
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 23, 2000]
[Document not affected by Public Laws enacted between
  January 23, 2000 and December 4, 2001]
[CITE: 42USC300e-7]

 
                 TITLE 42--THE PUBLIC HEALTH AND WELFARE
 
                    CHAPTER 6A--PUBLIC HEALTH SERVICE
 
             SUBCHAPTER XI--HEALTH MAINTENANCE ORGANIZATIONS
 
Sec. 300e-7. General provisions relating to loan guarantees and 
        loans
        

(a) Conditions

    (1) The Secretary may not approve an application for a loan 
guarantee under this subchapter unless he determines that (A) the terms, 
conditions, security (if any), and schedule and amount of repayments 
with respect to the loan are sufficient to protect the financial 
interests of the United States and are otherwise reasonable, including a 
determination that the rate of interest does not exceed such per centum 
per annum on the principal obligation outstanding as the Secretary 
determines to be reasonable, taking into account the range of interest 
rates prevailing in the private market for loans with similar 
maturities, terms, conditions, and security and the risks assumed by the 
United States, and (B) the loan would not be available on reasonable 
terms and conditions without the guarantee under this subchapter.
    (2)(A) The United States shall be entitled to recover from the 
applicant for a loan guarantee under this subchapter the amount of any 
payment made pursuant to such guarantee, unless the Secretary for good 
cause waives such right of recovery; and, upon making any such payment, 
the United States shall be subrogated to all of the rights of the 
recipient of the payments with respect to which the guarantee was made.
    (B) To the extent permitted by subparagraph (C), any terms and 
conditions applicable to a loan guarantee under this subchapter 
(including terms and conditions imposed under subparagraph (D)) may be 
modified by the Secretary to the extent he determines it to be 
consistent with the financial interest of the United States.
    (C) Any loan guarantee made by the Secretary under this subchapter 
shall be incontestable (i) in the hands of an applicant on whose behalf 
such guarantee is made unless the applicant engaged in fraud or 
misrepresentation in securing such guarantee, and (ii) as to any person 
(or his successor in interest) who makes or contracts to make a loan to 
such applicant in reliance thereon unless such person (or his successor 
in interest) engaged in fraud or misrepresentation in making or 
contracting to make such loan.
    (D) Guarantees of loans under this subchapter shall be subject to 
such further terms and conditions as the Secretary determines to be 
necessary to assure that the purposes of this subchapter will be 
achieved.

(b) Application requirements

    (1) The Secretary may not approve an application for a loan under 
this subchapter unless--
        (A) the Secretary is reasonably satisfied that the applicant 
    therefor will be able to make payments of principal and interest 
    thereon when due, and
        (B) the applicant provides the Secretary with reasonable 
    assurances that there will be available to it such additional funds 
    as may be necessary to complete the project or undertaking with 
    respect to which such loan is requested.

    (2) Any loan made under this subchapter shall (A) have such 
security, (B) have such maturity date, (C) be repayable in such 
installments, (D) on the date the loan is made, bear interest at a rate 
comparable to the rate of interest prevailing on such date with respect 
to marketable obligations of the United States of comparable maturities, 
adjusted to provide for appropriate administrative charges, and (E) be 
subject to such other terms and conditions (including provisions for 
recovery in case of default) as the Secretary determines to be necessary 
to carry out the purposes of this subchapter while adequately protecting 
the financial interests of the United States. On the date disbursements 
are made under a loan after the initial disbursement under the loan, the 
Secretary may change the rate of interest on the amount of the loan 
disbursed on that date to a rate which is comparable to the rate of 
interest prevailing on the date the subsequent disbursement is made with 
respect to marketable obligations of the United States of comparable 
maturities, adjusted to provide for appropriate administrative charges.
    (3) The Secretary may, for good cause but with due regard to the 
financial interests of the United States, waive any right of recovery 
which he has by reason of the failure of a borrower to make payments of 
principal of and interest on a loan made under this subchapter, except 
that if such loan is sold and guaranteed, any such waiver shall have no 
effect upon the Secretary's guarantee of timely payment of principal and 
interest.

