Federal Register / Vol. 86, No. 163 / Thursday, August 26, 2021 / Proposed Rules 47601 

other sources of income, and its 

anticipated expenses. Further, the 

Committee considered several 

alternative expenditure levels and 

assessment rates, including not 

changing the assessment rate or 

adjusting expenses. Ultimately, the 

Committee recommended the $0.20 per 

hundredweight assessment rate to fund 

the program’s expenses and maintain its 

reserve at a reasonable level. 

A review of historical and preliminary 

information pertaining to the upcoming 

crop year indicates that the producer 

price for the 2020–21 crop year is 

estimated to be $201.50 per 

hundredweight of dates. Utilizing that 

price, the estimated crop size, and the 

proposed assessment rate of $0.20 per 

hundredweight, the estimated 

assessment revenue for the 2020–21 

crop year as a percentage of total 

producer revenue will be approximately 

0.1 percent ($0.20 per hundredweight 

divided by $201.50 per hundredweight). 

This proposed action would increase 

the assessment obligation imposed on 

handlers. While assessments impose 

some additional costs on handlers, the 

costs are minimal and uniform on all 

handlers. Some additional costs may be 

passed on to producers. However, these 

costs would be offset by the benefits 

derived by the operation of the Order. 

In addition, the Committee’s and the 

Subcommittee’s meetings were widely 

publicized throughout the California 

date industry. All interested persons 

were invited to attend the meetings and 

encouraged to participate in Committee 

deliberations on all issues. The June 25, 

2020 Committee meeting was a virtually 

held public meeting and all entities, 

both large and small, were able to 

express views on this issue. Interested 

persons are invited to submit comments 

on this proposed rule, including the 

regulatory and information collection 

impacts of this action on small 

businesses. 

In accordance with the Paperwork 

Reduction Act of 1995 (44 U.S.C. 

Chapter 35), the Order’s information 

collection requirements have been 

previously approved by the Office of 

Management and Budget (OMB) and 

assigned OMB No. 0581–0178 Vegetable 

and Specialty Crops. No changes in 

these requirements would be necessary 

as a result of this action. Should any 

changes become necessary, they would 

be submitted to OMB for approval. 

This proposed rule would not impose 

any additional reporting or 

recordkeeping requirements on either 

small or large California date handlers. 

As with all Federal marketing order 

programs, reports and forms are 

periodically reviewed to reduce 

information requirements and 

duplication by industry and public 

sector agencies. 

AMS is committed to complying with 

the E-Government Act, to promote the 

use of the internet and other 

information technologies to provide 

increased opportunities for citizen 

access to Government information and 

services, and for other purposes. 

USDA has not identified any relevant 

Federal rules that duplicate, overlap, or 

conflict with this proposed rule. 

A small business guide on complying 

with fruit, vegetable, and specialty crop 

marketing agreements and orders may 

be viewed at: http://www.ams.usda.gov/ 

rules-regulations/moa/small-businesses. 

Any questions about the compliance 

guide should be sent to Richard Lower 

at the previously mentioned address in 

the FOR FURTHER INFORMATION CONTACT

section. 

List of Subjects in 7 CFR Part 987 

Dates, Marketing agreements, 

Reporting and recordkeeping 

requirements. 

For reasons set forth in the preamble, 

7 CFR part 987 is proposed to be 

amended as follows: 

PART 987—DOMESTIC DATES 

PRODUCED OR PACKED IN 

RIVERSIDE COUNTY, CALIFORNIA 

■ 1. The authority citation for part 987 

continues to read as follows: 

Authority: 7 U.S.C. 601–674. 

■ 2. Section 987.339 is revised to read 

as follows: 

§ 987.339 Assessment rate. 

On and after October 1, 2020, an 

assessment rate of $0.20 per 

hundredweight is established for dates 

produced or packed in Riverside 

County, California. 

Erin Morris, 

Associate Administrator, Agricultural 

Marketing Service. 

[FR Doc. 2021–17912 Filed 8–25–21; 8:45 am] 

BILLING CODE 3410–02–P 

FARM CREDIT ADMINISTRATION 

12 CFR Part 628 

RIN 3052–AD42 

Risk Weighting of High Volatility 

Commercial Real Estate (HVCRE) 

Exposures 

AGENCY: Farm Credit Administration. 

ACTION: Proposed rule. 

SUMMARY: The Farm Credit 

Administration (FCA, we, or our) is 

seeking comments on this proposed rule 

that would revise our regulatory capital 

requirements for Farm Credit System 

(FCS or System) institutions to define 

and establish risk-weightings for High 

Volatility Commercial Real Estate 

(HVCRE) exposures. 

DATES: Please send us your comments 

on or before November 24, 2021. 

ADDRESSES: For accuracy and efficiency 

reasons, please submit comments by 

email or through FCA’s website. We do 

not accept comments submitted by 

facsimiles (fax), as faxes are difficult for 

us to process and achieve compliance 

with section 508 of the Rehabilitation 

Act of 1973. Please do not submit your 

comment multiple times via different 

methods. You may submit comments by 

any of the following methods: 

• Email: Send us an email at regcomm@fca.gov. 

• FCA Website: http://www.fca.gov. 

Click inside the ‘‘I want to. . .’’ field 

near the top of the page; select 

‘‘comment on a pending regulation’’ 

from the dropdown menu; and click 

‘‘Go.’’ This takes you to an electronic 

public comment form. 

• Mail: Kevin J. Kramp, Director, 

Office of Regulatory Policy, Farm Credit 

Administration, 1501 Farm Credit Drive, 

McLean, VA 22102–5090. 

You may review copies of comments 

we receive on our website at http://

www.fca.gov. Once you are on the 

website, click inside the ‘‘I want to. . .’’ 

field near the top of the page; select 

‘‘find comments on a pending 

regulation’’ from the dropdown menu; 

and click ‘‘Go.’’ This will take you to the 

Comment Letters page where you can 

select the regulation for which you 

would like to read the public comments. 

We will show your comments as 

submitted, including any supporting 

data provided, but for technical reasons 

we may omit items such as logos and 

special characters. Identifying 

information that you provide, such as 

phone numbers and addresses, will be 

publicly available. However, we will 

attempt to remove email addresses to 

help reduce internet spam. You may 

also review comments at our office in 

McLean, Virginia. Please call us at (703) 

883–4056 or email us at reg-comm@

fca.gov to make an appointment. 

