EZ Guarantee Program and Micro Lender Program (MLP) Status, 72686-72692 [2016-25492]

Agencies

• DEPARTMENT OF AGRICULTURE
• Farm Service Agency

[Federal Register Volume 81, Number 204 (Friday, October 21, 2016)]
[Rules and Regulations]
[Pages 72686-72692]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-25492]


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DEPARTMENT OF AGRICULTURE

Farm Service Agency

7 CFR Parts 761 and 762

RIN 0560-AI34


EZ Guarantee Program and Micro Lender Program (MLP) Status

AGENCY: Farm Service Agency, USDA.

ACTION: Final rule.

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SUMMARY: The Farm Service Agency (FSA) is amending the guaranteed Farm 
Loan Programs (FLP) regulations to implement an EZ Guarantee Program 
and establish an additional lender status. The EZ Guarantee Program 
will help lenders reduce costs of underwriting and servicing loans to 
help meet the unique financing needs of small farm operations. The 
intended effects of the rule are to make guaranteed loan programs more 
widely available and attractive to small farm operations and the 
lenders who work with those farm operations through a more flexible 
underwriting analysis process, reduced application requirements, and 
faster FSA approval. In addition, FSA is amending the regulations to 
make a technical correction related to chattel appraisal appeals 
related to both guaranteed and direct loans.

DATES: 
    Effective Date: October 21, 2016.
    Comment Dates: We will consider comments on the Paperwork Reduction 
Act that we receive by: December 20, 2016.
    We will consider comments on the regulatory changes that we receive 
by: January 19, 2017.

ADDRESSES: We invite you to submit comments on this rule. In your 
comment, specify RIN 0560-AI34, and include the volume, date, and page 
number of this issue of the Federal Register. You may submit comments 
by either of the following methods:
     Federal Rulemaking Portal: Go to https://www.regulations.gov. Follow the instructions for submitting comments.
     Mail: Director, Loan Making Division, FLP, FSA, US 
Department of Agriculture, 1400 Independence Avenue SW., Stop 0522, 
Washington, DC 20250-0522.
    Comments will be available for viewing online at https://www.regulations.gov. In addition, comments will be available for public 
inspection at the above address during business hours from 8 a.m. to 5 
p.m., Monday through Friday, except holidays.

FOR FURTHER INFORMATION CONTACT: Randi Sheffer; telephone: (202) 205-
0682. Persons with disabilities or who require alternative means for 
communications should contact the USDA Target Center at (202) 720-2600 
(voice).

SUPPLEMENTARY INFORMATION:

Background

    FSA makes and services a variety of direct and guaranteed loans to 
the nation's farmers and ranchers who are unable to obtain private 
commercial credit at reasonable rates and terms. FSA also provides 
direct loan customers with credit counseling and supervision to enhance 
their opportunity for success. FSA direct and guaranteed loan 
applicants are often beginning farmers and socially disadvantaged 
farmers who do not qualify for conventional loans because of 
insufficient net worth or established farmers who have suffered 
financial setbacks due to natural disasters or economic downturns. FSA 
tailors direct and guaranteed loans to a customer's needs and may be 
used to buy farmland and to finance agricultural production.
    The Consolidated Farm and Rural Development Act of 1972 (CONACT, 
Pub. L. 92-419), as amended, authorizes FSA's Guaranteed Farm Loan 
Programs.

EZ Guarantee Program

    FSA is amending its FLP regulations to add an EZ Guarantee Program 
to further assist the financing needs of small farm operations. Section 
333A(g)(1)(A) of the CONACT states that FSA will provide lenders with a 
short, simplified application for loans which are $125,000 or less (see 
7 U.S.C. 1983a(g)(1)(A)). The EZ Guarantee Program process will be the 
same as the Guaranteed Loan Program, except there is a new, self-
contained application specifically formatted for EZ Guarantee loans. 
FSA may request additional information for the application when 
necessary to clarify a response on the application before making an 
approval decision.
    FSA is adding a definition of an EZ Guarantee loan in 7 CFR 761.2. 
The EZ Guarantee Program will provide alternatives for application and 
financial underwriting process for Operating Loan (OL) and Farm 
Ownership loan (FO) purposes. All other FLP rules will remain unchanged 
and the funding sources for these EZ Guarantee loans will continue to 
be through FSA's guaranteed OL and FO annual appropriations.
    All lenders who meet FSA eligibility criteria (see 7 CFR 762.105, 
762.106, and 762.107) will be eligible to originate EZ Guarantee loans. 
As discussed below, the rule adds MLP Status in addition to Standard 
Eligible Lender (SEL), Certified Lender Program (CLP), and Preferred 
Lender Program (PLP) status. SELs, CLPs, and PLPs may originate EZ 
Guarantee loans up to $100,000. Because of their limited experience in 
making agricultural loans, MLPs will be limited to loans up to $50,000. 
The streamlined application and new underwriting process will reduce 
the burden for all of the FSA lender types. Beyond that, we expect that 
this new EZ Guarantee Program may be of particular interest to and used 
primarily by small commercial lenders