(c) Sale of loans

    (1) The Secretary may from time to time, but with due regard to the 
financial interests of the United States, sell loans made by him under 
this subchapter.
    (2) The Secretary may agree, prior to his sale of any such loan, to 
guarantee to the purchaser (and any successor in interest of the 
purchaser) compliance by the borrower with the terms and conditions of 
such loan. Any such agreement shall contain such terms and conditions as 
the Secretary considers necessary to protect the financial interests of 
the United States or as otherwise appropriate. Any such agreement may 
(A) provide that the Secretary shall act as agent of any such purchaser 
for the purpose of collecting from the borrower to which such loan was 
made and paying over to such purchaser, any payments of principal and 
interest payable by such organization under such loan; and (B) provide 
for the repurchase by the Secretary of any such loan on such terms and 
conditions as may be specified in the agreement. The full faith and 
credit of the United States is pledged to the payment of all amounts 
which may be required to be paid under any guarantee under this 
paragraph.
    (3) After any loan under this subchapter to a public health 
maintenance organization has been sold and guaranteed under this 
subsection, interest paid on such loan which is received by the 
purchaser thereof (or his successor in interest) shall be included in 
the gross income of the purchaser of the loan (or his successor in 
interest) for the purpose of chapter 1 of title 26.
    (4) Amounts received by the Secretary as proceeds from the sale of 
loans under this subsection shall be deposited in the loan fund 
established under subsection (e) of this section.
    (5) Any reference in this subchapter (other than in this subsection 
and in subsection (d) of this section) to a loan guarantee under this 
subchapter does not include a loan guarantee made under this subsection.

(d) Loan guarantee fund

    (1) There is established in the Treasury a loan guarantee fund 
(hereinafter in this subsection referred to as the ``fund'') which shall 
be available to the Secretary without fiscal year limitation, in such 
amounts as may be specified from time to time in appropriation Acts, to 
enable him to discharge his responsibilities under loan guarantees 
issued by him under this subchapter and to take the action authorized by 
subsection (f) of this section. There are authorized to be appropriated 
from time to time such amounts as may be necessary to provide the sums 
required for the fund. To the extent authorized in appropriation Acts, 
there shall also be deposited in the fund amounts received by the 
Secretary in connection with loan guarantees under this subchapter and 
other property or assets derived by him from his operations respecting 
such loan guarantees, including any money derived from the sale of 
assets.
    (2) If at any time the sums in the funds are insufficient to enable 
the Secretary to discharge his responsibilities under guarantees issued 
by him before October 1, 1986, under this subchapter and to take the 
action authorized by subsection (f) of this section, he is authorized to 
issue to the Secretary of the Treasury notes or other obligations in 
such forms and denominations, bearing such maturities, and subject to 
such terms and conditions, as may be prescribed by the Secretary with 
the approval of the Secretary of the Treasury. Such notes or other 
obligations shall bear interest at a rate determined by the Secretary of 
the Treasury, taking into consideration the current average market yield 
on outstanding marketable obligations of the United States of comparable 
maturities during the month preceding the issuance of the notes or other 
obligations. The Secretary of the Treasury shall purchase any notes and 
other obligations issued under this paragraph and for that purpose he 
may use as a public debt transaction the proceeds from the sale of any 
securities issued under chapter 31 of title 31, and the purposes for 
which the securities may be issued under that chapter are extended to 
include any purchase of such notes and obligations. The Secretary of the 
Treasury may at any time sell any of the notes or other obligations 
acquired by him under this paragraph. All redemptions, purchases, and 
sales by the Secretary of the Treasury of such notes or other 
obligations shall be treated as public debt transactions of the United 
States. Sums borrowed under this paragraph shall be deposited in the 
fund and redemption of such notes and obligations shall be made by the 
Secretary from the fund.

(e) Loan fund

    There is established in the Treasury a loan fund (hereinafter in 
this subsection referred to as the ``fund'') which shall be available to 
the Secretary without fiscal year limitation, in such amounts as may be 
specified from time to time in appropriation Acts, to enable him to make 
loans under this subchapter and to take the action authorized by 
subsection (f) of this section. There shall also be deposited in the 
fund amounts received by the Secretary as interest payments and 
repayment of principal on loans made under this subchapter and other 
property or assets derived by him from his operations respecting such 
loans, from the sale of loans under subsection (c) of this section, or 
from the sale of assets.

