[Federal Register Volume 65, Number 173 (Wednesday, September 6, 2000)]
[Proposed Rules]
[Pages 53948-53962]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-22745]


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DEPARTMENT OF THE INTERIOR

Bureau of Indian Affairs

25 CFR Part 103

RIN 1076-AD73


Loan Guaranty, Insurance, and Interest Subsidy

AGENCY: Bureau of Indian Affairs, Interior.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Department of the Interior (DOI), Bureau of Indian Affairs 
(BIA) proposes to revise the regulations that implement the Loan 
Guaranty, Insurance, and Interest Subsidy Program. This Program 
authorizes the Secretary of DOI to guaranty or insure loans made by 
private lenders to individual Indians and to organizations of Indians, 
and to assist qualified borrowers with a portion of their

[[Page 53949]]

interest payments. These revised regulations will clarify and shorten 
existing regulatory language, reflect evolved BIA policies, address 
issues that have emerged over the years, and enhance some features of 
the Program.

DATES: Comments must be received on or before November 6, 2000.

ADDRESSES: Mail comments to George Gover, Acting Director, Office of 
Economic Development, Bureau of Indian Affairs, Department of the 
Interior, 1849 C St., NW, Mail Stop 4640-MIB, Washington, DC 20240; or 
hand deliver them to Room 4640 at the above address. Mail comments to 
the attention of the Desk Officer for Department of the Interior, 
Office of Information and Regulatory Affairs, Office of Management and 
Budget, 725 17th Street NW, Washington, DC 20503.
    You also may supply comments via electronic mail by sending them to 
[email protected]. Comments will be available for inspection at the 
above mailing address from 9 a.m. to 4 p.m., Monday through Friday 
beginning approximately 2 weeks after publication of this document in 
the Federal Register.

FOR FURTHER INFORMATION CONTACT: David B. Johnson, Division of Indian 
Affairs, Office of the Solicitor, 202-208-3401.

SUPPLEMENTARY INFORMATION: The Loan Guaranty, Insurance, and Interest 
Subsidy Program (Program) was established in the Act of April 12, 1974, 
as amended, 88 Stat. 79, 25 U.S.C. 1481 et seq. and 25 U.S.C. 1511 et 
seq. The Program has existed since 1974, and the regulations 
implementing it have existed since 1975. There has never been any 
extensive or significant revision of these regulations, and in fact 
most of the regulations remain as they were originally drafted. BIA 
believes that revising these regulations in the manner proposed below 
will clarify and shorten part 103, reflect evolved BIA policies, 
address issues that have emerged over the years, and enhance some 
features of the Program.
    The new regulations are drafted in plain language, to encourage 
understanding. BIA also has made some substantive changes in the 
regulations, in response to the history of the Program. For example, 
BIA hopes these new regulations will encourage lenders to take a fresh 
look at the insurance feature of the program, which has never been 
used.
    Publication of the proposed rule by DOI provides the public with an 
opportunity to participate in the rulemaking process. Interested 
persons may submit written comments regarding the proposed rule to the 
location identified in the ADDRESSES section of this document.
    The following table shows how the proposed new regulations relate 
to the regulations currently in effect:

----------------------------------------------------------------------------------------------------------------
                                                                                       Is there any intended
    Old regulatory section                        Now at section                     substantive change in the
                                                                                               rule?
----------------------------------------------------------------------------------------------------------------
103.1.........................  103.44...........................................  Very little. BIA has changed
                                                                                    definitions predominantly to
                                                                                    clarify the program. Some
                                                                                    old definitions have been
                                                                                    deleted, and some new ones
                                                                                    have been added.
103.2.........................  103.1, 103.2, 103.20.............................  No.
103.3.........................  103.4, 103.15(l).................................  Yes. Regulations no longer
                                                                                    permit loans for the
                                                                                    borrower's housing. Also,
                                                                                    BIA has deleted some
                                                                                    unnecessary provisions.
103.4.........................  103.12(c), 103.26(d), 103.27.....................  No.
103.5.........................  103.12(h), 103.26(l), 103.30(h)..................  No.
103.6.........................  103.12(h), 103.26(l), 103.30(h)..................  No.
103.7.........................  103.25, 103.26...................................  No.
103.8.........................  103.25...........................................  No.
103.9.........................  103.10, 103.11...................................  Yes. Regulations expand on
                                                                                    how BIA qualifies lenders
                                                                                    under the program, and now
                                                                                    provide for up to three
                                                                                    levels of lender approval.
103.10........................  103.4, 103.7, 103.10, 103.15(c)..................  No.
103.11........................
103.16, 103.18................  No...............................................
103.12........................  103.13, 103.16, 103.18...........................  No.
103.13........................  103.5, 103.6.....................................  Yes. Regulations no longer
                                                                                    limit loans to partnerships
                                                                                    or other non-tribal
                                                                                    organizations to $500,000.
                                                                                    Also, regulations now
                                                                                    clearly allow a single
                                                                                    borrower to have up to 2
                                                                                    separately guaranteed loans
                                                                                    or one loan guarantee and
                                                                                    any number of insured loans
                                                                                    at a time.
103.14........................  103.5, 103.6.....................................  Yes. Regulations no longer
                                                                                    mention housing as an
                                                                                    appropriate use of insured
                                                                                    loan funds. Regulations no
                                                                                    longer require tribal
                                                                                    lenders to have specific
                                                                                    prior approval to make
                                                                                    insured loans to other
                                                                                    tribes or Indian
                                                                                    organizations. Lenders can
                                                                                    now make insured loans of up
                                                                                    to $100,000 without specific
                                                                                    prior approval. Upon
                                                                                    obtaining specific prior
                                                                                    approval, lenders may make
                                                                                    insured loans to an
                                                                                    individual of up to
                                                                                    $500,000, or more for a
                                                                                    tribe or business entity.
                                                                                    The limit on the number of
                                                                                    insured loans a lender may
                                                                                    make to a borrower has been
                                                                                    deleted. BIA also has
                                                                                    deleted other provisions as
                                                                                    unnecessary.
103.15........................  103.9, 103.12, 103.13............................  Yes. BIA has revised the
                                                                                    application procedure to
                                                                                    eliminate redundancy and to
                                                                                    capture more information
                                                                                    concerning the borrower.
103.16........................  103.4(d).........................................  No.
103.17........................  103.4(c), 103.12(k)..............................  Yes. Regulations now require
                                                                                    the borrower to be current
                                                                                    on any debt that the
                                                                                    guaranteed or insured loan
                                                                                    is to refinance.
103.18........................  103.14...........................................  No.
103.19........................  103.16, 103.18...................................  No.
103.20........................  103.16, 103.18...................................  No.
103.21........................  103.34...........................................  No.
103.22........................  103.36(b) and (c)................................  Yes. Regulatory language has
                                                                                    been revised to curtail
                                                                                    certain abuses.
103.23........................  103.34(a)........................................  No.
103.24........................  103.15(c)........................................  No.
103.25........................  103.15(d) and (e)................................  No.
103.26........................  103.15(f)........................................  Yes. Regulations no longer
                                                                                    allow prepayment penalties.
                                                                                    BIA has deleted other
                                                                                    provisions as unnecessary or
                                                                                    confusing.

[[Page 53950]]

 
103.27........................  103.12(a) and (f), 103.13(b), 103.16(a),           No.
                                 103.26(i).
103.28........................  103.30(e), (f) and (g), 103.39(c)................  No.
103.29........................  103.12(j), 103.13(b), 103.30(d) and (i)..........  No.
103.30........................  Not applicable...................................  No. BIA has deleted former
                                                                                    regulatory language because
                                                                                    it is unnecessary or
                                                                                    redundant of other legal
                                                                                    provisions.
103.31........................  Not applicable...................................  No. BIA has deleted former
                                                                                    regulatory language because
                                                                                    it is unnecessary or
                                                                                    redundant of other legal
                                                                                    provisions.
103.32........................  Not applicable...................................  No. BIA has deleted former
                                                                                    regulatory language because
                                                                                    it is unnecessary or
                                                                                    redundant of other legal
                                                                                    provisions.
103.33........................  103.15(m)........................................  No. BIA has deleted some
                                                                                    regulatory language because
                                                                                    it is unnecessary or
                                                                                    redundant of other legal
                                                                                    provisions.
103.34........................  103.12(c) and (e), 103.13(b), 103.30(m)..........  No.
103.35........................  103.34(a), 103.43................................  No.
103.36........................  103.35, 103.36, 103.37, 103.38, 103.39...........  Yes. BIA has extended the
                                                                                    deadlines by which the
                                                                                    lender must notify BIA and
                                                                                    take action in response to a
                                                                                    default. BIA also has
                                                                                    specified some conditions
                                                                                    under which it might waive a
                                                                                    failure to adhere to strict
                                                                                    regulatory deadlines. Also,
                                                                                    regulations now fix the date
                                                                                    through which BIA is liable
                                                                                    to pay the lender for
                                                                                    interest accruing on the
                                                                                    loan.
103.37........................  103.35, 103.36, 103.37, 103.38, 103.39...........  Yes. BIA has extended the
                                                                                    deadlines by which the
                                                                                    lender must notify BIA and
                                                                                    take action in response to a
                                                                                    default. BIA also has
                                                                                    specified some conditions
                                                                                    under which it might waive a
                                                                                    failure to adhere to strict
                                                                                    regulatory deadlines. Also,
                                                                                    regulations now fix the date
                                                                                    through which BIA is liable
                                                                                    to pay the lender for
                                                                                    interest accruing on the
                                                                                    loan.
103.38........................  103.38...........................................  Yes. BIA has deleted a
                                                                                    provision that is obsolete.
103.39........................  Not applicable...................................  No. BIA has deleted former
                                                                                    regulatory language because
                                                                                    it is unnecessary or
                                                                                    redundant of other legal
                                                                                    provisions.
103.40........................  103.37, 103.39(d)................................  Yes. Regulations now fix the
                                                                                    date through which BIA is
                                                                                    liable to pay the lender for
                                                                                    interest accruing on the
                                                                                    loan.
103.41........................  103.15, 103.18...................................  No.
103.42........................  103.20, 103.21, 103.22, 103.23, 103.24...........  Yes. Regulations no longer
                                                                                    require the rate of interest
                                                                                    subsidy to be established at
                                                                                    the same time as the
                                                                                    corresponding loan guaranty
                                                                                    or insurance coverage. Also,
                                                                                    interest subsidy will no
                                                                                    longer be withdrawn before 3
                                                                                    years merely because the
                                                                                    borrower's cash flow begins
                                                                                    to equal or exceed industry
                                                                                    norms.
103.43........................  103.8,...........................................  Yes. The date the premium is
                                                                                    due now is 103.18, 103.19
                                                                                    tied to the date the loan
                                                                                    closes, not the date BIA
                                                                                    approves the loan guaranty
                                                                                    application. Also, BIA now
                                                                                    has fixed the amount of the
                                                                                    premium on insured loans,
                                                                                    which was inadvertently
                                                                                    omitted in prior
                                                                                    regulations.
103.44........................  103.15(a)........................................  Yes. BIA now permits charges
                                                                                    for reasonable and customary
                                                                                    broker commissions.
103.45........................  103.15(j)........................................  Yes. BIA now will guaranty or
                                                                                    insure the amount of any
                                                                                    late fees the lender
                                                                                    assesses, subject to certain
                                                                                    limitations.
103.46........................  103.30, 103.32...................................  No.
103.47........................  103.15(k)........................................  No.
103.48........................  103.15(l), 103.30(d).............................  No.
103.49........................  103.30, 103.39, 103.40...........................  No.
103.50........................  Not applicable...................................  Yes. There is no longer a
                                                                                    separate loan guaranty and
                                                                                    insurance fund. See, the
                                                                                    Federal Credit Reform Act of
                                                                                    1990, Pub. L. 101-508, Title
                                                                                    XIII, Sec.  13201(a).
103.51........................  103.28, 103.29...................................  Yes. Regulations now address
                                                                                    loan participation
                                                                                    agreements.
103.52........................  103.14, 103.32, 103.33...........................  No.
103.53........................  103.41...........................................  No.
103.54........................  Not applicable...................................  No. BIA has deleted former
                                                                                    regulatory language because
                                                                                    it was confusing and
                                                                                    redundant of other legal
                                                                                    provisions.
103.55........................
103.45........................  .................................................  Yes. BIA has updated this
                                                                                    provision.
----------------------------------------------------------------------------------------------------------------

