PART 761—FARM LOAN PROGRAMS; GENERAL PROGRAM ADMINISTRATION Authority: 5 U.S.C. 301 and 7 U.S.C. 1989. Source: 72 FR 63285, Nov. 8, 2007, unless otherwise noted. Subpart A—General Provisions § 761.1 Introduction. Link to an amendment published at 91 FR 56750, Sept. 4, 2026. (a) The Administrator delegates the responsibility to administer Farm Loan Programs of the Consolidated Farm and Rural Development Act (7 U.S.C. 1921 et seq. (b) The Deputy Administrator: (1) Delegates to each State Executive Director within the State Executive Director's jurisdiction the authority, and in the absence of the State Executive Director, the person acting in that position, to act for, on behalf of, and in the name of the United States of America or the Farm Service Agency to do and perform acts necessary in connection with making and guaranteeing loans, such as, but not limited to, making advances, servicing loans and other indebtedness, and obtaining, servicing, and enforcing or releasing security and other instruments related to the loan. For actions that do not result in a loss to the Farm Service Agency, a State Executive Director may redelegate authorities received under this paragraph to a Farm Loan Chief, Farm Loan Specialist, District Director, Farm Loan Manager, or Senior Farm Loan Officer, Farm Loan Officer, Loan Analyst, Loan Resolution Specialist, or Program Technician. (2) May establish procedures for further redelegation or limitation of authority. (c) This part and parts 762 through 767 of this subchapter describe the Agency's policies for its Farm Loan Programs. The objective of these programs is to provide progression lending and management assistance to eligible farmers to become owners or operators, or both, of family farms, to continue such operations when credit is not available elsewhere, or to return to normal farming operations after sustaining substantial losses as a result of a designated or declared disaster. The programs are designed to allow those who participate to transition to private commercial credit or other sources of credit in the shortest period of time practicable through the use of progression lending, including farm assessments, borrower training, market placement, and borrower graduation requirements. These regulations apply to loan applicants, borrowers, lenders, holders, Agency personnel, and other parties involved in making, guaranteeing, holding, servicing, or liquidating such loans. (d) This part describes the Agency's general and administrative policies for its guaranteed and direct Farm Loan Programs. In general, this part addresses issues that affect both guaranteed and direct loan programs. (e) Part 3 of this title and 31 CFR part 285 describe the policies and procedures the Agency will follow for non-centralized offset (including administrative offset) and referral to Treasury for centralized offset (TOP), Federal salary offset, Administrative Wage Garnishment, and collection through Treasury's private collection agencies (cross-servicing). Supplemental provisions for FLP purposes are described in part 761, subpart F of this title. (f) Part 3 of this title and 31 CFR parts 900-904 describe the policies and procedures the Agency will follow for debt settlement authorities pursuant to the Federal Claims Collection Standards. Supplemental provisions for FLP purposes are described in part 761, subpart F of this title. (g) Part 761, subpart F of this title describes the debt settlement policies and procedures for FLP debt pursuant to the Act. [72 FR 63285, Nov. 8, 2007, as amended at 76 FR 5057, Jan. 28, 2011; 83 FR 11869, Mar. 19, 2018; 85 FR 36691, June 17, 2020; 87 FR 13123, Mar. 9, 2022] § 761.2 Abbreviations and definitions. Link to an amendment published at 91 FR 56750, Sept. 4, 2026. The following abbreviations and definitions are applicable to the Farm Loan Programs addressed in parts 761 through 769 unless otherwise noted. (a) Abbreviations. ARA CL CLP DBSA DSA EE EM FCCS FLP FO FSA HPRP LIBOR ML MLP NRCS OIG OGC OL PLP RHF RL SAA SA SEL ST SW USDA USPAP (b) Definitions. Abandoned security property Accrued deferred interest Act et seq. Additional security Adequate security Adjustment Administrative appraisal review (i) Meets applicable Agency requirements; and (ii) Is accurate outside the requirements of standard 3 of USPAP. Agency Agreement for the use of proceeds Agricultural commodity Allonge Allowable costs Alternative repayment agreement Applicant Apprentice Aquaculture Assignment of guaranteed portion Assignment of indemnity Assistance Assumption Assumption agreement Basic part of an applicant's total farming operation Basic security Beginning farmer (i) Meets the loan eligibility requirements for a direct or guaranteed CL, FO, or OL, as applicable; (ii) Has not operated a farm for more than 10 years. This requirement applies to all members of an entity; (iii) Will materially and substantially participate in the operation of the farm: (A) In the case of a loan made to an individual, individually or with the family members, material and substantial participation requires that the individual provide substantial day-to-day labor and management of the farm, consistent with the practices in the county or State where the farm is located; or (B) In the case of a loan made to an entity, all members must materially and substantially participate in the operation of the farm. Material and substantial participation requires that the member provide some amount of the management, or labor and management necessary for day-to-day activities, such that if the individual did not provide these inputs, operation of the farm would be seriously impaired; (iv) Agrees to participate in any loan assessment and borrower training required by Agency regulations; (v) Except for an OL applicant, does not own real farm property or who, directly or through interests in family farm entities owns real farm property, the aggregate acreage of which does not exceed 30 percent of the average farm acreage of the farms in the county where the property is located. If the farm is located in more than one county, the average farm acreage of the county where the applicant's residence is located will be used in the calculation. If the applicant's residence is not located on the farm or if the applicant is an entity, the average farm acreage of the county where the major portion of the farm is located will be used. The average county farm acreage will be determined from the most recent Census of Agriculture; (vi) Demonstrates that the available resources of the applicant and spouse (if any) are not sufficient to enable the applicant to enter or continue farming on a viable scale; and (vii) In the case of an entity: (A) All the members are related by blood or marriage; and (B) All the members are beginning farmers. Borrower (or debtor) Cancellation Cash flow budget Chattel or real estate essential to the operation Chattel security Civil action Closing agent Coastal barrier Commercially foraged Compromise Conditional commitment Conservation Contract Conservation Contract review team Conservation loan Conservation plan Conservation practice Conservation project Consolidation Construction Controlled Controlled substance Cooperative Corporation Cosigner County County average yield Criminal action Crop allotment or quota Current market value buyout Debt forgiveness (i) Debt forgiveness includes: (A) Writing down or writing off a debt pursuant to 7 U.S.C. 2001; (B) Cancellation of remaining amounts owed after compromising, adjusting, reducing, or charging off a debt or claim pursuant to 7 U.S.C. 1981; (C) Paying a loss pursuant to 7 U.S.C. 2005 on a FLP loan guaranteed by the Agency; (D) Discharging a debt as a result of bankruptcy; or (E) Releases of liability which result in a loss to the Agency. (ii) Debt forgiveness does not include: (A) Debt