§ 935. — Insured loans; interest rates and lending levels.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 7USC935]
TITLE 7--AGRICULTURE
CHAPTER 31--RURAL ELECTRIFICATION AND TELEPHONE SERVICE
SUBCHAPTER III--RURAL ELECTRIC AND TELEPHONE DIRECT LOAN PROGRAMS
Sec. 935. Insured loans; interest rates and lending levels
(a) In general
The Secretary is authorized to make insured loans under this
subchapter and at the interest rates hereinafter provided to the full
extent of the assets available in the fund, subject only to limitations
as to amounts authorized for loans and advances as may be from time to
time imposed by the Congress of the United States for loans to be made
in any one year, which amounts shall remain available until expended:
Provided, That the Congress in the annual appropriation Act may also
authorize the transfer of any excess cash in the fund for deposit into
the Treasury as miscellaneous receipts: And provided further, That any
such loans and advances shall not be included in the totals of the
budget of the United States Government and shall be exempt from any
general limitation imposed by statute on expenditures and net lending
(budget outlays) of the United States.
(b) Insured loans
Loans made under this section shall be insured by the Secretary when
purchased by a lender. As used in this chapter, an insured loan is one
which is made, held, and serviced by the Secretary, and sold and insured
by the Secretary hereunder; such loans shall be sold and insured by the
Secretary without undue delay.
(c) Insured electric loans
(1) Hardship loans
(A) In general
The Secretary shall make insured electric loans, to the
extent of qualifying applications for the loans, at an interest
rate of 5 percent per year to any applicant for a loan who meets
each of the following requirements:
(i) The average revenue per kilowatt-hour sold by the
applicant is not less than 120 percent of the average
revenue per kilowatt-hour sold by all utilities in the State
in which the applicant provides service.
(ii) The average residential revenue per kilowatt-hour
sold by the applicant is not less than 120 percent of the
average residential revenue per kilowatt-hour sold by all
utilities in the State in which the applicant provides
service.
(iii) The average per capita income of the residents
receiving electric service from the applicant is less than
the average per capita income of the residents of the State
in which the applicant provides service, or the median
household income of the households receiving electric
service from the applicant is less than the median household
income of the households in the State.
(B) Severe hardship loans
In addition to hardship loans that are made under
subparagraph (A), the Secretary may make an insured electric
loan at an interest rate of 5 percent per year to an applicant
for a loan if, in the sole discretion of the Secretary, the
applicant has experienced a severe hardship.
(C) Limitation
Except as provided in subparagraph (D), the Secretary may
not make a loan under this paragraph to an applicant for the
purpose of furnishing or improving electric service to a
consumer located in an urban area (as defined by the Bureau of
the Census) if the average number of consumers per mile of line
of the total electric system of the applicant exceeds 17.
(D) Extremely high rates
In addition to hardship loans that are made under
subparagraphs (A) and (B), the Secretary shall make insured
electric loans, to the extent of qualifying applications for the
loans, at an interest rate of 5 percent per year to any
applicant for a loan whose residential revenue exceeds 15.0
cents per kilowatt-hour sold. A qualifying application from such
an applicant for the purpose of furnishing or improving electric
service to a consumer located outside of an urbanized area shall
not be subject to the conditions or limitation of subparagraph
(A) or (C).
(2) Municipal rate loans
(A) In general
The Secretary shall make insured electric loans, to the
extent of qualifying applications for the loans, at the interest
rate described in subparagraph (B) for the term or terms
selected by the applicant pursuant to subparagraph (C).
(B) Interest rate
(i) In general
Subject to clause (ii), the interest rate described in
this subparagraph on a loan to a qualifying applicant shall
be--
(I) the interest rate determined by the Secretary to
be equal to the current market yield on outstanding
municipal obligations with remaining periods to maturity
similar to the term selected by the applicant pursuant
to subparagraph (C), but not greater than the rate
determined under section 1927(a)(3)(A) of this title
that is based on the current market yield on outstanding
municipal obligations; plus
(II) if the applicant for the loan makes an election
pursuant to subparagraph (D) to include in the loan
agreement the right of the applicant to prepay the loan,
a rate equal to the amount by which--
(aa) the interest rate on commercial loans for a
similar period that afford the borrower such a
right; exceeds
(bb) the interest rate on commercial loans for
the period that do not afford the borrower such a
right.