Regulatory Planning and Review (E.O. 12866)

    This document is not a significant rule and is not subject to 
review by the Office of Management and Budget (OMB) under Executive 
Order 12866.
    This rule will not have an effect of $100 million or more on the 
economy. Current and foreseeable funding levels for the Program will 
permit at most $82 million in new loans per annum. The rule will not 
adversely affect in a material way the economy, productivity, 
competition, jobs, the environment, public health or safety, or State, 
local, or tribal governments or communities. The Program is designed to 
enhance, not hinder, productivity, competition, jobs, and the overall 
economy, and there is nothing inherent about the Program or the rule 
that will lead to adverse effects on the environment, public health or 
safety, or State, local, or tribal governments or communities.
    This rule will not create a serious inconsistency or otherwise 
interfere with an action taken or planned by another agency. There is 
nothing in the rule to limit other efforts to encourage Indian economic 
development.

[[Page 53951]]

    This rule does not alter the budgetary effects or entitlements, 
grants, user fees, or loan programs or the rights or obligations of 
their recipients. The Program does not create or limit any entitlement, 
has nothing to do with other grant or loan programs, and establishes no 
user fees.
    This rule does not raise novel legal or policy issues. Part 103 has 
caused minimal legal review since 1975, and the new rule is in 
substance very similar to the existing rule.

Regulatory Flexibility Act

    DOI certifies that this document will not have a significant 
economic effect on a substantial number of small entities under the 
Regulatory Flexibility Act (5 U.S.C. 601 et seq.). The number of 
lenders who might be impacted by the changes in this document is 
limited by the relatively modest number of individual Indians and 
organizations of Indians whose loans can be guaranteed or insured under 
the Program.

Small Business Regulatory Enforcement Fairness Act (SBREFA)

    This rule is not a major rule under 5 U.S.C. 804(2), the Small 
Business Regulatory Enforcement Fairness Act. This rule:
    (a) Does not have an annual effect on the economy of $100 million 
or more. Current and foreseeable funding levels for the Program will 
permit at most $82 million in new loans per annum.
    (b) Will not cause a major increase in costs or prices for 
consumers, individual industries, Federal, State, or local government 
agencies, or geographic regions. The rule is designed to clarify the 
roles and duties of the persons it may impact, and should in fact 
result in administrative savings. Any additional requirements imposed 
by the rule are either very limited in scope, or else in the nature of 
assembling information that lenders typically gather anyway.
    (c) Does not have significant adverse effects on competition, 
employment, investment, productivity, innovation, or the ability of 
U.S.-based enterprises to compete with foreign-based enterprises. To 
the contrary, the rule implements the Program in order to encourage 
investment in new Indian businesses, and thereby increase U.S.-based 
competition, employment, productivity, and innovation.

Unfunded Mandates Reform Act

    This rule does not impose an unfunded mandate on State, local, or 
tribal governments or the private sector of more than $100 million per 
year. It does not impose any mandates at all. The rule does not have a 
significant or unique effect on State, local, or tribal governments or 
the private sector. Only a small segment of the private sector--the 
lending community--is directly affected by the rule, and the rule (1) 
is functionally very similar to existing law, and (2) relates to a 
Program that will permit at most $82 million in new loans per annum, 
based on current and foreseeable funding levels. A statement containing 
the information required by the Unfunded Mandates Reform Act (2 U.S.C. 
1531, et seq.) is not required.

Takings (E.O. 12630)

    In accordance with Executive Order 12630, the rule does not have 
significant takings implications. The Program enhances the security 
available to lenders, and does not inherently involve any action that 
could deprive anyone of property without just compensation. A takings 
implication assessment is not required.

Federalism (E.O. 13132)

    In accordance with Executive Order 13132, this rule does not have 
federalism implications. This rule does not substantially and directly 
affect the relationship between the Federal and State governments. The 
rule is directed at the relationship between lenders and the Federal 
Government, and does not impact States at all. This rule does not 
impose costs on States or localities, for the same reason.

Civil Justice Reform (E.O. 12988)

    In accordance with Executive Order 12988, the Office of the 
Solicitor has determined that this rule does not unduly burden the 
judicial system and meets the requirements of sections 3(a) and 3(b)(2) 
of the Order.

Paperwork Reduction Act

    This regulation requires information collection from 10 or more 
parties and a submission under the Paperwork Reduction Act is required. 
An OMB form 83-I has been reviewed by DOI and sent to OMB for approval. 
You are invited to submit comments on the information collection 
request. You can receive copies of the OMB submission by contacting the 
person listed in the FOR FURTHER INFORMATION CONTACT section or by 
requesting the information from the Bureau of Indian Affairs 
Information Collection Control Officer, 1849 C Street, NW, Mail Stop 
4613 MIB, Washington, DC 20240. Please note that comments are available 
for public inspection during regular business hours. If you wish to 
have your name and address withheld, you must state this prominently at 
the beginning of your comments. We will honor that request to the 
extent allowable by law.
    The purpose of the Loan Guaranty, Insurance, and Interest Subsidy 
Program, 25 U.S.C. 1481 et seq. and 25 U.S.C. 1511 et seq., is to 
encourage private lending to individual Indians and organizations of 
Indians, by providing lenders with loan guaranties or loan insurance to 
reduce their potential risk. Lenders, borrowers, and the loan purpose 
all must qualify under Program terms. In addition, the Secretary of the 
Interior must be satisfied that there is a reasonable prospect that the 
loan will be repaid. BIA collects information under the proposed 
regulations to ensure compliance with Program requirements.
    BIA must approve of a lender before it can make loans that are 
guaranteed or insured under the Program. Pre-approval is a one-time 
process that we estimate imposes on lenders an average burden of 2 
hours, including time for reviewing instructions and preparing and 
submitting a BIA Loan Guaranty Agreement or Loan Insurance Agreement, 
as appropriate. After a lender is qualified as a BIA lender, the burden 
associated with individual loan guaranty or loan insurance applications 
is in large part one of gathering and submitting to BIA information the 
lender would ordinarily collect from its borrowers anyway, irrespective 
of the Program. The average burden of submitting a loan guaranty or 
insurance application is 2 hours, including time for reviewing 
instructions, searching data sources, and assembling the information 
needed. If BIA issues a guaranty certificate or approves an insurance 
agreement, the average burden to close the loan in accordance with this 
part is 1 hour. The average annual burden to maintain data and to 
prepare and submit reports is approximately 75 minutes, assuming an 
average of four reports each year. Interest subsidy calculations, where 
these are applicable, would increase the average annual burden to 
maintain data and submit reports to approximately 3.25 hours. Should 
the lender and borrower need to change material terms of the loan, 
there will be an additional reporting burden of approximately 1 hour. 
Finally, if the lender experiences a default, the burden associated 
with following the procedures in this part ranges from 30 minutes to 
4.5 hours.
    Based upon historical records, each year BIA anticipates 
approximately 64 applications for loan guaranties. Although there have 
never been any loan insurance applications, apparent need suggests that 
BIA will receive approximately 20 additional loan

[[Page 53952]]

insurance applications or notices of loan insurance per year. Of the 
combined 84 applications/notices, BIA expects that it will guarantee or 
insure approximately 64 new loans each year, of which approximately 45 
will receive interest subsidy.
    In all, BIA estimates the total annual Program compliance burden to 
range from approximately 4.75 to 12.75 hours per loan, with the average 
loan causing a burden of approximately 6.18 hours. Most compliance 
burdens fall below this average. For purposes of the following table, 
BIA assumes the average hourly wage per respondent to be $20.00:

