[Federal Register Volume 69, Number 23 (Wednesday, February 4, 2004)]
[Rules and Regulations]
[Pages 5259-5263]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-1793]



[[Page 5259]]

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DEPARTMENT OF AGRICULTURE

Farm Service Agency

7 CFR Part 762

Rural Housing Service

Rural Business--Cooperative Service

Rural Utilities Service

Farm Service Agency

7 CFR Parts 1941, 1943 and 1951

RIN 0560-AG81


2002 Farm Bill Regulations--Loan Eligibility Provisions

AGENCY: Farm Service Agency, USDA.

ACTION: Final rule.

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SUMMARY: This rule amends the Farm Service Agency's (FSA) regulations 
for direct and guaranteed farm loans to implement provisions of the 
Farm Security and Rural Investment Act of 2002 (2002 Act). 
Specifically, the rule provides that borrowers who are current on an 
FSA loan before the beginning date of the incidence period of a 
Presidentially-declared disaster or emergency, but who receive debt 
forgiveness on that loan following the disaster, are eligible for 
direct and guaranteed operating loan (OL) assistance if all other 
regulatory requirements are met. It also amends the regulations for 
direct farm ownership (FO) loans by making applicants eligible if they 
participated in the business operations of a farm or ranch for at least 
three of the past 10 years and meet other regulatory requirements. In 
addition, the rule amends regulations concerning reamortization of 
amortized Shared Appreciation Agreement (SAA) recapture debt.

DATES: Effective March 5, 2004.

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; or 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:

Executive Order 12866

    This 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 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. New provisions 
included in this rule will not impact a substantial number of small 
entities to a greater extent than large entities. The Agency did not 
receive any adverse comments to this determination in its proposed rule 
published at 68 FR 17316-17320 (April 9, 2003). All FSA direct and 
guaranteed 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 all 
entities.
    This rule revises loan eligibility criteria based on requirements 
of the 2002 Act. Consequently, a larger number of producers will likely 
be eligible for FSA credit. However, because of limited funding and 
restrictions on loan amounts, FSA expects that this rule will have 
little to no impact on the number of loans made. In fiscal year 2003, 
the Agency made approximately 28,700 direct and guaranteed loans.

Environmental Assessment

    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 has completed an environmental evaluation and concluded 
that 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 rule has been reviewed in accordance with Executive Order 
12988. This rule preempts State laws that are inconsistent with it. 
This rule is not retroactive. Before judicial action may be brought 
concerning this rule, administrative remedies must be exhausted.

Executive Order 12372

    This rule is 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

    This rule contains no Federal mandates under Title II of the 
Unfunded Mandates Reform Act of 1995 (UMRA) for State, local, and 
tribal governments or the private sector. Therefore, this rule is not 
subject to the requirements of sections 202 and 205 of UMRA.

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 are not affected 
by the final rule.

Government Paperwork Elimination Act

    FSA is committed to compliance with the Government Paperwork 
Elimination Act and the Freedom to E-File Act, which require Government 
agencies in general and FSA in particular to provide the option of 
submitting information or transacting business electronically to the 
maximum extent possible. The forms and other information collection 
activities required for participation in the program are not yet fully 
implemented for the public to conduct business with FSA electronically. 
However, loan application forms are available electronically for 
downloading through the USDA eForms Web site at http://www.sc.egov.usda.gov.

Federal Assistance Programs

    The title and number of the Federal assistance programs, as found 
in the

[[Page 5260]]

Catalog of Federal Domestic Assistance, to which the rule applies are:
    10.406--Farm Operating Loans;
    10.407--Farm Ownership Loans.

Discussion of the Final Rule

    In response to the proposed rule published on April 9, 2003, (68 FR 
17316-17320) seven respondents, including farm interest groups, a State 
Department of Agriculture, and individuals from five states and the 
District of Columbia commented. The comments involved all sections of 
the proposed rule and generally supported most of the changes proposed 
by the Agency.
    Some of the comments dealt with the administrative aspects of 
program delivery. This rule provides requirements and guidelines, not 
internal Agency procedures and processes. The Agency will issue 
handbook amendments and internal notices to provide processes for 
Agency personnel to follow in administering the regulations. These 
internal procedural documents are available at any FSA office by 
request.