(ii) Maximum rate
The interest rate described in this subparagraph on a
loan to an applicant for the loan shall not exceed 7 percent
if--
(I) the average number of consumers per mile of line
of the total electric system of the applicant is less
than 5.50; or
(II)(aa) the average revenue per kilowatt-hour sold
by the applicant is more than the average revenue per
kilowatt-hour sold by all utilities in the State in
which the applicant provides service; and
(bb) the average per capita income of the residents
receiving electric service from the applicant is less
than the average per capita income of the residents of
the State in which the applicant provides service, or
the median household income of the households receiving
electric service from the applicant is less than the
median household income of the households in the State.
(iii) Exception
Clause (ii) shall not apply to a loan to be made to an
applicant for the purpose of furnishing or improving
electric service to consumers located in an urban area (as
defined by the Bureau of the Census) if the average number
of consumers per mile of line of the total electric system
of the applicant exceeds 17.
(C) Loan term
(i) In general
Subject to clause (ii), the applicant for a loan under
this paragraph may select the term for which an interest
rate shall be determined pursuant to subparagraph (B), and,
at the end of the term (and any succeeding term selected by
the applicant under this subparagraph), may renew the loan
for another term selected by the applicant.
(ii) Maximum term
(I) Applicant
The applicant may not select a term that ends more
than 35 years after the beginning of the first term the
applicant selects under clause (i).
(II) Secretary
The Secretary may prohibit an applicant from
selecting a term that would result in the total term of
the loan being greater than the expected useful life of
the assets being financed.
(D) Call provision
The Secretary shall offer any applicant for a loan under
this paragraph the option to include in the loan agreement the
right of the applicant to prepay the loan on terms consistent
with similar provisions of commercial loans.
(3) Other source of credit not required in certain cases
The Secretary may not require any applicant for a loan made
under this subsection who is eligible for a loan under paragraph (1)
to obtain a loan from another source as a condition of approving the
application for the loan or advancing any amount under the loan.
(d) Insured telephone loans
(1) Hardship loans
(A) In general
The Secretary shall make insured telephone loans, to the
extent of qualifying applications for the loans, at an interest
rate of 5 percent per year, to any applicant who meets each of
the following requirements:
(i) The average number of subscribers per mile of line
in the service area of the applicant is not more than 4.
(ii) The applicant is capable of producing net income or
margins before interest of not less than 100 percent (but
not more than 300 percent) of the interest requirements on
all of the outstanding and proposed loans of the applicant.
(iii) The Secretary has approved a telecommunications
modernization plan for the State under paragraph (3) and, if
the plan was developed by telephone borrowers under this
subchapter, the applicant is a participant in the plan.
(iv) The average number of subscribers per mile of line
in the area included in the proposed loan is not more than
17.
(B) Authority to waive tier requirement
The Secretary may waive the requirement of subparagraph
(A)(ii) in any case in which the Secretary determines (and sets
forth the reasons for the waiver in writing) that the
requirement would prevent emergency restoration of the telephone
system of the applicant or result in severe hardship to the
applicant.
(C) Effect of lack of funds
On request of any applicant who is eligible for a loan under
this paragraph for which funds are not available, the applicant
shall be considered to have applied for a loan under subchapter
IV of this chapter.
(2) Cost-of-money loans
(A) In general
The Secretary may make insured telephone loans for the
acquisition, purchase, and installation of telephone lines,
systems, and facilities (other than buildings used primarily for
administrative purposes, vehicles not used primarily in
construction, and customer premise equipment) related to the
furnishing, improvement, or extension of rural
telecommunications service, at an interest rate equal to the
then current cost of money to the Government of the United
States for loans of similar maturity, but not more than 7
percent per year, to any applicant for a loan who meets the
following requirements:
(i) The average number of subscribers per mile of line
in the service area of the applicant is not more than 15, or
the applicant is capable of producing net income or margins
before interest of not less than 100 percent (but not more
than 500 percent) of the interest requirements on all of the
outstanding and proposed loans of the applicant.
