Microloan Operating Loans, 3828-3836 [2013-00672]
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pmangrum on DSK3VPTVN1PROD with
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to coordinates 42°41′45″, -77°70′29″;
then north along a farm road to
coordinates 42°41′60″, -77°70′36″; then
west along a farm road to coordinates
42°41′62″, -77°70′83″; then north along
the Marsh Ditch to coordinates
42°41′86″, -77°70′97″; then west along a
farm road to coordinates 42°41′81″,
-77°71′21″; then south along a farm road
to coordinates 42°41′76.0″, -77°71′18.0″;
then west along a fallow strip to
coordinates 42°41′75.6″, -77°71′40.2″;
then south along a fallow strip to
coordinates 42°41′61.3″, -77°71′42.0″;
then west along a farm road to
coordinates 42°41′60.4″, -77°71′68.1″;
then south along a farm road on the east
side of the Conrail right-of-way (Erie
Lackawanna Railroad) to coordinates
42°40′50″, -77°71′07″; then east along a
farm road to coordinates 42°40′49″,
-77°70′38″; then north along an
irrigation ditch to coordinates
42°40′69.9″, -77°70′46.8″; then east
along an irrigation ditch to coordinates
42°40′69.7″, -77°70′34.3″; then south
along the Marsh Ditch to coordinates
42°40′55.0″, -77°70′26.5″; then east to
point of beginning at coordinates
42°40′54.5″, -77°69′79.0″;
(D) The property in the town of
Cohocton (formerly known as the
‘‘Werthwhile Farm’’) bounded as
follows: Beginning at a point along the
north side of Brown Hill Road marked
by latitude/longitude coordinates
42°45′03.5″, -77°53′56.2″; then north
along a forest edge to coordinates
42°45′27.5″, -77°53′55.7″; then west
along a forest edge to coordinates
42°45′27″, -77°53′72.9″; then north along
a forest edge to coordinates 42°45′47.6″,
-77°53′72.2″; then west along a forest
edge and a hedgerow to the east side of
Rex Road to coordinates 42°45′48.7″,
-77°54′40.7″; then southwest along the
east side of Rex Road to coordinates
42°45′39.4″, -77°54′53.6″; then south
along a hedgerow and a forest edge to
coordinates 42°45′05.7″, -77°54′54.7″;
then east along a hedgerow and the
north side of Brown Hill Road to point
of beginning at coordinates 42°45′03.5″,
-77°53′56.2″; and
(E) The property located in the town
of Fremont that is bounded as follows:
Beginning at a point on Babcock Road
that intersects a farm road marked by
latitude/longitude coordinates
42°43′68.06″, -77°57′51.11″; then west
along the farm road to coordinates
42°43′67.22″, -77°57′80.56″; then south
to coordinates 42°43′60.00″,
-77°57′80.28″; then west to coordinates
42°43′59.44″, -77°58′07.50″; then south
to coordinates 42°43′35.28″,
-77°58′06.39″; then east to coordinates
42°43′33.06″, -77°57′78.89″; then south
to coordinates 42°43′18.61″,
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-77°57′77.78″; then east to coordinates
42°43′23.06″, -77°57′71.39″; then north
to coordinates 42°43′30.28″,
-77°57′63.89″; then east to coordinates
42°43′30.28″, -77°57′61.39″; then north
to coordinates 42°43′49.44″,
-77°57′56.94″; then east to coordinates
42°43′49.17″, -77°57′49.72″; then north
to the point of beginning at coordinates
42°43′68.06″, -77°57′51.11″.
*
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[FR Doc. C1–2013–00206 Filed 1–16–13; 8:45 am]
BILLING CODE 1505–01–D
DEPARTMENT OF AGRICULTURE
Farm Service Agency
7 CFR Parts 761 and 764
RIN 0560–AI17
Microloan Operating Loans
Farm Service Agency, USDA.
Final rule.
AGENCY:
ACTION:
The Farm Service Agency
(FSA) is modifying Operating Loan (OL)
application, eligibility, and security
requirements for Microloans (ML) to
better serve the unique operating needs
of small family farm operations. The
intended effect of this rule is to make
the OL Program more widely available
and attractive to small operators through
reduced application requirements, more
timely application processing, and
added flexibility in meeting the
managerial ability eligibility
requirement. FSA is also removing
provisions for the low documentation
(Lo-Doc) application process for OLs
from the existing direct loan regulations.
DATES: Effective January 17, 2013.
FOR FURTHER INFORMATION CONTACT:
Connie Holman; telephone: (202) 690–
0756. Persons with disabilities or who
require alternative means for
communication (Braille, large print,
audio tape, etc.) should contact the
USDA Target Center at (202) 720–2600
(voice and TDD).
SUPPLEMENTARY INFORMATION:
SUMMARY:
Background
FSA has a long history of providing
agricultural credit to the Nation’s
farmers and ranchers through its OL
Program. The Consolidated Farm and
Rural Development Act of 1972 (Pub. L.
92–419, CONACT), as amended,
authorizes FSA’s OL Program. FSA’s OL
Program is designed to finance the farm
operating needs of family farms for
operators who meet the program
eligibility requirements. Among other
things, eligible applicants must be
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unable to obtain sufficient credit from
other sources; have sufficient applicable
education, on-the-job training, or
farming experience; have an acceptable
credit history; and have adequate
collateral for the proposed loan. (See 7
CFR 764.101 and 764.252 for a full
explanation of OL eligibility
requirements.) OL funds may be used
for such things as annual or term
operating purposes to refinance certain
debts; pay normal farm operating and
family living expenses; purchase
livestock, equipment, and other
materials essential to a farm operation;
and may also be used for some minor
improvements to farm real estate, such
as wells and essential repairs to
buildings. (See 7 CFR 764.251 for a
complete list of OL funds uses.)
Throughout this rule, any reference to
‘‘farm’’ or ‘‘farmer’’ also includes
‘‘ranch’’ or ‘‘rancher,’’ respectively; in
this document, the word ‘‘operator’’
refers to farmers who operate a farm.
In on-going efforts to improve the OL
Program, FSA evaluated the unique
needs of small farm operations and
identified unintended barriers to
applying for OLs. As a result, FSA is
simplifying the application process and
adding flexibility for meeting both loan
eligibility and security requirements to
encourage their participation. FSA
published the proposed rule on May 25,
2012 (77 FR 31220–31226). The
proposed rule included provisions for
streamlining and abbreviating the
application process, modifying security
provisions, and providing additional
flexibility in meeting the experience
eligibility requirement. Additionally,
FSA proposed removing the Lo-Doc OL
Program provisions from the CFR. As
discussed below, this final rule makes a
few changes from the proposed rule in
response to comments.
The ML application process, or the
ML process, is within the existing OL
Program framework, and uses existing
OL appropriations to focus on the
financing needs of small farm
operations. These small farms,
including non-traditional farm
operations, currently have limited
financing options available.
ML has been designed to appeal to
small family farm operations. The ML
application process simplifies the
information required to apply by
reducing the level of documentation
required to more appropriately align
with the less complex structure and
needs of small operations. Additionally,
the eligibility requirement for
managerial ability and the loan security
requirements for the ML process have
been modified from the OL
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requirements to be more appropriate for
small family farms.
Summary of Comment and Reponses
In response to the proposed rule, FSA
received 48 comments. Comments were
from national and local organizations
primarily with agricultural, financial,
and socially disadvantaged group
affiliations; the general public; and FSA
employees. The issues in the comments
and the FSA responses, including a
discussion of any changes to the
regulation are discussed below.
The majority of the comments
received were positive and supportive
of the proposed ML process and
commended FSA for considering the
needs of small farms and niche-type
operations while designing the new
application process. Many of the
comments welcomed the proposed
changes without reservation. Some
comments included suggestions for finetuning the proposed ML process. Some
opposing comments stated concerns
with inexperienced borrowers, a
lessened standard of loan underwriting,
and potential losses for the government.
FSA is incorporating some changes to
the regulation as discussed in this final
rule. Some changes have been made to
the farm assessment, security,
eligibility, and farm operating plan
requirements to accommodate the
streamlined process for MLs. The
changes in 7 CFR part 764, ‘‘Direct Loan
Making,’’ add the loan application
requirements for ML; alternatives for
meeting the managerial ability eligibility
requirement for ML; operating loan uses
for ML; security requirements for ML;
and several other minor amendments.
Comment: Include the work
experience of migrant workers in the
requirement for managerial experience.
Response: For FSA loans generally
and for microloans, as specified in 7
CFR 764.101(i)(3), an applicant with
experience as a migrant worker may
meet the managerial requirement
through their farm experience
depending on the type of management
responsibilities the migrant worker
performed. Internal guidance was added
earlier this year to incorporate this type
of experience into FSA’s handbook at
paragraph 69(A) of 3–FLP. Additional
handbook guidance will be added to
further explain how this type of
experience can be used to meet the
requirements specified in the ML
regulations. Therefore, FSA is not
making any change beyond the
proposed rule changes.
Comment: FSA should broaden the
agriculture-related organizations beyond
youth programs, such as 4–H Club or
Future Farmers of America (FFA), to
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include groups such as farm incubator
programs and community based
organizations.
Response: FSA will not limit the
experience with agriculture-related
organizations to youth programs. FSA
agrees and will clarify that there are
acceptable organizations with
agricultural emphasis that can provide
similar benefits to participants. The
applicant that demonstrates day-to-day
management experience in an
agriculture related field. Therefore, FSA
is revising § 764.101(i)(4)(i) to include
other acceptable agricultural
organizations.
Comment: The proposed change to
the management experience should not
be implemented. An applicant gaining
experience on future intent is
problematic. There should be at least 1
year of farm experience prior to
participating in the proposed
apprenticeship. In addition, there
should be some type of quality control
for the mentors participating in the
apprenticeship program.
Response: FSA agrees that an
applicant should have some farm
experience or small business experience
to be determined eligible using
proposed participation in the selfdirected apprenticeship. FSA’s intent
was to create a farm management
opportunity for applicants who are not
able to meet the management ability
eligibility requirement through
traditional education, on the job training
(as a farm laborer with farm
management responsibilities), or
managerial farm experience. FSA
understands that there are applicants
who want to farm, but who may not
have had the traditional farm experience
opportunities available to someone
raised on a farm or in a farm or rural
community where agriculture-affiliated
organizations are within reach. Some
applicants, due to a variety of
circumstances, may have had only farm
labor positions available to them. A selfdirected apprenticeship was proposed
for ML applicants to allow applicants an
alternative means to gain farm
management experience for one
production cycle.
FSA has considered the suggestions to
improve the apprenticeship option. FSA
still requires that there be some farm
experience. FSA will also consider
small business experience of an
applicant along with the self-guided
apprenticeship as a means to meet the
management ability eligibility
requirement, if the applicant is unable
to meet this requirement through the
other options. This will assist applicants
who have only farm labor experience by
providing them the opportunity to gain
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farm management experience while
working with a mentor during the first
production and marketing cycle. FSA
will make the relevant changes to the
apprenticeship program. FSA will
monitor the results of the
apprenticeship option in the coming
years to determine if it adequately meets
the needs of the applicants we expect to
help. Therefore, FSA is revising
§ 764.101(i)(4)(ii) to adjust the proposed
alternatives to require sufficient prior
experience working on a farm or small
business management experience
combined with participation in a selfdirected apprenticeship.
Comment: Require the mentor to sign
the loan application to prevent fraud
and abuse of program.
Response: FSA will require that the
mentor’s full name and description of
operation be provided on the
application, but disagrees that the
mentor should have to sign the
application form. FSA believes
requiring a signature on the application
would make mentors wary of working
with FSA applicants and borrowers.
Therefore, FSA is not making any
change beyond the proposed rule
changes.
