There were two primary changes to this section:

First. The Agency added discussion concerning the availability of technical assistanceonly grants as one of the types of funding to be available under the program (Sec. 4280.301(a)(4) and (d)).

Second. The Agency clarified that participating microlenders can use the
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TA grants to provide technical assistance not only to
microentrepreneurs who have actually received a loan from the microlender, but also to microentrepreneurs who are seeking a loan from the microlender (Sec. 4280.301(a)(2)).

As the purpose of this Program is to support the development and ongoing success of rural microentrepreneurs and microenterprises, microentrepreneurs are encouraged to contact the Agency for a list of MDOs in or near their geographic area that are participating in this Program.

Definitions and Abbreviations (Sec. 4280.302)

The Agency made changes to the definitions section of the rule, including adding several new definitions. Except for terms in which the changes were grammatical, the following identify each affected term.

Agency personnel. Because no Agency personnel are eligible for a microloan under the interim rule, revised by removing the last clause (``who are more than 6 months from separating from the Agency'') because it is no longer necessary.

Close relative. Added to clarify the implementation of Sec. 4280.323(d) concerning the restrictions on the use of loan funds.

Default. Has been simplified for purposes of clarity.

Eligible project cost. Has been added as part of the implementation of the cost share requirement.

Facilitation of access to capital. To clarify this term, the words ``access to'' have been added.

Fiscal year. Added the word ``Federal'' for clarity.

Indian tribal government employee. Has been removed as a conforming change.

Loan loss reserve fund. Revised by removing text not associated with the definition of the term, but which was also covered elsewhere within the rule.

Microborrower. Added for clarification in implementing the rule.

Microentrepreneur. Revised to clarify that both the microentrepreneur and the microenterprise to be assisted under the program must be located in a rural area. In addition, the phrase ``business financing'' was replaced with ``business capital.'' Lastly, a sentence was added to note that a microentrepreneur who has received a loan under this program may also be referred to as a microborrower within the rule.

Military personnel. Revised to add the words ``or grade'' after the word ``rank''; ``United States'' after the word ``active''; ``active duty'' after the word ``their''; and to remove to the word ``enlisted''.

Nonprofit entity. Has been simplified and reference to the ``U.S. Internal Revenue Service'' has been removed.

Rural microenterprise. Revised the term to ``microenterprise'' and expanded the definition for clarity.

Rural microloan revolving fund. Revised for clarity.

Significant outmigration. Removed because the term is not used in the interim rule for the reasons discussed in the responses to comments.

State. Added to clarify the applicability of the program. Review of Appeal Rights and Administrative Concerns (Sec. 4280.304)

In paragraph (a), the words ``a microlender, or grantee MDO'' were added after the word ``MDO'' to clarify the applicability of this paragraph.
Nondiscrimination and Compliance With Other Federal Laws (Sec. 4280.305)

In paragraph (a), ``Applicant'' was replaced with ``Any entity receiving funds under this subpart'' to clarify the applicability of this paragraph.

Forms, Regulations, and Instructions (Sec. 4280.306)

This section has been added to identify where applicants can access forms, regulations, and instructions noted within the subpart. Program Requirements for MDOs (Sec. 4280.310)

This section has been revised and redesignated. The substantive changes are described below:

First. The citizenship requirements have been clarified to apply only to nonprofit entities (paragraph (a)(2)), not American Indian tribes or United States public institutions of higher education.

Second. In addition to moving the requirements specific to potential microlenders into paragraph (a)(4), the Agency has added a new provision (paragraph (a)(4)(ii)) regarding obtaining an attorney's opinion regarding the microlender's legal status and its ability to enter into program transactions at the time of initial entry into the program.

Third. A minimum score threshold has been added for MDOs to be considered for receiving an award under this subpart (paragraph (b)). Generally, applicants must receive at least 70 points out of 100 in order to be eligible to receive an award under the program.

Fourth. The Agency removed ``is delinquent in meeting U.S. Internal Revenue Service (IRS) requirements'' from the list of provisions identifying ineligible applicants.
Loan Provisions for Agency Loans to Microlenders (Sec. 4280.311)

A number of changes have been made to this section, including grammatical changes and redesignation of paragraphs. The substantive changes are described below:

First. The Agency revised the provisions associated with the cost share requirements by applying them only to loans and identifying two options for how microlenders can establish Rural Microloan Revolving Funds (RMRFs). The provisions also allow microlenders the option of setting up multiple RMRFs (paragraph d)). Because of this revision, a conforming change was made to paragraph (c) to refer to ``RMRF'' funds instead of ``Agency loan'' funds.

