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This subpart prescribes the poliand procedures to be followed in special servicing of Farmers Home inistration (FMHA) delinquent problem cases involving farm s to individuals, farm cooperatives, nerships, and corporations. It supents but does not duplicate other IA regulations with respect to suision and servicing activities. - Federal law prohibits discriminaon the basis of race, color, relinational origin, sex, marital us, age (provided that a person has capacity to enter into a binding ract), because all or part of a pers income derives from any public tance program, because a person ood faith has exercised any right er the Federal Consumer Credit cection Act, or because of a physior mental handicap (provided the icant can execute a legally binding cract).

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(a) "Delinquent" includes all active borrowers owing FmHA loans which are behind schedule.

(b) "Problem case" includes borrowers who are not delinquent on their loans but who are likely to become so or have major problems impairing their progress such as: (1) The lack of adequate resouces or income to meet their full scheduled annual operating payment; (2) incomplete planned development that has exceeded the estimated completion date shown on Form FmHA 424-1, "Development Plan," without an acceptable reason; (3) the need for improved farm, home, business, or financial managment; (4) serious health or family problems; (5) deferring payments for reasons other than development work; (6) deviating from the scheduled Farm and Home Plan without first consulting the County Supervisor, and (7) disposing of security without first getting the consent of the County Supervisor.

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(a) The purpose of the special servicing of delinquent and problem cases is to assist borrowers to overcome the major problems retarding their progress and to remove any delinquency on FmHA loans. This will be done by: (1) Determining the specific reasons for the delinquency or problem; (2) deciding upon corrective actions that should be taken; and (3) initiating and carrying out the actions agreed upon.

(b) The delinquent and problem case review will also be used in training personnel in the proper evaluation of applicants and resources and in the planning, supervising, and servicing aspects of the program.

§ 1960.4 Period for initiating the annual review of delinquent and other problem

cases.

(a) Generally, the most effective time to initiate the review is after a reasonable determination can be made with respect to the major production and income for the year and before the major analysis and subsequent planning period. Ordinarily, the period for the initial review should not extend over 60 days.

(b) Once each year the County Supervisor and the District Director will initiate the annual review of delinquent and other problem cases. This will be done during the period established by a State Supplement.

(c) The annual review will be reflected in the State and District plans of work.

§ 1960.5 Conducting the annual review.

The District Director and County Supervisor will review the delinquent and problem cases to determine the special servicing actions to be taken in each case. State Office loan chiefs and specialists will participate in a sufficient number of reviews to keep currently informed about the problems confronting borrowers and the adequacy of the corrective action being taken.

(a) Determining the causes of delinquency or other problems. The District Director and County Supervisor will review the case file and other sources to determine the basic reasons for the delinquency or other problems.

as:

(1) They will consider such things

(i) The borrower's background, experience, ability, assets and liabilities, and change in financial status.

(ii) The type and scope of operations being carried out.

(iii) The production and income received from each farm and nonfarm source.

(iv) The adequacy and potential of the chattel, land, and other resources.

(v) The amount and purpose of the FmHA and other credit provided and the amount of outstanding debts.

(vi) The repayments made on the indebtedness and whether such payments were in accordance with the borrower's ability.

(vii) The amount spent for capital goods.

(viii) The type and extent of supervisory assistance provided and the attitude of the borrower and the borrower's family toward such assistance.

(ix) Whether the total operation can be successful.

(x) Whether the borrower has maintained and accounted properly for the security and is current on real estate taxes and property issurance.

(2) The review should clearly identify the borrower's major problems. Failure should not be attributed to such factors as adverse weather conditions and low prices when the major problem actually involves lack of resources, need for major adjustments in the operations, consolidation, extension or adjustment of debts, or unsatisfactory farm, home, business, or financial management including the acquisition of unnecessary equipment.