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                        Total        Annual
               CFR Sections                        BIA form(s)?            Number of   Frequency of     annual       burden      Cost per      Cost to
                                                                          respondents    responses    responses      hours         hour      respondents
--------------------------------------------------------------------------------------------------------------------------------------------------------
103.11...................................  Yes                                    12             1            12           24          $20          $480
103.12, 103.13, 103.14, 103.21...........  Yes                                    84             1            84          168           20         3,360
103.17...................................  No                                     64             1            64           32           20           640
103.18...................................  Yes                                    64             1            64           32           20           640
103.23...................................  Yes                                    45             4           180           90           20         1,800
103.26...................................  No                                     64             1            64           32           20           640
103.32...................................  No                                     64             1            64           16           20           320
103.33...................................  No                                     64             4           256           64           20         1,280
103.34...................................  No                                     10             1            10           10           20           200
103.35...................................  Yes                                    20             1            20           10           20           200
103.36...................................  No                                     20             1            20           20           20           400
103.37...................................  Yes                                     7             1             7           14           20           280
103.38...................................  Yes                                     7             1             7            7           20           140
                                                                                                             852          519                     10,380
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The foregoing estimates cover labor only; they do not include the 
costs of postage, energy, supplies, or other fixed costs that lenders 
may allocate toward Program compliance, which is expected to be 
minimal.
    Organizations and individuals are invited to comment on (a) the 
necessity of the information for proper performance of the functions of 
the bureau and its practical utility, (b) the accuracy of the bureau's 
estimate of the burden of the collection, the validity of the 
methodology and assumptions used, (c) the quality, utility, and clarity 
of the information to be collected, (d) whether the burden can be 
minimized on the respondents by any means such as electronic, 
mechanical, automation. Organizations and individuals who desire to 
submit comments on the information collection requirements should 
direct them to the Office of Information and Regulatory Affairs, OMB, 
New Executive Office Building, Washington, DC 20503; Attention: Desk 
Officer for the U.S. Department of the Interior.
    OMB is required to make a decision concerning the collection of 
information contained in these proposed regulations between 30 and 60 
days after publication of this document in the Federal Register. 
Therefore, a comment to OMB is best ensured of having its full effect 
if OMB receives it within 30 days of publication. This does not affect 
the deadline for the public to comment to BIA on the proposed 
regulations.

National Environmental Policy Act

    This rule does not constitute a major Federal action significantly 
affecting the quality of the human environment. A detailed statement 
under the National Environmental Policy Act of 1969 is not required.

Clarity of this regulation

    Executive Order 12866 requires each agency to write regulations 
that are easy to understand. We invite your comments on how to make 
this rule easier to understand, including answers to questions such as 
the following: (1) Are the requirements in the rule clearly stated? (2) 
Does the rule contain technical language or jargon that interferes with 
its clarity? (3) Does the format of the rule (grouping and order of 
sections, use of headings, paragraphing, etc.) aid or reduce its 
clarity? (4) Would the rule be easier to understand if it were divided 
into more (but shorter) sections? (A ``section'' appears in bold type 
and is preceded by the symbol ``Sec. ''and a numbered heading; for 
example, Sec. 103.13 How does a lender apply for loan insurance 
coverage?) (5) Is the description of the rule in the SUPPLEMENTARY 
INFORMATION section of the preamble helpful in understanding the 
proposed rule? What else could we do to make the rule easier to 
understand?
    Send a copy of any comments that concern how we could make this 
rule easier to understand to: Office of Regulatory Affairs, Department 
of the Interior, Room 7229, 1849 C Street, NW, Washington, DC 20240. 
You may also e-mail the comments to this address: [email protected].

Public Comments

    If you wish to comment, you may submit your comments by any one of 
several methods. You may mail comments to the Office of Economic 
Development, Bureau of Indian Affairs, Department of the Interior, 1849 
C St., NW, Mail Stop 4640-MIB, Washington, DC 20240. You also may 
comment via the Internet to [email protected]. Please submit Internet 
comments as an ASCII file avoiding the use of special characters and 
any form of encryption. Please also include ``Attn: [1076-AD73]'' and 
your home and return address in your Internet message. If you do not 
receive a confirmation from the system that we have received your 
Internet message, contact us directly at 202-208-4499. Finally, you may 
hand-deliver comments to Room 4640 at the above address. Our practice 
is to make comments, including names and home addresses of respondents, 
available for public review during regular business hours. Individual 
respondents may request that we withhold their home address from the 
rulemaking record, which we will honor to the extent allowed by law. 
There also may be circumstances in which we would withhold from the 
rulemaking record a respondent's identity, as allowable by law. If you 
wish us to withhold your name and/or address, you must state this 
prominently at the beginning of your comment. However, we will not 
consider anonymous comments. We will make all submissions from 
organizations or businesses, and from individuals identifying 
themselves as representatives or officials of

[[Page 53953]]

organizations or businesses, available for public inspection in their 
entirety.
    Drafting Information: The primary author of this document is David 
B. Johnson, Division of Indian Affairs, Office of the Solicitor, 
Department of the Interior.

List of Subjects in 25 CFR Part 103

    Indians--Insurance, Interest subsidy, and Loan guaranty.
    For the reasons given in the preamble, BIA proposes to revise part 
103 in chapter I of title 25 of the Code of Federal Regulations as set 
forth below.

25 CFR PART 103--LOAN GUARANTY, INSURANCE, AND INTEREST SUBSIDY

Subpart A--General Provisions
Sec.
103.1  What does this part do?
103.2  Who does the Program help?
103.3  Who administers the Program?
103.4  What kinds of loans will BIA guarantee or insure?
103.5  What size loan will BIA guarantee or insure?
103.6  To what extent will BIA guarantee or insure a loan?
103.7  Must the borrower have equity in the business being financed?
103.8  Is there any cost for a BIA guaranty or insurance coverage?
Subpart B--How a Lender Obtains a Loan Guaranty or Insurance Coverage
103.9  Who applies to BIA under the Program?
103.10  What lenders are eligible under the Program?
103.11  How does BIA approve lenders for the Program?
103.12  How does a lender apply for a loan guaranty?
103.13  How does a lender apply for loan insurance coverage?
103.14  Can BIA request additional information?
103.15  Are there any prohibited loan terms?
103.16  How does BIA approve or reject a loan guaranty or insurance 
application?
103.17  Must the lender follow any special procedures to close the 
loan?
103.18  How does BIA issue a loan guaranty or confirm loan 
insurance?
103.19  When must the lender pay BIA the loan guaranty or insurance 
premium?
Subpart C--Interest Subsidy
103.20  What is interest subsidy?
103.21  Who applies for interest subsidy payments, and what is the 
application procedure?
103.22  How does BIA determine the amount of interest subsidy?
103.23  How does BIA make interest subsidy payments?
103.24  How long will BIA make interest subsidy payments?
Subpart D--Provisions Relating to Borrowers
103.25  What kind of borrower is eligible under the Program?
103.26  What must the borrower supply the lender in its loan 
application?
103.27  Can the borrower get help preparing its loan application or 
putting its loan funds to use?
Subpart E--Loan Transfers
103.28  What if the lender transfers part of the loan to another 
person?
103.29  What if the lender transfers the entire loan?
Subpart F--Loan Servicing Requirements
103.30  What standard of care must a lender meet?
103.31  What loan servicing requirements apply to BIA?
103.32  What sort of loan documentation does BIA expect the lender 
to maintain?
103.33  Are there reporting requirements?
103.34  What if the lender and borrower decide to change the terms 
of the loan?
Subpart G--Default and Payment by BIA
103.35  What must the lender do if the borrower defaults on the 
loan?
103.36  What options and remedies does the lender have if the 
borrower defaults on the loan?
103.37  What must the lender do to collect payment under its loan 
guaranty certificate or loan insurance coverage?
103.38  Is there anything else for BIA or the lender to do after BIA 
makes payment?
103.39  When will BIA refuse to pay all or part of a lender's claim?
103.40  Will BIA make exceptions to its criteria for denying 
payment?
103.41  What happens if a lender violates provisions of this part?
103.42  How long must a lender comply with Program requirements?
103.43  What must the lender do after repayment in full?
Subpart H--Definitions and Miscellaneous Provisions
103.44  What certain terms mean in this part.
103.45  Information collection.

    Authority: 25 U.S.C. 1498, 1511.

Subpart A--General Provisions


Sec. 103.1  What does this part do?

    This part explains how to obtain and use a BIA loan guaranty or 
loan insurance agreement under the Program, and who may do so. It also 
describes how to obtain and use interest subsidy payments under the 
Program, and who may do so.


Sec. 103.2  Who does the Program help?

    The purpose of the Program is to encourage eligible borrowers to 
develop viable Indian businesses through conventional lender financing. 
The Program benefits different parties in different ways. The direct 
function of the Program is to help lenders reduce excessive risks on 
loans they make. That function in turn helps borrowers secure 
conventional financing that might otherwise be unavailable.


Sec. 103.3  Who administers the Program?

    Authority for administering the Program ultimately rests with the 
Secretary, who may exercise that authority directly at any time. Absent 
a direct exercise of authority, however, the Secretary delegates 
Program authority to BIA officials through the U.S. Department of 
Interior Departmental Manual. A lender should submit all applications 
and correspondence to the BIA regional office serving the borrower's 
location. In some cases, the regional office may refer the lender 
either to the BIA field office or agency serving the borrower's 
specific location, or else to BIA's central office in Washington, D.C.


Sec. 103.4  What kinds of loans will BIA guarantee or insure?

    In general, BIA may guarantee or insure any loan made by an 
eligible lender to an eligible borrower to conduct a lawful business 
organized for profit. There are several important exceptions:
    (a) The business must contribute to the economy of an Indian tribe 
or its members, and be located on or near an Indian reservation;
    (b) The borrower may not use the loan for relending purposes;
    (c) If any portion of the loan is used to refinance an existing 
loan, the borrower must be current on the existing loan; and
    (d) BIA may not guarantee or insure a loan if it believes the 
lender would be willing to extend the requested financing without a BIA 
guaranty or insurance coverage.


Sec. 103.5  What size loan will BIA guarantee or insure?

    BIA can guarantee or insure a loan of up to $500,000 for an 
individual Indian, or more for an acceptable Indian business entity, 
Tribe, or tribal enterprise involving two or more persons. BIA can 
limit the size of loans it will guarantee or insure, depending on the 
resources BIA has available.


Sec. 103.6  To what extent will BIA guarantee or insure a loan?

