Community Programs Guaranteed Loans

Federal RegisterMay 26, 1999

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DEPARTMENT OF AGRICULTURE

Rural Housing Service

Rural Business-Cooperative Service

Rural Utilities Service

Farm Service Agency

7 CFR Parts 1980 and 3575

RIN 0575-AC17

Community Programs Guaranteed Loans

AGENCY: Rural Housing Service, USDA.

ACTION: Final rule.

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SUMMARY: The Rural Housing Service (RHS) is amending the Community

Programs (CP) Guaranteed Loans regulation, which is also utilized by

the Rural Utilities Service (RUS), by removing the requirements for

Community Facilities and implementing a new Community Programs

Guaranteed Loans regulation. RUS will continue to use 7 CFR part 1980,

subpart I for RUS guaranteed loans. This action is needed to streamline

and update the Community Programs Guaranteed Loans program. The

intended effect is to simplify and clarify the regulation; shift some

responsibility for loan documentation and analysis from the Government

to the lenders; make the program more responsive to the needs of

lenders, local community public bodies, and nonprofit corporations; and

provide for smoother processing of applications.

EFFECTIVE DATE: June 25, 1999.

FOR FURTHER INFORMATION CONTACT: Mel Padgett, Community Programs Senior

Loan Specialist, Rural Housing Service, U.S. Department of Agriculture,

STOP 3222, 1400 Independence Ave. SW., Washington, DC 20250-3222,

telephone: (202) 720-1495.

SUPPLEMENTARY INFORMATION:

Classification

This final rule has been determined to be not significant for the

purposes of Executive Order 12866 and, therefore, has not been reviewed

by OMB.

Programs Affected

The Catalog of Federal Domestic Assistance Programs impacted by

this action are 10.766, Community Facilities loans.

Intergovernmental Review

These loans are subject to the provisions of Executive Order 12372

which require intergovernmental consultation with State and local

officials. RHS conducts intergovernmental consultations for each loan

in the manner delineated in subpart V, part 3015 of title 7.

Civil Justice Reform

The final rule has been reviewed under Executive Order 12988, Civil

Justice Reform. In accordance with this rule: (1) All State and local

laws and regulations that are in conflict with this rule will be

preempted; (2) except as expressively provided in the regulation, no

retroactive effect will be given to this rule; and (3) administrative

proceedings of the National Appeals Division (7 CFR part 11) must be

exhausted before bringing suit in court challenging action taken under

this rule.

Environmental Impact Statement

The action has been reviewed in accordance with 7 CFR part 1940,

subpart G, ``Environmental Program.'' The Agency has determined that

this action does not constitute a major Federal action significantly

affecting the quality of the human environment and, in accordance with

the National Environmental Policy Act of 1969, 42 U.S.C. 4321 et seq.,

an Environmental Impact Statement is not required.

Unfunded Mandates Reform Act

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), 2

U.S.C. chapters 17A and 25, established requirements for Federal

agencies to assess the effects of their regulatory actions on State,

local, and tribal governments and the private sector. Under section 202

of the UMRA, RHS generally must prepare a written statement, including

a cost-benefit analysis, for proposed and final rules with ``Federal

mandates'' that may result in expenditures to State, local, or tribal

governments, in the aggregate, or to the private sector, of $100

million or more in any 1 year. When such a statement is needed for a

rule, section 205 of the UMRA generally requires RHS to identify and

consider a reasonable number of regulatory alternatives and adopt the

least costly, most cost-effective, or least burdensome alternative that

achieves the objectives of the rule.

This rule contains no Federal mandates (under the regulatory

provisions of title II of the UMRA) for State, local, and tribal

governments or the private sector. Therefore, this rule is not subject

to the requirements of sections 202 and 205 of the UMRA.

National Performance Review

This regulatory action is being taken as part of the National

Partnership for Reinventing Government to eliminate unnecessary

regulations and improve those that remain in force.

Regulatory Flexibility Act

This rule has been reviewed with regard to the requirements of the

Regulatory Flexibility Act (5 U.S.C. 601-612). The undersigned has

determined and certified by signature of this document that this rule

will not have a significant economic impact on a substantial number of

small entities since this rulemaking action does not involve a new or

expanded program.

Implementation

It is the policy of this Department that rules relating to public

property, loans, grants, benefits or contracts shall comply with 5

U.S.C. 553 notwithstanding the exemption of that section with respect

to such rules.

Paperwork Reduction Act

The information collection and recordkeeping requirements contained

in this regulation have been approved by the Office of Management and

Budget (OMB) under the provisions of 44 U.S.C. chapter 35 and were

assigned OMB control number 0575-0137, in accordance with the Paperwork

Reduction Act of 1995. Under the Paperwork Reduction Act of 1995, no

person is required to respond to a collection of information unless it

displays a valid OMB control number. This final rule does not impose

any new information or recordkeeping

[[Page 28334]]

requirements from those approved by OMB.

Discussion of the Final Rule

This action replaces the Community Facilities portion of the CP

guaranteed loan program administered under 7 CFR part 1980, subpart I.

Under the final rule, this guaranteed loan program will be more

flexible and place more reliance on lenders. There are fewer specific

requirements for lenders. The lender has added responsibility for

analyzing credit quality; for making, securing, and servicing the loan;

and for monitoring construction. Application processing procedures will

be more efficient; less burdensome for borrowers, lenders, and Rural

Development staff; and will provide for more rapid decisions.

The CP loan program was authorized by the Rural Development Act of

1972. The loans are made by private lenders to public bodies, nonprofit

corporations, and certain Indian tribes for the purpose of improving

rural living standards and for other purposes that create essential

community facilities located in cities, towns, or unincorporated areas

of up to 50,000 population required by the Federal Agriculture

Improvement and Reform Act of 1996. The previous statutory population

limit for loans for essential community facilities was 20,000. For

fiscal year 1999, the population unit will be 20,000 pursuant to

Sec. 735 of the Agriculture, Rural Development, Food and Drug

Administration and Related Agencies Appropriation Act, 1999. Since

1990, more than 355 community programs projects, totaling slightly more

than $325 million, have received loans which were guaranteed through

CP.