Comment: There should be qualifying
criteria for mentors so that their
suitability can be evaluated. Mentors
should demonstrate appropriate
technical and other capabilities to
provide guidance to applicants,
acknowledge the existence of a
proposed mentor relationship, and
provide documentation of their farm
profitability.
Response: FSA has made adjustments
to the regulatory text as proposed for 7
CFR 764.101(i)(4)(ii) to improve the selfdirected apprenticeship option to assist
applicants in meeting the management
ability eligibility requirement. At this
time, mentors will not be evaluated as
part of the application process. An
evaluation would cause the ML
application to become cumbersome, and
increase the process and burden on the
applicant and mentor. As stated
previously, FSA believes that this
would cause mentors to be reluctant to
work with FSA applicants and
borrowers. Part of the intent of ML is to
keep the process proportional to the
loan amount, and to the small
operations expected to frequently use
ML funds. FSA will evaluate the
effectiveness of the apprenticeship
program in the coming years to
determine if this tool is useful in
helping applicants who cannot meet the
management ability eligibility
requirement in other ways. Therefore,
FSA is not making any change beyond
the proposed rule changes.
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Comment: Do not limit debt
verification to the credit bureau reports;
most of the farm creditors do not report
to the credit bureaus.
Response: FSA understands that
many farm creditors and local suppliers
do not report to the credit bureaus. FSA
considers the self-certification of debt
on the application to be an acceptable
risk that will contribute to streamlining
efforts. Since applicants will still need
to demonstrate credit-worthiness as
specified in 7 CFR 764.101(d), among
other OL eligibility criteria, any risks in
this area are expected to be low. If
deemed necessary by the loan official,
additional information may be
requested from the applicant; however,
this should be in exceptional cases in
order to keep ML a truly streamlined
process. Therefore, FSA is not making
any change beyond the proposed rule
changes.
Comment: The non-itemized cash
flow will lower the level of business
analysis and supportive documentation
that would be required. FSA should
require a minimum of 3 years of tax
returns plus other information
completed in greater detail. The nonitemized cash flow with less
experienced operators is a set up for
failure in any business venture.
Response: FSA disagrees and will not
be requiring an itemized cash flow or
increased documentation for ML
applicants, as the intent of ML is to keep
the process proportional to the smaller
loan amounts and to the small, simpler
operations expected to seek this
financing. For applicants new to FSA
who may produce non-traditional crops
or with production practices where
yield per acre may be less important,
other factors, such as the production
capacity, the consistency of income and
expenses, and the timely harvest and
selling of produce, may be more
appropriate measurements to use in
establishing actual productivity and
projected plans. In addition, FSA
predicts that many ML borrowers will
be existing OL borrowers that already
borrow at the $35,000 threshold and
below. In these cases, FSA will have
information on file for many of these
applicants through the normal course of
business in past years (year end analysis
(YEA), Farm Assessments, etc.).
Therefore, FSA is not making any
change beyond the proposed rule
changes.
Comment: New operations applying
for ML should not be required to have
yields or yield history.
Response: The proposed rule already
allowed for circumstances where yield
history or reporting is impractical, not
relevant to the proposal submitted, or is
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not available. Some applicants meeting
the managerial eligibility requirements
will not have operated a farm in the
previous year, and therefore will not be
required to have yield history.
Therefore, FSA is not making any
change beyond the proposed rule
changes.
Comment: Any applicant having
caused FSA a loss should be considered
ineligible for ML. The documentation
needed for the application would be
beyond the intent for the simplified ML
process; they should have to provide all
of the documentation for an OL. The
applicant would have the option to
apply for OL through the regular process
as specified in 7 CFR 764.252(c).
Response: MLs are direct program
loans, and the general eligibility
requirements for direct loans already
state that an applicant who caused the
Agency a loss by receiving debt
forgiveness (defined in 7 CFR 761.2)
may be ineligible (7 CFR 764.101(d)(2)).
Comment: MLs should not be secured
by collateral worth only 100 percent of
the loan amount; it should still be able
to be secured with up to 150 percent,
when available. The proposed change
differs from the current regulation in
§ 764.104(c), which requires collateral
worth up to 150 percent of the loan
amount, if available, to secure the loan.
Why decrease security requirements for
MLs when these loans are riskier than
regular OL loans or loans made to
established producers? Additionally, the
crops financed for direct sales involve
added risk to loan security; it would be
impractical for FSA to enforce a
Uniform Commercial Code (UCC) filing
on these commodities and, therefore,
FSA would have no control over the
produce sales income.
Response: FSA’s intent for ML is to
provide flexibility for financing and to
prevent possible barriers to meeting
loan security requirements: Specifically,
requiring additional security to finance
unfamiliar crops and production. As a
clarification, for FSA’s existing OL
Program, all agricultural commodities,
whether salad greens or corn, are
considered eligible production for a
family farm and are regularly financed
by FSA with UCC filings. So long as the
agricultural commodities are
determined to have a security value of
100 percent of the amount loaned for
annual operating and family living
expenses these commodities can be
used to secure the loan. FSA agrees that
for MLs security of 100 percent should
always be required, but the requirement
for additional security up to 150
percent, when available, should be
limited to MLs for annual operating
purposes. FSA also believes that
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additional security from 100 percent to
150 percent should be limited to farm
assets, and is not to include the personal
residence. Therefore, FSA is revising
§ 764.255(c)(1), (2), (3), and (4) to limit
collateral to farm property having a
security value of at least 100 percent for
MLs and up to 150 percent, if available,
for MLs made for annual operating
purposes. This adjusts the security
requirements for crops and equipment
separately to meet a balance between
adequate collateral margin, the type of
security, and security requirements that
take into consideration the assets and
collateral of the non-traditional, and
new farm operations that FSA expects
will be seeking ML funding.
Comment: The costs to legally obtain
the collateral in cases where loans fail
would be onerous and exceed the value
FSA would recover.
Response: FSA agrees that in some
cases, the costs to obtain the collateral
could be onerous and exceed the value
FSA would recover. FSA is required to
service its loans, but can make the
decision on how best to service
delinquent loans on a case-by-case
basis. This flexibility can limit the
amount of loss to FSA. Treasury offsets
are also applied to delinquent borrower
accounts to recover amounts due. So,
even when the loan balance exceeds the
liquidated security FSA anticipates it
will recover additional amounts through
offsets. Therefore, FSA is not making
any change beyond the proposed rule
changes.
Comment: Sound underwriting
standards would require a second or
junior mortgage placed on the property
to cover the first mortgage.
Response: FSA is making some
adjustments to the security
requirements for annual MLs, requiring
chattel collateral up to 150 percent
when available, excluding personal
residences. Therefore, FSA is revising
§ 764.255(c)(1), (2), and (4) to limit
collateral to farm property having
security value of at least 100 percent,
and up to 150 percent, if available, for
MLs made for annual operating
purposes.
Comment: Allow a cosigner on the
security requirement.
Response: FSA presently accepts a
pledge of security from a third party or
a cosigner under general security
requirements. This option would also
apply to MLs. Therefore, FSA is not
making any change beyond the
proposed rule changes.
Comment: Do not remove the Lo-Doc
OL application process; Lo-Docs still
serve a purpose, particularly those that
are above the ML maximum of $35,000.
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Response: To continue providing
streamlined financing for annual OL
needs up to $300,000, FSA is
implementing internal processing
changes, which do not require changes
to the regulations, for an OL application
process for returning customers with no
changes in their operation since their
original loan application. This new
process for a subsequent OL, along with
ML, is expected to improve the overall
application process for all levels of OLs;
the Lo-Doc would then become obsolete
once these proposed changes are
implemented. Therefore, FSA is not
making any change beyond the
proposed rule changes.
Comment: The $35,000 maximum
loan limit for ML should be a different
amount. It should be $25,000 or lower
to limit risk. FSA should assess any
losses after a period of years, and then
consider increasing the maximum.
Alternately, the maximum amount
should be greater than $35,000, with a
limit up to $50,000.
Response: ML will initially have a
$35,000 maximum amount. FSA’s
preliminary analysis predicts this
amount will be sufficient to provide
financing needs to a substantial group of
operators, but still low enough to be a
manageable risk. FSA will review the
success of the program and will
reevaluate the loan amounts
periodically, and if any change is
needed, it will be made through
rulemaking. Therefore, FSA is not
making any change beyond the
proposed rule changes.
Comment: ML should be limited to
individuals and husband and wife joint
ventures only since this program is
intended for more simplistic operations.
The additional documentation required
for entities does not lend itself to this
type of simplified application.
Response: FSA disagrees. This
suggestion would cause some entities to
be excluded from the ML process that
might otherwise benefit from the
changes intended for small operations.
In addition, one of the requirements of
the Regulatory Flexibility Act (5 U.S.C.
603) is to consider alternatives to
minimize any significant economic
impact of the rule on small entities.
Arbitrarily limiting applicants to certain
entity compositions could be considered
disparate treatment. Furthermore, initial
analysis and applicant estimates for the
program show that only a small number
of ML applicants would be entity
applicants. The ML process is intended
to tie the dollar amount of risk involved
to the level of paperwork and
documentation needed, rather than the
type of organization. Therefore, FSA is
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not making any change beyond the
proposed rule changes.
Comment: ML should be limited to 4
of the 11 possible uses under the OL
Program to avoid bringing more
complex issues that would not fit a
simplified loan application.
Response: FSA disagrees. The ML
process is intended to tie the dollar
amount and risk involved to the level of
paperwork and documentation needed,
rather than the use of the loan money.
It would be disparate treatment, and
unsound business practice, to tie
paperwork requirements to the uses of
loan funds. Limiting uses of funds to
only a few of the normal OL loan uses
would punish those who request small
loans, and it would be potentially
confusing. MLs were designed to be less
complicated. Therefore, FSA is not
making any change beyond the
proposed rule changes.
Comment: There should be a
limitation on use of balloon payments
and terms to those that can be repaid
within 7 years. The documentation
needed to justify the longer terms
requires additional paperwork by both
the applicant and Farm Loan Programs
(FLP) staff.
Response: Loan terms for MLs will be
the same as FSA’s regular OL Program,
which does limit term loans to a 7-year
term. All MLs will be serviced the same
as regular OLs. FSA also realizes that
the profitability of an operation is not
directly tied to the amount of operating
funds it borrows and therefore believes
that many smaller operations whose
loan needs can be accommodated
through the new ML process can be
quite successful and business savvy
enough to easily handle any balloon
payment. Therefore, FSA is not making
any change beyond the proposed rule
changes.
Comment: FSA should not require an
ML applicant to submit additional
information even if specifically needed
to make a determination on the loan
application. Asking for additional
information may sound favorable to
FSA; but it may make the process less
palatable to the applicant after
submitting what is believed to be a
complete application.
Response: FSA will not be making
this change, as there are situations, such
as requesting a divorce decree document
in order to determine whose signature is
needed to secure a loan, in which
additional information will be
necessary. FSA believes that there is a
responsibility to undertake adequate
due diligence to protect loan funds. The
intent of the ML process is that
requiring additional information will be
the exception, in keeping with a truly
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streamlined process for applicants.
Therefore, FSA is not making any
change beyond the proposed rule
changes.
Comment: FSA should partner with
agricultural groups to provide training
and mentoring for ML applicants to
include beginning farmers, sustainable
agriculture, and specialty nontraditional operations.
Response: FSA does partner with
agricultural groups to provide training
and mentoring, and will do so for ML
applicants, and all borrower training
requirements will apply as with all
other FSA loans. FSA is committed to
working through outreach and
marketing efforts in local Service
Centers and State offices to continue to
seek additional opportunities for
applicants and borrowers to receive
appropriate, accessible training and
continuing education as they start and
build their farm operations. Therefore,
FSA is not making any change beyond
the proposed rule changes.
