Section 1955.20 - Acquisition of chattel propertyEvery effort will be made to avoid acquiring chattel property by having the borrower or Rural Development liquidate the property according to subpart A of part 1962 of this chapter and apply the proceeds to the borrower's account(s). Methods of acquisition authorized are:
(a)Purchase at the following types of sale:(1) Execution sale conducted by the U.S. Marshal, sheriff or other party acting under Court order to satisfy judgment liens.(2) Rural Development foreclosure sale conducted by the U.S. Marshal or sheriff in States where a State Supplement provides for sales to be conducted by them.(3) Sale by trustee in bankruptcy.(4) Public sale by prior lienholder.(5) Public sale conducted under the terms of Form RD 455-4, "Agreement for Voluntary Liquidation of Chattel Security," the power of sale in security agreements or crop and chattel mortgage, or similar instrument, if authorized by State Supplement.(b)Voluntary conveyance. Voluntary conveyance of chattels will be accepted only when the borrower can convey ownership free of other liens and the borrower can be released from liability under the conditions set forth in § 1955.10(f)(2) of this subpart. Payment of other lienholders' debts by Rural Development in order to accept voluntary conveyance of chattels is not authorized. Before a voluntary conveyance from a Farmer Program loan borrower can be accepted, the borrower must be sent Exhibit A with Attachments 1 and 2 of subpart S of part 1951 of this chapter. (1)Offer. The borrower's offer of voluntary conveyance will be made on Form RD 1955-1. If it is determined the conveyance offer can be accepted, the borrower will execute a bill of sale itemizing each item of chattel property being conveyed and will provide titles to vehicles or other equipment, where applicable.(2)Acceptance of offer release from liability. Before accepting an offer to convey chattels to Rural Development, the concurrence of the State Director must be obtained. When chattel security is voluntarily conveyed to the Government and the borrower and cosigner(s), if any, are to be released from liability, the servicing official will stamp the note(s) "Satisfied by Surrender of Security and Borrower Released from Liability." When the Agency debt less the market value and prior liens is $1 million or more (including principal, interest and other charges), release of liability must be approved by the Administrator or designee; otherwise, the State Director must approve the release of liability. All cases requiring a release of liability will be submitted in accordance with Exhibit A of Subpart B of Part 1956 of this chapter (available in any Rural Development office). Form RD 1955-1 will be executed by the servicing official showing acceptance by the Government, and the satisfied note(s) and a copy of Form RD 1955-1 will be furnished to the borrower.(3)Release of lien(s). When an offer has been accepted as outlined in paragraph (b)(2) of this section, the servicing official will release any liens of record which secured the satisfied indebtedness.(4)Rejection of offer. If it is determined an offer of voluntary conveyance will not be accepted, the servicing official will indicate on Form RD 1955-1 that the offer is rejected, execute the form, and furnish a copy to the borrower.(c)Attending sales. The servicing official will: (1) Attend all sales described in paragraph (a)(5) of this section unless an exception is authorized by the State Director because of physical danger to the Rural Development employee or adverse publicity would be likely.(2) Attend public sales by prior lienholders when the market value of the chattel property is significantly more than the amount of the prior lien(s).(3) Obtain the advice of the State Director on attending sales described in paragraphs (a) (1), (2), and (3) of this section.(d)Appraising chattel property. Prior to the sale, the servicing official will appraise chattel property using Form RD 440-21, "Appraisal of Chattel Property." If a qualified appraiser is not available to appraise chattel property, the State Director may obtain an appraisal from a qualified source outside Rural Development by contract in accordance with Rural Development Instruction 2024-A (available in any Rural Development office).(e)Abandonment of security interest. The State Director may authorize abandonment of the Government's security interest when chattel property, considering costs of moving or rehabilitation, has no market value and obtaining title would not be in the best interest of the Government.(f)Bidding at sale.(1) The servicing official is authorized to bid at sales described in paragraph (a) of this section. Ordinarily, only one bid will be made on items of chattel security unless the State Director authorizes incremental bidding. Bids will be made only when no other party bids or when it appears bidding will stop and the property will be sold for less than the amount of the Government's authorized bid. When the State Director determines attendance of an Rural Development employee might pose physical danger, a written bid may be submitted to the party holding the sale. The bid(s) will be the lesser of:(i) The market value of the item(s) less the estimated costs involved in the acquisition, care, and sale of the item(s) of security; or(ii) The unpaid balance of the borrower's secured Rural Development debt plus prior liens, if any.(2) Bids will not be made in the following situations unless authorized by the State Director: (i) When chattel property under prior lien has a market value which is not significantly more than the amount owed the prior lienholder. If Rural Development holds a junior lien on several items of chattel property, advice should be obtained from the State Director on bidding.(ii) After sufficient chattel property has been bid in by Rural Development to satisfy the Rural Development debt; prior liens, and cost of the sale.(iii) When the sale is being conducted by a lienholder junior to Rural Development.(v) When the sale is being conducted under the terms of Form RD 455-3, "Agreement for Sale by Borrower (Chattels and/or Real Estate)".(g)Payment of costs. Costs to be paid by Rural Development in connection with acquisition of chattel property will be paid as outlined in § 1955.5(d) of this subpart as recoverable costs. Note: Payment of other lienholders' debts in connection with voluntary conveyance of chattels is not authorized.
(h)Reporting acquisition of chattel property. Acquisition of chattel property will be reported by use of Form RD 1955-3 prepared and distributed in accordance with the FMI.50 FR 23904, June 7, 1985, as amended at 50 FR 45783, Nov. 1, 1985; 51 FR 45433, Dec. 18, 1986; 53 FR 27828 July 25, 1988; 53 FR 35764, Sept. 14, 1988; 60 FR 28320, May 31, 1995