[Federal Register Volume 76, Number 101 (Wednesday, May 25, 2011)]
[Rules and Regulations]
[Pages 30246-30250]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-12785]


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FARM CREDIT ADMINISTRATION

12 CFR Part 614

RIN 3052-AC62


Loan Policies and Operations; Loan Purchases From FDIC

AGENCY: Farm Credit Administration.

ACTION: Final rule.

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SUMMARY: The Farm Credit Administration (FCA or we) issues this final 
rule to amend its regulations on loan policies and operations. This 
final rule will permit Farm Credit System (System or FCS) institutions 
with direct lending authority to purchase from the Federal Deposit 
Insurance Corporation (FDIC) loans to farmers, ranchers, producers or 
harvesters of aquatic products and cooperatives that meet eligibility 
and scope of financing requirements. This will allow the System to 
provide liquidity and a stable source of funding and credit for 
borrowers of eligible agricultural loans in rural areas affected by the 
failure of their lending institution.

DATES: This regulation will be effective 30 days after publication in 
the Federal Register during which either or both Houses of Congress are 
in session. We will publish a notice of the effective date in the 
Federal Register.

FOR FURTHER INFORMATION CONTACT: 

Mark L. Johansen, Senior Policy Analyst, Office of Regulatory Policy, 
Farm Credit Administration, McLean, VA 22102-5090, (703) 883-4498, TTY 
(703) 883-4434, or
Mary Alice Donner, Senior Counsel, Office of General Counsel, Farm 
Credit Administration, McLean, VA 22102-5090, (703) 883-4020, TTY (703) 
883-4020.

SUPPLEMENTARY INFORMATION: 

I. Background

    Agriculture and rural sectors in the United States are adversely 
affected by bank failures and the resultant depressed local economies. 
Many commercial banks are active in agricultural and cooperative 
lending and, when they fail, farmers, ranchers, producers or harvesters 
of aquatic products, and cooperatives can be left seeking new lenders 
to meet their ongoing credit needs. Representatives from the FDIC, the 
System, and others have asked whether System institutions, directly or 
in partnership with other market participants, could provide a source 
of credit and liquidity to borrowers whose operations are financed with 
agricultural or cooperative loans affected by commercial bank 
failures.\1\
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    \1\ System institutions are federally chartered, cooperatively 
owned corporations authorized under titles I, II, and III of the 
Farm Credit Act of 1971, as amended (Act), to make long-term 
mortgage and short- and intermediate-term production loans to 
farmers, ranchers, aquatic producers or harvesters, and, in the case 
of banks for cooperatives, to eligible cooperative associations. See 
12 U.S.C. 2001 et seq.
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    On May 18, 2010, the FCA published a Notice of Proposed Rulemaking 
(NPRM) to amend FCA regulations governing purchase and sale of 
interests in loans (75 FR 27660). The proposed rule would allow System 
institutions to purchase certain agricultural or cooperative loans of 
failed commercial

[[Page 30247]]

banks from the FDIC. The FCA initially established a 60-day comment 
period but, on the request of the public, reopened the comment period 
for another 30 days (75 FR 56487, Sept. 16, 2010).\2\
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    \2\ The reopened comment period for the proposed rule closed on 
October 18, 2010.
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    After reviewing the comments, the FCA is adopting this final rule 
with two changes from the proposed rule. First, the FCA originally 
proposed a due diligence process in which a System institution would 
conduct a preliminary review of loans for eligibility prior to 
purchase, conduct a more thorough due diligence review after purchase, 
and divest ineligible loans. In response to the comments, FCA now 
modifies the final rule to eliminate the two-tiered due diligence 
process and to authorize only the purchase of agricultural loans that 
are eligible for System financing. Second, in response to comments 
concerning the need for the rule and those raising concerns on the 
safety and soundness of acquiring failed bank loans and out-of-
territory loans, the final rule requires System institutions to provide 
information on loans made under authority of this section to FCA in the 
Reports of Condition and Performance.

