81 FR 3289 - Direct Farm Ownership Microloan

DEPARTMENT OF AGRICULTURE
Farm Service Agency

Federal Register Volume 81, Issue 13 (January 21, 2016)

The Farm Service Agency (FSA) is adding Direct Farm Ownership Microloan (DFOML) to the existing Direct Loan Program. The revisions to the Direct Loan Program regulations consist of application, eligibility, repayment terms, and security requirements to better serve the unique operating needs of small family farm operations. The existing Microloans (ML) in the Direct Loan Program already include MLs for operating loans (OL). DFOML is expected to make farm ownership loans (FOs) available and more attractive to small operators through reduced application requirements, more timely application processing, and added flexibility for Youth Loan (YL) borrowers in meeting the farm experience eligibility requirement.

[Federal Register Volume 81, Number 13 (Thursday, January 21, 2016)]
[Rules and Regulations]
[Pages 3289-3293]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-01038]



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Federal Register / Vol. 81, No. 13 / Thursday, January 21, 2016 / 
Rules and Regulations

[[Page 3289]]



DEPARTMENT OF AGRICULTURE

Farm Service Agency

7 CFR Parts 761 and 764

RIN 0560-AI33


Direct Farm Ownership Microloan

AGENCY: Farm Service Agency, USDA.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Farm Service Agency (FSA) is adding Direct Farm Ownership 
Microloan (DFOML) to the existing Direct Loan Program. The revisions to 
the Direct Loan Program regulations consist of application, 
eligibility, repayment terms, and security requirements to better serve 
the unique operating needs of small family farm operations. The 
existing Microloans (ML) in the Direct Loan Program already include MLs 
for operating loans (OL). DFOML is expected to make farm ownership 
loans (FOs) available and more attractive to small operators through 
reduced application requirements, more timely application processing, 
and added flexibility for Youth Loan (YL) borrowers in meeting the farm 
experience eligibility requirement.

DATES: Effective date: January 21, 2016.
    Comment Date: We will consider comments we receive by April 20, 
2016.

ADDRESSES: We invite you to submit comments on this final rule. In your 
comment, please specify RIN 0560-AI33 and include the volume, date, and 
page number of this issue of the Federal Register. You may submit 
comments by either of the following methods:
     Federal eRulemaking Portal: Go to http://www.regulations.gov. Follow the instructions for submitting comments.
     Mail: Director, Loan Making Division, Farm Loan Programs 
(FLP), FSA, U.S. Department of Agriculture, 1400 Independence Avenue 
SW., Stop 0522, Washington, DC 20250-0522.
    Comments will be available for inspection online at http://www.regulations.gov and in the Office of the Director, Loan Making 
Division, FSA, USDA, 1400 Independence Avenue SW., Stop 0522, 
Washington, DC 20250-0522, between 8 a.m. and 4:30 p.m., except 
holidays.

FOR FURTHER INFORMATION CONTACT: Russ Clanton; telephone: (202) 690-
0214. Persons with disabilities or who require alternative means for 
communication should contact the USDA Target Center at (202) 720-2600 
(voice).

SUPPLEMENTARY INFORMATION:

