[Federal Register Volume 68, Number 32 (Tuesday, February 18, 2003)]
[Rules and Regulations]
[Pages 7693-7701]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-3562]



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  Federal Register / Vol. 68, No. 32 / Tuesday, February 18, 2003 / 
Rules and Regulations  

[[Page 7693]]



DEPARTMENT OF AGRICULTURE

Farm Service Agency

7 CFR Parts 762, 764, and 774

Rural Housing Service

Rural Business-Cooperative Service

Rural Utilities Service

Farm Service Agency

7 CFR Parts 1910, 1924, 1941, 1943, 1951, 1955, 1956, 1962, and 
1965

RIN 0560-AG78


2002 Farm Bill Regulations--General Credit Provisions

AGENCY: Farm Service Agency and Rural Housing Service, USDA.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: This rule amends the Farm Service Agency's (FSA) regulations 
to comply with provisions of the Farm Security and Rural Investment Act 
of 2002 (2002 Act). In addition, this rule clarifies direct loan 
eligibility criteria in accordance with the Department of Agriculture 
Reorganization Act of 1994. This rule amends the regulations that 
govern the direct and guaranteed farm loan programs of FSA by revising 
eligible loan purposes, percentage of loan guarantees, terms for 
downpayment loans, the direct loan ``term limit'' and numerous other 
provisions affecting loan making, servicing and collections. The rule 
is intended to focus more FSA resources on beginning farmers and 
ranchers and make more borrowers eligible for FSA farm credit 
assistance.

DATES: Effective February 18, 2003.

FOR FURTHER INFORMATION CONTACT: Kathy Zeidler, Senior Loan Officer, 
USDA, FSA, Farm Loan Programs Loan Making Division, STOP 0522, 1400 
Independence Avenue, SW., Washington, DC 20250-0522; telephone (202) 
720-5199; e-mail: [email protected]. Persons with 
disabilities who require alternative means for communication (Braille, 
large print, audio tape, etc.) should contact the USDA Target Center at 
(202) 720-2600 (voice and TDD).

SUPPLEMENTARY INFORMATION:

Notice and Comment

    This rule is not being published for public notice or to solicit 
comment from interested parties as a proposed rule because it 
implements precise requirements of the Farm Security and Rural 
Investment Act of 2002 (Pub. L. 107-171)(the 2002 Act) where the Agency 
has little or no leeway in terms of policy interpretation. Thus, this 
rule is published as final and is effective immediately. Other 
provisions of the 2002 Act that involve agency policy considerations in 
which public participation is required will be published separately 
according to 5 U.S.C. 553.

Executive Order 12866

    This final rule has been determined to be not significant under 
Executive Order 12866 and, therefore, has not been reviewed by the 
Office of Management and Budget (OMB).

Regulatory Flexibility Act

    In compliance with the Regulatory Flexibility Act, Public Law 96-
534, (5 U.S.C. 601), FSA has determined that this rule will not have a 
significant economic impact on a substantial number of small entities. 
FSA program participants are predominantly family-size farmers and 
ranchers and, as defined by the U.S. Small Business Administration, 
approximately 98 percent of all farmers are classified as small 
businesses. The provisions in this rule will not impact a substantial 
number of small entities to a greater extent than large entities. The 
intent of this rule is to implement legislation. Program participation 
is voluntary and requires no direct action on the part of small 
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 Evaluation

    The environmental impacts of this final rule have been considered 
in accordance with the provisions of the National Environmental Policy 
Act of 1969 (NEPA), 42 U.S.C. 4321 et seq., the regulations of the 
Council on Environmental Quality (40 CFR parts 1500-1508), and the FSA 
regulations for compliance with NEPA, 7 CFR parts 799, and 1940, 
subpart G. FSA completed an environmental evaluation and concluded the 
rule requires no further environmental review. No extraordinary 
circumstances or other unforeseeable factors exist which would require 
preparation of an environmental assessment or environmental impact 
statement. A copy of the environmental evaluation is available for 
inspection and review upon request.

Executive Order 12988

    This final rule has been reviewed in accordance with Executive 
Order 12988. This rule preempts State laws to the extent any laws are 
inconsistent with it, and its provisions are not retroactive. Before 
legal action may be brought concerning this rule, administrative 
remedies must be exhausted.

Executive Order 12372

    The programs within this rule are not subject to the provisions of 
Executive Order 12372, which requires intergovernmental consultation 
with State and local officials. See the notice related to 7 CFR part 
3015, subpart V, published at 48 FR 29115 (June 24, 1983).

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.

Unfunded Mandates

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), 
requires Federal agencies to assess the effects of their regulatory 
actions on State, local, and tribal governments or the private sector. 
The rule contains no Federal mandates, as defined by title II of the 
UMRA. Thus, this rule is not subject to the requirements of sections 
202 and 205 of UMRA.

[[Page 7694]]

Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA)

    This rule is not a major rule under 5 U.S.C. 804(2) and, therefore, 
is not subject to the requirements of the SBREFA.

Paperwork Reduction Act

    The Agency's information collection requirements, currently 
approved under OMB control numbers 0560-0154, 0560-0157, 0560-0162, 
0560-0166, 0560-0167, 0560-0171, and 0560-0178 are not affected by the 
final rule.

Federal Assistance Programs

    The titles and numbers of the Federal assistance programs, as found 
in the Catalog of Federal Domestic Assistance, to which this final rule 
applies are:

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

Discussion of the Final Rule

    This rule implements the general credit provisions of title V of 
the 2002 Act as they apply to FSA's Farm Loan Programs (FLP). The 
changes to Federal credit policies are relatively minor. The changes 
focus more FSA resources on beginning farmers and ranchers and make 
slightly more applicants eligible for FSA farm credit assistance. The 
effects of the changes are difficult to estimate, but they are expected 
to boost demand minimally for FSA farm loan programs. The specific 
regulatory changes are discussed below.

Refinancing Bridge Loans

    Section 5002 of the 2002 Act authorizes FSA to refinance a 
temporary bridge loan that was obtained from a commercial or 
cooperative lender because a shortage of loan funds prevented FSA from 
closing an approved direct farm ownership (FO) loan. This rule amends 7 
CFR 1943.16 to implement this section.