Second. The provisions concerning the term of a loan have been recast to state that a term shorter than 20 years will be considered if requested by the applicant MDO and must be agreed to by the microlender and the Agency (paragraph (e)(3)).

Third. The number of days loan closing must take place has been revised to within 90 days, rather than 60 days as proposed, before funds would be forfeited (paragraph (e)(8)).

Fourth. Revised the number of day microlenders have to make at least one microloan from within 30 days to within 60 days of disbursement (paragraph (e)(10)). Further, failure to make a microloan within this time period may result in the microlender not receiving any additional funds from the Agency and may result in the Agency demanding return of any funds already disbursed to the microlender.

Fifth. Revised substantially the interest rate provisions. In the interim rule, each microloan made to a microlender during the first five years of participation will bear an interest rate of 2 percent and each loan made to the microlender after the fifth year of participation will bear an interest rate of 1 percent (paragraph (e)(12)).

Sixth. Revised several dates in the section, including the date when the Agency will calculate and amortize the microlender's debt after the deferral period (e.g., (paragraph (e)(13)).

Seventh. Removed the provisions associated with negative amortization and reamortization (proposed Sec. 4280.311(d)(15)(i) and (ii)).

Eighth. Modified the rule to indicate that loans can be used to recapitalize existing Agency funded RMRFs (paragraph (f)(2)).

Ninth. Added a provision to provide microlenders 30 days to replenish the loan loss reserve fund (LLRF) if it falls
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below the required amount (paragraph (g)(2)(i)).

Tenth. Removed the phrase ``and partially funded'' in paragraph (g)(4).

Eleventh. Added a conforming change to the requirement for maintaining a minimum 100 percent of the amount owed by the microlender to the Agency for those microlenders with 3 years or less experience (paragraph (h)(2)).

Twelfth. Added a provision requiring microlenders to provide Agency access to any of the microlender's records pertaining to any microloan made to the microlender under this program. This was added to enable the Agency to better enforce the provision of this program (paragraph (h)(7)).

Thirteenth. Added a provision requiring prior written Agency approval before the microlender makes any key personnel changes (paragraph (h)(8)).

Loan Approval and Closing (Sec. 4280.312)

This section has been added and is comprised of proposed Sec. 4280.311(g) and (h) for clarity. Changes to these paragraphs are:

Grant Provisions (Sec. 4280.313)

This section has been redesignated (proposed Sec. 4280.312) and a number of changes have been made, including grammatical changes and reordering of paragraphs. The substantive changes are described below:

First. The calculation of the maximum TA grant amount has been revised such that the maximum annual TA grant to any one microlender could be $205,000 (paragraphs (a)(1)(i) and (b)(2)). The maximum TA grant amount for a microlender is now calculated as 25 percent of the first $400,000 of outstanding microloans owed to the microlender under this program, plus an additional 5 percent of the outstanding loan amount owed by the microborrowers to the lender over $400,000 up to and including $2.5 million.

Second. The addition of provisions that a microlender who expends more than 10 percent of its TA grant funding on administrative expenses will be considered in performance default and may have to forfeit funding (paragraph (b)(3)(iii)).

Third. Provisions have been added to address funding of the TAonly grants (paragraphs (a)(1)(ii) and (c)).

Fourth. The matching requirements have been revised (paragraph (a)(2)).

Fifth. The Agency added a provision requiring prior written Agency approval before the microlender makes any key personnel additions (paragraph (a)(5)).

Sixth. The grant oversight provisions were moved from this section and consolidated with those in Sec. 4280.320.
MDO Application and Submission Information (Sec. 4280.315)

Most of the changes to the section reflect a reorganization of the provisions found in the proposed rule. Substantive changes include:

A number of changes have been made to this section, including grammatical changes, redesignation of paragraphs, and clarification as to whether the information to be submitted applied to rural or non rural microentrepreneurs and microenterprises, or both, and to microloans or loans or the microlenders entire portfolio. The substantive changes are described below:

The Agency notes that, except for applications from microlenders with more than 5 years experience with this program:

1. The maximum number of points that each application can receive is 100;

2. Each application will be scored against the criteria specified in Sec. 4280.316(a) for which it can receive a maximum of 45 points;

3. Each application will be scored against the criteria specified in Sec. 4280.316(b), (c), or (d), as applicable, for which it can receive a maximum of 55 points; and

4. An application must receive at least 70 points in order to be eligible.

Applications from lenders with more than 5 years experience in this program will be scored on a pass/fail basis. Those applications that pass will be assigned a score of 90 points.

