(a) General. A borrower may voluntarily sell real property or chattel security to repay FLP debt in lieu of involuntary liquidation if all applicable requirements of this section are met. Partial dispositions are handled in accordance with part 765, subparts G and H, of this chapter.
(1) The borrower must sell all real property and chattel that secure FLP debt until the debt is paid in full or until all security has been liquidated.
(2) The Agency must approve the sale and approve the use of proceeds.
(3) The sale proceeds are applied in order of lien priority, except that proceeds may be used to pay customary costs appropriate to the transaction provided:
(i) The costs are reasonable in amount;
(ii) The borrower is unable to pay the costs from personal funds or have the purchaser pay;
(iii) The costs must be paid to complete the sale;
(iv) Costs are not for postage and insurance of the note while in transit when required for the Agency to present the promissory note to the recorder to obtain a release of a portion of the real property from the mortgage.
(4) The Agency will approve the sale of property when the proceeds do not cover the borrower's full debt only if:
(i) The sales price must be equal to or greater than the market value of the property; and
(ii) The sale is in the Agency's financial interest.
(5) If an unpaid loan balance remains after the sale, the Agency will continue to service the loan in accordance with part 761, subpart F of this chapter and part 3 of this title.
(b) Voluntary sale of chattel. If the borrower complies with paragraph (a) of this section, the borrower may sell chattel security by:
(1) Public sale if the borrower obtains the agreement of lienholders as necessary to complete the public sale; or
(2) Private sale if the borrower:
(i) Sells all of the security for not less than the market value;
(ii) Obtains the agreement of lienholders as necessary to complete the sale;
(iii) Has a buyer who is ready and able to purchase the property; and
(iv) Obtains the Agency's agreement for the sale.
[72 FR 63316, Nov. 8, 2007, as amended at 85 FR 36713, June 17, 2020]