Amount of Guarantee for Operations on Tribal Land

    Section 5003 of the 2002 Act expands the category of loans eligible 
for a 95 (instead of 90) percent guarantee to include operating loans 
(OL) made to a farmer or rancher whose land is subject to the 
jurisdiction of an Indian tribe and whose loan is secured by one or 
more security instruments that are subject to the jurisdiction of an 
Indian tribe. This rule amends FSA's guaranteed loan eligibility 
requirements at 7 CFR 762.129 accordingly.

Term and Loan Percentage Changes for Downpayment Loan Program

    Section 5005 of the 2002 Act modifies the terms for loans made 
under the Downpayment FO Loan Program for qualified beginning farmers 
and ranchers. Accordingly, this rule amends 7 CFR 1943.14 to specify 
that loans made under this program will be for 40 (instead of 30) 
percent of the purchase price or appraised value of the farm or ranch, 
whichever is less. The term of the loan is limited to 15 (instead of 
10) years or less. Also, the time period in which balloon installments 
are prohibited on loans obtained from other lenders in conjunction with 
a Downpayment FO loan is increased to 15 (instead of 10) years.

Term Limits on Direct Operating Loans

    Section 5101 of the 2002 Act requires the Agency to waive the term 
limit for a direct OL to a farmer or rancher when their land is subject 
to the jurisdiction of an Indian tribe and commercial credit is not 
available. The 2002 Act also provides for a one-time waiver for two 
years of the direct OL term limit on a case-by-case basis to other 
borrowers if certain criteria are met. The determination is not subject 
to administrative appeal. This rule amends 7 CFR 1941.12 to comply with 
these provisions. One of the statutory requirements for a case-by-case 
waiver is that the borrower have a ``viable farm or ranch operation.'' 
The Agency has adopted this requirement by referring to the existing 
definition of ``financially viable operation'' at 7 CFR 1941.4 and 
1924.54. Another statutory requirement is that the borrower has 
successfully completed, or will complete within one year, borrower 
training under section 359 of the Consolidated Farm and Rural 
Development Act (CONACT). The other statutory requirements for a case-
by-case waiver are that the borrower applied for commercial credit from 
at least two commercial lenders and was unable to obtain a commercial 
loan, including a loan guaranteed by the Secretary.

Emergency Loan Eligibility for Quarantine Losses

    Section 5201 of the 2002 Act authorizes emergency (EM) loans for 
losses resulting from quarantines imposed by the Secretary under the 
Plant Protection Act or animal quarantine laws as defined in section 
2509 of the Food, Agriculture, Conservation, and Trade Act of 1990. 
This rule amends 7 CFR 764.2 to add a definition of ``quarantine'' and 
revise the definition of ``disaster'' to comply with this requirement.

Entity Eligibility

    Section 5302 of the 2002 Act adds trusts and limited liability 
companies to the list of entities eligible for EM loans and direct and 
guaranteed OL and FO loans. Thus, 7 CFR 762.102, 764.2, 1910.4, 
1924.74, 1941.4 and 1943.4 are amended by revising the definitions of 
``entity'' and ``joint operation'' to comply with this requirement.

Simplified Loan Guarantee Application

    Section 5307 of the 2002 Act increases the loan amount for which 
FSA can accept a simplified guaranteed loan application from $50,000 to 
$125,000. Accordingly, 7 CFR 762.102 and 762.110 have been amended to 
meet this requirement.

Beginning Farmer Definition

    Section 5310 of the 2002 Act changes the definition of qualified 
beginning farmer or rancher by increasing the acres of land that these 
applicants may own to a maximum of 30 (instead of 25) percent of the 
average farm or ranch size in the county. This rule amends 7 CFR 
762.102, 1941.4 and 1943.4 definitions accordingly to comply with this 
requirement.

Term and Interest Rate Changes for Seed Loans

    Section 10103 of the 2002 Act extends to 36 (from 18) months the 
period of time for which the zero percent interest rate may apply to 
loans made under the Emergency Loan for Seed Producers Program. The Act 
also increases the term of these loans to the earlier of 36 months or 
the settlement of the bankruptcy proceeding involving AgriBiotech. 
These requirements are implemented in this rule by amending 7 CFR 
774.18.

Eligibility Criteria for Direct Loans

    Section 227(b) of the Department of Agriculture Reorganization Act 
of 1994 repealed a portion of section 333 of the CONACT, which 
contained eligibility criteria relating to an applicant's character and 
honesty. Therefore, this rule removes these obsolete eligibility 
criteria from 7 CFR 1941.12 and 1943.12.

Debt Settlement

    Section 5303 of the 2002 Act provides the Secretary the authority 
to approve or disapprove applications for debt settlement and release 
of liability without the recommendation of, but after consultation 
with, the local FSA County Committee (COC). The COC will be consulted 
by the Agency prior to an action of this type to comply with this 
statute and ensure that all available

[[Page 7695]]

information is considered. Also, the previous regulation described many 
actions involving debt settlement processing and COC recommendation 
which are internal and have been removed. This rule amends 7 CFR parts 
1951, 1955, 1956, 1962, and 1965 accordingly to remove references to 
COC recommendations.

Interest Rate Options for Loans in Servicing

    Section 5305 of the 2002 Act amended the CONACT by requiring FSA to 
use the lowest of the interest rate in effect at the time the borrower 
applies for Primary Loan Servicing (PLS), the original interest rate on 
the loan, or the interest rate being charged for the loan type at the 
time of deferral, consolidation, rescheduling, or reamortization. Prior 
to this statutory change, only the latter two options were specified. 
For the first new option, the time of PLS application will be the time 
the complete application is received by FSA. This method will be used 
on program loans with regular or limited resource interest rates. This 
rule, therefore, revises 7 CFR 1951.909 and Exhibit A of Attachment 1 
of part 1951, subpart S accordingly.

Inventory Property

    Section 5308 of the Act increases the time that the Agency is 
allowed to sell real estate inventory property to beginning farmers and 
ranchers from 75 days to 135 days. Section 5308 further emphasizes the 
need to maximize opportunities for beginning farmers by combining or 
subdividing inventory property. This rule amends 7 CFR 1955.63 and 
1955.107 accordingly to comply with these requirements. In addition, 
Exhibits G and G-1 of 7 CFR part 1955, subpart A are removed as they 
contain only administrative provisions which do not impact the public.

