Source: https://www.federalregister.gov/documents/2000/09/06/00-22745/loan-guaranty-insurance-and-interest-subsidy
Timestamp: 2018-04-21 17:54:10
Document Index: 401412213

Matched Legal Cases: ['art 103', '§\u200913201', '§\u2009103', 'art 103', 'ART 103', '§\u2009103', '§\u2009103', '§\u2009103', '§\u2009103', '§\u2009103', '§\u2009103', '§\u2009103', '§\u2009103', '§\u2009103', '§\u2009103', '§\u2009103', '§\u2009103', '§\u2009103', '§\u2009103', '§\u2009103', '§\u2009103', '§\u2009103', '§\u2009103', '§\u2009103', '§\u2009103', '§\u2009103', '§\u2009103', '§\u2009103', '§\u2009103', '§\u2009103', '§\u2009103', '§\u2009103', '§\u2009103', '§\u2009103', 'art 103', '§\u2009103']

A Proposed Rule by the Indian Affairs Bureau on 09/06/2000
53948-53962 (15 pages)
https://www.federalregister.gov/d/00-22745 https://www.federalregister.gov/d/00-22745
The Department of the Interior (DOI), Bureau of Indian Affairs (BIA) proposes to revise the regulations that implement the Loan Guaranty, Insurance, and Interest Subsidy Program. This Program authorizes the Secretary of DOI to guaranty or insure loans made by private lenders to individual Indians and to organizations of Indians, and to assist qualified borrowers with a portion of their Start Printed Page 53949interest payments. These revised regulations will clarify and shorten existing regulatory language, reflect evolved BIA policies, address issues that have emerged over the years, and enhance some features of the Program.
Mail comments to George Gover, Acting Director, Office of Economic Development, Bureau of Indian Affairs, Department of the Interior, 1849 C St., NW, Mail Stop 4640-MIB, Washington, DC 20240; or hand deliver them to Room 4640 at the above address. Mail comments to the attention of the Desk Officer for Department of the Interior, Office of Information and Regulatory Affairs, Office of Management and Budget, 725 17th Street NW, Washington, DC 20503.
You also may supply comments via electronic mail by sending them to loanregs@bia.gov. Comments will be available for inspection at the above mailing address from 9 a.m. to 4 p.m., Monday through Friday beginning approximately 2 weeks after publication of this document in the Federal Register.
The Loan Guaranty, Insurance, and Interest Subsidy Program (Program) was established in the Act of April 12, 1974, as amended, 88 Stat. 79, 25 U.S.C. 1481 et seq. and 25 U.S.C. 1511 et seq. The Program has existed since 1974, and the regulations implementing it have existed since 1975. There has never been any extensive or significant revision of these regulations, and in fact most of the regulations remain as they were originally drafted. BIA believes that revising these regulations in the manner proposed below will clarify and shorten part 103, reflect evolved BIA policies, address issues that have emerged over the years, and enhance some features of the Program.
The new regulations are drafted in plain language, to encourage understanding. BIA also has made some substantive changes in the regulations, in response to the history of the Program. For example, BIA hopes these new regulations will encourage lenders to take a fresh look at the insurance feature of the program, which has never been used.
Publication of the proposed rule by DOI provides the public with an opportunity to participate in the rulemaking process. Interested persons may submit written comments regarding the proposed rule to the location identified in the ADDRESSES section of this document.
The following table shows how the proposed new regulations relate to the regulations currently in effect:
Old regulatory section
Now at section
Is there any intended substantive change in the rule?
103.1 103.44 Very little. BIA has changed definitions predominantly to clarify the program. Some old definitions have been deleted, and some new ones have been added.
103.2 103.1, 103.2, 103.20 No.
103.3 103.4, 103.15(l) Yes. Regulations no longer permit loans for the borrower's housing. Also, BIA has deleted some unnecessary provisions.
103.4 103.12(c), 103.26(d), 103.27 No.
103.5 103.12(h), 103.26(l), 103.30(h) No.
103.6 103.12(h), 103.26(l), 103.30(h) No.
103.7 103.25, 103.26 No.
103.8 103.25 No.
103.9 103.10, 103.11 Yes. Regulations expand on how BIA qualifies lenders under the program, and now provide for up to three levels of lender approval.
103.10 103.4, 103.7, 103.10, 103.15(c) No.
103.16, 103.18 No.
103.12 103.13, 103.16, 103.18 No.
103.13 103.5, 103.6 Yes. Regulations no longer limit loans to partnerships or other non-tribal organizations to $500,000. Also, regulations now clearly allow a single borrower to have up to 2 separately guaranteed loans or one loan guarantee and any number of insured loans at a time.
