[Federal Register Volume 59, Number 172 (Wednesday, September 7, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-21877]


[[Page Unknown]]

[Federal Register: September 7, 1994]


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DEPARTMENT OF AGRICULTURE
Farmers Home Administration

7 CFR Part 1956

RIN 0575-AB26

 

Debt Settlement--Community and Business Programs

AGENCY: Farmers Home Administration, USDA.
ACTION: Final rule.

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SUMMARY: The Farmers Home Administration (FmHA) amends its policies and 
procedures governing debt settlement of Community Programs loans. These 
changes are necessary to comply with Section 2384, Title XXIII, of the 
Food, Agriculture, Conservation, and Trade Act of 1990 (Pub. L. 101-
624). This law is to establish and implement a program that is similar 
to the program established under Section 353 of the Consolidated Farm 
and Rural Development Act (7 U.S.C. 2001), except that the debt 
restructuring and loan servicing procedures shall apply to delinquent 
Community Facility hospital or health care program loans rather than 
Farmer Program loans. The intended effect is to keep these facilities 
in operation with manageable debt.

EFFECTIVE DATE: September 7, 1994.

FOR FURTHER INFORMATION CONTACT: Jennifer Barton, Loan Specialist, 
Community Facilities Division, Farmers Home Administration, Room 6314, 
South Agriculture Building, Washington, D.C. 20250, telephone: (202) 
720-1504.

SUPPLEMENTARY INFORMATION

Classification

    This rule has been determined to be significant/economically 
significant and was reviewed by the Office of Management and Budget 
under Executive Order 12866.

Environmental Impact Statement

    This document has been reviewed in accordance with 7 CFR part 1940, 
subpart G, ``Environmental Program.'' FmHA has determined that this 
action does not constitute a major Federal action significantly 
affecting the quality of the human environment and, in accordance with 
the National Environmental Policy Act of 1969 (Pub. L. 91-190), an 
Environmental Impact Statement is not required.

Executive Order 12778

    This regulation has been reviewed in light of Executive Order 12778 
and meets the applicable standards provided in sections 2(a) and 
(2)(b)(2) of that E.O. Provisions within this part which are 
inconsistent with State law are controlling. All administrative 
remedies pursuant to 7 CFR part 1900, subpart B, must be exhausted 
prior to filing suit.

Intergovernmental Review

    This action affects the following FmHA program as listed in the 
Catalog of Federal Domestic Assistance: No. 10.766 Community Facility 
Loans. This program is subject to the provisions of E.O. 12372 which 
requires intergovernmental consultation with State and local officials. 
(7 CFR part 3015, subpart V; 48 FR 29112, June 24, 1983, 49 FR 2267, 
May 31, 1984, 50 FR 14088, April 10, 1985.)

Paperwork Reduction Act

    The information collection requirements contained in this 
regulation have been approved by the Office of Management and Budget 
(OMB) under the provisions of 44 U.S.C. Chapter 35 and have been 
assigned OMB control number 0575-0124 in accordance with the Paperwork 
Reduction Act of 1980. This final rule does not revise or impose any 
new information collection requirements from those approved by OMB.

