[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: 7CFR1780.13]

[Page 1037-1038]
 
                          TITLE 7--AGRICULTURE
 
    CHAPTER XVII--RURAL UTILITIES SERVICE, DEPARTMENT OF AGRICULTURE
 
PART 1780--WATER AND WASTE LOANS AND GRANTS--Table of Contents
 
              Subpart A--General Policies and Requirements
 
Sec. 1780.13  Rates and terms.

    (a) General. (1) Each loan will bear interest at the rate prescribed 
in RD Instruction 440.1, exhibit B. The interest rates will be set by 
the Agency for each quarter of the fiscal year. All rates will be 
adjusted to the nearest one-eighth of one per centum. The rate will be 
the lower of the rate in effect at the time of loan approval or the rate 
in effect at the time of loan closing unless the applicant otherwise 
chooses.
    (2) If the interest rate is to be that in effect at loan closing on 
a loan involving multiple advances of RUS funds using temporary debt 
instruments, the interest rate charged shall be that in effect on the 
date when the first temporary debt instrument is issued.
    (b) Poverty rate. The poverty interest rate will not exceed 5 per 
centum per annum. All poverty rate loans must comply with the following 
conditions:
    (1) The primary purpose of the loan is to upgrade existing 
facilities or construct new facilities required to meet applicable 
health or sanitary standards; and
    (2) The median household income of the service area is below the 
higher of the poverty line, or 80 percent of the Statewide 
nonmetropolitan median household income.
    (c) Intermediate rate. The intermediate interest rate will be set at 
the poverty rate plus one-half of the difference between the poverty 
rate and the market rate, not to exceed 7 percent per annum. It will 
apply to loans that do not meet the requirements for the poverty rate 
and for which the median household income of the service area is not 
more than 100 percent of the nonmetropolitan median household income of 
the State.
    (d) Market rate. The market interest rate will be set using as 
guidance the average of the Bond Buyer (11-GO Bond) Index for the four 
weeks prior to the first Friday of the last month before the beginning 
of the quarter. The market rate will apply to all loans that do not 
qualify for a different rate under paragraph (b) or (c) of this section.
    (e) Repayment terms. The loan repayment period shall not exceed the 
useful

[[Page 1038]]

life of the facility, State statute or 40 years from the date of the 
note or bond, whichever is less. Where RUS grant funds are used in 
connection with an RUS loan, the loan will be for the maximum term 
permitted by this part, State statute, or the useful life of the 
facility, whichever is less, unless there is an exceptional case where 
circumstances justify making an RUS loan for less than the maximum term 
permitted. In such cases, the reasons must be fully documented.
    (1) Principal payments may be deferred in whole or in part for a 
period not to exceed 36 months following the date the first interest 
installment is due. If for any reason it appears necessary to permit a 
longer period of deferment, the Agency may authorize such deferment. 
Deferments of principal will not be used to:
    (i) Postpone the levying of taxes or assessments;
    (ii) Delay collection of the full rates which the borrower has 
agreed to charge users for its services as soon as those services become 
available;
    (iii) Create reserves for normal operation and maintenance;
    (iv) Make any capital improvements except those approved by the 
Agency which are determined to be essential to the repayment of the loan 
or to maintain adequate security; and
    (v) Make payment on other debt.
    (2) Payment date. Loan payments will be scheduled to coincide with 
income availability and be in accordance with State law. If State law 
only permits principal plus interest (P&I) type bonds, annual or 
semiannual payments will be used. Insofar as practical monthly payments 
will be scheduled one full month following the date of loan closing; or 
semiannual or annual payments will be scheduled six or twelve full 
months, respectively, following the date of loan closing or any 
deferment period. Due dates falling on the 29th, 30th or 31st day of the 
month will be avoided.
    (3) In all cases, including those in which RUS is jointly financing 
with another lender, the RUS payments of principal and interest should 
approximate amortized installments.