[Federal Register Volume 59, Number 131 (Monday, July 11, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-16658]
[[Page Unknown]]
[Federal Register: July 11, 1994]
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RESOLUTION TRUST CORPORATION
Policy Statement on Procedures for Non-Defaulting Commercial
Borrowers To Appeal Adverse Credit Decisions of the RTC Acting as
Conservator
AGENCY: Resolution Trust Corporation.
ACTION: Policy statement.
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SUMMARY: In accordance with Sec. 21A(b)(4)(C) of the Federal Home Loan
Bank Act, 12 U.S.C. 1441a(b)(4)(C), the Resolution Trust Corporation
(RTC) announces the establishment of a procedure for non-defaulting
commercial borrowers to appeal decisions by the RTC, when acting as
conservator of an insured depository institution, which have the effect
of terminating or otherwise adversely affecting credit agreements.
EFFECTIVE DATE: This policy is effective on July 11, 1994.
FOR FURTHER INFORMATION CONTACT: Henry W. Abbot, Senior Asset
Specialist, Office of Asset Management, (202) 416-7132; Robert Gunter,
Chief of Conservatorship/Receivership Operations Unit, Conservatorship
Operations, (202) 416-7257; William I. Jones, Counsel, Division of
Legal Services, (202) 736-3106; Resolution Trust Corporation, 801 17th
Street NW., Washington, DC 20434.
SUPPLEMENTARY INFORMATION:
Introduction and Authority
Section 3(b) of the Resolution Trust Corporation Completion Act
(RTC Completion Act), Public Law No. 93-204, enacted on December 17,
1993, added a new subparagraph (C) to Sec. 21A(b)(4) of the Federal
Home Loan Bank Act, 12 U.S.C. 1441a(b)(4), which requires the RTC to
implement and maintain a program, in a manner acceptable to the Thrift
Depositor Protection Oversight Board (Oversight Board), to provide an
appeals process for business and commercial borrowers to appeal
decisions by the RTC, when acting as conservator of an insured
depository institution, which would have the effect of terminating or
otherwise adversely affecting credit or loan agreements, lines of
credit, and similar arrangements with such borrowers who have not
defaulted on their obligations to the institution in conservatorship.
The RTC submitted this Policy on Procedures for Non-defaulting
Commercial Borrowers to Appeal Adverse Credit Decisions of the RTC
Acting as Conservator to the Oversight Board for consideration at its
June 16, 1994 meeting. The Oversight Board adopted a resolution
approving the policy at that meeting. In that resolution the Oversight
Board suggested that the RTC make the public aware of the new policy
through publication in the Federal Register.
The RTC is rapidly resolving the remaining institutions it operates
in conservatorships. Inasmuch as the policy affects only the operation
of those institutions in conservatorship, there is a critical need to
make the public aware of this new policy quickly.
In light of the request of the Oversight Board and the need to
publicize the policy quickly, the RTC has concluded that publication in
the Federal Register would be the best means of disseminating the new
policy to members of the public with an interest in the subject matter.
Policy on Procedures for Non-Defaulting Commercial Borrowers to Appeal
Adverse Credit Decisions of the RTC Acting as Conservator
The RTC is issuing procedures which provide a process for non-
defaulting business and commercial borrowers to appeal the RTC's
decisions (when acting as a conservator) which terminate or otherwise
adversely affect credit or loan agreements, lines of credit or other
similar arrangements.
I. Scope
The appeals process outlined herein pertains to adverse credit
decisions affecting a non-defaulting commercial borrower made by the
RTC as conservator for an insured depository institution for which the
RTC was acting as conservator on or after December 17, 1993. These
procedures shall only apply to adverse credit decisions affecting a
non-defaulting commercial borrower made on or after December 17, 1993
by the RTC as conservator for an insured depository institution and
only during the period for which the RTC acts as conservator for such
insured depository institution. The appeals process is not intended to
deny borrowers any rights otherwise provided under law.