103.14 103.5, 103.6 Yes. Regulations no longer mention housing as an appropriate use of insured loan funds. Regulations no longer require tribal lenders to have specific prior approval to make insured loans to other tribes or Indian organizations. Lenders can now make insured loans of up to $100,000 without specific prior approval. Upon obtaining specific prior approval, lenders may make insured loans to an individual of up to $500,000, or more for a tribe or business entity. The limit on the number of insured loans a lender may make to a borrower has been deleted. BIA also has deleted other provisions as unnecessary.
103.15 103.9, 103.12, 103.13 Yes. BIA has revised the application procedure to eliminate redundancy and to capture more information concerning the borrower.
103.16 103.4(d) No.
103.17 103.4(c), 103.12(k) Yes. Regulations now require the borrower to be current on any debt that the guaranteed or insured loan is to refinance.
103.18 103.14 No.
103.19 103.16, 103.18 No.
103.20 103.16, 103.18 No.
103.21 103.34 No.
103.22 103.36(b) and (c) Yes. Regulatory language has been revised to curtail certain abuses.
103.23 103.34(a) No.
103.24 103.15(c) No.
103.25 103.15(d) and (e) No.
103.26 103.15(f) Yes. Regulations no longer allow prepayment penalties. BIA has deleted other provisions as unnecessary or confusing.
Start Printed Page 53950
103.27 103.12(a) and (f), 103.13(b), 103.16(a), 103.26(i) No.
103.28 103.30(e), (f) and (g), 103.39(c) No.
103.29 103.12(j), 103.13(b), 103.30(d) and (i) No.
103.30 Not applicable No. BIA has deleted former regulatory language because it is unnecessary or redundant of other legal provisions.
103.31 Not applicable No. BIA has deleted former regulatory language because it is unnecessary or redundant of other legal provisions.
103.32 Not applicable No. BIA has deleted former regulatory language because it is unnecessary or redundant of other legal provisions.
103.33 103.15(m) No. BIA has deleted some regulatory language because it is unnecessary or redundant of other legal provisions.
103.34 103.12(c) and (e), 103.13(b), 103.30(m) No.
103.35 103.34(a), 103.43 No.
103.36 103.35, 103.36, 103.37, 103.38, 103.39 Yes. BIA has extended the deadlines by which the lender must notify BIA and take action in response to a default. BIA also has specified some conditions under which it might waive a failure to adhere to strict regulatory deadlines. Also, regulations now fix the date through which BIA is liable to pay the lender for interest accruing on the loan.
103.37 103.35, 103.36, 103.37, 103.38, 103.39 Yes. BIA has extended the deadlines by which the lender must notify BIA and take action in response to a default. BIA also has specified some conditions under which it might waive a failure to adhere to strict regulatory deadlines. Also, regulations now fix the date through which BIA is liable to pay the lender for interest accruing on the loan.
103.38 103.38 Yes. BIA has deleted a provision that is obsolete.
103.39 Not applicable No. BIA has deleted former regulatory language because it is unnecessary or redundant of other legal provisions.
103.40 103.37, 103.39(d) Yes. Regulations now fix the date through which BIA is liable to pay the lender for interest accruing on the loan.
103.41 103.15, 103.18 No.
103.42 103.20, 103.21, 103.22, 103.23, 103.24 Yes. Regulations no longer require the rate of interest subsidy to be established at the same time as the corresponding loan guaranty or insurance coverage. Also, interest subsidy will no longer be withdrawn before 3 years merely because the borrower's cash flow begins to equal or exceed industry norms.
103.43 103.8, Yes. The date the premium is due now is 103.18, 103.19 tied to the date the loan closes, not the date BIA approves the loan guaranty application. Also, BIA now has fixed the amount of the premium on insured loans, which was inadvertently omitted in prior regulations.
103.44 103.15(a) Yes. BIA now permits charges for reasonable and customary broker commissions.
103.45 103.15(j) Yes. BIA now will guaranty or insure the amount of any late fees the lender assesses, subject to certain limitations.
103.46 103.30, 103.32 No.
103.47 103.15(k) No.
103.48 103.15(l), 103.30(d) No.
103.49 103.30, 103.39, 103.40 No.
103.50 Not applicable. Yes. There is no longer a separate loan guaranty and insurance fund. See, the Federal Credit Reform Act of 1990, Pub. L. 101-508, Title XIII, § 13201(a).
103.51 103.28, 103.29 Yes. Regulations now address loan participation agreements.
