---
kind: "range"
citation: "7 U.S.C. §§ 933–938"
title: "7"
from: "933"
to: "938"
count: 12
release: "119-102"
url: "https://uscodex.org/usc/7/933..938"
---

# §933. Moneys in the Rural Electrification and Telephone Revolving Fund


Moneys in the [fund](/usc/7/4531.md?p=5) shall remain on deposit in the Treasury of the [United States](/usc/7/6402.md?p=8) until disbursed.


# §934. Authorized financial transactions; interim notes; purchase of obligations for resale; sale of notes and certificates; liens

- (a) The [Secretary](/usc/7/913.md?p=5) is authorized to make and issue interim notes to the [Secretary](/usc/7/913.md?p=5) of the Treasury for the purpose of obtaining [funds](/usc/7/4531.md?p=5) necessary for discharging obligations of the [fund](/usc/7/4531.md?p=5) and for making loans, advances and authorized expenditures out of the [fund](/usc/7/4531.md?p=5). Such notes shall be in such form and denominations and have such maturities and be subject to such terms and conditions as may be agreed upon by the [Secretary](/usc/7/913.md?p=5) and the [Secretary](/usc/7/913.md?p=5) of the Treasury. Such notes shall bear interest at a rate fixed by the [Secretary](/usc/7/913.md?p=5) of the Treasury, taking into consideration the current average market yield of outstanding marketable obligations of the [United States](/usc/7/6402.md?p=8) having maturities comparable to the notes issued by the [Secretary](/usc/7/913.md?p=5) under this section. The [Secretary](/usc/7/913.md?p=5) of the Treasury is authorized and directed to purchase any notes of the [Secretary](/usc/7/913.md?p=5) issued hereunder, and, for that purpose, the [Secretary](/usc/7/913.md?p=5) of the Treasury is authorized to use as a public debt transaction the proceeds from the sale of any securities issued under [chapter 31](/usc/31/chstIII-ch31.md) of title 31, and the purposes for which such securities may be issued under such chapter are extended to include the purchase of notes issued by the [Secretary](/usc/7/913.md?p=5). All redemptions, purchases, and sales by the [Secretary](/usc/7/913.md?p=5) of the Treasury of such notes shall be treated as public debt transactions of the [United States](/usc/7/6402.md?p=8): Provided, however, That such interim notes to the [Secretary](/usc/7/913.md?p=5) of the Treasury shall not be included in the totals of the budget of the [United States](/usc/7/6402.md?p=8) Government and shall be exempt from any general limitation imposed by statute on expenditures and net lending (budget outlays) of the [United States](/usc/7/6402.md?p=8).
- (b) The [Secretary](/usc/7/913.md?p=5) of the Treasury is authorized and directed to purchase for resale obligations insured through the [fund](/usc/7/4531.md?p=5) when offered by the [Secretary](/usc/7/913.md?p=5). Such resales shall be upon such terms and conditions as the [Secretary](/usc/7/913.md?p=5) of the Treasury shall determine. Purchases and resales by the [Secretary](/usc/7/913.md?p=5) of the Treasury hereunder shall not be included in the totals of the budget of the [United States](/usc/7/6402.md?p=8) Government and shall be exempt from any general limitation imposed by statute on expenditures and not lending (budget outlays) of the [United States](/usc/7/6402.md?p=8).
- (c) The [Secretary](/usc/7/913.md?p=5) may, on an insured basis or otherwise, sell and assign any notes in the [fund](/usc/7/4531.md?p=5) or sell certificates of beneficial ownership therein to the [Secretary](/usc/7/913.md?p=5) of the Treasury or in the private market. Any sale by the [Secretary](/usc/7/913.md?p=5) of notes individually or in blocks shall be treated as a sale of assets for the purposes of [chapter 11](/usc/31/chstII-ch11.md) of title 31, notwithstanding the fact that the [Secretary](/usc/7/913.md?p=5), under an agreement with the purchaser or purchasers, holds the debt instruments evidencing the loans and holds or reinvests payments thereon as trustee and custodian for the purchaser or purchasers of the individual note or of the certificate of beneficial ownership in a number of such notes. Security instruments taken by the [Secretary](/usc/7/913.md?p=5) in connection with any notes in the [fund](/usc/7/4531.md?p=5) may constitute liens running to the [United States](/usc/7/6402.md?p=8) notwithstanding the fact that such notes may be thereafter held by purchasers thereof.

