Guaranteed Loan Fees, 58089-58094 [2011-23724]

Agencies

• DEPARTMENT OF AGRICULTURE
• Farm Service Agency

[Federal Register Volume 76, Number 182 (Tuesday, September 20, 2011)]
[Unknown Section]
[Pages 58089-58094]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-23724]



[[Page 58089]]


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DEPARTMENT OF AGRICULTURE

Farm Service Agency

7 CFR Part 762

RIN 0560-AH41


Guaranteed Loan Fees

AGENCY: Farm Service Agency, USDA.

ACTION: Interim rule.

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SUMMARY: The Farm Service Agency (FSA) is amending the regulations for 
guaranteed loans to change the amount charged and collected in order 
for FSA to provide a guarantee. Except in certain limited cases, FSA 
currently charges a fee of 1 percent (1%) of the guaranteed amount on 
all guaranteed loans. The rule change is necessary for FSA to be able 
to offset the cost of the guaranteed loan program to maintain program 
funding to farmers and ranchers. Specifically, FSA is changing the 
current guaranteed loan fee from 1 percent to 1.5 percent.

DATES: Effective Date: October 1, 2011.
    Comment Date: We will consider comments that we receive by November 
21, 2011.

ADDRESSES: We invite you to submit comments on this interim rule. In 
your comment, include the volume, regulation identifier (RIN) date, and 
page number of this issue of the Federal Register. You may submit 
comments by any of the following methods:
     Federal eRulemaking Portal: Go to https://www.regulations.gov. Follow the online instructions for submitting 
comments.
     Mail: Director, Loan Making Division, Farm Loan Programs, 
FSA, USDA, 1400 Independence Avenue, SW., Stop 0522, Washington, DC 
20250-0522.
     Hand Delivery or Courier: Deliver comments to: USDA FSA, 
Farm Loan Programs, Loan Making Division, 1400 Independence Avenue, 
SW., Washington, DC 20250.
    Comments will be available for inspection online at https://www.regulations.gov and in the Office of the Director, Loan Making 
Division, FSA, at 1400 Independence Avenue, SW., Washington, DC, Monday 
through Friday between 8 a.m. to 4:30 p.m.

FOR FURTHER INFORMATION CONTACT: Tracy L. Jones, telephone: (202) 720-
3889. Persons with disabilities or who require alternative means for 
communications (Braille, large print, audio tape, etc.) should contact 
the USDA Target Center at (202) 720-2600 (voice and TDD).

SUPPLEMENTARY INFORMATION:

Background

    FSA published a proposed rule on May 15, 2006, (71 FR 27978-27980) 
proposing to amend regulations governing fees on loans made in the 
Guaranteed Loan Program.
    As specified in 7 CFR part 762, FSA provides guaranteed loans to 
eligible lenders (for example banks, Farm Credit System institutions, 
credit unions) with a guarantee of up to 95 percent of the loss of 
principal and interest on a loan in certain cases. Farmers and ranchers 
apply to an agricultural lender, who then applies for the guarantee. 
The FSA guarantee permits lenders to make agricultural credit available 
to farmers who do not meet the lender's normal underwriting standards.
    FSA guaranteed loans may be made for farm ownership, conservation, 
and operating purposes. Guaranteed farm ownership loans (FO) generally 
may be made to purchase farmland, construct or repair buildings and 
other fixtures, develop farmland to promote soil and water 
conservation, or refinance debt. Guaranteed operating loans (OL) 
generally may be used to purchase livestock, farm equipment, pay for 
minor improvements to buildings, costs associated with land and water 
development, annual operating expenses, family living expenses, and to 
refinance debts under certain conditions. Guaranteed conservation loans 
(CL) may be made to implement conservation projects deemed necessary by 
a farmer's Natural Resources Conservation Service conservation plan. On 
May 13, 2011, a Federal Register notice (76 FR 27986) announced that 
FSA is no longer accepting direct or guaranteed loan applications for 
CL Program due to a lack of funding. A notice will be published in the 
Federal Register announcing the date FSA will resume accepting direct 
and guaranteed loan applications for the CL Program if funding becomes 
available.
    The authority for FSA to set the amount of the fee is through 
several laws. The Consolidated Farm and Rural Development Act (CONTACT) 
section 307(b) (7 U.S.C. 1927) authorizes fees on farm ownership loans. 
As specified in the CONACT, the fees are to be set at an amount as 
``the Secretary may require.'' For the OL and CL Program, Title V of 
the Independent Offices Appropriations Act of 1952 (31 U.S.C. 9701) 
authorizes fees be prescribed for services or things of value to 
individuals or businesses provided by the Government.
    FSA currently charges a one-time guarantee fee of 1 percent (1.0%) 
on guaranteed loans at the time of loan origination as specified in 7 
CFR 762.130. FSA does not charge continuation fees for annual renewal 
of lines of credit (LOC) type OLs, loan servicing, or restructuring 
actions.
    In the proposed rule, FSA proposed increasing the existing one-time 
guarantee fee from 1 percent to 1.5 percent and adding a new annual 
continuation fee of 0.75 percent for advances on LOCs. This rule will 
change the regulation for the one-time guarantee fee from a fixed rate 
of 1 percent to a calculated rate that will initially be set at 1.5 
percent on October 1, 2011. The fee schedule with this new rate will be 
available at https://www.fsa.usda.gov/Internet/FSA_File/loanschartoct11.pdf and at any FSA office and is subject to future 
necessary revisions.
    The increase to 1.5 percent is required now because as proposed in 
the 2012 budget FSA will have less authority to fund guaranteed loans. 
Based on the proposed 2012 budget, the fee will need to be increased to 
1.5 percent for FO, OL, and CL guarantees. FSA expects future budgets 
will result in occasional small increases in the future, but does not 
expect that routine annual increases would be required.
    The assumptions used in the President's Fiscal Year (FY) 2012 
Budget proposal included ``Upfront fees'' of 1.5 percent in calculating 
the subsidy costs for FO, OL, and CL guarantees. In addition, the 2012 
budget

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proposes a substantially lower budget authority for the Guaranteed Loan 
Program. Without the increase in the guarantee fee, there will be no 
budget authority to make any guaranteed FOs and very little budget 
authority to make guaranteed OLs.
    The budget process for FSA loans is governed by the Federal Credit 
Reform Act (Credit Reform) of 1990. Credit Reform changed the way the 
costs of direct loans and loan guarantees are accounted for in the 
Federal Budget, placing the costs of credit programs on a budgetary 
basis equivalent to other Federal spending. These costs, referred to as 
subsidy costs, are developed based on criteria published in the Office 
of Management and Budget (OMB) Circular No. A-11, ``Preparation, 
Submission, and Execution of the Budget.'' Annual appropriations for 
the FSA Guaranteed Loan Program are based on these subsidy costs, not 
the actual principal of the loans guaranteed, and are recorded as 
budget authority.
    In summary, the subsidy cost represents the cost to the Government 
for each dollar guaranteed and this is the amount of ``budget 
authority'' appropriated to the agency. For example, if the subsidy 
cost is $0.03 for each dollar guaranteed, the subsidy rate is 3 
percent. The total principal amount that can be guaranteed by FSA in a 
fiscal year, referred to as ``program authority,'' is determined by 
dividing the budget authority by the subsidy rate (program authority = 
budget authority / subsidy rate). FSA program authority is reduced if 
there is a decrease in budget authority, without a corresponding 
decrease in subsidy rate, or an increase in subsidy rate, without a 
corresponding increase in budget authority. Expenses such as employee 
salaries, office leases and supplies, and software development are 
excluded from the program's budget authority.
    As discussed below in the discussion of comments, FSA reconsidered 
the proposed annual continuation fee of 0.75 percent for a LOC included 
in the proposed rule and is not implementing that proposed new 
continuation fee.