103.52 103.14, 103.32, 103.33 No.
103.53 103.41 No.
103.54 Not applicable. No. BIA has deleted former regulatory language because it was confusing and redundant of other legal provisions.
103.45 Yes. BIA has updated this provision.
This rule will not create a serious inconsistency or otherwise interfere with an action taken or planned by another agency. There is nothing in the rule to limit other efforts to encourage Indian economic development. Start Printed Page 53951
(a) Does not have an annual effect on the economy of $100 million or more. Current and foreseeable funding levels for the Program will permit at most $82 million in new loans per annum.
This regulation requires information collection from 10 or more parties and a submission under the Paperwork Reduction Act is required. An OMB form 83-I has been reviewed by DOI and sent to OMB for approval. You are invited to submit comments on the information collection request. You can receive copies of the OMB submission by contacting the person listed in the FOR FURTHER INFORMATION CONTACT section or by requesting the information from the Bureau of Indian Affairs Information Collection Control Officer, 1849 C Street, NW, Mail Stop 4613 MIB, Washington, DC 20240. Please note that comments are available for public inspection during regular business hours. If you wish to have your name and address withheld, you must state this prominently at the beginning of your comments. We will honor that request to the extent allowable by law.
The purpose of the Loan Guaranty, Insurance, and Interest Subsidy Program, 25 U.S.C. 1481 et seq. and 25 U.S.C. 1511 et seq., is to encourage private lending to individual Indians and organizations of Indians, by providing lenders with loan guaranties or loan insurance to reduce their potential risk. Lenders, borrowers, and the loan purpose all must qualify under Program terms. In addition, the Secretary of the Interior must be satisfied that there is a reasonable prospect that the loan will be repaid. BIA collects information under the proposed regulations to ensure compliance with Program requirements.
BIA must approve of a lender before it can make loans that are guaranteed or insured under the Program. Pre-approval is a one-time process that we estimate imposes on lenders an average burden of 2 hours, including time for reviewing instructions and preparing and submitting a BIA Loan Guaranty Agreement or Loan Insurance Agreement, as appropriate. After a lender is qualified as a BIA lender, the burden associated with individual loan guaranty or loan insurance applications is in large part one of gathering and submitting to BIA information the lender would ordinarily collect from its borrowers anyway, irrespective of the Program. The average burden of submitting a loan guaranty or insurance application is 2 hours, including time for reviewing instructions, searching data sources, and assembling the information needed. If BIA issues a guaranty certificate or approves an insurance agreement, the average burden to close the loan in accordance with this part is 1 hour. The average annual burden to maintain data and to prepare and submit reports is approximately 75 minutes, assuming an average of four reports each year. Interest subsidy calculations, where these are applicable, would increase the average annual burden to maintain data and submit reports to approximately 3.25 hours. Should the lender and borrower need to change material terms of the loan, there will be an additional reporting burden of approximately 1 hour. Finally, if the lender experiences a default, the burden associated with following the procedures in this part ranges from 30 minutes to 4.5 hours.
Based upon historical records, each year BIA anticipates approximately 64 applications for loan guaranties. Although there have never been any loan insurance applications, apparent need suggests that BIA will receive approximately 20 additional loan Start Printed Page 53952insurance applications or notices of loan insurance per year. Of the combined 84 applications/notices, BIA expects that it will guarantee or insure approximately 64 new loans each year, of which approximately 45 will receive interest subsidy.
In all, BIA estimates the total annual Program compliance burden to range from approximately 4.75 to 12.75 hours per loan, with the average loan causing a burden of approximately 6.18 hours. Most compliance burdens fall below this average. For purposes of the following table, BIA assumes the average hourly wage per respondent to be $20.00:
BIA form(s)?
103.11 Yes 12 1 12 24 $20 $480
103.12, 103.13, 103.14, 103.21 Yes 84 1 84 168 20 3,360
103.17 No 64 1 64 32 20 640
103.18 Yes 64 1 64 32 20 640
103.23 Yes 45 4 180 90 20 1,800
103.26 No 64 1 64 32 20 640
103.32 No 64 1 64 16 20 320
103.33 No 64 4 256 64 20 1,280
103.34 No 10 1 10 10 20 200
103.35 Yes 20 1 20 10 20 200
103.36 No 20 1 20 20 20 400
103.37 Yes 7 1 7 14 20 280
103.38 Yes 7 1 7 7 20 140
852 519 10,380
The foregoing estimates cover labor only; they do not include the costs of postage, energy, supplies, or other fixed costs that lenders may allocate toward Program compliance, which is expected to be minimal.