(f) Actions to protect interest of United States in event of default

    The Secretary may take such action as he deems appropriate to 
protect the interest of the United States in the event of a default on a 
loan made or guaranteed under this subchapter, including taking 
possession of, holding, and using real property pledged as security for 
such a loan or loan guarantee.

(July 1, 1944, ch. 373, title XIII, Sec. 1308, as added Pub. L. 93-222, 
Sec. 2, Dec. 29, 1973, 87 Stat. 927; amended Pub. L. 94-460, title I, 
Sec. 109(b)(2), (c), Oct. 8, 1976, 90 Stat. 1950; Pub. L. 95-559, 
Sec. 4(c), Nov. 1, 1978, 92 Stat. 2132; Pub. L. 97-35, title IX, 
Sec. 945, Aug. 13, 1981, 95 Stat. 577; Pub. L. 99-514, Sec. 2, Oct. 22, 
1986, 100 Stat. 2095; Pub. L. 99-660, title VIII, Sec. 807, Nov. 14, 
1986, 100 Stat. 3800.)

                          Codification

    In subsec. (d)(2), ``chapter 31 of title 31'' and ``that chapter'' 
substituted for ``the Second Liberty Bond Act'' and ``that Act'', 
respectively, on authority of Pub. L. 97-258, Sec. 4(b), Sept. 13, 1982, 
96 Stat. 1067, the first section of which enacted Title 31, Money and 
Finance.


                               Amendments

    1986--Subsec. (c)(3). 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.
    Subsec. (d)(2). Pub. L. 99-660 inserted ``before October 1, 1986,'' 
after ``guarantees issued by him''.
    1981--Subsec. (b)(2). Pub. L. 97-35 inserted provisions relating to 
changes in the rate of interest by the Secretary, and in cl. (D) made 
changes in nomenclature.
    1978--Subsec. (d). Pub. L. 95-559, Sec. 4(c)(2)(A), in pars. (1) and 
(2) inserted ``and to take the action authorized by subsection (f) of 
this section'' after ``by him under this subchapter''.
    Subsec. (e). Pub. L. 95-559, Sec. 4(c)(2)(B), inserted ``and to take 
the action authorized by subsection (f) of this section'' after ``loans 
under this subchapter''.
    Subsec. (f). Pub. L. 95-559, Sec. 4(c)(1), added subsec. (f).
    1976--Subsec. (a)(1)(A). Pub. L. 94-460, Sec. 109(c)(1), substituted 
``for loans with similar maturities, terms, conditions, and security'' 
for ``for similar loans''.
    Subsec. (b)(2)(D). Pub. L. 94-460, Sec. 109(c)(2), substituted 
``marketable obligations of the United States of comparable maturities, 
adjusted to provide for appropriate administrative charges'' for ``loans 
guaranteed under this subchapter''.
    Subsec. (c)(5). Pub. L. 94-460, Sec. 109(b)(2), added par. (5).


                    Effective Date of 1986 Amendment

    Amendment by Pub. L. 99-660 effective Oct. 1, 1985, see section 
815(a) of Pub. L. 99-660, set out as an Effective and Termination Dates 
of 1986 Amendment note under section 300e-1 of this title.


                    Effective Date of 1978 Amendment

    Amendment by Pub. L. 95-559 effective only for fiscal years 
beginning on or after October 1, 1978, see section 4(d) of Pub. L. 95-
559, set out as a note under section 300e-4 of this title.


                    Effective Date of 1976 Amendment

    Amendment by Pub. L. 94-460 effective Oct. 8, 1976, except that the 
amendment by section 109(c) of Pub. L. 94-460 applicable with respect to 
loan guarantees made under section 300e-4 of this title after Sept. 30, 
1976, see section 118 of Pub. L. 94-460, set out as a note under section 
300e of this title.

                  Section Referred to in Other Sections

    This section is referred to in sections 300e-4, 300e-5, 300e-8 of 
this title.