Discussion of Comments

    FSA received 619 comments on the proposed rule from individuals, 
employees, and the District of Columbia.
    The following provides a summary of the issues raised in the 
comments to the proposed rule and our responses, including changes we 
are making to the regulations in response to the comments.
    An overwhelming majority of the comments received opposed the rule 
change. Although most comments were specific about either the proposed 
fee increase or the new annual fee, other comments responded to the 
proposed rule in general.
    The majority of the comments opposed adding an annual 0.75 percent 
fee to LOCs as an excessive and cumbersome fee to collect on an annual 
basis. FSA has taken into consideration the requirements of the budget 
and the burden this administrative fee will have on LOCs, and is not 
adding the proposed 0.75 percent annual continuation fee. For 
guaranteed LOCs the guarantee fee would still be due in the first year, 
but farmers would have access to funding in future years without any 
additional fee cost. Because FSA will not change the regulation 
regarding the LOC annual fee, the detailed discussion of comments and 
responses below focuses on the comments that include the proposed 
increase in the existing guarantee fee.
    Several commenters supported the rule change suggesting that a 
guarantee fee of 1.5 percent would be manageable for FO, OL, and LOC. 
Several commenters supported the change noting that the costs of the 
guaranteed program have increased since the inception of the current 
pricing schedule in the early 1980s, and did not dispute increasing the 
fee to 1.5 percent on both term loans and lines of credit. The 
supporters believe the fee increase will not materially affect the 
borrower's cashflow because the 0.5 percent increase will be amortized 
over the term of the operating and farm ownership loans. Supporters 
indicated it would be better to charge a one-time fee rather than the 
annual continuation fee, even if the one-time fee was higher than the 
1.5 percent.
    Below are summarized issues raised in the comments FSA received 
regarding the guarantee fees:
    Comment: Fees associated with the guarantee program may add from $1 
to $7,000 to the cost of originating a loan, and in many cases may be 
the difference between a positive and negative cashflow. Increasing 
existing fees for operating and ownership loans up to the proposed 1.5 
percent level would hurt a large number of producers.
    Response: The 0.5 percent increase will have a greater impact on 
borrowers of LOCs and term OLs. For LOCs, the fee change has the 
greatest effect because the entire fee is paid by the farmer during the 
initial year of the loan; however, no additional fees will be charged 
in subsequent years when loan funds are readvanced. For term OLs, the 
fee increase has a lesser effect than with LOCs on the repayment 
requirements because the maximum term for these loans is 7 years, which 
limits the period over which the fee can be amortized. The impact on 
farmers receiving FO loans should be less significant. These are long 
term loans and amortization of the fee should have a minimal effect on 
cashflow. Based on a maximum loan of $1,119,000, the increase in the 
fee would be an additional $5,036 ($1,119,000 x 90 percent typical 
guarantee x 0.5 percent increase in fee) that could be amortized over 
the life of the loan. In FY 2010 the average fee was $2,544. If the fee 
on those loans were 1.5 percent, the average fee would have been 
$3,816. If the difference between the two fees is amortized over 7 
years, at an interest rate of 5 percent, it would be an additional $220 
annually. However, beginning farmers and socially disadvantaged (those 
who have been historically underserved) farmers who participate in the 
Downpayment Loan Program, along with borrowers who participate in the 
FSA Interest Assistance Program or a State Beginning Farmer Program and 
those direct FSA borrowers who are refinancing their direct loans will 
continue to have the one-time guarantee fee waived as provided in 7 CFR 
762.130(d)(4)(iii)(C). In FY 2010, 13 percent of all guaranteed loans 
approved were not charged a fee under this regulation.
    Comment: The proposed changes are burdensome on rural America. It 
is doubtful that FSA would cashflow with an additional 0.5 percent 
increase in guarantee fees. Therefore, the fee should stay as it is. 
While it is understood that the cost of doing business is increasing 
for everyone (including the Federal Government), proposing to increase 
costs targeting this segment of our population is unwise and ill-
advised.
    Response: The increase in the guarantee fee is not tied to expenses 
such as employees' salaries, office leases and supplies, and software 
development. The increase in the fee is necessary to insure that the 
guaranteed program has the funding necessary to implement the program 
and provide guarantee services to approved farm lenders. It is not to 
mitigate the above mentioned administrative expenses. Over the years, 
the cost of implementing the Guaranteed Loan Program has stayed 
relatively constant, which is attributed to the successful performance 
of the guaranteed lenders.
    Comment: Instead of the proposed fee changes, change the guarantee 
fee to a 2 percent to 2.5 percent fee upfront.
    Response: Based on the anticipated FY 2012 budget, the fee increase 
of 0.5 percent is the most appropriate increase at this time. This 
allows for a balance

