section 3.05. Informal action by members. Any action required by law 
to be taken at a meeting of the members, or any action which may be 
taken at a meeting of the members, may be taken without a meeting upon 
written consent or approval of all the members, setting forth the action 
so taken.
    Section 3.06. Quorum. At such a meeting a quorum shall consist of 40 
percent \2\ of the members, or twice the number of directors, whichever 
is greater. If a quorum is not present at any meeting of members, a 
majority of the members present may adjourn the meeting from time to 
time without further notice.
---------------------------------------------------------------------------

    \2\ For large organizations, a smaller figure may be used if it will 
not result in a quorum of less than 20 members.
---------------------------------------------------------------------------

    Section 3.07. Proxies. (a) At any meeting of the members, a member 
entitled to vote may vote by proxy executed in writing by the member. No 
proxy shall be valid after eleven months from the date of its execution. 
A proxy may be cancelled by notice executed by the member with like 
formality and delivered to the secretary.
    (b) At each meeting of the members, every member shall be entitled 
to vote in person or by proxy and shall be entitled to cast one vote. 
The votes for Directors shall be by ballot. Only the person in whose 
name membership is standing in the books of the cooperative on the day 
of such meeting shall be entitled to vote in person or by proxy. If the 
membership is jointly owned, co-members are limited to one-half vote 
each.
    (c) For any person to represent a member by proxy, such person must 
submit a power of attorney to the secretary of the board for examination 
at least one hour before the time of meeting. When the secretary has 
certified the power of attorney is in good order, the proxy holder shall 
have the right to do any and all things which might be done by the 
member were the member present in person, which right shall include the 
establishment of a quorum and the organizing of any meeting.

                               Article IV

                           Board of Directors

    Section 4.01. General powers. The affairs of the cooperative shall 
be managed by its board of directors.
    Section 4.01. Powers and duties. The board of directors shall have 
all the powers and duties necessary for the administration of the 
affairs of the cooperative and may do all such acts and things as are 
not by law or by these bylaws directed to be exercised and done by the 
members. The powers of the board of directors shall include but not be 
limited:
    a. To accept or reject all applications for membership and admission 
to occupancy of a dwelling unit in the cooperative housing project, 
either directly or through an authorized representative;
    b. To establish monthly occupancy charges, subject to approval of 
FmHA or its successor agency under Public Law 103-354, as provided for 
in the Occupancy Agreement and based on an operating budget formally 
adopted by the board;
    c. To engage an agent or employees, subject to the approval of FmHA 
or its successor agency under Public Law 103-354, for the management of 
the project under such terms as the board may determine;
    d. To authorize the recording of patronage capital assignments on 
the cooperative's books to members;
    e. To terminate membership and occupancy rights for cause; and
    f. To promulgate such rules and regulations pertaining to use and 
occupancy of the premises as may be deemed proper and are consistent 
with these bylaws and the Certificate of Incorporation and with any 
requirements of FmHA or its successor agency under Public Law 103-354 
while mortgagee.
    The affairs of the cooperative shall be managed by its board of 
directors.
    Section 4.02. Number and qualifications. The board of directors 
shall be composed of ------ persons, all of whom shall be members of the 
cooperative.\3\
---------------------------------------------------------------------------

    \3\ Number of directors must be not less than 5 and must be selected 
by a procedure that insures that the interest of minorities and woman 
are adequately represented.
---------------------------------------------------------------------------

    Section 4.03. Election and term of office. The term of the directors 
named in the Certificate of Incorporation shall expire when their 
successors have been elected at the first annual meeting or any special 
meeting called

[[Page 450]]

for that purpose. For a board of five (5) directors, the first annual 
meeting of the members the term of office of two (2) directors shall be 
fixed for two (2) years, and the term of office of one (1) director 
shall be fixed at (1) year. At the expiration of the initial term of 
office of each respective director, his/her successor shall be elected 
to serve a term of office for three (3) years.
    The directors shall hold office until their successors have been 
elected and hold their first meeting. (If a larger board of directors is 
contemplated, the terms of office should be established in a similar 
manner so that they will expire in different years.) The term of any 
director who becomes more than 30 days delinquent in payment of his 
occupancy charges shall be automatically terminated and the remaining 
directors shall appoint his successor as provided in Sec. 4.11.
    Section 4.04. Organization meeting. The first meeting of a newly 
elected board of directors shall be held within ten (10) days of 
election at such place as shall be fixed by the directors at the meeting 
at which such directors were elected. No notice shall be necessary to 
the newly elected directors in order legally to constitute such meeting, 
providing a majority of the whole board shall be present.
    Section 4.05. Regular Meetings. Regular meetings of the board of 
directors shall be held each month at such time and place within ------ 
miles of ------------. Notice of regular meetings of the board of 
directors shall be given to each director, personally or by mail, 
telephone or telegraph, at least 5 days prior to the day named for such 
meeting.
    Section 4.06. Special meetings. Special meeting of the board may be 
called by or at the request of the president and shall be called by the 
secretary at the request of any two directors on three days notice. Such 
notice shall be by mail, telephone or telegraph and shall state the 
time, place (as provided below) and purpose of meeting. The authorized 
person or persons calling a special meeting of the board may fix any 
place within or not more than ------ miles from ------------ as the 
place for holding such meeting.
    Section 4.07. Waiver of notice. Before or at any meeting of the 
board of directors, any director may, in writing, waive notice of such 
meeting and such waiver shall be deemed equivalent to the given of such 
notice. Attendance by a director at any meeting of the board shall be a 
waiver of notice by him/her of the time and place thereto. If all 
directors are present at any meeting of the board, no notice shall be 
required and any business may be transacted at such meeting.
    Section 4.08. Quorum. A majority of the board shall constitute a 
quorum for the transaction of business at any meeting of the board; but 
if less than a majority of the directors is present at said meeting, a 
majority of the directors present may adjourn the meeting from time to 
time without further notice.
    Section 4.09. Fidelity Bonds. The board of directors shall require 
that all officers and employees of the cooperative handling or 
responsible for cooperative or trust funds shall furnish adequate 
fidelity bonds. The premiums on such bonds shall be paid by the 
cooperative.
    Section 4.10. Manner of acting. The act of a majority of the 
directors at a meeting at which a quorum is present shall be the act of 
the board, unless the act of a greater number is required by law or by 
these bylaws. The board may also act by written consent of all the 
directors of the cooperative setting forth the action taken.
    Section 4.11. Vacancies. Any vacancy occurring on the board shall be 
filled by the board until the next meeting of the members and until a 
successor has been elected by the members to fill a vacancy. Such person 
shall be elected for the unexpired term of office of the predecessor in 
office.
    Section 4.12 Directors--removal from office. A director may be 
removed from office for violation of these bylaws or rules set forth in 
the Occupancy Agreement, by the vote of not less than three-fourths of 
the members present at a meeting of the members, provided notice of such 
proposed action shall have been duly given in the notice of the meeting 
and provided the director has been informed in writing of the charges 
preferred against the director at least 10 days before such meeting. The 
director involved shall be given an opportunity to be heard at such 
meeting. Any vacancy created by the removal of a director shall be 
filled by a majority vote, which may be taken at the same meeting at 
which such removal takes place.
    Section 4.13. Compensation. Directors shall not receive any 
compensation for their services as directors.
    Section 4.14. Directors--absence from meetings. Any director who is 
absent from ------ consecultive meetings without excuse satisfactory to 
the board shall be deemed to have surrendered the office of director.
    Section 4.15. Directors--Residuary Powers. The board shall have the 
powers and duties necessary or appropriate for the administration of the 
affairs of the cooperative. All powers of the cooperative except those 
specifically granted or reserved to the members by law, the Articles of 
Incorporation, or these bylaws shall be vested in the board.
    Section 4.16. Adviser to the board. The adviser to the board will be 
a member (or members) of the community who is not a member of the 
cooperative. In that capacity, the individual will be responsible for 
maintaining regular contacts with the board as well as being available 
to respond to special needs of the board at mutually agreeable times. 
The adviser will guide the board in its role of

[[Page 451]]

self-manager until such time as the adviser and FmHA or its successor 
agency under Public Law 103-354 determine that such close guidance is no 
longer necessary, usually not to exceed 2 years. At that time, the 
adviser will continue to counsel the board as appropriate. If it is 
apparent to the adviser, during this second phase of converting to self-
management, that the cooperative is unable to assume such a 
responsibility, the adviser will again establish the close supervision 
required in the first phase of operation. The ultimate goal of the 
adviser and the board is to achieve self-management for the cooperative. 
If this goal cannot be realized within a timeframe determined during the 
first, or subsequent, year of operation, then the management reserve 
funds will be used to hire professional management, thus relieving the 
adviser of his/her responsibilities.

                                Article V

                                Officers

    Section 5.01. Officers. The officers of the cooperative shall be a 
president, a vice president, a secretary, and a treasurer. The board may 
elect or appoint such other officers as it shall deem desirable, such 
officers to have the authority and perform the duties prescribed, from 
time to time, by the board. The offices of secretary and treasurer may 
be combined and held by one person.
    Section 5.02. Election and term of office. (a) The officers of the 
cooperative specified in Section 5.01 shall be elected from the 
membership of the board by the board at its annual meeting or as soon 
thereafter as feasible. New officers may be created and filled at any 
meeting of the board. Each officer shall hold office until the next 
annual election of directors and until a successor shall have been duly 
elected and shall have qualified.
    (b) The term of office shall be one year. Election of officers shall 
take place at the annual board meeting and shall be by ballot cast by 
qualified directors. A plurality of votes cast shall elect.
    Section 5.03. Removal. Any officer elected or appointed by the board 
may be removed by the board by two-thirds vote of the remaining 
directors FmHA or its successor agency under Public Law 103-354 
whenever, in its judgment, the best interests of the cooperative would 
be thereby served. Such removal shall be without prejudice to the 
membership rights, if any, of the officer so removed.
    Section 5.04. Vacancies. A vacancy in any office because of death, 
resignation, removal, disqualification, or otherwise, may be filled by 
the board by majority vote for the unexpired portion of the term.
    Section 5.05. President. The president shall be the principal 
executive officer of the cooperative and shall in general supervise and 
control all the business and affairs of the cooperative. The president 
shall preside at all meetings of the members and of the board. The 
president may sign, with attestation of the secretary or any other 
proper officer of the cooperative authorized by the board, any deeds, 
mortgages, bonds, contracts, or other instruments which the board 
authorizes to be executed. In some cases the signing and execution 
thereof shall be expressly delegated by the board or these bylaws or 
statute to some other officers or agent of the corporation and in 
general shall perform all duties incident to the office of president and 
such other duties as may be prescribed by the board from time to time.
    Section 5.06. Vice President. In the absence of the president or in 
the event of an inability or refusal to act, the vice president shall 
perform the duties of the president and, when so acting, shall have all 
the powers of and be subject to all the restrictions upon the president. 
Any vice president shall perform such other duties as from time to time 
may be assigned by the president of the board.
    Section 5.07. Secretary. The secretary shall keep the minutes of the 
meeting of the members and the board in one or more books provided for 
that purpose, see that all notices are duly given in accordance with the 
provisions of these bylaws or as required by law; be custodian of and 
see that the seal of the cooperative is affixed to all documents, the 
execution of which is on behalf of the cooperative under its seal, is 
duly authorized in accordance with the provisions of these bylaws; keep 
a register of the post office address of each member, which shall be 
furnished to the secretary and such other duties as from time to time 
may be assigned by the president of the board.
    Section 5.08. Treasurer. The treasurer shall have charge and custody 
of and be responsible for all funds and securities of the cooperative; 
receive and give receipts for moneys due and payable to the cooperative, 
from any source whatsoever, deposit all such money in the name of the 
cooperative in such banks, trust companies, or other depositories as 
shall be selected in accordance with the provisions of Article VIII of 
these bylaws; and in general perform all duties incident to the office 
of treasurer and such other duties as from time to time be assigned by 
the president of the board.

                               Article VI

                            Order of Business

    Section 6.01. Order of business. The order of business at any 
regular or special meeting of the members or the board shall be:

a. Roll Call.
b. Proof of notice of meeting or waiver of notice.

[[Page 452]]

c. Reading and approving of any unapproved minutes.
d. Reports of officers and committees.
e. Election of inspectors of election (when applicable)
f. Election of directors (when applicable).
g. Unfinished business.
h. New business.
i. Adjournment.
    If present, a representative of FmHA or its successor agency under 
Public Law 103-354 will be given an opportunity to address any regular 
or special meeting.
    Section 6.02. Parliamentary Procedure. On questions of parliamentary 
procedure not covered in these bylaws, a ruling by the president shall 
prevail.

                               Article VII

                               Committees

    Section 7.01. Committees of directors. The board of directors, by 
resolution adopted by majority of the directors in office, may designate 
one or more committees, each of which shall consist of one or more 
directors, which committees, to the extent provided in said resolution, 
shall have and exercise the authority of the board in the management of 
the cooperative; but the designation of such committees and the 
delegation thereto of authority shall not operate to relieve the board, 
or any individual director, of any responsibility imposed upon the board 
or any individual director by law.
    Section 7.02. Membership committees. Other committees not having and 
exercising the authority of the board in the management of the 
cooperative will be designated by a resolution adopted by a majority of 
the directors present at a meeting at which a quorum is present. At the 
first membership meeting the members will be solicited by the president 
to obtain voluntary commitments to serve on the various committees. As 
many members as possible should be encouraged to become involved in 
committee responsibilities. Any member may be removed from a committee 
by the president whenever in his/her judgment the best interest of the 
cooperative shall be served by such removal.
    Section 7.03. Term of office. Each member of membership committees 
shall continue as such until the next annual meeting of the members of 
the cooperative when members may change from one committee to another. 
Additional members may join a committee at any time during the year.
    Section 7.04. Chairperson. One member of each membership committee 
shall serve as chairperson by decision of the members of the committee. 
The chairperson will report committee activities and receive direction 
from a designated member of the board.
    Section 7.05. Vacancies. Vacancies in the membership of any 
membership committee may be filled in the same manner as provided in the 
case of the original members.
    Section 7.06. Quorum. Unless otherwise provided in the resolution of 
the board of directors designating a committee, a majority of the whole 
membership committee shall constitute a quorum and the act of a majority 
of the members present at a meeting at which a quorum is present shall 
be the act of the committee.
    Section 7.07. Rules. Each membership committee may adopt rules for 
its own government not inconsistent with these bylaws or with rules 
adopted by the board of directors.

                              Article VIII

                 Contracts, Checks, Deposits, and Funds

    Section 8.01. Deposits. All funds of the cooperative shall be 
deposited from time to time to the credit of the cooperative in such 
Federally insured banks, trust companies, or other Federally insured 
depositories as board may select.
    Section 8.02. Gifts. The board may accept on behalf of the 
cooperative any contribution, gift, bequest, or devise for the general 
purposes or for any special purpose of the cooperative.

                               Article IX

                       Certificates of Membership

    Section 9.01. Issuance of certificates. When a person has been 
approved for membership and has paid any dues that may then be required, 
a certificate of membership shall be issued in his/her name and 
delivered to the member by the secretary.

                                Article X

    Section 10.01. Books and accounts. The Treasurer of the cooperative 
shall keep correct and complete books and records of account and shall 
keep minutes of the proceedings of its members, the board, and 
committees having any of the authority of the board of directors, and 
shall keep at the registered or principal office a record giving the 
names and addresses of the members. All books and records of the 
cooperative may be inspected by any member, or member's agent or 
attorney, or FmHA or its successor agency under Public Law 103-354 for 
any proper purposes at any reasonable time.
    Section 10.02. Auditing. At the close of each fiscal year, the books 
and records of the cooperative shall be audited by a Certified Public 
Accountant or other person acceptable to FmHA or its successor agency 
under Public Law 103-354 whose report will be prepared and certified in 
accordance with the requirements of FmHA or its successor agency under 
Public Law 103-354. Based on such reports, the cooperative will furnish 
its members with an annual financial statement including the income and 
disbursements of

[[Page 453]]

the cooperative. The cooperative will also supply the members, as soon 
as practicable after the end of each calendar year, with a statement 
showing the amount assigned to each member's patronage capital account.

                               Article XI

                               Fiscal Year

    The fiscal year of the cooperative shall begin on the first day of 
January and end on the last day of December in each year, except that 
the first fiscal year of the cooperative shall begin at the date of 
incorporation.

                               Article XII

                                  Seal

    The board shall provide a cooperative seal, which shall be in the 
form of a circle and shall have inscribed thereon the name of the 
cooperative and the words ``Cooperative Seal.'' The seal will be kept by 
the secretary.

                              Article XIII

                            Waiver of Notice

    Whenever any notice is required to be given under the provisions of 
the statutes of said State or the Articles of Incorporation or the 
Bylaws of the cooperative, a waiver thereof in writing signed by the 
person or persons entitled thereto, whether before or after the time 
stated therein, shall be deemed equivalent to the giving of such notice.

                               Article XIV

                      Repeal of Amendment of Bylaws

    Section 14.01. Repeal of amendment of bylaws. These bylaws may be 
repealed or amended by a majority vote of the members present at any 
annual meeting of the members, or at any special meeting of the members 
called for such purpose, at which a quorum is present provided that 
while FmHA or its successor agency under Public Law 103-354 is mortgagee 
no amendment will become effective until it has received the FmHA or its 
successor agency under Public Law 103-354 written approval of FmHA or 
its successor agency under Public Law 103-354 and provided no such 
action shall change the purposes of the cooperative so as to impair its 
rights and powers under the laws of said State, or to waive any 
requirements of bond or any provision for the safety and security of the 
property and funds of the cooperative or its members, or to deprive any 
member without an express assent of rights, privileges or immunities 
then existing. Notice of any amendment to be offered at any meeting 
shall accompany the notice of any regular or special meeting at which 
proposed amendment is to be voted upon.

[56 FR 2248, Jan. 22, 1991]

  Exhibit E to Subpart E of Part 1944--Support Services for Congregate 
                         Housing and Group Homes

                               I. Purpose

    This exhibit prescribes support services for congregate housing and 
group homes.

                               II. General

    The success of congregate housing and group homes will depend on the 
quality and affordability of the service component. Congregate housing 
applicants should explore the feasibility of providing services 
individually to ensure affordability by very low-income tenants.

            III. Existing Community Services and Requirements

    Applicants should check local service agencies to determine what 
services are already available in the community. Services can often be 
provided more inexpensively through local service agencies or other 
groups which assist in providing services. In many communities there are 
established volunteer groups that may be willing to provide volunteer 
assistance to congregate housing tenants. Volunteer groups with a 
history of assisting elderly people may be able to supplement the 
delivery of services and help keep the costs affordable. Applicants 
should explore the availability of volunteers from the Retired Senior 
Volunteer Program (RSVP), local church groups and other community 
organizations. If volunteer groups are used, an alternative method of 
service delivery must be addressed in case the availability of 
volunteers ceases in the future. Applicants must also verify State and 
local licensing and certification requirements and include relevant 
information in the loan request.

                         IV. Service Agreements

    Applicant must submit a service agreement(s) for services that will 
not be provided by employees of the project. If services will be 
provided by employees of the project, the applicant must submit a 
separate budget for services and describe how tenants will be billed for 
services. Employees of congregate housing facilities who perform tasks 
for the management of the building and spend an appreciable amount of 
time in providing services to tenants should have their salaries 
prorated between the project's operation and maintenance budget and the 
services budget.

[[Page 454]]

                   V. Services for Congregate Housing

    The following services must be made available to tenants of 
congregate housing projects:
    A. Meals. At least one nutritious meal a day, 7 days a week, must be 
provided in accordance with Sec. 1944.224(a)(5)(i) of this subpart. The 
following information concerning the meal service must be included with 
the loan request.
    1. Who will provide the meals (i.e., meals offered by a local agency 
with tenant contribution; supplied or contracted for by owner with 
charge to tenant)?
    2. If the service will be provided by employees of the project, a 
proposed breakdown of costs for the meal service. The breakdown should 
include the cost of food, personnel and utilities needed to prepare and 
serve the meals. Information concerning the proposed staffing should be 
included.
    3. The cost to the tenant. Will tenants pay by the meal or be 
charged a rate for a specified time?
    4. A statement concerning the frequency of meals, including the 
number of meals to be served per week.
    5. Information concerning how the meals will be served (i.e., waiter 
style, buffet, tray service).
    6. Any licensing requirement necessary for the service.
    B. Transportation. Adequate transportation must be provided to 
shopping, medical and other services to meet the needs of the tenants. 
Applicants are encouraged to locate congregate housing facilities so 
that tenants can use public services. In many cases, service is 
available and the applicant can arrange for the project to be included 
in the schedule established by the provider. The following information 
concerning the transportation service must be included with the loan 
request:
    1. Who will provide the service (i.e., transportation provided by a 
local agency with tenant contribution; vehicle leased or purchased by 
applicant with charge to tenant)?
    2. If the service will be provided by employees of the project, a 
proposed breakdown of costs for the transportation service. The 
applicant should address the following costs: vehicle purchase or lease 
payment; personnel to operate the vehicle; fuel; maintenance; and 
insurance.
    3. The cost to the tenant. Will tenants pay for each trip or will 
they be charged a monthly rate?
    4. A typical proposed schedule.
    C. Housekeeping. Housekeeping services must be offered to assist 
congregate tenants with household tasks. The applicant must address the 
following concerning the housekeeping service:
    1. Who will provide the service (i.e., housekeeping offered by a 
local agency with tenant contribution; supplied or contracted for by 
applicant with charge to tenant)?
    2. If the service is provided by employees of the project, a 
proposed cost breakdown for the service which includes the cost of labor 
and supplies.
    3. The type of tasks that will be offered (i.e., light housekeeping, 
laundry, shampooing carpeting). What is the planned frequency of the 
tasks?
    4. The cost to the tenant.
    D. Personal services. Personal services include such items as 
assistance with personal hygiene, nutrition counseling and general 
health screening (blood pressure checks, etc.). The following 
information concerning the personal services must be submitted with the 
loan request:
    1. Who will provide the service (i.e., personal services offered by 
a local agency with tenant contribution; volunteer health services; 
contracted for by applicant with charge to tenant)?
    2. If the service is provided by employees of the project, a 
proposed cost breakdown for the service which includes the cost of labor 
and supplies.
    3. The type of tasks that will be provided.
    4. The cost to the tenant.
    5. Any licensing requirement necessary for the services.
    E. Recreational/social. Recreational and social activities must be 
offered to tenants to encourage interest in a variety of areas. The 
following areas could be considered: hobby and craft classes; dinners 
for holidays, birthdays, etc.; educational lectures; wellness and 
exercise programs; and a library. The applicant should encourage 
recreational/social activities which cause interaction between tenants, 
the project and the community. The following information concerning the 
recreational/social service must be included with the loan request:
    1. Who will provide the service (i.e., recreational/social 
activities offered by a local agency with tenant contribution; supplied 
or contracted for by applicant with charge to the tenant)?
    2. If the service is provided by employees of the project, a 
proposed cost breakdown which includes the cost of labor and supplies.
    3. The types and frequency of recreational/social activities that 
will be offered.
    4. The cost to the tenant.

                      VI. Services for Group Homes

    The following services must be made available to tenants of a group 
home:
    A. Meals. At least three nutritious meals a day, 7 days a week, must 
be provided if tenants are not capable of preparing their meals. If 
meals are provided, the budget may include only the cost of food if 
tenants assist a staff person in preparing meals. Tenants in some group 
homes may be able to prepare meals on their own with supervision from a

[[Page 455]]

project personnel. In these cases, applicants must ensure that the 
tenants will be preparing nutritious meals.
    B. Transportation. Applicants must submit information on the 
transportation service as detailed in paragraph V B of this exhibit.
    C. Housekeeping. Applicants must provide a narrative explaining how 
housekeeping will be accomplished. In many cases, group home tenants 
assist with housekeeping chores with little expense being borne by the 
project. Applicants should detail expenses that will be part of the 
service budget.
    D. Personal services. A higher percentage of tenants in a group home 
may require personal services. Applicants must detail the services to be 
offered and the cost to tenants.
    E. Recreational/social. In most cases, there will be little expense 
for recreational/social opportunities in a group home. Applicants should 
explain what will be offered to the tenants and the projected cost to 
tenants.

VII. Additional Items Necessary for Congregate Housing/Group Homes That 
 Cannot be Financed with FmHA or its successor agency under Public Law 
                           103-354 Loan Funds

    Congregate housing/group home projects require additional items that 
will not become affixed to the real estate. These items can include 
special portable equipment, furnishings, kitchen bars, dining ware, 
eating utensils, movable tables and chairs, steamtables, etc. In 
accordance with Sec. 1944.224(a)(3) of this subpart, loan funds cannot 
be used to finance these items. As a part of the loan request, 
applicants must include a proposed list of additional items that will be 
needed by the project and state how these items will be paid for.

[55 FR 26647, June 29, 1990, as amended at 58 FR 40954, July 30, 1993; 
62 FR 25065, May 7, 1997]

Exhibit F to Subpart E of Part 1944--Qualifications of an Adviser to the 
                                  Board

                Qualifications of an Adviser to the Board

    In the Board's analysis of the talents and abilities of a person to 
handle the job of adviser, the first attribute most desirable is the 
capacity to be a friend. The definitions of a friend include (1) A 
person whom one knows, likes, and trusts; (2) one with whom one is 
allied in a struggle or cause; (3) one who supports, sympathizes with or 
patronizes a group, cause, or movement.
    The adviser must care about the person he or she is trying to help. 
That means having patience and understanding during the trial and error 
period of a new cooperative's operation and also when it becomes 
necessary to explain complicated regulations or legal documents more 
than just once to those who have had less educational opportunities than 
the adviser.
    The adviser must teach a totally new housing concept to persons who 
have only had experience with a rental environment. This means that the 
adviser must be able to talk to each and every person who is interested 
in the cooperative housing and explain just what the person is facing. 
The adviser must also be able to listen to those who rely on someone's 
``being there'' to hear their problems and ideas. The adviser must be 
someone who is able to work with low-income persons and one who both 
understands their particular circumstances and strives to improve their 
well-being. The adviser, in this regard, must be able to learn as well 
as to teach.
    The adviser must be dedicated to those persons with whom he or she 
is associated as well as to have the capacity to work with city 
officials, Government officials, politicians, and other professionals to 
achieve the goal of housing the local citizens.

                        I. Educational Background

    a. Experience in working with--

Low-income people and with the problems inherent with this group.
    b. Administrative background for--

    1. Setting up system for management, including detailed financial, 
personal, and activity records;
    2. Setting up system for maintenance for buildings, grounds, and 
equipment.
    c. Training to--

1. Accept the major responsibility of teaching and have the experience 
          to carry this out.
2. Make certain that members are learning while doing, whatever the 
          activity.
3. Know how to use group dynamics.
4. Be ready to assist individual members resolve problems.
5. Recognize a need for social casework when required, then be able to 
          give or obtain that assistance. (Individual problems quickly 
          affect cooperatives.)
6. Have knowledge of and make effective use of resources.
7. Handle the business of a cooperative while teaching members how to 
          manage it themselves.
8. Understand complexity of management and maintenance.
9. Be able to understand, interpret, and teach the contents of documents 
          from funding agencies.

Ideally, a background in social work would be the most logical 
experience, but others can be considered.

[56 FR 2252, Jan. 22, 1991]

[[Page 456]]

   Exhibit F-1 to Subpart E of Part 1944--Relationship of Adviser to 
                                 Members

                   Relationship of Adviser to Members

    I. The adviser must be able to teach the members and the members 
must be willing to learn management and maintenance of total Cooperative 
while they gradually assume more and more responsibilities, until the 
cooperative is completely self-managed.
    II. In order to be effective, the adviser should have the ability to 
teach to members:

a. The complete procedures and techniques of management and maintenance.
b. A cooperative approach to everything involved while member lives in a 
          cooperative.
c. An ability to deal with persons in authority.
d. Resources and how to use them.
e. Board procedures and specific duties.
f. Functions and responsibilities of Committees.
g. Regulatory documents and their importance.
h. Attitudes and procedures that will help member to:
    1. Learn while doing.
    2. Make payments on time.
    3. Develop a willingness to do his or her fair share of the work and 
the decision-making.
    4. Cultivate a concern for his or her neighbor.
    5. Consider the good of the group, ahead of self-interest.
    6. Use his or her vote and know it counts: within the cooperative 
for directors and officers of the board; outside for local, state, and 
national Government.
    7. Cooperate with board and committees.
    III. The adviser must be able to help the people understand that 
there are rules which must be followed. The adviser must make certain 
that the members realize that, by signing their occupancy agreement, 
they are agreeing to live up to all aspects of that agreement. In so 
doing, they are agreeing to abide by all of the funding agency's 
regulations pertaining to the cooperative. These regulatory documents 
must be taught over and over and consulted by the members in all major 
decisions. The adviser would also be expected to:
a. Work with families or individuals with specific problems.
b. Consider each activity as an opportunity for the members to learn, 
          learning while doing must be the members' primary goal.
c. Become involved in the early planning stage of the cooperative.
d. Involve members in decisionmaking during the planning stage, 
          including the selection of living unit.
e. Feel a part of the group of members and break down regulations and 
          instructions into language understood by them.
f. Give members the freedom and encouragement to express ideas and to 
          carry out ideas accepted by the majority unless they are 
          contrary to Government regulations.
g. Interpret Government regulations and guidelines, being able to apply 
          and teach them.

[56 FR 2252, Jan. 22, 1991]

      Exhibit G to Subpart E of Part 1944--Adviser Responsibilities

                        Adviser Responsibilities

    I. Responsibilities of the adviser to the board will include--
a. Serving as backup manager while teaching self-management and 
          maintenance to the members.
b. Assisting in organizing the board of directors and standing 
          committees and meeting regularly with them.
c. Assisting in continual evaluation and monitoring of operations.
d. Developing an educational plan and being responsible for its 
          implementation.
e. Assisting in setting up systems and procedures for--
    1. Management, including detailed financial, personal, and activity 
records;
    2. Maintenance of buildings, grounds, and equipment.
f. Assisting with financial questions that are not of sufficient 
          complexity to require referral to an outside auditor.
g. Advising in evaluation of new applicants for membership.

[56 FR 2252, Jan. 22, 1991]

      Exhibit H to Subpart E of Part 1944--Limited Equity Agreement

                        Limited Equity Agreement

    This Agreement, dated ------------, by and between ------------ 
(hereinafter ``referred to as the ``Cooperative''), a corporation having 
its principal office and place of business at ------------ and Farmers 
Home Administration or its successor agency under Public Law 103-354, 
United States Department of Agriculture (hereinafter referred to as 
FmHA).

                           Witnesseth Whereas

    The purpose of the cooperative is to own and operate cooperative 
housing on behalf of its members, and the cooperative has applied to 
FmHA or its successor agency under Public Law 103-354 for mortgage 
financing as authorized under Section 515 of the Housing Act of 1949, as 
amended.

[[Page 457]]

    The purpose of FmHA or its successor agency under Public Law 103-354 
is to provide long term housing financing for very-low, low-, and 
moderate-income persons and households, although initially eligible 
cooperative members may remain in occupancy after exceeding the income 
limit established for moderate income.
    The additional purpose of FmHA or its successor agency under Public 
Law 103-354 is to maintain the availability of units financed by FmHA or 
its successor agency under Public Law 103-354 for very-low, low-, and 
moderate-income persons for as long as possible up to the 30-year 
maximum life of the loan.
    As a means for implementing and carrying out these purposes, the 
cooperative pledges to FmHA or its successor agency under Public Law 
103-354 that:
    (a) Equity accumulated by the cooperative, other than through the 
appreciation in value of real estate, furnishings, and equipment of the 
cooperative, will be assigned on the cooperative's books equally to 
members at the end of its fiscal year and in accordance with the IRS 
ruling concerning patronage capital.
    (b) The members will be notified, in writing, of the amount assigned 
to his or her patronage account each year after the assignment has been 
made.
    (c) The officers, board of directors, and members of the cooperative 
may not act to dissolve the cooperative for the purpose of distributing 
equity, or for other reasons, except as necessary due to default or 
other circumstances beyond the cooperative's control, and
    (d) Should it become necessary to dissolve the cooperative, all 
property and assets of the cooperative will be transferred to another 
nonprofit or such other municipal organization and be maintained for the 
same purposes for which it was started.
    (e) Only membership fees and money accrued in the member's patronage 
capital accounts will be distributed to the members and represents the 
entire equity payment to which the members are entitled. The cooperative 
reserves the right to withdraw from the equity payment or membership fee 
any amount due the cooperative through member's delinquency in payment 
of occupancy charge or through damage to the premises.
    In witness thereof, the parties hereto have caused this agreement to 
be signed and sealed the day and year first above written.

________________________________________________________________________
 (Cooperative)

________________________________________________________________________
 (Witness)

By:------------ (Seal)
 (Member)

    This agreement will be filed with the member's record.

[56 FR 2252, Jan. 22, 1991, as amended at 62 FR 67224, Dec. 23, 1997]

       Exhibit I to Subpart E of Part 1944--Subscription Agreement

                         Subscription Agreement

Dwelling Unit No. ------------

Date ------------

    1. Subscription Amount:
    (a) I/We ------------, a legal resident(s) of ------------, 
hereinafter called ``Subscriber,'' hereby subscribe for membership in --
----------, a cooperative housing corporation hereinafter called the 
``Cooperative,'' and hereby subscribe to a Membership Certificate in 
said Cooperative having a par value of $------------.
    (b) Subscriber hereby agrees to pay for the Membership Certificate, 
also referred to as Membership Fee, as follows:
    (1) $------------ upon signing this Agreement.
    (2) $------------ in monthly payments of ------------ payable over 
------------ consecutive months (not to exceed 12 months).
    2. Ratification of Other Provisions. Subscriber has read and agrees 
to be bound by all provisions of the articles of incorporation, bylaws, 
and occupancy agreement, copies of which are attached hereto and receipt 
of which is hereby acknowledged, and agrees to be bound by requirements 
of the Farmers Home Administration (FmHA) or its successor agency under 
Public Law 103-354 as long as it remains mortgagee.
    3. Priority of mortgage lien. This agreement and all rights 
hereunder are and at all times shall be subject and subordinate to the 
lien of the mortgage and accompanying documents to be executed by the 
Cooperative to FmHA or its successor agency under Public Law 103-354 and 
to any and all modifications, extensions, and renewals thereof; and to 
any mortgage or deed of trust which may at any time hereafter be placed 
on the property of the Cooperative or any part thereof.
    4. Occupancy agreement. Subscriber, if approved for membership, will 
be entitled to occupancy of the above numbered dwelling unit under 
provisions of the above-mentioned occupancy agreement. Estimated initial 
charge per month for said unit will be established prior to signing the 
occupancy agreement. Future charges will be based on family income, as 
provided for in the occupancy agreement. I/We agree to execute the 
occupancy agreement on demand and to comply with all the terms thereof.
    5. Cancellation rights. (a) The Cooperative reserves the right at 
any time before it has notified the Subscriber of his/her acceptability 
for membership, for reasons deemed

[[Page 458]]

sufficient by the Cooperative, and approved by FmHA or its successor 
agency under Public Law 103-354, to return the amount paid by the 
Subscriber under this Agreement. In the event the Subscriber shall have 
died prior to becoming a member, the Cooperative reserves the right to 
return the amount paid by the Subscriber under this Agreement to the 
Subscriber's estate or legal representative, and thereupon all rights of 
the Subscriber shall cease and terminate without further liability on 
the part of the Cooperative.
    (b) It is understood that the Subscriber's credit is subject to 
approval by FmHA or its successor agency under Public Law 103-354, and 
that said Subscriber's total household income must not exceed any 
limitations for initial occupancy established by FmHA or its successor 
agency under Public Law 103-354. In the event FmHA or its successor 
agency under Public Law 103-354 determines that the Subscriber does not 
meet FmHA or its successor agency under Public Law 103-354 credit, 
income limitation, or other eligibility requirements for participation 
in this project, the Cooperative shall return to Subscriber the sums 
paid hereunder. In the event FmHA or its successor agency under Public 
Law 103-354 determines that the necessary loan to finance the 
Cooperative housing project cannot be made or insured by FmHA or its 
successor agency under Public Law 103-354, or the Cooperative withdraws 
its application for such loan, the Cooperative shall return to 
Subscriber all sums paid by Subscriber hereunder. Upon either 
determination by FmHA or its successor agency under Public Law 103-354 
and the return of the sums to Subscriber as provided in this paragraph 
(b), this agreement shall become null and void and all rights and 
liabilities hereunder of the parties shall cease and terminate.
    (c) If the Subscriber within five (5) days after the execution of 
this subscription agreement, notifies the Cooperative in writing that he 
wishes to withdraw from the agreement, the amounts paid by the 
Subscriber under this agreement will be returned to the Subscriber and 
thereupon all rights and liabilities of the Subscriber hereunder shall 
cease and terminate. If, at the end of the five-day period, the 
Subscriber has not exercised this right to withdraw, the right will be 
terminated. If FmHA or its successor agency under Public Law 103-354 
determines that membership has not been achieved to the extent required 
by FmHA or its successor agency under Public Law 103-354, the Subscriber 
will again have the right to withdraw within a five-day period.
    (d) If the Subscriber defaults in any obligation under this 
Agreement, and such default continues for fifteen (15) days after notice 
sent by registered mail by the Cooperative to the Subscriber at the 
address given below, then at the option of the Cooperative, the 
Subscriber shall lose any and all rights under this agreement. Any 
amount paid toward this subscription price at the option of the 
Cooperative may be retained by the Cooperative as liquidated damages or 
be returned, less the Subscriber's proportionate share of expenses 
incurred by the Cooperative as determined solely by the Cooperative. The 
Cooperative may, at its option, release the obligations of the 
Subscriber under this agreement in the event the Subscriber secures an 
assignee of this agreement who assumes the obligations herein contained 
and is satisfactory to the Cooperative and FmHA or its successor agency 
under Public Law 103-354 while mortgagee. This Agreement is not 
otherwise assignable.
    6. Oral Representation Not to be Relied Upon. This agreement will 
supersede any prior understandings and agreements and constitutes the 
entire agreement between the Subscriber and the Cooperative, and no oral 
representation or statements shall be considered a part hereof.

Witness:

________________________________________________________________________
 Subscriber

________________________________________________________________________

________________________________________________________________________
 Subscriber

________________________________________________________________________
 Address

________________________________________________________________________
________________________________________________________________________
 Telephone

[56 FR 2253, Jan. 22, 1991]

        Exhibit J to Subpart E of Part 1944--Occupancy Agreement

                           Occupancy Agreement

    This Agreement, dated ----------, by and between ---------- 
(hereinafter referred to as the ``Cooperative''), at ---------- and ----
------ (hereinafter referred to as ``Member'').
    Witnesseth: Whereas:
    The purpose of the Cooperative is to acquire, own, and operate a 
cooperative housing project and its members shall have the right to 
occupy its dwelling units under the terms and conditions set forth in 
this agreement:
    Member is the owner and holder of a certificate of membership of the 
Cooperative and intends to occupy a dwelling unit in the project as 
permanent residence; and
    Member has certified to the accuracy of the statements in Member's 
application and agrees and understands that household income and other 
eligibility requirements are substantial and material requirements of 
his initial and continuing occupancy.

[[Page 459]]

    To Have and To Hold dewelling unit Number ---------- on the terms 
and conditions set forth in this agreement, in the corporate charter, 
bylaws, and any other rules and regulations of the Cooperative. The term 
of this agreement shall be for a three-year period ending on ----------, 
19 ----,\1\ renewable for successive three-year periods under the 
conditions provided for in this Agreement.
---------------------------------------------------------------------------

    \1\ The termination date to be inserted should be three years from 
the date of the occupancy agreement. (These terms may be for periods 
longer than 3 years if mutually agreeable to the member and to the 
cooperative.)
---------------------------------------------------------------------------

                      Article 1. Occupancy Charges

    Section 1.01. Commencing at the time indicated in ARTICLE 2, the 
Member agrees to pay to the Cooperative a monthly sum referred to as the 
``Occupancy Charge.'' This amount will be equal to one-twelfth of the 
Member's proportionate share of the total amount required by the 
Cooperative, as estimated by its board of directors, to meet its annual 
expenses and the requirements of the FmHA or its successor agency under 
Public Law 103-354 loan. These inlcude but are not limited to, the 
following items:
    (a) Project operating expenses and cost of services furnished.
    (b) Necessary management reserve and administrative costs.
    (c) Taxes and assessments levied against the project or the 
Cooperative which it is required to pay.
    (d) Fire and extended coverage insurance on the project and any 
other insurance which the Cooperative may require.
    (e) The cost of furnishing any water, electricity, heat, gas, 
garbage and trash collection, and other utilities, if furnished by the 
Cooperative.
    (f) Payments to other reserves set up by the board of directors.
    (g) Estimated costs of repairs, maintenance, and replacements of 
project property to be made by the Cooperative.
    (h) The amount of principal, interest, and any other required 
payments on any indebtedness of the Cooperative, including any loan made 
or insured by the Farmers Home Administration (FmHA) or its successor 
agency under Public Law 103-354, United States Department of 
Agriculture.
    (i) Any other expenses of the Cooperative approved by the board of 
directors and by FmHA or its successor agency under Public Law 103-354, 
while mortgagee, including operating deficiencies, if any, for prior 
periods.
    Section 1.02. The board of directors shall determine the amount of 
the occupancy charges annually, but may do so at more frequent intervals 
should circumstances so require. No Member shall be charged with more 
than the appropriate share determined by the board of directors. That 
amount of the occupancy charge required for payment on the principal of 
mortgage of the Cooperative or any other capital expenditures shall be 
credited upon the books of the Cooperative as a capital contribution by 
the Members. Until further notice from the Cooperative, the monthly 
charge for the above-mentioned dwelling unit shall be $------.

        Article 2. When Payment of Occupancy Charges To Commence

    Section 2.01. After thirty days' notice by the Cooperative that the 
dwelling unit is available for occupancy, or upon acceptance of 
occupancy, whichever is earlier, Member shall make a payment for 
occupancy charge covering the unexpired balance of the month. 
Thereafter, Member shall pay occupancy charge in advance on the first 
day of each month. Dates of payments may be changed by mutual agreement 
of the Cooperative and FmHA or its successor agency under Public Law 
103-354.
    Section 2.02. The Member agrees to furnish to the Cooperative, each 
year, a certificate of income on which the Member's occupancy charge 
will be determined.

                      Article 3. Patronage Refunds

    Section 3.01. The Board shall, on the books of the Cooperative, 
assign to Member in accordance with the IRS ruling concerning patronage 
capital, a porportionate share of money collected in excess of the 
amount needed for Cooperative expenses, including reserves designated as 
management reserve, and Members will be notified of the amount assigned 
each year.

                   Article 4. Member's Option To Renew

    Section 4.01. It is agreed that the term of occupancy shall be 
renewed for further periods of three years from the expiration of the 
initial term (or for the term mutually agreed to by the member and the 
Cooperative). Such renewals shall be based upon the same agreements as 
contained in this agreement unless: (1) Notice of Member's decision not 
to renew is given to the Cooperative in writing at least 4 months prior 
to expiration of the current terms, and (2) Member, before expiration of 
said term, shall (a) endorse membership certificate for transfer to 
Cooperative and deposits same with the Cooperative, (b) meet all 
obligations and pay all amounts due under this Agreement before said 
expiration, and (c) vacate and leave the premises in good state of 
repair. Upon compliance with foregoing provisions (1) and (2), Member 
shall have no further liability under this agreement. If extenuating 
circumstances warrant, the Member's four-month notification of intention 
to vacate may be modified appropriately. The Member will be entitled to 
the

[[Page 460]]

patronage capital which has accrued and been assigned during the term of 
this agreement provided that provisions (1) and (2) have been met.

      Article 5. Premises To Be Used for Residential Purposes Only

    Section 5.01. Member shall occupy the dwelling unit covered by this 
agreement as a private dwelling unit for the Member and/or immediate 
household and for no other purpose. The Member shall have use of all 
common community property and facilities of the project so long as 
Member continues to own a membership certificate of the Cooperative, 
occupies the assigned dwelling unit, and abides by the terms of this 
Agreement. Any sublessee of the Member , if approved pursuant of Article 
7 hereof, may enjoy the rights to which Member is entitled under this 
Article 5, except that the sublessee will have no voting rights in the 
affairs of the Cooperative.
    Section 5.02. Member shall not permit or suffer anything to be done 
or be kept upon said premises which will increase the rate of insurance 
on the building, or on its contents. Member will not obstruct or 
interfere with the rights of other occupants, or annoy them by 
unreasonable noises or otherwise permit any nuisance on the premises, or 
allow any illegal act to be committed. Member shall comply with all the 
requirements of the Board of Health and of all other governmental 
authorities with respect to the said premises. If, by reason of the 
occupancy or use of these premises by Member, the rate of insurance on 
the building is increased, Member shall become personally liable for the 
additional insurance premiums.

            Article 6. Member's Right to Peaceable Possession

    Section 6.01. In return for Member's continued fulfillment of the 
terms and conditions of this agreement, the Cooperative agrees that the 
Member may at all times while this agreement remains in effect, have and 
enjoy for the Member's sole use and benefit the dwelling unit and 
community facilities hereinabove described.

         Article 7. No Subletting Without Consent of Corporation

    Section 7.01. This agreement shall not be assigned nor Member's 
dwelling unit sublet without the written consent of the Cooperative and 
FmHA or its successor agency under Public Law 103-354, while mortgagee. 
Under this agreement the Member shall be liable for the conduct of the 
sublessee. Any unauthorized subleasing shall, at the option of the 
cooperative and of FmHA or its successor agency under Public Law 103-
354, while mortgagee, result in termination and forfeiture of Member's 
rights under this occupancy agreement.

                          Article 8. Transfers

    Section 8.01. Neither this agreement nor Member's right of occupancy 
shall be transferrable or assignable except as provided in the bylaws of 
the Cooperative for the transfer of membership.

               Article 9. Management, Taxes, and Insurance

    Section 9.01. The Cooperative shall provide necessary management, 
operation, and administration of the project; pay or provide for the 
payment of all taxes or assessments levied against the project; procure 
and pay or provide for the payment of fire insurance and extended 
coverage, and other insurance as the Cooperative may deem advisable on 
property in the project. The Cooperative will not, however, provide 
insurance on Member's personal property.

                          Article 10. Utilities

    Section 10.01. The Cooperative shall arrange for utilities (water, 
electricity, heat, and gas) for common areas of the structure(s) in 
amounts which it deems reasonable and in conformance with exhibit A-6 to 
subpart E of part 1944 (Strike out any of the foregoing items in this 
Article which are not applicable.) Each unit will be separately metered 
and Member shall pay directly to the supplier for the utilities billed 
to Member.

                           Article 11. Repairs

    Section 11.01. By Member. Member agrees to repair and maintain 
Member's dwelling unit at own expense as follows:
    (a) Any repairs or maintenance necessitated by Members's own 
negligence or misuse;
    (b) Any redecoration of own dwelling unit authorized, done or 
contracted for by Member;
    (c) Any repairs, maintenance, or replacements required on the 
following items: (Insert the items desired, subject to FmHA or its 
successor agency under Public Law 103-354 approval.)
    Section 11.02. By cooperative. The Cooperative shall provide and pay 
for all necessary repairs, maintenance, and replacements except as 
specified in Sec. 11.01. Member agrees to the right of the officers of 
the Cooperative to authorize entrance to Member's dwelling unit in order 
to complete necessary repairs, maintenance, and replacements and to 
authorize entrance for such purposes by employees of any contractor, 
utility company, municipal agency, or others at any reasonable hour of 
the day, and upon reasonable notice. In the event of emergency, the unit 
may be entered at any time. Notification of

[[Page 461]]

entry will be left for the member by the person performing the 
maintenance or repair.
    Section 11.03. Right of cooperative to make repairs at member's 
expense. In case Member shall fail to effect and pay for the repairs, 
maintenance, or replacement specified in Sec. 11.01, in a manner 
satisfactory to the Cooperative, the board may do so and add the cost of 
repairs to Member's next month's occupancy charge payment.

                  Article 12. Alterations and Additions

    Section 12.01. The Member shall not, without the written consent of 
the Cooperative make any structural alterations in the premises or in 
the water, gas or steampipes, electrical conduits, plumbing or other 
fixtures connected therewith, or remove any additions, improvements, or 
fixtures from the premises.
    Section 12.02. If Member for any reason ceases to be an occupant of 
the premises, Member shall surrender to the Cooperative possession 
thereof, including any alterations, additions, fixtures, and 
improvements.
    Section 12.03. Member shall not, without the prior written consent 
of the Cooperative install or use in dwelling unit any air conditioning 
equipment, electric heater, or power tools. Member agrees that the 
Cooperative or FmHA or its successor agency under Public Law 103-354, 
while mortgagee, may require the prompt removal of any such equipment at 
any time, and that failure to remove such equipment upon request shall 
constitute a default within the meaning of Article 13 of this agreement.

     Article 13. Definition of Default by Member and Effect Thereof

    Section 13.01. If, at any time after the happening of any event 
specified in clauses (a) through (k), below, the Cooperative gives to 
Member a 30-day notice of expiration, this agreement and all Member's 
rights under this agreement will expire on the date specified in such 
notice. In the meantime the default may be cured in a manner deemed 
satisfactory by the Cooperative. After 10 days following such expiration 
of Member's rights, the Cooperative may reenter the dwelling unit and 
remove all persons and personal property therefrom, by any means 
available to it by law, and may repossess the dwelling unit in its 
former state as if this agreement had not been made.
    (a) If, during the term of this agreement, Member ceases to be the 
owner and legal holder of a membership of the Cooperative.
    (b) If Member attempts to transfer or assign this agreement in a 
manner inconsistent with the provisions of the bylaws.
    (c) If, during continuance of this agreement, Member is declared 
bankrupt under the laws of the United States so as to be released from 
any debt or obligation to the Cooperative or to interfere with his full 
exercise of his rights as Member and occupant.
    (d) If, during continuance of this agreement, a receiver of Member's 
property is appointed under the laws of the United States or of any 
State.
    (e) If, during continuance of this agreement, Member shall make a 
general assignment for the benefit of creditors.
    (f) If, during continuance of this agreement, any of the membership 
rights in the Cooperative owned by Member are duly levied upon and sold 
under the process of any court.
    (g) If Member fails to effect and/or pay for repairs and maintenance 
as provided for in Article 11.
    (h) If Member fails to pay any sum due pursuant to Article 1.
    (i) If default occurs with respect to any obligation of Member under 
this agreement.
    (j) If, during the term of this agreement, Member fails to comply 
promptly with all requests by the Cooperative for information and 
certifications concerning the total current income of Member and 
Member's household or any other eligibility requirements for membership 
or occupancy.
    (k) If, during the term of this agreement, limitations for continued 
occupancy are established from time to time by the FmHA or its successor 
agency under Public Law 103-354 and are exceeded.
    Section 13.02. Member hereby expressly waives any and all right to 
reenter the dwelling if the eviction is by judgment of any court or 
judge. The words enter, reenter, or reentry as used in this agreement 
are not restricted to their technical legal meaning. In the event of a 
breach by Member of the terms of this agreement, the Cooperative shall 
have the right of injunction and the right to invoke any remedy allowed 
at law or in equity, as if reentry, summary proceedings, and other 
remedies were not provided for.
    Section 13.03. Failure by the Cooperative to avail itself of any 
remedy given under this agreement shall not waive or destroy any right 
of the Cooperative to avail itself of remedies for any similar or other 
breach or default by Member.
    Section 13.04. Notice by the Cooperative under any of the conditions 
described in section 13 shall be in writing. The cooperative shall not 
evict any member except by judicial action pursuant to State or local 
law and in accordance with the requirements of subpart C of part 1930 of 
this chapter.

       Article 14. Member To Comply With All Corporate Regulations

    Section 14.01. Member agrees to preserve and promote the cooperative 
ownership principles on which the Cooperative has been founded and to 
abide by the charter, bylaws,

[[Page 462]]

rules and regulations of the Cooperative, and amendments. The Member 
agrees to make diligent effort in performing duties and accepting 
responsibilities either through volunteering or by assignment from the 
board of directors. By acts of cooperation with other members, Member 
will strive to bring about and maintain a high standard in home and 
community conditions. The Cooperative agrees to deliver to Member its 
rules and regulations and/or to distribute them in such other manner as 
to constitute adequate notice.

         Article 15. Effect of Fire Loss on Interests of Member

    Section 15.01. In the event of loss or damage by fire or other 
casualty to Member's dwelling unit without fault or negligence of 
Member, the Cooperative shall determine (1) Whether to restore the 
damaged premises and, if not to restore (2) the amount to be paid to 
Member to redeem membership and for reimbursement for any loss sustained 
by the Member.
    Section 15.02. If, under such circumstances, the Cooperative decides 
to restore the premises, occupancy charges shall stop wholly or 
partially, as determined by the Cooperative, until the premises have 
been restored. If, on the other hand, the cooperative decides not to 
restore the premises, the occupancy charges shall cease from the date of 
such loss or damage.

                 Article 16. Inspection of Dwelling Unit

    Section 16.01. Member agrees that the representatives of any 
mortgage holding a mortgage on the property of the Cooperative, the 
officers of the Cooperative, or authorized representative of the 
Cooperative shall have the right to enter the dwelling unit of Member 
and make inspections and, with the approval of the Cooperative, the 
employees of any contractor, utility company, municipal agency, or 
others shall have the right to enter the dwelling unit of Member and 
make inspections at any reasonable hour of the day, upon reasonable 
notice, and at any time in the event of emergency.

                    Article 17. Subordination Clause

    Section 17.01. The Cooperative housing project of which Member's 
dwelling unit is a part is planned to be constructed by the Cooperative 
with the assistance of a loan to the Cooperative made or insured by the 
FmHA or its successor agency under Public Law 103-354. Therefore, this 
agreement and all rights, privileges, and benefits hereunder shall be at 
all times subject and subordinate to a first mortgage lien or any 
documents executed by the Cooperative to secure its obligations to FmHA 
or its successor agency under Public Law 103-354 and to any extensions 
and removals and to any security instrument which may be made in 
replacement thereof or at any time hereafter be placed on the property 
of the corporation. Member hereby agrees to execute, at the 
Cooperative's request and expense, any instrument which the Cooperative 
or any lender or mortgagee may deem necessary or desirable to 
subordinate this Agreement to any such security instrument. Member 
hereby appoints the Cooperative and each and every officer thereof, and 
any future officer, as irrevocable attorney-in-fact during the term of 
the agreement to execute any such instrument on behalf of Member.

       Article 18. Late Charges and Other Costs in Case of Default

    Section 18.01. In addition to all other sums due or to become due 
under this agreement, Member shall pay to the Cooperative a late charge, 
not to exceed $10.00, at any time payment of occupancy charges, or part 
thereof, is more than 10 days late. This late fee may be waived, 
depending on the circumstances and at the discretion of the board.
    Section 18.02. If, because of default by Member under any obligation 
in this agreement, the Cooperative obtains the services of an attorney, 
Member shall pay to the Cooperative all costs and fees involved, 
including reasonable attorney's fees and the costs of any resulting law 
suit, if such an action becomes necessary.

                           Article 19. Notices

    Section 19.01. Whenever any bylaw of Cooperative, any law, or this 
agreement requires notice to be given to either party, any notice or 
demand by the Cooperative to Member shall be considered to have been 
duly given if the same is delivered to Member at Member's unit or to 
Member's last known address. Any notice or demand by Member to the 
Cooperative shall be considered to have been duly given if delivered to 
an officer of the Cooperative. Such notice may also be given by 
depositing same in the United States mails addressed to Member as shown 
on the books of the Cooperative, or to the president of the cooperative, 
as the case may be, and the time of mailing shall be the time of giving 
such notice.

               Article 20. Oral Representation Not Binding

    Section 20.01. No representation other than those contained in this 
Agreement and in the charter and the bylaws of the Cooperative shall be 
binding upon the Cooperative.
    In Witness Whereof, the parties hereto have caused this agreement to 
be signed and sealed the day and year first above written.

________________________________________________________________________
 Cooperative

By: ------------(Seal)


[[Page 463]]


________________________________________________________________________
 Member

To Be Duly Acknowledged

[56 FR 2253, Jan. 22, 1991]



              Subpart F_Congregate Housing Services Program

    Source: 61 FR 42943, 42949, Aug. 19, 1996, unless otherwise noted.



Sec. 1944.251  Purpose.

    The requirements of this subpart augment the requirements of section 
802 of the National Affordable Housing Act of 1990 (approved November 
28, 1990, Public Law 101-625) (42 U.S.C. 8011), (hereinafter, section 
802), as amended by the Housing and Community Development Act of 1992 
(Public Law 102-550, approved October 28, 1992), which authorizes the 
Congregate Housing Services Program (hereinafter, CHSP or Program).



Sec. 1944.252  Definitions.

    In addition to the definitions in section 802(k), the following 
definitions apply to CHSP:
    Activity of Daily Living (ADL) means an activity regularly necessary 
for personal care.
    (1) The minimum requirements of ADLs include:
    (i) Eating (may need assistance with cooking, preparing or serving 
food, but must be able to feed self);
    (ii) Dressing (must be able to dress self, but may need occasional 
assistance);
    (iii) Bathing (may need assistance in getting in and out of the 
shower or tub, but must be able to wash self);
    (iv) Grooming (may need assistance in washing hair, but must be able 
to take care of personal appearance);
    (v) Getting in and out of bed and chairs, walking, going outdoors, 
using the toilet; and
    (vi) Household management activities (may need assistance in doing 
housework, grocery shopping or laundry, or getting to and from one 
location to another for activities such as going to the doctor and 
shopping, but must be mobile. The mobility requirement does not exclude 
persons in wheelchairs or those requiring mobility devices.)
    (2) Each of the Activities of Daily Living noted in paragraph (1) of 
this definition includes a requirement that a person must be able to 
perform at a specified minimal level (e.g., to satisfy the eating ADL, 
the person must be able to feed himself or herself). The determination 
of whether a person meets this minimal level of performance must include 
consideration of those services that will be performed by a person's 
spouse, relatives or other attendants to be provided by the individual. 
For example, if a person requires assistance with cooking, preparing or 
serving food plus assistance in feeding himself or herself, the 
individual would meet the minimal performance level and thus satisfy the 
eating ADL, if a spouse, relative or attendant provides assistance with 
feeding the person. Should such assistance become unavailable at any 
time, the owner is not obligated at any time to provide individualized 
services beyond those offered to the resident population in general. The 
Activities of Daily Living analysis is relevant only with regard to 
determination of a person's eligibility to receive supportive services 
paid for by CHSP and is not a determination of eligibility for 
occupancy;
    Adjusted income means adjusted income as defined in 24 CFR parts 813 
or 913.
    Applicant means a State, Indian tribe, unit of general local 
government, public housing authority (PHA), Indian housing authority 
(IHA) or local nonprofit housing sponsor. A State, Indian tribe, or unit 
of general local government may apply on behalf of a local nonprofit 
housing sponsor or a for-profit owner of eligible housing for the 
elderly.
    Area agency on aging means the single agency designated by the State 
Agency on Aging to administer the program described in Title III of the 
Older Americans Act of 1965 (45 CFR chapter 13).
    Assistant Secretary means the HUD Assistant Secretary for Housing-
Federal Housing Commissioner or the HUD Assistant Secretary for Public 
and Indian Housing.

[[Page 464]]

    Case management means implementing the processes of: establishing 
linkages with appropriate agencies and service providers in the general 
community in order to tailor the needed services to the program 
participant; linking program participants to providers of services that 
the participant needs; making decisions about the way resources are 
allocated to an individual on the basis of needs; developing and 
monitoring of case plans in coordination with a formal assessment of 
services needed; and educating participants on issues, including, but 
not limited to, supportive service availability, application procedures 
and client rights.
    Eligible housing for the elderly means any eligible project 
including any building within a mixed-use project that was designated 
for occupancy by elderly persons, or persons with disabilities at its 
inception or, although not so designated, for which the eligible owner 
or grantee gives preference in tenant selection (with HUD approval) for 
all units in the eligible project (or for a building within an eligible 
mixed-use project) to eligible elderly persons, persons with 
disabilities, or temporarily disabled individuals. For purposes of this 
subpart, this term does not include projects assisted under the Low-Rent 
Housing Homeownership Opportunity program (Turnkey III (24 CFR part 905, 
subpart G)).
    Eligible owner means an owner of an eligible housing project.
    Excess residual receipts mean residual receipts of more than $500 
per unit in the project which are available and not committed to other 
uses at the time of application to HUD for CHSP. Such receipts may be 
used as matching funds and may be spent down to a minimum of $500/unit.
    For-profit owner of eligible housing for the elderly means an owner 
of an eligible housing project in which some part of the project's 
earnings lawfully inure to the benefit of any private shareholder or 
individual.
    Grantee or Grant recipient means the recipient of funding under 
CHSP. Grantees under this Program may be states, units of general local 
government, Indian tribes, PHAs, IHAs, and local nonprofit housing 
sponsors.
    Local nonprofit housing sponsor means an owner or borrower of 
eligible housing for the elderly; no part of the net earnings of the 
owning organization shall lawfully inure to the benefit of any 
shareholder or individual.
    Nonprofit includes a public housing agency as that term is defined 
in section 3(b)(6) of the United States Housing Act of 1937.
    Person with disabilities means a household composed of one or more 
persons, at least one of whom is an adult who has a disability.
    (1) A person shall be considered to have a disability if such person 
is determined under regulations issued by the Secretary to have a 
physical, mental, or emotional impairment which:
    (i) Is expected to be of long-continued and indefinite duration;
    (ii) Substantially impedes his or her ability to live independently; 
and
    (iii) Is of such a nature that the person's ability could be 
improved by more suitable housing conditions.
    (2) A person shall also be considered to have a disability if the 
person has a developmental disability as defined in section 102(5) of 
the Developmental Disabilities Assistance and Bill of Rights Act (42 
U.S.C. 6001-7). Notwithstanding the preceding provisions of this 
paragraph, the terms person with disabilities or temporarily disabled 
include two or more persons with disabilities living together, one or 
more such persons living with another person who is determined (under 
regulations prescribed by the Secretary of HUD) to be essential to their 
care or well-being, and the surviving member or members of any household 
where at least one or more persons was an adult with a disability who 
was living, in a unit assisted under this section, with the deceased 
member of the household at the time of his or her death.
    Program participant (participant) means any project resident as 
defined in section 802(e)(1) who is formally accepted into CHSP, 
receives CHSP services, and resides in the eligible housing project 
served by CHSP grant.
    Qualifying supportive services means those services described in 
section 802(k)(16). Under this Program, health-

[[Page 465]]

related services mean non-medical supervision, wellness programs, 
preventive health screening, monitoring of medication consistent with 
state law, and non-medical components of adult day care. The Secretary 
concerned may also approve other requested supportive services essential 
for achieving and maintaining independent living.
    Rural Housing Service (RHS) means a credit agency for rural housing 
and rural development in the U.S. Department of Agriculture (USDA).
    Secretary concerned means (1) The Secretary of Housing and Urban 
Development, with respect to eligible federally assisted housing 
administered by HUD; and
    (2) The Secretary of Agriculture with reference to programs 
administered by the Administrator of the Rural Housing Service.
    Service coordinator means CHSP staff person responsible for 
coordinating Program services as described in section 1944.130.
    Service provider means a person or organization licensed or 
otherwise approved in writing by a State or local agency (e.g., 
Department of Health, Department of Human Services or Welfare) to 
provide supportive services.
    State agency means the State or an agency or instrumentality of the 
State.
    State agency on aging means the single agency designated by the 
Governor to administer the program described in Title III of the Older 
Americans Act of 1965 (See 45 CFR part 13).



Sec. 1944.253  Notice of funding availability, application process and 
selection.

    (a) Notice of funding availability. A Notice of Funding Availability 
(NOFA) will be published periodically in the Federal Register by the 
Secretary concerned containing the amounts of funds available, 
allocation or distribution of funds available among eligible applicant 
groups, where to obtain and submit applications, the deadline for 
submissions, and further explanation of the selection criteria, review 
and selection process. The Secretary concerned will designate the 
maximum allowable size for grants.
    (b) Selection criteria are set forth in section 802(h)(1) and shall 
include additional criteria specified by the Secretary concerned.



Sec. 1944.254  Program costs.

    (a) Allowable costs. (1) Allowable costs for direct provision of 
supportive services includes the provision of supportive services and 
others approved by the Secretary concerned for:
    (i) Direct hiring of staff, including a service coordinator;
    (ii) Supportive service contracts with third parties;
    (iii) Equipment and supplies (including food) necessary to provide 
services;
    (iv) Operational costs of a transportation service (e.g., mileage, 
insurance, gasoline and maintenance, driver wages, taxi or bus 
vouchers);
    (v) Purchase or leasing of vehicles;
    (vi) Direct and indirect administrative expenses for administrative 
costs such as annual fiscal review and audit, telephones, postage, 
travel, professional education, furniture and equipment, and costs 
associated with self evaluation or assessment (not to exceed one percent 
of the total budget for the activities approved); and
    (vii) States, Indian tribes and units of general local government 
with more than one project included in the grant may receive up to 1% of 
the total cost of the grant for monitoring the projects.
    (2) Allowable costs shall be reasonable, necessary and recognized as 
expenditures in compliance with OMB Cost Policies, i.e., OMB Circular A-
87, 24 CFR 85.36, and OMB Circular A-128.
    (b) Nonallowable costs. (1) CHSP funds may not be used to cover 
expenses related to any grantee program, service, or activity existing 
at the time of application to CHSP.
    (2) Examples of nonallowable costs under the program are:
    (i) Capital funding (such as purchase of buildings, related 
facilities or land and certain major kitchen items such as stoves, 
refrigerators, freezers, dishwashers, trash compactors or sinks);
    (ii) Administrative costs that represent a non-proportional share of 
costs charged to the Congregate Housing Services Program for rent or 
lease, utilities, staff time;

[[Page 466]]

    (iii) Cost of supportive services other than those approved by the 
Secretary concerned;
    (iv) Modernization, renovation or new construction of a building or 
facility, including kitchens;
    (v) Any costs related to the development of the application and plan 
of operations before the effective date of CHSP grant award;
    (vi) Emergency medical services and ongoing and regular care from 
doctors and nurses, including but not limited to administering 
medication, purchase of medical supplies, equipment and medications, 
overnight nursing services, and other institutional forms of service, 
care or support;
    (vii) Occupational therapy and vocational rehabilitation services; 
or
    (viii) Other items defined as unallowable costs elsewhere in this 
subpart, in CHSP grant agreement, and OMB Circular A-87 or 122.
    (c) Administrative cost limitation. Grantees are subject to the 
limitation in section 802(j)(4).



Sec. 1944.255  Eligible supportive services.

    (a) Supportive services or funding for such services may be provided 
by state, local, public or private providers and CHSP funds. A CHSP 
under this section shall provide meal and other qualifying services for 
program participants (and other residents and nonresidents, as described 
in Sec. 1944.125(a)) that are coordinated on site.
    (b) Qualifying supportive services are those listed in section 
802(k)(16) and in section 1944.105.
    (c) Meal services shall meet the following guidelines:
    (1) Type of service. At least one meal a day must be served in a 
group setting for some or all of the participants; if more than one meal 
a day is provided, a combination of a group setting and carry-out meals 
may be utilized.
    (2) Hot meals. At least one meal a day must be hot. A hot meal for 
the purpose of this program is one in which the principal food item is 
hot at the time of serving.
    (3) Special menus. Grantees shall provide special menus as necessary 
for meeting the dietary needs arising from the health requirements of 
conditions such as diabetes and hypertension. Grantees should attempt to 
meet the dietary needs of varying religious and ethnic backgrounds.
    (4) Meal service standards. Grantees shall plan for and provide 
meals which are wholesome, nutritious, and each of which meets a minimum 
of one-third of the minimum daily dietary allowances as established by 
the Food and Nutrition Board of the National Academy of Sciences-
National Research Council (or State or local standards, if these 
standards are higher). Grantees must have an annual certification, 
prepared and signed by a registered dietitian, which states that each 
meal provided under CHSP meets the minimum daily dietary allowances.
    (5) Food stamps and agricultural commodities. In providing meal 
services grantees must apply for and use food stamps and agricultural 
commodities as set forth in section 802(d)(2)(A).
    (6) Preference for nutrition providers: In contracting for or 
otherwise providing for meal services grantees must follow the 
requirements of section 802(d)(2)(B). These requirements do not preclude 
a grantee or owner from directly preparing and providing meals under its 
own auspices.



Sec. 1944.256  Eligibility for services.

    (a) Participants, other residents, and nonresidents. Such 
individuals are eligible either to participate in CHSP or to receive 
CHSP services, if they qualify under section 802(e)(1), (4) and (5). 
Under this paragraph, temporarily disabled persons are also eligible.
    (b) Economic need. In providing services under CHSP, grantees shall 
give priority to very low income individuals, and shall consider their 
service needs in selecting program participants.



Sec. 1944.257  Service coordinator.

    (a) Each grantee must have at least one service coordinator who 
shall perform the responsibilities listed in section 802(d)(4).
    (b) The service coordinator shall comply with the qualifications and 
standards required by the Secretary concerned. The service coordinator 
shall be trained in the subject areas set forth in section 802(d)(4), 
and in any

[[Page 467]]

other areas required by the Secretary concerned.
    (c) The service coordinator may be employed directly by the grantee, 
or employed under a contract with a case management agency on a fee-for-
service basis, and may serve less than full-time. The service 
coordinator or the case management agency providing service coordination 
shall not provide supportive services under a CHSP grant or have a 
financial interest in a service provider agency which intends to provide 
services to the grantee for CHSP.
    (d) The service coordinator shall:
    (1) Provide general case management and referral services to all 
potential participants in CHSP. This involves intake screening, upon 
referral from the grantee of potential program participants, and 
preliminary assessment of frailty or disability, using a commonly 
accepted assessment tool. The service coordinator then will refer to the 
professional assessment committee (PAC) those individuals who appear 
eligible for CHSP;
    (2) Establish professional relationships with all agencies and 
service providers in the community, and develop a directory of providers 
for use by program staff and program participants;
    (3) Refer proposed participants to service providers in the 
community, or those of the grantee;
    (4) Serve as staff to the PAC;
    (5) Complete, for the PAC, all paperwork necessary for the 
assessment, referral, case monitoring and reassessment processes;
    (6) Implement any case plan developed by the PAC and agreed to by 
the program participant;
    (7) Maintain necessary case files on each program participant, 
containing such information and kept in such form as HUD and RHS shall 
require;
    (8) Provide the necessary case files to PAC members upon request, in 
connection with PAC duties;
    (9) Monitor the ongoing provision of services from community 
agencies and keep the PAC and the agency providing the supportive 
service informed of the progress of the participant;
    (10) Educate grant recipient's program participants on such issues 
as benefits application procedures (e.g. SSI, food stamps, Medicaid), 
service availability, and program participant options and 
responsibilities;
    (11) Establish volunteer support programs with service organizations 
in the community;
    (12) Assist the grant recipient in building informal support 
networks with neighbors, friends and family; and
    (13) Educate other project management staff on issues related to 
``aging-in-place'' and services coordination, to help them to work with 
and assist other persons receiving housing assistance through the 
grantee.
    (e) The service coordinator shall tailor each participant's case 
plan to the individual's particular needs. The service coordinator shall 
work with community agencies, the grantee and third party service 
providers to ensure that the services are provided on a regular, 
ongoing, and satisfactory basis, in accordance with the case plan 
approved by the PAC and the participant.
    (f) Service coordinators shall not serve as members of the PAC.



Sec. 1944.258  Professional assessment committee.

    (a) General. (1) A professional assessment committee (PAC), as 
described in this section, shall recommend services appropriate to the 
functional abilities and needs of each eligible project resident. The 
PAC shall be either a voluntary committee appointed by the project 
management or an agency in the community which provides assessment 
services and conforms to section 802(e)(3)(A) and (B). PAC members are 
subject to the conflict of interest provisions in section 1944.175(b).
    (2) The PAC shall utilize procedures that ensure that the process of 
determining eligibility of individuals for congregate services affords 
individuals fair treatment, due process, and a right of appeal of the 
determination of eligibility, and shall ensure the confidentiality of 
personal and medical records.
    (3) The dollar value of PAC members' time spent on regular 
assessments after initial approval of program participants may be 
counted as match. If a community agency discharges the duties of the 
PAC, staff time is counted as its imputed value, and if the members are 
volunteers, their time is

[[Page 468]]

counted as volunteer time, according to sections 1944.145(c)(2) (ii) and 
(iv).
    (b) Duties of the PAC. The PAC is required to:
    (1) Perform a formal assessment of each potential elderly program 
participant to determine if the individual is frail. To qualify as 
frail, the PAC must determine if the elderly person is deficient in at 
least three ADLs, as defined in section 1944.105. This assessment shall 
be based upon the screening done by the service coordinator, and shall 
include a review of the adequacy of the informal support network (i.e., 
family and friends available to the potential participant to assist in 
meeting the ADL needs of that individual), and may include a more in-
depth medical evaluation, if necessary;
    (2) Determine if non-elderly disabled individuals qualify under the 
definition of person with disabilities under section 1944.105. If they 
do qualify, this is the acceptance criterion for them for CHSP. Persons 
with disabilities do not require an assessment by the PAC;
    (3) Perform a regular assessment and updating of the case plan of 
all participants;
    (4) Obtain and retain information in participant files, containing 
such information and maintained in such form, as HUD or RHS shall 
require;
    (5) Replace any members of the PAC within 30 days after a member 
resigns. A PAC shall not do formal assessments if its membership drops 
below three, or if the qualified medical professional leaves the PAC and 
has not been replaced.
    (6) Notify the grantee or eligible owner and the program 
participants of any proposed modifications to PAC procedures, and 
provide these parties with a process and reasonable time period in which 
to review and comment, before adoption of a modification;
    (7) Provide assurance of nondiscrimination in selection of CHSP 
participants, with respect to race, religion, color, sex, national 
origin, familial status or type of disability;
    (8) Provide complete confidentiality of information related to any 
individual examined, in accordance with the Privacy Act of 1974;
    (9) Provide all formal information and reports in writing.
    (c) Prohibitions relating to the PAC. (1) At least one PAC member 
shall not have any direct or indirect relationship to the grantee.
    (2) No PAC member may be affiliated with organizations providing 
services under the grant.
    (3) Individuals or staff of third party organizations that act as 
PAC members may not be paid with CHSP grant funds.
    (d) Eligibility and admissions. (1) Before selecting potential 
program participants, each grantee (with PAC assistance) shall develop a 
CHSP application form. The information in the individual's application 
is crucial to the PAC's ability to determine the need for further 
physical or psychological evaluation.
    (2) The PAC, upon completion of a potential program participant's 
initial assessment, must make a recommendation to the service 
coordinator for that individual's acceptance or denial into CHSP.
    (3) Once a program participant is accepted into CHSP, the PAC must 
provide a supportive services case plan for each participant. In 
developing this plan, the PAC must take into consideration the 
participant's needs and wants. The case plan must provide the minimum 
supportive services necessary to maintain independence.
    (e) Transition-out procedures. The grantee or PAC must develop 
procedures for providing for an individual's transition out of CHSP to 
another setting. Transition out is based upon the degree of supportive 
services needed by an individual to continue to live independently. If a 
program participant leaves the program, but wishes to retain supportive 
services, he or she may do so, as long as he or she continues to live in 
an eligible project, pays the full cost of services provided, and 
management agrees (section 802(e)(4) and (5)). A participant can be 
moved out of CHSP if he or she:
    (1) Gains physical and mental health and is able to function without 
supportive services, even if only for a short time (in which case 
readmission, based upon reassessment to determine the degree of frailty 
or the disability, is acceptable);

[[Page 469]]

    (2) Requires a higher level of care than that which can be provided 
under CHSP; or
    (3) Fails to pay services fees.
    (f) Procedural rights of participants. (1) The PAC must provide an 
informal process that recognizes the right to due process of individuals 
receiving assistance. This process, at a minimum, must consist of:
    (i) Serving the participant with a written notice containing a clear 
statement of the reasons for termination;
    (ii) A review of the decision, in which the participant is given the 
opportunity to present written or oral objections before a person other 
than the person (or a subordinate of that person) who made or approved 
the termination decision; and
    (iii) Prompt written notification of the final decision to the 
participant.
    (2) Procedures must ensure that any potential or current program 
participant, at the time of initial or regular assessment, has the 
option of refusing offered services and requesting other supportive 
services as part of the case planning process.
    (3) In situations where an individual requests additional services, 
not initially recommended by the PAC, the PAC must make a determination 
of whether the request is legitimately a needs-based service that can be 
covered under CHSP subsidy. Individuals can pay for services other than 
those recommended by the PAC as long as the additional services do not 
interfere with the efficient operation of the program.



Sec. 1944.259  Participatory agreement.

    (a) Before actual acceptance into CHSP, potential participants must 
work with the PAC and the service coordinator in developing supportive 
services case plans. A participant has the option of accepting any of 
the services under the case plan.
    (b) Once the plan is approved by the PAC and the program 
participant, the participant must sign a participatory agreement 
governing the utilization of the plan's supportive services and the 
payment of supportive services fees. The grantee annually must 
renegotiate the agreement with the participant.



Sec. 1944.260  Cost distribution.

