[Code of Federal Regulations]
[Title 49, Volume 4]
[Revised as of October 1, 2007]
From the U.S. Government Printing Office via GPO Access
[CITE: 49CFR260.45]

[Page 877-878]
 
                        TITLE 49--TRANSPORTATION
 
       CHAPTER II--FEDERAL RAILROAD ADMINISTRATION, DEPARTMENT OF 
                             TRANSPORTATION
 
PART 260_REGULATIONS GOVERNING LOANS AND LOAN GUARANTEES UNDER THE RAILROAD 
 
       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;

[[Page 878]]

    (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.
    (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.