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between increased cost to the borrower and funds available. As noted 
above, the fee schedule is available at https://www.fsa.usda.gov/Internet/FSA_File/loanschartoct11.pdf and at any FSA office and may 
change in the future as needed.
    Comment: Apply the proposed change only to new guarantees, not 
existing ones.
    Response: There will be no changes to the existing loan guarantees. 
The guarantee fee change will take effect on October 1, 2011. For loans 
obligated before October 1, 2011, the existing 1 percent fee will be 
charged. Loans obligated after October 1, 2011, will pay the new 1.5 
percent fee.
    Comment: The proposed fee increase will make it harder for farmers 
to stay profitable, or ultimately survive. Increasing the fee on 
guaranteed loans only enhances the probability of default as fees would 
rise in excess of 350 percent on top of fees that are not being paid by 
other farmers. As an example, a five-year, $100,000 guaranteed LOC 
would now cost the operator an additional $3,500 (an extra 0.50 percent 
in 1 year + 0.75 percent for the remaining four years).
    Response: As discussed above, FSA is not implementing the proposed 
0.75 percent fee on annual advances for line of credits as presented in 
the proposed rule. Therefore in the above example ($100,000 loan) the 
guarantee fee would increase only by $450 ($100,000 loan x 0.90 typical 
guarantee x 0.005 increase in fee).
    Comment: Without the new fee increases, many farmers could survive. 
However, with the fee increases, it may be the end of the road for many 
of these producers as they also face weather disasters and higher fuel 
and fertilizer expenses. With the economic crisis that producers are 
suffering, the last thing that they need is another expense.
    Response: FSA is committed to providing the resources necessary to 
meet the challenges of rising operating expenses. FSA is aware of the 
unforeseen weather factors and the current state of the economy. FSA 
offers relief through loan servicing options and disaster or emergency 
loan assistance in the event weather conditions or other unforeseen 
circumstances prevent the borrower from meeting their financial 
obligations. FSA is dedicated to providing guaranteed credit to as many 
farmers as possible.
    Comment: With higher fees, many farmers are not likely to meet the 
required loan terms to even qualify for the guaranteed loans. This puts 
more pressure on the direct loan program funding, which has had budget 
cuts over the years.
    Response: FSA is limited by budgetary constraints and the increase 
in the guarantee fee is necessary to continue the program. Based on the 
average fee charged on loans closed in FY 2010, the proposed increase 
in the fee would equate to an additional $1,272 or $220 annually for a 
7 year loan at 5 percent interest. Some operators with minimal cash 
flow margins will be unable to obtain guaranteed credit and may have to 
rely on the FSA direct loan program.
    Comment: The proposed fee increase is an added expense to farmers 
and producers that they in turn cannot pass on to someone else.
    Response: The guarantee fee is charged to and collected from the 
lender; however, FSA does allow the fee to be passed on to the borrower 
and, in practice, the fee is almost always passed on to the borrower 
and amortized in the loan. While this does increase the borrower's loan 
payments, budgetary constraints will not allow FSA to guarantee loans 
without the fee increase. FSA is not implementing the annual 
continuation fee that had been previously proposed.
    Comment: USDA and FSA are taking advantage of a group of producers 
that do not have other options available to them.
    Response: Some operators with minimal cash flow margins will be 
unable to obtain guaranteed credit. These operators would have the 
option and opportunity to apply for an FSA direct loan. However, to be 
able to continue to provide guaranteed credit to those farmers who do 
qualify for a guaranteed loan, FSA must increase the guarantee fee.
    Comment: The fees would directly impact the most vulnerable 
farmers, namely, those who cannot qualify for receiving commercial 
loans. These farmers would be the least able to pay the new and higher 
fees. The result would be that these less credit-worthy farmers would 
have a very difficult time graduating to commercial credit, assuming 
they would even be able to remain in business in the first place.
    Response: The guarantee fee is waived for loans involving interest 
assistance, loans where a majority of the funds are used to refinance 
an Agency direct loan (graduation), loans to beginning or socially 
disadvantaged farmers involved in the direct Downpayment Loan Program, 
and loans made through a qualified State Beginning Farmer Program per 7 
CFR 762.130(d)(4)(iii)(c).
    Comment: It is not fair for FSA to increase guaranteed loan fees as 
it would negatively impact the borrower's farming operation. FSA can 
generate additional revenues through some other means than increasing 
the cost of credit for the family farmers. FSA should find alternative 
ways to cut costs such as a reduction in staff. By increasing fees, FSA 
will be losing what presence it has with agricultural lenders not to 
mention the agriculture borrower.
    Response: FSA's source to fund guaranteed loans is the subsidy 
provided by the budget, which takes into account payments made by the 
government to the public and payments made to the government by the 
public. Any savings recognized because of cuts in other areas would not 
alleviate the anticipated budget constraints within the funding levels 
of the guaranteed loan program. A reduction in FSA administrative 
costs, such as salaries, has no impact on the budget authority for loan 
funds. FSA budget for administrative costs is separate from the budget 
for funding the guaranteed loan program.
    Comment: Increasing loan fees on the FSA guaranteed loan program is 
inconsistent with the goals of the program, which is to help those 
farmers and ranchers who could qualify for commercial credit if they 
had some additional support.
    Response: The goal of the guaranteed loan program is to help 
farmers. By increasing the guarantee fee by only 0.5 percent, FSA will 
maintain the level of funds available to those farmers who could not 
qualify for commercial credit without a guaranteed loan. FSA is 
committed to serving the agriculture credit needs of all eligible 
farmers and ranchers. The fees charged will be lower than other 
government loan guarantee programs.
    Comment: If the program becomes fee based, FSA would have to 
increase fees each year in order to provide the same level of funding. 
Without annual appropriations to support the guaranteed loan program, 
future fees could range widely from year to year.
    Response: Guarantee fees could vary year to year however 
historically the cost of the guaranteed program has not varied greatly 
from year to year. FSA anticipates the guarantee fee will vary, but we 
believe it will not vary widely from year to year.
    Comment: FSA should not have the authority to change fees in the 
future without formal promulgation of a change to the Code of Federal 
Regulations.
    Response: The proposed rule provided that the level of fees charged 
for a guaranteed loan may change in the future without promulgation of 
a rule to

