Contents
- 761.1 Introduction.
- 761.10 Planning and performing construction and other development.
- 761.101 Applicability.
- 761.102 Borrower recordkeeping and reporting.
- 761.103 Farm assessment.
- 761.104 Developing the farm operating plan.
- 761.105 Analysis.
- 761.106-761.200 -761.200 [Reserved]
- 761.11 Dishonored payment fee.
- 761.12-761.50 -761.50 [Reserved]
- 761.2 Abbreviations and definitions.
- 761.201 Purpose.
- 761.202 Timing of allocations.
- 761.203 National reserves for Farm Ownership and Operating loans.
- 761.204 Methods of allocating funds to State Offices.
- 761.205 Computing the formula allocation.
- 761.206 Pooling of unobligated funds allocated to State Offices.
- 761.207 Distribution of loan funds by State Offices.
- 761.208 Target participation rates for socially disadvantaged groups.
- 761.209 Loan funds for beginning farmers.
- 761.210 CL funds.
- 761.211 Transfer of funds.
- 761.3 Civil rights.
- 761.4 Conflict of interest.
- 761.401 Purpose.
- 761.402 Abbreviations and definitions.
- 761.403 General.
- 761.404 Eligibility.
- 761.405 Application.
- 761.406 Types of debt settlement.
- 761.407 Failure to pay.
- 761.408 Administrator authority.
- 761.5 Restrictions on lobbying.
- 761.51 Establishing a supervised bank account.
- 761.52 Deposits into a supervised bank account.
- 761.53 Interest bearing accounts.
- 761.54 Withdrawals from a supervised bank account.
- 761.55 Closing a supervised bank account.
- 761.56-761.100 -761.100 [Reserved]
- 761.6 Appeals.
- 761.7 Valuations.
- 761.8 Loan Limitations.
- 761.9 Interest rates for direct loans.
Subpart A · Subpart A—General Provisions
761.1Introduction.#
(a)The Administrator delegates the responsibility to administer Farm Loan Programs of the Consolidated Farm and Rural Development Act (7 U.S.C. 1921 et seq.) to the Deputy Administrator for Farm Loan Programs subject to any limitations established in 7 CFR 2.16(a)(2) and 7 CFR 2.42.
(b)The Deputy Administrator:
(1)Delegates to each State Executive Director within the State Executive Director's jurisdiction the authority, and in the absence of the State Executive Director, the person acting in that position, to act for, on behalf of, and in the name of the United States of America or the Farm Service Agency to do and perform acts necessary in connection with making and guaranteeing loans, such as, but not limited to, making advances, servicing loans and other indebtedness, and obtaining, servicing, and enforcing or releasing security and other instruments related to the loan. For actions that do not result in a loss to the Farm Service Agency, a State Executive Director may redelegate authorities received under this paragraph to a Deputy State Executive Director, Farm Loan Chief, Farm Loan Specialist, District Director, Farm Loan Manager, Senior Farm Loan Officer, Farm Loan Officer, Loan Analyst, Loan Resolution Specialist, Program Technician, or other positions as determined by the FSA Administrator.
(2)May establish procedures for further redelegation or limitation of authority.
(c)This part and parts 762 through 767 of this subchapter describe the Agency's policies for its Farm Loan Programs. The objective of these programs is to provide progression lending and management assistance to eligible farmers to become owners or operators, or both, of family farms, to continue such operations when credit is not available elsewhere, or to return to normal farming operations after sustaining substantial losses as a result of a designated or declared disaster. The programs are designed to allow those who participate to transition to private commercial credit or other sources of credit in the shortest period of time practicable through the use of progression lending, including farm assessments, borrower training, market placement, and borrower graduation requirements. These regulations apply to loan applicants, borrowers, lenders, holders, Agency personnel, and other parties involved in making, guaranteeing, holding, servicing, or liquidating such loans.
(d)This part describes the Agency's general and administrative policies for its guaranteed and direct Farm Loan Programs. In general, this part addresses issues that affect both guaranteed and direct loan programs.
(e)Part 3 of this title and 31 CFR part 285 describe the policies and procedures the Agency will follow for non-centralized offset (including administrative offset) and referral to Treasury for centralized offset (TOP), Federal salary offset, Administrative Wage Garnishment, and collection through Treasury's private collection agencies (cross-servicing). Supplemental provisions for FLP purposes are described in part 761, subpart F of this title.
(f)Part 3 of this title and 31 CFR parts 900-904 describe the policies and procedures the Agency will follow for debt settlement authorities pursuant to the Federal Claims Collection Standards. Supplemental provisions for FLP purposes are described in part 761, subpart F of this title.
(g)Part 761, subpart F of this title describes the debt settlement policies and procedures for FLP debt pursuant to the Act.
761.10Planning and performing construction and other development.#
(a)Purpose. This section describes Agency policies regarding the planning and performing of construction and other development work performed with:
(1)Direct FLP loan funds; or
(2)Insurance or other proceeds resulting from damage or loss to direct loan security.
(b)Funds for development work. The applicant or borrower:
(1)Must provide the Agency with an estimate of the total cash cost of all planned development prior to loan approval;
(2)Must show proof of sufficient funds to pay for the total cash cost of all planned development at or before loan closing; and
(3)Must not incur any debts for materials or labor or make any expenditures for development purposes prior to loan closing with the expectation of being reimbursed from Agency loan funds.
(c)Scheduling, planning, and completing development work. The applicant or borrower:
(1)Is responsible for scheduling and planning development work in a manner acceptable to the Agency and must furnish the Agency information fully describing the planned development, the proposed schedule, and the manner in which it will be accomplished;
(2)Is responsible for obtaining all necessary State and local construction approvals and permits prior to loan closing;
(3)Must ensure that all development work meets the environmental requirements established in part 1b of this title;
(4)Must schedule development work to start as soon as feasible after the loan is closed and complete work as quickly as practicable; and
(5)Is responsible for obtaining any required technical services from qualified technicians, tradespeople, and contractors.
(d)Construction and repair standards. (1) The construction of a new building and the alteration or repair of an existing building must conform with industry-acceptable construction practices and standards.
(2)All improvements to a property must conform to applicable laws, ordinances, codes, and regulations.
(3)The applicant or borrower is responsible for selecting a design standard that meets all applicable local and state laws, ordinances, codes, and regulations, including building, plumbing, mechanical, electrical, water, and waste management.
(4)The Agency will require drawings, specifications, and estimates to fully describe the work as necessary to protect the Agency's financial interests. The drawings and specifications must identify any specific development standards being used. Such information must be sufficiently complete to avoid any misunderstanding as to the extent, kind, and quality of work to be performed.
(5)The Agency will require technical data, tests, or engineering evaluations to support the design of the development as necessary to protect its financial interests.
(6)The Agency will require the applicant or borrower to provide written certification that final drawings and specifications conform with the applicable development standard as necessary to protect its financial interests. Certification must be obtained from individuals or organizations trained and experienced in the compliance, interpretation, or enforcement of the applicable development standards, such as licensed architects, professional engineers, persons certified by a relevant national model code organization, authorized local building officials, or national code organizations.
(e)Inspection. (1) The applicant or borrower is responsible for inspecting development work as necessary to protect their interest.
(2)The applicant or borrower must provide the Agency written certification that the development conforms to the plans and good construction practices, and complies with applicable laws, ordinances, codes, and regulations.
(3)The Agency will require the applicant or borrower to obtain professional inspection services during construction as necessary to protect its financial interests.
