Rule2022-04858
Farm Loan Programs; Direct and Guaranteed Loan Changes, Certified Mediation Program, and Guaranteed Loans Maximum Interest Rates
Primary source
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Published
March 9, 2022
Effective
March 9, 2022
Issuing agencies
Agriculture DepartmentFarm Service Agency
Abstract
The Farm Service Agency (FSA) amends the Farm Loan Programs (FLP) regulations to implement certain provisions authorized by the Agricultural Improvement Act of 2018 (2018 Farm Bill). This rule revises the provisions on FLP loan limits, allows additional flexibility for loan applicants to meet the required farming experience, provides higher guarantee rates for lenders to provide credit to beginning farmers and socially disadvantaged farmers, provides additional program benefits for veterans, provides equitable relief to certain borrowers, allows borrowers who have received debt restructuring with a write down to receive Emergency loans (EM), and expands those issues that are covered under the agricultural Certified Mediation Program. In addition to the 2018 Farm Bill changes, FSA also amends the regulations for loan servicing relating to accepting cash payments and establishing a fee for dishonored checks; these are discretionary changes. The result of these changes will increase loan limits or improve the various loan programs to relieve some restrictions to participation or otherwise encourage participation. This rule also revises the way FSA will establish the maximum interest rates in response to the discontinuing publication of the London Interbank Offered Rate (LIBOR) interest rates. The result of these changes will enable FSA to provide clearer guidance on maximum interest rates and allow for more consistency across all lenders participating in the guaranteed loan program. In addition, this rule corrects references to supervised credit in the regulations.
Full Text
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[Federal Register Volume 87, Number 46 (Wednesday, March 9, 2022)]
[Rules and Regulations]
[Pages 13117-13127]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-04858]
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Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
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Federal Register / Vol. 87, No. 46 / Wednesday, March 9, 2022 / Rules
and Regulations
[[Page 13117]]
DEPARTMENT OF AGRICULTURE
Farm Service Agency
7 CFR Parts 761, 762, 764, 765, 766, 768, and 785
[Docket No. FSA-2019-0005]
RIN 0560-AI43
Farm Loan Programs; Direct and Guaranteed Loan Changes, Certified
Mediation Program, and Guaranteed Loans Maximum Interest Rates
AGENCY: Farm Service Agency, Department of Agriculture (USDA).
ACTION: Final rule.
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SUMMARY: The Farm Service Agency (FSA) amends the Farm Loan Programs
(FLP) regulations to implement certain provisions authorized by the
Agricultural Improvement Act of 2018 (2018 Farm Bill). This rule
revises the provisions on FLP loan limits, allows additional
flexibility for loan applicants to meet the required farming
experience, provides higher guarantee rates for lenders to provide
credit to beginning farmers and socially disadvantaged farmers,
provides additional program benefits for veterans, provides equitable
relief to certain borrowers, allows borrowers who have received debt
restructuring with a write down to receive Emergency loans (EM), and
expands those issues that are covered under the agricultural Certified
Mediation Program. In addition to the 2018 Farm Bill changes, FSA also
amends the regulations for loan servicing relating to accepting cash
payments and establishing a fee for dishonored checks; these are
discretionary changes. The result of these changes will increase loan
limits or improve the various loan programs to relieve some
restrictions to participation or otherwise encourage participation.
This rule also revises the way FSA will establish the maximum interest
rates in response to the discontinuing publication of the London
Interbank Offered Rate (LIBOR) interest rates. The result of these
changes will enable FSA to provide clearer guidance on maximum interest
rates and allow for more consistency across all lenders participating
in the guaranteed loan program. In addition, this rule corrects
references to supervised credit in the regulations.
DATES: Effective: March 9, 2022.
FOR FURTHER INFORMATION CONTACT: Steven K. Ford; telephone: (202) 304-
7932; email: <a href="/cdn-cgi/l/email-protection#c5b6b1a0b3a0abeba3aab7a1f785b0b6a1a4eba2aab3"><span class="__cf_email__" data-cfemail="f281869784979cdc949d8096c0b287819693dc959d84">[email protected]</span></a>. Persons with disabilities or who
require alternative means for communications should contact the U.S.
Department of Agriculture (USDA) Target Center at (202) 720-2600
(voice).
SUPPLEMENTARY INFORMATION:
Background
FSA makes and services a variety of direct and guaranteed loans to
farmers who are temporarily unable to obtain private commercial credit.
FSA also provides credit counseling and supervision to direct loan
borrowers, so they have a better chance for success. FSA loan
applicants are often:
<bullet> Beginning farmers (BF) and socially disadvantaged (SDA)
farmers who do not qualify for conventional loans because of
insufficient net worth; or
<bullet> Established farmers who have suffered financial setbacks
due to natural disasters or economic downturns.
FSA loans are tailored to a farmer's needs and may be used to buy
farmland and to finance agricultural production.
2018 Farm Bill Changes
The following amendments made by this rule are non-discretionary
and are mandated by the 2018 Farm Bill (Pub. L. 115-334). The majority
of the changes were self-enacting and previously implemented by FSA;
this rule updates the regulations to be consistent. The changes to the
regulation will:
<bullet> Modify the existing 3-year farming experience requirement
for Direct Farm Ownership loans (FO) by including additional items as
acceptable experience;
<bullet> Increase the loan limit to $600,000 for Direct FOs and
increase the loan limit to $1,750,000 for Guaranteed FOs (these are the
base loan limit amounts as specified in the 2018 Farm Bill);
<bullet> Increase the Direct Operating loan (OL) limit to $400,000
and increase the Guaranteed OL limit to $1,750,000 (these are the base
loan limit amounts as specified in the 2018 Farm Bill);
<bullet> Allow SDA farmers and BF applicants to receive a guarantee
equal to 95 percent, rather than the otherwise applicable 90 percent
guarantee;
<bullet> Expand the definition of and provide additional benefits
for veteran farmers;
<bullet> Provide for equitable relief to certain direct loan
borrowers acting in good faith who have not complied with loan program
requirements after relying on a material action, advice, or non-action
from an FSA official;
<bullet> Allow borrowers who have received restructuring with a
write down to maintain eligibility for an EM; and
<bullet> Expand the scope of eligible issues and persons covered
under the agricultural Certified Mediation Program.
The Guaranteed FO and Guaranteed OL limits described above are base
amounts and have increased as a result of annual inflation adjustments
since the 2018 Farm Bill became effective.\1\ In addition to the 2018
Farm Bill changes, FSA is making additional discretionary policy
changes including the removal of cash as an option for payments of FSA
fees and loan installments and the inclusion of a fee for dishonored
payments.
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\1\ The loan limit for Guaranteed FOs and OLs are adjusted
annually based on the Prices Paid by Farmers Index that is published
by the USDA National Agricultural Statistics Service. The loan
limits specified in the 2018 Farm Bill are being included in the
regulation to show the base amounts. If the loan limit is increased
as a result of the annual adjustment, the new loan limit will be
announced on the FSA web page (<a href="http://www.fsa.usda.gov">www.fsa.usda.gov</a>); the loan limit
will not be decreased based on the annual adjustment. The current
adjusted loan limit for Guaranteed FOs and OLs is $1,825,000.
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Throughout this rule, any reference to ``farm'' or ``farmer'' also
includes ``ranch'' or ``rancher,'' respectively.
Farm Ownership Experience Requirement
Section 5101 of the 2018 Farm Bill amends section 302(b) of the
Consolidated Farm and Rural Development Act (CONACT) (7 U.S.C. 1922(b))
to expand what can be considered when evaluating whether the applicant
meets the existing 3-year experience requirement for Direct FOs.
[[Page 13118]]
To qualify for a Direct FO, 7 CFR 764.152(d) states that applicants
must have participated in the business operations of a farm for at
least 3 out of the 10 years prior to the date the application is
submitted.