reduction through a conservation contract; (B) Any write-down provided as part of the resolution of a discrimination complaint against the Agency; (C) Prior debt forgiveness that has been repaid in its entirety; (D) Consolidation, rescheduling, reamortization, or deferral of a loan; and (E) Forgiveness of a YL debt due to circumstances beyond the borrower's control. Debt settlement Debt service margin Debt write-down Default Deferral Delinquent borrower, Direct loan Disaster Disaster area Disaster set-aside Disaster yield Distressed borrower set-aside Down payment loan Economic Emergency loan Embedded entity Emergency loan Entity Entity member Equitable relief Essential family living and farm operating expenses (i) Are those that are basic, crucial, or indispensable; (ii) Are determined by the Agency based on the following considerations: (A) The specific borrower's operation; (B) What is typical for that type of operation in the area; and (C) What is an efficient method of production considering the borrower's resources; and (iii) Include, but are not limited to, essential: Household operating expenses; food, including lunches; clothing and personal care; health and medical expenses, including medical insurance; house repair and sanitation; school and religious expenses; transportation; hired labor; machinery repair; farm building and fence repair; interest on loans and credit or purchase agreement; rent on equipment, land, and buildings; feed for animals; seed, fertilizer, pesticides, herbicides, spray materials and other necessary farm supplies; livestock expenses, including medical supplies, artificial insemination, and veterinarian bills; machinery hire; fuel and oil; taxes; water charges; personal, property and crop insurance; auto and truck expenses; and utility payments. Established farmer (i) Actively participated in the operation and the management, including, but not limited to, exercising control over, making decisions regarding, and establishing the direction of, the farming operation at the time of the disaster; (ii) Spends a substantial portion of time in carrying out the farming operation; (iii) Planted the crop, or purchased or produced the livestock on the farming operation; (iv) In the case of an entity, is primarily engaged in farming and has over 50 percent of its gross income from all sources from its farming operation based on the operation's projected cash flow for the next crop year or the next 12-month period, as mutually determined; (v) Is not an integrated livestock, poultry, or fish processor who operates primarily and directly as a commercial business through contracts or business arrangements with farmers, except a grower under contract with an integrator or processor may be considered an established farmer, provided the farming operation is not managed by an outside full-time manager or management service and Agency loans will be based on the applicant's share of the agricultural production as specified in the contract; and (vi) Does not employ a full time farm manager. EZ Guarantee False information Family farm (i) Produces agricultural commodities, including agricultural commodities commercially foraged on Indian land for the purposes of OLs, for sale in sufficient quantities so that it is recognized as a farm rather than a rural residence or non-eligible enterprise; (ii) Has both physical labor and management provided as follows: (A) The majority of day-to-day, operational decisions, and all strategic management decisions are made by: ( 1 ( 2 (B) A substantial amount of labor to operate the farm is provided by: ( 1 ( 2 (iii) May use full-time hired labor in amounts only to supplement family labor; and (iv) May use reasonable amounts of temporary labor for seasonal peak workload periods or intermittently for labor intensive activities. Family living expenses Family members Farm Farmer Farm income Farm Loan Programs Farm Ownership loan Farm Program payments Feasible plan Financially distressed borrower Financially viable operation, (i) Meet annual operating expenses and debt payments as they become due; (ii) Meet essential family living expenses to the extent they are not met by dependable non-farm income; (iii) Provide for replacement of capital items; and (iv) Provide for long-term financial growth. Fixture Floodplains Foreclosed Foreclosure sale Forest Stewardship Management Plan Good faith Graduation Guaranteed loan Guarantor Hazard insurance Hearing official. Heirs' property Highly erodible land Holder Homestead protection Homestead protection property Household contents HPRP loan agreement HPRP loan funds HPRP revolving loan fund Inaccurate information Indian land, (i) Owned by an Indian Tribe; (ii) Owned by an Indian Tribe and is subject to restrictions against alienation or encumbrance by the United States; or (iii) Held in trust by the United States for an Indian Tribe. Indian reservation Indian Tribe In-house expenses Interest Assistance Agreement Intermediary Inventory property Joint financing arrangement Joint operation Land contract Leasehold Lender Lender's Agreement Lien Limited resource interest rate (i) FO or OL loan assistance under part 764 of this title; or (ii) Primary loan servicing on an FO, OL, or SW loan under part 766 of this title. Line of Credit Agreement Liquidation Liquidation expenses Livestock Loan Agreement Loan servicing programs Loan transaction Loss claim Loss rate Major deficiency Majority interest Market value Microloan Mineral right Minor deficiency Mortgage Natural disaster Negligent servicing Negotiated sale Net recovery value of security Net recovery value of non-essential assets Non-capitalized interest Non-eligible enterprise (i) Produces exotic animals, birds, or aquatic organisms or their products that may be agricultural in nature, but are not primarily associated with agricultural production, for example, there is no established or stable market for them, or production is speculative in nature; (ii) Produces animals, birds, or aquatic organisms ordinarily used for pets, companionship, sport, or pleasure and not primarily associated with human consumption, fiber, or draft use; (iii) Primarily markets goods or provides services which might be agriculturally related, but are not produced by the farming operation; or (iv) Processes or markets farm products when the majority of the commodities processed or marketed are not produced by the farming operation. Non-essential assets (i) Do not contribute to: (A) Income to pay essential family living expenses, or (B) The farming operation; and (ii) Are not exempt from judgment creditors or in a bankruptcy action. Non-monetary default Non-program loan Normal income security Normal production yield (i) The per acre actual production history of the crops produced by the farming operation used to determine Federal crop insurance payments or payment under the Noninsured Crop Disaster Assistance Program for the production year during which the disaster occurred; (ii) The applicant's own production records, or the records of production on which FSA Farm Program payments are made contained in the applicant's Farm Program file, if available, for the previous 3 years, when the actual production history in paragraph (i) of this definition is not available; (iii) The county average production yield, when the production records outlined in paragraphs (i) and (ii) of this definition are not available. Operating loan Operator Participated in the business operations of a farm (i) Been the manager or operator of a farming operation for the year's complete production cycle as evidenced by tax returns, FSA farm records or similar documentation; (ii) Been employed as a farm manager or farm management consultant for the year's complete production cycle; or (iii) Participated in the operation of a farm by virtue of being raised on a farm or having