regulation

Bureau of Indian Affairs, Interior

§ 103.17

published from time to time by a nationally recognized financial institution or news source;
(h) An increased rate of interest
based on default;
(i) 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 5 percent of
the late installment;
(j) 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;
(k) 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
(l) 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.
§ 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 § 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.
§ 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) At or prior to closing, the lender
must obtain appropriate, satisfactory
title and/or lien searches for each asset
to be used as loan collateral.
(c) At or prior to closing, the lender
must obtain recent appraisals for all
real property and improvements to be
used as collateral for the loan, to the
extent required by law.
(d) At or prior to closing, the lender
must document that the lender and
borrower have complied with all applicable Federal, State, local, and tribal
laws implicated by financing the borrower’s business, for example by securing:
(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) Certification by a registered surveyor or appropriate BIA official indicating that the proposed business will
not be located in a special flood hazard
area, as defined by applicable law.
(e) 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

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§ 103.18

25 CFR Ch. I (4–1–06 Edition)

with BIA’s written approval of any assignment of specific tribal trust assets
under § 103.15(l), 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);
(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.
(f) Unless BIA indicates otherwise in
writing, the lender must close a guaranteed or insured loan within 90 days
of any approval provided under § 103.16.
§ 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.
§ 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), or by a nationallyrecognized overnight delivery service
(signature of recipient required), stating 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
§ 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.
§ 103.21 Who applies for interest subsidy payments, and what is the application procedure?
(a) An eligible lender must request
interest subsidy payments on behalf of
an eligible borrower, after determining
that the borrower qualifies. Typically,
the lender should include a request 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 §§ 103.12 and

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