The authorizing legislation in 7 U.S.C. 1922(b)(1) provides FSA
with the general authority to substitute the 3-year management
experience requirement with other acceptable experience. Prior to this
rule, 7 CFR 764.152(d) specified that, for all applicants, 1 of these 3
years could be substituted with one of the following experiences:
<bullet> Postsecondary education in agriculture business,
horticulture, animal science, agronomy, or other agricultural related
fields;
<bullet> Significant business management experience; or
<bullet> Leadership or management experience while serving in any
branch of the military.
Section 5101 expands these allowances, including additional
education options, experience with another farm operation, mentorships
in day-to-day farm management, honorable discharge from service in the
armed forces, and similar experiences for BFs. These options address
the different ways in which farmers can learn about managing a farm
operation. Given the general authority under 7 U.S.C. 1922(b)(1)(iv),
FSA chooses to allow these alternative experiences to apply to all
farmers, not just BFs. Section 5101 also allows any two of these
allowances to be substituted for 2 years instead of 1 year.
Furthermore, this experience requirement may be waived altogether if
the farmer has at least 1-year experience as hired farm labor with
substantial management responsibilities and has a documented
established relationship with an individual who has experience in
farming and is a mentor with a Service Corps of Retired Executives
(SCORE) program. In the alternative to SCORE, section 5101 allows other
individuals or organizations that are committed to mentoring, are
local, and approved by the Secretary, to serve as a mentor. FSA will
approve documented mentorships on a case-by-case basis and requires
mentors to be local individuals who are experienced farmers or farm-
related businesspersons able to provide individualized assistance to
FSA's borrowers.
This rule amends the eligibility requirement in Sec. 764.152(d) to
list the alternatives that can be substituted to meet the farm
experience requirement. These additions provide flexibility for BF
applicants to meet FSA's Direct FO eligibility rules and access the
credit needed to finance farm operations without compromising the
managerial standards this requirement was designed to ensure.
FO Limits
Section 5103 of the 2018 Farm Bill amends section 305 of the CONACT
(7 U.S.C. 1925) to increase the maximum limits for the Direct and
Guaranteed FO programs. The loan limits have increased to $600,000 for
Direct FOs and $1,750,000 for Guaranteed FOs.
Prior to the 2018 Farm Bill the loan limit for Direct FOs was
$300,000. Loan limits for Guaranteed FOs, which increase annually based
on inflation, were at $1,429,000 prior to the 2018 Farm Bill.
These increased loan limits are necessary to assist farmers in
their ability to respond to the rising costs of farmland. The loan
limit changes also will enable more farmers to participate in loan
programs. Direct loan limits were last increased in the Food,
Conservation, and Energy Act of 2008 (2008 Farm Bill; Pub. L. 110-246).
Rising farmland prices since that time have made it increasingly
difficult for BFs to purchase farmland within the previous $300,000
Direct FO limit. Many FSA loans are made in conjunction with financing
from commercial lenders; however, as prices continue to rise joint
financing arrangements have become less effective to meet demand,
particularly from BFs looking to purchase real estate.
This rule amends 7 CFR 761.8 to increase the Direct and Guaranteed
FO loan limits. In addition, Sec. 761.8(a)(4) and (6) are being
amended to increase the limits for combined program assistance
reflecting these increased loan limits. The increase will help family
farmers better compete with larger, more financially secure farmers
when purchasing farmland. The amount of the increase is modest and will
not change the type of farm operation receiving FSA loans.
Farm OL Limits
Section 5201 of the 2018 Farm Bill amends section 313 of the CONACT
(7 U.S.C. 1943) to increase the loan limits for the Direct and
Guaranteed OL programs. The loan limits have increased to $400,000 for
Direct OLs and $1,750,000 for Guaranteed OL.
Prior to the 2018 Farm Bill the loan limit for Direct OLs was
$300,000. The loan limits for Guaranteed OLs, which increase annually
based on inflation, were at $1,429,000 prior to the 2018 Farm Bill.
The 2018 Farm Bill modified the loan limits to better assist
farmers with the increasing cost of operating and family living
expenses. Direct and Guaranteed OLs are critical for farmers when
purchasing crop inputs, livestock feed, farm equipment, and other
operating expenses. Since direct loan limits were last increased in the
2008 Farm Bill, the cost for farm equipment and operating expenses have
risen significantly. The additional operating credit available to
farmers will assist in responding to this inflation and help them to
continue to operate.
This rule amends 7 CFR 761.8 to increase the loan limits for Direct
and Guaranteed OLs. The increase in the loan limits will give BFs
access to the credit necessary to finance farm operations at today's
costs.
95 Percent Guarantee for SDA Farmers and BF Applicants
Section 5306 of the 2018 Farm Bill amends the CONACT by adding
section 367 (7 U.S.C. 2008b), which increases the percent of the FSA
guarantee for Guaranteed FOs and OLs from 90 percent to 95 percent for
a qualified BF or SDA farmer.
Previously, lenders could only receive a 95 percent guarantee
(rather than the typical 90 percent) under limited circumstances such
as refinancing FSA direct loan debt or participating in the Direct FO
Down Payment Loan Program. The increase in the guaranteed loan
percentage will give lenders more incentive to extend credit to BFs and
SDA farmers, a traditionally underserved segment of farmers.
This rule amends Sec. 762.129 to increase the Guaranteed FO and OL
guarantee percentage on loans made to all applicants meeting the
definition of ``beginning farmer'' or ``socially disadvantaged
applicant or farmer.''
Veteran Farmers
Section 12306 of the 2018 Farm Bill amends section 2501 of the
Food, Agriculture, Conservation, and Trade Act of 1990 (7 U.S.C. 2279)
and expands the definition of veteran farmer to include veterans who
have first obtained status as a veteran during the most recent 10-year
period, regardless of their previous farming experience. Specifically,
this expanded definition includes any veteran who served in the active
military, naval, or air service; and who was discharged or released
from service under conditions other than dishonorable; and whose
discharge was during the most recent 10-years from the date of
application for a direct or guaranteed loan.
Section 12306 also amends section 310E of the CONACT (7 U.S.C.
1935) to include veteran farmers as eligible borrowers to receive
direct Down
[[Page 13119]]
Payment loans, a program previously limited to BF applicants and SDA
farmers. To encourage program participation and expand benefits for
targeted groups, Down Payment Loan Program participants are not charged
a fee when they receive a guaranteed loan in conjunction with a Down
Payment loan. This change will ensure guarantee fees are also waived
for veteran farmers obtaining a direct Down Payment loan. This rule
amends 7 CFR 761.2, 762.130, 764.201, and 764.202 to include these
changes.
EMs
Section 5307 of the 2018 Farm Bill amends section 373(b)(2)(B) of
the CONACT (7 U.S.C. 2008h(b)(2)(B)) to allow borrowers who have
received debt restructuring with a write down to maintain eligibility
for an EM.
Prior to the 2018 Farm Bill, borrowers who had received debt
forgiveness were ineligible for EM. This change addresses the concern
that borrowers who have experienced a disaster, through no fault of
their own, are suddenly unable to receive financial assistance and
continue their operations. Borrowers who have received prior debt
forgiveness through restructuring with a write down still have viable
operations and FSA can now extend assistance to those current and past
borrowers who have suffered from a disaster. While there are other ways
debt forgiveness can be obtained through FSA, the 2018 Farm Bill
expands EM eligibility only to those whose debt forgiveness was in
conjunction with an approved debt restructuring plan.
This rule amends Sec. 764.352 to allow borrowers who have received
certain debt forgiveness to remain eligible for EM loans, allowing them
access to the necessary credit to continue their operations.
Equitable Relief
Section 5305 of the 2018 Farm Bill amends the CONACT (7 U.S.C.
2008a) by adding provisions to provide FSA the authority to consider
equitable relief under certain circumstances for FLP borrowers.
Previously, there were no statutory provisions for equitable relief for
FLP.
FSA is adding the definition of equitable relief to 7 CFR 761.2.
Equitable relief, as included in the 2018 Farm Bill, allows FSA
flexibility in working with existing borrower loan accounts that are
determined to be in non-compliance with loan program requirements, if
the borrower acted in good faith and relied on a material action of,
advice of, or non-action from an FSA official. Adding the equitable
relief definition will provide a common understanding of the term and
allow reference to the term in other portions of the regulation while
the specific details and process are provided in a newly added part of
the regulation.
