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The bank also said that the number of mortgages more than 60 days late declined in the second quarter, a sign of healthier conditions for borrowers.
They expect an increase in default rates this year or next, even if the economic conditions for borrowers do not deteriorate much.
The improving conditions for borrowers, Mr. Walsh said, come mainly from the drop in vacation home prices, not any relaxation in lending standards.
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"Conditions for subprime borrowers will get worse before they get better," he said.
But the government insisted the sales would make no difference to the terms and conditions for individual borrowers and it would retain control of all loan arrangements and regulations, including interest rates and repayment thresholds.
For the second year in a row, the administration explained the lower budget by pointing to improved economic conditions for commercial borrowers, which it expects to drive down default rates and lower the cost of the agency's lending initiatives.
Appearing before the Treasury select committee of backbench MPs, the chancellor said there would be "very significant financial volatility" if voters chose to leave the EU in the 23 June referendum, which would push up interest rates and tighten credit conditions – making it harder for borrowers to get loans.
"The terms and conditions are laid out in an easy-to-understand format for borrowers to understand and set out the variable interest they will be charged," says a spokesperson from the Student Loans Company.
The Dutch lender Rabobank has applied a nine-point checklist of conditions for would-be oil and gas borrowers that includes commitments to improve environmental performance and protect water quality.
However, there are terms and conditions with all student loan forgiveness programs that have to be followed or it could create real financial problems for borrowers.
§ 201.22 Credit requirements for borrowers.
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