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FmHA Instruction 1942-A - USDA Rural Development

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FmHA Instruction 1942-A - USDA Rural DevelopmentUSDA,Rural,FmHA,1942A

    RD Instruction 1942-A

    Table of Contents

    Page 1

    (Revision 1)PART 1942 - ASSOCIATIONS

    Subpart A - Community Facility Loans

    Table of Contents

    Sec.Page

    1942.1General.1

    1942.2Processing applications.2

    (a) Preapplications.2

    (b) Environmental review.5

    (c) Applications.5

    (d) Review of decision.6

    (e) Joint funding.6

    1942.3Preparation of appraisal reports.7

    1942.4Borrower contracts.7

    1942.5Application review and approval.7

    (a) Procedures for review.7

    (b) Projects requiring National Office review.10

    (c) For all applications.11

    (d) Loan approval and obligating funds.121942.6Preparation for loan closing.13

    (a) Obtaining closing instructions.13

    (b) Verification of users and other funds.13

    (c) Initial compliance review.14

    (d) Ordering loan checks.14

    (e) Multiple advances of Rural Development funds.141942.7Loan closing.15

    (a) Authority to execute, file, and record legal

     instruments.15

    (b) Preparation of mortgages.15

    (c) Source of funds for insured loans.15

    (d) Unused funds.15

    (e) Loan disbursements.15

    (f) Supervised bank accounts.15

    (11-17-04) SPECIAL PN

RD Instruction 1942-A

    Table of Contents

    Page 2

    (Revision 1)

    Sec.Page

    1942.8Actions subsequent to loan closing.15

    (a) Mortgages.15

    (b) Notes and bonds.16

    (c) Multiple advances - bond(s).16

    (d) Bond registration record.16

    (e) Disposition of title evidence.16

    (f) Material for State Office.16

    (g) State Office review of loan closing.16

    (h) Safeguarding bond shipments.17

    (i) Water stock certificates.17

    1942.9Planning, bidding, contracting, and constructing.17

    (a) Review of construction plans and specifications.17

    (b) Contract approval.17

    (c) Bid irregularities.17

    (d) Noncompliance.17

    1942.10- 1942.11 [Reserved]17

    1942.12Loan cancellation.17A

    (a) Form RD 1940-10, "Cancellation of U.S. Treasury

     Check and/or Obligation."17A

    (b) Notice of cancellation.17A

    1942.13Loan servicing.17A

    1942.14Subsequent loans.17A

    1942.15Delegation and redelegation of authority.17A1942.16State supplements and guides.17A

    (a) State supplements.17B

    (b) State guides.17B

    1942.17Community Facilities.18

    1942.18Community Facilities - Planning, Bidding,

    Contracting, Constructing.75

    1942.19Information pertaining to preparation of notes or bonds and

    bond transcript documents for public body applicants.961942.20Community Facility Guides.107

    1942.21Statewide Nonmetropolitan Median Household Income.1081942.22- 1942.49 [Reserved]108

    1942.50OMB control number.109

    Exhibit A OMB CIRCULAR NO. A-128

    Exhibit B USDA Regional Inspector General (OIG) Contacts for AuditsAutomation Supplement Engineering Fee Analysis (Distribution: WS only)

    oOo

    RD Instruction 1942-A

    PART 1942 - ASSOCIATIONS

    Subpart A - Community Facility Loans

    ? 1942.1 General.

    (a) This subpart outlines the policies and procedures for making and processing insured loans for community facilities except fire and rescue and other small essential community facility loans and water and waste disposal facilities. This subpart applies to Community Facilities loans for fire and rescue and other small essential community facility loans only as specifically provided for in subpart C of this part. Water and waste loans are provided for in part 1780 of this title. The Agency shall cooperate fully with State and local agencies in making loans to ensure maximum support to the State strategy for rural development. State Directors and their staffs shall maintain coordination and liaison with State agency and substate planning districts. Funds allocated for use under this subpart are also for the use of Indian tribes within the State, regardless of whether State development strategies include Indian reservations within the State's boundaries. Indians residing on such reservations must have equal opportunity to participate in the benefits of these programs as compared with other residents of the State. Federal statutes provide for extending the Agency’s financial programs without regard to race, color, religion, sex, national origin, marital status, age, or physical/mental handicap. The participants must possess the capacity to enter into legal contracts under State and local statutes. Any processing or servicing activity conducted pursuant to this subpart involving authorized assistance to Agency employees, members of their families, known close relatives, or business or close personal associates, is subject to the provisions of subpart D of part 1900 of this chapter. Applicants for this assistance are required to identify any known relationship or association with an Agency employee. (Revised 02-09-04, SPECIAL PN.)

