1. (a) Use of fund. The fund may be used for the following purposes:

   1. (1) to make loans on the condition that:

      1. (A) such loans are made at or below market interest rates, including interest free loans at terms not to exceed 20 years;
      2. (B) annual principal and interest payments will commence not later than one year after completion on any project and all loans will be fully amortized not later than 20 years after project completion; and
      3. (C) the recipient of a loan will establish a dedicated source of revenue for repayment of loans;
   2. (2) to buy or refinance the bonds of eligible applicants within the state at or below market rates, when such debt obligations were incurred after March 7, 1985;
   3. (3) for the reasonable costs of administering the fund and conducting activities under the Act, Title VI;
   4. (4) as a source of revenue or security for the payment of principal and interest on revenue or general obligation bonds issued by the state if the proceeds of sale of such bonds will be deposited in the fund;
   5. (5) to earn interest on fund accounts; and
   6. (6) to guarantee or purchase insurance for local debt obligations.
2. (b) Refinancing of debt. Applications for which refinancing is sought must include provisions for purchase of insurance for the local debt obligation.

3. (c) Conditions of Financial Assistance. Financial assistance pursuant to §375.12(a)(1) may be provided on the condition that:

   1. (1) the financial assistance is made at or below market interest rates, including 0% interest;
   2. (2) the recipient of the financial assistance will establish a dedicated source of revenue for repayment of the financial assistance;
   3. (3) interest payments will commence no later than 1 year after the date of closing and annual principal payments will commence either one year after completion of project construction or 5 years after the date of closing, whichever is earlier; and
   4. (4) the term of the financial assistance shall not exceed 20 years, the average bond life shall not exceed 16 years provided, and the financial assistance will be fully amortized not later than 20 years after the completion of project construction.

4. (d) Notwithstanding subsection (c), above, the board may buy the municipal debt obligations of eligible applicants with an extended term (defined as a term of more than 20 years but not more than 30 years) in accordance with §375.12(a)(2) on the condition that:

   1. (1) the financial assistance is made at or below market interest rates, including 0% interest;
   2. (2) the recipient of the financial assistance will establish a dedicated source of revenue for repayment of the financial assistance;
   3. (3) interest payments will commence no later than 1 year after the date of closing and annual principal payments will commence either one year after completion of project construction or 5 years after the date of closing, whichever is earlier;
   4. (4) the financial assistance is fully amortized not later than 30 years after the completion of project construction and the term of the municipal bonds are no longer than either 30 years or the design life of the project for which the assistance is provided, whichever is earlier;
   5. (5) the average bond life shall not exceed 20 years for either a level or unlevel debt service schedule; and
   6. (6) the assistance will not exceed the amount identified in the applicable intended use plan as available for financial assistance with an extended term.

Source Note:The provisions of this §375.12 adopted to be effective February 11, 1999, 24 TexReg 769; amended to be effective February 10, 2000, 25 TexReg 812; amended to be effective December 25, 2007, 32 TexReg 9729.