This section of the FEDERAL REGISTER

contains regulatory documents having general

applicability and legal effect, most of which

are keyed to and codified in the Code of

Federal Regulations, which is published under

50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by

the Superintendent of Documents. Prices of

new books are listed in the first FEDERAL

REGISTER issue of each week.

Rules and Regulations Federal Register

1563

Vol. 66, No. 6

Tuesday, January 9, 2001

DEPARTMENT OF AGRICULTURE

Farm Service Agency

7 CFR Part 770

Rural Housing Service

Rural Business-Cooperative Service

Rural Utilities Service

Farm Service Agency

7 CFR Parts 1823, 1902, 1951, and 1956

RIN 0560–AF43

Loans to Indian Tribes and Tribal

Corporations

AGENCY: Farm Service Agency, Rural

Housing Service, Rural BusinessCooperative Service, Rural Utilities

Service, Farm Service Agency, USDA.

ACTION: Final rule.

SUMMARY: This rule consolidates and

revises the Indian Tribal Land

Acquisition Program (ITLAP)

regulations. The rule eliminates the

reserve requirement and the waiver of

sovereign immunity for all new loans;

allows borrowers to use the loan reserve

accounts as either an extra payment on

their loans to the Farm Service Agency

(FSA) or for other tribal needs; provides

borrowers additional servicing options;

allows ITLAP funds to be used for

certain refinancing activities; expands

the uses borrowers may make of land

purchased with ITLAP funds; requires

ITLAP loan applications, in most cases,

to include a copy of the borrower’s

option to purchase the land; and

provides for subsequent loans to be

made to ITLAP borrowers.

EFFECTIVE DATE: February 8, 2001.

FOR FURTHER INFORMATION CONTACT: Gary

West, Senior Loan Officer, Farm Loan

Programs, Loan Servicing and Property

Management Division, Farm Service

Agency, USDA, 1400 Independence

Avenue, SW., STOP 0523, Washington,

DC 20250–0523, telephone (202) 690–

4008, facsimile (202) 690–0949,

electronic mail:

gwest@wdc.usda.fsa.gov.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This rule has been determined to be

significant under E.O. 12866 and has

been reviewed by the Office of

Management and Budget.

Regulatory Flexibility Act

In compliance with the Regulatory

Flexibility Act (5 U.S.C. 601–602), the

undersigned has determined and

certified by signature of this document

that this rule will not have a significant

economic impact on a substantial

number of small entities. New

provisions included in this rule will not

impact a substantial number of small

entities to a greater extent than large

entities. Thus, large entities are subject

to these rules to the same extent as

small entities. Therefore, a regulatory

flexibility analysis was not performed.

Environmental Impact Statement

This document has been reviewed in

accordance with 7 CFR part 1940,

subpart G, ‘‘Environmental Program.’’

The issuing agency has determined that

this action does not affect the quality of

human environment, and in accordance

with the National Environmental Policy

Act of 1969, Pub. L. 91–190, an

Environmental Impact Statement is not

required.

Executive Order 12988

This rule has been reviewed in

accordance with E.O. 12988, Civil

Justice Reform. In accordance with this

rule: (1) All State and local laws and

regulations that are in conflict with this

rule will be preempted; (2) no

retroactive effect will be given to this

rule; and (3) administrative proceedings

in accordance with 7 CFR parts 11 and

780 must be exhausted before bringing

suit in court challenging action taken

under this rule.

Executive Order 12372

For reasons set forth in the Notice

related to 7 CFR part 3015, subpart V

(48 FR 29115, June 24, 1983), the

programs within this rule are excluded

from the scope of E.O. 12372, which

requires intergovernmental consultation

with State and local officials.

Executive Order 13132

It has been determined under section

1(a) of Executive Order 13132,

Federalism, that this rule does not have

sufficient implications to warrant

consultation with the States. The

provisions contained in this rule will

not have a substantial direct effect on

States, or on the relationship between

the national government and the States,

or on the distribution of power and

responsibilities among various levels of

government. The rule does not add any

new significant loan making criteria, but

changes the format of the regulation in

compliance with efforts to streamline

our loan making and loan servicing

criteria.

The Unfunded Mandates Reform Act of

1995

Title II of the Unfunded Mandates

Reform Act of 1995 (UMRA), requires

Federal agencies to assess the effects of

their regulatory actions on State, local,

and tribal governments or the private

sector of $100 million or more in any 1

year. When a rule contains such

mandates, section 205 of the UMRA

requires agencies to prepare a written

statement, including a cost benefit

assessment, for proposed and final rules

with ‘‘Federal mandates’’ that may

result in such expenditures for State,

local, or Tribal governments, in the

aggregate, or to the private sector.

UMRA generally requires agencies to

consider alternatives and adopt the

more cost effective or least burdensome

alternative that achieves the objectives

of the rule.

This rule contains no Federal

mandates, as defined under Title II of

the UMRA, for State, local, and Tribal

governments or the private sector. Thus,

this rule is not subject to the

requirements of sections 202 and 205 of

UMRA.

