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PUBLIC LAWS OF MAINE
First Regular Session of the 121st

CHAPTER 455
S.P. 579 - L.D. 1625

An Act To Provide Affordable Loans for Higher Education

Be it enacted by the People of the State of Maine as follows:

     Sec. 1. 10 MRSA §969-A, sub-§14-C is enacted to read:

     14-C. Student loan secondary market. Take all actions necessary to implement and administer a student loan secondary market;

     Sec. 2. 20-A MRSA c. 417-F is enacted to read:

CHAPTER 417-F
HIGHER EDUCATION LOAN PURCHASE PROGRAM

§11491. Purpose; program established

     The Legislature finds and declares that the provision of a higher education for all residents of this State and for nonresidents attending institutions of higher education within this State who desire a higher education and are properly qualified is important to the welfare and security of this State and consequently is an important public purpose. Many qualified students are deterred by financial considerations from completing their education, with a consequent irreparable loss to the State of talents vital to the welfare of the State and its citizens. Accordingly, there is established the Higher Education Loan Purchase Program to provide greater access to federal loan program loans at a lower cost, enabling all residents of this State as well as nonresidents attending an institution of higher education in this State to attend the institutions of higher education of their choice.

§11492. Definitions

     As used in this chapter, unless the context otherwise indicates, the following terms have the following meanings.

     1. Authority. "Authority" means the Finance Authority of Maine established in Title 10, section 961 and its successors or assigns.

     2. Bonds. "Bonds" includes bonds, notes, commercial paper, pass-through instruments or any other evidences of indebtedness the authority issues under this chapter.

     3. Borrower. "Borrower" means a person who is obligated as a borrower to make payment of an eligible loan.

     4. Eligible lender. "Eligible lender" means the authority and the Federal Government and any financial institution, credit union or institution of higher education that is an eligible lender under the federal Higher Education Act of 1965, Public Law 89-329, 79 Stat. 1219, Title IV, as amended, or under the federal Health Professions Educational Assistance Act of 1976, Public Law 94-484, 90 Stat. 2243, as amended, as applicable or, in each case, any successor provision, that is approved by the authority for participation in the program.

     5. Eligible loan or loan. "Eligible loan" or "loan" means a loan originated under the federal Higher Education Act of 1965, Public Law 89-329, 79 Stat. 1219, Title IV, as amended, or under the federal Health Professions Educational Assistance Act of 1976, Public Law 94-484, 90 Stat. 2243, as amended, in each case along with any successor provision, by an eligible lender to a borrower, or under any student loan program administered by the authority.

     6. Finance. "Finance" means the acquisition or refinancing of eligible loans, including through loans to eligible lenders; however, except as otherwise provided in section 11493, subsection 2, the authority is not authorized hereby to originate loans, other than consolidation loans funding the payment of eligible loans to borrowers of eligible loans financed by the authority, through a financial institution acting in the capacity of a trustee on behalf of the authority.

     7. Program. "Program" means the Higher Education Loan Purchase Program established by this chapter.

§11493.    Higher Education Loan Purchase Program

     1. Program. The authority is authorized to carry out the program by issuing bonds for the purpose of financing eligible loans and may use any net earnings on those bonds to administer the program, to pay or further secure the bonds and to make eligible loans, except as otherwise provided in subsection 2.

     2. Authorization. The authority is not authorized to originate loans other than consolidation loans, except that, if the authority finds that there is a significant impediment to providing students the benefits of an allocation of tax-exempt bond cap without originating loans, it may adopt rules pursuant to subsection 3 to allow the authority to originate other loans.

     3. Rules. The authority shall adopt rules to implement and administer the program. All rules adopted pursuant to this subsection are routine technical rules as defined in Title 5, chapter 375, subchapter 2-A.

§11494. Records confidential

     1. Confidential information. Records containing any information acquired by the authority or a member, employee or agent of the authority from borrowers whose loans are financed by the authority are confidential for purposes of Title 1, section 402, subsection 3, paragraph A.

