§ 697g. Foreclosure and liquidation of loans
(a)
Delegation of authority
In accordance with this section, the Administration shall delegate to any qualified State or local development company (as defined in section
697
(e) of this title) that meets the eligibility requirements of subsection (b)(1) of this section the authority to foreclose and liquidate, or to otherwise treat in accordance with this section, defaulted loans in its portfolio that are funded with the proceeds of debentures guaranteed by the Administration under section
697 of this title.
(b)
Eligibility for delegation
(1)
Requirements
A qualified State or local development company shall be eligible for a delegation of authority under subsection (a) of this section if—
(A)
the company—
(i)
has participated in the loan liquidation pilot program established by the Small Business Programs Improvement Act of 1996 (15 U.S.C. 695 note ), as in effect on the day before promulgation of final regulations by the Administration implementing this section;
(iii)
during the 3 fiscal years immediately prior to seeking such a delegation, has made an average of not less than 10 loans per year that are funded with the proceeds of debentures guaranteed under section
697 of this title; and
(B)
the company—
(i)
has one or more employees—
(I)
with not less than 2 years of substantive, decision-making experience in administering the liquidation and workout of problem loans secured in a manner substantially similar to loans funded with the proceeds of debentures guaranteed under section
697 of this title; and
(ii)
submits to the Administration documentation demonstrating that the company has contracted with a qualified third-party to perform any liquidation activities and secures the approval of the contract by the Administration with respect to the qualifications of the contractor and the terms and conditions of liquidation activities.
(2)
Confirmation
On request the Administration shall examine the qualifications of any company described in subsection (a) of this section to determine if such company is eligible for the delegation of authority under this section. If the Administration determines that a company is not eligible, the Administration shall provide the company with the reasons for such ineligibility.
(c)
Scope of delegated authority
(1)
In general
Each qualified State or local development company to which the Administration delegates authority under section [1] (a) may with respect to any loan described in subsection (a) of this section—
(A)
perform all liquidation and foreclosure functions, including the purchase in accordance with this subsection of any other indebtedness secured by the property securing the loan, in a reasonable and sound manner according to commercially accepted practices, pursuant to a liquidation plan approved in advance by the Administration under paragraph (2)(A);
(B)
litigate any matter relating to the performance of the functions described in subparagraph (A), except that the Administration may—
(i)
defend or bring any claim if—
(I)
the outcome of the litigation may adversely affect the Administration’s management of the loan program established under section
696 of this title; or
(2)
Administration approval
(A)
Liquidation plan
(i)
In general
Before carrying out functions described in paragraph (1)(A), a qualified State or local development company shall submit to the Administration a proposed liquidation plan.
(B)
Purchase of indebtedness
(i)
In general
In carrying out functions described in paragraph (1)(A), a qualified State or local development company shall submit to the Administration a request for written approval before committing the Administration to the purchase of any other indebtedness secured by the property securing a defaulted loan.
(C)
Workout plan
(i)
In general
In carrying out functions described in paragraph (1)(C), a qualified State or local development company shall submit to the Administration a proposed workout plan.
(D)
Compromise of indebtedness
In carrying out functions described in paragraph (1)(A), a qualified State or local development company may—
(E)
Contents of notice of no decision
Any notice provided by the Administration under subparagraph (A)(ii)(II), (B)(ii)(II), or (C)(ii)(II)—
(ii)
shall state the specific reason for the Administration’s inability to act on a plan or request;
(3)
Conflict of interest
In carrying out functions described in paragraph (1), a qualified State or local development company shall take no action that would result in an actual or apparent conflict of interest between the company (or any employee of the company) and any third party lender, associate of a third party lender, or any other person participating in a liquidation, foreclosure, or loss mitigation action.
(d)
Suspension or revocation of authority
The Administration may revoke or suspend a delegation of authority under this section to any qualified State or local development company, if the Administration determines that the company—
(e)
Report
(1)
In general
Based on information provided by qualified State and local development companies and the Administration, the Administration shall annually submit to the Committees on Small Business of the House of Representatives and of the Senate a report on the results of delegation of authority under this section.
(2)
Contents
Each report submitted under paragraph (1) shall include the following information:
(A)
With respect to each loan foreclosed or liquidated by a qualified State or local development company under this section, or for which losses were otherwise mitigated by the company pursuant to a workout plan under this section—
(iii)
the total dollar amount of the loan at the time of liquidation, foreclosure, or mitigation of loss;
(B)
With respect to each qualified State or local development company to which authority is delegated under this section, the totals of each of the amounts described in clauses (i) through (v) of subparagraph (A).
(C)
With respect to all loans subject to foreclosure, liquidation, or mitigation under this section, the totals of each of the amounts described in clauses (i) through (v) of subparagraph (A).
(D)
A comparison between—
(E)
The number of times that the Administration has failed to approve or reject a liquidation plan in accordance with subparagraph (A)(i), a workout plan in accordance with subparagraph (C)(i), or to approve or deny a request for purchase of indebtedness under subparagraph (B)(i), including specific information regarding the reasons for the Administration’s failure and any delays that resulted.
[1] So in original. Probably should be “subsection”.