[Federal Register Volume 85, Number 37 (Tuesday, February 25, 2020)]
[Rules and Regulations]
[Pages 10555-10562]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-01891]
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Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
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Federal Register / Vol. 85 , No. 37 / Tuesday, February 25, 2020 /
Rules and Regulations
[[Page 10555]]
DEPARTMENT OF AGRICULTURE
Rural Utilities Service
7 CFR Part 1752
[RUS-19-Telecom-0021]
RIN 0572-AC41
Special Servicing of Telecommunications Programs Loans for
Financially Distressed Borrowers
AGENCY: Rural Utilities Service, USDA.
ACTION: Final rule; request for comments.
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SUMMARY: The Rural Utilities Service (RUS), a Rural Development agency
of the United States Department of Agriculture (USDA), hereinafter
referred to as ``RUS'' or ``the Agency'', is issuing a final rule with
request for comments to outline the general policies for servicing
actions associated with financially distressed borrowers from the
Telecommunications Infrastructure Loan Program, Rural Broadband
Program, Distance Learning and Telemedicine Program, Broadband
Initiatives Program, and Rural e-Connectivity Pilot Program. This rule
will ensure recipients comply with any revised terms in repayment on
loans and ensures serving actions are handled by RUS consistently
across programs.
DATES: Effective date: This final rule is effective February 25, 2020.
Comment date: Comments are due by April 27, 2020.
ADDRESSES: Comments may be submitted on this rule by the following
method:
Federal eRulemaking Portal: Go to http://www.regulations.gov and, in the lower ``Search Regulations and Federal
Actions'' box, select ``Rural Utilities Service'' from the agency drop-
down menu, then click on ``Submit.'' In the Docket ID column, select
RUS-19-Telecom-0021 to submit or view public comments and to view
supporting and related materials available electronically. Information
on using Regulations.gov, including instructions for accessing
documents, submitting comments, and viewing the docket after the close
of the comment period, is available through the site's ``User Tips''
link.
Other Information: Additional information about RUS and
its programs is available on the internet at https://www.usda.gov/topics/rural.
FOR FURTHER INFORMATION CONTACT: For general inquiries, contact Laurel
Leverrier, Acting Assistant Administrator Telecommunications Program,
Rural Utilities Service, U.S. Department of Agriculture (USDA), email:
[email protected], telephone: (202) 720-3416.
SUPPLEMENTARY INFORMATION:
Executive Order 12866, Regulatory Impact Analysis
This rule has been determined to be significant and was reviewed by
the Office of Management and Budget under Executive Order 12866. In
accordance with Executive Order 12866, a Regulatory Impact Analysis was
completed, outlining the costs and benefits of implementing this
program in rural America. The complete analysis is available in Docket
RUS-19-Telecom-0021 on Regulations.gov. The following is a summary
discussion of the Analysis:
RUS is publishing this rulemaking action to codify a new servicing
regulation which outlines policies for servicing actions associated
with distressed borrowers from the Telecommunications Infrastructure
Loan Program, Rural Broadband Program, Distance Learning and
Telemedicine Program, Broadband Initiatives Program, and Rural e-
Connectivity Pilot Program (collectively referred to as the ``RUS
Telecommunications Programs''). The challenges in providing high-
quality, but high-cost, telecommunications services to sparsely
populated and remote rural areas are well known. Historically, most RUS
Telecommunications Program borrowers have operated in a highly
regulated industry with predictable revenue streams, which served to
mitigate the risks associated with these loans. As technologies and
services evolve, new competitors and alternative technology packages
are changing the industry. Due to these recent changes in the
telecommunications industry and regulatory environment, this rulemaking
will ensure recipients comply with any revised terms in repayment on
loans and ensures serving actions are handled by RUS consistently
across the RUS Telecommunications Programs.
The new regulation is consistent with the Administration's efforts
to streamline Government functions, improve the efficiency and
effectiveness of Government activities, and strive to be more borrower-
friendly. The new regulation will ensure consistency and
appropriateness of the Agency's actions when borrowers default on their
debts. Specifically, it will:
(1) Ensure that RUS, under its own authority, will quickly address
servicing actions for its RUS Telecommunications Programs;
(2) Ensure servicing actions are handled by RUS consistently across
all RUS Telecommunications Programs;
(3) Maximize Risk Management of the loan portfolio;
(4) Improve the Agency's capacity to identify, address, and provide
guidance to distressed Borrowers in the early stages of distress;
(5) Result in more timely responses by setting forth clear
standards for identifying and mitigating material defaults;
(6) Improve the probability of repayment, and reduce legal costs on
its borrowers and improve overall customer service;
(7) Ensure that servicing recipients comply with any revised terms
in repayment on loans.
(8) Provide efficient recovery of debt which may mitigate negative
impacts on program subsidy rates; and
(9) Reduces duplication of staff effort and costs of duplicative
labor between federal Agencies.
Congressional Review Act
Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.),
the Office of Information and Regulatory Affairs designated this rule
as not a major rule, as defined by 5 U.S.C. 804(2).
