§ 2001. Debt restructuring and loan servicing
(a)
In general
The Secretary shall modify delinquent farmer program loans made or insured under this chapter, or purchased from the lender or the Federal Deposit Insurance Corporation under section
1929b of this title, to the maximum extent possible—
(1)
to avoid losses to the Secretary on such loans, with priority consideration being placed on writing-down the loan principal and interest (subject to subsections (d) and (e) of this section), and debt set-aside (subject to subsection (e) of this section), whenever these procedures would facilitate keeping the borrower on the farm or ranch, or otherwise through the use of primary loan service programs as provided in this section; and
(b)
Eligibility
To be eligible to obtain assistance under subsection (a) of this section—
(1)
the delinquency must be due to circumstances beyond the control of the borrower, as defined in regulations issued by the Secretary, except that the regulations shall require that, if the value of the assets calculated under subsection (c)(2)(A)(ii) of this section that may be realized through liquidation or other methods would produce enough income to make the delinquent loan current, the borrower shall not be eligible for assistance under subsection (a) of this section;
(2)
the borrower must have acted in good faith with the Secretary in connection with the loan as defined in regulations issued by the Secretary;
(c)
Restructuring determinations
(1)
Determination of net recovery
In determining the net recovery from the involuntary liquidation of a loan under this section, the Secretary shall calculate—
(2)
Recovery value
For the purpose of paragraph (1), the recovery value of the collateral securing the loan shall be based on—
(A)
(B)
the estimated administrative, legal, and other expenses associated with the liquidation and disposition of the loan and collateral, including—
(3)
Value of the restructured loan
(A)
In general
For the purpose of paragraph (1), the value of the restructured loan shall be based on the present value of payments that the borrower would make to the Federal Government if the terms of such loan were modified under any combination of primary loan service programs to ensure that the borrower is able to meet such obligations and continue farming operations.
(B)
Present value
For the purpose of calculating the present value referred to in subparagraph (A), the Secretary shall use a discount rate of not more than the current rate on 90-day Treasury bills.
(C)
Cash flow margin
For the purpose of assessing under subparagraph (A) the ability of a borrower to meet debt obligations and continue farming operations, the Secretary shall assume that the borrower needs up to 110 percent of the amount indicated for payment of farm operating expenses, debt service obligations, and family living expenses.
(4)
Notification
Within 90 days after receipt of a written request for restructuring from the borrower, the Secretary shall—
(5)
Restructuring of loans
If the value of the restructured loan is greater than or equal to the recovery value, the Secretary shall, within 45 days after notifying the borrower of such calculations, offer to restructure the loan obligations of the borrower under this chapter through primary loan service programs that would enable the borrower to meet the obligations (as modified) under the loan and to continue the farming operations of the borrower. If the borrower accepts such offer, within 45 days after receipt of notice of acceptance, the Secretary shall restructure the loan accordingly.
(6)
Termination of loan obligations
The obligations of a borrower to the Secretary under a loan shall terminate if—
(7)
Negotiation of appraisal
(A)
In general
In making a determination concerning restructuring under this subsection, the Secretary, at the request of the borrower, shall enter into negotiations concerning appraisals required under this subsection with the borrower.
(B)
Independent appraisal
If the borrower, based on a separate current appraisal, objects to the decision of the Secretary regarding an appraisal, the borrower and the Secretary shall mutually agree, to the extent practicable, on an independent appraiser who shall conduct another appraisal of the borrower’s property. The average of the two appraisals that are closest in value shall become the final appraisal under this paragraph. The borrower and the Secretary shall each pay one-half of the cost of the independent appraisal.
(d)
Principal and interest write-down
(1)
In general
(A)
Priority consideration
In selecting the restructuring alternatives to be used in the case of a borrower who has requested restructuring under this section, the Secretary shall give priority consideration to the use of principal and interest write-down, except that this procedure shall not be given first priority in the case of a borrower unless other creditors of such borrower (other than those creditors who are fully collateralized) representing a substantial portion of the total debt of the borrower held by such creditors, agree to participate in the development of the restructuring plan or agree to participate in a State mediation program.
(B)
Failure of creditors to agree
Failure of creditors to agree to participate in the restructuring plan or mediation program shall not preclude the use of principal and interest write-down by the Secretary if the Secretary determines that this restructuring alternative results in the least cost to the Secretary.
