Default & Prohibited transaction

[Guest jgordon]

Assume disqualified person takes loan from plan and signs a cognovit note stating that loan will bear interest of 7.5% is to be paid back within 20 months and payments are required monthly. Plan loan program is available to all participants and HCEs are not able to have greater amounts loaned to them then NHCEs. Disqualified person defaults on loan in month 12 and does not pay back balance of loan. Does the default automatically turn this into a prohibited transaction?