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

27660 

Vol. 75, No. 95 

Tuesday, May 18, 2010 

1System institutions are federally chartered, 

cooperatively owned corporations authorized under 

titles I, II, and III of the Farm Credit Act of 1971, 

as amended (Act), to make long-term mortgage and 

short- and intermediate-term production loans to 

farmers, ranchers and agricultural producers, and, 

in the case of banks for cooperatives, to eligible 

cooperative associations. See 12 U.S.C. 2001 et seq. 

2While a System institution could not qualify as 

a franchise purchaser, it could possibly pair with 

a non-System lender where that lender could buy 

the deposits and other loans leaving the System 

institution to buy the agricultural loans. 

3 12 CFR 614.4325(b). 

4The Act is silent as to specific authority of a 

System institution to buy loans from an entity such 

as the FDIC; however, section 1.5(5) of the Act gives 

Farm Credit Banks the authority to acquire, hold, 

dispose and otherwise exercise all the usual 

incidents of ownership of real and personal 

property necessary or convenient to its business 

(see section 2.2(5) and 2.12(5) for parallel authority 

with respect to Farm Credit associations); and 

section 1.5(15) of the Act gives Farm Credit Banks 

authority to buy and sell obligations of, or insured 

by the United States or any agency thereof (see 

section 2.2(11) and 2.12(17) for parallel authority 

with respect to Farm Credit associations). For 

parallel authorities with respect to banks for 

cooperatives, see section 3.1(5) and (13)(A) of the 

Act. 

FARM CREDIT ADMINISTRATION 

12 CFR Part 614 

RIN 3052–AC62 

Loan Policies and Operations; Loan 

Purchases From FDIC 

AGENCY: Farm Credit Administration. 

ACTION: Proposed rule. 

SUMMARY: The Farm Credit 

Administration is proposing to amend 

its rules on loan policies and operations. 

The amended rule would permit Farm 

Credit System (System) institutions with 

direct lending authority to purchase 

from the Federal Deposit Insurance 

Corporation (FDIC) loans to farmers, 

ranchers, producers or harvesters of 

aquatic products and cooperatives that 

meet eligibility and scope of financing 

requirements. This action would allow 

the System to provide liquidity and a 

stable source of funding and credit for 

borrowers in rural areas affected by the 

failure of their lending institution. 

DATES: You may send comments on or 

before July 19, 2010. 

ADDRESSES: We offer a variety of 

methods for you to submit your 

comments. For accuracy and efficiency 

reasons, commenters are encouraged to 

submit comments by e-mail or through 

the FCA’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. 

FCA requests that comments to the 

proposed amendment include the 

reference RIN 3052–AC62. 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: Gary K. Van Meter, Deputy 

Director, Office of Regulatory Policy, 

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 from 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 you provide, 

such as phone numbers and addresses, 

will be publicly available. However, we 

will attempt to remove e-mail addresses 

to help reduce Internet spam. 

FOR FURTHER INFORMATION CONTACT: 

Mark L. Johansen, Senior Policy 

Analyst, Office of Regulatory Policy, 

Farm Credit Administration, McLean, 

VA 22102–5090, (703) 883–4498, TTY 

(703) 883–4434, or 

Mary Alice Donner, Senior Attorney, 

Office of General Counsel, Farm 

Credit Administration, McLean, VA 

22102–5090, (703) 883–4020, TTY 

(703) 883–4020. 

SUPPLEMENTARY INFORMATION: 

Background 

Agriculture and rural sectors in the 

United States are adversely affected by 

bank failures and depressed local 

economies. Many commercial banks are 

active in agricultural and cooperative 

lending and, when they fail, farmers and 

ranchers and cooperatives can be left 

seeking new lenders to meet their 

ongoing credit needs. The Federal 

Deposit Insurance Corporation, Farm 

Credit System institutions, and others 

have asked whether System institutions, 

directly or in partnership with other 

market participants, could provide a 

source of credit and liquidity to 

borrowers whose operations are 

financed with agricultural or 

cooperative loans affected by 

commercial bank failures.1

When a bank fails and the FDIC is 

appointed receiver, the FDIC may sell 

the whole bank or its pieces (loans, 

deposits, or other assets).2 When the 

FDIC sells bank assets it may sell 

agricultural or cooperative loans 

individually or in pools at auction. The 

System, as a Government-sponsored 

enterprise for agricultural lending, 

should have a role in providing credit 

to farmers and ranchers and 

cooperatives and liquidity to these rural 

areas by bidding on agricultural or 

cooperative loans, consistent with the 

safe and sound operation of System 

business. 

