42 U.S.C. § 291j–3 — Applications and conditions

(a) Application contents: For each project seeking a loan guarantee (for a nonprofit private agency) or a direct loan (for a public agency), an application goes through the state agency to the Secretary. It must (1) include the same descriptions, plans, specifications, assurances, and information required for a section 291e grant application (except the federal-share certification); (2) include any other information the Secretary needs; and (3) include the state agency's certification of the total project cost and the amount of guarantee or loan being sought. (b) Conditions for approval: The Secretary can only approve the application if (1) enough money remains in the state's allotment for it; (2) the Secretary makes the same core findings normally required for a grant under section 291e(b)(1) through (4), with a modified priority finding that skips certain parts of the usual regulations; (3) the Secretary finds the outpatient-facility rules of section 291e(e) are satisfied; (4) the applicant assures it will keep records, allow access to them, and file reports the Secretary reasonably requires; and (5) for a guaranteed loan specifically, the Secretary also determines that its terms, security, maturity date, and repayment schedule adequately protect the government's financial interest and are otherwise reasonable — including that the interest rate is reasonable compared to private-market rates for similar loans and the risk the government is taking on. (c) Hearing: No application can be turned down without giving the state agency a chance for a hearing. (d) Amendments: Changing an approved application requires the same approval process as a new one. (e) Recovery rights: (1) If the government has to pay out on a guarantee for a nonprofit private agency's loan, it can generally recover that amount from the applicant — unless the Secretary waives that right for good cause — and once it pays, the government takes over the lender's rights against the applicant. (2) Guarantees for nonprofit private agencies come with whatever further terms the Secretary sets to make sure this part's goals are met; the Secretary can later modify those terms if doing so is consistent with the government's financial interest and with subsection (f). (f) Incontestable guarantee: Once the Secretary issues a guarantee for a nonprofit private agency's loan, it cannot be challenged or denied — either against the applicant it covers, or against anyone who lends money relying on it — except in cases of fraud or misrepresentation by the applicant or that lender.