Michigan Laws 324.20101a – Participation in management of facility by lender; “workout” defined
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(1) For purposes of this part, a lender holding a security interest in a facility participates in the management of the facility if that lender engages in acts of facility management that constitute actual participation in the management or operational affairs of a facility and that exceed the mere capacity to influence, or ability to influence, or the unexercised right to control facility operations. A lender holding a security interest is participating in the management of a facility, while the borrower is still in possession of the facility encumbered by the security interest, if the lender holding a security interest does any of the following:
(a) Exercises decision making control over the borrower’s environmental compliance.
Terms Used In Michigan Laws 324.20101a
- Disposal: means the discharge, deposit, injection, dumping, spilling, leaking, or placing of any hazardous substance into or on any land or water so that the hazardous substance or any constituent of the hazardous substance may enter the environment or be emitted into the air or discharged into any groundwater or surface water. See Michigan Laws 324.20101
- Escrow: Money given to a third party to be held for payment until certain conditions are met.
- Facility: means any area, place, parcel or parcels of property, or portion of a parcel of property where a hazardous substance in excess of the concentrations that satisfy the cleanup criteria for unrestricted residential use has been released, deposited, disposed of, or otherwise comes to be located. See Michigan Laws 324.20101
- Forbearance: A means of handling a delinquent loan. A
- Foreclosure: A legal process in which property that is collateral or security for a loan may be sold to help repay the loan when the loan is in default. Source: OCC
- Foreclosure: means possession by a lender of a property on which it has foreclosed on a security interest or the expiration of a lawful redemption period, whichever occurs first. See Michigan Laws 324.20101
- Hazardous substance: means 1 or more of the following, but does not include fruit, vegetable, or field crop residuals or processing by-products, or aquatic plants, that are applied to the land for an agricultural use or for use as an animal feed, if the use is consistent with generally accepted agricultural management practices at the time of the application or stamp sands:
(i) Any substance that the department demonstrates, on a case by case basis, poses an unacceptable risk to the public health, safety, or welfare, or the environment, considering the fate of the material, dose-response, toxicity, or adverse impact on natural resources. See Michigan Laws 324.20101Lender: means any of the following:
(i) A state or nationally chartered bank. See Michigan Laws 324.20101Rule: means a rule promulgated pursuant to the administrative procedures act of 1969, 1969 PA 306, MCL 24. See Michigan Laws 324.301 Security interest: means any interest, including a reversionary interest, in real property created or established for the purpose of securing a loan or other obligation. See Michigan Laws 324.20101 state: when applied to the different parts of the United States, shall be construed to extend to and include the District of Columbia and the several territories belonging to the United States; and the words "United States" shall be construed to include the district and territories. See Michigan Laws 8.3o this part: includes "rules promulgated under this part". See Michigan Laws 324.20101
(b) Undertakes responsibility for the borrower’s hazardous substance handling or disposal practices.
(c) Exercises control at a level comparable to that of a manager of the borrower’s enterprise, such that the holder has assumed or manifested responsibility for the overall management of the enterprise encompassing the day-to-day decision making of the enterprise with respect to either or both of the following:
(i) Environmental compliance.
(ii) All, or substantially all, of the operational aspects of the enterprise other than environmental compliance. As used in this subparagraph, “operational aspects of the enterprise” includes functions such as that of facility or plant manager, operations manager, chief operating officer, or chief executive officer. Operational aspects of the enterprise do not include the financial or administrative aspects of the enterprise such as that of credit manager, accounts payable or receivable manager, personnel manager, controller, chief financial officer, or similar functions.
(2) For purposes of this part, the following do not constitute participation in the management of a facility by a lender holding a security interest in the facility:
(a) The mere capacity to influence, or ability to influence, or the unexercised right to control facility operations.
(b) An act or omission prior to the time that indicia of ownership are held primarily to protect a security interest.
(c) Undertaking or requiring an environmental inspection of the facility in which indicia of ownership are to be held, or requiring a prospective borrower to undertake response activities at a facility or to comply or come into compliance, whether prior or subsequent to the time that indicia of ownership are held primarily to protect a security interest, with any applicable law, rule, or regulation.
(d) Actions that are consistent with holding ownership indicia primarily to protect a security interest. The authority of the lender holding a security interest to take such actions may, but need not, be contained in contractual or other documents specifying requirements for financial, environmental, and other warranties, covenants, conditions, representations, or promises from the borrower. Loan policing and workout activities cover and include all activities up to foreclosure and its equivalents.
(e) Engaging in policing activities prior to foreclosure if the lender holding a security interest does not by such actions participate in the management of the facility as described in subsection (1)(a) to (c). Permissible actions include, but are not limited to, requiring the borrower to undertake response activities at the facility during the term of the security interest; requiring the borrower to comply or come into compliance with applicable federal, state, and local environmental and other laws, rules, and regulations during the term of the security interest; and securing or exercising authority to monitor or inspect the facility in which indicia of ownership are maintained, including on-site inspections, or the borrower’s business or financial condition, during the term of the security interest. A lender holding a security interest that engages in workout activities prior to foreclosure and its equivalents will remain within the exemption if the lender holding a security interest does not by such action participate in the management of the facility.
(3) As used in this section, “workout” refers to those actions by which a lender holding a security interest, at any time prior to foreclosure or its equivalent, seeks to prevent, cure, or mitigate a default by the borrower or obligor or to preserve, or prevent the diminution of, the value of the security. Workout activities include, but are not limited to, restructuring or renegotiating the terms of the security interest; requiring payment of additional rent or interest; exercising forbearance; requiring or exercising rights pursuant to an assignment of accounts or other amounts owing to an obligor; requiring or exercising rights pursuant to an escrow agreement pertaining to amounts owing to an obligor; and providing specific or general financial or other advice, suggestions, counseling, or guidance.