42 U.S.C. § 300q–2 — General provisions

submitted 82 years ago by Pub. L. 93-641 to r/title-42-THE-PUBLIC-HEALTH-AND-WELFARE · 2,181 words · no verdicts yet

in plain englishAI-generated · not legal advice

This section sets the rules the Secretary must follow before making or guaranteeing loans for medical facility projects. It covers how the Secretary approves loans and guarantees and protects the government's financial interest, and lets the Secretary sell loans to other buyers. It also creates a Treasury loan fund to pay for these loans and guarantees, and lets the Secretary act to prevent or handle loan defaults.

(a) Loan guarantees; criteria for approval; recovery of payments by United States; modification, etc., of terms and conditions; incontestability. (1) Before guaranteeing a loan under this part, the Secretary must find two things: (A) the loan's terms, security, and repayment schedule protect the government's financial interests and are otherwise reasonable — including that the interest rate isn't higher than reasonable, given rates for similar private loans and the risk the government is taking on; and (B) the loan wouldn't be available on reasonable terms without the government's guarantee. (2)(A) If the government ever has to pay out on a guarantee, it can recover that payment from the loan applicant, unless the Secretary waives that right for good cause. Once the government pays, it steps into the shoes of whoever received the payment, for legal purposes. (B) The Secretary can change a loan guarantee's terms and conditions later, as long as doing so still protects the government's financial interest, subject to (C) below. (C) A loan guarantee can't be challenged later: (i) by the applicant who got it, unless the applicant lied or committed fraud to get it; or (ii) by anyone who lent money relying on the guarantee, unless that lender lied or committed fraud. (D) Guarantees are also subject to whatever other terms the Secretary decides are necessary to achieve this subchapter's purposes. (b) Loans; criteria for approval; terms and conditions; waiver of recovery of payments by United States. (1) Before approving a direct loan, the Secretary must be reasonably satisfied that (A) the applicant will be able to make its principal and interest payments on time, and (B) the applicant will have enough other money available to finish the project. (2) Every loan made under this part must: (A) have adequate security; (B) have a set maturity date; (C) be repayable in installments; (D) carry an interest rate close to the current rate for guaranteed loans under this part, minus any interest-rate subsidy for projects in poverty areas under section 300q(a)(2)(B); and (E) meet any other terms the Secretary decides are needed to serve this subchapter's purposes while still protecting the government financially. (3) The Secretary may waive the government's right to recover unpaid principal or interest from a borrower who defaults, for good cause and with due regard for the government's finances — but if that loan was later sold and guaranteed, the waiver doesn't affect the Secretary's promise to the buyer to pay principal and interest on time. (c) Sale of loans; authority; amount; agreements with purchasers; deposit of proceeds. (1) The Secretary may sell loans made under this part, on the private market, to the Federal National Mortgage Association, or to the Federal Financing Bank — always with the government's financial interest in mind. (2) A sold loan must be sold for an amount equal, or close, to its unpaid principal at the time of sale. (3)(A) When selling a loan, the Secretary can agree to (i) guarantee the buyer's principal and interest payments, and (ii) pay the buyer an interest subsidy on top of the loan's own interest, enough to add up to a reasonable market rate given the risk. (B) That sale agreement can also: (i) let the Secretary act as the buyer's agent, collecting payments from the borrower and passing them to the buyer; (ii) let the Secretary buy the loan back later, on agreed terms; (iii) require the Secretary, if the borrower defaults, to offer the buyer the option of closing out the loan by paying the buyer everything still owed; and (iv) require the Secretary, after such a close-out or any other loss, to step into the buyer's legal position to try to recover the loss from the borrower. (4) Money the Secretary gets from selling loans goes into the fund created under subsection (d). (5) If a loan sold to a buyer is also guaranteed, any interest — and any interest subsidy — the buyer receives after the sale counts as the buyer's taxable income under title 26. (d) Loan and loan guarantee fund; establishment; amounts authorized to be appropriated; issuance, purchase, and sale of notes, obligations, etc.; interest rates; public debt transactions. (1) The Treasury holds a loan and loan guarantee fund for the Secretary, available without a fiscal-year deadline, in whatever amounts Congress appropriates, to: (A) make direct loans; (B) cover the Secretary's obligations under loan guarantees; (C) pay the interest subsidy described in section 300q(a)(2)(B); (D) repurchase loans under subsection (c)(3)(B); (E) pay interest on sold-and-guaranteed loans; and (F) take the default-prevention actions authorized in subsection (f). Congress may appropriate whatever money the fund needs. Money the Secretary receives from loans and guarantees under this part — including proceeds from selling assets — also goes into the fund. (2) If the fund ever runs short of money for (A) interest payments under section 300q(a)(2)(B); (B) meeting guarantees to nonprofit private entities; (C) paying a loan buyer after the borrower defaults on a sold-and-guaranteed loan; (D) repurchasing loans under subsection (c)(3)(B); (E) paying interest on sold-and-guaranteed loans; or (F) taking default-prevention action under subsection (f) — the Secretary can borrow by issuing notes or other obligations to the Secretary of the Treasury, on terms the Secretary and Treasury agree on. The Treasury sets the interest rate on these notes, based on rates for comparable government securities, and must buy them, using proceeds from selling other Treasury securities if needed. The Treasury may later resell these notes. All these transactions count as public debt transactions. Money borrowed this way goes into the fund, and the fund repays the notes. (e) Transfers to and additional capitalization of loan and loan guarantee fund. (1) All the assets, commitments, obligations, and balances from the older loan fund created under section 291j–6 transfer into the fund created by subsection (d). (2) Congress may appropriate more money to capitalize the fund, for the fiscal years ending June 30 1975, June 30 1976, and September 30 of each year from 1977 through 1982. (f) Default prevention measures; terms and conditions; implementation of reforms; foreclosures; protection of Federal interest on default. (1) The Secretary can take steps to prevent default on a loan made or guaranteed under this part or under subchapter IV — including waiving regulatory conditions, delaying payments, renegotiating the loan, paying for technical help, or temporarily covering the borrower's interest and principal. If the Secretary spends money this way to help a medical facility, the Secretary can require the facility to make organizational, operational, or financial reforms, and to disclose whatever financial information the Secretary needs to check on those reforms. (2) If a borrower actually defaults, the Secretary can take action — consistent with state foreclosure law — to protect the government's interest, including selling property pledged as security, or temporarily taking possession of and using that property.

