Laws and Regs

24 CFR 203.pdf

Single Family Application for Insurance Benefits

Laws and Regs

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§ 203.350

24 CFR Ch. II (4–1–06 Edition)

excluded in computing the period within which the mortgagee shall commence foreclosure or acquire the property by other means as provided in
§ 203.355 of this subpart. No postponement or delay in the prosecution of
foreclosure proceedings during the period the mortgagor is in such military
service shall be construed as failure on
the part of the mortgagee to exercise
reasonable diligence in prosecuting
such proceedings to completion as required by this subpart.
[36 FR 24508, Dec. 22, 1971, as amended at 61
FR 36265, July 9, 1996]

ASSIGNMENT OF MORTGAGE
§ 203.350 Assignment of mortgage.
(a) Assignment of modified mortgages
pursuant to section 230, National Housing
Act. HUD may accept an assignment of
any mortgage covering a one-to-four
family residence if the following requirements are met:
(1) The mortgage was in default;
(2) The mortgagee has modified the
mortgage under § 203.616 to cure the default and to provide for mortgage payments within the reasonable ability of
the mortgagor to pay, at an interest
rate not exceeding current market interest rates; and
(3) Such other conditions that HUD
may prescribe, which may include the
requirement that the mortgagee continue to be responsible for servicing
the mortgage.
(b) Assignments pursuant to section 248,
National Housing Act. Notwithstanding
the provisions of paragraph (a), the
Commissioner shall, upon application
by the mortgagee, approve the assignment to the Commissioner of any
mortgage insured pursuant to section
248 of the National Housing Act (see
§ 203.43h) where the mortgagor has been
in default for more than 90 days. The
mortgagee may not request the Commissioner to accept an assignment
until the mortgagee has submitted documents to the Commissioner showing
that the requirements of § 203.604 have
been met. HUD shall then notify the
mortgagee of its approval of the mortgagee’s actions under § 203.604 and that
the mortgagee may assign the mortgage to the Secretary, or HUD will
specify what further action the mort-

gagee must take to meet the requirements of § 203.604.
(c) Assignment of mortgages insured
pursuant to section 247, National Housing
Act. Notwithstanding the provisions of
paragraph (a) of this section, the Secretary will, upon application by the
mortgagee, agree to accept an assignment of any mortgage insured pursuant to section 247 of the National Housing Act (§ 203.43i of this part) where the
mortgagor has been in default for more
than 180 days, provided that the requirements of § 203.665 are satisfied.
(d) Assignment of mortgages authorized
by section 203(q), National Housing Act.
Notwithstanding the provisions of
paragraph (a) of this section, the Secretary will, upon application by the
mortgagee, agree to accept assignment
of any mortgage authorized by section
203(q) of the National Housing Act
(§ 203.43j of this part) if
(1) The mortgagor has been in default
for more than 90 days for failure to
make a monthly payment,
(2) The requirements of § 203.666 are
satisfied, and
(3) The date of default occurs before
the mortgagor and the lessor execute a
lease renewal or a new lease with a
term of not less than five years beyond
the maturity date of the mortgage, or
with a term established by an arbitration award.
If the default is non-monetary, the
date of default occurs prior to an action described in paragraph (d)(3) of
this section, the requirements of
§ 203.666 are satisfied, and the mortgagor has been in default for more than
30 days, the Secretary may in his or
her discretion, upon application by the
mortgagee, agree to accept an assignment of the mortgage. If the leasehold
estate has terminated before the mortgage has been assigned, or title to the
property conveyed, to the Secretary,
and the mortgage is in default for any
reason for more than 30 days, the Secretary will, upon application by the
mortgagee, agree to accept an assignment of the mortgage.
(e) Filing assignment for record. Within
30 days of the Secretary’s written
agreement to accept assignment of a

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Office of Assistant Secretary for Housing, HUD
defaulted mortgage, or within such additional time as the Secretary authorizes in writing, the mortgagee must file
the assignment for record.
(Information collection requirements in
paragraph (b) were approved by the Office of
Management and Budget under control number 2502–0169)
[51 FR 21872, June 16, 1986, as amended at 52
FR 48202, Dec. 21, 1987; 53 FR 9869, Mar. 28,
1988; 53 FR 13404, Apr. 25, 1988; 55 FR 282, Jan.
4, 1980; 61 FR 35018, July 3, 1996]

§ 203.351 Application for insurance
benefits and fiscal data.
On the date the assignment of the
mortgage is filed for record, the mortgagee shall forward to the Commissioner the prescribed application for
insurance benefits and fiscal data pertaining to the mortgage transaction,
together with the receipts covering all
disbursements, as required by the fiscal
data form. In addition, the following
requirements shall be met:
(a) Items to be included with application. The following items shall be forwarded to the Commissioner with the
application:
(1) Credit and security instrument. The
original credit and security instruments assigned without recourse or
warranty, except that no act or omission of the mortgagee shall have impaired the validity and priority of the
mortgage.
(2) Recorded assignment instrument.
The original of the recorded assignment of mortgage. If the original of the
assignment is not available, a copy
shall be furnished and the original forwarded as soon as possible.
(3) Hazard insurance. All hazard insurance policies held in connection
with the mortgaged property, together
with a copy of the mortgagee’s notification to the carrier authorizing the
amendment of the loss payable clause
substituting the Commissioner as the
mortgagee.
(4) Rights and interests. An assignment of all rights and interests arising
under the mortgage, and all claims of
the mortgagee against the mortgagor
or others arising out of the mortgage
transaction.
(5) Property. All property of the mortgagor held by the mortgagee or to
which it is entitled (other than the

§ 203.355

cash items which are to be retained by
the mortgagee).
(6) Records and accounts. All records,
ledger cards, documents, books, papers
and accounts relating to the mortgage
transaction.
(7) Additional information. Any additional information or data which the
Commissioner may require.
(8) Title evidence. All title evidence
held by the mortgagee. It need not be
extended to include the recordation of
the assignment. If a mortgagee’s title
policy is furnished, the Commissioner
shall be a named insured under such
policy.
(b) Items to be retained by mortgagee.
The mortgagee shall retain all cash
amounts held or deposited for the account of the mortgagor or to which it
is entitled under the mortgage transaction that have not been applied in reduction of the principal mortgage indebtedness.
(c) Title evidence for mortgages insured under § 203.43d as set forth in
§ 203.385 shall accompany the application for insurance benefits.
[36 FR 24508, Dec. 22, 1971, as amended at 37
FR 7693, Apr. 10, 1972; 42 FR 57435, Nov. 2,
1977]

§ 203.353 Certification by mortgagee.
At the time of assignment of the
mortgage, the mortgagee shall certify
to the Commissioner that:
(a) Priority of mortgage to liens. The
mortgage is prior to all mechanics’ and
materialmen’s liens filed of record, regardless of when such liens attach, and
prior to all liens and encumbrances, or
defects which may arise except such
liens or other matters as may have
been approved by the Commissioner;
(b) Amount due. The amount stated in
the instrument of assignment is actually due and owing under the mortgage;
(c) Offsets or counterclaims. There are
no offsets or counterclaims thereto and
the mortgagee has a good right to assign.
CLAIM PROCEDURE
§ 203.355 Acquisition of property.
(a) In general. Upon default of a mortgage, except as provided in paragraphs
(b) through (i) of this section, the

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§ 203.355

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§ 203.355

24 CFR Ch. II (4–1–06 Edition)

mortgagee shall take one of the following actions within nine months
from the date of default, or within any
additional time approved by the Secretary or authorized by §§ 203.345 or
203.346. For mortgages where the date
of default is on or after February 1,
1998, the mortgagee shall take one or a
combination of the following actions
within six months of the date of default or within such additional time
approved by HUD or authorized by
§§ 203.345 or 203.346:
(1) Obtain a deed-in-lieu of foreclosure (see §§ 203.357, 203.389 and
203.402(f) of this part) with title being
taken in the name of the mortgagee or
the Secretary;
(2) Commence foreclosure;
(3) Enter into a special forbearance
agreement under § 203.614;
(4) Complete a modification of the
mortgage under § 203.616;
(5) Complete a refinance of the mortgage under § 203.43(c);
(6) Complete an assumption under
§ 203.512;
(7) File a partial claim under § 203.371;
or
(8) Initiate a pre-foreclosure sale
under § 203.370.
(b) Vacant or abandoned property.
With respect to defaulted mortgages on
vacant or abandoned property, if the
mortgagee discovers, or should have
discovered, that the property is vacant
or abandoned, the mortgagee must
commence foreclosure within the later
of 120 days after the date the property
became vacant, or 60 days after the
date the property is discovered, or
should have been discovered, to be vacant or abandoned; but no later than
the number of months from the date of
default as provided in paragraph (a) of
this section. The mortgagee must not
delay foreclosure on vacant or abandoned property because of the requirements of § 203.606.
(c) Prohibition of foreclosure within
time limits. If the laws of the State in
which the mortgaged property is located, or Federal bankruptcy law:
(1) Do not permit the commencement
of foreclosure within the time limits
described in paragraphs (a), (b), (g), (h)
and (i) of this section, the mortgagee
must commence foreclosure within 90
days after the expiration of the time

during which foreclosure is prohibited;
or
(2) Require the prosecution of a foreclosure to be discontinued, the mortgagee must recommence the foreclosure within 90 days after the expiration of the time during which foreclosure is prohibited.
(d) Property located on Indian land.
Upon default of a mortgage on property
located on Indian land insured pursuant to section 248 of the National Housing Act (see § 203.43h of this part), the
mortgagee
must
comply
with
§§ 203.350(b) and 204.664 of this part.
(e) Property located on Hawaiian home
lands. Upon default of a mortgage on
property located on Hawaiian home
lands insured pursuant to section 247 of
the National Housing Act (see § 203.43i
of this part), the mortgagee must comply with §§ 203.350(c) and 203.665 of this
part.
(f) Property located on the Allegany
Reservation of the Seneca Nation of Indians. Upon default of a mortgage on
property located on the Allegany Reservation of the Seneca Nation of Indians authorized by section 203(q) of the
National Housing Act (see § 203.43j of
this part), the mortgagee must comply
with §§ 203.350(d) and 203.666 of this
part, unless the mortgagor and the lessor have executed a lease renewal or a
new lease either with a term of not less
than five years beyond the maturity
date of the mortgage, or with a term
established by arbitration award. If a
lease renewal or new lease has been executed, the mortgagee must comply
with paragraph (a) of this section.
(g) Pre-foreclosure sale procedure.
Within 90 days of the end of a mortgagor’s participation in the pre-foreclosure sale procedure, or within the
time limit described in paragraph (a) of
this section, whichever is later, if no
closing of an approved pre-foreclosure
sale has occurred, the mortgagee must
obtain a deed in lieu of foreclosure,
with title being taken in the name of
the mortgagee or the Secretary, or undertake one of the actions listed at
§ 203.355(a). The end-of-participation
date is defined as:
(1) Four months after the date of
commencement of participation, if
there is no signed Contract of Sale at