FOR FURTHER INFORMATION CONTACT: 

Technical information: Ryan Leist, 

LeistR@fca.gov, Senior Accountant, or 

Jeremy R. Edelstein, EdelsteinJ@fca.gov, 

Associate Director, Finance and Capital 

Markets Team, Office of Regulatory 

Policy, Farm Credit Administration, 

McLean, VA 22102–5090, (703) 883– 

4414, TTY (703) 883–4056 or 

ORPMailbox@fca.gov; or 


jbell on DSKJLSW7X2PROD with PROPOSALS
47602 Federal Register / Vol. 86, No. 163 / Thursday, August 26, 2021 / Proposed Rules 

1The FBRAs are the Office of the Comptroller of 

the Currency (OCC), the Board of Governors of the 

Federal Reserve System (FRB), and the Federal 

Deposit Insurance Corporation (FDIC). 

2 78 FR 62018 (October 11, 2013) (final rule of the 

OCC and the FRB); 79 FR 20754 (April 14, 2014) 

(final rule of the FDIC). 

3Basel III was published in December 2010 and 

revised in June 2011. The text is available at http:// 

www.bis.org/publ/bcbs189.htm. The BCBS was 

established in 1974 by central banks with bank 

supervisory authorities in major industrial 

countries. The BCBS develops banking guidelines 

and recommends them for adoption by member 

countries and others. BCBS documents are available 

at http://www.bis.org. The FCA does not have 

representation on the Basel Committee as the 

FBRAs do. 

4 79 FR 52814. 

5See 79 FR 52814, 52820. FCA is not required by 

law to follow the Basel Committee standards. 

6 81 FR 49719, 49736 (July 28, 2016). 

7See supra footnote 6. 

8FCA staff submitted a comment letter in 

response to one of the proposals that communicated 

our concerns with a proposed exemption for 

agricultural land. 

9Public Law 115–174, 132 Stat. 1296 (2018). 10 84 FR 68019. 

Legal information: Jennifer Cohn, 

CohnJ@fca.gov, Senior Counsel, Office 

of General Counsel, Farm Credit 

Administration, McLean, VA 22102– 

5090, (720) 213–0440, TTY (703) 883– 

4056. 

SUPPLEMENTARY INFORMATION: 

Table of Contents 

I. Introduction 

A. Objectives of the Proposed Rule 

B. Background 

II. Proposed Rule 

A. Scope of HVCRE Exposure Definition 

B. Exclusions From HVCRE Exposure 

Definition 

1. One- to Four-Family Residential 

Properties 

2. Agricultural Land 

3. Loans on Existing Income Producing 

Properties That Qualify as Permanent 

Financings 

4. Certain Commercial Real Property 

Projects 

a. Loan-to-Value Limits 

b. Contributed Capital 

c. Value Appraisal 

d. Project 

5. Reclassification as a Non-HVCRE 

Exposure 

6. Applicability Only to Loans Made After 

Effective Date 

C. Impact on Prior FCA Board Actions 

III. Regulatory Flexibility Act Analysis 

I. Introduction 

A. Objectives of the Proposed Rule 

The FCA’s objectives in proposing 

this rule are to: 

• Update capital requirements to 

reflect the increased risks that exposures 

to certain acquisition, development or 

construction loans pose to System 

institutions; and 

• Ensure that the System’s capital 

requirements are comparable to the 

Basel III framework and the 

standardized approach the Federal 

banking regulatory agencies have 

adopted, with deviations as appropriate 

to accommodate the different 

operational and credit considerations of 

the System. 

B. Background 

In October 2013 and April 2014, the 

Federal banking regulatory agencies 

(FBRAs) 1 published in the Federal 

Register capital rules governing the 

banking organizations they regulate.2

Those rules follow the Basel Committee 

on Banking Supervision’s (BCBS or 

Basel Committee) document entitled 

‘‘Basel III: A Global Regulatory 

Framework for More Resilient Banks 

and Banking Systems’’ (Basel III), 

including subsequent changes to the 

BCBS’s capital standards and BCBS 

consultative papers.3

On September 4, 2014, FCA published 

in the Federal Register a notice of 

proposed rulemaking seeking public 

comment on revisions to our regulatory 

capital requirements.4 Our proposed 

rule was comparable to the final rule of 

the FBRAs and the Basel III framework, 

while taking into account the 

cooperative structure and the 

organization of the System. Beginning in 

2010, System institutions had sought for 

FCA to adopt a capital framework that 

was as similar as possible to the capital 

guidelines of the FBRAs as revised to 

implement the Basel III standards. In 

particular, System institutions had 

asserted that consistency of FCA capital 

requirements with those of the FBRAs 

would allow investors, shareholders, 

and others to better understand the 

financial strength and risk-bearing 

capacity of the System.5

Included in the provisions we 

proposed to adopt was a 150 percent 

risk-weight for HVCRE exposures. Our 

proposed definition of HVCRE was very 

similar to the definition the FBRAs had 

adopted at the time. System commenters 

expressed concern about parts of the 

proposed HVCRE definition and asked 

us not to adopt the definition. We did 

not adopt the HVCRE provisions when 

we adopted our final capital rules 

because we wanted to further consider 

and analyze HVCRE.6 In the preamble to 

the final capital rule, we said that we 

expected to engage in additional HVCRE 

rulemaking in the future.7

Beginning in 2017, the FBRAs issued 

several proposed rules on HVCRE 

exposures, in an effort to address 

concerns with the original definition.8

On May 24, 2018, the Economic Growth, 

Regulatory Relief, and Consumer 

Protection Act (EGRRCPA) 9 was 

enacted, adding a new statutory 

definition that would have to be 

satisfied for an exposure to be riskweighted as an HVCRE exposure. On 

December 13, 2019, the FBRAs 

published a final rule, which became 

effective on April 1, 2020, implementing 

the EGRRCPA requirements.10

Many of the provisions in the FBRAs’ 

final rule address the concerns 

commenters raised in response to the 

FCA’s 2014 proposed rule. Accordingly, 

to ensure that System institutions 

continue to hold enough regulatory 

capital to fulfill their mission as a 

Government-sponsored enterprise, we 

propose provisions that are, in general, 

similar to the FBRA provisions. 

However, we propose differences in two 

general areas. First, in their rule the 

FBRAs clarified the interpretation of 

certain terms generally to be consistent 

with their usage in other FBRA 

regulations or Call Report instructions; 

while we do not propose different 

interpretations of these terms, we do not 

propose to refer to these FBRA 

references, as we do not believe that is 

appropriate in our rules. Second, we 

propose some differences where 

appropriate to accommodate the 

different operational and credit 

considerations of the System, while 

continuing to maintain appropriate 

safety and soundness. 

II. Proposed Rule 

Because of the increased risk in 

exposures that fall within the definition 

of HVCRE exposures, we propose, 

consistent with the FBRAs, to assign a 

150 percent risk-weight to those 

exposures, rather than the 100 percent 

risk-weight generally assigned to 

commercial real estate and other 

corporate exposures under FCA 

regulation § 628.32(f)(1). As discussed 

below, our proposed rule is similar to 

the FBRAs’ rule in most respects. In 

general, the same loan to the same 

borrower—whether it is made by a 

commercial bank or a System 

institution—carries the same risk and 

should be assigned the same riskweight. The proposed definition of 

HVCRE exposure is intended to capture 

only those exposures that have 

increased risk characteristics in the 

acquisition, development, or 

construction of real property. 

