ffect of lack of funds

■ request of any applicant who is eligifor a loan under this paragraph for h funds are not available, the applicant - be considered to have applied for a under subchapter IV of this chapter. t-of-money loans

n general

e Administrator may make insured hone loans for the acquisition, pure, and installation of telephone lines, -ms, and facilities (other than buildings primarily for administrative purposes, eles not used primarily in construction, customer premise equipment) related to Furnishing, improvement, or extension ral telecommunications service, at an est rate equal to the then current cost oney to the Government of the United es for loans of similar maturity, but not - than 7 percent per year, to any applifor a loan who meets the following rements:

i) The average number of subscribers - mile of line in the service area of the Olicant is not more than 15, or the apcant is capable of producing net income margins before interest of not less than = percent (but not more than 500 pert) of the interest requirements on all the outstanding and proposed loans of applicant.

i) The Administrator has approved a ecommunications modernization plan the State under paragraph (3) and, if e plan was developed by telephone borvers under this subchapter, the applint is a participant in the plan.

oncurrent loan authority

= request of any applicant for a loan er this paragraph during any fiscal the Administrator shall

i) consider the application to be for a n under this paragraph and a loan der section 948 of this title; and

ii) if the applicant is eligible for a loan, ke a loan to the applicant under this ragraph in an amount equal to the count that bears the same ratio to the al amount of loans for which the applint is eligible under this paragraph and der section 948 of this title, as the ount made available for loans under s paragraph for the fiscal year bears to e total amount made available for loans der this paragraph and under section B of this title for the fiscal year. ffect of lack of funds

■ request of any applicant who is eligifor a loan under this paragraph for h funds are not available, the applicant I be considered to have applied for a guarantee under section 936 of this

ze telecommunications modernization plans pproval

not later than 1 year after final regulas are promulgated to carry out this

paragraph, any State, either by statute or through the public utility commission of the State, develops a telecommunications modernization plan that meets the requirements of subparagraph (B), the Administrator shall approve the plan for the State. If a State does not develop a plan in accordance with the requirements of the preceding sentence, the Administrator shall approve any telecommunications modernization plan for the State that meets the requirements that is developed by a majority of the borrowers of telephone loans made under this subchapter who are located in the State.

(B) Requirements

For purposes of subparagraph (A), a telecommunications modernization plan must, at a minimum, meet the following objectives:

(i) The plan must provide for the elimination of party line service.

(ii) The plan must provide for the availability of telecommunications services for improved business, educational, and medical services.

(iii) The plan must encourage and improve computer networks and information highways for subscribers in rural areas. (iv) The plan must provide for—

(I) subscribers in rural areas to be able to receive through telephone lines(aa) conference calling; (bb) video images; and

(cc) data at a rate of at least 1,000,000 bits of information per second; and

(II) the proper routing of information to subscribers.

(v) The plan must provide for uniform deployment schedules to ensure that advanced services are deployed at the same time in rural and nonrural areas.

(vi) The plan must provide for such additional requirements for service standards as may be required by the Administrator.

(C) Finality of approval

A telecommunications modernization plan approved under subparagraph (A) may not subsequently be disapproved. Notwithstanding paragraphs (1)(A)(iii) and (2)(A)(iii),1 and section 948(b)(4)(C) 2 of this title, the Administrator and the Governor of the telephone bank may make a loan to a borrower serving a State that does not have a telecommunication modernization plan approved by the Administrator if the loan is made less than 1 year after the Administrator has adopted final regulations implementing this paragraph.

(As amended Nov. 28, 1990, Pub. L. 101-624, title XXIII, § 2361, 104 Stat. 4042; Nov. 1, 1993, Pub. L. 103-129, § 2(a)(1), (c)(6), 107 Stat. 1356, 1364.)

1 So in original. Probably should be paragraph “(2)(A)(ii)”, * So in original. Probably should be section "948(b)(4)(B)".

AMENDMENTS

1993-Pub. L. 103-129, § 2(c)(6)(A), amended section catchline generally.

