[Federal Register Volume 63, Number 25 (Friday, February 6, 1998)]
[Rules and Regulations]
[Pages 6045-6063]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-3044]
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Rules and Regulations
Federal Register
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Federal Register / Vol. 63, No. 25 / Friday, February 6, 1998 / Rules
and Regulations
[[Page 6045]]
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DEPARTMENT OF AGRICULTURE
Rural Housing Service
Rural Business-Cooperative Service
Rural Utilities Service
Farm Service Agency
7 CFR Parts 1948, 1951 and 4274
RIN 0570-AA15
Intermediary Relending Program
AGENCIES: Rural Housing Service (RHS), Rural Business-Cooperative
Service (RBS), Rural Utilities Service (RUS), and Farm Service Agency
(FSA), USDA.
ACTION: Final rule.
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SUMMARY: The Rural Business-Cooperative Service (RBS) is amending the
regulations for the Intermediary Relending Program (IRP). This action
is needed to clarify and revise procedures and requirements regarding a
variety of issues. The amendments are expected to clarify the roles of
the Government and intermediaries, make the program more responsive to
the needs of intermediaries and ultimate recipients, and facilitate
continuing expansion of the program.
EFFECTIVE DATE: February 6, 1998.
FOR FURTHER INFORMATION CONTACT: M. Wayne Stansbery, Loan Specialist,
Rural Business-Cooperative Service, USDA, STOP 1521, 1400 Independence
Ave, S.W., Washington, DC 20250. Telephone (202) 720-6819. The TTD
number is (800) 877-8339 or (202) 708-9300.
SUPPLEMENTARY INFORMATION:
Classification
This rule has been determined to be significant and was reviewed by
OMB under Executive Order 12866.
Programs Affected
The Catalog of Federal Domestic Assistance program impacted by this
action is: 10.767, Intermediary Relending Program.
Program Administration
Due to reorganization actions within the Department of Agriculture,
the Intermediary Relending Program is currently administered by RBS.
RBS is a successor to the Rural Development Administration, which was a
successor to the Farmers Home Administration.
Paperwork Reduction Act
Under the Paperwork Reduction Act of 1995, no persons are required
to respond to a collection of information unless it displays a valid
OMB control number. The valid OMB control number assigned to the
collection of information in these final regulations is displayed at
the end of the affected section of the regulations. The reporting and
recordkeeping requirements contained in this regulation have been
approved by the Office of Management and Budget under the provisions of
44 U.S.C. chapter 35 and have been assigned OMB control number 0570-
0021 in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C.
3507)
Intergovernmental Review
As set forth in the final rule related notice to 7 CFR part 3015,
subpart V, 48 FR 29115, June 24, 1983, Intermediary Relending Loans are
subject to the provisions of Executive Order 12372 which requires
intergovernmental consultation with State and Local officials. RBS has
conducted intergovernmental consultation with such state and local
officials in accordance with RD Instruction 1940-J, ``Intergovernmental
Review of Farmers Home Administration Programs and Activities.''
Civil Justice Reform
This final rule has been reviewed under Executive Order 12988,
Civil Justice Reform. In accordance with this rule: (1) All state and
local laws and regulations that are in conflict with this rule will be
preempted; (2) No retroactive effect will be given to this rule; and
(3) Administrative proceedings in accordance with the regulations of
the Agency at 7 CFR 1900, subpart B, or those regulations published by
the Department of Agriculture at 7 CFR part 11 to implement the
statutory provisions relating to the National Appeals Division as
mandated by the Department of Agriculture Reorganization Act of 1994
must be exhausted before filing suit to challenge action taken under
this rule.
Environmental Impact Statement
This document has been reviewed in accordance with 7 CFR part 1940,
subpart G, ``Environmental Program.'' RBS has determined that this
action does not constitute a major Federal action significantly
affecting the quality of the human environment, and in accordance with
the National Environmental Policy Act of 1969, Pub. L. 91-190, an
Environmental Impact Statement is not required.
Regulatory Flexibility Act
In compliance with the Regulatory Flexibility Act, RBS has
determined that this action would not have a significant economic
impact on a substantial number of small entities because the action
will not affect a significant number of small entities as defined by
the Regulatory Flexibility Act (5 U.S.C. 601). RBS made this
determination based on the fact that this regulation only impacts those
who choose to participate in the grant program. Small entity applicants
will not be impacted to a greater extent than large entity applicants.
The Unfunded Mandates Reform Act of 1995
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Pub.
L. 104-4, establishes requirements for Federal agencies to assess the
effects of their regulatory actions on state, local, and tribal
governments and the private sector. Under section 202 of the UMRA, RBS
must prepare a written statement, including a cost-benefit analysis,
for proposed and final rules with ``Federal mandates'' that may result
in expenditures to State, local or tribal governments, in the
aggregate, or to the private sector, of $100 million or more in any one
year. When such a statement is needed for a rule, section 205 of UMRA
generally requires RBS to identify and consider a reasonable number of
regulatory alternatives and adopt the least costly, more cost effective
or least burdensome alternative that achieves the objectives of the
rule.
This rule contains no Federal mandates (under the regulatory
provisions of title II of the UMRA) for State, local, and tribal
governments or
[[Page 6046]]
the private sector. Thus this rule is not subject to the requirements
of sections 202 and 205 of UMRA.
National Performance Review
This regulatory action is being taken as part of the National
Performance Review program to eliminate unnecessary regulations and
improve those that remain in force.
Implementation
It is the policy of this Department that rules relating to public
property, loans, grants, benefits or contracts shall comply with 5
U.S.C. 553 notwithstanding the exemption of that section with respect
to such rules. Accordingly, this rule has previously been published as
a proposed rule, on January 18, 1995 (60 FR 3566), for public comment.
However, we are making this action effective upon publication of this
final rule rather than 30 days after publication. The net impact of
this rule is to interpret and clarify previous requirements, remove
restrictions, streamline requirements, and make the program a more
flexible and effective tool for rural economic development. Therefore
the Agency has determined that further delay in implementation of this
rule would not be in the public interest.
Background
This regulatory package is an initiative to enhance the program
through revisions based on experience with operation of the program.
The primary changes include the following:
1. The regulation is completely reorganized for improved clarity.
2. Definitions are provided for ``Agency IRP loan funds,'' ``IRP
revolving fund,'' ``revolved funds,'' and ``technical assistance.''
Throughout the document, clarifications are provided as to which
requirements apply only to Agency IRP loan funds, which apply to
revolving funds, and which apply to all assets in the IRP revolving
fund.
3. Agency State Offices are authorized to accept and process all
applications except those from applicants located within Washington,
D.C.. Those applications will be processed by the National Office.
4. Eligibility requirements for intermediaries are revised to
clarify that a proposed intermediary that does not have lending
experience may still qualify for a loan, if it will arrange for
services of people with lending experience.
5. Eligibility requirements are revised to provide that proposed
intermediaries with a delinquent outstanding Federal debt are not
eligible for program assistance.
6. Eligibility requirements are provided for ultimate recipients.
7. Eligible purposes for loans to ultimate recipients are revised
to authorize loans for refinancing, management consulting fees,
educational institutions, commercial fishing, revolving lines of
credit, and hotels, motels and other recreation and tourism facilities
(except golf courses, gambling and race tracks).
8. Security requirements are revised.
9. General guidelines are provided for interest rates and terms of
loans to ultimate recipients, along with clarification that such rates
must be within limits established in the intermediary's work plan.
10. Loan ceilings are revised to provide that, subject to certain
conditions, intermediaries may receive a series of subsequent loans of
up to $1 million each to a combined total of up to $15 million. The
ceiling on loans to an ultimate recipient is raised to $250,000.
11. The intermediary's responsibilities for maintaining and
managing the intermediary revolving fund are clarified and a provision
is added for establishment of a reserve for bad debts.
12. Loan disbursement procedures are revised to allow
intermediaries to draw up to 25 percent of their loan at loan closing.
The funds may be placed in an interest bearing account if they are not
immediately needed for loans to ultimate recipients.
13. The requirement for intermediaries to operate in accordance
with an approved work plan is clarified and guidelines are provided for
RBS approval of work plan revisions.
14. The contents of a complete application and work plan are
revised to eliminate some unnecessary items, provide more detail on
what should be covered regarding relending plans, add certifications
regarding debarment, Federal debt collection policies, and lobbying,
and provide for streamlined applications for subsequent loans.
15. The priority point scoring system is revised.
16. The requirement for a certification by the intermediary
regarding equity is removed.
17. Guidelines are provided for information to be submitted to RBS
regarding proposed loans to ultimate recipients and for RBS review and
response to the information.
Discussion of Comments
This rule was published in the Federal Register as a proposed rule
on January 18, 1995 (60 FR 3566). The proposed rule was published as a
revision to 7 CFR part 1948, subpart C. This final rule also renumbers
and redesignates the regulation as 7 CFR part 4274, subpart D. In
addition to publishing the proposed new regulation text for public
comment, the Agency specifically invited comments on several
alternatives. Eighty comments were received, most of which contained
comments on several issues. In general, the letters were very
supportive of the IRP and of the proposed rule. A summary of the
comments follows.
Section 1948.101(b) of the proposed rule included a broad purpose
statement in compliance with the authority contained in the authorizing
legislation. In response to a question asked by the Agency, 20 writers
said it would be helpful to have a more detailed and descriptive
mission statement in the regulation to set out the Agency intent to
emphasize alleviation of poverty, aid disadvantaged and remote
communities, assist smaller and emerging businesses, improve the
partnership with other public and private resources, and further
develop State and regional strategy based on identified community
needs. Nine writers thought the language in the proposed rule text was
adequate and that it would be better to have less, rather than more,
restrictive language in the purpose statement. The final rule contains
a purpose statement that clarifies what the Agency wants to emphasize
while maintaining sufficient flexibility to approve the loan purposes
set out in the eligible purposes section.
The proposed rule text would prohibit intermediaries from loaning
for revolving lines of credit. The Agency also asked for comments on
whether this is a service intermediaries should be providing. Ten
writers thought that loans for revolving lines of credit should not be
eligible. Some thought there is not much need. Others said this type of
credit entails too much risk and intermediaries would not have the
special expertise needed.
Twenty-eight writers felt that there is a crucial need for
revolving credit lines for small businesses and that intermediaries
should have the option of offering this service if they do have
expertise. The Agency is convinced that a significant need exists for
this type of credit, so the final rule allows intermediaries to provide
revolving lines of credit, if they meet guidelines that are included.
The proposed rule would allow intermediaries to make loans up to
$250,000. The Agency asked, however, if it might be appropriate to
retain the previous loan limit of $150,000. This
[[Page 6047]]
issue received more comments than any other single issue in the
proposed rule. Eleven writers were in favor of a $150,000 limit,
indicating that smaller loans are more difficult to obtain elsewhere
and that the program should be targeted toward small loans and small
businesses. However, 50 writers supported an increased loan limit of
$250,000. Many said they would not need that authority often, but
occasionally there is a very real need. Some thought the limit should
be even higher or the proposed restriction on the portion of the
portfolio that may be invested in loans of over $150,000 should be
removed.
The strong support by the comments, for the proposed higher limit,
reinforces the Agency belief that more flexibility is needed to allow
intermediaries to decide what size projects are best in their areas.
Therefore, the language of the proposed rule on this issue is retained
in the final rule.
The Agency requested comments on appropriate outcome and
performance measures and reporting requirements for the intermediary
loan funds financed by the program, and for the funded activities of
the ultimate recipients of the loans. Twenty-five writers commented on
this issue, but there was little consensus. Most writers recognized the
need for information for program evaluation, but most were also
concerned about the amount of burden on intermediaries to provide
information. Five writers thought the program should be evaluated on
little more than the amount of funds loaned out and the repayment to
the Agency. Six said reports should be made to the Agency on an annual
or semi-annual basis rather than quarterly. Fourteen writers thought
the number of jobs created or saved should be an evaluation criterion.
Three considered leveraging of other funds an item that should be
monitored. Three indicated that the fund balance, net profit, and
solvency of the intermediary should be considered. Five writers
suggested monitoring trends in the tax base of the service area as an
indicator of the success of an intermediary's program. One writer
suggested the Agency check on standard revolving loan fund reporting
requirements developed by the Economic Development Administration.
Other possible measures or report items suggested by 1 or more writers
included sales volume, taxes paid and gross payroll of ultimate
recipients, Standard Industrial Classification of ultimate recipients,
summary of delinquent loans and actions taken, accomplishments
regarding public policy, networking, outreach, and technical
assistance, housing units and square feet of facilities constructed,
and unemployment rate and per capita income trends in service area.
