7 Usc 2001

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[Laws in effect as of January 3, 2005]
[Document not affected by Public Laws enacted between
January 3, 2005 and April 21, 2006]
[CITE: 7USC2001]

TITLE 7--AGRICULTURE

CHAPTER 50--AGRICULTURAL CREDIT

SUBCHAPTER IV--ADMINISTRATIVE PROVISIONS

Sec. 2001. Debt restructuring and loan servicing

(a) In general

The Secretary shall modify delinquent farmer program loans made or
insured under this chapter, or purchased from the lender or the Federal
Deposit Insurance Corporation under section 1929b of this title, to the
maximum extent possible--
(1) to avoid losses to the Secretary on such loans, with
priority consideration being placed on writing-down the loan
principal and interest (subject to subsections (d) and (e) of this
section), and debt set-aside (subject to subsection (e) of this
section), whenever these procedures would facilitate keeping the
borrower on the farm or ranch, or otherwise through the use of
primary loan service programs as provided in this section; and
(2) to ensure that borrowers are able to continue farming or
ranching operations.

(b) Eligibility

To be eligible to obtain assistance under subsection (a) of this
section--
(1) the delinquency must be due to circumstances beyond the
control of the borrower, as defined in regulations issued by the
Secretary, except that the regulations shall require that, if the
value of the assets calculated under subsection (c)(2)(A)(ii) of
this section that may be realized through liquidation or other
methods would produce enough income to make the delinquent loan
current, the borrower shall not be eligible for assistance under
subsection (a) of this section;
(2) the borrower must have acted in good faith with the
Secretary in connection with the loan as defined in regulations
issued by the Secretary;
(3) the borrower must present a preliminary plan to the
Secretary that contains reasonable assumptions that demonstrate that
the borrower will be able to--
(A) meet the necessary family living and farm operating
expenses; and
(B) service all debts, including those of the loans
restructured; and

(4) the loan, if restructured, must result in a net recovery to
the Federal Government, during the term of the loan as restructured,
that would be more than or equal to the net recovery to the Federal
Government from an involuntary liquidation or foreclosure on the
property securing the loan.

(c) Restructuring determinations

(1) Determination of net recovery

In determining the net recovery from the involuntary liquidation
of a loan under this section, the Secretary shall calculate--
(A) the recovery value of the collateral securing the loan,
in accordance with paragraph (2); and
(B) the value of the restructured loan, in accordance with
paragraph (3).

(2) Recovery value

For the purpose of paragraph (1), the recovery value of the
collateral securing the loan shall be based on--
(A)(i) the amount of the current appraised value of the
interests of the borrower in the property securing the loan;
plus
(ii) the value of the interests of the borrower in all other
assets that are--
(I) not essential for necessary family living expenses;
(II) not essential to the operation of the farm; and
(III) not exempt from judgment creditors or in a
bankruptcy action under Federal or State law; less

(B) the estimated administrative, legal, and other expenses
associated with the liquidation and disposition of the loan and
collateral, including--
(i) the payment of prior liens;
(ii) taxes and assessments, depreciation, management
costs, the yearly percentage decrease or increase in the
value of the property, and lost interest income, each
calculated for the average holding period for the type of
property involved;
(iii) resale expenses, such as repairs, commissions, and
advertising; and
(iv) other administrative and attorney's costs; plus

(C) the value, as determined by the Secretary, of any
property not included in subparagraph (A)(i) if the property is
specified in any security agreement with respect to such loan
and the Secretary determines that the value of such property
should be included for purposes of this section.

(3) Value of the restructured loan

(A) In general

For the purpose of paragraph (1), the value of the
restructured loan shall be based on the present value of
payments that the borrower would make to the Federal Government
if the terms of such loan were modified under any combination of
primary loan service programs to ensure that the borrower is
able to meet such obligations and continue farming operations.

(B) Present value

For the purpose of calculating the present value referred to
in subparagraph (A), the Secretary shall use a discount rate of
not more than the current rate on 90-day Treasury bills.

(C) Cash flow margin

For the purpose of assessing under subparagraph (A) the
ability of a borrower to meet debt obligations and continue
farming operations, the Secretary shall assume that the borrower
needs up to 110 percent of the amount indicated for payment of
farm operating expenses, debt service obligations, and family
living expenses.

