§9623 Payment of Losses

Summary

The Corporation must pay a loan holder the share of a loss that the guarantee promises after the holder tries the extra collections and legal steps the Corporation requires. After paying, the Corporation gets the holder’s rights to collect from the borrower and must try to recover the amount it paid. Payments under these guarantees cannot be more than the dollar value of what was actually put into the project (tangible or intangible) plus any interest, earnings, or profits on those contributions, unless the Corporation allows adjustments for replacement cost or says an equity loss can be figured by the net book value on the date of loss. For equity insurance, the insured party and its affiliates must still carry at least 10 percent of the risk of loss, except that rule does not apply to loans from banks or similar lenders to unrelated borrowers. The Attorney General must act to protect the United States’ rights from these guarantees. Lenders and borrowers may agree to forbearance if the government has money available to cover any resulting cost.