DEBT RESTRUCTURING AND LOAN SERVICING.

SEC. 1816. DEBT RESTRUCTURING AND LOAN SERVICING. (a) Eligibility for Restructuring.— Section 353(b)(1) (7 U.S.C. 2001(b)(1)) is amended by inserting before the semicolon the following: “, except that the regulations shall require that, if the value of the assets calculated under subsection (c)(2)(A)(ii) 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)”. (b) Changes in Net Recovery Value Calculation.— (1) Inclusion of certain nonessential unsecured assets of the borrower in the recovery value.— Section 353(c)(2)(A) (7 U.S.C. 2001(c)(2)(A)) is amended to read as follows: “(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”. (2) Inclusion of security property not possessed by the borrower in the recovery value.— Section 353(c)(2) (7 U.S.C. 2001(c)(2)) is amended— (A) in subparagraph (B)(iv), by striking “costs.” and inserting “costs; plus”; and (B) by adding at the end the following new subparagraph: “(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.”. (c) Debt Service Margin.— Section 353(c)(3) (7 U.S.C. 2001(c)(3)) is amended by adding at the end the following new subparagraph: “(C) Debt service margin.— “(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.”. (d) Deadline for Restructuring Calculations.— Section 353(c)(4) (7 U.S.C. 2001(c)(4)) is amended by striking “60” and inserting “90”. 104 STAT. 3827 (e) Good Faith Requirement for Leaseback/Buyback Eligibility.— Section 335(e)(1) (7 U.S.C. 1985(e)(1)) is amended— (1) in subparagraph (A)(i), by inserting if such borrower-owner has acted in good faith with the Secretary, as defined in regulations issued by the Secretary, in connection with such loan” before the period at the end; and (2) in subparagraph (C)(i), by inserting “, if such borrower-owner has acted in good faith with the Secretary, as defined in regulations issued by the Secretary, in connection with the loan of such borrower-owner for which such property served as security” before the period at the end. (f) Termination of Loan Obligations.— Paragraph (6) of section 353(c) (7 U.S.C. 2001(c)(6)) is amended to read as follows: “(6) Termination of loan obligations.— “(A) Required conditions.— “(i) In general.— Except as provided in subparagraph (B), the obligations of a borrower to the Secretary under a restructured loan shall terminate if— “(I) the borrower satisfies the requirements of paragraphs (1) and (2) of subsection (b); “(II) the value of the restructured loan is less than the recovery value; and “(III) within 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 recovery value, “(ii) Limited applicability of good faith requirement.— Clause (i)(I) shall not apply to any offer of net recovery buyout made by the Secretary under this section before the date of enactment of this paragraph, unless the Secretary, before such date, determined that the borrower involved did not act in good faith with respect to the loan. “(B) Recapture.— “(i) Authority to require borrower to enter into agreement before terminating loan obligations.— “(I) In general.— The Secretary may require, as a condition of the termination of loan obligations under this paragraph, that the borrower enter into an agreement with the Secretary providing that if the borrower sells or otherwise conveys the real property used to secure such loan within 10 years after the date of such agreement, and realizes a gain on such sale or conveyance over the amount of the recovery value of the loan, then the Secretary may recapture part or all of the difference between the recovery value of the loan and the fair market value (on the date of such sale or conveyance) of the property securing the loan. “(II) Limitation on recapture amount.— The agreement described in subclause (I) shall not provide for recapture of an amount that exceeds the difference between such recovery value and the outstanding balance of principal and interest owed on the loan immediately prior to the termination of any loan obligations under this paragraph. 104 STAT. 3828 “(ii) Treatment of intrafamily transfers.— For purposes of clause (i)(I), transfer of title to a property, on the death or retirement of the borrower, to a spouse or child of the borrower who is actively engaged in farming on the property shall not be treated as a sale or conveyance.”. (g) Appraisals.— Section 353(c) (7 U.S.C. 2001(c)) is amended by adding at the end the following new paragraph: “(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.”. (h) Additional Provisions.— Section 353 is amended by adding at the end the following new subsections: “(l) 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 title, the Secretary shall not require full liquidation of a delinquent loan in order for the lender to be eligible to receive payment on losses. “(m) Disposition of Normal Income Security.— For purposes of subsection (b)(2) of this section, and subparagraphs (A)(i) and (C)(i) of section 335(e)(1)(A), 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 the date of enactment of this subsection 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. “(n) Only 1 Write-Down or Net Recovery Buy-Out Per Borrower for a 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. 104 STAT. 3829 “(o) 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). “(p) 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.”.