(a) Definitions. The following words and terms have the following meanings when used in this section, unless the context clearly indicates otherwise.
  (1) Average life--The number determined by dividing the sum of all payment periods by the total principal amount.
  (2) Borrower--Each eligible Applicant that has received a commitment from the Board.
  (3) Interest rate--The individual interest rate for each maturity in an amortized debt schedule as identified by the executive administrator under this chapter.
  (4) Market rate--The individual interest rate for each maturity in an amortized debt schedule payment that is the borrower's market cost of funds based on the MMD scale for the borrower as identified under subsection (c)(1) of this section.
  (5) MMD--Thomson Reuters Municipal Market Data Range of Yield Curve Scales.
  (6) Payment period--The number determined by multiplying the total principal amount due for an individual maturity as set forth in the debt instrument by the standard period for the debt instrument.
  (7) Standard period--The number identified by determining the number of days between the date of delivery of the funds to a borrower and the date of the maturity of a bond or loan payment pursuant to which the funds were provided calculated on the basis of a 360-day year composed of twelve 30-day periods and dividing that number by 360.
  (8) Term--For bonds, the length of time between when the bond is issued and the final maturity in the debt instrument; for loans, the period of time any principal is outstanding.
(b) Procedure for setting fixed interest rates.
  (1) The executive administrator will set fixed interest rates as described in the IUP and further determined in this section, on a date that is:
    (A) no earlier than five business days prior to the adoption of the political subdivision's bond ordinance or resolution or the borrower's execution of a loan agreement, but may be based on interest rate levels determined as of an earlier date; and
    (B) not more than 45 days before the anticipated closing of a commitment from the Board.
  (2) After 45 days from the assignment of the interest rate, rates may be extended only with the executive administrator's approval.
(c) Fixed rates. The fixed interest rates for financial assistance under this chapter will be determined as provided in this subsection. The executive administrator will identify the market rate for the borrower, determine the amount of adjustment from the market interest rate scale appropriate for the borrower pursuant to paragraph (2) of this subsection, apply the identified interest rate adjustment to the market rate for each year of the borrower's scale to determine the interest rate, and apply the interest rate to the proposed principal schedule, as more fully set forth in this subsection.
  (1) Identifying the market rate for eligible borrowers.
    (A) for borrowers that have a rating by a recognized bond rating entity and will not have bond insurance, the executive administrator will rely on the higher of the appropriate MMD scale for the current bond rating of the borrower or the appropriate MMD BAA scale; or
    (B) for borrowers with no rating by a recognized bond rating entity or for borrowers with a rating that is less than investment grade as determined by the executive administrator, the executive administrator will rely on the appropriate MMD BAA scale.
  (2) The fixed rate scale shall be established for each borrower using individual coupon rates for each maturity of the proposed debt based on the appropriate scale.
  (3) The program is designed to provide borrowers with an interest rate reduction from the fixed rate scale applicable to the borrower based on a level debt service schedule, or if applicable, the reduction is set at the total basis points below the fixed rate scale for borrowers as derived under paragraph (3) of this subsection. Notwithstanding the foregoing, in no event shall the interest rate as determined under this section be less than zero.
  (4) For loans and bond commitments with an average life in excess of 16 years for a term of up to 20 annual maturities or years or an average life in excess of 20 years for a term of up to 30 annual maturities or years (or a pro-rata calculation for terms between 20 and 30 annual maturities or years), and at the discretion of the Board for loans and bond commitments that have debt schedules that produce a total fixed lending rate reduction in excess of a standard loan or bond commitment structure (defined as a debt service schedule in which the first year of the maturity schedule is interest-only followed by principal maturing on the basis of level debt service), the following procedures will be used to determine the total fixed lending rate reduction:
    (A) The interest rate component of level debt service will be determined by using the 15th year (19th year for 30-year terms) coupon rate of the appropriate scale of the MMD scales that corresponds to the 15th year (19th year for 30-year terms) of principal of the standard loan or bond commitment structure and that is measured 30 days from the date that application is proposed to be presented to the Board for approval.
    (B) Level debt service will be calculated using the 15th year (19th year for 30-year terms) MMD Scale coupon rate as described in subparagraph (A) of this paragraph and the par amount of the loan or bond commitment according to a standard loan or bond commitment structure. For a loan or bond commitment that has been proposed for a term of years equal to a standard loan or bond commitment structure, the dates specified in the application shall be used for interest and principal calculation. For a loan or bond commitment that has been proposed for a term of years less than a standard loan or bond commitment structure or longer than a standard loan or bond commitment structure, level debt service will be calculated beginning with the dated date, will be based upon the principal and interest dates specified in the application, and will continue for the term of a standard loan or bond commitment structure.
    (C) A calculation will be made to determine how much a borrower's interest would be reduced if the loan or bond commitment had been made according to the total fixed lending rate reduction provided in paragraph (3) of this subsection and based upon the principal payments calculated in subparagraph (B) of this paragraph.
    (D) The Board will establish a total fixed lending rate reduction for the loan or bond commitment that will achieve the interest savings in subparagraph (C) of this paragraph based upon the principal schedule proposed by the borrower.
  (5) To determine the interest rate, the following procedures will apply:
    (A) Unless otherwise requested by the borrower under subparagraph (B) of this paragraph, the interest rate will be determined based on a debt service schedule that provides interest only to be paid in the first year of the debt service schedule and in which the remaining annual debt service payments are level, as determined by the executive administrator. The executive administrator will identify the appropriate MMD scale for the borrower and identify the market rate for the maturity due each year. The executive administrator will reduce that market rate of each year by the number of basis points applicable according to paragraph (2) of this subsection and thereby identify a proposed interest rate scale. The proposed interest rate scale will be applied to the proposed principal repayment schedule. If the resulting debt service schedule is level to the satisfaction of the executive administrator, then the proposed interest rate will be the interest rate for the commitment. If the resulting debt service schedule is not level to the satisfaction of the executive administrator, then the executive administrator may adjust the interest rate for any or all of the maturities to identify the interest rate that as closely as possible achieves the interest savings applicable according to paragraph (2) of this subsection while maintaining the principal schedule proposed by the borrower.
    (B) A borrower may request a debt service schedule in which the annual debt service payments are not level through the term of the amortized debt schedule, as determined by the executive administrator. From the level debt service schedule, the executive administrator will determine the amount of the subsidy applicable to the debt service schedule provided. The executive administrator will then identify the interest rate that as closely as possible provides the borrower the identified subsidy amount for the principal schedule requested by the borrower.
Cont'd...