Background Information

    Section 2384 of the Food, Agriculture, Conservation, and Trade Act 
of 1990, Pub. L. 101-624, amended the Consolidated Farm and Rural 
Development Act and requires the Secretary of Agriculture to develop a 
debt restructuring and loan servicing program for FmHA hospital or 
health care facility borrowers. This program is similar to the loan 
restructuring and servicing program in effect for delinquent Farmer 
Program loans. This rule amends current FmHA regulations to implement 
this program. The program is intended to facilitate the continued 
operation of rural hospitals and health care facilities by implementing 
all possible debt restructuring options available that will result in 
an economically viable facility.
    Given the congressional intent to provide rural hospitals and 
health care facilities a debt restructuring option similar to that 
provided Farmer Program borrowers, this regulation is modeled in a 
general sense on the Farmer Program restructuring scheme. Under this 
regulation, a hospital or health care debtor who is delinquent on its 
FmHA loan, and is unable to cure its delinquency through more 
traditional servicing methods, will be notified of the options 
available for debt restructuring. The debtor can apply for 
consideration by providing financial and operational information and 
proposing its own plan for curing the delinquency.
    In order to be eligible for consideration for debt restructuring, 
the debtor's delinquency must have been caused by factors outside the 
debtor's control. In addition, the debtor must have acted in good faith 
with regard to the FmHA loan. FmHA will make these determinations based 
on the debtor's representation and the Agency's review of other 
documents relevant to these preliminary matters.
    Once the debtor provides the financial and operational information 
required, FmHA will conduct a thorough analysis of the debtor's 
operations. This analysis will typically include contracting for an 
independent appraisal of the collateral securing the loan and 
contracting with an independent expert to prepare an ``operations 
review.'' This review will provide FmHA with information regarding the 
facility's operations, its financial standing, and suggest alternatives 
that could be implemented to address the delinquency.
    Using the information obtained from these sources and in 
consultation with the debtors and the experts, FmHA will calculate two 
values as required by the statute. First, FmHA will determine the 
loan's ``net recovery'' value. This value represents the current value 
of the loan if FmHA were to foreclose. Generally, the value is 
calculated by adding the value of assets securing the loan and 
subtracting the costs that would be incurred if the loan was 
foreclosed. Second, FmHA will determine the value of the restructured 
loan. This value is determined after a proposed plan is developed for 
the operation of the facility. That is, the operation and/or debt is 
modified to determine if the debtor can attain a positive cash flow and 
pay an adjusted debt service payment plus fund the FmHA Reserve 
Account.
    After the restructured loan value and the net recovery value are 
calculated, FmHA can determine whether the debtor's request for debt 
restructuring can be approved. As required by the statute, FmHA can 
approve debt restructuring only if the value of the restructured loan 
is greater than, or equal to, the net recovery value. Once the Agency 
reaches this conclusion, the debtor will be notified of the results and 
given its options. If possible, the debt will be restructured and the 
facility will continue operations. If the net recovery value is greater 
than the value of the restructured loan, the debtor may choose to pay 
off the loan at the reduced net recovery value. If this option is not 
chosen, the loan likely will be accelerated.
    Finally, if the debtor's debt is restructured or if the debtor 
elects to pay off the debt at the net recovery value, then the debtor 
will be required to execute an Appreciation Recapture Agreement. As 
explained in the statute, these Agreements allow the Agency to recoup a 
part or all of the debt that is written down if the debtor's underlying 
collateral appreciates in value over time and if the debtor sells the 
collateral within 10 years.

Discussion of Comments

    On January 13, 1993, a proposed rule was published in the Federal 
Register (58 FR 4095) providing for a 30-day review and comment period 
ending February 12, 1993. Six comments were received.
    Several respondents stated that the $300,000 limit on the writedown 
would not be enough to help many debtors and recommended that the rule 
be amended to remove the writedown limit. The rule is amended to remove 
the $300,000 limit. The writedown will be limited to the minimum amount 
necessary to meet the level of the facility's ability to service the 
debt.
    One respondent recommended that the interest rate available under 
the Rural Rental Housing program, Section 8, which permits loans at 
rates as low as 1 percent, be extended to include health care 
facilities located in designated health professional shortage areas. 
Since FmHA's program regulations do not permit a reduction of interest 
rates below the poverty line interest rate, FmHA will not reduce the 
interest rate further.
    Since publication of the proposed rule, the poverty line interest 
rate for FmHA and RDA loans changed from 5.0 percent to 4.5 percent. 
The final rule was changed to reference FmHA Instruction 440.1, Exhibit 
B, Interest Rates, for FmHA and RDA loans instead of using 5.0 percent.
    The loan servicing options available through this action will 
result in debt restructuring packages which will provide significant 
benefit to all rural areas.
    One respondent recommended that the definition of net recovery 
value be expanded to consider the potential net loss to the community 
if the facility were sold.
    The definition of net recovery value presently emphasizes that the 
value of the assets should be calculated based upon the facility 
continuing to operate as a going concern, not merely as an empty 
building but as a facility continuing to offer health care services to 
the community it serves. This value can be based on the facility 
offering health care services which may, or may not, be similar to 
those offered by the current operators. This is the most practical and 
accurate method of determining the net recovery value of the facility.
    One respondent recommended that we add the availability of 
writedown to servicing regulations without a mandate for a strict 
servicing regimen to be initiated as soon as a debtor reaches the 
delinquency time limitations. This respondent stated that a hospital 
could be offered net recovery buy out and not have the ability to 
obtain the buy out financing, at which point the Government would be 
forced to accelerate the loan.
    FmHA is concerned about maintaining health care in rural areas. 
There is language in the rule which allows the Agency discretion in 
such cases. The program is intended to facilitate the continued 
operation of rural hospitals and health care facilities.
    One respondent recommended a waiver of the $300,000 writedown limit 
when dealing with facilities in designated health professional shortage 
areas, those which are Medicare waivered acute-care facilities, 
alternate rural health care delivery models, or facilities associated 
with related programs that may be approved by appropriate State 
licensing agencies.
    As stated above, the $300,000 writedown limit has been removed.
    Therefore, the final rule is changed from the proposed rule 
published in the Federal Register on January 13, 1993, as follows: Debt 
writedown. A one-time reduction of the debt owed to FmHA including 
principal and interest. This reduction will be the minimum amount 
necessary to meet the level of the facility's ability to service the 
debt.

