---
kind: "section"
citation: "12 U.S.C. § 2202a"
title: "12"
title_heading: "Banks and Banking"
number: "2202a"
heading: "Restructuring distressed loans"
release: "119-102"
url: "https://uscodex.org/usc/12/2202a"
units:
  - "Chapter 23 — Farm Credit System"
  - "Subchapter IV — Provisions Applicable to Two or More Classes of Institutions of the System"
  - "Part C — Rights of Borrowers; Loan Restructuring"
---

# §2202a. Restructuring distressed loans

- (a) **Definitions—** As used in this part and [section 2219a of this title](/usc/12/2219a.md):
  - (1) **Application for restructuring—** The term “application for restructuring” means a written request—
    - (A) from a borrower for the [restructuring](#a-7) of a [distressed loan](#a-3) in accordance with a preliminary [restructuring](#a-7) plan proposed by the borrower as a part of the application;
    - (B) submitted on the appropriate forms prescribed by the [qualified lender](#a-6); and
    - (C) accompanied by sufficient financial information and repayment projections, where appropriate, as required by the [qualified lender](#a-6) to support a sound [credit](/usc/12/5481.md?p=7) decision.
  - (2) **Cost of foreclosure—** The term “cost of foreclosure” [includes](/usc/12/25b.md?p=a-3)—
    - (A) the difference between the outstanding balance due on a [loan](#a-5-A) made by a [qualified lender](#a-6) and the liquidation value of the [loan](#a-5-A), taking into consideration the borrower’s repayment capacity and the liquidation value of the collateral used to secure the [loan](#a-5-A);
    - (B) the estimated cost of maintaining a [loan](#a-5-A) as a nonperforming asset;
    - (C) the estimated cost of administrative and legal actions necessary to foreclose a [loan](#a-5-A) and dispose of property acquired as the result of the foreclosure, [including](/usc/12/25b.md?p=a-3) attorneys’ fees and court costs;
    - (D) the estimated cost of changes in the value of collateral used to secure a [loan](#a-5-A) during the period beginning on the date of the initiation of an action to foreclose or liquidate the [loan](#a-5-A) and ending on the date of the disposition of the collateral; and
    - (E) all other costs incurred as the result of the foreclosure or liquidation of a [loan](#a-5-A).
  - (3) **Distressed loan—** The term “distressed loan” means a [loan](#a-5-A) that the borrower does not have the financial capacity to pay according to its terms and that exhibits one or more of the following characteristics:
    - (A) The borrower is demonstrating adverse financial and repayment trends.
    - (B) The [loan](#a-5-A) is delinquent or past due under the terms of the [loan](#a-5-A) contract.
    - (C) One or both of the factors listed in subparagraphs [(A)](#a-3-A) and [(B)](#a-3-B), together with inadequate collateralization, present a high probability of loss to the lender.
  - (4) **Foreclosure proceeding—** The term “foreclosure proceeding” means—
    - (A) a foreclosure or similar legal proceeding to enforce a lien on property, whether real or personal, that secures a nonaccrual or [distressed loan](#a-3); or
    - (B) the seizing of and realizing on nonreal property collateral, other than collateral subject to a statutory lien arising under subchapter I or II, to effect collection of a nonaccrual or [distressed loan](#a-3).
  - (5) **Loan—**
    - (A) **In general—** Subject to [subparagraph (B)](#a-5-B), the term “loan” means a loan made to a farmer, rancher, or producer or harvester of aquatic products, for any agricultural or aquatic purpose and other [credit](/usc/12/5481.md?p=7) needs of the borrower, [including](/usc/12/25b.md?p=a-3) financing for basic processing and marketing directly related to the borrower’s operations and those of other eligible farmers, ranchers, and producers or harvesters of aquatic products.
    - (B) **Exclusion for loans designated for sale into secondary market—**
      - (i) **In general—** Except as provided in [clause (ii)](#a-5-B-ii), the term “[loan](#a-5-A)” does not include a [loan](#a-5-A) made on or after February 10, 1996, that is designated, at the time the [loan](#a-5-A) is made, for sale into a secondary market.
      - (ii) **Unsold loans—**
        - (I) **In general—** Except as provided in [subclause (II)](#a-5-B-ii-II), if a [loan](#a-5-A) designated for sale under [clause (i)](#a-5-B-i) is not sold into a secondary market during the 180-day period that begins on the date of the designation, the provisions of this section and sections [2202](/usc/12/2202.md), [2202b](/usc/12/2202b.md), [2202d](/usc/12/2202d.md), and [2219a](/usc/12/2219a.md) of this title that would otherwise apply to the [loan](#a-5-A) in the absence of the exclusion described in [clause (i)](#a-5-B-i) shall become effective with respect to the [loan](#a-5-A).