    (a) General. (1) Grantees, the Secretary concerned, and participants 
shall all contribute to the cost of providing supportive services 
according to section 802(i)(A)(i). Grantees must contribute at least 50 
percent of program cost, participants must contribute fees that in total 
are at least 10 percent of program cost, and the Secretary concerned 
will provide funds in an amount not to exceed 40 percent.
    (2) Section 802(i)(1)(B)(ii) creates a cost-sharing provision 
between grantee and the Secretary concerned if total participant fees 
collected over a year are less than 10 percent of total program cost. 
This provision is subject to availability of appropriated grant funds. 
If funds are not available, the grantee must assume the funding 
shortfall.
    (b) Prohibition on substitution of funds and maintenance of existing 
supportive services. Grantees shall maintain existing funding for and 
provision of supportive services prior to the application date, as set 
forth in section 802(i)(1)(D). The grantee shall ensure that the 
activities provided to the project under a CHSP grant will be in 
addition to, and not in substitution for, these previously existing 
services. The value of these services do not qualify as matching funds. 
Such services must be maintained either for the time the participant 
remains in CHSP, or for the duration of CHSP grant. The grantee shall 
certify compliance with this paragraph to the Secretary concerned.
    (c) Eligible matching funds. (1) All sources of matching funds must 
be directly related to the types of supportive services prescribed by 
the PAC or used for administration of CHSP.
    (2) Matching funds may include:
    (i) Cash (which may include funds from Federal, State and local 
governments, third party contributions, available payments authorized 
under Medicaid for specific individuals in CHSP, Community Development 
Block Grants or Community Services Block Grants, Older American Act 
programs or excess residual funds with the approval of the Secretary 
concerned),
    (ii) The imputed dollar value of other agency or third party-
provided direct services or staff who will work with or

[[Page 470]]

provide services to program participants; these services must be 
justified in the application to assure that they are the new or expanded 
services of CHSP necessary to keep the program participants independent. 
If services are provided by the state, Indian tribe, unit of general 
local government, or local nonprofit housing sponsor, IHA, PHA, or for-
profit or not-for-profit owner, any salary paid to staff from 
governmental sources to carry out the program of the grantee and any 
funds paid to residents employed by the Program (other than from amounts 
under a contract under section 1944.155) is allowable match.
    (iii) In-kind items (these are limited to 10 percent of the 50 
percent matching amount), such as the current market value of donated 
common or office space, utility costs, furniture, material, supplies, 
equipment and food used in direct provision of services. The applicant 
must provide an explanation for the estimated donated value of any item 
listed.
    (iv) The value of services performed by volunteers to CHSP, at the 
rate of $5.00 an hour.
    (d) Limitation. (1) The following are not eligible for use as 
matching funds:
    (i) PHA operating funds;
    (ii) CHSP funds;
    (iii) Section 8 funds other than excess residual receipts;
    (iv) Funds under section 14 of the U.S. Housing Act of 1937, unless 
used for service coordination or case management; and
    (v) Comprehensive grant funds unless used for service coordination 
or case management;
    (2) Local government contributions are limited by section 
802(i)(1)(E).
    (e) Annual review of match. The Secretary concerned will review the 
infusion of matching funds annually, as part of the program or budget 
review. If there are insufficient matching funds available to meet 
program requirements at any point after grant start-up, or at any time 
during the term of the grant (i.e., if matching funds from sources other 
than program participant fees drop below 50 percent of total supportive 
services cost), the Secretary concerned may decrease the federal grant 
share of supportive services funds accordingly.



Sec. 1944.261  Program participant fees.

    (a) Eligible program participants. The grantee shall establish fees 
consistent with section 1944.145(a). Each program participant shall pay 
CHSP fees as stated in paragraphs (d) and (e) of this section, up to a 
maximum of 20 percent of the program participant's adjusted income. 
Consistent with section 802(d)(7)(A), the Secretary concerned shall 
provide for the waiver of fees for individuals who are without 
sufficient income to provide for any payment.
    (b) Fees shall include: (1) Cash contributions of the program 
participant;
    (2) Food Stamps; and
    (3) Contributions or donations to other eligible programs acceptable 
as matching funds under section 1944.145(c).
    (c) Older Americans Act programs. No fee may be charged for any 
meals or supportive services under CHSP if that service is funded under 
an Older Americans Act Program.
    (d) Meals fees: (1) For full meal services, the fees for residents 
receiving more than one meal per day, seven days per week, shall be 
reasonable and shall equal between 10 and 20 percent of the adjusted 
income of the project resident, or the cost of providing the services, 
whichever is less.
    (2) The fees for residents receiving meal services less frequently 
than as described in paragraph (d)(1) of this section shall be in an 
amount equal to 10 percent of the adjusted income of the project 
resident, or the cost of providing the services, whichever is less.
    (e) Other service fees. The grantee may also establish fees for 
other supportive services so that the total fees collected from all 
participants for meals and other services is at least 10 percent of the 
total cost of CHSP. However, no program participants may be required to 
pay more than 20 percent of their adjusted incomes for any combination 
of services.
    (f) Other residents and nonresidents. Fees shall be established for 
residents of eligible housing projects (other than eligible project 
residents) and for nonresidents who receive meals and other services 
from CHSP under section

[[Page 471]]

1944.125(a). These fees shall be in an amount equal to the cost of 
providing the services.



Sec. 1944.262  Grant agreement and administration.

    (a) General. HUD will enter into grant agreements with grantees, to 
provide congregate services for program participants in eligible housing 
projects, in order to meet the purposes of CHSP.
    (b) Term of grant agreement and reservation of amount. A grant will 
be for a term of five years and the Secretary concerned shall reserve a 
sum equal to the total approved grant amount for each grantee. Grants 
will be renewable at the expiration of a term, subject to the 
availability of funds and conformance with the regulations in this 
subpart, except as otherwise provided in section 1944.160.
    (c) Monitoring of project sites by governmental units. States, 
Indian tribes, and units of general local government with a grant 
covering multiple projects shall monitor, review, and evaluate Program 
performance at each project site for compliance with CHSP regulations 
and procedures, in such manner as prescribed by HUD or RHS.
    (d) Reports. Each grantee shall submit program and fiscal reports 
and program budgets to the Secretary concerned in such form and at such 
times, as the Secretary concerned requires.
    (e) Enforcement. The Secretary concerned will enforce the 
obligations of the grantee under the agreement through such action as 
may be necessary, including terminating grants, recapturing grant funds, 
and imposing sanctions.
    (1) These actions may be taken for:
    (i) A grantee's non-compliance with the grant agreement or HUD or 
RHS regulations;
    (ii) Failure of the grantee to provide supportive services within 12 
months of execution of the grant agreement.
    (2) Sanctions include but are not limited to the following:
    (i) Temporary withholding of reimbursements or extensions or 
renewals under the grant agreement, pending correction of deficiencies 
by the grantee;
    (ii) Setting conditions in the contract;
    (iii) Termination of the grant;
    (iv) Substitution of grantee; and
    (v) Any other action deemed necessary by the Secretary concerned.
    (f) Renewal of grants. Subject to the availability of funding, 
satisfactory performance, and compliance with the regulations in this 
subpart:
    (1) Grantees funded initially under this subpart shall be eligible 
to receive continued, non-competitive renewals after the initial five-
year term of the grant.
    (2) Grantees will receive priority funding and grants will be 
renewed within time periods prescribed by the Secretary concerned.
    (g) Use of Grant Funds. If during any year, grantees use less than 
the annual amount of CHSP funds provided to them for that year, the 
excess amount can be carried forward for use in later years.



Sec. 1944.263  Eligibility and priority for 1978 Act recipients.

    Grantees funded initially under 42 U.S.C. 8001 shall be eligible to 
receive continued, non-competitive funding subject to its availability. 
These grantees will be eligible to receive priority funding under this 
subpart if they comply with the regulations in this part and with the 
requirements of any NOFA issued in a particular fiscal year.



Sec. 1944.264  Evaluation of Congregate Housing Services Programs.

    (a) Grantees shall submit annually to the Secretary concerned, a 
report evaluating the impact and effectiveness of CHSPs at the grant 
sites, in such form as the Secretary concerned shall require.
    (b) The Secretaries concerned shall further review and evaluate the 
performance of CHSPs at these sites and shall evaluate the Program as a 
whole.
    (c) Each grantee shall submit a certification with its application, 
agreeing to cooperate with and to provide requested data to the entity 
responsible for the Program's evaluation, if requested to do so by the 
Secretary concerned.

[[Page 472]]



Sec. 1944.265  Reserve for supplemental adjustment.

    The Secretary concerned may reserve funds subject to section 802(o). 
Requests to utilize supplemental funds by the grantee shall be 
transmitted to the Secretary concerned in such form as may be required.



Sec. 1944.266  Other Federal requirements.

    In addition to the Federal Requirements set forth in 24 CFR part 5, 
the following requirements apply to grant recipient organizations in 
this program:
    (a) Office of Management and Budget (OMB) Circulars and 
Administrative Requirements. The policies, guidelines, and requirements 
of OMB Circular No. A-87 and 24 CFR part 85 apply to the acceptance and 
use of assistance under this program by public body grantees. The 
policies, guidelines, and requirements of OMB Circular No. A-122 apply 
to the acceptance and use of assistance under this program by non-profit 
grantees. Grantees are also subject to the audit requirements described 
in 24 CFR part 44 (OMB Circular A-128).
    (b) Conflict of interest. In addition to the conflict of interest 
requirements in OMB Circular A-87 and 24 CFR part 85, no person who is 
an employee, agent, consultant, officer, or elected or appointed 
official of the applicant, and who exercises or has exercised any 
function or responsibilities with respect to activities assisted with 
CHSP grant funds, or who is in a position to participate in a decision-
making process or gain inside information with regard to such 
activities, may obtain a personal or financial interest or benefit from 
the activity, or have an interest in any contract, subcontract, or 
agreement with respect thereto, or any proceeds thereunder, either for 
himself or herself or for those with whom he or she has family or 
business ties during his or her tenure, or for one year thereafter. CHSP 
employees may receive reasonable salary and benefits.
    (c) Disclosures required by Reform Act. Section 102(c) of the HUD 
Reform Act of 1989 (42 U.S.C. 3545(c)) requires disclosure concerning 
other government assistance to be made available with respect to the 
Program and parties with a pecuniary interest in CHSP and submission of 
a report on expected sources and uses of funds to be made available for 
CHSP. Each applicant shall include information required by 24 CFR part 
12 on form HUD-2880 ``Applicant/Recipient Disclosure/Update Report,'' as 
required by the Federal Register Notice published on January 16, 1992, 
at 57 FR 1942.
    (d) Nondiscrimination and equal opportunity. (1) The fair housing 
poster regulations (24 CFR part 110) and advertising guidelines (24 CFR 
part 109);
    (2) The Affirmative Fair Housing Marketing Program requirements of 
24 CFR part 200, subpart M, and the implementing regulations at 24 CFR 
part 108; and
    (3) Racial and ethnic collection requirements--Recipients must 
maintain current data on the race, ethnicity and gender of program 
applicants and beneficiaries in accordance with section 562 of the 
Housing and Community Development Act of 1987 and section 808(e)(6) of 
the Fair Housing Act.
    (e) Environmental requirements. Support services, including the 
operating and administrative expenses described in section 1944.115(a), 
are categorically excluded from the requirements of the National 
Environmental Policy Act (NEPA) of 1969. These actions, however, are not 
excluded from individual compliance requirements of other environmental 
statutes, Executive Orders, and agency regulations where appropriate. 
When the responsible official determines that any action under this 
subpart may have an environmental effect because of extraordinary 
circumstances, the requirements of NEPA shall apply.

Subparts G-H [Reserved]



             Subpart I_Self-Help Technical Assistance Grants

    Source: 55 FR 41833, Oct. 16, 1990, unless otherwise noted.



Sec. 1944.401  Objective.

    This subpart sets forth the policies and procedures and delegates 
authority for providing Technical Assistance

[[Page 473]]

(TA) funds to eligible applicants to finance programs of technical and 
supervisory assistance for self-help housing, as authorized under 
section 523 of the Housing Act of 1949. Any processing or servicing 
activity conducted pursuant to this subpart involving authorized 
assistance to FmHA or its successor agency under Public Law 103-354 
employees, members of their families, known close relatives, or business 
or close personal associates, is subject to the provisions of subpart D 
of part 1900 of this chapter. Applicants for this assistance are 
required to identify any known relationship or association with an FmHA 
or its successor agency under Public Law 103-354 employee. This 
financial assistance may pay part or all of the cost of developing, 
administering, or coordinating programs of technical and supervisory 
assistance to aid needy very low- and low-income families in carrying 
out self-help housing efforts in rural areas. Very low-income families 
must receive a priority for recruitment and participation and may not 
comprise less than the percentage stated in subpart L of part 1940 of 
this chapter of those assisted in any grant. The primary purpose is to 
fund organizations that are willing to locate and work with families 
that otherwise do not qualify as homeowners. Generally, these are 
families below 50 percent of median incomes, living in substandard 
housing, and/or lacking the skills to be good homeowners. Grantees will 
comply with the nondiscrimination regulation subpart E of part 1901 of 
this chapter which states that no person in the United States shall, on 
the grounds of race, color, national origin, sex, religion, marital 
status, mental or physical handicap, or age, be excluded from 
participating in, be denied the benefits of, or be subject to 
discrimination in connection with the use of grant funds and all 
provisions of the Fair Housing Act of 1988.

[55 FR 41833, Oct. 16, 1990, as amended at 58 FR 227, Jan. 5, 1993]



Sec. 1944.402  Grant purposes.

    Farmers Home Administration (FmHA) or its successor agency under 
Public Law 103-354 may contract or make a grant to an organization to:
    (a) Give technical and supervisory assistance to eligible very low- 
and low-income families as defined in Appendix 9 of HB-1-3550 (available 
in any Rural Development office), in carrying out self-help housing 
efforts.
    (b) Assist other organizations to provide technical and supervisory 
assistance to eligible families.
    (c) Develop a final application, recruit families and related 
activities necessary to participate under paragraph (a) of this section.

[55 FR 41833, Oct. 16, 1990, as amended at 67 FR 78328, Dec. 24, 2002]



Sec. 1944.403  Definitions.

    (a) Agreement. The Self-Help Technical Assistance Agreement, which 
is a document signed by FmHA or its successor agency under Public Law 
103-354 and the grantee, sets forth the terms and conditions under which 
TA funds will be made available. (Exhibit A of this subpart).
    (b) Agreement period (or grant period). The period of time for which 
an agreement is in force. Generally, the period will not exceed 24 
months.
    (c) Date of completion. The date when all work under a grant is 
completed or the date in the TA grant agreement, or any supplement or 
amendment to it, when Federal assistance ends.
    (d) Direct costs. Those costs that are specifically identified with 
a particular project or activity. Grantees receiving funds from a single 
grant source would consider all costs as direct costs.
    (e) Disallowed costs. Those charges to a grant which FmHA or its 
successor agency under Public Law 103-354 determines cannot be 
authorized.
    (f) Equivalent units. Equivalent units represent the ``theoretical 
number of units'' arrived at by adding the equivalent percentage of 
completion figure for each family in the self-help program (pre-
construction and actual construction) together at any given date during 
program operations. The sum of the percentage of completion figures for 
all participant families represent the total number of ``theoretical 
units'' completed at any point in time. Equivalent units are useful in 
measuring progress during the period of the grant and are not a 
measurement of actual accomplishments. The number of

[[Page 474]]

equivalent units for any group can never exceed the number of planned or 
completed houses for that group.
    (g) Equivalent value of a modest house. The equivalent value of a 
modest house is the typical cost of a recent contractor-built FmHA or 
its successor agency under Public Law 103-354 financed home in the area 
plus the actual or projected costs of an acceptable site and site 
development. If FmHA or its successor agency under Public Law 103-354 
has not financed a contractor-built house during the last twelve months, 
the value will be established by use of the Marshall and Swift cost 
handbook or a similar type of handbook. Equivalent value of a modest 
house is established by FmHA or its successor agency under Public Law 
103-354.
    (h) Indirect costs. Those costs that are incurred for common or 
joint objectives and therefore, cannot be readily and specifically 
identified with a particular project or activity, e.g., self-help.
    (i) Mutual self-help. The construction method by which participating 
families organized in groups generally of 4 to 10 families utilize their 
own labor to reduce the total construction cost of their homes. 
Participating families complete construction work on their homes by an 
exchange of labor with one another. The mutual self-help method must be 
used for new construction.
    (j) Organization. (1) A State, political subdivision, or public 
nonprofit corporation (including Indian tribes or Tribal corporations); 
or
    (2) A private nonprofit corporation that is owned and controlled by 
private persons or interests and is organized and operated for purposes 
other than making gains or profits for the corporation and is legally 
precluded from distributing any gains or profits to its members.
    (k) Participating family. Individuals and/or their families who 
agree to build homes by the mutual self-help method and rehabilitate 
homes by the self-help method. Participants are families with very low- 
or low-incomes who have the ability to furnish their share of the 
required labor input regardless of the handicap, age, race, color, 
national origin, religion, family status, or sex of the head of 
household. The participating family must be approved for a section 502 
RH loan or similar loans from other Federal, state, and private lenders 
that uses income guidelines substantially similar to the Department of 
Housing and Urban Development before the start of construction, have 
sufficient time available to assist in building their own homes, and 
show a desire to work with other families. Each family in the group must 
contribute labor on each other's homes to accomplish the 65 percent of 
the total 100 percent of tasks listed in exhibit B-2 of this subpart. A 
participating family may use a substitute to perform the labor with 
prior approval of the Grantee and the FmHA or its successor agency under 
Public Law 103-354 State Director. A substitute is only permitted when 
the participating family is incapacitated.
    (l) Self-help. The construction method by which an individual family 
utilizes their labor to reduce the construction cost of their home 
without an exchange of labor between participating families. Unless 
otherwise authorized by the District Director, this method is only 
funded for repair and rehabilitation type construction.
    (m) Sponsor. An existing entity that is willing and able to assist 
an applicant, with or without charge, in applying for a grant and in 
carrying out responsibilities under the agreement. Examples of sponsors 
are local rural electric cooperatives, institutions of higher education, 
community action agencies and other self-help grantees. Also, when 
available, regional technical and management assistance contractors may 
qualify to serve as a sponsor at no charge.
    (n) Technical assistance. The organizing and supervising of groups 
of families in the construction of their own homes including:
    (1) Recruiting families who are interested in sharing labor in the 
construction of each other's homes and assisting such families in 
obtaining housing loans.
    (2) Conducting meetings of the families to explain the self-help 
program

[[Page 475]]

and subjects related to home ownership, such as loan payments, taxes, 
insurance, maintenance, and upkeep of the property.
    (3) Helping families in planning and developing activities that lead 
to the acquisition and development of suitable building sites.
    (4) Assisting families in selecting or developing house plans for 
homes which will meet their needs and which they can afford.
    (5) Assisting families in obtaining cost estimates for construction 
materials and any contracting that may be required.
    (6) Providing assistance in the preparation of loan applications.
    (7) Providing construction supervision and training for families 
while they construct their homes.
    (8) Providing financial supervision to individual families with 
section 502 Rural Housing (RH) loans which will minimize the time and 
effort required by FmHA or its successor agency under Public Law 103-354 
in processing borrower expenditures for materials and contract services.
    (9) Assisting families in solving other housing problems.
    (o) Termination of a grant. The cancellation of Federal assistance, 
in whole or in part, at any time before the date of completion.



Sec. 1944.404  Eligibility.

    To receive a grant, the applicant must:
    (a) Be an organization as defined in Sec. 1944.403(j) of this 
subpart.
    (b) Have the financial, legal, administrative, and actual capacity 
to assume and carry out the responsibilities imposed by the Agreement. 
To meet the requirement of actual capacity it must either:
    (1) Have necessary background and experience with proven ability to 
perform responsibly in the field of mutual self-help or other business 
management or administrative ventures which indicate an ability to 
perform responsibility in the field of mutual self-help; or
    (2) Be sponsored by an organization with background experience, and 
ability, which agrees in writing to help the applicant to carry out its 
responsibilities.
    (c) Legally obligate itself to administer TA funds, provide adequate 
accounting of the expenditure of such funds, and comply with the 
Agreement and FmHA or its successor agency under Public Law 103-354 
regulations.
    (d) If the organization is a private nonprofit corporation, be a 
corporation that:
    (1) Is organized under State and local laws.
    (2) Is qualified under section 501(c)(3) of the Internal Revenue 
Code of 1986.
    (3) Has as one of its purposes the production of affordable housing.
    (4) Has a Board of Directors which consist of not less than five.



Sec. 1944.405  Authorized use of grant funds.

    (a) Payment of salaries of personnel as authorized in the Agreement.
    (b) Payment of necessary and reasonable office expenses such as 
office rental, office utilities, and office equipment rental. The 
purchase of office equipment is permissible when the grantee determines 
it to be more economical than renting. As a general rule, these types of 
expenses would be classified as indirect costs in multiple funded 
organizations.
    (c) Purchase of office supplies such as paper, pens, pencils, and 
trade magazines.
    (d) Payment of necessary employee benefit costs including but not 
limited to items such as Worker's Compensation, employer's share of 
social security, health benefits, and a reasonable tax deferred pension 
plan for permanent employees.
    (e) Purchase, lease, or maintenance of power or specialty tools such 
as a power saw, electric drill, sabre saw, ladders, and scaffolds, which 
are needed by the participating families. The participating families, 
however, are expected to provide their own hand tools such as hammers 
and handsaws.
    (f) Payment of liability insurance and special purpose audit costs 
associated with self-help activities. These would be considered direct 
costs, even though the grantee's general liability insurance cost and 
the cost of audits

[[Page 476]]

for the organization are generally indirect costs.
    (g) Payment of reasonable fees for training of grantee personnel 
including board members. This may include the cost of travel and per 
diem to attend in or out-of-State training as authorized by the board of 
directors and, when necessary, for the employee to do the current job. 
These costs are generally direct costs.
    (h) Payment of services rendered by a sponsor or other organization 
after the grant is closed and when it is determined the sponsor can 
provide the necessary services which will result in an overall reduction 
in the cost of assistance. Typically, this will be limited to new 
grantees and an existing grantee for the period of time that its size or 
activity does not justify a full staff. A full staff is a full or part-
time director, project worker, secretary-bookkeeper, and a construction 
supervisor. This type of cost is generally direct.
    (i) Payment of certain consulting and legal costs required in the 
administration of the grant if such service is not available without 
cost. This does not include legal expenses for claims against the 
Federal Government. (Legal costs that may be incurred by the 
organization for the benefit of the participating families may be paid 
with prior approval of the State Director).
    (j) Payments of the cost of an accountant to set up an accounting 
system and perform audits that may be required. Generally, these costs 
are indirect.
    (k) Payments of reasonable expenses of board members for attending 
regular or special board meetings. These costs are indirect.



Sec. 1944.406  Prohibited use of grant funds.

    (a) Hiring personnel specifically for the purpose of performing any 
of the construction work for participating families in the self-help 
projects.
    (b) Buying real estate or building materials or other property of 
any kind for participating families.
    (c) Paying any debts, expenses, or costs which should be the 
responsibility of the participating families in the self-help projects.
    (d) Paying for training of an employee as authorized by Attachment B 
of OMB Circular A-122.
    (e) Paying costs other than approved indirect (including salaries) 
that are not directly related to helping very low- and low-income 
families obtain housing consistent with the objectives of this program.



Sec. 1944.407  Limitations.

    The amount of the TA grant depends on the experience and capability 
of the applicant and must be justified based on the number of families 
to be assisted. As a guide, the maximum grant amounts for any grant 
period will be limited to:
    (a) An average TA cost per equivalent unit of no more than 15 
percent of the cost of equivalent value of modest homes built in the 
area. (Upon request, the County Supervisor will provide the grantee the 
average cost of modest homes for the area); or
    (b) An average TA cost per equivalent unit that does not exceed the 
difference between the equivalent value of modest homes in the area and 
the average mortgage of the participating families minus $1,000; or
    (c) A TA per equivalent unit cost that does not exceed an amount 
established by the State Director. The State Director may authorize a 
greater TA cost than paragraph (a) or (b) of this section when needed to 
accomplish a particular objective, such as requiring the grantee to 
serve very low-income families, remote areas, or similar situations; or
    (d) A negotiated amount for repair and rehabilitation type 
proposals. At a minimum, applicants applying for repair and 
rehabilitation grants must include information on the proximity of the 
houses in a project, the typical needed repairs, and the cost savings 
between self-help and contractor rehabilitation and repair.

[55 FR 41833, Oct. 16, 1990; 56 FR 19253, Apr. 26, 1991]



Sec. 1944.408  [Reserved]



Sec. 1944.409  Executive Order 12372.

    The self-help program is subject to the provision of Executive Order 
12372

[[Page 477]]

which requires intergovernmental consultation with State and local 
officials. Under subpart J of part 1940 of this chapter (available in 
any Agency office), new applicants for the self-help program must submit 
their Statement of Activities to the State single point of contact prior 
to submitting their preapplication to Agency. The name of the point of 
contact is available from the State Office.

[55 FR 41833, Oct. 16, 1990, as amended at 61 FR 39851, July 31, 1996]



Sec. 1944.410  Processing preapplications, applications, and completing 
grant dockets.

    (a) Form SF-424, ``Application for Federal Assistance.'' Form SF-424 
in an original and one copy must be submitted by the applicant to the 
District Director. It will be used to establish communication between 
the applicant and RHS, determine the applicant's eligibility, determine 
how well the project can compete with similar applications from other 
organizations and eliminate any proposals which have little or no chance 
for Federal funding before applicants incur significant expenditures for 
preparing an application. In addition, the following information will be 
attached to and become a part of the preapplication:
    (1) Complete information about the applicant's previous experience 
and capacity to carry out the objective of the agreement.
    (2) If the applicant organization is already formed, a copy of or an 
accurate reference to the specific provisions of State law under which 
the applicant is organized; a certified copy of the applicant's Articles 
of Incorporation and Bylaws or other evidence of corporate existence; 
certificate of incorporation for other than public bodies; evidence of 
good standing from the State when the corporation has been in existence 
1 year or more; the names and addresses of the applicant's members, 
directors, and officers; and, if another organization is a member of the 
applicant-organization, its name, address, and principal business. If 
the applicant is not already formed, attach copies of the proposed 
organizational documents demonstrating compliance with Sec. 1944.404(d) 
of this subpart.
    (3) A current (no more than 12 months old) dated and signed 
financial statement showing the amounts and specific nature of assets 
and liabilities together with information on the repayment schedule and 
status of any debt owed by the applicant. If the applicant is being 
sponsored by another organization, the same type of financial statement 
also must be provided by the applicant's sponsor.
    (4) A narrative statement which includes information about the 
amount of the grant funds being requested, area(s) to be served, need 
for self-help housing in the area(s), the number of self-help units 
proposed to be built, rehabilitated or repaired during the agreement 
period, housing conditions of low-income families in the area and 
reasons why families need self-help assistance. Evidence should be 
provided that the communities support the activity and that there are 
low-income families willing to contribute their labor in order to obtain 
adequate housing. Evidence of community support may be letters of 
support from local officials, individuals and community organizations. 
The pre-application may contain information such as census materials, 
local planning studies, surveys, or other readily available information 
which indicates a need in the area for housing of the type and cost to 
be provided by the proposed self-help TA program.
    (5) A plan of how the organization proposes to reach very low-income 
families living in houses that are deteriorated, dilapidated, 
overcrowded, and/or lacking plumbing facilities.
    (6) A proposed budget which will be prepared on SF-424A, ``Budget 
Information (Non-Construction Programs)'' will be completed to address 
applicable assurances as outlined in Sec. 3015.205 of 7 CFR part 3015. 
State and local Government will include an assurance that the grantee 
shall comply with all applicable Federal statutes and regulations in 
effect with respect to the periods for which it receives grant funding. 
The State and local governments shall also comply with 7 CFR part 3016.
    (7) A preliminary survey as to the availability of lots and 
projected cost of the sites.

[[Page 478]]

    (8) A list of other activities the applicant is engaged in and 
expects to continue, and a statement as to other sources of funding and 
whether it will have sufficient funds to assure continued operation of 
the other activities for at least the period of the agreement. If multi-
funded, its cost allocation plan or indirect cost rate must be part of 
the pre-application.
    (9) Whether assistance under paragraph (d) of this section is 
requested and a brief narrative identifying the need, amount of funds 
needed, and projected time period.
    (10) If a project is planned for five or more housing lots or units, 
an Affirmative Fair Marketing Plan is required. The plan will be in 
effect until the completion of the project.
    (b) Preapplication review. (1) The District Director, within 30 days 
of receipt of the preapplication, Form SF-424, and all other required 
information and material will complete a thorough review for 
completeness, accuracy, and conformance to program policy and 
regulations. Incomplete preapplications will be returned to the 
applicant for completion. The applicant should be given the name of the 
regional technical assistance contractor. The County Supervisor in the 
prospective county will be contacted as to the need for the program in 
the proposed area and if the necessary resources are available to the 
grantee. This will include a discussion of the number of 502 and 504 
units that will need to be committed to the grantee and the potential 
work impact on the office during the grant period. If it is determined 
that the County Office lacks the resources (either personnel or funds) 
to process all loan requests in a timely manner, the District Director 
must communicate this need to the State Director along with a 
recommended solution. (Lack of resources at the county level are not 
grounds to deny a request). After the District Director has determined 
that the preapplication is complete and accurate, the District Director 
will assemble the material in an applicant case file and forward it to 
the State Director. The case file, as a minimum, must contain the 
following:
    (i) Form SF-424,
    (ii) Original and one copy of Form FmHA or its successor agency 
under Public Law 103-354 1940-20, ``Request for Environmental 
Information,''
    (iii) Eligibility recommendations, and
    (iv) HUD Form 935.2 ``Affirmative Fair Housing Marketing Plan'', if 
applicable.
    (2) The State Director may, if needed, submit the organizational 
documents with any comments or questions to the Office of General 
Counsel (OGC) for a preliminary opinion as to whether the applicant is 
or will be a legal organization of the type required by these 
regulations and for advice on any other aspects of the preapplication.
    (3) The State Director, if unable to determine eligibility or 
qualifications with the advice of the OGC, may submit the preapplication 
to the National Office for review. The preapplication will contain all 
memoranda from OGC giving the results of its review. The State Director 
will identify in the transmittal memorandum to the National Office the 
specific problem and will recommend possible solutions and any 
information about the applicant which would be helpful to the National 
Office in reaching a decision.
    (4) After an eligibility determination has been made, which should 
be completed within 30 days unless OGC is involved, the State Director 
will:
    (i) If the applicant is eligible, contact the National Office as to 
the availability of funds or submit the proposal to the National Office 
for authorization if the requested amount exceeds the State Director's 
approval authority. If funds are available, the final review officer, 
either the State Director or the Assistant Administrator, Housing will 
issue a letter of conditions that the applicant must meet and direct the 
District Director to issue Form AD-622, ``Notice of Preapplication 
Review Action.''
    (ii) If the applicant is determined not eligible, the State Director 
will direct the District Director to issue Form AD-622.
    (c) Form AD-622, ``Notice of Preapplication Review Action.'' (1) If 
the applicant is eligible and after the State Director has returned the

[[Page 479]]

preapplication information and the executed original Form FmHA or its 
successor agency under Public Law 103-354 1940-20 to the District 
Office, the District Director will, within 10 days, prepare and issue 
Form AD-622. The original Form AD-622 will be signed and delivered to 
the applicant along with the letter of conditions, a copy to the 
applicant's case file, a copy to the County Supervisor, and a copy to 
the State Director.
    (2) If the applicant is not eligible and after the State Director 
has returned the preapplication information, the District Director will 
within 5 days notify the applicant on Form AD-622. The notification will 
inform the applicant that an appeal of the decision may be made to the 
National Appeals Staff under subpart B of part 1900 of this chapter.
    (3) If the applicant is eligible and no grant or loan funds are 
available, the State Director will return the preapplication information 
to the District Director who will, within 10 days, notify the applicant 
on Form AD-622. The notification will explain the facts concerning the 
lack of funding and that FmHA or its successor agency under Public Law 
103-354 will notify them when funding will be available. This is not an 
appealable decision.
    (d) Self-help technical assistance grant predevelopment agreement. 
If the grantee requested predevelopment assistance and the State 
Director determines that the applicant lacks the financial resources to 
meet the conditions of grant approval, a grant of up to $10,000 and for 
up to six months will be made in order for the applicant to provide what 
is required by paragraph (e) of this section. Exhibit D of this subpart 
will be used for this purpose. Existing grantees proposing to operate in 
an area different from the area that they are currently funded to 
operate are eligible for this grant. However, this grant is available 
only once for a defined area. This grant is available only after the 
letter of conditions has been issued. Denial of this assistance is an 
appealable decision under subpart B of part 1900 of this chapter.
    (e) Form SF-424, ``Application for Federal Assistance.'' The 
applicant will submit Form SF-424 in an original and one copy to the 
District Director. The application should provide a detailed proposal of 
its goals including:
    (1) Names, addresses, number in household, and total annual 
household income of families who have been contacted by the applicant 
and are interested in participating in a self-help housing project. 
Community organizations including minority organizations may be used as 
a source of names of people interested in self-help housing.
    (2) Proof that the first group of prospective participating self-
help families have qualified for financial assistance.
    (3) Evidence that lots are optioned by the prospective participating 
self-help families for the first group. Evidence that lots are available 
for the remaining groups.
    (4) Detailed cost estimates of houses to be built by the mutual 
self-help method. Plans and specifications should be submitted with the 
cost estimates.
    (5) Proposed staffing need, including qualifications, experience, 
proposed hiring schedule, and availability of any prospective employees.
    (6) Name, address, and official position of the applicant's 
representative or representatives authorized to act for the applicant 
and work with FmHA or its successor agency under Public Law 103-354.
    (7) Budget information including a detailed budget for the Agreement 
period based upon the needs outlined in the proposal. SF 424A will be 
completed to furnish the budget information.
    (8) Indirect or direct cost policy and proposed indirect cost rate 
developed in accordance with 7 CFR part 3015 and part 3016.
    (9) Personnel procedures and practices that will be established or 
are in existence. Forms to be used should be submitted with the 
application.
    (10) A proposed monthly activities schedule showing the proposed 
dates for starting and completing the recruitment, loan processing and 
construction phases for each group of participant families.

[55 FR 41833, Oct. 16, 1990, as amended at 61 FR 39851, July 31, 1996]

[[Page 480]]



Sec. 1944.411  Conditions for approving a grant.

    A grant may be approved for an eligible applicant when the 
conditions in the letter of conditions are met and the following 
conditions are present:
    (a) The applicant has or can hire, or contract directly or 
indirectly with, qualified people to carry out its responsibilities in 
administering the grant.
    (b) The applicant has met all of the conditions listed in Sec. 
1944.410(e) of this subpart.
    (c) The grantee furnishes a signed statement that it complies with 
the requirements of the Departmental Regulations found in 7 CFR part 
3015 and part 3016.
    (d) A resolution has been adopted by the board of directors which 
authorizes the appropriate officer to execute exhibit A of this subpart 
and Form FmHA or its successor agency under Public Law 103-354 400-4, 
``Assurance Agreement.''
    (e) The grantee has fidelity bonding as covered in 7 CFR part 3015 
if a nonprofit organization or, if a State or local government, to the 
extent required in 7 CFR part 3016.
    (f) The grantee has agreed by completing SF-424B, ``Assurances-Non 
Construction Programs,'' that it will establish a recordkeeping system 
that is certifiable by a certified public accountant that it adequately 
meets the Agreement.
    (g) The grantee has established an interest bearing checking account 
on which at least two bonded officials will sign all checks issued and 
understands that interest earned in excess of $250.00 annually must be 
submitted to FmHA or its successor agency under Public Law 103-354 
quarterly. (The use of minority depository institutions is encouraged.)
    (h) The grantee has developed an agreement to be executed by the 
grantee and the self-help participants which clearly sets forth what is 
expected of each and has incorporated exhibit B-2 of this subpart which 
clearly shows what work is expected of the participating family.

[55 FR 41833, Oct. 16, 1990; 56 FR 19253, Apr. 26, 1991]



Sec. 1944.412  Docket preparation.

    When the application and all items required for the complete docket 
have been received, the District Director will thoroughly examine it to 
insure the application has been properly and accurately prepared and 
that it includes the required dates and signatures. The docket items 
will be assembled and distributed by the District Director in the 
following order:

----------------------------------------------------------------------------------------------------------------
                                                  Total No.  Signed by    No. for agreement
       Form No.         Name of form or document  of copies  applicant         docket         Copy for applicant
----------------------------------------------------------------------------------------------------------------
SF-424................  Application for Federal       3          1      1-O and 1C            1-C
                         Assistance.
AD-622................  Notice of Preapplication      2      .........  1-C                   1-O
                         Review Action.
FmHA 1940-1...........  Request for Obligation        4          2      3-O and 2C            1-C
                         of Funds.
FmHA 400-4............  Assurance Agreement.....      2          1      1-O                   1-C
                        HUD Form 935.2,               3          1      1-O and 1C            1-C
                         Affirmative Fair
                         Housing Marketing Plan.
                        Certified Copy                1          1      1-O                   -
                         Authorizing Resolution.
                        Self-Help Technical           2          1      1-O                   1-C
                         Assistance Grant
                         Agreement (Exhibit A).
                        Any Personnel Forms to        2      .........  1-O                   1-C
                         be used.
----------------------------------------------------------------------------------------------------------------
O=Original.
C=Copy.



Sec. 1944.413  Grant approval.

    (a) Approval of grant. Within 30 days of the grantee meeting the 
conditions of Sec. 1944.411 of this subpart or, if applicable, signing 
exhibit D, the approving official will:
    (1) Execute and distribute Form FmHA or its successor agency under 
Public Law 103-354 1940-1 in accordance with the Forms Manual Insert 
(FMI).
    (2) After the Finance Office acknowledges that funds are obligated, 
request an initial advance of funds on Form FmHA or its successor agency 
under Public Law 103-354 440-57, ``Acknowledgment of Obligated Funds/
Check Request,'' in accordance with the FMI. The amount of this request 
should cover the applicant's needs for the remainder of the month in 
which the

[[Page 481]]

grant is closed plus the next month. Subsequent advances will cover only 
a one-month period.
    (b) Cancellation of an approved grant. An approved grant may be 
canceled before closing if the applicant is no longer eligible, the 
proposal is no longer feasible, or the applicant requests cancellation. 
Cancellation will be accomplished as follows:
    (1) The District Director will prepare Form FmHA or its successor 
agency under Public Law 103-354 1940-10, ``Cancellation of U.S. Treasury 
Check and/or Obligation,'' according to the FMI and send it to the State 
Director with the reasons for cancellation. If the State Director 
approves the request, Form FmHA or its successor agency under Public Law 
103-354 1940-10 will be returned to the District Office for processing 
in accordance with the FMI.
    (2) The District Director will notify the applicant of the 
cancellation and the right to appeal under subpart B of part 1900 of 
this chapter. If the applicant requested the cancellation, no appeal 
rights are provided, but the applicant will still be notified of the 
cancellation.
    (c) Disapproval of grant. If a grant is disapproved after the docket 
has been developed, the approving official will state the reason on the 
original Form FmHA or its successor agency under Public Law 103-354 
1940-1, or in a memorandum to the District Director. The District 
Director will notify the applicant in writing of the disapproval and the 
reason for disapproval. Also, the notification will inform the applicant 
of its appeal rights under subpart B of part 1900 of this chapter.



Sec. 1944.414  [Reserved]



Sec. 1944.415  Grant approval and other approving authorities.

    (a) The State Director is authorized to approve or disapprove TA 
grants under this subpart. For a grant in excess of $300,000, or in the 
case of a grant amendment when the amount of the grant plus any 
unexpended funds from a previous grant will exceed $400,000, prior 
written consent of the National Office is required. In such cases, the 
docket, along with the State Director's recommendations, must be 
submitted to the National Office for review.
    (b) The State Director may approve a grant not to exceed $10,000 to 
an eligible organization under Sec. 1944.410(d) of this subpart. The 
grant must be limited to 6 months and funds must be used for the 
development of the final application, family recruitment, and related 
activities as explained in Sec. 1944.410(e) of this subpart. The amount 
of this grant will not be included in figuring TA cost per units.
    (c) The authority to contract for services is limited to the 
Administrator of FmHA or its successor agency under Public Law 103-354.
    (d) Monthly expenditures of the grantee will normally be approved by 
the District Director unless:
    (1) The grantee operates in only one county, in which case the 
authority may be delegated to the County Supervisor.
    (2) The grantee operates in more than one FmHA or its successor 
agency under Public Law 103-354 District, in which case the State 
Director will designate the approving official.
    (3) The grantee operates in more than one State Director's 
jurisdiction, in which case the Administrator will designate the 
approving official.
    (4) The expenditure is under contract authority, in which case the 
Contracting Official Representative will approve the monthly 
expenditure.



Sec. 1944.416  Grant closing.

    The grant is closed on the date the Agreement is executed as defined 
in Sec. 1944.403(a) by the applicant and the Government. Funds may not 
be advanced prior to the signing of the Agreement. The District Director 
or Assistant District Director are authorized to execute the Agreement 
for FmHA or its successor agency under Public Law 103-354. Person(s) 
authorized by resolution may sign for the applicant.



Sec. 1944.417  Servicing actions after grant closing.

    FmHA or its successor agency under Public Law 103-354 has a 
responsibility to help the grantee be successful and help the grantee 
avoid cases of fraud

[[Page 482]]

and abuse. Servicing actions also include correlating activities between 
the grantee and FmHA or its successor agency under Public Law 103-354 to 
the benefit of the participating families. The amount of servicing 
actions needed will vary in accordance with the experience of the 
grantee, but as minimum the following actions are required:
    (a) Monthly, the grantee will provide the District Director with a 
request for additional funds on Form SF-270, ``Request for Advance or 
Reimbursement.'' This request need only show the amount of funds used 
during the previous month, amount of unspent funds, projected need for 
the next 30 days, and written justification if the request exceeds the 
projected need for the next 30 days. This request must be in the 
District Director's office fifteen days prior to the beginning of the 
month. Upon receipt of the grantee's request, the District Director 
will:
    (1) If the request appears to be in order, process Form FmHA or its 
successor agency under Public Law 103-354 440-57 so that delivery of the 
check will be possible on the first of the next month.
    (2) If the request does not appear to be in order, immediately 
contact the grantee to resolve the problem. After the contact:
    (i) If the explanation is acceptable, process Form FmHA or its 
successor agency under Public Law 103-354 440-57 so delivery may be 
possible by the first of the next month, or
    (ii) If the explanation is not acceptable, immediately notify the 
grantee and request the amount of funds that appear reasonable for the 
next 30 days on Form FmHA or its successor agency under Public Law 103-
354 440-57, so that delivery may be possible by the first of the next 
month. Unapproved funds that are later approved will be added to the 
next month's request.
    (b) Quarterly, the grantee will submit exhibit B of this subpart in 
an original and three copies to the County Supervisor on or before 
January 15, April 15, July 15, and October 15 which will verify its 
progress toward meeting the objectives stated in the Agreement and the 
application. The County Supervisor will immediately complete the County 
Office review part and forward the report to the District Office. After 
exhibit B is received in the District Office, a meeting should be 
scheduled between the grantee, District Director, and the County 
supervisor since this is an opportune time for both the grantee and FmHA 
or its successor agency under Public Law 103-354 to review progress to 
date and make necessary adjustments for the future. This meeting is 
required if the grantee was previously identified as a problem grantee 
or will be identified as a problem grantee at this time. Regardless of 
whether a meeting will be held, the following will be done:
    (1) Exhibit B and other information will be evaluated to determine 
progress made to date. The District Director will comment on exhibit B 
as to whether the grantee is ahead or behind schedule in each of the 
following areas:
    (i) Assisting the projected number of families.
    (ii) Serving very low-income applicants. Is the grantee reaching a 
minimum of very low-income families as required in exhibit A, attachment 
2 to subpart L of part 1940 of this chapter (available in any FmHA or 
its successor agency under Public Law 103-354 office).
    (iii) Equivalent units (EUs). Is the number of EUs completed 
representative of lapse in time of the grant? For example, if 25 percent 
of the grant period has elapsed, are 25 percent of the number of EUs 
completed?
    (iv) Labor contributions by the family. Are the families working 
together and are they completing the labor tasks as established on 
exhibit B-2?
    (2) The District Director will submit exhibit B to the State 
Director who will evaluate the quarterly report along with the District 
Director's comments. If the State Director determines the grantee is 
progressing satisfactorily, the State Director will sign and forward 
exhibit B to the National Office. However, if the State Director 
determines the grantee is not performing as expected, the State Director 
will notify the grantee that it has been classified a ``High Risk'' 
grantee. The notice will specify the deficiencies and inform the grantee 
of proposed remedies for noncompliance. The notice will advise the 
grantee that FmHA or its successor agency under Public Law

[[Page 483]]

103-354 is available to assist and provide the name and address of an 
organization that is under contract with FmHA or its successor agency 
under Public Law 103-354 to assist them. The State Director will forward 
a copy of exhibit B, District Directors comments, and the reasons for 
classifying them as ``High Risk'' to the National Office, Single Family 
Housing, Special Programs Branch. When the period of time provided for 
corrective action has expired, an assessment will be made of the 
progress by the grantee toward correcting the situation. If the State 
Director determines:
    (i) The situation has been corrected or reasonable progress has been 
made toward correcting the situation, the ``High Risk'' status will be 
lifted and the grantee so notified.
    (ii) The situation has not been corrected but it is correctable if 
additional time is granted, an extension will be issued.
    (iii) The situation has not been corrected and it is unlikely to be 
corrected if given additional time, the grant will be terminated under 
Sec. 1944.426(b)(1) of this subpart.

[55 FR 41833, Oct. 16, 1990; 56 FR 19253, Apr. 26, 1991]



Sec. 1944.418  [Reserved]



Sec. 1944.419  Final grantee evaluation.

    Near the end of the grant period but prior to the last month, an 
evaluation of the grantee will be conducted by FmHA or its successor 
agency under Public Law 103-354. The State Director may use FmHA or its 
successor agency under Public Law 103-354 employees or an organization 
under contract to FmHA or its successor agency under Public Law 103-354 
to provide the evaluation. The evaluation is to determine how successful 
the grantee was in meeting goals and objectives as defined in the 
agreement, application, this regulation, and any amendments.
    (a) This is a quantitative evaluation of the grantee to determine if 
it met its goals in:
    (1) Assisting the project number of families in obtaining adequate 
housing.
    (2) Meeting the goal of assisting very low-income families.
    (3) Meeting the family labor requirement in Sec. 1944.411(h) and 
exhibit B-2 of this subpart.
    (4) Keeping costs within the guides set in Sec. 1944.407.
    (5) Meeting order objectives in the Agreement.
    (b) The evaluation is a narrative addressed to the State Director 
with a copy of the National Office, Single Family Housing Processing 
Division. It will be in 3 parts, namely; findings, recommendations, and 
an overall rating. The rating will be either unacceptable, acceptable, 
or outstanding, as follows:
    (1) Outstanding if the grantee met or exceeded all of the goals in 
paragraph (a) of this section.
    (2) Acceptable if the grantee met or exceeded all of the goals as 
defined in paragraph (a) except two.
    (3) Unacceptable if the grantee failed to obtain an acceptable 
rating.
    (c) After the State Director has reviewed the evaluation, a copy 
will be mailed to the grantee. The grantee may request a review of the 
evaluation with the District Director. This review is for clarification 
of the material and to dispute the findings if they are known to be 
wrong. The rating is not open for discussion except to the extent it can 
be proven that the findings do not support the rating. If this is the 
case, the District Director will file an amendment to the State 
Director.



Sec. 1944.420  Extension or revision of the grant agreement.

    The State Director may authorize the District Director to execute on 
behalf of the Government, exhibit C of this subpart, at any time during 
the grant period provided:
    (a) The extension period is for no more than one year from the final 
date of the existing Agreement.
    (b) The need for the extension is clearly justified.
    (c) If additional funds are needed, a revised budget is submitted 
with complete justification, and
    (d) The grantee is within the guidelines in Sec. 1944.407 of this 
subpart or the State Director determines that the best interest of the 
Government will be served by the extension.

[[Page 484]]



Sec. 1944.421  Refunding of an existing grantee.

    Grantees wishing to continue with self-help efforts after the end of 
the current grant plus any extensions should file Form SF-424, in 
accordance with Sec. 1944.410(e). It is recommended that it be filed at 
least 6 months before the end of the current grant period. Funds from 
the existing grant may be used to meet the conditions of a new grant to 
serve the same or redefined geographic area. If the grantee is targeting 
a different geographic area, a new preapplication must be submitted in 
accordance with Sec. 1944.410 and the grantee may apply for a 
predevelopment grant in accordance with Sec. 1944.410(d). In addition 
to meeting the conditions of an applicant as defined in Sec. 1944.411 
of this subpart, the grantee must also have received or will receive an 
acceptable rating on its current grant unless an exception is granted by 
the State Director. The State Director may grant an exception to the 
rating if it is determined that the reasons causing the previous 
unacceptable rating have been removed or will be removed with the 
approval of this grant.



Sec. 1944.422  Audit and other report requirements.

    The grantee must submit an audit to the appropriate FmHA or its 
successor agency under Public Law 103-354 District Office annually (or 
biennially if a State or local government with authority to do a less 
frequent audit requests it) and within 90 days of the end of the 
grantee's fiscal year, grant period, or termination of the grant. The 
audit, conducted by the grantee's auditors, is to be performed in 
accordance with Generally Accepted Government Auditing Standards 
(GAGAS), using the publication ``Standards for Audit of Governmental 
Organizations, Programs, Activities and Functions'' developed by the 
Comptroller General of the United States in 1981, and any subsequent 
revisions. In addition, the audits are also to be performed in 
accordance with 7 CFR parts 3015 and 3016 and FmHA or its successor 
agency under Public Law 103-354 requirements as specified in this 
subpart. Audits of borrower loan funds will be required. The number of 
borrower accounts audited will be determined by the auditor. In 
incidences where it is difficult to determine the appropriate number of 
accounts to be audited, auditors should be authorized by the State 
Director to audit the lesser of 10 loans or 10 percent of total loans.
    (a) Nonprofit organizations and others. If determined necessary 
these organizations are to be audited in accordance with FmHA or its 
successor agency under Public Law 103-354 requirements OMB Circular A-
110, A-133, and 7 CFR part 3015. These requirements also apply to public 
hospitals, public colleges, and universities if they are excluded from 
the audit requirements of paragraph (b) of this section.
    (1) An audit conducted by the grantee's auditor shall be supplied to 
the FmHA or its successor agency under Public Law 103-354 District 
Director as soon as possible but in no case later than ninety (90) days 
following the period covered by the grant agreement.
    (2) Auditors shall promptly notify United States Department of 
Agriculture's Office of the Inspector General Regional Inspector General 
and the FmHA or its successor agency under Public Law 103-354 District 
Office, in writing, of any indication of fraud, abuse, or illegal acts 
in grantees use of grant funds or in the handling of borrowers accounts.
    (3) Nonprofit organizations that receive less than $25,000 a year in 
Federal financial assistance need not be audited.
    (b) State and local governments and Indian tribes. These 
organizations are to be audited in accordance with this subpart and 7 
CFR part 3016. The grantee will forward completed audits to the 
appropriate Federal cognizant agency and a copy to the FmHA or its 
successor agency under Public Law 103-354 District Director. Cognizant 
agency means the Federal agency assigned by OMB Circular A-128. Within 
USDA, and OIG shall fulfill cognizant agency responsibilities. Smaller 
grantees not assigned a cognizant agency by OMB should contact the 
Federal agency that provided the most funds. When USDA is designated as 
the cognizant agency or when it has been determined by the borrower that 
FmHA or its successor

[[Page 485]]

agency under Public Law 103-354 provided the major portion of Federal 
financial assistance, the State Director will contact the appropriate 
USDA OIG Regional Inspector General. FmHA or its successor agency under 
Public Law 103-354 and the borrower shall coordinate all proposed audit 
plans with the appropriate USDA OIG.
    (1) State and local governments and Indian tribes that receive 
$25,000 or more a year in Federal financial assistance shall have an 
audit made in accordance with 7 CFR part 3016.
    (2) State and local and Indian tribes that receive less than $25,000 
a year in Federal financial assistance shall be exempt from 7 CFR part 
3016.
    (3) Public hospitals and public colleges and universities may be 
excluded by the State Director from OMB Circular A-128 audit 
requirements. If such entities are excluded, audits shall be made in 
accordance with paragraph (a) of this section.

[55 FR 41833, Oct. 16, 1990; 56 FR 19253, Apr. 26, 1991]



Sec. 1944.423  Loan packaging and 502 RH application submittal.

    A grantee is required to assist 502 RH applicants in submitting 
their application for a RH loan. Loan packaging will be performed in 
accordance with 7 CFR part 3550; therefore, it is important that the 
grantee be trained at an early date in the packaging of RH loans. 
Typically, this training should take place before the first applications 
are submitted to the County Office and before the grant is closed. A 
grantee should become very knowledgeable of FmHA or its successor agency 
under Public Law 103-354's eligibility requirements but must understand 
that only FmHA or its successor agency under Public Law 103-354 can 
approve or deny an applicant assistance. Grantee must work cooperatively 
with FmHA or its successor agency under Public Law 103-354 in the 502 
loan approval process and must work within the regulations for the 502 
program and recognize FmHA or its successor agency under Public Law 103-
354's ultimate decision making authority to approve or deny loans. 
However, the grantee may ask for clarification that may be helpful in 
working with future applicants. Grant funds may not be used to pay any 
expense in connection with an appeal that the applicant may file or 
pursue.

[55 FR 41833, Oct. 16, 1990, as amended at 67 FR 78328, Dec. 24, 2002]



Sec. 1944.424  Dwelling construction and standards.

    All construction will be performed in accordance with subpart A of 
part 1924 of this chapter. The planned work must meet the building 
requirements of 7 CFR part 3550 and meet the Development Standards as 
defined in subpart A of part 1924 of this chapter and in any local 
codes. Sites and site developments must conform to the requirements of 
subpart C of part 1924 of this chapter.

[55 FR 41833, Oct. 16, 1990, as amended at 67 FR 78328, Dec. 24, 2002]



Sec. 1944.425  Handling and accounting for borrower loan funds.

    Grantees will be required to administer borrower loan funds during 
the construction phases. The extent of their involvement will depend on 
the experience of the grantee and the amount of authority delegated to 
them by the District Director in accordance with Sec. 1924.6(c) of 
subpart A of part 1924 of this chapter. Training should include FmHA or 
its successor agency under Public Law 103-354's non-discrimination 
policies in receiving applications.



Sec. 1944.426  Grant closeout.

    (a) Grant purposes completed. Promptly after the date of completion, 
grant closeout actions will be taken to allow the orderly discontinuance 
of grantee activity.
    (1) The grantee will immediately refund to Rural Development any 
balance of grant funds that are not committed for the payment of 
authorized expenses.
    (2) The grantee will furnish Form SF-269A, ``Financial Status Report 
(short form)'' to FmHA or its successor agency under Public Law 103-354 
within 90 days after the date of completion of the grant. All other 
financial, performance, and other reports required as a condition of the 
grant also will be completed.

[[Page 486]]

    (3) After the grant closeout, FmHA or its successor agency under 
Public Law 103-354 retains the right to recover any disallowed costs 
which are discovered as a result of the final audit. 7 CFR part 3550 
will be used by FmHA or its successor agency under Public Law 103-354 to 
recover any unauthorized expenditures.
    (4) The grantee will provide FmHA or its successor agency under 
Public Law 103-354 an audit conforming to those requirements established 
in this part, including audits of self-help borrower accounts.
    (5) Upon request from the recipient, any allowable reimbursable cost 
not covered by previous payments shall be promptly paid by FmHA or its 
successor agency under Public Law 103-354.
    (b) Grant purposes not completed--(1) Notification of termination. 
The State Director will promptly notify the grantee and the National 
Office in writing of the termination action including the specific 
reasons for the decision and the effective date of the termination. The 
notification to the grantee will specify that if the grantee believes 
the reason for the proposed termination can be resolved, the grantee 
should, within 15 calendar days of the date of this notification, 
contact the State Director in writing requesting a meeting for further 
consideration. The meeting will be an informal proceeding at which the 
grantee will be given the opportunity to provide whatever additional 
information it believes should be considered in reaching a decision 
concerning the case. The grantee may have an attorney or any other 
person present at the meeting if desired. Within 7 calendar days of the 
meeting, the State Director will determine what action to take.
    (i) If the State Director determines that termination is not 
necessary, the grantee will be informed by letter along with the 
District Director.
    (ii) If the State Director determines that termination of the grant 
is appropriate, he/she will promptly inform the grantee by the use of 
exhibit B-3 of subpart B of part 1900 of this chapter.
    (2) National Office review. (i) Upon receipt of a request from a 
grantee that the decision of the State Director be reconsidered, the 
National Office will make a preliminary decision concerning the 
continued funding of the grantee during the appeal period. Written 
notification of the decision will be given to the State Director and 
grantee.
    (ii) The National Office will then obtain a comprehensive report on 
the matter from the State Office. This information will be considered 
together with any additional information that may be provided by the 
grantee.
    (c) Grant suspension. When the grantee has failed to comply with the 
terms of the agreement, the District Director will promptly report the 
facts to the State Director. The State Director will consider 
termination or suspension of the grant usually only after a Grantee has 
been classified as ``high risk'' in accordance with Sec. 1944.417(b)(2) 
of this subpart. When the State Director determines that the grantee has 
a reasonable potential to correct deficiencies the grant may be 
suspended. The State Director will request written authorization from 
the National Office to suspend a grantee. The suspension will adhere to 
7 CFR parts 3015 and 3016. The grantee will be notified of the grant 
suspension in writing by the State Director. The State Director will 
also promptly inform the grantee of its rights to appeal the decision by 
use of exhibit B-3 of subpart B of part 1900 of this chapter.
    (d) Grant termination. The State Director may terminate the grant 
agreement whenever FmHA or its successor agency under Public Law 103-354 
determines that the grantee has failed to comply with terms of the 
Agreement. The reasons for termination may include, but are not limited 
to, such problems as listed in paragraph (e)(3)(i) of exhibit A of this 
subpart. The State Director may also withhold further disbursement of 
grant funds and prohibit the grantee from incurring additional 
obligations of grant funds with written approval of the National Office. 
FmHA or its successor agency under Public Law 103-354 will allow all 
necessary and proper costs which grantee could not reasonably avoid.
    (1) Termination for cause. The grant agreement may be terminated in 
whole, or in part, at any time before

[[Page 487]]

date of completion, whenever FmHA or its successor agency under Public 
Law 103-354 determines that the grantee has failed to comply with terms 
of the Agreement. The State Director will notify the grantee in writing 
giving the reasons for the action and inform the grantee of its rights 
of appeal by use of exhibit B-3 of subpart B of part 1900 of this 
chapter.
    (2) Termination for convenience. FmHA or its successor agency under 
Public Law 103-354 or the grantee may terminate the grant in whole, or 
in part, when both parties agree that the continuation of the grant 
would not produce beneficial results. The two parties will agree in 
writing to the termination conditions including the effective date. No 
notice of rights of appeal will be issued by FmHA or its successor 
agency under Public Law 103-354.

[55 FR 41833, Oct. 16, 1990, as amended at 67 FR 78328, Dec. 24, 2002; 
68 FR 61331, Oct. 28, 2003]



Sec. 1944.427  Grantee self-evaluation.

    Annually or more often, the board of directors will evaluate their 
own self-help program. Exhibit E of this subpart is provided for that 
purpose. It is also recommended that they review their personnel policy, 
any audits that may have been conducted and other reports to determine 
if they need to make adjustments in order to prevent fraud and abuse, 
and meet the goals in the current grant agreement.



Sec. Sec. 1944.428-1944.449  [Reserved]



Sec. 1944.450  OMB control number.

    The reporting and recordkeeping requirements contained in this 
regulation have ben approved by the Office of Management and Budget and 
have been assigned OMB control number 0575-0043. Public reporting burden 
for this collection of information is estimated to vary from 10 minutes 
to 18 hours per response, with an average of 1.17 hours per response 
including time for reviewing instructions, searching existing data 
sources, gathering and maintaining the data needed, and completing and 
reviewing the collection of information. Send comments regarding this 
burden estimate or any other aspect of this collection of information, 
including suggestions for reducing this burden, to Department of 
Agriculture, Clearance Officer, OIRM, room 404-W, Washington, DC 20250; 
and to the Office of Management and Budget, Paperwork Reduction Project 
(OMB 0575-0043), Washington, DC 20503.

  Exhibit A to Subpart I of Part 1944--Self-Help Technical Assistance 
                             Grant Agreement

    THIS GRANT AGREEMENT dated --------, 19----, is between ------------

________________________________________________________________________
a nonprofit corporation (``Grantee''), organized and operating under
________________________________________________________________________
(authorizing State statute)

and the United States of America acting through the Farmers Home 
Administration, Department of Agriculture (``FmHA'') or its successor 
agency under Public Law 103-354.

    In consideration of financial assistance in the amount of $-------- 
(called ``Grant Funds'') to be made available by FmHA or its successor 
agency under Public Law 103-354 to Grantee under section 523(b)(1)(A) of 
the Housing Act of 1949 to be used in (specify area to be served) ------
-- for the purpose of providing a program of technical and supervisory 
assistance which will aid low-income families in carrying out mutual 
self-help housing efforts. Grantee will provide such a program in 
accordance with the terms of this Agreement and FmHA or its successor 
agency under Public Law 103-354 regulations.

                              Definitions:

    Date of Completion means the date when all work under a grant is 
completed or the date in the TA Grant Agreement, or any supplement or 
amendment thereto, on which Federal assistance ends.
    Disallowed costs are those charges to a grant which the FmHA or its 
successor agency under Public Law 103-354 determines cannot be 
authorized.
    Grant Closeout is the process by which the grant operation is 
concluded at the expiration of the grant period or following a decision 
to terminate the grant.
    Termination of a grant means the cancellation of Federal assistance, 
in whole of in part, under a grant at any time prior to the date of 
completion.

                           Terms of agreement:

    (a) This Agreement shall terminate -------- years from this date 
unless extended or sooner terminated under paragraphs (e) and (f) of 
this Agreement.
    (b) Grantee shall carry out the self-help housing activity described 
in the application docket which is attached to and made a part

[[Page 488]]

of this Agreement. Grantee will be bound by the conditions set forth in 
the docket, 7 CFR part 1944, subpart I, and the further conditions set 
forth in this Agreement. If any of the conditions in the docket are 
inconsistent with those in the Agreement or subpart I of part 1944, the 
latter will govern. A waiver of any condition must be in writing and 
must be signed by an authorized representative of FmHA or its successor 
agency under Public Law 103-354.
    (c) Grantee shall use grant funds only for the purposes and 
activities specified in FmHA or its successor agency under Public Law 
103-354 regulations and in the application docket approved by FmHA or 
its successor agency under Public Law 103-354 including the approved 
budget. Any uses not provided for in the approved budget must be 
approved in writing by FmHA or its successor agency under Public Law 
103-354 in advance.
    (d) If Grantee is a private nonprofit corporation, expenses charged 
for travel or per diem will not exceed the rates paid FmHA or its 
successor agency under Public Law 103-354 employees for similar 
expenses. If Grantee is a public body, the rates will be those that are 
allowable under the customary practice in the government of which 
Grantee is a part; if none are customary, the FmHA or its successor 
agency under Public Law 103-354 rates will be the maximum allowed.
    (e) Grant closeout and termination procedures will be as follows:
    (1) Promptly after the date of completion or a decision to terminate 
a grant, grant closeout actions are to be taken to allow the orderly 
discontinuation of Grantee activity.
    (i) Grantee shall immediately refund to FmHA or its successor agency 
under Public Law 103-354 any uncommitted balance of grant funds.
    (ii) Grantee will furnish to FmHA or its successor agency under 
Public Law 103-354 within 90 days after the date of completion of the 
grant a ``Financial Status Report'', Form SF-269A. All financial, 
performance, and other reports required as a condition of the grant will 
also be completed.
    (iii) Grantee shall account for any property acquired with technical 
assistance (TA) grant funds, or otherwise received from FmHA or its 
successor agency under Public Law 103-354.
    (iv) After the grant closeout, FmHA or its successor agency under 
Public Law 103-354 retains the right to recover any disallowed costs 
which may be discovered as a result of any audit.
    (2) When there is reasonable evidence that Grantee has failed to 
comply with the terms of this Agreement, the State Director may 
determine Grantee as ``high risk''. A ``high risk'' Grantee will be 
supervised to the extent necessary to protect the Government's interest 
and to help Grantee overcome the deficiencies.
    (3) Grant termination will be based on the following:
    (i) Termination for cause. This grant may be terminated in whole, or 
in part, 90 days after a Grantee has been classified as ``high risk'' if 
the State Director determines that Grantee has failed to correct 
previous deficiencies and is unlikely to correct such items if 
additional time is allowed. The reasons for termination may include, but 
are not limited to, such problems as:
    (A) Actual TA costs significantly exceeding the amount stipulated in 
the proposal.
    (B) The number of homes being built is significantly less than 
proposed construction or is not on schedule.
    (C) The cost of housing not being appropriate for the self-help 
program.
    (D) Failure of Grantee to only use grant funds for authorized 
purposes.
    (E) Failure of Grantee to submit adequate and timely reports of its 
operation.
    (F) Failure of Grantee to require families to work together in 
groups by the mutual self-help method in the case of new construction.
    (G) Serious or repetitive violation of any of the provisions of any 
laws administered by FmHA or its successor agency under Public Law 103-
354 or any regulation issued under those laws.
    (H) Violation of any nondiscrimination or equal opportunity 
requirement administered by FmHA or its successor agency under Public 
Law 103-354 in connection with any FmHA or its successor agency under 
Public Law 103-354 programs.
    (I) Failure to establish an accounting system acceptable to FmHA or 
its successor agency under Public Law 103-354.
    (J) Failure to serve very low-income families.
    (K) Failure to recruit families from substandard housing.
    (ii) Termination for convenience. FmHA or its successor agency under 
Public Law 103-354 or Grantee may terminate the grant in whole, or in 
part, when both parties agree that the continuation of the project would 
not produce beneficial results commensurate with the further expenditure 
of funds. The two parties shall agree upon the termination conditions, 
including the effective date and, in case of partial termination, the 
portion to be terminated.
    (4) To terminate a grant for cause, FmHA or its successor agency 
under Public Law 103-354 shall promptly notify Grantee in writing of the 
determination and the reasons for and the effective date of the whole or 
partial termination. Grantee will be advised of its appeal rights under 
7 CFR part 1900, subpart B.
    (f) An extension of this grant agreement may be approved by FmHA or 
its successor

[[Page 489]]

agency under Public Law 103-354 provided, in its opinion, the extension 
is justified and there is a likelihood that the Grantee can accomplish 
the goals set out and approved in the application docket during the 
period of the extension.
    (g) Grant funds may not be used to pay obligations incurred before 
the date of this Agreement. Grantee will not obligate grant funds after 
the grant termination or completion date.
    (h) As requested and in the manner specified by FmHA or its 
successor agency under Public Law 103-354, the Grantee must make 
quarterly reports, exhibit C of this subpart (on \1/15\, \4/15\, \7/15\ 
and \10/15\ of each year), and a financial status report at the end of 
the grant period, and permit on-site inspections of program progress by 
FmHA or its successor agency under Public Law 103-354 representatives. 
FmHA or its successor agency under Public Law 103-354 may require 
progress reports more frequently if it deems necessary. Grantee must 
also comply with the audit requirements found in Sec. 1944.422 of 
subpart I of 7 CFR part 1944, if applicable. Grantee will maintain 
records and accounts, including property, personnel and financial 
records, to assure a proper accounting of all grant funds. These records 
will be made available to FmHA or its successor agency under Public Law 
103-354 for auditing purposes and will be retained by Grantee for three 
years after the termination or completion of this grant.
    (i) Acquisition and disposal of personal equipment and supplies 
should comply with subpart R of 7 CFR part 3015 and subpart C of 7 CFR 
part 3016.
    (j) Results of the program assisted by grant funds may be published 
by Grantee without prior review by FmHA or its successor agency under 
Public Law 103-354, provided that such publications acknowledge the 
support provided by funds pursuant to the provisions of Title V of the 
Housing Act of 1949, 42 U.S.C. 1471, et seq., and that five copies of 
each such publication are furnished to the local representative of FmHA 
or its successor agency under Public Law 103-354.
    (k) Grantee certifies that no person or organization has been 
employed or retained to solicit or secure this grant for a commission, 
percentage, brokerage, or contingent fee.
    (l) Grantee shall comply with all civil rights laws and the FmHA or 
its successor agency under Public Law 103-354 regulations implementing 
these laws.
    (m) In all hiring or employment made possible by or resulting from 
this grant, Grantee: (1) Will not discriminate against any employee or 
applicant for employment because of race, religion, color, sex, marital 
status, national origin, age, or mental or physical handicap, and (2) 
will take affirmative action to insure that applicants are employed, and 
that employees are treated during employment without regard to their 
race, religion, color, sex, marital status, national origin, or mental 
or physical handicap. This requirement shall apply to, but not be 
limited to, the following: Employment, upgrading, demotion, or transfer; 
recruitment or recruitment advertising; layoff or termination; rates of 
pay or other forms of compensation; and selection for training, 
including apprenticeship. In the event Grantee signs a contract which 
would be covered by any Executive Order, law, or regulation prohibiting 
discrimination, Grantee shall include in the contract the ``Equal 
Employment Clause'' as specified by FmHA or its successor agency under 
Public Law 103-354.
    (n) It is understood and agreed by Grantee that any assistance 
granted under this Agreement will be administered subject to the 
limitations of Title V of the Housing Act of 1949 as amended, 42 U.S.C. 
1471 et seq., and related regulations, and that rights granted to FmHA 
or its successor agency under Public Law 103-354 in this Agreement or 
elsewhere may be exercised by it in its sole discretion to carry out the 
purposes of the assistance, and protect FmHA or its successor agency 
under Public Law 103-354's financial interest.
    (o) Grantee will maintain a code or standards of conduct which will 
govern the performance of its officers, employees, or agents. Grantee's 
officers, employees, or agents will neither solicit nor accept 
gratuities, favors, or anything of monetary value from suppliers, 
contractors, or others doing business with the grantee. To the extent 
permissible by State or local law, rules, or regulations such standards 
will provide for penalties, sanctions, or other disciplinary actions to 
be taken for violations of such standards.
    (p) Grantee shall not hire or permit to be hired any person in a 
staff position or as a participant if that person or a member of that 
person's immediate household is employed in an administrative capacity 
by the organization, unless waived by the State Director. (For the 
purpose of this section, the term household means all persons sharing 
the same dwelling, whether related or not).
    (q) Grantee's board members or employees shall not directly pr 
indirectly participate, for financial gain, in any transactions 
involving the organization or the participating families. This includes 
activities such as selling real estate, building material, supplies, and 
services.
    (r) Grantee will retain all financial records, supporting documents, 
statistical records, and other records pertinent to this agreement for 3 
years, and affirms that it is fully aware of the provisions of the 
Administrative Remedies for False Claims and Statements Act, 31 U.S.C. 
3801, et seq.

By______________________________________________________________________
(Signature)


[[Page 490]]


________________________________________________________________________
(Title)
GRANTEE

By______________________________________________________________________
(Signature)

________________________________________________________________________
(Title)
FARMERS HOME ADMINISTRATION or its successor agency under Public Law 
103-354

  Exhibit B to Subpart I of Part 1944--Evaluation Report of Self-Help 
                    Technical Assistance (TA) Grants

Evaluation for Quarter Ending: (1) ------, 19 ------
1. a. Name of Grantee: (2) ------
    b. Address: (3) ------
    c. Area the grant serves: (4) ------
2. Date of Agreement: (5) ------ Time Extended (6) ------
3. a. Equivalent unit increase during quarter:
(7)_____________________________________________________________________
First Month
(8)_____________________________________________________________________
Second Month
(9)_____________________________________________________________________
Third Month
b. Cumulative total number of Equivalent Units since beginning of grant:
(10)____________________________________________________________________
Total to Date
4. a. Method of Construction:
    Stick built ------%, Panelized ------%, Combined ------%
    b. Number of bedrooms per house built this grant period:
2BR,____________________________________________________________________
3BR,____________________________________________________________________
________________________________________________________________________
    c. Household size this Quarter:

1 person ------,
2 persons ------,
3 persons ------,
4 persons ------,
5 persons ------.

    d. Number of houses under construction this grant period, but 
started during previous grant period: ------
5. a. Number of houses proposed under this grant:
(11)____________________________________________________________________
    b. Number of houses completed under this grant:
(12)____________________________________________________________________
    c. Number of houses currently under construction:
(13)____________________________________________________________________
    d. Number of families in pre construction:
(14)____________________________________________________________________
    e. Number of Construction Supervisors:
(15)____________________________________________________________________
    f. Number of TA employees:
(16)____________________________________________________________________
6. a. Average time needed to construct a single house:
(17)____________________________________________________________________
    b. Number of months between submission of self-help borrower's 
docket and approval/rejection:
(18)____________________________________________________________________
    c. Number and percentage of loan docket rejections during reporting 
period: ------
(19)____________________________________________________________________
7. a. Did any of the following adversely affect the Grantee's ability to 
          accomplish program objectives?

 
                                                       YES         NO
 
TA Staff Turnover.................................   --------   --------
FmHA Staff Turnover...............................   --------   --------
Bad Weather.......................................   --------   --------
Loan Processing Delays............................   --------   --------
Site Acquisition and Development..................   --------   --------
Unavailable Loan/Grant Funds......................   --------   --------
Lack of Participants..............................   --------   --------
Communication between FmHA/Grantee................   --------   --------
 

8. Attach information concerning number of families contacted, number 
          who have indicated a willingness to be a participating family, 
          number of mutual self-help groups organized, progress on any 
          construction started, and any problems relating to the 
          operation of this grant.
I certify that the statements made above are true to the best of my 
          knowledge and belief.

(20)____________________________________________________________________
(Date)

(21)____________________________________________________________________
(Title)

GRANTEE
(22)____________________________________________________________________
(Signature)

                          County Office Review

I have reviewed the above information which I have found to be 
          substantially correct. Must be completed by County Office.
Comment: Must be completed (23)
Average appraisal value of units financed this Quarter:

________________________________________________________________________
Average amount loan per unit financed this Quarter:
________________________________________________________________________
(24)____________________________________________________________________
(Date)

(25)____________________________________________________________________
County Supervisor

                         District Office Review

Comment: Must be completed (26)
(27)____________________________________________________________________

[[Page 491]]

Date

(28)____________________________________________________________________
District Director

                           State Office Review

Comments: Must be completed (29)
(30)____________________________________________________________________
Date

(31)____________________________________________________________________
State Office Representative

 Exhibit B-1 to Subpart I of Part 1944--Instructions for Preparation of 
       Evaluation Report of Self-Help Technical Assistance Grants

    Exhibit B will be used by all Technical Assistance (TA) Grantees 
obtaining self-help TA grants. This attachment provides the grantee and 
FmHA or its successor agency under Public Law 103-354 a uniform method 
of reporting the performance progress of self-help projects. The TA 
Grantee will prepare an original and 4 copies of the attachment. The TA 
Grantee will sign the original and 3 copies and forward it to the local 
FmHA or its successor agency under Public Law 103-354 County Office. The 
TA Grantee will keep the unsigned copy for its records.
    The evaluation report will be completed in accordance with the 
following:
    1. Enter the date the quarter ends either March 31, June 30, 
September 30, or December 31 and the year.
    2. Enter the full name of the TA Grantee organization.
    3. Enter the complete mailing address of the TA Grantee 
organization.
    4. Enter the area served by the grant.
    5. Enter the date of the initial self-help TA grant agreement.
    6. Enter the time of any extension self-help TA grant agreement(s).
    7. Insert the number of equivalent units (EU) completed the first/
second/third month of the quarter using steps 1, 2, and 3 of exhibit B-
3.
    8. Insert the number of EU's completed the second month of the 
quarter by using steps 1, 2, and 3 of exhibit B-3.
    9. Insert the number of EU's completed the third month of the 
quarter by using steps 1, 2, and 3 of exhibit B-3.
    10. Add items (7), (8), and (9) to the total from the previous 
quarterly report to obtain the cumulative total number of EU's. This 
total is the cumulative total number of EU's for the project.
    11. Enter the number of houses planned in the TA Grantee 
proposal(s).
    12. Enter the number of houses completed and occupied since the 
beginning of the grant.
    13. Enter the number of houses that are under construction at the 
end of this quarter.
    14. Enter the number of families in the pre-construction phase.
    15. Enter the total number of construction supervisor(s) paid with 
TA grant funds.
    16. Enter the number of employees paid with TA grant funds including 
those listed in item 15.
    17. Insert the average elapsed time needed per house from excavation 
to final inspection by FmHA or its successor agency under Public Law 
103-354 to complete construction of a house. If no self-help homes have 
been completed by this grantee, use other projects or your best estimate 
as a guide.
    18. Enter the number of months it takes on average to approve or 
reject a borrower's docket once it's submitted.
    19. Enter number and percent of dockets submitted and rejected this 
quarter.
    20. Enter date of exhibit submittal.
    21. Insert title of the Grantee or authorized representative.
    22. Signature of Grantee or authorized representative.
    23. County Supervisor must answer questions concerning market value 
and loan amount and also should insert comments concerning progress of 
construction, success of the project and any problems that the 
organization may have.
    24. Insert date of County Supervisor's review.
    25. Signature of County Supervisor.
    26. District Director representative should insert his/her comments 
concerning items listed in Sec. 1944.417(b)(1) of 1944-I.
    27. Insert date of District Director review.
    28. Signature of District Director or representative.
    29. Insert State Office comments.
    30. Insert date of State Office review.
    31. Signature of State Office representative.