the actual law source: uscode.house.gov ↗public domain

(a) Loan guarantees; criteria for approval; recovery of payments by United States; modification, etc., of terms and conditions; incontestability

(1)

The Secretary may not approve a loan guarantee for a project under this part unless he determines that (A) the terms, conditions, security (if any), and schedule and amount of repayments with respect to the loan are sufficient to protect the financial interests of the United States and are otherwise reasonable, including a determination that the rate of interest does not exceed such per centum per annum on the principal obligation outstanding as the Secretary determines to be reasonable, taking into account the range of interest rates prevailing in the private market for similar loans and the risks assumed by the United States, and (B) the loan would not be available on reasonable terms and conditions without the guarantee under this part.

(2)

(A)

The United States shall be entitled to recover from the applicant for a loan guarantee under this part the amount of any payment made pursuant to such guarantee, unless the Secretary for good cause waives such right of recovery; and, upon making any such payment, the United States shall be subrogated to all of the rights of the recipient of the payments with respect to which the guarantee was made.

(B)

To the extent permitted by subparagraph (C), any terms and conditions applicable to a loan guarantee under this part (including terms and conditions imposed under subparagraph (D)) may be modified by the Secretary to the extent he determines it to be consistent with the financial interest of the United States.

(C)

Any loan guarantee made by the Secretary under this part shall be incontestable (i) in the hands of an applicant on whose behalf such guarantee is made unless the applicant engaged in fraud or misrepresentation in securing such guarantee, and (ii) as to any person (or his successor in interest) who makes or contracts to make a loan to such applicant in reliance thereon unless such person (or his successor in interest) engaged in fraud or misrepresentation in making or contracting to make such loan.

(D)

Guarantees of loans under this part shall be subject to such further terms and conditions as the Secretary determines to be necessary to assure that the purposes of this subchapter will be achieved.

(b) Loans; criteria for approval; terms and conditions; waiver of recovery of payments by United States

(1)

The Secretary may not approve a loan under this part unless—

(A)

the Secretary is reasonably satisfied that the applicant under the project for which the loan would be made will be able to make payments of principal and interest thereon when due, and

(B)

the applicant provides the Secretary with reasonable assurances that there will be available to it such additional funds as may be necessary to complete the project or undertaking with respect to which such loan is requested.