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Office of Assistant Secretary for Housing, HUD
that time, unless extended by the Commissioner;
(2) Six months after the date of commencement of participation, if there is
a signed contract but settlement has
not occurred by that date, unless extended by the Commissioner;
(3) The date the mortgagee is notified
of the mortgagor’s withdrawal from
the Pre-foreclosure Sale procedure; or
(4) The date of the letter sent by the
mortgagee to the mortgagor prior to
the expiration of the customary participation period, terminating the
mortgagor’s opportunity to participate
in the Pre-foreclosure Sale procedure.
(h) Special forbearance. If the mortgagor fails to meet the requirements of
a special forbearance under § 203.614 and
the failure continues for 60 days, the
mortgagee must undertake one of the
actions listed at § 203.355(a) within the
time limit described in paragraph (a) of
this section or 90 days after the mortgagor’s failure to meet the special forbearance requirements, whichever is
later.
(i) Modification under § 203.616, refinance under § 203.43(c), or assumption
under § 203.512. Provided that the mortgagee has established the mortgagor’s
eligibility within the time frame provided in § 203.355(a), if a mortgagee enters into a loss mitigation relief measure (i.e., modification under § 203.616,
refinance under § 203.43(c), or assumption under § 203.512) and it fails, the sixmonth period provided in § 203.355(a) is
extended by an additional 90 days to
allow the mortgagee to try another
loss mitigation tool or go to foreclosure.
[57 FR 47970, Oct. 20, 1992, as amended at 59
FR 50143, Sept. 30, 1994; 60 FR 57678, Nov. 16,
1995; 61 FR 35018, July 3, 1996; 62 FR 60129,
Nov. 6, 1997]

§ 203.356 Notice of foreclosure and
pre-foreclosure
sale;
reasonable
diligence requirements.
(a) Notice of foreclosure and pre-foreclosure sale. The mortgagee must give
notice to the Secretary, in a format
prescribed by the Secretary, within 30
days after the institution of foreclosure proceedings. The mortgagee
must give notice to the Secretary, in a
format prescribed by the Secretary,
within the time-frame prescribed by

§ 203.357

the Secretary, of the acceptance of any
mortgagor into the pre-foreclosure sale
procedure.
(b) Reasonable diligence. The mortgagee must exercise reasonable diligence in prosecuting the foreclosure
proceedings to completion and in acquiring title to and possession of the
property. A time frame that is determined by the Secretary to constitute
‘‘reasonable diligence’’ for each State
is made available to mortgagees.
[61 FR 36265, July 9, 1996]

§ 203.357 Deed in lieu of foreclosure.
(a) Mortgagors owning one property. In
lieu of instituting or completing a foreclosure, the mortgagee may acquire
property from one other than a corporate mortgagor by voluntary conveyance from the mortgagor who certifies
that he does not own any other property subject to a mortgage insured or
held by FHA. Conveyance of the property by deed in lieu of foreclosure is approved subject to the following requirements:
(1) The mortgage is in default at the
time the deed is executed and delivered;
(2) The credit instrument is cancelled
and surrendered to the mortgagor;
(3) The mortgage is satisfied of
record as a part of the consideration
for such conveyance;
(4) The deed from the mortgagor contains a covenant which warrants
against the acts of the grantor and all
claiming by, through, or under him and
conveys good marketable title;
(5) The mortgagee transfers to the
Commissioner good marketable title
accompanied by satisfactory title evidence.
(b) Corporate mortgagors. A mortgagee
may accept a deed in lieu of foreclosure
from a corporate mortgagor in compliance with the requirements of paragraph (a) of this section, if the mortgagee obtains the prior written consent
of the Commissioner.
(c) Mortgagors owning more than one
property. The mortgagee may accept a
deed in lieu of foreclosure in compliance with the provisions of paragraph
(a) of this section, from an individual
who owns more than one property
which is subject to a mortgage insured
or held by the FHA if the mortgagee

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§ 203.358

24 CFR Ch. II (4–1–06 Edition)

obtains the prior written consent of
the Commissioner.
§ 203.358 Direct conveyance of property.
In acquiring the property or conveying the property to the Commissioner the mortgagee may arrange for
the deed to be made directly to the
Commissioner from the mortgagor or
other grantor. The mortgagee shall be
responsible for determining that such
conveyance will comply with all of the
provisions of this part conveying good
marketable title and satisfactory title
evidence.
§ 203.359 Time of conveyance to the
Secretary.
(a) For mortgages insured under firm
commitments issued prior to November 19,
1992 or under direct endorsement processing where the credit worksheet was
signed by the mortgagee’s approved underwriter prior to November 19, 1992.
After acquiring good marketable title
to and possession of the property the
mortgagee must transfer the property
to the Secretary:
(1) Within 30 days after acquiring
possession of the mortgaged property
by foreclosure or other means; or
(2) Within such further time as may
be necessary to complete the title examination and perfect the title.
(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—(1) Conveyance by the mortgagee. The mortgagee
must acquire good marketable title
and transfer the property to the Secretary within 30 days of the later of:
(i) Filing for record the foreclosure
deed;
(ii) Recording date of deed in lieu of
foreclosure;
(iii) Acquiring possession of the property;
(iv) Expiration of the redemption period; or
(v) Such further time as the Secretary may approve in writing.
(2) Direct conveyance. In cases where
the mortgagee arranges for a direct
conveyance of the property to the Secretary, the mortgagee must ensure

that the property is transferred to the
Secretary within 30 days of the reasonable diligence time frame specified in
§ 203.356 of this part.
[57 FR 47971, Oct. 20, 1992, as amended at 61
FR 36453, July 10, 1996]

§ 203.360 Notice of property transfer
or pre-foreclosure sale and application for insurance benefits.
(a) On the date the deed is filed for
record the mortgagee shall notify the
Commissioner on a form prescribed by
him of the filing of such conveyance
and shall assign, without recourse or
warranty any or all claims which the
mortgagee has acquired in connection
with the mortgage transaction, and as
a result of the foreclosure proceedings
or other means by which the mortgagee acquired or conveyed such property, except such claims as may have
been released with the approval of the
Commissioner.
(b) Within 30 days of the closing of an
approved pre-foreclosure sale, the
mortgagee shall notify the Commissioner on a form prescribed by him of
the pre-foreclosure sale.
[36 FR 24508, Dec. 22, 1971, as amended at 59
FR 50144, Sept. 30, 1994]

§ 203.361 Acceptance of property by
Commissioner.
Upon receipt of notice of property
transfer the Commissioner shall accept
title to and possession of the property
as of the date of the filing for record of
the deed to the Commissioner, subject
to compliance with the regulations in
this part.
§ 203.362 Conditions for withdrawal of
application for insurance benefits.
With the consent of the Commissioner, a mortgagee may withdraw an
application for insurance benefits if
the mortgagee agrees that it will:
(a) Accept a reconveyance of the
property under a deed which warrants
against the acts of the Commissioner
and all claiming by, through, or under
him; and
(b) Promptly file a reconveyance for
record; and
(c) Accept without continuation the
title evidence which it furnished the
Commissioner; and

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§ 203.358

24 CFR Ch. II (4–1–06 Edition)

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24 CFR Ch. II (4–1–06 Edition)

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24 CFR Ch. II (4–1–06 Edition)

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Office of Assistant Secretary for Housing, HUD
(d) Reimburse the Commissioner for
property expenditures as set forth in
§ 203.364.
§ 203.363 Effect of noncompliance with
regulations.
(a) For mortgages insured under firm
commitments issued prior to November 19,
1992 or under direct endorsement processing where the credit worksheet was
signed by the mortgagee’s approved underwriter prior to November 19, 1992. If,
for any reason, the mortgagee fails to
comply with the regulations in this
subpart, the Secretary may hold processing of the application for insurance
benefits in abeyance for a reasonable
time in order to permit the mortgagee
to comply, or, in the alternative, the
Secretary may reconvey title to the
property to the mortgagee, in which
event the application for insurance
benefits shall be considered as cancelled without prejudice to the rights
of the mortgagee to reapply for insurance benefits at a subsequent date.
(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. If, for any
reason, the mortgagee fails to comply
with the regulations in this subpart,
the Secretary may hold processing of
the application for insurance benefits
in abeyance for a reasonable time in
order to permit the mortgagee to comply. In the alternative to holding processing in abeyance, the Secretary may
reconvey title to the property to the
mortgagee, in which event the application for insurance benefits shall be considered as cancelled and the mortgagee
shall refund the insurance benefits to
the Secretary as well as other funds required by § 203.364 of this part. The
mortgagee may reapply for insurance
benefits at a subsequent date; provided,
however, that the mortgagee may not
be reimbursed for any expenses incurred in connection with the property
after it has been reconveyed by the
Secretary, or paid any debenture interest accrued after the date of initial
conveyance or after the date conveyance was required by § 203.359 of this
part, whichever is earlier, and there
will be deducted from the insurance

§ 203.365

benefits any reduction in the Secretary’s estimate of the value of the
property occurring from the time of reconveyance to the time of reapplication.
[57 FR 47971, Oct. 20, 1992, as amended at 61
FR 36453, July 10, 1996]

§ 203.364 Mortgagee’s
liability
property expenditures.

Where the Secretary acquires a property and thereafter it becomes necessary for the Secretary to reconvey
the property to the mortgagee due to
the mortgagee’s noncompliance with
these regulations or the application for
insurance benefits is withdrawn with
the consent of the Secretary, the mortgagee shall reimburse the Secretary for
all expenses incurred in connection
with such acquisition and reconveyance. The reimbursement shall include
interest on the amount of insurance
benefits refunded by the mortgagee
from the date the insurance benefits
were paid to the date of refund at an
interest rate set in conformity with
the Treasury Fiscal Requirements
Manual, and the Secretary’s cost of
holding the property, accruing on a
daily basis, from the date the deed to
the Secretary was filed for record to
the date of reconveyance. These costs
are based on the Secretary’s estimate
of the taxes, maintenance and operating expenses of the property, and administrative expenses. Appropriate adjustments shall be made by the Secretary on account of any income received from the property.
[57 FR 47971, Oct. 20, 1992]

§ 203.365 Documents and information
to be furnished the Secretary;
claims review.
(a) Items to be furnished the Secretary.
Within 45 days after the deed is filed
for record, in the case of a conveyance
claim; or, in the case of a claim arising
from a pre-foreclosure sale, within 30
days after the closing of the pre-foreclosure sale, unless extended by the
Commissioner, the mortgagee must
forward to the Secretary:
(1) A copy of the deed to the Secretary that has been filed for record
and the title evidence continued so as
to include recordation of the deed; or

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§ 203.365

§ 203.364 Mortgagee’s
liability
property expenditures.

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§ 203.365

§ 203.364 Mortgagee’s
liability
property expenditures.

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§ 203.365

§ 203.364 Mortgagee’s
liability
property expenditures.

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§ 203.366

24 CFR Ch. II (4–1–06 Edition)

evidence, as prescribed by the Secretary, of the closing of the pre-foreclosure sale.
(2) Fiscal data pertaining to the
mortgage transaction.
(3) Any additional information or
data that the Secretary may require.
(b) Items to be retained by mortgagee.
The mortgagee must retain all cash
amounts, held or deposited for the account of the mortgagor or to which it
is entitled under the mortgage transaction, that have not been applied in
reduction of the principal mortgage indebtedness.
(c) Claim file to be maintained by mortgagee. (1) The Secretary may verify the
accuracy of information regarding the
insurance claim either before payment
of the claim or after payment by periodic reviews of the mortgagee’s
records. Mortgagees must reimburse
the Secretary for any claim and interest overpaid because of incorrect, unsupported, or inappropriate information provided by the mortgagee, or because of failure to provide correct information.
(2) Mortgagees must maintain a
claim file containing documentation
supporting all information submitted
for claim payment for at least three
years after a claim has been paid. All
claim files for claims paid during a period relating to an unresolved or ongoing claim review must be maintained
until final resolution of such review.
Information to be maintained in the
claim file includes receipts covering all
disbursements as required by the fiscal
data form, ledger cards covering the
mortgage transaction, and any additional information or data relevant to
the mortgage transaction or insurance
claim.
(3) The Secretary may review any
claim file at any time during the threeyear period after the claim has been
paid. Denial of access to any files will
be grounds for withdrawal of the mortgagee’s approved lender status, debarment by the Secretary, or immediate
suspension of all claim payments.
(4) Within 24 hours of a request by
the Secretary, a mortgagee must make
available for review, or forward to the
Secretary, hard copies of identified
claim files.

