
From the U.S. Code Online via GPO Access
[wais.access.gpo.gov]
[Laws in effect as of January 23, 2000]
[Document not affected by Public Laws enacted between
  January 23, 2000 and December 4, 2001]
[CITE: 42USC291j-7]

 
                 TITLE 42--THE PUBLIC HEALTH AND WELFARE
 
                    CHAPTER 6A--PUBLIC HEALTH SERVICE
 
  SUBCHAPTER IV--CONSTRUCTION AND MODERNIZATION OF HOSPITALS AND OTHER 
                           MEDICAL FACILITIES
 
Part B--Loan Guarantees and Loans for Modernization and Construction of 
                 Hospitals and Other Medical Facilities
 
Sec. 291j-7. Loans to public facilities


(a) Interest rates; security; equitable geographical distribution

    (1) Any loan made by the Secretary to a public agency under this 
part for the modernization or construction of a public hospital or other 
health facility shall require such public agency to pay interest thereon 
at a rate comparable to the current rate of interest prevailing with 
respect to loans, to nonprofit private agencies, which are guaranteed 
under this part, for the modernization or construction of similar 
facilities in the same or similar areas, minus 3 per centum per annum.
    (2)(A) No loan to a public agency shall be made under this part 
unless--
        (i) the Secretary is reasonably satisfied that such agency will 
    be able to make payments of principal and interest thereon when due, 
    and
        (ii) such agency provides the Secretary with reasonable 
    assurances that there will be available to such agency such 
    additional funds as may be necessary to complete the project with 
    respect to which such loan is requested.

    (B) Any loan to a public agency shall have such security, have such 
maturity date, be repayable in such installments, and be subject to such 
other terms and conditions (including provision for recovery in case of 
default) as the Secretary determines to be necessary to carry out the 
purposes of this part while adequately protecting the financial 
interests of the United States.
    (3) In making loans to public agencies under this part, the 
Secretary shall give due regard to achieving an equitable geographical 
distribution of such loans.

(b) Sale

    (1) The Secretary shall from time to time, but with due regard to 
the financial interests of the United States, sell loans referred to in 
subsection (a)(1) of this section either on the private market or to the 
Federal National Mortgage Association in accordance with section 1717 of 
title 12.
    (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 loan 
as of the time of sale.

(c) Agreements

    (1) The Secretary is authorized to enter into an agreement with the 
purchaser of any loan sold under this part under which the Secretary 
agrees--
        (A) to guarantee to such purchaser (and any successor in 
    interest to such purchaser) payment of the principal and interest 
    payable under such loan, and
        (B) 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.

    (2) Any such agreement--
        (A) may provide that the Secretary shall act as agent of any 
    such purchaser, for the purpose of collecting from the public agency 
    to which such loan was made and paying over to such purchaser, any 
    payments of principal and interest payable by such agency under such 
    loan;
        (B) may provide for the repurchase by the Secretary of any such 
    loan on such terms and conditions as may be specified in the 
    agreement;
        (C) shall provide that, in the event of any default by the 
    public agency to which such loan was made in payment of principal 
    and 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
        (D) shall provide that, in the event such loan is closed out as 
    provided in subparagraph (C), or in the event of any other loss 
    incurred by the Secretary by reason of the failure of such public 
    agency to make payments of principal and interest on such loan, the 
    Secretary shall be subrogated to all rights of such purchaser for 
    recovery of such loss from such public agency.

(d) Right of recovery; waiver

    The Secretary may, for good cause, waive any right of recovery which 
he has against a public agency by reason of the failure of such agency 
to make payments of principal and interest on a loan made to such agency 
under this part.

(e) Interest and interest subsidies as gross income under Internal 
        Revenue Code

    After any loan to a public agency under this part has been sold and 
guaranteed, interest paid on such loan and any interest subsidy paid by 
the Secretary with respect to such loan which is received by the 
purchaser thereof (or his successor in interest) shall be included in 
gross income for the purposes of chapter 1 of title 26.

(f) Sales proceeds; deposit and use

    Amounts received by the Secretary as proceeds from the sale of loans 
under this section shall be deposited in the loan fund established by 
section 291j-6 of this title, and shall be available to the Secretary 
for the making of further loans under this part in accordance with the 
provisions of subsection (a)(2) of such section.

(g) Authorization of appropriations

    There is authorized to be appropriated to the Secretary, for deposit 
in the loan fund established by section 291j-6 of this title, 
$30,000,000 to provide initial capital for the making of direct loans by 
the Secretary to public agencies for the modernization or construction 
of facilities referred to in subsection (a)(1) of this section.

(July 1, 1944, ch. 373, title VI, Sec. 627, as added Pub. L. 91-296, 
title II, Sec. 201, June 30, 1970, 84 Stat. 349; amended Pub. L. 99-514, 
Sec. 2, Oct. 22, 1986, 100 Stat. 2095.)


                               Amendments

    1986--Subsec. (e). Pub. L. 99-514 substituted ``Internal Revenue 
Code of 1986'' for ``Internal Revenue Code of 1954'', which for purposes 
of codification was translated as ``title 26'' thus requiring no change 
in text.


             Commitments for Direct Loans to Public Agencies

    Pub. L. 91-667, title II, Sec. 200, Jan. 11, 1971, 84 Stat. 2007, 
provided: ``That the Secretary is authorized to issue commitments for 
direct loans to public agencies in accordance with section 627 of the 
Public Health Service Act [this section] which shall constitute 
contractual obligations of the United States, the total of such 
outstanding commitments not to exceed $30,000,000 at any given time; to 
sell obligations received pursuant to such commitments as provided in 
section 627, and the proceeds of any such sale shall be used to make a 
direct loan pursuant to the outstanding commitment under which the 
obligations were received.''

                  Section Referred to in Other Sections

    This section is referred to in sections 291j-1, 291j-6 of this 
title.
