RD Instruction 4287-B

Table of Contents

Page 1

**PART 4287 - SERVICING**

**Subpart B - Servicing Business and Industry Guaranteed Loans**

**TABLE OF CONTENTS**

**[Sec]{.underline}. [Page]{.underline}**

**4287.101 Introduction. 1**

**4287.102 Definitions. 1**

**4287.103 Exception Authority. 1**

**4287.104 - 4287.105 \[Reserved\] 1**

**4287.106 Appeals. 1**

**4287.107 Routine servicing. 2**

**(a) Lender reports. 2**

**(b) Loan classification. 2**

**(c) Agency/lender conference. 2**

**(d) Financial reports. 3**

**(e) Additional expenditures. 3**

*(f) Borrower visits. 3*

*(g) State Office reports. 4*

**4287.108 - 4287.111 \[Reserved\] 4**

**4287.112 Interest rate adjustments. 4**

**(a) Reductions. 4**

**(b) Increases. 5**

**4287.113 Release of collateral. 5**

**4287.114 - 4287.122 \[Reserved\] 6**

**4287.123 Subordination of lien position. 6**

**4287.124 Alterations of loan instruments. 7**

**4287.125 - 4287.133 \[Reserved\] 7**

**4287.134 Transfer and assumption. 7**

**(a) Documentation of request. 7**

**(b) Terms. 7**

**(c) Release of liability. 7**

**(d) Proceeds. 8**

**(e) Additional loans. 8**

**(f) Credit quality. 8**

**(g) Documents. 8**

(12-23-96) SPECIAL PN

RD Instruction 4287-B

Table of Contents

Page 2

**[Sec]{.underline}. [Page]{.underline}**

**4287.134 Transfer and assumption (Con.).**

**(h) Loss resulting from transfer. 8**

**(i) Related party. 9**

**(j) Payment requests. 9**

**(k) Cash downpayment. 9**

*(l) Transfer and assumption options. 10*

*(m) Bankruptcy. 10*

*(n) Approval. 10*

*(o) Environmental. 10*

**4287.135 Substitution of lender. 11**

*4287.136 Lender failure. 12*

*(a) Uninsured lender. 12*

*(b) Insured lender. 12*

**4287.137 - 4287.144 \[Reserved\] 13**

**4287.145 Default by borrower. 13**

**4287.146 - 4287.155 \[Reserved\] 14**

**4287.156 Protective advances. 14**

**4287.157 Liquidation. 15**

**(a) Decision to liquidate. 15**

**(b) Liquidation by the Agency. 15**

**(c) Submission of liquidation plan. 16**

**(d) Lender\'s liquidation plan. 16**

**(e) Approval of liquidation plan. 17**

**(f) Acceleration. 18**

**(g) Filing an estimated loss claim. 18**

**(h) Accounting and reports. 18**

**(i) Transmitting payments and proceeds to the Agency. 19**

**(j) Abandonment of collateral. 19**

**(k) Disposition of personal or corporate guarantees. 19**

**(l) Compromise settlement. 20**

*(m) Bankruptcy. 21*

**4287.158 Determination of loss and payment. 21**

**(a) Report of loss form. 21**

**(b) Estimated loss. 21**

**(c) Final loss. 22**

**(d) Loss limit. 23**

**(e) Rent. 23**

**(f) Liquidation costs. 23**

**(g) Payment. 24**

RD Instruction 4287-B

Table of Contents

Page 3

**[Sec]{.underline}. [Page]{.underline}**

**4287.159 - 4287.168 \[Reserved\] 24**

**4287.169 Future recovery. 24**

**4287.170 Bankruptcy. 24**

**(a) Lender's responsibilities. 25**

**(b) Reports of loss during bankruptcy. 25**

**(c) Legal expenses during bankruptcy proceedings. 27**

*(d) Agency monitoring. 27*

**4287.171 - 4287.179 \[Reserved\] 27**

**4287.180 Termination of guarantee. 27**

**4287.181 - 4287.199 \[Reserved\] 28**

**4287.200 OMB control number. 28**

*Appendix A - Modification or Administrative Action*

*Appendix B - Business and Industry Guaranteed Loan*

*Final Loss Settlement Checklist*

**o0o**

(12-23-96) SPECIAL PN

RD Instruction 4287-B

**PART 4287 - SERVICING**

**Subpart B - Servicing Business and Industry Guaranteed Loans**

**§ 4287.101 [Introduction]{.underline}.**

**(a) This subpart supplements part 4279, subparts A and B, by providing
additional requirements and instructions for servicing and liquidating
all Business and Industry (B&I) Guaranteed Loans. This includes Drought
and Disaster (D&D), Disaster Assistance for Rural Business Enterprises
(DARBE), and Business and Industry Disaster (BID) loans.**

**(b) The lender will be responsible for servicing the entire loan and
will remain mortgagee and secured party of record notwithstanding the
fact that another party may hold a portion of the loan. The entire loan
will be secured by the same security with equal lien priority for the
guaranteed and unguaranteed portions of the loan. The unguaranteed
portion of a loan will neither be paid first nor given any preference or
priority over the guaranteed portion of the loan.**

**(c) Copies of all forms, regulations, and Instructions referenced in
this subpart are available in any Agency office. Whenever a form is
designated in this subpart, that designation includes predecessor and
successor forms, if applicable, as specified by the field or National
Office.** *Any portion of this Instruction appearing in italicized type
is considered by the Agency to be administrative procedure and has not
been published as part of the regulation in the Federal Register.*

**§ 4287.102 [Definitions]{.underline}.**

**The definitions and abbreviations contained in § 4279.2 of subpart A
of part 4279 of this chapter apply to this subpart.**

**§ 4287.103 [Exception authority]{.underline}.**

**Section 4279.15 of subpart A of part 4279 of this chapter applies to
this subpart.**

**§§ 4287.104 - 4287.105 \[Reserved\]**

**§ 44287.106 [Appeals]{.underline}.**

**Section 4279.16 of subpart A of part 4279 of this chapter applies to
this subpart.**

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DISTRIBUTION: WSDC Guaranteed Loan Servicing

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RD Instruction 4287-B

**§ 4287.107 [Routine servicing]{.underline}.**

**The lender is responsible for servicing the entire loan and for taking
all servicing actions that a prudent lender would perform in servicing
its own portfolio of loans that are not guaranteed. The Loan Note
Guarantee is unenforceable by the lender to the extent any loss is
occasioned by violation** **of usury laws, use of loan funds for
unauthorized purposes, negligent servicing, or failure to obtain the
required security interest regardless of the time at which the Agency
acquires knowledge of the foregoing. This responsibility includes but is
not limited to the collection of payments, obtaining compliance with the
covenants and provisions in the Loan Agreement, obtaining and analyzing
financial statements, checking on payment of taxes and insurance
premiums, and maintaining liens on collateral.** *The State Director has
the primary responsibility for ensuring that the lender is servicing the
loan in a prudent manner as required by the Lender\'s Agreement, the
regulations governing the program, and loan documents. Loan servicing is
intended to be preventive rather than curative. Prompt followup on
delinquent accounts and early recognition of and pursuing a solution to
potential problems are keys to resolving many problem accounts. The
lender should be immediately notified in writing when the Agency
suspects noncompliance with the legal instruments governing the loan.
The Regional Inspector General for Investigations, U.S. Department of
Agriculture (USDA), should be contacted when fraud is suspected. All
servicing actions that are submitted to the National Office must be sent
in the format set forth in appendix A of this subpart***.**

**(a) [Lender reports]{.underline}. The lender must report the
outstanding principal and interest balance on each guaranteed loan
semiannually using Form RD 1980-41, \"Guaranteed Loan Status Report.\"**

**(b) [Loan classification]{.underline}. Within 90 days of receipt of
the Loan Note Guarantee, the lender must notify the Agency of the
loan\'s classification or rating under its regulatory standards. Should
the classification be changed at a future time, the Agency must be
notified immediately.** *The Agency is required to classify all B&I
loans within the B&I portfolio. The Agency will classify B&I loans
within 30 days of receiving the lender\'s classification in accordance
with the internal system on the Rural Community Facilities Tracking
System (RCFTS). When the lender uses a classification system different
than the internal system used in RCFTS, the Agency will convert the
lender\'s classification to a corresponding RCFTS classification for
data entry.*

**(c) [Agency and lender conference]{.underline}. At the Agency's
request, the lender will meet with the Agency to ascertain how the
guaranteed loan is being serviced and that the conditions and covenants
of the Loan Agreement are being enforced.** *The Agency will hold
meetings with the lender at least annually. The Agency, at a minimum,
will remind the lender of its*

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RD Instruction 4287-B

§ 4287.107(c) (Con.)