Background

    FSA provides agricultural credit to the Nation's farmers and 
ranchers through the FO Program. The Consolidated Farm and Rural 
Development Act of 1972 (CONACT, Pub. L. 92-419), as amended, 
authorizes FSA's FO Program. The FO Program is designed to finance the 
farm ownership needs of family farms for operators who meet the program 
eligibility requirements. Among other things, eligible applicants must 
be unable to obtain sufficient credit from other sources; have 
sufficient farming experience; have an acceptable credit history; and 
have adequate collateral for the proposed loan. (See 7 CFR 764.101 and 
764.152 for a full explanation of FO eligibility requirements.) FO 
funds may be used, among other purposes, to purchase a farm, enlarge an 
existing farm, construct new farm buildings or improve structures, pay 
closing costs, and promote soil and water conservation and protection. 
(See 7 CFR 764.151 for a complete list of FO funds uses.) Throughout 
this rule, any reference to ``farm'' or ``farmer'' also includes 
``ranch'' or ``rancher,'' respectively; in this document, the word 
``operator'' refers to farmers who operate a farm.
    FSA has conducted a Direct ML Program for OLs since January 2013 
and has made 16,842 MLs to farmers since inception and provided MLs 
totaling $66.1 million dollars in FY 2013, $98.3 million in FY 2014, 
and $209.4 million in FY 2015 and the first quarter of FY 2016 (loan 
amounts are as of January 13, 2016). The Direct ML Program has seen 
explosive growth and helped to fill a need for financing of small farm 
operations, many of them to beginning or underserved farmers. Following 
the success of the Direct ML Program for direct OLs, FSA has decided to 
expand the ML Program to add direct FOs to reach more beginning farmers 
and farmers with small farms.
    FSA evaluated the unique needs of small farm operations and 
identified unintended barriers to applying for FOs of smaller loan 
amounts. FSA is simplifying the application process and adding 
flexibility for meeting loan eligibility in order to encourage their 
participation. FSA is creating the new DFOML application process within 
the existing FO Program framework, and will use existing FO 
appropriations to focus on the financing needs of small farm 
operations.
    FSA is implementing the DFOML to provide credit in an aggregate 
amount not to exceed $50,000. The $50,000 limit for MLs is established 
as specified in section 5106 of the Agricultural Act of 2014 (Pub. L. 
113-79, referred to as the 2014 Farm Bill), amending the CONACT (7 
U.S.C. 1943), to set the limit of $50,000 for the total ML indebtedness 
outstanding at any one time to any single borrower. Therefore, eligible 
farmers cannot have more than $50,000 in direct ML debt in each of the 
direct FO and OL programs upon loan closing. It is intended that 
smaller loan amounts will help small operations, such as beginning 
farmers, truck farmers, niche-type operations, and those who have 
demonstrated financial and business experience through the successful 
repayment of a Youth Loan (YL). These farmers tend to have difficulty 
obtaining real estate financing from lenders who are unlikely to loan 
such small amounts, particularly to non-typical operations. FSA is 
providing credit to these farmers at reasonable rates and terms that 
are significant because financing costs have a greater impact on 
smaller startup operations, which typically have a tighter cash flow.
    Similar to the OL ML, under 7 CFR 761.104(e) DFOML applicants can 
provide other forms of documentation, such as operator's sales 
receipts, financial statements, contracts, and tax returns. This change 
will be helpful for operations where past yields have little bearing on 
the projected plan, such as vegetable operators who plan short term and 
grow different crops to meet current demand; operators who produce 
crops using measures such as rows or partial rows versus acres; or 
operators who

[[Page 3290]]