Figure 1 illustrates the RMAP scoring process.
Application Requirements for All Applicants (Sec. 4280.316(a)) BILLING CODE 3410XYP
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[GRAPHIC] [TIFF OMITTED] TR28MY10.002
BILLING CODE 3410XYC

[[Page 30119]]

Changes to these application requirements are mostly editorial in nature; there were no changes in the basic scoring criteria or points to be awarded. Substantive changes included:

There were several important changes associated with the scoring criteria for these applications, including:

With the removal of outmigration as a scoring criterion for loans and the addition of the new scoring criterion, the points associated with most of the criteria also changed.
Application Requirements for MDOs Seeking To Participate as RMAP Microlenders With 3 Years or Less Experience (Sec. 4280.316(c))

There are no significant substantive changes to the scoring criteria for these applications other than a redistribution of points. Application Requirements for MDOs Seeking Technical AssistanceOnly Grants (Sec. 4280.316(d))

This is a completely new set of scoring criteria required by the addition to the interim rule of providing technical assistance grants to MDOs that are otherwise not participating as a microlender. The criteria included address: History of provision of technical assistance to microentrepreneurs, ability to provide technical assistance to microentrepreneurs, technical assistance plan, and proposed administrative expenses to be spent from TA grant funds.
ReApplication Requirements for Participating Microlenders With More Than 5 Years Experience as a Microlender Under This Program (Sec. 4280.316(e))

The substantive changes to this section were to:

Selection of Applications for Funding (Sec. 4280.317)

A few changes have been made to this section as briefly described below:

Grant Administration (Sec. 4280.320)

The changes made to this section addressed presentation of the requirements and updating and revising the forms to be submitted. This section now also states that if a microlender has more than one grant from the Agency, a separate report must be made for each.
Loans From the Microlenders to the Microentrepreneurs and

Microenterprises (Sec. 4280.322)

A number of changes have been made to this section, including grammatical changes and reordering of paragraphs. The substantive changes are described below:

A few changes have been made to this section:
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IV. Discussion of Comments

The proposed rule was published in the Federal Register on October 7, 2009 (74 FR 51713), with a 45day comment period that ended November 23, 2009. Comments were received from 48 commenters yielding over 450 individual comments on the proposed rule, which have been grouped into similar categories. Commenters included members of Congress, Rural Development personnel, microenterprise development organizations, trade associations, states, universities, environmental organizations, and individuals. As a result of some of the comments, the Agency made changes in the rule. The Agency sincerely appreciates the time and effort of all commenters. Responses to the comments on the proposed rule are discussed below.

General

Comment: Several commenters provided general support for the program, and positive discussion of other microenterprise development activities and programs to address rural need.

One commenter provided general support for the program's efforts to build the capacity of the microenterprise development industry to achieve new levels of performance and effectiveness. Due to tightened credit markets as a result of the recession, microlenders face increased demands to provide capital and technical assistance to both startups and existing microentrepreneurs.

Several commenters stated that they strongly support this commenter's comments on the proposed rule.

Response: The Agency appreciates the support for the program reflected by the commenters, acknowledges the microenterprise development work that has produced positive activity both in the United States and abroad for several decades, and looks forward to formalizing the Agency's participation in this economic development sector.

Comment: One commenter stated that they believe RMAP will do much good in reversing the economic and financial crisis in rural communities. With many rural areas underserved or not served at all by MDOs, the Agency should be doing all it can to recruit as many qualified organizations as possible to become engaged in rural training and microentrepreneur lending. The proposed rule's scoring should encourage the effort to build MDO networks to serve these communities with as many organizations with the necessary expertise as possible.

Response: The Agency acknowledges the commenter's support. Funding Allocations

Comment: Four commenters stated that the terms of the proposed rule make it difficult to determine how USDA will make decisions on applications that seek funding from different components (the socalled ``enhancement grants'' and the loans/TA grants) without stating how much of available funding goes to each component. The commenters recommended that the final rule should contain information concerning program funding, including the subsidy rate that will be used to calculate the RMAP loan program level and legislative intent in the USDA FY 2010 appropriations bill. If this information is unattainable or otherwise not available, the commenter recommended that all RMAP dollars not previously identified by Congress as loan subsidy dollars be used to provide TA training grants to MDOs.

