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RULE §187.13Withdrawals from Reserves by Participating Institutions

(a) In the event a loan enrolled under this program is charged-off, the participating financial institution may withdraw from its established reserve account an amount necessary to cover the anticipated loss.

(b) A participating financial institution, with the Office's approval, may withdraw from its established reserve immediately subsequent to loan charge-off that has been approved by the Office, or the institution may choose to attempt further collection proceedings before withdrawal. So long as the lender has notified the Office of the charge-off of an enrolled loan within the allowed 30 day time frame and the reserves are adequate to cover the charge-off at the time of notification, the lender shall not be limited to how long they may delay a claim for reimbursement. However, accrual of interest on charged-off loans will only be allowed for a time period of 180 days subsequent to charge-off. Recoupment of all other expenses, as is reasonable and necessary, shall be allowed to be claimed by the financial institution through its established reserve account.

(c) Only non-recoverable losses, plus reasonable and customary expenses, may be removed from the reserve account. Money taken in excess of this amount must be returned immediately to the reserve account. The financial institution must pursue recovery of claimed amounts, unless otherwise noted on the claim form. The financial institution shall notify the Office within thirty calendar days of any subsequent recovery made on any loan upon which a claim has been made.

(d) The reserve account shall be used by the financial institution only to cover any losses arising from a charge-off of a capital access loan, or that portion of a partially enrolled loan that is enrolled under the program, made by the financial institution.

(e) Partially enrolled loan amounts and enrolled loans sharing collateral or guarantees shall be subordinated to unenrolled portions and loans for purposes of claim subsequent to charge-off.

(f) The financial institution shall maintain records substantiating the non-recoverable losses, plus reasonable and necessary expenses, for three years following withdrawal from the program.

(g) A claim form, signed and dated by an authorized officer of the financial institution, must be remitted to the Office detailing the charged-off program loan 30 days prior to the charge-off. Claim forms will contain the following information:

  (1) borrower's name;

  (2) loan number used by the bank to identify the loan;

  (3) date of charge-off;

  (4) amount of claim, broken down to include:

    (A) customer principal;

    (B) accrued/unpaid interest;

    (C) out-of-pocket expenses; and

    (D) total claim amount.

  (5) statement of intent by the financial institution concerning its continued efforts to recover the charged-off loan;

  (6) statement of intent by the financial institution on whether to claim against the reserves as outlined on the form submitted or to request payment on the claim at a later date;

  (7) authorized signature, title, date and phone number of officer of the submitting financial institution.

(h) The Office may reject a claim:

  (1) if the claim form is not accurate and complete as prescribed by subsection (g) of this section;

  (2) if the representations and warranties provided by the participating financial institution at the time of enrollment have been determined to be misleading or false;

  (3) if the records of the financial institution do not substantiate the claim;

  (4) if funds in the financial institution's reserve account are insufficient to cover the claim;

  (5) if the claim form is not submitted thirty (30) days prior to the charge-off; or

  (6) for other good cause.

Source Note: The provisions of this §187.13 adopted to be effective September 15, 1997, 22 TexReg 8967; amended to be effective October 31, 2002, 27 TexReg 10010; amended to be effective August 5, 2012, 37 TexReg 5735

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