No. 42559 (New Rule): Rule R51-5. Rural Rehabilitation Loans

(New Rule)

DAR File No.: 42559
Filed: 02/05/2018 11:14:08 AM

RULE ANALYSIS

Purpose of the rule or reason for the change:

Title 4, Chapter 19, authorizes the Utah Department of Agriculture and Food (Department) to administer a loan program. This new rule establishes procedures for the application, review, and closing of a loan. Additionally, it outlines the collection process.

Summary of the rule or change:

This rule establishes the basic qualifications for those seeking to apply for a Rural Rehabilitation Loan. It outlines the application, review, and approval process for the Department. This rule establishes the make up of the Agricultural Advisory Board subcommittee for the approval of the loans. Additionally, this rule establishes time frames associated with the collection process.

Statutory or constitutional authorization for this rule:

• Section 4-19-103
• Subsection 4-2-103(i)
• Section 4-19-102

Anticipated cost or savings to:

the state budget:

This rule solidifies policies and procedures for the Department's loan division to follow. Nothing in this rule requires the division to changes the practices or procedures. There is no cost nor saving to the state budget with the formalizing of existing policies and procedures.

local governments:

There are no anticipated costs or benefits to local governments as this rule neither requires action from nor provides benefit to local governments.

small businesses:

This proposed rule may create a small benefit to small businesses as it clearly defines who is eligible to apply for a loan under the Rural Rehabilitation Loan Program. These loans are loans of last resort; therefore, this is the last opportunity for these businesses to receive funding. Due to the nature of these loans, it is not feasible for the Department to estimate the savings this will have for small businesses.

persons other than small businesses, businesses, or local governmental entities:

This rule clearly specifies the eligibility for a loan and the process to apply for a loan. These loans are loans of last resort; therefore, this is the last opportunity for these individuals to receive funding. Those who seek these loans will have already been through the loan process with other lenders and should already have the necessary materials prepared. There will be no additional costs to the individuals. Due to the nature of these loans, it is not feasible for the Department to estimate the savings this could have on the individuals.

Compliance costs for affected persons:

These are loans of last resort because of that the applicants should already have the necessary information prepared for other lenders. This would be the only cost associated with this rule.

Comments by the department head on the fiscal impact the rule may have on businesses:

This rule would solidify and make public the eligibility requirements for a Rural Rehabilitation Loan from the Department. There will be no costs to those applying for the loan because they have already gone through the process with other lenders.

LuAnn Adams, Commissioner

The full text of this rule may be inspected, during regular business hours, at the Office of Administrative Rules, or at:

Agriculture and Food
Administration
350 N REDWOOD RD
SALT LAKE CITY, UT 84116-3034

Direct questions regarding this rule to:

• Melissa Ure at the above address, by phone at 801-538-4976, by FAX at , or by Internet E-mail at [e-mail]

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

04/02/2018

This rule may become effective on:

04/09/2018

Authorized by:

LuAnn Adams, Commissioner

RULE TEXT

Appendix 1: Regulatory Impact Summary Table*

Fiscal Costs

FY 2018

FY 2019

FY 2020

State Government

$0

$0

$0

Local Government

$0

$0

$0

Small Businesses

$0

$0

$0

Non-Small Businesses

$0

$0

$0

Other Person

$0

$0

$0

Total Fiscal Costs:

$0

$0

$0

Fiscal Benefits

State Government

$0

$0

$0

Local Government

$0

$0

$0

Small Businesses

$0

$0

$0

Non-Small Businesses

$0

$0

$0

Other Persons

$0

$0

$0

Total Fiscal Benefits:

$0

$0

$0

Net Fiscal Benefits:

$0

$0

$0

*This table only includes fiscal impacts that could be measured. If there are inestimable fiscal impacts, they will not be included in this table. Inestimable impacts for State Government, Local Government, Small Businesses and Other Persons are described above. Inestimable impacts for Non-Small Businesses are described below.

 

Appendix 2: Regulatory Impact to Non-Small Businesses

 

The new rule establishes the eligibility requirements for a Rural Rehabilitation Loan and clarifies the application processes for review and approval of the loans. There are no anticipated costs to businesses small or large. Due to the nature of these loans it is impossible to estimate how many will be given to large or small businesses. These are loans of last resort; therefore, any preparation cost associated with documentations for these loans should have already occurred when they sought financing from a different institution.

