[Federal Register Volume 65, Number 96 (Wednesday, May 17, 2000)]
[Rules and Regulations]
[Pages 31248-31250]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-12335]


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DEPARTMENT OF AGRICULTURE

Farm Service Agency

7 CFR Part 1951

RIN 0560-AF91


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

AGENCY: Farm Service Agency, USDA.

ACTION: Interim rule.

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SUMMARY: The Farm Service Agency (FSA) is amending the disaster set-
aside program requirement to allow FSA to set aside portions of loan 
installments that could not be made as scheduled due to a natural 
disaster, as declared by the President or Secretary of Agriculture, or 
because of low commodity prices received during the 1999 crop year. In 
addition, disaster set-aside eligibility requirements are amended to 
require borrowers to develop a positive cash flow projection which will 
at least permit the borrower to pay all operating and family living 
expenses and meet scheduled payments on all debts for the next business 
accounting year. These provisions will allow the agency to service the 
loans of farmers who have experienced losses due to a natural disaster 
or low commodity prices in an efficient and timely manner while 
ensuring the future viability of the operation.

DATES: The effective date for this rule is May 17, 2000. Comments on 
this rule must be submitted by July 17, 2000 to be assured 
consideration.

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: Michael Cumpton, telephone (202) 690-
4014; electronic 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

    In compliance with the Regulatory Flexibility Act (5 U.S.C. 601, et 
seq.), the undersigned certifies 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. 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

    It is the determination of FSA that this action is not a major 
Federal action significantly affecting the environment. Therefore, in 
accordance with the National Environmental Policy Act of 1969, and 7 
CFR part 1940, subpart G, an Environmental Impact Statement is not 
required.

Executive Order 13132

    The policies contained in this rule do not have any substantial 
direct effect on states, on the relationship between the national 
government and the states, or on the distribution of power and 
responsibilities among the various levels of government. Nor does this 
rule impose substantial direct compliance costs on state and local 
governments. Therefore, consultation with the states 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; and (3) administrative proceedings in accordance with 7 CFR part 
11, and 7 CFR part 780 if the decision is made by the FSA county 
committee or personnel subordinate to the county committee, must be 
exhausted before bringing suit in court challenging action taken under 
this rule.

Executive Order 12372

    For reasons contained in the notice related to 7 CFR part 3015, 
subpart V (48 FR 29115, June 24, 1983), the programs to which this rule 
pertains are excluded from the scope of E.O. 12372, requiring 
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 most 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,

[[Page 31249]]

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 contained in this rule require no 
revisions to the information collection requirements (0560-0164) that 
were previously submitted to OMB on October 12, 1999.

Federal Assistance Programs

    These changes affect the following FSA programs as listed in the 
Catalog of Federal Domestic Assistance:

10.404--Emergency Loans
10.406--Farm Operating Loans
10.407--Farm Ownership Loans

Discussion of the Interim Rule

    The Farm Service Agency (FSA) publishes these amendments 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 as discussed below.
    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 drought in the 
South. Since that time almost 20,000 borrowers have received DSA 
assistance. The overall success of the program can be attributed to the 
relatively small amount of paperwork required in applying for 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.
    Because many delinquent borrowers received a previous writedown of 
debt under subpart S of 7 CFR part 1951, they are ineligible for 
additional debt forgiveness and most farm loans under Sec. 373 of the 
Consolidated Farm and Rural Development Act. As stated in the interim 
rule designed to assist borrowers for the 1998 crop year, published at 
64 FR 392 (January 5, 1999), an estimated 11,424 borrowers would suffer 
to irreparable financial harm without the interim rule taking immediate 
effect. Since low commodity prices continued to exist for the 1999 crop 
year, as well as the occurrence of several natural disasters, the 
Agency estimates that a similar number of borrowers were affected in 
the 1999 crop year and became delinquent in repayment of their FSA, FLP 
loan installments due to these adverse effects. Therefore, this rule 
will take effect immediately without prior notice and comment. There is 
justification for the rule to become effective immediately after 
publication; nevertheless, FSA will accept public comments on this 
interim rule for 60 days after the rule becomes effective.
    Section 7 CFR 1951.954 generally provides that each loan can only 
have one set-aside installment outstanding (7 CFR 1951.954(b)(2)(i)). A 
borrower could receive DSA again only if the existing set-aside 
installment were paid in full, or canceled through restructuring under 
subpart S of 7 CFR part 1951. This rule will allow borrowers who were 
affected by low commodity prices or by a natural disaster in a county 
declared a disaster by the President or Secretary to receive a second 
installment set aside without the first set-aside installment being 
paid in full or canceled. Because widespread disasters have occurred 
and low commodity prices continued to exist in the 1999 crop year, the 
Agency is offering second installment DSAs for the 1999 crop year to 
borrowers who have previously received DSA. Applications must be filed 
by August 31, 2000, for DSA due to low commodity prices. For DSAs due 
to natural disasters, borrowers in counties designated as disaster 
areas and borrowers farming in contiguous counties must file DSA 
applications within 8 months of the disaster designation.
    FSA records show that 25 percent of borrowers who receive DSA 
become immediately become delinquent the year following the set-aside. 
This is a much higher percentage than borrowers who have their debt 
restructured under subpart S of 7 CFR part 1951. In order to ensure the 
future viability of the farming operation, save borrower equity and 
reduce government losses, eligibility requirements for DSA have been 
amended to require borrowers to develop a cash flow projection for the 
next business accounting year. The cash flow projection must show that 
the borrower will at least be able to pay all operating expenses and 
taxes, provide for essential family living expenses and meet scheduled 
payments on all debts. The positive cash flow projection must be 
prepared in accordance with 7 CFR 1924.56(b).
    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 7 CFR part 1951. When the borrower pays any portion of the 
set-aside installments in the future, the payment will be applied to 
the oldest installment set-aside.