These loans can be made for a variety of purposes including health

care; public buildings and improvements; fire and rescue; easements;

purchase of equipment, machinery, and supplies; repair and

modernization; pollution control; and transportation studies. The rate

and terms of the loan are negotiated between the borrower and the

lender. This regulation is a high-priority effort to streamline the

administration and operation of the program, respond to the requests of

users of the program, and assist the field staff administering the

program. The revised regulation is simpler, clearer, and more logically

organized. The volume of regulatory material which a lender must review

to request, make, or service a CP guaranteed loan under the new

regulation is significantly less than the current regulation.

Clarifications of various items are also included, such as what is

meant by the term ``essential community facility.''

Except for the increase in the population limit in the definition

of ``Rural and Rural area,'' the revisions are not required by statute.

However, the President and the Secretary of Agriculture are committed

to streamlining all Federal regulations. This CP regulation streamlines

our application procedures, reduces loan application processing time by

placing greater emphasis on State resources, allows more management

flexibility and decision-making capacity at the State Office level, and

expands eligible loan purposes to include recreation.

The Agency has implemented revisions to make the program more

usable by lenders and borrowers. Also, the Agency recognizes that

changes are necessary to make the program more effective in creating

jobs and stimulating economic activity (particularly in chronically

low-income rural areas). Under the new CP regulation, the material that

must be submitted to, and reviewed by, the Agency before approval of

the guarantee has been streamlined. Some responsibilities for credit

analysis and application processing tasks will be shifted from the

Agency to the lender, where feasible. Following is a discussion of some

of the most significant policy revisions included in the final

regulation.

To streamline the regulation, the Agency has combined applicable

portions of the Direct Community Loan Programs (7 CFR part 1942,

subpart A), Fire and Rescue (7 CFR part 1942, subpart C), General

Guaranteed Regulation (7 CFR part 1980, subpart A), previously drafted

Guaranteed Community Programs Regulation, and program requirements

contained in forms which were not in regulations into the Guaranteed

Community Programs Regulation (7 CFR part 3575, subpart A). The Agency

also divided the regulation into general, processing, and servicing

sections. These actions should significantly reduce the amount of

regulatory material that a lender and a borrower must review to

determine eligibility and complete the application. This will also

simplify making and servicing a CP loan.

Additionally, the necessary information contained in the

preapplication package can be submitted simultaneously with the

application. Except the year that loan funds are received, the types of

audited financial statements will be the responsibility of the lender.

Also, we have included recreation as well as clarified that

telecommunications are eligible loan purposes.

Under the new regulation, the lender is responsible for legal

sufficiency. The lender will not only be able to negotiate interest

rates, but will also be able to negotiate incremental increases and

caps for each loan. This will give the lender more flexibility to fit

the CP guaranteed loan program to its lending policies and procedures.

The lender does not have to be a local lender provided it can

demonstrate the ability to adequately service the loan. This will

permit an expansion of eligible lenders to include such organizations

as State bond banks, the Rural Utilities Cooperative Finance

Corporation, Sallie Mae, and other lenders that are subject to credit

examination and supervision by a State or Federal entity that

supervises and regulates credit institutions. All of these

organizations have expressed an interest in the CP guaranteed lending

program in the past.

Discussion of Comments

The proposed rule was published in the Federal Register on October

7, 1997 (62 FR 52277), for public comment. Five comments were received.

All of the comments received expressed support for the changes in this

streamlined regulation. The comments ranged from making the regulation

easier to read and follow to agreeing that the regulatory burden was

lessened on the lenders as well as on our field employees. Also, the

ability to change interest rates on a quarterly basis was supported as

more in line with industry standards. Other changes which were

supported are: permitting the lender to monitor construction rather

than the Agency; permitting the preapplication information and the

application to be completed as one process; and making the lender

responsible for legal sufficiency.

One respondent requested consistent wording concerning the 5

percent which the lender must retain in its portfolio. The wording has

been changed to clarify that the amount which the lender must hold will

be 5 percent of the total loan amount and that this amount must be from

the unguaranteed portion of the loan.

One respondent wanted to know what is contained in chapter 37 of

title 31 of the United States Code. This chapter is commonly referred

to as the Debt Collection Act.

Definitions

One respondent suggested that all Rural Development program areas

have similar definitions for ``rural'' and ``rural area.'' The Agency

agrees that similar definitions would make the programs easier for our

field employees to implement. However, the Federal Agriculture

Improvement and Reform

[[Page 28335]]

Act of 1996 redefined the definition for ``rural'' and ``rural area''

as it applies to Community Facilities programs. This definition has

been incorporated into this regulation.

Except for fiscal year 1999, Community Facilities projects can be

located in incorporated cities or towns or unincorporated areas with a

population of less than 50,000; however, these projects cannot be

located in urbanized areas regardless of the population. Urbanized

areas are areas immediately adjacent to a city, town, or unincorporated

area exceeding 50,000 inhabitants. The boundaries of urbanized areas

are not limited to preexisting county or State lines. They often follow

the boundaries of small census-defined geographic units such as census

tracts and enumeration districts. Many urbanized areas cross county and

sometimes State lines.

Eligibility

One respondent wanted to include sole-member corporations as

eligible for the Community Facilities program. While this would

increase the potential number of borrowers, it goes against the concept

of broad-based community support.

One respondent suggested that business incubators be made an

eligible purpose. Business incubators are already eligible provided

they are designed as a training facility and they meet the basic

eligibility criteria of being either a nonprofit corporation or a

public body having broad-based community support.