Annual Review of Borrowers

    Section 5318 of the Act requires that FSA conduct annual loan 
assessments of direct loan borrowers. As this review was previously 
required twice per year, 7 CFR 1924.55 is amended to comply with this 
requirement.

List of Subjects

7 CFR Part 762

    Agriculture, Loan programs--agriculture.

7 CFR Part 764

    Agriculture, Disaster assistance, Loan programs--agriculture.

7 CFR Part 774

    Agriculture, Disaster, Loan programs--agriculture.

7 CFR Part 1910

    Agriculture, Credit, Loan programs--housing and community 
development, Low and moderate income housing, Sex discrimination.

7 CFR Part 1924

    Construction, Repair, Planning, Management advice, Loan programs--
agriculture, Loan programs--housing and community development.

7 CFR Part 1941

    Crops, Livestock, Loan programs--agriculture, Rural areas, Youth.

7 CFR Part 1943

    Crops, Loan programs--agriculture, Recreation, Water resources.

7 CFR Part 1951

    Account servicing, Credit, Debt restructuring, Loan programs--
agriculture, Loan Programs--housing and community development.

7 CFR Part 1955

    Foreclosure, Government acquired property, Government property 
management.

7 CFR Part 1956

    Account servicing, Accounting, Credit, Loan programs--agriculture, 
Loan programs--housing and community development, Rural areas.

7 CFR Part 1962

    Crops, Government property, Livestock, Loan programs--agriculture, 
Loan programs--housing and community development, Rural areas.

7 CFR Part 1965

    Foreclosure, Credit, Loan programs--agriculture, Loan programs--
housing and community development, Rural areas.

    Accordingly, 7 CFR Chapters VII and XVIII are amended as follows:

PART 762--GUARANTEED FARM LOANS

    1. The authority citation for part 762 continues to read as 
follows:

    Authority: 5 U.S.C. 301, 7 U.S.C. 1989.

    2. Amend Sec.  762.102(b) by revising the definitions of 
``Entity,'' ``Joint operation,'' the first sentence in subparagraph (5) 
of the ``Beginning farmer or rancher'' definition, and the second 
sentence of the ``Cash flow budget'' definition to read as follows:


Sec.  762.102  Abbreviations and definitions.

* * * * *
    (b) * * *
    Beginning farmer or rancher. * * *
    (5) Does not own real farm or ranch property or who, directly or 
through interests in family farm entities, owns real farm or ranch 
property, the aggregate acreage of which does not exceed 30 percent of 
the average farm or ranch acreage of the farms or ranches in the county 
where the property is located. * * *
* * * * *
    Cash flow budget. * * * Cash flow budgets for loans under $125,000 
do not require income and expenses itemized by categories.* * *
* * * * *
    Entity. Cooperatives, corporations, partnerships, joint operations, 
trusts, or limited liability companies.
* * * * *
    Joint operation. Individuals that have agreed to operate a farm or 
farms together as a business unit. The real and personal property may 
be owned separately or jointly by the individuals.
* * * * *

    3. Amend Sec.  762.110 in paragraphs (a) introductory text, (a)(1), 
(a)(3), and (b) introductory text by removing ``$50,000'' everywhere it 
appears and adding in its place ``$125,000.''

    4. Amend Sec.  762.129 by revising paragraph (b)(2) and the last 
sentence of paragraph (b)(3) and adding paragraph (b)(4) to read as 
follows:


Sec.  762.129  Percent of guarantee and maximum loss.

* * * * *
    (b) * * *
    (2) When the purpose of an FO guarantee is to participate in the 
downpayment loan program;
    (3) * * * The guaranteed OL must be made during the period that a 
borrower has the down payment loan outstanding; or
    (4) When a guaranteed OL is made to a farmer or rancher whose farm 
or ranch land is subject to the jurisdiction of an Indian tribe and 
whose loan is secured by one or more security instruments that are 
subject to the jurisdiction of an Indian tribe.
* * * * *

PART 764--EMERGENCY FARM LOANS

    5. The authority citation for part 764 continues to read as 
follows:

    Authority: 5 U.S.C. 301 and 7 U.S.C. 1989.

    6. Amend Sec.  764.2 by revising the definitions of ``Disaster'' 
and ``Entity''

[[Page 7696]]

and by adding a definition of ``Quarantine'' to read as follows:


Sec.  764.2  Definitions.

* * * * *
    Disaster means an event of unusual and adverse weather conditions, 
other natural phenomena, or quarantine, that has substantially affected 
producers of agricultural commodities by causing physical property or 
production losses in a county, or similar political subdivision, that 
triggered the inclusion of such county or political subdivision in the 
disaster area designated by the Agency.
* * * * *
    Entity means a partnership, corporation, cooperative, joint 
operation, trust or limited liability company that is an operator of an 
operation engaged in farming, ranching, or aquaculture activities at 
the time the disaster occurs.
* * * * *
    Quarantine means a quarantine imposed by the Secretary under the 
Plant Protection Act or animal quarantine laws (as defined in section 
2509 of the Food, Agriculture, Conservation and Trade Act of 1990).
* * * * *

PART 774--EMERGENCY LOAN FOR SEED PRODUCERS PROGRAM

    7. The authority citation for part 774 continues to read as 
follows:

    Authority: Pub. L. 106-224.

    8. Amend Sec.  774.18 by revising paragraphs (a)(1) and (b)(1) to 
read as follows:


Sec.  774.18  Interest rate, terms and security requirements.

    (a) Interest rate. (1) The interest rate on the loan will be zero 
percent for 36 months or until the date of settlement of, completion 
of, or final distribution of assets in the bankruptcy proceeding 
involving AgriBiotech, whichever comes first.
* * * * *
    (b) Terms. (1) Loans shall be due and payable upon the earlier of 
the settlement of the bankruptcy claim or 36 months from the date of 
the note.
* * * * *

PART 1910--GENERAL

    9. The authority citation for part 1910 continues to read as 
follows:

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

Subpart A--Receiving and Processing Applications

    10. Amend Sec. 1910.4 by revising the heading of paragraph (b), 
adding a new sentence after the eighth sentence in paragraph (b) and 
revising paragraph (b)(2) to read as follows:


Sec.  1910.4  Processing applications.