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amend the guaranteed loan regulations. To accurately predict future fee 
requirements would not be possible, and the change in the fees may be 
required quickly after the adoption of a budget; therefore, FSA will 
not publish the fee amount in the regulations and will not change the 
fee through rulemaking. The guarantee fee will be posted on the FSA Web 
site at https://www.fsa.usda.gov/Internet/FSA_File/loanschartoct11.pdf 
and available at any FSA office. The guarantee fee will be adjusted 
when needed based on the budget authority for the fiscal year.
    Comment: The Farm Credit System is required by law to provide 
financial services to young, beginning, and small farmers. Through the 
use of FSA guarantees, the Farm Credit System is able to provide 
financing to farmers that might not otherwise be assisted. To the 
extent the fee increases lessen participation in the Guaranteed Loan 
Program; the mission of the Farm Credit System is inhibited.
    Response: Both FSA and the Farm Credit System are mutually 
committed to providing agriculture credit to the nation's farmers and 
ranchers. FSA does not believe the mission of the Farm Credit System 
will be inhibited by the increase in the guarantee fee. FSA believes 
that by implementing only the guarantee fee increase, the impact on a 
few farmers will be minimal when compared to the alternative of a 
reduction in available funds for all eligible farmers.
    Comment: The fees will be a disincentive to attracting new banks 
into the FSA Guaranteed Loan Program. A number of banks will likely 
stop using the program and FSA will probably not find support for this 
fee increase in the banking industry. Fewer farmers and lenders using 
the program could cause the demise of the program.
    Response: FSA believes that only a small percentage of lenders and 
farmers will choose not to participate, and will not have a significant 
impact on the sustainability of the program. The Guaranteed Loan 
Program offers risk management portfolio exposure to lenders. Many 
lenders value this aspect of the program, and will continue to use our 
program. Budget constraints will not allow FSA to operate at its 
current level without the guarantee fee increase.
    Comment: The Small Business Administration (SBA) programs have 
experienced fewer banks and fewer rural customers using the program 
since increasing their fee structure.
    Response: SBA makes direct business loans and guarantees loans to 
small businesses, as well as loans to victims of natural disasters. SBA 
also works to get government procurement contracts for small businesses 
and assists business owners with management and technical assistance 
and business training. In addition to loans for small business owners, 
SBA is authorized to provide loans for agriculturally related 
industries. Many of the customers that work with SBA are different from 
those customers that work with FSA. Both agencies charge guaranteed 
loan fees for participation in their programs, which can be passed on 
to the borrower. However, the fees charged by SBA are much higher than 
those that would be charged by FSA based on this rule. In both cases, 
the fees can be financed into the loan and amortized over the life of 
the loan resulting in minimal costs per year.
    Comment: Offer a discount for the Preferred Lender Program (PLP).
    Response: PLP was developed to recognize experienced lenders, who 
have demonstrated expertise in, and understanding of, agricultural 
lending and the FSA Guaranteed Farm Loan Program. PLP is beneficial to 
both lenders and FSA. The streamlined loan making and servicing 
processes in 7 CFR part 762 allow lenders to reduce administrative 
costs and provide a quick turnaround time and a higher level of service 
to their customers. These incentives are sufficient. PLP lenders must 
pay the loan origination fee just like the Standard Eligible Lenders 
(SEL) and Certified Loan Program (CLP) lenders. We are not making any 
change in response to this suggestion.