II. Purpose of the Rule

    FCA regulations currently provide that a System institution may not 
purchase an interest in a loan from a non-System institution except for 
the purpose of pooling and securitizing loans to sell to the Federal 
Agricultural Mortgage Corporation unless the interest is a 
participation interest.\3\ As a result, System institutions are not 
currently authorized to buy loans from the FDIC. However, the Farm 
Credit Act of 1971, as amended (Act), does not prohibit System 
institutions from purchasing eligible loans from the FDIC. This rule 
will allow System institutions, directly or in partnership with other 
market participants, to purchase loans of failed banks from the FDIC 
acting as receiver or in any other capacity, when those loans meet 
eligibility and scope of financing requirements under titles I, II and 
III of the Act. System institutions will be able to provide a source of 
credit and liquidity to borrowers whose operations are financed with 
System eligible agricultural or cooperative loans affected by 
commercial bank failures.
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    \3\ 12 CFR 614.4325(b).
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III. Discussion of Comments

    We received approximately 94 comment letters from commercial banks 
and their trade groups, the Farm Credit Council, a few System 
institutions and individuals. All non-System entities opposed the 
proposed rule while the System entities supported it. The Independent 
Community Bankers of America (ICBA) submitted a comment letter dated 
October 18, 2010, in which it discusses the results of a survey it 
conducted of over 2000 agricultural banks to determine their opinions 
on the proposed rule. We treat the ICBA's summary of the results of its 
survey and all discussion of it as a comment of the ICBA. We discuss 
all relevant comments to our proposed rule and our responses below. 
Those areas of the proposed rule not receiving comment are finalized as 
proposed unless otherwise discussed in this preamble.

A. Legal Authority for the Rule

    Most of the non-System commenters objected that the rule gives 
System institutions authority beyond that granted by Congress and 
expands the Farm Credit mission beyond the intent of the Act. These 
commenters contend that the Act expressly identifies the limited 
authority of System institutions to buy, sell and participate in non-
System loans. They opine that the FDIC is comparable to a non-System 
lender and that Federal law does not grant authority to System 
institutions to purchase loans from non-System lenders. They object 
that ineligible loans that are distressed would remain in the FCS and 
borrowers could get the benefit of borrower rights. They state that by 
providing restructuring to ineligible distressed loans and financial 
services to ineligible borrowers, the FCA contravenes the Act. A few 
commenters contend that the FCA is suggesting that all powers not 
denied by Congress are therefore granted by Congress, and that this is 
disingenuous because obviously Congress cannot foresee all potential 
lending activities.
    Several System institutions commented that the FCA should authorize 
System institutions to purchase loans from FDIC successor banks, to 
purchase whole loans from non-System entities whenever it would benefit 
rural America, or that the FCA should allow the purchase of interests 
in all eligible loans.
    FCA response. We do not agree that the proposed rule contravenes 
the Act. Section 1.5(5) of the Act gives Farm Credit Banks the 
authority to acquire, hold, dispose and otherwise exercise all the 
usual incidents of ownership of real and personal property necessary or 
convenient to its business,\4\ and section 1.5(15) of the Act gives 
Farm Credit Banks authority to buy and sell obligations of, or insured 
by the United States or any agency thereof, and to make other 
investments as may be authorized under regulation issued by the FCA.\5\ 
System institutions have the specific authority to make eligible loans, 
and to participate in eligible loans with non-System lenders. While 
these provisions of the Act do not specifically identify the System's 
authority to buy eligible loans from the FDIC, an eventuality not 
contemplated by Congress at the time, they do set forth the parameters 
of the System's authority upon which the FCA relies in this rule.
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    \4\ See sections 2.2(5) and 2.12(5) of the Act for parallel 
authority with respect to Farm Credit associations.
    \5\ See sections 2.2(11) and 2.12(17) of the Act for parallel 
authority with respect to Farm Credit associations, and section 
3.1(5) and (13)(A) of the Act for parallel authorities with respect 
to banks for cooperatives.
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    The Supreme Court has held that the business of banking is not 
limited to authorized activities specifically identified or enumerated 
in a statute.\6\ System institutions may engage in those banking 
activities that are necessary to carry out their specific mission.\7\ 
The System's mission is to make credit available to farmers and 
ranchers and their cooperatives, and to provide for an adequate and 
flexible flow of money into rural areas, and to meet current and future 
rural credit needs.\8\ The System, as a Government-sponsored enterprise 
(GSE) for agricultural lending, should have a role in providing credit 
to farmers and ranchers and cooperatives and liquidity to rural areas, 
by purchasing eligible loans when the FDIC seeks buyers of agricultural 
or cooperative loans of a failed bank, consistent with the safe and 
sound operation of System business.
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    \6\ See NationsBank of North Carolina, N.A. v. Variable Annuity 
Life Insurance Co., 513 U.S. 251 (1995).
    \7\ REW Enterprises, Inc. v. Premier Bank, N.A., 49 F.3d 163 
(5th Cir. 1995).
    \8\ See Preamble, Farm Credit Act of 1971, as amended, 12 U.S.C. 
2001 et seq.
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    One non-System commenter contends that the FCA has, in the past, 
interpreted the Act to prohibit the proposed action, and that the FCA's 
authority to draft regulations does not authorize the FCA to go beyond 
the authority that limits the participation, selling and buying of 
loans with non-System banks.
    The FCA has in the past determined that System institutions may not 
purchase whole loans from commercial banks. As the result of bank 
failures in rural areas, the FCA has for the first

