49 CFR 260.31(d)

49 CFR 260 : REGULATIONS GOVERNING LOANS AND LOAN GUARANTEES UNDER THE RAILROAD REHABILITATION AND IMPROVEMENT FINANCING PROGRAM [ 49 CFR 260 ] : (T...

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TITLE 49 — TRANSPORTATION [ 49 CFR ]
PART 260 — REGULATIONS GOVERNING LOANS AND LOAN GUARANTEES UNDER THE RAILROAD
REHABILITATION AND IMPROVEMENT FINANCING PROGRAM [ 49 CFR 260 ]
Note:
— Current as of: 12/22/2011, Updated weekly.
— Enhanced with links to US Code, FR and CFR References where ever possible and more to come.
— You can embed the URL to this page in your documents to access the current CFR part.
— Most recent FR update to this part (prior to the current date) was done on 05/27/2009 for § 260.31; .
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Table of Contents
Subpart A — Overview
§ 260.1 — Program authority.
§ 260.3 — Definitions.
§ 260.5 — Eligible purposes.
§ 260.7 — Priority consideration.
§ 260.9 — Loan terms.
§ 260.11 — Investigation charge.
§ 260.13 — Credit reform.
§ 260.15 — Credit risk premium.
Subpart B — FRA Policies and Procedures for Evaluating Applications for Financial Assistance
§ 260.17 — Credit risk premium analysis.
§ 260.19 — Preapplication meeting.
Subpart C — Applications for Financial Assistance
§ 260.21 — Eligibility.
§ 260.23 — Form and content of application generally.
§ 260.25 — Additional information for Applicants not having a credit rating.
§ 260.27 — Additional information for loan guarantees.
§ 260.29 — Third party consultants.
§ 260.31 — Execution and filing of the application. [ Last updated on: 05/27/2009 ]
§ 260.33 — Information requests.
§ 260.35 — Environmental assessment.
Subpart D — Standards for Maintenance of Facilities Involved in the Project
§ 260.37 — Applicability.
§ 260.39 — Maintenance standards.
§ 260.41 — Inspection and reporting.
§ 260.43 — Impact on other laws.
Subpart E — Procedures To Be Followed in the Event of Default
§ 260.45 — Events of default for guaranteed loans.
§ 260.47 — Events of default for direct loans.
§ 260.49 — Avoiding defaults.

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49 CFR 260 : REGULATIONS GOVERNING LOANS AND LOAN GUARANTEES UNDER THE RAILROAD REHABILITATION AND IMPROVEMENT FINANCING PROGRAM [ 49 CFR 260 ] : (T...

Subpart F — Loan Guarantees—Lenders
§ 260.51 — Conditions of guarantee.
§ 260.53 — Lenders' functions and responsibilities.
§ 260.55 — Lender's loan servicing.

Authority:   45 U.S.C. 821, 822, 823; 49 CFR 1.49.
Source:   65 FR 41841, July 6, 2000, unless otherwise noted.

Subpart A—Overview
§ 260.1   Program authority.
Section 502 of the Railroad Revitalization and Regulatory Reform Act of 1976, as amended, 45 U.S.C. 821 et
seq., authorizes the Secretary of Transportation to provide direct loans and loan guarantees to State and local
governments, government sponsored authorities and corporations, railroads, and joint ventures that include at
least one railroad. The Secretary's authority has been delegated to the Administrator of the Federal Railroad
Administration, an agency of the Department of Transportation.
§ 260.3   Definitions.
As used in this part—
(a) Act means the Railroad Revitalization and Regulatory Reform Act of 1976, as amended, 45 U.S.C. 821 et
seq.
(b) Administrator means the Federal Railroad Administrator, or his or her representative.
(c) Applicant means any State or local government, government sponsored authority or corporation, railroad, or
group of two or more entities, at least one of which is a railroad, participating in a joint venture, that submits an
application to the Administrator for a direct loan or the guarantee of an existing obligation under which it is an
obligor or for a commitment to guarantee a new obligation.
(d) Borrower means an Applicant that has been approved for, and has received, financial assistance under this
part.
(e) Credit risk premium means that portion of the total subsidy cost to the Government of a direct loan or loan
guarantee that is not covered by Federal appropriations and which must be paid by Applicant or its non-Federal
infrastructure partner before that direct loan can be disbursed or loan guarantee can be issued.
(f) Direct loan means a disbursement of funds by the Government to a non-federal borrower under a contract that
requires the repayment of such funds.
(g) FRA means the Federal Railroad Administration.
(h) Financial assistance means a direct loan, or a guarantee of a new loan issued under this part.
(i) Holder means the current owner of an obligation or the entity retained by the owner to service and collect an
obligation which is guaranteed under the provisions of this part.
(j) Including means including but not limited to.
(k) Infrastructure partner means any non-Federal source of the Credit Risk Premium which must be paid to the
Administrator in lieu of, or in combination with, an appropriation in connection with financial assistance provided
under this part.
(l) Intermodal means of or relating to the connection between rail service and other modes of transportation,
including all parts of facilities at which such connection is made.
(m) Lender means the non-Federal entity making a loan to an Applicant for which a loan guarantee under this part
is sought.
(n) Loan guarantee means any guarantee, insurance, or other pledge with respect to the payment of all or a part
of the principal or interest on any debt obligation of a non-Federal borrower to a non-Federal Lender, but does

