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s <br /> When a loan becomes chronically and persistently late, and/or the borrower files for bankruptcy, <br /> the loan is classified as a bad debt. The remedies provided in the CWCB loan contracts are quite <br /> severe and would probably be implemented only a last resort against a bad debt. <br /> a. Accelerate the loan (declare the entire principal amount, late charges, if any, and accrued <br /> interest then outstanding immediately due and payable) <br /> b. Act upon the collateral, e.g., applying the proceeds in a certificate of deposit toward the <br /> amount due, charging the county trustee to transfer property in a deed of trust to the CWCB, <br /> taking over shares of stock held as collateral. <br /> As pointed out in the CWCB response to this audit issue, the State Collection process should be <br /> considered a means of last resort. This process creates bad will among intended beneficiaries and <br /> past experience with the State Collection Agency indicates they are geared towards collecting from <br /> individuals rather than from corporations and governmental entities. <br /> Aging Report <br /> An Aging Report for CWCB Loans should be developed to help visualize the status of loan <br /> payments. The first step would be to obtain a current, comprehensive list of loans along with the <br /> payment due dates and annual loan payment amount. Then, the date of the payments made on the <br /> loans during the past year would be added to the list. The aging report could be broken out similarly <br /> to the auditors' report, 0-15 days (since the Board has used the 15-day mark as a late charge...), 16- <br /> 30 days, 30-180 days, 180-365.days, and 366+days. <br /> • <br /> Recommendation <br /> We recommend that the Board provide feedback to the staff on the issue of delinquent loans, <br /> collection methods and reports during a discussion at the January 1999 workshop and through <br /> written comments and continued discussion. <br /> L:\BOARDMEMUAN99\Workshop—Delinquencies,Defaults,and Collections.doc <br /> • <br /> 3 <br />