New Mexico Administrative Code
Title 2 - PUBLIC FINANCE
Chapter 60 - INVESTMENT AND DEPOSIT OF PUBLIC FUNDS
Part 27 - INVESTMENT POLICY AND GUIDELINES ON PARTICIPATION LOANS SECTION 7-25-5.1 MARKET RATE INVESTMENTS
Section 2.60.27.12 - GENERAL DEFINITIONS, INTERPRETATIONS AND LOAN CHECKLIST

Universal Citation: 2 NM Admin Code 2.60.27.12

Current through Register Vol. 35, No. 18, September 24, 2024

A. APPRAISALS: An objective appraisal is necessary to document the value of the collateral. Care is required to be sure the appraisal is objective, and reasonably reflects true market values.

B. TITLE POLICY: Title companies' primary business is insuring that security interests have been correctly perfected and that there exists no prior ownership interests. The title company guarantees that there will be no losses due to prior claims on the property. The exception clause to the property title should be read carefully. A title company may issue what appears to be a perfectly good title policy, but if it contains many exceptions in reality the title is not insured at all.

C. SECURITY AGREEMENTS: A security agreement is a legal document that outlines the secured party's right to non-real property not in the physical possession of the secured party. The security agreement must be used with at least one other document to perfect a collateral position. Usually the other document is a financing statement.

D. FINANCING STATEMENTS: A financing statement never stands alone. There must always be a security agreement backing the financing statement. The financing statement legally notifies all potential creditors of a secured party's position.

E. ASSIGNMENT OF A SECURED INTEREST: The secured party may assign all or part of their security interest in the collateral either before or after filing the financing statement. However, to be effective against persons other than the secured party, the assignment should be made a matter of record.

(1) If the assignment is made before filing, the financing statement may disclose the amount of the security interest in the collateral described in the statement by an indication in the statement of the name and address of the assignee, or by including the assignment itself, or a copy thereof, on the face or back of the statement.

(2) If the assignment occurs after filing, and it is made a matter of record by the filing, in the place where the original financing statement was filed, of a separate written statement of assignment signed by the secured party of record and the debtor, the file number and the date of filing of the financing statement, the name and address of the assignee, and a description of the collateral assigned must be included.

F. LOAN AGREEMENTS: The purpose of a loan agreement is to trigger defaults early in a deteriorating loan situation, so that the financial institution can accelerate the loan and gain control of the situation. No matter how tightly the loan agreement is written it does not improve the quality of the credit. It is tailored to fit the requirements of specific situations. The following are common protective provisions:

(1) maintenance of current working capital position;

(2) restrictions on borrowings;

(3) restrictions on dividends;

(4) restrictions on the sale or pledging of business assets;

(5) restrictions on merger or consolidation;

(6) restrictions on acquisitions of additional fixed assets or assuming of lease obligations;

(7) requirements to keep all taxes paid and in current status;

(8) requirements to maintain property and equipment in good repair;

(9) requirements for adequate insurance;

(10) requirements for furnishing financial statements and credit information;

(11) restrictions against retirement of capital stock;

(12) restrictions as to contingent liabilities;

(13) limitations on salary and bonuses, and advances to officers, employees and other companies.

Disclaimer: These regulations may not be the most recent version. New Mexico may have more current or accurate information. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or the information linked to on the state site. Please check official sources.
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