[Federal Register Volume 68, Number 241 (Tuesday, December 16, 2003)]
[Rules and Regulations]
[Pages 69948-69952]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-31001]


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DEPARTMENT OF AGRICULTURE

Farm Service Agency

Rural Housing Service

Rural Business-Cooperative Service

Rural Utilities Service

7 CFR Parts 772, 1901, and 1951

RIN 0560-AG67


Servicing Minor Program Loans

AGENCY: Farm Service Agency, USDA.

ACTION: Final rule.

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SUMMARY: This rule consolidates, clarifies and revises the servicing 
regulations for the Minor Programs currently administered by the Farm 
Service Agency, Farm Loan Programs (FSA). Minor Program loans involve 
existing loans only since there is no longer funding for new loans in 
these programs. FSA Minor Programs consist of the following loan types: 
Grazing Association loans and Irrigation and Drainage Association loans 
previously administered by the U.S. Department of Agriculture's Rural 
Development (RD) mission area, and Non-Farm Enterprise and Recreation 
Loans made to individuals previously administered by FSA. Recreation 
loans to associations will continue to be serviced by the RD mission 
area.

EFFECTIVE DATE: January 15, 2004.

FOR FURTHER INFORMATION CONTACT: Mel Thompson, Senior Loan Officer, 
Farm Service Agency; telephone: (202) 720-7862; Facsimile: (202) 690-
1196; 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:

Discussion of the Final Rule

    This rule consolidates and clarifies the servicing policies of the 
Farm Service Agency's Minor Loan Programs. The Minor Programs were 
administered by the former Farmers Home Administration (FmHA). Under 
the discretionary authority of the Department of Agriculture 
Reorganization Act of 1994, Public Law 103-354, on October 20, 1994, 
the Individual-type loans (Non-Farm Enterprise and Recreation loans) 
were assigned to FSA. The Association-type loans (Grazing Associations 
and Irrigation and Drainage loans) were assigned to the RD mission 
area. Regulations for servicing the Association-type loans of these 
programs were found at 7 CFR part 1901, subpart E for civil rights 
compliance; 7 CFR part 1951, subpart E for servicing; 7 CFR part 1951, 
subpart F for graduation; 7 CFR part 1956, subpart C for debt 
settlement; and 7 CFR part 1962 subpart A for bankruptcy. Individual-
type Minor Program loans are the Non-Farm Enterprise loans defined in 7 
CFR 1941.4 and 1943.4 and which are a subgroup of FSA, Farm Operating 
and Farm Ownership loans; and Recreation loans, which are defined as 
Farm Loan Program (FLP) loans under 7 CFR 1951.906. Although these 
loans are no longer made by FSA, they are serviced as FLP loans in 
accordance with 7 CFR part 1951, subpart S.
    Because the current delegation of these similar loan programs 
between the FSA and RD mission area is inefficient, this rule removes 
parts of regulations that are currently shared by FSA and the agencies 
of the RD mission area and establishes a consolidated FSA regulation 
governing these programs. Information not specific to the Minor 
Programs has been eliminated and language has been improved for 
readability.
    On April 9, 2003, the Farm Service Agency published a proposed rule 
(68 FR 17320) requesting comments regarding proposed consolidation and 
revision of the rules affecting the FSA Minor Programs. A comment was 
received from an Agency employee regarding servicing violations of non-
compliance with civil rights laws by Minor Program borrowers. The 
commentor suggested that the Agency provide notices and try to correct 
the violation rather than going right into liquidation.
    The Agency is adopting the comment. The Agency has clarified its 
civil rights compliance standards contained in Sec.  772.3(a) and (d) 
since FSA's civil rights compliance procedures contained in 
Departmental regulations at 7 CFR 15.8 and internal Departmental 
Memorandum 4330-002, March 3, 1999, available on the Departmental 
website, also apply. The comment pertains only to association type 
loans (AMP) which are Federal financial assistance because the 
borrowers are the recipients of the Federal funding but are not the 
ultimate beneficiary of the program. See 7 CFR 15.2 for the definition 
of these terms in a civil rights context. In this situation FSA acts as 
an enforcement agent of civil rights laws, and no violations of civil 
rights laws by FSA have been alleged. Departmental Memorandum 4330-002, 
] 9 establishes a detailed compliance procedure, which provides notice 
and the opportunity to correct the violation before enforcement 
proceedings are undertaken. Moreover, 7 CFR part 15, subpart A provides 
an informal and formal means of disputing compliance issues through a 
fact finding process. Since these additional authorities already apply 
to civil rights compliance reviews, FSA has referenced these standards 
in Sec.  772.3.
    In addition, the Agency is clarifying its liquidation policy. 
Section 772.16 is revised to state that for Association-Type loans 
(AMP), the notice of acceleration will include appeal rights. For 
Individual-Type loans (IMP), Sec.  772.16 states that all appeals must 
be exhausted before the notice of acceleration is issued; however, the 
notice of acceleration itself is not appealable. Thus, for both types 
of Minor Program loans, borrowers can dispute factual issues before 
liquidation. FSA has maintained the different timing for appealing 
adverse Agency decisions. AMP loans were previously serviced by the RD 
mission area under regulations providing for appeals in the notice of 
acceleration. IMP loans serviced by FSA before this rule are still 
considered Farm Loan Program (FLP) loans which by regulation require 
that all appeals precede acceleration.

