§ 4274.330 - Agency IRP loan conditions and terms.

§ 4274.330 Agency IRP loan conditions and terms.

(a) Revolving fund. The intermediary must place Agency IRP loan funds in the intermediary's IRP revolving loan fund, and these funds must only be used to provide loans to eligible ultimate recipients per § 4274.320(a).

(b) Loan closing. Loan closing between the intermediary and the Agency must take place within six months of loan approval and obligation of funds, or funds will be forfeited, and the Agency will deobligate the loan.

(c) Term. The Agency IRP maximum loan term will be 30 years. Principal and interest payments will be scheduled at least annually. All Agency IRP loans will have interest-only payments scheduled for a maximum of the first three years following the loan closing. An intermediary may request a shorter interest-only period during the application process. All Agency IRP loans will automatically, fully amortize with principal and interest payments due in the fourth year on the anniversary of the closing date. The Agency IRP loan will fully amortize based on the total amount of the loan.

(d) Interest rate. The interest rate for an Agency IRP loan will be a fixed rate of one percent per annum over the term of the loan.

(e) Security. Security for all Agency IRP loans to intermediaries must ensure that the repayment of the loan is reasonably assured, when considered along with the intermediary's financial condition, work plan, and management ability. The intermediary is responsible for making loans to ultimate recipients in a manner that fully protects the interests of the intermediary and the Federal Government.

(1) Security for such loans may include, but is not limited to:

(i) Any realty, personalty, or intangible asset capable of being mortgaged, pledged, or otherwise encumbered by the intermediary in favor of the Agency; and

(ii) Any realty, personalty, or intangible asset capable of being mortgaged, pledged, or otherwise encumbered by an ultimate recipient in favor of the Agency.

(2) Initial security will consist of a pledge by the intermediary of all assets now in or hereafter placed in the IRP revolving loan fund, including cash and investments, notes receivable from ultimate recipients, and the intermediary's security interest in collateral pledged by ultimate recipients. Except for good cause shown, the Agency will not obtain assignments of specific assets at the time a loan is made to an intermediary or ultimate recipient. The intermediary must covenant that, in the event the intermediary's financial condition deteriorates or the intermediary takes action detrimental to prudent fund operation or fails to take action required of a prudent lender, the intermediary will provide additional security, execute any additional documents, and undertake any reasonable acts the Agency may request to protect the Federal Government interest or to perfect a security interest in any asset, including physical delivery of assets and specific assignments to the Agency. All debt instruments and collateral documents used by an intermediary in connection with loans to ultimate recipients, including all documents representing an interest in a participation loan made pursuant to § 4273.320 of this chapter, must be assignable.

(3) In addition to normal security documents, a first lien interest in the intermediary's IRP revolving loan fund account(s) will be accomplished by a control agreement satisfactory to the Agency. Agency signatures for withdrawals are not required. The depository bank must waive its offset and recoupment rights against the depository account to the Agency and subordinate any liens it may have against the IRP depository bank account. The use of Form RD 402-1, “Deposit Agreement,” or a similar form developed by the Agency's Office of the General Counsel is acceptable.

(f) Loan limits.

(1) No loan to an intermediary will exceed the maximum amount the intermediary can reasonably be expected to lend to eligible ultimate recipients, in an effective and sound manner, within three years after loan closing. Only one Agency IRP loan will be approved by the Agency for an intermediary in any single fiscal year unless the additional request is from an IRP earmark that serves a different geographical area than the initial non-earmarked loan.

(2) The Agency IRP loan to an intermediary will not exceed the maximum award amount established by the Agency in an annual Notice.

(3) Intermediaries that have received one or more Agency IRP loans may apply for and be considered for additional Agency IRP loans provided that the outstanding loans of the intermediary's IRP revolving loan fund are generally sound, the intermediary is in compliance with all applicable regulations and its loan agreements with the Agency, and either:

(i) The intermediary has insufficient IRP revolving loan funds available for lending to meet current and expected ultimate recipient loan demand. Funds available for lending consist of Agency IRP loan funds not yet disbursed by the Agency, revolved funds, and cash on-hand in the IRP revolving loan fund. Necessary cash reserves including, but not limited to, debt service reserves, may be deducted from the IRP revolving loan fund cash on-hand in determining funds available for lending. The intermediary must provide documentation acceptable to the Agency of the current and expected ultimate recipient loan demand; or

(ii) The Agency IRP loan will serve a geographic area not included in an area currently served by an existing IRP intermediary and it is not possible or feasible to expand the existing IRP loan's service area to include the new geographic area; and

(4) Total outstanding IRP indebtedness of an intermediary to the Agency will not exceed $15 million at any time.