(b) The Secretary of Agriculture (Secretary) established the Rural Utilities Service (RUS) on October 20, 1994, pursuant to the Department of Agriculture Reorganization Act of 1994, (7 U.S.C. 6941 et. seq.). RUS was assigned responsibility for administering electric and telecommunications loan and loan guarantee programs previously administered by REA, including water and waste loans and grants previously administered by the Rural Development Administration, along with other functions as the Secretary determined appropriate. The rights, interests, obligations, duties, and contracts previously vested in REA were transferred to, and vested in RUS.

The Administrator of the Rural Utilities Service (RUS) is appointed by the President. The Under Secretary, Rural Development delegated to the Administrator, in 7 CFR part 2, responsibility for administering the programs and activities of RUS. * * *

RUS, through the Telecommunications Program, make loans and loan guarantees to furnish and improve telecommunications service in rural areas.

Economic life as applied to facilities financed by loan funds, means the number of years resulting from dividing 100 percent by the depreciation rate (expressed as a percent) approved by the regulatory body with jurisdiction over the telephone service provided by the borrower for the class of facility involved or, if no approved rate exists, by the median depreciation rate expressed as a percent as published by RUS in its Statistical Report, Rural Telephone Borrowers for all RUS borrowers for that class of facility.

RUS cost-of-money loan means a loan made under section 305(d)(2) of the RE Act bearing an interest rate as determined under § 1735.31(c).

(b) RUS will not make hardship loans or RUS cost-of-money loans for any wireline local exchange service or similar fixed-station voice service that, in RUS' opinion, is inconsistent with the borrower achieving the requirements stated in the State's telecommunication modernization plan within the time frame stated in the plan (see 7 CFR part 1751, subpart B), unless RUS has determined that achieving the requirements as stated in such plan is not technically or economically feasible.

(e) No fees or charges are assessed for any type of loan or guarantee provided by RUS.

(b) RUS makes RUS cost-of-money to finance the improvement, expansion, construction, and acquisition of systems or facilities (excluding station apparatus owned by the borrower, headquarters facilities, and vehicles not used primarily in construction) to furnish and improve telephone service in rural areas, except as noted under paragraph (c) of this section.

(b) * * *

(2) Those facilities may, however, be financed with a RUS cost-of-money loans or a guaranteed loan if the borrower is eligible for such financing.

(f) On request of any borrower who is eligible for a hardship loan for which funds are not available, the borrower shall be considered to have applied for a RUS cost-of-money loans under sections 305 of the RE Act.

(g) Hardship loans may be made simultaneously with a RUS cost-of-money loans or guaranteed loans.

(a) RUS makes cost-of-money loans, under section 305(d)(2) of the RE Act. To qualify for cost-of-money loans, a borrower must meet each of the following requirements:

(b) To determine the RUS cost-of-money, the total loan amount will be multiplied by the ratio of RUS cost-of-money funds appropriated for the fiscal year to the sum of RUS cost-of-money funds appropriated for the fiscal year in which the loan is approved. If during the fiscal year the amount of funds appropriated changes, the ratio will be adjusted accordingly and applied only to those loans approved afterwards.

(c) The RUS cost-of-money loan shall bear interest as described in paragraphs (c)(1) and (2) of this section.

(d) Generally, no more than 10 percent of lending authority from appropriations in any fiscal year for RUS cost-of-money loans may be loaned to a single borrower. RUS will publish by notice in the Federal Register the dollar limit that may be loaned to a single borrower in that particular fiscal year based on approved RUS lending authority.

(e) On request of any borrower who is eligible for RUS cost-of-money loans for which funds are not available, the borrower shall be considered to have applied for a loan guarantee under section 306 of the RE Act.

(f) RUS cost-of-money loans may be made simultaneously with hardship loans or guaranteed loans.

(a) General. Loan guarantees under this section will be considered for only those borrowers specifically requesting a guarantee. Borrowers may also specify that the loan to be guaranteed shall be made by the Federal Financing Bank (FFB). RUS provides loan guarantees pursuant to section 306 of the RE Act. Guaranteed loans may be made simultaneously with hardship loans or RUS cost-of-money loans. No fees or charges are assessed for any guarantee of a loan provided by RUS. In view of the Government's guarantee, RUS generally obtains a first lien on all assets of the borrower (see § 1735.46).

(b) Borrowers that have demonstrated to the satisfaction of the Administrator an inability to maintain the funded reserve or net plant to secured debt ratio requirements, if any, contained in their mortgage, may elect to replace notes with an original maturity that exceeded the composite economic life of the facilities financed with notes bearing a shorter maturity approximating the expected composite economic life of the facilities financed, if this will result in a shorter maturity for the loan. The principal balance of the notes (hereinafter in this section called the “refunding notes”) issued to refund and substitute for the original notes would be the unpaid principal balance of the original notes. The refunding notes would mature at a date no later than the remaining economic life of the facilities financed by the loan, plus three years, as determined by the original feasibility study prepared in connection with the loan. Interest on the original note must continue to be paid through the closing date. All other payment terms, including the rate of interest on the refunding notes, would remain unchanged. Disposition of funds in the funded reserve will be determined by RUS at the closing date. RUS will notify the borrower in writing of the amendment of loan payment requirements and the terms and conditions thereof.

(c) A borrower qualifying under paragraph (b) of this section shall not be required to pay a prepayment premium on such portion of the payments under its new notes as exceeds the payments required under the notes being replaced.

