S. 3936 — USDA Loan Modernization Act

This section revises eligibility requirements for direct farm ownership loans (i.e., financing for purchasing or improving family-sized farm real estate) under 7 U.S.C. 1922(a) by (1) changing the required control of entities by farmers and ranchers, and the required interest held by such individuals in entities, to at least 50 percent (from a majority); and (2) replacing prior exceptions to owner-operator requirements with new provisions deeming qualified operators (as defined by the Secretary) eligible, allowing operating-only entities to qualify if one or more farm real estate owners holds at least 50 percent (or other percentage as determined by the Secretary) of the applicant, and permitting embedded entities to qualify if at least 75 percent of their ownership interests are held directly or indirectly by qualified operators of the farm.

This section revises eligibility requirements for direct and guaranteed farm operating loans under the Consolidated Farm and Rural Development Act by (1) lowering the required individual ownership interest in applicant entities from a majority to at least 50 percent, both generally and for entities controlled by blood-or-marriage-related individuals operating family-sized farms; and (2) establishing special rules deeming (A) qualified operators, as defined by the Secretary, to meet operator requirements, and (B) certain operating-only entities owned in whole or part by other entities to meet direct ownership requirements if at least 75 percent of the embedded entity's (or other entities') total ownership interests are held directly or indirectly by qualified farm operators. (As background, these Farm Service Agency loans provide credit for operating expenses to family farmers and ranchers unable to secure commercial financing. Thus, the changes broaden access for entity applicants with shared or multi-tiered ownership.)

This section revises eligibility requirements for emergency loans under the Consolidated Farm and Rural Development Act (i.e., direct and guaranteed loans to farmers, ranchers, including equine operations, and aquaculture producers whose operations are substantially affected by a federal quarantine, natural disaster, or presidentially declared major disaster or emergency and who cannot obtain sufficient commercial credit). Specifically, it restructures subsection (a); changes the required ownership interest held by eligible individuals (i.e., operators of not larger than family farms) from a majority to at least 50 percent; strikes an additional requirement applicable to certain entities; and adds special rules under new paragraph (2) deeming (A) qualified operators (as defined by the Secretary) to meet operator requirements; (B) operating-only entities to meet owner-operator requirements if one or more real estate owners hold at least 50 percent (or other percentage determined by the Secretary) of the applicant; and (C) certain embedded entities to meet direct ownership requirements if at least 75 percent of their ownership interests are held, directly or indirectly, by qualified farm operators.