     2. Wrongful disclosure prohibited. A member, employee, agent, other representative of the authority or other person may not knowingly divulge or disclose records declared confidential by this section, except that the authority may, in its discretion, make or authorize any disclosure of information of the following types:

§11495. Bonds

     1. Issuance; purpose; payment; authorization; interim receipts or certificates. The authority may issue bonds for the purposes of this chapter, including, except as otherwise provided by section 11493, subsection 2, financing eligible loans, which may include consolidation loans funding the payment of eligible loans to borrowers of eligible loans financed by the authority, financing loans to eligible lenders to fund the origination of eligible loans and acquiring existing portfolios of eligible loans from eligible lenders. The bonds of each issue must be authorized by the authority and be payable only from such sources specified in the agreement with bondholders, which may include, without limitation, payments on or with respect to eligible loans from any source, including sale proceeds; reserves established by the authority for the bonds; payments pursuant to agreements with financial institutions, credit unions, educational institutions or any governmental entity; payments pursuant to interest rate exchange agreements; investment earnings from funds or accounts maintained pursuant to a trust agreement or other document; proceeds of refunding bonds; and other fees, charges or revenues of the authority.

Bonds issued by the authority for the purposes of this chapter, the resolution authorizing the issuance of such bonds or any trust agreement securing such bonds may include such provisions, which must be part of the contract with the holders of the bonds of such issue and with any 3rd-party credit or liquidity provider or counterparties to interest rate exchange agreements, as the authority considers necessary or convenient to the security or issuance of the bonds, including without limitation:

     2. Credit not pledged. Bonds issued under this chapter do not constitute or create any debt or liability on behalf of the State, of any political subdivision of the State or the authority, a loan of the credit of the State or a pledge of the faith and credit of the State, of any political subdivision of the State or the authority, but are payable solely from the funds provided for the payment of those bonds. All the bonds issued under this chapter must contain a statement to the effect that the State, any political subdivision of the State or the authority is not obligated to pay the bonds or the interest on the bonds, except from funds provided for the payment of those bonds pursuant to one or more agreements, and that neither the faith and credit nor the taxing power of the State or of any political subdivision of the State is pledged to the payment of the principal of, premium, if any, or the interest on such bonds. The issuance of bonds under this chapter does not directly or indirectly or contingently obligate the State or any political subdivision of the State to levy or to pledge any form of taxation whatever or to make any appropriation for the bonds' payment.

     3. Liability of members. A member or employee of the authority or any person executing the bonds may not be held liable personally on the bonds or subject to any personal liability by reason of the issuance of the bonds.

     4. Interest rate exchange agreements. In connection with, or incidental to, the issuance or carrying of bonds issued under this chapter or carrying of any investment, the authority may enter into agreements with financial institutions or credit unions that the authority determines to be necessary or appropriate to place the obligation or investment of the authority, in whole or in part, on the interest rate, cash flow or other basis as determined by the authority.

     5. Purchasing, refunding or refinancing by authority. The authority may purchase its bonds out of any available funds and may hold, pledge, cancel or resell the bonds subject to and in accordance with agreements with bondholders. The authority may refund or refinance any of its bonds.

     6. Conclusive authorization. All bonds of the authority are conclusively presumed to be fully authorized and issued under the laws of the State, and any person or governmental unit is estopped from questioning their authorization, sale, issuance, execution or delivery by the authority.

§11496. Trust agreement; pledge of security

     1. Trust agreement. Any bonds issued under this chapter may be secured by a trust agreement by and between any or all of the following: the authority, a financial institution, a credit union and a corporate trustee or trustees, which may be any trust company or bank having the powers of a trust company within or without the State.