As with the risk-weighting provisions 

of our capital rules generally, language 

in the proposed definition of HVCRE 

exposure that refers to the financing of 

certain types of property or projects 

does not itself provide authority for an 

institution to engage in that financing, 


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Federal Register / Vol. 86, No. 163 / Thursday, August 26, 2021 / Proposed Rules 47603 

11As stated in the preamble to the Tier 1/Tier 2 

Capital Framework final rule, ‘‘We remind System 

institutions that the presence of a particular risk 

weighting does not itself provide authority for a 

System institution to have an exposure to that asset 

or item.’’ See 81 FR 49719, 49722 (July 28, 2016). 

12There may be overlap between HVCRE 

exposures and exposures to land in transition— 

agricultural land in the path of development. 

System institutions contemplating land in 

transition financing must review and understand 

FCA Bookletter BL–058 and must ensure they are 

in full compliance with all FCA regulations. 

13FCA regulation § 614.4240(q) defines ‘‘real 

property’’ as ‘‘all interests, benefits, and rights 

inherent in the ownership of real estate.’’ 

14A determination that a loan is a ‘‘credit facility 

secured by land or improved real property’’ does 

not mean that the loan is necessarily an HVCRE 

exposure. As mentioned above, a loan also has to 

satisfy three criteria, and not be subject to an 

exclusion, to be an HVCRE exposure. 

15See e.g., Farm Credit Council comment letter, 

Regulatory Capital, Implementation of Tier1/Tier2 

Framework, dated February 13, 2015. 

or to have an exposure to that property 

or project. This is a risk-weighting 

regulation only.11 System scope and 

eligibility authorities are contained in 

other provisions of our regulations and 

in the Farm Credit Act of 1971, as 

amended (Act).12

A. Scope of HVCRE Exposure Definition 

As the FBRAs did, we propose to 

define an HVCRE exposure as ‘‘a credit 

facility secured by land or improved 

real property’’ that meets three criteria 

(and that does not meet any of the 

definition’s exclusions, which are 

discussed below).13 The FBRAs defined 

this term in a manner that is consistent 

with the definition of ‘‘a loan secured by 

real estate’’ in their Call Report forms 

and instructions. In that definition, a 

loan is secured by real estate if the 

estimated value of the real estate 

collateral at origination (after deducting 

all senior liens held by others) is greater 

than 50 percent of the principal amount 

of the loan at origination. 

We propose to adopt the same 

meaning of ‘‘a credit facility secured by 

land or improved real property’’ as the 

FBRAs have adopted. Therefore, for 

example, if an institution makes a loan 

to construct and equip a building, and 

the loan is secured by both the real 

estate and the equipment, the institution 

must estimate the value of the building, 

upon completion, and of the equipment. 

If the value of the building is greater 

than 50 percent of the principal amount 

of the loan at origination, the loan 

would be a ‘‘loan secured by real 

estate,’’ and it would therefore be a 

‘‘credit facility secured by land or 

improved real property.’’ 14 If the value 

of the building, upon completion, is less 

than 50 percent of the principal amount 

of the loan at origination, it would not 

be a ‘‘loan secured by real estate,’’ and 

it would therefore not be a ‘‘credit 

facility secured by land or improved 

real property.’’ Accordingly, it would 

not be an HVCRE exposure. 

Under our proposal, a ‘‘credit facility 

secured by land or improved real 

property’’ would not be classified as an 

HVCRE exposure unless it met the 

following three criteria. If such a credit 

facility did not meet all three criteria, it 

would not be an HVCRE exposure. First, 

the credit facility must primarily 

finance or refinance the acquisition, 

development, or construction of real 

property. Second, the purpose of the 

credit facility must be to provide 

financing to acquire, develop, or 

improve such real property into incomeproducing property. Finally, the 

repayment of the credit facility must 

depend upon the future income or sales 

proceeds from, or refinancing of, such 

real property. 

The first criterion is that the credit 

facility must primarily finance or 

refinance the acquisition, development, 

or construction of real property. This 

criterion is satisfied if more than 50 

percent of the proposed use of the loan 

funds is for the acquisition, 

development, or construction of real 

property. The criterion is not satisfied if 

50 percent or less of the proposed use 

of the loan funds is for the acquisition, 

development, or construction of real 

property. 

The second criterion is that the credit 

facility has the purpose of providing 

financing to acquire, develop, or 

improve the real property into incomeproducing property. 

The third criterion is that the credit 

facility is dependent for repayment 

upon future income or sales proceeds 

from, or refinancing of, the real 

property. This criterion narrows the 

scope of the definition of HVCRE 

exposure from the definition we 

proposed in 2014. The definition we 

proposed in 2014 would have included 

within the scope of HVCRE exposures 

credit facilities for which repayment 

would be from the ongoing business of 

the borrower, as well as credit facilities 

that were dependent for repayment 

upon future income or sales proceeds. 

The Farm Credit Council and several 

System banks and association 

commenters expressed concern with the 

breadth of this definition from the 2014 

proposal.15 This proposal addresses that 

concern, since credit facilities that will 

be repaid from the borrower’s ongoing 

business would not be classified as an 

HVCRE exposure. We believe that a 

majority of System loans are repaid from 

the borrower’s ongoing business rather 

than from future income or sales 

proceeds, and therefore that a majority 

of potential System HVCRE exposures 

would not meet this criterion and would 

not be HVCRE exposures. 

B. Exclusions From HVCRE Exposure 

Definition 

Under this proposal, the exposures 

described in the following paragraphs 

would be excluded from the definition 

of HVCRE exposure: 

1. One- to Four-Family Residential 

Properties 

Under this proposal, as in the FBRA 

rule, an HVCRE exposure would not 

include a credit facility financing the 

acquisition, development, or 

construction of properties that are oneto four-family residential properties, 

provided that the dwelling (including 

attached components such as garages, 

porches, and decks) represents at least 

50 percent of the total appraised value 

of the collateral secured by the first or 

subsequent lien. 

Manufactured homes permanently 

affixed to the underlying property, 

when deemed to be real property under 

state law, would qualify for this 

exclusion, as would construction loans 

secured by single family dwelling units, 

duplex units, and townhouses. 

