[Federal Register Volume 62, Number 105 (Monday, June 2, 1997)]
[Proposed Rules]
[Pages 29678-29679]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-13930]


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 Proposed Rules
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
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  Federal Register / Vol. 62, No. 105 / Monday, June 2, 1997 / Proposed 
Rules  

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DEPARTMENT OF AGRICULTURE

Rural Housing Service
Rural Business-Cooperative Service
Rural Utilities Service
Farm Service Agency

7 CFR Part 1951

RIN 0572-AB23


Servicing of Community and Insured Business Programs Loans and 
Grants

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

ACTION: Proposed rule.

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SUMMARY: The Rural Utilities Service (RUS) hereby proposes to amend the 
regulations utilized to service loans and grants. The proposed rule 
will permit loan reamortization with interest rate adjustment for 
eligible delinquent borrowers. The proposed rule will provide debt 
relief to troubled borrowers and encourage these organizations to 
remain in operation and resume scheduled loan payments. The proposed 
rule will also provide RUS greater flexibility to service problem loans 
and permit a viable, cost effective alternative to debt write-offs.

DATES: Comments must be submitted on or before August 1, 1997.

ADDRESSES: Submit written comments in duplicate to the Branch Chief, 
Regulations and Paperwork Management Branch, Rural Development, U.S. 
Department of Agriculture, Stop 0743, Room 6345-S, 1400 Independence 
Ave. SW, Washington, DC 20250. Comments may also be submitted via the 
Internet by addressing them to ``[email protected]'' and must 
contain ``reamortization'' in the Subject. All comments made pursuant 
to this notice will be made available for public inspection during 
regular work hours at the above address.

FOR FURTHER INFORMATION CONTACT: John Purcell, Rural Utilities Service, 
Stop 1570, 1400 Independence Ave. SW, Washington, DC 20250, telephone 
(202) 720-9634.

SUPPLEMENTARY INFORMATION:

Classification

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

Regulatory Flexibility Act

    Pursuant to section 605 (b) of the Regulatory Flexibility Act, 5 
U.S.C. 605 (b), the head of the Agencies certify that this rule will 
not have a significant economic impact on a substantial number of small 
entities.

Intergovernmental Review

    This program is listed in the Catalog of Federal Domestic 
Assistance under number 10.760, Water and Waste Disposal Systems for 
Rural Communities, subject to the provisions of Executive Order 12372 
which requires intergovernmental consultation with State and local 
officials.

Environmental Impact Statement

    This action has been reviewed in accordance with 7 CFR part 1940, 
subpart G, ``Environmental Program.'' It has been determined that the 
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, Public Law 91-190, an 
Environmental Impact Statement is not required.

Civil Justice Reform

    This proposed rule has been reviewed under Executive Order 12998, 
Civil Justice Reform. If this proposed rule is adopted: (1) unless 
otherwise specifically provided all state and local laws and 
regulations that are in conflict with this rule will be preempted; (2) 
no retroactive effect will be given to this rule except as specifically 
prescribed in the rule; and (3) administrative proceedings of the 
National Appeals Division (7 CFR Part 11) must be exhausted before 
bringing suit.

Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act (44 U.S.C. 3507), 
the information collection requirements included in this rule have been 
approved through 7 CFR part 1951, subpart E. The assigned OMB number is 
0575-0066. This rule does not revise or impose any new information 
collection or recordkeeping requirements from those approved by the 
Office of Management and Budget.

National Performance Review

    This regulatory action is being taken as part of the National 
Performance Review program to eliminate unnecessary regulations and 
improve those that remain in force.

Unfunded Mandate Reform Act

    Title II of the Unfunded Mandate Reform Act of 1995 (UMRA), Public 
Law 104-4, establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on State, local, and tribal 
governments and the private sector. Under section 202 of the UMRA, the 
Agency generally must prepare a written statement, including a cost-
benefit analysis, for proposed and final rules with ``Federal 
Mandates'' that may result in expenditures to State, local, and tribal 
governments, in the aggregate, or to the private sector, of $100 
million or more in any one year. When such a statement is needed for a 
rule, section 205 of the UMRA generally requires the Agency to identify 
and consider a reasonable number of regulatory alternatives and adopt 
the least costly, more cost-effective or least burdensome alternative 
that achieves the objectives of the rule.
    This rule contains no Federal mandates (under the regulatory 
provisions of Title II of the UMRA) for State, local, and tribal 
governments or the private sector. Thus today's rule is not subject to 
the requirements of sections 202 and 205 of the UMRA.

