4 TAC §§27.1 - 27.8
The Board of Directors of the Texas Agricultural Finance
Authority (TAFA) of the Texas Department of Agriculture (the department) proposes
new §§27.1 - 27.8, concerning procedures for participation in the
TAFA Preferred Lender Program. The new chapter is proposed in order to provide
lenders of Texas an opportunity to participate in a preferred lender program
for the Young Farmer Loan Guarantee Program and the Farm and Ranch Finance
Program and to establish standards and procedures for the new program. The
preferred lender program will provide approved lenders the ability to receive
application approval for eligible applicants within a two-week time period
and will allow approved lenders to receive preapproval for all documentation
required for closing an approved commitment. The new sections state the purpose
of the program, provide definitions to be used in the chapter, establish qualifications
and application procedures for a preferred lender and required information
for applications submitted for the consideration to the respective programs,
and establish the commitment approval process, notification procedures for
an approved or denied application, procedures for the default of an approved
commitment, and procedures for an annual review and notification process by
TAFA for approved participating preferred lenders.
Mr. Robert Kennedy, Deputy Assistant Commissioner for Agricultural Finance,
has determined that for the first-five year period the new sections are in
effect, there will be no fiscal implications for state or local government
as a result of enforcing or administering the new sections. It is anticipated
that the revenue generated by the program from application fees and interest
income will be adequate to cover cost of administration of the program.
Mr. Kennedy also has determined that for each year of the first five years
the new sections are in effect, the public benefit anticipated as a result
of enforcing the new sections will be the potential to generate greater number
of approved commitments for agricultural entities by providing the lending
community an opportunity to receive expidited service from TAFA. There will
be no effect on small business. There will be no anticipated economic cost
to persons who are required to comply with the sections as proposed.
Comments on the proposal may be submitted to Mr. Robert Kennedy, Deputy
Assistant Commissioner for Finance, Texas Department of Agriculture, P.O.
Box 12847, Austin, Texas 78711. Comments must be received no later than 30
days from the date of publication of this proposal in the
Texas Register
.
The new sections are proposed under the Texas Agriculture Code, §58.022
and §59.022, which provide the TAFA board with the authority to adopt
rules and procedures for administration of the programs of TAFA.
The code affected by the proposal is the Texas Agriculture Code, Chapters
58 and 59.
§27.1.Purpose.
The Texas Agricultural Finance Authority (the Authority) is mandated
by the Texas legislature to provide financial assistance to eligible agricultural
entities throughout the state. The Authority has determined that for the Young
Farmer Loan Guarantee Program and the Farm and Ranch Finance Program, lenders
have the necessary policies and procedures to assure the Authority of reasonable
loan servicing practices and appropriate risk controls. This chapter establishes
standards of eligibility and procedures for the lending community to participate
in a preferred lender program for the two referenced programs.
§27.2.Definitions.
The following words and terms, when used in this chapter, shall have
the following meanings, unless the context clearly indicates otherwise.
(1)
Act--The Texas Agricultural Finance Authority Act, Texas
Agriculture Code, Chapter 58 and Chapter 59, as amended.
(2)
Applicant--Any lender or group of legally affiliated lenders
applying for a designation as a preferred lender under these rules.
(3)
Application--A written request from a lender, properly
authorized and including all required material for a lender who desires to
become a preferred lender.
(4)
Authority--The Texas Agricultural Finance Authority
(5)
Board--The board of directors of the Authority.
(6)
Business Day--A day on which the department is open for
business. The term shall not include Saturday, Sunday, or any traditional
holiday officially observed by the state. The department's normal business
hours are 8 a.m. to 5 p.m. each business day.
(7)
Commissioner--Commissioner is the commissioner of the Texas
Department of Agriculture.
(8)
Commitment--An approved loan request under the appropriate
program(s).
(9)
Loan Request--A request submitted by a preferred lender
on behalf of a potential borrower for the Program(s).
(10)
Preferred Lender--Applicants approved by the Board as
participants in the Preferred Lender Program for the respective Program(s).
(11)
Program(s)--Program(s) are the Young Farmer Loan Guarantee
Program and the Farm and Ranch Finance Program.
(12)
Staff--Staff of the department designated by the Commissioner
to administer programs of the Authority.
§27.3.Qualifications for the Preferred Lender Program (PLP).
The applicant must submit an application for PLP status to the Authority
to include:
(1)
a statement requesting PLP status for either, or both,
the Young Farmer Loan Guarantee Program and the Farm and Ranch Finance Program.
