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pdfRural Utilities Service, USDA
Pt. 1779
Program Official may concur in an applicant’s request to proceed with construction before funds are obligated
provided the RUS environmental requirements are complied with. The applicant must be advised in writing
that:
(1) Any authorization to proceed or
any concurrence in bid awards, contract concurrence, or other project development activity, is not a commitment by the Agency to provide grant
funds under this part.
(2) The Agency is not liable for any
debt incurred by the applicant in the
event that funds are not provided
under this part.
§ 1778.32–1778.33
§ 1778.34
[Reserved]
Grant servicing.
(a) Grants will be serviced in accordance with § 1951.215 of subpart E of part
1951 of this title and subpart O of part
1951 of this title.
(b) The grantee will provide an audit
report in accordance with § 1780.47 of
part 1780 of this chapter.
§ 1778.35
Subsequent grants.
Subsequent grants will be processed
in accordance with the requirements
set forth in this part. The initial and
subsequent grants made to complete a
previously approved project must comply with the maximum grant requirements set forth in § 1778.11.
§ 1778.36
[Reserved]
§ 1778.37 Forms, Instructions and Bulletins.
Bulletins, instructions and forms referenced are for use in administering
grants made under this part and are
available from any USDA/Rural Development office or the Rural Utilities
Service, United States Department of
Agriculture, Washington, DC 20250–1500.
§§ 1778.38–1778.99
§ 1778.100
[Reserved]
OMB control number.
The information collection requirements contained in this part have been
approved by the Office of Management
and Budget and assigned OMB control
number 0572–0110.
PART 1779—WATER AND WASTE
DISPOSAL PROGRAMS GUARANTEED LOANS
Sec.
1779.1 General.
1779.2 Definitions.
1779.3 Full faith and credit.
1779.4 Conditions of guarantee.
1779.5–1779.7 [Reserved]
1779.8 Access to lender’s records.
1779.9 Environmental requirements.
1779.10–1779.11 [Reserved]
1779.12 Inspections.
1779.13 Appeals.
1779.14–1779.16 [Reserved]
1779.17 Exception authority.
1779.18–1779.19 [Reserved]
1779.20 Eligibility.
1779.21–1779.23 [Reserved]
1779.24 Eligible loan purposes.
1779.25 Ineligible loan purposes.
1779.26 [Reserved]
1779.27 Eligible lenders.
1779.28 Transfer of lenders or borrowers
(prior to issuance of Loan Note Guarantee).
1779.29 Fees and charges by lender.
1779.30 Loan guarantee limitations.
1779.31–1779.32 [Reserved]
1779.33 Interest rates.
1779.34 Terms of loan repayment.
1779.35–1779.36 [Reserved]
1779.37 Insurance and fidelity bonds.
1779.38–1779.41 [Reserved]
1779.42 Design and construction requirements.
1779.43 Other Federal, State, and local requirements.
1779.44–1779.46 [Reserved]
1779.47 Economic feasibility requirements.
1779.48 Security.
1779.49–1779.51 [Reserved]
1779.52 Processing.
1779.53 Evaluation of application.
1779.54–1779.58 [Reserved]
1779.59 Review of requirements.
1779.60–1779.62 [Reserved]
1779.63 Conditions precedent to issuance of
the Loan Note Guarantee.
1779.64 Issuance of Lender’s Agreement,
Loan Note Guarantee, and Assignment
Guarantee Agreement.
1779.65 Lender’s sale or assignment of the
guaranteed portion of loan.
1779.66–1779.68 [Reserved]
1779.69 Loan servicing.
1779.70–1779.72 [Reserved]
1779.73 Replacement of loss, theft, destruction, mutilation, or defacement of Loan
Note Guarantee or Assignment Guarantee Agreement.
1779.74 [Reserved]
1779.75 Defaults by borrower.
1779.76–1779.77 [Reserved]
1779.78 Repurchase of loan.
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§ 1779.1
7 CFR Ch. XVII (1–1–12 Edition)
1779.79 [Reserved]
1779.80 Interest rate changes after loan closing.
1779.81 Liquidation.
1779.82 [Reserved]
1779.83 Protective advances.
1779.84 Additional loans or advances.
1779.85 Bankruptcy.
1779.86–1779.87 [Reserved]
1779.88 Transfer and assumptions.
1779.89 Mergers.
1779.90 Disposition of acquired property.
1779.91–1779.93 [Reserved]
1779.94 Determination and payment of loss.
1779.95 Future recovery.
1779.96 Termination of Loan Note Guarantee.
1779.97–1779.99 [Reserved]
1779.100 OMB control number.
AUTHORITY: 5 U.S.C. 301, 7 U.S.C. 1989, 16
U.S.C. 1005.
SOURCE: 66 FR 23138, May 8, 2001, unless
otherwise noted.
§ 1779.1 General.
(a) This part contains the regulations
for Water and Waste Disposal (WW)
loans guaranteed by the Agency and
applies to lenders, holders, borrowers,
and other parties involved in making,
guaranteeing, holding, servicing, or
liquidating such loans.
(b) The purpose of the WW guaranteed loan program is to provide a loan
guarantee for the construction or improvement of water and waste projects
serving the financially needy communities in rural areas. This purpose is
achieved through bolstering the existing private credit structure through
the guarantee of quality loans which
will provide lasting benefits.
§ 1779.2 Definitions.
The following general definitions are
applicable to the terms used in this
part:
Agency. The Rural Utilities Service
which is within the Rural Development
mission area of the United States Department of Agriculture or its successor agencies with authority delegated by the Secretary of Agriculture
to administer the Water and Waste Disposal Programs.
Application. An Agency prescribed
form to request an Agency guarantee
(available in any Agency office).
Arm’s length transaction. The sale, release, or disposition of assets in which
the title to the property passes to a
ready, willing, and able third party
who is not affiliated with, or related
to, and has no security, monetary, or
stockholder interest in the borrower or
transferor at the time of the transaction.
Assignment Guarantee Agreement. The
signed agreement among the Agency,
the lender, and the holder setting forth
the terms and conditions of an assignment of the guaranteed portion of a
loan or any part thereof (available in
any Agency office).
Borrower. The entity that borrows
money from the lender.
Collateral. Property pledged to secure
the guaranteed loan.
Conditional Commitment for Guarantee.
The Agency’s written statement to the
lender that the material submitted is
approved subject to the completion of
all conditions and requirements contained in the commitment (available in
any Agency office).
Guaranteed loan. A loan made and
serviced by a lender for which the
Agency and lender have entered into a
Lender’s Agreement and for which the
Agency has issued a Loan Note Guarantee.
Holder. The person or entity (other
than the lender) who holds all or a part
of the guaranteed portion of the loan
with no servicing responsibilities.
When the lender assigns part or all of
the guaranteed portion of the loan to
an assignee, the assignee becomes a
holder when the Assignment Guarantee
Agreement is signed by all parties.
Immediate family. Individuals who are
closely related by blood or by marriage, or within the same household,
such as a spouse, parent, child, brother,
sister, aunt, uncle, grandparent, grandchild, niece, or nephew.
In-house expenses. In-house expenses
include, but are not limited to, employees’ salaries, retainers being paid
to lawyers, travel, and overhead.
Insurance. Fire, windstorm, lightning, hail, explosion, riot, civil commotion, aircraft, vehicles, smoke, builder’s risk, liability, property damage,
flood or mudslide, worker’s compensation, fidelity bond, malpractice, or any
similar insurance that is available and
needed to protect the security or that
is required by law.
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Rural Utilities Service, USDA
§ 1779.3
Joint financing. Two or more lenders
(or any combination of lenders and
other financial sources) making separate relatively contemporaneous loans
or grants to supply the funds required
by one borrower. For example, such
joint financing may consist of the
Agency’s financial assistance with the
Economic Development Administration, Department of Housing and Urban
Development (HUD), or other Federal
and State agencies, and private and
quasi-public financial institutions.
Lender. The person or organization
making and responsible for servicing
the loan. The lender is also referred to
in this part as the applicant who is requesting a guarantee during the
preapplication and application stage of
processing.
Lender’s Agreement. The signed agreement between the Agency and the lender containing the lender’s responsibilities when the Loan Note Guarantee is
issued (available in any Agency office).
Loan Note Guarantee. The signed commitment issued by the Agency containing the terms and conditions of the
guarantee of an identified loan (available in any Agency office).
Market value. The amount for which
property would sell for its highest and
best use at a voluntary sale in an arm’s
length transaction.
Note. An evidence of debt. In those instances where the Agency guarantees a
bond issue, ‘‘note’’ shall also be construed to include a bond or other evidence of indebtedness, as appropriate.
Participation. Sale of an interest in a
loan in which the lender retains the
note, collateral securing the note, and
all responsibility for loan servicing and
liquidation.
Principals of borrowers. The owners,
officers, directors, entities, and supervisors directly involved in the operation and management of the borrower.
Protective advances. Advances made
by the lender for the purpose of preserving and protecting the collateral
where the debtor has failed to, and will
not or cannot, meet obligations to protect or preserve collateral.
Report of loss. An Agency form used
by lenders when reporting a loss under
an Agency guarantee (available in any
Agency office).
Rural and rural area. Any area not in
a city or town with a population in excess of 10,000 inhabitants, according to
the latest decennial census of the
United States
Service area. The area reasonably expected to be served by the project being
financed by the guaranteed loan.
State. Any of the 50 States, the Commonwealth of Puerto Rico, the Virgin
Islands of the United States, Guam,
American Samoa, Commonwealth of
the Northern Mariana Islands, Republic of the Marshall Islands, Republic of
Palau, and the Federated States of Micronesia.
State Bond Banks and State Bond
Pools. An entity authorized by the
State to issue State debt instruments
and utilize the funds received to finance the construction or improvement of drinking water or waste disposal facilities.
