Loan Servicing; Farm Loan Programs, 39565-39569 [E9-18986]

Download as PDF 39565 Proposed Rules Federal Register Vol. 74, No. 151 Friday, August 7, 2009 This section of the FEDERAL REGISTER contains notices to the public of the proposed issuance of rules and regulations. The purpose of these notices is to give interested persons an opportunity to participate in the rule making prior to the adoption of the final rules. DEPARTMENT OF AGRICULTURE Farm Service Agency 7 CFR Parts 761 and 766 RIN 0560–AI05 Loan Servicing; Farm Loan Programs Farm Service Agency, USDA. Proposed rule. AGENCY: pwalker on DSK8KYBLC1PROD with PROPOSALS ACTION: SUMMARY: The Farm Service Agency (FSA) is proposing to amend the Farm Loan Programs (FLP) direct loan servicing regulations primarily to implement provisions of the Food, Conservation, and Energy Act of 2008 (the 2008 Farm Bill). FSA proposes four amendments to the rules. The first amendment would further emphasize transitioning borrowers to private sources of credit in the shortest timeframe practicable. The second amendment would amend the Homestead Protection lease regulations by extending the right to purchase the leased property to the lessee’s immediate family when the lessee is a member of a socially disadvantaged group. The third amendment would amend the account liquidation regulations to suspend certain loan acceleration and foreclosure actions, including suspending interest accrual and offsets, if a borrower has filed a claim of program discrimination that has been accepted as valid by USDA and is at the point of acceleration or foreclosure. The fourth amendment would amend the supervised bank account regulations to be consistent with the recently amended Federal Deposit Insurance Act. DATES: We will consider comments that we receive by October 6, 2009. ADDRESSES: We invite you to submit written comments on this proposed rule. In your comment, include the volume, date, and page number of this issue of the Federal Register. You may submit comments by any of the following methods: VerDate Nov<24>2008 16:10 Aug 06, 2009 Jkt 217001 • E-mail: mike.cumpton@wdc.usda.gov. • Fax: (202) 720–5804. • Mail: Director, Loan Servicing and Property Management Division, Farm Service Agency, U.S. Department of Agriculture, 1400 Independence Avenue, SW., Stop 0523, Washington, DC 20250–0523. • Hand Delivery or Courier: Deliver comments to Farm Service Agency, Loan Servicing and Property Management Division, 1250 Maryland Ave., SW., Suite 500, Washington, DC 20024. • Federal eRulemaking Portal: Go to http://www.regulations.gov. Follow the online instructions for submitting comments. Comments may be inspected in the Office of the Director, Loan Servicing and Property Management Division (LSPMD), Farm Service Agency, at 1250 Maryland Ave., SW., Suite 500, Washington, DC, between 8 a.m. and 4:30 p.m., except holidays. FOR FURTHER INFORMATION CONTACT: Michael C. Cumpton, Assistant to the Director, LSPMD, Farm Service Agency; telephone: (202) 690–4014; Facsimile: (202) 720–5804; E-mail: mike.cumpton@wdc.usda.gov. Persons with disabilities or who require alternative means for communications should contact the USDA Target Center at (202) 720–2600 (voice and TDD). SUPPLEMENTARY INFORMATION: Background This proposed rule implements three provisions of the 2008 Farm Bill (Public Law 110–246; June 18, 2008) concerning loan servicing for FSA’s direct loan program. This law repealed Public Law 110–234 dated May 22, 2008 that inadvertently omitted Title III (Trade of the 2008 Farm Bill.) FSA loans are a means of providing credit to farmers whose financial risk exceeds a level acceptable to commercial lenders. For two of these amendments, the one that would allow family members of lessees who are members of a socially disadvantaged group to purchase properties under Homestead Protection and the one setting a moratorium on foreclosure actions for borrowers with an accepted program discrimination claim, there is little to no discretion in how to implement the provisions of the 2008 Farm Bill. For the third amendment promoting the goal of PO 00000 Frm 00001 Fmt 4702 Sfmt 4702 transitioning borrowers to private credit, the 2008 Farm Bill provides general guidance. In addition, this proposed rule would implement a conforming amendment to comply with section 136 of the Emergency Economic Stabilization Act of 2008 (Pub. L. 110– 343; October 3, 2008), which temporarily increased the standard maximum deposit insurance amount for Federal Deposit Insurance Corporation (FDIC)-insured accounts. Transitioning Borrowers to Private Credit Sections 302(a), 311(a), and 321(a) of the Consolidated Farm and Rural Development Act (the Con Act) establish the inability ‘‘to obtain sufficient credit elsewhere’’ as an eligibility requirement for FLP direct loans. Section 319 of the Con Act requires that FSA develop a plan ‘‘to encourage each borrower * * * to graduate to private commercial or other sources of credit.’’ Section 5304 of the 2008 Farm Bill requires that the Secretary ‘‘establish a plan and promulgate regulations (including performance criteria) that promote the goal of transitioning borrowers to private commercial credit and other sources of credit in the shortest time practicable.’’ Both section 319 of the Con Act and section 5304 of the 2008 Farm Bill require coordination with the following sections of the Con Act: • Borrower training established under section 359; • Loan assessment established under section 360; • Supervised credit under section 361; and • Market placement under section 362. FSA has implemented the borrower training program in existing regulations in 7 CFR part 764, subpart J. The market placement program is addressed in 7 CFR 762.110(g). Requirements regarding a borrower’s graduation to another source of credit are addressed in 7 CFR part 765, subpart C. None of these regulations would be changed by this proposed rule. The supervised credit requirement, which includes the loan assessment program, is specified in 7 CFR part 761, subpart C. This rule proposes to amend 7 CFR 761.103 pertaining to farm assessments, as well as 7 CFR 761.1, ‘‘Introduction,’’ to encourage the transitioning of borrowers E:\FR\FM\07AUP1.SGM 07AUP1 39566 Federal Register / Vol. 74, No. 151 / Friday, August 7, 2009 / Proposed Rules to commercial credit in the shortest period of time practicable and better establish the use of borrower training, supervised credit, including loan assessment, and market placement to plan for and evaluate a borrower’s ability to graduate. FSA is developing an internal plan that will include performance criteria to evaluate its success in transitioning borrowers to commercial credit. Performance criteria are not being established for borrowers in this proposed rule. pwalker on DSK8KYBLC1PROD with PROPOSALS Extension of Right To Reacquire Homestead Property to Family Members This rule proposes to amend section 766.154, ‘‘Homestead Protection Leases.’’ Section 766.154(c) currently addresses the right of a lessee to purchase leased property under Homestead Protection. This proposed amendment would expand that right to also allow an immediate family member of a lessee who is a member of a socially disadvantaged group (as currently defined in section 761.2) to exercise the option to purchase, as required by section 5305 of the 2008 Farm Bill. The lessee may designate a member of the lessee’s immediate family (parent, sibling, or child) as having this right to purchase. This immediate family member also has the right under section 5305 to choose any independent appraiser from a list of three approved by FSA to establish the current market value of the property. This policy will be added to the FSA Handbook procedures. Moratorium on Loan Acceleration and Foreclosure for Borrowers With an Accepted Discrimination Claim Section 14002 of the 2008 Farm Bill requires a moratorium on certain acceleration and loan foreclosure proceedings against any farmer or rancher who has a claim of program discrimination accepted by the Department as valid or who files such a claim that is accepted. The statutory moratorium applies only with respect to Farm Loan Program loans made under subtitle A, B, or C, of the Con Act, which includes Farm Ownership (FO), Soil and Water (SW), Recreation loans, and Emergency (EM) loans. Section 343(a)(10) of the Con Act defines ‘‘Farmer Program Loan’’ to include FO loans under section 303, Operating Loans (OL) under section 312, SW loans under section 304, EM loans under section 321, Economic Emergency (EE) loans under section 202 of the Emergency Agricultural Credit Adjustment Act, Economic Opportunity VerDate Nov<24>2008 16:10 Aug 06, 2009 Jkt 217001 (EO) loans under the Economic Opportunity Act of 1961, Softwood Timber (ST) loans under section 1254 of the Food Security Act of 1985, and Rural Housing loans for farm service buildings (RHF) under section 502 of the Housing Act of 1949. SW, EE, EO, ST, and RHF loans are no longer being made, but a few remain to be serviced. FSA regulation, 7 CFR 761.2, also includes Recreation loans formerly made under section 304 of the Con Act as a ‘‘program loan.’’ Loans made under statutory authorities other than the Con Act, such as the EE, EO, ST, and RHF loans, would not be covered by the section 14002 moratorium, but will continue to be covered by FSA’s internal voluntary suspension of acceleration and foreclosure when the borrower has a program discrimination complaint accepted by the USDA Office of Adjudication and Compliance (OAC). Non-program loans are not covered by the mandatory section 14002 moratorium, but will continue to be covered by the Agency’s voluntary suspension policy on acceleration and foreclosure when the borrower has a program discrimination complaint accepted by OAC. Non-program loans are defined by section 761.2 as those loans made on more stringent terms for the convenience of FSA because the applicant or property does not qualify for a program loan under applicable statutes and regulations. For example, under FSA regulations a third party may assume a program loan on non-program terms if the transferee is not eligible for the program loan, and in some circumstances FSA might collect an unauthorized loan by permitting the borrower to continue making payments on non-program terms. Homestead Protection financing and financing of recapture under Shared Appreciation Agreements authorized by sections 352 and 353 of the Con Act, respectively, also are considered non-program loans. Non-program loans historically have not been considered eligible for the broad loan servicing options available for program loans. These servicing rights are commonly the subject of dispute in the program discrimination claims addressed by section 14002, so it is reasonable to limit the moratorium to the program loans specified in the statute. FSA has found no Congressional intent for this moratorium provision to cover non-program loans. In fact, Congress’ specific reference to ‘‘Farm Loan Program Loans’’ indicates otherwise. Liquidation of non-program loans, therefore, may be delayed if a borrower’s program loans are under moratorium. This rule proposes to PO 00000 Frm 00002 Fmt 4702 Sfmt 4702 amend section 766.351, ‘‘Liquidation,’’ to specify the provisions of the moratorium accordingly. An ‘‘accepted’’ claim under section 14002 is a claim for which OAC has made the determination to accept on basic jurisdictional grounds. As explained in the Conference Report for the 2008 Farm Bill, ‘‘accepted’’ is a procedural term and not a statement as to the merits of the program discrimination claim. The acceptance of the claim is distinct from the person’s filing of a program discrimination claim. The moratorium began on the effective date of the 2008 Farm Bill, which was May 22, 2008, if the borrower had a pending claim that was accepted and the borrower was at the point of acceleration and foreclosure on or prior to that date. Otherwise, it will begin when a program discrimination complaint has been accepted and the borrower is at the point of acceleration or foreclosure. In either case, moratorium begins after all available loan servicing and appeal rights have been offered to the borrower. If the borrower’s account were accelerated and foreclosed prior to enactment of the statute or OAC’s acceptance of the borrower’s program discrimination claim, the moratorium would never be triggered. The moratorium will end on the earlier of the date the program discrimination claim is resolved by USDA OAC, or the date that a court of competent jurisdiction renders a final decision on the program discrimination claim if the farmer or rancher appeals the decision of USDA OAC. In addition to the moratorium on acceleration and foreclosure, section 14002 provided that interest accrual and offset would be suspended on the farm program loans made under subtitle A, B, or C of the Con Act for the claimants during the moratorium period (at the point of acceleration or foreclosure after all servicing and appeal rights have been exhausted). These benefits were not provided under FSA’s prior voluntary suspension policy and cannot be provided on any loans not made under subtitle A, B, or C of the Con Act. Interest accrual and Treasury offset generally are required by 31 U.S.C. sections 3717 and 3716, respectively. Interest accruals and offsets will resume on the covered loans when the moratorium terminates. If the borrower does not prevail on the program discrimination claim, the borrower will be liable for the interest that accrued during the moratorium under section 14002. In such case, the interest that would have accrued during the moratorium will be reinstated on the debt. Any debt that would have been E:\FR\FM\07AUP1.SGM 07AUP1 Federal Register / Vol. 74, No. 151 / Friday, August 7, 2009 / Proposed Rules paid down through offset will remain when the moratorium terminates and will be collected through normal procedures. If the borrower does prevail on the program discrimination claim, the borrower will not be liable for the interest and offsets during the moratorium. FSA will implement any settlement agreement or court order, as appropriate. Establishing a Supervised Bank Account This rule proposes to amend existing regulations in 7 CFR 761.51(e) which currently require that a financial institution pledge acceptable collateral with the Federal Reserve Bank when the balance deposited into a supervised bank account will exceed $100,000. The Emergency Economic Stabilization Act of 2008, section 136, amended the Federal Deposit Insurance Corporation Act to temporarily increase the standard maximum deposit insurance amount from $100,000 to $250,000, effective October 3, 2008, and ending December 31, 2009. After that date, the standard maximum deposit insurance amount will return to $100,000. This rule, therefore, proposes to amend section 761.51, ‘‘Establishing a Supervised Bank Account,’’ to remove the reference to the $100,000 threshold for insured balances and replace it with a reference to ‘‘the maximum amount insurable by the Federal Government.’’ pwalker on DSK8KYBLC1PROD with PROPOSALS Executive Order 12866 The Office of Management and Budget (OMB) designated this rule as not significant under Executive Order 12866 and, therefore, OMB was not required to review this proposed rule. Regulatory Flexibility Act In accordance with the Regulatory Flexibility Act (5 U.S.C. 601), FSA is certifying that there would not be a significant economic impact on a substantial number of small entities. All FSA direct loan borrowers and all farm entities affected by this rule are small businesses according to the North American Industry Classification System and the U. S. Small Business Administration. There is no diversity in size of the entities affected by this rule, and the costs to comply with it are the same for all entities. In this rule, FSA is proposing to revise regulations that affect loan servicing only. In 2007, over 2,500 direct borrowers (about 3.7 percent of the portfolio) graduated to commercial credit. FSA believes graduation will continue in the 3 to 5 percent range and is dependent on the overall farm economy. VerDate Nov<24>2008 16:10 Aug 06, 2009 Jkt 217001 Currently, FSA has 38 inventory properties under a Homestead Protection lease. The extension of purchase rights to the immediate family of lessees who are a members of a socially disadvantaged group will affect very few of these cases. Due to the acceleration and foreclosure moratorium FSA expects some Government losses due to the suspension of interest accrual (when the borrower prevails) and the loss of some offset payments. FSA does