Miscellaneous Conforming Changes

    Since the publication of the proposed rule, there have been several 
Farm Loan Programs rule changes, and a few of those that implemented 
provisions of the Food, Conservation, and Energy Act of 2008 (Pub. L. 
110-246, referred to as ``the 2008 Farm Bill'') require conforming 
changes in this rule.
    The current regulation specifies several guaranteed loan 
transactions that are not charged the guarantee fee, one of these is 
loans to farmers involved in the Direct Downpayment Program (see 7 CFR 
762.130(d)(4)(iii)(C)). At the time the exemption was established, the 
exemption was for loans to beginning farmers involved in the Direct 
Beginning Farmer Downpayment Program. On December 8, 2008, a final rule 
published in the Federal Register (73 FR 74343-74346) implemented 
provisions of the 2008 Farm Bill required for socially disadvantaged 
and beginning farmers. The changes to the regulations made by that 
final rule included expanding and renaming the Downpayment Program to 
include socially disadvantaged farmers. Therefore, we are making a 
conforming change by revising and expanding the exception in 7 CFR 
762.130(d)(4)(iii)(C) to specify that the guarantee will not be charged 
for loans to beginning or socially disadvantaged farmers involved in 
the Direct Downpayment Program (or beginning farmers participating in a 
qualified State beginning farmer program as discussed below).
    In addition, as specified in 7 U.S.C. 1929(i)(3), USDA may ``not 
charge any person (including a lender) any fee with respect to the 
provision of any guarantee'' under subsection (i) ``Coordination of 
Assistance for Qualified Beginning Farmers and Ranchers.'' Subsection 
(i) addresses requirements related to State beginning farmer programs. 
As defined in 7 U.S.C. 1929(i)(5), the term ``State beginning farmer 
program'' means:

    * * * any program that is--
    (A) carried out by, or under contract with, a State; and
    (B) designed to assist persons in obtaining the financial 
assistance necessary to enter agriculture and establish viable 
farming or ranching operations.