FSA is adding a new part, 7 CFR part 768, to address the
requirements and conditions under which equitable relief can be
provided. Under existing regulations, FSA has been required to
determine noncompliant accounts as having received unauthorized
assistance regardless of cause. Borrowers are then required to
immediately repay the loan or convert it to a non-program loan subject
to higher interest rates, less favorable terms, and limited loan
servicing. Instances have arisen and may arise where borrowers are
negatively impacted due to good faith reliance on a material action,
advice, or non-action of an FSA official. The new provision allows FSA
to consider relief in these specific instances to allow for more
equitable rates, terms, and conditions to be applied to noncompliant
accounts. The action, advice, or lack of action should be material to
the non-compliance for the reliance to be in good faith as required by
the 2018 Farm Bill. For example, it could be determined reasonable,
given a certain set of facts, for a borrower to interpret the failure
of a farm loan officer to respond to a borrower's statement that the
borrower plans to sell FSA collateral as an approval of that action.
Depending on the circumstances, the failure of the farm loan officer to
advise of the consequences of such an action (non-compliance) in
response to that information from the borrower may constitute a
material lack of action under the regulation. In contrast, minor
customer service issues, such as a failure by FSA to make a courtesy
reminder phone call under FSA policy to a borrower would not rise to
the requisite level of materiality. Repeated or more significant
customer service failures could rise to the level of material failures
based on a case-by-case determination, but such customer service
issues, especially where disparate levels of service arise across FSA's
customer base, should also be addressed through other technical service
initiatives and outreach programs.
The action, advice, or lack of action relied upon by the borrower
should also ordinarily be documented, but there may be situations where
documentation is not reasonably available (for example, where the
interaction with FSA was verbal). In those situations, the FSA official
with authority to grant equitable relief may determine that
contemporaneous documentation is not necessary. A lack of documentation
on its own should not be held against the borrower. All determinations
of equitable relief, however, must be documented with an explanation of
the determining official's basis for providing that relief.
Impacted borrowers may be required to assist in the resolution of
the noncompliance, provided the borrower agrees that these actions are
not detrimental to the long-term viability of the borrower's operation;
by taking such actions as partially repaying debt, disposing of assets,
changing operation or entity structure, and other necessary actions to
return to compliance and or eligibility. The 2018 Farm Bill also
specifies that equitable relief decisions are not subject to appeal or
judicial review.
Certified Mediation Program
Section 5402 of the 2018 Farm Bill amends section 501(c) of the
Agricultural Credit Act of 1987 (7 U.S.C. 5101(c)) to expand the scope
of issues for which mediation may be provided.
Section 5402(a)(1)(A)(ii) of the 2018 Farm Bill provides that in
addition to compliance with farm programs and conservation programs,
national organic program issues may now be mediated. Under the existing
regulation, the Certified Mediation Program may mediate pesticide use
issues that fall under the jurisdiction of USDA; this has not changed
as a result of the 2018 Farm Bill. Under the 2018 Farm Bill's new
provision, issues involving pesticide use may be a covered issue for
mediation when it involves organic producers outside of USDA programs.
In addition, organic certification-related disputes with the local
agencies that USDA has accredited to provide the certification may also
be eligible for mediation.
Section 5402(a)(1)(A)(iii) of the 2018 Farm Bill provides that
lease issues, including land and equipment leases, may be issues
covered by mediation programs. As leasing is a common farm practice,
disputes can and do occur between farmers and their landlords or
lessors. Increased restrictions in agricultural leases or the loss of a
lease can have negative impacts on a farm's viability. Mediation may
help resolve disputes at the early stages and enable farmers to retain
land or property under their leases.
Section 5402(a)(1)(A)(iii) of the 2018 Farm Bill also includes
family farm transition as an issue for which mediation services may be
provided. Farm families are frequently involved in transition issues,
which may include land division, asset and debt
[[Page 13120]]
distribution, individual and business responsibility for repayment of
farm loans, farm viability, managing interests and responsibilities of
off-farm heirs, and intergenerational conflict and responsibilities.
Unresolved family conflicts often complicate the process when FSA is
considering making loans to an operation as well as taking loan
servicing actions. Using mediation to resolve farm transition disputes
has the potential to keep farms viable. Resolving such disputes and
developing a sound business plan helps both FSA and the farmers, as FSA
or other creditors may make loans and help keep farmers in compliance
with loan or other program requirements.
Section 5402(a)(1)(A)(iii) of the 2018 Farm Bill further provides
that mediation may be used to help resolve farmer-neighbor conflicts.
As rural areas are developed, farmers are being increasingly faced with
neighbors who are unfamiliar with, and at times unsympathetic to,
typical and essential farming practices. Neighbors might complain about
a farm's noise, hours, dust, pesticide application, manure management,
odors, and runoff. Conflicts may also occur with municipal ordinances,
for example fence height limits, impervious cover limitations, and
prohibitions on specific farming activities. Such disputes may escalate
into conflicts involving multiple stakeholders that can result in legal
fees, which may have a negative impact on a farm's viability and
ability to access credit and pay debts.
Section 5402(a)(1)(A)(iii) of the 2018 Farm Bill provides for
mediation of such other issues as the USDA Secretary or head of a State
Department of Agriculture of each participating State considers
appropriate for better serving the agricultural community and persons
eligible for mediation. This rule, therefore, amends 7 CFR 785.3 to
provide that the list of additional issues to be mediated will be
included in the certification and recertification request.
Section 5402(a)(1)(B) of the 2018 Farm Bill provides that mediation
grant funding may be used to provide credit counseling to covered
persons before the initiation of mediation for issues involving USDA or
for issues unrelated to any ongoing dispute or mediation in which the
USDA is a party.
Further, section 5402(a)(2)(C) of the 2018 Farm Bill expanded the
universe of eligible persons to include any other person involved in an
issue for which mediation services are provided by a Certified
Mediation Program. The current definition provides that producers,
their creditors (as applicable), and other persons directly affected by
certain actions of USDA are considered ``covered persons.'' This rule,
therefore, amends 7 CFR 785.2 to revise the definition of ``covered
persons.''
This rule also amends 7 CFR 785.4(c) introductory text and (c)(1)
to provide that grant funds may be used for allowable costs in
mediating covered issues for covered persons. This rule amends the list
of the covered issues in 7 CFR 785.4(d) to reflect the additions made
by the 2018 Farm Bill.
In addition, a correction is being made in Sec. 785.4(c); the
reference to Sec. 785.3(b)(2) is being corrected to Sec. 785.3(a)(2),
and in the introductory text in Sec. 785.9, the reference to 2 CFR
200.333 is being corrected to 2 CFR 200.334. Also, in Sec. 785.9, the
recordkeeping requirement is being changed from 5 years to 3 years
because that is standard for the Federal Government records. For
consistency, edits are being made throughout 7 CFR part 785 for
references to the Certified Mediation Program.
Dishonored Payment Fee
FSA is adding new section 7 CFR 761.11 to add a penalty fee for
payments made by monetary instruments, such as checks, that are later
dishonored by the payer's financial institution. Payments made to FSA
that are later dishonored result in increased burdens on FSA payment
system and the staff to make accounting corrections, notify borrowers,
and reprocess payments. FSA will follow the U.S. Treasury statutory
determination in 26 U.S.C. 6657. By making this revision, FSA will
offset some of the cost associated with returned checks and anticipates
that it will serve as a deterrent against future infractions.