Executive Order 12988, Civil Justice Reform
This rule has been reviewed under Executive Order 12988, Civil
Justice Reform. The Agency has determined that this rule meets the
applicable standards provided in section 3 of the
[[Page 10556]]
Executive order. In addition, all state and local laws and regulations
that conflict with this rule will be preempted. No retroactive effect
will be given to this rule.
Executive Order 12372, Intergovernmental Consultation
This rule is excluded from the scope of Executive Order 12372,
Intergovernmental Consultation, which may require a consultation with
State and local officials. See the final rule related notice entitled,
``Department Programs and Activities Excluded from Executive Order
12372'' (50 FR 47034) advising that RUS loans and loan guarantees were
not covered by Executive Order 12372.
Regulatory Flexibility Act Certification
RUS certifies that this rule will not have a significant economic
impact on a substantial number of small entities, as defined in the
Regulatory Flexibility Act (5 U.S.C. 601 et seq.). The RUS
telecommunications program provides loans to borrowers at interest
rates and on terms that are more favorable than those generally
available from the private sector. RUS borrowers, as a result of
obtaining federal financing, receive economic benefits that exceed any
direct economic costs associated with complying with RUS regulations
and requirements.
Environmental Impact Statement
This rule has been examined under Agency environmental regulations
at 7 CFR part 1970. The Administrator has determined that this is not a
major Federal action significantly affecting the environment.
Therefore, in accordance with the National Environmental Policy Act of
1969 (42 U.S.C. 4321 et seq.), an Environmental Impact Statement is not
required.
Catalog of Federal Domestic Assistance
The Catalog of Federal Domestic Assistance (CFDA) number assigned
to the RUS Telecommunications Programs are as follows: 10.752, Rural e-
Connectivity Pilot Program; 10.851, Rural Telephone Loans and Loan
Guarantees; 10.855, Distance Learning and Telemedicine Loans and
Grants; 10.863 Community Connect Grant Program and 10.886, Rural
Broadband Access Loans and Loan Guarantees. The Catalog is available on
the internet at https://beta.sam.gov/. The Government Publishing Office
(GPO) prints and sells the CFDA to interested buyers. For information
about purchasing the Catalog of Federal Domestic Assistance from GPO,
call the Superintendent of Documents at 202-512-1800 or toll free at
866-512-1800, or access GPO's online bookstore at https://bookstore.gpo.gov.
Unfunded Mandates
This rule contains no Federal mandates (under the regulatory
provisions of Title II of the Unfunded Mandates Reform Act of 1995) for
state, local, and tribal governments or the private sector. Therefore,
this rule is not subject to the requirements of sections 202 and 205 of
the Unfunded Mandates Reform Act of 1995.
E-Government Act Compliance
RUS is committed to the E-Government Act, which requires Government
agencies in general to provide the public the option of submitting
information or transacting business electronically to the maximum
extent possible.
Executive Order 13132, Federalism
The policies contained in this rule do not have any substantial
direct effect on states, on the relationship between the national
government and the states, or on the distribution of power and
responsibilities among the various levels of government. Nor does this
rule impose substantial direct compliance costs on state and local
governments. Therefore, consultation with the states is not required.
Executive Order 13175, Consultation and Coordination With Indian Tribal
Governments
This rule has been reviewed in accordance with the requirements of
Executive Order 13175, ``Consultation and Coordination with Indian
Tribal Governments.'' Executive Order 13175 requires Federal agencies
to consult and coordinate with tribes on a government-to-government
basis on policies that have tribal implications, including regulations,
legislative comments or proposed legislation, and other policy
statements or actions that have substantial direct effects on one or
more Indian tribes, on the relationship between the Federal Government
and Indian tribes or on the distribution of power and responsibilities
between the Federal Government and Indian tribes. Rural Development, a
mission area for which RUS is an agency, has assessed the impact of
this rule on Indian tribes. Given that no tribal entity has requested
servicing actions in the past, and the limited impact this rule could
have on such entities should they request such a servicing action, the
agency has determined that to the best of our knowledge, this rule does
not, have tribal implications that require tribal consultation under
E.O. 13175. If a tribe would like to engage in consultation with Rural
Development on this rule, please contact Rural Development's Native
American Coordinator at (720) 544-2911 or [email protected].
Civil Rights Impact Analysis
Rural Development, a mission area for which RUS is an agency, has
reviewed this rule in accordance with USDA Regulation 4300-4, Civil
Rights Impact Analysis,'' to identify any major civil rights impacts
the rule might have on program participants on the basis of age, race,
color, national origin, sex, or disability. After review and analysis
of the rule and available data, it has been determined that based on
the analysis of the program purpose, application submission and
eligibility criteria, issuance of this final rule will neither
adversely nor disproportionately impact very low, low and moderate-
income populations, minority populations, women, Indian tribes or
persons with disability, by virtue of their race, color, national
origin, sex, age, disability, or marital or familial status.
