[Federal Register: January 9, 2001 (Volume 66, Number 6)]
[Rules and Regulations]
[Page 1563-1569]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr09ja01-1]
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DEPARTMENT OF AGRICULTURE
Farm Service Agency
7 CFR Part 770
Rural Housing Service
Rural Business-Cooperative Service
Rural Utilities Service
Farm Service Agency
7 CFR Parts 1823, 1902, 1951, and 1956
RIN 0560-AF43
Loans to Indian Tribes and Tribal Corporations
AGENCY: Farm Service Agency, Rural Housing Service, Rural Business-
Cooperative Service, Rural Utilities Service, Farm Service Agency,
USDA.
ACTION: Final rule.
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SUMMARY: This rule consolidates and revises the Indian Tribal Land
Acquisition Program (ITLAP) regulations. The rule eliminates the
reserve requirement and the waiver of sovereign immunity for all new
loans; allows borrowers to use the loan reserve accounts as either an
extra payment on their loans to the Farm Service Agency (FSA) or for
other tribal needs; provides borrowers additional servicing options;
allows ITLAP funds to be used for certain refinancing activities;
expands the uses borrowers may make of land purchased with ITLAP funds;
requires ITLAP loan applications, in most cases, to include a copy of
the borrower's option to purchase the land; and provides for subsequent
loans to be made to ITLAP borrowers.
EFFECTIVE DATE: February 8, 2001.
FOR FURTHER INFORMATION CONTACT: Gary West, Senior Loan Officer, Farm
Loan Programs, Loan Servicing and Property Management Division, Farm
Service Agency, USDA, 1400 Independence Avenue, SW., STOP 0523,
Washington, DC 20250-0523, telephone (202) 690-4008, facsimile (202)
690-0949, electronic mail: gwest@wdc.usda.fsa.gov.
SUPPLEMENTARY INFORMATION:
Executive Order 12866
This rule has been determined to be significant under E.O. 12866
and has been reviewed by the Office of Management and Budget.
Regulatory Flexibility Act
In compliance with the Regulatory Flexibility Act (5 U.S.C. 601-
602), the undersigned has determined and certified by signature of this
document that this rule will not have a significant economic impact on
a substantial number of small entities. New provisions included in this
rule will not impact a substantial number of small entities to a
greater extent than large entities. Thus, large entities are subject to
these rules to the same extent as small entities. Therefore, a
regulatory flexibility analysis was not performed.
Environmental Impact Statement
This document has been reviewed in accordance with 7 CFR part 1940,
subpart G, ``Environmental Program.'' The issuing agency has determined
that this action does not affect the quality of human environment, and
in accordance with the National Environmental Policy Act of 1969, Pub.
L. 91-190, an Environmental Impact Statement is not required.
Executive Order 12988
This rule has been reviewed in accordance with E.O. 12988, Civil
Justice Reform. In accordance with this rule: (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 bringing suit in court challenging action
taken under this rule.
Executive Order 12372
For reasons set forth in the Notice related to 7 CFR part 3015,
subpart V (48 FR 29115, June 24, 1983), the programs within this rule
are excluded from the scope of E.O. 12372, which requires
intergovernmental consultation with State and local officials.
Executive Order 13132
It has been determined under section 1(a) of Executive Order 13132,
Federalism, that this rule does not have sufficient implications to
warrant consultation with the States. The provisions contained in this
rule will not have a substantial direct effect on States, or on the
relationship between the national government and the States, or on the
distribution of power and responsibilities among various levels of
government. The rule does not add any new significant loan making
criteria, but changes the format of the regulation in compliance with
efforts to streamline our loan making and loan servicing criteria.
The Unfunded Mandates Reform Act of 1995
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA),
requires Federal agencies to assess the effects of their regulatory
actions on State, local, and tribal governments or the private sector
of $100 million or more in any 1 year. When a rule contains such
mandates, section 205 of the UMRA requires agencies to prepare a
written statement, including a cost benefit assessment, for proposed
and final rules with ``Federal mandates'' that may result in such
expenditures for State, local, or Tribal governments, in the aggregate,
or to the private sector. UMRA generally requires agencies to consider
alternatives and adopt the more cost effective or least burdensome
alternative that achieves the objectives of the rule.
This rule contains no Federal mandates, as defined under Title II
of the UMRA, for State, local, and Tribal governments or the private
sector. Thus, this rule is not subject to the requirements of sections
202 and 205 of UMRA.
Paperwork Reduction Act of 1995
The Agency announced its intent to obtain Office of Management and
Budget (OMB) approval of the information collections established under
7 CFR part 770 under a new OMB control number in the notice of proposed
rule (64 FR 59131). No comments were received from the public regarding
the proposed
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information collections and the Agency has requested OMB approval.
Federal Assistance Programs
These changes affect the following FSA programs as listed in the
Catalog of Federal Domestic Assistance.
