This section of the FEDERAL REGISTER

contains notices to the public of the proposed

issuance of rules and regulations. The

purpose of these notices is to give interested

persons an opportunity to participate in the

rule making prior to the adoption of the final

rules.

Proposed Rules Federal Register

47384

Vol. 62, No. 174

Tuesday, September 9, 1997

DEPARTMENT OF AGRICULTURE

Rural Housing Service

Rural Business-Cooperative Service

Rural Utilities Service

Farm Service Agency

7 CFR Parts 1962, 1965 and 1980

RIN 0560–AE92

Subordination of Direct Loan Basic

Security to Secure a Guaranteed Line

of Credit

AGENCIES: Rural Housing Service, Rural

Business-Cooperative Service, Rural

Utilities Service, Farm Service Agency,

USDA.

ACTION: Proposed rule.

SUMMARY: The Farm Service Agency

(FSA) proposes to revise its regulations

regarding loan security servicing to

allow the Agency to enhance the use of

subordinations to move direct farm

credit program borrowers to the private

sector. The first change is to allow

subordinations of direct loan basic

chattel and real estate security if

necessary to secure a guaranteed

operating line of credit. This action is

intended to encourage the making of

guaranteed lines of credit as opposed to

direct annual operating loans or

subordinations. Secondly, this rule also

proposes to revise FCP regulations to

allow subordination of Agency loan

security so another lender may

refinance a borrower’s debt. This change

is needed because recent legislation

places restrictions on the uses of direct

loans for refinancing. The proposal is

intended to allow the Agency to transfer

a portion of a direct loan borrower’s

government debt to commercial credit.

DATES: Comments on the proposed rule,

comments on alternatives to this

proposal, and the information collection

requirements of this rule must be

received on or before November 10,

1997 to be assured consideration.

ADDRESSES: Send comments on, and

alternatives to, the proposed rule to:

Director, Farm Credit Programs Loan

Servicing and Property Management

Division (LSPMD), Farm Service Agency

(FSA), U.S. Department of Agriculture

(USDA), room 5449-S, 1400

Independence Avenue, SW, STOP 0523,

Washington, D.C. 20013–0523.

Comments on the information collection

requirements of this proposed rule must

be sent to the Office of Management and

Budget (OMB) at the address listed in

the Paperwork Reduction Act section of

this preamble or sent to the Department

address listed after the OMB address.

FOR FURTHER INFORMATION CONTACT:

Craig Nehls, Branch Chief, USDA, FSA,

Farm Credit Programs Loan Servicing

Division, 1400 Independence Avenue,

SW, STOP 0523, Washington, D.C.

20013–0523, telephone (202) 720–1984.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This rule has been reviewed under

E.O. 12866 and has been determined to

be a significant regulatory action and

has been reviewed by OMB.

Executive Order 12372

1. For the reasons set forth in the

Notice related to 7 CFR part 3015,

subpart V (48 FR 29115, June 24, 1983),

Farm Ownership Loans, Farm Operating

Loans and Emergency Loans are

excluded from the scope of E.O. 12372,

which requires intergovernmental

consultation with State and local

officials.

2. The Soil and Water Loan Program

is subject to and has met the provisions

of E.O. 12372.

Federal Assistance Program

These changes affect the following

FSA programs as listed in the Catalog of

Federal Domestic Assistance:

10.404—Emergency Loans

10.406—Farm Operating Loans

10.407—Farm Ownership Loans

10.416—Soil and Water Loans

Environmental Impact Statement

It is the determination of the issuing

agency that this action is not a major

Federal action significantly affecting the

environment. Therefore, in accordance

with the National Environmental Policy

Act of 1969, Pub. L. 91–190, and 7 CFR

part 1940 subpart G, an Environmental

Impact Statement is not required.

Executive Order 12988

This proposed 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 unless those regulations

specifically allow bringing suit at an

earlier time.

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. This rule does

not involve a new or expanded program

and new provisions included in this

rule will not impact a substantial

number of small entities to a greater

extent than large entities. Although it is

the intent of this rule to move direct

loans to guaranteed loans, participation

is voluntary and requires no action on

the part of small entities. Thus, large

entities are subject to these rules to the

same extent as small entities. Therefore,

a regulatory flexibility analysis was not

performed.

