[Federal Register Volume 64, Number 211 (Tuesday, November 2, 1999)]
[Proposed Rules]
[Pages 59131-59137]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-28368]


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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. 64, No. 211 / Tuesday, November 2, 1999 / 
Proposed Rules  

[[Page 59131]]


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DEPARTMENT OF AGRICULTURE

Farm Service Agency

7 CFR Part 770

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

7 CFR Parts 1823 and 1956

RIN 0560-AF43


Loans to Indian Tribes and Tribal Corporations

AGENCY: Farm Service Agency, USDA.

ACTION: Proposed Rule.

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SUMMARY: This rule proposes to consolidate into one part and to revise 
the Indian Tribal Land Acquisition Program (ITLAP) regulations to allow 
borrowers to use the loan reserve accounts to purchase additional real 
estate and to give borrowers additional servicing options. The proposed 
rule also would allow ITLAP funds to be used for certain refinancing 
activities; limit the requirement for reserve accounts to loans not 
secured by a general assignment of Tribal income; expand the uses 
borrowers may make of land purchased with ITLAP funds; require ITLAP 
loan applications, in most cases, include a copy of the borrower's 
option to purchase the land; and provide for subsequent loans to be 
made to ITLAP borrowers.

DATES: Comments on the proposed rule must be received on or before 
December 2, 1999 to be assured of consideration. Comments on the 
information collection requirements of this rule must be received on or 
before January 3, 2000 to be assured of consideration.

ADDRESSES: Mail comments on the proposed rule to: Veldon Hall, 
Director, Farm Loan Programs, Loan Servicing and Property Management 
Division, Farm Service Agency, USDA, 1400 Independence Avenue, S.W., 
STOP 0523, Washington, D.C. 20250-0523, fax number: (202) 690-0949, or 
hand deliver them to room 5449-South at that address during normal 
business hours.

FOR FURTHER INFORMATION CONTACT: Gary West, Senior Loan Officer, Farm 
Loan Programs, Loan Servicing and Property Management Division, Farm 
Service Agency, USDA, 1400 Independence Avenue, S.W., STOP 0523, 
Washington, D.C. 20250-0523, telephone (202) 690-4008, facsimile (202) 
690-0949, electronic mail: [email protected].

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This rule has been determined to be significant under E.O. 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-
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. Thus, large entities are subject to 
these rules to the same extent as small entities. Therefore, a 
regulatory flexibility analysis 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 E.O. 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; 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.

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 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 one year. When such a 
statement is needed for a rule, section 205 of the UMRA requires 
agencies 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 creation of 7 CFR part 770 set forth in this proposed rule 
requires review and approval of the information collection requirements 
by OMB under the provisions of chapter 35 of title 44 of the United 
States Code.
    Title: 7 CFR 770 Indian Tribal Land Acquisition Program.
    OMB Control Number: 0560-NEW
    Type of Request: Approval of a new information collection.
    Abstract: The information collected under OMB Number 0560-NEW, as 
identified above, is needed for Farm Service Agency (FSA) to 
effectively administer the regulations relating to the making and 
servicing of loans under the Indian Tribal Land Acquisition Program. 
The information is collected by the loan official in order to document 
the borrower's eligibility for loans and specific loan servicing 
actions. The

[[Page 59132]]

reporting requirements imposed on the public by the regulations 
contained in 7 CFR part 770 are necessary to administer the Indian 
Tribal Land Acquisition Program (ITLAP) loan program in accordance with 
statutory requirements (25 U.S.C. 488-494) consistent with commonly 
performed lending practices.
    The proposed rule imposes information collection requirements on 
Native American Tribes seeking ITLAP loans or borrowers seeking loan 
servicing actions. In order to apply for an ITLAP loan, the applicant 
must provide information regarding its financial condition, ability to 
obtain other credit, plans for use of the land being purchased, plans 
for how it intends to repay the loan, loan security and purchase 
agreement for the land. If the borrower seeks loan servicing, the 
borrower must provide information regarding the financial condition of 
the tribe.
    Estimate of Burden: Public reporting burden for this collection of 
information is estimated to average 18.50 hours per loan application, 
.25 hours per request for a reamortization, .25 hours per request for 
an interest rate reduction, and 2 hours per request for a debt write 
down.
    Respondents: Native American Tribes.
    Estimated Number of Respondents: 12.
    Estimated Number of Responses per Respondent: 1.
    Estimated Total Annual Burden on Respondents: 83 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 
Craig Nehls, Branch Chief, Farm Loan Programs Loan Servicing Division, 
FSA, USDA, 1400 Independence Avenue, S.W., STOP 0523, Washington, D.C. 
20250-0523. 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.


