[Federal Register Volume 64, Number 136 (Friday, July 16, 1999)]
[Rules and Regulations]
[Pages 38297-38298]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-17799]


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DEPARTMENT OF AGRICULTURE

Farm Service Agency

7 CFR Part 762

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

7 CFR Part 1980

RIN 0560-AF38


Implementation of Preferred Lender Program and Streamlining of 
Guaranteed Farm Loan Programs Loan Regulations; Correction

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

ACTION: Correction to final regulations.

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SUMMARY: This document corrects the amendatory language contained in 
the final rule published February 12, 1999, (64 FR 7358) establishing 
the regulations that govern the Farm Service Agency (FSA) guaranteed 
farm loan program. These corrections are necessary to change some 
erroneous references, clarify some provisions, and correct sections 
that conflict with statute or other program requirements. The effect 
will be to ensure the original intent of each provision is stated and 
implemented correctly. This correction will apply retroactively to 
those loans approved since the effective date of the final rule.

DATES: Effective on July 16, 1999.

FOR FURTHER INFORMATION CONTACT: Phillip Elder (202) 690-4012; 
Electronic mail: [email protected].

SUPPLEMENTARY INFORMATION:

Background

    The final rule being corrected by this publication was promulgated 
under 7 CFR part 762 to replace the regulations under 7 CFR part 1980, 
subparts A and B, as they pertain to the guaranteed farm loan programs 
of FSA, to update and streamline program requirements, and to implement 
a preferred lender program.

Need for Correction

    As published, the final rule (64 FR 7358-7403) contains several 
technical errors which may prove misleading and cause unintentional 
results if not clarified.

Discussion of Changes

    The corrections being made are described as follows:
    (1) Section 762.122(a)(1) states, ``The total outstanding combined 
Direct and Guaranteed FO and OL principal balance cannot exceed 
$700,000 and,''. This conflicts with the combined direct and guaranteed 
loan maximum of $900,000 provided by paragraph (a)(4) of Sec. 762.122. 
Paragraph (a)(1) should read, ``The total outstanding combined 
guaranteed FO and OL principal balance cannot exceed $700,000 and,''. 
This change is consistent with the intended policy for loan limits as 
discussed in the preamble of the final rule. Paragraph (a)(4) also 
needs to be amended to refer to ``principal balance'' rather than 
``balance'' for consistency and clarity.
    (2) Section 762.122(c)(1) states, ``No guaranteed OL shall be made 
to any loan applicant after the 15th year that a loan applicant, or any 
individual signing the promissory note, first received direct or 
guaranteed OL.'' Since the 15 year limit is based on the

[[Page 38298]]

number of years of actual loan assistance the borrower has received and 
not the year in which the borrower ``first'' received loan assistance, 
this section should state, ``No guaranteed OL shall be made to any loan 
applicant after the 15th year that a loan applicant, or any individual 
signing the promissory note, received a direct or guaranteed OL.'' This 
change is consistent with former Agency policy under 7 CFR 
Sec. 1980.175. No policy change was intended in the final rule.
    (3) Section 762.145(e)(7), in the last sentence provides that an 
interest assistance agreement will be canceled if a writedown is 
approved. This provision was unintentionally retained from the previous 
regulation and will be deleted. Cancellation of the interest assistance 
agreement in the case of a writedown is not necessary due to changes in 
the way the subsidy is calculated under Sec. 762.150. This cancellation 
requirement conflicts directly with the second to last sentence of 
Sec. 762.150(g)(3) which states that the interest assistance agreement 
will not be canceled if a debt writedown is approved.
    (4) Section 762.150(e)(2) provides requirements for the 
continuation of interest assistance subsidy for the next year and 
states, ``The loan will be eligible for the continuation of interest 
assistance if a feasible plan, including interest assistance, can be 
projected for the plan period.'' As written, this sentence provides a 
minimum threshold for continuation without providing policy for subsidy 
on multiple loans. Thus, this provision implies that subsidy may be 
approved on multiple loans even if a positive cash flow is achieved 
with subsidy applied to only one loan. This error may cause subsidy to 
be awarded above the amount necessary to achieve a positive cash flow 
and, therefore, increase the costs of the loan to the Government. 
Previously, the Agency required, at a minimum, a positive cash flow 
(with a 10-percent margin) to be eligible for continuation of the 
subsidy. The 10 percent margin requirement was removed. The Agency 
intended to prohibit subsidy when it was not required to achieve a 10 
percent margin but failed to state this expressly. Under the corrected 
rule, the Agency will, at a maximum, continue to provide subsidy to as 
many loans as necessary in a multiple loan situation to achieve a 
positive cash flow for the plan period. Thus, the first sentence of 
Sec. 762.150(e)(2) is removed and two sentences are inserted in its 
place to state, ``The loan will be eligible for continuation of 
interest assistance if the cash flow budget projects a feasible plan 
with interest assistance applied. However, in the case of multiple 
loans with interest assistance, subsidy can be applied only to as many 
loans as necessary to achieve a positive cash flow for the plan 
period.''
    (5) Section 762.150(g)(4) is also erroneous due to changes made in 
the annual review procedure for interest assistance. This paragraph 
limits the timing of rescheduling and deferral of loans with interest 
assistance to the claim date or anniversary date of the agreement. 
Those limits were imposed due to the effect of restructuring actions on 
the annual calculation of subsidy. The formula for this calculation has 
been simplified under this section, so this restriction is no longer 
necessary. Thus, the last three sentences of Sec. 762.150(g)(4) are 
removed as a conforming change.
    (6) The final rule published February 12, 1999, contained the 
following erroneous cross references to other sections within the rule 
that are corrected by this rule:
    (A) Sections 762.106(g)(2)(ix) and 762.160(a)(2)(ii) refer to 
Sec. 762.146(c)(7) but should refer to Sec. 762.144(c)(7).
    (B) Section 762.150(g)(7), in the last sentence refers to 
Sec. 762.145(b)(3)(v) but should refer to Sec. 762.143(b)(3)(v).