# §935. Insured loans; interest rates and lending levels

- (a) **In general—** The [Secretary](/usc/7/913.md?p=5) is authorized to make [insured loans](/usc/7/936b.md?p=a-6-B) under this subchapter and at the interest rates hereinafter provided to the full extent of the assets available in the [fund](/usc/7/4531.md?p=5), 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](/usc/7/6402.md?p=8) 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](/usc/7/4531.md?p=5) 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](/usc/7/6402.md?p=8) Government and shall be exempt from any general limitation imposed by statute on expenditures and net lending (budget outlays) of the [United States](/usc/7/6402.md?p=8).
- (b) **Insured loans—** Loans made under this section shall be insured by the [Secretary](/usc/7/913.md?p=5) when purchased by a lender. As used in this chapter, an [insured loan](/usc/7/936b.md?p=a-6-B) is one which is made, held, and serviced by the [Secretary](/usc/7/913.md?p=5), and sold and insured by the [Secretary](/usc/7/913.md?p=5) hereunder; such loans shall be sold and insured by the [Secretary](/usc/7/913.md?p=5) without undue delay.
- (c) **Insured electric loans—**
  - (1) **Hardship loans—**
    - (A) **In general—** The [Secretary](/usc/7/913.md?p=5) 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](/usc/7/1359aa.md?p=5) 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](/usc/7/1359aa.md?p=5) 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](/usc/7/1359aa.md?p=5) 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](/usc/7/1359aa.md?p=5).
    - (B) **Severe hardship loans—** In addition to hardship loans that are made under [subparagraph (A)](#c-1-A), the [Secretary](/usc/7/913.md?p=5) 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](/usc/7/913.md?p=5), the applicant has experienced a severe hardship.
    - (C) **Limitation—** Except as provided in [subparagraph (D)](#c-1-D), the [Secretary](/usc/7/913.md?p=5) 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](/usc/7/1471.md?p=5) (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.
    - (D) **Extremely high rates—** In addition to hardship loans that are made under subparagraphs [(A)](#c-1-A) and [(B)](#c-1-B), the [Secretary](/usc/7/913.md?p=5) 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](/usc/7/1471.md?p=5) shall not be subject to the conditions or limitation of subparagraph [(A)](#c-1-A) or [(C)](#c-1-C).
  - (2) **Municipal rate loans—**
    - (A) **In general—** The [Secretary](/usc/7/913.md?p=5) shall make insured electric loans, to the extent of qualifying applications for the loans, at the interest rate described in [subparagraph (B)](#c-2-B) for the term or terms selected by the applicant pursuant to [subparagraph (C)](#c-2-C).
    - (B) **Interest rate—**
      - (i) **In general—** Subject to [clause (ii)](#c-2-B-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](/usc/7/913.md?p=5) 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)](#c-2-C), but not greater than the rate determined under [section 1927(a)(3)(A) of this title](/usc/7/1927.md?p=a-3-A) 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)](#c-2-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](/usc/7/1991.md?p=b-1) such a right; exceeds
          - (bb) the interest rate on commercial loans for the period that do not afford the [borrower](/usc/7/1991.md?p=b-1) such a right.
      - (ii) **Maximum rate—** 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](/usc/7/1359aa.md?p=5) 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](/usc/7/1359aa.md?p=5) 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](/usc/7/1359aa.md?p=5).
      - (iii) **Exception—** [Clause (ii)](#c-2-B-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](/usc/7/1471.md?p=5) (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.
    - (C) **Loan term—**
      - (i) **In general—** Subject to [clause (ii)](#c-2-C-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)](#c-2-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.
      - (ii) **Maximum term—**
        - (I) **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)](#c-2-C-i).
        - (II) **Secretary—** The [Secretary](/usc/7/913.md?p=5) 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.
    - (D) **Call provision—** The [Secretary](/usc/7/913.md?p=5) 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.
  - (3) **Other source of credit not required in certain cases—** The [Secretary](/usc/7/913.md?p=5) may not require any applicant for a loan made under this subsection who is eligible for a loan under [paragraph (1)](#c-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—**