10.421--Indian Tribes and Tribal Corporation Loans.
Discussion of the Comments on the Proposed Rule
On November 2, 1999, the Rural Housing Service, Rural Business-
Cooperative Service, Rural Utilities Service, and the Farm Service
Agency published a Proposed Rule (64 FR 59131) requesting comments
regarding proposed changes to ITLAP. On March 31, 2000, an extension to
the comment period was published. In response to the request for public
comment, 29 comments were received. The breakdown of the five groups
and or individuals who commented were: Three Native American tribes,
one individual and one Federal Government agency.
Four comments were received regarding the cancellation of ITLAP
debt. One comment opposed reducing or canceling any ITLAP debt that is
fully secured and collectable because (1) The Federal Government has an
affirmative responsibility to collect such debt and to not take that
action turns the loans into grants and (2) it would violate the
appropriations process. Three comments supported the cancellation of
debt in some unspecified form, or supported a broad based cancellation
of the debt. In response to the comment that the Agency not reduce any
ITLAP debt that is fully secured and collectable, these loans are based
upon the value of the land purchased and not the general assignment of
income that is generally subordinated by the tribe to the Agency to
secure repayment. The general assignment of funds comes from all tribal
sources and not just the income generated from the land. So while the
repayment is secured by the assignment, many loans are in fact not
fully collateralized based upon the value of the land. It is the intent
of the Agency in the final rule in situations where certain tribal
economic impact factors are extreme to provide a mechanism for debt
reduction, thereby reducing tribal payments to be more in line with the
value of the lands purchased with these loan funds.
Also, while we agree that the Federal Government has an affirmative
responsibility to collect its legitimate debts in accordance with
various statutes, the Federal Government also has an affirmative
responsibility to manage its loan programs in a manner that takes into
consideration economic realities and circumstances beyond the control
of participants in its loan programs. The Agency is not turning loans
into grants but simply providing options for loan restructuring and
debt relief for those who qualify. Providing such measures is
consistent with actions taken to provide assistance to all program
applicants in other Federal loan programs. However, the Agency has
determined that it will limit the term of restructured loans to remain
within the maximum 40-year term to help balance the needs of tribes for
relief from economic hardship with the need to protect the financial
integrity of government loan programs.
In response to the comments that suggested the Agency adopt a
policy of canceling ITLAP debt, the Agency cannot justify the simple
cancellation of ITLAP debt with respect to the program's current
borrowers or future borrowers. Such an action would be inconsistent
with the intent of the program, which is to provide credit to Native
American tribes for the purchase of reservation land. When Congress
amended the ITLAP legislation in 1989 (sec. 303 of Pub. L. 101-82) to
authorize debt relief, it tied such relief to changes in the value of
the land. In this amendment, Congress did not suggest or encourage the
Agency to use its debt settlement authorities to provide broad debt
relief. While comments to the proposed regulations did suggest new
eligibility criteria and specifics on debt reduction, which are
addressed here, none of the comments provided specific criteria to
support when complete cancellation of debt should take place. Also,
providing such relief could jeopardize the future of ITLAP because, at
a minimum, if such relief is not clearly limited, it could
substantially increase the projected costs for future ITLAP loans. The
increased loan losses would mean that under the Credit Reform Act of
1990, the cost of loans would increase which would result in the Agency
having less program loan funding available for such loans, even if the
appropriation level of the program remains unchanged. The decreased
funding would have a negative impact on ITLAP applicants. Therefore,
the Agency has concluded at this point that the proposal of broadly
canceling ITLAP debts will not be implemented.
Three respondents submitted comments regarding the methodology and
eligibility for reducing the principal amount of the outstanding ITLAP
debt to the present value of expected future annual rental value of the
land purchased with ITLAP loan funds and setting the annual ITLAP loan
payment at the annual rent received or that could be received from this
land. Two of these comments stated that the principal balance of such
loans should be reduced to the present value of future annual rents
that could be generated on the land purchased with loan funds. Two
comments supported the concept that loan payments should be adjusted to
equal rental income received from land purchased with loan funds. In
addition, one comment suggested that eligibility for debt relief be
tied to the unusually high rates of unemployment encountered on Native
American reservations. Three comments supported eligibility criteria
based upon socio-economic factors but indicated that the proposed rule
criteria was too complicated and terms such as unfunded mandates and
quantifying public health and safety needs could never be accurately
measured. These comments are indicative that many tribes are having or
have experienced severe socio-economic problems and are finding it
difficult to meet the basic needs of their members. As a result, the
Agency has determined that debt relief to an ITLAP borrower could be
extended to those who face extreme poverty and unemployment.