*servicing responsibilities under the Lender\'s Agreement during the
field visit, review the lender\'s latest financial analysis, and check
the loan classification.* *It is suggested that the application of loan
payments also be reviewed.*

*(1) Prepare for the visit by reviewing the previous field visit
reports.*

*(2) Coordinate the visit with the lender.*

*(3) Before the visit, discuss with the lender the borrower\'s financial
reporting and review the lender\'s analysis of the reports.*

*(4) Check the condition of the business premises and the collateral and
observe how the borrower is maintaining and utilizing the equipment.*

*(5) Check for potential hazardous contamination.*

*(6) Determine the economic impact of the B&I program.*

*(7) Document the findings in written correspondence with the lender.*

**(d) [Financial reports]{.underline}. The lender must obtain and
forward to the Agency the financial statements required by the Loan
Agreement. The lender must submit annual financial statements to the
Agency within 120 days of the end of the borrower\'s fiscal year. The
lender must analyze the financial statements and provide the Agency with
a written summary of the lender's analysis and conclusions, including
trends, strengths, weaknesses, extraordinary transactions, and other
indications of the financial condition of the borrower. Spreadsheets of
the new financial statements must also be included.** *The State
Director should handle public body financial reporting requirements
generally the same as for Community Programs. Office of Management and
Budget (OMB) Circular A-128 requires an audit for the fiscal year in
which the Loan Note Guarantee was issued. OMB Circular A-133 applies to
nonprofits.*

**(e) [Additional expenditures]{.underline}. The lender will not make
additional loans to the borrower without first obtaining the prior
written approval of the Agency, even though such loans will not be
guaranteed.**

*(f) [Borrower visits]{.underline}. Periodic borrower visits should be
coordinated whenever possible with the lender. It is strongly encouraged
that the lender accompany the Agency on all borrower visits. Borrower
visits*

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RD Instruction 4287-B

§ 4279.107(f) (Con.)

*should be scheduled during the first year of operation after issuance
of the Loan Note Guarantee. For all current borrowers, a field visit
should be done at least once every 3 years. Problem accounts should be
visited as frequently as the Agency deems necessary. Field visits should
be documented on Form 4279-15, \"Business and Industry Field Office
Review,\" or a similar format.*

*(g) [State Office reports]{.underline}. All problem loans that are in
excess of the State\'s loan servicing authority, all delinquent loans,
and any loans in bankruptcy will be reported on a quarterly basis to the
National Office using Form 4279-16, \"Quarterly Delinquent/Problem Loan
Report (Business and Industry).\"*

**§§ 4287.108 - 4287.111 \[Reserved\]**

**§ 4287.112 [Interest rate adjustments]{.underline}.**

**(a) [Reductions]{.underline}. The borrower, lender, and holder (if
any) may collectively initiate a permanent or temporary reduction in the
interest rate of the guaranteed loan at any time during the life of the
loan upon written agreement among these parties. The Agency must be
notified by the lender, in writing, within 10 calendar days of the
change. If any of the guaranteed portion has been purchased by the
Agency, then the Agency will affirm or reject interest rate change
proposals in writing. The Agency will concur in such interest-rate
changes only when it is demonstrated to the Agency that the change is a
more viable alternative than initiating or proceeding with liquidation
of the loan or continuing with the loan in its present state.**

**(1) Fixed rates can be changed to variable rates to reduce the
borrower's interest rate only when the variable rate has a ceiling which
is less than or equal to the original fixed rate.**

**(2) Variable rates can be changed to a fixed rate which is at or below
the current variable rate.**

**(3) The interest rates, after adjustments, must comply with the
requirements for interest rates on new loans as established by**

**§ 4279.125 of subpart B of part 4279.**

**(4) The lender is responsible for the legal documentation of
interest-rate changes by an endorsement or any other legally effective
amendment to the promissory note; however, no new notes may be issued.
Copies of all legal documents must be provided to the Agency.**

*(5) Factors which will be considered in making such determinations
include whether:*

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RD Instruction 4287-B

§ 4287.112(a)(5) (Con.)

*(i) continuing with the loan would realistically promote or enhance
rural development and employment in rural areas;*

*(ii) recovery is maximized and the monetary recovery would be increased
by proceeding immediately to liquidation (if applicable) or allowing the
borrower to continue at a reduced interest rate; and*

*(iii) an in-depth financial analysis by the lender reasonably indicates
that the business would be successful at a lower interest rate and
reasonably indicates that the borrower could make the reduced payment
and pay off amounts in arrears, if any.*

*(6) The State Director will notify the Finance Office of any
interest-rate change by using Form RD 1980-47, \"Guaranteed Loan
Borrower Adjustments,\" make corrections to RCFTS reflecting the change,
and document the loan file to reflect the change. A system must be
established to monitor the receipt from the lender of interest-rate
changes and the effective date of change on all guaranteed loans where
the Agency is the holder or where other circumstances might dictate a
change in the interest rate at some point in the future.*

**(b) [Increases]{.underline}. No increases in interest rates will be
permitted except the normal fluctuations in approved variable interest
rates unless a temporary interest-rate reduction occurred.**

**§ 4287.113 [Release of collateral]{.underline}.**

**(a) All releases of collateral with a value exceeding \$100,000 must
be supported by a current appraisal on the collateral released. The
appraisal will be at the expense of the borrower and must meet the
requirements of § 4279.144 of subpart B of part 4279 of this chapter.
The remaining collateral must be sufficient to provide for repayment of
the Agency's guaranteed loan. The Agency may, at its discretion, require
an appraisal of the remaining collateral in cases where it is determined
that the Agency may be adversely affected by the release of collateral.
Sale of release of collateral must be based on an arm's-length
transaction.** *There must be adequate consideration for release of
collateral and such release may include, but is not limited to:*

*(1) Application of the net proceeds from the sale of collateral to the
borrower\'s debts in order of lien priority (Application of sale*

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RD Instruction 4287-B

§ 4287.113(a)(1) (Con.)

*proceeds to the Agency guaranteed debt must be in inverse order of
maturity);*

*(2) Use of the net proceeds from the sale of collateral to purchase
other collateral of equal or greater value for which the lender will
obtain for the benefit of the guaranteed loan a lien position equal or
superior to the position previously held;*

*(3) Application of the net proceeds from the sale of collateral to the
borrower\'s business operation in such a manner that a significant
enhancement of the borrower\'s debt service ability will be clearly
demonstrated. (The lender\'s written request must detail how the
borrower\'s debt service ability will be enhanced); or*

*(4) Assurance that the release of collateral is essential for the
success of the business, thereby furthering the goals of the B&I
program. Such assurance must be supported by written documentation from
the lender*.

**(b) Within the parameters of paragraph (a) of this section, lenders
may, over the life of the loan, release collateral (other than personal
and corporate guarantees) with a cumulative value of up to 20 percent of
the original loan amount without Agency concurrence if the proceeds
generated are used to reduce the guaranteed loan or to buy replacement
collateral.**

**(c) Within the parameters of paragraph (a) of this section, release of
collateral with a cumulative value in excess of 20 percent of the
original loan or when the proceeds will not be used to reduce the
guaranteed loan or to buy replacement collateral must be requested in
writing by the lender and concurred in by the Agency in writing in
advance of the release. A written evaluation will be completed by the
lender to justify the release.**

*(d) Government officers are neither authorized to modify the terms of a
contract by the supplemental or substitute agreement if such
modifications are prejudicial to the interest of the United States nor
are they authorized to give away the property or claim of the
Government.*

**§§ 4287.114 - 4287.122 \[Reserved\]**

**§ 4287.123 [Subordination of lien position]{.underline}.**

**A subordination of the lender\'s lien position must be requested in
writing by the lender and concurred in by the Agency in writing in
advance of the subordination. The subordination must enhance the
borrower\'s business,**

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RD Instruction 4287-B

§ 4287.123 (Con.)