(4)Agency inspections do not create or imply any duty or obligation of the Agency to the applicant or borrower.
(f)Warranty and lien waivers. The applicant or borrower must obtain and submit all lien waivers on any construction before the Agency will issue final payment.
(g)Surety. The Agency will require surety to guarantee both payment and performance for construction contracts as necessary to protect its financial interests.
(h)Changing the planned development. An applicant or borrower must request, in writing, Agency approval for any change to a planned development. The Agency will approve a change if all of the following are met:
(1)It will not reduce the value of the Agency's security;
(2)It will not adversely affect the soundness of the farming operation;
(3)It complies with all applicable laws and regulations;
(4)It is for an authorized loan purpose;
(5)It is within the scope of the original loan proposal;
(6)If required, documentation that sufficient funding for the full amount of the planned development is approved and available;
(7)If required, surety to cover the full revised development amount has been provided; and
(8)The modification is certified in accordance with paragraph (d) (6) of this section.
761.11Dishonored payment fee.#
(a)The Agency will charge a fee for payment transactions that are returned for insufficient funds.
(b)[Reserved]
761.12-761.50-761.50 [Reserved]#
761.2Abbreviations and definitions.#
The following abbreviations and definitions are applicable to the Farm Loan Programs addressed in parts 761 through 769 unless otherwise noted.
(a)Abbreviations. AFT Application Fast Track. ARA Alternative Repayment Agreement. CL Conservation Loan. CLP Certified Lender Program. DBSA Distressed Borrower Set-Aside. DSA Disaster Set-Aside. EE Economic Emergency loan. EM Emergency loan. FCCS Federal Claims Collection Standards. FLP Farm Loan Programs. FO Farm Ownership loan. FSA Farm Service Agency, an Agency of the USDA, including its personnel and any successor Agency. HPRP The Heirs' Property Relending Program. LIBOR London Interbank Offered Rate. ML Microloan. MLP Micro Lender Program. NRCS National Resources and Conservation Service, USDA. OIG Office of the Inspector General, USDA. OGC Office of the General Counsel of the USDA. OL Operating loan. PLP Preferred Lender Program. RHF Rural Housing loan for farm service buildings. RL Recreation loan. SAA Shared Appreciation Agreement. SA Shared Appreciation loan. SEL Standard Eligible Lender. ST Softwood Timber loan. SW Soil and Water loan. USDA United States Department of Agriculture. USPAP Uniform Standards of Professional Appraisal Practice. YL Youth loan.
(b)Definitions. Abandoned security property is security property that a borrower is not occupying, is not in possession of, or has relinquished control of and has not made arrangements for its care or sale. Accrued deferred interest is unpaid interest from past due installments posted to a borrower's loan account. Act is the Consolidated Farm and Rural Development Act (7 U.S.C. 1921 et seq.). Additional security is property which provides security in excess of the amount of security value equal to the loan amount. Adequate security is property which is required to provide security value at least equal to the loan amount. Adjustment means the settlement of an FLP debt for less than the total amount owed. The adjusted amount is collected through a series of payments that are scheduled over time. An adjustment is not a final settlement until all scheduled payments have been made. After applying all payments pursuant to the adjustment agreement, any remaining balance is canceled. The amount canceled is reported to the IRS pursuant to § 3.90 of this title and applicable IRS requirements. Administrative appraisal review is a review of an appraisal to determine if the appraisal:
(i)Meets the loan eligibility requirements for a direct or guaranteed CL, FO, or OL, as applicable;
(ii)Has not operated a farm for more than 10 years. This requirement applies to all members of an entity;
(i)Are those that are basic, crucial, or indispensable;
(A)Writing down or writing off a debt pursuant to 7 U.S.C. 2001;
(B)Cancellation of remaining amounts owed after compromising, adjusting, reducing, or charging off a debt or claim pursuant to 7 U.S.C. 1981;
(C)Paying a loss pursuant to 7 U.S.C. 2005 on a FLP loan guaranteed by the Agency;
(D)Discharging a debt as a result of bankruptcy; or
(E)Releases of liability which result in a loss to the Agency.
(ii)Are determined by the Agency based on the following considerations:
(A)The specific borrower's operation;
(B)What is typical for that type of operation in the area; and
(C)What is an efficient method of production considering the borrower's resources; and
(D)Consolidation, rescheduling, reamortization, or deferral of a loan; and
(E)Forgiveness of a YL debt due to circumstances beyond the borrower's control. Debt settlement is a compromise, adjustment, or cancellation of an FLP debt. Debt service margin is the difference between all of the borrower's expected expenditures in a planning period (including farm operating expenses, capital expenses, essential family living expenses, and debt payments) and the borrower's projected funds available to pay all expenses and payments. Debt write-down means the reduction of the borrower's debt to that amount the Agency determines to be collectible based on an analysis of the security value and the borrower's ability to pay. Default is the failure of a borrower to observe any agreement with the Agency, or the lender in the case of a guaranteed loan, as contained in promissory notes, security instruments, and similar or related instruments. Deferral is a postponement of the payment of interest or principal, or both. Delinquent borrower, for loan servicing purposes, is a borrower who has failed to make all scheduled payments by the due date. Direct loan is a loan funded and serviced by the Agency as the lender. Disaster is an event of unusual and adverse weather conditions or other natural phenomena, or quarantine, that has substantially affected the production of agricultural commodities by causing physical property or production losses in a county, or similar political subdivision, that triggered the inclusion of such county or political subdivision in the disaster area as designated by the Agency. Disaster area is the county or counties declared or designated as a disaster area for EM loan assistance as a result of disaster related losses. This area includes counties contiguous to those counties declared or designated as disaster areas. Disaster set-aside is the deferral of payment of an annual loan installment to the Agency to the end of the loan term in accordance with part 766, subpart B of this chapter. Disaster yield is the per-acre yield of an agricultural commodity for the operation during the production cycle when the disaster occurred. Distressed borrower set-aside means the deferral of payment of an annual loan installment to the Agency to the end of the loan term in accordance with part 766, subpart J, of this chapter. Down payment loan is a type of FO loan made to beginning farmers and socially disadvantaged farmers to finance a portion of a real estate purchase under part 764, subpart E of this chapter. Economic Emergency loan is a loan that was made or guaranteed to an eligible applicant to allow for continuation of the operation during an economic emergency which was caused by a lack of agricultural credit or an unfavorable relationship between production costs and prices received for agricultural commodities. EE loans are not currently funded; however, such outstanding loans are serviced by the Agency or the lender in the case of a guaranteed EE loan. Embedded entity means an entity that has a direct or indirect interest, as a stockholder, member, beneficiary, or otherwise, in another entity. Emergency loan is a loan made to eligible applicants who have incurred substantial financial losses from a disaster. Entity means a corporation, partnership, joint operation, cooperative, limited liability company, trust, or other legal business organization, as determined by the Agency, that is authorized to conduct business in the state in which the organization operates. Organizations operating as non-profit entities under Internal Revenue Code 501 (26 U.S.C. 501) and estates are not considered eligible entities for Farm Loan Programs purposes. Entity member means all individuals and all embedded entities, as well as the individual members of the embedded entities, having an ownership interest in the assets of the entity. Equitable relief means relief provided in accordance with part 7 CFR 768.1. Essential family living and farm operating expenses means those expenses that:
(iii)Include, but are not limited to, essential: Household operating expenses; food, including lunches; clothing and personal care; health and medical expenses, including medical insurance; house repair and sanitation; school and religious expenses; transportation; hired labor; machinery repair; farm building and fence repair; interest on loans and credit or purchase agreement; rent on equipment, land, and buildings; feed for animals; seed, fertilizer, pesticides, herbicides, spray materials and other necessary farm supplies; livestock expenses, including medical supplies, artificial insemination, and veterinarian bills; machinery hire; fuel and oil; taxes; water charges; personal, property and crop insurance; auto and truck expenses; and utility payments. Established farmer means a farmer who operates the farm (in the case of an entity, its members as a group) who meets all of the following conditions:
(i)Has not operated a farm;
(A)Income to pay essential family living expenses, or
(B)The farming operation; and
(ii)Has operated a farm for not more than 10 years; or
(A)The majority of day-to-day, operational decisions, and all strategic management decisions are made by:
(2)The members responsible for operating the farm, in the case of an entity; and
(iii)Is a veteran who served in the active military, naval, or air service, and who was discharged or released from that service under conditions other than dishonorable and who first obtained status as a veteran during the most recent 10-year period. Wetlands are those lands or areas of land as determined by the Natural Resources Conservation Service to meet the requirements provided in section 1201 of the Food Security Act of 1985. Working capital is cash available to conduct normal daily operations including, but not limited to, paying for feed, seed, fertilizer, pesticides, farm supplies, cooperative stock, and cash rent. Youth loan is an operating type loan made to an eligible rural youth applicant to finance a modest income-producing agricultural project. Editorial Note:For Federal Register citations affecting § 761.2, see the List of CFR Sections Affected, which appears in the Finding Aids section of the printed volume and at www.govinfo.gov.