Remove Cash as an Acceptable Form of Payment
FSA is revising its Direct Loan Servicing regulations to remove
references to cash payments as it will no longer accept cash as a form
of payment on loans. This change will ensure borrower accounts are
correctly credited for submitted payments since FSA payment systems are
not designed to accept cash payments. In addition, the current process
for cash payments is inefficient. Currently cash payments involve a
two-step process. Employees have to travel to a financial institution
to obtain a money order or cashier's check and then have that money
order or cashier's check used for payment processing, resulting in risk
or additional risk of loss when using paper-based money for employees
and customers from, for example, improper handling and human error. The
regulatory change will require that borrowers provide FSA with a form
of payment that can be correctly and immediately processed into FSA's
payment system. FSA has analyzed the change to cash and determined that
this change will result in minimal impact on customers, will save time
and expense, eliminate risk, and is consistent with many electronic
commerce initiatives being implemented throughout USDA.
The change is consistent with the U.S. Department of the Treasury's
requirement to accept electronic payments and to meet Federal cash-
management laws (see U.S. Treasury Bulletin No. 2017-12).
This rule amends 7 CFR 765.151, 765.152, and 765.155, and 766.355
to remove the term cash.
Maximum Interest Rates
The regulations in 7 CFR 762.124 specify the interest rate rules
governing guaranteed loan program loans. Prior to this rule, the
regulation allowed lenders to charge a maximum interest rate at loan
closing or restructuring no greater than the 3-month LIBOR for loans
with rates fixed less than 5-years, or the 5-year Treasury note rate
for loans with rates fixed for 5 or more years, plus an allowable
markup.\2\ FSA had also included an alternative method for lenders
using a risk-based pricing model. These lenders were allowed to charge
a rate no greater than the rate one risk tier lower than the borrower
would qualify for without a guarantee.
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\2\ There are two maximum interest rates that depend on the
length of the loan--one is for shorter term loans and the other is
for longer term loans. The maximum interest rates are set using a
base rate plus an allowable markup.
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In July 2017, the U.K. Financial Conduct Authority announced they
would phase out LIBOR interest rates, ending publication in December
2021. Since 7 CFR 762.124 specifically included LIBOR as a rate that
guaranteed loans may not exceed, FSA is amending Sec. 762.124 to allow
for a replacement rate comparison.
FSA monitors the interest rates charged on its loans monthly,
comparing closed loans' rates to the LIBOR and Treasury thresholds.
Historically, very few loans have been closed with an interest rate at
or near the maximum rates allowed, regardless of the interest rate
method the respective lenders operated under.
FSA will replace use of the 3-month LIBOR rate with the Secured
Overnight Financing Rate (which is also known as SOFR) which was
established by the industry as an alternative to LIBOR
[[Page 13121]]
before LIBOR starts to phase out in December 2021.
FSA will continue to analyze agricultural lending pricing policies
and consider any changes in industry loan pricing practices as a result
of the discontinuation of LIBOR, lender pricing practices, economic
shocks, and financial market changes. Based on this analysis, FSA will
determine appropriate short-term maximum interest rates going forward,
whether using SOFR or another rate, and will post them on the FSA
website. FSA does not plan to make any changes to the use of the 5-year
Treasury rate basis plus markup for longer term loans. In order to be
flexible in response to changes in financial markets and other related
factors and to ensure the best rates are used to benefit borrowers and
lenders to ensure the success of the farm loans, we have determined
that the maximum interest rates are more appropriately announced
through the FSA website instead of specifying the specific indexes that
are being used by FSA in the regulation.
FSA's intent with this rule is not to reduce the rate charged to
guaranteed loan borrowers, or to reduce lender's profit margin on
loans. Rather, the purpose of this rule change is to simplify maximum
interest rate compliance for both lenders and FSA's staff. FSA's intent
is to select a replacement rate as close to the current LIBOR rates as
possible to minimize any impact on lenders and guaranteed loan
borrowers.
There has also been a concern from FSA staff and lenders about the
effectiveness of the risk-based pricing method in the regulation. FSA
included it as an alternative method to establish a maximum interest
rate for lenders using a formal risk-based pricing method. FSA added
the option to the regulation in 2013; both the agency and lenders have
had difficulty in trying to use the option, as explained below.
There are multiple approaches that lenders use to implement risk-
based pricing and many are more complex than the simple tier system
envisioned when this method was added to the regulation. Lender
policies include other factors beyond loan risk. Many include separate
tiers for default risk and loss risk, allow for considerable analyst
judgement using subjective factors, and may allow exceptions to
policies based on local market competition.
Lenders have also expressed frustration with the risk-based pricing
method in the regulation. Many are reluctant to share internal interest
rate practices or formulas and their credit staff are not aware of the
one tier better requirement, even several years later after
considerable training. As a result, lender loan narratives frequently
lack a description of the interest rate tier adjustment and FSA is
unable to determine at loan approval whether or not the proposed
interest rate complies with FSA rules. Therefore, FSA has relied
primarily on post-closing lender file reviews to confirm compliance
with interest rate regulations.
This rule amends Sec. 762.124 by removing the risk-based interest
rate alternative and places all lenders under the same base rates plus
allowable markup depending on the length of the loan.
Crop Insurance Violations
FSA is adding a paragraph to Sec. 762.120 to clarify that
guaranteed loan applicants must not be ineligible for assistance due to
disqualification resulting from a Federal Crop Insurance violation
according to 7 CFR part 718. This restriction already applies to FSA
guaranteed loan applicants; however, FSA is adding this provision to 7
CFR 762.120 for consistency with an identical limitation in the
regulations for FSA's direct loan applicants in 7 CFR 764.101(h).
Corrections
On August 9, 2021, FSA published a final rule titled ``Heirs'
Property Relending Program (HPRP), Improving Farm Loan Program
Delivery, and Streamlining Oversight Activities'' (86 FR 43381--43397)
in which FSA replaced the outdated term ``supervised credit,'' with the
term ``progression lending'' or similar pro-graduation terminology.
While most references were updated, several references were
inadvertently left unchanged. Therefore, the reference to ``supervised
credit'' wherever it appears in Sec. 761.1(c) is replaced with the
term ``progression lending,'' the reference to ``supervisory
agreements'' is replaced with the term ``progression lending plans'' in
Sec. 761.102(b)(1), and the term ``supervisory needs'' is replaced
with the term ``progression lending needs'' in Sec. 761.103(a)(2).
That August 2021 final rule also amended the regulations concerning
limited resource reviews in 7 CFR part 765. As a result of that change,
the paragraphs in 7 CFR 766.107 and 766.108 concerning these reviews
are no longer necessary and this rule is removing them.
In reviewing the regulations, FSA noticed an inconsistency that
needs to be addressed to avoid confusion and reduce program delivery
errors. Specifically, 7 CFR 764.40(d) specifies that title insurance or
final title opinion can be waived when, among other things, the loan
amount is less than $10,000. FSA is amending the regulation to increase
that amount to $25,000.00 to be consistent with EM title requirements
in 7 CFR 764.355(d) and (e).
Effective Date, Notice, and Comment
The Administrative Procedure Act (APA, 5 U.S.C. 553) provides that
the notice and comment and 30-day delay in the effective date
provisions do not apply when the rule involves any specified actions,
including matters related to loans. In addition, because this rule is
exempt from the requirements in 5 U.S.C. 553, it is also exempt from
the regulatory analysis requirements of the Regulatory Flexibility Act
(5 U.S.C. 601-612), as amended by the Small Business Regulatory
Enforcement Fairness Act of 1996 (SBREFA). The requirements for the
regulatory flexibility analysis in 5 U.S.C. 603 and 604 are
specifically tied to the agency being required to issue a proposed rule
by section 553 or any other law, and the definition of rule in 5 U.S.C.
601 is also tied to the publication of a proposed rule.
The rule is not a major rule under Congressional Review Act.
Therefore, FSA is not required to delay the effective date for 60 days
from the date of publication to allow for Congressional review.
Therefore, this rule is effective when published in the Federal
Register.
Executive Orders 12866 and 13563
Executive Order 12866, ``Regulatory Planning and Review,'' and
Executive Order 13563, ``Improving Regulation and Regulatory Review,''
direct agencies to assess all costs and benefits of available
regulatory alternatives and, if regulation is necessary, to select
regulatory approaches that maximize net benefits (including potential
economic, environmental, public health and safety effects, distributive
impacts, and equity). Executive Order 13563 emphasized the importance
of quantifying both costs and benefits, of reducing costs, of
harmonizing rules, and of promoting flexibility. The requirements in
Executive Orders 12866 and 13563 for the analysis of costs and benefits
to loans apply to rules that are determined to be significant.