Eligibility After Debt Forgiveness Resulting From an Emergency

    The proposed rule provided an exception to the general rule 
prohibiting farm loans to borrowers who have received prior debt 
forgiveness. As required by section 5319 of the 2002 Act, the rule 
proposed that FSA farm loan borrowers who received debt forgiveness on 
not more than one occasion resulting directly and primarily from a 
major disaster or emergency designated by the President on or after 
April 4, 1996, under the Robert T. Stafford Disaster Relief and 
Emergency Assistance Act (42 U.S.C. 5121 et seq.) may be eligible for 
direct or guaranteed farm operating loans to pay annual farm or ranch 
operating expenses. The rule also proposed that such debt forgiveness 
occur within three years following the onset of the disaster or 
emergency.
    Three commentors requested clarification of the timeline for when 
the exception will apply and recommended that ``onset'' be defined. 
These commentors also suggested that the second mention of the word 
``onset'' in 7 CFR 762.120(a)(2)(iii), 1941.12(a)(8)(ii)(C) and 
1941.12(b)(11)(ii)(C) be changed to ``designation date'' or ``disaster 
date.'' The Agency agrees that the reference to ``onset'' is confusing 
and has, therefore, revised the first occurrence to state ``the 
beginning date of the incidence period.'' The incidence period is 
defined in Agency regulations at 7 CFR part 1945, subpart A as ``the 
specific date or dates during which a disaster occurred.'' For further 
clarification, the final rule also changes the second appearance of the 
word ``onset'' in 7 CFR 762.120(a)(2)(iii), 1941.12(a)(8)(ii)(C), and 
1941.12 (b)(11)(ii)(C) to ``designation.''
    Two commentors suggested that loan eligibility under this exception 
be expanded to those who apply for, rather than receive, servicing 
within three years of the disaster or emergency's onset. The concern 
was that implementation of loan servicing may take months or years, and 
that borrowers should not be penalized for delays if they applied for 
loan servicing in a timely fashion. While FSA recognizes that loan 
servicing takes time, it does not adopt this suggestion. The proposal 
would be very difficult to implement since the borrower does not apply 
for all types of debt forgiveness, e.g. debt cancellation from 
bankruptcy or Government loss from payment of a guaranteed loss claim. 
When the debt forgiveness occurs is a brighter line of reference and 
will result in consistent implementation of the loan making policy.
    Two comments suggested that the regulation consider farmers who are 
not more than 30 days past due at the onset of the disaster for this 
exception. Commentors referred to Agency regulations wherein borrowers 
are considered ``past due'' for 30 days after a scheduled payment is 
not made, after which they are considered ``delinquent.'' The Agency 
recently published a rule which eliminates the 30-day past due period 
prior to a borrower becoming delinquent. Therefore, this comment is not 
adopted.
    One comment suggested that this exception be triggered by any type 
of disaster declaration. Section 5319 of the 2002 Act specifically 
refers to ``a major disaster or emergency designated by the President 
under the Robert T. Stafford Disaster Relief and Emergency Assistance 
Act (42 U.S.C. 5121 et seq.)'' when authorizing this exception. The 
Agency must follow the law in defining the applicable disaster; 
therefore, the comment is not adopted.
    One comment suggested that the producer must have been an FSA 
borrower at the time of the designation. This requirement is implicit 
in the regulation because borrowers must have been current on their FSA 
debt before the disaster occurred. Therefore, no change is needed.
    One comment suggested that only primary disaster counties be 
considered for this exception. This comment is not adopted because the 
Consolidated Farm and Rural Development Act section 321(a) (7 U.S.C. 
1961(a)) provides that disaster areas include both primary and 
contiguous counties.
    One comment suggested that the borrower must have been current at 
the time of the Presidential designation, and that this current status 
not be the result of the borrower having their account rescheduled or 
reamortized. This comment is not adopted because it would add 
unnecessary complexity to eligibility determinations and is too 
restrictive in the Agency's opinion. Primary Loan Servicing, which 
includes rescheduling and reamortization, is based on the borrower 
developing a feasible plan, and the delinquency has to be beyond the 
borrower's control. The suggested limitation, therefore, is not 
adopted.
    One comment suggested that the time between the disaster and the 
loss be reduced from three to no more than two years. This comment is 
not adopted because it could often take more than two years for the 
total impact of a disaster to be reflected in the financial performance 
of the operation.
    Another comment suggested that the borrower must have received an 
emergency loan as a result of the disaster to show that the loss was 
significant and contributed to the operation's need for debt 
forgiveness. A similar comment suggested that the borrower document 
that they applied for an emergency loan, Primary Loan Servicing, or 
Disaster Set-Aside as a result of the disaster to qualify for this 
exception. This comment on emergency loans is not adopted because it is 
too restrictive. Currently, interest rates for FSA operating loans are 
lower than the emergency loan rate. It is conceivable, therefore, that 
a farmer could obtain an operating loan rather than an emergency loan, 
but still be impacted by the disaster. This rule, however, does require 
that the borrower receive debt forgiveness, such as Primary Loan 
Servicing, within 10 years of the emergency designation.

