Laws and Regulations

§ 208.112

24 CFR Ch. II (4–1–19 Edition)

owners are required to transmit data
collected for the 12 months preceding
the effective date of the rule, as well as
data collected on or after the effective
date of the rule. Data collected for the
12 months preceding September 23, 1994
is to include only the tenant’s most recent ‘‘complete certification’’ (movein, initial certification, interim recertification, or annual recertification).
When the most recent certification for
a tenant is a partial certification
(gross rent change, unit transfer, or
correction), both the complete and partial certifications must be transmitted.
(e) Data to be transmitted. Electronic
transmission consists of data transmitted from the HUD–50059, 50059 worksheets, 52670 and 52670A, Parts 1 and 2
and 52671 A through D correctly formatted in accord with the HUD data
requirements and in lieu of the hard
copy forms.
[58 FR 61022, Nov. 19, 1993, as amended at 59
FR 43474, Aug. 24, 1994]

§ 208.112

Cost.

(a) The costs of the electronic transmission of the correctly formatted
data, including either the purchase and
maintenance of computer hardware or
software, or both, the cost of contracting for those services, or the cost
of centralizing the electronic transmission function, shall be considered
project operating costs to be paid from
project income, and considered project
operating costs for the purpose of processing and approving requests for HUD
approval of rent increases.
(b) At the owner’s option, the cost of
the computer software may include
service contracts to provide maintenance or training, or both. Regardless
of whether an owner obtains service
contracts to provide maintenance or
training or both, the software must be
updated to incorporate changes or revisions in legislation, regulations, handbooks, notices or HUD electronic transmission data format requirements.
(c) The source of funds for the purchase of hardware or software, or contracting for services for electronic
transmission, may include current
project operating income; an expense
item in processing rent increases; a
loan from the Reserve for Replacement

Account, or a release from the Residual
Receipts Account.
(d) A loan from the Reserve for Replacements Account must be repaid
within a five year period from the release date.
(e) Owners of smaller projects or partially assisted projects with few subsidized units and CAs that administer
no more than one project that determine that the purchase of hardware
and/or software is not cost effective
may contract out the electronic data
transmission function to organizations
that provide such services, including,
but not limited to the following organizations: local management agents,
local management associations and
management agents with centralized
facilities. Owners of multiple projects
may centralize the electronic transmission function. However, owners
that contract out or centralize the
electronic transmission function are
required to retain the ability to monitor the day-to-day operations of the
project at the project site and be able
to demonstrate that ability to the relevant HUD field office.
[58 FR 61022, Nov. 19, 1993, as amended at 59
FR 43475, Aug. 24, 1994]

PART 213—COOPERATIVE
HOUSING MORTGAGE INSURANCE
Subpart A—Eligibility Requirements—
Projects
Sec.
213.1

Eligibility requirements.

Subpart B—Contract Rights and
Obligations—Projects
213.251 Cross-reference.
213.252 Definitions.
213.253 Premiums upon initial endorsement.
213.254 Premiums where first principal payment more than one year after initial endorsement.
213.255 Premiums where first principal payment one year or less after initial endorsement.
213.256 Premiums; insurance upon completion.
213.257 Premiums; purchasing cooperatives;
Existing Construction, supplementary
loans to purchase existing community facility.
213.258 Subsequent annual premiums.
213.259 Computation of subsequent annual
premiums.

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Office of Assistant Secretary for Housing, HUD
213.259a Premiums—mortgages insured pursuant to Section 238(c) of the Act.
213.260 Allowable methods of premium payment.
213.265 Modifications and consolidations.
213.266 Initial insurance endorsement.
213.266a Insurance fund obligations.
213.267 Effect of insurance endorsement.
213.268 Final insurance endorsement.
213.269 Endorsement
of
supplementary
loans.
213.270 Supplementary loans; election of action; claims; debentures.
COOPERATIVE MANAGEMENT HOUSING
INSURANCE AND DISTRIBUTIVE SHARES
213.275 Nature of the Cooperative Management Housing Insurance Fund.
213.276 Allocation of Cooperative Management Housing Insurance Fund income or
losses.
213.277 Right and liability under the Cooperative Management Housing Insurance
Fund.
213.278 Distribution of distributive share.
213.279 Maximum amount of distributive
share.
213.280 Finality of determination.

Subpart C—Individual Properties Released
From Project Mortgage; Expiring Program
213.501

Savings clause.

AUTHORITY: 12 U.S.C. 1715b, 1715e; 42 U.S.C.
3535(d).
SOURCE: 36 FR 24553, Dec. 22, 1971, unless
otherwise noted.

Subpart A—Eligibility
Requirements—Projects
§ 213.1 Eligibility requirements.
The eligibility requirements set forth
in 24 CFR part 200, subpart A, apply to
multifamily project mortgages insured
under section 213 of the National Housing Act (12 U.S.C. 1715e), as amended.
[61 FR 14405, Apr. 1, 1996]

Subpart B—Contract Rights and
Obligations—Projects
§ 213.251 Cross-reference.
(a) All of the provisions of subpart B,
part 207 of this chapter covering mortgages insured under section 207 of the
National Housing Act, apply with full
force and effect to mortgages insured
under section 213 of the National Housing Act, except the following provisions:

Sec.
207.251
207.252
207.254

§ 213.252
Definitions.
First, second, and third premiums.
Form of endorsement.

(b) For the purposes of this subpart,
all references in part 207 of this chapter
to section 207 of the National Housing
Act shall be deemed to refer to section
213 of the Act, and all references in
part 207 of this chapter to the General
Insurance Fund shall be deemed to
refer to the Cooperative Management
Housing Insurance Fund in cases involving mortgages which are the obligation of the Cooperative Management
Housing Insurance Fund.
(c) The provisions of §§ 207.255, 207.256,
207.257, 207.261, 207.262 and 207.263 of this
chapter shall apply to supplementary
loans insured under section 213(j) of the
Act. In connection with the foregoing
provisions the terms mortgagor, mortgagee, mortgage shall be construed to
mean borrower, lender, and supplementary loan, including required security
instrument.
(d) Where the provisions of this subpart are applicable to supplementary
loans, the terms mortgagor, mortgagee,
mortgage, shall be construed to mean
borrower, lender, and supplementary
loan, including required security instrument.
(e) Where the provisons of this subpart are applicable to operating loss
loans, the terms mortgagor, mortgagee
and mortgage shall be construed to
mean borrower, lender and operating loss
loan, including required security instrument, respectively.
[36 FR 24553, Dec. 22, 1971, as amended at 37
FR 8662, Apr. 29, 1972]

§ 213.252 Definitions.
The definitions contained in § 213.1
shall apply to this subpart and in addition the following terms shall have the
meaning indicated.
(a) Contract of Insurance means the
agreement evidenced by endorsement
of the credit instrument by the Commissioner or his duly authorized representative and includes the terms,
conditions and provisions of this subpart and of the National Housing Act.
(b) Insured mortgage means a mortgage which has been insured by the endorsement of the credit instrument by
the Commissioner.

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§ 213.253

24 CFR Ch. II (4–1–19 Edition)

(c) Mortgage means such a first lien
upon real estate and other property as
is commonly given to secure advances
on, or the unpaid purchase price of,
real estate under the laws of the State,
district or territory in which the real
estate is located, together with the
credit instrument or instruments, if
any, secured thereby. In any instance
where an operating loss loan is involved, the term shall include both the
original mortgage and the instrument
securing the operating loss loan.
(d) Mortgagee means the original
lender under a mortgage, its successors
and such of its assigns as are approved
by the Commissioner, and includes the
holders of the credit instruments
issued under a trust indenture, mortgage or deed of trust pursuant to which
such holders act by and through a
trustee therein named.
(e) Mortgagor means the original borrower under a mortgage and its successors and such of its assigns as are approved by the Commissioner.
(f) Project Mortgage means a blanket
mortgage insured under section 213 of
the Act, covering a group of not less
than five single-family dwellings.
§ 213.253 Premiums upon initial endorsement.
(a) Management and Sales Types and
Investor Sponsored Projects. The mortgagee, upon the initial endorsement of
the mortgage for insurance, shall pay
to the Commissioner a first mortgage
insurance premium equal to one-half of
one percent of the original face amount
of the mortgage.
(b) Purchasing cooperatives. The provisions of paragraph (a) of this section do
not apply to the mortgage or a purchasing nonprofit cooperative housing
corporation or trust where such mortgage is endorsed for insurance pursuant
to the sale of an Investor Sponsored
Project to such purchasing nonprofit
cooperative housing corporation or
trust.
(c) Existing Construction. The provisions of paragraph (a) of the section
shall apply to a mortgage covering Existing Construction which involves insurance of advances for Commissioner
approved or required repairs, improvements, alterations and additions.

(d) Operating loss loans and supplementary loans. The provisions of paragraph (a) of this section shall apply to
any operating loss loan and to any supplementary loan, except a supplementary loan to finance the acquisition of an existing community facility.
§ 213.254 Premiums where first principal payment more than one year
after initial endorsement.
(a) Management and Sales Types and
Investor Sponsored Projects. (1) If the
date of the first principal payment is
more than one year following the date
of such initial insurance endorsement,
the mortgagee, upon the anniversary of
such insurance date, shall pay a second
premium equal to one-half of one percent of the original face amount of the
mortgage. On the date of the first principal payment, the mortgagee shall pay
a third premium equal to one-half of
one percent of the average outstanding
principal obligation of the mortgage
for the following year which shall be
adjusted so as to accord with such date
and so that the aggregate of the first,
second and third premiums shall equal
the sum of:
(i) One percent of the average outstanding principal obligation of the
mortgage for the year following the
date of initial insurance endorsement,
and
(ii) One-half of one percent per
annum of the average outstanding
principal obligation of the mortgage
for the period from the first anniversary of the date of initial insurance endorsement to one year following the
date of the first principal payment.
(2) If the date of the first principal
payment of a mortgage is more than
one year following the date of the initial insurance endorsement and the
mortgage is paid in full prior to the
date of such first principal payment,
the first and second premiums collected shall be adjusted so that the aggregate of the two premiums shall
equal the sum of:
(i) One percent of the average outstanding principal obligation of the
mortgage for the year following the
date of the initial insurance endorsement and
(ii) One-half of one percent per
annum of the average outstanding

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Office of Assistant Secretary for Housing, HUD
principal obligation of the mortgage
for the period from the first anniversary of the date of initial endorsement
to the date the mortgage was paid in
full.
(b) Purchasing cooperatives. The provisions of paragraph (a) of this section do
not apply to the mortgage of a purchasing nonprofit cooperative housing
corporation or trust where such mortgage is endorsed for insurance pursuant
to the sale of an Investor Sponsored
Project to such purchasing nonprofit
cooperative housing corporation or
trust.
(c) Existing Construction. The provisions of paragraph (a) of this section
shall apply to a mortgage covering Existing Construction which involves insurance of advances for Commissioner
approved or required repairs, improvements, alterations and additions.
(d) Supplementary loan; insurance of
advances. The provisions of paragraph
(a) shall apply to any supplementary
loan involving insurance of advances.
§ 213.255 Premiums where first principal payment one year or less after
initial endorsement.
(a) Management and Sales Types and
Investor Sponsored Projects. (1) If the
date of the first principal payment is
one year, or less than one year following the date of such initial insurance endorsement, the mortgagee,
upon such first principal payment date,
shall pay a second premium equal to
one-half of one percent of the average
outstanding principal obligation of the
mortgage for the following year which
shall be adjusted so as to accord with
such date and so that the aggregate of
the first and second premiums shall
equal the sum of
(i) One percent per annum of the average outstanding principal obligation
of the mortgage for the period from the
date of initial insurance endorsement
to the date of first principal payment,
and
(ii) One-half of one percent of the average outstanding principal obligation
of the mortgage for the year following
the date of the first principal payment.
(2) If the date of the first principal
payment of a mortgage is one year or
less than one year following the date of
the initial insurance endorsement and

§ 213.256

the mortgage is paid in full prior to the
date of such first principal payment,
the first and only premium collected
shall be adjusted so that the total premium shall equal one percent per
annum of the average outstanding
principal obligation of the mortgage
for the period from the date of initial
insurance endorsement to the date the
mortgage was paid in full.
(b) Purchasing cooperatives. The provisions of paragraph (a) of this section do
not apply to the mortgage of a purchasing nonprofit cooperative housing
corporation or trust where such mortgage is endorsed for insurance pursuant
to the sale of an Investor Sponsored
Project to such purchasing nonprofit
cooperative housing corporation or
trust.
(c) Existing Construction. The provisions of paragraph (a) of this section
shall apply to a mortgage covering Existing Construction which involves insurance of advances for Commissioner
approved or required repairs, improvements, alterations and additions.
(d) Supplementary loan; insurance of
advances. The provisions of paragraph
shall apply to a supplementary loan involving insurance of advances.
§ 213.256 Premiums; insurance upon
completion.
(a) Management and Sales Types and
Investor Sponsored Projects. (1) Where
the mortgage is initially and finally
endorsed for insurance pursuant to a
Commitment to Insure Upon Completion, the mortgagee on the date of the
first principal payment shall pay a second premium equal to one-half of one
percent of the average outstanding
principal obligation of the mortgage
for the year following such first principal payment date which shall be adjusted so as to accord with such date
and so that the aggregate of the first
and second premiums shall equal the
sum of one-half of one percent per
annum of the average outstanding
principal obligation of the mortgage
for the period from the date of the insurance endorsement to one year following the date of the first principal
payment.
(2) Where the mortgage is initially
and finally endorsed for insurance pursuant to a Commitment to Insure Upon

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§ 213.257

24 CFR Ch. II (4–1–19 Edition)

Completion and is paid in full prior to
the date of the first principal payment,
the first and only premium collected
shall be adjusted so that the total premium shall equal one-half of one percent per annum of the average outstanding principal obigation of the
mortgage for the period from the date
of the insurance endorsement to the
date the mortgage was paid in full.
(b) Purchasing cooperatives. The provisions of paragraph (a) of this section do
not apply to the mortgage of a purchasing nonprofit cooperative housing
corporation or trust where such mortgage is endorsed for insurance pursuant
to the sale of an Investor Sponsored
Project to such purchasing nonprofit
cooperative housing corporation or
trust.
(c) Existing Construction. The provisions of paragraph (a) of this section
shall apply to Existing Construction
not involving insurance of advances
but involved Commissioner approved or
required repairs, improvements, alterations and additions.
(d) Supplementary loans; Commitment
to Insure Upon Completion. The provisions of paragraphs (a) and (b) of this
section shall apply to a supplementary
loan endorsed for insurance pursuant
to a Commitment to Insure Upon Completion.
§ 213.257 Premiums; purchasing cooperatives; Existing Construction;
supplementary loans to purchase
existing community facility.
(a) Where a mortgage is endorsed for
insurance pursuant to the sale of an Investor Sponsor Project or covers Existing Construction not involving Commissioner approved or required repairs,
improvements, alterations and additions, the mortgagee, on the date of
the insurance endorsement, shall pay a
first premium equal to one-half of one
percent of the principal obligation of
the mortgage for the period from the
date of the insruance endorsement to
one year following the date of the first
principal payment. On the anniversary
of the first principal payment, this
first premium shall be adjusted to
equal one-half of one percent of the average outstanding principal obligation
of the mortgage for the period from the
date of the insurance endorsement to

one year following the date of the first
principal payment.
(b) The premium provisions of paragraph (a) of this section shall apply to
a supplementary loan to purchase an
existing community facility.
§ 213.258 Subsequent
miums.

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(a) Until the mortgage is paid in full
or until receipt by the Commissioner of
an application for insurance benefits,
or until the contract of insurance is
otherwise terminated with the consent
of the Commissioner, the mortgagee,
on each anniversary of the date of the
first principal payment, shall pay an
annual mortgage insurance premium
equal to one-half of one percent of the
average outstanding principal obligation of the mortgage for the year following the date on which such premium becomes payable.
(b) The provisions of paragraph (a) of
this section shall apply to operating
loss loans and to supplementary loans.
§ 213.259 Computation of subsequent
annual premiums.
The premiums payable on and after
the date of the first principal payment
shall be calculated in accordance with
the amortization provisions without
taking into account delinquent payments or prepayments.
§ 213.259a Premiums—mortgages
insured pursuant to section 238(c) of
the Act.
All of the provisions of §§ 213.253
through 213.259 governing mortgage insurance premiums shall apply to mortgages insured under this subpart pursuant to section 238(c) of the Act, except
that all mortgage insurance premiums
due on such mortgages in accordance
with §§ 213.253 through 213.259 shall be
calculated on the basis of one percent.
[42 FR 59675, Nov. 18, 1977]

§ 213.260 Allowable methods of premium payment.
Premiums shall be payable in cash or
in debentures at par plus accrued interest. All premiums are payable in advance and no refund can be made of
any portion thereof except as hereinafter provided in this part.

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Office of Assistant Secretary for Housing, HUD
§ 213.265 Modifications and consolidations.
Where a mortgage covering an investor sponsored project is modified and
consolidated with the mortgage of a
purchasing nonprofit cooperative housing corporation or trust, it shall be
deemed to be paid in full as of the date
of such modification and consolidation.

§ 213.270

§ 213.267 Effect of insurance endorsement.
From the date of initial endorsement, the Commissioner and the mortgagee or lender shall be bound by the
provisions of this subpart to the same
extent as if they had executed a contract including the provisions of this
subpart and the applicable sections of
the Act.

[37 FR 8662, Apr. 29, 1972]

§ 213.266 Initial
ment.

insurance

endorse-

The Commissioner shall indicate his
insurance of the mortgage or supplementary loan by endorsing the original
credit instrument and identifying the
section of the Act and the regulations
under which the mortgage or supplementary loan is insured and the date of
insurance.
§ 213.266a

Insurance fund obligations.

A mortgage endorsed for insurance
under section 213 of the Act shall be
the obligation either of the Cooperative Management Housing Insurance
Fund or of the General Insurance Fund.
The determination of the applicable
fund shall be governed by the following:
(a) A mortgage insured under section
213(a)(1) of the Act or under section
213(a)(3) if the project has been acquired by a cooperative corporation or
under section 213 (i) or (j) shall be the
obligation of the Cooperative Management Housing Insurance Fund, where it
has been insured pursuant to a commitment issued on or after August 10,
1965, or insured pursuant to a commitment issued prior to such date, and
transferred to the Cooperative Management Housing Insurance Fund.
(b) A mortgage insured under section
213(a)(2) of the Act or under section
213(a)(3) where the project has not been
acquired by a cooperative corporation
shall be the obligation of the General
Insurance Fund. A mortgage insured
prior to August 10, 1965, or insured pursuant to a commitment issued prior to
such date, where the project has not
been transferred to the Cooperative
Management Housing Insurance Fund,
shall also be the obligation of the General Insurance Fund.

§ 213.268 Final
insurance
endorsement.
When all advances of mortgage or
loan proceeds have been made and all
the terms and conditions of the commitment have been complied with to
the satisfaction of the Commissioner,
he shall indicate on the original credit
instrument the total of all advances he
has approved for insurance and again
endorse such instrument.
§ 213.269 Endorsement
of
supplementary loans.
The provisions of §§ 213.266, 213.267,
and 213.268 shall apply to supplementary loans.
§ 213.270 Supplementary loans; election of action; claims; debentures.
(a) Election of action. Where a real estate mortgage, deed of trust, conditional sales contract, chattel mortgage, lien, judgement, or any other security device has been used to secure
the payment of a loan made under the
provisions of this section, the lender
may not, except with the approval of
the
Commissioner,
both
proceed
against such security and also make
claim under its contract of insurance,
but shall elect which method it desires
to pursue.
(b) Maximum claim period. Notice of
intention to file claim on a form prescribed by the Commissioner shall be
filed within 45 days after the lender becomes eligible for the benefits of the
loan insurance, or within such later
time as may be agreed upon by the
Commissioner in writing.
(c) Items to be filed on submitting claim.
Within 30 days after the filing of the
notice of intention to file claim, or
within such further period as may be
agreed upon by the Commissioner in
writing, the lender shall file with the
Commissioner:

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§ 213.270

24 CFR Ch. II (4–1–19 Edition)

(1) The fiscal data pertaining to the
loan transaction;
(2) Receipts covering all disbursements as required by the fiscal data
form;
(3) The original note and any security instrument or instruments which
shall be assigned to the Commissioner
without recourse or warranty, except
that the lender must warrant that no
act or omission of the lender has impaired the validity and priority of such
security instrument or instruments,
that the security instrument or instruments, are prior to all mechanics’ and
materialmen’s liens filed of record subsequent to the recording of such security instrument or instruments regardless of whether such liens attached
prior to such recording date, and prior
to all liens and encumbrances which
may have attached or defects which
may have arisen subsequent to the recording of such security instrument or
instruments, except such liens or other
matters as may be approved by the
Commissioner, that the amount stated
in the instrument of assignment is actually due and owing under the security instrument or instruments, that
there are no offsets or counterclaims
thereto, and that the lender has a good
right to assign such note and security
instrument or instruments;
(4) All hazard insurance policies held
on property serving as security for the
loan or other evidence of insurance
coverage acceptable to the Commissioner, together with a copy of the
lender’s notification to the carrier authorizing the amendment of the loss
payable clause substituting the Commissioner as the holder of the security
instrument;
(5) The assignment to the Commissioner of all rights and interests arising under the note and security instrument or instruments so in default, and
all claims of the lender against the borrower or others arising out of the loan
transaction;
(6) All policies of title or other insurance or surety bonds, or other guarantees and any and all claims thereunder;
including evidence satisfactory to the
Commissioner that the original title
coverage has been extended to include
the assignment of the note and the se-

curity instrument or instruments to
the Commissioner;
(7) Any balance of the loan not advanced to the borrower;
(8) Any cash or property held by the
lender or its agents or to which it is
entitled; including deposits made for
the account of the borrower and which
have not been applied in reduction of
the principal obligation under the note
and security instrument or instruments;
(9) All records, ledger cards, documents, books, papers and accounts relating to the loan transaction;
(10) Any additional information or
data which the Commissioner may require.
(d) Claim computation. Upon an acceptable assignment of the note and security instrument, the Commissioner
shall pay the claim of the lender in
cash, in debentures or in a combination
of both, as determined by the Commissioner at the time of payment. The
payment shall be in an amount equal
to the unpaid principal balance of the
supplementary loan plus:
(1) Any accrued interest due on the
supplementary loan as of the date of
execution of its assignment to the
Commissioner;
(2) Any advance made previously
under the provisions of the loan instrument and approved by the Commissioner;
(3) Reimbursement for such reasonable collection costs, court costs, and
attorney’s fees as may be approved by
the Commissioner;
(4) An amount equivalent to the debenture interest which would have
been earned on the portion of the insurance benefits paid in cash, as of the
date such cash payment is made, except that when the lender fails to meet
any one of the applicable requirements
of paragraphs (b) and (c) of this section
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.

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Office of Assistant Secretary for Housing, HUD
(e) Debenture interest. The debentures
shall bear interest as provided in
§ 207.259(e)(6) of this chapter.
(f) Maturity of debentures. Debentures
shall mature 20 years from the date of
issue.
(g) Registration of debentures. Debentures shall be registered as to principal
and interest.
(h) Denomination of debentures. Debentures shall be issued in multiples of $50
and any difference not in excess of $50
between the amount of debentures to
which the lender is otherwise entitled
hereunder and the aggregate face value
of the debentures issued shall be paid
in cash by the Commissioner to the
lender.
(i) Redemption of debentures. Debentures shall, at the option of the Commissioner and with the approval of the
Secretary of the Treasury, be redeemable at par plus accrued interest on
any semiannual interest payment date
on 3 months’ notice of redemption
given in such manner as the 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.
(j) Issue date of debentures. The debentures shall be issued as of the date of
the execution of the assignment of the
supplementary loan in accordance with
the requirements of paragraph (c)(3) of
this section.
COOPERATIVE MANAGEMENT HOUSING
INSURANCE AND DISTRIBUTIVE SHARES
§ 213.275 Nature of the Cooperative
Management Housing Insurance
Fund.
The Cooperative Management Housing Insurance Fund shall consist of the
General Surplus Account and the Participating Reserve Account.

§ 213.279

§ 213.276 Allocation of Cooperative
Management Housing Insurance
Fund income or losses.
For any semiannual period in which
Cooperative Management Housing Insurance Fund operations shall result in
a net income, or loss, the Commissioner shall allocate such net income
or such loss to the General Surplus Account, to the Participating Reserve Account, or to both, as he may determine
to be in accordance 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 of the Fund.
§ 213.277 Right and liability under the
Cooperative Management Housing
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 Cooperative
Management Housing Insurance Fund.
§ 213.278 Distribution
share.

of

When the contract of insurance is
terminated by reason of payment in
full of the mortgage or by voluntary
termination approved by the Commissioner, and at such time or times prior
to such termination as the Commissioner may approve, the Commissioner
may distribute to a mortgagor under a
mortgage that is the obligation of the
Cooperative Management Housing Insurance Fund a share of the Participating Reserve Account in such manner and amount as he shall determine
to be equitable and in accordance with
sound actuarial and accounting practice.
§ 213.279 Maximum
tributive share.

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In no event shall a distributive share
of the Participating Reserve Account
exceed the aggregate paid scheduled
annual premiums of the mortgagor
paid to the year of termination of the

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§ 213.280

24 CFR Ch. II (4–1–19 Edition)

insurance or to the year of payment of
the share, if paid prior to termination.
§ 213.280 Finality of determination.
The determination of the Commissioner as to the amount to be paid to
any mortgagor from the Cooperative
Management Housing Insurance Fund
shall be final and conclusive.

Subpart C—Individual Properties
Released From Project Mortgage; Expiring Program
§ 213.501 Savings clause.
No new loans are being insured under
the Cooperative Housing Mortgage Insurance Program for individual properties released from a project mortgage. Any existing insured loans on individual properties released from a
project mortgage under this program
will continue to be governed by the
regulations on eligibility requirements, contract rights and obligations,
and servicing responsibilities in effect
as they existed immediately before December 26, 1996.
[61 FR 60160, Nov. 26, 1996]

PART 214—HOUSING COUNSELING
PROGRAM
Subpart A—General Program
Requirements
Sec.
214.1
214.3

Purpose.
Definitions.

Subpart B—Approval and Disapproval of
Housing Counseling Agencies
214.100
214.103
214.105
214.107
214.109

General.
Approval criteria.
Preliminary application process.
Approval by HUD.
Disapproval by HUD.

Subpart C—Inactive Status, Termination,
and Appeals
214.200 Inactive status.
214.201 Termination of HUD-approved status
and grant agreements.
214.203 Re-approval or removal as a result of
a performance review.
214.205 Appeals.

Subpart D—Program Administration
214.300

Counseling services.

214.303 Performance criteria.
214.305 Agency profile changes.
214.307 Performance review.
214.309 Reapproval and disapproval based on
performance review.
214.311 Housing counseling grant funds.
214.313 Housing counseling fees.
214.315 Recordkeeping.
214.317 Reporting.

Subpart E—Other Federal Requirements
214.500
214.503

Audit.
Other requirements.

AUTHORITY: 12 U.S.C. 1701x, 1701x–1; 42
U.S.C. 3535(d).
SOURCE: 72 FR 55648, Sept. 28, 2007, unless
otherwise noted.

Subpart A—General Program
Requirements
§ 214.1

Purpose.