Unfunded Mandates

Title II of the Unfunded Mandate

Reform Act of 1995 (UMRA), Pub. L.

104–4, requires Federal agencies to

assess the effects of their regulatory

actions on State, local, and tribal

governments or the private sector.

Agencies generally must prepare a

written statement, including a cost

benefit analysis, for proposed and final

rules with ‘‘Federal mandates’’ that may

result in expenditures of $100 million or

more in any 1 year 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.

The 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
Federal Register / Vol. 62, No. 174 / Tuesday, September 9, 1997 / Proposed Rules 47385

requirements of sections 202 and 205 of

UMRA.

Paperwork Reduction Act

The amendments to 7 CFR parts 1962,

1965 and 1980 set forth in this proposed

rule require no revisions to the

information collection requirements that

were previously approved by OMB

under the provisions of 44 U.S.C.

chapter 35. Comments regarding the

following issues should be sent to the

Desk Officer for Agriculture, Office of

Information and Regulatory Affairs,

Office of Management and Budget,

Washington, D.C. 20503 and to Craig

Nehls, Branch Chief, USDA, FSA, Farm

Credit Programs Loan Servicing

Division, Farm Service Agency, USDA,

1400 Independence Avenue, SW, STOP

0523, Washington, D.C. 20013–0523: (a)

Whether the collection of information is

necessary for the proper performance of

the functions of the agency, including

whether the information will have

practical utility; (b) the accuracy of the

agency’s estimate of burden including

the validity of the methodology and

assumptions used; (c) ways to enhance

the quality, utility and clarity of the

information to be collected; (d) ways to

minimize the burden of the collection of

information on those who are to

respond, including through the use of

appropriate automated, electronic,

mechanical, or other technological

collection techniques or other forms of

information technology. Comments

regarding paperwork burden will be

summarized and included in the request

for OMB approval of the information

collection. All comments will also

become a matter of public record.

Title: 7 CFR 1980-B, Farmer Program

Loans.

OMB Control Number: 0560–0155.

Expiration Date: March 31, 1998.

Type of Request: Request for

Comments.

Abstract: The information collected

under OMB Control Number 0560–0155,

as identified above, is needed in order

for FSA to effectively administer the

regulation relating to the subordination

of direct loan security to secure a

guaranteed loan line of credit. The

information is collected by the loan

official in consultation with the lender.

The basic objective of the guaranteed

loan program is to provide credit to

applicants who are unable to obtain

credit from lending institutions without

a guarantee. The reporting requirements

imposed on the public by the

regulations set out in 7 CFR part 1980–

B are necessary to administer the

guaranteed loan program in accordance

with statutory requirements listed above

and are consistent with commonly

performed lending practices. Collection

of information after loans are made is

necessary to protect the Government’s

financial interest.

This rule—to allow for subordinations

of direct loan security to secure a

guaranteed line of credit—is expected to

result in the substitution of guaranteed

loans in several cases where direct

Operating Loans (OL) or subordinations

are being used to fund annual farm

operating needs. This is expected to

result in a slight increase in the number

of guaranteed lines of credit, a decrease

in the number of OL’s and an increase

in the number of subordinations. The

respective requirements of

subordinations and OL loans will not

change. The Agency has determined

that the currently approved information

collection requirements contain

sufficient estimates to absorb this

proposed change since the first part of

this rule will affect the current burden

of these regulations by only 0.3 percent,

if at all. Therefore, no request for

revision is being made. Subordinations

of direct loan security (subordinations)

are governed by 7 CFR 1962.30 and

1965.12. Guaranteed Operating loans

(OL) are governed by 7 CFR 1980.175.

Estimate of Burden: Public reporting

burden for this collection of information

is estimated to average .71 hours per

response.

Respondents: Individuals or

households, businesses or other for

profit and farms.

Estimated Number of Respondents:

23,150.

Estimated Number of Responses per

Respondent: 1.

Estimated Total Annual Burden on

Respondents: 193,343.

Title: 7 CFR 1962–A, has no

information collection requirements and

does not have an OMB Control Number.