The appeals process described in this policy does not limit or
affect the exercise by the RTC, as conservator or receiver, of its
authority to repudiate contracts pursuant to 12 U.S.C. Sec. 1821(e).
II. Background
Generally, a predecessor institution retains the obligation to fund
unfunded or partially funded loan commitments, and such obligations are
not transferred to or assumed by the new savings association which the
RTC operates in conservatorship. However, it has also been the RTC's
policy for the conservator to consider funding partially funded loan
commitments, as generally outlined in the Asset Management and
Disposition Manual, Circular 10100.1, Change-One, Section F(3), and as
further detailed with respect to the handling of construction loans in
Circular 10100.32, Subject: ``Funding of ADC Loan Commitments,'' which
can be obtained upon request to one of the above listed contacts or
from one of the public reading rooms of the RTC. These practices will
continue. Pursuant to Section 21A(b)(4)(C) of the Federal Home Loan
Bank Act, as added by Section 3(b) of the RTC Completion Act, effective
December 17, 1993, whenever the RTC acting as conservator decides to
deny an extension of credit to a non-defaulting commercial borrower,
the borrower shall have an opportunity to appeal the decision to the
next level of authority above the initial decision maker, as described
below.
III. Definitions
The following definitions shall apply for purposes of this policy:
A. Adverse Credit Decision--a decision, made by the RTC as
conservator of an insured depository institution, to deny funds or a
request for a new extension of credit for commercial or business
purposes to a non-defaulting commercial borrower.
B. Credit Agreement--a construction loan agreement, commercial
mortgage agreement, commercial business loan agreement, line of credit
agreement or other commercial credit agreement for commercial or
business purposes.
C. Non-defaulting Commercial Borrower--a person or entity,
(1) who entered into a credit agreement with either:
(a) the predecessor institution prior to the appointment of the RTC
as receiver of the predecessor institution, or
(b) the depository institution in conservatorship prior to the
appointment of the RTC as conservator, where there is no predecessor
institution, and
(2) who is not in default of any obligations owed to the
predecessor institution or the institution in conservatorship.
D. Predecessor Institution--the insured depository institution in
receivership from which the assets, deposits and certain other
liabilities were transferred to the depository institution in
conservatorship which made the adverse credit decision.
IV. General Policies
A. Right of Appeal
A non-defaulting commercial borrower shall have the right to appeal
an adverse credit decision made by a Managing Agent or other person or
entity authorized to act on behalf of the RTC as conservator of an
insured depository institution.
B. Notice to Non-Defaulting Commercial Borrower
A Managing Agent or other person or entity authorized to act on
behalf of the RTC as conservator shall give notice to a non-defaulting
commercial borrower of (1) any adverse credit decision within the scope
of this directive as outlined in the Paragraph I above, and (2) the
right to appeal such decision. The notice should be sent via certified/
registered mail-return receipt requested to document receipt by the
borrower. (Two sample forms of such notice are included as Appendices A
and B.) This notice is in addition to any notice by the conservator
terminating a line of credit, or other credit agreement, or notice by
the receiver of the predecessor institution repudiating a loan
commitment or other credit agreement.
C. Procedure for the Appeal
(1) The Senior Credit Review Committee of the field office with
jurisdiction over the conservatorship shall normally decide the appeal
of the non-defaulting commercial borrower. However, if the adverse
credit decision under appeal was made by a field office's Senior Review
Committee, or by a person or entity at a level of authority above the
field office Senior Credit Review Committee, then the person or entity
at the next level of authority above the initial decision maker, as
determined by the RTC's delegations of authority, shall decide the
appeal of the non-defaulting borrower. (The person or entity deciding
the appeal is hereafter referred to as the ``hearer of the appeal.'')
(2) A non-defaulting commercial borrower must file an appeal, in
writing, with the hearer of the appeal within 60 calendar days of
receipt of the notice described in subparagraph IV.B above.