This part implements the Housing
Counseling Program authorized by section 106 of the Housing and Urban Development Act of 1968 (12 U.S.C. 1701x).
Section 106 authorizes HUD to make
grants to, or contract with, public or
private organizations to provide a
broad range of housing counseling services to homeowners and tenants to assist them in improving their housing
conditions and in meeting the responsibilities of tenancy or homeownership.
Section 106 also directs HUD to provide
housing
counseling
services
only
through agencies or individuals that
have been certified by HUD as competent to provide such services. The
regulations contained in this part prescribe the procedures and requirements
by which the Housing Counseling Program will be administered, including
the process by which agencies are approved and individuals will be certified
to provide the homeownership and
rental counseling, as defined by section
106. These regulations apply to all
agencies participating in HUD’s Housing Counseling Program, and to all organizations or entities that deliver
housing counseling, including homeownership counseling or rental housing
counseling, required under or provided
in connection with HUD programs.
[81 FR 90657, Dec. 14, 2016]

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Office of Assistant Secretary for Housing, HUD

PART 219—FLEXIBLE SUBSIDY PROGRAM
FOR
TROUBLED
PROJECTS
Sec.
219.1
219.2

Pt. 220

220.275

Method of paying insurance benefits.

INSURED HOME IMPROVEMENT LOANS
220.350

Cross-reference.

Subpart C—Eligibility Requirements—
Projects

Program operations.
Savings provision.

AUTHORITY: 12 U.S.C. 1715z-1a; 42 U.S.C.
3535(d).

220.501

Subpart D—Contract Rights and
Obligations—Projects

SOURCE: 61 FR 14405, Apr. 1, 1996, unless
otherwise noted.

§ 219.1 Program operations.
Effective May 1, 1996, the Flexible
Subsidy Program for Troubled Projects
will be governed and operate under the
statutory provisions codified at 12
U.S.C. 1715z–1a, under the administrative policies and procedures contained
in any applicable HUD Handbooks, and
other administrative bulletins and notices as the Department may issue
from time to time.
§ 219.2 Savings provision.
Part 219, as it existed immediately
before May 1, 1996, (contained in the
April 1, 1995 edition of 24 CFR, parts 200
to 219) will continue to govern the
rights and obligations of housing owners, tenants, and the Department of
Housing and Urban Development with
respect to units and projects assisted
under the Flexible Subsidy Program
for Troubled Projects prior to May 1,
1996. A list of any amendments to this
part published after the CFR revision
date is available from the Office of the
Rules Docket Clerk, Department of
Housing and Urban Development, 451
Seventh Street, SW., Washington, DC
20410.

PART 220—MORTGAGE INSURANCE AND INSURED IMPROVEMENT LOANS FOR URBAN RENEWAL AND CONCENTRATED
DEVELOPMENT AREAS
Subpart A [Reserved]

Eligibility requirements.

PROJECT MORTGAGE INSURANCE
220.751 Cross-reference.
220.753 Forbearance relief.
220.765 Special insurance benefits—forbearance relief cases.
INSURED PROJECT IMPROVEMENT LOANS
220.800 Definitions.
220.801 Initial insurance endorsement.
220.802 Final insurance endorsement.
220.803 Effect of insurance endorsement.
220.804 Insurance premiums.
220.804a Mortgagee’s late charge.
220.805 Termination of insurance.
220.806 Pro rata refund of insurance premium.
220.810 Definition of default.
220.811 Date of default.
220.812 Notice of default.
220.813 Commissioner’s right to require acceleration.
220.814 Election of action.
220.820 Maximum claim period.
220.821 Items to be filed on submitting
claim.
220.822 Claim computation; items included.
220.823 Claim computation; items deducted.
220.830 Debenture interest rate.
220.832 Maturity of debentures.
220.834 Registration of debentures.
220.836 Form and amounts of debentures.
220.838 Redemption of debentures.
220.840 Issue date of debentures.
220.842 Cash adjustment.
220.850 Assignment of insured loans.

Subpart E—Servicing Responsibilites—
Homes
220.900

Cross-reference.

AUTHORITY: 12 U.S.C. 1713, 1715b, 1715k, and
1735d; 42 U.S.C. 3535(d).

Subpart B—Contract Rights and
Obligations—Homes
Sec.
220.251 Cross-reference.
220.252 Forbearance of foreclosure and assignment of mortgage.
220.253 Substitute mortgagors.

SOURCE: 36 FR 24573, Dec. 22, 1971, unless
otherwise noted.

Subpart A [Reserved]

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§ 220.251

24 CFR Ch. II (4–1–19 Edition)
gage Insurance Fund shall be construed
to refer to the General Insurance Fund.

Subpart B—Contract Rights and
Obligations—Homes
§ 220.251

Cross-reference.

(a) All of the provisions of subpart B,
part 203 of this chapter covering mortgages insured under section 203 of the
National Housing Act apply to mortgages covering 1- to 11-family dwellings
insured under section 220 of the National Housing Act, except the following:
Sec.
203.258 Substitute mortgagors.
203.259 Scope.
203.280 One-time MIP.
203.281 Calculation of one-time MIP.
203.282 Mortgagee’s late charge and interest.
203.283 Refund of one-time MIP.
203.340 Conditions of special forbearance relief.
203.342 Recasting of mortgage.
203.343 Partial release, addition or substitution of security.
203.350 Assignment of defaulted mortgage—
ingeneral.
203.350a Assignment of defaulted mortgage.
203.351 Application for insurance benefits
and fiscal data.
203.353 Certification by mortgagee.
203.400 Method of payment.
203.402a Reimbursement for uncollected interest.
203.420 Nature of Mutual Mortgage Insurance Fund.
203.421 Allocation of Mutual Mortgage Insurance Fund income or loss.
203.422 Right and liability under Mutual
Mortgage Insurance Fund.
203.423 Distribution of distributive shares
203.424 Maximum amount of distributive
shares.
203.425 Finality of determination.
203.438 Mortgages on Indian land insured
pursuant to section 248 of the National
Housing Act.
203.439 Mortgages on Hawaiian home lands
insured pursuant to section 247 of the National Housing Act.
203.439a Mortgages on property in Allegany
Reservation of Seneca Nation of Indians
authorized by section 203(q) of the National Housing Act.

(b) For the purposes of this subpart,
all references in part 203 of this chapter
to section 203 of the act shall be construed to refer to section 220 of the act,
and all references to the Mutual Mort-

[36 FR 24573, Dec. 22, 1971, as amended at 42
FR 29304, June 8, 1977; 48 FR 28807, June 23,
1983; 51 FR 21874, June 16, 1986; 52 FR 8069,
Mar. 16, 1987; 52 FR 28470, July 30, 1987; 52 FR
48203, Dec. 21, 1987; 53 FR 9869, Mar. 28, 1988;
55 FR 34808, Aug. 24, 1990]

§ 220.252 Forbearance of foreclosure
and assignment of mortgage.
All of the provisions of §§ 203.340
through 203.342, 203.350, 203.352 and
203.353 of this chapter shall apply to
mortgages insured under this subpart,
except that the provisions relating to
forbearance of foreclosure, recasting of
the mortgage and assignment of a defaulted mortgage, shall be applicable
only to a mortgage covering a property
having not more than four dwelling
units.
§ 220.253 Substitute mortgagors.
(a) Selling mortgagor. The mortgagee
may effect the release of a mortgagor
from personal liability on the mortgage note only if it obtains the Commissioner’s approval of a substitute
mortgagor, as provided by this section.
(b) Purchasing mortgagor. (1) The
Commissioner may approve a substitute mortgagor with respect to any
mortgage insured under subpart A of
this part, if the substitute mortgagor
is to occupy the dwelling as a principal
residence or a secondary residence (as
these terms are defined in § 220.30(d)).
(2) The Commissioner may approve as
a substitute mortgagor an eligible nonoccupant mortgagor (as defined in
§ 220.30(d)) with respect to any mortgage insured under this part, only if
the outstanding balance of the mortgage does not exceed the Commissioner’s estimate of:
(i) The replacement cost of the property as of the date the mortgage was
originally accepted for insurance, or
the date the substitute mortgagor is
approved by the Commissioner, which
ever is greater, in the case of a dwelling described in § 220.30(a) (1) or (2); or
(ii) The cost of repair or rehabilitation, plus the Commissioner’s estimate
of the replacement cost of the property
as of either the date the mortgage was
originally accepted for insurance, or
the date the substitute mortgagor is

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Office of Assistant Secretary for Housing, HUD
approved by the Commissioner, whichever is greater, in the case of a dwelling described in § 220.30(a) (3) or (4).
(c) Applicability—current mortgagor.
Paragraph (b) of this section applies to
the Commissioner’s approval of a substitute mortgagor, only if the mortgage executed by the original mortgagor met the conditions of § 203.258(c)
of this chapter.
(d) Applicability—earlier mortgagor.
The occupancy and similar requirements set forth in § 203.258(d) of this
chapter apply to mortgages insured
under subpart A of this part.
(e) Mortgagees approved for participation in the Direct Endorsement program under § 203.3 may, subject to limitations established by the Commissioner, themselves approve an appropriate substitute mortgagor under this
section for mortgages which they own
or service, and need not obtain further
specific approval from the Commissioner.
(f) Definition. As used in this section,
the term substitute mortgagor includes:
(1) Persons who, upon the release by a
mortgagee of a previous mortgagor
from personal liability on the mortgage note, assume this liability and
agree to pay the mortgage debts; and
(2) persons who purchase without assuming liability on the mortgage note,
or purchase where no release is given
by the mortgagee to the previous mortgagor.
[55 FR 34808, Aug. 24, 1990, as amended at 57
FR 58351, Dec. 9, 1992]

§ 220.275 Method of paying insurance
benefits.
If the application for insurance benefits is acceptable to the Commissioner,
all of the insurance claim shall be paid
in cash unless the mortgagee files a
written request with the application
for payment in debentures. If such a request is made, all of the claim shall be
paid by issuing debentures and by making a cash payment adjusting any differences between the total amount of
the claim and the amount of the debentures issued.

§ 220.751

INSURED HOME IMPROVEMENT LOANS
§ 220.350

Cross-reference.

(a) All of the provisions of §§ 203.440
through 203.495 of this chapter covering
insured home improvement loans under
section 203(k) of the Act shall apply to
home improvement loans on one-tofour family dwellings under section
220(h) of the Act, except as set out in
paragraph (b).
(b) The provisions of §§ 203.473(a) shall
not be applicable to home improvement loans on one-to-four family
dwellings under section 220(h) of the
Act.
[52 FR 1330, Jan. 13, 1987]

Subpart C—Eligibility
Requirements—Projects
§ 220.501

Eligibility requirements.

The requirements set forth in 24 CFR
part 200, subpart A, apply to multifamily project mortgages insured under
section 220 of the National Housing Act
(12 U.S.C. 1715k), as amended.
[61 FR 14405, Apr. 1, 1996]

Subpart D—Contract Rights and
Obligations—Projects
PROJECT MORTGAGE INSURANCE
§ 220.751

Cross-reference.

(a) All of the provisions of subpart B,
part 207, of this chapter, covering
mortgages insured under section 207 of
the National Housing Act, apply with
full force and effect to multifamily
project mortgages insured under section 220 of the National Housing Act,
except § 207.256b Modification of mortgage terms.
(b) For the purposes of the portion of
this subpart, covering multifamily
project mortgages, all references in
part 207 of this chapter to section 207 of
the National Housing Act shall be
deemed to refer to section 220 of the
National Housing Act.
[36 FR 24573, Dec. 22, 1971, as amended at 80
FR 51468, Aug. 25, 2015]

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§ 220.753

24 CFR Ch. II (4–1–19 Edition)

§ 220.753 Forbearance relief.
(a) In a case where the mortgage is in
default, the mortgagor and the mortgagee may enter into a forbearance
agreement for the reduction or suspension of regular mortgage payments for
a specified period of time, if the following requirements are met:
(1) The mortgage was endorsed for insurance on or after July 7, 1961.
(2) The Commissioner determines
that the default was due to circumstances beyond the mortgagor’s
control and that the mortgage probably will be restored to good standing
within a reasonable period of time and
evidences such determination by written approval of the forbearance agreement.
(b) The time specified in § 207.258(a) of
this chapter, within which a mortgagee
shall give the Commissioner written
notice of its intention to file an insurance claim, shall be suspended for the
period of time specified in the forbearance agreement as long as the mortgagor complies with the requirements
of such agreement.
(c) If the mortgagor fails to meet the
requirements of a forbearance agreement or to cure the default under the
mortgage at the expiration of the forbearance period, and such failure continues for a period of 30 days, the mortgagee shall notify the Commissioner of
such failure. Within 45 days thereafter,
unless a modification or extension of
the forbearance agreement has been approved by the Commissioner, the mortgagee shall notify the Commissioner of
its election to file an insurance claim
and of its decision to either assign the
mortgage to the Commissioner or acquire and convey title to the property
to the Commissioner. If the mortgage
is assigned to the Commissioner, the
special insurance benefits prescribed in
§ 220.765 shall be applicable.
§ 220.765 Special insurance benefits—
forbearance relief cases.
(a) Upon a failure of the mortgagor
to meet the requirements of a forbearance agreement or to cure the default
under the mortgage at the expiration
of the forbearance period, the mortgagee shall be entitled to obtain a special insurance payment in cash, in lieu
of the insurance benefits otherwise pro-

vided under this subpart. To receive
the special insurance payment, the
mortgagee shall assign the mortgage to
the Commissioner in compliance with
the requirements of § 207.258(b) of this
chapter.
(b) The special insurance benefits to
the mortgagee shall be a cash payment
computed
in
accordance
with
§ 207.259(b) of this chapter, except that
in lieu of the allowance for debenture
interest in § 207.259(b)(1)(iii) of this
chapter, the payment shall include the
amount of the unpaid accrued mortgage interest computed to the date the
assignment of the mortgage to the
Commissioner is filed for record. In addition, there shall be included in the
cash payment an amount equivalent to
the debenture interest which would
have been earned from the date the
mortgage assignment was filed for
record to the date the payment is
made; except that when the mortgagee
fails to meet any of the applicable requirements of § 207.258(b) of this chapter and § 220.753(c) within the specified
times and in a manner satisfactory to
the Commissioner (or within such further time as the Commissioner may approve in writing), such debenture interest allowance shall be computed only
to the date on which the particular required action should have been taken.
INSURED PROJECT IMPROVEMENT LOANS
§ 220.800

Definitions.

All of the definitions contained in
§ 220.550 shall apply to §§ 220.800 et seq.
In addition the following terms shall
have the meaning indicated:
(a) Contract of insurance means the
agreement evidenced by the endorsement of the Commissioner upon the
note given in connection with an insured loan, incorporating by reference
the regulations in §§ 220.800 et seq. and
the applicable provisions of the Act.
(b) Maturity means the date on which
the loan indebtedness would be extinguished if paid in accordance with periodic payments provided for in the loan.
§ 220.801 Initial
ment.

insurance

The Commissioner shall indicate his
insurance of the loan by endorsing the

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Office of Assistant Secretary for Housing, HUD
original credit instrument and identifying the section of the Act and the
regulations under which the loan is insured and the date of insurance.
§ 220.802 Final
insurance
endorsement.
When all advances of loan proceeds
have been made, and all the terms and
conditions of the commitment have
been complied with to the satisfaction
of the Commissioner, he shall indicate
on the original credit instrument the
total of advances he has approved for
insurance and again endorse such instrument.
§ 220.803 Effect of insurance endorsement.
From the date of initial endorsement, the Commissioner and the lender
shall be bound by the provisions of this
subpart to the same extent as if they
had executed a contract including the
provisions of this subpart and the applicable sections of the Act.
§ 220.804 Insurance premiums.
(a) First premium. The lender, upon
the initial endorsement of the loan for
insurance, shall pay to the Commissioner a first loan insurance premium
equal to one-half of one percent of the
original face amount of the note.
(b) Second premium; first payment more
than one year following initial endorsement. If the date of the first principal
payment is more than one year following the date of initial insurance endorsement, the lender, upon the anniversary of such insurance date, shall
pay a second premium equal to onehalf of one percent of the original face
amount of the loan.
(c) Third premium. On the date of the
first principal payment, the lender
shall pay a third premium equal to
one-half of one percent of the average
outstanding principal obligation of the
note for the following year which shall
be adjusted so as to accord with such
date and so that the aggregate of the
three premiums shall equal the sum of
(1) one percent of the average outstanding principal obligation of the
note for the year following the date of
initial insurance endorsement and (2)
one-half of one percent per annum of
the average outstanding principal obli-

§ 220.804

gation of the note for the period from
the first anniversary of the date of initial insurance endorsement to one year
following the date of the first principal
payment.
(d) Second premium; first payment one
year or less following initial endorsement.
If the date of the first principal payment is one year, or less than one year
following the date of initial insurance
endorsement, the lender upon such
first principal payment date, shall pay
a second premium equal to one-half of
one percent of the average outstanding
principal obligation of the note for the
following year which shall be adjusted
so as to accord with such date and so
that the aggregate of the said two premiums shall equal the sum of (1) one
percent per annum of the average outstanding principal obligation of the
note for the period from the date of initial insurance endorsement to the date
of first principal payment and (2) onehalf of one percent of the average outstanding principal obligation of the
note for the year following the date of
the first principal payment.
(e) Second premium; commitment to insure upon completion. Where the note is
initially and finally endorsed for insurance pursuant to a Commitment to Insure Upon Completion, the lender on
the date of the first principal payment
shall pay a second premium equal to
one-half of one percent of the average
outstanding principal obligation of the
note for the year following such first
principal payment date which shall be
adjusted so as to accord with such date
and so that the aggregate of the said
two premiums shall equal the sum of
one-half of one percent per annum of
the average outstanding principal obligation of the note for the period from
the date of the insurance endorsement
to one year following the date of the
first principal payment.
(f) Annual insurance premium. Until
the note is paid in full, or until the
loan is assigned to the Commissioner,
or until the contract of insurance is
otherwise terminated with the consent
of the Commissioner, the lender, on
each anniversary of the date of the
first principal payment shall pay an
annual loan insurance premium equal
to one-half of one percent of the average outstanding principal obligation of

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§ 220.804a

24 CFR Ch. II (4–1–19 Edition)

the loan for the year following the date
on which such premium becomes payable.
(g) Method of premium payment. Premiums shall be payable in cash or in
debentures at par plus accrued interest. All premiums are payable in advance and no refund can be made of
any portion thereof except as hereinafter provided in §§ 220.800 et seq.
(h) Calculation of premiums. The premiums payable on and after the date of
the first principal payment shall be
calculated in accordance with the amortization provisions without taking
into account delinquent payments or
prepayments.
§ 220.804a

Mortgagee’s late charge.

Mortgage insurance premiums which
are paid to the Commissioner more
than 15 days after the billing date or
due date, whichever is later, shall include a late charge of 4 percent of the
amount of the payment due, except
that no late charge shall be required
with respect to any case for which HUD
fails to render a proper billing to the
mortgagee.
[43 FR 60154, Dec. 26, 1978]

§ 220.805

Termination of insurance.

(a) Prepayment in full. The contract of
insurance shall be terminated if the
loan is paid in full prior to its maturity. Notice of the prepayment shall be
given to the Commissioner, on a form
prescribed by the Commissioner, within 30 days from the date of the prepayment. The insurance termination shall
become effective as of the date of the
prepayment.
(b) Voluntary termination. The contract of insurance shall be voluntarily
terminated upon receipt by the Commissioner of a written request, on a
form prescribed by the Commissioner,
by the borrower and the lender for such
termination, accompanied by a submission of the original credit instrument
for cancellation of the insurance endorsement and the remittance of all
sums to which the Commissioner is entitled. The termination shall become
effective as of the date these requirements are met.

§ 220.806 Pro rata refund of insurance
premium.
Upon termination of loan insurance
contract by a payment in full or by a
voluntary termination, the Commissioner shall refund to the lender for the
account of the borrower an amount
equal to the pro rata portion of the
current annual loan insurance premium theretofore paid which is applicable to the portion of the year subsequent to the date of the prepayment or
the effective date of the voluntary termination of the contract of insurance.
§ 220.810

Definition of default.

(a) If the borrower fails to make any
payments due under or provided to be
paid by the terms of the note or security instrument and such default continues for a period of 30 days, the note
or security instrument shall be considered in default for the purposes of
§§ 220.800 et seq.
(b) The failure to perform any other
covenant under the note or security instrument shall be considered a default,
provided the lender because of such default, has exercised its right under the
note or security instrument and accelerated the debt.
(c) If such defaults as defined in paragraphs (a) and (b) of this section continue for a period of 30 days, the lender
shall be entitled to receive the benefits
of insurance hereinafter provided.
§ 220.811

Date of default.

For the purposes of §§ 220.800 et seq.,
the date of default shall be considered
as:
(a) The date of the first uncorrected
failure to perform a covenant or obligation under the note or security instrument; or
(b) The date of the first failure to
make a monthly payment which subsequent payments by the borrower are
insufficient to cover when applied to
the overdue monthly payments in the
order in which they became due.
§ 220.812

Notice of default.

(a) If the default as defined in § 220.810
is not cured within the 30 day grace period, the lender shall, within 30 days
thereafter, notify the Commissioner in
writing of such default.

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Office of Assistant Secretary for Housing, HUD
(b) The lender shall give notice in
writing to the Commissioner of the
failure of the borrower to comply with
any covenant or obligation under the
security instrument or note regardless
of the fact the lender may not have
elected to accelerate the debt.
§ 220.813 Commissioner’s right to require acceleration.
Upon receipt of notice of the failure
of the borrower to comply with any
covenant or obligation under the security instrument or note, or otherwise
being apprised thereof, the Commissioner reserves the right to require the
lender to accelerate payment of the
outstanding principal balance due in
order to protect the interests of the
Federal Housing Commissioner.
§ 220.814 Election of action.
Where a real estate mortgage, deed of
trust, conditional sales contract, chattel mortgage, lien, judgment, or any
other security device has been used to
secure the payment of a loan made
under the provisions of this section,
the lender may not, except with the approval of the Commissioner, both proceed against such security and also
make claim under its contract of insurance, but shall elect which method it
desires to pursue.
§ 220.820 Maximum claim period.
Notice of intention to file claim on a
form prescribed by the Commissioner
shall be filed within 45 days after the
lender becomes eligible for the benefits
of the loan insurance, or within such
later time as may be agreed upon by
the Commissioner in writing.
§ 220.821 Items to be filed on submitting claim.
Within 30 days after the filing of the
notice of intention to file claim, or
within such further period as may be
agreed upon by the Commissioner in
writing, the lender shall file with the
Commissioner:
(a) The fiscal data pertaining to the
loan transaction;
(b) Receipts covering all disbursements as required by the fiscal data
form;
(c) The original note and any security instrument or instruments which

§ 220.821

shall be assigned to the Commissioner
without recourse or warranty, except
that the lender must warrant that no
act or omission of the lender has impaired the validity and priority of such
security instrument or instruments,
that the security instrument or instruments are prior to all mechanics’ and
materialmen’s liens filed of record subsequent to the recording of such security instrument or instruments regardless of whether such liens attached
prior to such recording date, and prior
to all liens and encumbrances which
may have attached or defects which
may have arisen subsequent to the recording of such security instrument or
instruments, except such liens or other
matters as may be approved by the
Commissioner, that the amount stated
in the instrument of assignment is actually due and owing under the security instrument or instruments, that
there are no offsets or counter claims
thereto, and that the lender has a good
right to assign such note and security
instrument or instruments;
(d) All hazard insurance policies held
on property serving as security for the
loan, together with a copy of the lender’s notification to the carrier authorizing the amendment of the loss payable clause substituting the Commissioner as the holder of the security instrument;
(e) The assignment to the Commissioner of all rights and interests arising under the note and security instrument or instruments so in default, and
all claims of the lender against the borrower or others arising out of the loan
transaction;
(f) All policies of title or other insurance or surety bonds, or other guarantees and any and all claims thereunder;
including evidence satisfactory to the
Commissioner that the original title
coverage has been extended to include
the assignment of the note and security instrument or instruments to the
Commissioner.
(g) Any property held by the lender
or its agents or to which it is entitled
and, if payment is requested in debentures, any cash held by the lender or
its agents or to which it is entitled, including deposits made for the account
of the borrower, and which have not

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§ 220.822

24 CFR Ch. II (4–1–19 Edition)

been applied in reduction of the principal of the mortgage indebtedness;
(h) All records, ledger cards, documents, books, papers and accounts relating to the loan transaction;
(i) Any additional information or
data which the Commissioner may require.
§ 220.822 Claim computation; items included.
(a) Assignment of loan. Upon an acceptable assignment of the note and security instrument, the Commissioner
shall pay the claim of the lender in an
amount equal to the unpaid principal
balance of the loan plus:
(1) Any accrued interest due as of the
date of execution of the assignment of
the loan to the Commissioner.
(2) Any advances approved by the
Commissioner made previously by the
lender under the provisions of the note
of security instrument or instruments.
(3) Reimbursement for such reasonable collection costs, court costs, and
attorney’s fees as may be approved by
the Commissioner.
(4) Reimbursement for premiums
paid on any hazard insurance policies
held on the property.
(5) If payment is made in cash, an
amount equivalent to the debenture interest which would have been earned as
of the date insurance settlement occurs, except that when the lender fails
to meet any one of the applicable requirements of §§ 220.812, 220.820, and
220.821 within the specified time (or
within such further time as the Commissioner may approve in writing), the
debenture interest shall be computed
only to the date to which the particular action should have been taken
or to which it was extended.
(b) [Reserved]
[36 FR 24573, Dec. 22, 1971, as amended at 80
FR 51468, Aug. 25, 2015]

§ 220.823 Claim computation; items deducted.
If the lender is to receive payment in
cash, there shall be deducted from the
total of the added items in § 220.822 the
following:
(a) Any balance of the loan not advanced to the borrower;
(b) Any cash held by the lender or its
agents or to which it is entitled; in-

cluding deposits made for the account
of the borrower and which have not
been applied in reduction of the principal obligation under the note and security instrument or instruments.
§ 220.830 Debenture interest rate.
Debentures shall bear interest from
the date of issue, payable semiannually
on the first day of January and the
first day of July of each year at the
rate in effect as of the date the commitment was issued or as of the date
the loan was endorsed for insurance,
whichever rate is higher. The applicable rates of interest will be published
twice each year as a notice in the FEDERAL REGISTER.
[47 FR 26125, June 17, 1982]

§ 220.832 Maturity of debentures.
Debentures shall mature 10 years
from the date of issue.
§ 220.834 Registration of debentures.
Debentures shall be registered as to
principal and interest.
§ 220.836 Form and amounts of debentures.
Debentures issued under subpart D of
this part shall be in such form and
amounts; and shall be subject to such
terms and conditions; and shall include
such provisions for redemption, if any,
as may be prescribed by the Secretary,
with the approval of the Secretary of
the Treasury; and may be in book
entry or certificated registered form,
or such other form as the Secretary by
regulation may prescribe.
[59 FR 49816, Sept. 30, 1994]

§ 220.838 Redemption of debentures.
Debentures shall, at the option of the
Commissioner and with the approval of
the Secretary of the Treasury, be redeemable at par plus accrued interest
on any semiannual interest payment
date on three months’ notice of redemption given in such manner as the
Commissioner shall prescribe. The debenture interest on the debentures
called for redemption shall cease on
the semiannual interest date designated in the call notice. The Commissioner may include with the notice
of redemption an offer to purchase the

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Office of Assistant Secretary for Housing, HUD
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.
§ 220.840

Issue date of debentures.

The debentures shall be issued as of
the date of the execution of the assignment of the loan to the Commissioner.
§ 220.842

Cash adjustment.

Any difference of less than $50 between the amount of debentures to be
issued to the lender and the total
amount of the lender’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]

§ 220.850

Assignment of insured loans.

