§ 936a. — Prepayment of loans.
[Laws in effect as of January 7, 2003]
[Document not affected by Public Laws enacted between
January 7, 2003 and December 19, 2003]
[CITE: 7USC936a]
TITLE 7--AGRICULTURE
CHAPTER 31--RURAL ELECTRIFICATION AND TELEPHONE SERVICE
SUBCHAPTER III--RURAL ELECTRIC AND TELEPHONE DIRECT LOAN PROGRAMS
Sec. 936a. Prepayment of loans
(a) Conditions for prepayment
Except as provided in subsection (c) of this section, a borrower of
a loan made by the Federal Financing Bank and guaranteed under section
936 of this title may prepay such loan (or any loan advance thereunder)
by paying the outstanding principal balance due on the loan (or
advance), if--
(1) the loan is outstanding on July 2, 1986;
(2) private capital, with the existing loan guarantee, is used
to replace the loan; and
(3) the borrower certifies that any savings from such prepayment
will be passed on to its customers or used to improve the financial
strength of the borrower in cases of financial hardship.
(b) Charges on prepayment prohibited
No sums in addition to the payment of the outstanding principal
balance due on the loan may be charged as the result of such prepayment
against the borrower, the fund, or the Secretary.
(c) Disqualification for prepayment on finding of adverse affect on
Federal Financing Bank
(1) A borrower will not qualify for prepayment under this section
if, in the opinion of the Secretary of the Treasury, to prepay in such
borrower's case would adversely affect the operation of the Federal
Financing Bank.
(2) Paragraph (1) shall be effective in fiscal year 1987 only for
any loan the prepayment of the principal amount of which will cause the
cumulative amount of net proceeds from all such prepayments made during
such year to exceed $2,017,500,000.
(d) Amount of permissible prepayments; establishment of eligibility
criteria
(1) The Secretary shall permit, subject to subsection (a) of this
section, prepayments of principal on loans in fiscal year 1987 under
this section or Public Law 99-349 in such amounts as to realize net
proceeds from all such prepayments in fiscal year 1987 in an amount not
less than $2,017,500,000.
(2) The Secretary shall establish--
(A) eligibility criteria to ensure that any loan prepayment
activity required to be carried out under this subsection will be
directed to those cooperative borrowers in greatest need of the
benefits associated with prepayment, as determined by the Secretary;
and
(B) such other eligibility criteria as the Secretary determines
are necessary to carry out this subsection.
(e) Assignability and transferability of guarantees of loans
Any guarantee of a loan prepaid under this section shall be fully
assignable under the provisions of section 936 of this title and
transferable. However, the Secretary may require that any such
guarantee, if transfered \1\ or assigned, be transferred or assigned to
a loan or security that, if sold, will be grouped with nonguaranteed
loans or securities and sold in a manner to ensure that such sale will
not unreasonably compete with the marketing of obligations of the United
States.
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\1\ So in original. Probably should be ``transferred''.
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(May 20, 1936, ch. 432, title III, Sec. 306A, as added Pub. L. 99-509,
title I, Sec. 1011(a), Oct. 21, 1986, 100 Stat. 1875; amended Pub. L.
103-354, title II, Sec. 235(a)(7), (13), Oct. 13, 1994, 108 Stat. 3221.)
References in Text
Public Law 99-349, referred to in subsec. (d)(1), is Pub. L. 99-349,
July 2, 1986, 100 Stat. 710, known as the Urgent Supplemental
Appropriations Act, 1986. Provisions of title I of Pub. L. 99-349
relating to prepayment of loans were set out as a note under section 936
of this title and were repealed by Pub. L. 99-509, title I,
Sec. 1011(b), Oct. 21, 1986, 100 Stat. 1876. For complete classification
of this Act to the Code, see Tables.
Amendments
1994--Pub. L. 103-354 substituted ``Secretary'' for ``Rural
Electrification Administration'' in subsec. (b) and ``Secretary'' for
``Administrator'' wherever appearing in subsecs. (d) and (e).
Prepayment of Rural Electrification Loans During Fiscal Year 1988
Pub. L. 100-203, title I, Sec. 1401, Dec. 22, 1987, 101 Stat. 1330-
20, provided that:
``(a) Eligibility to Prepay.--Notwithstanding subsections (c), (d),
and (e) of section 306A of the Rural Electrification Act of 1936 (7
U.S.C. 936a(c), (d), and (e)), during fiscal year 1988, a borrower of a
loan made by the Federal Financing Bank and guaranteed under section 306
of such Act (7 U.S.C. 936) may, at the option of the borrower, prepay
such loan (or any loan advance thereunder) in accordance with
subsections (a) and (b) of section 306A of such Act, except that any
prepayment that would cause the total amount of such prepayments during
fiscal year 1988 to exceed $2,000,000,000 shall be subject solely to the
approval of the Secretary of the Treasury.