[[Page 492]]

    Exhibit B-2 to Subpart I of Part 1944--Breakdown of Construction 
      Development for Determining Percentage Construction Completed

------------------------------------------------------------------------
                                                In percent--
                                  --------------------------------------
                                    With slab    With crawl      With
                                     on grade      space       basement
------------------------------------------------------------------------
1. Excavation....................           3            5            6
    The removal of earth to allow the construction of a foundation or
     basement.
2. Footing, Foundations, columns.           8            8           11
    Footing: Construction of the spreading course or courses at the base
     or bottom of a foundation wall, pier, or column.
    Foundation: Construction of the supporting portion of a structure
     below the first floor construction, or below grade, including
     footing.
3. Floor slab or framing.........           6            4            4
    The floor slab consist of concrete, usually reinforced, poured over
     gravel and a vapor barrier with perimeter insulation to prevent
     heat loss.
4. Subflooring...................           0            1            1
    The installation of materials used for flooring that is laid
     directly on the joist and serving the purpose of a floor during
     construction prior installation of the finish floor.
5. Wall framing sheathing........           7            7            6
    The construction process of putting together and erecting the
     skeleton parts of a building's walls (the rough lumber work) and,
     for the exterior walls, covering with sheathing (plywood,
     waferboard, oriented strand board or lumber) and insulating board
     to close up the side walls prior to the installation of finish
     materials on the surface.
6. Roof and ceiling framing,                6            6            5
 sheathing.......................
    The process, or method, of putting the parts of a roof, such as
     truss, rafters, ridge and plates in position. Ceiling joist support
     the overhead interior lining of a room. Roof sheathing is any sheet
     material, such as plywood or particleboard, connected to the roof
     rafters or truss to act as a base for sheathing felt, shingles or
     other roof covers.
7. Roofing.......................           5            5            4
    The installation of a material that acts as a roof covering, making
     it impervious to the weather, such as shingles over sheathing felt,
     tile, or slate.
8. Siding, exterior trim, porches           7            7            6
    The installation of lumber, panel products or other materials
     intended for use as the exterior wall covering including all trim.
9. Windows and exterior doors....           9            9            8
    The installation of all exterior windows and doors. This includes
     securely fastening windows and doors plumb and level, square and
     true and adjusting sash, screens and hardware for smooth and proper
     operation.
10. Plumbing--roughed in.........           3            2            3
    Subject to local codes and regulations the installation of all parts
     of the plumbing system which must be completed prior to the
     installation of plumbing fixtures or appliances. This includes
     drain, waste, and vent piping, water supply, and the necessary
     built-in fixture supports.
11. Sewage disposal..............           1            1            1
    Subject to local codes and regulations the construction and
     installation of a wastewater disposal system consisting of a house
     sewer, a pretreatment unit (e.g., septic tank, individual package
     treatment plant), an acceptable absorption system (subsurface
     absorption field, seepage pit, or subsurface absorption bed). The
     system shall be designed to receive all sanitary sewage (bathroom,
     kitchen and laundry) from the dwelling, but not footing or roof
     drainage. It shall be designed so that gases generated anywhere in
     the system can easily flow back to the building sewer stack.
12. Heating--roughed in..........           1            1            1
    Subject to local codes and regulations the installation of ducts and/
     or piping and the necessary supports to minimize the cutting of
     walls and joist. This rough in is done before finish wall and floor
     installed.
13. Electrical--roughed in.......           2            2            2
    Subject to local codes and regulations the installation of conduit
     or cable and the location of switch, light, and outlet boxes with
     wires ready to connect. This roughing-in work is done before the
     dry wall finish is applied, and before the insulation is placed in
     the walls and ceiling.
14. Insulation...................           2            2            2

[[Page 493]]

 
    The installation of any material used in walls, floors, and ceilings
     to prevent heat transmission as required by FmHA Instruction 1924-
     A, exhibit D of 7 CFR of part 1924, subpart A.
15. Dry wall.....................           8            8            7
    Dry walling is covering the interior walls using sheets of gypsum
     board and taped joints.
16. Basement or porch floor,                1            1            6
 steps...........................
    The construction of basement or porch floors and steps whether wood
     or concrete.
17. Heating--finished............           3            3            3
    Subject to local codes and regulations the installation of
     registers, grilles and thermostats.
18. Flooring covering............           6            6            5
    The installation of the ``finish flooring'' (the material used as
     the final wearing surface that is applied to a floor). Floor
     covering include numerous flooring materials such as wood
     materials, vinyl, linoleum, cork, plastic, carpet and other
     materials in tile or sheet form.
19. Interior carpentry, trim,               6            6            5
 doors...........................
    Installing visible interior finish work (molding and/or trim),
     including covering joints around window and door openings. The
     installation of an interior door including frames and trim.
20. Cabinets and counter tops....           1            1            1
    Securing cabinets and counter tops (usually requiring only fastening
     to the wall or floor) that are plumb and level, square and true.
21. Interior painting............           4            4            3
    Cleaning and preparation of all interior surfaces and applying paint
     in strict accordance with the paint manufacturer's instructions.
22. Exterior painting............           1            1            1
    Cleaning and preparation of all exterior surfaces and applying paint
     in strict accordance with the paint manufacturer's instructions.
23. Plumbing--complete fixtures..           4            4            3
    Subject to local codes and regulations the installation of a
     receptor or device which requires both a water supply connection
     and a discharge to the drainage system, such as water closets,
     lavatories, bathtubs or sinks. Also, the installation of an
     energized household appliance with plumbing connections, such as a
     clothes washer, water heater, dishwasher or garbage grinder.
24. Electrical--complete fixtures           1            1            1
    Subject to local codes and regulations the installation of the
     fixtures, the switches, and switch plates. This is usually done
     after the dry wall finish is applied.
25. Finish hardware..............           1            1            1
    The installation of all the visible, functional hardware in a house
     that has a finish appearance, including such features as hinges,
     locks, catches, pulls, knobs, and clothes hooks.
26. Gutters and downspouts.......           1            1            1
    The installation of a shallow channel of wood, metal, or PVC
     (gutters) positioned just below and following along the eaves of
     the house for the purpose of collecting and diverting water from a
     roof to a vertical pipe (downspouts) used to carry rainwater from
     the roof to the ground by way of a splash block or into a drainage
     system.
27. Grading, paving, landscaping.           3            3            3
    Landscaping includes final grading, planting of shrubs and trees,
     and seeding or sodding of lawn areas. Final grading includes the
     best available routing of runoff water to assure that house and
     adjacent homes will not be endangered by the path of water runoff.
     The minimum slope should be 6 in 10[foot] or 5% from the
     foundation of the home. Paving includes both driveways and walks.
                                  --------------
        Total....................         100          100          100
------------------------------------------------------------------------


[[Page 494]]

Exhibit B-3 to Subpart I of Part 1944--Pre-Construction and Construction 
                             Phase Breakdown

I. General. This exhibit will be used by Farmers Home Administration 
          (FmHA) or its successor agency under Public Law 103-354 and 
          the Grantee in determining Grantee performance as required in 
          Sec. 1944.417(b) of this subpart.
II. Determining technical assistance (TA) cost per unit.
    A. Equivalent units are used to measure progress at any time during 
the period of the grant. It is necessary because self-help grantees have 
several groups of families in various stages of progress during the 
period of the grant. The following formula has been developed to provide 
a more accurate method of determining progress.

                                 Formula
------------------------------------------------------------------------
                                                      In percent--
                                               -------------------------
                Phase breakdown                   Value of
                                                 each phase   Cumulative
------------------------------------------------------------------------
Pre-construction:
  Phase I.....................................           10           10
  Phase II....................................           10           10
Construction:
  Phase III...................................           80       21-100
------------------------------------------------------------------------

    B. Using the Description of Phase Breakdown as a guide, the project 
staff selects the total percentage pertinent to the stage the self-help 
group is in and multiplies that percentage by the number of families 
(units) in the group. The result is the equivalent number of units 
completed. No credit may be given for Phase I, if the application is 
rejected. When this computation has been completed for each group that 
falls within Phases I-III, the total number of equivalent units is 
divided into the total grant funds expended to that date. The result is 
the TA cost per unit at that stage of the program's progress.
    C. The definition of pre-construction and construction phases 
described are follows:

                            Pre-Construction

    Phase I: Hold community meetings; conduct interviews; obtain house 
plans; prepare cost estimates; begin search for land; submit family 
applications to the lender; lender runs credit check; applications. 
Lender either approves or rejects.
    Phase II: Organize an association of section 502 Rural Housing 
eligible families; association conducts weekly meetings at which 
required lender forms are discussed and completed; house plans and land 
sites are selected; outside speakers explain and discuss taxes, 
insurance, how to keep a checking account, how interest is computed, 
home maintenance, decorating, and landscaping; etc.; completed loan 
dockets for each family are submitted to the lender. Family loan dockets 
are reviewed and recommendations made as to the loan amounts requested; 
the lender reviews family loan dockets; preliminary title search of each 
proposed building site is begun; requests loan check from Finance 
Office; when check arrives, final title search is made, loan closed, 
checking accounts opened, and construction begun.
    Construction: The grantee will utilize exhibit B-2 which outlines 27 
construction tasks to determine the percentage of completed construction 
activities.
    D. The computation of equivalent units and TA costs will be computed 
as follows:
    Exhibit C will be used for recording the following information and 
construction in this example which starts January 1.

                                 Step 1

    Both the grantee and FmHA or its successor agency under Public Law 
103-354 review the FmHA or its successor agency under Public Law 103-354 
loan application records to determine the percentage of completion for 
each family in the pre-construction phase of the program. These are 
Phases I-III. Total these percentages to find the number of ``equivalent 
units'' (EUs) completed at that date during pre-construction. For 
example, if there are eight families in Group 2 and all have 
completed the 20 percent phase of pre-construction, then there would be 
1.6 EUs in the pre-construction phase of the program as of that date. 
Each phase must be completed before it is considered in the calculation.

                                 Step 2

    Refer to the records of construction progress for families in the 
construction Phase III. As of that date, the director totals the 
percentage of completion figures for each family as follows:

Askew...........................................................    0.45
Whited..........................................................    0.40
Martinez........................................................    0.40
Gonzalez........................................................    0.38
Sherry..........................................................    0.34
Duran...........................................................    0.33
Johnson.........................................................    0.13
Harvey..........................................................    0.31
                                                                 -------
  EUs...........................................................    2.92
 

    Total production in the construction phase is therefore 2.92 EUs as 
of that date.

                                 Step 3

    Add the pre-construction and construction subtotals together:

Pre-construction................................................    1.60
Construction....................................................    2.92
                                                                 -------
  Total EUs.....................................................    4.52
 


[[Page 495]]

    This provides the total EUs of production during the first three 
months of operation. Steps 1, 2, and 3 will be used to complete items 7, 
8 and 9 of exhibit B of this subpart.

III. Preparation:
    Compile exhibit B of this subpart in an original and four copies. 
The exhibit will be signed by the TA Grantee. Submit the original and 
three copies of the exhibit quarterly to FmHA or its successor agency 
under Public Law 103-354 County Office on or before January 15, April 
15, July 15, and October 15, of each year for the quarters ending March 
31, June 30, September 30, and December 31 of each year. The District 
Director will keep the original and forward two copies to the State 
Office. The State Office will forward one copy to the National Office. 
The State Office will prepare information concerning TA grants closed 
within 30 days of the end of a quarter on the next quarterly report.

 Exhibit C to Subpart I of Part 1944--Amendment to Self-Help Technical 
                       Assistance Grant Agreement

    This Agreement dated, -------- 19----
between_________________________________________________________________
a nonprofit corporation (``Grantee''), organized and operating under

________________________________________________________________________
(authorizing State Statute)

and the United States of America acting through the Farmers Home 
Administration, Department of Agriculture (``FmHA'') or its successor 
agency under Public Law 103-354, amends the ``Self-Help Technical 
Assistance Grant Agreement'' between the parties dated -------- 19----, 
(``Agreement'').
    The Agreement is amended by providing additional financial 
assistance in the amount of -------- to be made available by FmHA or its 
successor agency under Public Law 103-354 to Grantee pursuant to section 
523 of Title V of the Housing Act of 1949 for the purpose of assisting 
in providing a program of technical and supervisory assistance which 
will aid low-income families in carrying out mutual self-help housing 
efforts; or
    The Agreement is amended by changing the completion date specified 
in convenant 1 from -------- to -------- and by making the following 
attachments to this amendment: (List and identify proposal and any other 
documents pertinent to the grant.)
    Agreed to this ---- day of ---- 19----.

________________________________________________________________________
(Name of Grantee)

By______________________________________________________________________
(Signature)

________________________________________________________________________
(Title)

United States of America

By______________________________________________________________________
(Signature)

________________________________________________________________________
(Title)
Farmers Home Administration or its successor agency under Public Law 
103-354

  Exhibit D to Subpart I of Part 1944--Self-Help Technical Assistance 
                     Grant Predevelopment Agreement

    This grant predevelopment agreement dated, ---- 19 ----, is between 
------------------------
a nonprofit corporation (``Grantee''), organized and operating under --
----------------------
(authorizing State statute)

and the United States of America acting through the Farmers Home 
Administration, Department of Agriculture (``FmHA'') or its successor 
agency under Public Law 103-354.
    In consideration of financial assistance in the amount of $---- 
(``Grant Funds'') to be made available by FmHA or its successor agency 
under Public Law 103-354 to Grantee under section 523 (b)(1)(A) of the 
Housing Act of 1949 to be used in (specify area to be served) ----------
------ for the purpose of developing a program of technical and 
supervisory assistance which will aid low-income families in carrying 
out mutual self-help housing efforts, Grantee will provide such a 
program in accordance with the terms of this Agreement and FmHA or its 
successor agency under Public Law 103-354 regulations.
    Grant funds will be used for authorized purposes as contained in 
Sec. 1944.410(d) of 7 CFR part 1944, subpart I, as necessary, to 
develop a complete program for a self-help TA grant. This will include 
recruitment, screening, loan packaging and related activities for 
prospective self-help participants.
    Agreed to this ---- day of ---- 19----.

________________________________________________________________________

(Name of Grantee)

By______________________________________________________________________
(Signature)

________________________________________________________________________
(Title)

United States of America

By______________________________________________________________________
(Signature)

________________________________________________________________________
(Title)
Farmers Home Administration or its successor agency under Public Law 
103-354

[[Page 496]]

  Exhibit E to Subpart I of Part 1944--Guidance for Recipients of Self-
  Help Technical Assistance Grants (Section 523 of Housing Act of 1949)

    7 CFR part 1944, subpart I provides the specific details of this 
grant program. The following is a list of some functions of the grant 
recipients taken from this subpart. With the list are questions we 
request to be answered by the recipients to reduce the potential for 
fraud, waste, unauthorized use or mismanagement of these grant funds. We 
suggest the Board of Directors answer these questions every six months 
by conducting their own review. Paid staff should not be permitted to 
complete this evaluation.

               A. Family Labor Contribution
 
1. Does your organization maintain a list of each family      Yes     No
 and a running total of hours worked (when and on what
 activity)?...............................................
2. Are there records of discussions with participating        Yes     No
 families counselling them when the family contribution is
 falling behind?..........................................
3. Are there obstacles which prevent the family from          Yes     No
 performing the required tasks?...........................
 
                   B. Use of Grant Funds
 
1. Were grant funds used to pay salaries or other expenses    Yes     No
 of personnel not directly associated with this grant?....
2. Were grant funds used to pay for construction work for     Yes     No
 participating families?..................................
3. Were all purchases or rentals (item and cost) of office    Yes     No
 equipment authorized?....................................
4. Are all office expenses authorized by 7 CFR part 1944,     Yes     No
 subpart I?...............................................
5. Was a record of long distance telephone calls              Yes     No
 maintained and was that log and telephone checked?.......
6. Was all travel and mileage incurred for official           Yes     No
 business and properly authorized in advance?.............
7. Were mileage and per diem rates within authorized          Yes     No
 levels?..................................................
8. Were participating families charged for use of tools?..    Yes     No
9. Were grant funds expended to train grant personnel?....    Yes     No
10. Was training appropriate for the individual trainee?..    Yes     No
11. Were any technical or consultant services obtained for    Yes     No
 participating families?..................................
12. Were the provided technical or consultant services        Yes     No
 appropriate in type and cost?............................
 
               C. Financial Responsibilities
 
1. Does each invoice paid by the grant recipient match the    Yes     No
 purchase order?..........................................
2. Does each invoice paid by the borrower and FmHA or its     Yes     No
 successor agency under Public Law 103-354 match the
 purchase order?..........................................
3. Were purchases made from the appropriate vendors?......    Yes     No
4. Are the invoices and itemized statements totalled for      Yes     No
 materials purchased for individual families?.............
5. Is there a record of deposits and withdrawals to           Yes     No
 account for all loan funds?..............................
6. Are checks from grant funds signed by the Board            Yes     No
 Treasurer and Executive Director?........................
7. Are grant funds deposited in an interest bearing           Yes     No
 account?.................................................
8. Are checks from loan funds prepared by the grant           Yes     No
 recipient for the borrower's and lender's signature?.....
9. Are checks from loan funds accompanied by accurate         Yes     No
 invoices?................................................
10. Are any borrower loan funds including interests,          Yes     No
 deposited in grantee accounts?...........................
11. Are checks from loan funds submitted to FmHA or its       Yes     No
 successor agency under Public Law 103-354 more often than
 once every 30 days?......................................
12. Is the reconciliation of bank statements for both         Yes     No
 grant and loan funds completed on a monthly basis?.......
13. If the person who issues the checks also reconciles       Yes     No
 them, does the Executive Director review this activity?..
14. Are materials purchased in bulk approved by the           Yes     No
 Executive Director?......................................
15. Was the amount of materials determined by both the        Yes     No
 Executive Director and construction staff?...............
16. Were any participating families consulted about the       Yes     No
 purchase of materials?...................................
17. Were savings accomplished by the bulk purchase method?    Yes     No
18. Did the Executive Director review the purchase order      Yes     No
 and the ultimate use of the materials?...................

[[Page 497]]

 
19. Are materials covered by insurance when stored by         Yes     No
 grantee?.................................................
 
                       D. Reporting
 
1. Are ``Requests for Advance or Reimbursement'' made once    Yes     No
 monthly to the FmHA or its successor agency under Public
 Law 103-354 District Office?.............................
2. Has the grant recipient engaged a certified public         Yes     No
 Accountant (CPA) or CPA firm to review their operations
 on a regular basis: (Annually is preferable but every two
 years and at the end or the grant period are
 requirements)?...........................................
3. Are the quarterly evaluation reports submitted on time     Yes     No
 to the County Supervisor?................................
 

    What, if any, problems exist that need to be corrected for effective 
management of the grant project?

________________________________________________________________________
Date

________________________________________________________________________
President, Board of Directors

(Period covered by report ------)

                               Answer Key

    The following answers should help your organization in assessing its 
vulnerability to fraud, waste, and abuse. You should take actions to 
correct practices that now generate an answer different from the key.

 
                  Question                              Answer
 
A. 1.......................................  Yes
A. 2.......................................  Yes
A. 3.......................................  Yes
B. 1.......................................  No
B. 2.......................................  No
B. 3.......................................  Yes
B. 4.......................................  Yes
B. 5.......................................  Yes
B. 6.......................................  Yes
B. 7.......................................  Yes
B. 8.......................................  No
B. 9.......................................  Yes
B. 10......................................  Yes
B. 11......................................  Yes
B. 12......................................  Yes
C. 1.......................................  Yes
C. 2.......................................  Yes
C. 3.......................................  Yes
C. 4.......................................  Yes
C. 5.......................................  Yes
C. 6.......................................  Yes
C. 7.......................................  No
C. 8.......................................  Yes
C. 9.......................................  Yes
C. 10......................................  No
C. 11......................................  No
C. 12......................................  Yes
C. 13......................................  Yes
C. 14......................................  Yes
C. 15......................................  Yes
C. 16......................................  Yes
C. 17......................................  Yes
C. 18......................................  Yes
C. 19......................................  Yes
D. 1.......................................  Yes
D. 2.......................................  Yes
D. 3.......................................  Yes
 

   Exhibit F to Subpart I of Part 1944--Site Option Loan to Technical 
                           Assistance Grantees

                              I. Objectives

    The objective of a Site Option (SO) loan under Section 523(b)(1)(B) 
of Title V of the Housing Act of 1949 is to enable technical assistance 
(TA) grantees to establish revolving fund accounts to obtain options on 
land needed to make sites available to families that will build their 
own homes by the self-help method. An SO loan will be considered only 
when sites cannot be made available by other means including a regular 
Rural Housing Site (RHS) loan.

                      II. Eligibility Requirements

    To be eligible for an SO loan, the applicant must be a TA grantee 
that is currently operating in a satisfactory manner under a TA grant 
agreement. If the SO loan applicant has applied for TA funds but is not 
already a TA grantee and it appears that the TA grant will be made, the 
SO loan may be approved but not closed until the TA grant is closed.

                           III. Loan Purposes

    Loans may be made only as necessary to enable eligible applicants to 
establish revolving accounts with which to obtain options on land that 
will be needed as building sites by self-help families participating in 
the TA self-help housing program. Loans will not be made to pay the full 
purchase price of land but only for the minimum amounts necessary to 
obtain an option from the seller. The option should be for as long as 
necessary but in no case should the option be for less than 90 days.

                             IV. Limitations

    (A) If the amount of an SO loan will exceed $10,000, the prior 
consent of the National Office shall be obtained before approval.
    (B) The amount of the SO loan should not exceed 15 percent of the 
purchase price of the land expected to be under option at any one time, 
unless a higher percent is authorized by the State Director when other 
land in not available or the particular area requires

[[Page 498]]

more down payment than elsewhere or similar circumstances exist.
    (C) Form FmHA or its successor agency under Public Law 103-354 440-
34, ``Option to Purchase Real Property,'' will be used without 
modification in all cases for obtaining options under this subpart.
    (D) The limitations of Sec. 1822.266(b) (1) and (2) of subpart F of 
part 1822 of this chapter (FmHA Instruction 444.8, paragraphs VI B (1) 
and (2)) concerning land purchase will apply to options purchased under 
this subpart.

                           V. Rates and Terms

    (A) Interest. Loans will be made at an interest rate of 3 percent.
    (B) Repayment period. Each SO loan will be repaid in one installment 
which will include the entire principal balance and accrued interest. 
The maximum repayment period for each SO loan will be the applicant's 
remaining TA grant funding period.
    (1) A shorter repayment period will be established if SO funds will 
not be needed for the entire TA grant funding period.
    (2) If a regular RHS loan is to be processed, the SO loan should be 
scheduled for repayment when RHS loan funds will be available to 
purchase the land and repay the amount of SO funds advanced on the 
option, unless SO loan funds will still be needed to purchase other 
options. Under no circumstances, however, will the repayment period 
exceed the applicant's remaining TA grant funding period.

                       VI. Processing Application

    (A) Form of application: The application for assistance will be in 
the form of a letter to the FmHA or its successor agency under Public 
Law 103-354 County Supervisor having jurisdiction over the area of the 
proposed site to be optioned. The letter will be signed by the applicant 
or its authorized representative and contain, as a minimum, the 
following information:
    (1) A copy of the proposed option that shows a legal description of 
the land, option price, purchase price, and terms of the option. If more 
than one site is to be purchased, a schedule of the proposed options 
should be included.
    (2) Information to verify that a regular RHS loan cannot be 
processed in time to secure the option.
    (3) Proposed method repayment of the SO loan.
    (4) Resolution from the applicant's governing body authorizing the 
application for an SO loan from FmHA or its successor agency under 
Public Law 103-354.
    (B) Responsibility of the County Supervisor. Upon receipt of an SO 
loan application, the County Supervisor will:
    (1) Determine whether the applicant is eligible. If the applicant is 
not eligible, or the loan cannot be made for other reasons, the 
application may be rejected by the County Supervisor with the 
concurrence of the District Director. The reasons for the rejection 
should be clearly stated and provided, in writing to the applicant. The 
applicant will have the right to have the decision reviewed following 
the procedure established in subpart B of part 1900 of this chapter.
    (2) Review and verify the accuracy of the information provided.
    (3) Make an inspection and a memorandum appraisal of each proposed 
site ``as is.'' The appraisal will include a narrative statement as to 
whether the site has been recently sold, verify that the seller is the 
owner of the property, and indicate whether the purchase price is 
acceptable based on the selling price of similar properties in the area.
    (4) Indicate whether or not it appears that, considering the 
location and cost of development, adequate building sites can be 
provided at reasonable costs.
    (5) If the option is for a tract of land on which 5 or more sites 
are proposed, the County Supervisor will forward to the District 
Director with recommendations as defined in Sec. 1924.119 of subpart C 
of part 1924 of this chapter.
    (6) If approval is recommended, prepare and have the applicant 
execute Form FmHA or its successor agency under Public Law 103-354 1940-
1, ``Request for Obligation of Funds,'' for the amount needed. Copies of 
the form will be distributed as provided in the Forms Manual Insert 
(FMI).
    (7) Forward the SO loan application and the applicant's TA 
application or TA docket to the State Director. The submission will 
include the appraisal report and the County Supervisor's comments and 
recommendations.

          VII. Loan Approval Authority and State Office Actions

    The State Director is authorized to approve SO loans developed in 
accordance with this exhibit. The approval or disapproval of the loan 
will be handled in the same manner as provided in Sec. 1822.272 of 
subpart F of part 1822 of this chapter (FmHA Instruction 444.8, 
paragraph XII). SO loans will be established in Automated Multiple 
Housing Accounting System (AMAS) using Form FmHA or its successor agency 
under Public Law 103-354 1944-51, ``Multiple Family Housing Obligation 
Fund Analysis''. The Issue loan/Grant checks transaction will be used to 
request a check for SO loans.

                           VIII. Loan Closing

    (A) General. Loan closing instructions will be provided by the 
Office of the General Counsel (OGC) to assure that the Promissory Note 
is properly completed and executed.

[[Page 499]]

The County Supervisor may then close the loan.
    (B) Security for the loan. The loan will be secured by a Promissory 
Note properly executed by the grantee using Form FmHA or its successor 
agency under Public Law 103-354 1940-16, ``Promissory Note.'' A lien on 
the optioned real estate will not be taken.
    (1) The ``kind of loan'' block on the note will read ``SO loan.''
    (2) The note will be modified to show that the only installment on 
the loan will be the final installment.
    (C) Loan is closed. The loan will be considered closed when the note 
is executed and the loan check delivered to the grantee.

             IX. Establishment of SO Loan Revolving Account

    (A) Supervised bank accounts will not be used for SO loans.
    (B) Grantee will deposit SO loan funds in a depository institution 
of its choice. The use of minority institutions is encouraged. Such 
funds will remain separate from any other account of the grantee and 
shall be established as an SO revolving account.
    (C) Checks drawn on the revolving account will be for the sole 
purpose of purchasing land options and must be signed by at least two 
authorized officials of the grantee who have been properly bonded in 
accordance with Sec. 1944.411 (e) and (g) of this subpart.
    (D) Grantees will not expend funds for any options until the site 
and the option form have been reviewed and approved by the County 
Supervisor.
    (1) SO funds will not be left unused in the revolving account in 
excess of 60 days.
    (2) If the funds are not used for the intended purpose within the 60 
days specified above, the unused portion will be refunded on the 
account.
    (E) When funds become available for repayment of the SO loan, such 
funds will be deposited in the revolving account for the purchase of 
additional site options if needed. If such funds are not needed to 
purchase more options, they will be applied on the SO loan.

                           X. Source of Funds

    SO loans will be funded from the self-help housing land development 
fund.

    Effective Date Note: At 69 FR 69105, Nov. 26, 2004, Exhibit F to 
subpart I of part 1944 was amended in paragraph VII by revising the 
words ``Form FmHA or its successor agency under Public Law 103-354 1944-
51'' to read ``Form RD 3560-51'', effective Feb. 24, 2005.

Subpart J [Reserved]



          Subpart K_Technical and Supervisory Assistance Grants

    Source: 44 FR 36891, June 22, 1979, unless otherwise noted.



Sec. 1944.501  General.

    (a) This subpart sets forth the policies and procedures for making 
grants under section 525(a) of the Housing Act of 1949, 42 U.S.C. 
1490e(a), to provide funds to eligible applicants to conduct programs of 
technical and supervisory assistance (TSA) for low-income rural 
residents to obtain and/or maintain occupancy of adequate housing. Any 
processing or servicing activity conducted pursuant to this subpart 
involving authorized assistance to FmHA or its successor agency under 
Public Law 103-354 employees, members of their families, known close 
relatives, or business or close personal associates, is subject to the 
provisions of subpart D of part 1900 of this chapter. Applicants for 
this assistance are required to identify any known relationship or 
association with an FmHA or its successor agency under Public Law 103-
354 employee. This financial assistance may pay part or all of the cost 
of developing, conducting, administering, or coordinating effective and 
comprehensive programs of technical and supervisory assistance which 
will aid needy low-income individuals and families in benefiting from 
federal, state, and local programs in rural areas.
    (b) The Farmers Home Administration (FmHA) or its successor agency 
under Public Law 103-354 will provide technical and supervisory grant 
assistance to applicants without discrimination because of race, color, 
religion, sex, national origin, age, marital status, or physical or 
mental handicap.

[44 FR 36891, June 22, 1979, as amended at 58 FR 228, Jan. 5, 1993]



Sec. 1944.502  Policy.

    (a) The policy of the FmHA or its successor agency under Public Law 
103-354 is to provide Technical and Supervisory Assistance to eligible 
applicants to do the following:

[[Page 500]]

    (1) Provide homeownership and financial counseling to reduce both 
the potential for delinquency by loan applicants and the level of 
payment delinquency by present FmHA or its successor agency under Public 
Law 103-354 housing loan borrowers; and
    (2) Facilitate the delivery of housing programs to serve the most 
needy low-income families in rural areas of greatest need for housing.
    (b) FmHA or its successor agency under Public Law 103-354 intends to 
fund projects which include counseling and delivery of housing programs.
    (c) State Directors are given a strong role in the selection of 
grantees so this program can complement FmHA or its successor agency 
under Public Law 103-354's policies of targeting FmHA or its successor 
agency under Public Law 103-354 resources to areas of greatest need 
within their States.
    (d) FmHA or its successor agency under Public Law 103-354 expects 
grant recipients to implement a TSA program and not to use TSA funds to 
prepare housing plans and strategies except as necessary to accomplish 
the specific objectives of the TSA project.



Sec. 1944.503  Objectives.

    The objectives of the TSA Grant Program are to assist low-income 
rural families in obtaining adequate housing to meet their family's 
needs and/or to provide the necessary guidance to promote their 
continued occupancy of already adequate housing. These objectives will 
be accomplished through the establishment or support of housing delivery 
and counseling projects run by eligible applicants. This program is 
intended to make use of any available housing program which provides the 
low-income rural resident access to adquate rental properties or 
homeownership.



Sec. Sec. 1944.504-1944.505  [Reserved]



Sec. 1944.506  Definitions.

    References in this subpart to County, District, State, National and 
Finance Offices and to County Supervisor, District Director, State 
Director, and Administrator refer to FmHA or its successor agency under 
Public Law 103-354 offices and officials and should be read as prefaced 
by FmHA or its successor agency under Public Law 103-354. Terms used in 
this subpart have the following meanings:
    (a) Adequate housing. A housing unit of adequate size and design to 
meet the specific needs of low-income families and the requirements 
governing the particular housing program providing the services or 
financial assistance.
    (b) Applicant or grantee. Any eligible organization which applies 
for or receives TSA funds under a grant agreement.
    (c) Grant agreement. The contract between FmHA or its successor 
agency under Public Law 103-354 and the applicant which sets forth the 
terms and conditions under which TSA funds will be made available.
    (d) Low-income family. Any household, including those with one 
member, whose adjusted annual income, computed in accordance with 7 CFR 
part 3550, subpart B, does not exceed the maximum low-income limits 
specified in Appendix 9 of HB-1-3550 (available in any Rural Development 
office).
    (e) Organization. (1) Public or private nonprofit corporations, 
agencies, institutions, Indian tribes, and other associations.
    (2) A private nonprofit corporation with local representation from 
the area being served that is owned and controlled by private persons or 
interests and is organized and operated by private persons or interests 
for purposes other than making gains or profits for the corporation and 
is legally precluded from distributing any gains or profits to its 
members.
    (f) Rural area. The definition in 7 CFR part 3550 applies.
    (g) Sponsored applicant. An eligible applicant which has a 
commitment of financial and/or technical assistance to apply for the TSA 
program and to implement such a program from a state, county, 
municipality, or other governmental entity or public body.
    (h) Supervisory assistance. Any type of assistance to low-income 
families which will assist those families in meeting the eligibility 
requirements for, or the financial and managerial responsibilities of, 
homeownership or tenancy in an adequate housing unit.

[[Page 501]]

Such assistance must include, but is not limited to, the following 
activities:
    (1) Assisting individual FmHA or its successor agency under Public 
Law 103-354 borrowers with financial problems to overcome delinquency 
and/or prevent foreclosure and assisting new low-income applicants to 
avoid financial problems through:
    (i) Financial and budget counseling including advice on debt levels, 
credit purchases, consumer and cost awareness, debt adjustment 
procedures, and availablity of other financial counseling services;
    (ii) Monitoring payment of taxes and insurance;
    (iii) Home maintenance and managment; and
    (iv) Other counseling based on the needs of the low-income families.
    (2) Contracting and assisting low-income families in need of 
adequate housing by:
    (i) Implementing an organized outreach program using available media 
and personal contacts;
    (ii) Explaining available housing programs and alternatives to 
increase the awareness of low-income families and to educate the 
community as to the benefits which can accrue from improved housing;
    (iii) Assisting low-income families locate adquate housing;
    (iv) Providing construction supervision, training, and guidance to 
low-income families not involved in mutual self-help projects who are 
otherwise being assisted by the TSA project;
    (v) Organizing local public or private nonprofit groups willing to 
provide adequate housing for low-income families; and
    (vi) Providing assistance to families and organizations in 
processing housing loan and/or grant applications generated by the TSA 
program, including developing and packaging such applications for new 
construction, rehabilitation, or repair to serve low-income families.
    (i) Technical assistance. Any specific expertise necessary to carry 
out housing efforts by or for low-income families to improve the 
quantity and/or quality of housing available to meet their needs. Such 
assistance should be specifically related to the supervisory assistance 
provided by the project, and may include, as appropriate, the following 
activities:
    (1) Develop, or assist eligible applicants to develop, multi-housing 
loan and/or grant applications for new construction, rehabilitation, or 
repair to serve low-income families.
    (2) Market surveys, engineering studies, cost estimates, and 
feasibility studies related to applications for housing assistance to 
meet the specific needs of the low-income families assisted under the 
TSA program.

[44 FR 36891, June 22, 1979, as amended at 46 FR 61990, Dec. 21, 1981; 
50 FR 39967, Oct. 1, 1985; 51 FR 6393, Feb. 26, 1986; 59 FR 7193, Feb. 
15, 1994; 67 FR 78328, Dec. 24, 2002]



Sec. Sec. 1944.507-1944.509  [Reserved]



Sec. 1944.510  Applicant eligibility.

    To be eligible to receive a grant, the applicant must:
    (a) Be an organization as defined in Sec. 1944.506(e).
    (b) Have the financial, legal, administrative, and operational 
capacity to assume and carry out the responsibilities imposed by the 
grant agreement. To meet this requirement of actual capacity, it must 
either:
    (1) Have necessary background and experience with proven ability to 
perform responsibly in the field of low-income rural housing development 
and counseling, or other business management or administrative 
experience which indicates an ability to provide responsible technical 
and supervisory assistance; or
    (2) Be assisted by an organization which has such background 
experience and ability and which agrees in writing that it will provide, 
without charge, the assistance the applicant will need to carry out its 
responsibilities.
    (c) Legally obligate itself to administer TSA funds, provide an 
adequate accounting of the expenditure of such funds, and comply with 
the grant agreement and FmHA or its successor agency under Public Law 
103-354 regulations;
    (d) Demonstrate an understanding of the needs of low-income rural 
families;
    (e) Have the ability and willingness to work within established 
guidelines; and

[[Page 502]]

    (f) If the applicant is engaged in or plans to become engaged in any 
other activities, it must be able to provide sufficient evidence and 
documentation that it has adequate resources, including financial 
resources, to carry on any other programs or activities to which it is 
committed without jeopardizing the success and effectiveness of its TSA 
project.



Sec. 1944.511  [Reserved]



Sec. 1944.512  Authorized representative of the applicant.

    FmHA or its successor agency under Public Law 103-354 will deal only 
with authorized representatives designed by the applicant. The 
authorized representatives must have no pecuniary interest in any of the 
following as they would relate in any way to the TSA grant: the award of 
any engineering, architectural, management, administration, or 
construction contracts; purchase of the furnishings, fixtures or 
equipment; or purchase and/or development of land.

    Note: FmHA or its successor agency under Public Law 103-354 has 
designated the District Office as the primary point of contact for all 
matters relating to the TSA program and as the office responsbile for 
the administration of approved TSA projects.



Sec. 1944.513  [Reserved]



Sec. 1944.514  Comprehensive TSA grant projects.

    (a) The rural area to be covered by the TSA project must be 
realistically serviceable by the applicant in terms of funding 
resources, manpower, and distances and generally should be limited to 
one to four counties within the service area of one District Office.
    (b) Consideration of the following items may assist applicants 
develop TSA projects which meet the needs of low-income families in the 
proposed TSA service area: present population distribution, projected 
population growth or decline, the amount of inadequate housing, economic 
conditions, and trends of the rural areas concerned, and any other 
factors affecting the quantity and quality of housing currently 
available or planned for the area. Consideration must also be given to 
the needs and desires of the community; the financial and social 
condition of the individuals within the community; the needs of areas 
with a concentration of low-income minority families and the needs of 
FmHA or its successor agency under Public Law 103-354 borrowers who are 
delinquent in their housing loan payments; the availability of 
supporting services such as water, sewerage, health and educational 
facilities, transportation, recreational and community facilities, and 
the types of housing facilities and services presently available or 
planned to which the low-income families have or will have ready access.
    (c) Each TSA applicant should consider the alternatives available to 
provide needed housing facilities and services for the area. 
Consideration should also be given to the recommendations and services 
available from local, state, federal governmental entities, and from 
private agencies and individuals.
    (1) In no case should the TSA project deliberately conflict with or 
duplicate housing studies, plans, projects, or any other housing related 
activities in a rural area unless documentation shows these activities 
do not meet the needs of low-income families.
    (2) Each TSA project should be coordinated to the extent possible 
with any comprehensive or special purpose plans and projects affecting 
low-income housing in the area.
    (3) To the fullest extent possible, TSA projects should be 
coordinated with any housing-related activities currently being carried 
out in the area.
    (d) TSA applicants must coordinate their proposals with the 
appropriate County and District Offices to be fully familiar with the 
needs of those offices and of the low-income families currently served 
by the County Offices.



Sec. 1944.515  [Reserved]



Sec. 1944.516  Grant purposes.

    Grant funds are to be used for a housing delivery system and 
counseling program to include a comprehensive program of technical and 
supervisory assistance as set forth in the grant agreement and any other 
special conditions as required by FmHA or its successor agency under 
Public Law 103-

[[Page 503]]

354. Uses of grant funds may include, but are not limited to:
    (a) The development and implementation of a program of technical and 
supervisory assistance as defined in Sec. 1944.506 (h) and (i).
    (b) Payment of reasonable salaries of professional, technical, and 
clerical staff actively assisting in the delivery of the TSA project.
    (c) Payment of necessary and reasonable office expenses such as 
office supplies and office rental, office utilities, telephone services, 
and office equipment rental.
    (d) Payment of necessary and reasonable administrative costs such as 
workers' compensation, liability insurance, audit reports, travel to and 
attendance at FmHA or its successor agency under Public Law 103-354 
approved training sessions, and the employer's share of Social Security 
and health benefits. Payments to private retirement funds are prohibited 
unless prior written authorization is obtained from the Administrator.
    (e) Payment of reasonable fees for necessary training of grantee 
personnel. This may include the cost of travel and per diem to attend 
regional training sessions when authorized by the State Director.
    (f) Other reasonable travel and miscellaneous expenses necessary to 
accomplish the objectives of the specific TSA grant which were 
anticipated in the individual TSA grant proposal and which have been 
included as eligible expenses at the time of grant approval.



Sec. 1944.517  [Reserved]



Sec. 1944.518  Term of grant.

    TSA projects will be funded under one Grant Agreement for two years 
commencing on the date of execution of the Agreement by the State 
Director.



Sec. 1944.519  [Reserved]



Sec. 1944.520  Ineligible activities.

    (a) Grant funds may not be used for:
    (1) Acquisition, construction, repair, or rehabilitation of 
structures or acquisition of land, vehicles, or equipment.
    (2) Replacement of or substitution for any financial support which 
would be available from any other source.
    (3) Duplication of current services in conflict with the 
requirements of Sec. 1944.514(c).
    (4) Hiring personnel to perform construction.
    (5) Buying property of any kind from families receiving technical or 
supervisory assistance from the grantee under the terms of the TSA 
grant.
    (6) Paying for or reimbursing the grantee for any expenses or debts 
incurred before FmHA or its successor agency under Public Law 103-354 
executes the grant agreement.
    (7) Paying any debts, expenses, or costs which should be the 
responsibility of the individual families receiving technical and 
supervisory assistance.
    (8) Any type of political activities.
    (9) Other costs including contributions and donations, 
entertainment, fines and penalties, interest and other financial costs, 
legislative expenses and any excess of cost from other grant agreements.
    (b) Advice and assistance may be obtained from the National Office 
where ineligible costs are proposed as part of the TSA project or where 
a proposed cost appears ineligible.
    (c) The grantee may not charge fees or accept compensation or 
gratuities from TSA recipients for the grantee's assistance under this 
program.



Sec. 1944.521  [Reserved]



Sec. 1944.522  Equal opportunity requirements.

    The policies and regulations contained in subpart E of part 1901 of 
this chapter apply to grants made under this subpart.



Sec. 1944.523  Other administrative requirements.

    The following policies and regulations apply to grants made under 
this subpart:
    (a) The policies and regulations contained in subpart F of part 1901 
of this chapter regarding historical and archaeological properties.
    (b) The policies and regulations contained in subpart G of part 1940 
of this

[[Page 504]]

chapter regarding Environmental Assessments.

[44 FR 36891, June 22, 1979, as amended at 48 FR 29121, June 24, 1983; 
49 FR 3763, Jan. 30, 1984]



Sec. 1944.524  [Reserved]



Sec. 1944.525  Targeting of TSA funds to States.

    (a) The Administrator will determine, based on the most current 
available information (generally that information used to determine the 
allocation to States of FmHA or its successor agency under Public Law 
103-354 housing loan funds), those States with the highest degree of 
substandard housing and persons in poverty in rural areas eligible to 
receive FmHA or its successor agency under Public Law 103-354 housing 
assistance. The Administrator will distribute a portion of the available 
funds for TSA to these States, leaving the balance available for 
national competition.
    (b) The Administrator will provide annual notice through a published 
Notice on the distribution of appropriated TSA funds, the number of 
preapplications to be submitted to the National Office from the State 
Offices, and the maximum grant amount per project.



Sec. 1944.526  Preapplication procedure.

    (a) Preapplication submission. (1) All applicants will file an 
original and two copies of SF 424.1, ``Application for Federal 
Assistance (For Non-construction),'' and supporting information detailed 
below with the appropriate District Office serving the proposed TSA 
area. A preapplication packet including SF 424.1 is available in all 
District and State Offices.
    (i) The applicant will provide informational copies of the 
preapplication to the County Supervisor(s) of the area to be served by 
the TSA project at the time of submittal to the appropriate District 
Office.
    (ii) If the TSA area encompasses more than one District Office, the 
preapplication will be filed at the District Office which serves the 
area in which the grantee will provide the greatest amount of TSA 
efforts. Additional informational copies of the preapplication will be 
sent by the applicant to the other affected District Office(s).
    (2) All preapplications shall be accompanied by the following 
information which will be used to determine the applicant's eligibility 
to undertake a TSA program and to determine whether the applicant might 
be funded.
    (i) A narrative presentation of the applicant's proposed TSA 
program, including:
    (A) The technical and supervisory assistance to be provided;
    (B) The time schedule for implementing the program;
    (C) The staffing pattern to execute the program and salary range for 
each position, existing and proposed;
    (D) The estimated number of low-income and low-income minority 
families the applicant will assist in obtaining affordable adequate 
housing;
    (E) The estimated number of FmHA or its successor agency under 
Public Law 103-354 borrowers who are delinquent or being foreclosed that 
the applicant will assist in resolving their financial problems relating 
to their delinquency;
    (F) The estimated number of households which will be assisted in 
obtaining adequate housing in the TSA area through new construction and/
or rehabilitation;
    (G) Annual estimated budget for each of the two years based on the 
financial needs to accomplish the objectives outlined in the proposal. 
The budget should include proposed direct and indirect costs for 
personnel, fringe benefits, travel, equipment, supplies, contracts, and 
other costs categories, detailing those costs for which the grantee 
proposes to use the TSA grant separately from non-TSA resources, if any;
    (H) The accounting system to be used;
    (I) The method of evaluation proposed to be used by the applicant to 
determine the effectiveness of its program;
    (J) The sources and estimated amounts of other financial resources 
to be obtained and used by the applicant for both TSA activities and 
housing development and/or supporting facilities; and

[[Page 505]]

    (K) Any other information necessary to explain the manner of 
delivering the TSA assistance proposed.
    (ii) Complete information about the applicant's previous experience 
and capacity to carry out the objectives of the proposed TSA program;
    (iii) Evidence of the applicant's legal existence, including, in the 
case of a private nonprofit organization, a copy of, or an accurate 
reference to, the specific provisions of State law under which the 
applicant is organized; a certified copy of the applicant's Articles of 
Incorporation and Bylaws or other evidence of corporate existence; 
certificate of incorporation for other than public bodies; evidence of 
good standing from the State when the corporation has been in existence 
one year or more; the names and addresses of the applicant's members, 
directors, and officers; and, if another organization is a member of the 
applicant-organization, its name, address, and principal business.
    (iv) For a private nonprofit entity, a current financial statement 
dated and signed by an authorized officer of the entity showing the 
amounts and specific nature of assets and liabilities together with 
information on the repayment schedule and status of any debt(s) owed by 
the applicant. If the applicant is an organization being assisted by 
another private nonprofit organization, the same type of financial 
statement should also be provided by that organization.
    (v) A brief narrative statement which includes information about the 
area to be served and the need for improved housing (including both 
percentage and actual number of both low-income and low-income minority 
families and substandard housing), the need for the type of technical 
and supervisory assistance being proposed, the method of evaluation to 
be use by the applicant in determining the effectiveness of its efforts 
(as related to paragraph (a)(2)(i) of this section), and any other 
information necessary to specifically address the selection criteria in 
Sec. 1944.529.
    (vi) A list of other activities the applicant is engaged in and 
expects to continue and a statement as to any other funding and whether 
it will have sufficient funds to assure continued operation of the other 
activities for at least the period of the TSA grant agreement.
    (3) An applicant should submit written statements from the county, 
parish, or township governments of the area affected that the project is 
beneficial and does not duplicate current activities. If the local 
governmental units will not provide such statements, the applicant will 
prepare and include with its preapplication a summary of its analysis of 
alternatives considered under Sec. 1944.514(c). However, Indian 
nonprofit organization applicants should obtain the written concurrence 
of the Tribal governing body in lieu of the concurrence of the county 
governments.
    (4) Sponsored applicants should submit a written commitment for 
financial and/or technical assistance from their sponsoring entity.
    (5) An original and one copy of Form FmHA or its successor agency 
under Public Law 103-354 1940-20, ``Request for Environmental 
Information.''
    (b) District Office processing of preapplications. (1) The District 
Director with whom the preapplication is filed will review the 
preapplication, SF 424.1, and any other supporting information from the 
applicant. The District Director will also:
    (i) Complete any required environmental review procedures as 
specified in subpart G of part 1940 of this chapter and attach to the 
application.
    (ii) Prepare a review of the project in accordance with subpart F of 
part 1901 of this chapter and attach it to the preapplication.
    (2) All District Directors and County Supervisors receiving 
informational copies of the preapplication should submit their comments 
within five working days to the District Director with whom the 
preapplication if filed.
    (3) The original and one copy of the preapplication, together with 
the District Director's written comments and recommendations, reflecting 
the criteria used in Sec. 1944.529 and exhibit C of this subpart, will 
be forwarded to the State Director within ten working days of receipt of 
the preapplication.
    (c) State Office processing of preapplications. (1) Upon receipt of 
a

[[Page 506]]

preapplication, the State Office will review and evaluate the 
preapplication and accompanying documents in accordance with the project 
selection criteria of Sec. 1944.529 and exhibit B of this subpart. The 
State Office will also:
    (i) Make a determination on Form FmHA or its successor agency under 
Public Law 103-354 1940-21, Form FmHA or its successor agency under 
Public Law 103-354 1940-22 or Class II Environmental Assessment in 
accordance with subpart G of part 1940 of this chapter.
    (ii) Prepare an historical and archaeological assessment in 
accordance with Sec. 1901.255 (b) and (c) of subpart F of part 1901 of 
this chapter.
    (2) Within 30 days of the closing date for receipt of 
preapplications as published in the Federal Register, the State Director 
will forward to the National Office the original preapplication(s) and 
supporting documents of the selected applicant(s), including any 
comments received in accordance with 7 CFR part 3015 subpart V, 
``Intergovernmental Review of Department of Agriculture Programs and 
Activities'' (See FmHA Instruction 1940-J, available in any FmHA or its 
successor agency under Public Law 103-354 Office), and the comments and 
recommendations of the County Office(s), District Office(s), and the 
State Office. The State Office will submit the preapplication(s) in 
accordance with the annual notice provided for by Sec. 1944.525 (b) of 
this subpart.
    (3) Concurrently the State Office will send a copy of the selected 
applicant's(s') SF 424.1 and relevant documents to the Regional Office 
of the General Counsel (OGC) requesting a legal determination be made of 
the applicant's legal existence and authority to conduct the proposed 
program of technical and supervisory assistance.
    (4) The State Office will notify other applicants that their 
preapplications will not selected and advise them of their appeal rights 
under subpart B of part 1900 of this chapter.
    (d) National Office processing of preapplications. (1) 
Preapplications for this program from those States targeted under Sec. 
1944.525 will be reviewed by the National Office for completeness and 
compliance with this subpart. If a grant is recommended, the National 
Office will return the preapplication(s) with any comments and 
recommendations to the State Office and advise that office to proceed 
with the issuance of Form AD-622, ``Notice of Preapplication Review 
Action,'' and to request the applicant to prepare SF 424.1 for 
submission to the District Office. If a grant is not recommended, the 
National Office will advise the State Office of action to take.
    (2) Preapplications from States which are not targeted in accordance 
with Sec. 1944.525 will be reviewed for completeness and compliance 
with this subpart and then evaluated in accordance with the project 
selection criteria of Sec. 1944.529. Those preapplications which are 
selected, and for which funds are available, will be returned to the 
appropriate State Office with any National Office comments and 
recommendations. The State Office will be advised to proceed with the 
issuance of SF 424.1 and to request the applicant to prepare Form AD-623 
for submission to the District Office as detailed in Sec. 1944.531.
    (3) Those preapplications for which funds are not available will be 
returned to the appropriate State Office which will notify each 
applicant and advise the applicant of its appeal rights under subpart B 
of part 1900 of this chapter.
    (4) State Directors will be advised of the National Office's action 
on their selected preapplication within 30 days of receipt of all 
preapplications.

[47 FR 40400, Sept. 14, 1982, as amended at 48 FR 29121, June 24, 1983; 
49 FR 3763, Jan. 30, 1984; 55 FR 13503 and 13504, Apr. 11, 1990; 55 FR 
50081, Dec. 4, 1990]



Sec. 1944.527  [Reserved]



Sec. 1944.528  Preapplication submission deadline.

    Dates governing the review and selection of TSA grant 
preapplications will be published annually in the Federal Register. 
Preapplications received after that time will not be considered for 
funding. For use of fiscal year 1979 funds, the deadline for submission 
of preapplications will be 45 calendar days from date of publication of 
final regulations.

[[Page 507]]



Sec. 1944.529  Project selection.

    (a) Projects must meet the following criteria:
    (1) Provide a program of supervisory assistance as defined in Sec. 
1944.506(h), and
    (2) Serve areas with a concentration of substandard housing and low-
income and low-income minority households.
    (b) In addition to the items listed in paragraph (a) of this 
section, the following criteria will be considered in the selection of 
grant recipients:
    (1) The extent to which the project serves areas with concentrations 
of FmHA or its successor agency under Public Law 103-354 single family 
housing loan borrowers who are delinquent in their housing loan payments 
and/or threatened with foreclosure.
    (2) The capability and past performance demonstrated by the 
applicant in administering its programs.
    (3) The effectiveness of the current efforts by the applicant to 
assist low-income families in obtaining adequate housing.
    (4) The extent to which the project will provide or increase the 
delivery of housing resources to low-income and low-income minority 
families in the area who are not currently occupying adequate housing.
    (5) The services the applicant will provide that are not presently 
available to assist low-income families in obtaining or maintaining 
occupancy of adequate housing and the extent of duplication of technical 
and supervisory assistance activities currently provided for low-income 
families.
    (6) The extent of citizen and local government participation and 
involvement in the development of the preapplication and project.
    (7) The extent of planned coordination with other Federal, State, or 
local technical and/or supervisory assistance programs.
    (8) The extent to which the project will make use of other financial 
and contributions-in-kind resources for both technical and supervisory 
assistance and housing development and supporting facilities.
    (9) Any comments received in accordance with 7 CFR part 3015 subpart 
V, ``Intergovernmental Review of Department of Agriculture Programs and 
Activities.'' See FmHA Instruction 1940-J, available in any FmHA or its 
successor agency under Public Law 103-354 office.
    (10) The extent to which the project will be cost effective, 
including but not limited to the ratio of personnel to be hired by the 
applicant to the cost of the project, the cost, both direct and 
indirect, per person benefiting from the project, and the expected 
benefits to low-income families from the project.
    (11) The extent to which the proposed staff and salary ranges, 
including qualifications, experience, proposed hiring schedule and 
availability of any prospective employees, will meet the objectives of 
the proposed TSA program.
    (12) The anticipated capacity of the applicant to implement the 
proposed time schedule for starting and completing the TSA program and 
each phase thereof.
    (13) The adequacy of the records and practices, including personnel 
procedures and practices, that will be established and maintained by the 
applicant during the term of the agreement.
    (c) Among the projects proposed by private nonprofit entities, 
preference will be given to sponsored applicants.

[47 FR 40400, Sept. 14, 1982, as amended at 48 FR 29121, June 24, 1983]



Sec. 1944.530  [Reserved]



Sec. 1944.531  Applications submission.

    (a) Upon notification that the applicant has been tentatively 
selected for funding, the State Office will forward to the applicant a 
signed Form AD-622 and provide SF 424.1 with instructions to the 
applicant for preparation of an application.
    (b) Upon receipt of Form AD-622, the applicant will submit an 
application in an original and 2 copies on Form SF 424.1, and provide 
whatever additional information is requested to the District Office 
within 30 days.
    (c) Upon receipt of an application on SF 424.1 by the District 
Office, a docket shall be assembled which will include the following:
    (1) Form SF 424.1 and the information submitted in accordance with 
Sec. 1944.526(a)(2).
    (2) Form AD-622.

[[Page 508]]

    (3) Any comments received in accordance with 7 CFR part 3015 subpart 
V, ``Intergovernmental Review of Department of Agriculture Programs and 
Activities.'' See FmHA Instruction 1940-J, available in any FmHA or its 
successor agency under Public Law 103-354 office.
    (4) SF 424.1.
    (5) OGC legal determination made pursuant to Sec. 1944.526(c)(3).
    (6) Grant Agreement.
    (7) Form FmHA or its successor agency under Public Law 103-354 1940-
1, ``Request for Obligation of Funds.''
    (8) Form FmHA or its successor agency under Public Law 103-354 400-
1, ``Equal Opportunity Agreement.''
    (9) Form FmHA or its successor agency under Public Law 103-354 400-
4, ``Assurance Agreement.''
    (10) Form FmHA or its successor agency under Public Law 103-354 
1940-20, ``Request for Environmental Information.''
    (11) Form FmHA or its successor agency under Public Law 103-354 
1940-22, ``Environmental Checklist for Categorical Exclusions,'' Form 
FmHA or its successor agency under Public Law 103-354 1940-21, 
``Environmental Assessment for Class I Actions'' or exhibit H, subpart G 
of part 1940 entitled, Environmental Assessment for Class II Actions.
    (12) The historical and archaeological assessment.
    (13) The detailed budget for the agreement period based upon the 
needs outlined in the proposal and the comments and recommendations by 
FmHA or its successor agency under Public Law 103-354.

[47 FR 40400, Sept. 14, 1982, as amended at 48 FR 29121, June 24, 1983; 
49 FR 3763, Jan. 30, 1984; 55 FR 13503 and 13504, April 11, 1990]



Sec. 1944.532  [Reserved]



Sec. 1944.533  Grant approval and announcement.

    Grant approval and announcement will be accomplished under the 
following procedure. The Administrator may modify this section if 
necessary to obligate funds in a timely and efficient manner.
    (a) The District Office will review the docket to determine whether 
the application complies with these regulations and is consistent with 
the information and supporting documents submitted with the 
preapplication and any comments and recommendations of the State and 
National Offices.
    (b) If major problems occur during the development of the docket, 
the District Office will call upon the State Office for assistance.
    (c) If a grant is recommended, Form FmHA or its successor agency 
under Public Law 103-354 1940-1 and the Grant Agreement will be prepared 
by the District Office and forwarded to the applicant for signature as 
authorized in its authorizing resolution. Exhibit A, Grant Agreement, is 
a part of these regulations.
    (d) When Form FmHA or its successor agency under Public Law 103-354 
1940-1 and the Grant Agreement are received from the applicant and 
signed by the applicant, the docket will be forwarded to the State 
Director.
    (e) Exhibit A to FmHA Instruction 2015-C (available in any FmHA or 
its successor agency under Public Law 103-354 office) will be prepared 
and sent to the Director of Information in the National Office.
    (f) If the State Director approves the project, the following 
actions will be taken in the order listed:
    (1) The State Director, or the State Director's designee, will 
telephone the Finance Office Check Request Station requesting that grant 
funds for a particular project be obligated. Immediately after 
contacting the Finance Office, the requesting official will furnish the 
requesting office's security identification code. Failure to furnish the 
security code will result in the rejection of the request for 
obligation. After the security code is furnished, the required 
information from Form FmHA or its successor agency under Public Law 103-
354 1940-1 will be furnished to the Finance Office. Upon receipt of the 
telephone request for obligation of funds, the Finance Office will 
record all information necessary to process the request for obligation 
in addition to the date and time of the request.
    (2) The individual making the request will record the date and time 
of the request and sign section 37 of Form

[[Page 509]]

FmHA or its successor agency under Public Law 103-354 1940-1.
    (i) The Finance Office will notify the State Office by telephone 
when funds are reserved and of the date of obligation. If funds cannot 
be reserved for a project, the Finance Office will notify the State 
Office that funds are not available. The obligation date will be six 
working days from the date the request for obligation is processed.
    (ii) The Finance Office will terminally process telephone obligation 
requests. Those requests received prior to 2:30 p.m. Central Time will 
be processed on the date of the request. Those requests received after 
2:30 p.m., to the extent possible, will be processed on the day 
received; however, there may be instances where the obligation will be 
processed on the next working day.
    (iii) The Finance Office will mail Form FmHA or its successor agency 
under Public Law 103-354 440-57, ``Acknowledgement of Obligated Funds/
Check Request,'' to the State Director, confirming the reservation of 
funds with the obligation date inserted as required by Item 9 on the 
Forms Manual Insert (FMI) for Form FmHA or its successor agency under 
Public Law 103-354 440-57.
    (iv) Form FmHA or its successor agency under Public Law 103-354 
1940-1 will not be mailed to the Finance Office.
    (3) The State Director will notify the Director of Information in 
the National Office with a recommendation that the project announcement 
be released.
    (4) An executed form FmHA or its successor agency under Public Law 
103-354 1940-1 will be sent to the applicant along with an executed copy 
of the Grant Agreement and scope of work on or before the date funds are 
obligated.
    (i) The actual date of applicant notification will be entered on the 
original of Form FmHA or its successor agency under Public Law 103-354 
1940-1 and the original of the form will be included as a permanent part 
of the file.
    (ii) Standard Form 270, ``Request for Advance or Reimbursement,'' 
will be sent to the applicant for completion and returned to FmHA or its 
successor agency under Public Law 103-354.
    (5) If it is determined that a project will not be funded or if 
major changes in the scope of the project are made after release of the 
approval announcement, the State Director will notify the Administrator 
and the Director, Legislative Affairs and Public Information Staff 
(LAPIS) by telephone or electronic mail, giving the reasons for such 
action. The Director, LAPIS, will inform all parties who were notified 
by the project announcement if the project will not be funded or of 
major changes in the project using the procedure similar to the 
announcement process. Form FmHA or its successor agency under Public Law 
103-354 1940-10, ``Cancellation of U.S. Treasury Check and/or 
Obligation,'' will not be submitted to the Finance Office until five 
working days after notifying the Administrator and the Director, LAPIS.
    (6) Upon receipt from the grantee of a properly completed SF-270, 
Form FmHA or its successor agency under Public Law 103-354 440-57 will 
be completed and the check request will be called to the Finance Office 
Check Request Station in accordance with the FMI for Form FmHA or its 
successor agency under Public Law 103-354 440-57.

[44 FR 36891, June 22, 1979, as amended at 47 FR 36415, Aug. 20, 1982; 
48 FR 30946, July 6, 1983; 55 FR 13504, Apr. 11, 1990]



Sec. 1944.534  [Reserved]



Sec. 1944.535  Cancellation of an approved grant.

    (a) The District Director will prepare Form FmHA or its successor 
agency under Public Law 103-354 1940-10, ``Cancellation of U.S. Treasury 
Check and/or Obligation,'' in an original and two copies (three copies 
if the technical and supervisory assistance (TSA) check has been 
received in the District Office from the Disbursing Office). Form FmHA 
or its successor agency under Public Law 103-354 1940-10 will be sent to 
the State Director (original and two copies with the check if the 
Treasury check is being canceled) with the reasons for requesting 
cancellation.
    (b) If the State Director approves the request for cancellation, he/
she will forward the original request for cancellation (original and one 
copy of Form FmHA or its successor agency under Public Law 103-354 1940-
10 with

[[Page 510]]

the check if the Treasury check is being canceled) to the Finance 
Office. If the TSA check is received in the District Office, the 
District Director will return it to the Finance Office with an original 
and one copy of Form FmHA or its successor agency under Public Law 103-
354 1940-10.
    (c) The District Director will notify the applicant of the 
cancellation and, unless the applicant requested the cancellation, its 
right to appeal in accordance with the FmHA or its successor agency 
under Public Law 103-354 Appeal Procedure contained in subpart B of part 
1900 of this chapter.

[44 FR 36891, June 22, 1979, as amended at 47 FR 36415, Aug. 20, 1982]



Sec. 1944.536  Grant closing.

    Closing is the process by which FmHA or its successor agency under 
Public Law 103-354 determines that applicable administrative actions 
have been completed and the Grant Agreement is signed. The Grant 
Agreement (Exhibit A) will be executed by the State Director at the time 
the Form FmHA or its successor agency under Public Law 103-354 1940-1 
and Grant Agreement is sent to the Grantee in accordance with Sec. 
1944.533 (f)(4). An executed original of the Grant Agreement shall be 
sent to the District Director and one copy to the grantee.

[44 FR 36891, June 22, 1979, as amended at 55 FR 13504, April 11, 1990]



Sec. 1944.537  [Reserved]



Sec. 1944.538  Extending and revising grant agreements.

    (a) All requests extending the original grant agreement or revising 
the TSA program must be in writing. Such requests will be processed 
through the District Director. Any such requests will be processed in 
accordance with the processing procedure specified in Sec. 1944.526 (b) 
and (c) of this subpart. The State Office will respond to the applicant 
within 30 days of receipt of the request in the State Office.
    (b) An extension of a grant beyond the two year term may be granted 
by the State Director when:
    (1) There are grant funds remaining and the grantee requests an 
extension at the end of the grant period,
    (2) The grantee has demonstrated its ability to conduct a 
comprehensive program of technical and supervisory assistance in 
accordance with the terms of its grant agreement and in a manner 
satisfactory to FmHA or its successor agency under Public Law 103-354,
    (3) The grantee is likely to complete the goals outlined in the 
initial proposal,
    (4) There is an unmet need to continue the delivery of the technical 
and supervisory assistance being provided by the grantee, and
    (5) The District Director recommends continuation of the grant until 
the grantee has expended all of the remaining grant funds.
    (c) Upon approval of the extension, the State Director will 
authorize the District Director to amend the ending date of the grant 
agreement and revise the budgets, if necessary, on behalf of the 
Government.
    (d) If the grant agreement must be revised and amended other than by 
extension, including any changes in the scope and objectives of the TSA 
program, the grantee will submit a revised budget and TSA program 
together with any information necessary to justify its requests. Such 
requests will be submitted to the State Director through the District 
Director.
    (e) The State Office will advise the National Office of all requests 
to extend or modify the original grant agreement. Prior concurrence of 
the National Office is not required unless the State Director so 
desires, in which case the State Director will advise the applicant that 
the request has been forwarded to the National Office for concurrence. 
The State Director's recommendation will accompany such requests.
    (f) Exhibit D to this subpart shall be executed upon approval of an 
extension of the grant period, or significant change in either the 
project budget or the objectives of the approved technical and 
supervisory activities.
    (g) If extension or modification is not approved, the State Office 
will notify the applicant in writing of the decision and advise the 
applicant of the appeal procedures under subpart B of part 1900 of this 
chapter.

[[Page 511]]



Sec. 1944.539  [Reserved]



Sec. 1944.540  Requesting TSA checks.

    (a) The initial TSA check may cover the applicant's needs for the 
first calendar month. If the first calendar month is a partial month, 
the check will cover the needs for the partial month and the next whole 
month.
    (b) The initial advance of TSA grant funds may not be requested 
simultaneously with the request for obligation of TSA grant funds. The 
initial advance must be requested on Form FmHA or its successor agency 
under Public Law 103-354 440-57 in accordance with the FMI after it has 
been received from the Finance Office indicating that funds have been 
obligated.
    (c) All advances will be requested only after receipt of Standard 
Form 270 from the grantee. The amount requested must be in accordance 
with the detailed budget, including amendments, as approved by FmHA or 
its successor agency under Public Law 103-354. Standard Form 270 will 
not be submitted more frequently than once every 30 days. In no case 
will additional funds be advanced if the grantee fails to submit 
required reports or is in violation of the grant agreement.



Sec. 1944.541  Reporting requirements.

    (a) Standard Form 269, ``Financial Status Report,'' and a project 
performance report will be required of all grantees on a quarterly 
basis. All grantees shall submit an original and two copies of these 
reports to the District Director. The project performance reports will 
be submitted not later than January 15, April 15, July 15, and October 
15 of each year.
    (b) As part of the grantee's preapplication submission required by 
Sec. 1944.526(a)(2)(i), the grantee established the objectives of its 
TSA program including the estimated number of low-income families to be 
assisted by the TSA program and established its method of evaluation to 
determine the effectiveness of its program. The project performance 
report should relate the activities during the report period to the 
project's objectives and analyze the effectiveness of the program. 
Accordingly, the report should include, but need not be limited to the 
following:
    (1) A comparison of actual accomplishments to the objectives 
established for that period, including:
    (i) The number of low-income families assisted in improving their 
housing conditions or in obtaining affordable adequate housing.
    (ii) The number of FmHA or its successor agency under Public Law 
103-354 borrowers who were delinquent or being foreclosed who were 
assisted in resolving their financial problems.
    (iii) The number of households assisted in obtaining adequate 
housing by the TSA program through new construction and/or 
rehabilitation.
    (2) Reasons why, if established objectives are not met.
    (3) Problems, delays, or adverse conditions which will materially 
affect attainment of the TSA grant objectives, prevent the meeting of 
time schedules or objectives, or preclude the attainment of project work 
elements during established time periods. This disclosure shall be 
accompanied by a statement of the action taken or contemplated and any 
Federal assistance needed to resolve the situation.
    (4) Objectives established for the next reporting period, 
sufficiently detailed to identify the type of assistance to be provided, 
the number and type of families to be assisted, etc.
    (c) These reports will be reviewed by the District Director to 
determine satisfactory progress. The District Director will work with 
the grantee to resolve any problems. The District Director will forward 
the original and one copy of the reports with any comments and 
recommendations to the State Director within ten working days of 
receipt.
    (d) The State Director will review the reports, comments, and 
recommendations forwarded by the District Director within five working 
days of receipt.
    (1) If the reports indicate satisfactory progress, the State 
Director will forward the original to the National Office with any 
comments or suggestions and return the remaining copy to the grantee 
through the District Director with a copy of the comments or 
recommendations.

[[Page 512]]

    (2) If the reports indicate unsatisfactory progress, the State 
Director will recommend appropriate action to resolve the indicated 
problem(s). The State Director has the discretion to not authorize 
further advances where the progress of the project is unsatisfactory. 
The State Director will notify the grantee through the District Director 
of a decision not to authorize further advances and advise the grantee 
of its appeal rights under subpart B of part 1900 of this chapter.
    (3) A copy of the memorandum returning the unsatisfactory reports 
will be forwarded to the National Office together with the State 
Director's decision, comments and recommendations, if appropriate.
    (e) The grantee will complete a final Standard Form 269 and a final 
performance report upon termination or expiration of the grant 
agreement.



Sec. 1944.542  [Reserved]



Sec. 1944.543  Grant monitoring.

    Each grant will be monitored by FmHA or its successor agency under 
Public Law 103-354 to ensure that the grantee is complying with the 
terms of the grant and that the TSA project activity is completed as 
approved. Ordinarily, this will involve a review of quarterly and final 
reports by FmHA or its successor agency under Public Law 103-354 and 
review by the appropriate District Director.



Sec. 1944.544  [Reserved]



Sec. 1944.545  Additional grants.

    An additional grant may be made to an applicant that has previously 
received a TSA grant and has achieved or nearly achieved the goals 
established for the previous grant by submitting a new proposal for TSA 
funds. The additional grant application will be processed as if it were 
an initial application. Upon approval, a new grant agreement will be 
required and the grant will be coded as an initial grant on Form FmHA or 
its successor agency under Public Law 103-354 440-1.



Sec. 1944.546  [Reserved]



Sec. 1944.547  Management assistance.

    The District Director will see that each TSA grantee receives 
management assistance to help achieve a successful program.
    (a) TSA employees who will be contacting and assisting families will 
receive training in packaging single family housing and Rural Rental 
Housing loans when, or very shortly after, they are hired so that they 
can work effectively.
    (b) TSA employees who will provide counseling, outreach, and other 
technical and supervisory assistance will receive training on FmHA or 
its successor agency under Public Law 103-354 policies, procedures, and 
requirements appropriate to their positions and the type of assistance 
the grantee will provide at the outset of the grant.
    (c) Training will be provided by FmHA or its successor agency under 
Public Law 103-354 employees and/or outside sources approved by FmHA or 
its successor agency under Public Law 103-354 when the technical and 
supervisory assistance involves rural housing programs other than FmHA 
or its successor agency under Public Law 103-354 programs. Appropriate 
training of TSA employees should be anticipated during the planning 
stages of the grant and the reasonable cost of such training included in 
the budget.
    (d) The District Director, in cooperation with the appropriate 
County Supervisor(s), should coordinate the management assistance given 
to the TSA grantee in a manner which is timely and effective. This will 
require periodic meetings with the grantee to discuss problems being 
encountered and offer assistance in solving these problems; to discuss 
the budget, the effectiveness of the grant, and any other unusual 
circumstances affecting delivery of the proposed TSA services; to keep 
the grantee aware of procedural and policy changes, availability of 
funds, etc.; and to discuss any other matters affecting the availability 
of housing opportunities for low-income families.
    (e) The District Director will advise the grantee of the options 
available to bring the delinquent borrowers' accounts current and advise 
the grantee

[[Page 513]]

that the appropriate County Supervisor retains all approval authority 
for any resolution of the delinquent accounts and all other authority 
currently available to remedy delinquent accounts.



Sec. 1944.548  Counseling consent by FmHA or its successor agency under 
Public Law 103-354 single family housing borrowers.

    (a) Subsequent to execution of the TSA grant agreement, the County 
Supervisor(s) serving the TSA project area will contact the delinquent 
FmHA or its successor agency under Public Law 103-354 single family 
housing borrowers who appear to be in need of supervisory assistance as 
defined in Sec. 1944.506(h)(1). Such contact will indicate the 
availability of the counseling services of the grantee and solicit the 
borrower's participation in the program. Exhibit E should be used in 
contacting and/or discussing counseling with the borrowers.
    (b) Upon indication of the borrower's willingness to participate in 
the program by his or her signature on exhibit E or similar letter or 
statement, the County Supervisor will make available to the grantee (at 
no cost) the borrower's FmHA or its successor agency under Public Law 
103-354 loan history including the following information:
    (1) Name, address, and telephone number;
    (2) Status of the account including the amount of the loan, the 
repayment schedule, and the amount of the delinquency; and
    (3) Other information needed for counseling purposes which may be 
provided in accordance with FmHA Instruction 2018-F.



Sec. 1944.549  Grant evaluation, closeout, suspension, and termination.

    (a) Grant evaluation will be an ongoing activity performed by both 
the grantee and FmHA or its successor agency under Public Law 103-354. 
The grantee will perform self-evaluations by preparing periodic project 
performance reports in accordance with Sec. 1944.541. FmHA or its 
successor agency under Public Law 103-354 will also review all reports 
prepared and submitted by the grantee in accordance with the grant 
agreement and this part.
    (b) Within forty-five (45) days after the grant ending date, the 
grantee will complete closeout procedures as specified in the grant 
agreement.
    (c) The grant can also be terminated before the grant ending date 
for the causes specified in the grant agreement. No further grant funds 
will be disbursed when grant suspension or termination procedures have 
been initiated in accordance with the grant agreement.



Sec. 1944.550  [Reserved]

  Exhibit A to Subpart K of Part 1944--Grant Agreement--Technical and 
                         Supervisory Assistance

    This Agreement dated ---------- is between ------------------------ 
(name), ------------------------ (address), (Grantee) and the United 
States of America acting through the Farmers Home Administration 
(Grantor or FmHA) or its successor agency under Public Law 103-354. The 
Grantor agrees to grant to Grantee a sum not to exceed $-------- subject 
to the terms and conditions established by the Grantor: Provided, 
however, That the proportionate share of any grant funds actually 
advanced and not needed for grant purposes shall be returned immediately 
to the Grantor. The Grantor may terminate the grant in whole, or in 
part, at any time before the date of completion, whenever it is 
determined that the Grantee has failed to comply with the conditions of 
the grant. The grantee may appeal this decision in accordance with the 
FmHA or its successor agency under Public Law 103-354 Appeal Procedure 
contained in subpart B of part 1900 of this chapter. In consideration of 
said grant by Grantor to Grantee, to be made pursuant to Section 525(a) 
of the Housing Act of 1949 for the purpose of providing funds to 
eligible nonprofit applicants (grantees) to pay part or all of the cost 
of developing, conducting, administering, or coordinating comprehensive 
programs of technical and supervisory assistance (TSA) which will aid 
needy low-income individuals and families in benefiting from Federal, 
State and local housing programs in rural areas, the Grantee will 
provide such a program in accordance with the terms of this agreement 
and applicable Farmers Home Administration (FmHA) or its successor 
agency under Public Law 103-354 regulations.

                          Part A--Definitions:

    1. Beginning date means the date when work under this grant will 
commence. Such

[[Page 514]]

date is set forth in paragraph 2 of part B of this Agreement.
    2. Ending date means the date when all work under this agreement is 
scheduled to be completed. It is also the latest date grant funds will 
be provided under this agreement, without an approved extension. Such 
date is set forth in paragraph 2 of part B of this Agreement.
    3. Disallowed costs are those charges to a grant which the FmHA or 
its successor agency under Public Law 103-354 determines cannot be 
authorized in accordance with applicable Federal costs principles or 
other conditions contained in this Agreement.
    4. Grant closeout is the process by which the grant operation is 
concluded at the expiration of the grant period or following a decision 
to terminate the grant.
    5. Termination of a grant means the cancellation of Federal 
assistance, in whole or in part, under a grant at any time before the 
date of completion.