  - (1) **Hardship loans—**
    - (A) **In general—** The [Secretary](/usc/7/913.md?p=5) 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](/usc/7/1471.md?p=5) 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](/usc/7/913.md?p=5) has approved a telecommunications modernization plan for the [State](/usc/7/1359aa.md?p=5) under [paragraph (3)](#d-3) and, if the plan was developed by telephone [borrowers](/usc/7/1991.md?p=b-1) under this subchapter, the applicant is a participant in the plan.
      - (iv) The average number of subscribers per mile of line in the [area](/usc/7/1471.md?p=5) included in the proposed loan is not more than 17.
    - (B) **Authority to waive tier requirement—** The [Secretary](/usc/7/913.md?p=5) may waive the requirement of [subparagraph (A)(ii)](#d-1-A-ii) in any case in which the [Secretary](/usc/7/913.md?p=5) 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.
    - (C) **Effect of lack of funds—** On request of any applicant who is eligible for a loan under this paragraph for which [funds](/usc/7/4531.md?p=5) are not available, the applicant shall be considered to have applied for a loan under subchapter IV.
  - (2) **Cost-of-money loans—**
    - (A) **In general—** The [Secretary](/usc/7/913.md?p=5) 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](/usc/7/5801.md?p=b-5) of [rural](/usc/7/1991.md?p=a-13-B) telecommunications service, at an interest rate equal to the then current cost of money to the Government of the [United States](/usc/7/6402.md?p=8) 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](/usc/7/1471.md?p=5) 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](/usc/7/913.md?p=5) has approved a telecommunications modernization plan for the [State](/usc/7/1359aa.md?p=5) under [paragraph (3)](#d-3) and, if the plan was developed by telephone [borrowers](/usc/7/1991.md?p=b-1) under this subchapter, the applicant is a participant in the plan.
    - (B) **Concurrent loan authority—** On request of any applicant for a loan under this paragraph during any fiscal year, the [Secretary](/usc/7/913.md?p=5) 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.
    - (C) **Effect of lack of funds—** On request of any applicant who is eligible for a loan under this paragraph for which [funds](/usc/7/4531.md?p=5) are not available, the applicant shall be considered to have applied for a loan guarantee under [section 936 of this title](/usc/7/936.md).
  - (3) **State telecommunications modernization plans—**
    - (A) **Approval—** If, not later than 1 year after final regulations are promulgated to carry out this paragraph, any [State](/usc/7/1359aa.md?p=5), either by statute or through the public utility [commission](/usc/7/1a.md?p=8) of the [State](/usc/7/1359aa.md?p=5), develops a telecommunications modernization plan that meets the requirements of [subparagraph (B)](#d-3-B), the [Secretary](/usc/7/913.md?p=5) shall approve the plan for the [State](/usc/7/1359aa.md?p=5). If a [State](/usc/7/1359aa.md?p=5) does not develop a plan in accordance with the requirements of the preceding sentence, the [Secretary](/usc/7/913.md?p=5) shall approve any telecommunications modernization plan for the [State](/usc/7/1359aa.md?p=5) that meets the requirements that is developed by a majority of the [borrowers](/usc/7/1991.md?p=b-1) of telephone loans made under this subchapter who are located in the [State](/usc/7/1359aa.md?p=5).
    - (B) **Requirements—** For purposes of [subparagraph (A)](#d-3-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](/usc/7/913.md?p=3).
      - (iv) The plan must provide for—
        - (I) subscribers in [rural areas](/usc/7/913.md?p=3) 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](/usc/7/1991.md?p=a-13-B) and nonrural areas.
      - (vi) The plan must provide for such additional requirements for service standards as may be required by the [Secretary](/usc/7/913.md?p=5).
    - (C) **Finality of approval—** A telecommunications modernization plan approved under [subparagraph (A)](#d-3-A) may not subsequently be disapproved. Notwithstanding paragraphs [(1)(A)(iii)](#d-1-A-iii) and (2)(A)(iii),[^1] and the [Secretary](/usc/7/913.md?p=5) may make a loan to a [borrower](/usc/7/1991.md?p=b-1) serving a [State](/usc/7/1359aa.md?p=5) that does not have a telecommunication modernization plan approved by the [Secretary](/usc/7/913.md?p=5) if the loan is made less than 1 year after the [Secretary](/usc/7/913.md?p=5) has adopted final regulations implementing this paragraph.

