[Federal Register Volume 67, Number 129 (Friday, July 5, 2002)]
[Notices]
[Pages 44799-44804]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-16827]


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DEPARTMENT OF AGRICULTURE

Farm Service Agency


Notice of Funds Availability (NOFA) Inviting Applications for the 
Horse Breeder Loan Program

AGENCY: Farm Service Agency, USDA.

ACTION: Notice.

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SUMMARY: This Notice announces the availability of funding to implement 
the Horse Breeder Loan Program as required by section 759 of the 
Agriculture, Rural Development, Food and Drug Administration, and 
Related Agencies Appropriations Act, 2002 (Act) (Pub. L. 107-76), which 
was enacted November 28, 2001. The Act directed the Secretary to 
implement a temporary low-interest loan program to assist horse 
breeders suffering economic loss as a result of mare reproductive loss 
syndrome (MRLS).

DATES: The Agency will begin accepting applications on July 1, 2002. 
The deadline for receipt of an application Form FSA 410-1 is September 
30, 2002. The Agency will not consider any application received after 
the deadline. The application package must be completed by June 30, 
2003. Authority to make Horse Breeder loans terminates September 30, 
2003. Comments on the information collection associated with this 
notice must be received on or before September 3, 2002, to be given 
full consideration.

ADDRESSES: General information and the application form FSA 410-1 may 
be obtained from the FSA Internet web site at: www.fsa.usda.gov or the 
USDA, Farm Service Agency listed in your local telephone directory.

FOR FURTHER INFORMATION CONTACT: Cathy Quayle, Senior Loan Officer or 
Patrick Spalding, Senior Loan Officer, USDA/FSA/DAFLP/STOP 0522, 1400 
Independence Avenue, SW, Washington, DC 20250-0522; telephone (202) 
720-1472; facsimile (202) 720-6797; electronic mail: [email protected] or [email protected].

SUPPLEMENTARY INFORMATION:

Executive Order 12372

    This program is not subject to the provisions of Executive Order 
12372, which requires consultation with State and local officials.
    During the 2001 horse breeding season, horse breeders suffered from 
an overwhelming number of early and late term fetal losses. Even with 
possible improvement in the coming breeding seasons, the economic 
impact on breeders will present financial difficulties over an extended 
period. The Agency is required by section 759(c) of the Act to make 
loans available to eligible horse breeders who have suffered a 
qualifying loss as a result of MRLS. Researchers have not pinpointed 
the exact cause of MRLS; however, as a result of extensive studies, 
common factors that are believed to have been the cause have been 
identified. The Agency is adopting the definition of MRLS developed by 
experts from the equine industry that is recognized and accepted by 
veterinarians.
    These loans will mitigate the income loss and reduction in credit 
availability faced by horse breeders. Assistance is limited to only 
those horse breeders who have suffered losses as a result of MRLS, 
cannot obtain sufficient credit elsewhere and meet all other 
requirements established in this notice. To assure that the recipients 
of these loans are those most impacted by the effects of MRLS, 
eligibility requirements are restrictive. As required by the Act, the 
horse breeder must derive more than 70 percent of their income from 
breeding, boarding, raising, training, or selling horses. The losses 
must have resulted from MRLS, and at least 30 percent of the mares 
owned, or boarded on a farm owned, operated, or leased by the breeder 
must have failed to conceive, miscarried, aborted or otherwise failed 
to produce a live, healthy foal.
    All persons approved for loan assistance must execute loan 
instruments and legal documents to secure the loan. For entity 
applicants, the loan instruments and legal documents must be executed 
in the name of the entity and all officers or partners and any board 
members. Horse Breeder loans are not made under the authority of the 
Consolidated Farm and Rural Development Act (CONACT), (7 U.S.C. 1961 et 
seq.); therefore, the Agency will service Horse Breeder loans in 
accordance with existing non-program Agency regulations in 7 CFR part 
1951, subpart J, or its successor regulation. The Agency will not 
provide direct farm loan program loan servicing benefits to Horse 
Breeder Loan Program borrowers.