(ii) The Secretary has approved a telecommunications
modernization plan for the State under paragraph (3) and, if
the plan was developed by telephone borrowers under this
subchapter, the applicant is a participant in the plan.
(B) Concurrent loan authority
On request of any applicant for a loan under this paragraph
during any fiscal year, the Secretary shall--
(i) consider the application to be for a loan under this
paragraph and a loan under section 948 of this title; and
(ii) if the applicant is eligible for a loan, make a
loan to the applicant under this paragraph in an amount
equal to the amount that bears the same ratio to the total
amount of loans for which the applicant is eligible under
this paragraph and under section 948 of this title, as the
amount made available for loans under this paragraph for the
fiscal year bears to the total amount made available for
loans under this paragraph and under section 948 of this
title for the fiscal year.
(C) Effect of lack of funds
On request of any applicant who is eligible for a loan under
this paragraph for which funds are not available, the applicant
shall be considered to have applied for a loan guarantee under
section 936 of this title.
(3) State telecommunications modernization plans
(A) Approval
If, not later than 1 year after final regulations are
promulgated to carry out this paragraph, any State, either by
statute or through the public utility commission of the State,
develops a telecommunications modernization plan that meets the
requirements of subparagraph (B), the Secretary shall approve
the plan for the State. If a State does not develop a plan in
accordance with the requirements of the preceding sentence, the
Secretary shall approve any telecommunications modernization
plan for the State that meets the requirements that is developed
by a majority of the borrowers of telephone loans made under
this subchapter who are located in the State.
(B) Requirements
For purposes of subparagraph (A), a telecommunications
modernization plan must, at a minimum, meet the following
objectives:
(i) The plan must provide for the elimination of party
line service.
(ii) The plan must provide for the availability of
telecommunications services for improved business,
educational, and medical services.
(iii) The plan must encourage and improve computer
networks and information highways for subscribers in rural
areas.
(iv) The plan must provide for--
(I) subscribers in rural areas to be able to receive
through telephone lines--
(aa) conference calling;
(bb) video images; and
(cc) data at a rate of at least 1,000,000 bits
of information per second; and
(II) the proper routing of information to
subscribers.
(v) The plan must provide for uniform deployment
schedules to ensure that advanced services are deployed at
the same time in rural and nonrural areas.
(vi) The plan must provide for such additional
requirements for service standards as may be required by the
Secretary.
(C) Finality of approval
A telecommunications modernization plan approved under
subparagraph (A) may not subsequently be disapproved.
Notwithstanding paragraphs (1)(A)(iii) and (2)(A)(iii),\1\ and
section 948(b)(4)(C) \2\ of this title, the Secretary and the
Governor of the telephone bank may make a loan to a borrower
serving a State that does not have a telecommunication
modernization plan approved by the Secretary if the loan is made
less than 1 year after the Secretary has adopted final
regulations implementing this paragraph.
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\1\ So in original. Probably should be paragraph ``(2)(A)(ii)''.
\2\ So in original. Probably should be section ``948(b)(4)(B)''.
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(May 20, 1936, ch. 432, title III, Sec. 305, as added Pub. L. 93-32,
Sec. 2, May 11, 1973, 87 Stat. 68; amended Pub. L. 94-570, Sec. 3, Oct.
20, 1976, 90 Stat. 2701; Pub. L. 97-35, title I, Sec. 165(a), Aug. 13,
1981, 95 Stat. 379; Pub. L. 101-624, title XXIII, Sec. 2361, Nov. 28,
1990, 104 Stat. 4042; Pub. L. 103-129, Sec. 2(a)(1), (c)(6), Nov. 1,
1993, 107 Stat. 1356, 1364; Pub. L. 103-354, title II, Sec. 235(a)(8),
(13), Oct. 13, 1994, 108 Stat. 3221.)
Amendments
1994--Pub. L. 103-354 substituted ``Secretary'' for
``Administrator'' in heading for subsec. (c)(2)(C)(ii)(II) and wherever
appearing in text.
1993--Pub. L. 103-129, Sec. 2(c)(6)(A), amended section catchline
generally.
