[Federal Register Volume 72, Number 176 (Wednesday, September 12, 2007)]
[Rules and Regulations]
[Pages 51988-51990]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-18032]


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DEPARTMENT OF AGRICULTURE

Farm Service Agency

7 CFR Part 770

RIN 0560-AG87


Indian Tribal Land Acquisition Program Loan Writedowns

AGENCY: Farm Service Agency, USDA.

ACTION: Final rule.

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SUMMARY: This rule revises the Farm Service Agency (FSA) Indian Tribal 
Land Acquisition Program (ITLAP) regulations as required by the Native 
American Technical Corrections Act of 2006. The regulations pertaining 
to rental value write-down of ITLAP loans will not require a market 
value rent study where the land is actually rented. The actual rents 
received shall be used to determine the rental value of the property 
for write-down purposes.

DATES: Effective Date: October 12, 2007.

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 revises the write-down servicing regulations of the Farm 
Service Agency's (FSA) Indian Tribal Land Acquisition Loan Program 
(ITLAP) to comply with section 203 of the Native American Technical 
Corrections Act of 2006, Public Law 109-221 (25 U.S.C. 494a) 
(``NATCA'').

A. Background

    ITLAP loans assist Native American tribes or tribal corporations 
with the acquisition of land interests within the tribal reservation or 
in an Alaskan community as set out in 7 CFR part 770. Loan funds may be 
used to acquire land, land interests and appurtenances which will be 
used for the benefit of the tribe or its members, pay costs for loan 
closing, and refinance non-USDA debts the applicant incurred to 
purchase the land in certain situations. During the life of the ITLAP 
loan the borrower has a number of servicing options available based on 
changes in their loan status. The servicing options available depend on 
each borrower's circumstances and can include reamortization, 
consolidation, interest rate reduction, deferral, land exchanges, debt 
writedown, release of reserve accounts, or a combination thereof.

B. Writedown Requirements

    Under 7 CFR 770.10(e) the Agency may reduce the unpaid principal 
and interest on an ITLAP loan based, in part, on the land sale value or 
rental value of

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the ITLAP property. The option used is as requested by the borrower or, 
if it requests both, the write-down is based on which option provides 
the greatest debt reduction. To be eligible for either writedown option 
the borrower must be in a persistent poverty county, have a per capita 
income for individual enrolled tribal members of less than 50 percent 
of the Federal poverty income rate, and have a tribal unemployment rate 
in excess of 50 percent.
    In a rental value write-down, FSA reduces the unpaid principal and 
interest on the loan approved for the writedown so that the annual loan 
payment for the remaining term of each loan equals the average of 
annual rental value of the land purchased with the loan. The rental 
value writedown option was provided along with a few other changes to 
ITLAP regulations in a final rule published on February 11, 2005 (70 FR 
7165). For determining the value of the property, that rule replaced 
the requirement for a full appraisal (i.e., combining comparable sales, 
income, and cost approaches) with a requirement for a study of the 
rental income of properties similar to and near the land purchased with 
ITLAP funds. See 7 CFR 770.2 and 770.10(e)(4).

C. Changes Required by the NATCA

    Section 203 of the NATCA (effective May 12, 2006) provides:

    Notwithstanding any other provision of law, any actual rental 
proceeds from the lease of land acquired under * * * [ITLAP program 
authority] (25 U.S.C. 488) certified by the Secretary of the 
Interior shall be deemed--
    (1) To constitute the rental value of that land; and
    (2) To satisfy the requirement for appraisal of that land.

    Thus, this rule amends the definition of ``rental value'', as it 
pertains to ITLAP, to provide that actual rents received will be used 
to determine the average rental value and the amount of write-down, 
rather than market rent, in accordance with the statute. Five years of 
data will be requested and yield the most reliable average, but the 
Agency will accept fewer years data if that is all that is available. 
If no actual rents have been received, then the borrower must provide a 
5-year market value rent study. The economic and other effects of this 
change are difficult to estimate; however, it likely will reduce the 
borrower's costs, eliminate the time required to complete an appraisal, 
and reduce FSA's application processing time. On the other hand, the 
administrative costs to the Government will likely increase due to the 
change in calculating the amount of debt to be forgiven by rental value 
write-down.