Organizations and individuals are invited to comment on (a) the necessity of the information for proper performance of the functions of the bureau and its practical utility, (b) the accuracy of the bureau's estimate of the burden of the collection, the validity of the methodology and assumptions used, (c) the quality, utility, and clarity of the information to be collected, (d) whether the burden can be minimized on the respondents by any means such as electronic, mechanical, automation. Organizations and individuals who desire to submit comments on the information collection requirements should direct them to the Office of Information and Regulatory Affairs, OMB, New Executive Office Building, Washington, DC 20503; Attention: Desk Officer for the U.S. Department of the Interior.
OMB is required to make a decision concerning the collection of information contained in these proposed regulations between 30 and 60 days after publication of this document in the Federal Register. Therefore, a comment to OMB is best ensured of having its full effect if OMB receives it within 30 days of publication. This does not affect the deadline for the public to comment to BIA on the proposed regulations.
Executive Order 12866 requires each agency to write regulations that are easy to understand. We invite your comments on how to make this rule easier to understand, including answers to questions such as the following: (1) Are the requirements in the rule clearly stated? (2) Does the rule contain technical language or jargon that interferes with its clarity? (3) Does the format of the rule (grouping and order of sections, use of headings, paragraphing, etc.) aid or reduce its clarity? (4) Would the rule be easier to understand if it were divided into more (but shorter) sections? (A “section” appears in bold type and is preceded by the symbol “§”and a numbered heading; for example, § 103.13 How does a lender apply for loan insurance coverage?) (5) Is the description of the rule in the SUPPLEMENTARY INFORMATION section of the preamble helpful in understanding the proposed rule? What else could we do to make the rule easier to understand?
If you wish to comment, you may submit your comments by any one of several methods. You may mail comments to the Office of Economic Development, Bureau of Indian Affairs, Department of the Interior, 1849 C St., NW, Mail Stop 4640-MIB, Washington, DC 20240. You also may comment via the Internet to loanregs@bia.gov. Please submit Internet comments as an ASCII file avoiding the use of special characters and any form of encryption. Please also include “Attn: [1076-AD73]” and your home and return address in your Internet message. If you do not receive a confirmation from the system that we have received your Internet message, contact us directly at 202-208-4499. Finally, you may hand-deliver comments to Room 4640 at the above address. Our practice is to make comments, including names and home addresses of respondents, available for public review during regular business hours. Individual respondents may request that we withhold their home address from the rulemaking record, which we will honor to the extent allowed by law. There also may be circumstances in which we would withhold from the rulemaking record a respondent's identity, as allowable by law. If you wish us to withhold your name and/or address, you must state this prominently at the beginning of your comment. However, we will not consider anonymous comments. We will make all submissions from organizations or businesses, and from individuals identifying themselves as representatives or officials of Start Printed Page 53953organizations or businesses, available for public inspection in their entirety.
Drafting Information: The primary author of this document is David B. Johnson, Division of Indian Affairs, Office of the Solicitor, Department of the Interior.
For the reasons given in the preamble, BIA proposes to revise part 103 in chapter I of title 25 of the Code of Federal Regulations as set forth below.
25 CFR PART 103—LOAN GUARANTY, INSURANCE, AND INTEREST SUBSIDY Subpart A—General Provisions
The purpose of the Program is to encourage eligible borrowers to develop viable Indian businesses through conventional lender financing. The Program benefits different parties in different ways. The direct function of the Program is to help lenders reduce excessive risks on loans they make. That function in turn helps borrowers secure conventional financing that might otherwise be unavailable.
Authority for administering the Program ultimately rests with the Secretary, who may exercise that authority directly at any time. Absent a direct exercise of authority, however, the Secretary delegates Program authority to BIA officials through the U.S. Department of Interior Departmental Manual. A lender should submit all applications and correspondence to the BIA regional office serving the borrower's location. In some cases, the regional office may refer the lender either to the BIA field office or agency serving the borrower's specific location, or else to BIA's central office in Washington, D.C.
(a) The business must contribute to the economy of an Indian tribe or its members, and be located on or near an Indian reservation;
BIA can guarantee or insure a loan of up to $500,000 for an individual Indian, or more for an acceptable Indian business entity, Tribe, or tribal enterprise involving two or more persons. BIA can limit the size of loans it will guarantee or insure, depending on the resources BIA has available.
(1) Ninety percent of the unpaid principal and accrued interest due on a loan; or
(2) Fifteen percent of the aggregate outstanding principal amount of all loans the lender has insured under the Program as of the date the lender makes a claim under its insurance coverage.
