[Code of Federal Regulations]
[Title 7, Volume 14]
[Revised as of January 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 7CFR1965.75]

[Page 381-382]
 
                          TITLE 7--AGRICULTURE
 
   CHAPTER XVIII--RURAL HOUSING SERVICE, RURAL BUSINESS--COOPERATIVE 
SERVICE, RURAL UTILITIES SERVICE, AND FARM SERVICE AGENCY, DEPARTMENT OF 
                         AGRICULTURE (CONTINUED)
 
PART 1965--REAL PROPERTY--Table of Contents
 
        Subpart B--Security Servicing for Multiple Housing Loans
 
Sec.  1965.75  Abandonment.

    When the District Director believes that the borrower has abandoned 
a project, an immediate check with the appropriate sources (for example: 
tenants, management agents, assessor's office, etc.) will be made to 
determine if the borrower has moved and, if so, whether a forwarding 
address can be determined so that further servicing actions can be 
taken.
    (a) A property is considered abandoned when any or all of the 
following conditions exist:
    (1) The borrower cannot be located after the District Director has 
made diligent efforts to contact the borrower. This condition also 
applies to those instances where the general partner(s) of a limited 
partnership cannot be located and the limited partners are unknown or 
cannot be located.
    (2) The project remains unoccupied for an extended period of time 
and the borrower makes no effort to maintain the security property, 
secure eligible occupants, and/or comply with the objectives of the loan 
within a reasonable period of time as specified by the District Director 
in a certified letter sent to the borrower requesting compliance.
    (b) If the property is not being maintained and the District 
Director determines that the borrower has abandoned the project, the 
District Director will attempt to contact any prior lienholders with a 
request that they take control of the property and make any emergency 
repairs necessary. If no prior lienholder is involved or the prior 
lienholder cannot immediately be contacted or refuses to make the 
emergency repair, the District Director will immediately notify the 
State Director and request permission to take possession of the property 
pending liquidation, make emergency repairs to prevent further 
deterioration of the security, and to enter into a lease with the 
individual tenants, or a management or caretaker's agreement, on behalf 
of the borrower.
    (c) A caretaker or management agent will normally be obtained when 
the borrower has abandoned the security property or has failed to 
maintain its operation and the State Director determines, with the 
advice of OGC, that the FmHA or its successor agency under Public Law 
103-354 should take possession of the property to best protect the 
interest of the Government subject to the following:

[[Page 382]]

    (1) Selection of a caretaker or management agent. Persons or firms 
chosen as caretakers or management agents should have experience in 
operating and managing similar properties or have business background or 
experience which qualifies them to perform the needed services. They 
must be located near the property to provide day-to-day supervision or 
appoint a qualified local person to meet this requirement. Caretakers 
will normally be selected for unoccupied projects or those not suitable 
for occupancy. Management agents will only be selected for projects 
which are occupied or suitable for occupancy. Selection procedures will 
be in accordance with Sec.  1955.63(a) of subpart B of part 1955 of this 
chapter, and will be appropriately documented. (No other actions 
specified in subpart B of part 1955 may be implemented until such time 
as liquidation action has been approved in writing by the appropriate 
FmHA or its successor agency under Public Law 103-354 official.)
    (2) Fees. The amount of the management agent or caretaker fee should 
be no more than the typical rate for similar services in the area. The 
amount may be based on a percentage of the income from the property or a 
flat fee amount. The fees will be considered a recoverable cost and 
charged to the borrower's account. The fees will be paid on a monthly 
basis in accordance with FmHA or its successor agency under Public Law 
103-354 Instruction 2024-A (available in any FmHA or its successor 
agency under Public Law 103-354 office).
    (3) Rental rates for abandoned projects. Rental rates will normally 
remain the same for eligible occupants as when the project was under the 
control of the borrower. Rental rates may be revised with the approval 
of the State Director under the following conditions:
    (i) The lease agreement between the borrower and tenant permits 
changing the rates.
    (ii) A change of rates is needed to provide income sufficient to pay 
operational and maintenance expenses, including the caretaker's fee, and 
to repay the loan on schedule.
    (iii) Any increase will not result in rental rates above the payment 
ability of eligible occupants, unless the State Director has given the 
authority to rent units to ineligible occupants.
    (d) All these actions shall be fully documented in the official case 
file. Liquidation will immediately be instituted according to subpart A 
of part 1955 of this chapter.
    (e) When the project is occupied but rent is not paid or collected, 
the eligibility of the occupants cannot be determined, and the borrower 
has failed to comply with the objectives of the loan within a reasonable 
period of time as specified by the District Director in a certified 
letter sent to the borrower requesting compliance, the State Director 
should refer the case to the Regional Attorney for guidance, including 
the possibility of having a receiver appointed.

[49 FR 49590, Dec. 21, 1984, as amended at 57 FR 36592, Aug. 14, 1992]