Condominium and cooperative 

construction loans would qualify for 

this exclusion, even if the loan is 

financing the construction of a building 

with five or more dwelling units, as long 

as the repayment of the loan comes from 

the sale of individual condominium 

dwelling units or individual cooperative 

housing units. This exclusion would 

apply to all credit facilities that fall 

within its scope, whether rural home 

financing under § 613.3030 or one- to 

four-family residential property 

financing under § 613.3000(b). Similar 

to the reduced risk-weight assigned to 

residential mortgage exposures under 

§ 628.32(g)(1), a credit facility would 

qualify for this exclusion only if the 

property securing the credit facility 

exhibits characteristics of residential 

property rather than agricultural 

property including, but not limited to, 

the requirement that the dwelling 

(including attached components such as 

garages, porches, and decks) represents 

at least 50 percent of the total appraised 

value of the collateral secured by the 

first or subsequent lien. If examiners 

determined that the property was not 

residential in nature, the credit facility 

would not qualify for this exclusion. 

Loans for multifamily residential 

property construction (such as 

apartment buildings where loan 

repayment is dependent upon 


jbell on DSKJLSW7X2PROD with PROPOSALS
47604 Federal Register / Vol. 86, No. 163 / Thursday, August 26, 2021 / Proposed Rules 

16See supra footnote 11. Additionally, certain 

multifamily residential property may meet the 

‘‘other credit needs’’ financing available to eligible 

borrowers as authorized by sections 1.11(a)(1) and 

2.4(a)(1) of the Act and referenced in § 613.3000. 

17See Federal Financial Institutions Examination 

Council (FFIEC) 031 and FFIEC 041—Instructions 

for Preparation of Consolidated Reports of 

Condition and Income. 

apartment rental income) would not 

qualify for this exclusion.16

Loans used solely to acquire 

undeveloped land would not qualify for 

this exclusion; the credit facility would 

also have to include financing for the 

construction of one- to four-family 

residential structures. Moreover, credit 

facilities that do not finance the 

construction of one- to four-family 

residential structures (as defined above), 

but instead solely finance improvements 

such as the laying of sewers, water 

pipes, and similar improvements to 

land, would not qualify for this 

exclusion. A credit facility that 

combines the financing of land 

development and the construction of 

one- to four-family structures would 

qualify for this exclusion. 

2. Agricultural Land 

We propose to exclude from the 

HVCRE definition credit facilities 

financing ‘‘agricultural land,’’ as defined 

in FCA regulation § 619.9025, or real 

estate used as an integral part of an 

aquatic operation. Section 619.9025 

defines ‘‘agricultural land’’ as ‘‘land 

improved or unimproved which is 

devoted to or available for the 

production of crops and other products 

such as but not limited to fruits and 

timber or for the raising of livestock.’’ 

This exclusion would apply only to 

financing for the agricultural and 

aquatic needs of bona fide farmers, 

ranchers, and producers and harvesters 

of aquatic products under § 613.3000 of 

FCA regulations. It would not apply to 

loans for farm property construction and 

land development purposes. 

With one exception, we intend our 

proposed agricultural land exclusion to 

have the same scope as the agricultural 

land exclusion of the FBRAs. The 

FBRAs’ definition of agricultural land 

has the same meaning as ‘‘farmland’’ in 

their Call Report forms and 

instructions.17 They define farmland as 

‘‘all land known to be used or usable for 

agricultural purposes, such as crop and 

livestock production. Farmland 

includes grazing or pastureland, 

whether tillable or not and whether 

wooded or not.’’ Loans for farm property 

construction and land development 

purposes are not loans on ‘‘farmland,’’ 

and therefore such loans do not fall 

within the agricultural land exclusion. 

Unlike the FBRAs, we propose to 

expressly include within the 

agricultural land exclusion real estate 

that is an integral part of an aquatic 

operation. 

As the FBRAs did in their final rule, 

loans for land development purposes 

and farm property construction would 

not be eligible in this proposed rule for 

the agricultural land exclusion from the 

HVCRE exposure definition. Loans 

made for land development purposes 

would include loans made to finance 

property improvements, such as laying 

sewers or water pipes preparatory to 

erecting new structures. Loans made for 

farm property construction would 

include loans made to finance the onsite construction of industrial, 

commercial, residential, or farm 

buildings. For the purposes of this 

exclusion, ‘‘construction’’ includes not 

only construction of new structures, but 

also additions or alterations to existing 

structures and the demolition of existing 

structures to make way for new 

structures. 

3. Loans on Existing Income Producing 

Properties That Qualify as Permanent 

Financings 

As in the FBRA rule, we propose to 

exclude from the definition of HVCRE 

exposure credit facilities that finance 

the acquisition or refinance of existing 

income-producing real property secured 

by a mortgage on such property, so long 

as the cash flow generated by the real 

property covers the debt service and 

expenses of the property in accordance 

with the System institution’s 

underwriting criteria for permanent 

loans. We also propose to exclude credit 

facilities financing improvements to 

existing income-producing real property 

secured by a mortgage on such property. 

Examiners may review the 

reasonableness of a System institution’s 

underwriting criteria for permanent 

loans through the regular examination 

process to ensure the real estate lending 

policies are consistent with safe and 

sound banking practices. 

We believe this income-producing 

property exclusion would address 

certain concerns expressed in comment 

letters from FCA’s 2014 proposed 

HVCRE definition regarding 

agribusiness and rural utility loans. 

System institutions commented they did 

not believe the definition of HVCRE was 

intended to include agribusiness or 

rural project financing transactions to 

build processing and marketing 

facilities or rural infrastructure. Under 

this proposal, these types of loans could 

qualify for the income-producing 

property exclusion if the cash flow 

being generated by the real property is 

sufficient to support the debt service 

and expenses of the real property in 

accordance with the System 

institution’s underwriting criteria for 

permanent loans. 

Agribusiness and rural project loans 

that are not secured by existing incomeproducing real property would not fall 

under this exclusion. Such loans often 

pose a greater credit risk than 

permanent loans. We believe it is 

appropriate to classify these loans as 

HVCRE exposures and impose a 150 

percent risk-weight given their 

increased risk compared to other 

commercial real estate exposures 

(unless the loan satisfies one of the 

other exclusions). However, as 

discussed in section 5—Reclassification 

as a Non-HVCRE Exposure section 

below, a System institution would be 

allowed to reclassify these HVCRE 

exposures as a non-HVCRE exposure if 

two conditions are met: 

• Substantial completion of the 

development or construction on the real 

property has occurred; and 

• the cash flow generated by the 

property covers the debt service and 

expenses on the property in accordance 

with the System institution’s loan 

underwriting standards for permanent 

financings. 

4. Certain Commercial Real Property 

Projects 

As in the FBRA rule, we propose to 

exclude from the definition of HVCRE 

exposure credit facilities for certain 

commercial real property projects that 

are underwritten in a safe and sound 

manner in accordance with proposed 

loan-to-value (LTV) limits and where 

the borrower has contributed a specified 

amount of capital to the project. A 

commercial real property project loan 

generally is used to acquire, develop, 

construct, improve, or refinance real 

property, and the primary source of 

repayment is dependent on the sale of 

the real property or the revenues from 

third-party rent or lease payments. 