The final rule contains a provision that would allow an ITLAP loan
to be written down to a level where annual loan payments are based upon
the previous 5-year average annual rental payment received for the land
purchased with loan funds projected over the remaining term of the
loan. The rental rate information will be obtained from the Native
American tribe or tribal corporation and verified with the Department
of Interior. This would occur if the Native American tribe is facing
extreme socio-economic problems, which are a part of the eligibility
criteria for debt relief. In further response to the comments the
Agency has changed the eligibility criteria to include socio-economic
factors that are more easily measured, such as per capita income and
tribal unemployment. However, a Native American tribe's loan could
receive the benefit of such a write-down regarding its ITLAP loans only
once, provided it has not received a land value write-down in the last
5 years. Such a write-down could involve as many ITLAP loans of the
tribe as meet the criteria under this regulation at the time of the
write-down application.
Two comments were received with regard to the number of years used
to determine the average rental value of the land purchased under the
rental value write-down option. The
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commenters believed that the Agency did not go far enough in using the
preceding 5 years to determine the average rental value of the land
purchased with loan funds. The commenters contended that the entire
history of the rental value of the land should be considered because
there have been several periods over the life of the existing loans
during which tribes have suffered financial hardships. The Agency
considered these comments but any write-down must be based upon an
accurate representation of the value of the land. To go back more than
5 years could result in a misstatement of the current land value. It is
not the purpose of the rental value write-down option to compensate the
borrower for financial hardship that it may have suffered in the past.
The purpose of the new write-down servicing option is to provide a
measure of relief, if necessary based upon the most recent indicators
of land value.
One comment was received regarding the restructuring of a loan by
lowering the interest rate and reamortizing the balance of the loan
over the remaining loan term. The comments were not opposed to lowering
the interest rate but were opposed to reamortizing over the remaining
term. They felt that keeping within the remaining term when no debt
relief is proposed simply increases a payment that already cannot be
met. This comment also referred to year 40 of the note as the balloon
payment date. In response, the Agency feels that routine loan
restructuring should take place when necessitated by temporary
circumstances and should be reamortized within the original note terms
in order to stay within the budgetary confines of program allocations
and to project a realistic repayment schedule for the loan. Also, the
Agency is publishing a deferral option in the final rule that will
further provide for temporary relief. If long-term problems are
encountered the debt-relief provisions of this rule should be explored.
In response to the balloon payment reference, the Agency believes that
40 years is a more than adequate repayment period for any note. Under
the equal amortization schedule the note is set up or restructured
under, year 40 is the final due date of the last installment and not a
balloon payment.
Two comments suggested that ITLAP borrowers should be eligible for
servicing options, such as reamortizations and deferrals (codified at 7
CFR part 1951, subpart S), and debt settlement options (codified at 7
CFR part 1956) that are available to Farm Loan Program (FLP) borrowers.
Based on a review of the FLP loan-making and servicing procedures, we
have determined that loan-making and servicing procedures for FLP are
not consistent with the statutorily established purposes of ITLAP. The
purpose of FLP loans is to assist family farming and ranching
operations in becoming economically successful. Conversely, the
statutory purpose of ITLAP loans is to assist Native American tribes in
the purchase of land and interests in land for the purpose of
consolidating their ownership of land within their reservations,
regardless of the economic use such tribe may make of the land. Thus,
FLP loans made to farmers and ranchers versus ITLAP loans made to
Native American tribes are substantially different in the types of
borrowers being targeted, the importance of how the borrower's
operation is structured, and the importance of the economic viability
of the project being funded. In order to accomplish the purpose of
these respective loan programs, the servicing options offered to
borrowers under each program must be different and tailored to the
distinct purposes of these programs. With respect to debt settlement,
for individual loans the security must be liquidated in order to debt
settle. In many cases, even when the security is liquidated a debt
settlement is not granted until a borrower makes a compromise offer to
settle the remaining indebtedness even though all the collateral has
been liquidated. The comments received considered this but felt that
land holdings on the reservation are unique because they are generally
secured by payment assignments, so collateral liquidation provisions
should not apply. To the extent that a final debt settlement procedure
is necessary, the Agency will use the general government procedures at
(4 CFR parts 101-105). The final rule implements loan servicing and
debt write-down provisions that are specially tailored and unique to
ITLAP and will maintain the economic viability of tribal lands
purchased with ITLAP funds.
Three comments were received regarding releasing assignments of
income and substituting real estate mortgages on the land purchased
with ITLAP funds. The comments suggest that the Agency take mortgages
as security for these existing loans in exchange for the release of the
general assignments of income that currently secure many of these
loans. The Agency does not agree with these comments. The assignment
guarantees repayment and since the ITLAP program is a credit program
the Agency is responsible for providing the best possible method of
collecting taxpayer dollars loaned. Also, in many of these cases taking
security in the form of a mortgage is not practical because the ITLAP
funds are being used to purchase fractional interests in land. A
mortgage on such fractional interests may not provide the Agency with
adequate security for the loan. However, the Agency is eliminating the
reserve account requirement for all new loans and providing reserve
account release criteria for existing loans in this rule. The reserve
is set up for tribes to pay and deposit one-tenth of their regularly
scheduled payment in the account until one full payment is in reserve.