                       Part B--Terms of agreement:

    Grantor and grantee agree:
    1. This agreement shall be effective when executed by both parties.
    2. The TSA activities approved by FmHA or its successor agency under 
Public Law 103-354 shall commence not later than ------------, and shall 
be completed by ------------, unless earlier terminated under paragraph 
B 18 below, or extended.
    3. Grantee shall carry out the TSA activities described in the 
application docket which is made a part of this Agreement. Grantee will 
be bound by the conditions set forth in the docket and the further 
conditions set forth in this Agreement. If any of the conditions in the 
docket are inconsistent with those in the Agreement, the latter will 
govern. A change of any conditions must be in writing and must be signed 
by an authorized representative of FmHA or its successor agency under 
Public Law 103-354.
    4. Grantee shall use grant funds only for the purpose and activities 
specified in FmHA or its successor agency under Public Law 103-354 
regulations and in the application docket approved by FmHA or its 
successor agency under Public Law 103-354 including the approved budget. 
Any uses not provided for in the approved budget must be approved in 
writing by FmHA or its successor agency under Public Law 103-354 in 
advance.
    5. If the Grantee is a private nonprofit corporation, expenses 
charged for travel or per diem will not exceed the rates paid FmHA or 
its successor agency under Public Law 103-354 employees for similar 
expenses. If the Grantee is a public body, the rates will be those that 
are allowable under the customary practice in the government of which 
the grantee is a part; if none are customary, the FmHA or its successor 
agency under Public Law 103-354 rates will be the maximum allowed.
    6. Grant funds will not be used for any of the following:
    (a) To pay obligations incurred before the effective date of this 
Agreement.
    (b) To pay obligations incurred after the grant termination or 
ending date.
    (c) Entertainment purposes.
    (d) To pay for capital assets, the purchase of real estate or 
vehicles, improvement or renovation of space, or repair or maintenance 
of privately owned vehicles.
    (e) Any other purpose specified in 7 CFR 1944.520.
    7. Grant funds shall not be used to replace any financial support 
previously provided or assured from any other source.
    8. Disbursal of grants will be governed as follows:
    (a) In accordance with Treasury Circular 1075 (fourth revision) part 
205, chapter II of title 31 of the Code of Federal Regulations, grant 
funds will be provided by FmHA or its successor agency under Public Law 
103-354 as cash advances on an as needed basis not to exceed one advance 
every 30 days. The advance will be made by direct Treasury check to the 
Grantee. The financial management system of the recipient organization 
shall provide for effective control over and accountability for all 
Federal funds as stated in OMB Circular A-102 (42 FR 45828, September 
12, 1977) for State and local governments and OMB Circular A-110 (41 FR 
32016, July 30, 1976) for nonprofit organizations.
    (b) Cash advances to the Grantee shall be limited to the minimum 
amounts needed and shall be timed to be in accord only with the actual, 
immediate cash requirements of the Grantee in carrying out the purpose 
of the planned project.
    (c) Grant funds should be promptly refunded to the FmHA or its 
successor agency under Public Law 103-354 and redrawn when needed if the 
funds are erroneously drawn in excess of immediate disbursement needs. 
The only exceptions to the requirement for prompt refunding are when the 
funds involved:
    (i) Will be disbursed by the recipient organization within seven 
calendar days from the date of the Treasury check, or
    (ii) Are less than $10,000 and will be disbursed within 30 calendar 
days from the date of the Treasury check.
    (d) Grantee shall provide satisfactory evidence to FmHA or its 
successor agency under Public Law 103-354 that all officers of the 
Grantee organization authorized to receive and/or disburse Federal funds 
are covered by satisfactory fidelity bonds sufficient to protect the 
Grantor's interests.
    (e) Grant funds will be placed in the Grantee's bank account(s) 
until disbursed.
    9. the Grantee will submit Performance and Financial reports as 
indicated below to

[[Page 515]]

the appropriate FmHA or its successor agency under Public Law 103-354 
District Office:
    (a) As needed, but not more frequently than once every 30 days, an 
original and 2 copies of Standard Form 270, ``Request for Advance or 
Reimbursement.''
    (b) Quarterly, (not later than January 15, April 15, July 15, and 
October 15 of each year) an original and 2 copies of Standard Form 269, 
``Financial Status Report,'' and a Project Performance report in 
accordance with Sec. 1944.541 of this subpart.
    (c) Within forty-five (45) days after the termination or expiration 
of the grant agreement, an original and 2 copies of Standard Form 269, 
and a final Project Performance report which will include a summary of 
the project's accomplishments, problems, and planned future activities 
of the Grantee for TSA. Final reports may serve as the last quarterly 
report.
    (d) FmHA or its successor agency under Public Law 103-354 may 
require performance reports more frequently if it deems necessary.
    10. In accordance with FMC 74-4, Attachment B, compensation for 
employees will be considered reasonable to the extent that such 
compensation is consistent with that paid for similar work in other 
activities of the State or local government.
    11. If the grant exceeds $100,000, transfers among direct cost 
budget categories totaling more than 5 percent of the total budget must 
have prior written approval by the appropriate District Director.
    12. Results of the program assisted by grant funds may be published 
by the grantee without prior review by FmHA or its successor agency 
under Public Law 103-354, provided that such publications acknowledge 
the support provided by funds pursuant to the provisions of Title V of 
the Housing Act of 1949 and that five copies of each such publication 
are furnished to the District Director.
    13. Grantee certifies that no person or organization has been 
employed or retained to solicit or secure this grant for a commission, 
percentage, brokerage, or contingent fee.
    14. No person in the United States shall, on the grounds of race, 
creed, color, sex, marital status, age, national origin, or mental or 
physical handicap, be excluded from participating in, be denied the 
proceeds of, or be subject to discrimination in connection with the use 
of grant funds. Grantee will comply with pertinent nondiscrimination 
regulations of FmHA or its successor agency under Public Law 103-354.
    15. In all hiring or employment made possible by or resulting from 
this grant, Grantee: (a) Will not discriminate against any employee or 
applicant for employment because of race, creed, color, sex, marital 
status, national origin, age, or mental or physical handicap, and (b) 
will take affirmative action to insure that employees are treated during 
employment without regard to their race, creed, color, sex, marital 
status, national origin, age, or mental or physical handicap. This 
requirement shall apply to, but not be limited to, the following: 
Employment, upgrading, demotion, or transfer; recruitment or recruitment 
advertising; layoff or termination; rates of pay or other forms of 
compensation; and selection for training, including apprenticeship. In 
the event Grantee signs a contract related to this grant which would be 
covered by any Executive Order, law, or regulation prohibiting 
discrimination, Grantee shall include in the contract the ``Equal 
Employment Clause'' as specified by FmHA or its successor agency under 
Public Law 103-354.
    16. The grantee accepts responsibility for accomplishing the TSA 
program as submitted and included in the application docket. The Grantee 
shall also:
    (a) Endeavor to coordinate and provide liaison with State and local 
housing organizations, where they exist.
    (b) Provide continuing information to FmHA or its successor agency 
under Public Law 103-354 on the status of Grantee programs, projects, 
related activities, and problems.
    (c) The Grantee shall inform the Grantor as soon as the following 
types of conditions become known:
    (i) Problems, delays, or adverse conditions which materially affect 
the ability to attain program objectives, prevent the meeting of time 
schedules or goals, or preclude the attainment of project work units by 
established time periods. This disclosure shall be accompanied by a 
statement of the action taken or contemplated, and any Grantor 
assistance needed to resolve the situation.
    (ii) Favorable developments or events which enable meeting time 
schedules and goals sooner than anticipated or producing more work units 
than originally projected.
    17. Grant closeout and termination procedures will be as follows:
    (a) Promptly after the date of completion or a decision to terminate 
a grant, grant closeout actions are to be taken to allow the orderly 
discontinuation of Grantee activity.
    (i) The grantee shall immediately refund to FmHA or its successor 
agency under Public Law 103-354 any uncommitted balance of grant funds.
    (ii) The Grantee will furnish to FmHA or its successor agency under 
Public Law 103-354 within 45 days after the date of completion of the 
grant a Standard Form 269 and all financial, performance, and other 
reports required as a condition of the grant.
    (iii) The Grantee shall account for any property acquired with TSA 
grant funds, or otherwise received from FmHA or its successor agency 
under Public Law 103-354.

[[Page 516]]

    (iv) After the grant closeout, FmHA or its successor agency under 
Public Law 103-354 retains the right to recover any disallowed costs 
which may be discovered as a result of an audit.
    (b) When there is reasonable evidence that the Grantee has failed to 
comply with the terms of this Agreement, the State Director can, on 
reasonable notice, terminate the grant pursuant to paragraph (c) below 
and withhold further payments or prohibit the Grantee from further 
obligating grant funds. FmHA or its successor agency under Public Law 
103-354 may allow all necessary and proper costs which the Grantee could 
not reasonably avoid.
    (c) Grant termination will be based on the following:
    (i) Termination for cause. This grant may be terminated in whole, or 
in part, at any time before the date of completion, whenever FmHA or its 
successor agency under Public Law 103-354 determines that the Grantee 
has failed to comply with the terms of the Agreement. The reasons for 
termination may include, but are not limited to, such problems as:
    (A) Failure to make satisfactory progress in attaining grant 
objectives.
    (B) Failure of Grantee to use grant funds only for authorized 
purposes.
    (C) Failure of Grantee to submit adequate and timely reports of its 
operation.
    (D) Violation of any of the provisions of any laws administered by 
FmHA or its successor agency under Public Law 103-354 or any regulation 
issued thereunder.
    (E) Violation of any nondiscrimination or equal opportunity 
requirement administered by FmHA or its successor agency under Public 
Law 103-354 in connection with any FmHA or its successor agency under 
Public Law 103-354 programs.
    (F) Failure to maintain an accounting system acceptable to FmHA or 
its successor agency under Public Law 103-354.
    (ii) Termination for convenience. FmHA or its successor agency under 
Public Law 103-354 or the Grantee may terminate the grant in whole, or 
in part, when both parties agree that the continuation of the project 
would not produce beneficial results commensurate with the further 
expenditure of funds. The two parties shall agree upon the termination 
conditions, including the effective date and, in case of partial 
termination, the portion to be terminated.
    (d) Procedure for termination of grant for cause. FmHA or its 
successor agency under Public Law 103-354 shall notify the Grantee in 
writing of the determination and the reasons for and the effective date 
of the whole or partial termination in accordance with 7 CFR 1900.53.
    18. Extension and/or revision of this grant agreement may be 
approved by FmHA or its successor agency under Public Law 103-354 
provided, in its opinion, the extention and/or revision is justified and 
there is a likelihood that the Grantee can accomplish the goals set out 
and approved in the application docket during the period of the 
extension and/or revision as specified in 7 CFR 1944.538.

                         Part C--Grantee agrees:

    1. To comply with property management standards for expendable and 
nonexpendable personal property established by Attachment N of OMB 
Circular A-102 or Attachment N of OMB Circular A-110 for State and local 
governments or nonprofit organizations respectively. Personal property 
means property of any kind except real property. It may be tangible--
having physical existence--or intangible--having no physical existence, 
such as patents, inventions, and copyrights. Nonexpendable personal 
property means tangible personal property having a useful life of more 
than one year and an acquisition cost of $300 or more per unit. A 
Grantee may use its own definition of nonexpendable personal property 
provided that such definition would at least include all tangible 
personal property as defined above. Expendable personal property refers 
to all tangible personal property other than nonexpendable personal 
property. When nonexpendable tangible personal property is acquired by a 
Grantee with project funds, title shall not be taken by the Federal 
Government but shall vest in the Grantee subject to the following 
conditions:
    (a) Right to transfer title. For items of nonexpendable personal 
property having a unit acquisition cost of $1,000 or more, FmHA or its 
successor agency under Public Law 103-354 may reserve the right to 
transfer title to the Federal Government or to a third party named by 
the Federal Government when such third party is otherwise eligible under 
existing statutes. Such reservation shall be subject to the following 
standards:
    (i) The property shall be appropriately identified in the grant or 
otherwise made known to the Grantee in writing.
    (ii) FmHA or its successor agency under Public Law 103-354 shall 
issue disposition instructions within 120 calendar days after the end of 
the Federal support of the project for which it was acquired. If FmHA or 
its successor agency under Public Law 103-354 fails to issue disposition 
instructions within the 120 calendar day period, the Grantee shall apply 
the standards of paragraph 1(c) below.
    (iii) When FmHA or its successor agency under Public Law 103-354 
exercises its right to take title, the personal property shall be 
subject to the provisions for federally owned nonexpendable property 
discussed in paragraph 1(a)(iv) below.
    (iv) When title is transferred either to the Federal Government or 
to a third party and the Grantee is instructed to ship the property 
elsewhere, the Grantee shall be reimbursed by the benefitting Federal 
agency

[[Page 517]]

with an amount which is computed by applying the percentage of the 
Grantee participation in the cost of the original grant project or 
program to the current fair market value of the property, plus any 
reasonable shipping or interim storage costs incurred.
    (b) Use of other tangible nonexpendable property for which the 
Grantee has title.
    (i) The Grantee shall use the property in the project or program for 
which it was acquired as long as needed, whether or not the project or 
program continues to be supported by Federal funds. When it is no longer 
needed for the original project or program, the Grantee shall use the 
property in connection with its other federally sponsored activities, in 
the following order of priority:
    (A) Activities sponsored by FmHA or its successor agency under 
Public Law 103-354.
    (B) Activities sponsored by other Federal agencies.
    (ii) Shared use. During the time that nonexpendable personal 
property is held for use on the project or program for which it was 
acquired, the Grantee shall make it available for use on other projects 
or programs if such other use will not interfere with the work on the 
project or program for which the property was originally acquired. First 
preference for such other use shall be given to other projects or 
programs sponsored by FmHA or its successor agency under Public Law 103-
354; second preference shall be given to projects or programs sponsored 
by other Federal agencies. If the property is owned by the Federal 
Government, use on other activities not sponsored by the Federal 
Government shall be permissible if authorized by FmHA or its successor 
agency under Public Law 103-354. User charges should be considered if 
appropriate.
    (c) Disposition of other nonexpendable property. When the Grantee no 
longer needs the property, the property may be used for other activities 
in accordance with the following standards:
    (i) Nonexpendable property with a unit acquisition cost of less than 
$1,000. The Grantee may use the property for other activities without 
reimbursement to the Federal Government or sell the property and retain 
the proceeds.
    (ii) Nonexpendable personal property with a unit acquisition cost of 
$1,000 or more. The Grantee may retain the property for other use 
provided that compensation is made to FmHA or its successor agency under 
Public Law 103-354 or its successor. The amount of compensation shall be 
computed by applying the percentage of Federal participation in the cost 
of the original project or program to the current fair market value of 
the property. If the Grantee has no need for the property and the 
property has further use value, the Grantee shall request disposition 
instructions from the original Grantor agency. FmHA or its successor 
agency under Public Law 103-354 shall determine whether the property can 
be used to meet the agency's requirements. If no requirement exists 
within that agency, the availability of the property shall be reported, 
in accordance with the guidelines of the Federal Property Management 
Regulations (FPMR) to the General Services Administration by FmHA or its 
successor agency under Public Law 103-354 to determine whether a 
requirement for the property exists in other Federal agencies. FmHA or 
its successor agency under Public Law 103-354 shall issue instructions 
to the Grantee no later than 120 days after the Grantee request and the 
following procedures shall govern:
    (A) If so instructed or if disposition instructions are not issued 
within 120 calendar days after the Grantee's request, the Grantee shall 
sell the property and reimburse FmHA or its successor agency under 
Public Law 103-354 an amount computed by applying to the sales proceeds 
the percentage of Federal participation in the cost of the original 
project or program. However, the Grantee shall be permitted to deduct 
and retain from the Federal shares $100 or ten percent of the proceeds, 
whichever is greater, for the Grantee's selling and handling expenses.
    (B) If the Grantee is instructed to dispose of the property other 
than as described in paragraph 1(a)(iv) above, the Grantee shall be 
reimbursed by FmHA or its successor agency under Public Law 103-354 for 
such costs incurred in its disposition.
    (C) The Grantee's property management standards for nonexpendable 
personal property shall include the following procedural requirements:
    (1) Property records shall be maintained accurately and shall 
include:
    (a) A description of the property.
    (b) Manufacturer's serial number, model number, Federal stock 
number, national stock number, or other identification number.
    (c) Sources of the property including grant or other agreement 
number.
    (d) Whether title vests in the Grantee or the Federal Government.
    (e) Acquisition date (or date received, if the property was 
furnished by the Federal Government) and cost.
    (f) Percentage (at the end of the budget year) of Federal 
participation in the cost of the project or program for which the 
property was acquired. (Not applicable to property furnished by the 
Federal Government).
    (g) Location, use, and condition of the property and the date the 
information was reported.
    (h) Unit acquisition cost.
    (i) Ultimate disposition data, including date of disposal and sales 
price or the method used to determine current fair market value when a 
Grantee compensates the Federal agency for its share.

[[Page 518]]

    (2) Property owned by the Federal Government must be marked to 
indicate Federal ownership.
    (3) A physical inventory of property shall be taken and the results 
reconciled with the property records at least once every two years. Any 
difference between quantities determined by the physical inspection and 
those shown in the accounting records shall be investigated to determine 
the causes of the difference. The Grantee shall, in connection with the 
inventory, verify the existence, current utilization, and continued need 
for the property.
    (4) A control system shall be in effect to ensure adequate 
safeguards to prevent loss, damage, or theft of the property. Any loss, 
damage, or theft of nonexpendable property shall be investigated and 
fully documented; if the property was owned by the Federal Government, 
the Grantee shall promptly notify FmHA or its successor agency under 
Public Law 103-354.
    (5) Adequate maintenance procedures shall be implemented to keep the 
property in good condition.
    (6) When the Grantee is authorized or required to sell the property, 
proper sales procedures shall be established which will provide for 
competition to the extent practicable and result in the highest possible 
return.
    (7) Expendable personal property shall vest in the Grantee upon 
acquisition. If there is a residual inventory of such property exceeding 
$1,000 in total aggregate fair market value, upon termination or 
completion of the grant and if the property is not needed for any other 
federally sponsored project or program, the Grantee shall retain the 
property for use on nonfederally sponsored activities, or sell it, but 
must in either case compensate the Federal Government for its share. The 
amount of compensation shall be computed in the same manner as 
nonexpendable personal property.
    2. To provide a financial management system which will include:
    (a) Accurate, current, and complete disclosure of the financial 
results of each grant. Financial reporting will be on an accrual basis.
    (b) Records which identify adequately the source and application of 
funds for grant-supported activities. Those records shall contain 
information pertaining to grant awards and authorizations, obligations, 
unobligated balances, assets, liabilities, outlays, and income.
    (c) Effective control over and accountability for all funds, 
property, and other assets. Grantee shall adequately safeguard all such 
assets and shall assure that they are solely for authorized purposes.
    (d) Accounting records supported by source documentation.
    3. To retain financial records, supporting documents, statistical 
records, and all other records pertinent to the grant for a period of at 
least three years after the submission of the final Project Performance 
report pursuant to paragraph B(9)(c) of this agreement except in the 
following situations:
    (a) If any litigation, claim, or audit is commenced before the 
expiration of the three year period, the records shall be retained until 
all litigations, claims, or audit findings involving the records have 
been resolved.
    (b) Records for nonexpandable property acquired with Federal funds 
shall be retained for three years after final disposition.
    (c) When records are transferred to or maintained by FmHA or its 
successor agency under Public Law 103-354, the three year retention 
requirement is not applicable.
    Microfilm copies may be substituted in lieu of original records. The 
Grantor and the Comptroller General of the United States, or any of 
their duly auhthorized representatives, shall have access to any books, 
documents, papers, and records of the Grantee which are pertinent to the 
specific grant program for the purpose of making audits, examinations, 
excerpts, and transcripts.
    4. To provide information as requested by the Grantor concerning the 
Grantee's actions in soliciting citizen participation in the application 
process, including published notice of public meetings, actual public 
meetings held, and content of written comments received.
    5. Not encumber, transfer, or dispose of the property or any part 
thereof, furnished by the Grantor or acquired wholly or in part with 
Grantor funds without the written consent of the Grantor except as 
provided in part C 1.
    6. To provide Grantor with such periodic reports of Grantee 
operations as may be required by authorized representatives of the 
Grantor.
    7. To execute Form FmHA or its successor agency under Public Law 
103-354 400-1, ``Equal Opportunity Agreement,'' and to execute any other 
agreements required by Grantor to implement the civil rights 
requirements.
    8. To include in all contracts in excess of $100,000 a provision for 
compliance with all applicable standards, orders, or regulations issued 
purusant to the Federal Clean Air Act as amended. Violations shall be 
reported to the Grantor and the Regional Office of the Environmental 
Protection Agency.
    9. That, upon any default under its representations or agreements 
set forth in this instrument, Grantee, at the option and demand of 
Grantor, will, to the extent legally permissible, repay to the Grantor 
forthwith the grant funds received with interest at the rate of five 
percentum per annum from the date of the default. The provisions of this

[[Page 519]]

Grant Agreement may be enforced by Grantor, at its option and without 
regard to prior waivers by it of previous defaults of Grantee, by 
judicial proceedings to require specific performance of the terms of 
this Grant Agreement or by such other proceedings in law or equity, in 
either Federal or State Courts, as may be deemed necessary by Grantor to 
assure compliance with the provisions of this Grant Agreement and the 
laws and regulations under which this grant is made.
    10. That no member of Congress shall be admitted to any share or 
part of this Grant or any benefit that may arise therefrom; but this 
provision shall not be construed to bar as a contractor under the Grant 
a publicly held corporation whose ownership might include a member of 
Congress.
    11. That all nonconfidential information resulting from its 
activities shall be made available to the general public on an equal 
basis.
    12. That the purpose for which this grant is made may complement, 
but shall not duplicate programs for which monies have been received, 
are committed, or are applied for from other sources, public and 
private.
    13. That the Grantee shall relinquish any and all copyrights and/or 
privileges to the materials developed under this grant, such material 
being the sole property of the Federal Government. In the event anything 
developed under this grant is published in whole or in part, the 
material shall contain notice and be identified by language to the 
following effect: ``The material is the result of tax-supported research 
and as such is not copyrightable. It may be freely reprinted with the 
customary crediting of the source.''
    14. That the Grantee shall abide by the policies promulgated in OMB 
Circular A-102, Attachment O, or OMB Circular A-110, Attachment O, which 
provides standards for use by Grantees in establishing procedures for 
the procurement of supplies, equipment, and other services with Federal 
grant funds.
    15. That it is understood and agreed that any assistance granted 
under this Agreement will be administered subject to the limitations of 
Title V of the Housing Act of 1949 as amended, 42 USC 1471 et. seq., and 
related regulations, and that rights granted to FmHA or its successor 
agency under Public Law 103-354 herein or elsewhere may be exercised by 
it in its sole discretion to carry out the purposes of the assistance, 
and protect FmHA or its successor agency under Public Law 103-354's 
financial interest.
    16. Standard of Conduct. No employee, officer or agent of Grantee 
shall participate in the selection, award or administration of a 
contract in which Federal funds are used where, to the knowledge of such 
employee, officer or agent, the employee, officer or agent or such 
person's immediate family members, partners or any organization in which 
such person or such person's immediate family award or administration of 
the contract, or (2) when such person is negotiating or has any 
arrangement concerning future employment. The recipient's officers, 
employees or agents shall neither solicit nor accept gratuities, favors 
or anything of monetary value from landlords or developers of rental or 
ownership housing projects in which the persons receiving TSA assistance 
may be placed as a result of such assistance.

                         Part D--Grantor agrees:

    1. That it may assist Grantee, within available appropriations, with 
such technical and management assistance as needed in planning the 
project and coordinating the plan with local officials, comprehensive 
plans, and any State or area plans for improving housing for low-income 
families in the area in which the project is located.
    2. That at its sole discretion, Grantor may at any time give any 
consent, deferment, subordination, release, satisfaction, or termination 
of any or all of Grantee's grant obligations, with or without valuable 
consideration, upon such terms and conditions as Grantor may determine 
to be (a) advisable to further the purposes of the grant or to protect 
Grantor's financial interests therein, and (b) consistent with the 
statutory purposes of the grant and the limitations of the statutory 
authority under which it is made and Grantor's regulations.
    This Agreement is subject to current Grantor regulations and any 
future regulations not inconsistent with the express terms hereof. 
Grantee on --------, 19--, has caused this Agreement to be executed by 
its duly authorized -------- and attested and its corporate seal affixed 
by its duly authorized --------.

Attest:

________________________________________________________________________

Grantee

________________________________________________________________________
By______________________________________________________________________

(Title)
By______________________________________________________________________

(Title)

Grantor

United States of America
Farmers Home Administration or its successor agency under Public Law 
103-354

By______________________________________________________________________

________________________________________________________________________
(Title)

[[Page 520]]

  Exhibit B to Subpart K of Part 1944--Administrative Instructions for 
State Offices Regarding Their Responsibilities in the Administration of 
         the Technical and Supervisory Assistance Grant Program

    A. The State Office will maintain for distribution to potential 
applicants, upon request, a supply of pre application packets consisting 
of:
    1. SF 424.1.
    2. Form FmHA or its successor agency under Public Law 103-354 400-1, 
``Equal Opportunity Agreement.''
    3. Form FmHA or its successor agency under Public Law 103-354 400-4, 
``Assurance Agreement.''
    4. Form FmHA or its successor agency under Public Law 103-354 1940-
20, ``Request for Environmental Information.''
    5. Subpart K of part 1944 of this chapter.
    B. The State Office should inform all potential applicants, at the 
time they pick up forms, that:
    1. The pre application must be submitted to the District Office 
serving the area in which the applicant proposes to operate the 
Technical and Supervisory Assistance (TSA) program.
    2. The State Office will refer all requests for assistance in 
completing the pre application to the appropriate District Office.
    C. Beyond the responsibilities of the State Office in the selection 
of grantees and the administration of the program, and as stated in 
Sec. 1944.502 of this subpart, the TSA program provides an opportunity 
for the State Director to give priority to applicants serving the rural 
areas of greatest need as well as use the program cooperatively with 
other Federal and State agencies in addressing the housing needs of the 
residents of a proposed TSA service area. Therefore, the State Office 
should be prepared, before receipt of pre applications, to advise the 
District Directors, potential applicants and other Federal and State 
agencies which part(s) of the State has the greatest need for the TSA 
program. The State Director should identify target areas in a similar 
manner to the process used by the Administrator pursuant to Sec. 
1944.525 of this subpart. Proposals which are clearly inappropriate and 
do not meet the basic priorities of Sec. 1944.529 (a) of this subpart 
should not be encouraged due to the complexity of the pre application 
submission.
    D. In addition to the instructions of Sec. 1944.526 of this 
subpart, the State Office should follow the procedures outlined below:
    1. Review pre applications for completeness and adequacy and make 
assessments required by Sec. 1944.526(c)(1) of this subpart.
    2. Request clarifications from the District Office if necessary.
    3. Evaluate the proposals in light of Sec. 1944.529 of this subpart 
and select the proposal(s) which best meets the priorities established 
under the project selection criteria in Sec. 1944.529 (a), (b) and (c) 
of this subpart.
    4. The State Office must provide written comments to be attached to 
the pre application(s) justifying the selection(s) and addressing the 
items in Sec. 1944.529 of this subpart.
    5. The State Office will forward the original SF 424.1 and 
accompanying documents of the selected pre application(s) as quickly as 
possible to the National Office, Attention: Special Authorities 
Division, Multi-Family Housing. In no case should the State Office 
forward their selected TSA pre application(s) later than thirty (30) 
days after the closing date for receipt of pre applications.
    6. Preapplications not selected by the State Office will be returned 
to the applicants through the appropriate District Offices with notice 
of appeal rights.
    7. In accordance with Sec. 1944.525 of this subpart, State Offices 
will be advised of the number of pre applications to be submitted from 
each state to the National Office.
    E. Sections 1944.531 and 1944.533 of this subpart detail the 
responsibilities of the State Office after tentative selection or 
concurrence of the TSA grantees by the National Office. Those 
preapplicants not selected will be promptly notified and their pre 
application returned with notice of appeal rights. Form AD-622, ``Notice 
of Preapplication Review Action,'' will be mailed from the State Office 
to the applicants. District Offices will receive a copy from the State 
Office.
    F. After execution of the grant agreement, the State Office will 
work closely with the District Office and the grantee to obtain 
additional resources from other Federal and State agencies to meet the 
needs of the TSA service area. The State Office should closely review 
the quarterly project performance reports and assist the District 
Director, as appropriate, in resolving any problems or taking advantage 
of favorable funding or program opportunities.

[44 FR 36891, June 22, 1979, as amended at 48 FR 29121, June 24, 1983; 
49 FR 3763, Jan. 30, 1984; 55 FR 13503 and 13504, Apr. 11, 1990]

[[Page 521]]

 Exhibit C to Subpart K of Part 1944--Instructions for District Offices 
Regarding Their Responsibilities in the Administration of the Technical 
                and Supervisory Assistance Grant Program

    A. The District Office will maintain for distribution to potential 
applicants, upon request, a supply of pre application packets consisting 
of:
    1. SF 424.1.
    2. Form FmHA or its successor agency under Public Law 103-354 400-1, 
``Equal Opportunity Agreement.''
    3. Form FmHA or its successor agency under Public Law 103-354 400-4, 
``Assurance Agreement.''
    4. Form FmHA or its successor agency under Public Law 103-354 1940-
20, ``Request for Environmental Information.''
    5. Subpart K of part 1944 of this chapter.
    B. District Directors will provide any necessary assistance in 
completing pre application forms.
    C. All applicants will submit pre applications to District Offices. 
Upon receipt of the pre application the District Director will review it 
to ensure that the pre application is complete and make assessments 
required by Sec. 1944.526(b)(1) of this subpart.
    D. The District Director will provide written comments to be 
attached to the pre application. These comments will, at a minimum, 
address the following items:
    1. Whether the area to be covered by the project is a ``rural area'' 
as defined by FmHA or its successor agency under Public Law 103-354 
regulations.
    2. The District Director's knowledge of the applicant's past 
history.
    3. The need for the proposed activity, and its relationship to the 
targeting strategies for the District.
    4. Appropriateness and applicability of this proposal for FmHA or 
its successor agency under Public Law 103-354 implementation funds.
    5. Extent of citizen involvement in development of pre application, 
particularly the involvement of minority and/or low-income groups.
    6. All other criteria specified in Sec. 1944.529 of this subpart.
    7. The comments and recommendations of the County Supervisors for 
the proposed TSA service area.
    E. The District Director will forward the original and one copy of 
the pre application and accompanying documents along with the comments 
and a summary recommendation to the State Director within ten (10) 
working days of receipt of the pre application.
    F. Those applicants invited to submit applications will submit their 
applications to the District Office with two copies. The District Office 
will retain the original for the docket and forward one copy to the 
appropriate State Office after making sufficient copies to forward one 
copy to each of the appropriate County Offices.
    G. The District Director, upon receipt of the application, will 
prepare a docket in accordance with Sec. 1944.531 of this subpart. The 
procedures for approval and project servicing are detailed in this 
subpart.

[44 FR 36891, June 22, 1979, as amended at 48 FR 29121, June 24, 1983; 
49 FR 3763, Jan. 30, 1984; 55 FR 13504, Apr. 11, 1990]

    Exhibit D to Subpart K of Part 1944--Amendment to Technical and 
                 Supervisory Assistance Grant Agreement

    This Amendment to Agreement dated ------------ 19-- between
herein called ``Grantee,'' organized and operating under________________
________________________________________________________________________
(authorizing State Statute)

and the United States of America acting through the Farmers Home 
Administration, Department of Agriculture, herein called ``FmHA,'' or 
its successor agency under Public Law 103-354 amends the Technical and 
Supervisory Assistance Grant Agreement'' between the parties hereto 
dated ------------ 19--, hereinafter called the ``Agreement.''
    Said Agreement is amended by changing the ending date specified in 
paragraph 2 of part B of the Agreement from ------------ to -------- 
and/or by making the following changes noted in the attachments hereto: 
(List and identify proposal and any other documents pertinent to the 
grant which are attached to the Amendment.)
    Agreed to this ---- day of ------------ 19--.

________________________________________________________________________
(Name of Grantee)

By______________________________________________________________________
 (Signature)

________________________________________________________________________

 (Title)

United States of America

By______________________________________________________________________

 (Signature)

________________________________________________________________________

 (Title)

Farmers Home Administration or its successor agency under Public Law 
103-354

________________________________________________________________________

 (Date)

[[Page 522]]

Exhibit E to Subpart K of Part 1944--Guide Letter to Delinquent FmHA or 
Its Successor Agency Under Public Law 103-354 Single Family Housing Loan 
                                Borrowers

Dear____________________________________________________________________
(name of borrower):

    This is to advise you that (name of TSA grantee) is available to 
provide independent counseling services to Farmers Home Administration 
(FmHA) or its successor agency under Public Law 103-354 borrowers in 
need of financial management assistance. These services may assist you 
in resolving your present delinquency in your housing loan.
    This organization is prepared to provide financial and budget 
counseling at no charge to you. Their counseling services include advice 
on debt levels and credit purchases, consumer and cost awareness, debt 
adjustment procedures, and other financial information and services.
    You are urged to take advantage of this program. However, your 
participation is voluntary and does not relieve you of any of your loan 
obligations to FmHA or its successor agency under Public Law 103-354 or 
limit the remedies FmHA or its successor agency under Public Law 103-354 
has to bring your loan current or recover the loan in full. Any plan 
altering your repayment schedule in any way must be approved by this 
office. However, it is our intention to work with you and the counseling 
organization in every way we can to resolve your delinquency.
    If you want to participate in this program, please sign the attached 
copy of this letter and return it to this office. At that time we will 
advise (name of TSA grantee) that you are interested in their services 
and provide them with the information they need to contact you. Only 
information available to the general public will be released.
    We are sure you agree that it is in your interest to make every 
effort to bring your account current. We look forward to your return of 
the attached copy of this letter.

Sincerely,

County Supervisor
Farmers Home Administration or its successor agency under Public Law 
103-354

Enclosure

(On attached copy only:)
    I desire to participate in the counseling program with (name of TSA 
grantee).

________________________________________________________________________
 Borrower

________________________________________________________________________
 Date



  Subpart L_Farmers Home Administration or Its Successor Agency Under 
        Public Law 103-354 Tenant Grievance and Appeals Procedure

    Source: 48 FR 56177, Dec. 19, 1983, unless otherwise noted.

    Effective Date Note: At 69 FR 69105, Nov. 26, 2004, subpart L was 
removed and reserved, effective Feb. 24, 2005.



Sec. 1944.551  Purpose.

    The purpose of this subpart is to set forth uniform requirements for 
grievance and appeals procedures in all Rural Rental Housing (RRH), 
Rural Cooperative Housing (RCH), and Labor Housing (LH) projects 
financed by the Farmers Home Administration (FmHA) or its successor 
agency under Public Law 103-354 under sections 514, 515, and 516 of the 
Housing Act of 1949. The objective of this subpart is to ensure the fair 
treatment of persons residing in multiple family projects while 
providing for an equitable manner by which borrowers can operate, 
maintain, and safeguard housing projects. The right to appeal under this 
subpart will also extend to persons who seek admission to the projects.

[56 FR 2256, Jan. 22, 1991]



Sec. 1944.552  Definitions.

    (a) Applicant. A person who has submitted an application for 
occupancy in a RRH, RCH, or LH project, and is not a tenant or member. 
This includes persons who have been denied an application for admission.
    (b) Borrower. The borrower (landlord) is the owner of the owner's 
authorized representative of a RRH, RCH, or LH project.
    (c) Consumer cooperative. A corporation which (1) Is organized under 
the cooperative laws of a State or Federally recognized Indian tribe; 
(2) will own and operate the housing on a cooperative basis solely for 
the benefit of the members; (3) will operate at cost and, for this 
purpose, any patronage refunds accruing to members in accordance with 
Sec. 1944.215(i) of this subpart will not be considered gains or 
profits; and (4) will restrict membership in the housing to eligible 
persons and, to any

[[Page 523]]

extent the cooperative and FmHA or its successor agency under Public Law 
103-354 permit, to others in special circumstances.
    (d) Eviction. Dispossession of the tenant by judicial action 
pursuant to State or local law from a RRH or LH unit as a result of 
termination of the tenancy, including a termination before or at the end 
of the lease term.
    (e) Grievance. A dispute which a tenant has with the borrower's 
action, or failure to act, according to the lease and/or FmHA or its 
successor agency under Public Law 103-354 regulations which results or 
may result in denial, significant reduction, or termination of benefits 
(other than eviction by judicial action pursuant to State or local law).
    (f) Hearing. An informal proceeding at which a tenant's grievance or 
appeal of a borrower's adverse action or decision, or an applicant's 
appeal of a rejected application, or denial of an application for 
admission is heard before an impartial hearing officer or hearing panel.
    (g) Lease. The written agreement, approved by FmHA or its successor 
agency under Public Law 103-354, between the borrower and tenant.
    (h) Tenant. An eligible lessee/occupant of a RRH or LH project who 
has executed a lease agreement. For the purposes of this subpart, the 
term tenant will also mean cooperative member.
    (i) Termination of tenancy. The termination of the lease, either 
before or at the end of the lease term, as the result of material 
noncompliance with the terms of the lease, rules for occupancy, or 
violation of FmHA or its successor agency under Public Law 103-354 
regulations applicable to conditions for occupancy.

[48 FR 56177, Dec. 19, 1983, as amended at 56 FR 2256, Jan. 22, 1991; 58 
FR 40954, July 30, 1993]



Sec. 1944.553  Exceptions.

    This subpart does not apply to:
    (a) Rent changes authorized by FmHA or its successor agency under 
Public Law 103-354. Rent changes must be authorized by FmHA or its 
successor agency under Public Law 103-354 in accordance with the 
requirements of exhibit C to subpart C of part 1930 of this chapter 
where tenants are provided an opportunity to provide comments to FmHA or 
its successor agency under Public Law 103-354 on a borrower's Notice of 
Proposed Rent Change.
    (b) Discrimination complaints. Any tenant/member of prospective 
tenant/member seeking occupancy or use of RRH, RCH, or related 
facilities who believes he/she has been discriminated against because of 
age, race, color, religion, sex, marital or familial status, handicap or 
national origin may file a complaint in person with, or by mail to the 
Office of Fair Housing and Equal Opportunity, Department of Housing and 
Urban Development (HUD), Washington, DC 20410, or any HUD office, or to 
the Secretary of Agriculture, Washington, DC 20250. If a complaint is 
made to an FmHA or its successor agency under Public Law 103-354 County, 
District or State Office, it must be directed to the Director of Equal 
Opportunity Staff, National Office, by the FmHA or its successor agency 
under Public Law 103-354 employee in charge of that office. When a 
complaint is sent to FmHA or its successor agency under Public Law 103-
354-EOS by a county or district office, the State Director will be made 
aware of the complaint.
    (c) Projects in which an association of all tenants has been duly 
formed. In projects where an association of all tenants has been duly 
formed and the association and the borrower have agreed to an alternate 
method of settling grievances, that method will be used.
    (d) Changes in rules required by FmHA or its successor agency under 
Public Law 103-354. Changes in rules required by FmHA or its successor 
agency under Public Law 103-354 in which proper notice and opportunity 
have been given according to law and the provisions of the lease.
    (e) Notification of termination of tenancy and eviction. 
Notification of termination of tenancy and eviction is to be handled in 
accordance with paragraph XIV C of exhibit B of subpart C of part 1930 
of this chapter and according to State or local law.
    (f) Termination of tenancy and eviction by judicial action as 
prescribed by State or local law. Termination of tenancy and eviction 
must be based on material

[[Page 524]]

violation of the lease terms or for other good cause as determined by 
the borrower or the project manager in accordance with paragraph XIV A 
of exhibit B of subpart C of part 1930. The borrower shall not evict any 
tenant except by judicial action pursuant to State or local law and in 
accordance with the requirements of this subpart.
    (g) Disputes between tenants. This subpart dose not apply to 
disputes between tenants not involving the borrower.
    (h) Displacement or other effects as a result of prepayment. This 
subpart does not apply to tenant displacement or other effects due to 
prepayment of the FmHA or its successor agency under Public Law 103-354 
loan. Opportunities for tenant input into the prepayment process are 
outlined in subpart E of part 1965 of this chapter.

[48 FR 56177, Dec. 19, 1983, as amended at 56 FR 2256, Jan. 22, 1991; 58 
FR 38925, July 21, 1993; 58 FR 40954, July 30, 1993]



Sec. 1944.554  Reasons for grievance and appeal.

    (a) Tenants. Grievance and appeal procedures provide a means for a 
tenant, in an FmHA or its successor agency under Public Law 103-354 
financed rental project, to meet with a borrower and to obtain a hearing 
if the tenant has a grievance. This opportunity relates to a borrower's 
action or failure to act, in accordance with the lease and/or FmHA or 
its successor agency under Public Law 103-354 regulations and results in 
a denial, significant reduction or, termination of benefits; or, when a 
tenant contests a borrower's notice of proposed adverse action as 
provided in Sec. 1944.555(b) of this subpart. This may include:
    (1) Failure to maintain the premises in such manner that provides 
decent, safe, and sanitary housing.
    (2) Violation of lease covenants and rules.
    (3) Modification of lease.
    (4) Rule changes.
    (5) Rent changes not authorized by FmHA or its successor agency 
under Public Law 103-354 according to exhibit C of subpart C of part 
1930 of this chapter.
    (6) Failure to maintain the premises according to State and local 
laws, statutes, or ordinances in effect at the date of final 
construction unless new or amended laws and ordinances are made 
retroactive to, or prior to, the date of final construction.
    (7) Denials of RA.
    (b) Applicant. Grievance and appeal procedure provides an appeal 
right for a person whose application for admission to occupancy in an 
RRH or LH project has been rejected, as well as for a person who has 
been denied an application for admission. This appeal right does not 
apply to those persons who are clearly not eligible for occupancy under 
FmHA or its successor agency under Public Law 103-354 regulations.

[48 FR 56177, Dec. 19, 1983, as amended at 50 FR 8596, Mar. 4, 1985; 58 
FR 40954, July 30, 1993]



Sec. 1944.555  Settlement of grievances and appeals.

    (a) General. Borrowers and applicants/tenants are encouraged to 
attempt to settle disputes through informal meetings without resorting 
to the hearing process further described in this subpart.
    (b) Notice to applicant/tenant. In the case of a borrower's proposed 
adverse action including denial of admission to occupancy, the borrower 
shall notify the applicant/tenant in writing. The notice must be 
delivered by certified mail return receipt requested, or a hand-
delivered letter with a signed and dated acknowledgement of receipt from 
the applicant/tenant, giving specific reasons for the proposed action. 
The notice must also advise the applicant or tenant of the right to 
respond to the notice within 10 calendar days after receipt, in 
accordance with paragraph (c) of this section and of the right to a 
hearing in accordance with Sec. 1944.556 of the subpart. In projects 
where there is a concentration of non-English speaking individuals, the 
notice must also be in the non-English concentration language, when 
necessary, for the tenant's understanding.
    (c) Presentation of grievances or responses to notice of proposed 
adverse actions. If the adverse action cannot be resolved otherwise, the 
applicant/tenant shall personally present to the borrower or borrower's 
designee any grievance or response, either orally or in writing, within 
10 calendar days after

[[Page 525]]

occurrence of the grievance or receipt of a notice of proposed adverse 
action. If requested, the borrower shall meet with the tenant within 5 
working days of the request in an attempt to resolve the grievance. The 
meeting shall be informal and the borrower shall be responsible for 
keeping appropriate notes relative to the meeting. If the grievance is 
not resolved to the applicant's/tenant's satisfaction, the borrower 
shall prepare a summary of the problem, including the borrower's 
position, the applicant's/tenant's position, and the results of the 
meeting (Exhibit A of this subpart must be used as the format for the 
summary) within 10 calendar days after the informal meeting. Two copies 
of the summary must be given to the applicant/tenant, one retained in 
the borrower's files and one sent to the District Director.



Sec. 1944.556  Procedure for obtaining a hearing.

    (a) Request for hearing. If the applicant or tenant desires a 
hearing, a written request for a hearing must be submitted to the 
borrower within 10 calendar days after receipt of the summary of any 
informal meeting. The written request must specify:
    (1) The reasons for the grievance or contest of the borrower's 
proposed action, and
    (2) The action or relief sought.
    (b) Selection of hearing officer or hearing panel. In order to 
properly evaluate grievances and appeals, the borrower and tenant shall 
select a hearing officer or hearing panel. The hearing officer shall be 
an impartial, disinterested person selected jointly by the borrower and 
the tenant. If the borrower and the tenant cannot agree on a hearing 
officer, they shall each appoint a member to a hearing panel and the 
members so selected shall select a third member. If within 30 days from 
the date of the request for a hearing the tenant and borrower, or their 
designee, have not agreed upon the selection of a hearing officer or 
hearing panel, the borrower shall notify the District Director by mail 
of the facts of the matter. The District Director shall, within 10 
working days of receipt of the letter, appoint a person to serve as the 
sole hearing officer. The District Director's selection of a hearing 
officer is final. The person selected by the District Director should 
not be an individual previously considered by the tenant or borrower. 
Members of the hearing panel or the hearing officer must be willing to 
render their service without compensation. The hearing officer or 
hearing panel has the authority to reverse the borrower's decision.
    (c) Standing hearing panel. In lieu of the procedure set forth in 
paragraph (b) of this section for each grievance or appeal presented, a 
borrower may provide that a standing panel be organized for each 
project. Such a panel may be organized soon after initial rent-up or at 
any time in the case of existing projects. Such a panel will be selected 
and have a membership as follows:
    (1) Standing panelist(s) of the tenants would be elected by a 
majority of the tenants. Either two alternates could be elected or three 
panelists of the tenants could be elected with equal status. The tenant, 
in this latter case, would designate one of the three tenant panelists 
to participate in the hearing. All tenants would be notified of the 
time, date, and purpose of the meeting to elect permanent hearing 
panelists at least two weeks before the appointed date. The notice must 
be conspiculously posted in the rental office and in each apartment 
building or structure. The meeting must be held at a place which is 
convenient and accessible to the tenants.
    (2) Standing borrower panelist(s) selected by the borrower. One or 
two alternates may also be designated.
    (3) A standing mutual panelist, to serve as the chair, selected by 
the other two persons or groups, including alternates, in which case 
each ``group'' gets one vote.
    (4) All standing hearing panel members serve one year and may be re-
elected. They must be willing to render their services without 
compensation.
    (5) A panel for a hearing shall consist of 3 members, one tenant 
panelist, one borrower panelist and the chair.
    (d) Examination of records. When the borrower has provided the 
applicant/tenant with a notice of proposed adverse action, the borrower 
shall allow the tenant to have the opportunity, at a reasonable time 
before the hearing

[[Page 526]]

and, at the expense of the tenant, to examine and/or copy all documents, 
records, and regulations of the borrower which the borrower intends to 
use at the meeting unless otherwise prohibited by law.
    (e) Scheduling of hearing. A hearing shall be scheduled to be held 
within 15 days after receipt of the tenant's request for a hearing at a 
time and place mutually convenient to both parties. If the parties 
cannot agree on a meeting place or time, the hearing officer or hearing 
panel will designate the place and time.
    (f) Escrow deposit. Provided the tenant's rental payments are 
otherwise current, an escrow deposit of rental payments may be used by 
the tenant in the case of a grievance involving a rent increase not 
authorized by FmHA or its successor agency under Public Law 103-354, or 
if the borrower fails to maintain the property in a decent, safe, and 
sanitary manner. When an escrow deposit is used, the tenant shall 
deposit into escrow, when the rent is due, the amount required by the 
lease. The escrow deposits must continue until the complaint is resolved 
through informal discussion or by the hearing officer or panel. The rent 
must be deposited in a federally insured financial institution or with a 
bonded independent agent. Failure to make timely escrow payments will 
result in a termination of the tenant grievance and appeals procedure 
and all sums will immediately become due and payable under the lease. 
Receipts of deposit must be available for examination by the borrower or 
the borrower's designee.
    (g) Failure to request a hearing. If the applicant/tenant does not 
request a hearing within the time provided by paragraph (a) of this 
section, the borrower's disposition of the grievance or appeal will 
become final.



Sec. 1944.557  Procedures governing the hearing.

    (a) Subject to paragraph (b) of this section, the hearing will be an 
informal proceeding before a hearing officer or hearing panel at which 
evidence may be received without regard to whether that evidence could 
be used in judicial proceedings.
    (b) The hearing must be structured so as to provide the basic 
safeguards for both the borrower and the tenant, which must include:
    (1) The right of both parties to be represented by counsel or 
another person(s) chosen as their representative.
    (2) The right of the applicant/tenant to a private hearing unless a 
public hearing is requested.
    (3) The right of the applicant/tenant to present oral or written 
evidence and arguments in support of their grievance or appeal and to 
refute the evidence of all witnesses on whose testimony or information 
the borrower relies.
    (4) The right of the borrower to present oral or written evidence 
and arguments in support of the decision, to refute evidence relied upon 
by the applicant/tenant, and to confront and cross-examine all witnesses 
on whose testimony or information the tenant relies.
    (5) A decision based solely and exclusively upon the facts presented 
at the hearing.
    (c) At the hearing the applicant/tenant must present evidence that 
he/she is entitled to the relief sought, and thereafter, the borrower 
shall present evidence showing the basis of its action or failure to act 
against that which the grievance or appeal is directed.
    (d) The hearing officer or hearing panel shall require that the 
borrower, the applicant/tenant, counsel and other participants or 
spectators conduct themselves in an orderly manner. Failure to comply 
with the directions of the hearing officer or hearing panel to obtain 
order may result in exclusion from the proceedings, or in a decision 
adverse to the interests of the disorderly party and granting or denial 
of the relief sought, as appropriate.
    (e) If the applicant/tenant (or his/her representative) fails to 
appear at a scheduled hearing, the hearing officer or hearing panel may 
make a determination to postpone the hearing for not to exceed five 
business days or may make a determination that the party has waived his 
or her right to a hearing under this subpart. Both the applicant/tenant 
and the borrower shall be notified of the determination of the hearing 
officer or hearing panel.

[[Page 527]]



Sec. 1944.558  Decision of the hearing officer or hearing panel.

    (a) The hearing officer or hearing panel shall prepare a written 
decision, together with the reasons therefor, within 10 calendar days 
after the hearing. The written decision must be specific as to the facts 
presented which were the basis upon which the decision was rendered. 
Copies of the decision must be sent to the borrower, the applicant/
tenant, and the FmHA or its successor agency under Public Law 103-354 
District Director.
    (b) The decision of the hearing officer or hearing panel shall be 
binding upon the parties to the hearing unless the parties to the 
hearing are notified within 10 calendar days by the District Director 
that the decision violates FmHA or its successor agency under Public Law 
103-354 regulations. The notification of the District Director will 
specify the FmHA or its successor agency under Public Law 103-354 
regulation that the decision violates. The hearing officer or hearing 
panel shall amend the decision to comply with the regulation(s) within 
10 days of receipt of the notice. (However, the decision of the hearing 
officer or hearing panel does not preclude either party's right 
thereafter to seek judicial relief through the courts.)
    (c) Upon receipt of written notification from the District Director 
that the decision is in compliance with FmHA or its successor agency 
under Public Law 103-354 regulations, the decision is binding upon the 
borrower and tenant, and the borrower and tenant shall take the 
necessary action, or refrain from any actions, necessary to carry out 
the decision.



Sec. 1944.559  Responsibilities of the FmHA or its successor agency 
under Public Law 103-354 District Director.

    (a) The District Director shall assure that a copy of this subpart 
is sent to each borrower with a requirement that the regulations be 
permanently posted in a conspicuous place for the information of 
tenants, such as the rental offices, laundry areas, activities rooms, or 
other places where it will be noticed by tenants. The District Director 
shall also require that the borrower maintain copies of this subpart at 
all times for inspection by the tenants and FmHA or its successor agency 
under Public Law 103-354 upon request. The District Director shall 
assure that where there is a concentration of non-English-speaking 
individuals, the regulation is made available in both English and the 
non-English concentration language.
    (b) The District Director shall encourage the borrower and 
applicant/tenant to resolve grievances and appeals through informal 
discussion; however, upon receipt of a summary of informal discussion as 
required by Sec. 1944.555(c) of this subpart, the District Director 
shall immediately review the summary to ascertain that the applicant/
tenant has received a copy of the summary and a copy of the proceedings 
to obtain a hearing, if matters could not be resolved through informal 
discussion.



Sec. Sec. 1944.560-1944.599  [Reserved]



Sec. 1944.600  OMB control number.

    The collections of information requirements contained in this 
regulation have been approved by the Office of Management and Budget and 
have been assigned OMB control number 0575-0046.

         Exhibit A to Subpart L of Part 1944--Summary of Meeting

Name and Address of Borrower:
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
Name and Address of Project:
________________________________________________________________________
________________________________________________________________________
Name and Address of Complainant:
________________________________________________________________________
________________________________________________________________________
Specific Nature of Complaint:
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
Date of Meeting:
Participants in Meeting:
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________

Decision and Specific Reasons Therefore:

[[Page 528]]

Borrower's Signature____________________________________________________
    I hereby acknowledge receipt of a copy of this summary and have been 
advised of my rights to use the attached procedures to obtain a hearing 
if I so choose.

Tenant's Acknowledgment:
Tenant's signature______________________________________________________
Procedures for Obtaining a Hearing:
    The following procedures may be used to obtain a hearing if you are 
not satisfied with the decision made as a result of our discussion on 
(date) ------------.
    1. Request for a Hearing. Send a written request for a hearing 
within ten days after you receive this notice to the project address 
shown in the summary. Indicate specifically: (1) The reason for your 
grievance or challenge of our proposed action, and (2) the action or 
relief you seek.
    2. Selection of Hearing Officer or Hearing Panel. (Strike out 
paragraph not needed).
    (a) As you probably already know, a Standing Hearing Panel is 
available to conduct the hearing.
    (b) We need to meet soon after your request for a hearing is 
received to select a hearing officer/hearing panel.
    3. Scheduling of Hearing: The hearing will be scheduled to be held 
within 15 days after we receive your request for a hearing. It will be 
held at a time and place convenient for both of us. If we cannot agree 
on a time and place, the hearing officer/hearing panel will designate 
the time and place.
    4. Examination of Records: You have the opportunity before the 
hearing to examine and, at your own expense, to copy all documents, 
records, and regulations that are relevant to the hearing unless 
otherwise prohibited by law.
    5. Procedures Governing Hearing:
    (a) The hearing will be an informal proceeding before a hearing 
officer or hearing panel at which both parties will have an opportunity 
to present their sides of the dispute.
    (b) Both parties may be represented by legal counsel or another 
person of one's choice.
    (c) You have a right to a private hearing, unless you request a 
public hearing.
    (d) Both parties have the right to present evidence, arguments, and 
witnesses to support their sides of the dispute, to refute evidence 
relied upon by the other party, and to confront and cross-examine all 
witnesses.
    (e) A decision will be based solely and exclusively upon the facts 
presented at the hearing.

Subpart M [Reserved]



                  Subpart N_Housing Preservation Grants

    Source: 58 FR 21894, Apr. 26, 1993, unless otherwise noted.



Sec. 1944.651  General.

    (a) This subpart sets forth the policies and procedures for making 
grants under section 533 of the Housing Act of 1949, 42 U.S.C. 1490(m), 
to provide funds to eligible applicants (hereafter also referred to as 
grantee(s)) to conduct housing preservation programs benefiting very 
low- and low-income rural residents. Program funds cover part or all of 
the grantee's cost of providing loans, grants, interest reduction 
payments or other assistance to eligible homeowners, owners of single or 
multiple unit rental properties or for the benefit of owners (as 
occupants) of consumer cooperative housing projects (hereafter also 
referred to as co-ops). Such assistance will be used to reduce the cost 
of repair and rehabilitation, to remove or correct health or safety 
hazards, to comply with applicable development standards or codes, or to 
make needed repairs to improve the general living conditions of the 
resident(s), including improved accessibility by handicapped persons. 
Such assistance will be used to reduce the cost of repair and 
rehabilitation, to remove or correct health or safety hazards, to comply 
with applicable development standards or codes, or to make needed 
repairs to improve the general living conditions of the residents, 
including improved accessibility by persons with a disability. 
Individual housing that is owner occupied may qualify for replacement 
housing when it is determined by the grantee that the housing is not 
economically feasible for repair or rehabilitation.
    (b) The Rural Housing Service (RHS) will provide Housing 
Preservation Grant (HPG) assistance to grantees who are responsible for 
providing assistance to eligible persons without discrimination because 
of race, color, religion, sex, national origin, age, familial status, or 
disability.
    (c) The pre application must only address a proposal to finance 
repairs and rehabilitation activities to individual housing or rental 
properties or co-ops.

[[Page 529]]

Any combination proposal will not be accepted.
    (d) Any processing or servicing activity conducted pursuant to this 
subpart involving authorized assistance to RHS employees, members of 
their families, known close relatives, or business or close personal 
associates, is subject to the provisions of subpart D of part 1900 of 
this chapter. Applicants for this assistance are required to identify 
any known relationship or association with an RHS employee.

[58 FR 21894, Apr. 26, 1993, as amended at 62 FR 26208, May 13, 1997]



Sec. 1944.652  Policy.

    (a) The policy of RHS is to provide HPG's to grantees to operate a 
program which finances repair and rehabilitation activities to 
individual housing, rental properties, or co-ops for very low- and low-
income persons. Individual housing that is owner occupied may qualify 
for replacement housing when it is determined by the grantee that the 
housing is not economically feasible for repair or rehabilitation. 
Grantees are expected to:
    (1) Coordinate and leverage funding for repair and rehabilitation 
activities, as well as replacement housing, with housing and community 
development organizations or activities operating in the same geographic 
area; and
    (2) Focus the program on rural areas and smaller communities so that 
it serves very low and low-income persons.
    (b) RHS intends to permit grantees considerable latitude in program 
design and administration. The forms or types of assistance must provide 
the greatest long-term benefit to the greatest number of persons 
residing in individual housing, rental properties, or co-ops needing 
repair and rehabilitation or replacement of individual housing.
    (c) Repairs and rehabilitation or replacement activities affecting 
properties on or eligible for listing on the National Register of 
Historic Places will be accomplished in a manner that supports national 
historic preservation objectives as specified in Sec. 1944.673.

[62 FR 26208, May 13, 1997]



Sec. 1944.653  Objective.

    The objective of the HPG program is to repair or rehabilitate 
individual housing, rental properties, or co-ops owned and/or occupied 
by very low- and low-income rural persons. Grantees will provide 
eligible homeowners, owners of rental properties, and owners of co-ops 
with financial assistance through loans, grants, interest reduction 
payments or other comparable financial assistance for necessary repairs 
and rehabilitation. Further, individual housing that is owner occupied 
may qualify for replacement housing when it is determined by the grantee 
that the housing is not economically feasible for repair or 
rehabilitation, except as specified in Sec. 1944.659.

[58 FR 21894, Apr. 26, 1993, as amended at 62 FR 26209, May 13, 1997]



Sec. 1944.654  Debarment and suspension--drug-free workplace.

    (a) For purposes of this subpart, exhibit A of FmHA Instruction 
1940-M (available in any Agency office) requires all Rural Development 
applicants; for an HPG to sign and submit with their pre application, 
Form AD-1047, ``Certification Regarding Debarment, Suspension, and Other 
Responsibility Matters--Primary Covered Transactions,'' which basically 
states that the applicant has not been debarred or suspended from 
Government assistance. Further, all grantees after receiving a HPG must 
obtain a signed certification (Form AD-1048, ``Certification Regarding 
Debarment, Suspension, Ineligibility and Voluntary Exclusion--Lower Tier 
Covered Transactions'') from all persons or entities (excluding 
homeowner recipients) that the grantee does business with as a result of 
the HPG. Grantees are responsible for informing these persons or 
entities of the provisions of exhibit A of FmHA Instruction 1940-M 
(available in any Agency office) and of maintaining Form AD-1048 in the 
grantee's office.
    (b) Grantees must also be made aware of the Drug-free Workplace Act 
of 1988 requirements found in exhibit A of FmHA Instruction 1940-M 
(available in any Agency office). For this subpart,

[[Page 530]]

a grantee is defined as any organization who applies for or receives a 
direct grant from Rural Development. All pre applications must include a 
signed Form AD-1049, ``Certification Regarding Drug-free Workplace 
Requirements (Grants) Alternative I--Grants Other Than Individuals.''

[58 FR 21894, Apr. 26, 1993, as amended at 61 FR 39851, July 31, 1996]



Sec. 1944.655  [Reserved]



Sec. 1944.656  Definitions.

    References in this subpart to District, State, National and Finance 
Offices, and to District Director, State Director, and Administrator 
refer to Rural Development offices and officials and should be read as 
prefaced by Rural Development. Terms used in this subpart have the 
following meanings:
    Adjusted income. As defined in 7 CFR 3550.54(c).
    Applicant or grantee. Any eligible organization which applies for or 
receives HPG funds under a grant agreement.
    Cooperative (co-op). For the purposes of the HPG program, a 
cooperative (co-op) is one which:
    (1) Is a corporation organized as a consumer cooperative;
    (2) Will operate the housing on a nonprofit basis solely for the 
benefit of the occupants; and
    (3) Is legally precluded from distributing, for a minimum period of 
5 years from the date of HPG assistance from the grantee, any gains or 
profits from operation of the co-op. For this purpose, any patronage 
refunds to occupants of the co-op would not be considered gains or 
profits. A co-op may accept non-members as well as members for occupancy 
in the project.
    Grant agreement. The contract between Agency and the grantee which 
sets forth the terms and conditions under which HPG funds will be made 
available. (See exhibit A of this subpart which is available in any 
Agency office.)
    Homeowner. For the purposes of the HPG program, a homeowner is one 
who can meet the conditions of income and ownership under Sec. 1944.661 
of this subpart.
    Household. For the purposes of the HPG program, a household is 
defined as all persons living all or part of the next 12 months in a 
unit or dwelling assisted with HPG funds.
    Housing preservation. The repair and rehabilitation activities that 
contribute to the health, safety, and well-being of the occupant, and 
contribute to the structural integrity or long-term preservation of the 
unit. As a result of these activities, the overall condition of the unit 
or dwelling must be raised to meet RHS Thermal Standards for existing 
structures and applicable development standards for existing housing 
recognized by RHS in part 1924, subpart A, of this chapter or standards 
contained in any of the voluntary national model codes acceptable upon 
review by RHS. Properties included on or eligible for inclusion on the 
National Register of Historic Places are subject to the standards and 
conditions of Sec. 1944.673. The term ``housing preservation'' does not 
apply to replacement housing.
    HPG. Housing Preservation Grant.
    Low income. An adjusted annual income that does not exceed the 
``lower'' income limit according to size of household as established by 
the United States Department of Housing and Urban Development (HUD) for 
the county or Metropolitan Statistical Area (MSA) where the property is 
located. Maximum low-income limits are set forth in Appendix 9 of HB-1-
3550 (available in any Rural Development office).
    Organization. An organization is defined as one of the following:
    (1) A State, commonwealth, trust territory, other political 
subdivision, or public nonprofit corporation authorized to receive and 
administer HPG funds;
    (2) An American Indian tribe, band, group, nation, including Alaskan 
Indians, Aleuts, Eskimos and any Alaskan Native Village, of the United 
States which is considered an eligible recipient under the Indian Self-
Determination and Education Assistance Act (Public Law (Pub. L.) 93-638) 
or under the State and Local Fiscal Assistance Act of 1972 (Pub. L. 92-
512);
    (3) A private nonprofit corporation that is owned and controlled by 
private persons or interests for purposes other than making gains or 
profits for the

[[Page 531]]

corporation, is legally precluded from distributing any gains or profits 
to its members, and is authorized to undertake housing development 
activities; or
    (4) A consortium of units of government and/or private nonprofit 
organizations which is otherwise eligible to receive and administer HPG 
funds and which meets the following conditions:
    (i) Be comprised of units of government and/or private nonprofit 
corporations that are close together, located in the same state, and 
serve areas eligible for FmHA or its successor agency under Public Law 
103-354 housing assistance; and
    (ii) Have executed an agreement among its members designating one 
participating unit of government or private nonprofit corporation as the 
applicant or designating a legal entity (such as a Council of 
Governments) to be the applicant.
    Overcrowding. The guidelines in the table in this definition are 
designed to assist grantees in implementing occupancy standards. Part 
1930, subpart C, exhibit B, paragraph VID2, of this chapter (available 
in any Rural Development State or District Office) gives further 
guidance. The table follows:

------------------------------------------------------------------------
                                                                Ideal
                     Number of bedrooms                       number of
                                                               persons
------------------------------------------------------------------------
0..........................................................            2
1..........................................................            2
2..........................................................            4
3..........................................................            6
4..........................................................            8
5..........................................................           10
------------------------------------------------------------------------

    Rental properties. Rental properties are defined as single-unit or 
multi-unit dwellings used for occupancy by tenants, owners, or members 
of an owner's immediate family.
    Replacement housing. The replacement of existing, individual owner 
occupied housing where repair and rehabilitation assistance is not 
economically feasible or practical. The term replacement housing does 
not apply to housing preservation. The overall condition of the unit or 
dwelling must meet RHS Thermal Standards for new or existing structures 
and applicable development standards for new or existing housing 
recognized by RHS in part 1924, subpart A, of this chapter or standards 
contained in any of the voluntary national model codes acceptable upon 
review by RHS. Properties included on or eligible for inclusion on the 
National Register of Historic Places are subject to the standards and 
conditions of Sec. 1944.673 prior to replacement.
    RHS. RHS means the Rural Housing Service, or a successor agency.
    Rural area. The definition in 7 CFR part 3550 applies.
    Tenant. Any person who resides in a single- or multi-unit rental 
property.
    Very low-income. An adjusted annual income that does not exceed the 
very low-income limit according to size of household as established by 
HUD for the county of MSA where the property is located. Maximum very 
low-income limits are set forth in 7 CFR part 3550.

[58 FR 21894, Apr. 26, 1996, as amended at 61 FR 39851, July 31, 1996; 
62 FR 26209, May 13, 1997; 67 FR 78329, Dec. 24, 2002]

    Effective Date Note: At 69 FR 69105, Nov. 26, 2004, Sec. 1944.656 
was amended by revising the definition of ``Overcrowding'', effective 
Feb. 24, 2005. For the convenience of the user, the revised text is set 
forth as follows.

Sec. 1944.656  Definitions.

                                * * * * *

    Overcrowding. Guidance is provided at 7 CFR 3560.155(e). These 
guidelines should result in an ideal range of persons per housing unit.

                                * * * * *



Sec. 1944.657  Restrictions on lobbying.

    All applicants must comply with FmHA Instruction 1940-Q (available 
in any FmHA or its successor agency under Public Law 103-354 office) 
which prohibits applicants of Federal grants from using appropriated 
funds for lobbying the Federal Government in connection with a specific 
grant.



Sec. 1944.658  Applicant eligibility.

    (a) To be eligible to receive a grant, the applicant must:
    (1) Be an organization as defined in Sec. 1944.656 of this subpart;
    (2) Have the necessary background and experience on the part of its 
staff or governing body with proven ability to perform responsibility in 
the field of

[[Page 532]]

low-income rural housing development, repair and rehabilitation, or have 
other business management or administrative experience which indicates 
an ability to operate a program providing repair and rehabilitation 
financial assistance as well as for replacement housing;
    (3) Legally obligate itself to administer HPG funds, provide an 
adequate accounting of the expenditure of such funds in compliance with 
the terms of this regulation, the grant agreement, and 7 CFR parts 3015 
or 3016 (available in any FmHA or its successor agency under Public Law 
103-354 office), as appropriate, and comply with the grant agreement and 
FmHA or its successor agency under Public Law 103-354 regulations; and
    (4) If the applicant is engaged in or plans to become engaged in any 
other activities, provide sufficient evidence and documentation that 
they have adequate resources, including financial resources, to carry on 
any other programs or activities to which they are committed without 
jeopardizing the success and effectiveness of the HPG project.
    (b) An applicant will not be considered eligible if it is a 
nonprofit entity and its proposal is based solely on an identity of 
interest, as defined in Sec. 1924.4(i) of subpart A of part 1924 of 
this chapter, between the applicant and the owner(s) of the proposed 
dwelling or co-op to be rehabilitated or repaired.

[58 FR 21894, Apr. 26, 1993, as amended at 62 FR 26209, May 13, 1997]



Sec. 1944.659  Replacement housing.

    Replacement housing applies only to existing, individual owner 
occupied housing. Replacement housing does not apply to rental 
properties (single-unit or multiple-unit) or to cooperative housing 
projects. The grantee is responsible for determining the extent of the 
repairs and rehabilitation prior to any assistance given to an 
individual homeowner. If the cost of such repairs and rehabilitation is 
not economically feasible, then the grantee may consider replacing the 
existing housing with replacement housing, subject to the following:
    (a) The HPG grantee:
    (1) Shall document the total costs for all repairs and 
rehabilitation of the existing housing; and
    (2) Shall document the basis for the determination that the costs 
for all repairs and rehabilitation for the existing housing are not 
economically feasible.
    (b) The individual homeowner:
    (1) Must meet all requirements of Sec. 1944.661;
    (2) Must lack the income and repayment ability to replace their 
existing home without the assistance of the HPG grantee;
    (3) Must have been determined by the HPG grantee and RHS to be 
unable to afford a loan under section 502 for replacement housing; and
    (4) Must be able to afford the replacement housing on terms set 
forth by the HPG grantee.
    (c) The existing home:
    (1) Must be demolished as part of the process of providing 
replacement housing. It will be determined by the grantee and individual 
homeowner when is the best time for demolition; and
    (2) May not be sold to make way for the replacement housing.
    (d) The replacement housing:
    (1) May be either new housing or a dwelling brought onto the site of 
the existing housing;
    (2) May use no more than $15,000 in HPG funds;
    (3) Must meet all applicable requirements of 7 CFR 3550.57; and
    (4) May not be sold within 5 years of completion of the project.
    (e) Any moneys received by the homeowner from selling salvaged 
material after demolishing the existing home must be used towards the 
replacement housing.

[62 FR 26209, May 13, 1997]



Sec. 1944.660  Authorized representative of the HPG applicant and FmHA 
or its successor agency under Public Law 103-354 point of contact.

    (a) FmHA or its successor agency under Public Law 103-354 will deal 
only with authorized representatives designated by the HPG applicant.
    (b) The State Director will designate either the State Office and/or 
the District Office as the processing office and/or the servicing office 
for the HPG

[[Page 533]]

program. The State Director's selection may be based on staffing, total 
program size, number of pre applications anticipated, type of 
applicants, or similar criteria. The State Director must publish this 
designation each year at the time the Federal Register is published 
informing the public of the open period for acceptance of pre 
applications as outlined in Sec. 1944.678 of this subpart.



Sec. 1944.661  Individual homeowners--eligibility for HPG assistance.

    The individual homeowners assisted must have income that meets the 
very low- or low-income definitions, be the owner of an individual 
dwelling at least 1 year prior to the time of assistance, and be the 
intended occupant of the dwelling subsequent to the time of assistance. 
The dwelling must be located in a rural area and be in need of housing 
preservation assistance. Each homeowner is required to submit evidence 
of income and ownership for retention in the grantee's files.
    (a) Income. Determination of income will be made in accordance with 
7 CFR 3550.54(c). All members of the household, as defined in Sec. 
1944.656 of this subpart, must be included when determining income. 
Grantees must use certifications, may require additional information 
from the homeowner, and should seek advice from their attorney.
    (b) Ownership. Evidence of ownership may be a photostatic copy of 
the instrument evidencing ownership. Methods for assuring the intention 
of the homeowner to continue to occupy the unit after assistance will be 
established by the grantee. Any of the following will satisfy or fulfill 
this requirement of ownership:
    (1) Full marketable title.
    (2) An undivided or divided interest in the property to be repaired, 
rehabilitated, or replaced when not all of the owners are occupying the 
property. HPG assistance may be made in such cases when:
    (i) The occupant has been living in the house for at least 1 year 
prior to the date of requesting assistance;
    (ii) The grantee has no reason to believe the occupant's position of 
owner/occupant will be jeopardized as a result of the improvements to be 
made with HPG funds; and
    (iii) In the case of a loan, and to the extent possible, the co-
owner(s) should also sign the security instrument.
    (3) A leasehold interest in the property to be repaired, 
rehabilitated, or replaced. When the potential HPG recipient's 
``ownership'' interest in the property is based on a leasehold interest, 
the lease must be in writing and a copy must be included in the 
grantee's file. The unexpired portion of the lease must not be less than 
5 years and must permit the recipient to make modifications to the 
structure without increasing the recipient's lease cost.
    (4) A life estate, with the right of present possession, control, 
and beneficial use of the property.
    (5) Land assignments may be accepted as evidence of ownership only 
for American Indians living on a reservation, when historically the 
permits have been used by the tribe and have had the comparable effect 
of a life estate.
    (c) Other evidence of ownership. The following items may be accepted 
as evidence of ownership if a recorded deed cannot be provided:
    (1) Any legal instrument, whether or not recorded, which is commonly 
considered evidence of ownership.
    (2) Evidence that the person(s) receiving assistance from the HPG 
grantee is listed as the owner of the property by the local taxing 
authority and is responsible for any real estate taxes.
    (3) Affidavits by others in the community that the person(s) 
receiving assistance from the HPG grantee has occupied the property as 
the apparent owner for a period of not less than 10 years, and is 
generally believed to be the owner.

[58 FR 21894, Apr. 26, 1993, as amended at 62 FR 26209, May 13, 1997]



Sec. 1944.662  Eligibility of HPG assistance on rental properties or 
co-ops.

    (a) Ownership. The owner(s) of rental properties or co-ops must own 
the dwelling at the time of receiving assistance from the HPG grantee. 
The dwelling must be located in a rural area and be in need of housing 
preservation assistance. Evidence of ownership may be a photostatic copy 
of the

[[Page 534]]

instrument evidencing ownership. Owners of rental properties and co-ops 
are required to submit evidence of ownership for retention in the 
grantee's files. Any of the following will satisfy or fulfill this 
requirement of ownership:
    (1) Full marketable title.
    (2) An undivided or divided interest in the property to be repaired 
or rehabilitated.
    (3) A leasehold interest in the property to be repaired or 
rehabilitated. Ownership interest in the property is based on a 
leasehold interest. The lease must be in writing and a copy must be 
included in the grantee's file. The unexpired portion of the lease must 
not be less than 5 years and must permit the recipient to make 
modifications to the structure without increasing the recipient's lease 
cost.
    (4) Land assignments may be accepted as evidence of ownership only 
for American Indians living on a reservation, when historically the 
permits have been used by the tribe and have had the comparable effect 
of a life estate.
    (b) Tenant eligibility. The following requirements must be met in 
order for a unit within a rental property or co-op to be assisted with 
HPG funds:
    (1) The tenant must have income that meets the very low- or low-
income definition.
    (2) The tenant must be the intended occupant of the unit, but is not 
required to have resided previously in the dwelling.
    (3) Any owner(s) who receives assistance from an HPG grantee or a 
member of the immediate family of the owner(s), who also resides in the 
unit within the dwelling to be repaired or rehabilitated is eligible to 
have their unit repaired or rehabilitated, if they are income eligible 
and meet all other requirements.
    (c) Identity of interest. When an identity of interest, as defined 
in Sec. 1924.4(i) of subpart A of part 1924 of this chapter, exists 
between a nonprofit entity and the owner(s) of a dwelling, the property 
is not eligible for assistance.



Sec. 1944.663  Ownership agreement between HPG grantee and rental 
property owner or co-op.

    HPG assistance may be provided by a grantee with respect to rental 
properties or co-ops only if the following conditions are met by the 
rental property owner(s) or by the co-op during a minimum 5 year 
restrictive period beginning on the date agreed upon in the agreement 
between the grantee and the rental property owner (or co-op). The HPG 
grantee is responsible for preparing, executing, and monitoring for 
compliance, the ownership agreement with the owner(s) of the rental 
property or the co-op. The rental property owner(s) or the co-ops are 
required to enter into an ownership agreement with the grantee to assure 
compliance with the requirements of this section.
    (a) Ownership agreement. At a minimum, the ownership agreement must 
include the following clauses:
    (1) The owner(s) agrees to make the units repaired or rehabilitated 
available for occupancy to very low- or low-income persons for a period 
of not less than 5 years, such restrictive period beginning on the date 
agreed upon in the agreement between the grantee and the rental property 
owner(s) or co-op.
    (2) The owner(s) agrees to pass on to the tenants any reduction in 
the debt service payments resulting from the HPG assistance provided by 
the HPG grantee to the owner(s).
    (3) The owner(s) of rental properties agrees not to convert the 
units to condominium ownership. In the case of co-ops, the owner(s) 
agrees not to convert the dwelling(s) to condominium ownership or any 
form of cooperative ownership not eligible under this section. This 
paragraph (a)(3) is subject to the restrictive period noted in paragraph 
(a)(1) of this section.
    (4) The owner(s) agrees not to refuse to rent a unit to any person 
solely because the person is receiving or is eligible to receive 
assistance under any Federal, State, or local housing assistance 
program.
    (5) The owner(s) agrees that the units repaired or rehabilitated 
will be occupied or available for occupancy by persons of very low- or 
low-income.
    (6) The owner(s) agrees to enter into and abide by written leases 
with the

[[Page 535]]

tenants and that such leases shall provide that the tenants may be 
evicted only for good cause.
    (7) The owner(s) agrees that, in the event the owner(s) or the 
owner's successors in interest fail to carry out the requirements of 
this section during the applicable period, they shall make a payment to 
FmHA or its successor agency under Public Law 103-354 in an amount that 
equals the total amount of assistance provided by the grantee plus 
interest thereon (without compounding) for each year and any fraction 
thereof that the assistance was outstanding. The interest rate shall be 
that as determined by FmHA or its successor agency under Public Law 103-
354 at the time of infraction taking into account the average yield on 
outstanding marketable long-term obligations of the United States during 
the month preceding the date on which the assistance was initially made 
available.
    (8) The owner(s) agrees that, notwithstanding any other provisions 
of law, the HPG assistance provided to the owner(s) shall constitute a 
debt which is payable in the case of any failure of this section and 
shall be secured by a security instrument provided by the owner(s) or 
co-op to the grantee, that provides for FmHA or its successor agency 
under Public Law 103-354 to take such action upon incapacity or 
dissolution of the grantee.
    (9) The owner(s) agrees and certifies that the assistance is being 
made available in conformity with Public Law 88-352, the ``Civil Rights 
Act of 1964,'' and Public Law 90-284, the ``Civil Rights Act of 1968.''
    (b) Responsibilities of the grantee. The grantee is responsible for 
insuring through verification and monitoring that the areas listed below 
are in compliance:
    (1) That HPG funds used for loans, grants, or interest reduction 
payments providing repair or rehabilitation assistance to owners of 
rental properties or co-ops are not in excess of 75 percent of the total 
cost of all repairs and rehabilitation activities eligible for HPG 
assistance.
    (2) That the owner(s) is not repairing and/or rehabilitating any 
unit unless it meets the requirements of Sec. 1944.662 (b)(3) of this 
subpart.
    (3) That rental property units being repaired and/or rehabilitated 
and occupied by owners or members of the owner's immediate family meet 
all other requirements of this subpart.
    (4) That, for multi-units not considered eligible as a result of 
paragraph (b)(2) or (b)(3) of this section, the grantee and owner(s) 
shall agree on a method, if any is needed, of determining the prorata 
share of repairs and rehabilitation activities to the dwelling, based on 
a percentage of the ineligible units to the total dwelling.