Subsec. (a). Pub. L. 103-129, § 2(c)(6)A), inserted heading.

Subsec. (b). Pub. L. 103-129, § 2(a)(1)(A), (B), (c)(6)(B), redesignated subsec. (c) as (b), inserted heading, and struck out former subsec. (b) which read as follows: "Insured loans made under this subchapter shall bear interest at 5 per centum per annum, except that the Administrator may make insured loans to electric or telephone borrowers at a lesser interest rate, but not less than 2 per centum per annum, if, in the Administrator's sole discretion, the Administrator finds that the borrower

or

"(1) has experienced extreme financial hardship;

"(2) cannot, in accordance with generally accepted management and accounting principles and without charging rates to its customers or subscribers so high as to create a substantial disparity between such rates and the rates charged for similar service in the same or nearby areas by other suppliers, provide service consistent with the objectives of this chapter."

Subsec. (c). Pub. L. 103-129, § 2(a)(1)(C), added subsec. (c). Former subsec. (c) redesignated (b).

Subsec. (d). Pub. L. 103-129, § 2(a)(1)(A), (C), added subsec. (d) and struck out former subsec. (d) which read as follows: "The Administrator shall make a telephone loan under this subchapter to an applicant therefor who is otherwise qualified to receive such a loan at the highest interest rate (but not less than the lowest interest rate, nor higher than the highest interest rate, specified in subsection (b) of this section) at which the borrower would be capable of producing net income or margins before interest payments of at least 100 percent (but not more than 150 percent) of the interest requirements on all of the applicant's outstanding and proposed loans."

1990 Subsec. (d). Pub. L. 101-624 added subsec. (d).

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 928, 936b, 939, 940, 940d, 948 of this title.

§ 936. Guaranteed loans; accommodations and subordination of liens; interest rates; assignability of guaranteed loans and related guarantees

The Administrator may provide financial assistance to borrowers for purposes provided in this chapter by guaranteeing loans, in the full amount thereof, made by the Rural Telephone Bank, National Rural Utilities Cooperative Finance Corporation, and any other legally organized lending agency, or by accommodating or subordinating liens or mortgages in the fund held by the Administrator as owner or as trustee or custodian for purchases of notes from the fund, or by any combination of such guarantee, accommodation, or subordination. The Administrator shall not provide such assistance to any borrower of a telephone loan under this chapter unless the borrower specifically applies for such assistance. No fees or charges shall be assessed for any such guarantee, accommodation, or subordination. With respect to guarantees issued by the Administrator under this section, on the request of the borrower of any such loan so guaranteed, the loan shall be made by the Federal Financing Bank and at a rate of interest that is not more than the rate of interest applicable to other similar loans then being made or purchased by the Bank. Guaranteed loans shall bear interest at the rate agreed

Page 520

upon by the borrower and the lender. Guaranteed loans, and accommodation and subordination of liens or mortgages, may be made concurrently with an insured loan. The amount of guaranteed loans shall be subject only to such limitations as to amounts as may be authorized from time to time by the Congress of the United States: Provided, That any amounts guaranteed hereunder shall not be included in the totals of the budget of the United States Government and shall be exempt from any general limitation imposed by statute on expenditures and net lending (budget outlays) of the United States. As used in this subchapter a guaranteed loan is one which is initially made, held, and serviced by a legally organized lending agency and which is guaranteed by the Administrator hereunder. A guaranteed loan, including the related guarantee, may be assigned to the extent provided in the contract of guarantee executed by the Administrator under this subchapter; the assignability of such loan and guarantee shall be governed exclusively by said contract of guarantee.

(As amended Nov. 28, 1990, Pub. L. 101-624, title XXIII, § 2362, 104 Stat. 4042.)

AMENDMENTS

1990-Pub. L. 101-624 inserted provisions prohibiting Administrator from providing assistance to telephone borrower unless borrower specifically applies therefor. SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 928, 935, 936a, 936c, 939, 940a of this title.

§ 936a. Prepayment of loans

SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in title 26 section 501.