Comment: Outreach for MLs is
important to Socially Disadvantaged
Applicants (SDA), applicants with
limited English proficiency, and various
ethnic minority communities. Will MLs
target funds for Beginning Farmer (BF)
and SDA applicants?
Response: FSA has a strong
commitment to Farm Loan Programs
outreach and marketing at the Service
Center and State Office levels, and
anticipates strong demand for ML from
SDAs. MLs are part of the OL Program
and will be included in the outreach.
Loan officials can locate interpreters on
an as-needed basis if there is a language
barrier with applicants. Loan
applications and funding for SDA and
BF customers are targeted, tracked, and
monitored to ensure that these
producers are reached within the
communities FSA serves. ML will have
the same BF and SDA loan funding
goals as does the existing OL Program.
Therefore, FSA is not making any
change beyond the proposed rule
changes.
Comment: For ML to effectively assist
the non-traditional farmers with this
streamlined process, staff will need to
be trained at the local and State levels.
Response: Local offices will be
provided training when the program is
introduced, and further training will be
provided on a periodic basis. Training
on the new process, and the expected
types of operations seeking MLs will be
provided for a successful roll-out and
implementation of this program.
Therefore, FSA is not making any
change beyond the proposed rule
changes.
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Comment: Prioritize data and data
collection to build information on
nontraditional types of local markets.
Response: FSA State offices compile
the prices and yields of agricultural
commodities, and make them available
to the Service Center staff for loan
underwriting and projecting purposes.
For States and regions that currently
have more exposure to more nontraditional and direct sales types of
operations, additional data has been
added on a year by year basis depending
on the consistency and availability of
market and yield data. Additional
guidance on organic and less traditional
crops is also being provided and will be
in handbook amendments. Therefore,
FSA is not making any change beyond
the proposed rule changes.
Comment: FSA should build in
metrics to evaluate, monitor, track, and
measure MLs separate from OLs.
Response: FSA is implementing the
necessary changes in our system, so that
the MLs can be isolated and evaluated.
Therefore, FSA is not making any
change beyond the proposed rule
changes.
Comment: The ML application should
be made available online with an
improved application interface.
Response: Applications and forms are
available online for printing; some
forms are fillable and can be submitted
electronically. FSA agrees that an online
application process would be an
efficient alternative to the present OL
application process, but a regulatory
change is not necessary to accomplish
this. Therefore, FSA is not making any
change beyond the proposed rule
changes.
Comment: ML would be enhanced if
payments could begin 3 years after
establishing crops with longer
production cycles versus requiring
installments due prior to crop maturity.
Response: The suggested change is
not necessary. In some circumstances
FSA already allows OL (which include
MLs) principal and interest payments to
be adjusted, and deferred until the crop
establishes and produces, including, for
example, woody plants, vineyard
plantings, asparagus, and cranberries.
Therefore, FSA is not making any
change beyond the proposed rule
changes.
Comment: Will ML be subject to the
direct OL term limits?
Response: ML is a part of the direct
OL Program and will be subject to the
OL term limits set by law (see 7 U.S.C.
1941). Therefore, FSA is not making any
change beyond the proposed rule
changes.
Comment: Will the Limited Resource
(LR) rates be used for ML?
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Response: ML is a part of the direct
OL Program, and LR rates can be used
as appropriate as specified in 7 CFR
764.254. In this current low interest rate
environment, the LR rate of 5 percent is
above the regular OL rate. When the
regular OL interest rate is above 5
percent, it will be appropriate to
consider the impact of LR rates on the
borrower’s cash flow. Therefore, no
change is necessary.
Comment: Allow borrowers to make
payments when they sell their products.
Response: A change is not necessary
because existing regulations already
allow FSA borrowers to pay on their
loans if receiving sales income
throughout the year and prior to the
annual due date. There are no
prepayment penalties for any FSA direct
loans. Therefore, FSA is not making any
change beyond the proposed rule
changes.
Comment: What is the projected
annual number of new borrowers, and
existing borrowers expected to receive
ML funds?
Response: FSA’s cost benefit analysis
looked at the segment of existing direct
OL customers borrowing $35,000 or less
and estimates that with ML maximum
rate of $35,000 there would be, at most,
3,340 existing borrowers in this group.
The analysis provides the best possible
information for borrower projections.
No regulatory change is necessary.
Comment: FSA should wait for the
next Farm Bill. What is FSA’s authority
for ML regulation?
Response: ML is a subset of OL.
Therefore, all the requirements and
provisions in 7 U.S.C. 1941 for OL apply
to MLs. FSA believes that many of these
changes provided through ML, which
were overwhelmingly supported by the
commenters, will be welcomed by FSA
customers. There has been much
anticipation for an OL process that is
more proportional to the loan amount,
and the smaller operations have been
seeking this financing. Therefore, FSA is
not making any change beyond the
proposed rule changes.
Comment: This program, like other
FLP loans, only applies to people with
bad credit, what about people with good
credit?
Response: Applicants must show
creditworthiness to be eligible for a
direct loan. While it is true that an
applicant must be unable to obtain
credit elsewhere, circumstances
surrounding an applicant’s inability to
obtain credit may not be related to bad
credit issues. Some lenders will not
lend for certain agricultural loan
purposes, for loan amounts or equity
amounts below a minimum threshold,
or for any agricultural purpose.
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Weather-related or economic-related
conditions beyond the applicant’s
control may also prove to be a
temporary setback for some operations.
Statistically, small operations are more
susceptible to these situations.
Therefore, FSA is not making any
change beyond the proposed rule
changes.
Comment: Technical assistance or
guidance from FSA to ML applicants
should be required. What resources are
available to provide this assistance?
Response: FSA officials will provide
technical assistance to direct loan
applicants, if needed, to complete FSA
forms and gather information necessary
for a complete application. This
assistance to applicants includes
explaining the application process;
identifying sources of information,
informing applicants of other technical
assistance providers who may be of
assistance at minimal or no charge (such
as Cooperative Extension Service, USDA
outreach grants, Service Corp of Retired
Executives), and advising applicants of
alternatives to help overcome barriers to
being determined eligible for FSA
assistance. Other resources are available
on a regional basis and FSA State
Offices and local Service Centers often
provide additional information not
available on a national basis. Therefore,
FSA is not making any change beyond
the proposed rule changes.
Comment: How will the definition of
‘‘family farm’’ relate to small
agricultural production; for example,
small family farms versus hobby farms?
Will there be restrictions on farm size or
gross income minimums?
Response: FSA is not changing the
‘‘family farm’’ definition with this rule;
any definition is unlikely to anticipate
and address every possible production
financing request. Requests to finance
unusual farm production will continue
to be handled on a case-by-case basis.
FSA will develop additional handbook
guidance, and provide initial and
ongoing training as needed to field staff
that will highlight and review ML
financing of small farm operations. The
current ‘‘family farm’’ definition in 7
CFR 764.101(k) does not specify
minimum farm size restrictions, or
minimum gross income, and FSA does
not believe that it is necessary to be
more specific for MLs. Therefore, FSA is
not making any change beyond the
proposed rule changes.
Comment: When will ML be
implemented?
Response: This final rule implements
the changes required to start ML.
Other comments and recommended
changes were out of scope or related to
statutory requirements of the loan
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programs other than MLs. Some of the
comments falling under the category of
statutory requirements or otherwise out
of scope for the proposed ML concerned
guaranteed ML lending, intermediary
(or partnering) lending, elimination of
OL term limits; and comments general
to FLP and not specific to ML.
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Effective Date
According to 5 U.S.C. 553(d), a rule is
to be published in the Federal Register
30 days prior to its effective date,
unless, among other things, there is
good cause found by the agency. (See 5
U.S.C. 553(d)(3).) FSA finds that good
cause exists to implement this final rule
immediately. At this time of year, a 30day delay between publication and
effective date of the final rule will
adversely impact the very applicants it
is intended to benefit. For ML to have
the greatest impact, it is essential for it
to be implemented as early in 2013 as
possible. Growers need credit as soon as
possible to pay land rent and crop
expenses so they can plant their crops
on time for optimum production and
marketing. Many suppliers offer early
season discounts for cash purchases of
planting inputs; a 3–5 percent discount
on seed, fertilizer, and chemicals will go
straight to a grower’s bottom line, a vital
addition to profit margin. Early
availability of MLs will allow FSA to
provide credit to these small producers
on a timely basis, enhancing their
prospects for success. This final rule
does not put any additional burdens on
the FSA borrower. Instead, the rule
makes the loan application less
burdensome for applicants for MLs than
for applicants for a standard OL. The
proposed rule was straightforward and
very well received by the public. The
rule imposes no complex policies or
program requirements that the public
would need 30 days to analyze and
understand prior to implementation.
Executive Orders 12866 and 13563
Executive Order 12866, ‘‘Regulatory
Planning and Review,’’ and Executive
Order 13563, ‘‘Improving Regulation
and Regulatory Review,’’ direct agencies
to assess all costs and benefits of
available regulatory alternatives and, if
regulation is necessary, to select
regulatory approaches that maximize
net benefits (including potential
economic, environmental, public health
and safety effects, distributive impacts,
and equity). Executive Order 13563
emphasized the importance of
quantifying both costs and benefits, of
reducing costs, of harmonizing rules,
and of promoting flexibility.
The Office of Management and Budget
(OMB) designated this rule as not
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significant under Executive Order 12866
and, therefore, OMB has not reviewed
this final 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 law, 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 a
substantial number of small entities for
the reasons explained below.
Consequently, FSA has not prepared a
regulatory flexibility analysis.
The term small entities include small
businesses, small organizations, and
small governmental jurisdictions. For
the purposes of assessing the impacts of
this rule on small entities, a small
business is based on the categories in
the Small Business Administration’s
Table of Small Business Size Standards
by North American Industry
Classification System (NAICS) Category
(13 CFR 121.201). All of the entities that
would request a Microloan would be
small businesses that produce crops and
livestock in subsectors 111 and 112
listed in 13 CFR 121.201. These
categories cover all primary agricultural
production. Under the SBA Small
Business Size Standard for these two
NAICS subsector categories, the
majority of businesses are considered
small when they receive less than
$750,000 in annual receipts; the
threshold is higher for two subcategories
of animal production. (See 13 CFR
121.201, subsectors 112112 and
112310.) This standard does not exclude
any of the potential farm loan borrowers
who will make use of the modifications
to the OL Program. Nevertheless, even
though the applicants under ML are
considered small entities, there would
not be a substantial number affected by
the rule.
Overall, this rule creates a new
application process and greater options
for eligibility and security for small
loans within the existing OL Program,
so, theoretically, some of the loans
could be made under the existing
program. Therefore, small entities in
two credit segments have to be
considered for this analysis. One
segment is the number of existing
borrowers who might take advantage of
the modifications in eligibility for future
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3833
loans. The other segment is the number
of new borrowers who might never have
applied for an FSA operating loan
without the modifications. The number
of existing borrowers who might make
use of the application, eligibility, and
security modifications for future loans
can be estimated using fiscal year 2011
direct operating loan data. Given that
the maximum borrowing limit is
$35,000 as set forth in the rule, it is
estimated there would be at most 3,340
borrowers with $102.7 million in loans
in this segment. However, since this
estimate consists of existing borrowers
with the same credit needs, this segment
will have no additional economic
impact. Only the demand by additional
borrowers will have an incremental
economic impact. This demand is more
difficult to estimate. Preliminary
estimates assume the new borrowers
will be younger, below the age of 35,
and have relatively low annual sales,
less than $10,000 annually. Using data
from the 2007 Census of Agriculture,
this segment of producers consists of
about 14,434 primary operators.
