Rule2022-20652
Updates to Servicing Requirements for Business & Industry Guaranteed Loans
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
September 23, 2022
Effective
October 24, 2022
Issuing agencies
Agriculture DepartmentRural Business-Cooperative ServiceRural Utilities Service
Abstract
The Rural Business Cooperative Service (RBCS or the Agency), a Rural Development (RD) agency of the United States Department of Agriculture (USDA), is revising their servicing requirements for the Business & Industry (B&I) Guaranteed Program to clarify the current regulation and update certain provisions to align with the OneRD Guarantee Loan Initiative.
Full Text
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<title>Federal Register, Volume 87 Issue 184 (Friday, September 23, 2022)</title>
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[Federal Register Volume 87, Number 184 (Friday, September 23, 2022)]
[Rules and Regulations]
[Pages 58019-58021]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-20652]
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Rules and Regulations
Federal Register
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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. 184 / Friday, September 23, 2022 /
Rules and Regulations
[[Page 58019]]
DEPARTMENT OF AGRICULTURE
Rural Business-Cooperative Service
Rural Utilities Service
7 CFR Part 4287
[Docket No. RBS-22-BUSINESS-0018]
RIN 0570-AB08
Updates to Servicing Requirements for Business & Industry
Guaranteed Loans
AGENCY: Rural Business Cooperative Service and Rural Utilities Service,
USDA.
ACTION: Final rule.
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SUMMARY: The Rural Business Cooperative Service (RBCS or the Agency), a
Rural Development (RD) agency of the United States Department of
Agriculture (USDA), is revising their servicing requirements for the
Business & Industry (B&I) Guaranteed Program to clarify the current
regulation and update certain provisions to align with the OneRD
Guarantee Loan Initiative.
DATES: This final rule is effective October 24, 2022.
ADDRESSES: Additional information about RD and its programs is
available on the internet at <a href="https://www.rd.usda.gov/">https://www.rd.usda.gov/</a>.
FOR FURTHER INFORMATION CONTACT: Justin Kirking, Servicing Branch
Chief, Rural Business-Cooperative Service, USDA Rural Development, 1400
Independence Ave. SW, Rm 5803-Stop 3201, Washington, DC 2050-3201;
telephone 608-606-0298; email <a href="/cdn-cgi/l/email-protection#147e6167607d7a3a7f7d667f7d7a7354616770753a737b62"><span class="__cf_email__" data-cfemail="d7bda2a4a3beb9f9bcbea5bcbeb9b097a2a4b3b6f9b0b8a1">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION:
I. Background
The purpose of the B&I Guaranteed Loan Program is to improve,
develop, or finance business, industry, and employment and improve the
economic and environmental climate in rural communities. This is
achieved by bolstering the existing private credit structure through
the guarantee of quality loans.
The regulations in 7 CFR part 4287, subpart B, Servicing Business
and Industry Guaranteed Loan Program, provide servicing and liquidation
requirements for Business & Industry (B&I) Guaranteed Loans originated
under 7 CFR part 4279, subparts A and B. Subparts A and B of 7 CFR part
4279 and subpart B of 7 CFR part 4287 are applicable to B&I Loans
guaranteed by the Agency prior to October 1, 2020, and to B&I loans
made under the authority of the Coronavirus Aid, Relief, and Economic
Security Act (CARES Act) (Pub. L. 116-136) to provide B&I guarantees
for loans needed as a result of the Coronavirus Disease 2019 (COVID-19)
pandemic for working capital loan purposes to support business
operations and facilities in rural areas (B&I CARES Act Program Loans).
Beginning on October 1, 2020, new B&I loans are made under 7 CFR part
5001, Guaranteed Loans, which is commonly referred to as the OneRD
Guarantee Loan Initiative.
The RBCS is amending 7 CFR part 4287, subpart B, with the intent to
clarify the current regulation and update certain provisions to align
with 7 CFR part 5001. It is anticipated that most existing lenders with
guaranteed loans serviced under 7 CFR part 4287, subpart B, will obtain
new guarantees under 7 CFR part 5001 which will be serviced in
accordance with subpart F of 7 CFR part 5001. The Agency has identified
several provisions that should be aligned between the two servicing
regulations (7 CFR part 5001 and 7 CFR part 4287, subpart B) in order
to provide consistency, efficiency, and to improve the customer
experience.