The Office of Management and Budget (OMB) designated this rule as
not significant under Executive Order 12866 and therefore, OMB has not
reviewed this rule and an analysis of costs and
[[Page 13122]]
benefits to loans is not required under either Executive Order 12866 or
13563.
Environmental Review
This rule revises the provisions on FLP loan limits and servicing.
The result of these changes will increase loan limits or improve the
various loan programs and relieve some restrictions to participation or
otherwise encourage participation. This rule includes changes mandated
by the 2018 Farm Bill and discretionary technical amendments that are
administrative in nature. All discretionary aspects of these loan
actions are covered by the Categorical Exclusions in 7 CFR 799.31(b).
The discretionary provisions of this action are covered by the
Categorical Exclusions, found in 7 CFR 799.31(b)(2)(iii) for minor
amendments or revisions to previously approved actions, and Sec.
799.31(b)(3)(i), for the issuance of minor technical corrections to
regulations. No Extraordinary Circumstances (Sec. 799.33) exist. As
such, the implementation of the discretionary technical amendments
provided in this rule does not constitute a major Federal action that
would significantly affect the quality of the human environment,
individually or cumulatively. Therefore, FSA will not prepare an
environmental assessment or environmental impact statement for this
regulatory action and this rule serves as the environmental screening
documentation of the programmatic environmental compliance decision for
this Federal action.
Executive Order 12988
This rule has been reviewed in accordance with Executive Order
12988, ``Civil Justice Reform.'' This rule will not preempt State or
local laws, regulations, or policies unless they represent an
irreconcilable conflict with this rule. Before any judicial actions may
be brought regarding the provisions of this rule the administrative
appeal provisions of 7 CFR parts 11 and 780 are to be exhausted.
Executive Order 13175
This rule has been reviewed for compliance with Executive Order
13175, ``Consultation and Coordination with Indian Tribal
Governments.'' The Executive Order 13175 requires Federal agencies to
consult and coordinate with Tribes on a government-to-government basis
on policies that have tribal implications, including regulations,
legislative comments or proposed legislation, and other policy
statements or actions that have substantial direct effects on one or
more Indian Tribes, on the relationship between the Federal Government
and Indian Tribes or on the distribution of power and responsibilities
between the Federal Government and Indian Tribes.
USDA has assessed the impact of this rule on Indian Tribes and
determined that this rule has Tribal implications that required Tribal
consultation under Executive Order 13175. Tribal consultation for this
rule was included in the 2018 Farm Bill consultation held on May 1,
2019, at the National Museum of the American Indian, in Washington, DC.
The portion of the Tribal Consultation relative to this rule was
conducted by USDA Farm Production and Conservation mission area, as
part of the Title V session. There were no specific comments from
Tribes on this rule during Tribal consultation. If a Tribe requests
additional comments, FSA will work with the Office of Tribal Relations
to ensure meaningful consultation is provided for modifications
identified in this rule that are not expressly mandated by legislation.
Unfunded Mandates
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA, Pub. L.
104-4) requires Federal agencies to assess the effects of their
regulatory actions on State, local, or Tribal governments or the
private sector. Agencies generally must prepare a written statement,
including a cost benefit analysis, for final rules with Federal
mandates that may result in expenditures of $100 million or more in any
1 year for State, local, or Tribal governments, in the aggregate, or to
the private sector. UMRA generally requires agencies to consider
alternatives and adopt the more cost effective or least burdensome
alternative that achieves the objectives of the rule. This rule
contains no Federal mandates under the regulatory provisions of Title
II for State, local, or Tribal governments, or private sector.
Therefore, this rule is not subject to the requirements of sections 202
and 205 of UMRA.
Federal Assistance Programs
The title and number of the Federal assistance programs, listed in
the Catalog of Federal Domestic Assistance, to which this rule applies
are:
10.099 Conservation Loans;
10.404 Emergency Loans;
10.406 Farm Operating Loans;
10.407 Farm Ownership Loans.
Paperwork Reduction Act
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C.
3501-3520), this rule does not change the approved information
collection under OMB control numbers 0560-0155, 0560-0233, 0560-0236,
0560-0237, 0560-0238 and 0560-0230.
USDA Non-Discrimination Policy
In accordance with Federal civil rights law and USDA civil rights
regulations and policies, USDA, its Agencies, offices, and employees,
and institutions participating in or administering USDA programs are
prohibited from discriminating based on race, color, national origin,
religion, sex, gender identity (including gender expression), sexual
orientation, disability, age, marital status, family or parental
status, income derived from a public assistance program, political
beliefs, or reprisal or retaliation for prior civil rights activity, in
any program or activity conducted or funded by USDA (not all bases
apply to all programs). Remedies and complaint filing deadlines vary by
program or incident.
Persons with disabilities who require alternative means of
communication for program information (for example, braille, large
print, audiotape, American Sign Language, etc.) should contact the
responsible Agency or USDA TARGET Center at (202) 720-2600 (voice and
TTY) or (844) 433-2774 (toll-free nationwide). Additionally, program
information may be made available in languages other than English.
To file a program discrimination complaint, complete the USDA
Program Discrimination Complaint Form, AD-3027, found online at <a href="https://www.usda.gov/oascr/how-to-file-a-program-discrimination-complaint">https://www.usda.gov/oascr/how-to-file-a-program-discrimination-complaint</a> and
at any USDA office or write a letter addressed to USDA and provide in
the letter all the information requested in the form. To request a copy
of the complaint form, call (866) 632-9992. Submit your completed form
or letter to USDA by mail to: U.S. Department of Agriculture, Office of
the Assistant Secretary for Civil Rights, 1400 Independence Avenue SW,
Washington, DC 20250-9410 or email: <a href="/cdn-cgi/l/email-protection#b7f8f6f4f7c2c4d3d699d0d8c1"><span class="__cf_email__" data-cfemail="347b757774414750551a535b42">[email protected]</span></a>.
USDA is an equal opportunity provider, employer, and lender.
List of Subjects
7 CFR Part 761
Accounting, Loan programs--agriculture, Rural areas.
7 CFR Part 762
Agriculture, Banks, Banking, Credit, Loan programs--agriculture.
7 CFR Part 764
Agriculture, Credit, Loan programs--agriculture.
[[Page 13123]]
7 CFR Part 765
Agriculture, Agricultural commodities, Credit, Livestock, Loan
programs--agriculture.
7 CFR Part 766
Agriculture, Agricultural commodities, Credit, Livestock, Loan
programs--agriculture.
7 CFR Part 768
Agriculture, Credit, Loan programs--agriculture.
7 CFR Part 785
Agriculture, Federal-state relations, Grant programs--
intergovernmental relations, Mediation programs.
For the reasons discussed above, FSA amends 7 CFR parts 761, 762,
764, 765, 766, 768, and 785 as follows:
PART 761--FARM LOAN PROGRAMS; GENERAL PROGRAM ADMINISTRATION
0
1. The authority citation for part 761 continues to read as follows:
Authority: 5 U.S.C. 301 and 7 U.S.C. 1989.
Subpart A--General Provisions
Sec. 761.1 [Amended]
0
2. In Sec. 761.1(c), remove ``Parts 761 through 767'' and ``supervised
credit'' wherever they appear and add ``This part and parts 762 through
767 of this subchapter'' and ``progression lending'' in their places,
respectively.
0
3. Amend Sec. 761.2(b) as follows:
0
a. Add the definition of ``Equitable relief'' in alphabetical order;
and
0
b. In the definition of ``Veteran farmer'':
0
i. Redesignate paragraphs (1) and (2) as paragraphs (i) and (ii);
0
ii. In newly redesignated paragraph (i):
0
A. Remove the word ``has'' and add ``Has'' in its place; and
0
B. Remove the word ``or''; and
0
iii. In newly redesignated paragraph (ii), remove ``has'' and the
period at the end and add ``Has'' and ``; or'' in their places,
respectively; and
0
iv. Add paragraph (iii).