Commercial real property project loans 

do not include ordinary business loans 

and lines of credit in which real 

property is taken as collateral. As it 

relates to the System, we believe this 

exclusion is most relevant to 

agribusiness (processing and marketing 

entities and farm-related businesses) 

and rural project loans. 

In order to qualify for this exclusion, 

a credit facility that finances a 

commercial real property project would 

be required to meet four distinct criteria. 

First, the LTV ratio would have to be 

less than or equal to the applicable 

maximum set forth in proposed 

Appendix A. Second, the borrower 


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Federal Register / Vol. 86, No. 163 / Thursday, August 26, 2021 / Proposed Rules 47605 

18See 12 CFR part 365, subpart A, Appendix A 

(FDIC); 12 CFR part 208, Appendix C (FRB); 12 CFR 

part 34, Appendix A (OCC). 

19Section 1.10(a) of the Act and § 614.4200(b)(1) 

of FCA regulations require at least an 85 percent 

LTV ratio for long-term real estate mortgage loans 

that are comprised primarily of agricultural or rural 

property, except for loans that have government 

guarantees or are covered by private mortgage 

insurance. Under § 614.4200(b)(1), agricultural or 

rural property includes agricultural land and 

improvements thereto, a farm-related business, a 

marketing or processing operation, a rural 

residence, or real estate used as an integral part of 

an aquatic operation. 

20Examination Bulletin FCA 2009–2, Guidance 

for Evaluating the Safety and Soundness of FCS 

Real Estate Lending (focusing on land in transition), 

December 2009. 

21See FCA Informational Memorandum, 

Guidance on Addressing Personal and Intangible 

Property within Collateral Evaluation Policies and 

Procedures (§ 614.4245), August 29, 2016; FCA 

Examination Manual EM–22.6, Loan Portfolio 

Management: Collateral Risk management, dated 

August 20, 2014. 

22This interpretation is consistent with the 

definitions of ‘‘unencumbered’’ and ‘‘marketable’’ 

in § 615.5134 of our regulations. 

23We intend that the terms ‘‘as completed’’ and 

‘‘as is,’’ as used in the definition of HVCRE 

Continued 

would have to contribute capital of at 

least 15 percent of the real property’s 

value to the project. Third, the 15 

percent amount of contributed capital 

would have to be contributed prior to 

the institution’s advance of funds (other 

than a nominal sum to secure the 

institution’s lien on the real property). 

Fourth, the 15 percent amount of 

contributed capital would have to be 

contractually required to remain in the 

project until the loan could be 

reclassified as a non-HVCRE exposure. 

The proposed interpretations of terms 

relevant to the four criteria for this 

exclusion are discussed below. 

a. Loan-to-Value Limits 

To qualify for this exclusion from the 

HVCRE exposure definition, the FBRAs’ 

rule requires that a credit facility be 

underwritten in a safe and sound 

manner in accordance with the 

Supervisory Loan-to-Value Limits 

contained in the Interagency Guidelines 

for Real Estate Lending Policies.18 These 

Interagency Guidelines require banking 

institutions, for real estate loans, to 

establish internal LTV limits that do not 

exceed specified supervisory limits 

ranging from 65 percent for raw land to 

85 percent for 1- to 4-family residential 

and improved property. 

The FCA has not adopted these 

supervisory LTV limits.19 Nevertheless, 

FCA examination guidance from 2009 

makes clear that FCA expectations are 

consistent with the Interagency 

Guidelines, including the supervisory 

LTV limits.20 We believe exposures 

should satisfy these LTV limits to 

qualify for this exclusion to the HVCRE 

definition. We propose to adopt these 

LTV limits, for the purpose of the 

HVCRE definition only, in a new 

Appendix A to part 628. 

b. Contributed Capital 

Under the proposal, cash, 

unencumbered readily marketable 

assets, paid development expenses outof-pocket, and contributed real property 

or improvements would count as forms 

of capital for purposes of the 15 percent 

capital contribution criterion. A System 

institution could consider costs 

incurred by the project and paid by the 

borrower prior to the advance of funds 

by the System institution as out-ofpocket development expenses paid by 

the borrower. 

The FBRAs’ version of the rule 

provides that the value of contributed 

real property means the appraised value 

of real property contributed by the 

borrower as determined under the 

standards prescribed by the Financial 

Institutions Reform, Recovery, and 

Enforcement Act of 1989 (12 U.S.C. 

3339) (FIRREA). Because FCA is not 

named in FIRREA as one of the Federal 

financial regulatory agencies covered by 

its real estate appraisal provisions, our 

proposal does not expressly require that 

the value must be determined under the 

FIRREA standards; rather, we propose to 

require that the value must be 

determined in accordance with FCA 

regulations at Subpart F of 12 CFR part 

614. FCA’s collateral evaluation rules 

are generally similar, although not 

identical, to the FIRREA standards, 

however, and therefore there should be 

few substantive differences in the 

approach to valuation. 

FCA has long recognized that 

Congress, through the enactment of 

FIRREA, expressed a strong belief that 

all financial transactions involving real 

property collateral should be supported 

by adequate and accurate collateral 

evaluations. Congress also expressed the 

belief that such collateral evaluations 

should be based on standards and 

guidelines that are consistently applied 

by the financial and appraisal 

industries. We believe that following the 

collateral evaluation requirements of 

FIRREA and the overarching beliefs of 

Congress is an essential element of the 

safe and sound lending activities 

covered by the System. FCA’s collateral 

evaluation regulations, at 12 CFR part 

614, subpart F, are generally similar, 

although not identical, to the FIRREA 

appraisal requirements.21

The value of the real property that 

could count toward the 15 percent 

contributed capital requirement would 

be reduced by the aggregate amount of 

any liens on the real property securing 

the HVCRE exposure. 

To ensure that tangible equity is 

invested in the project, funds borrowed 

from a third party (such as another 

lender, an owner or parent organization, 

or a related party) could count toward 

the capital contribution as long as the 

borrowed funds are not derived from, 

related to, or encumber any collateral 

that has been contributed to the project. 

Additionally, the recognition of any 

contribution of funds to a project would 

have to be in conformance with safe and 

sound lending practices and in 

accordance with the System 

institution’s underwriting criteria and 

internal policies. 

In addition, contributed property or 

improvements would have to be directly 

related to the project to be eligible to 

count towards the capital contribution. 

Real estate not developed as part of the 

project would not be counted toward 

the capital contribution. 

