Guaranteed Loanmaking and Servicing Regulations; Corrections, 30831-30833 [2018-14170]
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30831
Rules and Regulations
Federal Register
Vol. 83, No. 127
Monday, July 2, 2018
This section of the FEDERAL REGISTER
contains regulatory documents having general
applicability and legal effect, most of which
are keyed to and codified in the Code of
Federal Regulations, which is published under
50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by
the Superintendent of Documents.
DEPARTMENT OF AGRICULTURE
Rural Business-Cooperative Service
Rural Utilities Service
7 CFR Part 4280
RIN 0570–AA85
Guaranteed Loanmaking and Servicing
Regulations; Corrections
Rural Business-Cooperative
Service and Rural Utilities Service;
USDA.
ACTION: Correcting amendments.
AGENCY:
On June 3, 2016, the Rural
Business-Cooperative Service
promulgated changes to its Guaranteed
Loanmaking and Servicing Regulations.
Following final implementation of this
final rule, RBS found that conforming
amendments for adoption for the Rural
Energy for America Program (REAP) had
not been included. This technical
correction makes amendments to allow
REAP to continue to use procedures and
forms from the revised Guaranteed
program.
SUMMARY:
DATES:
Effective July 2, 2018.
Mark Brodziski, Rural Development,
Energy Programs, U.S. Department of
Agriculture, 1400 Independence Ave.
SW, Stop 3225, Washington, DC 20250–
3201; email: Mark.Brodziski@
wdc.usda.gov; telephone number: (202)
720–0410.
SUPPLEMENTARY INFORMATION:
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Need for Corrections
The Agency published a final rule on
June 3, 2016, (81 FR 35984) for the
purpose of improving program delivery,
clarifying the regulations to make them
easier to understand, and reducing
delinquencies. The Agency discovered
that conforming amendments had not
been included for 7 CFR part 4280 to
continue to allow the Rural Energy for
America Program to use procedures and
16:46 Jun 29, 2018
Jkt 244001
List of Subjects in 7 CFR Part 4280
Business and industry, Energy, Grant
programs—Business, Loan programs—
Business and industry, Rural areas.
Accordingly, 7 CFR chapter XLII is
amended by making the following
correcting amendments:
PART 4280—LOANS AND GRANTS
1. The authority citation for part 4280
continues to read as follows:
■
Authority: 5 U.S.C. 301; 7 U.S.C. 940c;
and 7 U.S.C. 1932(c).
Subpart B—Rural Energy for America
Program
§§ 4280.103, 4280.110, 4280.112, 4280.113,
4280.122, 4280.123, and 4280.196
[Amended]
2. In §§ 4280.103, 4280.110, 4280.112,
4280.113, 4280.122, 4280.123, and
4280.196, remove the words ‘‘Grant
Agreement’’ and add in their place the
words ‘‘Financial Assistance
Agreement’’ wherever they appear in
the following places:
■ a. § 4280.103;
■ b. § 4280.110(i) introductory text,
(i)(1), and (i)(2);
■ c. § 4280.112(b)(2);
■ d. § 4280.113(a)(4)(ii)(A) and (B);
■ e. § 4280.122(d), (e), (f), (g) and (h);
■ f. § 4280.123 introductory text and (d);
■ g. § 4280.196 introductory text.
■ 3. Amend § 4280.103 by:
■ a. Placing the newly designated
definition Financial Assistance
Agreement (Form RD 4280–2, Rural
Business Cooperative Service Financial
Assistance Agreement, or successor
form) in alphabetical order.
■
FOR FURTHER INFORMATION CONTACT:
VerDate Sep<11>2014
forms already codified for the
Guaranteed program and correctly
reference revised 7 CFR part 4279. This
notice makes technical corrections to
include the actual language in 7 CFR
part 4280 referencing language from 7
CFR part 4279 prior to amendment of
such regulation in 2017, update
references included in 7 CFR part 4280
to updated sections of 7 CFR part 4279,
and update the title of Form RD 4280–
2 from Grant Agreement to Financial
Assistance Agreement, all as intended at
the time of revision of 7 CFR part 4279.