[[Page 72687]]

desiring to build their agriculture portfolio and by nontraditional 
lenders who typically work with small farm operations.
    EZ Guarantee loans will be subject to the same eligibility, 
security, and environmental requirements, as any other guaranteed OL or 
FO. Loan purposes, interest rate requirements, loan terms, appraisal 
requirements, and percent guarantee, and guarantee fees will also 
remain the same. Therefore, Sec. Sec.  762.120 through 762.124 and 
762.126 through 762.127 are not being revised.
    Because small loans present less credit risk, and lenders are less 
inclined to finance small loans, FSA is revising Sec.  762.110 to 
reflect a new, all-inclusive application form to be used only for EZ 
Guarantee loans. Unlike other guaranteed applications, lenders will not 
need to submit supporting information to FSA; therefore, the approval 
process will require significantly less time. In addition, the 
application format is different from the application forms now being 
used by FSA guaranteed lenders. The EZ Guarantee application will 
include a series of questions that pertain to eligibility, loan 
repayment prospects, collateral, and environmental review, which if 
appropriate, will allow for an accelerated FSA approval. An application 
not qualifying for the accelerated FSA approval will not necessarily be 
rejected, but instead will require additional information. This rule 
also makes additional changes to Sec.  762.110 for clarity, but the 
rules for regular guaranteed applications remain the same.
    As part of streamlining the application process, FSA is revising 
Sec.  762.125 to use a more streamlined underwriting process for EZ 
Guarantee loans. Because of the limited income derived from a small 
loan, commercial lenders typically perform very limited financial 
analysis at loan origination. With the EZ Guarantee Program, the lender 
may analyze the loan in the same manner they would analyze a 
nonguaranteed loan of the same size and type, saving them time and 
money. Many lenders are now using historical averages, industry 
standards, or scorecard lending rather than projecting cash flow 
budgets to determine feasibility. Scorecard lending is an underwriting 
method where lenders use a variety of financial ratios and other 
information to predict the level of credit risk a particular applicant 
presents. Lenders will be required to analyze an EZ Guarantee 
application and determine that the applicant demonstrated reasonable 
prospects for repayment using normal, industry accepted methods and 
criteria. As part of the lender's information added to the application, 
the lender will describe the method and standards used on the EZ 
Guarantee application.
    The lender's standards need to meet the following requirements:
    1. The lender must perform the same financial analysis and apply 
the same underwriting standards for an EZ Guarantee loan as they would 
for a nonguaranteed loan of the same size and type.
    2. The lender must determine that the EZ Guarantee applicant 
demonstrates reasonable prospects to repay the requested loan. This 
determination must be arrived at using the lender's typical 
underwriting criteria and methods, such as a cash flow projection, a 
scorecard underwriting model, historical income and expenses, or other 
repayment capacity indicator.
    3. The lender will describe the methods and criteria used to 
determine the applicant's prospects for repayment on the EZ Guarantee 
application form.
    FSA anticipates changes in accepted lending practices, portfolio 
performance, and economic conditions will create a need to update the 
EZ Guarantee underwriting criteria; therefore, Sec.  762.125(d) 
specifies that the standards will be updated for future changes through 
an FSA announcement posted on the FSA Web site (www.fsa.usda.gov). That 
will allow for timely updating of the standards as needs change.
    Since lenders will continue to analyze and document EZ Guarantee 
loans using the same methods and standards they use for nonguaranteed 
loans, FSA anticipates little to no change in default rates resulting 
from the limited underwriting analysis.
    FSA will service EZ Guarantee loans as it currently services 
guaranteed OLs and FOs with exceptions for term loans performing 
according to the promissory notes and loan agreements. The lender will 
be responsible for servicing the entire loan in a reasonable and 
prudent manner, protecting and accounting for collateral; and the 
lender will also remain as the mortgagee or secured party of record. 
The lender will be responsible for servicing its guaranteed loans as it 
services any other loan in its portfolio and complying with all FLP 
requirements in 7 CFR 762.140 through 762.149. The reporting 
requirements will be the current reporting requirements in 7 CFR 
761.141 including semi-annual status and default status reporting.
    FSA is revising 7 CFR 762.140 for more limited analysis of 
borrowers with EZ Guarantee loans. If the loan is performing as 
intended, an annual analysis may not be required. All delinquent 
servicing lender responsibilities in 7 CFR 762.143 will remain the 
same.