 

The Commissioner of the Department of Agriculture and Food, LuAnn Adams, has reviewed and approved this fiscal analysis.

 

R51. Agriculture and Food, Administration.

R51-5. Rural Rehabilitation Loans.

R51-5-1. Authority

Pursuant to Sections 4-19-101 et seq . and 4-2-103(1)(i) of the Utah Code, this rule establishes the general operating practices by which the Rural Rehabilitation Loan program shall function.

 

R51-5-2. Definitions.

(1) AGRICULTURAL ADVISORY BOARD: A twenty-one-member board appointed by the Commissioner of Agriculture to advise the Commissioner regarding: the planning, implementation, and administration of the Department of Agriculture and Food's programs as authorized by UCA 4-2-108.

(2) BOARD: The Agricultural Advisory Board

(3) BORROWER/APPLICANT: A person applying to or borrowing Rural Rehabilitation federal or state funds.

(4) COMMISSIONER: The Commissioner of the Utah Department of Agriculture and Food, who is responsible for the conduct and administration of the Rural Rehabilitation Loan Program within the State in accordance with the Use Agreement entered into in January 1975.

(5) EXECUTIVE LOAN COMMITTEE: A committee consisting of the Board's chair, vice chair, and two other members selected for the Board who approve loans. The Executive Loan Committee shall be nominated at the beginning of each calendar year and shall serve a one year term.

 

R51-5-3. Program Objectives.

(1) The program is available to any entity allowed under the January 1975 Use Agreement, state or federal law, including individual farmers and ranchers or agricultural cooperatives, corporations, or other entities that directly or indirectly provide assistance to such farmers or members of their families.

(2) The Rural Rehabilitation Loan program may use funds for any purpose allowed under the January 1975 Use Agreement, including for one or more of the following rural rehabilitation purposes:

(a) Loans; such as:

(i) Real Estate Loans;

(ii) Farm Operating Loans;

(iii) Youth Loans;

(iv) Education Loans; or

(v) Irrigation and Water Conservation Projects

(b) Grants;

(i) Youth and Education Grant

(c) Reserve Fund; and

(d) Other Rural Rehabilitation Purposes

(3) Loans shall be for lands within the borders of the State of Utah and any collateral or security for a loan must be located within the State of Utah.

(4) Such portion of the cost of administration and protection of assets as necessary may be also used by the state for:

(a) Cost of Administration;

(b) Protection of the Assets; and

(c) Temporary investments, annual reports, implementing agreements and other allowed uses.

(5) The Department may not make a loan authorized under this chapter for a period to exceed 10-years but the loan is renewable. Total borrowings by any one entity shall be limited to no more than $350,000 with each application.

(6) For the purposes of protecting its interest in a defaulting loan, the Board may use either appropriated or repayment monies to purchase or otherwise obtain property in which the Board has acquired a security interest by any mortgage, trust deed, pledge, assignment, judgment, or other means at any execution, bankruptcy, or foreclosure sale.

(7) The Board may also operate or lease, if necessary to protect is investment, any property in which it has an interest, or sell or otherwise dispose of such property to recover loaned funds.

 

R51-5-4. Loan Application.

(1) Loan requests shall be accepted and processed from eligible Applicants regardless of race, age, sex, creed, color, religion, national origin, or on any other basis prohibited by law.

(2) A request for a loan must be in writing as required on the forms provided by the Department.

(3) The Executive Loan Committee and Board requires a minimum of 90 days to process, approve and close a loan.

(4) A request for a loan may be filed at any time during the program year.

(5) Approval of loan shall be subject to availability of funds. The loan staff shall impartially consider each loan application on the basis of program objectives and priorities set in place and approved by the Executive Loan Committee and Board.

(6) Use of loan money in conjunction with federal funds is encouraged. Applicants should apply for available federal (Farm Service Agency) or other cost-share assistance.

(7) The Department, through the Executive Loan Committee and/or Board and in conjunction with the Commissioner, may adopt additional policies and procedures as necessary to carry out the purposes of the Rural Rehabilitation Loan program. These policies and procedures may be in addition to those outlined in this Rule.

 

R51-5-5. Application Procedure.

(1) Any person or group of persons desiring to participate in the Rural Rehabilitation Loan program must apply through the Utah Department of Agriculture and Food through the Agriculture Loan department.

