§ 697g. — Foreclosure and liquidation of loans.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 15USC697g]
TITLE 15--COMMERCE AND TRADE
CHAPTER 14B--SMALL BUSINESS INVESTMENT PROGRAM
SUBCHAPTER V--LOANS TO STATE AND LOCAL DEVELOPMENT COMPANIES
Sec. 697g. Foreclosure and liquidation of loans
(a) Delegation of authority
In accordance with this section, the Administration shall delegate
to any qualified State or local development company (as defined in
section 697(e) of this title) that meets the eligibility requirements of
subsection (b)(1) of this section the authority to foreclose and
liquidate, or to otherwise treat in accordance with this section,
defaulted loans in its portfolio that are funded with the proceeds of
debentures guaranteed by the Administration under section 697 of this
title.
(b) Eligibility for delegation
(1) Requirements
A qualified State or local development company shall be eligible
for a delegation of authority under subsection (a) of this section
if--
(A) the company--
(i) has participated in the loan liquidation pilot
program established by the Small Business Programs
Improvement Act of 1996 (15 U.S.C. 695 note), as in effect
on the day before promulgation of final regulations by the
Administration implementing this section;
(ii) is participating in the Premier Certified Lenders
Program under section 697e of this title; or
(iii) during the 3 fiscal years immediately prior to
seeking such a delegation, has made an average of not less
than 10 loans per year that are funded with the proceeds of
debentures guaranteed under section 697 of this title; and
(B) the company--
(i) has one or more employees--
(I) with not less than 2 years of substantive,
decision-making experience in administering the
liquidation and workout of problem loans secured in a
manner substantially similar to loans funded with the
proceeds of debentures guaranteed under section 697 of
this title; and
(II) who have completed a training program on loan
liquidation developed by the Administration in
conjunction with qualified State and local development
companies that meet the requirements of this paragraph;
or
(ii) submits to the Administration documentation
demonstrating that the company has contracted with a
qualified third-party to perform any liquidation activities
and secures the approval of the contract by the
Administration with respect to the qualifications of the
contractor and the terms and conditions of liquidation
activities.
(2) Confirmation
On request the Administration shall examine the qualifications
of any company described in subsection (a) of this section to
determine if such company is eligible for the delegation of
authority under this section. If the Administration determines that
a company is not eligible, the Administration shall provide the
company with the reasons for such ineligibility.
(c) Scope of delegated authority
(1) In general
Each qualified State or local development company to which the
Administration delegates authority under section \1\ (a) may with
respect to any loan described in subsection (a) of this section--
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\1\ So in original. Probably should be ``subsection''.
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(A) perform all liquidation and foreclosure functions,
including the purchase in accordance with this subsection of any
other indebtedness secured by the property securing the loan, in
a reasonable and sound manner according to commercially accepted
practices, pursuant to a liquidation plan approved in advance by
the Administration under paragraph (2)(A);
(B) litigate any matter relating to the performance of the
functions described in subparagraph (A), except that the
Administration may--
(i) defend or bring any claim if--
(I) the outcome of the litigation may adversely
affect the Administration's management of the loan
program established under section 696 of this title; or
(II) the Administration is entitled to legal
remedies not available to a qualified State or local
development company and such remedies will benefit
either the Administration or the qualified State or
local development company; or
(ii) oversee the conduct of any such litigation; and
(C) take other appropriate actions to mitigate loan losses
in lieu of total liquidation or foreclosures, including the
restructuring of a loan in accordance with prudent loan
servicing practices and pursuant to a workout plan approved in
advance by the Administration under paragraph (2)(C).
(2) Administration approval
(A) Liquidation plan
(i) In general
Before carrying out functions described in paragraph
(1)(A), a qualified State or local development company shall
submit to the Administration a proposed liquidation plan.
(ii) Administration action on plan
(I) Timing
Not later than 15 business days after a liquidation
plan is received by the Administration under clause (i),
the Administration shall approve or reject the plan.
(II) Notice of no decision
With respect to any plan that cannot be approved or
denied within the 15-day period required by subclause
(I), the Administration shall within such period provide
in accordance with subparagraph (E) notice to the
company that submitted the plan.
(iii) Routine actions
In carrying out functions described in paragraph (1)(A),
a qualified State or local development company may undertake
routine actions not addressed in a liquidation plan without
obtaining additional approval from the Administration.
(B) Purchase of indebtedness
(i) In general
In carrying out functions described in paragraph (1)(A),
a qualified State or local development company shall submit
to the Administration a request for written approval before
committing the Administration to the purchase of any other
indebtedness secured by the property securing a defaulted
loan.
(ii) Administration action on request
(I) Timing
Not later than 15 business days after receiving a
request under clause (i), the Administration shall
approve or deny the request.
(II) Notice of no decision
With respect to any request that cannot be approved
or denied within the 15-day period required by subclause
(I), the Administration shall within such period provide
in accordance with subparagraph (E) notice to the
company that submitted the request.
(C) Workout plan
(i) In general
In carrying out functions described in paragraph (1)(C),
a qualified State or local development company shall submit
to the Administration a proposed workout plan.