10.421--Indian Tribes and Tribal Corporation Loans

Discussion of the Advanced Notice of Proposed Rulemaking

    On March 3, 1999, the Rural Housing Service, Rural Business-
Cooperative Service, Rural Utilities Service, and Farm Service Agency 
published an Advance Notice of Proposed Rulemaking (ANPR) (64 FR 10235) 
soliciting comments to six issues relating to a possible revision of 
the debt relief regulations for ITLAP. In response to this request for 
public comment, 49 comments were received from ten commenters. Six 
commenters represented Native American Tribes, two commenters were 
individuals representing themselves, one commenter represented an 
Intertribal water rights coalition, and one commenter represented 
another Federal Government agency. The following is a summary of the 
comments received for each of the six issues:
    1. Cancel the ITLAP debts in full. What criteria would be used to 
determine if a debt should be canceled?
    Fourteen comments were received in response to this issue. One 
comment opposed reducing or canceling any ITLAP debt that is fully 
secured and collectable. Nine comments supported the cancellation of 
debt in some unspecified form; four comments supported a broad based 
cancellation of the debt; and two comments indicated that their Native 
American Tribes had already repaid more than they had originally 
borrowed and therefore should not have to pay any additional amounts.
    2. Reduce the principal amount of the outstanding ITLAP debt to the 
present value of expected future annual rental value of the land 
purchased with ITLAP loan funds and set the annual ITLAP loan payment 
at the annual rent received or that could be received from this land.
    Five comments were received in response to this issue. Two comments 
stated that the principal balance of such loans should be reduced to 
present value of future annual rents that could be generated on the 
land purchased with loan funds; two comments supported the concept that 
loan payments should be adjusted to equal rental income received from 
land purchased with loan funds; and one comment supported a reduction 
in loan payments to equal 85 percent of the rents received on the land 
purchased by loan funds.
    3. Restructure the loan by lowering the interest rate and 
reamortizing the balance of the loan over the remaining loan term.
    Five comments were received in response to this issue which 
suggested that borrowers should be eligible for reamortizations, 
deferrals, and servicing options which are available to Farm Loan 
Program borrowers.
    4. Release the assignment of income and substitute real estate 
mortgages on the land purchased with ITLAP funds. The regulation could 
provide that payment terms of the loans would be restructured at such 
time.
    Two comments were received in response to this issue which 
indicated that the Agency should take mortgages as security for these 
in exchange for the general assignments of income that currently secure 
many of these loans.
    5. Consider the changes in Tribal revenues from all sources and 
grant a corresponding reduction in the loan principal.
    Six comments were received on this issue. Five comments supported 
the provisions of debt relief based on socio-economic condition of the 
Tribe; and one comment proposed that debt relief should be based on 
decreases in Federal funding.
    6. Grant deferrals of annual payments if the income loss is 
temporary.
    One comment was received on this issue which recommended that debt 
relief should be provided when a producer who rents land from the 
borrower suffers a reduction in commodity prices.
    In addition to the above listed comments, the Agency received 16 
comments on other issues related to ITLAP. One comment suggested that 
debt relief should be provided, if the making of the loan payments by 
the borrower will impede the borrower's ability to resolve fractional 
land interests on the reservation; one comment stated that debt relief 
should be provided if the making of loan payments impedes the 
borrower's ability to repay other loans or meet other Tribal needs; 
three comments indicated that debt relief should not be conditioned on 
whether the loan has been accelerated; one comment suggested that 
independent legislation would be needed to authorize additional

