[Federal Register Volume 73, Number 183 (Friday, September 19, 2008)]
[Rules and Regulations]
[Pages 54305-54307]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-22003]


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DEPARTMENT OF AGRICULTURE

Rural Business-Cooperative Service

7 CFR Parts 1951 and 4274

RIN: 0570-AA70


Intermediary Relending Program

AGENCY: Rural Business-Cooperative Service, USDA.

ACTION: Direct final rule.

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SUMMARY: The Rural Business-Cooperative Service (RBS) amends its 
regulations for the Intermediary Relending Program (IRP). This action 
is needed to address several contradictions between the servicing and 
processing regulations. The intended effect of this action is to 
incorporate consistent language in both regulations as it relates to 
loan limits for ultimate recipients, eligible vs. ineligible uses of 
funds, and include a requirement on the extent to which ultimate 
recipients are assisted by the loans made. The changes will result in 
eliminating inconsistencies within the regulations and provide clarity 
and guidance that will allow the program to operate more efficiently 
and effectively.

DATES: This direct final rule is effective November 3, 2008, unless 
USDA Rural Development receives written adverse comments or written 
notice of intent to submit adverse comments on or before October 20, 
2008. If USDA Rural Development receives such comments or notice, USDA 
Rural Development will publish a timely document in the Federal 
Register withdrawing the direct final rule.

ADDRESSES: You may submit adverse comments or notice of intent to 
submit adverse comments to this rule by any of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Mail: Submit written comments via the U.S. Postal Service 
to the Branch Chief, Regulations and Paperwork Management Branch, U.S. 
Department of Agriculture, STOP 0742, 1400 Independence Avenue, SW., 
Washington, DC 20250-0742.
     Hand Delivery/Courier: Submit written comments via Federal 
Express Mail or other courier service requiring a street address to the 
Branch Chief, Regulations and Paperwork Management Branch, U.S. 
Department of Agriculture, 300 7th Street, SW., 7th Floor, Washington, 
DC 20024.
    All written comments will be available for public inspection during 
regular work hours at 300 7th Street, SW., 7th Floor address listed 
above.

FOR FURTHER INFORMATION CONTACT: Lori A. Washington, Loan Specialist, 
Specialty Lenders Division, Rural Business-Cooperative Service, U.S. 
Department of Agriculture, STOP 3225, 1400 Independence Ave., SW., 
Washington, DC 20250-3225, Telephone (202) 720-9815, E-mail 
[email protected].

SUPPLEMENTARY INFORMATION:

Classification

    This rule has been determined to be not significant for purposes of 
Executive Order 12866 and has been reviewed by the Office of Management 
and Budget (OMB).

Programs Affected

    The Catalog of Federal Domestic Assistance number for the program 
impacted by this action is 10.767, Intermediary Relending Program.

Intergovernmental Review

    The IRP is subject to the provisions of Executive Order 12372, 
which requires intergovernmental consultation with State and local 
officials. USDA Rural Development has conducted intergovernmental 
consultation in the manner delineated in RD Instruction 1940-J, 
``Intergovernmental Review of Rural Development Programs and 
Activities,'' and in 7 CFR part 3015, subpart V.

Civil Justice Reform

    This direct final rule has been reviewed under Executive Order 
12988, Civil Justice Reform. In accordance with this rule: (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 this 
rule, and (3) administrative proceedings in accordance with the 
regulations of the Agency at 7 CFR part 11 must be exhausted before 
bringing suit in court challenging action taken under this rule unless 
those regulations specifically allow bringing suit at an earlier time.

Environmental Impact Statement

    This document has been reviewed in accordance with 7 CFR Part 1940, 
Subpart G, ``Environmental Program.'' USDA Rural Development has 
determined that this action does not constitute a major Federal action 
significantly affecting the quality of the human environment, and, in 
accordance with the National Environmental Policy Act of 1969, Public 
Law 91-190, an Environmental Impact Statement is not required.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public 
Law 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, USDA 
Rural Development 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 1 year. When such a statement is needed for a rule, 
section 205 of UMRA generally requires USDA Rural Development 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

[[Page 54306]]

provisions of Title II of the UMRA) for State, local, and tribal 
governments or the private sector. Thus, this rule is not subject to 
the requirements of sections 202 and 205 of UMRA.

