or 180-day period does not include any period prior to the end of the automatic stay. (i) If a lender or holder determines that it is not appropriate to commence and prosecute an action against a default borrower pursuant to §60.35(c)(3), it must file a default claim with the Secretary within 30 days after a loan has been determined to be in default. (ii) If a lender files suit against a defaulted borrower and does not pursue collection of the judgment obtained as a result of the suit, it must file a default claim with the Secretary within 60 days of the date of issuance of the judgment. If a lender or holder files suit against a defaulted borrower, and pursues collection of the judgment obtained as a result of the suit, these collection activities must begin within 60 days of the date of issuance of the judgment. If the lender or holder is unable to collect the full amount of principal and interest owed, a claim must be filed within 30 days of completion of the post-judgment collection activities. In either case, the lender or holder must assign the judgment to the Secretary as part of the default claim. (iii) In addition to the documentation required for all claims, the lender or holder must submit with its default claim at least the following: (A) Repayment schedule(s); (D) The original or a copy of all correspondence relevant to the HEAL loan to or from the borrower (whether received by the original lender, a subsequent holder, or an independent servicing agent); (E) A claims collection litigation report; and under chapter 11 or 13 of the Bankruptcy Act, or under chapter 7 with a complaint to determine the dischargeability of the loan, the lender or holder must file that notice with the Secretary within 10 days of the lender or holder's initial date of receipt, as documented by a date stamp. If the borrower is declaring bankruptcy under chapter 7 of the Bankruptcy Act, and has not filed a complaint to determine the dischargeability of the loan, the lender or holder must file the written notice with the Secretary within 30 days of the lender's or holder's initial date of receipt, as documented by a date stamp. If the Secretary has not paid the claim at the time the lender or holder receives that notice, upon receipt of the notice, the lender or holder must file with the bankruptcy court a proof of claim, if applicable, and an objection to the discharge or compromise of the HEAL loan. If the Secretary has paid the claim, the lender or holder must file a statement with the court notifying it that the loan is owned by the Secretary. (2) Death claims. A lender or holder must file a death claim with the Secretary within 30 days after the lender or holder obtains documentation that a borrower is dead. In addition to the documentation required for all claims, the lender or holder must submit with its death claim those documents which verify the death, including an official copy of the Death Certificate. (3) Disability claims. A lender or holder must file a disability claim with the Secretary within 30 days after it has been notified that the Secretary has determined a borrower to be totally and permanently disabled. In addition to the documentation required for all claims, the lender or holder must submit with its claim evidence of the Secretary's determination that the borrower is totally and permanently disabled. (4) Bankruptcy claims. For a bankruptcy under chapter 11 or 13 of the Bankruptcy Act, or a bankruptcy under chapter 7 of the Bankruptcy Act when the borrower files a complaint to determine the dischargeability of the HEAL loan, the current holder must file a claim with the Secretary within 10 days of the initial date of receipt of court notice or written notice from the borrower's attorney that the borrower has filed for bankruptcy under chapter 11 or chapter 13, or has filed a complaint to determine the dischargeability of the HEAL loan under chapter 7. The initial date of receipt of the written notice must be documented by a date stamp. The lender or holder must file with the bankruptcy court a proof of claim, if applicable, and an objection to the discharge or compromise of the HEAL loan. In addition to the documentation required for all claims, with its claim the lender or holder must submit to the Secretary at least the following: (i) Repayment schedule(s); (ii) A collection history, if any; (iii) A proof of claim, where applicable; (iv) An assignment to the United States of America of its proof of claim, where applicable; (v) All pertinent documents sent to or received from the bankruptcy court; and (vi) A statement of any facts of which the lender is aware that may form the basis for an objection to the bankrupt's discharge or an exception to the discharge. (vii) The notice of the first meeting or creditors, or an explanation as to why this is not included; (viii) In cases where there is defective service, a declaration or affidavit attesting to the fact that the lender or holder was not directly served with the notice of meeting of creditors. This declaration or affidavit must also indicate when and how the lender or holder learned of the bankruptcy; and (ix) In cases where there is defective service due to the borrower's failure to list the proper creditor, a copy of the letter sent to