[Code of Federal Regulations]

[Title 42, Volume 1]

[Revised as of October 1, 2006]

From the U.S. Government Printing Office via GPO Access

[CITE: 42CFR60.38]



[Page 336-337]

 

                         TITLE 42--PUBLIC HEALTH

 

    CHAPTER I--PUBLIC HEALTH SERVICE, DEPARTMENT OF HEALTH AND HUMAN 

                                SERVICES

 

PART 60_HEALTH EDUCATION ASSISTANCE LOAN PROGRAM--Table of Contents

 

                     Subpart D_The Lender and Holder

 

Sec.  60.38  Assignment of a HEAL loan.



    A HEAL note may not be assigned except to another HEAL lender, the 

Student Loan Marketing Association (popularly known as ``Sallie Mae''), 

or



[[Page 337]]



a public entity in the business of purchasing student loans, and except 

as provided in Sec.  60.40. In this section ``seller'' means any kind of 

assignor and ``buyer'' means any kind of assignee.

    (a) Procedure. A HEAL note assigned from one lender or holder to 

another must be subject to a blanket endorsement together with other 

HEAL notes being assigned or must individually bear effective words of 

assignment. Either the blanket endorsement or the HEAL note must be 

signed and dated by an authorized official of the seller. Within 30 days 

of the transaction, the buyer must notify the following parties of the 

assignment:

    (1) The Secretary;

    (2) The borrower. The notice to the borrower must contain a clear 

statement of all the borrower's rights and responsibilities which arise 

from the assignment of the loan, including a statement regarding the 

consequences of making payments to the seller subsequent to receipt of 

the notice; and

    (3) The borrower's school, as shown on the application form 

supporting the loan purchased by the buyer, if the borrower is enrolled 

in school.

    (b) Risks assumed by the buyer. Upon acquiring a HEAL loan, a new 

holder assumes responsibility for the consequences of any previous 

violations of applicable statutes, regulations, or the terms of the note 

except for defects under Sec.  60.41(d). A HEAL note is not a negotiable 

instrument, and a subsequent holder is not a holder in due course. If 

the borrower has a valid legal defense that could be asserted against 

the previous holder, the borrower can also assert the defense against 

the new holder. In this situation, if the new holder files a default 

claim on a loan, the Secretary denies the default claim to the extent of 

the borrower's defense. Furthermore, when a new holder files a claim on 

a HEAL loan, it must provide the Secretary with the same documentation 

that would have been required of the original lender.

    (c) Warranty. Nothing in this section precludes the buyer of a HEAL 

loan from obtaining a warranty from the seller covering certain future 

reductions by the Secretary in computing the amount of insurable loss, 

if any, on a claim filed on the loan. The warranty may only cover 

reductions which are attributable to an act or failure to act of the 

seller or other previous holder. The warranty may not cover matters for 

which the buyer is charged with responsibility under the HEAL 

regulations.

    (d) Bankruptcy. If a lender or holder assigns a HEAL loan to a new 

holder, or a new holder acquires a HEAL loan under 20 U.S.C. 1092a (the 

Combined Payment Plan authority), and the previous holder(s) 

subsequently receives court notice that the borrower has filed for 

bankruptcy, the previous holder(s) must forward the bankruptcy notice to 

the purchaser within 10 days of the initial date of receipt, as 

documented by a date stamp, except that if it is a chapter 7 bankruptcy 

with no complaint for dismissal, the previous holder(s) must file the 

notice with the purchaser within 30 days of the initial date of receipt, 

as documented by a date stamp. The previous holder(s) also must file a 

statement with the court notifying it of the change of ownership. 

Notwithstanding the above, the current holder will not be held 

responsible for any loss due to the failure of the prior holder(s) to 

meet the deadline for giving notice if such failure occurs after the 

current holder purchased the loan.



(Approved by the Office of Management and Budget under control numbers 

0915-0034 and 0915-0108)



[48 FR 38988, Aug. 26, 1983, as amended at 52 FR 749, Jan. 8, 1987; 56 

FR 42701, Aug. 29, 1991; 57 FR 28797, June 29, 1992]