(3) A non-defaulting commercial borrower must state the grounds for
the appeal. The non-defaulting commercial borrower may submit only
documentary evidence in support of the appeal.
(4) The hearer of the appeal shall make a good faith effort to
decide the appeal within 30 calendar days of receipt of the appeal and
all documentation necessary to act on the appeal.
(5) (a) The record of an appeal shall consist of the written appeal
and documentary evidence submitted by the non-defaulting commercial
borrower and any other evidence and information within the possession
or control of the RTC that relates to the appeal.
(b) The non-defaulting commercial borrower shall have the right to
review any documentation submitted by such borrower, along with the
appeal or prior to the filing of the appeal, for purposes of
determining the accuracy of the RTC's records. The hearer of the appeal
may extend the period for deciding the appeal of such reasonable time
as may be necessary to permit any such review of the documentation
submitted by the borrower.
(6) The hearer of the appeal may reverse an adverse credit decision
if the hearer determines that (a) the extension of credit is likely to
reduce a conservatorship's overall losses, or (b) the extension of
credit would not be likely to increase the conservatorship's overall
losses.
(7) As a condition to reversing the adverse credit decision, the
hearer of the appeal may require the non-defaulting commercial borrower
to release any related claim against the receiver for a predecessor
institution, in whole or in part.
(8) The hearer of the appeal shall provide written notice of the
decision, including an explanation of any negative ruling, to the
relevant Managing Agent, Field Office Claims Department, and to the
non-defaulting commercial borrower. The RTC will make a good faith
effort to provide such notice within 30 calendar days of receiving the
Appeal Letter and all other information necessary to act on the appeal.
D. Appeal Log
A log should be maintained in each conservatorship to track each
appeal under this procedure. Entries in the log, to be initiated upon
receipt of the borrower's appeal, shall include the following items:
borrower's name, date of credit application, date of adverse credit
decision, decision by whom, date borrower's appeal received, hearer the
of appeal, date of hearer's decision, date borrower notified of
decision, and remarks.
E. Appointment of Receiver
Upon the appointment of a receiver for the depository institution
operated in conservatorship by the RTC, with respect to such
institution, the right of all non-defaulting commercial borrowers to
appeal (and any pending appeal) under this process terminates.
Thereafter, any rights of the non-defaulting commercial borrowers, with
respect to such depository institution, are governed by 12 U.S.C.
Sec. 1821(d).
F. No Further Appeal
A non-defaulting commercial borrower shall have no right to appeal
the decision of the hearer of the appeal within the RTC or to any
court.
G. No Effect on RTC's Rights as Receiver or Conservator
Nothing contained in this policy shall be construed to waive or
alter the rights of the RTC as conservator or receiver with respect to
any commercial borrower or any insured depository institution. Such
rights include, by way of illustration only, the rights to repudiate
contracts, to leave obligations and liabilities with the receiver of
the predecessor institution and to require non-defaulting commercial
borrowers to adhere to the receivership claims procedures of the RTC.
The filing of an appeal with the hearer of the appeal in accordance
with the appeal procedures outlined in subparagraph IV.C above does not
preserve, and does not substitute for, the requirement that a claim be
filed and the claims process be pursued with respect to any claim
against: (1) the receiver for any predecessor institution, or (2) the
receiver for the depository institution operated in conservatorship if
a receiver is appointed for such institution.
V. Responsibility
RTC Field Office Vice Presidents are responsible for ensuring that
all conservatorships, SAMDA contractors, commercial loan servicers,
other commercial loan managers, and appropriate RTC staff are aware of
and comply with this policy.
By Order of John E. Ryan, Deputy and Acting Chief Executive
Officer.
Dated at Washington, D.C., this 5th day of July, 1994.
Resolution Trust Corporation.
William J. Tricarico,
Assistant Secretary.