Paperwork Reduction Act and Recordkeeping Requirements
The Information Collection and Recordkeeping requirements contained
in this rule have been approved by an emergency clearance under OMB
Control Number 0572-0153. In accordance with the Paperwork Reduction
Act of 1995 (44 U.S.C. chapter 35), RUS invites comments on this
information collection for which the Agency intends to request approval
from the Office of Management and Budget (OMB). RUS invites comments on
any aspect of this collection of information including suggestions for
reducing the burden. Comments may be submitted regarding this
information collection by the following method:
Federal eRulemaking Portal: Go to https://www.regulations.gov and, in the lower ``Search Regulations and Federal
Actions'' box, select ``Rural Utilities Service'' from the agency drop-
down menu, then click on ``Submit.'' In the Docket ID column, select
RUS-19-Telecom-0021 to submit or view public comments and to view
supporting and related materials available electronically. Information
on using Regulations.gov, including instructions for accessing
documents, submitting comments, and viewing the docket after the close
of the comment period, is available through the site's ``User Tips''
link. Comments on this information collection must be received by April
27, 2020.
[[Page 10557]]
Comments are invited on (a) the accuracy of the agency's estimate
of burden including the validity of the methodology and assumption
used; (b) ways to enhance the quality, utility, and clarity of the
information to be collected; and (c) ways to minimize the burden of the
collection of information on those who are to respond, including using
appropriate automated, electronic, mechanical, or other technological
collection techniques on other forms and information technology.
Title: Special Servicing of Telecommunications Programs Loans for
Financially Distressed Borrowers.
OMB Control Number: 0572-0153.
Type of Request: New.
Abstract: The RUS Telecommunications Programs provides loan funding
to build and expand broadband service into unserved and underserved
rural communities, along with very limited funding to support the costs
to acquire equipment to provide distance learning and telemedicine
service. While each program has its own regulation, which outlines
general program policies and requirements, types of assistance, and the
requirements for advance of funds, there is no regulation currently in
place to address how RUS will handle servicing actions associated with
distressed loans. The information collected from borrowers that need
servicing assistance, as required by this new servicing regulation,
will give RUS greater authority to address servicing actions and will
streamline and expedite servicing actions, improve the government's
recovery on such loans, and improve overall customer service. Examples
of information that will be collected by the Agency from the borrower
include, but are not limited to, a request and explanation for
servicing action, various financial, subscriber and organizational
information, as well as other documents and information that may be
relevant as determined by RUS.
Estimate of Burden: Public reporting burden for this collection of
information is estimated to average 5 hours per responses.
Estimated Number of Respondents: 5.
Estimated Number of Total Annual Responses per Respondents: 137.
Estimated Total Annual Burden on Respondents: 694.50 hours.
Copies of this information collection can be obtained from MaryPat
Daskal, Regulatory Division Team 2, Rural Development Innovation
Center, U.S. Department of Agriculture, 1400 Independence Ave. SW, Stop
1522, Washington, DC 20250. Phone: 202-720-7853.
All responses to this information collection and recordkeeping
notice will be summarized and included in the request for OMB approval.
All comments will also become a matter of public record.
Background
The Agency improves the quality of life in rural America by
providing investment capital for deployment of rural telecommunications
infrastructure. To achieve the goal of increasing economic opportunity
in rural America, the Agency finances infrastructure that enables
access to a seamless, nationwide telecommunications network. With
access to the same advanced telecommunications networks as its urban
counterparts--especially those designed to accommodate distance
learning, telework, and telemedicine --rural America will eventually
see improving educational opportunities, health care, economies, safety
and security, and ultimately higher employment. The Telecommunications
Infrastructure Loan Program, Rural Broadband Program, Distance Learning
and Telemedicine Program, Broadband Initiatives Program and ReConnect
Program (hereinafter collectively referred to as the ``RUS
Telecommunications Programs'') provide loan funding to build and expand
broadband and telecommunications services in rural communities.
The RUS Telecommunications Programs currently take servicing
actions on approximately 10-12 projects each year. While each program
has its own regulation, which outlines general program policies and
requirements, types of assistance, and the requirements for advance of
funds, there is no regulation currently in place to address how RUS
will handle special servicing actions associated with financially
distressed loans. At present, when a Borrower is financially
distressed, the Agency must rely on the authority of the Department of
Justice (DOJ) for many of these actions. This servicing regulation will
be located in 7 CFR part 1752 and will give RUS greater authority to
address servicing actions directly, without the additional transactions
costs associated with coordinating with DOJ. RUS will still work
closely with DOJ on cases involving foreclosure or bankruptcy, but this
rule will enable RUS to resolve many servicing actions without having
to involve DOJ. This will streamline and expedite servicing actions,
improve the Government's recovery on such loans, and improve overall
customer service. Since most RUS Telecommunications Program borrowers
are utilities, faster resolution of servicing actions will ensure that
rural Americans continue to receive service.
Regulation Objective
This rule outlines the general policies and procedures for
servicing actions associated with the RUS Telecommunications Programs
Borrowers in financial distress. The agency views this rule as narrowly
applying to loan servicing procedures within RUS. It will ensure
recipients comply with the established objectives and requirements for
loans, repaying loans on schedule or within the revised terms as agreed
to by the Agency, and act in accordance with any necessary agreements.
The rule will also ensure that servicing actions are handled by the
Agency in a consistent approach across all RUS Telecommunications
Programs, as well as protect the financial interest of the Agency. To
implement these changes, RUS is publishing this action as a final rule
with request for comments.