     2. Pledge of security. This subsection governs a pledge of security pursuant to this chapter.

§11497. Loan transactions

     Except as otherwise provided in section 11493, subsection 2, the authority may finance, sell, service, pledge, invest in, hold, trade, accept as collateral or otherwise deal in, acquire or transfer, all on such terms and conditions as the authority may specify, any eligible loan or portfolio of loans or loan pass-through certificate, pledge, including any pledge of loan revenue, loan participation certificate or other loan-backed or loan-related security. Any such transaction may be conducted by public or private offering. In connection with the financing or sale of an eligible loan or of a beneficial interest or participation in an eligible loan or portfolio of eligible loans, or other interest in eligible loans, the authority may enter into one or more agreements providing for the origination, guarantee, financing, purchase, sale, servicing, custody, control and administration of such eligible loan or portfolio of eligible loans. Any such agreement may provide that the authority, any other eligible lender, a financial institution, a credit union or other person may act as trustor, trustee or custodian under the agreement. Any such agreement may provide that, with respect to loans governed by the agreement, title to such eligible loans or portfolio of eligible loans or other interest in eligible loans is deemed to have been transferred on terms and to the extent specified in that agreement and that the effect of a sale of an interest in a loan is the same as a sale of a loan. The authority may issue or cause to be issued certificates or other instruments evidencing the holder's fractional interest in a pool of loans, which interest may be undivided or limited to one or more specific loans. Whether or not the certificates or instruments are of such form or character as to be negotiable instruments under Title 11, Article 3-A, the certificates or instruments are made negotiable instruments within the meaning of and for all purposes of Title 11, Article 3-A, subject only to such registration requirements as the authority may establish.

§11498. Tax exemption

     Bonds issued under this chapter constitute a proper public purpose and the securities, their transfer and the income from them, including any profits made on their sale, are at all times exempt from taxation within the State, whether or not those securities, their transfer or the income from them, including any profits made on their sale, are subject to federal taxation.

§11499. Bonds as legal investments

     Bonds issued by the authority under this chapter are securities in which all public officers and public bodies of the State and its political subdivisions; insurance companies and associations and other persons carrying on an insurance business; trust companies, banks, bankers, banking associations, savings banks and savings associations, including savings and loan associations; financial institutions; credit unions; building and loan associations; investment companies; executors, administrators, trustees and other fiduciaries; pension, retirement funds and profit-sharing plans; other persons carrying on a banking business; and all other persons may properly and legally invest funds, including capital in their control or belonging to them. These bonds are made securities that may properly and legally be deposited with and received by any state, municipal or public officer or any agency or political subdivision of the State for any purpose for which the deposit of bonds or other obligations of the State is now or may hereafter be authorized by law.

§11499-A. Taxable bond option

     With respect to all or any portion of any issue of any bonds or any series of bonds that the authority may issue in accordance with the limitations and restrictions of this chapter, the authority may covenant, elect and consent that the interest on the bonds be includable under the federal Internal Revenue Code or any subsequent corresponding internal revenue law of the United States in the gross income of the holders of the bonds to the same extent and in the same manner that the interest on bills, bonds, notes or other obligations of the United States is includable in the gross income of the holders under the federal Internal Revenue Code or any subsequent law. Bonds issued pursuant to this section are not subject to any limitations or restrictions of any law that may limit the authority's power to issue those bonds. The grant of power in this section may not be construed as limiting the inherent power of the State or its agencies under any other provision of law to issue debt, the interest on which is includable in the gross income of the holders under the federal Internal Revenue Code or any subsequent law.

§11499-B. Agreement of the State

     The State pledges to and agrees with the holders of any bonds issued under this chapter and with those parties who may enter into any contract with the authority pursuant to this chapter that the State will not limit, alter, restrict or impair the rights vested by this chapter in the authority until the bonds issued pursuant to this chapter, together with interest, including interest on any unpaid installment of interest and all costs and expenses in connection with any actions or proceedings by or on behalf of the bondholders, are fully met and discharged and such contracts are fully performed on the part of the authority. Nothing in this chapter precludes that limitation or alteration if and when adequate provision is made by law for the protection of the holders of such bonds and of those parties entering into contracts with the authority. The authority is authorized to include this pledge and undertaking for the State in those bonds or contracts.

§11499-C. Chapter cumulative; no notice required

     This chapter may not be construed as a restriction or limitation upon any powers that the authority might otherwise have under any laws of this State and this chapter is cumulative of any such powers. Neither the making of contracts nor the issuance of bonds pursuant to this chapter need comply with the requirements of any other state law applicable to the making of contracts, the issuance of bonds or the construction, acquisition or management of any project undertaken pursuant to this chapter. No proceedings, notice or approval is required for the issuance of any bonds or any instrument as security for those bonds, except as is provided in this chapter or in the federal Internal Revenue Code, if applicable.

§11499-D. Chapter liberally construed

     This chapter being necessary for the welfare of the State and its inhabitants must be liberally construed so as to effect its purposes.

Effective September 13, 2003, unless otherwise indicated.

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