Title: 7 CFR 1965–A, Servicing of Real

Estate Security for Farmer Program

Loans and Certain Note-Only Cases.

OMB Control Number: 0560–0158.

Expiration Date: April 30, 1998.

Type of Request: Revision and

Extension of a Currently Approved

Information Collection.

Abstract: The information collected

under OMB Control Number 0560–0158,

as identified above, is collected by the

loan servicing official in consultation

with the borrower, another creditor, or

other appropriate individuals from

whom information is necessary. The

information is used in order to process

subordination request and effectively

administer program policies and

procedures in a way that maximize

benefits to borrowers and maintains the

Government’s financial interest.

Section 331 of the Consolidated Farm

and Rural Development Act, as

amended, authorizes the Secretary of

Agriculture to grant releases from

personal liability where security

property is transferred to approved

applicants who, under agreement,

assume the outstanding secured

indebtedness. That section also

authorizes the Secretary of Agriculture

to grant partial releases and

subordinations of mortgages subject to

certain conditions and to consent to

leases of security and transfers of

security property. FSA county offices

must collect information from borrowers

requesting subordinations in order to

assure that the program is carried out in

accordance with the applicable laws

and authorities.

The 1996 Act modified the authorized

loan purposes for direct Farm

Ownership Loans (FO) by eliminating

the refinancing of existing indebtedness

as well as placing a limit on the number

of times a direct Farm Operating Loan

(OL) may be used for refinancing. This

has unintentionally restricted the

Agency’s ability to subordinate security

since 7 CFR 1965.12 allows

subordination for ‘‘authorized loan

purposes.’’ This causes problems in

cases where subordinations are

necessary for graduating direct loan

borrowers to commercial credit.

Graduation to commercial credit is one

of the Agency’s basic goals. The second

part of this rule—to allow for

subordinations for refinancing debt—is

intended to allow the Agency to meet

the need for refinancing created by the

Federal Agriculture Improvement Act of

1996 (1996 Act). It will have no effect

on currently approved information

collection requirements. The public

reporting burden under the

requirements of the regulation are

shown in the following estimates:

Estimate of Burden: Public reporting

burden for this collection of information

is estimated to average .64 hours per

response.

Respondents: Individuals or

households, businesses or other for

profit and farms.

Estimated Number of Respondents:

29,516.

Estimated Number of Responses per

Respondent: 1.

Estimated Total Annual Burden on

Respondents: 18,971.

Discussion of Proposed Rule

These changes involve the Farm

Credit Programs (FCP) loans of FSA

formerly administered by the Farmers

Home Administration (FmHA) as

Farmer Programs loans.
47386 Federal Register / Vol. 62, No. 174 / Tuesday, September 9, 1997 / Proposed Rules

Section 1980.108 (a)(iii) of Title 7 of

the Code of Federal Regulations states

that when a borrower is involved with

both a direct and guaranteed loan with

the Agency, the Agency may

subordinate its lien position only on

crops, feeder livestock or livestock

products in order to secure a guaranteed

loan and in other limited cases. FCP

loan servicing regulations (7 CFR part

1962, subpart A and part 1965, subpart

A), provide conditions for the

subordination of Agency lien position

on basic chattel and real estate security

to another lender without mention of

when the Agency will be providing the

lender a guarantee on the loan to be

made.

This proposed rule will allow FSA to

grant a subordination of basic chattel

and real estate security in connection

with a guaranteed line of credit. Such

subordinations will be subject to the

applicable requirements of 7 CFR

1962.30 and 1965.12 as referenced in 7

CFR 1980.108 in addition to conditions

specific to granting a subordination in

conjunction with a guaranteed loan. The

Agency currently offers subordinations

of basic chattel and real estate security

under 7 CFR 1980.108 (a)(1)(iii) up to an

amount necessary to collateralize a crop

loan or a guarantee of up to 90 percent

of principal and accrued interest on an

operating loan. However, some

commercial lenders and Congressional

representatives have expressed concerns

that this policy is too restrictive in areas

where commercial lenders do not

normally make loans to farm producers

secured only by crops, or livestock

products. Real estate and basic chattel

security is desired. The Agency does not

feel that this is a widespread problem.

