[Federal Register Volume 62, Number 148 (Friday, August 1, 1997)]
[Rules and Regulations]
[Pages 41251-41253]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-20280]



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 Rules and Regulations
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  Federal Register / Vol. 62, No. 148 / Friday, August 1, 1997 / Rules 
and Regulations  

[[Page 41251]]


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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 0560-AE98


Disaster Set-Aside Program--Second Installment Set-Aside

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

ACTION: Interim rule with request for comments.

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SUMMARY: The Farm Service Agency (FSA) is amending the disaster set-
aside program requirements to allow a second installment to be set-
aside for borrowers affected by a natural disaster in a county declared 
a major disaster or emergency by the President between January 1, 1997 
and August 1, 1997. The impact of these provisions will allow the 
agency to service disaster victims in an efficient and timely manner 
while keeping them in business.

DATES: Effective August 1, 1997. Comments must be submitted by 
September 30, 1997.

ADDRESSES: Submit written comments to Director, Farm Loan Programs Loan 
Servicing and Property Management Division, United States Department of 
Agriculture, Farm Service Agency, STOP 0523, 1400 Independence Avenue, 
SW, Washington DC 20250-0523.

FOR FURTHER INFORMATION CONTACT: Kimberly R. Laris, Senior Loan 
Officer, Farm Service Agency, U.S. Department of Agriculture, Stop 
0523, 1400 Independence Avenue, SW, Washington, D.C. 20250-0523; 
Telephone: 202-720-1659; Facsimile: 202-690-0949, e-mail: 
[email protected].

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    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

    The issuing agencies certify that this rule will not have a 
significant impact on a substantial number of small entities as defined 
in the Regulatory Flexibility Act, Pub. L. 96-534, as amended (5 U.S.C. 
601). Amendments included in this rule will not impact small entities 
to a greater extent than large entities or individual farm borrowers.

Environmental Impact Statement

    This document has been reviewed in accordance with 7 CFR part 1940, 
subpart G, ``Environmental Program.'' The issuing agencies have 
determined that this action does not significantly affect the quality 
of 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 12988

    This interim rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. In accordance with this rule: (1) 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; (3) 
administrative proceedings in accordance with 7 CFR parts 11 and 780 
must be exhausted before bringing suit in court challenging action 
taken under this rule.

Executive Order 12372

    For reasons set forth in the notice to 7 CFR part 3015, subpart V 
(48 FR 29115, June 24, 1983), the programs within this rule are 
excluded from the scope of Executive Order 12372, which requires 
intergovernmental consultation with State and local officials.

The Unfunded Mandates Reform Act of 1995

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Pub. 
L. 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 of $100 million or more in any 1 
year. When such a statement is needed for a rule, section 205 of the 
UMRA, FSA 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, or tribal 
governments, in the aggregate, or to the private sector. When such a 
statement is needed for a rule, section 205 of the UMRA generally 
requires FSA 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 regulatory provisions 
of Title II of the UMRA) for State, local, and tribal governments or 
the private sector. Thus, this rule is not subject to the requirements 
of sections 202 and 205 of the UMRA.

Paperwork Reduction Act of 1995

    The information collection requirements contained in these 
regulations were previously approved by OMB pursuant to the Paperwork 
Reduction Act of 1995 (44 U.S.C. chapter 35) under OMB control number 
0560-0164 through August 31, 1998. The amendments set forth in this 
interim rule do not contain additional information collections that 
require clearance by the OMB under the provisions of 44. U.S.C. chapter 
35.