not expect these changes to impose any additional cost to the borrowers. Therefore, the costs of compliance from this rule are expected to be minimal. Therefore, FSA certifies that this rule will not have a significant economic impact on a substantial number of small entities. Environmental Review The environmental impacts of this rule have been considered in a manner consistent with the provisions of the National Environmental Policy Act (NEPA, 42 U.S.C. 4321–4347), the regulations of the Council on Environmental Quality (40 CFR parts 1500–1508), and FSA regulations for compliance with NEPA (7 CFR part 799). The changes to the FLP direct loan servicing program, required by the 2008 Farm Bill that are identified in this proposed rule, are non-discretionary. Therefore, FSA has determined that NEPA does not apply to this rule, and no environmental assessment or environmental impact statement will be prepared. Executive Order 12988 This rule has been reviewed in accordance with E.O. 12988, Civil Justice Reform. In accordance with the executive order: (1) All State and local laws and regulations that are in conflict with this rule would be preempted; (2) no retroactive effect would be given to this rule; and (3) administrative proceedings in accordance with 7 CFR part 11 must be exhausted before bringing suit in court challenging action taken under this rule unless those regulations specifically allow bringing suit at an earlier time. Executive Order 12372 For reasons set forth in the Notice to 7 CFR part 3015, subpart V (48 FR 29115, June 24, 1983), the programs and activities within this rule are excluded from the scope of Executive Order 12372, which requires intergovernmental consultation with State and local officials. PO 00000 Frm 00003 Fmt 4702 Sfmt 4702 39567 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, and tribal governments or the private sector. Agencies generally must prepare a written statement, including a cost benefit analysis, for proposed and 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 proposed rule contains no Federal mandates, as defined under title II of the UMRA, for State, local, and tribal governments or the private sector. Thus, this proposed rule is not subject to the requirements of sections 202 and 205 of UMRA. Executive Order 13132 The policies contained in this rule would not have any substantial direct effect on States, the relationship between the national government and the States, or the distribution of power and responsibilities among the various levels of government. Nor would this proposed rule impose substantial direct compliance costs on State and local governments. Therefore, consultation with the States is not required. Paperwork Reduction Act The amendments proposed for 7 CFR parts 761 and 766 require no changes or new collection to the currently approved information collections by OMB under the control numbers of 0560–0233, 0560–0233 and 0560–0238. E-Government Act Compliance FSA is committed to complying with the E-Government Act, to promote the use of the Internet and other information technologies to provide increased opportunities for citizen access to Government information and services, and for other purposes. Federal Assistance Programs The title and number of the Federal assistance programs, as found in the Catalog of Federal Domestic Assistance, to which this proposed rule would apply are: 10.404 Emergency Loans; 10.406 Farm Operating Loans; 10.407 Farm Ownership Loans. E:\FR\FM\07AUP1.SGM 07AUP1 39568 Federal Register / Vol. 74, No. 151 / Friday, August 7, 2009 / Proposed Rules (2) Identify and prioritize training and supervisory needs; and (3) Develop a plan of supervision to assist the borrower in achieving financial viability and transitioning to private commercial credit or other sources of credit in the shortest time practicable. * * * * * List of Subjects 7 CFR Part 761 Agriculture, Agricultural commodities, Credit, Livestock, Loan programs—Agriculture. 7 CFR Part 766 Agriculture, Agricultural commodities, Credit, Livestock, Loan programs—Agriculture. For the reasons discussed in the preamble, the Farm Service Agency (USDA) proposes to amend 7 CFR chapter VII as follows: PART 766—DIRECT LOAN SERVICING—SPECIAL 5. The authority citation for part 766 is revised to read as follows: Authority: 5 U.S.C. 301 and 7 U.S.C. 1989. PART 761—GENERAL PROGRAM ADMINISTRATION 1. The authority citation for part 761 continues to read as follows: Authority: 5 U.S.C. 301 and 7 U.S.C. 1989. 6. In § 766.154, paragraph (c) is revised to read as follows: § 766.154 Subpart A—General Provisions Homestead Protection leases. * 2. In § 761.1, paragraph (c) is amended by adding a new fourth sentence at the end to read as follows: § 761.1 Subpart D—Homestead Protection Program Introduction. * * * * * (c) * * * The programs are designed to allow those who participate to transition to private commercial credit or other sources of credit in the shortest period of time practicable through the use of supervised credit, including farm assessments, borrower training, and market placement. * * * * * Subpart B—Supervised Bank Accounts 3. In § 761.51, paragraph (e) is revised to read as follows: § 761.51 Establishing a supervised bank account. * * * * * (e) If the funds to be deposited into the account cause the balance to exceed the maximum amount insurable by the Federal Government, the financial institution must agree to pledge acceptable collateral with the Federal Reserve Bank for the excess over the insured amount, before the deposit is made. * * * * (c) Lease-purchase options. (1) The lessee may exercise in writing the purchase option and complete the homestead protection purchase at any time prior to the expiration of the lease provided all lease payments are current. (2) If the lessee is a member of a socially disadvantaged group, the lessee may designate a member of the lessee’s immediate family (that is, parent, sibling, or child) (designee) as having the right to exercise the option to purchase. (3) The purchase price is the market value of the property when the option is exercised as determined by a current appraisal obtained by the Agency. (4) The lessee or designee may purchase homestead protection property with cash or other credit source. (5) The purchaser may receive Agency program or non-program financing provided: (i) The purchaser has not received previous debt forgiveness; (ii) The Agency has funds available to finance the purchase of homestead protection property; (iii) The purchaser demonstrates an ability to repay such an FLP loan; and (iv) The purchaser is otherwise eligible for the FLP loan. * * * * * pwalker on DSK8KYBLC1PROD with PROPOSALS Subpart C—Supervised Credit Subpart H—Loan Liquidation 4. In § 761.103, paragraph (a) is revised to read as follows: § 761.103 7. Section 766.358 is added to read as follows: Farm assessment. (a) The Agency, in collaboration with the applicant, will assess the farming operation to: (1) Determine the applicant’s financial condition, organization structure, and management strengths and weaknesses; VerDate Nov<24>2008 16:10 Aug 06, 2009 Jkt 217001 § 766.358 Acceleration and Foreclosure Moratorium. (a) Notwithstanding any other provisions of this subpart, borrowers who file or have filed a program discrimination complaint that is PO 00000 Frm 00004 Fmt 4702 Sfmt 4702 accepted by USDA Office of Adjudication and Compliance or successor office (USDA), and have been serviced to the point of acceleration or foreclosure on or after May 22, 2008, will not be accelerated or liquidated until such complaint has been resolved by USDA or closed by a court of competent jurisdiction. This moratorium applies only to program loans made under subtitle A, B, or C of the Act (for example, FO, OL, EM, SW, or RL). Interest will not accrue and no offsets will be taken on these loans during the moratorium. Interest accrual and offsets will continue on all other loans, including, but not limited to, non-program loans. (1) If the Agency prevails on the program discrimination compliant, the interest that would have accrued during the moratorium will be reinstated on the account when the moratorium terminates, and all offsets and servicing actions will resume. (2) If the borrower prevails on the program discrimination compliant, the interest that