Furthermore, since the Government will

be assuming nearly all of the risk for

these combination subordination and

guaranteed loans, conditions are

proposed to ensure that these loans are

made only in those areas that can

document problems with credit

availability. In addition, the loans will

only be made where the Agency will

have an extra 25 percent in security

value to cover its loan after the

subordination to protect the

Government from an undue risk of loss.

This rule is also proposing revisions

to FCP loan servicing regulations to

allow subordination of Agency loan

security so another lender may

refinance a borrower’s debt. This is

necessary as a result of a recent

modification to Agency loan eligibility

criteria made by the 1996 Act. Section

602 of the 1996 Act does not include

refinancing as an authorized loan

purpose for direct Farm Ownership

loans (FO). Section 312 of the 1996 Act

also places a limit on the number of

times a direct Farm Operating loan (OL)

may be used for refinancing. This has

unintentionally restricted the Agency’s

ability to subordinate security since 7

CFR 1962.30 and 1965.12 allow a

subordination only for ‘‘authorized loan

purposes.’’ This language is not required

by statute. The legislation has also

caused problems in cases where a

subordination is necessary for

graduations of direct loan borrowers to

commercial credit on some of their

loans. Graduation is one of the Agency’s

basic goals.

To address these problems, the

Agency proposes to allow

subordinations for loans to refinance a

borrower’s debts. Subordinations for

such purposes are not in conflict with

the language or the intent of the 1996

Act. The 1996 Act did not restrict the

use of guaranteed FO’s and OL’s for

refinancing purposes, so it is clear that

Congress did not intend to prohibit all

refinancing.

The Agency also proposes to revise

the provision concerning the

relationship between direct and

guaranteed loans in 7 CFR 1980.108 to

delete the requirement limiting

combined direct and guaranteed to

$650,000 when an Economic Emergency

loan is involved. This requirement of

the Emergency Agricultural Credit

Adjustment Act of 1978 was repealed by

§1851 of the Food, Agriculture,

Conservation, and Trade Act of 1990

(Pub. L. 101–624).

This rule also removes administrative

provisions from some of the affected

sections, leaving only regulatory actions

which impact the public in the Federal

Register. Matters involving internal

operating procedures and requirements

will be contained in the Agency’s

instructions and handbooks. This

streamlining makes the regulation more

concise and easier to read and

understand. Handbooks and

instructions are available to the public

upon request from an FSA office. Daily

management of existing programs will

not be affected by these administrative

deletions.

Also, this rule makes minor wording

changes, redesignates some numbered

paragraphs and revises references to

‘‘FmHA’’ to reference ‘‘FSA’’ or

‘‘Agency.’’

Accordingly, it is proposed that 7 CFR

chapter XVIII be amended as follows:

List of Subjects

7 CFR Part 1962

Crops, Government property,

Livestock, Loan programs—Agriculture,

Rural areas

7 CFR Part 1965

Real Property—Foreclosure, Loan

programs—Agriculture, Rural areas

7 CFR Part 1980

General—Agriculture, Loan

programs—Agriculture, EM

PART 1962—PERSONAL PROPERTY

1. The authority citation for part 1962

continues to read as follows:

Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 42

U.S.C. 1480.

Subpart A—Servicing and Liquidation

of Chattel Security

2. Section 1962.30 is revised to read

as follows:

§ 1962.30 Subordination and waiver of

liens on chattel security.

(a) Purposes. Subject to the

limitations set out in paragraph (b) of

this section, the Agency chattel liens

may be subordinated to a lien of another

creditor in any of the following

situations:

(1) The prior lien will soon mature or

has matured and the prior lienholder

desires to extend or renew the

obligation, or the obligation can be

refinanced. The relative lien position of

the Agency must be maintained.

(2) The subordination will permit

another creditor to refinance other debt

or lend for an authorized direct loan

purpose.

(3) The subordination is necessary to

obtain crop insurance. The creditor to

whom a subordination is given must

consent in writing to payment of the

insurance premiums from the crop or

insurance proceeds. When a

subordination is executed to enable the

borrower to obtain crop insurance on

Agency security, the borrower will

assign the insurance proceeds to the

Agency or name the Agency in the losspayable clause of the policy.