**and the Agency\'s interest. After the subordination, collateral must
be adequate to secure the loan. The lien to which the guaranteed loan is
subordinated must be for a fixed dollar limit and fixed or limited term,
after which the guaranteed loan lien priority will be restored.
Subordination to a revolving line of credit will not exceed 1 year.
There must be adequate consideration for the subordination.** *A
subordination is considered a servicing action requiring the appropriate
environmental review by the Agency in accordance with subpart G of part
1940.*

**§ 4287.124 [Alterations of loan instruments]{.underline}.**

**The lender shall neither alter nor approve any alterations of any loan
instrument without the prior written approval of the Agency.** *The
State Director will consult with the Regional Attorney and, if
necessary, the National Office for additional guidance.*

**§§ 4287.125 - 4287.133 \[Reserved\]**

**§ 4287.134 [Transfer and assumption]{.underline}.**

**(a) [Documentation of request]{.underline}. All transfers and
assumptions must be approved in writing by the Agency and must be to
eligible applicants in accordance with subpart B of part 4279 of this
chapter. An individual credit report must be provided for transferee
proprietors, partners, officers, directors, and stockholders with 20
percent or more interest in the business, along with such other
documentation as the Agency may request to determine eligibility.**
*Although a transfer and assumption is normally considered loan
servicing, it should be processed in the same manner as a new loan.*

**(b) [Terms]{.underline}. Loan terms must not be changed unless the
change is approved in writing by the Agency with the concurrence of any
holder and the transferor (including guarantors) if they have not been
or will not be released from liability. Any new loan terms must be
within the terms authorized by § 4279.126 of subpart B of part 4279 of
this chapter. The lender\'s request for approval of new loan terms will
be supported by an explanation of the reasons for the proposed change in
loan terms.** *(The maximum terms authorized by § 4279.126 of subpart B
of part 4279 may be considered when new terms are being offered.)*

**(c) [Release of liability]{.underline}. The transferor, including any
guarantor, may be released from liability only with prior Agency written
concurrence and only when the value of the collateral being transferred
is at least equal to the amount of the loan being assumed and is
supported by a current appraisal and a current financial statement. The
Agency will**

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(12-23-96) SPECIAL PN

RD Instruction 4287-B

§ 4287.134(c) (Con.)

**not pay for the appraisal. If the transfer is for less than the debt,
the lender must demonstrate to the Agency that the transferor and
guarantors have no reasonable debt-paying ability considering their
assets and income in the foreseeable future.**

**(d) [Proceeds]{.underline}. Any proceeds received from the sale of
collateral before a transfer and assumption will be credited to the
transferor\'s guaranteed loan debt in inverse order of maturity before
the transfer and assumption are closed.**

**(e) [Additional loans]{.underline}. Loans to provide additional funds
in connection with a transfer and assumption must be considered as a new
loan application under subpart B of part 4279 of this chapter.**

**(f) [Credit quality]{.underline}. The lender must make a complete
credit analysis which is subject to Agency review and approval.**

**(g) [Documents]{.underline}. Prior to Agency approval, the lender must
advise the Agency, in writing, that the transaction can be properly and
legally transferred, and the conveyance instruments will be filed,
registered, or recorded as appropriate.**

**(1) The assumption will be done on the lender\'s form of assumption
agreement and will contain the Agency case number of the transferor and
transferee. The lender will provide the Agency with a copy of the
transfer and assumption agreement. The lender must ensure that all
transfers and assumptions are noted on all original Loan Note
Guarantees.**

**(2) A new Loan Agreement, consistent in principle with the original
Loan Agreement, should be executed to establish the terms and conditions
of the loan being assumed. An assumption agreement can be used to
establish the loan covenants.**

**(3) The lender will provide to the Agency a written certification that
the transfer and assumption is valid, enforceable, and complies with all
Agency regulations.**

**(h) [Loss resulting from transfer]{.underline}. If a loss should occur
upon consummation of a complete transfer and assumption for less than
the full amount of the debt and the transferor (including personal
guarantors) is released from liability, the lender, if it holds the
guaranteed portion, may file an estimated report of loss to recover its
[pro rata]{.underline} share of the actual loss. If a holder owns any of
the guaranteed portion, such portion must be repurchased by the lender
or the Agency in accordance with § 4279.78(c) of subpart A of part
4279.**

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RD Instruction 4287-B

§ 4287.134(h) (Con.)

**In completing the report of loss, the amount of the debt assumed will
be entered as net collateral (recovery). Approved protective advances
and accrued interest thereon made during the arrangement of a transfer
and assumption will be included in the calculations.**

**(i) [Related party]{.underline}. If the transferor and transferee are
affiliated or related parties, any transfer and assumption must be for
the full amount of the debt.**

**(j) [Payment requests]{.underline}. Requests for a loan guarantee to
provide equity for a transfer and assumption must be considered as a new
loan under subpart B of part 4279.**

**(k) [Cash downpayment]{.underline}. When the transferee will be making
a cash downpayment as part of the transfer and assumption:**

**(1) The lender must have an appropriate appraiser, acceptable to both
the transferee and transferor and currently authorized to perform
appraisals, determine the value of the collateral securing the loan. The
appraisal fee and any other costs will not be paid by the Agency.**

**(2) The market value of the collateral, plus any additional property
the transferee proposes to offer as collateral, must be adequate to
secure the balance of the guaranteed loans.**

**(3) Cash downpayments may be paid directly to the transferor
provided:**

**(i) The lender recommends that the cash be released, and the Agency
concurs prior to the transaction being completed. The lender may wish to
require that an amount be retained for a defined period of time as a
reserve against future defaults. Interest on such account may be paid
periodically to the transferor or transferee as agreed;**

**(ii) The lender determines that the transferee has the repayment
ability to meet the obligations of the assumed guaranteed loan as well
as any other indebtedness;**

**(iii) Any payments by the transferee to the transferor will not
suspend the transferee\'s obligations to continue to meet the guaranteed
loan payments as they come due under the terms of the assumption; and**

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RD Instruction 4287-B

§ 4287.134(k)(3) (Con.)

**(iv) The transferor agrees not to take any action against the
transferee in connection with the assumption without prior written
approval of the lender and the Agency.**

*(l) [Transfer and assumption options]{.underline}.*

*(1) Transfer the total indebtedness on the same terms.*

*(2) Transfer the total indebtedness on different terms.*

*(3) Transfer for less than all of the debt on the same terms.*

*(4) Transfer for less than all of the debt on different terms.*

*(m) [Bankruptcy]{.underline}. The bankruptcy court does not have any
jurisdiction to require a lender to accept another debtor or to transfer
a loan to another entity. In such a case, contact your Regional Attorney
immediately.*

*(n) [Approval]{.underline}. The Agency will handle a transfer and
assumption as a new loan, and the transfer and assumption must be
approved by the State Director within the position's loan approval
authority. If there will be a loss or if the guaranteed loan balance is
in excess of the State Director\'s loan approval authority, the request
must be submitted to the National Office for review and concurrence. The
Regional Attorney will review all legal instruments used in the transfer
and assumption prior to the transaction being consummated. A copy of the
assumption agreement must be placed in the case file. The Finance Office
must be notified and the following information should be transmitted to
the Finance Office:*

*(1) Form RD 1980-7, \"Notification of Transfer and Assumption of a
Guaranteed Loan;\"*

*(2) Form RD 1980-50, \"Add, Delete, or Change Guaranteed Loan Borrower
Information;\" and*

*(3) Form RD 1980-51, \"Add, Change or Delete Guaranteed Loan Record,\"
for the transferee.*

*(o) [Environmental]{.underline}. Transfers and assumptions are
considered servicing actions requiring the appropriate environmental
review by the Agency in accordance with subpart G of part 1940.*

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RD Instruction 4287-B

**§ 4287.135 [Substitution of lender]{.underline}.**

**After the issuance of a Loan Note Guarantee, the lender shall not sell
or transfer the entire loan without the prior written approval of the
Agency. The Agency will not pay any loss or share in any costs (i.e.,
appraisal fees, environmental studies, or other costs associated with
servicing or liquidating the loan) with a new lender unless a
relationship is established through a substitution of lender in
accordance with paragraph (a) of this section. This includes cases where
the lender has failed and been taken over by a regulatory agency such as
the Federal Deposit Insurance Corporation (FDIC) and the loan is
subsequently sold to another lender.**

**(a) The Agency may approve the substitution of a new lender if:**

**(1) the proposed substitute lender:**

**(i) is an eligible lender in accordance with § 4279.29 of subpart A of
part 4279;**

**(ii) is able to service the loan in accordance with the original loan
documents; and**

**(iii) agrees in writing to acquire title to the unguaranteed portion
of the loan held by the original lender and assumes all original loan
requirements, including liabilities and servicing responsibilities.**

**(2) the substitution of the lender is requested in writing by the
borrower, the proposed substitute lender, and the original lender if
still in existence.**

**(b) Where the lender has failed and been taken over by FDIC and the
guaranteed loan is liquidated by FDIC rather than being sold to another
lender, the Agency will pay losses and share in costs as if FDIC were an
approved substitute lender.**

*(c) The Regional Attorney should be requested to review the proposed
substitution documents to ascertain that the documents will comply with
all legal requirements. State Directors may approve a substitution of
lender for loans where the outstanding loan balance is within the
State\'s delegated servicing authority.*