Guaranteed MLP

    FSA will administer MLP to increase collaboration with 
nontraditional lenders and assist small farm operations typically in 
underserved areas. The additional MLP Status will also enable 
nontraditional lenders to participate in the EZ Guarantee Program. 
Also, establishing a stronger working relationship with nontraditional 
lenders will be beneficial because they share a common goal with FSA to 
assist producers in underserved areas, including credit deserts such as 
Indian Country.
    Minor reference changes in the rules are being made in Sec. Sec.  
761.2, 762.101, and 762.128. In Sec.  761.2, an abbreviation of ``Micro 
Lender Program'' is being added. In Sec.  762.101, ``Micro Lender'' is 
being added to the lender classification. In Sec.  762.128, ``MLP'' is 
being added to the list of lenders who must comply with the 
environmental requirements.
    Also, this rule adds Sec.  762.107 to implement MLP including the 
creation of an additional MLP Status for nontraditional lenders and 
commercial lenders who are not eligible for or do not want Standard 
Eligible Lender (SEL), Certified Lender Program (CLP), or Preferred 
Lender Program (PLP) status. To request MLP Status, a lender will 
submit an application form to any FSA office. The application form will 
collect information from the lender, such as loan portfolio 
characteristics (delinquency and default rates), source(s) of loan 
funding, and certifications by the lender.
    FSA will evaluate the MLP Status application using the criteria in 
7 CFR 762.107(b).
    FSA regulations require guaranteed lenders to be subject to credit 
examination and supervision by an acceptable State or Federal 
regulatory agency (see 7 CFR 762.105(b)). This requirement has 
prevented many nontraditional lenders from qualifying to receive FSA 
Guarantees on loans made to their customers. MLP Status will allow 
nontraditional lenders to participate in FSA's EZ Guarantee Program by 
permitting this examination and supervision to be performed by other 
types of regulatory agencies. In the new Sec.  762.107(b)(3), FSA 
requires lenders to be subject to appropriate oversight to participate 
in the FSA Guaranteed Program as micro lenders. Nontraditional lenders 
such as Community Development Financial

[[Page 72688]]