Historically, FSA direct operating loans
have captured only 2 percent of the
agricultural credit market; so fewer than
300 borrowers will probably be added.
Therefore, about 4,000 entities could be
affected by this rule with an economic
impact of only about $10.5 million (300
new borrowers times $35,000 in loans
per borrower).
Furthermore, the minimal regulatory
requirements will affect large and small
businesses equally as part of the loan
making process, since MLs are
distinguished based on the size of the
loan, not the size of the operation. ML
applicants will have a lower paperwork
burden that will be commensurate with
the smaller loan amount, due to a
reduction in documentation required for
these loans. Therefore, in accordance
with the Regulatory Flexibility Act, FSA
is certifying that there would not be a
significant economic impact on a
substantial number of small entities.
Due to the limited number of entities,
the economic effects from any
additional lending are unlikely to have
a substantial impact on entities of any
size.
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 the FSA regulations for
compliance with NEPA (7 CFR part 799
and 7 CFR part 1940, subpart G). FSA
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concluded that simplifying the
application process and adding
flexibility for both meeting loan
eligibility and security requirements to
encourage small farm operation
participation in its OL Program
explained in this rule are administrative
in nature and will not have a significant
impact on the quality of the human
environment either individually or
cumulatively. The environmental
responsibilities for each prospective
applicant will not change from the
current process followed for all FLP
actions (7 CFR 1940.309). Therefore,
FSA will not prepare an environmental
impact statement on this rule.
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.
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Executive Order 13132
This rule has been reviewed under
Executive Order 13132, ‘‘Federalism.’’
The policies contained in this rule will
not have any substantial direct effect on
States, on the relationship between the
Federal Government and the States, or
on the distribution of power and
responsibilities among the various
levels of government. Nor would 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.’’
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Executive Order 13175 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, to USDA’s knowledge,
preempt Tribal law. FSA held a series
of tribal consultation sessions early in
the rule making process.
Representatives from all federally
recognized tribes were invited to
participate.
During the Tribal consultation,
sessions were held to discuss ML, and
FLP staff responded to the several
comments and questions. The following
summarizes the questions and responses
discussed during Tribal consultation.
Comment: Will ML be targeting a
certain group?
Response: MLs are designed to better
serve small family farm operations. In
addition, MLs may provide a bridge
between Youth Loans and the
traditional OL Program, and between
the needs of smaller operations as they
grow into larger farm operations.
Comment: What is the purpose of ML?
Response: ML will require less
information to provide an application
process more proportional to smaller
loan amounts and operations in the
growing segment of family farms
engaged in organic farming and direct
sales farming practices. Additionally,
ML will provide financing at reasonable
rates and terms, as some smaller
operations often rely on credit cards,
and dealer financing to finance their
operations because they believe that
paperwork requirements are often not
worth the benefits.
Comment: Will financing operations
raising rice in lakes owned by the Tribes
be eligible for ML and other FSA loans?
Response: Operations using lakes
managed by the Tribe can be eligible for
FSA loans, including ML. FLP also
welcomes the opportunity for future
conversations to consider regulations
that would permit financing operations
that raise fish in bodies of water not
fully controlled by the Tribe.
Comment: When will ML be
implemented?
Response: FLP explained the steps of
the rulemaking process, but could not
provide an exact date for
implementation. This final rule
implements the changes required to
start ML.
Unfunded Mandates Reform Act
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
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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
under the regulatory provisions of Title
II of the Unfunded Mandates Reform
Act of 1995 (UMRA) for State, local, or
Tribal governments, or the private
sector. Therefore, this rule is not subject
to the requirements of sections 202 and
205 of UMRA.
Paperwork Reduction Act
In accordance with the Paperwork
Reduction Act of 1995 (44 U.S.C. 3501–
3520), FSA described the new
information collection activities in the
request for public comment in the
proposed rule. Comments related to the
Paperwork Reduction Act are discussed
above and are in the supporting
document that OMB reviewed. No
change to the information collection
was required based on the comments.
After the final rule is published, the
new information collection request will
be merged with FSA existing
information collection request approved
under OMB control number 0560–0237.
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.
List of Subjects
7 CFR Part 761
Accounting, Loan programs—
agriculture, Rural areas.
7 CFR Part 764
Agriculture, Disaster assistance, Loan
programs—agriculture.
For reasons discussed above, FSA
amends 7 CFR chapter VII as follows:
PART 761—FARM LOAN PROGRAMS;
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.
■
2. Amend § 761.2 as follows:
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a. In paragraph (a), remove the
abbreviation ‘‘Lo-Doc’’ and add an
abbreviation, in alphabetical order, for
‘‘ML Microloan’’;
■ b. In paragraph (b), add definitions, in
alphabetical order, for ‘‘Apprentice’’
and ‘‘Microloan’’; and
■ c. In paragraph (b), remove the
definition of ‘‘Low-Documentation
Operating loan.’’
The additions read as follows:
The addition reads as follows:
■
§ 761.2
Abbreviations and definitions.
*
*
*
*
*
(a) * * *
ML Microloan.
*
*
*
*
*
(b) * * *
Apprentice means an individual who
receives applied guidance and input
from an individual with the skills and
knowledge pertinent to the successful
operation of the farm enterprise being
financed.
*
*
*
*
*
Microloan is a type of OL of $35,000
or less made under reduced application,
eligibility, and security requirements.
*
*
*
*
*
■ 3. Amend § 761.103 as follows:
■ a. Revise paragraph (b), introductory
text;
■ b. Redesignate paragraphs (c) through
(e) as paragraphs (d) through (f); and
■ c. Add paragraph (c).
The revision and addition read as
follows:
§ 761.103
Farm assessment.
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*
*
*
*
*
(b) Except for ML, the initial
assessment must evaluate, at a
minimum, the:
*
*
*
*
*
(c) For ML, the Agency will complete
a narrative that will evaluate, at a
minimum, the:
(1) Type of farming operation and
adequacy of resources;
(2) Amount of assistance necessary to
cover expenses to carry out the
proposed farm operating plan, including
building an adequate equity base;
(3) The goals of the operation;
(4) The financial viability of the entire
operation, including a marketing plan,
and available production history, as
applicable;
(5) Supervisory plan; and
(6) Training plan.
*
*
*
*
*
■ 4. Amend § 761.104 as follows:
■ a. Redesignate paragraphs (e) and (f)
as (f) and (g),
■ b. Add paragraph (e), and
■ c. In newly redesignated paragraph (f),
remove the cross reference ‘‘paragraph
(f)’’ and add in its place the cross
reference ‘‘paragraph (g)’’.
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§ 761.104
plan.
Developing the farm operating
*
*
*
*
*
(e) For MLs, when projected yields
and unit prices cannot be determined as
specified in paragraphs (c) and (d) of
this section because the data is not
available or practicable, other
documentation from other reliable
sources may be used to assist in
developing the applicant’s farm
operating plan.
*
*
*
*
*
PART 764—DIRECT LOAN MAKING
5. The authority citation for part 764
continues to read as follows:
■
Authority: 5 U.S.C. 301 and 7 U.S.C. 1989.
§ 764.1
[Amended]
6. Amend § 764.1(b)(2) by adding the
words ‘‘ML and’’ immediately following
the word ‘‘including’’.
■ 7. Revise § 764.51(c) to read as
follows:
■
§ 764.51
Loan application.
*
*
*
*
*
(c) For an ML request, all of the
following criteria must be met:
(1) The loan requested is:
(i) To pay annual or term operating
expenses, and
(ii) $35,000 or less and the applicant’s
total outstanding Agency OL debt at the
time of loan closing will be $35,000 or
less,
(2) The applicant must submit the
following:
(i) Items (1), (2), (3), (6), (7), (9), and
(11) of paragraph (b) of this section;
(ii) Financial and production records
for the most recent production cycle, if
available, and practicable to project the
cash flow of the operating cycle, and
(iv) Verification of all non-farm
income relied upon for repayment; and
(3) The Agency may require an ML
applicant to submit any other
information listed in paragraph (b) of
this section upon request when
specifically needed to make a
determination on the loan application.
*
*
*
*
*
■ 8. Amend § 764.101 as follows:
■ a. In paragraph (i)(3) at the end of the
first sentence add the text ‘‘or for MLs
the applicant may have obtained and
successfully repaid one FSA YouthOL’’; and
■ b. Add paragraph (i)(4).
The addition reads as follows:
§ 764.101
*
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*
*
(i) * * *
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*
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3835
(4) Alternatives for ML. ML applicants
also may demonstrate managerial ability
by one of the following:
(i) Certification of a past participation
with an agriculture-related organization,
such as, but not limited to, 4–H Club,
FFA, beginning farmer and rancher
development programs, or Community
Based Organizations, that demonstrates
experience in a related agricultural
enterprise; or
(ii) A written description of a selfdirected apprenticeship combined with
either prior sufficient experience
working on a farm or significant small
business management experience. As a
condition of receiving the loan, the selfdirected apprenticeship requires that
the applicant seek, receive, and apply
guidance from a qualified person during
the first cycle of production and
marketing typical for the applicant’s
specific operation. The individual
providing the guidance must be
knowledgeable in production,
management, and marketing practices
that are pertinent to the applicant’s
operation, and agree to form a
developmental partnership with the
applicant to share knowledge, skills,
information, and perspective of
agriculture to foster the applicant’s
development of technical skills and
management ability.
§ 764.103
[Amended]
9. Amend § 764.103 as follows:
a. In paragraph (c) remove the words
‘‘downpayment loans’’ and add the
words ‘‘downpayment loans, MLs made
for purposes other than annual
operating,’’ in their place.
■ b. In paragraph (e), last sentence,
remove the words ‘‘conservation loans’’
and add the words ‘‘CL, ML’’ in their
place.
■ 10. Amend § 764.251 as follows:
■ a. Revise paragraph (a), to add the
words ‘‘and ML’’ immediately after
‘‘OL’’ in the introductory text; and b.
Remove paragraph (b).
■ 11. Amend § 764.255 as follows:
■ a. Revise paragraph (b), introductory
text; and
■ b. Add paragraph (c).
The revision and addition read as
follows:
■
■
§ 764.255
Security Requirements.
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(b) Except for MLs, by a:
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(c) For MLs:
(1) For annual operating purposes,
loans must be secured by a first lien on
farm property or products having a
security value of at least 100 percent of
the loan amount, and up to 150 percent,
when available.
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Federal Register / Vol. 78, No. 12 / Thursday, January 17, 2013 / Rules and Regulations
(2) For loans made for purposes other
than annual operating purposes, loans
must be secured by a first lien on farm
property or products purchased with
loan funds and having a security value
of at least 100 percent of the loan
amount.
(3) A lien on real estate is not required
unless the value of the farm products,
farm property, and other assets available
to secure the loan is not at least equal
to 100 percent of the loan amount.
(4) Notwithstanding the provisions of
paragraphs (c)(1), (c)(2), and (c)(3) of
this section, FSA will not require a lien
on a personal residence.
Signed on December 21, 2012.
Juan M. Garcia,
Administrator, Farm Service Agency.
[FR Doc. 2013–00672 Filed 1–15–13; 11:15 am]
BILLING CODE 3410–05–P
DEPARTMENT OF HOMELAND
SECURITY
Coast Guard
33 CFR Part 117
[Docket No. USCG–2013–0008]
Drawbridge Operation Regulation;
Snohomish River, Everett, WA
Coast Guard, DHS.
Notice of deviation from
drawbridge regulation.
AGENCY:
ACTION:
The Coast Guard has issued a
temporary deviation from the operating
schedules that govern the SR 529
Bridges across the Snohomish River,
mile 3.6 near Everett, WA. This
deviation is necessary to facilitate heavy
maintenance and equipment upgrades
on the bridges. This deviation allows
the bridges to remain in the closed
position during maintenance activities.