(2)
Participation of creditors
Before eliminating the option to use debt write-down in the case of a borrower, the Secretary shall make a reasonable effort to contact the creditors of such borrower, either directly or through the borrower, and encourage such creditors to participate with the Secretary in the development of a restructuring plan for the borrower.
(e)
Shared appreciation arrangements
(1)
In general
As a condition of restructuring a loan in accordance with this section, the borrower of the loan may be required to enter into a shared appreciation arrangement that requires the repayment of amounts written off or set aside.
(2)
Terms
Shared appreciation agreements shall have a term not to exceed 10 years, and shall provide for recapture based on the difference between the appraised values of the real security property at the time of restructuring and at the time of recapture.
(3)
Percentage of recapture
The amount of the appreciation to be recaptured by the Secretary shall be 75 percent of the appreciation in the value of such real security property if the recapture occurs within 4 years of the restructuring, and 50 percent if the recapture occurs during the remainder of the term of the agreement.
(4)
Time of recapture
Recapture shall take place at the end of the term of the agreement, or sooner—
(5)
Transfer of title
Transfer of title to the spouse of a borrower on the death of such borrower shall not be treated as a conveyance for the purpose of paragraph (4).
(6)
Notice of recapture
Beginning with fiscal year 2000 not later than 12 months before the end of the term of a shared appreciation arrangement, the Secretary shall notify the borrower involved of the provisions of the arrangement.
(7)
Financing of recapture payment
(A)
In general
The Secretary may amortize a recapture payment owed to the Secretary under this subsection.
(C)
Interest rate
(i)
In general
The interest rate applicable to an amortization under this paragraph may not exceed the rate applicable to a loan to reacquire homestead property less 100 basis points.
(ii)
Existing amortizations and loans
The interest rate applicable to an amortization or loan made by the Secretary before October 28, 2000, to finance a recapture payment owed to the Secretary under this subsection may not exceed the rate applicable to a loan to reacquire homestead property less 100 basis points.
(D)
Reamortization
(i)
In general
The Secretary may modify the amortization of a recapture payment referred to in subparagraph (A) of this paragraph on which a payment has become delinquent by using loan service tools under section
1991
(b)(3) of this title if—
(f)
Determination to restructure
If the appeal process results in a determination that a loan is eligible for restructuring, the Secretary shall restructure the loan in the manner consistent with this section, taking into consideration the restructuring recommendations, if any, of the appeals officer.
(g)
Prerequisites to foreclosure or liquidation
No foreclosure or other similar actions shall be taken to liquidate any loan determined to be ineligible for restructuring by the Secretary under this section—
(i)
Notice of ineligibility for restructuring
(1)
In general
A notice of ineligibility for restructuring shall be sent to the borrower by registered or certified mail within 15 days after such determination.
(j)
Independent appraisals
An appeal filed with the appeals division under section
1983b of this title may include a request by the borrower for an independent appraisal of any property securing the loan. On such request, the appeals division shall present the borrower with a list of three appraisers approved by the county supervisor, from which the borrower shall select an appraiser to conduct the appraisal, the cost of which shall be borne by the borrower. The results of such appraisal shall be considered in any final determination concerning the loan. A copy of any appraisal made under this paragraph shall be provided to the borrower.
(k)
Partial liquidations
If partial liquidations are performed (with the prior consent of the Secretary) as part of loan servicing by a guaranteed lender under this chapter, the Secretary shall not require full liquidation of a delinquent loan in order for the lender to be eligible to receive payment on losses.
(l)
Disposition of normal income security
For purposes of subsection (b)(2) of this section, if a borrower—
(1)
disposed of normal income security prior to October 14, 1988, without the consent of the Secretary; and
(2)
demonstrates that—
(B)
the borrower would have been entitled to a release of income proceeds by the Secretary if the regulations in effect on November 28, 1990, had been in effect at the time of the disposition,
the Secretary shall not consider the borrower to have acted without good faith to the extent of the disposition.
(m)
Only 1 write-down or net recovery buy-out per borrower for loan made after January 6, 1988
(n)
Liquidation of assets
The Secretary may not use the authority provided by this section to reduce or terminate any portion of the debt of the borrower that the borrower could pay through the liquidation of assets (or through the payment of the loan value of the assets, if the loan value is greater than the liquidation value) described in subsection (c)(2)(A)(ii) of this section.
(o)
Lifetime limitation on debt forgiveness per borrower
The Secretary may provide not more than $300,000 in principal and interest forgiveness under this section per borrower.
[1] See References in Text note below.