Response: The Agency considered a standard division among the program components and determined that such a balance should be adjustable in future years based on market demands and conditions. Therefore, the Agency has not included program funding in the rule with one exception. As noted later in this preamble, the Agency plans to use up to 10 percent of program funding each year for technical assistance only grants for MDOs that are not otherwise participating in the program. The Agency will publish program levels annually in a Notice of Funding Availability (NOFA).

Existing MDO Emphasis

Comment: Several commenters were concerned that the proposed rule applies exclusively to existing MDOs, especially those heavily involved in lending. The commenters stated that one of the purposes of the law is to build and enhance microenterprise services in rural areas, particularly remote rural areas and believe the application and scoring emphasis on MDO history (particularly an MDO's lending history) implies funding only for existing MDOs, and the ``enhancement grants'' provision (of the proposed rule) is defined in terms of
``microlenders'' and ``projects'' and activities that enhance the microlenders' capabilities, implying that funds will go exclusively for existing MDOs involved in lending. According to the commenters, this upsets the intended balance in RMAP between training, technical assistance (not connected to loans to MDOs) and lending, and between existing MDOs and developing a network of MDOs in unserved and underserved rural areas. The commenters suggested that the final rule restore the intended balance in both respects.

Response: With regard to the comment concerning training and technical assistance, the Agency agrees that microlenders who are not participating in RMAP as lenders should have access to technical assistance grants in order to provide such assistance to rural microentrepreneurs. Thus, the Agency has included in the rule Sec. 4280.301 provisions for MDOs who are otherwise not participating in the program to be eligible to receive technical assistance grants.

With regard to the comment concerning existing MDOs and developing a network of MDOs, the Agency disagrees with the commenters that the rule does not address both. As provided in both the proposed rule and this interim rule, MDOs with less than 3 years experience are eligible to compete for program funds. Thus, this would allow for developing a network of MDOs. However, to further meet the need for developing a network, the Agency is requesting that comments and suggestions regarding the delivery of an enhancement grant program be submitted (see Section V of this preamble).

Administrative Management

Comment: One commenter expressed concern that the interest rate criteria specified were too complex for the current automated systems to monitor or effectively manage.

Response: During the development of the regulation, the program area has been engaged in system requirements discussions with Agency information technology staff. The Agency anticipates that, by the time the first applications are received, systems (the Rural Utilities Loan Servicing System (RULSS)) will be ready to accommodate the interest rate provisions in the rule.

Comment: One commenter stated that the program should be aligned with existing Rural Development programs and administrative capabilities. The
[[Page 30121]]
commenter believes that the Administrative requirements overall are too complex to manage within existing Agency systems and substantially out of sync with other Agency programs to be costeffective to the taxpayer for management. According to the commenter, the proposed rule must align payment and deferral options with the Intermediary Relending Program (IRP) in order to be costeffective.

Response: The Agency disagrees with the commenter's characterization of the proposed RMAP regulation. The Agency is in the process of placing its administrative systems under RULSS. RMAP will be aligned with other similar programs to leverage electronic reporting resources with the objective of improved informationgathering and more efficient program management. The RMAP program will begin the program area's move to newer, more flexible, more responsive administration of the program. This is expected to result in improved electronic reporting, less paperbased program administration, and mitigation of duplicative or unnecessary work, thereby allowing RMAP to be implemented efficiently.

Furthermore, RMAP is different from the IRP and, thus, certain provisions will not align intentionally with the IRP. Finally, the Agency believes that the RMAP provisions are very similar to other existing Federal microenterprise programs and the participating entities will understand the provisions contained in RMAP.

Comment: One commenter believes that the rule as proposed could cause issues with Office of the Inspector General (OIG) audits.

Response: The Agency believes that OIG audits are helpful in terms of suggesting program improvements. It further believes that programs that are efficiently and effectively managed will have few negative comments as the result of such audits.

Micromanagement

Comment: One commenter stated that as proposed there is too much micromanagement in the program, especially if the MDO is applying for the minimum loan amount of $50,000. According to the commenter, the reporting burden is too great to make it worth their while.

Response: Reporting requirements for this program have been kept to a minimum as a result of instituting an electronic reporting system. Reporting is flexible, automated, and easily accessed by lenders, grantees, and agency personnel.

Loans, TA Grants, Enhancement Grants

Comment: A number of commenters believe that the proposed rule should be revised to maintain the intent of Congress by restoring the balance between the funding for loan capital and funding for training and technical assistance. As one claimed, the proposed rule is in ``direct contradiction to the law'' because it eliminates all grants to microenterprise programs to provide business training to existing and prospective microentrepreneurs. The commenter stated that, by eliminating the training funds (and by capping technical assistance funds), the proposed rule will make it difficult for organizations to fund the staff needed to work with borrowers and other clients.

