7 CFR Part 1703, Subpart H

Rural Utilities Service, USDA

§ 1703.302

in accordance with § 1703.147 of this
subpart.
§ 1703.147

§ 1703.302 Definitions and rules of construction.
(a) Definitions. For the purpose of this
subpart, the following terms will have
the following meanings:1
Administrator means the Administrator of RUS.
Borrower means any organization
which has an outstanding direct loan
or insured loan made by RUS for the
provision of electric or telephone service.
Cushion of credit payment means a
voluntary unscheduled payment on an
RUS note made after October 1, 1987,
credited to the cushion of credit account of a borrower.
Deferment means a re-amortization of
a payment of principal and/or interest
on an RUS direct loan or insured loan
for over either a 5- or 10 year period,
with the first payment beginning on
the date of the deferment.
Direct loan means a loan that is made
by the Administrator pursuant to section 4 or section 201 of the RE Act (7
U.S.C. 901 et seq.) for the provision of
electric or telephone service in rural
areas and does not include a loan made
to promote economic development in
rural areas.
Financially distressed borrower means
an RUS-financed borrower determined
by the Administrator to be either:
(i) In default or near default on interest or principal payments due on loans
made or guaranteed under the RE Act;
(ii) A borrower that was in default or
near default, but is currently participating in a workout or debt restructuring plan with RUS; or
(iii) Experiencing a financial hardship.
Insured loan means a loan that is
made, held, and serviced by the Administrator, and sold and insured by the
Administrator, pursuant to Section 305
of the RE Act (7 U.S.C. 901 et seq.) for
the provision of electric or telephone
service in rural areas and does not include a loan made to promote economic development in rural areas.
Job creation means the creation of
jobs in rural areas, or in close enough
proximity to rural areas so that it is
likely that the majority of the jobs
created will be held by residents of
rural areas.

Appeals.

Any appeal must be made, in writing,
within 10 days after the applicant is
notified of the determination to deny
the application. Appeals shall be submitted to the Administrator, RUS,
U.S. Department of Agriculture, 1400
Independence Ave., SW., STOP 1590,
Washington, DC 20250–1590. Thereafter,
the Administrator will review the appeal to determine whether to sustain,
reverse, or modify the original determination. Final determinations will be
made after consideration of all appeals.
The Administrator’s determination
will be final. A copy of the Administrator’s decision will be furnished promptly to the applicant.

Subpart H—Deferments of RUS
Loan Payments for Rural Development Projects
SOURCE: 58 FR 21639, Apr. 23, 1993, unless
otherwise noted. Redesignated at 64 FR 14356,
Mar. 25, 1999.

§ 1703.300

Purpose.

This subpart E sets forth RUS’s policies and procedures for making loan
deferments of principal and interest
payments on direct loans or insured
loans made for electric or telephone
purposes, but not for loans made for
rural economic development purposes,
in accordance with subsection (b) of
section 12 of the RE Act. Loan
deferments are provided for the purpose of promoting rural development
opportunities.
§ 1703.301

Policy.

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It is RUS’s policy to encourage borrowers to invest in and promote rural
development and rural job creation
projects that are based on sound economic and financial analyses. Borrowers are encouraged to use this program to promote economic, business
and community development projects
that will benefit rural areas.

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§ 1703.303

7 CFR Ch. XVII (1–1–08 Edition)

Project means a rural development
project that a borrower proposes and
the Administrator approves as qualifying under this subpart.
RE Act means the Rural Electrification Act of 1936, as amended (7 U.S.C.
901 et seq.).
REA means the Rural Electrification
Administration formerly an agency of
the United States Department of Agriculture and predecessor agency to RUS
with respect to administering certain
electric and telephone loan programs.
RTB means the Rural Telephone
Bank (telephone bank), a body corporate and an instrumentality of the
United States, that obtains supplemental funds from non-Federal sources
and utilizes them in making loans, operating on a self-sustaining basis to the
extent practicable (section 401, RE
Act).
RUS means the Rural Utilities Service, an agency of the United States Department of Agriculture established
pursuant to Section 232 of the Federal
Crop Insurance Reform and Department of Agriculture Reorganization
Act of 1994 (Pub. L. 103–354, 108 Stat.
3178), successor to REA with respect to
administering certain electric and telephone programs. See 7 CFR 1700.1.
Technical assistance means market research, product or service improvement, feasibility studies, environmental studies, and similar activities
that benefit rural development or rural
job creation projects.
(b) Rules of construction. Unless the
context otherwise indicates; ‘‘includes’’
and ‘‘including’’ are not limiting, and
‘‘or’’ is not exclusive. The terms defined in § 1703.302(a) include both the
plural and the singular.