Executive Order 12866

    This rule has been determined under Executive Order 12866 to be not 
significant and was not reviewed by the Office of Management and 
Budget.

Regulatory Flexibility Act

    In accordance with the Regulatory Flexibility Act, 5 U.S.C. 601, 
the Agency has determined that there will not be a significant economic 
impact on a substantial number of small entities. All Farm Service 
Agency direct loan borrowers and all entities affected by this rule are 
small businesses according to the North American Industry 
Classification System, and the United States Small Business 
Administration. There is no diversity in size of the entities affected 
by this rule and the costs to comply with it are the same for

[[Page 69949]]

all entities. FSA stated its finding in the proposed rule at 68 FR 
17320, April 9, 2003, that the rule will not have a significant 
economic impact on a substantial number of small entities, and received 
no comments on this finding.
    There are currently 346 Minor Loan Program borrowers including 61 
Grazing Associations, 39 Irrigation and Drainage Associations, 218 Non-
Farm Enterprise loans, and 28 Recreations loans to individuals which 
total less than $22,000,000 in outstanding indebtedness. This rule 
consolidates the regulations governing these programs, but it contains 
no new requirements nor does it eliminate any provision in previous 
regulations. This rule does not limit options available to program 
participants, or change any aspect of the program that would have a 
significant effect on the business of these associations. Therefore, 
the costs of compliance resulting from this rule are deemed not 
significant. Accordingly, pursuant to section 605(b) of the Regulatory 
Flexibility Act, 5 U.S.C. 605(b), the Agency certifies that this rule 
will not have a significant economic impact on a substantial number of 
small entities.

Environmental Evaluation

    The environmental impacts of this 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 that the 
rule requires no further environmental review because no new loans are 
authorized. Servicing existing loans in accordance with previously 
published rules containing environmental requirements is not a major 
Federal action significantly affecting the quality of the human 
environment. No extraordinary circumstances or other unforeseeable 
factors exist which required preparation of an environmental assessment 
or environmental impact statement.

Executive Order 12988

    This rule has been reviewed in accordance with E.O. 12988, Civil 
Justice Reform. In accordance with that Executive Order: (1) All State 
and local laws and regulations that are in conflict with this rule will 
be preempted; (2) no retroactive effect will be given to this rule; and 
(3) administrative proceedings in accordance with 7 CFR part 11 must be 
exhausted before requesting judicial review.

Executive Order 12372

    As stated in the Notice related to 7 CFR part 3015, subpart V (48 
FR 29115, June 24, 1983) the programs and activities within this rule 
do not require consultation with state and local officials under the 
scope of Executive Order 12372.

Unfunded Mandates

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public 
Law 104-4, requires Federal agencies to assess the effects of their 
regulatory actions on State, local, and tribal governments or the 
private sector. This rule contains no Federal mandates, as defined by 
title II of the UMRA; therefore, this rule is not subject to sections 
202 and 205 of the UMRA.