State Director. The Rural Development State Director or the staff member who has been delegated authority
to perform action on behalf of the
State Director.
Substantive change. Any change in the
purpose of the loan or any change in
the financial condition of the borrower
or the collateral which would jeopardize the performance of the loan.
Transfer and assumption. The conveyance by a debtor to an assuming party
of the assets, collateral, and liabilities
of the loan in return for the assuming
party’s binding promise to pay the outstanding debt.
Waste disposal. Sanitary sewer (treatment and collection), solid waste, and
storm drainage facilities.
WW. An acronym for Water and
Waste Disposal.
§ 1779.3 Full faith and credit.
The Loan Note Guarantee constitutes an obligation supported by the
full faith and credit of the United
States and is not contestable except for
fraud or misrepresentation (including
negligent misrepresentation) of which
the lender or holder has actual knowledge, participates in, or condones. A
note which provides for the payment of
interest on interest shall not be guaranteed and any Loan Note Guarantee
or Assignment Guarantee Agreement
attached to, or relating to, a note
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§ 1779.4
7 CFR Ch. XVII (1–1–12 Edition)
which provides for payment of interest
on interest is void. The Loan Note
Guarantee will not be enforceable by
the lender to the extent any loss is occasioned by violation of usury laws,
negligent servicing, or failure to obtain
the required security regardless of the
time at which the Agency acquires
knowledge of the foregoing. Any losses
occasioned will not be enforceable by
the lender to the extent that loan
funds are used for purposes other than
those specifically approved by the
Agency in its Conditional Commitment
for Guarantee. Negligent servicing is
defined as the failure to perform those
services which a reasonably prudent
lender would perform in servicing its
own portfolio of loans that are not
guaranteed. The term includes not only
the concept of a failure to act, but also
not acting in a timely manner, acting
in a manner contrary to the manner in
which a reasonably prudent lender
would act up to the time of loan maturity, or until a final loss is paid. The
Loan Note Guarantee or Assignment
Guarantee Agreement in the hands of a
holder shall not cover interest accruing
90 days after the holder has demanded
repurchase by the lender, nor shall the
Loan Note Guarantee or Assignment
Guarantee Agreement in the hands of a
holder cover interest accruing 90 days
after the lender or Agency has requested the holder to surrender the evidence of debt for repurchase.
§ 1779.4 Conditions of guarantee.
A loan guarantee under this part will
be evidenced by a Loan Note Guarantee
issued by the Agency. Each lender will
also execute a Lender’s Agreement.
(a) The entire loan will be secured by
the same security with equal lien priority for the guaranteed and non-guaranteed portions of the loan. The nonguaranteed portion of the loan will not
be paid first nor given any preference
or priority over the guaranteed portion.
(b) The lender will be responsible for
servicing the entire loan and will remain mortgagee or secured party of
record notwithstanding the fact that
another party may hold a portion of
the loan.
(c) When a guaranteed portion of a
loan is sold to a holder, the holder
shall have all rights of the lender under
the Loan Note Guarantee to the extent
of the portion purchased. The lender
will remain bound by all the obligations under the Loan Note Guarantee,
Lender’s Agreement, and Agency program regulations. If the Agency makes
a payment to a holder, then the lender
must reimburse the Agency.
(d) A lender will receive all payments
of principal and interest on the account of the entire loan and will
promptly remit to each holder a pro
rata share, less any lender servicing
fee.
(e) The lender may retain all of the
unguaranteed portion of the loan or
may sell part of the unguaranteed portion of the loan through participation.
However, the lender is required to retain 5 percent of the loan amount from
the unguaranteed portion in their portfolio.
§§ 1779.5–1779.7
[Reserved]
§ 1779.8 Access to lender’s records.
Upon request by the Agency, the
lender will permit representatives of
the Agency (or other agencies of the
U.S. Department of Agriculture authorized by that Department or the
U.S. Government) to inspect and make
copies of any of the records of the lender pertaining to the guaranteed loans.
Such inspection and copying may be
made during regular office hours of the
lender or at any other time the lender
and the Agency agree upon.
§ 1779.9 Environmental requirements.
Facilities financed must undergo an
environmental impact analysis in accordance with the National Environmental Policy Act and Agency requirements as contained in part 1794 of this
chapter. In accordance with Agency
guidance documents (RUS Bulletin
1794A–602; this document is available in
any Agency State Office or online at
http://www.usda.gov/rus/water/ees/
index.htm), the environmental review
requirements shall be performed by the
applicant simultaneously and concurrently with the project’s engineering
planning and design. This should provide flexibility to consider reasonable
alternatives to the project and development methods to mitigate any adverse
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Rural Utilities Service, USDA
§ 1779.20
environmental effects. Facility planning and design must not only be responsive to the owner’s needs but must
consider
the
environmental
consequences of the proposed project. Facility design will incorporate and integrate, where practicable, mitigation
measures that avoid or minimize adverse environmental impacts. The
lender must assist the Agency in ensuring that the borrower complies with
the Agency’s environmental review
process and implements any mitigation
measure identified in the environmental review document or Conditional Commitment for Guarantee.
This assistance includes ensuring that
the borrower takes no action (for example, initiation of construction) or
incur any obligations that will have an
adverse environmental impact or limit
the range of alternatives to be considered prior to completion of the environmental review process. If construction is started prior to completion of
the environmental review and the
Agency is deprived of its opportunity
to fulfill its obligation to comply with
applicable
environmental
requirements, the application for financial assistance may be denied. Satisfactory
completion of the environmental review process must occur prior to the
approval of the applicant’s request or
commitment of Agency resources.
§§ 1779.10–1779.11
[Reserved]
§ 1779.12 Inspections.
The lender will notify the Agency of
any scheduled field inspections during
construction and after issuance of the
Loan Note Guarantee. The Agency may
attend such field inspections. Any inspections or review conducted by the
Agency, including those with the lender, are for the benefit of the Agency
only and not for the benefit of other
parties in interest. Agency inspections
do not relieve any parties in interest of
their responsibilities to conduct necessary inspections.
§ 1779.13 Appeals.
Only the borrower, lender, or holder
can appeal an Agency decision. In cases
where the Agency has denied or reduced the amount of final loss payment
to the lender, the adverse decision may
be appealed only by the lender. A decision by a lender adverse to the interest
of the borrower is not a decision by the
Agency, whether or not concurred in
by the Agency. Appeals will be handled
in accordance with the regulations of
the National Appeals Division, U.S. Department of Agriculture, published at 7
CFR part 11.
§§ 1779.14–1779.16
§ 1779.17
[Reserved]
Exception authority.
The Administrator may, in individual cases, make an exception to any
requirement or provision of this part
which is not inconsistent with the authorizing statute or other applicable
law and is determined to be in the Government’s interest.
§§ 1779.18–1779.19
§ 1779.20
[Reserved]
Eligibility.
(a) Availability of credit from other
sources. The Agency must determine
that the borrower is unable to obtain
the required credit without the loan
guarantee from private, commercial, or
cooperative sources at reasonable rates
and terms for loans for similar purposes and periods of time. The Agency
must also determine if an outstanding
judgment obtained by the United
States in a Federal Court (other than
the U.S. Tax Court) has been entered
against the borrower or if the borrower
has an outstanding delinquent debt
with any Federal agency. Such judgment or delinquency shall cause the
potential borrower to be ineligible to
receive a loan guarantee until the judgment is paid in full or otherwise satisfied or the delinquency is cured.
(b) Legal authority and responsibility.
(1) Each borrower must have, or will
obtain, the legal authority necessary
to construct, operate, and maintain the
proposed facility and services. They
must also have legal authority for obtaining, giving security for, and repaying the proposed loan.
(2) The borrower shall be responsible
for operating, maintaining, and managing the facility and services, and providing for the continued availability
and use of the facility and services at
reasonable rates and terms.
(c) Applicant. Eligible entities are:
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§§ 1779.21–1779.23
7 CFR Ch. XVII (1–1–12 Edition)
(1) A public body such as a municipality, county, district, authority, or
other political subdivision of a State
located in a rural area.
(2) An organization operated on a
not-for-profit basis, such as an association, cooperative, or private corporation. The organization must be an association controlled by a local public
body or bodies, or have a broadly based
ownership by or membership of people
of the local community; or
(3) Indian tribes on Federal and State
reservations and other federally recognized Indian tribes.
(d) Facility location. Facilities must
be located in rural areas, except: For
utility services such as drinking water,
sanitary sewer, solid waste disposal or
storm drainage facilities serving both
rural and non-rural areas. In such
cases, Agency funds may be used to finance only that portion serving rural
areas, regardless of facility location.
(e) Facilities for public use. All facilities financed under the provisions of
this part shall be for public purposes.
(1) Facilities will be installed to
serve any user within the service area
who desires service and can be feasibly
and legally served.
(2) In no case will boundaries for the
proposed service area be chosen in such
a way that any user or area will be excluded because of race, color, religion,
sex, marital status, age, disability, or
national origin.
(3) The lender will determine that,
when feasible and legally possible, inequities within the proposed project’s
service area for the same type service
proposed will be remedied by the owner
on, or before, completion of the
project. Inequities are defined as unjustified variations in availability, adequacy, or quality of service. User rate
schedules for portions of existing systems or facilities that were developed
under different financing, rates, terms,
or conditions do not necessarily constitute inequities.
§§ 1779.21–1779.23
§ 1779.24
[Reserved]
Eligible loan purposes.
(a) To construct, enlarge, extend, or
otherwise improve rural drinking
water, sanitary sewage, solid waste dis-
posal, and storm wastewater disposal
facilities.
(b) To construct or relocate public
buildings, roads, bridges, fences, or
utilities, and to make other public improvements necessary for the successful operation or protection of facilities
authorized in paragraph (a) of this section.
(c) To relocate private buildings,
roads, bridges, fences, or utilities, and
other private improvements necessary
for the successful operation or protection of facilities authorized in paragraph (a) of this section.