    Therefore, we are making a conforming change by revising and 
expanding the exception in 7 CFR 762.130(d)(4)(iii)(C) to specify that 
the guarantee will not be charged for loans to beginning farmers 
participating in a qualified State beginning farmer program.
    On September 3, 2010, an interim rule was published in the Federal 
Register (75 FR 54005-54016) implementing the new CL Program, which was 
established by the 2008 Farm Bill. Therefore, we are making a 
conforming change by to specify that the guarantee fee also will be 
calculated for the CL Program guaranteed loans.

Effective Date

    The Administrative Procedure Act (APA, 5 U.S.C. 553) provides 
generally that before rules are issued by Government agencies, the rule 
must be published in the Federal Register, and the required publication 
of a substantive rule is to be not less than 30 days before its 
effective date. One of the exceptions is when the agency finds good 
cause for not delaying the effective date. If the guarantee fee is not 
increased to 1.5 percent for FY 2012, then FSA will not be able to 
guarantee any new FOs and very few OLs. Therefore, FSA finds that there 
is good cause for making this rule effective less than 30 days after 
publication in the Federal Register. FSA has decided it is appropriate 
to issue its final policy as an interim rule to give the public more 
opportunity to

[[Page 58093]]

comment on the increase to the one-time guarantee fee and to understand 
better the need to increase the fee. Publishing this rule as an interim 
rule allows FSA to increase the guarantee fee and therefore maintain 
the Guaranteed Loan Program, while allowing time for public comment.

Executive Order 12866

    The Office of Management and Budget (OMB) designated this rule as 
not significant under Executive Order 12866 and therefore, OMB has not 
reviewed this interim rule.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601-612), as amended by 
the Small Business Regulatory Enforcement Fairness Act of 1996 
(SBREFA), generally requires an agency to prepare a regulatory 
flexibility analysis of any rule subject to the notice and comment 
rulemaking requirements under the Administrative Procedure Act (5 
U.S.C. 553) or any other statute, unless the agency certifies that the 
rule will not have a significant economic impact on a substantial 
number of small entities. FSA has determined that this rule will not 
have a significant impact on substantial number of small entities for 
the reasons explained below. Therefore, FSA has not prepared a 
regulatory flexibility analysis.
    All guarantee fees are charged to and collected from the lender by 
FSA. FSA allows the fee to be passed on to the applicant and, in 
practice, the expense is almost always passed on to the borrower or 
applicant. All FSA guaranteed loan borrowers and all farm entities 
affected by this rule are small businesses according to U.S. Small 
Business Administration small business size standards. 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 sizes of entities. The costs of 
compliance with this rule are expected to be minimal. FSA certifies 
that this rule will not have a significant economic impact on a 
substantial number of small entities.

Environmental Evaluation

    The environmental impacts of this rule have been considered in a 
manner consistent with 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 the FSA regulations 
for compliance with NEPA (7 CFR part 799). The changes to the 
guaranteed loan program that are identified in this rule are 
administrative in nature. Therefore, FSA has determined that no 
environmental assessment or environmental impact statement will be 
prepared.

Executive Order 12372

    Executive Order 12372, ``Intergovernmental Review of Federal 
Programs,'' requires consultation with State and local officials. The 
objectives of the Executive Order are to foster an intergovernmental 
partnership and a strengthened Federalism, by relying on State and 
local processes for State and local government coordination and review 
of proposed Federal Financial assistance and direct Federal 
development. 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.