One respondent indicated that combining the floodplain management

plan requirements with flood insurance would eliminate service to most

of his State. The Agency did not intend to change the existing

floodplain requirements. However, in our efforts to streamline the

regulations, we combined two requirements and used a conjunction which

tied the two requirements together. The Agency has separated and

reworded these requirements in this final regulation. The requirements

are the same as our existing regulation. To make a loan in a Federal

Emergency Management Agency designated 100-year floodplain, a

floodplain management plan must be in place.

Also, National Flood Insurance must be available, and the lender

must require such insurance.

As a result of internal discussions, the Environmental Requirements

section has been expanded slightly in order to highlight the existing

burden on the applicant to take no actions that would either limit the

range of alternatives to be considered or which might adversely effect

the environment prior to completion of the Agency's environmental

review.

Equal Opportunity and Fair Housing Act requirements

One respondent suggested that we list all the specific individual

requirements under these laws. These requirements are spelled out in a

separate section. If a lender needs more specific information, the

Agency can administratively handle these situations on a case-by-case

basis.

One respondent requested clarification concerning the Agency's

review of the equal opportunity and nondiscrimination requirements when

evaluating an application. The Agency will further clarify our

employees' responsibilities for reviewing loan applications in Agency

instructions.

Rates and Terms

One respondent supported permitting both variable and fixed

interest rates in the same loan but pointed out that the restriction

which requires the guaranteed portion of the loan to always have a

lower interest rate than the unguaranteed portion of the loan would

prevent lenders from making the guaranteed portion fixed and the

unguaranteed portion variable when the interest rate market is

declining. We agree, and we have removed this restriction in these

cases.

Design and Construction

One respondent said that this regulation seems to say that if the

Agency guarantees a loan on an existing building, we would not require

any changes to make the building meet the Americans with Disabilities

Act (ADA). The ADA does not require that existing buildings be made

accessible unless they are remodeled. Then only the portion which is

remodeled must be made accessible. For example, if four interior

offices were remodeled, only those four offices would have to be made

accessible. But the restrooms or the entry way would not have to be

accessible. If you remodeled the building front, then the front entry

would have to be made accessible. In conclusion, any new work must be

accessible and designed in accordance with the ADA. Any area of the

existing structure that is not remodeled does not have to meet the ADA.

Since this is not a Community Programs requirement, we will clarify

this concept for our employees in our instructions.

One respondent suggested a standard certification form for the

lender to complete certifying that construction has been completed in

accordance with the proper building codes. To maintain flexibility and

keep the regulations and public paperwork at a minimum, we have

incorporated this as a lender certification.

One respondent suggested amending our concurrence to preliminary

architectural or engineering reports or plans because many Community

Facilities projects do not require complex reports but rather simple

drawings and estimates of project costs. We agree. This was our

original intent in the proposed general portion of the design and

construction requirements section. We have added the words ``or plans''

to this section.

One respondent questioned the lack of a reference to procurement

utilizing free and open competition. The borrower and the lender both

benefit from free and open competition. In the spirit of reducing the

regulatory burden to the public, the lender will now be responsible for

determining the best method to ensure that the project is completed

within budget. If the lender determines that design and build is a

better method than sealed bids, the lender will have the flexibility to

approve such construction.

Feasibility Requirements

One respondent strongly supported the loan approval official being

able to determine if an independent feasibility analysis is necessary.

It also stated that the economic section of the regulation confuses the

lender credit analysis with the feasibility report. The Agency intends

that the loan approval official will determine whether or not an

independent feasibility analysis is necessary. Consequently, the

lender's financial credit analysis may serve as a feasibility analysis

when the loan approval official concludes sufficient economic

information is provided in their analysis. We have added a sentence to

clarify this issue.

Processing

One respondent indicated that we should have included a timeframe

to provide the lender an answer. While we agree, this is an

administrative matter within the Agency and will be incorporated into

our field employee instructions.

One respondent suggested moving the subsection concerning changing

the scope of the project from the section describing the conditions

precedent to issuing a loan note guarantee to the section discussing

the review of requirements in the conditional commitment. The Agency

agrees and has moved this subsection.

[[Page 28336]]

One respondent suggested that the number of customers discussed in

the loan application evaluation section should apply only to Water and

Waste Division projects. The Agency disagrees. The number of customers

is important for other utility-type projects such as gas distribution

systems. Also, the number of customers may play an important role in

other community facilities-type projects such as hospitals, nursing

homes, and child care.

One respondent questioned if the certifications listed under the

conditions precedent to issuance of the loan note guarantee section met

all applicable requirements set out in the regulations. It was

suggested clarification was needed. The Agency listed the items which

the lender must certify to before the loan note guarantee could be

issued. By certifying to these conditions, the lender is stating that

it has met the requirements set out in the regulation.

One respondent requested clarification concerning the title report

under the lender's certifications in the conditions precedent to

issuance of a loan note guarantee. The respondent wanted to know

whether or not the title report was referring to a final title opinion

or a preliminary title opinion. The Agency intends this to be the

lender's legal counsel's opinion which states that the loan has been

closed and proper title has been obtained in accordance with the

security instrument and other agreements between the lender and the

Agency.

One respondent requested further clarification of the guaranteed

loan closing report. This report is a Rural Development form. All

references to specific form numbers have been eliminated from the

actual text of the Federal Register. The actual form numbers will

appear in the Agency instructions to our field employees. Only the form

names appear in the Federal Register.

One respondent questioned the need to require a parity lien

position. We agree, the lender should determine that adequate security

is obtained for the loan and the Agency can either concur or choose not

to guarantee the loan accordingly. This requirement has been deleted.

