§ 1929a. — Rural Development Insurance Fund
[Laws in effect as of January 7, 2003]
[Document not affected by Public Laws enacted between
January 7, 2003 and December 19, 2003]
[CITE: 7USC1929a]
TITLE 7--AGRICULTURE
CHAPTER 50--AGRICULTURAL CREDIT
SUBCHAPTER I--REAL ESTATE LOANS
Sec. 1929a. Rural Development Insurance Fund
(a) Creation; revolving fund; rural development loans
There is hereby created the Rural Development Insurance Fund
(hereinafter in this section referred to as the ``Insurance Fund'')
which shall be used by the Secretary as a revolving fund for the
discharge of the obligations of the Secretary under contracts
guaranteeing or insuring rural development loans. For the purpose of
this section ``rural development loans'' shall be those provided for by
sections 1926(a)(1) and 1932 of this title, except loans (other than for
water systems and waste disposal facilities) of a type authorized by
section 1926(a)(1) of this title prior to its amendment by the Rural
Development Act of 1972.
(b) Transfer of assets and liabilities
The assets and liabilities of the Agricultural Credit Insurance Fund
referred to in section 1929(a) of this title applicable to loans for
water systems and waste disposal facilities under section 1926(a)(1) of
this title are hereby transferred to the Insurance Fund. Such assets
(including the proceeds thereof) and liabilities and rural development
loans guaranteed or insured pursuant to this chapter shall be subject to
the provisions of this section.
(c) Credits in the Treasury; investments; notes, purchasing authority of
the Secretary
Moneys in the Insurance Fund not needed for current operations shall
be deposited in the Treasury of the United States to the credit of the
Insurance Fund or invested in direct obligations of the United States or
obligations guaranteed by the United States. The Secretary may purchase
with money in the Insurance Fund any notes issued by the Secretary to
the Secretary of the Treasury for the purpose of obtaining money for the
Insurance Fund.
(d) Notes, issuing authority of the Secretary; use of funds; terms and
conditions, form, denominations, maturities, and interest rate
of notes; notes, purchasing authority of the Secretary of the
Treasury; public debt transactions
The Secretary is authorized to make and issue notes to the Secretary
of the Treasury for the purpose of obtaining funds necessary for
discharging obligations under this section and for making loans,
advances, and authorized expenditures out of the Insurance Fund. Such
notes shall be in such form and denominations and have such maturities
and be subject to such terms and conditions as may be prescribed by the
Secretary with the approval of the Secretary of the Treasury. Such notes
shall bear interest at a rate fixed by the Secretary of the Treasury,
taking into consideration the current average market yield of
outstanding marketable obligations of the United States having
maturities comparable to the average maturities of rural development
loans made, guaranteed, or insured under this chapter. The Secretary of
the Treasury is authorized and directed to purchase any notes of the
Secretary issued hereunder, and, for that purpose, the Secretary of the
Treasury is authorized to use as a public debt transaction the proceeds
from the sale of any securities issued under chapter 31 of title 31, and
the purposes for which such securities may be issued under such chapter
are extended to include the purchase of notes issued by the Secretary
hereunder. All redemptions, purchases, and sales by the Secretary of the
Treasury of such notes shall be treated as public debt transactions of
the United States.
(e) Notes and security as part of Insurance Fund; collection and sale of
notes and other obligations; deposit of net proceeds in
Insurance Fund
Notes and security acquired by the Secretary in connection with
rural development loans made, guaranteed, or insured under this chapter
or transferred by subsection (b) of this section shall become a part of
the Insurance Fund. Notes and other obligations may be held in the
Insurance Fund and collected in accordance with their terms or may be
sold by the Secretary with or without agreements for insurance thereof
at the balance due thereon, or on such other basis as the Secretary may
determine from time to time, including sale on a nonrecourse basis. The
Secretary and any subsequent purchaser of such notes and other
obligations sold by the Secretary on a nonrecourse basis shall be
relieved of any responsibilities that might have been imposed had the
borrower remained indebted to the Secretary. All net proceeds from such
collections, including sales of notes or property, shall be deposited in
and become a part of the Insurance Fund.