(2) The one page application letter must contain all information needed as instructed on the Application Information page that shall be sent to the prospective Applicant upon inquiry to the loan program. To be considered, the application must contain all appropriate information as instructed, be fully completed, and must provide all requested personal information.

(3) The completed application shall be sent directly to the Agriculture Loan department either by email or regular mail. Upon receipt, loan staff shall contact the Applicant and provide further information to the Applicant about the policies and procedures to obtain approval by the Board. This conversation and/or any other actions by the loan staff does not guarantee loan approval.

 

R51-5-6. Loan Review.

(1) The application and required documentation shall be reviewed by loan staff and discussed with the Applicant(s) or their representative. Loan staff shall proceed with a policy compliance review, credit analysis and underwriting prior to presenting a written loan proposal to the Executive Loan Committee for approval.

(2) Decisions concerning the use of loan program funds shall be the decision of the Agricultural Advisory Board by recommendation of the Commissioner and the Department loan staff.

(3) The Board shall ensure, to the best of its ability, that available rural rehabilitation loan funds can be borrowed in accordance with this rule and state and federal laws. If there are insufficient funds to fund all loan applications, funds shall be distributed based on the date the complete application is received, in sequential order.

(4) All loans shall be approved by a majority of the Executive Loan Committee and ratified by the Agricultural Advisory Board.

(5) All credit approved on this basis shall be reported to the Board for ratification at the next scheduled Board meeting.

 

R51-5-7. Loan Closing.

(1) Upon approval by the Executive Loan Committee and ratification by the Board, the Commissioner shall sign and make the final obligation of funds by signing the Rural Rehabilitation Obligation to Purchase form.

(2) Loan staff shall prepare loan documents and instruction letter for the title company closing; including a signed Warrant Request to disburse funds.

(3) The Borrower may proceed with the closing at the title company.

(4) Neither the state, the Department nor the Board have any obligation to disburse funds prior to the completion of the above described procedures.

(5) The Applicant shall be required to cover any costs incurred for loan closing including escrow fees, title insurance, recording fees, and appraisal when necessary.

 

R51-5-8. Collections.

(1) Collection Policy. The following procedures should be followed on delinquent loans:

(a) 30 Days Past Due: If payment has not been received within 30 days after due date, a delinquent notice reflecting the amount due including penalty shall be sent to the Borrower.

(b) 60 Days Past Due: If payment has not been received within 60 days after due date, a second delinquent notice shall be sent out. Personal contact shall also be made by loan staff with the Borrower during this time period to try to collect the payment.

(c) 90 Days Past Due: If payment has not been received within 90 days after due date, a third delinquent notice shall be sent out. This notice may also advise the Borrower that payment must be made or other satisfactory arrangements made with loan staff within 30 days or the account shall be assigned to the Attorney General's Office for appropriate action. Attempts to make personal contact by loan staff shall be made during this period of time to try to collect the payment or make acceptable arrangements with the Borrower.

(d) 120 to 180 Days Past Due: Loan staff shall work with the Borrower to make satisfactory arrangements for payment of past due amounts. This may include modifying of the terms of the original contract to meet the Borrower's ability to perform on the obligation, taking additional or substitute collateral if the lender is deemed insecure, or any other appropriate actions to provide service for the Borrower and protect against loss should be done. If it appears that the Borrower shall be unable to pay the loan, refuses to communicate or cooperate with the Department or loan staff or fails to cure the delinquency, the account shall be assigned to the Attorney General's office for collection and foreclosure proceedings. These actions are at the discretion of the loan staff in consultation with the Commissioner or his/her designee and the Attorney General's Office.

(2) Notwithstanding the above time guidelines, at any time, the loan staff, with approval from the Commissioner his/her designee, may consult with the Attorney General's Office on behalf of the Department to protect the state's interest in any pledged security or collateral on a loan or to protect its interest in any property, real or otherwise.

(3) Notwithstanding the above time guidelines, the state or the Department may, at any time, pursue any legal or equitable remedy allowed under state or federal law to protect its interest in any pledged security or collateral on a loan or to protect its interest in any property, real or otherwise.

 

KEY: Rural Rehabilitation Loans, loans

Date of Enactment or Last Substantive Amendment: 2018

Authorizing, and Implemented or Interpreted Law: 4-19-103, 4-2-103(i), 4-19-102

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