One respondent requested that the Agency eliminate the test for

credit. The respondent further points out that the Rural Development

Business and Industry (B&I) program does not require such a test for

credit to be eligible for a guaranteed loan. The Agency is bound by

statute and must require this test for credit. The B&I program is

exempt from this statutory provision.

One respondent suggested that finder and packaging fees be

considered an eligible loan purpose. This comment also suggested paying

real estate broker fees. These fees are already paid as part of the

sale and purchase. To be consistent with other Community Facilities

loan programs, the Agency does not consider finder fees necessary. All

Community Programs loans have professional and technical assistance

such as architects, engineers, and accountants who provide similar

services. Consequently, the Agency feels that paying additional fees is

unnecessary.

One respondent requested clarification concerning whether or not

the preapplication forms are still necessary when the Agency receives

an application for a loan guarantee from a lender without going through

the preapplication process. The Agency will accept applications without

a preapplication package.

Servicing

Two respondents strongly suggested that the audit requirements

should be the lender's responsibility. We agree, based upon discussions

with our sister agencies and the Office of Management and Budget (OMB),

we have determined that we do not have continuing compliance

requirements as described in the OMB circular A-133. Consequently, in

the year that funds are received, the Agency will require an audit in

accordance with the OMB circular A-133. In subsequent years, the lender

(with Agency concurrence) will determine the type of financial

reporting and financial audits that will be required for the duration

of the loan.

One respondent noted that the lender and borrower visits were

omitted and suggested that they should be required periodically. While

we agree, this is an administrative matter and will be addressed in the

Agency's field instruction.

One respondent wanted to clarify that the sale of one lender to

another in a merger situation did not constitute a transfer of lender.

We agree.

One respondent suggested that we increase the amount of protective

advances from $500 to $5,000 dollars. This amount would be consistent

with other mission area regulations and would be consistent with

inflation. We agree, the amount of protective advances which the lender

can make without Agency concurrence has been increased from $500 to

$5,000.

List of Subjects

7 CFR Part 1980

Loan programs--Agriculture, Loan programs--Business and industry,

Loan programs--Housing and community development, Rural development

assisance.

7 CFR Part 3575

Community facilities, Guaranteed loans, Loan programs.

Accordingly, chapters XVIII and XXXV, title 7, Code of Federal

Regulations, are amended as follows:

PART 1980--GENERAL

1. The authority citation for part 1980 continues to read as

follows:

Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 42 U.S.C. 1480.

Subpart I--Community Programs Guaranteed Loans

Sec. 1980.801 [Amended]

2. Section 1980.801(b) is amended by removing the words ``and other

essential community'' in the first sentence.

Sec. 1980.802 [Amended]

3. Section 1980.802 is amended by removing the definition for

``Community facilities.''

Sec. 1980.805 [Amended]

4. Section 1980.805 is amended by removing the third through the

seventh sentences of the section.

Sec. 1980.813 [Amended]

5. Section 1980.813 is amended in the introductory text of

paragraph (a) by revising the words ``, and other essential community

facilities providing essential'' to read ``providing'' in the first

sentence and by removing paragraphs (a)(2), (b)(1), and (b)(2);

paragraphs (a)(3), (b)(3), and (b)(4), are redesignated as paragraphs

(a)(2), (b)(1), and (b)(2), respectively; and by removing the words

``and X-ray machines'' in newly redesignated paragraph (a)(2)(i).

Sec. 1980.814 [Amended]

6. Section 1980.814 is amended by removing paragraph (d) and

redesignating paragraphs (e) through (h) as paragraphs (d) through (g),

respectively.

7. Section 1980.844 is revised to read as follows:

Sec. 1980.844 Appraisal reports.

The borrower is responsible for the acquisition of all property

rights necessary for the project and will determine that prices paid

are reasonable and fair.

[[Page 28337]]

8. Chapter XXXV, title 7, Code of Federal Regulations is amended by

adding a new part 3575 to read as follows:

PART 3575--GENERAL

Subpart A--Community Programs Guaranteed Loans

Sec.

3575.1 General.

3575.2 Definitions.

3575.3 Full faith and credit.

3575.4 Conditions of guarantee.

3575.5-3575.7 [Reserved]

3575.8 Access to lender's records.

3575.9 Environmental requirements.

3575.10-3575.11 [Reserved]

3575.12 Inspections.

3575.13 Appeals.

3575.14-3575.16 [Reserved]

3575.17 Exception authority.

3575.18-3575.19 [Reserved]

3575.20 Eligibility.

3575.21-3575.23 [Reserved]

3575.24 Eligible loan purposes.

3575.25 Ineligible loan purposes.

3575.26 [Reserved]

3575.27 Eligible lenders.

3575.28 Transfer of lenders or borrowers (prior to issuance of Loan

Note Guarantee).

3575.29 Fees and charges by lender.

3575.30 Loan guarantee limitations.

3575.31-3575.32 [Reserved]

3575.33 Interest rates.

3575.34 Terms of loan repayment.

3575.35-3575.36 [Reserved]

3575.37 Insurance and fidelity bonds.

3575.38-3575.39 [Reserved]

3575.40 Equal opportunity and Fair Housing Act requirements.

3575.41 [Reserved]

3575.42 Design and construction requirements.

3575.43 Other Federal, State, and local requirements.

3575.44-3575.46 [Reserved]

3575.47 Economic feasibility requirements.

3575.48 Security.

3575.49-3575.51 [Reserved]

3575.52 Processing.

3575.53 Evaluation of application.

3575.54-3575.58 [Reserved]

3575.59 Review of requirements.

3575.60-3575.62 [Reserved]

3575.63 Conditions precedent to issuance of the Loan Note

Guarantee.

3575.64 Issuance of Lender's Agreement, Loan Note Guarantee, and

Assignment Guarantee Agreement.

3575.65 Lender's sale or assignment of the guaranteed portion of

loan.

