§ 1980.110 - Loan subsidy rates, claims, and payments (for EM actual loss loans only).

Loan subsides are payments made by the Agency to lenders to induce them to service and collect guaranteed EM loans.

(a) Subsidy rates. The Agency will establish subsidy rates periodically. Thus, the subsidy rate may vary from time to time. However, the subsidy rate set forth in the Loan Note Guarantee will remain constant during the life of the loan guarantee. The subsidy rate will be a rate equal to the difference, if any, between the interest rate charged to the borrower and any higher annual rate prevailing in the private market for similar loans as determined by the Secretary of Agriculture. The lender may contact the local County Supervisor servicing the area to obtain the current subsidy rate. (See FmHA Instruction 440.1, exhibit B, a copy of which is available in any the Agency Office.)

(b) Annual subsidy claims and payments. The initial subsidy claim will be prepared by the lender using Form FmHA 1980-24, “Request Interest Assistance/Interest Rate Buydown/Subsidy Payment to Guaranteed Loan Lender,” on or about 12 months from the date of the note. The original will be mailed by the lender to the County Supervisor. Subsequent subsidy claims will be filed by the lender on or about 12 months thereafter, but no later than the anniversary date of the filing of the initial subsidy claim. Upon full payment of a note, assumption or transfer, the Agency purchase of a guaranteed loan, or a substitution of lender, the lender will immediately prepare Form FmHA 1980-24 and mail the original to the County Supervisor.

(c) When subsidy payments cease. When the Agency purchases a guaranteed portion of a loan, subsidy payments on that portion will cease. Loan subsidy payments will also cease when the Loan Note Guarantee terminates.