DEBT RESTRUCTURING AND LOAN SERVICING.

SEC. 615. DEBT RESTRUCTURING AND LOAN SERVICING. (a) In General.— Subtitle D (7 U.S.C. 1981 et seq.) is amended by adding at the end thereof the following new section: “SEC. 353. DEBT RESTRUCTURING AND LOAN SERVICING. “(a) In General.— The Secretary shall modify delinquent farmer program loans made or insured under this title, or purchased from the lender or the Federal Deposit Insurance Corporation under section 309B, 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)), and debt set-aside (subject to subsection (e)), 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)— “(1) the delinquency must be due to circumstances beyond the control of the borrower, as defined in regulations issued by the Secretary; “(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 snail be based on— “(A) the amount of the current appraised value of the property securing the loan; less “(B) the estimated administrative, legal, and other expenses associated with the liquidation and disposition of the loan and collateral, including— 101 STAT. 1679 “(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. “(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. “(4) Notification.— Within 60 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 title 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.— 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 101 STAT. 1680value and the fair market value of the property securing the loan on the date of such agreement. “(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 proceure 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). “(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. 101 STAT. 1681 “(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 333B, 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. “(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 333B 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) Future Creditworthiness of Borrower Determined Without Regard to Restructuring.— 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.”. (b) Other Restructuring Provisions.— (1) Option to restructure interest rates for certain water and waste disposal and community facility borrowers.— (A) In general.— The item designated “Loan Programs” under the subheading “Farmers Home Administration” in chapter I of title I of the Supplemental Appropriations Act, 1985 (7 U.S.C. 1927a; 99 Stat. 296) is amended— (i) by striking out “Effective November 12, 1983, and thereafter,” and inserting in lieu thereof “Effective October 1, 1981, and thereafter, in the case of water and waste disposal and community facility borrowers, and effective November 12, 1983, and thereafter, in the case of housing and farm borrowers,”; and 101 STAT. 1682 (ii) by striking out “housing, farm, water and waste disposal, and community facility” and inserting in lieu thereof “such”, (B) Certain obligations excepted.— The amendment made by subparagraph (A) shall not apply to any note or other obligation sold under section 1001 of the Omnibus Reconciliation Act of 1986 on or before the date of the enactment of this paragraph. (2) Interest rate restructuring for certain other borrowers.— Effective July 29, 1987, the interest rate charged on any loan of $2,000,000 or more made on such date under section 306 to any nonprofit corporation shall be the interest rate quoted to such nonprofit corporation by the Farmers Home Administration on June 22, 1987, in the request for obligation of funds made with respect to the loan. (c) Liquidation Not Required as Prerequisite to Debt Restructuring and Loan Servicing.— Subsection (d) of section 331 (7 U.S.C. 1981(d)) is amended— (1) by inserting “debts or” before “claims”; and (2) by adding at the end of the first sentence the following: “The Secretary may not require liquidation of property securing any farmer program loan or acceleration of any payment required under any farmer program loan as a prerequisite to initiating an action authorized under this subsection.”. (d) Suspension of Collection Activities During Transition Period.— 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. The preceding sentence shall not prohibit the Secretary from taking any action with respect to waste, fraud, or abuse by the borrower.