# §936. Guaranteed loans; accommodations and subordination of liens; interest rates; assignability of guaranteed loans and related guarantees


The [Secretary](/usc/7/913.md?p=5) may provide financial assistance to [borrowers](/usc/7/1991.md?p=b-1) for purposes provided in this chapter by guaranteeing loans, in the full amount thereof, made by the National [Rural](/usc/7/1991.md?p=a-13-B) Utilities Cooperative Finance [Corporation](/usc/7/1502.md?p=b-5) and any other legally organized lending agency, or by accommodating or subordinating liens or mortgages in the [fund](/usc/7/4531.md?p=5) held by the [Secretary](/usc/7/913.md?p=5) as owner or as trustee or custodian for purchases of notes from the [fund](/usc/7/4531.md?p=5), or by any combination of such guarantee, accommodation, or subordination. The [Secretary](/usc/7/913.md?p=5) shall not provide such assistance to any [borrower](/usc/7/1991.md?p=b-1) of a telephone loan under this chapter unless the [borrower](/usc/7/1991.md?p=b-1) specifically applies for such assistance. No fees or charges shall be assessed for any such accommodation or subordination. Guaranteed loans shall bear interest at the rate agreed upon by the [borrower](/usc/7/1991.md?p=b-1) and the lender. Guaranteed loans, and accommodation and subordination of liens or mortgages, may be made concurrently with an [insured loan](/usc/7/936b.md?p=a-6-B). The amount of guaranteed loans shall be subject only to such limitations as to amounts as may be authorized from time to time by the Congress of the [United States](/usc/7/6402.md?p=8): Provided, That any amounts guaranteed hereunder shall not be included in the totals of the budget of the [United States](/usc/7/6402.md?p=8) Government and shall be exempt from any general limitation imposed by statute on expenditures and net lending (budget outlays) of the [United States](/usc/7/6402.md?p=8). As used in this subchapter a guaranteed loan is one which is initially made, held, and serviced by a legally organized lending agency and which is guaranteed by the [Secretary](/usc/7/913.md?p=5) hereunder. A guaranteed loan, including the related guarantee, may be assigned to the extent provided in the [contract](/usc/7/518.md?p=4) of guarantee executed by the [Secretary](/usc/7/913.md?p=5) under this subchapter; the assignability of such loan and guarantee shall be governed exclusively by said [contract](/usc/7/518.md?p=4) of guarantee.