[[Page 30248]]

time considered the question of whether a System institution may 
purchase an otherwise eligible loan from the FDIC, a non-bank, non-
lender, liquidator. It is unlikely that Congress ever considered this 
particular authority; however, Congress intended the System to provide 
liquidity to rural areas where necessary, and the FCA believes that 
allowing System institutions to bid on loans of failed banks--loans 
that the System could make outright and could participate in if 
originated by commercial banks--furthers that intent.
    The FCA does not agree with the comments of the System institutions 
that it should broaden the reach of the rule.

B. Eligibility

    Non-System commenters object to the provision of the proposed rule 
that would allow ineligible loans to remain within the System until 
divested. They object that the proposed rule would allow System 
institutions to offer financial services to borrowers who are not 
eligible under the Act and would offer financial remedies that are 
statutorily exclusive to those who meet eligibility requirements. They 
conclude that the proposed rule is contrary to statutory intent. 
Several commenters state that there should be an outright prohibition 
against purchasing ineligible loans, and that if the FCA cannot assure 
that loans purchased are within the legal requirements for System 
institutions, then FCA has no business making such a proposal. Many 
commenters object that the proposed rule does not set forth a required 
timeline for divesting illegal loans, and several commenters suggest 
that System institutions with ineligible loans should be subject to 
penalties.
    One commenter states that the Act and existing regulations plainly 
identify loan eligibility, carefully keeping with the limited purposes 
Congress intended. This commenter states that under the proposed rule 
the ineligible loan, one not related to the mission of the Act and its 
congressionally defined mission or one in which the borrower does not 
acquire voting stock, would remain within the System until divested. 
Several commenters stated that the result of the rule would be that the 
System institutions would hold all manner of loans not related to 
farming and agriculture. One commenter states that if a loan is 
ineligible due to borrower status or loan type then that is the end of 
the analysis, and the FCS institution is not authorized to provide 
financial services. The commenter concludes that financing that is 
ineligible based on loan type or membership cannot be made eligible by 
being identified as distressed. The commenter further opines that a 
System institution cannot expeditiously divest of ineligible distressed 
loans in which it has provided restructuring financing, because the 
restructuring process takes time. One System institution commented that 
requiring a second due diligence review after loan purchase and 
divestiture will result in a substantial discount in the bid amount.
    FCA response. We agree with commenters that System institutions do 
not have authority to purchase ineligible loans. Therefore, we are 
changing Sec.  614.4325(b)(3)(i) of the final rule to require 
participating System institutions to determine eligibility of the loans 
or loan pools up front, before purchase. If a determination of 
eligibility cannot be made, then the System institution may not 
purchase the loan or loan pool under the rule. Because eligibility must 
be determined before purchasing the loan, there is no need to require 
divestiture of these loans except if the borrower does not elect to 
acquire voting stock, and Sec.  614.4325(b)(3)(v) is modified 
accordingly.
    This rule requires System institutions to establish a program 
offering each eligible borrower of a purchased loan the opportunity to 
acquire voting stock. We expect System institutions to have a fair and 
equitable program in place to make membership available to all 
interested borrowers. We anticipate that pursuant to such a program all 
borrowers will choose to become members. If, however, a borrower 
chooses not to acquire voting stock, the borrower will not be entitled 
to borrower rights under this rule, and Sec.  614.4325(b)(3)(iv) is 
modified accordingly.

