[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: 7CFR1735.46]

[Page 316-317]
 
                          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 D--Terms of Loans
 
Sec. 1735.46  Loan security documents.

    (a) Loans are to be repaid according to their terms. RUS generally 
obtains a first lien on all assets of the borrower. This lien shall be 
in the form of a mortgage by the borrower to the Government or a deed of 
trust made by and between the borrower and a trustee, satisfactory to 
the Administrator, together with such security agreements, financing 
statements, or other security documents as RUS may deem

[[Page 317]]

necessary in a particular case. Where a borrower is unable by reason of 
pre-existing encumbrances, or otherwise, to furnish a first mortgage 
lien on its entire system the Administrator may, if he determines such 
security to be reasonably adequate and the form and nature thereof 
otherwise appropriate, accept other forms of security. See RUS Bulletins 
320-4, 320-22, 321-2, 322-2, 323-1, and 326-1 for details. See 7 CFR 
part 1744, subpart B for information on lien accommodations and 
subordinations.
    (b) Loan security documents of borrowers with loans approved after 
October 6, 1997 will provide limits on allowable cash distributions in 
any calendar year as follows:
    (1) No more than 25 percent of the prior calendar year's net 
earnings or margins if the borrower's net worth is at least 1 percent of 
its total assets after the distribution is made;
    (2) No more than 50 percent of the prior calendar year's net 
earnings or margins if the borrower's net worth is at least 20 percent 
of its total assets after the distribution is made;
    (3) No more than 75 percent of the prior calendar year's net 
earnings or margins if the borrower's net worth is at least 30 percent 
of its total assets after the distribution is made; or
    (4) No limit on distributions if the borrower's net worth is at 
least 40 percent of its total assets after the distribution is made.
    (c) Borrowers that have not received a loan after October 6, 1997 
may request the Administrator to apply these requirements to them. 
Borrowers may request in writing that RUS substitute the new 
requirements described in paragraphs (b)(1) through (b)(4) of this 
section. Upon request by the borrower, the provisions of the borrower's 
loan documents restricting cash distributions or investments shall not 
be enforced to the extent that such provisions are inconsistent with 
this section.
    (d) Rural development investments meeting the criteria set forth in 
7 CFR part 1744, subpart D, will not be counted against a borrower's 
allowable cash distributions in any calendar year (7 U.S.C. 926).
    (e) References to a borrower's mortgage in this section include 
deeds of trust and any other loan document applying the same 
requirements to a borrower.
    (f) This section does not limit the rights of any parties to the 
mortgage other than RUS or RTB.

[54 FR 13351, Apr. 3, 1989. Redesignated at 55 FR 39395, Sept. 27, 1990, 
as amended at 59 FR 29537, June 8, 1994; 62 FR 46871, Sept. 5, 1997]