Paperwork Reduction Act of 1995

The Agency announced its intent to

obtain Office of Management and

Budget (OMB) approval of the

information collections established

under 7 CFR part 770 under a new OMB

control number in the notice of

proposed rule (64 FR 59131). No

comments were received from the

public regarding the proposed

1564 Federal Register / Vol. 66, No. 6 / Tuesday, January 9, 2001 / Rules and Regulations

information collections and the Agency

has requested OMB approval.

Federal Assistance Programs

These changes affect the following

FSA programs as listed in the Catalog of

Federal Domestic Assistance.

10.421—Indian Tribes and Tribal

Corporation Loans.

Discussion of the Comments on the

Proposed Rule

On November 2, 1999, the Rural

Housing Service, Rural BusinessCooperative Service, Rural Utilities

Service, and the Farm Service Agency

published a Proposed Rule (64 FR

59131) requesting comments regarding

proposed changes to ITLAP. On March

31, 2000, an extension to the comment

period was published. In response to the

request for public comment, 29

comments were received. The

breakdown of the five groups and or

individuals who commented were:

Three Native American tribes, one

individual and one Federal Government

agency.

Four comments were received

regarding the cancellation of ITLAP

debt. One comment opposed reducing

or canceling any ITLAP debt that is fully

secured and collectable because (1) The

Federal Government has an affirmative

responsibility to collect such debt and

to not take that action turns the loans

into grants and (2) it would violate the

appropriations process. Three

comments supported the cancellation of

debt in some unspecified form, or

supported a broad based cancellation of

the debt. In response to the comment

that the Agency not reduce any ITLAP

debt that is fully secured and

collectable, these loans are based upon

the value of the land purchased and not

the general assignment of income that is

generally subordinated by the tribe to

the Agency to secure repayment. The

general assignment of funds comes from

all tribal sources and not just the

income generated from the land. So

while the repayment is secured by the

assignment, many loans are in fact not

fully collateralized based upon the

value of the land. It is the intent of the

Agency in the final rule in situations

where certain tribal economic impact

factors are extreme to provide a

mechanism for debt reduction, thereby

reducing tribal payments to be more in

line with the value of the lands

purchased with these loan funds.

Also, while we agree that the Federal

Government has an affirmative

responsibility to collect its legitimate

debts in accordance with various

statutes, the Federal Government also

has an affirmative responsibility to

manage its loan programs in a manner

that takes into consideration economic

realities and circumstances beyond the

control of participants in its loan

programs. The Agency is not turning

loans into grants but simply providing

options for loan restructuring and debt

relief for those who qualify. Providing

such measures is consistent with actions

taken to provide assistance to all

program applicants in other Federal

loan programs. However, the Agency

has determined that it will limit the

term of restructured loans to remain

within the maximum 40-year term to

help balance the needs of tribes for

relief from economic hardship with the

need to protect the financial integrity of

government loan programs.

In response to the comments that

suggested the Agency adopt a policy of

canceling ITLAP debt, the Agency

cannot justify the simple cancellation of

ITLAP debt with respect to the

program’s current borrowers or future

borrowers. Such an action would be

inconsistent with the intent of the

program, which is to provide credit to

Native American tribes for the purchase

of reservation land. When Congress

amended the ITLAP legislation in 1989

(sec. 303 of Pub. L. 101–82) to authorize

debt relief, it tied such relief to changes

in the value of the land. In this

amendment, Congress did not suggest or

encourage the Agency to use its debt

settlement authorities to provide broad

debt relief. While comments to the

proposed regulations did suggest new

eligibility criteria and specifics on debt

reduction, which are addressed here,

none of the comments provided specific

criteria to support when complete

cancellation of debt should take place.

Also, providing such relief could

jeopardize the future of ITLAP because,

at a minimum, if such relief is not

clearly limited, it could substantially

increase the projected costs for future

ITLAP loans. The increased loan losses

would mean that under the Credit

Reform Act of 1990, the cost of loans

would increase which would result in

the Agency having less program loan

funding available for such loans, even if

the appropriation level of the program

remains unchanged. The decreased

funding would have a negative impact

on ITLAP applicants. Therefore, the

Agency has concluded at this point that

the proposal of broadly canceling ITLAP

debts will not be implemented.

Three respondents submitted

comments regarding the methodology

and eligibility for reducing the principal

amount of the outstanding ITLAP debt

to the present value of expected future

annual rental value of the land

purchased with ITLAP loan funds and

setting the annual ITLAP loan payment

at the annual rent received or that could

be received from this land. Two of these

comments stated that the principal

balance of such loans should be reduced

to the present value of future annual

rents that could be generated on the

land purchased with loan funds. Two

comments supported the concept that

loan payments should be adjusted to

equal rental income received from land

purchased with loan funds. In addition,

one comment suggested that eligibility

for debt relief be tied to the unusually

high rates of unemployment

encountered on Native American

reservations. Three comments

supported eligibility criteria based upon

socio-economic factors but indicated

that the proposed rule criteria was too

complicated and terms such as

unfunded mandates and quantifying

public health and safety needs could

never be accurately measured. These

comments are indicative that many

tribes are having or have experienced

severe socio-economic problems and are

finding it difficult to meet the basic

needs of their members. As a result, the

Agency has determined that debt relief

to an ITLAP borrower could be

extended to those who face extreme

poverty and unemployment.

