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e-CFR data is current as of April 2, 2020

Title 7Subtitle BChapter XVIIISubchapter HPart 1980Subpart E → §1980.497

Title 7: Agriculture
Subpart E—Business and Industrial Loan Program

§1980.497   General administrative.

Refer to RD Instruction 1980-E, Appendix G, Liquidation and Property Management Guide (available in any Rural Development office) for advice on how to interact with the OGC on liquidations and property management.

(a) Office of the General Counsel (OGC). In performing the Rural Development functions with respect to B&I, D & D, and DARBE loans, the advice and assistance of OGC may be sought and followed on any legal matter. However, it is the responsibility of the lender to ascertain that all requirements for making, securing, and servicing the loan are duly met. If Rural Development has any questions concerning the lender's resolution of these matters, OGC should be consulted. Assistance of OGC will be requested on all loans as specified herein and all liquidations and workouts.

(b) Contact with OGC. Initial informal contact with OGC should be made as soon as possible. Rural Development State Directors should use the following format in formally requesting legal assistance on workouts.

(1) Origination: All written requests should come from the State Director.

(2) Method: Request should be made by referral memorandum to the Regional Attorney setting forth a brief statement of the facts, the reason assistance is requested, the extent of legal assistance sought, the date when Rural Development's response to the lender's liquidation plan (if any) is due and:

(i) Projected losses on collateral: e.g., projected losses on collateral are expected to be significant.

(ii) Unusual or complex nature of primary collateral: e.g., multi-state foreclosures or foreclosure of leases or general intangibles.

(iii) Presence of other major creditors or of senior creditors: e.g., guaranteed loan collateral may be subject to a prior lien or other creditors may have rights in other assets of borrower, such as inventory and accounts receivable.

(iv) Litigation is pending or threatened: e.g., bankruptcy, other foreclosure suits.

(3) Materials to submit: Referral memorandums will be accompanied by a copy of lender's liquidation plan together with a copy of Rural Development's planned response and principal loan papers, conditional commitment for guarantee, guarantee documents and any comments from the National Office. If lender refuses to prepare a plan, the State Director should so state. DO NOT SEND DOCKETS unless specifically requested by OGC.

(c) Reviews prior to issuance of the loan note guarantee. After the conditional commitment for guarantee has been issued and proposed with closing documents prepared by the lender and forwarded to Rural Development with the lender's legal counsel's opinion in the suggested format of appendix H of this subpart, but prior to issuing the loan note guarantee, the State Director will forward the loan docket to the Regional Attorney for review. After an administrative review, the State Director will include with the docket a letter with recommendations and indicating any special items, documents or problems that need to be addressed specifically which may have a significant impact upon the loan or may be contrary to the regulation. The docket will be assembled for OGC review in accordance with §1980.451 Administrative B 5 of this subpart and indexed and tabbed.

(d) Please submit the following for OGC review. Copies of:

(1) Letter from Rural Development National Office authorizing loan guarantee containing conditions (if applicable);

(2) Form RD 449-14, including any amendments;

(3) Loan Agreement;

(4) Promissory Notes;

(5) Security documents—Real Estate Mortgage, Security Agreement, Financing Statements, and Leases (if applicable);

(6) Personal or corporation guarantees with related security documents;

(7) Proposed Form RD 449-35.

(8) Proposed Form RD 449-34.

(9) Proposed Form RD 449-36, if any;

(10) Proposed Lender's Certification (§1980.60 of subpart A of this part); and

(11) Opinion of Lender's Counsel in form prescribed by OGC.

(e) Do not submit for OGC review feasibility studies, title information, or the original application unless specifically requested to do so.

(f) OGC advice. The Regional Attorney will review the docket and furnish advice to Rural Development on whether it may issue the LOAN NOTE GUARANTEE AFTER THE LOAN IS CLOSED. SUCH ADVICE IS FOR THE benefit of RURAL DEVELOPMENT ONLY AND DOES NOT RELIEVE THE LENDER OF ITS RESPONSIBILITIES UNDER RURAL DEVELOPMENT REGULATIONS. The Regional Attorney at his/her option may attend the loan closing. Upon receipt of the Regional Attorney's advice, the State Director will correct or cause to be corrected any noted deficiencies before issuing the Loan Note Guarantee.

(g) Delegation of authority. The State Director may delegate those administrative duties and responsibilities as authorized in the Administrative sections of this subpart, except those specifically reserved to the State Director.

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