    (b) Indian tribes on Federal and State reservations and other Federally recognized Indian tribes are eligible to apply for and are encouraged to participate in this program. Such tribes might not be subject to State and local laws or jurisdiction. However, any requirements of this subpart that affect applicant eligibility, the adequacy of the Agency's security or the adequacy of service to users of the facility and all other requirements of this subpart must be met.

    _____________________________________________________________________________

    DISTRIBUTION: WSAL Loan and Grant Making

     Associations

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    (2-6-85) PN 956

    RD Instruction 1942-A

    ? 1942.1 (Con.)

    (c) Loans sold without insurance by the Agency to the private sector will be serviced in the private sector and will not be serviced under this subpart. The provisions of this subpart are not applicable to such loans. Future changes to this subpart will not be made applicable to such loans. (Revised 10-20-87, SPECIAL PN.)

    (d) The Area Office will normally be the entry point for preapplications and serve as a local contact point. Applications will be filed with the Area Office and loans will be processed to the maxium extent possible by the Area Office staff. The applicant's governing body should designate one person to coordinate the activities of its engineer, architect, attorney, and any other professional employees and to act as contact person during loan processing. Agency personnel should make every effort to involve the applicant's contact person when meeting with the applicant's professional consultants and/or agents. The State Office staff will monitor community programs loanmaking and servicing, and will provide assistance to Area Office personnel to the extent necessary to assure that the activities are being accomplished in an orderly manner consistent with the Agency’s regulations. (Revised 05-19-92, SPECIAL PN.)

    ? 1942.2 Processing applications.

    (a) Preapplications.

    (1) The Area Office may handle initial inquiries and provide basic

    information about the program. They are to provide the

    preapplication, SF 424.2, "Application for Federal Assistance (For

    Construction)." The Rural Development Manager will assist

    applicants as needed in completing SF 424.2, and in filing written

    notice of intent and request for priority recommendation with the

    appropriate clearinghouse. The Rural Development Manager will

    inform the applicant that it may be necessary to apply for credit

    from commercial sources. It will be explained that if credit for

    the project is available from commercial sources at reasonable rates

    and terms the applicant is not eligible for the Agency’s financing.

    The Rural Development Manager will meet with the applicant, whenever

    appropriate to discuss the

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    RD Instruction 1942-A

    ? 1942.2(a)(1) (Con.)

    Agency’s preapplication processing. Guidance and assistance will be provided by the State Director, as needed, for orderly application processing. The District Director will determine that the preapplication is properly completed and fully reviewed. The District Director will then forward to the State Director: (Revised 02-14-96, PN 257.)

    (i) Eligibility determination and recommendations.

    (ii) One copy of SF 424.2. (Revised 4-11-90, SPECIAL PN.)

    (iii) State intergovernmental review comments and

    recommendations (clearinghouse comments).

    (iv) Priority recommendations.

    (v) Supporting documentation necessary to make an eligibility

    determination, such as financial statements, audits, or copies

    of organizational documents or existing debt instruments. The

    District Director will advise applicants on what documents are

    necessary. Applicants should not be required to expend

    significant amounts of money or time developing supporting

    documentation at the preapplication stage. (Added 3-1-88,

    SPECIAL PN.)

    (2) The State Director will review each SF 424.2 along with other information that is deemed necessary to determine whether financing from commercial sources at reasonable rates and terms is available. If credit elsewhere is indicated, the State Director will instruct the District Director to so inform the applicant and recommend the applicant apply to commercial sources for financing. Projects may be funded jointly with other lenders provided the requirements of ?1942.17 (g) of this subpart are met. Joint financing occurs when two or more lenders make separate loans to supply the funds required by one applicant for a project.

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    RD Instruction 1942-A

    ? 1942.2(a)(2) (Con.)

    (i) In order to provide a basis for referral of

    preapplications of only those applicants who may be able to finance projects through commercial sources, State Directors should maintain liaison with representatives of banks, investment bankers, financial advisors, and other lender representatives in the State. State Directors should maintain criteria for determining preapplications which should be referred to commercial lenders. A list of lenders representatives interested in receiving such referral should be maintained.

    (ii) The State Director shall maintain a working relationship with the State Office or official that has been designated as the single point of contact for the intergovernmental review process and give full consideration to their comments when selecting preapplications to be processed. (Revised 05-19-92, SPECIAL PN.)