(4) Notification

Within 90 days after receipt of a written request for
restructuring from the borrower, the Secretary shall--
(A) make the calculations specified in paragraphs (2) and
(3);
(B) notify the borrower in writing of the results of such
calculations; and
(C) provide documentation for the calculations.

(5) Restructuring of loans

If the value of the restructured loan is greater than or equal
to the recovery value, the Secretary shall, within 45 days after
notifying the borrower of such calculations, offer to restructure
the loan obligations of the borrower under this chapter through
primary loan service programs that would enable the borrower to meet
the obligations (as modified) under the loan and to continue the
farming operations of the borrower. If the borrower accepts such
offer, within 45 days after receipt of notice of acceptance, the
Secretary shall restructure the loan accordingly.

(6) Termination of loan obligations

The obligations of a borrower to the Secretary under a loan
shall terminate if--
(A) the borrower satisfies the requirements of paragraphs
(1) and (2) of subsection (b) of this section;
(B) the value of the restructured loan is less than the
recovery value; and
(C) not later than 90 days after receipt of the notification
described in paragraph (4)(B), the borrower pays (or obtains
third-party financing to pay) the Secretary an amount equal to
the current market value.

(7) Negotiation of appraisal

(A) In general

In making a determination concerning restructuring under
this subsection, the Secretary, at the request of the borrower,
shall enter into negotiations concerning appraisals required
under this subsection with the borrower.

(B) Independent appraisal

If the borrower, based on a separate current appraisal,
objects to the decision of the Secretary regarding an appraisal,
the borrower and the Secretary shall mutually agree, to the
extent practicable, on an independent appraiser who shall
conduct another appraisal of the borrower's property. The
average of the two appraisals that are closest in value shall
become the final appraisal under this paragraph. The borrower
and the Secretary shall each pay one-half of the cost of the
independent appraisal.

(d) Principal and interest write-down

(1) In general

(A) Priority consideration

In selecting the restructuring alternatives to be used in
the case of a borrower who has requested restructuring under
this section, the Secretary shall give priority consideration to
the use of principal and interest write-down, except that this
procedure shall not be given first priority in the case of a
borrower unless other creditors of such borrower (other than
those creditors who are fully collateralized) representing a
substantial portion of the total debt of the borrower held by
such creditors, agree to participate in the development of the
restructuring plan or agree to participate in a State mediation
program.

(B) Failure of creditors to agree

Failure of creditors to agree to participate in the
restructuring plan or mediation program shall not preclude the
use of principal and interest write-down by the Secretary if the
Secretary determines that this restructuring alternative results
in the least cost to the Secretary.

(2) Participation of creditors

Before eliminating the option to use debt write-down in the case
of a borrower, the Secretary shall make a reasonable effort to
contact the creditors of such borrower, either directly or through
the borrower, and encourage such creditors to participate with the
Secretary in the development of a restructuring plan for the
borrower.

(e) Shared appreciation arrangements

(1) In general

As a condition of restructuring a loan in accordance with this
section, the borrower of the loan may be required to enter into a
shared appreciation arrangement that requires the repayment of
amounts written off or set aside.

(2) Terms

Shared appreciation agreements shall have a term not to exceed
10 years, and shall provide for recapture based on the difference
between the appraised values of the real security property at the
time of restructuring and at the time of recapture.

(3) Percentage of recapture

The amount of the appreciation to be recaptured by the Secretary
shall be 75 percent of the appreciation in the value of such real
security property if the recapture occurs within 4 years of the
restructuring, and 50 percent if the recapture occurs during the
remainder of the term of the agreement.

(4) Time of recapture

Recapture shall take place at the end of the term of the
agreement, or sooner--
(A) on the conveyance of the real security property;
(B) on the repayment of the loans; or
(C) if the borrower ceases farming operations.

(5) Transfer of title

Transfer of title to the spouse of a borrower on the death of
such borrower shall not be treated as a conveyance for the purpose
of paragraph (4).

(6) Notice of recapture

Beginning with fiscal year 2000 not later than 12 months before
the end of the term of a shared appreciation arrangement, the
Secretary shall notify the borrower involved of the provisions of
the arrangement.