Environmental Compliance

    The environmental impacts of the loan program to be implemented by 
this NOFA have been considered in accordance with the provisions of the 
National Environmental Policy Act of 1969 (NEPA, 42 U.S.C. 4321, et 
seq.) Based on the nature and scope of this notice, FSA has concluded 
that the notice will not have any significant impacts upon the human 
environment as documented through the completion of an environmental 
assessment. A copy of the environmental assessment is available for 
inspection and review upon request. Therefore, FSA has developed a 
Finding of No Significant Impact (FONSI) pursuant to NEPA, the 
regulations of the Council on Environmental Quality (40 CFR parts 1500-
1508), and FSA's regulations for compliance with NEPA, 7 CFR part 1940, 
subpart G.

Paperwork Reduction Act

    A request for emergency clearance of the information collections 
associated with this notice has been submitted to the Office of 
Management and Budget (OMB) under 5 CFR 1320.13(a)(2)(iii).
    In accordance with the Paperwork Burden Reduction Act of 1995, FSA 
will provide a regular submission of the information collection package 
to OMB at the end of the comment period for the following notice.
    Title: Horse Breeder Loans.
    OMB Control Number: 0560-NEW.
    Type of request: Request for review and extension.
    Abstract: The collection of the information required by this notice 
is

[[Page 44800]]

required in order to certify that applicants for loans are eligible to 
receive benefits. The information will be collected from applicants in 
paper form by Agency loan approval officials in the county office that 
serves the applicant's geographic area. The information will be used 
and evaluated by the loan approval official to determine if the 
applicant meets the criteria established by the Agency. The information 
may be viewed, used and monitored by other Agency or USDA officials, 
and may be released in accordance with the Privacy Act or Freedom of 
Information Act. The information will be collected on an as needed 
basis. Failure to collect this information may result in persons 
receiving benefits other than intended program beneficiaries.
    Estimate of Burden: Public reporting for this collection of 
information is estimated to average .63 hours per response.
    Respondents: Farms, individuals and businesses.
    Estimated number of respondents: 800.
    Estimated number of responses per respondent: 1.
    Estimated total annual burden on respondents: 1258 hours.
    Comments are invited on (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; (c) ways to enhance the 
quality, utility and clarity of the information to be collected; (d) 
ways to minimize the burden collection on those who are to respond, 
including through use of appropriate automated, electronic, mechanical, 
or other technological collection techniques or other forms of 
information technology. These comments should be addressed to Cathy 
Quayle, Senior Loan Officer, USDA, Farm Loan Programs, STOP 0522, 1400 
Independence Avenue, SW, Washington DC 20250-0522. Comments are assured 
of having effect if received within 60 days of this notice. Comments 
received after that date will be considered to the extent practicable. 
All comments received in response to this notice, including names and 
addresses, will be a matter of public record. Copies of the submission 
may be obtained from Cathy Quayle by calling (202) 690-4018.