§ 936b. Sale or prepayment of direct or insured loans (a) Discounted prepayment by borrowers of electric loans

(1) In general

Except as provided in paragraph (2), a direct or insured loan made under this chapter shall not be sold or prepaid at a value that is less than the outstanding principal balance on the loan.

(2) Exception

On request of the borrower, an electric loan made under this chapter, or a portion of such a loan, that was advanced before May 1, 1992, or has been advanced for not less than 2 years, shall be sold to or prepaid by the borrower at the lesser of

(A) the outstanding principal balance on the loan; or

(B) the present value of the loan discounted from the face value at maturity at the rate established by the Administrator. (3) Discount rate

The discount rate applicable to the prepayment under this subsection of a loan or loan advance shall be the then current cost of funds to the Department of the Treasury for

igibility

In general

borrower that has prepaid an insured or ect loan shall under this chapter in the e manner as other borrowers, except t

(i) a borrower that has prepaid a loan, ther before or after October 21, 1992, at discount rate as provided by paragraph ), shall not be eligible, except at the disetion of the Administrator, to apply for - receive direct or insured loans under is chapter during the 120-month period eginning on the date of the prepayment; nd

(ii) a borrower that prepaid a loan efore October 21, 1992, at a discount rate -eater than that provided by paragraph ), shall not be eligible—

(I) except at the discretion of the Administrator, to apply for or receive direct or insured loans described in clause (i) during the 180-month period beginning on the date of the prepayment; or

(II) to apply for or receive direct or insured loans described in clause (i) until the borrower has repaid to the Federal Government the sum of

(aa) the amount (if any) by which the discount the borrower received by reason of the prepayment exceeds the discount the borrower would have received had the discount been based on the cost of funds to the Department of the Treasury at the time of the prepayment; and

(bb) interest on the amount described in item (aa), for the period beginning on the date of the prepayment and ending on the date of the repayment, at a rate equal to the average annual cost of borrowing by the Department of the Treasury.

Effect on existing agreements

a borrower and the Administrator have red into an agreement with respect to a ayment occurring before October 21, , this paragraph shall supersede any ision in the agreement relating to the oration of eligibility for loans under this pter.

(C) Distribution borrowers

A distribution borrower not in default on the repayment of loans made or insured under this chapter shall be eligible for discounted prepayment as provided in this subsection. For the purpose of determining eligibility for discounted prepayment under this subsection or eligibility for assistance under this chapter, a default by a borrower from which a distribution borrower purchases wholesale power shall not be considered a default by the distribution borrower. (6) Definitions

As used in this subsection:

(A) Direct loan

The term "direct loan" means a loan made under section 904 of this title. (B) Insured loan

The term "insured loan" means a loan made under section 935 of this title.

(b) Mergers of electric borrowers

Notwithstanding subsection (a) of this section, a direct or insured loan may be prepaid by an electric borrower at the lesser of the outstanding principal balance due thereon or the present value thereof discounted from the face value at maturity at the rate set by the Administrator if the borrower is an electrical organization which resulted from a merger or consolidation between a borrower and an organization which, prior to October 1, 1987, prepaid its direct or insured loans pursuant to this section. Prepayments by a borrower hereunder shall be made not later than one year after the effective date of the merger, consolidation, or other transaction. The discount rate to be set by the Administrator for direct or insured loans prepayments hereunder shall be based on the current cost of funds to the Department of the Treasury for obligations of comparable maturity to those being prepaid. If a borrower prepays using tax exempt financing, the discount shall be adjusted to make the discount equivalent to fully taxable financing. The borrower shall certify in writing whether the financing will be tax exempt and shall comply with such other terms and conditions as the Administrator may establish which are reasonable and necessary to implement this provision. As used in this section, the term "direct loan" means a loan made under section 904 of this title.

(As amended Nov. 28, 1990, Pub. L. 101-624, title XXIII, § 2387, 104 Stat. 4051; Oct. 21, 1992, Pub. L. 102-428, § 2, 106 Stat. 2183.)