Comments were requested on this issue as a tool to obtain ideas. There
was no consensus among the writers, and the Agency believes more study
is needed before making regulatory changes. No change from the proposed
rule has been made in the final rule regarding this issue. The Agency
will continue, however, to work on the development of an improved
reporting form.
The proposed rule text would require intermediaries to have a
successful lending record or to bring individuals with loan making and
servicing experience and expertise into the operation. In the interest
of enabling more socially oriented community-based organizations to use
the program, the Agency asked for comments on allowing loans to
intermediaries that have experience in assisting rural business or
community development, but not lending experience.
Several writers expressed the desire to be sure of flexibility as
to how such expertise may be achieved when the applicant intermediary
does not have the experience in-house prior to filing the application.
Hiring new staff with the needed experience, contracting for services,
and creating a review or advisory board with experienced lenders as
members are all options that one or more writers wanted to be sure were
available. Only six writers advocated not requiring lending experience
in some form for intermediary eligibility. Twenty six writers felt
lending experience is important. Several writers were quite adamant
that intermediaries cannot be expected to be successful and should not
be approved unless they have lending experience or will acquire the
services of someone with lending experience before receiving Federal
funds.
It was the intent of the proposed rule language to require lending
experience in some form, but to allow considerable flexibility as to
how the experience is brought into the intermediaries' decision
processes. A preponderance of the writers seemed to agree with that
concept. Therefore, no change from the proposed rule language is made
in the final rule on this issue.
The proposed rule text requires that at least 51 percent of the
ownership interest or membership of both intermediaries and ultimate
recipients be citizens of the United States or legally admitted to the
United States for permanent residence. The Agency asked for comments on
the concept of allowing loans to ultimate recipients owned by persons
who are not United States citizens or admitted for permanent residence,
provided the project funded creates or retains jobs for U.S. residents.
Such loans would be restricted to fixed assets located in the U.S. and
the business would have to have managers that are U.S. citizens or
legally admitted to the U.S. for permanent residence. Seventeen writers
expressed approval of the concept. They generally indicated that this
provision would help to create jobs and that foreign investment may be
particularly helpful to the U.S. economy. Three writers opposed this
concept, generally on the grounds that profits from businesses with
Federal assistance should not leave the country. Since the publication
of the proposed rule, questions have been raised as to how this
provision may relate to provisions of the Welfare Reform Act. Because
of uncertainty regarding that issue, the change allowing the ultimate
recipients to not be citizens or lawfully admitted residents has not
been adopted in the final rule.
The Agency asked for comments on revising the eligible loan
purposes for loans to ultimate recipients to include management
consultant fees. Five writers were opposed to making management
consultant fees an eligible loan purpose. They pointed out that if
management is a problem it should be solved before a loan is approved
and that Small Business Development Centers and the Service Core of
Retired Executives can assist with management questions. They did not
think the services the ultimate recipients would receive would be worth
the cost or would improve repayment ability.
Nineteen writers thought intermediaries should be able to offer
loans for management consultant fees. This group of writers tended to
believe that management consultants would be likely to help some
businesses enough for the business to become successful and to return
additional profits sufficient to pay for the cost of the consultant
fees. This group also tended to believe that intermediaries should be
able to make the decision, without federal restriction. The Agency
agrees that this use of funds could be effective in some cases and that
intermediaries should be able to decide if this assistance should be an
eligible loan purpose. The final rule includes management consultant
fees as an eligible loan purpose for loans to ultimate recipients.
The Agency requested comments on a suggestion to revise the
eligible loan
[[Page 6048]]
purposes to allow intermediaries to use IRP funds to provide direct
technical assistance to ultimate recipients or prospective recipients.
Ten of the respondents did not believe it is financially feasible to
fund technical assistance from IRP loan funds. If the intermediary is
allowed to use part of the funds loaned by the Agency to pay for the
intermediary's costs for providing assistance to ultimate recipients,
then that amount of funds is no longer available to be loaned to
ultimate recipients. Therefore, that amount of funds is owed by the
intermediary to the Agency, but is not producing revenue for the
intermediary. This group of respondents indicated that all funds
received by the intermediary from the agency should be reloaned by the
intermediary to generate repayment ability.
Twenty respondents favored allowing IRP funds to be used by the
intermediary to pay costs of providing technical assistance, primarily
based on the grounds that such assistance is needed for many potential
ultimate recipients to become successful. The Agency agrees that
technical assistance is a valuable tool for assisting new or struggling
businesses and the ability to provide more or better technical
assistance would enable intermediaries to assist more businesses in
communities where the assistance is most needed. However, the Agency
agrees with the commenters questioning the financial feasibility of the
concept. No one has solved the problem of how an intermediary would
repay the funds it used to pay for technical assistance. No change from
the proposed rule is made on this issue.
When the IRP was initiated in 1988, the security required for most
loans to intermediaries was a blanket pledge of the IRP revolving fund.
In 1991, the regulation was revised to require assignments on all
promissory notes and security documents. The proposed rule attempted to
clarify, but not change, the requirement that promissory notes be
transferred to the Agency and assignment documents be provided but not
recorded. Intermediaries have complained from time to time about being
required to provide the assignments and the Agency asked for comments
on whether the providing of assignments is an inordinate burden on the
intermediary.
Forty-two respondents to the proposed rule said the assignments
should not be required and seven said they did not object to continuing
the assignments. The objectors generally cited such things as the legal
costs for having assignments prepared, the administrative burden on
both the intermediary and the Agency of transferring documents back and
forth and monitoring them, and the additional complications of
releasing paid-in-full loans, foreclosure, and other servicing actions.
Those that did not object generally indicated that the burden of
assignments is not great and the requirement is consistent with sound
lending practice. In the interest of reducing administrative burden on
both intermediaries and Agency staff and providing more flexibility for
intermediaries to operate their programs, the requirement for
assignments has been removed from the final rule.
Three writers objected to the requirement that intermediaries
agree, in the loan agreement, to provide additional security as the
Agency may require at any time during the life of the loan if an
assessment indicates the need for such security to protect the
Government's interest. When the original IRP regulation was published
in 1988, four writers objected to this provision. It was retained then
because the Agency believed that it was needed to protect the
Government's interest. The basic concept is retained now for the same
reason, although the language has been amended as part of the amended
security requirements. The assets of a revolving fund, which make up
the security for most IRP loans, continually change. The value can
easily deteriorate, either because of economic conditions outside the
control of the intermediary or because of poor decisions by the
intermediary. In such cases, if the intermediary has other assets that
could be used to repay the IRP loan, the Agency has a responsibility to
the taxpayers to use whatever tools are available to ensure loan
repayment.
Current regulations require intermediaries to obtain the
Government's review and concurrence in the IRP loans the intermediaries
propose to make to ultimate recipients. The proposed rule clarifies the
limited scope of review required for concurrence and also clarifies
that the requirement for review and concurrence applies only when
Federal loan funds are involved. The requirement does not apply to
loans made from the revolving fund from collections on previous loans.
In addition, the Agency requested comments on a suggestion to exempt
intermediaries that have demonstrated a successful track record of
lending IRP funds and servicing loans from the requirement or to simply
not require Government review and concurrence on loans to ultimate
recipients made from subsequent loans to intermediaries.
Thirty-nine respondents to the proposed rule said that Agency
review and concurrence should not be required for intermediaries that
have established a successful record. Several of those respondents
would like all prior Agency review eliminated, even on initial loans.
One said Agency review and concurrence is not a burden and should be
continued. One indicated Agency review and concurrence helps protect
the intermediary against the possibility of future findings that a loan
was not eligible and the process would not be a burden if it did not
include an environmental impact assessment and intergovernmental
consultation. The objectors generally seemed to feel that Agency review
is an unnecessary additional step that slows service to the ultimate
recipients. An intermediary is reviewed before its loan is approved for
ability to carry out the program and then monitored through periodic
visits, reports, and audits. The intermediaries would like the ability
to make their day-to-day lending decisions independently.
The Agency has determined that loans to ultimate recipients made
from Agency IRP loan funds, regardless of whether the funds are from an
initial or subsequent loan to an intermediary, constitute Federal
financial assistance. Therefore, the Agency has a responsibility to
ensure that the funds are used for authorized purposes. More
specifically, the National Environmental Policy Act imposes certain
responsibilities on the Agency to consider environmental impacts and
Executive Order 12372 imposes responsibilities on the Agency to provide
opportunity for intergovernmental consultation and consider comments
from designated representatives of State government before approving
the financial assistance. These are specific requirements imposed on
the Agency that the Agency does not have legal authority to delegate or
to fail to perform. The Agency cannot meet these responsibilities
unless it retains prior approval authority for all loans to ultimate
recipients that are made from agency funds. No change from the proposed
rule in made on this issue.
Intermediaries are required to establish separate bookkeeping
accounts and bank accounts for the IRP revolving fund. Intermediaries
that receive more than one IRP loan are required to establish a
separate revolving fund with separate accounts for each loan. The
proposed rule would allow the funds to be combined with Government
consent and under certain conditions. The
[[Page 6049]]
Agency invited comments on the alternative of allowing the funds to be
combined without Government consent unless the purposes of the loans
were significantly different.
Thirty-eight writers commented on this issue and all of them were
opposed to keeping separate accounts if it can be avoided. The Agency
is generally in agreement, but there are situations where there is no
logical alternative to separate funds. For example, there are several
intermediaries now that have one loan made without a requirement for
assignments of promissory notes and collateral documents to the Agency
and another loan that does have that requirement. To know which
ultimate recipient loans must have assignments, such an intermediary
must either keep separate funds or provide assignments for all loans.
The decision to remove the requirement for assignments will solve this
issue, but there may be other similar issues in the future.
The real issue, therefore, appears to be whether the burden should
be on the intermediary to request consent to combine funds when it may
be appropriate or on the Agency to impose the requirement for separate
funds when necessary. To accommodate the comments to the extent
feasible, the final rule has been amended from the proposed rule to
place the burden on the Agency to impose the requirement when
necessary.
The Agency invited comments on the intergovernmental and
environmental review requirements referenced in the proposed rule and
how they could be further streamlined. Four respondents indicated that
environmental assessments are important and not much can be done to
make the process more streamlined than it already is. Twenty-six
respondents thought the environmental review and the intergovernmental
consultation process is excessive. Most of the comments were in
reference to environmental concerns. Several comments appeared to
indicate that the writers were considering environmental review in
terms of protection against reduced collateral value due to site
contamination with hazardous material. That is a credit quality issue
and most of the Agency environmental review procedure does not address
that issue. The Agency review is addressed toward assessing the
possibility that financing the proposed project will result in some
future environmental impact. Some of the suggestions were for
procedures that are already authorized under Agency regulations and
some were for items that would put the Agency in violation of its
environmental responsibilities.
The National Environmental Policy Act (NEPA) and the regulations of
the Council on Environmental Quality require environmental assessments
of proposed Agency actions and sets out general procedures and
requirements for meeting the requirements. Executive Order 12372
requires an opportunity for State comments on proposed Federal actions
and sets out general procedures. The Agency is always looking for ways
to meet these requirements more rapidly and in a manner more convenient
for the people the Agency serves. The comments have not identified
further changes that could be made at this time that would streamline
the process and keep the Agency in compliance with NEPA and Executive
Order 12372. Therefore, no changes from the proposed rule have been
made regarding these issues.
In connection with implementation of the proposed rule the Agency
plans to begin using a printed form as a loan agreement rather than
preparing a loan agreement for each loan based on an exhibit to the
regulation. Comments were invited on a possible additional step of
having one loan agreement serve for multiple loans to the same
intermediary by having a supplemental loan agreement extending the
coverage of the original loan agreement to include the additional loan
executed at loan closing for each subsequent loan.
One writer thought that it was a good idea to have a new loan
agreement for each loan as new members of the board or management team
would be more likely to read it if a new agreement must be signed.
Twenty-eight writers were in favor of simply having an amendment or
supplement to the original loan agreement for subsequent loans.
Accordingly, the final rule provides for a supplemental loan agreement
to be executed in connection with subsequent loans to make the original
loan agreement applicable to the subsequent loan.
The Agency asked for comments on several alternative application
requirements recommended by a task force but not incorporated into the
proposed rule text. Nine writers were generally in favor of the
suggested further revisions to the application. One of these writers
said intermediaries would have the information and could share it.
Another was willing to trade more due diligence at the application
stage for more independence later. Eight writers were opposed to the
additional application information. They generally seemed to feel that
the language in the proposed rule text is adequate and the changes
suggested would complicate the process, make it more time consuming,
require more paperwork, and cause more inconsistencies.