(d) For payment of other utility connection charges as provided in service
contracts between utility systems.
(e) When a necessary part of the
project relates to those facilities authorized in paragraphs (a), (b), (c) or (d)
of this section the following may be
considered:
(1) Reasonable fees and costs such as:
legal, engineering, administrative services, fiscal advisory, recording, environmental analyses and surveys, possible salvage or other mitigation measures, planning, establishing or acquiring rights;
(2) Costs of acquiring interest in
land: rights, such as water rights;
leases; permits; rights-of-way; and
other evidence of land or water control
or protection necessary for development of the facility;
(3) Purchasing or renting equipment
necessary to install, operate, maintain,
extend, or protect facilities;
(4) Cost of additional applicant labor
and other expenses necessary to install
and extend service;
(5) In unusual cases such as a low-income area, the cost for connecting the
user to the main service line;
(6) Interest incurred during construction in conjunction with multiple advances or interest on interim financing;
(7) Initial operating expenses, including interest, for a period ordinarily not
exceeding one year when the applicant
is unable to pay such expenses;
(8) The purchase of existing facilities
when it is necessary either to improve
service or prevent the loss of service;
and
(9) Refinancing non-Agency debts incurred by, or on behalf of, an applicant
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Rural Utilities Service, USDA
§ 1779.28
when all of the following conditions
exist:
(i) The debts being refinanced are a
secondary part of the total loan unless
the debt being refinanced is an Agency
direct loan;
(ii) The debts were incurred for the
facility or service being financed or
any part thereof; and
(iii) Arrangements cannot be made
with the creditors to extend or modify
the terms of the debts so that a sound
basis will exist for making a loan.
(10) Refinancing Agency debts.
§ 1779.25 Ineligible loan purposes.
Loan funds may not be used to finance:
(a) Facilities which are not modest in
size, design, and cost;
(b) Loan or grant finder’s fees;
(c) The construction of any new combined storm and sanitary sewer facilities;
(d) Any portion of the cost of a facility which does not serve a rural area;
(e) That portion of project costs normally provided by a business or industrial
user,
such
as
wastewater
pretreatment;
(f) Rental for the use of equipment or
machinery owned by the applicant;
(g) For other purposes not directly
related to operating and maintenance
of the facility being installed or improved; or
(h) The payment of a judgment which
would disqualify an applicant for a
loan under § 1779.20(a).
§ 1779.26
[Reserved]
§ 1779.27 Lenders.
(a) Eligible lenders. Eligible lenders
may participate in the loan guarantee
program. These lenders must be subject
to credit examination and supervision
by an appropriate agency of the United
States or a State that supervises and
regulates credit institutions. A lender
must have the capability to adequately
service loans for which a guarantee is
requested. Eligible lenders are:
(1) Any Federal or State chartered
bank or savings and loan association;
(2) Any mortgage company that is a
part of a bank holding company;
(3) Co-Bank, National Rural Utilities
Cooperative
Finance
Corporation,
Farm Credit Bank of the Federal Land
Bank, or other Farm Credit System institution with direct lending authority
authorized to make loans of the type
guaranteed by this part;
(4) An insurance company regulated
by a State or National insurance regulatory agency;
(5) State Bond Banks or State Bond
Pools; and
(6) Other lenders that possess the
legal powers necessary and incidental
to making and servicing guaranteed
loans involving community development-type projects. Lenders under this
category must be approved by the National Office prior to the issuance of
the loan guarantee.
(b) Conflict of interest. When the lender’s officers, stockholders, directors, or
partners (including their immediate
families) or the borrower, its officers,
stockholders, directors, or partners (including their immediate families) own,
or have management responsibilities in
each other, the lender must disclose
such business or ownership relationships. The Agency will determine if
such relationships are likely to result
in a conflict of interest. This does not
preclude lender officials from being on
the borrower’s board of directors.
§ 1779.28 Transfer of lenders or borrowers (prior to issuance of Loan
Note Guarantee).
(a) Prior to issuance of the loan guarantee, the Agency may approve the
transfer of an outstanding Conditional
Commitment for Guarantee from the
present lender to a new eligible lender:
Provided, That:
(1) The former lender states in writing why it does not wish to continue to
be the lender for this project;
(2) No substantive changes in ownership or control of the borrower has occurred;
(3) No substantive changes in the borrower’s written plan, scope of work, or
changes in the purpose or intent of the
project has occurred; and
(4) No substantive changes in the
loan agreement or Conditional Commitment for Guarantee are required.
(b) The substitute lender must execute a new application for loan and
guarantee (available in any Agency office).
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§ 1779.29
7 CFR Ch. XVII (1–1–12 Edition)
(c) If approved, the Agency will issue
a letter of amendment to the original
Conditional Commitment for Guarantee reflecting the new lender who
will acknowledge acceptance of the
offer in writing.
(d) Once the Conditional Commitment for Guarantee is issued, the
Agency will not approve any substitution of borrowers, including changes
in the form of the legal entity, except
a change in the legal entity may be requested when the original borrower is
replaced with substantially the same
individuals or officers with the same
interest as originally approved.
§ 1779.29 Fees and charges by lender.
(a) Routine charges and fees. The lender may establish charges and fees for
the loan if they do not exceed those
charged other borrowers for similar
types of transactions. ‘‘Similar types
of transactions’’ mean those transactions involving the same type of loan
for which a non-guaranteed loan borrower would be assessed charges and
fees.
(b) Late payment fees. Late payment
charges will not be covered by the
Loan Note Guarantee. Such charges
may not be added to the principal and
interest due under any guaranteed
note. Late payment charges may be
made only if:
(1) They are routinely made by the
lender in all types of loan transactions;
(2) Payment has not been received
within the customary timeframe allowed by the lender; or
(3) The lender agrees with the borrower, in writing, that the rate or
method of calculating the late payment charges will not be changed to increase charges while the Loan Note
Guarantee is in effect.
(c) Guarantee fees. The guaranteed
loan fee will be the applicable guarantee fee rate multiplied by the principal loan amount multiplied by the
percent of guarantee. The one-time
guarantee fee is paid when the Loan
Note Guarantee is issued.
(1) The fee will be paid to the Agency
by the lender and is nonreturnable. The
lender may pass the fee to the borrower.
(2) The guarantee fee rates are available in any Agency office.
§ 1779.30 Loan guarantee limitations.
(a) The guarantee will be 90 percent
of eligible loss.
(b) The lender will retain a minimum
of 5 percent of the total loan amount.
The retained amount must be from the
unguaranteed portion of the loan and
cannot be participated to another lender.
§§ 1779.31–1779.32
[Reserved]
§ 1779.33 Interest rates.
(a) General. Rates will be negotiated
between the lender and the borrower.
They may be either fixed or variable
rates. Interest rates will be those rates
customarily charged borrowers in similar circumstances in the ordinary
course of business and are subject to
Agency review and approval.
(b) Variable rate publication. A variable interest rate must be tied to a
base rate published periodically in a
recognized national or regional financial publication specifically agreed to
by the lender and borrower. Such an
agreement must be documented in the
borrower or lender loan agreement.
(1) Interest rate caps and incremental
adjustment limitations will also be negotiated between the lender and the
borrower. Notice of any interest rate
change proposed by the lender should
allow a sufficient time period for the
borrower to obtain any required State
or other regulatory approval and to implement any user rate adjustments
necessary as a result of the interest
rate change. The intervals between interest rate adjustments will be specified in the loan agreement (but not
more often than quarterly).
(2) The lender must incorporate within the variable rate note, the provision
for adjustment of payments coincident
with an interest rate adjustment. This
will ensure the outstanding principal
balance is properly amortized within
the prescribed loan maturity and
eliminate the possibility of a balloon
payment at the end of the loan.
(c) Changes. Any change in the interest rate between the date of issuance of
the Conditional Commitment for Guarantee and before the issuance of the
Loan Note Guarantee must be approved
by the Agency. Approval of such
change will be shown as an amendment
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§ 1779.42
to the Conditional Commitment for
Guarantee.
(d) Different rates on guaranteed and
unguaranteed portion of the loan. It is
permissible to have one interest rate
on the guaranteed portion of the loan
and another interest rate on the
unguaranteed portion of the loan, provided the lender and borrower agree,
and:
(1) The rate on the unguaranteed portion does not exceed that currently
being charged on loans for similar purposes to borrowers under similar circumstances; and
(2) The rate on the guaranteed portion of the loan will not exceed the
rate on the unguaranteed portion. This
requirement does not apply when the
unguaranteed rate is variable and the
guaranteed portion is fixed.
(e) Multi-rates. When multi-rates are
used, the lender will provide the Agency with the overall effective interest
rate for the entire loan. Multi-rate
loans may be either fixed, variable, or
a combination of fixed and variable.
§ 1779.34 Terms of loan repayment.
(a) General. Principal and interest on
the loan will be due and payable as provided in the note except, any interest
accrued as the result of the borrower’s
default on the guaranteed loan over
and above that which would have accrued at the note rate on the guaranteed loan will not be guaranteed by the
Agency. The lender will structure repayments as established in the loan
agreement between the lender and borrower. Ordinarily, such installments
will be scheduled for payment as
agreed upon by the lender and borrower
on terms that reasonably ensure repayment of the loan. However, the first installment to include a repayment of
principal may be scheduled for payment after the project is operable and
has begun to generate income. Such installment must be due and payable
within 3 years from the date of the
note and at least annually thereafter.
Interest will be due at least annually
from the date of the note. Monthly
payments will be required except for
borrowers with income limited to less
frequent intervals.
(b) Term length. The maximum time
allowable for final maturity for a guar-
anteed WW loan will be limited to the
useful life of the facility, not to exceed
40 years.
(c) Balloon payments. The principal
balance should be properly amortized
within the prescribed loan maturity.