Discussion

    The Rural Utilities Service is the result of a reorganization of 
programs administered by the former Farmers Home Administration and the 
former Rural Development Administration. As currently written, 7 CFR 
part 1951, subpart E does not permit loan reamortization with interest 
rate adjustment on outstanding loans. Accordingly, RUS is unable to 
provide debt relief to borrowers that become seriously delinquent on 
their loan payments. The proposed rule will provide debt relief to 
troubled

[[Page 29679]]

borrowers and encourage these organizations to remain in operation and 
resume scheduled loan payments. The proposed rule will also provide RUS 
greater flexibility to service problem loans and permit a viable, cost 
effective alternative to debt write-offs.

List of Subjects in 7 CFR Part 1951

    Accounting, Grant programs--housing and community development, 
Reporting and recordkeeping requirements, Rural areas.

    Accordingly, chapter XVIII of title 7 of the Code of Federal 
Regulations is proposed to be amended as follows:

PART 1951--SERVICING AND COLLECTIONS

    1. The authority citation for part 1951 is revised to read as 
follows:

    Authority: 5 U.S.C. 301; 7 U.S.C. 1981, 1989; 31 U.S.C. 3711; 42 
U.S.C. 1480.

Subpart E--Servicing of Community and Insured Business Programs 
Loans and Grants

    2. Section 1951.223(d) is added to read as follows:


Sec. 1951.223  Reamortization.

 * * * * *
    (d) Reamortization with interest rate adjustment--water and waste 
borrowers only. A borrower that is seriously delinquent in loan 
payments may be eligible for loan reamortization with interest rate 
adjustment. The purpose of loan reamortization with interest rate 
adjustment is to provide relief for a borrower that is unable to 
service the outstanding loan in accordance with its existing terms and 
to enhance recovery on the loan. A borrower must meet the conditions of 
this subpart to be considered eligible for this provision.
    (1) Eligibility determination. The State Director, Rural 
Development, may submit to the Administrator for approval an adjustment 
in the rate of interest charged on outstanding loans only for those 
borrowers who meet the following requirements:
    (i) The borrower has exhausted all other servicing provisions 
contained in this subpart;
    (ii) The borrower is experiencing severe financial problems;
    (iii) Any management deficiencies must have been corrected or the 
borrower must submit a plan acceptable to the State office to correct 
any deficiencies before an interest rate adjustment may be considered;
    (iv) Borrower user rates must be comparable to similar systems. In 
addition, the operating expenses reported by the borrower must appear 
reasonable in relation to similar system expenses;
    (v) The borrower has cooperated with Rural Development in exploring 
alternative servicing options and has acted in good faith with regard 
to eliminating the delinquency and complying with its loan agreements 
and agency regulations; and
    (vi) The borrower's account must be delinquent at least one annual 
debt payment for 180 days.
    (2) Conditions of approval. All borrowers approved for an 
adjustment in the rate of interest by the Administrator shall agree to 
the following conditions:
    (i) The borrower shall agree not to maintain cash or cash reserves 
beyond what is reasonable at the time of interest rate adjustment to 
meet debt service, operating, and reserve requirements.
    (ii) A review of the borrower's management and business operations 
may be required at the discretion of the State Director. This review 
shall be performed by an independent expert who has been recommended by 
the State Director and approved by the National Office. The borrower 
must agree to implement all recommendations made by the State Director 
as a result of the review.
    (iii) If requested, a copy of the latest audited financial 
statements or management report must be submitted to the Administrator.
    (3) Reamortization. At the discretion of the Administrator, the 
interest rate charged on outstanding loans of eligible borrowers may be 
adjusted to no less than the poverty interest rate and the term of the 
loans may be extended up to a new 40 year term or the remaining useful 
life of the facility, whichever is less.

    Dated: May 15, 1997.
Jill Long Thompson,
Under Secretary, Rural Development.
[FR Doc. 97-13930 Filed 5-30-97; 8:45 am]
BILLING CODE 3410-XV-U