[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: 7CFR1779.80]

[Page 1023]
 
                          TITLE 7--AGRICULTURE
 
    CHAPTER XVII--RURAL UTILITIES SERVICE, DEPARTMENT OF AGRICULTURE
 
PART 1779--WATER AND WASTE DISPOSAL PROGRAMS GUARANTEED LOANS--Table of Contents
 
Sec. 1779.80  Interest rate changes after loan closing.

    (a) General.Subject to the restrictions below, the borrower, lender, 
and holder (if any) may collectively effect a permanent reduction in the 
interest rate on the guaranteed loan at any time during the life of the 
loan on written agreement by all of the applicable parties. After such a 
permanent reduction, the Loan Note Guarantee will only cover losses of 
interest at the reduced interest rate. The Agency must be notified by 
the lender, in writing, within 10 calendar days of the change. When the 
Agency is a holder, it will concur only when it is demonstrated that the 
change is more viable than liquidation and that the Government's 
financial interests are not adversely affected. Factors which will be 
considered in making such determination are the Government's cost of 
borrowing money and the project's enhancement of rural development. The 
monetary recovery must be greater than the liquidation recovery, and a 
financial feasibility analysis must show the project's continued 
viability.
    (1) Fixed rates cannot be changed to variable rates to reduce the 
interest rate to the borrower unless the variable rate has a ceiling 
which is less than the original fixed rate.
    (2) Variable rates can be changed to a lower fixed rate. In a final 
loss settlement when qualifying rate changes are made with the required 
written agreements and notification, the interest will be calculated for 
the periods the given rates were in effect. The lender must maintain 
records which adequately document the accrued interest claimed.
    (3) The lender is responsible for the legal documentation of 
interest rate changes. However, the lender may not issue a new note.
    (b) Increases.No increases in interest rates will be permitted under 
the loan guarantee except the normal fluctuations in approved variable 
interest rate loans.