grow crops that sell in volumes such as bunches. In some of these cases 
it will be impracticable, burdensome, and often irrelevant for the 
farmer to demonstrate accurate yields, especially if a variety of 
produce is harvested and then sold to the public only hours later. In 
such cases, past reliable history of income and expenses or cash 
receipts may be more useful in projecting the future production revenue 
of a field, greenhouse, or operation. Also, if an operator is changing 
the crop from year to year to meet changing market demands, then 
production for the past 2 or 3 years may not be applicable to the 
production model. This modification allows FSA to assist operations 
that otherwise may have difficulty meeting or documenting production 
and yield history and will provide sufficient information for a loan 
official to determine eligibility and feasibility.
    Additionally, repayment terms are being modified for these smaller 
FOs to allow borrowers to more quickly build equity in their farm real 
estate according to their repayment ability. That, combined with the 
already established flexibility for the farmers to make loan payments 
when they sell their products, allows farmers to more efficiently 
manage their income and resources.
    This rule modifies the FO eligibility requirements in 7 CFR 764.152 
to allow farmers who have successfully repaid an FSA financed YL to use 
the term of that loan toward the 3 years farm management experience for 
a DFOML. Each year of the YL term can be applied toward meeting the 
requirement for 3 years of farm management experience.
    The repayment terms of DFOML will differ from the regular FO 
Program; the maximum number of years for a borrower to pay back a DFOML 
is 25 years. For smaller real estate loans, there is not a large 
difference in the payment amount between the annual installments under 
DFOML's maximum 25-year amortization schedule and the regular FO's 
maximum 40 year amortization. However; the interest paid on a 40 year 
amortization is considerably larger than on the 25-year schedule. The 
borrowers will benefit from paying less total interest on the life of 
their loan. The average number of years for an FO to be outstanding is 
13 years, with loans being either paid in full or refinanced with 
another lender within this timeframe. Some borrowers do remain with FSA 
for the duration of their FO term. The 25-year maximum is reasonable 
for assisting our borrowers to purchase land and to build equity in the 
property. The benefits will help small operations endure through the 
start-up years, demonstrate capacity, build equity, move up to FSA 
regular loan programs, and eventually graduate to commercial credit.
    Our role in providing supervised credit is to help borrowers 
prepare for the transition to conventional credit. While a DFOML will 
reduce the paperwork burden on applicants and FSA staff, it will not 
reduce the amount of oversight provided by FSA to these farmers. In 
fact, as a result of streamlining the application process, FSA will 
have more time to work on cash flow analysis, provide borrower training 
and ready these borrowers for transition into commercial credit.

ML Application Requirements and Application Processing

    This rule is revising 7 CFR 764.51 to add the requirements for the 
DFOML application. A complete DFOML application will consist of the 
following:
     A microloan application form (Sec.  764.51(b)(1));
     A balance sheet (Sec.  764.51(b)(9) and (d)(2)(ii));
     An operating plan (Sec.  764.51(b)(9));
     Applicable environmental information (Sec.  764.51(b)(7));
     Description of the applicant's farm training and 
experience (Sec.  764.51(b)(3));
     Verification of applicant's farm experience (Sec.  
764.51(d)(2)(v));
     Documentation that credit cannot be obtained elsewhere 
(Sec.  764.51(b)(6));
     Documents with regard to the property or option to 
purchase agreement (Sec.  764.51(b)(10));
     The credit report fee (Sec.  764.51(b)(11)); and
     Verification of non-farm income for repayment (Sec.  
764.51(d)(2)(iii)).
     In addition, if the applicant is an entity, the complete 
application will include entity and entity member information specified 
in Sec.  764.51(b)(2).
    The DFOML application form is the same one in use for applicants 
for Direct ML Program for OLs. This form is intended to capture most of 
the information needed to process an ML, including sections for the 
applicant to describe farm training and experience. It also reduces and 
simplifies the financial statement.
    Environmental information will still be handled through the county 
office process, involving FSA staff and NRCS staff, as applicable. This 
will not change from the current process followed for regular FOs.
    Verification of non-farm income will only be required if that 
income is necessary for a feasible plan and sufficient cash flow for 
debt repayment. This is a change from the existing FO application 
process, as income is always verified as specified in Sec.  
764.51(b)(8). If it is necessary to verify debt, debts will be verified 
through the credit bureau reporting system.
    This information will be sufficient for a loan official to 
determine eligibility and feasibility. The DFOML includes an 
abbreviated loan assessment, Farm Business Plan credit presentation, 
and year-end analysis, which will better parallel components of a small 
operation. Additionally, since these real estate loans will be $50,000 
or less, the appraisal requirement may be met by an authorized agency 
official's evaluation that establishes the value of the real estate. An 
acceptable evaluation for DFOML will include an identification of the 
location of the property; a description of the property, including any 
improvements and its current and projected use; confirmation that the 
property was physically inspected and the date of the inspection; 
description of the analysis performed and supporting information used 
to determine the property's market value; an effective date of the 
evaluation and signature of the preparer.
    The reduced requirements will allow loan staff to focus on 
paperwork that is valuable in the analysis of these smaller operations, 
instead of reviewing the required forms and paperwork necessary with 
larger, more complex real estate loans. The lower loan limit helps 
mitigate much of the risk inherent with less documentation and non-
typical agricultural operations.
    For incomplete applications, FSA will follow existing direct loan 
processing procedures. Following current procedures, FSA will inform 
the applicant, through written correspondence, of any missing items 
needed to complete the application prior to established regulatory 
deadlines.