3575.66-3575.68 [Reserved]

3575.69 Loan servicing.

3575.70-3575.72 [Reserved]

3575.73 Replacement of loss, theft, destruction, mutilation, or

defacement of Loan Note Guarantee or Assignment Guarantee Agreement.

3575.74 [Reserved]

3575.75 Defaults by borrower.

3575.76-3575.77 [Reserved]

3575.78 Repurchase of loan.

3575.79 [Reserved]

3575.80 Interest rate changes after loan closing.

3575.81 Liquidation.

3575.82 [Reserved]

3575.83 Protective advances.

3575.84 Additional loans or advances.

3575.85 Bankruptcy.

3575.86-3575.87 [Reserved]

3575.88 Transfer and assumptions.

3575.89 Mergers.

3575.90 Disposition of acquired property.

3575.91-3575.93 [Reserved]

3575.94 Determination and payment of loss.

3575.95 Future recovery.

3575.96 Termination of Loan Note Guarantee.

3575.97-3575.99 [Reserved]

3575.100 OMB control number.

Subpart B--[Reserved]

Authority: 5 U.S.C. 301, 7 U.S.C. 1989.

Subpart A--Community Programs Guaranteed Loans

Sec. 3575.1 General.

(a) This subpart contains the regulations for Community Programs

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 Community Programs guaranteed loan program

is to improve, develop, or finance essential community facilities in

rural areas. This purpose is achieved through bolstering the existing

private credit structure through the guarantee of quality loans which

will provide lasting community benefits.

Sec. 3575.2 Definitions.

The following general definitions are applicable to the terms used

in this subpart:

Agency. The Rural Housing 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 Community Facilities 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.

Community facility (essential). The term ``facility'' as used in

this subpart refers to both the physical structure financed and the

resulting service provided to rural residents. An essential community

facility must:

(1) Be a function customarily provided by a local unit of

government;

(2) Be a public improvement needed for the orderly development of a

rural community;

(3) Not include private affairs or commercial or business

undertakings (except for limited authority for industrial parks);

(4) Be within the area of jurisdiction or operation for eligible

public bodies or a similar local rural service area of a not-for-profit

corporation; and

(5) Be located in a rural area.

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, staff 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.

[[Page 28338]]

Joint financing. Two or more lenders (or any combination of lenders

and other financial sources) making separate relatively contemporaneous

loans 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 subpart 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 classification system. The process by which loans are examined

and categorized by degree of potential loss in the event of default.

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.

Problem loan. A loan which is not complying with its terms and

conditions.

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.

Public body. A municipality, county, or other political subdivision

of a State, special purpose district, an Indian tribe on a Federal or

State reservation, or another federally recognized Indian tribe.

Report of loss. A form used by lenders when reporting a loss under

an Agency guarantee (available in any Agency office).

Rural and rural area. (1) For fiscal year 1999, the terms ``rural''

and ``rural area'' mean a city, town, or unincorporated area with

20,000 inhabitants or less according to the latest decennnial census.

(2) For later fiscal years, the terms ``rural'' and ``rural area''

mean a city, town, or unincorporated area that has a population of

50,000 inhabitants or less according to the latest decennial census of

the United States, other than an urbanized area immediately adjacent to

a city, town, or unincorporated area that has a population in excess of

50,000 inhabitants.

Service area. The area reasonably expected to be served by the

facility 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 essential community 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.

Sec. 3575.3 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 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.

Sec. 3575.4 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 non-guaranteed 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.

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.

[[Page 28339]]

(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.

Secs. 3575.5--3575.7 [Reserved]

Sec. 3575.8 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.

Sec. 3575.9 Environmental requirements.

Requirements for an environmental review or mitigation actions are

contained in part 1940, subpart G, of this title. The lender must

assist the Agency to ensure that the lender's applicant complies with

any mitigation measures required by the Agency's environmental review

for the purpose of avoiding or reducing adverse environmental impacts

of construction or operation of the facility financed with the

guaranteed loan. This assistance includes ensuring that the lender's

applicant is to take no actions (for example, initiation of

construction) or incur any obligations with respect to their proposed

undertaking that would either limit the range of alternatives to be

considered during the Agency's environmental review process or which

would have an adverse effect on the environment. 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 Agency approval of the applicant's

request or any commitment of Agency resources.

Sec. Sec. 3575.10--3575.11 [Reserved]

Sec. 3575.12 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 of interest. Agency inspections do not relieve any

parties of interest of their responsibilities to conduct necessary

inspections.

Sec. 3575.13 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.

Sec. Sec. 3575.14--3575.16 [Reserved]

Sec. 3575.17 Exception authority.

The Administrator may, in individual cases, make an exception to

any requirement or provision of this subpart or address any omission of

this subpart provided the Administrator determines that application of

the requirement or provision, or failure to take action in the case of

an omission, would adversely affect the Government's financial

interest. Requests for exceptions must be in writing by the State

Director.

Sec. Sec. 3575.18--3575.19 [Reserved]

Sec. 3575.20 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. This determination shall become a part of the

Agency casefile. 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 security 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.

(i) These responsibilities must be exercised by the borrower even

though the facility may be operated, maintained, or managed by a third

party under contract, management agreement, or written lease.

(ii) Leases may only be used when this is the only feasible way to

provide the service, is the customary practice to provide such service

in the State, and must provide for the borrower's management control of

the facility.

(iii) Contracts, management agreements, or leases must not contain

options or other provisions for transfer of ownership.

(3) The lender is responsible for reviewing any contracts,

management agreements, or leases to determine that they will not

adversely impact the borrower's repayment ability or the security value

of the guaranteed loan.