The release may help to free funds for borrowers to use in other areas
rather than have them tied up in the reserve account.
One comment was received regarding granting of deferrals of annual
payments if the income loss is temporary. The comment recommended that
debt relief should be provided when a producer who rents land from the
borrower suffers a reduction in commodity prices. The Agency agrees and
has provided specific deferral criteria in Sec. 770.10(c) of the final
rule.
One comment suggested that debt relief should be provided if the
making of the loan payments by the borrower will impede the borrower's
ability to resolve fractional land interests on the reservation. One
comment stated that debt relief should be provided if the making of
loan payments impedes the borrower's ability to repay other loans or
meet other tribal needs. In response, the ITLAP program that provides
credit for a tribe to purchase land is not a program designed to solve
all tribal needs, nor could it possibly be designed to do so. If tribes
have other payment obligations, they may also approach those creditors
for relief. ITLAP is a loan program in which tribes recognize their
repayment responsibilities when entering into the loan. The Agency
cannot promulgate regulations that simply allow a borrower to not make
payments because it has decided that purchasing additional lands is a
priority.
Two comments indicated that the Agency should take action regarding
debt relief without promulgating new regulations, since such
regulations are not necessary and would violate Executive Order (E.O.)
13084. These comments indicated that the E.O. obligates the Secretary
of Agriculture to take actions to assist Native American tribes while
waiving the normal regulatory requirements to take such actions. The
Agency agrees that the E.O. does place an obligation on the Secretary
of Agriculture to take steps
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wherever possible to assist Native American tribes. As indicated in the
Proposed Rule the Agency re-examined ITLAP to determine if there are
ways in which the Agency can provide more debt relief options to
borrowers. The Agency, however, does not agree that the E.O. would
allow the Agency to implement such policy changes in violation of the
requirements of notice and comment rulemaking requirements in section
553 of Title 5, United States Code and the Statement of Policy of the
Secretary of Agriculture relating to notices of proposed rulemaking and
public participation (36 FR 13804). Further, while the public
notification and subsequent comment periods of the informal rulemaking
process has taken additional time, this process has given all
interested parties, including affected Native American tribes, the
opportunity to participate in the development of this final rule, thus
ensuring that their interests and concerns have been heard. Therefore,
the Agency proceeded with the consideration and development of ITLAP
debt relief changes through the notice and comment rulemaking process.
One comment indicated that the Agency's concerns regarding the
budgetary impacts of providing debt relief to borrowers were misplaced
because such relief would enable borrowers to purchase more fractional
interests and thus reduce the overall Federal Government's costs in
tracking these fractional interests. The comment indicated that any
additional costs to the Federal Government would be offset by the
reduction in costs to administer programs on Native American
reservations. The comment indicated that this information is readily
available from the Department of the Interior's Bureau of Indian
Affairs and that a reduction in debt would have a corollary effect of
reducing the costs incurred by the Federal Government of managing
fractional interests within the confines of Federally Recognized Indian
Reservations. Only authorizing legislation could allow for
consideration of such a proposal. In addition, these comments ignore
the Agency's concerns expressed in the Proposed Rule of the impact on
the Federal budget that any ITLAP debt relief will have on the Agency
and the reality of the Federal budgeting process.
One comment indicated that funding for the loan program should be
provided to the full program authorization level of $50 million and
that such a change would be in the best interests of the program. The
Agency has no comment as the Congressional appropriation process
establishes program funding levels, not the Agency.
One comment requested clarification on the definition of
Reservation to include the former reservations in Oklahoma. While
inclusion of these lands would be consistent with other FSA loan
programs, the statute authorizing ITLAP, 25 U.S.C. 488, limits ITLAP
loans to ``interests * * * within the tribe's reservation as determined
by the Secretary of the Interior or within a community in Alaska
incorporated by the Secretary * * *'' Former reservations lands are not
covered by the ITLAP authorizing statute and thus the comment was not
adopted.
One comment indicated that under the proposed land value or rental
value write-down criteria the appraisal that would be necessary would
be cost prohibitive because of fractionated interests in land. The
Agency maintains that a value must be established prior to any write-
down just as it was when the loans were originally made. If the
appraisal cost is viewed as being excessive, then, as with any loan,
the borrower will have to make a decision on what is in its best
interest.
Two comments requested that any requirement for the tribe to waive
its sovereign immunity be removed. The Agency agrees and will no longer
require the waiver. The lack of a waiver does not prevent the Federal
Government from bringing suit against the borrower.
One comment suggested that the Agency is not equipped to handle
loans to tribes and that the ITLAP program should be transferred to an
Agency that is better suited to understanding and working with tribal
programs, such as the Department of the Interior. This type of a loan
program transfer between departments of the Federal Government would
require enacting legislation.
