
From the U.S. Code Online via GPO Access
[wais.access.gpo.gov]
[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 15USC697g]

 
                      TITLE 15--COMMERCE AND TRADE
 
             CHAPTER 14B--SMALL BUSINESS INVESTMENT PROGRAM
 
      SUBCHAPTER V--LOANS TO STATE AND LOCAL DEVELOPMENT COMPANIES
 
Sec. 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;
                (ii) is participating in the Premier Certified Lenders 
            Program under section 697e of this title; or
                (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) who have completed a training program on loan 
                liquidation developed by the Administration in 
                conjunction with qualified State and local development 
                companies that meet the requirements of this paragraph; 
                or

                (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--
---------------------------------------------------------------------------
    \1\ So in original. Probably should be ``subsection''.
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            (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
                    (II) the Administration is entitled to legal 
                remedies not available to a qualified State or local 
                development company and such remedies will benefit 
                either the Administration or the qualified State or 
                local development company; or

                (ii) oversee the conduct of any such litigation; and

            (C) take other appropriate actions to mitigate loan losses 
        in lieu of total liquidation or foreclosures, including the 
        restructuring of a loan in accordance with prudent loan 
        servicing practices and pursuant to a workout plan approved in 
        advance by the Administration under paragraph (2)(C).

                     (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.
            (ii) Administration action on plan

                (I) Timing

                    Not later than 15 business days after a liquidation 
                plan is received by the Administration under clause (i), 
                the Administration shall approve or reject the plan.
                (II) Notice of no decision

                    With respect to any plan that cannot be approved or 
                denied within the 15-day period required by subclause 
                (I), the Administration shall within such period provide 
                in accordance with subparagraph (E) notice to the 
                company that submitted the plan.
            (iii) Routine actions

                In carrying out functions described in paragraph (1)(A), 
            a qualified State or local development company may undertake 
            routine actions not addressed in a liquidation plan without 
            obtaining additional approval from the Administration.

        (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.
            (ii) Administration action on request

                (I) Timing

                    Not later than 15 business days after receiving a 
                request under clause (i), the Administration shall 
                approve or deny the request.
                (II) Notice of no decision

                    With respect to any request that cannot be approved 
                or denied within the 15-day period required by subclause 
                (I), the Administration shall within such period provide 
                in accordance with subparagraph (E) notice to the 
                company that submitted the request.

        (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.
            (ii) Administration action on plan

                (I) Timing

                    Not later than 15 business days after a workout plan 
                is received by the Administration under clause (i), the 
                Administration shall approve or reject the plan.
                (II) Notice of no decision

                    With respect to any workout plan that cannot be 
                approved or denied within the 15-day period required by 
                subclause (I), the Administration shall within such 
                period provide in accordance with subparagraph (E) 
                notice to the company that submitted the plan.

        (D) Compromise of indebtedness

            In carrying out functions described in paragraph (1)(A), a 
        qualified State or local development company may--
                (i) consider an offer made by an obligor to compromise 
            the debt for less than the full amount owing; and
                (ii) pursuant to such an offer, release any obligor or 
            other party contingently liable, if the company secures the 
            written approval of the Administration.

        (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)--
                (i) shall be in writing;
                (ii) shall state the specific reason for the 
            Administration's inability to act on a plan or request;
                (iii) shall include an estimate of the additional time 
            required by the Administration to act on the plan or 
            request; and
                (iv) if the Administration cannot act because 
            insufficient information or documentation was provided by 
            the company submitting the plan or request, shall specify 
            the nature of such additional information or documentation.

                      (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--
        (1) does not meet the requirements of subsection (b)(1) of this 
    section;
        (2) has violated any applicable rule or regulation of the 
    Administration or any other applicable law; or
        (3) fails to comply with any reporting requirement that may be 
    established by the Administration relating to carrying out of 
    functions described in paragraph (1).

(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--
                (i) the total cost of the project financed with the 
            loan;
                (ii) the total original dollar amount guaranteed by the 
            Administration;
                (iii) the total dollar amount of the loan at the time of 
            liquidation, foreclosure, or mitigation of loss;
                (iv) the total dollar losses resulting from the 
            liquidation, foreclosure, or mitigation of loss; and
                (v) the total recoveries resulting from the liquidation, 
            foreclosure, or mitigation of loss, both as a percentage of 
            the amount guaranteed and the total cost of the project 
            financed.

            (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--
                (i) the information provided under subparagraph (C) with 
            respect to the 12-month period preceding the date on which 
            the report is submitted; and
                (ii) the same information with respect to loans 
            foreclosed and liquidated, or otherwise treated, by the 
            Administration during the same period.

            (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.

(Pub. L. 85-699, title V, Sec. 510, as added Pub. L. 106-554, 
Sec. 1(a)(9) [title III, Sec. 307(a)], Dec. 21, 2000, 114 Stat. 2763, 
2763A-685.)

                       References in Text

    The Small Business Programs Improvement Act of 1996, referred to in 
subsec. (b)(1)(A)(i), is Pub. L. 104-208, div. D, Sept. 30, 1996, 110 
Stat. 3009-724. Provisions relating to loan liquidation pilot program 
are contained in section 204 of title II of div. D of Pub. L. 104-208, 
which is set out as a note under section 695 of this title. For complete 
classification of this Act to the Code, see Short Title of 1996 
Amendment note set out under section 631 of this title and Tables.


                               Regulations

    Pub. L. 106-554, Sec. 1(a)(9) [title III, Sec. 307(b)], Dec. 21, 
2000, 114 Stat. 2763, 2763A-689, provided that:
    ``(1) In general.--Not later than 150 days after the date of the 
enactment of this Act [Dec. 21, 2000], the Administrator shall issue 
such regulations as may be necessary to carry out section 510 of the 
Small Business Investment Act of 1958 [15 U.S.C. 697g], as added by 
subsection (a) of this section.
    ``(2) Termination of pilot program.--Beginning on the date on which 
final regulations are issued under paragraph (1), section 204 of the 
Small Business Programs Improvement Act of 1996 [Pub. L. 104-208, div. 
D] (15 U.S.C. 695 note) shall cease to have effect.''