(2)
a summary of the applicant's capability to adequately approve,
including the approval process, and service the requested commitment(s);
(3)
evidence of credit examination and supervision of applicable
state and/or federal regulatory agencies to include a certificate of good
standing from these agencies;
(4)
a statement of ability to properly service and discharge
its loan making and servicing responsibilities;
(5)
a sample of the applicant's credit management system, which
contains policies and underwriting standards; loan and security documentation;
credit file management documentation; collateral management system documentation;
and portfolio management system;
(6)
a compilation of the historical loan loss ratio for loans
comparable to the two programs under these rules over the last five years,
or a copy of the call report completed by the applicant and filed with their
regulatory authority for a comparable period;
(7)
a copy or sample of an approved loan request including
application and underwriting information. Should this be a copy of an approved
application, please delete names, addresses, and other confidential information;
(8)
a copy of all loan documents, which are normally used by
the Preferred Lender in closing an approved loan request;
(9)
evidence of other Preferred Lender Program status designations,
if any;
(10)
a statement of any potential conflict of interest of the
borrower with any employee of the Texas Department of Agriculture or the board
of the Texas Agricultural Finance Authority; and
(11)
an agreement that to maintain its PLP status, the applicant
must submit at least four (4) loan requests each fiscal year, which can be
a combination of the two programs.
§27.4.Preferred Lender Program Approval Process.
(a)
A complete application from a applicant for the Preferred
Lender Program will be considered by the Board at the next regularly scheduled
meeting with notification of approval or denial issued by staff to lender
within ten working days after the posted meeting.
(b)
Upon approval of Preferred Lender Program status, the applicant
and the Authority will negotiate the proper guaranty and/or participation
agreement(s) for the respective program(s).
§27.5.Required Information for a Commitment Request to the Program(s).
(a)
The preferred lender will submit, at a minimum, the following,
with each loan request submitted for participation in the program(s):
(1)
the eligibility checklist for the respective program;
(2)
the signed notification for the Texas Public Information
Act;
(3)
a copy of the lender's loan application;
(4)
a copy of the lender's loan narrative;
(5)
historical financial statements and/or tax returns for
the last three years of the proposed borrower, if available;
(6)
the borrower's balance sheet, which could be the year end
statement and an interim statement, less than 90 days old;
(7)
the borrower's cash flow budget for the period of the projected
financing;
(8)
a copy of the borrower's credit report;
(9)
a plan for servicing the loan;
(10)
a statement of any potential conflict of interest of the
borrower with any employee of the Texas Department of Agriculture or the board
of the Texas Agricultural Finance Authority; and
(11)
any other information that could be applicable to approving
or denying the loan request under the program.
(b)
In addition to the minimum requirements, the preferred
lender will perform at least the same level of evaluation and documentation
for the commitment that the preferred lender would perform for loans not in
the program.
§27.6.Approval or Denial and Issuance of Notification.
(a)
Staff will review the loan request submitted for completeness
and notify the preferred lender of any information that is deficient within
two business days from the date received.
(b)
When all information is received, staff will review the
loan request and prepare a credit memorandum within five business days of
receipt, for review by the deputy assistant commissioner and/or the assistant
commissioner with a recommendation for either approval or denial.
(c)
The credit memorandum will contain a brief narrative of
the project including the amount and terms of the commitment, the percentage
of guaranty requested or participation to be purchased, summary of collateral
pledged, history of the borrowers, summary financial information, and strengths
and weaknesses of the operation.
(d)
The assistant commissioner and/or deputy assistant commissioner
will present the applications to the commissioner for approval or denial.
(e)
Notification of approval or denial by the commissioner
will be submitted to the lender in writing within 14 business days from the
date of receipt of the completed application.
(f)
If the commissioner approves the loan request, preferred
lender will proceed with closing the loan request using the pre-approved loan
documentation. Should any loan document be required that has not been previously
approved by the Authority, a copy must be submitted to staff for approval
before closing.
(g)
Staff shall, within 30 business days of the preferred lender
closing the commitment, perform an inspection of the project and collateral
pledged to the project.
(h)
The preferred lender will submit to staff a complete set
of the closing documents within 10 business days of closing the commitment.
(i)
Staff will have the option of reviewing any of the pledged
collateral for the project upon notification of the lender and the borrower.
§27.7.Commitments in Default.
(a)
The preferred lender will notify staff in writing of any
condition of default, excluding payment default, that may occur by the borrower
within 10 business days of the determination of default. In the case of a
payment default preferred lender with notify staff of any payment default
when such account is 30 days past due.
(b)
The preferred lender will notify staff in writing of any
collection efforts to be taken by the preferred lender against the borrower.
(c)
The preferred lender will notify staff of a request of
any deferrals or restructures of the original commitment prior to any deferral
or restructure, and receipt of written notification of approval from staff
prior to any deferral or restructure.
(d)
Any payment by the Authority will be pursuant to the appropriate
agreement negotiated between the Authority and the preferred lender for the
respective program.
§27.8.Review of Preferred Lenders by the Authority.
(a)
The Board will review each approved preferred lender after
each biennium of the state to determine the preferred lender's participation
in the program.
(b)
The Board may at its discretion disqualify a preferred
lender, at any time, from its preferred lender status for any action identified
by the Authority, which would not be reasonable and prudent by a comparable
lender for a similar account.
(c)
Should a preferred lender be determined in non-compliance
with these rules and procedures or be disqualified by the Board, the preferred
lender will be notified in writing of any actions taken by the Board.
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of
the Secretary of State, on March 26, 2001.
TRD-200101769
Dolores Alvarado Hibbs
Deputy General Counsel
Texas Department of Agriculture
Earliest possible date of adoption: May 6, 2001
For further information, please call: (512) 463-4075