List of Subjects in 7 CFR Part 1956

    Accounting, Loan programs--Agricultural, Rural areas.

    Accordingly, Chapter XVIII, title 7, Code of Federal Regulations is 
amended as follows:

PART 1956--DEBT SETTLEMENT

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

    Authority: 7 U.S.C. 1989; 42 U.S.C. 1480; 5 U.S.C. 301; 31 
U.S.C. 3711; 7 CFR 2.23 and 2.70.

Subpart C--Debt Settlement--Community and Business Programs

    2. Section 1956.102 is amended by redesignating the existing text 
as paragraph (a), adding a heading to newly designated paragraph (a), 
and by adding a new paragraph (b) to read as follows:


Sec. 1956.102   Application of policies.

    (a) General. * * *
    (b) For hospitals and health care facilities only. Loan servicing 
and debt restructuring options according to Sec. 1956.143 of this 
subpart must be exhausted before the other settlement authorities of 
this subpart are applicable.
    3. Section 1956.143 is added to read as follows:


Sec. 1956.143   Debt restructuring--hospitals and health care 
facilities.

    This section pertains exclusively to delinquent Community Facility 
hospital and health care facility loans. Those facilities which are 
nonprogram (NP) loans as defined in Sec. 1951.203 (f) of subpart E of 
part 1951 of this chapter are excluded. The purpose of debt 
restructuring is to keep the hospital or health care facility in 
operation with manageable debt.
    (a) Definitions. As used in this section, the following definitions 
apply:
    Consolidation. The combining of two or more debt instruments into 
one instrument, normally accompanied by reamortization.
    Debt writedown. A one-time reduction of the debt owed to FmHA 
including principal and interest. This reduction will be the minimum 
amount necessary to meet the level of the facility's ability to service 
the debt. The writedown will be applied first to interest and then 
principal.
    Delinquency due to circumstances beyond the control of the debtor. 
Includes situations such as: The debtor has less money than planned due 
to unexpected and uncontrollable events such as unexpected loss of 
service area population, unforeseeable costs incurred for compliance 
with State or Federal regulatory requirements, or the loss of key 
personnel.
    Delinquent debtor. For purposes of this section, delinquency is 
defined as being 180 days behind schedule on the FmHA payments. That 
is, one full annual installment or the equivalent for monthly, 
quarterly, or semiannual installments.
    Eligibility. Applicants must be delinquent due to circumstances 
beyond their control and have acted in good faith by trying to fulfill 
the agreements with FmHA in connection with the delinquent loans.
    Interest rate reduction. Reduction of the interest rate on the 
restructured loan to as low as the poverty line interest rate in effect 
on community and business programs loans.
    Loan deferral. The temporary delay of principal and interest 
payments for up to 6 months. The debtor must be able to demonstrate the 
ability to pay the debt, as restructured, at the end of this delay 
period.
    Net recovery value. A calculation of the net value of the 
collateral and other assets held by the debtor. This value would be 
determined by adding the fair market value of FmHA's interest in any 
real property pledged as collateral for the loan, plus the value of any 
other assets pledged or otherwise available for the repayment of the 
debt, minus the anticipated administrative and legal expenses that 
would be incurred in connection with the liquidation of the loan. This 
value of the assets should be calculated based upon the facility 
continuing to operate as a going concern. Therefore, the facility 
should be valued not merely as an empty building but as a facility 
continuing to offer health care services which may, or may not, be 
similar to those offered by the current operators.
    Operations review. A study of management and business operations of 
the facility by an independent expert. For example, a study of a 
hospital and nursing home would include such areas as: general and 
administrative, dietary, housekeeping, laundry, nursing, physical 
plant, social services, income potential, Federal, State, and insurance 
payments, and rate analysis. Also, recommendations and conclusions are 
