[Federal Register Volume 68, Number 208 (Tuesday, October 28, 2003)]
[Rules and Regulations]
[Pages 61329-61333]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-27046]


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DEPARTMENT OF AGRICULTURE

Rural Housing Service

Rural Business-Cooperative Service

Rural Utilities Service

Farm Service Agency

7 CFR Parts 1902, 1930, 1942, 1944, 1948, 1951, 1955, 1956, 1962, 
1965, 1980, and 2045


Loan Payments and Collections

AGENCIES: Rural Housing Service, Rural Business-Cooperative Service, 
Rural Utilities Service, and Farm Service Agency, USDA.

ACTION: Final rule.

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SUMMARY: The Agencies are revising their internal loan payment and 
collections regulations to replace the current regulations. This action 
is necessary since existing regulations are obsolete and do not 
accurately reflect the current payment and collections methodologies 
employed by the Agencies. The intended effect is to simplify and update 
the regulations; update internal control procedures for safeguarding 
collections; remove references to the Concentration Banking System 
(CBS) procedures which were eliminated in November 1997; and to add 
procedures for new electronic payment methods that are currently in use 
by the Agencies (Preauthorized Debits, FedWire, Customer Initiated 
Payments, etc.). These amended regulations are to ensure the Agencies' 
field offices have current guidance on the payment and collection 
methods available and how to use them.

EFFECTIVE DATE: October 28, 2003.

FOR FURTHER INFORMATION CONTACT: Mark Huntley, Accountant, Office of 
the Deputy Chief Financial Officer, Policy and Internal Review 
Division, U.S. Department of Agriculture, STOP 33, PO Box 200011, St. 
Louis, MO 63120, telephone: (314) 539-6063.

SUPPLEMENTARY INFORMATION:

Classification

    This action is not subject to the provisions of Executive Order 
12866 since it involves only internal Agency management. This action is 
not published for prior notice and comment under the Administrative 
Procedure Act since it involves only internal Agency management and 
publication for comment is unnecessary and contrary to the public 
interest.

Programs Affected

    The catalog of Federal Domestic Assistance programs impacted by 
this action are as follows:

10.404--Emergency Loans
10.405--Farm Labor Housing Loans and Grants
10.406--Farm Operating Loans
10.407--Farm Ownership Loans
10.410--Very Low to Moderate Income Housing Loans
10.411--Rural Housing Site Loans and Self-Help Housing Land Development 
Loans
10.415--Rural Rental Housing Loans
10.417--Very Low-Income Housing Repair Loans and Grants
10.420--Rural Self-Help Housing Technical Assistance
10.421--Indian Tribes and Tribal Corporation Loans
10.427--Rural Rental Assistance Payments
10.760--Water and Waste Disposal Systems for Rural Communities
10.766--Community Facilities Loans and Grants
10.767--Intermediary Relending Program
10.768--Business and Industry Loans
10.770--Water and Waste Disposal Loans and Grants (Section 306C)
10.854--Rural Economic Development Loans and Grants

Intergovernmental Consultation

    Programs with Catalog of Federal Domestic Assistance numbers 
10.405, 10.407, 10.411, 10.415, 10.420, 10.421, 10.427, 10.760, 10.766, 
10.767, 10.768, 10.770, and 10.854 are subject to the provisions of 
Executive Order 12372 which requires intergovernmental consultation 
with State and local officials.
    Programs with Catalog of Federal Domestic Assistance numbers 
10.404, 10.406, 10.410, and 10.417 are excluded from the scope of 
Executive Order 12372.

Civil Justice Reform

    This final rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. In accordance with this rule: (1) Unless 
otherwise specifically provided, all State and local laws and 
regulations that are in conflict with this rule will be preempted; (2) 
no retroactive effect will be given to this rule except as specifically 
prescribed in the rule; and (3) administrative

[[Page 61330]]

proceedings of the National Appeals Division (7 CFR part 11) must be 
exhausted before litigation against the Department is instituted.