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debt relief options; seven comments indicated that the Agency should 
take action without promulgating new regulations since such regulations 
are not necessary and would violate Executive Order (E.O.) 13084; two 
comments indicated that the Agency's concerns regarding the budgetary 
impacts of providing debt relief to borrowers were misplaced because 
such relief would enable borrowers to purchase more fractional 
interests and thus reduce the overall Federal Government's costs in 
tracking these fractional interests; and one comment indicated that 
funding for the loan program should be provided to the full program 
authorization level of $50 million.
    Based on a review of the comments, the Agency has reached the 
following conclusions which, in part, formed the basis for the proposed 
changes to the debt relief provisions of ITLAP contained in this 
proposed rule:
    In response to the comments that suggested the Agency adopt a 
policy of canceling ITLAP debt, the Agency cannot justify the simple 
cancellation of ITLAP debt with respect to the program's current 
borrowers. Such an action would be inconsistent with the intent of the 
program which is to provide loan financing to Native American Tribes 
for the purchase of reservation land. Such a change would move the 
program from a loan program to a grant program. When Congress amended 
the ITLAP legislation to authorize debt relief, it tied such relief to 
changes in the value of the land. (Sec. 303 of Pub. L. 101-82) In this 
amendment, Congress did not suggest or encourage the Agency use its 
debt settlement authorities to provide broad debt relief. Further, none 
of the comments provided specific criteria to support when such 
cancellations of debt should take place and none of the comments 
addressed the issue that providing such relief to those with recent 
loans would be unfair to those who have already repaid substantial 
portions of their debt. Finally, providing such relief could jeopardize 
the future of this program. At a minimum, as indicated in the ANPR, if 
such relief is not clearly limited, it could substantially increase the 
projected costs for future ITLAP loans which would mean that under the 
Credit Reform Act of 1990 the Agency would have fewer program loan 
funds available for such loans, even if the appropriation level of the 
program remains unchanged. Therefore, the Agency has concluded that at 
this point, the option of broadly canceling ITLAP debts should not be 
pursued. However, the Agency will accept more comments on this issue in 
response this proposed rule.
    In response to the comments that recommended the Agency allow an 
ITLAP borrower whose loan is secured by an assignment of income to 
substitute as security for the loan a mortgage on the land purchased 
with ITLAP funds, the Agency does not, at this point, propose a change 
to the ITLAP regulations to allow for such a substitution. The Agency 
has experienced a very low delinquency rate with respect to ITLAP loans 
secured by an assignment of income. Further, before an ITLAP loan may 
be secured with an assignment of income, the Agency must first 
determine that such security would be superior to taking a mortgage on 
the purchased land. In many of these cases taking security in the form 
of a mortgage is not practical because the ITLAP funds are being used 
to purchase fractional interests in land. A mortgage on such fractional 
interests would not provide the Agency with adequate security for the 
loan. Therefore, the Agency, at this time, does not believe that such a 
change would be in the best interests of the program. However, the 
Agency will take additional comments on this issue in response to this 
proposed rule.
    The Agency received comments with respect to issues 2, 5, and 6 
that suggested in a variety of ways that the ITLAP regulations should 
be changed to allow for debt relief if rental value of the land could 
not generate enough income to equal the ITLAP loan payments. In 
addition, the Agency received comments that debt relief should be 
provided to borrowers that are suffering a loss of revenue, facing 
severe socio-economic problems and having difficulties in meeting the 
basic needs of its members. Specifically, these comments taken together 
indicate that some Native American Tribes, over an extended period of 
time, are having to take funds needed from other high priority 
activities to make ITLAP loan payments. The Agency has determined that 
debt relief to an ITLAP borrower could be extended to those borrowers 
forced to use scarce Tribal assets needed to fight long term socio-
economic problems to make ITLAP loan payments. The proposed rule 
contains a provision that would allow, under certain circumstances, an 
ITLAP loan be written down once to a level where ITLAP annual loan 
payments equal the previous five year average annual rental payment for 
the land purchased by loan funds, if the Native American Tribe is 
facing certain socio-economic problems. However, a Native American 
Tribe could receive the benefit of such a write down regarding its 
ITLAP loans only once. Such a write down could involve as many ITLAP 
loans of the Tribe as meet the criteria under this regulation at the 
time of the write down application. Further, in response to comments 
received, the availability of this proposed form of debt relief will 
not be conditioned on the acceleration of the loan.
    The Agency received comments that ITLAP borrowers should have the 
same servicing options (codified at 7 CFR part 1951, subpart S) and 
debt settlement options (codified at 7 CFR part 1956) as Farm Loan 
Program (FLP) borrowers with Farm Ownership, Farm Operating, and 
Emergency loans.
    Based on a review of the FLP loan making and servicing procedures, 
we have determined that loan making and servicing procedures for 
farmers and ranchers are not consistent with the statutorily 
established purposes of ITLAP. The purpose of FLP loans is to assist 
farming and ranching operations in becoming economically successful. 
Conversely, the statutory purpose of ITLAP loans is to assist Native 
American Tribes in the purchase of land and interests in land for the 
purpose of consolidating their ownership of land within their 
reservations regardless of the economic use such Tribe may make of the 
land. Thus, FLP loans made to farmers and ranchers versus ITLAP loans 
made to Native American Tribes are substantially different in the types 
of borrowers being targeted, the importance of how the borrower's 
operation is structured, and the importance of the economic viability 
of the project being funded. In order to accomplish the purpose of 
these respective loan programs, the servicing options offered to 
borrowers under each program must be different and tailored to the 
distinct purposes of these programs.
    With respect to debt settlement, the security for most ITLAP loans 
is a general assignment against Tribal income and not a mortgage on the 
property purchased with ITLAP funds. Therefore, since the security for 
these loans in most cases has nothing to do with the purchased land or 
the operations on the purchased land, the debt settlement regulations 
at 7 CFR part 1956 which are premised, to the extent possible, on 
maintaining the economic viability of operations on the land will not 
work with ITLAP borrowers. Based on this analysis, in the proposed rule 
we have created loan servicing and debt settlement provisions that are 
specially tailored and unique to ITLAP.