*(d) RCFTS should be updated to reflect the change, and the Finance
Office should be notified using Form RD 1980-42, \"Notice of
Substitution of Lender.\"*

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RD Instruction 4287-B

*§ 4287.136 [Lender failure]{.underline}.*

*For financial institutions that have failed, the following procedure
should be followed:*

*(a) [Uninsured lender]{.underline}. When an uninsured lender with an
Agency guaranteed loan fails, the Agency must notify both the National
Office and the Regional Attorney, in writing, at once. The Agency will
likely be dealing with a bankruptcy situation where the receiver will
control any B&I Guaranteed Loan and sell it as part of the liquidation
process. These are lengthy, complicated affairs and the Agency needs to
keep track of the B&I Guaranteed Loan and monitor the bankruptcy
progress. The Agency should make any successor to the failed institution
aware that the lender or insuring agency cannot arbitrarily change the
Lender\'s Agreement and related documents on the guaranteed loan.*

*(b) [Insured lender]{.underline}. When an insured lender fails, its
assets, including its loans, are normally taken over by the insuring
agency such as the FDIC. The B&I Guaranteed Loan will usually be
acquired by either the insuring agency or a private institution.*

**\
***(1) [Initial action]{.underline}. As soon as the Agency becomes aware
that a lender has failed, the Agency should contact the FDIC office (if
there is one) or the State agency servicing the lender\'s area at once.
The Agency should brief the FDIC or State agency on the requirements
contained in the Lender\'s Agreement as well as any other Agency
regulations that apply. The Regional Attorney should be contacted for
legal advice, including determining the time period established by
applicable law in which a proof of claim can be filed.*

*(2) [Recovery by the Agency]{.underline}. When the Agency has
repurchased the guaranteed portion of the loan, the lender has failed,
and the Agency suspects that the guarantee is unenforceable due to
negligent servicing, unauthorized use of loan funds, fraud, or
misrepresentation by the lender.*

*(i) Involve the National Office and Regional Attorney as soon as it is
suspected that the Loan Note Guarantee may be unenforceable.*

*(ii) Determine and document the exact amount of loss paid by the Agency
as a result of negligent servicing.*

## 12

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RD Instruction 4287-B

§ 4287.136(b)(2) (Con.)

*(iii) Locate the name and address of the insurance company covering the
failed institution and its officers for errors and omissions. The Agency
loan officer should contact the Regional Attorney to structure a demand
letter for payment of the loss associated with the negligence.*

*(iv) If the financial institution has been taken over by a Federal or
State regulatory agency, the Agency should request ettlement of the loss
from the assets of the failed institution by filing a timely proof of
claim.*

*(v) If the failed institution\'s operations and the Agency guaranteed
loan were sold to another institution, with the concurrence of the
Regional Attorney and the National Office, a timely appropriate demand
for payment should be made from the new entity. A detailed analysis
substantiated with any supporting documents should accompany the demand
for payment within the time constraints established by law.*

*(vi) Should the demand on the successor financial institution be
denied, the Agency should obtain the documented reasons in writing. The
Regional Attorney should be consulted to prepare the rebuttal and
request for reconsideration of payment.*

**§§ 4287.137 - 4287.144 \[Reserved\]**

**§ 4287.145 [Default by borrower]{.underline}.**

**(a) The lender must notify the Agency when a borrower is 30 days past
due on a payment or is otherwise in default of the Loan Agreement. Form
RD 1980-44, \"Guaranteed Loan Borrower Default Status,\" will be used
and the lender will continue to submit this form bimonthly until such
time as the loan is no longer in default. If a monetary default exceeds
60 days, the lender will arrange a meeting with the Agency and the
borrower to resolve the problem.**

**(b) In considering options, the prospects for providing a permanent
cure without adversely affecting the risk to the Agency and the lender
is the paramount objective.**

**(1) Curative actions include but are not limited to**:

**(i) deferment of principal (subject to rights of any holder);**

**(ii) an additional unguaranteed temporary loan by the lender to bring
the account current;**

## 13

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(12-23-96) SPECIAL PN

RD Instruction 4287-B

§ 4287.145(b)(1) (Con.)

**(iii) reamortization of or rescheduling the payments on the loan
(subject to rights of any holder);**

**(iv) transfer and assumption of the loan in accordance with**

**§ 4287.134 of this subpart;**

**(v) reorganization;**

**(vi) liquidation;**

**(vii) subsequent loan guarantees; and**

**(viii) changes in interest rates with the Agency\'s, the lender\'s,
and the holder\'s approval, provided that the interest rate is adjusted
proportionately between the guaranteed and unguaranteed portion of the
loan and the type of rate remains the same.**

**(2) In the event a deferment, rescheduling, reamortization, or
moratorium is accomplished, it will be limited to the remaining life of
the collateral or remaining limits as contained in § 4279.126 of subpart
B of part 4279 of this chapter whichever is less.**

*(c) Any fully justified rescheduled, deferred, or reamortized loan
which meets the revised performance agreed to by the lender and the
Agency will no longer be classified as delinquent but should be
considered a problem loan for a reasonable period of time and watched
closely. The Agency will notify the Finance Office, in writing, of any
changes in payment terms (interest-rate adjustment and reamortizations)
as well as the effective dates of such changes.*

**§§ 4286.146 - 4287.155 \[Reserved\]**

**§ 4287.156 [Protective advances]{.underline}.**

**Protective advances are advances made by the lender for the purpose of
preserving and protecting the collateral where the debtor has failed to,
will not, or cannot meet its obligations. Sound judgment must be
exercised in determining that the protective advance preserves
collateral and recovery is actually enhanced by making the advance.
Protective advances will not be made in lieu of additional loans.**

**(a) The maximum loss to be paid by the Agency will never exceed the
original principal plus accrued interest regardless of any protective
advances made.**

## 14

##  

RD Instruction 4287-B

§ 4287.156 (Con.)

**(b) Protective advances and interest thereon at the note rate will be
guaranteed at the same percentage of loss as provided in the Loan Note
Guarantee.**

**(c) Protective advances must constitute an indebtedness of the
borrower to the lender and be secured by the security instruments.
Agency written authorization is required when cumulative protective
advances exceed \$5,000.**

**§ 4287.157 [Liquidation]{.underline}.**

**In the event of one or more incidents of default or third party
actions that the borrower cannot or will not cure or eliminate within a
reasonable period of time, liquidation may be considered. If the lender
concludes that liquidation is necessary, it must request the Agency\'s
concurrence. The lender will liquidate the loan unless the Agency, at
its option, carries out liquidation. When the decision to liquidate is
made, if the loan has not already been repurchased, provisions will be
made for repurchase in accordance with § 4279.78 of subpart A of part
4279.**

**(a) [Decision to liquidate]{.underline}. A decision to liquidate shall
be made when it is determined that the default cannot be cured through
actions contained in § 4287.145 of this subpart or it has been
determined that it is in the best interest of the Agency and the lender
to liquidate. The decision to liquidate or continue with the borrower
must be made as soon as possible when any of the following exist:**

**(1) A loan has been delinquent 90 days and the lender and borrower
have not been able to cure the delinquency through one of the actions
contained in § 4287.145 of this subpart.**

**(2) It has been determined that delaying liquidation will jeopardize
full recovery on the loan.**

**(3) The borrower or lender has been uncooperative in resolving the
problem and the Agency or the lender has reason to believe the borrower
is not acting in good faith, and it would enhance the position of the
guarantee to liquidate immediately.**

**(b) [Liquidation by the Agency]{.underline}. The Agency may require
the lender to assign the security instruments to the Agency if the
Agency, at its option, decides to liquidate the loan. When the Agency
liquidates, reasonable liquidation expenses will be assessed against the
proceeds**

## 15

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(12-23-96) SPECIAL PN

RD Instruction 4287-B

§ 4287.157(b) (Con.)