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not include the insurance of deposits, shares, or other withdrawable accounts in financial institutions.
(o) Obligation means a bond, note, conditional sale agreement, equipment trust certificate, security agreement, or
other obligation.
(p) Obligor means the debtor under an obligation, including the original obligor and any successor or assignee of
such obligor.
(q) Project means the purpose for which financial assistance is requested.
(r) Railroad means a rail carrier subject to part A of subtitle IV of title 49, United States Code.
(s) Subsidy cost of a direct loan means the net present value, at the time when the direct loan is disbursed, of the
following estimated cash flows:
(1) Loan disbursements;
(2) Repayments of principal; and
(3) Payments of interest and other payments by or to the Government over the life of the loan after adjusting for
estimated defaults, prepayments, fees, penalties, and other recoveries; including the effects of changes in loan
terms resulting from the exercise by the borrower of an option included in the loan contract.
(t) Subsidy cost of a loan guarantee means the net present value, at the time when the guaranteed loan is
disbursed, of the following estimated cash flows:
(1) Payments by the Government to cover defaults, delinquencies, interest subsidies, or other payments; and
(2) The payments to the Government including origination and other fees, penalties and recoveries.
§ 260.5   Eligible purposes.
(a) Financial assistance under this part is available solely to:
(1) Acquire, improve, or rehabilitate intermodal or rail freight or passenger equipment or facilities, including track,
components of track, bridges, yards, buildings, and shops;
(2) Refinance outstanding debt incurred for purposes described in paragraph (a)(1) of this section; or
(3) Develop or establish new intermodal or railroad facilities.
(b) Financial assistance under this part cannot be used for railroad operating expenses.
§ 260.7   Priority consideration.
When evaluating applications, the Administrator will give priority consideration (but not necessarily in the following
order) to projects that:
(a) Enhance public safety;
(b) Enhance the environment;
(c) Promote economic development;
(d) Enable United States companies to be more competitive in international markets;
(e) Are endorsed by the plans prepared under section 135 of title 23, United States Code, by the State or States
in which they are located; or
(f) Preserve or enhance rail or intermodal service to small communities or rural areas.
§ 260.9   Loan terms.
The maximum repayment period for direct loans and guaranteed loans under this part is 25 years from the date of
execution. The interest rate on direct loans will be equal to the rate on Treasury securities of a similar term. In
general, the financial assistance provided will be required to be repaid prior to the end of the useful life of the
project it is used to fund.
§ 260.11   Investigation charge.

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(a) Applicants for financial assistance under this part may be required to pay an investigation charge of up to onehalf of one percent of the principal amount of the direct loan or portion of the loan to be guaranteed.
(b) When an investigation charge is assessed, one-half of the investigation charge shall be paid by Applicant at
the time a formal application is submitted to FRA.
(c) Within 60 days after the date of filing of the application, Applicant shall pay to the Administrator the balance of
the investigation charge.
§ 260.13   Credit reform.
The Federal Credit Reform Act of 1990, 2 U.S.C. 661, requires Federal agencies to set aside the subsidy cost of
new credit assistance provided in the form of direct loans or loan guarantees. The subsidy cost will be the
estimated long term cost to the Government of the loan or loan guarantee. The subsidy cost associated with each
direct loan or loan guarantee, which the Administrator must set aside, may be funded by Federal appropriations,
direct payment of a Credit Risk Premium by the Applicant or a non-Federal infrastructure partner on behalf of the
Applicant, or any combination thereof.
§ 260.15   Credit risk premium.
(a) Where available Federal appropriations are inadequate to cover the subsidy cost, a non-Federal infrastructure
partner may pay to the Administrator a Credit Risk Premium adequate to cover that portion of the subsidy cost not
covered by Federal appropriations. Where there is no Federal appropriation, the Credit Risk Premium must cover
the entire subsidy cost.
(b) The amount of the Credit Risk Premium required for each direct loan or loan guarantee, if any, shall be
established by the Administrator. The Credit Risk Premium shall be determined based on the credit risk and
anticipated recovery in the event of default, including the recovery of collateral.
(c) The Credit Risk Premium must be paid before the disbursement of a direct or guaranteed loan. Where the
borrower draws down the direct or guaranteed loan in several increments, the borrower may pay a portion of the
total Credit Risk Premium for each increment equal to the proportion of that increment to the total amount of the
direct or guaranteed loan.
(d) Each direct loan and loan guarantee made by the Administrator will be included in one cohort of direct loans
or one cohort of loan guarantees, respectively, made during that same fiscal year, or longer period, as may be
determined by the Administrator. When all obligations in a cohort have been satisfied or liquidated, the amount of
Credit Risk Premiums, paid by applicants or infrastructure partners, remaining in the cohort, after deductions
made to mitigate losses from any loan or loan guarantee in the cohort, together with interest accrued thereon, will
be repaid on a pro rata basis to each original payor of a Credit Risk Premium for any obligation which was fully
satisfied. If the Administrator's estimate of the default risk cost of each loan is accurate, the aggregate of Credit
Risk Premiums associated with each cohort of loans will fully offset all losses in the cohort and none will remain
to be returned to the payees.
Subpart B—FRA Policies and Procedures for Evaluating Applications for Financial Assistance
§ 260.17   Credit risk premium analysis.
(a) When Federal appropriations are not available to cover the total subsidy cost, the Administrator will determine
the Credit Risk Premium necessary for each direct loan or loan guarantee by estimating the credit risk and the
potential recovery in the event of a default of each project evaluating the factors described in paragraphs (b) and
(c) of this section.
(b) Establishing the credit risk.
(1) Where an Applicant has received a recent credit rating from one or more nationally recognized rating
agencies, that rating will be used to estimate the credit risk.
(2) Where an Applicant has not received a credit rating from a credit rating agency, the Administrator will
determine the credit risk based on an evaluation of the following factors:
(i) Business risk, based on Applicant's:
(A) Industry outlook;
(B) Market position;