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    The Agency received comments that it should proceed with 
consideration of additional debt relief options for ITLAP borrowers 
through informal rulemaking, because such actions violate E.O. 13084. 
These comments indicated that this E.O. obligates the Secretary of 
Agriculture to take actions to assist Native American Tribes while 
waiving the normal regulatory requirements to take such actions. The 
Agency agrees with these comments that the E.O. does place an 
obligation on the Secretary of Agriculture to take steps wherever 
possible to assist Native American Tribes. As indicated in the ANPR the 
Agency is re-examining ITLAP to determine if there are ways in which 
the Agency can provide more debt relief options to borrowers. The 
Agency, however, does not agree that the E.O. would allow the Agency to 
implement such policy changes in violation of the requirements of 
notice and comment rulemaking requirements in section 553 of title 5, 
United States Code or the Statement of Policy of the Secretary of 
Agriculture relating to notices of proposed rulemaking and public 
participation (36 FR 13804). Further, while the notice and comment 
informal rulemaking process may take additional time, this process will 
give all interested parties, including affected Native American Tribes, 
the opportunity to participate in the development of this regulation to 
ensure their interests and concerns are heard prior to the 
implementation of any policy change. Therefore, the Agency has 
determined to proceed with the consideration and development of ITLAP 
debt relief changes through the notice and comment rulemaking process. 
In response to the concerns expressed that any additional debt relief 
changes to ITLAP should be made as soon as possible, the comment period 
for this proposed rule has been reduced from the standard 60-day time 
frame to 30 days to expedite the implementation of this rule.
    The Agency received several comments that disagreed with the 
Agency's concerns expressed in the ANPR that the consideration of the 
impact on the Federal budget any ITLAP debt relief proposal is 
important. These comments indicated that any additional costs to the 
Federal Government by providing additional debt relief to ITLAP 
borrowers, which would enable such borrowers to purchase more 
fractional interests, would be offset by the reduction in costs to the 
Federal Government to administer programs on Native American 
reservations. We do not have any information that would support the 
contention that the costs of providing additional ITLAP debt relief 
would be offset by other reductions in the cost of administering 
Federal Government programs on Native American reservations.
    Therefore, the Agency is proposing to allow certain ITLAP loans to 
be written down to a value where the annual loan payment will equal the 
average annual rental income that could be generated from the land if 
the borrower can demonstrate based on criteria established in the 
proposed rule that over an extended period of time, the Native American 
Tribe is facing other economic burdens which are being exacerbated as a 
result of the fact that the ITLAP loan payments exceed the long term 
income producing value of the land.