Sec. 1944.664  Housing preservation and replacement housing assistance.

    (a) Grantees are responsible for providing loans, grants, or other 
comparable assistance to homeowners, owners of rental properties or co-
ops for housing preservation or for replacement housing as described in 
Sec. 1944.656.
    (b) HPG funds used for loans, grants, or interest reduction payments 
to provide rental repair and/or rehabilitation assistance to owners of 
rental properties or co-ops shall not exceed the requirement noted in 
Sec. 1944.663(b)(1) of this subpart.
    (c) Authorized housing preservation assistance includes, but is not 
limited to, cost of labor and materials for:
    (1) Installation and/or repair of sanitary water and waste disposal 
systems, together with related plumbing and fixtures, which will meet 
local health department requirements;
    (2) Energy conservation measures such as:
    (i) Insulation; and
    (ii) Combination screen-storm windows and doors;
    (3) Repair or replacement of the heating system including the 
installation of alternative systems such as woodburning stoves or space 
heaters, when appropriate and if local codes permit;
    (4) Electrical wiring;
    (5) Repair of, or provision for, structural supports and 
foundations;
    (6) Repair or replacement of the roof;
    (7) Replacement of severely deteriorated siding, porches or stoops;

[[Page 536]]

    (8) Alterations of the unit's interior or exterior to provide 
greater accessibility for any handicapped person;
    (9) For properties listed on or eligible for the National Register 
of Historic Places, activities associated with conforming repair and 
rehabilitation activities to the standards and/or design comments 
resulting from the consultation process contained in Sec. 1944.673 of 
this subpart;
    (10) Necessary repairs to manufactured housing provided:
    (i) For homeowners only, the recipient owns the home and the site on 
which the home is situated and the homeowner has occupied that home on 
that site for at least 1 year prior to receiving HPG assistance; and
    (ii) For homeowners, owners of single- or multiple-unit rental 
properties, and co-ops, the manufactured housing is on a permanent 
foundation or will be put on a permanent foundation with HPG funds. 
Advice on the requirements for a permanent foundation is available from 
FmHA or its successor agency under Public Law 103-354. Guidance may be 
found in Sec. 1944.223(e) of subpart E of this part and in exhibit J of 
subpart A of part 1924 of this chapter;
    (11) Additions to any dwelling (conventional or manufactured) only 
when it is clearly necessary to alleviate overcrowding or to remove 
health hazards to the occupants; or
    (12) Relocation costs either permanent or temporary for assistance 
to rental properties or co-ops, as noted in Sec. 1944.667 of this 
subpart.
    (d) Authorized replacement housing assistance includes, but is not 
limited to:
    (1) Building a dwelling and providing related facilities for use by 
the individual homeowner as a permanent resident;
    (2) Providing a safe and sanitary water and waste disposal system, 
together with related plumbing and fixtures, which will meet local 
health department requirements;
    (3) Providing minimum site preparation and other on-site improvement 
including grading, foundation plantings, and minimal landscaping, and 
other on-site improvements required by local jurisdictions;
    (4) Providing special design features or equipment when necessary 
because of physical handicap or disability of the HPG recipient or 
member of the household;
    (5) Purchasing and installing approved energy saving measures and 
approved furnaces and space heaters which use a type of fuel that is 
commonly used, and is economical and dependably available;
    (6) Providing storm cellars and similar protective structures, if 
typical for the area;
    (7) Paying real estate taxes which are due and payable on the 
existing dwelling or site at the time of closing, if this amount is not 
a substantial part of the HPG assistance. (HPG assistance may not be 
made available if the real estate taxes which are due and payable are 
not paid at the time assistance is granted.);
    (8) Providing living area for the HPG recipient and all members of 
the household as required in 7 CFR 3550.54(c);
    (9) Moving a dwelling onto the site of the demolished, previously 
existing housing and meeting all HPG housing preservation requirements 
for repair and rehabilitation;
    (10) Providing funds for demolishing the existing housing; and
    (11) Any other cost that is reasonable and justifiable directly 
related to replacement activities.
    (e) HPG funds may be used for payment of incidental expenses 
directly related to accomplishing authorized activities such as fees for 
connection of utilities (water, sewer, gas, electric), credit reports, 
surveys, title clearance, loan closing, inspections, and architectural 
or other technical services. All fees will be in accordance with local 
prevailing rates and so documented.
    (f) HPG funds may be used where they do not contribute to the 
health, safety and well being of the occupant or do not materially 
contribute to the structural integrity or long-term preservation of the 
unit. The percentage of the funds to be used for such purposes must not 
exceed 20 percent of the total funding for the unit(s) and/or dwelling, 
and such work must be combined with improvements listed as eligible 
under

[[Page 537]]

paragraph (c) of this section. These improvements may include, but are 
not limited to the following:
    (1) Painting;
    (2) Paneling;
    (3) Floor covering, including carpeting;
    (4) Improving clothes closets or shelving;
    (5) Improving kitchen cabinets;
    (6) Air conditioning; or
    (7) Landscape plantings.
    (g) Under the following conditions, HPG funds may be used to 
reimburse the grantee for authorized housing preservation or replacement 
housing activities performed by employees of the grantee where the 
grantee acts as a construction contractor and furnishes construction 
services:
    (1) The grantee must demonstrate that such work performed by the 
grantee results in cost savings in terms of time and labor over cost for 
such work prevailing in the area;
    (2) The grantee has established a process for third party review of 
all performance by a local government, building inspector or other 
independent party;
    (3) The grantee has established or makes available a process that 
provides for consumer protection to the individual homeowner, owner of a 
rental property, or co-op assisted; and
    (4) The grantee's accounting system provides a clear delineation 
between administrative costs and construction contractor (non-
administrative) costs.
    (h) HPG funds may not be used to:
    (1) Assist in the construction or completion of an addition 
(excluding paragraph (c)(11) of this section) or a new dwelling. This 
paragraph does not apply to replacement housing.
    (2) Refinance any debt or obligation of the grantee, the individual 
homeowner, owners of a rental property, or co-ops other than obligations 
incurred for eligible items covered by this section entered into after 
the date of agreement with the HPG grantee.
    (3) Repair or rehabilitate as well as replace any property located 
in the Coastal Barrier Resources System.

[58 FR 21894, Apr. 26, 1993, as amended at 62 FR 26210, May 13, 1997]



Sec. 1944.665  Supervision and inspection of work.

    Grantees are responsible for supervising all rehabilitation and 
repair work, as well as replacement housing financed with HPG 
assistance. After all HPG work has been completed, a final inspection 
must be done by a disinterested third party, such as local building and 
code enforcement officials. If there are no such officials serving the 
area where HPG activities will be undertaken, or if the grantee would 
also normally make such inspections, the grantee must use qualified 
contract or fee inspectors.

[58 FR 21894, Apr. 26, 1993, as amended at 62 FR 26210, May 13, 1997]



Sec. 1944.666  Administrative activities and policies.

    Grant funds are to be used primarily for housing repair and 
rehabilitation activities. Use of grant funds for direct and indirect 
administrative costs is a secondary purpose and must not exceed 20 
percent of the HPG funds awarded to the grantee.
    (a) Administrative expenses may include:
    (1) payment of reasonable salaries or contracts for professional, 
technical, and clerical staff actively assisting in the delivery of the 
HPG project.
    (2) Payment of necessary and reasonable office expenses such as 
office rental, supplies, utilities, telephone services, and equipment. 
(Any item of nonexpendable personal property having a unit value of 
$1,000 or more, acquired with HPG funds, will be specifically identified 
to FmHA or its successor agency under Public Law 103-354 in writing.)
    (3) Payment of necessary and reasonable administrative costs such as 
workers' compensation, liability insurance, and the employer's share of 
Social Security and health benefits. Payments to private retirement 
funds are permitted if the grantee already has such a fund established 
and ongoing.
    (4) Payment of reasonable fees for necessary training of grantee 
personnel.
    (5) Payment of necessary and reasonable costs for an audit upon 
expiration of the grant agreement.

[[Page 538]]

    (6) Other reasonable travel and miscellaneous expenses necessary to 
accomplish the objectives of the specific HPG grant which were 
anticipated in the individual HPG grant proposal and which have been 
approved as eligible expenses at the time of grant approval.
    (b) HPG administrative funds may not be used for:
    (1) Preparing housing development plans and strategies except as 
necessary to accomplish the specific objectives of the HPG project.
    (2) Substitution of any financial support previously provided or 
currently available from any other source.
    (3) Reimbursing personnel to perform construction related to housing 
preservation assistance. (Non-administrative funds may be used if 
construction is for housing preservation assistance under the provisions 
of Sec. 1944.664(g) of this subpart.
    (4) Buying property of any kind from persons receiving assistance 
from the grantee under the terms of the HPG agreement.
    (5) Paying for or reimbursing the grantee for any expense or debts 
incurred before FmHA or its successor agency under Public Law 103-354 
executes the grant agreement.
    (6) Paying any debts, expenses, or costs which should be the 
responsibility of the individual homeowner, owner, tenant or household 
member of a rental property, or owner (member) or non-member of a co-op 
receiving HPG assistance outside the costs of repair and rehabilitation 
as well as for replacement housing (individual homeowners only).
    (7) Any type of political activities prohibited by the Office of 
Management and Budget (OMB) Circular A-122.
    (8) Other costs including contributions and donations, 
entertainment, fines and penalties, interest and other financial costs 
unrelated to the HPG assistance to be provided, legislative expenses, 
and any excess of cost from other grant agreements.
    (9) Paying added salaries for employees paid by other sources, i.e., 
public agencies who pay employees to handle grants.
    (c) Advice concerning ineligible costs may be obtained from FmHA or 
its successor agency under Public Law 103-354 as part of the HPG pre 
application review or when a proposed cost appears ineligible.
    (d) The grantee may not charge fees or accept any compensation or 
gratuities from HPG recipients for the grantee's technical or 
administrative services under this program. Where the grantee performs 
as a construction contractor, the grantee may be paid such compensation 
directly related to construction services provided and limited to 
authorized housing preservation activities.
    (e) The policies, guidelines and requirements of 7 CFR parts 3015 
and 3016 apply to the acceptance and use of HPG funds.

[58 FR 21894, Apr. 26, 1993, as amended at 62 FR 26210, May 13, 1997]



Sec. 1944.667  Relocation and displacement.

    (a) Relocation. Public bodies and agencies must comply with the 
requirements of the Uniform Relocation Assistance and Real Property 
Acquisition Act of 1970. The grantee must provide assistance for 
permanent or temporary relocation of displaced persons for units 
repaired or rehabilitated or for individual homes replaced with HPG 
assistance. HPG funds may be used to cover costs incurred in the 
relocation of displaced persons. The applicant shall include in its 
statement of activities, a statement concerning the temporary relocation 
of homeowners and/or tenants during the period of repairs and/or 
rehabilitation to the units or dwellings. Any contract or agreement 
between the homeowner and the grantee, as well as between the grantee 
and the owner(s) of rental properties and co-ops shall include a 
statement covering at a minimum;
    (1) The period of relocation (if any);
    (2) The name(s) of the party (or parties) who shall bear the cost of 
temporarily relocating; and
    (3) The name(s) of the party (or parties) who shall bear the cost of 
permanent relocation; and
    (4) If paragraphs (a) (2) or (3) of this section is the grantee, the 
maximum amount of temporary or permanent relocation costs proposed to be 
allowed.
    (b) Displacement. The applicant shall include in its statement of 
activities, a

[[Page 539]]

statement as to how its proposed HPG financial assistance program shall 
keep to a minimum the displacement of homeowners and/or tenants.

[58 FR 21894, Apr. 26, 1993, as amended at 62 FR 26210, May 13, 1997]



Sec. 1944.668  Term of grant.

    HPG projects may be funded under the terms of a grant agreement for 
a period of up to 2 years commencing on the date of execution of the 
grant agreement by the FmHA or its successor agency under Public Law 
103-354 approval official. Term of the project will be based upon HPG 
resources available for the proposed project and the accomplishability 
of the applicant's proposal within 1 or 2 years. Applicants requesting a 
2 year term may be asked to develop a feasible 1 year program if 
sufficient funds are not available for a 2 year program.



Sec. 1944.669  [Reserved]



Sec. 1944.670  Project income.

    (a) Project income during the grant period from loans made to 
homeowners, owners of rental properties, and co-ops is governed by 7 CFR 
parts 3015 and 3016. All income during the grant period, including 
amounts recovered by the grantee due to breach of agreements between the 
grantee and the HPG recipient, must be used under (and in accordance 
with) the requirements of the HPG program.
    (b) Grantees are encouraged to establish a program which reuses 
income from loans after the grant period for continuing repair and 
rehabilitation activities, as well as for individual housing replaced.

[58 FR 21894, Apr. 26, 1993, as amended at 62 FR 26210, May 13, 1997]



Sec. 1944.671  Equal opportunity requirements and outreach efforts.

    The policies and regulations contained in subpart E of part 1901 of 
this chapter apply to grantees under this subpart.
    (a) Fair housing. The Fair Housing Act prohibits any person or 
entity whose business includes engaging in residential real estate-
related transactions to discriminate against any person in making loans, 
grants, or other financial assistance for a unit or dwelling, or which 
will be secured by a unit or dwelling, because of race, color, religion, 
sex, national origin, age, familial status, or handicap/disability. 
Prohibited practices under this section include:
    (1) Failing to provide any person in connection with a residential 
real estate-related transaction, information regarding the availability 
of loans, grants, or other financial assistance, or providing 
information that is inaccurate or different from that provided others; 
and
    (2) The term residential and real estate-related transaction 
includes the making or purchasing of loans, grants, or other financial 
assistance for purchasing, constructing, improving, repairing, or 
rehabilitating a unit or dwelling, as well as for replacement housing 
for individual homeowners.
    (b) Outreach. In addition, the HPG grantee is required to address an 
outreach effort in their program. The amount of outreach should 
sufficiently reach the entire service area. As a measure of compliance, 
the percentages of the individuals served by the HPG grantee should be 
in proportion to the percentages of the population of the service area 
by race/national origin. If the percentages are not proportional, then 
adequate justification is to be made. Exhibit E-1 of this subpart 
(available in any FmHA or its successor agency under Public Law 103-354 
office) will be used to monitor these requirements. (Further explanation 
and guidance of exhibit E-1 can be found in exhibit E-2 of this subpart 
which is available in any FmHA or its successor agency under Public Law 
103-354 office). A separate file will be maintained by the grantee that 
will include the following outreach activities:
    (1) Community contacts to community organizations, community 
leaders, including minority leaders, by name, race, and date contacted;
    (2) Copies of all advertising in local newspapers, and through other 
media. Any advertising must reach the entire service area. FmHA or its 
successor agency under Public Law 103-354 encourages the use of 
minority-owned radio stations and other types of media, if available, in 
the service area.

[[Page 540]]

The grantee's file shall also include the name of the media used, and 
the percentage of its patronage by race/national origin; and
    (3) Copies of any other advertising or other printed material, 
including the application form used. The application form shall include 
the nondiscrimination slogan: ``This is an equal opportunity program. 
Discrimination is prohibited by Federal Law.''
    (c) Additional requirements. In order to meet the Fair Housing 
requirements and the nondiscrimination requirements of Title VI of the 
Civil rights Act of 1964, Section 504 of the Rehabilitation Act of 1973, 
and the Age Discrimination Act of 1975, the HPG grantee will need to 
adhere to the recommendations of exhibit H of this subpart (available in 
any FmHA or its successor agency under Public Law 103-354 office).

[58 FR 21894, Apr. 26, 1993, as amended at 62 FR 26210, May 13, 1997]



Sec. 1944.672  Environmental requirements.

    Subpart G of part 1940 of this chapter will be followed regarding 
environmental requirements. The following is additional information on 
how to approach HPG projects under those requirements:
    (a) The approval of an HPG grant for the repair, rehabilitation, or 
replacement of dwellings shall be a Class I action. As part of their 
preapplication materials, applicants shall submit Form RD 1940-20, 
``Request for Environmental Information,'' for the geographical areas 
proposed to be served by the program. The applicant shall refer to 
exhibit F-1 of this subpart (available in any Rural Development State or 
District Office) when completing Form RD 1940-20. Further guidance on 
completing this form is available from the Agency office servicing the 
program.
    (b) The use of HPG funds by the grantee to repair, rehabilitate, or 
replace on the same site, specific dwellings is generally exempt from an 
RHS environmental review. However, if such dwellings are located in a 
floodplain, wetland, or the proposed work is not concurred in by the 
Advisory Council on Historic Preservation under the requirements of 
Sec. 1944.673, an RHS environmental review is required. Dwellings within 
the Coastal Barrier Resources System are not eligible for HPG 
assistance. Applicants must include in their preapplication a process 
for identifying dwellings that may receive housing preservation or 
replacement housing assistance that will require an environmental 
assessment. This may be accomplished through use of exhibit F-2 of this 
subpart (available in any Rural Development State or District Office) or 
another process supplying similar information acceptable to RHS.
    (c) If a specific dwelling is not located in a floodplain, wetland, 
or the proposed work is concurred in by the Advisory Council on Historic 
Preservation under the requirements of Sec. 1944.673 of this subpart, 
no environmental review is required by FmHA or its successor agency 
under Public Law 103-354. The grantee only needs to indicate its review 
and compliance with this subpart, indicating such in each recipient's 
file in accordance with paragraph (e) of this section.
    (d) When a dwelling requiring an environmental assessment is 
proposed for HPG assistance, the grantee will immediately contact the 
RHS office designated to service the HPG grant. Prior to approval of HPG 
assistance to the recipient by the grantee, RHS will prepare the 
environmental assessment in accordance with part 1940, subpart G, of 
this chapter with the assistance of the grantee, as necessary. Paragraph 
VIII of exhibit C of this subpart (available in any Rural Development 
State or District Office) provides further guidance in this area.
    (e) If FmHA or its successor agency under Public Law 103-354 is 
required to make an environmental assessment, the grantee will be 
provided with a copy of the assessment which will be made part of the 
recipient's file. The grantee must also include in each recipient's 
file:
    (1) Documentation on how the process for historic preservation 
review under Sec. 1944.673 of this subpart has been complied with, 
including all relevant reviews and correspondence; and

[[Page 541]]

    (2) Determination as to whether the unit is located in a 100-year 
floodplain or a wetland.
    (3) Documentation of this review. Suggested language is: ``We have 
considered this dwelling under FmHA or its successor agency under Public 
Law 103-354's environmental and historic preservation requirements for a 
HPG (Sec. Sec. 1944.672 and 1944.673 of this subpart) and an 
environmental assessment is not required. The review was completed in 
accordance with the process to identify properties requiring an FmHA or 
its successor agency under Public Law 103-354 environmental assessment 
approved with our statement of activities.''
    (f) Proposed use of funds by an applicant to use monies for 
additions under Sec. 1944.664 (c)(11) of this subpart must be addressed 
in the statement of activities.
    (g) Grantees must contact FmHA or its successor agency under Public 
Law 103-354 prior to actual usage of funds by the grantees under Sec. 
1944.664 (c)(11) of this subpart. FmHA or its successor agency under 
Public Law 103-354 must complete the appropriate level of environmental 
review in accordance with subpart G of part 1940 of this chapter.

[58 FR 21894, Apr. 26, 1993, as amended at 62 FR 26210, May 13, 1997]



Sec. 1944.673  Historic preservation and replacement housing requirements 
and procedures.

    (a) FmHA or its successor agency under Public Law 103-354 has 
entered into a Programmatic Memorandum of Agreement (PMOA) with the 
National Conference of State Historic Preservation Officers (SHPO) and 
the Advisory Council on Historic Preservation in order to implement the 
specific requirements regarding historic preservation contained in 
section 533 of the Housing Act of 1949, 42 U.S.C. 1490(m) of the 
enabling legislation. The PMOA, with attachments, can be found in FmHA 
Instruction 2000-FF (available in any FmHA or its successor agency under 
Public Law 103-354 office). A copy of the PMOA will be provided to each 
applicant for a HPG as part of the pre application package specified in 
paragraph II of exhibit C of this subpart (available in any FmHA or its 
successor agency under Public Law 103-354 office).
    (b) Each applicant for an HPG grant will provide, as part of its 
preapplication documentation submitted to RHS, a description of its 
proposed process for assisting very low-and low-income persons owning 
historic properties needing rehabilitation, repair, or replacement. 
``Historic properties'' are defined as properties that are listed or 
eligible for listing on the National Register of Historic Places. Each 
HPG proposal shall comply with the provisions of Stipulation I, A-G of 
the PMOA (RD Instruction 2000-FF), available in any Rural Development 
State or District Office. Should RHS be required to assume 
responsibility for compliance with 36 CFR part 800 in accordance with 
Stipulation III of the PMOA, the grantee will assist RHS in preparing an 
environmental assessment. RHS will work with the grantee to develop 
alternative actions or mitigation measures, as appropriate.
    (c) Such assumption of responsibility by FmHA or its successor 
agency under Public Law 103-354 on a particular property shall not 
preclude the grantee from carrying out the requirements of 36 CFR part 
800 on other properties as though it were a Federal agency, but no work 
may be commenced on any unit or dwelling in controversy until and unless 
so advised by FmHA or its successor agency under Public Law 103-354.

[58 FR 21894, Apr. 26, 1993, as amended at 62 FR 26211, May 13, 1997]



Sec. 1944.674  Public participation and intergovernmental review.

    (a) In preparing its statement of activities, the applicant is 
responsible for consulting with leaders from the county, parish and/or 
township governments of the area where HPG activities will take place 
for the purpose of assuring that the proposed HPO program is beneficial 
and does not duplicate current activities. American Indian nonprofit 
organization applicants should obtain the written concurrence of the 
tribal governing body in lieu of consulting with the county governments 
when the program is operated only on tribal land.

[[Page 542]]

    (b) The applicant must also make its statement of activities 
available to the public for comment. The applicant must announce the 
availability of its statement of activities for review in a newspaper of 
general circulation in the project area and allow at least 15 days for 
public comment. The start of this 15-day period must occur no later than 
16 days prior to the last day for acceptance of pre applications by FmHA 
or its successor agency under Public Law 103-354.
    (c) The HPG program is subject to the provisions of Executive Order 
12372, which requires intergovernmental consultation with State and 
local officials. Under FmHA Instruction 1940-J (available in any FmHA or 
its successor agency under Public Law 103-354 office) prospective 
applicants for HPG grants must submit its statement of activities to the 
State single point of contact prior to submitting their pre application 
to FmHA or its successor agency under Public Law 103-354. Evidence of 
submittal of the statement of activities to the State single point of 
contact is to be submitted with a pre application. Comments and 
recommendations made through the intergovernmental review process are 
for the purpose of assuring consideration of State and local government 
views. The name of the State single point of contact is available from 
any FmHA or its successor agency under Public Law 103-354 office. This 
section does not apply to American Indian tribes, bands, groups, etc., 
as noted in Sec. 1944.656 of this subpart.



Sec. 1944.675  Allocation of HPG funds to States and unused HPG funds.

    The allocation and distribution of HPG funds is found in Sec. 
1940.578 of subpart L of part 1940 of this chapter.



Sec. 1944.676  Preapplication procedures.

    (a) All applicants will file an original and two copies of Standard 
Form (SF) 424.1, ``Application For Federal Assistance (For 
Nonconstruction),'' and supporting information with the appropriate FmHA 
or its successor agency under Public Law 103-354 office. A pre 
application package, including SF-424.1, is available in any FmHA or its 
successor agency under Public Law 103-354 Office.
    (b) All pre applications shall be accompanied by the following 
information which FmHA or its successor agency under Public Law 103-354 
will use to determine the applicant's eligibility to undertake the HPG 
program and to evaluate the pre application under the project selection 
criteria of Sec. 1944.679 of this subpart.
    (1) A statement of activities proposed by the applicant for its HPG 
program as appropriate to the type of assistance the applicant is 
proposing, including:
    (i) A complete discussion of the type of and conditions for 
financial assistance for housing preservation, including whether the 
request for assistance is for a homeowner assistance program, a rental 
property assistance program, or a co-op assistance program;
    (ii) The process for selecting recipients for HPG assistance, 
determining housing preservation needs of the dwelling, performing the 
necessary work, and monitoring/inspecting work performed;
    (iii) A description of the process for identifying potential 
environmental impacts in accordance with Sec. 1944.672 of this subpart, 
and the provisions for compliance with Stipulation I, A-G of the PMOA 
(FmHA Instruction 2000-FF available in any FmHA or its successor agency 
under Public Law 103-354 office) in accordance with Sec. 1944.673 (b) 
of this subpart. With the exception of Stipulation I, D of the PMOA, 
this may be accomplished by adoption of exhibit F-2 of this subpart 
(available in any FmHA or its successor agency under Public Law 103-354 
office), or another process supplying similar information acceptable to 
FmHA or its successor agency under Public Law 103-354;
    (iv) The development standard(s) the applicant will use for the 
housing preservation work; and, if not the FmHA or its successor agency 
under Public Law 103-354 development standards for existing dwellings, 
the evidence of its acceptance by the jurisdiction where the grant will 
be implemented;
    (v) The time schedule for completing the program;
    (vi) The staffing required to complete the program;

[[Page 543]]

    (vii) The estimated number of very low- and low-income minority and 
nonminority persons the grantee will assist with HPG funds; and, if a 
rental property or co-op assistance program, the number of units and the 
term of restrictive covenants on their use for very low- and low-income;
    (viii) The geographical area(s) to be served by the HPG program;
    (ix) The annual estimated budget for the program period based on the 
financial needs to accomplish the objectives outlined in the proposal. 
The budget should include proposed direct and indirect administrative 
costs, such as personnel, fringe benefits, travel, equipment, supplies, 
contracts, and other cost categories, detailing those costs for which 
the grantee proposes to use the HPG grant separately from non-HPG 
resources, if any. The applicant budget should also include a schedule 
(with amounts) of how the applicant proposes to draw HPG grant funds, 
i.e., monthly, quarterly, lump sum for program activities, etc.;
    (x) A copy of an indirect cost proposal as required in 7 CFR parts 
3015 and 3016, when the applicant has another source of federal funding 
in addition to the FmHA or its successor agency under Public Law 103-354 
HPG program;
    (xi) A brief description of the accounting system to be used;
    (xii) The method of evaluation to be used by the applicant to 
determine the effectiveness of its program which encompasses the 
requirements for quarterly reports to FmHA or its successor agency under 
Public Law 103-354 in accordance with Sec. 1944.683(b) of this subpart 
and the monitoring plan for rental properties and co-ops (when 
applicable) according to Sec. 1944.689 of this subpart;
    (xiii) The source and estimated amount of other financial resources 
to be obtained and used by the applicant for both HPG activities and 
housing development and/or supporting activities;
    (xiv) The use of program income, if any, and the tracking system 
used for monitoring same;
    (xv) The applicant's plan for disposition of any security 
instruments held by them as a result of its HPG activities in the event 
of its loss of legal status;
    (xvi) Any other information necessary to explain the proposed HPG 
program; and
    (xvii) The outreach efforts outlined in Sec. 1944.671(b) of this 
subpart.
    (2) Complete information about the applicant's experience and 
capacity to carry out the objectives of the proposed HPG program.
    (3) Evidence of the applicant's legal existence, including, in the 
case of a private nonprofit organization, a copy of, or an accurate 
reference to, the specific provisions of State law under which the 
applicant is organized; a certified copy of the applicant's Articles of 
Incorporation and Bylaws or other evidence of corporate existence; 
certificate of incorporation for other than public bodies; evidence of 
good standing from the State when the corporation has been in existence 
1 year or more; and, the names and addresses of the applicant's members, 
directors and officers. If other organizations are members of the 
applicant-organization, or the applicant is a consortium, pre 
applications should be accompanied by the names, addresses, and 
principal purpose of the other organizations. If the applicant is a 
consortium, documentation showing compliance with Sec. 1944.656 of this 
subpart will also be included.
    (4) For a private nonprofit entity, the most recent audited 
statement and a current financial statement dated and signed by an 
authorized officer of the entity showing the amounts and specific nature 
of assets and liabilities together with information on the repayment 
schedule and status of any debt(s) owed by the applicant. If the 
applicant is an organization being assisted by another private nonprofit 
organization, the same type of financial statement should also be 
provided by that organization.
    (5) A brief narrative statement which includes information about the 
area to be served and the need for improved housing (including both 
percentage and actual number of both low-income and low-income minority 
households and substandard housing), the need for the type of housing 
preservation assistance being proposed, the anticipated use of HPG 
resources for historic properties, the method of evaluation to be used 
by

[[Page 544]]

the applicant in determining the effectiveness of its efforts (according 
to paragraph (b)(1)(xii) of this section).
    (6) A statement containing the component for alleviating 
overcrowding as defined by Sec. 1944.656 of this subpart.
    (7) A list of other activities the applicant is engaged in and 
expects to continue, a statement as to any other funding, and whether it 
will have sufficient funds to assure continued operation of the other 
activities for at least the period of the HPG grant agreement.
    (8) Any other information necessary that specifically addresses the 
selection criteria in Sec. 1944.679 of this subpart.
    (c) The applicant must submit an original and one copy of Form FmHA 
or its successor agency under Public Law 103-354 1940-20 prepared in 
accordance with exhibit F-1 of this subpart (available in any FmHA or 
its successor agency under Public Law 103-354 office).
    (d) The applicant must submit a description of its process for:
    (1) Identifying and rehabilitating properties that are listed on or 
eligible for listing on the National Register of Historic Places.
    (2) Identifying properties that are located in a floodplain or 
wetland.
    (3) Identifying properties located within the Coastal Barrier 
Resources System.
    (4) Coordinating with other public and private organizations and 
programs that provide assistance in the rehabilitation of historic 
properties (Stipulation I, D, of the PMOA, FmHA Instruction 2000-FF, 
available in any FmHA or its successor agency under Public Law 103-354 
office).
    (5) Paragraphs (d) (1), (2), and (3) of this section may be 
accomplished by adoption of exhibit F-2 of this subpart (available in 
any FmHA or its successor agency under Public Law 103-354 office), or 
another process supplying similar information acceptable to FmHA or its 
successor agency under Public Law 103-354.
    (e) The applicant must submit evidence of SHPO concurrence in the 
proposal, or in the event of nonconcurrence, a copy of SHPO's comments 
together with evidence that the applicant has sought the Advisory 
Council on Historic Preservation's advice as to how the disagreement 
might be resolved, and a copy of any advice provided by the Council.
    (f) The applicant must submit written statements and related 
correspondence reflecting compliance with Sec. 1944.674 (a) and (c) of 
this subpart regarding consultation with local government leaders in the 
preparation of its program and the consultation with local and state 
government pursuant to the provisions of Executive Order 12372.
    (g) The applicant is to make its statement of activities available 
to the public for comment prior to submission to FmHA or its successor 
agency under Public Law 103-354 pursuant to Sec. 1944.674(b) of this 
subpart. The application must contain a description of how the comments 
(if any were received) were addressed.
    (h) The applicant must submit an original and one copy of Form FmHA 
or its successor agency under Public Law 103-354 400-1, ``Equal 
Opportunity Agreement,'' and Form FmHA or its successor agency under 
Public Law 103-354 400-4, ``Assurance Agreement,'' in accordance with 
Sec. 1944.674(c) of this subpart.



Sec. 1944.677  [Reserved]



Sec. 1944.678  Preapplication submission deadline.

    Dates governing the invitation and review of HPG pre applications 
will be published annually in the Federal Register and may be obtained 
from FmHA or its successor agency under Public Law 103-354 offices 
processing HPG pre applications. Preapplications received after the date 
specified in the Federal Register will not be considered for funding in 
that fiscal year and will be returned.



Sec. 1944.679  Project selection criteria.

    (a) Applicants must meet all of the following threshold criteria:
    (1) Provide a financially feasible program of housing preservation 
assistance. Financially feasible is defined as proposed assistance which 
will be affordable to the intended recipient or result in affordable 
housing for very low- and low-income persons;

[[Page 545]]

    (2) Serve eligible rural areas with a concentration of substandard 
housing for households with very low- and low-income;
    (3) Be an eligible applicant entity as defined in Sec. 1944.658 of 
this subpart;
    (4) Meet the requirements of consultation and public comment in 
accordance with Sec. 1944.674 of this subpart; and
    (5) Submit a complete pre application as outlined in Sec. 1944.676 
of this subpart.
    (b) For applicants meeting all of the requirements listed in 
paragraph (a) of this section, FmHA or its successor agency under Public 
Law 103-354 will use the weighted criteria in this paragraph (b) in the 
selection of grant recipients. Each pre application and its accompanying 
statement of activities will be evaluated and, based solely on the 
information contained in the pre application, the applicant's proposal 
will be numerically rated on each criteria within the range provided. 
The highest ranking applicant(s) will be selected based on allocation of 
funds available to the State. Exhibit D of this subpart (available in 
any FmHA or its successor agency under Public Law 103-354 office) will 
be used to document the rating.
    (1) Points are awarded based on the percentage of very low-income 
persons that the applicant proposes to assist, using the following 
scale:
    (i) More than 80%: 20 points.
    (ii) 61% to 80%: 15 points.
    (iii) 41% to 60%: 10 points.
    (iv) 20% to 40%: 5 points.
    (v) Less than 20%: 0 points.
    (2) The applicant's proposal may be expected to result in the 
following percentage of HPG fund use (excluding administrative costs) to 
total cost of unit preservation. This percentage reflects maximum repair 
or rehabilitation with the least possible HPG funds due to leveraging, 
innovative financial assistance, owner's contribution or other specified 
approaches. Points are awarded based on the following percentage of HPG 
funds (excluding administrative costs) to total funds:
    (i) 50% or less: 20 points.
    (ii) 51% to 65%: 15 points.
    (iii) 66% to 80%: 10 points.
    (iv) 81% to 95%: 5 points.
    (v) 96% to 100%: 0 points.
    (3) The applicant has demonstrated its administrative capacity in 
assisting very low- and low-income persons to obtain adequate housing 
based on the following:
    (i) The organization or a member of its staff has 2 or more years 
experience successfully managing and operating a rehabilitation or 
weatherization type program, including FmHA or its successor agency 
under Public Law 103-354's HPG program: 10 points.
    (ii) The organization or a member of its staff has 2 or more years 
experience successfully managing and operating a program assisting very 
low- and low-income persons obtain housing assistance: 10 points.
    (iii) If the organization has administered grant programs, there are 
no outstanding or unresolved audit or investigative findings which might 
impair carrying out the proposal: 10 points.
    (4) The proposed program will be undertaken entirely in rural areas 
outside MSAs identified by FmHA or its successor agency under Public Law 
103-354 as having populations below 10,000 or in remote parts of other 
rural areas (i.e., rural areas contained in MSAs with less than 5,000 
population) as defined in Sec. 1944.656 of this subpart: 10 points.
    (5) The program will use less than 20 percent of HPG funds for 
administration purposes:
    (i) More than 20%: Not Eligible.
    (ii) 20%: 0 points.
    (iii) 19%: 1 point.
    (iv) 18%: 2 points.
    (v) 17%: 3 points.
    (vi) 16% 4 points.
    (vii) 15% or less: 5 points.
    (6) The proposed program contains a component for alleviating 
overcrowding as defined in Sec. 1944.656 of this subpart: 5 points.
    (c) In the event more than one pre application receives the same 
amount of points, those pre applications will then be ranked based on 
the actual percentage figure used for determining the points under 
paragraph (b)(1) of this section. Further, in the event that pre 
applications are still tied, then those pre applications still tied will 
be ranked based on the percentage figures used (low to high) in 
paragraph (b)(2) of this section. Further, for applications

[[Page 546]]

where assistance to rental properties or co-ops is proposed, those still 
tied will be further ranked based on the number of years the units are 
available for occupancy under the program (a minimum of 5 years is 
required). For this part, ranking will be based from most to least 
number of years. Finally, if there is still a tie, then a ``lottery'' 
System will be used.



Sec. 1944.680  Limitation on grantee selection.

    After all pre applications have been reviewed under the selection 
criteria and if more than one pre application has met the criteria of 
Sec. 1944.679(a) of this subpart, the State Director or approval 
official may not approve more than 50 percent of the State's allocation 
to a single entity.



Sec. 1944.681  Application submission.

    Applicants selected by FmHA or its successor agency under Public Law 
103-354 will be advised to submit a full application in an original and 
two copies of SF 424.1, and are to include any condition or amendments 
that must be incorporated into the statement of activities prior to 
submitting a full application. Instructions on submission and timing 
will be provided by FmHA or its successor agency under Public Law 103-
354.



Sec. 1944.682  Preapplication/application review, grant approval, and 
requesting HPG funds.

    The FmHA or its successor agency under Public Law 103-354 offices 
processing HPG pre applications/applications will review the pre 
applications and applications submitted. Further review and actions will 
be taken by FmHA or its successor agency under Public Law 103-354 
personnel in accordance with exhibit C of this subpart (available in any 
FmHA or its successor agency under Public Law 103-354 office). Exhibit G 
of this subpart (available in any FmHA or its successor agency under 
Public Law 103-354 office) will be used by the State Office to notify 
the National Office of pre applications received, eligibility, ranking, 
number of proposed units, amount requested by applicants, and amount 
recommended by State Office. Preapplications determined not eligible 
and/or not meeting the selection criteria will be notified in the manner 
prescribed in exhibit C of this subpart (available in any FmHA or its 
successor agency under Public Law 103-354 office). In addition, FmHA or 
its successor agency under Public Law 103-354 will document its findings 
and advise the applicant of its review rights or appeal rights (if 
applicable) under subpart B of part 1900 of this chapter. Applications 
determined not eligible will be handled in the same manner. The pre 
applications or applications determined incomplete will be notified in 
the manner prescribed in exhibit C of this subpart (available in any 
FmHA or its successor agency under Public Law 103-354 office) and will 
not be given appeal rights. The State Director is authorized to approve 
an HPG in accordance with this subpart and subpart A of part 1901 of 
this chapter. The State Director may delegate this authority in writing 
to designated State Office personnel and District Directors. Further:
    (a) Grant approval is the process by which FmHA or its successor 
agency under Public Law 103-354 determines that all applicable 
administrative and legal conditions for making a grant have been met, 
the grant agreement is signed, and funds have been obligated for the HPG 
project. If acceptable, the approval official will inform the applicant 
of approval, having the applicant sign Form FmHA or its successor agency 
under Public Law 103-354 1940-1, ``Request for Obligation of Funds,'' 
and exhibit A of this subpart (available in any FmHA or its successor 
agency under Public Law 103-354 office). The applicant will be sent a 
copy of the executed grant agreement and Form FmHA or its successor 
agency under Public Law 103-354 1940-1. Should any conditions be 
attached to the grant agreement that must be satisfied prior to the 
applicant receiving any HPG funds, the grant agreement and the 
conditions will be returned to the applicant for acceptance and 
acknowledgement on the grant agreement prior to execution by the 
approval official.
    (b) The application may be disapproved before execution of the grant 
agreement if the applicant is no longer

[[Page 547]]

eligible, the proposal is no longer feasible, or the applicant requests 
cancellation of its project. Except when the applicant requests 
cancellation, FmHA or its successor agency under Public Law 103-354 will 
document its findings and advise the applicant of its appeal rights 
under subpart B of part 1900 of this chapter.
    (c) With the executed grant agreement and Form FmHA or its successor 
agency under Public Law 103-354 1940-1, FmHA or its successor agency 
under Public Law 103-354 will send the approved applicant (now the 
``grantee'') copies of SF-270, ``Request for Advance or Reimbursement''. 
The grantee must submit an original and two copies of SF-270 to the FmHA 
or its successor agency under Public Law 103-354 office servicing the 
project. In addition, the grantee must submit SF-272, ``Federal Cash 
Transactions Report,'' each time an advance of funds is made. This 
report shall be used by FmHA or its successor agency under Public Law 
103-354 to monitor cash advances made to the grantee. Advances or 
reimbursements must be in accordance with the grantee's budget and 
statement of activities, including any amendments, prior approved by 
FmHA or its successor agency under Public Law 103-354. Requests for 
reimbursement or advances must be at least 30 calendar days apart.
    (d) If the grantee fails to submit required reports pursuant to 
Sec. 1944.683 of this subpart or is in violation of the grant 
agreement, FmHA or its successor agency under Public Law 103-354 may 
suspend HPG reimbursements and advances or terminate the grant in 
accordance with Sec. 1944.688 of this subpart and the grant agreement.



Sec. 1944.683  Reporting requirements.

    (a) SF-269, ``Financial Status Report,'' is required of all grantees 
on a quarterly basis. Grantees shall submit an original and two copies 
of the report to the designated FmHA or its successor agency under 
Public Law 103-354 servicing office. When preparing the Financial Status 
Report, the total program outlays (Item 10, g, of SF-269) should be less 
any rebates, refunds, or other discounts. Reports must be submitted no 
later than 15 days after the end of each calendar quarter.
    (b) Quarterly performance reports shall be submitted by grantees 
with SF-269, in an original and two copies (see exhibit E-1 or this 
subpart which is available in any FmHA or its successor agency under 
Public Law 103-354 office.) The quarterly report should relate the 
activities during the report period to the project's objectives and 
analyze the effectiveness of the program. As part of the grantee's pre 
application submission, as required by Sec. 1944.676(b) of this 
subpart, the grantee establishes its objectives for the HPG program, 
including its method of evaluation to determine its effectiveness. 
Accordingly, the report must include, but need not be limited to, the 
following:
    (1) Use of HPG funds for administration and housing preservation 
activities.
    (2) The following specific information for each unit or dwelling 
assisted:
    (i) Name(s), address, and income(s) of each homeowner assisted or 
the name and address of the owner(s) or co-op for each rental property 
(single or multi-unit) or co-op assisted;
    (ii) Total cost of repair/rehabilitation, a list of major repairs 
made, amount financed by HPG, and amount financed from which other 
sources;
    (iii) Type of assistance provided (interest subsidy, loan, grant, 
etc.); and
    (iv) Results of implementing the environmental process contained in 
Sec. 1944.672 of this subpart and the historic preservation process 
contained in Sec. 1944.673 of this subpart.
    (3) The use of HPG and any other funds for replacement housing.
    (4) A comparison of actual accomplishments to the objectives set for 
that period, including:
    (i) The number of very low- and low-income, minority and nonminority 
persons assisted in obtaining adequate housing by the HPG program 
through repair and rehabilitation as well as for replacement housing; 
and
    (ii) The average cost of assistance provided to each household.
    (5) Reasons why, if established objectives are not met.
    (6) Problems, delays, or adverse conditions which will materially 
affect attainment of the HPG grant objectives, prevent the meeting of 
time schedules

[[Page 548]]

or objectives, or preclude the attainment of program work elements 
during established time periods. This disclosure shall be accompanied by 
a statement of the action taken or contemplated and any Federal or other 
assistance needed to relieve the situation.
    (7) Objectives established for the next reporting period, 
sufficiently detailed to identify the type of assistance to be provided, 
the number and type of households to be assisted, etc.
    (8) A certification that the final building inspection reports for 
each rehabilitation or repair work financed as well as for replacement 
housing with HPG funds for that quarter is on file.
    (c) The grantee should be prepared to meet with the FmHA or its 
successor agency under Public Law 103-354 office servicing the project 
to discuss its quarterly report shortly after submission.
    (d) If the reports are not submitted in a timely manner or if the 
reports indicate that the grantee has made unsatisfactory progress or 
the grantee is not meeting its established objectives, the FmHA or its 
successor agency under Public Law 103-354 official servicing the grant 
will recommend to the State Director appropriate action to resolve the 
indicated problem(s). If appropriate corrective action is not taken by 
the grantee, the State Director has the discretion to not authorize 
further advances by suspending the project in accordance with Sec. 
1944.688 of this subpart and the grant agreement.

[58 FR 21894, Apr. 26, 1993, as amended at 62 FR 26211, May 13, 1997]



Sec. 1944.684  Extending grant agreement and modifying the statement 
of activities.

    (a) All requests extending the original grant agreement or modifying 
the HPG program's statement of activities must be in writing. Such 
requests will be processed through the designated FmHA or its successor 
agency under Public Law 103-354 office servicing the project. The 
approval official will respond to the applicant within 30 days of 
receipt of the request.
    (b) A grantee may request an extension of the grant agreement prior 
to the end of the project term specified in the grant agreement if the 
grantee anticipates that there will be grant funds remaining and the 
grantee has demonstrated its ability to conduct its program in a manner 
satisfactory to FmHA or its successor agency under Public Law 103-354. 
The approval official may approve an extension when:
    (1) The grantee is likely to complete or exceed the goals outlined 
in the approved statement of activities; and
    (2) The FmHA or its successor agency under Public Law 103-354 office 
responsible for servicing the grant recommends continuation of the grant 
until the grantee has expended all of the remaining grant funds.
    (c) Modifications to the statement of activities, such as revising 
the processes the grantee follows in operating the HPG program, may be 
approved by the approval official when the modifications are for 
eligible purposes in accordance with Sec. Sec. 1944.664 and 1944.666 of 
this subpart, meet any applicable review and process requirements of 
this subpart, and the program will continue to serve the geographic area 
originally approved. The grantee will submit its proposed revisions 
together with the necessary supporting information to FmHA or its 
successor agency under Public Law 103-354 prior to modifying its 
operation from the approved statement of activities.
    (d) Exhibit B of this subpart (available in any FmHA or its 
successor agency under Public Law 103-354 office) will be used for all 
extensions on and modifications to the grant agreement.



Sec. 1944.685  [Reserved]



Sec. 1944.686  Additional grants.

    An additional HPG grant may be made when the grantee has achieved or 
nearly achieved the goals established for the previous or existing 
grant. The grantee must file a pre application for the current fiscal 
year which will be processed and compared under the project selection 
criteria to others submitted at that time.



Sec. 1944.687  [Reserved]



Sec. 1944.688  Grant evaluation, closeout, suspension, and termination.

    (a) Grant evaluation will be an on-going activity performed by both 
the

[[Page 549]]

grantee and FmHA or its successor agency under Public Law 103-354. The 
grantee will perform self-evaluations by preparing quarterly performance 
reports in accordance with Sec. 1944.683 of this subpart. FmHA or its 
successor agency under Public Law 103-354 will also review all reports 
prepared and submitted by the grantee in accordance with the grant 
agreement and this subpart.
    (b) The grant can be suspended or terminated before the grant ending 
date for the causes specified in the grant agreement. No further grant 
funds will be advanced when grant suspension or termination procedures 
have been initiated in accordance with the grant agreement. Grantees may 
be reimbursed for eligible costs incurred prior to the effective date of 
the suspension or termination. Grantees are prohibited from incurring 
additional obligations of funds after notification, pending corrective 
action by the grantee. FmHA or its successor agency under Public Law 
103-354 may allow necessary and proper costs that the grantee could not 
reasonably avoid during the period of suspension provided they are for 
eligible HPG purposes. In the event of termination, FmHA or its 
successor agency under Public Law 103-354 may allow necessary and 
reasonable costs for an audit.
    (c) Grantees will have the opportunity to appeal a suspension or 
termination under FmHA or its successor agency under Public Law 103-
354's appeal procedures under subpart B of part 1900 of this chapter.
    (d) The grantee will complete the closeout procedures as specified 
in the grant agreement.
    (e) The grantee will have an audit performed upon termination or 
completion of the project in accordance with 7 CFR parts 3015 and 3016, 
as applicable. As part of its final report, the grantee will address and 
resolve all audit findings.



Sec. 1944.689  Long-term monitoring by grantee.

    (a) The grantee is required to perform long-term monitoring on any 
housing preservation program involving rental properties and co-ops. 
This monitoring shall be at least on an annual basis and shall consist 
of, at a minimum, the following:
    (1) All requirements noted in Sec. 1944.663 of this subpart;
    (2) All requirements of the ``ownership agreement'' executed between 
the grantee and the rental property owner or co-op; and
    (3) All requirements noted in 7 CFR parts 3015 and 3016 during the 
effective period of the grant agreement.
    (b) The grantee is required to make available to FmHA or its 
successor agency under Public Law 103-354 any such information as 
requested by FmHA or its successor agency under Public Law 103-354 
concerning the above. The grantee shall submit to the FmHA or its 
successor agency under Public Law 103-354 servicing office an annual 
report every year while the ownership agreement is in effect. This 
report shall be submitted within 15 days after the anniversary date or 
end of the grant agreement. At a minimum, the report will consist of a 
statement that the grantee is in compliance with this subpart.
    (c) All files pertaining to such rental property owner or co-op 
shall be kept separate and shall be maintained for a period of 3 years 
after the termination date of the ownership agreement.



Sec. 1944.690  Exception authority.

    The Administrator of FmHA or its successor agency under Public Law 
103-354 may, in individual cases, make an exception to any requirements 
of this subpart not required by the authorizing statute if the 
Administrator finds that application of such requirement would adversely 
affect the interest of the Government, or adversely affect the 
accomplishment of the purposes of the HPG program, or result in undue 
hardship by applying the requirement. The Administrator or the Assistant 
Administrator for Housing may exercise this exception authority at the 
request of the State Director. The request must be supported by 
information demonstrating the adverse impact, citing the particular 
requirement involved, recommending proper alternative course(s) of 
action, and outlining how the adverse impact could be

[[Page 550]]

mitigated. Exception to any requirement may also be initiated by the 
Assistant Administrator for Housing.



Sec. Sec. 1944.691-1944.699  [Reserved]



Sec. 1944.700  OMB control number.

    According to the Paperwork Reduction Act of 1995 (44 U.S.C. chapter 
35), no persons are required to respond to a collection of information 
unless it displays a valid OMB control number. The valid OMB control 
number for the information collection in this subpart is 0575-0115.

[62 FR 26211, May 13, 1997]

    Exhibit A to Subpart N of Part 1944--Housing Preservation Grant 
                                Agreement

    This Agreement dated ------ is between ------ (name), ------ 
(address), (grantee), organized and operating under ------ (authorizing 
State statute), and the United States of America acting through the 
Farmers Home Administration (FmHA) or its successor agency under Public 
Law 103-354. FmHA or its successor agency under Public Law 103-354 
agrees to grant a sum not to exceed $------ subject to the terms and 
conditions of this Agreement; provided, however, that the grant funds 
actually advanced and not needed for grant purposes shall be returned 
immediately to FmHA or its successor agency under Public Law 103-354. 
The Housing Preservation Grant (HPG) Statement of Activities approved by 
FmHA or its successor agency under Public Law 103-354, is attached, and 
shall commence within 10 days of the date of execution of this agreement 
by FmHA or its successor agency under Public Law 103-354 and be 
completed by ------ (date). FmHA or its successor agency under Public 
Law 103-354 may terminate the grant in whole, or in part, at any time 
before the date of completion, whenever it is determined that the 
grantee has failed to comply with the conditions of this Grant Agreement 
or FmHA or its successor agency under Public Law 103-354 regulation 
related hereto. The grantee may appeal adverse decisions in accordance 
with the FmHA or its successor agency under Public Law 103-354 Appeal 
Procedures contained in subpart B of part 1900 of this chapter.
    In consideration of said grant by FmHA or its successor agency under 
Public Law 103-354 to the Grantee, to be made pursuant to section 533 of 
the Housing Act of 1949, Housing Preservation Grant (HPG) program, the 
grantee will provide such a program in accordance with the terms of this 
Agreement and applicable FmHA or its successor agency under Public Law 
103-354 regulations.

                           Part A--Definitions

    1. Beginning date means the date this agreement is executed by FmHA 
or its successor agency under Public Law 103-354 and costs can be 
incurred.
    2. Ending date means the date when all work under this agreement is 
scheduled to be completed. It is also the latest date grant funds will 
be provided under this agreement, without an approved extension.
    3. Disallowed costs are those charges to a grant which the FmHA or 
its successor agency under Public Law 103-354 determines cannot be 
authorized in accordance with applicable Federal cost principles 
contained in Treasury Circular 74-4, ``Cost Principles Applicable to 
Grants and Contracts with State and Local Governments,'' OMB Circular A-
87, ``Cost Principles for State and Local Governments,'' OMB Circular A-
122, ``Cost Principles for Nonprofit Organizations,'' and other 
conditions contained in this Agreement and OMB Circular A-102 ``Uniform 
Requirements for Grants to State and Local Governments,'' and OMB 
Circular A-110, ``Grants and Agreements with Institutions of Higher 
Education, Hospitals and Other Nonprofit Organizations, Uniform 
Administrative Requirements,'' as appropriate.
    4. ``Grant closeout'' is the process by which the grant operation is 
concluded at the expiration of the grant period or following a decision 
to terminate the grant.
    5. ``Termination'' of the grant means the cancellation of Federal 
assistance, in whole or in part, at any time before the date of 
completion.

                       Part B--Terms of agreement

    FmHA or its successor agency under Public Law 103-354 and grantee 
agree:
    1. All grant activities shall be limited to those authorized in 
subpart N of 7 CFR part 1944.
    2. This Agreement shall be effective when executed by both parties.
    3. The HPG activities approved by FmHA or its successor agency under 
Public Law 103-354 shall commence and be completed by the date indicated 
above, unless earlier terminated under paragraph B 18 below or extended.
    4. Grantee shall carry out the HPG activities and processes as 
described in the approved Statement of Activities which is made a part 
of this Agreement. Grantee will be bound by the activities and processes 
set forth in the Statement of Activities and the further conditions set 
forth in this Agreement. If the Statement of Activities is inconsistent 
with the Agreement, the latter will govern. A change of any activities 
and processes must be in writing and must be

[[Page 551]]

signed by the FmHA or its successor agency under Public Law 103-354 
State Director or his or her delegated representative.
    5. Grantee shall use grant funds only for the purpose and activities 
approved by FmHA or its successor agency under Public Law 103-354 in the 
HPG budget. Any uses not provided for in the approved budget must be 
approved in writing by FmHA or its successor agency under Public Law 
103-354 in advance.
    6. If the Grantee is a private nonprofit corporation, expenses 
charged for travel or per diem will not exceed the rates paid FmHA or 
its successor agency under Public Law 103-354 employees for similar 
purposes. If the grantee is a public body, the rates will be those that 
are allowable under the customary practice in the government of which 
the grantee is a part; if none are customary, the FmHA or its successor 
agency under Public Law 103-354 rates will be the maximum allowed.
    7. Grant funds will not be used for any of the following:
    (a) To pay obligations incurred before the effective date of this 
Agreement.
    (b) To pay obligations incurred after the grant termination or 
ending date.
    (c) Entertainment purposes.
    (d) To pay for capital assets, the purchase of real estate or 
vehicles, improvement or renovation of grantee's office space, or repair 
or maintenance of privately owned vehicles.
    (e) Any other purpose specified in Sec. Sec. 1944.664(f) and 
1944.666(b) of this subpart.
    (f) Administrative expenses exceeding 20% HPG grant funds.
    8. Grant funds shall not be used to substitute for any financial 
support previously provided and currently available or assured from any 
other source.
    9. Disbursal of grants will be governed as follows:
    (a) In accordance with Treasury Circular 1075 (fourth revision) part 
205, chapter II of title 31 of the Code of Federal Regulations, grant 
funds will be provided by FmHA or its successor agency under Public Law 
103-354 as cash advances on an as needed basis not to exceed one advance 
every 30 days. The advance will be made by direct Treasury check to the 
grantee. The financial management system of the recipient organization 
shall provide for effective control over and accountability for all 
Federal funds as stated to OMB Circular A-102 (42 FR 45828, September 
12, 1977) for State and local governments and OMB Circular A-110 (41 FR 
32016, July 30, 1976) for nonprofit organizations.
    (b) Cash advances to the grantee shall be limited to the minimum 
amounts needed and shall be timed to be in accord only with the actual, 
immediate cash requirements of the Grantee in carrying out the purpose 
of the planned project. The timing and amount of cash advances shall be 
as close as administratively feasible to the actual disbursements by the 
grantee for direct program costs (as identified in the grantee's 
Statement of Activity and budget and fund use plan) and proportionate 
share of any allowable indirect costs.
    (c) Grant funds should be promptly refunded to the FmHA or its 
successor agency under Public Law 103-354 and redrawn when needed if the 
funds are erroneously drawn in excess of immediate disbursement needs. 
The only exceptions to the requirement for prompt refunding are when the 
funds involved:
    (i) Will be disbursed by the recipient organization within seven 
calendar days from the date of the Treasury check, or
    (ii) Are less than $10,000 and will be disbursed within 30 calendar 
days from the date of the Treasury check.
    (d) Grantee shall provide satisfactory evidence to FmHA or its 
successor agency under Public Law 103-354 that all officers of the 
Grantee organization authorized to receive and/or disburse Federal funds 
are covered by satisfactory fidelity bonds sufficient to protect FmHA or 
its successor agency under Public Law 103-354's interests.
    10. The grantee will submit performance and financial reports as 
indicated below to the appropriate FmHA or its successor agency under 
Public Law 103-354 office.
    (a) As needed, but not more frequently than once every 30 calendar 
days, an original and 2 copies of SF-270, ``Request for Advance or 
Reimbursement.''
    (b) Quarterly (not later than February 15, May 15, August 15, and 
November 15 of each year), an original and 2 copies of SF-269, 
``Financial Status Report,'' and a quarterly performance report in 
accordance with Sec. 1944.683 of this subpart.
    (c) Within ninety (90) days after the termination or expiration of 
the Grant Agreement, an original and 2 copies of SF-269, and a final 
performance report which will include a summary of the project's 
accomplishments, problems, and planned future activities of the grantee 
for HPG. Final reports may serve as the last quarterly report.
    (d) FmHA or its successor agency under Public Law 103-354 may 
require performance reports more frequently if deemed necessary.
    11. In accordance with FMC Circular 74-4, Attachment B, compensation 
for employees will be considered reasonable to the extent that such 
compensation is consistent with that paid for similar work in other 
activities of the State or local government.
    12. If the grant exceeds $100,000, cumulative transfers among direct 
cost budget categories totaling more than 5 percent of the total budget 
must have prior written approval by FmHA or its successor agency under 
Public Law 103-354.

[[Page 552]]

    13. Results of the program assisted by grant funds may be published 
by the grantee without prior review by FmHA or its successor agency 
under Public Law 103-354, provided that such publications acknowledge 
the support provided by funds pursuant to the provisions of Title V of 
the Housing Act of 1949, as amended, and that five copies of each such 
publications are furnished to FmHA or its successor agency under Public 
Law 103-354.
    14. Grantee certifies that no person or organization has been 
employed or retained to solicit or secure this grant for a commission, 
percentage, brokerage, or contingent fee.
    15. No person in the United States shall, on the grounds of race, 
creed, color, sex, marital status, age, national origin, or mental or 
physical handicap, be excluded from participating in, be denied the 
proceeds of, or be subject to discrimination in connection with the use 
of grant funds. Grantee will comply with the nondiscrimination 
regulations of FmHA or its successor agency under Public Law 103-354 
contained in subpart E of part 1901 of this chapter.
    16. In all hiring or employment made possible by or resulting from 
this grant, the grantee: (a) Will not discriminate against any employee 
or applicant for employment because of race, creed, color, sex, marital 
status, national origin, age, or mental or physical handicap, and (b) 
will take affirmative action to insure that employees are treated during 
employment without regard to their race, creed, color, sex, marital 
status, national origin, age, or mental or physical handicap. This 
requirement shall apply to, but not be limited to, the following: 
Employment, upgrading, demotion, or transfer; recruitment or recruitment 
advertising, layoff or termination, rates of pay or other forms of 
compensation; and selection for training, including apprenticeship. In 
the event grantee signs a contract related to this grant which would be 
covered by any Executive Order, law, or regulation prohibiting 
discrimination, grantee shall include in the contract the ``Equal 
Employment Clause'' as specified by Form FmHA or its successor agency 
under Public Law 103-354 400-1, ``Equal Employment Agreement.''
    17. The grantee accepts responsibility for accomplishing the HPG 
program as submitted and included in the Statement of Activities. The 
grantee shall also:
    (a) Endeavor to coordinate and provide liaison with State and local 
housing organizations, where they exist.
    (b) Provide continuing information to FmHA or its successor agency 
under Public Law 103-354 on the status of grantee HPG programs, 
projects, related activities, and problems.
    (c) The grantee shall inform FmHA or its successor agency under 
Public Law 103-354 as soon as the following types of conditions become 
known:
    (i) Problems, delays, or adverse conditions which materially affect 
the ability to attain program objectives, prevent the meeting of time 
schedules or goals, or preclude the attainment of project work units by 
established time periods. This disclosure shall be accompanied by a 
statement of the action taken or contemplated, new time schedules 
required and any FmHA or its successor agency under Public Law 103-354 
assistance needed to resolve the situation.
    (ii) Favorable developments or events which enable meeting time 
schedules and goals sooner than anticipated or producing more work units 
than originally projected.
    18. Grant closeout and termination procedures will be as follows:
    (a) Promptly after the date of completion or a decision to terminate 
a grant, grant closeout actions are to be taken to allow the orderly 
discontinuation of grantee activity.
    (i) The grantee shall immediately refund to FmHA or its successor 
agency under Public Law 103-354 any uncommitted balance of grant funds.
    (ii) The grantee will furnish to FmHA or its successor agency under 
Public Law 103-354 within 90 calendar days after the date of completion 
of the grant an SF-269 and all financial, performance, and other reports 
required as a condition of the grant, including an audit report.
    (iii) The grantee shall account for any property acquired with HPG 
grant funds, or otherwise received from FmHA or its successor agency 
under Public Law 103-354.
    (iv) After the grant closeout, FmHA or its successor agency under 
Public Law 103-354 retains the right to recover any disallowed costs 
which may be discovered as a result of an audit.
    (b) When there is reasonable evidence that the grantee has failed to 
comply with the terms of this Agreement, the State Director can, on 
reasonable notice, suspend the grant pending corrective action or 
terminate the grant pursuant to paragraph (c) below. In such instances, 
FmHA or its successor agency under Public Law 103-354 may reimburse the 
grantee for eligible costs incurred prior to the effective date of the 
suspension or termination and may allow all necessary and proper costs 
which the grantee could not reasonably avoid. FmHA or its successor 
agency under Public Law 103-354 will withhold further advances and 
grantees are prohibited from further obligating grant funds, pending 
corrective action.
    (c) Grant termination will be based on the following:
    (i) Termination for cause. This grant may be terminated in whole or 
in part at any time before the date of completion, whenever FmHA or its 
successor agency under Public Law 103-354 determines that the grantee 
has

[[Page 553]]

failed to comply with the terms of this Agreement. The reasons for 
termination may include, but are not limited to, such problems as:
    (A) Failure to make reasonable and satisfactory progress in 
attaining grant objectives.
    (B) Failure of grantee to use grant funds only for authorized 
purposes.
    (C) Failure of grantee to submit adequate and timely reports of its 
operation.
    (D) Violation of any of the provisions of any laws administered by 
FmHA or its successor agency under Public Law 103-354 or any regulation 
issued thereunder.
    (E) Violation of any nondiscrimination or equal opportunity 
requirement administered by FmHA or its successor agency under Public 
Law 103-354 in connection with any FmHA or its successor agency under 
Public Law 103-354 programs.
    (F) Failure to maintain an accounting system acceptable to FmHA or 
its successor agency under Public Law 103-354.
    (ii) Termination for convenience. FmHA or its successor agency under 
Public Law 103-354 or the grantee may terminate the grant in whole, or 
in part, when both parties agree that the continuation of the project 
would not produce beneficial results commensurate with the further 
expenditure of funds. The two parties shall agree upon the termination 
conditions, including the effective date and, in case of partial 
termination, the portion to be terminated.
    (d) FmHA or its successor agency under Public Law 103-354 shall 
notify the grantee in writing of the determination and the reasons for 
and the effective date of the suspension or termination. Except for 
termination convenience, grantees have the opportunity to appeal a 
suspension or termination under FmHA or its successor agency under 
Public Law 103-354's appeal procedure, subpart B of part 1900 of this 
chapter.
    19. Upon any default under its representatives or agreements set 
forth in this instrument, the grantee, at the option and demand of FmHA 
or its successor agency under Public Law 103-354, will, to the extent 
legally permissible, repay to FmHA or its successor agency under Public 
Law 103-354 forthwith the grant funds received with interest at the rate 
of five per centum per annum from the date of the default. The 
provisions of this Grant Agreement may be enforced by FmHA or its 
successor agency under Public Law 103-354, at its option and without 
regard to prior waivers by it or previous defaults of the grantee, by 
judicial proceedings to require specific performance of the terms of 
this Grant Agreement or by such other proceedings in law or equity, in 
either Federal or State Courts, as may be deemed necessary by FmHA or 
its successor agency under Public Law 103-354 to assure compliance with 
the provisions of this Grant Agreement and the laws and regulations 
under which this grant is made.
    20. Extension of this Grant Agreement and/or modifications of the 
Statement of Activities may be approved by FmHA or its successor agency 
under Public Law 103-354 provided, in its opinion, the extension and/or 
modification is justified and there is a likelihood that the grantee can 
accomplish the goals set out and approved in the Statement of Activities 
during the period of the extension and/or modifications as specified in 
Sec. 1944.684 of this subpart.

                         Part C--Grantee agrees

    1. To comply with property management standards for expendable and 
nonexpendable personal property established by Attachment N of OMB 
Circular A-102 or Attachment N of OMB Circular A-110 for State and local 
governments or nonprofit organizations respectively. Personal property 
means property of any kind except real property. It may be tangible--
having physical existence--or intangible--having no physical existence, 
such as patents, inventions, and copyrights. Nonexpendable personal 
property means tangible personal property having a useful life of more 
than one year and an acquisition cost of $300 or more per unit. A 
grantee may use its own definitions of nonexpendable personal property 
provided that such definition would at least include all tangible 
personal property as defined above. Expendable personal property refers 
to all tangible personal property other than nonexpendable personal 
property. When nonexpendable tangible personal property is acquired by a 
grantee with project funds, title shall not be taken by the Federal 
Government but shall vest in the grantee subject to the following 
conditions:
    (a) Right to transfer title. For items of nonexpendable personal 
property having a unit acquisition cost of $1,000 or more, FmHA or its 
successor agency under Public Law 103-354 may reserve the right to 
transfer title to the Federal Government or to a third party named by 
the Federal Government when such third party is otherwise eligible under 
existing statutes. Such reservation shall be subject to the following 
standards:
    (i) The property shall be appropriately identified in the grant or 
otherwise made known to the grantee in writing.
    (ii) FmHA or its successor agency under Public Law 103-354 shall 
issue disposition instructions within 120 calendar days after the end of 
the Federal support of the project for which it was acquired. If FmHA or 
its successor agency under Public Law 103-354 fails to issue disposition 
instructions within the 120 calendar day period, the grantee shall apply 
the standards of paragraph 1(c) below.
    (iii) When FmHA or its successor agency under Public Law 103-354 
exercises its right to take title, the personal property shall be 
subject to the provisions for federally owned

[[Page 554]]

nonexpendable property discussed in paragraph 1(a)(iv) below.
    (iv) When title is transferred either to the Federal Government or 
to a third party and the grantee is instructed to ship the property 
elsewhere, the grantee shall be reimbursed by the benefitting Federal 
agency with an amount which is computed by applying the percentage of 
the grantee participation in the cost of the original grant project or 
program to the current fair market value of the property, plus any 
reasonable shipping or interim storage costs incurred.
    (b) Use of other tangible nonexpendable property for which the 
grantee has title.
    (i) The grantee shall use the property in the project or program for 
which it was acquired as long as needed, whether or not the project or 
program continues to be supported by Federal funds. When it is no longer 
needed for the original project or program, the grantee shall use the 
property in connection with its other federally sponsored activities, in 
the following order of priority:
    (A) Activities sponsored by FmHA or its successor agency under 
Public Law 103-354.
    (B) Activities sponsored by other Federal agencies.
    (ii) Shared use. During the time that nonexpendable personal 
property is held for use on the project or program for which it was 
acquired, the grantee shall make it available for use on other projects 
or programs if such other use will not interfere with the work on the 
project or program for which the property was originally acquired. First 
preference for such other use shall be given to other projects or 
programs sponsored by FmHA or its successor agency under Public Law 103-
354; second preference shall be given to projects or programs sponsored 
by other Federal agencies. If the property is owned by the Federal 
Government, use on other activities not sponsored by the Federal 
Government shall be permissible if authorized by FmHA or its successor 
agency under Public Law 103-354. User charges should be considered if 
appropriate.
    (c) Disposition of other nonexpendable property. When the grantee no 
longer needs the property, the property may be used for other activities 
in accordance with the following standards:
    (i) Nonexpendable property with a unit acquisition cost of less than 
$1,000. The grantee may use the property for other activities without 
reimbursement to the Federal Government or sell the property and retain 
the proceeds.
    (ii) Nonexpendable personal property with a unit acquisition cost of 
$1,000 or more. The grantee may retain the property for other use 
provided that compensation is made to FmHA or its successor agency under 
Public Law 103-354 or its successor. The amount of compensation shall be 
computed by applying the percentage of Federal participation in the cost 
of the original project or program to the current fair market value of 
the property. If the grantee has no need for the property and the 
property has further use value, the grantee shall request disposition 
instructions from the original Grantor agency. FmHA or its successor 
agency under Public Law 103-354 shall determine whether the property can 
be used to meet the agency's requirements. If no requirement exists 
within that agency, the availability of the property shall be reported, 
in accordance with the guidelines of the Federal Property Management 
Regulations (FPMR) to the General Services Administration by FmHA or its 
successor agency under Public Law 103-354 to determine whether a 
requirement for the property exists in other Federal agencies. FmHA or 
its successor agency under Public Law 103-354 shall issue instructions 
to the grantee no later than 120 calendar days after the grantee request 
and the following procedures shall govern:
    (A) If so instructed or if disposition instructions are not issued 
within 120 calendar days after the grantee's request, the grantee shall 
sell the property and reimburse FmHA or its successor agency under 
Public Law 103-354 an amount computed by applying to the sales proceeds 
the percentage of Federal participation in the cost of the original 
project or program. However, the grantee shall be permitted to deduct 
and retain from the Federal shares $100 or ten percent of the proceeds, 
whichever is greater, for the grantee's selling and handling expenses.
    (B) If the grantee is instructed to dispose of the property other 
than as described in paragraph 1(a)(iv) above, the grantee shall be 
reimbursed by FmHA or its successor agency under Public Law 103-354 for 
such costs incurred in its disposition.
    (C) The grantee's property management standards for nonexpendable 
personal property shall include the following procedural requirements:
    (1) Property records shall be maintained accurately and shall 
include:
    (a) A description of the property.
    (b) Manufacturer's serial number, model number, Federal stock 
number, national stock number, or other identification number.
    (c) Sources of the property including grant or other agreement 
number.
    (d) Whether title vests in the grantee or the Federal Government.
    (e) Acquisition date (or date received, if the property was 
furnished by the Federal Government) and cost.
    (f) Percentage (at the end of the budget year) of Federal 
participation in the cost of the project or program for which the 
property was acquired. (Not applicable to property furnished by the 
Federal Government).

[[Page 555]]

    (g) Location, use, and condition of the property and the date the 
information was reported.
    (h) Unit acquisition cost.
    (i) Ultimate disposition data, including date of disposal and sales 
price or the method used to determine current fair market value when a 
grantee compensates the Federal agency for its share.
    (2) Property owned by the Federal Government must be marked to 
indicate Federal ownership.
    (3) A physical inventory of property shall be taken and the results 
reconciled with the property records at least once every two years. Any 
differences between quantities determined by the physical inspection and 
those shown in the accounting records shall be investigated to determine 
the causes of the difference. The grantee shall, in connection with the 
inventory, verify the existence, current utilization, and continued need 
for the property.
    (4) A control system shall be in effect to ensure adequate 
safeguards to prevent loss, damage, or theft of the property. Any loss, 
damage, or theft of nonexpendable property shall be investigated and 
fully documented; if the property was owned by the Federal Government, 
the grantee shall promptly notify FmHA or its successor agency under 
Public Law 103-354.
    (5) Adequate maintenance procedures shall be implemented to keep the 
property in good condition.
    (6) When the grantee is authorized or required to sell the property, 
proper sales procedures shall be established which will provide for 
competition to the extent practicable and result in the highest possible 
return.
    (7) Expendable personal property shall vest in the grantee upon 
acquisition. If there is a residual inventory of such property exceeding 
$1,000 in total aggregate fair market value, upon termination or 
completion of the grant and if the property is not needed for any other 
federally sponsored project or program, the grantee shall retain the 
property for use on nonfederally sponsored activities, or sell it, but 
must in either case compensate the Federal Government for its share. The 
amount of compensation shall be computed in the same manner as 
nonexpendable personal property.
    2. To provide a financial management system which will include:
    (a) Accurate, current, and complete disclosure of the financial 
results of each grant. Financial reporting will be on an accrual basis.
    (b) Records which identify adequately the source and application of 
funds for grant-supported activities. Those records shall contain 
information pertaining to grant awards and authorizations, obligations, 
unobligated balances, assets, liabilities, outlays, and income.
    (c) Effecting control over and accountability for all funds, 
property, and other assets. Grantee shall adequately safeguard all such 
assets and shall assure that they are solely for authorized purposes.
    (d) Accounting records supported by source documentation.
    3. To retain financial records, supporting documents, statistical 
records, and all other records pertinent to the grant for a period of at 
least three years after the submission of the final Project Performance 
report pursuant to part B (10)(c) of this Agreement except in the 
following situations:
    (a) If any litigation, claim, audit, or investigation is commenced 
before the expiration of the three year period, the records shall be 
retained until all litigations, claims, audit or investigation findings 
involving the records have been resolved.
    (b) Records for nonexpendable property acquired by FmHA or its 
successor agency under Public Law 103-354, the three year retention 
requirement is not applicable.
    (c) When records are transferred to or maintained by FmHA or its 
successor agency under Public Law 103-354, the three year retention 
requirement is not applicable.
    Microfilm copies may be substituted in lieu of original records. 
FmHA or its successor agency under Public Law 103-354 and the 
Comptroller General of the United States, or any of their duly 
authorized representatives, shall have access to any books, documents, 
papers, and records of the grantee which are pertinent to the specific 
grant program for the purpose of making audits, examinations, excerpts, 
and transcripts.
    4. To provide information as requested by FmHA or its successor 
agency under Public Law 103-354 concerning the grantee's actions in 
soliciting citizen participation in the application process, including 
published notice of public meetings, actual public meetings held, and 
content of written comments received.
    5. Not to encumber, transfer, or dispose of the property or any part 
thereof, furnished by FmHA or its successor agency under Public Law 103-
354 or acquired wholly or in part with HPG funds without the written 
consent of FmHA or its successor agency under Public Law 103-354 except 
as provided in part C 1 of this Agreement.
    6. To provide FmHA or its successor agency under Public Law 103-354 
with such periodic reports of grantee operations as may be required by 
authorized representatives of FmHA or its successor agency under Public 
Law 103-354.
    7. To execute Form FmHA or its successor agency under Public Law 
103-354 400-1, and to execute any other agreements required by FmHA or 
its successor agency under Public

[[Page 556]]

Law 103-354 to implement the civil rights requirements.
    8. To include in all contracts in excess of $100,000 a provision for 
compliance with all applicable standards, orders, or regulations issued 
pursuant to the Clean Air Act, 42 U.S.C. 1875C-9 as amended. Violations 
shall be reported to FmHA or its successor agency under Public Law 103-
354 and the Regional Office of the Environmental Protection Agency.
    9. That no member of Congress shall be admitted to any share or part 
of this grant or any benefit that may arise therefrom, but this 
provision shall not be construed to bar as a contractor under the grant 
a publicly held corporation whose ownership might include a member of 
Congress.
    10. That all nonconfidential information resulting from its 
activities shall be made available to the general public on an equal 
basis.
    11. That the purpose for which this grant is made may complement, 
but shall not duplicate programs for which monies have been received, 
are committed, or are applied for from other sources, public and 
private.
    12. That the grantee shall relinquish any and all copyrights and/or 
privileges to the materials developed under this grant, such material 
being the sole property of the Federal Government. In the event anything 
developed under this grant is published in whole or in part, the 
material shall contain notice and be identified by language to the 
following effect: ``The material is the result of tax-supported research 
and as such is not copyrightable. It may be freely reprinted with the 
customary crediting of the source.''
    13. That the grantee shall abide by the policies promulgated in OMB 
Circular A-102, Attachment O, or OMB Circular A-110, Attachment O, as 
applicable, which provides standards for use by Grantees in establishing 
procedures for the procurement of supplies, equipment, and other 
services with Federal grant funds.
    14. That it is understood and agreed that any assistance granted 
under this Agreement will be administered subject to the limitations of 
Title V of the Housing Act of 1949 as amended, 42 U.S.C. 1471 et seq., 
and related regulations, and that all rights granted to FmHA or its 
successor agency under Public Law 103-354 herein or elsewhere may be 
exercised by it in its sole discretion to carry out the purposes of the 
assistance, and project FmHA or its successor agency under Public Law 
103-354's financial interest.
    15. That it will adopt a Standard of Conduct that provides that, if 
an employee, officer, or agent of the grantee, or such person's 
immediate family members conducts business with the grantee, the grantee 
must not:
    (a) Participate in the selection, award, or administration of a 
contract to such persons for which Federal funds are used;
    (b) Knowingly permit the award or administration of the contract to 
be delivered to such persons or other immediate family members or to any 
entity (i.e., partnerships, corporation, etc.) in which such persons or 
their immediate family members have an ownership interest; or
    (c) Permit such person to solicit or accept gratuities, favors or 
anything of monetary value from landlords or developers of rental or 
ownership housing projects or any other person receiving HPG assistance.

