46 U.S.C. § 53715 — Escrow fund

(a) In General. If a guaranteed obligation's proceeds will pay for building, rebuilding, or reconditioning^* a vessel^* that will secure the guarantee, the Secretary^* or Administrator^* may accept and hold in escrow, under an agreement with the obligor^*, a portion of the proceeds from all such obligations equal to: (1) the amount by which (A) the principal of all such obligations exceeds (B) 75 percent or 87.5 percent (whichever applies under section 53709(b)) of the amount paid by or for the account of the obligor for the work; plus (2) any interest the Secretary or Administrator requires on that amount.

(b) Security Involving Both Uncompleted and Delivered Vessels. If the security covers both a vessel still being built and one already delivered, the obligation's principal must be prorated between them under the Secretary's or Administrator's regulations, for purposes of (a).

(c) Disbursement Before Termination of Agreement. (1) Before the escrow agreement ends, the Secretary or Administrator must pay out escrow money, as the agreement specifies, to: (A) cover what the obligor owes for building, rebuilding, or reconditioning the securing vessel, and for interest on the obligations; (B) redeem the obligations under a refinancing guaranteed under this chapter; and (C) pay any extra interest earnings to the obligor at the times the escrow agreement sets. (2) If a guarantee payment comes due before the escrow agreement ends, the money then in escrow — including earned but unpaid income — must go into the account under section 53717. It's credited against what the obligor owes the Secretary or Administrator on the guaranteed obligations, and any leftover goes to the obligor.

(d) Payments Required Before Disbursement. (1) No escrow money can be paid out under (c) until the obligor has paid, from sources other than the obligation's proceeds, at least 25 percent or 12.5 percent (whichever applies under section 53709(b)) of the vessel's approved total actual cost^*. If that cost rises after approval — before or after the first payout — no further payouts happen until the obligor has separately paid that same 25 or 12.5 percent of the cost increase. This rule doesn't force the Secretary or Administrator to finance a cost increase unless it meets this chapter's or other law's requirements. (2) The Secretary or Administrator must set up, by regulation, a clear, independent, risk-based process for verifying and documenting a project's progress before releasing guaranteed loan funds. At minimum, this requires documented proof of construction^* progress before any escrow payout, and may require an independent party's certificate confirming that progress.

(e) Disbursement on Termination of Agreement. (1) If no guarantee payment has come due before the escrow agreement ends, the escrow balance at termination must be used to: (A) prepay the amount by which the principal of all obligations financing the vessel's construction exceeds 75 or 87.5 percent (whichever applies) of the vessel's paid actual cost; and (B) pay interest on that prepaid principal. (2) Any money left over goes to the obligor.

(f) Investment. The Secretary or Administrator may invest and reinvest escrow money in U.S. government obligations that mature in time to be available as the escrow agreement needs. Investment income goes to the obligor once received.

(g) Terms To Protect Government. The escrow agreement must include any other terms the Secretary or Administrator thinks are needed to fully protect the government's interests.