The final rule contains a provision

that would allow an ITLAP loan to be

written down to a level where annual

loan payments are based upon the

previous 5-year average annual rental

payment received for the land

purchased with loan funds projected

over the remaining term of the loan. The

rental rate information will be obtained

from the Native American tribe or tribal

corporation and verified with the

Department of Interior. This would

occur if the Native American tribe is

facing extreme socio-economic

problems, which are a part of the

eligibility criteria for debt relief. In

further response to the comments the

Agency has changed the eligibility

criteria to include socio-economic

factors that are more easily measured,

such as per capita income and tribal

unemployment. However, a Native

American tribe’s loan could receive the

benefit of such a write-down regarding

its ITLAP loans only once, provided it

has not received a land value writedown in the last 5 years. Such a writedown could involve as many ITLAP

loans of the tribe as meet the criteria

under this regulation at the time of the

write-down application.

Two comments were received with

regard to the number of years used to

determine the average rental value of

the land purchased under the rental

value write-down option. The

Federal Register / Vol. 66, No. 6 / Tuesday, January 9, 2001 / Rules and Regulations 1565

commenters believed that the Agency

did not go far enough in using the

preceding 5 years to determine the

average rental value of the land

purchased with loan funds. The

commenters contended that the entire

history of the rental value of the land

should be considered because there

have been several periods over the life

of the existing loans during which tribes

have suffered financial hardships. The

Agency considered these comments but

any write-down must be based upon an

accurate representation of the value of

the land. To go back more than 5 years

could result in a misstatement of the

current land value. It is not the purpose

of the rental value write-down option to

compensate the borrower for financial

hardship that it may have suffered in

the past. The purpose of the new writedown servicing option is to provide a

measure of relief, if necessary based

upon the most recent indicators of land

value.

One comment was received regarding

the restructuring of a loan by lowering

the interest rate and reamortizing the

balance of the loan over the remaining

loan term. The comments were not

opposed to lowering the interest rate but

were opposed to reamortizing over the

remaining term. They felt that keeping

within the remaining term when no debt

relief is proposed simply increases a

payment that already cannot be met.

This comment also referred to year 40

of the note as the balloon payment date.

In response, the Agency feels that

routine loan restructuring should take

place when necessitated by temporary

circumstances and should be

reamortized within the original note

terms in order to stay within the

budgetary confines of program

allocations and to project a realistic

repayment schedule for the loan. Also,

the Agency is publishing a deferral

option in the final rule that will further

provide for temporary relief. If longterm problems are encountered the debtrelief provisions of this rule should be

explored. In response to the balloon

payment reference, the Agency believes

that 40 years is a more than adequate

repayment period for any note. Under

the equal amortization schedule the

note is set up or restructured under,

year 40 is the final due date of the last

installment and not a balloon payment.

Two comments suggested that ITLAP

borrowers should be eligible for

servicing options, such as

reamortizations and deferrals (codified

at 7 CFR part 1951, subpart S), and debt

settlement options (codified at 7 CFR

part 1956) that are available to Farm

Loan Program (FLP) borrowers. Based

on a review of the FLP loan-making and

servicing procedures, we have

determined that loan-making and

servicing procedures for FLP are not

consistent with the statutorily

established purposes of ITLAP. The

purpose of FLP loans is to assist family

farming and ranching operations in

becoming economically successful.

Conversely, the statutory purpose of

ITLAP loans is to assist Native

American tribes in the purchase of land

and interests in land for the purpose of

consolidating their ownership of land

within their reservations, regardless of

the economic use such tribe may make

of the land. Thus, FLP loans made to

farmers and ranchers versus ITLAP

loans made to Native American tribes

are substantially different in the types of

borrowers being targeted, the

importance of how the borrower’s

operation is structured, and the

importance of the economic viability of

the project being funded. In order to

accomplish the purpose of these

respective loan programs, the servicing

options offered to borrowers under each

program must be different and tailored

to the distinct purposes of these

programs. With respect to debt

settlement, for individual loans the

security must be liquidated in order to

debt settle. In many cases, even when

the security is liquidated a debt

settlement is not granted until a

borrower makes a compromise offer to

settle the remaining indebtedness even

though all the collateral has been

liquidated. The comments received

considered this but felt that land

holdings on the reservation are unique

because they are generally secured by

payment assignments, so collateral

liquidation provisions should not apply.

To the extent that a final debt settlement

procedure is necessary, the Agency will

use the general government procedures

at (4 CFR parts 101–105). The final rule

implements loan servicing and debt

write-down provisions that are specially

tailored and unique to ITLAP and will

maintain the economic viability of tribal

lands purchased with ITLAP funds.

Three comments were received

regarding releasing assignments of

income and substituting real estate

mortgages on the land purchased with

ITLAP funds. The comments suggest

that the Agency take mortgages as

security for these existing loans in

exchange for the release of the general

assignments of income that currently

secure many of these loans. The Agency

does not agree with these comments.