I. Definitions Applicable to Horse Breeder Loans

    Additional security is property that provides security in excess of 
the amount of security value equal to the loan amount.
    Adequate security is property that provides a security value at 
least equal to the amount of the loan.
    Agency is the Farm Service Agency, its employees, and any successor 
agency.
    Applicant is the individual or business entity applying for the 
loan.
    Approval official is an Agency official who has been delegated 
approval authorities within applicable loan programs.
    Bred is the attempt to produce offspring by sexual union or 
artificial insemination.
    Business entity is a corporation, partnership, joint operation, 
trust, limited liability company, or cooperative.
    Cash flow budget is a projection listing all anticipated cash 
inflows (including all farm income, non-farm income and all loan 
advances) and all cash outflows (including all farm and non-farm debt 
service and other expenses) to be incurred by the borrower during the 
period of the budget. A cash flow budget may be completed either for a 
12-month period, a typical production cycle, or the life of the loan, 
as appropriate.
    False information is information provided by an applicant, 
borrower, or other source to the Agency which is known by the provider 
to be incorrect, and was provided to the Agency in order to obtain 
benefits for which the applicant or borrower would not otherwise have 
been eligible.
    Feasible plan is a plan that demonstrates that the loan will be 
repaid as agreed, as determined by the Agency. The plan must 
demonstrate that the applicant will meet all other credit needs and 
obligations, including judgments, for which the applicant is legally 
responsible.
    Financial needs are ordinary and necessary expenses, and financial 
obligations which are incurred, in connection with the horse breeder 
business.
    Financial obligations are the debts owed by the horse breeder that 
are directly related to the horse breeder business.
    Horse is any mammal in the genus Equus, to include but not limited 
to ass, mule, pony and donkey.
    Horse breeder is an individual or business entity who as of 
November 28, 2001, derives more than 70 percent of their gross income 
from the horse breeding business during the shorter of:
    1. The 5-year period ending on January 1, 2001; or
    2. the period the individual or business entity has been engaged in 
the horse breeder business.
    Horse breeder business is the business of breeding, boarding, 
raising, training, or selling horses.
    Losses are the verifiable damages of the interrupted horse 
reproductive process resulting from MRLS.
    Mare Reproductive Loss Syndrome (MRLS) is, during the period 
beginning April 24, 2001, and ending June 30, 2001, the occurrence of 
any of the following equine medical conditions:
    1. Early- and late-term equine fetal losses;
    2. Pericarditis;
    3. Epicarditis;
    4. Unilateral endophthalmitis; or
    5. Panophthalmitis.
    Ordinary and necessary expenses are the operating expenses directly 
related to the horse breeder business, including, but not limited to: 
taxes, feed, veterinary expenses, fixtures and farm maintenance.
    Readily available is when the insurance is sold by insurance agents 
in the applicant's normal trade area.
    Security is property or right of any kind that is subject to a real 
or personal property lien. Any reference to ``collateral'' or 
``security property'' will be considered a reference to the term 
``security.''
    States or United States is the United States itself, any of the 
fifty States, the Commonwealth of Puerto Rico, the Virgin Islands of 
the United States, Guam, American Samoa, and the Commonwealth of the 
Northern Mariana Islands.
    United States non-citizen national is a person born in an outlying 
possession of the United States (American Samoa or Swain's Island) on 
or after the date the U.S. acquired the possession, or a person whose 
parents are U.S. non-citizen nationals (subject to certain residency 
requirements).

II. Appeals

    An applicant or borrower may request an appeal or review of an 
adverse decision made by the Agency in accordance with 7 CFR parts 11 
and 780 or its successor regulation.

III. Eligibility Requirements

    Applicants must meet all of the following requirements to be 
eligible for a Horse Breeder loan:
    1. Timely application. The applicant must submit a signed form FSA 
410-1 completed to the best of the applicant's ability to the Agency no 
later than September 30, 2002.
    2. Horse breeder. The applicant must be a horse breeder as defined 
by this notice.
    3. Qualifying loss. During the period beginning January 1 and 
ending October

[[Page 44801]]

1 of any calendar year 2000, 2001 or 2002:
    (a) 30 percent or more of the mares owned by the applicant failed 
to conceive, miscarried, aborted or otherwise failed to produce a live 
healthy foal; or
    (b) 30 percent or more of mares boarded on a farm owned, operated 
or leased by the applicant failed to conceive, miscarried, aborted or 
otherwise failed to produce a live healthy foal.
    4. Financial need. The applicant is be unable to meet financial 
obligations, or pay ordinary and necessary expenses incurred in 
connection with the horse breeder business.
    5. Test for credit. The applicant must be unable to obtain 
sufficient credit elsewhere at reasonable rates and terms.
    (a) To establish this, the applicant must obtain written denials of 
credit from legally organized commercial lending institutions within 
reasonable proximity of the applicant that specify the reasons for the 
denial as follows:
    (1) In the case of a loan request of $300,000 or more, two written 
denials of credit are required.
     One of these lenders must be the applicant's normal 
lender.
     Both lenders must typically make horse breeder business 
loans.
    (2) In the case of a loan request of less than $300,000, one 
written denial of credit is required.
     The applicant's normal lender will be contacted unless the 
lender has already denied a request to continue with the applicant or 
extend additional credit.
     The applicant may contact another lender that makes horse 
breeder business loans.
    (3) In the case of a loan request of $100,000 or less, the Agency 
may waive the requirement for obtaining a written denial of credit if 
the Agency determines that requiring a written denial would pose an 
undue burden on the applicant and based on the applicant's 
circumstances credit is not likely to be available.
    (b) Notwithstanding the applicant's submission of the required 
written denial of credit, the Agency may contact other commercial 
lending institutions within reasonable proximity of the applicant and 
make an independent determination of the applicant's ability to obtain 
credit elsewhere.
    (c) When the applicant is an entity, all individuals, members, 
stockholders, and partners must meet test for credit requirements.
    6. Citizenship. The applicant must be a citizen of the United 
States, United States non-citizen national, or a qualified alien under 
applicable Federal immigration laws. For an entity applicant, the 
majority of the entity must be owned by members meeting the citizenship 
test or other entities that are domestically owned.
    7. Legal capacity. The loan applicant must be of legal age, mental 
capacity, and have the authority to enter into a legally binding 
agreement. An entity applicant, and all entity members who will execute 
the promissory note, must meet this requirement.
    8. Federal debt. At loan closing, the applicant and anyone who will 
execute the promissory note must not be delinquent on any Federal debt, 
other than a debt under the Internal Revenue Code of 1986, nor be a 
federal judgment debtor on a non-tax debt.
    9. Unpaid judgement. At loan closing the applicant and anyone who 
will execute the promissory note must not have any outstanding unpaid 
judgements obtained by the United States in any court.
    10. False information. The applicant, in past or present dealings 
with the Agency, must not have knowingly provided the Agency with false 
information.
    11. Credit history. The individual or business entity applicant and 
all entity members must have acceptable credit history demonstrated by 
debt repayment. A history of failure to repay past debts as they came 
due (including debts to the Internal Revenue Service) when the ability 
to repay was within their control will demonstrate unacceptable credit 
history.
    12. Repayment. The applicant must submit a feasible plan as defined 
in this notice.