Executive Order 12988

    This rule has been reviewed in accordance with Executive Order 
12988, ``Civil Justice Reform.'' The provisions of this rule will not 
have preemptive effect with respect to any State or local laws, 
regulations, or policies that conflict with such provision or which 
otherwise impede their full implementation. The rule will not have 
retroactive effect. Before any judicial action may be brought regarding 
this rule, all administrative remedies in accordance with 7 CFR part 11 
must be exhausted.

Executive Order 13132

    This rule has been reviewed under Executive Order 13132, 
``Federalism.'' The policies contained in this rule do not have any 
substantial direct effect on States, the relationship between the 
Federal government and the States, or 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

    This rule has been reviewed for compliance with Executive Order 
13175, ``Consultation and Coordination with Indian Tribal 
Governments.'' This Executive Order imposes requirements on the 
development of regulatory policies that have tribal implications or 
preempt tribal laws. The USDA Office of Tribal Relations has concluded 
that the policies contained in this rule do not have Tribal 
implications that preempt Tribal law. FSA will provide government-to-
government consultation with Tribal governments to discuss this interim 
rule. The Tribal consultation will be available through a 
teleconference. Leadership from all Federally recognized Tribes that 
have lands within the affected counties will be invited to the 
consultation. FSA will respond in a timely and meaningful manner to all 
Tribal government requests for Tribal consultation about this rule and 
will provide additional avenues, such as webinars and teleconferences, 
to periodically host collaborative conversations with Tribal leaders 
and their representatives about ways to improve this rule in Indian 
country. When Tribal consultation is complete, FSA will analyze the 
feedback and incorporate any required changes through the final rule.

Unfunded Mandates Reform Act of 1995

    Title II of the Unfunded Mandate 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 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 
rule contains no Federal mandates as defined by Title II of UMRA for 
State, local, or tribal governments or for the 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, as found 
in the Catalog of Federal Domestic Assistance, to which this rule 
applies are:

10.099--Conservation Loans,
10.406--Farm Operating Loans,
10.407--Farm Ownership Loans.

Paperwork Reduction Act of 1995

    The amendments to 7 CFR part 762 in this interim rule require no 
new collection or changes to the current information collections 
approved by OMB under the control number 0560-0155.

E-Government Act Compliance

    FSA is committed to complying with the E-Government Act, to promote 
the use of the Internet and other

[[Page 58094]]

information technologies to provide increased opportunities for citizen 
access to Government information and services, and for other purposes.

List of Subjects in 7 CFR Part 762

    Agriculture, Credit, Loan programs--Agriculture.

    For reasons discussed above, this rule amends 7 CFR part 762 as 
follows:

PART 762--GUARANTEED FARM LOANS

0
1. Revise the authority citation for part 762 to read as follows:

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

0
2. Amend Sec.  762.130 by revising paragraphs (d)(4)(ii) and 
(d)(4)(iii)(C) to read as follows:


Sec.  762.130  Loan approval and issuing the guarantee.

* * * * *
    (d) * * *
    (4) * * *
    (ii) The guarantee fee is established by the Agency at the time the 
guarantee is obligated. The current fee schedule is available at https://www.fsa.usda.gov and any FSA office. Guaranteed fees may be adjusted 
annually based on factors that affect program costs. The nonrefundable 
fee is paid to the Agency by the lender. The fee may be passed on to 
the borrower and included in loan funds. The guarantee fee for the loan 
type will be calculated as follows:
    (A) FO guarantee fee = Loan Amount x % guaranteed x (FO percentage 
established by FSA).
    (B) OL guarantee fee = Loan Amount x % guaranteed x (OL percentage 
established by FSA).
    (C) CL guarantee fee = Loan Amount x % guaranteed x (CL percentage 
established by FSA).
    (iii) * * *
    (C) Loans to beginning or socially disadvantaged farmers involved 
in the direct Downpayment Loan Program or beginning farmers 
participating in a qualified State Beginning Farmer Program.
* * * * *

    Signed on September 12, 2011.
Bruce Nelson,
Administrator, Farm Service Agency.
[FR Doc. 2011-23724 Filed 9-19-11; 8:45 am]
BILLING CODE 3410-05-P