(c) BIA's guaranty certificate or loan insurance agreement should reflect the Start Printed Page 53954lowest guaranty or insurance percentage rate that satisfies the lender's risk management requirements.
The lender is responsible for determining whether it will require a BIA guaranty or insurance coverage, based upon the loan application it receives from an eligible borrower. If the lender requires a BIA guaranty or insurance coverage, the lender is responsible for completing and submitting a guaranty application or complying with a loan insurance agreement under the Program. Borrowers should not apply to BIA for a guaranty or insurance coverage, and should refrain from direct contact with BIA personnel with respect to a lender's application.
(a) Except as specified in paragraph (c) of this section, a lender is eligible under the Program, and may be considered for BIA approval, if the lender is:
(b) Eligible lenders may include tribes making loans from their own funds.
(c) The following lenders are not qualified to issue loans under the Program:
(b) BIA will consider a lender's loan agreement and/or loan insurance agreement suspended as of:
(2) The effective date of a merger between the lender and any other entity; or
(c) If a lender's loan agreement and/or loan insurance agreement is suspended under paragraph (b) of this section, the lender, or its successor in interest, must enter into a new loan guaranty agreement and/or loan insurance agreement with BIA in order to secure any new BIA loan guarantees or insurance coverage.
(a) A copy of the borrower's complete loan application;
(b) A description of the borrower's equity in the business being financed;
(c) A copy of the lender's independent credit analysis of the borrower's business, repayment ability, and loan collateral (including insurance), plus the lender's evaluation of the extent to which the borrower will need technical assistance that the lender will be unable to provide;
(d) An original report from a nationally-recognized credit bureau, dated within 90 days of the date of the lender's loan guaranty application package, outlining the credit history of the borrower and each co-maker or guarantor of the loan (if any);
(e) Appropriate title and/or lien searches for each asset to be used as loan collateral;
(f) A copy of the lender's loan commitment letter to the borrower, showing at a minimum the proposed loan amount, purpose, interest rate, schedule of payments, and security (including insurance requirements), and the lender's material terms and conditions for funding;
(h) Evidence that the lender has complied with, and caused the borrower to comply with, all applicable Federal, State, local, and tribal laws implicated by financing the borrower's business, including (for example):
(4) A plat map and/or certification by a registered surveyor indicating that the Start Printed Page 53955proposed business will not be located in a special flood hazard area, as defined by applicable law;
(i) A written explanation from the lender indicating why it needs a BIA guaranty for the loan, and the minimum loan guarantee percentage it will accept;
(j) If any significant portion of the loan will be used to finance construction, renovation, or demolition work, the lender's:
(3)Proposed work inspection procedures;
(k) If any significant portion of the loan will be used to refinance or otherwise retire existing indebtedness:
(b) For loans in an original principal amount of over $100,000, the lender must seek BIA's specific prior approval in each case. The lender must submit a loan insurance coverage application request form, together with the same information required for a loan guaranty under § 103.12, except for the information required by § 103.12(i).
(e) A balloon repayment schedule;
(f) A prepayment penalty;
(g) An interest rate greater than what BIA considers reasonable, taking into account the range of rates prevailing in the private market for similar loans;
(h) A variable interest rate, unless the rate is tied to a specific prime rate published from time to time by a nationally recognized financial institution or news source;
(i) An increased rate of interest based on default;
(j) A fee imposed for the late repayment of any installment due, except for a late fee that:
(3) Equals no more than the lesser of 5 percent of the late installment or $100;
(k) An “insecurity” clause, or any similar provision permitting the lender to declare a loan default solely on the basis of its subjective view of the borrower's changed repayment prospects;
(l) A requirement that the borrower take title to any real or personal property purchased with loan proceeds by a title instrument containing restrictions on alienation, control or use of the property, unless otherwise required by applicable law; or
(m) A requirement that a borrower which is a tribe provide as security a general assignment of the tribe's trust income. If otherwise lawful, a tribe may provide as loan security an assignment of trust income from a specific source.
(b) The lender must supply BIA with copies of all final, signed loan closing documents within 30 days following closing. To the extent applicable, loan closing documents must include the following:
(2) Security agreements, including pledge and similar agreements, and related financing statements (together with BIA's written approval of any assignment of specific tribal trust assets under § 103.15(m), or of any security interest in an individual Indian money account);
(4) Guarantees (other than from BIA); Start Printed Page 53956
(c) Unless BIA indicates otherwise in writing, the Lender must close a guaranteed or insured loan within 60 days of any approval provided under § 103.16.