borrower pursuant to any provision of
the RE Act. The determination to suspend eligibility for the deferment of
loan payments under this subpart will
be based on:
(a) The borrower’s demonstrated unwillingness to exercise diligence in repaying loans made by RUS or RTB or
guaranteed by RUS that results in the
Administrator being unable to find
that such loans, would be repaid within
the time agreed; or
(b) The borrower’s demonstrated unwillingness to meet the requirements
in RUS’s or RTB’s legal documents or
regulations.
§ 1703.304 Restrictions
on
the
deferment of loan payments.
(a) The deferment must not impair
the security of any loans made RUS or
RTB, or guaranteed by RUS, pursuant
to the RE Act.
(b) At no point in time may the
amount of the debt service payments
deferred exceed 50 percent of the total
cost of a community, business, or economic development project for which a
deferment is provided.
(c) A borrower may defer debt service
payments only in an amount equal to
the investment made by such borrower
in a rural development project. The investment must not be made from:
(1) Proceeds of loans made or guaranteed pursuant to the RE Act, or grants
made pursuant to the RE Act or section 2331 through section 2335A of the
Rural Economic Development Act of
1990 (7 U.S.C. 950aaa et seq.);
(2) Funds necessary to make timely
payments of principal and interest on
loans made, guaranteed or lien accommodated pursuant to the RE Act;
(3) Insurance proceeds from mortgaged property;
(4) Damage awards and sale proceeds
resulting from eminent domain and
similar proceedings involving mortgaged property;
(5) Sale proceeds from mortgaged
property sales requiring specific Administrator approval; and
(6) Funds which are restricted by
RUS or RTB loan instruments to be
held in trust for the Government or to
be held for any other specific purpose.
(d) Any investment made in a rural
development project prior to the date

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[58 FR 21639, Apr. 23, 1993, as amended at 59
FR 66440, Dec. 27, 1994]

§ 1703.303 Eligibility
criteria
for
deferment of loan payments.
The deferment of loan payments may
be granted to any borrower that is not
financially distressed, delinquent on
any Federal debt, or in bankruptcy
proceedings. However, the deferment of
loan payments will not be granted to a
borrower during any period in which
the Administrator has determined that
no additional financial assistance of
any nature should be provided to the

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Rural Utilities Service, USDA

§ 1703.309

of the application for a deferment
based on such project cannot be used to
satisfy the requirements of this section.

(b) For any purpose not reasonably
related to the project as determined by
the Administrator;
(c) To transfer existing employment
or business activities from one area to
another; or
(d) For the borrower’s electric or
telephone operations, nor for any operations affiliated with the borrower unless the Administrator has specifically
informed the borrower in writing that
the affiliated operations are part of the
approved purposes.

§ 1703.305 Requirements for deferment
of loan payments.
(a) Except as otherwise provided in
paragraph (b) of this section, the borrower must make a cushion of credit
payment equal to the amount of the
payment deferred and subject to the
following rules:
(1) Cushion of credit payments made
prior to the date that an application
for deferral has been approved by RUS
cannot be used to satisfy the requirements of this section;
(2) Once a cushion of credit payment
has been made to satisfy the requirements of paragraph (a) of this section,
it must remain on deposit in the cushion of credit account on the date of the
deferral or the deferral will not take
place; and
(3) The cushion of credit payment
must be received by RUS on the date
the payment being deferred is due, or
within 30 days prior to this date.
(b) A borrower may elect to consolidate in one application filed pursuant
to § 1703.311, all of the related deferrals
it wishes to receive in a twelve month
period following application approval.
In such a case, the requirement contained in paragraph (a)(1) of this section may alternatively be satisfied by
depositing an amount equal to the aggregate deferrals covered by such application into the cushion of credit account at the time the first cushion of
credit payment is due under paragraph
(a)(1) of this section.