**derived from the sale of the collateral. Form RD 1980-45, \"Notice of
Liquidation Responsibility,\" will be forwarded to the Finance Office
when the Agency liquidates the loan.** *The State Director has no
authority to exercise the option to liquidate by the Agency without
National Office concurrence.*

**(c) [Submission of liquidation plan]{.underline}. The lender will,
within 30 days after a decision to liquidate, submit to the Agency in
writing its proposed detailed method of liquidation. Upon approval by
the Agency of the liquidation plan, the lender will commence
liquidation.**

**(d) [Lender\'s liquidation plan]{.underline}. The 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 promissory note and related security
instruments and a copy of the payment ledger if available which reflects
the current loan balance and accrued interest to date and the method of
computing the interest.**

**(2) A full and complete list of all collateral including any personal
and corporate guarantees.**

**(3) The recommended liquidation methods for making the maximum
collection possible on the indebtedness and the justification for such
methods, including recommended action:**

**(i) for acquiring and disposing of all collateral; and**

**(ii) to collect from guarantors.**

**(4) Necessary steps for preservation of the collateral.**

**(5) Copies of the borrower\'s latest available financial statements.**

**(6) Copies of the guarantor\'s latest available financial
statements.**

**(7) An itemized list of estimated liquidation expenses expected to be
incurred along with justification for each expense.**

**(8) A schedule to periodically report to the Agency on the progress of
liquidation.**

**(9) Estimated protective advance amounts with justification.**

## 16

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RD Instruction 4287-B

§ 4287.157(d) (Con.)

**(10) Proposed protective bid amounts on collateral to be sold at
auction and a breakdown to show how the amounts were determined.**

**(11) If a voluntary conveyance is considered, the proposed amount to
be credited to the guaranteed debt.**

**(12) Legal opinions, if needed.**

**(13) If the outstanding balance of principal and accrued interest is
less than \$200,000, the lender will obtain an estimate of fair market
and potential liquidation value of the collateral. If the outstanding
balance of principal and accrued interest is \$200,000 or more, the
lender will obtain an independent appraisal report meeting the
requirements of § 4279.144 of subpart B of part 4279 on all collateral
securing the loan which will reflect the fair market value and potential
liquidation value. In order to formulate a liquidation plan which
maximizes recovery, collateral must be evaluated for the release of
hazardous substances, petroleum products, or other environmental hazards
which may adversely impact the market value of the collateral. The
appraisal shall consider this aspect. The independent appraiser\'s fee,
including the cost of the environmental site assessment, will be shared
equally by the Agency and the lender.**

**(e) [Approval of liquidation plan]{.underline}. The Agency will inform
the lender in writing whether it concurs in the lender\'s liquidation
plan** *within 30 days after receipt of the liquidation plan from the
lender. If the Agency needs additional time to respond to the
liquidation plan, it will advise the lender of a definite time for such
response.* **Should the Agency and the lender not agree on the
liquidation plan, negotiations will take place between the Agency and
the lender to resolve the disagreement. When the liquidation plan is
approved by the Agency, the lender will proceed expeditiously with
liquidation.** *The liquidation plan will be approved within the State
Director's delegated loan servicing authority. In the event the loan
balance is in excess of the State Director\'s delegated authority, the
liquidation plan must be forwarded to the National Office in the
appropriate format identified in appendix A of this Instruction with
supporting documentation for review and concurrence. The liquidation
plan may be modified when conditions warrant. All modifications must be
approved in writing by the Agency prior to implementation.*

## 17

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(12-23-96) SPECIAL PN

RD Instruction 4287-B

§ 4287.157(e) (Con.)

**(1) A transfer and assumption of the borrower\'s operation can be
accomplished before or after the loan goes into liquidation. However, if
the collateral has been purchased through foreclosure or the borrower
has conveyed title to the lender, no transfer and assumption is
permitted.**

**(2) A protective bid may be made by the lender, with prior Agency
written approval, at a foreclosure sale to protect the lender\'s and the
Agency\'s interest. The protective bid will not exceed the amount of the
loan, including expenses of foreclosure, and should be based on the
liquidation value considering estimated expenses for holding and
reselling the property. These expenses include, but are not limited to,
expenses for resale, interest accrual, length of time necessary for
resale, maintenance, guard service, weatherization, and prior liens.**
*If the liquidation value is not more than the sale expenses plus any
liens superior to the lien of the guaranteed loan, normally, a
protective bid should not be made.*

**(f) [Acceleration]{.underline}. The lender, or the Agency if it
liquidates, will proceed to accelerate the indebtedness as expeditiously
as possible when acceleration is necessary including giving any notices
and taking any other legal actions required. A copy of the acceleration
notice or other acceleration document will be sent to the Agency (or
lender if the Agency liquidates). The guaranteed loan will be considered
in liquidation once the loan has been accelerated and a demand for
payment has been made upon the borrower.**

**(g) [Filing an estimated loss claim]{.underline}. When the lender is
conducting the liquidation and owns any or all of the guaranteed portion
of the loan, the lender will file an estimated loss claim once a
decision has been made to liquidate if the liquidation will exceed 90
days. The estimated loss payment will be based on the liquidation value
of the collateral. For the purpose of reporting and loss claim
computation, the lender will discontinue interest accrual on the
defaulted loan in accordance with Agency procedures, and the loss claim
will be promptly processed in accordance with applicable Agency
regulations** *as set forth in*

*§ 4279.78(b)(6) of subpart A of part 4279 of this chapter***.**

**(h) [Accounting and reports]{.underline}. When the lender conducts
liquidation, it will account for funds during the period of liquidation
and will provide the Agency with reports at least quarterly on the
progress of liquidation including disposition of collateral, resulting
costs, and additional procedures necessary for successful completion of
the liquidation.**

## 18

##  

RD Instruction 4287-B

§ 4287.157 (Con.)

**(i) [Transmitting payments and proceeds to the Agency]{.underline}.
When the Agency is the holder of a portion of the guaranteed loan, the
lender will transmit to the Agency its [pro rata]{.underline} share of
any payments received from the borrower, liquidation, or other proceeds
using Form RD 1980-43, \"Lender\'s Guaranteed Loan Payment to FmHA.\"**

**(j) [Abandonment of collateral]{.underline}. There may be instances
when the cost of liquidation would exceed the potential recovery value
of the collection. The lender, with proper documentation and concurrence
of the Agency, may abandon the collateral in lieu of liquidation. A
proposed abandonment will be considered a servicing action requiring the
appropriate environmental review by the Agency in accordance with
subpart G of part 1940 of this title. Examples where abandonment may be
considered include, but are not limited to:**

**(1) The cost of liquidation is increased or the value of the
collateral is decreased by environmental issues;**

**(2) The collateral is functionally or economically obsolete;**

**(3) There are superior liens held by other parties in excess of the
value of the collateral;**

**(4) The collateral has deteriorated; or**

**(5) The collateral is specialized and there is little or no demand for
it.**

**(k) [Disposition of personal or corporate guarantees]{.underline}. The
lender should take action to maximize recovery from all collateral,
including personal and corporate guarantees. The lender will seek a
deficiency judgment when there is a reasonable chance of future
collection of the judgment. The lender must make a decision whether or
not to seek a deficiency judgment when:**

**(1) a borrower voluntarily liquidates the collateral, but the sale
fails to pay the guaranteed indebtedness;**

**(2) the collateral is voluntarily conveyed to the lender, but the
borrower and personal and corporate guarantors are not released from
liability; or**

**(3) a liquidation plan is being developed for forced liquidation.**

## 19

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(12-23-96) SPECIAL PN

RD Instruction 4287-B

§ 4287.157 (Con.)

**(l) [Compromise settlement]{.underline}. A compromise settlement may
be considered at any time.**

**(1) The lender and the Agency must receive complete financial
information on all parties obligated for the loan and must be satisfied
that the statements reflect the true and correct financial position of
the debtor including all assets. Adequate consideration must be received
before a release from liability is issued. Adequate consideration
includes money, additional security, or other benefit to the goals and
objectives of the Agency.**

**(2) Before a personal guarantor can be released from liability, the
following factors must be considered.**

**(i) Cash, either lump sum or over a period of time, or other
consideration offered by the guarantor;**

**(ii) Age and health of the guarantor;**

**(iii) Potential income of the guarantor;**

**(iv) Inheritance prospects of the guarantor;**

**(v) Availability of the guarantor\'s assets.**

**(vi) Possibility that the guarantor\'s assets have been concealed or
improperly transferred; and**

**(vii) Effect of other guarantors on the loan.** *(Consent of other
guarantors may be needed.)*

**(3) Once the Agency and the lender agree on a reasonable amount that
is fair and adequate, the lender can proceed to effect the settlement
compromise.** *Releases should not be executed until all payments or
other considerations have been received by the lender and the Agency.
Such cases involving fraud, negligent servicing, or misrepresentation
must be reviewed by the Regional Attorney and have the concurrence of
the National Office.*

**(4) A compromise will only be accepted if it is in the best interest
of the Agency.**

## 20

##  

RD Instruction 4287-B

§ 4287.157 (Con.)

