[Code of Federal Regulations]

[Title 49, Volume 4]

[Revised as of October 1, 2005]

From the U.S. Government Printing Office via GPO Access

[CITE: 49CFR260.45]



[Page 819-820]

 

                        TITLE 49--TRANSPORTATION

 

       CHAPTER II--FEDERAL RAILROAD ADMINISTRATION, DEPARTMENT OF 

                             TRANSPORTATION

 

PART 260_REGULATIONS GOVERNING LOANS AND LOAN GUARANTEES UNDER THE 

RAILROAD REHABILITATION AND IMPROVEMENT FINANCING PROGRAM--Table 

of Contents

 

       Subpart E_Procedures To Be Followed in the Event of Default

 

Sec. 260.45  Events of default for guaranteed loans.





    (a) If the Borrower is more than 30 days past due on a payment or is 

in violation of any covenant or condition of the loan documents and such 

violation constitutes a default under the provisions of the loan 

documents, Lender must notify the Administrator in writing and must 

continue to submit this information to the Administrator each month 

until such time as the loan is no longer in default; and the 

Administrator will pay the Lender of the obligation, or the Lenders's 

agent, an amount equal to the past due interest on the guaranteed 

portion of the defaulted loan. This payment will in no way reduce the 

Borrower's obligation to the Lender to make all payments of principal 

and interest in accordance with the note. If the loan is brought 

current, the Lender will repay to the Agency any interest payments made 

by the Agency, plus accrued interest at the note rate.

    (b) If the default has continued for more than 90 days, the 

Administrator will pay to the Lender, or the Lender's agent, 90 percent 

of the unpaid guaranteed principal. If, subsequent to this payment being 

made, the default is cured and liquidation is no longer appropriate, the 

Lender will repay such funds to the Administrator, plus interest at the 

note rate.

    (c) After the default has continued for more than 90 days, the 

Lender shall expeditiously submit to the Administrator, in writing, its 

proposed detailed plan to resolve the default by liquidating the 

collateral or by any other means. If the resolution will require the 

liquidation of the collateral, then the Lender's plan shall include:

    (1) Proof adequate to establish that the Lender is legally in 

possession of the obligation, or is the agent for a Holder who is 

legally in possession of the obligation, and a statement of the current 

loan balance and accrued interest to date and the method of computing 

the interest;

    (2) A full and complete list of all collateral, including any 

personal and corporate guarantees;

    (3) The recommended liquidation methods for making the maximum 

collection possible and the justification for such methods, including 

recommended action for acquiring and disposing of all collateral and 

collecting from any guarantors;

    (4) Necessary steps for preservation of the collateral;

    (5) Copies of the Borrower's latest available financial statements;

    (6) Copies of any guarantor's latest available financial statements;

    (7) An itemized list of estimated liquidation expenses expected to 

be incurred along with justification for each expense;

    (8) A schedule to periodically report to the FRA on the progress of 

liquidation;

    (9) Proposed protective bid amounts on collateral to be sold at 

auction and a breakdown to show how the amounts were determined;

    (10) If a voluntary conveyance is considered, the proposed amount to 

be credited to the guaranteed debt;

    (11) Legal opinions, as appropriate;

    (12) The Lender will obtain an independent appraisal on all 

collateral securing the loan which will reflect the fair market value 

and potential liquidation value. In order to formulate a liquidation 

plan that maximizes recovery, the appraisal shall consider the presence 

of hazardous substances, petroleum products, or other environmental 

hazards, which may adversely impact the market value of the collateral; 

and

    (13) The anticipated expenses associated with the liquidation will 

be considered a cost of liquidation.

    (d) The Administrator will inform the Lender in writing whether the 

Administrator concurs in the Lender's liquidation plan. Should the 

Administrator and the Lender not agree on the liquidation plan, 

negotiations will take place between the Administrator and the Lender to 

resolve the disagreement. When the liquidation plan is approved by the 

Administrator, the Lender will proceed expeditiously with liquidation. 

The liquidation plan may be modified when conditions warrant. All 

modifications must be approved in writing by the Administrator prior to 

implementation.



[[Page 820]]



    (e) Lender will account for funds during the period of liquidation 

and will provide the Administrator with reports at least quarterly on 

the progress of liquidation including disposition of collateral, 

resulting costs, and additional procedures necessary for successful 

completion of the liquidation.

    (f) Within 30 days after final liquidation of all collateral, the 

Lender will prepare and submit to the Administrator a final report in 

which the Lender must account for all funds during the period of 

liquidation, disposition of the collateral, all costs incurred, and any 

other information necessary for the successful completion of 

liquidation. Upon receipt of the final accounting and report of loss, 

the Administrator may audit all applicable documentation to confirm the 

final loss. The Lender will make its records available and otherwise 

assist the Administrator in making any investigation.

    (g) The Administrator shall be subrogated to all the rights of the 

Lender, or if Lender is agent for a Holder then to all of the rights of 

the Holder, with respect to the Borrower to the extent of the 

Administrator's payment to the Lender under this section.

    (h) When the Administrator finds the final report to be proper in 

all respects:

    (1) All amounts recovered in liquidation shall be paid to the 

Administrator; and

    (2) The remaining obligation of the Administrator to the Lender 

under the guarantee, if any, will be paid directly to Lender by the 

Administrator.

    (i) The Administrator shall not be required to make any payment 

under paragraphs (a) and (b) of this section if the Administrator finds, 

before the expiration of the periods described in such subsections, that 

the default has been remedied.

    (j) The Administrator shall have the right to charge Borrower 

interest, penalties and administrative costs, including all of the 

United States' legally assessed or reasonably incurred expenses of its 

counsel and court costs in connection with any proceeding brought or 

threatened to enforce payment or performance under applicable loan 

documents, in accordance with OMB Circular A-129 (www.whitehouse.gov/

omb), as it may be revised from time to time.