The premium is due within 30 calendar days of the loan closing. If not paid on time, BIA will send the lender written notice by certified mail, return receipt requested, that the premium is due immediately. If the lender fails to make the premium payment within 30 calendar days of the date of BIA's notice, BIA's guaranty certificate or insurance coverage with respect to that particular loan is void, without further action.
(a) An eligible lender must apply for interest subsidy payments on behalf of an eligible borrower, after determining that the borrower qualifies. Typically, the lender should include an application for interest subsidy at the time it applies for a guaranty or insurance coverage under the Program. A request for interest subsidy must be supported by the information required in §§ 103.12 and 103.13 (relating to loan guaranty and insurance coverage applications). BIA approves, returns, or rejects interest subsidy applications in the same manner indicated in § 103.16, based on the factors in § 103.20 and BIA's available resources.
Interest subsidy payments should equal the difference between the lender's rate of interest and the rate determined by the Secretary of the Treasury in accordance with 25 U.S.C. 1464. BIA may fix the amount of interest subsidy as of any date between the date of the borrower's application and the date BIA approves interest subsidy.
The lender must send BIA reports at least quarterly on the borrower's loan payment history, together with a calculation of the interest subsidy then due. The lender's reports and calculation do not have to be in any specific format, but the reports must contain at least the information required by § 103.33. Based on the lender's reports and calculation, BIA will send interest subsidy payments to the borrower in care of the lender. The payments belong to the borrower, but the borrower and lender may agree in advance on how the borrower will use interest subsidy payments. BIA may verify and correct interest subsidy calculations and payments at any time.
(c) Interest subsidy payments will not apply to any loan payment made after the corresponding loan guaranty or insurance coverage stops under the Program, regardless of the circumstances.
(f) The borrower's balance sheets and operating statements for the preceding 2 years, or so much of that period that the borrower has been in business;
(h) At least 2 years of financial projections for the borrower's business, consisting of pro-forma balance sheets, operating statements, and cash flow statements;
(j) Recent appraisals for all real property and improvements to be used as collateral for the loan, to the extent required by law;
(k) A detailed list of all proposed hazard, liability, key man life, and other kinds of insurance the borrower will maintain on its business assets and operations;
(l) Evidence that the borrower's business will be conducted in compliance with all applicable Federal, State, local, and tribal laws, including (for example):
(4) A plat map and/or certification by a registered surveyor indicating that the proposed business will not be located in a special flood hazard area, as defined by applicable law;
(m) If any significant portion of the loan will be used to finance construction, renovation, or demolition work:
(2) To the extent possible, copies of all construction and architectural contracts for the work, plans and specifications, and applicable building permits;
(n) If the borrower is a tribe or a tribal enterprise, resolutions by the tribe and proof of authority under tribal law permitting the borrower to borrow the loan amount and offer the proposed loan collateral; and
(o) If the borrower is a business entity, resolutions by the appropriate governing officials and proof of authority under its organizing documents permitting the borrower to borrow the loan amount and offer the proposed loan collateral.
A borrower may seek BIA's assistance when preparing a loan application or when planning business operations, including assistance identifying and complying with applicable laws as indicated by § 103.26(l). The borrower should contact the BIA field or agency office serving the area in which the borrower's business is to be located, or if there is no separate field or agency office serving the area, then the borrower should contact the BIA regional office serving the area. BIA will either assist the borrower directly, or help the borrower locate the requested assistance free of charge or at a below market rate.
(a) A lender may transfer one or more interests in a guaranteed loan to another person or persons, as long as the parties have in place an agreement that designates one person to perform all of the duties required of the lender under the Program and the loan guaranty certificate. Starting on the date of the transfer, only the person designated to perform the duties of the lender will be entitled to exercise the rights conferred by BIA's loan guaranty certificate, and will from that point forward be considered the lender for purposes of the Program. A lender under the Program must both own an interest in and service the guaranteed loan. BIA will not consider more than one person at any given time to be the lender with respect to any loan guaranty certificate. If the person designated to perform the duties of the lender in an agreement among loan participants is not the original lender, then the provisions of § 103.29 will apply (relating to sale or assignment of guaranteed loans), and the person designated to perform the duties of the lender must give BIA notice of its interest in the loan.
(b) Transferring any interest in an insured loan to another person will void the insurance coverage for that loan, except where the transfer is effected by a merger in which the lender is not the surviving entity. If a merger results in a change in the lender's identity, the lender's successor must notify BIA in writing of the change within 30 calendar days of the merger, and must re-apply to become an approved lender under the Program, as indicated in § 103.11.