(7) Financing of recapture payment

(A) In general

The Secretary may amortize a recapture payment owed to the
Secretary under this subsection.

(B) Term

The term of an amortization under this paragraph may not
exceed 25 years.

(C) Interest rate

(i) In general

The interest rate applicable to an amortization under
this paragraph may not exceed the rate applicable to a loan
to reacquire homestead property less 100 basis points.
(ii) Existing amortizations and loans

The interest rate applicable to an amortization or loan
made by the Secretary before October 28, 2000, to finance a
recapture payment owed to the Secretary under this
subsection may not exceed the rate applicable to a loan to
reacquire homestead property less 100 basis points.

(D) Reamortization

(i) In general

The Secretary may modify the amortization of a recapture
payment referred to in subparagraph (A) of this paragraph on
which a payment has become delinquent by using loan service
tools under section 1991(b)(3) of this title if--
(I) the default is due to circumstances beyond the
control of the borrower; and
(II) the borrower acted in good faith (as determined
by the Secretary) in attempting to repay the recapture
amount.
(ii) Limitations

(I) Term of reamortization

The term of a reamortization under this subparagraph
may not exceed 25 years from the date of the original
amortization agreement.
(II) No reduction or principal or unpaid
interest due

A reamortization of a recapture payment under this
subparagraph may not provide for reducing the
outstanding principal or unpaid interest due on the
recapture payment.

(f) Determination to restructure

If the appeal process results in a determination that a loan is
eligible for restructuring, the Secretary shall restructure the loan in
the manner consistent with this section, taking into consideration the
restructuring recommendations, if any, of the appeals officer.

(g) Prerequisites to foreclosure or liquidation

No foreclosure or other similar actions shall be taken to liquidate
any loan determined to be ineligible for restructuring by the Secretary
under this section--
(1) until the borrower has been given the opportunity to appeal
such decision; and
(2) if the borrower appeals, the appeals process has been
completed, and a determination has been made that the loan is
ineligible for restructuring.

(h) Time limits for restructuring

Once an appeal has been filed under section 1983b \1\ of this title,
a decision shall be made at each level in the appeals process within 45
days after the receipt of the appeal or request for further review.
---------------------------------------------------------------------------
\1\ See References in Text note below.
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(i) Notice of ineligibility for restructuring

(1) In general

A notice of ineligibility for restructuring shall be sent to the
borrower by registered or certified mail within 15 days after such
determination.

(2) Contents

The notice required under paragraph (1) shall contain--
(A) the determination and the reasons for the determination;
(B) the computations used to make the determination,
including the calculation of the recovery value of the
collateral securing the loan; and
(C) a statement of the right of the borrower to appeal the
decision to the appeals division, and to appear before a hearing
officer.

(j) Independent appraisals

An appeal filed with the appeals division under section 1983b of
this title may include a request by the borrower for an independent
appraisal of any property securing the loan. On such request, the
appeals division shall present the borrower with a list of three
appraisers approved by the county supervisor, from which the borrower
shall select an appraiser to conduct the appraisal, the cost of which
shall be borne by the borrower. The results of such appraisal shall be
considered in any final determination concerning the loan. A copy of any
appraisal made under this paragraph shall be provided to the borrower.

(k) Partial liquidations

If partial liquidations are performed (with the prior consent of the
Secretary) as part of loan servicing by a guaranteed lender under this
chapter, the Secretary shall not require full liquidation of a
delinquent loan in order for the lender to be eligible to receive
payment on losses.

(l) Disposition of normal income security

For purposes of subsection (b)(2) of this section, if a borrower--
(1) disposed of normal income security prior to October 14,
1988, without the consent of the Secretary; and
(2) demonstrates that--
(A) the proceeds were utilized to pay essential household
and farm operating expenses; and
(B) the borrower would have been entitled to a release of
income proceeds by the Secretary if the regulations in effect on
November 28, 1990, had been in effect at the time of the
disposition,

the Secretary shall not consider the borrower to have acted without good
faith to the extent of the disposition.

(m) Only 1 write-down or net recovery buy-out per borrower for loan made
after January 6, 1988

(1) In general

The Secretary may provide for any one borrower not more than 1
write-down or net recovery buy-out under this section with respect
to all loans made to the borrower after January 6, 1988.

