PART 1714—PRE-LOAN POLICIES AND PROCEDURES FOR INSURED ELECTRIC LOANS Authority: 7 U.S.C. 901 et seq.; et seq.; et seq. Source: 58 FR 66260, Dec. 20, 1993, unless otherwise noted. Subpart A—General § 1714.1 [Reserved] § 1714.2 Definitions. The definitions set forth in 7 CFR 1710.2 are applicable to this part, unless otherwise stated. References to specific RUS forms and other RUS documents, and to specific sections of such forms and documents, shall include the corresponding forms, documents, sections and lines in any subsequent revisions of these forms and documents. § 1714.3 Applicability of provisions. (a) Insured electric loans approved on or after November 1, 1993. et seq., (b) Insured electric loans approved prior to November 1, 1993. § 1714.4 Interest rates. (a) Municipal rate loans. (b) Hardship rate loans. (c) Application procedure. [58 FR 66260, Dec. 20, 1993, as amended at 67 FR 16969, Apr. 9, 2002; 84 FR 32615, July 9, 2019] § 1714.5 Determination of interest rates on municipal rate loans. (a) RUS will post on the RUS website, Electric Program HomePage, a schedule of interest rates for municipal rate loans at the beginning of each calendar quarter. The schedule will show the year of maturity and the applicable interest rates in effect for all funds advanced on municipal rate loans during the calendar quarter and all interest rate terms beginning in the quarter. All interest rates will be adjusted to the nearest one eighth of one percent (0.125 percent). (b) The rate for interest rate terms of 20 years or longer will be the average of the 20 year rates published in the Bond Buyer in the 4 weeks specified in paragraph (d) of this section for the “11-Bond GO Index” of Aa rated general obligation municipal bonds, or the successor to this index. (c) The rate for terms of less than 20 years will be the average of the rates published in the Bond Buyer in the 4 weeks specified in paragraph (d) of this section in the table of “Municipal Market Data—General Obligation Yields” for Aa rated bonds, or the successor to this table, for obligations maturing in the same year as the interest rate term selected by the borrower. (d) The interest rates on municipal rate loans shall not exceed the interest rate determined under section 307(a)(3)(A) of the Consolidated Farm and Rural Development Act (7 U.S.C. 1927(a)(3)(A)) for Water and Waste Disposal loans. The method used to determine this rate is set forth in the regulations of the Rural Housing Service at 7 CFR 1942.17(f)(1) and (4). Pursuant to the RUS rule, the interest rates are set using as guidance the average of the Bond Buyer Index for the four weeks prior to the first Friday of the last month before the beginning of the quarter. [58 FR 66260, Dec. 20, 1993, as amended at 67 FR 16969, Apr. 9, 2002; 80 FR 9861, Feb. 24, 2015] § 1714.6 Interest rate term. (a) Municipal rate loans. (1) The initial interest rate term will begin on the date of the advance. All rollover interest rate terms will begin on the first day of a month, and except for the last interest rate term to final maturity, shall end on the last day of a month. All terms except for the initial interest rate term on an advance, and the last term to final maturity shall be in yearly increments. (2) The following limits apply to the number of advances of funds that may be made to the borrower on any municipal rate loan: (i) If the loan period is 2 years or less, not more than 6 advances; (ii) If the loan period is more than 2 years, not more than 8 advances. (3) For the initial interest rate term of an advance, a letter from an authorized official of the borrower indicating the selection of the term shall accompany the request for the advance. (4) At the end of any interest rate term, the borrower shall pay all accrued interest and principal balance then due, and either prepay the remaining principal of the advance at face value, or roll over the remaining principal for a new term, provided that no interest rate term may end later than the date of the final maturity. (i) If the borrower elects to prepay all or part of the remaining principal of the advance at face value, it must notify the Director of the appropriate Regional Division or the Power Supply Division in writing not later than 20 days before the rollover maturity date. (ii) If the borrower wishes to elect a new interest rate term that is different from the term previously selected, it must notify RUS in writing of the new term not later than 20 days before the end of the current term. The election of the new term shall be addressed to the Director, Financial Operations Division, Rural Utilities Service, Washington, DC 20250-1500. (iii) If the borrower fails to notify RUS within the timeframes set out in this paragraph of its intention to prepay or elect a different interest rate term, RUS will automatically roll over the remaining principal for the shorter of, and at the interest rate applicable to: (A) A period equal in length to the term that is expiring; or (B) The remaining period to final maturity. (b) Hardship rate loans. [58 FR 66260, Dec. 20, 1993, as amended at 60 FR 3734, Jan. 19, 1995] § 1714.7 Interest rate cap. Except as provided in paragraph (c) of this section, the municipal interest rate may not exceed 7 percent on a loan advance to a borrower primarily engaged in providing retail electric service if the borrower meets, at the time of loan approval, either the consumer density test set forth in paragraph (a) of this section, or both the rate disparity test for the interest rate cap and the consumer income test set forth in paragraph (b) of this section. (a) Low consumer density test. (b)(1) Rate disparity test for the interest rate cap. (2) Consumer income test. (i) To qualify under the consumer income test, the borrower must include in its loan application information about the location of its residential consumers. The borrower must provide to RUS, based on the most recent data available at the time of loan application, either the number of consumers in each county it serves or the number of consumers in each census tract it serves. Using 5-year income data from the American Community Survey (ACS) or, if needed, other Census Bureau data, RUS will compare, on a weighted average basis, the average per capita and median household income of the counties or census tracts served by the borrower with state figures. (ii) If there is reason to believe that the ACS or other Census Bureau data does not accurately represent the economic conditions of the borrower's consumers, the reasons will be documented and the borrower may furnish, or RD may obtain, additional information regarding such economic conditions. Information must consist of reliable data from local, regional, State, or Federal sources or from a survey conducted by a reliable impartial source. The Administrator has the sole discretion to determine whether such data submitted by the borrower is sufficient to determine whether the borrower qualifies under the consumer income test. (3) Borrowers serving 2 or more states. (c) High density test. [58 FR 66260, Dec. 20, 1993, as amended at 80 FR 9861, Feb. 24, 2015] § 1714.8 Hardship rate loans. Except as provided in paragraph (d) of this section, the Administrator shall make an insured electric loan for eligible purposes at the 5 percent hardship rate to a borrower primarily engaged in providing retail electric service if the borrower meets, at the time of loan approval, both the rate disparity test for hardship and the consumer income test described in paragraph (a) of this section; or the extremely high rates test set forth in paragraph (b) of this section. A loan at the 5 percent hardship rate may also be made to any borrower pursuant to paragraph (c) of this section who, in the sole discretion of the Administrator, has experienced a severe hardship. The Administrator may not require a loan from a supplemental source in connection with a hardship rate loan. (a)(1) Rate disparity test for hardship. (2) Consumer income test. (3) Borrowers serving 2 or more states. (b) Extremely high rates test. (c) Administrator's discretion. (d) High density test. (Approved by the Office of Management and Budget under control number 0572-1013) § 1714.9 Prepayment of insured loans. This section sets out provisions for prepayment of insured electric loans at face value. Provisions for discounted prepayment of RUS loans are set out in 7 CFR part 1786. (a) Municipal rate loans. (1) Prepayment on a rollover maturity date. (2) Prepayment on a date other than a rollover maturity date. (b) Hardship rate loans. §§ 1714.10-1714.49 [Reserved] Subpart B [Reserved]