Updates to Servicing Requirements for Business & Industry Guaranteed Loans, 58019-58021 [2022-20652]

Agencies

• DEPARTMENT OF AGRICULTURE
• Rural Business-Cooperative Service
• Rural Utilities Service

[Federal Register Volume 87, Number 184 (Friday, September 23, 2022)]
[Rules and Regulations]
[Pages 58019-58021]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-20652]



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Rules and Regulations
                                                Federal Register
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Federal Register / Vol. 87, No. 184 / Friday, September 23, 2022 / 
Rules and Regulations

[[Page 58019]]



DEPARTMENT OF AGRICULTURE

Rural Business-Cooperative Service

Rural Utilities Service

7 CFR Part 4287

[Docket No. RBS-22-BUSINESS-0018]
RIN 0570-AB08


Updates to Servicing Requirements for Business & Industry 
Guaranteed Loans

AGENCY: Rural Business Cooperative Service and Rural Utilities Service, 
USDA.

ACTION: Final rule.

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SUMMARY: The Rural Business Cooperative Service (RBCS or the Agency), a 
Rural Development (RD) agency of the United States Department of 
Agriculture (USDA), is revising their servicing requirements for the 
Business & Industry (B&I) Guaranteed Program to clarify the current 
regulation and update certain provisions to align with the OneRD 
Guarantee Loan Initiative.

DATES: This final rule is effective October 24, 2022.

ADDRESSES: Additional information about RD and its programs is 
available on the internet at https://www.rd.usda.gov/.

FOR FURTHER INFORMATION CONTACT: Justin Kirking, Servicing Branch 
Chief, Rural Business-Cooperative Service, USDA Rural Development, 1400 
Independence Ave. SW, Rm 5803-Stop 3201, Washington, DC 2050-3201; 
telephone 608-606-0298; email [email protected].

SUPPLEMENTARY INFORMATION: 

I. Background

    The purpose of the B&I Guaranteed Loan Program is to improve, 
develop, or finance business, industry, and employment and improve the 
economic and environmental climate in rural communities. This is 
achieved by bolstering the existing private credit structure through 
the guarantee of quality loans.
    The regulations in 7 CFR part 4287, subpart B, Servicing Business 
and Industry Guaranteed Loan Program, provide servicing and liquidation 
requirements for Business & Industry (B&I) Guaranteed Loans originated 
under 7 CFR part 4279, subparts A and B. Subparts A and B of 7 CFR part 
4279 and subpart B of 7 CFR part 4287 are applicable to B&I Loans 
guaranteed by the Agency prior to October 1, 2020, and to B&I loans 
made under the authority of the Coronavirus Aid, Relief, and Economic 
Security Act (CARES Act) (Pub. L. 116-136) to provide B&I guarantees 
for loans needed as a result of the Coronavirus Disease 2019 (COVID-19) 
pandemic for working capital loan purposes to support business 
operations and facilities in rural areas (B&I CARES Act Program Loans). 
Beginning on October 1, 2020, new B&I loans are made under 7 CFR part 
5001, Guaranteed Loans, which is commonly referred to as the OneRD 
Guarantee Loan Initiative.
    The RBCS is amending 7 CFR part 4287, subpart B, with the intent to 
clarify the current regulation and update certain provisions to align 
with 7 CFR part 5001. It is anticipated that most existing lenders with 
guaranteed loans serviced under 7 CFR part 4287, subpart B, will obtain 
new guarantees under 7 CFR part 5001 which will be serviced in 
accordance with subpart F of 7 CFR part 5001. The Agency has identified 
several provisions that should be aligned between the two servicing 
regulations (7 CFR part 5001 and 7 CFR part 4287, subpart B) in order 
to provide consistency, efficiency, and to improve the customer 
experience.

II. Summary of Changes to the Rule

Section 4287.107 Routine Servicing

    Paragraph (d) is updated to clarify financial reporting 
requirements for the Borrower(s).

Section 4287.112 Interest Rate Changes

    Paragraph (b) is revised to provide flexibility regarding changing 
from a variable rate to a fixed rate and to help align with 7 CFR part 
5001.