CODIFICATION

AMENDMENTS

than the face value of any outstanding principal balance on such loan, except when sold to or prepaid by the borrower at the lesser of the outstanding principal balance due on the loan or the loan's present value discounted from the face value at maturity at the rate set by the Administrator. The exception contained in the preceding sentence shall be effective for the period ending September 30, 1987."

Subsec. (b). Pub. L. 102-428, § 2(b), inserted heading. 1990-Pub. L. 101-624 designated existing provisions as subsec. (a) and added subsec. (b).

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in title 26 section 501.

§ 936c. Refinancing and prepayment of FFB loans (a) In general

A borrower of a loan made by the Federal Financing Bank and guaranteed under section 936 of this title may, at the option of the borrower, refinance or prepay the loan or an advance on the loan, or any portion of the loan or advance.

(b) Penalty

(1) Determination of penalty

A penalty shall be assessed against a borrower that refinances or prepays a loan or loan advance, or any portion of a loan or advance, under this section. Except as provided in paragraph (2), the penalty shall be equal to the lesser of

(A) the difference between the outstanding principal balance of the loan being refinanced and the present value of the loan discounted at a rate equal to the then current cost of funds to the Department of the Treasury for obligations of comparable maturity to the loan being refinanced or prepaid;

(B) 100 percent of the amount of interest for 1 year on the outstanding principal balance of the loan or loan advance, or any portion of the loan or advance, being refinanced, multiplied by the ratio that

(i) the number of quarterly payment dates between the date of the refinancing or prepayment and the maturity date for the loan advance; bears to

(ii) the number of quarterly payment dates between the first quarterly payment date that occurs 12 years after the end of the year in which the amount being refinanced was advanced and the maturity date of the loan advance; and

(C)(i) the present value of 100 percent of the amount of interest for 1 year on the outstanding principal balance of the loan or loan advance, or any portion of the loan or advance, being refinanced or prepaid; plus

(ii) for the interval between the date of the refinancing or prepayment and the first quarterly payment date that occurs 12 years after the end of the year in which the amount being refinanced or prepaid was advanced, the present value of the difference between

(I) each payment scheduled for the interval on the loan amount being refinanced or prepaid; and

(II) the payment amounts that would be required during the interval on the

amounts being refinanced or prepaid if the interest rate on the loan were equal to the then current cost of funds to the Department of the Treasury for obligations of comparable maturity to the loan being refinanced or prepaid.

(2) Limitation

(A) In general

Except as provided in subparagraph (B), the penalty provided by paragraph (1)(A) shall be required for refinancing or prepayment under this section.

(B) Exception

In the case of a loan advanced under an agreement that permits the refinancing or prepayment of the loan advance based on the payment of 1 year of interest on the outstanding principal balance of the loan advance, a borrower may, in lieu of the penalty required by paragraph (1)(A), pay a penalty as provided by—

(i) paragraph (1)(B), if the loan advance has reached the 12-year maturity required under the loan agreement for the refinancing or prepayment; or

(ii) paragraph (1)(C), if the loan advance has not reached the 12-year maturity required under the loan agreement for the refinancing or prepayment.

(3) Financing of penalty

(A) In general

In the case of a refinancing under this section, a borrower may, at the option of the borrower, meet the penalty requirements of paragraph (1) by—

(i) making a payment in the amount of the required penalty at the time of the refinancing; or

(ii) increasing the outstanding principal balance of the loan advance guaranteed by the Administrator that is being refinanced under this section by the amount of the penalty.