Discussion of the Proposed Rule

    Pub. L. 91-229 (25 U.S.C. 488-494) authorized the Secretary of 
Agriculture to establish ITLAP. This program was administered by the 
former Farmers Home Administration (FmHA) to make loans to Native 
American Tribes and Tribal corporations to acquire land and fractional 
interests in land on the Tribes' reservations. Under the authority of 
the Department of Agriculture Reorganization Act of 1994, Pub. L. 103-
354, on October 20, 1994, FmHA's ITLAP functions were transferred to 
the FSA. Regulations for implementing this program are found at 7 CFR 
part 1823, subpart N for loan making; 7 CFR part 1951, subpart E for 
loan servicing; and 7 CFR part 1956, subpart C, for debt settlement. 
The proposed rule would consolidate the ITLAP regulations into one part 
and clarify that this program is exclusively administered by FSA.
    The proposed rule would limit the circumstances when a reserve 
account would be required to secure an ITLAP loan to those loans not 
adequately secured by a general assignment of Tribal income. With 
respect to loans that are not delinquent and that are presently 
adequately secured by a general assignment of Tribal income, the Agency 
will release its interest in such funds and allow them to be returned 
to the Native American Tribe or Tribal corporation. During our review 
of ITLAP in preparation of this proposed rule, the Agency determined 
that a general assignment of Tribal income may provide the Agency 
sufficient security for ITLAP loans. The additional security provided 
by the reserve account is unnecessary. ITLAP loans secured by an 
assignment of income have a very low delinquency rate. Only in a 
handful of cases has the Agency sought to recover an ITLAP loan payment 
from the reserve account.
    The proposed rule also would allow Native American Tribes and 
Tribal corporations with remaining ITLAP loans secured by a mortgage to 
use their reserve accounts to purchase additional land consistent with 
ITLAP, which would be added to the mortgage securing the loan. With 
this change, the Agency would allow borrowers the use of this reserve 
account to purchase additional land that could increase its future 
income. The proposed rule would require the reserve funds be placed in 
Federally insured interest bearing accounts. We believe that these 
changes are consistent with the intent of ITLAP to assist Native 
American Tribes and Tribal corporations to consolidate their ownership 
in reservation lands and to encourage the rapid build up of the reserve 
accounts in those cases when they are required.
    The proposed rule would also expand the use of ITLAP loan funds to 
include refinancing of an existing debt incurred by the Native American 
Tribe or Tribal corporation to purchase land provided: (1) The loan 
application was received and the Agency approved a land acquisition 
proposal for the land at issue, prior to the purchase of the land, (2) 
the Native American Tribe or Tribal corporation was not able to obtain 
an option on the land, (3) the debt to be refinanced is short term debt 
with a balloon payment that cannot otherwise be refinanced with the 
creditor, and (4) the debt secured by the land subject to the 
refinancing must otherwise meet the requirements of ITLAP.
    The proposed rule would allow certain ITLAP loans to be written 
down to a value where the annual loan payment would equal the 5-year 
average rental value for the land purchased with such loan funds if the 
borrower could establish that the Native American Tribe was facing 
economic hardships based on a combination of certain criteria. Such a 
write down could involve as many ITLAP loans of the Tribe as meet the 
criteria under this regulation at the time of the write down 
application. This proposed amendment is based on comments received in 
response to the ANPR published on March 3, 1999, previously discussed.
    The proposed rule would clarify the process under which the Agency 
will reduce the interest rate of an ITLAP loan to the interest in 
effect at the time of application for such a reduction. Such a 
reduction will take place if the ITLAP loan has been in effect for more 
than 5 years.
    The proposed rule would make several other changes to the ITLAP. 
The

[[Page 59135]]

proposed rule would clarify the approved uses of land that are the 
subject of an ITLAP loan to ensure that the Agency's mortgage on the 
land is protected by requiring Agency approval prior to such land being 
either leased, sold, or exchanged. The proposed rule would clarify that 
a subsequent ITLAP loan may be made to a borrower for the same purposes 
and under the same conditions as a prior loan. The proposed rule would 
require that prior to obtaining an ITLAP loan, the Native American 
Tribe or Tribal corporation obtain an option or other acceptable 
purchase agreement to purchase the land at issue and that a copy of 
such agreement accompany the ITLAP loan application. The purpose for 
this change is to allow the Agency to have all relevant information 
regarding the land purchase for which ITLAP loan funds are being 
sought. The proposed rule would, under limited circumstances, allow a 
reamortization of an ITLAP loan beyond 40 years. Debt settlement of 
ITLAP loans will be handled in accordance with the general government-
wide debt collection standards at 4 CFR parts 101-105 and the USDA 
regulations at 7 CFR part 3, subpart B.

List of Subjects

7 CFR Part 770

    Credit, Indians, Loan programs--agriculture.

7 CFR Part 1823

    Credit, Grazing lands, Indians, Loan programs--agriculture, Rural 
areas, Soil conservation.

7 CFR Part 1956

    Accounting, Loan programs--agriculture, Rural areas.

    Accordingly, for the reasons stated in the preamble, the Farm 
Service Agency proposes to add 7 CFR part 770 and amend 7 CFR parts 
1823 and 1956 as follows:
    1. Part 770 is added to read as follows:

PART 770--INDIAN TRIBAL LAND ACQUISITION LOANS

Sec.
770.1  Purpose
770.2  Definitions.
770.3  Eligibility for a loan.
770.4  Eligible uses of loan funds.
770.5  Loan limitations.
770.6  Rates and terms.
770.7  Security.
770.8  Use of acquired land.
770.9  Special Requirements.
770.10  Servicing.