There were other comments relating to specifics of the Agency's
internal administrative processing of various loan making or servicing
actions. These comments and recommended actions are solely
administrative in nature and will be covered in the Agency handbook.
Discussion of the Final Rule
Public Law 91-229 (25 U.S.C. 488-494) authorized the Secretary of
Agriculture to establish ITLAP to make loans to Native American tribes
and tribal corporations to acquire land and fractional interests in
land on the tribes' reservations. This program was administered by the
former Farmers Home Administration (FmHA). Under the authority of the
Department of Agriculture Reorganization Act of 1994, Pub. L. 103-354,
on October 20, 1994, FmHA's ITLAP functions were transferred to FSA.
Regulations for implementing this program are found at 7 CFR part 1823,
subpart N for loan making; 7 CFR part 1951, subpart E for loan
servicing; and 7 CFR part 1956, subpart C, for debt settlement. The
final rule will consolidate the ITLAP regulations into one part and
clarify that this program is exclusively administered by FSA.
The final rule will eliminate the reserve account. With respect to
loans that are not delinquent and that are presently adequately secured
by a general assignment of tribal income, the Agency will release its
interest in existing reserve accounts and allow them to be returned to
the Native American tribe or tribal corporation. During the review of
ITLAP in preparation of the proposed rule and the final rule, the
Agency determined that a general assignment of tribal income provides
the Agency sufficient security for ITLAP loans. The additional security
provided by the reserve account is unnecessary. ITLAP loans secured by
an assignment of income have a very low delinquency rate. The release
of the reserve would allow Native American tribes and tribal
corporations to use these funds towards an extra payment or for other
tribal operations. Also, with this change, the borrowers could use the
reserve account funds to purchase additional land that could increase
its future income or for other pressing tribal needs. The Agency
believes that these changes are consistent with the intent of ITLAP to
assist Native American tribes and tribal corporations to consolidate
their ownership in reservation lands.
The final rule also adopts the use of unemployment rates and tribal
per capita income for enrolled tribal members as an eligibility
criteria more easily obtainable than calculating the percentage or
tribal shortfall to meet unfunded State or Federal mandates.
The final rule expands the use of ITLAP loan funds to include:
Refinancing of an existing debt incurred by the Native American tribe
or tribal corporation to purchase land, provided the loan application
and land purchase proposal was received by the Agency and approved
prior to the purchase of the land; the Native American tribe or tribal
corporation was not able to obtain an option on the land; the debt to
be refinanced is short term debt with a balloon payment that cannot
otherwise be refinanced with the creditor; and the debt secured by the
land subject to the refinancing must otherwise meet the requirements of
ITLAP.
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The final rule allows certain ITLAP loans to be written down to a
value where the annual loan payment would equal the 5-year average
rental value for the land purchased with such loan funds if the
borrower could establish that the Native American tribe was facing
economic hardships based on a combination of certain eligibility
criteria. Such a write-down could involve as many ITLAP loans of the
tribe as meet the criteria under this regulation at the time of the
write-down application.
The final rule clarifies the process under which the Agency will
reduce the interest rate of an ITLAP loan to the interest in effect at
the time of application for such a reduction. Such a reduction will
take place if the ITLAP loan has been in effect for more than 5 years.
This change is being made to allow borrowers who have extreme
impoverished circumstances to benefit from any program interest rate
changes. Borrowers could qualify if the tribe has a per capita income
for enrolled tribal members which is less than the Federally
established poverty income rate by more than 50 percent and the tribal
unemployment rate exceeds 50 percent.
The final rule clarifies the approved uses of land that are the
subject of an ITLAP loan to ensure that the Agency's mortgage or income
assignment on the land is protected by requiring Agency approval prior
to such land being either leased, sold, or exchanged. The final rule
clarifies that a subsequent ITLAP loan may be made to a borrower for
the same purposes and under the same conditions as a prior loan. The
final rule requires that prior to obtaining an ITLAP loan, the Native
American tribe or tribal corporation must obtain an option or other
acceptable purchase agreement to purchase the land at issue and that a
copy of such agreement accompany the ITLAP loan application. The
purpose for this change is to allow the Agency to have all relevant
information regarding the land purchase for which ITLAP loan funds are
being sought. The final rule will also eliminate the need for the tribe
to waive their right to sovereign immunity as the Government will
receive an assignment of income that has been approved by Department of
Interior, Bureau of Indian Affairs, which serves to guarantee the
repayment of the loan, negating the need for the waiver of sovereign
immunity.
List of Subjects
7 CFR Part 770
Credit, Indians, Loan programs--agriculture.
7 CFR Part 1823
Credit, Grazing lands, Indians, Loan programs--agriculture, Rural
areas, Soil conservation.
7 CFR Part 1902
Accounting, Banks, banking, Grant programs--Housing and community
development, Loan programs--Agriculture, Loan programs--Housing and
community development.
