An agency holding security or collateral which may be liquidated and
the proceeds applied on debts due it through the exercise of a power of
sale in the security instrument or a nonjudicial foreclosure should do
so by such procedures if the debtor fails to pay the debt within a
reasonable time after demand, unless the cost of disposing of the
collateral will be disproportionate to its value or special
circumstances require judicial foreclosure. The agency should provide
the debtor with reasonable notice of the sale, an accounting of any
surplus proceeds, and any other procedures required by contract or law.
Collection from other sources, including liquidation of security or
collateral, is not a prerequisite to requiring payment by a surety or
insurance concern unless such action is expressly required by statute or
contract.