    Authority: 5 U.S.C. 301, 25 U.S.C. 490.


Sec. 770.1  Purpose.

    This part contains policies and procedures of the Agency for making 
and servicing loans to assist a Native American Tribe with the 
acquisition of land interests within the Tribal reservation or Alaskan 
community.


Sec. 770.2  Definitions.

    Agency means the Farm Service Agency and includes any successor 
agency.
    Appraisal means an appraisal for the purposes of determining the 
market value of land (less value of any existing buildings that pass 
with the land) that meets the requirements of the Uniform Standards of 
Professional Appraisal Practice consistent with part 1922 of this title 
and by an appraiser approved by the Agency.
    Applicant means a Native American Tribe or Tribal corporation 
seeking a loan under this part.
    Loan funds means money loaned under this part.
    Native American Tribe means:
    (1) An Indian Tribe recognized by the Department of the Interior; 
or
    (2) A community in Alaska incorporated by the Department of the 
Interior pursuant to the Indian Reorganization Act.
    Reservation means lands or interests in land within:
    (1) The Native American Tribe's reservation as determined by the 
Department of the Interior; or
    (2) A community in Alaska incorporated by the Department of the 
Interior pursuant to the Indian Reorganization Act.
    Tribal corporation means a corporation established pursuant to the 
Indian Reorganization Act.


Sec. 770.3  Eligibility for a loan.

    To be eligible for a loan under this part, an applicant shall:
    (a) File an application with the Agency on a form approved by the 
Agency;
    (b) Be a Native American Tribe or a Tribal corporation of a Native 
American Tribe without adequate uncommitted funds, based on Generally 
Accepted Accounting Principals, to acquire lands or interests therein 
within the Native American Tribe's reservation for the use of the 
Native American Tribe or Tribal corporation or the members of either;
    (c) Be unable to obtain sufficient credit elsewhere at reasonable 
rates and terms;
    (d) Waive immunity from suit or liability and provide necessary 
information to private, commercial and government lenders in order to 
determine if the applicant meets the credit requirements of this part; 
and
    (e) Demonstrate reasonable prospects of success in the proposed 
operation of the land to be purchased with funds provided under this 
part by providing:
    (1) A feasibility plan for the use of the Native American Tribe's 
land and other enterprises and funds from any other source from which 
payment will be made;
    (2) A satisfactory management and repayment plan; and
    (3) A satisfactory record for paying obligations.


Sec. 770.4  Eligible uses of loan funds.

    (a) Land. Loan funds may be used to acquire land and interests 
therein (including fractional interests, rights-of-way, water rights, 
easements, and other appurtenances (excluding buildings) that would 
normally pass with the land or are necessary for the proposed operation 
of the land) located within the Native American Tribe's reservation 
which will be used for the benefit of the Tribe or its members.
    (b) Costs of acquiring the land. Loan funds may be used to pay 
costs incidental to land acquisition, such as those for title 
clearance, legal services, land surveys, and loan closing.
    (c) Refinancing existing debt. Loan funds may be used to refinance 
non-United States Department of Agriculture preexisting debts the 
Native American Tribe or Tribal corporation incurred to purchase the 
land if the following conditions exist:
    (1) Prior to the acquisition of such land, the Native American 
Tribe or Tribal corporation shall file a loan application regarding the 
purchase of such land and receive the Agency's approval for the land 
purchase;
    (2) The Native American Tribe or Tribal corporation could not have 
acquired an option on such land;
    (3) The debt for such land is a short term debt with a balloon 
payment that cannot be paid by the Native American Tribe or the Tribal 
corporation and that cannot be extended or modified to enable the 
Native American Tribe or Tribal corporation to satisfy the obligation; 
and
    (4) The purchase of such land must be consistent with all other 
applicable requirements of this part.
    (d) Appraisal costs. Loan funds may be used to pay for the costs of 
any appraisals that may be conducted pursuant to this part.


Sec. 770.5  Loan limitations.