* * * * *
    (b) Completed Farm Loan Programs applications and additional FSA 
responsibilities. * * * Applicants who request a waiver of the direct 
OL term limits in accordance with subpart A of part 1941 of this 
chapter based on the facts that their land is subject to the 
jurisdiction of an Indian tribe and their loan is secured by one or 
more security instruments subject to the jurisdiction of an Indian 
tribe, automatically consent to the Agency releasing information as 
necessary to the Bureau of Indian Affairs to confirm these facts. * * *
    (2) If the applicant is a cooperative, corporation, partnership, 
joint operation, trust, or limited liability company:
    (i) A complete list of entity members showing the address, 
citizenship, principal occupation, and the number of shares and 
percentage of ownership or of stock held in the entity by each member, 
or the percentage of interest in the entity held by each member.
    (ii) A current personal financial statement from each member of the 
entity.
    (iii) A current financial statement from the entity itself.
    (iv) A copy of the entity's charter or any entity agreement, any 
articles of incorporation and bylaws, any certificate or evidence of 
current registration (good standing), and a resolution(s) adopted by 
the Board of Directors or entity members authorizing specified officers 
of the entity to apply for and obtain the desired loan and execute 
required debt, security, and other instruments and agreements.
* * * * *

PART 1924--CONSTRUCTION AND REPAIR

    11. The authority citation for part 1924 continues to read as 
follows:

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

Subpart B--Management Advice to Individual Borrowers and Applicants

    12. Revise Sec.  1924.55 by removing the last sentence of the 
introductory text, and by revising the heading, adding a first 
sentence, and revising the last sentence of paragraph (e) to read as 
follows:


Sec.  1924.55  Assessment of the agricultural operation.

* * * * *
    (e) Annual review. For all borrowers, the assessment described 
under this section will be reviewed on at least an annual basis to 
monitor progress. * * * The year-end analysis under this section may be 
treated as the required assessment review.

    13. Revise the fourth sentence of Sec.  1924.74(b)(1) to read as 
follows:


Sec.  1924.74  Borrower Training program.

* * * * *
    (b) Processing--
    (1) Agency review. * * * In the case of a cooperative, corporation, 
partnership, joint operation, trust, or limited liability company, any 
individual member holding a majority interest in the entity or who is 
operating the farm must agree to complete the training on behalf of the 
entity. * * *
* * * * *

PART 1941--OPERATING LOANS

    14. The authority citation for part 1941 continues to read as 
follows:

    Authority: 5 U.S.C. 301 and 7 U.S.C. 1989.

Subpart A--Operating Loan Policies, Procedures and Authorizations

    15. In part 1941, subpart A, revise all references to ``a 
cooperative, corporation, partnership, or joint operation'' to read 
``an entity.'' Also, revise all references to ``cooperative(s), 
corporation(s), partnership(s) or joint operation(s)'' to read 
``entities.''
    16. In part 1941, subpart A, revise all references to ``members, 
stockholders, partners, or joint operators'' to read ``members.'' Also, 
revise all references to ``member's, partner's, stockholder's, or joint 
operator's'' to read ``member's.'' And, revise all references to 
``member, stockholder, partner, or joint operator'' to read ``member.''
    17. Amend the first sentence of Sec.  1941.1 by removing the words 
``farm cooperatives, private domestic corporation, partnerships, and 
joint operations' and adding in their place the word ``entities.''
    18. Amend Sec.  1941.4 by removing the number ``25'' from the first 
sentence in paragraph (e) of the definition of ``Beginning farmer or 
rancher'' and adding in its place the number ``30,'' by adding a 
definition of ``entity,'' and by adding a sentence at the end of the 
definition of ``financially viable operation'' to read as follows:

[[Page 7697]]

Sec.  1941.4  Definitions.

* * * * *
    Entity. Cooperative, corporation, partnership, joint operation, 
trust, or limited liability company.
* * * * *
    Financially viable operation. * * * This definition only applies 
when considering a term limit waiver under Sec.  1941.12.
* * * * *
    19. Amend Sec.  1941.6 by revising paragraph (c) to read as 
follows:


Sec.  1941.6  Credit elsewhere.

* * * * *
    (c) Property and interest in property owned and income received by 
an individual applicant, or an entity applicant and all of its members 
as individuals will be considered and used by an applicant in obtaining 
credit from other sources.
* * * * *

    20. Amend Sec.  1941.12 by:
    a. Removing paragraphs (a)(4) and (5);
    b. Redesignating paragraphs (a)(6) through (11) as (a)(4) through 
(9) respectively;
    c. Revising the new paragraph (a)(6);
    d. Removing paragraphs (b)(5)(iii) and (iv);
    e. Redesignating paragraphs (b)(5)(v) and (vi) as (b)(5)(iii) and 
(iv) respectively;
    f. Revising paragraphs (b)(6)(i), (b)(7)(i), (b)(8)(iii) and 
(b)(9);
    The revised text reads as follows:


Sec.  1941.12  Eligibility requirements.

* * * * *
    (a) * * *
    (6)(i) Have not executed a promissory note for a direct OL loan in 
more than 6 different calendar years prior to the calendar year that 
the requested direct OL loan will close. This eligibility restriction 
applies to anyone who signs the promissory note. Youth loans are not 
counted as direct OL loans for the purpose of this paragraph. This 
limitation does not apply to farmers or ranchers when their land is 
subject to the jurisdiction of an Indian tribe, the loan is secured by 
one or more security instruments subject to the jurisdiction of Indian 
tribe, and the test for credit requirement in Sec.  1941.6 is met. On a 
case-by-case basis, a one-time waiver to this eligibility restriction 
may also be granted for a period of two years if the following 
conditions are met:
    (A) The applicant has a financially viable operation;
    (B) The applicant applied for commercial credit from at least two 
commercial sources;
    (C) The applicant was unable to obtain a commercial loan (including 
an Agency-guaranteed loan); and
    (D) The applicant has successfully completed, or will complete 
within one year, borrower training.
    (ii) This determination is not subject to administrative appeal.
* * * * *
    (b) * * *
    (6) * * *
    (i) The requirements of paragraphs (b)(5)(i), (ii) and (iv) of this 
section must be met.
* * * * *
    (7) * * *
    (i) The requirements of paragraphs (b)(5)(i), (ii) and (iv) of this 
section must be met by the entity and all its members.
* * * * *
    (8) * * *
    (iii) The majority interest holders of the entity meet the 
requirements of paragraphs (b)(5)(i), (ii) and (iv) of this section.
    (9)(i) Have no member of the entity who has executed a promissory 
note for direct OL loans closed in more than 6 different calendar years 
prior to the calendar year that the requested direct OL loan will 
close. This eligibility restriction applies to anyone who signs the 
promissory note. Youth loans are not counted as direct OL loans for the 
purpose of this paragraph. This limitation does not apply to farmers or 
ranchers when their land is subject to the jurisdiction of an Indian 
tribe, the loan is secured by one or more security instruments subject 
to the jurisdiction of an Indian tribe, and the test for credit 
requirement in Sec.  1941.6 is met. On a case-by-case basis, a one-time 
waiver to this eligibility restriction may also be granted for a period 
of two years if the following conditions are met:
    (A) The applicant has a financially viable operation;
    (B) The applicant applied for commercial credit from at least two 
commercial sources;
    (C) The applicant was unable to obtain a commercial loan (including 
an Agency-guaranteed loan); and
    (D) The applicant has successfully completed, or will complete 
within one year, borrower training.
    (ii) This determination is not subject to administrative appeal.
* * * * *

