[Federal Register Volume 83, Number 52 (Friday, March 16, 2018)]
[Rules and Regulations]
[Pages 11633-11634]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-05319]


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DEPARTMENT OF AGRICULTURE

Rural Business-Cooperative Service

Rural Utilities Service

7 CFR Part 4279

RIN 0570-AA85


Guaranteed Loanmaking and Servicing Regulations; Corrections

AGENCY:  Rural Business-Cooperative Service and Rural Utilities 
Service; USDA.

ACTION: Final rule; technical correction.

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SUMMARY: On June 3, 2016, the Rural Business-Cooperative Service 
promulgated changes to its Guaranteed Loanmaking and Servicing 
Regulations. Following final implementation of this final rule, RBS 
found two technical corrections that are necessary.

[[Page 11634]]


DATES: Effective March 16, 2018.

FOR FURTHER INFORMATION CONTACT: Kelley Oehler, Rural Development, 
Business Programs, U.S. Department of Agriculture, 1400 Independence 
Ave. SW, Stop 3224, Washington, DC 20250-3224; email: 
[email protected]; telephone number: (202) 720-1418.

SUPPLEMENTARY INFORMATION: 

Need for Corrections

    The Agency published a final rule on June 3, 2016 (81 FR 35984-
36027) for the purpose of improving program delivery, clarifying the 
regulations to make them easier to understand, and reducing 
delinquencies.
    This document makes technical corrections to the Business and 
Industry (B&I) Guaranteed Loan regulations in two areas: Full faith and 
credit and leasehold improvements.
    Full faith and credit. In Sec.  4279.72(a), Full faith and credit, 
the Agency identifies in the second, third, and fourth sentences 
circumstances under which the guarantee is unenforceable in whole or in 
part. In all circumstances, the guarantee is unenforceable by the 
lender. However, the rule identifies ``by the lender'' in the third 
sentence, but not in the second or fourth sentence. To correct this 
oversight and provide clarity, the Agency is revising the second and 
fourth sentences to include the phrase ``by the lender.''
    Leasehold improvements. The B&I Guaranteed Loan Program rule 
specifically identifies, in Sec.  4279.113, certain leasehold 
improvements as an eligible project purpose for a B&I loan guarantee. 
However, there are other provisions in the B&I Guaranteed Loan Program 
rule that are inconsistent with and undermine this intent. 
Specifically, the rule relies on the definition of ``leasehold 
improvements'' as found in General Acceptable Accounting Practices 
(GAAP) (see Sec.  4279.2(c)). GAAP considers leasehold improvements to 
be ``intangible assets.'' Provisions in the B&I rule regarding 
intangible assets in the calculation of tangible balance sheet equity 
(see Sec.  4279.131(d)(2)) and the prohibition of intangible assets 
from serving as primary collateral (see Sec.  4279.131(b)(3)) make it 
unintentionally difficult for leasehold improvement projects to meet 
equity and collateral requirements. Therefore, with this document, the 
Agency is correcting those provisions of the B&I Guaranteed Loan 
Program rule that are preventing leasehold improvement projects from 
meeting equity and collateral requirements for a B&I loan guarantee.

List of Subjects in 7 CFR Part 4279

    Loan programs--business and industry, Reporting and recordkeeping 
requirements, Rural areas.

    Accordingly, 7 CFR chapter XLII is amended by making the following 
correcting amendments:

PART 4279--GUARANTEED LOAN MAKING

0
1. The authority citation for part 4279 continues to read as follows:

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

Subpart A--General

0
2. Revise the second and fourth sentences of Sec.  4279.72(a) 
introductory text to read as follows:


Sec.  4279.72  Conditions of guarantee.

* * * * *
    (a) * * * The guarantee will be unenforceable by the lender to the 
extent that any loss is occasioned by a provision for interest on 
interest or default or penalty interest. * * * Any losses occasioned 
will be unenforceable by the lender to the extent that loan funds were 
used for purposes other than those specifically approved by the Agency 
in its Conditional Commitment or amendment thereof in accordance with 
Sec.  4279.173(b). * * *
* * * * *

Subpart B--Business and Industry Loans

0
3. Amend Sec.  4279.131 as follows:
0
a. Add a sentence to the end of paragraph (b)(3); and
0
b. Revise the first and fourth sentences in paragraph (d)(2).
    The addition and revisions read as follows:


Sec.  4279.131  Credit quality.

* * * * *
    (b) * * *
    (3) * * * For purposes of determining compliance with this 
requirement, leasehold improvements are considered tangible assets and 
can serve as primary collateral.
* * * * *
    (d) * * *
    (2) Tangible balance sheet equity will be determined based upon 
financial statements prepared in accordance with GAAP except that, for 
the purposes of this subpart, leasehold improvements are to be 
considered tangible assets when making the tangible balance sheet 
equity calculation. * * * Tangible equity cannot include appraisal 
surplus, bargain purchase gains, or intangible assets (except for 
leasehold improvements). * * *
* * * * *

    Dated: March 8, 2018.
Bette B. Brand,
Administrator, Rural Business-Cooperative Service.
    Dated: March 8, 2018.
Christopher A. McLean,
Acting Administrator, Rural Utilities Service.
[FR Doc. 2018-05319 Filed 3-15-18; 8:45 am]
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