Subsec. (a). Pub. L. 103-129, Sec. 2(c)(6)(A), inserted heading.
Subsec. (b). Pub. L. 103-129, Sec. 2(a)(1)(A), (B), (c)(6)(B),
redesignated subsec. (c) as (b), inserted heading, and struck out former
subsec. (b) which read as follows: ``Insured loans made under this
subchapter shall bear interest at 5 per centum per annum, except that
the Administrator may make insured loans to electric or telephone
borrowers at a lesser interest rate, but not less than 2 per centum per
annum, if, in the Administrator's sole discretion, the Administrator
finds that the borrower--
``(1) has experienced extreme financial hardship; or
``(2) cannot, in accordance with generally accepted management
and accounting principles and without charging rates to its
customers or subscribers so high as to create a substantial
disparity between such rates and the rates charged for similar
service in the same or nearby areas by other suppliers, provide
service consistent with the objectives of this chapter.''
Subsec. (c). Pub. L. 103-129, Sec. 2(a)(1)(C), added subsec. (c).
Former subsec. (c) redesignated (b).
Subsec. (d). Pub. L. 103-129, Sec. 2(a)(1)(A), (C), added subsec.
(d) and struck out former subsec. (d) which read as follows: ``The
Administrator shall make a telephone loan under this subchapter to an
applicant therefor who is otherwise qualified to receive such a loan at
the highest interest rate (but not less than the lowest interest rate,
nor higher than the highest interest rate, specified in subsection (b)
of this section) at which the borrower would be capable of producing net
income or margins before interest payments of at least 100 percent (but
not more than 150 percent) of the interest requirements on all of the
applicant's outstanding and proposed loans.''
1990--Subsec. (d). Pub. L. 101-624 added subsec. (d).
1981--Subsec. (b). Pub. L. 97-35 substituted provisions establishing
an interest rate at 5 per centum per annum and a lower rate, but not
less than 2 per cent, under the enumerated criteria, for provisions
establishing standard and special rates, with special rates applicable
under enumerated criteria.
1976--Subsec. (b). Pub. L. 94-570 struck out from introductory text
``meets either of the following conditions'' after ``borrower which'';
limited par. (1) to the telephone borrowers, substituting provision for
an average subscriber density of three or fewer per mile at the end of
the most recent calendar year ending at least six months before approval
of the loan for prior provision for an average consumer or subscriber
density of two or fewer per mile; substituted in par. (2) provision,
limited to electric borrowers, respecting having an average consumer
density of two or fewer per mile or an average adjusted plant revenue
ratio of over 9.0 at end of the most recent calendar year ending at
least six months before approval of the loan, determination of such
ratio, and defining sum of distribution plant and general plant, gross
revenue, and cost of power for prior provision for and average gross
revenue per mile which is at least $450 below the average gross revenue
per mile of REA-financed electric systems, in the case of electric
borrowers, or at least $300 below the average gross revenue per mile of
REA-financed telephone systems, in the case of telephone borrowers; and
inserted in proviso of par. (2) ``to a telephone or electric borrower''
after ``make a loan''.
Effective Date of 1981 Amendment
Section 165(d) of Pub. L. 97-35 provided that: ``The amendments made
by subsection (a) of this section [amending this section] shall apply to
loans the applications for which are received by the Rural
Electrification Administration after July 24, 1981.''
Effective Date of 1976 Amendment; Interest Rate
Section 4 of Pub. L. 94-570 provided that: ``This Act [amending this
section and section 931 of this title] shall take effect upon enactment
[Oct. 20, 1976] except that insured loans made pursuant to applications
for such loans which would otherwise lose eligibility for special rate
financing upon such enactment, received by the Rural Electrification
Administration and still pending on the date of enactment of this Act
[Oct. 20, 1976], shall bear interest as determined under section 305(b)
of the Rural Electrification Act of 1936 before its amendment by this
Act [former provisions of subsec. (b) of this section].''
Effective Date
Section effective May 11, 1973, see section 12 of Pub. L. 93-32, set
out as a note under section 930 of this title.
Section Referred to in Other Sections
This section is referred to in sections 928, 936b, 939, 940, 940d,
948 of this title.
