[Code of Federal Regulations]
[Title 25, Volume 1]
[Revised as of April 1, 2005]
From the U.S. Government Printing Office via GPO Access
[CITE: 25CFR103.36]

[Page 311-313]
 
                            TITLE 25--INDIANS
 
     CHAPTER I--BUREAU OF INDIAN AFFAIRS, DEPARTMENT OF THE INTERIOR
 
PART 103_LOAN GUARANTY, INSURANCE, AND INTEREST SUBSIDY--Table of Contents
 
                  Subpart G_Default and Payment by BIA
 
Sec. 103.36  What options and remedies does the lender have if the borrower 
defaults on the loan?

    (a) The lender may grant the borrower a temporary forbearance, even 
beyond any default cure periods specified in the loan documents, if 
doing so

[[Page 312]]

is likely to result in the borrower curing the default. However, BIA 
must approve in writing any forbearance or other agreement that:
    (1) Permanently modifies the terms of the loan in any manner 
indicated by Sec. 103.34(a);
    (2) Would allow the borrower's default to extend beyond the deadline 
established in Sec. 103.36(d) for the lender to elect a remedy; or
    (3) Is not likely to result in the borrower curing the default.
    (b) The lender may make precautionary advances on the borrower's 
behalf during the default, if doing so is reasonably necessary to ensure 
that loan recovery prospects do not significantly deteriorate. Items for 
which the lender may make precautionary advances include, for example:
    (1) Hazard, liability, or key man life insurance premiums;
    (2) Security measures to safeguard abandoned business assets;
    (3) Real or personal property taxes;
    (4) Corrective actions required by court or administrative orders; 
or
    (5) Essential maintenance.
    (c) BIA will guaranty or insure the amount of precautionary advances 
from the date of each advance to the same extent as other amounts due 
under the loan, if:
    (1) The borrower has demonstrated its inability or unwillingness to 
make the payment or perform the duty that jeopardizes loan recovery, 
including by undue delay in making the payment or performing the duty;
    (2) The total expense of all precautionary advances by the lender 
does not at the time of the advance exceed 10 percent of the outstanding 
principal balance of the loan;
    (3) Where loan document provisions do not require the borrower to 
repay precautionary advances (however termed) when made by the lender, 
or where the total expense of all precautionary advances by the lender 
will exceed 10 percent of the outstanding principal balance of the loan 
when made, the lender secures BIA's prior written approval; and
    (4) The lender properly claims and documents all precautionary 
advances, if and when it submits a claim for loss under Sec. 103.37.
    (d) If the default remains uncured, the lender must send BIA a 
written notice by certified mail (return receipt requested), or by a 
nationally-recognized overnight delivery service (signature of recipient 
required) within 90 calendar days of the default to select one of the 
following remedies:
    (1) In the case of a guaranteed loan, the lender may submit a claim 
to BIA for its loss;
    (2) In the case of either a guaranteed or insured loan, the lender 
may liquidate all collateral securing the loan, and upon completion, if 
it has a residual loss on the loan, it may submit a claim to BIA for 
that loss; or
    (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, unless BIA specifically extends this 
deadline in writing. However, the lender may at any time before the 
expiration of the 45-day period (or any extension thereof) change its 
choice of remedy by sending BIA a notice otherwise complying with Sec. 
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 (or any extension thereof), the 
lender's only permissible remedy under the Program will be to pursue the 
procedure specified in Sec. 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 Sec. 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:
    (1) The lender consistently has acted in good faith, and

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    (2) The lender's failure to provide timely notice either:
    (i) Has not caused any actual or potential prejudice to BIA; or
    (ii) Was the result of the lender relying upon specific written 
advice from a BIA official.