Subpart B--Closing Loans Secured by Chattels

    21. Amend Sec.  1941.54 by revising paragraph (b)(2) as follows and 
removing paragraph (b)(3):


Sec.  1941.54  Promissory note.

* * * * *
    (b) Signatures. * * *
    (2) Entities. The promissory note(s) will be executed so as to 
evidence liability of the entity as well as individual liability of all 
members of the entity.

    22. Amend Sec.  1941.57 by revising paragraph (a) to read as 
follows:


Sec.  1941.57  Security instruments.

* * * * *
    (a) Executing security instruments by borrowers. State supplements 
will be issued, as necessary, to carry out the provisions of this 
paragraph. In order to close the loan and obtain the desired lien, 
security instruments will be executed by appropriate entity officials, 
on behalf of an entity borrower. Any other signatures needed to assure 
the required security will be obtained as provided in State 
supplements. A cosigner will be required only when it has been 
determined that the applicant cannot possibly meet the security 
requirements for the loan request.
* * * * *

PART 1943--FARM OWNERSHIP, SOIL AND WATER AND RECREATION

    23. The authority citation for part 1943 continues to read as 
follows:

    Authority: 5 U.S.C. 301 and 7 U.S.C. 1989.

Subpart A--Direct Farm Ownership Loan Policies, Procedures, and 
Authorizations

    24. In part 1943, subpart A, revise all references to ``a 
cooperative, corporation, partnership, or joint operation'' to read 
``an entity.'' Similarly, revise all references to ``cooperative(s), 
corporation(s), partnership(s) or joint operation(s)'' to read 
``entities.''

    25. In part 1943, subpart A, revise all references to ``members, 
stockholders, partners, or joint operators'' to read ``members.'' Also, 
revise all references to ``member's, partner's, stockholder's, or joint 
operator's'' to read ``member's.'' And, revise all references to 
``member, stockholder, partner, or joint operator'' to read ``member.''

    26. Amend Sec.  1943.1 by removing the words ``farm cooperatives, 
private domestic corporations, partnerships, and joint operations'' and 
adding in their place the words ``and entities.''

    27. Amend Sec.  1943.4 by removing the number ``25'' from the first 
sentence in paragraph (e) of the definition of ``Beginning farmer or 
rancher'' and adding in its place the number ``30'' and

[[Page 7698]]

by adding a definition of ``entity'' to read as follows:


Sec.  1943.4  Definitions.

* * * * *
    Entity. Cooperative, corporation, partnership, joint operation, 
trust, or limited liability company.
* * * * *

    28. Amend Sec.  1943.6 by revising paragraph (c) to read as 
follows:


Sec.  1943.6  Credit elsewhere.

* * * * *
    (c) Property and interests in property owned and income received by 
an individual applicant, or an entity applicant and all of its members 
as individuals, will be considered and used by an applicant in 
obtaining credit from other sources.
* * * * *

    29. Amend Sec.  1943.12 by:
    a. Removing paragraphs (a)(4) and (a)(5);
    b. Redesignating (a)(6) through (a)(11) as (a)(4) through (a)(9) 
respectively;
    c. Removing paragraphs (b)(4)(iii) and (b)(4)(iv);
    d. Redesignating paragraphs (b)(4)(v) and (b)(4)(vi) as (b)(4)(iii) 
and (b)(4)(iv); and
    e. Revising paragraphs (b)(5)(i), (b)(6)(i) and (b)(7) to read as 
follows:


Sec.  1943.12  Farm ownership loan eligibility requirements.

* * * * *
    (b) * * *
    (5) * * *
    (i) The requirements of paragraphs (b)(4)(i), (ii) and (iv) of this 
section must be met.
* * * * *
    (6) * * *
    (i) The requirements of paragraphs (b)(4)(i), (ii) and (iv) of this 
section must be met by the entity applicant and all its members.
* * * * *
    (7) If each member's ownership interest does not exceed the family 
farm definition limits, their collective interests can exceed the 
family farm definition limits only if:
    (i) All of the members of the entity are related by blood or 
marriage,
    (ii) All of the members are or will be operators of the entity, and
    (iii) The majority interest holders of the entity meet the 
requirements of paragraphs (b)(4)(i), (ii) and (iv) of this section.
* * * * *

    30. Amend Sec.  1943.14 by revising paragraphs (c), (d)(4) and 
(e)(2)(i) to read as follows:


Sec.  1943.14  Downpayment FO loan program for beginning farmers or 
ranchers.

* * * * *
    (c) Loan purposes. Loans may be made to provide an amount equal to 
40 percent of the purchase price or appraised value, whichever is 
lower, of the farm or ranch to be acquired, unless the applicant 
requests a lesser amount. The remaining balance of the purchase price 
or appraised value, whichever is lower, not to exceed 50 percent, may 
be guaranteed by the Agency.
    (d) * * *
    (4) The other financing for the balance of the purchase price is 
amortized for less than 30 years and/or a balloon payment is scheduled 
within the 15 years of the Agency loan.
    (e) * * *
    (2) Terms of loans. (i) Each loan made under this section shall be 
amortized over a period of 15 years or less, at the option of the 
borrower.
* * * * *

    31. Amend Sec.  1943.16 by adding a new paragraph (e) to read as 
follows:


Sec.  1943.16  Loan purposes.