worked on a farm (which can include a farm-related apprenticeship, internship, or similar educational program with applied work experience) with significant responsibility for the day-to-day decisions for the year's complete production cycle, which may include selection of seed varieties, weed control programs, input suppliers, livestock feeding programs, or decisions to replace or repair equipment. Partnership Past due Physical loss Potential liquidation value Present value Presidentially-designated emergency et seq. Primary loan servicing programs (i) Loan consolidation and rescheduling, or reamortization; (ii) Interest rate reduction, including use of the limited resource rate program; (iii) Deferral; (iv) Write-down of the principal or accumulated interest; or (v) Any combination of paragraphs (i) through (iv) of this definition. Production cycle Production loss Program loans Promissory note Prospectus Protective advance Quarantine Reamortization Reasonable rates and terms Recoverable cost Recreation loan Redemption right Related by blood or marriage Related by blood or marriage Relative Repossessed property Rescheduling Restructuring Revolved funds Rural youth Security Security instrument Security value Shared Appreciation Agreement Socially disadvantaged applicant or farmer Socially disadvantaged group Softwood Timber Program loan Soil and Water loan Streamlined Conservation Loan Subordination Subsequent loan Succession plan Supervised bank account Technical appraisal review Transfer and assumption Trust Ultimate recipient Unaccounted for security Unauthorized assistance Undivided ownership interest Uniform Standards of Professional Appraisal Practice United States U. S. Attorney Veteran Veteran farmer (i) Has not operated a farm; (ii) Has operated a farm for not more than 10 years; or (iii) Is a veteran who served in the active military, naval, or air service, and who was discharged or released from that service under conditions other than dishonorable and who first obtained status as a veteran during the most recent 10-year period. Wetlands Working capital Youth loan [72 FR 63285, Nov. 8, 2007; 72 FR 74153, Dec. 31, 2007] Editorial Note: For Federal Register www.govinfo.gov. § 761.3 Civil rights. Part 15d of this title contains applicable regulations pertaining to civil rights and filing of discrimination complaints by program participants. § 761.4 Conflict of interest. The Agency enforces conflict of interest policies to maintain high standards of honesty, integrity, and impartiality in the making and servicing of direct and guaranteed loans. These requirements are established in 5 CFR parts 2635 and 8301. § 761.5 Restrictions on lobbying. A person who applies for or receives a loan made or guaranteed by the Agency must comply with the restrictions on lobbying in 2 CFR part 418. [72 FR 63285, Nov. 8, 2007, as amended at 79 FR 75996, Dec. 19, 2014] § 761.6 Appeals. Except as provided in 7 CFR part 762, appeal of an adverse decision made by the Agency will be handled in accordance with 7 CFR parts 11 and 780. § 761.7 Appraisals. Link to an amendment published at 91 FR 56751, Sept. 4, 2026. (a) General. (1) Real estate and chattel appraisals made in connection with the making and servicing of direct FLP and Non-program loans; and (2) Appraisal reviews conducted on appraisals made in connection with the making and servicing of direct and guaranteed FLP and Non-program loans. (b) Appraisal standards. (2) When a chattel appraisal is required, it must be completed on an applicable Agency form (available in each Agency State Office) or other format containing the same information. (c) Use of an existing real estate appraisal. (1) The appraisal was completed within the previous 18 months and the Agency determines that: (i) The appraisal meets the provisions of this section and the applicable Agency loan making or servicing requirements; and (ii) Market values have remained stable since the appraisal was completed; or (2) The appraisal was not completed in the previous 18 months, but has been updated by the appraiser or appraisal firm that completed the appraisal, and both the update and the original appraisal were completed in accordance with USPAP. (d) Appraisal reviews. (2) With respect to a chattel appraisal, the Agency may conduct an administrative appraisal review. (e) Appraisal appeals. (1) When an applicant or borrower challenges a real estate appraisal used by the Agency for any loan making or loan servicing decision, except primary loan servicing decisions as specified in § 766.115 of this chapter, the issue for review is limited to whether the appraisal used by the Agency complies with USPAP. The applicant or borrower must submit a technical appraisal review prepared by a State Certified General Appraiser that will be used to determine whether the Agency's appraisal complies with USPAP. The applicant or borrower is responsible for obtaining and paying for the technical appraisal review. (2) When an applicant or borrower challenges a chattel appraisal used by the Agency for any loan making or loan servicing decision, except for primary loan servicing decisions as specified in § 766.115 of this chapter, the issue for review is limited to whether the appraisal used by the Agency is consistent with present market values of similar items in the area. The applicant or borrower must submit an independent appraisal review that will be used to determine whether the appraisal is consistent with present market values of similar items in the area. The applicant or borrower is responsible for obtaining and paying for the independent appraisal. [72 FR 63285, Nov. 8, 2007, as amended at 78 FR 65529, Nov. 1, 2013; 79 FR 78693, Dec. 31, 2014; 81 FR 72690, Oct. 21, 2016; 86 FR 43390, Aug. 9, 2021] § 761.8 Loan Limitations. Link to an amendment published at 91 FR 56752, Sept. 4, 2026. (a) Dollar limits. (1) Farm Ownership, Down payment loans, Conservation loans, and Soil and Water loans: (i) Direct—$600,000; (ii) Guaranteed—$1,750,000 (for fiscal year 2019 and increased at the beginning of each fiscal year in accordance with paragraph (b) of this section); (iii) Any combination of a direct Farm Ownership loan, direct Conservation loan, direct Soil and Water loan, guaranteed Farm Ownership loan, guaranteed Conservation loan, and guaranteed Soil and Water loan $1,750,000 (for fiscal year 2019 and increased each fiscal year in accordance with paragraph (b) of this section); (2) Operating loans: (i) Direct—$400,000; (ii) Guaranteed—$1,750,000 (for fiscal year 2019 and increased each fiscal year in accordance with paragraph (b) of this section); (iii) Any combination of a direct Operating loan and guaranteed Operating loan—$1,750,000 (for fiscal year 2019 and increased each fiscal year in accordance with paragraph (b) of this section); (3) Any combination of guaranteed Farm Ownership loan, guaranteed Conservation loan, guaranteed Soil and Water loan, and guaranteed Operating loan—$1,750,000 (for fiscal year 2019 and increased each fiscal year in accordance with paragraph (b) of this section); (4) Any combination of direct Farm Ownership loan, direct Conservation loan, direct Soil and Water loan, direct Operating loan, guaranteed Farm Ownership loan, guaranteed Conservation loan, guaranteed Soil and Water loan, and guaranteed Operating loan-the amount in paragraph (a)(1)(ii) of this section plus $600,000; (5) Emergency loans—$500,000; (6) Any combination of direct Farm Ownership loan, direct Conservation loan, direct Soil and Water loan, direct Operating loan, guaranteed Farm Ownership loan, guaranteed Conservation loan, guaranteed Soil and Water loan, guaranteed Operating loan, and Emergency loan-the amount in paragraph (a)(1)(ii) of this section plus $1,100,000. (b) Guaranteed loan limit. http://www.fsa.usda.gov. (c) Line of credit advances. [72 FR 