Regulatory Flexibility Act

    In compliance with the Regulatory Flexibility Act, USDA Rural 
Development has determined that this action would not have a 
significant economic impact on a substantial number of small entities 
because the action will not affect a significant number of small 
entities as defined by the Regulatory Flexibility Act (5 U.S.C. 601). 
USDA Rural Development made this determination based on the fact that 
this regulation only impacts those who choose to participate in the 
program. Small entity applicants will not be impacted to a greater 
extent than large entity applicants. Therefore, a regulatory impact 
analysis was not performed.

Executive Order 13132, Federalism

    It has been determined under Executive Order 13132, Federalism, 
that this rule does not have sufficient federalism implications to 
warrant the preparation of a Federalism Assessment. The provisions 
contained in this rule will not have a substantial direct effect on 
States or their political subdivisions or on the distribution of power 
and responsibilities among the various levels of Government.

Paperwork Reduction Act

    This rule does not revise or impose any new information collection 
or recordkeeping requirements.

E-Government Act Compliance

    USDA Rural Development is committed to complying with the E-
Government Act, to promote the use of the Internet and other 
information technologies to provide increased opportunities for citizen 
access to Government information and services, and for other purposes.

Background

    A recent Management Control Review of the program identified 
contradictions between the processing (7 CFR part 4274, subpart D) and 
servicing (7 CFR part 1951, subpart R) regulations. USDA Rural 
Development is correcting inconsistencies in the following areas: (1) 
Eligible and ineligible loan purposes; (2) ineligible borrowers; and 
(3) the definition of ``rural area.'' The following clarifications are 
being made (1) setting the level of ultimate recipient loan assistance; 
and (2) establishing when debt refinancing should be considered. We are 
also deleting references to churches which precluded charitable and 
faith-based institutions from participating in the program in order to 
align it with current Departmental policies. We are also requiring an 
annual report on the extent to which increased employment, income and 
ownership opportunities are provided to low-income persons, farm 
families, and displaced farm families for each loan made by an 
intermediary.

List of Subjects

7 CFR Part 1951

    Loan programs--Agriculture, rural areas.

7 CFR Part 4274

    Community development, Economic development, Loan programs--
Business, Rural areas.

0
For reasons set forth in this preamble, chapters XVIII and XLII, title 
7, Code of Federal Regulations, are amended as follows:

CHAPTER XVIII--RURAL HOUSING SERVICE, RURAL BUSINESS-COOPERATIVE 
SERVICE, RURAL UTILITIES SERVICE, AND FARM SERVICE AGENCY, 
DEPARTMENT OF AGRICULTURE

PART 1951--SERVICING AND COLLECTIONS

0
1. 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; 301 
U.S.C. 3716; 42 U.S.C. 1480.

Subpart R--Rural Development Loan Servicing

0
2. Section 1951.853 is amended by adding paragraph (b)(2)(xi) to read 
as follows:


Sec.  1951.853  Loan purposes for undisbursed RDLF loan funds from HHS.

* * * * *
    (b) * * *
    (2) * * *
    (xi) Debt refinancing if the following conditions are met.
    (A) Intermediary is responsible for determining whether debt 
restructuring is in the best interest of the revolving loan fund.
    (B) Refinancing debts will be allowed only when it is determined by 
the intermediary that the project is viable and refinancing is 
necessary to create new or save existing jobs or create or continue a 
needed service; and
    (C) On any request for refinancing of a secured loan, the 
intermediary must obtain the previously held collateral as security and 
must not pay off a creditor in excess of the value of the collateral. 
Additional collateral will be required when the refinancing of an 
unsecured loan is unavoidable to accomplish the necessary strengthening 
of the ultimate recipient's position.
0
3. Section 1951.854 is amended by removing paragraphs (b)(7) and (b)(8) 
and revising paragraph (a) to read as follows:


Sec.  1951.854  Ineligible assistance purposes.