The additions read as follows:
Sec. 761.2 Abbreviations and definitions.
* * * * *
(b) * * *
Equitable relief means waiving a requirement for Direct Farm
Ownership, Direct Farm Operating, or Direct Emergency loans when the
borrower is not in compliance with loan program requirements, but acted
in good faith and relied on a material action, advice, or non-action
from an Agency official to the detriment of the borrower's operation.
* * * * *
Veteran farmer * * *
(iii) Is a veteran who served in the active military, naval, or air
service, and who was discharged or released from that service under
conditions other than dishonorable and who first obtained status as a
veteran during the most recent 10-year period.
* * * * *
Sec. 761.8 [Amended]
0
4. Amend Sec. 761.8 as follows:
0
a. In paragraph (a)(1)(i), remove the dollar amount ``$300,000'' and
add ``$600,000'' in its place;
0
b. In paragraphs (a)(1)(ii) and (iii), remove ``$700,000'' and ``2000''
and add ``$1,750,000'' and ``2019'' in their places, respectively;
0
c. In paragraph (a)(2)(i), remove the dollar amount ``$300,000'' and
add ``$400,000'' in its place;
0
d. In paragraphs (a)(2)(ii) and (iii) and (a)(3), remove ``$700,000''
and ``2000'' and add ``$1,750,000'' and ``2019'' in their places,
respectively;
0
e. In paragraph (a)(4), remove the dollar amount ``$300,000'' and add
``$600,000'' in its place; and
0
f. In paragraph (a)(6), remove ``guaranteed Farm Ownership'' and
``$800,000'' and add ``guaranteed Farm Ownership loan'' and
``$1,100,000'' in their places, respectively.
0
5. Add Sec. 761.11 to read as follows:
Sec. 761.11 Dishonored payment fee.
(a) The Agency will charge a fee for payment transactions that are
returned for insufficient funds.
(b) [Reserved]
Subpart C--Progression Lending
0
6. In Sec. 761.102, revise the section heading and paragraph (b)(1) to
read as follows:
Sec. 761.102 Borrower recordkeeping and reporting.
* * * * *
(b) * * *
(1) Cooperate with the Agency and comply with all progression
lending plans, farm assessments, farm operating plans, year-end
analyses, and all other loan-related requirements and documents;
* * * * *
Sec. 761.103 [Amended]
0
7. In Sec. 761.103(a)(2), remove the word ``supervisory'' and add
``progression lending'' in its place.
PART 762--GUARANTEED FARM LOANS
0
8. The authority citation for part 762 continues to read as follows:
Authority: 5 U.S.C. 301 and 7 U.S.C. 1989.
0
9. In Sec. 762.120, add paragraph (o) to read as follows:
Sec. 762.120 Applicant eligibility.
* * * * *
(o) Disqualification. The applicant, and all entity members in the
case of an entity, must not be ineligible due to disqualification
resulting from a Federal Crop Insurance violation, according to 7 CFR
part 718.
Sec. 762.124 [Amended]
0
10. Amend Sec. 762.124 as follows:
0
a. In paragraph (a)(3) introductory text, remove the words ``the
following, as applicable:'' and adding ``the rates established and
announced by the Agency on the FSA website (<a href="http://www.fsa.usda.gov">www.fsa.usda.gov</a>).'';
0
b. Remove paragraphs (a)(3)(i) through (iii); and
0
c. Remove paragraph (a)(4) and redesignate paragraphs (a)(5) and (6) as
paragraphs (a)(4) and (5).
0
11. Amend Sec. 762.129 as follows:
0
a. Revise paragraph (b)(1); and
0
b. In paragraph (b)(2)(i), remove the acronym ``SDA'' and add
``socially disadvantaged'' in its place.
The revision reads as follows:
Sec. 762.129 Percent of guarantee and maximum loss.
* * * * *
(b) * * *
(1) For OLs and FOs, the guarantee will be issued at 95 percent
when:
(i) The sole purpose of a guaranteed FO or OL is to refinance an
Agency direct farm loan and when only a portion of the loan is used to
refinance a direct Agency loan, a weighted percentage of a guarantee
will be provided;
(ii) The purpose of a guaranteed FO is to participate in the down
payment loan program;
(iii) A guaranteed OL is made to a farmer who is participating in
the Agency's down payment loan program. The guaranteed OL must be made
during the period that a borrower has the down payment loan
outstanding;
(iv) A guaranteed OL is made to a farmer whose farm land is subject
to the jurisdiction of an Indian tribe and whose loan is secured by one
or more security instruments that are subject to the jurisdiction of an
Indian tribe;
(v) A guaranteed FO or OL is made to a qualified socially
disadvantaged farmer; or
[[Page 13124]]
(vi) A guaranteed FO or OL is made to a qualified beginning farmer.
* * * * *
Sec. 762.130 [Amended]
0
12. In Sec. 762.130(d)(4)(iii)(C), remove the words ``beginning or
socially disadvantaged'' and adding ``beginning, socially
disadvantaged, or veteran'' in their place.
PART 764--DIRECT LOAN MAKING
0
13. The authority citation for part 764 continues to read as follows:
Authority: 5 U.S.C. 301 and 7 U.S.C. 1989.
Subpart D--Farm Ownership Loan Program
0
14. In Sec. 764.152, revise the section heading and paragraph (d) to
read as follows:
Sec. 764.152 General eligibility requirements.
* * * * *
(d) And in the case of an entity, one or more members constituting
a majority interest, must have participated in the business operations
of a farm for at least 3 years out of the 10 years prior to the date
the application is submitted.
(1) The following experiences can substitute for up to 2 of the 3
years:
(i) Not less than 16 credit hours of post-secondary education in an
agriculture-related field;
(ii) Successful completion of a farm management curriculum offered
by a cooperative extension service, community college, adult vocational
agriculture program, non-profit organization, or land-grant college or
university;
(iii) One (1)-year experience as a farm laborer with substantial
management responsibility;
(iv) Successful completion of an internship, mentorship, or
apprenticeship in day-to-day farm management;
(v) Significant business management experience;
(vi) Honorable discharge from the armed forces of the United
States;
(vii) Successful repayment of an FSA financed youth loan; or
(viii) Established relationship with a counselor in the Service
Corps of Retired Executives (SCORE) program who has experience in
farming or ranching, or with Agency-approved local individuals or
organizations that are committed to providing mentorship in farming or
ranching; or
(2) The 3-year requirement in this paragraph (d) will be waived if
the applicant meets the requirements of both paragraphs (d)(1)(iii) and
(viii) of this section.
* * * * *
Subpart E--Downpayment Loan Program
Sec. 764.201 [Amended]
0
15. In Sec. 764.201, remove the words ``beginning farmer or socially
disadvantaged'' and adding ``beginning farmer, socially disadvantaged
farmer, or veteran farmer'' in their place.
0
16. In Sec. 764.202, revise paragraph (b) to read as follows:
Sec. 764.202 Eligibility requirements.
* * * * *
(b) Be a beginning farmer, socially disadvantaged farmer, or
veteran farmer.
Subpart I--Emergency Loan Program
0
17. Amend Sec. 764.352 as follows:
0
a. In paragraphs (a) and (b), remove the semicolon and add a period it
its place;
0
b. In paragraph (c)(3)(i), remove the semicolon and add ``; and'' in
its place;
0
c. In paragraphs (c)(3)(ii), (d), and (e)(3) and (4), remove the
semicolon and add a period in its place; and
0
d. Revise paragraph (f).
The revision reads as follows:
Sec. 764.352 Eligibility requirements.
* * * * *
(f) And all entity members in the case of an entity, must not have
received debt forgiveness from the Agency on more than one occasion on
or before April 4, 1996, or any time after April 4, 1996. A write down
associated with a restructuring action under Section 353 of the Act is
not considered debt forgiveness for EM Loan purposes.