§ 1703.307 Uses of the deferments of
loan payments.
The deferment of loan payments will
be made to enable the borrower to provide funding and assistance for rural
development and job creation projects.
This includes, but is not limited to, the
borrower providing financing to local
businesses, community development
assistance, technical assistance to
businesses, and other community, business, or economic development projects
that will benefit rural areas.
§ 1703.308 Amount of deferment funds
available.
(a) The total amount of deferments
made available for each fiscal year
under this program will not exceed 3
percent of the total payments due during fiscal year 1993 from all borrowers
on direct loans and insured loans made
under the RE Act. For each subsequent
fiscal year after 1993, the total amount
of deferments will not exceed 5 percent
of the total payments due for the year
from all borrowers on direct loans and
insured loans.
(b) The total amount of annual
deferments are subject to limitations
established by appropriations Acts.

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§ 1703.306 Limitation on funds derived
from the deferment of loan payments.

§ 1703.309 Terms of repayment of deferred loan payments.
(a) Deferments made to enable the
borrower to provide financing to local
businesses will be repaid over a period
of 60 months, in equal installments,
with payments beginning on the date
of the deferment, and continuing in
such a manner until the total amount
of the deferment is repaid. The
deferment payments will be made on
either a monthly or quarterly basis depending on the existing repayment

Funds derived from the deferment of
loan payments will not be used:
(a) To fund or assist projects which
would, in the judgement of the Administrator, create a conflict of interest or
the appearance of a conflict of interest.
The borrower must disclose to the Administrator information regarding any
potential conflict of interest or appearance of a conflict of interest;

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§ 1703.310

7 CFR Ch. XVII (1–1–08 Edition)

terms of the direct loan or insured loan
being deferred. The deferment will not
accrue interest.
(b) In the case of deferments made to
enable the borrower to provide community development assistance, technical
assistance to businesses, and for other
community, business, or economic development projects not included in
paragraph (a) of this section, the
deferment will be repaid over a period
of 120 months, in equal installments,
with payments beginning on the date
of the deferment and continuing in
such a manner until the total amount
of the deferment is repaid. The
deferment payments will be made on
either a monthly or quarterly basis depending on the existing repayment
terms of the direct loan or insured loan
being deferred. The deferment will not
accrue interest.
(c) The maturity date of a loan may
not be extended as a result of a
deferment.
(d) If the required payment is not
made by the borrower or received by
the Administrator when due, the Administrator will reduce the borrower’s
cushion of credit account established
under this subpart in an amount equal
to the deferment payment required.
(e) The balance in a borrower’s cushion of credit account shall not be reduced by the borrower below the level
of the unpaid balance of the payment
deferred.

(i) Be signed by the president or vice
president of the borrower;
(ii) Contain information on the total
amount of deferment requested for
each specific project;
(iii) Contain information on the type
of project and the length of deferment
requested as defined in § 1703.309; and
(iv) Specify which officer of the borrower has been given the authority to
certify to those matters required in
this section;
(2) Submit certification by the appropriate officer to the Administrator
that the proposed project will not violate the limitations set forth in
§ 1703.306 and disclose all information
regarding any potential conflict of interest or appearance of a conflict of interest that would allow the Administrator to make an informed decision;
(3) Submit certification by the appropriate officer to the Administrator
that an investment in the rural development project will be made by the
borrower in an amount equal to the deferred debt service payment;
(4) Submit certification by the appropriate officer to the Administrator
that the amount of the deferment will
not exceed 50 percent of the total cost
of the project for which the deferment
is provided;
(5) Submit certification by the appropriate officer to the Administrator
that it will make a cushion of credit
payment necessary to satisfy the requirement of § 1703.305(a);
(6) Submit certification by the appropriate officer to the Administrator
that it will comply with § 1703.313 and
provide documentation showing that
its total investments, including the
proposed investment, will not exceed
the investment limitations specified in
7 CFR part 1717, Subpart N, Investments, Loans and Guarantees by Electric Borrowers, or 7 CFR Part 1744,
Post Loan Policies and Procedures
Common to Guaranteed and Insured
Loans. The documentation must provide a list of each rural development
project the borrower has invested in to
date,
including
the
investment
amounts;
(7) Submit to the Administrator written identification of the direct loan(s)
and/or insured loan(s) for which payments are to be deferred;

