---
kind: "section"
citation: "43 U.S.C. § 2424"
title: "43"
title_heading: "Public Lands"
number: "2424"
heading: "Defaults"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/43/2424"
units:
  - "Chapter 42 — Rural Water Supply"
  - "Subchapter II — Twenty-First Century Water Works"
---

# §2424. Defaults

- (a) **Payments by Secretary—**
  - (1) **In general—** If a borrower defaults on the [obligation](/usc/43/2421.md?p=5), the holder of the [loan guarantee](/usc/43/2421.md?p=3) shall have the right to demand payment of the unpaid amount from the [Secretary](/usc/43/2401.md?p=10).
  - (2) **Payment required—** By such date as may be specified in the [loan guarantee](/usc/43/2421.md?p=3) or related agreements, the [Secretary](/usc/43/2401.md?p=10) shall pay to the holder of the [loan guarantee](/usc/43/2421.md?p=3) the unpaid interest on, and unpaid principal of, the [obligation](/usc/43/2421.md?p=5) with respect to which the borrower has defaulted, unless the [Secretary](/usc/43/2401.md?p=10) 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](/usc/43/2421.md?p=5) for the benefit of the [non-Federal borrower](/usc/43/2421.md?p=4) that may be agreed on by the parties to the [obligation](/usc/43/2421.md?p=5) and approved by the [Secretary](/usc/43/2401.md?p=10).
- (b) **Subrogation—**
  - (1) **In general—** If the [Secretary](/usc/43/2401.md?p=10) makes a payment under [subsection (a)](#a), the [Secretary](/usc/43/2401.md?p=10) shall be subrogated to the rights of the recipient of the payment as specified in the [loan guarantee](/usc/43/2421.md?p=3) 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](/usc/43/2421.md?p=3) or related agreements; or
    - (B) permit the [non-Federal borrower](/usc/43/2421.md?p=4), pursuant to an agreement with the [Secretary](/usc/43/2401.md?p=10), to continue to pursue the purposes of the [project](/usc/43/2421.md?p=6) if the [Secretary](/usc/43/2401.md?p=10) determines the purposes to be in the public interest.
  - (2) **Superiority of rights—** The rights of the [Secretary](/usc/43/2401.md?p=10), with respect to any property acquired pursuant to a [loan guarantee](/usc/43/2421.md?p=3) 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](/usc/43/2421.md?p=5) guaranteed under this section, the [Secretary](/usc/43/2401.md?p=10) may enter into a contract to pay, and pay, holders of the [obligation](/usc/43/2421.md?p=5), for and on behalf of the [non-Federal borrower](/usc/43/2421.md?p=4), from funds appropriated for that purpose, the principal and interest payments that become due and payable on the unpaid balance of the [obligation](/usc/43/2421.md?p=5) if the [Secretary](/usc/43/2401.md?p=10) finds that—
  - (1)
    - (A) the [non-Federal borrower](/usc/43/2421.md?p=4) is unable to meet the payments and is not in default;
    - (B) it is in the public interest to permit the [non-Federal borrower](/usc/43/2421.md?p=4) to continue to pursue the purposes of the [project](/usc/43/2421.md?p=6); 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](/usc/43/2401.md?p=10) is authorized to pay shall be no greater than the amount of principal and interest that the [non-Federal borrower](/usc/43/2421.md?p=4) is obligated to pay under the agreement being guaranteed; and
  - (3) the borrower agrees to reimburse the [Secretary](/usc/43/2401.md?p=10) for the payment (including interest) on terms and conditions that are satisfactory to the [Secretary](/usc/43/2401.md?p=10).
- (d) **Action by Attorney General—**
  - (1) **Notification—** If the [non-Federal borrower](/usc/43/2421.md?p=4) defaults on an [obligation](/usc/43/2421.md?p=5), the [Secretary](/usc/43/2401.md?p=10) 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](/usc/43/505a.md?p=1-A) of the defaulting [non-Federal borrower](/usc/43/2421.md?p=4) as are associated with the [obligation](/usc/43/2421.md?p=5); or
    - (B) any other security pledged to secure the [obligation](/usc/43/2421.md?p=5).

## Source credit

(Pub. L. 109–451, title II, § 205, Dec. 22, 2006, 120 Stat. 3358.)