Eligibility

    Since DFOMLs are FOs, applicants will be subject to existing FO 
eligibility requirements. However, FSA added flexibility for YL 
borrowers in meeting the managerial ability requirement. Current 
regulations in 7 CFR 764.152(d) require that an FO applicant show the 
ability to manage a farm operation; the applicant must have 
participated in the business operations of a farm for at least 3 years 
out of the 10 years prior to the date the application is submitted. One 
of these three years can be substituted with the following experience:
     Postsecondary education in agriculture business, 
horticulture, animal science, agronomy, or other agricultural related 
fields,
     Significant business management experience, or

[[Page 3291]]

     Leadership or management experience while serving in any 
branch of the military.
    As noted above, the current revisions add flexibility for farmers 
who have successfully repaid an FSA financed YL to use the term of that 
loan toward the 3 years farm management experience for a DFOML.
    Except as noted in the rule, FO eligibility and feasibility 
criteria will remain consistent with existing programs in FLP, but the 
small loan amount will make the extensive paperwork requirements 
unnecessary. The farm operation will be required to project a positive 
cash flow, and servicing options will remain consistent with existing 
FLP options. The DFOML process will simply broaden the reach of FSA's 
FO Program by providing flexibility that allows FSA loan programs to be 
more attractive to small and beginning farmers.
    This rule modifies the ML definition, in 7 CFR 761.2, to include FO 
uses of funds; the prior ML definition only addressed direct OLs. 
Additionally, this rule creates a distinction between MLs used for OL 
and FO purposes in areas in which the application process, eligibility, 
and security requirements differ.
    FSA has considered several options in creating the DFOML and has 
weighed the underwriting risks against the opportunity to improve the 
FO Program. The underwriting risks will be limited due to the lower 
loan amounts and the smaller pool of applicants who are able to benefit 
from DFOML. The benefits to beginning and small farmers to apply for 
DFOML clearly outweigh any perceived risks or barriers.

Security Requirements

    As specified in Sec.  764.101(c) and (e), MLs are exempted from the 
requirements of obtaining 150 percent security and taking a lien on 
non-essential assets. As specified in Sec.  764.155(b)(1), an ML made 
for FO purposes, may be secured only by the real estate being purchased 
or improved, as long as it meets the 100 percent security requirement. 
This is consistent with the security requirements in place for existing 
OL MLs.

Applicability of Other Regulatory Requirements

    Other existing and applicable regulatory requirements pertaining to 
development of operating plans, loan processing and closing, use of 
loan funds, loan servicing, and environmental requirements not 
specifically amended by this rule will apply to MLs, like other FOs.

Miscellaneous Changes

    In addition to the changes discussed above, this rule is making 
conforming minor changes to correct the ML limit to be consistently 
$50,000 and to otherwise add MLs to FOs in the regulations.

Notice and Comment

    In general, the Administrative Procedure Act (5 U.S.C. 553) 
requires that a notice of proposed rulemaking be published in the 
Federal Register and interested persons be given an opportunity to 
participate in the rulemaking through submission of written data, 
views, or arguments with or without opportunity for oral presentation, 
except when the rule involves a matter relating to public property, 
loans, grants, benefits, or contracts. This rule involved matters 
relating to loans and is therefore being published as a final rule. 
Although FSA is not required to provide the opportunity for comments on 
this rule, we are requesting public comments for 90 days to get input 
on the changes.

