Title 43 — Public LandsRelease 119-73not60

§2424 Defaults

Title 43 › Chapter 42— RURAL WATER SUPPLY › Subchapter II— TWENTY-FIRST CENTURY WATER WORKS › § 2424

Last updated Apr 5, 2026|Official source

Summary

If the borrower stops paying, the lender can ask the Secretary to cover the unpaid principal and interest. The Secretary must pay by whatever date the loan papers say, unless the Secretary decides the borrower did not really default or has fixed the problem. The lender and borrower can agree to delay or change payments for the borrower's benefit, but the Secretary must approve that plan. If the Secretary pays, the Secretary steps into the lender’s shoes and gets the lender’s legal rights under the loan papers. That can include taking, using, leasing, selling, or keeping any property tied to the loan, or letting the borrower keep running the project if the Secretary thinks it serves the public. The Secretary’s claim to that property is stronger than anyone else’s. If the borrower can’t pay but is not yet in default, the Secretary may also pay amounts due on behalf of the borrower if it helps the public and is likely better for the government than letting a default happen. Any such payment can’t be more than what the borrower owes, and the borrower must agree to pay back the Secretary with interest on terms the Secretary accepts. When a default occurs, the Secretary must tell the Attorney General, who will try to recover what is owed from the project’s assets or other pledged security.

Full Legal Text

Title 43, §2424

Public Lands — Source: USLM XML via OLRC

(a)(1)If a borrower defaults on the obligation, the holder of the loan guarantee shall have the right to demand payment of the unpaid amount from the Secretary.

(2)By such date as may be specified in the loan guarantee or related agreements, the Secretary shall pay to the holder of the loan guarantee the unpaid interest on, and unpaid principal of, the obligation with respect to which the borrower has defaulted, unless the Secretary finds that there was not default by the borrower in the payment of interest or principal or that the default has been remedied.

(3)Nothing in this subsection precludes any forbearance by the holder of the obligation for the benefit of the non-Federal borrower that may be agreed on by the parties to the obligation and approved by the Secretary.

(b)(1)If the Secretary makes a payment under subsection (a), the Secretary shall be subrogated to the rights of the recipient of the payment as specified in the loan guarantee or related agreements, including, as appropriate, the authority (notwithstanding any other provision of law) to—

(A)complete, maintain, operate, lease, or otherwise dispose of any property acquired pursuant to the loan guarantee or related agreements; or

(B)permit the non-Federal borrower, pursuant to an agreement with the Secretary, to continue to pursue the purposes of the project if the Secretary determines the purposes to be in the public interest.

(2)The rights of the Secretary, with respect to any property acquired pursuant to a loan guarantee or related agreement, shall be superior to the rights of any other person with respect to the property.

(c)With respect to any obligation guaranteed under this section, the Secretary may enter into a contract to pay, and pay, holders of the obligation, for and on behalf of the non-Federal borrower, from funds appropriated for that purpose, the principal and interest payments that become due and payable on the unpaid balance of the obligation if the Secretary finds that—

(1)(A)the non-Federal borrower is unable to meet the payments and is not in default;

(B)it is in the public interest to permit the non-Federal borrower to continue to pursue the purposes of the project; and

(C)the probable net benefit to the Federal Government in paying the principal and interest will be greater than that which would result in the event of a default;

(2)the amount of the payment that the Secretary is authorized to pay shall be no greater than the amount of principal and interest that the non-Federal borrower is obligated to pay under the agreement being guaranteed; and

(3)the borrower agrees to reimburse the Secretary for the payment (including interest) on terms and conditions that are satisfactory to the Secretary.

(d)(1)If the non-Federal borrower defaults on an obligation, the Secretary shall notify the Attorney General of the default.

(2)On notification, the Attorney General shall take such action as is appropriate to recover the unpaid principal and interest due from—

(A)such assets of the defaulting non-Federal borrower as are associated with the obligation; or

(B)any other security pledged to secure the obligation.

Reference

Citations & Metadata

Citation

43 U.S.C. § 2424

Title 43 — Public Lands

Last Updated

Apr 5, 2026

Release point: 119-73not60