the borrower at the time of purchase of the HEAL loan by the current holder, or a sample letter with documentation indicating when the letter was sent to the borrower. (Approved by the Office of Management and Budget under control numbers 0915-0036 and 0915-0108) [48 FR 38988, Aug. 26, 1983, as amended at 52 FR 750, Jan. 8, 1987; 56 FR 42701, Aug. 29, 1991; 57 FR 28798, June 29, 1992] § 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 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] § 60.42 Records, reports, inspection, and audit requirements for HEAL lenders and holders. (a) Records. (1) A lender or holder must keep complete and accurate records of each HEAL loan which it holds. The records must be organized in a way that permits them to be easily retrievable and allows the ready identification of the current status of each loan. The required records include: (i) The loan application; (ii) The original promissory note; (iii) The repayment schedule agreement; (iv) Evidence of each disbursement of loan proceeds; (v) Notices of changes in a borrower's address and status as a full-time student; (vi) Evidence of the borrower's eligibility for a deferment; (vii) The borrower's signed statement describing his or her rights and responsibilities in connection with a HEAL loan; (viii) The documents required for the exercise of forbearance; (ix) Documentation of the assignment of the loan; and (x) Evidence of a borrower's creditworthiness, including the borrower's credit report. (2) The lender or holder must maintain for each borrower a payment history showing the date and amount of each payment received on the borrower's behalf, and the amounts of each payment attributable to principal and interest. A lender or holder must also maintain for each loan a collection history showing the date and subject of each communication with a borrower or endorser for collection of a delinquent loan. Furthermore, a lender or holder must keep any additional records which are necessary to make any reports required by the Secretary. (3) A lender or holder must retain the records required for each loan for not less than 5 years following the date the loan is repaid in full by the borrower. However, in particular cases the Secretary may require the retention of records beyond this minimum period. A lender or holder must keep the original copy of an unpaid promissory note, but may store all other records in microform or computer format. (4) The lender or holder must maintain accurate and complete records on each HEAL borrower and related school activities required by the HEAL program. All HEAL records shall be maintained under security and protected from fire, flood, water leakage, other environmental threats, electronic data system failures or power fluctuations, unauthorized intrusion for use, and theft. (b) Reports. A lender or holder must submit reports to the Secretary at the time and in the manner required by the Secretary. (c) Inspections. Upon request, a lender or holder must afford the Secretary, the Comptroller General of the United States, and any of their authorized representatives access to its records in order to assure the correctness of its reports. (d) The lender or holder must comply with the Department's biennial audit requirements of section 705 of the Act. (e) Any lender or holder who has information which indicates potential or actual commission of fraud or other offenses against the United States, involving these loan funds, must promptly provide this information to the appropriate Regional Office of Inspector General for Investigations. (Approved by the Office of Management and Budget under control numbers 0915-0043 and 0915-0108) [48 FR 38988, Aug. 26, 1983, as amended at 52 FR 750, Jan. 8, 1987; 57 FR 28798, June 29, 1992] § 60.43 Limitation, suspension, or termination of the eligibility of a HEAL lender or holder. (a) The Secretary may limit, suspend, or terminate the eligibility under the HEAL program of an otherwise eligible lender or holder that violates or fails to comply with any provision of title VII, part A, subpart I of the Act as amended (42 U.S.C. 292–292p), these regulations, or agreements with the Secretary concerning the HEAL program. Prior to terminating a lender or holder's participation in the program, the Secretary will provide the entity an opportunity for a hearing in accordance with the procedures under paragraph (b) of this section. (b) The Secretary will provide any lender or holder subject to termination with a written notice, sent by certified mail, specifying his or her intention to terminate the lender or holder's participation in the program and stating that the entity may request, within 30 days of the receipt of this notice, a formal hearing. if the entity requests a hearing, it must, within 90 days of the receipt of the notice, submit material, factual issues in dispute to demonstrate that there is cause for a hear ing. These issues must be both substantive and relevant. The hearing will be held in the Washington, DC metropolitan area. The Secretary will deny a hearing if: (1) The request for a hearing is untimely (i.e., fails to meet the 30-day requirement); (2) The lender or holder does not provide a statement of material, factual issues in dispute within the 