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 any new significant loan servicing criteria on state and 
local governments. The rule revises the citation references and 
consolidates the servicing regulations to streamline loan servicing 
criteria applicable to Minor Programs. Therefore, consultation with the 
states is not required.

Paperwork Reduction Act

    The amendments to 7 CFR parts 772, 1901, subpart E, and 1951, 
subparts E and F, contained in this rule only delete requirements and 
propose no new collections nor do they significantly affect the 
aggregate information collection burden of the Agencies. Still, this 
rule transfers some of the information collections that were approved 
under OMB control numbers 0575-0118, 0575-0093, and 0575-0066, to part 
772, which has been approved by OMB and assigned control number 0560-
0230.

Federal Assistance Program

    These changes affect no programs listed in the Catalog of Federal 
Domestic Assistance.

List of Subjects in 7 CFR

Part 772

    Agriculture, Credit, Rural areas.

Part 1901

    Civil rights, Compliance reviews, Minority groups.

Part 1951

    Account servicing, Grant programs--housing and community 
development, Reporting requirements, Rural areas.

0
Accordingly, for the reasons stated in the preamble, 7 CFR part 772 is 
added and parts 1901 and 1951 are revised as follows:
0
1. Add part 772 to read as follows:

PART 772--SERVICING MINOR PROGRAM LOANS

Sec.
772.1 Policy.
772.2 Abbreviations and definitions.
772.3 Compliance.
772.4 Environmental requirements.
772.5 Security maintenance.
772.6 Subordination of security.
772.7 Leasing minor program loan security.
772.8 Sale or exchange of security property.
772.9 Releases.
772.10 Transfer and assumption--AMP loans.
772.11 Transfer and assumption--IMP loans.
772.12 Graduation.
772.13 Delinquent account servicing.
772.14 Reamortization of AMP loans.
772.15 Protective advances.
772.16 Liquidation.
772.17 Equal Opportunity and non-discrimination requirements.
772.18 Exception authority.

    Authority: 5 U.S.C. 301, 7 U.S.C. 1989, 25 U.S.C. 490.


Sec.  772.1  Policy.

    (a) Purpose. This part contains the Agency's policies and 
procedures for servicing Minor Program loans which include: Grazing 
Association loans, Irrigation and Drainage Association loans, and Non-
Farm Enterprise and Recreation loans to individuals.
    (b) Appeals. The regulations at 7 CFR parts 11 and 780 apply to 
decisions made under this part.


Sec.  772.2  Abbreviations and Definitions.

    (a) Abbreviations.

AMP Association-Type Minor Program loan;
CFR Code of Federal Regulations;
FO Farm Ownership Loan;
FSA Farm Service Agency;
IMP Individual-Type Minor Program loan;
OL Operating Loan;
USDA United States Department of Agriculture.
    (b) Definitions.
    Association-Type Minor Program loans (AMP): Loans to Grazing 
Associations and Irrigation and Drainage Associations.
    Entity: Cooperative, corporation, partnership, joint operation, 
trust, or limited liability company.

[[Page 69950]]

    Graduation: The requirement contained in loan documents that 
borrowers pay their FSA loan in full with funds received from a 
commercial lending source as a result of improvement in their financial 
condition.
    Individual-type Minor Program loans (IMP): Non-Farm Enterprise or 
Recreation loans to individuals.
    Member: Any individual who has an ownership interest in the entity 
which has received the Minor Program loan.
    Minor Program: Non-Farm Enterprise, Individual Recreation, Grazing 
Association, or Irrigation and Drainage loan programs administered or 
to be administered by FSA
    Review official: An agency employee, contractor or designee who is 
authorized to conduct a compliance review of a Minor Program borrower 
under this part.


Sec.  772.3  Compliance.