Participated in the Business Operations of a Farm or Ranch

    As required by section 5001 of the 2002 Act, this rule revises an 
eligibility requirement for FSA's direct FO loan program. Applicants 
may now be eligible for FO loans if they participated in the business 
operations of a farm or ranch for at least three years, rather than 
having operated a farm or ranch for that length of time. FSA proposed 
to define farm participation consistently with its direct OL program, 
with regard to acceptable farm experience and on-the-job training. The 
participation

[[Page 5261]]

requirement proposed stated that applicants must have (1) owned, 
managed, or operated a farm or ranch business for at least three years 
worth of complete production and marketing cycles; (2) have been 
employed as a farm manager or farm management consultant for at least 
three years worth of complete production and marketing cycles; or (3) 
participated in the operation of a farm or ranch by being raised on or 
working on a farm or ranch and having had significant responsibility 
for the day-to-day decision-making for at least three years' worth of 
complete production and marketing cycles. The proposed rule also 
included a provision limiting the three years of participation to the 
five years prior to the date the loan application is submitted, which 
is consistent with OL eligibility requirements.
    Four comments suggested that the Agency delete specific reference 
to when the participation took place. These commentors argued that this 
part of the rule could adversely affect loan applicants who have 
significant and otherwise qualified experience, but may have been in 
school or the armed services for a period of time before returning to 
farming as a career. One of these commentors recommended that the rule 
be changed to three years in the last eight years. The Agency agrees 
that the five-year limitation is too restrictive and could exclude many 
otherwise eligible applicants from obtaining needed loan funds. Rather 
than delete specific reference to when the participation took place, 
because recent farming experience is still a better indicator of future 
success, the final rule will increase to 10 years the period of time 
when participation in the business operations of a farm could have 
occurred.
    Three comments suggested that the Agency clarify what is meant by 
``significant responsibility for day-to-day decisions.'' Commentors 
suggested that examples of eligibility determination criteria be 
defined in the rule or through administrative notice or handbook, since 
it would be impractical to come up with an exhaustive list for what 
actions constitute ``significant responsibility.'' Commentors also 
recommended that the rule describe the types of documentation (e.g., 
affidavits) that will satisfy eligibility requirements. The Agency 
agrees that it would be impractical to come up with an exhaustive list 
for what actions constitute ``significant responsibility;'' however, 
some examples have been added for clarity. As suggested, FSA will issue 
administrative notices or handbook amendments, as necessary, to provide 
further guidance on these issues.
    One comment recommended FSA consider findings of discrimination by 
the Agency when assessing farming history to determine when the 
applicant's participation took place. The concern was that 
discrimination could have forced the applicant to stop farming and, 
therefore, render the applicant ineligible under this policy. The 
Agency is increasing to 10 years the period of time when participation 
in the business operations of a farm could have occurred. This change 
should alleviate the concern since it allows for more years of no 
farming.
    One comment suggested that the Agency require the three years of 
participation to have occurred after the applicant reaches age 18. This 
comment is not adopted because it is too restrictive and may adversely 
impact beginning farmers without providing any real benefit to the 
applicant or the Agency.