    (iii) The State Director will review the District Director's eligibility determination and recommendations in sufficient time for the District Director's use in preparing and issuing Form AD-622.

    (iv) Form AD-622 will be prepared by the District Director within forty-five (45) calendar days from receipt of the preapplication by the Agency, stating the results of the review action. The original will be signed and delivered to the applicant with a copy to the State Director.

    (3) For preapplications eligible for Agency funding which have the

    necessary priority to compete with similar preapplications, the

    Agency will issue Form AD-622 inviting an application containing the

    following statement: (Revised 10-19-88, SPECIAL PN.)

    "You are advised against taking any actions or incurring any obligations which would either limit the range of alternatives to be considered, or which would have an adverse effect on the environment. Satisfactory completion of the environmental review process must occur prior to the issuance of the letter of conditions."

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    RD Instruction 1942-A

    ? 1942.2(a) (Con.)

    (4) The following statement must be added to Form AD-622 when

    notifying preapplicants who are eligible, but do not have the

    priority necessary for further consideration at this time:

    "You are advised against incurring obligations which would

    limit the range of alternatives to be considered, or which

    cannot be fulfilled without Rural Development funds until the

    funds are actually made available. Therefore, you should

    refrain from such actions as initiating engineering and legal

    work, taking actions which would have an adverse effect on the

    environment, taking options on land rights, developing

    detailed plans and specifications, or inviting construction

    bids until notified by Rural Development to proceed."(b) Environmental review. Environmental requirements will be

    documented in accordance with Subpart G of Part 1940 of this chapter and submitted to the State Director. Starting with the earliest discussions with prospective applicants or review of preapplications and continuing throughout application processing, environmental issues must be considered. This should provide flexibility to consider alternatives to the project and develop methods to mitigate identified adverse environmental impacts. Documentation of the appropriate environmental review should be completed as soon as possible; however, the State Director will ensure that the appropriate environmental review is completed prior to issuing the letter of conditions. (Revised 10-19-88, SPECIAL PN.)

    (c) Applications. The District Director should assist the applicant in application assembly and processing.

    (1) State Directors should have applications in process

    representing approximately 150 percent of the current State

    allocation.

    (2) The application docket will include SF 424.2 and related forms,

    materials, and information. The application will be assembled in

    accordance with Guide 15 of this subpart or State guides developed

    under ?1942.16 of this subpart. (Revised 4-11-90, SPECIAL PN.)

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    RD Instruction 1942-A

    ? 1942.2(c) (Con.)

    (3) When an applicant is notified to proceed with an application,

    the District Director should arrange for a conference with the

    applicant to provide copies of appropriate appendices and forms;

    furnish guidance necessary for orderly application processing; and

    to initiate a processing checklist for establishing a time schedule

    for completing items using Form RD 1942-39, "Processing Check List

    (Other Than Public Bodies)," or Form RD 1942-40, "Processing Check

    List (Public Bodies)," or other checklist adopted for use in the

    State. The District Director will confirm decisions made at this

    conference by letter to the applicant and by copy of the processing

    checklist. The original and a copy of the processing checklist will

    be retained in the District Office and a copy will be forwarded to

    the State Office. The original and copy of the checklist retained

    in the District Office will be kept current as application

    processing actions are taken. The copy will be sent to the State

    Office to use in updating its copy of this form. The State Office

    will then return the District Office's copy. As the application is

    being processed, and the need develops for additional conferences,

    the District Director will arrange with the applicant for such

    conferences to extend and update the processing checklist.

    (Revised 11-8-89, PN 121)

    (d) Review of decision. If at any time prior to loan approval it is decided that favorable action will not be taken on a preapplication or application, the District Director will notify the applicant in writing of the reasons why the request was not favorably considered. The notification to the applicant will state that a review of this decision by Rural Development may be requested by the applicant under Subpart B of Part 1900 of this chapter. The following statement will also be made on all notifications of adverse action. "The Federal Equal Credit Opportunity Act prohibits creditors from discriminating against credit applicants on the basis of race, color, religion, national origin, sex, marital status, age (Provided that the applicant has the capacity to enter into a binding contract); because all or part of the applicant's income is derived from any public assistance program; or because the applicant has in good faith exercised any right under the Consumer Credit Protection Act. The Federal Agency that administers compliance with this law is the Federal Trade Commission, Equal Credit Opportunity, Washington, D.C. 20580.” (Revised 3/1/88, SPECIAL PN.)