The assignment guarantees repayment

and since the ITLAP program is a credit

program the Agency is responsible for

providing the best possible method of

collecting taxpayer dollars loaned. Also,

in many of these cases taking security in

the form of a mortgage is not practical

because the ITLAP funds are being used

to purchase fractional interests in land.

A mortgage on such fractional interests

may not provide the Agency with

adequate security for the loan. However,

the Agency is eliminating the reserve

account requirement for all new loans

and providing reserve account release

criteria for existing loans in this rule.

The reserve is set up for tribes to pay

and deposit one-tenth of their regularly

scheduled payment in the account until

one full payment is in reserve. The

release may help to free funds for

borrowers to use in other areas rather

than have them tied up in the reserve

account.

One comment was received regarding

granting of deferrals of annual payments

if the income loss is temporary. The

comment recommended that debt relief

should be provided when a producer

who rents land from the borrower

suffers a reduction in commodity prices.

The Agency agrees and has provided

specific deferral criteria in § 770.10(c) of

the final rule.

One comment suggested that debt

relief should be provided if the making

of the loan payments by the borrower

will impede the borrower’s ability to

resolve fractional land interests on the

reservation. One comment stated that

debt relief should be provided if the

making of loan payments impedes the

borrower’s ability to repay other loans

or meet other tribal needs. In response,

the ITLAP program that provides credit

for a tribe to purchase land is not a

program designed to solve all tribal

needs, nor could it possibly be designed

to do so. If tribes have other payment

obligations, they may also approach

those creditors for relief. ITLAP is a loan

program in which tribes recognize their

repayment responsibilities when

entering into the loan. The Agency

cannot promulgate regulations that

simply allow a borrower to not make

payments because it has decided that

purchasing additional lands is a

priority.

Two comments indicated that the

Agency should take action regarding

debt relief without promulgating new

regulations, since such regulations are

not necessary and would violate

Executive Order (E.O.) 13084. These

comments indicated that the E.O.

obligates the Secretary of Agriculture to

take actions to assist Native American

tribes while waiving the normal

regulatory requirements to take such

actions. The Agency agrees that the E.O.

does place an obligation on the

Secretary of Agriculture to take steps

1566 Federal Register / Vol. 66, No. 6 / Tuesday, January 9, 2001 / Rules and Regulations

wherever possible to assist Native

American tribes. As indicated in the

Proposed Rule the Agency re-examined

ITLAP to determine if there are ways in

which the Agency can provide more

debt relief options to borrowers. The

Agency, however, does not agree that

the E.O. would allow the Agency to

implement such policy changes in

violation of the requirements of notice

and comment rulemaking requirements

in section 553 of Title 5, United States

Code and the Statement of Policy of the

Secretary of Agriculture relating to

notices of proposed rulemaking and

public participation (36 FR 13804).

Further, while the public notification

and subsequent comment periods of the

informal rulemaking process has taken

additional time, this process has given

all interested parties, including affected

Native American tribes, the opportunity

to participate in the development of this

final rule, thus ensuring that their

interests and concerns have been heard.

Therefore, the Agency proceeded with

the consideration and development of

ITLAP debt relief changes through the

notice and comment rulemaking

process.

One comment indicated that the

Agency’s concerns regarding the

budgetary impacts of providing debt

relief to borrowers were misplaced

because such relief would enable

borrowers to purchase more fractional

interests and thus reduce the overall

Federal Government’s costs in tracking

these fractional interests. The comment

indicated that any additional costs to

the Federal Government would be offset

by the reduction in costs to administer

programs on Native American

reservations. The comment indicated

that this information is readily available

from the Department of the Interior’s

Bureau of Indian Affairs and that a

reduction in debt would have a

corollary effect of reducing the costs

incurred by the Federal Government of

managing fractional interests within the

confines of Federally Recognized Indian

Reservations. Only authorizing

legislation could allow for consideration

of such a proposal. In addition, these

comments ignore the Agency’s concerns

expressed in the Proposed Rule of the

impact on the Federal budget that any

ITLAP debt relief will have on the

Agency and the reality of the Federal

budgeting process.

One comment indicated that funding

for the loan program should be provided

to the full program authorization level

of $50 million and that such a change

would be in the best interests of the

program. The Agency has no comment

as the Congressional appropriation

process establishes program funding

levels, not the Agency.

One comment requested clarification

on the definition of Reservation to

include the former reservations in

Oklahoma. While inclusion of these

lands would be consistent with other

FSA loan programs, the statute

authorizing ITLAP, 25 U.S.C. 488, limits

ITLAP loans to ‘‘interests * * * within

the tribe’s reservation as determined by

the Secretary of the Interior or within a

community in Alaska incorporated by

the Secretary * * *’’ Former

reservations lands are not covered by

the ITLAP authorizing statute and thus

the comment was not adopted.

One comment indicated that under

the proposed land value or rental value

write-down criteria the appraisal that

would be necessary would be cost

prohibitive because of fractionated

interests in land. The Agency maintains

that a value must be established prior to

any write-down just as it was when the

loans were originally made. If the

appraisal cost is viewed as being

excessive, then, as with any loan, the

borrower will have to make a decision

on what is in its best interest.