Institutions (CDFIs) are supervised and regulated, but not to the same 
degree that agencies like the Office of the Comptroller of the Currency 
or other banking authorities regulate commercial banks. The following 
types of organizations have currently been determined to meet these 
standards:
    1. A lender meeting the examination and supervision requirement in 
Sec.  762.105(b).
    2. CDFI. CDFIs that have been awarded funds and are under the 
supervision of the CDFIs Program described in 12 CFR part 1805.
    3. Rural Rehabilitation Corporation (RRC). RRCs that have entered 
into an agreement establishing an ongoing reporting and credit 
supervision relationship with FSA.
    Traditional lenders, such as banks or credit unions, that are 
currently not eligible to obtain SEL, CLP or PLP status, would be 
eligible to apply for MLP status. Additionally nontraditional lenders 
that are certified by the U.S. Department of the Treasury--such as 
CDFIs--or that are subject to credit examination and supervision by 
FSA's Deputy Administrator for FLP (DAFLP)--such as RRCs--would be 
eligible to apply for MLP Status because:
    1. FSA has experience in working with CDFIs and RRCs. In addition, 
CDFIs and RRCs typically make loans to small farms and underserved 
farmers, and are expected to be one of the primary users of the new EZ 
Guarantee Program; and
    2. At this time, FSA does not have sufficient knowledge or 
expertise regarding other types of nontraditional lenders. Further 
research, including the potential need for guarantees by other types of 
nontraditional lenders is required before allowing these lenders to 
participate in the EZ Guarantee Program.
    FSA expects to allow future expansion of the MLP Status to include 
other types of nontraditional lenders once further research is 
conducted; therefore, Sec.  762.107(b)(3) specifies that FSA will 
announce future modifications to acceptable oversight on the FSA Web 
site. This will allow FSA to include other lenders as our experience 
with MLP Status grows.
    In addition to the oversight and portfolio performance criteria, 
FSA also will require the lender to demonstrate experience in making 
the types of loans they will be requesting FSA to guarantee and the 
resources to properly make and service these loans, which is very 
similar to what FSA requires of its other lenders. MLPs lending 
capabilities may be demonstrated by their experience making and 
servicing other loans rather than just agricultural loans, as with 
other FSA guaranteed lenders.
    As an objective measure of the capability to make and service 
loans, FSA is establishing minimum volume and maximum loss rates. These 
rates will be based on the lender's entire portfolio. In 7 CFR 
762.107(b)(3), FSA requires lenders to demonstrate significant positive 
experience in making and servicing loans. The experience must be that:
    1. The lender has originated 20 or more business loans of $50,000 
or less; and
    2. The lender's losses on all business loans of $50,000 or less 
made over the past 7 years do not exceed 3 percent.
    Again, to allow for timely modification of these rates as 
circumstances change, FSA may modify these rates by posting rates on 
the FSA Web site.
    Once approved, MLP Status will be valid for 5 years unless revoked 
by FSA. This is consistent with the timeframe of FSA's CLP and PLP 
lender status. FSA will also reconsider MLP Status in the event a 
lender's ownership changes, as is currently done with CLP and PLP 
lenders.
    An MLP Status lender will be bound by all existing terms specified 
in FSA's Lender's Agreement. It will have the same reporting 
requirements and be subject to periodic lender review. Unlike FSA's 
other guaranteed lenders, however, MLP lenders typically have limited 
experience with agricultural loans and therefore will only be able to 
underwrite loans up to $50,000 under the EZ Guarantee Program.

Technical Correction for Chattel Appraisal Appeals

    FSA is amending the regulations in 7 CFR 761.7(e)(2) to make a 
technical correction related to chattel appraisal appeals in connection 
with both guaranteed and direct loans. In the FSA final rule published 
on November 28, 2013, (78 FR 65523-65541), changes made relative to 
chattel appraisal appeals specified that the borrower needs to provide 
an independent appraisal. However, it was the intent of FSA that the 
borrower provide an independent appraisal review by a person that 
possesses sufficient experience or training to establish market value 
of chattel property based on public sales of the same or similar 
property in the market area, rather than an entirely new appraisal. 
Therefore, this rule is correcting that error in 7 CFR 761.7(e)(2).

Notice and Comment

    In general, the Administrative Procedure Act (5 U.S.C. 553) 
requires that a notice of proposed rulemaking be published in the 
Federal Register and interested persons be given an opportunity to 
participate in the rulemaking through submission of written data, 
views, or arguments with or without opportunity for oral presentation, 
except that when the rule involves a matter relating to public 
property, loans, grants, benefits, or contracts section 553 does not 
apply. This rule involved matters relating to loans and is therefore 
being published as a final rule without the prior opportunity for 
comments. Although FSA is not required to provide the opportunity for 
comments on this rule, we are requesting public comments for 90 days to 
request public input on the changes.

Effective Date

    The Administrative Procedure Act (APA, 5 U.S.C. 553) provides 
generally that before rules are issued by Government agencies, the rule 
is required to be published in the Federal Register, and the required 
publication of a substantive rule is to be not less than 30 days before 
its effective date. However, as noted above, one of the exceptions is 
that section 553 does not apply to rulemaking that involves a matter 
relating to loans. Therefore, because this rule relates to loans, the 
30-day effective period requirement in section 553 does not apply. This 
final rule is effective when published in the Federal Register. Most 
FLP guaranteed loans are established at the beginning of the calendar 
year; therefore, implementing this rule quickly will benefit beginning 
and small farms starting in 2016, instead of having to wait for 2017.