Effective Date

    The Administrative Procedure Act (5 U.S.C. 553) provides generally 
that before rules are issued by Government agencies, the rule is 
required to be published in the Federal Register, and the required 
publication of a substantive rule is to be not less than 30 days before 
its effective date. One of the exceptions is when the agency finds good 
cause for not delaying the effective date. Most FO loans are 
established at the beginning of the calendar year, therefore, 
implementing this rule quickly will benefit beginning and small farms 
starting in 2016 instead of having to wait for 2017. Using the 
administrative procedure provisions in 5 U.S.C. 553, FSA finds that 
there is good cause for making this rule effective less than 30 days 
after publication in the Federal Register. Therefore, this final rule 
is effective when published in the Federal Register.

Executive Orders 12866 and 13563

    Executive Order 12866, ``Regulatory Planning and Review,'' and 
Executive Order 13563, ``Improving Regulation and Regulatory Review,'' 
direct agencies to assess all costs and benefits of available 
regulatory alternatives and, if regulation is necessary, to select 
regulatory approaches that maximize net benefits (including potential 
economic, environmental, public health and safety effects, distributive 
impacts, and equity). Executive Order 13563 emphasized the importance 
of quantifying both costs and benefits, of reducing costs, of 
harmonizing rules, and of promoting flexibility.
    The Office of Management and Budget (OMB) designated this rule as 
not significant under Executive Order 12866 and, therefore, OMB has not 
reviewed this final rule.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601-612), as amended by 
the Small Business Regulatory Enforcement Fairness Act of 1996 
(SBREFA), generally requires an agency to prepare a regulatory 
flexibility analysis of any rule whenever an agency is required by APA 
or any other law to publish a final rule, unless the agency certifies 
that the rule will not have a significant economic impact on a 
substantial number of small entities. This rule is not subject to the 
Regulatory Flexibility Act because it is exempt from notice and comment 
rulemaking requirements of the APA and no other law requires that a 
proposed rule be published for this rulemaking initiative.

Environmental Review

    The environmental impacts of this rule have been considered in a 
manner consistent with the provisions of the National Environmental 
Policy Act (NEPA, 42 U.S.C. 4321-4347), the regulations of the Council 
on Environmental Quality (40 CFR parts 1500-1508), and the FSA 
regulations for compliance with NEPA (7 CFR 799 and 7 CFR part 1940, 
subpart G). FSA concluded that simplifying the application process and 
adding flexibility for meeting loan eligibility requirements to 
encourage small farm operation participation in its FO program 
explained in this rule are administrative in nature and will not have a 
significant impact on the quality of the human environment either 
individually or cumulatively. The environmental responsibilities for 
each prospective applicant will not change from the current process 
followed for all FLP actions (7 CFR 1940.309). Therefore, FSA will not 
prepare an environmental assessment or environmental impact statement 
on this rule.

Executive Order 12372

    Executive Order 12372, ``Intergovernmental Review of Federal 
Programs,'' requires consultation with State and local officials. The 
objectives of the Executive Order are to foster an intergovernmental 
partnership and a strengthened Federalism, by relying on State and 
local processes for State and local government coordination and review 
of proposed Federal Financial

[[Page 3292]]

assistance and direct Federal development. For reasons set forth in the 
Notice to 7 CFR part 3015, subpart V (48 FR 29115, June 24, 1983), the 
programs and activities within this rule are excluded from the scope of 
Executive Order 12372.

Executive Order 12988

    This rule has been reviewed in accordance with Executive Order 
12988, ``Civil Justice Reform.'' The provisions of this rule will not 
have preemptive effect with respect to any State or local laws, 
regulations, or policies that conflict with such provision or which 
otherwise impede their full implementation. The rule will not have 
retroactive effect.

Executive Order 13132

    This rule has been reviewed under Executive Order 13132, 
``Federalism.'' The policies contained in this rule will not have any 
substantial direct effect on States, on the relationship between the 
Federal Government and the States, or on the distribution of power and 
responsibilities among the various levels of government. Nor would this 
rule impose substantial direct compliance costs on State and local 
governments. Therefore, consultation with the States is not required.