``(b) Priority for Approval.--In determining which borrowers shall
be permitted to prepay loans under subsection (a):
``(1) The Administrator of the Rural Electrification
Administration shall give priority to those 8 borrowers that were
determined by the Administrator, prior to the date of the enactment
of this Act [Dec. 22, 1987], to be eligible to prepay, or that
prepaid, an advance under section 306A of such Act [7 U.S.C. 936a]
(as in effect prior to the date of the enactment of this Act),
except that to retain such priority a borrower shall--
``(A) notify the Administrator in writing, within 30 days
after the issuance of regulations to carry out this section, of
the intent of the borrower to prepay; and
``(B) complete such prepayment by disbursing funds to the
Federal Financing Bank to prepay loan advances within 120 days
after the issuance of such regulations.
``(2) In considering requests for prepayment under subsection
(a) by borrowers not described in paragraph (1), the Administrator
shall permit prepayment based on the order in which borrowers are
prepared to disburse funds to the Federal Financing Bank to complete
such prepayments. If more than 1 borrower is so prepared at the same
time, and if the combined amount of such prepayments would cause the
total amount of prepayments during fiscal year 1988, under this
section, to exceed $2,000,000,000, the Administrator shall--
``(A) base the determination on the date on which prepayment
applications have been submitted; or
``(B) permit partial prepayment by two or more borrowers.
``(c) Regulations.--Not later than 30 days after the date of
enactment of this Act [Dec. 22, 1987], the Administrator of the Rural
Electrification Administration shall issue such regulations as are
necessary to carry at this section.
``(d) Study.--Not later than January 1, 1989, the Comptroller
General of the United States shall--
``(1) study--
``(A) all benefits provided by Federal Financing Bank
lending and the procedures and conditions for the prepayment of
current Federal Financing Bank loans;
``(B) the benefits and costs to Federal Financing Bank
borrowers of making prepayments; and
``(C) alternative conditions and procedures for prepayment
of all Federal Financing Bank loans to balance Federal benefits
with Federal costs; and
``(2) submit to Congress a report describing the results of such
study, together with any appropriate recommendations.''
Prepayment of Guaranteed Loans; Restrictions
Pub. L. 100-202, Sec. 101(k) [title VI, Sec. 633], Dec. 22, 1987,
101 Stat. 1329-322, 1329-356, provided that: ``Hereafter,
notwithstanding section 306A(c), (d), and (e) of the Rural
Electrification Act of 1936, as amended [7 U.S.C. 936a(c), (d), (e)], a
borrower of a loan made by the Federal Financing Bank and guaranteed
under section 306 of such Act (7 U.S.C. 936) may, at the option of the
borrower, prepay such loan (or any loan advance thereunder) in
accordance with section 306A(a) and (b) of such Act: Provided, That any
prepayment in excess of $2,500,000,000 shall be subject to the approval
of the Secretary of the Treasury.''
Pub. L. 100-71, title I, July 11, 1987, 101 Stat. 429, provided in
part that: ``Hereafter, notwithstanding section 306A(d) of the Rural
Electrification Act of 1936 (7 U.S.C. 936a(d)), a borrower of a loan
made by the Federal Financing Bank and guaranteed under section 306 of
such Act (7 U.S.C. 936) may, at the option of the borrower, prepay such
loan (or any loan advance thereunder) in accordance with section 306A of
such Act.''
Regulations
Section 1011(c) of Pub. L. 99-509 provided that: ``The Secretary of
Agriculture shall issue regulations to implement this section [enacting
sections 936a and 936b of this title and repealing provisions set out as
a note under section 936 of this title] within 60 days after the date of
enactment of this Act [Oct. 21, 1986]. Such regulations--
``(1) shall facilitate prepayment of loans under section 306A of
the Rural Electrification Act of 1936 [this section], as added by
subsection (a); and
``(2) may not require any rural utility that is a borrower of
loans subject to section 306A to make unreasonable reductions in
rates to its customers as a condition of such prepayment.''
Section Referred to in Other Sections
This section is referred to in title 26 section 501.