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(C) Management and financial policies;
(D) Capital expenditures; and
(E) Operating efficiency.
(ii) Financial risk, based on Applicant?s past and projected:
(A) Profitability;
(B) Liquidity;
(C) Financial strength;
(D) Size; and
(E) Level of capital expenditures; and
(iii) Project risk, based on the proposed project's:
(A) Potential for improving revenues, profitability and cash flow from operations; and
(B) Reliance on third parties for success.
(c) The potential recovery in the event of a default will be based on:
(1) The nature of the Applicant's assets; and
(2) Liquidation value of the collateral offered, including the terms and conditions of the lien securing the collateral.
§ 260.19   Preapplication meeting.
Potential Applicants may request a meeting with the FRA Associate Administrator for Railroad Development to
discuss the nature of the project being considered. Applicants must be prepared to provide at least the following
information:
(a) Applicant's name, address, and contact person;
(b) Name of the proposed infrastructure partner(s), if any, including the identification of potential amounts of
funding from each;
(c) Amount of the direct loan or loan guarantee request, and a description of the technical aspects of the project
including a map of the existing railroad lines with the location of the project indicated;
(d) Brief description and estimate of the economic impact, including future demand for service, improvements that
can be achieved, the project's relation to the priorities listed in §260.7, along with any feasibility, market or other
studies that may have been done as attachments;
(e) Amount of Applicant's equity and a description of collateral offered, with estimated values, including the basis
of such, to be offered as security for the loan;
(f) If applicable, the names and addresses of the Applicant's parent, affiliates, and subsidiary corporations, if any,
and a description of the ownership relationship and the level of guarantee, if any, to be offered;
(g) For existing companies, a current balance sheet and an income statement not more than 90 days old and
financial statements for the borrower and any parent, affiliates, and subsidiaries for at least the four most recent
years; and
(h) Information relevant to the potential environmental impacts of the project in the context of applicable Federal
law.
Subpart C—Applications for Financial Assistance
§ 260.21   Eligibility.
The Administrator may make a direct loan to an Applicant, or guarantee the payment of the principal balance and
any interest of an obligation of an Applicant prior to, on, or after the date of execution or the date of disbursement
of such obligation, if the proceeds of such direct loan or obligation shall be, or have been, used by the Applicant

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for the eligible purposes listed in §260.5(a)(1), (2), and (3).
§ 260.23   Form and content of application generally.
Each application shall include, in the order indicated and identified by applicable paragraph numbers and letters
corresponding to those used in this section, the following information:
(a) Full and correct name and principal business address of the Applicant;
(b) Date of Applicant's incorporation, or organization if not a corporation, and name of the government, State or
territory under the laws of which it was incorporated or organized. If Applicant is a partnership, association, or
other form of organization other than a corporation, a full description of the organization should be furnished;
(c) Name, title, and address of the person to whom correspondence regarding the application should be
addressed.
(d) A statement of whether the project involves another railroad or other participant, through joint execution,
coordination, or otherwise; if so, description of the relative participation of Applicant and such other railroad or
participant, including financial statements (if applicable) and financing arrangements of each participant, portion of
the work to be performed by each participant, and anticipated level of usage of the equipment or facility of each
participant when the work is completed, along with a statement by a responsible officer or official of the other
railroad or participant that the information provided reflects their agreement on these matters;
(e) A detailed description of the amount and timing of the financial assistance that is being requested and its
purpose or purposes, including:
(1) Detailed description of the project and its purpose or purposes;
(2) A description of all facilities or equipment and the physical condition of such facilities or equipment included in
or directly affected by the proposed project;
(3) Each part or sub-part into which the project may reasonably be divided and the priority and schedule of
expenditure for each part or sub-part; and
(4) Proposed dates of commencement and completion of the project and estimated timing of the expenditure of
the proceeds of the obligation;
(5) A map of Applicant's existing railroad with location of project indicated, if appropriate.
(f) A listing and description of the collateral to be offered the Administrator in connection with any financial
assistance provided; Applicant's opinion of the value of this security and the basis for such opinion; in the case of
leased equipment to be rehabilitated or improved with the proceeds of the obligation proposed to be guaranteed,
Applicant shall state, in addition to the above, whether the lease provides for, or the lessor will permit,
encumbrance of the leasehold or subordination of the lessor's interest in the equipment to the Administrator;
(g) A statement, in summary form, showing financial obligations to or claims against the United States or
obligations for which the United States is guarantor, if any, by Applicant or any affiliated corporate entity of the
Applicant or the Applicant's parent as of the date of the application, including:
(1) Status of any claims under litigation; and
(2) Any other debits or credits existing between the Applicant and the United States, showing the department or
agency involved in such loans, claims and other debts;
(h) To the extent such information is available, an analysis that includes:
(1) A statement, together with supporting evidence including copies of all market analyses and studies that have
been performed to determine present and future demand for rail services or facilities, that the financing is justified
by present and future probable demand for rail services or facilities, will meet existing needs for such services or
facilities, and will provide shippers or passengers with improved service;
(2) Description of the impact of the project upon the projected freight or passenger traffic to be originated,
terminated, or carried by the Applicant for at least the five years immediately following completion of the project;
(3) Explanation of the manner in which the project will increase the economical and efficient utilization of
equipment and facilities; and
(4) Description of cost savings or any other benefit which would accrue to the Applicant from the project;

