7 U.S.C. § 940 — Refinancing of rural development loans

Page 545 TITLE 7—AGRICULTURE § 940 Editorial Notes REFERENCES IN TEXT The date of enactment of this section, referred to in subsec. (d), is the date of enactment of Pub. L. 110–246, which was approved June 18, 2008. CODIFICATION Pub. L. 110–234 and Pub. L. 110–246 enacted identical sections. Pub. L. 110–234 was repealed by section 4(a) of Pub. L. 110–246. Statutory Notes and Related Subsidiaries EFFECTIVE DATE Enactment of this section and repeal of Pub. L. 110–234 by Pub. L. 110–246 effective May 22, 2008, the date of enactment of Pub. L. 110–234, see section 4 of Pub. L. 110–246, set out as a note under section 8701 of this title. § 937. Loans from other credit sources When it appears to the Secretary 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 abil- ity 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, subject, however, to full use being made by the Secretary of the funds made available hereunder for such insured loans under this subchapter. The Secretary 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. (May 20, 1936, ch. 432, title III, § 307, as added Pub. L. 93–32, § 2, May 11, 1973, 87 Stat. 70; amended Pub. L. 97–35, title I, § 165(c), Aug. 13, 1981, 95 Stat. 379; Pub. L. 103–129, § 2(c)(8), Nov. 1, 1993, 107 Stat. 1365; Pub. L. 103–354, title II, § 235(a)(13), Oct. 13, 1994, 108 Stat. 3221.) Editorial Notes AMENDMENTS 1994—Pub. L. 103–354 substituted ‘‘Secretary’’ for ‘‘Ad- ministrator’’ wherever appearing. 1993—Pub. L. 103–129 inserted at end ‘‘The Adminis- trator 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.’’ 1981—Pub. L. 97–35 substituted ‘‘an insured loan’’ for ‘‘a loan insured at the standard rate’’. Statutory Notes and Related Subsidiaries 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. § 938. Full faith and credit of the United States Any contract of insurance or guarantee exe- cuted by the Secretary under this subchapter shall be an obligation supported by the full faith and credit of the United States and incontest- able except for fraud or misrepresentation of which the holder had actual knowledge at the time it became a holder. (May 20, 1936, ch. 432, title III, § 308, as added Pub. L. 93–32, § 2, May 11, 1973, 87 Stat. 70; amended Pub. L. 94–124, § 2, Nov. 4, 1975, 89 Stat. 677; Pub. L. 103–354, title II, § 235(a)(13), Oct. 13, 1994, 108 Stat. 3221.) Editorial Notes AMENDMENTS 1994—Pub. L. 103–354 substituted ‘‘Secretary’’ for ‘‘Ad- ministrator’’. 1975—Pub. L. 94–124 substituted ‘‘of which the holder had actual knowledge at the time it became a holder’’ for ‘‘of which the holder has actual knowledge’’. Statutory Notes and Related Subsidiaries 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. § 939. Loan terms and conditions Loans made from or insured through the fund shall be for the same purposes and on the same terms and conditions as are provided for loans in subchapters I and II of this chapter except as otherwise provided in sections 933 to 938 inclu- sive. (May 20, 1936, ch. 432, title III, § 309, as added Pub. L. 93–32, § 2, May 11, 1973, 87 Stat. 70; amended Pub. L. 101–624, title XXIII, § 2360, Nov. 28, 1990, 104 Stat. 4042; Pub. L. 103–129, § 2(b)(2), Nov. 1, 1993, 107 Stat. 1363; Pub. L. 104–127, title VII, § 779, Apr. 4, 1996, 110 Stat. 1151; Pub. L. 115–334, title VI, § 6602(b)(11), Dec. 20, 2018, 132 Stat. 4777.) Editorial Notes AMENDMENTS 2018—Pub. L. 115–334 struck out at end ‘‘The pre- ceding sentence shall not be construed to make section 948(b)(2) or 950b of this title applicable to this sub- chapter.’’ 1996—Pub. L. 104–127 struck out subsec. (a) designa- tion and heading ‘‘In general’’ and heading and text of subsec. (b). Prior to amendment, text read as follows: ‘‘The term of any telephone loan made under this sub- chapter shall be determined by the borrower at the time the loan application is submitted.’’ 1993—Subsec. (a). Pub. L. 103–129 inserted at end ‘‘The preceding sentence shall not be construed to make sec- tion 948(b)(2) or 950b of this title applicable to this sub- chapter.’’ 1990—Pub. L. 101–624 designated existing provisions as subsec. (a) and added subsec. (b). Statutory Notes and Related Subsidiaries 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. § 940. Refinancing of rural development loans At the request of the borrower, the Secretary is authorized and directed to refinance with loans which will be insured under this chapter at the interest rates provided in section 935 of this title any loans made for rural electric and tele- phone facilities under any provision of the Con- solidated Farm and Rural Development Act [7 U.S.C. 1921 et seq.]