[Code of Federal Regulations]
[Title 7, Volume 11]
[Revised as of January 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 7CFR1735.22]

[Page 309-310]
 
                          TITLE 7--AGRICULTURE
 
    CHAPTER XVII--RURAL UTILITIES SERVICE, DEPARTMENT OF AGRICULTURE
 
PART 1735--GENERAL POLICIES, TYPES OF LOANS, LOAN REQUIREMENTS--TELECOMMUNICATIONS PROGRAM--Table of Contents
 
               Subpart B--Loan Purposes and Basic Policies
 
Sec. 1735.22  Loan security.

    (a) RUS makes loans only if, in the judgment of the Administrator, 
the security therefor is reasonably adequate and the loan will be repaid 
within the time agreed. See 7 CFR 1735.18 and 7 CFR 1735.51.
    (b) RUS generally requires that borrowers provide it with a first 
lien on all of the borrower's property. See 7 CFR 1735.46.
    (c) In the case of loans that include the financing of telephone 
facilities that do not constitute self-contained operating systems or 
units (such as lines switched by other systems), the borrower shall, in 
addition to the mortgage lien on all of the borrower's telephone 
facilities, furnish adequate assurance, in the form of contractual or 
other security arrangements, that continuous and efficient telephone 
service will be rendered.
    (d) The borrower shall provide RUS with a satisfactory Area Coverage 
Survey. See 7 CFR 1737.30 and 1737.31.
    (e) RUS makes loans only if the borrower's entire system, including 
the facilities to be constructed with the proceeds of the loan, is 
economically feasible, as determined by RUS. In addition, RUS considers 
a system to be feasible only if the system, in addition to being 
feasible in all other respects, is year 2000 compliant or if the 
borrower provides RUS with a certification, satisfactory to RUS, that 
the system will be year 2000 compliant at a reasonable time before 
December 31, 1999. Year 2000 compliant means that product performance 
and function are not affected by dates before, during, and after the 
year 2000.

[[Page 310]]

    (f) For purposes of determining compliance with TIER requirements, 
unless a borrower whose existing mortgage contains TIER maintenance 
requirements notifies RUS in writing differently, RUS will apply the 
requirements described in paragraph (g) of this section to the borrower 
regardless of the provisions of the borrower's existing mortgage.
    (g) For loans approved after October 6, 1997 loan contracts and 
mortgages covering hardship loans, RUS cost-of-money loans, RTB loans, 
and guaranteed loans will contain a provision requiring the borrower to 
maintain a TIER of at least 1.0 during the Forecast Period. At the end 
of the Forecast Period, the borrower shall be required to maintain, at a 
minimum, a TIER at least equal to the projected TIER determined by the 
feasibility study prepared in connection with the loan, but at least 1.0 
and not greater than 1.5.
    (h) Nothing in this section shall affect any rights of supplemental 
lenders under the RUS mortgage, or other creditors of the borrower, to 
limit a borrower's TIER requirement to a level above that established in 
paragraph (g) of this section.
    (i) A borrower will not be required to raise its TIER as a condition 
for receiving a loan. Additional financial, investment, and managerial 
controls appear in the loan contract and mortgage required by RUS.

[54 FR 13351, Apr. 3, 1989. Redesignated at 55 FR 39395, Sept. 27, 1990, 
as amended at 56 FR 26597, June 10, 1991; 58 FR 66254, Dec. 20, 1993; 62 
FR 46870, Sept. 5, 1997; 63 FR 45678, Aug. 27, 1998]