
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: 42USC300q-2]

 
                 TITLE 42--THE PUBLIC HEALTH AND WELFARE
 
                    CHAPTER 6A--PUBLIC HEALTH SERVICE
 
              SUBCHAPTER XIV--HEALTH RESOURCES DEVELOPMENT
 
                    Part A--Loans and Loan Guarantees
 
Sec. 300q-2. General provisions


(a) Loan guarantees; criteria for approval; recovery of payments by 
        United States; modification, etc., of terms and conditions; 
        incontestability

    (1) The Secretary may not approve a loan guarantee for a project 
under this part 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 similar loans 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 part.
    (2)(A) The United States shall be entitled to recover from the 
applicant for a loan guarantee under this part 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 part (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 part 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 part 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) Loans; criteria for approval; terms and conditions; waiver of 
        recovery of payments by United States

    (1) The Secretary may not approve a loan under this part unless--
        (A) the Secretary is reasonably satisfied that the applicant 
    under the project for which the loan would be made 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 part shall (A) have such security, (B) 
have such maturity date, (C) be repayable in such installments, (D) bear 
interest at a rate comparable to the current rate of interest 
prevailing, on the date the loan is made, with respect to loans 
guaranteed under this part, minus any interest subsidy made in 
accordance with section 300q(a)(2)(B) of this title with respect to a 
loan made for a project located in an urban or rural poverty area, 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.
    (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 reasons of the failure of a borrower to make payments of 
principal of and interest on a loan made under this part, 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; authority; amount; agreements with purchasers; 
        deposit of proceeds

    (1) The Secretary shall from time to time, but with due regard to 
the financial interests of the United States, sell loans made under this 
part either on the private market or to the Federal National Mortgage 
Association in accordance with section 1717 of title 12 or to the 
Federal Financing Bank.
    (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 loans 
as of time of sale.
    (3)(A) The Secretary is authorized to enter into an agreement with 
the purchaser of any loan sold under this part under which the Secretary 
agrees--
        (i) to guarantee to such purchaser (and any successor in 
    interest to such purchaser) payments of the principal and interest 
    payable under such loan, and
        (ii) 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.

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

    (4) Amounts received by the Secretary as proceeds from the sale of 
loans under this subsection shall be deposited in the fund established 
under subsection (d) of this section.
    (5) If any loan to a public entity under this part is sold and 
guaranteed by the Secretary under this subsection, interest paid on such 
loan after its sale and any interest subsidy paid, under paragraph 
(3)(A)(ii), by the Secretary with respect to such loan which is received 
by the purchaser of the loan (or the purchaser's successor in interest) 
shall be included in the gross income of the purchaser or successor for 
the purpose of chapter 1 of title 26.

(d) Loan and loan guarantee fund; establishment; amounts authorized to 
        be appropriated; issuance, purchase, and sale of notes, 
        obligations, etc.; interest rates; public debt transactions

    (1) There is established in the Treasury a loan and 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 appropriations 
Acts--
        (A) to enable him to make loans under this part,
        (B) to enable him to discharge his responsibilities under loan 
    guarantees issued by him under this part,
        (C) for payment of interest under section 300q(a)(2)(B) of this 
    title on loans guaranteed under this part,
        (D) for repurchase of loans under subsection (c)(3)(B) of this 
    section,
        (E) for payment of interest on loans which are sold and 
    guaranteed, and
        (F) to enable the Secretary 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. There 
shall also be deposited in the fund amounts received by the Secretary in 
connection with loans and loan guarantees under this part and other 
property or assets derived by him from his operations respecting such 
loans and 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--
        (A) to make payments of interest under section 300q(a)(2)(B) of 
    this title,
        (B) to otherwise comply with guarantees under this part of loans 
    to nonprofit private entities,
        (C) in the case of a loan which was made, sold, and guaranteed 
    under this part, to make to the purchaser of such loan payments of 
    principal and interest on such loan after default by the entity to 
    which the loan was made, or
        (D) to repurchase loans under subsection (c)(3)(B) of this 
    section,
        (E) to make payments of interest on loans which are sold and 
    guaranteed, and
        (F) to enable the Secretary 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) Transfers to and additional capitalization of loan and loan 
        guarantee fund

    (1) The assets, commitments, obligations, and outstanding balances 
of the loan guarantee and loan fund established in the Treasury by 
section 291j-6 of this title shall be transferred to the fund 
established by subsection (d) of this section.
    (2) To provide additional capitalization for the fund established 
under subsection (d) of this section there are authorized to be 
appropriated to the fund, such sums as may be necessary for the fiscal 
years ending June 30, 1975, June 30, 1976, September 30, 1977, September 
30, 1978, September 30, 1979, September 30, 1980, September 30, 1981, 
and September 30, 1982.

