Subordination of lien position.

CFR · 2024-01-01 · US · Title 7

(a) (b) (1) The subordination of the lender's lien position enhances the borrower's business and is in the best financial interest of the Agency; (2) The lien to which the guaranteed loan is subordinated is for a fixed dollar amount or fixed credit limit and for a fixed term, after which the guaranteed loan lien priority will be restored; (3) Remaining collateral is sufficient to provide for adequate collateral coverage of the guaranteed loan. The Agency may require a current independent appraisal in accordance with § 5001.203 of this part. However, if the original appraisal is more than one year old, but less than two years old, the lender may provide an appraisal with a new effective date of evaluation in lieu of a completely new appraisal; (4) Lien priorities remain for the portion of the loan collateral that was not subordinated; (5) The subordination of collateral to a line of credit does not extend beyond the term of the line of credit and in no event exceeds more than three years. (6) Subordination to a tax-exempt obligation is strictly prohibited in compliance with OMB Circular A-129, “Policies for Federal Credit Programs and Non-Tax Receivables.”

official document · source cfr-2024 · id 7:§ 5001.510