Insured loans; interest rates and lending levels

7 U.S.C. § 935

• Title: 7 — Agriculture
• Chapter: SUBCHAPTER III—RURAL ELECTRIC AND TELEPHONE DIRECT LOAN PROGRAMS

Text

(a) In general
The Secretary is authorized to make insured loans under this subchapter and at the interest rates hereinafter provided to the full extent of the assets available in the fund, subject only to limitations as to amounts authorized for loans and advances as may be from time to time imposed by the Congress of the United States for loans to be made in any one year, which amounts shall remain available until expended: Provided, That the Congress in the annual appropriation Act may also authorize the transfer of any excess cash in the fund for deposit into the Treasury as miscellaneous receipts: And provided further, That any such loans and advances shall not be included in the totals of the budget of the United States Government and shall be exempt from any general limitation imposed by statute on expenditures and net lending (budget outlays) of the United States.
(b) Insured loans
Loans made under this section shall be insured by the Secretary when purchased by a lender. As used in this chapter, an insured loan is one which is made, held, and serviced by the Secretary, and sold and insured by the Secretary hereunder; such loans shall be sold and insured by the Secretary without undue delay.
(c) Insured electric loans
The Secretary shall make insured electric loans, to the extent of qualifying applications for the loans, at an interest rate of 5 percent per year to any applicant for a loan who meets each of the following requirements:
(i) The average revenue per kilowatt-hour sold by the applicant is not less than 120 percent of the average revenue per kilowatt-hour sold by all utilities in the State in which the applicant provides service.
(ii) The average residential revenue per kilowatt-hour sold by the applicant is not less than 120 percent of the average residential revenue per kilowatt-hour sold by all utilities in the State in which the applicant provides service.
(iii) The average per capita income of the residents receiving electric service from the applicant is less than the average per capita income of the residents of the State in which the applicant provides service, or the median household income of the households receiving electric service from the applicant is less than the median household income of the households in the State.
In addition to hardship loans that are made under subparagraph (A), the Secretary may make an insured electric loan at an interest rate of 5 percent per year to an applicant for a loan if, in the sole discretion of the Secretary, the applicant has experienced a severe hardship.
Except as provided in subparagraph (D), the Secretary may not make a loan under this paragraph to an applicant for the purpose of furnishing or improving electric service to a consumer located in an urban area (as defined by the Bureau of the Census) if the average number of consumers per mile of line of the total electric system of the applicant exceeds 17.
In addition to hardship loans that are made under subparagraphs (A) and (B), the Secretary shall make insured electric loans, to the extent of qualifying applications for the loans, at an interest rate of 5 percent per year to any applicant for a loan whose residential revenue exceeds 15.0 cents per kilowatt-hour sold. A qualifying application from such an applicant for the purpose of furnishing or improving electric service to a consumer located outside of an urbanized area shall not be subject to the conditions or limitation of subparagraph (A) or (C).
The Secretary shall make insured electric loans, to the extent of qualifying applications for the loans, at the interest rate described in subparagraph (B) for the term or terms selected by the applicant pursuant to subparagraph (C).
Subject to clause (ii), the interest rate described in this subparagraph on a loan to a qualifying applicant shall be—
(I) the interest rate determined by the Secretary to be equal to the current market yield on outstanding municipal obligations with remaining periods to maturity similar to the term selected by the applicant pursuant to subparagraph (C), but not greater than the rate determined under section 1927(a)(3)(A) of this title that is based on the current market yield on outstanding municipal obligations; plus
(II) if the applicant for the loan makes an election pursuant to subparagraph (D) to include in the loan agreement the right of the applicant to prepay the loan, a rate equal to the amount by which—
(aa) the interest rate on commercial loans for a similar period that afford the borrower such a right; exceeds
(bb) the interest rate on commercial loans for the period that do not afford the borrower such a right.
The interest rate described in this subparagraph on a loan to an applicant for the loan shall not exceed 7 percent if—
(I) the average number of consumers per mile of line of the total electric system of the applicant is less than 5.50; or
(II)(aa) the average revenue per kilowatt-hour sold by the applicant is more than the average revenue per kilowatt-hour sold by all utilities in the State in which the applicant provides service; and
(bb) the average per capita income of the residents receiving electric service from the applicant is less than the average per capita income of the residents of the State in which the applicant provides service, or the median household income of the households receiving electric service from the applicant is less than the median household income of the households in the State.
Clause (ii) shall not apply to a loan to be made to an applicant for the purpose of furnishing or improving electric service to consumers located in an urban area (as defined by the Bureau of the Census) if the average number of consumers per mile of line of the total electric system of the applicant exceeds 17.
Subject to clause (ii), the applicant for a loan under this paragraph may select the term for which an interest rate shall be determined pursuant to subparagraph (B), and, at the end of the term (and any succeeding term selected by the applicant under this subparagraph), may renew the loan for another term selected by the applicant.