(f) Default prevention measures; terms and conditions; implementation of 
        reforms; foreclosures; protection of Federal interest on default

    (1) The Secretary may take such action as may be necessary to 
prevent a default on a loan made or guaranteed under this part or under 
subchapter IV of this chapter, including the waiver of regulatory 
conditions, deferral of loan payments, renegotiation of loans, and the 
expenditure of funds for technical and consultative assistance, for the 
temporary payment of the interest and principal on such a loan, and for 
other purposes. Any such expenditure made under the preceding sentence 
on behalf of a medical facility shall be made under such terms and 
conditions as the Secretary shall prescribe, including the 
implementation of such organizational, operational, and financial 
reforms as the Secretary determines are appropriate and the disclosure 
of such financial or other information as the Secretary may require to 
determine the extent of the implementation of such reforms.
    (2) The Secretary may take such action, consistent with State law 
respecting foreclosure procedures, 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 part or under subchapter IV of this 
chapter, including selling real property pledged as security for such a 
loan or loan guarantee and for a reasonable period of time taking 
possession of, holding, and using real property pledged as security for 
such a loan or loan guarantee.

(July 1, 1944, ch. 373, title XVI, Sec. 1602, formerly Sec. 1622, as 
added Pub. L. 93-641, Sec. 4, Jan. 4, 1975, 88 Stat. 2265; amended Pub. 
L. 95-83, title I, Sec. 106(x)(2), (y), Aug. 1, 1977, 91 Stat. 385; 
renumbered Sec. 1602 and amended Pub. L. 96-79, title II, 
Secs. 201(b)(2), (3), 203(a)(1), (3), (g), Oct. 4, 1979, 93 Stat. 631, 
635; Pub. L. 97-414, Sec. 8(q), Jan. 4, 1983, 96 Stat. 2062; Pub. L. 99-
514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095.)

                       References in Text

    Subchapter IV of this chapter, referred to in subsec. (f), is 
classified to section 291 et seq. of this title.

                          Codification

    In subsec. (d), ``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.


                            Prior Provisions

    A prior section 1602 of act July 1, 1944, ch. 373, title XVI, as 
added Jan. 4, 1975, Pub. L. 93-641, Sec. 4, 88 Stat. 2258; amended Aug. 
1, 1977, Pub. L. 95-83, title I, Sec. 106(r), (s), 91 Stat. 385, was 
classified to section 300o-1 of this title, prior to repeal by Pub. L. 
96-79, title II, Sec. 202(a), Oct. 4, 1979, 93 Stat. 632.


                               Amendments

    1986--Subsec. (c)(5). 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.
    1983--Subsec. (f)(2). Pub. L. 97-414 inserted ``selling real 
property pledged as security for such a loan or loan guarantee and'' 
after ``including''.
    1979--Subsec. (b)(2)(D). Pub. L. 96-79, Sec. 201(b)(2), substituted 
``minus any interest subsidy made in accordance with section 
300q(a)(2)(B) of this title (with respect to a loan made for a project 
located in an urban or rural poverty area'' for ``minus 3 per centum per 
annum''.
    Subsec. (d)(1). Pub. L. 96-79, Sec. 203(a)(3), (g)(2), substituted 
in subpar. (C) reference to section ``300q(a)(2)(B)'' for ``300q(b)(2)'' 
of this title, and added subpar. (F).
    Subsec. (d)(2). Pub. L. 96-79, Sec. 203(a)(3), (g)(3), substituted 
in subpar. (A) reference to section ``300q(a)(2)(B)'' for ``300q(b)(2)'' 
of this title, and added subpar. (F).
    Subsec. (e)(2). Pub. L. 96-79, Sec. 201(b)(3), authorized 
appropriations for fiscal years ending Sept. 30, 1979 through 1982.
    Subsec. (f). Pub. L. 96-79, Sec. 203(g)(1), added subsec. (f).
    1977--Subsec. (c)(5). Pub. L. 95-83, Sec. 106(y), added subsec. 
(c)(5).
    Subsec. (e)(2). Pub. L. 95-83, Sec. 106(x)(2), substituted 
provisions authorizing appropriations for fiscal years ending Sept. 30, 
1977 and 1978, for prior such authorization for fiscal year ending June 
30, 1977.


                    Effective Date of 1979 Amendment

    Amendment by Pub. L. 96-79 effective Oct. 1, 1979, except that 
amendment of subsec. (b)(2)(D) respecting interest subsidy payments for 
loans or loan guarantees applicable only with respect to loans and loan 
guarantees made after Oct. 1, 1979, and that subsidies for such 
commitments made before Oct. 1, 1979, payable as authorized before Oct. 
1, 1979, see section 204 of Pub. L. 96-79, set out as a note under 
section 300q of this title.

                  Section Referred to in Other Sections

    This section is referred to in section 300q of this title.