FCA regulations currently provide 

that a System institution may not 

purchase an interest in a loan from a 

non-System institution except for the 

purpose of pooling and securitizing 

loans to sell to the Federal Agricultural 

Mortgage Corporation unless the interest 

is a participation interest.3 As a result, 

the System is not able to buy loans from 

the FDIC. However, the Farm Credit Act 

of 1971, as amended (Act), does not 

prohibit System institutions from 

purchasing loans from the FDIC.4 The 

FCA believes that allowing System 

institutions to purchase loans from the 

FDIC when a commercial bank lender 

carrying a portfolio of eligible 

agricultural or cooperative loans is 

closed and placed in receivership would 

further the public policy of the Act. 

The proposed rule would create a 

regulatory framework for authorizing 

System institutions to purchase 

agricultural or cooperative loans of 

failed commercial banks from the FDIC. 

mstockstill on DSKH9S0YB1PROD with PROPOSALS

Federal Register / Vol. 75, No. 95 / Tuesday, May 18, 2010 / Proposed Rules 27661 

5Part 613, subpart A sets forth the eligibility 

requirements for financing bona fide farmers, 

ranchers and aquatic producers or harvesters under 

titles I and II. Part 613, subpart B sets forth 

eligibility requirements for cooperative financing 

under title III. 

6This rule would require borrower rights to 

borrowers of loans purchased from the FDIC by 

System institutions with direct lending authority 

under titles I and II of the Act. Borrower rights 

would not be required to be given to borrowers of 

loans purchased from the FDIC by a bank for 

cooperatives. This is because section 4.14A(a)(6) of 

the Act excepts banks for cooperatives from 

borrower rights requirements. 

7Section 4.3A(c)(1)(E) of the Act requires that as 

a condition of borrowing from or through the 

institution, any borrower who is entitled to hold 

voting stock or participation certificates shall, at the 

time a loan is made, acquire voting stock or 

participation certificates in an amount not less than 

$1,000 or 2 percent of the amount of the loan, 

whichever is less. Section 4.3A(c)(1)(D) of the Act 

provides that the bylaws of each bank and 

association shall provide for the issuance of voting 

stock which may only be held by borrowers who 

are farmers, ranchers or producers or harvesters of 

aquatic products, and eligible cooperative 

associations. 

8 12 CFR part 617, subparts A and D through G. 

These ‘‘borrower rights’’ would not apply to loans 

to cooperatives. See footnote 6. 

The System institution would be 

required to use due diligence to the 

extent allowed by the FDIC auction 

process to determine whether the loans 

purchased meet the eligibility and scope 

of financing requirements of the Act and 

FCA regulations.5 All failed bank 

borrowers with agricultural loans 

purchased by a System institution 

would be entitled to certain ‘‘borrower 

rights.’’ 6 Failed bank borrowers with 

agricultural or cooperative loans also 

would be offered membership status 

through a stock membership program 

developed by the System institution that 

meets the requirements of the System 

institution’s bylaws and the Act.7 Noneligible loans and eligible loans to failed 

bank borrowers who chose not to 

become members would be divested. 

However, if distressed, those loans that 

were purchased by System institutions 

with titles I and II direct lending 

authority would be subject to borrower 

rights and would be restructured or 

foreclosed, whichever is least costly, as 

soon as financially feasible. 