    (e) Joint funding. Rural Development may finance projects jointly with funds from other sources, such as, commercial/private lenders, Federal agencies, State and local Governments, etc. Other departments, agencies, and

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    RD Instruction 1942-A

    ? 1942.2(e) (Con.)

    executive establishments of the Federal Government may participate and

    provide financial and technical assistance jointly with Rural

    Development to any applicant to whom Rural Development is providing

    assistance. The amount of participation by the other department,

    agency, or executive establishment shall only be limited by its

    authorities except that any limitation on joint participation itself is

    superseded by Section 125 of PL 95-334 (Section 347, Consolidated Farm

    and Rural Development Act, as amended).

    ? 1942.3 Preparation of appraisal reports.

    When the loan approval official requires an appraisal, Form RD 442-10, "Appraisal Report - Water and Waste Disposal Systems," may be used with appropriate supplements. Form RD 442-10 may be modified as appropriate or other appropriate format may be used for facilities other than water and waste disposal. Appraisal reports prepared for use in connection with the purchase of existing essential community facilities or when required by ? 1942.17(g)(2)(iii)(8)(2), (9)(3)(iii)(B)(2), and (j)(4) of this subpart, may be prepared by the RD engineer/architect or, if desired by the State Director or other qualified appraiser. The loan approving official may require an applicant to provide an appraisal prepared by an independent qualified appraisers however, the loan approving official must determine that the appraised value shown in such reports reflects the present market value. (Revised 3-1-88, SPECIAL PN.)

    ? 1942.4 Borrower contracts.

    The State Director will, with assistance as necessary by the Office of the General Counsel (OGC), concur in agreements between borrowers and third parties such as contracts for professional and technical services and contracts for the purchase of water or treatment of waste. State Directors are expected to work closely with representatives or engineering and architectural societies, bar associations, commercial lenders, accountant associations, and others in developing standard forms of agreements, where needed, and other such matters in order to expedite application processing, minimize referrals to OGC, and resolve problems which may arise. ? 1942.5 Application review and approval.

    (a) Procedures for review. Ordinarily the Rural Development staff

    review will proceed as applications are being developed. An overall

    review of the applicant's financial status, including a review of all

    assets and liabilities, will be a part of the docket review process by

    the staff and approval officials. The engineering/architect reports and

    association data are to be reviewed by the Rural Development staff

    engineer or architect, as appropriate, as soon as available but prior to

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    (2-6-85) PN 956

    RD Instruction 1942-A

    ? 1942.5(a) (Con.)

    the Rural Development Manager's completion of the Project Summary. During the review, the Rural Development Manager, in all cases, will make certain that no low-income or minority community within the service area has been omitted or discouraged from participating in the proposed project. The Rural Development Manager will also determine how the service area was defined to ensure that gerrymandering of specific communities or areas has not occurred. The findings should be documented in the running record. Prior to presenting the assembled application to the approval official, the assembled application ordinarily will be processed in the following sequence:

    (1) The Rural Development Manager will complete the automated

    Community Facilities Project Summary, including written analysis and

    recommendations and will prepare a draft Letter of Conditions

    listing all the requirements that the applicant must agree to meet

    within a specific time. (Revised 03-19-03, PN 357.)

    (i) Requirements listed in the Letter of Conditions will

    include the following, unless inappropriate due to the

    particular type of funding or entity involved: Maximum amount

    of loan and/or grant that may be considered; scheduling of

    payments; term of loan and any deferment of principal that may

    be allowed; reserve requirements; compliance with Section 504

    of the Rehabilitation Act of 1973; number of users (members)

    and verification required; contributions; rates and charges;

    interim financing; disbursement of funds; security

    requirements; graduation requirements; debt collection

    policies through the execution of Form RD 1910-11,

    "Application Certification, Federal Collection Policies for

    Consumer or Commercial Debts"; organization; business

    operations; insurance and bonding (including

    applicant/borrower and contractor); construction contract

    documents and bidding requirements; accounts; records; audit

    reports required (including requirements of OMB Circulars

    A-128 and A-110); adoption of Form RD 1942-47, "Loan

    Resolution (Public Bodies)," for public bodies or Form RD

    1942-9, "Loan Resolution (Security Agreement)," for other than

    public bodies; closing instructions; and any other

    requirements. (Revised 8-11-89, SPECIAL PN.)

    (ii) Each Letter of Conditions will contain the following

    paragraphs: (Revised 1-31-85, SPECIAL PN.)

    This letter establishes conditions that must be

    understood and agreed to by you before further

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    (Revision 5)

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