63285, Nov. 8, 2007, as amended at 73 FR 74345, Dec. 8, 2008; 75 FR 54012, Sept. 3, 2010; 86 FR 43390, Aug. 9, 2021; 87 FR 13123, Mar. 9, 2022] § 761.9 Interest rates for direct loans. Interest rates for all direct loans are set in accordance with the Act. A copy of the current interest rates may be obtained in any Agency office. § 761.10 Planning and performing construction and other development. Link to an amendment published at 91 FR 56752, Sept. 4, 2026. (a) Purpose. (1) Direct FLP loan funds; or (2) Insurance or other proceeds resulting from damage or loss to direct loan security. (b) Funds for development work. (1) Must provide the Agency with an estimate of the total cash cost of all planned development prior to loan approval; (2) Must show proof of sufficient funds to pay for the total cash cost of all planned development at or before loan closing; (3) Must not incur any debts for materials or labor or make any expenditures for development purposes prior to loan closing with the expectation of being reimbursed from Agency loan funds. (c) Scheduling, planning, and completing development work. (1) Is responsible for scheduling and planning development work in a manner acceptable to the Agency and must furnish the Agency information fully describing the planned development, the proposed schedule, and the manner in which it will be accomplished; (2) Is responsible for obtaining all necessary State and local construction approvals and permits prior to loan closing; (3) Must ensure that all development work meets the environmental requirements established in part 799 of this chapter; (4) Must schedule development work to start as soon as feasible after the loan is closed and complete work as quickly as practicable; (5) Is responsible for obtaining any required technical services from qualified technicians, tradespeople, and contractors. (d) Construction and repair standards. (2) All improvements to a property must conform to applicable laws, ordinances, codes, and regulations. (3) The applicant or borrower is responsible for selecting a design standard that meets all applicable local and state laws, ordinances, codes, and regulations, including building, plumbing, mechanical, electrical, water, and waste management. (4) The Agency will require drawings, specifications, and estimates to fully describe the work as necessary to protect the Agency's financial interests. The drawings and specifications must identify any specific development standards being used. Such information must be sufficiently complete to avoid any misunderstanding as to the extent, kind, and quality of work to be performed. (5) The Agency will require technical data, tests, or engineering evaluations to support the design of the development as necessary to protect its financial interests. (6) The Agency will require the applicant or borrower to provide written certification that final drawings and specifications conform with the applicable development standard as necessary to protect its financial interests. Certification must be obtained from individuals or organizations trained and experienced in the compliance, interpretation, or enforcement of the applicable development standards, such as licensed architects, professional engineers, persons certified by a relevant national model code organization, authorized local building officials, or national code organizations. (e) Inspection. (2) The applicant or borrower must provide the Agency written certification that the development conforms to the plans and good construction practices, and complies with applicable laws, ordinances, codes, and regulations. (3) The Agency will require the applicant or borrower to obtain professional inspection services during construction as necessary to protect its financial interests. (4) Agency inspections do not create or imply any duty or obligation of the Agency to the applicant or borrower. (f) Warranty and lien waivers. (g) Surety. (h) Changing the planned development. (1) It will not reduce the value of the Agency's security; (2) It will not adversely affect the soundness of the farming operation; (3) It complies with all applicable laws and regulations; (4) It is for an authorized loan purpose; (5) It is within the scope of the original loan proposal; (6) If required, documentation that sufficient funding for the full amount of the planned development is approved and available; (7) If required, surety to cover the full revised development amount has been provided; and (8) The modification is certified in accordance with paragraph (d) (6) of this section. [72 FR 63285, Nov. 8, 2007, as amended at 81 FR 51284, Aug. 3, 2016] § 761.11 Dishonored payment fee. (a) The Agency will charge a fee for payment transactions that are returned for insufficient funds. (b) [Reserved] [87 FR 13123, Mar. 9, 2022] §§ 761.12-761.50 [Reserved] Subpart B—Supervised Bank Accounts § 761.51 Establishing a supervised bank account. (a) Supervised bank accounts will be used to: (1) Assure correct use of funds are planned and released for capital purchases, construction projects, site development work, debt refinancing, or proceeds from the sale of basic security, and perfection of the Agency's security interest in assets purchased or refinanced when electronic funds transfer or treasury check processes are not practicable; (2) Protect the Agency's security interest in insurance indemnities or other loss compensation resulting from loss or damage to loan security; or (3) Assist borrowers with limited financial skills with cash management, subject to the following conditions: (i) Use of a supervised bank for this purpose will be temporary and infrequent; (ii) The need for a supervised bank account in this situation will be determined on a case-by-case basis; and (iii) The borrower agrees to the use of a supervised bank account for this purpose by executing the deposit agreement. (b) The borrower may select the financial institution in which the account will be established, provided the institution is Federally insured. If the borrower does not select an institution, the Agency will choose one. (c) Only one supervised bank account will be established for any borrower. (d) If both spouses sign an FLP note and security agreement, the supervised bank account will be established as a joint tenancy account with right of survivorship from which either borrower can withdraw funds. (e) If the funds to be deposited into the account cause the balance to exceed the maximum amount insurable by the Federal Government, the financial institution must agree to pledge acceptable collateral with the Federal Reserve Bank for the excess over the insured amount, before the deposit is made. (1) If the financial institution is not a member of the Federal Reserve System, the institution must pledge acceptable collateral with a correspondent bank that is a member of the Federal Reserve System. The correspondent bank must inform the Federal Reserve Bank that it is holding securities pledged for the supervised bank account in accordance with 31 CFR part 202 (Treasury Circular 176). (2) When the balance in the account has been reduced, the financial institution may request a release of part or all of the collateral, as applicable, from the Agency. [72 FR 63285, Nov. 8, 2007, as amended at 76 FR 5057, Jan. 28, 2011; 86 FR 43390, Aug. 9, 2021] § 761.52 Deposits into a supervised bank account. (a) Checks or money orders may be deposited into a supervised bank account provided they are not payable: (1) Solely to the Federal Government or any agency thereof; or (2) To the Treasury of the United States as a joint payee. (b) Loan proceeds may be deposited electronically. § 761.53 Interest bearing accounts. (a) A supervised bank account, if possible, will be established as an interest bearing deposit account provided that the funds will not be immediately