Balloon payments at the end of the
loan are prohibited.
§§ 1779.35–1779.36
§ 1779.37
[Reserved]
Insurance and fidelity bonds.
The lender must provide evidence
that the borrower has adequate insurance and fidelity bond coverage by loan
closing or start of construction, whichever occurs first. Adequate coverage
must be maintained for the life of the
loan and is subject to Agency review
and approval.
§§ 1779.38–1779.41
[Reserved]
§ 1779.42 Design and construction requirements.
The lender will provide the Agency
with a written certification at the end
of construction that all funds were utilized for authorized purposes. The borrower and the lender will authorize designs and plans based upon the preliminary architectural and engineering reports or plans approved by the lender
and concurred in by the Agency. The
borrower will take into consideration
any lender or Agency comments when
the facility is being designed.
(a) Architectural and engineering practices. All project facilities must be designed utilizing accepted architectural
and engineering practices and must
conform to applicable Federal, State,
and local codes and requirements. The
lender must ensure that the planned
project will be completed within the
available funds and, once completed,
will be suitable for the borrower’s
needs.
(b) Construction monitoring. The lender will monitor the progress of construction and undertake the reviews
and inspections necessary to ensure
that construction proceeds in accordance with the approved plans, specifications, and contract documents and
that funds are used for eligible project
costs. The lender must expeditiously
report any problems in project development to the Agency.
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§ 1779.43
7 CFR Ch. XVII (1–1–12 Edition)
(c) Equal employment opportunities.
For all construction contracts in excess of $10,000, the contractor must
comply with Executive Order 11246 (30
FR 12319, 3 CFR, 1964–1965 Comp., p. 339)
entitled ‘‘Equal Employment Opportunity’’ as amended and as supplemented by applicable Department of
Labor regulations (41 CFR part 60–1).
The borrower and lender are responsible for ensuring that the contractor
complies with these requirements.
(d) Americans with Disabilities Act. WW
loans which involve the construction
of, or addition to, facilities that accommodate the public and commercial
facilities as defined by the Americans
with Disabilities Act (42 U.S.C. 12181 et
seq.) must comply with that Act. The
lender and borrower are responsible for
compliance.
(e) Administrative. When the Agency
reviews the preliminary architectural
and engineering reports or plans, they
must also consider all applicable Federal laws such as the seismic requirements of Executive Order 12699 (55 FR
835, 3 CFR, 1990 Comp., p. 269), the debarment requirements of 7 CFR part
3017, and the Copeland Anti-Kickback
Act (18 U.S.C. 874).
§ 1779.43 Other Federal, State, and
local requirements.
In addition to the specific requirements of this part and beginning on the
date of issuance of the Loan Note
Guarantee, proposals for facilities financed in whole or in part with a loan
guaranteed by the Agency will be coordinated with all appropriate Federal,
State, and local agencies. Borrowers
and lenders will be required to comply
with any Federal, State, or local laws
or regulatory commission rules which
are in existence and which affect the
project including, but not limited to:
(a) Applicant’s authority to design,
construct, develop, operate, and maintain the proposed facilities;
(b) Borrowing money, giving security, and raising revenues for repayment;
(c) Land use zoning;
(d) Health, safety, and sanitation
standards as well as design and installation standards; and
(e) Protection of the environment
and consumer affairs.
§§ 1779.44–1779.46
[Reserved]
§ 1779.47 Economic feasibility requirements.
All projects financed under the provisions of this section must be based on
taxes, assessments, revenues, fees, or
other sources of revenues in an amount
sufficient to provide for facility operation and maintenance, a reasonable
reserve, and debt payment. The lender
is responsible for determining the credit quality and economic feasibility of
the proposed loan and must address all
elements of the credit quality in a
written financial feasibility analysis
which includes adequacy of equity,
cash flow, security, history, and management capabilities. Financial feasibility reports must take into consideration any interest rate adjustment
which may be instituted under the
terms of the note. The lender’s financial credit analysis may also serve as
the feasibility analysis when sufficient
evidence is included to determine economic feasibility as well as financial
viability. The borrower’s consulting
engineer may complete the financial
feasibility analysis for WW systems. If
the facility is used by businesses and
the success or failure of the facility is
dependent on individual businesses,
then the economic viability of those
businesses must be assessed.
(a) Exceptions. The Agency loan approval official may exempt the lender
from the requirement for an independent financial feasibility report
(when requested by the borrower and
the lender) provided the approval official determines that the financial feasibility analysis prepared by the borrower fairly represents the financial
feasibility of the facility and the financial feasibility analysis contains an accurate projection of the usage, revenues, and expenses of the facility.
(b) Insufficient information. When the
lender or Agency has insufficient information to determine the borrower’s repayment ability, an independent feasibility analysis is required.
§ 1779.48
Collateral.
(a) Lender responsibility. The lender is
responsible for obtaining and maintaining proper and adequate collateral to
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Rural Utilities Service, USDA
§ 1779.53
protect the interest of the lender, the
holder, and the Government.
(b) Type of collateral. Collateral must
be of such a nature that repayment of
the loan is reasonably ensured when
considered with the integrity and ability of project management, soundness
of the project, and the borrower’s prospective earnings. The collateral may
include, but is not limited to, the following: General obligation bonds, revenue bonds, pledge of taxes or assessments, assignment of facility revenue,
land, easements, rights-of-way, water
rights, buildings, machinery, equipment, accounts receivable, contracts,
cash, or other accounts or assignments
of leases or leasehold interest.
(c) Separate collateral. All collateral
must secure the entire loan. The lender
will not take separate security to secure only the unguaranteed portion of
the loan. The lender will not require
compensating balances or certificates
of deposit as a means of eliminating
the
lender’s
exposure
on
the
unguaranteed portion of the loan.
§§ 1779.49–1779.51
§ 1779.52
[Reserved]
Processing.
(a)
Preapplications.
(1)
The
preapplication package may be submitted either alone or the necessary
information may be submitted simultaneously with the application. The
preapplication package will contain:
(i) An Application for Federal Assistance on a form provided by the Agency
(available in any Agency office);
(ii) State intergovernmental or other
type review comments and recommendations for the borrower’s
project (clearinghouse comments, if applicable);
(iii) Supporting documentation necessary to make an eligibility determination such as financial statements,
audits, copies of organizational documents, or existing debt instruments;
and
(iv) Documentation of lender eligibility in accordance with § 1779.27.
(2) If the Agency determines that the
project may meet requirements and is
likely to be funded, the lender must
submit a complete application if it has
not previously submitted one.
(b) Applications. Contents of application package:
(1) Application for Loan and Guarantee on a form prescribed by the
Agency (available in any Agency office);
(2) Proposed loan agreement;
(3) Environmental Report. (See RUS
Bulletin 1794A–602; this document is
available in any Agency State Office or
online at http://www.usda.gov/rus/water/
ees/index.htm);
(4) Preliminary architectural or engineering report (PER);
(5) Cost estimates;
(6) Appraisal reports (as appropriate);
(7) Credit reports (as appropriate);
(8) Financial feasibility analysis and
report (as appropriate) if not included
in PER; and
(9) Any additional information required.
§ 1779.53
Evaluation of application.
If the Agency determines that the
borrower is eligible, the proposed loan
is for an eligible purpose, there is reasonable assurance of repayment ability, sufficient collateral and equity exists, the proposed loan complies with
all applicable statutes and regulations,
the environmental impact analyses is
complete, and adequate funds are
available, the Agency will provide the
lender and the borrower with the Conditional Commitment for Guarantee,
listing all conditions for the guarantee.
Applicable requirements will include
the following:
(a) Approved use of guaranteed loan
funds (source and use of funds);
(b) Rates and terms of the loan;
(c) Scheduling of payments;
(d) Number of customers;
(e) Security and lien priority;
(f) Appraisals;
(g) Insurance and bonding;
(h) Financial reporting;
(i) Equal opportunity and nondiscrimination;
(j) Mitigation measures for environmental issues (if necessary);
(k) Americans with Disabilities Act;
(l) By-laws and articles of incorporation changes; and
(m) Other requirements necessary to
protect the Government.
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§§ 1779.54–1779.58
§§ 1779.54–1779.58
§ 1779.59
7 CFR Ch. XVII (1–1–12 Edition)
[Reserved]
Review of requirements.
(a) Lender and borrower. The lender
and borrower must complete and sign
the Acceptance of Conditions and return a copy to the Agency as soon as
possible. Notwithstanding the preceding sentence, if certain conditions
cannot be met, the lender and borrower
may propose alternate conditions for
Agency consideration.
(b) Cancellation. If the lender decides
at any time after receiving a Conditional Commitment for Guarantee that
it no longer wants a guarantee, the
lender must immediately advise the
Agency of the cancellation.
(c) Modifications. The lender agrees
that once the Conditional Commitment
for Guarantee is issued and accepted by
the lender and borrower, it will not be
modified as to the scope of the project,
overall facility concept, project purpose, use of proceeds, or other terms
and conditions.
§§ 1779.60–1779.62
[Reserved]
§ 1779.63 Conditions
precedent
to
issuance of the Loan Note Guarantee.
The Loan Note Guarantee will not be
issued until:
(a) The lender certifies that:
(1) No changes have been made in the
lender’s loan conditions and requirements since the issuance of the Conditional Commitment for Guarantee except those approved in the interim by
the Agency in writing.
(2) All planned property acquisition
has been completed and all development has been substantially completed
in accordance with plans, specifications, and applicable building codes. No
costs have exceeded the amounts approved by the lender and the Agency.
(3) Required insurance is in effect.
(4) The loan has been properly closed
and the required security instruments
have been obtained on any after-acquired property that cannot be covered
initially under State statutory provisions.
(5) The borrower has marketable title
to the collateral then owned by the
borrower, subject to the instrument securing the loan to be guaranteed and
subject to any other exceptions approved, in writing, by the Agency.