(ii) Administration action on plan
(I) Timing
Not later than 15 business days after a workout plan
is received by the Administration under clause (i), the
Administration shall approve or reject the plan.
(II) Notice of no decision
With respect to any workout plan that cannot be
approved or denied within the 15-day period required by
subclause (I), the Administration shall within such
period provide in accordance with subparagraph (E)
notice to the company that submitted the plan.
(D) Compromise of indebtedness
In carrying out functions described in paragraph (1)(A), a
qualified State or local development company may--
(i) consider an offer made by an obligor to compromise
the debt for less than the full amount owing; and
(ii) pursuant to such an offer, release any obligor or
other party contingently liable, if the company secures the
written approval of the Administration.
(E) Contents of notice of no decision
Any notice provided by the Administration under subparagraph
(A)(ii)(II), (B)(ii)(II), or (C)(ii)(II)--
(i) shall be in writing;
(ii) shall state the specific reason for the
Administration's inability to act on a plan or request;
(iii) shall include an estimate of the additional time
required by the Administration to act on the plan or
request; and
(iv) if the Administration cannot act because
insufficient information or documentation was provided by
the company submitting the plan or request, shall specify
the nature of such additional information or documentation.
(3) Conflict of interest
In carrying out functions described in paragraph (1), a
qualified State or local development company shall take no action
that would result in an actual or apparent conflict of interest
between the company (or any employee of the company) and any third
party lender, associate of a third party lender, or any other person
participating in a liquidation, foreclosure, or loss mitigation
action.
(d) Suspension or revocation of authority
The Administration may revoke or suspend a delegation of authority
under this section to any qualified State or local development company,
if the Administration determines that the company--
(1) does not meet the requirements of subsection (b)(1) of this
section;
(2) has violated any applicable rule or regulation of the
Administration or any other applicable law; or
(3) fails to comply with any reporting requirement that may be
established by the Administration relating to carrying out of
functions described in paragraph (1).
(e) Report
(1) In general
Based on information provided by qualified State and local
development companies and the Administration, the Administration
shall annually submit to the Committees on Small Business of the
House of Representatives and of the Senate a report on the results
of delegation of authority under this section.
(2) Contents
Each report submitted under paragraph (1) shall include the
following information:
(A) With respect to each loan foreclosed or liquidated by a
qualified State or local development company under this section,
or for which losses were otherwise mitigated by the company
pursuant to a workout plan under this section--
(i) the total cost of the project financed with the
loan;
(ii) the total original dollar amount guaranteed by the
Administration;
(iii) the total dollar amount of the loan at the time of
liquidation, foreclosure, or mitigation of loss;
(iv) the total dollar losses resulting from the
liquidation, foreclosure, or mitigation of loss; and
(v) the total recoveries resulting from the liquidation,
foreclosure, or mitigation of loss, both as a percentage of
the amount guaranteed and the total cost of the project
financed.
(B) With respect to each qualified State or local
development company to which authority is delegated under this
section, the totals of each of the amounts described in clauses
(i) through (v) of subparagraph (A).
(C) With respect to all loans subject to foreclosure,
liquidation, or mitigation under this section, the totals of
each of the amounts described in clauses (i) through (v) of
subparagraph (A).
(D) A comparison between--
(i) the information provided under subparagraph (C) with
respect to the 12-month period preceding the date on which
the report is submitted; and
(ii) the same information with respect to loans
foreclosed and liquidated, or otherwise treated, by the
Administration during the same period.
(E) The number of times that the Administration has failed
to approve or reject a liquidation plan in accordance with
subparagraph (A)(i), a workout plan in accordance with
subparagraph (C)(i), or to approve or deny a request for
purchase of indebtedness under subparagraph (B)(i), including
specific information regarding the reasons for the
Administration's failure and any delays that resulted.
(Pub. L. 85-699, title V, Sec. 510, as added Pub. L. 106-554,
Sec. 1(a)(9) [title III, Sec. 307(a)], Dec. 21, 2000, 114 Stat. 2763,
2763A-685.)
References in Text
The Small Business Programs Improvement Act of 1996, referred to in
subsec. (b)(1)(A)(i), is Pub. L. 104-208, div. D, Sept. 30, 1996, 110
Stat. 3009-724. Provisions relating to loan liquidation pilot program
are contained in section 204 of title II of div. D of Pub. L. 104-208,
which is set out as a note under section 695 of this title. For complete
classification of this Act to the Code, see Short Title of 1996
Amendment note set out under section 631 of this title and Tables.
Regulations
Pub. L. 106-554, Sec. 1(a)(9) [title III, Sec. 307(b)], Dec. 21,
2000, 114 Stat. 2763, 2763A-689, provided that:
``(1) In general.--Not later than 150 days after the date of the
enactment of this Act [Dec. 21, 2000], the Administrator shall issue
such regulations as may be necessary to carry out section 510 of the
Small Business Investment Act of 1958 [15 U.S.C. 697g], as added by
subsection (a) of this section.
``(2) Termination of pilot program.--Beginning on the date on which
final regulations are issued under paragraph (1), section 204 of the
Small Business Programs Improvement Act of 1996 [Pub. L. 104-208, div.
D] (15 U.S.C. 695 note) shall cease to have effect.''