DATES: This deviation is effective from
8 a.m. on January 21, 2013, through 6
p.m. March 15, 2013.
ADDRESSES: The docket, USCG–2013–
0008, for this deviation is available
online; go to https://
www.regulations.gov, type the docket
number in the ‘‘SEARCH’’ box and click
‘‘SEARCH,’’ and then click on ‘‘Open
Docket Folder’’ next to the item listing
this notice of deviation. You may also
visit the Docket Management Facility in
Room W12–140 on the ground floor of
the Department of Transportation West
Building, 1200 New Jersey Avenue SE.,
Washington, DC 20590, between 9 a.m.
and 5 p.m., Monday through Friday,
except Federal holidays.
FOR FURTHER INFORMATION CONTACT: If
you have questions on this temporary
pmangrum on DSK3VPTVN1PROD with
SUMMARY:
VerDate Mar<15>2010
12:47 Jan 16, 2013
Jkt 229001
deviation, call or email the Bridge
Administrator, Coast Guard Thirteenth
District; telephone 206–220–7282, email
randall.d.overton@uscg.mil. If you have
questions on viewing the docket, call
Renee V. Wright, Program Manager,
Docket Operations, telephone 202–366–
9826.
DEPARTMENT OF HOMELAND
SECURITY
The
Washington State Department of
Transportation (WSDOT) has requested
that the SR 529 Bridges across the
Snohomish River remain closed to
vessel traffic to facilitate heavy
maintenance and equipment upgrades
on the bridges. The SR 529 Bridges cross
the Snohomish River at mile 3.6 and
provide 38 feet of vertical clearance
above mean high water elevation while
in the closed position. Vessels which do
not require a bridge opening may
continue to transit beneath the bridges
during this closure period. Under
normal conditions the SR 529 Bridges
crossing the Snohomish River operate in
accordance with 33 CFR 117.1059(c)
which requires advance notification of 1
hour when a bridge opening is needed.
This deviation period is from 8 a.m. on
January 21, 2013, through 6 p.m. March
15, 2013. The deviation allows the SR
529 Bridges crossing the Snohomish
River to remain in the closed position
and need not open for maritime traffic
from 8 a.m. on January 21, 2013,
through 6 p.m. March 15, 2013. The
bridges shall operate in accordance to
33 CFR 117.1059 at all other times.
Waterway usage on the Snohomish
River includes vessels ranging from
commercial tug and barge to small
pleasure craft. Mariners will be notified
and kept informed of the bridges’
operational status via the construction
contractor performing the maintenance
as well as via the Coast Guard Notice to
Mariners publication and Broadcast
Notice to Mariners as appropriate. The
bridges will not be able to open during
this maintenance activity because the
lifting mechanisms will be inoperable.
In accordance with 33 CFR 117.35(e),
the drawbridges must return to their
regular operating schedule immediately
at the end of the effective period of this
temporary deviation. This deviation
from the operating regulations is
authorized under 33 CFR 117.35.
Drawbridge Operation Regulation;
Shark River, Avon, NJ
SUPPLEMENTARY INFORMATION:
Dated: January 7, 2013.
Randall D. Overton,
Bridge Administrator, Thirteenth Coast Guard
District.
[FR Doc. 2013–00886 Filed 1–16–13; 8:45 am]
BILLING CODE 9110–04–P
PO 00000
Frm 00010
Fmt 4700
Sfmt 4700
Coast Guard
33 CFR Part 117
[Docket No. USCG–2012–1089]
Coast Guard, DHS.
Notice of deviation from
drawbridge regulation.
AGENCY:
ACTION:
The Coast Guard has issued a
temporary deviation from the operating
schedule that governs the draws of two
bridges which operate as one unit,
specifically, the S71 bridge, mile 0.8
and the railroad bridge, mile 0.9 both of
which are across the Shark River (South
Channel), at Avon Township, NJ. This
deviation is necessary to facilitate
machinery replacement on the Shark
River railroad bridge. This temporary
deviation will allow the drawbridges,
which operate in unison, to remain in
the closed-to-navigation position on
specific dates and times.
DATES: This deviation is effective from
12:01 a.m. February 25, 2013, until
12:01 a.m. on March 6, 2013.
ADDRESSES: The docket, USCG–2012–
1089, for this temporary deviation is
available online; go to https://
www.regulations.gov, type the docket
number in the ‘‘SEARCH’’ box and click
‘‘Search,’’ and then click on ‘‘Open
Docket Folder’’ next to the item listing
this notice of deviation. You may also
visit the Docket Management Facility in
Room W12–140 on the ground floor of
the Department of Transportation West
Building, 1200 New Jersey Avenue SE.,
Washington, DC 20590, between 9 a.m.
and 5 p.m., Monday through Friday,
except Federal holidays.
FOR FURTHER INFORMATION CONTACT: If
you have questions on this temporary
deviation, call or email Mr. Jim
Rousseau, Bridge Administration
Branch Fifth District, Coast Guard;
telephone (757) 398–6557, email
James.L.Rousseau2@uscg.mil. If you
have questions on reviewing the docket,
call Renee V. Wright, Program Manager,
Docket Operations, 202–366–9826.
SUPPLEMENTARY INFORMATION: The New
Jersey Transit, owner and operator of
the Shark River Railroad Bridge across
the Shark River (South Channel), mile
0.9, at Avon, NJ, has requested a
temporary deviation from the current
operating regulations set out in 33 CFR
117.751, to accommodate machinery
replacement for the Shark River Bridge.
SUMMARY:
E:\FR\FM\17JAR1.SGM
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Agencies
[Federal Register Volume 78, Number 12 (Thursday, January 17, 2013)]
[Rules and Regulations]
[Pages 3828-3836]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-00672]
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DEPARTMENT OF AGRICULTURE
Farm Service Agency
7 CFR Parts 761 and 764
RIN 0560-AI17
Microloan Operating Loans
AGENCY: Farm Service Agency, USDA.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The Farm Service Agency (FSA) is modifying Operating Loan (OL)
application, eligibility, and security requirements for Microloans (ML)
to better serve the unique operating needs of small family farm
operations. The intended effect of this rule is to make the OL Program
more widely available and attractive to small operators through reduced
application requirements, more timely application processing, and added
flexibility in meeting the managerial ability eligibility requirement.
FSA is also removing provisions for the low documentation (Lo-Doc)
application process for OLs from the existing direct loan regulations.
DATES: Effective January 17, 2013.
FOR FURTHER INFORMATION CONTACT: Connie Holman; telephone: (202) 690-
0756. Persons with disabilities or who require alternative means for
communication (Braille, large print, audio tape, etc.) should contact
the USDA Target Center at (202) 720-2600 (voice and TDD).
SUPPLEMENTARY INFORMATION:
Background
FSA has a long history of providing agricultural credit to the
Nation's farmers and ranchers through its OL Program. The Consolidated
Farm and Rural Development Act of 1972 (Pub. L. 92-419, CONACT), as
amended, authorizes FSA's OL Program. FSA's OL Program is designed to
finance the farm operating needs of family farms for operators who meet
the program eligibility requirements. Among other things, eligible
applicants must be unable to obtain sufficient credit from other
sources; have sufficient applicable education, on-the-job training, or
farming experience; have an acceptable credit history; and have
adequate collateral for the proposed loan. (See 7 CFR 764.101 and
764.252 for a full explanation of OL eligibility requirements.) OL
funds may be used for such things as annual or term operating purposes
to refinance certain debts; pay normal farm operating and family living
expenses; purchase livestock, equipment, and other materials essential
to a farm operation; and may also be used for some minor improvements
to farm real estate, such as wells and essential repairs to buildings.
(See 7 CFR 764.251 for a complete list of OL funds uses.) Throughout
this rule, any reference to ``farm'' or ``farmer'' also includes
``ranch'' or ``rancher,'' respectively; in this document, the word
``operator'' refers to farmers who operate a farm.
In on-going efforts to improve the OL Program, FSA evaluated the
unique needs of small farm operations and identified unintended
barriers to applying for OLs. As a result, FSA is simplifying the
application process and adding flexibility for meeting both loan
eligibility and security requirements to encourage their participation.
FSA published the proposed rule on May 25, 2012 (77 FR 31220-31226).
The proposed rule included provisions for streamlining and abbreviating
the application process, modifying security provisions, and providing
additional flexibility in meeting the experience eligibility
requirement. Additionally, FSA proposed removing the Lo-Doc OL Program
provisions from the CFR. As discussed below, this final rule makes a
few changes from the proposed rule in response to comments.
The ML application process, or the ML process, is within the
existing OL Program framework, and uses existing OL appropriations to
focus on the financing needs of small farm operations. These small
farms, including non-traditional farm operations, currently have
limited financing options available.
ML has been designed to appeal to small family farm operations. The
ML application process simplifies the information required to apply by
reducing the level of documentation required to more appropriately
align with the less complex structure and needs of small operations.
Additionally, the eligibility requirement for managerial ability and
the loan security requirements for the ML process have been modified
from the OL
[[Page 3829]]
requirements to be more appropriate for small family farms.
Summary of Comment and Reponses
In response to the proposed rule, FSA received 48 comments.
Comments were from national and local organizations primarily with
agricultural, financial, and socially disadvantaged group affiliations;
the general public; and FSA employees. The issues in the comments and
the FSA responses, including a discussion of any changes to the
regulation are discussed below.
The majority of the comments received were positive and supportive
of the proposed ML process and commended FSA for considering the needs
of small farms and niche-type operations while designing the new
application process. Many of the comments welcomed the proposed changes
without reservation. Some comments included suggestions for fine-tuning
the proposed ML process. Some opposing comments stated concerns with
inexperienced borrowers, a lessened standard of loan underwriting, and
potential losses for the government.
FSA is incorporating some changes to the regulation as discussed in
this final rule. Some changes have been made to the farm assessment,
security, eligibility, and farm operating plan requirements to
accommodate the streamlined process for MLs. The changes in 7 CFR part
764, ``Direct Loan Making,'' add the loan application requirements for
ML; alternatives for meeting the managerial ability eligibility
requirement for ML; operating loan uses for ML; security requirements
for ML; and several other minor amendments.
Comment: Include the work experience of migrant workers in the
requirement for managerial experience.
Response: For FSA loans generally and for microloans, as specified
in 7 CFR 764.101(i)(3), an applicant with experience as a migrant
worker may meet the managerial requirement through their farm
experience depending on the type of management responsibilities the
migrant worker performed. Internal guidance was added earlier this year
to incorporate this type of experience into FSA's handbook at paragraph
69(A) of 3-FLP. Additional handbook guidance will be added to further
explain how this type of experience can be used to meet the
requirements specified in the ML regulations. Therefore, FSA is not
making any change beyond the proposed rule changes.
Comment: FSA should broaden the agriculture-related organizations
beyond youth programs, such as 4-H Club or Future Farmers of America
(FFA), to include groups such as farm incubator programs and community
based organizations.
Response: FSA will not limit the experience with agriculture-
related organizations to youth programs. FSA agrees and will clarify
that there are acceptable organizations with agricultural emphasis that
can provide similar benefits to participants. The applicant that
demonstrates day-to-day management experience in an agriculture related
field. Therefore, FSA is revising Sec. 764.101(i)(4)(i) to include
other acceptable agricultural organizations.
Comment: The proposed change to the management experience should
not be implemented. An applicant gaining experience on future intent is
problematic. There should be at least 1 year of farm experience prior
to participating in the proposed apprenticeship. In addition, there
should be some type of quality control for the mentors participating in
the apprenticeship program.
