This section of the FEDERAL REGISTER

contains notices to the public of the proposed

issuance of rules and regulations. The

purpose of these notices is to give interested

persons an opportunity to participate in the

rule making prior to the adoption of the final

rules.

Proposed Rules Federal Register

27949 

Vol. 75, No. 96 

Wednesday, May 19, 2010 

DEPARTMENT OF AGRICULTURE 

Rural Housing Service 

7 CFR Part 1980 

RIN 0575–AC83 

Single Family Housing Guaranteed 

Loan Program 

AGENCY: Rural Housing Service, USDA. 

ACTION: Proposed rule. 

SUMMARY: The Rural Housing Service 

proposes two changes to its Single 

Family Housing Guaranteed Loan 

Program (SFHGLP) regulation. This 

action is taken to achieve savings for the 

taxpayer, simplify regulations, and 

promote efficiency in managing the 

SFHGLP. The proposed changes are in 

accordance with the recommendations 

of the Inspector General in its Audit 

(Number 04601–0017–CH) of April 

2009. 

Under the SFHGLP regulation as it 

stands today, lenders may set an interest 

rate for a loan under the SFHGLP that 

either does not exceed the Lender’s 

published rate for VA first mortgage 

loans with no discount points or does 

not exceed the current Federal National 

Mortgage Association (Fannie Mae) 

posted yield for 90-day delivery 

(Actual/Actual), plus six-tenths of 1 

percent for 30-year fixed rate 

conventional loans, rounded up to the 

nearest one-quarter of 1 percent. The 

first proposed rule change would 

eliminate the lender’s published VA rate 

for first mortgage loans with no discount 

points as an option for a maximum 

interest rate on loans. The effect of this 

action would be to create a more 

uniform, simpler standard for interest 

rates under the SFHGLP, whereby 

lenders would always use the current 

Fannie Mae rate as the rate ceiling. The 

Fannie Mae rate is the most widely 

utilized interest rate guidance by 

approved lenders. It is also the most 

accessible to lenders and the Agency 

when documenting loan files to ensure 

affordable interest rates are extended to 

Guaranteed Loan Program borrowers. 

The second proposed change relates 

to the rights of the Secretary when the 

Secretary has to pay a claim under the 

guarantee for the loan, but the original 

lender did not originate the loan in 

accordance with the program 

requirements. The proposed rule change 

would allow the Secretary in certain 

circumstances to seek indemnification 

from the originator of the loan for the 

Secretary’s loss. This change promises 

to save taxpayer money and incentivize 

due care on the part of lenders by 

allowing the Government to recoup the 

funds it pays out in the event of a claim 

under the guarantee where the original 

lender did not comply with SFHGLP 

requirements. 

DATES: Written or e-mail comments on 

the proposed rule must be received on 

or before July 19, 2010. 

ADDRESSES: You may submit comments 

on this proposed rule by any one of the 

following methods: 

• E-Mail: comments@wdc.usda.gov. 

Include ‘‘RIN No. 0575–AC83’’ in the 

subject line of the message. 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments 

electronically. 

• Mail: Submit written comments via 

the U.S. Postal Service to the Branch 

Chief, Regulations and Paperwork 

Management Branch, U.S. Department 

of Agriculture, STOP 0742, 1400 

Independence Ave., SW., Washington, 

DC 20250–0742. 

• Hand Delivery/Courier: Submit 

written comments via Federal Express 

mail, or other courier service requiring 

a street address to the Branch Chief, 

Regulations and Paperwork 

Management Branch, U.S. Department 

of Agriculture, 300 7th Street, SW., 7th 

Floor, Washington, DC 20024. 

All written comments will be available 

for public inspection during regular 

work hours at the 300 7th Street, SW., 

7th Floor address listed above. 

FOR FURTHER INFORMATION CONTACT: 

Joaquin Tremols, Acting Director, Single 

Family Housing Guaranteed Loan 

Division, USDA Rural Development, 

Room 2241, STOP 0784, 1400 

Independence Ave., SW., Washington, 

DC 20250, Telephone: (202) 720–1465, 

E-mail: joaquin.tremols@wdc.usda.gov. 

SUPPLEMENTARY INFORMATION: 

Classification 

This proposed rule has been 

determined to be non-significant by the 

Office of Management and Budget 

(OMB) under Executive Order 12866. 

Executive Order 12988 

This rule has been reviewed under 

Executive Order 12988, Civil Justice 

Reform. Except where specified, all 

State and local laws and regulations that 

are in direct conflict with this rule will 

be preempted. Federal funds carry 

Federal requirements. No person is 

required to apply for funding under this 

program, but if they do apply and are 

selected for funding, they must comply 

with the requirements applicable to the 

Federal program funds. This rule is not 

retroactive. It will not affect agreements 

entered into prior to the effective date 

of the rule. Before any judicial action 

may be brought regarding the provisions 

of this rule, the administrative appeal 

provisions of 7 CFR part 11 must be 

exhausted. 