IV. Loan Uses

    Loan funds only may be used to:
    1. Pay ordinary and necessary expenses for the horse breeding 
business.
    2. Replace mares and foals lost or disabled due to MRLS.
    3. Purchase or lease additional existing pasture to replace pasture 
where a veterinarian or other recognized expert has determined the 
potential for MRLS exists.
    4. Pay or refinance financial obligations as defined by this 
notice, provided the applicant can demonstrate a need to do so.
    5. Pay loan closing costs.

V. Limitations

    1. The maximum cumulative loan amount any individual or business 
entity may receive under this notice is limited to $500,000.
    2. The amount of the loan is further limited to the lesser of; (a) 
the financial needs of the applicant; or (b) the amount of loss 
suffered by the applicant as measured by Section XI of this notice.
    3. Outstanding loan balances from Agency Farm Loan Programs, direct 
or guaranteed, will not affect the amount an applicant is eligible to 
receive under this section.

VI. Prohibited Use of Loan Funds

    1. Loan funds may not be used to pay expenses incurred for lobbying 
or related activities.
    2. Loan funds may not be used for any purpose which contributes to 
excessive erosion of highly-erodible land or to the conversion of 
wetlands to produce an agricultural commodity.
    3. Loan funds may not be used to refinance consumer debt, such as 
home equity loans, automobile loans, or credit card debt unless such 
debt is directly attributable to the horse breeder business operation.
    4. Loan funds may not be used to pay Federal judgments.

VII. Loans to Agency Employees

    Loans may be made to Agency employees otherwise qualified for the 
loans.

VIII. Federal Equal Credit Opportunity Act (ECOA)

    The Agency must comply with the provisions of ECOA and the 
implementing regulations of the Federal Reserve System published in 12 
CFR part 202.

IX. Environmental Compliance

    1. The environmental and historic preservation requirements 
contained in 7 CFR part 1940, subpart G or its successor regulation 
must be met prior to approval of any loan.
    2. In order to minimize the financial risk associated with 
contamination of real property from hazardous waste and other 
environmental concerns, the Agency will complete an environmental risk 
evaluation.
    (a) The Agency will not accept as security any real estate which 
has significant environmental risks, such as, but not limited to the 
presence of known or suspected underground storage tanks or hazardous 
waste.
    (b) If the real estate offered as security contains significant 
environmental risks, the Agency will provide the applicant with the 
option of properly correcting or removing the risk, at the applicant's 
expense or offering other non-contaminated property as security for the 
loan.