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§ 1703.310 Environmental
considerations.
Prospective recipients of funds received from the deferment of loan payments are encouraged to consider the
potential environmental impact of
their proposed projects at the earliest
planning stage and plan development
in a manner that reduces, to the extent
practicable, the potential to affect the
quality of the human environment adversely.
§ 1703.311 Application procedures for
deferment of loan payments.
(a) A borrower applying for a
deferment must:
(1) Submit a certified board resolution to the Administrator requesting a
deferment of principal and interest.
The resolution must:

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Rural Utilities Service, USDA

Pt. 1709

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(8) Submit to the Administrator a
written narrative which contains information regarding the proposed rural
development or job creation project
such as the manner in which the
project will promote community, business, or economic development in rural
areas, the nature of the project, its location, the primary beneficiaries, and,
if applicable, the number and type of
jobs to be created; and
(9) Submit to the Administrator a
letter of approval from the state regulatory authority, if applicable, granting its approval for the borrower to
defer direct loan payment(s) and/or insured loan payment(s) and invest the
amount in a rural development project.
(b) The Administrator reserves the
right to determine that special circumstances require additional data
from borrowers before acting on a
deferment. The Administrator also reserves the right to require, as a condition of approving a loan payment
deferment pursuant to this subpart,
that the borrower execute and deliver
any amendments or supplements to its
loan documents that may be necessary
or appropriate to achieve the purposes
outlined in § 1703.300.
(c) The Administrator will decide
whether the borrower is eligible for the
deferment and will notify the borrower
of the decision.

velopment project are properly supported with certifications, invoices,
contracts, bills of sale, cancelled
checks, or any other forms of evidence
determined appropriate by the Administrator and that such supporting material is available at the borrower’s
premises for review by the RUS field
accountant, borrower’s certified public
accountant, the Office of Inspector
General, the General Accounting Office
and any other accountant conducting
an audit of the borrower’s financial
statements for this rural development
program.
§ 1703.313 Compliance with other regulations.
(a) Investments in a rural economic
development project made by an electric borrower under this subpart are
subject to the provisions of 7 CFR part
1717, Subpart N, Investments, Loans
and Guarantees by Electric Borrowers.
(b) Investments in a rural economic
development project made by a telephone borrower under this subpart are
subject to the provisions of 7 CFR Part
1744, Post Loan Policies and Procedures Common to Guaranteed and Insured Loans.

PART 1709—ASSISTANCE TO HIGH
ENERGY COST COMMUNITIES
Subpart A—General Requirements

§ 1703.312 RUS review requirements.
Borrowers shall ensure that funds are
invested in the rural development
project as approved by RUS. The Administrator reserves the right to review the books and copy records of borrowers
receiving
loan
payment
deferments as necessary to ensure that
the investments in the rural development project are in accordance with
this subpart and the representations
and purposes stated in the borrower’s
completed application. If an audit discloses that the amount deferred was
not used for the purposes stated in the
completed application, the borrower
shall be required to promptly repay the
amount deferred and the benefits of the
deferment to the borrower will be recaptured by RUS. The borrower is responsible for ensuring that disbursements and expenditures of funds covering the investment in the rural de-

Sec.
1709.1 Purpose.
1709.2 Policy. [Reserved]
1709.3 Definitions.
1709.4 Allocation of available funds among
programs.
1709.5 Determination of energy cost benchmarks.
1709.6 Appeals.
1709.7 Applicant eligibility.
1709.8 Electronic submission.
1709.9 Grant awards and advance of funds.
1709.10 Ineligible grant purposes.
1709.11 Award conditions.
1709.12 Reporting requirements.
1709.13 Grant administration.
1709.14 Inspections.
1709.15 Grant close out.
1709.16 Performance reviews.
1709.17 Environmental review.
1709.18 Civil rights.
1709.19 Other USDA regulations.
1709.20 Member delegate clause.
1709.21 Audit requirements.
1709.22 Project changes.

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