    (a) Land improvement and development costs. Loan funds may not be 
used for any land improvement or development purposes, acquisition or 
repair of buildings or personal property,

[[Page 59136]]

payment of operating costs, payment of finder's fees, or similar costs, 
or for any purpose that will contribute to excessive erosion of highly 
erodible land or to the conversion of wetlands to produce an 
agriculture commodity as further explained in exhibit M of subpart G of 
part 1940 of this title.
    (b) Loan funds may not exceed value of the land. The amount of loan 
funds used to acquire land may not exceed the market value of the land 
(excluding the value of any improvements) as determined by the Agency.
    (c) Time limit for loan disbursal. Loan funds for a land purchase 
must be disbursed over a period not to exceed 24 months from the date 
of loan approval.
    (d) Sale of non-renewable assets. The sale of assets that are not 
renewable within the life of the loan will require a reduction in loan 
principal equal to the value of the assets sold.


Sec. 770.6  Rates and terms.

    (a) Term. Except as provided in Sec. 770.10(c), each loan will be 
scheduled for repayment over a period not to exceed 40 years from the 
date of the note.
    (b) Interest rate. The interest rate charged by the Agency will be 
the lower of the interest rate in effect at the time of the loan 
approval or loan closing. Except as provided Sec. 770.10(b), the 
interest rate will be constant for the life of the loan.


Sec. 770.7  Security.

    A mortgage or deed of trust on the land to be purchased by the 
applicant will be taken as security for a loan under this part unless 
the Agency determines that an assignment of income from the applicant 
provides as good or better security. If an assignment of income is to 
be taken as the sole security for the loan, the prior approval of the 
Administrator is required.


Sec. 770.8  Use of acquired land.

    (a) In general. Land acquired with loan funds, or other property 
serving as the security for a loan under this part, may be leased, 
sold, exchanged, or subject to a subordination of the Agency's 
interests, provided the Agency provides prior written approval of the 
action, if the Agency determines that the borrower's loan obligations 
to the Agency are adequately secured and the borrower's ability to 
repay the loan is not impaired.
    (b) Land exchanges. In the case where the borrower proposes to 
exchange any portion of land securing a loan for other land, title 
clearance and a new mortgage on the land received by the borrower in 
exchange, which adequately secures the unpaid principal balance of the 
loan, will be required unless the Agency determines any remaining land 
or other loan security is adequate security for the loan.


Sec. 770.9  Special requirements.

    (a) Loan authorizations. The Native American Tribe or Tribal 
corporation will take appropriate action to obtain and prove security 
for the loan.
    (b) Right to mortgage. If a mortgage is to be obtained on trust or 
restricted land with respect to a loan under this part and the Native 
American Tribe's or Tribal corporation's constitution or charter does 
not specifically authorize mortgage of such land, the mortgage must be 
authorized by Tribal referendum. All mortgages of trust or restricted 
land must be approved by the Department of the Interior.
    (c) Waiver of immunity. Prior to loan closing, the appropriate 
Tribal officials will execute on behalf of the Native American Tribe or 
Tribal corporation and in favor of the Agency, a waiver of immunity for 
the loan being made, which waiver has been approved by the Department 
of the Interior.
    (d) Reserve accounts. (1) Creation of reserve account. In the case 
of a loan not adequately secured by a general assignment of Tribal 
income, funds will be collected from the borrower and deposited into a 
Federally insured, interest bearing reserve account at the rate of 10 
percent of the annual payment per year under each loan authorized under 
this part until the reserve account has accumulated an amount equal to 
one year's installment for each loan made to the borrower under this 
part.
    (2) Use of reserve funds. (i) Loan security. The funds in the 
reserve account will be available to further secure the loan made to 
the borrower under this part.
    (ii) Purchase additional land. The Agency shall allow a borrower to 
use some or all of the reserve account for additional land purchases 
under terms and conditions consistent with the requirements of this 
part provided the loan is not delinquent or likely to become delinquent 
and any land purchased shall be added to the property that secures the 
loan.
    (iii) Make an installment payment. Reserve funds may be used to 
make an installment payment for a loan made under this part, if the 
borrower lacks other financial resources to make such a payment.
    (e) Subsequent loan. A subsequent loan may be made to a borrower 
for the same purposes and under the same conditions as the initial loan 
made to the borrower under this part.
    (f) Options. Except for refinancing activities authorized in 
Sec. 770.4(c), the applicant shall obtain an option or other acceptable 
purchase agreement for land to be purchased with loan funds, and such 
agreement shall be included with the application for loan funds.
    (g) Cost of appraisals. The applicant or the borrower, as 
appropriate, will pay the cost of all appraisals required under this 
part.


Sec. 770.10  Servicing.