[[Page 44802]]

X. Other Federal, State, and Local Requirements

    Horse Breeder loan borrowers are required to comply with all 
applicable:
    1. Federal, State, or local laws;
    2. Regulatory commission rules; and
    3. Regulations which are presently in existence, or which may be 
later adopted including, but not limited to, those governing the 
following:
    (a) Borrowing money, pledging security, and raising revenues for 
repayment of debt;
    (b) Accounting and financial reporting; and
    (c) Protection of the environment.
    4. Any construction financed by the Agency must comply with 
applicable Federal, State, local, and industry building standards.

XI. Loss Calculations

    1. (a) The applicant's Federal income tax and business records will 
the primary source of financial information for the loss calculation. 
Sales, receipts, invoices, or other official sale records will document 
the sales price of individual animals as referenced in paragraph (2) of 
this section.
    (b) If the applicant does not have 3 complete years of business 
records, the Agency will obtain the most reliable and reasonable 
information available from sources such as the Cooperative Extension 
Service, universities, and breed associations to document production 
and expenses for those years for which the applicant does not have a 
complete year of business records. To the extent such additional 
information is unavailable, the Agency will use the applicant's 
available business records to make realistic income and expense 
calculations.
    2. To determine the value of foals lost or disabled as a result of 
MRLS:
    (a) The average sales price of horses sold by the applicant will be 
determined by adding the total proceeds from the sales of horses 
including only: weanlings, yearlings and 2-year old offspring for the 
previous 3 non-loss years, and dividing by the number of horses sold 
during those 3 years.
    (b) The average sales price will be multiplied by the number of 
mares shown on the veterinarian certification that failed to conceive 
or produce a live healthy foal due to MRLS.
    3. To determine the value of all other losses:
    (a) Calculate the average annual net income for the horse breeder 
business for the previous 3 non-loss years, and subtract the horse 
breeder business net income for the loss year.
    (b) The annual net income for the horse breeder business will be 
determined by subtracting all cash business expenses and proceeds from 
sales of weanlings, yearlings, and 2 year old offspring, from all 
business income reported on Schedule F and other related schedules of 
the applicant's Federal income tax return. Any depreciation shown on 
Schedule F is not a cash expense and must not be included as an expense 
in loss calculations.
    (c) The average annual net income for the horse breeder business 
shall be calculated by adding the applicant's horse breeder business 
annual net income from the previous 3 non-loss years and dividing by 3.
    4. The results of the calculations from paragraphs 2 and 3 of this 
section shall be added together to determine the total amount of loss 
the applicant has suffered as a result of MRLS.

XII. Complete Loan Application

    An Agency application Form FSA 410-1, completed to the best of the 
applicant's ability and submitted on or before September 30, 2002, will 
meet the application deadline. However, a loan decision will not be 
made until a complete application is received in accordance with this 
section. All forms listed are available at any Agency office. The 
Agency will not consider any application that is not complete as of 
June 30, 2003. A complete loan application includes all of the 
following items:
    1. A completed form FSA 410-1.
    2. If the applicant is a business entity, all legal documents 
evidencing the organization and any state recognition of the entity 
such as articles of incorporation or partnership agreements. The 
application must include the following information for each entity 
member:
    (a) Name.
    (b) Address.
    (c) Social Security number, or IRS tax ID number for a member that 
is a business entity.
    (d) Percent ownership interest in the entity.
    (e) In the case of a member that is itself a business entity, legal 
documents evidencing the organization and any State recognition of the 
entity.
    3. Verification that the applicant or individual members of an 
entity applicant cannot obtain credit elsewhere including a loan 
guarantee by a State or other Federal agency.
    4. Income tax and business records for the lesser of the previous 3 
years or the number of years in business.
    5. A current balance sheet that was prepared within 90 days of the 
date of application.
    6. Projected production, income and expenses, and loan repayment 
plan, which may be submitted on Form FSA 431-2 or other similar plan of 
operation acceptable to the Agency.
    7. Verification of off-farm employment, and other non-farm income, 
if any. This will be required only when the applicant is relying on 
off-farm income for a feasible plan.
    8. A legal description of farm, real estate property securing the 
loan and a copy of any lease, contract, option or agreement, or a 
written statement setting forth terms or conditions of any agreement 
entered into by the applicant which may be pertinent to consideration 
of the application.
    9. A written certification from a licensed veterinarian, see 
Exhibit 1 sample, stating the number of mares:
    (a) Owned or boarded that were bred.
    (b) That failed to conceive or otherwise produce a live healthy 
foal.
    10. A credit report fee of $28.00 for individual applicants, $34.00 
for joint applicants and $40.00 for commercial business applicants.
    11. Any other documents requested by the Agency and needed to 
process the application.