(d) Statistical sampling. HUD may use
statistical sampling in selecting claims
to be reviewed and in determining the
amount due the Secretary because of
overpayment.
[57 FR 47972, Oct. 20, 1992, as amended at 59
FR 50144, Sept. 30, 1994]

§ 203.366 Conveyance
title.

marketable

(a) Satisfactory conveyance of title and
transfer of possession. The mortgagee
shall tender to the Commissioner a satisfactory conveyance of title and transfer of possession of the property. The
deed or other instrument of conveyance shall convey good marketable
title to the property, which shall be accompanied by title evidence satisfactory to the Commissioner.
(b) Conveyance of property without
good marketable title. (1) 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, if the title to
the property conveyed by the mortgagee to the Secretary is not good and
marketable, the mortgagee must correct any title defect within 60 days
after receiving notice from the Secretary, or within such further time as
the Secretary may approve in writing.
(2) If the defect is not corrected within 60 days, or such further time as the
Secretary approves in writing, the
mortgagee must reimburse the Secretary for HUD’s costs of holding the
property, accruing on a daily basis, and
interest on the amount of insurance
benefits paid to the mortgagee at an
interest rate set in conformity with
the Treasury Fiscal Requirements
Manual from the date of such notice to
the date the defect is corrected or until
the Secretary reconveys the property
to the mortgagee, as described in paragraph (b)(3) of this section. The daily
holding costs to be charged a mortgagee shall include the costs specified
in § 203.364 of this part.
(3) If the title defect is not corrected
within a reasonable time, as determined by HUD, the Secretary will,
after notice, reconvey the property to
the mortgagee and the mortgagee must

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Office of Assistant Secretary for Housing, HUD
reimburse the Secretary in accordance
with §§ 203.363 and 203.364 of this part.
[36 FR 24508, Dec. 22, 1971, as amended at 57
FR 47972, Oct. 20, 1992; 61 FR 36453, July 10,
1996]

§ 203.367 Contents of deed and supporting documents.
The deed and supporting accompanying documents shall be as follows:
(a) Deed. A deed conveying the property to the Federal Housing Commissioner. The deed shall:
(1) Contain covenants which warrant
title against acts of the grantor, and
all claiming by, through, or under said
grantor, if the grantor is the mortgagee or mortgagor; if the grantor is a
party other than the mortgagee or
mortgagor, the special warranty covenants may be limited or amended to
accord with the law of the particular
jurisdiction.
(2) Recite nominal consideration, if
such recital is adequate under the laws
of the State in which the property is
located or such other consideration as
may be necessary to support the deed.
(b) Maps or survey. A map or diagram
showing property location with reference to public streets or roads or a
survey, if available. When a part of the
property has been taken by condemnation proceedings or conveyance in lieu
of condemnation, a map or diagram
showing the part taken and the property remaining is required.
(c) Credit documents. The original
credit and security instruments, if
available or a deficiency judgment, if
any, duly assigned or endorsed by the
mortgagee, without recourse, to the
Commissioner.
§ 203.368 Claims without conveyance
procedure.
(a)(1) The requirements of this section apply to any insured mortgage
subject to this subpart which was either insured pursuant to:
(i) A conditional commitment issued
on or after November 30, 1983 or, as appropriate,
(ii) An application for mortgage insurance endorsement under the Single
Family Direct Endorsement Program,
as provided in § 203.255(b), where the
property appraisal report was signed by

§ 203.368

the mortgagee’s underwriter on or
after November 30, 1983.
(2) The requirements of this section
shall also apply to any other mortgages subject to this subpart where the
mortgagee elects to provide the notice
to HUD required by paragraph (d) of
this section.
(b) Notwithstanding the provisions of
paragraph (a) of this section, the requirements of this section do not apply
if the mortgaged property has been
damaged as set out in § 203.378.
(c) Nothing in this section shall affect any rights or obligations arising
under the procedures set forth in subpart C of this part.
(d) After initiating proceedings to
foreclose an insured mortgage within
the coverage of paragraph (a)(1) of this
section by judicial, statutory, or other
means authorized by the mortgage instrument, the mortgagee shall furnish
notice of the foreclosure to the Commissioner, containing such information
as shall be prescribed by the Commissioner, together with a copy of the notice of sale, on or before the date of
first publication, posting, or other notice. The mortgagee foreclosing an insured mortgage subject to this subpart
and within the coverage of paragraph
(a)(2) of this section may elect to become subject to this section by providing such notices to the Commissioner in accordance with the preceding sentence.
(e) Where notice of the foreclosure
sale is provided pursuant to paragraph
(d) of this section, the Commissioner
may elect to cause the mortgaged property to be appraised and to give written notice to the mortgagee, not less
than five days prior to the date of the
foreclosure sale, of the Commissioner’s
estimate of the fair market value of
the mortgaged property, less adjustments as the Commissioner may deem
appropriate (which may include, without limitation, the Commissioner’s estimate of holding costs and resale costs
that would be incurred if title to the
mortgaged property were conveyed to
the Commissioner). Such amount is referred to hereafter as the ‘‘Commissioner’s adjusted fair market value.’’

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§ 203.368

24 CFR Ch. II (4–1–06 Edition)

(f) If the Commissioner fails to provide notice of the Commissioner’s adjusted fair market value to the mortgagee not less than five days prior to
the scheduled date of foreclosure sale,
this section shall have no further application and §§ 203.355 through 203.367
shall apply: Provided, that a mortgagee
which receives the Commissioner’s notice at any time prior to the foreclosure sale may waive late receipt by
so notifying the Commissioner, in
which case this section shall apply.
(g) If the Commissioner provides notice of the Commissioner’s adjusted
fair market value in accordance with
paragraph (e) of this section the following shall be applicable:
(1) The mortgagee shall tender a bid
at the foreclosure sale in the amount of
the Commissioner’s adjusted fair market value.
(2) If the mortgagee acquires title to
the mortgaged property pursuant to a
bid at foreclosure sale in an amount
equal to the Commissioner’s adjusted
fair market value, the mortgagee may
elect to retain title to the property and
to file a claim for the insurance benefits computed as provided in § 203.401(b).
(3) If a party other than the mortgagee acquires title to the mortgaged
property either pursuant to a bid at
foreclosure sale or through the redemption of the property in an amount not
less than the Commissioner’s adjusted
fair market value, the mortgagee may
file a claim for the insurance benefits
computed as provided in § 203.401(b).
(4) If the mortgagee acquires title to
the mortgaged property pursuant to a
bid at foreclosure sale in an amount in
excess of the Commissioner’s adjusted
fair market value, the mortgagee is
deemed to have elected to retain title
to the property and is limited to filing
a claim for the insurance benefits computed as provided in § 203.401(b). In the
event the mortgagee can show good
cause for having bid an amount in excess of the Commissioner’s adjusted
fair market value, the Commissioner
may, at his discretion, waive the provisions of this subparagraph and allow
the mortgagee to convey title to the
Commissioner and file a claim for the
insurance benefits computed as provided in § 203.401(a). A mortgagee which
has elected to follow the provisions of

this section pursuant to paragraph
(a)(2) of this section and bids an
amount in excess of the Commissioner’s adjusted fair market value
shall not be subject to the provisions of
this subparagraph, and may elect to retain or convey title in filing a claim
for the insurance benefits.
(5) In any other case, the mortgagee
may file a claim for insurance benefits
only upon conveyance of title to the
mortgaged property to the Commissioner.
(h) If the Commissioner provides
timely notice of the Commissioner’s
adjusted fair market value in accordance with paragraph (e), the Commissioner may require the mortgagee to
advertise the upcoming sale in addition
to the standard legal notices which
may be required by state law.
(i) Where a mortgagee files a claim
for the insurance benefits without conveying title to the property to the
Commissioner, as authorized by this
section:
(1) Sections 203.358 through 203.367
shall not be applicable.
(2) The mortgagee shall assign to the
Commissioner, without recourse or
warranty, any or all claims which the
mortgagee has acquired in connection
with the mortgage transaction and as a
result of the foreclosure proceedings or
other means by which the mortgagee
or party other than the mortgagee acquired such property, except such
claims as may have been released with
the approval of the Commissioner.
(3) The mortgagee shall forward to
the Commissioner:
(i) Fiscal data pertaining to the
mortgage transaction;
(ii) The original credit and security
instruments, if available, or a deficiency judgment, if any, duly assigned
or endorsed by the mortgagee, without
recourse, to the Commissioner; and
(iii) Any additional information or
data which the Commissioner may require.
(4) The mortgagee shall retain all
cash amounts held or deposited for the
account of the mortgagor or to which
the mortgagee is entitled under the
mortgage transaction that have not
been applied in reduction of the principal mortgage indebtedness. Cash

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Office of Assistant Secretary for Housing, HUD
amounts shall be itemized and deducted from the claim pursuant to
§ 203.403. Receipts for disbursements are
to be retained by the mortgagee and
are to be made available upon request
by the Commissioner.
(5) The mortgagee shall file its claim:
(i) Within 30 days after the mortgagee acquired good marketable title
to the property; or
(ii) Within 30 days after a party other
than the mortgagee acquired good marketable title to the property; or
(iii) In redemption States, within 30
days after the mortgagor or another
party redeemed the property or the redemption period has expired; or
(iv) Within such other time as may
be determined by the Commissioner.
(6) In any case in which the insurance
benefits paid include, pursuant to
§ 203.402(c), hazard insurance premiums
paid by the mortgagee, the portion of
the hazard insurance premium allocable to the period after acquisition of
title by the mortgagee or a third party
shall be deducted from the mortgage
insurance benefits otherwise payable.
(Approved by the Office of Management and
Budget under control number 2502–0347)
[52 FR 1327, Jan. 13, 1987, as amended at 61
FR 36453, July 10, 1996]

§ 203.369 Deficiency judgments.
(a) Mortgages insured on or after
March 28, 1988. (1) For mortgages insured pursuant to firm commitments
issued on or after March 28, 1988, or
pursuant to direct endorsement processing where the credit worksheet was
signed by the mortgagee’s underwriter
on or after March 28, 1988, the Secretary may require the mortgagee diligently to pursue a deficiency judgment
in connection with any foreclosure.
With respect to claims filed for insurance benefits on such mortgages, any
judgment obtained by the mortgagee
must be assigned to the Secretary.
(2) In cases where the Secretary requires the pursuit of a deficiency judgment and provides the mortgagee with
the Secretary’s estimate of the fair
market value of the property, less adjustments,
in
accordance
with
§ 203.368(e) of this part, the mortgagee
must tender a bid at the foreclosure
sale in that amount, and must take all
other appropriate steps in accordance