Another commenter stated that the proposed rule directs most of the RMAP funds to loan capital and gives short shrift to support for training, financial planning, and critical support services that MDOs offer. The proposed rule does this by limiting the purposes of grants to support microenterprise development and by capping the maximum technical assistance grant an MDO can receive at $100,000, rather than 25 percent of the MDO's total balance of microloans.

Response: The Agency disagrees that the proposed rule was in direct contradiction to the law, because it provided for loans and for grants for both technical assistance to microentrepreneurs (referred to as technical assistance grants) and training of MDOs staff to enhance their capabilities in providing technical assistance to their clients (referred to as enhancement grants). Nevertheless, the Agency, as noted later in this preamble, has added in Sec. 4280.301 that technical assistance grants may be made available to MDOs that are not otherwise participating in RMAP. The Agency believes that this change provides for an improved program and satisfies the concerns expressed by these commenters.

Finally, the Agency understands that those seeking technical assistance funding would prefer no funding cap. The Agency believes that, in order to fund more MDOs in rural areas nationwide, a cap is necessary. However, as later discussed, the maximum amount of technical assistance grants has been increased.

Inflexibility

Comment: Several commenters stated that the proposed rule is inflexible and will unnecessarily increase expenses for microenterprise service providers. To illustrate their concern, one commenter states that programs must identify prospective borrowers before they can receive loan funds from USDA. The result is that more time must be spent completing paperwork, leaving less time to serve
microentrepreneurs. These rules ignore the flexibility needed to help microentrepreneurs be successful.

One commenter believes that the proposed rule does not reflect the reality of how lending to microentrepreneurs actually works.

Another commenter believes that the approach is far too elaborate and unnecessarily complex, particularly in the way RMAP loans are structured and reamortized and in the scoring system. The commenter stated there is the maximum need for flexibility and latitude for the program to succeed.

Three of the commenters stated that the rule, as proposed, will add to the administrative burdens on MDOs and decrease the portion of staff time that can be devoted where it should be devotedservicing loans, providing technical assistance and conducting outreach that brings more microentrepreneurs in the door for services.

Response: It is not the intent of the Agency to require microlenders to identify prospective borrowers before they can receive loan funds from the USDA. There is no such requirement in the proposed rule. Similarly, the restrictions placed on the relationship between the microlender and the microborrowers are minimal and stem from statutory requirements, such as the maximum loan amount, the maximum term of a microloan, and the provision of technical assistance and training for microborrowers. The proposed rule did, however, require that the microlender make a microloan within 30 days of receipt of funds from the Agency. To the extent that the commenter may be referring to this policy, the interim rule instead adopts a 60 day requirement to provide microlenders more flexibility.

Notice of Funding Availability

Comment: Two commenters proposed that the Agency set a timeline for a NOFA that both reflects the Congressional funding process and allows for greater accountability to RMAP participants. The commenter recommended that a NOFA be made either no later than 45 days after the enactment of the appropriate spending bill or no later than 30 days after the disbursement of funds and/or budget authority to USDA.

Response: The Agency disagrees that it is necessary to set a timeline for issuing a NOFA, in part because there is no relationship between when the
[[Page 30122]]
Agency will accept applications and when it issues a NOFA. It is the Agency's intent, however, to publish RMAP NOFAs as early as possible each fiscal year. This comment is associated with the administration of RMAP and not with the proposed rule itself. Thus, no changes have been made to the rule as a result of this comment.

MDO Administrative Costs

Comment: One commenter believes that the Agency's expectation, noted under its Regulatory Flexibility Act discussion, that participating MDOs will be able to cover most of their administrative costs by ``the interest rate spread between the one percent loan from Rural Development and the interest rate on loans made to the microentrepreneurs by the MDO'' seems to be in conflict with subsequent sections of the proposed rule that severely limit MDO uses of interest income and must be clarified.

Response: The Agency agrees with the commenter that the statement in the preamble to the proposed rule was in error. The Agency has not repeated this statement in this preamble.

Intermediary Relending Program

Comment: One commenter recommended that the program be delivered under the published IRP regulations with the exception that the term must be 20 years and that microborrowers comply with the criteria in the proposed rule (i.e., proposed Sec. Sec. 4280.322 and 4280.323). The commenter further suggested that RMAP grant funds be administered under the published Rural Business Enterprise Grants regulations with the exception that the RMAP grants would be awarded in the proportional amounts indicated in the proposed rule (25 percent of the RMAP loan) and accompany RMAP loan awards. According to the commenter, adopting existing, wellunderstood, functional program regulations will allow rapid deployment and operation of the important RMAP initiative.