We would interpret the term 

‘‘unencumbered readily marketable 

assets’’ to mean insured deposits, 

financial instruments, and bullion in 

which the System institution has a 

perfected interest. For collateral to be 

considered ‘‘readily marketable’’ by a 

System institution, the institution’s 

expectation would be that the financial 

instrument and bullion would be salable 

under ordinary circumstances with 

reasonable promptness at a fair market 

value determined by quotations based 

on actual transactions, an auction or 

similarly available daily bid and ask 

price market.22 Readily marketable 

collateral should be appropriately 

discounted by the institution consistent 

with the institution’s usual practices for 

making loans secured by such collateral. 

Examiners may review the 

reasonableness of a System institution’s 

underwriting criteria to ensure the real 

estate lending policies are consistent 

with safe and sound banking practices. 

c. Value Appraisal 

Under the proposal, the 15 percent 

capital contribution would be required 

to be calculated using the real property’s 

value. An appraised ‘‘as completed’’ 

value is preferred; however, an ‘‘as 

completed’’ value appraisal may not 

always be available, such as in the case 

of purchasing raw land without plans 

for development in the near term, which 

would typically have an ‘‘as is’’ value 

appraisal. Therefore, we propose to 

permit the use of an ‘‘as is’’ appraisal, 

if an ‘‘as completed’’ appraisal is not 

available, for purposes of the 15 percent 

capital contribution.23


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47606 Federal Register / Vol. 86, No. 163 / Thursday, August 26, 2021 / Proposed Rules 

exposure, would have the same meaning as in the 

Interagency Appraisal and Evaluation Guidelines 

(December 2, 2010), issued by the OCC, the FRB, 

the FDIC, the Office of Thrift Supervision, and the 

National Credit Union Administration. Under these 

Guidelines, ‘‘as completed’’ reflects property’s 

market value as of the time that development is 

expected to be completed, and ‘‘as is’’ means the 

estimate of the market value of real property in its 

current physical condition, use, and zoning as of 

the appraisal’s effective date. 

24See § 614.4260(c), which sets forth the types of 

real estate-related transactions that do not require 

appraisals. 

25See 84 FR 68019, 68027 (December 13, 2019). 

26BL–070: Revised Capital Treatment for Certain 

Water and Wastewater Exposures, November 8, 

2018. 

27BL–070 does allow the reduced risk-weight for 

exposures during routine repair, upgrade, or 

maintenance projects that do not impede the 

facility’s full operation. 

28FCA BL–053: Revised Regulatory Capital 

Treatment for Certain Electric Cooperatives Assets, 

February 12, 2007. 

29See § 628.1(d)(3). 

In addition, we would allow the use 

of a collateral evaluation of the real 

property instead of an appraisal to 

determine the value, for purposes of the 

HVCRE exposure definition, where our 

appraisal regulations 24 permit collateral 

evaluations to be used in lieu of 

appraisals. 

The FBRAs’ regulatory exclusion for 

Certain Commercial Real Property 

Projects specifies that an ‘‘as 

completed’’ value appraisal must be 

used. This is consistent with the 

EGRRCPA’s statutory definition for the 

Certain Commercial Real Property 

Projects exclusion, which included only 

appraised ‘‘as completed’’ values. As 

explained by the FBRAs, the EGRRCPA 

required this appraised ‘‘as completed’’ 

value for their regulations. In the 

preamble of their final rule, the FBRAs 

clarified their definition allows ‘‘as is’’ 

appraisals for raw land loans and 

collateral evaluations for loans in 

amounts under certain specified 

thresholds in their appraisal 

regulations.25 However, the FBRAs did 

not change the wording of the 

EGRRCPA’s statutory definition in their 

regulations to reflect this interpretation. 

The EGRRCPA does not apply to System 

institutions, and FCA is not required to 

adopt the statutory definition. 

Accordingly, we propose to deviate 

from the statutory definition for Certain 

Commercial Real Property Projects to 

include ‘‘as is’’ appraisals and collateral 

evaluations to align our regulation with 

the FBRAs’ interpretation of the 

definition. 

d. Project 

In this proposal, the 15 percent 

capital contribution and the appraisal or 

collateral evaluation would be measured 

in relation to a ‘‘project.’’ Some credit 

facilities for the acquisition, 

development, or construction of real 

property may have multiple phases as 

part of a larger construction or 

development project. In the case of a 

project with multiple phases, in order 

for a loan financing a phase to be 

eligible for the contributed capital 

exclusion, the phase must have its own 

appraised value or an appropriate 

evaluation in order for it to be deemed 

a separate ‘‘project’’ for the purpose of 

the 15 percent capital contribution 

calculation. We expect that each project 

phase being financed by a credit facility 

have a proper appraisal or evaluation 

with an associated ‘‘as completed’’ or 

‘‘as is’’ value. Where appropriate and in 

accordance with the System 

institution’s applicable underwriting 

standards, a System institution may 

look at a multiphase project as a 

complete project rather than as 

individual phases. 

5. Reclassification as a Non-HVCRE 

Exposure 

Under the proposal, a System 

institution would be allowed to 

reclassify an HVCRE exposure as a nonHVCRE exposure when the substantial 

completion of the development or 

construction on the real property has 

occurred and the cash flow generated by 

the property covered the debt service 

and expenses on the property in 

accordance with the institution’s loan 

underwriting standards for permanent 

financings. We expect each System 

institution to have prudent, clear, and 

measurable underwriting standards, 

which we may review through the 

examination process. 

6. Applicability Only to Loans Made 

After Effective Date 

In consideration of the changes this 

rule would require, we propose that 

only loans made after the effective date 

of this rule would be subject to the 

HVCRE risk-weighting requirements. 

Loans made prior to the rule’s effective 

date could continue to be risk-weighted 

as if the rule had not been adopted. 

After the effective date, when a 

System institution modifies a loan or if 

a project is altered in a manner that 

materially changes the underwriting of 

the credit facility (such as increases to 

the loan amount, changes to the size and 

scope of the project, or removing all or 

part of the 15 percent minimum capital 

contribution in a project), the institution 

must treat the loan as a new exposure 

and reevaluate the exposure to 

determine whether or not it is an 

HVCRE exposure. 