§ 203.370

with State law to obtain a deficiency
judgment.
(b) Mortgages insured before March 28,
1988. For mortgages insured pursuant
to firm commitments issued before
March 28, 1988, or pursuant to direct
endorsement processing where the
credit worksheet was signed by the
mortgagee’s underwriter before March
28, 1988, the Secretary may request
that the mortgage diligently pursue a
deficiency judgment in connection
with the foreclosure. With respect to
claims filed for insurance benefits on
such mortgages, any judgment obtained by the mortgagee must be assigned to the Secretary.
(c) In cases where pursuit of a deficiency judgment is requested or required under this section, the Commissioner, where the Commissioner determines it appropriate under State law
requirements, may extend the otherwise applicable period of time within
which a deficiency judgment (and other
claims against the mortgagor) and related credit documents must be assigned to the Commissioner under
§ 203.360, § 203.367 or § 203.368 of this subpart.
(d) In addition to meeting the requirements of § 203.356, in cases where
the Commissioner determines it necessary because of State law requirements, the Commissioner may also require (or request, as the Commissioner
may determine) the mortgagee to provide the Commissioner with notice of
the mortgagee’s intent to institute
foreclosure proceedings a reasonable
amount of time before proceedings are
instituted, in order that the Commissioner may be able effectively to require or request the mortgagee, in appropriate cases, to seek a deficiency
judgment.
(The information collection requirements
contained in this section have been approved
by the Office of Management and Budget
under control number 2535–0093)
[53 FR 4387, Feb. 16, 1988, as amended at 57
FR 47972, Oct. 20, 1992; 61 FR 36453, July 10,
1996]

§ 203.370 Pre-foreclosure sales.
(a) General. HUD will pay FHA insurance benefits to mortgagees in cases
where, in accordance with all regulations and procedures applicable to pre-

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§ 203.370

§ 203.370 Pre-foreclosure sales.
(a) General. HUD will pay FHA insurance benefits to mortgagees in cases
where, in accordance with all regulations and procedures applicable to pre-

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§ 203.371

24 CFR Ch. II (4–1–06 Edition)

foreclosure sales, the mortgaged property is sold by the mortgagor, after default and prior to foreclosure, at its current fair market value (less adjustments as the Commissioner may deem
appropriate) but for less than the mortgage loan amount currently outstanding.
(b) Notification of mortgagor. The
mortgagee shall give notice, according
to prescribed procedures, of the opportunity to be considered for the preforeclosure sale procedure to each
mortgagor in default. All notices to
mortgagors must be in an accessible
format, if requested, or if required by
the person’s known disability, as required by 24 CFR part 9.
(c) Eligibility for the Pre-foreclosure
Sale Procedure. In order to be considered for the pre-foreclosure sale procedure, a mortgagor:
(1) Must be an owner occupant in a
single family residence that is security
for a mortgage insured under this part,
unless otherwise prescribed by the Secretary.
(2) Must have an account in default,
for such period as determined by the
Secretary, which default is the result
of an adverse and unavoidable financial
situation.
(3) Must have, at the time application is made to pursue a pre-foreclosure sale, a mortgaged property
whose current fair market value, compared to the amount needed to discharge the mortgage, meets the criterion established by the Secretary,
unless a variance is granted by the Secretary.
(4) Must have received homeownership counseling, as defined by the Secretary, and have executed a certification to that effect.
[59 FR 50144, Sept. 30, 1994, as amended at 61
FR 35018, July 3, 1996]

§ 203.371

Partial claim.

(a) General. Notwithstanding the conveyance, sale or assignment requirements for payment of a claim elsewhere in this part, HUD will pay partial FHA insurance benefits to mortgagees after a period of forbearance, the
maximum length of which HUD will
prescribe, and in accordance with this
section.

(b) Requirements. The following conditions must be met for payment of a
partial claim:
(1) The mortgagor has been delinquent for at least 4 months or such
other time prescribed by HUD;
(2) The amount of the arrearage has
not exceeded the equivalent of 12
monthly mortgage payments;
(3) The mortgagor is able to resume
making full monthly mortgage payments;
(4) The mortgagor is not financially
able to make sufficient additional payments to repay the arrearage within a
time specified by HUD; and
(5) The mortgagor is not financially
qualified to support monthly mortgage
payments on a modified mortgage or
on a refinanced mortgage in which the
total arrearage is included.
(c) Repayment of the subordinate lien.
The mortgagor must execute a mortgage in favor of HUD with terms and
conditions acceptable to HUD for the
amount of the partial claim under
§ 203.414(a). HUD may require the mortgagee to be responsible for servicing
the subordinate mortgage on behalf of
HUD.
(d) Application for insurance benefits.
Along with the prescribed application
for partial claim insurance benefits,
the mortgagee shall forward to HUD
the original credit and security instruments required by paragraph (c) of this
section.
[61 FR 35018, July 3, 1996, as amended at 62
FR 60130, Nov. 6, 1997]

CONDITION OF PROPERTY
§§ 203.375–203.376

[Reserved]

§ 203.377 Inspection and preservation
of properties.
The mortgagee, upon learning that a
property subject to a mortgage insured
under this part is vacant or abandoned,
shall be responsible for the inspection
of such property at least monthly, if
the loan thereon is in default. When a
mortgage is in default and a payment
thereon is not received within 45 days
of the due date, and efforts to reach the
mortgagor by telephone within that period have been unsuccessful, the mortgagee shall be responsible for a visual
inspection of the security property to

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Office of Assistant Secretary for Housing, HUD
determine whether the property is vacant. The mortgagee shall take reasonable action to protect and preserve
such security property when it is determined or should have been determined
to be vacant or abandoned until its
conveyance to the Secretary, if such
action does not constitute an illegal
trespass. ‘‘Reasonable action’’ includes
the commencement of foreclosure
within the time required by § 203.355(b)
of this part.
[57 FR 47972, Oct. 20, 1992]

§ 203.378

Property condition.

(a) Condition at time of transfer. When
the property is transferred, or a mortgage is assigned to the Commissioner,
the property shall be undamaged by
fire, earthquake, flood, or tornado, except as set forth in this subpart.
(b) Damage to property by waste. The
mortgagee shall not be liable for damage to the property by waste committed by the mortgagor, its heirs, successors or assigns in connection with
mortgage insurance claims paid on or
after July 2, 1968.
(c) Mortgagee responsibility. The mortgagee shall be responsible for:
(1) Damage by fire, flood, earthquake,
hurricane, or tornado;
(2) Damage to or destruction of security properties on which the loans are
in default and which properties are vacant or abandoned, when such damage
or destruction is due to the mortgagee’s failure to take reasonable action
to inspect, protect and preserve such
properties as required by § 203.377 of
this part, as to all mortgages insured
on or after January 1, 1977; and
(3) As to all 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, any damage of whatsoever nature that the property has sustained
while in the possession of the mortgage
if the property is conveyed to the Secretary without notice to and approval
by the Secretary as required by § 203.379
of this part.
(d) Limitation. The mortgagee’s responsibility for property damage shall

§ 203.379

not exceed the amount of its insurance
claim as to a particular property.
[36 FR 34508, Dec. 22, 1971. Redesignated and
amended at 41 FR 49735, Nov. 10, 1976; 57 FR
47973, Oct. 20, 1992; 58 FR 32057, June 8, 1993;
61 FR 36265, July 9, 1996; 61 FR 36453, July 10,
1996]

§ 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 § 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

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§ 203.378

Property condition.

§ 203.379

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§ 203.378

Property condition.

§ 203.379

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§ 203.380

24 CFR Ch. II (4–1–06 Edition)

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 § 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 § 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
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 Statelicensed 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 § 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 §§ 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]

§ 203.380
tion.

Certificate of property condi-

(a) The mortgagee shall either:
(1) Certify that as of the date of the
filing of deed for record, or assignment
of the mortgage to the Secretary, the
property was:
(i) Undamaged by fire, flood, earthquake, hurricane or tornado; and
(ii) As to mortgages insured or for
which commitments to insure were
issued on or after January 2, 1977,
undamaged due to failure of the mortgagee to take action as required by
§ 203.377; and
(iii) As to mortgages insured under
firm commitments issued on or after
November 19, 1992, or under direct endorsement processing where the credit

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Office of Assistant Secretary for Housing, HUD
worksheet was signed by the mortgagee’s underwriter on or after November
19, 1992, undamaged while the property
was in the possession of the mortgage;
or
(2) Attach to its claim a copy of the
Secretary’s authorization to convey
the property in damaged condition.
(b) In the absence of evidence to the
contrary, the mortgagee’s certificate
or description of the damage shall be
accepted by the Secretary as establishing the condition of the property,
as of the date of the filing of the deed
or assignment of the mortgage.
[57 FR 47973, Oct. 20, 1992, as amended at 61
FR 36265, July 9, 1996; 61 FR 36453, July 10,
1996]

§ 203.381

Occupancy of property.

The mortgagee shall certify that the
property is vacant and contains no personal property as of the date of filing
for record of the deed to the Secretary
or that the Secretary has consented to
accept the property occupied.
[45 FR 59563, Sept. 10, 1980]

§ 203.382 Cancellation of hazard insurance.
The mortgagee shall cancel any hazard insurance policy as of the date of
the filing for record of the deed to the
Commissioner subject to the following
conditions:
(a) The amount of the return premium due the mortgagee because of
such cancellation may be calculated on
a ‘‘short-rate’’ basis and reported on
fiscal data supporting the application
for debentures and the amount shall be
deducted from the total amount
claimed.
(b) If the mortgagee’s calculation of
the return premium is less than the actual return, the amount of the difference between the actual refund and
the calculated amount shall be remitted to the Commissioner, accompanied
by the carrier’s or agent’s statement.
(c) If the mortgagee’s calculation of
the return premium is more than the
actual return, the mortgagee may file
with the Commissioner a claim, supported by the carrier’s or agent’s statement of the amount of the refund,
whereupon the Commissioner shall

§ 203.385

issue a check to the mortgagee in settlement of the claim.
PROPERTY TITLE TRANSFERS AND TITLE
WAIVERS
§ 203.385 Types of satisfactory title evidence.
The following types of title evidence
shall be satisfactory to the Commissioner:
(a) Fee or owner’s title policy. A fee or
owner’s policy of title insurance, a
guaranty or guarantee of title, or a
certificate of title, issued by a title
company, duly authorized by law and
qualified by experience to issue such
instruments. If an owner’s policy of
title insurance is furnished, it shall
show title in the Commissioner and
inure to the benefit of his successors in
office.
(b) Mortgagee’s policy of title insurance. A mortgagee’s policy of title insurance supplemented by an Abstract
and an Attorney’s Certificate of Title
covering the period subsequent to the
date of the mortgage, the terms of the
policy shall be such that the liability
of the title company will continue in
favor of the Commissioner after title is
conveyed to him. The policy may be
drawn in favor of the mortgagee and
the Federal Housing Commissioner, ‘‘as
their interests may appear’’, with the
consent of the title company endorsed
thereon;
(c) Abstract and legal opinion. An abstract of title prepared by an abstract
company or individual engaged in the
business of preparing abstracts of title
and accompanied by the legal opinion
as to the quality of such title signed by
an attorney at law experienced in examination of titles. If title evidence
consists of an Abstract and an Attorney’s Certificate of Title, the search
shall extend for at least forty years
prior to the date of the Certificate to a
well recognized source of good title;
(d) Torrens of similar certificate. A
Torrens or similar title certificate; or
(e) Title standard of U.S. or State government. Evidence of title conforming
to the standards of a supervising
branch of the Government of the
United States or of any State or Territory thereof.

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§ 203.381

Occupancy of property.