  Part D--FmHA or its successor agency under Public Law 103-354 agrees

    1. That it may assist grantee, within available appropriations, with 
such technical and management assistance as needed in coordinating the 
Statement of Activities with local officials, comprehensive plans, and 
any State or area plans for improving housing for very low- and low-
income households in the area in which the project is located.
    2. That at its sole discretion, FmHA or its successor agency under 
Public Law 103-354 may at any time give any consent, deferment, 
subordination, release, satisfaction, or termination of any or all of 
grantee's grant obligations, with or without valuable consideration, 
upon such terms and conditions as Grantor may determine to be (a) 
advisable to further the purposes of the grant or to protect FmHA or its 
successor agency under Public Law 103-354's financial interests therein, 
and (b) consistent with the statutory purposes of the grant and the 
limitations of the statutory authority under which it is made and FmHA 
or its successor agency under Public Law 103-354 regulations.
    This Agreement is subject to current FmHA or its successor agency 
under Public Law 103-354 regulations and any future regulations not 
inconsistent with the express terms hereof. Grantee has caused this 
Agreement to be executed by its duly authorized ------, properly 
attested to and its corporate seal affixed by its duly authorized ----
--.

    Attest:
    Grantee:
By______________________________________________________________________
(Title)_________________________________________________________________

    United States Of America Farmers Home Administration or its 
successor agency under Public Law 103-354:
By______________________________________________________________________
(Title)_________________________________________________________________

    Date of Execution of Grant Agreement by FmHA or its successor agency 
under Public Law 103-354:
________________________________________________________________________
    Attached Statement of Activities Is Made Part of This Agreement.

[[Page 557]]

 Exhibit B to Subpart N of Part 1944--Amendment to Housing Preservation 
                             Grant Agreement

    This Amendment between ------ herein called ``Grantee,'' and the 
United States of America acting through the Farmers Home Administration, 
Department of Agriculture, herein called ``FmHA,'' or its successor 
agency under Public Law 103-354 hereby amends the Housing Preservation 
Grant Agreement executed by said parties on ------, 19--, hereinafter 
called the ``Agreement.''
    Said Agreement is amended by extending the Agreement to ------, 19--
, and/or by making the following changes noted in the attachments 
hereto: (List and identify proposal and any other documents pertinent to 
the grant which are attached to the Amendment.)
    Grantee has caused this Agreement to be executed by its duly 
authorized ------, properly attested to and its corporate seal affixed 
by its duly authorized ------.

    Attest:
    Grantee:
By______________________________________________________________________
(Title)_________________________________________________________________

    United States Of America Farmers Home Administration or its 
successor agency under Public Law 103-354.
By______________________________________________________________________
(Title)_________________________________________________________________

    Date of Execution of Amendment to Grant Agreement by FmHA or its 
successor agency under Public Law 103-354: ------.

________________________________________________________________________

             Exhibit C to Subpart N of Part 1944 [Reserved]

Exhibit D to Subpart N of Part 1944--Project Selection Criteria--Outline 
                               Rating Form

Applicant Name ------------_____________________________________________
Applicant Address ------------__________________________________________
    Application received on ------.
    State ------ District Office ------.

                           Threshold Criteria
 
Applicant must meet the following:
  1. Proposes a financially feasible HPG program.......    yes--    no--
  2. Serves an eligible rural area.....................    yes--    no--
  3. Is an eligible HPG grantee........................    yes--    no--
  4. Has met consultation and public comment rules.....    yes--    no--
 

    If answer to any of the above is ``no'', application is rejected and 
applicant so notified.
    Selection Criteria:
    Select the appropriate rating:
    1. Points awarded based on the percentage of very-low income 
homeowners or families the applicant proposes to assist, using the 
following scale ------:
    (a) More than 80%: 20 points.
    (b) 61% to 80%: 15 points.
    (c) 41% to 60%: 10 points.
    (d) 20% to 40%: 5 points.
    (e) Less than 20%: 0 points.
    2. Points awarded based on the applicant's percentage of use of HPG 
funds to total cost of unit preservation. This percentage reflects 
maximum rehabilitation with the least possible HPG funds due to 
leveraging, innovative financial assistance, or other specified 
approaches. Points are based on the following percentage of HPG funds to 
total funds ------:
    (a) 50% or less: 20 points.
    (b) 51% to 65%: 15 points.
    (c) 66% to 80%: 10 points.
    (d) 81% to 95%: 5 points.
    (e) 96% to 100%: 0 points.
    3. The applicant has demonstrated its administrative capacity in 
assisting very low- and low-income families obtain adequate housing 
based on the following:
    (a) The organization or a member of its staff has two or more years 
experience successfully managing and operating a rehabilitation or 
weatherization type program ------:
    Yes--10 points.
    No--0 points.
    (b) The organization or a member of its staff has two or more years 
experience successfully managing and operating a program assisting very 
low- and low-income families obtain housing assistance ------:
    Yes--10 points.
    No--0 points.
    (c) If the organization has administered grant programs, there are 
no outstanding or unresolved audit or investigative findings which might 
impair carrying out the proposal ------:
    No findings: 10 points.
    Outstanding findings: 0 points.
    4. The proposed program will be undertaken entirely in rural areas 
outside Metropolitan Statistical Areas (MSAs) identified by FmHA or its 
successor agency under Public Law 103-354 as having populations below 
10,000 or in remote parts of other rural areas (i.e., rural areas 
contained in MSAs with less than 5,000 population) ------:
    Non-MSA area below 10,000 pop.: 10 points.
    MSA area below 5,000 pop.: 10 points.
    Neither: 0 points.
    5. The program will use less than 20 percent of HPG funds for 
administration------:
    Less than 20%: 5 points.
    20%: 0 points.
    6. The proposed program contains a component for alleviating 
overcrowding ------:

[[Page 558]]

    Has component: 5 points.
    No component: 0 points.
    7. The applicant is an existing grantee and meets the conditions of 
Sec. 1944.686 of this subpart for additional points ------:
    Meets conditions: 10 points.
    Doesn't meet conditions: 0 points.
    Total Points ------:
    Ranking of This Applicant --------

  Exhibit E to Subpart N of Part 1944--Guide For Quarterly Performance 
                                 Report

Grantee name:___________________________________________________________
Grantee address:________________________________________________________
Grant quarter:------------______________________________________________

    Report Period: From: ------ To: ------

    I. General Information on Use of HPG Funds During Period:

    A. Use of Administrative Funds:
 Budgeted Amount.....................................................$--
                                                                    ----
 Expended Thru Last Quarter...........................................--
                                                                    ----
Direct Cost:
 Personnel...........................................................$--
                                                                    ----
 Supplies & Equip.....................................................--
                                                                    ----
 Travel...............................................................--
                                                                    ----
Indirect Costs:
 (------% Rate).......................................................--
                                                                    ----
  This Quarter Total..................................................--
                                                                    ----
    B. Use of Program Funds:
 Budgeted Amount......................................................--
                                                                    ----
 Expended Thru Last Quarter...........................................--
                                                                    ----
Loans......................................................No. ------ $ 
                                                                  ------
Grants.......................................................No. ------ 
                                                                  ------
Other subsidies
 (describe briefly)..........................................No. ------ 
                                                                  ------
  This Quarter Total..................................................--
                                                                    ----

    II. Description of recipients provided assistance during report 
period: (Attach breakdown for each HPG recipient on separate page 
including name, address, income, size, race, housing preservation 
activities, and type of assistance received):

 Number of low-income homeowners assisted.............................--
                                                                    ----
 Number of very low-income homeowners assisted........................--
                                                                    ----
  Total number of homeowners assisted.................................--
                                                                    ----

Racial composition:

  White...............................................................--
                                                                    ----
  Black...............................................................--
                                                                    ----
  Hispanic............................................................--
                                                                    ----
  Am. Indian..........................................................--
                                                                    ----
  Other...............................................................--
                                                                    ----

    III. Description of types of housing preservation provided:

----------------------------------------------------------------------------------------------------------------
                             Housing preservation activity                                Financial assistance
----------------------------------------------------------------------------------------------------------------
                             Item                              Cost of materials/labor    HPG    Other    Total
----------------------------------------------------------------------------------------------------------------
 
 
----------------------------------------------------------------------------------------------------------------

    IV. Objectives for next period:

 Loans.......................................................No. ------ 
                                                                 $------
 Grants......................................................No. ------ 
                                                                 $------
 Other subsidy...............................................No. ------ 
                                                                 $------
  Totals.....................................................No. ------ 
                                                                 $------

    V. Project summary:

------------------------------------------------------------------------
                                       No.
                                    homeowners   HPG funds      Other
------------------------------------------------------------------------
Assistance objectives of project.  ...........      $------      $------
Assistance to date...............  ...........       ------       ------
Assistance during next period....  ...........     --------     --------
Average amount of HPG assistance.  ...........  ...........  ...........
Per unit provided (program to          $------  ...........  ...........
 date) (per unit)................
------------------------------------------------------------------------

    VI. Narrative:
    A. Significant accomplishments.
    B. Problem areas.
    C. Proposed changes/assistance needed, etc.
    D. Status of implementing environmental and historic preservation 
requirements. Include number of historic properties assisted.



PART 1945_EMERGENCY--Table of Contents




                  Subpart A_Disaster Assistance_General

Sec.
1945.1 [Reserved]
1945.2 Purpose.
1945.3-1945.4 [Reserved]
1945.5 Abbreviations.
1945.6 Definitions.
1945.7-1945.17 [Reserved]
1945.18 United States Department of Agriculture (USDA) Food and 
          Agriculture Council (FAC).
1945.19 Reporting potential natural disasters and initial actions.
1945.20 Making EM loans available.
1945.21 Reporting and coordination requirements.
1945.22-1945.24 [Reserved]
1945.25 Relationship between FmHA or its successor agency under Public 
          Law 103-354 and FEMA.
1945.26 Relationship between FmHA or its successor agency under Public 
          Law 103-354 and SBA.
1945.27 Relationship between FCIC and FmHA or its successor agency under 
          Public Law 103-354.
1945.28 Relationship between ASCS and FmHA or its successor agency under 
          Public Law 103-354.
1945.29 [Reserved]
1945.30 FmHA or its successor agency under Public Law 103-354 Emergency 
          Loan Support Teams (ELST).

[[Page 559]]

1945.31 FmHA or its successor agency under Public Law 103-354 Emergency 
          Loan Assessment Teams (ELAT).
1945.32-1945.34 [Reserved]
1945.35 Special EM loan training.
1945.36-1945.44 [Reserved]
1945.45 Public information function.
1945.46-1945.50 [Reserved]

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

    Source: 46 FR 28331, May 26, 1981, unless otherwise noted.



                  Subpart A_Disaster Assistance_General

    Source: 53 FR 30384, Aug. 11, 1988, unless otherwisenoted.



Sec. 1945.1  [Reserved]



Sec. 1945.2  Purpose.

    This subpart describes and explains the types of incidents which can 
result in an area being determined a disaster area, thereby making 
qualified farmers in such areas eligible for Farmers Home Administration 
(FmHA) or its successor agency under Public Law 103-354 Emergency (EM) 
loans. With respect to natural disasters, it sets forth the 
responsibility of the Secretary of Agriculture; the factors used in 
making a natural disaster determination; the relationship between FmHA 
or its successor agency under Public Law 103-354 and the Federal 
Emergency Management Agency (FEMA); the method for establishing and 
using Emergency Loan Support Teams (ELST) and Emergency Loan Assessment 
Teams (ELAT); the training of FmHA or its successor agency under Public 
Law 103-354 personnel; and disaster related public information 
functions. The natural disaster determinations/notifications made under 
this subpart do not apply to any program other than the FmHA or its 
successor agency under Public Law 103-354 EM loan program. FmHA or its 
successor agency under Public Law 103-354's policy is to make EM loans 
to any otherwise qualified applicant without regard to race, color, 
religion, sex, national origin, marital status, age, or physical/mental 
handicap (provided the applicant can execute a legal contract) as 
provided by law.



Sec. Sec. 1945.3-1945.4  [Reserved]



Sec. 1945.5  Abbreviations.

    The following abbreviations are used in this subpart.
    (a) ASCS--Agricultural Stabilization and Conservation Service.
    (b) DAR--Damage Assessment Report.
    (c) ELAT--Emergency Loan Assessment Team.
    (d) ELST--Emergency Loan Support Team.
    (e) EM--Emergency.
    (f) EOH--USDA Emergency Operations Handbook.
    (g) FAC--Food and Agriculture Council.
    (h) FCIC--Federal Crop Insurance Corporation.
    (i) FCO--Federal Coordinating Officer.
    (j) FEMA--Federal Emergency Management Agency.
    (k) FmHA--Farmers Home Administration or its successor agency under 
Public Law 103-354.
    (l) LFAC--Local Food and Agriculture Council.
    (m) NASS--State Statistical Office of the USDA National Agricultural 
Statistics Service.
    (n) OMB--Office of Management and Budget.
    (o) SBA--Small Business Administration.
    (p) SFAC--USDA State Food and Agriculture Council.
    (q) USDA--United States Department of Agriculture.



Sec. 1945.6  Definitions.

    The following definitions are applicable to this subpart:
    (a) Applicant. The person or entity carrying on the farming 
operation at the time of the disaster and requesting EM loan assistance 
from FmHA or its successor agency under Public Law 103-354.
    (b) County. A local administrative subdivision of a State or a 
similar political subdivision of the United States.
    (1) Primary county. A county determined to be a disaster area.
    (2) Contiguous county. A county that touches a primary county at any 
point.

[[Page 560]]

    (c) Disaster. A natural disaster, as determined by the Secretary of 
Agriculture or the FmHA or its successor agency under Public Law 103-354 
Administrator, or a major disaster or emergency declared by the 
President.
    (1) Major disaster. Any hurricane, tornado, storm, flood, high 
water, wind-driven water, tidal wave, tsunami, earthquake, volcanic 
eruption, landslide, mudslide, snowstorm, drought, fire, explosion, or 
other catastrophe in any part of the United States which, in the 
determination of the President, causes damage of sufficient severity and 
magnitude to warrant major disaster assistance under the ``Disaster 
Relief Act of 1974,'' above and beyond normal emergency services 
available from Federal, State and local governments.
    (2) Presidential emergency. Any hurricane, tornado, storm, flood, 
high water, wind-driven water, tidal wave, tsunami, earthquake, volcanic 
eruption, landslide, mudslide, snowstorm, drought, fire, explosion, or 
other catastrophe in any part of the United States which is of such 
magnitude that the President makes a declaration requiring Federal 
emergency assistance to supplement State and local efforts to save lives 
and protect property, public health and safety, or to avert or lessen 
the threat of a disaster.
    (3) Natural disaster. A disaster in any part of the United States in 
which unusual and adverse weather conditions or other natural phenomena 
have substantially affected farmers by causing severe physical property 
losses and/or severe production losses within a county. Except where 
otherwise specified, the use of the term county or similar political 
subdivision is for administrative purposes only.
    (i) Unusual and adverse weather conditions or natural phenomena 
include such things as:
    (A) A major single natural occurrence or event such as a blizzard, 
cyclone, earthquake, hurricane or tornado.
    (B) A single storm, or series of storms, accompanied by severe hail, 
excessive rain, heavy snow, ice and/or high wind.
    (C) An electrical storm.
    (D) A severe weather pattern over a period of time which, due to 
excessive rainfall, unusual lack of rainfall, or periods of high or low 
temperatures, causes flooding, substantial water damage, drought or 
freezing, or which results in the spreading and flourishing of insects 
or pests, or in plant or animal diseases spreading into epidemic 
proportions, or prevents the control of fire, however caused.
    (ii) Severe physical property losses are those which the 
Administrator determines prior to a natural disaster determination by 
the Secretary, to be severe, and to have caused extensive damage to or 
destruction of, physical farm property including farmland (except sheet 
erosion); structures on the land such as buildings, fences, dams, etc.; 
machinery, equipment, and tools; livestock, livestock products; poultry; 
poultry products; growing crops (see Sec. 1945.163(b)(11) of subpart D 
of part 1945 of this chapter); harvested crops, and supplies which, if 
not repaired or replaced, would make it impossible for farmers affected 
by the unusual and adverse weather conditions to continue operating 
their farms on a sound basis.
    (iii) Severe production losses within a county are those in which 
either:
    (A) The Secretary determines that there has been a reduction 
countywide of at least 30 percent of the normal year's dollar value of 
all crops, including hay and pasture, and the crops could not be 
replanted or replaced with a substitute crop, or
    (B) The Secretary determines that there has been a 30 percent loss 
countywide in the normal year's dollar value of a single enterprise (as 
defined in Sec. 1945.154(a) of subpart D of part 1945 of this chapter); 
or
    (C) The Secretary, after exercising discretion, determines that, 
although the conditions set forth in Sec. 1945.6(c)(3)(iii)(A) and (B) 
of this subpart have not been met, the unusual and adverse weather 
conditions or natural phenomena have resulted in such significant 
production losses, or have produced such extenuating circumstances as to 
warrant a finding that a natural disaster has occurred. In making this 
determination, the Secretary may request the Administrator

[[Page 561]]

to provide for consideration such factors as the nature and extent of 
production losses; the number of farmers who have sustained qualifying 
production losses; the number of farmers in that other lenders in the 
county indicate they will not be in position to finance; whether the 
losses will cause undue hardship to a certain segment of farmers in the 
county; whether damage to particular crops has resulted in undue 
hardship; whether other Federal and/or State benefit programs, which are 
being made available due to the same disaster, will consequently lessen 
undue hardship and the demand for EM loans; and any other factors 
considered relevant. The Secretary will consider the information set 
forth in Sec. 1945.6(i) of this subpart in deciding whether a natural 
disaster has occurred.
    (4) Potential natural disaster. Unusual and adverse weather 
conditions or natural phenomena that have caused physical and/or 
production losses, but which have not yet been examined by the Secretary 
or the Administrator for consideration as a natural disaster.
    (d) Disaster area(s). The county(ies) declared/designated as a 
disaster area for EM loan assistance as a result of disaster related 
losses. This included counties named as contiguous to those counties 
declared/designated as disaster areas.
    (e) Farmers. Individuals, cooperatives, corporations, partnerships 
or joint operations who are farmers, ranchers, or aquaculture operators 
actively engaged in their operation at the time a disaster occurs.
    (f) Incidence period. The specific date or dates during which a 
disaster occurred.
    (g) National Office. The Director, Emergency Designation Staff.
    (h) Normal year's dollar value. The FmHA or its successor agency 
under Public Law 103-354 National Office will determine the normal 
year's dollar value by establishing a normal year yield and price. 
Normal year yield will be the average yield of the 5 years immediately 
preceding the disaster year for each cash crop, including hay and 
pasture, grown in the county. The price will be the average commodity 
price for the 36 months immediately preceding the disaster year for each 
crop. Yields and prices used to establish the value or normal production 
will be obtained from the NASS. In cases where crops produced and/or 
prices are not available from NASS, the information will be obtained 
from other reliable sources. Yields used to establish the disaster 
year's production will be obtained from DARs which are prepared by the 
LFACs and SFACs. Prices used to establish the value of disaster year 
production will be the same as those used to establish normal year 
values.
    (i) Substantially affected. A farmer applicant has been 
substantially affected when there has been a disaster as defined in 
paragraph (c) of this section, and the applicant has sustained 
qualifying physical and/or production losses, as defined in Sec. 
1945.154(a) of subpart D of part 1945 of this chapter.
    (j) Termination date. The date specified in a disaster declaration/
determination/notification which establishes the final date after which 
EM loan applications can no longer be accepted. For both physical and 
production losses, the termination date will be 8 months from the date 
of the disaster declaration/determination/notification.
    (k) United States or State. Each of the several States, the 
Commonwealth of Puerto Rico, the Virgin Islands of the United States, 
Guam, American Samoa, and the Commonwealth of the Northern Mariana 
Islands.

[53 FR 30384, Aug. 11, 1988, as amended at 58 FR 26681, May 5, 1993]



Sec. Sec. 1945.7-1945.17  [Reserved]



Sec. 1945.18  United States Department of Agriculture (USDA) Food 
and Agriculture Council (FAC).

    There is a USDA FAC established by the Secretary to serve every 
State and every County in the United States. The FACs are responsible 
for reporting the occurrence of and assessing the damage caused by 
potential disasters, as required to ensure that the Department's 
disaster programs are implemented when and where needed; to coordinate 
the Department's EM disaster programs with those of other Federal 
departments and agencies; and to provide personnel, as needed and 
requested by

[[Page 562]]

FEMA, to help staff disaster application centers in major disaster 
areas.
    (a) State Food and Agriculture Council (SFAC). The SFACs are 
composed of representatives of the several USDA agencies having 
emergency program responsibilities at the State level. The vice 
chairpersons, Emergency Programs, of the SFACs are the ASCS State 
Executive Directors. FmHA or its successor agency under Public Law 103-
354 State Directors are members of the SFACs.
    (b) Local Food and Agriculture Council (LFAC). These councils are 
composed of representatives of the several USDA agencies having 
available personnel at the County level. The chairpersons of the LFACs, 
in most cases, are the ASCS County Executive Directors. The FmHA or its 
successor agency under Public Law 103-354 County Supervisors are members 
of the LFACs.
    (c) FAC policies and procedures. These policies and procedures are 
set forth in the USDA Emergency Operations Handbook (EOH), available in 
any ASCS or FmHA or its successor agency under Public Law 103-354 
Office.



Sec. 1945.19  Reporting potential natural disasters and initial actions.

    (a) Purpose. The purpose of reporting potential natural disasters is 
to provide a systematic procedure for rapid reporting of the occurrence 
and extent of damage and loss caused by such events which may result in 
a natural disaster determination.
    (b) Responsibility for assessing and reporting disasters. USDA SFACs 
and LFACs representing their members agencies are best qualified at the 
State and County levels to accomplish the assessment of agricultural 
production losses resulting from a potential natural disaster. These 
councils are charged with the responsibility of reporting the occurrence 
of and assessing the damage caused by disasters and will perform this 
responsibility under policies and procedures as set forth in the EOH.
    (c) Actions to be taken. Immediately after the occurrence of a 
potential natural disaster:
    (1) When physical losses only occur, the FmHA or its successor 
agency under Public Law 103-354 County Supervisor will report to the 
State Director who will advise the Administrator that there has been a 
potential natural disaster with physical property losses to one or more 
farmers. This report must be made to the Administrator within 3 months 
from the last day of the disaster incidence period. Upon receiving the 
report, the Administrator will decide whether a natural disaster has 
occurred. If it has, the Administrator will make EM loans available to 
any otherwise qualified applicant who has suffered qualifying physical 
losses. Availability of EM loans assistance under this Administrator 
action shall be limited to physical losses only. Notices that EM loans 
are available will identify the county in which the unusual and adverse 
weather condition, or natural phenomenon has occurred and also each 
contiguous county.
    (2) When physical and/or production losses occur, the FmHA or its 
successor agency under Public Law 103-354 County Supervisor will report 
to the LFAC chairperson, as specified in the EOH, all substantial 
physical property loss, damage or injury and severe production losses 
that have occurred in the County Office area. The County Supervisor will 
assist the LFAC in preparing the 24-hour report required in paragraph 
(c)(3) of this section. If the LFAC has not completed its 24 hour report 
within two workdays after the occurrence of a potential natural 
disaster, the County Supervisor will report to the State Director of 
Form FmHA or its successor agency under Public Law 103-354 1945-27, 
``Report of Natural Disaster.'' In urgent situations, the report may be 
made by telephone, followed by the LFAC report or Form FmHA or its 
successor agency under Public Law 103-354 1945-27. Either of these 
reports will be based on information obtained from personal knowledge 
and from farmers, agricultural and community leaders, and from any other 
personally contacted reliable source(s). The County Supervisor will 
convey to the LFAC chairperson all information pertaining to the 
potential disaster and provide the chairperson with a copy of Form FmHA 
or its successor agency under Public Law 103-354 1945-27, if prepared.

[[Page 563]]

    (3) The LFAC will report the potential natural disaster, in 
accordance with the EOH, to:
    (i) The SFAC, Vice Chairperson; and
    (ii) Appropriate County Government representative(s).
    (4) The SFAC will provide copies of the LFAC report to:
    (i) The USDA Washington Offices of ASCS, FmHA or its successor 
agency under Public Law 103-354 and Office of Intergovernmental Affairs; 
and
    (ii) The State Governor's Emergency Coordinator and the State 
Department of Agriculture.
    (5) The FmHA or its successor agency under Public Law 103-354 State 
Director will inform the National Office of each potential natural 
disaster as soon as possible and forward to the National Office a copy 
of the LFAC report or Form FmHA or its successor agency under Public Law 
103-354 1945-27, with any attachments, and supplemented with the State 
Director's comments and recommendations. The State Director must include 
a statement as to the number of farmers, ranchers, and aquaculture 
operators affected by the potential natural disaster. In urgent 
situations, the State Director will report to the National Office, 
Emergency Designation Staff, by telephone, and immediately thereafter 
send a written report to the National Office, Emergency Designation 
Staff. The State Director will continually notify the SFAC Vice 
Chairperson, Emergency Programs, of any additional information received 
concerning the potential natural disaster.
    (6) When inquiries are received from persons affected by a potential 
natural disaster, they will be provided the following information:
    (i) By the County Office:
    (A) The kind of assistance that will be available if the President 
declares a major disaster or emergency, or if the Secretary determines 
that a natural disaster has occurred.
    (B) Whether or not physical property loss EM loans are available.
    (C) That applications for EM loans may be filed for future 
processing if such loans are made available, or may be filed at a later 
date after the necessary determinations have been made.
    (D) Whether regular FmHA or its successor agency under Public Law 
103-354 farm loan assistance is available.
    (ii) State Office, or the National Office, will furnish the same 
information as the County Office, or will refer the person to the 
appropriate County Office.
    (7) When inquiries are received from a Governor, a County Governing 
Body or Indian Tribal Council concerning a potential natural disaster, 
they will be informed of the procedure for making EM loans available.
    (8) The actions required in paragraph (b) of this section will be 
taken even if the Governor of a State has requested the President to 
declare a county(ies) a major disaster or Presidential emergency area.



Sec. 1945.20  Making EM loans available.

    EM loans will be made available to applicants having qualifying 
severe physical and/or production losses within a county named by FEMA 
as eligible for Federal assistance under a major disaster or emergency 
declaration by the President; or under a natural disaster determination 
by the Secretary of Agriculture, pursuant to Sec. 1945.6(c)(3)(iii) of 
this subpart; and to applicants having qualifying severe physical 
property losses when, prior to action by the President or the Secretary, 
the FmHA or its successor agency under Public Law 103-354 Administrator 
has determined (pursuant to Sec. 1945.6(c)(3)(ii) of this subpart) that 
such losses have occurred as a result of a natural disaster. Any 
determination made by the Secretary or the Administrator, pursuant to 
this subpart may be revised or reversed upon the receipt of new facts 
which establish that a change is warranted. FmHA or its successor agency 
under Public Law 103-354's policy is to make loans to any otherwise 
qualified applicant. When a county has been designated/declared a 
disaster area where eligible farmers may qualify for EM loans due to a 
disaster(s) occurring on or after May 31, 1983, under this section, all 
other counties contiguous to the eligible county(ies) are also named as 
areas where EM actual loss loans may be made to applicants whose 
operations have been

[[Page 564]]

substantially affected by the same disaster(s).
    (a) Declaration by the President. When there is a Presidential major 
disaster or emergency declaration and FEMA has notified the FmHA or its 
successor agency under Public Law 103-354 National Office, the following 
actions will be taken:
    (1) The National Office will immediately:
    (i) Notify the State Director and the Director, Finance Office by 
telephone and confirm by electronic message. The notification will 
contain:
    (A) The date of the declaration;
    (B) The name(s) of the county(ies) determined eligible for Federal 
disaster assistance;
    (C) The type of disaster;
    (D) The incidence period for the disaster;
    (E) The termination date for accepting applications; and
    (F) The disaster declaration number [Examples: Major Disasters, 
M491; or Presidential Emergency, E061].
    (ii) Take the actions required by Sec. 1945.21(a)(1) of this 
subpart.
    (2) The State Director will immediately:
    (i) Notify the appropriate County Supervisor(s) to make EM loans 
available in the declared counties, and confirm this notification by a 
State supplement containing information listed in paragraphs (a)(1)(i) 
(A) through (F) of this section.
    (ii) Notify the SFAC Vice Chairperson, Emergency Programs, in 
writing; and
    (iii) Prepare the public announcements deemed appropriate to inform 
the farm community, and coordinate the issuance of such announcements 
with FEMA's Public Information Officer.
    (3) The County Supervisor will immediately upon receiving 
notification that the county(ies) has been declared a disaster area:
    (i) Notify the Chairperson LFAC in writing;
    (ii) Make such public announcements as seem appropriate to 
adequately inform the local farm community;
    (iii) Arrange and conduct meetings with local agricultural lenders 
and agricultural leaders within 10 working days after the disaster 
declaration date to explain the purpose and the assistance available 
under the EM loan program; and
    (iv) Be available to help staff the FEMA disaster assistance 
centers, when requested to do so.
    (b) Determination by the Secretary of Agriculture. When a potential 
disaster has substantially affected farmers, causing qualifying severe 
losses and it is requested by a Governor or Indian Tribal Council that 
there be a determination that a natural disaster has occurred, the 
Secretary will acknowledge the request in writing and consider whether a 
determination should be made, provided the Secretary receives such 
request in writing within three months of the last day of the occurrence 
of such potential disaster. The Governor or Indian Tribal Council should 
send a copy of the request to the FmHA or its successor agency under 
Public Law 103-354 State Director. When the Secretary finds based on the 
material received pursuant to this subpart that the conditions of Sec. 
1945.6(c)(3)(iii) (A) or (B) have been met, it shall be announced that a 
natural disaster has occurred. Also, if on finding that the conditions 
of Sec. 1945.6(c)(3)(iii)(C) of this subpart so warrant, the Secretary 
may determine that a natural disaster has occurred.
    (1) Upon receipt of the Governor's or Indian Tribal Council's 
request through the Secretary's Office, the FmHA or its successor agency 
under Public Law 103-354 National Office will immediately take the 
following actions:
    (i) Notify the State Director by telephone of the Governor's 
request.
    (ii) Obtain an immediate report from the State Director on whether 
there have been severe physical property losses within each of the 
counties requested by the Governor or Indian Tribal Council.
    (iii) Obtain a report from the State Director on production losses.
    (2) The State Director will immediately:
    (i) Notify the SFAC Vice Chairperson, Emergency Programs, that a DAR 
is needed, unless the Governor has already made such request to the SFAC 
Vice Chairperson, in accordance with

[[Page 565]]

the EOH for the requested county(ies); and
    (ii) Advise the National Office on whether qualifying physical 
property losses have occurred.
    (iii) Review each DAR, as soon as it is available, and forward it to 
the National Office with written comments on the extent of probable 
qualifying production losses, and other factors which are recommended 
for consideration by the Secretary in making determinations under Sec. 
1945.6(c)(3) of this subpart. The State Director will also submit to the 
National Office a list of all agricultural commodities produced in the 
State, giving the average yearly prices for each commodity for the three 
years immediately preceding the disaster year; the county average yields 
for each commodity for the five years immediately preceding the disaster 
year; and any additional supportive information. Yields and prices data 
will be used to establish the normal year's production and will be 
obtained from the USDA National Agricultural Statistics Service (NASS) 
by the State Director. In cases where crops produced and/or prices are 
not available from NASS, the information will be obtained from other 
reliable sources.
    (iv) Upon receipt of the Administrator's request for a survey in 
connection with a request by the Secretary for information needed 
concerning Sec. 1945.6(c)(3)(iii)(C), expeditiously gather and compile 
the information requested and submit it to the Administrator with a 
recommendation. The survey will be conducted in a manner jointly agreed 
upon by the Administrator and the State Director.
    (3) The National Office will:
    (i) Immediately use the State Director's report and accompanying 
price and yield information to analyze and verify losses reported in the 
DAR(s), along with any other information and comments provided by the 
State Director.
    (ii) Promptly forward a written report to the Secretary, along with 
supporting information, for use by the Secretary in making a decision on 
the requested natural disaster determination.
    (4) The Secretary will review the results of the survey and 
determine whether a natural disaster has occurred.
    (i) When the Secretary determines that a natural disaster has 
occurred:
    (A) The Administrator will be directed to make EM loans available in 
the county(ies) named by the Secretary, as provided by law.
    (B) The Administrator will notify the State Director, by electronic 
message, of the Secretary's decision. Such notice will not be given to 
the State Director until the Secretary has notified the Governor or 
Indian Tribal Council, from whom the natural disaster determination 
request was received.
    (C) The National Office will immediately pursue the same course of 
action as described in paragraph (a)(1) of this section, except the 
disaster determination number will be coded S and three numbers (Example 
S141).
    (D) The State Director will immediately pursue the same course of 
action as described in paragraph (a)(2) of this section.
    (E) The County Supervisor will immediately pursue the same course of 
action as described in paragraph (a)(3) of this section.
    (ii) When the Secretary determines that the conditions in Sec. 
1945.6(c)(3)(iii) (A) or (B) of this subpart have not been met, and 
decides to consider other factors in accordance with Sec. 
1945.6(c)(3)(iii)(C) of this subpart, the Secretary will:
    (A) Request the Administrator to provide additional information for 
consideration through an actual survey of farmers and lending 
institutions in the county(ies) requested to be determined a natural 
disaster area.
    (B) The Administrator will instruct the State Director to conduct 
the survey focusing on such factors as:
    (1) The nature and extent of production losses;
    (2) The number of farmers who have sustained qualifying production 
losses;
    (3) The number of farmers in paragraph (b)(4)(ii)(B)(2) of this 
section that other lenders in the County Office area indicate they will 
not be in a position to finance;
    (4) Whether the losses will cause undue hardship to a certain 
segment of farmers in the county;

[[Page 566]]

    (5) Whether damage to particular crops has resulted in undue 
hardship;
    (6) Whether other Federal and/or State benefit programs, which are 
being made available due to the same disaster, will consequently lessen 
undue hardship and the demand for EM loans; and
    (7) Any other factors considered relevant.
    (iii) If the Secretary finds that the conditions of Sec. 
1945.6(c)(3)(iii) (A) or (B) of this subpart have not been met, and 
decides that the conditions do not warrant a natural disaster finding 
under Sec. 1945.6(c)(3)(iii)(C) of this subpart, the Governor or Indian 
Tribal Council and other concerned officials will be notified of this 
and the reason(s) for the Secretary's conclusions.
    (c) Notification by the FmHA or its successor agency under Public 
Law 103-354 Administrator. When the Administrator determines that an 
unusual and adverse weather condition or natural phenomenon has 
substantially affected farmers, causing qualifying severe physical 
losses, the Administrator will make EM physical loss loans available in 
the county(ies) identified and notify the State Director by electronic 
message.
    (1) The Administrator, upon notifying the State Director that EM 
physical loss loans are to be made available, will issue the following:
    (i) The Administrator's notification number (Example: N181);
    (ii) The incidence period for the natural disaster; and
    (iii) The termination date for accepting applications.
    (2) The State Director upon receiving written notification by 
electronic message from the Administrator will notify:
    (i) Appropriate County Supervisor(s) to commence processing EM loan 
applications in appropriate county(ies).
    (ii) The SFAC Vice Chairperson, Emergency Programs; and
    (iii) The news media with appropriate announcements.
    (3) The Administrator will notify the Office of the Secretary of 
Agriculture of any action taken concerning physical property losses. The 
National Office will also provide the same information to the 
appropriate Governor or Indian Tribal Council, FEMA, ASCS, SBA and other 
concerned officials at their request.
    (4) Upon notification from the State Director that EM loans are 
available in a county, the County Supervisor will pursue the course of 
action described in Sec. 1945.20(a)(3) of this subpart.
    (d) Relationship between Administrator's notification and 
Secretary's determination. Both the Administrator and the Secretary can 
make natural disaster determinations affecting the same county:
    (1) When the Administrator has made physical loss loans available 
pursuant to Sec. 1945.6(c)(3)(ii), and the Secretary later makes 
production loss loans available pursuant to Sec. 1945.6(c)(3)(iii) on 
the basis of the same unusual and adverse weather condition or natural 
phenomenon, such physical and production losses will be considered to be 
caused by a single natural disaster. Any physical loss loans made 
pursuant to the Administrator's earlier notification will be included in 
the maximum amount available to an applicant as prescribed in Sec. 
1945.163(e) of subpart D of part 1945 of this chapter.
    (2) When a series of unusual and adverse weather conditions or 
natural phenomena occur in a county within the same crop year, and it is 
not possible for the Secretary to assess the damages in order to 
determine whether the conditions in Sec. 1945.6(c)(3)(iii) have been 
met until the end of such series or the crop year, a determination that 
a natural disaster has occurred shall be considered for both physical 
property and production losses to be due to a single natural disaster. 
Any physical loss loans made pursuant to the Administrator's earlier 
notification will be included in the maximum amount available to an 
applicant as prescribed in Sec. 1945.163(e) of subpart D of part 1945 
of this chapter.
    (e) Extension of termination dates for continuing disaster 
conditions. When a natural disaster continues beyond the date on which 
an Administrator's notification or Secretary's determination is made, 
and when there are continuing losses or damages caused by that disaster, 
the Administrator will extend the incidence period and the termination 
date for such specified period as

[[Page 567]]

the Administrator finds appropriate, but not in excess of 60 days. The 
following actions will be taken to obtain an extension:
    (1) The County Supervisor will advise the State Director of the 
conditions for which an extension is requested.
    (2) The State Director will make a recommendation to the 
Administrator on whether an extension should be granted; and
    (3) The Administrator will, if the request is granted:
    (i) Amend the initial notification/determination (using the same 
number) by establishing a new incidence period and termination date; and
    (ii) Notify the State Director by electronic message.
    (f) Limitations. When actions are authorized by the Secretary or the 
Administrator under paragraphs (b) or (c) of this section, such actions 
will ordinarily be completed within six months after the beginning date 
of the incidence period of a reported disaster, except when the actions 
required in paragraph (b)(2) of this section cause a delay beyond the 
six months period, in which event the actions must be completed within 
nine months of the beginning date of the incidence period. The Secretary 
may extend this limitation up to 12 months from the beginning date of 
the incidence period if there were other exceptional causes for the 
delay.



Sec. 1945.21  Reporting and coordination requirements.

    After EM loans are made available under Sec. 1945.20 of this 
subpart, the following actions will be taken immediately:
    (a) By the National Office. The Administrator or a designee will:
    (1) Submit weekly reports to the following, informing them of the 
past week's disaster actions taken by FmHA or its successor agency under 
Public Law 103-354. If no actions are taken in any particular week, 
negative reports will be made:
    (i) The Secretary of Agriculture or the Secretary's designee;
    (ii) The Director of the FmHA or its successor agency under Public 
Law 103-354 Finance Office;
    (iii) The FEMA;
    (iv) The SBA Central Office;
    (v) The ASCS National Office;
    (vi) The FCIC National Office;
    (vii) The OMB;
    (viii) The National Oceanic and Atmospheric Administration; and
    (ix) The Office of Governmental and Public Affairs.
    (2) The weekly reports will contain the following information:
    (i) The date of the declaration/determination/notification;
    (ii) The name(s) of any county(ies) in which EM loans are available;
    (iii) The nature of the damages and losses; and
    (iv) The termination data for accepting EM loan applications.
    (b) By the State Director. (1) Notify the appropriate County 
Supervisor(s) of the:
    (i) Name(s) of any county(ies) in which EM loans are available;
    (ii) Date of the declaration/determination/notification;
    (iii) Disaster number;
    (iv) Type of disaster;
    (v) Incidence period; and
    (vi) Termination date for accepting applications.
    (2) Notify the State ASCS Executive Director of the authority to 
make EM loans. Promptly have a meeting to review and implement the 
provisions of the Memorandum of Understanding between ASCS and FmHA or 
its successor agency under Public Law 103-354 on Disaster Assistance, 
exhibit A of FmHA Instruction 2000-JJ (available in any FmHA or its 
successor agency under Public Law 103-354 office). Arrive at a mutual 
understanding as to how ASCS disaster program benefits are to be handled 
in conjunction with the processing of FmHA or its successor agency under 
Public Law 103-354 EM actual loss loans, so that duplication of benefits 
for the same losses are not received by disaster victims;
    (3) Contact the FCIC Field Operations Office Director to review the 
Memorandum of Understanding between FCIC and FmHA or its successor 
agency under Public Law 103-354, exhibit A of FmHA Instruction 2000-N 
(available in any FmHA or its successor agency under Public Law 103-354 
office), and arrive at a mutual understanding as to how FCIC indemnity

[[Page 568]]

payments are to be handled in conjunction with the processing of EM 
actual loss loans so that duplication of benefits for the same losses 
are not received by disaster victims;
    (4) Make appropriate public announcements, including notices in 
Indian Tribal Council(s) news media. However, if the declaration was by 
the President, under Sec. 1945.20(a) of this subpart, news releases 
should be cleared with the FEMA; and
    (5) If the FEMA notifies the State Director that an agreement 
between the State and Federal Government (FEMA) has been made to provide 
408 grants in a major disaster area to those suffering damages and 
losses to housing and personal property, who are ineligible for disaster 
loan assistance through the FmHA or its successor agency under Public 
Law 103-354 and/or SBA, the following actions will be taken:
    (i) The State Director will notify the appropriate County 
Supervisor(s) of the address and phone number of the nearest FEMA office 
in the Supervisor's area; and
    (ii) At the close of business each week, the County Supervisor(s) 
will forward to the State Director a list of applicants claiming 
physical losses who do not qualify for EM loan assistance, with the 
reason(s) they do not qualify; and
    (iii) The State Director will immediately summarize the information 
received from the County Supervisors and forward a report to FEMA.
    (c) By the County Supervisor. (1) Notify the County ASCS Executive 
Director of the declaration/determination/notification and have a 
meeting to review and implement the provisions of the Memorandum of 
Understanding between ASCS and FmHA or its successor agency under Public 
Law 103-354 on Disaster Assistance, exhibit A of FmHA Instruction 2000-
JJ (available in any FmHA or its successor agency under Public Law 103-
354 office), to arrive at a mutual understanding as to how ASCS disaster 
program benefits and other information in ASCS's records will be made 
available and used in processing EM actual loss loans. Also, the County 
Supervisor will request that information regarding the availability of 
EM loans be placed in the ASCS's newsletter;
    (2) Notify the County Governing Body, Indian Tribal Council(s), and 
make appropriate public announcements including notices in Indian Tribal 
Council(s') news media; and
    (3) Explain the assistance available under the EM program to 
agricultural lenders and leaders in the area including Indian 
agricultural lenders and leaders.



Sec. Sec. 1945.22-1945.24  [Reserved]



Sec. 1945.25  Relationship between FmHA or its successor agency under 
Public Law 103-354 and FEMA.

    (a) General. When a major disaster or emergency declaration is made 
by the President, the FEMA is charged with the responsibility for seeing 
that disaster assistance is made available to disaster victims. Also, 
FEMA is responsible for coordinating the actions of other Federal 
agencies who have programs to provide disaster assistance. A Federal 
Coordinating Officer (FCO) is appointed for each major disaster or 
emergency to coordinate Federal assistance in the disaster area.
    (b) Before the declaration. (1) When a request for a major disaster 
or emergency declaration is made by the Governor of a State, the FEMA 
through its Regional Director is responsible for obtaining an assessment 
of the losses and damages to respond to the request.
    (2) If the FEMA makes a request for information from FmHA or its 
successor agency under Public Law 103-354 on losses and damages caused 
by an unusual and adverse weather condition or natural phenomenon, the 
FEMA representative will be advised to contact the SFAC Vice 
Chairperson. The EOH provides that the SFAC will request the LFAC to 
prepare the DAR. State Directors and County Supervisors should cooperate 
with the SFAC Vice Chairpersons and LFAC Chairpersons in preparing the 
DARs.
    (c) After the declaration. When a major disaster has been declared 
by the President and the FEMA establishes a disaster application 
center(s) in the local disaster area(s):
    (1) The SFAC will be responsible for:
    (i) Selecting qualified USDA employees to represent USDA at each 
center,

[[Page 569]]

after consulting with other council members in making the selection. 
FmHA or its successor agency under Public Law 103-354 State Directors 
will cooperate with the SFAC in seeing that centers are properly 
staffed.
    (ii) Orienting the selected employees on all current USDA disaster 
programs. FmHA or its successor agency under Public Law 103-354 State 
Directors will cooperate in this orientation to ensure that the USDA 
representatives at the center(s) are familiarized with the FmHA or its 
successor agency under Public Law 103-354 EM loan program and other FmHA 
or its successor agency under Public Law 103-354 loan programs that 
could be of assistance to the disaster victims; and
    (iii) Informing the FEMA that USDA representatives are available to 
help at each of the disaster application centers.
    (2) The FmHA or its successor agency under Public Law 103-354 State 
Director will be responsible for pursuing the following policy in 
working with the FEMA and the FCO by:
    (i) Authorizing receipt of EM loan applications in the counties 
named by the FEMA. However, no EM loans can be approved until the 
National Office has given such notification as prescribed in Sec. 
1945.20(a)(1) of this subpart;
    (ii) Attending or delegating a representative to attend any 
meeting(s) called by the FCO to discuss Federal assistance under the 
disaster declaration; and
    (iii) Advising the FCO to contact the SFAC Vice Chairperson, if a 
request is made by the FCO for FmHA or its successor agency under Public 
Law 103-354 employees to help staff the FEMA's Disaster Application 
Centers; and
    (iv) Advising the FCO that FmHA or its successor agency under Public 
Law 103-354's ``Report of Emergency Loans Made Pertaining to Disasters'' 
will be provided quarterly to FEMA's National Office by the FmHA or its 
successor agency under Public Law 103-354 National Office.



Sec. 1945.26  Relationship between FmHA or its successor agency under 
Public Law 103-354 and SBA.

    (a) General. Public Law 99-272 made agricultural enterprises 
ineligible for SBA physical disaster and economic injury loan programs. 
However, in disaster areas declared by the President or the SBA 
Administrator, the SBA will continue to accept physical disaster loan 
applications for losses to dwellings and/or personal household contents, 
regardless of whether the dwelling is located on a farm or nonfarm 
tract. It is the policy of USDA and FmHA or its successor agency under 
Public Law 103-354 to cooperate with SBA in the use of each agency's 
respective loan making authorities, to complement the activities of each 
other; and to the extent possible, improve the delivery of disaster 
assistance to the agricultural segment of the country and minimize the 
potential for duplication of benefits for the same losses from the 
disaster loan programs administered by the two agencies.
    (b) Preventing duplication of disaster program benefits. Preventing 
borrowers from receiving duplicate disaster program benefits will be 
assured by taking the following precautions:
    (1) For all counties named by FEMA under a major disaster or 
Presidential emergency declaration, the FmHA or its successor agency 
under Public Law 103-354 County Offices will notify the appropriate SBA 
Disaster Area Office of all EM loan applications received each week, for 
damage or loss of farm dwellings and/or loss of household contents. 
Notice will be given by forwarding to SBA a photocopy of the applicant's 
completed Form FmHA or its successor agency under Public Law 103-354 
410-1, ``Application for FmHA or its successor agency under Public Law 
103-354 Services.'' Block 22 of the form should indicate the purpose for 
which the loan was requested.
    (2) For each application referred to in paragraph (b)(1) of this 
section, FmHA or its successor agency under Public Law 103-354 County 
Offices will send a copy of each final action taken with EM loan 
applications to the appropriate SBA Disaster Area Office.
    (3) A farm applicant may elect to obtain SBA financing for physical 
damage or loss to the dwelling and household contents, and separate 
financing from FmHA or its successor agency under Public Law 103-354 to 
cover damages or losses to the farming operation.

[[Page 570]]

Accordingly, applicants who elect to receive SBA physical disaster loans 
for dwelling and/or household content losses may also file for FmHA or 
its successor agency under Public Law 103-354 EM loan assistance in 
disaster areas declared by the President or the Secretary of Agriculture 
or FmHA or its successor agency under Public Law 103-354 Administrator. 
An EM loan will not be approved until it is determined the requirements 
of Sec. 1945.163(d) of subpart D of this part will be met. When an EM 
loan is approved, the FmHA or its successor agency under Public Law 103-
354 County Office will notify the SBA Disaster Area Office, pursuant to 
paragraph (a)(4)(ii) of Sec. 1945.183 of subpart D of this part.
    (c) How SBA disaster loans are made available. SBA disaster loans 
are available in counties:
    (1) Named by the FEMA under a major disaster or emergency 
declaration by the President; for physical loss and/or economic injury 
disaster loans.
    (2) Declared by the SBA Administrator for physical loss and economic 
injury disaster loans.
    (3) Designated by the Secretary of Agriculture for Agri-dependent 
businesses.
    (d) Notification of SBA disaster areas. The SBA Central (National) 
Office will notify the FmHA or its successor agency under Public Law 
103-354 National Office when its disaster loan program is made 
available. The FmHA or its successor agency under Public Law 103-354 
National Office will notify State Directors, by memorandum, of the SBA 
disaster areas; and State Directors will notify the appropriate County 
Supervisor(s) in writing.



Sec. 1945.27  Relationship between FCIC and FmHA or its successor 
agency under Public Law 103-354.

    (a) General. Exhibit A of FmHA Instruction 2000-N (available in any 
FmHA or its successor agency under Public Law 103-354 office) is a 
Memorandum of Understanding between FCIC and FmHA or its successor 
agency under Public Law 103-354. This Memorandum of Understanding is 
intended to assist in maintaining and improving the working relationship 
between the FCIC and the FmHA or its successor agency under Public Law 
103-354 by providing encouragement to regular and FmHA or its successor 
agency under Public Law 103-354 EM loan borrowers to use Federal All-
Risk Crop Insurance, where available; assist FmHA or its successor 
agency under Public Law 103-354 borrowers to obtain All-Risk Crop 
Insurance or other agricultural commodity insurance coverage; and 
exchange information essential to the elimination of duplicating 
compensatory disaster benefits from the FCIC and FmHA or its successor 
agency under Public Law 103-354 for the same disaster losses.
    (b) Annual meeting with FCIC. FmHA or its successor agency under 
Public Law 103-354 State Directors will meet with FCIC Field Operations 
Office Directors at least once each year to review the Memorandum of 
Understanding and rededicate their efforts and those of their respective 
agency employees to comply with the agreements contained in the 
Memorandum of Understanding.
    (c) Contact after EM actual loss loans are made available. After 
each disaster, when EM loans are made available, State Directors are 
required to promptly contact the FCIC Field Operations Office Director 
to review the Memorandum of Understanding and agree on how each agency 
will fulfill its responsibilities in dealing with the disaster 
situation.
    (d) Notification to County Offices. State Directors will provide 
instructions for actions to be taken by County Supervisors in 
maintaining a good relationship with FCIC Insurance Representatives.



Sec. 1945.28  Relationship between ASCS and FmHA or its successor 
agency under Public Law 103-354.

    Exhibit A of FmHA Instruction 2000-JJ (a copy of which is available 
in any FmHA or its successor agency under Public Law 103-354 office) is 
a Memorandum of Understanding between ASCS and FmHA or its successor 
agency under Public Law 103-354. This Memorandum of Understanding is 
intended to assist in maintaining and improving the working relationship 
between the ASCS and the FmHA or its successor agency under Public Law 
103-

[[Page 571]]

354 by coordinating certain ASCS disaster programs with the FmHA or its 
successor agency under Public Law 103-354 EM loan program. It 
specifically identifies the administrative responsibilities of FmHA or 
its successor agency under Public Law 103-354 County Supervisors and 
ASCS County Executive Directors concerning disaster benefits.



Sec. 1945.29  [Reserved]



Sec. 1945.30  FmHA or its successor agency under Public Law 103-354 
Emergency Loan Support Teams (ELST).

    (a) Use of ELSTs. ELSTs are to be used when a disaster warrants 
immediate attention by FmHA or its successor agency under Public Law 
103-354 in implementing the EM loan program. Also, ELSTs are used when 
unusually large numbers of EM loan applications are received and 
personnel from other areas are required to be temporarily assigned to 
assist in rendering prompt service to the affected area(s).
    (b) State Office ELST. Each State Director shall form an ELST to be 
deployed, when needed, in areas affected by a major disaster, 
Presidential emergency, or a natural disaster. ELSTs shall assist the 
State Directors in expediting the making of EM loans to disaster 
victims.
    (1) State Directors shall use the ELSTs formed in their State(s) and 
all other FmHA or its successor agency under Public Law 103-354 
personnel within their State(s), as the need arises, in making EM loans. 
If additional help is needed beyond that available in the State, 
including the use of overtime, temporary personnel, and/or private 
contractors, the State Director shall advise the National Office of 
these needs and request outside assistance.
    (2) Upon request from a State Director, the Assistant Administrator, 
Farmer Programs, will consider detailing ELSTs from other States to 
assist in the making of EM loans.
    (3) State ELSTs will consist of a team leader and team members, 
selected by the State Director.
    (i) The State ELST can include Farmer Programs Specialists, County 
and Assistant County Supervisors, Program Review Assistants, County 
Office Assistants, and County Office Clerks.
    (ii) So that no one person or County Office unit bears an unfair 
burden, State team members will be changed from time to time.
    (iii) Team members will provide training in EM loan making and EM 
loan servicing to all County Office employees.
    (iv) District Directors are responsible for notifying the State 
Director of any need to change a team member within their district.
    (4) State ELSTs will be trained as follows:
    (i) The National Office will hold training meetings or workshops for 
ELST leaders as needed; and
    (ii) State ELST leaders will be responsible for training and keeping 
the State team and all other State personnel currently informed on all 
phases of EM loans.
    (5) State Directors will issue a State supplement establishing an 
ELST for the State(s) under their jurisdiction. This supplement will 
name the team leader and all members. A copy of this supplement will be 
sent to the National Office, Attention: Director, Emergency Designation 
Staff.
    (c) National Office ELST leaders. The National Office has 
established a cadre of ELST team leaders.
    (1) National Office team leaders will be used as follows:
    (i) Training of FmHA or its successor agency under Public Law 103-
354 field personnel, other USDA personnel, and temporary personnel in 
the making of EM loans:
    (ii) Assisting State Directors in the organization and expediting of 
assistance to eligible disaster victims; and
    (iii) Leading ELSTs in areas with an unusually large volume of EM 
loan applications.
    (2) Upon request from a State Director, the Assistant Administrator, 
Farmer Programs, will consider detailing one or more National Office 
team leaders to assist in the training of personnel and organizing of EM 
loan processing activities.

[[Page 572]]



Sec. 1945.31  FmHA or its successor agency under Public Law 103-354 
Emergency Loan Assessment Teams (ELAT).

    The State Director will deploy ELATs on a continuing basis to the 
designated areas to monitor EM loan processing activities in order to 
minimize loan errors, especially in loss calculations and eligibility 
determinations. Such teams will be composed of State Office Farmer 
Programs staff members, District Directors or Assistant District 
Directors, Office Management Assistants/Program Review Assistants, and 
auditors from the Office of Inspector General, if they desire to 
participate. The team leader will keep the State Director informed by 
telephone and by submission of weekly written reports, setting forth the 
problems discovered and the corrective actions taken or to be taken. The 
State Director will keep all County and District Offices in the 
designated area of the State informed of the common problems found by 
the team and require appropriate corrective action to be taken by the 
County Office. Such actions will be monitored by the District Director 
and reported to the State Director when corrective measures have been 
completed. State Directors will monitor the handling of this quality 
control measure and will forward a copy of the ELAT team leader's report 
to the Administrator, Attention: Emergency Designation Staff.



Sec. Sec. 1945.32-1945.34  [Reserved]



Sec. 1945.35  Special EM loan training.

    (a) General. When it is evident that a large number of farmers were 
affected by a widespread disaster in a State, the National Office will 
send a qualified representative(s) from the Emergency Designation Staff 
to the State to assist the State Director in conducting a training 
meeting(s) with State, District and County employees, provided there has 
not been a recent training meeting in that State.
    (b) Purpose. A good training program is a must in disaster areas. 
This program should adequately instruct State and County Office 
personnel so that when the training is completed they will be well 
qualified to process EM loans without undue delay. The training meeting 
will last two days (16 hours) and include a workshop and a test.
    (c) Objective. The basic objective of this training program is to 
keep State and County personnel properly trained in the current methods 
of processing EM loan applications and EM loan making. This will result 
in more expeditious service to disaster victims during critical times 
and minimize erroneous interpretations of regulations by FmHA or its 
successor agency under Public Law 103-354 employees in administering the 
EM loan program.
    (d) Comprehensive EM loan training package. A comprehensive EM loan 
training package has been developed for use by National Office and Staff 
Office personnel in training all EM loan writers (both regular and 
temporary employees). This package, including an application kit, will 
be used for the EM loan training meetings, and any subsequent EM loan 
training meetings conducted by State or District personnel.
    (e) Funding. Travel for the two-day session required in paragraph 
(b) of this section may be funded from a special purpose account with 
advance approval from the Budget Division. The following information 
must be provided to the Budget Division when a request is made for these 
additional travel funds:
    (1) Number of sessions.
    (2) Categories, by number, of personnel attending each session.
    (3) Estimated cost per session.



Sec. Sec. 1945.36-1945.44  [Reserved]



Sec. 1945.45  Public information function.

    A good public information program is a must in disaster areas. This 
program should inform farmers and the general public when and where EM 
loans are available. Also, the information will state the EM loan 
objectives, eligibility requirements, and type of assistance available. 
Public information functions will be performed according to exhibit A of 
FmHA instruction 2015-A (available in any FmHA or its successor agency 
under Public Law 103-354 office).

[[Page 573]]



Sec. Sec. 1945.46-1945.50  [Reserved]

                          PART 1946 [RESERVED]



PART 1948_RURAL DEVELOPMENT--Table of Contents




Subpart A [Reserved]

   Subpart B_Section 601 Energy Impacted Area Development Assistance 
                                 Program

Sec.
1948.51 General.
1948.52 Objectives.
1948.53 Definitions.
1948.54 Eligible applicants.
1948.55 Source of funds.
1948.56 Program purposes.
1948.57 Eligible activities.
1948.58 [Reserved]
1948.59 Ineligible activities.
1948.60 Delegation and redelegation of authority.
1948.61 State supplements and guides.
1948.62 Environmental impact requirements.
1948.63 Historic preservation requirements.
1948.64 Equal opportunity requirements.
1948.65 Relocation Act requirements.
1948.66 [Reserved]
1948.67 Procedure for designation.
1948.68 Criteria for designation.
1948.69 [Reserved]
1948.70 Designation approval.
1948.71 [Reserved]
1948.72 Industry reports.
1948.73-1948.77 [Reserved]
1948.78 Growth management and housing planning projects.
1948.79 Application procedure for planning grants.
1948.80 Planning grant selection criteria.
1948.81 State Investment Strategy for Energy Impacted Areas.
1948.82 Plan and State Investment Strategy approval procedure.
1948.83 Performance of site development work.
1948.84 Application procedure for site development and acquisition 
          grants.
1948.85 [Reserved]
1948.86 Site development and acquisition grant selection criteria.
1948.87 [Reserved]
1948.88 Direct land acquisition by FmHA or its successor agency under 
          Public Law 103-354.
1948.89 Land condemnation by FmHA or its successor agency under Public 
          Law 103-354.
1948.90 Land transfers.
1948.91 Inspections of development.
1948.92 Grant approval and fund obligation.
1948.93 Appeal procedure.
1948.94 Reporting requirements.
1948.95 Grant monitoring.
1948.96 Audit requirements.
1948.97 Grant closing and fund disbursement.
1948.98 Grant agreements.
1948.99-1948.100 [Reserved]

Exhibit A to Subpart B--Grant Agreement--Growth Management and Housing 
          Planning for Approved Designated Energy Impacted Areas
Exhibit B to Subpart B--Grant Agreement (Public Bodies) for Site 
          Development and/or Site Acquisition for Housing and/or Public 
          Facilities and/or Services

Subpart C [Reserved]

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

Subpart A [Reserved]



   Subpart B_Section 601 Energy Impacted Area Development Assistance 
                                 Program

    Authority: Sec. 601, Pub. L. 95-620, delegation of authority by the 
Sec. of Agri., 7 CFR 2.23; delegation of authority by the Asst. Sec. for 
Rural Development, 7 CFR 2.70.

    Source: 44 FR 35984, June 19, 1979, unless otherwise noted.



Sec. 1948.51  General.

    This subpart sets forth policies and procedures for designation, 
approval of designation, and making grants for assistance to areas 
impacted by increased coal and uranium production, processing, or 
transportation. The Farmers Home Administration (FmHA) or its successor 
agency under Public Law 103-354 will fully consider all A-95 clearing-
house review comments and recommendations in selecting applications for 
funding. Any processing or servicing activity conducted pursuant to this 
subpart involving authorized assistance to FmHA or its successor agency 
under Public Law 103-354 employees, members of their families, known 
close relatives, or business or close personal associates, is subject to 
the provisions of subpart D of part 1900 of this chapter. Applicants for 
this assistance are required to identify any known relationship or 
association with

[[Page 574]]

an FmHA or its successor agency under Public Law 103-354 employee.

[44 FR 35984, June 19, 1979, as amended at 58 FR 228, Jan. 5, 1993]



Sec. 1948.52  Objectives.

    The objective of the program is to help areas impacted by coal or 
uranium development activities by providing assistance for the 
development of growth management and housing plans and in developing and 
acquiring sites for housing and public facilities and services.



Sec. 1948.53  Definitions.

    (a) Approved designated area. A group of counties, a county, or a 
part of a county designated as an energy impacted area by the Governor 
of a State and approved by the Secretary of Energy.
    (b) Available financial resources. All existing financial resources 
which could be used for impact assistance including Federal, State, and 
local financial resources and financial resources accruing to States and 
local governments as a result of coal or uranium development activity 
and not already committed to other programs by low or historical 
precedent.
    (c) Coal. Coal means anthracite and bituminous coal, lignite, and 
any fuel derivative thereof.
    (d) Coal or uranium development activities. The production, 
processing, or transportation of coal or uranium.
    (1) Production includes the mining of coal or uranium and all mine 
site operations connected with such mining operations and processing 
activities. This includes construction activities on mine sites relating 
to mining, production, and processing.
    (2) Processing includes all operations performed on coal or uranium 
including construction of processing plants. However, processing does 
not include conversion into electrical energy.
    (3) Transportation which directly relates to the production and 
processing of coal or uranium including transportation networks in the 
county of origin of the coal or uranium and counties of processing of 
coal and uranium. This includes transportation depots along 
transportation networks that are used primarily for the transfer of coal 
or uranium for domestic consumption. This also includes unit train 
rolling stock construction and repair facilities.
    (e) Condemnation by U.S. Department of Agriculture (USDA). The use 
of Federal authority by the Secretary of Agriculture to condemn real 
property.
    (f) Council of local governments. An areawide development 
organization which includes one or more local governments servicing at 
least a portion of an approved designated area. Such organization must 
either have a policymaking body made up of a majority of local elected 
officials.
    (g) Eligible employment. Full time work related to coal or uranium 
development activities.
    (h) Eligible employment facility. A coal or uranium mine, processing 
plant, or transportation depot.
    (i) Energy impacted areas. An area where coal and uranium 
development activities have a significant impact on the socio-economic 
structure of the area and which meet the criteria set out at Sec. 
1948.68 of this subpart.
    (j) Fair market value. The price at which a property will sell in 
the open market allowing a reasonable period of time for typical, fully-
informed buyers and sellers to react, assuming that the purchaser and 
seller are both willing participants in the transaction.
    (k) Grantee. An entity with whom FmHA or its successor agency under 
Public Law 103-354 has entered into a grant agreement under this 
program.
    (l) Growth management planning. Planning for the orderly development 
of an approved designated area. This planning includes, but is not 
limited to: Planning for provision of resources to support housing, 
public facility needs, sewer and water needs; planning for the provision 
of additional public services needed; overall plans for the coordinated 
development of all approved designated areas within a State; the 
development of State Investment Strategies for Energy Impacted Areas; 
and coordination of development of approved designated areas at the 
interstate level where impact is interstate in nature.
    (m) Housing planning. Identification of present and future housing 
needs within an approved designated area and

[[Page 575]]

providing methods for developing needed housing. This planning includes, 
but is not limited to the identification of: housing sites; housing site 
development needs; data and resource needs; funding needs; acquisition 
methods; and agencies of government responsible for delivery of housing 
services.
    (n) Industry reports. Those reports concerning production, expected 
production, and employment within an approved designated area which are 
requested by the Governor and submitted by a person to the Secretary of 
Energy.
    (o) Local government. Any county, parish, city, town, township, 
village, or other general purpose political subdivision of a State with 
the power to levy taxes and expend Federal, State, and local funds and 
exercise governmental powers and which is located in, or has authority 
over, the energy impact area. With the concurrence of the Governor, the 
term may also include such school, water, sewer, highway, or other 
public special purpose districts or authorities, or public or private 
nonprofit corporations as may be appropriate to carry out the purpose 
for which a grant is being made. These corporations or special purpose 
districts or authorities may apply (including applications previously 
received) for grants from fiscal year 1981 and earlier fiscal year funds 
only.
    (p) Person. Any corporation, individual, partnership, company, 
association, firm, institution, society, trust, joint venture, or joint 
stock company, any State or any agency or instrumentality thereof.
    (q) Public facilities. Installations open to the public and used for 
the public welfare. This includes but is not limited to: hospitals, 
clinics, firehouses, parks, recreation areas, sewer plants, water 
plants, community centers, libraries, city or town halls, jailhouses, 
courthouses, and schoolhouses.
    (r) Public services. The provision to the public of services such 
as: health care, fire and police protection, recreation, etc.
    (s) Site. A site is a plot of land which is suitable or can be made 
suitable for providing housing, public facilities, or services.
    (t) Site acquisition. Obtaining legal title to a site (or sites) or 
obtaining leaseholds or other interests in land, by an instrumentality 
of a state or local Government, or by FmHA or its successor agency under 
Public Law 103-354, for housing, public facilities, or services.
    (u) Site development. Site restoration, necessary off-site 
improvements and such on-site improvements as the construction of 
sewerage collection and water distribution lines (does not include 
individual taps) and construction of access roads; but does not include 
the construction of houses or public facilities.
    (v) Site restoration. On-site improvements to the real property 
(such as backfilling, compacting, grading and leveling) necessary for 
the construction of houses and public facilities.
    (w) State. Any of the fifty States, Puerto Rico, and any territory 
or possession of the United States.
    (x) State Investment Strategy for Energy Impacted Areas. The 
investment strategy for the development of approved designated areas 
within a State as proposed by the Governor and approved by FmHA or its 
successor agency under Public Law 103-354.
    (y) Substandard housing. All housing units which do not have 
complete plumbing fixtures, lack adequate heating systems, are not 
structurally sound, or contain any other conditions that would cause a 
safety, sanitary, or health hazard to the family or community.

[44 FR 35984, June 19, 1979, as amended at 45 FR 26943, Apr. 22, 1980; 
46 FR 33021, June 26, 1981]



Sec. 1948.54  Eligible applicants.

    Organizations eligible for grants include local governments, 
councils of local government, and State governments that have the leval 
authority necessary to undertake the proposed project.

[46 FR 33022, June 26, 1981]



Sec. 1948.55  Source of funds.

    (a) Grants will be awarded from appropriate funds specifically 
allocated for this program.
    (b) Grants made for growth management and housing planning may equal 
but will not exceed 10 percent of the

[[Page 576]]

total amount of funds appropriated for and allocated to this program.



Sec. 1948.56  Program purposes.

    (a) FmHA or its successor agency under Public Law 103-354 will make 
grants for assistance to approved designated areas in accordance with 
criteria contained in this subpart by providing assistance to fill gaps 
in growth management and housing planning, and to provide supplementary 
support for acquisition and development of sites for housing and public 
facilities and services by States, local governments, and councils of 
local government.
    (b) Efforts will be made to provide comprehensive assistance to 
approved designated areas through the coordination power of the 
Secretary of Agriculture by utilizing existing plans, State and local 
programs, and other Federal programs to the maximum extent possible. 
Particular attention will be given to the utilization of existing FmHA 
or its successor agency under Public Law 103-354 authorities under other 
FmHA or its successor agency under Public Law 103-354 programs in 
conjunction with this subpart for providing assistance to approved 
designated areas in accordance with the Governor's approved State 
Investment Strategy for Energy Impacted Areas.
    (c) Where existing plans are unsuitable or nonexistent, and other 
assistance programs are inadequate or unavailable on a timely basis, 
FmHA or its successor agency under Public Law 103-354 will provide 
assistance under this subpart to States, councils of local governments, 
and local governments for the modification, updating, and/or development 
of growth management and/or housing plans to deal with problems 
resulting from coal or uranium development within approved designated 
areas according to the criteria contained in this subpart.
    (d) Where needed, FmHA or its successor agency under Public Law 103-
354 will provide assistance for the development of sites and/or the 
acquisition of sites for housing and public facilities and services 
within approved designated areas according to the criteria contained in 
this subpart. Such assistance for site development and acquisition will 
be made in accordance with FmHA or its successor agency under Public Law 
103-354 approved plans and State Investment Strategies for Energy 
Impacted Areas in accordance with the criteria contained in the subpart.
    (e) At the request of the Governor of the appropriate State, FmHA or 
its successor agency under Public Law 103-354 will take action to 
acquire real property directly for sites for housing and/or public 
facilities and services in accordance with procedures set forth in this 
subpart.
    (f) At the request of the Governor of the appropriate State, where 
neither the State nor local government has power to do so for this 
purpose, FmHA or its successor agency under Public Law 103-354 may take 
action through condemnation to acquire real property for sites necessary 
for housing, public facilities, or services.



Sec. 1948.57  Eligible activities.

    Grant Funds may be used for:
    (a) The preparation of growth management and/or housing plans (or 
aspects thereof) for which financial resources are not available for 
approved designated areas as set forth in the grant agreement, including 
but limited to:
    (1) One hundred percent of the total cost of developing growth 
management and/or housing plans.
    (2) One hundred percent of the cost of developing aspects of growth 
management plans and/or housing plans including but not limited to:
    (i) Sewer plans;
    (ii) Water plans;
    (iii) Recreation plans;
    (iv) Transportation plans;
    (v) Education plans; and
    (vi) Subdivision plans.
    (3) Payment of salaries of professional, technical, and clerical 
staff to carry out growth management and housing planning and 
evaluation;
    (4) Payment of necessary reasonable office expenses such as office 
rental, office utilities, and office equipment rental;
    (5) Purchase of office supplies;

[[Page 577]]

    (6) Payment of necessary reasonable administrative posts, such as 
workmen's compensation, liability insurance, and employer's share of 
social security and travel; and
    (7) Payment of costs to undertake tests, make appraisals, and 
arrange for engineering/architectural services necessary for the 
planning activity.
    (b) Up to 75 percent of the actual cost of developing or acquiring 
sites for housing, public facilities, or services for which financial 
resources are otherwise not available as set forth in the grant 
agreement, including but not limited to:
    (1) Necessary grading and leveling;
    (2) Sewer and water connections;
    (3) Necessary water and sewer lines to housing and public facilities 
sites;
    (4) Access roads to housing and public facilities sites;
    (5) Restoring previously mined sites;
    (6) Necessary engineering reports in connection with site 
development;
    (7) Payment of costs to undertake tests, make appraisals, and 
engineering/architectural services necessary for the site development 
and/or site acquisition;
    (8) Necessary legal fees involved in the transfer of the real 
property.



Sec. 1948.58  [Reserved]



Sec. 1948.59  Ineligible activities.

    (a) Growth management and housing planning grant funds may not be 
used for:
    (1) Acquisition, construction, repair, or rehabilitation of existing 
housing and public facilities;
    (2) Replacement of, or substitution for, any financial support 
previously provided or assured from any other source which would result 
in a reduction of current efforts on the part of the applicant;
    (3) Duplication of current services;
    (4) Routine administrative activities not allowed under Federal 
Management Circular FMC 74-4, ``Cost Principles Applicable to Grants and 
Contracts with State and Local Governments;''
    (5) Planning for areas other than approved designated areas;
    (6) Planning other than growth management and housing planning; or
    (7) Political activities.
    (b) Grant funds for site development may not be used for:
    (1) Construction, repair, or rehabilitation of housing and public 
facilities;
    (2) Replacement of, or substitution for, any financial support 
previously provided or assured from any other source which would result 
in a reduction of effort on the part of the applicant;
    (3) Administrative expenses not allowed under FMC 74-4;
    (4) Purposes for which funding exists under other State or Federal 
programs that may reasonably be obtained on a timely basis by the 
applicants;
    (5) Duplication of current services; or
    (6) Political activities.



Sec. 1948.60  Delegation and redelegation of authority.

    The FmHA or its successor agency under Public Law 103-354 State 
Director is responsible for implementing the authorities contained in 
this subpart and may issue State supplements redelegating these 
authorities to appropriate FmHA or its successor agency under Public Law 
103-354 employees.



Sec. 1948.61  State supplements and guides.

    FmHA or its successor agency under Public Law 103-354 State 
Directors will obtain National Office clearance for all State 
supplements and guides in accordance with paragraph VIII of FmHA 
Instruction 021.2, (available in any FmHA or its successor agency under 
Public Law 103-354 office).
    (a) State supplements. State Directors may supplement this subpart 
as appropriate to meet State and local laws and regulations and to 
provide for orderly application processing and efficient service to 
applicants. State supplements shall not contain any requirements 
pertaining to designations, designation approval, or plan approv als 
more restrictive than those in this subpart.
    (b) State guides. State Directors may develop guides for use by 
applicants if the guides to this subpart are not adequate. State 
Directors may prepare guides for: items needed for the application; 
items necessary for the docket; and items required prior to grant 
closing or construction starts.

[[Page 578]]



Sec. 1948.62  Environmental impact requirements.

    (a) The policies and regulations contained in subpart G of part 1940 
of this chapter apply to grants made and other actions under this 
program.
    (b) Subsequent to an energy impact area designation by the Governor 
and establishment of priorities, the FmHA or its successor agency under 
Public Law 103-354 State Director, in consultation with the Governor, 
shall define the geographic boundaries or otherwise delineate the areas 
which will be studied for environmental impacts.
    (c) Boundaries shall define the area within which the environmental 
impacts of the proposed action can be reasonably studied. Proper 
delineation of impact areas will avoid duplication of effort by using 
one assessment or impact statement to study a broad area rather than 
numerous overlapping documents prepared for smaller projects.

[44 FR 35984, June 19, 1979, as amended at 49 FR 3764, Jan. 30, 1984]



Sec. 1948.63  Historic preservation requirements.

    The policies and regulations contained in part 1901, subpart F, of 
this chapter apply to this program.



Sec. 1948.64  Equal opportunity requirements.

    The policies and regulations contained in part 1901, subpart E, of 
this chapter apply to grants made under this program.



Sec. 1948.65  Relocation Act requirements.

    The policies and regulations contained in title 7, subtitle A, part 
21 of the Code of Federal Regulations (Uniform Relocation Assistance and 
Real Property Acquisition Policies Act of 1970) will apply to site 
development and acquisition grants and other actions under this program.



Sec. 1948.66  [Reserved]



Sec. 1948.67  Procedure for designation.

    (a) Local governments may request the Governor of the State in which 
they are located to designate an area served by them as an energy 
impacted area.
    (b) The Governor will define the geographic area of a designated 
area consistent with the nature of the impact and the socio-economic 
integration of the area.
    (c) The Governor may designate an area as an energy impacted area 
based on the criteria contained in this subpart.



Sec. 1948.68  Criteria for designation.