The task force recommended application requirements be further
revised, in section 1948.122(a)(2)(iii) of the proposed rule, to
provide that the demonstration of need could be met through targeting
criteria and supporting evidence that such prospective ultimate
recipients exist in sufficient numbers to justify funding the
intermediary's request. One of the writers was adamant that the show of
need should not be based on targeting information, but rather, better
documentation should be required to show that an adequate number of
potential ultimate recipients exist. The Agency believes that it is
important to realize that need for jobs does not necessarily equal
demand for business loans. To create loan demand, there must also be
existing or potential businesses willing and able to borrow and repay
funds for startups or expansion. The Agency does, however, want to
encourage the identification of areas of greatest need and target
program assistance to those areas when feasible. Therefore, the final
rule includes the option to include targeting information in the
demonstration of need, provided it is accompanied by evidence that such
prospective ultimate recipients exist in sufficient numbers to justify
the loan.
The task force recommended further revising the application
requirements by requiring the proposed intermediary to provide a set of
goals, strategies, and anticipated outcomes for its program and a
mechanism for evaluating the outcome of its IRP loan program. The
Agency believes it is important for intermediaries to develop goals,
strategies, and anticipated outcomes in order to obtain the maximum
result from program funds. Therefore, the final rule includes a
requirement for goals, strategies and anticipated outcomes for the
intermediary's IRP loan program. To avoid further increasing the
paperwork burden, there is no requirement included for a method of
measuring outcome. The Agency will continue to study ways to measure
outcomes in a consistent manner throughout the country.
The task force also recommended requiring each proposed
intermediary to provide specific information on how it will ensure that
technical assistance will be made available to ultimate recipients. The
Agency believes that having technical assistance available to ultimate
recipients may be an important factor in the success of many revolving
loan funds. However, some intermediaries may not be able to
[[Page 6050]]
arrange for such services but can operate a successful relending
program without it. Such intermediaries should not be denied
assistance. Therefore, the final rule requires applicants to describe
what technical assistance will be available to its ultimate recipients,
without requiring that such assistance be universally available.
As proposed, priority points for community representation are
limited to intermediaries with service areas not exceeding 10 counties.
The Agency believes it should retain the category to encourage local
participation in intermediary management, but remove some of the
objections raised. The change to 14 counties is adopted in the final
rule.
The Agency invited comments on further modifications to proposed
scoring criteria to place greater emphasis on such factors as community
and beneficiary targeting, conformance with regional or community
development plans, and encouragement of smaller-size loans, with
proportionately less emphasis on the intermediary's own resources and
its ability to leverage funds.
Regarding the reduction of priority points for leveraging and
intermediary contribution, six writers commented in favor and eleven
commented in opposition, primarily based on differences of opinion on
what is most important for the public good.
Regarding the creation of a new category of points for smaller
loans, three writers were in favor and sixteen were opposed. The
opposition seemed to be based on belief that the size of loans has
little or no impact on the effectiveness of the program, intermediaries
need flexibility to meet the needs in their particular areas, and
intermediaries could too easily say they were going to make small
loans, to get the points, and then not do it.
Regarding the awarding of points to intermediaries that propose to
operate in accordance with a strategic plan, particularly one developed
for an empowerment zone or enterprise community, writers were nearly
equally divided, on philosophical grounds, with eight commenting in
favor and nine commenting in opposition.
In the final rule, the reductions in points for leveraging are
adopted, to shift more relative weight toward social factors. The
previous points for intermediary contribution are maintained because
that is a very important contributor to improved collectability of the
Agency's loan. The suggested new points for small loans are not adopted
because we believed that such a change would detract from program
effectiveness. The suggested language regarding strategic plans and
Empowerment Zones and Enterprise Communities is adopted as guidance for
items that could justify Administrator points because the Agency
generally wants to encourage strategic planning and assistance to
Empowerment Zones and Enterprise Communities.
Also, an additional category of priority points has been added
based on reduction in population of the service area. This was done
because it came to the Agency's attention after the comment period was
over that some areas have a low unemployment rate because of out
migration. The percentage of the population seeking employment is low
because many of the people needing employment have already left.
Therefore, unemployment rate alone does not adequately reflect the need
for economic development and jobs to enable the existing population to
stay and former residents to return.
The proposed rule would require intermediaries to establish a bad
debt reserve in the amount of 15 percent of the IRP portfolio unless a
different amount is justified by the intermediary and approved by the
Agency. The Agency asked for comments on whether 15 percent of the IRP
portfolio is an appropriate amount of bad debt reserve for most
intermediaries.
Most writers that commented on this issue agreed that a bad debt
reserve is needed and sixteen writers thought 15 percent was an
acceptable amount.
However, twenty-six writers disagreed with the 15 percent, with
most of them saying it is too high. Many of the writers wanted the
amount of the reserve required for each intermediary to be established
based on that intermediary's history and situation. The Agency agrees
that there should be flexibility, and the proposed rule language would
allow for flexibility, but the Agency also wants to provide a general
guideline from which adjustments can be made as appropriate. From the
writers who mentioned any particular amount, most suggestions ranged
between 3 and 10 percent of the portfolio. The final rule adopts a
guideline amount of six percent because the program history seems to
justify that amount as sufficient for the losses that have occurred.
The proposed rule would remove a general prohibition on loans for
recreation and tourism facilities, but retain a prohibition on loans
for hotels, motels, bed and breakfast establishments, and convention
centers. Thirty-nine writers favored making hotels, motels, bed and
breakfasts and convention centers eligible, compared to three who
agreed with keeping them ineligible. It was pointed out that such
facilities are very important to the potential economic development of
many rural areas and that it is unfair to treat them as a group rather
than consider each on its own merits.
The final rule adopts hotels, motels, bed and breakfasts, and
convention centers as eligible. The Agency agrees that such facilities
can be an important economic development tool in some areas and that
each should be evaluated on its own merits.
One writer wanted virtually unrestricted use of IRP for financing
agricultural production. The Agency believes that agricultural
production is a specialized type of financing, the Department of
Agriculture has special lending programs for agricultural production,
and IRP should, for the most part, be restricted to other general
business development. The recommendation is not adopted.
One writer wanted cranberry production to be made an eligible loan
purpose, and pointed out that Senate Report 103-290, ``Agriculture,
Rural Development, Food and Drug Administration, and Related Agencies
Appropriation Bill, 1995,'' suggested the Department to make regulatory
changes to allow Maine cranberry growers to qualify for IRP assistance.
The Agency has determined that singling out one product, such as
cranberry production, as an exception to the prohibition on loans for
agriculture production is not justified. Therefore, the suggestion
regarding cranberries is not adopted and other exceptions to the
prohibition are also eliminated.
One writer said that commercial fishing should be an eligible loan
purpose. Commercial fishing was inadvertently made ineligible through
the definition of agriculture production. The recommendation is adopted
by revising the definition.
Six writers were opposed to the provision that would limit
subsequent loans to intermediaries to $1 million per year. These
writers prefer that the loan amounts be limited only by factors such as
the intermediary applicant's lending record or the demand for funds in
the service area. The demand for funds is very difficult to determine
accurately and may change drastically with little or no notice. Slow
use by intermediaries of approved loan funds is still a major Agency
concern in IRP in spite of Agency efforts to limit loan amounts
according to demand. Limiting all subsequent loans to $1 million per
year reduces the likelihood that intermediaries will borrow more than
they can use in 1 year. The demand by
[[Page 6051]]
intermediaries for IRP funds from the Agency far exceeds the available
funds. Limiting subsequent loans to $1 million per year will help to
ensure distribution of each year's available funds to more applicants,
while still allowing intermediaries with large needs to eventually
obtain large amounts of funds. This provision of the proposed rule is
unchanged.
Three writers requested that the term underrepresented be defined.
The final rule includes a definition of underrepresented group as a
group of U. S. citizens with identifiable common characteristics that
have not received IRP assistance or have received a lower percentage of
total IRP dollars than the percentage the group represents of the
general population.
Three writers wanted intermediaries to be allowed to use IRP funds
to guarantee loans, as a alternative to making direct loans to ultimate
recipients. They were apparently interested in the intermediaries
having greater flexibility to determine how to best use the IRP funds
to meet the needs of their service areas.
The Agency feels that an important benefit of the IRP is that, due
to the low cost of money provided by the Agency and the nonprofit
nature of most intermediaries, intermediaries can often offer below
market interest rates to businesses that cannot afford market rates. By
offering guarantees rather than direct loans, the interest rate would
be established by commercial lenders, based on their cost of money and
profit goals, and the interest rate advantage would be lost. Offering
loan guarantees instead of direct loans also brings in a new set of
management concerns and risks. Guaranteeing a loan does not require any
cash, so the IRP loan funds would not be ``used'' to make the
guarantee. Guaranteeing a loan creates a contingent liability,
requiring the guarantor to pay an unknown amount at an unknown future
date in the event a loss occurs. Presumably, IRP funds would be placed
by the intermediary in secure investments and held to be available to
pay losses if necessary. Some intermediaries might use this type of
program as an excuse to place an excessive amount of funds in safe
investments to accumulate interest earnings rather than help ultimate
recipients. Other intermediaries might place too small an amount in
safe investments and then be unable to meet their commitments in the
event of losses that exceed expectations. This recommendation is not
adopted.
Two writers wanted intermediaries to be allowed to purchase
participation agreements in bank loans. Many intermediaries cooperate
with banks, making referrals to each other and sharing risks through
joint financing of ultimate recipient needs. The Agency strongly
encourages this cooperation and joint financing. However, we have
required that in a joint financing arrangement, the intermediary and
bank each make a separate loan with separate debt instruments. When an
organization buys a participation agreement it normally is not making a
loan; it is purchasing an investment. The loan is made by the bank. The
bank holds the promissory note and the collateral. The bank does the
loan servicing, collects the payments, and forwards the appropriate
portion of the payment to the holder of the participation agreement.
The holder of the participation agreement has no responsibility for and
no control over the servicing and no direct relationship with the
borrower. It is an investor, not a lender. It would be too easy for the
intermediary to use the purchase of participation agreements as a
mechanism to simply invest in loans the bank would make anyway.
The Agency believes that, to properly carry out the intent of the
program, intermediaries should have a direct lender-borrower
relationship with the ultimate recipients. The intermediary should be
in position to deal directly with the ultimate recipient to service the
loan. If necessary, the Agency should be able to influence the
servicing of the loan by the intermediary or to foreclose on a
defaulted loan to an intermediary and take over the servicing and
collection of the loan to the ultimate recipient.
The IRP regulation has always required intermediaries to make loans
and the Agency has held that buying participations is not making loans.
The word direct was inserted in the proposed rule to further clarify
the intent. The language of the proposed rule is maintained in the
final rule.
Three writers recommended elimination of the provision that
ultimate recipients cannot obtain loans from more than one
intermediary. This recommendation has been adopted. However, the
language has been revised to clarify that the limits on loan amount to
one ultimate recipient apply to the total dollar amount of IRP debt,
regardless of whether it is one loan from one intermediary or several
loans from several intermediaries.
Two writers also objected to the provision that IRP funds cannot
finance more than 75 percent of total project costs. This provision
helps to ensure wider distribution of limited program funds and reduced
risk through ultimate beneficiary contribution or leveraging of other
funding sources, and so the recommendation is not adopted.
Two writers requested a preferred lender status be established for
experienced and successful intermediaries that target assistance to
certain populations. Only one writer indicated what special benefits a
preferred status should carry. Rather than create a special class of
intermediaries, the agency is moving toward providing all the
discretion and benefits it considers reasonable to all intermediaries.
Therefore, the recommendation is not adopted.
The one writer who suggested specific benefits for preferred
lenders proposed a moratorium on loan principal and interest payments
to the Agency so long as the lender met certain performance standards.
If the lender did not maintain the standards, it would lose its
preferred lender status and be expected to resume normal loan
repayment. Presumably, the interest that accrued and the principal that
came due while the moratorium was in effect would be forgiven.
The Agency does not have the legal authority to forgive debt except
in debt settlement situations when it is documented that the borrower
does not have repayment ability. Also, as a matter of good credit
program management, the Agency does not believe loan programs should be
mixed with the characteristics of grant programs. If a grant is
appropriate, the assistance should be authorized as a grant and
recognized as a grant by all parties from the beginning. If a loan is
made, it should be clearly set out in writing exactly what repayment is
required. Then collection should be pursued in accordance with the
lenders rights, so long as the borrower has repayment ability. To set
up a loan with the understanding that a certain payment is required
under normal circumstances but will be reduced under certain conditions
would invite misunderstanding and dispute over the borrower's
liability, create servicing problems, and foster law suits to enforce
or prevent collection. The recommendation is not adopted.
