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<br />Discussion <br /> <br />Someday a Construction Fund or STTFP A borrower may declare bankruptcy, become . <br />insolvent, or simply refuse to comply with its repayment requirement under the loan contract. <br />Currently, the Board may decide to commence foreclosure proceedings on the Construction Fund <br />or STTFPBA loan. There is no internal way for the CWCB to pay for the costs associated with a <br />loan foreclosure, other than using its operating budget. <br /> <br />The costs associated with a foreclosure are impossible to estimate because every loan is <br />different. During foreclosure however, the Board might face expenses associated with property <br />management, appraisals, assessments, taxes, County fees, insurance fees, court costs and legal <br />fees. The costs could add up very quickly depending on the type of the borrower and size of the <br />loan. Timing of the foreclosure is also impossible to predict. However, given the Construction <br />Fund bill timetable, it would be a minimum of six months until funds would become available if <br />the Board recommended foreclosure of a loan at its November meeting. Likewise, if the Board <br />recommended foreclosure just after the Construction Fund bill legislative deadline in March, the <br />delay of fund availability would be well over one year. <br /> <br />The establishment of this new fund Cteates the spending authority required within the <br />Construction Fund and STTFPBA program to expend funds required in a foreclosure proceeding. <br />With no specific cost estimates to rely upon, staff would recommend a nominal amount of <br />$100,000 be established as the minimum amount necessary to cover initial foreclosure <br />expenditures for any given loan until additional funds, if required, could be appropriated by the <br />General Assembly. <br /> <br />. <br /> <br />Recommendation <br /> <br />Staff recommends that the Board consider a motion to recommend to the General <br />Assembly that a Foreclosure Fund be created within the CWCB Construction Fund with an initial <br />appropriation to the fund of $100,000. The purpose of the fund will be to provide the CWCB a <br />method of payment for the direct costs associated with foreclosing Construction Fund or <br />Severance Tax Trust Fund Perpetual Base Account delinquent loans. <br /> <br />. <br />