Analysis of the Proposed Rule 

We propose to amend § 614.4325(b) to 

allow System institutions to purchase 

loans from the FDIC acting as receiver 

or in any other capacity under its 

statutory authority. The authority to 

purchase would be limited to loans that, 

with reasonable due diligence allowed 

through the FDIC auction process, the 

System institution determines eligibility 

and scope of financing requirements 

under titles I, II and III of the Act. After 

purchase, the System institution would 

be required to complete a more 

thorough due diligence to ensure that all 

of the loans meet eligibility and scope 

of financing requirements. System 

institutions would be urged to maintain 

prudent credit underwriting standards 

in purchasing loans from the FDIC. 

Funding bank approval would be 

required for acquisitions of loans from 

the FDIC exceeding 10 percent of the 

purchasing Farm Credit association’s 

capital. 

System institutions are particularly 

positioned to assist distressed borrowers 

through the borrower rights 

requirements of the Act. The proposed 

rule would provide that the borrower 

rights provisions of part 617 of the FCA 

regulations, except those with respect to 

effective interest rate disclosure, would 

apply to the failed bank borrowers to the 

same extent as they would have if the 

System institution had made the loan 

directly to the failed bank borrower. As 

such, the System institution would be 

able to restructure loans to some of the 

failed bank borrowers and these 

restructures would allow some of the 

borrowers to remain in production 

agriculture. Once purchased, the System 

institution would use all the rights 

contained in part 617 to work with the 

failed bank borrowers with agricultural 

loans to restructure the loan when it is 

the least cost alternative. These rights 

would include actions on applications, 

distressed loan restructuring, and rights 

of first refusal.8 System institutions 

would not be expected to retroactively 

provide differential and effective 

interest rate disclosures associated with 

new loans; however, if a new System 

loan was made to a failed bank 

borrower, then those provisions, and all 

of part 617, would apply to that loan. 

In addition to borrower rights, the 

rule would provide that the System 

institution give the failed bank 

borrowers whose loans meet eligibility 

and scope of financing requirements an 

opportunity to acquire stock of the 

institution under a program to be 

developed by each System institution, 

consistent with the System institution’s 

bylaws and the requirements of the Act. 

A System institution would be required 

to divest the loan as soon as reasonably 

feasible if the failed bank borrower 

could not or would not participate in 

the membership program (nonparticipating failed bank borrower). If 

that loan was distressed, the nonparticipating failed bank borrower 

would be given all the borrower rights 

set forth in part 617, subparts A and D 

through G, during the divestiture 

period. The non-participating failed 

bank borrower would not be entitled to 

patronage, voting, or other shareholder 

rights under the FCA regulations or 

institution bylaws. 

Because of the nature of the loan 

pools, it may be impossible to purchase 

a pool with loans solely within the 

purchasing institution’s territory. 

Therefore, the proposed rule would 

allow any System institution to 

purchase loans from the FDIC regardless 

of whether the borrower’s agricultural 

operation is located wholly or partially 

in the institution’s chartered territory. 

However, we would expect System 

institutions to focus on serving farmers 

and ranchers’ operations within their 

chartered territories, and an institution 

should carefully analyze whether it has 

the ability to adequately service a 

particular purchased loan to a borrower 

whose operations are located outside its 

chartered territory. If it does not have 

that ability, then the institution should 

consider partnering with the System 

institution located in the lending 

territory where the headquarters for the 

failed bank borrower is located. If it 

does have the ability to adequately 

service a loan or pool of loans outside 

of its chartered territory, a System 

institution would be permitted to 

purchase that loan or pool of loans 

provided notice is given to the System 

institution(s) chartered to serve the 

territory where the headquarters of the 

failed bank borrower is located. We 

propose to amend § 614.4070 by adding 

a new paragraph (d) that exempts 

territorial concurrence for loans or pools 

of loans purchased from the FDIC, if 

notice is provided to the System 

institution in whose chartered territory 

the headquarters of the failed bank 

borrower is located. Requiring territorial 

concurrence compliance on each 

purchase would impede a System 

institution’s ability to bid on a pool of 

agricultural loans. However, this 

territorial concurrence exemption does 

not apply to any additional loans that 

may be made to the borrower. 