        - (II) **Later sale—** If a [loan](#a-5-A) described in [subclause (I)](#a-5-B-ii-I) is sold into a secondary market after the end of the 180-day period described in [subclause (I)](#a-5-B-ii-I), [subclause (I)](#a-5-B-ii-I) shall not apply with respect to the [loan](#a-5-A) beginning on the date of the sale.
  - (6) **Qualified lender—** The term “qualified lender” means—
    - (A) a [System institution](/usc/12/2271.md?p=3) that makes [loans](#a-5-A) (as defined in [paragraph (5)](#a-5)) except a [bank](/usc/12/1426a.md?p=g-1) for cooperatives; and
    - (B) each [bank](/usc/12/1426a.md?p=g-1), [institution](/usc/12/2162.md?p=d-3), [corporation](/usc/12/2277a.md?p=2), [company](/usc/12/24a.md?p=g-1), union, and [association](/usc/12/1828.md?p=s-4-E-i) described in [section 2015(b)(1)(B) of this title](/usc/12/2015.md?p=b-1-B) but only with respect to [loans](#a-5-A) discounted or pledged under [section 2015(b)(1) of this title](/usc/12/2015.md?p=b-1).
  - (7) **Restructure and restructuring—** The terms “restructure” and “restructuring” include rescheduling, reamortization, renewal, deferral of principal or interest, monetary concessions, and the taking of any other action to modify the terms of, or forbear on, a [loan](#a-5-A) in any way that will make it probable that the operations of the borrower will become financially viable.
- (b) **Notice—**
  - (1) **In general—** On a determination by a [qualified lender](#a-6) that a [loan](#a-5-A) made by the lender is or has become a [distressed loan](#a-3), the lender shall provide written notice to the borrower that the [loan](#a-5-A) may be suitable for [restructuring](#a-7), and include with such notice—
    - (A) a copy of the policy of the lender established under [subsection (g)](#g) that governs the treatment of [distressed loans](#a-3); and
    - (B) all materials necessary to enable the borrower to submit an [application for restructuring](#a-1) on the [loan](#a-5-A).
  - (2) **Notice before foreclosure—** Not later than 45 days before any [qualified lender](#a-6) begins [foreclosure proceedings](#a-4) with respect to a [loan](#a-5-A) outstanding to any borrower, the lender shall notify the borrower that the [loan](#a-5-A) may be suitable for [restructuring](#a-7) and that the lender will review any such suitable [loan](#a-5-A) for [restructuring](#a-7), and shall include with such notice a copy of the policy and the materials described in [paragraph (1)](#b-1).
  - (3) **Limitation on foreclosure—** No [qualified lender](#a-6) may foreclose or continue any [foreclosure proceeding](#a-4) with respect to any [distressed loan](#a-3) before the lender has completed any pending consideration of the [loan](#a-5-A) for [restructuring](#a-7) under this section.
- (c) **Meetings—** On determination by a [qualified lender](#a-6) that a [loan](#a-5-A) made by the lender is or has become a [distressed loan](#a-3), the lender shall provide a reasonable opportunity for the borrower thereof to personally meet with a representative of the lender—
  - (1) to review the status of the [loan](#a-5-A), the financial condition of the borrower, and the suitability of the [loan](#a-5-A) for [restructuring](#a-7); and
  - (2) with respect to a [loan](#a-5-A) that is in nonaccrual status, to develop a plan for [restructuring](#a-7) the [loan](#a-5-A) if the [loan](#a-5-A) is suitable for [restructuring](#a-7).
- (d) **Consideration of applications—**
  - (1) **In general—** When a [qualified lender](#a-6) receives an [application for restructuring](#a-1) from a borrower, the [qualified lender](#a-6) shall determine whether or not to [restructure](#a-7) the [loan](#a-5-A), taking into consideration—
    - (A) whether the cost to the lender of [restructuring](#a-7) the [loan](#a-5-A) is equal to or less than the [cost of foreclosure](#a-2);
    - (B) whether the borrower is applying all income over and above necessary and reasonable living and operating expenses to the payment of primary obligations;
    - (C) whether the borrower has the financial capacity and the management skills to protect the collateral from diversion, dissipation, or deterioration;
    - (D) whether the borrower is capable of working out existing financial difficulties, reestablishing a viable operation, and repaying the [loan](#a-5-A) on a rescheduled basis; and
    - (E) in the case of a [distressed loan](#a-3) that is not delinquent, whether [restructuring](#a-7) consistent with sound lending practices may be taken to reasonably ensure that the [loan](#a-5-A) will not become a [loan](#a-5-A) that it is necessary to place in nonaccrual status.
