§ 617.62 Interim financing. (a) If necessary, an applicant shall arrange for interim financing, subject to the approval of the Secretary, to cover the cost of construction, reconstruction, or renovation pending the loan closing. (b) If the Secretary finds that the applicant is unable to secure necessary interim financing on reasonable terms, the Secretary may provide for advances against the approved loan. (Authority: 20 U.S.C. 1132c-2(b), 1132d11(a)) § 617.63 Construction fund. (a)(1) A borrower shall deposit in a separate bank account (i) The proceeds of the sale of the bonds or notes; (ii) Any interim advances against the approved loans; and (iii) All other money that the borrower will use in paying for the construction, reconstruction, or renovation of the approved project. (2) The separate account shall be known as the construction fund. (3) The borrower shall keep this account in a bank of its choice. (4) The borrower shall make all expenditures for the construction, reconstruction, or renovation from this fund. (5) Accounting for this fund shall be in accordance with generally accepted accounting principles. (b)(1) If necessary and appropriate, the Secretary may approve other arrangements for (i) The deposit of construction funds; and (ii) The accounting for those funds. (2) Those other arrangements must provide adequate accountability for the total construction, reconstruction, or renovation receipts and expenditures. (Authority: 20 U.S.C. 1132c-2(b), 1132d11(a)) § 617.64 Investment of idle construction funds. (a) If the money on deposit in the construction fund exceeds the estimated disbursements for the project for the next 90 days, the Secretary encourages the borrower-if permitted by State or local law-to invest those excess funds. (b) If the borrower chooses to invest the funds referred to in paragraph (a) of this section, the borrower-unless otherwise prohibited by State or local law-shall invest those funds in (1) Direct obligations of the U.S. Government; or (2) Obligations whose principal and interest are guaranteed by the U.S. Government. (c) An investment made in accordance with paragraph (b) of this section shall be in obligations that will mature not later than 18 months from the date of the investment. (Authority: 20 U.S.C. 1132c-2(b), 1132d11(a)) § 617.65 Disposal of balance remaining in the construction fund. Upon full settlement with all contractors, suppliers, and the other parties to whom it has incurred obligations under the project, the borrower shall dispose of any money remaining in the construction fund in accordance with the provisions of the loan agreement. (Authority: 20 U.S.C. 1132c-2(b), 1132d11(a)) § 617.66 Moratorium on principal or interest payments on loans. The Secretary may approve a moratorium on the repayment of principal and interest installments on a loan if the borrower (a) Can demonstrate a temporary inability to make those payments without undue financial hardship; and (b) Furnishes, in a plan acceptable to the Secretary, a specific schedule for repayment of the amounts in arrears. However, the Secretary may permit the borrower to defer submission of the plan if the borrower (1) Clearly demonstrates that it cannot reasonably project a specific repayment schedule due to circumstances beyond its control; and (2) Satisfactorily assures the Secretary that it will develop a schedule for consideration at a future date that the Secretary designates. (Authority: 20 U.S.C. 1132c-2(b)(5)(A)) § 617.67 Discounted prepayment of a loan. (a)(1) The Secretary may provide a discount for prepayment in full of an Academic Facilities loan in an amount determined to be in the best financial interests of the Government for institutions that meet the conditions established in paragraph (b) of this section. (2) The discount is applicable both to loans in current payment status and to loans in default as long as an institution does not become delinquent or in default on its loans after October 1, 1986. The Secretary reviews proposals from institutions with defaulted loans separately from those in current payment status in order to provide institutions in default all possible guidance in accomplishing the prepayment of their college housing loans. (b) The Secretary may approve a proposal from an institution for discounted prepayment of an Academic Facilities loan if— (1) The prepayment is made before October 1, 1991; (2) The prepayment is made from non-Federal sources; (3) The prepayment is made on a loan both issued before October 1, 1986 and outstanding for at least five years; (4) The prepayment is not derived from proceeds of obligations, the income of which is exempt from taxation under the Internal Revenue Code of 1954; (5) The prepayment is in an amount determined in accordance with paragraph (c) of this section; and (6) The Secretary is assured that the education facility