(6) When required, the entire amount
of the loan for working capital has
been disbursed except in cases where
the Agency has approved disbursement
over an extended time.
(7) All other requirements of the Conditional Commitment for Guarantee
have been met.
(8) Lien priorities are consistent with
requirements of the Conditional Commitment for Guarantee.
(9) The loan proceeds have been disbursed for purposes and in amounts
consistent with the Conditional Commitment for Guarantee and as specified
on the application for the guaranteed
loan. A copy of a detailed statement by
the lender detailing the use of loan
funds will be attached to support this
certification.
(10) There has been no substantive
adverse change in the borrower’s financial condition nor any other adverse
change in the borrower during the period of time from the Agency’s
issuance of the Conditional Commitment for Guarantee to issuance of the
Loan Note Guarantee. The lender’s certification must address all adverse
changes of the borrower and the guarantors. For purposes of this paragraph
(a)(10), the term borrower includes any
parent, affiliate, or subsidiary of the
borrower.
(11) All Federal, State, and local design and construction requirements
have been met.
(12) The lender understands and will
meet the requirements of the Debt Collection Act (31 U.S.C. Chapter 37).
(13) The lender would not make the
loan without an Agency guarantee.
(b) The lender has executed and delivered the Lender’s Agreement and closing report for the guaranteed loan
along with the appropriate guarantee
fee.
(c) The lender has advised the Agency
of plans to sell or assign any part of
the loan as provided in the Lender’s
Agreement.
(d) Where applicable, the lender must
certify that the borrower has obtained:
(1) A legal opinion relative to the
title to rights-of-way and easements.
Lenders are responsible for ensuring
that borrowers have obtained valid,
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Rural Utilities Service, USDA
§ 1779.65
continuous, and adequate rights-of-way
and easements needed for the construction, operation, and maintenance of a
facility.
(2) A title opinion or title insurance
showing ownership of the land and all
mortgages or other lien defects, restrictions, or encumbrances, if any. It
is the responsibility of the lender to
ensure that the borrower has obtained
and recorded such releases, consents,
or subordinations to such property
rights from holders of outstanding
liens or other instruments as may be
necessary for the construction, operation, and maintenance of the facility
and to provide the required security.
For example, when a site is for major
structures and the lender and borrower
are able to obtain only a right-of-way
or easement on such a site rather than
a fee simple title, such a title opinion
must be requested.
(e) If the Loan Note Guarantee cannot be issued before the Conditional
Commitment expires, the lender must
submit a written request for an extension of the expiration date. The lender
must document and certify to paragraph (a)(1) and (a)(11) of this section
specifically identifying any modifications.
(f) Coincident with, or immediately
after, loan closing, the lender will contact the Agency and provide those documents and certifications required in
this section. For loans to public bodies,
lenders may require an opinion from
recognized bond counsel regarding the
adequacy of the preparation and
issuance of the debt instruments. Only
when the Agency is satisfied that all
conditions for the guarantee have been
met will the Loan Note Guarantee be
executed.
§ 1779.64 Issuance of Lender’s Agreement, Loan Note Guarantee, and Assignment Guarantee Agreement.
(a) Lender’s Agreement. If the Agency
finds that all requirements have been
met, the lender and the Agency will
execute the Lender’s Agreement. The
original will be retained by the Agency
and a signed duplicate original will be
retained by the lender. A separate
Lender’s Agreement must be executed
for each loan to be guaranteed by the
Agency.
(b) Loan Note Guarantee. (1) Upon receipt of the executed Lender’s Agreement and after all requirements have
been met, the Agency will execute the
Loan Note Guarantee. All originals of
the Loan Note Guarantee will be provided to the lender and attached to the
note.
(2) If the lender has selected the
multi-note system, a Loan Note Guarantee will be prepared and attached to
each note the borrower issues. All the
notes will be listed on the Loan Note
Guarantee. Not more than ten notes
will be issued for the guaranteed portion (unless the Agency and borrower
agree otherwise) and one note issued
for the unguaranteed portion.
(c) Assignment of Guarantee. In the
event the lender assigns the guaranteed portion of the loan to a holder, the
lender, holder, and Agency will execute
an Agency prescribed Assignment
Guarantee Agreement.
(d) Failure to meet conditions. If the
Agency determines that it cannot execute the Loan Note Guarantee because
all requirements have not been met,
the lender will have a reasonable period within which to satisfy the objections. If the lender satisfies the objections within the time allowed, the
guarantee will be issued.
(e) Loan closing report. The lender will
prepare and deliver a guaranteed loan
closing report for each loan to be guaranteed and a guarantee fee to the
Agency in return for the Loan Note
Guarantee.
§ 1779.65 Lender’s sale or assignment
of the guaranteed portion of loan.
The lender may retain all of the
guaranteed loan. The lender must not
sell or participate any amount of the
guaranteed or non-guaranteed portion
of the loan to the borrower or to members of the borrower’s immediate families, the borrower’s officers, directors,
stockholders, other owners, or a subsidiary or affiliate. Disposition of the
guaranteed portion of a loan may not
be made prior to full disbursement,
completion of construction, and acquisition of real estate and equipment
without the prior written approval of
the Agency. If the lender desires to
market all or part of the guaranteed
portion of the loan at, or subsequent
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§§ 1779.66–1779.68
7 CFR Ch. XVII (1–1–12 Edition)
to, loan closing, the loan must not be
in default.
(a) Assignment. Any sale or assignment by the lender of the guaranteed
portion of the loan must be accomplished in accordance with the conditions in the Lender’s Agreement.
(b) Participation. The lender may obtain participation in the loan under its
normal operating procedures.
(c) Minimum retention. The lender is
required to hold in its own portfolio or
retain a minimum of 5 percent of the
total loan amount. This amount must
be of the non-guaranteed portion of the
loan and cannot be participated to another. The lender may sell the remaining amount of the non-guaranteed portion of the loan only through participation.
conclusions,
including
trends,
strengths, weaknesses, extraordinary
transactions, and other indications of
the financial condition of the borrower.
Additionally, when applicable, the
lender will require an audit in accordance with Office of Management and
Budget (OMB) circulars (available in
any Agency office).
(c) Delinquent loans. The lender will
service delinquent loans in accordance
with the Lender’s Agreement and reasonable and prudent lending standards.
(d) Loan balances. The lender must report to the Agency the outstanding
principal and interest balance on each
guaranteed loan semiannually.
(e) Collateral inspections. The lender
will inspect the collateral as often as
necessary to properly service the loan.
§§ 1779.66–1779.68
§§ 1779.70–1779.72
§ 1779.69
[Reserved]
Loan servicing.
(a) Lender responsibilities. The lender
is responsible for servicing the entire
loan in accordance with the lender’s
loan agreement. The unguaranteed portion of the loan will not be paid first
nor given any preference or priority
over the guaranteed portion of the
loan. The lender is responsible for taking all servicing actions that a prudent
lender would perform in servicing a
portfolio of loans that are not guaranteed. This responsibility includes, but
is not limited to, the collection of payments; obtaining compliance with the
covenants and provisions in the note,
loan agreement, security instrument,
or any supplemental agreements; obtaining and analyzing financial statements; verifying the payment of taxes
and insurance premiums; and maintaining liens on collateral. The lender
must notify the Agency of any violation of the loan agreement with the
borrower within 30 days of such violation.
(b) Financial reports. The lender must
obtain the financial statements required by the Loan Agreement. The
lender must submit the borrower’s annual financial statements to the Agency within 120 days of the end of the
borrower’s fiscal year. The lender must
analyze the financial statements and
provide the Agency with a written
summary of the lender’s analysis and
[Reserved]
§ 1779.73 Replacement of loss, theft,
destruction, mutilation, or defacement of Loan Note Guarantee or Assignment Guarantee Agreement.
(a) Replacement. The Agency may
issue a replacement Loan Note Guarantee or Assignment Guarantee Agreement which may have been lost, stolen,
destroyed, mutilated, or defaced to the
lender or holder upon receipt of a certificate of loss and an indemnity bond
in accordance with this section.
(b) Lender responsibilities. When a
Loan Note Guarantee or Assignment
Guarantee Agreement is lost, stolen,
destroyed, mutilated, or defaced while
in the custody of the lender or holder,
the lender will coordinate the activities of the party who seeks the replacement documents and will submit the
required documents to the Agency for
processing. The requirements for replacement are as follows:
(1) A certificate of loss properly notarized which includes:
(i) Legal name and present address of
either the lender or the holder who is
requesting the replacement forms;
(ii) Legal name and address of the
lender of record;
(iii) Capacity of person certifying;
(iv) Full identification of the Loan
Note Guarantee or Assignment Guarantee Agreement, including the name
of the borrower, Agency case number,
date of the Loan Note Guarantee, Assignment Guarantee Agreement, face
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Rural Utilities Service, USDA
§ 1779.78
amount of the evidence of debt purchased, date of evidence of debt,
present balance of the loan, percentages of guarantee and, if Assignment
Guarantee Agreement, the original
named holder and the percentage of the
guaranteed portion of the loan assigned
to that holder. Any existing parts of
the document to be replaced must be
attached to the certificate;
(v) A full statement of circumstances
of the loss, theft, or destruction of the
Loan Note Guarantee or Assignment
Guarantee Agreement; and
(vi) The holder shall present evidence
demonstrating current ownership of
the Loan Note Guarantee and Note or
Assignment Guarantee Agreement. If
the present holder is not the same as
the original holder, a copy of the endorsement of each successive holder in
the chain of transfer from the initial
holder to present holder must be included. If copies of the endorsement
cannot be obtained, best available
records of transfer must be presented
to the Agency (e.g., order confirmation, canceled checks).
(2) An indemnity bond acceptable to
the Agency shall accompany the request for replacement except when the
holder is the United States, a Federal
Reserve Bank, a Federal Government
corporation, a State or Territory, or
the District of Columbia.