* * * * *
Subpart J--Loan Decision and Closing
Sec. 764.402 [Amended]
0
18. In Sec. 764.402(d)(1)(i), remove the dollar amount ``$10,000'' and
add ``$25,000'' in its place.
PART 765--DIRECT LOAN SERVICING--REGULAR
0
19. The authority citation for part 765 continues to read as follows:
Authority: 5 U.S.C. 301 and 7 U.S.C. 1989.
Subpart D--Borrower Payments
0
20. In Sec. 765.151, revise paragraph (a) to read as follows:
Sec. 765.151 Handling payments.
(a) Borrower payments. Borrowers must submit their loan payments in
a form acceptable to the Agency, such as checks and money orders. Forms
of payment not acceptable to the Agency include, but are not limited
to, cash, foreign currency, foreign checks, and sight drafts.
* * * * *
Sec. 765.152 [Amended]
0
21. In Sec. 765.152(b)(4), remove the words ``Cash proceeds'' and
adding ``Proceeds'' in their place.
Sec. 765.155 [Amended]
0
22. In Sec. 765.155, remove paragraph (a)(1)(i) and redesignate
paragraphs (a)(1)(ii) through (iv) as paragraphs (a)(1)(i) through
(iii).
PART 766--DIRECT LOAN SERVICING-SPECIAL
0
23. The authority citation for part 766 continues to read as follows:
Authority: 5 U.S.C. 301, 7 U.S.C. 1989, and 1981d(c).
Subpart C--Loan Servicing Programs
Sec. 766.107 [Amended]
0
24. In Sec. 766.107, remove paragraph (d)(4).
Sec. 766.108 [Amended]
0
25. In Sec. 766.108, remove paragraph (c)(4) and redesignate paragraph
(c)(5) as paragraph (c)(4).
Subpart H--Loan Liquidation
0
26. In Sec. 766.355, revise paragraph (c)(1) to read as follows:
Sec. 766.355 Acceleration of loans.
* * * * *
(c) * * *
(1) Pay the account in full;
* * * * *
0
27. Add part 768, consisting of Sec. Sec. 768.1 and 768.2, to read as
follows:
PART 768--EQUITABLE RELIEF
Authority: 5 U.S.C. 301 and 7 U.S.C. 1989.
Sec. 768.1 Providing equitable relief.
(a) If the Farm Service Agency (Agency or FSA) determines that a
borrower is not in compliance with Agency loan requirements in this
chapter, the Agency may consider equitable relief as specified in this
section:
(1) Requirements. After determination that a borrower is in
noncompliance with loan program requirements in this chapter, the
Agency may provide equitable relief to a borrower if it is determined
that the borrower:
[[Page 13125]]
(i) Acted in good faith; and
(ii) Relied on a material action, advice, or non-action from an
Agency official to the detriment of the borrower's operation or the
action approved by the Agency official resulted in the borrower
becoming noncompliant with the loan program requirements in this
chapter.
(2) Determination. The material action, advice, or response from an
Agency official under paragraph (a)(1) of this section must be
documented, unless the Agency official with authority to grant
equitable relief determines that documentation is not reasonably
available. Notwithstanding any delegations in this chapter, only the
Secretary, FSA Administrator, Deputy Administrator for Farm Loan
Programs, or any other official within U.S. Department of Agriculture
(USDA) specifically designated by the Secretary, may make the
determination for the Agency to grant equitable relief and must
document the basis for that determination.
(3) Relief. If the borrower meets the requirements in paragraph
(a)(1) of this section, the Agency may provide to a borrower either or
both of the following forms of equitable relief:
(i) The borrower may choose to keep loans at current rates or other
terms received in association with the loan which was determined to be
noncompliant; or
(ii) The borrower may receive other equitable relief for the loan
as the Agency determines to be appropriate.
(4) Conditions. As a condition of receiving relief, the Agency may
require the borrower to take actions to remedy the noncompliance,
provided the borrower agrees those actions do not adversely affect the
long-term viability of the borrower's operation.
(b) A determination or action of the Agency under this section is
final and not subject to administrative appeal or judicial review.
Sec. 768.2 [Reserved]
PART 785--CERTIFIED MEDIATION PROGRAM
0
28. The authority citation for part 785 continues to read as follows:
Authority: 5 U.S.C. 301; 7 U.S.C. 1989; and 7 U.S.C. 5101-5104.
0
29. Revise the heading for part 785 to read as set forth above.
Sec. 785.1 [Amended]
0
30. Amend Sec. 785.1 as follows:
0
a. In paragraph (b), remove ``USDA'', ``certified State mediation
program'', ``State's certified mediation program'', and ``appeals
regulations'' and add ``U.S. Department of Agriculture (USDA)'',
``Certified Mediation Program'', ``State's Certified Mediation
Program'', ``appeals regulations in this chapter'' in their places,
respectively;
0
b. In paragraph (d), remove the words ``program certified'' and add
``Certified Mediation Program'' in their place; and
0
c. In paragraph (e), remove the words ``program certified'' and ``This
provision'' and add ``Certified Mediation Program'' and ``This
paragraph (e)'' in their places, respectively.
0
31. Amend Sec. 785.2 as follows:
0
a. Remove the definition for ``Certified State mediation program'' and
add the definition for ``Certified Mediation Program'' in its place;
0
b. Revise the definition of ``Covered persons'';
0
c. In the definition for ``Mediation services'', remove the words
``State mediation program'' and add ``Certified Mediation Program'' in
their place; and
0
d. In the definition for ``Qualifying State'', remove the words ``State
mediation program'' and add ``Certified Mediation Program'' in their
place.
The addition and revision read as follows:
Sec. 785.2 Definitions.
* * * * *
Certified Mediation Program means a program providing mediation
services that has been certified in accordance with Sec. 785.3.
* * * * *
Covered persons means agricultural producers, their creditors (as
applicable), persons directly affected by actions of the USDA, and any
other persons involved in covered issues under Sec. 785.4(d); for
which mediation services are provided by a Certified Mediation Program.
* * * * *
0
32. In Sec. 785.3, revise the section heading, the introductory text,
and paragraphs (a) introductory text and (a)(2)(vi) to read as follows:
Sec. 785.3 Annual certification of a State's Certified Mediation
Program.
To obtain certification from FSA for the Certified Mediation
Program, the State must meet the requirements of this section.
(a) New request for certification. A new request for certification
of a State mediation program must include descriptive and supporting
information regarding the mediation program and a certification that
the mediation program meets certain requirements as prescribed in this
section. If a State is also qualifying its mediation program to request
a grant of Federal funds under the Certified Mediation Program, the
State must submit with its request for certification additional
information as specified in Sec. 785.4.
* * * * *
(2) * * *
(vi) That the State's Certified Mediation Program ensures, in the
case of other issues covered by the Certified Mediation Program, that:
(A) USDA receives adequate notification of those issues by the
deadline specified in Sec. 785.6(a)(1); and
(B) Persons directly affected by actions of USDA receive adequate
notification of the Certified Mediation Program; and
* * * * *
0
33. Amend Sec. 785.4 as follows:
0
a. Revise the section heading;
0
b. In paragraph (a) introductory text, remove the words ``State
mediation program'' and add ``State's Certified Mediation Program'' in
their place;
0
c. In paragraph (b)(1), remove the words ``in any FSA office and on the
internet,'' and add ``at'' in their place;
0
d. Revise paragraph (b)(2);
0
e. Revise paragraphs (c) introductory text, (c)(1) introductory text,
and (c)(2)(iv); and
0
f. Add paragraph (d).
The revisions and addition read as follows:
Sec. 785.4 Grants to States with a Certified Mediation Program.
* * * * *
(b) * * *
(2) A budget with supporting details providing estimates of the
cost of operation and administration of the Certified Mediation
Program. Proposed direct expenditures will be grouped in the categories
of allowable direct costs under the Certified Mediation Program as
specified in paragraph (c)(1) of this section;
* * * * *
(c) Grant purposes. Grants made under this part will be used only
to pay the allowable costs of operation and administration of the
components of a qualifying State's Certified Mediation Program that
have been certified as specified in Sec. 785.3(a)(2). Costs of
services other than mediation services to covered issues and covered
persons within the State are not considered part of the cost of
operation and administration of the Certified Mediation Program for the
purpose of determining the amount of a grant award.