Request for Comments on Proposed 

Rule 

We invite comments on the proposed 

rule and will take all comments into 

consideration before issuing the final 

amendment to the FCA regulations on 

loan policies and operations. 

Regulatory Flexibility Act 

Pursuant to section 605(b) of the 

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

et seq.), FCA hereby certifies that the 

proposed rule will not have a significant 

economic impact on a substantial 

number of small entities. Each of the 

banks in the Farm Credit System, 

considered together with its affiliated 

mstockstill on DSKH9S0YB1PROD with PROPOSALS

27662 Federal Register / Vol. 75, No. 95 / Tuesday, May 18, 2010 / Proposed Rules 

associations, has assets and annual 

income in excess of the amounts that 

would qualify them as small entities. 

Therefore, Farm Credit System 

institutions are not ‘‘small entities’’ as 

defined in the Regulatory Flexibility 

Act. 

List of Subjects in 12 CFR Part 614 

Agriculture, Banks, banking, Foreign 

trade, Reporting and recordkeeping 

requirements, Rural areas. 

Accordingly, for the reasons stated in 

the preamble, part 614 of chapter VI, 

title 12 of the Code of Federal 

Regulations, is proposed to be amended 

as follows: 

PART 614—LOAN POLICIES AND 

OPERATIONS 

1. The authority citation for part 614 

continues to read as follows: 

Authority: 42 U.S.C. 4012a, 4104a, 4104b, 

4106, and 4128; secs. 1.3, 1.5, 1.6, 1.7, 1.9, 

1.10, 1.11, 2.0, 2.2, 2.3, 2.4, 2.10, 2.12, 2.13, 

2.15, 3.0, 3.1, 3.3, 3.7, 3.8, 3.10, 3.20, 3.28, 

4.12, 4.12A, 4.13B, 4.14, 4.14A, 4.14C, 4.14D, 

4.14E, 4.18, 4.18A, 4.19, 4.25, 4.26, 4.27, 

4.28, 4.36, 4.37, 5.9, 5.10, 5.17, 7.0, 7.2, 7.6, 

7.8, 7.12, 7.13, 8.0, 8.5 of the Farm Credit Act 

(12 U.S.C. 2011, 2013, 2014, 2015, 2017, 

2018, 2019, 2071, 2073, 2074, 2075, 2091, 

2093, 2094, 2097, 2121, 2122, 2124, 2128, 

2129, 2131, 2141, 2149, 2183, 2184, 2201, 

2202, 2202a, 2202c, 2202d, 2202e, 2206, 

2206a, 2207, 2211, 2212, 2213, 2214, 2219a, 

2219b, 2243, 2244, 2252, 2279a, 2279a–2, 

2279b, 2279c–1, 2279f, 2279f–1, 2279aa, 

2279aa–5); sec. 413 of Pub. L. 100–233, 101 

Stat. 1568, 1639. 

Subpart B—Chartered Territories 

2. Amend § 614.4070 by adding a new 

paragraph (d) to read as follows: 

§ 614.4070 Loans and chartered territory— 

Farm Credit Banks, agricultural credit 

banks, Federal land bank associations, 

Federal land credit associations, production 

credit associations, and agricultural credit 

associations. 

* * * * * 

(d) A bank or association chartered 

under title I or II of the Act may finance 

eligible borrower operations conducted 

wholly or partially outside its chartered 

territory through the purchase of loans 

from the Federal Deposit Insurance 

Corporation in compliance with 

§ 614.4325(b)(3), provided: 

(1) Notice is given to the Farm Credit 

System institution(s) chartered to serve 

the territory where the headquarters of 

borrower’s operation being financed is 

located; and 

(2) After loan purchase, additional 

financing of eligible borrower 

operations complies with paragraphs 

(a), (b), and (c) of this section. 

Subpart H—Loan Purchases and Sales 

3. Amend § 614.4325 by revising 

paragraph (b) to read as follows: 

§ 614.4325 Purchase and sale of interests 

in loans. 