    (a) An area designated by the Governor must have the following 
characteristics:
    (1) During the most recent calendar year, the eligible employment in 
coal or uranium development activities within the area has increased by 
eight percent or more from the preceding year, or such employment (as 
projected by generally acceptable estimates) will increase by eight 
percent (of the eligible employment in the year of the designation) or 
more per year during each of the next three calendar years.
    (2) Because of increased employment in coal or uranium development 
activities, a shortage of housing, inadequate public facilities, or 
services exists or will exist in the area. Such shortages or 
inadequacies may be demonstrated by: Housing shortage statistics; higher 
occupancy rates of substandard houses than has historically occurred 
within the area; an increase (for which data or projected data is 
available) in eligible employment from the year of the designation of at 
least 100 workers and one-half of one percent of the designated area's 
population; or data showing that available public facilities and 
services in the area are below generally accepted standards due to the 
increased demand resulting from coal and uranium development activities.
    (3) Available State and local financial resources are inadequate to 
meet the public need for housing or public facilities and services at 
present or in the next three years. In making this determination the 
Governor should consider the following:
    (i) State revenue increases resulting from coal and uranium 
development activity based on existing tax laws;
    (ii) Federal funds transferred to the State for impact assistance;

[[Page 579]]

    (iii) Local revenue increases resulting from coal or uranium 
development activities based on existing tax laws;
    (iv) Other federal financial assistance to which the area may have 
access;
    (v) All other available State and local sources of funding;
    (vi) The time during which the resources will be available;
    (vii) Existing laws committing increases in State and local revenues 
and Federal transfers to purposes other than impact assistance; and
    (viii) The estimated cost of development based on the best available 
informed judgment.
    (b) Designations submitted to the Secretary of Energy for approval 
must have the following attached:
    (1) A list of all counties and parts of counties covered by the 
designation;
    (2) If the area is smaller than a county, a map showing the boundary 
of the area and the approximate location of all eligible employment 
facilities in the area and nearby;
    (3) A written justification for the inclusion of an area if the area 
is smaller than a county;
    (4) The level of eligible employment within the designated area for 
each of the two most recent calendar years. This data should be obtained 
from a single source for the entire State, if possible; special surveys 
may be used when the Governor determines that these more accurately 
reflect employment conditions within the designated area, or in cases 
where data from other sources for the most recent calendar year is 
unavailable at the time of designation. Reference should be made to the 
data sources used if it is a Federal source; if a non-Federal sources is 
used, a copy of the source and a brief description of the procedures 
used for justification should be included. If projections of eligible 
employment are to be considered, projections of such employment for the 
next three years must be attached; identification of data sources and 
methodology used in developing those projections and a copy of any 
survey data used should be included.
    (c) In areas where the impacted area covers counties or parts of 
counties located in more than one State, the Governors of the affected 
States may jointly designate such area and submit the designation to the 
Secretary of Energy for approval.
    (d) After examining these factors and determining that the area 
meets the criteria of (a) above, the Governor may so certify in a letter 
bearing his or her signature and submit the letter of certification with 
all data and estimates upon which the designation is based to the 
Secretary of Energy for approval.
    (e) Each designation submitted should have the name and phone number 
of a contact person in the Governor's designating office.
    (f) An original and one copy of the designation should be submitted 
to the Secretary of Energy, Department of Energy, Mail Stop 8G-031, 
Forrestal Building, Washington, DC 20585.
    (g) Two copies of all designations submitted for approval shall be 
submitted to the appropriate FmHA or its successor agency under Public 
Law 103-354 State Director. The FmHA or its successor agency under 
Public Law 103-354 State Director shall forward one copy to the Office 
of Area Development Assistance in the FmHA or its successor agency under 
Public Law 103-354 National Office.
    (h) The Governor should designate all areas expected to be 
considered in fiscal year 1979 allocations of funds before July 1, 1979.

[44 FR 35984, June 19, 1979, as amended at 46 FR 33022, June 26, 1981]



Sec. 1948.69  [Reserved]



Sec. 1948.70  Designation approval.

    Upon receipt of a request for approval of a designation made under 
this section, the Secretary of Energy shall:
    (a) Determine to the best of his ability the consistency of the 
supporting data submitted along with the designation by the Governor;
    (b) Confer with FmHA or its successor agency under Public Law 103-
354 on approval;
    (c) Notify the Governor and the Administrator of FmHA or its 
successor agency under Public Law 103-354 of action taken on each 
designation within 30 calendar days of the receipt of a request for 
approval;
    (d) Consult with the Governor before the disapproval of any 
designation; and

[[Page 580]]

    (e) Publish a description in the Federal Register of all designated 
areas approved within 30 days of their approval.



Sec. 1948.71  [Reserved]



Sec. 1948.72  Industry reports.

    Any person regularly engaged in any coal or uranium development 
activity within an area designated and approved in accordance with this 
subpart, shall prepare and transmit a report to the Secretary of Energy, 
Department of Energy, Mail Stop 8G-031, Forrestal Building, Washington, 
DC 20585 within 90 days after a written request to such person by the 
Governor of the State in which such area is located.
    (a) The report shall contain:
    (1) Projected levels of employment in coal or uranium development 
activities within the approved designated area for the next three 
calendar years;
    (2) The projected number of new jobs to be created in coal or 
uranium development activities by the person within the approved 
designated area in each of the following three calendar years;
    (3) Current or planned actions of the person in relation to the 
provision of housing or public facilities for such person's employees in 
the next three calendar years;
    (4) Contracts in force whereby the person intends to provide funds 
to State government, local governments, and public or private nonprofit 
organizations for the provision of housing or public facilities for such 
person's employees; and
    (5) The projected quantity of coal or uranium to be produced, 
processed, or transported by the person in each of the next three years.
    (b) The Governor requesting the report will notify the Secretary of 
Energy of persons from whom reports have been requested.
    (c) The Secretary of Energy shall provide a copy of these reports to 
the Secretary of Agriculture, the appropriate Governor, and the 
appropriate county or local officials, and make it available for public 
inspection and copying in the public reading room of the Department of 
Energy, Room GA152, Forrestal Building, Washington, DC 20585.



Sec. Sec. 1948.73-1948.77  [Reserved]



Sec. 1948.78  Growth management and housing planning projects.

    (a) Existing plans for growth management and housing may be used to 
meet the planning requirements of this subpart.
    (b) A reasonable effort should be made to modify existing plans for 
use in meeting the planning requirements of this section.
    (c) The Governor shall be responsible for the coordination of 
planning within a State.
    (d) The planning process developed with assistance under this 
section should begin at the local level and flow upward to the State.
    (e) Planning processes developed with assistance under this section 
should have the maximum possible citizen involvement in the development 
of plans.
    (f) Governors should give full consideration to local and substate 
priorities in the development of the State Investment Strategy for 
Energy Impacted Areas.
    (g) Plans developed with assistance under this section should be 
fully coordinated with other Federal, State, substate, and local 
planning activities affected by the project.
    (h) Planning conducted by the State include effective management 
activities for coordinated development of approved designated areas 
through the plan implementation stage.

[44 FR 35984, June 19, 1979, as amended at 48 FR 29121, June 24, 1983]



Sec. 1948.79  Application procedure for planning grants.

    (a) Applicants may submit a preapplication for a planning grant upon 
designation of the area as an energy impacted area by the Governor. FmHA 
or its successor agency under Public Law 103-354 will not take final 
action on the preapplication until the designation has been approved by 
the Secretary of Energy.
    (b) Intergovernmental consultation should be carried out in 
accordance with 7 CFR part 3015 subpart V, ``Intergovernmental Review of 
Department of Agriculture office.''
    (c) Applicants shall file an original and one copy of SF 424.1, 
``Application

[[Page 581]]

for Federal Assistance (For Non-construction),'' with the appropriate 
FmHA or its successor agency under Public Law 103-354 office. A copy 
should also be filed with the Governor's office of the appropriate 
State. This form is available in all FmHA or its successor agency under 
Public Law 103-354 offices. Local governments and councils of local 
governments shall submit preapplications to the appropriate FmHA or its 
successor agency under Public Law 103-354 District Office. State 
governments shall apply to the appropriate FmHA or its successor agency 
under Public Law 103-354 State Office. The FmHA or its successor agency 
under Public Law 103-354 District Office will forward the preapplication 
with written comments within 10 working days to the appropriate State 
Office.
    (d) All preapplications shall be accompanied by:
    (1) Evidence of applicant's legal existence;
    (2) Evidence of applicant's authority to prepare growth management 
and/or housing plans;
    (3) A statement declaring that the planning neither duplicates nor 
conflicts with current activities;
    (4) An original and one copy of Forms FmHA 400-1, ``Equal 
Opportunity Agreement,'' and Form FmHA or its successor agency under 
Public Law 103-354 400-4, ``Assurance Agreement;'' and
    (5) A statement regarding other financial resources available to the 
area for this planning.
    (e) District and State FmHA or its successor agency under Public Law 
103-354 Offices receiving preapplications will:
    (1) Determine if the area to be covered by this project is an 
``approved designated area'' as defined in this subpart;
    (2) Comply with the environmental requirements set forth in this 
subpart; and
    (3) Prepare a Historic Preservation Assessment in accordance with 
part 1901, subpart F, of this chapter.
    (f) District FmHA or its successor agency under Public Law 103-354 
Offices receiving preapplications will also provide written comments 
reflecting planning grant selection criteria listed in this subpart.
    (g) The FmHA or its successor agency under Public Law 103-354 
District Office will forward the original of the preapplication and 
accompanying documents including those described in paragraphs (e)(1) 
through (e)(3) and (f) of this section to the appropriate FmHA or its 
successor agency under Public Law 103-354 State Director within 10 
working days of receipt of the preapplication.
    (h) Upon receipt of a preapplication, the FmHA or its successor 
agency under Public Law 103-354 State Office will:
    (1) Review and evaluate the preapplication and accompanying 
documents;
    (2) Consult with the Governor of the appropriate State concerning 
the Governor's priorities and recommended funding level for the project; 
and
    (3) Respond to the applicant within 30 days of the date of receipt 
of the preapplication using Form AD-622, ``Notice of Preapplication 
Review Action,'' indicating the action taken on the preapplication.
    (i) Upon notification that the applicant is eligible to compete with 
other applicants for funding, a SF 424.1 may be submitted to the FmHA or 
its successor agency under Public Law 103-354 State Office by all 
applicants.
    (j) The FmHA or its successor agency under Public Law 103-354 State 
Office will send evidence of the applicant's legal existence and 
authority to the USDA Regional Office of General Counsel (OGC) and 
request that a legal determination be made of the applicant's legal 
existence and authority to prepare growth management and/or housing 
plans in those cases where an application (SF 424.1) is requested.
    (k) Upon receipt of an application on SF 424.1 by the FmHA or its 
successor agency under Public Law 103-354 State Office, a docket will be 
prepared which will include the following:
    (1) Form SF 424.1;
    (2) Form AD-622;
    (3) Any comments received in accordance with 7 CFR part 3015 subpart 
V, ``Intergovernmental Review of Department of Agriculture Programs and 
Activities''. See FmHA Instruction 1940-

[[Page 582]]

J, available in any FmHA or its successor agency under Public Law 103-
354 office.
    (4) SF 424.1;
    (5) Evidence of the applicant's legal existence and authority to 
prepare growth management and/or housing plans;
    (6) OGC legal determinations;
    (7) Grant agreement and scope of work;
    (8) Form FmHA or its successor agency under Public Law 103-354 440-
1, ``Request for Obligation of Funds;''
    (9) Form FmHA or its successor agency under Public Law 103-354 400-
1;
    (10) Form FmHA or its successor agency under Public Law 103-354 400-
4;
    (11) Historic Preservation Assessment;
    (12) District, where appropriate, and State FmHA or its successor 
agency under Public Law 103-354 written comments, assessments, and 
analysis of the proposed projects in accordance with the grant selection 
criteria; and
    (13) All certificates and statements accompanying the pre-
application and/or application.

[44 FR 35984, June 19, 1979, as amended at 48 FR 29121, June 24, 1983; 
49 FR 3764, Jan. 30, 1984; 55 FR 13503 and 13504, Apr. 11, 1990]



Sec. 1948.80  Planning grant selection criteria.

    The following criteria will be used in the selection of planning 
grant recipients:
    (a) Planning assistance which could be used for the purpose of the 
proposed planning process is not available from other sources on a 
timely basis (Mandatory);
    (b) The increase in the number of new employees and the percentage 
of increase in employment in coal and/or uranium development activities 
in the year of designation within the approved designated area (years 
projected will be averaged and treated equally);
    (c) The need for planning in relation to the financial resources 
available for such planning;
    (d) The planning priorities and recommended funding level of the 
Governor(s) of the appropriate State(s);
    (e) The appropriateness of the proposed planning activity for 
meeting the planning needs of the area, including but not limited to the 
building of planning capacity and the local priority for the project;
    (f) The inadequacy of existing plans for mitigating the effects of 
coal and/or uranium development activities; and
    (g) The nature of comments and recommendation received in accordance 
with 7 CFR part 3015 subpart V, ``Intergovernmental Review of Department 
of Agriculture Programs and Activities'' (See FmHA Instruction 1940-J, 
available in any FmHA or its successor agency under Public Law 103-354 
office.

[44 FR 35984, June 19, 1979, as amended at 48 FR 29121, June 24, 1983]



Sec. 1948.81  State Investment Strategy for Energy Impacted Areas.

    (a) The State Investment Strategy for Energy Impacted Areas should 
be a dynamic document updated as each plan or group of plans is 
submitted to FmHA or its successor agency under Public Law 103-354 for 
approval.
    (b) The Governor shall consult with the FmHA or its successor agency 
under Public Law 103-354 State Director when developing or updating a 
State Investment Strategy for Energy Impacted Areas.
    (c) The State Investment Strategy for Energy Impacted Areas will 
include but is not limited to:
    (1) A list of projects in order of priority;
    (2) The Governor's recommended level of and method of funding for 
each project through completion of the project identified in the plans 
submitted and incorporated into the State Investment Strategy for Energy 
Impacted Areas;
    (3) Methods of coordinating assistance with other State and Federal 
development programs;
    (4) The differential between available financial resources and the 
cost of needed site development and acquisition for housing and public 
facilities and services within the area covered by the State Investment 
Strategy for Energy Impacted Areas;
    (5) References to plan and page number of plan on which each 
priority project is described.
    (d) The State Investment Strategy for Energy Impacted Areas having

[[Page 583]]

projects expected to be funded in FY 1979 should be submitted to the 
FmHA or its successor agency under Public Law 103-354 State Director of 
the appropriate State before July 15, 1979. A copy should also be 
forwarded to the Administrator, FmHA or its successor agency under 
Public Law 103-354.



Sec. 1948.82  Plan and State Investment Strategy approval procedure.

    (a) Any plan submitted for FmHA or its successor agency under Public 
Law 103-354 approval, whether it is a plan developed with assistance 
under this section, an existing plan, or a modified plan, should 
contain:
    (1) The present level of coal or uranium production, processing, or 
transportation within the approved designated area covered by the plan;
    (2) The anticipated level of coal or uranium production, processing, 
or transportation in each of the next three calendar years within the 
area covered by the plan;
    (3) A brief description of the socio-economic impacts that have 
occurred during the two most recent calendar years in the approved 
designated area covered by the plan;
    (4) A brief description of the socio-economic impacts that are 
expected to occur in the approved designated area covered by the plan 
within each of the next three calendar years;
    (5) The anticipated number of new employees expected to be hired in 
coal or uranium development activities in each of the next three years 
within the approved designated area covered by the plan;
    (6) Available financial resources and federal programs that may be 
applied to meeting the needs of the approved designated area including 
but not limited to the following:
    (i) The expected amount of State assistance and State expenditures 
in the approved designated area covered by the plan which will be used 
for impact assistance in the next three years;
    (ii) The amount of tax revenues expected to accrue to local 
governments serving the approved designated area covered by the plan in 
each of the next three years due to increased economic activities which 
have occurred since the year prior to designation or are expected to 
occur as a result of coal and uranium development activity;
    (iii) Sources and amount of assistance State and local governments 
are now receiving or are expected to receive from persons for the 
provision of housing and public facility and services; and
    (iv) Existing budget surplus at the State and local level.
    (7) The specific needs of the area covered by the plan as to the 
number of housing units now needed and the number that are expected to 
be needed in each of the next three years, and/or the number and type of 
public facilities and services now needed or expected to be needed in 
the next three years;
    (8) The type and quantity of real property now needed or expected to 
be needed in the next three years for the construction of public 
facilities and/or housing and/or in the provisions of public services;
    (9) Proposed method of acquisition for each site to be acquired by 
the State or local governments; and
    (10) An estimate of assistance that will be necessary under this 
section and/or other FmHA or its successor agency under Public Law 103-
354 or Federal programs for the development of the site.
    (b) All plans meeting the criteria in paragraph (a) of this section 
should be forwarded to the Governor of the appropriate State or States 
for possible incorporation into the State Investment Strategy for Energy 
Impacted Areas.
    (c) Appropriate growth management and/or housing plans received by 
the Governor under this section may be submitted to the appropriate FmHA 
or its successor agency under Public Law 103-354 State Office by the 
Governor.
    (d) The Governor shall submit a copy of the State Investment 
Strategy for Energy Impacted Areas along with all plans the Governor is 
submitting to FmHA or its successor agency under Public Law 103-354 for 
approval.
    (e) During fiscal year 1979 the Governor may submit existing plans 
to FmHA or its successor agency under Public Law 103-354 for qualified 
approval in which some sections under paragraph (a) above are 
incomplete, provided that planning is presently

[[Page 584]]

being done to fill these gaps, or application for a planning grant has 
been submitted or is to be submitted to cover the cost of the needed 
planning. These plans must be resubmitted for final approval on or 
before December 31, 1980. No requested grant will be approved for land 
acquisition or site development unless the request is cited in the FmHA 
or its successor agency under Public Law 103-354-approved comprehensive 
growth management plan for the designated area in which the project is 
located.
    (f) The FmHA or its successor agency under Public Law 103-354 State 
Director shall review all plans and the State Investment Strategy for 
Energy Impacted Areas and provide comments on the following:
    (1) Appropriateness of FmHA or its successor agency under Public Law 
103-354 assistance under this section as called for in the plans;
    (2) Appropriateness of FmHA or its successor agency under Public Law 
103-354 assistance under other programs as called for in the plans;
    (3) Appropriateness of the State Investment Strategy for Energy 
Impacted Areas;
    (4) Other Federal programs which could be used instead of, or in 
addition to, assistance under this section; and
    (5) Recommended action.
    (g) The FmHA or its successor agency under Public Law 103-354 State 
Director shall submit all plans received from the Governor, the State 
Investment Strategy Energy Impacted Areas, and any comments to the FmHA 
or its successor agency under Public Law 103-354 National Office for 
approval within 10 days of the submission of plans and the State 
Investment Strategies for Energy Impacted Areas to the State Director.
    (h) The FmHA or its successor agency under Public Law 103-354 
National Office shall review all plans and State Investment Strategy for 
Energy Impacted Areas received and approve or return them for 
modification within 30 days of their receipt in the FmHA or its 
successor agency under Public Law 103-354 National Office.
    (i) The FmHA or its successor agency under Public Law 103-354 
National Office shall notify the appropriate State Director of all plans 
that have been approved by the Administrator.
    (j) Upon approval of the plans and State Investment Strategies for 
Energy Impacted Areas by the Administrator, FmHA or its successor agency 
under Public Law 103-354, the FmHA or its successor agency under Public 
Law 103-354 State Director may exercise the authority of the Secretary 
of Agriculture under Section 603 of the Rural Development Act of 1972 to 
convene a meeting of the appropriate representatives of all Federal and 
State agencies which are requested to supply development funds by the 
State Investment Strategy for Energy Impacted Areas for the purpose of 
obtaining tentative funding commitments consistent with their 
authorities.
    (k) The FmHA or its successor agency under Public Law 103-354 State 
Office shall notify the Governor and the appropriate District Directors 
of all plans approved by the Administrator, FmHA or its successor agency 
under Public Law 103-354.
    (l) Modifications to approved plans shall be approved by the 
Administrator of FmHA or its successor agency under Public Law 103-354 
following the above procedure.
    (m) The Governor's modification to the State Investment Strategy for 
Energy Impacted Areas may be approved by the FmHA or its successor 
agency under Public Law 103-354 State Director provided the modification 
is consistent with FmHA or its successor agency under Public Law 103-354 
approved plans.



Sec. 1948.83  Performance of site development work.

    Site development work will be done in accordance with Sec. 1942.18 
of FmHA Instruction 1942-A.



Sec. 1948.84  Application procedure for site development and acquisition 
grants.

    (a) For those projects for which Federal funding is sought in excess 
of $100,000 the applicant shall file SF 424.2, ``Application for Federal 
Assistance (For Construction)'' with the appropriate FmHA or its 
successor agency under Public Law 103-354 office. For

[[Page 585]]

those projects for which Federal funding is sought for less than 
$100,000, the applicant shall file SF 424.2 with the appropriate FmHA or 
its successor agency under Public Law 103-354 office. A copy should also 
be filed with the Governor's office of the appropriate State.
    (b) The FmHA or its successor agency under Public Law 103-354 office 
receiving a SF 424.2 shall reply to the applicant with-in 45 calendar 
days regarding the applicant's eligibility to compete for funding under 
this program using Form AD-622. (FmHA or its successor agency under 
Public Law 103-354 District offices will send each preapplication to the 
FmHA or its successor agency under Public Law 103-354 State Offices for 
review before replying to the applicant. FmHA or its successor agency 
under Public Law 103-354 District offices will send a copy of Form AD-
622 to the FmHA or its successor agency under Public Law 103-354 State 
Office at the time the AD-622 is sent to the applicant.)
    (c) Intergovernmental consultation should be carried out in 
accordance with 7 CFR part 3015 subpart V, ``Intergovernmental Review of 
Department of Agriculture Programs and Activities''. See FmHA 
Instruction 1940-J, available in any FmHA or its successor agency under 
Public Law 103-354 office.
    (d) Applicants shall file an original and one copy of SF 424.2, with 
the appropriate FmHA or its successor agency under Public Law 103-354 
office. Local governments and councils of local government shall submit 
applications to the FmHA or its successor agency under Public Law 103-
354 District Office and State governments to the FmHA or its successor 
agency under Public Law 103-354 State Office. Applications shall 
include:
    (1) Evidence of applicant's legal existence and authority to 
undertake the proposed project;
    (2) Evidence of ownership of or lease on a site to be developed or 
``Options to Purchase Real Property,'' Form FmHA or its successor agency 
under Public Law 103-354 440-34, (Lease on a site for a public facility 
will be in accordance with FmHA Instruction 1942-A and lease on a site 
for housing will be in accordance with 7 CFR part 3550);
    (3) Description of project and relationship to approved growth 
management and housing plan. Applicant must cite pages and section of 
the approved plan;
    (4) A plat of the area including elevations;
    (5) Preliminary plans and specifications on proposed development 
which will contain an estimate of the projected cost of site development 
prepared by independent qualified appraisers or architects/engineers;
    (6) The amount of Federal grant needed;
    (7) The amount and source of applicant's financial contribution to 
the project;
    (8) An original and one copy of Form FmHA or its successor agency 
under Public Law 103-354 1940-20;
    (9) An original and one copy of Forms FmHA or its successor agency 
under Public Law 103-354 400-1 and Form FmHA or its successor agency 
under Public Law 103-354 400-4;
    (10) Evidence that the land is stable if the land has been 
previously mined (include relevant data on soil and analysis);
    (11) Assurance that the requirements set forth in title 7, subtitle 
A, part 21 of the Code of Federal Regulations (Uniform Relocation 
Assistance and Real Property Acquisition Policies Act of 1970) have been 
met.
    (12) Specific concurrence of the Governor if the proposed applicant 
is neither a council of local governments nor a general purpose 
political subdivision of a State;
    (e) District and State FmHA or its successor agency under Public Law 
103-354 Offices receiving applications shall:
    (1) Determine if the project is in accordance with a FmHA or its 
successor agency under Public Law 103-354 approved growth management 
and/or housing plan covering the approved designated area;
    (2) Comply with environmental requirements set forth in subpart G of 
part 1940 of this chapter;
    (3) Prepare a Historic Preservation Assessment in accordance with 
part 1901, subpart F, of this chapter;

[[Page 586]]

    (4) Determine site stability if the land has been previously mined; 
and
    (f) District FmHA or its successor agency under Public Law 103-354 
Offices receiving applications shall also provide written comments 
reflecting site development and acquisition grant selection criteria 
(Sec. 1948.86) listed in this subpart.
    (g) The FmHA or its successor agency under Public Law 103-354 
District Office shall forward the original of the application and 
accompanying documents including those required in paragraph (e) of this 
section to the FmHA or its successor agency under Public Law 103-354 
State Director within 10 working days of receipt of the application.
    (h) Upon receipt of an application, the FmHA or its successor agency 
under Public Law 103-354 State Office shall:
    (1) Review and evaluate the application and accompanying documents;
    (2) Determine that the project is a part of and consistent with the 
State Investment Strategy for Energy Impacted Areas;
    (3) Send a copy of the applicant's evidence of legal existence and 
authority to the USDA Regional OGC for review;
    (4) If applicant is local government(s), consult with the Governor 
on funding recommendation of the project; and
    (5) Respond to the applicant within 30 days of the date of receipt 
of the application.
    (i) Upon receipt of an application by the FmHA or its successor 
agency under Public Law 103-354 State Office, a docket shall be prepared 
which shall include the following:
    (1) Application SF 424.2 and enclosures;
    (2) Any comments received in accordance with 7 CFR part 3015 subpart 
V, ``Intergovernmental Review of Department of Agriculture Programs and 
Activities''. See FmHA Instruction 1940-J, available in any FmHA or its 
successor agency under Public Law 103-354 office.
    (3) Evidence of ownership or lease of site to be developed;
    (4) Evidence of applicant's legal existence and authority;
    (5) OGC legal determination;
    (6) Preliminary plans and specifications concerning the proposed 
development;
    (7) Grant agreement and scope of work;
    (8) An estimate of projected cost of site development prepared by 
independent qualified appraisers or engineers/architects;
    (9) A topographical map of the area;
    (10) Form FmHA or its successor agency under Public Law 103-354 440-
1;
    (11) Form FmHA or its successor agency under Public Law 103-354 400-
1;
    (12) Form FmHA or its successor agency under Public Law 103-354 400;
    (13) Form FmHA or its successor agency under Public Law 103-354 
1940-20, if required by subpart G of part 1940 of this chapter;
    (14) A copy of the appropriate FmHA or its successor agency under 
Public Law 103-354 environmental review required by subpart G of part 
1940 of this chapter;
    (15) Historic Preservation Assessment;
    (16) A copy of the State Investment for Energy Areas; and
    (17) District, where appropriate, and State FmHA or its successor 
agency under Public Law 103-354 written comments, assessments and 
analysis of the proposed project in accordance with the grant selection 
criteria.

[44 FR 35984, June 19, 1979, as amended at 46 FR 61991, Dec. 21, 1981; 
48 FR 29121, June 24, 1983; 49 FR 3764, Jan. 30, 1984; 55 FR 13503 and 
13504, Apr. 11, 1990; 67 FR 78329, Dec. 24, 2002]



Sec. 1948.85  [Reserved]



Sec. 1948.86  Site development and acquisition grant selection criteria.

    The following criteria will be considered in the selection of site 
development and/or acquisition grant recipients:
    (a) Required criteria. Each project must meet the following 
criteria:
    (1) The area is covered by a FmHA or its successor agency under 
Public Law 103-354 approved plan;
    (2) The FmHA or its successor agency under Public Law 103-354 
approved plan specifically calls for the site development and/or 
acquisition;
    (3) Other Federal funds that the community could receive for the 
proj ect

[[Page 587]]

are inadequate or not available, and no State or local funds for site 
development are available to permit development on a timely basis;
    (4) The site is to be developed and/or acquired and is to be used 
for housing, public facilities, or services;
    (5) The applicant has title to the site, lease on site, or an option 
on the site and funds to purchase the site, or is applying for site 
acquisition funds;
    (6) The site will comply with Executive Orders 11988, ``Flood Plain 
Management'' and 11990, ``Protection of Wetlands;''
    (7) An appraisal of the fair market value of the site must have been 
completed;
    (8) Priority has been given in the selection of site to unoccupied 
or previously mined land;
    (9) Class I or Class II farm land was included in the site only if 
other suitable land was not available;
    (10) The land is stable if previously mined; and
    (11) Assurance that the requirements set forth in title 7, subtitle 
A, part 21 of the Code of Federal Regulations (Uniform Relocation 
Assistance and Real Property Acquisition Policies Act of 1970) have been 
met.
    (b) Competitive criteria. The following criteria will be considered 
in the selection of grantees:
    (1) Priority assigned and recommended funding level by the Governor 
in the State Investment Strategy for Energy Impacted Areas;
    (2) The increase in the number of new employees and the percentage 
of increase in employment in coal and/or uranium development activities 
in the year of designation within the approved designated area (years 
projected will be averaged and treated equally);
    (3) The severity of need for housing, public facilities, services 
that has resulted from coal or uranium development activities in 
relation to available financial resources within the approved designated 
area covered by the plan calling for the project;
    (4) Local priority for the project;
    (5) The amount of effort by State and local government to meet the 
needs of the area covered by the application as called for in the State 
Investment Strategy for Energy Impacted Areas in relation to available 
financial resources;
    (6) An assessment of the environmental impacts of the project; and
    (7) The nature of comments and recommendations of A-95 clearing- 
house(s).



Sec. 1948.87  [Reserved]



Sec. 1948.88  Direct land acquisition by FmHA or its successor agency 
under Public Law 103-354.

    (a) FmHA or its successor agency under Public Law 103-354 may take 
action to acquire real property directly upon the written request of the 
Governor of the State in which the real property is located. FmHA or its 
successor agency under Public Law 103-354 will not acquire real property 
directly under this section without such a request.
    (b) All requests for direct land acquisition should be submitted to 
the FmHA or its successor agency under Public Law 103-354 State 
Director. The following conditions must be met prior to the submission 
of a request for direct acquisition by FmHA or its successor agency 
under Public Law 103-354:
    (1) The State or local government serving the area must lack power 
to condemn land of this type for this purpose and must supply an opinion 
by the State Attorney General that this authority is lacking;
    (2) The real property is to be used as a site for needed housing, 
public facilities, or services;
    (3) The site acquisition is called for in a FmHA or its successor 
agency under Public Law 103-354 approved plan;
    (4) The site is specifically identified by a FmHA or its successor 
agency under Public Law 103-354 approved plan;
    (5) State and local governments have been unable to obtain the real 
property for a price which does not substantially exceed its fair market 
value; and suitable alternate sites are not available;
    (6) The land is not Indian Trust land;
    (7) The land is not U.S. Forest Service land; and
    (8) There is legal authority to undertake the proposed project.

[[Page 588]]

    (c) FmHA or its successor agency under Public Law 103-354 may 
acquire Federal real property not prohibited in paragraphs (b) (6) and 
(7) of this section for purposes contained in this subpart. Farm land 
(Class I and II) will not be considered unless there is no other 
suitable land available.
    (d) If the State Director determines that no other suitable real 
property exists that can be obtained at a price which does not 
substantially exceed its fair market value, and if the appropriate State 
or local government lacks condemnation authority as evidenced by opinion 
from the Attorney General, and there is authority to undertake the 
proposed project, then the State Director shall follow the procedures 
set out in title 7, subtitle A, part 21 of the Code of Federal 
Regulations (Uniform Relocation Assistance and Real Property Acquisition 
Policies Act of 1970) and immediately open negotiations to directly 
acquire the real property through purchase or trade.
    (e) The FmHA or its successor agency under Public Law 103-354 State 
Director may acquire real property by purchase to trade for other real 
property when FmHA or its successor agency under Public Law 103-354 has 
been requested to acquire real property by the Governor of the State in 
which the real property is located.
    (f) The Governor shall submit, with this request, a commitment from 
the State to acquire real property, together with a plan of compensation 
to FmHA or its successor agency under Public Law 103-354 and evidence of 
the State's legal authority to enter into this agreement with FmHA or 
its successor agency under Public Law 103-354 to accept the real 
property and repay FmHA or its successor agency under Public Law 103-354 
for the fair market value of the real property for the intended purpose.
    (g) Real property acquired by FmHA or its successor agency under 
Public Law 103-354 shall be transferred to the State requesting by a 
quitclaim deed for a price equal to the fair market value in accordance 
with the terms of a transfer agreement.
    (h) After obtaining title to the real property and prior to transfer 
to the State, the property shall be managed by FmHA or its successor 
agency under Public Law 103-354 in accordance with part 1955, subpart B 
of this chapter.
    (i) The State Director shall inform the Governor that FmHA or its 
successor agency under Public Law 103-354 real property acquisition is 
not likely to occur by purchase or trade if negotiations have failed to 
produce acceptable results within 90 days of the request for FmHA or its 
successor agency under Public Law 103-354 acquisition of real property.



Sec. 1948.89  Land condemnation by FmHA or its successor agency under 
Public Law 103-354.

    (a) If FmHA or its successor agency under Public Law 103-354 
attempts to acquire real property at the request of a Governor through 
purchase or trade and is unable to do so, FmHA or its successor agency 
under Public Law 103-354 may take action to condemn the real property by 
the following procedures:
    (1) A request for condemnation shall be submitted by the FmHA or its 
successor agency under Public Law 103-354 State Director to the 
Administrator, FmHA or its successor agency under Public Law 103-354, 
Washington, DC 20250 at the request of the Governor of the appropriate 
State. A copy of the Governor's request for FmHA or its successor agency 
under Public Law 103-354 real property condemnation and the State 
Attorney General's opinion that State and local government condemnation 
authority is lacking shall be attached to the FmHA or its successor 
agency under Public Law 103-354 State Director's request.
    (2) The Administrator shall forward all requests for Federal 
condemnation to the OGC, USDA with a recommendation for action.
    (3) The Administrator, FmHA or its successor agency under Public Law 
103-354 shall inform the Governor of any action on the request for 
condemnation.
    (4) Real property condemned by FmHA or its successor agency under 
Public Law 103-354 shall be transferred to the requesting State by a 
quitclaim

[[Page 589]]

Deed for a price equal to the fair market value of the real property in 
accordance with terms of a negotiated real property transfer agreement.
    (5) After obtaining title to real property and prior to transfer to 
the State, the property shall be managed by FmHA or its successor agency 
under Public Law 103-354 in accordance with part 1955, subpart B of this 
chapter.
    (b) FmHA or its successor agency under Public Law 103-354 may not 
condemn Indian Trust Land or U.S. Forest Service Land.



Sec. 1948.90  Land transfers.

    (a) Transfers of real property acquired by FmHA or its successor 
agency under Public Law 103-354.
    (1) A request for FmHA or its successor agency under Public Law 103-
354 acquisition of real property by a Governor of a State constitutes an 
agreement by that State to receive said real property and to reimburse 
FmHA or its successor agency under Public Law 103-354 for the fair 
market value of said real property for the intended use.
    (2) Terms and conditions, including reimbursement terms, for real 
property transfers shall be set forth in a Real Property Transfer 
Agreement between the Administrator, FmHA or its successor agency under 
Public Law 103-354 and the appropriate Governor. These terms and 
conditions will be agreed upon by FmHA or its successor agency under 
Public Law 103-354 and the State prior to FmHA or its successor agency 
under Public Law 103-354 attempting to acquire the property. These 
agreements shall be prepared after consulting with OGC, and forwarded 
for prior approval by the FmHA or its successor agency under Public Law 
103-354 National Office.
    (3) All funds from real property transfers received by FmHA or its 
successor agency under Public Law 103-354 shall be deposited in the U.S. 
Treasury.
    (b) Transfer of real property acquired and/or developed with grant 
funds from a grant made under this subpart to a person.
    (1) Real property acquired and/or developed under this subpart may 
be transferred to a person for the purposes of construction of 
privately-owned housing.
    (2) All transfers of real property to a person must be approved by 
the FmHA or its successor agency under Public Law 103-354 State Director 
of the appropriate State.
    (3) Transfer of real property by a recipient of assistance under 
this subpart to a person must be by contract which: acknowledges the use 
of funds provided under this subpart to acquire or develop the site; 
specifies the date of performance prior to delivery of the deed; 
provides for FmHA or its successor agency under Public Law 103-354 
concurrence before changes or modifications; and assures FmHA or its 
successor agency under Public Law 103-354 that the real property will be 
used for the purposes under which the grant was made.
    (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.
    (5) All funds received by FmHA or its successor agency under Public 
Law 103-354 from real property transfers shall be deposited in the U.S. 
Treasury.

(42 U.S.C. 8401; delegation of authority by the Secretary of 
Agriculture, 7 CFR 2.23; delegation of authority by the Assistant 
Secretary for Rural Development, 7 CFR 2.70)

[44 FR 35984, June 19, 1979, as amended at 46 FR 33022, June 26, 1981; 
56 FR 28038, June 19, 1991; 68 FR 61331, Oct. 28, 2003]



Sec. 1948.91  Inspections of development.

    Inspections will be made by the FmHA or its successor agency under 
Public Law 103-354 State Engineer or other employee designated by the 
FmHA or its successor agency under Public Law 103-354 State Director to 
ascertain whether site development is proceeding in accordance with 
plans and specifications. Such inspections are solely for the benefit of 
the Government and not for the benefit of the Grantee or any other 
person.

[[Page 590]]



Sec. 1948.92  Grant approval and fund obligation.

    (a) The FmHA or its successor agency under Public Law 103-354 State 
Office shall review the docket to determine whether the proposed grant 
complies with this subpart and that funds are available.
    (b) The FmHA or its successor agency under Public Law 103-354 State 
Director shall be the approving officer on all grants made under this 
subpart.
    (c) If at any time prior to grant approval it is decided that 
favorable action will not be taken on a preapplication or application, 
the FmHA or its successor agency under Public Law 103-354 State Director 
will notify the applicant in writing of the reasons why the request was 
not favorably considered. The notification to the applicant will state 
that a review of this decision by FmHA or its successor agency under 
Public Law 103-354 may be requested by the applicant in accordance with 
FmHA Instruction 1900-B.
    (d) If a grant is recommended, Form FmHA or its successor agency 
under Public Law 103-354 440-1 and the proposed grant agreement and 
scope of work will be prepared and forwarded to the applicant for 
signature.
    (e) When Form FmHA or its successor agency under Public Law 103-354 
440-1 and the grant agreement and scope of work are received by the 
applicant, the applicant will sign these documents and forward them to 
the State Director.
    (f) Exhibit A to FmHA Instruction 2015-C (available in any FmHA or 
its successor agency under Public Law 103-354 Office) will be prepared 
by the State Director and sent to the Director of Information, Farmers 
Home Administration or its successor agency under Public Law 103-354.
    (g) If the State Director approves the project, the following 
actions will be taken in the order listed:
    (1) The State Director, or a designee, will telephone the Finance 
Office requesting that grant funds for a particular project be 
obligated. Immediately after contacting the Finance Office, the 
requesting official shall furnish the requesting office's security 
identification code. Failure to furnish the security code will result in 
the rejection of the request of obligation. After the security code is 
furnished, the required information from Form FmHA or its successor 
agency under Public Law 103-354 440-1 shall be furnished to the Finance 
Office. Upon receipt of the telephone request for obligation of funds, 
the Finance Office shall record all information necessary to process the 
request for obligation in addition to the date and time of request.
    (2) The individual making the request shall record the date and time 
of the request.
    (3) The Finance Office will notify the FmHA or its successor agency 
under Public Law 103-354 State Office by telephone when funds are 
reserved and the date the funds will be obligated. If funds cannot be 
reserved for a project, the Finance Office will notify the FmHA or its 
successor agency under Public Law 103-354 State Office that funds are 
not available. The obligation date will be six working days from the 
date the request for obligation is processed.
    (4) The Finance Office will send Form FmHA or its successor agency 
under Public Law 103-354 440-57, ``Acknowledgement of Obligated Funds/
Check Request,'' to the FmHA or its successor agency under Public Law 
103-354 State Director, informing the State Director of the reservation 
of funds with the obligation date inserted as required by Item 9 on the 
Forms Manual Insert (FMI) for Form FmHA or its successor agency under 
Public Law 103-354 440-57.
    (5) Form FmHA or its successor agency under Public Law 103-354 440-1 
will not be mailed to the Finance Office.
    (6) A copy of Form FmHA or its successor agency under Public Law 
103-354 440-1 will be sent the FmHA or its successor agency under Public 
Law 103-354 National Office.
    (7) The State Director shall notify the Director of Information in 
the FmHA or its successor agency under Public Law 103-354 National 
Office with a recommendation that the project announcement be released.
    (8) An executed copy of Form FmHA or its successor agency under 
Public Law 103-354 440-1 shall be sent to the applicant along with an 
executed copy

[[Page 591]]

of the grant agreement and scope of work on or before the date funds are 
obligated.
    (9) The actual date of applicant notification will be entered on the 
original of Form FmHA or its successor agency under Public Law 103-354 
440-1 and the original of the form will be included as a permanent part 
of the file.
    (10) For planning grants, Standard Form 270, ``Request for Advance 
or Reimbursement,'' will be sent to the applicant for completion and 
return to FmHA or its successor agency under Public Law 103-354. For 
site acquisition and site development grants, Standard Form 271, 
``Outlay Report and Request for Reimbursement for Construction 
Programs,'' will be sent to the applicant for completion and returned to 
FmHA or its successor agency under Public Law 103-354.
    (11) If it is determined that a project will not be funded or if 
major changes in the scope of the project are made after release of the 
approval announcement, the FmHA or its successor agency under Public Law 
103-354 State Director will notify the Director, Legislative Affairs and 
Public Information Staff (LAPIS) by telephone or electronic mail giving 
the reasons for such action. The Director, LAPIS, will inform all 
parties who were notified by the project announcement that the project 
will not be funded or of major changes in the project using a procedure 
similar to the announcement process. Form FmHA or its successor agency 
under Public Law 103-354 1940-10, ``Cancellation of U.S. Treasury Check 
and/or Obligation,'' will not be submitted to the Finance Office until 
five working days after notifying the Director, LAPIS.

(7 U.S.C. 1989; 42 U.S.C. 1480; 5 U.S.C. 301; sec. 10 Pub. L. 93-357; 
delegation of authority by the Sec. of Agri., 7 CFR 2.23; delegation of 
authority by the Under Secretary for Small Community and Rural 
Development, 7 CFR 2.70)

[44 FR 35984, June 19, 1979, as amended at 47 FR 36416, Aug. 20, 1982; 
48 FR 30946, July 6, 1983]



Sec. 1948.93  Appeal procedure.

    Any grantee or applicant for FmHA or its successor agency under 
Public Law 103-354 assistance under this subpart who has been directly 
and adversely affected by an administrative decision by FmHA or its 
successor agency under Public Law 103-354 may appeal such decision in 
accordance with FmHA Instruction 1900-B.



Sec. 1948.94  Reporting requirements.

    (a) For planning grants, SF-270 shall be submitted by grantees on an 
as-needed basis but not more frequently that once every 30 days. SF-269, 
``Financial Status Report,'' and a project performance activity report 
will be required of all grantees on a quarterly basis. SF-269 and a 
final project performance report will also be required. These final 
reports may serve as the last quarterly reports. Grantees shall 
constantly monitor performance to ensure that time schedules are being 
met, projected work by time periods is being accomplished, and other 
performance objectives are being achieved. All grantees except States 
should submit an original of each report and one copy to the appropriate 
FmHA or its successor agency under Public Law 103-354 District Office. 
When the grantee is a State, an original should be submitted to the 
appropriate FmHA or its successor agency under Public Law 103-354 State 
Office. The project performance reports shall include, but need not be 
limited to the following:
    (1) A comparison of actual accomplishments to the objectives 
established for that period;
    (2) Reasons why established objectives were not met;
    (3) Problems, delays, or adverse conditions which will materially 
affect attainment of planned project objectives, prevent the meeting of 
time schedules or objectives, or preclude the attainment of project work 
elements during established time periods. This disclosure shall be 
accompanied by a statement of the action taken or contemplated and any 
Federal assistance needed to resolve the situation; and
    (4) Objectives established for the next reporting period.
    (b) For site development and land acquisition grants, grantees shall 
submit Form SF-271 for payment of site development costs. Multiple 
advances will be made in accordance with FmHA Instruction 402.1 
(available in any FmHA

[[Page 592]]

or its successor agency under Public Law 103-354 office) and will be 
made as needed to cover required disbursements for not less than 30 day 
periods. Advances will be requested for the next 30 day period by the 
grantee on Form SF-272, ``Report of Federal Cash Transactions.'' Each 
payment estimate must be approved by the grantee. A final Form SF-272 
will be submitted to FmHA or its successor agency under Public Law 103-
354 to include the final advance not later than 90 days after the final 
advance.



Sec. 1948.95  Grant monitoring.

    Each grant will be monitored by FmHA or its successor agency under 
Public Law 103-354 to ensure that the Grantee is complying with the 
terms of the grant and that the project activities are completed as 
approved. This will involve on-site visits to the project area and 
review of quarterly and final reports by FmHA or its successor agency 
under Public Law 103-354.



Sec. 1948.96  Audit requirements.

    (a) Audit requirements for Site Development and Acquisition Grants 
will be made in accordance with FmHA Instruction 1942-G.
    (b) Audits for planning grants made in accordance with State 
statutes or regulatory agencies will be acceptable provided they are 
prepared in sufficient detail to permit FmHA or its successor agency 
under Public Law 103-354 to determine that grant funds have been used in 
compliance with the proposal, any applicable laws and regulations, and 
the grant agreement. A copy of the audit shall be submitted to the State 
Director as soon as possible but in no case later than 90 days following 
the period covered by the grant.



Sec. 1948.97  Grant closing and fund disbursement.

    Grant closing and fund disbursement will be accomplished in 
accordance with FmHA Instruction 1942-G.



Sec. 1948.98  Grant agreements.

    The following Grant Agreements are a part of this regulation.
    (a) Exhibit A of this subpart is a Grant Agreement for Growth 
Management and Housing Planning Grants for approved Designated Energy 
Impacted Areas.
    (b) Exhibit B of this subpart is a Grant Agreement for Site 
Development and/or Site Acquisition for Housing and/or Public Facilities 
and/or Services.



Sec. Sec. 1948.99-1948.100  [Reserved]

Exhibit A to Subpart B of Part 1948--Grant Agreement--Growth Management 
   and Housing Planning for Approved Designated Energy Impacted Areas

    This Agreement is between

(Name),_________________________________________________________________
(Address),(Grantee) and the United States of America acting through the 
Farmers Home Administration (Grantor or FmHA) or its successor agency 
under Public Law 103-354. Grantee has determined to undertake certain 
growth management and housing planning for energy impacted areas at an 
estimated cost of $---------- and has duly authorized such planning. The 
Grantor agrees to grant to Grantee a sum not to exceed $---------- 
subject to the terms and conditions established by the Grantor; 
provided, however, that any grant funds actually advanced and not needed 
for grant purposes shall be returned immediately to the Grantor. The 
Grantor may terminate the grant in whole, or in part, at any time before 
the date of completion, whenever it is determined that the Grantee has 
failed to comply with the conditions of the grant. In consideration of 
said grant by Grantor to Grantee, to be made pursuant to Section 601 of 
the Powerplant and Industrial Fuel Use Act of 1978 (Pub. L. 95-620) for 
the purpose only of defraying the planning costs as permitted by 
applicable Farmers Home Administration or its successor agency under 
Public Law 103-354 regulations:

                                 Part A

Grantor and Grantee agree:

    1. This agreement shall be effective when executed by both parties.
    2. The scope of work set out below shall be completed prior to------
--------.
    3. (a) Use of grant funds for travel which is determined as being 
necessary to the program for which the grant is established may be 
subject to the travel policies of the Grantee institution if they are 
uniformly applied regardless of the source of funds in determining the 
amounts and types of reimbursable travel expenses of Grantee staff and 
consultants. Where the Grantee institution does not have such specific 
policies uniformly applied, the Federal Travel Regulations shall apply 
in determining the amount

[[Page 593]]

charged to the grant. Grantee may purchase furniture and office 
equipment only if specifically approved in the scope of work. Approval 
will be given only when Grantee demonstrates that purchase is necessary 
and would result in less cost to the Government in providing Federal-
share funds or to the Grantee in providing its contributions. Commercial 
purchase under these circumstances will be approved only after 
consideration of Federal supply sources.
    (b) Expenses and Purchases Excluded:
    (i) In no event shall the Grantee expend or request reimbursement 
from Federal-share funds for obligations entered into or for costs 
incurred or accrued prior to the effective date of this grant.
    (ii) Funds budgeted under this grant may not be used for 
entertainment expenses.
    (iii) Funds budgeted under this grant may not be used to pay for 
capital assets, the purchase of real estate or vehicles, improvement and 
renovation of space, and repair and maintenance of privately-owned 
vehicles.
    (c) Grant funds shall not be used to replace any financial support 
previously provided or assured from any other source. The Grantee agrees 
that the general level of expenditure by the Grantee for the benefit of 
program area and/or program covered by this agreement shall be 
maintained and not reduced as a result of the Federal share funds 
received under this grant.
    4. (a) In accordance with Treasury Circular 1075, grant funds will 
be disbursed by the FmHA or its successor agency under Public Law 103-
354 as cash advances on an as-needed basis not to exceed one advance 
every 30 days. The financial management system of the recipient 
organization shall provide for effective control over and accountability 
for all Federal funds as stated in OMB Circular A-102 revised for State 
and local governments.
    (b) Cash advances to the Grantee shall be limited to the minimum 
amounts needed and shall be timed to be in accord only with the actual, 
immediate cash requirements of the Grantee in carrying out the purpose 
of the planning project.
    (c) The timing and amount of cash advances shall be as close as is 
administratively feasible to the actual disbursements by the recipient 
organization for direct program costs.
    (d) Federal funds should be promptly refunded to the FmHA or its 
successor agency under Public Law 103-354 and redrawn when needed if the 
funds are erroneously drawn in excess of immediate disbursement needs. 
The only exceptions to the requirement for prompt refunding are when the 
funds involved:
    (i) Will be disbursed by the recipient organization within seven 
calendar days, or
    (ii) Are less than $10,000 and will be disbursed within 30 calendar 
days.
    (e) Grantee shall provide satisfactory evidence to FmHA or its 
successor agency under Public Law 103-354 that all officers of Grantee 
organization authorized to receive and/or disburse Federal funds are 
covered by such bonding and/or insurance requirements as are normally 
required by the Grantee.
    (f) Grant funds will be placed in a bank account(s). If for any 
reason grant funds are invested, income earned on such investment shall 
be identified as interest income on grant funds and forwarded to the 
Finance Office, FmHA or its successor agency under Public Law 103-354, 
St. Louis, Missouri, unless the Grantee is a State. ``State'' includes 
instrumentalities of a State but not political subdivisions of a State. 
A State Grantee is not accountable for interest earned on grant funds.
    5. The Grantee will submit Performance and Financial reports as 
indicated below:
    (a) As needed, but not more frequently than once every 30 days, an 
original and 2 copies of Standard Form 270, ``Request for Advance or 
Reimbursement;''
    (b) Quarterly, an original and 2 copies of Standard Form 269, 
``Financial Status Report,'' and a Project Performance report according 
to the schedule below:

     Period Date due

    (c) Final, an original and 2 copies of Standard Form 269, 
``Financial Status Report,'' and a Project Performance report according 
to the schedule below:

     Period Date due

    Note: Final reports may serve as the last quarterly reports.

    (d) The Project Performance reports shall include but need not be 
limited to the following:
    (i) A comparison of actual accomplishment to the objectives 
established for that period;
    (ii) Reasons why established objectives were not met;
    (iii) Problems, delays, or adverse conditions which will materially 
affect attainment of planned project objectives, prevent the meeting of 
time schedules or objectives, or preclude the attainment of project work 
elements during established time periods. This disclosure shall be 
accompanied by a Statement of the action taken or comtemplated and any 
Federal assistance needed to resolve the situation; and
    (iv) Objectives established for the next reporting period.
    (e) All Grantees except States shall submit an original of each 
report and one copy to the appropriate FmHA or its successor agency 
under Public Law 103-354 District Office. A State Grantee shall submit 
original reports to the appropriate FmHA or its successor agency under 
Public Law 103-354 State Office.

[[Page 594]]

    (f) The plan(s) developed under this grant shall be submitted to the 
appropriate Governor for incorporation into the State Investment 
Strategy for Energy Impacted Areas. The Governor will submit the plan 
and the State Investment Strategy to the appropriate FmHA or its 
successor agency under Public Law 103-354 State Office(s). The FmHA or 
its successor agency under Public Law 103-354 State Office will forward 
the plan and State Investment Strategy to the FmHA or its successor 
agency under Public Law 103-354 National Office for approval of the 
plan.
    6. The Budget covered by this agreement is:

----------------------------------------------------------------------------------------------------------------
                                                                                 Non-Federal share
                        Budget categories                           Federal  ------------------------    Total
                                                                     funds       Cash       In-kind
----------------------------------------------------------------------------------------------------------------
Direct charges:
  1. Personnel..................................................           $  ..........  ..........  ..........
  2. Fringe benefits............................................  ..........  ..........  ..........  ..........
  3. Travel.....................................................  ..........  ..........  ..........  ..........
  4. Equipment..................................................  ..........  ..........  ..........  ..........
  5. Supplies...................................................  ..........  ..........  ..........  ..........
  6. Contractual................................................  ..........  ..........  ..........  ..........
  7. Others.....................................................  ..........  ..........  ..........  ..........
                                                                 -------------
    Total Direct Charges........................................  ..........  ..........  ..........  ..........
  8. Indirect charges...........................................  ..........  ..........  ..........  ..........
                                                                 -------------
    Total.......................................................  ..........  ..........  ..........  ..........
----------------------------------------------------------------------------------------------------------------

    (a) In accordance with FMC 74-4, Attachment B, compensation for 
employees will be considered reasonable to the extent that such 
compensation is consistent with that paid for similar work in other 
activities of the State or local government.
    (b) In accordance with OMB Circular A-102, Attachment K, transfers 
among direct cost budget categories of more than 5 percent of the total 
budget must have prior written approval by the State Director, Farmers 
Home Administration or its successor agency under Public Law 103-354.
    7. (a) The scope of work is described in the attached exhibit 1. The 
Grantee accepts responsibility for establishing a development process 
which will improve local conditions and alleviate problems associated 
with increased coal or uranium production in the Grantee areas. The 
Grantee shall:
    (i) Develop a growth management and housing plan for assistance to 
approved designated area(s) impacted by increased coal or uranium 
production.
    (ii) Contribute to development of a State Investment Strategy for 
Energy Impacted Areas.
    (iii) Endeavor to coordinate and provide liaison with State 
development organizations, where they exist.
    (iv) Provide continuing information to FmHA or its successor agency 
under Public Law 103-354 on the status of Grantee programs, projects, 
related activities, and problems.
    (b) The Grantee shall inform the Grantor as soon as the following 
types of conditions become known:
    (i) Problems, delays, or adverse conditions which materially affect 
the ability to attain program objectives, prevent the meeting of time 
schedules or goals, or preclude the attainment of project work units by 
established time periods. This disclosure shall be accompanied by a 
statement of the action taken or contemplated, and any Grantor 
assistance needed to resolve the situation.
    (ii) Favorable developments or events which enable meeting time 
schedules and goals sooner than anticipated or producing more work units 
than originally projected.

                                 Part B

Grantee agrees:

    1. To comply with property management standards established by 
Attachment N of OMB Circular A-102 for expendable and nonexpendable 
personal property Personal property means property of any kind except 
real property. It may be tangible--having physical existence--or 
intangible--having no physical existence, such as patents, inventions, 
and copyrights. Nonexpendable personal property means tangible personal 
property having a useful life of more than one year and an acquisition 
cost of $300 or more per unit. A Grantee may use its own definition of 
nonexpendable personal property provided that such definition would at 
least include all tangible personal property as defined above. 
``Expendable personal property'' refers to all tangible personal 
property other than nonexpendable property. When nonexpendable tangible 
property is acquired by a Grantee with proj ect funds, title shall not 
be taken by the Federal Government but shall vest in the Grantee subject 
to the following conditions:
    (a) Right to transfer title. For items of nonexpendable personal 
property having a

[[Page 595]]

unit acquisition cost of $1,000 or more, FmHA or its successor agency 
under Public Law 103-354 may reserve the right to transfer the title to 
the Federal Government or to a third party named by the Federal 
Government when such third party is otherwise eligible under existing 
statutes. Such reservation shall be subject to the following standards:
    (1) The property shall be appropriately identified in the grant or 
otherwise made known to the Grantee in writing.
    (2) FmHA or its successor agency under Public Law 103-354 shall 
issue disposition instructions within 120 calendar days after the end of 
the Federal support of the project for which it was acquired. If FmHA or 
its successor agency under Public Law 103-354 fails to issue disposition 
instructions within the 120 calendar day period, the Grantee shall apply 
the standards of paragraph (4) below.
    (3) When FmHA or its successor agency under Public Law 103-354 
exercises its right to take title, the personal property shall be 
subject to the provisions for federally owned nonexpendable property 
discussed in paragraph (4), below.
    (4) When title is transferred either to the Federal Government or to 
a third party and the Grantee is instructed to ship the property 
elsewhere, the Grantee shall be reimbursed by the benefiting Federal 
agency with an amount which is computed by applying the percentage of 
the Grantee participation in the cost of the original grant project or 
program to the current fair market value of the property, plus any 
reasonable shipping or interim storage costs incurred.
    (b) Use of other nontangible expendable property for which the 
Grantee has title.
    (1) The Grantee shall use the property in the project or program for 
which it was acquired as long as needed, whether or not the project or 
program continues to be supported by Federal funds. When it is no longer 
needed for the original project or program, the Grantee shall use the 
property in connection with its other Federally sponsored activities, in 
the following order of priority:
    (a) Activities sponsored by FmHA or its successor agency under 
Public Law 103-354.
    (b) Activities sponsored by other Federal agencies.
    (2) Shared use. During the time that nonexpendable personal property 
is held for use on the project or program for which it was acquired, the 
Grantee shall make it available for use on other projects or programs if 
such other use will not interfere with the work on the project or 
program for which the property was originally acquired. First preference 
for such other use shall be given to other projects or programs 
sponsored by FmHA or its successor agency under Public Law 103-354; 
second preference shall be given to projects or programs sponsored by 
other Federal agencies. If the property is owned by the Federal 
Government, use on other activities not sponsored by the Federal 
Government shall be permissable if authorized by FmHA or its successor 
agency under Public Law 103-354. User charges should be considered if 
appropriate.
    (c) Disposition of other nonexpendable property. When the Grantee no 
longer needs the property as provided in 1(a)(4) above, the property may 
be used for other activities in accordance with the following standards:
    (1) Nonexpendable property with a unit acquisition cost of less than 
$1,000. The Grantee may use the property for other activities without 
reimbursement to the Federal Government or sell the property and retain 
the proceeds.
    (2) Nonexpendable personal property with a unit acquisition cost of 
$1,000 or more. The Grantee may retain the property for other use 
provided that compensation is made to FmHA or its successor agency under 
Public Law 103-354 or its successor. The amount of compensation shall be 
computed by applying the percentage of Federal participation in the cost 
of the original project or program to the current fair market value of 
the property. If the Grantee has no need for the property and the 
property has further use value, the Grantee shall request disposition 
instructions from the original Grantor agency.
    FmHA or its successor agency under Public Law 103-354 shall 
determine whether the property can be used to meet the agency's 
requirements. If no requirement exists within that agency, the 
availability of the property shall be reported, in accordance with the 
guidelines of the Federal Property Management Regulations (FPMR), to the 
General Services Administration by FmHA or its successor agency under 
Public Law 103-354 to determine whether a requirement for the property 
exists in other Federal agencies. FmHA or its successor agency under 
Public Law 103-354 shall issue instructions to the Grantee no later than 
120 days after the Grantee request and the following procedures shall 
govern:
    (a) If so instructed or if disposition instructions are not issued 
within 120 calendar days after the Grantee's request, the Grantee shall 
sell the property and reimburse FmHA or its successor agency under 
Public Law 103-354 an amount computed by applying to the sales proceeds 
the percentage of Federal participation in the cost of the original 
project or program. However, the Grantee shall be permitted to deduct 
and retain from the Federal share $100 or ten percent of the proceeds, 
whichever is greater, for the Grantee's selling and handling expenses.
    (b) If the Grantee is instructed to dispose of the property other 
than as described in (1)(a)(4) above, the Grantee shall be reimbursed by 
FmHA or its successor agency under Public Law 103-354 for such costs 
incurred in its disposition.

[[Page 596]]

    (c) Property management standards for nonexpendable property. The 
Grantee's property management standards for nonexpendable personal 
property shall include the following procedural requirements:
    (1) Property records shall be maintained accurately and shall 
include:
    (a) A description of the property.
    (b) Manufacturer's serial number, model number, Federal stock 
number, national stock number, or other identification number.
    (c) Sources of the property including grant or other agreement 
number.
    (d) Whether title vests in the Grantee or the Federal Government.
    (e) Acquisition date (or date received, if the property was 
furnished by the Federal Government) and cost.
    (f) Percentage (at the end of the budget year) of Federal 
participation in the cost of the project or program for which the 
property was acquired. (Not applicable to property furnished by the 
Federal Government.)
    (g) Location, use and condition of the property and the date the 
information was reported.
    (h) Unit acquisition cost.
    (i) Ultimate disposition data, including date of disposal and sales 
price or the method used to determine current fair market value where a 
Grantee compensates the Federal agency for its share.
    (2) Property owned by the Federal Government must be marked to 
indicate Federal ownership.
    (3) A physical inventory of property shall be taken and the results 
reconciled with the property records at least once every two years. Any 
differences between quantities determined by the physical inspection and 
those shown in the accounting records shall be investigated to determine 
the causes of the difference. The Grantee shall, in connection with the 
inventory, verify the existence, current utilization, and continued need 
for the property.
    (4) A control system shall be in effect to insure adequate 
safeguards to prevent loss, damage, or theft of the property. Any loss, 
damage, or theft of nonexpendable property shall be investigated and 
fully documented; if the property was owned by the Federal Government, 
the Grantee shall promptly notify FmHA or its successor agency under 
Public Law 103-354.
    (5) Adequate maintenance procedures shall be implemented to keep the 
property in good condition.
    (6) Where the Grantee is authorized or required to sell the 
property, proper sales procedures shall be established which would 
provide for competition to the extent practicable and result in the 
highest possible return.
    (7) Expendable personal property shall vest in the Grantee upon 
acquisition. If there is a residual inventory of such property exceeding 
$1,000 in total aggregate fair market value, upon termination or 
completion of the grant and if the property is not needed for any other 
Federally sponsored project or program, the Grantee shall retain the 
property for use on nonfederally sponsored activities, or sell it, but 
must in either case compensate the Federal Government for its share. The 
amount of compensation shall be computed in the same manner as 
nonexpendable personal property.
    2. To provide Financial Management Systems which will include:
    (a) Accurate, current, and complete disclosure of the financial 
results of each grant. Financial Reporting will be on an accrual basis.
    (b) Records which identify adequately the source and application of 
funds for grant-supported activities. Those records shall contain 
information pertaining to grant awards and authorizations, obligations, 
unobligated balances, assets, liabilities, outlays, and income.
    (c) Effective control over and accountability for all funds, 
property, and other assets. Grantee shall adequately safeguard all such 
assets and shall assure that they are used solely for authorized 
purposes.
    (d) Accounting records supported by source documentation.
    (e) Provide an audit report prepared in sufficient detail to allow 
Grantor to determine that funds have been used in compliance with the 
proposal any applicable laws and regulations and this agreement.
    3. To retain financial records, supporting documents, statistical 
records, and all other records pertinent to the grant for a period of at 
least three years after closing except that the records shall be 
retained beyond the three-year period if audit findings have not been 
resolved. Microfilm copies may be substituted in lieu of original 
records. The Grantor and the Comptroller General of the United States, 
or any of their duly authorized representatives, shall have access to 
any books, documents, papers, and rec ords of the Grantee which are 
pertinent to the specific grant program for the purpose of making audit, 
examination, excerpts, and transcripts.
    4. To provide information as requested by the Grantor to determine 
the need for and complete any necessary Environmental Impact Statements.
    5. To provide information as requested by the Grantor concerning the 
Grantee's actions in soliciting citizen participation in the application 
process, including published notice of public meetings, actual public 
meetings held, and content of written comments received.
    6. To account for and to return to Grantor interest earned on grant 
funds pending their

[[Page 597]]

disbursement for program purposes unless the Grantee is a State. See 
part A 4(f) above.
    7. Not to encumber, transfer, or dispose of the property or any part 
thereof, furnished by the Grantor or acquired wholly or in part with 
Grantor funds without the written consent of the Grantor except as 
provided in part B 1.
    8. To provide Grantor such periodic reports as it may require of 
Grantee operations by designated representative of the Grantor.
    9. To execute Form FmHA or its successor agency under Public Law 
103-354 400-1, ``Equal Opportunity Agreement,'' and to execute any other 
agreements required by Grantor to implement the civil rights 
requirements.
    10. To include in all contracts in excess of $100,000 a provision 
for compliance with all applicable standards, orders, or regulations 
issued pursuant to the Clean Air Act of 1970. Violations shall be 
reported to the Grantor and the Regional Office of the Environmental 
Protection Agency.
    11. That, upon any default under its representations or agreements 
set forth in this instrument, Grantee, at the option and demand of 
Grantor, will, to the extent legally permissible, repay to the Grantor 
forthwith the original principal amount of the grant stated herein 
above, with interest at the rate of five per centum per annum from the 
date of the default. The provisions of this Grant Agreement may be 
enforced by Grantor, at its option and without regard to prior waivers 
by it of previous defaults of Grantee, by judicial proceedings to 
require specific performance of the terms of this Grant Agreement or by 
such other proceedings in law or equity, in either Federal or State 
courts, as may be deemed necessary by Grantor to assure compliance with 
the provisions of this Grant Agreement and the laws and regulations 
under which this grant is made.
    12. That no member of Congress shall be admitted to any share or 
part of this grant or any benefit that may arise therefrom; but this 
provision shall not be construed to bar as a contractor under the grant 
a publicly held corporation whose ownership might include a member of 
Congress.
    13. That all non-confidential information resulting from its 
activities shall be made available to the general public on an equal 
basis.
    14. That the purpose and scope of work for which this grant is made 
shall not duplicate programs for which monies have been received, are 
committed, or are applied for from other sources, public and private.
    15. That the Grantee shall relinquish any and all copyrights and/or 
privileges to the materials developed under this grant, such material 
being the sole property of the Federal Government. In the event anything 
developed under this grant is published in whole or in part, the 
material shall contain notice and be identified by language to the 
following effect: ``The material is the result of tax-supported research 
and as such is not copyrightable. It may be freely reprinted with the 
customary crediting of the source.''
    16. That the Grantee shall abide by the policies promulgated in OMB 
Circular A-102, Attachment O, which provides standards for use by 
Grantees in establishing procedures for the procurement of supplies, 
equipment, and other services with Federal grant funds.
    17. To the following termination provisions:
    (a) Termination for cause: The Grantor agency may terminate any 
grant in whole, or in part, at any time before the date of completion, 
whenever it is determined that the Grantee has failed to comply with the 
conditions of the grant. The Grantor agency shall promptly notify the 
Grantee in writing of the determination and the reasons for the 
termination, together with the effective date.
    (b) Termination for convenience. The Grantor agency or Grantee may 
terminate grants in whole, or in part, when both parties agree that the 
continuation of the proj ect would not produce beneficial results 
commensurate with the further expenditure of funds. The two parties 
shall agree upon the termination conditions, including the effective 
date and, in the case of partial terminations, the portion to be 
terminated. The Grantee shall not incur new obligations for the 
terminated portion after the effective date, and shall cancel as many 
outstanding obligations as possible. The Grantor agency shall allow full 
credit to the Grantee for the Federal share of the noncancelable 
obligations, properly incurred by the Grantee prior to termination.

                                 Part C

Grantor agrees:

    1. That it will assist Grantee, within available appropriations, 
with such technical assistance as Grantor deems appropriate in planning 
the project and coordinating the plan with local official comprehensive 
plans and with any State or area plans for the area in which the project 
is located.
    2. That at its sole discretion, Grantor may at any time give any 
consent, deferment, subordination, release, satisfaction, or termination 
of any or all of Grantee's grant obligations, with or without valuable 
consideration, upon such terms and conditions as Grantor may determine 
to be (a) advisable to further the purposes of the grant or to protect 
Grantor's financial interest therein, and (b) consistent with both the 
statutory purposes of the grant and the limitations of the statutory 
authority under which it is made.

[[Page 598]]

    This agreement is subject to current Grantor regulations and any 
future regulations not inconsistent with the express terms hereof.
    Grantee on ----------------------, 19----, has caused this agreement 
to be executed by its duly authorized ---------------------- and 
attested and its corporate seal affixed by its duly authorized --------
--------------.
Attest:

Grantee:

By______________________________________________________________________
------------------------------------------------
(Title)
By______________________________________________________________________

------------------------------------------------
(Title)
Grantor:
United States of America Farmers Home Administration or its successor 
agency under Public Law 103-354.

By______________________________________________________________________

------------------------------------------------
(Title)
(Approved by the Office of Management and Budget under control number 
0575-0040)

[44 FR 35984, June 19, 1979, as amended at 47 FR 745, Jan. 7, 1982]

Exhibit B to Subpart B of Part 1948--Grant Agreement (Public Bodies) for 
   Site Development and/or Site Acquisition for Housing and/or Public 
                       Facilities and/or Services

    This agreement dated ------------, 19--, between ------------------
------------------ a public body corporate organized and operating under 
------------------------ (Authorizing State Statute)
    Herein called ``Grantee,'' and the United States of America acting 
through the Farmers Home Administration or its successor agency under 
Public Law 103-354, Department of Agriculture, herein called 
``Grantor,'' Witnesseth:
    Grantee has determined to undertake a project for site acquisition 
and/or site development as follows: ------------------------------ 
(herein called project) to serve the approved designated energy impacted 
area under its jurisdiction at an estimated cost of $----------, and has 
duly authorized the undertaking of such project;
    Grantee is able to finance not more than $---------- of the site 
acquisition and/or site development costs through revenues, charges, 
taxes or assessments, or funds otherwise available to Grantee. Said sum 
has been committed to and by Grantee for such project acquisition and/or 
site development costs.
    The Grantor agrees to grant to Grantee a sum not to exceed $--------
-- subject to the terms and conditions established by the Grantor. 
Provided, however, that the proportionate share of any grant funds 
actually advanced and not needed for grant purposes shall be returned 
immediately to the Grantor. The Grantor may terminate the grant in 
whole, or in part, at any time before the date of completion, whenever 
it is determined that the Grantee has failed to comply with the 
conditions of the grant.
    In consideration of said grant by Grantor to Grantee, to be made 
pursuant to Section 601 of the Powerplant and Industrial Fuel Use Act of 
1978 (Pub. L. 95-620) for the purpose only of defraying a part of the 
acquisition and/or site development costs, as defined by applicable 
Farmers Home Administration or its successor agency under Public Law 
103-354 regulations:

Grantee agrees that Grantee will:

    1. Cause said project to be completed within the total sums 
available to it, including said grant, in accordance with the proj ect 
plans and specifications and any necessary modifications thereof 
prepared by Grantee and approved by Grantor.
    2. Permit periodic inspection of the proj ect by a representative of 
Grantor.
    3. Make the housing or public facility or services available to all 
persons in Grantee's servce area without regard to race, color, national 
origin, religion, sex, marital status, age, physical or mental handicap.
    4. Use the real property including land and land improvements for 
authorized purposes of the grant as long as needed.
    a. The Grantee shall obtain approval of the Grantor before using the 
real property for other purposes when the Grantee determines that the 
property is no longer for the original purposes.
    b. When the real property is no longer needed as provided above, 
return all real property furnished or purchased wholly with Federal 
grant funds to the Grantor. In the case of property purchased in part 
with Federal grant funds, the Grantee may be permitted to take title to 
the Federal interest therein upon compensating the Federal Government 
for its fair share of the property. The Federal share of the property 
shall be the amount computed by applying the percentage of the Federal 
Participation in the total cost of the grant program for which the 
property was acquired to the current fair market value of the property.
    5. Not use grant funds to replace any financial support previously 
provided or assured from any other source. The Grantee agrees that the 
general level of expenditure by the Grantee for the benefit of program 
area and/or program covered by this agreement shall be maintained and 
not reduced as a result of the Federal share funds received under this 
grant.

[[Page 599]]

    6. Not use grant funds to pay for construction costs of housing or 
public facilities.
    This Grant Agreement covers the following described real property 
(use continuation sheets as necessary).
    7. Abide by the following conditions pertaining to nonexpendable 
personal property which is furnished by the Grantor or acquired wholly 
or in part with Grant Funds.
    a. The Grantee shall retain such property as long as there is a need 
for the property to accomplish the purpose of the grant. When there is 
no longer a need for the property to accomplish the purpose of the 
grant, the Grantee shall use the property in connection with other 
Federal grants it has received in the following order of priority.
    (1) Other grant of the Grantor needing the property.
    (2) Grants of other Federal agencies needing the property.
    b. When the Grantee no longer has need for the property in any of 
its Federal grant programs, the property may be used for its own 
official activities in accordance with the following standards:
    (1) Nonexpendable property with an acquisition cost of less than 
$500 and used four years or more. The Grantee may use the property for 
its own official activities without reimbursement to the Federal 
Government or sell the property and retain the proceeds.
    (2) All other nonexpendable property. The Grantee may retain the 
property for its own use provided that a fair compensation is made to 
the Grantor. The amount of compensation shall be computed by applying 
the percentage of the Grantor participation in the grant program to the 
current fair market value of the property as determined by the Grantor.
    c. If the Grantee has no need for the property, disposition shall be 
made as follows:
    (1) Nonexpendable property with an acquisition cost of $1,000 or 
less. Except for that property which meets the criteria of b(1) above, 
the Grantee shall sell the property and reimburse the Grantor an amount 
which is computed in accordance with (3) below.
    (2) Nonexpendable property with an acquisition cost of over $1,000. 
The Grantee shall request disposition instructions from Grantor.
    (3) If disposition instructions are not issued within 120 days after 
reporting, the Grantee shall sell the property and reimburse the Grantor 
an amount which is computed by applying the percentage of the Grantor 
participation in the grant program to the sales proceeds. Further, the 
Grantee shall be permitted to retain $100 or ten percent of the 
proceeds, whichever is greater, for the Grantee's selling and handling 
expenses.
    d. The Grantee's property management standards for nonexpendable 
personal property shall also include:
    (1) Property records which accurately provide for: a description of 
the property; manufacturer's serial number or other identification 
number; acquisition date and cost; sources of the property; and ultimate 
disposition data including sales price or the method used to determine 
current fair market value if the Grantee reimburses the Grantor for its 
share.
    (2) A physical inventory of property shall be taken and the result 
reconciled with the property records at least once every two years to 
verify the existence, current utilization, and continued need for the 
property.
    (3) A control system shall be in effect to insure adequate 
safeguards to prevent loss, damage, or theft to the property shall be 
investigated and fully documented.
    (4) Adequate maintenance procedures shall be implemented to keep the 
property in good condition.
    (5) Proper sales procedures shall be established for unneeded 
property which would provide for competition to the extent practicable 
and result in the highest possible return.

This Grant Agreement covers the following described nonexpendable 
property (use continuation sheets as necessary).