to be included in the study which would indicate the creditworthiness 
of the facility and its ability to continue as a going concern. In 
analyzing a debtor's proposed restructuring plan, FmHA may contract for 
the completion of an operations review. These reviews will be developed 
by individuals and entities who have demonstrated an expertise in the 
analysis of health care facilities from an operational and 
administrative standpoint. FmHA will consider the following criteria 
for selection: past experience in health care facility analysis, a 
familiarity with the problems of rural health care facilities, a 
knowledge of the particular area currently served by the facility in 
question, and a willingness to work with both FmHA and the debtor in 
developing a final plan for restructuring.
    Restructured loan. A revision of the debt instruments including any 
combination of the following: writing down of accumulated interest 
charges and principal, deferral, consolidation, and adjustment of the 
interest rates and terms, usually followed by reamortization.
    (b) Debtor notification. All servicing actions permitted under 
subpart E of part 1951 of this chapter are to be exhausted prior to 
consideration for debt restructuring under this section. To this end, 
the servicing official must ensure that the casefile clearly documents 
that all servicing actions under subpart E of part 1951 of this chapter 
have been exhausted and that the debtor is at least 1 full year's debt 
service behind schedule for a minimum of 180 days. The debtor then 
should be informed of the debt restructuring available under this 
section by using language similar to that provided in Guide 1 of this 
subpart (available in any FmHA Office) as follows:
    (1) Any introductory paragraph;
    (2) A paragraph concerning prior servicing attempts;
    (3) A discussion of eligibility, as defined in this section, 
including the provision that the debtor acted in good faith in 
connection with their FmHA loan and that the delinquency was caused by 
circumstances beyond their control;
    (4) Two paragraphs that explain the goal of the debt restructuring 
program;
    (5) A paragraph stating that debt restructuring may include a 
combination of servicing actions listed in paragraph (a) of this 
section;
    (6) Information that details what the debtor must do to apply for 
restructuring. A response must be received within 45 days of receipt of 
this letter to request consideration for debt restructuring and the 
request must include projected balance sheets, budgets, and cash-flow 
statements which include and clearly identify funding of the FmHA 
reserve account for the next 3 years;
    (7) A discussion of FmHA's analysis and calculation process; and
    (8) A paragraph identifying the FmHA official who may be contacted 
for assistance.
    (c) State Director's restructuring determination. Upon receipt of 
the delinquent debtor's request for debt restructuring consideration, 
the State Director will:
    (1) Within 15 days of receipt of debtor's request, if an operations 
review is deemed necessary, send a memorandum to the Administrator 
asking for program authority to contract for the review in accordance 
with Exhibit D of FmHA Instruction 2024-A (available in any FmHA 
Office). The name of the debtor involved and the projected amount of 
funds anticipated to be spent for the contract should also be provided. 
It is anticipated that an operations review will be necessary in most 
cases and that the only exceptions would be for smaller health care 
facilities or facilities that have developed a proposed plan that is 
comprehensive and realistic. Upon receipt of the Administrator's 
program contracting approval authority, a contract is to be awarded to 
an organization qualified to perform an operations review as defined in 
paragraph (a) of this section. The operations review normally will be 
completed and delivered to FmHA within 60 days of the award date.
    (2) Contract for an appraisal to be performed by an independent, 
qualified fee appraiser. Note: To the extent possible, the appraisal 
should be scheduled for completion no later than the completion date of 
the operations review.
    (3) Complete an analysis of the operations review, appraisal, and 
other documented information, and make an eligibility determination.