*(m) [Bankruptcy]{.underline}.*

*(1) If a trustee is appointed by the bankruptcy court to sell the
collateral, the trustee rather than the lender is responsible for the
liquidation. Normally, no liquidation expenses will be incurred by the
lender.*

*(2) Pursuit of personal and corporate guarantors who are not the
borrower and not in bankruptcy is a matter outside of the jurisdiction
of the court. Reasonable expenses incurred in pursuit of such guarantors
would be allowable provided there was sufficient collateral sold or
collections made on the loan to cover such expenses.*

**§ 4287.158 [Determination of loss and payment]{.underline}.**

**In all liquidation cases, final settlement will be made with the
lender after the collateral is liquidated, unless otherwise designated
as a future recovery or after settlement and compromise of all parties
has been completed. The Agency will have the right to recover losses
paid under the guarantee from any party which may be liable.** *State
Directors are authorized to approve estimated and final reports of loss
within the position's delegated loan servicing authority. Approval of
estimated and final reports of loss that exceed the State Director\'s
delegated loan servicing authority must be forwarded to the National
Office for review and concurrence in the format set forth in appendix A
of this Instruction.*

**(a) [Report of loss form]{.underline}. Form RD 449-30, \"Loan Note
Guarantee Report of Loss,\" will be used for calculations of all
estimated and final loss determinations. Estimated loss payments may
only be approved by the Agency after the Agency has approved a
liquidation plan.**

**(b) [Estimated loss]{.underline}. In accordance with the requirements
of**

**§ 4287.157(g) of this subpart, an estimated loss claim based on
liquidation appraisal value will be prepared and submitted by the
lender.**

**(1) The estimated loss payment shall be applied as of the date of such
payment. The total amount of the loss payment remitted by the Agency
will be applied by the lender on the guaranteed portion of the loan
debt. Such application does not release the borrower from liability.**

## 21

## 

(12-23-96) SPECIAL PN

RD Instruction 4287-B

§ 4287.158(b) (Con.)

**(2) An estimated loss will be applied first to reduce the principal
balance on the guaranteed loan and the balance, if any, to accrued
interest. Interest accrual on the defaulted loan will be discontinued.**

**(3) A protective advance claim will be paid only at the time of the
final report of loss payment except in certain transfer and assumption
situations as specified in § 4287.134 of this subpart.**

**(c) [Final loss]{.underline}. Within 30 days after liquidation of all
collateral, except for certain unsecured personal or corporate
guarantees as provided for in this section, is completed, a final report
of loss must be prepared and submitted by the lender to the Agency. The
Agency will not guarantee interest beyond this 30-day period other than
for the period of time it takes the Agency to process the loss claim.
Before approval by the Agency of any final loss report, the lender must
account for all funds during the period of liquidation, disposition of
the collateral, all costs incurred, and any other information necessary
for the successful completion of liquidation. Upon receipt of the final
accounting and report of loss, the Agency may audit all applicable
documentation to determine the final loss. The lender will make its
records available and otherwise assist the Agency in making any
investigation. The documentation accompanying the report of loss must
support the amounts shown on Form RD 449-30.**

**(1) A determination must be made regarding the collectibility of
unsecured personal and corporate guarantees. If reasonably possible,
such guarantees should be promptly collected or otherwise disposed of in
accordance with § 4287.157(k) of this subpart prior to completion of the
final loss report. However, in the event that collection from the
guarantors appears unlikely or will require a prolonged period of time,
the report of loss will be filed when all other collateral has been
liquidated, and unsecured personal or corporate guarantees will be
treated as a future recovery with the net proceeds to be shared on a pro
rata basis by the lender and the Agency.** *The State Office will
establish a follow-up system to ensure that the lender is making
reasonable collection efforts and distributing any collections
properly.*

**(2) The lender must document that all of the collateral has been
accounted for and properly liquidated and that liquidation proceeds have
been properly accounted for and applied correctly to the loan.**

**(3) The lender will show a breakdown of any protective advance amount
as to the payee, purpose of the expenditure, date paid, and evidence
that the amount expended was proper and that payment was actually
made.**

## 22

##  

RD Instruction 4287-B

§ 4287.158(c) (Con.)

**(4) The lender will show a breakdown of liquidation expenses as to the
payee, purpose of the expenditure, date paid, and evidence that the
amount expended was proper and that payment was actually made.** *The
Agency should review all liquidation expenses to determine if the
expenses were proper, reasonable, and in accordance with the approval
given by the Agency.* **Liquidation expenses are recoverable only from
collateral proceeds. Attorney fees may be approved as liquidation
expenses provided the fees are reasonable and cover legal issues
pertaining to the liquidation that could not be properly handled by the
lender and its in-house counsel.**

**(5) Accrued interest will be supported by documentation as to how the
amount was accrued. If the interest rate was a variable rate, the lender
will include documentation of changes in both the selected base rate and
the loan rate.**

**(6) Loss payments will be paid by the Agency within 60 days after the
review of the final loss report and accounting of the collateral.**

*(7) Should there be a circumstance where the lender cannot or will not
sign a final report of loss, the State Director may complete the final
report of loss and submit it to the Finance Office without the lender\'s
signature. Before this action can be taken, all collateral must be
disposed of or accounted for; there must be no evidence of fraud,
misrepresentation, or negligent servicing by the lender; and all efforts
to obtain the cooperation of the lender must have been exhausted and
documented***.**

*(8) Appendix B of this subpart will be completed on each final report
of loss and a copy placed in the loan file.*

**(d) [Loss limit]{.underline}. The amount payable by the Agency to the
lender cannot exceed the limits set forth in the Loan Note Guarantee.**

**(e) [Rent]{.underline}. Any net rental or other income that has been
received by the lender from the collateral will be applied on the
guaranteed loan debt.**

**(f) [Liquidation costs]{.underline}. Liquidation costs will be
deducted from the proceeds of the disposition of primary collateral. If
changed circumstances after submission of the liquidation plan require a
substantial revision of liquidation costs, the lender will procure the
Agency\'s written concurrence prior to proceeding with the proposed
changes. No in-house expenses of the lender will be allowed. In-house
expenses include, but are not limited to, employee\'s salaries, staff
lawyers, travel, and overhead.**

## 23

## 

(12-23-96) SPECIAL PN

RD Instruction 4287-B

§ 4287.158 (Con.)

**(g) [Payment]{.underline}. When the Agency finds the final report of
loss to be proper in all respects, it will approve Form RD 449-30 and
proceed as follows:**

**(1) If the loss is greater than any estimated loss payment, the Agency
will pay the additional amount owed by the Agency to the lender.**

**(2) If the loss is less than the estimated loss payment, the lender
will reimburse the Agency for the overpayment plus interest at the note
rate from the date of payment.**

**(3) If the Agency has conducted the liquidation, it will pay the
lender in accordance with the Loan Note Guarantee.**

**§§ 4287.159 - 4287.168 \[Reserved\]**

**§ 4287.169 [Future recovery]{.underline}.**

**After a loan has been liquidated and a final loss has been paid by the
Agency, any future funds which may be recovered by the lender will be
pro rated between the Agency and the lender based on the original
percentage of guarantee.**

**§ 4287.170 [Bankruptcy]{.underline}.**

**The lender is responsible for protecting the guaranteed loan and all
collateral securing the loan in bankruptcy proceedings.**

**(a) [Lender's responsibilities]{.underline}. It is the lender's
responsibility to protect the guaranteed loan debt and all of the
collateral securing it in bankruptcy proceedings. These responsibilities
include, but are not limited to the following:**

**(1) The lender will file a proof of claim where necessary and all the
necessary papers and pleadings concerning the case.**

**(2) The lender will attend and, where necessary, participate in
meetings of the creditors and all court proceedings.**

**(3) When permitted by the Bankruptcy Code, the lender will request
modification of any plan of reorganization whenever it appears that
additional recoveries are likely.**

**(4) The Agency will be kept adequately and regularly informed in
writing of all aspects of the proceedings.**

## 24

##  

RD Instruction 4287-B

§ 4287.170(a) (Con.)