(2)

Any loan made under this part shall (A) have such security, (B) have such maturity date, (C) be repayable in such installments, (D) bear interest at a rate comparable to the current rate of interest prevailing, on the date the loan is made, with respect to loans guaranteed under this part, minus any interest subsidy made in accordance with section 300q(a)(2)(B) of this title with respect to a loan made for a project located in an urban or rural poverty area, and (E) be subject to such other terms and conditions (including provisions for recovery in case of default), as the Secretary determines to be necessary to carry out the purposes of this subchapter while adequately protecting the financial interests of the United States.

(3)

The Secretary may, for good cause but with due regard to the financial interests of the United States, waive any right of recovery which he has by reasons of the failure of a borrower to make payments of principal of and interest on a loan made under this part, except that if such loan is sold and guaranteed, any such waiver shall have no effect upon the Secretary’s guarantee of timely payment of principal and interest.

(1)

The Secretary shall from time to time, but with due regard to the financial interests of the United States, sell loans made under this part either on the private market or to the Federal National Mortgage Association in accordance with section 1717 of title 12 or to the Federal Financing Bank.

(2)

Any loan so sold shall be sold for an amount which is equal (or approximately equal) to the amount of the unpaid principal of such loans as of time of sale.

(3)

(A)

The Secretary is authorized to enter into an agreement with the purchaser of any loan sold under this part under which the Secretary agrees—

(i)

to guarantee to such purchaser (and any successor in interest to such purchaser) payments of the principal and interest payable under such loan, and

(ii)

to pay as an interest subsidy to such purchaser (and any successor in interest of such purchaser) amounts which, when added to the amount of interest payable on such loan, are equivalent to a reasonable rate of interest on such loan as determined by the Secretary after taking into account the range of prevailing interest rates in the private market on similar loans and the risks assumed by the United States.

(B)

Any agreement under subparagraph (A)—

(i)

may provide that the Secretary shall act as agent of any such purchaser, for the purpose of collecting from the entity to which such loan was made and paying over to such purchaser any payments of principal and interest payable by such entity under such loan;

(ii)

may provide for the repurchase by the Secretary of any such loan on such terms and conditions as may be specified in the agreement;

(iii)

shall provide that, in the event of any default by the entity to which such loan was made in payment of principal or interest due on such loan, the Secretary shall, upon notification to the purchaser (or to the successor in interest of such purchaser), have the option to close out such loan (and any obligations of the Secretary with respect thereto) by paying to the purchaser (or his successor in interest) the total amount of outstanding principal and interest due thereon at the time of such notification; and

(iv)

shall provide that, in the event such loan is closed out as provided in clause (iii), or in the event of any other loss incurred by the Secretary by reason of the failure of such entity to make payments of principal or interest on such loan, the Secretary shall be subrogated to all rights of such purchaser for recovery of such loss from such entity.

(4)

Amounts received by the Secretary as proceeds from the sale of loans under this subsection shall be deposited in the fund established under subsection (d).

(5)

If any loan to a public entity under this part is sold and guaranteed by the Secretary under this subsection, interest paid on such loan after its sale and any interest subsidy paid, under paragraph (3)(A)(ii), by the Secretary with respect to such loan which is received by the purchaser of the loan (or the purchaser’s successor in interest) shall be included in the gross income of the purchaser or successor for the purpose of chapter 1 of title 26.

(d) Loan and loan guarantee fund; establishment; amounts authorized to be appropriated; issuance, purchase, and sale of notes, obligations, etc.; interest rates; public debt transactions

(1)

There is established in the Treasury a loan and loan guarantee fund (hereinafter in this subsection referred to as the “fund”) which shall be available to the Secretary without fiscal year limitation, in such amounts as may be specified from time to time in appropriations Acts—

(A)

to enable him to make loans under this part,

(B)

to enable him to discharge his responsibilities under loan guarantees issued by him under this part,

(C)

for payment of interest under section 300q(a)(2)(B) of this title on loans guaranteed under this part,

(D)

for repurchase of loans under subsection (c)(3)(B),

(E)

for payment of interest on loans which are sold and guaranteed, and

(F)

to enable the Secretary to take the action authorized by subsection (f).

There are authorized to be appropriated from time to time such amounts as may be necessary to provide the sums required for the fund. There shall also be deposited in the fund amounts received by the Secretary in connection with loans and loan guarantees under this part and other property or assets derived by him from his operations respecting such loans and loan guarantees, including any money derived from the sale of assets.