# §936a. Prepayment of loans

- (a) **Conditions for prepayment—** Except as provided in [subsection (c)](#c), a [borrower](/usc/7/1991.md?p=b-1) of a loan made by the Federal Financing [Bank](/usc/7/27.md?p=a) and guaranteed under [section 936 of this title](/usc/7/936.md) may prepay such loan (or any loan advance thereunder) by paying the outstanding principal balance due on the loan (or advance), if—
  - (1) the loan is outstanding on July 2, 1986;
  - (2) private capital, with the existing loan guarantee, is used to replace the loan; and
  - (3) the [borrower](/usc/7/1991.md?p=b-1) certifies that any savings from such prepayment will be passed on to its customers or used to improve the financial strength of the [borrower](/usc/7/1991.md?p=b-1) in cases of financial hardship.
- (b) **Charges on prepayment prohibited—** No sums in addition to the payment of the outstanding principal balance due on the loan may be charged as the result of such prepayment against the [borrower](/usc/7/1991.md?p=b-1), the [fund](/usc/7/4531.md?p=5), or the [Secretary](/usc/7/913.md?p=5).
- (c) **Disqualification for prepayment on finding of adverse affect on Federal Financing Bank—**
  - (1) A [borrower](/usc/7/1991.md?p=b-1) will not qualify for prepayment under this section if, in the opinion of the [Secretary](/usc/7/913.md?p=5) of the Treasury, to prepay in such [borrower](/usc/7/1991.md?p=b-1)’s case would adversely affect the operation of the Federal Financing [Bank](/usc/7/27.md?p=a).
  - (2) [Paragraph (1)](#c-1) shall be effective in fiscal year 1987 only for any loan the prepayment of the principal amount of which will cause the cumulative amount of net proceeds from all such prepayments made during such year to exceed $2,017,500,000.
- (d) **Amount of permissible prepayments; establishment of eligibility criteria—**
  - (1) The [Secretary](/usc/7/913.md?p=5) shall permit, subject to [subsection (a)](#a), prepayments of principal on loans in fiscal year 1987 under this section or Public Law 99–349 in such amounts as to realize net proceeds from all such prepayments in fiscal year 1987 in an amount not less than $2,017,500,000.
  - (2) The [Secretary](/usc/7/913.md?p=5) shall establish—
    - (A) eligibility criteria to ensure that any loan prepayment activity required to be carried out under this subsection will be directed to those cooperative [borrowers](/usc/7/1991.md?p=b-1) in greatest need of the benefits associated with prepayment, as determined by the [Secretary](/usc/7/913.md?p=5); and
    - (B) such other eligibility criteria as the [Secretary](/usc/7/913.md?p=5) determines are necessary to carry out this subsection.
- (e) **Assignability and transferability of guarantees of loans—** Any guarantee of a loan prepaid under this section shall be fully assignable under the provisions of [section 936 of this title](/usc/7/936.md) and transferable. However, the [Secretary](/usc/7/913.md?p=5) may require that any such guarantee, if transfered[^1] or assigned, be transferred or assigned to a loan or security that, if sold, will be grouped with nonguaranteed loans or securities and sold in a manner to ensure that such sale will not unreasonably compete with the marketing of obligations of the [United States](/usc/7/6402.md?p=8).