D. Summary of Economic Impacts

    Under the new write-down rules required under Section 203 of the 
NATCA, ITLAP borrowers will be able to use a 5-year average of actual 
rental income received on the land purchased with the ITLAP loan to 
determine any write-down amount requested. This provision increases the 
likelihood that principal and accrued interest write-downs will occur 
in the program and that higher ITLAP loan subsidy rates will follow. 
FSA estimates that a total of 3 current ITLAP borrowers will meet the 
new write-down criteria and the estimated costs of this rule are based 
upon the assumption that all 3 borrowers are likely to take advantage 
of the lower standards imposed by NATCA. These 3 borrowers owe 
approximately $20 million on loans that originally totaled $31 million. 
FSA estimates the taxpayer costs will increase by as much as $5 million 
as a result of write-downs to these 3 borrowers. Furthermore, future 
taxpayer costs are expected to increase slightly as a result of higher 
subsidy costs resulting from higher loan losses.
Notice and Comment
    The notice and comment provisions of 5 U.S.C. 553 and the Statement 
of Policy of the Secretary of Agriculture effective July 24, 1971, (36 
FR 13804), relating to notices of proposed rulemaking and public 
participation in rulemaking, provide that certain rules may go forward 
without public notice and comment when they are in the public interest. 
This regulation adopts changes mandated in the NATCA Section 203. 
Accordingly, this rule is published without requesting public comment 
and will be effective 30 days after publication in the Federal 
Register.

Executive Order 12866

    This rule has been determined under Executive Order 12866 to be 
significant and was reviewed by the Office of Management and Budget.

Regulatory Flexibility Act

    In accordance with the Regulatory Flexibility Act (RFA), 5 U.S.C. 
601, the Agency has determined that there will be no significant 
economic impact on a substantial number of small entities. There are 
currently 24 ITLAP borrowers with 105 loans totaling $52 million. 
However, only about four are likely to be affected by this rule. The 
RFA requires agencies to consider the impact of their regulatory 
proposals on small entities, minimize small entity impacts, and provide 
their analyses for public comment. This rule affects Indian Tribes, and 
such Tribes are not small businesses as defined by and subject to the 
Regulatory Flexibility Act. Nevertheless, this rule provides a 
substantial reduction in cost to Tribes applying for debt write-down. 
Thus, to the extent an Indian Tribe may be affected by this rule, there 
are no negative impacts.

Environmental Evaluation

    The environmental impacts of this rule have been considered 
consistent 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 part 1940, subpart G. FSA 
has determined that this rule will not have a significant impact on the 
human or natural environment and therefore requires no further 
environmental review.

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 parts 11 and 
780 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 of expenditures of $100 million or more in any one year. 
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

[[Page 51990]]

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.

Paperwork Reduction Act

    The information collections were previously approved under OMB 
control number 0560-0198, but the package was retired since there are 
less than ten respondents annually and the collections are, therefore, 
not subject to the Paperwork Burden Act. The number of estimated annual 
respondents is not increased by this rule.

Federal Assistance Program

    The changes affect the following program listed in the Catalog of 
Federal Domestic Assistance: 10.421--Indian Tribes and Tribal 
Corporation Loans.

List of Subjects in 7 CFR Part 770

    Agriculture, Credit, Indians, Rural areas, Loan programs.

0
Accordingly, for the reasons stated in the preamble, 7 CFR part 770 is 
amended as follows:

PART 770--INDIAN TRIBAL LAND ACQUISITION LOANS

0
1. The authority citation for part 770 is revised to read as follows:

    Authority: 5 U.S.C. 301, 25 U.S.C. 488.


0
2. Amend Sec.  770.2 by revising the definition of ``rental value'' in 
paragraph (b) to read as follows:


Sec.  770.2  Abbreviations and definitions.

* * * * *
    (b) * * *
    Rental value for the purpose of rental value write-downs, equals 
the average actual rental proceeds received from the lease of land 
acquired under ITLAP. If there are no rental proceeds, then rental 
value will be based on market data according to Sec.  770.10(e)(4).
* * * * *

0
3. Amend Sec.  770.10 by revising paragraph (e)(4)(iii) to read as 
follows:


Sec.  770.10  Servicing.

* * * * *
    (e) * * *
    (4) * * *
    (iii) The borrower provides a record of any actual rents received 
for the land for the preceding 5 years, which will be used to calculate 
the average rental value. This record must be certified by the 
Department of the Interior. For land that has not been leased or has 
not received any rental income, the borrower must provide a market 
value rent study report for the preceding 5 years, which identifies the 
average annual rental value based on the market data. The market value 
rent study report must be prepared by a certified general appraiser and 
meet the requirements of USPAP.
* * * * *

    Signed in Washington, DC, on September 6, 2007.
Teresa C. Lasseter,
Administrator, Farm Service Agency.
[FR Doc. E7-18032 Filed 9-11-07; 8:45 am]
BILLING CODE 3410-05-P