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The annual renewal fee is paid once a year and is required to maintain the enforceability of the guarantee as to the lender.
The rate of the annual renewal fee (a specified percentage) is established by Rural Development in an annual notice published in the Federal Register, multiplied by the outstanding principal loan balance as of December 31 of each year, multiplied by the percent of guarantee. The rate is the rate in effect at the time the loan is obligated and will remain in effect for the life of the loan.
Annual renewal fees are due on January 31. Payments not received by April 1 are considered delinquent and, at the Agency discretion, may result in cancellation of the guarantee to the lender. Holders' Right will continue in effect as specified in the Loan Note Guarantee and Assignment Guarantee Agreement. Any delinquent annual renewal fees will bear interest at the note rate and will be deducted from any loss payment due to the lender. For loans where the Loan Note Guarantee is issued between October 1 and December 31, the first annual renewal fee payment will be due January 31 of the second year following the date the Loan Note Guarantee was issued.