    (a) BIA can guarantee up to 90 percent of the unpaid principal and 
accrued interest due on a loan.
    (b) BIA can insure up to the lesser of:
    (1) Ninety percent of the unpaid principal and accrued interest due 
on a loan; or
    (2) Fifteen percent of the aggregate outstanding principal amount 
of all loans the lender has insured under the Program as of the date 
the lender makes a claim under its insurance coverage.
    (c) BIA's guaranty certificate or loan insurance agreement should 
reflect the

[[Page 53954]]

lowest guaranty or insurance percentage rate that satisfies the 
lender's risk management requirements.
    (d) Absent exceptional circumstances, BIA will allow no more than:
    (1) Two simultaneous guarantees under the Program covering 
outstanding loans from the same lender to the same borrower; or
    (2) One loan guaranty under the Program when the lender 
simultaneously has one or more outstanding loans insured under the 
Program to the same borrower.


Sec. 103.7  Must the borrower have equity in the business being 
financed?

    The borrower must be projected to have at least 20 percent equity 
in the business being financed, immediately after the loan is funded. 
If a substantial portion of the loan is for construction or renovation, 
the borrower's equity may be calculated based upon the reasonable 
estimated value of the borrower's assets after completion of the 
construction or renovation.


Sec. 103.8  Is there any cost for a BIA guaranty or insurance coverage?

    BIA charges the lender a premium for a guaranty or insurance 
coverage.
    (a) The premium is:
    (1) Two percent of the portion of the original loan principal 
amount that BIA guarantees; or
    (2) One percent of the portion of the original loan principal 
amount that BIA insures, without considering the 15 percent aggregate 
outstanding principal limitation on the lender's insured loans.
    (b) Lenders may pass the cost of the premium on to the borrower, 
either by charging a one-time fee or by adding the cost to the 
principal amount of the borrower's loan. Adding the premium to the 
principal amount of the loan will not make any further premium due. BIA 
will guarantee or insure the additional principal to the same extent as 
the original approved principal amount.

Subpart B--How a Lender Obtains a Loan Guaranty or Insurance 
Coverage


Sec. 103.9  Who applies to BIA under the Program?

    The lender is responsible for determining whether it will require a 
BIA guaranty or insurance coverage, based upon the loan application it 
receives from an eligible borrower. If the lender requires a BIA 
guaranty or insurance coverage, the lender is responsible for 
completing and submitting a guaranty application or complying with a 
loan insurance agreement under the Program. Borrowers should not apply 
to BIA for a guaranty or insurance coverage, and should refrain from 
direct contact with BIA personnel with respect to a lender's 
application.


Sec. 103.10  What lenders are eligible under the Program?

    (a) Except as specified in paragraph (c) of this section, a lender 
is eligible under the Program, and may be considered for BIA approval, 
if the lender is:
    (1) Regularly engaged in the business of making loans;
    (2) Capable of evaluating and servicing loans in accordance with 
reasonable and prudent industry standards; and
    (3) Otherwise reasonably acceptable to BIA.
    (b) Eligible lenders may include tribes making loans from their own 
funds.
    (c) The following lenders are not qualified to issue loans under 
the Program:
    (1) An agency or instrumentality of the Federal Government;
    (2) A lender that borrows money from any Federal Government source, 
other than the Federal Reserve Bank System, for purposes of relending;
    (3) A lender that does not include the interest on loans it makes 
in gross income, for purposes of chapter 1, title 26 of the United 
States Code; and
    (4) A lender that does not keep any ownership interest in loans it 
originates.


Sec. 103.11  How does BIA approve lenders for the Program?

    (a) BIA approves each lender by entering into a loan guaranty 
agreement and/or a loan insurance agreement with it. BIA may provide up 
to three different levels of approval for a lender making guaranteed 
loans, depending on factors such as:
    (1) The number of loans the lender makes under the Program;
    (2) The total principal balance of the lender's Program loans;
    (3) The number of years the lender has been involved with the 
Program;
    (4) The relative benefits and opportunities the lender has given to 
Indian business efforts through the Program; and
    (5) The lender's historical compliance with Program requirements.
    (b) BIA will consider a lender's loan agreement and/or loan 
insurance agreement suspended as of:
    (1) The effective date of a change in the lender's corporate 
structure;
    (2) The effective date of a merger between the lender and any other 
entity; or
    (3) The start of any legal proceeding in which substantially all of 
the lender's assets may be subject to disposition through laws 
governing bankruptcy, insolvency, or receivership.
    (c) If a lender's loan agreement and/or loan insurance agreement is 
suspended under paragraph (b) of this section, the lender, or its 
successor in interest, must enter into a new loan guaranty agreement 
and/or loan insurance agreement with BIA in order to secure any new BIA 
loan guarantees or insurance coverage.


Sec. 103.12  How does a lender apply for a loan guaranty?

    To apply for a loan guaranty, a BIA-approved lender must submit to 
BIA a loan guaranty application request form, together with each of the 
following:
    (a) A copy of the borrower's complete loan application;
    (b) A description of the borrower's equity in the business being 
financed;
    (c) A copy of the lender's independent credit analysis of the 
borrower's business, repayment ability, and loan collateral (including 
insurance), plus the lender's evaluation of the extent to which the 
borrower will need technical assistance that the lender will be unable 
to provide;
    (d) An original report from a nationally-recognized credit bureau, 
dated within 90 days of the date of the lender's loan guaranty 
application package, outlining the credit history of the borrower and 
each co-maker or guarantor of the loan (if any);
    (e) Appropriate title and/or lien searches for each asset to be 
used as loan collateral;
    (f) A copy of the lender's loan commitment letter to the borrower, 
showing at a minimum the proposed loan amount, purpose, interest rate, 
schedule of payments, and security (including insurance requirements), 
and the lender's material terms and conditions for funding;
    (g) The lender's good faith estimate of any loan-related fees and 
costs it will charge the borrower, as authorized under this part;
    (h) Evidence that the lender has complied with, and caused the 
borrower to comply with, all applicable Federal, State, local, and 
tribal laws implicated by financing the borrower's business, including 
(for example):
    (1) Copies of all permits and licenses required to operate the 
borrower's business;
    (2) Environmental studies required for construction and/or business 
operations under NEPA and other environmental laws;
    (3) Archeological or historical studies required by law; and
    (4) A plat map and/or certification by a registered surveyor 
indicating that the

[[Page 53955]]

proposed business will not be located in a special flood hazard area, 
as defined by applicable law;
    (i) A written explanation from the lender indicating why it needs a 
BIA guaranty for the loan, and the minimum loan guarantee percentage it 
will accept;
    (j) If any significant portion of the loan will be used to finance 
construction, renovation, or demolition work, the lender's:
    (1) Insurance and bonding requirements for the work;
    (2) Proposed draw requirements; and
    (3)Proposed work inspection procedures;
    (k) If any significant portion of the loan will be used to 
refinance or otherwise retire existing indebtedness:
    (1) A clear description of all loans being paid off, including the 
names of all makers, cosigners and guarantors, maturity dates, payment 
schedules, uncured delinquencies, collateral, and payoff amounts as of 
a specific date; and
    (2) A comparison of the terms of the loan or loans being paid off 
and the terms of the new loan, identifying the advantages of the new 
loan over the loan being paid off.


Sec. 103.13  How does a lender apply for loan insurance coverage?

    BIA-approved lenders can make loans insured under the Program in 
two ways, depending on the size of the loan:
    (a) For loans in an original principal amount of up to $100,000 per 
borrower, the lender can make each loan in accordance with the lender's 
loan insurance agreement, without specific prior approval from BIA.
    (b) For loans in an original principal amount of over $100,000, the 
lender must seek BIA's specific prior approval in each case. The lender 
must submit a loan insurance coverage application request form, 
together with the same information required for a loan guaranty under 
Sec. 103.12, except for the information required by Sec. 103.12(i).
    (c) The lender must submit a loan insurance application package 
even for a loan of less than $100,000 if:
    (1) The total outstanding balance of all insured loans the lender 
is extending to the borrower under the Program exceeds $100,000; or
    (2) the lender makes a request for interest subsidy, pursuant to 
Sec. 103.21.


Sec. 103.14  Can BIA request additional information?

    BIA may require the lender to provide additional information, 
whenever BIA believes it needs the information to properly evaluate a 
new lender, guaranty application, or insurance application. After BIA 
issues a loan guaranty or insurance coverage, the lender must let BIA 
inspect the lender's records at any reasonable time for information 
concerning the Program.


Sec. 103.15  Are there any prohibited loan terms?

    A loan agreement guaranteed or insured under the Program may not 
contain:
    (a) Charges by the lender styled as ``points,'' loan origination 
fees, or any similar fees (however named), except that if authorized in 
the loan agreement, the lender may charge the borrower a reasonable 
annual loan servicing fee that:
    (1) Is not included as part of the loan principal; and
    (2) Does not bear interest;
    (b) Charges of any kind by the lender or by any third party except 
for the reasonable and customary cost of legal and architectural 
services, broker commissions, surveys, compliance inspections, title 
inspection and/or insurance, lien searches, appraisals, recording 
costs, premiums for required hazard, liability, key man life, and other 
kinds of insurance, and such other charges as BIA may approve in 
writing;
    (c) A loan repayment term of over 30 years;
    (d) Payments scheduled less frequently than annually;
    (e) A balloon repayment schedule;
    (f) A prepayment penalty;
    (g) An interest rate greater than what BIA considers reasonable, 
taking into account the range of rates prevailing in the private market 
for similar loans;
    (h) A variable interest rate, unless the rate is tied to a specific 
prime rate published from time to time by a nationally recognized 
financial institution or news source;
    (i) An increased rate of interest based on default;
    (j) A fee imposed for the late repayment of any installment due, 
except for a late fee that:
    (1) Is imposed only after the borrower is at least 30 days late 
with payment;
    (2) Does not bear interest; and
    (3) Equals no more than the lesser of 5 percent of the late 
installment or $100;
    (k) An ``insecurity'' clause, or any similar provision permitting 
the lender to declare a loan default solely on the basis of its 
subjective view of the borrower's changed repayment prospects;
    (l) A requirement that the borrower take title to any real or 
personal property purchased with loan proceeds by a title instrument 
containing restrictions on alienation, control or use of the property, 
unless otherwise required by applicable law; or
    (m) A requirement that a borrower which is a tribe provide as 
security a general assignment of the tribe's trust income. If otherwise 
lawful, a tribe may provide as loan security an assignment of trust 
income from a specific source.