disbursed, and the account is held jointly by the borrower and the Agency if this arrangement will benefit the borrower. (b) Interest earned on a supervised bank account will be treated as normal income security. § 761.54 Withdrawals from a supervised bank account. (a) The Agency will authorize a withdrawal from the supervised bank account for an approved purpose after ensuring that: (1) Sufficient funds in the supervised bank account are available; (2) No loan proceeds are disbursed prior to confirmation of proper lien position, except to pay for lien search if needed; (3) No checks are issued to “cash;” and (4) The use of funds is consistent with the current farm operating plan or other agreement with the Agency. (b) A check must be signed by the borrower with countersignature of the Agency, except as provided in paragraph (c) of this section. All checks must bear the legend “countersigned, not as co-maker or endorser.” (c) The Agency will withdraw funds from a supervised bank account without borrower counter-signature only for the following purposes: (1) For application on Agency indebtedness; (2) To refund Agency loan funds; (3) To protect the Agency's lien or security; (4) To accomplish a purpose for which such advance was made; or (5) In the case of a deceased borrower, to continue to pay necessary farm expenses to protect Agency security in conjunction with the borrower's estate. § 761.55 Closing a supervised bank account. (a) If the supervised bank account is no longer needed and the loan account is not paid in full, the Agency will determine the source of the remaining funds in the supervised bank account. If the funds are determined to be: (1) Loan funds: (i) From any loan type, except Youth loan, and the balance is less than $1,000, the Agency will provide the balance to the borrower to use for authorized loan purposes; (ii) From a Youth loan, and the balance is less than $100, the Agency will provide the balance to the borrower to use for authorized loan purposes; (2) Loan funds: (i) From any loan type, except Youth loan, and the balance is $1,000 or greater, the Agency will apply the balance to the FLP loan; (ii) From a Youth loan, and the balance is $100 or greater, the Agency will apply the balance to the FLP loan; (3) Normal income funds, the Agency will apply the balance to the remaining current year's scheduled payments and pay any remaining balance to the borrower; and (4) Basic security funds, the Agency will apply the balance to the FLP loan as an extra payment or the borrower may apply the balance toward the purchase of basic security, provided the Agency obtains a lien on such security and its security position is not diminished. (b) If the borrower is uncooperative in closing a supervised bank account, the Agency will make written demand to the financial institution for the balance and apply it in accordance with paragraph (a) of this section. (c) In the event of a borrower's death, the Agency may: (1) Apply the balance to the borrower's FLP loan; (2) Continue with a remaining borrower, provided the supervised bank account was established as a joint tenancy with right of survivorship account; (3) Refund unobligated balances from other creditors in the supervised bank account for specific operating purposes in accordance with any prior written agreement between the Agency and the deceased borrower; or (4) Continue to pay expenses from the supervised bank account in conjunction with the borrower's estate. §§ 761.56-761.100 [Reserved] Subpart C—Progression Lending § 761.101 Applicability. This subpart applies to all direct applicants and borrowers, except borrowers with only Non-program loans. § 761.102 Borrower recordkeeping and reporting. (a) A borrower must maintain accurate records sufficient to make informed management decisions and to allow the Agency to render loan making and servicing decisions in accordance with Agency regulations. These records must include the following: (1) Production (e.g., total and per unit for livestock and crops); (2) Revenues, by source; (3) Other sources of funds, including borrowed funds; (4) Operating expenses; (5) Interest; (6) Family living expenses; (7) Profit and loss; (8) Tax-related information; (9) Capital expenses; (10) Outstanding debt; and (11) Debt repayment. (b) A borrower also must agree in writing to: (1) Cooperate with the Agency and comply with all progression lending plans, farm assessments, farm operating plans, and all other loan-related requirements and documents; (2) Submit financial information and an updated farm operating plan when requested by the Agency; (3) Immediately notify the Agency of any proposed or actual significant change in the farming operation, any significant changes in family income, expenses, or the development of problem situations, or any losses or proposed significant changes in security. (c) If the borrower fails to comply with these requirements, unless due to reasons outside the borrower's control, the non-compliance may adversely impact future requests for assistance. [72 FR 63285, Nov. 8, 2007, as amended at 87 FR 13123, Mar. 9, 2022; 89 FR 65037, Aug. 8, 2024] § 761.103 Farm assessment. Link to an amendment published at 91 FR 56752, Sept. 4, 2026. (a) The Agency, in collaboration with the applicant, will assess the farming operation to: (1) Determine the applicant's financial condition, organizational structure, and management strengths and weaknesses; (2) Identify and prioritize training and progression lending needs; and (3) Develop a progression lending plan to assist the borrower in achieving financial viability and transitioning to private commercial credit or other sources of credit at reasonable rates and terms, except for CL. (b) Except for ML, the initial assessment must evaluate, at a minimum, the: (1) Farm organization and key personnel qualifications; (2) Type of farming operation; (3) The short- and long-term goals of the operation, including goals to reasonably increase working capital reserves and savings, including reasonable savings for retirement and education, to support operational stability and growth, and goals for progression towards graduation to commercial credit or eventual self-financing; (4) Adequacy of real estate, including facilities, to conduct the farming operation; (5) Adequacy of chattel property used to conduct the farming operation; (6) Historical performance, except for streamlined CL; (7) Farm operating plan; (8) Progression lending plan, except for streamlined CL; (9) Training plan; and (10) Graduation plan, except for CL. (c) For ML, the Agency will complete a narrative that will evaluate, at a minimum, the: (1) Type of farming operation and adequacy of resources; (2) Amount of assistance necessary to cover expenses to carry out the proposed farm operating plan, including building an adequate equity base; (3) The short- and long-term goals of the operation, including goals to reasonably increase working capital reserves and savings, including reasonable savings for retirement and education, to support operational stability and growth, and goals for progression towards graduation to commercial credit or eventual self-financing; (4) The short- and long-term financial viability of the farming operation, including a marketing plan, and available production history, as applicable; (5) Progression lending plan; and (6) Training plan. (d) An assessment update must be prepared for each subsequent loan. The update must include a farm operating plan and any other items discussed in paragraph (b) of this section that have significantly changed since the initial assessment. (e) The Agency reviews the assessment to determine a borrower's progress at least annually, combining any required classification and graduation reviews as part of the review. For streamlined CLs, the borrower must provide a current