(iv)Write-down of the principal or accumulated interest; or
(v)Any combination of paragraphs (i) through (iv) of this definition. Production cycle is the time it takes to produce an agricultural commodity from the beginning of the production process until it is normally disposed of or sold. Production loss is verifiable damage or destruction with respect to annual growing crops. Program loans include CL, FO, OL, and EM. In addition, for loan servicing purposes the term includes existing loans for the following programs no longer funded: SW, RL, EE, ST, and RHF. Promissory note is a written agreement to pay a specified sum on demand or at a specified time to the party designated. The terms “promissory note” and “note” are interchangeable. Prospectus consists of a transmittal letter, a current balance sheet and projected year's budget which is sent to commercial lenders to determine their interest in financing or refinancing specific Agency direct loan applicants and borrowers. Protective advance is an advance made by the Agency or a lender to protect or preserve the collateral from loss or deterioration. Quarantine is a quarantine imposed by the Secretary under the Plant Protection Act or animal quarantine laws (as defined in section 2509 of the Food, Agriculture, Conservation and Trade Act of 1990). Real estate evaluation is an estimate of value of real estate provided by an individual who is not required to comply with USPAP, using market supported information to analyze the subject property. Real estate-related financial transaction means any transaction involving:
(vi)Does not employ a full time farm manager. 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. False information is information provided by an applicant, borrower or other source to the Agency that the applicant or borrower knows to be incorrect. Family farm means a business operation that:
(A)In the case of a loan made to an individual, individually or with the family members, material and substantial participation requires that the individual provide substantial day-to-day labor and management of the farm, consistent with the practices in the county or State where the farm is located; or
(B)In the case of a loan made to an entity, all members must materially and substantially participate in the operation of the farm. Material and substantial participation requires that the member provide some amount of the management, or labor and management necessary for day-to-day activities, such that if the individual did not provide these inputs, operation of the farm would be seriously impaired;
(iv)Agrees to participate in any loan assessment and borrower training required by Agency regulations;
(v)Except for an OL applicant, does not own real farm property or who, directly or through interests in family farm entities owns real farm property, the aggregate acreage of which does not exceed 30 percent of the average farm acreage of the farms in the county where the property is located. If the farm is located in more than one county, the average farm acreage of the county where the applicant's residence is located will be used in the calculation. If the applicant's residence is not located on the farm or if the applicant is an entity, the average farm acreage of the county where the major portion of the farm is located will be used. The average county farm acreage will be determined from the most recent Census of Agriculture;
(vi)Demonstrates that the available resources of the applicant and spouse (if any) are not sufficient to enable the applicant to enter or continue farming on a viable scale; and
(vii)In the case of an entity:
(A)All the members are related by blood or marriage; and
(B)All the members are beginning farmers. Borrower (or debtor) is an individual or entity that has an outstanding obligation to the Agency or to a lender under any direct or guaranteed FLP loan, without regard to whether the loan has been accelerated. The term “borrower” includes all parties liable for such obligation, including collection-only borrowers, except for debtors whose total loans and accounts have been voluntarily or involuntarily foreclosed, sold, or conveyed, or who have been discharged of all such obligations owed to the Agency or guaranteed lender. Business loan means a loan or other extension of credit made primarily for agricultural purposes to any corporation, general or limited partnership, business trust, joint venture, sole proprietorship, or other person (including entities and individuals engaged in farming enterprises). Cancellation means the final resolution of an FLP debt without receiving payment in full. Any amounts still owed, after applying payments in accordance with approved adjustment and compromise agreements, is canceled. The amount canceled is reported to the IRS pursuant to § 3.90 of this title and applicable IRS requirements. Cash flow budget is a projection listing all anticipated cash inflows (including all farm income, nonfarm income and all loan advances) and all cash outflows (including all farm and nonfarm debt service and other expenses) to be incurred during the period of the budget. Advances and principal repayments of lines of credit may be excluded from a cash flow budget. Cash flow budgets for guaranteed loans under $125,000 do not require income and expenses itemized by categories. A cash flow budget may be completed either for a 12-month period, a typical production cycle, or the life of the loan, as appropriate. It may also be prepared with a breakdown of cash inflows and outflows for each month of the review period and include the expected outstanding operating credit balance for the end of each month. The latter type is referred to as a “monthly cash flow budget.” Civil action is a court proceeding to protect the Agency's financial interests. A civil action does not include bankruptcy and similar proceedings to impound and distribute the bankrupt's assets to creditors, or probate or similar proceedings to settle and distribute estates of incompetents or decedents, and pay claims of creditors. Closing agent is the attorney or title insurance company selected by the applicant and approved by the Agency to provide closing services for the proposed loan or servicing action. Unless a title insurance company provides loan closing services, the term “title company” does not include “title insurance company.” Coastal barrier is an area of land identified as part of the national Coastal Barrier Resources System under the Coastal Barrier Resources Act of 1980. Commercial real estate transaction means a real estate-related financial transaction that is secured by a property whose primary value is not derived from a single 1-4 family residence. Commercially foraged means the harvesting of naturally occurring plants, or plantlike material, including fungi, that develop with limited management of the resource. Compromise is the settlement of an FLP debt or claim by a lump-sum payment of less than the total amount owed in satisfaction of the debt or claim. Conditional commitment is the Agency's commitment to a lender that the material the lender has submitted is approved subject to the completion of all listed conditions and requirements. Conservation Contract is a contract under which a borrower agrees to set aside land for conservation, recreation or wildlife purposes in exchange for reduction of a portion of an outstanding FLP debt. Conservation Contract review team is comprised by the appropriate offices of FSA, the Natural Resources Conservation Service, U.S. Fish and Wildlife Service, State Fish and Wildlife Agencies, Conservation Districts, National Park Service, Forest Service, State Historic Preservation Officer, State Conservation Agencies, State Environmental Protection Agency, State Natural Resource Agencies, adjacent public landowner, and any other entity that may have an interest and qualifies to be a management authority for a proposed conservation contract. Conservation loan means a loan made to eligible applicants to cover the costs to the applicant of carrying out a qualified conservation project. Conservation plan means an NRCS-approved written record of the land user's decisions and supporting information, for treatment of a land unit or water as a result of the planning process, that meets NRCS Field Office Technical Guide (FOTG) quality criteria for each natural resource (soil, water, air, plants, and animals) and takes into account economic and social considerations. The conservation plan describes the schedule of operations and activities needed to solve identified natural resource problems and takes advantage of opportunities at a