Response: FSA agrees that an applicant should have some farm
experience or small business experience to be determined eligible using
proposed participation in the self-directed apprenticeship. FSA's
intent was to create a farm management opportunity for applicants who
are not able to meet the management ability eligibility requirement
through traditional education, on the job training (as a farm laborer
with farm management responsibilities), or managerial farm experience.
FSA understands that there are applicants who want to farm, but who may
not have had the traditional farm experience opportunities available to
someone raised on a farm or in a farm or rural community where
agriculture-affiliated organizations are within reach. Some applicants,
due to a variety of circumstances, may have had only farm labor
positions available to them. A self-directed apprenticeship was
proposed for ML applicants to allow applicants an alternative means to
gain farm management experience for one production cycle.
FSA has considered the suggestions to improve the apprenticeship
option. FSA still requires that there be some farm experience. FSA will
also consider small business experience of an applicant along with the
self-guided apprenticeship as a means to meet the management ability
eligibility requirement, if the applicant is unable to meet this
requirement through the other options. This will assist applicants who
have only farm labor experience by providing them the opportunity to
gain farm management experience while working with a mentor during the
first production and marketing cycle. FSA will make the relevant
changes to the apprenticeship program. FSA will monitor the results of
the apprenticeship option in the coming years to determine if it
adequately meets the needs of the applicants we expect to help.
Therefore, FSA is revising Sec. 764.101(i)(4)(ii) to adjust the
proposed alternatives to require sufficient prior experience working on
a farm or small business management experience combined with
participation in a self-directed apprenticeship.
Comment: Require the mentor to sign the loan application to prevent
fraud and abuse of program.
Response: FSA will require that the mentor's full name and
description of operation be provided on the application, but disagrees
that the mentor should have to sign the application form. FSA believes
requiring a signature on the application would make mentors wary of
working with FSA applicants and borrowers. Therefore, FSA is not making
any change beyond the proposed rule changes.
Comment: There should be qualifying criteria for mentors so that
their suitability can be evaluated. Mentors should demonstrate
appropriate technical and other capabilities to provide guidance to
applicants, acknowledge the existence of a proposed mentor
relationship, and provide documentation of their farm profitability.
Response: FSA has made adjustments to the regulatory text as
proposed for 7 CFR 764.101(i)(4)(ii) to improve the self-directed
apprenticeship option to assist applicants in meeting the management
ability eligibility requirement. At this time, mentors will not be
evaluated as part of the application process. An evaluation would cause
the ML application to become cumbersome, and increase the process and
burden on the applicant and mentor. As stated previously, FSA believes
that this would cause mentors to be reluctant to work with FSA
applicants and borrowers. Part of the intent of ML is to keep the
process proportional to the loan amount, and to the small operations
expected to frequently use ML funds. FSA will evaluate the
effectiveness of the apprenticeship program in the coming years to
determine if this tool is useful in helping applicants who cannot meet
the management ability eligibility requirement in other ways.
Therefore, FSA is not making any change beyond the proposed rule
changes.
[[Page 3830]]
Comment: Do not limit debt verification to the credit bureau
reports; most of the farm creditors do not report to the credit
bureaus.
Response: FSA understands that many farm creditors and local
suppliers do not report to the credit bureaus. FSA considers the self-
certification of debt on the application to be an acceptable risk that
will contribute to streamlining efforts. Since applicants will still
need to demonstrate credit-worthiness as specified in 7 CFR 764.101(d),
among other OL eligibility criteria, any risks in this area are
expected to be low. If deemed necessary by the loan official,
additional information may be requested from the applicant; however,
this should be in exceptional cases in order to keep ML a truly
streamlined process. Therefore, FSA is not making any change beyond the
proposed rule changes.
Comment: The non-itemized cash flow will lower the level of
business analysis and supportive documentation that would be required.
FSA should require a minimum of 3 years of tax returns plus other
information completed in greater detail. The non-itemized cash flow
with less experienced operators is a set up for failure in any business
venture.
Response: FSA disagrees and will not be requiring an itemized cash
flow or increased documentation for ML applicants, as the intent of ML
is to keep the process proportional to the smaller loan amounts and to
the small, simpler operations expected to seek this financing. For
applicants new to FSA who may produce non-traditional crops or with
production practices where yield per acre may be less important, other
factors, such as the production capacity, the consistency of income and
expenses, and the timely harvest and selling of produce, may be more
appropriate measurements to use in establishing actual productivity and
projected plans. In addition, FSA predicts that many ML borrowers will
be existing OL borrowers that already borrow at the $35,000 threshold
and below. In these cases, FSA will have information on file for many
of these applicants through the normal course of business in past years
(year end analysis (YEA), Farm Assessments, etc.). Therefore, FSA is
not making any change beyond the proposed rule changes.
Comment: New operations applying for ML should not be required to
have yields or yield history.
Response: The proposed rule already allowed for circumstances where
yield history or reporting is impractical, not relevant to the proposal
submitted, or is not available. Some applicants meeting the managerial
eligibility requirements will not have operated a farm in the previous
year, and therefore will not be required to have yield history.
Therefore, FSA is not making any change beyond the proposed rule
changes.
Comment: Any applicant having caused FSA a loss should be
considered ineligible for ML. The documentation needed for the
application would be beyond the intent for the simplified ML process;
they should have to provide all of the documentation for an OL. The
applicant would have the option to apply for OL through the regular
process as specified in 7 CFR 764.252(c).
Response: MLs are direct program loans, and the general eligibility
requirements for direct loans already state that an applicant who
caused the Agency a loss by receiving debt forgiveness (defined in 7
CFR 761.2) may be ineligible (7 CFR 764.101(d)(2)).
Comment: MLs should not be secured by collateral worth only 100
percent of the loan amount; it should still be able to be secured with
up to 150 percent, when available. The proposed change differs from the
current regulation in Sec. 764.104(c), which requires collateral worth
up to 150 percent of the loan amount, if available, to secure the loan.
Why decrease security requirements for MLs when these loans are riskier
than regular OL loans or loans made to established producers?
Additionally, the crops financed for direct sales involve added risk to
loan security; it would be impractical for FSA to enforce a Uniform
Commercial Code (UCC) filing on these commodities and, therefore, FSA
would have no control over the produce sales income.
Response: FSA's intent for ML is to provide flexibility for
financing and to prevent possible barriers to meeting loan security
requirements: Specifically, requiring additional security to finance
unfamiliar crops and production. As a clarification, for FSA's existing
OL Program, all agricultural commodities, whether salad greens or corn,
are considered eligible production for a family farm and are regularly
financed by FSA with UCC filings. So long as the agricultural
commodities are determined to have a security value of 100 percent of
the amount loaned for annual operating and family living expenses these
commodities can be used to secure the loan. FSA agrees that for MLs
security of 100 percent should always be required, but the requirement
for additional security up to 150 percent, when available, should be
limited to MLs for annual operating purposes. FSA also believes that
additional security from 100 percent to 150 percent should be limited
to farm assets, and is not to include the personal residence.
Therefore, FSA is revising Sec. 764.255(c)(1), (2), (3), and (4) to
limit collateral to farm property having a security value of at least
100 percent for MLs and up to 150 percent, if available, for MLs made
for annual operating purposes. This adjusts the security requirements
for crops and equipment separately to meet a balance between adequate
collateral margin, the type of security, and security requirements that
take into consideration the assets and collateral of the non-
traditional, and new farm operations that FSA expects will be seeking
ML funding.
Comment: The costs to legally obtain the collateral in cases where
loans fail would be onerous and exceed the value FSA would recover.
Response: FSA agrees that in some cases, the costs to obtain the
collateral could be onerous and exceed the value FSA would recover. FSA
is required to service its loans, but can make the decision on how best
to service delinquent loans on a case-by-case basis. This flexibility
can limit the amount of loss to FSA. Treasury offsets are also applied
to delinquent borrower accounts to recover amounts due. So, even when
the loan balance exceeds the liquidated security FSA anticipates it
will recover additional amounts through offsets. Therefore, FSA is not
making any change beyond the proposed rule changes.
Comment: Sound underwriting standards would require a second or
junior mortgage placed on the property to cover the first mortgage.
Response: FSA is making some adjustments to the security
requirements for annual MLs, requiring chattel collateral up to 150
percent when available, excluding personal residences. Therefore, FSA
is revising Sec. 764.255(c)(1), (2), and (4) to limit collateral to
farm property having security value of at least 100 percent, and up to
150 percent, if available, for MLs made for annual operating purposes.
Comment: Allow a cosigner on the security requirement.
Response: FSA presently accepts a pledge of security from a third
party or a cosigner under general security requirements. This option
would also apply to MLs. Therefore, FSA is not making any change beyond
the proposed rule changes.
Comment: Do not remove the Lo-Doc OL application process; Lo-Docs
still serve a purpose, particularly those that are above the ML maximum
of $35,000.
[[Page 3831]]
Response: To continue providing streamlined financing for annual OL
needs up to $300,000, FSA is implementing internal processing changes,
which do not require changes to the regulations, for an OL application
process for returning customers with no changes in their operation
since their original loan application. This new process for a
subsequent OL, along with ML, is expected to improve the overall
application process for all levels of OLs; the Lo-Doc would then become
obsolete once these proposed changes are implemented. Therefore, FSA is
not making any change beyond the proposed rule changes.
Comment: The $35,000 maximum loan limit for ML should be a
different amount. It should be $25,000 or lower to limit risk. FSA
should assess any losses after a period of years, and then consider
increasing the maximum. Alternately, the maximum amount should be
greater than $35,000, with a limit up to $50,000.
Response: ML will initially have a $35,000 maximum amount. FSA's
preliminary analysis predicts this amount will be sufficient to provide
financing needs to a substantial group of operators, but still low
enough to be a manageable risk. FSA will review the success of the
program and will reevaluate the loan amounts periodically, and if any
change is needed, it will be made through rulemaking. Therefore, FSA is
not making any change beyond the proposed rule changes.
Comment: ML should be limited to individuals and husband and wife
joint ventures only since this program is intended for more simplistic
operations. The additional documentation required for entities does not
lend itself to this type of simplified application.
Response: FSA disagrees. This suggestion would cause some entities
to be excluded from the ML process that might otherwise benefit from
the changes intended for small operations. In addition, one of the
requirements of the Regulatory Flexibility Act (5 U.S.C. 603) is to
consider alternatives to minimize any significant economic impact of
the rule on small entities. Arbitrarily limiting applicants to certain
entity compositions could be considered disparate treatment.
Furthermore, initial analysis and applicant estimates for the program
show that only a small number of ML applicants would be entity
applicants. The ML process is intended to tie the dollar amount of risk
involved to the level of paperwork and documentation needed, rather
than the type of organization. Therefore, FSA is not making any change
beyond the proposed rule changes.
Comment: ML should be limited to 4 of the 11 possible uses under
the OL Program to avoid bringing more complex issues that would not fit
a simplified loan application.
Response: FSA disagrees. The ML process is intended to tie the
dollar amount and risk involved to the level of paperwork and
documentation needed, rather than the use of the loan money. It would
be disparate treatment, and unsound business practice, to tie paperwork
requirements to the uses of loan funds. Limiting uses of funds to only
a few of the normal OL loan uses would punish those who request small
loans, and it would be potentially confusing. MLs were designed to be
less complicated. Therefore, FSA is not making any change beyond the
proposed rule changes.
Comment: There should be a limitation on use of balloon payments
and terms to those that can be repaid within 7 years. The documentation
needed to justify the longer terms requires additional paperwork by
both the applicant and Farm Loan Programs (FLP) staff.