  - (2) **Applications not required for restructuring plans—** This section shall not prevent a [qualified lender](#a-6) from proposing a [restructuring](#a-7) plan for an individual borrower in the absence of an [application for restructuring](#a-1) from the borrower.
- (e) **Restructuring—**
  - (1) **In general—** If a [qualified lender](#a-6) determines that the potential cost to such [qualified lender](#a-6) of [restructuring](#a-7) the [loan](#a-5-A) in accordance with a proposed [restructuring](#a-7) plan is less than or equal to the potential [cost of foreclosure](#a-2), the [qualified lender](#a-6) shall [restructure](#a-7) the [loan](#a-5-A) in accordance with the plan.
  - (2) **Computation of cost of restructuring—** In determining whether the potential cost to the [qualified lender](#a-6) of [restructuring](#a-7) a [distressed loan](#a-3) is less than or equal to the potential [cost of foreclosure](#a-2), a [qualified lender](#a-6) shall consider all relevant factors, [including](/usc/12/25b.md?p=a-3)—
    - (A) the present value of interest income and principal forgone by the lender in carrying out the [restructuring](#a-7) plan;
    - (B) reasonable and necessary administrative expenses involved in working with the borrower to finalize and implement the [restructuring](#a-7) plan;
    - (C) whether the borrower has presented a preliminary [restructuring](#a-7) plan and cash-flow analysis taking into account income from all sources to be applied to the debt and all assets to be pledged, showing a reasonable probability that orderly debt retirement will occur as a result of the proposed [restructuring](#a-7); and
    - (D) whether the borrower has furnished or is willing to furnish complete and current financial statements in a form acceptable to the [institution](/usc/12/2162.md?p=d-3).
- (f) **Least cost alternative—** If two or more [restructuring](#a-7) alternatives are available to a [qualified lender](#a-6) under this section with respect to a [distressed loan](#a-3), the lender shall [restructure](#a-7) the [loan](#a-5-A) in conformity with the alternative that results in the least cost to the lender.
- (g) **Restructuring policy—**
  - (1) **Establishment—** Each [bank](/usc/12/1426a.md?p=g-1) [board](/usc/12/221a.md?p=a) of [directors](/usc/12/2279bb.md?p=3) shall develop a policy within 60 days after January 6, 1988, that is consistent with this section, to govern the [restructuring](#a-7) of [distressed loans](#a-3). Such policy shall constitute the [restructuring](#a-7) policy of each [qualified lender](#a-6) within the [district](/usc/12/221a.md?p=a).
  - (2) **Contents of policy—** The policy established under [paragraph (1)](#g-1) shall include an explanation of—
    - (A) the procedure for submitting an [application for restructuring](#a-1); and
    - (B) the right of borrowers with [distressed loans](#a-3) to seek review by a [credit](/usc/12/5481.md?p=7) review committee in accordance with [section 2202 of this title](/usc/12/2202.md) of a denial of an [application for restructuring](#a-1).
  - (3) **Submission of policy to FCA—** Each [bank](/usc/12/1426a.md?p=g-1) [board](/usc/12/221a.md?p=a) shall submit the policy of the [district](/usc/12/221a.md?p=a) governing the treatment of [distressed loans](#a-3) under this section to the Farm [Credit](/usc/12/5481.md?p=7) Administration. Notwithstanding the duty imposed by the preceding sentence, the other duties imposed by this section shall take effect on January 6, 1988.
- (h) **Compliance—** The Farm [Credit](/usc/12/5481.md?p=7) Administration may issue a directive requiring compliance with any provision of this section to any [qualified lender](#a-6) that fails to comply with such provision.
- (i) **Permitted foreclosures—** This section shall not be construed to prevent any [qualified lender](#a-6) from enforcing any contractual provision that allows the lender to foreclose a [loan](#a-5-A), or from taking such other lawful action as the lender deems appropriate, if the lender has reasonable grounds to believe that the [loan](#a-5-A) collateral will be destroyed, dissipated, consumed, concealed, or permanently removed from the [State](/usc/12/1707.md?p=d) in which the collateral is located.
- (j) **Application of section—** The time limitation prescribed in [subsection (b)(2)](#b-2), and the requirements of [subsection (c)](#c), shall not apply to a [loan](#a-5-A) that became a [distressed loan](#a-3) before January 6, 1988, if the borrower and lender of the [loan](#a-5-A) are in the process of negotiating [loan](#a-5-A) [restructuring](#a-7) with respect to the [loan](#a-5-A).
- (k) **Assistance in restructuring—** Each Farm [Credit](/usc/12/5481.md?p=7) [Bank](/usc/12/1426a.md?p=g-1), on request of any [association](/usc/12/1828.md?p=s-4-E-i), may assist the [association](/usc/12/1828.md?p=s-4-E-i) in [restructuring](#a-7) [loans](#a-5-A) under this section.