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(i) A statement as to how the project will contribute to, or enhance, the safe operation of the railroad, considering
such factors as the occupational safety and health of the employees and the improvement of the physical and
other conditions that have caused or may cause serious injury or loss of life to the public or significant property
damage;
(j) A statement of the Applicant's maintenance program for its entire rail system and planned maintenance
program for the equipment or facilities financed by the proceeds of the financial assistance;
(k) A certified statement in the form contained in §260.31(d) that Applicant will pay to the Administrator, in
accordance with §260.11, the investigation charge with respect to the application.
(l) Information relevant to the potential environmental impacts of the project in the context of applicable Federal
laws;
(m) Any additional information that the Applicant deems appropriate to convey a full and complete understanding
of the project, the project's relations to the priorities listed in §260.7, and its impact, or to assist the Administrator
in making the statutorily prescribed findings; and
(n) Any other information which the Administrator may deem necessary concerning an application filed under this
part.
(o) Railroad applicants must also submit a copy of application for financing for the project in the private sector,
including terms requested, from at least one commercial lender, and its response refusing to provide such
financing.
§ 260.25   Additional information for Applicants not having a credit rating.
Each application submitted by Applicants not having a recent credit rating from one or more nationally recognized
rating agencies shall include, in the order indicated and identified by applicable numbers and letters
corresponding to those used in this section, the following information:
(a) A narrative statement detailing management's business plan to enhance Applicant's ability to provide rail
services including a discussion of the following:
(1) Applicant's current and prospective traffic base, including by commodity and geographic region, major markets
served, major interchange points, and market development plans;
(2) Applicant's current operating patterns, and plans, if any, to enhance its ability to serve its current and
prospective traffic base;
(3) System-wide plans to maintain equipment and rights-of-way at current or improved levels; and
(4) Specific plans for rationalization of marginal or uneconomic services;
(b) Detailed financial information, including:
(1) Financial statements prepared by a Certified Public Accountant (audited, if available), for the four calendar
years immediately preceding the date of filing of the application, including:
(i) A copy of Applicant's most recent year-end general balance sheet and a copy of Applicant's most recent
unaudited general balance sheet; and
(ii) Applicant's most recent annual income statement and a spread sheet showing unaudited monthly and year-todate income statement data up to the date the application is filed;
(2) Projected financial statements, including spread sheets showing for each of the four years subsequent to the
year in which the application is filed, both before and after giving effect to the proceeds of the assistance
requested in the application:
(i) Forecasted annual income statement;
(ii) Forecasted year-end balance sheets. These spread sheets shall be accompanied by a statement setting forth
the bases for such forecasts; and
(iii) A spread sheet showing changes in financial position for the year in which the application is filed, including the
period ending on the date of the application based upon actual data and the period from the date of the
application to the end of the year, based upon estimated and forecasted data;

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(c) Capital spending plans for the next five years;
(d) Cash flow projections;
(e) Contingency plans for termination of the project before completion, if necessary; and
(f) A narrative description of Applicant's management team, including:
(1) Rail experience of top management;
(2) Management's plans for achieving growth and its long-term capital spending plan; and
(3) A narrative description of Applicant's workforce and the historical rate of employee turnover.
§ 260.27   Additional information for loan guarantees.
Applications for a loan guarantee shall also include in the order indicated and identified by applicable numbers
and letters corresponding to those used in this section, the following information:
(a) With respect to each existing obligation to be refinanced or proposed obligation:
(1) A certified copy of proposed or executed obligation agreements;
(2) A detailed description of the obligation, and a description of the series or issue of which the obligation is, or
will be, a part, including:
(i) Effective date, or anticipated effective date;
(ii) Where a guarantee is sought for an outstanding obligation being refinanced, actual effective rate of interest; or
where the obligation is new, the terms of the proposed obligation including the proposed effective rate of interest;
and
(iii) All related documents, whether executed or proposed;
(3) For an existing obligation, the Applicant's payment history on that obligation; and
(b) With respect to each existing Lender, Holder, or prospective Lender, a statement as to:
(1) Full and correct name and principal business address;
(2) Reference to applicable provisions of law and the charter or other governing instruments conferring authority
to do business on the Lender, Holder, or prospective Lender;
(3) Brief statement of the circumstances and negotiations leading to the agreement by the Lender, Holder, or
prospective Lender to make the loan;
(4) Brief statement of the nature and extent of any affiliation or business relationship between the Lender, Holder,
or prospective Lender and the Applicant or any of Applicant's directors, partners, or principal executive officers;
and.
(5) Full and complete statement of all sums to be provided by the Lender or Holder, or to be provided by the
prospective Lender in connection with the proposed obligation including:
(i) Name and address of each person to whom the payment has been made or will be made and nature of any
affiliation, association, or prior business relationship between any person named in this paragraph and the
Lender, Holder or prospective Lender or any of its directors, partners, or officers; and
(ii) Amount of the cash payment, or the nature and value of other consideration.
§ 260.29   Third party consultants.
Applicants may utilize independent third-party consultants to prepare a financial evaluation of the proposed
project and the applicant, if approved by FRA. Providing such an evaluation would greatly assist FRA in the
evaluation of the application and would significantly reduce the time necessary for FRA to process the application.
We encourage the use of third party consultants.
§ 260.31   Execution and filing of the application.