The applicant may not select a term that ends more than 35 years after the beginning of the first term the applicant selects under clause (i).
The Secretary may prohibit an applicant from selecting a term that would result in the total term of the loan being greater than the expected useful life of the assets being financed.
The Secretary shall offer any applicant for a loan under this paragraph the option to include in the loan agreement the right of the applicant to prepay the loan on terms consistent with similar provisions of commercial loans.
The Secretary may not require any applicant for a loan made under this subsection who is eligible for a loan under paragraph (1) to obtain a loan from another source as a condition of approving the application for the loan or advancing any amount under the loan.
(d) Insured telephone loans
The Secretary shall make insured telephone loans, to the extent of qualifying applications for the loans, at an interest rate of 5 percent per year, to any applicant who meets each of the following requirements:
(i) The average number of subscribers per mile of line in the service area of the applicant is not more than 4.
(ii) The applicant is capable of producing net income or margins before interest of not less than 100 percent (but not more than 300 percent) of the interest requirements on all of the outstanding and proposed loans of the applicant.
(iii) The Secretary has approved a telecommunications modernization plan for the State under paragraph (3) and, if the plan was developed by telephone borrowers under this subchapter, the applicant is a participant in the plan.
(iv) The average number of subscribers per mile of line in the area included in the proposed loan is not more than 17.
The Secretary may waive the requirement of subparagraph (A)(ii) in any case in which the Secretary determines (and sets forth the reasons for the waiver in writing) that the requirement would prevent emergency restoration of the telephone system of the applicant or result in severe hardship to the applicant.
On request of any applicant who is eligible for a loan under this paragraph for which funds are not available, the applicant shall be considered to have applied for a loan under subchapter IV.
The Secretary may make insured telephone loans for the acquisition, purchase, and installation of telephone lines, systems, and facilities (other than buildings used primarily for administrative purposes, vehicles not used primarily in construction, and customer premise equipment) related to the furnishing, improvement, or extension of rural telecommunications service, at an interest rate equal to the then current cost of money to the Government of the United States for loans of similar maturity, but not more than 7 percent per year, to any applicant for a loan who meets the following requirements:
(i) The average number of subscribers per mile of line in the service area of the applicant is not more than 15, or the applicant is capable of producing net income or margins before interest of not less than 100 percent (but not more than 500 percent) of the interest requirements on all of the outstanding and proposed loans of the applicant.
(ii) The Secretary has approved a telecommunications modernization plan for the State under paragraph (3) and, if the plan was developed by telephone borrowers under this subchapter, the applicant is a participant in the plan.
On request of any applicant for a loan under this paragraph during any fiscal year, the Secretary shall—
(i) consider the application to be for a loan under this paragraph; and
(ii) if the applicant is eligible for a loan, make a loan to the applicant under this paragraph in an amount equal to the amount that bears the same ratio to the total amount of loans for which the applicant is eligible under this paragraph, as the amount made available for loans under this paragraph for the fiscal year bears to the total amount made available for loans under this paragraph for the fiscal year.
On request of any applicant who is eligible for a loan under this paragraph for which funds are not available, the applicant shall be considered to have applied for a loan guarantee under section 936 of this title.
If, not later than 1 year after final regulations are promulgated to carry out this paragraph, any State, either by statute or through the public utility commission of the State, develops a telecommunications modernization plan that meets the requirements of subparagraph (B), the Secretary shall approve the plan for the State. If a State does not develop a plan in accordance with the requirements of the preceding sentence, the Secretary shall approve any telecommunications modernization plan for the State that meets the requirements that is developed by a majority of the borrowers of telephone loans made under this subchapter who are located in the State.
For purposes of subparagraph (A), a telecommunications modernization plan must, at a minimum, meet the following objectives:
(i) The plan must provide for the elimination of party line service.
(ii) The plan must provide for the availability of telecommunications services for improved business, educational, and medical services.
(iii) The plan must encourage and improve computer networks and information highways for subscribers in rural areas.
(iv) The plan must provide for—
(I) subscribers in rural areas to be able to receive through telephone lines—
(aa) conference calling;
(bb) video images; and
(cc) data at a rate of at least 1,000,000 bits of information per second; and
(II) the proper routing of information to subscribers.
(v) The plan must provide for uniform deployment schedules to ensure that advanced services are deployed at the same time in rural and nonrural areas.
(vi) The plan must provide for such additional requirements for service standards as may be required by the Secretary.
A telecommunications modernization plan approved under subparagraph (A) may not subsequently be disapproved. Notwithstanding paragraphs (1)(A)(iii) and (2)(A)(iii),1 and the Secretary may make a loan to a borrower serving a State that does not have a telecommunication modernization plan approved by the Secretary if the loan is made less than 1 year after the Secretary has adopted final regulations implementing this paragraph.