(f) Deposit of loan service charges in Insurance Fund
The Secretary shall deposit in the Insurance Fund any charges
collected for loan services provided by the Secretary as well as charges
assessed for losses and costs of administration in connection with
making, guaranteeing, or insuring rural development loans under this
chapter.
(g) Use of Insurance Fund
The Secretary may utilize the Insurance Fund--
(1) to pay amounts to which the holder of insured notes is
entitled on loans heretofore or hereafter insured accruing between
the date of any payments by the borrower and the date of transmittal
of any such payments to the holder. In the discretion of the
Secretary, payments other than final payments need not be remitted
to the holder until due or until the next agreed annual or
semiannual remittance date;
(2) to pay to the holder of insured notes any deferred or
defaulted installment, or upon assignment of the note to the
Secretary at the Secretary's request, the entire balance due on the
loan;
(3) to purchase notes in accordance with contracts of insurance
heretofore or hereafter entered into by the Secretary;
(4) to make payments in compliance with the Secretary's
obligations under contracts of guarantee entered into by him;
(5) to pay taxes, insurance, prior liens, expenses necessary to
make fiscal adjustments in connection with the application and
transmittal of collections or necessary to obtain credit reports on
applicants or borrowers, expenses for necessary services, including
construction inspections, commercial appraisals, loan servicing,
consulting business advisory or other commercial and technical
services, and other program services, and other expenses and
advances authorized in section 1985(a) of this title in connection
with insured loans. Such items may be paid in connection with
guaranteed loans after or in connection with acquisition by the
Secretary of such loans or security therefor after default, to an
extent determined by the Secretary to be necessary to protect the
interest of the Government, or in connection with grants and any
other activity authorized in this chapter;
(6) to pay the difference between interest payments by borrowers
and interest to which holders of insured notes are entitled under
contracts of insurance heretofore or hereafter entered into by the
Secretary; and
(7) to pay the Secretary's costs of administration necessary to
insure loans under the programs referred to in subsection (a) of
this section, make grants under sections 1926(a) and 1932 of this
title, service, and otherwise carry out such programs, including
costs of the Secretary incidental to guaranteeing rural development
loans under this chapter, either directly from the Insurance Fund or
by transfers from the Fund to, and merger with, any appropriations
for administrative expenses.
(h) Gross income; interest or other income on insured loans
When any loan is sold out of the Insurance Fund as an insured loan,
the interest or other income thereon paid to an insured holder shall be
included in gross income for purposes of chapter 1 of title 26.
(Pub. L. 87-128, title III, Sec. 309A, as added Pub. L. 92-419, title I,
Sec. 116, Aug. 30, 1972, 86 Stat. 661; amended Pub. L. 95-113, title XV,
Sec. 1510(b), Sept. 29, 1977, 91 Stat. 1022; Pub. L. 95-334, title I,
Secs. 107(b), 110, Aug. 4, 1978, 92 Stat. 422, 424; Pub. L. 99-509,
title I, Sec. 1001(b), Oct. 21, 1986, 100 Stat. 1874; Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095; Pub. L. 99-500, title III,
Sec. 381(b), Oct. 18, 1986, 100 Stat. 1783-369, and Pub. L. 99-591,
title III, Sec. 381(b), Oct. 30, 1986, 100 Stat. 3341-372; Pub. L. 104-
127, title VI, Sec. 661(c), title VII, Secs. 741(b), 745, Apr. 4, 1996,
110 Stat. 1106, 1124, 1125.)
References in Text
For statutory changes to section 1926(a)(1) of this title by the
Rural Development Act of 1972, referred to in subsec. (a), see 1972
Amendment note for section 104 of Pub. L. 92-419, set out under section
1926 of this title. For complete classification of the Rural Development
Act of 1972 to the Code, see Short Title of 1972 Amendment note set out
under section 1921 of this title and Tables.
For definition of ``this chapter'', referred to in subsecs. (b),
(d), (e), (f), and (g)(5), (7), see note set out under section 1921 of
this title.