C. Need for the Rule

    The ICBA comments that when loans are available for bidding, the 
competition in the bidding process is adequate to aggressive. It 
comments that there is robust competition among community banks for 
credit-seeking customers. Several commenters state that the rule allows 
System institutions to leverage high capital levels to spur new growth 
at the expense of private sector lenders. Many non-System commenters 
state that they are not aware of a lack of buyers of loans or loan 
pools from the FDIC after bank failures. They state that there are 
plenty of bidders on good quality loans. They comment that System 
institutions are not needed in the bidding process as there is no lack 
of commercial and community bank buyers for loans sold by FDIC. One 
commenter states that System institutions rarely reach out to help with 
loans that have material weakness. This commenter states that System 
institutions cherry pick the best loans from the community and that if 
the System needs loans it should reach out to farmers who need cheap 
credit but do not qualify for bank loans.
    FCA response. The rule does not authorize System institutions to 
bid on loans or pools of loans that include loans not eligible for 
direct lending. The FDIC decides how to package loan assets for sale, 
and if the FDIC decides that the most cost effective and efficient way 
to sell loans is to create a pool of agricultural loans eligible for 
System financing, then System institutions will be able to bid on those 
pools. As mentioned above, if a determination of eligibility cannot be 
made, then the System institution is not authorized by this rule to 
purchase the loan or loan pool. This helps assure that the System 
institutions will only enter the FDIC auction market based on need. If 
there are enough non-System banks to bid on loans at auction, the FDIC 
is unlikely to go to the trouble and expense of packaging System 
eligible loans. The FDIC will have the incentive to limit the pool to 
loans eligible for purchase by Farm Credit institutions only if there 
is not an available market to buy agricultural loans.

D. Unfair Competition

    Some non-System commenters opine that the rule allows System 
institutions to shop for high quality loans, including ineligible 
loans, while ignoring marginal credits. Many non-System commenters 
assert that the rule allows System institutions to use their GSE status 
and tax advantages to undercut the bidding of community banks in the 
FDIC auction process.
    Many non-System commenters assert that because community banks have 
paid premiums to the Deposit Insurance Fund to enable the FDIC to 
resolve failed FDIC-insured banks, it would be unfair to allow non-
paying FCS institutions to compete in bidding on loans of failed banks. 
They state that the rule allows the System to leverage its GSE status, 
and the fact that the System does not pay premiums into the Deposit 
Insurance Fund results in a gross unfairness to community banks.
    FCA response. The final rule does not authorize System institutions 
to purchase loans ineligible for financing. System institutions are 
exercising their authority to support agriculture by bidding on 
agricultural loans where there is a need, consistent with their 
mission. Further, to the extent the System institutions are able to

[[Page 30249]]

participate in the bidding process, they are increasing the return to 
the FDIC on failed bank assets, thereby providing additional support to 
the insurance fund. The result is a benefit to FDIC-insured banks.

E. Out of Territory Loans and Safety and Soundness

    Many non-System commenters question why FCA would propose a rule 
that would allow a System institution to purchase pools of loans 
without first obtaining the prior consent of the System institution in 
whose lending territory the borrower's agricultural operation is wholly 
or partially located. Many commenters state that this practice is not 
consistent with cooperative principles or a cooperative system and that 
out-of-territory loan purchases would pose safety and soundness issues 
for FCS lenders bidding on loans in territories with which the lenders 
are unfamiliar.
    One commenter states that the rule allows System institutions to 
hold more than the usual volume of extra territorial loans and that 
capital that should be reserved to finance farming and agriculture 
within a territory would be diverted to purchase loans outside of the 
territory, some of which would be distressed and not related to 
farming, resulting in a loss of available capital in the district. The 
commenter stated that System institutions will expend resources to 
manage loans far outside their districts, resulting in added economic 
risks associated with the purchase of loans from failed banks. One 
commenter states that it appears the FCA is willing to allow System 
institutions to engage in significant risks in the quality of loans 
purchased just so they can achieve greater growth.
    FCA response. The System is not the lender of last resort and 
therefore not required to fund loans that are not creditworthy or would 
pose considerable risk to the safety and soundness of the institution. 
On the other hand, the System, as a GSE, does have a mission 
responsibility to provide credit to rural areas where needed so long as 
the institution remains safe and sound. As such, the bidding System 
institution should consider the overall credit quality of the loan pool 
recognizing that the loans in the pool will have varying degrees of 
individual loan quality.
    As a practical matter the chartered territory of the System 
institution located closest to the failed commercial bank would never 
be exactly in line with the headquarters of the eligible agricultural 
borrowers of the failed bank. It would be impractical for the FDIC to 
package loans by FCS territory. The rule requires the purchasing System 
institution to notify the System institutions in whose lending 
territory the borrowers' headquarters are wholly or partially located 
to alert them to the purchase and, as noted in the preamble to the 
proposal, consider partnering with that institution if the purchasing 
institution cannot adequately service a purchased loan located outside 
of its chartered territory. However, System institutions must comply 
with Sec.  614.4070 if a new loan is subsequently made to the borrower.
    To address safety and soundness concerns, we have added to the 
final rule a provision requiring System institutions to provide 
information on loans purchased under authority of this section in the 
Reports of Condition and Performance. This allows the FCA to monitor 
loans acquired through this program to make adjustments as necessary if 
safety and soundness issues arise.