# §936b. Sale or prepayment of direct or insured loans

- (a) **Discounted prepayment by borrowers of electric loans—**
  - (1) **In general—** Except as provided in [paragraph (2)](#a-2), a direct or [insured loan](#a-6-B) made under this chapter shall not be sold or prepaid at a value that is less than the outstanding principal balance on the loan.
  - (2) **Exception—** On request of the [borrower](/usc/7/1991.md?p=b-1), an electric loan made under this chapter, or a portion of such a loan, that was advanced before May 1, 1992, or has been advanced for not less than 2 years, shall be sold to or prepaid by the [borrower](/usc/7/1991.md?p=b-1) at the lesser of—
    - (A) the outstanding principal balance on the loan; or
    - (B) the present value of the loan discounted from the face value at maturity at the rate established by the [Secretary](/usc/7/913.md?p=5).
  - (3) **Discount rate—** The discount rate applicable to the prepayment under this subsection of a loan or loan advance shall be the then current cost of [funds](/usc/7/4531.md?p=5) to the Department of the Treasury for obligations of comparable maturity to the remaining term of the loan.
  - (4) **Tax exempt financing—** If a [borrower](/usc/7/1991.md?p=b-1) prepays a loan under this subsection using tax exempt financing, the discount shall be adjusted to ensure that the [borrower](/usc/7/1991.md?p=b-1) receives a benefit that is equal to the benefit the [borrower](/usc/7/1991.md?p=b-1) would receive if the [borrower](/usc/7/1991.md?p=b-1) used fully taxable financing. The [borrower](/usc/7/1991.md?p=b-1) shall certify in writing whether the financing will be tax exempt and shall comply with such other terms and conditions as the [Secretary](/usc/7/913.md?p=5) may establish that are reasonable and necessary to carry out this subsection.
  - (5) **Eligibility—**
    - (A) **In general—** A [borrower](/usc/7/1991.md?p=b-1) that has prepaid an insured or [direct loan](#b) shall remain eligible for assistance under this chapter in the same manner as other [borrowers](/usc/7/1991.md?p=b-1), except that—
      - (i) a [borrower](/usc/7/1991.md?p=b-1) that has prepaid a loan, either before or after October 21, 1992, at a discount rate as provided by [paragraph (3)](#a-3), shall not be eligible, except at the discretion of the [Secretary](/usc/7/913.md?p=5), to apply for or receive direct or [insured loans](#a-6-B) under this chapter during the 120-month period beginning on the date of the prepayment; and
      - (ii) a [borrower](/usc/7/1991.md?p=b-1) that prepaid a loan before October 21, 1992, at a discount rate greater than that provided by [paragraph (3)](#a-3), shall not be eligible—
        - (I) except at the discretion of the [Secretary](/usc/7/913.md?p=5), to apply for or receive direct or [insured loans](#a-6-B) described in [clause (i)](#a-5-A-i) during the 180-month period beginning on the date of the prepayment; or
        - (II) to apply for or receive direct or [insured loans](#a-6-B) described in [clause (i)](#a-5-A-i) until the [borrower](/usc/7/1991.md?p=b-1) has repaid to the Federal Government the sum of—
          - (aa) the amount (if any) by which the discount the [borrower](/usc/7/1991.md?p=b-1) received by reason of the prepayment exceeds the discount the [borrower](/usc/7/1991.md?p=b-1) would have received had the discount been based on the cost of [funds](/usc/7/4531.md?p=5) to the Department of the Treasury at the time of the prepayment; and
          - (bb) interest on the amount described in [item (aa)](#a-5-A-ii-II-aa), for the period beginning on the date of the prepayment and ending on the date of the repayment, at a rate equal to the average annual cost of borrowing by the Department of the Treasury.
    - (B) **Effect on existing agreements—** If a [borrower](/usc/7/1991.md?p=b-1) and the [Secretary](/usc/7/913.md?p=5) have entered into an agreement with respect to a prepayment occurring before October 21, 1992, this paragraph shall supersede any provision in the agreement relating to the restoration of eligibility for loans under this chapter.
    - (C) **Distribution borrowers—** A distribution [borrower](/usc/7/1991.md?p=b-1) not in default on the repayment of loans made or insured under this chapter shall be eligible for discounted prepayment as provided in this subsection. For the purpose of determining eligibility for discounted prepayment under this subsection or eligibility for assistance under this chapter, a default by a [borrower](/usc/7/1991.md?p=b-1) from which a distribution [borrower](/usc/7/1991.md?p=b-1) purchases wholesale power shall not be considered a default by the distribution [borrower](/usc/7/1991.md?p=b-1).
  - (6) **Definitions—** As used in this subsection:
    - (A) **Direct loan—** The term “[direct loan](#b)” means a loan made under [section 904 of this title](/usc/7/904.md).
    - (B) **Insured loan—** The term “insured loan” means a loan made under [section 935 of this title](/usc/7/935.md).
- (b) **Mergers of electric borrowers—** Notwithstanding [subsection (a)](#a), a direct or [insured loan](#a-6-B) may be prepaid by an electric [borrower](/usc/7/1991.md?p=b-1) at the lesser of the outstanding principal balance due thereon or the present value thereof discounted from the face value at maturity at the rate set by the [Secretary](/usc/7/913.md?p=5) if the [borrower](/usc/7/1991.md?p=b-1) is an electrical organization which resulted from a merger or consolidation between a [borrower](/usc/7/1991.md?p=b-1) and an organization which, prior to October 1, 1987, prepaid its direct or [insured loans](#a-6-B) pursuant to this section. Prepayments by a [borrower](/usc/7/1991.md?p=b-1) hereunder shall be made not later than one year after the effective date of the merger, consolidation, or other transaction. The discount rate to be set by the [Secretary](/usc/7/913.md?p=5) for direct or [insured loans](#a-6-B) prepayments hereunder shall be based on the current cost of [funds](/usc/7/4531.md?p=5) to the Department of the Treasury for obligations of comparable maturity to those being prepaid. If a [borrower](/usc/7/1991.md?p=b-1) prepays using tax exempt financing, the discount shall be adjusted to make the discount equivalent to fully taxable financing. The [borrower](/usc/7/1991.md?p=b-1) shall certify in writing whether the financing will be tax exempt and shall comply with such other terms and conditions as the [Secretary](/usc/7/913.md?p=5) may establish which are reasonable and necessary to implement this provision. As used in this section, the term “direct loan” means a loan made under [section 904 of this title](/usc/7/904.md).

