[Federal Register Volume 64, Number 78 (Friday, April 23, 1999)]
[Rules and Regulations]
[Pages 19863-19865]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-10258]



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 Rules and Regulations
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  Federal Register / Vol. 64, No. 78 / Friday, April 23, 1999 / Rules 
and Regulations  

[[Page 19863]]


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DEPARTMENT OF AGRICULTURE

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

7 CFR Part 1951

RIN 0560-AF80


Suspension of Collection of Recapture Amount for Borrowers With 
Certain Shared Appreciation Agreements

AGENCY: Farm Service Agency, USDA.

ACTION: Interim rule.

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SUMMARY: The Farm Service Agency (FSA) is amending the shared 
appreciation agreement requirements to allow certain Farm Loan Program 
(FLP) borrowers with such agreements that end prior to December 31, 
2000, to have the obligation to pay all or part of the recapture amount 
due under the agreement suspended for up to 3 years. This rule will 
allow those borrowers to suspend their obligation to pay the recapture 
amount to give them time to recover from the current situation of 
depressed commodity prices.

DATES: Effective April 23, 1999. Comments on this rule and on the 
information collections must be submitted by June 22, 1999 to be 
assured consideration.

ADDRESSES: Submit written comments to the 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: David Spillman, Branch Chief, or 
Veldon Hall, telephone (202) 720-0900; electronic mail: david 
[email protected].

SUPPLEMENTARY INFORMATION:

Executive Order 12866

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

Regulatory Flexibility Act

    In compliance with the Regulatory Flexibility Act (5 U.S.C. 601 and 
602), the undersigned has determined and certified by signature of this 
document that this rule will not have a significant economic impact on 
a substantial number of small entities. New provisions included in this 
rule will not impact a substantial number of small entities to a 
greater extent than large entities. Therefore, a regulatory flexibility 
analysis is not required and was not performed.

Environmental Impact Statement

    This document has been reviewed in accordance with 7 CFR part 1940, 
subpart G, ``Environmental Program.'' The issuing agency has determined 
that this action does not 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 rule has been reviewed in accordance with 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 because it will not affect agreements, entered into prior to the 
effective date of the rule, to pay the shared appreciation amount due 
under a shared appreciation agreement; and (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. 
This rule will only allow certain borrowers who are obligated to pay a 
sum certain at the maturity date of the shared appreciation agreement 
to delay that payment.

Executive Order 12372

    For reasons set forth in the Notice related to 7 CFR part 3015, 
subpart V (48 FR 29115, June 24, 1983), the programs within this rule 
are excluded from the scope of E.O. 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, requires Federal agencies to assess the effects of their 
regulatory actions on State, local, and tribal governments or 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 requires FSA to 
prepare a written statement, including a cost benefit assessment, for 
proposed and final rules with ``Federal mandates'' that may result in 
such expenditures for State, local, or tribal governments, in the 
aggregate, or to the private sector. UMRA generally requires agencies 
to consider alternatives and adopt the more cost effective or least 
burdensome alternative that achieves the objectives of the rule.
    This rule contains no Federal mandates, as defined under 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 UMRA.

Paperwork Reduction Act of 1995

    The amendments to 7 CFR part 1951 set forth in this interim rule 
require a revision to the information collection requirements that were 
previously approved by OMB under the provisions of chapter 35 of title 
44 of the United States Code. Since this interim rule will be effective 
as soon as it is published, FSA has submitted a request for emergency 
approval of the information collections of this rule to OMB. Still, the 
agency is seeking public comments on the information collection 
estimates and subsequent revisions may be made based on the comments 
received.
    Title: 7 CFR 1951-S, Farmer Program Account Servicing Policies.
    OMB Control Number: 0560-0161.
    Expiration Date of Approval: March 31, 2001.
    Type of Request: Extension and revision of a currently approved 
information collection.
    Abstract: The information collected under OMB Number 0560-0161, as 
identified above, is needed for FSA to effectively administer the 
regulations relating to the servicing of delinquent

[[Page 19864]]