    (a) Reamortization. (1) Eligibility for reamortization. The Agency 
may approve a reamortization of a loan under this part if:
    (i) The account is delinquent and cannot be brought current within 
1 year; or
    (ii) The account is current, but due to circumstances beyond the 
control of the borrower, the borrower will be unable to meet the annual 
loan payments.
    (2) Terms of reamortization. The term of a loan may not be extended 
unless:
    (i) Reamortization within the remaining term of the loan would 
increase the annual payment to such an extent that the borrower cannot 
meet its obligations; and
    (ii) No intervening lien exists on the security for the loan.
    (3) Consolidation of Notes. If one or more notes are to be 
reamortized, consolidation of the notes is authorized.
    (b) Interest rate reduction. The Agency shall, at the borrower's 
request, reduce the interest rate for an existing loan made under this 
part to the current interest rate for such loans if the loan was made 
more than 5 year prior to the application for the interest reduction 
and the Department of the Interior and the borrower certify that the 
borrower meets at least one of the criteria contained in paragraph 
(c)(2)(ii) of this section.
    (c) Debt write down. (1) Application. A borrower may apply for a 
write down under either the land value or rental value option or both 
options provided in this paragraph. If the borrower applies for a land 
value write down, the borrower must provide a current appraisal of the 
land purchased with the loan funds at the time of application. If the 
borrower applies and is determined eligible for a land value and a 
rental value write down, the borrower will receive a write down based 
on the write down option that provides the greatest debt reduction.
    (2) Eligibility. To be eligible for a write down under this 
paragraph, the borrower (in the case of a Tribal corporation, the 
Native American Tribe of the borrower) must:

[[Page 59137]]

    (i) Be located in a county which is listed as a persistent poverty 
county by the Economic Research Service pursuant to the most recent 
data from the Bureau of the Census; and
    (ii) Have a socio-economic condition over the immediately preceding 
5 year period that meets at least two of the following factors as 
certified by the Native American Tribe and the Department of the 
Interior:
    (A) The Native American Tribe has experienced a decrease, on a per 
capita basis, in State and Federal funding of more than 15 percent;
    (B) The Tribal gross income, on a per capita basis, has declined by 
more than 20 percent;
    (C) The Native American Tribe has incurred increased costs 
associated with unfunded or partially funded mandates from Federal or 
State Governments equal to more than 15 percent of the total amount 
received from Federal or State sources; and
    (D) The Native American Tribe has incurred an increase in costs of 
meeting the public health and safety needs of Tribal members of more 
than 20 percent.
    (3) Land value write down. The Agency may adjust the unpaid 
principal and interest balance on any loan made under this part to the 
current market value of the land that was purchased with loan funds, 
if:
    (i) The market value of such land has declined by at least 25 
percent since the land was purchased with loan funds as established by 
an appraisal;
    (ii) Land value decrease is not attributed to the depletion of 
resources contained on or under the land;
    (iii) The land on which the principal write down is requested has 
been held by the borrower for at least 5 years; and
    (iv) The loan has not been written down under paragraph (d)(3) of 
this section within the last 5 years.
    (4) Rental value write down. The Agency may write down loans made 
under this part so the annual loan payment for the remaining term of 
each loan equals the average of annual rental value of the land 
purchased by each such loan for the immediately preceding 5-year period 
if:
    (i) The land that was purchased with loan funds was purchased more 
than 5 years prior to the application for such writedown;
    (ii) The description of the land purchased with the loan funds and 
the rental values used to calculate the 5 year average annual rental 
value of the land have been certified by the Department of the 
Interior;
    (iii) The borrower provides a current appraisal of the land; and
    (iv) The borrower (in the case of a Tribal corporation, the Native 
American Tribe of the borrower) has not previously benefitted from a 
write down under paragraph (d)(3) of this section.

PART 1823--[REMOVED AND RESERVED]

    2. Remove and reserve part 1823.

PART 1956--DEBT SETTLEMENT

    3. The authority citation for part 1956 continues to read as 
follows:

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

Subpart C--Debt Settlement--Community and Business Programs


Sec. 1956.101  [Amended]

    4. Amend Sec. 1956.101 to remove the phrase ``and Indian Tribal 
Land Acquisition loans;''


Sec. 1956.137  [Removed and Reserved]

    5. Remove and reserve Sec. 1956.137.

    Signed at Washington, D.C., on October 21, 1999.
August Schumacher, Jr.,
Under Secretary for Farm and Foreign Agricultural Services.
[FR Doc. 99-28368 Filed 11-01-99; 8:45 am]
BILLING CODE 3410-05-P