Executive Order 13175

    This rule has been reviewed in accordance with the requirements of 
Executive Order 13175, ``Consultation and Coordination with Indian 
Tribal Governments.'' Executive Order 13175 requires Federal agencies 
to consult and coordinate with tribes on a government-to-government 
basis on policies that have tribal implications, including regulations, 
legislative comments or proposed legislation, and other policy 
statements or actions that have substantial direct effects on one or 
more Indian tribes, on the relationship between the Federal Government 
and Indian tribes or on the distribution of power and responsibilities 
between the Federal Government and Indian tribes.
    FSA has assessed the impact of this rule on Indian tribes and 
determined that this rule does not, to our knowledge, have tribal 
implications that require tribal consultation under Executive Order 
13175. If a Tribe requests consultation, FSA will work with the USDA 
Office of Tribal Relations to ensure meaningful consultation is 
provided where changes, additions, and modifications identified in this 
rule are not expressly mandated by the 2014 Farm Bill.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandate Reform Act of 1995 (UMRA, Pub. L. 
104-4) requires Federal agencies to assess the effects of their 
regulatory actions on State, local, or Tribal governments or the 
private sector. Agencies generally must prepare a written statement, 
including a cost benefit analysis, for proposed and final rules with 
Federal mandates that may result in expenditures of $100 million or 
more in any 1 year 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 under the regulatory provisions of 
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) for State, 
local, or Tribal governments, or the private sector. Therefore, this 
rule is not subject to the requirements of sections 202 and 205 of 
UMRA.

Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
3501-3520), FSA described the Direct Farm Ownership Microloan (DFOML) 
information collection activities in the request for the renewal and 
revision of the 0260-0237, Direct Loan Making, notice published on 10/
07/2015, 80 FR 60614-60615. FSA will be using the existing approval for 
the forms to begin the DFOML collection under the 0560-0237, Direct 
Loan Making. Therefore, no change to the information collection was 
required in this rule.

E-Government Act Compliance

    FSA is committed to complying with the E-Government Act, to promote 
the use of the Internet and other information technologies to provide 
increased opportunities for citizen access to Government information 
and services, and for other purposes.

Federal Assistance Programs

    The title and number of the Federal assistance programs, as found 
in the Catalog of Federal Domestic Assistance, to which this final rule 
would apply is:

10.407 Farm Ownership Loans.

List of Subjects

7 CFR Part 761

    Accounting, Loan programs-agriculture, Rural areas.

7 CFR Part 764

    Agriculture, Disaster assistance, Loan programs-agriculture, 
Agricultural commodities, Livestock.

    For reasons discussed above, FSA amends 7 CFR chapter VII as 
follows:

PART 761--FARM LOAN PROGRAMS; GENERAL PROGRAM ADMINISTRATION

0
1. The authority citation for part 761 continues to read as follows:

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


0
2. Revise the definition of ``Microloan'' in Sec.  761.2(b) to read as 
follows:


Sec.  761.2  Abbreviations and definitions.

* * * * *
    (b) * * *
    Microloan means a type of OL or FO of $50,000 or less made using a 
reduced loan application. Direct MLs are made under modified 
eligibility and security requirements.
* * * * *

PART 764--DIRECT LOAN MAKING

0
3. The authority citation for part 764 continues to read as follows:

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


Sec.  764.1  [Amended]

0
4. In Sec.  764.1(b)(1), add the phrase ``ML and'' immediately after 
``including''.

0
5. Amend Sec.  764.51 as follows:
0
a. In paragraph (c) introductory text, add the words ``for OL 
purposes'' immediately after ``request'';
0
b. Redesignate paragraphs (d), (e), and (f) as paragraphs (e), (f), and 
(g); and
0
c. Add a new paragraph (d).
    The addition reads as follows:


Sec.  764.51  Introduction.