(2) Special rule

For purposes of paragraph (1), the Secretary shall treat any
loan made on or before January 6, 1988, with respect to which a
restructuring, write-down, or net recovery buy-out is provided under
this section after such date, as a loan made after such date.

(n) Liquidation of assets

The Secretary may not use the authority provided by this section to
reduce or terminate any portion of the debt of the borrower that the
borrower could pay through the liquidation of assets (or through the
payment of the loan value of the assets, if the loan value is greater
than the liquidation value) described in subsection (c)(2)(A)(ii) of
this section.

(o) Lifetime limitation on debt forgiveness per borrower

The Secretary may provide not more than $300,000 in principal and
interest forgiveness under this section per borrower.

(Pub. L. 87-128, title III, Sec. 353, as added Pub. L. 100-233, title
VI, Sec. 615(a), Jan. 6, 1988, 101 Stat. 1678; amended Pub. L. 101-624,
title XVIII, Sec. 1816(a)-(d), (f)-(h), Nov. 28, 1990, 104 Stat. 3826-
3828; Pub. L. 102-237, title V, Sec. 501(h), Dec. 13, 1991, 105 Stat.
1868; Pub. L. 104-127, title VI, Secs. 645, 661(j), Apr. 4, 1996, 110
Stat. 1103, 1107; Pub. L. 105-277, div. A, Sec. 101(a) [title VIII,
Secs. 807, 808], Oct. 21, 1998, 112 Stat. 2681, 2681-40; Pub. L. 106-31,
title III, Sec. 3019(b), May 21, 1999, 113 Stat. 99; Pub. L. 106-387,
Sec. 1(a) [title VIII, Sec. 818(a)], Oct. 28, 2000, 114 Stat. 1549,
1549A-58; Pub. L. 107-171, title V, Sec. 5314, May 13, 2002, 116 Stat.
347.)

References in Text

For definition of ``this chapter'', referred to in subsecs. (a),
(c)(5), and (k), see note set out under section 1921 of this title.
Section 1983b of this title, referred to in subsec. (h), was
repealed by Pub. L. 103-354, title II, Sec. 281(c), Oct. 13, 1994, 108
Stat. 3233.