(a) An insured loan may not be transferred or pledged prior to the full disbursement of the loan, except with the
prior written approval of the Commissioner which approval may be subject
to such conditions and qualifications
as the Commissioner may prescribe.
Subsequent to full disbursement such
loan may be transferred only to a
transferee who is a lender approved by
the Commissioner. Upon such transfer
and the assumption by the transferee
of all obligations under the contract of
insurance the transferor shall be released from its obligations under the
contract of insurance.
(b) The contract of insurance shall
terminate with respect to loans described in paragraph (a) of this section
upon the happening of either of the following events:
(1) The transfer or pledge of the insured loan to any person, firm, or corporation, public or private, other than
an approved lender.
(2) The disposal by a lender of any
partial interest in the insured loan by
means of a declaration of trust or by a
participation or trust certificate or by
any other device, unless with the prior
written approval of the Commissioner,
which approval may be subject to such
conditions and qualifications as the

§ 220.900

Commissioner in his discretion may
prescribe: Provided, That this paragraph shall not be applicable to any
loan so long as it is held in a common
trust fund maintained by a bank or
trust company exclusively for the collective investment and reinvestment of
moneys contributed thereto by the
bank or trust company in its capacity
as a trustee, executor or administrator;
and in conformity with the rules and
regulations prevailing from time to
time of the Board of Governors of the
Federal Reserve System, pertaining to
the collective investment of trust
funds: Provided further, That this paragraph shall not be applicable to any
loan so long as it is held in a common
trust estate administered by a bank or
trust company which is subject to the
inspection and supervision of a governmental agency, exclusively for the benefit of other banking institutions
which are subject to the inspection and
supervision of a governmental agency,
and which are authorized by law to acquire beneficial intersts in such common trust estate, nor to any loan
transferred to such a bank or trust
company as trustee exclusively for the
benefit of outstanding owners of undivided interest in the trust estate,
under the terms of certificates issued
and sold more than three years prior to
said transfer, by a corporation which is
subject to the inspection and supervision of a governmental agency.

Subpart E—Servicing
Responsibilities—Homes
§ 220.900

Cross-reference.

All of the provisions of subpart C,
part 203 of the chapter concerning the
responsibilities of servicers of mortgages insured under section 203 of the
National Housing Act apply to mortgages covering 1- to 11-family dwellings
insured under section 220 of the National Housing Act, except §§ 203.664
through 203.666.
[52 FR 48203, Dec. 21, 1987, and 53 FR 9869,
Mar. 28, 1988]

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Pt. 221

24 CFR Ch. II (4–1–19 Edition)

PART 221—LOW COST AND MODERATE INCOME MORTGAGE INSURANCE—SAVINGS CLAUSE
Subpart A—Eligibility Requirements—Low
Cost Homes—Savings Clause

SOURCE: 36 FR 24587, Dec. 22, 1971, unless
otherwise noted.

Subpart
A—Eligibility
ments—Low Cost
Savings Clause
§ 221.1

Sec.
221.1

Savings clause.

Subpart B—Contract Rights and
Obligations—Low Cost Homes
221.251 Cross-reference.
221.252 Substitute mortgagors.
221.254 Mortgage insurance premiums.
221.255 Assignment option.
221.256 Interest rate increase and payment
of mortgage insurance premiums on
mortgages under §§ 221.60 and 221.65
221.275 Method of paying insurance benefits.
221.280 Waived title objections.
SPECIAL PROVISIONS APPLICABLE ONLY TO
MORTGAGES INVOLVING CONDOMINIUM UNITS
221.300 Changes in the plan of apartment
ownership.
221.305 Condition of the multifamily structure.
221.310 Assessment of taxes.
221.315 Certificate of tax assessment.
221.320 Certificate or statement of condition.
221.325 Cancellation of hazard insurance.

[66 FR 5913, Jan. 19, 2001]

Subpart B—Contract Rights and
Obligations—Low Cost Homes

Eligibility requirements.

§ 221.251

Subpart D—Contract Rights and
Obligations—Moderate Income Projects
221.751 Cross-reference.
221.753 Termination of mortgage insurance.
221.755 Premiums first, second, third and
operating loss loans.
221.761 Forbearance relief.
221.762 Payment of insurance benefits.
221.763 Special insurance benefits—forbearance relief cases.
221.770 Assignment option.
221.775 Option period.
221.780 Issuance of debentures.
221.785 Date of maturity of debentures.
221.790 Debenture interest rate.
221.795 Displacement—below market interest rate mortgages.

Subpart E—Servicing Responsibilities—Low
Cost Homes
221.800

Savings clause.

(a) Effective February 20, 2001, the
authority to insure mortgages under
section 221(d)(2) of the National Housing Act (12 U.S.C. 1715l(d)(2)) for low
cost and moderate income mortgage
insurance is terminated, except that
HUD will endorse for insurance validly
processed mortgages under direct endorsement where the credit worksheet
was signed by the mortgagee’s underwriter before February 20, 2001.
(b) Subpart A of this part, as it existed immediately before February 20,
2001, will continue to govern the rights
and obligations of insured mortgage
lenders, mortgagors, and HUD with respect to section 221(d)(2) single family
loans insured before February 20, 2001,
or in accordance with paragraph (a) of
this section, pursuant to the applicable
provisions of this subpart.

Subpart C—Eligibility Requirements—
Moderate Income Projects
221.501

Cross-reference.

AUTHORITY: 12 U.S.C. 1715b, 1715l, and 1735d;
42 U.S.C. 3535(d).

Cross-reference.

(a) All of the provisions of subpart B,
part 203 of this chapter covering mortgages insured under section 203 of the
National Housing Act apply to mortgages covering one- to four-family
dwellings insured under section 221 of
the National Housing Act, except the
following provisions:
Sec.
203.258 Substitute mortgagors.
203.259a Scope.
203.260 Amount of Mortgage Insurance Premium (MIP).
203.261 Calculation of MIP.
203.262 Due date of MIP.
203.264 Payment of MIP.
203.266 Period covered by MIP.
203.268 Pro rata payment of MIP.
203.280 One-time MIP.
203.281 Calculation of one-time MIP.
203.282 Mortgagee’s late charge and interest.
203.283 Refund of one-time MIP.

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Pt. 221

24 CFR Ch. II (4–1–19 Edition)

PART 221—LOW COST AND MODERATE INCOME MORTGAGE INSURANCE—SAVINGS CLAUSE
Subpart A—Eligibility Requirements—Low
Cost Homes—Savings Clause

SOURCE: 36 FR 24587, Dec. 22, 1971, unless
otherwise noted.

Subpart
A—Eligibility
ments—Low Cost
Savings Clause
§ 221.1

Sec.
221.1

Savings clause.

Subpart B—Contract Rights and
Obligations—Low Cost Homes
221.251 Cross-reference.
221.252 Substitute mortgagors.
221.254 Mortgage insurance premiums.
221.255 Assignment option.
221.256 Interest rate increase and payment
of mortgage insurance premiums on
mortgages under §§ 221.60 and 221.65
221.275 Method of paying insurance benefits.
221.280 Waived title objections.
SPECIAL PROVISIONS APPLICABLE ONLY TO
MORTGAGES INVOLVING CONDOMINIUM UNITS
221.300 Changes in the plan of apartment
ownership.
221.305 Condition of the multifamily structure.
221.310 Assessment of taxes.
221.315 Certificate of tax assessment.
221.320 Certificate or statement of condition.
221.325 Cancellation of hazard insurance.

[66 FR 5913, Jan. 19, 2001]

Subpart B—Contract Rights and
Obligations—Low Cost Homes

Eligibility requirements.

§ 221.251

Subpart D—Contract Rights and
Obligations—Moderate Income Projects
221.751 Cross-reference.
221.753 Termination of mortgage insurance.
221.755 Premiums first, second, third and
operating loss loans.
221.761 Forbearance relief.
221.762 Payment of insurance benefits.
221.763 Special insurance benefits—forbearance relief cases.
221.770 Assignment option.
221.775 Option period.
221.780 Issuance of debentures.
221.785 Date of maturity of debentures.
221.790 Debenture interest rate.
221.795 Displacement—below market interest rate mortgages.

Subpart E—Servicing Responsibilities—Low
Cost Homes
221.800

Savings clause.

(a) Effective February 20, 2001, the
authority to insure mortgages under
section 221(d)(2) of the National Housing Act (12 U.S.C. 1715l(d)(2)) for low
cost and moderate income mortgage
insurance is terminated, except that
HUD will endorse for insurance validly
processed mortgages under direct endorsement where the credit worksheet
was signed by the mortgagee’s underwriter before February 20, 2001.
(b) Subpart A of this part, as it existed immediately before February 20,
2001, will continue to govern the rights
and obligations of insured mortgage
lenders, mortgagors, and HUD with respect to section 221(d)(2) single family
loans insured before February 20, 2001,
or in accordance with paragraph (a) of
this section, pursuant to the applicable
provisions of this subpart.

Subpart C—Eligibility Requirements—
Moderate Income Projects
221.501

Cross-reference.

AUTHORITY: 12 U.S.C. 1715b, 1715l, and 1735d;
42 U.S.C. 3535(d).

Cross-reference.

(a) All of the provisions of subpart B,
part 203 of this chapter covering mortgages insured under section 203 of the
National Housing Act apply to mortgages covering one- to four-family
dwellings insured under section 221 of
the National Housing Act, except the
following provisions:
Sec.
203.258 Substitute mortgagors.
203.259a Scope.
203.260 Amount of Mortgage Insurance Premium (MIP).
203.261 Calculation of MIP.
203.262 Due date of MIP.
203.264 Payment of MIP.
203.266 Period covered by MIP.
203.268 Pro rata payment of MIP.
203.280 One-time MIP.
203.281 Calculation of one-time MIP.
203.282 Mortgagee’s late charge and interest.
203.283 Refund of one-time MIP.

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Office of Assistant Secretary for Housing, HUD
203.288 Discontinuance of adjusted premium
charge.
203.295 Voluntary termination of insurance.
203.389 Waived title objections.
203.400 Method of payment.
203.420 Nature of Mutual Mortgage Insurance Fund.
203.421 Allocation of Mutual Mortgage Insurance Fund income or loss.
203.422 Right and liability under Mutual
Mortgage Insurance Fund.
203.423 Distribution of distributive shares.
203.424 Maximum amount of distributive
shares.
203.425 Finality of determination.
203.436 Claim procedure—graduated payment mortgages.
203.438 Mortgages on Indian land insured
pursuant to section 248 of the National
Housing Act.
203.439 Mortgages on Hawaiian home lands
insured pursuant to section 247 of the National Housing Act.
203.439a Mortgages on property in Allegany
Reservation of Seneca Nation of Indians
authorized by section 203(q) of the National Housing Act.

(b) For the purposes of this subpart,
all references in part 203 of this chapter
to section 203 of the Act shall be construed to refer to section 221 of the
Act, and all references to the Mutual
Mortgage Insurance Fund shall be construed to refer to the General Insurance Fund.
[36 FR 24587, Dec. 22, 1971, as amended at 37
FR 8663, Apr. 29, 1972; 41 FR 42949, Sept. 29,
1976; 42 FR 29304, June 8, 1977; 47 FR 30754,
July 15, 1982; 48 FR 28807, June 23, 1983; 51 FR
21874, June 16, 1986; 52 FR 8069, Mar. 16, 1987;
52 FR 28470, July 30, 1987; 52 FR 48204, Dec. 21,
1987; 53 FR 9869, Mar. 28, 1988; 55 FR 34810,
Aug. 24, 1990; 61 FR 37801, July 19, 1996]

§ 221.252 Substitute mortgagors.
(a) Selling mortgagor. The mortgagee
may effect the release of a mortgagor
from personal liability on the mortgage note only if it obtains the Commissioner’s approval of a substitute
mortgagor, as provided by this section.
(b) Purchasing mortgagor. The Commissioner may approve a substitute
mortgagor with respect to any mortgage insured under subpart A of this
part, if the substitute mortgagor is to
occupy the dwelling as a principal residence or a secondary residence (as
these terms are defined in § 221.20(c)) or
is a private nonprofit or public entity
as provided in section 221(h) of the National Housing Act.

§ 221.254

(c) Applicability—current mortgagor.
Paragraph (b) of this section applies to
the Commissioner’s approval of a substitute mortgagor, only if the mortgage executed by the original mortgagor met the conditions of § 203.258(c)
of this chapter.
(d) Applicability—earlier mortgagor.
The occupancy and similar requirements set forth in § 203.258(d) of this
chapter apply to mortgages insured
under subpart A of this part.
(e) Mortgagees approved for participation in the Direct Endorsement program under § 203.3 of this chapter may,
subject to limitations established by
the Commissioner, themselves approve
an appropriate substitute mortgagor
under the section and need not obtain
further specific approval from the
Commissioner.
(f) Definition. As used in this section,
the term substitute mortgagor includes:
(1) Persons who, upon the release by
a mortgagee of a previous mortgagor
from personal liability on the mortgage note, assume this liability and
agree to pay the mortgage debts and
(2) Persons who purchase without assuming liability on the mortgage note
or purchase where no release is given
by the mortgagee to the previous mortgagor.
[55 FR 34810, Aug. 24, 1990, as amended at 57
FR 58351, Dec. 9, 1992]

§ 221.254 Mortgage
insurance
premiums.
(a) All of the provisions of §§ 203.260
through 203.295 of this chapter relating
to mortgage insurance premiums shall
apply to mortgages insured under this
subpart, except that as to mortgages
meeting the special requirements of
§ 221.60 or § 221.65, such provisions shall
only be applicable under the circumstances prescribed in paragraph (b)
of this section. Notwithstanding any
provision in the mortgage instrument,
there shall be no adjusted mortgage insurance premium or voluntary termination charge due the Commissioner on
account of the prepayment of any
mortgage or the voluntary termination
of any mortgage insurance contract
where (1) The mortgage is prepaid in
full, or (2) the Commissioner receives a
request for voluntary termination on
or after May 1, 1972.

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§ 221.255

24 CFR Ch. II (4–1–19 Edition)

(b) Whenever the interest rate on a
mortgage insured under this part as
having met the special requirement of
§ 221.60 or § 221.65 shall have been increased to the maximum rate in accordance with § 221.60(j), § 221.65(d)(4), or
§ 221.65(d)(5), the provisions of §§ 203.260
through 203.295 of this chapter relating
to mortgage insurance premiums shall
apply except that:
(1) References to the original principal amount shall be construed as the
scheduled unpaid principal balance,
without taking into account delinquent payments or prepayments, on
the date of the change in interest rate
required under the mortgage.
(2) References to the date of the
issuance of a Mortgage Insurance Certificate or the date of the endorsement
of the credit instrument or the date
the insurance becomes effective shall
be construed as the date of the change
in interest required under the mortgage.
(3) References to the first year of amortization under the mortgage shall be
construed as the period beginning on
the date of the change in interest rate
required under the mortgage and ending on the next anniversary of the beginning of amortization.
[36 FR 24587, Dec. 22, 1971, as amended at 37
FR 8663, Apr. 29, 1972]

§ 221.255 Assignment option.
(a) A mortgagee holding a mortgage
insured pursuant to a conditional or
firm commitment issued on or before
November 30, 1983 has the option to assign, transfer and deliver to the Commissioner the original credit instrument and the mortgage securing it,
provided the mortgage is not in default
at the expiration of 20 years from the
date of final endorsement of the credit
instrument. In processing a mortgagee’s claim for insurance benefits
under this section, the Commissioner
may direct the mortgagee to assign,
transfer and deliver the original credit
instrument, and the mortgage securing
it, directly to the Government National Mortgage Association (GNMA).
Upon such assignment, transfer and delivery, either to the Commissioner or
to GNMA, as directed, the mortgage insurance contract shall terminate and
the mortgagee shall be entitled to re-

ceive insurance benefits in accordance
with this section.
(b) The mortgagee may exercise its
assignment option within 1 year following the twentieth anniversary of
the date the mortgage was endorsed for
insurance.
(c) Upon the exercise of the assignment option the Commissioner shall
issue to the assignor mortgagee debentures having a total face value equal to
the amount of the original principal
obligation of the mortgage which was
unpaid on the date of the assignment,
plus accrued interest to such date.
(d) The debentures issued pursuant to
the exercise of an assignment option
shall be dated as of the date the mortgage is assigned to the Commissioner
and shall mature 10 years after such
date.
(e) The debentures issued pursuant to
the exercise of an assignment option
shall bear interest at the going Federal
rate at date of issuance. The going Federal rate means the annual rate of interest specified by the Secretary of the
Treasury as applicable to the 6-month
period which includes the issuance date
of the debentures. The Secretary of the
Treasury shall determine this applicable rate by estimating the average
yield to maturity, on the basis of daily
closing market bid quotations or prices
during the month of May or the month
of November, as the case may be, next
preceding such 6-month period, on all
outstanding marketable obligations of
the United States having a maturity
date of 8 to 12 years from the first day
of May or November, as the case may
be. If there should be no outstanding
marketable obligations of the United
States having the 8 to 12 year maturity
at the time the Secretary of the Treasury is required to determine the debenture rate involved, the obligation next
shorter than 8 years and the obligation
next longer than 12 years respectively,
shall be used.
(f) Debentures shall bear interest
from the date of issue, payable semiannually on the first day of January
and the first day of July of each year
at the rate in effect on the issue date,
a date which shall be established as
provided in § 203.410 of this chapter. The
interest rate shall be established by
the Commissioner in an amount not in

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Office of Assistant Secretary for Housing, HUD
excess of the annual rate of interest
which the Secretary of the Treasury
shall specify as applicable to the 6month period (consisting of January
through June, or July through December) which includes the issuance date
of such debentures, which applicable
rate for each 6-month period shall be
determined by the Secretary of the
Treasury, at the request of the Commissioner, by estimating the average
yield to maturity, on the basis of daily
closing market bid quotations or prices
during the calendar month next preceding the establishment of such rate
of interest, on all outstanding marketable obligations of the United States
having a maturity date of 15 years or
more from the first day of such next
preceding month, and by adjusting
such estimated average annual yield to
the nearest one-eighth of 1 per centum.
[36 FR 24587, Dec. 22, 1971, as amended at 49
FR 12697, Mar. 30, 1984]

§ 221.256 Interest rate increase and
payment of mortgage insurance
premiums on mortgages under
§ 221.60 and § 221.65.
(a) Where a mortgage meets the special requirements of § 221.60 or § 221.65,
the following procedures are applicable:
(1) The mortgagee shall determine, at
least biennially, whether the mortgagor has continued to occupy the
property securing the mortgage. If the
mortgagee determines that the mortgagor is not occupying the property or
that the mortgagor has sold the property subject to the mortgage to a purchaser not qualifying under the provisions of § 221.60(h) or § 221.65(d)(4) (as appropriate) for the continuation of a
below market interest rate, interest on
such mortgage shall be computed by
the mortgagee at the highest rate permissible under the mortgage. The computation at the higher rate shall be effective from the first day of the month
following the month in which the right
to collect interest at the increased rate
first accrued, as determined by the
mortgagee.
(2) The mortgagee shall determine
the mortgagor’s family income, at
least biennially, and shall increase the
mortgage interest pursuant to the requirements
of
§§ 221.60(g)
and

§ 221.280

221.65(d)(5), as appropriate, to comply
with the requirements of such sections.
The computation at the higher rate
shall be effective from the first day of
the month following the month in
which the mortgagee determines that
the mortgagor’s family income was increased.
(b) The mortgagee shall notify the
Commissioner, on a form prescribed by
the Commissioner, within 30 days of
making the determination of the right
to compute interest at the higher rate,
as provided in paragraph (a) of this section, of:
(1) The date on which such right first
accrued, and
(2) The outstanding principal balance
of the mortgage on the first day of the
month following the date on which
such right first accrued.
(c) The liability for payment of mortgage insurance premiums shall begin
on and be computed from the first day
of the month following the date on
which the right to compute interest at
the higher rate shall have first accrued.
[36 FR 24587, Dec. 22, 1971, as amended at 37
FR 8663, Apr. 29, 1972]

§ 221.275 Method of paying insurance
benefits.
If the application for insurance benefits is acceptable to the Commissioner,
all of the insurance claim shall be paid
in cash unless the mortgagee files a
written request with the application
for payment in debentures. If such a request is made, all of the claim shall be
paid by issuing debentures and by making a cash payment adjusting any differences between the total amount of
the claim and the amount of the debentures issued.
§ 221.280 Waived title objections.
(a) General provisions. All of the provisions of § 203.389 of this chapter (relating to the waiver by the Commissioner of objections to title) shall
apply to mortgages insured under this
subpart, with the exception of mortgages involving condominium units.
(b) Provisions applicable to condominium units. Where the mortgage involves a condominium unit, the Commissioner shall not object to title by
reason of the following matters:

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§ 221.300

24 CFR Ch. II (4–1–19 Edition)

(1) 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.
(2) Easements for public utilities
along one or more of the property
lines, provided the exercise of the
rights thereunder do not interfere with
any of the buildings or improvements
located on the subject property.
(3) Encroachments on the subject
property by improvements on adjoining
property, provided such encroachments
do not interfere with the use of any improvements on the subject property.
(4) 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.
(5) Customary buildings or use restrictions for breach of which there is
no reversion and which have not been
violated to a material extent.
SPECIAL PROVISIONS APPLICABLE ONLY
TO MORTGAGES INVOLVING CONDOMINIUM UNITS
§ 221.300 Changes in the plan of apartment ownership.
The mortgagee shall notify the Commissioner of any changes in the plan of
apartment ownership and in the administration of the property. Such notification shall be given either at the time
of the conveyance of the property or at
the time of the assignment of the
mortgage. Any changes in such plan
shall require approval by the Commissioner.
§ 221.305 Condition of the multifamily
structure.
(a) When a family unit is conveyed or
a mortgage is assigned to the Commissioner, the family unit and the common areas and facilities (including restricted common areas and facilities)
designated for the particular unit shall
be undamaged by fire, earthquake, tornado, or boiler explosion, except if the
property has been damaged, either of
the following actions shall be taken:
(1) The property may be repaired
prior to its conveyance or prior to the

assignment of the mortgage to the
Commissioner.
(2) With the prior approval of the
Commissioner, the property may be
conveyed or the mortgage assigned to
the Commissioner without repairing
the damage. In such instances, the
Commissioner shall deduct from the insurance benefits either his estimate of
the decrease in value of the family unit
or the amount of any insurance recovery received by the mortgagee, whichever is the greater.
(b) If the property has been damaged
by fire and such property was not covered by fire insurance at the time of
the damage, the mortgagee may convey the property or assign the mortgage to the Commissioner without deduction from the insurance benefits for
any loss occasioned by such fire if the
following conditions are met:
(1) The property shall have been covered by fire insurance at the time the
mortgage was insured.
(2) The fire insurance shall have been
later cancelled or renewal shall have
been refused by the insuring company.
(3) The mortgagee shall have notified
the Commissioner within 30 days (or
within such further time as the Commissioner may approve) of the cancellation of the fire insurance or of the
refusal of the insuring company to
renew the fire insurance. This notification shall have been accompanied by a
certification of the mortgagee that
diligent efforts were made, but it was
unable to obtain fire insurance coverage at reasonably competitive rates
and that it will continue its efforts to
obtain adequate fire insurance coverage at competitive rates.
§ 221.310 Assessment of taxes.
When a family unit is conveyed to
the Commissioner or a mortgage is assigned to the Commissioner, the unit
shall be assessed and subject to assessment for taxes pertaining only to that
unit.
§ 221.315 Certificate of tax assessment.
The mortgagee shall certify, as of the
date of filing for record of the deed or
assignment of the mortgage to the
Commissioner, that the family unit is
assessed and subject to assessment for
taxes pertaining to that unit.

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Office of Assistant Secretary for Housing, HUD
§ 221.320 Certificate or statement of
condition.
(a) At the time of the assignment of
the mortgage or conveyance of the
property to the Commissioner, the
mortgagee shall, as of the date of the
filing for record of the deed or assignment,
(1) Certify that the conditions of
§ 221.305(a) have been met; or
(2) Submit a statement describing
any such damage that may still exist.
(b) In the absence of evidence to the
contrary, the mortgagee’s certificate
or its statement as to damage shall be
accepted by the Commissioner as establishing the condition of the family
unit and the common areas and facilities including restricted common areas
and facilities designated for the particular unit.
§ 221.325 Cancellation of hazard insurance.
The provisions of § 203.382 of this
chapter are incorporated by reference
and shall apply to hazard insurance
policies carried solely for the family
unit.

Subpart
C—Eligibility
ments—Moderate
Projects

RequireIncome

207.252a Premiums—operating loss loans.
207.259 Insurance benefits.

(b) For the purposes of this subpart,
all references in part 207 of this chapter
to section 207 of the act shall be construed to refer to section 221 of the
Act, and all references to part 207 shall
be construed to refer to this subpart.
[36 FR 24587, Dec. 22, 1971, as amended at 37
FR 8663, Apr. 29, 1972; 42 FR 59675, Nov. 18,
1977]

§ 221.753 Termination of mortgage insurance.
In addition to the provisions of
§ 207.253a, the following requirements
apply to certain multifamily mortgages insured under section 221 of the
National Housing Act:
(a) For those projects qualifying as
eligible low income housing under
§ 248.201, the contract of insurance may
be terminated only as provided in part
248.
(b) For those projects subject to section 250(a) of the National Housing Act,
the contract of insurance may be terminated only if the Commissioner determines that the requirements of section 250(a) are met.
[55 FR 38958, Sept. 21, 1990]

§ 221.501 Eligibility requirements.
The requirements set forth in 24 CFR
part 200, subpart A, apply to multifamily project mortgages insured under
section 221 of the National Housing Act
(12 U.S.C. 1715l), as amended.
[61 FR 14405, Apr. 1, 1996]

Subpart D—Contract Rights and
Obligations—Moderate
Income Projects
§ 221.751 Cross-reference.
(a) All of the provisions of subpart B,
part 207 of this chapter, covering mortgages insured under section 207 of the
National Housing Act, apply with full
force and effect to multifamily project
mortgages insured under section 221 of
the National Housing Act, except the
following provisions:
Sec.
207.252

§ 221.755

§ 221.755 Premiums first, second, third
and operating loss loans.
All of the provisions of §§ 207.252 and
207.252a of this chapter, relating to
mortgage insurance premiums, apply
to mortgages insured under this subpart that provide for interest at the
market rate prescribed in § 221.518(a)
except that as to mortgages insured
under this subpart pursuant to section
238(c) of the Act all mortgage insurance premiums due in accordance with
§§ 207.252 and 207.252a shall be calculated on the basis of one percent.
The provisions of § 207.252. shall not
apply to:
(a) Mortgages that provide for interest during the construction period at
the market rate and for interest subsequent to final endorsement at the
below market rate prescribed in
§ 221.518(b); or

First, second, and third premium.

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§ 221.761

24 CFR Ch. II (4–1–19 Edition)

(b) Mortgages encumbering a project
in which all units are covered by an annual contributions contract issued pursuant to section 10(c) of the Housing
Act of 1937.
[36 FR 24587, Dec. 22, 1971, as amended at 42
FR 59675, Nov. 18, 1977]

§ 221.761

Forbearance relief.