To help inform RUS on the effects of the new regulation, RUS is
taking this opportunity to request public comment on the regulation.
How can RUS improve the review of servicing requests,
including the documentation needed to request a servicing action, to
avoid placing unnecessary burden or duplicative requirements on
borrowers?
Are there other servicing options that the agency has not
addressed in the rulemaking?
Given the amount of debt and complexity of borrower's
other debt arrangements, what is an appropriate amount of time to be
given to respond to agency requests, understanding that the Government
has a responsibility to address the default timely?
Conclusion
RUS already acts to address servicing needs as they arise but, in
many cases, must rely on DOJ since the Telecommunications Programs lack
their own servicing regulations. RUS believes that a stand-alone
regulation will minimize the programs' reliance on DOJ and the
regulatory change will give RUS the authority to quickly address
servicing actions without having to involve DOJ, which will simplify
the process and reduce the burden and costs on Borrowers. This
regulation will maximize the ability of the Borrowers to use and
understand the available servicing tools under the applicable program.
It will also ensure Borrowers comply with the established objectives
and requirements for loans, repay loans
[[Page 10558]]
on schedule, and act in accordance with any necessary agreements.
Additionally, this regulation will ensure serving actions are handled
consistently, and protect the financial interest of the Agency.
List of Subjects in 7 CFR Part 1752
Broadband, Community development, Grant programs-education, Grant
programs-health, Loan programs--communications, Reporting and
recordkeeping requirements, Rural areas, Telephone, Telecommunications.
Accordingly, for reasons set forth in the preamble, chapter XVII,
title 7, the Code of Federal Regulations is amended by adding part 1752
to read as follows:
PART 1752--SERVICING OF TELECOMMUNICATIONS PROGRAMS
Sec.
1752.1 Purpose.
1752.2 Objectives.
1752.3 Definitions.
1752.4 Availability of forms, bulletins, and procedures.
1752.5 Monetary default by Borrower.
1752.6 Request for special servicing action.
1752.7 Civil rights and requirements.
1752.8--1752.10 [Reserved]
1752.11 Consent to additional, unsecured debt.
1752.12 Parity lien.
1752.13 Reamortization of or rescheduling of the debt payments.
1752.14 Deferment of principal and/or interest payments.
1752.15 Interest rate adjustments.
1752.16 Transfer of collateral and assumption of debt.
1752.17 Sale or exchange of loan collateral.
1752.18 Sale of the note.
1752.19 Debt settlement.
1752.20--1752.24 [Reserved]
1752.25 Special terms.
1752.26 No rights to special servicing actions.
1752.27 Confidentiality of borrower information.
1752.28 Interest accrual.
1752.29 Communications laws.
1752.30 Information collection and reporting requirements.
1752.31 Authorized signatories.
Authority: 7 U.S.C. 1981(b)(4), 7 U.S.C. 901 et seq. and 7
U.S.C. 950aaa et seq.
Sec. 1752.1 Purpose.
This part prescribes the policies and procedures for loan and grant
servicing for financial assistance made under the Rural Utilities
Service (RUS) Telecommunications Infrastructure Loan Program, Rural
Broadband Program, Distance Learning and Telemedicine Program,
Broadband Initiatives Program, and the Rural e-Connectivity Pilot
Program (in this part collectively referred to as the ``RUS
Telecommunications Programs'').
Sec. 1752.2 Objectives.
The purpose of loan and grant servicing functions is to assist
recipients to meet the objectives of loans and grants, repay loans on
schedule, comply with agreements and protect RUS' financial interests.
The provisions of this part will ensure recipients comply with any
revised terms in repayment on loans and ensures serving actions are
handled consistently by the Agency.
Sec. 1752.3 Definitions.
The terms and conditions provided in this section are applicable to
this part only. All financial terms not defined in this section shall
have the commonly-accepted meaning under Generally Accepted Accounting
Principles.
Acceleration. A written notice informing the Borrower that the
total unpaid principal and interest is due and payable immediately.
Administrator. Administrator of the Rural Utilities Service.
Agency. The Rural Utilities Service, an agency of the United States
Department of Agriculture's Rural Development mission area.
Assumption of debt. Agreement by one party to legally bind itself
to repay the debt of the RUS borrower.
Borrower. Recipient of loan funding under a RUS Telecommunications
Program.
Broadband system. The telecommunications or broadband network
financed with RUS loan and/or grant funding or maintained by the
Borrower and contained as part of the collateral to the loan.
Cancellation. Final discharge of debt with a release of liability.
Charge-off. Write-off of a debt and termination of servicing
activity without release of liability. A charge-off is a decision by
the Agency to remove debt from Agency receivables, however, future
payments may be received.
Collateral. Means the assets, equipment and/or revenues pledged as
security for the loan as defined in the loan documents.
Disposition of facility. Relinquishing control of a facility to
another entity.
Loan Documents. All associated loan agreements, loan and security
agreements, loan/grant agreements, mortgages, and promissory notes, as
applicable.
Liquidation. Satisfaction of a debt through the sale of a
Borrower's assets and cancellation of liabilities.
Parity lien. A lien having an equal lien position to another
lender's lien on a Borrower's asset.