One writer requested that intermediaries be able to provide equity
investment for ultimate recipients. Another requested the conflict of
interest paragraph from the existing regulation be kept in place so
that it applies to all loans from the IRP revolving fund. In the
proposed rule the requirement was moved and would only apply to loans
from Agency IRP loan funds. The conflict of interest paragraph provides
that an intermediary and its principal officers (including immediate
[[Page 6052]]
family) must hold no legal or financial interest or influence in the
ultimate recipient, and the ultimate recipient and its principal
officers (including immediate family) must hold no legal or financial
interest or influence in the intermediary. This not only prevents an
intermediary from using Agency IRP loan funds for equity investment, it
prevents the intermediary from making a loan from Agency IRP loan funds
to an ultimate recipient to which it has provided equity investment
from another source of funding.
The Agency recognizes that there is a need for equity investment or
venture capital for new businesses in rural areas. However, providing
equity investment means purchasing an ownership interest in the
business. The Agency is concerned that if an intermediary is
considering a loan to a business in which it owns an interest, the
intermediary's credit quality analysis and loan approval decision may
be influenced by its desire to assist or protect the value of its
ownership interest. The final rule does not authorize the use of IRP
loan funds for equity investment and the conflict of interest
restriction has been rewritten so that it applies to all loans made
from the IRP revolving loan fund.
One writer wanted the definition of rural to be amended so that
loans could be made to ultimate recipients in cities of up to 50,000
people. The Agency believes that retaining the 25,000 population limit
will help direct the limited funding to the areas of greatest need. The
recommendation is not adopted.
One writer indicated that the definitions of Agency IRP loan funds,
IRP revolving fund, and revolved funds are not sufficiently clear. The
writer wanted a statement included, consistent with an existing
Administrative Notice, to provide that revolved funds are not subject
to the requirements of Agency regulations. The writer also wanted a
paragraph to set out what regulatory procedures are required of
intermediaries administering non-Federal funds. The Agency believes
that the definitions of Agency IRP loan funds, IRP revolving funds, and
revolved funds are as clear as can be achieved. The Agency believes
that the broad statement in the previous regulation regarding non-
federal funds not being subject to the regulations has been the cause
of past confusion about what requirements apply in different
situations. The Agency has intentionally avoided such broad statements
in the new regulation. Also, the Agency intentionally wrote the
proposed rule to apply the requirements differently than under the
Administrative Notice that provided interpretation of the previous
regulation. The Agency has attempted to end the confusion over these
issues by clearly stating in each section of the regulation whether
that section applies to Agency IRP loan funds only or to the IRP
revolving fund. Section 4274.332(a) explains that if the reference is
to the IRP revolving fund, the requirement applies to both revolved (or
non-Federal) funds and Agency IRP loan funds. If the reference is to
Agency IRP loan funds, without reference to the IRP revolving fund,
then the requirement applies only to Agency IRP loan funds. The
language of the proposed rule on this issue is not changed.
One writer recommended the restrictive language regarding interest
rates to ultimate recipients be removed to allow intermediaries
flexibility. The proposed rule only provides a general guideline
regarding how interest rates should be established and requires that
limits be established in the work plan. There is also a provision for
amending the work plan that could be used should the limits established
at the application stage become a problem in the future.
Some guidelines and limits are needed to deal with two extremes
that continue to occur from time to time. Some intermediaries propose
to charge interest rates so low that sufficient revenues would not be
produced to maintain the revolving fund and meet the repayment schedule
to the Agency. These intermediaries must be counseled and encouraged to
plan for higher rates in order for the loan from the Agency to be
feasible. There are other intermediaries that propose interest rates so
high that it raises questions as to whether the intermediary is trying
to help ultimate recipients and the community or just trying to bring
in revenues.
The Agency believes that the language in the proposed rule gives
the intermediary considerable flexibility while also providing
sufficient guidelines to allow the Agency to prevent unreasonable
extremes. The recommendation is not adopted.
One writer requested that the ban on loans to charitable and
educational institutions be removed because they can be valid
businesses. Another writer wanted certain organizations that the writer
considered charitable to be eligible. The prohibition of loans to
educational institutions has been removed in the interest of allowing
more flexibility and the reference to charitable has been clarified.
The Agency's concern is that loans not be made if the recipient will
depend on donations, rather than sales or fees, to repay the loan or
administer the revolving loan fund.
One writer objected to the requirement that the intermediary's
interest in insurance required of the ultimate recipient be assigned to
the Agency. The Agency agrees that valid assignment of all such
insurance is an unnecessary administrative burden. The final rule has
been modified to require assignments of insurance only if the
intermediary is in default.
In addition to responding to the public comments, the final rule
differs from the proposed rule by providing that any applicant that is
delinquent on any Federal debt is not eligible to receive assistance
from Agency IRP funds. This provision was added to comply with Public
Law 104-132 dated April 26, 1996 (31 U.S.C. 3720B).
Lists of Subjects
7 CFR Part 1948
Business and industry, Credit, Economic development, Rural areas.
7 CFR Part 1951
Loan programs--Agriculture, Rural areas.
7 CFR Part 4274
Community development, Economic development, Loan programs--
Business, Rural areas.
Accordingly, Title 7, Chapters XVIII and XLII, of the Code of
Federal Regulations are amended as follows:
CHAPTER XVIII--RURAL HOUSING SERVICE, RURAL BUSINESS-COOPERATIVE
SERVICE, RURAL UTILITIES SERVICE, AND FARM SERVICE AGENCY, DEPARTMENT
OF AGRICULTURE
PART 1948--RURAL DEVELOPMENT
1. The authority citation for part 1948 is revised to read as
follows:
Authority: 5 U.S.C. 301, 7 U.S.C. 1932 note.
Subpart C--[Removed and Reserved]
2. Subpart C, part 1948 is removed and reserved.
PART 1951--SERVICING AND COLLECTIONS
3. The authority citation for part 1951 has been revised to read as
follows:
Authority: 5 U.S.C. 301, 7 U.S.C. 1932 Note, 7 U.S.C. 1989, 42
U.S.C. 1480.
Subpart R--Rural Development Loan Servicing
4. Section 1951.852(b)is amended by removing the numeric paragraph
designations and by removing the
[[Page 6053]]
abbreviation for ``FmHA or its successor agency under Pub. L. 103-
354''.
5. Section 1951.853 is amended by revising in paragraph (a) the
words ``FmHA or its successor agency under Public Law 103-354'' to read
``the Agency'' and by revising paragraph (b)(2)(ix) to read as follows:
Sec. 1951.853 Loan purposes for undisbursed RDLF loan funds from HHS.
* * * * *
(b) * * *
(2) * * *
(ix) Reasonable fees and charges only as specifically listed in
this subparagraph. Authorized fees include loan packaging fees,
environmental data collection fees, and other professional fees
rendered by professionals generally licensed by individual State or
accreditation associations, such as engineers, architects, lawyers,
accountants, and appraisers. The amount of fee will be what is
reasonable and customary in the community or region where the project
is located. Any such fees are to be fully documented and justified.
* * * * *
6. Section 1951.883 is amended by revising paragraph (a)(2) to read
as follows:
Sec. 1951.883 Reporting requirements.
(a) * * *
(2) Quarterly or semiannual reports (due 30 days after the end of
the period).
(i) Reports will be required quarterly during the first year after
loan closing and, if all loan funds are not utilized during the first
year, quarterly reports will be continued until at least 90 percent of
the Agency IRP loan funds have been advanced to ultimate recipients.
Thereafter, reports will be required semiannually. Also, the Agency may
require quarterly reports if the intermediary becomes delinquent in
repayment of its loan or otherwise fails to fully comply with the
provisions of its work plan or Loan Agreement, or the Agency determines
that the intermediary's IRP revolving fund is not adequately protected
by the current sound worth and paying capacity of the ultimate
recipients.
(ii) These reports shall contain only information on the IRP
revolving loan fund, or if other funds are included, the IRP loan
program portion shall be segregated from the others; and in the case
where the intermediary has more than one IRP revolving fund from the
Agency a separate report shall be made for each of the IRP revolving
funds.
(iii) The reports will include, on a form provided by the Agency,
information on the intermediary's lending activity, income and
expenses, financial condition, and a summary of names and
characteristics of the ultimate recipients the intermediary has
financed.
* * * * *
CHAPTER XLII--RURAL BUSINESS-COOPERATIVE SERVICE AND RURAL UTILITIES
SERVICE, DEPARTMENT OF AGRICULTURE
7. Chapter XLII, title 7, Code of Federal Regulations is amended by
adding a new part 4274 to to read as follows:
PART 4274--DIRECT AND INSURED LOANMAKING
Subparts A-C--[Reserved]
Subpart D--Intermediary Relending Program (IRP)
Sec.
4274.301 Introduction.
4274.302 Definitions and abbreviations.
4274.303-4274.306 [Reserved]
4274.307 Eligibility requirements--Intermediary.
4274.308 Eligibility requirements--Ultimate recipients.
4274.309-4274.313 [Reserved]
4274.314 Loan purposes.
4274.315-4274.318 [Reserved]
4274.319 Ineligible loan purposes.
4274.320 Loan terms.
4274.321-4274.324 [Reserved]
4274.325 Interest rates.
4274.326 Security.
4274.327-4274.330 [Reserved]
4274.331 Loan limits.
4274.332 Post award requirements.
4274.333-4274.336 [Reserved]
4274.337 Other regulatory requirements.
4274.338 Loan agreements between the Agency and the intermediary.
4274.339-4274.342 [Reserved]
4274.343 Application.
4274.344 Filing and processing applications for loans.
4274.345-4274.349 [Reserved]
4274.350 Letter of conditions.
4274.351-4274.354 [Reserved]
4274.355 Loan approval and obligating funds.
4274.356 Loan closing.
4274.357-4274.360 [Reserved]
4274.361 Requests to make loans to ultimate recipients.
4274.362-4274.372 [Reserved]
4274.373 Appeals.
4274.374-4274.380 [Reserved]
4274.381 Exception authority.
4274.382-4274.399 [Reserved]
4274.400 OMB control number.
Authority: 5 U.S.C. 301; 7 U.S.C. 1932 note; 7 U.S.C. 1989.
Subpart D--Intermediary Relending Program (IRP)
Sec. 4274.301 Introduction.
(a) This subpart contains regulations for loans made by the Agency
to eligible intermediaries and applies to borrowers and other parties
involved in making such loans. The provisions of this subpart supersede
conflicting provisions of any other subpart. The servicing and
liquidation of such loans will be in accordance with part 1951, subpart
R, of this title.
(b) The purpose of the program is to alleviate poverty and increase
economic activity and employment in rural communities, especially
disadvantaged and remote communities, through financing targeted
primarily towards smaller and emerging businesses, in partnership with
other public and private resources, and in accordance with State and
regional strategy based on identified community needs. This purpose is
achieved through loans made to intermediaries that establish programs
for the purpose of providing loans to ultimate recipients for business
facilities and community developments in a rural area.
(c) Proposed intermediaries are required to identify any known
relationship or association with a USDA Rural Development employee. Any
processing or servicing Agency activity conducted pursuant to this
subpart involving authorized assistance to United States Department of
Agriculture (USDA) Rural Development employees, members of their
families, close relatives, or business or close personal associates, is
subject to the provisions of subpart D of part 1900 of this chapter.
(d) Copies of all forms, regulations, and Agency procedures
referenced in this subpart are available in the National Office or any
Rural Development State Office.
Sec. 4274.302 Definitions and abbreviations.
(a) General definitions. The following definitions are applicable
to the terms used in this subpart:
Agency. The Federal agency within the USDA with responsibility
assigned by the Secretary of Agriculture to administer IRP. At the time
of publication of this rule, that Agency was the Rural Business-
Cooperative Service (RBS).
Agency IRP loan funds. Cash proceeds of a loan obtained from the
Agency through IRP, including the portion of an IRP revolving fund
directly provided by the Agency IRP loan. Agency IRP loan funds are
Federal funds.
Agricultural production or agriculture production. The cultivation,
production, growing, raising, feeding, housing, breeding, hatching, or
managing of crops, plants, animals, or birds, either for fiber, food
for human consumption, or livestock feed.
[[Page 6054]]
Initial Agency IRP loan. The first IRP loan made by the Agency to
an intermediary.
Intermediary. The entity requesting or receiving Agency IRP loan
funds for establishing a revolving fund and relending to ultimate
recipients.
IRP revolving fund. A group of assets, obtained through or related
to an Agency IRP loan and recorded by the intermediary in a bookkeeping
account or set of accounts and accounted for, along with related
liabilities, revenues, and expenses, as an entity or enterprise
separate from the intermediary's other assets and financial activities.
Principals of intermediary. Members, officers, directors, and other
individuals or entities directly involved in the operation and
management (including setting policy) of an intermediary.