Codification
Pub. L. 99-591 is a corrected version of Pub. L. 99-500.
In subsec. (d), ``chapter 31 of title 31'' and ``such chapter''
substituted for ``the Second Liberty Bond Act, as amended'' and ``such
Act, as amended,'' respectively, on authority of Pub. L. 97-258,
Sec. 4(b), Sept. 13, 1982, 96 Stat. 1067, the first section of which
enacted Title 31, Money and Finance.
Amendments
1996--Subsec. (a). Pub. L. 104-127, Sec. 741(b), struck out ``,
1926(a)(14),'' after ``1926(a)(1)''.
Pub. L. 104-127, Sec. 661(c)(1), substituted ``1926(a)(1),
1926(a)(14), and 1932 of this title'' for ``1924(b), 1926(a)(1),
1926(a)(14), 1932, and 1942(b) of this title''.
Subsec. (b). Pub. L. 104-127, Sec. 661(c)(2), which directed
amendment of first sentence of subsec. (b) by striking ``and section
1928 of this title'', was executed by striking that language in second
sentence after ``provisions of this section'' to reflect the probable
intent of Congress.
Subsec. (g). Pub. L. 104-127, Sec. 745, redesignated pars. (2) to
(8) as (1) to (7), respectively, and struck out former par. (1) which
read as follows: ``to make rural development loans which could be
insured under this chapter whenever he has a reasonable assurance that
they can be sold without undue delay, and he may sell and insure such
loans;''.
1986--Subsec. (e). Pub. L. 99-500, Pub. L. 99-509, and Pub. L. 99-
591 amended second sentence of subsec. (e) identically, substituting
``Notes and other obligations'' for ``Notes'' and substituting ``,
including sale on a nonrecourse basis. The Secretary and any subsequent
purchaser of such notes or other obligations sold by the Secretary on a
nonrecourse basis shall be relieved of any responsibilities that might
have been imposed had the borrower remained indebted to the Secretary.''
for period at end.
Subsec. (h). Pub. L. 99-514 substituted ``Internal Revenue Code of
1986'' for ``Internal Revenue Code of 1954'', which for purposes of
codification was translated as ``title 26'' thus requiring no change in
text.
1978--Subsec. (a). Pub. L. 95-334, Sec. 107(b), inserted reference
to section 1926(a)(14) of this title.
Subsec. (g)(8). Pub. L. 95-334, Sec. 110, substituted provisions
relating to payment of costs of administration necessary to insure loans
under subsec. (a) of this section, make grants under sections 1926(a)
and 1932 of this title, and otherwise carry out such programs for
provisions relating to payment of costs of administration of the rural
loan development program.
1977--Subsec. (g)(3). Pub. L. 95-113 substituted ``any deferred or
defaulted installment'' for ``any defaulted installment''.
Effective Date of 1977 Amendment
Amendment by Pub. L. 95-113 effective Oct. 1, 1977, see section 1901
of Pub. L. 95-113, set out as a note under section 1307 of this title.
Disaster Assistance for Rural Business Enterprises
Pub. L. 101-82, title IV, Sec. 401, Aug. 14, 1989, 103 Stat. 583, as
amended by Pub. L. 101-220, Sec. 9(d), Dec. 12, 1989, 103 Stat. 1882,
provided that:
``(a) Loan Guarantees.--The Secretary of Agriculture shall guarantee
loans made in rural areas to--
``(1) public, private, or cooperative organizations, to Indian
tribes on Federal and State reservations or other federally
recognized Indian tribal groups, or to any other business entities
to assist such organizations, tribes, or entities in alleviating the
distress caused to such organizations, tribes, or entities, directly
or indirectly, by the drought, freeze, storm, excessive moisture,
earthquake, or related condition in 1988 or 1989; and
``(2) such organizations, tribes, or entities that refinance or
restructure debt as a result of losses incurred, directly or
indirectly, because of such natural disasters in 1988 or 1989.