    (i) Eligibility determination. The State Director must conclude 
that the debtor is eligible for debt restructuring consideration. This 
conclusion will be clearly documented in the casefile based on a review 
of the following:
    (A) The debtor acted in good faith with regard to the delinquent 
loan. The casefile must reflect the debtor's cooperation in exploring 
servicing alternatives. The casefile should contain no evidence of 
fraud, waste, or conversion by the debtor, and no evidence that the 
debtor violated the loan agreement or FmHA regulations.
    (B) The delinquency was caused by circumstances beyond the control 
of the debtor. This determination will be based on the debtor's 
narrative on this issue, which is a required part of the application 
for debt restructuring, and a separate review of the debtor's casefile 
and operations.
    (C) As part of the application for debt restructuring, the debtor 
submitted a proposed operating plan that presents feasible alternatives 
for addressing the delinquency.
    (ii) Debtor determined eligible. If the debtor is determined to be 
eligible for debt restructuring, a determination of a net recovery 
value and level of debt the facility will support will be made. It is 
anticipated that meetings with the debtor, the contractor who performed 
the operations review, and others, as appropriate, could be necessary 
to develop these values; although it should be emphasized throughout 
these meetings that any calculations and conclusions reached are 
preliminary in nature, pending final review by the Administrator. For 
debt restructuring calculations and computing a feasible cash-flow 
projection, the following order and combinations of loan servicing 
actions will be followed:
    (A) Loan deferral for up to 6 months.
    (B) Interest rate reduction to not less than the poverty line rate 
as determined by FmHA Instruction 440.1, exhibit B (available in any 
FmHA Office). Interest rate reduction will be considered only in 
conjunction with an extension of the term of the loan to the remaining 
useful life of the facility or 40 years, whichever is less.
    (C) Debt writedown. Other creditors of the debtor, representing a 
substantial portion of the total debt, are expected to participate in 
the development of a restructuring plan which includes debt writedown. 
Debt writedown participation by other creditors should be on a pro rata 
basis with the FmHA writedown. However, failure of these creditors to 
agree to participate in the plan shall not preclude the use of 
principal and interest writedown by FmHA if it is determined that this 
option results in the least cost to the Federal Government.
    (iii) Debtor determined ineligible. If the State Director concludes 
that the debtor is not eligible for debt restructuring consideration 
for any of the reasons listed in paragraph (c)(3)(i) of this section, 
then the debtor will be notified by a letter that includes the 
following information:
    (A) The basis for the determination;
    (B) The next step in servicing the loan: possible acceleration if 
the delinquency is not cured; and
    (C) The debtor may appeal this determination in accordance with 
subpart B of part 1900 of this chapter.
    (iv) State Director's recommendation. Upon completion of the 
determination of net recovery value and restructured debt in accordance 
with paragraph (c)(3)(ii) of this section, and prior to formal 
presentation to the borrower, the State Director will forward a 
recommendation to the National Office with the following documentation:
    (A) That all other servicing efforts have been exhausted as 
required in paragraph (b) of this section.
    (B) Financial statements including balance sheets, income and 
expense, cash-flows for the most recent actual year, and projections 
for the next 3 years. The amount of FmHA's restructured debt and 
reserve account requirements are to be clearly indicated on the 
projected statements. Also, operating statistics including number of 
beds, patient days of care, outpatient visits, occupancy percentage, 
etc., for the same periods of time must be included.
    (C) Copies of the operations review, developed for the particular 
loan, and appraisal.
    (D) Calculations of the net recovery value.
    (E) Debt restructuring calculations including a listing of the 