§ 203.385

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§ 203.386

24 CFR Ch. II (4–1–06 Edition)

§ 203.386 Coverage of title evidence.
Evidence of title shall be executed as
of a date to include the recordation of
the deed to the Commissioner. The evidence of title shall show that according
to the public records, there are not, at
such date, any outstanding prior liens,
including any past-due and unpaid
ground rents, general taxes or special
assessments.
§ 203.387 Acceptability of customary
title evidence.
If the title and title evidence are
such as to be acceptable to prudent
lending institutions and leading attorneys generally in the community in
which the property is situated, such
title and title evidence shall be satisfactory to the Secretary and shall be
considered as good and marketable. In
cases of disagreement, the Secretary
will make the final decision.
[57 FR 47974, Oct. 20, 1992]

§ 203.389 Waived title objections.
The Commissioner shall not object to
title by reason of the following matters:
(a) Violations of a restriction based
on race, color or creed, even where
such restriction provides for a penalty
of reversion or forfeiture of title or a
lien for liquidated damage.
(b)(1) Customary easements for public utilities, party walls, driveways,
and other purposes.
(2) Easements for public utilities
along one or more of the property lines
and extending not more than 10 feet
therefrom and for drainage or irrigation ditches along the rear 10 feet of
the property, provided the exercise of
the rights thereunder do not interfere
with any of the buildings or improvements located on the subject property.
(c) Easements for underground conduits which are in place and do not extend under any buildings on the subject
property;
(d) Mutual easements for joint driveways constructed partly on the subject
property and partly on adjoining property, provided the agreements creating
such easements are of record;
(e) Encroachments on the subject
property by improvements on adjoining
property where such encroachments do

not exceed 1 foot, provided such encroachments do not touch any buildings or interfere with the use of any
improvements on the subject property;
(f) Encroachments on adjoining property by eaves and overhanging projections attached to improvements on
subject property where such encroachments do not exceed 1 foot.
(g) Encroachments on adjoining property by hedges, wooden or wire fences
belonging to the subject property;
(h) Encroachments on adjoining property by driveways belonging to subject
property where such encroachments do
not exceed 1 foot, provided there exists
a clearance of at least 8 feet between
the buildings on the subject property
and the property line affected by the
encroachment;
(i) Variations between the length of
the subject property lines as shown on
the application for insurance and as
shown by the record or possession
lines, provided such variations do not
interfere with the use of any of the improvements on the subject property
and do not involve a deficiency of more
than 2 percent with respect to the
length of the front line or more than 5
percent with respect to the length of
any other line;
(j) Encroachments by garages or improvements other than those which are
attached to or a portion of the main
dwelling structure over easements for
public utilities, provided such encroachment does not interfere with the
use of the easement or the exercise of
the rights of repair and maintenance in
connection therewith;
(k) Violations of cost or set back restrictions which do not provide a penalty of reversion or forfeiture of title,
or a lien for liquidated damages which
may be superior to the lien of the insured mortgage. Violations of such restrictions which do provide for such
penalties, provided such penalty rights
have been duly released or subordinated to the lien of the insured mortgage, or provided a policy of title insurance is furnished expressly insuring
the Commissioner against loss by reason of such penalties.
(l) Customary building and use restrictions which:

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Office of Assistant Secretary for Housing, HUD
(1) Are coupled with a reversionary
clause, provided there has been no violation prior to the date of the deed to
the Commissioner; or
(2) Are not coupled with a reversionary clause and have not been violated to a material extent.
(m) Outstanding oil, water or mineral
rights (or damage caused by the exercise of such rights) which are customarily waived by prudent leading institutions and leading attorneys in the
community.
(n) The voluntary or involuntary
conveyance of a part of the subject
property pursuant to condemnation
proceedings or in lieu of condemnation
proceedings, if:
(1) The part conveyed does not exceed
10 percent by area of the property;
(2) No damage to existing structures,
improvements, or unrepaired damage
to sewage, water, or paving has been
suffered;
(3) All of the payment received as
compensation for the taking by condemnation or conveyance in lieu of
condemnation has been applied to reduction of the mortgage indebtedness;
(4) The conveyance occurred subsequent to insurance of the mortgage;
and
(5) There is included with the documents and information furnished the
Commissioner with the application for
insurance benefits, a statement by the
mortgagee that the requirements of
this paragraph have been met.
(o) Federal tax liens and rights of redemption arising therefrom if the following conditions are observed. If the
mortgagee acquires the property by
foreclosure the mortgagee shall give
notice to the Internal Revenue Service
(IRS) of the foreclosure action. The
Commissioner will not object to an
outstanding right of redemption in IRS
if: (1) The Federal tax lien was perfected subsequent to the date of the
mortgage lien, and (2) The mortgagee
has bid an amount sufficient to make
the mortgagee whole if the property is
in fact redeemed by the IRS.
[36 FR 34508, Dec. 22, 1971, as amended at 41
FR 49736, Nov. 10, 1976]

§ 203.390

§ 203.390 Waiver of title—mortgages or
property formerly held by the Secretary.
(a) Mortgages sold by the Secretary. (1)
If the Secretary sells a mortgage and
such mortgage is later reassigned to
him or the property covered by such
mortgage is later conveyed to him, he
will not object to title by reason of any
lien or other adverse interest that was
senior to the mortgage on the date of
the original sale of such mortgage.
(2) The Secretary will accept an assignment of a mortgage previously sold
by him, where the mortgagee is unable
to complete foreclosure because of a
defect in the mortgage instrument, a
defect in the mortgage transaction, or
a defect in title which existed at or
prior to the time the mortgage assignment was filed for record. In such instances, the Secretary will not object
to title by reason of any such defect.
(b) Property sold by the Secretary. (1) If
a property held by the Secretary is sold
by the Secretary who also insures a
mortgage financing the sale, and the
mortgage is later reassigned to the
Secretary or the property covered by
the mortgage is later conveyed to the
Secretary, the Secretary will not object to title by reason of any lien or
other adverse interest that was senior
to the mortgage on the date the mortgage was filed for record, except where
the lien or other adverse interest arose
from a lien or interest that had already
been recorded against the mortgagor.
(2) The Secretary will accept an assignment of a mortgage executed in
connection with the sale of property by
the Secretary, where the mortgagee is
unable to complete foreclosure because
of a defect in the mortgage instrument,
a defect in the mortgage transaction,
or a defect in title which existed at or
prior to the time the mortgage was
filed for record, except where the defect arose from a lien or interest that
had already been recorded against the
mortgagor on the date that the mortgage was filed for record. Except for
the case of a lien or interest that had
already been recorded against the

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Office of Assistant Secretary for Housing, HUD
items set forth in § 203.402 and subtracting therefrom all applicable items
set forth in § 203.403; provided, however,
that appropriate adjustment shall be
made for any such items covered by the
proceeds of the foreclosure sale.
(3) If the mortgagee acquires title to
the mortgaged property pursuant to a
bid not less in amount than the Commissioner’s adjusted fair market value,
and the mortgagor or another party redeems the property, the amount of the
insurance benefits shall be determined
by deducting the amount paid to redeem the property and received by the
mortgagee from the original principal
balance of that mortgage (as increased
by the amount of open-end advances
made by the mortgagee and approved
by the Commissioner) which was unpaid on the date of the institution of
foreclosure proceedings, and adding to
the difference, if any, all applicable
items set forth in § 203.402 and subtracting therefrom all applicable items
set forth in § 203.403; provided however,
that appropriate adjustments shall be
made for any such items covered by
that amount paid by the mortgagor or
other party to redeem the property.
(c) Pre-foreclosure Sales. Where a
claim for insurance benefits is filed in
accordance with this subpart, based on
a pre-foreclosure sale approved by or
on behalf of the Secretary (under the
provisions of § 203.370), the amount of
insurance benefits shall be computed
by adding to the original principal balance of the mortgage (as increased by
the amount of open-end advances made
by the mortgagee and approved by the
Commissioner) which was unpaid on
the date of closing of the pre-foreclosure sale, the amount of all applicable items set forth in § 203.402; provided
however that appropriate adjustment
shall be made for any such items covered by proceeds of the pre-foreclosure
sale.
(d) Final Payment. (1) The mortgagee
may not file for any additional payments of its mortgage insurance claim
after six months from payment by the
Commissioner of the final payment except for:
(i) Cases where the Commissioner requests or requires a deficiency judgment.

§ 203.402

(ii) Other cases where the Commissioner determines it appropriate and
expressly authorizes an extension of
time.
(2) For the purpose of this section,
the term final payment shall mean, in
the case of claims filed for conveyed
properties, the payment under subpart
B of this part which is made by the
Commissioner based upon the submission by the mortgagee of all required
documents and information filed pursuant to § 203.365. In the case of claims
filed under claims without conveyance
of title, final payment shall mean the
payment which is made by the Commissioner based upon submission by
the mortgagee of all required documents and information filed pursuant
to §§ 203.368 and 203.401(b). In the case of
claims filed pursuant to pre-foreclosure
sales, final payment shall mean the payment which is made by the Commissioner based upon submission by the
mortgagee of all required documents
and information filed pursuant to
§§ 203.370 and 203.401(d).
[52 FR 1328, Jan. 13, 1987, as amended at 56
FR 3215, Jan. 29, 1991; 59 FR 50144, Sept. 30,
1994]

§ 203.402 Items included in payment—
conveyed and non-conveyed properties.
The insurance benefits paid in connection with foreclosed properties,
whether or not conveyed to the Commissioner; and those properties conveyed to the Commissioner as a result
of a deed in lieu of foreclosure; and
those properties sold under an approved pre-foreclosure sale shall include the following items:
(a) Taxes, ground rent and water
rates, which are liens prior to the
mortgage;
(b) Special assessments, which are
noted on the application for insurance
or which become liens after the insurance of the mortgage.
(c) Hazard insurance premiums on
the mortgaged property not in excess
of a reasonable rate as defined in
§ 203.379(a)(4).
(d) Periodic MIP or open-end insurance charges;
(e) Taxes imposed upon any deeds or
other instruments by which said property was acquired by the mortgagee

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§ 203.402

24 CFR Ch. II (4–1–06 Edition)

and transferred or conveyed to the
Commissioner, or was acquired by the
mortgagee and retained pursuant to
§ 203.368;
(f) Foreclosure costs or costs of acquiring the property otherwise (including costs of acquiring the property by
the mortgagee and of conveying and
evidencing title to the property to
HUD, but not including any costs borne
by the mortgagee to correct title defects) actually paid by the mortgagee
and approved by HUD, in an amount
not in excess of two-thirds of such
costs or $75, whichever is the greater.
For mortgages insured on or after February 1, 1998, the Secretary will reimburse a percentage of foreclosure costs
or costs of acquiring the property,
which percentage shall be determined
in accordance with such conditions as
the Secretary shall prescribe. Where
the foreclosure involves a mortgage
sold by the Secretary on or after August 1, 1969, or a mortgage executed in
connection with the sale of property by
the Secretary on or after such date, the
mortgagee shall be reimbursed (in addition to the amount determined under
the foregoing) for any extra costs incurred in the foreclosure as a result of
a defect in the mortgage instrument,
or a defect in the mortgage transaction
or a defect in title which existed at or
prior to the time the mortgage (or its
assignment by the Secretary) was filed
for record, if the mortgagee establishes
to the satisfaction of the Commissioner
that such extra costs are over and
above those customarily incurred in
the area.
(g)(1) For mortgages insured under firm
commitments issued before November 19,
1992, or under direct endorsement processing where the credit worksheet was
signed by the mortgagee’s underwriter before November 19, 1992, reasonable payments made by the mortgagee, with
the approval of the Secretary, for the
purpose of protecting, operating, or
preserving the property, or removing
debris from the property.
(2) 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, reasonable
payments made by the mortgagee, with

the approval of the Secretary, for the
purpose of protecting, operating, or
preserving the property, or removing
debris from the property prior to the
time of conveyance required by § 203.359
of this part.
(3) Reasonable costs for performing
the inspections required by § 203.377 of
this part and to determine if the property is vacant or abandoned are considered to be costs of protecting, operating or preserving the property.
(h) Any uncollected mortgage interest allowed pursuant to an approved
forbearance plan;
(i) An amount which the Commissioner finds to be sufficient to compensate the mortgagee for any loss
which it may have sustained on account of interest on debentures and the
payment of any MIP and open-end insurance charge by reason of its having
postponed the institution of foreclosure proceedings or the acquisition
of the property by other means under a
mortgage to which the provisions of
sections 302 and 306 of the Soldiers’ and
Sailors’ Civil Relief Act of 1940, as
amended, apply during any part or all
of the period of the mortgagor’s military service and three months thereafter;
(j) Charges for the administration,
operation, maintenance or repair of
community-owned property or the
maintenance and repair of the mortgaged property paid by the mortgagee
with respect to which it certifies to the
Secretary that payment was made for
the purpose of discharging an obligation arising out of a covenant filed for
record and approved by the Secretary
prior to the issuance of the mortgage;
and charges for the repair of the mortgaged property required by and in an
amount authorized by the Secretary
under § 203.379 of this part;
(k)(1) For properties conveyed to the
Secretary, an amount equivalent to the
debenture interest which would have
been earned, as of the date such payment is made, on the portion of the insurance benefits paid in cash, if such
portion had been paid in debentures,
except that:
(i) When the mortgagee fails to meet
any one of the applicable requirements
of §§ 203.355, 203.356(b), 203.359, 203.360,
203.365, 203.606(b)(1), or 203.366 within