(a) In a case where the mortgage is in
default, the mortgagor and the mortgagee may enter into a forbearance
agreement for the reduction or suspension of regular mortgage payments for
a specified period of time, if the following requirements are met:
(1) The mortgage was endorsed for insurance on or after July 7, 1961.
(2) The Commissioner determines
that the default was due to circumstances beyond the mortgagor’s
control and that the mortgage probably will be restored to good standing
within a reasonable period of time and
evidences such determination by written approval of the forbearance agreement.
(b) The time specified in § 207.258(a) of
this chapter, within which a mortgagee
shall give the Commissioner written
notice of its intention to file an insurance claim, shall be suspended for the
period of time specified in the forbearance agreement as long as the mortgagor complies with the requirements
of such agreement.
(c) If the mortgagor fails to meet the
requirements of a forbearance agreement or to cure the default under the
mortgage at the expiration of the forbearance period, and such failure continues for a period of 30 days, the mortgagee shall notify the Commissioner of
such failure. Within 45 days thereafter,
unless a modification or extension of
the forbearance agreement has been approved by the Commissioner, the mortgagee shall notify the Commissioner of
its election to file an insurance claim
and of its decision to either assign the
mortgage to the Commissioner or to
acquire and convey title to the property to the Commissioner. If the mortgage is assigned to the Commissioner,
the special insurance benefits prescribed in § 221.763 shall be applicable.
[36 FR 24587, Dec. 22, 1971, as amended at 51
FR 27838, Aug. 4, 1986]

§ 221.762 Payment of insurance benefits.
All of the provisions of § 207.259 of
this chapter relating to insurance benefits apply to multifamily project
mortgages insured under this subpart,
except as provided in this section:
(a) [Reserved]
(b) Below market interest rate mortgages. Where the mortgage has been finally endorsed and the special below
market interest rate provided in
§ 221.518(b) is applicable as of the date
of default, the 1 percent deduction from
insurance
benefits
prescribed
in
§ 207.259(b)(2)(iv) of this chapter shall
not be applicable.
(c) Mortgages financed with section
11(b) obligations. Where the funds for a
mortgage loan are provided by obligations that are tax-exempt under section 11(b) of the United States Housing
Act of 1937 (24 CFR part 811), the one
percent deduction from insurance benefits prescribed in § 207.259(b)(2)(iv) of
this chapter shall not be applicable to
claims with respect to multifamily
rental housing projects for which a
firm commitment for mortgage insurance was issued on or after March 12,
1979.
[36 FR 24587, Dec. 22, 1971, as amended at 44
FR 40890, July 13, 1979; 80 FR 51468, Aug. 25,
2015]

§ 221.763 Special insurance benefits—
forbearance relief cases.
(a) In the case of a mortgage that
provides for payment of interest at the
market rate prescribed in § 221.518(a), if
the mortgagor fails to meet the requirements of a forbearance agreement
or to cure the default under the mortgage at the expiration of the forbearance agreement, the mortgagee shall
be entitled to obtain a special insurance payment in cash, in lieu of the insurance benefits otherwise provided
under this subpart. To receive the special insurance payment, the mortgagee
shall assign the mortgage to the Commissioner in compliance with the requirements of § 207.258(b) of this chapter.
(b) The special insurance benefit to
the mortgagee shall be a cash payment
computed
in
accordance
with
§ 207.259(b) of this chapter, except that
in lieu of the allowance for debenture

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Office of Assistant Secretary for Housing, HUD
interest in § 207.259(b)(1)(iii) of this
chapter, the payment shall include the
amount of the unpaid accrued mortgage interest computed to the date the
assignment of the mortgage to the
Commissioner is filed for record. In addition, there shall be included in the
cash payment an amount equivalent to
the debenture interest which would
have been earned from the date the
mortgage assignment was filed for
record to the date the payment is
made; except that when the mortgagee
fails to meet any of the applicable requirements of § 207.258(b) of this chapter and § 221.761(c) within the specified
times and in a manner satisfactory to
the Commissioner (or within such further time as the Commissioner may approve in writing), such debenture interest allowance shall be computed only
to the date on which the particular required action should have been taken.
§ 221.770 Assignment option.
A mortgagee holding a conditional or
firm commitment issued on or before
November 30, 1983 (or, in the Direct Endorsement program, a property appraisal report signed by the mortgagee’s approved underwriter on or before
November 30, 1983) has the option to assign, transfer and deliver to the Commissioner the original credit instrument and the mortgage securing it,
provided that the mortgage is not in
default at the expiration of 20 years
from the date of final endorsement of
the credit instrument. In processing a
mortgagee’s claim for insurance benefits under this section, the Commissioner may direct the mortgagee to assign, transfer and deliver the original
credit instrument, and the mortgage
securing it, directly to the Government
National
Mortgage
Association
(GNMA). Upon such assignment, transfer and delivery either to the Commissioner or to GNMA, as directed, the
mortgage insurance contract shall terminate and the mortgagee shall be entitled to receive insurance benefits in
accordance with § 221.780.
[49 FR 12698, Mar. 30, 1984, as amended at 57
FR 58351, Dec. 9, 1992]

§ 221.775 Option period.
The mortgagee may exercise its option to assign within one year fol-

§ 221.790

lowing the twentieth anniversary of
the date the mortgage was finally endorsed for insurance.
§ 221.780

Issuance of debentures.

Upon the exercise of the assignment
option and the satisfactory performance of the requirements as to assignment set out in § 207.258 of this chapter,
the Commissioner shall issue the assignor mortgagee debentures having a
total par value equal to the amount of
the original principal obligation of the
mortgage which was unpaid on the date
of the assignment, plus accrued interest to such date.
[59 FR 49816, Sept. 30, 1994]

§ 221.785 Date of maturity of debentures.
The debentures issues pursuant to
the exercise of an assignment option
shall be dated as of the date the mortgage is assigned to the Commissioner
and shall mature 10 years after such
date.
§ 221.790

Debenture interest rate.

The debentures issued pursuant to
the exercise of an assignment option
shall bear interest at the going Federal
rate at date of issuance. The going Federal rate means the annual rate of interest specified by the Secretary of the
Treasury as applicable to the 6-month
period which includes the issuance date
of the debentures. The Secretary of the
Treasury shall determine this applicable rate by estimating the average
yield to maturity, on the basis of daily
closing market bid quotations or prices
during the month of May or the month
of November, as the case may be, next
preceding such 6-month period, on all
outstanding marketable obligations of
the United States having a maturity
date of 8 to 12 years from the first day
of May or November, as the case may
be. If there should be no outstanding
marketable obligations of the United
States having the 8 to 12 year maturity
at the time the Secretary of the Treasury is required to determine the debenture rate involved, the obligation next
shorter than 8 years and the obligation
next longer than 12 years respectively
shall be used.

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§ 221.795

24 CFR Ch. II (4–1–19 Edition)

§ 221.795 Displacement—below market
interest rate mortgages.
(a) Minimizing displacement. Consistent with the other goals and objectives of this part, Owners shall assure
that they have taken all reasonable
steps to minimize the displacement of
persons (households, businesses, nonprofit organizations, and farms) as a
result of a project assisted under this
part.
(b) Temporary relocation. The following policies cover residential tenants who will not be required to move
permanently but who must relocate
temporarily to permit rehabilitation or
other work for the project. Such tenants must be provided:
(1) Reimbursement for all reasonable
out-of-pocket expenses incurred in connection with the temporary relocation,
including the cost of moving to and
from the temporarily occupied housing,
any increase in monthly rent/utility
costs and any incidental expenses.
(2) Appropriate advisory services, including reasonable advance written notice of:
(i) The date and approximate duration of the temporary relocation;
(ii) The location of the suitable, decent, safe, and sanitary dwelling to be
made available for the temporary period;
(iii) The terms and conditions under
which the tenant may lease and occupy
a suitable, decent, safe, and sanitary
dwelling in the building/complex following completion of the rehabilitation; and
(iv) The provisions of paragraph (b)(1)
of this section.
(c) Relocation assistance for displaced
persons. A ‘‘displaced person’’ (defined
in paragraph (g) of this section) must
be provided relocation assistance at
the levels described in, and in accordance with the requirements of, the Uniform Relocation Assistance and Real
Property Acquisition Policies Act of
1970, as amended (URA) (42 U.S.C. 4201–
4655) and implementing regulations at
49 CFR part 24. A ‘‘displaced person’’
shall be advised of his or her rights
under the Fair Housing Act (42 U.S.C.
3601–19), and, if the representative comparable replacement dwelling used to
establish the amount of the replacement housing payment to be provided

to a minority person is located in an
area of minority concentration, such
person also shall be given, if possible,
referrals to comparable and suitable,
decent, safe and sanitary replacement
dwellings not located in such areas.
(d) Real property acquisition requirements. The acquisition of real property
for a project is subject to the URA and
the requirements described in 49 CFR
part 24, subpart B.
(e) Appeals. A person who disagrees
with the Owner’s determination concerning whether the person qualifies as
a ‘‘displaced person,’’ or with the
amount of relocation assistance for
which the person is eligible, may file a
written appeal of that determination
with the Owner. A person who is dissatisfied with the Owner’s determination
on his or her appeal may submit a written request for review of that determination to the HUD Field Office.
(f) Responsibility of Owner. (1) The
Owner shall certify (i.e., provide assurance of compliance as required by 49
CFR part 24) that the Owner will comply with the URA, the regulations at 49
CFR part 24, and the requirements of
this section. The Owner shall ensure
such compliance notwithstanding any
third party’s contractual obligation to
the Owner to comply with these provisions.
(2) The cost of required relocation assistance is an eligible project cost in
the same manner and to the same extent as other project costs. Such costs
also may be paid with funds available
from other sources.
(3) The Owner shall maintain records
in sufficient detail to demonstrate
compliance with these provisions. The
Owner shall maintain data on the race,
ethnic, gender, and disability status of
displaced persons.
(g) Definition of displaced person. (1)
For purposes of this section, the term
displaced person means a person (household, business, nonprofit organization,
or farm) that moves from real property, or moves personal property from
real property, permanently, as a direct
result of acquisition, rehabilitation, or
demolition for a project assisted under
this part. The term ‘‘displaced person’’
includes, but may not be limited to:

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Office of Assistant Secretary for Housing, HUD
(i) A tenant-occupant of a dwelling
unit who moves from the building/complex, permanently, after the Owner
executes the agreement covering the
rehabilitation, demolition or acquisition, if the move occurs before the tenant is provided written notice offering
him or her the opportunity to lease and
occupy a suitable, decent, safe, and
sanitary dwelling in the same building/
complex, under reasonable terms and
conditions, upon completion of the
project. Such reasonable terms and
conditions include a monthly rent and
estimated average monthly utility
costs that do not exceed the amount
approved by HUD;
(ii) A tenant-occupant of a dwelling
who is required to relocate temporarily, but does not return to the building/complex, if either:
(A) The tenant is not offered payment for all reasonable out-of-pocket
expenses incurred in connection with
the temporary relocation, including
the cost of moving to and from the
temporarily occupied unit, any increased housing costs and incidental
expenses; or
(B) Other conditions of the temporary relocation are not reasonable;
or
(iii) A tenant-occupant of a dwelling
who moves from the building/complex,
permanently, after he or she has been
required to move to another dwelling
unit in the same building/complex in
order to carry out the project, if either:
(A) The tenant is not offered reimbursement for all reasonable out-ofpocket expenses incurred in connection
with the move; or
(B) Other conditions of the move are
not reasonable; or
(iv) Any person, including a person
who moves before the Owner’s execution of the agreement covering the rehabilitation, demolition, or acquisition, if the Owner or HUD determines
that the displacement resulted directly
from rehabilitation, demolition or acquisition for the assisted project.
(2) Notwithstanding the provisions of
paragraph (g)(1) of this section, a person does not qualify as a ‘‘displaced
person’’ (and is not eligible for relocation assistance under the URA or this
section), if:

§ 221.800

(i) The person has been evicted for serious or repeated violation of the terms
and conditions of the lease or occupancy agreement, violation of applicable Federal, State or local law, or other
good cause, and HUD determines that
the eviction was not undertaken for
the purpose of evading the obligation
to provide relocation assistance;
(ii) The person moved into the property after the execution of the agreement covering the rehabilitation, demolition or acquisition and, before signing a lease and commencing occupancy, received written notice of the
project, its possible impact on the person (e.g., the person may be displaced,
temporarily relocated or suffer a rent
increase) and the fact that he or she
would not qualify as a ‘‘displaced person’’ (or for any assistance provided
under this section) as a result of the
project;
(iii) The person is ineligible under 49
CFR 24.2(g)(2); or
(iv) HUD determines that the person
was not displaced as a direct result of
acquisition, rehabilitation, or demolition for the project.
(3) The Owner may ask HUD, at any
time, to determine whether a displacement is or would be covered by this
section.
(h) Definition of initiation of negotiations. For purposes of determining the
formula for computing the replacement
housing assistance to be provided to a
residential tenant displaced as a direct
result of privately undertaken rehabilitation, demolition, or acquisition of
the real property, the term initiation of
negotiations means the Owner’s execution of the agreement covering the rehabilitation, demolition, or acquisition.
(Approved by Office of Management and
Budget under OMB Control Number 2506–
0121)
[59 FR 29330, June 6, 1994]

Subpart E—Servicing
Responsibilities—Low Cost Homes
§ 221.800 Cross-reference.
All of the provisions of subpart C,
part 203 of the chapter concerning the
responsibilities of servicers of mortgages insured under section 203 of the

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Pt. 231

24 CFR Ch. II (4–1–19 Edition)

National Housing Act apply to mortgages covering one- to four-family
dwellings to be insured under section
221 of the National Housing Act, except
§§ 203.664 through 203.666.

PART 232—MORTGAGE INSURANCE FOR NURSING HOMES, INTERMEDIATE CARE FACILITIES,
BOARD AND CARE HOMES, AND
ASSISTED LIVING FACILITIES

[52 FR 48204, Dec. 21, 1987, and 53 FR 9869,
Mar. 28, 1988]

Sec.
232.1 Eligibility requirements, generally;
applicability of certain requirements.
232.2 License.
232.3 Eligible borrower.
232.7 Bathroom.
232.11 Establishment and maintenance of
long-term debt service reserve account.

PART 231—HOUSING MORTGAGE
INSURANCE FOR THE ELDERLY
Subpart A—Eligibility Requirements
Sec.
231.1

Subpart A—Eligibility Requirements

Eligibility requirements.

Subpart B—Contract Rights and
Obligations

Subpart B—Contract Rights and
Obligations
231.251

Cross-reference.

AUTHORITY: 12 U.S.C. 1715b, 1715v; 42 U.S.C.
3535(d).
SOURCE: 36 FR 24615, Dec. 22, 1971, unless
otherwise noted.

Subpart C—Eligibility Requirements—Supplemental Loans To Finance Purchase
and Installation of Fire Safety Equipment

Subpart A—Eligibility
Requirements
§ 231.1

Eligibility requirements.

The requirements set forth in 24 CFR
part 200, subpart A, apply to multifamily project mortgages insured under
section 231 of the National Housing Act
(12 U.S.C. 1715v), as amended.
[61 FR 14406, Apr. 1, 1996]

Subpart B—Contract Rights and
Obligations
§ 231.251

232.251 Cross-reference.
232.252 Definitions.
232.254 Withdrawal of project funds, including for repayments of advances from the
borrower, operator, or management
agent.
232.256 Partial payment of claims.

232.500

Definitions.

232.505
232.510
232.515
232.520
er.
232.522

Application and application fee.
Commitment and commitment fee.
Refund of fees.
Maximum fees and charges by lend-

FEES AND CHARGES

Inspection fee.
ELIGIBLE SECURITY INSTRUMENTS

Cross-reference.

(a) All of the provisions of part 207,
subpart B of this chapter covering
mortgages insured under section 207 of
the National Housing Act apply to
mortgages insured under section 231 of
such Act.
(b) For the purposes of this subpart
all references in part 207 of this chapter
to section 207 of the Act shall be construed to refer to section 231 of the
Act.

232.525 Note and security form.
232.530 Disbursement of proceeds.
232.535 Loan multiples—minimum principal.
232.540 Method of loan payment and amortization period.
232.545 Covenant against liens.
232.550 Accumulation of next premium.
232.555 Security instrument and lien.
232.560 Interest rate.
232.565 Maximum loan amount.
232.570 Endorsement of credit instrument.
232.580 Application of payments.
232.585 Prepayment privilege and prepayment charge.
232.586 Minimum principal loan amount.
PROPERTY REQUIREMENTS
232.590
232.591

Eligibility of property.
Smoke detectors.

232.595

Eligibility of title.

TITLE

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Pt. 231

24 CFR Ch. II (4–1–19 Edition)

National Housing Act apply to mortgages covering one- to four-family
dwellings to be insured under section
221 of the National Housing Act, except
§§ 203.664 through 203.666.

PART 232—MORTGAGE INSURANCE FOR NURSING HOMES, INTERMEDIATE CARE FACILITIES,
BOARD AND CARE HOMES, AND
ASSISTED LIVING FACILITIES

[52 FR 48204, Dec. 21, 1987, and 53 FR 9869,
Mar. 28, 1988]

Sec.
232.1 Eligibility requirements, generally;
applicability of certain requirements.
232.2 License.
232.3 Eligible borrower.
232.7 Bathroom.
232.11 Establishment and maintenance of
long-term debt service reserve account.

PART 231—HOUSING MORTGAGE
INSURANCE FOR THE ELDERLY
Subpart A—Eligibility Requirements
Sec.
231.1

Subpart A—Eligibility Requirements

Eligibility requirements.

Subpart B—Contract Rights and
Obligations

Subpart B—Contract Rights and
Obligations
231.251

Cross-reference.

AUTHORITY: 12 U.S.C. 1715b, 1715v; 42 U.S.C.
3535(d).
SOURCE: 36 FR 24615, Dec. 22, 1971, unless
otherwise noted.

Subpart C—Eligibility Requirements—Supplemental Loans To Finance Purchase
and Installation of Fire Safety Equipment

Subpart A—Eligibility
Requirements
§ 231.1

Eligibility requirements.

The requirements set forth in 24 CFR
part 200, subpart A, apply to multifamily project mortgages insured under
section 231 of the National Housing Act
(12 U.S.C. 1715v), as amended.
[61 FR 14406, Apr. 1, 1996]

Subpart B—Contract Rights and
Obligations
§ 231.251

232.251 Cross-reference.
232.252 Definitions.
232.254 Withdrawal of project funds, including for repayments of advances from the
borrower, operator, or management
agent.
232.256 Partial payment of claims.

232.500

Definitions.

232.505
232.510
232.515
232.520
er.
232.522

Application and application fee.
Commitment and commitment fee.
Refund of fees.
Maximum fees and charges by lend-

FEES AND CHARGES

Inspection fee.
ELIGIBLE SECURITY INSTRUMENTS

Cross-reference.

(a) All of the provisions of part 207,
subpart B of this chapter covering
mortgages insured under section 207 of
the National Housing Act apply to
mortgages insured under section 231 of
such Act.
(b) For the purposes of this subpart
all references in part 207 of this chapter
to section 207 of the Act shall be construed to refer to section 231 of the
Act.

232.525 Note and security form.
232.530 Disbursement of proceeds.
232.535 Loan multiples—minimum principal.
232.540 Method of loan payment and amortization period.
232.545 Covenant against liens.
232.550 Accumulation of next premium.
232.555 Security instrument and lien.
232.560 Interest rate.
232.565 Maximum loan amount.
232.570 Endorsement of credit instrument.
232.580 Application of payments.
232.585 Prepayment privilege and prepayment charge.
232.586 Minimum principal loan amount.
PROPERTY REQUIREMENTS
232.590
232.591

Eligibility of property.
Smoke detectors.

232.595

Eligibility of title.

TITLE

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Office of Assistant Secretary for Housing, HUD
unit in the same building/complex in
order to carry out the project, if either:
(A) The tenant is not offered reimbursement for all reasonable out-ofpocket expenses incurred in connection
with the move; or
(B) Other conditions of the move are
not reasonable; or
(iv) Any person, including a person
who moves before the mortgagor’s execution of the agreement covering the
rehabilitation, demolition, or acquisition, if the mortgagor or HUD determines that the displacement resulted
directly from rehabilitation, demolition or acquisition for the assisted
project.
(2) Notwithstanding the provisions of
paragraph (g)(1) of this section, a person does not qualify as a ‘‘displaced
person’’ (and is not eligible for relocation assistance under the URA or this
section), if:
(i) The person has been evicted for serious or repeated violation of the terms
and conditions of the lease or occupancy agreement, violation of applicable Federal, State or local law, or other
good cause, and HUD determines that
the eviction was not undertaken for
the purpose of evading the obligation
to provide relocation assistance;
(ii) The person moved into the property after the execution of the agreement covering the rehabilitation, demolition or acquisition and, before signing a lease or commencing occupancy,
was provided written notice of the
project, its possible impact on the person (e.g., the person may be displaced,
temporarily relocated or suffer a rent
increase) and the fact that the person
would not qualify as a ‘‘displaced person’’ (or for any assistance provided
under this section) as a result of the
project;
(iii) The person is ineligible under 49
CFR 24.2(g)(2); or
(iv) HUD determines that the person
was not displaced as a direct result of
acquisition, rehabilitation, or demolition for the project;
(3) The mortgagor may request, at
any time, HUD’s determination of
whether a displacement is or would be
covered by this section.
(h) Definition of initiation of negotiations. For purposes of determining the
formula for computing the replacement

Pt. 241

housing assistance to be provided to a
residential tenant displaced as a direct
result of privately undertaken rehabilitation, demolition or acquisition of the
real property, the term initiation of negotiations means the mortgagor’s execution of the agreement covering the
rehabilitation, demolition or acquisition.
(Approved by Office of Management and
Budget under OMB Control Number 2506–
0121)
[59 FR 29331, June 6, 1994]

PART 241—SUPPLEMENTARY FINANCING
FOR
INSURED
PROJECT MORTGAGES
Subpart A—Eligibility Requirements
Sec.
241.1

Eligibility requirements.

Subpart B—Contract Rights and
Obligations
241.251 Cross-reference.
241.260 Definitions.
241.261 Payment of insurance benefits.
241.265 Insurance of property against flood.
241.270 Refund upon termination of insurance.
241.275 No vested right in fund.

Subpart C—Eligibility Requirements—Supplemental Loans To Finance Purchase
and Installation of Energy Conserving
Improvements, Solar Energy Systems,
and Individual Utility Meters in Multifamily Projects Without a HUD-Insured
or HUD-Held Mortgage
241.500

Definitions.
FEES AND CHARGES

241.505 Processing of applications and required fees.
241.510 Commitments.
241.515 Inspection fee.
241.520 Fees on increases.
241.525 Refund of fees.
241.530 Maximum fees and charges by lender.
ELIGIBLE SECURITY INSTRUMENTS
241.530a Note and security form.
241.535 Loan multiples—minimum principal.
241.540 Method of loan payment and amortization period.
241.545 Covenant against liens.
241.550 Accumulation of next premium.
241.555 Security instrument and lien.
241.560 Agreed interest rate.

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Pt. 241

24 CFR Ch. II (4–1–19 Edition)

241.565 Maximum loan amount.
241.570 Insurance endorsement.
241.580 Application of payments.
241.585 Prepayment privilege and prepayment charge.
241.586 Minimum principal loan amount.

EXTENSION OF TIME
241.897

Actions to be taken by lender.

241.900
241.905

No vested right in fund.
Effect of amendments.

RIGHTS IN HOUSING FUND

PROPERTY REQUIREMENTS
241.590

Subpart E—Insurance for Equity Loans and
Acquisition Loans—Eligibility Requirements

Eligibility of property.
TITLE

241.595 Eligibility of title.
241.600 Title evidence.
FORM OF CONTRACT
241.605
241.610
241.615

Contract requirements.
Assurance of completion.
Certification of cost requirements.
ELIGIBLE BORROWERS

241.625 Eligible borrowers.
241.626 Disclosure and verification of Social
Security and Employer Identification
Numbers.
SPECIAL REQUIREMENTS
241.630 Maximum insurance against loss.
241.635 Regulatory agreement.
241.640 Employment discrimination prohibited.
241.645 Labor standards and prevailing wage
requirements.

Subpart D—Contract Rights and Obligations—Multifamily Projects Without a
HUD-Insured or HUD-Held Mortgage
241.800

Definitions.
PREMIUMS

241.805 Insurance premiums.
241.805a Mortgagee’s late charge.
241.815 Termination of insurance.
241.825 Pro rata refund of insurance premium.
RIGHTS AND DUTIES OF LENDER UNDER THE
CONTRACT OF INSURANCE
241.830 Definition of default.
241.840 Date of default.
241.850 Notice of default.
241.860 Commissioner’s right to require acceleration.
241.865 Election by the lender.
241.875 Maximum claim period.
241.880 Items to be delivered on submitting
claim.
241.885 Insurance benefits.
241.890 Characteristics of debentures.
241.893 Cash adjustment.
ASSIGNMENTS
241.895

241.1000 Purpose and scope.
241.1005 Definitions.
241.1010 Feasibility letter.
241.1015 Processing of applications and required fees.
241.1020 Commitments.
241.1025 Refund of fees.
241.1030 Mortgage insurance premiums.
241.1035 Charges by lender.
241.1040 Eligible lenders.
241.1045 Note and security form.
241.1046 Rental assistance.
241.1050 Method of loan payment.
241.1055 Date of first payment to principal.
241.1060 Maturity.
241.1065 Maximum loan amount—loans insured in connection with a plan of action
under subpart C of part 248 of this chapter.
241.1067 Maximum loan amount—loans insured in connection with a plan of action
under subpart B of part 248 of this chapter.
241.1068 Renegotiation of an equity loan.
241.1069 Escrow requirements.
241.1070 Agreed interest rate.
241.1080 Eligibility of title.
241.1085 Title evidence.
241.1090 Accumulation of next premium.
241.1095 Application of payments.
241.1100 Prepayment privilege and charges.
241.1105 Late charges.
241.1120 Mortgagee’s consent.

Subpart F—Insurance for Equity Loans and
Acquisition Loans—Contract Rights
and Obligations
241.1200 Cross-references.
241.1205 Payment of insurance benefits.
241.1210 Condition for payment of insurance
benefits.
241.1215 Calculation of insurance benefits.
241.1220 Termination of insurance benefits.
241.1230 No vested right in fund.
241.1235 Cross default.
241.1245 Insurance endorsement.
241.1250 Effect of endorsement.
AUTHORITY: 12 U.S.C. 1715b, 1715z–6, and
1735d; 42 U.S.C. 3535(d).
SOURCE: 36 FR 24653, Dec. 22, 1971, unless
otherwise noted.

Assignment of insured loans.

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Office of Assistant Secretary for Housing, HUD

Subpart A—Eligibility
Requirements
§ 241.1

Eligibility requirements.

The requirements set forth in 24 CFR
part 200, subpart A, apply to multifamily project mortgages insured under
section 241 of the National Housing Act
(12 U.S.C. 1715z–6), as amended.

Cross-reference.

(a) Projects with a HUD-insured or
HUD-held mortgage. All of the provisions of subpart B, part 207 of this
chapter, covering mortgages insured
under section 207 of the National Housing Act, apply with full force and effect
to multifamily project and group practice facility mortgages insured under
section 241 of the National Housing
Act, except the following provisions:
Sec.
207.251
207.253a
207.259
207.260
207.262

Definitions.
Termination of insurance contract.
Insurance benefits.
Protection of mortgage security.
No vested right in fund.

(b) For the purposes of this subpart,
the terms mortgagor, mortgagee and
mortgage, as used in subpart B, part 207
of this chapter shall be construed to
mean borrower, lender and supplementary loan (including the security instrument), respectively.
(c) Projects without a HUD-insured or
HUD-held mortgage. The provisions of
subpart D of this part shall be applicable to a project without a HUD-insured
or HUD-held mortgage that is receiving
a loan insured under subpart A of this
part in connection with a plan of action approved by the Commissioner
under part 248 of this chapter.
[36 FR 24653, Dec. 22, 1971, as amended at 37
FR 8664, Apr. 29, 1972; 48 FR 57129, Dec. 28,
1983; 57 FR 12037, Apr. 8, 1992]

§ 241.260

Payment of insurance bene-

All of the provisions of § 207.259 of
this chapter relating to insurance benefits shall apply to multifamily loans
insured under this subpart.

Subpart B—Contract Rights and
Obligations
§ 241.251

dition, the term contract of insurance,
as used in this subpart, means the
agreement evidenced by endorsement
of the credit instrument by the Commissioner or his duly authorized representative, and includes the provisions of this subpart and of the National Housing Act.
§ 241.261
fits.