would have accrued during the moratorium will not be reinstated on the account unless specifically required by the settlement agreement or court order. (b) The moratorium will begin on: (1) May 22, 2008, if the borrower had a pending program discrimination claim that was accepted by USDA as valid and was at the point of acceleration or foreclosure on or before that date or (2) The date after May 22, 2008, when the borrower has a program discrimination claim accepted by USDA as valid and the borrower is at the point of acceleration or foreclosure. (c) The point of acceleration under this section is the earliest of the following: (1) The day after all rights offered on the Agency notice of intent to accelerate expire if the borrower does not appeal; (2) The day after all appeals resulting from an Agency notice of intent to accelerate are concluded if the borrower appeals and the Agency prevails on the appeal; (3) The day after all appeal rights have been concluded relating to a failure to graduate and the Agency prevails on any appeal; (4) Any other time when, because of litigation, third party action, or other unforeseen circumstance, acceleration is the next step for the Agency in servicing and liquidating the account. (d) A borrower is considered to be in foreclosure status under this section anytime after acceleration of the account. (e) The moratorium will end on the earlier of: E:\FR\FM\07AUP1.SGM 07AUP1 Federal Register / Vol. 74, No. 151 / Friday, August 7, 2009 / Proposed Rules (1) The date the program discrimination claim is resolved by USDA or (2) The date that a court of competent jurisdiction renders a final decision on the program discrimination claim if the farmer or rancher appeals the decision of USDA. Signed in Washington, DC, on August 3, 2009. Jonathan Coppess, Administrator, Farm Service Agency. [FR Doc. E9–18986 Filed 8–6–09; 8:45 am] BILLING CODE 3410–05–P DEPARTMENT OF ENERGY 10 CFR Part 609 RIN 1901–AB21 Loan Guarantees for Projects That Employ Innovative Technologies pwalker on DSK8KYBLC1PROD with PROPOSALS AGENCY: Office of the Chief Financial Officer, Department of Energy. ACTION: Proposed rule. SUMMARY: On October 23, 2007, the Department of Energy (DOE or the Department) published a final rule establishing regulations for the loan guarantee program authorized by Section 1703 of Title XVII of the Energy Policy Act of 2005 (Title XVII or the Act). Section 1703 of Title XVII authorizes the Secretary of Energy (Secretary) to make loan guarantees for projects that ‘‘avoid, reduce, or sequester air pollutants or anthropogenic emissions of greenhouse gases; and employ new or significantly improved technologies as compared to commercial technologies in service in the United States at the time the guarantee is issued.’’ Section 1703 of Title XVII also identifies ten categories of technologies and projects that are potentially eligible for loan guarantees. The two principal goals of section 1703 of Title XVII are to encourage commercial use in the United States of new or significantly improved energyrelated technologies and to achieve substantial environmental benefits. DOE believes that commercial use of these technologies will help sustain and promote economic growth, produce a more stable and secure energy supply and economy for the United States, and improve the environment. Through experience gained implementing the loan guarantee program authorized by section 1703 of Title XVII, and information received from industry indicating the wide variety of ownership structures which participants would like to employ in VerDate Nov<24>2008 16:10 Aug 06, 2009 Jkt 217001 implementing projects seeking loan guarantees, DOE believes it is appropriate to consider certain changes to the existing regulations to provide flexibility in the determination of an appropriate collateral package to secure guaranteed loan obligations, facilitate collateral sharing and related intercreditor arrangements with other project lenders, and to provide a more workable interpretation of certain statutory provisions regarding DOE’s treatment of collateral. DATES: Comments on this proposed rule must be postmarked no later than September 8, 2009. ADDRESSES: Comments may be submitted using any of the following methods: • Federal eRulemaking Portal: http:// www.regulations.gov. Follow the instructions for submitting comments. • E-mail: lgprogram@hq.doe.gov. • Postal Mail: David G. Frantz, Director, Loan Guarantee Program Office, Office of the Chief Financial Officer, 1000 Independence Avenue, SW., Washington, DC.20585–0121. Please submit one signed original paper copy. • Hand Delivery/Courier: David G. Frantz, Director, Loan Guarantee Program Office, Office of the Chief Financial Officer, 1000 Independence Avenue, SW., Washington, DC 20585– 0121. Please submit one signed original paper copy. FOR FURTHER INFORMATION CONTACT: David G. Frantz, Director, Loan Guarantee Program Office, Office of the Chief Financial Officer, 1000 Independence Avenue, SW., Washington, DC 20585–0121, (202) 586– 8336, e-mail: lgprogram@hq.doe.gov; or Susan S. Richardson, Chief Counsel for the Loan Guarantee Program, Office of the General Counsel, 1000 Independence Avenue, SW., Washington, DC 20585–0121, (202) 586– 9521, e-mail: lgprogram@hq.doe.gov. SUPPLEMENTARY INFORMATION: I. Background and Proposed Amendment II. Regulatory Review A. Executive Order 12866 B. National Environmental Policy Act of 1969 C. The Regulatory Flexibility Act D. Paperwork Reduction Act E. Unfunded Mandates Reform Act of 1995 F. Treasury and General Government Appropriations Act, 1999 G. Executive Order 13132 H. Executive Order 12988 I. Treasury and General Government Appropriations Act, 2001 J. Executive Order 13211 K. Congressional Notification L. Approval by the Office of the Secretary of Energy PO 00000 Frm 00005 Fmt 4702 Sfmt 4702 39569 I. Background and Proposed Amendment Today’s proposed rule would amend the regulations implementing the loan guarantee program authorized by section 1703 of Title XVII of the Energy Policy Act of 2005 (42 U.S.C. 16511– 16514) (referred to as Title XVII). Section 1703 of Title XVII authorizes the Secretary of Energy (Secretary), after consultation with the Secretary of the Treasury, to make loan guarantees for projects that ‘‘(1) avoid, reduce, or sequester air pollutants or anthropogenic emissions of greenhouse gases; and (2) employ new or significantly improved technologies as compared to commercial technologies in service in the United States at the time the guarantee is issued.’’ (42 U.S.C. 16513(a)) Section 1702 of Title XVII outlines general terms and conditions for loan guarantee agreements and directs the Secretary to include in loan guarantee agreements ‘‘such detailed terms and conditions as the Secretary determines appropriate to (i) protect the interests of the United States in case of a default; and (ii) have available all the patents and technology necessary for any person selected, including the Secretary, to complete and operate the project. (42 U.S.C. 16512(g)(2)(c)). Further, section 1702(d) addresses certain threshold requirements that must be met before the guaranty is made; and section 1702(g) addresses the Secretary’s rights in the case of default of the loan. Specifically, section 1702(d) of Title XVII states, under the heading ‘‘Repayment’’ and addressing ‘‘Subordination,’’ that ‘‘[t]he [guaranteed] obligation shall be subject to the condition that the obligation is not subordinate to other financing.’’ Further, when addressing the situation of default, section 1702(g)(2) of Title XVII states, with respect to ‘‘subrogation’’ and ‘‘superiority of rights,’’ that ‘‘[t]he rights of the Secretary, with respect to any property acquired pursuant to a guarantee or related agreements, shall be superior to the rights of any other person with respect to the property.’’ In the October 23, 2007 final rule implementing Title XVII, DOE interpreted the interplay between these two provisions of section 1702 such that both describe the rights the Secretary must secure as a condition of making a guarantee. This understanding is reflected in the text of the regulations which requires that the Secretary receive a first lien security interest in all project assets as an incident to making a guarantee. Moreover, this E:\FR\FM\07AUP1.SGM 07AUP1

