553 
taged farmers in a State in proportion to the total 
number of farmers in the State. 
‘‘(b) RESERVATION AND ALLOCATION.— 
‘‘(1) RESERVATION.—To the maximum extent 
practicable, the Secretary shall reserve sufficient 
loan funds made available under chapter 1 for use 
by members of socially disadvantaged groups identi-
fied under target participation rates established 
under subsection (a). 
‘‘(2) ALLOCATION.—The Secretary shall allo-
cate the loans on the basis of the proportion of 
members of socially disadvantaged groups in a coun-
ty and the availability of inventory farmland, with 
the greatest amount of loan funds being distributed 
in the county with the greatest proportion of socially 
disadvantaged group members and the greatest 
quantity of available inventory farmland. 
‘‘(3) INDIAN
RESERVATIONS.—In distributing 
loan funds in counties within the boundaries of an 
Indian reservation, the Secretary shall allocate the 
funds on a reservation-wide basis. 
‘‘(c) OPERATING LOANS.— 
‘‘(1) ESTABLISHMENT.— 
‘‘(A) IN
GENERAL.—The Secretary shall 
establish annual target participation rates that 
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shall ensure that socially disadvantaged farmers 
receive loans made or guaranteed under chapter 
2. 
‘‘(B) CONSIDERATIONS.—In establishing 
the target rates, the Secretary shall consider 
the number of socially disadvantaged farmers in 
a State in proportion to the total number of 
farmers in the State. 
‘‘(2) RESERVATION AND ALLOCATION.— 
‘‘(A) IN GENERAL.—To the maximum ex-
tent practicable, the Secretary shall reserve and 
allocate the proportion of the loan funds of each 
State made available under chapter 2 that is 
equal to the target participation rate of the 
State for use by the socially disadvantaged 
farmers in the State. 
‘‘(B) DISTRIBUTION.—To the maximum 
extent practicable, the Secretary shall distribute 
the total loan funds reserved under subpara-
graph (A) on a county-by-county basis accord-
ing to the number of socially disadvantaged 
farmers in the county. 
‘‘(C) 
REALLOCATION
OF
UNUSED 
FUNDS.—Any funds reserved and allocated 
under this paragraph but not used within a 
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State shall, to the extent necessary to satisfy 
pending applications under this subtitle, be 
available for use by socially disadvantaged 
farmers in other States, as determined by the 
Secretary, and any remaining funds shall be re-
allocated within the State. 
‘‘(d) REPORT.—The Secretary shall prepare and sub-
mit to the Committee on Agriculture of the House of Rep-
resentatives and the Committee on Agriculture, Nutrition, 
and Forestry of the Senate a report that describes the an-
nual target participation rates and the success in meeting 
the rates. 
‘‘(e) IMPLEMENTATION CONSISTENT WITH SUPREME 
COURT HOLDING.—Not later than 180 days after April 
4, 1996, the Secretary shall ensure that the implementa-
tion of this section is consistent with the holding of the 
Supreme Court in Adarand Constructors, Inc. v. Federico 
Pena, Secretary of Transportation, 115 S. Ct. 2097 
(1995). 
‘‘SEC. 3417. COMPROMISE OR ADJUSTMENT OF DEBTS OR 
CLAIMS BY GUARANTEED LENDER. 
‘‘(a) LOSS BY LENDER.—If the lender of a guaran-
teed farmer program loan takes any action described in 
section 3903(a)(4) with respect to the loan and the Sec-
retary approves the action, for purposes of the guarantee, 
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the lender shall be treated as having sustained a loss equal 
to the amount by which— 
‘‘(1) the outstanding balance of the loan imme-
diately before the action; exceeds 
‘‘(2) the outstanding balance of the loan imme-
diately after the action. 
‘‘(b) NET PRESENT VALUE OF LOAN.—The Sec-
retary shall approve the taking of an action described in 
section 3903(a)(4) by the lender of a guaranteed farmer 
program loan with respect to the loan if the action reduces 
the net present value of the loan to an amount equal to 
not less than the greater of— 
‘‘(1) the greatest net present value of a loan the 
borrower could reasonably be expected to repay; and 
‘‘(2) the difference between— 
‘‘(A) the greatest amount that the lender 
of the loan could reasonably expect to recover 
from the borrower through bankruptcy, or liq-
uidation of the property securing the loan; and 
‘‘(B) all reasonable and necessary costs 
and expenses that the lender of the loan could 
reasonably expect to incur to preserve or dis-
pose of the property (including all associated 
legal and property management costs) in the 
course of such a bankruptcy or liquidation. 
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‘‘(c) NO LIMITATION ON AUTHORITY.—This section 
shall not limit the authority of the Secretary to enter into 
a shared appreciation arrangement with a borrower under 
section 3411(e). 
‘‘SEC. 3418. WAIVER OF MEDIATION RIGHTS BY BOR-
ROWERS. 
‘‘The Secretary may not make or guarantee any 
farmer program loan to a farm borrower on the condition 
that the borrower waive any right under the mediation 
program of any State. 
‘‘SEC. 3419. BORROWER TRAINING. 
‘‘(a) IN GENERAL.—The Secretary shall contract to 
provide educational training to all borrowers of direct 
loans made under this subtitle in financial and farm man-
agement concepts associated with commercial farming. 
‘‘(b) CONTRACT.— 
‘‘(1) IN
GENERAL.—The Secretary may con-
tract with a State or private provider of farm man-
agement and credit counseling services (including a 
community college, the extension service of a State, 
a State department of agriculture, or a nonprofit or-
ganization) to carry out this section. 
‘‘(2) CONSULTATION.—The Secretary may con-
sult with the chief executive officer of a State con-
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