Executive Order 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 emphasizes 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

[[Page 72689]]

significant under Executive Order 12866 and, therefore, OMB was not 
required to review 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 whenever an agency is required by APA 
or any other law to publish a proposed rule, unless the agency 
certifies that the rule will not have a significant economic impact on 
a substantial number of small entities. This rule is not subject to the 
Regulatory Flexibility Act because it is exempt from notice and comment 
rulemaking requirements of the APA and no other law requires that a 
proposed rule be published for this rulemaking initiative.

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). Through this 
rule, FSA is establishing the EZ Guarantee Program to provide a 
guarantee for OLs and FOs up to $100,000, which are expected to be most 
used by beginning farmers and farmers with small farms (farms with 
annual gross agricultural products sales from $1,000 to $99,999) with 
less traditional farm operations who are not typically FSA Guaranteed 
loan customers. FSA is implementing the MLP Status to allow 
nontraditional lenders to participate in the EZ Guarantee Program, 
which is an administrative change. FSA is revising the existing FLP 
regulations to make those changes, but it is not changing the 
environmental review requirements that apply. The environmental 
responsibilities for each prospective applicant will not change from 
the current process followed for all FLP actions (7 CFR 799). Each EZ 
Guarantee Program action will be reviewed under the existing process to 
ensure it will not have a significant impact on the quality of the 
human environment either individually or cumulatively. Therefore, FSA 
will not prepare a programmatic environmental assessment or 
environmental impact statement on this rule.

Executive Order 12372

    Executive Order 12372, ``Intergovernmental Review of Federal 
Programs,'' requires consultation with State and local officials that 
would be directly affected by proposed Federal financial assistance. 
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 specified in the final rule 
related notice regarding 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.'' This rule will not preempt State or 
local laws, regulations, or policies unless they represent an 
irreconcilable conflict with this rule. The rule does not have 
retroactive effect. Before any judicial action may be brought regarding 
the provisions of this rule, the administrative appeal provisions of 7 
CFR parts 11 and 780 are to be exhausted.

Executive Order 13132

    This rule has been reviewed under Executive Order 13132, 
``Federalism.'' The policies contained in this rule do not have any 
substantial direct effect on States, on the relationship between the 
Federal government and the States, or the distribution of power and 
responsibilities among the various levels of government, except as 
required by law. Nor will 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 in accordance with the requirements of 
Executive Order 13175, ``Consultation and Coordination with Indian 
Tribal Governments.'' Executive Order 13175 requires Federal agencies 
to consult and coordinate with tribes on a government-to-government 
basis on policies that have tribal implications, including regulations, 
legislative comments or proposed legislation, and other policy 
statements or actions that have substantial direct effects on one or 
more Indian tribes, on the relationship between the Federal government 
and Indian tribes or on the distribution of power and responsibilities 
between the Federal government and Indian tribes.
    FSA has assessed the impact of this rule on Indian tribes and 
determined that this rule does not, to our knowledge, have tribal 
implications that require tribal consultation under Executive Order 
13175. If a Tribe requests consultation, FSA will work with the USDA 
Office of Tribal Relations to ensure meaningful consultation is 
provided.

Unfunded Mandates

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA, Pub. L. 
104-4) requires Federal agencies to assess the effects of their 
regulatory actions on State, local, or Tribal governments or the 
private sector. Agencies generally must prepare a written statement, 
including a cost benefit analysis, for proposed and final rules with 
Federal mandates that may result in expenditures of $100 million or 
more in any 1 year for State, local, or Tribal governments, in the 
aggregate, or to the private sector. UMRA generally requires agencies 
to consider alternatives and adopt the more cost effective or least 
burdensome alternative that achieves the objectives of the rule. This 
rule contains no Federal mandates, as defined in Title II of UMRA, for 
State, local, or Tribal governments, or private sector. Therefore, this 
rule is not subject to the requirements of sections 202 and 205 of 
UMRA.

Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995, the 
following new information collection request that supports the EZ 
Guarantee Program was submitted to OMB for emergency approval and is 
also being submitted to OMB for the 3-year approval. FSA is requesting 
comments from interested individuals and organizations on the 
information collection activities related to the EZ Guarantee 
application process as described in this rule. FSA is currently 
modifying the loan application process in order to provide loans to 
eligible borrowers through the EZ Guarantee process.
    After OMB approval of the information collection request, FSA will 
merge this new information collection request with FSA's approved 
information collection of the OMB control number 0560-0155.
    Title: EZ Guarantee Program.
    OMB Control Number: 0560--New.
    Type of Request: New Collection.
    Abstract: This information collection is required to support the 
regulation in 7 CFR part 762, ``Guaranteed Farm

[[Page 72690]]

Loans,'' which establishes the requirements for most of FSA's 
guaranteed loan programs and the changes in the rule that add the EZ 
Guarantee application process, as well as the application for lenders 
to receive MLP Status. The information collection established in this 
rule is necessary for FSA to evaluate the applicant's request and 
determine if eligibility, loan repayment, and security requirements can 
be met. The application includes information from the borrower and the 
lender; in general, the lender submits the application to FSA 
electronically. In addition, the information collection from lenders 
seeking MLP Status is necessary to ensure they meet the necessary 
regulatory standards to make and service agricultural loans.
    The formulas used to calculate the total burden hours is estimated 
average time per response hours times total annual burden hours.
    The estimated Public Burden for the EZ Guarantee and MLP Status 
are:
    Estimate of Burden: Public reporting for this collection of 
information is estimated to average 0.46899 hours. The travel time, 
which is included in the total annual burden, is estimated to be 1 hour 
per respondent.
    Type of Respondents: Individuals or households, businesses or other 
for profit, and farms.
    Estimated Number of Respondents: 6,280.
    Estimated Average Number of Responses per Respondent: 1.3.
    Estimated Total Annual Number of Responses: 8,160.
    Estimated Total Annual Burden on Respondents: 3,827 hours.
    We are requesting comments on all aspects of this information 
collection and to help us:
    1. Evaluate whether the collection of information is necessary for 
the proper performance of the FSA functions, including whether the 
information will have practical utility;
    2. Evaluate the accuracy of FSA's estimate of burden including the 
validity of the methodology and assumptions used;
    3. Enhance the quality, utility, and clarity of the information to 
be collected; and
    4. Minimize the burden of the collection of information on those 
who are to respond, including through the use of appropriate automated, 
electronic, mechanical, or other technological collection techniques or 
other forms of information technology.
    All comments received in response to this document, including names 
and addresses when provided, will be a matter of public record. 
Comments will be summarized and included in the submission for OMB 
approval.

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 other purposes.

Federal Assistance Programs

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

List of Subjects

7 CFR Part 761

    Accounting, Loan programs-agriculture, Rural areas.

7 CFR Part 762

    Agriculture, Banks, Banking, Credit, Loan Programs--agriculture.

    For the reasons discussed above, FSA amends 7 CFR parts 761 and 762 
as follows:

PART 761--FARM LOAN PROGRAM; GENERAL PROGRAM ADMINISTRATION

0
1. The authority citation for part 761 continues to read as follows:

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

Subpart A--General Provisions

0
2. Amend Sec.  761.2 as follows:
0
a. In paragraph (a), add the abbreviation for ``MLP'' in alphabetical 
order; and
0
b. In paragraph (b), add the definition of ``EZ Guarantee'' in 
alphabetical order.
    The addition and revision read as follows:


Sec.  761.2  Abbreviations and definitions.

* * * * *
    (a) * * *
* * * * *
    MLP Micro Lender Program.
* * * * *
    (b) * * *
* * * * *
    EZ Guarantee means a type of OL or FO of $100,000 or less made 
using a simplified loan application. As part of the simplified 
application process, EZ Guarantees are processed using a streamlined 
underwriting method to determine financial feasibility.
* * * * *


Sec.  761.7  [Amended]

0
3. Amend Sec.  761.7(e)(2) by removing the words ``independent 
appraisal'' in both places and add the words ``independent appraisal 
review'' in their place.

PART 762--GUARANTEED FARM LOANS

0
4. The authority citation for part 762 continues to read as follows:

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


0
5. Amend Sec.  762.101(c) as follows:
0
a. In paragraph (c)(2), remove the punctuation and word ``, or'' and 
add a semicolon in their place;
0
b. In paragraph (c)(3), remove the period and add the punctuation and 
word ``; or'' in its place; and
0
c. Add paragraph (c)(4).
    The addition reads as follows:


Sec.  762.101  Introduction.