[61 FR 14407, Apr. 1, 1996]

§ 241.275

Definitions.

All of the definitions contained in
§ 241.1 shall apply to this subpart. In ad-

[80 FR 51469, Aug. 25, 2015]

§ 241.265 Insurance
against flood.

of

The mortgaged property shall be insured against flood as stipulated by the
Federal Housing Commissioner. The
mortgagee shall obtain such coverage
in the event the mortgagor fails to do
so. If the mortgagee fails to pay any
premiums necessary to keep the mortgaged premises so insured, the contract
of mortgage insurance may be terminated at the election of the Commissioner.
[39 FR 26023, July 16, 1974]

§ 241.270 Refund upon termination of
insurance.
Upon termination of the insurance
contract by payment in full or by voluntary termination, the Commissioner
shall refund to the lender for the account of the borrower an amount equal
to the pro rata portion of the current
annual loan insurance premium theretofore paid, which is applicable to the
portion of the year subsequent to (a)
the date of the prepayment or (b) the
effective date of the voluntary termination of the contract of insurance.
§ 241.275

No vested right in fund.

Neither the lender nor the borrower
shall have any vested or other right in
the insurance fund under which the
loan is insured.

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§ 241.500

24 CFR Ch. II (4–1–19 Edition)

Subpart
C—Eligibility
Requirements—Supplemental Loans
To Finance Purchase and Installation of Energy Conserving Improvements, Solar
Energy Systems, and Individual Utility Meters in Multifamily Projects Without a HUDInsured or HUD-Held Mortgage
SOURCE: 45 FR 57983, Aug. 29, 1980, unless
otherwise noted.

§ 241.500 Definitions.
In addition to the definitions contained in subpart A of this part, incorporated herein by reference, except
§ 241.1(f), (h) and (i), the following
terms, as used in § 241.500 et seq., shall
have the meaning indicated:
(a) Approved lender means a financial
institution or other mortgagee approved by the Commissioner as eligible
for insurance under section 2 of the National Housing Act, or a mortgagee approved under section 203(b)(1) of the
National Housing Act, or a state housing agency approved pursuant to 24
CFR 883.102.
(b) Borrower means the owner of a
project held in fee simple or of a leasehold interest which is not now covered
by a mortgage insured or held by the
Secretary.
(c) Energy saving loan means any
form of secured obligation used in connection with the purchase and installation of energy conserving improvements.
(d) Multifamily project means a project
which consists of not less than five
dwelling units on one site, each such
unit providing complete living facilities including provisions for cooking,
eating, and sanitation within the unit
and which is not now covered by a
mortgage insured or held by the Secretary.
FEES AND CHARGES
§ 241.505 Processing of applications
and required fees.
(a) Preapplication conference. The
local HUD Office will determine whether participation in a preapplication
conference is required as a condition to

submission of an initial application for
a firm commitment for insurance of an
energy savings improvement loan on a
project. An application for a firm commitment for insurance must be submitted by both the project sponsor and
an approved lender. Applications shall
be submitted to the local HUD Office
on HUD-approved forms. No application will be considered unless accompanied by all exhibits required by the
form and program handbooks.
(b) Application for firm commitment. An
application for a firm commitment
shall be accompanied by the payment
of an application fee of $5 per thousand
dollars of the requested loan amount to
be insured.
(c) Cross-reference. The provisions of
paragraphs (e) (Inspection fee), (f)(1)
(Fee on increases), (g) (Reopening of
expired commitments), (i) (Refund of
fees), and (j) (Fees not required) of
§ 200.40 of this chapter apply to applications submitted under subpart E of this
part.
[61 FR 14416, Apr. 1, 1996]

§ 241.510

Commitments.

(a) Firm commitment. The issuance of
a firm commitment indicates the Commissioner’s approval of the application
for insurance and sets forth the terms
and conditions upon which the loan
will be insured.
(b) Types of firm commitment. (1)
Where the amount of the loan is
$250,000 or more, the firm commitment
may provide for the insurance of advances of loan money made during construction or may provide for the insurance of the loan after completion of
the improvements.
(2) Where the amount of the loan is
less than $250,000, the firm commitment shall provide for insurance of the
loan after completion of the improvements.
(c) Term of commitment. (1) A firm
commitment to insure advances shall
be effective for a period of not more
than 60 days from the day of issuance.
(2) A firm commitment to insure
upon completion shall be effective for a

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Office of Assistant Secretary for Housing, HUD
designated term within which the borrower is required to begin construction, and if construction is begun as required, the commitment shall be effective for such additional period, estimated by the Commissioner, as will
allow for completion of construction.
(3) The term of a firm commitment
may be extended in such a manner as
the Commissioner may prescribe.
[61 FR 14417, Apr. 1, 1996]

§ 241.515 Inspection fee.
The firm commitment may provide
for the payment of an inspection fee in
an amount not to exceed $5 per thousand dollars of the commitment. If an
inspection fee is required, it shall be
paid as follows:
(a) If the case involves the insurance
of advances, it shall be paid at the time
of initial endorsement.
(b) If the case involves insurance
upon completion, it shall be paid prior
to the date construction is begun.
§ 241.520 Fees on increases.
(a) Increase in firm commitment prior to
endorsement. An application filed prior
to initial endorsement (or prior to endorsement in a case involving insurance upon completion), for an increase
in the amount of an outstanding firm
commitment shall be accompanied by a
combined additional application and
commitment fee. This combined additional fee shall be in an amount which
will aggregate $3 per thousand dollars
of the amount of the requested increase. if an inspection fee was required in the original commitment, an
additional inspection fee shall be paid
in an amount computed at the same
dollar rate per thousand dollars of the
amount of increase in commitment as
was used for the ispection fee required
in the original commitment. When insurance of advances is involved, the additional inspection fee shall be paid at
time of initial endorsement. When insurance upon completion is involved,
the additional inspection fee shall be
paid prior to the date construction is
begun or if construction has begun, it
shall be paid with the application for
increase.
(b) Increase in loan between initial and
final endorsement. Upon an application,
filed between initial and final endorse-

§ 241.530

ment, for an increase in the amount of
the loan, either by amendment or by
substitution of a new loan, a combined
additional application and commitment fee shall accompany the application. This combined additional fee
shall be in an amount which will aggregate $3 per thousand dollars of the
amount of the increase requested. If an
inspection fee was required in the
original commitment, an additional inspection fee shall accompany the application in an amount not to exceed $5
per thousand dollars of the amount of
the increase requested.
§ 241.525

Refund of fees.

If the amount of the commitment
issued or an increase in loan prior to
endorsement is less than the amount
applied for, the Commissioner shall refund the excess amount of the application and commitment fees submitted
by the applicant. If an application is
rejected before it is assigned for processing, or in such other instances as
the Commissioner may determine, the
entire application and commitment
fees or any portion thereof may be returned to the applicant. Commitment,
inspection, and reopening fees may be
refunded, in whole or in part if it is determined by the Commissioner that the
installation of energy conserving improvements for the project has been
prevented because of condemnation
proceedings or other legal action taken
by a governmental body or public agency, or in such other instances as the
Commissioner may determine.
§ 241.530 Maximum fees and charges
by lender.
The lender may collect from the borrower the amount of the fees provided
for in this subpart. The lender may
also collect from the borrower an initial service charge in an amount not to
exceed 2 percent of the original principal amount of the loan to reimburse
the lender for the cost of originating
and closing the transaction. Any additional charges shall be subject to the
prior approval of the Commissioner.

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§ 241.530a

24 CFR Ch. II (4–1–19 Edition)

ELIGIBLE SECURITY INSTRUMENTS
§ 241.530a

Note and security form.

The lender shall present for insurance a note and security instrument,
on forms approved by the Commissioner for use in the jurisdiction in
which the property to be improved is
located.
[45 FR 57983, Aug. 29, 1980, as amended at 45
FR 80276, Dec. 4, 1980]

§ 241.535 Loan
principal.

multiples—minimum

The loan shall involve a principal obligation in multiples of $100, and the
minimum principal obligation shall be
$10,000.
§ 241.540 Method of loan payment and
amortization period.
(a) Monthly payments. The loan shall
provide for monthly payments on the
first day of each month on account of
interest and principal and shall provide
for payment in accordance with the
amortization plan as agreed upon by
the borrower, the lender and the Commissioner.
(b) Amortization period. (1) The loan
shall have an amortization of either 5,
10, or 15 years by providing for either
60, 120, or 180 monthly amortization
payments. No energy saving loan shall
have an amortization period in excess
of 15 years unless the amount of the
loan exceeds $50,000.00, in which event
the amortization period may be increased to 20 years, with a provision for
240 monthly amortization payments.
(2) In any event, the loan shall have
a maturity satisfactory to the Commissioner of not less than 2 or more than
20 years from the date of the beginning
of amortization, or the Commissioner’s
estimate of the remaining economic
life of the structure, whichever is the
lesser.
(3) The Commissioner shall establish
the date of the first payment to principal, which shall be no later than the
first day of the second month following
the date of final endorsement (for
projects involving insurance of advances) or endorsement (for projects
involving insurance upon completion)
of the loan for insurance.

§ 241.545 Covenant against liens.
The security instrument shall contain a covenant against the creation by
the borrower of additional liens against
the property superior or inferior to the
lien of such instrument, except with
the prior approval of the Commissioner.
§ 241.550 Accumulation of next premium.
The security instrument shall provide for payments by the borrower to
the lender on each interest payment
date of an amount sufficient to accumulate in the hands of the lender one
payment period prior to its due date,
the next annual insurance premium
payable by the lender to the Commissioner.
§ 241.555 Security instrument and lien.
(a) The security instrument shall
cover the entire property included in
the project, shall be a lien on the real
property of the project under the laws
of the jurisdiction in which the project
is located, and may be junior to such
prior liens or mortgage indebtedness as
the Commissioner may approve. The
security instrument shall contain a
provision that a default under the first
mortgage is a default under the supplementary loan security instrument.
(b) For bond-financed projects where
the bond resolution contains a provision prohibiting the creation of additional liens, the Commissioner may accept at his/her option:
(1) A first lien on another property
whose fair market value as determined
by the Commissioner equals or exceeds
the amount of the loan insured under
this part;
(2) A Collateral Account in an
amount not less than the amount of
the loan insured under this part funded
with cash or negotiable bonds or securities backed by the full faith and credit of the United States Government; or
(3) Other security acceptable to the
Commissioner.
§ 241.560 Agreed interest rate.
(a) The mortgage shall bear interest
at the rate agreed upon by the lender
and the borrower.
(b) Interest shall be payable in
monthly installments on the principal

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Office of Assistant Secretary for Housing, HUD
amount of the loan outstanding on the
due date of each installment.
[45 FR 57983, Aug. 29, 1980, as amended at 49
FR 19459, May 8, 1984]

§ 241.565 Maximum loan amount.
The principal amount of the loan
shall in no event exceed the cost of the
energy conserving improvements including the purchase thereof, cost of
installation, architect’s fees, interest
during construction and such other
miscellaneous fees and charges incident to construction as determined by
the Commissioner. Nor shall the principal amount of the loan exceed the
lesser of the following:
(a) An amount which can be supported by residual income, which is the
amount of net income remaining after
payment of all existing debt service requirements and deduction of proprietary earnings, as determined by the
Commissioner. The computation of net
income shall take into account the
amount which will be saved in operating costs over the period of repayment of the loan as a result of the installation of the energy conserving improvements.
(b) An amount which, when added to
the existing outstanding indebtedness,
does not exceed the Commissioner’s estimate of the value of the project after
the energy conserving improvements
are installed.
§ 241.570 Insurance endorsement.
(a) Initial endorsement. The Commissioner shall indicate his/her insurance
of the mortgage by endorsing the original credit instrument and identifying
the section of the Act and the regulations under which the mortgage is insured and the date of insurance.
(b) Final endorsement. When all advances of mortgage proceeds have been
made and all the terms and conditions
of the commitment have been complied
with to the satisfaction of the Commissioner, he/she shall indicate on the
original credit instrument the total approved for insurance and again endorse
such instrument.
(c) Effect of endorsement. From the
date of initial endorsement, the Commissioner and the mortgagee or lender
shall be bound by the provisions of this
subpart to the same extent as if they

§ 241.586

had executed a contract including the
provisions of this subpart and the applicable sections of the Act.
(d) Insurance upon completion. When
all advances of mortgage proceeds have
been made and all the terms and conditions of the commitment have been
complied with to the satisfaction of the
Commissioner, he/she shall indicate
the total approved for insurance and
endorse the credit instrument, identifying the date of insurance.
§ 241.580 Application of payments.
(a) The security instrument shall
provide that all monthly payments to
be made by the borrower shall be added
together and this aggregate amount
shall be paid by the borrower upon
each monthly payment date in a single
payment. The lender shall apply the
payment to the following items in the
order set forth:
(1) Premium charges under the contract of insurance;
(2) Interest on the loan;
(3) Amortization of the principal of
the loan.
(b) Any deficiency in the amount of
any monthly payments required under
paragraph (a) of this section shall constitute an event of default and the loan
shall further provide for a grace period
of 30 days within which time the default must be cured.
§ 241.585 Prepayment privileges and
prepayment charge.
The security instrument shall contain a provision permitting prepayment of the loan in whole or in part
upon any interest payment date after
giving to the lender 30 days advance
written notice and it may contain a
provision, with the approval of the
Commissioner, for a reasonable charge
in the event of prepayment. The borrower shall be permitted to prepay up
to 15 percent of the original principal
amount of the loan in any one calendar
year without an additional charge. A
provision for a charge in the event of
prepayment may not be included in a
loan of $200,000 or less.
§ 241.586 Minimum
principal
loan
amount.
A mortgagee may not require, as a
condition of providing a loan insured

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§ 241.590

24 CFR Ch. II (4–1–19 Edition)

under this subpart, that the principal
amount of the mortgage exceed a minimum amount established by the mortgagee.
[53 FR 8886, Mar. 18, 1988]

PROPERTY REQUIREMENTS
§ 241.590

Eligibility of property.

(a) A loan to be eligible for insurance
shall be on real estate held:
(1) In fee simple; or
(2) On the interest of the lessee under
a lease for not less than seventy-five
years which is renewable; or
(3) Under a lease having a period of
not less than twenty-five years to run
from the date the loan is executed.
(b) The property constituting security for the loan transaction must be
held by an eligible borrower as herein
defined and must at the time the loan
is insured be free and clear of all liens
other than those specifically approved
by the Commissioner.
TITLE
§ 241.595

Eligibility of title.

In order for the property which is to
be the security for a loan to be insured
under this subpart to be eligible for insurance, the Commissioner shall determine that the title to the property is
vested in the borrower as of the date
the security instrument is filed for
record. The title evidence will be examined by the Commissioner and the endorsement of the credit instrument for
insurance shall be evidence of its acceptability.
§ 241.600

Title evidence.

(a) Upon insurance of the loan, the
lender shall furnish to the Commissioner a survey, satisfactory to the
Commissioner, and a policy of title insurance as provided in paragraph (a)(1)
of this section. If the lender is unable
to furnish such policy for reasons satisfactory to the Commissioner, the lender shall furnish such evidence of title
as provided in paragraph (a) (2), (3), or
(4) of this section as the Commissioner
may require. Any survey, policy of
title insurance, or evidence of title required under this section shall be furnished without expense to the Commis-

sioner. The acceptable types of title
evidence are:
(1) A policy of title insurance issued
by a company and in a form satisfactory to the Commissioner. The policy
shall name the lender and the Secretary of Housing and Urban Development, as their respective interests may
appear, as the insured. The policy shall
provide that upon acquisition of title
by the lender or the Secretary, it will
continue to provide the same coverage
as the original policy, and will run to
the lender upon its acquisition of the
property in extinguishment of the debt,
and to the Secretary upon acquisition
of the property pursuant to the loan insurance contract.
(2) An abstract of title satisfactory
to the Commissioner, prepared by an
abstract company or individual engaged in the business of preparing abstracts of title, accompanied by a legal
opinion satisfactory to the Commissioner, as to the quality of such title,
signed by an attorney at law experienced in the examination of titles.
(3) A Torrens or similar title certificate.
(4) Evidence of title conforming to
the standards of a supervising branch
of the Government of the United States
of America, or of any State or territory
thereof.
(b) The survey required by paragraph
(a) of this section need not be furnished
in connection with a project where the
loan does not exceed $200,000.
[45 FR 57983, Aug. 29, 1980, as amended at 58
FR 34217, June 24, 1993]

FORM OF CONTRACT
§ 241.605 Contract requirements.
(a) When the principal amount of the
loan is $100,000 or less, the form of contract between the borrower and the
contractor shall be in accordance with
the following:
(1) The contract between the borrower and the general contractor may
be in the form of either a lump sum
contract or a cost plus contract. Either
form of contract shall include the cost
of the energy conserving improvements, their installation, and such
other work to be performed by the contractor as necessary to meet the requirements of the Secretary. A lump

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Office of Assistant Secretary for Housing, HUD
sum contract shall provide for the payment of a specified amount. A cost plus
contract shall provide for the payment
of the contractor’s actual cost of compliance with the requirements of the
contract, plus such allowances for
overhead and profit as may be approved
by the Commissioner and shall provide
that the total cost under the contract
shall not exceed the upset price as approved by the Commissioner.
(2) If agreed to by the general contractor and borrower, a lump sum form
of contract between the borrower and
the general contractor may be used unless the Commissioner determines that
a cost plus contract with a maximum
upset price is necessary to protect the
interest of the borrower or the Commissioner.
(b) When the principal amount of the
loan is over $100,000, the form of contract between the borrower and the
contractor shall be in accordance with
the following:
(1) Lump sum contract. If the Commissioner determines that there is no identity of interest between the borrower
or any of the officers, directors or
stockholders of the borrower and the
contractor, there may be used a lump
sum contract providing for payment of
the specified amount.
(2) Cost plus fixed fee contract. (i) If
the Commissioner determines that
there is any identity of interest (financial or otherwise) between the borrower, its officers, directors or stockholders and the contractor, the form of
contract shall provide for payment of
the actual cost of construction not to
exceed an upset price and may provide
for payment of a fixed fee not exceeding a reasonable allowance as established by the Commissioner in accordance with customary practices in the
area.
(ii) In any case where the borrower is
a nonprofit entity, a cost plus fixed fee
contract shall be used unless it is established to the Commissioner’s satisfaction that such form of contract is
not required to protect his/her interests and the interests of the borrower,
in which case, a lump sum form of contract may be used.

§ 241.610

§ 241.615
Assurance of completion.

(a) The borrower shall furnish assurance of completion of the project in the
following
minimum
forms
and
amounts:
(1) Where the estimated cost of construction of the improvements is
$500,000 or less, the borrower shall furnish assurance of completion of the
project in the form of a personal indemnity agreement executed by the
principal officers, directors, stockholders, or partners of the entity acting as general contractor.
(2) Where the estimated cost of construction of the improvements is more
than $500,000 or where such cost is less
than $500,000 and a personal indemnity
agreement is not executed, the assurance shall be in the form of corporate
surety bonds for payment and performance, each in the minimum amount of
25 percent of the construction contract,
or a completion assurance agreement
secured by a cash deposit in the minimum amount of 15 percent of the
amount of the construction contract.
(3) All types of assurance of completion shall be on forms approved by the
Commissioner. Any surety company
executing a bond and any party executing a personal indemnity agreement
must be satisfactory to the Commissioner.
(4) A mortgagee may prescribe more
stringent requirements for assurance of
completion than the minimum requirements of this section.
(b) The lender may accept, in lieu of
a cash deposit required by paragraph
(a) of this section, an unconditional irrevocable letter of credit issued to the
lender by a banking institution. In the
event a demand under the letter of
credit is not immediately met, the
lender shall forthwith provide cash
equivalent to the undrawn balance
thereunder.
§ 241.615 Certification of cost requirements.
(a) Certification agreement. The lender
shall submit with the application an
agreement on a form prescribed by the
Commissioner and executed by the borrower and the lender.
(b) Certificate and adjustment. No loan
shall be insured unless:

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§ 241.625

24 CFR Ch. II (4–1–19 Edition)

(1) A certification of actual cost is
made by the contractor in cases in
which a cost plus form of contract is
used; and
(2) The amount of the loan is adjusted to reflect the actual cost to the
borrower of the improvements when either a cost plus or lump sum form or
contract is used.
(c) Cost computation. The term actual
cost of the improvements shall mean the
cost to the borrower of the improvements, after deducting the amount of
any kickbacks, rebates or trade discount received in connection with the
improvements,
and
including
the
amounts paid under any contract for
the improvements, labor, materials,
and for any other items of expenses approved by the Commissioner.
(d) Statement of facts. Any agreement,
undertaking, statement or certification required in connection with cost
certification shall specifically state
that it has been made, presented and
delivered for the purpose of influencing
an official action of the Commissioner
and may be relied upon as a true statement of the facts contained therein.
(e) Incontestability. Upon the Commissioner’s approval of the cost certification, such certification shall be final
and incontestable except for fraud or
material misrepresentation on the part
of the borrower.
(f) Records. The borrower shall keep
and maintain adequate records of all
costs of any construction improvements or other cost items not representing work under the general contract and shall require the contractor
to keep similar records and, upon request by the Commissioner, both shall
make available for examination such
records, including any collateral agreements.
(g) Certificate of public accountant.
Where required by the Commissioner,
each certificate of actual cost shall be
supported by a certificate as to accuracy by an independent Certified Public Accountant or independent public
accountant licensed by a regulatory
authority of a State or other political
subdivision of the United States on or
prior to December 31, 1970, which shall
include a statement that the accounts,
records and supporting documents have
been examined in accordance with gen-

erally accepted auditing standards to
the extent deemed necessary to verify
the actual costs.
ELIGIBLE BORROWERS
§ 241.625

Eligible borrowers.

In order to be eligible as a borrower
under this subpart, the applicant shall
be a profit, limited distribution, nonprofit, or cooperative owner of a multifamily housing project which is not
covered by a mortgage insured or held
by the Secretary and which the Commissioner has determined to be an acceptable risk in that energy conservation or solar energy benefits to be derived outweigh the risks of possible
loss of the Federal Government.
§ 241.626 Disclosure and verification of
Social Security and Employer Identification Numbers.
To be eligible for loan insurance
under this subpart, the borrower must
meet the requirements for the disclosure and verification of Social Security
and Employer Identification Numbers,
as provided by part 200, subpart U, of
this chapter.
(Approved by the Office of Management and
Budget under control number 2502–0118)
[54 FR 39696, Sept. 27, 1989]

SPECIAL REQUIREMENTS
§ 241.630
loss.

Maximum insurance against

A loan insured under this subpart
shall be insured for 90 percent of any
loss incurred by the person holding the
note for the loan.
§ 241.635

Regulatory agreement.

Any borrower obligated on the note
for any loan insured under this subpart
shall be regulated or restricted in a
manner and on a form prescribed by
the Secretary as to rents or sales,
charges, capital structure, rate of return and methods of operation of the
multifamily project to such an extent
and in such manner as to provide reasonable rental to tenants and a reasonable return on the investment until the
termination of all obligations of the
Secretary under the contract of insurance.

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Office of Assistant Secretary for Housing, HUD
§ 241.640 Employment
prohibited.

discrimination

Any contract or subcontract executed for the performance of constructing the improvements to the
project shall provide that there shall
be no discrimination against any employee or applicant for employment because of race, color, religion, sex, familial status, disability, age, or national origin.
[61 FR 14417, Apr. 1, 1996]

§ 241.645 Labor standards and
vailing wage requirements.

pre-

(a) Any contract, subcontract, or
building loan agreement executed for
the performance of construction of the
project shall comply with all applicable labor standards and provisions of
the regulations of the Secretary of
Labor set forth in §§ 5.1 through 5.12 of
title 29.
(b) No construction contract shall be
entered into with a general contractor
or any subcontractor if such contractor
or any such subcontractor or any firm,
corporation, partnership or association
in which such contractor or subcontractor has a substantial interest is included on the ineligible list of contractors or subcontractors established and
maintained by the Comptroller General, pursuant to § 5.6(b) of title 29.
(c) No advance under the mortgage
shall be eligible for insurance after notification from the Commissioner that
the general contractor or any subcontractor or any firm, corporation, partnership or association in which such
contractor or subcontractor has a substantial interest, was on the date the
contract or subcontract was executed,
on the ineligible list established by the
Comptroller General, pursuant to the
provision of the Secretary of Labor set
forth in §§ 5.1 through 5.12 of title 29.
(d) No advance under any mortgage
shall be eligible for insurance unless
there is filed with the application of
such advance a certificate or certificates in the form required by the Commissioner, supported by such other information as the Commissioner may
prescribe, certifying that the laborers
and mechanics employed in the construction of the dwelling or dwellings,
or housing project involved, have been

§ 241.805

paid not less than the wage prevailing
in the locality in which the work was
performed for the corresponding classes
of laborers and mechanics employed on
construction of a similar character, as
determined by the Secretary of Labor
prior to beginning of construction and
after the date of filing of the application for insurance.
(e) Compliance with the provisions of
this subsection shall be evidenced at
such time and in such manner as the
Commissioner may prescribe.

Subpart D—Contract Rights and
Obligations—Multifamily
Projects Without a HUD-Insured or HUD-Held Mortgage
SOURCE: 45 FR 57987, Aug. 29, 1980, unless
otherwise noted.

§ 241.800 Definitions.
All of the definitions contained in
§ 241.500 shall apply to this subpart. In
addition, as used in this subpart, the
following terms shall have the meaning
indicated:
(a) Contract of insurance means the
agreement evidenced by the endorsement of the Commissioner upon the
note given in connection with an insured loan and includes the provisions
of this subpart and the applicable provisions of the Act.
(b) Maturity means the date on which
the loan indebtedness would be extinguished if paid in accordance with periodic payments provided for in the loan.
PREMIUMS
§ 241.805 Insurance premiums.
(a) First premium. The lender, upon
the endorsement of the loan for insurance, shall pay to the Commissioner a
first loan insurance premium equal to
one percent of the original face amount
of the note.
(b) Second premium. The lender, on
the date of the first principal payment,
shall pay a second premium equal to
one percent of the average outstanding
principal obligation of the loan for the
year following such first principal payment date which shall be adjusted as of
that date so that the aggregate of the
first and second premiums shall equal
the sum of one percent per annum of

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§ 241.805a

24 CFR Ch. II (4–1–19 Edition)

the average outstanding principal obligation of the loan for the period from
the date of the insurance endorsement
to one year following the date of the
first principal payment.
(c) Annual insurance premium. Until
the note is paid in full, or until the
loan is assigned to the Commissioner,
or until the contract of insurance is
otherwise terminated with the consent
of the Commissioner, the lender, on
each anniversary of the date of the
first principal payment shall pay an
annual loan insurance premium equal
to one percent of the average outstanding principal obligation of the
loan for the year following the date on
which such premium becomes payable.
(d) Method of premium payment. Premiums shall be payable in cash or in
debentures of the General Insurance
Fund at par plus accrued interest. All
premiums are payable in advance and
no refund can be made of any portion
thereof except as provided in this part.
(e) Calculation of premiums. The premiums payable on and after the date of
the first principal payment shall be
calculated in accordance with the amortization provisions without taking
into account delinquent payments or
prepayments.
§ 241.805a

Mortgagee’s late charge.

Mortgage insurance premiums which
are paid to the Commissioner more
than 15 days after the billing date or
due date, whichever is later, shall include a late charge of 4 percent of the
amount of the payment due, except
that no late charge shall be required
with respect to any case for which HUD
fails to render a proper billing to the
mortgagee.
§ 241.815

Termination of insurance.