XIII. Interest Rate

    Loans closed in accordance with this notice will be charged 
interest at the rate established for Emergency loans in 7 CFR part 764. 
Current rates are available at any Agency office.

XIV. Terms

    1. Repayment period. The Agency schedules repayment of Horse 
Breeder loans based on the useful life of the loan security and the 
applicant's repayment ability, but not to exceed 20 years. Loans 
secured only by collateral other than real estate shall not exceed 7 
years. If necessary to improve the repayment ability of the borrower 
and real estate security is available, the term of the loan may be 
extended up to a total length not to exceed 20 years from the date of 
the promissory note. Balloon installments are prohibited. Balloon 
installments are final installments that exceed twice the amount of the 
regular amortized installment.
    2. Minimum payment requirement. The repayment schedule must include 
at least one payment every year. Payments must be no less than the 
interest accrued on the principal balance at the time the installment 
is to be paid and may not result in a prohibited balloon installment.

XV. Security Requirements

    1. The applicant shall have sufficient equity to provide adequate 
security for

[[Page 44803]]

the loan. In addition, the applicant shall provide additional security, 
if available, not to exceed 150 percent of the loan amount.
    2. Loans shall be secured by collateral that can be adequately 
described in security instruments.
    3. The Agency will take the best lien obtainable on the following 
security, if available, as necessary to protect the Government's 
interest. The security will be taken in the order of priority as 
follows:
    (a) Real Estate. A survey is not required if the property is 
adequately described. The applicant is responsible for obtaining and 
paying any costs for documentation necessary to properly identify the 
security property.
    (b) Chattels and crops, other than horses. Chattels consist of 
equipment or livestock, other than horses. Equipment must be identified 
by manufacturer, model, year, and serial number, where available.
    (c) Other assets owned by the applicant. Other assets owned by the 
applicant such as certificates of deposit may be taken as security. The 
applicant shall provide satisfactory documentation as to the value of 
the assets and their availability for Agency lien perfection.
    (d) Third party pledges of property not owned by the applicant. 
Interests in property not owned by the applicant (such as, but not 
limited to: real estate, leases that provide a mortgageable value, 
water rights, easements, mineral rights, and royalties) can be offered 
as security for the loan.
    (e) Horses. Horses must be identified by color, sex, and 
distinguishing marks (i.e., socks, blaze, registration numbers).
    (f) Repayment ability. The applicant's repayment ability may be 
accepted as adequate security provided that the applicant can meet all 
of the following requirements.
    (1) The applicant has pledged as security for the loan all 
available personal and business collateral.
    (2) The feasible plan, approved by the Agency, indicates the loan 
will be repaid based upon the applicant's production and income history 
and addresses applicable income risks to the extent practicable through 
the use of breeder's insurance, mortality insurance, or similar risk 
management practices.
    (3) The applicant has had positive net income from the horse 
breeder business in at least 3 of the past 5 years. If the applicant 
has been in the horse breeder business for fewer than 5 years, the 
applicant must have had positive net income from the horse breeder 
business in at least 50 percent of the years the applicant has been in 
the horse breeder business.
    (4) The applicant has given the Agency an assignment on any USDA 
program payments, unencumbered installment sales proceeds, or other 
contractually based income.

XVI. Appraisals and Valuation Requirements

    Appraisals generally are required for real estate and chattel 
property used to secure a Horse Breeder loan. Real estate appraisals, 
however, are not required when the amount of the loan does not exceed 
$50,000 and the loan approval official clearly documents that the 
estimated value of security, less existing liens, exceeds the loan 
amount. Real estate and chattel appraisals shall be completed in 
accordance with 7 CFR 761.7.

XVII. Taking Indian Trust Lands as Security

    The Agency may take a lien on Indian Trust lands as security 
provided that the requirements of 7 CFR part 1943, subpart A or its 
successor regulations are satisfied.

