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Indian Tribal Land Acquisition Program Loan Writedowns 


[Federal Register: September 12, 2007 (Volume 72, Number 176)]
[Rules and Regulations]
[Page 51988-51990]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12se07-2]

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DEPARTMENT OF AGRICULTURE
Farm Service Agency
7 CFR Part 770
RIN 0560-AG87

Indian Tribal Land Acquisition Program Loan Writedowns

AGENCY: Farm Service Agency, USDA.
ACTION: Final rule.

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SUMMARY: This rule revises the Farm Service Agency (FSA) Indian Tribal
Land Acquisition Program (ITLAP) regulations as required by the Native
American Technical Corrections Act of 2006. The regulations pertaining
to rental value write-down of ITLAP loans will not require a market
value rent study where the land is actually rented. The actual rents
received shall be used to determine the rental value of the property
for write-down purposes.

DATES: Effective Date: October 12, 2007.

FOR FURTHER INFORMATION CONTACT: Mel Thompson, Senior Loan Officer,
Farm Service Agency; telephone: 202-720-7862; Facsimile: 202-690-1196;
E-mail: mel_thompson@wdc.usda.gov. Persons with disabilities who
require alternative means for communication (Braille, large print,
audio tape, etc.) should contact the USDA Target Center at (202) 720-
2600 (voice and TDD).

SUPPLEMENTARY INFORMATION:

Discussion of the Final Rule

    This rule revises the write-down servicing regulations of the Farm
Service Agency's (FSA) Indian Tribal Land Acquisition Loan Program
(ITLAP) to comply with section 203 of the Native American Technical
Corrections Act of 2006, Public Law 109-221 (25 U.S.C. 494a)
(``NATCA'').

A. Background

    ITLAP loans assist Native American tribes or tribal corporations
with the acquisition of land interests within the tribal reservation or
in an Alaskan community as set out in 7 CFR part 770. Loan funds may be
used to acquire land, land interests and appurtenances which will be
used for the benefit of the tribe or its members, pay costs for loan
closing, and refinance non-USDA debts the applicant incurred to
purchase the land in certain situations. During the life of the ITLAP
loan the borrower has a number of servicing options available based on
changes in their loan status. The servicing options available depend on
each borrower's circumstances and can include reamortization,
consolidation, interest rate reduction, deferral, land exchanges, debt
writedown, release of reserve accounts, or a combination thereof.

B. Writedown Requirements

    Under 7 CFR 770.10(e) the Agency may reduce the unpaid principal
and interest on an ITLAP loan based, in part, on the land sale value or
rental value of

[[Page 51989]]

the ITLAP property. The option used is as requested by the borrower or,
if it requests both, the write-down is based on which option provides
the greatest debt reduction. To be eligible for either writedown option
the borrower must be in a persistent poverty county, have a per capita
income for individual enrolled tribal members of less than 50 percent
of the Federal poverty income rate, and have a tribal unemployment rate
in excess of 50 percent.
    In a rental value write-down, FSA reduces the unpaid principal and
interest on the loan approved for the writedown so that the annual loan
payment for the remaining term of each loan equals the average of
annual rental value of the land purchased with the loan. The rental
value writedown option was provided along with a few other changes to
ITLAP regulations in a final rule published on February 11, 2005 (70 FR
7165). For determining the value of the property, that rule replaced
the requirement for a full appraisal (i.e., combining comparable sales,
income, and cost approaches) with a requirement for a study of the
rental income of properties similar to and near the land purchased with
ITLAP funds. See 7 CFR 770.2 and 770.10(e)(4).

C. Changes Required by the NATCA

    Section 203 of the NATCA (effective May 12, 2006) provides:

    Notwithstanding any other provision of law, any actual rental
proceeds from the lease of land acquired under * * * [ITLAP program
authority] (25 U.S.C. 488) certified by the Secretary of the
Interior shall be deemed--
    (1) To constitute the rental value of that land; and
    (2) To satisfy the requirement for appraisal of that land.

    Thus, this rule amends the definition of ``rental value'', as it
pertains to ITLAP, to provide that actual rents received will be used
to determine the average rental value and the amount of write-down,
rather than market rent, in accordance with the statute. Five years of
data will be requested and yield the most reliable average, but the
Agency will accept fewer years data if that is all that is available.
If no actual rents have been received, then the borrower must provide a
5-year market value rent study. The economic and other effects of this
change are difficult to estimate; however, it likely will reduce the
borrower's costs, eliminate the time required to complete an appraisal,
and reduce FSA's application processing time. On the other hand, the
administrative costs to the Government will likely increase due to the
change in calculating the amount of debt to be forgiven by rental value
write-down.

