Security
Q. Should the value of all buildings, including home, be included in the appraised value of the property?
A. Yes. The loan guarantee however, is always based on the purchase price or the appraised value, whichever is the
lesser of the two.
Q. Can a lender do an appraisal?
A. The lender may make its own appraisal where it would have done so in the normal course of it's own business. In
cases where the lender would have obtained an independent appraisal from a person qualified in the field relevant to the
property being taken as security than they should do so. Both types of appraisals must be documented and retained on
file in the event of a claim for loss.
Q. Can a loan be secured by something other than the item purchased?
A. Yes. The bottom line is that the loan must be fully secured at all times.
Q. Is the loan amount based on the purchased price or the appraised value?
A. The loan guarantee amount is based the lesser of the two. i.e. If it is for a new piece of equipment, the guarantee
would be based on the purchase price. The appraised value on a non arms length transaction such as a sale from an
individual to a corporation. An appraisal is also required for resale and used equipment.
Q. Can security be substituted?
A. If there is any substitution of security preapproved by the lender, a change of original security, or change in priority of
security, the Minister's approval is required under a Revision of Terms Schedule 2.
Q. Does security need to be sold prior to submitting a Claim for Loss?
A. Not in all cases. A Claim for Loss may be submitted to our administration even if the security hasn't been sold. After
payment of a claim for loss, the Minister may request the lender to continue to actively follow an account in order to
effect recovery, or provide reports to the minister of any developments in certain cases.
Q. Can Crown leased land be taken as security?
A. No. We would prefer that this type of security is not taken. (Speak to the Lender in these cases and if this is part of
a security package that will be viable over the time frame of the loan it may be OK). The circumstances of each inquiry
should be individually assessed.
Q. Can a lender accept a settlement on behalf of the Crown?
A. No. In cases where the lender is negotiating a settlement of a loan, the lender should inform the Minister of the
negotiations. The Minister's approval must be obtained prior to acceptance of any settlement of a FIMCLA or FILA
loan outstanding.