``(b) Eligible Loans.--
``(1) In general.--Loans guaranteed under this section shall be
loans made by any Federal or State chartered bank, savings and loan
association, cooperative lending agency, insurance company, or other
legally organized lending agency.
``(2) Production agriculture.--No application for a loan
guarantee under this section shall be denied on the basis that such
organization, tribe, or entity engages in whole or in part in
production agriculture.
``(c) Loan Guarantee Limits.--
``(1) Percentage of principal and interest.--No guarantee under
this section shall exceed 90 percent of the principal and interest
amount of the loan or $2,500,000, whichever is the lesser amount.
``(2) Total amount.--The total amount of loan guarantee under
this section shall not exceed $300,000,000.
``(d) Use of the Rural Development Insurance Fund.--The Secretary
shall use the Rural Development Insurance Fund established under section
309A of the Consolidated Farm and Rural Development Act (7 U.S.C. 1929a)
for the purposes of discharging the obligations of the Secretary under
this section.''
Similar provisions were contained in the following prior act:
Pub. L. 100-387, title III, Sec. 331, Aug. 11, 1988, 102 Stat. 951.
Sale of Rural Development Notes and Other Obligations
Section 1001 of Pub. L. 99-509, as amended by Pub. L. 100-233, title
VIII, Sec. 803, Jan. 6, 1988, 101 Stat. 1714; Pub. L. 101-220, Sec. 12,
Dec. 12, 1989, 103 Stat. 1883, provided that:
``(a) Sales Required.--The Secretary of Agriculture, under such
terms as the Secretary may prescribe, shall sell notes and other
obligations held in the Rural Development Insurance Fund established
under section 309A of the Consolidated Farm and Rural Development Act [7
U.S.C. 1929a] in such amounts as to realize net proceeds to the
Government of not less than--
``(1) $1,000,000,000 from such sales during fiscal year 1987,
``(2) $552,000,000 from such sales during fiscal year 1988, and
``(3) $547,000,000 from such sales during fiscal year 1989.
``(b) [Amended subsec. (e) of this section]
``(c) Contract Provisions.--Consistent with section 309A(e) of the
Consolidated Farm and Rural Development Act [7 U.S.C. 1929a(e)], as
amended by subsection (b), any sale of notes or other obligations, as
described in subsection (a), shall not alter the terms specified in the
note or other obligation, except that, on sale, a note or other
obligation shall not be subject to the provisions of section 333(c) of
the Consolidated Farm and Rural Development Act [7 U.S.C. 1983(c)].
``(d) Eligibility to Purchase Notes.--Notwithstanding any other
provision of law, each institution of the Farm Credit System shall be
eligible to purchase notes and other obligations held in the Rural
Development Insurance Fund and to service (including the extension of
additional credit and all other actions necessary to preserve, conserve,
or protect the institution's interest in the purchased notes or other
obligations), collect, and dispose of such notes and other obligations,
subject only to such terms and conditions as may be agreed to by the
Secretary of Agriculture and the purchasing institution and as may be
approved by the Farm Credit Administration.
``(e) Loan Servicing.--Prior to selling any note or other
obligation, as described in subsection (a), the Secretary of Agriculture
shall require persons offering to purchase the note or other obligation
to demonstrate--
``(1) an ability or resources to provide such servicing, with
respect to the loans represented by the note or other obligation,
that the Secretary deems necessary to ensure the continued
performance on the loan; and
``(2) the ability to generate capital to provide the borrowers
of the loans such additional credit as may be necessary in proper
servicing of the loans.
``(f) Right of First Refusal.--
``(1) In general.--Before conducting a sale of a portfolio of
notes or other obligations under this section, the Secretary of
Agriculture shall--
``(A) determine whether the issuer of any unsold note or
other obligation desires to purchase the note or other
obligation; and
``(B) if so, hold open for 30 days, an offer to sell the
note or other obligation to the issuer at a price to be
determined under paragraph (2).
``(2) Determination of offering price.--
``(A) Authority.--The Secretary of Agriculture shall
determine, in accordance with subparagraph (B), the price at
which a note or other obligation shall be offered for sale under
this subsection.