In addition, information on lender
eligibility and credit quality is updated
to bring them into conformance with the
Guaranteed program and current
implementation.
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b. Revising the definition of State to
read as follows:
■
§ 4280.103
Definitions.
*
*
*
*
*
State. Any of the 50 States of the
United States, the District of Columbia,
the Commonwealth of Puerto Rico, the
U.S. Virgin Islands, Guam, American
Samoa, the Commonwealth of the
Northern Mariana Islands, the Republic
of Palau, the Federated States of
Micronesia, and the Republic of the
Marshall Islands.
*
*
*
*
*
■ 4. Revise § 4280.125 to read as
follows:
§ 4280.125 Compliance with §§ 4279.29
through 4279.99 of this chapter.
(a) General. Except for § 4279.29 of
this chapter, all loans guaranteed under
this subpart must comply with the
provisions found in §§ 4279.30 through
4279.99 of this chapter.
(b) Instead of § 4279.29 of this
chapter, the Eligible lenders provisions
of this subpart are:
(1) Traditional lenders. An eligible
lender is any Federal or State chartered
bank, Farm Credit Bank, other Farm
Credit System institution with direct
lending authority, Bank for
Cooperatives, Savings and Loan
Association, or mortgage company that
is part of a bank-holding company.
These entities must be subject to credit
examination and supervision by either
an agency of the United States or a
State. Eligible lenders may also include
credit unions provided, they are subject
to credit examination and supervision
by either the National Credit Union
Administration or a State agency, and
insurance companies provided they are
regulated by a State or National
insurance regulatory agency. Eligible
lenders include the National Rural
Utilities Cooperative Finance
Corporation.
(2) Other lenders. Rural Utilities
Service borrowers and other lenders not
meeting the criteria of paragraph (a) of
this section may be considered by the
Agency for eligibility to become a
guaranteed lender provided, the Agency
determines that they have the legal
authority to operate a lending program
and sufficient lending expertise and
financial strength to operate a successful
lending program.
(i) Such a lender must:
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Federal Register / Vol. 83, No. 127 / Monday, July 2, 2018 / Rules and Regulations
(A) Have a record of successfully
making at least three commercial loans
annually for at least the most recent 3
years, with delinquent loans not
exceeding 10 percent of loans
outstanding and historic losses not
exceeding 10 percent of dollars loaned,
or when the proposed lender can
demonstrate that it has personnel with
equivalent previous experience and
where the commercial loan portfolio
was of a similar quantity and quality;
and
(B) Have tangible balance sheet equity
of at least seven percent of tangible
assets and sufficient funds available to
disburse the guaranteed loans it
proposes to approve within the first 6
months of being approved as a
guaranteed lender.
(ii) A lender not eligible under
paragraph (a) of this section that wishes
consideration to become a guaranteed
lender must submit a request in writing
to the State Office for the State where
the lender’s lending and servicing
activity takes place. The lender’s written
request must include:
(A) Evidence showing that the lender
has the necessary capital and resources
to successfully meet its responsibilities.
(B) Copy of any license, charter, or
other evidence of authority to engage in
the proposed loanmaking and servicing
activities. If licensing by the State is not
required, an attorney’s opinion to this
effect must be submitted.
(C) Information on lending
experience, including length of time in
the lending business; range and volume
of lending and servicing activity; status
of loan portfolio including delinquency
rate, loss rate as a percentage of loan
amounts, and other measures of success;
experience of management and loan
officers; audited financial statements
not more than 1 year old; sources of
funds for the proposed loans; office
location and proposed lending area; and
proposed rates and fees, including loan
origination, loan preparation, and
servicing fees. Such fees must not be
greater than those charged by similarly
located commercial lenders in the
ordinary course of business.
(D) An estimate of the number and
size of guaranteed loan applications the
lender will develop.
(3) Expertise. Loan guarantees will
only be approved for lenders with
adequate experience and expertise to
make, secure, service, and collect REAP
loans.
■ 5. Revise § 4280.126 to read as
follows:
§ 4280.126
Guarantee/annual renewal fee.