(a) A lender may transfer all of its rights in a guaranteed loan to any other person. To keep the BIA loan guaranty in effect, the acquiring person must send BIA written notice of the transfer, describing the borrower, the loan, BIA's loan guaranty certificate number, and the acquiring person's name and address. Starting on the date of the transfer, only the acquiring person will be entitled to exercise the rights conferred by BIA's loan guaranty certificate, and will from that point forward be considered the lender for purposes of the Program. The acquiring person must service the guaranteed loan and otherwise perform all of the duties required of the lender under the Program and the loan guaranty certificate. If the acquiring person fails to send BIA proper notice within 30 calendar days of the date of the transfer, BIA's loan guaranty certificate will be void, without further action.
(b) Transferring an insured loan to another person will void the insurance coverage for that loan, except where the transfer is effected by a merger in which the lender is not the surviving entity. In the event a merger results in a change in the lender's identity, the lender's successor must notify BIA in writing of the change within 30 calendar days of the merger, and must re-apply to become an approved lender under the Program, as indicated in § 103.11.
(c) Whenever feasible, require the borrower to use automatic bank account debiting to make loan payments;
(e) Promptly record all security interests and subsequently keep them in effect. Lenders must record all mortgages and other security interests in accordance with State and local law, including the laws of any tribe that may have jurisdiction. Lenders also must record any:
(1) Leasehold mortgages or assignments of income involving individual Indian or tribal trust land with the BIA office having responsibility for maintaining records on that trust land; and
(2) Assignments of individual Indian money accounts with the Office of Trust Funds Management within the United States Department of the Interior;
(a) Once a lender extends a loan that is guaranteed or insured under the Program, BIA has no responsibility for decisions concerning it, except for:
(1) Any approvals required under this part;
(2) Any decisions reserved to BIA under conditions of BIA's guaranty certificate or insurance coverage; and
(3) Decisions concerning a loan that the lender has assigned to BIA or to which BIA is subrogated by virtue of paying a claim based on a guaranty certificate or insurance coverage.
(b) Lenders should not ask BIA personnel for advice or concurrence concerning any loan servicing decisions the lender alone is expected to make.
(b) Original signed and/or certified counterparts of all final loan documents, including those listed in § 103.17 (concerning loan documents the lender is to supply BIA), all renewals, modifications, and additions to those documents, and signed settlement statements;
(b) If applicable, the lender also must supply a calculation of any interest subsidy payments that are due, as indicated in § 103.23.
(d) If there is a default on the loan, the lender is required to notify BIA, as indicated in §§ 103.35 and 103.36.
(e) If the loan is prepaid in full, the lender must promptly notify BIA in writing so that BIA can eliminate the guaranty or insurance coverage from its active recordkeeping system.
(iii) Lenders may not increase the outstanding principal amount of a loan guaranteed or insured under the Program if a significant effect of doing so would be to allow the borrower to pay accrued loan interest.
(7) Allow the borrower to move any significant portion of its business operations to a location that is not on or near an Indian reservation.
(b) In the case of an insured loan, the amount of which will not exceed $100,000 when combined with all other loans from the lender to the borrower, the lender need not obtain BIA's prior approval to make any of the loan modifications indicated in § 103.34(a), except as provided in § 103.21(b). However, all loan modifications must remain consistent with the lender's loan insurance agreement with BIA, and in the event of an increase in the borrower's outstanding principal amount (if a term loan), or maximum available credit (if a revolving loan), the lender must send BIA an additional premium payment in accordance with §§ 103.8, 103.19 and this section. The lender must pay the additional premium only on the increase in the outstanding principal amount of the loan (if a term loan) or the increase in the credit limit available to the borrower (if a revolving loan). To the extent a loan modification changes any of the information supplied to BIA under § 103.18(b)(3), the lender also must promptly notify BIA of the new information.
(b) The lender also must send written notice of the default to BIA by certified mail, return receipt requested, within 60 calendar days of the default unless the default is fully cured before that deadline. This notice is required even if the lender grants the borrower a forbearance under § 103.36(a). One purpose of the notice is to give BIA the opportunity to intervene and seek assistance for the borrower, even though BIA has no duty, either to the lender or the borrower, to do so. Another purpose of the notice is to permit BIA to plan for a possible loss claim from the lender, under § 103.36(d). The lender's notice should clearly indicate:
(2) Would allow the borrower's default to extend beyond the deadline Start Printed Page 53960established in § 103.36(d) for the lender to elect a remedy; or
(d) If the default remains uncured, the lender must send BIA a written notice by certified mail, return receipt requested, within 90 calendar days of the default to select one of the following remedies:
(3) The lender may negotiate a loan modification agreement with the borrower to permanently change the terms of the loan in a manner that will cure the default. If the lender chooses this remedy, it may take no longer than 45 calendar days from the date BIA receives the notice of remedy selection to finalize a loan modification agreement and secure BIA's written approval of it. However, the lender may at any time before the expiration of the 45-day period change its choice of remedy by sending BIA a notice otherwise complying with § 103.36(d)(1) or (2). If the lender fails to send BIA a notice changing its choice of remedy and does not finalize an approved loan modification agreement within the 45-day period, the lender's only permissible remedy under the Program will be to pursue the procedure specified in § 103.36(d)(2).