(1) Allowable costs. Subject to applicable cost principles in 2 CFR
part
[[Page 13126]]
200, subpart E, allowable costs for operations and administration are
limited to those that are reasonable and necessary to carry out the
State's Certified Mediation Program in providing mediation services for
covered issues and covered persons within the State. Specific
categories of costs allowable under the State's Certified Mediation
Program include, and are limited to:
* * * * *
(2) * * *
(iv) Services provided by a State's Certified Mediation Program
that are not consistent with the features of the Certified Mediation
Program as specified in this part including advocacy services on behalf
of a mediation participant, such as representation of a mediation
client before an administrative appeals entity of the USDA or other
Federal Government department or Federal or State Court proceeding.
(d) Covered issues. Covered issues include:
(1) Agricultural loans, regardless of whether the loans are made or
guaranteed by USDA or made by a third party--mediation services must be
provided; and
(2) The following issues for which mediation services may be
provided to covered persons that are involved in one or more of the
following:
(i) Wetlands determinations;
(ii) Compliance with farm programs, conservation programs, and the
National Organic Program established under the Organic Foods Production
Act of 1990;
(iii) Rural water loan programs;
(iv) Grazing on National Forest System lands;
(v) Pesticides;
(vi) Lease issues, including land leases and equipment leases;
(vii) Family farm transition;
(viii) Farmer-neighbor disputes;
(ix) Such other issues as the Secretary or the head of the
Department of Agriculture of each participating State considers
appropriate for better serving the agricultural community and persons
eligible for mediation; or
(x) Credit counseling:
(A) Prior to the initiation of any mediation involving the USDA; or
(B) Unrelated to any ongoing dispute or mediation in which the USDA
is a party.
0
33. Revise Sec. 785.5 to read as follows:
Sec. 785.5 Fees for mediation services.
A requirement that non-USDA parties who elect to participate in
mediation pay a fee for mediation services will not preclude
certification of a State's mediation program or its eligibility for a
grant; however, if participation in mediation is mandatory for a USDA
agency, a State's Certified Mediation Program may not require the USDA
agency to pay a fee to participate in a mediation.
0
34. In Sec. 785.6, revise paragraph (a)(3) to read as follows:
Sec. 785.6 Deadlines and address.
(a) * * *
(3) Requests for additional grant funds during a fiscal year. Any
request by a State's Certified Mediation Program, that is eligible for
grant funding as of the beginning of the fiscal year, for additional
grant funds during that fiscal year for additional, unbudgeted demands
for mediation services must be submitted on or before March 1 of the
fiscal year.
* * * * *
0
35. Amend Sec. 785.7 as follows:
0
a. In paragraph (a), remove the words ``certified State mediation
program'' and add ``State's Certified Mediation Program'' in their
place;
0
b. In paragraph (b)(3) introductory text, remove the words ``State
program'' and add ``State's Certified Mediation Program'' in their
place;
0
c. Revise paragraph (c)(1);
0
d. In paragraph (c)(2), remove the words ``certified State mediation
program'' and add ``State's Certified Mediation Program'' in their
place;
0
e. In paragraph (d)(1)(iii), remove the words ``certified State
mediation programs'' and add ``Certified Mediation Program'' in their
place; and
0
f. Revise paragraph (e)(1).
The revisions read as follows:
Sec. 785.7 Distribution of Federal grant funds.
* * * * *
(c) * * *
(1) Grant funds will be paid in advance, in installments throughout
the Federal fiscal year as requested by a State's Certified Mediation
Program and approved by FSA. The initial payment to a Certified
Mediation Program in a qualifying State eligible for grant funding as
of the beginning of a fiscal year will represent at least one-fourth of
the State's annual grant award. The initial payment will be made as
soon as practicable after certification, or re-certification, after
grant funds are appropriated and available.
* * * * *
(e) * * *
(1) States receiving Certified Mediation Program grant funds are
encouraged to obligate award funds within the Federal fiscal year of
the award. A State may, however, carry forward any funds disbursed to
its Certified Mediation Program that remain unobligated at the end of
the fiscal year of award for use in the next fiscal year for costs
resulting from obligations in the subsequent funding period. Any
carryover balances plus any additional obligated fiscal year grant will
not exceed the lesser of 70 percent of the State's budgeted allowable
costs of operation and administration of the State's Certified
Mediation Program for the subsequent fiscal year, or $500,000.
* * * * *
0
36. Amend Sec. 785.8 as follows:
0
a. Revise paragraph (a) introductory text;
0
b. In paragraphs (a)(1) introductory text and (a)(1)(i), remove the
words ``certified State mediation program'' and add ``State's Certified
Mediation Program'' in their place;
0
c. In paragraph (a)(2) introductory text, remove the words ``certified
mediation program'' and add ``State's Certified Mediation Program'' in
their place; and
0
d. In paragraph (a)(2)(ii)(B), remove the word ``certified''.
The revision reads as follows:
Sec. 785.8 Reports by qualifying States receiving mediation grant
funds.
(a) Annual report by the State on its Certified Mediation Program.
No later than 30 days following the end of a fiscal year during which a
qualifying State received a grant award under this part, the State must
submit to the Administrator an annual report on its Certified Mediation
Program. The annual report must include the following:
* * * * *
0
37. In Sec. 785.9, revise the introductory text and paragraph (c) to
read as follows:
Sec. 785.9 Access to program records.
The regulations in 2 CFR 200.334 through 200.338 provide general
record retention and access requirements for records pertaining to
grants. In addition, the State must maintain and provide the Government
access to pertinent records regarding services delivered by the State's
Certified Mediation Program for purposes of evaluation, audit and
monitoring of the State Certified Mediation Program as follows:
* * * * *
(c) All participants in a mediation must sign and date an
acknowledgment of receipt of such notice from the mediator. The State's
Certified Mediation Program must maintain originals of such
acknowledgments in its mediation files for at least 3 years.
[[Page 13127]]
0
38. In Sec. 785.10, revise paragraphs (a) introductory text, (a)(1),
(2), and (5), and (b) to read as follows:
Sec. 785.10 Penalty for non-compliance.
(a) The Administrator is authorized to withdraw the certification
of a State's Certified Mediation Program, terminate or suspend the
grant to the State's Certified Mediation Program, require a return of
unspent grant funds, a reimbursement of grant funds on account of
expenditures that are not allowed, and may impose any other penalties
or sanctions authorized by law if the Administrator determines that:
(1) The State's Certified Mediation Program, at any time, does not
meet the requirements in this part for certification;
(2) The State's Certified Mediation Program is not being operated
in a manner consistent with the features of the program as certified by
FSA, with the regulations in this part, or the grant agreement;
* * * * *
(5) Reports submitted by a State on its Certified Mediation Program
as required by Sec. 785.8 are false, contain misrepresentations or
material omissions, or are otherwise misleading.
(b) In the event that FSA gives notice to the State of its intent
to enforce any withdrawal of certification or other penalty for non-
compliance, USDA agencies will cease to participate in any mediation
conducted by the State's Certified Mediation Program immediately upon
delivery of such notice to the State.
Sec. 785.11 [Amended]
0
39. In Sec. 785.11, remove the words ``State mediation program'' and
adding ``State's Certified Mediation Program'' in their place wherever
they appear.
Sec. 785.12 [Amended]
0
40. In Sec. 785.12, remove the cross reference ``parts 15, 15b and
1901, subpart E, of'' and adding ``parts 15 and 15b of'' in their
place.
Zach Ducheneaux,
Administrator, Farm Service Agency.
[FR Doc. 2022-04858 Filed 3-8-22; 8:45 am]
BILLING CODE 3410-01-P
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</html>Indexed from Federal Register on March 9, 2022.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.