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Office of Assistant Secretary for Housing, HUD
the specified time and in a manner satisfactory to the Secretary (or within
such further time as the Secretary may
approve in writing), the interest allowance in such cash payment shall be
computed only to the date on which
the particular required action should
have been taken or to which it was extended;
(ii) When the mortgagee fails to meet
the requirements of § 203.356(a) of this
part within the specified time and in a
manner satisfactory to the Secretary
(or within such further time as the
Secretary may approve in writing), the
interest allowance in such cash payment shall be computed to a date set
administratively by the Secretary.
(2) Where a claim for insurance benefits is being paid without conveyance
of title to the Commissioner in accordance with § 203.368, an amount equivalent to the sum of:
(i) The debenture interest which
would have been earned, as of the date
the mortgagee or a party other than
the mortgagee acquires good marketable title to the mortgaged property,
on an amount equal to the amount by
which an insurance claim determined
in accordance with §203.401(a) exceeds
the amount of the actual claim being
paid in debentures; plus
(ii) The debenture interest which
would have been earned, from the date
the mortgagee or a party other than
the mortgagee acquires good marketable title to the mortgaged property to
the date when payment of the claim is
made, on the portion of the insurance
benefits paid in cash if such portion
had been paid in debentures, except
that if the mortgagee fails to meet any
of the applicable requirements of
§§ 203.355, 203.356, 203.368(i) (3) and (5) of
this chapter within the specified time
and in a manner satisfactory to the
Commissioner (or within such further
time as the Commissioner may approve
in writing), the interest allowance in
such cash payment shall be computed
only to the date on which the particular required action should have
been taken or to which it was extended.
(3) Where a claim for insurance benefits is being paid following a pre-foreclosure sale, without foreclosure or
conveyance to the Commissioner in ac-

§ 203.402

cordance with § 203.370, an amount
equivalent to the sum of:
(i) The debenture interest which
would have been earned, as of the date
of the closing of the pre-foreclosure
sale, on an amount equal to the
amount by which an insurance claim
determined
in
accordance
with
§ 203.401(a) exceeds the amount of the
actual claim being paid in debentures;
plus
(ii) The debenture interest which
would have been earned, from the date
of the closing of the pre-foreclosure
sale to the date when payment of the
claim is made, on the portion of the insurance benefits paid in cash if such
portion had been paid in debentures,
except that if the mortgagee fails to
meet any of the applicable requirements of § 203.365 within the specified
time and in a manner satisfactory to
the Commissioner (or within such further time as the Commissioner may approve in writing), the interest allowance in such cash payment shall be
computed only to the date on which
the particular required action should
have been taken or to which it was extended.
(l) Reasonable costs of appraisal
under § 203.368(e) or pursuant to
§ 203.370;
(m) Costs of additional advertising
under 203.368(h);
(n) Costs of foreclosure as computed
in paragraph (f) of this section where
the acquiring party is one other than
the mortgagee, as provided in § 203.368;
(o) In any case in which the Commissioner, pursuant to § 203.369, requires or
requests that the mortgagee seek a deficiency judgment, an amount necessary to reimburse the mortgagee for
those additional costs incurred that exceed the costs of foreclosure. In those
jurisidictions that require the initiation of a judicial foreclosure action in
order to obtain a deficiency judgment,
a mortgagee shall receive full reimbursement for the costs of the foreclosure action, where, but for the requested deficiency judgment, judicial
foreclosure would not have been necessary.
(p) An amount approved by HUD and
paid to the mortgagor as consideration
for the execution of a deed in lieu of
foreclosure and, if authorized by HUD,

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§ 203.402a

24 CFR Ch. II (4–1–06 Edition)

an administrative fee approved by HUD
paid to the mortgagee for its role in facilitating a successful deed in lieu of
foreclosure, not to be subject to the
payment of debenture interest thereon.
(q) Reasonable costs incurred in
evicting occupants and in removing
personal property from acquired properties;
(r) Notwithstanding any other provision in this section, the mortgagee will
not be reimbursed for any expenses incurred in connection with the property
after a reconveyance from the Secretary to the mortgagee as provided in
§ 203.363(b) of this part.
(s) Reasonable costs of the title
search ordered by the mortgagee, in accordance with procedures prescribed by
HUD, to determine the status of a
mortgagor meeting all other criteria
for approval to participate in the preforeclosure sale procedure, or to determine if a mortgagor meets the criteria
for approval of the mortgagee’s acceptance of a deed in lieu of foreclosure.
(t) The administrative fee as authorized by the Secretary and payable to
the mortgagee for its role in facilitating a successful pre-foreclosure sale,
said fee not to be subject to the payment of debenture interest thereon.
[36 FR 34508, Dec. 22, 1971, as amended at 41
FR 49736, Nov. 10, 1976; 45 FR 56801, Aug. 6,
1980; 48 FR 28806, June 23, 1983; 51 FR 28551,
Aug. 8, 1986; 52 FR 1329, Feb. 13, 1987; 53 FR
4388, Feb. 16, 1988; 57 FR 47974, Oct. 20, 1992;
59 FR 50145, Sept. 30, 1994; 61 FR 35018, July
3, 1996; 61 FR 36266, July 9, 1996; 61 FR 36453,
July 10, 1996; 62 FR 60130, Nov. 6, 1997]

§ 203.402a Reimbursement for uncollected interest.
The mortgagee shall be entitled to
receive an allowance in the insurance
settlement for unpaid mortgage interest if the mortgagor fails to meet the
requirements of a forbearance agreement entered into pursuant to § 203.614
and this failure continues for a period
of 60 days. The interest allowance shall
be computed to:
(a) The earliest of the applicable following dates, except as provided in
paragraph (b) of this section:
(1) The date of the initiation of foreclosure;
(2) The date of the acquisition of the
property by the mortgagee by means
other than foreclosure;

(3) The date the property was acquired by the Commissioner under a direct conveyance from the mortgagor;
(4) Ninety days following the date the
mortgagor fails to meet the requirements of the forbearance agreement, or
such other date as the Commissioner
may approve in writing prior to the expiration of the 90-day period; or
(5) The date the mortgagee sends the
mortgagor notice of eligibility to participate in the Pre-Foreclosure Sale
procedure; or
(b) The date foreclosure is initiated
or a deed in lieu is obtained, or the
date such actions were required by
§ 203.355(c), whichever is earlier, if the
commencement of foreclosure within
the time limits described in § 203.355(a),
(b), (g), or (h) is precluded by:
(1) The laws of the State in which the
mortgaged property is located; or
(2) Federal bankruptcy law.
[60 FR 57678, Nov. 16, 1995, as amended at 61
FR 35019, July 3, 1996]

§ 203.403 Items deducted from payment—conveyed and non-conveyed
properties.
There shall be deducted from the
total of the added items in §§ 203.401
and 203.402 the following cash items:
(a) All amounts recieved by the mortgagee on account of the mortgage after
the institution of foreclosure proceedings or the acquisition of the property by direct conveyance or otherwise
after default.
(b) All amounts received by the mortgagee from any source relating to the
property on account of rent or other
income after deducting reasonable expenses incurred in handling the property.
(c) All cash retained by the mortgagee including amounts held or deposited for the account of the mortgagor
or to which it is entitled under the
mortgage transaction that have not
been applied in reduction of the principal mortgage indebtedness.
(d) With regard to claims filed pursuant to successful pre-foreclosure sales,
all amounts received by the mortgagee
relating to the sale of the property.
[36 FR 24508, Dec. 22, 1971, as amended at 52
FR 1329, Jan. 13, 1987; 59 FR 50145, Sept. 30,
1994]

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§ 203.410

24 CFR Ch. II (4–1–06 Edition)

Commissioner shall prescribe. The debenture interest on the debentures
called for redemption shall cease on
the semiannual interest payment date
designated in the call notice. The Commissioner may include with the notice
of redemption an offer to purchase the
debentures at par plus accrued interest
at any time during the period between
the notice of redemption and the redemption date. If the debentures are
purchased by the Commissioner after
such call and prior to the named redemption date, the debenture interest
shall cease on the date of purchase.
§ 203.410 Issue date of debentures.
(a) Conveyed properties, claims without
conveyance, pre-foreclosure sales— Where
the property is conveyed to the Commissioner, or the mortgagee or other
party acquires title to the property
under the claim without conveyance
procedure or the pre-foreclosure sale
procedure, debenture shall be dated:
(1) If issued prior to September 2,
1964, or issued on or after such date and
a certificate of claim is also issued, as
of one of the dates as follows:
(i) The foreclosure proceedings were
instituted;
(ii) The property was otherwise acquired by the mortgagee after default;
(iii) The property was acquired by
the Commissioner, if directly conveyed
to the Commissioner from the mortgagor; or
(iv) The property was acquired after
default by a third party under the preforeclosure sale procedure.
(2) If issued on or after September 2,
1964, and a certificate of claim is not
issued, as of the date of default as defined in this part.
(3) As of the day after the date to
which mortgage interest is computed
as specified in § 203.402a, if the insurance settlement includes an allowance
for uncollected interest in connection
with a special forbearance.
(b) Assigned mortgages. Where the
mortgage is assigned to the Commissioner, debentures shall be dated as of
the date of the assignment.
(c) Notwithstanding paragraph (a) of
this section, in connection with conveyed properties and claims without
conveyance, debentures issued as reimbursement for expenditures made by a

mortgagee after the date of default
shall be dated as of the date the expenditure is actually made by the
mortgagee.
[36 FR 24508, Dec. 22, 1971, as amended at 50
FR 3892, Jan. 29, 1985; 52 FR 1329, Jan. 13,
1987; 59 FR 50145, Sept. 30, 1994; 60 FR 57678,
Nov. 16, 1995]

§ 203.411

Cash adjustment.