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(a) The original application shall bear the date of execution, be signed in ink by or on behalf of the Applicant, and
shall bear the corporate seal in the case of an Applicant which is a corporation. Execution shall be by all partners
if a partnership, unless satisfactory evidence is furnished of the authority of a partner to bind the partnership, or if
a corporation, an association or other similar form of organization, by its president or other executive officer
having knowledge of the matters therein set forth. Persons signing the application on behalf of the Applicant shall
also sign a certificate in form as follows:
(Name of official) certifies that he or she is the (Title of official) of the (Name of Applicant); that he or she is authorized on the part of the
Applicant to sign and file with the Administrator this application and exhibits attached thereto; that the consent of all parties whose
consent is required, by law or by binding commitment of the Applicant, in order to make this application has been given; that he or she
has carefully examined all of the statements contained in such application and the exhibits attached thereto and made a part thereof
relating to the aforesaid (Name of Applicant); that he or she has knowledge of the matters set forth therein and that all such statements
made and matters set forth therein are true and correct to the best of his or her knowledge, information, and belief; and that Applicant will
pay the balance of the investigation charge in accordance with §260.11.
(Signature of official)
(Date)

(b) There shall be made a part of the original application the following certificate by the Chief Financial Officer or
equivalent officer of the Applicant:
(Name of officer) certifies that he or she is (Title of officer) of (Name of Applicant); that he or she has supervision over the books of
accounts and other financial records of the affected Applicant and has control over the manner in which they are kept; that such
accounts are maintained in good faith in accordance with the effective accounting practices; that such accounts are adequate to assure
that proceeds from the financing being requested will be used solely and specifically for the purposes authorized; that he or she has
examined the financial statements and supporting schedules included in this application and to the best of his or her knowledge and
belief those statements accurately reflect the accounts as stated in the books of account; and that, other than the matters set forth in the
exceptions attached to such statements, those financial statements and supporting schedules represent a true and complete statement of
the financial position of the Applicant and that there are no undisclosed assets, liabilities, commitments to purchase property or securities,
other commitments, litigation in the courts, contingent rental agreements, or other contingent transactions which might materially affect
the financial position of the Applicant.
(Signature of official)
(Date)

(c) The Applicant shall pay the investigation charge in accordance with §260.11.
(d) The application shall be accompanied by a transmittal letter in form as follows:
Federal Railroad Administrator, c/o Associate Administrator for Railroad Development, Federal Railroad Administration, Washington, D.C.
20590
Re: Application for financial assistance under the Railroad Rehabilitation and Improvement Financing Program.
Dear Sir or Madam: Being duly authorized by (jointly and severally/if more than one) (the “Applicant”) to convey the understandings
hereinafter set forth, I respectfully submit this application and remit its investigation fee in the amount equal to one-half the total
investigation fee established by the Administrator. By this filing, Applicant requests the Administrator to investigate the application and
make the necessary findings upon which Applicant's eligibility for a direct loan or loan guarantee may be determined. Applicant
understands that neither the acceptance of this filing, the deposit of the investigation charge, nor the commencement of an investigation
acknowledges the sufficiency of the application's form, content or merit. Furthermore, Applicant understands that the Administrator will
incur numerous expenses by this filing with respect to the investigation of the application, the appraisal of security being offered, and the
making of the necessary determinations and findings, and promises to pay, within 60 days, the remainder of the investigation fee
required by the Administrator. Applicant understands that the Administrator will establish the amount of Credit Risk Premium due from
Applicant, if any, as provided in §260.15. Applicant agrees to pay such Credit Risk Premium prior to the disbursement of direct or
guaranteed loan, as appropriate. Such Credit Risk Premium may be refunded as provided in §260.15.
    Respectfully submitted.
Applicant(s)
Seal(s) by Its(Their).