7 CFR Part 1951
Accounting, Grant programs--Housing and community development;
Reporting and recordkeeping requirements, Rural areas.
7 CFR Part 1956
Accounting, Loan programs--Agriculture, Rural areas.
Accordingly, for the reasons stated in the preamble, 7 CFR part 770
is added and 7 CFR parts 1823, 1902, 1951, and 1956 are amended as
follows:
1. Part 770 is added to read as follows:
PART 770--INDIAN TRIBAL LAND ACQUISITION LOANS
Sec.
770.1 Purpose.
770.2 Abbreviations and definitions.
770.3 Eligibility requirements.
770.4 Authorized loan uses.
770.5 Loan limitations.
770.6 Rates and terms.
770.7 Security requirements.
770.8 Use of acquired land.
770.9 Appraisals.
770.10 Servicing.
Authority: 5 U.S.C. 301, 25 U.S.C. 490.
Sec. 770.1 Purpose.
This part contains the Agency's policies and procedures for making
and servicing loans to assist a Native American tribe or tribal
corporation with the acquisition of land interests within the tribal
reservation or Alaskan community.
Sec. 770.2 Abbreviations and definitions.
(a) Abbreviations.
FSA Farm Service Agency, an Agency of the United States Department
of Agriculture, including its personnel and any successor Agency.
ITLAP Indian Tribal Land Acquisition Program.
(b) Definitions.
Administrator is the head of the Farm Service Agency.
Agency is Farm Service Agency (FSA).
Appraisal is an appraisal for the purposes of determining the
market value of land (less value of any existing improvements that pass
with the land) that meets the requirements of part 761 of this chapter.
Applicant is a Native American tribe or tribal corporation
established pursuant to the Indian Reorganization Act seeking a loan
under this part.
Loan funds refers to money loaned under this part.
Native American tribe is:
(1) An Indian tribe recognized by the Department of the Interior;
or
(2) A community in Alaska incorporated by the Department of the
Interior pursuant to the Indian Reorganization Act.
Reservation is lands or interests in land within:
(1) The Native American tribe's reservation as determined by the
Department of the Interior; or
(2) A community in Alaska incorporated by the Department of the
Interior pursuant to the Indian Reorganization Act.
Reserve is an account established for loans approved in accordance
with regulations in effect prior to February 8, 2001 which required
that an amount equal to 10 percent of the annual payment be set aside
each year until at least one full payment is available.
Tribal corporation is a corporation established pursuant to the
Indian Reorganization Act.
Sec. 770.3 Eligibility requirements.
An applicant must:
(a) Submit a completed Agency application form;
(b) Except for refinancing activities authorized in Sec. 770.4(c),
obtain an option or other acceptable purchase agreement for land to be
purchased with loan funds;
(c) Be a Native American tribe or a tribal corporation of a Native
American tribe without adequate uncommitted funds, based on Generally
Accepted Accounting Principles, or another financial accounting method
acceptable to Secretary of Interior to acquire lands or interests
therein within the Native American tribe's reservation for the use of
the Native American tribe or tribal corporation or the members of
either;
(d) Be unable to obtain sufficient credit elsewhere at reasonable
rates and terms for purposes established in Sec. 770.4;
(e) Demonstrate reasonable prospects of success in the proposed
operation of the land to be purchased with funds provided under this
part by providing:
(1) A feasibility plan for the use of the Native American tribe's
land and other
[[Page 1568]]
enterprises and funds from any other source from which payment will be
made;
(2) A satisfactory management and repayment plan; and
(3) A satisfactory record for paying obligations.
(f) Unless waived by the FSA Administrator, not have any
outstanding debt with any Federal Agency (other than debt under the
Internal Revenue Code of 1986) which is in a delinquent status.
(g) Not be subject to a judgment lien against the tribe's property
arising out of a debt to the United States.
Sec. 770.4 Authorized loan uses.
Loan funds may only be used to:
(a) Acquire land and interests therein (including fractional
interests, rights-of-way, water rights, easements, and other
appurtenances (excluding improvements) that would normally pass with
the land or are necessary for the proposed operation of the land)
located within the Native American tribe's reservation which will be
used for the benefit of the tribe or its members.
(b) Pay costs incidental to land acquisition, including but not
limited to, title clearance, legal services, land surveys, and loan
closing.
(c) Refinance non-United States Department of Agriculture
preexisting debts the applicant incurred to purchase the land provided
the following conditions exist:
(1) Prior to the acquisition of such land, the applicant filed a
loan application regarding the purchase of such land and received the
Agency's approval for the land purchase;
(2) The applicant could not acquire an option on such land;
(3) The debt for such land is a short term debt with a balloon
payment that cannot be paid by the applicant and that cannot be
extended or modified to enable the applicant to satisfy the obligation;
and
(4) The purchase of such land is consistent with all other
applicable requirements of this part.