Any difference of less than $50 between the amount of debentures to be
issued to the mortgagee and the total
amount of the mortgagee’s claim, as
approved by the Commissioner, may be
adjusted by the issuance of a check in
payment thereof.
[59 FR 49816, Sept. 30, 1994]

§ 203.412 Payment for foreclosure alternative actions.
Notwithstanding the conveyance,
sale, or assignment requirements for
payment of a claim elsewhere in this
part, HUD may pay the mortgagee, in
accordance with procedures prescribed
by HUD, for the following foreclosure
alternative actions, in such amounts as
HUD determines:
(a) Assumptions under § 203.512;
(b)
Special
forbearance
under
§§ 203.471 and 203.614;
(c) Recasting or modification of defaulted mortgages under § 203.616,
where the mortgagee is not reimbursed
under § 203.405(a);
(d) Refinancing under § 203.43(c).
[61 FR 35019, July 3, 1996]

§ 203.413

[Reserved]

§ 203.414 Amount of payment—partial
claims.
(a) Claim amount. Where a claim for
partial insurance benefits is filed in accordance with § 203.371, the amount of
the insurance benefits shall consist of
the arrearage not to exceed an amount
equivalent to 12 monthly mortgage
payments, and any costs prescribed by
HUD related to the default.
(b) Servicing fee. The claim may also
include a payment for activities, such
as servicing the subordinate mortgage,
which HUD may require.
[61 FR 35019, July 3, 1996, as amended at 62
FR 60130, Nov. 6, 1997]

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Office of Assistant Secretary for Housing, HUD
CERTIFICATE OF CLAIM
§ 203.415 Delivery
claim.

§ 203.423

MUTUAL MORTGAGE INSURANCE FUND
AND DISTRIBUTIVE SHARES

certificate

(a) If the mortgage was accepted for
insurance pursuant to a commitment
issued prior to September 2, 1964, the
mortgagee may, by filing a written request with the application for debentures, receive in addition to the debentures and the cash adjustment check, a
certificate of claim issued in accordance with section 204(e) of the Act.
This certificate shall become payable
(if at all) as prescribed in section 204(f)
of the Act.
(b) If the mortgage was accepted for
insurance pursuant to a commitment
issued on or after September 2, 1964, or
under the Direct Endorsement, Lender
Insurance, or Coinsurance programs,
no certificate of claim will be issued.
[36 FR 24508, Dec. 22, 1971, as amended at 57
FR 58349, Dec. 9, 1992; 62 FR 30227, June 2,
1997]

§ 203.416 Amount and items of certificate of claim.
The certificate shall be for an
amount which the Commissioner determines to be sufficient to pay all
amounts due under the mortgage and
not covered by the amount of debentures and cash adjustment check. The
certificate shall include a reasonable
amount for necessary expenses incurred by the mortgagee in connection
with the foreclosure proceedings or the
acquisition of the mortgaged property
otherwise and the conveyance thereof
to the Commissioner, including reasonable attorneys’ fees, unpaid interest,
and cost of repairs to the property
made by the mortgagee to remedy the
waste.
§ 203.417 Rate of interest of certificate
of claim.
Each certificate of claim shall provide that there shall accrue to the
holder thereof with respect to the face
amount of such certificate, an increment at the rate of 3 percent per
annum.

§ 203.420 Nature of Mutual Mortgage
Insurance Fund.
The Mutual Mortgage Insurance
Fund shall consist of the General Surplus Account and the Participating Reserve Account.
§ 203.421 Allocation of Mutual Mortgage Insurance Fund income or
loss.
For any semiannual period in which
Mutual Mortgage Insurance operations
shall result in a net income, or loss,
the Commissioner shall allocate, after
taking into account the actuarial status of the entire Mutual Mortgage Insurance Fund, such net income or such
loss to the General Surplus Account
and/or to the Participating Reserve Account as the Commissioner may determine to be in accord with sound actuarial and accounting practice. In determining net income or loss, the Commissioner shall take into consideration
all income received from fees, premiums and earnings on investments of
the fund, operating expenses and provision for losses to the fund.
[56 FR 18948, Apr. 24, 1991]

§ 203.422 Right and liability under Mutual Mortgage Insurance Fund.
No mortgagor or mortgagee shall
have any vested right in a credit balance in either the General Surplus Account or the Participating Reserve Account. No mortgagor or mortgagee
shall be subject to any liability arising
under the mutuality of the Mutual
Mortgage Insurance Fund.
§ 203.423 Distribution of distributive
shares.
(a) The Commissioner may provide
for the distribution to the mortgagor
of a share of the participating reserve
account if the contract of insurance is
terminated by:
(1) Conveyance to one other than the
Commissioner and a claim for the insurance benefits is not presented by
the mortgage (§ 203.315), provided, however, in the case of a mortgage insured
pursuant to an application for a conditional commitment received on or
after May 19, 1988, (or, as appropriate,

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§ 203.616

24 CFR Ch. II (4–1–06 Edition)

forbearance relief to the mortgagor in
accordance with the conditions prescribed by HUD.
[61 FR 35020, July 3, 1996]

§ 203.616

Mortgage modification.

The mortgagee may modify a mortgage for the purpose of changing the
amortization provisions by recasting
the total unpaid amount due for a term
not exceeding 360 months. The mortgagee must notify HUD of such modification in a format prescribed by HUD
within 30 days of the execution of the
modification agreement.

(§ 203.43j) only if the default occurred
before the mortgagor and the lessee
execute a lease renewal or a new lease
either with a term of not less than five
years beyond the maturity date of the
mortgage, or with a term established
by an arbitration award.
(b) Claims through assignment. Before
a mortgagee requests the Secretary to
accept assignment under § 203.350(d) the
mortgagee must submit documents
showing that the requirements of
§ 203.604 have been met.
[53 FR 13405, Apr. 25, 1988, as amended at 61
FR 35020, July 3, 1996]

OCCUPIED CONVEYANCE

[62 FR 60130, Nov. 6, 1997]

MORTGAGES IN DEFAULT ON PROPERTY
LOCATED ON INDIAN RESERVATIONS
§ 203.664 Processing defaulted mortgages on property located on Indian
land.
Before a mortgagee requests that the
Secretary accept assignment under
§ 203.350(b) of a mortgage insured pursuant to section 248 of the National Housing Act (§ 203.43h), the mortgagee must
submit documents showing that the requirements of § 203.604 have been met.
[61 FR 35020, July 3, 1996]

MORTGAGES IN DEFAULT ON PROPERTY
LOCATED ON HAWAIIAN HOME LANDS
§ 203.665 Processing defaulted mortgages on property located on Hawaiian home lands.
Before a mortgagee requests the Secretary to accept assignment under
§ 203.350(c) of a mortgage insured pursuant to section 247 of the National Housing Act (§ 203.43i), the mortgagee must
submit documents showing that the requirements of § 203.604 have been met.
[61 FR 35020, July 3, 1996]

ASSIGNMENT AND FORBEARANCE—PROPERTY IN ALLEGANY RESERVATION OF
SENECA INDIANS
§ 203.666 Processing defaulted mortgages on property in Allegany Reservation of Seneca Nation of Indians.
(a) Applicability. This section applies
to mortgages authorized by section
203(q) of the National Housing Act

§ 203.670 Conveyance
of
occupied
property.
(a) It is HUD’s policy to reduce the
inventory of acquired properties in a
manner that expands homeownership
opportunities, strengthens neighborhoods and communities, and ensures a
maximum return to the mortgage insurance fund.
(b) The Secretary will accept conveyance of an occupied property containing one to four residential units if
the Secretary finds that:
(1) An individual residing in the property suffers from a temporary, permanent, or long-term illness or injury
that would be aggravated by the process of moving from the property, and
that the individual meets the eligibility criteria in § 203.674(a);
(2) State or local law prohibits the
mortgagee from evicting a tenant residing in the property who is making
regular monthly payments to the
mortgagor, or prohibits eviction for
other similar reasons beyond the control of the mortgagee; or
(3) It is in the Secretary’s interest to
accept conveyance of the property occupied under § 203.671, the property is
habitable as defined in § 203.673, and,
except
for
conveyances
under
§ 203.671(d), each occupant who intends
to remain in the property after the
conveyance meets the eligibility criteria in § 203.674(b).
(c) HUD consents to accept good marketable title to occupied property
where 90 days have elapsed since the
mortgagee notified HUD of pending acquisition, the Department has notified

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Office of Assistant Secretary for Housing, HUD
the mortgagee that it was considering
a request for continued occupancy, and
no subsequent notification from HUD
has been received by the mortgagee.
[53 FR 874, Jan. 14, 1988, as amended at 56 FR
46967, Sept. 16, 1991; 58 FR 54246, Oct. 20, 1993;
61 FR 36266, July 9, 1996]

§ 203.671 Criteria for determining the
Secretary’s interest.
It is in the Secretary’s interest to accept occupied conveyance when one or
more of the following are met:
(a) Occupancy of the property is essential to protect it from vandalism
from time of acquisition to the time of
preparation for sale.
(b) The average time in inventory for
HUD’s unsold inventory in the residential area in which the property is located exceeds six months.
(c) With respect to multi-unit properties, the marketability of the property would be improved by retaining
occupancy of one or more units.
(d) The high cost of eviction or relocation expenses makes eviction impractical.
[45 FR 59563, Sept. 10, 1980, as amended at 56
FR 46967, Sept. 16, 1991; 58 FR 54246, Oct. 20,
1993]

§ 203.672 Residential areas.
(a) For the purposes of occupied conveyance considerations, a residential
area is any area which constitutes a
local economic market for the purchase and sale of residential real estate. In making determinations of residential areas, substantial weight shall
be given to delineations of such areas
commonly used by persons active in
the real estate industry in the affected
area.
(b) HUD shall establish such residential areas within six (6) months of the
publication of these regulations when
HUD’s current established patterns of
dealing with the disposition of its acquired home property inventory and related recordkeeping does not coincide
with paragraph (a) of this section.
Under such circumstances the Secretary shall apply such established patterns in defining residential areas until
the standards in paragraph (a) of this
section are implemented.
[45 FR 59563, Sept. 10, 1980]

§ 203.673

§ 203.673
Habitability.

(a) For purposes of § 203.670, a property is habitable if it meets the requirements of this section in its
present condition, or will meet these
requirements with the expenditure of
not more than five percent of the fair
market value of the property. The cost
of hazard reduction or abatement of
lead-based paint hazards in the property, as required by the Lead-Based
Paint Poisoning Prevention Act (42
U.S.C. 4821–4846), and the Residential
Lead-Based Paint Hazard Reduction
Act of 1992 (42 U.S.C. 4851–4856), and implementing regulations in part 35 of
this title, is excluded from these repair
cost limitations.
(b)(1) Each residential unit must contain:
(i) Heating facilities adequate for
healthful and comfortable living conditions, taking into consideration the
local climate;
(ii) Adequate electrical supply for
lighting and for equipment used in the
residential unit;
(iii) Adequate cooking facilities;
(iv) A continuing supply of hot and
cold water; and
(v) Adequate sanitary facilities and a
safe method of sewage disposal.
(2) The property shall be structurally
sound, reasonably durable, and free
from hazards that may adversely affect
the health and safety of the occupants
or may impair the customary use and
enjoyment by the occupants. Unacceptable hazards include, but are not limited to, subsidence, erosion, flood, exposure to the elements, exposed or unsafe electrical wiring, or an accumulation of minor hazards, such as broken
stairs.
(c) If repairs, including lead-based
paint hazard reduction or abatement,
are to be made while the property is
occupied, the occupant must hold the
Secretary and the Department harmless against any personal injury or
property damage that may occur during the process of making repairs. If
temporary relocation of the occupant
is necessary during repairs, no reimbursement for relocation expenses will
be provided to the occupant.
[53 FR 874, Jan. 14, 1988, as amended at 64 FR
50225, Sept. 15, 1999]

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§ 203.673

§ 203.673
Habitability.

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§ 203.673

§ 203.673
Habitability.

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§ 203.673

§ 203.673
Habitability.

