20 USC 1078-6 - Default reduction program

U.S Code last checked for updates: Nov 22, 2024

§ 1078–6.

Default reduction program

(a)

Other repayment incentives

(1)

Sale or assignment of loan

(A)

In general

Each guaranty agency, upon securing 9 payments made within 20 days of the due date during 10 consecutive months of amounts owed on a loan for which the Secretary has made a payment under paragraph (1) of section 1078(c) of this title, shall—

(i)

if practicable, sell the loan to an eligible lender; or

(ii)

beginning July 1, 2014, assign the loan to the Secretary if the guaranty agency has been unable to sell the loan under clause (i).

(B)

Monthly payments

(C)

Consumer reporting agencies

(D)

Duties upon sale

With respect to a loan sold under subparagraph (A)(i)—

(i)

the guaranty agency—

(I)

shall, in the case of a sale made on or after July 1, 2014, repay the Secretary 100 percent of the amount of the principal balance outstanding at the time of such sale, multiplied by the reinsurance percentage in effect when payment under the guaranty agreement was made with respect to the loan; and

(II)

may, in the case of a sale made on or after July 1, 2014, in order to defray collection costs—

(aa)

charge to the borrower an amount not to exceed 16 percent of the outstanding principal and interest at the time of the loan sale; and

(bb)

retain such amount from the proceeds of the loan sale; and

(ii)

the Secretary shall reinstate the Secretary’s obligation to—

(I)

reimburse the guaranty agency for the amount that the agency may, in the future, expend to discharge the guaranty agency’s insurance obligation; and

(II)

pay to the holder of such loan a special allowance pursuant to section 1087–1 of this title.

(E)

Duties upon assignment

With respect to a loan assigned under subparagraph (A)(ii)—

(i)

the guaranty agency shall add to the principal and interest outstanding at the time of the assignment of such loan an amount equal to the amount described in subparagraph (D)(i)(II)(aa); and

(ii)

the Secretary shall pay the guaranty agency, for deposit in the agency’s Operating Fund established pursuant to section 1072b of this title, an amount equal to the amount added to the principal and interest outstanding at the time of the assignment in accordance with clause (i).

(F)

Eligible lender limitation

(G)

Default due to error

(2)

Use of proceeds of sales

(3)

Borrower eligibility

(4)

Applicability of general loan conditions

(5)

Limitation

(b)

Satisfactory repayment arrangements to renew eligibility

(c)

Financial and economic literacy

(Pub. L. 89–329, title IV, § 428F, as added Pub. L. 99–498, title IV, § 402(a), Oct. 17, 1986, 100 Stat. 1394; amended Pub. L. 100–50, § 10(u), June 3, 1987, 101 Stat. 346; Pub. L. 101–239, title II, § 2005(a), Dec. 19, 1989, 103 Stat. 2116; Pub. L. 102–325, title IV, § 420, July 23, 1992, 106 Stat. 534; Pub. L. 103–208, § 2(c)(38)–(40), Dec. 20, 1993, 107 Stat. 2466; Pub. L. 105–244, title IV, § 421, Oct. 7, 1998, 112 Stat. 1696; Pub. L. 109–171, title VIII, § 8014(h), Feb. 8, 2006, 120 Stat. 171; Pub. L. 110–315, title IV, § 426, Aug. 14, 2008, 122 Stat. 3235; Pub. L. 111–39, title IV, § 402(d)(1), July 1, 2009, 123 Stat. 1941; Pub. L. 113–67, div. A, title V, § 501, Dec. 26, 2013, 127 Stat. 1186.)

cite as: 20 USC 1078-6