90-day required period; or (3) The statement of factual issues in dispute is frivolous or inconsequential. In the event that the Secretary denies a hearing, the Secretary will send a written denial, by certified mail, to the lender or holder setting forth the reasons for denial. If a hearing is denied, or if as a result of the hearing, termination is still determined to be necessary, the lender or holder will be terminated from participation in the program. An entity will be permitted to reapply for participation in the program when it demonstrates, and the Secretary agrees, that it is in compliance with all HEAL requirements. (c) This section does not apply to a determination that a HEAL lender fails to meet the statutory definition of an "eligible lender." (d) This section also does not apply to administrative action by the Department of Health and Human Services based on any alleged violation of: (1) Title VI of the Civil Rights Act of 1964, which is governed by 45 CFR part 80; (2) Title IX of the Education Amendments of 1972, which is governed by 45 CFR part 86; (3) The Family Educational Rights and Privacy Act of 1974 (section 438 of the General Education Provisions Act, as amended), which is governed by 34 CFR part 99; or (4) Title XI of the Right to Financial Privacy Act of 1978, Pub. L. 95-630 (12 U.S.C. 3401-3422). (Approved by the Office of Management and Budget under control number 0915-0144) [48 FR 38988, Aug. 26, 1983, as amended at 57 FR 28799, June 29, 1992; 58 FR 67349, Dec. 21, 1993] Subpart E-The School § 60.50 Which schools are eligible to be HEAL schools? (a) In order to participate in the HEAL program, a school must enter into a written agreement with the Secretary. In the agreement, the school promises to comply with provisions of the HEAL law and the HEAL regulations. For initial entry into this agreement and for the agreement to remain in effect, a school must satisfy the following requirements: (1) The school must be legally authorized within a State to conduct a course of study leading to one of the following degrees: Doctor of Medicine Doctor of Osteopathic Medicine Doctor of Dentistry or equivalent degree Bachelor or Master of Science in Pharmacy or equivalent degree Doctor of Optometry or equivalent degree Doctor of Veterinary Medicine or equivalent degree Doctor of Podiatric Medicine or equivalent degree Graduate or equivalent degree in Public Health Doctor of Chiropractic or equivalent degree Doctoral degree of Clinical Psychology Masters or doctoral degree in Health Administration For the purposes of this section, the term "State" includes, in addition to the several States, the District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands, the Virgin Islands, Guam, American Samoa, the Trust Territory of the Pacific Islands (the Republic of Palau), the Republic of the Marshall Islands, and the Federated States of Micronesia. (2)(i) The school must be accredited by a recognized agency approved for that course of study by the Secretary of Education, as described in paragraph (a)(2)(ii) of this section, except where a school is not eligible for accreditation solely because it is too new. A new school is eligible if the Secretary of Education determines that it can reasonably expect to be accredited before the beginning of the academic year following the normal graduation date of its first entering class. The Secretary of Education makes this determination after consulting with the appropriate accrediting agency and receiving reasonable assurance to that effect. (ii) The approved accrediting agencies are: (A) Liaison Committee on Medical Education. (B) American Osteopathic Association. (C) Commission on Dental Accreditation. (D) Council on Education of American Veterinary Medical Association. (E) Council on Optometric Education. (F) Council on Podiatric Medical Education. (G) American Council on Pharmaceutical Education. (H) Council on Education for Public Health. (I) Council on Chiropractic Edu cation. (J) Accrediting Commission on Education for Health Services Administration. (K) Committee on Accreditation of American Psychological Association. (b) If a HEAL school undergoes a change of controlling ownership or form of control, its agreement automatically expires at the time of that change. The school must enter into a new agreement with the Secretary in order to continue its participation in the HEAL program. [48 FR 38988, Aug. 26, 1983, as amended at 52 FR 751, Jan. 8, 1987; 57 FR 28799, June 29, 1992] § 60.51 The student loan application. When the student completes his or her portion of the student loan application and submits it to the school, the school must do the following: (a) Accurately and completely fill out its portion of the HEAL application; (b) Verify, to the best of its ability, the information provided by the student on the HEAL application, including, but not limited to, citizenship status and Social Security number. To comply with this requirement, the school may request that the student provide a certified copy of his or her birth certificate, his or her naturalization papers, and an original Social Security card or copy issued by the Federal Government, or other documentation that the school may require. The school must assure that the applicant's |