Federal Assistance Programs

10.404--Emergency Loans
10.406--Farm Operating Loans
10.407--Farm Ownership Loans
10.416--Soil and Water Loans

Discussion of the Interim Rule

    FSA publishes this amendment to subpart T of part 1951 without 
prior notice and comment because of the emergency nature of the program 
and the eligibility requirements involved. Publication as a proposed 
rule for notice and comment is impractical and contrary to the public 
interest. The Disaster Set-Aside (DSA) program was first made available 
to FSA Farm Loan Programs (FLP) borrowers beginning October 21, 1994, 
because of the heavy flooding in the Midwest and extreme

[[Page 41252]]

drought in the South. Since that time, approximately 12,000 borrowers 
have received DSA assistance. The overall success of the program can be 
attributed to the small amount of paperwork required in applying and 
processing DSA requests. DSA gives FLP borrowers a chance to recover 
from their losses without having to incur additional debt to pay 
creditors or liquidate essential assets. The cost to the government is 
substantially less under this servicing program than any other 
servicing program as no debt is written off, no appraisal costs are 
incurred as under subpart S of part 1951, and no liquidation costs are 
incurred.
    Many of the borrowers who received DSA in 1994 and 1995 were again 
affected by heavy snowfall and flooding in the Midwest during the 
beginning months of 1997. The President has declared the majority of 
North Dakota, South Dakota, and Minnesota as a disaster area. Many of 
these borrowers have received a previous writedown of debt under 
subpart S of part 1951, thereby making them ineligible for additional 
writeoffs or emergency loans as a result of Sec. 373 of the 
Consolidated Farm and Rural Development Act. The expansion of the 
program to permit a second debt set-aside, therefore, is needed 
immediately to benefit these disaster victims. While there is 
justification for the rule to become effective 10 days after 
publication, FSA will accept public comments on the rule for 60 days.
    The existing regulations provide that each loan can only have one 
set-aside installment outstanding. The only way a borrower could 
receive DSA again, would be if the previous set-aside installment were 
paid in full, or cancelled through restructuring under subpart S of 
part 1951. This rule will allow borrowers, who were affected by a 
natural disaster in a county declared a major disaster or emergency by 
the President between January 1, 1997 and August 1, 1997, to receive a 
second installment set-aside without having to pay in full the first 
set-aside installment, or cancel the set-aside altogether. Borrowers 
who farmed in counties contiguous to the county that was declared a 
disaster area are not eligible for the second installment set-aside 
unless they also farmed in the county declared a disaster area and meet 
all the eligibility requirements. This rule will allow such borrowers 
to receive immediate financial relief from their FLP obligations in a 
more expedient manner than under subpart S of part 1951.
    If the borrower pays any portion of the set-aside installments in 
the future, the payment will be applied to the oldest installment set-
aside first.
    Borrowers affected by a disaster declared by the President prior to 
the effective date of this rule will have 6 months from the date they 
are notified of the program to apply for a second installment set-
aside.
    The notification requirements described in section 1951.953 are 
also being amended in FSA's internal instructions to require 
notification of DSA assistance quarterly instead of each time an area 
is designated a disaster area. The notification would include a list of 
all designations outstanding, including those received during the 
preceding quarter. This will eliminate a lot of confusion as well as 
provide a reminder to the borrower of any outstanding declarations to 
apply for DSA and emergency loans.
    A clarification is also being made to Sec. 1951.954(b)(4). The 
amount that can be set-aside was limited to the amount the borrower was 
unable to pay FSA from the production marketing period in which the 
disaster occurred, or the amount the borrower was unable to pay other 
creditors and expenses, rounded up to the nearest whole installment. 
This was misleading. The other creditors and expenses do not come into 
play unless the FLP installment was paid. As written, this would make 
borrowers ineligible to receive DSA if the lesser amount due other 
creditors was less than their FLP installment since section 
1951.954(a)(6) requires all FLP installments to be current after the 
scheduled installments are set-aside. In this case, all FLP 
installments would not be current if the total of the FLP installments 
was less than the other creditors payments. The provision has been 
clarified to state that if the installment due immediately after the 
disaster was paid, but other creditors and expenses were not, the 
amount set-aside will be the lesser of the amount the borrower is 
unable to pay other creditors and expenses, rounded up to the nearest 
whole FLP installment, or the next FLP installment due.

