The provisions in this section establish the process by which the Agency may make loans to eligible re-lenders who then in turn re-loan the funds to eligible applicants for eligible projects under this subpart. This section may be supplemented by provisions in annual notices published in the Federal Register. In such notices, the Agency may impose, among other things, limits on the total amount of funds to be used through this process and the amount of the loan funding that will be provided to each re-lender.
(a) Re-lender eligibility. Re-lenders must meet each of the following requirements:
(1) Demonstrate the legal authority necessary to make and service loans involving community infrastructure and development similar to the type of projects listed in § 1942.17(d);
(2) Meet federal, state and local requirements in accordance with § 1942.17(k);
(3) As specified in the annual Federal Register notice, demonstrate that a percent of its portfolio is for projects located in or serving Persistent Poverty County(ies) or High Poverty Areas, or that the Re-lender has a minimum amount of experience making loans for projects located in or serving Persistent Poverty County(ies) or High Poverty Area(s);
(4) Agree to provide adequate collateral, as determined by the Agency, to support the loan request;
(5) Provide a Letter of Intent from a financial institution that an Irrevocable Letter of Credit (or performance guarantee) acceptable to the Agency will be issued by the financial institution if the Re-lender is approved for funding;
(6) As specified in the annual Federal Register notice, agree to provide an Irrevocable Letter of Credit (or performance guarantee) acceptable to the Agency in the minimum amount equal to the principal and interest installments due the Agency during the first five (5) years of the loan, prior to receiving loan disbursements;
(7) Demonstrate one of the following, as provided in the annual Federal Register notice:
(i) Re-lender is regulated and supervised by a Federal or State Banking Regulatory Agency that is subject to credit examination, AND the institution, its subsidiaries, holding companies, and affiliates are not on their respective regulatory agency's watch list and have no regulatory actions outstanding against them;
(ii) Re-lender has a strong Financial Strength and Performance Rating as specified in the annual Federal Register notice. The achieved rating must indicate financial strength, performance, and risk management practices that consistently provide for safe and sound operations; or
(iii) At the time of application, Re-lender provides written documentation, acceptable to the Agency, from a financial institution that an Irrevocable Letter of Credit (or performance guarantee) acceptable to the Agency will be issued by the financial institution, if the Re-lender is approved for funding; and the Re-lender:
(A) Obtains a strong Financial Strength and Performance Rating as specified in the Annual Federal Register notice prior to any funds being advanced; or
(B) Proves to be a financially sound institution as determined by the Agency in accordance with the annual Federal Register notice;
(8) Be a legal, non-governmental entity at the time of application (with the exception of Tribal governmental entities);
(9) Be a member of a national organization that provides training, technical assistance and credit evaluation of member organizations, such as FDIC, NCUA or other similar organizations; or be certified by a Government agency as having a primary mission of promoting community development in low-income target markets and perform training and technical assistance as part of that mission;
(10) Agrees to loan a majority of Agency funds, as specified in the annual Federal Register notice, to applicants whose projects are located in or serve Persistent Poverty County(ies) or High Poverty Area(s); and
(11) Meet any other criteria specified by the Agency in the annual Notice published in the Federal Register.
(b) Applicant and project eligibility. To be eligible for a CF Direct loan from a re-lender under this section,
(1) The applicant must meet the eligibility requirements found in this subpart, including but not limited to those in § 1942.2(a)(2) regarding the inability to obtain credit elsewhere and § 1942.17(b) and (k);
(2) The applicant must comply with any other criteria specified by the Agency in the annual Program Notice published in the Federal Register; and
(3) The project must:
(i) Meet all of the eligibility requirements for a project found in this subpart, including but not limited to § 1942.17(b)(2), (d), (e), and (g) and all environmental review requirements as specified in § 1942.2(b) and 7 CFR part 1970; and
(ii) Meet any additional requirements that may be specified in the program's annual Notice published in the Federal Register.
(c) Application submission requirements. To apply for funds under this section, a Re-lender must timely submit all items as specified in the annual Federal Register notice.
(d) Evaluation criteria. The Agency will score and rank all eligible and complete Re-lender applications based upon the evaluation factors set out in the annual Federal Register notice, including but not limited to: Lending experience and strength of the re-lender, poverty and project service area, and Administrator's discretionary points.
(e) Other Re-lender requirements. Prior to receiving a direct loan from the Agency, the eligible re-lender must:
(1) Enter into a Re-lender's agreement provided by the Agency;
(2) Execute a promissory note;
(3) Provide an Agency approved Irrevocable Letter of Credit (or performance guarantee) acceptable to the Agency in the minimum amount equal to the principal and interest installments due during the first five (5) years of the loan, prior to receiving any loan disbursements;
(4) Provide adequate collateral satisfactory to the agency; and
(5) Meet any other loan conditions as described in the annual Notice published in the Federal Register.
(f) Loan origination and servicing -
(1) Re-lenders. After the Agency loan is made to the Re-lender, the Re-lender is responsible for:
(i) Presenting to the Agency eligible CF direct loan applications in accordance with this subpart and any additional terms established in the applicable annual Notice published in the Federal Register;
(ii) Underwriting and servicing each loan reviewed and approved by the Agency under this section;
(iii) Submitting reports to the Agency after any loan disbursement as specified in the annual Federal Register notice;
(iv) Certifying to the Agency that the Re-lender and Borrower have met the requirements of 7 CFR 3575.42 and 3575.43 for planning, bidding, contracting and construction, as specified in the annual Federal Register Notice;
(v) Complying with other Agency requirements as specified in the annual Federal Register notice concerning environmental, civil rights, and other applicable Federal state, and local law;
(vi) Obtaining disbursement of loan funds according to this section and the annual Federal Register notice within 5 years. Any loan funds not disbursed within that time will be deobligated and become unavailable for disbursement.
(2) Agency responsibilities.
(i) Based on the information presented by the Re-lender and any additional information that may be requested by the Agency, the Agency will determine the eligibility of the applicant and project under this subpart.
(ii) The Agency will notify the re-lender of its determination and any administrative review or appeal rights for Agency decisions made under this subpart. Programmatic decisions based on clear and objective statutory or regulatory requirements are not appealable; however, such decisions are reviewable for appealability by the National Appeals Division (NAD). The applicant and re-lender may appeal any Agency decision that directly and adversely impacts them. For an adverse decision that impacts the applicant, the re-lender and applicant must jointly execute a written request for appeal for an alleged adverse decision made by the Agency. An adverse decision that only impacts the re-lender may be appealed by the re-lender only. A decision by a re-lender adverse to the interest of an applicant or borrower is not a decision by the Agency, whether or not concurred in by the Agency. Appeals will be conducted by USDA NAD and will be handled in accordance with 7 CFR part 11.
(iii) For approved eligible borrowers and projects, the Agency will confirm that all environmental requirements as specified in this subpart and 7 CFR part 1970 have been met and that the Re-lender has provided adequate security for its loan, before the Agency will disburse funds to the Re-lender;
(iv) The Agency will service each re-lender's loan in accordance with 7 CFR part 1951, subpart E. The Agency may suspend further disbursements, and pursue any other available and appropriate remedies, if any of the re-lender loans become troubled, delinquent, or otherwise in default status, or if the re-lender is not meeting the terms of its Relender's Agreement.
[81 FR 43936, July 6, 2016]