    (a) Requirements. No Minor Program borrower shall directly, or 
through contractual or other arrangement, subject any person or cause 
any person to be subjected to discrimination on the basis of race, 
color, national origin, or disability. Borrowers must comply with all 
applicable Federal laws and regulations regarding equal opportunity in 
hiring, procurement, and related matters. AMP borrowers are subject to 
the nondiscrimination provisions applicable to Federally assisted 
programs contained in 7 CFR part 15, subparts A and C, and part 15b. 
IMP loans are subject to the nondiscrimination provisions applicable to 
federally conducted programs contained in 7 CFR parts 15d and 15e.
    (b) Reviews. In accordance with Title VI of the Civil Rights Act of 
1964, the Agency will conduct a compliance review of all Minor Program 
borrowers, to determine if a borrower has directly, or through 
contractual or other arrangement, subjected any person or caused any 
person to be subjected to discrimination on the basis of race, color, 
or national origin. The borrower must allow the review official access 
to their premises and all records necessary to carry out the compliance 
review as determined by the review official.
    (c) Frequency and timing. Compliance reviews will be conducted no 
later than October 31 of every third year until the Minor Program loan 
is paid in full or otherwise satisfied.
    (d) Violations. If a borrower refuses to provide information or 
access to their premises as requested by a review official during a 
compliance review, or is determined by the Agency to be not in 
compliance in accordance with this section or Departmental regulations 
and procedures, the Agency will service the loan in accordance with the 
provisions of Sec.  772.16 of this part.


Sec.  772.4  Environmental requirements.

    Servicing activities such as transfers, assumptions, 
subordinations, sale or exchange of security property, and leasing of 
security will be reviewed for compliance with 7 CFR part 1940, subpart 
G and the exhibits to that subpart and 7 CFR part 799.


Sec.  772.5  Security maintenance.

    (a) General. Borrowers are responsible for maintaining the 
collateral that is serving as security for their Minor Program loan in 
accordance with their lien instruments, security agreement and 
promissory note.
    (b) Security inspection. The Agency will inspect real estate that 
is security for a Minor Program loan at least once every 3 years, and 
chattel security at least annually. More frequent security inspections 
may be made as determined necessary by the Agency. Borrowers will allow 
representatives of the Agency, or any agency of the U.S. Government, in 
accordance with statutes and regulations, such access to the security 
property as the agency determines is necessary to document compliance 
with the requirements of this section.
    (c) Violations. If the Agency determines that the borrower has 
failed to adequately maintain security, made unapproved dispositions of 
security, or otherwise has placed the repayment of the Minor Program 
loan in jeopardy, the Agency will:
    (1) For chattel security, service the account according to 7 part 
1962, subpart A. If any normal income security as defined in that 
subpart secures a Minor Program loan, the reporting, approval and 
release provisions in that subpart shall apply.
    (2) For real estate security for AMP loans, contact the Regional 
Office of General Counsel for advice on the appropriate servicing 
including liquidation if warranted.
    (3) For real estate security for IMP loans, service the account 
according to 7 CFR part 1965, subpart A.


Sec.  772.6  Subordination of security.

    (a) Eligibility. The Agency shall grant a subordination of Minor 
Program loan security when the transaction will further the purposes 
for which the loan was made, and all of the following are met:
    (1) The loan will still be adequately secured after the 
subordination, or the value of the loan security will be increased by 
the amount of advances to be made under the terms of the subordination.
    (2) The borrower can document the ability to pay all debts 
including the new loan.
    (3) The action does not change the nature of the borrower's 
activities to the extent that they would no longer be eligible for a 
Minor Program loan.
    (4) The subordination is for a specific amount.
    (5) The borrower is unable, as determined by the Agency, to 
refinance its loan and graduate in accordance with this subpart.
    (6) The loan funds will not be used in such a way that will 
contribute to erosion of highly erodible land or conversion of wetlands 
for the production of an agricultural commodity according to 7 CFR part 
1940, subpart G.
    (7) The borrower has not been convicted of planting, cultivating, 
growing, producing, harvesting or storing a controlled substance under 
Federal or state law. ``Borrower,'' for purposes of this subparagraph, 
specifically includes an individual or entity borrower and any member 
of an entity borrower. ``Controlled substance,'' for the purpose of 
this subparagraph, is defined at 21 CFR part 1308. The borrower will be 
ineligible for a subordination for the crop year in which the 
conviction occurred and the four succeeding crop years. An applicant 
must attest on the Agency application form that it, and its members if 
an entity, have not been convicted of such a crime.
    (b) Application. To request a subordination, a Minor Program 
borrower must make the request in writing and provide the following:
    (1) The specific amount of debt for which a subordination is 
needed;
    (2) An appraisal prepared in accordance with Sec.  761.7 of this 
chapter, if the request is for a subordination of more than $10,000, 
unless a sufficient appraisal report, as determined by the Agency, that 
is less than one year old, is on file with the Agency; and
    (3) Consent and subordination, as necessary, of all other 
creditors' security interests.