``(B) Price.--Such price shall be determined by discounting
the payment stream of such note or other obligation at the yield
on the then most recent sale of the portfolio, adjusted for
changes in market interest rates, servicing and sales expenses,
and the maturity and interest rate of such note.
``(3) Prohibitions.--
``(A) Purchase of obligation not tied to purchase of other
obligations.--The Secretary of Agriculture shall not require the
issuer of any unsold note or other obligation to be offered for
sale under this subsection to purchase any other such note or
other obligation as a condition of the sale of any such note or
other obligation to the issuer.
``(B) Offer to be made without regard to financing.--The
Secretary shall offer notes or other obligations for sale to the
issuers thereof under this subsection without regard to the
manner in which such issuers intend to finance the purchase of
such notes or other obligations. However, the price of sale to
any issuer using tax exempt financing shall be determined using
a yield reflective of the Schedule of Certified Interest Rates
as published monthly by the Secretary of the Treasury.
``(g) Applicability of Prohibition on Curtailment or Limitation of
Service.--Section 306(b) of the Consolidated Farm and Rural Development
Act (7 U.S.C. 1926(b)) shall be applicable to all notes or other
obligations sold or intended to be sold under this section.
``(h)(1) Notwithstanding the provisions of section 633 of the Rural
Development, Agriculture, and Related Agencies Appropriations Act, 1989
(Public Law 100-460) [title VI, Oct. 1, 1988, 102 Stat. 2263], the
Secretary of Agriculture shall offer to the issuer of any unsold note or
other obligation described in paragraph (2)(A) for which such issuer
made the good faith deposit described in paragraph (2)(A) the
opportunity to purchase such note or other obligation consistent with
the provisions of this subsection and subsections (f)(2) and (f)(3).
``(2) The provisions of this subsection shall apply only to those
issuers who:
``(A) on or before March 9, 1989, made a good faith deposit
under this section for fiscal year 1989 with the Secretary to
purchase a note or other obligation held in the Rural Development
Insurance Fund; and
``(B) otherwise meet all eligibility criteria, as such criteria
existed immediately prior to May 9, 1989, at the time the purchase
occurs under this subsection.
``(3) The opportunity to purchase any such note or other obligation
shall be held open, under the policies and procedures in effect under
subsections (f)(2) and (f)(3) immediately prior to May 9, 1989, for 150
days after the date of enactment of this subsection [Dec. 12, 1989]. The
Secretary shall not require any further good faith deposit from issuers
who qualify under this subsection. The Secretary shall notify eligible
issuers of the opportunity afforded under this subsection within 30 days
after the date of enactment of this subsection and may require such
issuers to express an intention to purchase their note or other
obligation by a date certain.''
Section 381 of Pub. L. 99-500 and Pub. L. 99-591 provided that:
``(a) In General.--The Secretary of Agriculture shall, under such
terms as the Secretary may prescribe, sell notes and other obligations
held in the Rural Development Insurance Fund established under section
309A of the Consolidated Farm and Rural Development Act (7 U.S.C. 1929a)
in such amounts as to realize net proceeds of not less than--
``(1) $25,000,000 from such sales during fiscal year 1987;
``(2) $36,000,000 from such sales during fiscal year 1988; and
``(3) $37,000,000 from such sales during fiscal year 1989.
``(b) [Amended subsec. (e) of this section]
``(c) Farm Credit System Institutions.--Notwithstanding any other
provision of law, institutions of the Farm Credit System operating under
the Farm Credit Act of 1971 (12 U.S.C. 2001) shall be eligible to
purchase notes and other obligations held in the Rural Development
Insurance Fund and to service (including the extension of additional
credit and all other actions necessary to preserve, conserve, or protect
the institutions' interests in such notes and other obligations),
collect, and dispose of such notes and other obligations, subject only
to such terms and conditions as may be agreed to by the Secretary of
Agriculture and such purchasing institutions and as are approved by the
Farm Credit Administration.''
Section Referred to in Other Sections
This section is referred to in sections 1929, 1929b, 6942 of this
title; title 42 section 8813.