Paperwork Reduction Act

    The information collection requirements contained in this rule have 
been approved by the Office of Management and Budget (OMB) under the 
provisions of 44 U.S.C. chapter 35 and were assigned OMB control number 
0575-0184 in accordance with the Paperwork Reduction Act of 1995. No 
person is required to respond to a collection of information unless it 
displays a valid OMB control number. This rule does not impose any new 
information collection requirements from those approved by OMB.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Pub. 
L. 104-4, establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on State, local, and tribal 
governments and the private sector. Under section 202 of the UMRA, the 
Agencies generally must prepare a written statement, including a cost-
benefit analysis, for proposed and final rules with ``Federal 
mandates'' that may result in expenditures to State, local, or tribal 
governments, in the aggregate, or to the private sector, of $100 
million or more in any one year. When such a statement is needed for a 
rule, section 205 of the UMRA generally requires the agencies to 
identify and consider a reasonable number of regulatory alternatives 
and adopt the least costly, more cost-effective, or least burdensome 
alternative that achieves the objectives of the rule.
    This rule contains no Federal mandates (under the regulatory 
provisions of title II of the UMRA) for State, local, and tribal 
governments or the private sector. Thus, the rule is not subject to the 
requirements of section 202 and 205 of the UMRA.

Environmental Impact Statement

    This document has been reviewed in accordance with 7 CFR part 1940, 
subpart G, ``Environmental Program.'' The Agencies have determined that 
this final action does not constitute a major Federal action 
significantly affecting the quality of human environment, and in 
accordance with the National Environmental Policy Act of 1969, 42 
U.S.C. 4321 et seq., an Environmental Impact Statement is not required.

Executive Order 13132, Federalism

    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.

Discussion of Final Rule

    In November 1997 Rural Development discontinued using the 
Concentration Banking System (CBS). CBS was a collection system in 
which Rural Development field offices would deposit loan payments and 
collections they received in Treasury Limited Accounts (TLA's) at local 
banks. Daily, the concentrator bank (Mercantile Bank in St. Louis, MO) 
would sweep all local bank TLA's and deposit the funds with Treasury. 
Rural Development field offices would send the detailed loan payment 
information to the Rural Development Finance Office (FO) in St. Louis, 
MO. The FO would reconcile the detailed loan payment data with the 
deposit information and credit the borrower accounts for the payment.
    In September 1997, Rural Development implemented the Rural Housing 
Service wholesale lockbox system. The wholesale lockbox significantly 
reduced collections received in field offices and it was determined 
that CBS was no longer cost effective to continue operating. In 
addition, since 1997, Rural Development has expanded its use of 
electronic collection methods (e.g., Preauthorized Debits, Customer 
Initiated Payments, FedWire, etc.).
    The Farm Service Agency (FSA) payment collection policies are 
established in internal agency handbooks. While collections under some 
FSA programs were processed according to 7 CFR 1951, subpart B, prior 
to the USDA Reorganization Act, FSA no longer utilizes this subpart.

List of Subjects

7 CFR Part 1902

    Accounting, Banks, banking, Grant programs--Housing and community 
development, Loan programs--Agriculture, Loan programs--Housing and 
community development.

7 CFR Part 1930

    Accounting, Administrative practice and procedure, Grant programs--
Housing and community development, Loan programs--Housing and community 
development, Low and moderate income housing, Reporting and 
recordkeeping requirements.

7 CFR Part 1942

    Community development, Community facilities, Loan programs--Housing 
and community development, Loan security, Rural areas, Waste treatment 
and disposal--Domestic, Water supply--Domestic.

7 CFR Part 1944

    Farm labor housing, Grant programs--Housing and community 
development, Loan programs--Housing and community development, Low and 
moderate income housing--Rental, Migrant labor, Mobile homes, 
Mortgages, Nonprofit organizations, Public housing, Rent subsidies, 
Rural housing, Subsidies.

7 CFR Part 1948

    Business and industry, Coal, Community development, Community 
facilities, Energy, Grant programs--Housing and community development, 
Housing, Nuclear energy, Planning, Rural areas, Transportation

7 CFR Part 1951

    Accounting, Account servicing, Credit, Financial institutions, 
Foreclosure, Government acquired property, Loan programs--Agriculture, 
Loan programs--Housing and community development, Low and moderate 
income housing loans--Servicing, Mortgages, Reporting requirements, 
Rural areas, Sale of government acquired property, Surplus government 
property.