Response: The Agency disagrees with the commenter's recommendation to administer RMAP under the IRP and RBEG regulations because of the many statutory differences between the programs.

Purpose and Scope(Sec. 4280.301)

Comment: In referring to proposed Sec. 4280.301(b), one commenter expressed concern that the sentence ``Technical assistance grants will be awarded to microlenders to provide technical assistance to microentrepreneurs who have received one or more microloans from the MDO under this program'' would mean that entrepreneurs that have not received a microloan from an MDO under this program would not be able to receive technical assistance.

Response: The Agency agrees that it is in the best interest of the program not to limit technical assistance only to those microborrowers who actually receive a microloan under RMAP. Therefore, the Agency has revised the sentence for clarity to indicate that a microentrepreneur seeking a microloan would also be eligible to receive technical assistance.
Definitions and Abbreviations(Sec. 4280.302)

Administrative Expenses

Comment: One commenter recommended removing the limitation on the percent of TA grant funding that may be used to fund expenses because it has nothing to do with the definition.

Response: While the Agency does not disagree with the commenter's observation, the Agency believes that it is helpful here to explain the limitations to the public and Agency staff. For these reasons, and because it does ``no harm,'' the Agency has not revised the definition as suggested by the commenter.

Agency Personnel

Comment: Two commenters asked why there was a distinction made in the definition for personnel who are more than 6 months from separating from the Agency. One of the commenters also asked how someone would know that they are more than 6 months from separating from the Agency. One of the commenters believes that it is inappropriate, if not illegal, for the Agency to ask its staff when they plan to separate and the other commenter suggested deleting this phrase.

Response: As proposed, the Agency intended to allow Agency personnel who knew that they would be leaving the Agency within 6 months to apply for and receive RMAP funds. This distinction was intended to parallel the provisions for military personnel elsewhere in the proposed rule. After considering this and other similar comments, the Agency has determined that a ``blanket'' prohibition for all Agency employees while they are still with the Agency is easier to implement and consistent with other program regulations. The Agency, therefore, has removed the language from the rule.

Application

Comment: One commenter suggested adding ``required to be'' after the word ``documentation'' in the definition, so that it would read: ``The forms and documentation required to be submitted by an MDO for acceptance into the program.''

Response: The Agency disagrees with the commenter's suggestion. The application is what is submitted, not what is required. Section 4280.315 makes clear what items are required for a complete application. Therefore, the Agency has not revised this definition. Business Incubator

Comment: One commenter stated that a business incubator is not an organization, but is generally a ``thing'', such as a building.

Response: The Agency disagrees with the commenter. As used in this interim rule, a business incubator is an organization that can perform such tasks as renting space, using equipment, etc. A building cannot do such tasks. The Agency, however, is adding to the definition the condition that, to be considered a business incubator, the organization provides temporary premises ``at below market rates.'' This is a condition that the Agency overlooked when proposing the rule and believes is an important aspect of a business incubator.

Default

Comment: One commenter asked why a definition of default was included in the proposed rule.

Response: The Agency is including a definition of default for clarity because its history in the administration of other loan programs has shown that defaults other than the more common monetary default (e.g., nonperformance is a form of default) can and do occur.

Comment: One commenter stated the definition of monetary default (found in paragraph (i) of the proposed definition of default) is extremely and unnecessarily complex. Further, according to the commenter, it is inconsistent with current Agency practice of annual installments for principal and interest or semiannual installments for interest.

Response: The Agency agrees that a simpler definition is sufficient and has revised the definition accordingly. The Agency notes that it will collect payments on a monthly basis via an automated system. Fiscal Year

Comment: One commenter stated that ``fiscal year'' should be clarified as ``Federal fiscal year'' because most organizations work off of either the calendar year or their individual fiscal year.

Response: The Agency agrees with the commenter and has revised the rule to
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more clearly identify the fiscal year as being the Federal fiscal year. MDO

Comment: One commenter suggested adding quasipublic entities that are formed by State or other governmental statutes whose purposes for operation are consistent with the program as eligible MDOs. According to the commenter, many quasipublic state agencies operate business and microbusiness programs and, therefore, they need to be included as eligible entities.