(3) All indemnity bonds must be
issued and payable to the United
States of America. The bond shall be in
an amount not less than the unpaid
principal and interest. The bond shall
hold the Government harmless against
any claim or demand which might arise
or against any damage, loss, costs, or
expenses which might be sustained or
incurred by reasons of the loss or replacement of the instruments.
§ 1779.74
[Reserved]
§ 1779.75
Defaults by borrower.
(a) Lender notification to Agency. The
lender must notify the Agency when a
borrower is 30 days past due on a payment, has not met its responsibilities
of providing the required financial
statements, or is otherwise in default.
The lender will continue to keep the
Agency informed on a bimonthly basis
until such time as the loan is no longer
in default. If a monetary default exceeds 60 days, the lender will arrange a
meeting with the borrower to resolve
the default. The lender will provide a
summary of the meeting and any decisions or actions agreed upon.
(b) Servicing options. In considering
servicing options, the prospects for
providing a permanent cure without
adversely affecting the risks to the
Agency and the lender must be the
paramount objective. Temporary curative
actions
(such
as
payment
deferments or collateral subordination)
must strengthen the loan and be in the
best financial interest of the lender and
the Agency. Some of these actions may
require concurrence of the holder.
(c) Multi-note. If the loan was closed
with the multi-note option, the lender
may need to possess all notes to take
some servicing actions. In those situations when the Agency is holder of
some of the notes, the Agency may endorse the notes back to the lender, provided a proper receipt is received from
the lender which defines the reason for
the transfer. Under no circumstances
will the Agency endorse the original
Loan Note Guarantee to the lender.
§§ 1779.76–1779.77
§ 1779.78
[Reserved]
Repurchase of loan.
(a) Repurchase by lender. The lender
has the option to repurchase the loan
from a holder within 30 days of written
demand from the holder when the borrower is in default not less than 60 days
on payment. The repurchase will be for
an amount equal to the unpaid guaranteed portion of principal and accrued
interest less the lender’s servicing fee.
The guarantee does not cover the note
interest to the holder on the guaranteed loan accruing after 90 days from
the date of the demand letter to the
lender. The holder will concurrently
send a copy of the demand to the Agency. The lender will accept an assignment without recourse from the holder
upon repurchase. The lender is encouraged to repurchase the loan to facilitate the accounting of funds, resolve
the problem, and permit the borrower
to cure the default, where reasonable.
The lender will notify the holder and
the Agency of its decision within 30
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§ 1779.79
7 CFR Ch. XVII (1–1–12 Edition)
days of receipt of demand from the
holder.
(b) Agency repurchase. (1) If the lender
does not repurchase as provided in
paragraph (a) of this section, the Agency will purchase from the holder the
unpaid principal balance of the guaranteed portion together with accrued interest to date of repurchase (less the
lender’s servicing fee) within 30 days
after a specific written demand directed to the Agency. The copy of the
demand on the lender is not sufficient.
The guarantee will not cover the note
interest to the holder on the guaranteed loan accruing after 90 days from
the date of the original demand letter.
The lender shall not charge the Agency
any servicing fees nor are any such fees
collectible from the Agency.
(2) The holder’s demand to the Agency must include a copy of the written
demand made upon the lender. The
holder or duly authorized agent must
also include evidence of the right to require payment from the Agency. Such
evidence will consist of either the
original of the Loan Note Guarantee
properly endorsed to the Agency or the
original of the Assignment Guarantee
Agreement properly assigned to the
Agency without recourse including all
rights, title, and interest in the loan.
The Agency will be subrogated to all
rights of the holder. The holder must
include in the demand the amount due
including unpaid principal, unpaid interest to date of demand, and interest
subsequently accruing from the date of
demand to the proposed payment date.
Unless otherwise agreed to by the
Agency, such proposed payment will
not be later than 30 days from the date
of demand.
(3) The lender must promptly provide
the Agency with the information necessary for the Agency’s determination
of the appropriate amount due the
holder upon the Agency’s notification
to the lender of the holder’s demand for
payment. This information must be
certified by an authorized officer of the
lender. Any discrepancy between the
amount claimed by the holder and the
information submitted by the lender
must be resolved before payment will
be approved. The Agency will notify
both parties and such conflict will sus-
pend the running of the 30-day payment requirement.
(4) Any purchase by the Agency does
not change, alter, or modify any of the
lender’s obligations to the Agency arising from the loan or guarantee nor
does it waive any of the Agency’s
rights against the lender. The Agency
may set off against the lender all
rights inuring to the Agency as the
holder of the instrument against the
Agency’s obligation to the lender under
the Loan Note Guarantee.
(c) Repurchase for servicing. When the
lender determines that repurchase of
the guaranteed portion of the loan is
necessary to service the loan, the holder must sell the guaranteed portion to
the lender for the unpaid principal and
interest balance (less the lender’s servicing fee). The guarantee does not
cover interest accruing after 90 days
from the date the lender’s or Agency’s
letter requesting the holder to tender
its guaranteed portion. The lender
must not repurchase from the holder
for arbitrage purposes to further its
own financial gain. Any repurchase
must be made only after the lender obtains the Agency written approval. If
the lender does not repurchase the portion from the holder, the Agency may,
at its option, purchase such guaranteed
portion for servicing purposes.
§ 1779.79
[Reserved]
§ 1779.80 Interest rate changes after
loan closing.
(a) General. Subject to the restrictions below, the borrower, lender, and
holder (if any) may collectively effect a
permanent reduction in the interest
rate on the guaranteed loan at any
time during the life of the loan on written agreement by all of the applicable
parties. After such a permanent reduction, the Loan Note Guarantee will
only cover losses of interest at the reduced interest rate. The Agency must
be notified by the lender, in writing,
within 10 calendar days of the change.
When the Agency is a holder, it will
concur only when it is demonstrated
that the change is more viable than
liquidation and that the Government’s
financial interests are not adversely affected. Factors which will be considered in making such determination are
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Rural Utilities Service, USDA
§ 1779.81
the Government’s cost of borrowing
money and the project’s enhancement
of rural development. The monetary recovery must be greater than the liquidation recovery, and a financial feasibility analysis must show the
project’s continued viability.
(1) Fixed rates cannot be changed to
variable rates to reduce the interest
rate to the borrower unless the variable rate has a ceiling which is less
than the original fixed rate.
(2) Variable rates can be changed to a
lower fixed rate. In a final loss settlement when qualifying rate changes are
made with the required written agreements and notification, the interest
will be calculated for the periods the
given rates were in effect. The lender
must maintain records which adequately document the accrued interest
claimed.
(3) The lender is responsible for the
legal documentation of interest rate
changes. However, the lender may not
issue a new note.
(b) Increases. No increases in interest
rates will be permitted under the loan
guarantee except the normal fluctuations in approved variable interest rate
loans.
§ 1779.81
Liquidation.
Liquidation will occur when the lender concludes that liquidation of the
guaranteed loan is necessary because of
default or third party actions that the
borrower cannot, or will not, cure or
eliminate within a reasonable period of
time and the Agency concurs with the
lender; or the Agency, at any time,
independently concludes that liquidation is necessary. The lender will proceed as expeditiously as possible, including giving any notices or taking
any legal actions required by the security instruments.
(a) General. If a lender has made a
loan guaranteed by the Agency under
previous regulations, the lender has
the option to liquidate the loan under
the provisions of this part or under the
provisions of previous regulations. The
lender will notify the Agency in writing within 10 days after its decision to
liquidate, which regulatory provisions
it chooses to use. The lender may not
choose some provisions of one regula-
tion and other provisions of the other
regulation.
(b) Acquiring property titles. If a lender
acquires title to property, the Agency
may elect to permit the lender the option of calculating the final loss settlement using the net proceeds received
at the time of the ultimate disposition
of the property. The lender must submit to the Agency a written request to
use this option within 15 days of acquiring title and the Agency must
agree, in writing, prior to the lender
submitting any request for estimated
loss payment.
(c) Liquidation plan. The lender will
(within 30 days after a decision to liquidate) submit to the Agency, in writing, a proposed, detailed liquidation
plan. Upon approval by the Agency of
the liquidation plan, the lender will
commence liquidation. The lender’s
liquidation plan must include, but is
not limited to, the following:
(1) Such proof as the Agency requires
to establish the lender’s ownership of
the guaranteed loan notes and related
security instruments, a copy of the
payment ledger or other documentation which reflects the outstanding
loan balance and accrued interest to
date, and the method of computing the
interest;
(2) A complete list of collateral;
(3) The recommended liquidation
methods for making the maximum collection possible on the indebtedness
and the justification for such methods,
including the recommended action for
acquiring and disposing of all collateral;
(4) Necessary steps for preservation
of the collateral;
(5) Copies of the borrower’s latest
available financial statements;
(6) An itemized list of estimated liquidation expenses expected to be incurred and justification for each expense;
(7) A schedule to periodically report
to the Agency on the progress of the
liquidation;
(8) Estimated protective advance
amounts with justification;
(9) Proposed protective bid amounts
on collateral to be sold at auction and
a discussion of how the amounts were
determined;
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§ 1779.82
7 CFR Ch. XVII (1–1–12 Edition)
(10) If a voluntary conveyance is considered, the proposed amount to be
credited to the guaranteed debt;
(11) Legal opinions, as needed; and
(12) If the outstanding balance of
principal and interest is less than
$250,000, the lender will obtain an estimate of fair market and potential liquidation value of the collateral. If the
outstanding balance of principal and
interest is $250,000 or more, the lender
will obtain an independent appraisal
report on all collateral securing the
loan which will reflect the fair market
value and potential liquidation value.
The independent appraiser’s fee will be
shared equally by the Agency and the
lender.
(d) Partial liquidation plan. If actions
are necessary to immediately preserve
and protect the collateral, a partial
liquidation plan may be submitted and,
when approved, must be followed by a
complete liquidation plan prepared by
the lender.