direct FSA farm loans. The information is collected by the loan 
official in order to document the borrower's eligibility for specific 
loan servicing actions. The reporting requirements imposed on the 
public by the regulations contained in 7 CFR part 1951-S are necessary 
to administer the loan program in accordance with statutory 
requirements, are consistent with commonly performed lending practices, 
and are necessary to protect the Government's financial interest.
    This rule, which provides for the suspension of the borrower's 
obligation to pay the recapture payment due under a shared appreciation 
agreement in 1999 and 2000, will result in an information collection 
burden for borrower's seeking such a suspension. Each borrower who 
wishes to suspend a recapture payment obligation will be required to 
request a suspension, read and sign a suspension agreement, and provide 
cash flow projections documenting that they are unable to pay for 2 
years subsequent to the suspension. The revision to the information 
collection requirements approved under 0560-0161 also requests approval 
of an existing requirement associated with this program. The currently 
approved information collection contains no burden estimates for the 
information collection requirements contained in 7 CFR 1951.914(e). 
Specifically, paragraphs 1951.914(e)(1) and (8) require a borrower that 
wishes to amortize the recapture due to present a feasible plan 
documenting their ability to pay the recapture in installments plus 
interest and to execute a promissory note for the amount due.
    Estimate of Burden: Public reporting burden for this collection of 
information is estimated to average 1.51 hours per response.
    Respondents: Individuals or households, businesses or other for 
profit and farms.
    Estimated Number of Respondents: 9,453.
    Estimated Number of Responses per Respondent: 1.
    Estimated Total Annual Burden on Respondents: 14,309 hours.
    Proposed topics for comment include: (a) Whether the collection of 
information is necessary for the proper performance of the functions of 
the agency, including whether the information will have practical 
utility; (b) the accuracy of the agency's estimate of burden including 
the validity of the methodology and assumptions used; (c) ways to 
enhance the quality, utility and clarity of the information to be 
collected; (d) ways to minimize the burden of the collection of 
information on those who are to respond, including through the use of 
appropriate automated, electronic, mechanical, or other technological 
collection techniques or other forms of information technology. 
Comments regarding this information collection should be sent to the 
Desk Officer for Agriculture, Office of Information and Regulatory 
Affairs, Office of Management and Budget, Washington, D.C. 20503 and to 
David Spillman, Branch Chief, USDA, FSA, Farm Loan Programs Loan 
Servicing Division, Farm Service Agency, USDA, 1400 Independence 
Avenue, SW, STOP 0523, Washington, D.C. 20250-0523. A copy and 
explanation of the information collection requirements of this rule may 
be obtained from Mr. Spillman at the above address. Comments regarding 
paperwork burden will be summarized and included in the request for OMB 
approval of the information collection. All comments will also become a 
matter of public record.

Federal Assistance Programs

    These changes affect the following FSA programs as listed in the 
Catalog of Federal Domestic Assistance.
    10.407--Farm Ownership Loans

Discussion of the Interim Rule

    The Farm Service Agency (FSA) publishes this amendment to subpart S 
of part 1951 for immediate affect 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 as discussed below.
    In late 1988, the Agricultural Credit Act of 1987 amended Sec. 353 
of the Consolidated Farm and Rural Development Act (Con Act) by 
inserting subsection (e) (7 U.S.C. 2001(e)) to allow the Farmers Home 
Administration (which later became part of FSA), to begin restructuring 
debts with debt write-downs and entering into shared appreciation 
agreements with borrowers. Under these agreements, a borrower is 
required to make a recapture payment equal to a specified portion of 
any appreciation in the value of the real estate between the date of 
the agreement and the earlier of the following dates: (1) The date the 
real estate securing the borrower's loan with the agency is sold, (2) 
the repayment of the loan, (3) the date the borrower ceases farming 
operations, or (4) the date 10 years after the borrower and the agency 
entered into the agreement. The recapture payment is 75% of the 
appreciation in the case of agreements that lasted 4 years or less and 
50% of the appreciation in the case of all other agreements.
    Many of these agreements have now matured. However, the prices for 
many agricultural commodities for the 1998 crop are at depressed 
levels. Such depressed prices are expected to continue for at least 
another year. In certain cases, the prices farmers are receiving for 
the agricultural commodities they produce have fallen by more than 50% 
over the last 3 years. This situation has led to a substantial fall in 
farm income across nearly all sectors of production agriculture. Thus, 
a significant percentage of the approximately 3,300 borrowers with 
shared appreciation agreements that are coming to an end during the 
1999 and 2000 calendar years are not able to repay the recapture 
amounts.
    This rule will allow those borrowers to suspend their obligation to 
pay the recapture amount to give them time to recover from the current 
situation of depressed commodity prices. Accordingly, there is a good 
cause to make the rule effective immediately upon publication. FSA will 
accept public comments on the rule for 60 days after publication in the 
Federal Register.
    The shared appreciation agreement regulations codified at 7 CFR 
1951.914, generally provide the procedures for the servicing of shared 
appreciation agreements, including the procedure for determining and 
collecting recapture amount of any appreciation in the secured real 
estate.
    The rule would amend the regulation by adding paragraph (h) to give 
a borrower with a shared appreciation agreement that becomes due on or 
before December 31, 2000, provided there has been no agreement for 
payment of the recapture amount, a period of 30 days to apply for a 1 
year suspension of the borrower's obligation to pay the recapture 
amount if the borrower certifies in writing the inability to pay the 
recapture amount. In order to protect the Government's lien position, 
FSA must determine that its mortgage on the secured real estate will 
not expire prior to the end of the suspension period plus an additional 
3 years, or FSA must be advised that under State law the mortgage can 
be extended for an additional 3 years.
    A suspension may be renewed twice. At each renewal, the borrower 
will receive a suspension limited to the portion of the recapture 
amount FSA determines, based on a Farm and Home Plan, that the borrower 
is still unable to pay at the time of the renewal request. The amount 
of the recapture payment subject to a suspension will accrue