Unfunded Mandates Reform Act 

Title II of the Unfunded Mandates 

Reform Act of 1995 (UMRA), Public 

Law 104–4, establishes requirements for 

Federal agencies to assess the effect of 

their regulatory actions on State, local, 

and tribal governments and the private 

sector. Under section 202 of the UMRA, 

the Agency generally must prepare a 

written statement, including a costbenefit analysis, for proposed and final 

rules with ‘‘Federal mandates’’ that may 

result in expenditures to State, local, or 

tribal governments, in the aggregate, or 

to the private sector, of $100 million, or 

more, in any one year. When such a 

statement is needed for a rule, section 

205 of the UMRA generally requires the 

Agency to identify and consider a 

reasonable number of regulatory 

alternatives and adopt the least costly, 

most cost-effective, or least burdensome 

alternative that achieves the objectives 

of the rule. 

This proposed rule contains no 

Federal mandates (under the regulatory 

provisions of Title II of the UMRA) for 

State, local, and tribal governments or 

the private sector. Therefore, this rule is 

not subject to the requirements of 

sections 202 and 205 of the UMRA. 

Environmental Impact Statement 

This document has been reviewed in 

accordance with 7 CFR part 1940, 


erowe on DSK5CLS3C1PROD with PROPOSALS-1
27950 Federal Register / Vol. 75, No. 96 / Wednesday, May 19, 2010 / Proposed Rules 

subpart G, ‘‘Environmental Program.’’ It 

is the determination of the Agency that 

this action does not constitute a major 

Federal action significantly affecting the 

quality of the human environment, and, 

in accordance with the National 

Environmental Policy Act of 1969, 

Public Law 91–190, neither an 

Environmental Assessment nor an 

Environmental Impact Statement is 

required. 

Federalism—Executive Order 13132 

The policies contained in this rule do 

not have any substantial direct effect on 

States, on the relationship between the 

national government and States, or on 

the distribution of power and 

responsibilities among the various 

levels of government. Nor does this rule 

impose substantial direct compliance 

costs on State and local governments. 

Therefore, consultation with the States 

is not required. 

Regulatory Flexibility Act 

In compliance with the Regulatory 

Flexibility Act (5 U.S.C. 601 et seq.) the 

undersigned has determined and 

certified by signature of this document 

that this rule change will not have a 

significant impact on a substantial 

number of small entities. This rule does 

not impose any significant new 

requirements on Agency applicants and 

borrowers, and the regulatory changes 

affect only Agency determination of 

program benefits for guarantees of loans 

made to individuals. 

Intergovernmental Consultation 

This program/activity is not subject to 

the provisions of Executive Order 

12372, which require intergovernmental 

consultation with State and local 

officials. (See the Notice related to 7 

CFR part 3015, subpart V, at 48 FR 

29112, June 24, 1983; 49 FR 22675, May 

31, 1984; 50 FR 14088, April 10, 1985). 

Programs Affected 

This program is listed in the Catalog 

of Federal Domestic Assistance under 

Number 10.410, Very Low to Moderate 

Income Housing Loans (Section 502 

Rural Housing Loans). 

Paperwork Reduction Act 

The information collection and record 

keeping requirements contained in this 

regulation have been approved by OMB 

in accordance with the Paperwork 

Reduction Act of 1995 (44 U.S.C. 3501 

et seq.). The assigned OMB control 

number is 0575–AC83. 

E–Government Act Compliance 

The Rural Housing Service is 

committed to complying with the EGovernment 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. 

Background 

In the spring of 2009, the Inspector 

General completed an audit of the 

controls over lending activities in the 

SFHGLP. The audit was initiated 

because of an investigation by the 

Inspector General into a lender who 

submitted false documents to the 

Agency to obtain loan guarantees. 

Additionally, the Inspector General was 

concerned that some lenders were 

setting interest rates on guaranteed 

loans that were excessive and not in 

compliance with Agency guidelines. 

The audit evaluated the systems and 

processes to ensure that lenders (1) 

submit accurate and legitimate borrower 

eligibility data and (2) set interest rates 

on loans within Agency guidelines. The 

audit report made a number of 

recommendations for what the SFHGLP 

can do to streamline operations, prevent 

fraud, and improve efficiency in its 

mission. In response to the audit, the 

two rules presented here are being 

proposed. 

OMB Control Number 

The report and recordkeeping 

requirements contained in this 

regulation have been approved by the 

Office of Management and Budget and 

have been assigned OMB control 

number 0575–AC83. 

List of Subjects in 7 CFR Part 1980 

Home improvement, Loan Programs— 

Housing and community development, 

Mortgage insurance, Mortgages, Rural 

areas. 

