(a) Municipal rate loans. Each advance of funds on a municipal rate loan shall bear interest at a single rate for each interest rate term. All interest rates applicable to municipal rate loans will be increased by one eighth of one percent (0.125 percent), if the borrower elects to include in the loan agreement a prepayment option (call provision), allowing the borrower to prepay all or a portion of an advance on a date other than a rollover maturity date. However, no interest rate for any advances of a loan to a borrower who qualifies for the interest rate cap may exceed 7 percent.

(b) Hardship rate loans. All advances of funds on hardship rate loans shall bear interest at a rate of 5 percent.

(c) Application procedure. The borrower must indicate whether the application is for a municipal rate loan, with or without the interest rate cap, or a hardship rate loan. If the application is for a municipal rate loan, the borrower must also indicate whether they intend to elect the prepayment option.

[58 FR 66260, Dec. 20, 1993, as amended at 67 FR 16969, Apr. 9, 2002; 84 FR 32615, July 9, 2019]