Sec. 103.16  How does BIA approve or reject a loan guaranty or 
insurance application?

    (a) BIA reviews each guaranty or insurance application, and may 
evaluate each loan application independently from the lender. BIA bases 
its loan guaranty or insurance decisions on many factors, including 
compliance with this part, and whether there is a reasonable prospect 
of loan repayment from business cash flow, or if necessary, from 
liquidating loan collateral. Lenders are expected to obtain a first 
lien security interest in enough collateral to reasonably secure 
repayment of each loan guaranteed or insured under the Program, to the 
extent that collateral is available.
    (b) BIA approves applications by issuing an approval letter, 
followed by the procedures in Sec. 103.18. If the guaranty or insurance 
application is incomplete, BIA may return the application to the 
lender, or hold the application while the lender submits the missing 
information. If BIA denies the application, it will provide the lender 
with a written explanation, with a copy to the borrower.


Sec. 103.17  Must the lender follow any special procedures to close the 
loan?

    (a) BIA officials or their representatives may attend the closing 
of any loan or loan modification that BIA agrees to guarantee or 
insure. For guaranteed loans, and insured loans that BIA must 
individually review under this part, the lender must give BIA notice of 
the date of closing at least 5 business days before closing occurs.
    (b) The lender must supply BIA with copies of all final, signed 
loan closing documents within 30 days following closing. To the extent 
applicable, loan closing documents must include the following:
    (1) Promissory notes;
    (2) Security agreements, including pledge and similar agreements, 
and related financing statements (together with BIA's written approval 
of any assignment of specific tribal trust assets under Sec. 103.15(m), 
or of any security interest in an individual Indian money account);
    (3) Mortgage instruments or deeds of trust (together with BIA's 
written approval, if required by 25 U.S.C. 483a, or if the mortgage is 
of a leasehold interest in tribal trust property);
    (4) Guarantees (other than from BIA);

[[Page 53956]]

    (5) Construction contracts, and plans and specifications;
    (6) Leases related to the business (together with BIA's written 
approval, if required under 25 CFR part 162);
    (7) Attorney opinion letters;
    (8) Resolutions made by a Tribe or business entity;
    (9) Waivers or partial waivers of sovereign immunity; and
    (10) Similar instruments designed to document the loan, establish 
the basis for a security interest in loan collateral, and comply with 
applicable law.
    (c) Unless BIA indicates otherwise in writing, the Lender must 
close a guaranteed or insured loan within 60 days of any approval 
provided under Sec. 103.16.


Sec. 103.18  How does BIA issue a loan guaranty or confirm loan 
insurance?

    (a) A loan is guaranteed under the Program when all of the 
following occur:
    (1) BIA issues a signed loan guaranty certificate bearing a series 
number, an authorized signature, a guaranty percentage rate, the 
lender's name, the borrower's name, the original principal amount of 
the loan, and such other terms and conditions as BIA may require;
    (2) The loan closes and funds;
    (3) The lender pays BIA the applicable loan guaranty premium; and
    (4) The lender meets all of the conditions listed in the loan 
guaranty certificate.
    (b) A loan is insured under the Program when all of the following 
occur:
    (1) The loan's purpose and terms meet the requirements of the 
Program and the lender's loan insurance agreement with BIA;
    (2) The loan closes and funds;
    (3) The lender notifies BIA of the borrower's identity and 
organizational structure, the amount of the loan, the interest rate, 
the payment schedule, and the date on which the loan closing and 
funding occurred;
    (4) The lender pays BIA the applicable loan insurance premium;
    (5) If over $100,000 or if the loan requires interest subsidy, BIA 
approves the loan in writing; and
    (6) If over $100,000 or if the loan requires interest subsidy, the 
lender meets all of the conditions listed in BIA's written loan 
approval.


Sec. 103.19  When must the lender pay BIA the loan guaranty or 
insurance premium?

    The premium is due within 30 calendar days of the loan closing. If 
not paid on time, BIA will send the lender written notice by certified 
mail, return receipt requested, that the premium is due immediately. If 
the lender fails to make the premium payment within 30 calendar days of 
the date of BIA's notice, BIA's guaranty certificate or insurance 
coverage with respect to that particular loan is void, without further 
action.

Subpart C--Interest Subsidy


Sec. 103.20  What is interest subsidy?

    Interest subsidy is a payment BIA makes for the benefit of the 
borrower, to reimburse part of the interest payments the borrower has 
made on a loan guaranteed or insured under the Program. It is available 
to borrowers whose projected or historical earnings before interest and 
taxes, after adjustment for extraordinary items, is less than the 
industry norm.


Sec. 103.21  Who applies for interest subsidy payments, and what is the 
application procedure?

    (a) An eligible lender must apply for interest subsidy payments on 
behalf of an eligible borrower, after determining that the borrower 
qualifies. Typically, the lender should include an application for 
interest subsidy at the time it applies for a guaranty or insurance 
coverage under the Program. A request for interest subsidy must be 
supported by the information required in Secs. 103.12 and 103.13 
(relating to loan guaranty and insurance coverage applications). BIA 
approves, returns, or rejects interest subsidy applications in the same 
manner indicated in Sec. 103.16, based on the factors in Sec. 103.20 
and BIA's available resources.
    (b) BIA's approval of interest subsidy for an insured loan may 
provide for specific limitations on the manner in which the lender and 
borrower can modify the loan.


Sec. 103.22  How does BIA determine the amount of interest subsidy?

    Interest subsidy payments should equal the difference between the 
lender's rate of interest and the rate determined by the Secretary of 
the Treasury in accordance with 25 U.S.C. 1464. BIA may fix the amount 
of interest subsidy as of any date between the date of the borrower's 
application and the date BIA approves interest subsidy.


Sec. 103.23  How does BIA make interest subsidy payments?

    The lender must send BIA reports at least quarterly on the 
borrower's loan payment history, together with a calculation of the 
interest subsidy then due. The lender's reports and calculation do not 
have to be in any specific format, but the reports must contain at 
least the information required by Sec. 103.33. Based on the lender's 
reports and calculation, BIA will send interest subsidy payments to the 
borrower in care of the lender. The payments belong to the borrower, 
but the borrower and lender may agree in advance on how the borrower 
will use interest subsidy payments. BIA may verify and correct interest 
subsidy calculations and payments at any time.


Sec. 103.24  How long will BIA make interest subsidy payments?

    (a) BIA will issue interest subsidy payments for the term of the 
loan, up to 3 years. If interest subsidy payments still are justified, 
the lender may apply for up to two 1-year extensions of this initial 
term. BIA will make interest subsidy payments on a single loan for no 
more than 5 years.
    (b) BIA will choose the date from which it calculates interest 
subsidy years, usually the date the lender first extends the loan 
funds. Interest subsidy payments will apply to all loan payments made 
in the calendar years following that date.
    (c) Interest subsidy payments will not apply to any loan payment 
made after the corresponding loan guaranty or insurance coverage stops 
under the Program, regardless of the circumstances.

Subpart D--Provisions Relating to Borrowers


Sec. 103.25  What kind of borrower is eligible under the Program?

    (a) A borrower is eligible for a BIA-guaranteed or insured loan if 
the borrower is:
    (1) An Indian individual;
    (2) An Indian-owned business entity organized under Federal, State, 
or tribal law, with an organizational structure reasonably acceptable 
to BIA;
    (3) A tribe; or
    (4) A business enterprise established and recognized by a tribe.
    (b) To be eligible for a BIA-guaranteed or insured loan, a business 
entity or tribal enterprise must be at least 51 percent owned by 
Indians. If at any time a business entity or tribal enterprise becomes 
less than 51 percent Indian owned, the lender either may declare a 
default as of the date the borrower stopped being at least 51 percent 
Indian owned and exercise its remedies under this part, or else 
continue to extend the loan to the borrower and allow BIA's guaranty or 
insurance coverage to become invalid.

[[Page 53957]]

Sec. 103.26  What must the borrower supply the lender in its loan 
application?

    The lender may use any form of loan application it chooses. 
However, the borrower must supply the lender the information listed in 
this section in order for BIA to process a guaranty or insurance 
coverage application:
    (a) The borrower's precise legal name, address, and tax 
identification number or social security number;
    (b) Proof of the borrower's eligibility under the Program;
    (c) A statement signed by the borrower, indicating that it is not 
delinquent on any Federal tax or other debt obligation;
    (d) The borrower's business plan, including resumes of all 
principals and a detailed discussion of the product or service to be 
offered, market factors, the borrower's marketing strategy, and any 
technical assistance the borrower may require;
    (e) A detailed description of the borrower's equity in the business 
being financed, including the method(s) of valuation;
    (f) The borrower's balance sheets and operating statements for the 
preceding 2 years, or so much of that period that the borrower has been 
in business;
    (g) The borrower's current financial statement, and the financial 
statements of all co-makers and guarantors of the loan (other than 
BIA);
    (h) At least 2 years of financial projections for the borrower's 
business, consisting of pro-forma balance sheets, operating statements, 
and cash flow statements;
    (i) A detailed list of all proposed collateral for the loan, 
including asset values and the method(s) of valuation;
    (j) Recent appraisals for all real property and improvements to be 
used as collateral for the loan, to the extent required by law;
    (k) A detailed list of all proposed hazard, liability, key man 
life, and other kinds of insurance the borrower will maintain on its 
business assets and operations;
    (l) Evidence that the borrower's business will be conducted in 
compliance with all applicable Federal, State, local, and tribal laws, 
including (for example):
    (1) Copies of all permits and licenses required to operate the 
borrower's business;
    (2) Environmental studies required for construction and/or business 
operations under NEPA and other environmental laws;
    (3) Archeological or historical studies required by law; and
    (4) A plat map and/or certification by a registered surveyor 
indicating that the proposed business will not be located in a special 
flood hazard area, as defined by applicable law;
    (m) If any significant portion of the loan will be used to finance 
construction, renovation, or demolition work:
    (1) Written quotes for the work from established and reputable 
contractors; and
    (2) To the extent possible, copies of all construction and 
architectural contracts for the work, plans and specifications, and 
applicable building permits;
    (n) If the borrower is a tribe or a tribal enterprise, resolutions 
by the tribe and proof of authority under tribal law permitting the 
borrower to borrow the loan amount and offer the proposed loan 
collateral; and
    (o) If the borrower is a business entity, resolutions by the 
appropriate governing officials and proof of authority under its 
organizing documents permitting the borrower to borrow the loan amount 
and offer the proposed loan collateral.