Another commenter believes the term ``nonprofit'' is used rather ambiguously in the proposed rule and recommended that the Agency provide a clarification to ensure that public nonprofit entities, such as Councils of Governments, Regional Planning Commissions and Economic Development Districts, are eligible to apply for program assistance as MDOs. The commenter stated that many of these entities are experienced lenders as they currently operate USDA IRP, a program similar to RMAP, which also provides valuable assistance for financing business and economic development activity in rural regions of this country.

A third commenter requested that local governments be included as eligible applicants for program funds. The commenter asked why their local government organization is not considered the equivalent of an MDO, or at least eligible to apply for the funding as USDA has considered them capable of providing these services in the past when they awarded funding. The commenter suggests the language of the RMAP be changed to refer to MDOs and other entities that provide assistance to microentrepreneurs.

Response: Section 379E of the Consolidated Farm and Rural Development Act provides the definition for MDO. The Agency cannot change the definition and, thus, for example, quasigovernmental organizations cannot be included unless they otherwise meet the definition. Consistent with the eligibility requirements provided in other loan programs under the Consolidated Farm and Rural Development Act, the reference to nonprofits is understood to mean only private nonprofits. If Congress had intended to include other entities, they would have done so as they have done for other provisions in the Consolidated Farm and Rural Development Act. For this reason, the Agency has not revised the definition of MDO as suggested by the commenters.

Comment: A number of commenters requested that the rule clarify the ability of multiple groups to collaborate on an application (example: statewide microenterprise associations, statewide community action agency/programs). According to the commenters, such collaboratives could prove valuable in unserved and underserved rural areas, and bring together efficient and effective microenterprise development services among multiple MDOs. Potential collaborations are likely to be non profit entities as contained in the definition of MDO in the proposed rule. The commenters suggest that the final rule be clarified to allow applications by such collaborations where other eligibility requirements are met. Scoring of such collaborative applications should consider the combined strengths and experiences of the collaborators.

Three of the commenters further stated that the Agency should apportion 20 percent of available funds to enhancement grants and allow collaborations and associations that have proven track records in providing capacity building services to MDOs to apply for these grants. Enhancement programs are an opportunity to build the capacity of MDOs to reach more clients with stronger and more effective services. This involves training trainers; curriculum development; increasing access to markets; quality assessment and evaluation; and much more. One of the purposes of this legislation is to create a strong network of MDOs. Collaborations and associations serve to build the strength of the entire industry.

Response: The Agency is not opposed to collaborative MDO efforts. MDOs selected to participate in the program are encouraged to develop communitybased partnerships. However, such partnerships and collaboratives will be developed outside of the relationship between the Agency and the participating MDOs.

The Agency disagrees with the commenters' suggestion to specify a percent of available funds to be apportioned to any single aspect of the program. In order to facilitate equitable distribution between loans and grants and provide for flexibility to meet program needs, the Agency will announce anticipated distributions in an annual Federal Register notice.

Microentrepreneur

Comment: Two commenters pointed out that the proposed definition states that ``All microentrepreneurs assisted under this regulation must be located in rural areas.'' The commenters recommended changing this to read ``All microenterprises assisted under this regulation must be located in rural areas''. The commenters stated that, while some entrepreneurs do work from home, they are concerned that an entrepreneur that provides a service or operates a microenterprise in a rural area may be disqualified from participation under this definition.

Response: The Agency disagrees with the commenters' recommendation. It is the Agency's intent that both the microenterprise and microentrepreneur be located in a rural area, so both definitions have been revised to clearly state this. The Agency has not revised this definition as suggested by the commenter.

Military Personnel

Comment: One commenter was concerned that the proposed rule was purposefully eliminating National Guard employees that are not deployed. The commenter pointed out that there was an administrative notice issued for the IRP that addressed IRP loans to certain military personnel. The commenter, therefore, recommended that RMAP be as inclusive as it can to service members.

Response: Although it was not the intent of the Agency, the Agency agrees with the commenter that National Guard employees that are not deployed would have been excluded from the program. The Agency has revised the definition to remove the reference to ``enlisted'' and added other provisions (see Sec. 4280.322(g)) that would make such personnel eligible under this program.

Nonprofit Entity

Comment: One commenter recommended removing ``that has applied for or received such designation from the U.S. Internal Revenue Service'' as a criterion for defining a nonprofit entity. According to the commenter, this criterion is inconsistent with all other Rural Development programs. The commenter suggested that instead the criterion should be ``registered as a nonprofit in the State, Commonwealth, Territory, etc. in which the entity is located.''