F. Comments Requesting FCA Expand FCS Institutions' Authority

    Several System commenters stated that the FCA should allow FCS 
institutions to purchase whole loans from FDIC successor banks and from 
non-System entities whenever it would benefit rural America. Many non-
System commenters objected to an extension of the rule to successor 
banks.
    The rule is intended to provide liquidity to areas in need of 
credit incident to a bank failure. The FCA does not intend to extend 
the rule beyond the purchase of loans directly from the FDIC either in 
its receivership or corporate capacity.

IV. Section-by-Section Analysis

A. Section 614.4070(d)

    This section is finalized as proposed.

B. Section 614.4325(b)(3)

    This section is finalized as proposed. See discussion on authority 
above.

C. Section 614.4325(b)(3)(i)

    In response to the comments, and for the reasons discussed above, 
this section authorizes System institutions to purchase loans from the 
FDIC, but now requires participating System institutions to conduct 
thorough due diligence prior to purchase.

D. Section 614.4325(b)(3)(ii)

    This section is finalized as proposed.

E. Section 614.4325(b)(3)(iii)

    This section is finalized as proposed.

F. Section 614.4325(b)(3)(iv)

    Commenters object to this section because it could result in 
allowing borrowers of distressed ineligible loans certain borrower 
rights. In response to the comments, the FCA has modified the rule to 
authorize purchase of only eligible loans. Therefore, only borrowers of 
eligible loans will be afforded borrower rights under this section. 
This section is finalized as proposed.

G. Section 614.4325(b)(3)(v)

    In response to the comments, the FCA has modified the rule to 
authorize only the purchase of eligible loans. Therefore, a provision 
addressing divestiture of ineligible loans is unnecessary. This section 
is modified from the proposed rule accordingly.

H. Section 614.4325(b)(3)(vi)

    To ensure adequate oversight and disclosure of loans purchased 
under this section, we adopt a new paragraph (vi), which provides that 
each System institution shall include information on loans purchased 
under authority of this section in the Reports of Condition and 
Performance required under Sec.  621.12 of this chapter, in the format 
prescribed by FCA reporting instructions.
    FCA makes System ``call report'' data publicly available through 
its Web site at http://www.fca.gov. Under Sec.  621.13(a) of this 
chapter, System institutions must prepare Reports of Condition and 
Performance in accordance with FCA instructions.

V. Regulatory Flexibility Act

    Pursuant to section 605(b) of the Regulatory Flexibility Act (5 
U.S.C. 601 et seq.), FCA hereby certifies that the final rule will not 
have a significant economic impact on a substantial number of small 
entities. Each of the banks in the Farm Credit System, considered 
together with its affiliated associations, has assets and annual income 
in excess of the amounts that would qualify them as small entities. 
Therefore, Farm Credit System institutions are not ``small entities'' 
as defined in the Regulatory Flexibility Act.

List of Subjects in 12 CFR Part 614

    Agriculture, Banks, Banking, Foreign trade, Reporting and 
recordkeeping requirements, Rural areas.

    Accordingly, for the reasons stated in the preamble, part 614 of 
chapter VI, title 12 of the Code of Federal Regulations, is amended as 
follows:

[[Page 30250]]

PART 614--LOAN POLICIES AND OPERATIONS

0
1. The authority citation for part 614 continues to read as follows:

    Authority:  42 U.S.C. 4012a, 4104a, 4104b, 4106, and 4128; secs. 
1.3, 1.5, 1.6, 1.7, 1.9, 1.10, 1.11, 2.0, 2.2, 2.3, 2.4, 2.10, 2.12, 
2.13, 2.15, 3.0, 3.1, 3.3, 3.7, 3.8, 3.10, 3.20, 3.28, 4.12, 4.12A, 
4.13B, 4.14, 4.14A, 4.14C, 4.14D, 4.14E, 4.18, 4.18A, 4.19, 4.25, 
4.26, 4.27, 4.28, 4.36, 4.37, 5.9, 5.10, 5.17, 7.0, 7.2, 7.6, 7.8, 
7.12, 7.13, 8.0, 8.5 of the Farm Credit Act (12 U.S.C. 2011, 2013, 
2014, 2015, 2017, 2018, 2019, 2071, 2073, 2074, 2075, 2091, 2093, 
2094, 2097, 2121, 2122, 2124, 2128, 2129, 2131, 2141, 2149, 2183, 
2184, 2201, 2202, 2202a, 2202c, 2202d, 2202e, 2206, 2206a, 2207, 
2211, 2212, 2213, 2214, 2219a, 2219b, 2243, 2244, 2252, 2279a, 
2279a-2, 2279b, 2279c-1, 2279f, 2279f-1, 2279aa, 2279aa-5); sec. 413 
of Pub. L. 100-233, 101 Stat. 1568, 1639.

Subpart B--Chartered Territories

0
2. Amend Sec.  614.4070 by adding a new paragraph (d) to read as 
follows:


Sec.  614.4070  Loans and chartered territory--Farm Credit Banks, 
agricultural credit banks, Federal land bank associations, Federal land 
credit associations, production credit associations, and agricultural 
credit associations.

* * * * *
    (d) A bank or association chartered under title I or II of the Act 
may finance eligible borrower operations conducted wholly or partially 
outside its chartered territory through the purchase of loans from the 
Federal Deposit Insurance Corporation in compliance with Sec.  
614.4325(b)(3), provided:
    (1) Notice is given to the Farm Credit System institution(s) 
chartered to serve the territory where the headquarters of the 
borrower's operation being financed is located; and
    (2) After loan purchase, additional financing of eligible borrower 
operations complies with paragraphs (a), (b), and (c) of this section.

Subpart H--Loan Purchases and Sales

0
3. Amend Sec.  614.4325 by revising paragraph (b) to read as follows:


Sec.  614.4325  Purchase and sale of interests in loans.

* * * * *
    (b) Authority to purchase and sell interests in loans. Loans and 
interests in loans may only be sold in accordance with each 
institution's lending authorities, as set forth in subpart A of this 
part. No Farm Credit System institution may purchase any interest in a 
loan from an institution that is not a Farm Credit System institution, 
except:
    (1) For the purpose of pooling and securitizing such loans under 
title VIII of the Act;
    (2) Purchases of a participation interest that qualifies under the 
institution's lending authority, as set forth in subpart A of this 
part, and meets the requirements of Sec.  614.4330 of this subpart;
    (3) Loans purchased from the Federal Deposit Insurance Corporation, 
provided that the Farm Credit System institution with direct lending 
authority under title I, II or III of the Act:
    (i) Conducts a thorough due diligence prior to purchase to ensure 
that the loan, or pool of loans, qualifies under the institution's 
lending authority as set forth in subpart A of this part, and meets 
scope of financing and eligibility requirements in subpart A or subpart 
B of part 613;
    (ii) Obtains funding bank approval if a Farm Credit System 
association purchases loans or pools of loans that exceed 10 percent of 
total its capital;
    (iii) Establishes a program whereby each eligible borrower of the 
loan purchased is offered an opportunity to acquire the institution's 
required minimum amount of voting stock;
    (iv) Determines whether each loan purchased, except for loans 
purchased that could be financed only by a bank for cooperatives under 
title III of the Act, is a distressed loan as defined in Sec.  
617.7000, and provides borrowers of purchased loans who acquire voting 
stock the rights afforded in Sec.  617.7000, subparts A, and D through 
G if the loan is distressed; and
    (v) Divests eligible purchased loans when the borrowers elect not 
to acquire stock under the program offered in paragraph (b)(3)(iii) of 
this section in the same manner it would divest loans under its current 
business practices.
    (vi) Includes information on loans purchased under authority of 
this section in the Reports of Condition and Performance required under 
Sec.  621.12 of this chapter, in the format prescribed by FCA reporting 
instructions.
* * * * *

    Date: May 19, 2011.
Dale L. Aultman,
Secretary, Farm Credit Administration Board.
[FR Doc. 2011-12785 Filed 5-24-11; 8:45 am]
BILLING CODE 6705-01-P