Section 4287.113 Release of Collateral

    Paragraphs (a) and (c) are revised to establish uniform procedure 
for the release of collateral and to bring the regulation more in 
alignment with 7 CFR part 5001.

III. Executive Orders/Acts

Executive Order 12866--Classification

    This rule has been determined to be not significant for purposes of 
Executive Order 12866 and, therefore, has not been reviewed by the 
Office of Management and Budget (OMB).

Congressional Review Act

    Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), 
the Office of Information and Regulatory Affairs designated this rule 
as not a major rule, as defined by 5 U.S.C. 804(2).

Assistance Listing Number (Formally Known as the Catalog of Federal 
Domestic Assistance)

    The Assistance Listing Number assigned to the Business and Industry 
Guaranteed Loan Program is 10.768. The Assistance Listings are 
available on the internet at https://sam.gov/.

Executive Order 12372--Intergovernmental Review

    This final rule is excluded from the scope of Executive Order 12372 
(Intergovernmental Consultation), which may require a consultation with 
State and local officials.

Paperwork Reduction Act

    This rule contains no new reporting or recordkeeping burdens under 
OMB control number 0570-0069 that would require approval under the 
Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35).

National Environmental Policy Act

    In accordance with the National Environmental Policy Act of 1969, 
Public Law 91-190, this final rule has been reviewed in accordance with 
7 CFR part 1970 (``Environmental Policies and Procedures''). RBCS has 
determined that (i) this action meets the criteria established in 7 CFR 
1970.53(f); (ii) no extraordinary circumstances exist; and (iii) the 
action is not ``connected'' to other actions with potentially 
significant impacts, is not considered a ``cumulative action'' and is 
not precluded by 40 CFR 1506.1. Therefore,

[[Page 58020]]

the Agency has determined that the action does not have a significant 
effect on the human environment, and therefore neither an Environmental 
Assessment nor an Environmental Impact Statement is required.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public 
Law 104-4, establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on State, local, and tribal 
governments and the private sector. Under section 202 of the UMRA, RBCS 
generally must prepare a written statement, including a cost-benefit 
analysis, for proposed and final rules with Federal mandates that may 
result in expenditures to State, local, or tribal governments, in the 
aggregate, or to the private sector, of $100 million or more in any one 
year. When such a statement is needed for a rule, section 205 of the 
UMRA generally requires RBCS to identify and consider a reasonable 
number of regulatory alternatives and adopt the least costly, most 
cost-effective, or least burdensome alternative that achieves the 
objectives of the rule.
    This final rule contains no Federal mandates (under the regulatory 
provisions of title II of the UMRA) for State, local, and tribal 
governments or the private sector. Therefore, this final rule is not 
subject to the requirements of sections 202 and 205 of the UMRA.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601-602) (RFA) generally 
requires an agency to prepare a regulatory flexibility analysis of any 
rule subject to notice and comment rulemaking requirements under the 
Administrative Procedure Act (``APA'') or any other statute. The 
Administrative Procedures Act exempts from notice and comment 
requirements rules ``relating to agency management or personnel or to 
public property, loans, grants, benefits, or contracts'' (5 U.S.C. 
553(a)(2)), so therefore an analysis has not been prepared for this 
rule.

Executive Order 12988--Civil Justice Reform

    This rule has been reviewed under Executive Order 12988. In 
accordance with this rule: (1) unless otherwise specifically provided, 
all State and local laws that conflict with this rule will be 
preempted; (2) no retroactive effect will be given to this rule except 
as specifically prescribed in the rule; and (3) administrative 
proceedings of the National Appeals Division of the Department of 
Agriculture (7 CFR part 11) must be exhausted before bringing suit in 
court that challenges action taken under this rule.