(e) Failure by the lender to provide BIA with notice of the lender's election of remedy within 90 calendar days of the default, as indicated in § 103.36(d), will invalidate BIA's loan guaranty certificate or insurance coverage for that particular loan, absent an express waiver of this provision by BIA. BIA may preserve the validity of a loan guaranty certificate or insurance coverage through waiver of this provision only when BIA determines, in its discretion, that:
(ii) Was the result of the lender relying upon specific written advice from a BIA agent.
(1) If the lender makes an immediate claim under § 103.36(d)(1), it must send BIA the claim for loss within 90 calendar days of the default, by certified mail, return receipt requested. The lender's claim for loss may include interest that has accrued on the outstanding principal amount of the loan only through the date it submits the claim.
(iii) 180 calendar days after the date of the default.
(b) For insured loans, after liquidating all loan collateral, the lender must submit a claim for its loss (if any) on a form approved by BIA. The lender must send BIA the claim for loss by certified mail, return receipt requested, within 30 calendar days of completing all liquidation efforts. The lender must perform collateral liquidation as expeditiously and thoroughly as is reasonably possible, within the standards established by this part. The lender's claim for loss may include interest that has accrued on the outstanding principal amount of the loan through the earlier of:
(3) 180 calendar days after the date of the default.
(5) Participate fully in all bankruptcy proceedings that may arise involving the borrower and any co-maker or guarantor. Full participation might include, for example, filing a proof of claim in the case, attending creditors' meetings, and seeking a court order releasing the automatic stay of collection efforts so that the lender can liquidate affected loan collateral. Start Printed Page 53961
(e) BIA will pay the lender the guaranteed or insured portion of the lender's claim for loss, to the extent the claim is based upon reasonably sufficient evidence of the loss and compliance with the requirements of this part.
(2) Notified BIA of his acquisition of the loan interest as required by §§ 103.28 or 103.29;
(4) Has not itself violated the standards set forth §§ 103.39(c) or (e).
(b) Except as otherwise required by law, a lender must maintain records with respect to particular loans for no more than 6 years after either:
(2) The lender accepts payment from BIA pursuant to a guaranty certificate or an insurance agreement.
(c) This section does not restrict any claims BIA may have against the lender or any other party arising from the Lender's participation in the Program.
The lender must completely and promptly release of record all remaining collateral for a guaranteed or insured loan after the loan has been paid in full.
The release must be at the lender's sole cost. In addition, if the loan is prepaid the lender must notify BIA in accordance with § 103.33(e).
(6) The imposition of a Federal, State, local, or tribal government lien on any assets of the borrower or assets otherwise used as collateral for the loan, except real property tax liens imposed by law to secure payments that are not yet due; and
Mortgage, when used as a noun, means a consensual lien on real or personal property in favor of the lender, given by the borrower or a co-maker or guarantor of the loan (other than BIA), to secure loan repayment. The term “mortgage” includes “deed of trust.”
Program means the BIA's Loan Guaranty, Insurance, and Interest Start Printed Page 53962Subsidy Program, established under 25 U.S.C. 1481 et seq., 25 U.S.C. 1511 et seq., and this part 103.
Tribe means any Indian or Alaska Native tribe, band, nation, pueblo, rancheria, village, community or corporation that the Secretary acknowledges to exist as an Indian tribe.
(a) The information collection requirements of §§ 103.11, 103.12, 103.13, 103.14, 103.17, 103.21, 103.23, 103.26, 103.32, 103.33, 103.34, 103.35, 103.36, 103.37, and 103.38 have been approved by the Office of Management and Budget under 44 U.S.C. 3501 et seq. and assigned approval number 1076-0XXX. The information will be used to approve and make payments on Federal loan guarantees, insurance agreements, and interest subsidy awards. Response is required to obtain a benefit.
[FR Doc. 00-22745 Filed 9-5-00; 8:45 am]