Sec.  772.7  Leasing minor program loan security.

    (a) Eligibility. The Agency may consent to the borrower leasing all 
or a portion of security property for Minor Program loans to a third 
party when:
    (1) Leasing is the only feasible way to continue to operate the 
enterprise and is a customary practice;

[[Page 69951]]

    (2) The lease will not interfere with the purpose for which the 
loan was made;
    (3) The borrower retains ultimate responsibility for the operation, 
maintenance and management of the facility or service for its continued 
availability and use at reasonable rates and terms;
    (4) The lease prohibits amendments to the lease or subleasing 
arrangements without prior written approval from the Agency;
    (5) The lease terms provide that the Agency is a lienholder on the 
subject property and, as such, the lease is subordinate to the rights 
and claims of the Agency as lienholder; and
    (6) The lease is for less than 3 years and does not constitute a 
lease/purchase arrangement, unless the transfer and assumption 
provisions of this subpart are met.
    (b) Application. The borrower must submit a written request for 
Agency consent to lease the property.


Sec.  772.8  Sale or exchange of security property.

    (a) For AMP loans.
    (1) Sale of all or a portion of the security property may be 
approved when all of the following conditions are met:
    (i) The property is sold for market value based on a current 
appraisal prepared in accordance with Sec.  761.7 of this chapter.
    (ii) The sale will not prevent carrying out the original purpose of 
the loan. The borrower must execute an Assurance Agreement as 
prescribed by the Agency. The covenant involved will remain in effect 
as long as the property continues to be used for the same or similar 
purposes for which the loan was made. The instrument of conveyance will 
contain the nondiscrimination covenants contained in 7 CFR 1951.204.
    (iii) The remaining security for the loan is adequate or will not 
change after the transaction.
    (iv) Sale proceeds remaining after paying any reasonable and 
necessary selling expenses are applied to the Minor Program loan 
according to lien priority.
    (2) Exchange of all or a portion of security property for an AMP 
loan may be approved when:
    (i) The Agency will obtain a lien on the property acquired in the 
exchange;
    (ii) Property more suited to the borrower's needs related to the 
purposes of the loan is to be acquired in the exchange;
    (iii) The AMP loan will be as adequately secured after the 
transaction as before; and
    (iv) It is necessary to develop or enlarge the facility, improve 
the borrower's debt-paying ability, place the operation on a more sound 
financial basis or otherwise further the loan objectives and purposes, 
as determined by the Agency.
    (b) For IMP loans.
    (1) A sale or exchange of chattel that is serving as security is 
governed by 7 CFR part 1962, subpart A.
    (2) A sale or exchange of real estate that is serving as security 
for an IMP loan is governed by 7 CFR part 1965, subpart A.


Sec.  772.9  Releases.

    (a) Security. Minor Program liens may be released when:
    (1) The debt is paid in full;
    (2) Security property is sold for market value and sale proceeds 
are received and applied to the borrower's creditors according to lien 
priority; or
    (3) An exchange in accordance with Sec.  772.7(b) has been 
concluded.
    (b) Borrower liability. The Agency may release a borrower from 
liability when the Minor Program loan, plus all administrative 
collection costs and charges are paid in full. IMP borrowers who have 
had previous debt forgiveness on a farm loan program loan as defined in 
7 CFR 1951.906, however, cannot be released from liability by FSA until 
the previous loss to the Agency has been repaid with interest from the 
date of debt forgiveness. An AMP borrower may also be released in 
accordance with Sec.  772.10 in conjunction with a transfer and 
assumption.
    (c) Servicing of debt not satisfied through liquidation. Balances 
remaining after sale or liquidation of the security will be subject to 
administrative offset in accordance with 7 CFR part 3, Department of 
Treasury Offset Program (TOP) and Treasury Cross-Servicing regulations 
at 31 CFR part 285 and Federal Claims Collections Standards at 31 CFR 
parts 900-904. Thereafter the debt settlement provisions in 7 CFR part 
1956, subpart B of chapter XVIII of the Code of Federal Regulations or 
successor regulation apply.


