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Electronic Code of Federal Regulations

e-CFR data is current as of February 14, 2020

Title 7Subtitle BChapter XVIIISubchapter HPart 1980Subpart E → §1980.470


Title 7: Agriculture
PART 1980—GENERAL
Subpart E—Business and Industrial Loan Program


§1980.470   Defaults by borrower.

[See §1980.63 of subpart A, of this part.]

Administrative

Refer to Appendix G of FmHA or its successor agency under Public Law 103-354 Instruction 1980-E (available in any FmHA or its successor agency under Public Law 103-354 Office) for advice on how to interact with the lender on liquidations and property management.

A. In case of any monetary or significant non-monetary default under the loan agreement, the lender is responsible for arranging a meeting with the State Director, or its designee, and borrower to resolve the problem. A memorandum of the meeting, individuals who attend, a summary of the problem and proposed solution will be prepared by the Rural Development representative and retained in the loan file. When the State Director receives a notice of default on a loan, he/she will immediately notify the National Office in writing of the details and will subsequently report the problem loan to the National Office on the quarterly status report. The State Director will notify the lender and borrower of any decision reached by Rural Development.

B. In considering servicing options, some of which are identified in paragraph X. A of Form RD 449-35, the prospects for providing a permanent cure without adversely affecting the risks of the Rural Development and the lender must become the paramount objective. Within the State Director's authority temporary curative actions such as payment deferments, moratoriums on payments or collateral subordination, if approved, must strengthen the loan and be in the best interests of the lender and Rural Development. Some of these actions may require concurrence of the holder(s). A deferral, rescheduling, reamortization or moratorium is limited by the period of time authorized by this subpart for the purpose for which the loan(s) is made or the remaining useful life of the collateral securing the loan. For example, if the promissory note on a working captial loan is scheduled to mature in 2 years the loan could be rescheduled for 7 years or the remaining life of the collateral whichever is the lesser of the two.

C. Subsequent loan guarantee requests will be processed in accordance with provisions of §1980.473 of this subpart.

D. If the loan was closed with the multi-note option, the lender may need to possess all notes to take some servicing actions. In these situations when Rural Development is holder of some of the notes, the State Director may endorse the notes back to the lender after the State Director has sought the advice and guidance of OGC, provided a proper receipt is received from the lender which defines the reason for the transfer. Under no circumstances will Rural Development endorse the original Form RD 449-34 to the lender.

E. The State Director's authority to approve servicing actions is defined in §1980.469, Administrative D.2.

F. Consultant services may be recommended by the State Director to assist Rural Development and the lender in determining which servicing action is appropriate. Requests for consultant services should be made by the State Director and addressed to the Administrator, Attn: Business and Industry Division. A full explanation of the loan history, an evaluation and scope of the proposed study and the need should be included in the request.

G. When the National Office determines it is necessary on individual cases, due to some special servicing requirements, it may, at its option, assume the servicing responsibility on individual cases.

H. The State Director will report all delinquent and problem loans quarterly to the Director, Business and Industry Division, by the 10th day of January, April, July and October.

I. The State Director will notify the Finance Office by memorandum of any change in payment terms such as reamortizations or interest rate adjustments and effective dates of any changes resulting from servicing actions.

[52 FR 6501, Mar. 4, 1987, as amended as 80 FR 9908, Feb. 24, 2015; 80 FR 9908, Feb. 24, 2015]

Editorial Note: At 80 FR 9908, Feb. 24, 2015, §1980.470 was amended by removing “Refer to appendix G of this subpart (available in any FmHA or its successor agency under Public Law 103-354 Office)” from the introductory text and adding “Refer to RD Instruction 1980-E, Appendix G, Liquidation and Property Management Guide (available in any Rural Development office)” in its place; however the amendment could not be incorporated because the phrase to be replaced could not be found.

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