## Source credit

(Pub. L. 92–181, title IV, § 4.14A, as added Pub. L. 100–233, title I, § 102(a), Jan. 6, 1988, 101 Stat. 1574; amended Pub. L. 100–399, title I, § 102(a)–(f), Aug. 17, 1988, 102 Stat. 990; Pub. L. 104–105, title II, § 208(a), Feb. 10, 1996, 110 Stat. 173; Pub. L. 115–334, title V, § 5411(22), Dec. 20, 2018, 132 Stat. 4681.)

## Notes

### Editorial Notes

### Amendments

2018—Subsec. (a). Pub. L. 115–334, § 5411(22)(A)(i), inserted “and section 2219a of this title” after “this part” in introductory provisions.

Subsec. (a)(5)(B)(ii)(I). Pub. L. 115–334, § 5411(22)(A)(ii), struck out “2202c,” after “2202b,”.

Subsecs. (h) to (j). Pub. L. 115–334, § 5411(22)(B), (C), redesignated subsecs. (i) to (k) as (h) to (j), respectively, and struck out former subsec. (h). Prior to amendment, text of subsec. (h) read as follows: “During the 5-year period beginning on January 6, 1988, each qualified lender shall submit semiannual reports to the Farm Credit Administration containing—

“(1) the results of the review of distressed loans of the lender; and

“(2) the financial effect of loan restructurings and liquidations on the lender.”

Subsecs. (k), (l). Pub. L. 115–334, § 5411(22)(C), (D), redesignated subsec. (l) as (k) and struck out “production credit” after “request of any”. Former subsec. (k) redesignated (j).

1996—Subsec. (a)(5). Pub. L. 104–105 designated existing provisions as subpar. (A), inserted subpar. heading, substituted “Subject to subparagraph (B), the term” for “The term”, and added subpar. (B).

1988—Subsec. (a). Pub. L. 100–399, § 102(a), struck out “(other than in sections 2205 and 2206 of this title)” after “in this part”.

Subsec. (a)(6)(B). Pub. L. 100–399, § 102(b), substituted “section 2015(b)(1)(B) of this title” for “section 2074(a)(2) of this title” and “section 2015(b)(1) of this title” for “section 2074(a) of this title”.

Subsec. (e)(1). Pub. L. 100–399, § 102(c), substituted “cost to such qualified” for “cost to a qualified”.

Subsec. (g)(1). Pub. L. 100–399, § 102(d), substituted “bank” for “farm credit district”.

Subsec. (g)(3). Pub. L. 100–399, § 102(e), substituted “bank board” for “district board”.

Subsec. (l). Pub. L. 100–399, § 102(f), substituted “Farm Credit Bank” for “Federal intermediate credit bank”.

### Statutory Notes and Related Subsidiaries

### Effective Date of 1988 Amendment

Amendment by section 102(b), (f) of Pub. L. 100–399 effective immediately after amendment made by section 401 of Pub. L. 100–233, which was effective 6 months after Jan. 6, 1988, and amendment by section 102(a), (c)–(e) of Pub. L. 100–399 effective as if enacted immediately after enactment of Pub. L. 100–233, which was approved Jan. 6, 1988, see section 1001 of Pub. L. 100–399, set out as a note under section 2002 of this title.

### Sense of Congress

Pub. L. 100–233, title I, § 102(b), Jan. 6, 1988, 101 Stat. 1579, provided that: “It is the sense of Congress that the banks and associations (except banks for cooperatives) operating under the Farm Credit Act of 1971 (12 U.S.C. 2001 et seq.) should administer distressed loans to farmers with the objective of using the loan guarantee programs of the Farmers Home Administration and other loan restructuring measures, including participation in interest rate buy-down programs that are Federally or State funded, and other Federal and State sponsored financial assistance programs that offer relief to financially distressed farmers, as alternatives to foreclosure, considering the availability and appropriateness of such programs on a case-by-case basis.”