various servicing combinations used in these calculations as contained 
in paragraph (c)(3)(ii) of this section. For example:
    (1) Interest rate reduced from the applicant's current rate on all 
loans to the poverty line rate as determined by FmHA instruction 440.1, 
exhibit B (available in any FmHA Office); and
    (2) Extension of the terms from 25 to 30 years.
    (F) Information concerning discussions with the debtor and their 
agreement or disagreement with the calculations and recommendations.
    (G) If debt restructuring is proposed:
    (1) A draft of Form FmHA 1951-33, if applicable, and any other 
necessary comments or requirements that may be required by OGC and Bond 
Counsel in Sec. 1951.223 (c)(3) and (4) of subpart E of part 1951 of 
this chapter.
    (2) A draft of Form FmHA 1956-1, if applicable. Complete only parts 
I, II, VI, and VIII. Part VI, ``Debtor's Offer and Certification,'' 
will be in a separate attachment and contain the adjusted unpaid 
principal amount for which FmHA approval is requested. In Part VI of 
the form, type ``see attached.''
    (H) If the proposed restructured debt will not cash-flow or is less 
than the net recovery value, omit the items in paragraph (c)(3)(iv)(G) 
of this section.
    (d) National Office processing of State Director's request.
    (1) After reviewing the recommendation to either debt restructure 
or liquidate for the net recovery value, the Administrator, after 
concurring, modifying, or not concurring in the recommendation, will 
return the submission for further processing.
    (2) If a debt writedown is used in the restructuring process, the 
amount will be included in the National Office transmittal memorandum. 
The draft Form FmHA 1956-1 will not need to be finalized and returned 
to the Administrator for signature. The State Director's signature on 
the final copy will be sufficient. However, a copy of the National 
Office memorandum is to be attached to the form when completed.
    (e) Debtor notification of debt restructuring and net recovery 
value calculations. The State Director will provide a copy of the basis 
for the debt restructuring or net recovery determination to the debtor.
    (1) If the value of the restructured loan is equal to, or greater 
than, the recovery value, the debtor will be made an offer to accept 
the restructured debt by using language similar to that provided in 
Guide 2 of this subpart (available in any FmHA Office) and including 
the following paragraphs:
    (i) An introductory paragraph indicating that FmHA has concluded 
its consideration of the debtor's request;
    (ii) A paragraph indicating FmHA's approval of the debt 
restructuring request and that acceptance must be received by FmHA 
within 45 days from receipt of this letter; and
    (iii) That the debtor's acceptance will require the execution of a 
Shared Appreciation Agreement similar to Guide 4 of this subpart 
(available in any FmHA Office) and possible new debt instruments 
accompanied by Bond Counsel opinions.
    (2) If the debt analysis calculations indicate that a restructured 
debt would be less than the net recovery value of the security, a 
letter using language similar to that provided in Guide 3 of this 
subpart (available in any FmHA Office), will be sent to the debtor that 
includes the following paragraphs:
    (i) An introductory paragraph indicating that FmHA has concluded 
its consideration of the debtor's request;
    (ii) Paragraphs indicating that:
    (A) The debtor may pay FmHA the net recovery value of the loan. The 
debtor will be given 30 days from receipt of this letter to inform FmHA 
of its intent, 90 days to finalize the payoff, and will be notified 
that an election to pay off FmHA would require the execution of a Net 
Recovery Buy Out Recapture Agreement, similar to that provided in Guide 
5 of this subpart (available in any FmHA Office); or
    (B) If the debt is not paid off at the net recovery value, FmHA 
will proceed to liquidate the loan.
    (f) Debtor responses to debt restructuring and net recovery value 
calculations. Responses from the debtor will be handled as follows:
    (1) Acceptance of FmHA's restructured debt offer. When a debtor 
accepts the offer for debt restructuring, processing will be in 
accordance with Sec. 1951.223 (c) of subpart E of part 1951 of this 
chapter using the adjusted unpaid principal and outstanding accrued 