(b) Conditions. Agency chattel liens

may be subordinated to a lien of another

creditor if all of the following

conditions are met:

(1) The lien to be subordinated is on

crops, livestock increase, feeder

livestock, and other normal income

security. If the lien is on basic chattel

security, the Agency will subordinate

only to the extent necessary to provide

the lender with the security it requires

to make the loan.

(2) The subordination is limited to a

specific amount.

(3) Only one subordination to one

creditor may be outstanding at any one

time in connection with the same

security.
Federal Register / Vol. 62, No. 174 / Tuesday, September 9, 1997 / Proposed Rules 47387

(4) The borrower has not been

convicted of planting, cultivating,

growing, producing, harvesting or

storing a controlled substance under

Federal or State law. ‘‘Borrower’’ for

purposes of this provision, specifically

includes an individual or entity

borrower and any member stockholder,

partner, or joint operator, of an entity

borrower and any member, stockholder,

partner, or joint operator of an entity

borrower. ‘‘Controlled substance’’ is

defined at 21 CFR part 1308. The

borrower will be ineligible for a

subordination for the crop year in which

the conviction occurred and the 4

succeeding crop years. Applicants must

attest on the Agency application form

that it and its members, if an entity,

have not been convicted of such a

crime.

(5) The loan funds will not be used in

such a way that will contribute to

erosion of highly erodible land or

conversion of wetlands for the

production of an agricultural

commodity according to subpart G of

part 1940 of this chapter.

(6) Subordinations will not be granted

to another USDA agency.

(c) Subordination to make a

guaranteed loan. Notwithstanding the

requirements of this section

subordinations on chattel security to

make a guaranteed loan will be

approved in accordance with § 1980.108

of subpart B of part 1980 of this chapter.

(d) Forms. Subordinations will be

executed on Agency forms available in

any FSA office or on another form

approved by the Agency.

PART 1965—REAL PROPERTY

3. The authority citation for 7 CFR

part 1965 continues to read as follows:

Authority: 5 U.S.C. 301; 7 U.S.C. 1989 and

42 U.S.C. 1480.

Subpart A—Servicing of Real Estate

Security for Farmer Program Loans

and Certain Note-Only Cases

4. Section 1965.12 is revised to read

as follows:

§ 1965.12 Subordination of an Agency

mortgage.

(a) A subordination may be granted if

all of the following conditions are met:

(1) The subordination is to refinance

debt or for any other authorized loan

purpose.

(2) The Agency debt cannot be

refinanced without a subordination.

(3) The subordination will further the

purposes for which the Agency loans

were originally made.

(4) Any cooperative stock required in

connection with the loan secured by the

subordinated security will be assigned

to the Agency.

(5) If the unpaid principal and

accrued interest balance of the Agency

loan exceeds the value of the loan

security, a subordination may be

granted only if the value of the security

will be increased by at least the amount

of the advances to be made.

(6) The Agency loan is still adequately

secured after the subordination.

(7) The borrower can document the

ability to repay the total amount due

under subordination and pay all other

debt payments scheduled for the subject

operating cycle.

(8) The loan funds will not be used in

such a way that will contribute to

erosion of highly erodible land or

conversion of wetlands for the

production of an agricultural

commodity according to part 1940,

subpart G of this chapter.

(9) When a non-farm tract secures a

single family housing (SFH) loan, the

other lender’s funds will only be used

for the same purposes and with the

same limitations that would be

applicable if a SFH loan were made.

(10) When the subordination will be

used to acquire land, the FSA county

committee has made a favorable

recommendation.

(11) Any planned development

performed in a manner directed by the

creditor and agreed to by the Agency

which reasonably attains the objectives

of part 1924, subpart A of this chapter.

(12) Funds to be used to develop or

to acquire land will be deposited in a

supervised bank account that is subject

to signature by the Agency and the

borrower or in a similar arrangement to

ensure that funds will be spent for the

planned purposes.

(13) In cases of land purchase or

exchange of property, the Agency will

obtain a valid mortgage on the acquired

land. Title clearance and loan closing

will be required as for an initial or

subsequent FO loan, as appropriate.