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. For-profit

corporations operated as not-for-profit corporations are eligible

borrowers as long as they operate as a not-for-profit corporation for

the duration of their guaranteed loans. Single member corporations or

corporations owned or substantially controlled by other corporations or

associations are not eligible organizations. Before a loan is made to a

borrower other than a public body, the articles of incorporation or the

loan agreement will include a condition similar to the following:

If the corporation dissolves or ceases to perform the community

facility objectives and functions, the board of directors shall

distribute all business property and assets to one or more nonprofit

corporations or public bodies. This distribution must be approved by

75 percent of the users or members and must serve the public welfare

of the community. The assets may not be distributed to any members,

directors, stockholders, or others having financial or managerial

interest in the corporation. Nothing herein shall prohibit the

corporation from paying its debts.

(3) A private nonprofit essential community facility (other than

utilities)

[[Page 28340]]

must have significant ties with the local rural community. Such ties

are necessary to ensure to the greatest extent possible that a facility

under private control will carry out a public purpose and continue to

primarily serve rural areas. Ties may be evidenced by items such as:

(i) Association with, or controlled by, a local public body or

bodies or broadly based ownership and controlled by members of the

community.

(ii) Substantial public funding through taxes, revenue bonds, or

other local government sources, or substantial voluntary community

funding such as would be obtained through a community-wide funding

campaign.

(4) Indian tribes on Federal and State reservations and other

federally recognized Indian tribes.

(d) Facility location. Facilities must be located in rural areas,

except:

(1) For utility services such as natural gas or hydroelectric

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.

(2) Telecommunication projects. The part of the facility located in

a non-rural area must be necessary to provide the essential services to

rural areas.

(e) Facilities for public use. All facilities financed under the

provisions of this subpart 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. This does not preclude:

(i) Financing or constructing projects in phases when it is not

practical to finance or construct the entire project at one time, and

(ii) Financing or constructing facilities where it is not

economically feasible to serve the entire area, provided economic

feasibility is determined on the basis of the entire system or facility

and not by considering the cost of separate extensions to, or parts

thereof. Additionally, the borrower must publicly announce a plan for

extending service to areas not initially receiving service. Also, the

borrower must provide written notice to potential users located in the

areas not to be initially served.

(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 (i.e., gas distribution system) 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.

Sec. Sec. 3575.21--3575.23 [Reserved]

Sec. 3575.24 Eligible loan purposes.

(a) Funds may be used to construct, enlarge, extend, or otherwise

improve other essential community facilities providing essential

service primarily to rural residents and rural businesses.

(1) Essential community facilities include, but are not limited to:

(i) Fire, rescue, and public safety,

(ii) Health services,

(iii) Community, social, or cultural services,

(iv) Transportation facilities such as streets, roads, and bridges,

(v) Telecommunication equipment,

(vi) Hydroelectric generating facilities and related connecting

systems and appurtenances only when not eligible for financing under

the authorities of the Rural Utilities Service. Funds may not be used

to finance other types of electrical generating or transmitting

facilities,

(vii) Supplemental and supporting structures for other rural

electrification or telephone systems (including facilities such as

headquarters and office buildings, storage facilities, and maintenance

shops) only when not eligible for financing under the authorities of

the Rural Utilities Service,

(viii) Natural gas distribution systems,

(ix) Industrial park sites (but only to the extent of land

acquisition and necessary site preparation) including access ways and

utility extensions to and throughout the site. Funds may not be used in

connection with industrial parks to finance on-site utility systems or

business and industrial buildings, and

(x) Recreational facilities.

(2) Otherwise improve includes, but is not limited to, the

following:

(i) The purchase of major equipment (such as telecommunication

equipment and X-ray machines) which will in themselves provide an

essential service to rural residents,

(ii) The purchase of existing facilities, when necessary, either to

improve or to prevent a loss of service, and

(iii) Payment of tap fees and other utility connection charges as

provided in utility purchase contracts.

(b) Funds also may be used:

(1) To construct or relocate public buildings, roads, bridges,

fences, or utilities and to make other public improvements necessary to

the successful operation or protection of facilities authorized by

paragraph (a) of this section.

(2) To relocate private buildings, roads, bridges, fences, or

utilities, and other private improvements necessary to the successful

operation or protection of facilities authorized in paragraph (a) of

this section.

(3) To pay the following expenses (but only when such expenses are

a necessary part of a loan to finance facilities authorized in

paragraph (a) of this section):

(i) Reasonable fees and costs such as origination fee, loan

guarantee fee, legal, engineering, architectural, fiscal advisory,

recording, environmental impact analyses, archaeological surveys,

possible salvage or other mitigation measures, planning and

establishing or acquiring rights.

(ii) Interest on loans until the facility is self-supporting, but

not for more than 2 years unless a longer period is approved by the

Agency; interest on loans secured by general obligation bonds until tax

revenues are available for payment, but not for more than 2 years

unless a longer period is approved by the Agency's National Office; and

interest on interim financing.

(iii) Costs of acquiring interest in land; rights such as water

rights, leases, permits, rights-of-way, and other evidence of land or

water control necessary for development of the facility.

(iv) Purchasing or renting equipment necessary to install,

maintain, extend, protect, operate, or utilize facilities.

(v) Initial operating expenses for a period ordinarily not

exceeding 1 year when the borrower is unable to pay such expenses.

(vi) Refinancing debts incurred by, or on behalf of, a community

when all of the following conditions exist:

(A) The debts being refinanced are less than 50 percent of the

total loan,

(B) The debts were incurred for the facility or service being

financed or any part thereof (such as interim financing, construction

expenses, etc.), and

modify the terms of the debts so that a sound basis will exist for

making a loan.