Except for the conditions for receiving
reduced guarantee fee and unless
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16:46 Jun 29, 2018
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otherwise specified in a Federal
Register notice, the provisions specified
in § 4279.120 of this chapter apply to
loans guaranteed under this subpart.
■ 6. Amend § 4280.129 by revising
paragraph (e)(3) to read as follows:
§ 4280.129
Guaranteed loan funding.
*
*
*
*
*
(e) * * *
(3) Routine lender fees, as described
in § 4279.120 (c) of this chapter.
*
*
*
*
*
7. Amend § 4280.130 by revising
paragraph (b) to read as follows:
■
§ 4280.130
Loan processing.
*
*
*
*
*
(b) The provisions found in
§§ 4279.125(d), 4279.150, 4279.166,
4279.161, and 4279.167(b) of this
chapter do not apply to loans
guaranteed under this subpart.
8. Revise § 4280.131 to read as
follows:
■
§ 4280.131
Credit quality.
The lender is primarily responsible
for determining credit quality and must
address all of the elements of credit
quality in a written credit analysis
including adequacy of equity, cash flow,
collateral, history, management, and the
current status of the industry for which
credit is to be extended.
(a) Cash flow. All efforts will be made
to structure or restructure debt so that
the business has adequate debt coverage
and the ability to accommodate
expansion.
(b) Collateral. (1) Collateral must have
documented value sufficient to protect
the interest of the lender and the
Agency and, except as set forth in
paragraph (b)(2) of this section, the
discounted collateral value will be at
least equal to the loan amount. Lenders
will discount collateral consistent with
sound loan-to-value policy.
(2) Some businesses are
predominantly cash-flow oriented, and
where cash flow and profitability are
strong, loan-to-value coverage may be
discounted accordingly. A loan
primarily based on cash flow must be
supported by a successful and
documented financial history.
(c) Industry. Current status of the
industry will be considered and
businesses in areas of decline will be
required to provide strong business
plans which outline how they differ
from the current trends. The regulatory
environment surrounding the particular
business or industry will be considered.
(d) Equity. Borrowers must
demonstrate evidence of a financial
contribution in the project of not less
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than 25 percent of total Eligible Project
Costs. Federal grant funds may be used
as the financial contribution.
(e) Lien priorities. The entire loan will
be secured by the same security with
equal lien priority for the guaranteed
and unguaranteed portions of the loan.
The unguaranteed portion of the loan
will neither be paid first nor given any
preference or priority over the
guaranteed portion. A parity or junior
position may be considered provided
that discounted collateral values are
adequate to secure the loan in
accordance with paragraph (b) of this
section after considering prior liens.
(f) Management. A thorough review of
key management personnel will be
completed to ensure that the business
has adequately trained and experienced
managers.
9. Revise § 4280.134 to read as
follows:
■
§ 4280.134 Personal and corporate
guarantees.
Except for Passive Investors, all
personal and corporate guarantees must
be in accordance with § 4279.132 of this
chapter.
■ 10. Amend § 4280.137 by revising
paragraphs (b)(2)(viii)(C) and (c)(1), and
the first sentence of paragraph (c)(2), to
read as follows:
§ 4280.137 Application and
documentation.
*
*
*
*
*
(b) * * *
(2) * * *
(viii) * * *
(C) Pro forma financial statements.
Provide pro forma balance sheet at startup of the borrower’s business operation
that reflects the use of the loan proceeds
or grant award; 2 additional years of
financial statements, indicating the
necessary start-up capital, operating
capital, and short-term credit; and
projected cash flow and income
statements for 3 years supported by a
list of assumptions showing the basis for
the projections.