Executive Order 13132--Federalism

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

Executive Order 13175--Consultation and Coordination With Indian Tribal 
Governments

    This executive order imposes requirements on RBCS in the 
development of regulatory policies that have tribal implications or 
preempt tribal laws. RBCS has determined that the rule does not have a 
substantial direct effect on one or more Indian tribe(s) or on either 
the relationship or the distribution of powers and responsibilities 
between the Federal Government and Indian tribes. Thus, this rule is 
not subject to the requirements of Executive Order 13175. If tribal 
leaders are interested in consulting with RBCS on this rule, they are 
encouraged to contact USDA's Office of Tribal Relations or RD's Native 
American Coordinator at: [email protected] to request such a consultation.

E-Government Act Compliance

    Rural Development is committed to the E-Government Act, which 
requires Government agencies in general to provide the public the 
option of submitting information or transacting business electronically 
to the maximum extent possible.

Civil Rights Impact Analysis

    Rural Development, a mission area for which RBCS is an agency, has 
reviewed this rule in accordance with USDA Regulation 4300-4, Civil 
Rights Impact Analysis,'' to identify any major civil rights impacts 
the rule might have on program participants on the basis of age, race, 
color, national origin, sex, or disability. After review and analysis 
of the rule and available data, it has been determined that based on 
the analysis of the program purpose, application submission and 
eligibility criteria, issuance of this final rule is not likely to 
negatively impact very low, low and moderate-income populations, 
minority populations, women, Indian tribes or persons with disability, 
by virtue of their race, color, national origin, sex, age, disability, 
or marital or familial status. No major civil rights impact is likely 
to result from this rule.

USDA Non-Discrimination Statement

    In accordance with Federal civil rights laws and USDA civil rights 
regulations and policies, the USDA, its Mission Areas, agencies, staff 
offices, employees, and institutions participating in or administering 
USDA programs are prohibited from discriminating based on race, color, 
national origin, religion, sex, gender identity (including gender 
expression), sexual orientation, disability, age, marital status, 
family/parental status, income derived from a public assistance 
program, political beliefs, or reprisal or retaliation for prior civil 
rights activity, in any program or activity conducted or funded by USDA 
(not all bases apply to all programs). Remedies and complaint filing 
deadlines vary by program or incident.
    Program information may be made available in languages other than 
English. Persons with disabilities who require alternative means of 
communication to obtain program information (e.g., Braille, large 
print, audiotape, American Sign Language) should contact the 
responsible Mission Area, agency, or staff office; the USDA TARGET 
Center at (202) 720-2600 (voice and TTY); or the Federal Relay Service 
at (800) 877-8339.
    To file a program discrimination complaint, a complainant should 
complete a Form AD-3027, USDA Program Discrimination Complaint Form, 
which can be obtained online at https://www.usda.gov/sites/default/files/documents/usda-program-discrimination-complaint-form.pdf, from 
any USDA office, by calling (866) 632-9992, or by writing a letter 
addressed to USDA. The letter must contain the complainant's name, 
address, telephone number, and a written description of the alleged 
discriminatory action in sufficient detail to inform the Assistant 
Secretary for Civil Rights (ASCR) about the nature and date of an 
alleged civil rights violation. The completed AD-3027 form or letter 
must be submitted to USDA by:
    (1) Mail: U.S. Department of Agriculture, Office of the Assistant 
Secretary for Civil Rights, 1400 Independence Avenue SW, Washington, DC 
20250-9410; or
    (2) Fax: (833) 256-1665 or (202) 690-7442; or
    (3) Email: [email protected].

List of Subjects for 7 CFR Part 4287

    Economic development, Energy, Energy conservation, Grant programs,

[[Page 58021]]

Loan programs, Loan programs--business, Loan programs--housing and 
community development, Renewable energy, Reporting and recordkeeping 
requirements, Rural areas.

    For the reasons discussed in the preamble, 7 CFR part 4287 is 
amended as follows:

PART 4287--SERVICING

0
1. The authority citation for part 4287 continues to read as follows:

    Authority: 5 U.S.C. 301; 7 U.S.C. 1932(a); 7 U.S.C. 1989.

Subpart B--Servicing Business and Industry Guaranteed Loans

0
2. Amend Sec.  4287.107 by revising paragraph (d) to read as follows:


Sec.  4287.107   Routine servicing.