Sec. 103.27  Can the borrower get help preparing its loan application 
or putting its loan funds to use?

    A borrower may seek BIA's assistance when preparing a loan 
application or when planning business operations, including assistance 
identifying and complying with applicable laws as indicated by 
Sec. 103.26(l). The borrower should contact the BIA field or agency 
office serving the area in which the borrower's business is to be 
located, or if there is no separate field or agency office serving the 
area, then the borrower should contact the BIA regional office serving 
the area. BIA will either assist the borrower directly, or help the 
borrower locate the requested assistance free of charge or at a below 
market rate.

Subpart E--Loan Transfers


Sec. 103.28  What if the lender transfers part of the loan to another 
person?

    (a) A lender may transfer one or more interests in a guaranteed 
loan to another person or persons, as long as the parties have in place 
an agreement that designates one person to perform all of the duties 
required of the lender under the Program and the loan guaranty 
certificate. Starting on the date of the transfer, only the person 
designated to perform the duties of the lender will be entitled to 
exercise the rights conferred by BIA's loan guaranty certificate, and 
will from that point forward be considered the lender for purposes of 
the Program. A lender under the Program must both own an interest in 
and service the guaranteed loan. BIA will not consider more than one 
person at any given time to be the lender with respect to any loan 
guaranty certificate. If the person designated to perform the duties of 
the lender in an agreement among loan participants is not the original 
lender, then the provisions of Sec. 103.29 will apply (relating to sale 
or assignment of guaranteed loans), and the person designated to 
perform the duties of the lender must give BIA notice of its interest 
in the loan.
    (b) Transferring any interest in an insured loan to another person 
will void the insurance coverage for that loan, except where the 
transfer is effected by a merger in which the lender is not the 
surviving entity. If a merger results in a change in the lender's 
identity, the lender's successor must notify BIA in writing of the 
change within 30 calendar days of the merger, and must re-apply to 
become an approved lender under the Program, as indicated in 
Sec. 103.11.


Sec. 103.29  What if the lender transfers the entire loan?

    (a) A lender may transfer all of its rights in a guaranteed loan to 
any other person. To keep the BIA loan guaranty in effect, the 
acquiring person must send BIA written notice of the transfer, 
describing the borrower, the loan, BIA's loan guaranty certificate 
number, and the acquiring person's name and address. Starting on the 
date of the transfer, only the acquiring person will be entitled to 
exercise the rights conferred by BIA's loan guaranty certificate, and 
will from that point forward be considered the lender for purposes of 
the Program. The acquiring person must service the guaranteed loan and 
otherwise perform all of the duties required of the lender under the 
Program and the loan guaranty certificate. If the acquiring person 
fails to send BIA proper notice within 30 calendar days of the date of 
the transfer, BIA's loan guaranty certificate will be void, without 
further action.
    (b) Transferring an insured loan to another person will void the 
insurance coverage for that loan, except where the transfer is effected 
by a merger in which the lender is not the surviving entity. In the 
event a merger results in a change in the lender's identity, the 
lender's successor must notify BIA in writing of the change within 30 
calendar days of the merger, and must re-apply to become an approved 
lender under the Program, as indicated in Sec. 103.11.

[[Page 53958]]

Subpart F--Loan Servicing Requirements


Sec. 103.30  What standard of care must a lender meet?

    Lenders must service all loans guaranteed or insured under the 
Program in a commercially reasonable manner, in accordance with 
standards and procedures adopted by prudent lenders in the BIA region 
in which the borrower's business is located, and in accordance with 
this part. If the lender fails to follow any of these standards, BIA 
may reduce or eliminate entirely the amount payable under its guaranty 
or insurance coverage to the extent BIA can reasonably attribute the 
loss to the lender's failure. BIA also may deny payment completely if 
the lender gets a loan guaranty or insurance coverage through fraud, or 
negligently allows a borrower's fraudulent loan application or use of 
loan funds to go undetected. In particular, and without limitation, 
lenders must:
    (a) Check and verify information contained in the borrower's loan 
application, such as the borrower's eligibility, the authority of 
persons acting on behalf of the borrower, and the title status of any 
proposed collateral;
    (b) Take reasonable precautions to assure that loan proceeds are 
used as specified in BIA's guaranty certificate or written insurance 
approval, or if not so specified, then in descending order of 
importance:
    (1) BIA's written loan guaranty approval;
    (2) The loan documents;
    (3) The terms of the lender's final loan commitment to the 
borrower; or
    (4) The borrower's loan application;
    (c) Whenever feasible, require the borrower to use automatic bank 
account debiting to make loan payments;
    (d) Require the borrower to take title to real and personal 
property purchased with loan proceeds in the borrower's own name, 
except for real property to be held in trust by the United States for 
the benefit of a borrower that is a tribe;
    (e) Promptly record all security interests and subsequently keep 
them in effect. Lenders must record all mortgages and other security 
interests in accordance with State and local law, including the laws of 
any tribe that may have jurisdiction. Lenders also must record any:
    (1) Leasehold mortgages or assignments of income involving 
individual Indian or tribal trust land with the BIA office having 
responsibility for maintaining records on that trust land; and
    (2) Assignments of individual Indian money accounts with the Office 
of Trust Funds Management within the United States Department of the 
Interior;
    (f) Assure, to the extent reasonably practicable, that the borrower 
and any guarantor of the loan (other than BIA) keep current on all 
taxes levied on real and personal property used in the borrower's 
business or as collateral for the loan, and on all applicable payroll 
taxes;
    (g) Assure, to the extent reasonably practicable, that all required 
insurance policies remain in effect, including hazard, liability, key 
man life, and other kinds of insurance, in amounts reasonably necessary 
to protect the interests of the borrower, the borrower's business, and 
the lender;
    (h) Assure, to the extent reasonably practicable, that the borrower 
remains in compliance with all applicable Federal, State, local and 
tribal laws, including environmental laws and laws concerning the 
preservation of historical and archeological sites and data;
    (i) Assure, to the extent reasonably practicable, that the borrower 
causes any construction, renovation, or demolition work funded by the 
loan to proceed in accordance with approved construction contracts and 
plans and specifications, which must be sufficient in scope and detail 
to adequately govern the work;
    (j) Reserve for itself and BIA the right to inspect the borrower's 
business records and all loan collateral at any reasonable time;
    (k) Promptly notify the borrower in writing of any material breach 
by the borrower of the terms of its loan, with specific instructions on 
how to cure the breach and a deadline for doing so;
    (l) Participate in any probate, receivership, bankruptcy, or 
similar proceeding involving the borrower and any guarantor or co-maker 
of the borrower's debt, to the extent necessary to maintain the 
greatest possible rights to repayment; and
    (m) Otherwise seek to avoid and mitigate any potential loss arising 
from the loan, using at least that level of care the lender would use 
if it did not have a BIA loan guaranty or insurance coverage.


Sec. 103.31  What loan servicing requirements apply to BIA?

    (a) Once a lender extends a loan that is guaranteed or insured 
under the Program, BIA has no responsibility for decisions concerning 
it, except for:
    (1) Any approvals required under this part;
    (2) Any decisions reserved to BIA under conditions of BIA's 
guaranty certificate or insurance coverage; and
    (3) Decisions concerning a loan that the lender has assigned to BIA 
or to which BIA is subrogated by virtue of paying a claim based on a 
guaranty certificate or insurance coverage.
    (b) Lenders should not ask BIA personnel for advice or concurrence 
concerning any loan servicing decisions the lender alone is expected to 
make.


Sec. 103.32  What sort of loan documentation does BIA expect the lender 
to maintain?

    For every loan guaranteed or insured under the Program, the lender 
must maintain:
    (a) BIA's original loan guaranty certificate or insurance coverage 
approval letter, if applicable;
    (b) Original signed and/or certified counterparts of all final loan 
documents, including those listed in Sec. 103.17 (concerning loan 
documents the lender is to supply BIA), all renewals, modifications, 
and additions to those documents, and signed settlement statements;
    (c) Originals or copies, as appropriate, of all documents gathered 
by the lender under Secs. 103.12, 103.13 and 103.26 (concerning 
information submitted by the borrower in its loan application, and 
information supplied to BIA in the lender's loan guaranty or insurance 
coverage application);
    (d) originals or copies, as appropriate, of all applicable 
insurance binders or certificates, including without limitation hazard, 
liability, key man life, and title insurance;
    (e) a complete and current history of all loan transactions, 
including dated disbursements, payments, adjustments, and notes 
describing all contacts with the borrower;
    (f) originals or copies, as appropriate, of all correspondence with 
the borrower, including default notices and evidence of receipt;
    (g) originals or copies, as appropriate, of all correspondence, 
notices, news items or other information concerning the borrower, 
whether gathered by the lender or furnished to it, containing material 
information about the borrower and its business operations;
    (h) originals or copies, as appropriate, of all advertisements, 
notices, title instruments, accountings, and other documentation of 
efforts to liquidate loan collateral; and
    (i) originals or copies, as appropriate, of all notices, pleadings, 
motions, orders, and other documents associated with any legal 
proceeding involving the lender and the borrower or its assets, 
including without limitation judicial or non-judicial foreclosure 
proceedings, suits to collect payment, bankruptcy proceedings, probate 
proceedings, and any settlement associated with threatened or actual 
litigation.

[[Page 53959]]

Sec. 103.33  Are there reporting requirements?