financed by the proceeds of the loan being prepaid will continue to be used for educational purposes for the duration of the loans' originally scheduled time to maturity; (c) The Secretary determines the amount of a prepayment for an Academic Facilities loan based on (1) Current market yields on outstanding marketable obligations of the United States with remaining periods to maturity comparable to that of the loan to be prepaid; (2) Current fair market value of outstanding marketable obligations that are of comparable quality to that of the loan to be prepaid; (3) Current and anticipated administrative costs incurred by the Secretary in servicing the loan to be prepaid; or (4) Current net proceeds that the Secretary would receive from nongovernmental investors, if the loan to be prepaid were purchased by such investors on the open market. (Authority: 20 U.S.C. 1132d-1) [51 FR 46583, Dec. 23, 1986] Subpart E-Annual Interest Grants for Construction, Reconstruction, or Renovation of Academic Facilities Under Section 745 of Title VII C of the Act 8 617.71 Purpose and eligibility. (a) The Secretary may make annual interest grants to reduce the cost of borrowing funds, other than those available under this part, for the construction, reconstruction, or renovation of academic facilities. (b) Those eligible to apply for annual interest grants are (1) Institutions of higher education; and (2) Higher education building agencies. (Authority: 20 U.S.C. 1132c-4) (b-1)(1) The Secretary considers making an annual interest grant only if the applicant is unable to secure from other sources a loan-up to the amount the Secretary may subsidize under the law-with an interst rate equally as favorable as the rate applicable to direct Federal loans under Title VII C of the Act. (2) In order to assist the Secretary in making this determination, the applicant shall comply with any procedures the Secretary may establish, including public advertising for bids. (Authority: 20 U.S.C. 1132c-4(e)(2)) (c) The Secretary does not make an annual interest grant for a loan if— (1) A borrower is legally obligated under that loan before it has filed an application under this subpart; or (2) The loan covers a construction, reconstruction, or renovation activity that the borrower began more than 12 months before the closing date for which it requests an interest grant. (Authority: 20 U.S.C. 1132c-4) § 617.72 Amount of annual interest grants. (a) Each interest grant that the Secretary makes is approximately equal to, but not more than, the difference between (1) The average annual debt service that the borrower is required to pay on the amount borrowed from private sources for the project covered by the application; and (2) An average annual debt service on the same amount at an interest rate of three percent. (b) The Secretary may amend the amount of the annual interest grant stipulated in the agreement to reflects changes in the amount or terms of the loan. (c)(1) If the borrower increases its loan, it may request of the Secretary an increase in the amount of its annual interest grant. (2) The borrower must make this request (i) Not later than 12 months after it has begun construction, reconstruction, or renovation; and (ii) By submitting to the Secretary an amended application. (3) The Secretary considers the request, subject to the ranking system applicable at the time the borrower submits the request. (d)(1) If, at the time the borrower becomes legally obligated under a loan, there has been a change in the rate of interest or the terms of the loan, the borrower may request of the Secretary an increase in the amount of its annual interest grant. (2) The Secretary considers the request apart from the ranking system. (Authority: 20 U.S.C. 1132c-4(b)) § 617.73 Submission of applications. (a) An applicant for annual interest grants shall submit its application at the time, in the manner, and containing the information that the Secretary specifies. (b) The applicant may not invite bids under the project before submitting its application to the Secretary. (c)(1) The applicant shall send a copy of its application to the State commission before submitting it to the Secretary. (2) The commission shall review and evaluate the application and provide comments to the Secretary regarding (i) Use of space; (ii) Enrollment data; and (iii) The overall need for the facility-or for the reconstruction or renovation of the facility-for which the applicant has requested assistance. (3) Following its review, the commission shall furnish its evaluation to the applicant. (4) If the applicant does not agree with the evaluation, the applicant may include with its application to the Secretary a statement supporting its position. (d) The commission shall submit the application to the Secretary together with all State clearinghouse comments required by OMB Circular