Correction of Publication

    Accordingly, the final rule published in the Federal Register, FR 
Doc. 99-3256, (64 FR 7358) on February 12, 1999, is corrected as 
follows:
    1. At 64 FR 7384, in the first column, Sec. 762.106(g)(2)(ix) is 
corrected to read as follows:


Sec. 762.106  Preferred and certified lender programs.

* * * * *
    (g) * * *
    (2) * * *
    (ix) Failure to comply with the reimbursement requirements of 
Sec. 762.144(c)(7).
* * * * *
    2. At 64 FR 7386, in the second column, Secs. 762.122(a)(1), 
(a)(4), and (c)(1) are corrected to read as follows:


Sec. 762.122  Loan limitations.

    (a) * * *
    (1) The total outstanding combined guaranteed FO and OL principal 
balance cannot exceed $700,000 and,
* * * * *
    (4) The total combined outstanding direct and guaranteed FO and OL 
principal balance cannot exceed $900,000.
* * * * *
    (c) * * *
    (1) No guaranteed OL shall be made to any loan applicant after the 
15th year that a loan applicant, or any individual signing the 
promissory note, received a direct or guaranteed OL.
* * * * *
    3. At 64 FR 7395, in the first column, Sec. 762.145(e)(7) is 
corrected by removing the last sentence.
    4. At 64 FR 7400, in the second column, Sec. 762.150(e)(2) is 
corrected to read as follows:


Sec. 762.150  Interest assistance program.

* * * * *
    (e) * * *
    (2) The loan will be eligible for continuation of interest 
assistance if the cash flow budget projects a feasible plan with 
interest assistance applied. However, interest assistance can be 
applied only to as many loans as necessary to achieve a positive cash 
flow for the plan period. If the cash flow budget indicates that the 
borrower requires a level of interest assistance greater than 4 percent 
to project a feasible plan, then the Agency will deny the continuation 
of interest assistance. Interest assistance will be reduced to zero 
during that period. See Sec. 762.102(b) for the definition of feasible 
plan.
    5. At 64 FR 7401, in the first column, Sec. 762.150(g)(4) is 
corrected by removing the last three sentences.
    6. At 64 FR 7401, in the first column, the last sentence of 
Sec. 762.150(g)(7) is corrected by removing ``Sec. 762.145(b)(3)(v)'' 
and adding ``Sec. 762.143(b)(3)(v)'' in its place.
    7. At 64 FR 7401, in the second column, Sec. 762.160(a)(2)(ii) is 
corrected to read as follows:


Sec. 762.160  Sale, assignment and participation.

    (a) * * *
    (2) * * *
    (ii) The lender has not complied with the reimbursement 
requirements of Sec. 762.144(c)(7), except when the 180 day 
reimbursement or liquidation requirement has been waived by the Agency.
* * * * *
    Signed at Washington, DC on July 7, 1999.
August Schumacher Jr.,
Under Secretary for Farm and Foreign Agricultural Services.
Jill Long Thompson,
Under Secretary for Rural Development.
[FR Doc. 99-17799 Filed 7-15-99; 8:45 am]
BILLING CODE 3410-05-P