# §936c. Refinancing and prepayment of FFB loans

- (a) **In general—** A [borrower](/usc/7/1991.md?p=b-1) of a loan made by the Federal Financing [Bank](/usc/7/27.md?p=a) and guaranteed under [section 936 of this title](/usc/7/936.md) may, at the option of the [borrower](/usc/7/1991.md?p=b-1), refinance or prepay the loan or an advance on the loan, or any portion of the loan or advance.
- (b) **Penalty—**
  - (1) **Determination of penalty—** A penalty shall be assessed against a [borrower](/usc/7/1991.md?p=b-1) that refinances or prepays a loan or loan advance, or any portion of a loan or advance, under this section. Except as provided in [paragraph (2)](#b-2), the penalty shall be equal to the lesser of—
    - (A) the difference between the outstanding principal balance of the loan being refinanced and the present value of the loan discounted at a rate equal to the then current cost of [funds](/usc/7/4531.md?p=5) to the Department of the Treasury for obligations of comparable maturity to the loan being refinanced or prepaid;
    - (B) 100 percent of the amount of interest for 1 year on the outstanding principal balance of the loan or loan advance, or any portion of the loan or advance, being refinanced, multiplied by the ratio that—
      - (i) the number of quarterly payment dates between the date of the refinancing or prepayment and the maturity date for the loan advance; bears to
      - (ii) the number of quarterly payment dates between the first quarterly payment date that occurs 12 years after the end of the year in which the amount being refinanced was advanced and the maturity date of the loan advance; and
    - (C)
      - (i) the present value of 100 percent of the amount of interest for 1 year on the outstanding principal balance of the loan or loan advance, or any portion of the loan or advance, being refinanced or prepaid; plus
      - (ii) for the interval between the date of the refinancing or prepayment and the first quarterly payment date that occurs 12 years after the end of the year in which the amount being refinanced or prepaid was advanced, the present value of the difference between—
        - (I) each payment scheduled for the interval on the loan amount being refinanced or prepaid; and
        - (II) the payment amounts that would be required during the interval on the amounts being refinanced or prepaid if the interest rate on the loan were equal to the then current cost of [funds](/usc/7/4531.md?p=5) to the Department of the Treasury for obligations of comparable maturity to the loan being refinanced or prepaid.
  - (2) **Limitation—**
    - (A) **In general—** Except as provided in [subparagraph (B)](#b-2-B), the penalty provided by [paragraph (1)(A)](#b-1-A) shall be required for refinancing or prepayment under this section.
    - (B) **Exception—** In the case of a loan advanced under an agreement that permits the refinancing or prepayment of the loan advance based on the payment of 1 year of interest on the outstanding principal balance of the loan advance, a [borrower](/usc/7/1991.md?p=b-1) may, in lieu of the penalty required by [paragraph (1)(A)](#b-1-A), pay a penalty as provided by—
      - (i) [paragraph (1)(B)](#b-1-B), if the loan advance has reached the 12-year maturity required under the loan agreement for the refinancing or prepayment; or
      - (ii) [paragraph (1)(C)](#b-1-C), if the loan advance has not reached the 12-year maturity required under the loan agreement for the refinancing or prepayment.
  - (3) **Financing of penalty—**
    - (A) **In general—** In the case of a refinancing under this section, a [borrower](/usc/7/1991.md?p=b-1) may, at the option of the [borrower](/usc/7/1991.md?p=b-1), meet the penalty requirements of [paragraph (1)](#b-1) by—
      - (i) making a payment in the amount of the required penalty at the time of the refinancing; or
      - (ii) increasing the outstanding principal balance of the loan advance guaranteed by the [Secretary](/usc/7/913.md?p=5) that is being refinanced under this section by the amount of the penalty.
    - (B) **Increased principal—** If a [borrower](/usc/7/1991.md?p=b-1) meets the penalty requirements of [paragraph (1)](#b-1) by increasing the outstanding principal balance of the loan advance that is being refinanced, the [borrower](/usc/7/1991.md?p=b-1) shall make a payment at the time of the refinancing equal to 2.5 percent of the amount of the penalty that is added to the outstanding principal balance of the loan.
- (c) **Loan terms and conditions after refinancing—**
  - (1) **In general—** On the payment of a penalty as provided by [subsection (b)](#b), the loan or loan advance, or any portion of the loan or advance, shall be refinanced at the interest rate described in [paragraph (2)](#c-2) for a term selected by the [borrower](/usc/7/1991.md?p=b-1) pursuant to [paragraph (3)](#c-3), except that this paragraph shall not apply if the loan advance, or any portion of the advance, is prepaid by the [borrower](/usc/7/1991.md?p=b-1).
  - (2) **Interest rate—** The interest rate on a loan refinanced under this section shall be determined to be equal to the then current cost of [funds](/usc/7/4531.md?p=5) to the Department of the Treasury for obligations of comparable maturity to a term selected by the [borrower](/usc/7/1991.md?p=b-1) pursuant to [paragraph (3)](#c-3), except that such rate shall not be greater than 7 percent per year, subject to [subsection (d)](#d).
  - (3) **Loan term—** Subject to [paragraph (4)](#c-4), the [borrower](/usc/7/1991.md?p=b-1) of a loan that is refinanced under this section—
    - (A) shall select the term for which an interest rate shall be determined pursuant to [paragraph (2)](#c-2); and
    - (B) at the end of the term (and any succeeding term selected by the [borrower](/usc/7/1991.md?p=b-1) under this paragraph), may renew the loan for another term selected by the [borrower](/usc/7/1991.md?p=b-1).
  - (4) **Maximum term—** The [borrower](/usc/7/1991.md?p=b-1) may not select a term pursuant to [paragraph (3)](#c-3) that ends after the maturity date set for the loan before the refinancing of the loan under this section.
  - (5) **Existing loans—** In the case of the refinancing of a loan of a [borrower](/usc/7/1991.md?p=b-1) pursuant to this section and the inclusion of a penalty in the outstanding principal balance of the refinanced loan pursuant to [subsection (b)(3)](#b-3)—
    - (A) the refinancing and inclusion of the penalty shall not be subject to appropriations or limited by the amount provided during a fiscal year for new loans, loan guarantees, or other credit activity;
    - (B) the request of the [borrower](/usc/7/1991.md?p=b-1) for the refinancing under this section may not be denied or delayed; and
    - (C) the [borrower](/usc/7/1991.md?p=b-1) may not be limited in the selection of any refinancing or prepayment option provided by this section to the [borrower](/usc/7/1991.md?p=b-1).
- (d) **Maximum rate option—**
  - (1) **In general—** Except as provided in paragraphs [(2)](#d-2), [(3)](#d-3), and [(4)](#d-4), a [borrower](/usc/7/1991.md?p=b-1) of a loan or loan advance, or any portion of the loan or advance, that is refinanced under this section shall have the option of ensuring that the interest rate on such loan, loan advance, or portion thereof does not exceed 7 percent per year.
  - (2) **Limitation—** A [borrower](/usc/7/1991.md?p=b-1) may not exercise the option under [paragraph (1)](#d-1) in the case of a loan or loan advance, or portion thereof, if the total amount of such loans for which such option would be exercised exceeds 50 percent of the outstanding principal balance of the loans made to such [borrower](/usc/7/1991.md?p=b-1) and guaranteed under [section 936 of this title](/usc/7/936.md).
  - (3) **Fee—** A [borrower](/usc/7/1991.md?p=b-1) that exercises the maximum rate option under [paragraph (1)](#d-1) shall, at the time of exercising such option, pay a fee equal to 1 percent of the outstanding principal balance of such loan or loan advance, or portion thereof, for which such option is exercised. Such fee shall be in addition to the penalties and other payments required under [subsection (b)](#b).
  - (4) **Sunset—** The option provided under [paragraph (1)](#d-1) shall not be available in the case of any loan or loan advance, or portion thereof, unless a written request to exercise such option is sent to the [Secretary](/usc/7/913.md?p=5) not later than 1 year after the effective date of regulations issued to carry out the [Rural](/usc/7/1991.md?p=a-13-B) Electrification Loan Restructuring Act of 1993.