Amendments

2002--Subsec. (e)(7)(D). Pub. L. 107-171 added subpar. (D).
2000--Subsec. (e)(7). Pub. L. 106-387 added par. (7).
1999--Subsec. (c)(3)(C). Pub. L. 106-31 substituted ``110 percent''
for ``100 percent''.
1998--Subsec. (c)(3)(C). Pub. L. 105-277, Sec. 101(a) [title VIII,
Sec. 808], substituted ``100 percent'' for ``110 percent''.
Subsec. (e)(6). Pub. L. 105-277, Sec. 101(a) [title VIII, Sec. 807],
added par. (6).
1996--Subsec. (c)(3)(C). Pub. L. 104-127, Sec. 645(1)(A), added
subpar. (C) and struck out heading and text of former subpar. (C). Text
read as follows:
``(i) Assumption.--For the purpose of assessing under subparagraph
(A) the ability of a borrower to meet debt obligations and continue
farming operations, the Secretary shall assume that the borrower needs
up to 105 percent of the amount indicated for payment of debt
obligations.
``(ii) Available income.--If an amount up to 105 percent of the debt
payments of the borrower has been earmarked for such payments, the
Secretary shall consider the income of the borrower to be adequate to
meet the debt obligations of the borrower.''
Subsec. (c)(6). Pub. L. 104-127, Sec. 645(1)(B), added par. (6) and
struck out former par. (6), which specified required conditions for
termination of loan obligations, limited applicability of good faith
requirement, authorized recapture by requiring borrower to enter into
agreement before terminating loan obligations, and provided for
limitation on recapture amount and treatment of intrafamily transfers.
Subsec. (k). Pub. L. 104-127, Sec. 645(2), (3), redesignated subsec.
(l) as (k) and struck out heading and text of former subsec. (k). Text
read as follows: ``The creditworthiness of, or the adequacy of
collateral offered by, any borrower whose loan obligations are
restructured under this section shall be determined without regard to
such restructuring.''
Subsec. (l). Pub. L. 104-127, Sec. 661(j), struck out ``and
subparagraphs (A)(i) and (C)(i) of section 1985(e)(1) of this title,''
before ``if a borrower'' in introductory provisions.
Pub. L. 104-127, Sec. 645(3), redesignated subsec. (m) as (l).
Subsecs. (m) to (p). Pub. L. 104-127, Sec. 645(3), redesignated
subsecs. (m) to (p) as (l) to (o), respectively.
1991--Subsec. (c)(6)(A)(ii). Pub. L. 102-237, Sec. 501(h)(1),
substituted ``November 28, 1990'' for ``the date of enactment of this
paragraph''.
Subsec. (m). Pub. L. 102-237, Sec. 501(h)(2), substituted ``section
1985(e)(1)'' for ``section 1985(e)(1)(A)''.
1990--Subsec. (b)(1). Pub. L. 101-624, Sec. 1816(a), inserted before
semicolon at end ``, except that the regulations shall require that, if
the value of the assets calculated under subsection (c)(2)(A)(ii) of
this section that may be realized through liquidation or other methods
would produce enough income to make the delinquent loan current, the
borrower shall not be eligible for assistance under subsection (a) of
this section''.
Subsec. (c)(2)(A). Pub. L. 101-624, Sec. 1816(b)(1), amended subpar.
(A) generally. Prior to amendment, subpar. (A) read as follows: ``the
amount of the current appraised value of the property securing the loan;
less''.
Subsec. (c)(2)(B)(iv). Pub. L. 101-624, Sec. 1816(b)(2)(A),
substituted ``costs; plus'' for ``costs.''
Subsec. (c)(2)(C). Pub. L. 101-624, Sec. 1816(b)(2)(B), added
subpar. (C).
Subsec. (c)(3)(C). Pub. L. 101-624, Sec. 1816(c), added subpar. (C).
Subsec. (c)(4). Pub. L. 101-624, Sec. 1816(d), substituted ``90''
for ``60'' in introductory provisions.
Subsec. (c)(6). Pub. L. 101-624, Sec. 1816(f), amended par. (6)
generally. Prior to amendment, par. (6) read as follows: ``If the value
of the restructured loan is less than the recovery value and if, within
45 days after receipt of the notification described in paragraph (4)(B),
the borrower pays (or obtains third-party financing to pay) the
Secretary an amount equal to the recovery value, the obligations of the
borrower to the Secretary under the loan shall terminate, except that
the Secretary may require, as a condition of such termination of loan
obligations, that the borrower enter into an agreement with the
Secretary if the borrower sells or otherwise conveys the real property
used to secure such loan within 2 years after the date of such
agreement. Any such agreement shall provide for the recapture of part or
all of the difference between the recovery value of the loan and the
fair market value (on the date of such agreement) of the property
securing the loan if the borrower realizes a gain on the sale or
conveyance over the amount of the recovery value of the loan. In no
event shall any such agreement provide for recapture of an amount that
exceeds the difference between such recovery value and the fair market
value of the property securing the loan on the date of such agreement.''
Subsec. (c)(7). Pub. L. 101-624, Sec. 1816(g), added par. (7).
Subsecs. (l) to (p). Pub. L. 101-624, Sec. 1816(h), added subsecs.
(l) to (p).

Effective Date of 1996 Amendment

Amendment by section 645(1) of Pub. L. 104-127 effective 90 days
after Apr. 4, 1996, and amendment by sections 645(2), (3) and 661(j) of
Pub. L. 104-127 effective Apr. 4, 1996, see section 663(a), (b) of Pub.
L. 104-127, set out as a note under section 1922 of this title.

Effective Date of 1991 Amendment

Amendment by Pub. L. 102-237 effective as if included in the
provision of the Food, Agriculture, Conservation, and Trade Act of 1990,
Pub. L. 101-624, to which the amendment relates, see section 1101(b)(3)
of Pub. L. 102-237, set out as a note under section 1421 of this title.

