§1279a. Escrow fund

(a) Creation

If the proceeds of an obligation guaranteed under this subchapter are to be used to finance the construction, reconstruction, or reconditioning of a vessel or vessels which will serve as security for the guarantee of the Secretary, the Secretary is authorized to accept and hold, in escrow under an escrow agreement with the obligor, a portion of the proceeds of all obligations guaranteed under this subchapter whose proceeds are to be so used which is equal to: (i) the excess of the principal amount of all obligations whose proceeds are to be so used over 75 per centum, or 87½ per centum, whichever is applicable under section 1274 ¹ of this Appendix, of the amount paid by or for the account of the obligor for the construction, reconstruction, or reconditioning of the vessel or vessels; (ii) with such interest thereon, if any, as the Secretary may require: Provided, That in the event the security for the guarantee of an obligation by the Secretary relates both to a vessel or vessels to be constructed, reconstructed or reconditioned and to a delivered vessel or vessels, the principal amount of such obligation shall be prorated for purposes of this subsection (a) under regulations prescribed by the Secretary.

(b) Disbursement prior to termination of escrow agreement

The Secretary shall, as specified in the escrow agreement, disburse the escrow fund to pay amounts the obligor is obligated to pay as interest on such obligations or for the construction, reconstruction, or reconditioning of the vessel or vessels used as security for the guarantee of the Secretary under this subchapter, to redeem such obligations in connection with a refinancing under paragraph (4) ¹ of section 1274(a) of this Appendix or to pay to the obligor at such times as may be provided for in the escrow agreement any excess interest deposits, except that if payments become due under the guarantee prior to the termination of the escrow agreement, all amounts in the escrow fund at the time such payments become due (including realized income which has not yet been paid to the obligor) shall be paid into the Fund and (i), be credited against any amounts due or to become due to the Secretary from the obligor with respect to the guaranteed obligations and (ii) to the extent not so required, be paid to the obligor.

(c) Disbursement upon termination of escrow agreement

If payments under the guarantee have not become due prior to the termination of the escrow agreement, any balance of the escrow fund at the time of such termination shall be disbursed to prepay the excess of the principal of all obligations whose proceeds are to be used to finance the construction, reconstruction, or reconditioning of the vessel or vessels which serve or will serve as security for such guarantee over 75 per centum or 87½ per centum, whichever is applicable under section 1274 ¹ of this Appendix, of the actual cost of such vessel or vessels to the extent paid, and to pay interest on such prepaid amount of principal, and the remainder of such balance of the escrow fund shall be paid to the obligor.

(d) Investment of fund

The Secretary may invest and reinvest all or any part of the escrow fund in obligations of the United States with such maturities that the escrow fund will be available as required for purposes of the escrow agreement.

(e) Payment of income

Any income realized on the escrow fund shall, upon receipt, be paid to the obligor.

(f) Terms of escrow agreement

The escrow agreement shall contain such other terms as the Secretary may consider necessary to protect fully the interests of the United States.

(June 29, 1936, ch. 858, title XI, §1108, formerly §1111, as added Pub. L. 86–127, §1(2), July 31, 1959, 73 Stat. 272 ; renumbered and amended Pub. L. 92–507, §5, Oct. 19, 1972, 86 Stat. 916 ; Pub. L. 97–31, §12(136), Aug. 6, 1981, 95 Stat. 166 .)

References in Text

References in subsecs. (a) to (c) to section 1274 of this Appendix, were in the original references to section 1104 of this title, meaning section 1104 of title XI of the Merchant Marine Act, 1936, act June 29, 1936, ch. 858. Section 1104 of that Act was renumbered as section 1104A of that Act by Pub. L. 101–380, title IV, §4115(f)(1), Aug. 18, 1990, 104 Stat. 521 .

Paragraph (4) of section 1274(a) of this Appendix, referred to in subsec. (b), was redesignated paragraph (5) of section 1274(a) of this Appendix by Pub. L. 96–561, title II, §220(3)(A)(iii), Dec. 22, 1980, 94 Stat. 3292 .

Amendments

1981-Subsecs. (a), (b), (d), (f). Pub. L. 97–31 struck out "of Commerce" after "Secretary" wherever appearing.

1972-Subsec. (a). Pub. L. 92–507 substantially reenacted subsec. (a) and substituted requirement that an escrow fund be created out of proceeds of obligations, for requirement that such fund be created out of sale of bonds.

Subsec. (b). Pub. L. 92–507 substituted provisions for the disbursement of escrow fund to pay certain payments the obligor is obligated to pay, for provisions for the disbursement of such fund to pay certain payments the mortgagor or borrower is obligated to pay.

Subsec. (c). Pub. L. 92–507 substituted provisions for the disbursement of the remainder of funds in the escrow fund to the obligor on the termination of the escrow agreement, for provisions for the disbursement of such funds to the mortgagor or borrower as the case may be.

Subsec. (d). Pub. L. 92–507 substituted "the escrow fund" for "such fund".

Subsec. (e). Pub. L. 92–507 substituted provisions for payment of income to obligor, for provisions for payment of such income to mortgagor or borrower.

Subsec. (f). Pub. L. 92–507 substituted "to protect fully" for "to fully protect".

Section Referred to in Other Sections

This section is referred to in sections 1271, 1273, 1274 of this Appendix.

¹ See References in Text note below.