Reamortization of SAA Recapture Debt

    Section 5314 of the 2002 Act authorizes FSA to consider 
reamortization of amortized SAA recapture debt for up to 25 years from 
the date of the original amortization agreement when the borrower 
becomes delinquent on this non-program debt. To be eligible for this 
reamortization, the default must be due to circumstances beyond the 
borrower's control, and the borrower must have acted in good faith in 
attempting to repay the recapture amount. Because such reamortization 
can be considered even when a borrower has no outstanding FSA loans, or 
when the SAA was triggered by all FSA loans being paid in full, FSA is 
amending 7 CFR 1951.901, 1951.907, 1951.909, and 1951.914 to comply 
with this requirement.
    Comments supported the proposed 30-day notification of an 
incomplete application established in Sec. 1951.907(e) for delinquent 
non-program borrowers who have only an SAA. No adverse comments were 
received; therefore, this policy is being adopted as internal Agency 
policy. It is not published in this rule.
    As SAA amortizations are non-program debt, adverse decisions 
regarding these accounts are not appealable, but are reviewable by the 
next level Agency official according to 7 CFR 1951.454. One commentor 
indicated that the proposed language did not clearly refer to these 
review rights. The Agency concurs with the comment and has clarified 
the language in Sec. 1951.909.
    One commentor felt that the Agency should be able to use deferral, 
disaster set-aside, rescheduling, consolidation, and limited resource 
interest rates on SAA amortizations in addition to reamortization. The 
commentor stated that Congress, had that been its intent, could have 
confined restructure to reamortization by referring to 7 U.S.C. 
1991(b)(3)(a). However, that provision of law does, in fact, include 
loan consolidation and rescheduling, and the 2002 Act specifically 
refers to reamortization only. Further, the use of limited resource 
rates would conflict with 7 U.S.C. 2001(e)(7)(C), which specifies how 
the maximum interest rate for SAA amortizations is determined. The 
comment, therefore, is not adopted.
    One commentor referred to language in the Conference Committee 
Report which suggested that the Agency allow appraisal negotiation and 
the use of ``agriculture value'' when determining SAA recapture. 
Appraisal negotiation, whereby two or more appraisals are used to 
obtain a value, however, is required by statute (7 U.S.C. 2001) only 
for Primary Loan Servicing. A borrower who disagrees with the value 
determined by the appraisal for SAA recapture may appeal to the 
National Appeals Division. Thus, the Agency will not implement a multi-
appraisal system. Current appraisal requirements fully comply with 
Federal and state laws, and have not caused any problems. The 
suggestion would increase administrative costs and burden and, thus, is 
not adopted.
    With regard to ``agriculture value'' appraisals, the Agency notes 
that the SAA was established by Congress to protect the interest of the 
taxpayer. In implementing the Consolidated Farm and Rural Development 
Act, the Agency must ensure consistency and comply with all appraisal 
standards. Therefore, only market value appraisals will be used when 
making a determination of SAA recapture. This value is established when 
each SAA contract is executed, represents the true value of the 
property, and reflects the total appreciation the borrower has received 
after having debt forgiven by the Government.

List of Subjects

7 CFR Part 762

    General--Agriculture, Loan programs--Agriculture.

7 CFR Part 1941

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

[[Page 5262]]

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.

0
Accordingly, 7 CFR chapters VII and XVIII are amended as follows:

PART 762--GUARANTEED FARM LOANS

0
1. The authority citation for part 762 continues to read as follows:

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


0
2. Amend Sec. 762.102(b) by adding a definition of ``Presidentially-
designated emergency'' to read as follows:


Sec. 762.102  Abbreviations and definitions.

* * * * *
    (b) Definitions.
* * * * *
    Presidentially-designated emergency. A major disaster or emergency 
designated by the President under the Robert T. Stafford Disaster 
Relief and Emergency Assistance Act (42 U.S.C. 5121 et seq.)
* * * * *

0
3. Amend Sec. 762.120 by revising paragraph (a) to read as follows:


Sec. 762.120  Loan applicant eligibility.

* * * * *
    (a) Agency loss. (1) Except as provided in paragraph (a)(2) of this 
section, the applicant, and anyone who will execute the promissory 
note, has not caused the Agency a loss by receiving debt forgiveness on 
all or a portion of any direct or guaranteed loan made under the 
authority of the CONACT by debt write-down or write-off; compromise, 
adjustment, reduction, or charge-off under the provisions of section 
331 of the CONACT; discharge in bankruptcy; or through payment of a 
guaranteed loss claim on:
    (i) More than three occasions on or prior to April 4, 1996; or
    (ii) Any occasion after April 4, 1996.
    (2) The applicant may receive a guaranteed OL to pay annual farm 
and ranch operating and family living expenses, provided the applicant 
meets all other requirements for the loan, if the applicant and anyone 
who will execute the promissory note:
    (i) Received a write-down under section 353 of the CONACT;
    (ii) Is current on payments under a confirmed reorganization plan 
under chapter 11, 12, or 13 of title 11 of the United States Code; or
    (iii) Received debt forgiveness on not more than one occasion after 
April 4, 1996, resulting directly and primarily from a Presidentially-
designated emergency for a county or contiguous county in which the 
applicant operates. Only applicants who were current on all existing 
direct and guaranteed FSA loans prior to the beginning date of the 
incidence period for a Presidentially-designated emergency and received 
debt forgiveness on that debt within three years after the designation 
of such emergency meet this exception.
* * * * *