(b) Determining corrective actions to be taken. During the review a decision must be made as to whether FmHA will continue with the borrower or whether FmHA assistance will be discontinued and action initiated to liquidate the loan. In some instances, it is possible to determine from the information available in the file or from the knowledge of the County Office staff the corrective action that should be taken. In other cases, a visit to the borrower's farm, home, or business enterprise may be required in order to evaluate the possible plans and alternatives for corrective action. The District Director will participate in visits to evaluate especially difficult cases and will make sure that appropriate action is taken. State Office loan chiefs or specialists also will participate in visits in appropriate cases.

(1) For those borrowers who will continue to receive FmHA assistance, decisions must be made as to the specific actions to be taken to correct the major deficiencies, when is the best time to initate the action, and whether additional FmHA credit will be needed.

(2) There may be a limited number of cases in which neither immediate corrective nor liquidation action is feasible. With such borrowers, decisions will be made concerning the specific servicing actions to be taken to protect both the interest of the Government and the borrower and to collect the loan as soon as practicable under the appropriate policies set forth in Subpart A of Part 1962 of this chapter and Subpart A of Part 1872 of this chapter (FmHA Instruction 465.1).

(3) For those borrowers with whom FmHA services will be discontinued, liquidation action will be initiated in accordance with Subpart A of Part

his chapter or Subpart A of 2 of this chapter (FmHA In465.1).

utines. (1) State Directors will a State form for use in tabuformation on cases to be inn the review. When completed, n will be prepared in an origitwo copies. The original is to ned in the County Office with for the District Director and a or the State Office. The form lude as a minimum the follow

orrower's name. mount owed.

Problem or amount delinquent. Reasons for problem or delin

y.

Actions to be taken.

Date actions will be taken.

Any additional information. Before the annual review, the ty Office Assistant will list all which are delinquent, the cases h the County Supervisor indicates to be reviewed because they are y to become delinquent in the future, and those with other seriproblems. At the time of the ew, the County Office Assistant will assemble the files and manent system cards for use in the ew.

Appropriate entries will be made e running case record to indicate agreement reached by the District ctor and County Supervisor as to reasons for the delinquency or lems, the actions to be taken, and cime such actions will be initiated. District Director and the County ervisor will agree on the informato be entered and will initial the y.

The County Office Assistant will e appropriate entries on the manent system card for followup

n.

As actions on the cases are taken, County Supervisor will indicate ly such actions on the County ce copy of the list of delinquent owers and problem cases. The nty Supervisor will also make apriate entries in the running case rd.

The District Director will report he State Director on Form FmHA

401-1, "Operations Review Questionnaire," when the annual review of all delinquent and problem cases has been accomplished in each County Office

unit.

(7) As the District Director follows up on the actions taken in accordance with the provisions of § 1960.13(a) of this subpart, appropriate notations will be made on the District Director's list of delinquent or problem case borrowers to keep it up-to-date along with the appropriate notations in the running case record. Progress in servicing cases will also be noted in the summary section of Form FmHA 401-1.

§§ 1960.6-1960.10 [Reserved]

§ 1960.11 Use of County Committee.

After the annual review, the County Supervisor should discuss with the County Committee any special problems encountered and the nature of the decision made for the corrective actions. The County Supervisor will seek the advice of the County Committee on those borrowers: (a) With complex problems, (b) for whom a tentative decision to discontinue FmHA services has been made, (c) for whom neither corrective action nor immediate liquidation action is feasible, and (d) for whom he/she and the District Director determine that Committee advice is needed. During the year the County Supervisor will report to the Committee on the progress being made in carrying out the actions agreed upon for removing delinquencies or correcting other problems.

§ 1960.12 Supervision and servicing by the County Supervisor.

(a) The borrowers referred to in this subpart have unusual circumstances to overcome. Therefore, it is necessary that they receive effective supervision and that diligent loan and security servicing actions are carried out.

(b) The County Supervisor should use the release authority to meet only minimum essential needs when liens are held on crops, livestock, and other chattels. When real estate security is involved and partial releases, leases, or subordination agreements are requested, the County Supervisor should

assure that such actions will aid the borrower in overcoming the problem.