interest at the Administrator's approved interest rate and terms. The 
debtor will be required to execute a Shared Appreciation Agreement 
which will provide that, should the debtor sell or transfer title to 
the facility within the next 10 years, FmHA is entitled to a portion of 
any gain realized. This agreement will include language similar to that 
found in Guide 4 of this subpart (available in any FmHA Office). The 
original of Form FmHA 1956-1, with appropriate attachments signed by 
the State Director, and a copy of the Shared Appreciation Agreement 
will be sent to the Finance Office. Note: All documents pertaining to 
this transaction will be sent to the Finance Office in one single 
complete package; and
    (2) Acceptance by debtor to pay off loan at the recovery value. 
Processing of this transaction will be in accordance with Sec. 1956.124 
of this subpart. However, the account does not need to be accelerated. 
The debtor will be required to execute a Net Recovery Buy Out Recapture 
Agreement, similar to that found in Guide 5 of this subpart (available 
in any FmHA Office). The original of Form FmHA 1956-1, with appropriate 
attachments signed by the State Director, and a copy of the recorded 
Net Recovery Buy Out Recapture Agreement will be sent to the Finance 
Office. The executed Net Recovery Buy Out Recapture Agreement will be 
recorded in the county in which the facility is located. The Finance 
Office will credit the accounts of debtors who entered into Net 
Recovery Buy Out Recapture Agreements with the amount paid by the 
debtor (net recovery value). Note: All documents pertaining to this 
transaction will be sent to the Finance Office in one single complete 
package.
    (g) Collection and processing of recapture.
    (1) When FmHA becomes aware of the sale or transfer of title to the 
facility on which there is an effective Net Recovery Buy Out Recapture 
Agreement (Guide 5 of this subpart available in any FmHA Office) or a 
Shared Appreciation Agreement (Guide 4 of this subpart available in any 
FmHA Office) outstanding and a determination is made that a recapture 
is appropriate, FmHA will notify the debtor of the following:
    (i) Date and amount of recapture due; and
    (ii) FmHA action to be taken if debtor does not respond within the 
designated timeframe with the amount of recapture due.
    (2) When the recapture is received, the payment will be processed 
on Form FmHA 451-2 as a miscellaneous collection in accordance with 
subpart B of part 1951 of this chapter. The Form FmHA 451-2 along with 
a copy of the Net Recovery Buy Out Recapture Agreement (Guide 5 of this 
subpart available in any FmHA Office) or Shared Appreciation Agreement 
(Guide 4 of this subpart available in any FmHA Office), as appropriate, 
will be forwarded to the Finance Office.
    (3) When the amount of the recapture has been paid and credited to 
the debtor's account, the debtor will be released from liability by 
using Form FmHA 1965-8, ``Release from Personal Liability,'' modified 
as appropriate.
    (h) No recapture due. If FmHA determines there is no recapture due, 
the Net Recovery Buy Out Recapture Agreement (Guide 5 of this subpart 
available in any FmHA Office) or Shared Appreciation Agreement (Guide 4 
of this subpart available in any FmHA Office) will be appropriately 
annotated, the Recapture Agreement released from the record, and the 
Agreement returned to the debtor.
    4. Section 1956.147 is amended by revising the word ``borrower'' to 
read ``debtor'' in paragraphs (a)(3)(iv) and (a)(3)(v)(B).
    5. Section 1956.150 is revised to read as follows:


Sec. 1956.150   OMB Control Number.

    The reporting requirements contained in this regulation have been 
approved by the Office of Management and Budget and assigned OMB 
control number 0575-0124. Public reporting burden for this collection 
of information is estimated to vary from \1/2\ hour to 30 hours per 
response with an average of 8.14 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, Ag Box 7630, Washington, D.C. 20250; and to 
the Office of Information and Regulatory Affairs, Office of Management 
and Budget, Washington, D.C. 20503.

    Dated: August 15, 1994.
Bob J. Nash,
Under Secretary, Small Community and Rural Development.
[FR Doc. 94-21877 Filed 9-6-94; 8:45 am]
BILLING CODE 3410-32-P