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, 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 T--Disaster Set-Aside Program

    2. Amend Sec. 1951.951 by revising the second sentence to read as 
follows:


Sec. 1951.951  Purpose

    * * * The DSA program is available to Farm Loan Program (FLP) 
borrowers, as defined in subpart S of this part, who suffered losses as 
a result of a natural disaster or low commodity prices in 1999. * * *

    3. Amend Sec. 1951.952 by revising the second sentence to read as 
follows:


Sec. 1951.952  General

    * * * The intent of this program is to relieve some of the 
borrower's immediate financial stress caused by a disaster or low 
commodity prices and avoid foreclosure by the Government. * * *

    4. Amend Sec. 1951.953 by revising paragraph (b) to read as 
follows:


Sec. 1951.953  Notification and request for DSA.

    (a) * * *
    (b) Deadline to apply. All FLP borrowers liable for the debt must 
request DSA within 8 months from the date the disaster was designated, 
in accordance with 7 CFR part 1945, subpart A. Applications due to low 
commodity prices in 1999 must be received on or before August 31, 2000.
* * * * *

    5. Amend Sec. 1951.954 as follows:
    a. Revise paragraphs (a)(1)(ii), (a)(1)(iii), (a)(5), and 
(b)(2)(i);
    b. Redesignate paragraphs (a)(6) and (a)(7) as (a)(7) and (a)(8), 
respectively, and add new paragraph (a)(6).
    The revisions and additions read as follows:


Sec. 1951.954  Eligibility and loan limitation requirements.

    (a) * * *
    (1) * * *
    (ii) If the borrower is applying for a second installment to be set 
aside based

[[Page 31250]]

on a declared disaster, the borrower must have operated in a county 
declared a major disaster by the President or the Secretary, or in a 
county contiguous to such a county, and the Agency must have determined 
that second set-asides can be processed and approved for declared 
disasters in the specified year. The first set aside must have been 
provided for a previous crop year.
    (iii) All FLP borrowers may apply for an installment to be set 
aside based on low commodity prices during 1999. If the borrower is 
applying for a second installment to be set aside based on low 
commodity prices, the first set-aside must have been provided for a 
previous crop year. County location, or proximity to a disaster 
declared county is not a consideration when the DSA is justified by low 
commodity prices.
* * * * *
    (5) As a direct result of the declared disaster or the 1999 low 
commodity prices, both pursuant to paragraph (a)(1) of this section, 
the borrower does not have sufficient income available to pay all 
family living and operating expenses, other creditors, and FSA. This 
determination will be based on the borrower's actual production, income 
and expense records for the disaster or affected year and any other 
records required by the servicing official. Compensation received for 
losses shall be considered as well as increased expenses incurred 
because of a disaster. Consideration will also be given to insufficient 
income for the next production and marketing period following the 
affected year if the borrower establishes that production will be 
reduced or expenses increased as a result of the disaster or the 1999 
low commodity prices.
    (6) For the next business accounting year, the borrower must 
develop a positive cash flow projection showing that the borrower will 
at least be able to pay all operating expenses and taxes due during the 
year, essential family living expenses and meet scheduled payments on 
all debts. The cash flow projection must be prepared in accordance with 
7 CFR 1924.56. The borrower will provide any documentation required to 
support the cash flow projection.
* * * * *
    (b) * * *
    (2) * * *
    (i) Except as provided in paragraph (a) of this section, only one 
unpaid installment for each FLP loan may be set-aside.
* * * * *

    6. In subpart T of part 1951, revise all references to ``FC'' to 
read ``FLP''.

    Signed in Washington, DC, on May 8, 2000.
August Schumacher, Jr.,
Under Secretary for Farm and Foreign Agricultural Services.
[FR Doc. 00-12335 Filed 5-16-00; 8:45 am]
BILLING CODE 3410-05-P