(14) The borrower has not been

convicted of planting, cultivating,

growing, producing, harvesting or

storing a controlled substance under

Federal or State law. ‘‘Borrower’’ for

purposes of this provision, specifically

includes an individual or entity

borrower and any member stockholder,

partner, or joint operator, of an entity

borrower and any member, stockholder,

partner, or joint operator of an entity

borrower. ‘‘Controlled substance’’ is

defined at 21 CFR part 1308. The

borrower will be ineligible for a

subordination for the crop year in which

the conviction occurred and the four

succeeding crop years. Applicants must

attest on the Agency application form

that it and its members, if an entity,

have not been convicted of such a

crime.

(b) Subordination on real estate

owned by an entity member. When the

borrower is an entity and the Agency

has taken real estate as additional

security on property owned by an entity

member, a subordination for any

authorized Farm Credit Programs loan

purpose may be approved when it is

needed for the entity member to finance

a separate operation. The subordination,

however, may be approved only if it

does not cause the unpaid principal and

accrued interest balance of the Agency

loan to exceed the value of the loan

security or otherwise adversely affect

the security.

(c) Request for subordination. A

borrower must complete an application

provided by the Agency to receive

consideration for a subordination.

(d) Notice of foreclosure. The

lienholder requesting the subordination

will agree to give notice of foreclosure

as required by the Agency.

(e) Reamortizing existing Agency

debts. The Agency may consent to a

reamortization of an existing Agency

debt, other than an SFH debt, when a

subordination is granted to the debt of

another lender. The reamortization will

be allowed only when the borrower

cannot reasonably be expected to meet

all currently scheduled installments

when due and the conditions of part

1951, subpart S, of this chapter are met.

(g) Subordination to make a

guaranteed loan. Notwithstanding the

requirements of this section,

subordinations of liens on real estate

security to make a guaranteed loan will

be in accordance with § 1980.108 of this

chapter.

PART 1980—GENERAL

5. The authority citation for 7 CFR

part 1980 continues to read as follows:

Authority: 5 U.S.C. 301; 7 U.S.C. 1989 and

42 U.S.C. 1480.

Subpart B—Farmer Programs Loans

6. Section 1980.108 is amended to

add paragraphs (a)(1)(v) and (vi) and to

revise paragraphs (a)(1)(iii) and (d) to

read as follows:

§1980.108 General provisions.

(a) ***

(1) ***

(v) The Agency may subordinate its

security interest on a direct loan when

a guaranteed loan is involved in any of

the following circumstances:

(A) To permit a guaranteed lender to

advance funds and perfect a security

interest in crops, feeder livestock, or
47388 Federal Register / Vol. 62, No. 174 / Tuesday, September 9, 1997 / Proposed Rules

livestock products, (milk, eggs, wool,

etc.).

(B) When the lender requesting the

guarantee needs the subordination of

the Agency’s lien position to maintain

its lien position when servicing or

restructuring.

(C) When the lender requesting the

guarantee is refinancing the debt of

another lender and the Agency’s

position on real estate security will not

be adversely affected.

(vi) The Agency may subordinate its

security interest in chattels and real

estate, or both to permit a Contract of

Guarantee—Line of Credit to be

advanced for annual operating needs in

accordance with §1980.175 (c)(2) only

when the following conditions are met:

(A) The value of the total security for

the direct loan or loans exceeds the total

unpaid balance of the direct loan that it

secures by at least 25 percent of the

amount of the proposed line of credit

after the subordination.

(B) The applicant cannot obtain

sufficient credit through a conventional

guaranteed loan.

(C) The subordination is limited to a

specific amount.

(D) The loan funds will not be used

in such a way that will contribute to

erosion of highly erodible land or

conversion of wetlands for the

production of an agricultural

commodity according to part 1940,

subpart G of this chapter.

(E) The borrower has not been

convicted of planting, cultivating,

growing, producing, harvesting or

storing a controlled substance under

Federal or State law. ‘‘Borrower’’ for

purposes of this provision, specifically

includes an individual or entity

borrower and any member stockholder,

partner, or joint operator, of an entity

borrower and any member, stockholder,

partner, or joint operator of an entity

borrower. ‘‘Controlled substance’’ is

defined at 21 CFR part 1308. The

borrower will be ineligible for a

subordination for the crop year in which

the conviction occurred and the 4

succeeding crop years. Applicants must

attest on the Agency application form

that it and its members, if an entity,

have not been convicted of such a

crime.