Agencies

[Federal Register Volume 74, Number 151 (Friday, August 7, 2009)]
[Proposed Rules]
[Pages 39565-39569]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-18986]


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Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.

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Federal Register / Vol. 74, No. 151 / Friday, August 7, 2009 / 
Proposed Rules

[[Page 39565]]



DEPARTMENT OF AGRICULTURE

Farm Service Agency

7 CFR Parts 761 and 766

RIN 0560-AI05


Loan Servicing; Farm Loan Programs

AGENCY: Farm Service Agency, USDA.

ACTION: Proposed rule.

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SUMMARY: The Farm Service Agency (FSA) is proposing to amend the Farm 
Loan Programs (FLP) direct loan servicing regulations primarily to 
implement provisions of the Food, Conservation, and Energy Act of 2008 
(the 2008 Farm Bill). FSA proposes four amendments to the rules. The 
first amendment would further emphasize transitioning borrowers to 
private sources of credit in the shortest timeframe practicable. The 
second amendment would amend the Homestead Protection lease regulations 
by extending the right to purchase the leased property to the lessee's 
immediate family when the lessee is a member of a socially 
disadvantaged group. The third amendment would amend the account 
liquidation regulations to suspend certain loan acceleration and 
foreclosure actions, including suspending interest accrual and offsets, 
if a borrower has filed a claim of program discrimination that has been 
accepted as valid by USDA and is at the point of acceleration or 
foreclosure. The fourth amendment would amend the supervised bank 
account regulations to be consistent with the recently amended Federal 
Deposit Insurance Act.

DATES: We will consider comments that we receive by October 6, 2009.

ADDRESSES: We invite you to submit written comments on this proposed 
rule. In your comment, include the volume, date, and page number of 
this issue of the Federal Register. You may submit comments by any of 
the following methods:
     E-mail: mike.cumpton@wdc.usda.gov.
     Fax: (202) 720-5804.
     Mail: Director, Loan Servicing and Property Management 
Division, Farm Service Agency, U.S. Department of Agriculture, 1400 
Independence Avenue, SW., Stop 0523, Washington, DC 20250-0523.
     Hand Delivery or Courier: Deliver comments to Farm Service 
Agency, Loan Servicing and Property Management Division, 1250 Maryland 
Ave., SW., Suite 500, Washington, DC 20024.
     Federal eRulemaking Portal: Go to http://www.regulations.gov. Follow the online instructions for submitting 
comments.
    Comments may be inspected in the Office of the Director, Loan 
Servicing and Property Management Division (LSPMD), Farm Service 
Agency, at 1250 Maryland Ave., SW., Suite 500, Washington, DC, between 
8 a.m. and 4:30 p.m., except holidays.

FOR FURTHER INFORMATION CONTACT: Michael C. Cumpton, Assistant to the 
Director, LSPMD, Farm Service Agency; telephone: (202) 690-4014; 
Facsimile: (202) 720-5804; E-mail: mike.cumpton@wdc.usda.gov. Persons 
with disabilities or who require alternative means for communications 
should contact the USDA Target Center at (202) 720-2600 (voice and 
TDD).