balance sheet and income tax records. Any negative trends noted between the previous years' and the current years' information must be evaluated and addressed in the assessment of the streamlined CL borrower. (f) If a CL borrower becomes financially distressed, delinquent, or receives any servicing options available under part 766 of this chapter, all elements of the assessment in paragraph (b) of this section must be addressed. [72 FR 63285, Nov. 8, 2007, as amended at 75 FR 54012, Sept. 3, 2010; 76 FR 5057, Jan. 28, 2011; 78 FR 3835, Jan. 17, 2013; 78 FR 65529, Nov. 1, 2013; 86 FR 43391, Aug. 9, 2021; 87 FR 13123, Mar. 9, 2022; 89 FR 63037, Aug. 8, 2024] § 761.104 Developing the farm operating plan. Link to an amendment published at 91 FR 56752, Sept. 4, 2026. (a) An applicant or borrower must submit a farm operating plan to the Agency, upon request, for loan making or servicing purposes. (b) An applicant or borrower may request Agency assistance in developing the farm operating plan. (c) The farm operating plan will be based on accurate and verifiable information. (1) Historical information will be used as a guide. (2) Positive and negative trends, mutually agreed upon changes and improvements, and current input prices will be taken into consideration when arriving at reasonable projections. (3) Projected yields will be calculated according to the following priorities: (i) The applicant or borrower's own production records for the previous 3 years; (ii) The per-acre actual production history of the crops produced by the farming operation used to determine Federal crop insurance payments, if available; (iii) FSA Farm Program actual yield records; (iv) County averages; (v) State averages. (4) If the applicant or borrower's production history has been substantially affected by a disaster declared by the President or designated by the Secretary of Agriculture, or the applicant or borrower has had a qualifying loss from such disaster but the farming operation was not located in a declared or designated disaster area, the applicant or borrower may: (i) Use county average yields, or state average yields if county average yields are not available, in place of the disaster year yields when the county or state average yields are realistic and reasonable compared to the applicant's actual non-disaster year yields, as determined by the agency approval official; or (ii) Exclude the production year with the lowest actual or county average yield if their yields were affected by disasters during at least 2 of the 3 years. (d) Unit prices for agricultural commodities established by the Agency will generally be used. Applicants and borrowers that provide evidence that they will receive a premium price for a commodity may use a price above the price established by the Agency. (e) For MLs, when projected yields and unit prices cannot be determined as specified in paragraphs (c) and (d) of this section because the data is not available or practicable, other documentation from other reliable sources may be used to assist in developing the applicant's farm operating plan. (f) Development of farm operating plans and determination of appropriate repayment terms must include consideration of a reasonable amount of cash flow margin to increase working capital reserves and savings, including reasonable savings for retirement and education, to support operational stability and growth. (g) Except as provided in paragraph (h) of this section, the applicant or borrower must sign the final farm operating plan prior to approval of any loan or servicing action. (h) If the Agency believes the applicant or borrower's farm operating plan is inaccurate, or the information upon which it is based cannot be verified, the Agency will discuss and try to resolve the concerns with the applicant or borrower. If an agreement cannot be reached, the Agency will make loan approval and servicing determinations based on the Agency's revised farm operating plan. [72 FR 63285, Nov. 8, 2007, as amended at 78 FR 3835, Jan. 17, 2013; 86 FR 43391, Aug. 9, 2021; 89 FR 65037, Aug. 8, 2024] § 761.105 Analysis. Link to an amendment published at 91 FR 56752, Sept. 4, 2026. (a) The Agency conducts an analysis at its discretion or if the borrower: (1) Is being considered for a new direct loan or subordination; (2) Is financially distressed or delinquent; (3) Has a loan deferred, excluding deferral of an installment under subpart B of part 766; or (4) Is receiving a limited resource interest rate on any loan, in which case the review will be completed at least every 2 years. (b) The analysis must include a review of the previous production cycle's actual income, expense, and production performance, as well as a farm operating plan for the new operating cycle. [72 FR 63285, Nov. 8, 2007, as amended at 75 FR 54013, Sept. 3, 2010; 86 FR 43391, Aug. 9, 2021; 89 FR 65038, Aug. 8, 2024] §§ 761.106-761.200 [Reserved] Subpart D—Allocation of Farm Loan Programs Funds to State Offices § 761.201 Purpose. (a) This subpart addresses: (1) The allocation of funds for direct and guaranteed FO, CL, and OL loans; (2) The establishment of socially disadvantaged target participation rates; and (3) The reservation of loan funds for beginning farmers. (b) The Agency does not allocate EM loan funds to State Offices but makes funds available following a designated or declared disaster. EM loan funds are available on a first-come first-served basis. (c) State funding information is available for review in any State Office. [72 FR 63285, Nov. 8, 2007, as amended at 75 FR 54013, Sept. 3, 2010] § 761.202 Timing of allocations. The Agency's National Office allocates funds for FO, CL, and OL loans to the State Offices on a fiscal year basis, as made available by the Office of Management and Budget. However, the National Office will retain control over the funds when funding or administrative constraints make allocation to State Offices impractical. [72 FR 63285, Nov. 8, 2007, as amended at 75 FR 54013, Sept. 3, 2010] § 761.203 National reserves for Farm Ownership and Operating loans. (a) Reservation of funds. (b) Allocation of reserved funds. § 761.204 Methods of allocating funds to State Offices. FO, CL, and OL loan funds are allocated to State Offices using one or more of the following allocation methods: (a) Formula allocation, if data, as specified in § 761.205, is available to use the formula for the State. (b) Administrative allocation, if the Agency cannot adequately meet program objectives with a formula allocation. The National Office determines the amount of an administrative allocation on a case-by-case basis. (c) Base allocation, to ensure funding for at least one loan in each State, District, or County Office. In making a base allocation, the National Office may use criteria other than those used in the formula allocation, such as historical Agency funding information. [72 FR 63285, Nov. 8, 2007, as amended at 75 FR 54013, Sept. 3, 2010] § 761.205 Computing the formula allocation. (a) The formula allocation for FO, CL, or OL loan funds is equal to: (1) The amount available for allocation by the Agency minus the amounts held in the National Office reserve and distributed by base and administrative allocation, multiplied by (2) The State Factor, which represents the percentage of the total amount of the funds for a loan program that the National Office allocates to a State Office. formula allocation = (amount available for allocation−national reserve−base allocation−administrative allocation) × State Factor (b) To calculate the State Factor, the Agency: (1) Uses the following criteria, data sources, and weights: Criteria Loan type criterion is used for Data source Weight for Weight for Farm operators with sales of $2,500-$39,999 and less than 200 days work off the farm FO, CL, and OL loans U.S. Census of Agriculture 15 