Processing office or officer. The processing office for an IRP
application is the office within the Agency administrative organization
with assigned authority and responsibility to process the application.
The processing office is the primary contact for the proposed
intermediary and maintains the official application case file. The
processing officer for an application is the person in charge of the
processing office. The processing officer is responsible for ensuring
that all regulations and Agency procedures are complied with in regard
to applications under the office's jurisdiction.
Revolved funds. The cash portion of an IRP revolving fund that is
not composed of Agency loan funds, including funds that are repayments
of Agency IRP loans and including fees and interest collected on such
loans. Revolved funds shall not be considered Federal funds.
Rural area. All territory of a State that is not within the outer
boundary of any city having a population of 25,000 or more, according
to the latest decennial census.
Servicing office or officer. The servicing office for an IRP loan
is the office within the Agency administrative organization with
assigned authority and responsibility to service the loan. The
servicing office is the primary contact for the borrower and maintains
the official case file after the loan is closed. The servicing officer
for a loan is the person in charge of the servicing office. The
servicing officer is responsible for ensuring that all regulations and
Agency procedures are complied with in regard to loans under the
office's jurisdiction.
State. Any of the 50 States, the District of Columbia, the
Commonwealth of Puerto Rico, the Virgin Islands of the United States,
Guam, American Samoa, the Commonwealth of the Northern Mariana Islands,
the Republic of Palau, the Federated States of Micronesia, and the
Republic of the Marshall Islands.
Subsequent IRP loan. An IRP loan from the Agency to an intermediary
that has received one or more IRP loans previously.
Technical assistance. A function performed for the benefit of an
ultimate recipient or proposed ultimate recipient, which is a problem
solving activity. The Agency will determine whether a specific activity
qualifies as technical assistance.
Ultimate recipient. An entity or individual that receives a loan
from an intermediary's IRP revolving fund.
Underrepresented group. U.S. citizens with identifiable common
characteristics, that have not received IRP assistance or have received
a lower percentage of total IRP dollars than the percentage they
represent of the general population.
United States. The 50 States of the United States of America, the
District of Columbia, the Commonwealth of Puerto Rico, the Virgin
Islands of the United States, Guam, American Samoa, the Commonwealth of
the Northern Mariana Islands, the Republic of Palau, the Federated
States of Micronesia, and the Republic of the Marshall Islands.
(b) Abbreviations. The following are applicable to this subpart:
B&I--Business and Industry
IRP--Intermediary Relending Program
OGC--Office of the General Counsel
OIG--Office of Inspector General
OMB--Office of Management and Budget
RBS--Rural Business-Cooperative Service, or any successor agency
RDLF--Rural Development Loan Fund
USDA--United States Department of Agriculture
Secs. 4274.303-4274.306 [Reserved]
Sec. 4274.307 Eligibility requirements--Intermediary.
(a) The types of entities which may become intermediaries are:
(1) Private nonprofit corporations.
(2) Public agencies--Any State or local government, or any branch
or agency of such government having authority to act on behalf of that
government, borrow funds, and engage in activities eligible for funding
under this subpart.
(3) Indian groups--Indian tribes on a Federal or State reservation
or other federally recognized tribal groups.
(4) Cooperatives--Incorporated associations, at least 51 percent of
whose members are rural residents, whose members have one vote each,
and which conduct, for the mutual benefit of their members, such
operations as producing, purchasing, marketing, processing, or other
activities aimed at improving the income of their members as producers
or their purchasing power as consumers.
(b) The intermediary must:
(1) Have the legal authority necessary for carrying out the
proposed loan purposes and for obtaining, giving security for, and
repaying the proposed loan.
(2) Have a proven record of successfully assisting rural business
and industry, or, for intermediaries that propose to finance community
development, a proven record of successfully assisting rural community
development projects of the type planned.
(i) Except as provided in paragraph (b)(2)(ii) of this section,
such record will include recent experience in loan making and servicing
with loans that are similar in nature to those proposed for the IRP and
a delinquency and loss rate acceptable to the Agency.
(ii) The Agency may approve an exception to the requirement for
loan making and servicing experience provided:
(A) The proposed intermediary has a proven record of successfully
assisting (other than through lending) rural business and industry or
rural community development projects of the type planned; and
(B) The proposed intermediary will, before the loan is closed,
bring individuals with loan making and servicing experience and
expertise into the operation of the IRP revolving fund.
(3) Have the services of a staff with loan making and servicing
expertise acceptable to the Agency.
(4) Have capitalization acceptable to the Agency.
(c) No loans will be extended to an intermediary unless:
(1) There is adequate assurance of repayment of the loan based on
the fiscal and managerial capabilities of the proposed intermediary.
(2) The loan is not otherwise available on reasonable (i.e., usual
and customary) rates and terms from private sources or other Federal,
State, or local programs.
(3) The amount of the loan, together with other funds available, is
adequate to assure completion of the project or achieve the purposes
for which the loan is made.
(d) At least 51 percent of the outstanding interest or membership
in any nonpublic body intermediary must be composed of citizens of the
United
[[Page 6055]]
States or individuals who reside in the United States after being
legally admitted for permanent residence.
(e) Any delinquent debt to the Federal Government by the
intermediary or any principal of the intermediary shall cause the
intermediary to be ineligible to receive any IRP loan. Agency loan
funds may not be used to satisfy the debt.
Sec. 4274.308 Eligibility requirements--Ultimate recipients.
(a) Ultimate recipients may be individuals, public or private
organizations, or other legal entities, with authority to incur the
debt and carry out the purpose of the loan.
(b) To be eligible to receive loans from the IRP revolving loan
fund, ultimate recipients;
(1) Must be citizens of the United States or reside in the United
States after being legally admitted for permanent residence. In the
case of an organization, at least 51 percent of the outstanding
membership or ownership must be either citizens of the United States or
residents of the United States after being legally admitted for
permanent residence.
(2) Must be located in a rural area of a State.
(3) Must be unable to finance the proposed project from its own
resources or through commercial credit or other Federal, State, or
local programs at reasonable rates and terms.
(4) Must, along with its principal officers (including their
immediate family), hold no legal or financial interest or influence in
the intermediary. Also, the intermediary and its principal officers
(including immediate family) must hold no legal or financial interest
or influence in the ultimate recipient. However, this paragraph shall
not prevent an intermediary that is organized as a cooperative from
making a loan to one of its members.
(c) Any delinquent debt to the Federal Government by the ultimate
recipient or any of its principals shall cause the proposed ultimate
recipient to be ineligible to receive a loan from Agency IRP loan
funds. Agency IRP loan funds may not be used to satisfy the
delinquency.
Secs. 4274.309-4274.313 [Reserved]
Sec. 4274.314 Loan purposes.
(a) Intermediaries. Agency IRP loan funds must be placed in the
intermediary's IRP revolving fund and used by the intermediary to
provide direct loans to eligible ultimate recipients.
(b) Ultimate recipients. Loans from the intermediary to the
ultimate recipient using the IRP revolving fund must be for community
development projects, the establishment of new businesses, expansion of
existing businesses, creation of employment opportunities, or saving
existing jobs. Such loans may include, but are not limited to:
(1) Business and industrial acquisitions when the loan will keep
the business from closing, prevent the loss of employment
opportunities, or provide expanded job opportunities.
(2) Business construction, conversion, enlargement, repair,
modernization, or development.
(3) Purchase and development of land, easements, rights-of-way,
buildings, facilities, leases, or materials.
(4) Purchase of equipment, leasehold improvements, machinery, or
supplies.
(5) Pollution control and abatement.
(6) Transportation services.
(7) Start-up operating costs and working capital.
(8) Interest (including interest on interim financing) during the
period before the facility becomes income producing, but not to exceed
3 years.
(9) Feasibility studies.
(10) Debt refinancing.
(i) A complete review will be made by the intermediary to determine
whether the loan will restructure debts on a schedule that will allow
the ultimate recipient to operate successfully and pay off the loan
rather than merely take over an unsound loan. The intermediary will
obtain the proposed ultimate recipient's complete debt schedule which
should agree with the proposed ultimate recipient's latest balance
sheet; and
(ii) Refinancing debts may be allowed only when it is determined by
the intermediary that the project is viable and refinancing is
necessary to create new or save existing jobs or create or continue a
needed service; and
(iii) On any request for refinancing of existing secured loans, the
intermediary is required, at a minimum, to obtain the previously held
collateral as security for the loans and must not pay off a creditor in
excess of the value of the collateral. Additional collateral will be
required when the refinancing of unsecured loans is unavoidable to
accomplish the necessary strengthening of the ultimate recipient's
position.
(11) Reasonable fees and charges only as specifically listed in
this paragraph. Authorized fees include loan packaging fees,
environmental data collection fees, management consultant fees, and
other fees for services rendered by professionals. Professionals are
generally persons licensed by States or accreditation associations,
such as engineers, architects, lawyers, accountants, and appraisers.
The maximum amount of fee will be what is reasonable and customary in
the community or region where the project is located. Any such fees are
to be fully documented and justified.
(12) Hotels, motels, tourist homes, bed and breakfast
establishments, convention centers, and other tourist and recreational
facilities except as prohibited by Sec. 4274.319.
(13) Educational institutions.
(14) Revolving lines of credit: Provided,
(i) The portion of the intermediary's total IRP revolving fund that
is committed to or in use for revolving lines of credit will not exceed
25 percent at any time;
(ii) All ultimate recipients receiving revolving lines of credit
will be required to reduce the outstanding balance of the revolving
line of credit to zero at least one time each year;
(iii) All revolving lines of credit will be approved by the
intermediary for a specific maximum amount and for a specific maximum
time period, not to exceed two years;
(iv) The intermediary will provide a detailed description, which
will be incorporated into the intermediary's work plan and be subject
to Agency approval, of how the revolving lines of credit will be
operated and managed. The description will include evidence that the
intermediary has an adequate system for:
(A) Interest calculations on varying balances, and
(B) Monitoring and control of the ultimate recipients' cash,
inventory, and accounts receivable; and
(v) If, at any time, the Agency determines that an intermediary's
operation of revolving lines of credit is causing excessive risk of
loss for the intermediary or the Government, the Agency may terminate
the intermediary's authority to use the IRP revolving fund for
revolving lines of credit. Such termination will be by written notice
and will prevent the intermediary from approving any new lines of
credit or extending any existing revolving lines of credit beyond the
effective date of termination contained in the notice.
Secs. 4274.315-4274.318 [Reserved]
Sec. 4274.319 Ineligible loan purposes.
Agency IRP loan funds may not be used for payment of the
intermediary's administrative costs or expenses. The IRP revolving fund
may not be used for:
(a) Assistance in excess of what is needed to accomplish the
purpose of the ultimate recipient's project .
[[Page 6056]]
(b) Distribution or payment to the owner, partners, shareholders,
or beneficiaries of the ultimate recipient or members of their families
when such persons will retain any portion of their equity in the
ultimate recipient.
(c) Charitable institutions that would not have revenue from sales
or fees to support the operation and repay the loan, churches,
organizations affiliated with or sponsored by churches, and fraternal
organizations.
(d) Assistance to government employees, military personnel, or
principals or employees of the intermediary or organizations for which
such persons are directors or officers or in which they have ownership
of 20 percent or more.
(e) A loan to an ultimate recipient which has an application
pending with or a loan outstanding from another intermediary involving
an IRP revolving fund if the total IRP loans would exceed the limits
established in Sec. 4274.331(b).
(f) Agricultural production.
(g) The transfer of ownership unless the loan will keep the
business from closing, or prevent the loss of employment opportunities
in the area, or provide expanded job opportunities.
(h) Community antenna television services or facilities.
(i) Any illegal activity.
(j) Any project that is in violation of either a Federal, State, or
local environmental protection law or regulation or an enforceable land
use restriction unless the assistance given will result in curing or
removing the violation.
(k) Lending and investment institutions and insurance companies.
(l) Golf courses, race tracks, or gambling facilities.
Sec. 4274.320 Loan terms.
(a) No loan to an intermediary shall be extended for a period
exceeding 30 years. Interest and principal payments will be scheduled
at least annually. The initial principal payment may be deferred
(during the period before the facility becomes income producing) by the
Agency, but not more than 3 years.
(b) Loans made by an intermediary to an ultimate recipient from the
IRP revolving fund will be scheduled for repayment over a term
negotiated by the intermediary and ultimate recipient. The term must be
reasonable and prudent considering the purpose of the loan, expected
repayment ability of the ultimate recipient, and the useful life of
collateral, and must be within any limits established by the
intermediary's work plan.
Sec. Sec. 4274.321-4274.324 [Reserved]
Sec. 4274.325 Interest rates.
(a) Loans made by the Agency pursuant to this subpart shall bear
interest at a fixed rate of 1 percent per annum over the term of the
loan.