SUPPLEMENTARY INFORMATION:

Background

    This proposed rule implements three provisions of the 2008 Farm 
Bill (Public Law 110-246; June 18, 2008) concerning loan servicing for 
FSA's direct loan program. This law repealed Public Law 110-234 dated 
May 22, 2008 that inadvertently omitted Title III (Trade of the 2008 
Farm Bill.) FSA loans are a means of providing credit to farmers whose 
financial risk exceeds a level acceptable to commercial lenders. For 
two of these amendments, the one that would allow family members of 
lessees who are members of a socially disadvantaged group to purchase 
properties under Homestead Protection and the one setting a moratorium 
on foreclosure actions for borrowers with an accepted program 
discrimination claim, there is little to no discretion in how to 
implement the provisions of the 2008 Farm Bill. For the third amendment 
promoting the goal of transitioning borrowers to private credit, the 
2008 Farm Bill provides general guidance. In addition, this proposed 
rule would implement a conforming amendment to comply with section 136 
of the Emergency Economic Stabilization Act of 2008 (Pub. L. 110-343; 
October 3, 2008), which temporarily increased the standard maximum 
deposit insurance amount for Federal Deposit Insurance Corporation 
(FDIC)-insured accounts.

Transitioning Borrowers to Private Credit

    Sections 302(a), 311(a), and 321(a) of the Consolidated Farm and 
Rural Development Act (the Con Act) establish the inability ``to obtain 
sufficient credit elsewhere'' as an eligibility requirement for FLP 
direct loans. Section 319 of the Con Act requires that FSA develop a 
plan ``to encourage each borrower * * * to graduate to private 
commercial or other sources of credit.''
    Section 5304 of the 2008 Farm Bill requires that the Secretary 
``establish a plan and promulgate regulations (including performance 
criteria) that promote the goal of transitioning borrowers to private 
commercial credit and other sources of credit in the shortest time 
practicable.'' Both section 319 of the Con Act and section 5304 of the 
2008 Farm Bill require coordination with the following sections of the 
Con Act:
     Borrower training established under section 359;
     Loan assessment established under section 360;
     Supervised credit under section 361; and
     Market placement under section 362.
    FSA has implemented the borrower training program in existing 
regulations in 7 CFR part 764, subpart J. The market placement program 
is addressed in 7 CFR 762.110(g). Requirements regarding a borrower's 
graduation to another source of credit are addressed in 7 CFR part 765, 
subpart C. None of these regulations would be changed by this proposed 
rule. The supervised credit requirement, which includes the loan 
assessment program, is specified in 7 CFR part 761, subpart C. This 
rule proposes to amend 7 CFR 761.103 pertaining to farm assessments, as 
well as 7 CFR 761.1, ``Introduction,'' to encourage the transitioning 
of borrowers

[[Page 39566]]

to commercial credit in the shortest period of time practicable and 
better establish the use of borrower training, supervised credit, 
including loan assessment, and market placement to plan for and 
evaluate a borrower's ability to graduate.
    FSA is developing an internal plan that will include performance 
criteria to evaluate its success in transitioning borrowers to 
commercial credit. Performance criteria are not being established for 
borrowers in this proposed rule.

Extension of Right To Reacquire Homestead Property to Family Members

    This rule proposes to amend section 766.154, ``Homestead Protection 
Leases.'' Section 766.154(c) currently addresses the right of a lessee 
to purchase leased property under Homestead Protection. This proposed 
amendment would expand that right to also allow an immediate family 
member of a lessee who is a member of a socially disadvantaged group 
(as currently defined in section 761.2) to exercise the option to 
purchase, as required by section 5305 of the 2008 Farm Bill. The lessee 
may designate a member of the lessee's immediate family (parent, 
sibling, or child) as having this right to purchase. This immediate 
family member also has the right under section 5305 to choose any 
independent appraiser from a list of three approved by FSA to establish 
the current market value of the property. This policy will be added to 
the FSA Handbook procedures.

Moratorium on Loan Acceleration and Foreclosure for Borrowers With an 
Accepted Discrimination Claim

    Section 14002 of the 2008 Farm Bill requires a moratorium on 
certain acceleration and loan foreclosure proceedings against any 
farmer or rancher who has a claim of program discrimination accepted by 
the Department as valid or who files such a claim that is accepted. The 
statutory moratorium applies only with respect to Farm Loan Program 
loans made under subtitle A, B, or C, of the Con Act, which includes 
Farm Ownership (FO), Soil and Water (SW), Recreation loans, and 
Emergency (EM) loans. Section 343(a)(10) of the Con Act defines 
``Farmer Program Loan'' to include FO loans under section 303, 
Operating Loans (OL) under section 312, SW loans under section 304, EM 
loans under section 321, Economic Emergency (EE) loans under section 
202 of the Emergency Agricultural Credit Adjustment Act, Economic 
Opportunity (EO) loans under the Economic Opportunity Act of 1961, 
Softwood Timber (ST) loans under section 1254 of the Food Security Act 
of 1985, and Rural Housing loans for farm service buildings (RHF) under 
section 502 of the Housing Act of 1949. SW, EE, EO, ST, and RHF loans 
are no longer being made, but a few remain to be serviced. FSA 
regulation, 7 CFR 761.2, also includes Recreation loans formerly made 
under section 304 of the Con Act as a ``program loan.'' Loans made 
under statutory authorities other than the Con Act, such as the EE, EO, 
ST, and RHF loans, would not be covered by the section 14002 
moratorium, but will continue to be covered by FSA's internal voluntary 
suspension of acceleration and foreclosure when the borrower has a 
program discrimination complaint accepted by the USDA Office of 
Adjudication and Compliance (OAC).
    Non-program loans are not covered by the mandatory section 14002 
moratorium, but will continue to be covered by the Agency's voluntary 
suspension policy on acceleration and foreclosure when the borrower has 
a program discrimination complaint accepted by OAC. Non-program loans 
are defined by section 761.2 as those loans made on more stringent 
terms for the convenience of FSA because the applicant or property does 
not qualify for a program loan under applicable statutes and 
regulations. For example, under FSA regulations a third party may 
assume a program loan on non-program terms if the transferee is not 
eligible for the program loan, and in some circumstances FSA might 
collect an unauthorized loan by permitting the borrower to continue 
making payments on non-program terms. Homestead Protection financing 
and financing of recapture under Shared Appreciation Agreements 
authorized by sections 352 and 353 of the Con Act, respectively, also 
are considered non-program loans. Non-program loans historically have 
not been considered eligible for the broad loan servicing options 
available for program loans. These servicing rights are commonly the 
subject of dispute in the program discrimination claims addressed by 
section 14002, so it is reasonable to limit the moratorium to the 
program loans specified in the statute. FSA has found no Congressional 
intent for this moratorium provision to cover non-program loans. In 
fact, Congress' specific reference to ``Farm Loan Program Loans'' 
indicates otherwise. Liquidation of non-program loans, therefore, may 
be delayed if a borrower's program loans are under moratorium. This 
rule proposes to amend section 766.351, ``Liquidation,'' to specify the 
provisions of the moratorium accordingly.
    An ``accepted'' claim under section 14002 is a claim for which OAC 
has made the determination to accept on basic jurisdictional grounds. 
As explained in the Conference Report for the 2008 Farm Bill, 
``accepted'' is a procedural term and not a statement as to the merits 
of the program discrimination claim. The acceptance of the claim is 
distinct from the person's filing of a program discrimination claim. 
The moratorium began on the effective date of the 2008 Farm Bill, which 
was May 22, 2008, if the borrower had a pending claim that was accepted 
and the borrower was at the point of acceleration and foreclosure on or 
prior to that date. Otherwise, it will begin when a program 
discrimination complaint has been accepted and the borrower is at the 
point of acceleration or foreclosure. In either case, moratorium begins 
after all available loan servicing and appeal rights have been offered 
to the borrower. If the borrower's account were accelerated and 
foreclosed prior to enactment of the statute or OAC's acceptance of the 
borrower's program discrimination claim, the moratorium would never be 
triggered. The moratorium will end on the earlier of the date the 
program discrimination claim is resolved by USDA OAC, or the date that 
a court of competent jurisdiction renders a final decision on the 
program discrimination claim if the farmer or rancher appeals the 
decision of USDA OAC.
    In addition to the moratorium on acceleration and foreclosure, 
section 14002 provided that interest accrual and offset would be 
suspended on the farm program loans made under subtitle A, B, or C of 
the Con Act for the claimants during the moratorium period (at the 
point of acceleration or foreclosure after all servicing and appeal 
rights have been exhausted). These benefits were not provided under 
FSA's prior voluntary suspension policy and cannot be provided on any 
loans not made under subtitle A, B, or C of the Con Act. Interest 
accrual and Treasury offset generally are required by 31 U.S.C. 
sections 3717 and 3716, respectively. Interest accruals and offsets 
will resume on the covered loans when the moratorium terminates. If the 
borrower does not prevail on the program discrimination claim, the 
borrower will be liable for the interest that accrued during the 
moratorium under section 14002. In such case, the interest that would 
have accrued during the moratorium will be reinstated on the debt. Any 
debt that would have been