C. Impact on Prior FCA Board Actions 

FCA Bookletter BL–070 authorizes 

System institutions to assign a reduced 

risk-weight (lower than the 100 percent 

risk-weight generally assigned to 

commercial real estate exposures under 

FCA regulation § 628.32(f)(1)) for rural 

water and wastewater (RWW) facilities 

that satisfy criteria.26 BL–070 does not 

permit this reduced risk-weight for 

exposures when a RWW facility is not 

fully operational due to initial 

construction or major renovation; 

instead, institutions must assign riskweights to these ‘‘major construction’’ 

exposures in accordance with Part 628 

of our regulations.27 If this proposed 

regulation is adopted, BL–070 would 

continue to assign risk-weights to these 

‘‘major construction’’ exposures in 

accordance with Part 628 as it would be 

amended; in other words, an exposure 

to a RWW facility that is not fully 

operational due to initial construction 

or major renovation would continue to 

be assigned a risk-weight in accordance 

with Part 628 (either as an HVCRE 

exposure or as a corporate exposure 

under § 628.32(f)(1), depending on 

whether it satisfies the definition of 

HVCRE exposure or not). Under BL– 

070, a RWW exposure during 

construction or major renovation, when 

the facility is not fully operational, may 

not be assigned a reduced risk-weight. 

All other RWW exposures would 

continue to receive reduced risk-weights 

in accordance with BL–070. 

FCA Bookletter BL–053 authorizes 

System institutions to assign a reduced 

risk-weight to certain electric 

cooperative exposures, including for 

some power plants that are in the 

construction phase.28 This treatment is 

authorized under our reservation of 

authority.29 In the future, we may 

consider whether the risk-weight 

authorized by BL–053 remains 

appropriate. 

III. Regulatory Flexibility Act Analysis 

Pursuant to section 605(b) of the 

Regulatory Flexibility Act (5 U.S.C. 601 

et seq.), FCA hereby certifies that the 

proposed rule would not have a 

significant economic impact on a 

substantial number of small entities. 

Each of the banks in the System, 

considered together with its affiliated 

associations, has assets and annual 

income in excess of the amounts that 

would qualify them as small entities. 

Therefore, System institutions are not 

‘‘small entities’’ as defined in the 

Regulatory Flexibility Act. 


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Federal Register / Vol. 86, No. 163 / Thursday, August 26, 2021 / Proposed Rules 47607 

List of Subjects in 12 CFR Part 628 

Accounting, Agriculture, Banks, 

Banking, Capital, Government 

securities, Investments, Rural areas. 

For the reasons stated in the 

preamble, part 628 of chapter VI, title 12 

of the Code of Federal Regulations is 

proposed to be amended as follows: 

PART 628—CAPITAL ADEQUACY OF 

SYSTEM INSTITUTIONS 

■ 1. The authority citation for part 628 

continues to read as follows: 

Authority: Secs. 1.5, 1.7, 1.10, 1.11, 1.12, 

2.2, 2.3, 2.4, 2.5, 2.12, 3.1, 3.7, 3.11, 3.25, 4.3, 

4.3A, 4.9, 4.14B, 4.25, 5.9, 5.17, 8.0, 8.3, 8.4, 

8.6, 8.8, 8.10, 8.12 of the Farm Credit Act (12 

U.S.C. 2013, 2015, 2018, 2019, 2020, 2073, 

2074, 2075, 2076, 2093, 2122, 2128, 2132, 

2146, 2154, 2154a, 2160, 2202b, 2211, 2243, 

2252, 2279aa, 2279aa–3, 2279aa–4, 2279aa–6, 

2279aa–8, 2279aa–10, 2279aa–12); sec. 

301(a), Pub. L. 100–233, 101 Stat. 1568, 1608 

((12 U.S.C. 2154 note); sec. 939A, Pub. L. 

111–203, 124 Stat. 1326, 1887 (15 U.S.C. 

78o–7 note). 

■ 2. Amend § 628.2 by adding paragraph 

(6) to the definition of ‘‘Corporate 

exposure’’ and a new definition, in 

alphabetical order, for ‘‘High volatility 

commercial real estate (HVCRE) 

exposure’’ to read as follows: 

§ 628.2 Definitions. 

* * * * * 

Corporate exposure * * * 

* * * * * 

(6) A high volatility commercial real 

estate (HVCRE) exposure; 

* * * * * 

High volatility commercial real estate 

(HVCRE) exposure means: 

(1) A credit facility secured by land or 

improved real property that, prior to 

being reclassified by the System 

institution as a non-HVCRE exposure 

pursuant to paragraph (6) of this 

definition: 

(i) Primarily finances, has financed, or 

refinances the acquisition, development, 

or construction of real property; 

(ii) Has the purpose of providing 

financing to acquire, develop, or 

improve such real property into income 

producing real property; and 

(iii) Is dependent upon future income 

or sales proceeds from, or refinancing 

of, such real property for the repayment 

of such credit facility. 

(2) An HVCRE exposure does not 

include a credit facility financing: 

(i) The acquisition, development, or 

construction of properties that are: 

(A) One- to four-family residential 

properties, provided that the dwelling 

(including attached components such as 

garages, porches, and decks) represents 

at least 50 percent of the total appraised 

value of the collateral secured by the 

first or subsequent lien. Credit facilities 

that do not finance the construction of 

one- to four-family residential 

structures, but instead solely finance 

improvements such as the laying of 

sewers, water pipes, and similar 

improvements to land, do not qualify for 

the one- to four-family residential 

properties exclusion; 

(B) [Reserved] 

(C) Agricultural land, as defined in 

§ 619.9025 of this chapter, or real estate 

used as an integral part of an aquatic 

operation. This provision applies only 

to financing for the agricultural and 

aquatic needs of bona fide farmers, 

ranchers, and producers and harvesters 

of aquatic products under § 613.3000 of 

this chapter. This provision does not 

apply to loans for farm property 

construction and land development 

purposes; 

(ii) The acquisition or refinance of 

existing income-producing real property 

secured by a mortgage on such property, 

if the cash flow being generated by the 

real property is sufficient to support the 

debt service and expenses of the real 

property, in accordance with the System 

institution’s applicable loan 

underwriting criteria for permanent 

financings; 

(iii) Improvements to existing income 

producing improved real property 

secured by a mortgage on such property, 

if the cash flow being generated by the 

real property is sufficient to support the 

debt service and expenses of the real 

property, in accordance with the System 

institution’s applicable loan 

underwriting criteria for permanent 

financings; or 

(iv) Commercial real property projects 

in which: 

(A) The loan-to-value ratio is less than 

or equal to the applicable loan-to-value 

limit set forth in Appendix A to this 

part; 

(B) The borrower has contributed 

capital of at least 15 percent of the real 

property’s appraised, ‘‘as completed’’ 

value to the project. The use of an ‘‘as 

is’’ appraisal is allowed in instances 

where an ‘‘as completed’’ value 

appraisal is not available. The use of an 

evaluation of the real property instead 

of an appraisal to determine the ‘‘as 

completed’’ appraised value is allowed 

if § 614.4260(c) of this chapter permits 

evaluations to be used in lieu of 

appraisals. The contribution may be in 

the form of: 

(1) Cash; 

(2) Unencumbered readily marketable 

assets; 

(3) Paid development expenses out-ofpocket; or 

(4) Contributed real property or 

improvements; and 

(C) The borrower contributed the 

amount of capital required by paragraph 

(2)(iv)(B) of this definition before the 

System institution advances funds 

(other than the advance of a nominal 

sum made in order to secure the System 

institution’s lien against the real 

property) under the credit facility, and 

such minimum amount of capital 

contributed by the borrower is 

contractually required to remain in the 

project until the HVCRE exposure has 

been reclassified by the System 

institution as a non-HVCRE exposure 

under paragraph (6) of this definition. 