Response: The Agency agrees with the commenter that the proposed rule would have been too restrictive. Therefore, the Agency removed the IRS requirement from the definition and has revised it to read: ``A private entity chartered as a nonprofit entity under State law.'' Rural or Rural Area

Comment: One commenter stated that, for the purposes of this program, the terms ``rural'' and ``rural area'' are defined as any area of a State not in a city or town that has a population of more than 50,000 inhabitants, according to the latest decennial census of the [[Page 30124]]
United States; and the contiguous and adjacent urbanized area. The commenter then pointed out that the Freely Associated States (Republic of Palau, Republic of the Marshall Islands, and the Federated States of Micronesia) are not under the jurisdiction of the U.S. Census Bureau and do their own internal Census. The commenter, therefore, recommended adding after ``according to the latest decennial census of the United States'' the following: ``or of any of the Freely Associated States, as appropriate.''

Response: The Agency agrees with the commenter's concern. However, rather than revising the text as suggested by the commenter, the Agency has added a definition of ``State'' to include reference to each of the Freely Associated States identified by the commenter. By doing so, it is unnecessary to make the change suggested by the commenter. Significant Outmigration

Comment: Four commenters stated that this definition was more restrictive than it should be and that the definition rejects the definitions of the term that already exist in law or proposed in legislation. The commenters provided, as examples, the American Jobs Creation Act of 2004 (Pub. L. 108357) and the proposed ``New Homestead Act of 2007'' (S. 1093). These use a net outmigration of at least 10 percent during a 20year period. The commenters suggested defining ``significant outmigration'' as outmigration of 7.5 percent over two Census periods and/or 5 percent outmigration over one Census period in order to recognize the current state of rural demographics and to enable the program to be widespread throughout the nation.

Another commenter suggested that the population outmigration criteria be lowered from 15 percent over thirty years to 10 percent over thirty years. In Iowa, this change would provide a threefold increase in the number of targeted outmigration counties compared to the 12 counties under the currently proposed criteria.

One commenter stated that the U.S. Department of the Treasury's Community Development Financial Institutions Fund (CDFI Fund) uses the following definition of ``significant outmigration:'' ``In counties located outside of a Metropolitan Area, the county population loss during the period between the most recent decennial census and the previous decennial census is at least 10 percent; or (5) in counties located outside of a Metropolitan Area, the county net migration loss during the fiveyear period preceding the most recent decennial census is at least five percent.'' The commenter urged USDA to adopt this definition.

Response: The Agency agrees that the definition of outmigration should take other current definitions into consideration. However, because outmigration issues apply to enhancement grants only, the Agency will address this issue when it publishes the final rule.

Comment: One commenter pointed out that the Freely Associated States (Republic of Palau, Republic of the Marshall Islands, and the Federated States of Micronesia) are not under the jurisdiction of the U.S. Census Bureau and do their own internal Census. The commenter, therefore, recommended revising the definition of significant outmigration to reflect this.

Response: The Agency agrees with the commenter's concern regarding the Freely Associated States. The Agency has revised the text in this definition (as noted in the response to the previous comment) and, in doing so, has removed reference to the U.S. Census Bureau.

Socially Disadvantaged

Comment: One commenter requested that the Agency define racially and ethnically diverse populations by using the same definition as found in the Small, Socially Disadvantaged Producer Program. Socially Disadvantaged Individuals are those who have been subjected to racial, ethnic or gender prejudice because of their identity as members of a group, without regard for their individual qualities.

Another commenter recommended either including a definition for ``socially disadvantaged'' under proposed Sec. 4280.302 that includes women and other disadvantaged groups or expanding proposed Sec. 4280.316(b)(1)(v) to include an explanation of the term ``socially disadvantaged.'' The commenter pointed out that the scoring rules concerning provision of technical assistance to microentrepreneurs (proposed Sec. 4280.316(b)(3)(iii)) contain a reference to an undefined group of ``socially disadvantaged'' microentrepreneurs. It is not stated whether ``socially disadvantaged'' includes gender (presumably female microentrepreneurs). This is inconsistent with proposed Sec. 4280.316(b)(1)(

FOR FURTHER INFORMATION CONTACT

Lori Washington, Loan Specialist, Business Programs, Specialty Programs Division, USDA, Rural Development, Rural BusinessCooperative Service, Room 6868, South Agricultural Building, Stop 3225, 1400 Independence Avenue, SW., Washington, DC 202503225; Telephone: (202) 7209815, Email: lori.washington@wdc.usda.gov.