II. Summary of Changes to the Rule
Section 4287.107 Routine Servicing
Paragraph (d) is updated to clarify financial reporting
requirements for the Borrower(s).
Section 4287.112 Interest Rate Changes
Paragraph (b) is revised to provide flexibility regarding changing
from a variable rate to a fixed rate and to help align with 7 CFR part
5001.
Section 4287.113 Release of Collateral
Paragraphs (a) and (c) are revised to establish uniform procedure
for the release of collateral and to bring the regulation more in
alignment with 7 CFR part 5001.
III. Executive Orders/Acts
Executive Order 12866--Classification
This rule has been determined to be not significant for purposes of
Executive Order 12866 and, therefore, has not been reviewed by the
Office of Management and Budget (OMB).
Congressional Review Act
Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.),
the Office of Information and Regulatory Affairs designated this rule
as not a major rule, as defined by 5 U.S.C. 804(2).
Assistance Listing Number (Formally Known as the Catalog of Federal
Domestic Assistance)
The Assistance Listing Number assigned to the Business and Industry
Guaranteed Loan Program is 10.768. The Assistance Listings are
available on the internet at <a href="https://sam.gov/">https://sam.gov/</a>.
Executive Order 12372--Intergovernmental Review
This final rule is excluded from the scope of Executive Order 12372
(Intergovernmental Consultation), which may require a consultation with
State and local officials.
Paperwork Reduction Act
This rule contains no new reporting or recordkeeping burdens under
OMB control number 0570-0069 that would require approval under the
Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35).
National Environmental Policy Act
In accordance with the National Environmental Policy Act of 1969,
Public Law 91-190, this final rule has been reviewed in accordance with
7 CFR part 1970 (``Environmental Policies and Procedures''). RBCS has
determined that (i) this action meets the criteria established in 7 CFR
1970.53(f); (ii) no extraordinary circumstances exist; and (iii) the
action is not ``connected'' to other actions with potentially
significant impacts, is not considered a ``cumulative action'' and is
not precluded by 40 CFR 1506.1. Therefore,
[[Page 58020]]
the Agency has determined that the action does not have a significant
effect on the human environment, and therefore neither an Environmental
Assessment nor an Environmental Impact Statement is required.
Unfunded Mandates Reform Act
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public
Law 104-4, establishes requirements for Federal agencies to assess the
effects of their regulatory actions on State, local, and tribal
governments and the private sector. Under section 202 of the UMRA, RBCS
generally must prepare a written statement, including a cost-benefit
analysis, for proposed and final rules with Federal mandates that may
result in expenditures to State, local, or tribal governments, in the
aggregate, or to the private sector, of $100 million or more in any one
year. When such a statement is needed for a rule, section 205 of the
UMRA generally requires RBCS to identify and consider a reasonable
number of regulatory alternatives and adopt the least costly, most
cost-effective, or least burdensome alternative that achieves the
objectives of the rule.
This final rule contains no Federal mandates (under the regulatory
provisions of title II of the UMRA) for State, local, and tribal
governments or the private sector. Therefore, this final rule is not
subject to the requirements of sections 202 and 205 of the UMRA.
Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601-602) (RFA) generally
requires an agency to prepare a regulatory flexibility analysis of any
rule subject to notice and comment rulemaking requirements under the
Administrative Procedure Act (``APA'') or any other statute. The
Administrative Procedures Act exempts from notice and comment
requirements rules ``relating to agency management or personnel or to
public property, loans, grants, benefits, or contracts'' (5 U.S.C.
553(a)(2)), so therefore an analysis has not been prepared for this
rule.
Executive Order 12988--Civil Justice Reform
This rule has been reviewed under Executive Order 12988. In
accordance with this rule: (1) unless otherwise specifically provided,
all State and local laws that conflict with this rule will be
preempted; (2) no retroactive effect will be given to this rule except
as specifically prescribed in the rule; and (3) administrative
proceedings of the National Appeals Division of the Department of
Agriculture (7 CFR part 11) must be exhausted before bringing suit in
court that challenges action taken under this rule.
