[Federal Register Volume 68, Number 85 (Friday, May 2, 2003)]
[Proposed Rules]
[Pages 23425-23426]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-10898]


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FARM CREDIT ADMINISTRATION

12 CFR Part 613

RIN 3052-AC20


Eligibility and Scope of Financing

AGENCY: Farm Credit Administration.

ACTION: Advance notice of proposed rulemaking.

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SUMMARY: The Farm Credit Administration (FCA) is considering whether to 
revise its regulations governing eligibility and scope of financing for 
farmers, ranchers, and aquatic producers or harvesters who borrow from 
Farm Credit System (FCS or System) institutions that operate under 
titles I or II of the Farm Credit Act of 1971, as amended (Act). We are 
also considering whether we should modify our regulatory definition of 
``moderately priced'' rural housing. We invite your comments.

DATES: You may send us comments by July 31, 2003.

ADDRESSES: You may send comments by electronic mail to ``[email protected],'' through the Pending Regulations section of FCA's Web 
site, ``www.fca.gov,'' or through the government-wide 
``www.regulations.gov'' portal. You may also send comments to Robert E. 
Donnelly, Acting Director, Regulation and Policy Division, Office of 
Policy and Analysis, Farm Credit Administration, 1501 Farm Credit 
Drive, McLean, Virginia 22102-5090 or by facsimile to (703) 734-5784. 
You may review copies of all comments we receive at our office in 
McLean, Virginia.

FOR FURTHER INFORMATION CONTACT:

Mark L. Johansen, Policy Analyst, Office of Policy and Analysis, Farm 
Credit Administration, McLean, VA 22102-5090, (703) 883-4498, TTY (703) 
883-4434,

 or

Richard Katz, Senior Attorney, Office of General Counsel, Farm Credit

[[Page 23426]]

Administration, McLean, VA 22102-5090, (703) 883-4020, TTY (703) 883-
4020.

SUPPLEMENTARY INFORMATION:

I. Introduction

    We received two petitions under 5 U.S.C. 553(e) to repeal Sec.  
613.3005, which limits the amount of credit that FCS institutions that 
operate under titles I or II of the Act can extend to eligible farmers, 
ranchers, and aquatic producers or harvesters (collectively referred to 
as ``farmers''). The petitioners state that the Act does not restrict 
the System's authority to finance all the credit needs of any group of 
eligible farmers and, therefore, Sec.  613.3005 should be eliminated as 
having no basis in law. The petitioners also state that Sec.  613.3005 
unnecessarily restricts the System's ability to serve creditworthy and 
eligible farmers, particularly those who have significant off-farm 
income, and young, beginning, and small farmers.
    One petitioner also asked us to change the definition of 
``moderately priced'' rural housing in Sec.  613.3030(a)(4). The 
petitioner stated that this definition has not kept pace with the 
evolving rural housing market and, therefore, is preventing FCS 
institutions that operate under titles I and II from fully serving the 
housing needs of eligible non-farm rural residents.
    We have decided to start a rulemaking in response to these two 
petitions. We reserve judgment on the appropriate legal interpretation 
of the relevant provisions of the Act. Nevertheless, we believe it is 
appropriate to review our regulations governing eligibility and scope 
of financing for farmers and our definition of ``moderately priced'' 
rural housing. The goal of this rulemaking is to explore how our 
regulations can become more responsive to the needs of all eligible and 
creditworthy farmers and rural residents within the boundaries of the 
Act.

II. Background

A. Farmers

    Section 1.9 of the Act authorizes FCS mortgage lenders to extend 
credit to ``bona fide farmers, ranchers, or producers or harvesters of 
aquatic products.'' Section 1.11(a)(1) of the Act states that ``Loans 
made by a Farm Credit [mortgage lender] to farmers, ranchers, and 
producers or harvesters of aquatic products may be for any agricultural 
or aquatic purpose and other credit needs of the applicant * * *.'' 
Similarly, section 2.4(a)(1) authorizes certain FCS associations to 
``make, guarantee, or participate with other lenders in short- and 
intermediate-term loans and other similar financial assistance to * * * 
bona fide farmers and ranchers and the producers or harvesters of 
aquatic products, for agricultural or aquatic purposes and other 
requirements of such borrowers * * *.''
    Under Sec.  613.3000(a)(1), a ``bona fide farmer or rancher'' is 
``a person owning agricultural land or engaged in the production of 
agricultural products * * *.'' The scope of financing regulation, Sec.  
613.3005, which the petitioners asked us to repeal, states:

    It is the objective of each bank and association, except for 
banks for cooperatives, to provide full credit, to the extent of 
creditworthiness, to the full-time bona fide farmer (one whose 
primary business and vocation is farming, ranching, or producing or 
harvesting aquatic products); and conservative credit to less than 
full-time farmers for agricultural enterprises, and more restricted 
credit for other credit requirements as needed to ensure a sound 
credit package or to accommodate a borrower's needs as long as the 
total credit results in being primarily an agricultural loan. 
However, the part-time farmer who needs to seek off-farm employment 
to supplement farm income or who desires to supplement off-farm 
income by living in a rural area and is carrying on a valid 
agricultural operation, shall have availability of credit for 
mortgages, other agricultural purposes, and family needs in the 
preferred position along with full-time farmers. Loans to farmers 
shall be on an increasingly conservative basis as the emphasis moves 
away from the full-time bona fide farmer to the point where 
agricultural needs only will be financed for the applicant whose 
business is essentially other than farming. Credit shall not be 
extended where investment in agricultural assets for speculative 
appreciation is a primary factor.

B. Non-Farm Rural Housing

    Existing Sec.  613.3030(a)(4) establishes two methods that FCS 
lenders may use to determine whether rural housing is ``moderately 
priced.'' The first method derives from section 8.0(1)(B) of the Act, 
which defines ``moderate priced'' for the purpose of secondary market 
financing as dwellings (excluding the land) that do not exceed 
$100,000, as adjusted for inflation. The second method authorizes FCS 
banks and associations to determine whether housing in a particular 
rural area is ``moderately priced'' by documenting data from a 
credible, independent, and recognized national or regional source. 
Housing values at or below the 75th percentile are deemed to be 
moderately priced.

III. Questions

    This rulemaking gives you the opportunity to tell us whether and 
how we should change our eligibility and scope of financing regulations 
for eligible farmers. We want to know if you think we should change the 
eligibility criteria for farmers as defined in Sec.  613.3000. In 
addition, we seek your input on whether we should repeal, retain, or 
amend the scope of financing requirements in Sec.  613.3005. We are 
particularly interested in your views on how we should regulate FCS 
lending for farmers' other credit needs. Please respond to the 
following questions.
    1. Current Sec.  613.3000(a)(1) defines a bona fide farmer, 
rancher, or aquatic producer as a person who either owns agricultural 
land or is engaging in the production of agricultural products. Do you 
think the FCA should retain or change this definition? If you favor 
changing this definition, please offer specific recommendations.
    2. What limits, if any, should FCA regulations place on lending for 
farmers' other credit needs?
    3. How should we regulate access to the other credit needs of 
eligible farmers who derive most of their income from off-farm sources? 
Do you favor retaining the current regulatory distinction between full-
time and part-time farmers? If not, what would be a better approach?
    4. Should we change our definition of ``moderately priced'' rural 
housing in Sec.  613.3030(a)(4)? If you favor changing the definition, 
please offer specific recommendations.
    The FCA welcomes other ideas or suggestions you may have about our 
eligibility and scope of financing regulations for eligible farmers and 
our regulations defining ``moderately priced'' rural housing.
    The FCA also plans to conduct a public meeting on eligibility and 
scope of financing for eligible farmers and our definition of 
``moderately priced'' rural housing. We will publish a separate notice 
in the Federal Register that will provide interested parties more 
information about the public meeting.

    Dated: April 29, 2003.
Jeanette C. Brinkley,
Secretary, Farm Credit Administration Board.
[FR Doc. 03-10898 Filed 5-1-03; 8:45 am]
BILLING CODE 6705-01-P