Two comments requested that any

requirement for the tribe to waive its

sovereign immunity be removed. The

Agency agrees and will no longer

require the waiver. The lack of a waiver

does not prevent the Federal

Government from bringing suit against

the borrower.

One comment suggested that the

Agency is not equipped to handle loans

to tribes and that the ITLAP program

should be transferred to an Agency that

is better suited to understanding and

working with tribal programs, such as

the Department of the Interior. This type

of a loan program transfer between

departments of the Federal Government

would require enacting legislation.

There were other comments relating

to specifics of the Agency’s internal

administrative processing of various

loan making or servicing actions. These

comments and recommended actions

are solely administrative in nature and

will be covered in the Agency

handbook.

Discussion of the Final Rule

Public Law 91–229 (25 U.S.C. 488–

494) authorized the Secretary of

Agriculture to establish ITLAP to make

loans to Native American tribes and

tribal corporations to acquire land and

fractional interests in land on the tribes’

reservations. This program was

administered by the former Farmers

Home Administration (FmHA). Under

the authority of the Department of

Agriculture Reorganization Act of 1994,

Pub. L. 103–354, on October 20, 1994,

FmHA’s ITLAP functions were

transferred to FSA. Regulations for

implementing this program are found at

7 CFR part 1823, subpart N for loan

making; 7 CFR part 1951, subpart E for

loan servicing; and 7 CFR part 1956,

subpart C, for debt settlement. The final

rule will consolidate the ITLAP

regulations into one part and clarify that

this program is exclusively

administered by FSA.

The final rule will eliminate the

reserve account. With respect to loans

that are not delinquent and that are

presently adequately secured by a

general assignment of tribal income, the

Agency will release its interest in

existing reserve accounts and allow

them to be returned to the Native

American tribe or tribal corporation.

During the review of ITLAP in

preparation of the proposed rule and the

final rule, the Agency determined that a

general assignment of tribal income

provides the Agency sufficient security

for ITLAP loans. The additional security

provided by the reserve account is

unnecessary. ITLAP loans secured by an

assignment of income have a very low

delinquency rate. The release of the

reserve would allow Native American

tribes and tribal corporations to use

these funds towards an extra payment or

for other tribal operations. Also, with

this change, the borrowers could use the

reserve account funds to purchase

additional land that could increase its

future income or for other pressing

tribal needs. The Agency believes that

these changes are consistent with the

intent of ITLAP to assist Native

American tribes and tribal corporations

to consolidate their ownership in

reservation lands.

The final rule also adopts the use of

unemployment rates and tribal per

capita income for enrolled tribal

members as an eligibility criteria more

easily obtainable than calculating the

percentage or tribal shortfall to meet

unfunded State or Federal mandates.

The final rule expands the use of

ITLAP loan funds to include:

Refinancing of an existing debt incurred

by the Native American tribe or tribal

corporation to purchase land, provided

the loan application and land purchase

proposal was received by the Agency

and approved prior to the purchase of

the land; the Native American tribe or

tribal corporation was not able to obtain

an option on the land; the debt to be

refinanced is short term debt with a

balloon payment that cannot otherwise

be refinanced with the creditor; and the

debt secured by the land subject to the

refinancing must otherwise meet the

requirements of ITLAP.

Federal Register / Vol. 66, No. 6 / Tuesday, January 9, 2001 / Rules and Regulations 1567

The final rule allows certain ITLAP

loans to be written down to a value

where the annual loan payment would

equal the 5-year average rental value for

the land purchased with such loan

funds if the borrower could establish

that the Native American tribe was

facing economic hardships based on a

combination of certain eligibility

criteria. Such a write-down could

involve as many ITLAP loans of the

tribe as meet the criteria under this

regulation at the time of the write-down

application.

The final rule clarifies the process

under which the Agency will reduce the

interest rate of an ITLAP loan to the

interest in effect at the time of

application for such a reduction. Such

a reduction will take place if the ITLAP

loan has been in effect for more than 5

years. This change is being made to

allow borrowers who have extreme

impoverished circumstances to benefit

from any program interest rate changes.

Borrowers could qualify if the tribe has

a per capita income for enrolled tribal

members which is less than the

Federally established poverty income

rate by more than 50 percent and the

tribal unemployment rate exceeds 50

percent.

The final rule clarifies the approved

uses of land that are the subject of an

ITLAP loan to ensure that the Agency’s

mortgage or income assignment on the

land is protected by requiring Agency

approval prior to such land being either

leased, sold, or exchanged. The final

rule clarifies that a subsequent ITLAP

loan may be made to a borrower for the

same purposes and under the same

conditions as a prior loan. The final rule

requires that prior to obtaining an

ITLAP loan, the Native American tribe

or tribal corporation must obtain an

option or other acceptable purchase

agreement to purchase the land at issue

and that a copy of such agreement

accompany the ITLAP loan application.

The purpose for this change is to allow

the Agency to have all relevant

information regarding the land purchase

for which ITLAP loan funds are being

sought. The final rule will also

eliminate the need for the tribe to waive

their right to sovereign immunity as the

Government will receive an assignment

of income that has been approved by

Department of Interior, Bureau of Indian

Affairs, which serves to guarantee the

repayment of the loan, negating the

need for the waiver of sovereign

immunity.

