[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: 7CFR1780.87]

[Page 1065-1066]
 
                          TITLE 7--AGRICULTURE
 
    CHAPTER XVII--RURAL UTILITIES SERVICE, DEPARTMENT OF AGRICULTURE
 
PART 1780--WATER AND WASTE LOANS AND GRANTS--Table of Contents
 
 Subpart D--Information Pertaining to Preparation of Notes or Bonds and 
          Bond Transcript Documents for Public Body Applicants
 
Sec. 1780.87  Permanent instruments for Agency loans.

    Agency loans will be evidenced by an instrument determined legally 
sufficient and in accordance with the following order of preference:
    (a) First preference--Form RD 440-22, ``Promissory Note''. Refer to 
paragraph (b) of this section for methods of various frequency payment 
calculations.
    (b) Second preference--single instruments with amortized 
installments. A single instrument providing for amortized

[[Page 1066]]

installments which follows Form RD 440-22 as closely as possible. The 
full amount of the loan must show on the face of the instrument, and 
there must be provisions for entering the date and amount of each 
advance on the reverse or an attachment. When principal payments are 
deferred, the instrument will show that ``interest only'' is due on 
interest-only installment dates, rather than specific dollar amounts. 
The payment period including the ``interest only'' installment cannot 
exceed 40 years, the useful life of the facility, or State statute 
limitations, whichever occurs first. The amortized installment, computed 
as follows, will be shown as due on installment dates thereafter.
    (1) Monthly payments. Multiply by twelve the number of years between 
the due date of the last interest-only installment and the final 
installment to determine the number of monthly payments. When there are 
no interest-only installments, multiply by twelve the number of years 
over which the loan is amortized. Then multiply the loan amount by the 
amortization factor and round to the next higher dollar.
    (2) Semiannual payments. Multiply by two the number of years between 
the due date of the last interest-only installment and the due date of 
the final installment to determine the correct number of semiannual 
periods. When there are no interest-only installments, multiply by two 
the number of years over which the loan is amortized. Then multiply the 
loan amount by the applicable amortization factor.
    (3) Annual payments. Subtract the due date of the last interest-only 
installment from the due date of the final installment to determine the 
number of annual payments. When there are no interest-only installments, 
the number of annual payments will equal the number of years over which 
the loan is amortized. Then multiply the loan amount by the applicable 
amortization factor and round to the next higher dollar.
    (c) Third preference--single instruments with installments of 
principal plus interest. If a single instrument with amortized 
installments is not legally permissible, use a single instrument 
providing for installments of principal plus interest accrued on the 
principal balance. For bonds with semiannual interest and annual 
principal, the interest is calculated by multiplying the principal 
balance times the interest rate and dividing this figure by two. 
Principal installments are to be scheduled so that total combined 
interest and principal payments closely approximate amortized payments.
    (1) The repayment terms concerning interest only installments 
described in paragraph (b) of this section apply.
    (2) The instrument shall contain in substance provisions indicating:
    (i) Principal maturities and due dates;
    (ii) Regular payments shall be applied first to interest due through 
the next principal and interest installment due date and then to 
principal due in chronological order stipulated in the bond; and
    (iii) Payments on delinquent accounts will be applied in the 
following sequence:
    (A) Billed delinquent interest;
    (B) Past due interest installments;
    (C) Past due principal installments;
    (D) Interest installment due; and
    (E) Principal installment due.
    (d) Fourth preference--serial bonds with installments of principal 
plus interest. If instruments described under the first, second, and 
third preferences are not legally permissible, use serial bonds with a 
bond or bonds delivered in the amount of each advance. Bonds will be 
numbered consecutively and delivered in chronological order. Such bonds 
will conform to the minimum requirements of Sec. 1780.94. Provisions for 
application of payments will be the same as those set forth in paragraph 
(c)(2)(ii) of this section.
    (e) Coupon bonds. Coupon bonds will not be used unless required by 
State statute. Such bonds will conform to the minimum requirements of 
Sec. 1780.94.