*
*
*
*
*
(c) * * *
(1) Application contents. If the
application is for a loan with total
project costs in the amount of $80,000
or less, the application must contain the
information specified in § 4280.119(b),
except as specified in paragraph (c)(2) of
this section (e.g., the grant application
SF–424 forms under § 4280.119(b) are
not required to be submitted), and must
present the information in the same
order as shown in § 4280.119(b). If the
application is for less than $200,000, but
more than $80,000, the application must
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Federal Register / Vol. 83, No. 127 / Monday, July 2, 2018 / Rules and Regulations
contain the information specified in
§ 4280.118(b), except as specified in
paragraph (c)(2) of this section (e.g., the
grant application SF–424 forms under
§ 4280.117(a) are not required to be
submitted), and must present the
information in the same order as shown
in § 4280.118(b). If the application is for
$200,000 and greater, the application
must contain the information specified
in § 4280.117, except as specified in
paragraph (c)(2) of this section, (e.g., the
grant application SF–424 forms under
§ 4280.117(a) are not required to be
submitted), and must present the
information in the same order as shown
in § 4280.117.
(2) Lender forms, certifications, and
agreements. Each application submitted
under paragraph (c) of this section must
use Form RD 4279–1, ‘‘Application for
Loan Guarantee,’’ and the forms and
certifications specified in paragraphs
(b)(2)(ii), (iii) (if not previously
submitted), (v), (viii), (ix), (x), and (xi)
of this section. * * *
11. Amend § 4280.142 by revising the
first sentence of the introductory text to
read as follows:
■
§ 4280.142 Conditions precedent to
issuance of loan note guarantee.
The provisions of § 4279.181 of this
chapter apply except for
§ 4279.181(a)(9)(v). * * *
*
*
*
*
*
Dated: June 8, 2018.
Bette B. Brand,
Administrator, Rural Business-Cooperative
Service.
Dated: June 14, 2018.
Kenneth L. Johnson,
Administrator, Rural Utilities Service.
(FCS) banks and associations. The final
rule strengthens eligibility criteria for
investments that FCS banks purchase
and hold, and implements section 939A
of the Dodd-Frank Wall Street Reform
and Consumer Protection Act by
removing references to and
requirements for credit ratings and
substituting other appropriate standards
of creditworthiness. The final rule
revises FCA’s regulatory approach to
investments by FCS associations by
limiting the type and amount of
investments that an association may
hold for risk management purposes.
DATES: This correction shall become
effective on January 1, 2019.
FOR FURTHER INFORMATION CONTACT:
David J. Lewandrowski, Senior Policy
Analyst, Office of Regulatory Policy,
(703) 883–4212, TTY (703) 883–4056,
lewandrowskid@fca.gov;
J.C. Floyd, Associate Director of Finance
and Capital Market Team, Office of
Regulatory Policy, (703) 883–4321,
TTY (703) 883–4056, floydjc@fca.gov;
or
Richard A. Katz, Senior Counsel, Office
of General Counsel, (703) 883–4020,
TTY (703) 883–4056, katzr@fca.gov.
SUPPLEMENTARY INFORMATION: In FR Doc.
2018–12366 appearing on page 27486 in
the Federal Register of Tuesday, June
12, 2018, the following corrections are
made:
§ 611.1153
[Corrected]
1. On page 27499, in the first column,
in part 611, amendatory instruction 2 is
removed.
■
§ 611.1155
[Corrected]
2. On page 27499, in the first column,
in part 611, amendatory instruction 3 is
removed.
■
[FR Doc. 2018–14170 Filed 6–29–18; 8:45 am]
BILLING CODE 3410–XY–P
§ 615.5133
[Corrected]
3. On page 27500, in the first column,
in § 615.5133, in paragraph (b), in the
fourth sentence, the word ‘‘banks’’ is
corrected to read ‘‘bank’s’’.
■
FARM CREDIT ADMINISTRATION
12 CFR Parts 611 and 615
[Docket No. 2018–12366]
§ 615.5140
RIN 3052–AC84
[Corrected]
4. On page 27502, in the third column,
in § 615.5140, in paragraph (b)(3)(i), in
the first sentence, the reference
‘‘§ 615.5133(a), (b), (c), (d), and (e)’’ is
corrected to read ‘‘§ 615.5133(a), (b), (c),
(d), (e), (h), and (i).’’