7 CFR Part 1955

    Government acquired property, Government property management, Sale 
of government acquired property, Surplus government property.

7 CFR Part 1956

    Accounting, Loan programs--Agriculture, Rural areas.

7 CFR Part 1962

    Crops, Government property, Livestock, Loan programs--Agriculture, 
Rural areas.

7 CFR Part 1965

    Administrative practice and procedure.

7 CFR Part 1980

    Loan programs--Business and industry--Rural development assistance, 
Rural areas.

7 CFR Part 2045

    Personnel, volunteers.

0
For the reasons set forth in the preamble, chapter XVIII, title 7, Code 
of

[[Page 61331]]

Federal Regulations is amended as follows:

PART 1902--SUPERVISED BANK ACCOUNTS

0
1. The authority citation for part 1902 revised to read as follows:

    Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 7 U.S.C. 6991, et seq.; 
42 U.S.C. 1480; Reorganization Plan No. 2 of 1953 (5 U.S.C. App.).

Subpart A--Disbursement of Loan, Grant, and Other Funds


Sec.  1902.8  [Removed and Reserved]

0
2. Section 1902.8 is removed and reserved.

Subpart C--[Removed and Reserved]

0
3. Subpart C of part 1902 consisting of Sec. Sec.  1902.101 through 
1902.150 is removed and reserved.

PART 1930--GENERAL

0
4. The authority citation for part 1930 continues to read as follows:

    Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 16 U.S.C. 1005

Subpart C--Management and Supervision of Multiple Family Housing 
Borrowers and Grant Recipients

0
5. In exhibit H the introductory text of paragraph IX is revised to 
read as follows:

Exhibit H to Subpart C of Part 1930--Interest Credits on Insured Rural 
Rental Housing and Rural Cooperative Housing Loans

* * * * *
    IX Project Payments: With each payment made, the borrower will 
complete Form RD 1944-29. The agency representative will transmit the 
payments to the Finance Office.
* * * * *

PART 1942--ASSOCIATIONS

0
6. The authority citation for part 1942 continues to read as follows:

    Authority: 5 U.S.C. 301; 7 U.S.C. 1932; 7 U.S.C. 1989; and 16 
U.S.C. 1005.

Subpart A--Community Facility Loans

0
7. Section 1942.7(d) is revised to read as follows:


Sec.  1942.7  Loan closing.

* * * * *
    (d) Unused funds. Obligated funds planned for project development 
which remain after all authorized costs have been provided for will be 
disposed of in accordance with Sec.  1942.17(p)(6) of this subpart.
* * * * *


Sec.  1942.19  [Amended]

0
8. Paragraph (h)(6) of section 1942.19 is removed and reserved.

PART 1944--HOUSING

0
9. The authority citation for part 1944 continues to read as follows:

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

Subpart D--Farm Labor Housing Loan and Grant Policies, Procedures, 
and Authorizations


Sec.  1944.175  [Amended]

0
10. Paragraph (e) of section 1944.175 is removed and reserved.


Sec.  1944.181  [Amended]

0
11. Paragraph (b)(3)(ii) of section 1944.181 is removed and reserved.

Subpart I--Self Help Technical Assistance Grants

0
12. Section 1944.426(a)(1) is revised to read as follows:


Sec.  1944.426  Grant closeout.

    (a) * * *
    (1) The grantee will immediately refund to Rural Development any 
balance of grant funds that are not committed for the payment of 
authorized expenses.
* * * * *

PART 1948--RURAL DEVELOPMENT

0
13. The authority citation for part 1948 continues to read as follows:

    Authority: 5 U.S.C. 301, 7 U.S.C. 1932 note.

Subpart B--Section 601 Energy Impacted Area Development Assistance 
Program

0
14. Section 1948.90(b)(4) is revised to read as follows:


Sec.  1948.90  Land transfers.