(4) To pay obligations for construction incurred prior to filing a

preapplication and application with the Agency. Construction work must

not be started (and obligations for such work or materials must not be

incurred) before

[[Page 28341]]

the Conditional Commitment for Guarantee is issued. If there are

compelling reasons for proceeding with construction before the

Conditional Commitment for Guarantee is issued, lenders may request

Agency approval to pay such obligations and not jeopardize a guarantee

from the Agency. Such request must comply with the following:

(i) Provide conclusive evidence that the contract was entered into

without intent to circumvent the Agency regulations. However, the

Agency is not required or obligated to pay a loss unless a written

guarantee is issued,

(ii) Modify the outstanding contract to conform with the provisions

of this subpart. Where this is not possible, modifications will be made

to the extent practicable and, as a minimum, the contract must comply

with all State and local laws and regulations as well as statutory

requirements and executive orders related to the Agency financing. When

construction is complete and it is impracticable to modify the

contract, the borrower and lender must provide the certification

required by paragraph (b)(4)(iii) of this section,

(iii) Provide a certification by an engineer or architect that any

construction performed complies fully with the plans and

specifications, and

(iv) The borrower and the contractor must have complied with all

statutory and executive order requirements related to Agency financing

for construction already performed even though the requirements may not

have been included in the contract documents.

Sec. 3575.25 Ineligible loan purposes.

Loan funds may not be used to finance:

(a) Properties to be used for commercial rental when the borrower

has no control over tenants and services offered except for industrial-

site infrastructure development,

(b) Facilities primarily for the purpose of housing Federal or

State agencies,

(d) Telephone systems,

(e) Facilities which are not modest in size, design, and cost,

(f) Finder's and packager's fees,

(g) Projects located within the Coastal Barriers Resource System

that do not qualify for an exception as defined in section 6 of the

Coastal Barriers Resource Act, 16 U.S.C. 3501 et seq. (available in any

Agency office),

(h) New combined sanitary and storm water sewer facilities, or

(i) Projects that are located in a special flood or mudslide hazard

area as designated by the Federal Emergency Management Agency in a

community that is not participating in the National Flood Insurance

Program.

Sec. 3575.26 [Reserved]

Sec. 3575.27 Eligible lenders.

(a) Eligible lenders. Eligible lenders (as defined in this section)

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) Bank for Cooperatives, 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 subpart;

(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. These lenders must also be subject to credit

examination and supervision by either an appropriate agency of the

United States or a State that supervises and regulates credit

institutions and provide documentation acceptable to the Agency that

they have the ability to service the loan. 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.

Sec. 3575.28 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:

(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).

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. Exceptions to 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.

Sec. 3575.29 Fees and charges by lender.

(a) Routine charges and fees. The lender may establish the charges

and fees for the loan, provided 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.

guarantee fee rate multiplied by the principal loan amount multiplied

by the percent of

[[Page 28342]]

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.

Sec. 3575.30 Loan guarantee limitations.

The percentage of guarantee, up to the maximum allowed by this

section, is a matter for negotiation between the lender and the Agency.

(a) The maximum guarantee is 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.

Secs. 3575.31--3575.32 [Reserved]

Sec. 3575.33 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.

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 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. When a combination of fixed and variable

interest rates are used, the interest rate for the unguaranteed portion

will not be lower than the guaranteed portion of the loan.

Sec. 3575.34 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 guaranteed CP loan will be limited to the useful life of the

facility, not to exceed 40 years.

amortized within the prescribed loan maturity. Balloon payments at the

end of the loan are prohibited.

Secs. 3575.35--3575.36 [Reserved]

Sec. 3575.37 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.

Secs. 3575.38--3575.39 [Reserved]

Sec. 3575.40 Equal opportunity and Fair Housing Act requirements.

(a) Equal Credit Opportunity Act. The lender will comply with the

requirements of title V of the Equal Credit Opportunity Act (15 U.S.C.

1691 et seq.). (See the Federal Reserve Board Regulation, 12 CFR part

202.)

(b) Fair Housing Act. Certain housing-related projects such as

nursing homes, group homes, or assisted-living facilities must comply

with the requirements of the Fair Housing Act (42 U.S.C. 3601 et seq.).

This includes completion of an Affirmative Fair Housing Marketing Plan

and compliance with the Housing and Urban Development accessibility

guidelines except for areas open to the public which are covered by the

Americans with Disabilities Act (42 U.S.C. 12181 et seq.). The lender

will determine that the borrower has a valid plan in effect at all

times.

Sec. 3575.41 [Reserved]

Sec. 3575.42 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

[[Page 28343]]

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.

in excess of $10,000, the contractor must comply with Executive Order

11246 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. Community Facilities 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.

Sec. 3575.43 Other Federal, State, and local requirements.

In addition to the specific requirements of this subpart 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) Organization and authority to design, construct, develop,

operate, and maintain the proposed facilities;

(b) Borrowing money, giving security, and raising revenues for

repayment;

(d) Health, safety, and sanitation standards; and

(e) Protection of the environment and consumer affairs.

Secs. 3575.44-3575.46 [Reserved]

Sec. 3575.47 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. Other sources of

revenue or guarantors are particularly important in considering the

feasibility of recreation-type loans. 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.

(a) Financial feasibility. The borrower, lender, or other qualified

entity must prepare the financial feasibility analysis (suggested

financial feasibility guidelines are available in any Agency office) in

the following instances:

(1) Facilities primarily used for fire and rescue services;

(2) Facilities that are not dependent on facility revenues for debt

payment;

(3) Loans of less than $500,000; or

(4) Projects in which the borrower has operated similar facilities

on a financially successful basis.

(b) Utility projects. The borrower's consulting engineer may

complete the financial feasibility analysis for utility systems.

all other facilities must be prepared by a qualified entity not having

a direct interest in the management of the facility. The lender may

prepare the feasibility study if qualified staff is available.

(d) 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.

(e) Insufficient information. When the lender or Agency has

insufficient information to determine the borrower's repayment ability,

an independent feasibility analysis is required.

Sec. 3575.48 Security.