Rural Utilities Service (RUS). An agency of the United States
Department of Agriculture's Rural Development mission area.
Settlement. Compromise, adjustment, cancellation, or charge-off of
a debt owed to the Agency. The term ``settlement'' is used to refer to
any of these actions, whether individually or collectively.
Unliquidated obligations. Obligated loan funds that have not been
advanced.
Voluntary conveyance. A method by which title to security is
voluntarily transferred to the Federal Government.
Sec. 1752.4 Availability of forms, bulletins, and procedures.
Forms, bulletins, and procedures referenced in this part are
available online at https://www.rd.usda.gov/publications/regulations-guidelines.
Sec. 1752.5 Monetary default by Borrower.
A defaulting Borrower's primary responsibility is to expeditiously
bring the delinquent account current. If a monetary default exceeds 60
days, RUS will attempt to discuss the situation with the Borrower and
make the Borrower aware of options that may be available. In
considering options, the prospects for providing a permanent cure
without adversely affecting the risk to the Agency is the paramount
objective. RUS will also work with entities that are not in monetary
default but whose financial position is such that, without RUS action,
a monetary default is imminent within the next 24 months, as evidenced
by a financial forecast provided by the Borrower. RUS receives
quarterly financial reports and annual audits from borrowers and
actively monitors the borrower's Times Interest Earned Ratio (TIER),
Current Ration, Debt Service Coverage Ratio, and Net Worth.
Sec. 1752.6 Request for special servicing action.
(a) Special servicing actions include, but are not limited to, one
or more of the following:
(1) Consent to additional, unsecured debt;
(2) Parity lien;
(3) Reamortization or rescheduling of debt payments;
(4) Deferment of principal and/or interest;
(5) Interest rate adjustment;
(6) Transfer of collateral and assumption of debt;
(7) Sale or exchange of loan collateral;
(8) Sale of the note; and
(9) Debt settlement.
(b) In order for the Agency to consider one or more of the curative
actions cited in paragraph (a) of this section, the Borrower must
submit a written request to RUS.
(1) The written request must contain the following items:
[[Page 10559]]
(i) A detailed explanation of the request and why it is needed.
(ii) Most recent audited financial statements for the Borrower.
(iii) Borrower's Pro Forma 5-year financial forecast, which
includes an Income Statement, Balance Sheet, and Statement of Cash
Flows, 2 years of historical data, current year data and a 5-year
forecast, with detailed supporting assumptions. Additionally, in order
to request assistance under this paragraph (b)(1)(iii), the Borrower
must make a showing that the account is delinquent and cannot be
brought current within one year, or that the Borrower will become
delinquent within 24 months, as demonstrated in the Pro Forma.
(iv) Existing and projected subscriber numbers and service tiers,
along with pricing for each tier. Additionally, for companies receiving
support from the Federal Communications Commission, a detailed forecast
of the support revenue, certified by a cost consultant, must be
included.
(v) Current organizational chart for the Borrower, related
entities, and affiliated companies, as well as information relating to
ownership interest in the Borrower and its related entities.
(vi) A complete list of all collateral and steps the Borrower is
taking to preserve the collateral.
(2) The Agency may request the additional documents in paragraphs
(b)(2)(i) through (iv) of this section after reviewing the Borrower's
servicing request:
(i) An appraisal in order to determine the adequacy of loan
security or repayment ability;
(ii) An itemized list of estimated liquidation expenses expected to
be incurred along with justification for each expense;
(iii) A legal opinion regarding RUS' interests in the impacted
collateral and supporting evidence, in the form of Uniform Commercial
Code Statements and filed Mortgages, that RUS maintains a first lien
position on all assets of the Borrower, or such collateral as mandated
by the Loan Documents; and
(iv) Such other documents that may be relevant in individual cases,
as determined by RUS.
(3) When submitting a request for a servicing action, the
distressed Borrower must consent to the following during the request
and for the duration of the servicing action:
(i) On-site visit. A Management Analysis Profile (MAP) visit of the
Borrower's entire operation;
(ii) RUS priority payment. Borrowers must agree that no other
creditors will be paid without RUS consent, if RUS is not receiving
full principal and interest payments;
(iii) Additional reporting and monitoring. Throughout the term of
the servicing action(s), RUS will require increased frequency and/or
additional details to the reporting and monitoring required under the
terms of the Loan Documents; and
(iv) Additional controls and limitations. RUS may require
additional controls and limitations such as segregation of accounts,
RUS review of expenditures, etc.
(c) False information provided by a Borrower, or by entities acting
on behalf of the Borrower, will give rise to the immediate termination
of any servicing action(s).
Sec. 1752.7 Civil rights and requirements.
(a) Equal opportunity and nondiscrimination. The Agency will ensure
that equal opportunity and nondiscriminatory requirements are met in
accordance with the Equal Credit Opportunity Act and 7 CFR part 15. In
accordance with Federal civil rights law and U.S. Department of
Agriculture (USDA) civil rights regulations and policies, the USDA, its
agencies, offices, and employees, and institutions participating in or
administering USDA programs are prohibited from discriminating based on
race, color, national origin, religion, sex, gender identity (including
gender expression), sexual orientation, disability, age, marital
status, family/parental status, income derived from a public assistance
program, political beliefs, or reprisal or retaliation for prior civil
rights activity, in any program or activity conducted or funded by USDA
(not all bases apply to all programs).