■ 5. On page 27502, in the third column,
in § 615.5140, in paragraph (b)(4)(ii), in
the first sentence, the reference
‘‘§ 615.5132’’ is corrected to read
‘‘§ 615.5131’’.
■ 6. On page 27503, in the first column,
in § 615.5140, in paragraph (b)(6)(ii), in
the first sentence, the reference
■
Organization; Funding and Fiscal
Affairs, Loan Policies and Operations,
and Funding Operations; Investment
Eligibility; Correction
Farm Credit Administration.
Final rule; correction.
daltland on DSKBBV9HB2PROD with RULES
AGENCY:
ACTION:
The Farm Credit
Administration (FCA or our) is
correcting a final rule that appeared in
the Federal Register on June 12, 2019
that amends our regulations governing
investments of both Farm Credit System
SUMMARY:
VerDate Sep<11>2014
16:46 Jun 29, 2018
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30833
‘‘paragraph (b)(3)’’ is corrected to read
‘‘paragraph (b)(4)’’.
§ 615.5143
[Corrected]
7. On page 27503, in the second
column, in § 615.5143, in paragraph
(a)(2), the reference ‘‘§ 615.5140(b)(3)’’ is
corrected to read ‘‘§ 615.5140(b)(4)’’.
■ 8. On page 27503, in the third column,
in § 615.5143, in paragraph (b)(3), the
reference ‘‘§ 615.5140(b)(3)’’ is corrected
to read ‘‘§ 615.5140(b)(4)’’.
■
Dated: June 26, 2018.
Dale L. Aultman,
Secretary, Farm Credit Administration Board.
[FR Doc. 2018–14107 Filed 6–29–18; 8:45 am]
BILLING CODE 6705–01–P
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 97
[Docket No. 31200; Amdt. No. 3806]
Standard Instrument Approach
Procedures, and Takeoff Minimums
and Obstacle Departure Procedures;
Miscellaneous Amendments
Federal Aviation
Administration (FAA), DOT.
ACTION: Final rule.
AGENCY:
This rule amends, suspends,
or removes Standard Instrument
Approach Procedures (SIAPs) and
associated Takeoff Minimums and
Obstacle Departure Procedures for
operations at certain airports. These
regulatory actions are needed because of
the adoption of new or revised criteria,
or because of changes occurring in the
National Airspace System, such as the
commissioning of new navigational
facilities, adding new obstacles, or
changing air traffic requirements. These
changes are designed to provide for the
safe and efficient use of the navigable
airspace and to promote safe flight
operations under instrument flight rules
at the affected airports.
DATES: This rule is effective July 2,
2018. The compliance date for each
SIAP, associated Takeoff Minimums,
and ODP is specified in the amendatory
provisions.
The incorporation by reference of
certain publications listed in the
regulations is approved by the Director
of the Federal Register as of July 2, 2018.
ADDRESSES: Availability of matter
incorporated by reference in the
amendment is as follows:
SUMMARY:
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]]>Agencies
[Federal Register Volume 83, Number 127 (Monday, July 2, 2018)]
[Rules and Regulations]
[Pages 30831-30833]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-14170]
========================================================================
Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
========================================================================
Federal Register / Vol. 83, No. 127 / Monday, July 2, 2018 / Rules
and Regulations
[[Page 30831]]
DEPARTMENT OF AGRICULTURE
Rural Business-Cooperative Service
Rural Utilities Service
7 CFR Part 4280
RIN 0570-AA85
Guaranteed Loanmaking and Servicing Regulations; Corrections
AGENCY: Rural Business-Cooperative Service and Rural Utilities
Service; USDA.
ACTION: Correcting amendments.
-----------------------------------------------------------------------
SUMMARY: On June 3, 2016, the Rural Business-Cooperative Service
promulgated changes to its Guaranteed Loanmaking and Servicing
Regulations. Following final implementation of this final rule, RBS
found that conforming amendments for adoption for the Rural Energy for
America Program (REAP) had not been included. This technical correction
makes amendments to allow REAP to continue to use procedures and forms
from the revised Guaranteed program.
DATES: Effective July 2, 2018.