(3) An HVCRE exposure does not 

include any loan made prior to the 

effective date of this rule. 

(4) An HVCRE exposure does not 

include a credit facility reclassified as a 

non-HVCRE exposure under paragraph 

(6) of this definition. 

(5) Value of contributed real property: 

For the purposes of this HVCRE 

exposure definition, the value of any 

real property contributed by a borrower 

as a capital contribution is the appraised 

value of the property as determined 

under standards prescribed in 

accordance with FCA regulations at 

subpart F of part 614 of this chapter, in 

connection with the extension of the 

credit facility or loan to such borrower. 

(6) Reclassification as a non-HVCRE 

exposure: For purposes of this HVCRE 

exposure definition and with respect to 

a credit facility and a System 

institution, a System institution may 

reclassify an HVCRE exposure as a nonHVCRE exposure upon: 

(i) The substantial completion of the 

development or construction of the real 

property being financed by the credit 

facility; and 

(ii) Cash flow being generated by the 

real property being sufficient to support 

the debt service and expenses of the real 

property, in accordance with the System 

institution’s applicable loan 

underwriting criteria for permanent 

financings. 

(7) [Reserved]. 

* * * * * 

■ 3. Amend § 628.32 by adding 

paragraph (j) to read as follows: 

§ 628.32 General risk weights. 

* * * * * 

(j) High volatility commercial real 

estate (HVCRE) exposures. A System 

institution must assign a 150-percent 

risk weight to an HVCRE exposure. 

* * * * * 

■ 4. Amend § 628.63 by adding entry 

(b)(8) to Table 3 to § 628.63 to read as 

follows: 


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47608 Federal Register / Vol. 86, No. 163 / Thursday, August 26, 2021 / Proposed Rules 

§ 628.63 Disclosures. 

* * * * * 

(b) * * * 

(4) * * * 

* * * * * 

TABLE 3 TO § 628.63—CAPITAL ADEQUACY

*******

Quantitative disclosures ............................................................................ (b) Risk-weighted assets for: 

* * * * * * * 

(8) HVCRE exposures; 

* * * * * * * 

* * * * * 

■ 5. Add Appendix A to Part 628 to read 

as follows: 

Appendix A to Part 628—Loan-to-Value 

Limits for High Volatility Commercial 

Real Estate Exposures 

Table A sets forth the loan-to-value limits 

specified in paragraph (2)(iv)(A) of the 

definition of high volatility commercial real 

estate exposure in § 628.2. 

TABLE A—LOAN-TO-VALUE LIMITS FOR HIGH VOLATILITY COMMERCIAL REAL ESTATE EXPOSURES

Loan category 

Loan-to-value 

limit 

(percent) 

Raw Land ............................................................................................................................................................................................. 65 

Land development ............................................................................................................................................................................... 75 

Construction: ........................

Commercial, multifamily,1 and other non-residential .................................................................................................................... 80 

1- to 4-family residential ............................................................................................................................................................... 85 

Improved property ........................................................................................................................................................................ 85 

Owner-occupied 1- to 4-family and home equity ......................................................................................................................... 2 85 

1 Multifamily construction includes condominiums and cooperatives. 

2 If a loan is covered by private mortgage insurance, the loan-to-value (LTV) may exceed 85 percent to the extent that the loan amount in excess of 85 percent is covered by the insurance. If a loan is guaranteed by Federal, State, or other governmental agencies, the LTV limit is 97 

percent. 

The loan-to-value limits should be applied 

to the underlying property that collateralizes 

the loan. For loans that fund multiple phases 

of the same real estate project (e.g., a loan for 

both land development and construction of 

an office building), the appropriate loan-tovalue limit is the limit applicable to the final 

phase of the project funded by the loan; 

however, loan disbursements should not 

exceed actual development or construction 

outlays. In situations where a loan is fully 

cross-collateralized by two or more 

properties or is secured by a collateral pool 

of two or more properties, the appropriate 

maximum loan amount under loan-to-value 

limits is the sum of the value of each 

property, less senior liens, multiplied by the 

appropriate loan-to-value limit for each 

property. To ensure that collateral margins 

remain within the limits, System institutions 

should redetermine conformity whenever 

collateral substitutions are made to the 

collateral pool. 

Dated: August 12, 2021. 

Dale Aultman, 

Secretary, Farm Credit Administration Board. 

[FR Doc. 2021–17560 Filed 8–25–21; 8:45 am] 

BILLING CODE 6705–01–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 39 

[Docket No. FAA–2021–0697; Project 

Identifier MCAI–2020–01540–R] 

RIN 2120–AA64 

Airworthiness Directives; Leonardo 

S.p.a. Helicopters 

AGENCY: Federal Aviation 

Administration (FAA), DOT. 

ACTION: Notice of proposed rulemaking 

(NPRM). 

SUMMARY: The FAA proposes to adopt a 

new airworthiness directive (AD) for 

certain Leonardo S.p.a. Model A109E 

helicopters. This proposed AD was 

prompted by reports of cracking in the 

center fuselage frame assembly in the 

intersection of the lateral pylon and 

floor spar at station (STA) 1815 on the 

left- and right-hand sides. This 

proposed AD would require repetitive 

inspections of the intersection of the 

lateral pylon and floor spar at STA 1815 

for cracking and, depending on the 

findings, repair, as specified in a 

European Union Aviation Safety Agency 

(EASA) AD, which is proposed for 

incorporation by reference (IBR). The 

FAA is proposing this AD to address the 

unsafe condition on these products. 

DATES: The FAA must receive comments 

on this proposed AD by October 12, 

2021. 

ADDRESSES: You may send comments, 

using the procedures found in 14 CFR 

11.43 and 11.45, by any of the following 

methods: 

• Federal eRulemaking Portal: Go to 

https://www.regulations.gov. Follow the 

instructions for submitting comments. 

• Fax: (202) 493–2251. 

• Mail: U.S. Department of 

Transportation, Docket Operations, M– 

30, West Building Ground Floor, Room 

W12–140, 1200 New Jersey Avenue SE, 

Washington, DC 20590. 

• Hand Delivery: Deliver to Mail 

address above between 9 a.m. and 5 

p.m., Monday through Friday, except 

Federal holidays. 

For EASA material that is proposed 

for IBR in this AD, contact EASA, 


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