(e) Disposition of collateral. Disposition of collateral acquired by the lender must be approved, in writing, by the
Agency when:
(1) The lender’s cost to acquire the
collateral of a borrower exceeds the potential recovery value of the security
and the lender proposes abandoning the
collateral in lieu of liquidation; or
(2) The acquired collateral is to be
sold to the borrower, borrower’s stockholders or officers, or the lender or
lender’s stockholders or officers.
(f) Agency liquidation. The Agency
will liquidate at its option only when it
is a holder and there is reason to believe the lender is not likely to initiate
liquidation efforts that will result in
maximum recovery. When the Agency
liquidates, proceeds derived from the
sale of the collateral will be applied
first to reasonable liquidation expenses
and second to the guaranteed portion
of the loan.
(g) Final loss payment. Final loss payments will be made only after all collateral has been properly accounted for
and liquidation expenses are determined to be reasonable and within approved limits. Any estimated loss payments made to the lender will be credited against the final loss on the guaranteed loan. The amount of an estimated loss payment must be credited
as a deduction from the principal balance of the loan.
§ 1779.82
[Reserved]
§ 1779.83
Protective advances.
Protective advances can only be
added to the loan account for purposes
of requirements to preserve the value
of the security. Protective advances
constitute an indebtedness of the borrower to the lender and must be secured by collateral to the same extent
as principal and interest. Protective
advances include, but are not limited
to, advances made for taxes, annual assessments, ground rent, hazard and
flood insurance premiums affecting the
collateral (including any other expenses necessary to protect the collateral). Attorney fees are not a protective advance.
(a) Agency approval. The Agency must
approve, in writing, all protective advances on loans within its loan approval authority which exceed a total
cumulative advance amount of $5,000 to
the same borrower. Protective advances must be reasonable when associated with the value of the collateral
being preserved.
(b) Preserving collateral. When considering protective advances, sound judgment must be exercised in determining
that the additional funds advanced will
actually preserve collateral and recovery is actually enhanced by making the
advance.
§ 1779.84
Additional loans or advances.
The lender will not make additional
expenditures or new loans to the borrower without first obtaining the written approval of the Agency even
though such expenditures or loans will
not be guaranteed.
§ 1779.85
Bankruptcy.
(a) Calculating losses. Report of Loss
form (available in any Agency office)
will be used for calculating estimated
and final loss determinations.
(b) Lender responsibility. The lender is
responsible for protecting the guaranteed loan debt and all the collateral securing it in bankruptcy proceedings.
These responsibilities include, but are
not limited to, the following:
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§ 1779.88
(1) Filing a proof of claim, where necessary, and all necessary papers and
pleadings;
(2) Attending and, where necessary,
participating in meetings of the creditors and all court proceedings;
(3) Immediately seeking adequate
protection of the collateral if it is subject to being used by the trustee in
bankruptcy or the debtor in possession;
(4) Where appropriate, seeking involuntary conversion of a pending chapter
11 case to a liquidation proceeding or
seeking dismissal of the proceedings;
and
(5) Keeping the Agency adequately
and regularly informed, in writing, of
all aspects of the proceedings.
(c) Appraisals. In a chapter 9 or chapter 11 reorganization, the lender must
obtain an independent appraisal of the
collateral if the Agency believes an
independent appraisal is necessary. The
Agency and the lender will share the
appraisal fee equally.
(d) Liquidation expenses. Only expenses authorized by the court of chapter 9 plans or chapter 11 reorganizations, or chapters 11 or 7 liquidation
(unless the liquidation is by the lender), may be deducted from the collateral proceeds.
(e) Repurchase from the holder. The
Agency or the lender, with the approval of the Agency, may initiate the
repurchase of the unpaid guaranteed
portion of the loan from the holder. If
the lender is the holder, an estimated
loss payment may be filed at the initiation of a chapter 7 proceeding or after
a chapter 9 or chapter 11 proceeding becomes a liquidation proceeding. Any
loss payment on loans in bankruptcy
must be approved by the Agency.
(f) Chapter 11 bankruptcy. If a borrower has filed for protection under
chapters 9 or 11 of the United States
Code for a reorganization (but not
chapter 13) and all or a portion of the
debt has been discharged, the lender
may request an estimated loss payment of the guaranteed portion of the
accrued interest and principal discharged by the court. If the court approves revisions to the chapter 9 plan
or chapter 11 reorganization plan, subsequent estimated loss payments may
be requested in accordance with the
court approved changes. Once the reor-
ganization plan has been satisfactorily
completed, the lender is responsible for
submitting the documentation necessary for the Agency to review and adjust the estimated loss claim to reflect
any actual discharge of principal and
interest and to reimburse the lender
for any court ordered interest-rate reduction under the terms of the reorganization plan.
(g) Agency approval of estimated liquidation expenses. The Agency must approve, in advance and in writing, the
lender’s estimated liquidation expenses
of collateral in a liquidation if the liquidation is performed by the lender.
These expenses must be reasonable and
customary and not include in-house expenses of the lender.
(h) Reconciliation. In the event that
the estimated loss payment exceeds the
actual loss, the lender will reimburse
the Agency the amount in excess of the
actual loss plus interest at the note
rate from the date of the estimated
loss payment.
§§ 1779.86–1779.87
§ 1779.88
[Reserved]
Transfers and assumptions.
(a) General. For all transfers and assumptions, the lender must concur in
the plans for disposition of funds in the
transferor’s debt service, reserve, and
operation and maintenance account.
The Agency will approve, in writing,
transfers and assumptions of loans to
transferees who will continue the original purpose of the guaranteed loan subject to the following applicable provisions:
(1) When the transaction is to a member of the borrower’s organization, it
will be at an amount which will not result in a loss to the lender.
(2) Transfers to eligible borrowers
will receive preference if recovery to
the lender from the sale price is not
less than it would be if the transfer was
to an ineligible borrower.
(3) The present borrower is unable or
unwilling to accomplish the objectives
of the guaranteed loan, and the transfer will be to the lender’s and Agency’s
advantage.
(4) The transferee will assume an
amount at least equal to either the
present market value or the debt,
whichever is less.
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§ 1779.88
7 CFR Ch. XVII (1–1–12 Edition)
(b) Transfers to an eligible borrower. (1)
The total indebtedness may be transferred to an eligible borrower on the
same terms.
(2) The total indebtedness may be
transferred to another eligible borrower on different terms not to exceed
those terms for which an initial guaranteed loan can be made.
(3) Less than the total indebtedness
may be transferred to another eligible
borrower on the same or different
terms and the pro rata share of any eligible loss paid to the lender.
(4) A guaranteed loan for which the
transferee is eligible may be made in
connection with a transfer subject to
the policies and procedures governing
the type of loan being made.
(5) If the transferor is to receive a
payment for the equity, the total debt
must be assumed.
(c) Ineligible borrower. Transfers to ineligible borrowers are considered only
when needed as a method for servicing
problem cases when an eligible transferee is not available. Transfers should
not be considered as a means by which
members can obtain equity or as a
method of providing a source of easy
credit for purchasers. Transfers must
meet the following requirements:
(1) All transfers to ineligible borrowers will include a one-time nonrefundable transfer fee to the Agency
of no more than 1 percent. Transfer
fees will be collected, and payments applied, in accordance with paragraph (d)
of this section.
(2) For all loans covered by this part,
the Agency may approve a transfer of
indebtedness to, and assumption of, a
loan by a transferee who does not meet
the eligibility requirements for the
kind of loan being assumed when the
ineligible borrower will:
(i) Make a significant down payment,
and
(ii) Agree to pay the remaining balance within not more than 15 years. Installments will be at least equal to the
amount amortized over a period not
greater than the remaining life of the
debt being transferred, and the balance
will be due the fifteenth year.
(3) Interest rates to ineligible transferees will be the rate specified in the
note of the transferor or the rates customarily charged borrowers in similar
circumstances in the ordinary course
of business and are subject to Agency
review and approval. The rates may be
either fixed or variable.
(i) Transferees must have the ability
to repay as determined by the lender
the debt according to the Assumption
Agreement and must have the legal authority to enter into the contract. The
transferee will submit a current balance sheet to the lender. The lender
will obtain and analyze the credit history of the transferee.
(ii) The transferor may receive equity payments only when the full
amount of the debt is assumed. However, equity payments will not be made
on more favorable terms than those on
which the balance of the debt will be
paid.
(d) Transfer fees. Transfer fees are a
one-time nonrefundable cost to be collected by the lender at the time of application or proposal.
(1) The transfer fees will be a standard fee plus the cost of the appraisal.
(2) The lender will collect and submit
the fee to the Agency.
(3) The Agency may waive the transfer fee if it determines that such waiver is in the best interest of the Agency.
(e) Processing transfers and assumptions. (1) In any transfer and assumption case, the transferor (including any
guarantor) may be released from liability by the lender only with prior Agency written concurrence and only when
the value of the collateral being transferred is at least equal to the amount
of the loan, or part of the loan, being
assumed. If the transfer is for less than
the entire debt:
(i) The Agency must determine that
the transferor and any guarantor have
no reasonable debt-paying ability considering their assets and income at the
time of transfer, and
(ii) The lender must certify that the
transferor has cooperated in good faith,
used due diligence to maintain the collateral against loss, and has otherwise
fulfilled all of the regulations of this
part to the best of the borrower’s ability.
(2) The lender will make, in all cases,
a complete credit analysis to determine viability of the project (subject
to the Agency review and approval) including any requirement for deposit in
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Rural Utilities Service, USDA
§ 1779.90
an escrow account as security to meet
the determined equity requirements for
the project.
(3) The lender will confirm that the
transaction can be properly transferred
and the conveyance instruments will
be filed, registered, or recorded as appropriate and legally permissible.