    8. Provide Financial Management Systems which will include:
    (a) Accurate, current, and complete disclosure of the financial 
results of each grant. Financial Reporting will be on an accrual basis.
    (b) Records which identify adequately the source and application of 
funds for grant-supporting activities. Those records shall contain 
information pertaining to grant awards and authorizations, obligations, 
unobligated balances, assets, liabilities, outlays, and income.
    (c) Effective control over and accountability for all funds, 
property and other assets. Grantees shall adequately safeguard all such 
assets and shall assure that they are used solely for authorized 
purposes.
    (d) Accounting records supported by source documentation.
    9. Retain financial records, supporting documents, statistical 
records, and all other records pertinent to the grant for a period of at 
least three years after grant closing except that the records shall be 
retained beyond the three-year period if audit findings have not been 
resolved. Microfilm copies may be substituted in lieu of original 
records. The Grantor and the Comptroller General of the United States, 
or any of their duly authorized representatives, shall have access to 
any books, documents, papers, and records of the Grantee governments 
which are pertinent to the specific grant program

[[Page 600]]

for the purpose of making audit, examination, excerpts and transcripts.
    10. Provide information as requested by the Grantor to determine the 
need for and complete any necessary Environmental Impact Statements.
    11. Provide an audit report prepared in sufficient detail to allow 
the Grantor to determine that funds have been used in compliance with 
the proposal, any applicable laws and regulations and this agreement.
    12. Agree to account for and to return to Grantor interest earned on 
grant funds pending their disbursement for program purposes when the 
Grantee is a unit of local government. States and agencies of 
instrumentalities of states shall not be held accountable for interest 
earned on grant funds pending their disbursement.
    13. Not encumber, transfer, or dispose of the property or any part 
thereof, furnished by the Grantor or acquired wholly or in part with 
Grantor funds without the written consent of the Grantor except as 
provided in item 5 above.
    14. Provide Grantor with such periodic reports as it may require and 
permit periodic inspection of its operations by a designated 
representative of the Grantor.
    15. Execute Form FHA 400-1, ``Equal Opportunity Agreement,'' Form 
FHA 400-4, ``Nondiscrimination Agreement,'' and any other agreements 
required by Grantor to implement the civil rights requirements. If any 
such form has been executed by Grantee as a result of a loan being made 
to Grantee by Grantor contemporaneously with the making of this grant, 
another form of the same type need not be executed in connection with 
this grant.
    16. Include in all contracts for construction or repair a provision 
for compliance with the Copeland ``Anti-Kick Back'' Act (18 USC 874) as 
supplemented in Department of Labor regulations (29 CFR, part 3). The 
Grantee shall report all suspected or reported violations to the 
Grantor.
    17. In Contracts in excess of $2,000 and in other contracts in 
excess of $2,500 which involve the employment of mechanics or laborers, 
to include a provision for compliance with sections 103 and 107 of the 
Contract Work Hours and Safety Standards Act (40 USC 327-330) as 
supplemented by Department of Labor regulations (29 CFR, part 5).
    18. Include in all contracts in excess of $2,500 a provision for 
compliance with applicable regulations and standards of the Cost of 
Living Council in establishing wages and prices. Grantee shall report 
any violations of such regulation and standards to the Grantor and the 
local Internal Revenue Service field office.
    19. Include in all contracts in excess of $100,000 a provision for 
compliance with all applicable standards, orders, or regulations issued 
pursuant to the Clear Air Act of 1970. Violations shall be reported to 
the Grantor and the Regional Office of the Environmental Protection 
Agency.
    20. Upon any default under its representations or agreements set 
forth in this instrument, Grantee, at the option and the demand of 
Grantor, will, to the extent legally permissible, repay to Grantor 
forthwith the original principal amount of the grant stated hereinabove, 
with interest at the rate of five per centum per annum from the date of 
the default. The provisions of this Grant Agreement may be enforced by 
Grantor at its option and without regard to prior waivers by it of 
previous defaults of Grantee, by judicial proceedings to require 
specific performance of the terms of this Grant Agreement or by such 
other proceedings in law or equity, in either Federal or State courts, 
as may be deemed necessary by Grantor to assure compliance with the 
provisions of this Grant Agreement and the laws and regulations under 
which this grant is made.
    21. That no member of Congress shall be admitted to any share or 
part of this grant or any benefit that may arise therefrom; but this 
provision shall not be construed to bar as a contractor under the grant 
a publicly held corporation whose ownership might include a member of 
Congress.
    22. That all non-confidential information resulting from its 
activities shall be made available to the general public on an equal 
basis.
    23. That the purpose and scope of work for which this grant is made 
shall not duplicate programs for which monies have been received are 
committed, or are applied for from other sources, public and private.
    24. That Grantee shall relinquish any and all copyrights and/or 
privileges to the materials developed under this grant, such material 
being the sole property of the Federal Government. In the event anything 
developed under this grant is published in whole or in part, the 
material shall contain notice and be identified by language to the 
following effect: ``The material is the result of tax-supported research 
and as such is not copyrightable. It may be freely reprinted with the 
customary crediting of the source.''
    25. That the Grantee shall abide by the policies promulgated in OMB 
Circular A-95, Attachment O, which provides standards for use by 
Grantees in establishing procedures for the procurement of supplies, 
equipment, and other services with Federal grant funds.
    26. To the following termination provisions:
    (a) Termination for cause: The Grantor agency may terminate any 
grant in whole, or in part, at any time before the date of completion, 
whenever it is determined that the Grantee has failed to comply with the 
conditions of the grant. The Grantor agency shall promptly notify the 
Grantee in writing of the determination and the reasons for the

[[Page 601]]

termination, together with the effective date.
    (b) Termination for convenience. The Grantor agency or Grantee may 
terminate grants in whole, or in part, when both parties agree that the 
continuation of the proj ect would not produce beneficial results 
commensurate with the further expenditure of funds. The two parties 
shall agree upon the termination conditions, including the effective 
date and, in the case of partial terminations, the portion to be 
terminated. The Grantee shall not incur new obligations for the 
terminated portion after the effective date, and shall cancel as many 
outstanding obligations as possible. The Grantor agency shall allow full 
credit to the Grantee for the Federal share of the noncancelable 
obligations, properly incurred by the Grantee prior to termination.

Grantor agrees that it will:

    1. Assist Grantee, within available appropriations, with such 
technical assistance as Grantor deems appropriate in planning the 
project and coordinating the plan with local official comprehensive 
plans and with any State or area plans for the area in which the project 
is located.
    2. In its sole discretion, Grantor may at any time give any consent, 
deferment, subordination, release, satisfaction, or termination of any 
or all of Grantee's grant obligations, with or without valuable 
consideration, upon such terms and conditions as Grantor may determine 
to be (a) advisable to further the purposes of the grant or to protect 
Grantor's financial interest therein, and (b) consistent with both the 
statutory purposes of the grant and the limitations of the statutory 
authority under which it is made.

Grantee on the date first above written has caused this agreement to be 
executed by its duly authorized------------------------
and attested and its corporate seal affixed by its duly authorized------
------------------
Attest:
(Seal)
By______________________________________________________________________

(Title)

Grantee

________________________________________________________________________

By______________________________________________________________________
________________________________________________________________________
(Title)

Grantor
United States of America
Farmers Home Administration or its successor agency under Public Law 
103-354

By______________________________________________________________________
________________________________________________________________________
(Title)
(Approved by the Office of Management and Budget under control number 
0575-0040)

[44 FR 35984, June 19, 1979, as amended at 47 FR 745, Jan. 7, 1982]

Subpart C [Reserved]

                          PART 1949 [RESERVED]

[[Page 603]]



                              FINDING AIDS




  --------------------------------------------------------------------

  A list of CFR titles, subtitles, chapters, subchapters and parts and 
an alphabetical list of agencies publishing in the CFR are included in 
the CFR Index and Finding Aids volume to the Code of Federal Regulations 
which is published separately and revised annually.

  Table of CFR Titles and Chapters
  Alphabetical List of Agencies Appearing in the CFR
  List of CFR Sections Affected

[[Page 605]]



                    Table of CFR Titles and Chapters




                     (Revised as of January 1, 2005)

                      Title 1--General Provisions

         I  Administrative Committee of the Federal Register 
                (Parts 1--49)
        II  Office of the Federal Register (Parts 50--299)
        IV  Miscellaneous Agencies (Parts 400--500)

                    Title 2--Grants and Agreements

            Subtitle A--Office of Management and Budget Guidance 
                for Grants and Agreements
         I  [Reserved]
        II  Office of Management and Budget Circulars and Guidance
            Subtitle B--Federal Agency Regulations for Grants and 
                Agreements [Reserved]


                        Title 3--The President

         I  Executive Office of the President (Parts 100--199)

                           Title 4--Accounts

         I  General Accounting Office (Parts 1--99)

                   Title 5--Administrative Personnel

         I  Office of Personnel Management (Parts 1--1199)
        II  Merit Systems Protection Board (Parts 1200--1299)
       III  Office of Management and Budget (Parts 1300--1399)
         V  The International Organizations Employees Loyalty 
                Board (Parts 1500--1599)
        VI  Federal Retirement Thrift Investment Board (Parts 
                1600--1699)
      VIII  Office of Special Counsel (Parts 1800--1899)
        IX  Appalachian Regional Commission (Parts 1900--1999)
        XI  Armed Forces Retirement Home (Part 2100)
       XIV  Federal Labor Relations Authority, General Counsel of 
                the Federal Labor Relations Authority and Federal 
                Service Impasses Panel (Parts 2400--2499)

[[Page 606]]

        XV  Office of Administration, Executive Office of the 
                President (Parts 2500--2599)
       XVI  Office of Government Ethics (Parts 2600--2699)
       XXI  Department of the Treasury (Parts 3100--3199)
      XXII  Federal Deposit Insurance Corporation (Part 3201)
     XXIII  Department of Energy (Part 3301)
      XXIV  Federal Energy Regulatory Commission (Part 3401)
       XXV  Department of the Interior (Part 3501)
      XXVI  Department of Defense (Part 3601)
    XXVIII  Department of Justice (Part 3801)
      XXIX  Federal Communications Commission (Parts 3900--3999)
       XXX  Farm Credit System Insurance Corporation (Parts 4000--
                4099)
      XXXI  Farm Credit Administration (Parts 4100--4199)
    XXXIII  Overseas Private Investment Corporation (Part 4301)
      XXXV  Office of Personnel Management (Part 4501)
        XL  Interstate Commerce Commission (Part 5001)
       XLI  Commodity Futures Trading Commission (Part 5101)
      XLII  Department of Labor (Part 5201)
     XLIII  National Science Foundation (Part 5301)
       XLV  Department of Health and Human Services (Part 5501)
      XLVI  Postal Rate Commission (Part 5601)
     XLVII  Federal Trade Commission (Part 5701)
    XLVIII  Nuclear Regulatory Commission (Part 5801)
         L  Department of Transportation (Part 6001)
       LII  Export-Import Bank of the United States (Part 6201)
      LIII  Department of Education (Parts 6300--6399)
       LIV  Environmental Protection Agency (Part 6401)
        LV  National Endowment for the Arts (Part 6501)
       LVI  National Endowment for the Humanities (Part 6601)
      LVII  General Services Administration (Part 6701)
     LVIII  Board of Governors of the Federal Reserve System (Part 
                6801)
       LIX  National Aeronautics and Space Administration (Part 
                6901)
        LX  United States Postal Service (Part 7001)
       LXI  National Labor Relations Board (Part 7101)
      LXII  Equal Employment Opportunity Commission (Part 7201)
     LXIII  Inter-American Foundation (Part 7301)
       LXV  Department of Housing and Urban Development (Part 
                7501)
      LXVI  National Archives and Records Administration (Part 
                7601)
     LXVII  Institute of Museum and Library Services (Part 7701)
      LXIX  Tennessee Valley Authority (Part 7901)
      LXXI  Consumer Product Safety Commission (Part 8101)
    LXXIII  Department of Agriculture (Part 8301)
     LXXIV  Federal Mine Safety and Health Review Commission (Part 
                8401)

[[Page 607]]

     LXXVI  Federal Retirement Thrift Investment Board (Part 8601)
    LXXVII  Office of Management and Budget (Part 8701)

                      Title 6--Homeland Security

         I  Department of Homeland Security, Office of the 
                Secretary (Parts 0--99)

                         Title 7--Agriculture

            Subtitle A--Office of the Secretary of Agriculture 
                (Parts 0--26)
            Subtitle B--Regulations of the Department of 
                Agriculture
         I  Agricultural Marketing Service (Standards, 
                Inspections, Marketing Practices), Department of 
                Agriculture (Parts 27--209)
        II  Food and Nutrition Service, Department of Agriculture 
                (Parts 210--299)
       III  Animal and Plant Health Inspection Service, Department 
                of Agriculture (Parts 300--399)
        IV  Federal Crop Insurance Corporation, Department of 
                Agriculture (Parts 400--499)
         V  Agricultural Research Service, Department of 
                Agriculture (Parts 500--599)
        VI  Natural Resources Conservation Service, Department of 
                Agriculture (Parts 600--699)
       VII  Farm Service Agency, Department of Agriculture (Parts 
                700--799)
      VIII  Grain Inspection, Packers and Stockyards 
                Administration (Federal Grain Inspection Service), 
                Department of Agriculture (Parts 800--899)
        IX  Agricultural Marketing Service (Marketing Agreements 
                and Orders; Fruits, Vegetables, Nuts), Department 
                of Agriculture (Parts 900--999)
         X  Agricultural Marketing Service (Marketing Agreements 
                and Orders; Milk), Department of Agriculture 
                (Parts 1000--1199)
        XI  Agricultural Marketing Service (Marketing Agreements 
                and Orders; Miscellaneous Commodities), Department 
                of Agriculture (Parts 1200--1299)
       XIV  Commodity Credit Corporation, Department of 
                Agriculture (Parts 1400--1499)
        XV  Foreign Agricultural Service, Department of 
                Agriculture (Parts 1500--1599)
       XVI  Rural Telephone Bank, Department of Agriculture (Parts 
                1600--1699)
      XVII  Rural Utilities Service, Department of Agriculture 
                (Parts 1700--1799)
     XVIII  Rural Housing Service, Rural Business-Cooperative 
                Service, Rural Utilities Service, and Farm Service 
                Agency, Department of Agriculture (Parts 1800--
                2099)
        XX  Local Television Loan Guarantee Board (Parts 2200--
                2299)

[[Page 608]]

      XXVI  Office of Inspector General, Department of Agriculture 
                (Parts 2600--2699)
     XXVII  Office of Information Resources Management, Department 
                of Agriculture (Parts 2700--2799)
    XXVIII  Office of Operations, Department of Agriculture (Parts 
                2800--2899)
      XXIX  Office of Energy, Department of Agriculture (Parts 
                2900--2999)
       XXX  Office of the Chief Financial Officer, Department of 
                Agriculture (Parts 3000--3099)
      XXXI  Office of Environmental Quality, Department of 
                Agriculture (Parts 3100--3199)
     XXXII  Office of Procurement and Property Management, 
                Department of Agriculture (Parts 3200--3299)
    XXXIII  Office of Transportation, Department of Agriculture 
                (Parts 3300--3399)
     XXXIV  Cooperative State Research, Education, and Extension 
                Service, Department of Agriculture (Parts 3400--
                3499)
      XXXV  Rural Housing Service, Department of Agriculture 
                (Parts 3500--3599)
     XXXVI  National Agricultural Statistics Service, Department 
                of Agriculture (Parts 3600--3699)
    XXXVII  Economic Research Service, Department of Agriculture 
                (Parts 3700--3799)
   XXXVIII  World Agricultural Outlook Board, Department of 
                Agriculture (Parts 3800--3899)
       XLI  [Reserved]
      XLII  Rural Business-Cooperative Service and Rural Utilities 
                Service, Department of Agriculture (Parts 4200--
                4299)

                    Title 8--Aliens and Nationality

         I  Department of Homeland Security (Immigration and 
                Naturalization) (Parts 1--499)
         V  Executive Office for Immigration Review, Department of 
                Justice (Parts 1000--1399)

                 Title 9--Animals and Animal Products

         I  Animal and Plant Health Inspection Service, Department 
                of Agriculture (Parts 1--199)
        II  Grain Inspection, Packers and Stockyards 
                Administration (Packers and Stockyards Programs), 
                Department of Agriculture (Parts 200--299)
       III  Food Safety and Inspection Service, Department of 
                Agriculture (Parts 300--599)

                           Title 10--Energy

         I  Nuclear Regulatory Commission (Parts 0--199)
        II  Department of Energy (Parts 200--699)

[[Page 609]]

       III  Department of Energy (Parts 700--999)
         X  Department of Energy (General Provisions) (Parts 
                1000--1099)
      XVII  Defense Nuclear Facilities Safety Board (Parts 1700--
                1799)
     XVIII  Northeast Interstate Low-Level Radioactive Waste 
                Commission (Part 1800)

                      Title 11--Federal Elections

         I  Federal Election Commission (Parts 1--9099)

                      Title 12--Banks and Banking

         I  Comptroller of the Currency, Department of the 
                Treasury (Parts 1--199)
        II  Federal Reserve System (Parts 200--299)
       III  Federal Deposit Insurance Corporation (Parts 300--399)
        IV  Export-Import Bank of the United States (Parts 400--
                499)
         V  Office of Thrift Supervision, Department of the 
                Treasury (Parts 500--599)
        VI  Farm Credit Administration (Parts 600--699)
       VII  National Credit Union Administration (Parts 700--799)
      VIII  Federal Financing Bank (Parts 800--899)
        IX  Federal Housing Finance Board (Parts 900--999)
        XI  Federal Financial Institutions Examination Council 
                (Parts 1100--1199)
       XIV  Farm Credit System Insurance Corporation (Parts 1400--
                1499)
        XV  Department of the Treasury (Parts 1500--1599)
      XVII  Office of Federal Housing Enterprise Oversight, 
                Department of Housing and Urban Development (Parts 
                1700--1799)
     XVIII  Community Development Financial Institutions Fund, 
                Department of the Treasury (Parts 1800--1899)

               Title 13--Business Credit and Assistance

         I  Small Business Administration (Parts 1--199)
       III  Economic Development Administration, Department of 
                Commerce (Parts 300--399)
        IV  Emergency Steel Guarantee Loan Board, Department of 
                Commerce (Parts 400--499)
         V  Emergency Oil and Gas Guaranteed Loan Board, 
                Department of Commerce (Parts 500--599)

                    Title 14--Aeronautics and Space

         I  Federal Aviation Administration, Department of 
                Transportation (Parts 1--199)
        II  Office of the Secretary, Department of Transportation 
                (Aviation Proceedings) (Parts 200--399)

[[Page 610]]

       III  Commercial Space Transportation, Federal Aviation 
                Administration, Department of Transportation 
                (Parts 400--499)
         V  National Aeronautics and Space Administration (Parts 
                1200--1299)
        VI  Air Transportation System Stabilization (Parts 1300--
                1399)

                 Title 15--Commerce and Foreign Trade

            Subtitle A--Office of the Secretary of Commerce (Parts 
                0--29)
            Subtitle B--Regulations Relating to Commerce and 
                Foreign Trade
         I  Bureau of the Census, Department of Commerce (Parts 
                30--199)
        II  National Institute of Standards and Technology, 
                Department of Commerce (Parts 200--299)
       III  International Trade Administration, Department of 
                Commerce (Parts 300--399)
        IV  Foreign-Trade Zones Board, Department of Commerce 
                (Parts 400--499)
       VII  Bureau of Industry and Security, Department of 
                Commerce (Parts 700--799)
      VIII  Bureau of Economic Analysis, Department of Commerce 
                (Parts 800--899)
        IX  National Oceanic and Atmospheric Administration, 
                Department of Commerce (Parts 900--999)
        XI  Technology Administration, Department of Commerce 
                (Parts 1100--1199)
      XIII  East-West Foreign Trade Board (Parts 1300--1399)
       XIV  Minority Business Development Agency (Parts 1400--
                1499)
            Subtitle C--Regulations Relating to Foreign Trade 
                Agreements
        XX  Office of the United States Trade Representative 
                (Parts 2000--2099)
            Subtitle D--Regulations Relating to Telecommunications 
                and Information
     XXIII  National Telecommunications and Information 
                Administration, Department of Commerce (Parts 
                2300--2399)

                    Title 16--Commercial Practices

         I  Federal Trade Commission (Parts 0--999)
        II  Consumer Product Safety Commission (Parts 1000--1799)

             Title 17--Commodity and Securities Exchanges

         I  Commodity Futures Trading Commission (Parts 1--199)
        II  Securities and Exchange Commission (Parts 200--399)
        IV  Department of the Treasury (Parts 400--499)

[[Page 611]]

          Title 18--Conservation of Power and Water Resources

         I  Federal Energy Regulatory Commission, Department of 
                Energy (Parts 1--399)
       III  Delaware River Basin Commission (Parts 400--499)
        VI  Water Resources Council (Parts 700--799)
      VIII  Susquehanna River Basin Commission (Parts 800--899)
      XIII  Tennessee Valley Authority (Parts 1300--1399)

                       Title 19--Customs Duties

         I  Bureau of Customs and Border Protection, Department of 
                Homeland Security; Department of the Treasury 
                (Parts 0--199)
        II  United States International Trade Commission (Parts 
                200--299)
       III  International Trade Administration, Department of 
                Commerce (Parts 300--399)
        IV  Bureau of Immigration and Customs Enforcement, 
                Department of Homeland Security (Parts 400--599)

                     Title 20--Employees' Benefits

         I  Office of Workers' Compensation Programs, Department 
                of Labor (Parts 1--199)
        II  Railroad Retirement Board (Parts 200--399)
       III  Social Security Administration (Parts 400--499)
        IV  Employees Compensation Appeals Board, Department of 
                Labor (Parts 500--599)
         V  Employment and Training Administration, Department of 
                Labor (Parts 600--699)
        VI  Employment Standards Administration, Department of 
                Labor (Parts 700--799)
       VII  Benefits Review Board, Department of Labor (Parts 
                800--899)
      VIII  Joint Board for the Enrollment of Actuaries (Parts 
                900--999)
        IX  Office of the Assistant Secretary for Veterans' 
                Employment and Training, Department of Labor 
                (Parts 1000--1099)

                       Title 21--Food and Drugs

         I  Food and Drug Administration, Department of Health and 
                Human Services (Parts 1--1299)
        II  Drug Enforcement Administration, Department of Justice 
                (Parts 1300--1399)
       III  Office of National Drug Control Policy (Parts 1400--
                1499)

                      Title 22--Foreign Relations

         I  Department of State (Parts 1--199)
        II  Agency for International Development (Parts 200--299)
       III  Peace Corps (Parts 300--399)

[[Page 612]]

        IV  International Joint Commission, United States and 
                Canada (Parts 400--499)
         V  Broadcasting Board of Governors (Parts 500--599)
       VII  Overseas Private Investment Corporation (Parts 700--
                799)
        IX  Foreign Service Grievance Board Regulations (Parts 
                900--999)
         X  Inter-American Foundation (Parts 1000--1099)
        XI  International Boundary and Water Commission, United 
                States and Mexico, United States Section (Parts 
                1100--1199)
       XII  United States International Development Cooperation 
                Agency (Parts 1200--1299)
       XIV  Foreign Service Labor Relations Board; Federal Labor 
                Relations Authority; General Counsel of the 
                Federal Labor Relations Authority; and the Foreign 
                Service Impasse Disputes Panel (Parts 1400--1499)
        XV  African Development Foundation (Parts 1500--1599)
       XVI  Japan-United States Friendship Commission (Parts 
                1600--1699)
      XVII  United States Institute of Peace (Parts 1700--1799)

                          Title 23--Highways

         I  Federal Highway Administration, Department of 
                Transportation (Parts 1--999)
        II  National Highway Traffic Safety Administration and 
                Federal Highway Administration, Department of 
                Transportation (Parts 1200--1299)
       III  National Highway Traffic Safety Administration, 
                Department of Transportation (Parts 1300--1399)

                Title 24--Housing and Urban Development

            Subtitle A--Office of the Secretary, Department of 
                Housing and Urban Development (Parts 0--99)
            Subtitle B--Regulations Relating to Housing and Urban 
                Development
         I  Office of Assistant Secretary for Equal Opportunity, 
                Department of Housing and Urban Development (Parts 
                100--199)
        II  Office of Assistant Secretary for Housing-Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Parts 200--299)
       III  Government National Mortgage Association, Department 
                of Housing and Urban Development (Parts 300--399)
        IV  Office of Housing and Office of Multifamily Housing 
                Assistance Restructuring, Department of Housing 
                and Urban Development (Parts 400--499)
         V  Office of Assistant Secretary for Community Planning 
                and Development, Department of Housing and Urban 
                Development (Parts 500--599)
        VI  Office of Assistant Secretary for Community Planning 
                and Development, Department of Housing and Urban 
                Development (Parts 600--699) [Reserved]

[[Page 613]]

       VII  Office of the Secretary, Department of Housing and 
                Urban Development (Housing Assistance Programs and 
                Public and Indian Housing Programs) (Parts 700--
                799)
      VIII  Office of the Assistant Secretary for Housing--Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Section 8 Housing Assistance 
                Programs, Section 202 Direct Loan Program, Section 
                202 Supportive Housing for the Elderly Program and 
                Section 811 Supportive Housing for Persons With 
                Disabilities Program) (Parts 800--899)
        IX  Office of Assistant Secretary for Public and Indian 
                Housing, Department of Housing and Urban 
                Development (Parts 900--1699)
         X  Office of Assistant Secretary for Housing--Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Interstate Land Sales 
                Registration Program) (Parts 1700--1799)
       XII  Office of Inspector General, Department of Housing and 
                Urban Development (Parts 2000--2099)
        XX  Office of Assistant Secretary for Housing--Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Parts 3200--3899)
       XXV  Neighborhood Reinvestment Corporation (Parts 4100--
                4199)

                           Title 25--Indians

         I  Bureau of Indian Affairs, Department of the Interior 
                (Parts 1--299)
        II  Indian Arts and Crafts Board, Department of the 
                Interior (Parts 300--399)
       III  National Indian Gaming Commission, Department of the 
                Interior (Parts 500--599)
        IV  Office of Navajo and Hopi Indian Relocation (Parts 
                700--799)
         V  Bureau of Indian Affairs, Department of the Interior, 
                and Indian Health Service, Department of Health 
                and Human Services (Part 900)
        VI  Office of the Assistant Secretary-Indian Affairs, 
                Department of the Interior (Parts 1000--1199)
       VII  Office of the Special Trustee for American Indians, 
                Department of the Interior (Part 1200)

                      Title 26--Internal Revenue

         I  Internal Revenue Service, Department of the Treasury 
                (Parts 1--899)

           Title 27--Alcohol, Tobacco Products and Firearms

         I  Alcohol and Tobacco Tax and Trade Bureau, Department 
                of the Treasury (Parts 1--399)
        II  Bureau of Alcohol, Tobacco, Firearms, and Explosives, 
                Department of Justice (Parts 400--699)

[[Page 614]]

                   Title 28--Judicial Administration

         I  Department of Justice (Parts 0--299)
       III  Federal Prison Industries, Inc., Department of Justice 
                (Parts 300--399)
         V  Bureau of Prisons, Department of Justice (Parts 500--
                599)
        VI  Offices of Independent Counsel, Department of Justice 
                (Parts 600--699)
       VII  Office of Independent Counsel (Parts 700--799)
      VIII  Court Services and Offender Supervision Agency for the 
                District of Columbia (Parts 800--899)
        IX  National Crime Prevention and Privacy Compact Council 
                (Parts 900--999)
        XI  Department of Justice and Department of State (Parts 
                1100--1199)

                            Title 29--Labor

            Subtitle A--Office of the Secretary of Labor (Parts 
                0--99)
            Subtitle B--Regulations Relating to Labor
         I  National Labor Relations Board (Parts 100--199)
        II  Office of Labor-Management Standards, Department of 
                Labor (Parts 200--299)
       III  National Railroad Adjustment Board (Parts 300--399)
        IV  Office of Labor-Management Standards, Department of 
                Labor (Parts 400--499)
         V  Wage and Hour Division, Department of Labor (Parts 
                500--899)
        IX  Construction Industry Collective Bargaining Commission 
                (Parts 900--999)
         X  National Mediation Board (Parts 1200--1299)
       XII  Federal Mediation and Conciliation Service (Parts 
                1400--1499)
       XIV  Equal Employment Opportunity Commission (Parts 1600--
                1699)
      XVII  Occupational Safety and Health Administration, 
                Department of Labor (Parts 1900--1999)
        XX  Occupational Safety and Health Review Commission 
                (Parts 2200--2499)
       XXV  Employee Benefits Security Administration, Department 
                of Labor (Parts 2500--2599)
     XXVII  Federal Mine Safety and Health Review Commission 
                (Parts 2700--2799)
        XL  Pension Benefit Guaranty Corporation (Parts 4000--
                4999)

                      Title 30--Mineral Resources

         I  Mine Safety and Health Administration, Department of 
                Labor (Parts 1--199)
        II  Minerals Management Service, Department of the 
                Interior (Parts 200--299)
       III  Board of Surface Mining and Reclamation Appeals, 
                Department of the Interior (Parts 300--399)

[[Page 615]]

        IV  Geological Survey, Department of the Interior (Parts 
                400--499)
       VII  Office of Surface Mining Reclamation and Enforcement, 
                Department of the Interior (Parts 700--999)

                 Title 31--Money and Finance: Treasury

            Subtitle A--Office of the Secretary of the Treasury 
                (Parts 0--50)
            Subtitle B--Regulations Relating to Money and Finance
         I  Monetary Offices, Department of the Treasury (Parts 
                51--199)
        II  Fiscal Service, Department of the Treasury (Parts 
                200--399)
        IV  Secret Service, Department of the Treasury (Parts 
                400--499)
         V  Office of Foreign Assets Control, Department of the 
                Treasury (Parts 500--599)
        VI  Bureau of Engraving and Printing, Department of the 
                Treasury (Parts 600--699)
       VII  Federal Law Enforcement Training Center, Department of 
                the Treasury (Parts 700--799)
      VIII  Office of International Investment, Department of the 
                Treasury (Parts 800--899)
        IX  Federal Claims Collection Standards (Department of the 
                Treasury--Department of Justice) (Parts 900--999)

                      Title 32--National Defense

            Subtitle A--Department of Defense
         I  Office of the Secretary of Defense (Parts 1--399)
         V  Department of the Army (Parts 400--699)
        VI  Department of the Navy (Parts 700--799)
       VII  Department of the Air Force (Parts 800--1099)
            Subtitle B--Other Regulations Relating to National 
                Defense
       XII  Defense Logistics Agency (Parts 1200--1299)
       XVI  Selective Service System (Parts 1600--1699)
     XVIII  National Counterintelligence Center (Parts 1800--1899)
       XIX  Central Intelligence Agency (Parts 1900--1999)
        XX  Information Security Oversight Office, National 
                Archives and Records Administration (Parts 2000--
                2099)
       XXI  National Security Council (Parts 2100--2199)
      XXIV  Office of Science and Technology Policy (Parts 2400--
                2499)
     XXVII  Office for Micronesian Status Negotiations (Parts 
                2700--2799)
    XXVIII  Office of the Vice President of the United States 
                (Parts 2800--2899)

               Title 33--Navigation and Navigable Waters

         I  Coast Guard, Department of Homeland Security (Parts 
                1--199)
        II  Corps of Engineers, Department of the Army (Parts 
                200--399)

[[Page 616]]

        IV  Saint Lawrence Seaway Development Corporation, 
                Department of Transportation (Parts 400--499)

                          Title 34--Education

            Subtitle A--Office of the Secretary, Department of 
                Education (Parts 1--99)
            Subtitle B--Regulations of the Offices of the 
                Department of Education
         I  Office for Civil Rights, Department of Education 
                (Parts 100--199)
        II  Office of Elementary and Secondary Education, 
                Department of Education (Parts 200--299)
       III  Office of Special Education and Rehabilitative 
                Services, Department of Education (Parts 300--399)
        IV  Office of Vocational and Adult Education, Department 
                of Education (Parts 400--499)
         V  Office of Bilingual Education and Minority Languages 
                Affairs, Department of Education (Parts 500--599)
        VI  Office of Postsecondary Education, Department of 
                Education (Parts 600--699)
        XI  National Institute for Literacy (Parts 1100--1199)
            Subtitle C--Regulations Relating to Education
       XII  National Council on Disability (Parts 1200--1299)

                          Title 35 [Reserved]

             Title 36--Parks, Forests, and Public Property

         I  National Park Service, Department of the Interior 
                (Parts 1--199)
        II  Forest Service, Department of Agriculture (Parts 200--
                299)
       III  Corps of Engineers, Department of the Army (Parts 
                300--399)
        IV  American Battle Monuments Commission (Parts 400--499)
         V  Smithsonian Institution (Parts 500--599)
       VII  Library of Congress (Parts 700--799)
      VIII  Advisory Council on Historic Preservation (Parts 800--
                899)
        IX  Pennsylvania Avenue Development Corporation (Parts 
                900--999)
         X  Presidio Trust (Parts 1000--1099)
        XI  Architectural and Transportation Barriers Compliance 
                Board (Parts 1100--1199)
       XII  National Archives and Records Administration (Parts 
                1200--1299)
        XV  Oklahoma City National Memorial Trust (Part 1501)
       XVI  Morris K. Udall Scholarship and Excellence in National 
                Environmental Policy Foundation (Parts 1600--1699)

             Title 37--Patents, Trademarks, and Copyrights

         I  United States Patent and Trademark Office, Department 
                of Commerce (Parts 1--199)

[[Page 617]]

        II  Copyright Office, Library of Congress (Parts 200--299)
        IV  Assistant Secretary for Technology Policy, Department 
                of Commerce (Parts 400--499)
         V  Under Secretary for Technology, Department of Commerce 
                (Parts 500--599)

           Title 38--Pensions, Bonuses, and Veterans' Relief

         I  Department of Veterans Affairs (Parts 0--99)

                       Title 39--Postal Service

         I  United States Postal Service (Parts 1--999)
       III  Postal Rate Commission (Parts 3000--3099)

                  Title 40--Protection of Environment

         I  Environmental Protection Agency (Parts 1--1099)
        IV  Environmental Protection Agency and Department of 
                Justice (Parts 1400--1499)
         V  Council on Environmental Quality (Parts 1500--1599)
        VI  Chemical Safety and Hazard Investigation Board (Parts 
                1600--1699)
       VII  Environmental Protection Agency and Department of 
                Defense; Uniform National Discharge Standards for 
                Vessels of the Armed Forces (Parts 1700--1799)

          Title 41--Public Contracts and Property Management

            Subtitle B--Other Provisions Relating to Public 
                Contracts
        50  Public Contracts, Department of Labor (Parts 50-1--50-
                999)
        51  Committee for Purchase From People Who Are Blind or 
                Severely Disabled (Parts 51-1--51-99)
        60  Office of Federal Contract Compliance Programs, Equal 
                Employment Opportunity, Department of Labor (Parts 
                60-1--60-999)
        61  Office of the Assistant Secretary for Veterans' 
                Employment and Training Service, Department of 
                Labor (Parts 61-1--61-999)
            Subtitle C--Federal Property Management Regulations 
                System
       101  Federal Property Management Regulations (Parts 101-1--
                101-99)
       102  Federal Management Regulation (Parts 102-1--102-299)
       105  General Services Administration (Parts 105-1--105-999)
       109  Department of Energy Property Management Regulations 
                (Parts 109-1--109-99)
       114  Department of the Interior (Parts 114-1--114-99)
       115  Environmental Protection Agency (Parts 115-1--115-99)
       128  Department of Justice (Parts 128-1--128-99)

[[Page 618]]

            Subtitle D--Other Provisions Relating to Property 
                Management [Reserved]
            Subtitle E--Federal Information Resources Management 
                Regulations System
       201  Federal Information Resources Management Regulation 
                (Parts 201-1--201-99) [Reserved]
            Subtitle F--Federal Travel Regulation System
       300  General (Parts 300-1--300-99)
       301  Temporary Duty (TDY) Travel Allowances (Parts 301-1--
                301-99)
       302  Relocation Allowances (Parts 302-1--302-99)
       303  Payment of Expenses Connected with the Death of 
                Certain Employees (Part 303-1--303-99)
       304  Payment of Travel Expenses from a Non-Federal Source 
                (Parts 304-1--304-99)

                        Title 42--Public Health

         I  Public Health Service, Department of Health and Human 
                Services (Parts 1--199)
        IV  Centers for Medicare & Medicaid Services, Department 
                of Health and Human Services (Parts 400--499)
         V  Office of Inspector General-Health Care, Department of 
                Health and Human Services (Parts 1000--1999)

                   Title 43--Public Lands: Interior

            Subtitle A--Office of the Secretary of the Interior 
                (Parts 1--199)
            Subtitle B--Regulations Relating to Public Lands
         I  Bureau of Reclamation, Department of the Interior 
                (Parts 200--499)
        II  Bureau of Land Management, Department of the Interior 
                (Parts 1000--9999)
       III  Utah Reclamation Mitigation and Conservation 
                Commission (Parts 10000--10010)

             Title 44--Emergency Management and Assistance

         I  Federal Emergency Management Agency, Department of 
                Homeland Security (Parts 0--399)
        IV  Department of Commerce and Department of 
                Transportation (Parts 400--499)

                       Title 45--Public Welfare

            Subtitle A--Department of Health and Human Services 
                (Parts 1--199)
            Subtitle B--Regulations Relating to Public Welfare

[[Page 619]]

        II  Office of Family Assistance (Assistance Programs), 
                Administration for Children and Families, 
                Department of Health and Human Services (Parts 
                200--299)
       III  Office of Child Support Enforcement (Child Support 
                Enforcement Program), Administration for Children 
                and Families, Department of Health and Human 
                Services (Parts 300--399)
        IV  Office of Refugee Resettlement, Administration for 
                Children and Families, Department of Health and 
                Human Services (Parts 400--499)
         V  Foreign Claims Settlement Commission of the United 
                States, Department of Justice (Parts 500--599)
        VI  National Science Foundation (Parts 600--699)
       VII  Commission on Civil Rights (Parts 700--799)
      VIII  Office of Personnel Management (Parts 800--899)
         X  Office of Community Services, Administration for 
                Children and Families, Department of Health and 
                Human Services (Parts 1000--1099)
        XI  National Foundation on the Arts and the Humanities 
                (Parts 1100--1199)
       XII  Corporation for National and Community Service (Parts 
                1200--1299)
      XIII  Office of Human Development Services, Department of 
                Health and Human Services (Parts 1300--1399)
       XVI  Legal Services Corporation (Parts 1600--1699)
      XVII  National Commission on Libraries and Information 
                Science (Parts 1700--1799)
     XVIII  Harry S. Truman Scholarship Foundation (Parts 1800--
                1899)
       XXI  Commission on Fine Arts (Parts 2100--2199)
     XXIII  Arctic Research Commission (Part 2301)
      XXIV  James Madison Memorial Fellowship Foundation (Parts 
                2400--2499)
       XXV  Corporation for National and Community Service (Parts 
                2500--2599)

                          Title 46--Shipping

         I  Coast Guard, Department of Homeland Security (Parts 
                1--199)
        II  Maritime Administration, Department of Transportation 
                (Parts 200--399)
       III  Coast Guard (Great Lakes Pilotage), Department of 
                Homeland Security (Parts 400--499)
        IV  Federal Maritime Commission (Parts 500--599)

                      Title 47--Telecommunication

         I  Federal Communications Commission (Parts 0--199)
        II  Office of Science and Technology Policy and National 
                Security Council (Parts 200--299)

[[Page 620]]

       III  National Telecommunications and Information 
                Administration, Department of Commerce (Parts 
                300--399)

           Title 48--Federal Acquisition Regulations System

         1  Federal Acquisition Regulation (Parts 1--99)
         2  Department of Defense (Parts 200--299)
         3  Department of Health and Human Services (Parts 300--
                399)
         4  Department of Agriculture (Parts 400--499)
         5  General Services Administration (Parts 500--599)
         6  Department of State (Parts 600--699)
         7  United States Agency for International Development 
                (Parts 700--799)
         8  Department of Veterans Affairs (Parts 800--899)
         9  Department of Energy (Parts 900--999)
        10  Department of the Treasury (Parts 1000--1099)
        12  Department of Transportation (Parts 1200--1299)
        13  Department of Commerce (Parts 1300--1399)
        14  Department of the Interior (Parts 1400--1499)
        15  Environmental Protection Agency (Parts 1500--1599)
        16  Office of Personnel Management, Federal Employees 
                Health Benefits Acquisition Regulation (Parts 
                1600--1699)
        17  Office of Personnel Management (Parts 1700--1799)
        18  National Aeronautics and Space Administration (Parts 
                1800--1899)
        19  Broadcasting Board of Governors (Parts 1900--1999)
        20  Nuclear Regulatory Commission (Parts 2000--2099)
        21  Office of Personnel Management, Federal Employees 
                Group Life Insurance Federal Acquisition 
                Regulation (Parts 2100--2199)
        23  Social Security Administration (Parts 2300--2399)
        24  Department of Housing and Urban Development (Parts 
                2400--2499)
        25  National Science Foundation (Parts 2500--2599)
        28  Department of Justice (Parts 2800--2899)
        29  Department of Labor (Parts 2900--2999)
        30  Department of Homeland Security, Homeland Security 
                Acquisition Regulation (HSAR) (Parts 3000--3099)
        34  Department of Education Acquisition Regulation (Parts 
                3400--3499)
        35  RESERVED
        44  Federal Emergency Management Agency (Parts 4400--4499)
        51  Department of the Army Acquisition Regulations (Parts 
                5100--5199)
        52  Department of the Navy Acquisition Regulations (Parts 
                5200--5299)
        53  Department of the Air Force Federal Acquisition 
                Regulation Supplement (Parts 5300--5399)

[[Page 621]]

        54  Defense Logistics Agency, Department of Defense (Parts 
                5400--5499)
        57  African Development Foundation (Parts 5700--5799)
        61  General Services Administration Board of Contract 
                Appeals (Parts 6100--6199)
        63  Department of Transportation Board of Contract Appeals 
                (Parts 6300--6399)
        99  Cost Accounting Standards Board, Office of Federal 
                Procurement Policy, Office of Management and 
                Budget (Parts 9900--9999)

                       Title 49--Transportation

            Subtitle A--Office of the Secretary of Transportation 
                (Parts 1--99)
            Subtitle B--Other Regulations Relating to 
                Transportation
         I  Research and Special Programs Administration, 
                Department of Transportation (Parts 100--199)
        II  Federal Railroad Administration, Department of 
                Transportation (Parts 200--299)
       III  Federal Motor Carrier Safety Administration, 
                Department of Transportation (Parts 300--399)
        IV  Coast Guard, Department of Homeland Security (Parts 
                400--499)
         V  National Highway Traffic Safety Administration, 
                Department of Transportation (Parts 500--599)
        VI  Federal Transit Administration, Department of 
                Transportation (Parts 600--699)
       VII  National Railroad Passenger Corporation (AMTRAK) 
                (Parts 700--799)
      VIII  National Transportation Safety Board (Parts 800--999)
         X  Surface Transportation Board, Department of 
                Transportation (Parts 1000--1399)
        XI  Bureau of Transportation Statistics, Department of 
                Transportation (Parts 1400--1499)
       XII  Transportation Security Administration, Department of 
                Homeland Security (Parts 1500--1699)

                   Title 50--Wildlife and Fisheries

         I  United States Fish and Wildlife Service, Department of 
                the Interior (Parts 1--199)
        II  National Marine Fisheries Service, National Oceanic 
                and Atmospheric Administration, Department of 
                Commerce (Parts 200--299)
       III  International Fishing and Related Activities (Parts 
                300--399)
        IV  Joint Regulations (United States Fish and Wildlife 
                Service, Department of the Interior and National 
                Marine Fisheries Service, National Oceanic and 
                Atmospheric Administration, Department of 
                Commerce); Endangered Species Committee 
                Regulations (Parts 400--499)

[[Page 622]]

         V  Marine Mammal Commission (Parts 500--599)
        VI  Fishery Conservation and Management, National Oceanic 
                and Atmospheric Administration, Department of 
                Commerce (Parts 600--699)

                      CFR Index and Finding Aids

            Subject/Agency Index
            List of Agency Prepared Indexes
            Parallel Tables of Statutory Authorities and Rules
            List of CFR Titles, Chapters, Subchapters, and Parts
            Alphabetical List of Agencies Appearing in the CFR

[[Page 623]]





           Alphabetical List of Agencies Appearing in the CFR




                     (Revised as of January 1, 2005)

                                                  CFR Title, Subtitle or 
                     Agency                               Chapter

Administrative Committee of the Federal Register  1, I
Advanced Research Projects Agency                 32, I
Advisory Council on Historic Preservation         36, VIII
African Development Foundation                    22, XV
  Federal Acquisition Regulation                  48, 57
Agency for International Development, United      22, II
     States
  Federal Acquisition Regulation                  48, 7
Agricultural Marketing Service                    7, I, IX, X, XI
Agricultural Research Service                     7, V
Agriculture Department                            5, LXXIII
  Agricultural Marketing Service                  7, I, IX, X, XI
  Agricultural Research Service                   7, V
  Animal and Plant Health Inspection Service      7, III; 9, I
  Chief Financial Officer, Office of              7, XXX
  Commodity Credit Corporation                    7, XIV
  Cooperative State Research, Education, and      7, XXXIV
       Extension Service
  Economic Research Service                       7, XXXVII
  Energy, Office of                               7, XXIX
  Environmental Quality, Office of                7, XXXI
  Farm Service Agency                             7, VII, XVIII
  Federal Acquisition Regulation                  48, 4
  Federal Crop Insurance Corporation              7, IV
  Food and Nutrition Service                      7, II
  Food Safety and Inspection Service              9, III
  Foreign Agricultural Service                    7, XV
  Forest Service                                  36, II
  Grain Inspection, Packers and Stockyards        7, VIII; 9, II
       Administration
  Information Resources Management, Office of     7, XXVII
  Inspector General, Office of                    7, XXVI
  National Agricultural Library                   7, XLI
  National Agricultural Statistics Service        7, XXXVI
  Natural Resources Conservation Service          7, VI
  Operations, Office of                           7, XXVIII
  Procurement and Property Management, Office of  7, XXXII
  Rural Business-Cooperative Service              7, XVIII, XLII
  Rural Development Administration                7, XLII
  Rural Housing Service                           7, XVIII, XXXV
  Rural Telephone Bank                            7, XVI
  Rural Utilities Service                         7, XVII, XVIII, XLII
  Secretary of Agriculture, Office of             7, Subtitle A
  Transportation, Office of                       7, XXXIII
  World Agricultural Outlook Board                7, XXXVIII
Air Force Department                              32, VII
  Federal Acquisition Regulation Supplement       48, 53
Air Transportation Stabilization Board            14, VI
Alcohol and Tobacco Tax and Trade Bureau          27, I
Alcohol, Tobacco, Firearms, and Explosives,       27, II
     Bureau of
AMTRAK                                            49, VII
American Battle Monuments Commission              36, IV
American Indians, Office of the Special Trustee   25, VII
Animal and Plant Health Inspection Service        7, III; 9, I
Appalachian Regional Commission                   5, IX

[[Page 624]]

Architectural and Transportation Barriers         36, XI
     Compliance Board
Arctic Research Commission                        45, XXIII
Armed Forces Retirement Home                      5, XI
Army Department                                   32, V
  Engineers, Corps of                             33, II; 36, III
  Federal Acquisition Regulation                  48, 51
Benefits Review Board                             20, VII
Bilingual Education and Minority Languages        34, V
     Affairs, Office of
Blind or Severely Disabled, Committee for         41, 51
     Purchase From People Who Are
Broadcasting Board of Governors                   22, V
  Federal Acquisition Regulation                  48, 19
Census Bureau                                     15, I
Centers for Medicare & Medicaid Services          42, IV
Central Intelligence Agency                       32, XIX
Chief Financial Officer, Office of                7, XXX
Child Support Enforcement, Office of              45, III
Children and Families, Administration for         45, II, III, IV, X
Civil Rights, Commission on                       45, VII
Civil Rights, Office for                          34, I
Coast Guard                                       33, I; 46, I; 49, IV
Coast Guard (Great Lakes Pilotage)                46, III
Commerce Department                               44, IV
  Census Bureau                                   15, I
  Economic Affairs, Under Secretary               37, V
  Economic Analysis, Bureau of                    15, VIII
  Economic Development Administration             13, III
  Emergency Management and Assistance             44, IV
  Federal Acquisition Regulation                  48, 13
  Fishery Conservation and Management             50, VI
  Foreign-Trade Zones Board                       15, IV
  Industry and Security, Bureau of                15, VII
  International Trade Administration              15, III; 19, III
  National Institute of Standards and Technology  15, II
  National Marine Fisheries Service               50, II, IV, VI
  National Oceanic and Atmospheric                15, IX; 50, II, III, IV, 
       Administration                             VI
  National Telecommunications and Information     15, XXIII; 47, III
       Administration
  National Weather Service                        15, IX
  Patent and Trademark Office, United States      37, I
  Productivity, Technology and Innovation,        37, IV
       Assistant Secretary for
  Secretary of Commerce, Office of                15, Subtitle A
  Technology, Under Secretary for                 37, V
  Technology Administration                       15, XI
  Technology Policy, Assistant Secretary for      37, IV
Commercial Space Transportation                   14, III
Commodity Credit Corporation                      7, XIV
Commodity Futures Trading Commission              5, XLI; 17, I
Community Planning and Development, Office of     24, V, VI
     Assistant Secretary for
Community Services, Office of                     45, X
Comptroller of the Currency                       12, I
Construction Industry Collective Bargaining       29, IX
     Commission
Consumer Product Safety Commission                5, LXXI; 16, II
Cooperative State Research, Education, and        7, XXXIV
     Extension Service
Copyright Office                                  37, II
Corporation for National and Community Service    45, XII, XXV
Cost Accounting Standards Board                   48, 99
Council on Environmental Quality                  40, V
Court Services and Offender Supervision Agency    28, VIII
     for the District of Columbia
Customs and Border Protection Bureau              19, I
Defense Contract Audit Agency                     32, I
Defense Department                                5, XXVI; 32, Subtitle A; 
                                                  40, VII

[[Page 625]]

  Advanced Research Projects Agency               32, I
  Air Force Department                            32, VII
  Army Department                                 32, V; 33, II; 36, III, 
                                                  48, 51
  Defense Intelligence Agency                     32, I
  Defense Logistics Agency                        32, I, XII; 48, 54
  Engineers, Corps of                             33, II; 36, III
  Federal Acquisition Regulation                  48, 2
  National Imagery and Mapping Agency             32, I
  Navy Department                                 32, VI; 48, 52
  Secretary of Defense, Office of                 32, I
Defense Contract Audit Agency                     32, I
Defense Intelligence Agency                       32, I
Defense Logistics Agency                          32, XII; 48, 54
Defense Nuclear Facilities Safety Board           10, XVII
Delaware River Basin Commission                   18, III
District of Columbia, Court Services and          28, VIII
     Offender Supervision Agency for the
Drug Enforcement Administration                   21, II
East-West Foreign Trade Board                     15, XIII
Economic Affairs, Under Secretary                 37, V
Economic Analysis, Bureau of                      15, VIII
Economic Development Administration               13, III
Economic Research Service                         7, XXXVII
Education, Department of                          5, LIII
  Bilingual Education and Minority Languages      34, V
       Affairs, Office of
  Civil Rights, Office for                        34, I
  Educational Research and Improvement, Office    34, VII
       of
  Elementary and Secondary Education, Office of   34, II
  Federal Acquisition Regulation                  48, 34
  Postsecondary Education, Office of              34, VI
  Secretary of Education, Office of               34, Subtitle A
  Special Education and Rehabilitative Services,  34, III
       Office of
  Vocational and Adult Education, Office of       34, IV
Educational Research and Improvement, Office of   34, VII
Elementary and Secondary Education, Office of     34, II
Emergency Oil and Gas Guaranteed Loan Board       13, V
Emergency Steel Guarantee Loan Board              13, IV
Employee Benefits Security Administration         29, XXV
Employees' Compensation Appeals Board             20, IV
Employees Loyalty Board                           5, V
Employment and Training Administration            20, V
Employment Standards Administration               20, VI
Endangered Species Committee                      50, IV
Energy, Department of                             5, XXIII; 10, II, III, X
  Federal Acquisition Regulation                  48, 9
  Federal Energy Regulatory Commission            5, XXIV; 18, I
  Property Management Regulations                 41, 109
Energy, Office of                                 7, XXIX
Engineers, Corps of                               33, II; 36, III
Engraving and Printing, Bureau of                 31, VI
Environmental Protection Agency                   5, LIV; 40, I, IV, VII
  Federal Acquisition Regulation                  48, 15
  Property Management Regulations                 41, 115
Environmental Quality, Office of                  7, XXXI
Equal Employment Opportunity Commission           5, LXII; 29, XIV
Equal Opportunity, Office of Assistant Secretary  24, I
     for
Executive Office of the President                 3, I
  Administration, Office of                       5, XV
  Environmental Quality, Council on               40, V
  Management and Budget, Office of                5, III, LXXVII; 14, VI; 
                                                  48, 99
  National Drug Control Policy, Office of         21, III
  National Security Council                       32, XXI; 47, 2
  Presidential Documents                          3
  Science and Technology Policy, Office of        32, XXIV; 47, II

[[Page 626]]

  Trade Representative, Office of the United      15, XX
       States
Export-Import Bank of the United States           5, LII; 12, IV
Family Assistance, Office of                      45, II
Farm Credit Administration                        5, XXXI; 12, VI
Farm Credit System Insurance Corporation          5, XXX; 12, XIV
Farm Service Agency                               7, VII, XVIII
Federal Acquisition Regulation                    48, 1
Federal Aviation Administration                   14, I
  Commercial Space Transportation                 14, III
Federal Claims Collection Standards               31, IX
Federal Communications Commission                 5, XXIX; 47, I
Federal Contract Compliance Programs, Office of   41, 60
Federal Crop Insurance Corporation                7, IV
Federal Deposit Insurance Corporation             5, XXII; 12, III
Federal Election Commission                       11, I
Federal Emergency Management Agency               44, I
  Federal Acquisition Regulation                  48, 44
Federal Employees Group Life Insurance Federal    48, 21
     Acquisition Regulation
Federal Employees Health Benefits Acquisition     48, 16
     Regulation
Federal Energy Regulatory Commission              5, XXIV; 18, I
Federal Financial Institutions Examination        12, XI
     Council
Federal Financing Bank                            12, VIII
Federal Highway Administration                    23, I, II
Federal Home Loan Mortgage Corporation            1, IV
Federal Housing Enterprise Oversight Office       12, XVII
Federal Housing Finance Board                     12, IX
Federal Labor Relations Authority, and General    5, XIV; 22, XIV
     Counsel of the Federal Labor Relations 
     Authority
Federal Law Enforcement Training Center           31, VII
Federal Management Regulation                     41, 102
Federal Maritime Commission                       46, IV
Federal Mediation and Conciliation Service        29, XII
Federal Mine Safety and Health Review Commission  5, LXXIV; 29, XXVII
Federal Motor Carrier Safety Administration       49, III
Federal Prison Industries, Inc.                   28, III
Federal Procurement Policy Office                 48, 99
Federal Property Management Regulations           41, 101
Federal Railroad Administration                   49, II
Federal Register, Administrative Committee of     1, I
Federal Register, Office of                       1, II
Federal Reserve System                            12, II
  Board of Governors                              5, LVIII
Federal Retirement Thrift Investment Board        5, VI, LXXVI
Federal Service Impasses Panel                    5, XIV
Federal Trade Commission                          5, XLVII; 16, I
Federal Transit Administration                    49, VI
Federal Travel Regulation System                  41, Subtitle F
Fine Arts, Commission on                          45, XXI
Fiscal Service                                    31, II
Fish and Wildlife Service, United States          50, I, IV
Fishery Conservation and Management               50, VI
Food and Drug Administration                      21, I
Food and Nutrition Service                        7, II
Food Safety and Inspection Service                9, III
Foreign Agricultural Service                      7, XV
Foreign Assets Control, Office of                 31, V
Foreign Claims Settlement Commission of the       45, V
     United States
Foreign Service Grievance Board                   22, IX
Foreign Service Impasse Disputes Panel            22, XIV
Foreign Service Labor Relations Board             22, XIV
Foreign-Trade Zones Board                         15, IV
Forest Service                                    36, II
General Accounting Office                         4, I
General Services Administration                   5, LVII; 41, 105
  Contract Appeals, Board of                      48, 61
  Federal Acquisition Regulation                  48, 5

[[Page 627]]

  Federal Management Regulation                   41, 102
  Federal Property Management Regulations         41, 101
  Federal Travel Regulation System                41, Subtitle F
  General                                         41, 300
  Payment From a Non-Federal Source for Travel    41, 304
       Expenses
  Payment of Expenses Connected With the Death    41, 303
       of Certain Employees
  Relocation Allowances                           41, 302
  Temporary Duty (TDY) Travel Allowances          41, 301
Geological Survey                                 30, IV
Government Ethics, Office of                      5, XVI
Government National Mortgage Association          24, III
Grain Inspection, Packers and Stockyards          7, VIII; 9, II
     Administration
Harry S. Truman Scholarship Foundation            45, XVIII
Health and Human Services, Department of          5, XLV; 45, Subtitle A
  Centers for Medicare & Medicaid Services        42, IV
  Child Support Enforcement, Office of            45, III
  Children and Families, Administration for       45, II, III, IV, X
  Community Services, Office of                   45, X
  Family Assistance, Office of                    45, II
  Federal Acquisition Regulation                  48, 3
  Food and Drug Administration                    21, I
  Human Development Services, Office of           45, XIII
  Indian Health Service                           25, V; 42, I
  Inspector General (Health Care), Office of      42, V
  Public Health Service                           42, I
  Refugee Resettlement, Office of                 45, IV
Homeland Security, Department of                  6, I
  Coast Guard                                     33, I; 46, I; 49, IV
  Coast Guard (Great Lakes Pilotage)              46, III
  Customs and Border Protection Bureau            19, I
  Federal Emergency Management Agency             44, I
  Immigration and Customs Enforcement Bureau      19, IV
  Immigration and Naturalization                  8, I
  Transportation Security Administration          49, XII
Housing and Urban Development, Department of      5, LXV; 24, Subtitle B
  Community Planning and Development, Office of   24, V, VI
       Assistant Secretary for
  Equal Opportunity, Office of Assistant          24, I
       Secretary for
  Federal Acquisition Regulation                  48, 24
  Federal Housing Enterprise Oversight, Office    12, XVII
       of
  Government National Mortgage Association        24, III
  Housing--Federal Housing Commissioner, Office   24, II, VIII, X, XX
       of Assistant Secretary for
  Housing, Office of, and Multifamily Housing     24, IV
       Assistance Restructuring, Office of
  Inspector General, Office of                    24, XII
  Public and Indian Housing, Office of Assistant  24, IX
       Secretary for
  Secretary, Office of                            24, Subtitle A, VII
Housing--Federal Housing Commissioner, Office of  24, II, VIII, X, XX
     Assistant Secretary for
Housing, Office of, and Multifamily Housing       24, IV
     Assistance Restructuring, Office of
Human Development Services, Office of             45, XIII
Immigration and Customs Enforcement Bureau        19, IV
Immigration and Naturalization                    8, I
Immigration Review, Executive Office for          8, V
Independent Counsel, Office of                    28, VII
Indian Affairs, Bureau of                         25, I, V
Indian Affairs, Office of the Assistant           25, VI
     Secretary
Indian Arts and Crafts Board                      25, II
Indian Health Service                             25, V; 42, I
Industry and Security, Bureau of                  15, VII
Information Resources Management, Office of       7, XXVII
Information Security Oversight Office, National   32, XX
     Archives and Records Administration
Inspector General

[[Page 628]]

  Agriculture Department                          7, XXVI
  Health and Human Services Department            42, V
  Housing and Urban Development Department        24, XII
Institute of Peace, United States                 22, XVII
Inter-American Foundation                         5, LXIII; 22, X
Interior Department
  American Indians, Office of the Special         25, VII
       Trustee
  Endangered Species Committee                    50, IV
  Federal Acquisition Regulation                  48, 14
  Federal Property Management Regulations System  41, 114
  Fish and Wildlife Service, United States        50, I, IV
  Geological Survey                               30, IV
  Indian Affairs, Bureau of                       25, I, V
  Indian Affairs, Office of the Assistant         25, VI
       Secretary
  Indian Arts and Crafts Board                    25, II
  Land Management, Bureau of                      43, II
  Minerals Management Service                     30, II
  National Indian Gaming Commission               25, III
  National Park Service                           36, I
  Reclamation, Bureau of                          43, I
  Secretary of the Interior, Office of            43, Subtitle A
  Surface Mining and Reclamation Appeals, Board   30, III
       of
  Surface Mining Reclamation and Enforcement,     30, VII
       Office of
Internal Revenue Service                          26, I
International Boundary and Water Commission,      22, XI
     United States and Mexico, United States 
     Section
International Development, United States Agency   22, II
     for
  Federal Acquisition Regulation                  48, 7
International Development Cooperation Agency,     22, XII
     United States
International Fishing and Related Activities      50, III
International Investment, Office of               31, VIII
International Joint Commission, United States     22, IV
     and Canada
International Organizations Employees Loyalty     5, V
     Board
International Trade Administration                15, III; 19, III
International Trade Commission, United States     19, II
Interstate Commerce Commission                    5, XL
James Madison Memorial Fellowship Foundation      45, XXIV
Japan-United States Friendship Commission         22, XVI
Joint Board for the Enrollment of Actuaries       20, VIII
Justice Department                                5, XXVIII; 28, I, XI; 40, 
                                                  IV
  Alcohol, Tobacco, Firearms, and Explosives,     27, II
       Bureau of
  Drug Enforcement Administration                 21, II
  Federal Acquisition Regulation                  48, 28
  Federal Claims Collection Standards             31, IX
  Federal Prison Industries, Inc.                 28, III
  Foreign Claims Settlement Commission of the     45, V
       United States
  Immigration Review, Executive Office for        8, V
  Offices of Independent Counsel                  28, VI
  Prisons, Bureau of                              28, V
  Property Management Regulations                 41, 128
Labor Department                                  5, XLII
  Benefits Review Board                           20, VII
  Employee Benefits Security Administration       29, XXV
  Employees' Compensation Appeals Board           20, IV
  Employment and Training Administration          20, V
  Employment Standards Administration             20, VI
  Federal Acquisition Regulation                  48, 29
  Federal Contract Compliance Programs, Office    41, 60
       of
  Federal Procurement Regulations System          41, 50
  Labor-Management Standards, Office of           29, II, IV
  Mine Safety and Health Administration           30, I
  Occupational Safety and Health Administration   29, XVII
  Public Contracts                                41, 50
  Secretary of Labor, Office of                   29, Subtitle A

[[Page 629]]

  Veterans' Employment and Training Service,      41, 61; 20, IX
       Office of the Assistant Secretary for
  Wage and Hour Division                          29, V
  Workers' Compensation Programs, Office of       20, I
Labor-Management Standards, Office of             29, II, IV
Land Management, Bureau of                        43, II
Legal Services Corporation                        45, XVI
Library of Congress                               36, VII
  Copyright Office                                37, II
Local Television Loan Guarantee Board             7, XX
Management and Budget, Office of                  5, III, LXXVII; 14, VI; 
                                                  48, 99
Marine Mammal Commission                          50, V
Maritime Administration                           46, II
Merit Systems Protection Board                    5, II
Micronesian Status Negotiations, Office for       32, XXVII
Mine Safety and Health Administration             30, I
Minerals Management Service                       30, II
Minority Business Development Agency              15, XIV
Miscellaneous Agencies                            1, IV
Monetary Offices                                  31, I
Morris K. Udall Scholarship and Excellence in     36, XVI
     National Environmental Policy Foundation
National Aeronautics and Space Administration     5, LIX; 14, V
  Federal Acquisition Regulation                  48, 18
National Agricultural Library                     7, XLI
National Agricultural Statistics Service          7, XXXVI
National and Community Service, Corporation for   45, XII, XXV
National Archives and Records Administration      5, LXVI; 36, XII
  Information Security Oversight Office           32, XX
National Bureau of Standards                      15, II
National Capital Planning Commission              1, IV
National Commission for Employment Policy         1, IV
National Commission on Libraries and Information  45, XVII
     Science
National Council on Disability                    34, XII
National Counterintelligence Center               32, XVIII
National Credit Union Administration              12, VII
National Crime Prevention and Privacy Compact     28, IX
     Council
National Drug Control Policy, Office of           21, III
National Foundation on the Arts and the           45, XI
     Humanities
National Highway Traffic Safety Administration    23, II, III; 49, V
National Imagery and Mapping Agency               32, I
National Indian Gaming Commission                 25, III
National Institute for Literacy                   34, XI
National Institute of Standards and Technology    15, II
National Labor Relations Board                    5, LXI; 29, I
National Marine Fisheries Service                 50, II, IV, VI
National Mediation Board                          29, X
National Oceanic and Atmospheric Administration   15, IX; 50, II, III, IV, 
                                                  VI
National Park Service                             36, I
National Railroad Adjustment Board                29, III
National Railroad Passenger Corporation (AMTRAK)  49, VII
National Science Foundation                       5, XLIII; 45, VI
  Federal Acquisition Regulation                  48, 25
National Security Council                         32, XXI
National Security Council and Office of Science   47, II
     and Technology Policy
National Telecommunications and Information       15, XXIII; 47, III
     Administration
National Transportation Safety Board              49, VIII
National Weather Service                          15, IX
Natural Resources Conservation Service            7, VI
Navajo and Hopi Indian Relocation, Office of      25, IV
Navy Department                                   32, VI
  Federal Acquisition Regulation                  48, 52
Neighborhood Reinvestment Corporation             24, XXV
Northeast Interstate Low-Level Radioactive Waste  10, XVIII
   Commission
[[Page 630]]

Nuclear Regulatory Commission                     5, XLVIII; 10, I
  Federal Acquisition Regulation                  48, 20
Occupational Safety and Health Administration     29, XVII
Occupational Safety and Health Review Commission  29, XX
Offices of Independent Counsel                    28, VI
Oklahoma City National Memorial Trust             36, XV
Operations Office                                 7, XXVIII
Overseas Private Investment Corporation           5, XXXIII; 22, VII
Patent and Trademark Office, United States        37, I
Payment From a Non-Federal Source for Travel      41, 304
     Expenses
Payment of Expenses Connected With the Death of   41, 303
     Certain Employees
Peace Corps                                       22, III
Pennsylvania Avenue Development Corporation       36, IX
Pension Benefit Guaranty Corporation              29, XL
Personnel Management, Office of                   5, I, XXXV; 45, VIII
  Federal Acquisition Regulation                  48, 17
  Federal Employees Group Life Insurance Federal  48, 21
       Acquisition Regulation
  Federal Employees Health Benefits Acquisition   48, 16
       Regulation
Postal Rate Commission                            5, XLVI; 39, III
Postal Service, United States                     5, LX; 39, I
Postsecondary Education, Office of                34, VI
President's Commission on White House             1, IV
     Fellowships
Presidential Documents                            3
Presidio Trust                                    36, X
Prisons, Bureau of                                28, V
Procurement and Property Management, Office of    7, XXXII
Productivity, Technology and Innovation,          37, IV
     Assistant Secretary
Public Contracts, Department of Labor             41, 50
Public and Indian Housing, Office of Assistant    24, IX
     Secretary for
Public Health Service                             42, I
Railroad Retirement Board                         20, II
Reclamation, Bureau of                            43, I
Refugee Resettlement, Office of                   45, IV
Regional Action Planning Commissions              13, V
Relocation Allowances                             41, 302
Research and Special Programs Administration      49, I
Rural Business-Cooperative Service                7, XVIII, XLII
Rural Development Administration                  7, XLII
Rural Housing Service                             7, XVIII, XXXV
Rural Telephone Bank                              7, XVI
Rural Utilities Service                           7, XVII, XVIII, XLII
Saint Lawrence Seaway Development Corporation     33, IV
Science and Technology Policy, Office of          32, XXIV
Science and Technology Policy, Office of, and     47, II
     National Security Council
Secret Service                                    31, IV
Securities and Exchange Commission                17, II
Selective Service System                          32, XVI
Small Business Administration                     13, I
Smithsonian Institution                           36, V
Social Security Administration                    20, III; 48, 23
Soldiers' and Airmen's Home, United States        5, XI
Special Counsel, Office of                        5, VIII
Special Education and Rehabilitative Services,    34, III
     Office of
State Department                                  22, I; 28, XI
  Federal Acquisition Regulation                  48, 6
Surface Mining and Reclamation Appeals, Board of  30, III
Surface Mining Reclamation and Enforcement,       30, VII
     Office of
Surface Transportation Board                      49, X
Susquehanna River Basin Commission                18, VIII
Technology Administration                         15, XI
Technology Policy, Assistant Secretary for        37, IV
Technology, Under Secretary for                   37, V
Tennessee Valley Authority                        5, LXIX; 18, XIII

[[Page 631]]

Thrift Supervision Office, Department of the      12, V
     Treasury
Trade Representative, United States, Office of    15, XX
Transportation, Department of                     5, L
  Commercial Space Transportation                 14, III
  Contract Appeals, Board of                      48, 63
  Emergency Management and Assistance             44, IV
  Federal Acquisition Regulation                  48, 12
  Federal Aviation Administration                 14, I
  Federal Highway Administration                  23, I, II
  Federal Motor Carrier Safety Administration     49, III
  Federal Railroad Administration                 49, II
  Federal Transit Administration                  49, VI
  Maritime Administration                         46, II
  National Highway Traffic Safety Administration  23, II, III; 49, V
  Research and Special Programs Administration    49, I
  Saint Lawrence Seaway Development Corporation   33, IV
  Secretary of Transportation, Office of          14, II; 49, Subtitle A
  Surface Transportation Board                    49, X
  Transportation Statistics Bureau                49, XI
Transportation, Office of                         7, XXXIII
Transportation Security Administration            49, XII
Transportation Statistics Bureau                  49, XI
Travel Allowances, Temporary Duty (TDY)           41, 301
Treasury Department                               5, XXI; 12, XV; 17, IV; 
                                                  31, IX
  Alcohol and Tobacco Tax and Trade Bureau        27, I
  Community Development Financial Institutions    12, XVIII
       Fund
  Comptroller of the Currency                     12, I
  Customs and Border Protection Bureau            19, I
  Engraving and Printing, Bureau of               31, VI
  Federal Acquisition Regulation                  48, 10
  Federal Law Enforcement Training Center         31, VII
  Fiscal Service                                  31, II
  Foreign Assets Control, Office of               31, V
  Internal Revenue Service                        26, I
  International Investment, Office of             31, VIII
  Monetary Offices                                31, I
  Secret Service                                  31, IV
  Secretary of the Treasury, Office of            31, Subtitle A
  Thrift Supervision, Office of                   12, V
Truman, Harry S. Scholarship Foundation           45, XVIII
United States and Canada, International Joint     22, IV
     Commission
United States and Mexico, International Boundary  22, XI
     and Water Commission, United States Section
Utah Reclamation Mitigation and Conservation      43, III
     Commission
Veterans Affairs Department                       38, I
  Federal Acquisition Regulation                  48, 8
Veterans' Employment and Training Service,        41, 61; 20, IX
     Office of the Assistant Secretary for
Vice President of the United States, Office of    32, XXVIII
Vocational and Adult Education, Office of         34, IV
Wage and Hour Division                            29, V
Water Resources Council                           18, VI
Workers' Compensation Programs, Office of         20, I
World Agricultural Outlook Board                  7, XXXVIII

[[Page 633]]



List of CFR Sections Affected



All changes in this volume of the Code of Federal Regulations that were 
made by documents published in the Federal Register since January 1, 
2001, are enumerated in the following list. Entries indicate the nature 
of the changes effected. Pages numbers refer to Federal Register pages. 
The user should consult the entries for chapters and parts as well as 
sections for revisions.
For the period before January 1, 2001, see the ``List of CFR Sections 
Affected, 1949-1963, 1964-1972, 1973-1985, and 1986-2000,'' published in 
11 separate volumes.

                                  2001

7 CFR
                                                                   66 FR
                                                                    Page
Chapter XVIII
1941.16 Introductory paragraph revised; interim.....................1573
1941.29 Heading and (b) revised; (d) removed........................7568
1942 Authority citation revised....................................27014
1942.304 Amended; interim..........................................27014
1943.29 Heading and (b) revised; (c) removed; (d) redesignated as 
        new (c).....................................................7568
1943.79 Removed.....................................................7568
1945 Authority citation revised.....................................7568
1945.154 (a) amended................................................7568
1945.163 (e) amended................................................7568

                                  2002

7 CFR
                                                                   67 FR
                                                                    Page
Chapter XVIII
1940.401 (c)(3)(ii) and (iii) amended; eff. 1-23-03................78328
1941.970--1941.991 (Subpart C) Removed.............................59773
1942 Authority citation revised....................................77908
1942.5 (a)(1) introductory text, (2), (3), (b)(1)(ii)(C), (c) 
        introductory text and (3) revised..........................60854
    Corrected......................................................63019
1942.17 (f)(1) revised.............................................60854
1942.108 (b) removed...............................................60854
1942.304 Regulation at 66 FR 27014 confirmed.......................63537
1942.304 Amended; interim..........................................77908
1942.305 (a) revised; (b)(3)(iv)(G) added; interim.................77908
1944.73 (d) amended; eff. 1-23-03..................................78328
1944.75 Amended; eff. 1-23-03......................................78328
1944.51--1944.100 (Subpart B) Exhibit C amended; eff. 1-23-03......78328
1944.151 Revised...................................................66310
1944.153 Amended...................................................66310
    Amended; eff. 1-23-03..........................................78328
1944.157 (c) redesignated as (d); new (c) added....................66310
1944.158 (o) added.................................................66311
1944.164 (j)(2)(ii) and (n) amended; eff. 1-23-03..................78328
1944.168 (c)(1)(ii) amended; eff. 1-23-03..........................78328
1944.205 Amended; eff. 1-23-03.....................................78328
1944.22 (g) and (h) amended; eff. 1-23-03..........................78328
1944.223 (e)(4)(iii) revised; eff. 1-23-03.........................78328
1944.402 (a) amended; eff. 1-23-03.................................78328
1944.423 Amended; eff. 1-23-03.....................................78328
1944.424 Amended; eff. 1-23-03.....................................78328
1944.426 (a)(1) and (3) amended; eff. 1-23-03......................78328
1944.506 (d) revised; (f) amended; eff. 1-23-03....................78328
1944.656 Amended; eff. 1-23-03.....................................78329
1945.151--1945.200 (Subpart D) Removed...............................801
1946 Removed.......................................................57319
1948.84 (d)(2) amended; eff. 1-23-03...............................78329

[[Page 634]]

                                  2003

7 CFR
                                                                   68 FR
                                                                    Page
Chapter XVIII
1940.588 Heading, (d), (g), (h) and (j) revised; (k) removed.......14528
1940.589 (b)(1)(ii), (g) and (h) revised; (k) removed..............14528
1940.593 Added.....................................................14528
    (g) correctly designated.......................................17153
1941.1--1941.50 (Subpart A) Nomenclature change.....................7696
1941.1 Amended......................................................7696
1941.4 Amended......................................................7696
1941.6 (c) revised..................................................7697
1941.12 (a)(4), (5), (b)(5)(iii), and (iv) removed; (a)(6) through 
        (11), (b)(5)(v) and (vi) redesignated as (a)(4) through 
        (9), (b)(5)(iii) and (iv); (a)(6), (b)(6)(i), (7)(i), 
        (8)(iii) and (9) revised....................................7697
    (a)(1) and (b)(5)(i) revised; (a)(8), (9), (b)(11) and (12) 
amended............................................................62223
1941.17 (e) added..................................................62224
1941.18 (b)(4) amended.............................................62224
1941.23 (b)(3) removed; (b)(4) redesignated as (b)(3)..............62224
1941.33 (b)(1)(iii) revised; (c)(2) amended........................62224
1941.54 (b)(2) revised; (b)(3) removed..............................7697
1941.57 (a) revised.................................................7697
1942 Authority citation revised; eff. 2-9-04.......................65830
1942.1 (a) amended; eff. 2-9-04....................................65830
1942.7 (d) revised.................................................61331
1942.19 (h)(6) removed.............................................61331
1942.101--1942.150 (Subpart C) Heading revised; eff. 2-9-04........65830
1942.101 Revised; eff. 2-9-04......................................65830
1942.103 Revised; eff. 2-9-04......................................65830
1942.104 (a) revised; (b) and (c) removed; (d) redesignated as new 
        (b); eff. 2-9-04...........................................65830
    New (b) correctly revised; eff. 2-9-04.........................69001
1942.108 (e) and (g) revised; eff. 2-9-04..........................65830
1942.111 (b) revised; eff. 2-9-04..................................65830
1942.112 (a)(1)(iii) added; eff. 2-9-04............................65831
1943.1--1941.50 (Subpart A) Nomenclature change.....................7697
1943.1 Amended......................................................7697
1943.4 Amended...............................................7697, 62224
1943.6 (c) revised..................................................7698
1943.12 (a)(4), (5), (b)(4)(iii) and (iv) removed; (a)(6) through 
        (11), (b)(4)(v) and (vi) redesignated as (a)(4) through 
        (9), (b)(4)(iii) and (iv); (b)(5)(i), (6)(i) and (7) 
        revised.....................................................7698
    (a)(1) and (b)(4)(i) revised; (a)(9) and (b)(11) amended.......62224
1943.14 (c), (d)(4) and (e)(2)(i) revised...........................7698
1943.16 (e) added...................................................7698
1943.17 (a)(2) amended; (c) added..................................62224
1943.34 Heading, (a) and (b) revised; (c) removed..................62224
1943.38 (g)(3)(ii) amended; (g)(3)(iii) removed.....................7698
1944.175 (e) removed...............................................61331
1944.181 (b)(3)(ii) removed........................................61331
1944.426 (a)(1) revised............................................61331
1948.90 (b)(4) revised.............................................61331

                                  2004

7 CFR
                                                                   69 FR
                                                                    Page
Chapter XVIII
1940 Technical correction..........................................75454
    Comment period extension.......................................77609
1940.551--1940.600 (Subpart L) Exhibit B amended; interim; eff. 2-
        24-05......................................................69104
1940.589 (d) revised................................................5264
1941.4 Amended......................................................5262
1941.12 (a)(8) and (b)(11) revised..................................5262
1941.25 (a)(4) revised.............................................30999
1942 Technical correction..........................................75454
    Comment period extension.......................................77609
1942.17 (q)(l)(iii) removed; (q)(l)(iv) redesignated as 
        (q)(1)(iii); interim; eff. 2-24-05.........................69104
1942.21 Added......................................................65519
1943.4 Amended......................................................5263
1943.12 (a)(6) introductory text and (b)(8) introductory text 
        revised.....................................................5263
1944 Technical correction..........................................75454
    Comment period extension.......................................77609
1944.51--1944.100 (Subpart B) Exhibit B and Exhibit C amended; 
        interim; eff. 2-24-05......................................69104
1944.151--1944.200 (Subpart D) Removed; interim; eff. 2-24-05......69105
1944.201--1944.250 (Subpart E) Removed; interim; eff. 2-24-05......69105

[[Page 635]]

1944.401--1944.450 (Subpart I) Exhibit F amended; interim; eff. 2-
        24-05......................................................69105
1944.551--1944.600 (Subpart L) Removed; interim; eff. 2-24-05......69105
1944.656 Amended; interim; eff. 2-24-05............................69105


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