Sec.  772.10  Transfer and assumption--AMP loans.

    (a) Eligibility. The Agency may approve transfers and assumptions 
of AMP loans when:
    (1) The present borrower is unable or unwilling to accomplish the 
objectives of the loan;
    (2) The transfer will not harm the Government or adversely affect 
the Agency's security position;
    (3) The transferee will continue with the original purpose of the 
loan;
    (4) The transferee will assume an amount at least equal to the 
present market value of the loan security;
    (5) The transferee documents the ability to pay the AMP loan debt 
as provided in the assumption agreement and has the legal capacity to 
enter into the contract;
    (6) If there is a lien or judgment against the Agency security 
being transferred, the transferee is subject to such claims. The 
transferee must document the ability to repay the claims against the 
land; and
    (7) If the transfer is to one or more members of the borrower's 
organization and there is no new member, there must not be a loss to 
the Government.
    (b) Withdrawal. Withdrawal of a member and transfer of the 
withdrawing member's interest in the Association to a new eligible 
member may be approved by the Agency if all of the following conditions 
are met:
    (1) The entire unpaid balance of the withdrawing member's share of 
the AMP loan must be assumed by the new member;
    (2) In accordance with the Association's governing articles, the 
required number of remaining members must agree to accept any new 
member; and
    (3) The transfer will not adversely affect collection of the AMP 
loan.
    (c) Requesting a transfer and assumption. The transferor/borrower 
and transferee/applicant must submit:
    (1) The written consent of any other lienholder, if applicable.
    (2) A current balance sheet and cash flow statement.
    (d) Terms. The interest rate and term of the assumed AMP loan will 
not be changed. Any delinquent principal and interest of the AMP loan 
must be paid current before the transfer and assumption will be 
approved by the Agency.
    (e) Release of liability. Transferors may be released from 
liability with respect to an AMP loan by the Agency when:
    (1) The full amount of the loan is assumed; or
    (2) Less than the full amount of the debt is assumed, and the 
balance remaining will be serviced in accordance with Sec.  772.9(c).


Sec.  772.11  Transfer and assumption--IMP loans.

    Transfers and assumptions for IMP loans are processed in accordance 
with 7 CFR part 1962, subpart A, for chattel secured loans and 7 CFR 
part 1965, subpart A, for real estate secured loans. Any remaining 
transferor liability will be serviced in accordance with Sec.  772.9(c) 
of this subpart.

[[Page 69952]]

Sec.  772.12  Graduation.

    (a) General. This section only applies to Minor Program borrowers 
with promissory notes which contain provisions requiring graduation.
    (b) Graduation reviews. Borrowers shall provide current financial 
information when requested by the Agency or its representatives to 
conduct graduation reviews.
    (1) AMP loans shall be reviewed at least every two years. In the 
year to be reviewed, each borrower must submit, at a minimum, a year-
end balance sheet and cash flow projection for the current year.
    (2) All IMP borrowers classified as ``commercial'' or ``standard'' 
in accordance with 7 CFR part 1951, subpart F, shall be reviewed at 
least every 2 years. In the year to be reviewed, each borrower must 
submit a year-end balance sheet, actual financial performance for the 
most recent year, and a projected budget for the current year.
    (c) Criteria. Borrowers must graduate from the Minor Programs as 
follows:
    (1) Borrowers with IMP loans that are classified as ``commercial'' 
or ``standard'' must apply for private financing within 30 days from 
the date the borrower is notified of lender interest, if an application 
is required by the lender. For good cause, the Agency may grant the 
borrower a reasonable amount of additional time to apply for 
refinancing.
    (2) Borrowers with AMP loans will be considered for graduation at 
least every two years or more frequently if the Agency determines that 
the borrower's financial condition has significantly improved.


Sec.  772.13  Delinquent account servicing.