List of Subjects in 7 CFR Part 1951

    Accounting, Credit, Disaster assistance, Loan programs--
agriculture, Loan programs--housing and community development, Low and 
moderate income housing.

    Accordingly, part 1951 Chapter XVIII, title 7, Code of Federal 
Regulations is amended as follows:

PART 1951--SERVICING AND COLLECTIONS

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

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

Subpart T--Disaster Set-Aside Program

    2. Section 1951.953 is amended by removing and reserving paragraph 
(a) and by revising paragraph (b) to read as follows:


Sec. 1951.953  Notification and request for DSA.

* * * * *
    (b) Deadline to apply. All FLP borrowers liable for the debt must 
request DSA within 8 months from the date the disaster was designated, 
except borrowers applying for a second installment set-aside for 
disasters declared by the President between January 1, 1997 and August 
1, 1997, have 6 months from the date of the notification letter to 
apply. Borrowers may only be considered for DSA one time for each 
disaster.
* * * * *
    3. Section 1951.954 is amended in paragraph (a)(1) by adding a 
sentence at the end of the paragraph and revising (b)(2) and (b)(4) to 
read as follows:


Sec. 1951.954  Eligibility and loan limitation requirements.

    (a) * * *
    (1) * * * If the borrower is applying for a second installment to 
be set-aside, the disaster area operated must have been in a county 
declared a major disaster or emergency by the President between January 
1, 1997 and August 1. 1997.
* * * * *
    (b) * * *
    (2) Only one unpaid installment for each farm loan may be set-
aside. Except for Presidential disaster declarations between January 1, 
1997 and August 1, 1997, if there is an installment still set-aside 
from a previous disaster, the loan is not eligible for DSA. For 
Presidential declarations between January 1, 1997 and August 1, 1997, 
borrowers who already have one installment set-aside from a previous 
disaster may set-aside a second installment. If the set-aside is later 
paid in full, or cancelled through restructuring under subpart S of 
this part, the set-aside will no longer exist and, therefore, the loan 
may be considered for Disaster Set-Aside (DSA) in the future.
    (3) * * *
    (4) The amount set-aside shall be limited to the amount the 
borrower is

[[Page 41253]]

unable to pay Farm Service Agency (FSA) from the production and 
marketing period in which the disaster occurred. However, if the 
installment due immediately after the disaster was paid, but other 
creditors and expenses were not, the amount set-aside will be the 
lesser of the amount the borrower is unable to pay other creditors and 
expenses, rounded up to the nearest whole installment, or the next 
installment due. Expenses which the borrower is unable to pay may 
include the following year's operating and family living expenses if 
the income or commodities lost from the disaster year would have been 
used for these purposes, or if normal income security from the disaster 
year is approved for release under subpart A of 7 CFR part 1962 or 
otherwise authorized under subpart B of 7 CFR part 1924 for these 
purposes. Under no circumstances will a portion of the installment be 
set-aside leaving a balance still due. The portion not set-aside must 
be paid by the borrower on or before the date Exhibit A of FmHA 
Instruction 1951-T (available in any FSA office) is signed.
* * * * *
    4. Section 1951.957 is amended by revising paragraph (b)(7) to read 
as follows:


Sec. 1951.957  Eligibility determination and processing.

* * * * *
    (b) * * *
    (7) Payments applied to the amount set-aside will be applied first 
to interest and then to principal. If more than one installment is set-
aside on the loan, payments will be applied to the oldest installment 
set-aside until paid in full, before applying payments to the second 
installment set-aside.
* * * * *
    Signed at Washington, D.C., on July 22, 1997.
James W. Schroeder,
Acting Under Secretary for Farm and Foreign Agricultural Services.
[FR Doc. 97-20280 Filed 7-31-97; 8:45 am]
BILLING CODE 3410-05-P