* * * * *
    (e) Refinance a bridge loan if the following conditions are met:
    (1) The applicant obtained the loan to be refinanced to purchase a 
farm after a direct FO was approved;
    (2) Direct FO funds were not available to fund the loan at the time 
of approval;
    (3) The loan to be refinanced is temporary financing; and
    (4) The loan was made by a commercial or cooperative lender.

    32. Amend Sec.  1943.38 by removing the words ``Cooperatives or 
corporations'' from paragraph (g)(3)(ii) and adding in their place the 
word ``Entities,'' and by removing paragraph (g)(3)(iii).

PART 1951--SERVICING AND COLLECTIONS

    33. The authority citation for part 1951 continues to read as 
follows:

    Authority: 5 U.S.C. 301; 7 U.S.C. 1932 Note; 7 U.S.C. 1989; 31 
U.S.C. 3716; 42 U.S.C. 1480.

Subpart J--Management and Collection of Nonprogram (NP) Loans

    34. Amend Sec.  1951.463 by removing and reserving paragraph (e).

Subpart S--Farm Loan Programs Account Servicing Policies

    35. Amend Sec.  1951.903 by removing the words ``recommended by the 
County Committee (except where the debt has been discharged through 
bankruptcy),'' from the second sentence of paragraph (b).

    36. Amend Sec.  1951.909 by:
    a. Revising paragraphs (a)(3), (e)(1)(xii), and (e)(2)(viii);
    b. Redesignating paragraph (e)(2)(ix) as (e)(2)(x);
    c. Adding new paragraph (e)(2)(ix);
    d. Revising paragraph (i)(2)(i).
    The revised and added text reads as follows:


Sec.  1951.909  Processing primary loan service programs requests.

    (a) * * *
    (3) If a completed application includes a request for a waiver from 
the training required by paragraph (c)(5) of this section, the Agency 
will, prior to any offer of Primary Loan Servicing, evaluate the 
borrower's knowledge and ability in production and financial management 
and determine the need for additional training as set out in Sec.  
1924.74 of this chapter.
* * * * *
    (e) * * *
    (1) * * *
    (xii) Interest rates of consolidated and/or rescheduled loans will 
be as follows:
    (A) The interest rate for loans made at the regular interest rate 
will be the lesser of:
    (1) The lowest interest rate for that type of loan on the date a 
complete servicing application was received;
    (2) The lowest interest rate for that type of loan on the date of 
restructure; or
    (3) The lowest original loan note rate on any of the original notes 
being consolidated and/or rescheduled.
    (B) The interest rate for loans made at the limited resource 
interest rate will be the lesser of:
    (1) The limited resource interest rate for that type of loan on the 
date a complete servicing application was received;
    (2) The limited resource interest rate for that type of loan on the 
date of restructure; or
    (3) The lowest original loan note rate on any of the original notes 
being consolidated and/or rescheduled.
    (C) OL loans that were not assigned a limited resource rate when 
the loan was received, may be assigned a limited resource rate if:
    (1) The borrower meets the requirements for the limited resource 
interest rate; and
    (2) A feasible plan cannot be developed at regular interest rates 
and maximum terms permitted in this section.
* * * * *

[[Page 7699]]

    (2) * * *
    (viii) Interest rates of reamortized loans will be as follows:
    (A) The interest rate for loans made at the regular interest rate 
will be the lesser of:
    (1) The interest rate for that type of loan on the date a complete 
servicing application was received;
    (2) The interest rate for that type of loan on the date of 
restructure; or
    (3) The original loan note rate of the note being reamortized.
    (B) The interest rate of FO or SW loans made at the limited 
resource interest rate will be the lesser of:
    (1) The limited resource interest rate for that type of loan on the 
date a complete servicing application was received;
    (2) The limited resource interest rate for that type of loan on the 
date of restructure; or
    (3) The original loan note rate on the note being reamortized.
    (C) FO or SW loans that were not assigned a limited resource rate 
when the loan was received, may be assigned a limited resource rate if:
    (1) The borrower meets the requirements for the limited resource 
interest rate;
    (2) A feasible plan cannot be developed at regular interest rates 
and maximum terms permitted in this section; and
    (3) For SW loans, the loan funds were used for soil and water 
conservation and protection purposes as set forth in Sec.  1943.66 
(a)(1) through (a)(5) of this chapter.
    (D) SA payment agreement will be reamortized at the current SA 
amortization rate in effect on the date of approval or the rate on the 
original payment agreement, whichever is less.
    (ix) If there are no deferred installments, the first installment 
payment under the reamortization will be at least equal to the interest 
amount which will accrue on the new principal between the date the 
Promissory Note is processed and the next installment due date. The 
amount of outstanding accrued interest and any outstanding protective 
advances made on the loan will be added to the principal at the time of 
reamortization (the date the new note is signed by the borrower). 
Protective advances are not authorized for the payment of prior or 
junior liens except real estate tax liens.
* * * * *
    (i) * * *
    (2) * * *
    (i) If the administrative appeal process results in a determination 
that the borrower is eligible for Primary Loan Servicing, the servicing 
official will process the request pursuant to this section. The 
servicing official will use the information the appeal officer used in 
making the decision on the appeal, unless stated otherwise in the final 
appeal decision letter. In cases of debt restructuring resulting from 
appeals, the interest rate will be determined in accordance with 
paragraphs (e)(1)(xii) and (e)(2)(viii) of this section as applicable. 
If implementation of the appeal decision would cause writedown or 
writeoff of more than $300,000 because of interest accrued after the 
adverse decision, the servicing official will process the action so as 
to complete the transaction.
* * * * *

    37-38. Amend Exhibit A to subpart S as follows:
    a. In Attachment 1, Section I, Subsection 4, the paragraph entitled 
``Interest Rate for Loan Servicing'' is revised.
    b. In Attachment 1, Section V, the paragraphs entitled ``Approval 
Requirements'' are revised.
    The revised text reads as follows:

Exhibit A--Notice of the Availability of Loan Servicing and Debt 
Settlement Programs for Delinquent Farm Borrowers

