REAP Direct – Revolving Loan Fund (RD-RLF)
Delinquency and Environmental Policies
Delinquency and Default
A payment is considered delinquent if unpaid by the 15th day of each month or due date that is agreed upon.
REAP will generate a reminder call within three days of a missed payment. If there is no response the Business Specialist will be notified for further follow-up.
A default letter is sent to the borrower when the debt maintains a 90 day delinquent status and the borrower fails to perform as promised in a delinquency work out and fails to communicate with the lender. Any loan that is delinquent for 90 days will be declared in default and a default letter, by certified mail, will be sent to the borrower from the Project Leader. A loan is defaulted if the entire principal balance is unpaid thirty (30) days after written default notice is sent to the Borrower.
The borrower understands that formal collection actions will be taken and can include hiring a collection agency, garnishment of wages, the forced sale of the borrower’s assets, and/or other processes to satisfy the outstanding indebtedness. The borrower agrees to pay any reasonable attorney or other fees required as a result of any such collection efforts.
Collections
Collections are the last source of repayment and will begin immediately when a loan is in default. Every reasonable effort will be taken to recover the money owed by the borrower to the REAP Direct – Revolving Loan Fund. Collections are pursued in accordance with the following guidelines.
- The Program Director/Business Specialist will recover collateral from the borrower that was used to secure the loan and arrange for its sale.
- Judgments are filed against the borrower for the balance of the loan owed after the sale of collateral.
- The Program Director/Business Specialist tracks defaulted loans and seeks opportunity for repayment. An example would be rescheduling a loan.
Loan Restructuring
Loans may be restructured as a delinquency solution. The amount of the rescheduled note shall include all accumulated fees as part of the principle, in addition to all unpaid principle, interest and penalty fees. The interest rate will be set in accordance with RD-RLF guidelines at the time of rescheduling. A fee will be charged for rescheduling a note. Any subsequent rescheduling will also have a fee. Loans may require an inspection or environmental audit especially if the property is to be mortgaged.
- Past due loans are re-structured only when the borrower is not able to become current on their own and when the borrower is making scheduled payment according to a revised payment schedule agreed upon by the borrower and the Project Leader.
- We will work with a borrower as long as the borrower is making an effort with the business and demonstrates commitment.
Delinquency and Default Lender and Borrower Timelines
- Month #1 – Borrower does not make payment on due date.
i. Borrowers Role – The borrower will contact the Program Director /Business Specialist and make arrangement for payment. The borrower will also relay any problems they are having in not making their payment.
ii. REAP’s Role – REAP will generate a reminder call within three days of a missed payment. If there is no response the Business Specialist will be notified for further follow-up. Business Specialist will determine if assistance is needed for the borrower’s business. Questions of possible solutions will be developed in conjunction with all parties.
- Month #2 – Borrower has not made the previous month’s payment, nor this month’s payment by the due date.
i. Borrowers Role – The borrower will contact the Program Director /Business Specialist and make arrangements for payment.
ii. REAP’s Role – A letter will be sent to the borrower from the Program Director /Senior Business Specialist. The letter will state that if payment or arrangements are not made before the next due date, REAP will consider the loan in default. The Program Director /Business Specialist will continue to make direct contact and continue to seek solutions in conjunction with all parties.
- Month #3 – Borrower has not made the previous two months’ payment, nor is willing or able to work with REAP on a solution of delinquency. The loan is considered to be in default if no payments have been made for 3 consecutive months.
i. Borrowers Role – The borrower will need to contact the Program Director /Business Specialist and make arrangements for payment.
ii. REAP’s Role – REAP will continue to make contact with the borrower and seek delinquency solutions. The Program Director/Senior Business Specialist will send a default letter to the borrower when the debt maintains a 90-day delinquent status. The loan will be defaulted if the entire principal balance is unpaid thirty (30) days after written default notice is sent to the borrower. REAP will immediately begin collection procedures to recover the unpaid balance of the loan.
Insufficient Funds Procedures
With the first occurrence of a returned check, the REAP office will contact the borrower. The Business Specialist will also be contacted. There will be a late fee and returned check fee with each occurrence.
Fees Charged
- Late Payments
- Borrower’s payment is late - $10.00
- Insufficient funds or bounced check - $10.00 per occurrence.
- Rescheduled Loans
- First time rescheduling - $10.00
- Second time rescheduling - $20.00
Environmental Policy
Most loans, which involve real estate as collateral, will generally necessitate that the staff asks the borrower to answer the questions on an environmental questionnaire. If the potential for the borrower exists in any form, the possible risk to REAP will be weighed against the expected benefits and a decision made by the Program Director whether to make the loan. Note: All applicants will be required to complete the environmental questionnaire.
The environmental questionnaire will provide an indication of what step(s) should be taken next. The questionnaire will be a standard lender’s environmental questionnaire format. If the questionnaire raises any doubts a Phase 1 audit by an independent inspector will be ordered prior to loan approval or disapproval. Payment for a Phase 1 audit is the responsibility of the borrower. In the event of contamination REAP may:
- Deny the loan request,
- Determine the contamination risk is slight and take a security interest in the property, or
- Require the borrower to work with the seller to clean up the contamination prior to loan closing.
I have read and understand this document and agree to abide by the stated terms.
Signed: ______Date: ______
(Borrower)
REAP I003 10/00