conservation management system level. This definition only applies to the direct loans and guaranteed loans for the Conservation Loan Program. Conservation practice means a specific treatment, such as a structural or vegetative measure, or management technique, commonly used to meet specific needs in planning and implementing conservation, for which standards and specifications have been developed. Conservation practices are contained in the appropriate NRCS Field Office Technical Guide (FOTG), which is based on the National Handbook of Conservation Practices (NHCP). Conservation project means conservation measures that address provisions of a conservation plan or Forest Stewardship Management Plan. Consolidation is the process of combining the outstanding principal and interest balance of two or more loans of the same type made for operating purposes. Construction is work such as erecting, repairing, remodeling, relocating, adding to, or salvaging any building or structure, and the installing, repairing, or adding to heating and electrical systems, water systems, sewage disposal systems, walks, steps, and driveways. Controlled is when a director or an employee has more than a 50 percent ownership in an entity or, the director or employee, together with relatives of the director or employee, have more than a 50 percent ownership. Controlled substance is the term as defined in 21 U.S.C. 812. Cooperative is an entity that has farming as its purpose, whose members have agreed to share the profits of the farming enterprise, and is recognized as a farm cooperative by the laws of the state in which the entity will operate a farm. Corporation is a private domestic corporation created and organized under the laws of the state in which it will operate a farm. Cosigner is a party, other than the applicant, who joins in the execution of a promissory note to assure its repayment. The cosigner becomes jointly and severally liable to comply with the repayment terms of the note, but is not authorized to severally receive loan servicing available under 7 CFR parts 765 and 766. In the case of an entity applicant, the cosigner cannot be a member of the entity. County is a local administrative subdivision of a State or similar political subdivision of the United States. County average yield is the historical average yield for an agricultural commodity in a particular political subdivision, as determined or published by a government entity or other recognized source. Criminal action is the prosecution by the United States to exact punishment in the form of fines or imprisonment for alleged violation of criminal statutes. Crop allotment or quota is a farm's share of an approved national tobacco or peanut allotment or quota. Current market value buyout is the termination of a borrower's loan obligations to the Agency in exchange for payment of the current appraised value of the borrower's security property and non-essential assets, less any prior liens. Debt forgiveness means the reduction or termination of a debt under the Act in a manner that results in a loss to the Agency:
761.3Civil rights.#
Part 15d of this title contains applicable regulations pertaining to civil rights and filing of discrimination complaints by program participants.
761.4Conflict of interest.#
The Agency enforces conflict of interest policies to maintain high standards of honesty, integrity, and impartiality in the making and servicing of direct and guaranteed loans. These requirements are established in 5 CFR parts 2635 and 8301.
761.5Restrictions on lobbying.#
A person who applies for or receives a loan made or guaranteed by the Agency must comply with the restrictions on lobbying in 2 CFR part 418.
761.6Appeals.#
Except as provided in 7 CFR part 762, appeal of an adverse decision made by the Agency will be handled in accordance with 7 CFR parts 11 and 780.
761.7Valuations.#
(a)General. This section describes Agency requirements for:
(1)Real estate and personal property appraisals made in connection with the making and servicing of direct FLP and Non-program loans;
(2)Appraisal reviews conducted on appraisals made in connection with the making and servicing of direct and guaranteed FLP and Non-program loans;
(3)Real estate evaluations made in connection with the making and servicing of direct FLP loans and Non-program loans; and
(4)Reviews of real estate evaluations made in connection with the making and servicing of direct and guaranteed FLP and Non-program loans.
(b)Valuation standards. (1) Real estate appraisals, technical appraisal reviews and their respective forms must comply with the standards contained in USPAP, as well as applicable Agency regulations and procedures for the specific FLP activity involved. Applicable appraisal procedures and regulations are available for review in each Agency State Office.
(2)When a personal property appraisal or real estate evaluation is required, it must be completed on an applicable Agency form (available in each Agency State Office) or other format containing the same information.
(c)Use of an existing real estate appraisal. Except as otherwise provided in 7 CFR part 766, when a real estate appraisal is required, the Agency will use the existing real estate appraisal to conduct the loan transaction under either of the following conditions:
(1)The appraisal was completed within the previous 18 months and the Agency determines that:
(i)The appraisal meets the provisions of this section and the applicable Agency loan making or servicing requirements; and
(ii)Market values have remained stable since the appraisal was completed; or
(2)The appraisal was not completed in the previous 18 months, but the Agency determines that the appraisal meets the requirements of this section, and:
(i)The appraisal has been updated by the appraiser or appraisal firm that completed the appraisal and both the update and the original appraisal were completed in accordance with USPAP; or
(ii)The appraisal was completed in the previous 36 months and the Agency has documentation reflecting that:
(A)Market conditions have remained stable or improved based on sales of similar properties;
(B)The property in question remains in the same or better condition; and
(C)The value of the property has remained the same or increased.
(d)Valuation reviews. (1) With respect to a real estate appraisal, the Agency may conduct a technical appraisal review or an administrative appraisal review, or both.
(2)With respect to a personal property appraisal or real estate evaluation, the Agency may conduct an administrative review.
(e)Valuation appeals. Challenges to a valuation used by the Agency are limited as follows:
(1)When an applicant or borrower challenges a real estate appraisal used by the Agency for any loan making or loan servicing decision, except primary loan servicing decisions as specified in § 766.115 of this chapter, the issue for review is limited to whether the appraisal used by the Agency complies with USPAP. The applicant or borrower must submit a technical appraisal review prepared by a State Certified General Appraiser that will be used to determine whether the Agency's appraisal complies with USPAP. The applicant or borrower is responsible for obtaining and paying for the technical appraisal review.
(2)When an applicant or borrower challenges a personal property appraisal used by the Agency for any loan making or loan servicing decision, except for primary loan servicing decisions as specified in § 766.115 of this chapter, the issue for review is limited to whether the appraisal used by the Agency is consistent with present market values of similar items in the area. The applicant or borrower must submit an independent appraisal review that will be used to determine whether the appraisal is consistent with present market values of similar items in the area. The applicant or borrower is responsible for obtaining and paying for the independent appraisal review.
(3)When an applicant or borrower challenges a real estate evaluation used by the Agency for any loan making or loan servicing decision, except for primary loan servicing decisions as specified in § 766.115 of this chapter, the issue for review is limited to whether the real estate evaluation used by the Agency is consistent with present market values of similar properties in the area. The applicant or borrower must submit an independent review of the real estate evaluation that will be used to determine whether the evaluation is consistent with present market values of similar properties in the area. The applicant or borrower is responsible for obtaining and paying for the independent real estate evaluation review.