For the reason stated in the preamble, 

Chapter XVIII, Title 7 of the Code of 

Federal Regulations is proposed to be 

amended as follows: 

PART 1980—RURAL HOUSING LOANS 

1. The authority citation for part 1980 

continues to read as follows: 

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

Subpart E also issued under 7 U.S.C. 1932(a). 

Subpart D—Rural Housing Loans 

2. Section 1980.308 is revised to read 

as follows: 

§ 1980.308 Full faith and credit. 

(a) Loan note guarantee. The loan 

note guarantee constitutes an obligation 

supported by the full faith and credit of 

the United States and is incontestable 

except for fraud or misrepresentation of 

which the Lender has actual knowledge 

at the time it becomes such Lender or 

which the Lender participates in or 

condones. Misrepresentation includes 

negligent misrepresentation. A note 

which provides for the payment of 

interest on interest shall not be 

guaranteed. Any guarantee or 

assignment of a guarantee attached to or 

relating to a note which provides for the 

payment of interest on interest is void. 

Notwithstanding the prohibition of 

interest on interest, interest may be 

capitalized in connection with 

reamortization over the remaining term 

with written concurrence of RHS. The 

loan note guarantee will be 

unenforceable to the extent any loss is 

occasioned by violation of usury laws, 

negligent servicing, or failure to obtain 

the required security regardless of the 

time at which RHS acquires knowledge 

of the foregoing. Negligent servicing is 

defined as servicing that is inconsistent 

with this subpart and includes the 

failure to perform those services which 

a reasonably prudent lender would 

perform in servicing its own loan 

portfolio of loans that are not 

guaranteed. The term includes not only 

the concept of a failure to act, but also 

not acting in a timely manner or acting 

contrary to the manner in which a 

reasonably prudent lender would act up 

to the time of loan maturity or until a 

final loss is paid. Any losses occasioned 

will be unenforceable to the extent that 

loan funds are used for purposes other 

than those authorized in this subpart. 

When the lender conducts liquidation 

in an expeditious manner, in 

accordance with the provisions of 

§ 1980.374 of this subpart, the loan note 

guarantee shall cover interest until the 

claim is paid within the limit of the 

guarantee. 

(b) Indemnification. If RHS 

determines that a Lender did not 

originate a loan in accordance with the 

requirements in this subpart, and RHS 

pays a claim under the loan guarantee, 

RHS may revoke the Lender’s eligibility 

status in accordance with § 1980.309 (h) 

of this subpart and may also require the 

Lender: 

(1) To indemnify RHS for the loss, if 

the payment under the guarantee was 

made within 24 months of loan closing; 

or 

(2) To indemnify RHS for the loss 

regardless of how long ago the loan 

closed, if RHS determines that fraud or 

misrepresentation was involved in 

connection with the origination of the 

loan. 

3. Section 1980.320 is revised to read 

as follows: 


erowe on DSK5CLS3C1PROD with PROPOSALS-1
Federal Register / Vol. 75, No. 96 / Wednesday, May 19, 2010 / Proposed Rules 27951 

1See title VIII of the Farm Credit Act of 1971, as 

amended (Act), 12 U.S.C. 2279aa–2279cc et seq.) 

2See section 8.13 of the Act. 

§ 1980.320 Interest rate. 

The interest rate must not exceed the 

established, applicable usury rate. Loans 

guaranteed under this subpart must bear 

a fixed interest rate over the life of the 

loan. The rate shall be agreed upon by 

the borrower and the Lender and must 

not be more than the current Fannie 

Mae rate as defined in § 1980.302(a) of 

this subpart. The Lender must 

document the rate and the date it was 

determined. 

4. Section 1980.353 (c)(4) is revised to 

read as follows: 

§ 1980.353 Filing and processing 

applications. 

(c) * * * 

(4) Anticipated loan rates and terms, 

the date and amount of the Fannie Mae 

rate used to determine the interest rate, 

and the Lender’s certification that the 

proposed rate is in compliance with 

§ 1980.320 of this subpart. 

* * * * * 

Dated: April 30, 2010. 

Tammye Trevin ̃ o, 

Administrator, Rural Housing Service. 

[FR Doc. 2010–11383 Filed 5–18–10; 8:45 am] 

BILLING CODE 3410–XV–P 

FARM CREDIT ADMINISTRATION 

12 CFR Part 652 

RIN 3052–AC56 

Federal Agricultural Mortgage 

Corporation Funding and Fiscal 

Affairs; Farmer Mac Investments and 

Liquidity 

AGENCY: Farm Credit Administration. 

ACTION: Advance notice of proposed 

rulemaking (ANPRM). 

