7 USC 2001 - Debt restructuring and loan servicing

View all text of Subchapter IV [§ 1981 - § 2008x]

§ 2001. Debt restructuring and loan servicing

(a) In generalThe Secretary shall modify delinquent farmer program loans made or insured under this chapter, or purchased from the lender or the Federal Deposit Insurance Corporation under section 1929b of this title, to the maximum extent possible—

(1) to avoid losses to the Secretary on such loans, with priority consideration being placed on writing-down the loan principal and interest (subject to subsections (d) and (e)), and debt set-aside (subject to subsection (e)), whenever these procedures would facilitate keeping the borrower on the farm or ranch, or otherwise through the use of primary loan service programs as provided in this section; and

(2) to ensure that borrowers are able to continue farming or ranching operations.

(b) EligibilityTo be eligible to obtain assistance under subsection (a)—

(1) the delinquency must be due to circumstances beyond the control of the borrower, as defined in regulations issued by the Secretary, except that the regulations shall require that, if the value of the assets calculated under subsection (c)(2)(A)(ii) that may be realized through liquidation or other methods would produce enough income to make the delinquent loan current, the borrower shall not be eligible for assistance under subsection (a);

(2) the borrower must have acted in good faith with the Secretary in connection with the loan as defined in regulations issued by the Secretary;

(3) the borrower must present a preliminary plan to the Secretary that contains reasonable assumptions that demonstrate that the borrower will be able to—

(A) meet the necessary family living and farm operating expenses; and

(B) service all debts, including those of the loans restructured; and

(4) the loan, if restructured, must result in a net recovery to the Federal Government, during the term of the loan as restructured, that would be more than or equal to the net recovery to the Federal Government from an involuntary liquidation or foreclosure on the property securing the loan.

(1) Determination of net recoveryIn determining the net recovery from the involuntary liquidation of a loan under this section, the Secretary shall calculate—

(A) the recovery value of the collateral securing the loan, in accordance with paragraph (2); and

(B) the value of the restructured loan, in accordance with paragraph (3).

(2) Recovery valueFor the purpose of paragraph (1), the recovery value of the collateral securing the loan shall be based on—

(A)

(i) the amount of the current appraised value of the interests of the borrower in the property securing the loan; plus

(ii) the value of the interests of the borrower in all other assets that are—(I) not essential for necessary family living expenses;(II) not essential to the operation of the farm; and(III) not exempt from judgment creditors or in a bankruptcy action under Federal or State law; less

(B) the estimated administrative, legal, and other expenses associated with the liquidation and disposition of the loan and collateral, including—

(i) the payment of prior liens;

(ii) taxes and assessments, depreciation, management costs, the yearly percentage decrease or increase in the value of the property, and lost interest income, each calculated for the average holding period for the type of property involved;

(iii) resale expenses, such as repairs, commissions, and advertising; and

(iv) other administrative and attorney’s costs; plus

(C) the value, as determined by the Secretary, of any property not included in subparagraph (A)(i) if the property is specified in any security agreement with respect to such loan and the Secretary determines that the value of such property should be included for purposes of this section.

(3) Value of the restructured loan

(A) In general

(B) Present value

(4) NotificationWithin 90 days after receipt of a written request for restructuring from the borrower, the Secretary shall—

(A) make the calculations specified in paragraphs (2) and (3);

(B) notify the borrower in writing of the results of such calculations; and

(5) Restructuring of loans

(6) Termination of loan obligationsThe obligations of a borrower to the Secretary under a loan shall terminate if—

(A) the borrower satisfies the requirements of paragraphs (1) and (2) of subsection (b);

(B) the value of the restructured loan is less than the recovery value; and

(C) not later than 90 days after receipt of the notification described in paragraph (4)(B), the borrower pays (or obtains third-party financing to pay) the Secretary an amount equal to the current market value.

(7) Negotiation of appraisal

(A) In general

(B) Independent appraisal

(d) Principal and interest write-down

(1) In general

(A) Priority consideration

(B) Failure of creditors to agree

(2) Participation of creditors

(e) Shared appreciation arrangements

(1) In general

(2) Terms

(3) Percentage of recapture

(4) Time of recaptureRecapture shall take place at the end of the term of the agreement, or sooner—

(A) on the conveyance of the real security property;

(B) on the repayment of the loans; or

(5) Transfer of title

(6) Notice of recapture

(7) Financing of recapture payment

(A) In general

(B) Term

(i) In general

(ii) Existing amortizations and loans

(D) Reamortization

(i) In generalThe Secretary may modify the amortization of a recapture payment referred to in subparagraph (A) of this paragraph on which a payment has become delinquent by using loan service tools under section 1991(b)(3) of this title if—(I) the default is due to circumstances beyond the control of the borrower; and(II) the borrower acted in good faith (as determined by the Secretary) in attempting to repay the recapture amount.

(ii) Limitations(I) Term of reamortization(II) No reduction or principal or unpaid interest due

(f) Determination to restructure

(g) Prerequisites to foreclosure or liquidationNo foreclosure or other similar actions shall be taken to liquidate any loan determined to be ineligible for restructuring by the Secretary under this section—

(1) until the borrower has been given the opportunity to appeal such decision; and

(2) if the borrower appeals, the appeals process has been completed, and a determination has been made that the loan is ineligible for restructuring.

(h) Time limits for restructuring

(i) Notice of ineligibility for restructuring

(1) In general

(2) ContentsThe notice required under paragraph (1) shall contain—

(A) the determination and the reasons for the determination;

(B) the computations used to make the determination, including the calculation of the recovery value of the collateral securing the loan; and

(C) a statement of the right of the borrower to appeal the decision to the appeals division, and to appear before a hearing officer.

(j) Independent appraisals

(k) Partial liquidations

(l) Disposition of normal income securityFor purposes of subsection (b)(2) of this section, if a borrower—

(1) disposed of normal income security prior to October 14, 1988, without the consent of the Secretary; and

(2) demonstrates that—

(A) the proceeds were utilized to pay essential household and farm operating expenses; and

(B) the borrower would have been entitled to a release of income proceeds by the Secretary if the regulations in effect on November 28, 1990, had been in effect at the time of the disposition,

the Secretary shall not consider the borrower to have acted without good faith to the extent of the disposition.

(m) Only 1 write-down or net recovery buy-out per borrower for loan made after January 6, 1988

(1) In general

(2) Special rule

(n) Liquidation of assets

(o) Lifetime limitation on debt forgiveness per borrower

(Pub. L. 87–128, title III, § 353, as added Pub. L. 100–233, title VI, § 615(a), Jan. 6, 1988, 101 Stat. 1678; amended Pub. L. 101–624, title XVIII, § 1816(a)–(d), (f)–(h), Nov. 28, 1990, 104 Stat. 3826–3828; Pub. L. 102–237, title V, § 501(h), Dec. 13, 1991, 105 Stat. 1868; Pub. L. 104–127, title VI, §§ 645, 661(j), Apr. 4, 1996, 110 Stat. 1103, 1107; Pub. L. 105–277, div. A, § 101(a) [title VIII, §§ 807, 808], Oct. 21, 1998, 112 Stat. 2681, 2681–40; Pub. L. 106–31, title III, § 3019(b), May 21, 1999, 113 Stat. 99; Pub. L. 106–387, § 1(a) [title VIII, § 818(a)], Oct. 28, 2000, 114 Stat. 1549, 1549A–58; Pub. L. 107–171, title V, § 5314, May 13, 2002, 116 Stat. 347.)