History

(May 20, 1936, ch. 432, title III, §305, as added Pub. L. 93–32, §2, May 11, 1973, 87 Stat. 68; amended Pub. L. 94–570, §3, Oct. 20, 1976, 90 Stat. 2701; Pub. L. 97–35, title I, §165(a), Aug. 13, 1981, 95 Stat. 379; Pub. L. 101–624, title XXIII, §2361, Nov. 28, 1990, 104 Stat. 4042; Pub. L. 103–129, §2(a)(1), (c)(6), Nov. 1, 1993, 107 Stat. 1356, 1364; Pub. L. 103–354, title II, §235(a)(8), (13), Oct. 13, 1994, 108 Stat. 3221; Pub. L. 115–334, title VI, §6602(b)(8), (9), Dec. 20, 2018, 132 Stat. 4776, 4777.)

Editorial Notes

Editorial Notes

Amendments
2018—Subsec. (d)(2)(B)(i). Pub. L. 115–334, §6602(b)(8)(A), struck out "and a loan under section 948 of this title" after "under this paragraph".
Subsec. (d)(2)(B)(ii). Pub. L. 115–334, §6602(b)(8)(B), struck out "and under section 948 of this title" after "under this paragraph" in two places.
Subsec. (d)(3)(C). Pub. L. 115–334, §6602(b)(9), substituted "the Secretary" for "and section 948(b)(4)(C) of this title, the Secretary and the Governor of the telephone bank".
1994—Pub. L. 103–354 substituted "Secretary" for "Administrator" in heading for subsec. (c)(2)(C)(ii)(II) and wherever appearing in text.
1993—Pub. L. 103–129, §2(c)(6)(A), amended section catchline generally.
Subsec. (a). Pub. L. 103–129, §2(c)(6)(A), inserted heading.
Subsec. (b). Pub. L. 103–129, §2(a)(1)(A), (B), (c)(6)(B), redesignated subsec. (c) as (b), inserted heading, and struck out former subsec. (b) which read as follows: "Insured loans made under this subchapter shall bear interest at 5 per centum per annum, except that the Administrator may make insured loans to electric or telephone borrowers at a lesser interest rate, but not less than 2 per centum per annum, if, in the Administrator's sole discretion, the Administrator finds that the borrower—
"(1) has experienced extreme financial hardship; or
"(2) cannot, in accordance with generally accepted management and accounting principles and without charging rates to its customers or subscribers so high as to create a substantial disparity between such rates and the rates charged for similar service in the same or nearby areas by other suppliers, provide service consistent with the objectives of this chapter."
Subsec. (c). Pub. L. 103–129, §2(a)(1)(C), added subsec. (c). Former subsec. (c) redesignated (b).
Subsec. (d). Pub. L. 103–129, §2(a)(1)(A), (C), added subsec. (d) and struck out former subsec. (d) which read as follows: "The Administrator shall make a telephone loan under this subchapter to an applicant therefor who is otherwise qualified to receive such a loan at the highest interest rate (but not less than the lowest interest rate, nor higher than the highest interest rate, specified in subsection (b) of this section) at which the borrower would be capable of producing net income or margins before interest payments of at least 100 percent (but not more than 150 percent) of the interest requirements on all of the applicant's outstanding and proposed loans."
1990—Subsec. (d). Pub. L. 101–624 added subsec. (d).
1981—Subsec. (b). Pub. L. 97–35 substituted provisions establishing an interest rate at 5 per centum per annum and a lower rate, but not less than 2 per cent, under the enumerated criteria, for provisions establishing standard and special rates, with special rates applicable under enumerated criteria.
1976—Subsec. (b). Pub. L. 94–570 struck out from introductory text "meets either of the following conditions" after "borrower which"; limited par. (1) to the telephone borrowers, substituting provision for an average subscriber density of three or fewer per mile at the end of the most recent calendar year ending at least six months before approval of the loan for prior provision for an average consumer or subscriber density of two or fewer per mile; substituted in par. (2) provision, limited to electric borrowers, respecting having an average consumer density of two or fewer per mile or an average adjusted plant revenue ratio of over 9.0 at end of the most recent calendar year ending at least six months before approval of the loan, determination of such ratio, and defining sum of distribution plant and general plant, gross revenue, and cost of power for prior provision for and average gross revenue per mile which is at least $450 below the average gross revenue per mile of REA-financed electric systems, in the case of electric borrowers, or at least $300 below the average gross revenue per mile of REA-financed telephone systems, in the case of telephone borrowers; and inserted in proviso of par. (2) "to a telephone or electric borrower" after "make a loan".

Statutory Notes and Related Subsidiaries

Effective Date of 1981 Amendment
Pub. L. 97–35, title I, §165(d), Aug. 13, 1981, 95 Stat. 379, provided that: "The amendments made by subsection (a) of this section [amending this section] shall apply to loans the applications for which are received by the Rural Electrification Administration after July 24, 1981."

Effective Date of 1976 Amendment; Interest Rate
Pub. L. 94–570, §4, Oct. 20, 1976, 90 Stat. 2702, provided that: "This Act [amending this section and section 931 of this title and enacting provisions set out as a note under section 901 of this title] shall take effect upon enactment [Oct. 20, 1976] except that insured loans made pursuant to applications for such loans which would otherwise lose eligibility for special rate financing upon such enactment, received by the Rural Electrification Administration and still pending on the date of enactment of this Act [Oct. 20, 1976], shall bear interest as determined under section 305(b) of the Rural Electrification Act of 1936 before its amendment by this Act [former provisions of subsec. (b) of this section]."

Effective Date
Section effective May 11, 1973, see section 12 of Pub. L. 93–32, set out as a note under section 930 of this title.