SUMMARY: The Farm Credit 

Administration (FCA, Agency, us, or 

we) is considering amending our 

regulations governing the Federal 

Agricultural Mortgage Corporation 

(Farmer Mac or the Corporation) nonprogram investments and liquidity 

requirements. The objective of these 

regulations is to ensure that Farmer Mac 

holds an appropriate level of highquality, liquid investments to maintain 

a sufficient liquidity reserve, invest 

surplus funds, and manage interest rate 

risk. 

DATES: You may send us comments by 

July 6, 2010. 

ADDRESSES: We offer a variety of 

methods for you to submit comments on 

this advanced notice of proposed 

rulemaking. For accuracy and efficiency 

reasons, commenters are encouraged to 

submit comments by e-mail or through 

the Agency’s Web site. As facsimiles 

(fax) are difficult for us to process and 

achieve compliance with section 508 of 

the Rehabilitation Act, we are no longer 

accepting comments submitted by fax. 

Regardless of the method you use, 

please do not submit your comment 

multiple times via different methods. 

You may submit comments by any of 

the following methods: 

• E-mail: Send us an e-mail at regcomm@fca.gov. 

• FCA Web site: http://www.fca.gov. 

Select ‘‘Public Commenters,’’ then 

‘‘Public Comments,’’ and follow the 

directions for ‘‘Submitting a Comment.’’ 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• Mail: Joseph T. Connor, Associate 

Director for Policy and Analysis, Office 

of Secondary Market Oversight, Farm 

Credit Administration, 1501 Farm 

Credit Drive, McLean, VA 22102–5090. 

You may review copies of all 

comments we receive at our office in 

McLean, Virginia, or on our Web site at 

http://www.fca.gov. Once you are in the 

Web site, select ‘‘Public Commenters,’’ 

then ‘‘Public Comments,’’ and follow the 

directions for ‘‘Reading Submitted 

Public Comments.’’ We will show your 

comments as submitted, 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. 

FOR FURTHER INFORMATION CONTACT: 

Joseph T. Connor, Associate Director for 

Policy and Analysis, Office of 

Secondary Market Oversight, Farm 

Credit Administration, McLean, VA 

22102–5090, (703) 883–4280, TTY 

(703) 883–4056; or 

Jennifer A. Cohn, Senior Counsel, Office 

of General Counsel, Farm Credit 

Administration, McLean, VA 22102– 

5090, (703) 883–4020, TTY (703) 883– 

4020. 

SUPPLEMENTARY INFORMATION: 

I. Objective 

The objective of this ANPRM is to 

solicit public comments on revisions 

and updates to Farmer Mac’s nonprogram investment and liquidity 

management regulations in light of 

investment and liquidity risk issues that 

arose during the recent financial crisis. 

With the benefit of information gained 

through this ANPRM and our internal 

analysis, we will consider changes to 

the regulations to enhance their 

fundamental objective: to ensure the 

safety and soundness and continuity of 

Farmer Mac operations. 

II. Background 

Congress established Farmer Mac in 

1988 as part of its effort to resolve the 

agricultural crisis of the 1980s. Congress 

expected that establishing a secondary 

market for agricultural and rural 

housing mortgages would increase the 

availability of competitively priced 

mortgage credit to America’s farmers, 

ranchers, and rural homeowners. 

In addition to serving its investorstakeholders, Farmer Mac, like all 

Government-sponsored enterprises 

(GSEs), has a public policy purpose 

embedded in its corporate mission that 

arises from having been created by an 

act of Congress. The public policy 

component of its mission explicitly 

includes its service to customerstakeholders (farmers, ranchers, rural 

homeowners, and rural utility 

cooperatives, all through their lenders).1

The public policy component also 

includes protection of taxpayerstakeholders. The latter arises from 

Farmer Mac’s ability to issue debt to the 

Department of the Treasury to cover 

guarantee losses under certain 

circumstances.2 These two public policy 

components of Farmer Mac’s mission 

are, in some respects, counterbalancing, 

as we now explain. 

A fundamental premise of finance is 

the natural positive relationship 

between risk and expected return. This 

means that when Farmer Mac increases 

its expected return, it also increases its 

risk of loss; the opposite is true when 

risk decreases. More return, in general, 

will better position Farmer Mac to 

reduce the rates it charges customers (a 

benefit to those stakeholders) and 

increase its earnings (a benefit to 

investor-stakeholders). However, the 

risk Farmer Mac assumes to earn a 

greater return increases the risk to 

others, including ultimately taxpayers, 

and thus adds an offsetting cost to these 

earnings benefits. 

In general, a guiding principle for 

FCA in establishing regulations is to 

maintain an appropriate balance 

between these costs and benefits, i.e., 

attempting to maximize Farmer Mac’s 

ability to serve its customers and 

provide an appropriate return for 

investors while ensuring that it engages 

in safe and sound operations, thereby 

providing a high degree of certainty that 

Farmer Mac will continue to be able to 

make its products available to serve 


erowe on DSK5CLS3C1PROD with PROPOSALS-1