WAIS Document Retrieval[Code of Federal Regulations]
[Title 24, Volume 2, Parts 200 to 499]
[Revised as of April 1, 2000]
From the U.S. Government Printing Office via GPO Access
[CITE: 24CFR203.379]

[Page 196-197]
 
                 TITLE 24--HOUSING AND URBAN DEVELOPMENT
 
PART 203--SINGLE FAMILY MORTGAGE INSURANCE--Table of Contents
 
               Subpart B--Contract Rights and Obligations
 
Sec. 203.379  Adjustment for damage or neglect.

    (a) If the property has been damaged by fire, flood, earthquake, 
hurricane, or tornado, or, for mortgages insured on or after January 1, 
1977, the property has suffered damage because of the mortgagee's 
failure to take action as required by Sec. 203.377, the damage must be 
repaired before conveyance of the property or assignment of the mortgage 
to the Secretary, except under the following conditions:
    (1) If the prior approval of the Secretary is obtained, there will 
be deducted from the insurance benefits the Secretary's estimate of the 
cost of repairing the damage or any insurance recovery received by the 
mortgagee, whichever is greater.
    (2) If the property has been damaged by fire and was not covered by 
fire insurance at the time of the damage, or the amount of insurance 
coverage was inadequate to repair fully the damage, only the amount of 
insurance recovery received by the mortgagee, if any, will be deducted 
from the insurance benefits, provided the mortgagee certifies, at the 
time that a claim is filed for insurance benefits, that:
    (i) At the time the mortgage was insured, the property was covered 
by fire insurance in an amount at least equal to the lesser of 100 
percent of the insurable value of the improvements, or the principal 
loan balance of the mortgage; and
    (ii) The insurer later cancelled this coverage or refused to renew 
it for reasons other than nonpayment of premium; and
    (iii) The mortgagee made diligent though unsuccessful efforts within 
30 days of any cancellation or non-renewal of hazard insurance, and at 
least annually thereafter, to secure other coverage or coverage under a 
FAIR Plan, in an amount described in paragraph (a)(2)(i) of this 
section, or if coverage to such an extent was unavailable at a 
reasonable rate, the greatest extent of coverage that was available at a 
reasonable rate; and
    (iv) The extent of coverage obtained by the mortgagee in accordance 
with paragraph (a)(2)(iii) of this section was the greatest available at 
a reasonable rate, or if the mortgagee was unable to obtain insurance, 
none was available at a reasonable rate; and
    (v) The mortgagee took the actions required by Sec. 203.377 of this 
part.
    (3) The certification requirements set out in paragraph (a)(2) of 
this section apply to any mortgage insured by HUD on or after September 
22, 1980, for which a claim has not been filed before September 30, 
1986. Any mortgage insured on or after September 22, 1980, for which a 
claim has been filed before September 30, 1986, but the claim has not 
been settled before that date, will be governed by Sec. 203.379(b) 
(1986) Edition as it existed immediately before September 30, 1986.
    (4)(i) As used in this section, reasonable rate means a rate that is 
not in excess of the rate or advisory rate set by the principal State-
licensed rating organization for essential property insurance in the 
voluntary market, or if coverage is available under a FAIR Plan, the 
FAIR Plan rate.
    (ii) If a State has neither a FAIR Plan nor a State-licensed rating 
organization for essential property insurance in the voluntary market, 
the mortgagee must provide to the HUD Field Office having jurisdiction, 
information concerning the lowest rates available from an insurer for 
the types of coverage involved, with a request for

[[Page 197]]

a determination of whether the rate is reasonable. HUD will determine 
the rate to be reasonable if it approximates the rate assessed for 
comparable insurance coverage applicable to similarly situated 
properties in a State that offers a FAIR Plan or maintains a State-
licensed rating organization.
    (b) For mortgages insured under firm commitments issued on or after 
November 19, 1992, or under direct endorsement processing where the 
credit worksheet was signed by the mortgagee's underwriter on or after 
November 19, 1992, the provisions of paragraph (a) of this section apply 
and, in addition, if the property has been damaged during the time of 
the mortgagee's possession by events other than fire, flood, earthquake, 
hurricane, or tornado, or if it was damaged notwithstanding reasonable 
action by the mortgagee as required by Sec. 203.377 of this part, the 
mortgagee must provide notice of such damage to the Secretary and may 
not convey until directed to do so by the Secretary. The Secretary will 
either:
    (1) Allow the mortgagee to convey the property damaged; or
    (2) Require the mortgagee to repair the damage before conveyance, 
and the Secretary will reimburse the mortgagee for reasonable payments 
not in excess of the Secretary's estimate of the cost of repair, less 
any insurance recovery.
    (c) In the event the damaged property is conveyed to the Secretary 
without prior notice or approval as provided in paragraphs (a) or (b) of 
this section, the Secretary may:
    (1) After notice, reconvey the property to the mortgagee and the 
mortgagee must reimburse the Secretary in accordance with Secs. 203.363 
and 203.364 of this part, or
    (2) Require the mortgagee to reimburse the Secretary for the greater 
of the Secretary's estimate of the cost of repair or any insurance 
recovery.

[57 FR 47973, Oct. 20, 1992, as amended at 61 FR 36265, July 9, 1996]