* * * * *
    (b) * * *
    (4) Proceeds derived from the sale of land acquired or developed 
through the use of a grant provided under this subpart must be divided 
between the grantee and Rural Development on a pro rata basis. A 
grantee may not recover its cost from sale proceeds to the exclusion of 
Rural Development. The amount to be returned to Rural Development is to 
be computed by applying the percentage of the Rural Development grant 
participation in the total cost of the project to the proceeds from the 
sale.
* * * * *

PART 1951--SERVICING AND COLLECTIONS

0
15. 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 A--Account Servicing Policies


Sec.  1951.6  [Removed and Reserved]

0
16. Section 1951.6 is removed and reserved.

Subpart B--[Removed and Reserved]

0
17. Subpart B consisting of Sec. Sec.  1951.51 through 1951.55 is 
removed and reserved.

Subpart E--Servicing of Community and Direct Business Programs 
Loans and Grants

0
18. The introductory text of section 1951.221 is revised to read as 
follows:


Sec.  1951.221  Collections, payments and refunds.

    Payments and refunds are handled in accordance with the following:
* * * * *

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

0
19. The first sentence of section 1951.455(e) is revised to read as 
follows:


Sec.  1951.455  NP loan making for Single Family Housing (SFH) and farm 
property (real and chattel).

* * * * *
    (e) Downpayment. A downpayment must be collected at closing. * * *
* * * * *

Subpart K--Predetermined Amortization Schedule System (PASS) 
Account Servicing


Sec.  1951.506  [Amended]

0
20. Paragraphs (b) and (c) of section 1951.506 are removed and 
reserved.

PART 1955--PROPERTY MANAGEMENT

0
21. 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 B--Management of Property

0
22. Section 1955.55(e) is revised to read as follows:

[[Page 61332]]

Sec.  1955.55  Taking abandoned real or chattel property into custody 
and related actions.

* * * * *
    (e) Income and costs. Income received from the property will be 
applied to the borrower's account as an extra payment. Expenditures 
will be charged to the borrower's account as a recoverable cost.
* * * * *

0
23. In section 1955.62 the introductory text of paragraph (b)(1) is 
revised to read as follows:


Sec.  1955.62  Removal and disposition of nonsecurity personal property 
from inventory real property.

* * * * *
    (b) * * *
    (1) If a reasonable amount can likely be realized by the agency 
from sale of the personal property, it may be sold at public sale. 
Items under lien will be sold first and the proceeds up to the amount 
of the lien paid to the lienholders less a pro rata share of the sale 
expenses. Proceeds from sale of items not under lien and proceeds in 
excess of the amount due a lienholder will be remitted and applied in 
the following order:
* * * * *

0
24. In section 1955.66 the introductory text of paragraph (l) is 
revised to read as follows:


Sec.  1955.66  Lease of real property.

* * * * *
    (l) Lease income. Lease proceeds will be applied as follows:
* * * * *

Subpart C--Disposal of Inventory Property

0
25. Section 1955.109(c) is revised to read as follows:


Sec.  1955.109  Processing and closing (CONACT).

* * * * *
    (c) Form of payment. Payments at closing will be in the form of 
cash, cashier's check, certified check, postal or bank money order, or 
bank draft made payable to the Agency.
* * * * *
0
26. Section 1955.117(d) is revised to read as follows:


Sec.  1955.117  Processing credit sales on program terms (housing).

* * * * *
    (d) Downpayment. When a downpayment is made, it will be collected 
at closing.
* * * * *

0
27. In section 1955.118 paragraphs (a) and (b)(4) are revised to read 
as follows:


Sec.  1955.118  Processing cash sales or MFH credit sales on NP terms.

    (a) Cash sales. Cash sales will be closed by the servicing official 
collecting the purchase price (less any earnest money deposit or bid 
deposit) and delivering the deed to the purchaser.
    (b) * * *
    (4) Downpayment. A downpayment of not less than 10 percent of the 
purchase price is required at closing.
* * * * *


Sec.  1955.120  [Amended]

0
28. The last sentence in section 1955.120 is removed.
0
29. Section 1955.122(e) is revised to read as follows:


Sec.  1955.122  Method of sale (chattel).

