15 U.S.C. § 697g — Foreclosure and liquidation of loans

Page 1152 TITLE 15—COMMERCE AND TRADE § 697g Small Business Prepayment Penalty Relief Act of 1994. (Pub. L. 85–699, title V, § 509, as added Pub. L. 103–403, title V, § 503, Oct. 22, 1994, 108 Stat. 4199; amended Pub. L. 104–208, div. D, title II, § 208(h)(1)(H), Sept. 30, 1996, 110 Stat. 3009–747.) Editorial Notes REFERENCES IN TEXT For definition of ‘‘this chapter’’, referred to in sub- sec. (a)(1), see References in Text note set out under section 661 of this title. Public Law 103–317, referred to in subsec. (a)(2)(B)(iii), is Pub. L. 103–317, Aug. 26, 1994, 108 Stat. 1724, known as the Departments of Commerce, Justice, and State, The Judiciary, and Related Agencies Appropriations Act, 1995. For complete classification of this Act to the Code, see Tables. The Small Business Prepayment Penalty Relief Act of 1994, referred to in subsec. (g), is title V of Pub. L. 103–403, Oct. 22, 1994, 108 Stat. 4198, which enacted this section and provisions set out as notes under this sec- tion and section 661 of this title. For complete classi- fication of this Act to the Code, see Short Title of 1994 Amendment note set out under section 661 of this title and Tables. AMENDMENTS 1996—Subsec. (a)(1). Pub. L. 104–208, § 208(h)(1)(H)(i), struck out at end ‘‘A small business investment com- pany operating under the authority of section 681(d) of this title that has issued a debenture that was pur- chased by and is held by the Administration, may, under the same terms and conditions, prepay such de- benture, and the penalty as provided in this section, and shall thereafter be immediately eligible to apply for additional assistance from the Administration.’’ Subsec. (e)(1)(B). Pub. L. 104–208, § 208(h)(1)(H)(ii), sub- stituted ‘‘section 681 of this title’’ for ‘‘subsection (c) or (d) of section 681 of this title’’. Statutory Notes and Related Subsidiaries INTENTION OF CONGRESS Pub. L. 103–403, title V, § 502, Oct. 22, 1994, 108 Stat. 4198, provided that: ‘‘(a) IN GENERAL.—The Small Business Administra- tion shall fully utilize the $30,000,000 appropriated in Public Law 103–317 [108 Stat. 1724] to reduce, in accord- ance with this title [enacting this section and provi- sions set out as a note under section 661 of this title] and the amendments made by this title, prepayment penalties imposed in connection with debentures issued under— ‘‘(1) section 303 or 503 of the Small Business Invest- ment Act of 1958 [15 U.S.C. 683, 697], which have been purchased by the Federal Financing Bank; and ‘‘(2) title III [probably means title III of Pub. L. 85–699, which is classified to section 681 et seq. of this title] to companies operating under section 301(d) of such Act [15 U.S.C. 681(d)], which have been purchased by the Small Business Administration. ‘‘(b) EQUAL OPPORTUNITY.—In order to provide an equal opportunity to participate in the program au- thorized under this title, the Small Business Adminis- tration shall afford each borrower or issuer of a deben- ture subject to this title, not less than 45 days to elect to participate and to provide an earnest money deposit. The Administration shall subsequently allow a period of not less than 4 months, during which those bor- rowers or issuers that elect to participate shall be al- lowed to complete the prepayment process. ‘‘(c) RESTRICTIONS ON PARTICIPATION.—In no event shall the Small Business Administration— ‘‘(1) allow any borrower or issuer to participate in the program if the borrower or issuer fails to— ‘‘(A) make a timely election and provide the de- posit on a timely basis; or ‘‘(B) complete the prepayment process within the required time; or ‘‘(2) allow any borrower or issuer to participate in the program at a percentage rate other than the rate finally determined to be applicable to all other bor- rowers or issuers with similar terms of years.’’ § 697g. Foreclosure and liquidation of loans (a) Delegation of authority In accordance with this section, the Adminis- tration shall delegate to any qualified State or local development company (as defined in sec- tion 697(e) of this title) that meets the eligi- bility requirements of subsection (b)(1) the au- thority to foreclose and liquidate, or to other- wise treat in accordance with this section, de- faulted 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 com- pany shall be eligible for a delegation of au- thority under subsection (a) if— (A) the company— (i) has participated in the loan liquida- tion 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 imple- menting this section; (ii) is participating in the Premier Cer- tified Lenders Program under section 697e of this title; or (iii) during the 3 fiscal years imme- diately 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 sub- stantive, decision-making experience in administering the liquidation and work- out of problem loans secured in a manner substantially similar to loans funded with the proceeds of debentures guaran- teed under section 697 of this title; and (II) who have completed a training pro- gram 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 docu- mentation demonstrating that the com- pany 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 activi- ties. (2) Confirmation On request the Administration shall exam- ine the qualifications of any company de- Page 1153 TITLE 15—COMMERCE AND TRADE § 697g 1 So in original. Probably should be ‘‘subsection’’. scribed in subsection (a) to determine if such company is eligible for the delegation of au- thority under this section. If the Administra- tion determines that a company is not eligi- ble, the Administration shall provide the com- pany 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 dele- gates authority under section 1 (a) may with respect to any loan described in subsection (a)— (A) perform all liquidation and foreclosure functions, including the purchase in accord- ance with this subsection of any other in- debtedness secured by the property securing the loan, in a reasonable and sound manner according to commercially accepted prac- tices, pursuant to a liquidation plan ap- proved in advance by the Administration under paragraph (2)(A); (B) litigate any matter relating to the per- formance of the functions described in sub- paragraph (A), except that the Administra- tion 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 estab- lished under section 696 of this title; or (II) the Administration is entitled to legal remedies not available to a quali- fied 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 liti- gation; and (C) take other appropriate actions to miti- gate 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 work- out plan approved in advance by the Admin- istration 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 liquida- tion plan. (ii) Administration action on plan (I) Timing Not later than 15 business days after a liquidation plan is received by the Ad- ministration under clause (i), the Ad- ministration 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 Ad- ministration shall within such period provide in accordance with subparagraph (E) notice to the company that sub- mitted the plan. (iii) Routine actions In carrying out functions described in paragraph (1)(A), a qualified State or local development company may undertake rou- tine actions not addressed in a liquidation plan without obtaining additional ap- proval 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 ap- proval before committing the Administra- tion to the purchase of any other indebted- ness secured by the property securing a de- faulted 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 can- not 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 sub- mitted 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 Adminis- tration under clause (i), the Administra- tion 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 pe- riod provide in accordance with subpara- graph (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, Page 1154 TITLE 15—COMMERCE AND TRADE § 697g if the company secures the written ap- proval 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 ad- ditional time required by the Administra- tion to act on the plan or request; and (iv) if the Administration cannot act be- cause insufficient information or docu- mentation was provided by the company submitting the plan or request, shall speci- fy the nature of such additional informa- tion or documentation. (3) Conflict of interest In carrying out functions described in para- graph (1), a qualified State or local develop- ment company shall take no action that would result in an actual or apparent conflict of in- terest 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, fore- closure, 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 com- pany, if the Administration determines that the company— (1) does not meet the requirements of sub- section (b)(1); (2) has violated any applicable rule or regu- lation of the Administration or any other ap- plicable law; or (3) fails to comply with any reporting re- quirement that may be established by the Ad- ministration relating to carrying out of func- tions 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 delega- tion 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 de- velopment 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 au- thority 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 sub- paragraph (C) with respect to the 12-month period preceding the date on which the re- port is submitted; and (ii) the same information with respect to loans foreclosed and liquidated, or other- wise treated, by the Administration during the same period. (E) The number of times that the Adminis- tration has failed to approve or reject a liq- uidation plan in accordance with subpara- graph (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, § 510, as added Pub. L. 106–554, § 1(a)(9) [title III, § 307(a)], Dec. 21, 2000, 114 Stat. 2763, 2763A–685.) Editorial Notes 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 relat- ing 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 sec- tion 631 of this title and Tables. Statutory Notes and Related Subsidiaries CHANGE OF NAME Committee on Small Business of Senate changed to Committee on Small Business and Entrepreneurship of Senate. See Senate Resolution No. 123, One Hundred Seventh Congress, June 29, 2001. REGULATIONS Pub. L. 106–554, § 1(a)(9) [title III, § 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 Ad- ministrator shall issue such regulations as may be nec- essary to carry out section 510 of the Small Business Investment Act of 1958 [15 U.S.C. 697g], as added by sub- section (a) of this section. ‘‘(2) TERMINATION OF PILOT PROGRAM.