[Federal Register Volume 60, Number 136 (Monday, July 17, 1995)]
[Notices]
[Pages 36415-36416]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-17433]



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FARM CREDIT ADMINISTRATION


Proposed Related Services; Real Estate Brokerage, Farm 
Management, and Mineral Management

AGENCY: Farm Credit Administration.

ACTION: Notice; request for public comment.

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SUMMARY: The Farm Credit Administration (FCA or Agency), by the Farm 
Credit Administration Board (Board), requests public comment on an 
inquiry by a Farm Credit System (System or FCS) institution for 
approval to offer Real Estate Brokerage, Farm Management, and Mineral 
Management service programs as authorized ``Related Services.'' The 
requested services are being published for a 60-day public comment 
period prior to the FCA acting on a request to offer such services.

DATES: Comments must be submitted to the FCA within September 15, 1995.

ADDRESSES: Comments should be mailed or delivered (in triplicate) to 
Patricia W. DiMuzio, Associate Director, Regulation Development, Office 
of Examination, Farm Credit Administration.

FOR FURTHER INFORMATION CONTACT:

Linda C. Sherman, Policy Analyst, Regulation Development, Office of 
Examination, Farm Credit Administration, McLean, VA 22102-5090, (703) 
883-4498, TDD (703) 883-4444,
    or
Gary K. Van Meter, Senior Attorney, Administrative Law and Enforcement 
Division, Office of General Counsel, Farm Credit Administration, 
McLean, VA 22102-5090, (703) 883-4020, TDD (703) 883-4444.

SUPPLEMENTARY INFORMATION: On June 15, 1995, the FCA Board voted to 
adopt final regulations on related services at 12 CFR part 618. (See 60 
FR 34090, June 30, 1995.) Under title I, section 1.12; title II, 
sections 2.5 and 2.12 (15); and title III, section 3.7 of the Farm 
Credit Act of 1971, as amended (the Act), the FCA is responsible for 
promulgating regulations governing the offering and administering of 
technical assistance, financial assistance, and financially related 
services (hereinafter referred to as ``related services'') by System 
banks and associations. The statute authorizes System institutions to 
provide financial and technical assistance to borrowers, applicants, 
and members and make available to them related services appropriate to 
their on-farm, aquatic and cooperative operations under regulations 
prescribed by the FCA.
    Related service, as defined in Sec. 618.8000(c) (see 60 FR 34090, 
June 30, 1995), means ``any service or activity provided by a System 
bank or association that is appropriate to the recipient's on-farm, 
aquatic, or cooperative operations, including control of related 
financial matters.'' The FCA notes that, should the requested service 
be authorized, farm-related businesses or persons eligible for rural 
housing loans would not be eligible unless they otherwise satisfy the 
eligibility criteria for related services in Sec. 618.8005.
    The revised regulation at Sec. 618.8000 requires a prior 
determination that any new services, not previously authorized and 
placed on the Related Services List (RS List), are legally authorized 
and do not present excessive risk to the requesting institution or the 
System as a whole. In order to evaluate safety and soundness risks, the 
submitting institution must be specific in its request as to what types 
of services will be provided and, if necessary, what controls would be 
appropriate to address potential risks.
    The following services would be provided to persons eligible to 
receive such services from the Farm Credit System under Sec. 618.8005:
    Real Estate Brokerage Services: The applicant would offer real 
estate brokerage services to buyers or sellers (or both parties) of 
agricultural property. Commissions on sales transactions of property 
would be competitive with other brokerage services in the service 
territory. Key factors of the program would include the following: 
Location of sales professionals throughout proposed service territory; 
national and regional advertising; complete auction services; large 
network of qualified buyers; recommended pricing strategies for 
clients; prompt and efficient sales closings; and suggestions for 
assistance with financial structuring for purchasers.
    Farm Management Services: Regional teams of professionals familiar 
with the market would provide a full complement of farm land services 
to all types of agricultural land owners in the service territory, 
subject to eligibility constraints. Farm management includes defining 
ownership goals, identifying problems, analyzing alternatives and 
making recommendations for achieving business goals. Farm managers 
would present the customer with a full spectrum of lease or custom 
farming alternatives and help the owner decide how to ultimately get 
the best return on the owner's assets. Key factors of the service would 
include developing a comprehensive farm operating plan, securing 
operators/renters and negotiating leases, providing property reporting 
including annual budgets and projections, periodic inspections of crop 
programs and conservation measures, analysis of government programs, 
formulation and implementation of capital improvement and repairs, and 
handling commodity sales.
    Mineral Management Services: The applicant would provide 
professional mineral management services to eligible customers. 
Marketing techniques would be utilized to maximize lease bonuses and 
assure that energy companies are aware of the clients' unleased/
available mineral acreage. Key factors of the service include 
supervision and management of mineral assets, collection and processing 
of revenue from producing assets, property evaluation, unitization, 
review and payment of taxes, review and tracking of authorizations for 
expenses, lease evaluation and negotiation, lease payment record 
maintenance, review of lease and other mineral-related agreements, 
processing division orders and assignments, and regular property 
reviews for each account.
    Because of the complex nature of these proposed services, the FCA 
solicits public comment prior to acting on the request, in accordance 
with the guidelines recently adopted in 

[[Page 36416]]
Sec. 618.8010(c)(3). The Agency believes that its evaluation of the 
proposal will be aided by public comment on issues raised by the 
proposal. Specifically, the FCA requests comments on the risks inherent 
in offering these services, such as the potential for conflicts of 
interest and liability or environmental concerns, particularly in 
regard to providing such services to borrowers with distressed loans. 
The Agency also requests comments on the potential benefits to farmers, 
how the provider ensures that services are provided to eligible 
entities, feasibility and appropriateness of such services for Farm 
Credit institutions, the impact of such services on the lending 
function, and any other pertinent issues. In addition, the FCA requests 
commenters to consider what Systemwide issues might be raised by a 
decision to authorize such services.
    The FCA also requests commenters to propose how they believe 
identified concerns might be mitigated. Commenters should bear in mind 
that the identified concerns could also be addressed by the FCA's 
standard of conduct regulations, or by applicable State laws and 
regulations, licensing requirements, and industry ethical standards, or 
in appropriate circumstances, by requiring pertinent disclosure or 
anti-tying requirements for certain services. Additionally, internal 
controls could be adopted that limit the amount of risk taken on by an 
institution offering such services.
    The FCA has concluded that some of the conflict of interest or 
liability concerns might be addressed by offering any or all of the 
services through a service corporation and requests comment on the 
following issues:
    (a) What, if any, limits should there be on board structure or 
composition?
    (b) If necessary, how should the amount of capital a bank can 
invest in the service corporation be limited?
    (c) Are there any organizational or procedural constraints or 
limits that may be appropriate?
    In its evaluation of the proposed services, the FCA will focus on 
systemic issues rather than on institution or program-specific factors. 
If the FCA authorizes the above-related services, any System bank or 
association may develop a program and subsequently offer the related 
service(s) to eligible recipients, subject to any special conditions or 
limitations imposed by the FCA. The Agency may, at the time of 
approval, impose such special conditions or limitations on any approved 
service as the FCA in its sole discretion may deem necessary or 
appropriate to ensure safety and soundness or compliance with law or 
regulation. These programs would be subject to review during the 
examination process.

    Dated: July 11, 1995.
Floyd Fithian,
Secretary, Farm Credit Administration Board.
[FR Doc. 95-17433 Filed 7-14-95; 8:45 am]
BILLING CODE 6705-01-P