[[Page 39567]]

paid down through offset will remain when the moratorium terminates and 
will be collected through normal procedures. If the borrower does 
prevail on the program discrimination claim, the borrower will not be 
liable for the interest and offsets during the moratorium. FSA will 
implement any settlement agreement or court order, as appropriate.

Establishing a Supervised Bank Account

    This rule proposes to amend existing regulations in 7 CFR 761.51(e) 
which currently require that a financial institution pledge acceptable 
collateral with the Federal Reserve Bank when the balance deposited 
into a supervised bank account will exceed $100,000. The Emergency 
Economic Stabilization Act of 2008, section 136, amended the Federal 
Deposit Insurance Corporation Act to temporarily increase the standard 
maximum deposit insurance amount from $100,000 to $250,000, effective 
October 3, 2008, and ending December 31, 2009. After that date, the 
standard maximum deposit insurance amount will return to $100,000. This 
rule, therefore, proposes to amend section 761.51, ``Establishing a 
Supervised Bank Account,'' to remove the reference to the $100,000 
threshold for insured balances and replace it with a reference to ``the 
maximum amount insurable by the Federal Government.''

Executive Order 12866

    The Office of Management and Budget (OMB) designated this rule as 
not significant under Executive Order 12866 and, therefore, OMB was not 
required to review this proposed rule.

Regulatory Flexibility Act

    In accordance with the Regulatory Flexibility Act (5 U.S.C. 601), 
FSA is certifying that there would not be a significant economic impact 
on a substantial number of small entities. All FSA direct loan 
borrowers and all farm entities affected by this rule are small 
businesses according to the North American Industry Classification 
System and the U. S. Small Business Administration. There is no 
diversity in size of the entities affected by this rule, and the costs 
to comply with it are the same for all entities.
    In this rule, FSA is proposing to revise regulations that affect 
loan servicing only.
    In 2007, over 2,500 direct borrowers (about 3.7 percent of the 
portfolio) graduated to commercial credit. FSA believes graduation will 
continue in the 3 to 5 percent range and is dependent on the overall 
farm economy.
    Currently, FSA has 38 inventory properties under a Homestead 
Protection lease. The extension of purchase rights to the immediate 
family of lessees who are a members of a socially disadvantaged group 
will affect very few of these cases.
    Due to the acceleration and foreclosure moratorium FSA expects some 
Government losses due to the suspension of interest accrual (when the 
borrower prevails) and the loss of some offset payments. FSA does not 
expect these changes to impose any additional cost to the borrowers. 
Therefore, the costs of compliance from this rule are expected to be 
minimal. Therefore, FSA certifies that this rule will not have a 
significant economic impact on a substantial number of small entities.

Environmental Review

    The environmental impacts of this rule have been considered in a 
manner consistent with the provisions of the National Environmental 
Policy Act (NEPA, 42 U.S.C. 4321-4347), the regulations of the Council 
on Environmental Quality (40 CFR parts 1500-1508), and FSA regulations 
for compliance with NEPA (7 CFR part 799). The changes to the FLP 
direct loan servicing program, required by the 2008 Farm Bill that are 
identified in this proposed rule, are non-discretionary. Therefore, FSA 
has determined that NEPA does not apply to this rule, and no 
environmental assessment or environmental impact statement will be 
prepared.

Executive Order 12988

    This rule has been reviewed in accordance with E.O. 12988, Civil 
Justice Reform. In accordance with the executive order: (1) All State 
and local laws and regulations that are in conflict with this rule 
would be preempted; (2) no retroactive effect would be given to this 
rule; and (3) administrative proceedings in accordance with 7 CFR part 
11 must be exhausted before bringing suit in court challenging action 
taken under this rule unless those regulations specifically allow 
bringing suit at an earlier time.

Executive Order 12372

    For reasons set forth in the Notice to 7 CFR part 3015, subpart V 
(48 FR 29115, June 24, 1983), the programs and activities within this 
rule are excluded from the scope of Executive Order 12372, which 
requires intergovernmental consultation with State and local officials.

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, and tribal governments or the 
private sector. Agencies generally must prepare a written statement, 
including a cost benefit analysis, for proposed and 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 
proposed rule contains no Federal mandates, as defined under title II 
of the UMRA, for State, local, and tribal governments or the private 
sector. Thus, this proposed rule is not subject to the requirements of 
sections 202 and 205 of UMRA.

Executive Order 13132

    The policies contained in this rule would not have any substantial 
direct effect on States, the relationship between the national 
government and the States, or the distribution of power and 
responsibilities among the various levels of government. Nor would this 
proposed rule impose substantial direct compliance costs on State and 
local governments. Therefore, consultation with the States is not 
required.