* * * * * 

(b) Authority to purchase and sell 

interests in loans. Loans and interests in 

loans may only be sold in accordance 

with each institution’s lending 

authorities, as set forth in subpart A of 

this part. No Farm Credit System 

institution may purchase any interest in 

a loan from an institution that is not a 

Farm Credit System institution, except: 

(1) For the purpose of pooling and 

securitizing such loans under title VIII 

of the Act; 

(2) Purchases of a participation 

interest that qualifies under the 

institution’s lending authority, as set 

forth in subpart A of this part and meets 

the requirements of § 614.4330 of this 

subpart; 

(3) Loans purchased from the Federal 

Deposit Insurance Corporation, 

provided that the Farm Credit System 

institution with direct lending authority 

under titles I, II, or III of the Act: 

(i) Conducts reasonable due diligence 

prior to purchase, and conducts 

thorough review after purchase, to 

determine that the loan, or pool of 

loans, qualifies under the institution’s 

lending authority as set forth in subpart 

A of this part, and meets scope of 

financing and eligibility requirements in 

subpart A or subpart B of part 613; 

(ii) Obtains funding bank approval, if 

a Farm Credit System association, for 

loans or pools of loans purchased 

exceeding 10 percent of total capital; 

(iii) Establishes a program whereby 

each eligible borrower of the loan 

purchased is offered an opportunity to 

acquire the institution’s required 

minimum amount of voting stock; 

(iv) Determines whether each loan 

purchased, except for loans purchased 

that could be financed only by a bank 

for cooperatives under title III of the 

Act, is a distressed loan as defined in 

§ 617.7000, and provides the borrower 

of the purchased loan the rights afforded 

in § 617.7000, subparts A, and D 

through G if the loan is distressed 

regardless of whether the loan is to an 

eligible or ineligible borrower; and 

(v) Divests itself of ineligible loans 

purchased that are not distressed loans 

as defined in § 617.7000 and purchased 

loans of borrowers who elect not to 

acquire stock under the program offered 

in paragraph (b)(3)(iii) of this section in 

the same manner it would divest, under 

its current business practices, a loan in 

its loan portfolio determined to be 

ineligible. 

* * * * * 

Dated: May 12, 2010. 

Roland E. Smith, 

Secretary, Farm Credit Administration Board. 

[FR Doc. 2010–11772 Filed 5–17–10; 8:45 am] 

BILLING CODE 6705–01–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 25 

[Docket No. NM428; Notice No. 25–99–11– 

SC] 

Special Conditions: Boeing 747–468, 

Installation of a Medical Lift 

AGENCY: Federal Aviation 

Administration (FAA), DOT. 

ACTION: Notice of proposed special 

conditions. 

SUMMARY: This action proposes special 

conditions for the Boeing 747–468 

airplane. This airplane, as modified by 

Jet Aviation, will have a novel or 

unusual design feature associated with 

the installation of a medical lift. The 

applicable airworthiness regulations do 

not contain adequate or appropriate 

safety standards for this design feature. 

These proposed special conditions 

contain the additional safety standards 

that the Administrator considers 

necessary to establish a level of safety 

equivalent to that established by the 

existing airworthiness standards. 

DATES: We must receive your comments 

by June 17, 2010. 

ADDRESSES: You must mail two copies 

of your comments to: Federal Aviation 

Administration, Transport Airplane 

Directorate, Attn: Rules Docket (ANM– 

113), Docket No. NM428, 1601 Lind 

Avenue, SW., Renton, Washington 

98057–3356. You may deliver two 

copies to the Transport Airplane 

Directorate at the above address. You 

must mark your comments: Docket No. 

NM428. You can inspect comments in 

the Rules Docket weekdays, except 

Federal holidays, between 7:30 a.m. and 

4 p.m. 

FOR FURTHER INFORMATION CONTACT: 

Jayson Claar, Transport Airplane 

Directorate, Aircraft Certification 

Service, 1601 Lind Avenue, SW., 

Renton, Washington 98057–3356; 

telephone (425) 227–2194; facsimile 

(425) 227–1149. 

SUPPLEMENTARY INFORMATION: 

mstockstill on DSKH9S0YB1PROD with PROPOSALS