7 CFR 1779.81 - Liquidation.

§ 1779.81 Liquidation.
Liquidation will occur when the lender concludes that liquidation of the guaranteed loan is necessary because of default or third party actions that the borrower cannot, or will not, cure or eliminate within a reasonable period of time and the Agency concurs with the lender; or the Agency, at any time, independently concludes that liquidation is necessary. The lender will proceed as expeditiously as possible, including giving any notices or taking any legal actions required by the security instruments.
(a) General. If a lender has made a loan guaranteed by the Agency under previous regulations, the lender has the option to liquidate the loan under the provisions of this part or under the provisions of previous regulations. The lender will notify the Agency in writing within 10 days after its decision to liquidate, which regulatory provisions it chooses to use. The lender may not choose some provisions of one regulation and other provisions of the other regulation.
(b) Acquiring property titles. If a lender acquires title to property, the Agency may elect to permit the lender the option of calculating the final loss settlement using the net proceeds received at the time of the ultimate disposition of the property. The lender must submit to the Agency a written request to use this option within 15 days of acquiring title and the Agency must agree, in writing, prior to the lender submitting any request for estimated loss payment.
(c) Liquidation plan. The lender will (within 30 days after a decision to liquidate) submit to the Agency, in writing, a proposed, detailed liquidation plan. Upon approval by the Agency of the liquidation plan, the lender will commence liquidation. The lender's liquidation plan must include, but is not limited to, the following:
(1) Such proof as the Agency requires to establish the lender's ownership of the guaranteed loan notes and related security instruments, a copy of the payment ledger or other documentation which reflects the outstanding loan balance and accrued interest to date, and the method of computing the interest;
(2) A complete list of collateral;
(3) The recommended liquidation methods for making the maximum collection possible on the indebtedness and the justification for such methods, including the recommended action for acquiring and disposing of all collateral;
(4) Necessary steps for preservation of the collateral;
(5) Copies of the borrower's latest available financial statements;
(6) An itemized list of estimated liquidation expenses expected to be incurred and justification for each expense;
(7) A schedule to periodically report to the Agency on the progress of the liquidation;
(8) Estimated protective advance amounts with justification;
(9) Proposed protective bid amounts on collateral to be sold at auction and a discussion of how the amounts were determined;
(10) If a voluntary conveyance is considered, the proposed amount to be credited to the guaranteed debt;
(11) Legal opinions, as needed; and
(12) If the outstanding balance of principal and interest is less than $250,000, the lender will obtain an estimate of fair market and potential liquidation value of the collateral. If the outstanding balance of principal and interest is $250,000 or more, the lender will obtain an independent appraisal report on all collateral securing the loan which will reflect the fair market value and potential liquidation value. The independent appraiser's fee will be shared equally by the Agency and the lender.
(d) Partial liquidation plan. If actions are necessary to immediately preserve and protect the collateral, a partial liquidation plan may be submitted and, when approved, must be followed by a complete liquidation plan prepared by the lender.
(e) Disposition of collateral. Disposition of collateral acquired by the lender must be approved, in writing, by the Agency when:
(1) The lender's cost to acquire the collateral of a borrower exceeds the potential recovery value of the security and the lender proposes abandoning the collateral in lieu of liquidation; or
(2) The acquired collateral is to be sold to the borrower, borrower's stockholders or officers, or the lender or lender's stockholders or officers.
(f) Agency liquidation. The Agency will liquidate at its option only when it is a holder and there is reason to believe the lender is not likely to initiate liquidation efforts that will result in maximum recovery. When the Agency liquidates, proceeds derived from the sale of the collateral will be applied first to reasonable liquidation expenses and second to the guaranteed portion of the loan.
(g) Final loss payment. Final loss payments will be made only after all collateral has been properly accounted for and liquidation expenses are determined to be reasonable and within approved limits. Any estimated loss payments made to the lender will be credited against the final loss on the guaranteed loan. The amount of an estimated loss payment must be credited as a deduction from the principal balance of the loan.

Title 7 published on 2014-01-01

no entries appear in the Federal Register after this date.

This is a list of United States Code sections, Statutes at Large, Public Laws, and Presidential Documents, which provide rulemaking authority for this CFR Part.

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United States Code
U.S. Code: Title 7 - AGRICULTURE
U.S. Code: Title 16 - CONSERVATION

Title 7 published on 2014-01-01

The following are ALL rules, proposed rules, and notices (chronologically) published in the Federal Register relating to 7 CFR 1779 after this date.

  • 2014-04-02; vol. 79 # 63 - Wednesday, April 2, 2014
    1. 79 FR 18482 - Environmental Policies and Procedures
      GPO FDSys XML | Text
      DEPARTMENT OF AGRICULTURE, Rural Business-Cooperative Service, Rural Utilities Service, Rural Housing Service, Farm Service Agency
      Proposed rule; extension of public comment period.
      Comments on the proposed rule must be received on or before May 7, 2014.
      7 CFR Parts 1703, 1709, 1710, 1717, 1720, 1721, 1724, 1726, 1737, 1738, 1739, 1740, 1753, 1774, 1775, 1779, 1780, 1781, and 1782