(F) No subordination will exist in

favor of another creditor on the same

security.

(G) The subordination is not in favor

of another USDA agency.

(H) Any stock required in connection

with the loan secured by the

subordinated security will be assigned

to the Agency.

(I) The borrower can document the

ability to repay the total amount due

under subordination and pay all other

debt payments scheduled for the subject

operating cycle.

(J) The borrower will complete an

application provided by the Agency to

receive consideration for a

subordination, and

(K) The lienholder requesting the

subordination will agree to give notice

of foreclosure as required by the

Agency.

* * * * *

(d) Relationship between Agency

loans, direct and guaranteed. A

guaranteed FO or OL loan may be made

to an insured borrower with the same

type of direct loan provided:

(1) The outstanding combined direct

and guaranteed FO or OL principal

balance owned by the loan applicant or

owed by anyone who will sign the note

as cosigner may not exceed the

authorized guaranteed loan limit for that

type of loan.

(2) Chattel and real estate collateral

must be separate and identifiable so as

to be discernible from the collateral

pledged to the Agency for a direct loan.

Different lien positions on real estate are

considered separate and identifiable

collateral.

7. Section 1980.175 is amended to

add paragraph (h)(3) as follows:

§1980.175 Operating Loans.

* * * * *

(h) Special security requirements. (1)

* * *

(3) Subject to the requirements of this

section, the Agency may approve a

Contract of Guarantee for a line of credit

to be secured by basic chattel or real

estate security in which the Agency has

subordinated its lien position in

accordance with § 1980.108.

* * * * *

Signed in Washington, DC, on September

2, 1997.

Dallas Smith,

Acting Under Secretary for Farm and Foreign

Agricultural Services.

Jill Long Thompson,

Under Secretary for Rural Development.

[FR Doc. 97–23750 Filed 9–8–97; 8:45 am]

BILLING CODE 3410–05–P

DEPARTMENT OF COMMERCE

National Oceanic and Atmospheric

Administration

15 CFR Part 911

[Docket No. 970725178–7178–01]

Policies and Procedures Regarding

Use of the NOAA Space-Based Data

Collection Systems

AGENCY: National Oceanic and

Atmospheric Administration,

Department of Commerce.

ACTION: Notice of proposed rulemaking.

SUMMARY: The National Oceanic and

Atmospheric Administration (NOAA)

proposes regulations revising its

policies and procedures for authorizing

the use of its space-based Data

Collection Systems which operate on

NOAA’s Geostationary Operational

Environmental Satellites (GOES) and

Polar-orbiting Operational

Environmental Satellites (POES). These

proposed regulations revise the current

policy on the use of the GOES Data

Collection System (DCS), and formalize

a new policy for the use of the Argos

Data Collection and Location System

(Argos DCS) which flies on the POES.

The regulations are intended to

harmonize, as much as practicable, the

system use policies for the two systems

which in the past have been disparate.

The fundamental principle underlying

these regulations is that the Government

will not allow its space-based data

collection systems to be used where

there are commercial services available

that fulfill users’ requirements.

DATES: Comments must be received by

November 10, 1997.

ADDRESSES: Comments should be sent to

Mr. Dane Clark, NOAA National

Environmental Satellite, Data, and

Information Service, Direct Services

Division (E/SP3), 4700 Silver Hill Road,

Stop 9909, Room 0158, Washington,

D.C. 20233–9909.

FOR FURTHER INFORMATION CONTACT:

Dane Clark at (301) 457–5678, e-mail:

satinfo@nesdis.noaa.gov or Kira Alvarez

at (301) 713–0053, e-mail:

Kira.Alvarez@noaa.gov.

SUPPLEMENTARY INFORMATION: NOAA

operates environmental data collection

systems on its GOES and on its POES.

The GOES DCS consists of: U.S.

Government instruments on NOAA

geostationary satellites; user Data

Collection Platforms (DCP); data receipt

and data dissemination systems. With

the exception of the DCP, which are

managed by the individual users, the

GOES DCS is managed by NOAA. The