(b) Civil rights compliance. Recipients of Federal assistance under
this part must comply with the Americans with Disabilities Act of 1990,
Title VI of the Civil Rights Act of 1964, and Section 504 of the
Rehabilitation Act of 1973. Prior to determining eligibility of any
servicing action under this part, the Agency will determine that the
Borrower is in compliance with all civil rights requirements of the
latest Civil Rights Compliance Review conducted by the Agency.
(c) Discrimination complaints. Persons believing they have been
subjected to discrimination prohibited by this section may file a
complaint personally, or by an authorized representative with USDA,
Director, Office of Adjudication, 1400 Independence Avenue SW,
Washington, DC 20250. A complaint must be filed no later than 180 days
from the date of the alleged discrimination, unless the time for filing
is extended by the designated officials of USDA or the Agency.
Sec. Sec. 1752.8--1752.10 [Reserved]
Sec. 1752.11 Consent to additional, unsecured debt.
(a) An additional, unsecured loan from another lender to the
Borrower may be approved subject to the conditions set forth in this
section. In order to request assistance under this section, the
Borrower must make a showing that the additional debt will cure any
existing or projected delinquency. Additionally, the following
requirements must be met, as determined by RUS:
(1) The additional debt will not disadvantage RUS's standing or
lien on any of the collateral already pledged to RUS;
(2) The additional debt will not adversely impact the continued
financial viability of the Borrower or the Borrower's ability to carry
out the purposes of the RUS loan;
(3) The debt is needed to resolve short-term, negative cashflow
problems; and
(4) The Borrower is in good standing with the Agency or will become
so with the additional debt.
(b) In the case where all assets of the Borrower are not secured by
the Government's debt, the Borrower may request additional debt that is
secured by collateral that is not subject to the Government's security
interest.
Sec. 1752.12 Parity lien.
A Borrower's request for parity may be approved subject to the
conditions set forth in this section. In order to request assistance
under this section, the Borrower must make a showing that the amount of
new debt is at least equal to the amount of the collateral being added
and will cure any existing or projected delinquency. The following
factors will be considered in assessing whether the request is in the
Government's best interest:
(a) The value of the added assets compared with the amount of new
debt to be secured;
(b) The value of the assets already pledged under the Loan
Documents, and any effects of the proposed transaction on the value of
those assets;
(c) The ratio of the total outstanding debt secured under the Loan
Documents to the value of all assets pledged as security under the Loan
Documents;
(d) The Borrower's ability to repay its debt owed to the
Government;
(e) The overall financial viability of the Borrower; and
[[Page 10560]]
(f) That the Borrower is in good standing with the Agency or will
become so with the parity lien; and
(g) Such other conditions as may be imposed by the Agency on a
case-by-case basis, as determined by RUS.
Sec. 1752.13 Reamortization of or rescheduling of the debt payments.
A reamortization or rescheduling of debt payments may be approved
subject to the conditions set forth in this section. In order to
request a reamortization or rescheduling of debt payments, the Borrower
must make a showing that the Borrower does not have access to other
sources of capital or alternatives for resolving the delinquency, and
that the reamortization or rescheduling of debt payment will cure any
existing or projected delinquency. Reamortizations or rescheduling of
debt will be limited to 10 years beyond the original maturity date.
Additionally, the following requirements must be met, as determined by
RUS:
(a) The Borrower has cooperated with RUS in exploring alternative
servicing options and has acted in good faith with regard to
eliminating the delinquency and complying with its loan agreements and
Agency regulations;
(b) Any management deficiencies identified by RUS have been
corrected or the Borrower has submitted a plan acceptable to RUS to
correct any deficiencies;
(c) The Borrower has presented a budget which clearly indicates
that it is able to meet the proposed payment schedule and the
reamortization or rescheduling of debt payments will ensure the
continued financial viability of the Borrower;
(d) The Agency will consider the useful life of the facilities
along with the level of debt service payments that the Borrower can
contribute when determining the appropriate term to place on any
reamortized loan; and
(e) Such other conditions as may be imposed by the Agency on a
case-by-case basis, as determined by RUS.
Sec. 1752.14 Deferment of principal and/or interest payments.
A deferment of principal and/or interest payments which will
continue the original purpose of the loan may be approved subject to
the conditions set forth in this section.
(a) Principal-only deferrals. In order to request a principal
deferral, the Borrower must make a showing that at the end of the
deferment period the Borrower's financial position has improved and the
Borrower is able to make full principal and interest payments, curing
any delinquency or projected delinquency. Deferments of principal will
be limited to no more than 36 months. Additionally, the following
requirements must be met, as determined by RUS:
(1) Any management deficiencies identified by RUS have been
corrected or the Borrower has submitted a plan acceptable to RUS to
correct any deficiencies;
(2) The Borrower has presented a budget which clearly indicates
that it is able to meet the new proposed payment schedule and after the
end of the deferral period is able to resume making full principal and
interest payments while maintaining a positive cashflow position;
(3) Unless authorized by prior RUS written consent, the Borrower
will only use funds otherwise due and payable under the RUS Note for
the benefit of the broadband system. Such expenditures include, but are
not limited to, costs to complete any necessary construction of the
Project, costs to connect additional subscribers, marketing and sales
costs, and other such costs that are necessary to maximize the value of
the broadband system; and
(4) The Borrower will comply with such other conditions as may be
imposed by the Agency on a case-by-cases basis, as determined by RUS.