FOR FURTHER INFORMATION CONTACT: Mark Brodziski, Rural Development,
Energy Programs, U.S. Department of Agriculture, 1400 Independence Ave.
SW, Stop 3225, Washington, DC 20250-3201; email:
[email protected]; telephone number: (202) 720-0410.
SUPPLEMENTARY INFORMATION:
Need for Corrections
The Agency published a final rule on June 3, 2016, (81 FR 35984)
for the purpose of improving program delivery, clarifying the
regulations to make them easier to understand, and reducing
delinquencies. The Agency discovered that conforming amendments had not
been included for 7 CFR part 4280 to continue to allow the Rural Energy
for America Program to use procedures and forms already codified for
the Guaranteed program and correctly reference revised 7 CFR part 4279.
This notice makes technical corrections to include the actual language
in 7 CFR part 4280 referencing language from 7 CFR part 4279 prior to
amendment of such regulation in 2017, update references included in 7
CFR part 4280 to updated sections of 7 CFR part 4279, and update the
title of Form RD 4280-2 from Grant Agreement to Financial Assistance
Agreement, all as intended at the time of revision of 7 CFR part 4279.
In addition, information on lender eligibility and credit quality is
updated to bring them into conformance with the Guaranteed program and
current implementation.
List of Subjects in 7 CFR Part 4280
Business and industry, Energy, Grant programs--Business, Loan
programs--Business and industry, Rural areas.
Accordingly, 7 CFR chapter XLII is amended by making the following
correcting amendments:
PART 4280--LOANS AND GRANTS
0
1. The authority citation for part 4280 continues to read as follows:
Authority: 5 U.S.C. 301; 7 U.S.C. 940c; and 7 U.S.C. 1932(c).
Subpart B--Rural Energy for America Program
Sec. Sec. 4280.103, 4280.110, 4280.112, 4280.113, 4280.122, 4280.123,
and 4280.196 [Amended]
0
2. In Sec. Sec. 4280.103, 4280.110, 4280.112, 4280.113, 4280.122,
4280.123, and 4280.196, remove the words ``Grant Agreement'' and add in
their place the words ``Financial Assistance Agreement'' wherever they
appear in the following places:
0
a. Sec. 4280.103;
0
b. Sec. 4280.110(i) introductory text, (i)(1), and (i)(2);
0
c. Sec. 4280.112(b)(2);
0
d. Sec. 4280.113(a)(4)(ii)(A) and (B);
0
e. Sec. 4280.122(d), (e), (f), (g) and (h);
0
f. Sec. 4280.123 introductory text and (d);
0
g. Sec. 4280.196 introductory text.
0
3. Amend Sec. 4280.103 by:
0
a. Placing the newly designated definition Financial Assistance
Agreement (Form RD 4280-2, Rural Business Cooperative Service Financial
Assistance Agreement, or successor form) in alphabetical order.
0
b. Revising the definition of State to read as follows:
Sec. 4280.103 Definitions.
* * * * *
State. Any of the 50 States of the United States, the District of
Columbia, the Commonwealth of Puerto Rico, the U.S. Virgin Islands,
Guam, American Samoa, the Commonwealth of the Northern Mariana Islands,
the Republic of Palau, the Federated States of Micronesia, and the
Republic of the Marshall Islands.
* * * * *
0
4. Revise Sec. 4280.125 to read as follows:
Sec. 4280.125 Compliance with Sec. Sec. 4279.29 through 4279.99 of
this chapter.
(a) General. Except for Sec. 4279.29 of this chapter, all loans
guaranteed under this subpart must comply with the provisions found in
Sec. Sec. 4279.30 through 4279.99 of this chapter.
(b) Instead of Sec. 4279.29 of this chapter, the Eligible lenders
provisions of this subpart are:
(1) Traditional lenders. An eligible lender is any Federal or State
chartered bank, Farm Credit Bank, other Farm Credit System institution
with direct lending authority, Bank for Cooperatives, Savings and Loan
Association, or mortgage company that is part of a bank-holding
company. These entities must be subject to credit examination and
supervision by either an agency of the United States or a State.