(a) Prepayment in full. The contract of
insurance shall be terminated if the
loan is paid in full prior to its maturity. Notice of the prepayment shall be
given to the Commissioner, on a form
prescribed by the Commissioner, within 30 days from the date of the prepayment. The insurance termination shall
become effective as of the date of the
prepayment, or 30 days prior to the
Commissioner’s receipt of the prepayment notice, whichever is later.

(b) Voluntary termination. The contract of insurance shall be voluntarily
terminated upon receipt by the Commissioner of a written request, on a
form prescribed by the Commissioner,
by the borrower and the lender for such
termination, accompanied by a submission of the original credit instrument
for cancellation of the insurance endorsement and the remittance of all
sums to which the Commissioner is entitled. The termination shall become
effective as of the date these requirements are met.
§ 241.825 Pro rata refund of insurance
premium.
Upon termination of a loan insurance
contract by a payment in full or by a
voluntary termination, the Commissioner shall refund to the lender for the
account of the borrower an amount
equal to the pro rata portion of the
current annual loan insurance premium theretofore paid which is applicable to the portion of the year subsequent to the effective date of the termination.
RIGHTS AND DUTIES OF LENDER UNDER
THE CONTRACT OF INSURANCE
§ 241.830

Definition of default.

(a) If the borrower fails to make any
payments due under or provided to be
paid by the terms of the note or security instrument, the note shall be considered in default for the purposes of
this subpart.
(b) The failure to perform any other
covenant under the note or security instrument shall be considered a default:
Provided, The lender, because of such
default, has exercised its rights under
the note or security instrument and accelerated the debt.
(c) The failure to make any payment
or to perform any covenant under the
first conventional note and mortgage
by reason of which the holder thereof
declares a default as evidenced by formal written declaration of said default
to the Commissioner and the lender by
the holder of the first note and mortgage, shall be considered a default
under the insured loan.
(d) If such defaults as defined in paragraphs (a), (b), and (c) of this section
continue for a period of 30 days, the

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Office of Assistant Secretary for Housing, HUD
lender shall be entitled to receive the
benefits of insurance hereinafter provided.
§ 241.840 Date of default.
In computing loan insurance benefits, the date of default shall be considered as:
(a) The date of the lender’s acceleration of the debt because of the borrower’s uncorrected failure to perform
a covenant or obligation under the
note or security instrument; or
(b) The date of the first failure to
make a monthly payment which subsequent payments by the borrower are
insufficient to cover when applied to
the overdue monthly payments in the
order in which they become due.
(c) The date of the lender’s acceleration of the debt because of the borrower’s default under the first conventional note and mortgage.
§ 241.850 Notice of default.
(a) If the default is not cured within
the 30 day grace period, as defined in
§ 241.530(d), the lender shall, within 30
days thereafter, notify the Commissioner in writing of such default.
(b) The lender shall give notice in
writing to the Commissioner of the
failure of the borrower to comply with
any covenant or obligation under the
security instrument or note regardless
of the fact that the lender may not
have elected to accelerate the debt.
§ 241.860 Commissioner’s right to require acceleration.
Upon receipt of notice of the failure
of the borrower to comply with any
covenant or obligation under the security instrument or note, or under the
conventional note and mortgage, the
Commissioner may require the lender
to accelerate payment of the outstanding principal balance due.
§ 241.865 Election by the lender.
Where a real estate mortgage, or
other security instrument has been
used to secure the payment of a loan
made under the provisions of this subpart and subpart C of this part, the
lender may either elect to assign the
loan to the Commissioner in exchange
for the payment of insurance benefits
or may exercise its rights under the

§ 241.880

note and security instrument in lieu of
making a claim for insurance benefits.
If the lender elects the latter course,
the Commissioner shall be so notified
and the contract of insurance shall be
deemed terminated upon the date of receipt of such notification.
§ 241.875

Maximum claim period.

Notice of intention to file claim on a
form prescribed by the Commissioner
shall be filed within 45 days after the
lender becomes eligible for the benefits
of the loan insurance, or within such
later time as may be agreed upon by
the Commissioner in writing.
§ 241.880 Items to be delivered on submitting claim.
Within 30 days after the filing of the
notice of intention to assign the loan
to the Commissioner, or within such
further period as may be agreed upon
by the Commissioner in writing, the
lender shall deliver to the Commissioner:
(a) The fiscal data pertaining to the
loan transactions;
(b) Receipts covering all disbursements as required by the fiscal data
form;
(c) The original note and any security instrument or instruments which
shall be assigned to the Commissioner
without recourse or warranty, except
that the lender must warrant that no
act or omission of the lender has impaired the validity and priority of such
security instrument or instruments
that the security instrument or instruments are prior to all mechanics’ and
materialmen’s liens filed of record subsequent to the recording of such security instrument or instruments regardless of whether such liens attached
prior to such recording date, and prior
to all liens and encumbrances which
may have attached or defects which
may have arisen subsequent to the recording of such security instrument or
instruments, except such liens or other
matters as may be approved by the
Commissioner, that the amount stated
in the instrument of assignment is actually due and owing under the security instrument or instruments, that
there are no offsets or counterclaims
thereto, and that the lender has a good

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§ 241.885

24 CFR Ch. II (4–1–19 Edition)

right to assign such note and security
instrument or instruments;
(d) The assignment to the Commissioner of all rights and interests arising under the note and security instrument or instruments so in default and
all claims of the lender against the borrower or others arising out of the loan
transaction;
(e) All policies of title or other insurance or surety bonds, or other guarantees and any and all claims thereunder;
including evidence satisfactory to the
Commissioner that the original title
coverage has been extended to include
the assignment of the note and security instrument or instruments to the
Commissioner;
(f) All records, ledger cards, documents, books, papers and accounts relating to the loan transaction;
(g) Any additional information or
data which the Commissioner may require;
(h) The following cash items, held in
connection with the loan insured under
this subpart, shall either be retained
by the lender or delivered to the Commissioner at the time the insurance
claim is filed.
(1) Any cash held by the lender or its
agents or to which it is entitled including deposits made for the account of
the borrower and which have not been
applied in reduction of the principal
the loan indebtedness.
(2) All funds held by the lender for
the account of the borrower received
pursuant to any other agreement.
(i) On the date the assignment of the
note and security instrument or instruments are filed for record, the lender
shall notify the Commissioner and the
Office of Finance and Accounting by
telegram of such recordation.
§ 241.885 Insurance benefits.
(a) Method of payment. Payment of insurance claims shall be made in cash,
in debentures, or in a combination of
both, as determined by the Commissioner either at, or prior to, the time of
payment.
(b) Amount of payment. Upon acceptable assignment of the note and security instrument to the Commissioner,
the insurance benefits shall be paid in
an amount equal to 90 percent of the
amount determined as follows:

(1) By adding to the unpaid principal
amount of the loan, computed as of the
date of default, the following items:
(i) Any accrued interest due as of the
date of execution of the assignment of
the loan to the Commissioner.
(ii) Any advances approved by the
Commissioner made previously by the
lender under the provisions of the note
or security instrument or instruments.
(iii) Reimbursements for such reasonable collection costs, court costs,
and attorney’s fees as may be approved
by the Commissioner.
(iv) Any loan insurance premiums
paid after default.
(v) If payment is made in cash, an
amount equivalent to the debenture interest which would have been earned
thereon, as of the date such cash payment is made, except when the lender
fails to meet any one of the applicable
requirements of §§ 241.850, 241.875, and
241.880, 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.
(2) By deducting from the total of the
items computed under paragraph (b)(1)
of this section the following items:
(i) Any amount received by the lender on account of the loan after the date
of default.
(ii) Any net income received by the
lender from the property covered by
the note or security instrument and
not applied to prior debts held by the
lender.
(iii) The sum of the cash items retained by the lender pursuant to
§ 241.880(h) (1) and (2).
[45 FR 57987, Aug. 29, 1980, as amended at 80
FR 51469, Aug. 25, 2015]

§ 241.890 Characteristics
of
debentures.
Debentures issued in settlement of
insurance claims under this subpart
shall have the same characteristics and
the same requirements for registration
and redemption as those issued pursuant to subpart B of this part except
that debentures shall bear interest at
the rate in effect as of the date the

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Office of Assistant Secretary for Housing, HUD
commitment was issued, or as of the
date the loan was first endorsed for insurance, whichever rate is higher, and
shall mature 10 years from the date of
issue which date shall be the date of
execution of the assignment of the loan
to the Commissioner.
§ 241.893

Cash adjustment.

Any difference of less than $50 between the amount of debentures to be
issued to the lender and the total
amount of the lender’s claim, as approved by the Commissioner, may be
adjusted by the issuance of a check in
payment thereof.
[59 FR 49817, Sept. 30, 1994]

ASSIGNMENTS
§ 241.895

Assignment of insured loans.

EXTENSION OF TIME
Actions to be taken by lend-

With respect to any action required
of the lender within a period of time
prescribed by this subpart, the Commissioner may extend such period.
RIGHTS IN HOUSING FUND
§ 241.900

§ 241.905 Effect of amendments.
The regulations in this subpart may
be amended by the Commissioner at
any time and from time to time in
whole or in part, but such amendment
shall not adversely affect the interests
of a lender under the contract of insurance on any loan already insured and
shall not adversely affect the interests
of a lender on any loan to be insured on
which the Commissioner has made a
commitment to insure.

Subpart E—Insurance for Equity
Loans
and
Acquisition
Loans—Eligibility
Requirements
SOURCE: 57 FR 12037, Apr. 8, 1992, unless
otherwise noted.

(a) An insured loan may be transferred only to a transferee who is a
lender approved by the Commissioner.
Upon such transfer and the assumption
by the transferee of all obligations
under the contract of insurance the
transferor shall be released from its obligations under the contract of insurance.
(b) The contract of insurance shall
terminate with respect to loans described in paragraph (a) of this section
upon the happening of either of the following events:
(1) The transfer or pledge of the insured loan to any person, firm or corporation, public or private, other than
an approved lender.
(2) The disposal by a lender of any
partial interest in the insured loan to
other than an approved lender.

§ 241.897
er.

§ 241.1000

No vested right in fund.

Neither the lender nor the borrower
shall have any vested or other right in
the General Insurance Fund.

§ 241.1000 Purpose and scope.
(a) Section 231 of the Emergency Low
Income Housing Preservation Act of
1989 (‘‘ELIHPA’’) amended the National
Housing Act by adding a new subsection (f) to section 241. This section
authorizes the Secretary to provide insurance for an equity loan as a vehicle
for the owner of an eligible multifamily project to capture a portion of
the project’s equity, in connection with
a plan of action approved by the Commissioner under ELIHPA.
(b) Section 602 of the Low-Income
Housing Preservation and Resident
Homeownership
Act
of
1990
(‘‘LIHPRHA’’) amended section 241 by
expanding its scope to include both equity loans for owners, and acquisition
loans for purchasers, under a plan of
action approved under the provisions of
the 1990 Act, and by making other
changes. The provisions of section
241(f) as amended by LIHPRHA are applicable to owners with plans of action
being processed under part 248, subpart
B of this chapter, which implements
LIHPRHA.
(c) The provisions of section 241(f) of
the Act as they were in effect prior to
LIHPRHA remain in effect for owners
with plans of action being processed
under part 248, subpart C of this chapter, which implements ELIHPA.
(d) The insurance of an equity loan or
acquisition loan under subpart E of
this part may be provided only as a

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§ 241.1005

24 CFR Ch. II (4–1–19 Edition)

specific element of a plan of action approved by the Commissioner under part
248 of this chapter and is not available
under any other departmental program.
(e) Unless otherwise indicated, the
provisions of subparts E and F of this
part are applicable to loans insured in
connection with plans of action being
processed under either subpart B or C
of part 248 of this chapter.
(f) An owner or purchaser may obtain
both a rehabilitation loan under subpart A of this part and an equity loan
or acquisition loan under subpart E of
this part.
§ 241.1005

Definitions.

(a) All of the definitions of § 241.1
apply to equity and acquisition loans
insured under subpart E of this part except the following definitions:
§ 241.1(i)—Borrower;
§ 241.1(k)—Energy conserving improvements;
§ 241.1(1)—Solar energy system.

(b) As used in subpart E of this part,
the following terms have the meaning
indicated:
Acquisition loan means a loan or advance of credit made to a purchaser of
eligible low income housing which is
made for the purpose of implementing
a plan of action approved in accordance
with part 248 of this chapter.
Borrower means the owner or qualified purchaser of an eligible low income housing project, which owner receives and becomes primarily obligated
for the repayment of an equity loan.
With respect to loans insured in connection with a plan of action under
part 248, subpart C of this chapter, the
term includes a public entity, a nonprofit organization or a limited equity
cooperative, which entity is purchasing
an eligible low income housing project
by means of an equity loan and is obligated for the payment of the equity
loan.
Eligible low income housing has the
same meaning as provided at § 248.101
or § 248.201 of this chapter, with respect
to loans insured in connection with
plans of action under subparts B or C of
part 248 of this chapter.
Equity means, for purpose of subparts
E and F of this part only, the difference between the fair market value

of the project as determined by the
Commissioner and the outstanding indebtedness relating to the property.
Equity Loan means a loan or advance
of credit to the owner of an eligible low
income housing project which is made
for the purpose of implementing a plan
of action approved in accordance with
part 248 of this chapter.
Extension preservation equity has the
same meaning as provided at § 248.101 of
this chapter.
Limited equity cooperative means a
tenant cooperative corporation which,
in a manner acceptable to the Commissioner, restricts the initial and resale
price of the shares of stock in the cooperative corporation so that the shares
remain affordable to low-income families and moderate income families.
Low-income families has the same
meaning as provided at § 248.101 of this
chapter.
Moderate income families has the same
meaning as provided at § 248.101 of this
chapter.
Plan of action has the same meaning
as provided at § 248.101 or § 248.201 of
this chapter.
Preservation equity has the same
meaning as provided at § 248.101 of this
chapter.
Priority purchaser has the same meaning as provided at § 248.101 of this chapter.
Qualified Purchaser has the same
meaning as provided at § 248.101 of this
chapter.
§ 241.1010 Feasibility letter.
(a) Request for study. The owner may
request the Commissioner to undertake
a feasibility analysis of an equity or
acquisition loan, and issue a feasibility
letter. At the discretion of the Commissioner the feasibility analysis may
be undertaken or denied.
(b) Findings. The issuance of a feasibility letter indicates completion of
the Commissioner’s preliminary analysis for the insurance of an equity or
acquisition loan. The feasibility letter
shall contain the Commissioner’s estimate of the supportable loan amount,
based upon the project’s equity in the
case of an equity loan and based on the
project’s purchase price in the case of
an acquisition loan, but such feasibility letter shall neither constitute a

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Office of Assistant Secretary for Housing, HUD
commitment to insure nor bind the
Commissioner in any other manner.
(c) Fee. The Commissioner shall not
charge a fee for undertaking a feasibility analysis or for the issuance of a
feasibility letter.
§ 241.1015 Processing of applications
and required fees.
(a) Application. An application for the
issuance of a firm commitment for insurance of an equity or acquisition
loan on a project shall be submitted by
an approved lender and by the owner or
purchaser of the project to the Commissioner on a form prescribed by the
Commissioner. No application shall be
considered unless the exhibits called
for by such forms are furnished.
(b) Commitment fees. An application
for a firm commitment shall be accompanied by the payment of an application-commitment fee of $5.00 per thousand dollars of the requested loan
amount to be insured.
[61 FR 14417, Apr. 1, 1996]

§ 241.1020

Commitments.

(a) Firm commitment. The issuance of
a firm commitment indicates the Commissioner’s approval of the application
for insurance and sets forth the terms
and conditions upon which the equity
or acquisition loan will be insured. The
firm commitment may provide for the
insurance of advances of the equity or
acquisition loan immediately upon endorsement of the note.
(b) Term of commitment. (1) A firm
commitment is effective for whatever
term is specified in the text of the
commitment.
(2) The term of a firm commitment
may be extended in such manner as the
Commissioner may prescribe.
(c) Reopening of expired commitments.
An expired firm commitment may be
reopened if a request for reopening is
received by the Commissioner within 90
days of the expiration of the commitment. The reopening request shall be
accompanied by a fee of 50 cents per
thousand dollars of the amount of the
expired commitment. If the reopening
request is not received by the Commissioner within the required 90-day period, a new application, accompanied

§ 241.1030

by the required application and commitment fee, must be submitted.
[61 FR 14417, Apr. 1, 1996]

§ 241.1025

Refund of fees.

If the amount of the commitment
issued is less than the amount applied
for, the Commissioner shall refund the
excess amount of the application and
commitment fees submitted by the applicant. If an application is rejected before it is assigned for processing, or in
such other instances as the Commissioner may determine, the entire application and commitment fees or any
portion thereof may be returned to the
applicant. Commitment and reopening
fees may also be refunded to the applicant, in whole or in part, in such other
instances as the Commissioner may determine.
§ 241.1030 Mortgage
miums.

insurance

The lender, upon endorsement of the
note, shall pay the Commissioner a
first mortgage insurance premium
equal to 0.5 percent of the original face
amount of the equity or acquisition
loan.
(a) If the date of the first principal
payment is more than one year following the date of endorsement, the
lender upon each anniversary of such
endorsement date, shall pay a premium
equal to 0.5 percent of the original face
amount of the loan. On the date of the
first principal payment, the lender
shall pay another premium equal to 0.5
percent of the average outstanding
principal obligation of the loan for the
following year which shall be adjusted
so as to accord with such date and so
that the aggregate of said premiums
shall equal the sum of:
(1) 0.5 percent of the average outstanding principal obligation of the
loan for the year following the date of
endorsement; and
(2) 0.5 percent per annum of the average outstanding principal obligation of
the loan for the period from the first
anniversary of the date of endorsement
to one year following the date of the
first principal payment.
(b) If the date of the first principal
payment is one year or less than one

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§ 241.1035

24 CFR Ch. II (4–1–19 Edition)

year following the date of endorsement, the lender, upon such first principal payment date, shall pay a second
premium equal to 0.5 percent of the average outstanding principal obligation
of the loan for the following year which
shall be adjusted so as to accord with
such date and so that the aggregate of
the said two premiums shall equal the
sum of:
(1) 0.5 percent per annum of the average outstanding principal obligation of
the loan for the period from the date of
endorsement to the date of the first
principal payment; and
(2) 0.5 percent of the average outstanding principal obligation of the
loan for the year following the date of
the first payment following the date of
the first principal payment.
(c) Until the equity or acquisition
loan is paid in full or until receipt by
the Commissioner of an application for
insurance benefits, or until the contract of insurance is otherwise terminated with the consent of the Commissioner, the lender on each anniversary
date of the first principal payment,
shall pay an annual insurance premium
equal to 0.5 percent of the average outstanding principal obligation of the
loan for the year following the date on
which such premium becomes payable.
(d) The premiums payable on or after
the date of the first principal payment
shall be calculated in accordance with
the amortizing provisions without taking into account delinquent payments
or prepayments.
(e) Premiums shall be payable in
cash or in debentures at par plus accrued interest. All premiums are payable in advance and no refund can be
made of any portion thereof except as
hereinafter provided in subpart E of
this part.
§ 241.1035 Charges by lender.
(a) The lender may collect from the
borrower the amount of the fees provided for by subpart E of this part.
(b) The lender may also collect from
the borrower an initial service charge,
as reimbursement for the cost of closing the transaction, in an amount not
to exceed 2 percent of the original principal amount of the loan.
(c) Any charges to be collected by the
lender in addition to those prescribed

in paragraphs (a) and (b) of this section, shall be subject to the prior approval of the Commissioner.
§ 241.1040

Eligible lenders.

Lenders approved as mortgagees
under §§ 202.6, 202.7 or 202.9 of this chapter are eligible for insurance of equity
loans under this subpart.
[62 FR 20088, Apr. 24, 1997]

§ 241.1045

Note and security form.

The lender shall present for insurance a note and security instrument on
forms approved by the Commissioner
for use in the jurisdiction in which the
property is located, which shall not be
changed without the prior approval of
the Commissioner. The security instrument shall provide for accelerated repayment at the request of the Commissioner pursuant to § 241.1046(b).
§ 241.1046

Rental assistance.

(a) When underwriting an equity or
acquisition loan under subpart E of
this part, the Commissioner may assume that the rental assistance provided in accordance with a plan of action approved under subparts B or C of
part 248 of this chapter will be extended for the full term of the contract
entered into under the plan of action.
(b) In the event that rental assistance is not extended under part 248 of
this chapter, or the Commissioner is
unable to develop a revised package of
incentives to the owner comparable to
those received under the original approved plan of action, the Commissioner may require the mortgagee to
accelerate the debt of the equity or acquisition loan.
(c) If the Commissioner is unable to
extend the term of rental assistance for
the full term of the contract entered
into under part 248 of this chapter, the
Commissioner is authorized to take
such actions as the Commissioner
deems appropriate to avoid default,
avoid disruption of the sound ownership and management of the property
or otherwise minimize the cost to the
Federal Government.
§ 241.1050 Method of loan payment.
The loan shall provide for monthly
payments on the first day of each

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Office of Assistant Secretary for Housing, HUD
month on account of interest and principal and shall provide for payments in
accordance with the amortization plan
as agreed upon by the borrower, the
lender, and the Commissioner.
§ 241.1055 Date of first payment to
principal.
The date for first payment to principal shall be established by the Commissioner.
§ 241.1060 Maturity.
(a) Equity loans shall have a term
not to exceed 40 years; and
(b) Acquisition loans shall have a
term of 40 years.
[58 FR 37814, July 13, 1993]

§ 241.1069

erage. To the extent practicable, equity loans shall have amortization provisions which will support the maximum loan amount authorized under
this section.
(b) The amount of the acquisition
loan shall not exceed:
(1) The amount of rehabilitation
costs as determined under an approved
plan of action and related charges; plus
(2) Ninety-five percent of the transfer
preservation equity of the project; and
(3) If the purchaser is a priority purchaser, the loan may include any expenses associated with the acquisition,
loan closing, and implementation of
the plan of action, subject to the approval of the Commissioner.
[58 FR 37814, July 13, 1993]

§ 241.1065 Maximum loan amount—
loans insured in connection with a
plan of action under subpart C of
part 248 of this chapter.
The amount of the equity loan shall
not exceed ninety percent of the owner’s equity in the project, as determined by the Commissioner. Notwithstanding the above, the equity loan
shall not exceed an amount which,
when added to the existing indebtedness on the property, can be supported
by 90 percent of the projected net operating income of the project, as determined by the Commissioner. The Commissioner, in making a determination
regarding the amount of an equity loan
and sums available to service said loan,
shall take into account the fact that
the project’s income may increase
within the limits established by
§ 248.233(d) of this chapter.
§ 241.1067 Maximum loan amount—
loans insured in connection with a
plan of action under subpart B of
part 248 of this chapter.
(a) The amount of the equity loan
shall not exceed:
(1) The amount of rehabilitation
costs as determined under an approved
plan of action and related charges; plus
(2) The lesser of 70 percent of the extension preservation equity of the
project; or
(3) The amount the Commissioner determines can be supported by the
project on the basis of an 8 percent return on extension preservation equity,
assuming normal debt service cov-

§ 241.1068 Renegotiation of an equity
loan.
The Commissioner shall renegotiate
and modify the terms of an equity loan
insured under this subpart at the request of the owner of the project for
which a loan closing occurred if—
(a) The loan closing occurred between
September 28, 1992 and January 26, 1993;
(b) The loan was made pursuant to a
plan of action submitted under subpart
C of part 248 of this chapter; and
(c) The plan of action was accepted
by the Commissioner for processing in
December 1991.
[58 FR 37814, July 13, 1993]

§ 241.1069 Escrow requirements.
(a) An equity loan provided in connection with a plan of action under
subpart B of part 248 of this chapter
shall provide for the lender to deposit,
on behalf of the borrower, 10 percent of
the loan amount in an escrow account,
controlled by the Commissioner or a
State housing finance agency approved
by the Commissioner, which shall be
made available to the borrower upon
the expiration of the 5-year period beginning on the date the loan is made,
subject to compliance with § 248.147 of
this chapter.
(b) An equity loan provided in connection with a plan of action under either subpart B or subpart C of part 248
of this chapter shall provide for the
lender to phase in advances to reflect
project rent levels.

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§ 241.1070
§ 241.1070

24 CFR Ch. II (4–1–19 Edition)
Agreed interest rate.

The equity or acquisition loan shall
bear interest at the rate agreed upon
by the borrower and the lender.
§ 241.1080

Eligibility of title.

In order for the project to be eligible
for insurance, the Commissioner shall
determine that the title to the property is vested in the borrower as of the
date the security instrument is filed
for record. The title evidence will be
examined by the Commissioner and the
endorsement of the credit instrument
for insurance shall be evidence of its
acceptability.
§ 241.1085

Title evidence.

(a) Upon insurance of the loan, the
lender shall furnish to the Commissioner a policy of title insurance as
provided in paragraph (a)(1) of this section. If the lender is unable to furnish
such policy for reasons satisfactory to
the Commissioner, the lender shall furnish such evidence of title as provided
in paragraphs (a)(2), (3) or (4) of this
section as the Commissioner may require. Any policy of title insurance, or
evidence of title required under this
section shall be furnished without expense to the Commissioner. The acceptable types of title evidence are:
(1) A policy of title insurance issued
by a company and in a form satisfactory to the Commissioner. The policy
shall name the lender and the Secretary of Housing and Urban Development, as their respective interests may
appear, as the insured. The policy shall
provide that upon acquisition of title
by the lender or the Secretary, it will
continue to provide the same coverage
as the original policy, and will run to
the lender upon its acquisition of the
property in extinguishment of the debt,
and to the Secretary upon acquisition
of the property pursuant to the loan insurance contract.
(2) An abstract of title satisfactory
to the Commissioner, prepared by an
abstract company or individual engaged in the business of preparing abstracts of title, accompanied by a legal
opinion satisfactory to the Commissioner, as to the quality of such title,
signed by an attorney at law experienced in the examination of titles;

(3) A Torrens or similar title certification; or
(4) Evidence of title conforming to
the standards of a supervising branch
of the Government of the United States
of America, or of any State or territory
thereof.
[57 FR 12037, Apr. 8, 1992, as amended at 58
FR 34217, June 24, 1993]

§ 241.1090 Accumulation of next premium.
The security instrument shall provide for payments by the borrower to
the lender on each interest payment
date of an amount sufficient to accumulate in the hands of the lender one
payment period prior to its due date
the next annual insurance premium
payable by the lender to the Commissioner. These payments shall continue
only as long as the contract of insurance remains in effect.
§ 241.1095

Application of payments.

(a) The security instrument shall
provide that all monthly payments to
be made by the borrower shall be added
together and the aggregate amount
shall be paid by the borrower upon
each monthly payment date in a single
payment. The lender shall apply the
payment in the following order:
(1) Premium charges under the contact of insurance;
(2) Interest on the loan; and
(3) Amortization of the principal of
the loan.
(b) Any deficiency in the amount of
any monthly payments required under
paragraph (a) of this section shall constitute a default. The security instrument shall provide for a grace period of
30 days within which time the default
must be cured.
§ 241.1100 Prepayment
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(a) Prepayment privilege. (1) Except as
otherwise provided in paragraph (b) of
this section, the security instrument
shall contain a provision permitting
the borrower to prepay the loan, in
whole or in part, upon any interest
payment date after giving to the lender
30 days advance notice of its intention
to prepay.