    (a) The lender must periodically report the borrower's loan payment 
history so that BIA can recalculate the government's contingent 
liability. Loan payment history reports must be quarterly unless BIA 
provides otherwise for a particular loan. These reports can be in any 
format the lender desires, as long as they contain:
    (1) The lender's name;
    (2) The borrower's name;
    (3) A reference to BIA's Loan Guaranty Certificate or Loan 
Insurance Agreement number;
    (4) The lender's internal loan number; and
    (5) The date and amount of all loan balance activity for the 
reporting period.
    (b) If applicable, the lender also must supply a calculation of any 
interest subsidy payments that are due, as indicated in Sec. 103.23.
    (c) If there is a transfer of any or all of the lender's ownership 
interest in the loan, the party receiving the ownership interest may be 
required to notify BIA, as indicated in Secs. 103.28 and 103.29.
    (d) If there is a default on the loan, the lender is required to 
notify BIA, as indicated in Secs. 103.35 and 103.36.
    (e) If the loan is prepaid in full, the lender must promptly notify 
BIA in writing so that BIA can eliminate the guaranty or insurance 
coverage from its active recordkeeping system.


Sec. 103.34  What if the lender and borrower decide to change the terms 
of the loan?

    (a) The lender must obtain written BIA approval before modifying a 
loan guaranteed or insured under the Program, if the change will:
    (1) Increase the borrower's outstanding principal amount (if a term 
loan), or maximum available credit (if a revolving loan).
    (i) BIA will approve or disapprove a loan increase based upon the 
lender's explanation of the borrower's need for additional funding, and 
updated information of the sort required under Secs. 103.12, 103.13, 
and 103.26, as applicable.
    (ii) Upon approval by BIA and payment of an additional guaranty or 
insurance premium in accordance with Secs. 103.8 and 103.19 and this 
section, the entire outstanding loan amount, as modified, will be 
guaranteed or insured (as the case may be) to the extent BIA specifies. 
The lender must pay the additional premium only on the increase in the 
outstanding principal amount of the loan (if a term loan) or the 
increase in the credit limit available to the borrower (if a revolving 
loan).
    (iii) Lenders may not increase the outstanding principal amount of 
a loan guaranteed or insured under the Program if a significant effect 
of doing so would be to allow the borrower to pay accrued loan 
interest.
    (2) Permanently adjust the loan repayment schedule.
    (3) Increase a fixed interest rate, convert a fixed interest rate 
to an adjustable interest rate, or convert an adjustable interest rate 
to a fixed interest rate.
    (4) Allow any changes in the identity or organizational structure 
of the borrower.
    (5) Allow any material change in the use of loan proceeds or the 
nature of the borrower's business.
    (6) Release any collateral taken as security for the loan, except 
items sold in the ordinary course of business and promptly replaced by 
similar items of collateral, such as inventory.
    (7) Allow the borrower to move any significant portion of its 
business operations to a location that is not on or near an Indian 
reservation.
    (8) Be likely to materially increase the risk of a claim on BIA's 
guaranty or insurance coverage, or materially reduce the aggregate 
value of the collateral securing the loan.
    (9) Cure a default for which BIA is to receive notice under 
Sec. 103.35(b).
    (b) In the case of an insured loan, the amount of which will not 
exceed $100,000 when combined with all other loans from the lender to 
the borrower, the lender need not obtain BIA's prior approval to make 
any of the loan modifications indicated in Sec. 103.34(a), except as 
provided in Sec. 103.21(b). However, all loan modifications must remain 
consistent with the lender's loan insurance agreement with BIA, and in 
the event of an increase in the borrower's outstanding principal amount 
(if a term loan), or maximum available credit (if a revolving loan), 
the lender must send BIA an additional premium payment in accordance 
with Secs. 103.8, 103.19 and this section. The lender must pay the 
additional premium only on the increase in the outstanding principal 
amount of the loan (if a term loan) or the increase in the credit limit 
available to the borrower (if a revolving loan). To the extent a loan 
modification changes any of the information supplied to BIA under 
Sec. 103.18(b)(3), the lender also must promptly notify BIA of the new 
information.
    (c) Subject to any applicable BIA loan guaranty or insurance 
coverage conditions, a lender may extend additional loans to a borrower 
without BIA approval, if the additional loans are not to be guaranteed 
or insured under the Program.

Subpart G--Default and Payment by BIA


Sec. 103.35  What must the lender do if the borrower defaults on the 
loan?

    (a) The lender must send written notice of the default to the 
borrower, and otherwise meet the standard of care established for the 
lender in this part. The lender's notice to the borrower should be sent 
as soon as possible after the default, but in any event before the 
lender's notice to BIA under paragraph (b) of this section. For 
purposes of the Program, ``default'' will mean a default as defined in 
this part.
    (b) The lender also must send written notice of the default to BIA 
by certified mail, return receipt requested, within 60 calendar days of 
the default unless the default is fully cured before that deadline. 
This notice is required even if the lender grants the borrower a 
forbearance under Sec. 103.36(a). One purpose of the notice is to give 
BIA the opportunity to intervene and seek assistance for the borrower, 
even though BIA has no duty, either to the lender or the borrower, to 
do so. Another purpose of the notice is to permit BIA to plan for a 
possible loss claim from the lender, under Sec. 103.36(d). The lender's 
notice should clearly indicate:
    (1) The identity of the borrower;
    (2) The applicable Program guaranty certificate or insurance 
agreement number;
    (3) The date and nature of all bases for default;
    (4) If a monetary default, the amount of past due principal and 
interest, the date through which interest has been calculated, and the 
amount of any late fees, precautionary advances, or other amounts the 
lender claims;
    (5) The nature and outcome of any correspondence or other contacts 
with the borrower concerning the default; and
    (6) The precise nature of any action the borrower could take to 
cure the default.


Sec. 103.36  What options and remedies does the lender have if the 
borrower defaults on the loan?

    (a) The lender may grant the borrower a temporary forbearance, even 
beyond any default cure periods specified in the loan documents, if 
doing so is likely to result in the borrower curing the default. 
However, BIA must approve in writing any forbearance or other agreement 
that:
    (1) Permanently modifies the terms of the loan in any manner 
indicated by Sec. 103.34(a);
    (2) Would allow the borrower's default to extend beyond the 
deadline

[[Page 53960]]

established in Sec. 103.36(d) for the lender to elect a remedy; or
    (3) Is not likely to result in the borrower curing the default.
    (b) The lender may make precautionary advances on the borrower's 
behalf during the default, if doing so is reasonably necessary to 
ensure that loan recovery prospects do not significantly deteriorate. 
Items for which the lender may make precautionary advances include, for 
example:
    (1) Hazard, liability, or key man life insurance premiums;
    (2) Security measures to safeguard abandoned business assets;
    (3) Real or personal property taxes;
    (4) Corrective actions required by court or administrative orders; 
or
    (5) Essential maintenance.
    (c) BIA will guaranty or insure the amount of precautionary 
advances from the date of each advance to the same extent as other 
amounts due under the loan, if:
    (1) The borrower has demonstrated its inability or unwillingness to 
make the payment or perform the duty that jeopardizes loan recovery, 
including by undue delay in making the payment or performing the duty;
    (2) The total expense of all precautionary advances by the lender 
does not at the time of the advance exceed 10 percent of the 
outstanding principal balance of the loan;
    (3) Where loan document provisions do not require the borrower to 
repay precautionary advances (however termed) when made by the lender, 
or where the total expense of all precautionary advances by the lender 
will exceed 10 percent of the outstanding principal balance of the loan 
when made, the lender secures BIA's prior written approval; and
    (4) The lender properly claims and documents all precautionary 
advances, if and when it submits a claim for loss under Sec. 103.37.
    (d) If the default remains uncured, the lender must send BIA a 
written notice by certified mail, return receipt requested, within 90 
calendar days of the default to select one of the following remedies:
    (1) In the case of a guaranteed loan, the lender may submit a claim 
to BIA for its loss;
    (2) In the case of either a guaranteed or insured loan, the lender 
may liquidate all collateral securing the loan, and upon completion, if 
it has a residual loss on the loan, it may submit a claim to BIA for 
that loss; or
    (3) The lender may negotiate a loan modification agreement with the 
borrower to permanently change the terms of the loan in a manner that 
will cure the default. If the lender chooses this remedy, it may take 
no longer than 45 calendar days from the date BIA receives the notice 
of remedy selection to finalize a loan modification agreement and 
secure BIA's written approval of it. However, the lender may at any 
time before the expiration of the 45-day period change its choice of 
remedy by sending BIA a notice otherwise complying with 
Sec. 103.36(d)(1) or (2). If the lender fails to send BIA a notice 
changing its choice of remedy and does not finalize an approved loan 
modification agreement within the 45-day period, the lender's only 
permissible remedy under the Program will be to pursue the procedure 
specified in Sec. 103.36(d)(2).
    (e) Failure by the lender to provide BIA with notice of the 
lender's election of remedy within 90 calendar days of the default, as 
indicated in Sec. 103.36(d), will invalidate BIA's loan guaranty 
certificate or insurance coverage for that particular loan, absent an 
express waiver of this provision by BIA. BIA may preserve the validity 
of a loan guaranty certificate or insurance coverage through waiver of 
this provision only when BIA determines, in its discretion, that:
    (1) The lender consistently has acted in good faith, and
    (2) The lender's failure to provide timely notice either:
    (i) Has not caused any actual or potential prejudice to BIA; or
    (ii) Was the result of the lender relying upon specific written 
advice from a BIA agent.


Sec. 103.37  What must the lender do to collect payment under its loan 
guaranty certificate or loan insurance coverage?