(2)

If at any time the sums in the funds are insufficient to enable the Secretary—

(A)

to make payments of interest under section 300q(a)(2)(B) of this title,

(B)

to otherwise comply with guarantees under this part of loans to nonprofit private entities,

(C)

in the case of a loan which was made, sold, and guaranteed under this part, to make to the purchaser of such loan payments of principal and interest on such loan after default by the entity to which the loan was made, or

(D)

to repurchase loans under subsection (c)(3)(B),

(E)

to make payments of interest on loans which are sold and guaranteed, and

(F)

to enable the Secretary to take the action authorized by subsection (f),

he is authorized to issue to the Secretary of the Treasury notes or other obligations in such forms and denominations, bearing such maturities, and subject to such terms and conditions, as may be prescribed by the Secretary with the approval of the Secretary of the Treasury. Such notes or other obligations shall bear interest at a rate determined by the Secretary of the Treasury, taking into consideration the current average market yield on outstanding marketable obligations of the United States of comparable maturities during the month preceding the issuance of the notes or other obligations. The Secretary of the Treasury shall purchase any notes and other obligations issued under this paragraph and for that purpose he may use as a public debt transaction the proceeds from the sale of any securities issued under chapter 31 of title 31, and the purposes for which the securities may be issued under that chapter are extended to include any purchase of such notes and obligations. The Secretary of the Treasury may at any time sell any of the notes or other obligations acquired by him under this paragraph. All redemptions, purchases, and sales by the Secretary of the Treasury of such notes or other obligations shall be treated as public debt transactions of the United States. Sums borrowed under this paragraph shall be deposited in the fund and redemption of such notes and obligations shall be made by the Secretary from the fund.

(e) Transfers to and additional capitalization of loan and loan guarantee fund

(1)

The assets, commitments, obligations, and outstanding balances of the loan guarantee and loan fund established in the Treasury by section 291j–6 of this title shall be transferred to the fund established by subsection (d) of this section.

(2)

To provide additional capitalization for the fund established under subsection (d) there are authorized to be appropriated to the fund, such sums as may be necessary for the fiscal years ending June 30, 1975, June 30, 1976, September 30, 1977, September 30, 1978, September 30, 1979, September 30, 1980, September 30, 1981, and September 30, 1982.

(f) Default prevention measures; terms and conditions; implementation of reforms; foreclosures; protection of Federal interest on default

(1)

The Secretary may take such action as may be necessary to prevent a default on a loan made or guaranteed under this part or under subchapter IV, including the waiver of regulatory conditions, deferral of loan payments, renegotiation of loans, and the expenditure of funds for technical and consultative assistance, for the temporary payment of the interest and principal on such a loan, and for other purposes. Any such expenditure made under the preceding sentence on behalf of a medical facility shall be made under such terms and conditions as the Secretary shall prescribe, including the implementation of such organizational, operational, and financial reforms as the Secretary determines are appropriate and the disclosure of such financial or other information as the Secretary may require to determine the extent of the implementation of such reforms.

(2)

The Secretary may take such action, consistent with State law respecting foreclosure procedures, as he deems appropriate to protect the interest of the United States in the event of a default on a loan made or guaranteed under this part or under subchapter IV, including selling real property pledged as security for such a loan or loan guarantee and for a reasonable period of time taking possession of, holding, and using real property pledged as security for such a loan or loan guarantee.

Source credit: (July 1, 1944, ch. 373, title XVI, § 1602, formerly § 1622, as added Pub. L. 93–641, § 4, Jan. 4, 1975, 88 Stat. 2265; amended Pub. L. 95–83, title I, § 106(x)(2), (y), Aug. 1, 1977, 91 Stat. 385; renumbered § 1602 and amended Pub. L. 96–79, title II, §§ 201(b)(2), (3), 203(a)(1), (3), (g), Oct. 4, 1979, 93 Stat. 631, 635; Pub. L. 97–414, § 8(q), Jan. 4, 1983, 96 Stat. 2062; Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095.)

history & why it existsrecord from the source credit

1944Enacted · Pub. L. 93-641 · 88 Stat. 2265
1977Amended · Pub. L. 95-83 · 91 Stat. 385
1979Amended · Pub. L. 96-79 · 93 Stat. 631, 635
1983Amended · Pub. L. 97-414 · 96 Stat. 2062
1986Amended · Pub. L. 99-514 · 100 Stat. 2095

A history note hasn’t been published yet. The record shows enactment by Pub. L. 93-641 on 1944-07-01.

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