Eligible lenders may also include credit unions provided, they are
subject to credit examination and supervision by either the National
Credit Union Administration or a State agency, and insurance companies
provided they are regulated by a State or National insurance regulatory
agency. Eligible lenders include the National Rural Utilities
Cooperative Finance Corporation.
(2) Other lenders. Rural Utilities Service borrowers and other
lenders not meeting the criteria of paragraph (a) of this section may
be considered by the Agency for eligibility to become a guaranteed
lender provided, the Agency determines that they have the legal
authority to operate a lending program and sufficient lending expertise
and financial strength to operate a successful lending program.
(i) Such a lender must:
[[Page 30832]]
(A) Have a record of successfully making at least three commercial
loans annually for at least the most recent 3 years, with delinquent
loans not exceeding 10 percent of loans outstanding and historic losses
not exceeding 10 percent of dollars loaned, or when the proposed lender
can demonstrate that it has personnel with equivalent previous
experience and where the commercial loan portfolio was of a similar
quantity and quality; and
(B) Have tangible balance sheet equity of at least seven percent of
tangible assets and sufficient funds available to disburse the
guaranteed loans it proposes to approve within the first 6 months of
being approved as a guaranteed lender.
(ii) A lender not eligible under paragraph (a) of this section that
wishes consideration to become a guaranteed lender must submit a
request in writing to the State Office for the State where the lender's
lending and servicing activity takes place. The lender's written
request must include:
(A) Evidence showing that the lender has the necessary capital and
resources to successfully meet its responsibilities.
(B) Copy of any license, charter, or other evidence of authority to
engage in the proposed loanmaking and servicing activities. If
licensing by the State is not required, an attorney's opinion to this
effect must be submitted.
(C) Information on lending experience, including length of time in
the lending business; range and volume of lending and servicing
activity; status of loan portfolio including delinquency rate, loss
rate as a percentage of loan amounts, and other measures of success;
experience of management and loan officers; audited financial
statements not more than 1 year old; sources of funds for the proposed
loans; office location and proposed lending area; and proposed rates
and fees, including loan origination, loan preparation, and servicing
fees. Such fees must not be greater than those charged by similarly
located commercial lenders in the ordinary course of business.
(D) An estimate of the number and size of guaranteed loan
applications the lender will develop.
(3) Expertise. Loan guarantees will only be approved for lenders
with adequate experience and expertise to make, secure, service, and
collect REAP loans.
0
5. Revise Sec. 4280.126 to read as follows:
Sec. 4280.126 Guarantee/annual renewal fee.
Except for the conditions for receiving reduced guarantee fee and
unless otherwise specified in a Federal Register notice, the provisions
specified in Sec. 4279.120 of this chapter apply to loans guaranteed
under this subpart.
0
6. Amend Sec. 4280.129 by revising paragraph (e)(3) to read as
follows:
Sec. 4280.129 Guaranteed loan funding.
* * * * *
(e) * * *
(3) Routine lender fees, as described in Sec. 4279.120 (c) of this
chapter.
* * * * *
0
7. Amend Sec. 4280.130 by revising paragraph (b) to read as follows:
Sec. 4280.130 Loan processing.
* * * * *
(b) The provisions found in Sec. Sec. 4279.125(d), 4279.150,
4279.166, 4279.161, and 4279.167(b) of this chapter do not apply to
loans guaranteed under this subpart.
0
8. Revise Sec. 4280.131 to read as follows:
Sec. 4280.131 Credit quality.
The lender is primarily responsible for determining credit quality
and must address all of the elements of credit quality in a written
credit analysis including adequacy of equity, cash flow, collateral,
history, management, and the current status of the industry for which
credit is to be extended.
(a) Cash flow. All efforts will be made to structure or restructure
debt so that the business has adequate debt coverage and the ability to
accommodate expansion.
(b) Collateral. (1) Collateral must have documented value
sufficient to protect the interest of the lender and the Agency and,
except as set forth in paragraph (b)(2) of this section, the discounted
collateral value will be at least equal to the loan amount. Lenders
will discount collateral consistent with sound loan-to-value policy.