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Office of Assistant Secretary for Housing, HUD

§ 241.1205

(2) If the loan exceeds $200,000, the security instrument may contain a provision for an additional charge in the
event of prepayment of principal as
may be agreed upon between the borrower and lender. These charges shall
not be imposed if the loan is accelerated at the request of the Commissioner, pursuant to § 241.1046(b). The
borrower shall be permitted to prepay
up to 15 percent of the original principal amount of the loan in any one
calendar year without any additional
charge. A provision for an additional
charge in the event of prepayment may
not be included in a loan of $200,000 or
less.
(b) Prepayment of bond-financed loan.
Where the lender has obtained the
funds for the loan by the issuance and
sale of bonds or bond anticipation
notes, or both, the loan may contain a
prepayment restriction and prepayment penalty charges acceptable to the
Commissioner as to term, amount, and
conditions.

Subpart F—Insurance for Equity
Loans
and
Acquisition
Loans—Contract Rights and
Obligations

§ 241.1105

(2) For the purposes of subpart F of
this part, all references in part 207 of
this chapter to section 207 of the Act
and to the term ‘‘mortgage’’ shall be
construed to refer to section 241(f) of
the Act and ‘‘equity or acquisition
loan,’’ respectively.
(b) Projects without a HUD-insured or
HUD-held mortgage. The provisions of
subpart D of this part shall be applicable to a project without a HUD-insured
or HUD-held mortgage that is receiving
an equity loan or acquisition loan
under subpart E of this part in connection with a plan of action approved by
the Commissioner under part 248 of
this chapter.
(c) All of the definitions in § 241.1005
apply to subpart F of this part. In addition, as used in subpart F of this part,
the term ‘‘contract of insurance’’
means the agreement evidenced by the
Commissioner’s insurance endorsement
and includes the provisions of subpart
F of this part and of the Act.

Late charges.

The note and security instrument
may provide for the lender’s collection
of a late charge, not to exceed 2 cents
for each dollar of each payment to interest or principal more than 15 days in
arrears, to cover the expense involved
in handling delinquent payments. Late
charges shall be separately charged to
and collected from the borrower and
shall not be deducted from any aggregate monthly payment.
§ 241.1120

Mortgagee’s consent.

The holder of an insured mortgage
which is recorded prior to the equity or
acquisition loan shall not withhold its
consent to the equity or acquisition
loan (whether or not such equity or acquisition loan is insured by the Commissioner) or the security instrument
executed in connection therewith, and
may not charge a fee as a condition to
its consent to such loan or security instrument.

SOURCE: 57 FR 12040, Apr. 8, 1992, unless
otherwise noted.

§ 241.1200

Cross-references.

(a) Projects with a HUD-insured or
HUD-held mortgage. (1) All the provisions of part 207, subpart B of this
chapter, covering mortgages insured
under section 207 of the Act, apply to
equity loans or acquisition loans on a
project insured under section 241(f) of
the Act, except the following provisions:
Sec.
207.251 Definitions.
207.252 First, second and third premium.
207.252a Premiums—operating loss loans.
207.252b Premiums—mortgages insured pursuant to section 223(f) of the Act.
207.252c Premiums—mortgages insured pursuant to section 238(c) of the Act.
207.254 Insurance endorsement.

§ 241.1205
fits.

Payment of insurance bene-

All the provisions of § 207.259 of this
chapter relating to insurance benefits
shall apply to an equity or acquisition

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§ 241.1210

24 CFR Ch. II (4–1–19 Edition)

loan insured under subpart F of this
part.
[80 FR 51469, Aug. 25, 2015]

§ 241.1210 Condition for payment of insurance benefits.
(a) All of the provisions of § 207.258 of
this chapter apply to subpart F of this
part, except that, if the holder of the
senior insured mortgage institutes a
foreclosure action, the lender shall notify the Commissioner in a timely
manner of such action. The Commissioner, at its option, may then direct
the lender to assign the equity or acquisition loan to the Commissioner, or
bid an amount necessary to acquire the
project and convey the project to the
Commissioner.
(b) If the equity loan or acquisition
loan is assigned in accordance with
this section, the Commissioner at a
foreclosure sale may bid, in addition to
amounts otherwise authorized, any
sum not in excess of the aggregate unpaid indebtedness secured by the senior
insured mortgage and equity or acquisition loan, plus taxes, insurance, foreclosure costs, fees and other expenses.
§ 241.1215 Calculation of insurance
benefits.
All of the provisions of § 207.259 of
this chapter apply to subpart F of this
part, except that if the lender, at the
direction of the Commissioner, acquires title to the project at a foreclosure sale instituted by the holder of
the senior insured mortgage, the
amount of the claim determined under
§ 207.259(c) of this chapter shall also include an amount bid by the lender to
satisfy the senior insured mortgage at
the foreclosure sale.
§ 241.1220 Termination of insurance
benefits.
All of the provisions of § 207.253a of
this chapter apply to subpart F of this
part, except that the following shall
also constitute grounds for terminating the contract of insurance:
(a) The failure of the lender to notify
the Commissioner in a timely manner
of a foreclosure action initiated by the
holder of the senior insured mortgage;
and
(b) The failure of the lender when directed by the Commissioner to assign

the equity or acquisition loan or bid an
amount necessary to acquire title to
the project and convey the project to
the Commissioner, in accordance with
§ 241.1210.
§ 241.1230

No vested right in fund.

Neither the lender nor the borrower
shall have any vested or other right in
the insurance fund under which the
loan is insured.
§ 241.1235

Cross default.

In the event the borrower commits a
default under a prior recorded insured
mortgage and the holder thereof initiates a foreclosure proceeding, said default under the prior recorded insured
mortgage shall constitute a default
under the equity or acquisition loan.
§ 241.1245

Insurance endorsement.

(a) Endorsement. The Commissioner
shall indicate his insurance of the equity loan or acquisition loan by endorsing the original credit instrument and
identifying the section of the Act and
the regulations under which the loan is
insured and the date of insurance.
(b) Endorsement of phased loan. In the
event the loan is phased, the Commissioner shall indicate his insurance of
each amount by endorsing the original
credit instrument and identifying the
section of the Act and the regulations
under which such amount is insured
and the date of the insurance.
(c) Final advance of phased loan. When
all advances of a phased loan have been
made and the terms and conditions of
the commitment have been complied
with to the satisfaction of the Commissioner, the Commissioner shall indicate on the original credit instrument
the total of all advances the Commissioner has approved for insurance and
again endorse such instrument.
§ 241.1250

Effect of endorsement.

From the date that the equity or acquisition loan is endorsed, the Commissioner and the lender shall be bound by
the provisions of subpart F of this part
to the same extent as if they had executed a contract including the provisions of subpart F of this part and the
applicable sections of the Act.

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Office of Assistant Secretary for Housing, HUD

PART 242—MORTGAGE
INSURANCE FOR HOSPITALS
Subpart A—General Eligibility
Requirements
Sec.
242.1 Definitions.
242.2 Program financial self-sufficiency.
242.3 Encouragement of certain programs.
242.4 Eligible hospitals.
242.5 Eligible mortgagees/lenders.
242.6 Property requirements.
242.7 Maximum mortgage amounts.
242.8 Standards for licensure and methods
of operation.
242.9 Physician ownership.
242.10 Eligible mortgagors.
242.11 Regulatory compliance required.
242.13 Parents and affiliates.
242.14 Mortgage reserve fund.
242.15 Limitation on refinancing existing
indebtedness.

Subpart B—Application Procedures and
Commitments
242.16 Applications.
242.17 Commitments.
242.18 Inspection fee.
242.19 Fees on increases.
242.20 Reopening of expired commitments.
242.21 Refund of fees.
242.22 Maximum fees and charges by mortgagee.
242.23 Maximum mortgage amounts and
cash equity requirements.
242.24 Initial operating costs.

Subpart C—Mortgage Requirements
242.25 Mortgage form and disbursement of
mortgage proceeds.
242.26 Agreed interest rate.
242.27 Maturity.
242.28 Allowable costs for consultants.
242.29 Payment requirements.
242.30 Application of payments.
242.31 Accumulation of accruals.
242.32 Covenant against liens.
242.33 Covenant for malpractice, fire, and
other hazard insurance.
242.35 Mortgage lien certifications.
242.37 Mortgage prepayment.
242.38 Late charge.

Subpart D—Endorsement for Insurance
242.39
242.40
242.41
242.42
242.43

Insurance endorsement.
Mortgagee certificate.
Certification of cost requirements.
Certificates of actual cost.
Application of cost savings.

242.44

Construction standards.

Subpart E—Construction

Pt. 242

242.45 Early commencement of work.
242.46 Insured
advances—building
loan
agreement.
242.47 Insured advances for building components stored off-site.
242.48 Insured advances for certain equipment and long lead items.
242.49 Funds and finances: deposits and letters of credit.
242.50 Funds and finances: off-site utilities
and streets.
242.51 Funds and finances: insured advances
and assurance of completion.
242.52 Construction contracts.
242.53 Excluded contractors.

Subpart F—Nondiscrimination and Wage
Rates
242.54
242.55

Nondiscrimination.
Labor standards.

Subpart G—Regulatory Agreement, Accounting and Reporting, and Financial
Requirements
242.56 Form of regulation.
242.57 Maintenance of hospital facility.
242.58 Books, accounts, and financial statements.
242.59 Inspection of facilities by Commissioner.
242.61 Management.
242.62 Releases of lien.
242.63 Additional indebtedness and leasing.
242.64 Current and future property.
242.65 Distribution of assets.
242.66 Affiliate transactions.
242.67 New corporations, subsidiaries, affiliations, and mergers.

Subpart H—Miscellaneous Requirements
242.68 Disclosure and verification of Social
Security and Employer Identification
Numbers.
242.69 Transfer fee.
242.70 Fees not required.
242.72 Leasing of hospital.
242.73 Waiver of eligibility requirements for
mortgage insurance.
242.74 Smoke detectors.
242.75 Title requirements.
242.76 Title evidence.
242.77 Liens.
242.78 Zoning, deed, and building restrictions.
242.79 Environmental quality determinations and standards.
242.81 Lead-based paint poisoning prevention.
242.82 Energy conservation.
242.83 Debarment and suspension.
242.84 Previous participation and compliance requirements.
242.86 Property and mortgage assessment.
242.87 Certifications.

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§ 255.3

24 CFR Ch. II (4–1–19 Edition)

provided by this section for full insurance, effective as of the date of assignment in accordance with the appropriate provisions of 24 CFR part 207.
Any future claim by GNMA, or any assignment of the fully insured Mortgage, will be governed by the appropriate provisions of 24 CFR part 207, except that any payment will be made in
cash instead of debentures.
[59 FR 1475, Jan. 11, 1994]

§ 255.3 Case-by-case conversion to full
insurance.

266.215 Functions delegated by HUD to
HFAs.
266.220 Nondiscrimination in housing and
employment.
266.225 Labor standards.

Subpart D—Processing, Development, and
Approval
266.300 HFAs accepting 50 percent or more
of risk.
266.305 HFAs accepting less than 50 percent
of risk.
266.310 Insurance of advances or insurance
upon completion; applicability of requirements.
266.315 Recordkeeping requirements.

CROSS REFERENCE: The provisions of 24
CFR 251.3 apply to this part.

Subpart E—Mortgage and Closing
Requirements; HUD Endorsement

[61 FR 49038, Sept. 17, 1996]

§ 255.6 Method of payment of mortgage
insurance premiums.
The provisions of 24 CFR 251.6 shall
apply to this part.
[63 FR 1303, Jan. 8, 1998]

PART
266—HOUSING
FINANCE
AGENCY RISK-SHARING PROGRAM FOR INSURED AFFORDABLE
MULTIFAMILY
PROJECT
LOANS
Subpart A—General Provisions
Sec.
266.1 Purpose and scope.
266.5 Definitions.
266.10 Allocations of assistance and credit
subsidy.
266.15 Risk-Sharing Agreement.
266.20 Effect of amendments.
266.25 Limitation on HUD insurance liability.
266.30 Nonapplicability of 24 CFR part 246.

Subpart B—Housing Finance Agency
Requirements
266.100 Qualified housing finance agency
(HFA).
266.105 Application requirements.
266.110 Reserve requirements.
266.115 Program monitoring and evaluation.
266.120 Actions for which sanctions may be
imposed.
266.125 Scope and nature of sanctions.
266.130 Reinsurance.

Subpart F—Project Management and
Servicing
266.500 General.
266.505 Regulatory agreement requirements.
266.507 Maintenance requirements.
266.510 HFA responsibilities.
266.515 Record retention.
266.520 Program monitoring and compliance.

Subpart G—Contract Rights and
Obligations
MORTGAGE INSURANCE PREMIUMS
266.600 Mortgage insurance premium: Insurance upon completion.
266.602 Mortgage insurance premium: Insured advances.
266.604 Mortgage insurance premium: Other
requirements.
266.606 Mortgage insurance premium: Duration and method of paying.
266.608 Mortgage insurance premium: Pro
rata refund.
266.610 Method of payment of mortgage insurance premiums.
INSURANCE ENDORSEMENT
266.612

Subpart C—Program Requirements
266.200
266.205
266.210

266.400 Property requirements—real estate.
266.402 Recordation.
266.405 Title.
266.410 Mortgage provisions.
266.415 Mortgage lien and other obligations.
266.417 Authority to adjust mortgage insurance amount.
266.420 Closing and endorsement by the
Commissioner.

Insurance endorsement.
ASSIGNMENTS

Eligible projects.
Ineligible projects.
HUD-retained review functions.

266.616 Transfer of partial interest under
participation agreement.

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Office of Assistant Secretary for Housing, HUD
TERMINATION
266.620 Termination of Contract of Insurance.
266.622 Notice and date of termination by
the Commissioner.
CLAIM PROCEDURES
266.626 Notice of default and filing an insurance claim.
266.628 Initial claim payments.
266.630 Partial payment of claims.
266.632 Withdrawal of claim.
266.634 Reinstatement of the contract of insurance.
266.636 Insuring new loans for defaulted
projects.
266.638 Issuance of HFA Debenture.
266.640 Foreclosure and acquisition.
266.642 Appraisals.
266.644 Application for final claim settlement.
266.646 Determining the amount of loss.
266.648 Items included in total loss.
266.650 Items deducted from total loss.
266.652 Determining share of loss.
266.654 Final claim settlement and HFA Debenture redemption.
266.656 Recovery of costs after final claim
settlement.
266.658 Program monitoring and compliance.
AUTHORITY: 12 U.S.C. 1707; 42 U.S.C. 3535(d).
SOURCE: 59 FR 62524, Dec. 5, 1994, unless
otherwise noted.

Subpart A—General Provisions

full mortgage insurance on affordable
multifamily housing projects processed
by such HFAs under this program.
Through risk-sharing agreements with
HUD, HFAs contract to reimburse HUD
for a portion of the loss from any defaults that occur while HUD insurance
is in force.
(3) The extent to which HUD will direct qualified HFAs regarding their underwriting standards and loan terms
and conditions is related to the proportion of the risk taken by an HFA.
(b) Purpose. The primary purpose of
this pilot program is to test the effectiveness of providing new forms of
credit enhancement for multifamily
loans, i.e., utilization of full insurance
by HUD, pursuant to risk-sharing
agreements with qualified housing finance agencies, for the development of
affordable housing. The utilization of
Federal credit enhancements should increase access to capital markets and,
thereby, increase the supply of affordable multifamily housing. By permitting HFAs to underwrite, process, and
service loans and to manage and dispose of properties that fall into default,
HUD expects affordable housing to be
made available to eligible families and
individuals in a timely manner.
§ 266.5

§ 266.1 Purpose and scope.
(a) Authority and scope. (1) Section 542
of the Housing and Community Development Act of 1992 directs the Secretary of the Department of Housing
and
Urban
Development,
acting
through the Federal Housing Administration, to carry out programs that
will demonstrate the effectiveness of
providing new forms of Federal credit
enhancement for multifamily loans.
Section 542, entitled, ‘‘Multifamily
Mortgage Credit Demonstrations,’’ provides new independent insurance authority that is not under the National
Housing Act.
(2) Section 542(c) of the Housing and
Community Development Act of 1992
specifically directs the Secretary to
carry out a pilot program of risk-sharing with qualified State and local housing finance agencies (HFAs). The qualified HFAs are authorized to underwrite
and process loans. HUD will provide

§ 266.5

Definitions.

Act means the Housing and Community Development Act of 1992, as
amended.
Affordable housing means a project in
which 20 percent or more of the units
are both rent-restricted and occupied
by families whose income is 50 percent
or less of the area median income as
determined by HUD, with adjustments
for household size, or in which 40 percent (25 percent in New York City) or
more of the units are both rent-restricted and occupied by families
whose income is 60 percent or less of
the area median income as determined
by HUD, with adjustments for household size. A residential unit is rent-restricted if the gross rent with respect
to such unit does not exceed 30 percent
of the imputed income limitation applicable to such unit.
Board and Care/Assisted Living Facility
means a residential facility for independent living that is regulated by

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§ 266.5

24 CFR Ch. II (4–1–19 Edition)

State or local government that provides continuous protective oversight
and assistance with the activities of
daily living to frail elderly persons or
other persons needing such assistance.
Continuous protective oversight may
range from as little as awareness on
the part of management staff of residents’ whereabouts (and the ability to
intervene in the event of crisis) to a
higher level of services and assistance.
Assistance with the activities of daily
living may include, but is not limited
to, bathing, dressing, eating, getting in
and out of bed or chairs, walking, going
outdoors, using the toilet, laundry,
home management, meal preparation,
shopping, supervision of medication,
and housework.
Commissioner means the Federal
Housing Commissioner or his or her authorized representative.
Contract of insurance means the
agreement evidenced by the endorsement of the Commissioner upon the
credit instrument given in connection
with an insured mortgage, incorporating by reference the regulations
in this part and the applicable provisions of the Act.
Credit subsidy means the cost of a direct loan or loan guarantee under the
Federal Credit Reform Act of 1990 as
defined in subpart B of title 13 of the
Omnibus Budget Reconciliation Act of
1990 (Pub.L. 101-508, approved Nov. 5,
1990).
Debenture means the instrument
issued by the HFA to HUD upon payment of an insurance claim by HUD.
The instrument must be in the standard form of a State or Municipal Debenture issued under the Uniform Commercial Code, where applicable, and
must be supported by the full faith and
credit of the HFA. The instrument
must define the terms and conditions
and the risk-sharing portion which the
HFA will pay at the end of the term of
the Debenture, and must be for the full
amount of the claim payment. The
term Debenture may include similar instruments, such as promissory notes
and bonds, as mutually agreed upon by
the Commissioner and the HFA.
Designated offices means the HUD
Field Offices that are assigned the responsibility for program monitoring,
imposing or recommending sanctions

for program violations, and conducting
informal hearings.
Firm approval letter means a letter
issued by HUD to an HFA upon the
positive completion of the HUD-retained reviews described in § 266.210.
The letter will apportion units to the
project and provide that, so long as the
HFA is in good standing and absent
fraud or misrepresentation by the
HFA, HUD will endorse the project
mortgage for insurance upon presentation by the HFA of the required Closing Docket and certifications required
by this part and the Commissioner’s
administrative requirements.
Gross rent includes any utility allowance (including charges for the occupancy of a cooperative unit) determined by the Secretary after taking
into account such determination under
section 8 of the U.S. Housing Act of
1937 (42 U.S.C. 1437f). It does not include any payment under section 8 or
any comparable rental assistance program (with respect to such unit or occupants thereof), nor does it include
any fee for a supportive service that is
paid to the owner of the unit (on the
basis of the low-income status of the
tenant of the unit) by any governmental program of assistance (or by an
organization
described
in
section
501(c)(3) of the Internal Revenue Code
(26 U.S.C. 501(c)(3)) and exempt from
tax under section 501(a) of the Code (26
U.S.C. 501(a)) if such program (or organization) provides assistance for rent
and the amount of assistance provided
for rent is not separable from the
amount of assistance provided for supportive services. It also does not include any rental payment to the owner
of the unit to the extent such owner
pays an equivalent amount to the
Farmers Home Administration under
section 515 of the Housing Act of 1949
(42 U.S.C. 1485).
Housing finance agency or HFA means
any public body, agency, or instrumentality created by a specific act of a
State legislature or local municipality
empowered to finance activities designed to provide housing and related
facilities, through land acquisition,
construction or rehabilitation. The
term State includes the several States,
Puerto Rico, the District of Columbia,

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Office of Assistant Secretary for Housing, HUD
Guam, the Trust Territory of the Pacific Islands, American Samoa and the
Virgin Islands.
Insured mortgage means a valid single
first lien given to secure advances on,
or the unpaid purchase price of, real estate, under the laws of the State in
which the real estate is located, together with the credit instrument, if
any, secured thereby. Any other financing permitting on property insured under this part must be expressly
subordinate to the insured mortgage.
Level I participants means HFAs that
elect to take 50 percent or more of the
risk of loss in 10 percent increments on
mortgages issued under this program.
Level II participants means HFAs that
elect to take 10 or 25 percent of the
risk of loss on mortgages issued under
this program, dependent on the loanto-replacement cost or loan-to-value
ratio of the project to be insured.
Mortgage means such a single first
lien upon the real estate as is commonly given to secure advances on, or
the unpaid purchase price of, real estate under the laws of the jurisdiction
where the real estate is situated, together with the credit instruments, if
any, secured thereby.
Mortgagee means the original lender
under a mortgage and its successors
and assigns approved by the Commissioner.
Mortgagor means the original borrower under a mortgage and its successor and assigns.
Multifamily housing means housing
accommodations on the mortgaged
property that are designed principally
for residential use, conform to standards satisfactory to the Secretary, and
consist of not less than 5 rental units
(including cooperative units) on 1 site.
These
units
may
be
detached,
semidetached, row house, or multifamily structures.
Qualified HFA means an HFA that
meets the requirements described in
§ 266.100(a).
Risk-Sharing Agreement means a contract between an HFA and the Commissioner that incorporates the terms, obligations, and conditions specified in
this part.
Secondary financing means any grant,
loan, inferior lien, or other form of indebtedness used during loan origina-

§ 266.20

tion prior to HUD endorsement to finance a multifamily property insured
under this part which is inferior to the
insured mortgage as defined above and
does not have first priority for payment.
Single Room Occupancy, or SRO,
projects means multifamily projects
consisting of units that are not required to contain food preparation or
sanitary facilities for occupancy by
single individuals capable of independent living.
Supportive services means any service
provided under a planned program of
services designed to enable residents of
a residential rental property to remain
independent and avoid placement in a
hospital, nursing home, or intermediate care facility for the mentally
or physically handicapped. In the case
of a single room occupancy unit, the
term includes any service provided to
assist tenants in locating and retaining
permanent housing. This definition is
to be used in conjunction with the
‘‘gross rent’’ calculation.
§ 266.10 Allocations of assistance and
credit subsidy.
(a) Notice of availability of assistance.
HUD will announce the availability of
assistance under this program through
publication of a Notice in the FEDERAL
REGISTER. Such Notice will invite
qualified HFAs to submit an application for approval and/or for additional
units under this part. The Notice will
indicate the deadline date for submission of applications, required documentation, the address to which the
applications must be submitted and
other relevant information.
(b) Credit subsidy will be obligated
and allocated in accordance with outstanding Department instructions.
§ 266.15 Risk-Sharing Agreement.
Execution of a Risk-Sharing Agreement is a prerequisite to participation
in this program. The Risk-Sharing
Agreement shall be in a form acceptable to the Commissioner.
[61 FR 7947, Feb. 29, 1996]

§ 266.20 Effect of amendments.
The Commissioner may amend the
regulations in this part from time to
time. Amendments to the regulations

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§ 266.25

24 CFR Ch. II (4–1–19 Edition)

will not adversely affect the interest of
a lender under a Contract of Insurance
on any mortgage already insured or on
any mortgage to be insured on which
HUD has already issued its firm approval letter.
§ 266.25 Limitation on HUD insurance
liability.
The Commissioner shall have no obligation to recognize or deal with anyone
other than the HFA in its role as mortgagee of record and as party to a risksharing agreement with HUD with respect to the rights, benefits, and obligations of the HFA under the contract
of insurance.
§ 266.30 Nonapplicability of 24 CFR
part 246.
The provisions of 24 CFR part 246 do
not apply to projects that are security
for mortgages insured under this part.