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§ 203.674

24 CFR Ch. II (4–1–06 Edition)

§ 203.674 Eligibility for continued occupancy.
(a) Occupancy because of temporary,
permanent, or long-term illness or injury of an individual residing in the
property will be limited to a reasonable time, to be determined by the Secretary on a case-by-case basis, and will
be permitted only if all the conditions
in this paragraph (a) are met:
(1) A timely request is made in accordance with § 203.676, including the
submittal of documents required in
§ 203.675(b)(4).
(2) The occupant agrees to execute a
month-to-month lease, at the time of
acquisition of the property by the Secretary and on a form prescribed by
HUD, and to pay a fair market rent as
determined by the Secretary. The rental rate shall be established on the basis
of rents charged for other properties in
comparable condition after completion
of repairs (if any).
(3) The occupant’s total housing cost
(rent plus utility costs to be paid by
the occupant) will not exceed 38 percent of the occupant’s net effective income (gross income less Federal income taxes). However, a higher percentage may be permitted if the occupant has been paying at least the required rental amount for the dwelling,
or if there are other compensating factors (e.g., where the occupant is able to
rely on cash savings or on contributions from family members to cover
total housing costs).
(4) The occupant agrees to allow access to the property (during normal
business hours and upon a minimum of
two days advance notice) by HUD Field
Office staff or by a HUD representative,
so that the property may be inspected
and any necessary repairs accomplished, or by a sales broker.
(5) The occupant discloses and
verifies Social Security Numbers, as
provided by part 200, subpart T, of this
chapter.
(b) An occupant who does not meet
the illness or injury criteria in paragraph (a) of this section is eligible for
continued occupancy only if all the
conditions in this paragraph (b) are
met:
(1) A timely request is made in accordance with § 203.676.

(2) The occupant agrees to execute a
month-to-month lease, at the time of
acquisition of the property by the Secretary and on a form prescribed by
HUD, to pay fair market rent as determined by the Secretary, and to pay the
rent for the first month in advance at
the time the lease is executed. The
rental rate shall be established on the
basis of rents charged for other properties in comparable condition after
completion of repairs (if any).
(3) The occupant will have been in occupancy at least 90 days before the
date the mortgagee acquires title to
the property.
(4) The occupant’s total housing cost
(rent plus utility costs to be paid by
the occupant) will not exceed 38 percent of the occupant’s net effective income (gross income less Federal income taxes). However, a higher percentage may be permitted if the occupant has been paying at least the required rental amount for the dwelling,
or if there are other compensating factors (e.g., where the occupant is able to
rely on cash savings or on contributions from family members to cover
total housing costs).
(5) The occupant agrees to allow access to the property (during normal
business hours and upon a minimum of
two days advance notice) by HUD Field
Office staff or by a HUD representative,
so that the property may be inspected
and any necessary repairs accomplished, or by a sales broker.
(6) The occupant discloses and
verifies Social Security Number, as
provided by part 200, subpart T, of this
chapter.
(Approved by the Office of Management and
Budget under control number 2502–0268)
[53 FR 874, Jan. 14, 1988, and 53 FR 8626, Mar.
16, 1988, as amended at 54 FR 39693, Sept. 27,
1989; 56 FR 46967, Sept. 16, 1991]

§ 203.675 Notice to occupants of pending acquisition.
(a) At least 60 days, but not more
than 90 days, before the date on which
the mortgagee reasonably expects to
acquire title to the property, the mortgagee shall notify the mortgagor and
each head of household who is actually
occupying a unit of the property of its
potential acquisition by HUD. The

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§ 203.674

24 CFR Ch. II (4–1–06 Edition)

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Office of Assistant Secretary for Housing, HUD
mortgagee shall send a copy of this notification to the appropriate HUD Field
Office.
(b) The notice shall provide a brief
summary of the conditions under
which continued occupancy is permissible and advise them that:
(1) Potential acquisition of the property by the Secretary is pending;
(2) The Secretary requires that properties be vacant at the time of conveyance to the Secretary, unless the mortgagor or other occupant can meet the
conditions for continued occupany in
§ 203.670, the habitability criteria in
§ 203.673, and the eligibility criteria in
§ 203.674;
(3) An occupant may request permission to remain in occupancy in the
event of acquisition of the property by
the Secretary by notifying the HUD
Field Office in writing, with any required documentation, within 20 days
of the date of the mortgagee’s notice to
the occupant;
(4) If an occupant seeks to qualify for
continued occupancy under the illness
or injury provisions of § 203.674(a), the
occupant shall provide to the HUD
Field Office, at the time of the occupant’s request for permission to remain
in occupancy, documentation to support this claim. Documentation shall
include an estimate of the time when
the patient could be moved without severely aggravating the illness or injury, and a statement by a State-certified physician establishing the validity of the occupant’s claim. HUD may
require more than one medical opinion
or may arrange an examination by a
physician approved by HUD; and
(5) If an occupant fails to make a
timely request, the property must be
vacated before the scheduled time of
acquisition.
(Approved by the Office of Management and
Budget under control number 2502–0268)
[53 FR 875, Jan. 14, 1988, and 53 FR 8626, Mar.
16, 1988, as amended at 58 FR 54246, Oct. 20,
1993]

§ 203.676 Request for continued occupancy.
An occupant may request permission
to continue to occupy the property following conveyance to the Secretary by
notifying the HUD Field Office in writing, within 20 days after the date of the

§ 203.677

mortgagee’s notice of pending acquisition. Verification of illness or injury as
described in § 203.675(b)(4) shall be submitted within this time period if an occupant seeks to qualify for continued
occupancy under the provisions of
§ 203.674(a). The HUD Field Office will
notify the mortgagee in writing that
an occupied conveyance has been requested.
(Approved by the Office of Management and
Budget under control number 2502–0268)
[53 FR 875, Jan. 14, 1988, and 53 FR 8626, Mar.
16, 1988, as amended at 58 FR 54246, Oct. 20,
1993]

§ 203.677 Decision to approve or deny
a request.
(a) The HUD Field Office will provide
written notification of its decision to
an occupant who makes a timely request to continue to occupy the property. The decision of the HUD Field Office on this matter will be made by the
Chief, Property Disposition. If the decision is to deny the request, the notice
to the occupant will include a statement of the reason or reasons for the
decision and of the occupant’s right to
appeal. The occupant may appeal
HUD’s decision within 20 days after the
date of HUD’s notice. The appeal must
be addressed to the Field Office Manager and be in writing, and the occupant may provide documentation intended to refute the reasons given for
HUD’s decision. The occupant may also
request an informal conference with a
representative of the HUD Field Office
Manager. A request for an informal
conference must be made in writing
within 10 days after the date of HUD’s
notice. The occupant may be represented at the conference by counsel
or by other persons with pertinent expert knowledge or experience.
(b) After notification that HUD has
denied a request for continued occupancy, the occupant, on his or her request, shall be permitted to review all
relevant material in HUD’s possession
(including a copy of the inspection report if the request is denied because
the property is not habitable as defined
in § 203.673). Only material in HUD’s
possession that directly pertains to
conditions for continued occupancy
under §§ 203.670, 203.673, and 203.674 may
be considered material relevant for an

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§ 203.678

24 CFR Ch. II (4–1–06 Edition)

occupant’s review under this paragraph. This review shall be limited to a
review of material for purposes of the
informal conference or the appeal of
the Department’s decision. The information will only be provided after request for an informal conference or appeal has been submitted to HUD.
(c) After consideration of an appeal,
the HUD Field Office will notify the applicant in writing of HUD’s final decision. This final decision will be made
by the HUD Field Office Manager or a
representative of the Field Office Manager (other than the Chief, Property
Disposition). If the decision is to deny
the occupant’s request, the notice to
the occupant will reflect consideration
of the issues raised by the occupant.
(d) If, after consideration of an appeal, the Field Office Manager denies
the request for new or additional reasons, the occupant will be afforded an
opportunity to request that the Field
Office Manager reconsider its decision
under the provisions of paragraph (c) of
this section.
[53 FR 875, Jan. 14, 1988, and 53 FR 8626, Mar.
16, 1988]

§ 203.678 Conveyance of vacant property.
(a) HUD will require that the property be conveyed vacant if the occupant fails to request permission to continue to occupy within the time period
specified in § 203.676, or fails to request
a conference or to appeal a decision to
deny occupied conveyance within the
time period specified in § 203.677(a).
(b) If the mortgagee has not been notified by HUD, within 45 days of the
date of the mortgagee’s notification of
pending acquisition, that a request for
continued occupancy is under consideration, the mortgagee shall convey the
property vacant, unless otherwise directed by HUD.
[53 FR 875, Jan. 14, 1988, and 53 FR 8626, Mar.
16, 1988]

§ 203.679 Continued
conveyance.

occupancy

after

(a) Occupancy of HUD-acquired property is temporary in all cases and is
subject to termination when necessary
to facilitate preparing the property for
sale and completing the sale.

(b) HUD will notify the occupant to
vacate the property and, if necessary,
will take appropriate eviction action in
any of the following situations:
(1) Failure of the occupant to execute
the lease required by § 203.674 (a)(2) and
(b)(2), or failure to pay the rental
amount required, including the initial
payment at the time of execution of
the lease, or to comply with the terms
of the lease;
(2) Failure of the occupant to allow
access to the property upon request in
accordance with § 203.674 (a)(4) and
(b)(5);
(3) Necessity to prepare the property
for sale; or
(4) Assignment of the property by the
Secretary to a different use or program.
[53 FR 876, Jan. 14, 1988, and 53 FR 8626, Mar.
16, 1988; 61 FR 36266, July 9, 1996]

§ 203.680 Approval of occupancy after
conveyance.
When an occupied property is conveyed to HUD before HUD has had an
opportunity to consider continued occupancy (e.g., where HUD has taken
more than 90 days to make a final decision on continued occupancy in accordance with § 203.670(c)), a determination
regarding continued occupancy will be
made in accordance with the conditions for the initial approval of occupied conveyance. Any such determination shall be in accordance with HUD’s
obligations under the terms of any
month-to-month lease that has been
executed.
[53 FR 876, Jan. 14, 1988, and 53 FR 8626, Mar.
16, 1988]

§ 203.681 Authority of HUD Field Office Managers.
Field Office Managers shall act for
the Secretary in all matters relating to
assignment and occupied conveyance
determinations. The decision of the
Field Office Manager under § 203.677
will be final and not be subject to further administrative review.
[53 FR 876, Jan. 14, 1988, and 53 FR 8626, Mar.
16, 1988]

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§ 203.678

24 CFR Ch. II (4–1–06 Edition)

§ 203.679 Continued
conveyance.

occupancy

after

(a) Occupancy of HUD-acquired property is temporary in all cases and is
subject to termination when necessary
to facilitate preparing the property for
sale and completing the sale.

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§ 203.678

24 CFR Ch. II (4–1–06 Edition)

§ 203.679 Continued
conveyance.

occupancy

after

(a) Occupancy of HUD-acquired property is temporary in all cases and is
subject to termination when necessary
to facilitate preparing the property for
sale and completing the sale.

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§ 203.678

24 CFR Ch. II (4–1–06 Edition)

§ 203.679 Continued
conveyance.

occupancy

after

(a) Occupancy of HUD-acquired property is temporary in all cases and is
subject to termination when necessary
to facilitate preparing the property for
sale and completing the sale.

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§ 203.678

24 CFR Ch. II (4–1–06 Edition)

§ 203.679 Continued
conveyance.

occupancy

after

(a) Occupancy of HUD-acquired property is temporary in all cases and is
subject to termination when necessary
to facilitate preparing the property for
sale and completing the sale.

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File Type	application/pdf
File Title	Document
Subject	Extracted Pages
Author	U.S. Government Printing Office
File Modified	2014-02-21
File Created	2006-05-19