(f)Real estate evaluations. (1) Real estate related financial transactions that do not exceed the higher of the current OMB appraisal threshold or the following limits do not require a real estate appraisal:
(i)$500,000 for commercial real estate transactions; or
(ii)$250,000 for business loan transactions.
(2)A real estate evaluation may be completed when a real estate appraisal is not required to determine the security value under this subpart.
(3)The determination to not obtain a real estate appraisal is subject to applicable Agency guidance.
(4)Notwithstanding the provisions of this subpart, the Agency retains the discretion to obtain a real estate appraisal in lieu of completing a real estate evaluation on a case-by-case basis.
761.8Loan Limitations.#
(a)Dollar limits. The outstanding principal balances for an applicant or anyone who will sign the promissory note cannot exceed any of the following at the time of loan closing or assumption of indebtedness. If the outstanding principal balance exceeds any of the limits at the time of approval, the Agency must document that funds will be available to reduce the indebtedness prior to loan closing or assumption of indebtedness.
(1)Farm Ownership, Down payment loans, Conservation loans, and Soil and Water loans:
(i)Direct—$600,000;
(ii)Guaranteed—$1,750,000 (for fiscal year 2019 and increased at the beginning of each fiscal year in accordance with paragraph (b) of this section);
(iii)Any combination of a direct Farm Ownership loan, direct Conservation loan, direct Soil and Water loan, guaranteed Farm Ownership loan, guaranteed Conservation loan, and guaranteed Soil and Water loan $1,750,000 (for fiscal year 2019 and increased each fiscal year in accordance with paragraph (b) of this section);
(2)Operating loans:
(i)Direct—$400,000;
(ii)Guaranteed—$1,750,000 (for fiscal year 2019 and increased each fiscal year in accordance with paragraph (b) of this section);
(iii)Any combination of a direct Operating loan and guaranteed Operating loan—$1,750,000 (for fiscal year 2019 and increased each fiscal year in accordance with paragraph (b) of this section);
(3)Any combination of guaranteed Farm Ownership loan, guaranteed Conservation loan, guaranteed Soil and Water loan, and guaranteed Operating loan—$1,750,000 (for fiscal year 2019 and increased each fiscal year in accordance with paragraph (b) of this section);
(4)Any combination of direct Farm Ownership loan, direct Conservation loan, direct Soil and Water loan, direct Operating loan, guaranteed Farm Ownership loan, guaranteed Conservation loan, guaranteed Soil and Water loan, and guaranteed Operating loan-the amount in paragraph (a)(1)(ii) of this section plus $600,000;
(5)Emergency loans—$500,000;
(6)Any combination of direct Farm Ownership loan, direct Conservation loan, direct Soil and Water loan, direct Operating loan, guaranteed Farm Ownership loan, guaranteed Conservation loan, guaranteed Soil and Water loan, guaranteed Operating loan, and Emergency loan-the amount in paragraph (a)(1)(ii) of this section plus $1,100,000.
(b)Guaranteed loan limit. The dollar limits of guaranteed loans will be increased each fiscal year based on the percentage change in the Prices Paid by Farmers Index as compiled by the National Agricultural Statistics Service, USDA. The maximum loan limits for the current fiscal year are available in any FSA office and on the FSA website at http://www.fsa.usda.gov.
(c)Line of credit advances. The total dollar amount of guaranteed line of credit advances and income releases cannot exceed the total estimated expenses, less interest expense, as indicated on the borrower's cash flow budget, unless the cash flow budget is revised and continues to reflect a feasible plan.
Subpart B · Subpart B—Supervised Bank Accounts
761.51Establishing a supervised bank account.#
(a)Supervised bank accounts will be used to:
(1)Assure correct use of funds are planned and released for capital purchases, construction projects, site development work, debt refinancing, or proceeds from the sale of basic security, and perfection of the Agency's security interest in assets purchased or refinanced when electronic funds transfer or treasury check processes are not practicable;
(2)Protect the Agency's security interest in insurance indemnities or other loss compensation resulting from loss or damage to loan security; or
(3)Assist borrowers with limited financial skills with cash management, subject to the following conditions:
(i)Use of a supervised bank for this purpose will be temporary and infrequent;
(ii)The need for a supervised bank account in this situation will be determined on a case-by-case basis; and
(iii)The borrower agrees to the use of a supervised bank account for this purpose by executing the deposit agreement.
(c)Only one supervised bank account will be established for any borrower.
(d)If both spouses sign an FLP note and security agreement, the supervised bank account will be established as a joint tenancy account with right of survivorship from which either borrower can withdraw funds.
(e)If the funds to be deposited into the account cause the balance to exceed the maximum amount insurable by the Federal Government, the financial institution must agree to pledge acceptable collateral with the Federal Reserve Bank for the excess over the insured amount, before the deposit is made.
(1)If the financial institution is not a member of the Federal Reserve System, the institution must pledge acceptable collateral with a correspondent bank that is a member of the Federal Reserve System. The correspondent bank must inform the Federal Reserve Bank that it is holding securities pledged for the supervised bank account in accordance with 31 CFR part 202 (Treasury Circular 176).
(2)When the balance in the account has been reduced, the financial institution may request a release of part or all of the collateral, as applicable, from the Agency.
761.52Deposits into a supervised bank account.#
(a)Checks or money orders may be deposited into a supervised bank account provided they are not payable:
(1)Solely to the Federal Government or any agency thereof; or
(2)To the Treasury of the United States as a joint payee.
(b)Loan proceeds may be deposited electronically.
761.53Interest bearing accounts.#
(b)Interest earned on a supervised bank account will be treated as normal income security.
761.54Withdrawals from a supervised bank account.#
(a)The Agency will authorize a withdrawal from the supervised bank account for an approved purpose after ensuring that:
(1)Sufficient funds in the supervised bank account are available;
(2)No loan proceeds are disbursed prior to confirmation of proper lien position, except to pay for lien search if needed;
(3)No checks are issued to “cash;” and
(4)The use of funds is consistent with the current farm operating plan or other agreement with the Agency.
(b)A check must be signed by the borrower with countersignature of the Agency, except as provided in paragraph (c) of this section. All checks must bear the legend “countersigned, not as co-maker or endorser.”
(c)The Agency will withdraw funds from a supervised bank account without borrower counter-signature only for the following purposes:
(1)For application on Agency indebtedness;
(2)To refund Agency loan funds;
(3)To protect the Agency's lien or security;
(4)To accomplish a purpose for which such advance was made; or
761.55Closing a supervised bank account.#
(a)If the supervised bank account is no longer needed and the loan account is not paid in full, the Agency will determine the source of the remaining funds in the supervised bank account. If the funds are determined to be:
(1)Loan funds:
(i)From any loan type, except Youth loan, and the balance is less than $1,000, the Agency will provide the balance to the borrower to use for authorized loan purposes;
(ii)From a Youth loan, and the balance is less than $100, the Agency will provide the balance to the borrower to use for authorized loan purposes;
(2)Loan funds:
(i)From any loan type, except Youth loan, and the balance is $1,000 or greater, the Agency will apply the balance to the FLP loan;
(ii)From a Youth loan, and the balance is $100 or greater, the Agency will apply the balance to the FLP loan;
(3)Normal income funds, the Agency will apply the balance to the remaining current year's scheduled payments and pay any remaining balance to the borrower; and
(4)Basic security funds, the Agency will apply the balance to the FLP loan as an extra payment or the borrower may apply the balance toward the purchase of basic security, provided the Agency obtains a lien on such security and its security position is not diminished.