(e) The original application and supporting papers, and two copies thereof for the use of the Administrator, shall
be filed with the Associate Administrator for Railroad Development of the Federal Railroad Administration, 1200
New Jersey Avenue, SE., MailStop 20, Washington, DC 20590. Each copy shall bear the dates and signatures
that appear in the original and shall be complete in itself, but the signatures in the copies may be stamped or
typed.
[65 FR 41841, July 6, 2000, as amended at 74 FR 25176, May 27, 2009]
§ 260.33   Information requests.
If an Applicant desires that any information submitted in its application or any supplement thereto not be released

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by the Administrator upon request from a member of the public, the Applicant must so state and must set forth
any reasons why such information should not be released, including particulars as to any competitive harm which
would probably result from release of such information. The Administrator will keep such information confidential
to the extent permitted by law.
§ 260.35   Environmental assessment.
(a) The provision of financial assistance by the Administrator under this Part is subject to a variety of
environmental and historic preservation statutes and implementing regulations including the National
Environmental Policy Act (“NEPA”) (42 U.S.C. 4332 et seq. ), Section 4(f) of the Department of Transportation Act
(49 U.S.C. 303(c)), the National Historic Preservation Act (16 U.S.C. 470(f)), the Coastal Zone Management Act
(16 U.S.C. 1451), and the Endangered Species Act (16 U.S.C. 1531). Appropriate environmental/historic
preservation documentation must be completed and approved by the Administrator prior to a decision by the
Administrator on the applicant's financial assistance request. FRA's “Procedures for Considering Environmental
Impacts” (“FRA's Environmental Procedures”) (65 FR 28545 (May 26, 1999)) or any replacement environmental
review procedures that the FRA may later issue and the NEPA regulation of the Council on Environmental Quality
(“CEQ Regulation”) (40 CFR Part 1500) will govern the FRA's compliance with applicable environmental/historic
preservation review requirements.
(b) The Administrator, in cooperation with the applicant, has the responsibility to manage the preparation of the
appropriate environmental document. The role of the applicant will be determined by the Administrator in
accordance with the CEQ Regulation and Environmental Procedures.
(c) Depending on the type, size and potential environmental impact of the project for which the applicant is
seeking financial assistance, FRA will need to determine whether the project is categorically excluded from
detailed environmental review under FRA's Environmental Procedures and, if not, to prepare or have prepared an
Environmental Assessment leading to an Environmental Impact Statement (EIS) or a Finding of No Significant
Impact. At the discretion of the Administrator, Applicants may be required to prepare and submit an environmental
assessment of the proposed project or to submit adequate documentation to support a finding that the project is
categorically excluded from detailed environmental review. If the applicant is a public agency that has statewide
jurisdiction or is a local unit of government acting through a statewide agency, and meets the requirements of
section 102(2)(D) of NEPA, the applicant may be requested to prepare the EIS and other environmental
documents under the Administrator's guidance.
(d) Applicants are strongly urged to consult with the Associate Administrator for Railroad Development at the
earliest possible stage in project development in order to assure that the environmental/historic preservation
review process can be completed in a timely manner.
(e) Applicants may not initiate any activities that would have an adverse environmental impact or limit the choice
of reasonable alternatives in advance of the completion of the environmental review process. This does not
preclude development by applicants of plans or designs or performance of other work necessary to support the
application for financial assistance.
Subpart D—Standards for Maintenance of Facilities Involved in the Project
§ 260.37   Applicability.
This subpart prescribes standards governing the maintenance of facilities that are being, or have been, acquired,
rehabilitated, improved, or constructed with the proceeds of a direct loan or a guaranteed loan issued under this
part for the period during which any portion of the principal or interest of such obligation remains unpaid.
§ 260.39   Maintenance standards.
(a) When the proceeds of a direct loan or an obligation guaranteed by the Administrator under this part are, or
were, used to acquire, rehabilitate, improve or construct track, roadbed, and related structures, Borrower shall, as
long as any portion of the principal or interest of such obligation remains unpaid, maintain such facilities in at least
the highest track class, as defined by FRA Track Safety Standards in part 213 of this chapter, specified in the
Application at which the rehabilitated, improved, acquired, or constructed track is to be operated upon completion
of the project.
(b) When the proceeds of a direct loan or an obligation guaranteed by the Administrator under this part are, or
were, used for equipment or facilities, the Borrower shall, during the period in which any portion of the principal or
interest in such obligation remains unpaid, maintain such equipment or facilities in a manner consistent with
sound engineering and maintenance practices and in a condition that will permit the level of use that existed upon
completion of the acquisition, rehabilitation, improvement or construction of such equipment or facilities.