* * * * *

Interest Rate for Loan Servicing

    When loans are consolidated, rescheduled, or reamortized, the 
interest rate of the new loan will be either the interest rate on the 
original loan, the interest rate on the date you submit a complete 
application for loan servicing, or the interest rate for that type of 
loan on the date of restructure, whichever is less. If you meet the 
eligibility requirements, you may be able to get the limited resource 
interest rate on OL, SW, or FO loans, if the loan was not originally 
approved with a limited resource rate. For information about current 
interest rates, contact the FSA county office.
* * * * *

Approval Requirements

    If you sell your collateral, you must apply the proceeds from the 
sale to your FSA account before you can be considered for debt 
settlement. In the case of compromise or adjustment, however, you may 
keep your collateral if you are unable to pay your total FSA debt and 
pay FSA the present market value of your collateral along with any 
additional amount you are able to pay as determined by FSA. You will be 
allowed to retain a reasonable equity in essential nonsecurity property 
to continue your normal operations and meet minimum family living 
expenses. FSA will not finance a compromise or adjustment offer.
    The County Committee will be consulted on all debt settlements of 
FLP loans. FSA must find that the statements on your application are 
true, and that you do not have assets or income in addition to what you 
stated in your application. You must also have not previously received 
any form of debt forgiveness from FSA on any other direct farm loan. If 
you qualify, your application must also be approved by the FSA State 
Executive Director or the FSA Administrator depending on the amount of 
the debt to be settled.
* * * * *

PART 1955--PROPERTY MANAGEMENT

    39. The authority citation for part 1955 continues to read as 
follows:

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

Subpart A--Liquidation of Loans Secured by Real Estate and 
Acquisition of Real and Chattel Property

    40. Amend Sec.  1955.10 by revising paragraphs (f)(2) and (f)(3) to 
read as follows:


Sec.  1955.10  Voluntary conveyance of real property by the borrower to 
the Government.

* * * * *
    (f) * * *
    (2) Consolidated Farm and Rural Development Act (CONACT) loans to 
individuals. If the Agency indebtedness plus any prior liens exceeds 
the market value of the property, the indebtedness cannot be satisfied 
but a credit can be given equal to the market value less prior liens. 
Debt settlement will be considered in accordance with subpart B of part 
1956 of this chapter.
    (i) Crediting accounts. The Agency will credit an account by an 
amount equal to the market value less prior liens, unless the borrower 
is Native American. Native American borrower-owners will be credited 
with the fair market value or the Agency debt against the property, 
whichever is greater, provided:
    (A) The borrower-owner is a member of a tribe or the tribe, and
    (B) The property is located within the confines of a federally 
recognized Indian reservation.
    (ii) Agency approval. The same procedure outlined in paragraphs

[[Page 7700]]

(f)(1)(i) through (f)(1)(iii) of this section will be followed for 
approving the voluntary conveyance. The conveyance will be accepted in 
full satisfaction of the indebtedness unless the market value of the 
property to be conveyed is less than the total of Government 
indebtedness and prior liens, and the borrower has agreed to accept a 
credit in the amount of the market value of the security property less 
prior liens, if any.
    (3) Loans to organizations. When an offer of voluntary conveyance 
is received from an organization borrower, and the market value of the 
property being conveyed (less prior liens, if any) is less than the 
Government debt, full consideration must be given to the borrower's 
present situation and future prospects for paying all or a part of the 
debt.
* * * * *

    41. Remove Exhibits G and G-1 to subpart A.

Subpart B--Management of Property

    42. Amend Sec.  1955.63 by revising paragraphs (a) and (b) to read 
as follows:


Sec.  1955.63  Suitability determination.

* * * * *
    (a) Determination. The Agency will classify property that secured 
loans or was acquired under the CONACT as ``suitable property'' or 
``surplus property'' in accordance with the definitions found in Sec.  
1955.53.
    (b) Grouping and subdividing farm properties. To the maximum extent 
practicable, the Agency will maximize the opportunity for beginning 
farmers and ranchers to purchase inventory properties. Farm properties 
may be subdivided or grouped according to Sec.  1955.140, as feasible, 
to carry out the objectives of the applicable loan program. Properties 
may also be subdivided to facilitate the granting or selling of a 
conservation easement or the fee title transfer of portions of a 
property for conservation purposes. The environmental effects of such 
actions will be considered pursuant to subpart G of part 1940 of this 
chapter.
* * * * *

Subpart C--Disposal of Inventory Property

    43. Amend Sec.  1955.107 by revising paragraphs (a)(2)(i), (b) 
introductory text, (b)(1), and (b)(2) to read as follows:


Sec.  1955.107  Sale of FSA property (CONACT).

* * * * *
    (a) * * *
    (2) * * *
    (i) Sale to beginning farmers/ranchers. Not later than 135 days 
from the date of acquisition, FSA will sell suitable farm property, 
with a priority given to applicants who are classified as beginning 
farmers or ranchers, as defined in Sec.  1955.103, as of the time of 
sale.
* * * * *
    (b) Surplus property and suitable property not sold to a beginning 
farmer or rancher. Except where a lessee is exercising the option to 
purchase under the Homestead Protection provision of subpart S of part 
1951 of this chapter, surplus property will be offered for public sale 
by sealed bid or auction within 15 days from the date of acquisition in 
accordance with Sec.  1955.147 or Sec.  1955.148. Suitable farm 
property which has been advertised for sale to a beginning farmer or 
rancher in accordance with paragraph (a) of this section, but has not 
sold within 135 days from the date of acquisition will be offered for 
public sale by sealed bid or auction to the highest bidder as provided 
in paragraph (b)(1) of this section. All prospective buyers will be 
notified in writing as part of the property advertisement of the 
presence of any highly erodible land, converted wetlands, floodplains, 
wetlands, or other special characteristics of the property that may 
limit its use or cause an easement to be placed on the property.
    (1) Advertising surplus property. FSA will advertise surplus 
property for sale by sealed bid or auction within 15 days from the date 
of acquisition or, for those suitable properties not sold to beginning 
farmers or ranchers in accordance with this section, within 135 days of 
the date of acquisition.
    (2) Sale by sealed bid or auction. Surplus real estate must be 
offered for public sale by sealed bid or auction and must be sold no 
later than 165 days from the date of acquisition to the highest bidder. 
Preference will be given to a cash offer which is at least *percent of 
the highest offer requiring credit. (*Refer to Exhibit B of RD 
Instruction 440.1 (available in any Agency office) for the current 
percentage.) Equally acceptable sealed bid offers will be decided by 
lot.
* * * * *

    44. Amend Sec.  1955.137 by revising the first sentences of 
paragraphs (b)(3)(ii) and (b)(3)(iii) to read as follows:


Sec.  1955.137  Real property located in special areas or having 
special characteristics.

