222.58 INSURANCE OF LOAN.
Subdivision 1. Authorization.
The commissioner is authorized, upon application by the
lender, to insure any eligible loan as provided in this section and, under such terms as the
commissioner may prescribe by rule, to make commitments for insuring such loans prior to
the date of their execution or disbursement.
Subd. 2. Eligibility requirements.
A loan is eligible for insurance under this section under
the following conditions:
(a) The loan shall be in an original principal amount, bear an interest rate, contain complete
amortization provisions, and have a maturity satisfactory under such terms as the commissioner
may prescribe by rule.
(b) The proceeds of the loan shall be used solely for:
(1) participation in contracts for capital investment loans for rail line rehabilitation,
acquisition, or installation;
(2) capital improvement projects designed to improve rail service or reduce the economic
impact of discontinuance of rail service, and may include but are not limited to construction
or improvement of short segments of rail line such as side track, team track, and connections
between existing lines; and construction and improvement of loading, unloading, storage, and
transfer facilities, and rail facilities of the rail users or rail carriers;
(3) rehabilitation of locomotives owned by rail carriers primarily in operation on railroad
lines within the state;
(4) rehabilitation or acquisition of rolling stock owned or acquired by rail users or rail
carriers operating or doing business primarily within the state; or
(5) costs of technical and inspection services related to the rehabilitation of locomotives or
acquisition or rehabilitation of rolling stock.
(c) The loan agreement shall contain such terms and provisions with respect to any other
matters as the commissioner may prescribe.
(d) The borrower provides a guarantee and collateral for the loan which is acceptable to the
commissioner as sufficient security to protect the interests of the state.
Subd. 3. Presumptive validity.
Any contract of insurance executed by the commissioner
under this section shall be conclusive evidence of the eligibility of the loan for insurance, and the
validity of any such contract of insurance properly executed and in the hands of any approved
lender shall not be contestable, except for fraud or misrepresentation on the part of the lender.
Subd. 4. Procedures upon default.
Except as provided in subdivision 5, the provisions of
this subdivision shall apply upon default. Within 90 days of a default on a loan, the lender shall
send notice to the borrower stating that the commissioner must be notified if the default continues
for another 90 days, and the consequences of that default. The lender shall send a copy of the
notice to the commissioner. The lender and the borrower may agree to take any steps reasonable
to assure the fulfillment of the loan obligation.
After 180 days from the initial default, if the borrower has not made arrangements to meet
the obligation, the lender shall file a claim with the commissioner, identifying the loan and the
nature of the default. Upon the lender's assignment, transfer, and delivery to the commissioner,
within 210 days of the initial default, all rights and interests arising under the loan and any other
security interests securing the loan, the commissioner shall pay to the lender from the account
an amount equal to the outstanding unpaid principal indebtedness at the time of default less
ten percent, plus interest at six percent per annum from the date of default. The failure of the
borrower to make any payment under or as provided by any loan insured under this section
shall be considered a default under the loan.
Subd. 5. Procedures upon default; revenue bond project.
If the loan money is obtained
by the lender through the issuance of revenue bonds under chapter 362A or 474 the provisions
of this subdivision shall apply upon default. If the borrower fails to make any payment under
or as provided by the loan agreement and remains in default for a period of 15 days, the trustee
designated by the lender shall send a notice of the default to the commissioner and to the
borrower. After 90 days from the initial default if the borrower remains in default under the loan
agreement, the trustee shall file a claim with the commissioner, identifying the loan and the nature
of the default. Within ten days of the assignment, transfer, and delivery to the commissioner of all
the lender's rights and interests arising under the loan and any other security interests securing
the loan, the commissioner shall pay to the trustee from the account an amount equal to the
outstanding unpaid principal indebtedness at the time of the default less ten percent, plus interest
at six percent per annum from the date of default.
Subd. 5a. Interest adjustment.
A loan insured under this section that is amortized over a
term of not more than ten years with equal annual installments of principal and interest and that
has an interest rate exceeding seven percent per annum is eligible for an interest adjustment
under this subdivision. The commissioner may pay annually to the lender a percentage of the
outstanding balance due on an eligible loan at the beginning of the year equal to the difference
between the interest rate on the loan and an interest rate of seven percent per annum. The
percentage paid by the commissioner shall not exceed four percent. The borrower shall reimburse
the commissioner for any amounts paid pursuant to this subdivision the year after the last payment
is due on the loan. The obligation to reimburse the commissioner shall be a lien against any
property of the borrower in which the proceeds of the loan have been invested. As a condition
of receiving an interest adjustment the commissioner may require the borrower to demonstrate
inability to obtain similar assistance or a low interest loan from other available sources. The
commissioner may adopt by rule additional reasonable conditions or qualifications for payment of
interest adjustments under this subdivision.
Subd. 6.[Repealed, 1994 c 635 art 1 s 41
History: 1978 c 667 s 4; Ex1979 c 1 s 41,42; 1986 c 444; 1994 c 635 art 1 s 27