Page:United States Statutes at Large Volume 94 Part 2.djvu/147

 PUBLIC LAW 96-374—OCT. 3, 1980

94 STAT. 1425

"(1) the State is not served by a State agency or nonprofit private institution or organization having an agreement with the Secretary pursuant to section 428(b), or "(2) an agency, institution, or organization in a State having such an agreement does not authorize loans under this section (A) within one hundred and twenty days after the effective date of this amendment, or (B) if a State is prohibited from authorizing loans under this section because of existing State law, one hundred and twenty days after the adjournment of the next regular session of the State legislature which convenes after the effective date of this amendment.". SPECIAL ALLOWANCES

SEC. 420. (a) Section 438 of the Act is amended to read as follows: "SPECIAL ALLOWANCES

"SEC. 438. (a) In order to assure (1) that the limitation on interest 20 USC 1087-1. payments or other conditions (or both) on loans made or insured under this part, do not impede or threaten to impede the carrying out of the purposes of this part or do not cause the return to holders of loans to be less than equitable, (2) that incentive payments on such loans are paid promptly to eligible lenders, and (3) that appropriate consideration of relative administrative costs and money market conditions is made in setting the quarterly rate of such payments, the Congress finds it necessary to establish an improved method for the determination of the quarterly rate of the special allowances on such loans, and to provide for a thorough, expeditious and objective examination of alternative methods for the determination of the quarterly rate of such allowances. "(b)(1) A special allowance shall be paid for each of the three-month periods ending March 31, June 30, September 30, and December 31 of every year and the amount of such allowance paid to any holder with respect to any three-month period shall be a percentage of the average unpaid balance of principal (not including unearned interest added to principal) of all eligible loans held by such holder during such period. "(2)(A) Subject to subparagraph (D) and paragraph (4), the special allowance paid pursuant to this subsection on loans for which the applicable interest rate is 7 per centum per annum or less shall be computed (i) by determining the average of the bond equivalent rates of the ninety-one-day Treasury bills auctioned for such three-month period, (ii) by subtracting 3.5 per centum from such average, (iii) by rounding the resultant per centum upward to the nearest one-eighth of 1 per centum, and (iv) by dividing the resultant per centum by four. "(B) Subject to subparagraph (D) and paragraph (4), the special allowance paid pursuant to this subsection on loans for which the applicable interest rate is 8 per centum per annum shall be computed (i) by determining the average of the bond equivalent rates of the ninety-one-day Treasury bills auctioned for such three-month period, (ii) by subtracting 4.5 per centum from such average, (iii) by rounding the resultant per centum upward to the nearest one-eighth of 1 per centum, and (iv) by dividing the resultant per centum by four. "(C) Subject to subparagraph (D) and paragraph (4), the special allowance paid pursuant to this subsection on loans for which the applicable interest rate is 9 per centum per annum shall be computed (i) by determining the average of the bond equivalent rates of the

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