Code of Maine Rules
94 - INDEPENDENT AGENCIES
457 - FINANCE AUTHORITY OF MAINE (FAME)
Chapter 101 - LOAN INSURANCE PROGRAM
Section 457-101-6 - Loan and Insurance Terms and Conditions
Universal Citation: 94 ME Code Rules ยง 457-101-6
Current through 2024-38, September 18, 2024
A. Loan Terms
(1)
Interest Rate and Term. The
rate of interest on the insured loan and the term of the loan shall be agreed
between the lender and the borrower, subject to the approval of the
Authority.
(2)
Covenants. Any loan approved for insurance shall impose covenants
and requirements in accordance with prudent lending practices as approved by
the Authority.
(3)
Use of
Loan Proceeds. The lender shall ensure that proceeds of an insured loan
are used only for the business purposes approved by the Authority.
(4)
Personal Guaranties. All
insured loans shall be guaranteed by any shareholder of the Borrower who:
(a) owns 20% or more of the Borrower;
or
(b) owns 5% or more of the
Borrower and receives substantial income from the Borrower, Exceptions may be
made to the requirements of this paragraph only if:
1. For insured loans with FAME exposure equal
to or less than $500,000, the Chief Executive Officer finds, or
2. For insured loans with FAME exposure over
$500,000, two-thirds (2/3) of the Members of the Board present and voting at a
meeting find:
(i) extraordinary public
benefit will result from the project; and
(ii) substantial equity is present in the
project.
(5)
Lien Priorities. Where the
Authority's insurance liability exceeds $1,000,000, the insured Loan must have
a first, or shared first priority lien on all material collateral that secures
the loan.
B. Insurance Terms
(1)
Types
of Insurance. A lender may request insurance on a pro-rata or leveraged
basis.
(a) Pro Rata Insurance shall cover up
to 100% (or such lesser amount as indicated in the Loan Insurance Authorization
or Loan Insurance Agreement) of a lender's loss of principal, interest, and
reasonable costs of collection including attorney's fees, on an insured loan on
a pro rata basis, as a percentage of the Lender's total loss after default by
borrower and application of all loan payments, proceeds of collateral and
recoveries after default from borrower and guarantors, but in no event more
than the specified percentage of the original loan amount, and in all cases
subject to the limitations set forth in this Rule, the Loan Insurance Agreement
required in Section VII and the Loan Insurance Authorization for the insured
loan. By way of illustration, on a $100,000 loan with 90% pro rata loan
insurance, the Authority's maximum insurance liability is $90,000, or 90% of
the original principal balance of the loan. If, after default, liquidation of
all collateral and reasonable enforcement of collection from borrowers and
guarantors, the loan balance is 65,000, the Authority's pro rata insurance
liability would be $58,500.
(b)
Leveraged Insurance shall cover 100% of a Lenders loss of principal, interest,
and reasonable costs of collection including attorney's fees, up to the lesser
of (a) 25% (or such lesser amount as indicated in the Loan Insurance
Authorization or Loan Insurance Agreement) of the original loan amount; or (b)
25% (or such lesser amount as indicated in the Loan Insurance Authorization or
Loan Insurance Agreement) of the loan balance at the time of default, prior to
application of any proceeds of collateral or recoveries after default from
borrower or guarantors to the insured loan, in all cases subject to the
limitations set forth in this Rule, the Loan Insurance Agreement required in
Section VII and the Loan Insurance Authorization for the insured loan prior to
determining the applicability of insurance. By way of illustration, on a
$100,000 loan with 25% leveraged loan insurance, the Authority's maximum
insurance liability is $25,000, or 25% of the original principal balance of the
loan. If, at the time of borrower default, the loan balance is $85,000, and
after liquidation of collateral, application of all such proceeds and payments
collected after default from borrower and guarantors, the loan balance is
$20,000, the Authority's insurance liability would be $20,000.00.
(2)
Limitations on
Insurance
(a)
Exclusions.
Notwithstanding anything to the contrary elsewhere in this rule, Loan insurance
does not cover any part of an insured loan balance that represents:
(i) accrued interest at the contract
(non-default) rate in excess of 90 days;
(ii) late fees;
(iii) default rate interest or penalty
interest over the contract rate;
(iv) unreasonable attorney's fees or other
collection costs; or
(v) costs of
environmental remediation.
(b)
Maximum Insurance.
Notwithstanding anything to the contrary elsewhere in this rule, the
Authority's maximum aggregate liability to any one Borrower shall not exceed
the lesser of (i) such amount as is set forth in the Credit Policy, or (b) the
maximum amount permitted by
10 MRSA
§1026-A. In addition, the maximum
leveraged insurance liability of the authority to any one Borrower shall be
$3,000,000.
(c)
Enhanced
insurance coverage for certain projects. Notwithstanding anything to the
contrary elsewhere in this rule, pro rata loan insurance shall not exceed 90%
except in the following cases:
(i) loans to
veterans (provided Authority insured loans to veterans at rates greater than
90% shall not exceed $5,000,000 in the aggregate at any one time);
(ii) loans for oil storage facility projects
(provided Authority insured loans for oil storage facility projects at rates
greater than 90% shall not exceed $5,000,000 in the aggregate at any one
time);
(iii) loans for clean fuel
vehicle projects (provided Authority insured loans for clean fuel vehicle
projects at rates greater than 90% shall not exceed $5,000,000 in the aggregate
at any one time);
(iv) loans for
waste oil disposal site clean-up projects (provided Authority insured loans for
waste oil disposal site clean-up projects at rates greater than 90% shall not
exceed $1,000,000 in the aggregate at any one time);
(v) loans for Plymouth waste oil remedial
projects (provided Authority insured loans for Plymouth waste oil remedial
projects at rates greater than 90% shall not exceed $1,000,000 in the aggregate
at any one time);
(d)
Limit on Insurance during construction periods. Where the insured
loan is projected in whole or in material part to finance a project involving
construction or substantial renovation of a facility, and where such facility
is a substantial part of the collateral for the insured Loan, Loan insurance
shall not be effective until construction is completed and all costs of
construction are paid, unless the Loan is otherwise adequately secured or the
completion of construction is adequately ensured by a Performance Bond, such
that the Authority determines, in its discretion, that the risk of loss on
account of construction related issues is de
minimus.
(e)
[Repealed effective December 9, 2012]
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