D. Summary of Economic Impacts

    Under the new write-down rules required under Section 203 of the
NATCA, ITLAP borrowers will be able to use a 5-year average of actual
rental income received on the land purchased with the ITLAP loan to
determine any write-down amount requested. This provision increases the
likelihood that principal and accrued interest write-downs will occur
in the program and that higher ITLAP loan subsidy rates will follow.
FSA estimates that a total of 3 current ITLAP borrowers will meet the
new write-down criteria and the estimated costs of this rule are based
upon the assumption that all 3 borrowers are likely to take advantage
of the lower standards imposed by NATCA. These 3 borrowers owe
approximately $20 million on loans that originally totaled $31 million.
FSA estimates the taxpayer costs will increase by as much as $5 million
as a result of write-downs to these 3 borrowers. Furthermore, future
taxpayer costs are expected to increase slightly as a result of higher
subsidy costs resulting from higher loan losses.
Notice and Comment
    The notice and comment provisions of 5 U.S.C. 553 and the Statement
of Policy of the Secretary of Agriculture effective July 24, 1971, (36
FR 13804), relating to notices of proposed rulemaking and public
participation in rulemaking, provide that certain rules may go forward
without public notice and comment when they are in the public interest.
This regulation adopts changes mandated in the NATCA Section 203.
Accordingly, this rule is published without requesting public comment
and will be effective 30 days after publication in the Federal Register.

Executive Order 12866

    This rule has been determined under Executive Order 12866 to be
significant and was reviewed by the Office of Management and Budget.

Regulatory Flexibility Act

    In accordance with the Regulatory Flexibility Act (RFA), 5 U.S.C.
601, the Agency has determined that there will be no significant
economic impact on a substantial number of small entities. There are
currently 24 ITLAP borrowers with 105 loans totaling $52 million.
However, only about four are likely to be affected by this rule. The
RFA requires agencies to consider the impact of their regulatory
proposals on small entities, minimize small entity impacts, and provide
their analyses for public comment. This rule affects Indian Tribes, and
such Tribes are not small businesses as defined by and subject to the
Regulatory Flexibility Act. Nevertheless, this rule provides a
substantial reduction in cost to Tribes applying for debt write-down.
Thus, to the extent an Indian Tribe may be affected by this rule, there
are no negative impacts.

Environmental Evaluation

    The environmental impacts of this rule have been considered
consistent with the provisions of the National Environmental Policy Act
of 1969 (NEPA), 42 U.S.C. 4321 et seq., the regulations of the Council
on Environmental Quality (40 CFR parts 1500-1508), and the FSA
regulations for compliance with NEPA, 7 CFR part 1940, subpart G. FSA
has determined that this rule will not have a significant impact on the
human or natural environment and therefore requires no further
environmental review.

Executive Order 12988

    This rule has been reviewed in accordance with E.O. 12988, Civil
Justice Reform. In accordance with that Executive Order: (1) All State
and local laws and regulations that are in conflict with this rule will
be preempted; (2) no retroactive effect will be given to this rule; and
(3) administrative proceedings in accordance with 7 CFR parts 11 and
780 must be exhausted before requesting judicial review.

Executive Order 12372

    As stated in the Notice related to 7 CFR part 3015, subpart V (48
FR 29115, June 24, 1983) the programs and activities within this rule
do not require consultation with state and local officials under the
scope of Executive Order 12372.

Unfunded Mandates

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public
Law 104-4, requires Federal agencies to assess the effects of their
regulatory actions on state, local, and tribal governments or the
private sector of expenditures of $100 million or more in any one year.
This rule contains no Federal mandates, as defined by title II of the
UMRA; therefore, this rule is not subject to sections 202 and 205 of
the UMRA.

Executive Order 13132

    The policies contained in this rule do not have any substantial
direct effect on states, on the relationship between the

[[Page 51990]]

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.

Paperwork Reduction Act

    The information collections were previously approved under OMB
control number 0560-0198, but the package was retired since there are
less than ten respondents annually and the collections are, therefore,
not subject to the Paperwork Burden Act. The number of estimated annual
respondents is not increased by this rule.

Federal Assistance Program

    The changes affect the following program listed in the Catalog of
Federal Domestic Assistance: 10.421--Indian Tribes and Tribal
Corporation Loans.

List of Subjects in 7 CFR Part 770

    Agriculture, Credit, Indians, Rural areas, Loan programs.

• Accordingly, for the reasons stated in the preamble, 7 CFR part 770 is
amended as follows:

PART 770--INDIAN TRIBAL LAND ACQUISITION LOANS

• 1. The authority citation for part 770 is revised to read as follows:

    Authority: 5 U.S.C. 301, 25 U.S.C. 488.

• 2. Amend Sec.  770.2 by revising the definition of ``rental value'' in
paragraph (b) to read as follows:

Sec.  770.2  Abbreviations and definitions.

* * * * *
    (b) * * *
    Rental value for the purpose of rental value write-downs, equals
the average actual rental proceeds received from the lease of land
acquired under ITLAP. If there are no rental proceeds, then rental
value will be based on market data according to Sec.  770.10(e)(4).
* * * * *

• 3. Amend Sec.  770.10 by revising paragraph (e)(4)(iii) to read as
follows:

Sec.  770.10  Servicing.

* * * * *
    (e) * * *
    (4) * * *
    (iii) The borrower provides a record of any actual rents received
for the land for the preceding 5 years, which will be used to calculate
the average rental value. This record must be certified by the
Department of the Interior. For land that has not been leased or has
not received any rental income, the borrower must provide a market
value rent study report for the preceding 5 years, which identifies the
average annual rental value based on the market data. The market value
rent study report must be prepared by a certified general appraiser and
meet the requirements of USPAP.
* * * * *

    Signed in Washington, DC, on September 6, 2007.
Teresa C. Lasseter,
Administrator, Farm Service Agency.
[FR Doc. E7-18032 Filed 9-11-07; 8:45 am]
BILLING CODE 3410-05-P

 
 

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