(b) Interest rates charged by intermediaries to ultimate recipients
on loans from the IRP revolving fund shall be negotiated by the
intermediary and ultimate recipient. The rate must be within limits
established by the intermediary's work plan approved by the Agency. The
rate should normally be the lowest rate sufficient to cover the loan's
proportional share of the IRP revolving fund's debt service costs,
reserve for bad debts, and administrative costs.
Sec. 4274.326 Security.
(a) Intermediaries. Security for all loans to intermediaries must
be such that the repayment of the loan is reasonably assured, when
considered along with the intermediary's financial condition, work
plan, and management ability. It is the responsibility of the
intermediary to make loans to ultimate recipients in such a manner that
will fully protect the interests of the intermediary and the
Government.
(1) Security for such loans may include, but is not limited to:
(i) Any realty, personalty, or intangible capable of being
mortgaged, pledged, or otherwise encumbered by the intermediary in
favor of the Agency; and
(ii) Any realty, personalty, or intangible 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 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 will
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 Agency's 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 must be assignable.
(b) Ultimate recipients. Security for a loan from an intermediary's
IRP revolving fund to an ultimate recipient will be negotiated between
the intermediary and ultimate recipient, within the general security
policies established by the intermediary and approved by the Agency.
Secs. 4274.327-4274.330 [Reserved]
Sec. 4274.331 Loan limits.
(a) Intermediary.
(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 1 year after loan
closing.
(2) The initial Agency IRP loan as defined in Sec. 4274.302(a) will
not exceed $2 million.
(3) Intermediaries that have received one or more IRP loans may
apply for and be considered for subsequent IRP loans provided:
(i) At least 80 percent of the Agency IRP loan funds approved for
the intermediary have been disbursed to eligible ultimate recipients;
(ii) The intermediary is promptly relending all collections from
loans made from its IRP revolving fund in excess of what is needed for
required debt service, reasonable administrative costs approved by the
Agency, and a reasonable reserve for debt service and uncollectable
accounts;
(iii) The outstanding loans of the intermediary's IRP revolving
fund are generally sound; and
(iv) The intermediary is in compliance with all applicable
regulations and its loan agreements with the Agency.
(4) Subsequent loans will not exceed $1 million each and not more
than one loan will be approved for an intermediary in any one fiscal
year.
(5) Total outstanding IRP indebtedness of an intermediary to the
Agency will not exceed $15 million at any time.
(b) Ultimate recipients. Loans from intermediaries to ultimate
recipients using the IRP revolving fund must not exceed the lesser of:
(1) $250,000; or
(2) Seventy five percent of the total cost of the ultimate
recipient's project for which the loan is being made.
(c) Portfolio. No more than 25 percent of an IRP loan approved may
be used for
[[Page 6057]]
loans to ultimate recipients that exceed $150,000. This limit does not
apply to revolved funds.
Sec. 4274.332 Post award requirements.
(a) Applicability. Intermediaries receiving loans under this
program shall be governed by these regulations, the loan agreement, the
approved work plan, security interests, and any other conditions which
the Agency may impose in making a loan. Whenever this subpart imposes a
requirement on loans made from the ``IRP revolving fund,'' such
requirement shall apply to all loans made by an intermediary to an
ultimate recipient from the intermediary's IRP revolving fund for as
long as any portion of the intermediary's IRP loan from the Agency
remains unpaid. Whenever this subpart imposes a requirement on loans
made by intermediaries from ``Agency IRP loan funds,'' without specific
reference to the IRP revolving fund, such requirement shall apply only
to loans made by an intermediary using Agency IRP loan funds, and will
not apply to loans made from revolved funds.
(b) Maintenance of IRP revolving fund. For as long as any part of
an IRP loan to an intermediary remains unpaid, the intermediary must
maintain the IRP revolving fund. All Agency IRP loan funds received by
an intermediary must be deposited into an IRP revolving fund. The
intermediary may transfer additional assets into the IRP revolving
fund. All cash of the IRP revolving fund shall be deposited in a
separate bank account or accounts. No other funds of the intermediary
will be commingled with such money. All moneys deposited in such bank
account or accounts shall be money of the IRP revolving fund. Loans to
ultimate recipients are advanced from the IRP revolving fund. The
receivables created by making loans to ultimate recipients, the
intermediary's security interest in collateral pledged by ultimate
recipients, collections on the receivables, interest, fees, and any
other income or assets derived from the operation of the IRP revolving
fund are a part of the IRP revolving fund.
(1) The portion of the IRP revolving fund that consists of Agency
IRP loan funds, on a last-in-first-out basis, may only be used for
making loans in accordance with Sec. 4274.314 of this subpart. The
portion of the IRP revolving fund which consists of revolved funds may
be used for debt service, reasonable administrative costs, or reserves
in accordance with this section, or for making additional loans.
(2) The intermediary must submit an annual budget of proposed
administrative costs for Agency approval. The amount removed from the
IRP revolving fund for administrative costs in any year must be
reasonable, must not exceed the actual cost of operating the IRP
revolving fund, including loan servicing and providing technical
assistance, and must not exceed the amount approved by the Agency in
the intermediary's annual budget.
(3) A reasonable amount of revolved funds must be used to create a
reserve for bad debts. Reserves must be accumulated over a period of
years. The total amount should not exceed maximum expected losses,
considering the quality of the intermediary's portfolio of loans.
Unless the intermediary provides loss and delinquency records that, in
the opinion of the Agency, justifies different amounts, a reserve for
bad debts of 6 percent of outstanding loans must be accumulated over 3
years and then maintained.
(4) Any cash in the IRP revolving fund from any source that is not
needed for debt service, approved administrative costs, or reasonable
reserves must be available for additional loans to ultimate recipients.
(5) All reserves and other cash in the IRP revolving loan fund not
immediately needed for loans to ultimate recipients or other authorized
uses will be deposited in accounts in banks or other financial
institutions. Such accounts will be fully covered by Federal deposit
insurance or fully collateralized with U.S. Government obligations, and
must be interest bearing. Any interest earned thereon remains a part of
the IRP revolving fund.
(6) If an intermediary receives more than one IRP loan, it need not
establish and maintain a separate IRP revolving loan fund for each
loan; it may combine them and maintain only one IRP revolving fund,
unless the Agency requires separate IRP revolving funds because there
are significant differences in the loan purposes, work plans, loan
agreements, or requirements for the loans. The Agency may allow loans
with different requirements to be combined into one IRP revolving fund
if the intermediary agrees in writing to operate the combined revolving
funds in accordance with the most stringent requirements as required by
the Agency.
Secs. 4274.333--4274.336 [Reserved]
Sec. 4274.337 Other regulatory requirements.
(a) Intergovernmental consultation. The IRP is subject to the
provisions of Executive Order 12372 which requires intergovernmental
consultation with State and local officials. The approval of a loan to
an intermediary will be the subject of intergovernmental consultation.
For each ultimate recipient to be assisted with a loan from Agency IRP
loan funds and for which the State in which the ultimate recipient is
to be located has elected to review the program under their
intergovernmental review process, the State Single Point of Contact
must be notified. Notification, in the form of a project description,
must be initiated by the intermediary or the ultimate recipient. Any
comments from the State must be included with the intermediary's
request to use the Agency loan funds for the ultimate recipient. Prior
to the Agency's decision on the request, compliance with the
requirements of intergovernmental consultation must be demonstrated for
each ultimate recipient. (See RD Instruction 1940-J (available in any
Rural Development State Office)).
(b) Environmental requirements.
(1) Unless specifically modified by this section, the requirements
of part 1940, subpart G, of this title apply to this subpart.
Intermediaries and ultimate recipients must consider the potential
environmental impacts of their projects at the earliest planning stages
and develop plans to minimize the potential to adversely impact the
environment. Both the intermediaries and the ultimate recipients must
cooperate and furnish such information and assistance as the Agency
needs to make any of its environmental determinations.
(2) For each application for a loan to an intermediary, the Agency
will review the application, supporting materials, and any
environmental information required from the intermediary and complete a
Class II environmental assessment. This assessment will focus on the
potential cumulative impacts of the projects as well as any
environmental concerns or problems that are associated with individual
projects that can be identified at this time. Neither the completion of
the environmental assessment nor the approval of the application is an
Agency commitment to the use of loan funds for a specific project;
therefore, no public notification requirements for a Class II
assessment will apply to the application.
(3) For each proposed loan from an intermediary to an ultimate
recipient using Agency IRP loan funds, the Agency will complete the
environmental review required by part 1940, subpart G, of this title
including public notification requirements. The results of this review
will be used by the Agency in making its decision on
[[Page 6058]]
concurrence in the proposed loan. The Agency will prepare an
Environmental Impact Statement for any application for a loan from
Agency IRP loan funds determined to have a significant effect on the
quality of the human environment.
(c) Equal opportunity and nondiscrimination requirements.
(1) In accordance with title V of Pub. L. 93-495, the Equal Credit
Opportunity Act, and section 504 of the Rehabilitation Act for
Federally Conducted Programs and Activities, neither the intermediary
nor the Agency will discriminate against any employee, intermediary, or
proposed ultimate recipient on the basis of sex, marital status, race,
color, religion, national origin, age, physical or mental disability
(provided the proposed intermediary or proposed ultimate recipient has
the capacity to contract), because all or part of the proposed
intermediary's or proposed ultimate recipient's income is derived from
public assistance of any kind, or because the proposed intermediary or
proposed ultimate recipient has in good faith exercised any right under
the Consumer Credit Protection Act, with respect to any aspect of a
credit transaction anytime Agency loan funds are involved.
(2) The regulations contained in subpart E of part 1901 of this
title apply to this program.
(3) The Administrator will assure that equal opportunity and
nondiscrimination requirements are met in accordance with the Equal
Credit Opportunity Act, title VI of the Civil Rights Act of 1964,
``Nondiscrimination in Federally Assisted Programs,'' 42 U.S.C. 2000d-
4, Section 504 of the Rehabilitation Act for Federally Conducted
Programs and Activities, the Age Discrimination Act of 1975, and the
Americans With Disabilities Act.
(d) Seismic safety of new building construction.
(1) The Intermediary Relending Program is subject to the provisions
of Executive Order 12699 that requires each Federal agency assisting in
the financing, through Federal grants or loans, or guaranteeing the
financing, through loan or mortgage insurance programs, of newly
constructed buildings to assure appropriate consideration of seismic
safety.
(2) All new buildings financed with Agency IRP loan funds shall be
designed and constructed in accordance with the seismic provisions of
one of the following model building codes or the latest edition of that
code providing an equivalent level of safety to that contained in the
latest edition of the National Earthquake Hazard Reduction Programs
(NEHRP) Recommended Provisions for the Development of Seismic
Regulations for New Building (NEHRP Provisions):
(i) 1991 International Conference of Building Officials (ICBO)
Uniform Building Code;
(ii) 1993 Building Officials and Code Administrators International,
Inc. (BOCA) National Building Code; or
(iii) 1992 Amendments to the Southern Building Code Congress
International (SBCCI) Standard Building Code.
(3) The date, signature, and seal of a registered architect or
engineer and the identification and date of the model building code on
the plans and specifications shall be evidence of compliance with the
seismic requirements of the appropriate code.
Sec. 4274.338 Loan agreements between the Agency and the intermediary.
A loan agreement or a supplement to a previous loan agreement must
be executed by the intermediary and the Agency at loan closing for each
loan. The loan agreement will be prepared by the Agency and reviewed by
the intermediary prior to loan closing.