15 Farm operators with sales of $40,000 or more and less than 200 days work off farm FO, CL, and OL loans U.S. Census of Agriculture 35 35 Tenant farm operators FO, CL, and OL loans U.S. Census of Agriculture 25 20 3-year average net farm income FO, CL, and OL loans USDA Economic Research Service 15 15 Value of farm real estate assets FOs and CLs USDA Economic Research Service 10 N/A Value of farm non-real estate assets OL loans USDA Economic Research Service N/A 15 (2) Determines each State's percentage of the national total for each criterion; (3) Multiplies the percentage for each State determined in paragraph (b)(2) of this section by the applicable weight for that criterion; (4) Sums the weighted criteria for each State to obtain the State factor. [72 FR 63285, Nov. 8, 2007, as amended at 75 FR 54013, Sept. 3, 2010] § 761.206 Pooling of unobligated funds allocated to State Offices. The Agency periodically pools unobligated FO, CL, and OL loan funds that have been allocated to State Offices. When pooling these funds, the Agency places all unobligated funds in the appropriate National Office reserve. The pooled funds may be retained in the national reserve or reallocated to the States. [72 FR 63285, Nov. 8, 2007, as amended at 75 FR 54013, Sept. 3, 2010] § 761.207 Distribution of loan funds by State Offices. A State Office may distribute its allocation of loan funds to District or County level using the same allocation methods that are available to the National Office. State Offices may reserve a portion of the funds to meet unexpected or justifiable program needs during the fiscal year. § 761.208 Target participation rates for socially disadvantaged groups. (a) General. (2) The Agency sets the target participation rates for State and County levels annually. (3) When distributing loan funds in counties within Indian reservations, the Agency will allocate the funds on a reservation-wide basis. (4) The Agency reserves and allocates sufficient loan funds to achieve these target participation rates. The Agency may also use funds that are not reserved and allocated for socially disadvantaged groups to make or guarantee loans to members of socially disadvantaged groups. (b) FO and CL, loans based on ethnicity or race. (1) State is equal to the percent of the total rural population in the State who are members of such socially disadvantaged groups. (2) County is equal to the percent of rural population in the county who are members of such socially disadvantaged groups. (c) OL loans based on ethnicity or race. (1) State is equal to the percent of the total number of farmers in the State who are members of such socially disadvantaged groups. (2) County is equal to the percent of the total number of farmers in the county who are members of socially disadvantaged ethnic groups. (d) Women farmers. (i) State is equal to the percent of farmers in the State who are women. (ii) County is equal to the percent of farmers in the county who are women. (2) In developing target participation rates for women, the Agency will consider the number of women who are current farmers and potential farmers. [72 FR 63285, Nov. 8, 2007, as amended at 75 FR 54013, Sept. 3, 2010] § 761.209 Loan funds for beginning farmers. Each fiscal year, the Agency reserves a portion of direct and guaranteed FO and OL loan funds for beginning farmers in accordance with section 346(b)(2) of the Act. § 761.210 CL funds. (a) The following applicants and conservation projects will receive priority for CL funding: (1) Beginning farmer or socially disadvantaged farmer, (2) An applicant who will use the loan funds to convert to a sustainable or organic agriculture production system as evidenced by one of the following: (i) A conservation plan that states the applicant is moving toward a sustainable or organic production system, or (ii) An organic plan, approved by a certified agent and the State organic certification program, or (iii) A grant awarded by the Sustainable Agriculture Research and Education (SARE) program of the National Institute of Food and Agriculture, USDA. (3) An applicant who will use the loan funds to build conservation structures or establish conservation practices to comply with 16 U.S.C. 3812 (section 1212 of the Food Security Act of 1985) for highly erodible land. (b) [Reserved] [75 FR 54013, Sept. 3, 2010] § 761.211 Transfer of funds. If sufficient unsubsidized guaranteed OL funds are available, then beginning on: (a) August 1 of each fiscal year, the Agency will use available unsubsidized guaranteed OL loan funds to make approved direct FO loans to beginning farmers under the Down payment loan program; and (b) September 1 of each fiscal year the Agency will use available unsubsidized guaranteed OL loan funds to make approved direct FO loans to beginning farmers. [72 FR 63285, Nov. 8, 2007, as amended at 73 FR 74345, Dec. 8, 2008. Redesignated at 75 FR 54013, Sept. 3, 2010, as amended at 86 FR 43391, Aug. 9, 2021; 90 FR 30559, July 10, 2025] Subpart F—Farm Loan Programs Debt Settlement Source: 85 FR 36691, June 17, 2020, unless otherwise noted. § 761.401 Purpose. (a) This subpart describes the Agency's policies for debt settlement as authorized by the Consolidated Farm and Rural Development Act (CONACT) (7 U.S.C. 1921, 7 U.S.C. 1981, 1981a, 1981d, and 2008h). (b) FLP debts that cannot be debt settled using CONACT debt settlement authority such as when a borrower has received previous debt forgiveness on another direct loan made under the CONACT, will be processed as specified in 31 U.S.C. chapter 37 and 31 CFR parts 900 through 904. § 761.402 Abbreviations and definitions. (a) Abbreviations and definitions for terms used in this subpart are provided in 7 CFR part 3 and § 761.2. (b) Definitions used only in this subpart include: (1) Third party converter (i) Is in possession of agency security property, or money from the sale of security, in relation to a loan or other debt that the individual or entity was not liable for; or (ii) Assists, or participates knowingly or unknowingly, in the transportation or sale of agency security, in relation to a loan or other debt that the individual or entity was not liable for; or (iii) Assists, or participates knowingly or unknowingly, in temporarily or permanently relocating or concealing the location of agency security property, or money from the sale of agency security, in relation to a loan or other debt that the individual or entity was not liable for. (2) [Reserved] § 761.403 General. Link to an amendment published at 91 FR 56752, Sept. 4, 2026. (a) The Agency will settle debts that result from, except as otherwise specified in this section: (1)(i) Farm Ownership loans (part 764, subpart D of this chapter), including down payment loans (764, subpart E of this chapter); (ii) Operating loans (part 764, subpart G of this chapter), including microloans part 764 of this chapter), and youth loans (part 764, subpart H of this chapter); (iii) Emergency loans (part 764, subpart I of this chapter); (iv) Conservation loans (part 764, subpart F of this chapter); (v) Economic Emergency loans (serviced under parts 761 through 767 of this chapter); softwood timber loans; Soil and Water loans; Individual Recreation Loans; Irrigation and Drainage loans; and Shift-in-land-use (Grazing Association) loans; (2) Costs associated with servicing a borrower's account including, but not limited to, Uniform Commercial Code filing fees, surveys, appraisals, protective advances, and liquidation expenses; (3) Debts reduced to judgment; (4) Non-Program Loans; (5) Amounts the Agency is authorized to recapture through agreements such as the Shared Appreciation Agreement (part 766, subpart E of this chapter); (6) Loss claims paid on guaranteed loans (part 762 of this chapter); (7) Unauthorized assistance; (8) Amounts the Agency may collect from third party