    (a) AMP loans. If the borrower does not make arrangements to cure 
the default after notice by the Agency and is not eligible for 
reamortization in accordance with Sec.  772.14, the Agency will 
liquidate the account according to Sec.  772.16.
    (b) IMP loans. Delinquent IMP borrowers will be serviced according 
to 7 CFR part 1951, subpart S, and parts 3 and 1951, subpart C, 
concerning internal agency offset and referral to the Department of 
Treasury Offset Program and Treasury Cross-Servicing (or successor 
regulations).


Sec.  772.14  Reamortization of AMP loans.

    The Agency may approve reamortization of AMP loans provided:
    (a) There is no extension of the final maturity date of the loan;
    (b) No intervening lien exists on the security for the loan which 
would jeopardize the Government's security position;
    (c) If the account is delinquent, it cannot be brought current 
within one year and the borrower has presented a cash flow budget which 
demonstrates the ability to meet the proposed new payment schedule; and
    (d) If the account is current, the borrower will be unable to meet 
the annual loan payments due to circumstances beyond the borrower's 
control.


Sec.  772.15  Protective advances.

    (a) The Agency may approve, without regard to any loan or total 
indebtedness limitation, vouchers to pay costs, including insurance and 
real estate taxes, to preserve and protect the security, the lien, or 
the priority of the lien securing the debt owed to the Agency if the 
debt instrument provides that the Agency may voucher the account to 
protect its lien or security.
    (b) The Agency may pay protective advances only when it determines 
it to be in the Government's best financial interest.
    (c) Protective advances are immediately due and payable.


Sec.  772.16  Liquidation.

    When the Agency determines that continued servicing will not 
accomplish the objectives of the loan and the delinquency or financial 
distress cannot be cured by the options in Sec.  772.13, or the loan is 
in non-monetary default, the borrower will be encouraged to dispose of 
the Agency security voluntarily through sale or transfer and assumption 
in accordance with this part. If such a transfer or voluntary sale is 
not carried out, the loan will be liquidated according to 7 CFR part 
1955, subpart A. For AMP loans, appeal rights under 7 CFR part 11 are 
provided in the notice of acceleration. For IMP loans, appeal rights 
must be exhausted before acceleration, and the notice of acceleration 
is not appealable.


Sec.  772.17  Equal opportunity and non-discrimination requirements.

    With respect to any aspect of a credit transaction, the Agency will 
comply with the requirements of the Equal Credit Opportunity Act as 
implemented in 7 CFR 1910.2, and the Department's civil rights policy 
in 7 CFR part 15d.


Sec.  772.18  Exception authority.

    Exceptions to any requirement in this subpart can be approved in 
individual cases by the Administrator if application of any requirement 
or failure to take action would adversely affect the Government's 
financial interest. Any exception must be consistent with the 
authorizing statute and other applicable laws.

PART 1901--PROGRAM-RELATED INSTRUCTIONS

Subpart E--Civil Rights Compliance Requirements

0
2. The authority citation for part 1901 is revised to read as follows:


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

Sec.  1901.204  [Amended]

0
3. Amend Sec.  1901.204 by:
0
a. Removing paragraphs (a)(1), (2), (4), and (10);
0
b. Redesignating paragraph (a)(3) as paragraph (a)(1);
0
c. Redesignating paragraphs (a)(5) through (9) as paragraphs (a)(2) 
through (6); and
0
d. Redesignating paragraphs (a)(11) through (28) as paragraphs (a)(7) 
through (24).

PART 1951--SERVICING AND COLLECTIONS

0
4. 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; 42 
U.S.C. 1480.

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


Sec.  1951.201  [Amended]

0
5. Amend 1951.201 by removing the words: ``loans for Grazing and other 
shift-in-land-use projects;'' and ``Association Irrigation and Drainage 
loans.''

Sec.  1951.221  [Amended]

0
6. Amend Sec.  1951.221 in paragraph (b) heading by removing the words 
``Grazing Association Loans, Irrigation and Drainage and other''.

    Signed in Washington, DC, on December 10, 2003.
Floyd D. Gaibler,
Acting Under Secretary for Farm and Foreign Agricultural Services.
[FR Doc. 03-31001 Filed 12-15-03; 8:45 am]
BILLING CODE 3410-05-P