First National Bank made a loan to Lawrence & Co. for the purpose of purchasing landscape equipment, secured by a storage lot the company owned. The borrower made payments for a year and then defaulted. Three months passed without any communication or payments from the borrower, despite the bank's efforts to locate the company's owners. The company appears to have ceased operations. What is the bank's BEST course of action?
The bank should make reasonable inquiries to determine whether the property is abandoned and if so, report it as abandoned. This is because the borrower has disappeared, there have been no payments for three months, and the company appears to have ceased operations. Therefore, it's important for the bank to assess the current status of the property before taking any further action such as foreclosure. This approach ensures that the bank has the necessary information to act appropriately based on the actual condition of the property.
When a borrower defaults and there is no communication or evidence of continued operation, the lender (in this case, the bank) should take steps to ascertain the status of the property securing the loan. Making reasonable inquiries to determine whether the property has been abandoned is a prudent approach. This might include efforts to contact the borrower through various means, checking the property for signs of operational activity, or consulting with local authorities.