* * * * *
    (c) * * *
    (4) Micro Lender under Sec.  762.107.
* * * * *


Sec.  762.105  [Amended]

0
6. In Sec.  762.105(d)(2) remove ``CLP or PLP'' and add ``CLP, PLP, or 
MLP'' in its place.

0
7. Add Sec.  762.107 to read as follows:


Sec.  762.107  Micro Lender Program.

    (a) General. The lenders must submit the following items:
    (1) To request MLP Status, a lender must submit an application form 
to any local FSA office.
    (2) The lender must provide any additional information requested by 
the Agency to process an MLP request, if the lender continues with the 
approval process.
    (3) MLP lender authorities are limited to originating and servicing 
EZ Guarantee loans.
    (b) MLP criteria. An MLP lender must satisfy the following 
requirements to obtain MLP Status:
    (1) Have experience in making and servicing business loans.
    (2) Have the staff and resources to properly and efficiently 
discharge its loan making and loan servicing responsibilities that may 
include use of Agency approved agents.
    (3) Be subject to oversight as established and announced by the 
Agency on the FSA Web site (www.fsa.usda.gov).
    (4) Have a loss rate not in excess of the maximum MLP loss rate 
established and announced by the Agency on the FSA Web site 
(www.fsa.usda.gov).
    (5) Have made the minimum number of loans as established and 
announced

[[Page 72691]]

by the Agency on the FSA Web site (www.fsa.usda.gov).
    (6) Not be debarred or suspended from participation in Government 
contracts or programs or be delinquent on a Government debt. This 
includes the lender's officers and agents.
    (c) Renewal of MLP Status. MLP Status will expire within a period 
not to exceed 5 years from the date the lender's agreement is executed, 
unless a new lender's agreement is executed.
    (1) Renewal of MLP Status is not automatic. A lender must submit a 
new application for renewal.
    (2) MLP Status will be renewed if the applicable eligibility 
criteria under this section are met, and no cause exists for denying 
renewal under paragraph (d)(1) of this section.
    (d) Revocation of MLP Status. The Agency may revoke the lender's 
MLP Status at any time during the 5 year term for cause as specified in 
paragraph (d)(1) of this section.
    (1) Any of the following instances constitutes cause for revoking 
or not renewing MLP Status:
    (i) Violation of the terms of the lender's agreement;
    (ii) Failure to maintain MLP eligibility criteria;
    (iii) Knowingly submitting false or misleading information to the 
Agency;
    (iv) Deficiencies that indicate an inability to process or service 
Agency guaranteed farm loan programs loans in accordance with this 
subpart;
    (v) Failure to correct cited deficiencies in loan documents upon 
notification by the Agency;
    (vi) Failure to submit status reports in a timely manner; or
    (vii) Failure to comply with the reimbursement requirements of 
Sec.  762.144(c)(7) and (c)(8).
    (2) A lender that has lost MLP Status may reapply for MLP Status 
once the problem that caused the MLP Status to be revoked has been 
resolved.

0
8. Amend Sec.  762.110 as follows:
0
a. Redesignate paragraphs (a) through (h) as paragraphs (c) through 
(j);
0
b. Add new paragraphs (a) and (b);
0
c. Revise newly redesignated paragraphs (c), (d) introductory text, and 
(f);
0
d. In newly redesignated paragraph (e) introductory text, remove the 
references ``(a)'' and (b)'' and add the references ``(c)'' and (d)'' 
in their place;
0
e. Remove newly redesignated paragraphs (e)(3) and (4);
0
f. Further redesignate newly redesignated paragraph (e)(5) as paragraph 
(e)(3).
0
g. In newly redesignated paragraph (g)(1), remove the last sentence; 
and
0
h. In newly redesignated paragraph (g)(4), remove ``CLP and PLP'' and 
add the word ``All'' in their place.
    The additions and revisions read follows:


Sec.  762.110  Loan application.