**(5) In a Chapter 11 reorganization, if an independent appraisal of
collateral is necessary in the Agency's opinion, the Agency and the
lender will share such appraisal fee equally.**

**(b) [Reports of loss during bankruptcy]{.underline}. When the loan is
involved in reorganization proceedings, payment of loss claims may be
made as provided in this section. For a liquidation proceeding, only
paragraphs (b)(3) and (5) of this section are applicable.**

**(1) [Estimated loss payments]{.underline}.**

**(i) If a borrower has filed for protection under Chapter 11\
of the United States Code for a reorganization (but not\
Chapter 13) and all or a portion of the debt has been discharged, the
lender will request an estimated loss payment of the guaranteed portion
of the accrued interest and principal discharged by the court. Only one
estimated loss payment is allowed during the reorganization. All
subsequent claims of the lender during reorganization will be considered
revisions to the initial estimated loss. A revised estimated loss
payment may be processed by the Agency, at its option, in accordance
with any court-approved changes in the reorganization plan. Once the
reorganization plan has been completed, the lender is responsible for
submitting the documentation necessary for the Agency to review and
adjust the estimated loss claim to reflect any actual discharge of
principal and interest and to reimburse the lender for any court-ordered
interest-rate reduction under the terms of the reorganization plan.**

**(ii) The lender will use Form RD 449-30 to request an estimated loss
payment and to revise any estimated loss payments during the course of
the reorganization plan. The estimated loss claim, as well as any
revisions to this claim, will be accompanied by documentation to support
the claim.**

**(iii) Upon completion of a reorganization plan, the lender will
complete a Form RD 1980-44 and forward this form to the Finance
Office.**

**(2) [Interest loss payments]{.underline}.**

**(i) Interest losses sustained during the period of the reorganization
plan will be processed in accordance with paragraph (b)(1) of this
section.**

## 25

## 

(12-23-96) SPECIAL PN

RD Instruction 4287-B

§ 4287.170(b)(2) (Con.)

**(ii) Interest losses sustained after the reorganization plan is
completed will be processed annually when the lender sustains a loss as
a result of a permanent interest rate reduction which extends beyond the
period of the reorganization plan.**

**(iii) If an estimated loss claim is paid during the operation of the
Chapter 11 reorganization plan and the borrower repays in full the
remaining balance without an additional loss sustained by the lender, a
final report of loss is not necessary.** *The Finance Office will close
out the estimated loss or final loss at the time of notification of
payment in full.*

*(iv) A report of loss will be completed to compensate the lender for
any excess in interest rate specified in the Loan Note Guarantee and the
rate of interest specified in the plan.*

**(3) [Final loss payments]{.underline}. Final loss payments will be
processed when the loan is liquidated.**

**(4) [Payment application]{.underline}. The lender must apply estimated
loss payments first to the unsecured principal of the guaranteed portion
of the debt and then to the unsecured interest of the guaranteed portion
of the debt. In the event a bankruptcy court attempts to direct the
payments to be applied in a different manner, the lender will
immediately notify the Agency servicing office.** *The Agency will
immediately obtain advice from the Office of the General Counsel (OGC)
on what action to take.*

**(5) [Overpayments]{.underline}. Upon completion of the reorganization
plan, the lender will provide the Agency with the documentation
necessary to determine whether the estimated loss paid equals the actual
loss sustained. If the actual loss sustained as a result of the
reorganization is less than the estimated loss, the lender will
reimburse the Agency for the overpayment plus interest at the note rate
from the date of payment of the estimated loss. If the actual loss is
greater than the estimated loss payment, the lender will submit a
revised estimated loss in order to obtain payment of the additional
amount owed by the Agency to the lender.** *State Directors should
carefully determine the amount of estimated loss payments to avoid
litigation that may become necessary to recover overpayments from the
lender.*

## 26

##  

RD Instruction 4287-B

§ 4287.170(b) (Con.)

**(6) [Protective advances]{.underline}. If approved protective advances
were made prior to the borrower having filed bankruptcy, these
protective advances and accrued interest will be considered in the loss
calculations.**

**(c) [Legal expenses during bankruptcy proceedings]{.underline}.**

**(1) When a bankruptcy proceeding results in a liquidation of the
borrower by a trustee, legal expenses will be handled as directed by the
court.**

**(2) Chapter 11 generally pertains to a reorganization of a business
contemplating an ongoing business rather than a termination and
dissolution of the business where legal protection is afforded to the
business as defined under Chapter 11 of the Bankruptcy Code.
Consequently, expenses incurred by the lender in a Chapter 11
reorganization can never be liquidation expenses unless the proceeding
becomes a Chapter 11 liquidation. If the proceeding should become a
liquidating 11, reasonable and customary liquidation expenses may be
deducted from proceeds of collateral as provided in the Lender's
Agreement. Chapter 7 pertains to a liquidation of the borrower's assets.
If, and when, liquidation of the borrower's assets under Chapter 7 is
conducted by the bankruptcy trustee, then the lender cannot claim
expenses.**

*(d) [Agency monitoring]{.underline}. State Directors are responsible
for seeing that the Agency is fully informed by the lender on all
bankruptcy cases and*

*monitoring the lender\'s files to ensure timely action on bankruptcy
cases. The Agency may approve the repurchase of the unpaid guaranteed
portion of the loan from the holders to reduce interest accrual during
Chapter 7 proceedings or after a Chapter 11 proceeding becomes a
liquidation proceeding. State Directors must approve in advance and in
writing the lender\'s estimated liquidation expenses on loans in
liquidation bankruptcy.*

**§§ 4287.171 - 4287.179 \[Reserved\]**

**§ 4287.180 [Termination of guarantee]{.underline}.**

**A guarantee under this part will terminate automatically:**

**(a) upon full payment of the guaranteed loan;**

**(b) upon full payment of any loss obligation; or**

## 27

## 

(12-23-96) SPECIAL PN

RD Instruction 4287-B

§ 4287.170 (Con.)

**(c) upon written notice from the lender to the Agency that the
guarantee will terminate 30 days after the date of notice, provided that
the lender holds all of the guaranteed portion and the Loan Note
Guarantee is returned to the Agency to be canceled.** *The Agency will
notify the Finance Office that the Loan Note Guarantee has been
terminated or the loan has been paid in full.*

**§§ 4287.181 - 4287.199 \[Reserved\]**

**§ 4287.200 [OMB control number]{.underline}.**

**The information collection requirements contained in this regulation
have been approved by OMB and have been assigned OMB control number
0575-0168. Public reporting burden for this collection of information is
estimated to vary from 15 minutes to 8 hours per response, with an
average of 4 hours per response, including time for reviewing the
collection of information. Send comments regarding this burden, estimate
or any other aspect of this collection of information, including
suggestions for reducing this burden to the Department of Agriculture,
Clearance Officer, OIRM, Stop 7630, Washington, D.C. 20250. You are not
required to respond to this collection of information unless it displays
a currently valid OMB control number.**

*Attachments: Appendices A and B.*

## oOo

## 28

##  

RD Instruction 4287-B

Appendix A

Page 1

*MODIFICATION OR ADMINISTRATIVE ACTION*

*BORROWER INFORMATION:*

*Name and Address of Borrower:
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Number of Employees and Annual Payroll:
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*History of Account:
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*LOAN INFORMATION:*

*Name and Address of Lender: (If different from lender holding
guarantee, has the lender been substituted as outlined in § 4287.135 of
this subpart?)
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Date Loan Note Guarantee was issued:
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Original Amount of the Loan:
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Interest Rate and Terms:
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Unpaid Balance:*

*Principal: \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Interest:
\$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Status: ( )Current ( )Delinquent ( )Liquidation*

*( )Chapter 7 ( )Chapter 11 ( )Other (Specify)
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Use of Loan Funds:
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Market and liquidation value of collateral:*

*Collateral Appraisal Date Lien Position Market Value Liquidation Value*

*\_\_\_\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*\_\_\_\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*\_\_\_\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*\_\_\_\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

(12-23-96) SPECIAL PN

RD Instruction 4287-B

Appendix A

Page 2

*Who owns the guaranteed portion? \_\_\_lender \_\_\_Agency
\_\_\_holder*

*Has an estimated loss been paid? \_\_\_\_\_\_ Amount paid and
date:\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*FINANCIAL INFORMATION:*

*Credit quality review ratios and comments:*

*Current Ratio: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Industry Average:
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Comments:
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Equity: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Industry
Average: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Comments:
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Debt to Worth: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Industry Average:
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Comments:
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Working Capital: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Industry Average:
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Comments:
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Describe any loan covenant violations:
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Is the cash flow adequate to satisfy current portion of long term debt?
\_\_\_\_\_\_*

*\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Financial condition of personal guarantors:*

*Dates of latest financial statements:
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Net worth: \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Outside net
worth: \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Comments on collectibility:
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

RD Instruction 4287-B

Appendix A

Page 3

*SERVICING REQUEST:*

*Nature of request:
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*State Office analysis of request:
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Lender recommendation:
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Comments on regional attorney\'s review (Attach copy of opinions):
\_\_\_\_\_\_\_\_\_\_\_\_*

*\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Environmental review: Type:
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Adequacy:
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Comments:
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*State Director and Program Chief recommendations:
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

