§ 936c. — Refinancing and prepayment of FFB loans.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 7USC936c]
TITLE 7--AGRICULTURE
CHAPTER 31--RURAL ELECTRIFICATION AND TELEPHONE SERVICE
SUBCHAPTER III--RURAL ELECTRIC AND TELEPHONE DIRECT LOAN PROGRAMS
Sec. 936c. Refinancing and prepayment of FFB loans
(a) In general
A borrower of a loan made by the Federal Financing Bank and
guaranteed under section 936 of this title may, at the option of the
borrower, refinance or prepay the loan or an advance on the loan, or any
portion of the loan or advance.
(b) Penalty
(1) Determination of penalty
A penalty shall be assessed against a borrower that refinances
or prepays a loan or loan advance, or any portion of a loan or
advance, under this section. Except as provided in paragraph (2),
the penalty shall be equal to the lesser of--
(A) the difference between the outstanding principal balance
of the loan being refinanced and the present value of the loan
discounted at a rate equal to the then current cost of funds to
the Department of the Treasury for obligations of comparable
maturity to the loan being refinanced or prepaid;
(B) 100 percent of the amount of interest for 1 year on the
outstanding principal balance of the loan or loan advance, or
any portion of the loan or advance, being refinanced, multiplied
by the ratio that--
(i) the number of quarterly payment dates between the
date of the refinancing or prepayment and the maturity date
for the loan advance; bears to
(ii) the number of quarterly payment dates between the
first quarterly payment date that occurs 12 years after the
end of the year in which the amount being refinanced was
advanced and the maturity date of the loan advance; and
(C)(i) the present value of 100 percent of the amount of
interest for 1 year on the outstanding principal balance of the
loan or loan advance, or any portion of the loan or advance,
being refinanced or prepaid; plus
(ii) for the interval between the date of the refinancing or
prepayment and the first quarterly payment date that occurs 12
years after the end of the year in which the amount being
refinanced or prepaid was advanced, the present value of the
difference between--
(I) each payment scheduled for the interval on the loan
amount being refinanced or prepaid; and
(II) the payment amounts that would be required during
the interval on the amounts being refinanced or prepaid if
the interest rate on the loan were equal to the then current
cost of funds to the Department of the Treasury for
obligations of comparable maturity to the loan being
refinanced or prepaid.
(2) Limitation
(A) In general
Except as provided in subparagraph (B), the penalty provided
by paragraph (1)(A) shall be required for refinancing or
prepayment under this section.
(B) Exception
In the case of a loan advanced under an agreement that
permits the refinancing or prepayment of the loan advance based
on the payment of 1 year of interest on the outstanding
principal balance of the loan advance, a borrower may, in lieu
of the penalty required by paragraph (1)(A), pay a penalty as
provided by--
(i) paragraph (1)(B), if the loan advance has reached
the 12-year maturity required under the loan agreement for
the refinancing or prepayment; or
(ii) paragraph (1)(C), if the loan advance has not
reached the 12-year maturity required under the loan
agreement for the refinancing or prepayment.
(3) Financing of penalty
(A) In general
In the case of a refinancing under this section, a borrower
may, at the option of the borrower, meet the penalty
requirements of paragraph (1) by--
(i) making a payment in the amount of the required
penalty at the time of the refinancing; or
(ii) increasing the outstanding principal balance of the
loan advance guaranteed by the Secretary that is being
refinanced under this section by the amount of the penalty.
(B) Increased principal
If a borrower meets the penalty requirements of paragraph
(1) by increasing the outstanding principal balance of the loan
advance that is being refinanced, the borrower shall make a
payment at the time of the refinancing equal to 2.5 percent of
the amount of the penalty that is added to the outstanding
principal balance of the loan.
(c) Loan terms and conditions after refinancing
(1) In general
On the payment of a penalty as provided by subsection (b) of
this section, the loan or loan advance, or any portion of the loan
or advance, shall be refinanced at the interest rate described in
paragraph (2) for a term selected by the borrower pursuant to
paragraph (3), except that this paragraph shall not apply if the
loan advance, or any portion of the advance, is prepaid by the
borrower.