(B) Increased principal

If a borrower meets the penalty requirements of paragraph (1) by increasing the outstanding principal balance of the loan advance that is being refinanced, the borrower shall make a payment at the time of the refinancing equal to 2.5 percent of the amount of the penalty that is added to the outstanding principal balance of the loan. (c) Loan terms and conditions after refinancing (1) In general

On the payment of a penalty as provided by subsection (b) of this section, the loan or loan advance, or any portion of the loan or advance, shall be refinanced at the interest rate described in paragraph (2) for a term selected by the borrower pursuant to paragraph (3), except that this paragraph shall not apply if the loan advance, or any portion of the advance, is prepaid by the borrower.

interest rate on a loan refinanced this section shall be determined to be to the then current cost of funds to the -tment of the Treasury for obligations parable maturity to a term selected by orrower pursuant to paragraph (3), - that such rate shall not be greater percent per year, subject to subsection this section.

n term

ect to paragraph (4), the borrower of a mat is refinanced under this section

O shall select the term for which an inst rate shall be determined pursuant to graph (2); and

O at the end of the term (and any sucIng term selected by the borrower -r this paragraph), may renew the loan nother term selected by the borrower. cimum term

borrower may not select a term pursuparagraph (3) that ends after the madate set for the loan before the refig of the loan under this section. =ting loans

e case of the refinancing of a loan of a ver pursuant to this section and the inof a penalty in the outstanding princilance of the refinanced loan pursuant section (b)(3) of this section

▪the refinancing and inclusion of the lty shall not be subject to appropriaor limited by the amount provided ng a fiscal year for new loans, loan antees, or other credit activity;

- the request of the borrower for the recing under this section may not be ed or delayed; and

the borrower may not be limited in selection of any refinancing or prepay= option provided by this section to the Ower.

pal balance of such loan or loan advance, or portion thereof, for which such option is exercised. Such fee shall be in addition to the penalties and other payments required under subsection (b) of this section.

(4) Sunset

The option provided under paragraph (1) shall not be available in the case of any loan or loan advance, or portion thereof, unless a written request to exercise such option is sent to the Administrator not later than 1 year after the effective date of regulations issued to carry out the Rural Electrification Loan Restructuring Act of 1993.

(May 20, 1936, ch. 432, title III, § 306C, as added Aug. 10, 1993, Pub. L. 103-66, title I, § 1201(a), 107 Stat. 327; amended Nov. 1, 1993, Pub. L. 103-129, § 2(c)(10), 107 Stat. 1365.)

REFERENCES IN TEXT

The Rural Electrification Loan Restructuring Act of 1993, referred to in subsec. (d)(4), is Pub. L. 103-129, Nov. 1, 1993, 107 Stat. 1356. Section 6 of Pub. L. 103-129 relates to the issuance of regulations to carry out amendments made by the Act and is set out as a note under section 901 of this title. For complete classification of this Act to the Code, see Short Title of 1993 Amendment note set out under section 901 of this title and Tables.

AMENDMENTS

1993-Subsec. (c)(2). Pub. L. 103-129, § 2(c)(10)(A), inserted before period at end ", except that such rate shall not be greater than 7 percent per year, subject to subsection (d) of this section".

Subsec. (d). Pub. L. 103-129, § 2(c)(10)(B), added subsec. (d).

REGULATIONS

Section 1201(b) of Pub. L. 103-66 provided that: "Not later than 45 days after the date of enactment of this section [Aug. 10, 1993], the Administrator of the Rural Electrification Administration shall issue interim final regulations to carry out the amendment made by subsection (a) [enacting this section]."

§ 936d. Eligibility of distribution borrowers for loans, loan guarantees, and lien accommodations

For the purpose of determining the eligibility of a distribution borrower not in default on the repayment of a loan made or guaranteed under this chapter for a loan, loan guarantee, or lien accommodation under this subchapter, a default by a borrower from which the distribution borrower purchases wholesale power shall not

(1) be considered a default by the distribution borrower;

(2) reduce the eligibility of the distribution borrower for assistance under this chapter; or (3) be the cause, directly or indirectly, of imposing any requirement or restriction on the borrower as a condition of the assistance, except such requirements or restrictions as are necessary to implement a debt restructuring agreed on by the power supply borrower and the Government.

(May 20, 1936, ch. 432, title III, § 306D, as added Nov. 1, 1993, Pub. L. 103-129, § 2(c)(7), 107 Stat. 1364.)