[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: 42CFR60.41]



[Page 340-341]

 

                         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.  60.41  Determination of amount of loss on claims.



    (a) General rule. HEAL insurance covers the unpaid balance of 

principal and interest on an eligible HEAL loan, less the amount of any 

judgment collected pursuant to default proceedings commenced by the 

eligible lender or holder involved. In determining whether to approve an 

insurance claim for payment, the Secretary considers legal defects 

affecting the initial validity or insurability of the loan. The 

Secretary also deducts from a claim any amount that is not a legally 

enforceable obligation of the borrower except to the extent that the 

defense of infancy applies. The Secretary further considers whether all 

holders of the loan have complied with the requirements of the HEAL 

regulations, including those concerned with the making, servicing, and 

collecting of the loan, the timely filing of claims, and the submission 

of documents with a claim.

    (b) Special rules for loans acquired by assignment. If a claim is 

filed by a lender or holder that obtained a loan by assignment, that 

lender or holder is not entitled to any payment under this section 

greater than that to which a previous holder would have been entitled. 

In particular, the Secretary deducts from the claim any amounts that are 

attributable to payments made by the borrower to a prior holder of the 

loan before the borrower received proper notice of the assignment of the 

loan.

    (c) Special rules for loans made by school lenders. (1) If the loan 

for which a claim is filed was originally made by a school and the claim 

is filed by that school, the Secretary deducts from the claim an amount 

equal to any unpaid refund that the school owes the borrower.

    (2) If the loan for which a claim is filed was originally made by a 

school but the claim is filed by another lender of holder that obtained 

the note by assignment, the Secretary deducts from the claim an amount 

equal to any unpaid refund that the school owed the borrower prior to 

the assignment.

    (d) Circumstances under which defects in claims may be cured or 

excused. The Secretary may permit a lender or holder to cure certain 

defects in a specified manner as a condition for payment of a



[[Page 341]]



default claim. The Secretary may excuse certain defects if the holder 

submitting the default claim satisfies the Secretary that the defect did 

not contribute to the default or prejudice the Secretary's attempt to 

collect the loan from the borrower. The Secretary may also excuse 

certain defects if the defect arose while the loan was held by another 

lender or holder and the holder submitting the default claim satisfies 

the Secretary that the assignment of the loan was an arm's length 

transaction, that the present holder did not know of the defect at the 

time of the sale and that the present holder could not have become aware 

of the defect through an examination of the loan documents.

    (e) Payment of insured interest. The payment on an approved claim 

covers the unpaid principal balance and interest that accrues through 

the date the claim is paid, except:

    (1) If the lender or holder failed to submit a claim within the 

required period after the borrower's default; death; total and permanent 

disability; or filing of a petition in bankrupty under chapter 11 or 13 

of the Bankruptcy Act, or under chapter 7 where the borrower files a 

complaint to determine the dischargeability of the HEAL loan; the 

Secretary does not pay interest that accrued between the end of that 

period and the date the Secretary received the claim.

    (2) If the Secretary returned the claim to the lender or holder for 

additional documentation necessary for the approval of the claim, the 

Secretary pays interest only for the first 30 days following the return 

of the claim to the lender or holder.



[48 FR 38988, Aug. 26, 1983, as amended at 56 FR 42702, Aug. 29, 1991; 

57 FR 28798, June 29, 1992]