* * * * *
    (e) Negotiated sale. Perishable acquired items and crops (except 
timber) and chattels for which no acceptable bid was received from 
auction or sealed bid methods may be sold by direct negotiation for the 
best price obtainable. No public notice is required to negotiate with 
interested parties including prior bidders. Justification for the use 
of this method of sale will be documented.
* * * * *

0
30. Section 1955.123(b) is revised to read as follows:


Sec.  1955.123  Sale procedures (chattel).

* * * * *
    (b) Receipt of payment. Payment will be by cashier's check, 
certified check, postal or bank money order or personal check (not in 
excess of $500) made payable to the agency. Cash may be accepted if it 
is not possible for one of these forms of payment to be used. Third 
party checks are not acceptable. If full payment is not received at the 
time of sale, the offer will be documented by Form RD 1955-45 or Form 
RD 1955-46 where the chattel is sold jointly with real estate by 
regular sale.
* * * * *

0
31. Section 1955.130(e)(2) is revised to read as follows:


Sec.  1955.130  Real estate brokers.

* * * * *
    (e) * * *
    (2) Offeror default. When a contract is cancelled due to offeror 
default, the earnest money will be delivered to and retained by the 
agency as full liquidated damages.
* * * * *


Sec.  1955.139  [Amended]

0
32. In section 1955.139 the last sentence in paragraph (a)(2) and the 
second sentence in paragraph (a)(3)(iv) are removed.

0
33. The first sentence of Section 1955.147(e) is revised to read as 
follows:


Sec.  1955.147  Sealed bid sales.

* * * * *
    (e) Failure to close. If a successful bidder fails to perform under 
the terms of the offer, the bid deposit will be retained as full 
liquidated damages. * * *
* * * * *


Sec.  1955.148  [Amended]

0
34. In Section 1955.148 the last three sentences are removed.

PART 1956--DEBT SETTLEMENT

0
35. 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


Sec.  1956.85  [Amended]

0
36. Paragraph (a)(2) of section 1956.85 is removed and reserved.

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


Sec.  1956.139  [Amended]

0
37. Paragraph (b) of section 1956.139 is removed and reserved:


Sec.  1956.143  [Amended]

0
38. Paragraph (g)(2) of section 1956.143 is removed and reserved.

PART 1962--PERSONAL PROPERTY

0
39. 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


Sec.  1962.49  [Amended]

0
40. Paragraph (e)(3)(ii) of section 1962.49 is removed and reserved.

PART 1965--REAL PROPERTY

0
41. 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 B--Security Servicing for Multiple Housing Loans

0
42. Section 1965.61(a) is revised to read as follows:

[[Page 61333]]

Sec.  1965.61  General loan servicing requirements.

    (a) Payments. Payments will be handled in accordance with subpart A 
of part 1951 of this chapter, and subparts D and E of part 1944 of this 
chapter.
* * * * *

PART 1980--GENERAL

0
43. The authority citation for part 1980 is revised to read as follows:

    Authority: 7 U.S.C. 1989.

Subpart E--Business and Industrial Loan Program


Sec.  1980.461  [Removed and Reserved]

0
44. Section 1980.461 is removed and reserved.

PART 2045--GENERAL

0
45. The authority citation for part 2045 is revised to read as follows:

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

Subpart JJ--Rural Development--Utilization of Gratuitous Services

0
46. The last sentence of section 2045.1754(c) is revised to read as 
follows:


Sec.  2045.1754  Scope of gratuitous services performed.

* * * * *
    (c) * * * Such persons, except Construction Inspectors may, when 
under direct supervision of County Supervisors, act as Collection 
Officers and be allowed to use receipt books.

    Dated: October 16, 2003.
Thomas C. Dorr,
Under Secretary, Rural Development.
    Dated: October 10, 2003.
J.B. Penn,
Under Secretary for Farm and Foreign Agricultural Service.
[FR Doc. 03-27046 Filed 10-27-03; 8:45 am]
BILLING CODE 3410-XT-P