* * * * *
    (b) * * *
    (3) * * *
    (ii) After receiving the wetland determination from NRCS, FSA will 
review the determination for each inventory property and determine if 
any of the wetlands or converted wetlands identified by NRCS were 
considered cropland on the date the property was acquired or were used 
for farming at any time during the period beginning on the date 5 years 
before the property was acquired and ending on the date the property 
was acquired. * * *
    (iii) After FSA has completed the determination of whether the 
wetlands or converted wetlands located on an inventory property were 
used for cropland or farming, the U.S. Fish and Wildlife Service (FWS) 
will be contacted. * * *
* * * * *

PART 1956--DEBT SETTLEMENT

    45. 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 B--Debt Settlement--Farm Loan Programs and Multi-Family 
Housing

    46. Remove and reserve Sec.  1956.57 (f).

    47. Amend Sec.  1956.70 by revising paragraph (b)(3) introductory 
text to read as follows:


Sec.  1956.70  Cancellation.

* * * * *

    (b) * * *
    (3) Debtors discharged in bankruptcy. If there is no security for 
the debt, debts discharged in bankruptcy shall be cancelled by use of 
the appropriate Agency form with the attachments noted below. No 
attempt will be made to obtain the debtor's signature. If the debtor 
has executed a new promise to pay prior to discharge and has otherwise 
accomplished a valid reaffirmation of the debt in accordance with 
advice from OGC, the debt is not discharged.
* * * * *

    48. Amend Sec.  1956.84 by revising paragraph (e) to read as 
follows:


Sec.  1956.84  Approval or rejection.

* * * * *
    (e) Appeal rights. A debtor whose debt settlement offer is rejected 
will be notified of appeal rights pursuant to 7 CFR part 11.
* * * * *

    49. Revise Sec.  1956.96 to read as follows:

[[Page 7701]]

Sec.  1956.96  Delinquent adjustment agreements.

    A 90-day extension for making the payments may be given by the 
Agency when the circumstances of the case justify an extension. A 
decision not to extend the time for making payments is not appealable. 
If the debtor is delinquent under the terms of the adjustment agreement 
and is likely to be financially unable to meet the terms of the 
agreement, the Agency may cancel the existing agreement and process a 
different type of settlement more consistent with the debtor's 
repayment ability, provided the facts in the case justify such action. 
The cancellation of an adjustment agreement is appealable. If an 
agreement is cancelled, any payments received shall be retained as 
payments on the debt owed at the time of the adjustment agreement.

PART 1962--PERSONAL PROPERTY

    50. The authority citation for part 1962 continues to read as 
follows:

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

Subpart A--Servicing and Liquidation of Chattel Security

    51. Amend Sec.  1962.41 by removing paragraph (f) and revising 
paragraph (e) to read as follows:


Sec.  1962.41  Sale of chattel security or EO property by borrowers.

* * * * *
    (e) Unpaid debt. If the sale of all security results in less than 
full payment of the debt, the borrower may request debt settlement of 
the remaining debt. The servicing official will consult with the County 
Committee before determining if the borrower's account can be debt 
settled in accordance with subpart B of part 1956 of this chapter.

    52. Amend Sec.  1962.46 by revising paragraph (g)(5)(ii) to read as 
follows:


Sec.  1962.46  Deceased borrowers.

* * * * *
    (g) * * *
    (5) * * *
    (ii) If only a portion of the debt is assumed, the amount assumed 
equals the amount as determined by OGC which could be collected from 
the assets of the estate of the deceased borrower, including the value 
of any security or EO property.
* * * * *

PART 1965--REAL PROPERTY

    53. The authority citation for part 1965 continues to read as 
follows:

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

Subpart A--Servicing of Real Estate Security for Farm Loan Programs 
Loans and Certain Note-Only Cases

    54. Amend Sec.  1965.26 by removing paragraphs (f)(6) and (g) and 
revising paragraphs (c)(2)(iv) introductory text and (f)(5) to read as 
follows:


Sec.  1965.26  Liquidation action.

* * * * *
    (c) * * *
    (2) * * *
    (iv) The Agency approves the compromise or adjustment offer in 
accordance with subpart B to part 1956 of this chapter and the borrower 
makes a settlement offer according to the following:
* * * * *
    (f) * * *
    (5) If the sale of all security results in less than full payment 
of the debt, the borrower may submit a request for debt settlement. The 
servicing official will consult with the County Committee before 
determining if the borrower's account can be debt settled in accordance 
with subpart B of part 1956 of this chapter.
* * * * *
    55. Amend Sec.  1965.27 by removing and reserving paragraphs 
(b)(19) and (g)(6), revising paragraph (f), amending paragraph (h) by 
removing the words ``County Supervisor'' wherever they appear and 
adding in their place the words ``Agency'' and revising the fifth 
sentence of paragraph (h)(1) to read as follows:


Sec.  1965.27  Transfer of real estate security.

* * * * *
    (f) Release of transferor from liability. The borrower may be 
released from personal liability when all of the real estate security 
is transferred under paragraph (c) or (d) of this section and the total 
outstanding debt or that portion of the debt equal to the present 
market value of the security is assumed. Release shall not be granted 
to any borrower or cosigner who was liable for any FLP direct loan 
which was reduced or terminated in a manner resulting in a loss to the 
Government. When the total outstanding debt is not assumed, any request 
for debt settlement will be processed in accordance with subpart B of 
part 1956.
* * * * *
    (h) * * *
    (1) * * * The Agency will consider the following:
* * * * *

    Dated: January 31, 2003.
J. B. Penn,
Under Secretary for Farm and Foreign Agricultural Services.
    Dated: February 4, 2003.
Thomas C. Dorr,
Under Secretary for Rural Development.
[FR Doc. 03-3562 Filed 2-14-03; 8:45 am]
BILLING CODE 3410-05-P