. (May 20, 1936, ch. 432, title III, § 310, as added Pub. L. 93–32, § 2, May 11, 1973, 87 Stat. 70; Page 546 TITLE 7—AGRICULTURE § 940a amended Pub. L. 103–354, title II, § 235(a)(13), Oct. 13, 1994, 108 Stat. 3221.) Editorial Notes REFERENCES IN TEXT The Consolidated Farm and Rural Development Act, referred to in text, is title III of Pub. L. 87–128, Aug. 8, 1961, 75 Stat. 307, which is classified principally to chap- ter 50 (§ 1921 et seq.) of this title. For complete classi- fication of the Act to the Code, see Short Title note set out under section 1921 of this title and Tables. AMENDMENTS 1994—Pub. L. 103–354 substituted ‘‘Secretary’’ for ‘‘Ad- ministrator’’. Statutory Notes and Related Subsidiaries 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. § 940a. Repealed. Pub. L. 104–127, title VII, § 780, Apr. 4, 1996, 110 Stat. 1151 Section, act May 20, 1936, ch. 432, title III, § 311, as added Oct. 18, 1986, Pub. L. 99–500, § 101(m) [title VI, § 623], 100 Stat. 1783–308, 1783–333, and Oct. 30, 1986, Pub. L. 99–591, § 101(m) [title VI, § 623], 100 Stat. 3341–308, 3341–333; amended Oct. 13, 1994, Pub. L. 103–354, title II, § 235(a)(7), (13), 108 Stat. 3221, related to privatization demonstration program. § 940b. Use of funds A borrower of an insured or guaranteed elec- tric loan under this chapter may, without re- striction or prior approval of the Secretary, in- vest its own funds or make loans or guarantees, not in excess of 15 percent of its total utility plant. (May 20, 1936, ch. 432, title III, § 312, as added Pub. L. 100–203, title I, § 1402, Dec. 22, 1987, 101 Stat. 1330–21; amended Pub. L. 103–354, title II, § 235(a)(13), Oct. 13, 1994, 108 Stat. 3221.) Editorial Notes AMENDMENTS 1994—Pub. L. 103–354 substituted ‘‘Secretary’’ for ‘‘Ad- ministrator’’. § 940c. Cushion of credit payments program (a) Establishment (1) In general (A) Development and promotion of program The Secretary shall develop and promote a program to encourage borrowers to volun- tarily make deposits into cushion of credit accounts established within the Rural Elec- trification and Telephone Revolving Fund. (B) Termination Effective on December 20, 2018, no deposits may be made under subparagraph (A). (2) Interest (A) In general Amounts in each cushion of credit account shall accrue interest to the borrower at a rate of 5 percent per annum. (B) Reduction Notwithstanding subparagraph (A), amounts in each cushion of credit account shall accrue interest to the borrower at a rate equal to— (i) 4 percent per annum in fiscal year 2021; and (ii) the then applicable 1-year Treasury rate thereafter. (3) Balance (A) In general A borrower may reduce the balance of its cushion of credit account only if the amount obtained from the reduction is used to make scheduled payments on loans made or guar- anteed under this chapter. (B) Prepayment Notwithstanding subparagraph (A) and subject to subparagraph (C), beginning on December 20, 2018, and ending with Sep- tember 30, 2020, a borrower may, at the sole discretion of the borrower, reduce the bal- ance of its cushion of credit account if the amount obtained from the reduction is used to prepay loans made or guaranteed under this chapter. (C) No prepayment premium Notwithstanding any other provision of this chapter, no prepayment premium shall be imposed or collected with respect to that portion of a loan that is prepaid by a bor- rower in accordance with subparagraph (B). (D) Mandatory funding Notwithstanding section 661c of title 2, out of any funds in the Treasury not otherwise appropriated, the Secretary of the Treasury shall make available such sums as necessary to cover any loan modification costs as de- fined in section 661a of title 2. (b) Uses of cushion of credit payments (1) In general (A) Cash balance Cushion of credit payments shall be held in the Rural Electrification and Telephone Revolving Fund as a cash balance in the cushion of credit accounts of borrowers. (B) Interest All cash balance amounts (obtained from cushion of credit payments, loan payments, and other sources) held by the Fund shall bear interest to the Fund at a rate equal to the weighted average rate on outstanding certificates of beneficial ownership issued by the Fund. (C) Credits The amount of interest accrued on the cash balances shall be credited to the Fund as an offsetting reduction to the amount of interest paid by the Fund on its certificates of beneficial ownership. (2) Rural economic development subaccount The Secretary shall maintain a subaccount within the Rural Electrification and Tele- phone Revolving Fund to which shall be cred- ited, on a monthly basis, a sum determined by multiplying the outstanding cushion of credit payments made after October 1, 1987, by the difference (converted to a monthly basis) be-