Response: Loan terms for MLs will be the same as FSA's regular OL
Program, which does limit term loans to a 7-year term. All MLs will be
serviced the same as regular OLs. FSA also realizes that the
profitability of an operation is not directly tied to the amount of
operating funds it borrows and therefore believes that many smaller
operations whose loan needs can be accommodated through the new ML
process can be quite successful and business savvy enough to easily
handle any balloon payment. Therefore, FSA is not making any change
beyond the proposed rule changes.
Comment: FSA should not require an ML applicant to submit
additional information even if specifically needed to make a
determination on the loan application. Asking for additional
information may sound favorable to FSA; but it may make the process
less palatable to the applicant after submitting what is believed to be
a complete application.
Response: FSA will not be making this change, as there are
situations, such as requesting a divorce decree document in order to
determine whose signature is needed to secure a loan, in which
additional information will be necessary. FSA believes that there is a
responsibility to undertake adequate due diligence to protect loan
funds. The intent of the ML process is that requiring additional
information will be the exception, in keeping with a truly streamlined
process for applicants. Therefore, FSA is not making any change beyond
the proposed rule changes.
Comment: FSA should partner with agricultural groups to provide
training and mentoring for ML applicants to include beginning farmers,
sustainable agriculture, and specialty non-traditional operations.
Response: FSA does partner with agricultural groups to provide
training and mentoring, and will do so for ML applicants, and all
borrower training requirements will apply as with all other FSA loans.
FSA is committed to working through outreach and marketing efforts in
local Service Centers and State offices to continue to seek additional
opportunities for applicants and borrowers to receive appropriate,
accessible training and continuing education as they start and build
their farm operations. Therefore, FSA is not making any change beyond
the proposed rule changes.
Comment: Outreach for MLs is important to Socially Disadvantaged
Applicants (SDA), applicants with limited English proficiency, and
various ethnic minority communities. Will MLs target funds for
Beginning Farmer (BF) and SDA applicants?
Response: FSA has a strong commitment to Farm Loan Programs
outreach and marketing at the Service Center and State Office levels,
and anticipates strong demand for ML from SDAs. MLs are part of the OL
Program and will be included in the outreach. Loan officials can locate
interpreters on an as-needed basis if there is a language barrier with
applicants. Loan applications and funding for SDA and BF customers are
targeted, tracked, and monitored to ensure that these producers are
reached within the communities FSA serves. ML will have the same BF and
SDA loan funding goals as does the existing OL Program. Therefore, FSA
is not making any change beyond the proposed rule changes.
Comment: For ML to effectively assist the non-traditional farmers
with this streamlined process, staff will need to be trained at the
local and State levels.
Response: Local offices will be provided training when the program
is introduced, and further training will be provided on a periodic
basis. Training on the new process, and the expected types of
operations seeking MLs will be provided for a successful roll-out and
implementation of this program. Therefore, FSA is not making any change
beyond the proposed rule changes.
[[Page 3832]]
Comment: Prioritize data and data collection to build information
on nontraditional types of local markets.
Response: FSA State offices compile the prices and yields of
agricultural commodities, and make them available to the Service Center
staff for loan underwriting and projecting purposes. For States and
regions that currently have more exposure to more non-traditional and
direct sales types of operations, additional data has been added on a
year by year basis depending on the consistency and availability of
market and yield data. Additional guidance on organic and less
traditional crops is also being provided and will be in handbook
amendments. Therefore, FSA is not making any change beyond the proposed
rule changes.
Comment: FSA should build in metrics to evaluate, monitor, track,
and measure MLs separate from OLs.
Response: FSA is implementing the necessary changes in our system,
so that the MLs can be isolated and evaluated. Therefore, FSA is not
making any change beyond the proposed rule changes.
Comment: The ML application should be made available online with an
improved application interface.
Response: Applications and forms are available online for printing;
some forms are fillable and can be submitted electronically. FSA agrees
that an online application process would be an efficient alternative to
the present OL application process, but a regulatory change is not
necessary to accomplish this. Therefore, FSA is not making any change
beyond the proposed rule changes.
Comment: ML would be enhanced if payments could begin 3 years after
establishing crops with longer production cycles versus requiring
installments due prior to crop maturity.
Response: The suggested change is not necessary. In some
circumstances FSA already allows OL (which include MLs) principal and
interest payments to be adjusted, and deferred until the crop
establishes and produces, including, for example, woody plants,
vineyard plantings, asparagus, and cranberries. Therefore, FSA is not
making any change beyond the proposed rule changes.
Comment: Will ML be subject to the direct OL term limits?
Response: ML is a part of the direct OL Program and will be subject
to the OL term limits set by law (see 7 U.S.C. 1941). Therefore, FSA is
not making any change beyond the proposed rule changes.
Comment: Will the Limited Resource (LR) rates be used for ML?
Response: ML is a part of the direct OL Program, and LR rates can
be used as appropriate as specified in 7 CFR 764.254. In this current
low interest rate environment, the LR rate of 5 percent is above the
regular OL rate. When the regular OL interest rate is above 5 percent,
it will be appropriate to consider the impact of LR rates on the
borrower's cash flow. Therefore, no change is necessary.
Comment: Allow borrowers to make payments when they sell their
products.
Response: A change is not necessary because existing regulations
already allow FSA borrowers to pay on their loans if receiving sales
income throughout the year and prior to the annual due date. There are
no prepayment penalties for any FSA direct loans. Therefore, FSA is not
making any change beyond the proposed rule changes.
Comment: What is the projected annual number of new borrowers, and
existing borrowers expected to receive ML funds?
Response: FSA's cost benefit analysis looked at the segment of
existing direct OL customers borrowing $35,000 or less and estimates
that with ML maximum rate of $35,000 there would be, at most, 3,340
existing borrowers in this group. The analysis provides the best
possible information for borrower projections. No regulatory change is
necessary.
Comment: FSA should wait for the next Farm Bill. What is FSA's
authority for ML regulation?
Response: ML is a subset of OL. Therefore, all the requirements and
provisions in 7 U.S.C. 1941 for OL apply to MLs. FSA believes that many
of these changes provided through ML, which were overwhelmingly
supported by the commenters, will be welcomed by FSA customers. There
has been much anticipation for an OL process that is more proportional
to the loan amount, and the smaller operations have been seeking this
financing. Therefore, FSA is not making any change beyond the proposed
rule changes.
Comment: This program, like other FLP loans, only applies to people
with bad credit, what about people with good credit?
Response: Applicants must show creditworthiness to be eligible for
a direct loan. While it is true that an applicant must be unable to
obtain credit elsewhere, circumstances surrounding an applicant's
inability to obtain credit may not be related to bad credit issues.
Some lenders will not lend for certain agricultural loan purposes, for
loan amounts or equity amounts below a minimum threshold, or for any
agricultural purpose. Weather-related or economic-related conditions
beyond the applicant's control may also prove to be a temporary setback
for some operations. Statistically, small operations are more
susceptible to these situations. Therefore, FSA is not making any
change beyond the proposed rule changes.
Comment: Technical assistance or guidance from FSA to ML applicants
should be required. What resources are available to provide this
assistance?
Response: FSA officials will provide technical assistance to direct
loan applicants, if needed, to complete FSA forms and gather
information necessary for a complete application. This assistance to
applicants includes explaining the application process; identifying
sources of information, informing applicants of other technical
assistance providers who may be of assistance at minimal or no charge
(such as Cooperative Extension Service, USDA outreach grants, Service
Corp of Retired Executives), and advising applicants of alternatives to
help overcome barriers to being determined eligible for FSA assistance.
Other resources are available on a regional basis and FSA State Offices
and local Service Centers often provide additional information not
available on a national basis. Therefore, FSA is not making any change
beyond the proposed rule changes.
Comment: How will the definition of ``family farm'' relate to small
agricultural production; for example, small family farms versus hobby
farms? Will there be restrictions on farm size or gross income
minimums?
Response: FSA is not changing the ``family farm'' definition with
this rule; any definition is unlikely to anticipate and address every
possible production financing request. Requests to finance unusual farm
production will continue to be handled on a case-by-case basis. FSA
will develop additional handbook guidance, and provide initial and
ongoing training as needed to field staff that will highlight and
review ML financing of small farm operations. The current ``family
farm'' definition in 7 CFR 764.101(k) does not specify minimum farm
size restrictions, or minimum gross income, and FSA does not believe
that it is necessary to be more specific for MLs. Therefore, FSA is not
making any change beyond the proposed rule changes.
Comment: When will ML be implemented?
Response: This final rule implements the changes required to start
ML.
Other comments and recommended changes were out of scope or related
to statutory requirements of the loan
[[Page 3833]]
programs other than MLs. Some of the comments falling under the
category of statutory requirements or otherwise out of scope for the
proposed ML concerned guaranteed ML lending, intermediary (or
partnering) lending, elimination of OL term limits; and comments
general to FLP and not specific to ML.
Effective Date
According to 5 U.S.C. 553(d), a rule is to be published in the
Federal Register 30 days prior to its effective date, unless, among
other things, there is good cause found by the agency. (See 5 U.S.C.
553(d)(3).) FSA finds that good cause exists to implement this final
rule immediately. At this time of year, a 30-day delay between
publication and effective date of the final rule will adversely impact
the very applicants it is intended to benefit. For ML to have the
greatest impact, it is essential for it to be implemented as early in
2013 as possible. Growers need credit as soon as possible to pay land
rent and crop expenses so they can plant their crops on time for
optimum production and marketing. Many suppliers offer early season
discounts for cash purchases of planting inputs; a 3-5 percent discount
on seed, fertilizer, and chemicals will go straight to a grower's
bottom line, a vital addition to profit margin. Early availability of
MLs will allow FSA to provide credit to these small producers on a
timely basis, enhancing their prospects for success. This final rule
does not put any additional burdens on the FSA borrower. Instead, the
rule makes the loan application less burdensome for applicants for MLs
than for applicants for a standard OL. The proposed rule was
straightforward and very well received by the public. The rule imposes
no complex policies or program requirements that the public would need
30 days to analyze and understand prior to implementation.
Executive Orders 12866 and 13563
Executive Order 12866, ``Regulatory Planning and Review,'' and
Executive Order 13563, ``Improving Regulation and Regulatory Review,''
direct agencies to assess all costs and benefits of available
regulatory alternatives and, if regulation is necessary, to select
regulatory approaches that maximize net benefits (including potential
economic, environmental, public health and safety effects, distributive
impacts, and equity). Executive Order 13563 emphasized the importance
of quantifying both costs and benefits, of reducing costs, of
harmonizing rules, and of promoting flexibility.
The Office of Management and Budget (OMB) designated this rule as
not significant under Executive Order 12866 and, therefore, OMB has not
reviewed this final 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 law, 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 a substantial number of small entities for the
reasons explained below. Consequently, FSA has not prepared a
regulatory flexibility analysis.
The term small entities include small businesses, small
organizations, and small governmental jurisdictions. For the purposes
of assessing the impacts of this rule on small entities, a small
business is based on the categories in the Small Business
Administration's Table of Small Business Size Standards by North
American Industry Classification System (NAICS) Category (13 CFR
121.201). All of the entities that would request a Microloan would be
small businesses that produce crops and livestock in subsectors 111 and
112 listed in 13 CFR 121.201. These categories cover all primary
agricultural production. Under the SBA Small Business Size Standard for
these two NAICS subsector categories, the majority of businesses are
considered small when they receive less than $750,000 in annual
receipts; the threshold is higher for two subcategories of animal
production. (See 13 CFR 121.201, subsectors 112112 and 112310.) This
standard does not exclude any of the potential farm loan borrowers who
will make use of the modifications to the OL Program. Nevertheless,
even though the applicants under ML are considered small entities,
there would not be a substantial number affected by the rule.