(a) The loan agreement will, as a minimum, set out:
(1) The amount of the loan;
(2) The interest rate;
(3) The term and repayment schedule;
(4) The provisions for late charges. The intermediary shall pay a
late charge of 4 percent of the payment due if payment is not received
within 15 calendar days following the due date. The late charge shall
be considered unpaid if not received within 30 calendar days of the
missed due date for which it was imposed. Any unpaid late charge shall
be added to principal and be due as an extra payment at the end of the
term. Acceptance of a late charge by the Agency does not constitute a
waiver of default;
(5) The disbursement procedure. Disbursement of loan funds by the
Agency to the intermediary shall take place after the loan agreement
and promissory note are executed, and any other conditions precedent to
disbursement of funds are fully satisfied. For purposes of computing
interest, the date of each draw down shall constitute the date the
funds are advanced under the loan agreement;
(i) The intermediary may initially draw up to 25 percent of the
loan funds. If the intermediary does not have loans to ultimate
recipients ready to close sufficient to use the initial draw, the funds
must be deposited in an interest bearing account in accordance with
Sec. 4274.332(b)(5) until needed for such loans. The initial draw must
be used for loans to ultimate recipients before any additional Agency
IRP loan funds may be drawn by the intermediary. Any funds from the
initial draw that have not been used for loans to ultimate recipients
within 1 year from the date of the draw must be returned to the Agency
as an extra payment on the loan. Agency IRP loan funds must not be used
for administrative expenses;
(ii) After the initial draw of funds, an intermediary may draw down
only such funds as are necessary to cover a 30-day period in
implementing its approved work plan. Advances must be requested by the
intermediary in writing;
(6) The provisions regarding default. On the occurrence of any
event of default, the Agency may declare all or any portion of the debt
and interest to be immediately due and payable and may proceed to
enforce its rights under the loan agreement or any other instruments
securing or relating to the loan and in accordance with the applicable
law and regulations. Any of the following may be regarded as an ``event
of default'' in the sole discretion of the Agency:
(i) Failure of the intermediary to carry out the specific
activities in its loan application as approved by the Agency or comply
with the loan terms and conditions of the loan agreement, any
applicable Federal or State laws, or with such USDA or Agency
regulations as may become applicable;
(ii) Failure of the intermediary to pay within 15 calendar days of
its due date any installment of principal or interest on its promissory
note to the Agency;
(iii) The occurrence of;
(A) The intermediary becoming insolvent, or ceasing, being unable,
or admitting in writing its inability to pay its debts as they mature,
or making a general assignment for the benefit of, or entering into any
composition or arrangement with creditors, or;
(B) Proceedings for the appointment of a receiver, trustee, or
liquidator of the intermediary, or of a substantial part of its assets,
being authorized or instituted by or against it;
(iv) Submission or making of any report, statement, warranty, or
representation by the intermediary or agent on its behalf to USDA or
the Agency in connection with the financial assistance awarded
hereunder which is false, incomplete, or incorrect in any material
respect; or
(v) Failure of the intermediary to remedy any material adverse
change in its financial or other condition (such as the
representational character of its board of directors or policymaking
body) arising since the date of the
[[Page 6059]]
Agency's award of assistance hereunder, which condition was an
inducement to Agency's original award.
(7) The insurance requirements. (i) Hazard insurance with a
standard mortgage clause naming the intermediary as beneficiary will be
required by the intermediary on every ultimate recipient's project
funded from the IRP revolving fund in an amount that is at least the
lesser of the depreciated replacement value of the property being
insured or the amount of the loan. Hazard insurance includes fire,
windstorm, lightning, hail, business interruption, explosion, riot,
civil commotion, aircraft, vehicle, marine, smoke, builder's risk,
public liability, property damage, flood or mudslide, or any other
hazard insurance that may be required to protect the security. The
intermediary's interest in the insurance will be assigned to the
Agency, upon the Agency's request, in the event of default by the
intermediary.
(ii) Ordinarily, life insurance, which may be decreasing term
insurance, is required for the principals and key employees of the
ultimate recipient funded from the IRP revolving fund and will be
assigned or pledged to the intermediary and subsequently, in the event
of request by the Agency following default by the intermediary, to the
Agency. A schedule of life insurance available for the benefit of the
loan will be included as part of the application.
(iii) Workmen's compensation insurance on ultimate recipients is
required in accordance with the State law.
(iv) Flood Insurance. The intermediary is responsible for
determining if an ultimate recipient funded from the IRP revolving fund
is located in a special flood or mudslide hazard area. If the ultimate
recipient is in a flood or mudslide area, then flood or mudslide
insurance must be provided in accordance with subpart B of part 1806 of
this chapter.
(v) Intermediaries will provide fidelity bond coverage for all
persons who have access to intermediary funds. Coverage may be provided
either for all individual positions or persons, or through ``blanket''
coverage providing protection for all appropriate employees and
officials. The Agency may also require the intermediary to carry other
appropriate insurance, such as public liability, workers compensation,
and property damage.
(A) The amount of fidelity bond coverage required by the Agency
will normally approximate the total annual debt service requirements
for the Agency loans;
(B) Other types of coverage may be considered acceptable if it is
determined by the Agency that they fulfill essentially the same purpose
as a fidelity bond;
(C) Intermediaries must provide evidence of adequate fidelity bond
and other appropriate insurance coverage by loan closing. Adequate
coverage in accordance with this section must then be maintained for
the life of the loan. It is the responsibility of the intermediary to
assure and provide evidence that adequate coverage is maintained. This
may consist of a listing of policies and coverage amounts in reports
required by paragraph (b)(4) of this section or other documentation.
(b) The intermediary will agree in the loan agreement:
(1) Not to make any changes in the intermediary's articles of
incorporation, charter, or by-laws without the concurrence of the
Agency;
(2) Not to make a loan commitment to an ultimate recipient to be
funded from Agency IRP loan funds without first receiving the Agency's
written concurrence;
(3) To maintain a separate ledger and segregated account for the
IRP revolving fund;
(4) To Agency reporting requirements by providing:
(i) An annual audit;
(A) Dates of audit report period need not necessarily coincide with
other reports on the IRP. Audit reports shall be due 90 days following
the audit period. Audits must cover all of the intermediary's
activities. Audits will be performed by an independent certified public
accountant. An acceptable audit will be performed in accordance with
Generally Accepted Government Auditing Standards and include such tests
of the accounting records as the auditor considers necessary in order
to express an opinion on the financial condition of the intermediary.
The Agency does not require an unqualified audit opinion as a result of
the audit. Compilations or reviews do not satisfy the audit
requirement;
(B) It is not intended that audits required by this subpart be
separate and apart from audits performed in accordance with State and
local laws or for other purposes. To the extent feasible, the audit
work should be done in connection with these audits. Intermediaries
covered by OMB Circular A-128 or A-133 should submit audits made in
accordance with those circulars;
(ii) Quarterly or semiannual reports (due 30 days after the end of
the period);
(A) Reports will be required quarterly during the first year after
loan closing and, if all loan funds are not utilized during the first
year, quarterly reports will be continued until at least 90 percent of
the Agency IRP loan funds have been advanced to ultimate recipients.
Thereafter, reports will be required semiannually. Also, the Agency may
require quarterly reports if the intermediary becomes delinquent in
repayment of its loan or otherwise fails to fully comply with the
provisions of its work plan or Loan Agreement, or the Agency determines
that the intermediary's IRP revolving fund is not adequately protected
by the current sound worth and paying capacity of the ultimate
recipients.
(B) These reports shall contain information only on the IRP
revolving loan fund, or if other funds are included, the IRP loan
program portion shall be segregated from the others; and in the case
where the intermediary has more than one IRP revolving fund from the
Agency a separate report shall be made for each of the IRP revolving
funds.
(C) The reports will include, on a form provided by the Agency,
information on the intermediary's lending activity, income and
expenses, financial condition, and a summary of names and
characteristics of the ultimate recipients the intermediary has
financed.
(iii) Annual proposed budget for the following year; and
(iv) Other reports as the Agency may require from time to time.
(5) Before the first relending of Agency funds to an ultimate
recipient, to obtain written Agency approval of;
(i) All forms to be used for relending purposes, including
application forms, loan agreements, promissory notes, and security
instruments;
(ii) Intermediary's policy with regard to the amount and form of
security to be required;
(6) To obtain written approval of the Agency before making any
significant changes in forms, security policy, or the work plan. The
servicing officer may approve changes in forms, security policy, or
work plans at any time upon a written request from the intermediary and
determination by the Agency that the change will not jeopardize
repayment of the loan or violate any requirement of this subpart or
other Agency regulations. The intermediary must comply with the work
plan approved by the Agency so long as any portion of the
intermediary's IRP loan is outstanding;
(7) To secure the indebtedness by pledging the IRP revolving fund,
including its portfolio of investments derived from the proceeds of the
loan
[[Page 6060]]
award, and pledging its real and personal property and other rights and
interests as the Agency may require;
(8) 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, to
provide additional security, execute any additional documents, and
undertake any reasonable acts the Agency may request, to protect the
agency's interest or to perfect a security interest in any assets,
including physical delivery of assets and specific assignments; and
(9) That if any part of the loan has not been used in accordance
with the intermediary's work plan by a date three years from the date
of the loan agreement, the Agency may cancel the approval of any funds
not yet delivered to the intermediary and the intermediary will return,
as an extra payment on the loan, any funds delivered to the
intermediary that have not been used by the intermediary in accordance
with the work plan. The Agency, at its sole discretion, may allow the
intermediary additional time to use the loan funds by delaying
cancellation of the funds by not more than 3 additional years. If any
loan funds have not been used by 6 years from the date of the loan
agreement, the approval will be canceled of any funds that have not
been delivered to the intermediary and the intermediary will return, as
an extra payment on the loan, any funds it has received and not used in
accordance with the work plan. In accordance with the Intermediary
Relending Program promissory note, regular loan payments will be based
on the amount of funds actually drawn by the intermediary.
Secs. 424.339--4274.342 [Reserved]
Sec. 4274.343 Application.
(a) The application will consist of:
(1) An application form provided by the Agency.
(2) A written work plan and other evidence the Agency requires to
demonstrate the feasibility of the intermediary's program to meet the
objectives of this program. The plan must, at a minimum:
(i) Document the intermediary's ability to administer IRP in
accordance with the provisions of this subpart. In order to adequately
demonstrate the ability to administer the program, the intermediary
must provide a complete listing of all personnel responsible for
administering this program along with a statement of their
qualifications and experience. The personnel may be either members or
employees of the intermediary's organization or contract personnel
hired for this purpose. If the personnel are to be contracted for, the
contract between the intermediary and the entity providing such service
will be submitted for Agency review, and the terms of the contract and
its duration must be sufficient to adequately service the Agency loan
through to its ultimate conclusion. If the Agency determines the
personnel lack the necessary expertise to administer the program, the
loan request will not be approved;
(ii) Document the intermediary's ability to commit financial
resources under the control of the intermediary to the establishment of
IRP. This should include a statement of the sources of non-Agency funds
for administration of the intermediary's operations and financial
assistance for projects;
(iii) Demonstrate a need for loan funds. As a minimum, the
intermediary should identify a sufficient number of proposed and known
ultimate recipients it has on hand to justify Agency funding of its
loan request, or include well developed targeting criteria for ultimate
recipients consistent with the intermediary's mission and strategy for
IRP, along with supporting statistical or narrative evidence that such
prospective recipients exist in sufficient numbers to justify Agency
funding of the loan request;
(iv) Include a list of proposed fees and other charges it will
assess the ultimate recipients;
(v) Demonstrate to Agency satisfaction that the intermediary has
secured commitments of significant financial support from public
agencies and private organizations;
(vi) Provide evidence to Agency satisfaction that the intermediary
has a proven record of obtaining private or philanthropic funds for the
operation of similar programs to IRP;
(vii) Include the intermediary's plan (specific loan purposes) for
relending the loan funds. The plan must be of sufficient detail to
provide the Agency with a complete understanding of what the
intermediary will accomplish by lending the funds to the ultimate
recipient and the complete mechanics of how the funds will get from the
intermediary to the ultimate recipient. The service area, eligibility
criteria, loan purposes, fees, rates, terms, collateral requirements,
limits, priorities, application process, method of disposition of the
funds to the ultimate recipient, monitoring of the ultimate recipient's
accomplishments, and reporting requirements by the ultimate recipient's
management are some of the items that must be addressed by the
intermediary's relending plan;
(viii) Provide a set of goals, strategies, and anticipated outcomes
for the intermediary's program. Outcomes should be expressed in
quantitative or observable terms such as jobs created for low income
area residents or self empowerment opportunities funded, and should
relate to the purpose of IRP (see Sec. 4274.301(b)); and
(ix) Provide specific information as to whether and how the
intermediary will ensure that technical assistance is made available to
ultimate recipients and potential ultimate recipients. Describe the
qualifications of the technical assistance providers, the nature of
technical assistance that will be available, and expected and committed
sources of funding for technical assistance. If other than the
intermediary itself, describe the organizations providing such
assistance and the arrangements between such organizations and the
intermediary.