(d) To apply for refunding notes, borrowers must send to the Area Office the following:

(1) A certified copy of a board resolution requesting an amendment of loan payment requirements and that certain notes be replaced;

(2) If applicable, evidence of approval by the regulatory body with jurisdiction over the telecommunications service provided by the borrower to issue refunding notes; and

(3) Such other documents as may be required by the RUS.

(e) Principal and interest will be repaid in accordance with the terms of the notes. Generally, interest is payable each month as it accrues. Principal payments on each note generally are scheduled to begin 2 years after the date of the note. After this deferral period, interest and principal payments on all funds advanced during this 2-year period are scheduled in equal monthly installments. Principal payments on funds advanced 2 years or more after the date of the note will begin with the first billing after the advance. The interest and principal payments on each of these advances will be scheduled in equal monthly installments. This CFR part supersedes those portions of RUS Bulletin 320-12, “Loan Payments and Statements” with which it is in conflict.

The loan documents normally provide that RUS insured loans may be repaid in full at any time without prepayment premiums. Depending upon the lender, there may be prepayment premiums on loans guaranteed by RUS. See RUS Bulletin 320-12 for additional information. This CFR part supersedes those portions of RUS Bulletin 320-12, “Loan Payments and Statements,” with which it is in conflict.

(f) This section does not limit the rights of any parties to the mortgage other than RUS.

(a) * * *

(2) Sufficient funds are available from sources other than RUS or FFB to complete the purposes of the loan being rescinded; or

RUS cost-of-money loan means a loan made under section 305(d)(2) of the RE Act bearing an interest rate as determined under 7 CFR 1735.31(c).

(i) Telecommunications modernization plan. A borrower applying for hardship or concurrent RUS cost-of-money loans should refer to 7 CFR part 1751, subpart B.

(a) * * * The amount of funds included in any loan shall be limited for certain items:

(1) Operating funds for working capital or current operating deficiencies shall be included only in cases of financial hardship as determined by the Administrator.

(2) Contingencies shall not exceed 3 percent of the total amount of loan funds to be used for construction, engineering, operating equipment and operating funds.

(a) For purposes of determining the creditworthiness of a borrower for RUS cost-of-money, the Administrator shall assume that the loan, if made, would bear interest at the Treasury rate on the date of determination as described in paragraph (b) of this section. * * *

Administrator means the Administrator of RUS.

Advance means transferring funds from RUS or a lender guaranteed by RUS to the borrower's construction fund.

RE Act (Act) means the Rural Electrification Act of 1936 (7 U.S.C. 901 et. seq.).

RUS means the Rural Utilities Service, and includes its predecessor, the Rural Electrification Administration.

(a) * * *

(2) With RUS cost-of-money or FFB loan funds, the following apply:

(a) Borrowers may specify the sequence of advances of funds under any combination of approved telephone loans from RUS or FFB, except that for all loans approved on or after November 1, 1993, the borrower may use loan funds:

(1) Only for purposes for which that type of loan (i.e. Hardship, RUS cost-of-money, or FFB) may be made; and

(d) Borrowers of RUS funds may request advances by wire service only for amounts greater than $500,000 or for advances to borrowers outside the Continental United States. * * *

Administrator means the Administrator of the Rural Utilities Service (RUS).

Borrower means any organization which has an outstanding loan made by RUS or guaranteed by RUS, or which is seeking such financing.

Borrower. Any organization that has received a RUS loan designation number and which has an outstanding telephone loan made by RUS or guaranteed by RUS, or which has a completed loan application with RUS.

RUS cost-of-money loan. A loan made under section 305(d)(2) of the RE Act bearing interest as determined under 7 CFR 1735.31(c).

(a) * * *. In particular, beginning February 13, 1996, RUS will make RUS hardship and RUS cost-of-money loans for facilities and other RE Act purposes in a State only if:

(b) Office of the Administrator. According to 7 CFR 2.47, the Administrator has responsibility for managing and administering the programs and support functions of RUS to provide financial and technical support for rural infrastructure to include electrification, clean drinking water, telecommunications, and water disposal systems, pursuant to the Consolidated Farm and Rural Development Act, as amended (7 U.S.C. 1921 et. seq.), and the Rural Electrification Act of 1936, as amended (7 U.S.C. 901 et. seq.). The office develops and implements strategic plans concerning the Rural Electrification Act of 1936, as amended.

(3) Office of Assistant Administrator—Telecommunications Program. Headed by the Assistant Administrator—Telecommunications Program, this office is responsible to the Administrator for directing and coordinating the National Rural Telecommunications, Distance Learning, and Telemedicine programs of RUS. The Assistant Administrator, Telecommunications Program, is responsible for developing, maintaining, and implementing regulations and program procedures on the processing and approval of grants, loans, and loan-related activities for all rural telecommunications borrowers and grant recipients. The office directs the following three divisions:

(iii) Telecommunications Area Offices. Headed by area directors, these four offices are responsible for administering the Telecommunications, Distance Learning, and Telemedicine programs for specific geographic areas, and serving as the single point of contact for all program applicants and borrowers within their respective areas. The offices provide guidance to applicants and borrowers on RUS loan policies and procedures and make recommendations to the Administrator on applications for loans, guarantees, and grants. The offices assure that borrower systems and facilities are designed and constructed in accordance with the terms of the loan, acceptable engineering practices and specifications, and acceptable loan security standards.