List of Subjects

7 CFR Part 770

Credit, Indians, Loan programs—

agriculture.

7 CFR Part 1823

Credit, Grazing lands, Indians, Loan

programs—agriculture, Rural areas, Soil

conservation.

7 CFR Part 1902

Accounting, Banks, banking, Grant

programs—Housing and community

development, Loan programs—

Agriculture, Loan programs—Housing

and community development.

7 CFR Part 1951

Accounting, Grant programs—

Housing and community development;

Reporting and recordkeeping

requirements, Rural areas.

7 CFR Part 1956

Accounting, Loan programs—

Agriculture, Rural areas.

Accordingly, for the reasons stated in

the preamble, 7 CFR part 770 is added

and 7 CFR parts 1823, 1902, 1951, and

1956 are amended as follows:

1. Part 770 is added to read as follows:

PART 770—INDIAN TRIBAL LAND

ACQUISITION LOANS

Sec.

770.1 Purpose.

770.2 Abbreviations and definitions.

770.3 Eligibility requirements.

770.4 Authorized loan uses.

770.5 Loan limitations.

770.6 Rates and terms.

770.7 Security requirements.

770.8 Use of acquired land.

770.9 Appraisals.

770.10 Servicing.

Authority: 5 U.S.C. 301, 25 U.S.C. 490.

§ 770.1 Purpose.

This part contains the Agency’s

policies and procedures for making and

servicing loans to assist a Native

American tribe or tribal corporation

with the acquisition of land interests

within the tribal reservation or Alaskan

community.

§ 770.2 Abbreviations and definitions.

(a) Abbreviations.

FSA Farm Service Agency, an Agency

of the United States Department of

Agriculture, including its personnel and

any successor Agency.

ITLAP Indian Tribal Land Acquisition

Program.

(b) Definitions.

Administrator is the head of the Farm

Service Agency.

Agency is Farm Service Agency

(FSA).

Appraisal is an appraisal for the

purposes of determining the market

value of land (less value of any existing

improvements that pass with the land)

that meets the requirements of part 761

of this chapter.

Applicant is a Native American tribe

or tribal corporation established

pursuant to the Indian Reorganization

Act seeking a loan under this part.

Loan funds refers to money loaned

under this part.

Native American tribe is:

(1) An Indian tribe recognized by the

Department of the Interior; or

(2) A community in Alaska

incorporated by the Department of the

Interior pursuant to the Indian

Reorganization Act.

Reservation is lands or interests in

land within:

(1) The Native American tribe’s

reservation as determined by the

Department of the Interior; or

(2) A community in Alaska

incorporated by the Department of the

Interior pursuant to the Indian

Reorganization Act.

Reserve is an account established for

loans approved in accordance with

regulations in effect prior to February 8,

2001 which required that an amount

equal to 10 percent of the annual

payment be set aside each year until at

least one full payment is available.

Tribal corporation is a corporation

established pursuant to the Indian

Reorganization Act.

§ 770.3 Eligibility requirements.

An applicant must:

(a) Submit a completed Agency

application form;

(b) Except for refinancing activities

authorized in § 770.4(c), obtain an

option or other acceptable purchase

agreement for land to be purchased with

loan funds;

(c) Be a Native American tribe or a

tribal corporation of a Native American

tribe without adequate uncommitted

funds, based on Generally Accepted

Accounting Principles, or another

financial accounting method acceptable

to Secretary of Interior to acquire lands

or interests therein within the Native

American tribe’s reservation for the use

of the Native American tribe or tribal

corporation or the members of either;

(d) Be unable to obtain sufficient

credit elsewhere at reasonable rates and

terms for purposes established in

§ 770.4;

(e) Demonstrate reasonable prospects

of success in the proposed operation of

the land to be purchased with funds

provided under this part by providing:

(1) A feasibility plan for the use of the

Native American tribe’s land and other

1568 Federal Register / Vol. 66, No. 6 / Tuesday, January 9, 2001 / Rules and Regulations

enterprises and funds from any other

source from which payment will be

made;

(2) A satisfactory management and

repayment plan; and

(3) A satisfactory record for paying

obligations.

(f) Unless waived by the FSA

Administrator, not have any outstanding

debt with any Federal Agency (other

than debt under the Internal Revenue

Code of 1986) which is in a delinquent

status.

(g) Not be subject to a judgment lien

against the tribe’s property arising out of

a debt to the United States.

§ 770.4 Authorized loan uses.

Loan funds may only be used to:

(a) Acquire land and interests therein

(including fractional interests, rights-ofway, water rights, easements, and other

appurtenances (excluding

improvements) that would normally

pass with the land or are necessary for

the proposed operation of the land)

located within the Native American

tribe’s reservation which will be used

for the benefit of the tribe or its

members.

(b) Pay costs incidental to land

acquisition, including but not limited

to, title clearance, legal services, land

surveys, and loan closing.

