43 U.S.C. § 2424 — Defaults

(a) Payments by Secretary^*. (1) In general. If a borrower defaults, the holder of the loan guarantee^* may demand the unpaid amount from the Secretary. (2) Payment required. By the date stated in the guarantee or related agreements, the Secretary must pay the holder the unpaid interest and principal on the defaulted obligation^*, unless the Secretary finds there was no default in interest or principal payments or that the default was fixed. (3) Forbearance. This subsection does not prevent the holder from agreeing to give the non-Federal borrower^* more time or other forbearance if the parties agree and the Secretary approves.

(b) Subrogation. (1) In general. If the Secretary pays under subsection (a), the Secretary receives the payment recipient’s rights specified in the guarantee or related agreements. This may include, despite another law, authority to (A) complete, maintain, operate, lease, or otherwise dispose of property acquired under the guarantee or agreements, or (B) let the borrower continue pursuing the project’s purposes under an agreement with the Secretary if the Secretary finds those purposes serve the public interest. (2) Superiority of rights. The Secretary’s rights to property acquired under a guarantee or related agreement are superior to every other person’s rights in that property.

(c) Payment of principal and interest by Secretary. For an obligation guaranteed under this section, the Secretary may contract to pay and may pay its holders, for the borrower and from appropriated funds, principal and interest that become due on the unpaid balance if the Secretary finds: (1)(A) the borrower cannot make the payments but is not in default, (B) the public interest supports letting the borrower continue the project^*, and (C) paying principal and interest will probably benefit the Federal Government more than a default would; (2) the payment will not exceed the principal and interest the borrower must pay under the guaranteed agreement; and (3) the borrower agrees to reimburse the Secretary, including interest, on terms satisfactory to the Secretary.

(d) Action by Attorney General. (1) Notification. If the borrower defaults, the Secretary must notify the Attorney General. (2) Recovery. After notification, the Attorney General must take appropriate action to recover the unpaid principal and interest from (A) the defaulting borrower’s assets associated with the obligation or (B) other security pledged for the obligation.