(c) When the corrective action agreed upon by the County Supervisor and District Director did not provide for extending additional FmHA assistance, the County Supervisor will not approve or submit for approval any type of FmHA loan application until the facts concerning the need for the loan and the manner in which it will assist the borrower in overcoming the problem have been concurred in by the District Director.

(d) The County Supervisor will conduct a complete analysis on all delinquent and problem case borrowers reported on the annual review who will be continuing their farming operations. Form FmHA 1960-12, "Financial Farm Analysis Summary," will be completed after the analysis is conducted.

(e) During the beginning of the production season the County Supervisor will discuss with those delinquent and problem case borrowers who plan to continue their farming operations, but who have not been able to show substantial progress, of conditions agreed upon in their current Farm and Home Plans which must be met in order for them to continue receiving FmHA assistance. The County Supervisor will clearly document the discussion in the running case record and within a reasonable period of time execute FmHA Guide Letter 1960-A-1 as a follow-up to his or her discussion with the borrower.

[45 FR 27913, Apr. 25, 1980, as amended at 46 FR 61641, Dec. 18, 1981]

§ 1960.13 Followup servicing actions by District Directors and State Office staff.

(a) Followup by the District Director. The District Director is responsible for seeing that the County Office staff makes specific plans for corrective action with the borrower and that actions agreed upon are carried out. On visits to the County Office, the District Director will review the list of delinquent and other problem cases and take the necessary steps to assure that the actions agreed upon are being carried out in an effective and timely manner. This will include visits to

evaluate a sufficient number of such cases to determine whether the desired results are being obtained and to determine what further training is needed by the County Supervisor in servicing such cases. The District Director should continue followup actions periodically as needed to obtain the desired results in each County Office area. The followup should include a thorough review of any subsequent loans being made to the borrower to assure that the plan incorporates the corrective action agreed upon.

(b) Followup by State Office Staff. (1) The State Director is responsible for seeing that the special servicing actions prescribed by this subpart are carried out by the County Supervisors and District Directors.

(2) Loan chiefs and specialists should review a representative sample of delinquent and problem cases during each visit to a County Office to assure that a thorough analysis has been made, that appropriate followup action has been taken, and to determine what further training, if any, is needed for the District Director and County Supervisor.

(3) The State and/or District Offices should periodically review the progress made in servicing these cases.

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Source: 44 FR 4437, Jan. 22, 1979, unless otherwise noted.

Subpart A-Servicing and Liquidation of Chattel Security

§ 1962.1 Purpose.

This subpart delegates authorities and gives procedures for servicing, care, and liquidation of Farmers Home Administration (FmHA) chattel security, Economic Opportunity (EO) loan property, and note only loans.

§ 1962.2 Policy.

(a) Chattel security, EO property and note only loans will be serviced to accomplish the loan objectives and protect to FmHA's financial interest. To accomplish these objectives, security will be serviced in accordance with the security instruments and related agreements, including any authorized modifications: Provided, The borrower has reasonable prospects of accomplishing the loan objectives, properly maintains and accounts for the security, and otherwise satisfactorily meets the loan obligations including repayment.

(b) If the objectives of paragraph (a) of this section cannot be met, or if the chattel security must be liquidated for other reasons, the security will be liquidated promptly to protect FmHA's financial interest. Normally, the borrower will dispose of chattel security and EO property at a public or private sale. However, when this cannot be done, the County Supervisor will take possession of and sell chattel security in accordance with this subpart.

§ 1962.3 Authorities and responsibilities.

(a) Redelegation of authority. Authority will be redelegated to the maximum extent possible consistent with program requirements and available resources. The State Director, District Director and County Supervisor are authorized to redelegate, in writing, any authority delegated to them in this subpart to any employee determined by them to be qualified..

(b) Responsibilities—(1) FmHA personnel. The State Director, District Director and County Supervisor are

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