(b) Principal and interest deferrals. A principal and interest
deferral shall only be approved when the Borrower has demonstrated that
it is the only option for the Agency to avoid foreclosure and is in the
best interest of the Government to avoid a substantial loss to the
Government. Additionally, principal and interest deferrals may be
approved if the Borrower and RUS have agreed to a public sale of the
broadband system and such a deferral is needed to provide time to
complete the sale of the broadband system. Principal and interest
deferrals will be limited to no more than 24 months, unless extended by
the Agency for good cause and full cooperation of the Borrower.
Additionally, the following requirements must be met, as determined by
RUS:
(1) The Borrower has cooperated with RUS in exploring alternative
servicing options and has acted in good faith with regard to
eliminating the delinquency and complying with its Loan Documents and
Agency regulations;
(2) Any management deficiencies identified by RUS have been
corrected or the Borrower has submitted a plan acceptable to RUS to
correct any deficiencies; and
(3) Unless authorized by prior RUS written consent, the Borrower
will only use funds otherwise due and payable under the RUS Note for
the benefit of the broadband system. Such expenditures include, but are
not limited to, costs to execute a sale of the broadband system, costs
to complete any necessary construction of the Project, costs to connect
additional subscribers, marketing and sales costs, and other such costs
that are necessary to maximize the value of the broadband system for an
eventual sale;
(4) In cases when the Borrower and RUS have agreed to a public sale
of the broadband system, the Borrower agrees that within 30 days of the
execution of the deferral agreement, the Borrower will develop a
process and timeline for the sale of the broadband system, in form and
substance satisfactory to RUS, and will continually execute on those
plans in order to effectuate a public sale of the broadband system; and
(5) The Borrower will comply with such other conditions as may be
imposed by the Agency on a case-by-cases basis, as determined by RUS.
Sec. 1752.15 Interest rate adjustments.
Interest rate reductions may be approved subject to the conditions
set forth in this section. In order to request an interest rate
reduction, the Borrower must make a showing that the Borrower does not
have access to other sources of capital or alternatives to resolve the
delinquency, and the interest rate adjustment will cure any existing or
projected delinquency. Additionally, the following requirements must be
met, as determined by RUS:
(a) The Borrower has cooperated with RUS in exploring alternative
servicing options and has acted in good faith with regard to
eliminating the delinquency and complying with its loan agreements and
Agency regulations;
(b) Any management deficiencies identified by RUS have been
corrected or the Borrower has submitted a plan acceptable to RUS to
correct any deficiencies;
(c) The Borrower has presented a budget which clearly indicates
that it is able to meet the proposed payment schedule and the interest
rate reduction will improve the financial viability of the Borrower;
(d) The Borrower has agreed to not maintain cash or cash reserves
beyond what is reasonable at the time of interest rate adjustment to
meet debt service, operating, and reserve requirements; and
(e) The Borrower will comply with such other conditions as may be
[[Page 10561]]
imposed by the Agency on a case-by-cases basis, as determined by RUS.
Sec. 1752.16 Transfer of collateral and assumption of debt.
A transfer of collateral and assumption of debt may be approved
subject to the conditions set forth in this section. In order to
request assistance under this section, the Borrower must make a showing
that the transfer of collateral and assumption of debt will improve the
likelihood that the government will be repaid and maximize the Agency's
recovery on such loans. Such actions will be subject to the following
requirements:
(a) The transfer will not be disadvantageous to the Government, as
determined by RUS;
(b) The Agency has concurred to plans for disposition of funds in
any reserve account, including project construction bank accounts;
(c) The transferee will assume all of the Borrower's
responsibilities regarding the loan(s) and will accept the original
loan conditions, as well as any others that may be imposed by the
Agency;
(d) There must be no lien, judgement, or similar claims of other
parties against the loan collateral being transferred, and once
transferred, such collateral may not be subject to the lien, judgement,
or similar claims of other parties of the transferee;
(e) Title to all assets must be conveyed to the transferee; and
(f) The Borrower will comply with such other conditions as may be
imposed by the Agency on a case-by-case basis, as determined by RUS.
Sec. 1752.17 Sale or exchange of loan collateral.
