A Subordination of the Lender’s lien position must be requested in writing by the Lender and concurred with in writing by the Agency in advance of the Subordination. The Lender’s Subordination proposal must include a financial analysis of the servicing action and be fully supported by current financial statements of the Borrower and guarantors that are less than 90 days old.
Terms Used In 7 CFR 4287.323
- Appraisal: A determination of property value.
- Lien: A claim against real or personal property in satisfaction of a debt.
(a) The Subordination of the Lender’s lien position must enhance the Borrower’s business and be in the best financial interest of the Agency.
(b) The lien to which the guaranteed loan is subordinated is for a fixed dollar limit and for a fixed term after which the guaranteed loan lien priority will be restored. Notwithstanding, a Subordination of lien position on inventory and accounts receivable may be made to a line of credit.
(c) Collateral must remain sufficient to provide for adequate Collateral coverage. The Agency may require a current independent appraisal in accordance with §4279.244 of this chapter.
(d) Lien priorities must remain for the portion of the loan Collateral that was not subordinated.
(e) Subordination of the Lender’s lien position must be for Good Cause.