Overall, this rule creates a new application process and greater
options for eligibility and security for small loans within the
existing OL Program, so, theoretically, some of the loans could be made
under the existing program. Therefore, small entities in two credit
segments have to be considered for this analysis. One segment is the
number of existing borrowers who might take advantage of the
modifications in eligibility for future loans. The other segment is the
number of new borrowers who might never have applied for an FSA
operating loan without the modifications. The number of existing
borrowers who might make use of the application, eligibility, and
security modifications for future loans can be estimated using fiscal
year 2011 direct operating loan data. Given that the maximum borrowing
limit is $35,000 as set forth in the rule, it is estimated there would
be at most 3,340 borrowers with $102.7 million in loans in this
segment. However, since this estimate consists of existing borrowers
with the same credit needs, this segment will have no additional
economic impact. Only the demand by additional borrowers will have an
incremental economic impact. This demand is more difficult to estimate.
Preliminary estimates assume the new borrowers will be younger, below
the age of 35, and have relatively low annual sales, less than $10,000
annually. Using data from the 2007 Census of Agriculture, this segment
of producers consists of about 14,434 primary operators. Historically,
FSA direct operating loans have captured only 2 percent of the
agricultural credit market; so fewer than 300 borrowers will probably
be added. Therefore, about 4,000 entities could be affected by this
rule with an economic impact of only about $10.5 million (300 new
borrowers times $35,000 in loans per borrower).
Furthermore, the minimal regulatory requirements will affect large
and small businesses equally as part of the loan making process, since
MLs are distinguished based on the size of the loan, not the size of
the operation. ML applicants will have a lower paperwork burden that
will be commensurate with the smaller loan amount, due to a reduction
in documentation required for these loans. Therefore, in accordance
with the Regulatory Flexibility Act, FSA is certifying that there would
not be a significant economic impact on a substantial number of small
entities. Due to the limited number of entities, the economic effects
from any additional lending are unlikely to have a substantial impact
on entities of any size.
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 the FSA
regulations for compliance with NEPA (7 CFR part 799 and 7 CFR part
1940, subpart G). FSA
[[Page 3834]]
concluded that simplifying the application process and adding
flexibility for both meeting loan eligibility and security requirements
to encourage small farm operation participation in its OL Program
explained in this rule are administrative in nature and will not have a
significant impact on the quality of the human environment either
individually or cumulatively. The environmental responsibilities for
each prospective applicant will not change from the current process
followed for all FLP actions (7 CFR 1940.309). Therefore, FSA will not
prepare an environmental impact statement on this rule.
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.
Executive Order 13132
This rule has been reviewed under Executive Order 13132,
``Federalism.'' The policies contained in this rule will not have any
substantial direct effect on States, on the relationship between the
Federal Government and the States, or on the distribution of power and
responsibilities among the various levels of government. Nor would 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.'' Executive Order 13175 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, to USDA's knowledge,
preempt Tribal law. FSA held a series of tribal consultation sessions
early in the rule making process. Representatives from all federally
recognized tribes were invited to participate.
During the Tribal consultation, sessions were held to discuss ML,
and FLP staff responded to the several comments and questions. The
following summarizes the questions and responses discussed during
Tribal consultation.
Comment: Will ML be targeting a certain group?
Response: MLs are designed to better serve small family farm
operations. In addition, MLs may provide a bridge between Youth Loans
and the traditional OL Program, and between the needs of smaller
operations as they grow into larger farm operations.
Comment: What is the purpose of ML?
Response: ML will require less information to provide an
application process more proportional to smaller loan amounts and
operations in the growing segment of family farms engaged in organic
farming and direct sales farming practices. Additionally, ML will
provide financing at reasonable rates and terms, as some smaller
operations often rely on credit cards, and dealer financing to finance
their operations because they believe that paperwork requirements are
often not worth the benefits.
Comment: Will financing operations raising rice in lakes owned by
the Tribes be eligible for ML and other FSA loans?
Response: Operations using lakes managed by the Tribe can be
eligible for FSA loans, including ML. FLP also welcomes the opportunity
for future conversations to consider regulations that would permit
financing operations that raise fish in bodies of water not fully
controlled by the Tribe.
Comment: When will ML be implemented?
Response: FLP explained the steps of the rulemaking process, but
could not provide an exact date for implementation. This final rule
implements the changes required to start ML.
Unfunded Mandates Reform Act
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 under the regulatory provisions of
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) for State,
local, or Tribal governments, or the private sector. Therefore, this
rule is not subject to the requirements of sections 202 and 205 of
UMRA.
Paperwork Reduction Act
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C.
3501-3520), FSA described the new information collection activities in
the request for public comment in the proposed rule. Comments related
to the Paperwork Reduction Act are discussed above and are in the
supporting document that OMB reviewed. No change to the information
collection was required based on the comments. After the final rule is
published, the new information collection request will be merged with
FSA existing information collection request approved under OMB control
number 0560-0237.
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.
List of Subjects
7 CFR Part 761
Accounting, Loan programs--agriculture, Rural areas.
7 CFR Part 764
Agriculture, Disaster assistance, Loan programs--agriculture.
For reasons discussed above, FSA amends 7 CFR chapter VII as
follows:
PART 761--FARM LOAN PROGRAMS; GENERAL PROGRAM ADMINISTRATION
0
1. The authority citation for part 761 continues to read as follows:
Authority: 5 U.S.C. 301 and 7 U.S.C. 1989.
0
2. Amend Sec. 761.2 as follows:
[[Page 3835]]
0
a. In paragraph (a), remove the abbreviation ``Lo-Doc'' and add an
abbreviation, in alphabetical order, for ``ML Microloan'';
0
b. In paragraph (b), add definitions, in alphabetical order, for
``Apprentice'' and ``Microloan''; and
0
c. In paragraph (b), remove the definition of ``Low-Documentation
Operating loan.''
The additions read as follows:
Sec. 761.2 Abbreviations and definitions.
* * * * *
(a) * * *
ML Microloan.
* * * * *
(b) * * *
Apprentice means an individual who receives applied guidance and
input from an individual with the skills and knowledge pertinent to the
successful operation of the farm enterprise being financed.
* * * * *
Microloan is a type of OL of $35,000 or less made under reduced
application, eligibility, and security requirements.
* * * * *
0
3. Amend Sec. 761.103 as follows:
0
a. Revise paragraph (b), introductory text;
0
b. Redesignate paragraphs (c) through (e) as paragraphs (d) through
(f); and
0
c. Add paragraph (c).
The revision and addition read as follows:
Sec. 761.103 Farm assessment.
* * * * *
(b) Except for ML, the initial assessment must evaluate, at a
minimum, the:
* * * * *
(c) For ML, the Agency will complete a narrative that will
evaluate, at a minimum, the:
(1) Type of farming operation and adequacy of resources;
(2) Amount of assistance necessary to cover expenses to carry out
the proposed farm operating plan, including building an adequate equity
base;
(3) The goals of the operation;
(4) The financial viability of the entire operation, including a
marketing plan, and available production history, as applicable;
(5) Supervisory plan; and
(6) Training plan.
* * * * *
0
4. Amend Sec. 761.104 as follows:
0
a. Redesignate paragraphs (e) and (f) as (f) and (g),
0
b. Add paragraph (e), and
0
c. In newly redesignated paragraph (f), remove the cross reference
``paragraph (f)'' and add in its place the cross reference ``paragraph
(g)''.
The addition reads as follows:
Sec. 761.104 Developing the farm operating plan.
* * * * *
(e) For MLs, when projected yields and unit prices cannot be
determined as specified in paragraphs (c) and (d) of this section
because the data is not available or practicable, other documentation
from other reliable sources may be used to assist in developing the
applicant's farm operating plan.
* * * * *
PART 764--DIRECT LOAN MAKING
0
5. The authority citation for part 764 continues to read as follows:
Authority: 5 U.S.C. 301 and 7 U.S.C. 1989.
Sec. 764.1 [Amended]
0
6. Amend Sec. 764.1(b)(2) by adding the words ``ML and'' immediately
following the word ``including''.
0
7. Revise Sec. 764.51(c) to read as follows:
Sec. 764.51 Loan application.
* * * * *
(c) For an ML request, all of the following criteria must be met:
(1) The loan requested is:
(i) To pay annual or term operating expenses, and
(ii) $35,000 or less and the applicant's total outstanding Agency
OL debt at the time of loan closing will be $35,000 or less,
(2) The applicant must submit the following:
(i) Items (1), (2), (3), (6), (7), (9), and (11) of paragraph (b)
of this section;
(ii) Financial and production records for the most recent
production cycle, if available, and practicable to project the cash
flow of the operating cycle, and
(iv) Verification of all non-farm income relied upon for repayment;
and
(3) The Agency may require an ML applicant to submit any other
information listed in paragraph (b) of this section upon request when
specifically needed to make a determination on the loan application.
* * * * *
0
8. Amend Sec. 764.101 as follows:
0
a. In paragraph (i)(3) at the end of the first sentence add the text
``or for MLs the applicant may have obtained and successfully repaid
one FSA Youth-OL''; and
0
b. Add paragraph (i)(4).
The addition reads as follows:
Sec. 764.101 General eligibility requirements.
* * * * *
(i) * * *
(4) Alternatives for ML. ML applicants also may demonstrate
managerial ability by one of the following:
(i) Certification of a past participation with an agriculture-
related organization, such as, but not limited to, 4-H Club, FFA,
beginning farmer and rancher development programs, or Community Based
Organizations, that demonstrates experience in a related agricultural
enterprise; or
(ii) A written description of a self-directed apprenticeship
combined with either prior sufficient experience working on a farm or
significant small business management experience. As a condition of
receiving the loan, the self-directed apprenticeship requires that the
applicant seek, receive, and apply guidance from a qualified person
during the first cycle of production and marketing typical for the
applicant's specific operation. The individual providing the guidance
must be knowledgeable in production, management, and marketing
practices that are pertinent to the applicant's operation, and agree to
form a developmental partnership with the applicant to share knowledge,
skills, information, and perspective of agriculture to foster the
applicant's development of technical skills and management ability.
Sec. 764.103 [Amended]
0
9. Amend Sec. 764.103 as follows:
0
a. In paragraph (c) remove the words ``downpayment loans'' and add the
words ``downpayment loans, MLs made for purposes other than annual
operating,'' in their place.
0
b. In paragraph (e), last sentence, remove the words ``conservation
loans'' and add the words ``CL, ML'' in their place.
0
10. Amend Sec. 764.251 as follows:
0
a. Revise paragraph (a), to add the words ``and ML'' immediately after
``OL'' in the introductory text; and b. Remove paragraph (b).
0
11. Amend Sec. 764.255 as follows:
0
a. Revise paragraph (b), introductory text; and
0
b. Add paragraph (c).
The revision and addition read as follows:
Sec. 764.255 Security Requirements.
* * * * *
(b) Except for MLs, by a:
* * * * *
(c) For MLs:
(1) For annual operating purposes, loans must be secured by a first
lien on farm property or products having a security value of at least
100 percent of the loan amount, and up to 150 percent, when available.
[[Page 3836]]
(2) For loans made for purposes other than annual operating
purposes, loans must be secured by a first lien on farm property or
products purchased with loan funds and having a security value of at
least 100 percent of the loan amount.
(3) A lien on real estate is not required unless the value of the
farm products, farm property, and other assets available to secure the
loan is not at least equal to 100 percent of the loan amount.
(4) Notwithstanding the provisions of paragraphs (c)(1), (c)(2),
and (c)(3) of this section, FSA will not require a lien on a personal
residence.
Signed on December 21, 2012.
Juan M. Garcia,
Administrator, Farm Service Agency.
[FR Doc. 2013-00672 Filed 1-15-13; 11:15 am]
BILLING CODE 3410-05-P