(c) Refinance non-United States

Department of Agriculture preexisting

debts the applicant incurred to purchase

the land provided the following

conditions exist:

(1) Prior to the acquisition of such

land, the applicant filed a loan

application regarding the purchase of

such land and received the Agency’s

approval for the land purchase;

(2) The applicant could not acquire an

option on such land;

(3) The debt for such land is a short

term debt with a balloon payment that

cannot be paid by the applicant and that

cannot be extended or modified to

enable the applicant to satisfy the

obligation; and

(4) The purchase of such land is

consistent with all other applicable

requirements of this part.

(d) Pay for the costs of any appraisal

conducted pursuant to this part.

§ 770.5 Loan limitations.

(a) Loan funds may not be used for

any land improvement or development

purposes, acquisition or repair of

buildings or personal property, payment

of operating costs, payment of finder’s

fees, or similar costs, or for any purpose

that will contribute to excessive erosion

of highly erodible land or to the

conversion of wetlands to produce an

agriculture commodity as further

established in exhibit M to subpart G of

part 1940 of this title.

(b) The amount of loan funds used to

acquire land may not exceed the market

value of the land (excluding the value

of any improvements) as determined by

a current appraisal.

(c) Loan funds for a land purchase

must be disbursed over a period not to

exceed 24 months from the date of loan

approval.

(d) The sale of assets that are not

renewable within the life of the loan

will require a reduction in loan

principal equal to the value of the assets

sold.

§ 770.6 Rates and terms.

(a) Term. Each loan will be scheduled

for repayment over a period not to

exceed 40 years from the date of the

note.

(b) Interest rate. The interest rate

charged by the Agency will be the lower

of the interest rate in effect at the time

of the loan approval or loan closing,

which is the current rate available in

any FSA office. Except as provided in

§ 770.10(b) the interest rate will be fixed

for the life of the loan.

§ 770.7 Security requirements.

(a) The applicant will take

appropriate action to obtain and provide

security for the loan.

(b) A mortgage or deed of trust on the

land to be purchased by the applicant

will be taken as security for a loan,

except as provided in paragraph (c) of

this section.

(1) If a mortgage or deed of trust is to

be obtained on trust or restricted land

and the applicant’s constitution or

charter does not specifically authorize

mortgage of such land, the mortgage

must be authorized by tribal

referendum.

(2) All mortgages or deeds of trust on

trust or restricted land must be

approved by the Department of the

Interior.

(c) The Agency may take an

assignment of income in lieu of a

mortgage or deed of trust provided:

(1) The Agency determines that an

assignment of income provides as good

or better security; and

(2) Prior approval of the

Administrator has been obtained.

§ 770.8 Use of acquired land.

(a) General. Subject to § 770.5(d) land

acquired with loan funds, or other

property serving as the security for a

loan under this part, may be leased,

sold, exchanged, or subject to a

subordination of the Agency’s interests,

provided:

(1) The Agency provides prior written

approval of the action;

(2) The Agency determines that the

borrower’s loan obligations to the

Agency are adequately secured; and

(3) The borrower’s ability to repay the

loan is not impaired.

(b) Title. Title to land acquired with

a loan made under this part may, with

the approval of the Secretary of the

Interior, be taken by the United States

in trust for the tribe or tribal

corporation.

§ 770.9 Appraisals.

(a) The applicant or the borrower, as

appropriate, will pay the cost of any

appraisal required under this part.

(b) Appraisals must be completed in

accordance with § 761.7 of this chapter.

§ 770.10 Servicing.

(a) Reamortization.

(1) Eligibility. The Agency may

consider reamortization of a loan

provided:

(i) The borrower submits a completed

Agency application form; and

(ii) The account is delinquent due to

circumstances beyond the borrower’s

control and cannot be brought current

within 1 year; or

(iii) The account is current, but due to

circumstances beyond the borrower’s

control, the borrower will be unable to

meet the annual loan payments.

(2) Terms. The term of a loan may not

be extended beyond 40 years from the

date of the original note.

(i) Reamortization within the

remaining term of the loan will be

predicated on a projection of the tribe’s

operating expenses indicating the ability

to meet the new payment schedule; and

(ii) No intervening lien exists on the

security for the loan which would

jeopardize the Government’s security

priority.

(3) Consolidation of notes. If one or

more notes are to be reamortized,

consolidation of the notes is authorized.

(b) Interest rate reduction. The

Agency may consider a reduction of the

interest rate for an existing loan to the

current interest rate as available from

any Agency office provided:

(1) The borrower submits a completed

Agency application form;

(2) The loan was made more than 5

years prior to the application for the

interest reduction; and

(3) The Department of the Interior and

the borrower certify that the borrower

meets at least one of the criteria

contained in paragraph (e)(2) of this

section.

(c) Deferral. The Agency may consider

a full or partial deferral for a period not

to exceed 5 years provided:

(1) The borrower submits a completed

Agency application form;

Federal Register / Vol. 66, No. 6 / Tuesday, January 9, 2001 / Rules and Regulations 1569

(2) The borrower presents a plan

which demonstrates that due to

circumstances beyond their control,

they will be unable to meet all financial

commitments unless the Agency

payment is deferred; and

(3) The borrower will be able to meet

all financial commitments, including

the Agency payments, after the deferral

period has ended.