A-95. (e) If the State commission is not the agency serving as the State postsecondary education commission authorized under Section 1202(a) of the Act, the State commission shall afford the latter the opportunity to review and evaluate an application filed under section 745 of the Act. less than the useful life of the facilities or 50 years, whichever is longer. (d) The applicant has the necessary legal authority to (1) Finance; construct, reconstruct, or renovate; and maintain the proposed facilities; (2) Apply for and receive the proposed loan and annual interest grants; and (3) Pledge or mortgage any assets or revenues to be given as security for the proposed loan; and (e) The applicant's financing plan meets the conditions of § 617.76 and is otherwise practicable and feasible. (Authority: 20 U.S.C. 1132c-4) § 617.75 Limits of Federal assistance. (a) The principal amount of a loanor portion of a loan-on which the Secretary approves an annual interest grant, together with the amount of any other Federal financial assistance the applicant has obtained or is assured of obtaining under any other Federal program, may not exceed 90 percent of the eligible development cost. (b) The aggregate principal amount of loans-or portions of loans-on which the Secretary approves annual interest grants does not exceed $5 million per campus for a Federal fiscal year. (Authority: 20 U.S.C. 1132c-4) (3) Contain other provisions that will assure the Secretary that the support provided by the Secretary over the term of the loan is no more than is necessary to carry out the purposes of this subpart. (b)(1) If the Secretary finds that unusual circumstances warrant an exception, the Secretary may accept a financing plan related to a loan for which (i) The term is longer than 30 years; (ii) The annual installments of interest and principal are not substantially level; or (iii) Both. (2) However, the term of a loan otherwise eligible for assistance under this subpart may not exceed 40 years. (Authority: 20 U.S.C. 1132c-4) § 617.77 Evidence of lowest possible cost of loan. (a) An applicant shall demonstrate to the satisfaction of the Secretary that the loan it proposes to obtain is at the lowest possible net interest cost. (b)(1) In the case of an applicant proposing to issue tax-exempt bonds to finance the construction, reconstruction, or renovation of academic facilities, the Secretary considers the applicant to meet the requirement in paragraph (a) of this section if the applicant proposes to sell those securities after publicly advertising for bids for the securities in an advertising medium acceptable to the Secretary. (2) Before advertising these bonds for sale, the applicant shall submit for the Secretary's approval (i) A draft of the notice of sale; and (ii) A statement of essential facts concerning the sale. (c)(1) An applicant proposing to issue securities that are not taxexempt shall submit to the Secretary offers from at least three lending institutions normally engaged in making long-term construction, reconstruction, or renovation loans. (2) The applicant shall have given each of those institutions the information necessary to enable it to specify in its offer the (i) Amount of the loan; (iv) Security provisions; and (v) Prepayment provisions. (d) The applicant-whether proposing to issue tax-exempt bonds or proposing to issue securities that are not tax-exempt-may not enter into a firm and binding agreement with a lender before the Secretary has approved the loan offer. (Authority: 20 U.S.C. 1132c-4) § 617.78 Annual interest grant agreement. (a)(1) After approving an application for annual interest grants, the Secretary prepares and sends to the applicant a proposed agreement containing the terms and conditions of those grants. (2) The Secretary enters into this agreement for the benefit of the applicant institution only. (b) The proposed agreement provides that if the applicant does not become legally obligated under the loan before the Secretary puts the agreement into effect, the Secretary does not make any grant under the agreement unless the Secretary concurs in the rate of interest and other terms and conditions of the loan. (c)(1) The applicant may not enter into the agreement or (i) For the benefit of third parties; (ii) To induce (A) The making of loans by third parties; or (B) The sale of bonds to third parties. (2) The Secretary does not entertain grievances or claims of third parties with respect to the agreement between the Secretary and applicant institution. (Authority: 20 U.S.C. 1132c-4) § 617.79 Payment of annual interest grants. (a) The Secretary makes payments under an annual interest grant agreement once a year. (b) The date of payment coincides as closely as possible with (1) The anniversary date of the loan or; (2) The date when debt service requirement related to the loan is greatest. |