(2) Interest rate
The interest rate on a loan refinanced under this section shall
be determined to be equal to the then current cost of funds to the
Department of the Treasury for obligations of comparable maturity to
a term selected by the borrower pursuant to paragraph (3), except
that such rate shall not be greater than 7 percent per year, subject
to subsection (d) of this section.
(3) Loan term
Subject to paragraph (4), the borrower of a loan that is
refinanced under this section--
(A) shall select the term for which an interest rate shall
be determined pursuant to paragraph (2); and
(B) at the end of the term (and any succeeding term selected
by the borrower under this paragraph), may renew the loan for
another term selected by the borrower.
(4) Maximum term
The borrower may not select a term pursuant to paragraph (3)
that ends after the maturity date set for the loan before the
refinancing of the loan under this section.
(5) Existing loans
In the case of the refinancing of a loan of a borrower pursuant
to this section and the inclusion of a penalty in the outstanding
principal balance of the refinanced loan pursuant to subsection
(b)(3) of this section--
(A) the refinancing and inclusion of the penalty shall not
be subject to appropriations or limited by the amount provided
during a fiscal year for new loans, loan guarantees, or other
credit activity;
(B) the request of the borrower for the refinancing under
this section may not be denied or delayed; and
(C) the borrower may not be limited in the selection of any
refinancing or prepayment option provided by this section to the
borrower.
(d) Maximum rate option
(1) In general
Except as provided in paragraphs (2), (3), and (4), a borrower
of a loan or loan advance, or any portion of the loan or advance,
that is refinanced under this section shall have the option of
ensuring that the interest rate on such loan, loan advance, or
portion thereof does not exceed 7 percent per year.
(2) Limitation
A borrower may not exercise the option under paragraph (1) in
the case of a loan or loan advance, or portion thereof, if the total
amount of such loans for which such option would be exercised
exceeds 50 percent of the outstanding principal balance of the loans
made to such borrower and guaranteed under section 936 of this
title.
(3) Fee
A borrower that exercises the maximum rate option under
paragraph (1) shall, at the time of exercising such option, pay a
fee equal to 1 percent of the outstanding principal balance of such
loan or loan advance, or portion thereof, for which such option is
exercised. Such fee shall be in addition to the penalties and other
payments required under subsection (b) of this section.
(4) Sunset
The option provided under paragraph (1) shall not be available
in the case of any loan or loan advance, or portion thereof, unless
a written request to exercise such option is sent to the Secretary
not later than 1 year after the effective date of regulations issued
to carry out the Rural Electrification Loan Restructuring Act of
1993.
(May 20, 1936, ch. 432, title III, Sec. 306C, as added Pub. L. 103-66,
title I, Sec. 1201(a), Aug. 10, 1993, 107 Stat. 327; amended Pub. L.
103-129, Sec. 2(c)(10), Nov. 1, 1993, 107 Stat. 1365; Pub. L. 103-354,
title II, Sec. 235(a)(13), Oct. 13, 1994, 108 Stat. 3221.)
References in Text
The Rural Electrification Loan Restructuring Act of 1993, referred
to in subsec. (d)(4), is Pub. L. 103-129, Nov. 1, 1993, 107 Stat. 1356.
Section 6 of Pub. L. 103-129 relates to the issuance of regulations to
carry out amendments made by the Act and is set out as a note under
section 901 of this title. For complete classification of this Act to
the Code, see Short Title of 1993 Amendment note set out under section
901 of this title and Tables.
Amendments
1994--Subsecs. (b)(3)(A)(ii), (d)(4). Pub. L. 103-354 substituted
``Secretary'' for ``Administrator''.
1993--Subsec. (c)(2). Pub. L. 103-129, Sec. 2(c)(10)(A), inserted
before period at end ``, except that such rate shall not be greater than
7 percent per year, subject to subsection (d) of this section''.
Subsec. (d). Pub. L. 103-129, Sec. 2(c)(10)(B), added subsec. (d).
Regulations
Section 1201(b) of Pub. L. 103-66 provided that: ``Not later than 45
days after the date of enactment of this section [Aug. 10, 1993], the
Administrator of the Rural Electrification Administration shall issue
interim final regulations to carry out the amendment made by subsection
(a) [enacting this section].''