converters, or other individuals or entities having possession of security for FLP loans or monies obtained through the sale of FLP loan security; and (9) Debt returned to the Agency from the Treasury cross-servicing program. (b) The debtor's signature is not required to process some debt settlement actions. These cases include, but are not limited to, debts discharged in bankruptcy and debts returned from Treasury's cross-servicing program with amounts still owing when no further collection can be taken. (c) FSA will not engage in settlement of a debt if: (1) Foreclosure of security has been initiated and is pending with Justice, unless Justice has advised FSA that it does not object to the settlement; or (2) Debts that have been referred to Justice for a judgment, or a judgement has been obtained by the United States Attorney or Justice, unless Justice closes its file and releases the judgement back to FSA for continued servicing; or (3) The debtor's account is involved in a fiscal irregularity investigation in which final action has not been taken or the account shows evidence that a shortage may exist and an investigation will be requested. (d) The Agency will consider settlement of a debt only when: (1) All security has been liquidated and the proceeds, less any prior lien amounts, have been applied to the debt; or the Agency received a lump sum payment equal to the security's current market value, less any prior lien amounts, and (2) Payment is received based on the Agency's determination of the amount the borrower can pay to resolve the remaining balance owed on the unsecured debt. (3) The lump sum payment made under paragraph (d)(1) of this section for the security's market value may be submitted by the borrower, an individual authorized to act for the borrower pursuant to a power of attorney document or court order, or an individual who is not an obligor on the debt but who has an ownership interest in the security. (e) If an FLP loan has been accelerated and all security has been liquidated, and the agency has approved an adjustment debt settlement offer in accordance with this subpart, voluntary payments and involuntary payments (such as offsets) will be applied in the following order, as applicable: (1) Recoverable costs and protective advances plus interest; (2) Loan principal; (3) Deferred non-capitalized interest; (4) Accrued deferred interest; and (5) Interest accrual to date of payment. (f) Settlement of FLP debt referred to Treasury's cross-servicing program and returned to the Agency as uncollectible will not be processed for the borrower until all FLP debts referred to the cross-servicing program for that borrower have been returned, with or without payment agreements. [85 FR 36691, June 17, 2020, as amended at 86 FR 10441, Feb. 22, 2021] § 761.404 Eligibility. (a) A borrower is eligible for debt settlement if the borrower: (1) Meets the requirements for the particular type of debt settlement under this part; and (2) Submits a complete application for debt settlement as specified in § 761.405. (b) All parties liable for the debt must submit a complete application with the following exceptions: (1) The applicable information required in § 761.405 can be provided by the administrator or executor of the Estate, heir, or other authorized person who can sign the debt settlement application; or compiled by FSA staff when a signature cannot be obtained. (2) The debt may be settled when the borrower has no known assets or income from which collection can be made, has disappeared and cannot be located without undue expense, and there is no security remaining for the debt. (3) In cases where the full amount of the unsecured debt cannot be collected in a reasonable time by legal action or through enforced collection proceedings, the Agency may consider a debt settlement offer submitted by a borrower without requiring a complete application. When evaluating these offers, the Agency will consider the likelihood of the debtor obtaining a larger income or additional assets, including inheritance prospects within 5 years, from which legal or enforced collection could be made. (c) A borrower is not eligible for debt settlement if: (1) The borrower is indebted on another active FLP loan that the borrower cannot or will not debt settle; or (2) The debt has been referred to the OIG, OGC, or Justice because of suspected civil or criminal violation, unless investigation was declined or advice was provided that the debt can be canceled, compromised, or adjusted. § 761.405 Application. (a) A borrower requesting debt settlement must submit complete and accurate information from which the Agency can make a full determination of the borrower's financial circumstances and repayment ability. Except for the situations listed in § 761.404(b), each liable party, must submit the following: (1) One completed original debt settlement application on the applicable Agency form signed by all parties liable for the debt; (2) A current financial statement; (3) A cash flow projection for the next production or earnings period; (4) Verification of employment or other earned income, including verification of a nondebtor spouse's income which will be included as available to pay family living expenses; (5) Verification of assets including, but not limited to, cash, checking accounts, savings accounts, certificates of deposit, individual retirement accounts, retirement and pension funds, mutual funds, stocks, bonds, and accounts receivable; (6) Verification of debts exceeding an amount determined by the Agency; (7) Copies of complete Federal income tax returns for the previous 3 years; and (8) Any other items requested by the Agency to evaluate the debtor's financial condition. (b) [Reserved] [85 FR 36691, June 17, 2020, as amended at 86 FR 43391, Aug. 9, 2021] § 761.406 Types of debt settlement. (a) Compromise. (1) The borrower pays a lump sum as a compromise for the remaining unsecured debt; and (2) The amount is reasonable based on the Agency's determination of what the borrower can pay to settle the debt. (b) Adjustment. (1) The borrower agrees to pay the adjustment amount for a period of time not to exceed 5 years; and (2) The amount is reasonable based on the Agency's determination of what the borrower can pay to settle the debt; and (3) The borrower provides documentation that funds are, or will be, available to pay the adjustment offer through its term. (c) Cancellation. § 761.407 Failure to pay. (a) Failure to pay any compromise amount approved by FSA by the date agreed will result in cancellation of the compromise agreement. (b) Failure to pay debt adjustment amounts approved by FSA by the dates agreed will result in cancellation of the adjustment agreement. (c) A debtor who has entered into an agreement under this subpart may request that FSA extend a repayment date for 90 days. The debtor must provide information that supports the basis for the request at the time the request is made. (d) If a debtor is delinquent under the terms of an adjustment agreement and FSA determines the debtor is likely to be financially unable to meet the terms of the agreement, the existing agreement may be cancelled and the debtor may be allowed to apply for a different type of settlement more consistent with the debtor's repayment ability. (e) If an agreement is cancelled, any payments received will be retained as payments on the debt owed. § 761.408 Administrator authority. On an individual case basis, the Agency may consider granting an exception to any requirement of this part if: (a) The exception is not inconsistent with the authorizing statute or other applicable law; and (b) The Agency's financial interest would be adversely affected by acting in accordance with this part and granting an exception would resolve or eliminate the adverse effect upon its financial interest.