PART 1941--OPERATING LOANS

0
4. The authority citation for part 1941 continues to read as follows:

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

Subpart A--Operating Loan Policies, Procedures and Authorizations

0
5. Amend Sec. 1941.4 by adding a definition of ``Presidentially-
designated emergency'' to read as follows:


Sec. 1941.4  Definitions.

* * * * *
    Presidentially-designated emergency. A major disaster or emergency 
designated by the President under the Robert T. Stafford Disaster 
Relief and Emergency Assistance Act (42 U.S.C. 5121 et seq.).
* * * * *

0
6. Amend Sec. 1941.12 by revising paragraphs (a)(8) and (b)(11) to read 
as follows:


Sec. 1941.12  Eligibility requirements.

    (a) * * *
    (8) Agency loss. (i) Except as provided in paragraph (a)(8)(ii) of 
this section, the applicant, and anyone who will execute the promissory 
note, has not caused the Agency a loss by receiving debt forgiveness on 
all or a portion of any direct or guaranteed loan made under the 
authority of the CONACT by debt write-down or write-off; compromise, 
adjustment, reduction, or charge-off under the provisions of section 
331 of the CONACT; discharge in bankruptcy; or through payment of a 
guaranteed loss claim.
    (ii) The applicant may receive a direct OL loan to pay annual farm 
and ranch operating and family living expenses, provided the applicant 
meets all other requirements for the loan, if the applicant and anyone 
who will execute the promissory note:
    (A) Received a write-down under section 353 of the CONACT;
    (B) Is current on payments under a confirmed reorganization plan 
under chapter 11, 12, or 13 of title 11 of the United States Code; or
    (C) Received debt forgiveness on not more than one occasion after 
April 4, 1996, resulting directly and primarily from a Presidentially-
designated emergency for a county or contiguous county in which the 
applicant operates. Only applicants who were current on all existing 
direct and guaranteed FSA loans prior to the beginning date of the 
incidence period of a Presidentially-designated emergency and received 
debt forgiveness on that debt within three years after the designation 
of such emergency meet this exception.
* * * * *
    (b) * * *
    (11) Agency loss. (i) Except as provided in paragraph (b)(11)(ii) 
of this section, the applicant, and anyone who will execute the 
promissory note, has not caused the Agency a loss by receiving debt 
forgiveness on all or a portion of any direct or guaranteed loan made 
under the authority of the CONACT by debt write-down or write-off; 
compromise, adjustment, reduction, or charge-off under the provisions 
of section 331 of the CONACT; discharge in bankruptcy; or through 
payment of a guaranteed loss claim.
    (ii) The applicant may receive a direct OL loan to pay annual farm 
and ranch operating and family living expenses, provided the applicant 
meets all other requirements for the loan, if the applicant and anyone 
who will execute the promissory note:
    (A) Received a write-down under section 353 of the CONACT;
    (B) Is current on payments under a confirmed reorganization plan 
under chapter 11, 12, or 13 of title 11 of the United States Code; or
    (C) Received debt forgiveness on not more than one occasion after 
April 4, 1996, resulting directly and primarily from a Presidentially-
designated emergency for a county or contiguous county in which the 
applicant operates. Only applicants who were current on all existing 
direct and guaranteed FSA loans prior to the beginning date of the 
incidence period of a Presidentially-designated emergency and received 
debt forgiveness on that debt within three years after the designation 
of such emergency meet this exception.
* * * * *

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

0
7. The authority citation for part 1943 continues to read as follows:

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

[[Page 5263]]

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

0
8. Amend Sec. 1943.4 by adding a definition of ``participated in the 
business operations of a farm or ranch'' to read as follows:


Sec. 1943.4  Definitions.

