(a) DBSA is available to borrowers with at least one outstanding program loan authorized in subtitle A, B, or C of the CONACT (the loan must be an OL, FO, CL, SW, or EM), and who are a delinquent borrower or financially distressed borrower.

(b) DBSA is not intended to circumvent other servicing available under this part.

(a) Borrower eligibility. The borrower must meet all the following requirements to be eligible for DBSA:

(1) The borrower must currently be operating the farm. Farmers who have rented out their land base for cash are not considered to be operating the farm.

(2) The borrower must have acted in good faith, and the borrower's inability to make the current or upcoming scheduled loan payments must be for reasons not within the borrower's control.

(3) The borrower cannot have more than one DBSA on each loan.

(4) The borrower does not have sufficient income available to pay all family living and farm operating expenses, other creditors, and debts to the Agency. This determination will be based on:

(i) The borrower's actual production, income and expense records; and

(ii) Any other records required by the Agency;

(5) For the next production cycle, the borrower must develop a feasible plan showing that the borrower will at least be able to pay all operating expenses and taxes due during the year, essential family living expenses, and meet scheduled payments on all debts, including Agency debts. The borrower must provide documentation required to support the farm operating plan.

(6) The borrower must not be in non-monetary default.

(7) The borrower must not be ineligible due to disqualification resulting from Federal crop insurance violation according to 7 CFR part 718.

(8) The borrower must not become 165 days past due before the appropriate Agency DBSA documents are executed.

(b) Loan eligibility. The loan must meet all the following requirements to be eligible for DBSA:

(1) To be considered for DBSA the loan must have been either an OL, FO, CL, SW or EM outstanding prior to September 25, 2024.

(2) All of the borrower's program and non-program loans must be current after the Agency completes DBSA for the scheduled payment installment.

(3) All FLP loans must either be current or less than 150 days past due at the time the complete application for DBSA is received by the Agency.

(4) The Agency has not accelerated the borrower's account.

(5) For any loan that will receive DBSA, the remaining term of the loan must equal or exceed 2 years from the due date of the DBSA agreement.

(6) The loan must not have an existing DBSA or DSA in place.

(7) The loan must not have been consolidated with any other loan that would not be eligible for DBSA on its own merits.

(a) The DBSA amount is limited to the lesser of:

(1) The amount of the delinquent installment or upcoming scheduled installment; or

(2) The amount the borrower is unable to pay the Agency. Borrowers are required to pay any portion of an installment they are able to pay.

(b) The amount set aside will be the unpaid balance remaining on the installment at the time DBSA is complete. The amount will include the unpaid interest and any principal that would be credited to the account as if the installment were paid on the due date, taking into consideration any payments applied to principal and interest since the due date.

(c) Recoverable cost items may not be set aside.

(a) Requests for DBSA. To request DBSA:

(1) A borrower must submit a request for DBSA to the Agency in writing.

(2) All borrowers liable for the loan must sign the DBSA request.

(b) Required financial information. When requesting DBSA:

(1) The borrower must submit actual production, income, and expense records for the current and upcoming production cycle unless the Agency already has that information for the borrower.

(2) The borrower must provide any additional information requested by the Agency.

Subject to the 165-calendar day limitation in § 766.452(a)(8), the borrower must execute the appropriate Agency documents within 45 days after the borrower receives notification of Agency approval of DBSA, which will be within 30 days of having submitted a complete application.

(a) Interest accrual. Interest will accrue on any principal portion of the DBSA installment at the rate of one eighth of a percent.

(b) Due date. The DBSA amount, including interest accrued on the principal portion of the set-aside, is due on or before the final due date of the loan.

(c) Applying payments. The Agency will apply borrower payments toward DBSA installments first to interest and then to principal.

(a) The Agency will cancel a DBSA agreement if the Agency takes any PLS action on the loan.

(b) The Agency will cancel a DBSA agreement if the borrower pays the:

(1) Current market value buyout in accordance with § 766.113; or

(2) The set-aside installment.

If the Agency determines that the borrower received an unauthorized DBSA, the Agency will reverse the DBSA agreement after all appeals are concluded.