    (a) General. This paragraph (a) specifies the general requirements 
for guaranteed loan applications:
    (1) Lenders must perform at least the same level of evaluation and 
documentation for a guaranteed loan that the lender typically performs 
for non-guaranteed loans of a similar type and amount.
    (2) The application thresholds in this section apply to any single 
loan, or package of loans submitted for consideration at any one time. 
A lender must not split a loan into two or more parts in order to fall 
below the threshold in order to avoid additional documentation.
    (3) The Agency may require lenders with a lender loss rate in 
excess of the rate for CLP lenders to assemble additional documentation 
specified in paragraph (d) of this section.
    (b) EZ Guarantee loans. MLP lenders may submit an EZ Guarantee 
application for loans up to $50,000. All other lenders may submit EZ 
Guarantee applications for loans up to $100,000. Lenders must submit:
    (1) An EZ Guarantee application form.
    (2) If the loan fails to pass the underwriting criteria for EZ 
Guarantee approval in Sec.  762.125(d), or the responses in the 
application are insufficient for the Agency to make a loan decision, 
the lender must provide additional information as requested by the 
Agency.
    (c) Loans up to $125,000. Lenders must submit the following items 
for loans up to $125,000 (other than EZ Guarantees):
    (1) The application form;
    (2) Loan narrative, including a plan for servicing the loan;
    (3) Balance sheet;
    (4) Cash flow budget; and
    (5) Credit report.
    (d) Loans over $125,000. A complete application for loans over 
$125,000 will require items specified in paragraph (c) of this section, 
plus the following items:
* * * * *
    (f) CL Guarantees. In addition to the other requirements in this 
section, the following items apply when a lender is requesting a CL 
guarantee:
    (1) Lenders must submit a copy of the conservation plan or Forest 
Stewardship Management Plan;
    (2) Lenders must submit plans to transition to organic or 
sustainable agriculture when the funds requested will be used to 
facilitate the transition and the lender is requesting consideration 
for priority funding;
    (3) When CL guarantee applicants meet all the following criteria, 
the cash flow budget requirement in this section will be waived:
    (i) Be current on all payments to all creditors including the 
Agency (if currently an Agency borrower);
    (ii) Debt to asset ratio is 40 percent or less;
    (iii) Balance sheet indicates a net worth of 3 times the requested 
loan amount or greater; and
    (iv) FICO credit score is at least 700; for entity applicants, the 
FICO credit score of the majority of the individual members of the 
entity must be at least 700.
* * * * *

0
9. Amend Sec.  762.125 as follows:
0
a. Revise paragraphs (a) introductory text and (b) introductory text; 
and
0
b. Add paragraph (d).
    The revisions and addition read as follows:


Sec.  762.125  Financial feasibility.

    (a) General. Except for streamlined CL guarantees (see Sec.  
762.110(f)), the following requirements must be met:
* * * * *
    (b) Estimating production. Except for streamlined CL guarantees 
(see Sec.  762.110(f)), the following requirements must be met:
* * * * *
    (d) EZ Guarantee feasibility. Notwithstanding any other provision 
of this section:
    (1) The Agency will evaluate EZ Guarantee application financial 
feasibility using criteria determined and announced by the Agency on 
the FSA Web site (www.fsa.usda.gov).
    (2) EZ Guarantee applications that satisfy the criteria will be 
determined to meet the financial feasibility standards in this section.
    (3) EZ Guarantee applications that do not satisfy the criteria will 
require further documentation as determined by the Agency and announced 
on the FSA Web site (www.fsa.usda.gov).


Sec.  762.128  [Amended]

0
10. Amend Sec.  762.128(a) by removing ``CLP and PLP'' and adding 
``CLP, PLP, and MLP'' in its place.

0
11. Amend Sec.  762.140 by revising the introductory text of paragraph 
(b)(5) and adding paragraph (b)(5)(v) to read as follows:


Sec.  762.140  General servicing responsibilities.

* * * * *

[[Page 72692]]

    (b) * * *
    (5) Performing an annual analysis of the borrower's financial 
condition to determine the borrower's progress for all term loans with 
aggregate balances greater than $100,000 and all line of credit loans. 
The annual analysis will include:
* * * * *
    (v) For borrowers with an outstanding loan balance for existing 
term loans of $100,000 or less, the need for an annual analysis will be 
determined by the Agency for SEL, CLP, and MLP lenders. The annual 
analysis for PLP lenders will be in accordance with requirements in 
lender's credit management system (CMS).
* * * * *

Val Dolcini,
Administrator, Farm Service Agency.
[FR Doc. 2016-25492 Filed 10-20-16; 8:45 am]
 BILLING CODE 3410-05-P