Section 5001.515 - Default by borrowerWhen there is a default by a borrower, the lender must act prudently and expeditiously in working with the borrower to bring the account current or cure the default through restructuring if a realistic plan can be developed, or to accelerate the account and conduct a liquidation in accordance with § 5001.517 and in a manner that will minimize any potential loss.
(a)Default notification and meetings. The lender must notify the Agency within the timeframe as provided in § 5001.502(a)(3)(i) . (1) The lender will provide this notification by submitting the guaranteed loan borrower default status report in the Agency's electronic reporting system. The lender must update the loan's status each month until such time as the loan is no longer in default.(2) If a monetary default exceeds 30 calendar days, the lender must meet with the borrower and, if necessary, the Agency within 45 calendar days of the date of the default to discuss the situation. The lender must provide the Agency with a written summary of the meeting, including any decisions and actions agreed upon within 10 calendar days of the meeting.(b)Curative options. In considering curative actions, providing a permanent cure without adversely affecting the risk to the Agency and the lender is the paramount objective. The lender may consider temporary curative actions (e.g., payment deferments or collateral subordination) provided they strengthen the loan and are in the best financial interest of the lender and the Agency.(1) Curative actions (subject to the rights of any holder and Agency concurrence) include, but are not limited to, the following options:(i) Deferment of principal and/or interest payments;(ii) An additional unguaranteed temporary loan by the lender to bring the account current;(iii) Re-amortization of or rescheduling the payments on the loan excluding capitalization of accrued interest;(iv) Transfer and assumption of the loan in accordance with § 5001.506 ;(vii) Changes in interest rates in accordance with § 5001.513 . Any interest payments must be adjusted proportionately between the guaranteed and unguaranteed portion of the loan; and(viii) Troubled debt restructure.(2) The term of any deferment, rescheduling, re-amortization, or moratorium cannot exceed the lesser of the remaining useful life of the collateral or remaining term of the loan as set forth in § 5001.402(b) of this part.(i) During a period of deferment or moratorium on the guaranteed loan, the lender's non-guaranteed loan(s) and any stockholder or affiliate loans must also be under deferment or moratorium.(ii) Balloon payments are permitted as a loan servicing option as long as there is a reasonable prospect for successful repayment of the guaranteed loan and the remaining life of the collateral supports the action. 85 FR 42518 , July 14, 2020, as amended at 85 FR 62199 , Oct. 2, 2020 85 FR 42518 , 10/1/2020; as amended at 85 FR 62199 , 10/2/2020