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§ 260.41   Inspection and reporting.
(a) Equipment or facilities subject to the provisions of this subpart may be inspected at such times as the
Administrator deems necessary to assure compliance with the standards set forth in §260.39. Each Borrower
shall permit representatives of the FRA to enter upon its property to inspect and examine such facilities at
reasonable times and in a reasonable manner. Such representatives shall be permitted to use such testing
devices as the Administrator deems necessary to insure that the maintenance standards imposed by this subpart
are being followed.
(b) Each Borrower shall submit annually to the Administrator financial records and other documents detailing the
maintenance and inspections performed which demonstrate that the Borrower has complied with the standards in
§260.39.
§ 260.43   Impact on other laws.
Standards issued under this subpart shall not be construed to relieve the Borrower of any obligation to comply
with any other Federal, State, or local law or regulation.
Subpart E—Procedures To Be Followed in the Event of Default
§ 260.45   Events of default for guaranteed loans.
(a) If the Borrower is more than 30 days past due on a payment or is in violation of any covenant or condition of
the loan documents and such violation constitutes a default under the provisions of the loan documents, Lender
must notify the Administrator in writing and must continue to submit this information to the Administrator each
month until such time as the loan is no longer in default; and the Administrator will pay the Lender of the
obligation, or the Lenders's agent, an amount equal to the past due interest on the guaranteed portion of the
defaulted loan. This payment will in no way reduce the Borrower's obligation to the Lender to make all payments
of principal and interest in accordance with the note. If the loan is brought current, the Lender will repay to the
Agency any interest payments made by the Agency, plus accrued interest at the note rate.
(b) If the default has continued for more than 90 days, the Administrator will pay to the Lender, or the Lender's
agent, 90 percent of the unpaid guaranteed principal. If, subsequent to this payment being made, the default is
cured and liquidation is no longer appropriate, the Lender will repay such funds to the Administrator, plus interest
at the note rate.
(c) After the default has continued for more than 90 days, the Lender shall expeditiously submit to the
Administrator, in writing, its proposed detailed plan to resolve the default by liquidating the collateral or by any
other means. If the resolution will require the liquidation of the collateral, then the Lender's plan shall include:
(1) Proof adequate to establish that the Lender is legally in possession of the obligation, or is the agent for a
Holder who is legally in possession of the obligation, and a statement of the current loan balance and accrued
interest to date and the method of computing the interest;
(2) A full and complete list of all collateral, including any personal and corporate guarantees;
(3) The recommended liquidation methods for making the maximum collection possible and the justification for
such methods, including recommended action for acquiring and disposing of all collateral and collecting from any
guarantors;
(4) Necessary steps for preservation of the collateral;
(5) Copies of the Borrower's latest available financial statements;
(6) Copies of any guarantor's latest available financial statements;
(7) An itemized list of estimated liquidation expenses expected to be incurred along with justification for each
expense;
(8) A schedule to periodically report to the FRA on the progress of liquidation;
(9) Proposed protective bid amounts on collateral to be sold at auction and a breakdown to show how the
amounts were determined;
(10) If a voluntary conveyance is considered, the proposed amount to be credited to the guaranteed debt;
(11) Legal opinions, as appropriate;

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(12) The Lender will obtain an independent appraisal on all collateral securing the loan which will reflect the fair
market value and potential liquidation value. In order to formulate a liquidation plan that maximizes recovery, the
appraisal shall consider the presence of hazardous substances, petroleum products, or other environmental
hazards, which may adversely impact the market value of the collateral; and
(13) The anticipated expenses associated with the liquidation will be considered a cost of liquidation.
(d) The Administrator will inform the Lender in writing whether the Administrator concurs in the Lender's
liquidation plan. Should the Administrator and the Lender not agree on the liquidation plan, negotiations will take
place between the Administrator and the Lender to resolve the disagreement. When the liquidation plan is
approved by the Administrator, the Lender will proceed expeditiously with liquidation. The liquidation plan may be
modified when conditions warrant. All modifications must be approved in writing by the Administrator prior to
implementation.
(e) Lender will account for funds during the period of liquidation and will provide the Administrator with reports at
least quarterly on the progress of liquidation including disposition of collateral, resulting costs, and additional
procedures necessary for successful completion of the liquidation.
(f) Within 30 days after final liquidation of all collateral, the Lender will prepare and submit to the Administrator a
final report in which the Lender must account for all funds during the period of liquidation, disposition of the
collateral, all costs incurred, and any other information necessary for the successful completion of liquidation.
Upon receipt of the final accounting and report of loss, the Administrator may audit all applicable documentation
to confirm the final loss. The Lender will make its records available and otherwise assist the Administrator in
making any investigation.
(g) The Administrator shall be subrogated to all the rights of the Lender, or if Lender is agent for a Holder then to
all of the rights of the Holder, with respect to the Borrower to the extent of the Administrator's payment to the
Lender under this section.
(h) When the Administrator finds the final report to be proper in all respects:
(1) All amounts recovered in liquidation shall be paid to the Administrator; and
(2) The remaining obligation of the Administrator to the Lender under the guarantee, if any, will be paid directly to
Lender by the Administrator.
(i) The Administrator shall not be required to make any payment under paragraphs (a) and (b) of this section if the
Administrator finds, before the expiration of the periods described in such subsections, that the default has been
remedied.
(j) The Administrator shall have the right to charge Borrower interest, penalties and administrative costs, including
all of the United States' legally assessed or reasonably incurred expenses of its counsel and court costs in
connection with any proceeding brought or threatened to enforce payment or performance under applicable loan
documents, in accordance with OMB Circular A–129 ( www.whitehouse.gov/omb ), as it may be revised from time
to time.
§ 260.47   Events of default for direct loans.
(a) Upon the Borrower's failure to make a scheduled payment, or upon the Borrower's violation of any covenant or
condition of the loan documents which constitutes a default under the provisions of the loan documents, the
Administrator, at the Administrator's discretion may:
(1) Exercise any and all remedies available under the provisions of the loan agreement and other loan
documents, including any guarantees, or inherent in law or equity;
(2) Terminate further borrowing of funds;
(3) Take possession of assets pledged as collateral; and
(4) Liquidate pledged collateral.
(b) The Administrator shall have the right to charge Borrower interest, penalties and administrative costs,
including all of the United States' legally assessed or reasonably incurred expenses of its counsel and court costs
in connection with any proceeding brought or threatened to enforce payment or performance under applicable
loan documents, in accordance with OMB Circular A–129, as it may be revised from time to time.
§ 260.49   Avoiding defaults.

