42 USC 292f - Default of borrower

U.S Code last checked for updates: Jun 01, 2024

§ 292f.

Default of borrower

(a)

Conditions for payment to beneficiary

(1)

In general

(2)

Exceptional performance

(A)

Authority

(B)

Compliance performance rating

(C)

Annual audits for lenders, holders, and servicers

(D)

Secretary’s determinations

(E)

Quarterly compliance audit

(F)

Revocation authority

(G)

Documentation

(H)

Cost of audits

(I)

Additional revocation authority

(J)

Noncompliance

(b)

Subrogation

(c)

Forbearance

(d)

Reasonable care and diligence regarding loans

(e)

Definitions

For purposes of this section:

(1)

The term “insurance beneficiary” means the insured or its authorized assignee in accordance with section 292e(c) of this title.

(2)

The term “amount of the loss” means, with respect to a loan, unpaid balance of the principal amount and interest on such loan, less the amount of any judgment collected pursuant to default proceedings commenced by the eligible lender or holder involved.

(3)

The term “default” includes only such defaults as have existed for 120 days.

(4)

The term “servicer” means any agency acting on behalf of the insurance beneficiary.

(f)

Reductions in Federal reimbursements or payments for defaulting borrowers

(g)

Conditions for discharge of debt in bankruptcy

Notwithstanding any other provision of Federal or State law, a debt that is a loan insured under the authority of this subpart may be released by a discharge in bankruptcy under any chapter of title 11, only if such discharge is granted—

(1)

after the expiration of the seven-year period beginning on the first date when repayment of such loan is required, exclusive of any period after such date in which the obligation to pay installments on the loan is suspended;

(2)

upon a finding by the Bankruptcy Court that the nondischarge of such debt would be unconscionable; and

(3)

upon the condition that the Secretary shall not have waived the Secretary’s rights to apply subsection (f) to the borrower and the discharged debt.

(h)

Requirement regarding actions for default

(1)

In general

With respect to the default by a borrower on any loan covered by Federal loan insurance under this subpart, the Secretary shall, under subsection (a), require an eligible lender or holder to commence and prosecute an action for such default unless—

(A)

in the determination of the Secretary—

(i)

the eligible lender or holder has made reasonable efforts to serve process on the borrower involved and has been unsuccessful with respect to such efforts, or

(ii)

prosecution of such an action would be fruitless because of the financial or other circumstances of the borrower;

(B)

for such loans made before November 4, 1988, the loan involved was made in an amount of less than $5,000; or

(C)

for such loans made after November 4, 1988, the loan involved was made in an amount of less than $2,500.

(2)

Relationship to claim for payment

(3)

State court judgments

(i)

Inapplicability of Federal and State statute of limitations on actions for loan collection

(j)

School collection assistance

(July 1, 1944, ch. 373, title VII, § 707, as added Pub. L. 102–408, title I, § 102, Oct. 13, 1992, 106 Stat. 2002; amended Pub. L. 103–43, title XX, § 2014(a)(2), June 10, 1993, 107 Stat. 215; Pub. L. 105–392, title I, §§ 142(a), (b), 144(a), Nov. 13, 1998, 112 Stat. 3579, 3581.)

cite as: 42 USC 292f