Effective Date of 1990 Amendment

Section 1861 of title XVIII of Pub. L. 101-624 provided that:
``(a) In General.--Except as otherwise provided in this title, this
title and the amendments made by this title [enacting sections 1981f and
2006a to 2006e of this title, section 2076a of Title 12, Banks and
Banking, and section 494 of Title 25, Indians, amending this section,
sections 1924, 1927, 1933, 1934, 1942, 1946, 1981, 1981d, 1982, 1983,
1983a, 1983b, 1985, 1991, 1997, 2003, and 5106 of this title, section
3132 of Title 5, Government Organization and Employees, sections 2019,
2075, 2077, 2218, 2252, 2254, 2277a-5, 2277a-9, 2277a-10, 2277a-14,
2278a-6, 2279aa, and 2279aa-11 of Title 12, and section 492 of Title 25,
enacting provisions set out as notes under section 1981f of this title
and section 2001 of Title 12, amending provisions set out as a note
under section 1985 of this title, and repealing provisions set out as a
note preceding section 1961 of this title] shall become effective on the
date of enactment of this Act [Nov. 28, 1990].
``(b) Notice of Debt Settlement Programs.--The amendment made by
section 1807(1) of this Act [amending section 1981d(b)(1) of this title]
shall become effective 120 days after the date of enactment of this Act
[Nov. 28, 1990].
``(c) Debt Restructuring and Loan Servicing.--
``(1) In general.--Except as provided in section
353(c)(6)(A)(ii) of the Consolidated Farm and Rural Development Act
[7 U.S.C. 2001(c)(6)(A)(iii)] (as added by section 1816(f) of this
Act) and in paragraph (3) of this subsection, section 1816 of this
Act and the amendments made by such section 1816 [amending this
section and section 1985 of this title] shall apply to new
applications submitted under section 353 of the Consolidated Farm
and Rural Development Act (7 U.S.C. 2001) on or after the date of
enactment of this Act [Nov. 28, 1990].
``(2) Definition of new application.--As used in paragraph (1),
the term `new application' means an application submitted by a
borrower to initiate a debt restructuring consideration and not an
application reconsidered after an appeal or revision of the original
application.
``(3) Liquidation of assets.--Section 353(o) of the Consolidated
Farm and Rural Development Act [7 U.S.C. 2001(o)] (as added by
section 1816(h) of this Act) shall not apply until the Secretary of
Agriculture has issued final regulations to carry out such section
353(o).
``(d) Restoration of First Lien on Stock.--The amendment made by
section 1833 of this Act [enacting section 2076a of Title 12 and
amending section 2077 of Title 12] shall be effective as of January 7,
1988.
``(e) Regulations.--As soon as practicable after the date of
enactment of this Act [Nov. 28, 1990]--
``(1) the Secretary of Agriculture shall issue such regulations
as are necessary to carry out subtitles A and C of this Act
[probably means subtitles A (Secs. 1801-1824) and C (Secs. 1851-
1854) of title XVIII of Pub. L. 101-624, enacting sections 1981f and
2006a to 2006e of this title and section 494 of Title 25, amending
this section, sections 1924, 1927, 1933, 1934, 1942, 1946, 1981,
1981d, 1982, 1983, 1983a, 1983b, 1985, 1991, 1997, 2003, and 5106 of
this title and section 492 of Title 25, enacting provisions set out
as a note under section 1981f of this title, amending provisions set
out as a note under section 1985 of this title, and repealing
provisions set out as a note preceding section 1961 of this title]
and the amendments made by such subtitles; and
``(2) the Farm Credit Administration shall issue such
regulations as are necessary to carry out subtitle B of this Act
[probably means subtitle B (Secs. 1831-1843) of title XVIII of Pub.
L. 101-624, enacting section 2076a of Title 12, amending section
3132 of Title 5 and sections 2019, 2075, 2077, 2218, 2252, 2254,
2277a-5, 2277a-9, 2277a-10, 2277a-14, 2278a-6, 2279aa, and 2279aa-11
of Title 12, and enacting provisions set out as a note under section
2001 of Title 12] and the amendments made by such subtitle.''

Suspension of Collection Activities During Transition Period

Section 615(d) of Pub. L. 100-233 provided that: ``The Secretary of
Agriculture shall not initiate any acceleration, foreclosure, or
liquidation in connection with any delinquent farmer program loan before
the date the Secretary has issued final regulations to carry out the
amendments made by this section [enacting section 2001 of this title and
amending sections 1927a and 1981 of this title]. The preceding sentence
shall not prohibit the Secretary from taking any action with respect to
waste, fraud, or abuse by the borrower.''