* * * * *
    (d) For an ML request for FO purposes, all of the following 
criteria must be met:
    (1) The loan requested is:
    (i) To pay for any authorized purpose under the FO Program, which 
are specified in Sec.  764.151; and
    (ii) $50,000 or less and the applicant's total outstanding Agency 
FO debt at the time of loan closing will be $50,000 or less,
    (2) The applicant must submit the following:
    (i) Items specified in paragraphs (b)(1), (2), (3), (6), (7), (9), 
(10), and (11) of this section;
    (ii) Financial and production records for the most recent 
production cycle, if available and practicable to project the cash flow 
of the operating cycle; and

[[Page 3293]]

    (iv) Verification of all non-farm income relied upon for repayment; 
and
    (v) Verification of applicant's farm experience;
    (3) The Agency may require an ML applicant to submit any other 
information listed in paragraph (b) of this section upon request when 
necessary to make a determination on the loan application.
* * * * *

0
6. Amend Sec.  764.101 as follows:
0
a. In paragraph (i)(3), remove ``MLs'' and add the phrase ``MLs, made 
for OL purposes,'' in its place; and
0
b. Revise paragraph (i)(4).
    The revision reads as follows:


Sec.  764.101  General eligibility requirements.

* * * * *
    (i) * * *
    (4) Alternatives for MLs made for OL purposes. Applicants for MLs 
made for OL purposes, also may demonstrate managerial ability by one of 
the following:
* * * * *

0
7. Revise Sec.  764.107(a) to read as follows:


Sec.  764.107  General appraisal requirements.

    (a) Establishing value for real estate. The value of real estate 
will be established by an appraisal completed in accordance with Sec.  
761.7 of this chapter, except that for MLs made for FO purposes, the 
appraisal requirement may be satisfied by an evaluation by an 
authorized agency official that establishes the value of the real 
estate.
* * * * *

0
8. Amend Sec.  764.152 as follows:
0
a. Redesignate paragraph (e) as paragraph (f); and
0
b. Add a new paragraph (e).
    The addition reads as follows:


Sec.  764.152  Eligibility requirements.

* * * * *
    (e) For an ML made for FO purposes, if an ML applicant has 
successfully repaid an FSA financed youth loan, the term of that loan 
may be used toward the 3 years of management experience required for a 
FO direct loan.
* * * * *

0
9. Amend Sec.  764.154 as follows:
0
a. In paragraph (b), remove the words ``The Agency'' and add the phrase 
``Except for MLs made for FO purposes, the Agency'' in their place.
0
b. Add paragraph (b)(1) and add and reserve paragraph (b)(2).
    The addition reads as follows:


Sec.  764.154  Rates and terms.

* * * * *
    (b) * * *
    (1) For MLs made for FO purposes the Agency schedules repayment of 
an FO based on the applicant's ability to repay and the useful life of 
the security. In no event will the term be more than 25 years from the 
date of the note.
    (2) [Reserved]
* * * * *

0
10. In Sec.  764.155, add paragraph (b)(1) to read as follows; and add 
and reserve paragraph (b)(2).


Sec.  764.155  Security requirements.

* * * * *
    (b) * * *
    (1) An ML made for FO purposes, may be secured only by the real 
estate being purchased or improved, as long as its value is at least 
100 percent of the loan amount.
    (2) [Reserved]
* * * * *

0
11. Amend Sec.  764.203 as follows:
0
a. Redesignate paragraph (c) as paragraph (d); and
0
b. Add a new paragraph (c).
    The addition reads as follows:


Sec.  764.203  Limitation.

* * * * *
    (c) Downpayment loans made as an ML for FO purposes may not exceed 
$50,000.
* * * * *


Sec.  764.251  [Amended]

0
12. In Sec.  764.251(a) introductory text, add the phrase ``used for OL 
purposes'' immediately after ``ML''.


Sec.  764.255  [Amended]

0
13. In Sec.  764.255(c) introductory text, add ``used for OL purposes'' 
immediately after ``MLs''.

Val Dolcini,
Administrator, Farm Service Agency.
[FR Doc. 2016-01038 Filed 1-20-16; 8:45 am]
 BILLING CODE 3410-05-P