[Code of Federal Regulations]

[Title 12, Volume 6]

[Revised as of January 1, 2006]

From the U.S. Government Printing Office via GPO Access

[CITE: 12CFR617.7425]



[Page 211-212]

 

                       TITLE 12--BANKS AND BANKING

 

                 CHAPTER VI--FARM CREDIT ADMINISTRATION

 

PART 617_BORROWER RIGHTS--Table of Contents

 

    Subpart E_Distressed Loan Restructuring; State Agricultural Loan 

                           Mediation Programs

 

Sec. 617.7425  What type of notice should be given to a borrower before 

foreclosure?



    The qualified lender must send the 45-day notice, as described in 

Sec. 617.7410(a)(2), no later than 45 days before any qualified lender 

begins foreclosure proceedings. The notice informs the borrower in 

writing that the loan may be suitable for restructuring and that the 

qualified lender will review any suitable loan for possible 

restructuring. The 45-day notice must include a copy of the policy and 

the materials described in Sec. 617.7410(b). The notice must also state 

that if the loan is restructured, the borrower must perform under this 

restructure agreement. If the borrower does not perform, the qualified 

lender may initiate foreclosure.

    (a) Does the notice have to inform the borrower that foreclosure is 

possible? The notice must inform the borrower that the alternative to 

restructuring may be foreclosure. If the notice does not inform the 

borrower of potential foreclosure, then the qualified lender must send a 

second notice at least 45 days before foreclosure is initiated.

    (b) How are borrowers who are debtors in a bankruptcy proceeding 

notified? A qualified lender must restate the language from the 

automatic stay provision to emphasize that the notice is not intended to 

be an attempt to collect, assess, or recover a claim. The qualified 

lender should send the notice to the borrower and, if retained, the 

borrower's counsel.

    (c) May a qualified lender foreclose on a loan when there is a 

restructuring application on file? No qualified lender may foreclose or 

continue any foreclosure proceeding with respect to a distressed loan 

before the lender has completed consideration of any pending application 

for restructuring and



[[Page 212]]



CRC consideration, if applicable. This section does not prevent a lender 

from taking any action necessary to avoid the dissipation of assets or 

the diversion, dissipation, or deterioration of collateral if the lender 

has reasonable grounds to believe that such diversion, dissipation, or 

deterioration may occur.