[[Page 19865]]

interest at a rate equal to the applicable Federal borrowing interest 
rate, as determined by the FSA Administrator.
    Thirty days before the suspension period FSA will notify the 
borrower that the suspension of the shared appreciation agreement will 
end in the near future. This notification is separate and apart from 
the notification required by Sec. 807 of the Agriculture, Rural 
Development, Food and Drug Administration, and Related Agencies 
Appropriations Act, 1999 (1999 Appropriations Act). Section 807 of the 
1999 Appropriations Act requires FSA, beginning in fiscal year 2000, to 
send an FLP borrower notice of the provisions of the agreement not 
later than 12 months before the end of the term of a shared 
appreciation agreement. Under additional FSA procedures all borrowers 
whose agreements were due, even if the payment obligation is suspended, 
were notified of the agreements' provisions in the timeframe required 
by Sec. 807. The requirement in this regulation that borrowers be 
notified 30 days before the end of the suspension is not intended to 
apply under Sec. 807 of the 1999 Appropriations Act.
    If the real estate is conveyed during the suspension period, the 
recapture amount plus any applicable interest will become immediately 
due and payable under the notice procedures explained in the notice to 
the borrowers.

List of Subjects in 7 CFR Part 1951

    Accounting, Credit, Loan programs-agriculture.

    Accordingly, 7 CFR part 1951 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; 31 U.S.C. 3716; 42 
U.S.C. 1480.

Subpart S--Farmer Program Account Servicing Policies

    2. Section 1951.914 is amended by revising the heading and 
introductory text of paragraph (b) and by adding paragraph (h) to read 
as follows:


Sec. 1951.914  Servicing of accounts restructured under Primary Loan 
Service Program.

* * * * *
    (b) Recapture under Shared Appreciation Agreements. Except as 
provided in paragraph (h), recapture of any appreciation will take 
place at the end of the term of the agreement, or sooner, if the 
following occurs: * * *
* * * * *
    (h) Suspension of Recapture Payment Obligation under a Shared 
Appreciation Agreement.
    (1) A borrower may request from a Farm Loan Program (FLP) servicing 
official, a suspension of the obligation to pay the recapture amount 
under a shared appreciation agreement, if:
    (i) The shared appreciation agreement recapture payment is now due 
but there has been no agreement to pay the recapture payment;
    (ii) The 10 year term of the agreement ends on or before December 
31, 2000;
    (iii) The secured real estate has not yet been conveyed so that the 
entire amount of the shared appreciation agreement recapture payment is 
due;
    (iv) The borrower has complied with the other terms of the 
agreement;
    (v) The borrower certifies in writing that the borrower is not able 
to pay the recapture amount;
    (vi) The agreement or the obligations thereunder have not been 
accelerated and there are pending servicing rights under this subpart 
still available to the borrower; and
    (vii) The Agency's mortgage which secures the agreement remains in 
effect for a period not less than the suspension period under this 
paragraph plus 3 additional years or the Agency determines that the 
mortgage can be extended for an additional 3 years beyond the 
suspension period.
    (2) A request for suspension of the obligation to pay the recapture 
amount must be submitted in writing to the FLP servicing official after 
the borrower has received notification of the recapture amount due by 
the later of:
    (i) 30 days after the borrower has received notification of the 
recapture amount due; or
    (ii) May 24, 1999.
    (3) The term of the suspension of the obligation to pay the 
recapture amount is 1 year.
    (4) A suspension may be renewed by the Agency at the request of a 
borrower in writing not more than twice. Prior to renewal of a 
suspension, the Agency will determine, based on a Farm and Home Plan, 
the portion of the recapture amount the borrower is still unable to 
pay, or obtain credit to pay, from any other source (including 
nonprogram loans from the Agency, in accordance with this part), the 
suspension will be limited to such an amount. The Agency must also 
determine that the conditions prescribed in paragraphs (h)(1)(i) 
through (h)(1)(vi) are still met.
    (5) The amount of the recapture payment suspended will accrue 
interest at a rate equal to the applicable rate of interest of Federal 
borrowing, as determined by the Agency.
    (6) Thirty days before the end of the suspension period, the FLP 
Servicing Official shall inform the borrower by letter of the suspended 
amount, including accrued interest that is owed and the date such 
payment is due.
    (7) At the end of the suspension period, the borrower will be 
obligated to pay the amount suspended, plus any accrued interest and 
the borrower will be so notified.
    (8) If the real estate that is the subject of the shared 
appreciation agreement during the suspension period is conveyed, the 
suspended amount, plus any accrued interest shall become immediately 
due and payable by the borrower in accordance with the procedures 
established under paragraph (c), except that an appraisal is not 
required on the real estate.

    Signed in Washington, DC, on April 20, 1999.
August Schumacher, Jr.,
Under Secretary for Farm and Foreign Agricultural Services.
[FR Doc. 99-10258 Filed 4-21-99; 8:45 am]
BILLING CODE 3410-05-P