(4) The assumption will be made on
the lender’s form of Assumption Agreement and will contain the Agency case
number of the transferor and transferee.
(5) Loan terms cannot be changed by
the Assumption Agreement unless previously approved in writing by the
Agency with the concurrence of holder
and the transferor (including guarantor
if it has not been released from personal liability). Any new loan terms
cannot exceed those authorized in this
part. The lender’s request will be supported by:
(i) An explanation of the reasons for
the proposed change in the loan terms,
and
(ii) Certification that the lien position securing the guaranteed loan will
be maintained or improved, and proper
hazard insurance will be continued in
effect.
(6) In the case of a transfer and assumption, it is the lender’s responsibility to see that all such transfers and
assumptions will be noted on all originals of the Loan Note Guarantee. The
lender will provide the Agency a copy
of the Transfer and Assumption Agreement.
(7) If a loss should occur upon a complete transfer of assets and assumption
for less than the full amount of the
debt and the transferor-debtor (including personal guarantor) is released
from personal liability (as provided in
paragraph (e)(1)(i) of this section), the
lender (if holding the guaranteed portion) may file an estimated Report of
Loss to recover their pro rata share of
the actual loss at that time. Approved
protective advances and accrued interest made during the arrangement of a
transfer and assumption, if not assumed by the transferee, will be entered on the estimated Report of Loss.
§ 1779.89 Mergers.
(a) General. The Agency may approve
mergers or consolidations (herein re-
ferred to as ‘‘mergers’’) when the resulting organization will be eligible for
an Agency guaranteed loan and assumes all the liabilities and acquires
all the assets of the merged borrower.
Mergers may be approved when:
(1) The merger is in the best interest
of the Government and the merging
borrower;
(2) The resulting borrower can meet
all required conditions as contained in
specific loan note agreements; and
(3) All property can be legally transferred to the resulting borrower.
(b) Distinguishing mergers from transfers and assumptions. Mergers occur
when one entity combines with another
entity in such a way that the first entity ceases to exist as a separate entity
while the other continues. In a consolidation, two or more entities combine
to form a new, consolidated entity with
the original entity ceasing to exist.
Such transactions must be distinguished from transfers and assumptions in which a transferor will not
necessarily go out of existence, and the
transferee will not always take all the
transferor’s assets nor assume all the
transferor’s liabilities.
§ 1779.90 Disposition of acquired property.
(a) General. When the lender acquires
title to the collateral and the final loss
claim is not paid until final disposition, the lender must proceed as quickly as possible to develop a plan to fully
protect the collateral, and the lender
must dispose of the collateral without
delay.
(b) Re-title collateral. Any collateral
accepted by the lender must not be titled in the Agency’s name in whole or
in part. The Agency’s position is that
of a guarantor relating to losses, not a
lender.
(c) Collateral preservation. After acquiring the collateral, the lender must
protect the collateral from deterioration (weather, vandalism, etc.). Hazard
insurance in an amount necessary to
cover the fair market value of the collateral must be maintained.
(d) Collateral sale. (1) The lender will
prepare and submit to the Agency a
plan on the best method of sale, keeping in mind any prospective purchasers. The Agency must approve the
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§§ 1779.91–1779.93
7 CFR Ch. XVII (1–1–12 Edition)
plan in writing. If an existing approved
liquidation plan addresses the disposition of acquired property, no further
review is required unless modification
of the plan is needed.
(2) Anytime there is a case when the
conversion of collateral to cash can
reasonably be expected to result in a
negative net recovery amount, abandonment of the collateral should be
considered. The Agency must approve
abandonment in writing.
§§ 1779.91–1779.93
[Reserved]
§ 1779.94 Determination and payment
of loss.
In all liquidation cases, final settlement will be made with the lender
after the collateral is liquidated. The
Agency will have the right to recover
losses paid under the guarantee from
any liable party.
(a) General. If the lender takes title
to collateral, any loss will be based on
the collateral value at the time the
lender obtains title.
(b) Loss calculations. The Report of
Loss form (available in any Agency office) will be used for calculations of all
estimated and final loss determinations. Estimated loss payments may
only be approved after the lender has
submitted a liquidation plan approved
by the Agency.
(c) Estimated loss payments. When the
lender is conducting the liquidation
and owns any of the guaranteed portion of the loan, it may request an estimated loss payment by submitting an
estimate of loss that will occur in connection with liquidation of the loan.
An estimated loss payment may be approved after the Agency has approved
the liquidation plan.
(1) The lender will prepare and submit a Report of Loss using the appraised value in lieu of amount received from sale of collateral.
(2) The estimated loss payment shall
be calculated as of the date of such
payment. The total amount of the loss
payment remitted by the Agency will
be applied by the lender on the guaranteed portion of the loan debt. Such application does not release the borrower
from liability. At the time of final loss
settlement, the lender may notify the
borrower that the loss payment has
been so applied.
(3) After liquidation has been completed, a final Report of Loss will be
submitted by the lender to the Agency.
(d) Final report of loss.In all cases, a
final Report of Loss must be submitted
to the Agency. Before Agency approval
of any final loss report, the lender
must account for all funds obtained,
disposition of the collateral, all costs
incurred, and any other information
necessary for the successful completion
of liquidation. Upon receipt of the final
accounting and Report of Loss, the
Agency may conduct an audit and will
determine the final loss. The lender
will make its records available to, and
otherwise assist, the Agency in making
any audit it requires of the Report of
Loss.
The
documentation
accompanying the Report of Loss must support the loss claimed.
(1) The lender must document and
show that all of the collateral has been
accounted for and properly liquidated
and that liquidation proceeds have
been properly accounted for and applied correctly on the loan. The Agency
must be satisfied that the lender has
accomplished this in the manner contained herein and that the lender has
maximized the collections in conducting the liquidation.
(2) The lender must show a breakdown on any protective advance
amount as to the payee, purpose of the
expenditure, date paid, evidence that
the amount expended was proper, and
that the amount was actually paid.
(3) The lender must show a breakdown of liquidation expenses as to the
payee, purpose of the expenditure, date
paid, evidence that the amount expended was proper, and that the
amount was actually paid.
(4) Accrued interest should be supported by attachments showing how
the amount was accrued by the lender.
A copy of the promissory note and
ledger will be attached. If the interest
rate was a variable rate, the lender
must
include
documentation
of
changes in the selected base rate and
when the changes in the loan rate became effective.
(e) Liquidation income. Any net rental
or other income that has been received
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Rural Utilities Service, USDA
Pt. 1780
by the lender from the collateral will
be applied on the guaranteed loan debt.
(f) Liquidation costs. Certain reasonable liquidation costs will be allowed
during the liquidation process. The liquidation costs must be submitted as a
part of the liquidation plan. Such costs
will be deducted from gross proceeds
received from the disposition of collateral unless the costs have been previously determined by the lender (with
Agency concurrence) to be protective
advances. If changed circumstances
after submission of the liquidation plan
require a revision of liquidation costs,
the lender will obtain the Agency’s
written concurrence prior to proceeding with the proposed changes. No
in-house expenses of the lender will be
allowed.
(g) Protective advance losses. In those
instances where the lender made authorized protective advances, the lender may claim recovery for the guaranteed portion of any loss of monies advanced as well as interest resulting
from such protective advances. These
claims shall be included in the final
Report of Loss.
(h) Final loss approval. After the final
Report of Loss has been tentatively approved:
(1) If the actual loss is greater than
any estimated loss payment, such loss
will be paid by the Agency;
(2) If the actual loss is less than any
estimated loss payment, the lender will
reimburse the Agency;
(3) If the Agency conducted the liquidation, it will provide an accounting
to the lender and will pay the lender in
accordance with the Loan Note Guarantee.
(i) Loss limits. The amount payable by
the Agency to the lender cannot exceed
the limits contained in the Loan Note
Guarantee. If the Agency conducts the
liquidation, loss occasioned by accruing interest will be covered by the
guarantee only to the date the Agency
accepts this responsibility. When the
liquidation is conducted by the lender,
loss occasioned by accruing interest
will be covered to the extent of the
guarantee to the date of final settlement provided the lender proceeds expeditiously with the liquidation plan
approved by the Agency.
§ 1779.95 Future recovery.
After a loan has been liquidated and
a final loss has been paid by the Agency, any future funds which may be recovered by the lender will be pro-rated
between the Agency and the lender in
accordance with the guaranteed percentage even if the Loan Note Guarantee has been terminated.
§ 1779.96 Termination of Loan Note
Guarantee.
The Loan Note Guarantee under this
part will terminate automatically:
(a) Upon full payment of the guaranteed loan; or
(b) Upon full payment of any loss obligation or negotiated loss settlement
except for future recovery provisions;
or
(c) Upon written request from the
lender to the Agency, provided that the
lender holds all of the guaranteed portion and the original Loan Note Guarantee is returned to the Agency.
§§ 1779.97–1779.99
[Reserved]
§ 1779.100 OMB control number.
The reporting and recordkeeping requirements contained in this part have
been approved by the Office of Management and Budget and have been assigned OMB control number 0572–0122.
PART 1780—WATER AND WASTE
LOANS AND GRANTS
Subpart A—General Policies and
Requirements
Sec.
1780.1 General.
1780.2 Purpose.
1780.3 Definitions and grammatical rules of
construction.
1780.4 Availability of forms and regulations.
1780.5 [Reserved]
1780.6 Application information.
1780.7 Eligibility.
1780.8 [Reserved]
1780.9 Eligible loan and grant purposes.
1780.10 Limitations.
1780.11 Service area requirements.
1780.12 [Reserved]
1780.13 Rates and terms.
1780.14 Security.
1780.15 Other Federal, State, and local requirements.
1780.16 [Reserved]
1780.17 Selection priorities and process.
289
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| File Type | application/pdf |
| File Modified | 2012-02-15 |
| File Created | 2012-02-15 |