Executive Order 13132--Federalism
The policies contained in this rule do not have any substantial
direct effect on States, on the relationship between the National
Government and the States, or on the distribution of power and
responsibilities among the various levels of government. Nor does this
rule impose substantial direct compliance costs on state and local
governments. Therefore, consultation with the States is not required.
Executive Order 13175--Consultation and Coordination With Indian Tribal
Governments
This executive order imposes requirements on RBCS in the
development of regulatory policies that have tribal implications or
preempt tribal laws. RBCS has determined that the rule does not have a
substantial direct effect on one or more Indian tribe(s) or on either
the relationship or the distribution of powers and responsibilities
between the Federal Government and Indian tribes. Thus, this rule is
not subject to the requirements of Executive Order 13175. If tribal
leaders are interested in consulting with RBCS on this rule, they are
encouraged to contact USDA's Office of Tribal Relations or RD's Native
American Coordinator at: <a href="/cdn-cgi/l/email-protection#f6b7bfb7b8b683859297d8919980"><span class="__cf_email__" data-cfemail="da9b939b949aafa9bebbf4bdb5ac">[email protected]</span></a> to request such a consultation.
E-Government Act Compliance
Rural Development is committed to the E-Government Act, which
requires Government agencies in general to provide the public the
option of submitting information or transacting business electronically
to the maximum extent possible.
Civil Rights Impact Analysis
Rural Development, a mission area for which RBCS is an agency, has
reviewed this rule in accordance with USDA Regulation 4300-4, Civil
Rights Impact Analysis,'' to identify any major civil rights impacts
the rule might have on program participants on the basis of age, race,
color, national origin, sex, or disability. After review and analysis
of the rule and available data, it has been determined that based on
the analysis of the program purpose, application submission and
eligibility criteria, issuance of this final rule is not likely to
negatively impact very low, low and moderate-income populations,
minority populations, women, Indian tribes or persons with disability,
by virtue of their race, color, national origin, sex, age, disability,
or marital or familial status. No major civil rights impact is likely
to result from this rule.
USDA Non-Discrimination Statement
In accordance with Federal civil rights laws and USDA civil rights
regulations and policies, the USDA, its Mission Areas, agencies, staff
offices, 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/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.
Program information may be made available in languages other than
English. Persons with disabilities who require alternative means of
communication to obtain program information (e.g., Braille, large
print, audiotape, American Sign Language) should contact the
responsible Mission Area, agency, or staff office; the USDA TARGET
Center at (202) 720-2600 (voice and TTY); or the Federal Relay Service
at (800) 877-8339.
To file a program discrimination complaint, a complainant should
complete a Form AD-3027, USDA Program Discrimination Complaint Form,
which can be obtained online at <a href="https://www.usda.gov/sites/default/files/documents/usda-program-discrimination-complaint-form.pdf">https://www.usda.gov/sites/default/files/documents/usda-program-discrimination-complaint-form.pdf</a>, from
any USDA office, by calling (866) 632-9992, or by writing a letter
addressed to USDA. The letter must contain the complainant's name,
address, telephone number, and a written description of the alleged
discriminatory action in sufficient detail to inform the Assistant
Secretary for Civil Rights (ASCR) about the nature and date of an
alleged civil rights violation. The completed AD-3027 form or letter
must be submitted to USDA by:
(1) Mail: U.S. Department of Agriculture, Office of the Assistant
Secretary for Civil Rights, 1400 Independence Avenue SW, Washington, DC
20250-9410; or
(2) Fax: (833) 256-1665 or (202) 690-7442; or
(3) Email: <a href="/cdn-cgi/l/email-protection#d5a5a7bab2a7b4b8fbbcbba1b4beb095a0a6b1b4fbb2baa3"><span class="__cf_email__" data-cfemail="e292908d8590838fcc8b8c96838987a297918683cc858d94">[email protected]</span></a>.
List of Subjects for 7 CFR Part 4287
Economic development, Energy, Energy conservation, Grant programs,
[[Page 58021]]
Loan programs, Loan programs--business, Loan programs--housing and
community development, Renewable energy, Reporting and recordkeeping
requirements, Rural areas.
For the reasons discussed in the preamble, 7 CFR part 4287 is
amended as follows:
PART 4287--SERVICING
0
1. The authority citation for part 4287 continues to read as follows:
Authority: 5 U.S.C. 301; 7 U.S.C. 1932(a); 7 U.S.C. 1989.
