For Administrative Use Only Missouri RD AN No. 1380(1951-F)

> October 2, 2001

TO: All Rural Development Managers

All Community Development Managers

FROM: Gregory C. Branum

State Director, Rural Development

SUBJECT: Analyzing Credit Needs and Graduation

of Community Program Borrowers

[PURPOSE/INTENDED OUTCOME]{.underline}:

To provide the results of the recent survey of lender criteria and
policies. This information will allow the Area Offices to complete the
screening and review of Community Program (CP) borrowers selected for a
graduation review.

[COMPARISON WITH PREVIOUS AN]{.underline}:

This AN replaces Missouri AN No. 1359 (1951-F) dated July 18, 2000.

[IMPLEMENTATION RESPONSIBILITIES]{.underline}:

The Community Program review process is outlined in RD AN 3621(1951-F),
RD Instruction 1951-F and RUS Staff Instruction 1780-6. By separate
cover, the list of CF and W&W borrowers to be reviewed will be sent to
each Area Office.

Attached is an updated list of investment bankers that have expressed an
interest in working in rural areas. To assist you in the borrower
graduation review, a lender survey has been conducted for public body
borrowers as well as not-for-profit borrowers. Copies of the public body
surveys from commercial lenders and bond brokers will be furnished to
you by separate cover. These should be filed in your 1951-F Operational
File with your local lender surveys and list of investment bankers for
future reference.

[Public Body Borrowers/Applicants:]{.underline} The interest rates on
unrated tax-exempt revenue bonds fall within the range of 5% to 6.5% for
the most common terms of 20 to 35 years. Some firms have

EXPIRATION DATE: FILING INSTRUCTIONS: Preceding

August 2, 2002 Rural Development Inst. 1951-F

a minimum bond size and some do not. \$40,000 is the lowest minimum
reflected in the survey. The required debt service coverage ranged from
110% to 200%. Most firms require three to five

years of audited financial statements.

[Not-for-Profit Borrowers/Applicants:]{.underline} The interest rates on
notes fall within the range of 4.2% to 9%. The rate may be variable or
fixed. The term of the loans range from 5 to 25 years depending on the
loan purpose, credit quality, and security. Loan size ranges from
\$5,000 to

\$12 Million. The required debt service coverage varies from 100% to
200% and the current ratio ranges from 1-1 to 2-1.

The fluctuations shown on the completed surveys will require each office
to continue their contacts with the lenders so that each situation will
be assessed on current terms and conditions.

The following must be considered in your review process:

1.  Area Offices will complete the initial review on all borrowers
    listed on the graduation review list. An Initial Review Worksheet
    (MO 1951-F, Guide 1) will be completed for each of those borrowers.

2.  Community Programs Thorough Review Worksheet (MO 1951-F, Guide 2)
    will need to be completed if deemed necessary.

3.  Form 1951-24, Results of Graduation Review, should be signed and
    dated before submission to the State Office.

4.  Documentation of the graduation review should be placed in the
    running record of each borrower file.

5.  RCFTS Screen CP16, Graduation Information, should be updated for
    [each loan]{.underline} screened. Items to be updated during the
    graduation review process include: Initial Screening Date, Thorough
    Review Date (if applicable), Disposition Date and Disposition Code.

We ask that the following be submitted to the State Office, by
**November 15, 2001** for review by the State's Graduation Review Team
members:

-   Initial Review Worksheet on all borrowers reviewed, including
    results of financial review analysis.

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-   Thorough Review Worksheet on all borrowers receiving a thorough
    review, including results of financial review analysis.

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-   Other notes or comments pertinent to your review decision which
    might be helpful to the

Review Team

-   Form 1951-24, Results of Graduation Review.

Attachment \-- List of Investment Bankers