(a) Lender responsibility. The lender is responsible for obtaining

and maintaining proper and adequate security to protect the interest of

the lender, the holder, and the Government.

(b) Type of security. Security 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 security 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.

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.

Secs. 3575.49--3575.51 [Reserved]

Sec. 3575.52 Processing.

(a) Preapplications. (1) The preapplication package must 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, existing debt instruments, etc.; and

(iv) Documentation of lender eligibility in accordance with

Sec. 3575.27.

(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. The Agency must do

an environmental review before further processing will be completed.

(b) Applications. Contents of application package:

[[Page 28344]]

(1) Application for Loan and Guarantee on a form prescribed by the

Agency (available in any Agency office);

(2) Proposed loan agreement;

(3) Request for Environmental Information (available in any Agency

office);

(4) Preliminary architectural or engineering report;

(5) Cost estimates;

(6) Appraisal reports (as appropriate);

(7) Credit reports;

(8) Financial feasibility analysis and report; and

(9) Any additional information required.

Sec. 3575.53 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 review is complete and considered in determining

compliance, 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;

(d) Number of customers;

(e) Security and lien priority;

(f) Appraisals;

(g) Insurance and bonding;

(h) Financial reporting;

(i) Equal opportunity and nondiscrimination;

(j) Environment or mitigation;

(k) Americans with Disabilities Act;

(l) By-laws and articles of incorporation changes; and

(m) Other requirements necessary to protect the Government.

Sec. Sec. 3575.54-3575.58 [Reserved]

Sec. 3575.59 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.

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.

Sec. Sec. 3575.60-3575.62 [Reserved]

Sec. 3575.63 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) All equal opportunity and Fair Housing Plan requirements have

been met.

(5) 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.

(6) 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.

(7) 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.

(8) All other requirements of the Conditional Commitment for

Guarantee have been met.

(9) Lien priorities are consistent with requirements of the

Conditional Commitment for Guarantee.

(10) 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.

(11) 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, the term borrower

includes any parent, affiliate, or subsidiary of the borrower.

(12) All Federal, State, and local design and construction

requirements have been met.

(13) The lender understands and will meet the requirements of the

Debt Collection Act (chapter 37 of title 31 of the United States Code).

(14) 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.

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, 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 for utility-

type facilities (such as a gas distribution system) 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) For loans exceeding $150,000, the lender has certified its

compliance with the Anti-Lobby Act (18 U.S.C. 1913). Also, if any funds

have been, or will be, paid to any person for influencing or attempting

to influence an officer or employee of any agency, a Member of

Congress, an officer or employee of Congress, or an employee of a

Member of Congress in connection with this

[[Page 28345]]

commitment providing for the United States to guarantee a loan, the

lender shall completely disclose such lobbying activities in accordance

with 31 U.S.C. 1352.

(f) 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.

(g) 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.

Sec. 3575.64 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.

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.

Sec. 3575.65 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 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.

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.

Sec. Sec. 3575.66--3575.68 [Reserved]

Sec. 3575.69 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 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).

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.

Sec. Sec. 3575.70--3575.72 [Reserved]

Sec. 3575.73 Replacement of loss, theft, destruction, mutilation, or

defacement of Loan Note Guarantee or Assignment Guarantee Agreement.

(a) Replacement of Loan Note Guarantee. 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:

[[Page 28346]]

(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 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, etc.).

(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.

Sec. 3575.74 [Reserved]

Sec. 3575.75 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.

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.

Sec. Sec. 3575.76--3575.77 [Reserved]

Sec. 3575.78 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 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 written demand to the Agency. 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 suspend 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.

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

[[Page 28347]]

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.

Sec. 3575.79 [Reserved]

Sec. 3575.80 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 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.

Sec. 3575.81 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 subpart 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 regulation 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.

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;

(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, reasonable liquidation expenses

will be assessed against the proceeds derived from the sale of the

collateral.

(g) Final loss payment. Final loss payments will be made only after

all collateral has been properly accounted for and liquidation expenses

are

[[Page 28348]]

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.

Sec. 3575.82 [Reserved]

Sec. 3575.83 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.

Sec. 3575.84 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.

Sec. 3575.85 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:

(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.

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 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 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 chapter 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 11 reorganization plan,

subsequent estimated loss payments may be requested in accordance with

the court approved changes. Once the reorganization 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.

Sec. Sec. 3575.86--3575.87 [Reserved]

Sec. 3575.88 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.

(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.

considered only when needed as a method for servicing

[[Page 28349]]

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 one percent.

Transfer fees will be collected, and payments applied, in accordance

with paragraph (d) of this section.

(2) For all loans covered by this subpart, 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 subpart 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 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 subpart. 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) 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.

Sec. 3575.89 Mergers.

(a) General. The Agency may approve mergers or consolidations

(herein referred 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.

Sec. 3575.90 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.

lender must protect the collateral from deterioration (weather,

vandalism, etc.). Hazard insurance in an amount necessary to

[[Page 28350]]

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 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.

Secs. 3575.91-3575.93 [Reserved]

Sec. 3575.94 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.

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 may 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 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.

Sec. 3575.95 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.

Sec. 3575.96 Termination of Loan Note Guarantee.

The Loan Note Guarantee under this subpart 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

that the lender holds all of the guaranteed portion and the original

Loan Note Guarantee is returned to the Agency.

[[Page 28351]]

Secs. 3575.97--3575.99 [Reserved]

Sec. 3575.100 OMB control number.

The report and recordkeeping requirements contained in this

regulation have been approved by the Office of Management and Budget

and have been assigned OMB control number 0575-0137.

Subpart B--[Reserved]

Dated: May 17, 1999.

Jill Long Thompson,

Under Secretary, Rural Development.

[FR Doc. 99-13117 Filed 5-25-99; 8:45 am]

BILLING CODE 3410-XV-U

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.