(d) Land exchanges. In the cases

where a borrower proposes to exchange

any portion of land securing a loan for

other land, title clearance and a new

mortgage on the land received by the

borrower in exchange, which adequately

secures the unpaid principal balance of

the loan, will be required unless the

Agency determines any remaining land

or other loan security is adequate

security for the loan.

(e) Debt write-down.

(1) Application. The Agency will

consider debt write-down under either

the land value option or rental value

option, as requested by the borrower.

(i) The borrower must submit a

completed Agency application form;

(ii) If the borrower applies and is

determined eligible for a land value and

a rental value write-down, the borrower

will receive a write-down based on the

write-down option that provides the

greatest debt reduction.

(2) Eligibility. To be eligible for debt

write-down, the borrower (in the case of

a tribal corporation, the Native

American tribe of the borrower) must:

(i) Be located in a county which is

identified as a persistent poverty county

by the United States Department of

Agriculture, Economic Research Service

pursuant to the most recent data from

the Bureau of the Census; and

(ii) Have a socio-economic condition

over the immediately preceding 5 year

period that meets the following two

factors as certified by the Native

American tribe and the Department of

the Interior:

(A) The Native American tribe has a

per capita income for individual

enrolled tribal members which is less

than 50 percent of the Federally

established poverty income rate

established by the Department of Health

and Human Services;

(B) The tribal unemployment rate

exceeds 50 percent;

(3) Land value write-down. The

Agency may reduce the unpaid

principal and interest balance on any

loan made to the current market value

of the land that was purchased with

loan funds provided:

(i) The market value of such land has

declined by at least 25 percent since the

land was purchased as established by a

current appraisal;

(ii) Land value decrease is not

attributed to the depletion of resources

contained on or under the land;

(iii) The loan was made more than 5

years prior to the application for land

value writedown; and

(iv) The loan has not previously been

written down under paragraph (d)(4) of

this section and has not been written

down within the last 5 years under this

paragraph.

(4) Rental value write-down. The

Agency may reduce the unpaid

principal and interest on any loan, so

the annual loan payment for the

remaining term of each loan equals the

average of annual rental value of the

land purchased by each such loan for

the immediately preceding 5-year

period provided:

(i) The loan was made more than 5

years prior to the rental value

writedown;

(ii) The description of the land

purchased with the loan funds and the

rental values used to calculate the 5 year

average annual rental value of the land

have been certified by the Department of

the Interior;

(iii) The borrower provides a current

appraisal of the land; and

(iv) The loan has not been previously

written down under this paragraph and

has not been written down within the

last 5 years under paragraph (d)(3) of

this section.

(e) Release of reserve. Existing reserve

accounts may be released for the

purpose of making ITLAP loan

payments or to purchase additional

lands, subject to the following:

(1) A written request is received

providing details of the use of the funds;

(2) The loan is not delinquent;

(3) The loan adequately secured by a

general assignment of tribal income.

PART 1823—[Reserved]

2. Remove and reserve part 1823.

PART 1902—SUPERVISED BANK

ACCOUNTS

3. The authority citation is revised to

read as follows:

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

U.S.C. 1480; 7 CFR 2.16 and 2.42.

§ 1902.15 [Amended]

4. Amend the first sentence of

paragraph (c) of § 1902.15 by removing

the words ‘‘Indian Land Acquisition,’.

PART 1951—SERVICING AND

COLLECTIONS

5. The authority citation continues to

read as follows:

Authority: 5 U.S.C. 301; 7 U.S.C. 1932

Note, 7 U.S.C. 1989, 42 U.S.C. 1480.

Subpart E—Servicing of Community

and Direct Business Programs Loans

and Grants

§ 1951.201 [Amended]

6. Amend the first sentence of

§ 1951.201 by removing the words

‘‘loans to Indian Tribes and Tribal

Corporations;’.

§ 1951.221 [Amended]

7. Amend the heading of

§ 1951.221(b) by removing the words

‘‘and Indian Tribes and Tribal

Corporation Loans’’.

§ 1951.222 [Amended]

8. Remove § 1951.222(a)(11).

§ 1951.230 [Amended]

9. Amend § 1951.230 as follows:

a. Add the word ‘‘and’’ at the end of

paragraph (b)(5);

b. Remove the word ‘‘; and’’ and add

in its place ‘‘.’’ at the end of paragraph

(b)(6); and

c. Remove paragraph (b)(7).

PART 1956—DEBT SETTLEMENT

10. The authority citation for part

1956 continues to read as follows:

Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 31

U.S.C. 3711; 42 U.S.C. 1480.

Subpart C—Debt Settlement—

Community and Business Programs

11. Amend § 1956.101 by removing

the phrase ‘‘and Indian Tribal Land

Acquisition loans;’’

§ 1956.105 [Amended]

12. Amend § 1956.105 by removing

paragraph (k).

§ 1956.137 [Removed and reserved]

13. Remove and reserve § 1956.137.

Signed at Washington, DC, on December

22, 2000.

August Schumacher,

Under Secretary for Farm and Foreign

Agricultural Services.

Jill Long Thompson,

Under Secretary for Rural Development.

[FR Doc. 01–100 Filed 1–8–01; 8:45 am]

BILLING CODE 3410–05–P