(b)If the borrower is uncooperative in closing a supervised bank account, the Agency will make written demand to the financial institution for the balance and apply it in accordance with paragraph (a) of this section.
(c)In the event of a borrower's death, the Agency may:
(1)Apply the balance to the borrower's FLP loan;
(2)Continue with a remaining borrower, provided the supervised bank account was established as a joint tenancy with right of survivorship account;
(3)Refund unobligated balances from other creditors in the supervised bank account for specific operating purposes in accordance with any prior written agreement between the Agency and the deceased borrower; or
(4)Continue to pay expenses from the supervised bank account in conjunction with the borrower's estate.
761.56-761.100-761.100 [Reserved]#
Subpart C · Subpart C—Progression Lending
761.101Applicability.#
This subpart applies to all direct applicants and borrowers, except borrowers with only Non-program loans.
761.102Borrower recordkeeping and reporting.#
(a)A borrower must maintain accurate records sufficient to make informed management decisions and to allow the Agency to render loan making and servicing decisions in accordance with Agency regulations. These records must include the following:
(1)Production (e.g., total and per unit for livestock and crops);
(2)Revenues, by source;
(3)Other sources of funds, including borrowed funds;
(4)Operating expenses;
(5)Interest;
(6)Family living expenses;
(7)Profit and loss;
(8)Tax-related information;
(9)Capital expenses;
(10)Outstanding debt; and
(11)Debt repayment.
(b)A borrower also must agree in writing to:
(1)Cooperate with the Agency and comply with all progression lending plans, farm assessments, farm operating plans, and all other loan-related requirements and documents;
(2)Submit financial information and an updated farm operating plan when requested by the Agency;
(3)Immediately notify the Agency of any proposed or actual significant change in the farming operation, any significant changes in family income, expenses, or the development of problem situations, or any losses or proposed significant changes in security.
761.103Farm assessment.#
(a)The Agency, in collaboration with the applicant, will assess the farming operation to:
(1)Determine the applicant's financial condition, organizational structure, and management strengths and weaknesses;
(2)Identify and prioritize training and progression lending needs; and
(3)Develop a progression lending plan to assist the borrower in achieving financial viability and transitioning to private commercial credit or other sources of credit at reasonable rates and terms, except for CL.
(b)The initial assessment must evaluate, at a minimum, the:
(1)Farm organization and key personnel qualifications;
(2)Type of farming operation;
(3)The short- and long-term goals of the operation, including a marketing plan, goals to reasonably increase working capital reserves and savings, including reasonable savings for retirement and education, to support operational stability and growth, and goals for progression towards graduation to commercial credit or eventual self-financing;
(4)Adequacy of resources to conduct the farming operation including real estate, facilities, and personal property;
(5)Historical performance, except for streamlined CL and loan transactions processed through AFT;
(6)Farm operating plan, except for loan transactions processed through AFT;
(7)Progression lending plan including a plan for graduation, except for streamlined CL; and
(8)Training plan.
(c)An assessment update must be prepared for each subsequent loan. The update must include a farm operating plan, unless the subsequent loan was processed through AFT, and any other items discussed in paragraph (b) of this section that have significantly changed since the initial assessment.
(d)The Agency reviews the assessment to determine a borrower's progress at least annually, combining any required classification and graduation reviews as part of the review. For streamlined CLs, the borrower must provide a current balance sheet and income tax records. Any negative trends noted between the previous years' and the current years' information must be evaluated and addressed in the assessment of the streamlined CL borrower.
(e)If a CL borrower becomes financially distressed, delinquent, or receives any servicing options available under part 766 of this chapter, all elements of the assessment in paragraph (b) of this section must be addressed.
761.104Developing the farm operating plan.#
(a)An applicant or borrower must submit a farm operating plan to the Agency, upon request, for loan making or servicing purposes.
(b)An applicant or borrower may request Agency assistance in developing the farm operating plan.
(c)The farm operating plan will be based on accurate and verifiable information.
(1)Historical information will be used as a guide.
(2)Positive and negative trends, mutually agreed upon changes and improvements, and current input prices will be taken into consideration when arriving at reasonable projections.
(3)Projected yields will be calculated according to the following priorities:
(i)The applicant or borrower's own production records for the previous 3 years;
(ii)The per-acre actual production history of the crops produced by the farming operation used to determine Federal crop insurance payments, if available;
(iii)FSA Farm Program actual yield records;
(iv)County averages;
(v)State averages.
(4)If the applicant or borrower's production history has been substantially affected by a disaster declared by the President or designated by the Secretary of Agriculture, or the applicant or borrower has had a qualifying loss from such disaster but the farming operation was not located in a declared or designated disaster area, the applicant or borrower may:
(i)Use county average yields, or state average yields if county average yields are not available, in place of the disaster year yields when the county or state average yields are realistic and reasonable compared to the applicant's actual non-disaster year yields, as determined by the agency approval official; or
(ii)Exclude the production year with the lowest actual or county average yield if their yields were affected by disasters during at least 2 of the 3 years.
(d)Unit prices for agricultural commodities established by the Agency will generally be used. Applicants and borrowers that provide evidence that they will receive a premium price for a commodity may use a price above the price established by the Agency.
(e)For MLs, when projected yields and unit prices cannot be determined as specified in paragraphs (c) and (d) of this section because the data is not available or practicable, other documentation from other reliable sources may be used to assist in developing the applicant's farm operating plan.
(f)Development of farm operating plans and determination of appropriate repayment terms must include consideration of a reasonable amount of cash flow margin to increase working capital reserves and savings, including reasonable savings for retirement and education, to support operational stability and growth.
(g)Except as provided in paragraph (h) of this section, the applicant or borrower must sign the final farm operating plan prior to approval of any loan or servicing action.
(h)If the Agency believes the applicant or borrower's farm operating plan is inaccurate, or the information upon which it is based cannot be verified, the Agency will discuss and try to resolve the concerns with the applicant or borrower. If an agreement cannot be reached, the Agency will make loan approval and servicing determinations based on the Agency's revised farm operating plan.
(i)For loan transactions processed through AFT, the likelihood of repayment is evaluated by the financial benchmarking process in lieu of a farm operating plan. Therefore, the aspects of paragraphs (c), (d), (e), (f), (g), and (h) of this section which require the Agency to verify income, expense, yield, and price planning to create accurate and verifiable cash flow budgets and for the applicant to sign the final farm operating plan do not apply to applications processed through AFT.
761.105Analysis.#
(a)The Agency conducts an analysis at its discretion or if the borrower:
(1)Is being considered for a new direct loan;
(2)Is financially distressed or delinquent;
(3)Has a loan deferred, excluding deferral of an installment under subpart B of part 766; or
(4)Is receiving a limited resource interest rate on any loan, in which case the review will be completed at least every 3 years.
(b)Except when processing a loan transaction under § 765.105(a)(1) through AFT, the analysis must include a review of the previous production cycle's actual income, expense, and production performance, as well as a farm operating plan for the new operating cycle.
761.106-761.200-761.200 [Reserved]#
Subpart D · Subpart D—Allocation of Farm Loan Programs Funds to State Offices
761.201Purpose.#
(a)This subpart addresses:
(1)The allocation of funds for direct and guaranteed FO, CL, and OL loans;
(2)The establishment of socially disadvantaged target participation rates; and
(3)The reservation of loan funds for beginning farmers.