Appendix A--Notice of Adverse Decision and Right To Appeal
[For Use Where Conservator Does Not Assume Obligation To Fund and/or
Where the Receiver of Predecessor Institution Repudiates]
[date]
[Name of Borrower]
[Address of Borrower]
Dear ________________:
Effective [date], the Office of Thrift Supervision appointed the
Resolution Trust Corporation as Receiver for [Predecessor
Institution]. Concurrently with such appointment, a new federal
mutual association was formed, [name of de novo institution], and
the Resolution Trust Corporation was appointed Conservator of the
[name of de novo institution] (the ``Conservator''). Most of the
assets of [Predecessor Institution] were acquired by the Conservator
in consideration of the assumption by the Conservator of some, but
not all, of the liabilities of the [Predecessor Institution]. The
Conservator DID NOT, however, assume the obligation to continue to
fund your loan{, and as you were informed in another letter the
Receiver for [Predecessor Institution] has repudiated the loan
agreement and terminated any obligation to continue to fund your
loan}.\1\ You may have a claim against the Receiver of [Predecessor
Institution] for the unfunded loan amount. You must follow any
instructions from the receiver regarding the filing of such claim.
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\1\To be used when a repudiation occurs.
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Notwithstanding that the Conservator has no obligation to
continue to fund your loan, the Conservator has the discretion to
provide funds to you through a new extension of credit, when the
Conservator determines, in its sole discretion, that it is in the
best interest of the Conservator to provide those funds. However,
the Conservator has decided not to provide funds to you.
Because you are a non-defaulting commercial borrower of [name of
the predecessor institution], section 21A(b)(4)(C) of the Federal
Home Loan Bank Act provides you with an opportunity to appeal this
adverse credit decision of the Conservator. You must submit your
appeal in writing to the hearer of the appeal, set forth below,
within 60 days of receipt of this notice, stating the grounds for
your appeal. In support of your appeal, you may submit documentary
evidence, which must be submitted at the same time as your letter of
appeal. The hearer of the appeal will conduct no evidentiary
hearing. A copy of the RTC's policy on borrower appeals is attached
for your information.
You should know that the hearer of the appeal may only reverse
the adverse credit decision if the hearer determines that to do so
would reduce, or would not increase, the overall losses to the RTC
as Conservator.
Your appeal should be submitted to:
[Name of Hearer of the Appeal]
[Address of Hearer]
Attention: ____________
The filing of an appeal with the hearer of the appeal does not
preserve your claim with the receiver of [Predecessor Institution]
or affect in any way the right of the Receiver to repudiate your
credit agreement.
Sincerely,
[Managing Agent or other official]
Appendix B--Notice of Adverse Decision and Right To Appeal
[For Use]
(1) Where Credit Agreement Transferred to Conservator and
Conservator Terminated Agreement in Accordance With Its Terms, or
(2) Where Non-Defaulting Commercial Borrower Has Made an
Application for a New Loan or a New Line of Credit.]
[date]
[Name of Borrower]
[Address of Borrower]
Dear ____________:
The Resolution Trust Corporation acting as Conservator of [name
of de novo] (the ``Conservator'') has [reviewed your application for
credit and has] decided not to provide funds to you. Section
21A(b)(4)(C) of the Federal Home Loan Bank Act provides you with an
opportunity to appeal this adverse credit decision of the
Conservator. You must submit your appeal in writing to the hearer of
the appeal, set forth below, within 60 days of receipt of this
notice, stating the grounds for your appeal. In support of your
appeal, you may submit documentary evidence, which must be submitted
at the same time as your letter of appeal. The hearer of the appeal
will conduct no evidentiary hearing. A copy of the RTC's policy on
borrower appeals is attached for your information.
You should know that the hearer of the appeal may only reverse
the adverse credit decision if the hearer determines that to do so
would reduce, or would not increase, the overall losses to the RTC
as Conservator.
Your appeal should be submitted to:
[Name of Hearer of the Appeal]
[Address of Hearer]
Attention: ____________
Sincerely yours,
[Managing Agent or other official]
[FR Doc. 94-16658 Filed 7-8-94; 8:45 am]
BILLING CODE 6714-01-M