* * * * *
    Participated in the business operations of a farm or ranch. An 
applicant has participated in the business operations of a farm or 
ranch if the applicant has:
    (1) Been the owner, manager or operator of a farm business for the 
year's complete production and marketing cycle as evidenced by tax 
returns, FSA farm records or similar documentation;
    (2) Been employed as a farm manager or farm management consultant 
for the year's complete production and marketing cycle; or
    (3) Participated in the operation of a farm by virtue of being 
raised on a farm or having worked on a farm with significant 
responsibility for the day-to-day decisions for the year's complete 
production and marketing cycle, which may include selection of seed 
varieties, weed control programs, input suppliers, or livestock feeding 
programs or decisions to replace or repair equipment.
* * * * *

0
9. Amend Sec. 1943.12 by revising the introductory text in paragraphs 
(a)(6) and (b)(8) to read as follows:


Sec. 1943.12  Farm ownership loan eligibility requirements.

    (a) * * *
    (6) Have participated in the business operations of a farm or ranch 
for at least 3 years out of the 10 years prior to the date the 
application is submitted and satisfy at least one of the following 
conditions:
* * * * *
    (b) * * *
    (8) Have one or more members, constituting a majority interest in 
the business entity, who have participated in the business operations 
of a farm or ranch for at least 3 years out of the 10 years prior to 
the date the application is submitted and satisfy at least one of the 
following conditions:
* * * * *

PART 1951--SERVICING AND COLLECTIONS

0
10. 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 S--Farm Loan Programs Account Servicing Policies

0
11. Amend Sec. 1951.901 by revising the third sentence to read as 
follows:


Sec. 1951.901  Purpose.

    * * * Shared Appreciation amortized payments (SA) may be 
reamortized in accordance with Sec.Sec. 1951.907(e), 1951.909(c)(6) and 
1951.909(e)(2). * * *
* * * * *

0
12. In Sec. 1951.907, remove the second sentence and revise the third 
sentence of paragraph (c) introductory text, redesignate paragraph (e) 
as (f) and add a new paragraph (e) to read as follows:


Sec. 1951.907  Notice of loan service programs.

* * * * *
    (c) * * * Delinquent borrowers who have also violated their loan 
agreements with the agency will be handled in accordance with paragraph 
(d) of this section. * * *
* * * * *
    (e) The Agency will notify delinquent NP borrowers who have only SA 
amortization agreements within 15 days of the missed payment of their 
rights with regard to the debt. All items in paragraph (f)(5) of this 
section, with the exception of Attachments 2 or 4 of exhibit A and 
information for conservation contracts or debt settlement, must be 
submitted within 60 days of such notice for the borrower to be 
considered for reamortization.
* * * * *

0
13. Amend Sec. 1951.909 by adding a new paragraph (c)(6) and revising 
the heading of (e)(2) to read as follows.


Sec. 1951.909  Processing primary loan service program requests.

* * * * *
    (c) * * *
    (6) Non-Program borrowers who have only SA amortization agreements 
must meet the requirements in paragraph (c)(1) of this section, have 
acted in good faith in attempting to repay the recapture amount, and 
develop a feasible plan. Borrowers who are not eligible under this 
paragraph will be notified of the adverse decision. After review rights 
are provided in accordance with Sec. 1951.454, the account will be 
liquidated in accordance with Sec. 1951.468.
* * * * *
    (e) * * *
    (2) Reamortization of FO, SW, RL, RHF, EE, or EM loans made for 
real estate purposes and SA amortization agreements. * * *
* * * * *

0
14. Amend Sec. 1951.914 by revising paragraphs (e) introductory text 
and (e)(11) to read as follows:


Sec. 1951.914  Servicing shared appreciation agreements.

* * * * *
    (e) Shared appreciation amortization. Shared appreciation due under 
this section may be amortized to a Non-program amortized payment unless 
the amount is due because of acceleration or the borrower ceases 
farming. The amount due may be amortized as an SA amortized payment 
under the following conditions:
* * * * *
    (11) If a borrower with an SA amortized payment also has 
outstanding Farm Loan Programs loan and becomes delinquent or 
financially distressed in accordance with Sec. 1951.906 or if a 
borrower with an SA amortized payment has no outstanding Farm Loan 
Programs loan and becomes delinquent on the SA amortized payment, the 
SA payment agreement may be reamortized in accordance with Sec. 
1951.909.
* * * * *

    Dated: January 29, 2004.
J.B. Penn,
Under Secretary for Farm and Foreign Agricultural Services.
    Dated: January 16, 2004.
Gilbert Gonzalez,
Under Secretary for Rural Development.
[FR Doc. 04-1793 Filed 2-3-04; 8:45 am]
BILLING CODE 3410-05-P