Paperwork Reduction Act

    The amendments proposed for 7 CFR parts 761 and 766 require no 
changes or new collection to the currently approved information 
collections by OMB under the control numbers of 0560-0233, 0560-0233 
and 0560-0238.

E-Government Act Compliance

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

Federal Assistance Programs

    The title and number of the Federal assistance programs, as found 
in the Catalog of Federal Domestic Assistance, to which this proposed 
rule would apply are:
    10.404 Emergency Loans;
    10.406 Farm Operating Loans;
    10.407 Farm Ownership Loans.

[[Page 39568]]

List of Subjects

7 CFR Part 761

    Agriculture, Agricultural commodities, Credit, Livestock, Loan 
programs--Agriculture.

7 CFR Part 766

    Agriculture, Agricultural commodities, Credit, Livestock, Loan 
programs--Agriculture.

    For the reasons discussed in the preamble, the Farm Service Agency 
(USDA) proposes to amend 7 CFR chapter VII as follows:

PART 761--GENERAL PROGRAM ADMINISTRATION

    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

    2. In Sec.  761.1, paragraph (c) is amended by adding a new fourth 
sentence at the end to read as follows:


Sec.  761.1  Introduction.

* * * * *
    (c) * * * The programs are designed to allow those who participate 
to transition to private commercial credit or other sources of credit 
in the shortest period of time practicable through the use of 
supervised credit, including farm assessments, borrower training, and 
market placement.
* * * * *

Subpart B--Supervised Bank Accounts

    3. In Sec.  761.51, paragraph (e) is revised to read as follows:


Sec.  761.51  Establishing a supervised bank account.

* * * * *
    (e) If the funds to be deposited into the account cause the balance 
to exceed the maximum amount insurable by the Federal Government, the 
financial institution must agree to pledge acceptable collateral with 
the Federal Reserve Bank for the excess over the insured amount, before 
the deposit is made.

Subpart C--Supervised Credit

    4. In Sec.  761.103, paragraph (a) is revised to read as follows:


Sec.  761.103  Farm assessment.

    (a) The Agency, in collaboration with the applicant, will assess 
the farming operation to:
    (1) Determine the applicant's financial condition, organization 
structure, and management strengths and weaknesses;
    (2) Identify and prioritize training and supervisory needs; and
    (3) Develop a plan of supervision to assist the borrower in 
achieving financial viability and transitioning to private commercial 
credit or other sources of credit in the shortest time practicable.
* * * * *

PART 766--DIRECT LOAN SERVICING--SPECIAL

    5. The authority citation for part 766 is revised to read as 
follows:

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

Subpart D--Homestead Protection Program

    6. In Sec.  766.154, paragraph (c) is revised to read as follows:


Sec.  766.154  Homestead Protection leases.

* * * * *
    (c) Lease-purchase options. (1) The lessee may exercise in writing 
the purchase option and complete the homestead protection purchase at 
any time prior to the expiration of the lease provided all lease 
payments are current.
    (2) If the lessee is a member of a socially disadvantaged group, 
the lessee may designate a member of the lessee's immediate family 
(that is, parent, sibling, or child) (designee) as having the right to 
exercise the option to purchase.
    (3) The purchase price is the market value of the property when the 
option is exercised as determined by a current appraisal obtained by 
the Agency.
    (4) The lessee or designee may purchase homestead protection 
property with cash or other credit source.
    (5) The purchaser may receive Agency program or non-program 
financing provided:
    (i) The purchaser has not received previous debt forgiveness;
    (ii) The Agency has funds available to finance the purchase of 
homestead protection property;
    (iii) The purchaser demonstrates an ability to repay such an FLP 
loan; and
    (iv) The purchaser is otherwise eligible for the FLP loan.
* * * * *

Subpart H--Loan Liquidation

    7. Section 766.358 is added to read as follows:


Sec.  766.358  Acceleration and Foreclosure Moratorium.

    (a) Notwithstanding any other provisions of this subpart, borrowers 
who file or have filed a program discrimination complaint that is 
accepted by USDA Office of Adjudication and Compliance or successor 
office (USDA), and have been serviced to the point of acceleration or 
foreclosure on or after May 22, 2008, will not be accelerated or 
liquidated until such complaint has been resolved by USDA or closed by 
a court of competent jurisdiction. This moratorium applies only to 
program loans made under subtitle A, B, or C of the Act (for example, 
FO, OL, EM, SW, or RL). Interest will not accrue and no offsets will be 
taken on these loans during the moratorium. Interest accrual and 
offsets will continue on all other loans, including, but not limited 
to, non-program loans.
    (1) If the Agency prevails on the program discrimination compliant, 
the interest that would have accrued during the moratorium will be 
reinstated on the account when the moratorium terminates, and all 
offsets and servicing actions will resume.
    (2) If the borrower prevails on the program discrimination 
compliant, the interest that would have accrued during the moratorium 
will not be reinstated on the account unless specifically required by 
the settlement agreement or court order.
    (b) The moratorium will begin on:
    (1) May 22, 2008, if the borrower had a pending program 
discrimination claim that was accepted by USDA as valid and was at the 
point of acceleration or foreclosure on or before that date or
    (2) The date after May 22, 2008, when the borrower has a program 
discrimination claim accepted by USDA as valid and the borrower is at 
the point of acceleration or foreclosure.
    (c) The point of acceleration under this section is the earliest of 
the following:
    (1) The day after all rights offered on the Agency notice of intent 
to accelerate expire if the borrower does not appeal;
    (2) The day after all appeals resulting from an Agency notice of 
intent to accelerate are concluded if the borrower appeals and the 
Agency prevails on the appeal;
    (3) The day after all appeal rights have been concluded relating to 
a failure to graduate and the Agency prevails on any appeal;
    (4) Any other time when, because of litigation, third party action, 
or other unforeseen circumstance, acceleration is the next step for the 
Agency in servicing and liquidating the account.
    (d) A borrower is considered to be in foreclosure status under this 
section anytime after acceleration of the account.
    (e) The moratorium will end on the earlier of:

[[Page 39569]]

    (1) The date the program discrimination claim is resolved by USDA 
or
    (2) The date that a court of competent jurisdiction renders a final 
decision on the program discrimination claim if the farmer or rancher 
appeals the decision of USDA.

    Signed in Washington, DC, on August 3, 2009.
Jonathan Coppess,
Administrator, Farm Service Agency.
[FR Doc. E9-18986 Filed 8-6-09; 8:45 am]
BILLING CODE 3410-05-P