(b)The Agency does not allocate EM loan funds to State Offices but makes funds available following a designated or declared disaster. EM loan funds are available on a first-come first-served basis.
(c)State funding information is available for review in any State Office.
761.202Timing of allocations.#
The Agency's National Office allocates funds for FO, CL, and OL loans to the State Offices on a fiscal year basis, as made available by the Office of Management and Budget. However, the National Office will retain control over the funds when funding or administrative constraints make allocation to State Offices impractical.
761.203National reserves for Farm Ownership and Operating loans.#
(a)Reservation of funds. At the start of each fiscal year, the National Office reserves a portion of the funds available for each direct and guaranteed loan program. These reserves enable the Agency to meet unexpected or justifiable program needs during the fiscal year.
(b)Allocation of reserved funds. The National Office distributes funds from the reserve to one or more State Offices to meet a program need or Agency objective.
761.204Methods of allocating funds to State Offices.#
FO, CL, and OL loan funds are allocated to State Offices using one or more of the following allocation methods:
(a)Formula allocation, if data, as specified in § 761.205, is available to use the formula for the State.
(b)Administrative allocation, if the Agency cannot adequately meet program objectives with a formula allocation. The National Office determines the amount of an administrative allocation on a case-by-case basis.
(c)Base allocation, to ensure funding for at least one loan in each State, District, or County Office. In making a base allocation, the National Office may use criteria other than those used in the formula allocation, such as historical Agency funding information.
761.205Computing the formula allocation.#
(a)The formula allocation for FO, CL, or OL loan funds is equal to:
(1)The amount available for allocation by the Agency minus the amounts held in the National Office reserve and distributed by base and administrative allocation, multiplied by
(2)The State Factor, which represents the percentage of the total amount of the funds for a loan program that the National Office allocates to a State Office. formula allocation = (amount available for allocation−national reserve−base allocation−administrative allocation) × State Factor
(b)To calculate the State Factor, the Agency:
(1)Uses the following criteria, data sources, and weights: Criteria Loan type criterion is used for Data source Weight forFO loans(percent) Weight forOL loans(percent) Farm operators with sales of $2,500-$39,999 and less than 200 days work off the farm FO, CL, and OL loans U.S. Census of Agriculture 15 15 Farm operators with sales of $40,000 or more and less than 200 days work off farm FO, CL, and OL loans U.S. Census of Agriculture 35 35 Tenant farm operators FO, CL, and OL loans U.S. Census of Agriculture 25 20 3-year average net farm income FO, CL, and OL loans USDA Economic Research Service 15 15 Value of farm real estate assets FOs and CLs USDA Economic Research Service 10 N/A Value of farm non-real estate assets OL loans USDA Economic Research Service N/A 15
(2)Determines each State's percentage of the national total for each criterion;
(3)Multiplies the percentage for each State determined in paragraph (b)(2) of this section by the applicable weight for that criterion;
(4)Sums the weighted criteria for each State to obtain the State factor.
761.206Pooling of unobligated funds allocated to State Offices.#
The Agency periodically pools unobligated FO, CL, and OL loan funds that have been allocated to State Offices. When pooling these funds, the Agency places all unobligated funds in the appropriate National Office reserve. The pooled funds may be retained in the national reserve or reallocated to the States.
761.207Distribution of loan funds by State Offices.#
A State Office may distribute its allocation of loan funds to District or County level using the same allocation methods that are available to the National Office. State Offices may reserve a portion of the funds to meet unexpected or justifiable program needs during the fiscal year.
761.208Target participation rates for socially disadvantaged groups.#
(a)General. (1) The Agency establishes target participation rates for providing FO, CL, and OL loans to members of socially disadvantaged groups.
(2)The Agency sets the target participation rates for State and County levels annually.
(3)When distributing loan funds in counties within Indian reservations, the Agency will allocate the funds on a reservation-wide basis.
(4)The Agency reserves and allocates sufficient loan funds to achieve these target participation rates. The Agency may also use funds that are not reserved and allocated for socially disadvantaged groups to make or guarantee loans to members of socially disadvantaged groups.
(b)FO and CL, loans based on ethnicity or race. The FO and CL, loan target participation rate based on ethnicity or race in each:
(1)State is equal to the percent of the total rural population in the State who are members of such socially disadvantaged groups.
(2)County is equal to the percent of rural population in the county who are members of such socially disadvantaged groups.
(c)OL loans based on ethnicity or race. The OL loan target participation rate based on ethnicity or race in each:
(1)State is equal to the percent of the total number of farmers in the State who are members of such socially disadvantaged groups.
(2)County is equal to the percent of the total number of farmers in the county who are members of socially disadvantaged ethnic groups.
(d)Women farmers. (1) The target participation rate for women farmers in each:
(i)State is equal to the percent of farmers in the State who are women.
(ii)County is equal to the percent of farmers in the county who are women.
(2)In developing target participation rates for women, the Agency will consider the number of women who are current farmers and potential farmers.
761.209Loan funds for beginning farmers.#
Each fiscal year, the Agency reserves a portion of direct and guaranteed FO and OL loan funds for beginning farmers in accordance with section 346(b)(2) of the Act.
761.210CL funds.#
(a)The following applicants and conservation projects will receive priority for CL funding:
(1)Beginning farmer or socially disadvantaged farmer,
(2)An applicant who will use the loan funds to convert to a sustainable or organic agriculture production system as evidenced by one of the following:
(i)A conservation plan that states the applicant is moving toward a sustainable or organic production system, or
(ii)An organic plan, approved by a certified agent and the State organic certification program, or
(iii)A grant awarded by the Sustainable Agriculture Research and Education (SARE) program of the National Institute of Food and Agriculture, USDA.
(3)An applicant who will use the loan funds to build conservation structures or establish conservation practices to comply with 16 U.S.C. 3812 (section 1212 of the Food Security Act of 1985) for highly erodible land.
(b)[Reserved]
761.211Transfer of funds.#
If sufficient unsubsidized guaranteed OL funds are available, then beginning on:
(a)August 1 of each fiscal year, the Agency will use available unsubsidized guaranteed OL loan funds to make approved direct FO loans to beginning farmers under the Down payment loan program; and
(b)September 1 of each fiscal year the Agency will use available unsubsidized guaranteed OL loan funds to make approved direct FO loans to beginning farmers.
Subpart F · Subpart F—Farm Loan Programs Debt Settlement
761.401Purpose.#
(a)This subpart describes the Agency's policies for debt settlement as authorized by the Consolidated Farm and Rural Development Act (CONACT) (7 U.S.C. 1921, 7 U.S.C. 1981, 1981a, 1981d, and 2008h).
(b)FLP debts that cannot be debt settled using CONACT debt settlement authority such as when a borrower has received previous debt forgiveness on another direct loan made under the CONACT, will be processed as specified in 31 U.S.C. chapter 37 and 31 CFR parts 900 through 904.
761.402Abbreviations and definitions.#
(a)Abbreviations and definitions for terms used in this subpart are provided in 7 CFR part 3 and § 761.2.
(b)Definitions used only in this subpart include:
(1)Third party converter means an individual or entity who:
(i)Is in possession of agency security property, or money from the sale of security, in relation to a loan or other debt that the individual or entity was not liable for; or
(ii)Assists, or participates knowingly or unknowingly, in the transportation or sale of agency security, in relation to a loan or other debt that the individual or entity was not liable for; or
(iii)Assists, or participates knowingly or unknowingly, in temporarily or permanently relocating or concealing the location of agency security property, or money from the sale of agency security, in relation to a loan or other debt that the individual or entity was not liable for.