A cash sale of all or a portion of a Borrower's assets or an
exchange of security property for Borrowers in a distressed situation
may be approved subject to the conditions set forth in this section. In
order to request assistance under this section, the Borrower must make
a showing that the sale or exchange of collateral is in the best
interest of the Government to avoid a substantial loss to the
Government. Additionally, the following requirements must be met, as
determined by RUS:
(a) If a sale of all of the assets, that the consideration is for
the full amount of the debt or the present fair market value as
determined by an independent appraiser that has been approved by RUS,
and which addresses any conditions of the appraisal as may be imposed
by RUS; and
(b) If the sale is for a portion of the assets, that the remaining
property is adequate security for the loan and that the transaction
will not adversely affect the Agency's security position; and provided
that any proceeds remaining after paying reasonable and necessary
selling expenses, as approved by the Agency in advance, are to be used
for the following purposes:
(1) Repayment of the RUS debt, and other non-RUS debt if secured by
a parity lien with the Agency; and/or
(2) Improvement of the broadband network or other facilities of the
Borrower, including customer premise equipment and other equipment
needed to upgrade the broadband network, if necessary to improve the
Borrower's ability to repay the loan; and
(c) Any grant assets in the sale of collateral that were financed
with Agency grants must follow the disposition rules as stated in the
Loan Documents or Grant/Loan Documents.
Sec. 1752.18 Sale of the note.
In the event of one or more incidents of default by the Borrower
that cannot or will not be cured within a reasonable period of time,
the Agency may sell the note. A decision to sell the note may be made
when the Agency determines that the monetary default cannot be cured
through the other actions as outlined in this part, or it has been
determined that it is in the best interest of the Agency. The decision
to sell the note should be made as soon as possible when one or more of
the following exist:
(a) A loan is 90 days behind on any scheduled payment and the
Agency and Borrower have not been able to cure the delinquency through
actions such as those contained in this part;
(b) It is determined that delaying sale of the note will jeopardize
full recovery on the loan; or
(c) The Borrower is uncooperative in resolving the delinquency or
the Agency has reason to believe the Borrower is not acting in good
faith, and it would improve the position of the Agency to sell the note
immediately.
Sec. 1752.19 Debt settlement.
Debts will not be settled directly by the Agency if:
(a) Referral to the Office of Inspector General and/or to Office of
General Counsel is contemplated or pending because of suspected
criminal violation;
(b) Civil action to protect the interest of the Government is
contemplated or pending;
(c) An investigation for suspected fiscal irregularity is
contemplated or pending;
(d) The Borrower is uncooperative in resolving the delinquency or
the Agency has reason to believe the Borrower is not acting in good
faith; or
(e) The debt has been referred to the Department of Justice, such
as in bankruptcy proceedings.
Sec. Sec. 1752.20-1752.24 [Reserved]
Sec. 1752.25 Special terms.
If the Administrator determines the servicing actions in this part
would not protect the Government's interest due to unique circumstances
of the debtor, the Agency reserves the right to negotiate special terms
to maximize the Government's recovery on the debt.
Sec. 1752.26 No rights to special servicing actions.
Nothing in this part should be assumed guaranteed as a right to the
Borrower for any of the special servicing actions noted in this part.
Sec. 1752.27 Confidentiality of borrower information.
Borrowers are encouraged to identify and label any confidential and
proprietary information contained in their applications. The Agency
will protect confidential and proprietary information from public
disclosure to the fullest extent authorized by applicable law,
including the Freedom of Information Act, as amended (5 U.S.C. 552),
the Trade Secrets Act, as amended (18 U.S.C. 1905), the Economic
Espionage Act of 1996 (18 U.S.C. 1831 et seq.), and Communications
Assistance for Law Enforcement Act (CALEA) (47 U.S.C. 1001 et seq.).
Sec. 1752.28 Interest accrual.
(a) The Agency may determine to stop accruing interest if the
account has remained delinquent for a period of 18 months or more, and
the Agency has determined, in its sole discretion, that it will not
recover the full outstanding principal balance on the loan.
(b) Notwithstanding paragraph (a) of this section, the
Administrator may waive the accrual of interest on any outstanding
delinquent debt, if in the sole determination of the Administrator,
such waiver facilitates and maximizes the Government's recovery of the
debt, such as under a voluntary foreclosure by the Borrower.
Sec. 1752.29 Communications laws.
Borrowers must comply with all applicable Federal and state
communications laws and regulations, including, for example, the
Communications Act of 1934, as amended (47 U.S.C. 151 et seq.), the
Telecommunications Act of 1996, as amended (Pub. L. 104-104, 110 Stat.
56 (1996), and CALEA. For further information see http://www.fcc.gov.
[[Page 10562]]
Sec. 1752.30 Information collection and reporting requirements.
Copies of all forms and instructions referenced in this part may be
obtained from RUS. Data furnished by Borrowers will be used to
determine eligibility for certain servicing actions. Furnishing the
data is voluntary; however, the failure to provide data could result in
a servicing action being denied or the Agency taking adverse action
against the Borrower to collect funds. The collection of information is
vital to RUS to ensure compliance with the provisions of this part. The
information collection requirements contained in this part have been
approved by the Office of Management and Budget (OMB) under OMB Control
Number 0572-0153.
Sec. 1752.31 Authorized signatories.
Only the RUS Administrator can bind the Government to the
expenditure of funds. Notwithstanding anything contained in this part,
however, any settlement resulting in the reduction of $500,000 or more
in payment to the Government, inclusive of attorney's fees, shall be
approved by the Under Secretary for Rural Development, or higher.
Chad Rupe,
Administrator, Rural Utilities Service.
[FR Doc. 2020-01891 Filed 2-24-20; 8:45 am]
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