94-457-602 Me. Code R. § 2

Current through 2024-36, September 4, 2024

Section 457-602-2 - Common Manual Materials Modified or not Adopted

The following sections of the Common Manual as applied to the Maine Guaranteed Student Loan Programs are replaced or modified as noted. [All references are to the Common Manual.]

A.Section 3.3.B. under Blanket Certificate of Loan Guarantee Programs is modified to include the following: Unless prior arrangements have been made with the Authority, lenders cannot use the Authority's blanket-guarantee process for the guarantee of loans that will be delivered via direct disbursement to students attending an eligible foreign school.

B.Section 7.7.I. is modified as follows: For loans guaranteed by the Authority, a lender must cancel any remaining unmade disbursements upon learning that the borrower has initiated a bankruptcy action that would result in the lender being required to file a claim with the guarantor. Further, the lender is required to notify the school, the borrower, and the Authority of the cancellation. The lender must also notify the borrower that he or she may reapply for any remaining eligibility. In cases where the MPN is used as a multi-year note, an MPN executed before the bankruptcy action remains valid for future loans. This includes the new loan that replaces any disbursements cancelled due to the bankruptcy action. However, the lender may, at its discretion, choose to obtain a new MPN from the borrower.

Unlike Common Manual policy, the Authority does not recommend that the lender contact the school to request the return of any funds that are undelivered at the time the lender is notified of the borrower's bankruptcy.

Disbursements made on or after the date a bankruptcy claim is filed - or made more than 30 days after the date the lender receives notice of the bankruptcy action, if that date is earlier - will not be insured unless the lender obtains documentation from the bankruptcy court clearly indicating that the additional disbursements are included in the bankruptcy action. Also, if a lender disburses funds after it files a bankruptcy claim or more than 30 days after its receipt of bankruptcy notification, the lender must ensure that the total amount of disbursed funds is noted on the lender's proof of claim with the bankruptcy court.

In all cases, a lender must adhere to the disbursement schedule provided by the school. If disbursements are scheduled by the school to occur after the claim-filing deadline, the lender must not disburse the funds early in order to include the subsequent disbursements in the claim.

For bankruptcy action where a claim should not be filed because the loan is not dischargeable (see subsection 13.8.A for requirements), the lender must make any remaining disbursements. If the lender chooses not to make remaining disbursements, the lender must notify the school, the borrower, and the Authority of the cancellation. The lender also must notify the borrower that he or she may reapply for any remaining eligibility. In cases where the MPN is used as a multi-year note, an MPN executed before the bankruptcy action remains valid for future loans. However, at its discretion, a lender may choose to obtain a new MPN for the borrower.

C. Section 12.3.A. is modified as follows: As a result of previous bankruptcy court rulings, a loan holder that fails to suspend collection activities after receiving notification of a bankruptcy filing from a borrower may incur liability through contempt charges from bankruptcy courts for violating the automatic stay provisions of bankruptcy law, as authorized in 11 U.S.C. §362. To minimize such liability, the Authority will allow loan holders to suspend collection activities in response to any of the following types of notification that a borrower has filed bankruptcy: A telephone call or letter from the borrower. A telephone call or letter from the borrower's attorney.

If the loan holder suspends collection activities upon receiving notification from the borrower, the loan holder must immediately begin actively pursuing confirmation by the bankruptcy court that the borrower has filed bankruptcy.

The loan holder must retain documentation of its efforts to ascertain whether the borrower filed bankruptcy, and must note the reason collection activities were suspended in the loan file. Although notification of a bankruptcy filing from a borrower may be considered sufficient for suspending collection activities, a bankruptcy claim may be filed on a loan only after notification from the borrower's attorney or bankruptcy court confirmation of the borrower's filing is obtained. The time filing deadline will be measured from the date the lender receives proof of bankruptcy filing from the attorney or the bankruptcy court (rather than the date the original unofficial notification is received).

If the loan holder is unable to obtain court confirmation of the bankruptcy filing within a reasonable period of time (preferably within 45 days), it must resume servicing on the loan at the point of delinquency, if any, that existed at the time the collection activities were suspended. A lender may capitalize the interest that accrues during the period when collection activities were suspended only if it obtains written authorization from the borrower.

D.Section 13.8.A. is modified to the extent necessary to incorporate the modifications to Section 7.7.I.

The Authority requires lenders to file an assignment with the court when the lender files a Proof of Claim (POC) instead of submitting the original assignment in the claim file. A copy of the court-filed assignment must be included in the claim file.

The Authority strongly encourages lenders to file such assignments and POCs electronically with the court when possible. If the lender files electronically with a court, it must provide a copy of the electronically transferred documents in the claim file.

E.Section 15.2 is amended to add the following:

Consolidation for Borrowers with Defaulted Loans. The Authority will guarantee a Consolidation loan that includes a defaulted loan only if the borrower makes satisfactory repayment arrangements with the loan holder before applying for the Consolidation loan. For these purposes, satisfactory repayment arrangements are defined as three consecutive, on-time, voluntary, monthly payments. Furthermore, the Authority requires that the payments satisfy interest accruing on each defaulted loan to be consolidated.

94-457 C.M.R. ch. 602, § 2