Title 43, Public LandsRelease 119-110

§2424 Defaults

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

Last updated Sep 22, 2026|Official source

Summary

If a borrower fails to pay, the loan guarantee holder can ask the Secretary to pay the unpaid principal and interest. The Secretary must pay by the date in the guarantee unless the Secretary finds there was no default or the borrower fixed it. The holder and borrower may agree to delay or change payments if the Secretary approves. If the Secretary pays, the Secretary takes the holder’s rights under the guarantee. That can include running, leasing, selling, or otherwise handling any property tied to the loan, or letting the borrower keep working on the project if it serves the public interest. The Secretary’s rights to that property are stronger than anyone else’s. The Secretary may also pay current loan payments on behalf of a struggling borrower (as long as the borrower is not already in default), if it’s in the public interest, the payment won’t exceed what is owed, and the borrower agrees to repay the Secretary. The Secretary must tell the Attorney General about any default, and the Attorney General will try to recover what is owed from the borrower’s project assets or other pledged security.

Full Legal Text

Title 43, §2424

Public Lands, Source: USLM XML via OLRC

(a)Payments by Secretary

(1)In general

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)Payment required

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)Forbearance

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)Subrogation

(1)In general

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)Superiority of rights

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)Payment of principal and interest by Secretary

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)Action by Attorney General

(1)Notification

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

(2)Recovery

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

Sep 22, 2026

Release point: 119-110