(12-23-96) SPECIAL PN

RD Instruction 4287-B

Appendix A

Page 4

***NOTE**: **For all modifications or administrative actions, the
following information must be considered:***

*1. Start with number 1 when the first modification is approved and
enter this number in the upper right hand corner of the Letter of
Concurrence and related "Modification or Administrative Action" sheet.*

*2. Next to the modified wording on the work copy of the Conditional
Commitment for Guarantee and the Term Loan Agreement or any form which
has been modified, pencil in a short cross reference to the modification
and identify the number given it.*

*3. File the copies of the "Modification or Administrative Action" sheet
and related Letters of Concurrence numerically in the docket directly on
top of the affected original documents of conditions.*

*4. The order of recordingkeeping should include any requests which were
declined by the National Office.*

*oOo*

RD Instruction 4287-B

Appendix B

Page 1

*BUSINESS AND INDUSTRY GUARANTEED LOAN*

*FINAL LOSS SETTLEMENT CHECKLIST*

*I. General Information:*

*Date \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ State
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Name of Borrower
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Case Number
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Type of Project
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Type Organization
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Servicing Office
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Original Loan Amount
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Date of Loan
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Loan Number
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Repayment Period
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Interest Rate
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Fixed
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*\* Variable
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Daily Accrual 360 or 365 days
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Percent of Guarantee
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Subsequent Loan Amount
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Date of Subsequent Loan
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Repayment Period
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Interest Rate
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Fixed
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*\* Variable
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Daily Accrual 360 or 365 days
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Percent of Guarantee
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Type of Security:*

*GO Bond
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Revenue Bond
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Real Estate
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Machinery and Equipment
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Accounts Receivable
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Inventory
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Furniture and Fixtures
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Personal Guarantee
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Other
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Name of Lender
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Percent of Loan Held by Lender
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

(12-23-96) SPECIAL PN

RD Instruction 4287-B

Appendix B

Page 2

*Name of Holder
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Percent of Loan Held by Holder
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Amount of Holder\'s interest repurchased by Lender
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Percent of Holder\'s interest repurchased by Lender
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Amount of Holder\'s interest repurchased by Agency
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Percent of Holder\'s interest repurchased by Agency
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*\* List below the dates and interest rate changes for variable rate
loans*

*from the date the loan was last current through the settlement date.*

*Exact Date of Interest Guaranteed Unguaranteed*

*Rate change Rate Note Note*

*\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*II. Collateral for the Loan:*

*Appr. Value at Date of Appr. Value Appr.*

* Loan Approval Appraisal at Liquidation Date*

*Current Market or Liquidation
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Land-Buildings
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Machinery and*

*Equipment
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Accounts
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Receivable*

*Inventory
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Furniture and*

*Fixtures
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Other
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

RD Instruction 4287-B

Appendix B

Page 3

*III. Loan Balance at Liquidation*

*Date Liquidation Plan Submitted
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Date of Liquidation Plan
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Effective Date of Liquidation
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Principal Balance at Liquidation \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Interest Balance at Liquidation
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Total Balance at Liquidation
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Daily Interest Accrual
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*IV. LIQUIDATION COSTS:*

*Phase I Assessment Cost \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Phase II Assessment Cost \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Legal Fees
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Sheriff\'s Cost
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Taxes Due and Paid \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Auction Cost
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Broker Cost
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Other fees (identify below):\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Total Liquidation Expenses \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Appraisal Fees
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Date Appraisal Fees Paid \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Protective Advances \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Dates Protective Advances Paid \_\_\_\_\_\_\_\_\_ (1)
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*(2) \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*V. USE OF LIQUIDATION PROCEEDS:*

*Net Proceeds Applied to Guaranteed Loan \_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Proceeds Applied to Liquidation Expenses \_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Other Applications (identify) \_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

(12-23-96) SPECIAL PN

RD Instruction 4287-B

Appendix B

Page 4

*VI. SOURCE OF LIQUIDATION PROCEEDS:*

*Sale Proceeds Received \_\_\_\_\_\_\_\_\_\_\_\_\_*

*Land-Building \_\_\_\_\_\_\_\_\_\_\_\_\_*

*Machinery and Equipment \_\_\_\_\_\_\_\_\_\_\_\_\_*

*Furniture and Fixtures \_\_\_\_\_\_\_\_\_\_\_\_\_*

*Inventory \_\_\_\_\_\_\_\_\_\_\_\_\_*

*Other (identify) \_\_\_\_\_\_\_\_\_\_\_\_\_*

*Collection on Personal Guarantee \_\_\_\_\_\_\_\_\_\_\_\_\_*

*VII. Summary (circle the proper answer)*

*NOTE: All questions answered with \"NO\" must be explained and fully*

*documented to support the reason for the \"NO\" answer.*

*1. (YES - NO - NA) Did the borrower comply with all applicable laws*

*and provisions of the Loan Agreement?*

*2. (YES - NO - NA) Were copies of the borrower\'s financial statements*

*submitted to the Agency as required by the Lender\'s*

*Agreement?*

*3. (YES - NO - NA) Did the lender submit and follow a plan of*

*liquidation?*

*4. (YES - NO - NA) Did the Agency approve, in writing, the lender\'s
plan*

*of liquidation and any subsequent revision?*

*5. (YES - NO - NA) Is documentation for justification and*

*authorization of all liquidation expenses and*

*protective advances attached?*

*6. (YES - NO - NA) Was a determination made that the lender did not*

*charge for \"in house\" fees in connection with the*

*liquidation?*

*7. (YES - NO - NA) Did the Agency approve protective advances in*

*writing?*

RD Instruction 4287-B

Appendix B

Page 5

*8. (YES - NO - NA) Were all liquidation appraisal fees shared equally*

*between the lender and the Agency?*

*9. (YES - NO - NA) Did the lender obtain the proper security and lien*

*position at loan closing?*

*10. (YES - NO - NA) Did the lender maintain proper liens and security*

*instruments on security?*

*11. (YES - NO - NA) Was adequate insurance coverage as required by the*

*Conditional Commitment maintained at all times?*

*12. (YES - NO - NA) Was all collateral disposed of and accounted for?*

*13. (YES - NO - NA) Has a list of all unaccounted for security been*

*provided and has the value been taken into account*

*for the final loss settlement amount?*

*14. (YES - NO - NA) Have all proceeds been accounted for from the sale*

*of collateral?*

*15. (YES - NO - NA) Have all liquidation costs been deducted from the*

*sale proceeds?*

*16. (YES - NO - NA) If the lender had other loans with the borrower,*

*did the lender apply proceeds to the appropriate*

*loans?*

*17. (YES - NO - NA) Have lender payment records been reviewed to*

*determine that payments were applied correctly and*

*interest was properly accrued and posted to the*

*borrower\'s account?*

*18. (YES - NO - NA) Has a determination been made whether to pursue
the*

*personal guarantee, if one was taken, and is a*

*deficiency judgment warranted?*

*19. (YES - NO - NA) Have all personal guarantees been accounted for
and*

*and are the lender\'s actions documented?*

*20. (YES - NO - NA) Have required signatures been obtained on Form\
RD 449-30, \"Loan Note Guarantee Report of Loss\"?*

(12-23-96) SPECIAL PN

RD Instruction 4287-B

Appendix B

Page 6

*21. (YES - NO - NA) Has the settlement date been agreed to by the*

*lender and the Agency and is it entered on Form RD*

*449-30?*

*22. (YES - NO - NA) Has the proper report code been entered on Form*

*RD 449-30?*

*23. (YES - NO - NA) Have interest computations been verified?*

*24. (YES - NO - NA) Is there additional interest to be paid to the*

*check date?*

*25. (YES - NO - NA) If payment is to be wired to the lender, has the*

*lender\'s routing information been provided?*

*26. (YES - NO - NA) Has the Office of Inspector General and the Office*

*of the General Counsel approved payment where*

*applicable?*

*27. (YES - NO - NA) Was the loan properly closed in accordance with
the*

*Conditional Commitment?*

*28. (YES - NO - NA) Were loan funds used for authorized purposes?*

*29. (YES - NO - NA) If loan funds were not used for authorized*

*purposes, has the unauthorized use of funds been*

*taken into consideration?*

*30. (YES - NO - NA) If a future recovery possibility exists, has the*

*Agency set up a monitoring system to followup with*

*the lender?*

*31. (YES - NO - NA) Have overpayments of estimated loss requests*

*been taken into consideration?*

*32. (YES - NO - NA) If the Agency has a receivable, has the lender*

*remitted to the Agency its pro rata share of funds?*

*33. (YES - NO - NA) Has pro rata application of funds been made to the*

*guaranteed or unguaranteed loan?*

*DATE \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ AGENCY APPROVAL OFFICIAL
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

## *oOo*