7 U.S.C. § 936 — Guaranteed loans; accommodations and

Page 538 TITLE 7—AGRICULTURE § 936 ‘‘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 Adminis- trator’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 serv- ice 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 sub- sec. (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 in- terest 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 per- cent (but not more than 150 percent) of the interest re- quirements 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 estab- lishing standard and special rates, with special rates applicable under enumerated criteria. 1976—Subsec. (b). Pub. L. 94–570 struck out from in- troductory text ‘‘meets either of the following condi- tions’’ after ‘‘borrower which’’; limited par. (1) to the telephone borrowers, substituting provision for an av- erage 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 den- sity of two or fewer per mile; substituted in par. (2) pro- vision, 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 sys- tems, in the case of telephone borrowers; and inserted in proviso of par. (2) ‘‘to a telephone or electric bor- rower’’ 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 en- actment [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 Elec- trification Administration and still pending on the date of enactment of this Act [Oct. 20, 1976], shall bear inter- est 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. § 936. Guaranteed loans; accommodations and subordination of liens; interest rates; assign- ability of guaranteed loans and related guar- antees The Secretary may provide financial assist- ance to borrowers for purposes provided in this chapter by guaranteeing loans, in the full amount thereof, made by the National Rural Utilities Cooperative Finance Corporation and any other legally organized lending agency, or by accommodating or subordinating liens or mortgages in the fund held by the Secretary as owner or as trustee or custodian for purchases of notes from the fund, or by any combination of such guarantee, accommodation, or subordina- tion. The Secretary shall not provide such as- sistance to any borrower of a telephone loan under this chapter unless the borrower specifi- cally applies for such assistance. No fees or charges shall be assessed for any such accommo- dation or subordination. Guaranteed loans shall bear interest at the rate agreed upon by the bor- rower and the lender. Guaranteed loans, and ac- commodation and subordination of liens or mortgages, may be made concurrently with an insured loan. 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: Pro- vided, That any amounts guaranteed hereunder 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. 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 guaran- teed by the Secretary hereunder. A guaranteed loan, including the related guarantee, may be assigned to the extent provided in the contract of guarantee executed by the Secretary under this subchapter; the assignability of such loan and guarantee shall be governed exclusively by said contract of guarantee. (May 20, 1936, ch. 432, title III, § 306, as added Pub. L. 93–32, § 2, May 11, 1973, 87 Stat. 69; amended Pub. L. 94–124, § 1, Nov. 4, 1975, 89 Stat. 677; Pub. L. 97–35, title I, § 165(b), Aug. 13, 1981, 95 Stat. 379; Pub. L. 101–624, title XXIII, § 2362, Nov. 28, 1990, 104 Stat. 4042; Pub. L. 103–354, title II, § 235(a)(13), Oct. 13, 1994, 108 Stat. 3221; Pub. L. 110–234, title VI, § 6102(b), May 22, 2008, 122 Stat. 1195; Pub. L. 110–246, § 4(a), title VI, § 6102(b), June 18, 2008, 122 Stat. 1664, 1956; Pub. L. 115–334, title VI, § 6602(b)(10), Dec. 20, 2018, 132 Stat. 4777.) Page 539 TITLE 7—AGRICULTURE § 936a 1 So in original. Probably should be ‘‘transferred’’. Editorial Notes CODIFICATION Pub. L. 110–234 and Pub. L. 110–246 made identical amendments to this section. The amendments by Pub. L. 110–234 were repealed by section 4(a) of Pub. L. 110–246. AMENDMENTS 2018—Pub. L. 115–334 substituted ‘‘the National Rural Utilities Cooperative Finance Corporation’’ for ‘‘the Rural Telephone Bank, National Rural Utilities Coop- erative Finance Corporation,’’. 2008—Pub. L. 110–246, § 6102(b), substituted ‘‘No fees or charges shall be assessed for any such accommodation or subordination.’’ for ‘‘No fees or charges shall be as- sessed for any such guarantee, accommodation, or sub- ordination. With respect to guarantees issued by the Secretary under this section, on the request of the bor- rower of any such loan so guaranteed, the loan shall be made by the Federal Financing Bank and at a rate of interest that is not more than the rate of interest ap- plicable to other similar loans then being made or pur- chased by the Bank.’’ 1994—Pub. L. 103–354 substituted ‘‘Secretary’’ for ‘‘Ad- ministrator’’ wherever appearing. 1990—Pub. L. 101–624 inserted provisions prohibiting Administrator from providing assistance to telephone borrower unless borrower specifically applies therefor. 1981—Pub. L. 97–35 inserted provisions relating to loans made by Federal Financing Bank with respect to guarantees issued under this section, and substituted ‘‘an insured loan’’ for ‘‘a loan insured at the standard rate’’. 1975—Pub. L. 94–124 authorized assignment of guaran- teed loans and their related guarantees and inserted ‘‘initially’’ before ‘‘made, held, and serviced’’ in provi- sion defining guaranteed loans as that term is used in this subchapter. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2008 AMENDMENT Amendment 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 an Effective Date note under section 8701 of this title. 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. PREPAYMENT OF LOANS Pub. L. 99–349, title I, July 2, 1986, 100 Stat. 713, re- lated to the prepayment of loans made by the Federal Financing Bank, and guaranteed by the Administrator of the Rural Electrification Administration, prior to repeal by Pub. L. 99–509, title I, § 1011(b), Oct. 21, 1986, 100 Stat. 1876. § 936a. Prepayment of loans (a) Conditions for prepayment Except as provided in subsection (c), a bor- rower of a loan made by the Federal Financing Bank and guaranteed under section 936 of this title 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 certifies that any savings from such prepayment will be passed on to its customers or used to improve the financial strength of the borrower 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 prepay- ment against the borrower, the fund, or the Sec- retary. (c) Disqualification for prepayment on finding of adverse affect on Federal Financing Bank (1) A borrower will not qualify for prepayment under this section if, in the opinion of the Sec- retary of the Treasury, to prepay in such bor- rower’s case would adversely affect the oper- ation of the Federal Financing Bank. (2) Paragraph (1) shall be effective in fiscal year 1987 only for any loan the prepayment of the principal amount of which will cause the cu- mulative amount of net proceeds from all such prepayments made during such year to exceed $2,017,500,000. (d) Amount of permissible prepayments; estab- lishment of eligibility criteria (1) The Secretary shall permit, subject to sub- section (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 shall establish— (A) eligibility criteria to ensure that any loan prepayment activity required to be car- ried out under this subsection will be directed to those cooperative borrowers in greatest need of the benefits associated with prepay- ment, as determined by the Secretary; and (B) such other eligibility criteria as the Sec- retary determines are necessary to carry out this subsection. (e) Assignability and transferability of guaran- tees of loans Any guarantee of a loan prepaid under this section shall be fully assignable under the provi- sions of section 936 of this title and transferable. However, the Secretary 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 en- sure that such sale will not unreasonably com- pete with the marketing of obligations of the United States. (May 20, 1936, ch. 432, title III, § 306A, as added Pub. L. 99–509, title I, § 1011(a), Oct. 21, 1986, 100 Stat. 1875; amended Pub. L. 103–354, title II, § 235(a)(7), (13), Oct. 13, 1994, 108 Stat. 3221.) Editorial Notes REFERENCES IN TEXT Public Law 99–349, referred to in subsec. (d)(1), is Pub. L. 99–349, July 2, 1986, 100 Stat. 710, known as the Ur- gent Supplemental Appropriations Act, 1986. Provisions of title I of Pub. L. 99–349 relating to prepayment of loans were set out as a note under section 936 of this title and were repealed by Pub. L. 99–509, title I, § 1011(b), Oct. 21, 1986, 100 Stat. 1876. For complete clas- sification of this Act to the Code, see Tables.