(d) Pay for the costs of any appraisal conducted pursuant to this
part.
Sec. 770.5 Loan limitations.
(a) Loan funds may not be used for any land improvement or
development purposes, acquisition or repair of buildings or personal
property, payment of operating costs, payment of finder's fees, or
similar costs, or for any purpose that will contribute to excessive
erosion of highly erodible land or to the conversion of wetlands to
produce an agriculture commodity as further established in exhibit M to
subpart G of part 1940 of this title.
(b) The amount of loan funds used to acquire land may not exceed
the market value of the land (excluding the value of any improvements)
as determined by a current appraisal.
(c) Loan funds for a land purchase must be disbursed over a period
not to exceed 24 months from the date of loan approval.
(d) The sale of assets that are not renewable within the life of
the loan will require a reduction in loan principal equal to the value
of the assets sold.
Sec. 770.6 Rates and terms.
(a) Term. Each loan will be scheduled for repayment over a period
not to exceed 40 years from the date of the note.
(b) Interest rate. The interest rate charged by the Agency will be
the lower of the interest rate in effect at the time of the loan
approval or loan closing, which is the current rate available in any
FSA office. Except as provided in Sec. 770.10(b) the interest rate will
be fixed for the life of the loan.
Sec. 770.7 Security requirements.
(a) The applicant will take appropriate action to obtain and
provide security for the loan.
(b) A mortgage or deed of trust on the land to be purchased by the
applicant will be taken as security for a loan, except as provided in
paragraph (c) of this section.
(1) If a mortgage or deed of trust is to be obtained on trust or
restricted land and the applicant's constitution or charter does not
specifically authorize mortgage of such land, the mortgage must be
authorized by tribal referendum.
(2) All mortgages or deeds of trust on trust or restricted land
must be approved by the Department of the Interior.
(c) The Agency may take an assignment of income in lieu of a
mortgage or deed of trust provided:
(1) The Agency determines that an assignment of income provides as
good or better security; and
(2) Prior approval of the Administrator has been obtained.
Sec. 770.8 Use of acquired land.
(a) General. Subject to Sec. 770.5(d) land acquired with loan
funds, or other property serving as the security for a loan under this
part, may be leased, sold, exchanged, or subject to a subordination of
the Agency's interests, provided:
(1) The Agency provides prior written approval of the action;
(2) The Agency determines that the borrower's loan obligations to
the Agency are adequately secured; and
(3) The borrower's ability to repay the loan is not impaired.
(b) Title. Title to land acquired with a loan made under this part
may, with the approval of the Secretary of the Interior, be taken by
the United States in trust for the tribe or tribal corporation.
Sec. 770.9 Appraisals.
(a) The applicant or the borrower, as appropriate, will pay the
cost of any appraisal required under this part.
(b) Appraisals must be completed in accordance with Sec. 761.7 of
this chapter.
Sec. 770.10 Servicing.
(a) Reamortization.
(1) Eligibility. The Agency may consider reamortization of a loan
provided:
(i) The borrower submits a completed Agency application form; and
(ii) The account is delinquent due to circumstances beyond the
borrower's control and cannot be brought current within 1 year; or
(iii) The account is current, but due to circumstances beyond the
borrower's control, the borrower will be unable to meet the annual loan
payments.
(2) Terms. The term of a loan may not be extended beyond 40 years
from the date of the original note.
(i) Reamortization within the remaining term of the loan will be
predicated on a projection of the tribe's operating expenses indicating
the ability to meet the new payment schedule; and
(ii) No intervening lien exists on the security for the loan which
would jeopardize the Government's security priority.
(3) Consolidation of notes. If one or more notes are to be
reamortized, consolidation of the notes is authorized.
(b) Interest rate reduction. The Agency may consider a reduction of
the interest rate for an existing loan to the current interest rate as
available from any Agency office provided:
(1) The borrower submits a completed Agency application form;
(2) The loan was made more than 5 years prior to the application
for the interest reduction; and
(3) The Department of the Interior and the borrower certify that
the borrower meets at least one of the criteria contained in paragraph
(e)(2) of this section.
(c) Deferral. The Agency may consider a full or partial deferral
for a period not to exceed 5 years provided:
(1) The borrower submits a completed Agency application form;
[[Page 1569]]
(2) The borrower presents a plan which demonstrates that due to
circumstances beyond their control, they will be unable to meet all
financial commitments unless the Agency payment is deferred; and
(3) The borrower will be able to meet all financial commitments,
including the Agency payments, after the deferral period has ended.
(d) Land exchanges. In the cases where a borrower proposes to
exchange any portion of land securing a loan for other land, title
clearance and a new mortgage on the land received by the borrower in
exchange, which adequately secures the unpaid principal balance of the
loan, will be required unless the Agency determines any remaining land
or other loan security is adequate security for the loan.