XVIII. Insurance for Loan Security

    An applicant must obtain insurance, consistent with this section, 
equal to the lesser of the value of the security at the time of loan 
closing, or the principal of the loan.
    1. Hazard insurance. All security (except growing crops) must be 
covered by hazard insurance if it is readily available and economically 
feasible.
    2. Flood or mudslide insurance. Real estate security located in a 
special Flood Hazard Area as determined by the Federal Emergency 
Management Agency, must be covered by flood or mudslide insurance.
    3. Crop insurance. Growing crops used to provide adequate security 
must be covered by crop insurance if such insurance is readily 
available and economically feasible.
    4. Mortality insurance. All horses used as security for the loan 
must be covered by mortality insurance if it is readily available and 
economically feasible.
    5. Indemnities. An applicant must:
    (a) List the Agency as loss payee for the insurance indemnity 
payment or as a beneficiary of a mortgagee loss payable clause; and
    (b) In the case of crop and mortality insurance, execute an 
assignment of indemnity in favor of the Agency.

XIX. Funding Applications

    Loan requests will be funded based on the date the Agency receives 
the complete application. Loan approval is subject to the availability 
of Emergency loan funds.

XX. Loan Closing

    The loan approval official, or designee, shall close the loan 
according to the following.
    1. The applicant must meet all conditions specified in this notice 
prior to loan closing.
    2. There must have been no significant changes in the plan of 
operation or the applicant's financial condition since the loan was 
approved and less than 90 days has passed since financial information 
has been updated.
    3. The applicant shall execute all loan instruments and legal 
documents required by the Agency to evidence the debt, perfect the 
required security position in property, and protect the Government's 
interests in accordance with applicable State and Federal laws.
    4. Horse Breeder loans with security other than real estate shall 
be closed in accordance with 7 CFR part 1941, subpart B, or its 
successor regulation.
    5. Horse Breeder loans secured by real estate shall be closed in 
accordance with 7 CFR part 1927, subpart B, or its successor 
regulation. Loans with real estate security will be closed by a closing 
agent, selected by and paid for by the applicant.
    (a) For loans over $25,000, title clearance is required when real 
estate is taken as security.
    (b) For loans of $25,000 or less, when real estate is taken as 
security, a certification of ownership in real estate is required. 
Certification of ownership may be in the form of an affidavit which is 
signed by the applicant, naming the record owner of the real estate in 
question and listing the balances due on all known debts against the 
real estate. Whenever the loan approval official is uncertain of the 
record owner or debts against the real estate security, a title search 
is required.

XXI. Fees

    The applicant will pay all loan closing fees including but not 
limited to fees for title clearance, recording any legal instruments 
determined to be necessary, and all notary, lien search, attorney fees 
and similar fees incident to loan transactions. No fees will be 
assessed for work performed by Agency employees.

XXII. Reporting

    The borrower must notify the Agency of any adverse actions related 
to the loan, including but not limited to, anticipated default on the 
loan.

[[Page 44804]]

XXIII. Loan Servicing

    If any installment is not paid according to the terms of the loan 
agreement, the loan is not fully satisfied at expiration of the loan 
agreement, or the borrower is in default on any term of the loan 
agreement or security instruments, the loan will be serviced in 
accordance with 7 CFR 1951.468 or its successor regulation, during the 
term of the loan.

    Signed at Washington, DC, on June 28, 2002.
James R. Little,
Administrator, Farm Service Agency.

Exhibit 1.--Sample Veterinary Certification

Woodside Veterinary Clinic, P.O. Box 29, Alexandria, Virginia 45207

William A. Doctor, D.V.M.
Tanya J. Thoms, D.V.M.
    Equine and Companion Animals
    Medicine and Surgery
    Telephone: 303-233-4455
    FAX 303-233-4456

    Name of Client: Circle K Farms.
    Address of Client: 123 Shade Tree Lane, Alexandria, Virginia 
45207.
    Period covered by this Certification: 2000 and 2001 Breeding and 
Foal Seasons.

    The number of mares owned that were bred ------
    The number of mares boarded that were bred ------

    As a result of MRLS:
    The number of mares that failed to conceive or produce a live 
healthy foal.------
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Signature of Veterinarian

[FR Doc. 02-16827 Filed 7-3-02; 8:45 am]
BILLING CODE 3410-05-P