(3) Environmental information on a form provided by the Agency for
all projects positively identified as proposed ultimate recipient loans
that are Class I or Class II actions under subpart G of part 1940 of
this title;
(4) Comments from the State Single Point of Contact, if the State
has elected to review the program under Executive Order 12372;
(5) A pro forma balance sheet at start-up and projected balance
sheets for at least 3 additional years; financial statements for the
last 3 years, or from inception of the operations of the intermediary
if less than 3 years; and projected cash flow and earnings statements
for at least 3 years supported by a list of assumptions showing the
basis for the projections. The projected earnings statement and balance
sheet must include one set of projections that shows the IRP revolving
fund only and a separate set of projections that shows the proposed
intermediary organization's total operations. Also, if principal
repayment on the IRP loan will not be scheduled during the first 3
years, the projections for the IRP revolving fund must extend to
include a year with a full annual installment on the IRP loan;
(6) A written agreement of the intermediary to the Agency audit
requirements;
(7) An agreement on a form provided by the Agency assuring
compliance with
Title VI of the Civil Rights Act of 1964;
(8) Complete organizational documents, including evidence of
authority to conduct the proposed activities;
(9) Evidence that the loan is not available at reasonable rates and
terms
[[Page 6061]]
from private sources or other Federal, State, or local programs;
(10) Latest audit report, if available;
(11) A form provided by the Agency in which the applicant certifies
its understanding of the Federal collection policies for consumer or
commercial debts;
(12) A Department of Agriculture form containing a certification
regarding debarment, suspension, and other responsibility matters for
primary covered transactions; and
(13) A statement on a form provided by the Agency regarding
lobbying, as required by 7 CFR part 3018.
(b) Applications from intermediaries that already have an active
IRP loan may be streamlined as follows:
(1) The requirements of paragraphs (a)(6), (a)(8), and (a)(10) of
this section may be omitted;
(2) A statement that the new loan would be operated in accordance
with the work plan on file for the previous loan may be submitted in
lieu of a new work plan; and
(3) The financial information required by paragraph (a)(5) of this
section may be limited to projections for the proposed new IRP
revolving loan fund.
Sec. 4274.344 Filing and processing applications for loans.
(a) Intermediaries' contact. Intermediaries desiring assistance
under this subpart may file applications with the state office for the
state in which the intermediary's headquarters is located.
Intermediaries headquartered in the District of Columbia may file the
application with the National Office, Rural Business-Cooperative
Service, USDA, Specialty Lenders Division, STOP 1521, 1400 Independence
Avenue SW, Washington, DC 20250-1521.
(b) Filing applications. Intermediaries must file the complete
application, in one package. Applications received by the Agency will
be reviewed and ranked quarterly and funded in the order of priority
ranking. The Agency will retain unsuccessful applications for
consideration in subsequent reviews, through a total of four quarterly
reviews.
(c) Loan priorities. Priority consideration will be given to
proposed intermediaries. Points will be allowed only for factors
indicated by well documented, reasonable plans which, in the opinion of
the Agency, provide assurance that the items have a high probability of
being accomplished. The points awarded will be as specified in
paragraphs (c)(1) through (c)(6) of this section. If an application
does not fit one of the categories listed, it receives no points for
that paragraph or subparagraph.
(1) Other funds. Points allowed under this paragraph are to be
based on documented successful history or written evidence that the
funds are available.
(i) The intermediary will obtain non-Federal loan or grant funds to
pay part of the cost of the ultimate recipients' projects. The amount
of funds from other sources will average:
(A) At least 10% but less than 25% of the total project cost--5
points;
(B) At least 25% but less than 50% of the total project cost--10
points; or
(C) 50% or more of the total project cost--15 points.
(ii) The intermediary will provide loans to the ultimate recipient
from its own funds (not loan or grant) to pay part of the costs of the
ultimate recipients' projects. The amount of non-Agency derived
intermediary funds will average:
(A) At least 10% but less than 25% of the total project costs--5
points;
(B) At least 25% but less than 50% of total project costs--10
points; or
(C) 50% or more of total project costs--15 points.
(2) Employment. For computations under this paragraph, income data
should be from the latest decennial census of the United States,
updated according to changes in the consumer price index. The poverty
line used will be as defined in section 673 (2) of the Community
Services Block Grant Act (42 U.S.C. 9902(2)). Unemployment data used
will be that published by the Bureau of Labor Statistics, U.S.
Department of Labor.
(i) The median household income in the service area of the proposed
intermediary equals the following percentage of the poverty line for a
family of four:
(A) At least 150% but not more than 175%--5 points;
(B) At least 125% but less than 150%--10 points; or
(C) Below 125%--15 points.
(ii) The following percentage of the loans the intermediary makes
from Agency IRP loan funds will be in counties with median household
income below 80 percent of the statewide non-metropolitan median
household income. (To receive priority points under this category, the
intermediary must provide a list of counties in the service area that
have qualifying income):
(A) At least 50% but less than 75%--5 points;
(B) At least 75% but less than 100%--10 points; or
(C) 100%--15 points.
(iii) The unemployment rate in the intermediary's service area
equals the following percentage of the national unemployment rate:
(A) At least 100% but less than 125%--5 points;
(B) At least 125% but less 150%--10 points; or
(C) 150% or more--15 points.
(iv) The intermediary will require, as a condition of eligibility
for a loan to an ultimate recipient from Agency IRP loan funds, that
the ultimate recipient certify in writing that it will employ the
following percentage of its workforce from members of families with
income below the poverty line:
(A) At least 10% but less than 20% of the workforce--5 points;
(B) At least 20% but less than 30% of the workforce--10 points; or
(C) 30% of the workforce or more--15 points.
(v) The intermediary has a demonstrated record of providing
assistance to members of underrepresented groups, has a realistic plan
for targeting loans to members of underrepresented groups, and, based
on the intermediary's record and plans, it is expected that the
following percentages of its loans made from Agency IRP loan funds will
be made to entities owned by members of underrepresented groups:
(A) At least 10% but less than 20%--5 points;
(B) At least 20% but less than 30%--10 points; or
(C) 30% or more--15 points.
(vi) The population of the service area according to the most
recent decenial census was lower than that recorded by the previous
decenial census by the following percentage:
(A) At least 10 percent but less than 20 percent--5 points;
(B) At least 20 percent but less than 30 percent--10 points; or
(C) 30 percent or more--15 points.
(3) Intermediary contribution. All assets of the IRP revolving fund
will serve as security for the IRP loan, and the intermediary will
contribute funds not derived from the Agency into the IRP revolving
fund along with the proceeds of the IRP loan. The amount of non-Agency
derived funds contributed to the IRP revolving fund will equal the
following percentage of the Agency IRP loan:
(i) At least 5% but less than 15%--15 points;
(ii) At least 15% but less than 25%--30 points; or
(iii) 25% or more--50 points.
(4) Experience. The intermediary has actual experience in making
and servicing commercial loans, with a successful record, for the
following number of full years:
[[Page 6062]]
(i) At least 1 but less than 3 years--5 points;
(ii) At least 3 but less than 5 years--10 points;
(iii) At least 5 but less than 10 years--20 points; or
(iv) 10 or more years--30 points.
(5) Community representation. The service area is not more than 14
counties and the intermediary utilizes local opinions and experience by
including community representatives on its board of directors or
equivalent oversight board. For purposes of this section, community
representatives are people, such as civic leaders, business
representatives, or bankers, who reside in the service area and are not
employees of the intermediary. Points will be assigned as follows:
(i) At least 10% but less than 40% of the board members are
community representatives--5 points;
(ii) At least 40% but less than 75% of the board members are
community representatives--10 points; or
(iii) At least 75% of the board members are community
representatives--15 points.
(6) Administrative. The Administrator may assign up to 35
additional points to an application to account for the following items
not adequately covered by the other priority criteria set out in this
section. The items that may be considered are the amount of funds
requested in relation to the amount of need; a particularly successful
business development record; a service area with no other IRP coverage;
a service area with severe economic problems, such as communities that
have remained persistently poor over the last 60 years or have
experienced long-term population decline or job deterioration; a
service area with emergency conditions caused by a natural disaster or
loss of a major industry; a work plan that is in accord with a
strategic plan, particularly a plan prepared as part of a request for
an Empowerment Zone/Enterprise Community designation; or excellent
utilization of a previous IRP loan.
Secs. 4274.345--4274.349 [Reserved]
Sec. 4274.350 Letter of conditions.
If the Agency is able to make the loan, it will provide the
intermediary a letter of conditions listing all requirements for the
loan. Immediately after reviewing the conditions and requirements in
the letter of conditions, the intermediary should complete, sign and
return the form provided by the Agency indicating the intermediary's
intent to meet the conditions. If certain conditions cannot be met, the
intermediary may propose alternate conditions to the Agency. The Agency
loan approval official must concur with any changes made to the
initially issued or proposed letter of conditions prior to acceptance.
Secs. 4274.351--4274.354 [Reserved]
Sec. 4274.355 Loan approval and obligating funds.
The loan will be considered approved on the date the signed copy of
the obligation of funds document is mailed to the intermediary. The
approving official may request an obligation of funds when available
and according to the following:
(a) The obligation of funds document may be executed by the loan
approving official providing the intermediary has the legal authority
to contract for a loan and to enter into required agreements, and has
signed the obligation of funds document.
(b) An obligation of funds established for an intermediary may be
transferred to a different (substituted) intermediary provided:
(1) The substituted intermediary is eligible to receive the
assistance approved for the original intermediary;
(2) The substituted intermediary bears a close and genuine
relationship to the original intermediary; and
(3) The need for and scope of the project and the purposes for
which Agency IRP loan funds will be used remain substantially
unchanged.
Sec. 4274.356 Loan closing.
(a) At loan closing, the intermediary must certify to the
following:
(1) No major changes have been made in the work plan except those
approved in the interim by the Agency.
(2) All requirements of the letter of conditions have been met.
(3) There has been no material change in the intermediary nor its
financial condition since the issuance of the letter of conditions. If
there have been changes, they must be explained. The changes may be
waived, at the sole discretion of the Agency.
(4) That no claim or liens of laborers, materialmen, contractors,
subcontractors, suppliers of machinery and equipment, or other parties
are pending against the security of the intermediary, and that no suits
are pending or threatened that would adversely affect the security of
the intermediary when the security instruments are filed.
(b) The processing officer will approve only minor changes which do
not materially affect the project, its capacity, employment, original
projections, or credit factors. Changes in legal entities or where tax
consideration are the reason for change will not be approved.
Secs. 4274.357--4274.360 [Reserved]
Sec. 4274.361 Requests to make loans to ultimate recipients.
(a) An intermediary may use revolved funds to make loans to
ultimate recipients without obtaining prior Agency concurrence. When an
intermediary proposes to use Agency IRP loan funds to make a loan to an
ultimate recipient, and prior to final approval of such loan, Agency
concurrence is required.
(b) A request for Agency concurrence in approval of a proposed loan
to an ultimate recipient must include:
(1) Certification by the intermediary that;
(i) The proposed ultimate recipient is eligible for the loan;
(ii) The proposed loan is for eligible purposes;
(iii) The proposed loan complies with all applicable statutes and
regulations;
(iv) The ultimate recipient is unable to finance the proposed
project through commercial credit or other Federal, State, or local
programs at reasonable rates and terms; and
(v) The intermediary and its principal officers (including
immediate family) hold no legal or financial interest or influence in
the ultimate recipient, and the ultimate recipient and its principal
officers (including immediate family) hold no legal or financial
interest or influence in the intermediary except the interest and
influence of a cooperative member when the intermediary is a
cooperative;
(2) For projects that meet the criteria for a Class I or Class II
environmental assessment or environmental impact statement as provided
in subpart G of part 1940 of this title, a completed and executed
request for environmental information on a form provided by the Agency;
(3) All comments obtained in accordance with Sec. 4274.337(a),
regarding intergovernmental consultation;
(4) Copies of sufficient material from the ultimate recipient's
application and the intermediary's related files, to allow the Agency
to determine the:
(i) Name and address of the ultimate recipient;
(ii) Loan purposes;
(iii) Interest rate and term;
(iv) Location, nature, and scope of the project being financed;
(v) Other funding included in the project; and
(vi) Nature and lien priority of the collateral.
[[Page 6063]]
(5) Such other information as the Agency may request on specific
cases.
Secs. 4274.362--4274.372 [Reserved]
Sec. 4274.373 Appeals.
Any appealable adverse decision made by the Agency which affects
the intermediary may be appealed in accordance with USDA appeal
regulations found at 7 CFR part 11.
Secs. 4274.374--4274.380 [Reserved]
Sec. 4274.381 Exception authority.
The Administrator may, in individual cases, grant an exception to
any requirement or provision of this subpart which is not inconsistent
with any applicable law, provided the Administrator determines that
application of the requirement or provision would adversely affect
USDA's interest.
Secs. 4274.382--4274.399 [Reserved]
Sec. 4274.400 OMB control number.
The reporting and recordkeeping requirements contained in this
regulation have been approved by the Office of Management and Budget
under the provisions of 44 U.S.C. chapter 35 and have been assigned OMB
control number 0570-0021 in accordance with the Paperwork Reduction Act
of 1995 (44 U.S.C. 3507).
Dated: January 9, 1998.
Jill Long Thompson,
Under Secretary, Rural Development.
[FR Doc. 98-3044 Filed 2-5-98; 8:45 am]
BILLING CODE 3410-XY-U