# §936d. Eligibility of distribution borrowers for loans, loan guarantees, and lien accommodations


For the purpose of determining the eligibility of a distribution [borrower](/usc/7/1991.md?p=b-1) not in default on the repayment of a loan made or guaranteed under this chapter for a loan, loan guarantee, or lien accommodation under this subchapter, a default by a [borrower](/usc/7/1991.md?p=b-1) from which the distribution [borrower](/usc/7/1991.md?p=b-1) purchases wholesale power shall not—

- (1) be considered a default by the distribution [borrower](/usc/7/1991.md?p=b-1);
- (2) reduce the eligibility of the distribution [borrower](/usc/7/1991.md?p=b-1) for assistance under this chapter; or
- (3) be the cause, directly or indirectly, of imposing any requirement or restriction on the [borrower](/usc/7/1991.md?p=b-1) as a condition of the assistance, except such requirements or restrictions as are necessary to implement a debt restructuring agreed on by the power supply [borrower](/usc/7/1991.md?p=b-1) and the Government.

# §936e. Administrative prohibitions applicable to certain electric borrowers

- (a) **In general—** For the purpose of relieving [borrowers](/usc/7/1991.md?p=b-1) of unnecessary and burdensome requirements, the [Secretary](/usc/7/913.md?p=5), guided by the practices of private lenders with respect to similar credit risks, shall issue regulations, applicable to any electric [borrower](/usc/7/1991.md?p=b-1) under this chapter whose net worth exceeds 110 percent of the outstanding principal balance on all loans made or guaranteed to the [borrower](/usc/7/1991.md?p=b-1) by the [Secretary](/usc/7/913.md?p=5), to minimize those approval rights, requirements, restrictions, and prohibitions that the [Secretary](/usc/7/913.md?p=5) otherwise may establish with respect to the operations of such a [borrower](/usc/7/1991.md?p=b-1).
- (b) **Subordination or sharing of liens—** At the request of a private lender providing financing to such a [borrower](/usc/7/1991.md?p=b-1) for a capital investment, the [Secretary](/usc/7/913.md?p=5) shall, expeditiously, either offer to share the government’s lien on the [borrower](/usc/7/1991.md?p=b-1)’s system or offer to subordinate the government’s lien on that property financed by the private lender.
- (c) **Issuance of regulations—** In issuing regulations implementing this section, the [Secretary](/usc/7/913.md?p=5) may establish requirements, guided by the practices of private lenders, to ensure that the security for any loan made or guaranteed under this chapter is reasonably adequate.
- (d) **Authority of Secretary—** Nothing in this section limits the [authority](/usc/7/2009aa.md?p=1) of the [Secretary](/usc/7/913.md?p=5) to establish terms and conditions with respect to the use by [borrowers](/usc/7/1991.md?p=b-1) of the proceeds of loans made or guaranteed under this chapter or to take any other action specifically authorized by law.

# §936f. Substantially underserved trust areas

- (a) **Definitions—** In this section:
  - (1) **Eligible program—** The term “eligible program” means a program administered by the [Rural](/usc/7/1991.md?p=a-13-B) Utilities Service and authorized in—
    - (A) this chapter; or
    - (B) paragraph (1), (2), (14), (22), or (24) of [section 1926(a) of this title](/usc/7/1926.md?p=a) or section [1926a](/usc/7/1926a.md), [1926c](/usc/7/1926c.md), [1926d](/usc/7/1926d.md), or [1926e](/usc/7/1926e.md) of this title.
  - (2) **Substantially underserved trust area—** The term “substantially underserved trust area” means a community in “trust land” (as defined in [section 3765 of title 38](/usc/38/3765.md)) with respect to which the [Secretary](/usc/7/913.md?p=5) determines has a high need for the benefits of an [eligible program](#a-1).
- (b) **Initiative—** The [Secretary](/usc/7/913.md?p=5), in consultation with local governments and Federal agencies, may implement an initiative to identify and improve the availability of [eligible programs](#a-1) in communities in [substantially underserved trust areas](#a-2).
- (c) **Authority of Secretary—** In carrying out [subsection (b)](#b), the [Secretary](/usc/7/913.md?p=5)—
  - (1) may make available from loan or loan guarantee programs administered by the [Rural](/usc/7/1991.md?p=a-13-B) Utilities Service to qualified utilities or applicants financing with an interest rate as low as 2 percent, and with extended repayment terms;
  - (2) may waive nonduplication restrictions, matching [fund](/usc/7/4531.md?p=5) requirements, or credit support requirements from any loan or grant program administered by the [Rural](/usc/7/1991.md?p=a-13-B) Utilities Service to facilitate the construction, acquisition, or improvement of infrastructure;
  - (3) may give the highest funding priority to designated projects in [substantially underserved trust areas](#a-2); and
  - (4) shall only make loans or loan guarantees that are found to be financially feasible and that provide [eligible program](#a-1) benefits to [substantially underserved trust areas](#a-2).
- (d) **Report—** Not later than 1 year after the date of enactment of this section and annually thereafter, the [Secretary](/usc/7/913.md?p=5) shall submit to Congress a report that describes—
  - (1) the progress of the initiative implemented under [subsection (b)](#b); and
  - (2) recommendations for any regulatory or legislative changes that would be appropriate to improve services to [substantially underserved trust areas](#a-2).

# §937. Loans from other credit sources


When it appears to the [Secretary](/usc/7/913.md?p=5) that the loan applicant is able to obtain a loan for part of his credit needs from a responsible cooperative or other credit source at reasonable rates and terms consistent with the loan applicant’s ability to pay and the achievement of this chapter’s objectives, he may request the loan applicant to apply for and accept such a loan concurrently with an [insured loan](/usc/7/936b.md?p=a-6-B), subject, however, to full use being made by the [Secretary](/usc/7/913.md?p=5) of the [funds](/usc/7/4531.md?p=5) made available hereunder for such [insured loans](/usc/7/936b.md?p=a-6-B) under this subchapter. The [Secretary](/usc/7/913.md?p=5) may not request any applicant for an electric loan under this chapter to apply for and accept a loan in an amount exceeding 30 percent of the credit needs of the applicant.


# §938. Full faith and credit of the United States


Any [contract](/usc/7/518.md?p=4) of insurance or guarantee executed by the [Secretary](/usc/7/913.md?p=5) under this subchapter shall be an obligation supported by the full faith and credit of the [United States](/usc/7/6402.md?p=8) and incontestable except for fraud or misrepresentation of which the holder had actual knowledge at the time it became a holder.