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Borrowers are encouraged to contact the Administrator prior to the occurrence of an event of default to explore
possible avenues for avoiding such an occurrence.
Subpart F—Loan Guarantees—Lenders
§ 260.51   Conditions of guarantee.
(a) The percentage of the obligation for which Applicant seeks a guarantee is a matter of negotiation between the
Lender and the Applicant, subject to the Administrator's approval. The maximum percentage of the total obligation
that the Administrator will guarantee is 80 percent. The amount of guarantee allowed will depend on the total
credit quality of the transaction and the level of risk believed to be assumed by the Administrator.
(b) A guarantee under this part constitutes an obligation supported by the full faith and credit of the United States
and is incontestable except for fraud or misrepresentation of which a Lender or Holder has actual knowledge at
the time it becomes such Lender or Holder or which a Lender or Holder participates in or condones. In addition,
the guarantee will be unenforceable by the Lender or the Holder to the extent any loss is occasioned by the
violation of usury laws, negligent servicing, or failure to obtain the required security regardless of the time at
which the Administrator acquires knowledge thereof. Any losses occasioned will be unenforceable to the extent
that loan funds are used for purposes other than those specifically approved by FRA in its guarantee.
(c) The Administrator may guarantee an Applicant's obligation to any Lender provided such Lender can establish
to the satisfaction of the Administrator that it has the legal authority and sufficient expertise and financial strength
to operate a successful lending program. Loan guarantees will only be approved for Lenders with adequate
experience and expertise to make, secure, service, and collect the loans.
(d) The Lender may sell all of the guaranteed portion of the loan on the secondary market, provided the loan is
not in default, or retain the entire loan.
(e) When a guaranteed portion of a loan is sold to a Holder, the Holder shall succeed to all rights of the Lender
under the loan guarantee to the extent of the portion purchased. The Lender will remain bound to all obligations
under the loan guarantee and the provisions of this part. In the event of material fraud, negligence or
misrepresentation by the Lender or the Lender's participation in or condoning of such material fraud, negligence
or misrepresentation, the Lender will be liable for payments made by the Agency to any Holder.
§ 260.53   Lenders' functions and responsibilities.
Lenders have the primary responsibility for the successful delivery of the program consistent with the policies and
procedures outlined in this part. All Lenders obtaining or requesting a loan guarantee from the Administrator are
responsible for:
(a) Loan processing. Lender shall be responsible for all aspects of loan processing, including:
(1) Processing applications for the loan to be guaranteed;
(2) Developing and maintaining adequately documented loan files;
(3) Recommending only loan proposals that are eligible and financially feasible;
(4) Obtaining valid evidence of debt and collateral in accordance with sound lending practices;
(5) Supervising construction, where appropriate;
(6) Distributing loan funds;
(7) Servicing guaranteed loans in a prudent manner, including liquidation if necessary; and
(8) Obtaining the Administrator's approval or concurrence as required in the loan guarantee documentation;
(b) Credit evaluation. Lender must analyze all credit factors associated with each proposed loan and apply its
professional judgment to determine that the credit factors, considered in combination, ensure loan repayment.
The Lender must have an adequate underwriting process to ensure that loans are reviewed by other than the
originating officer. There must be good credit documentation procedures;
(c) Environmental responsibilities. Lender has a responsibility to become familiar with Federal environmental
requirements; to consider, in consultation with the prospective borrower, the potential environmental impacts of
their proposals at the earliest planning stages; and to develop proposals that minimize the potential to adversely
impact the environment. Lender must alert the Administrator to any controversial environmental issues related to

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a proposed project or items that may require extensive environmental review. Lender must assist borrowers as
necessary to comply with the environmental requirements outlined in this part. Additionally, Lender will assist in
the collection of additional data when the Agency needs such data to complete its environmental review of the
proposal; and assist in the resolution of environmental problems;
(d) Loan closing. The Lender will conduct or arrange for loan closings; and
(e) Fees and charges. The Lender may establish charges and fees for the loan provided they are similar to those
normally charged other Applicants for the same type of loan in the ordinary course of business.
§ 260.55   Lender's loan servicing.
(a) The lender is responsible for servicing the entire loan and for taking all servicing actions that are prudent. This
responsibility includes but is not limited to the collection of payments, obtaining compliance with the covenants
and provisions in the loan documents, obtaining and analyzing financial statements, verification of tax payments,
and insurance premiums, and maintaining liens on collateral.
(b) The lender must report the outstanding principal and interest balance on each guaranteed loan semiannually.
(c) At the Administrator's request, the Lender will periodically meet with the Administrator to ascertain how the
guaranteed loan is being serviced and that the conditions and covenants of the loan documents are being
enforced.
(d) The Lender must obtain and forward to the Administrator the Borrower's annual financial statements within
120 days after the end of the Borrower's fiscal year and the due date of other reports as required by the loan
documents. The Lender must analyze the financial statements and provide the Agency with a written summary of
the Lender's analysis and conclusions, including trends, strengths, weaknesses, extraordinary transactions, and
other indications of the financial condition of the Borrower.
(e) Neither the Lender nor the Holder shall alter, nor approve any amendments of, any loan instrument without the
prior written approval of the Administrator.

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