Subpart B--Servicing Business and Industry Guaranteed Loans
0
2. Amend Sec. 4287.107 by revising paragraph (d) to read as follows:
Sec. 4287.107 Routine servicing.
* * * * *
(d) Borrower financial reports. The lender must obtain, analyze,
and forward to the Agency the borrower's and any guarantor's annual
financial statements required by the loan agreement within 120 days of
the end of the borrower's fiscal year. States, local government, Indian
tribes, institution of higher education, and nonprofit organization
borrowers who meet the Federal awards expended threshold established in
2 CFR part 200, subpart F, during their fiscal year must submit an
audit conducted in accordance with 2 CFR part 200, subpart F. When the
borrower's audit is conducted in accordance with 2 CFR part 200,
subpart F, audits must be submitted no later than nine months after the
end of the borrower's fiscal year or 30 days after the borrower's
receipt of the auditor's report, whichever is earlier. The lender must
analyze these financial statements and provide the Agency with a
written summary of the lender's analysis, ratio analysis, and
conclusions, which, at a minimum, must include trends, strengths,
weaknesses, extraordinary transactions, violations of loan covenants
and covenant waivers proposed by the lender, any routine servicing
actions performed, and other indications of the financial condition of
the borrower. Spreadsheets of the financial statements must also be
included. Following the Agency's review of the lender's financial
analysis, the Agency will provide a written report of any concerns to
the lender. Any concerns based upon the Agency's review must be
addressed by the lender. If the lender makes a reasonable attempt to
obtain financial statements but is unable to obtain the borrower's
cooperation, the failure to obtain financial statements will not impair
the validity of the Loan Note Guarantee.
* * * * *
0
3. Amend Sec. 4287.112 by revising paragraph (b) to read as follows:
Sec. 4287.112 Interest rate changes.
* * * * *
(b) No increases in interest rates will be permitted, except the
normal fluctuations in approved variable interest rates, unless a
temporary interest rate reduction occurred or to change from a variable
rate to a fixed rate. Variable rates can be changed to a fixed rate at
the request of the borrower, lender, agreement of the holder, if any,
and with the Agency's prior written concurrence. After the rate change,
the rate must meet the requirements of 7 CFR 4279.125.
* * * * *
0
4. Amend Sec. 4287.113 by revising paragraph (a) and the introductory
text of paragraph (c) to read as follows:
Sec. 4287.113 Release of collateral.
(a) Within the parameters of paragraph (c) of this section, lenders
may, over the life of the loan, release collateral (other than personal
and corporate guarantees) without Agency concurrence if the proceeds
generated are used to pay down debt in order of lien priority, reduce
the guaranteed loan or to acquire replacement collateral. Working
assets, such as accounts receivable, inventory, and work-in-progress
that are routinely depleted or sold and proceeds used for the normal
course of business operations may be used in and released for routine
business purposes without prior concurrence of the Agency as long as
the loan is not in monetary default or liquidation.
* * * * *
(c) Collateral must remain sufficient to provide for adequate
collateral coverage for the outstanding guaranteed loan(s). For a
release of collateral request when the Borrower is not in monetary
default or liquidation, the lender must support all releases of chattel
collateral with a value exceeding $250,000 and real estate collateral
with a value exceeding $500,000 with a current appraisal on the
collateral being released and otherwise meets the requirements of Sec.
4279.144 of this chapter. All other release of collateral requests must
meet the appraisal requirements of Sec. 4279.144 of this chapter. The
cost of this appraisal will not be paid for by the Agency. The Agency
may, at its discretion, require an appraisal of the remaining
collateral in cases where it has been determined that the Agency may be
adversely affected by the release of collateral. The sale or release of
the collateral must be based on an arm's length transaction, and there
must be adequate consideration for the release of collateral. Such
consideration may include, but is not limited to:
* * * * *
Karama Neal,
Administrator, Rural Business Cooperative Service.
Chrisopher A. McLean,
Acting Administrator, Rural Utilities Service.
[FR Doc. 2022-20652 Filed 9-22-22; 8:45 am]
BILLING CODE 3410-XY-P
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