(e) Debt write-down.
(1) Application. The Agency will consider debt write-down under
either the land value option or rental value option, as requested by
the borrower.
(i) The borrower must submit a completed Agency application form;
(ii) If the borrower applies and is determined eligible for a land
value and a rental value write-down, the borrower will receive a write-
down based on the write-down option that provides the greatest debt
reduction.
(2) Eligibility. To be eligible for debt write-down, the borrower
(in the case of a tribal corporation, the Native American tribe of the
borrower) must:
(i) Be located in a county which is identified as a persistent
poverty county by the United States Department of Agriculture, Economic
Research Service pursuant to the most recent data from the Bureau of
the Census; and
(ii) Have a socio-economic condition over the immediately preceding
5 year period that meets the following two factors as certified by the
Native American tribe and the Department of the Interior:
(A) The Native American tribe has a per capita income for
individual enrolled tribal members which is less than 50 percent of the
Federally established poverty income rate established by the Department
of Health and Human Services;
(B) The tribal unemployment rate exceeds 50 percent;
(3) Land value write-down. The Agency may reduce the unpaid
principal and interest balance on any loan made to the current market
value of the land that was purchased with loan funds provided:
(i) The market value of such land has declined by at least 25
percent since the land was purchased as established by a current
appraisal;
(ii) Land value decrease is not attributed to the depletion of
resources contained on or under the land;
(iii) The loan was made more than 5 years prior to the application
for land value writedown; and
(iv) The loan has not previously been written down under paragraph
(d)(4) of this section and has not been written down within the last 5
years under this paragraph.
(4) Rental value write-down. The Agency may reduce the unpaid
principal and interest on any loan, so the annual loan payment for the
remaining term of each loan equals the average of annual rental value
of the land purchased by each such loan for the immediately preceding
5-year period provided:
(i) The loan was made more than 5 years prior to the rental value
writedown;
(ii) The description of the land purchased with the loan funds and
the rental values used to calculate the 5 year average annual rental
value of the land have been certified by the Department of the
Interior;
(iii) The borrower provides a current appraisal of the land; and
(iv) The loan has not been previously written down under this
paragraph and has not been written down within the last 5 years under
paragraph (d)(3) of this section.
(e) Release of reserve. Existing reserve accounts may be released
for the purpose of making ITLAP loan payments or to purchase additional
lands, subject to the following:
(1) A written request is received providing details of the use of
the funds;
(2) The loan is not delinquent;
(3) The loan adequately secured by a general assignment of tribal
income.
PART 1823--[Reserved]
2. Remove and reserve part 1823.
PART 1902--SUPERVISED BANK ACCOUNTS
3. The authority citation is revised to read as follows:
Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 42 U.S.C. 1480; 7 CFR
2.16 and 2.42.
Sec. 1902.15 [Amended]
4. Amend the first sentence of paragraph (c) of Sec. 1902.15 by
removing the words ``Indian Land Acquisition,'.
PART 1951--SERVICING AND COLLECTIONS
5. The authority citation continues to read as follows:
Authority: 5 U.S.C. 301; 7 U.S.C. 1932 Note, 7 U.S.C. 1989, 42
U.S.C. 1480.
Subpart E--Servicing of Community and Direct Business Programs
Loans and Grants
Sec. 1951.201 [Amended]
6. Amend the first sentence of Sec. 1951.201 by removing the words
``loans to Indian Tribes and Tribal Corporations;'.
Sec. 1951.221 [Amended]
7. Amend the heading of Sec. 1951.221(b) by removing the words
``and Indian Tribes and Tribal Corporation Loans''.
Sec. 1951.222 [Amended]
8. Remove Sec. 1951.222(a)(11).
Sec. 1951.230 [Amended]
9. Amend Sec. 1951.230 as follows:
a. Add the word ``and'' at the end of paragraph (b)(5);
b. Remove the word ``; and'' and add in its place ``.'' at the end
of paragraph (b)(6); and
c. Remove paragraph (b)(7).
PART 1956--DEBT SETTLEMENT
10. The authority citation for part 1956 continues to read as
follows:
Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 31 U.S.C. 3711; 42
U.S.C. 1480.
Subpart C--Debt Settlement--Community and Business Programs
11. Amend Sec. 1956.101 by removing the phrase ``and Indian Tribal
Land
Acquisition loans;''
Sec. 1956.105 [Amended]
12. Amend Sec. 1956.105 by removing paragraph (k).
Sec. 1956.137 [Removed and reserved]
13. Remove and reserve Sec. 1956.137.
Signed at Washington, DC, on December 22, 2000.
August Schumacher,
Under Secretary for Farm and Foreign Agricultural Services.
Jill Long Thompson,
Under Secretary for Rural Development.
[FR Doc. 01-100 Filed 1-8-01; 8:45 am]
BILLING CODE 3410-05-P
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