—Beginning on the date on which final regulations are issued under Page 1155 TITLE 15—COMMERCE AND TRADE §§ 703 to 712 paragraph (1), section 204 of the Small Business Pro- grams Improvement Act of 1996 [Pub. L. 104–208, div. D] (15 U.S.C. 695 note) shall cease to have effect.’’ CHAPTER 15—ECONOMIC RECOVERY SUBCHAPTER I—GENERALLY Sec. 701 to 712. Omitted or Repealed. 712a. Limitation of obligations for administra- tive expenses of certain agencies; limi- tation on life of certain agencies. 713 to 713a–3. Omitted or Repealed. 713a–4. Obligations of Commodity Credit Cor- poration; issuance; sale; purchase; re- demption; etc. 713a–5. Exemption of Commodity Credit Cor- poration and its obligations from tax- ation. 713a–6. Sale of surplus agricultural commodities to foreign governments. 713a–7. Exchange of surplus agricultural com- modities for reserve stocks of strategic materials. 713a–8. Omitted. 713a–9. Reimbursement of corporation from funds of Government agencies for serv- ices, losses, operating costs, or com- modities purchased. 713a–10. Omitted. 713a–11. Annual appropriations to reimburse Commodity Credit Corporation for net realized loss. 713a–11a. Interest prohibited when reimbursing Corporation for net realized losses. 713a–12. Deposit of net realized gain of Com- modity Credit Corporation in Treas- ury. 713a–13. Policies and procedures for minimum ac- quisition of stocks by Commodity Credit Corporation, encouragement of marketing through private trade chan- nels and procurement of maximum re- turns in marketplace for producers and Corporation. 713a–14, 713b. Repealed. 713c. Federal Surplus Commodities Corpora- tion; continuance of existence; pur- chase and distribution of surplus agri- cultural commodities. 713c–1. Annual report to Congress by Federal Surplus Commodities Corporation. 713c–2. Purchase and distribution of surplus fishery products. 713c–3. Promotion of the free flow of domesti- cally produced fishery products. 713d. Declaration of purpose. 713d–1. Critical shortages; recommendations by President; public hearings. 713d–2. Food and conservation program; appro- priations; administrative expenses. 713d–3. Authorizations for appropriations. SUBCHAPTER II—COMMODITY CREDIT CORPORATION 714. Creation and purpose of Corporation. 714a. Location of offices. 714b. General powers of Corporation. 714c. Specific powers of Corporation. 714d. Laws applicable to Corporation. 714e. Capital stock; amount; interest. 714f. Use of funds. 714g. Board of Directors. 714h. Officers and employees; appointment; duties. 714i. Cooperation with other governmental agencies. 714j. Utilization of associations and trade fa- cilities. 714k. Records; annual report. Sec. 714l. Interest of Members of Congress. 714m. Crimes and offenses. 714n. Transfer of assets of Commodity Credit Corporation, a Delaware corporation. 714o. Dissolution of Delaware corporation. 714p. Release of innocent purchasers of con- verted goods. SUBCHAPTER I—GENERALLY § 701. Omitted Editorial Notes CODIFICATION Section was section 1 of the National Industrial Re- covery Act of June 16, 1933, ch. 90, 48 Stat. 195, as amended and modified by act June 14, 1935, ch. 246, 49 Stat. 375, which declared a national emergency and laid down policy objectives for the industrial recovery. After the act was held unconstitutional in A. L. A. Schechter Poultry Corporation v. U.S. (N.Y. 1935, 55 S.Ct. 837, 295 U.S. 495, 79 L.Ed. 1570, 97 A.L.R. 947), the Na- tional Recovery Administration was terminated and its functions and agencies transferred by Executive Orders Nos. 7252 and 7323, set out under sections 703 to 712 of this title. Statutory Notes and Related Subsidiaries SHORT TITLE OF 2022 AMENDMENT Pub. L. 117–121, § 1, May 12, 2022, 136 Stat. 1188, pro- vided that: ‘‘This Act [amending section 713c–3 of this title] may be cited as the ‘American Fisheries Advisory Committee Act’.’’ §§ 702 to 702f. Repealed. Pub. L. 89–554, § 8(a), Sept. 6, 1966, 80 Stat. 648 Section 702, act June 16, 1933, ch. 90, § 2, 48 Stat. 195, and sections 702a to 702f, act June 19, 1934, ch. 677, §§ 1–6, 48 Stat. 1183, provided for establishment of agencies to administer the National Industrial Recovery Act dur- ing period of emergency and for regulation of em- ployer-employee relations. §§ 703 to 712. Omitted Editorial Notes CODIFICATION Sections 703 to 712 of this title were sections 3 to 10, 303, and 304 of the National Industrial Recovery Act of June 16, 1933, ch. 90, 48 Stat. 195, as amended and modi- fied by act June 14, 1935, ch. 246, 49 Stat. 375. After the act was held unconstitutional in A. L. A. Schechter Poul- try Corporation v. U.S. (N. Y. 1935, 55 S. Ct. 837, 295 U. S. 495, 79 L. Ed. 1570, 97 A. L. R. 947), the National Recov- ery Administration was terminated and its functions and agencies transferred by Executive Order Nos. 7252 and 7323, see below. Subsequently, sections 303 and 304 of the Act, classified to sections 711 and 712 of this title, were repealed by Pub. L. 107–217, § 6(b), Aug. 21, 2002, 116 Stat. 1304. For history of the Commodity Cred- it Corporation, the Electric Home and Farm Authority, and the Export-Import Bank of Washington, see notes set out under section 712a of this title. Executive Documents EX. ORD. NO. 7252. TERMINATING THE NATIONAL RECOV- ERY ADMINISTRATION AND TRANSFERRING CERTAIN AGENCIES AND FUNCTIONS THEREOF TO THE DEPART- MENTS OF COMMERCE AND LABOR Ex. Ord. No. 7252, Dec. 21, 1935, provided: 1. The National Recovery Administration and the of- fice of Administrator thereof are hereby terminated.