California Education Code 94161 – (a) The authority shall establish procedures under which …
(a) The authority shall establish procedures under which financial institutions may submit claims for reimbursement for losses incurred as a result of qualified loan defaults. A financial institution that charges off all or part of a qualified loan to the loss reserve account may file a claim for reimbursement with the authority if all of the following conditions are met:
(1) The claim occurs contemporaneously with the action of the financial institution to charge off all or part of the qualified loan.
Terms Used In California Education Code 94161
- Authority: means the California Educational Facilities Authority created by this chapter or any board, body, commission, department, or officer succeeding to the principal functions of the authority or to whom the power conferred upon the authority by this chapter is given by law. See California Education Code 94110
- Financial institution: means a bank as defined under paragraph (4) of subdivision (b) of §. See California Education Code 94157
- Loss reserve account: means an account in the State Treasury or in any financial institution that is established and maintained by the authority for the benefit of a financial institution participating in the program for the purposes of any of the following:
California Education Code 94157
- Program: means the California Student Loan Refinancing Program created pursuant to this article. See California Education Code 94157
- Qualified borrower: means an individual meeting all of the following requirements:
California Education Code 94157
- Qualified loan: means a loan or a portion of a loan made by a financial institution to a qualified borrower to refinance a private student loan under the program. See California Education Code 94157
(2) The charge off on a qualified loan is made in a manner that is consistent with the financial institution’s usual method for making determinations on personal loans that are not qualified loans.
(3) The financial institution has met all of the conditions established by the authority to assist the borrower in making payments prior to filing a claim for reimbursement.
(b) Costs for which a financial institution may be reimbursed from its loss reserve account include the amount of qualified loan principal charged off, accrued interest on the principal, reasonable out-of-pocket expenses incurred in pursuing its collection efforts, including preservation of collateral, and any other related costs. Proper documentation of the expenses, to the satisfaction of the authority, shall be presented at the time of the claim.
(c) If a financial institution files two or more claims contemporaneously, and there are insufficient funds in the loss reserve account at that time to cover the entire amount of such claims, the financial institution may designate the order of priority in which the claims shall be paid.
(d) A financial institution may seek reimbursement of qualified loan losses prior to the liquidation of collateral, if any, from defaulted qualified loans. The financial institution shall repay the loss reserve account for any moneys received as reimbursement under this section if the financial institution recovers moneys from the qualified borrower or from the liquidation of collateral for the defaulted qualified loan, less any reasonable out-of-pocket expenses incurred in collection of this amount.
(e) In any case in which the payment of a claim under this section has fully covered a financial institution’s loss on a qualified loan, the financial institution shall assign to the authority any right or title to, or interest in, any collateral, security, or other right of recovery in connection with a qualified loan made under the program.
(Added by Stats. 2014, Ch. 816, Sec. 2. (AB 2377) Effective January 1, 2015.)