    (a) For guaranteed loans, the lender must submit a claim for its 
loss on a form approved by BIA.
    (1) If the lender makes an immediate claim under Sec. 103.36(d)(1), 
it must send BIA the claim for loss within 90 calendar days of the 
default, by certified mail, return receipt requested. The lender's 
claim for loss may include interest that has accrued on the outstanding 
principal amount of the loan only through the date it submits the 
claim.
    (2) If the lender elects first to liquidate the collateral securing 
the loan under Sec. 103.36(d)(2), and has a residual loss after doing 
so, it must send BIA the claim for loss within 30 calendar days of 
completing all liquidation efforts. The lender must perform collateral 
liquidation as expeditiously and thoroughly as is reasonably possible, 
within the standards established by this part. The lender's claim for 
loss may include interest that has accrued on the outstanding principal 
amount of the loan only through the earlier of:
    (i) The date it submits the claim;
    (ii) The date the lender gets a judgment of foreclosure or sale (or 
the non-judicial equivalent) on the principal collateral securing the 
loan; or
    (iii) 180 calendar days after the date of the default.
    (b) For insured loans, after liquidating all loan collateral, the 
lender must submit a claim for its loss (if any) on a form approved by 
BIA. The lender must send BIA the claim for loss by certified mail, 
return receipt requested, within 30 calendar days of completing all 
liquidation efforts. The lender must perform collateral liquidation as 
expeditiously and thoroughly as is reasonably possible, within the 
standards established by this part. The lender's claim for loss may 
include interest that has accrued on the outstanding principal amount 
of the loan through the earlier of:
    (1) The date it submits the claim;
    (2) The date the lender gets a judgment of foreclosure or sale (or 
the non-judicial equivalent) on the principal collateral securing the 
loan; or
    (3) 180 calendar days after the date of the default.
    (c) Whenever the lender liquidates loan collateral under 
Sec. 103.36(d)(2), it must vigorously pursue all reasonable methods of 
collection concerning the loan collateral before submitting a claim for 
its residual loss (if any) to BIA. Without limiting the generality of 
the preceding sentence, the lender must:
    (1) Foreclose, either judicially or non-judicially, all rights of 
redemption the borrower or any co-maker or guarantor of the loan (other 
than BIA) may have in collateral under any mortgage securing the loan;
    (2) Gather and dispose of all personal property pledged as 
collateral under the loan, in accordance with applicable law;
    (3) Exercise all set-off rights the lender may have under contract 
or applicable law;
    (4) Make demand for payment on the borrower, all co-makers, and all 
guarantors of the loan (other than BIA); and
    (5) Participate fully in all bankruptcy proceedings that may arise 
involving the borrower and any co-maker or guarantor. Full 
participation might include, for example, filing a proof of claim in 
the case, attending creditors' meetings, and seeking a court order 
releasing the automatic stay of collection efforts so that the lender 
can liquidate affected loan collateral.

[[Page 53961]]

    (d) BIA may require further information, including without 
limitation copies of any documents the lender is to maintain under 
Sec. 103.32 and all documentation of liquidation efforts, to help BIA 
evaluate the lender's claim for loss.
    (e) BIA will pay the lender the guaranteed or insured portion of 
the lender's claim for loss, to the extent the claim is based upon 
reasonably sufficient evidence of the loss and compliance with the 
requirements of this part.


Sec. 103.38  Is there anything else for BIA or the lender to do after 
BIA makes payment?

    When BIA pays the lender on its claim for loss, the lender must 
sign and deliver to BIA an assignment of rights to its loan agreement 
with the borrower, in a document acceptable to BIA. Immediately upon 
payment, BIA is subrogated to all rights of the lender under the loan 
agreement with the borrower, and must pursue collection efforts against 
the borrower and any co-maker and guarantor, as required by law.


Sec. 103.39  When will BIA refuse to pay all or part of a lender's 
claim?

    BIA may deny all or part of a lender's claim for loss when:
    (a) The loan is not guaranteed or insured as indicated in 
Sec. 103.18;
    (b) The guarantee or insurance coverage has become invalid under 
Secs. 103.28, 103.29, or 103.36(e);
    (c) The lender has not met the standard of care indicated in 
Sec. 103.30;
    (d) The lender presents a claim for a residual loss after 
attempting to liquidate loan collateral, and:
    (1) The lender has not made a reasonable effort to liquidate all 
security for the loan;
    (2) The lender has taken an unreasonable amount of time to complete 
its liquidation efforts, the probable consequence of which has been to 
reduce overall prospects of loss recovery; or
    (3) The lender's loss claim is inflated by unreasonable liquidation 
expenses or unjustifiable deductions from collateral liquidation 
proceeds applied to the loan balance; or
    (e) The lender has otherwise failed in any material respect to 
follow the requirements of this part, and BIA can reasonably attribute 
some or all of the lender's loss to that failure.


Sec. 103.40  Will BIA make exceptions to its criteria for denying 
payment?

    (a) BIA will not reduce or deny payment solely on the basis of 
Secs. 103.39(c) or (e) when the lender making the claim for loss:
    (1) Is a person to whom a previous lender transferred the loan 
under Secs. 103.28 or 103.29 before maturity for value;
    (2) Notified BIA of his acquisition of the loan interest as 
required by Secs. 103.28 or 103.29;
    (3) Had no involvement in or knowledge of the actions or 
circumstances that would have allowed BIA to reduce or deny payment to 
a previous lender; and
    (4) Has not itself violated the standards set forth Secs. 103.39(c) 
or (e).
    (b) If BIA makes payment to a lender under this section, it may 
seek reimbursement from the previous lender or lenders who contributed 
to the loss by violating Secs. 103.39(c) or (e).


Sec. 103.41  What happens if a lender violates provisions of this part?

    In addition to reducing or eliminating payment on a specific claim 
for loss, BIA may either temporarily suspend, or permanently bar, a 
lender from making or acquiring loans under the Program if the lender 
repeatedly fails to abide by the requirements of this part, or if the 
lender significantly violates the requirements of this part on any 
single occasion.


Sec. 103.42  How long must a lender comply with Program requirements?

    (a) A lender must comply in general with Program requirements 
during:
    (1) The effective period of its loan guaranty agreement or loan 
insurance agreement; and
    (2) Whatever additional period is necessary to resolve any 
outstanding loan guaranty or insurance claims or coverage the lender 
may have.
    (b) Except as otherwise required by law, a lender must maintain 
records with respect to particular loans for no more than 6 years after 
either:
    (1) The loan is repaid in full; or
    (2) The lender accepts payment from BIA pursuant to a guaranty 
certificate or an insurance agreement.
    (c) This section does not restrict any claims BIA may have against 
the lender or any other party arising from the Lender's participation 
in the Program.


Sec. 103.43  What must the lender do after repayment in full?

    The lender must completely and promptly release of record all 
remaining collateral for a guaranteed or insured loan after the loan 
has been paid in full.
    The release must be at the lender's sole cost. In addition, if the 
loan is prepaid the lender must notify BIA in accordance with 
Sec. 103.33(e).

Subpart H--Definitions and Miscellaneous Provisions


Sec. 103.44  What certain terms mean in this part.

    BIA means the Bureau of Indian Affairs within the United States 
Department of the Interior.
    Default means:
    (1) The borrower's failure to make a scheduled loan payment when it 
is due;
    (2) The borrower's failure to meet a material condition of the loan 
agreement;
    (3) The borrower's failure to comply with any other condition, 
covenant or obligation under the terms of the loan agreement within 
applicable grace or cure periods;
    (4) The borrower's failure to remain at least 51 percent Indian 
owned, as provided in Sec. 103.25(b);
    (5) The filing of a voluntary or involuntary petition in bankruptcy 
listing the borrower as debtor;
    (6) The imposition of a Federal, State, local, or tribal government 
lien on any assets of the borrower or assets otherwise used as 
collateral for the loan, except real property tax liens imposed by law 
to secure payments that are not yet due; and
    (7) Any default defined in the loan agreement, to the extent the 
definition is not inconsistent with this part.
    Equity means the value, after deducting all debt, of the borrower's 
tangible assets in the business being financed, on which a lender can 
perfect a first lien security interest. It can include cash, 
securities, or other cash equivalent instruments, but cannot include 
the value of contractual options, the right to pay below market rental 
rates, or similar rights if those rights:
    (1) Are unassignable; or
    (2) Can expire before maturity of the loan.
    Indian means a person who is a member of a tribe as defined in this 
part.
    Loan agreement means the collective terms and conditions under 
which the lender extends a loan to a borrower, as reflected by the 
documents that evidence the loan.
    Mortgage, when used as a noun, means a consensual lien on real or 
personal property in favor of the lender, given by the borrower or a 
co-maker or guarantor of the loan (other than BIA), to secure loan 
repayment. The term ``mortgage'' includes ``deed of trust.''
    NEPA means the National Environmental Policy Act of 1969, 42 U.S.C. 
4321 et seq.
    Person means any individual or distinct legal entity.
    Program means the BIA's Loan Guaranty, Insurance, and Interest

[[Page 53962]]

Subsidy Program, established under 25 U.S.C. 1481 et seq., 25 U.S.C. 
1511 et seq., and this part 103.
    Reservation means any land that is an Indian reservation, 
California rancheria, public domain Indian allotment, pueblo, Indian 
colony, former Indian reservation in Oklahoma, or land held by an 
Alaska Native corporation under the provisions of the Alaska Native 
Claims Settlement Act (85 Stat. 688), as amended.
    Secretary means the Secretary of the United States Department of 
the Interior, or his authorized representative.
    Tribe means any Indian or Alaska Native tribe, band, nation, 
pueblo, rancheria, village, community or corporation that the Secretary 
acknowledges to exist as an Indian tribe.


Sec. 103.45  Information collection.

    (a) The information collection requirements of Secs. 103.11, 
103.12, 103.13, 103.14, 103.17, 103.21, 103.23, 103.26, 103.32, 103.33, 
103.34, 103.35, 103.36, 103.37, and 103.38 have been approved by the 
Office of Management and Budget under 44 U.S.C. 3501 et seq. and 
assigned approval number 1076-0XXX. The information will be used to 
approve and make payments on Federal loan guarantees, insurance 
agreements, and interest subsidy awards. Response is required to obtain 
a benefit.
    (b) The burden on the public to report this information is 
estimated to average from 15 minutes to 2 hours per response, including 
the time for reviewing instructions, gathering and maintaining data, 
and completing and reviewing the information collection. Direct 
comments regarding the burden estimate or any other aspect of this 
information collection to the Information Collection Control Officer, 
Bureau of Indian Affairs, MS 4613, 1849 C Street, NW., Washington, DC 
20240.

    Dated: August 14, 2000.
Kevin Gover,
Assistant Secretary--Indian Affairs.
[FR Doc. 00-22745 Filed 9-5-00; 8:45 am]
BILLING CODE 4310-02-P