* * * * *
    (d) Borrower financial reports. The lender must obtain, analyze, 
and forward to the Agency the borrower's and any guarantor's annual 
financial statements required by the loan agreement within 120 days of 
the end of the borrower's fiscal year. States, local government, Indian 
tribes, institution of higher education, and nonprofit organization 
borrowers who meet the Federal awards expended threshold established in 
2 CFR part 200, subpart F, during their fiscal year must submit an 
audit conducted in accordance with 2 CFR part 200, subpart F. When the 
borrower's audit is conducted in accordance with 2 CFR part 200, 
subpart F, audits must be submitted no later than nine months after the 
end of the borrower's fiscal year or 30 days after the borrower's 
receipt of the auditor's report, whichever is earlier. The lender must 
analyze these financial statements and provide the Agency with a 
written summary of the lender's analysis, ratio analysis, and 
conclusions, which, at a minimum, must include trends, strengths, 
weaknesses, extraordinary transactions, violations of loan covenants 
and covenant waivers proposed by the lender, any routine servicing 
actions performed, and other indications of the financial condition of 
the borrower. Spreadsheets of the financial statements must also be 
included. Following the Agency's review of the lender's financial 
analysis, the Agency will provide a written report of any concerns to 
the lender. Any concerns based upon the Agency's review must be 
addressed by the lender. If the lender makes a reasonable attempt to 
obtain financial statements but is unable to obtain the borrower's 
cooperation, the failure to obtain financial statements will not impair 
the validity of the Loan Note Guarantee.
* * * * *

0
3. Amend Sec.  4287.112 by revising paragraph (b) to read as follows:


Sec.  4287.112   Interest rate changes.

* * * * *
    (b) No increases in interest rates will be permitted, except the 
normal fluctuations in approved variable interest rates, unless a 
temporary interest rate reduction occurred or to change from a variable 
rate to a fixed rate. Variable rates can be changed to a fixed rate at 
the request of the borrower, lender, agreement of the holder, if any, 
and with the Agency's prior written concurrence. After the rate change, 
the rate must meet the requirements of 7 CFR 4279.125.
* * * * *

0
4. Amend Sec.  4287.113 by revising paragraph (a) and the introductory 
text of paragraph (c) to read as follows:


Sec.  4287.113   Release of collateral.

    (a) Within the parameters of paragraph (c) of this section, lenders 
may, over the life of the loan, release collateral (other than personal 
and corporate guarantees) without Agency concurrence if the proceeds 
generated are used to pay down debt in order of lien priority, reduce 
the guaranteed loan or to acquire replacement collateral. Working 
assets, such as accounts receivable, inventory, and work-in-progress 
that are routinely depleted or sold and proceeds used for the normal 
course of business operations may be used in and released for routine 
business purposes without prior concurrence of the Agency as long as 
the loan is not in monetary default or liquidation.
* * * * *
    (c) Collateral must remain sufficient to provide for adequate 
collateral coverage for the outstanding guaranteed loan(s). For a 
release of collateral request when the Borrower is not in monetary 
default or liquidation, the lender must support all releases of chattel 
collateral with a value exceeding $250,000 and real estate collateral 
with a value exceeding $500,000 with a current appraisal on the 
collateral being released and otherwise meets the requirements of Sec.  
4279.144 of this chapter. All other release of collateral requests must 
meet the appraisal requirements of Sec.  4279.144 of this chapter. The 
cost of this appraisal will not be paid for by the Agency. The Agency 
may, at its discretion, require an appraisal of the remaining 
collateral in cases where it has been determined that the Agency may be 
adversely affected by the release of collateral. The sale or release of 
the collateral must be based on an arm's length transaction, and there 
must be adequate consideration for the release of collateral. Such 
consideration may include, but is not limited to:
* * * * *

Karama Neal,
Administrator, Rural Business Cooperative Service.
Chrisopher A. McLean,
Acting Administrator, Rural Utilities Service.
[FR Doc. 2022-20652 Filed 9-22-22; 8:45 am]
BILLING CODE 3410-XY-P