    (a) Intermediaries. Intermediary loans may not be used by the 
intermediary for any of the following purposes:
    (1) For payment of the intermediary's own administrative costs or 
expenses.
    (2) For assistance in excess of what is needed to accomplish the 
purpose of the ultimate recipient project.
    (3) For distribution or payment to the owner, partners, 
shareholders, or beneficiaries of the ultimate recipient or members of 
their families when such persons will retain any portion of their 
equity in the ultimate recipient.
    (4) For charitable institutions, that would not have revenue from 
sales, fees, or stable revenue to support the operation and repay the 
loan, and fraternal organizations.
    (5) For assistance to Federal government employees, active duty 
military personnel, employees of the intermediary, or any organization 
for which such persons are directors or officers or have 20 percent or 
more ownership.
    (6) For relending in a non-rural area.
    (7) For a loan to an ultimate recipient which has an application 
pending with, or a loan outstanding from, another intermediary 
involving an IRP revolving fund if the total IRP loans would exceed the 
limits established in Sec.  4274.331(b).
    (8) For any line of credit.
    (9) For lending and investment institutions and insurance 
companies.
    (10) For golf courses, race tracks, or gambling facilities.
    (11) To finance more than 75 percent or more than $250,000 of an 
ultimate recipient's total project cost, as described in Sec.  
4274.331(b). The total amount of RDLF funds requested by the ultimate 
recipient plus the outstanding balance of any existing RDLF loan(s) 
will not exceed $150,000. This limit does not apply to revolved funds. 
Other loans, grants, or intermediary or ultimate recipient 
contributions or funds from other sources must be used to make up the 
difference between the total cost and the assistance provided with RDLF 
funds.
    (12) For any investments in securities or certificates of deposit 
of over 30-day

[[Page 54307]]

duration without the concurrence of Rural Development. If the IRP funds 
have been unused to make loans to ultimate recipients for 6 months or 
more, those funds will be returned to Rural Development unless Rural 
Development provides an exception to the intermediary. Any exception 
would be based on evidence satisfactory to Rural Development that every 
effort is being made by the intermediary to utilize the IRP funding in 
conformance with program objectives.

CHAPTER XLII--RURAL BUSINESS-COOPERATIVE SERVICE AND RURAL 
UTILITIES SERVICE, DEPARTMENT OF AGRICULTURE

PART 4274--DIRECT AND INSURED LOANMAKING

0
4. The authority citation for part 4274 continues to read as follows:

    Authority: 5 U.S.C. 301; 7 U.S.C. 1932 note; 7 U.S.C. 1989.

Subpart D--Intermediary Relending Program (IRP)

0
5. Section 4274.314 is amended by revising paragraph (b)(10)(i) and by 
adding paragraph (b)(15) to read as follows:


Sec.  4274.314  Loan purposes.

* * * * *
    (b) * * *
    (10) * * *
    (i) The intermediary is responsible for making prudent lending 
decisions based on sound underwriting principles when considering the 
restructuring of an ultimate recipient's debt; and
* * * * *
    (15) Aquaculture-based rural small businesses.
0
6. Section 4274.319 is amended by revising paragraphs (c) and (d) and 
by adding paragraphs (m) and (n) to read as follows:


Sec.  4274.319  Ineligible loan purposes.

* * * * *
    (c) Charitable institutions, that would not have revenue from 
sales, fees, or stable revenue to support the operation and repay the 
loan, and fraternal organizations.
    (d) Assistance to Federal government employees, active duty 
military personnel, employees of the intermediary, or any organization 
for which such persons are directors or officers or have 20 percent or 
more ownership.
* * * * *
    (m) For any line of credit.
    (n) For any legitimate business activity when more than 10 percent 
of the annual gross revenue is derived from legalized gambling 
activity.
0
7. Section 4274.338 is amended by adding paragraph (b)(4)(ii)(D) to 
read as follows:


Sec.  4274.338  Loan agreements between the Agency and the 
intermediary.

* * * * *
    (b) * * *
    (4) * * *
    (ii) * * *
    (D) An annual report on the extent to which increased employment, 
income and ownership opportunities are provided to low-income persons, 
farm families, and displaced farm families for each loan made by such 
intermediary.

    Dated: September 12, 2008.
Ben Anderson,
Administrator, Rural Business-Cooperative Service.
[FR Doc. E8-22003 Filed 9-18-08; 8:45 am]
BILLING CODE 3410-XY-P