(2) Some businesses are predominantly cash-flow oriented, and where
cash flow and profitability are strong, loan-to-value coverage may be
discounted accordingly. A loan primarily based on cash flow must be
supported by a successful and documented financial history.
(c) Industry. Current status of the industry will be considered and
businesses in areas of decline will be required to provide strong
business plans which outline how they differ from the current trends.
The regulatory environment surrounding the particular business or
industry will be considered.
(d) Equity. Borrowers must demonstrate evidence of a financial
contribution in the project of not less than 25 percent of total
Eligible Project Costs. Federal grant funds may be used as the
financial contribution.
(e) Lien priorities. The entire loan will be secured by the same
security with equal lien priority for the guaranteed and unguaranteed
portions of the loan. The unguaranteed portion of the loan will neither
be paid first nor given any preference or priority over the guaranteed
portion. A parity or junior position may be considered provided that
discounted collateral values are adequate to secure the loan in
accordance with paragraph (b) of this section after considering prior
liens.
(f) Management. A thorough review of key management personnel will
be completed to ensure that the business has adequately trained and
experienced managers.
0
9. Revise Sec. 4280.134 to read as follows:
Sec. 4280.134 Personal and corporate guarantees.
Except for Passive Investors, all personal and corporate guarantees
must be in accordance with Sec. 4279.132 of this chapter.
0
10. Amend Sec. 4280.137 by revising paragraphs (b)(2)(viii)(C) and
(c)(1), and the first sentence of paragraph (c)(2), to read as follows:
Sec. 4280.137 Application and documentation.
* * * * *
(b) * * *
(2) * * *
(viii) * * *
(C) Pro forma financial statements. Provide pro forma balance sheet
at start-up of the borrower's business operation that reflects the use
of the loan proceeds or grant award; 2 additional years of financial
statements, indicating the necessary start-up capital, operating
capital, and short-term credit; and projected cash flow and income
statements for 3 years supported by a list of assumptions showing the
basis for the projections.
* * * * *
(c) * * *
(1) Application contents. If the application is for a loan with
total project costs in the amount of $80,000 or less, the application
must contain the information specified in Sec. 4280.119(b), except as
specified in paragraph (c)(2) of this section (e.g., the grant
application SF-424 forms under Sec. 4280.119(b) are not required to be
submitted), and must present the information in the same order as shown
in Sec. 4280.119(b). If the application is for less than $200,000, but
more than $80,000, the application must
[[Page 30833]]
contain the information specified in Sec. 4280.118(b), except as
specified in paragraph (c)(2) of this section (e.g., the grant
application SF-424 forms under Sec. 4280.117(a) are not required to be
submitted), and must present the information in the same order as shown
in Sec. 4280.118(b). If the application is for $200,000 and greater,
the application must contain the information specified in Sec.
4280.117, except as specified in paragraph (c)(2) of this section,
(e.g., the grant application SF-424 forms under Sec. 4280.117(a) are
not required to be submitted), and must present the information in the
same order as shown in Sec. 4280.117.
(2) Lender forms, certifications, and agreements. Each application
submitted under paragraph (c) of this section must use Form RD 4279-1,
``Application for Loan Guarantee,'' and the forms and certifications
specified in paragraphs (b)(2)(ii), (iii) (if not previously
submitted), (v), (viii), (ix), (x), and (xi) of this section. * * *
0
11. Amend Sec. 4280.142 by revising the first sentence of the
introductory text to read as follows:
Sec. 4280.142 Conditions precedent to issuance of loan note
guarantee.
The provisions of Sec. 4279.181 of this chapter apply except for
Sec. 4279.181(a)(9)(v). * * *
* * * * *
Dated: June 8, 2018.
Bette B. Brand,
Administrator, Rural Business-Cooperative Service.
Dated: June 14, 2018.
Kenneth L. Johnson,
Administrator, Rural Utilities Service.
[FR Doc. 2018-14170 Filed 6-29-18; 8:45 am]
BILLING CODE 3410-XY-P
