Maintained for Historical Purposes

This resource is being maintained for historical purposes only and is not currently applicable.

(Disaster Letter-97-01) (Disaster Letter-97-01) Guidance for guaranty agencies concerning the recent floods in California, Idaho, and Nevada. This guidance is different than the Department's previous guidance for helping borrowers who live in natural disaster areas.

DCLPublicationDate: 1/1/97
DCLID: Disaster Letter-97-1
AwardYear:
Summary: Guidance for guaranty agencies concerning the recent floods in California, Idaho, and Nevada. This guidance is different than the Department's previous guidance for helping borrowers who live in natural disaster areas.


January 14, 1997

SUMMARY: Guidance for guaranty agencies concerning the recent
floods in California, Idaho, and Nevada. This guidance is different than
the Department's previous guidance for helping borrowers who live in
natural disaster areas.


Dear Guaranty Agency Director:

NEW DISASTER AREAS.

In response to the flooding that occurred in early January in California,
Idaho, and Nevada, President Clinton has declared the following counties
and jurisdictions to be disaster areas:

California:
Alpine, Amador, Butte, Calaveras, Colusa, Del Norte, El Dorado, Fresno,
Glenn, Humboldt, Lake, Lassen, Madera, Marin, Mariposa, Mendocino,
Modoc, Mono, Monterey, Napa, Nevada, Placar, Plumas, Sacramento,
San Benito, San Joaquin, San Mateo, Santa Cruz, Shasta, Sierra,
Siskiyou, Solano, Sonoma, Stanislaus, Sutter, Tehama, Trinity, Tulare,
Tuolumne, Yolo, Yuba, and the city of Morgan Hill.

Idaho:
Adams, Boundary, Bonner, Boise, Clearwater, Elmore, Gem, Idaho,
Latah, Payette, Shoshone Valley, and Washington.

Nevada:
Douglas, Lyon, Storey, Washoe, and the city of Carson City.


The listings of designated disaster areas in California, Idaho, and Nevada
are complete as of the date of this letter. If additional areas are included
by FEMA after the date of this letter, we will send a revised
comprehensive listing to you. In the meantime, lenders and guaranty
agencies may contact the Department's toll-free number at 1-800-433-
7327, Monday through Friday from 9:00 a.m. to 5:00 p.m. EST for
further updates.

INTERIM POLICY.

For the past few years, the Department has notified you whenever the
President has officially declared that specific areas in the U.S. have
experienced major natural disasters that would qualify the residents and
businesses located in those areas to become eligible for individual
disaster assistance from the federal government. Those declarations have
been made in accordance with the standards used by the Federal
Emergency Management Agency (FEMA). Based on those Presidential
declarations, the Department initially permitted, and later required loan
holders to grant forbearances to borrowers who were harmed by the
disasters.

Because lenders, loan servicers, and guarantors have great difficulty
identifying borrowers directly affected by such disasters, forbearance has
been granted for a 90-day period to all borrowers residing in a designated
area. In the case of delinquent and defaulted borrowers, this has resulted
in the total cessation of all collection efforts for a 90-day period, even if
there was no evidence that the borrower had been affected by the disaster.

In light of the standards used by FEMA, which frequently result in large
geographical areas being designated as disaster areas, such as last year's
designation of the entire state of Pennsylvania, the Department believes it
must reevaluate its current policy for handling natural disasters. The
Department hopes to publish a "Dear Colleague" letter shortly following
its reevaluation of the current policy. Until such time as that guidance is
developed, the Department strongly recommends that lenders and
guaranty agencies take the following steps to provide relief to affected
borrowers who contact them:

1. Loan holders are strongly recommended to grant forbearances to
borrowers who contact them and indicate that they have been adversely
affected by the disaster and need temporary relief from their loan
obligations. If the holder believes that the borrower has been harmed and
needs assistance, the holder may grant a forbearance for up to 3 months
based on either the borrower's oral or written request for assistance,
which must be documented in the holder's files.

2. The holder does not need to obtain supporting documentation or a
signed written agreement from the borrower to justify a forbearance for
this initial 3-month period. The Secretary will decline to enforce the
requirements of 34 CFR 682.211(c) for this period.

3. A continuation of the forbearance past this 3-month period will
require supporting documentation and a written agreement from the
borrower.

This interim policy is effective immediately, while we continue to
reevaluate our current policy. We hope to balance the interests of
borrowers and taxpayers with those of loan holders, but our primary
concern must be for the borrowers and taxpayers. If you have comments
or questions concerning this interim policy, or if you believe other
approaches for handling these natural disasters would be more
appropriate, please contact me at (202) 708-8242, or by fax at (202) 708-
7196.

Sincerely,

Pamela A. Moran
Chief, Loans Branch
Policy Development Division
Student Financial Assistance Programs


cc: ED Regional Offices
National Council of Higher Education Loan Programs, Inc.
Consumer Bankers Association
National Association of Student Financial Aid Administrators

Last Modified: 12/31/1996