(2)[Reserved]
761.403General.#
(a)The Agency will settle debts that result from, except as otherwise specified in this section:
(1)(i) Farm Ownership loans (part 764, subpart D of this chapter), including down payment loans (764, subpart E of this chapter);
(b)The debtor's signature is not required to process some debt settlement actions. These cases include, but are not limited to, debts discharged in bankruptcy and debts returned from Treasury's cross-servicing program with amounts still owing when no further collection can be taken.
(c)FSA will not engage in settlement of a debt if:
(1)Foreclosure of security has been initiated and is pending with Justice, unless Justice has advised FSA that it does not object to the settlement; or
(2)Debts that have been referred to Justice for a judgment, or a judgement has been obtained by the United States Attorney or Justice, unless Justice closes its file and releases the judgement back to FSA for continued servicing; or
(3)The debtor's account is involved in a fiscal irregularity investigation in which final action has not been taken or the account shows evidence that a shortage may exist and an investigation will be requested.
(d)The Agency will consider settlement of a debt only when:
(1)All security has been liquidated and the proceeds, less any prior lien amounts, have been applied to the debt; or the Agency received a lump sum payment equal to the security's current market value, less any prior lien amounts, and
(2)Payment is received based on the Agency's determination of the amount the borrower can pay to resolve the remaining balance owed on the unsecured debt.
(3)The lump sum payment made under paragraph (d)(1) of this section for the security's market value may be submitted by the borrower, an individual authorized to act for the borrower pursuant to a power of attorney document or court order, or an individual who is not an obligor on the debt but who has an ownership interest in the security.
(e)If an FLP loan has been accelerated and all security has been liquidated, and the agency has approved an adjustment debt settlement offer in accordance with this subpart, voluntary payments and involuntary payments (such as offsets) will be applied in the following order, as applicable:
(1)Recoverable costs and protective advances plus interest;
(2)Loan principal;
(3)Accrued deferred interest; and
(4)Interest accrual to date of payment.
(ii)Operating loans (part 764, subpart G of this chapter), including microloans part 764 of this chapter), and youth loans (part 764, subpart H of this chapter);
(iii)Emergency loans (part 764, subpart I of this chapter);
(iv)Conservation loans (part 764, subpart F of this chapter);
(v)Economic Emergency loans (serviced under parts 761 through 767 of this chapter); softwood timber loans; Soil and Water loans; Individual Recreation Loans; Irrigation and Drainage loans; and Shift-in-land-use (Grazing Association) loans;
(2)Costs associated with servicing a borrower's account including, but not limited to, Uniform Commercial Code filing fees, surveys, appraisals, protective advances, and liquidation expenses;
(3)Debts reduced to judgment;
(4)Non-Program Loans;
(5)Amounts the Agency is authorized to recapture through agreements such as the Shared Appreciation Agreement (part 766, subpart E of this chapter);
(6)Loss claims paid on guaranteed loans (part 762 of this chapter);
(7)Unauthorized assistance;
(8)Amounts the Agency may collect from third party converters, or other individuals or entities having possession of security for FLP loans or monies obtained through the sale of FLP loan security; and
(9)Debt returned to the Agency from the Treasury cross-servicing program.
761.404Eligibility.#
(1)Meets the requirements for the particular type of debt settlement under this part; and
(2)Submits a complete application for debt settlement as specified in § 761.405.
(b)All parties liable for the debt must submit a complete application with the following exceptions:
(1)The applicable information required in § 761.405 can be provided by the administrator or executor of the Estate, heir, or other authorized person who can sign the debt settlement application; or compiled by FSA staff when a signature cannot be obtained.
(2)The debt may be settled when the borrower has no known assets or income from which collection can be made, has disappeared and cannot be located without undue expense, and there is no security remaining for the debt.
(3)In cases where the full amount of the unsecured debt cannot be collected in a reasonable time by legal action or through enforced collection proceedings, the Agency may consider a debt settlement offer submitted by a borrower without requiring a complete application. When evaluating these offers, the Agency will consider the likelihood of the debtor obtaining a larger income or additional assets, including inheritance prospects within 5 years, from which legal or enforced collection could be made.
(c)A borrower is not eligible for debt settlement if:
(2)The debt has been referred to the OIG, OGC, or Justice because of suspected civil or criminal violation, unless investigation was declined or advice was provided that the debt can be canceled, compromised, or adjusted.
761.405Application.#
(a)A borrower requesting debt settlement must submit complete and accurate information from which the Agency can make a full determination of the borrower's financial circumstances and repayment ability. Except for the situations listed in § 761.404(b), each liable party, must submit the following:
(1)One completed original debt settlement application on the applicable Agency form signed by all parties liable for the debt;
(2)A current financial statement;
(3)A cash flow projection for the next production or earnings period;
(4)Verification of employment or other earned income, including verification of a nondebtor spouse's income which will be included as available to pay family living expenses;
(5)Verification of assets including, but not limited to, cash, checking accounts, savings accounts, certificates of deposit, individual retirement accounts, retirement and pension funds, mutual funds, stocks, bonds, and accounts receivable;
(6)Verification of debts exceeding an amount determined by the Agency;
(7)Copies of complete Federal income tax returns for the previous 3 years; and
(8)Any other items requested by the Agency to evaluate the debtor's financial condition.
(b)[Reserved]
761.406Types of debt settlement.#
(a)Compromise. The Agency may compromise a debt owed to the Agency if the requirements of this subpart are met and:
(1)The borrower pays a lump sum as a compromise for the remaining unsecured debt; and
(2)The amount is reasonable based on the Agency's determination of what the borrower can pay to settle the debt.
(b)Adjustment. The Agency may settle a debt owed to the Agency through an adjustment agreement if the requirements of this subpart are met and:
(1)The borrower agrees to pay the adjustment amount for a period of time not to exceed 5 years; and
(2)The amount is reasonable based on the Agency's determination of what the borrower can pay to settle the debt; and
(3)The borrower provides documentation that funds are, or will be, available to pay the adjustment offer through its term.
(c)Cancellation. The Agency may cancel a debt owed to the Agency if the requirements of this subpart are met and the application and supporting documents indicate that the borrower is unable to pay a compromise or adjustment offer.
761.407Failure to pay.#
(a)Failure to pay any compromise amount approved by FSA by the date agreed will result in cancellation of the compromise agreement.
(b)Failure to pay debt adjustment amounts approved by FSA by the dates agreed will result in cancellation of the adjustment agreement.
(c)A debtor who has entered into an agreement under this subpart may request that FSA extend a repayment date for 90 days. The debtor must provide information that supports the basis for the request at the time the request is made.
(d)If a debtor is delinquent under the terms of an adjustment agreement and FSA determines the debtor is likely to be financially unable to meet the terms of the agreement, the existing agreement may be cancelled and the debtor may be allowed to apply for a different type of settlement more consistent with the debtor's repayment ability.
(e)If an agreement is cancelled, any payments received will be retained as payments on the debt owed.
761.408Administrator authority.#
On an individual case basis, the Agency may consider granting an exception to any requirement of this part if:
(a)The exception is not inconsistent with the authorizing statute or other applicable law; and
(b)The Agency's financial interest would be adversely affected by acting in accordance with this part and granting an exception would resolve or eliminate the adverse effect upon its financial interest.
United States Government work; public domain under 17 U.S.C. § 105.