Subpart B—Housing Finance
Agency Requirements
§ 266.100 Qualified housing finance
agency (HFA).
(a) Qualifications. To participate in
the program, an HFA must apply and
be specifically approved for the pilot
program described in this part, in addition to being approved as a mortgagee
under § 202.10. The HFA must maintain
eligibility by continuing to comply
with the requirements set forth in the
Risk-Sharing Agreement and this part.
To qualify for participation in the program described in this part, an HFA
must:
(1) Carry the designation of ‘‘top
tier’’ or its equivalent as evaluated by
Standard and Poor’s or any other nationally recognized rating Agency; or
(2) Receive an overall rating of ‘‘A’’
for the HFA for its general obligation
bonds from a nationally recognized rating agency; or
(3) Otherwise demonstrate its capacity as a sound and experienced HFA
based on, but not limited to, experience
in financing multifamily housing, fund
balances, administrative capabilities,
investment policy, internal controls,
financial management, portfolio quality, and State or local support; and
(4) Be a HUD-approved multifamily
mortgagee in good standing; and

(5) Have at least five years experience in multifamily underwriting; and
(6) Certify that:
(i) The Department of Justice has not
brought a civil rights suit against the
Agency, and no suit is pending;
(ii) There has not been an adjudication of a civil rights violation in a civil
action brought against the HFA by a
private individual, unless the HFA is
operating in compliance with a court
order, or implementing a HUD-approved compliance agreement designed
to correct the areas of noncompliance;
(iii) There are no outstanding findings of noncompliance with civil rights
statutes, Executive Orders, or regulations as a result of formal administrative proceedings, or the Secretary has
not issued a charge against the HFA
under the Fair Housing Act, unless the
HFA is operating under a compliance
agreement designed to correct the
areas of noncompliance.
(b) Approval levels. Approval levels
consist of the following:
(1) Level I approval to originate,
service, and dispose of multifamily
mortgages where the HFA uses its own
underwriting standards and loan terms
and conditions, and assumes 50 to 90
percent of the risk of loss (increments
of 10 percent).
(2) Level II approval to originate,
service, and dispose of multifamily
mortgages where the HFA uses underwriting standards and loan terms and
conditions approved by HUD, and:
(i) When the loan-to-replacement
cost ratio for new construction and
substantial rehabilitation projects or
the loan-to-value ratio for existing
projects is greater than or equal to 75
percent, the HFA shall assume 25 percent of the risk of loss.
(ii) When the loan-to-replacement
cost ratio for new construction and
substantial rehabilitation or the loanto-value ratio for existing projects is
less than 75 percent, the HFA shall assume 10 percent, or 25 percent at the
HFA’s option, of the risk of loss.
(3) For HFAs who plan to use Level I
and Level II processing, the underwriting standards and loan terms and
conditions to be used on Level II loans
must be approved by HUD.
[59 FR 62524, Dec. 5, 1994, as amended at 62
FR 20088, Apr. 24, 1997]

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Office of Assistant Secretary for Housing, HUD
§ 266.105 Application requirements.
(a) Applications for approval as a HUDapproved multifamily mortgagee. HFAs
that are not HUD-approved mortgagees
at the time of their application to participate in the program under this part
must submit, concurrently, separate
applications for approval to participate
in the program and for approval to operate as a HUD-approved mortgagee.
Application for approval as a HUD-approved mortgagee must be submitted
to HUD in accordance with the applicable HUD requirements.
(b) Applications for participation in
program. Applications from HFAs for
approval to participate in the program
under this part will be submitted in response to a notice published in the
FEDERAL REGISTER. The notice will include the required application exhibits
and any other information or documentation necessary for approval for
participation in the Risk-Sharing Program.
[61 FR 7947, Feb. 29, 1996]

§ 266.110 Reserve requirements.
(a) HFAs with top-tier designation or
overall rating of ‘‘A’’ on general obligation bonds. An HFA with a top tier or
equivalent designation or an HFA with
an overall rating of ‘‘A’’ on its general
obligation bonds is not required to
have additional reserves so long as the
HFA maintains that designation or
rating, unless the Commissioner determines that a prescribed level of reserves is necessary. If the designation
or rating is lost, the HFA must immediately establish a reserve account
funded in accordance with the requirements set forth in paragraph (b) of this
section. The reserve account must reflect all loans in the HFA’s portfolio
endorsed under this part.
(b) Other HFAs. (1) For other HFAs, a
specifically identified dedicated account consisting entirely of liquid assets (i.e., cash or cash equivalents or
readily marketable securities) must be
established and maintained in a financial institution acceptable to HUD.
This account may be drawn upon by
HUD and may be used by the HFA only
with the prior written approval of HUD
for the purpose of meeting the HFA’s
risk-sharing obligations under this

§ 266.115

part. The account must be established
prior to the execution of any Risk
Sharing Agreement under this part in
an initial amount of not less than
$500,000. Thereafter, the HFA must deposit at each loan closing and thereafter maintain the following additional
amounts in the dedicated account:
(i) $10.00 per $1,000 of the unpaid principal balance that is equal to or less
than $50 million; plus
(ii) $7.50 per $1,000 of the unpaid principal balance that is greater than $50
million and less than $150 million; plus
(iii) $5.00 per $1,000 of the unpaid
principal balance that is greater than
$150 million.
(2) The Commissioner may determine
that higher levels of reserves may be
necessary.
§ 266.115 Program
monitoring
and
evaluation.
(a) HFA certifications. HUD will rely
heavily on the certifications required
of an HFA under this part and such additional certifications as the Commissioner may require in his or her administrative procedures. An HFA’s continued participation in the program is
predicated upon compliance with these
certifications and its recommending
for endorsement only those mortgages
that comply with requirements of the
program, including the HFA’s origination, underwriting and closing procedures incorporated by reference into
the Risk-Sharing Agreement.
(b) Monitoring and evaluation. Monitoring and evaluation activities will
focus on compliance with program requirements and performance of the
HFA in meeting program objectives of
providing affordable housing. They will
enable HUD to evaluate the effectiveness of the program as required by section 542(d)(3) of the Act.
(c) Responsibility for monitoring and
evaluation. The Commissioner or his or
her designee will be responsible for
overall program monitoring and evaluation.
(d) HFA submissions. (1) For each loan
insured under this part, basic underwriting and closing information must
be submitted in a format specified by
HUD and must accompany the closing
docket submitted in accordance with
§ 266.420(b). Information relative to

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§ 266.120

24 CFR Ch. II (4–1–19 Edition)

project management and servicing (including disposition) will be required
after endorsement.
(2) The HFA must submit semi-annual reports setting forth the original
mortgage amounts and outstanding
principal balances on mortgages the
HFA has underwritten, and the status
of all projects insured under this part
(e.g., current, in default, acquired,
under workout agreement, in bankruptcy). For projects where the mortgagor has declared bankruptcy, the
HFA must submit information containing the date the bankruptcy was
filed and the date the HFA requested
the Court to dismiss the bankruptcy
proceedings.
§ 266.120 Actions for which sanctions
may be imposed.
Results of monitoring or other reviews may serve as the basis for the
Commissioner’s imposing sanctions on
the HFA. Violations for which sanctions may be imposed include, but are
not limited to:
(a) Commission of fraud or making a
material misrepresentation by the
HFA with respect to any mortgage insured or to any other matter under this
part.
(b) Assignment or transfer of interest
in any insured mortgage not in accord
with the requirements of this part.
(c) Engagement in business practices
that do not conform to generally accepted practices of prudent lenders or
that demonstrate irresponsibility.
(d) Actions or conduct for which
sanctions may be imposed against the
HFA by HUD’s Mortgagee Review
Board under 24 CFR 25.9.
(e) Failure to:
(1) Reveal in its application for participation in the program all the information required by this part;
(2) Notify HUD in a timely manner of
any pending or actual changes that
would adversely affect HFA operations
or financial status;
(3) Comply with all eligibility requirements for participation in the
program;
(4) Issue debentures in the event of
an initial claim payment by HUD, or to
reimburse HUD for payment of a claim;
(5) Maintain its top tier designation
or overall rating of ‘‘A’’ on general ob-

ligation bonds (or if such designation
or rating is lost, comply with paragraph (e)(6) of this section);
(6) Establish and maintain a dedicated account, if required, or meet
other financial obligations under this
program;
(7) Perform underwriting, insurance
of advances, cost certification, management, servicing or property disposition functions in a prudent and acceptable manner based on the standards incorporated by reference into the Risksharing Agreement;
(8) Submit financial and other reports required by this part;
(9) Comply with any regulatory requirement or with the Risk-Sharing
Agreement;
(10) Maintain any other standards
HUD may establish for participation in
this program;
(11) Enforce the regulatory agreement provisions with respect to individual projects;
(12) Maintain a default ratio acceptable to HUD relative to the HFA’s own
portfolio and the defaults experienced
under this part by other program participants;
(13) Consider adequately special risk
circumstances without compensating
for the higher risks of such transactions (e.g., high loan-to-value ratios
in areas with high vacancy or default
rates); or
(14) Remit mortgage insurance premiums on a timely basis or failure to
refund or credit mortgagor’s accounts
with overpaid mortgage insurance premiums.
§ 266.125 Scope and nature of sanctions.
(a) Actions by Designated Office. Depending on the nature and extent of
the noncompliance with the requirements of this part, the Designated Office may take any of the following actions:
(1) Require that the HFA execute a
trust agreement, establish a trust account in accordance with such agreement, and fund such account which
may be drawn upon by HUD for purposes of meeting the HFA’s risk-sharing obligations;

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Office of Assistant Secretary for Housing, HUD
(2) Require the HFA to assume a
higher portion of risk for the subject
and future mortgages;
(3) Recommend to the Commissioner
that the HFA be required to contract
its loan servicing or property disposition functions to a third party;
(4) Recommend to the Commissioner
that the mortgage insurance be terminated in cases of fraud or material misrepresentation by the HFA, or transfer
of interest in an insured mortgage or
assignment of the mortgage not in accord with the requirements of this
part;
(5) Recommend to the Commissioner
that approval for the HFA to participate in the program be suspended or
withdrawn;
(6) Recommend to the Commissioner
that the HFA’s mortgagee approval be
withdrawn pursuant to 24 CFR part 25
and/or that penalties be imposed pursuant to 24 CFR part 30;
(7) Require additional financial or
other reports as may be necessary to
monitor the activities of the HFA more
closely.
(b) Actions by Headquarters. HUD
Headquarters may impose any of the
sanctions set forth or recommended in
paragraph (a) of this section based
upon its responsibilities for monitoring
and overall program oversight.
(c) Effect of suspension or withdrawal.
A suspension or withdrawal action will
not affect any mortgage insurance endorsement in effect on the date of the
suspension or withdrawal action.
(d) HFA right to informal hearing. (1)
Any sanction imposed by a Designated
Office in writing will be immediately
effective, will state the grounds for the
action, and provide for the HFA’s right
to an informal hearing before the Designated Office Representative or his or
her designee in the Designated Office.
The HFA may request an informal
hearing within 10 working days of receipt of the suspension or withdrawal
action and the Designated Office shall
give the HFA an opportunity to be
heard within 10 working days of receipt
of the HFA’s request. The HFA may be
represented by counsel. The Designated
Office Representative, or his or her designee, will advise the HFA in writing of
the decision within 10 working days of

§ 266.200

the informal hearing, which decision
will constitute final HUD action.
(2) Sanctions imposed by Headquarters will be handled in a similar
manner, except that the informal hearing shall be before the Commissioner
or his or her designee.
§ 266.130 Reinsurance.
Reinsurance will be permitted for the
portion of the HFA risk, subject to the
following requirements:
(a) Neither HUD’s nor the HFA’s position shall be subordinated;
(b) The reinsurance may not be used
to reduce any reserve or fund balance
requirements; and
(c) Such reinsurance does not incur
an obligation to the Federal Government.

Subpart C—Program
Requirements
§ 266.200 Eligible projects.
(a) Minimum project size. Projects insured under this part must consist of
five or more rental dwelling units (including cooperative dwelling units) on
one site. The site may consist of two or
more non-contiguous parcels of land
situated so as to comprise a readily
marketable real estate entity within
an area small enough to allow convenient and efficient management. The
units may be detached, semi-detached,
row houses, multifamily structures, or
mobile home parks (exclusive of the
mobile homes).
(b) New construction or substantial rehabilitation. Insurance under this part
shall be for the purpose of financing
the new construction or substantial rehabilitation of projects meeting the
other requirements of this part as follows:
(1) New construction occurs when all
project and construction elements are
installed as part of the work.
(2) Substantial rehabilitation is any
combination of the following work to
the existing facilities of a project that
aggregates to at least 15 percent of
project’s value after the rehabilitation
and that results in material improvement of the project’s economic life,
liveability, marketability, and profitability: Replacement, alteration and/or
modernization of building spaces, long-

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§ 266.205

24 CFR Ch. II (4–1–19 Edition)

lived building or mechanical system
components, or project facilities. Substantial rehabilitation may include but
not consist solely of any combination
of: minor repairs, replacement of shortlived building or mechanical system
components, cosmetic work, or new
project additions.
(c) Existing projects. Financing of existing properties without substantial
rehabilitation is allowed.
(1) If an existing multifamily project
is being acquired and HUD insurance
under this part will be used to facilitate the acquisition of projects to increase the supply of affordable housing,
such acquisitions are permissible if the
HUD insured mortgage does not exceed
the sum of the total cost of acquisition, cost of financing, cost of repairs,
and reasonable transaction costs as determined by the Commissioner.
(2) If the property is subject to an
HFA-financed loan to be refinanced and
such refinancing will result in the preservation of affordable housing, refinancing of these properties is permissible if project occupancy is not less
than 93 percent (to include consideration of rent in arrears), based on the
average occupancy in the project over
the most recent 12 months, and the
mortgage does not exceed an amount
supportable by the lower of the unit
rents being collected under the rental
assistance agreement or the unit rents
being collected at unassisted projects
in the market area that are similar in
amenities and location to the project
for which insurance is being requested.
The HUD-insured mortgage may not
exceed the sum of the existing indebtedness, cost of refinancing, the cost of
repairs and reasonable transaction
costs as determined by the Commissioner. If a loan to be refinanced has
been in default within the 12 months
prior to application for refinancing, the
HFA must assume not less than 50 percent of the risk.
(d) Projects receiving Section 8 rental
subsidies or other rental subsidies.
Projects receiving project-based housing assistance payments under section
8 of the U.S. Housing Act of 1937 or
other rental subsidies and meeting the
requirements of this part may be insured under this part only if the mortgage does not exceed an amount sup-

portable by the lower of the unit rents
being or to be collected under the rental assistance agreement or the unit
rents being collected at unassisted
projects in the market that are similar
in amenities and location to the
project for which insurance is being requested.
(e) SRO projects. Single room occupancy (SRO) projects, as defined in
§ 266.5, are eligible for insurance under
this part. Units in SRO projects must
be subject to 30-day or longer leases;
however, rent payments may be made
on a weekly basis in SRO projects.
(f) Board and care/assisted living facilities. Board and care projects and assisted living facilities may be insured
if the facilities meet the definition of
those terms in § 266.5.
(g) Elderly projects. Projects or parts
of projects specifically designed for the
use and occupancy by elderly families.
An elderly family means any household
where the head or spouse is 62 years of
age or older, and also any single person
who is 62 years of age or older.
(h) Zoning requirements. Projects insured under this part must meet applicable zoning and other State/local government requirements.
§ 266.205 Ineligible projects.
The following projects and facilities
are not eligible for insurance under
this part:
(a) Transient housing or hotels. Rental
for transient or hotel purposes. For
purposes of this part, rental for transient or hotel purposes means:
(1) Rental for any period less than 30
days, or
(2) Any rental, if the occupants of the
housing accommodations are provided
customary hotel services such as room
service for food and beverages, maid
service, furnishing and laundering of
linens, or valet service.
(b) Projects in military impact areas. A
project located in a military impact
area, as determined by HUD. A military impact area is generally a small
or medium size metropolitan housing
market area or a remote or isolated
nonmetropolitan area where:
(1) Military-connected households
comprise 25 percent or more of the
total households in the market area.
Military-connected households include

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Office of Assistant Secretary for Housing, HUD
active duty military personnel, civilian
employees of the military service (Department of Defense) or other Federal
agency at or in support of the installation, and employees of contractors and
sub-contractors
directly
associated
with the military installation, and
their dependents. Unaccompanied active duty military personnel housed in
military-controlled
group
quarters
housing (barracks, BOQ’s) are excluded;
and
(2) There is concern about the continued stability of the current level of
military strength and mission at the
installation based on public announcements from the Department of Defense
or the military service of impending
changes; and
(3) The complete reduction of military-connected households living in
nonmilitary rental housing over a 5
year period, at an annual average decline of 20 percent, would, taking into
account growth in the civilian economy and normal changes in the housing inventory, cause an adverse impact
on the private rental market resulting
in an increase in the rental vacancy
rate in the housing market of 10 percent or more at the end of that period.
(c) Retirement service centers. Projects
designed for the elderly with extensive
services and luxury accommodations
that provide for central kitchens and
dining rooms with food service or mandatory services.
(d) Nursing homes or intermediate care
facilities. Nursing homes and intermediate care facilities licensed and
regulated by State or local government
and providing nursing and medical
care.
§ 266.210 HUD-retained review functions.
Certain functions are retained by the
Commissioner. The HFA must submit
any information or certification required by the Commissioner to permit
determination of compliance with requirements concerning:
(a) Previous participation of principals.
Previous participation of the principals
of the mortgagor, general contractor,
consultant or management agent in accordance with the Previous Participation and Clearance Review Procedures
of 24 CFR 200.210 through 200.218.

§ 266.215

(b) Environmental review requirements.
To determine compliance with the requirements of the National Environmental Policy Act of 1969 and related
laws and authorities, the HUD Field
Office (or other responsible entity
through such delegation as may be in
effect by regulation hereafter) will
visit each project site proposed for insurance under this part and prepare the
applicable environmental reviews as
set forth in 24 CFR part 50 (or as set
forth in 24 CFR part 58 for the other responsible entity). These requirements
must be completed before HUD may
issue the firm approval letter.
(c) Intergovernmental review. Intergovernmental review of Federal programs
under Executive Order 12372, as implemented in 24 CFR part 52.
(d) Subsidy layering. The Commissioner, or Housing Credit Agencies
through such delegation as may be in
effect by regulation hereafter, shall review all projects receiving tax credits
and some form of HUD assistance for
any excess subsidy provided to individual projects and reduce subsidy
sources in accordance with outstanding
guidelines.
(e) Davis-Bacon Act. The Commissioner shall obtain and provide to the
HFA the appropriate Department of
Labor wage rate determinations under
the Davis-Bacon Act, where they apply
under this part.
[59 FR 62524, Dec. 5, 1994, as amended at 60
FR 16573, Mar. 31, 1995]

§ 266.215 Functions delegated by HUD
to HFAs.
The following functions are delegated
by HUD to the HFAs:
(a) Affirmative Fair Housing Marketing
Plan (AFHMP). The HFA will perform
information collection, reviews and
ministerial activities associated with
the review and approval of the AFHMP
for all projects. (Enforcement of fair
housing and equal opportunity laws is
the responsibility of HUD.)
(b) Labor standards and prevailing
wage requirements. The HFA will perform information collection (e.g., payroll review and routine interviews) and
other routine administration and enforcement functions regarding labor
standards,
in
accordance
with
§ 266.225(e). (Enforcement of Davis-

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§ 266.220

24 CFR Ch. II (4–1–19 Edition)

Bacon prevailing wage requirements
and labor standards is the responsibility of HUD.)
(c) Insurance of advances. In cases involving insured advances, the HFA will
approve periodic advances of mortgage
insurance proceeds during construction
of the project subject to terms specified by the Commissioner.
(d) Cost certification. The HFA will
perform cost certification functions on
each insured loan subject to terms
specified by the Commissioner.
(e) Lead-Based Paint. The HFA will
perform functions related to LeadBased Paint requirements subject to
terms specified by the Commissioner.
§ 266.220 Nondiscrimination in housing and employment.
The mortgagor must certify to the
HFA that, so long as the mortgage is
insured under this part, it will:
(a) Not use tenant selection procedures that discriminate against families with children, except in the case of
a project that constitutes ‘‘housing for
older persons’’ as defined in section
807(b)(2) of the Fair Housing Act (42
U.S.C. 3607(b)(2));
(b) Not discriminate against any family because of the sex of the head of
household;
(c) Comply with the Fair Housing Act
(42 U.S.C. 3601-3619), as implemented by
24 CFR part 100; titles II and III of the
Americans with Disabilities Act of 1990
(42 U.S.C. 12101-12213), as implemented
by 28 CFR part 35; section 3 of the
Housing and Urban Development Act of
1968 (12 U.S.C. 1701u), as implemented
by 24 CFR part 135; the Equal Credit
Opportunity Act (15 U.S C. 1691-1691f),
as implemented by 12 CFR part 202; Executive Order 11063, as amended by Executive Order 12259 (3 CFR 1958-1963
Comp., p. 652 and 3 CFR 1980 Comp., p.
307), and implemented by 24 CFR part
107; Executive Order 11246 (3 CFR 19641965 Comp., p. 339), as implemented by
41 CFR part 60; other applicable Federal laws and regulations issued pursuant to these authorities; and applicable
State and local fair housing and equal
opportunity laws. In addition, a mortgagor that receives Federal financial
assistance must also certify to the
HFA that, so long as the mortgage is
insured under this part, it will comply

with title VI of the Civil Rights Act of
1964 (42 U.S.C. 2000d), as implemented
by 24 CFR part 1; the Age Discrimination Act of 1975 (42 U.S.C. 6101-6107), as
implemented by 24 CFR part 146; and
section 504 of the Rehabilitation Act of
1973 (29 U.S.C. 794), as implemented by
24 CFR part 8.
§ 266.225 Labor standards.
(a) Applicability of Davis-Bacon. (1) All
laborers and mechanics employed by
contractors or subcontractors on a
project insured under this part shall be
paid not less than the wages prevailing
in the locality in which the work was
performed for the corresponding classes
of laborers and mechanics employed in
construction of a similar character, as
determined by the Secretary of Labor
in accordance with the Davis-Bacon
Act, as amended (40 U.S.C. 276a-276a-5),
where the project meets all of the following conditions:
(i) Advances for the project are insured under this part;
(ii) The project involves new construction or substantial rehabilitation;
and
(iii) The project will contain 12 or
more dwelling units.
(2) Projects that do not meet these
conditions are not subject to DavisBacon wage rates except to the extent
required as a condition of other Federal assistance to the project.
(b) Volunteers. The provisions of this
section shall not apply to volunteers
under the conditions set out in 24 CFR
part 70. In applying part 70, insurance
under this part shall be treated as a
program for which there is a statutory
exemption for volunteers.
(c) Labor standards. Any contract,
subcontract, or building loan agreement executed for a project subject to
Davis-Bacon wage rates under paragraph (a) of this section shall comply
with all labor standards and provisions
of 29 CFR parts 1, 3 and 5 that would be
applicable to a mortgage insurance
program to which Davis-Bacon wage
rates are made applicable by statute.
(d) Advances. (1) No advance under a
mortgage on a project subject to DavisBacon wage rates under paragraph (a)
of this section shall be eligible for insurance under this part unless the HFA
determines (in accordance with the

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Office of Assistant Secretary for Housing, HUD
Commissioner’s administrative procedures) that the general contractor or
any subcontractor or any firm, corporation, partnership or association in
which the contractor or subcontractor
has a substantial interest was not, on
the date the contract or subcontract
was executed, on the ineligible list established by the Comptroller General,
pursuant 29 CFR 5.12, issued by the
Secretary of Labor.
(2) No advance under any mortgage
on a project subject to Davis-Bacon
wage rates under paragraph (a) of this
section shall be insured under this part
unless there is filed with the application for the advance, and no such mortgage shall be insured under this part
unless there is filed with the HFA after
completion of the construction or substantial rehabilitation, a certificate or
certificates in the form required by the
Commissioner, supported by such other
information as the Commissioner may
prescribe, certifying that the laborers
and mechanics employed in the construction of the project involved have
been paid not less than the wages determined by the Secretary of Labor to
be prevailing in accordance with paragraph (a) of this section.
(e) Responsibility for enforcement and
administration. The Commissioner retains responsibility for enforcement of
labor standards under this section, but
the Commissioner may delegate to the
HFA information collection (e.g., payroll review and routine interviews) and
other routine administration and enforcement functions, subject to monitoring by the Commissioner. Where
routine administration and enforcement functions are delegated to the
HFA, the HFA shall bear financial responsibility for any deficiency in payment of prevailing wages or, where applicable under 29 CFR part 1, any increase in compensation to a contractor, that is attributable to any
failure properly to carry out its delegated functions. For example, failure
of an HFA to supply or ensure inclusion of the proper contract clauses or
wage determination in a contract or
building loan agreement may require
the HFA to fund increased compensation to a contractor as the result of increased wages attributable to incorpo-

§ 266.300

ration of the proper clauses and wage
determination.

Subpart D—Processing,
Development, and Approval
§ 266.300 HFAs accepting 50 percent or
more of risk.
(a) Underwriting standards. An HFA
electing to take 50 percent or more of
the risk on loans may use its own underwriting standards and loan terms
and conditions (as disclosed and submitted with its application) to underwrite and approve loans without further review by HUD.
(b) HFA responsibilities. The HFA is
responsible for the performance of all
functions except those HUD-retained
functions specified in §§ 266.210 and
266.225(e). After acceptance of an application for a loan to be insured under
this part, the HFA must:
(1) Determine that a market for the
project exists, taking into consideration any comments from the HUD
Field Office relative to the potential
adverse impact the project will have on
existing or proposed Federally insured
and assisted projects in the area.
(2) Establish the maximum insurable
mortgage and review plans and specifications for compliance with HFA
standards;
(3) Determine the acceptability of
the proposed mortgagor and management agent;
(4) Approve the Affirmative Fair
Housing Marketing Plan; and
(5) Make any other determinations
necessary to ensure acceptability of
the proposed project.
(c) HUD-retained reviews. After positive completion of the HUD-retained
reviews specified in § 266.210(a), (b), and
(c), the HUD Field Office will issue a
firm approval letter.
(d) Inspections and other reviews. The
HFA is responsible for inspections during construction, processing and approving advances of mortgage proceeds
during construction, review and approval of cost certification, and closing
of the loan.
(e) Endorsement of mortgage note for
insurance. So long as the HFA is in
good standing, and absent fraud or material misrepresentation on the part of
the HFA, the Commissioner or designee

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§ 266.305

24 CFR Ch. II (4–1–19 Edition)

will endorse the mortgage note for insurance upon presentation by the HFA
of the Closing Docket and certifications required in § 266.420(b), subject
to HUD’s right to adjust under § 266.417.
§ 266.305 HFAs accepting less than 50
percent of risk.
(a) Underwriting standards. The underwriting standards and loan terms and
conditions of any HFA electing to take
less than 50 percent of the risk on certain projects are subject to review,
modification, and approval by HUD in
accordance with § 266.100(b)(2). These
HFAs may assume 25 percent or 10 percent of the risk depending upon the
loan-to-replacement-cost or loan-tovalue ratios of the projects to be insured as specified in § 266.100(b)(2)(i)
and (ii).
(b) HFA responsibilities. The HFA is
responsible for the performance of all
functions except those HUD-retained
functions specified in § 266.210 and
266.225(e). After acceptance of an application for a loan to be insured under
this part, the HFA must:
(1) Determine that a market for the
project exists, taking into consideration any comments from the HUD
Field Office relative to the potential
adverse impact the project will have on
existing or proposed Federally insured
and assisted projects in the area;
(2) Establish the maximum insurable
mortgage, and review plans and specifications for compliance with HFA
standards as approved by HUD;
(3) Determine the acceptability of
the proposed mortgagor and management agent;
(4) Approve the Affirmative Fair
Housing Marketing Plan; and
(5) Make any other determinations
necessary to ensure acceptability of
the proposed project.
(c) HUD-retained reviews. After positive completion of the HUD-retained
reviews specified in § 266.210 (a), (b), and
(c), the HUD Field Office will issue a
firm approval letter which, among
other things, will apportion units and
obligate credit subsidy to the project.
(d) Inspections and other reviews. The
HFA is responsible for inspections during construction, processing and approving advances of mortgage proceeds
during construction, review and ap-

proval of cost certification, and closing
of the loan.
(e) Endorsement of mortgage note for
insurance. So long as the HFA is in
good standing, and absent fraud or material misrepresentation on the part of
the HFA, the Commissioner or designee
will endorse the mortgage note for insurance upon presentation by the HFA
of the Closing Docket and certifications required in § 266.420(b), subject
to HUD’s right to adjust under § 266.417.
§ 266.310 Insurance of advances or insurance upon completion; applicability of requirements.
(a) General. HUD will agree to insure
periodic advances of mortgage proceeds
or to insure the entire mortgage upon
completion of construction for projects
involving new construction or substantial rehabilitation. Existing projects
without the need for substantial rehabilitation will be considered insurance
upon completion cases. In insurance
upon completion cases, only the permanent loan is insured and a single endorsement is required after satisfactory completion of construction, substantial rehabilitation or repairs. In
periodic advances cases, progress payments approved by the HFA and both
an initial and final endorsement on the
mortgage are required.
(b) Insurance of advances. Periodic advances will be authorized by the HFA
subject to terms specified by the Commissioner.
(c) Insurance upon completion—(1) New
construction and substantial rehabilitation. An HFA may approve a loan that
will be insured upon completion of construction of the project. The HFA approval must prescribe a designated period during which the mortgagor must
start construction or substantial rehabilitation. If construction or rehabilitation is started as required, the approval will be valid for the period estimated by the HFA for construction and
loan closing, including any extension
approved by the HFA.
(2) Existing projects with no substantial
rehabilitation. Existing projects with or
without repairs are only insured upon
completion, although HFAs may permit noncritical repairs to be completed
after endorsement upon establishment
of escrows acceptable to the HFA.

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Office of Assistant Secretary for Housing, HUD
(d) Requirements applicable to both
periodic advances and insurance upon
completion cases—(1) Inspections. The
HFA must inspect projects under this
part at such times during construction,
substantial rehabilitation, or repairs as
the HFA determines. The inspections
must be conducted to assure compliance with plans and specifications,
work write-ups, and other contract
documents.
(2) Approval of advances. At all times,
the loan must be kept in balance, and
advances approved only if warranted by
construction
progress
evidenced
through HFA inspection, as well as in
accord with plans, specifications, work
write-ups and other contract documents. In approving advances, HFAs
must
make
certain
that
other
mortgageable items are supported with
proper bills and/or receipts before funds
can be approved and advanced for insurance.
(3) Cost certification. In order to ensure that the final amount for insurance is supported by certified costs:
(i) The mortgagor (and general contractor, if there is an identity of interest with the mortgagor) must execute a
certificate of actual costs, in a form
acceptable to the HFA, when all physical improvements are completed to
the satisfaction of the HFA and before
final endorsement; and
(ii) The cost certification provided by
the mortgagor must be audited by an
independent public accountant.
(4) Contestability. Although the HFA
has authority to approve the mortgagor’s (and general contractor’s) certification of cost, the certification will be
contestable by the Commissioner during the period up to and including final
endorsement of the mortgage. After
final endorsement, the certification
will be final and incontestable except
for fraud or material misrepresentation on the part of the mortgagor (and/
or general contractor).
(5) Assurance of completion. The mortgagor must furnish assurance of completion of the project in accordance
with any requirements of the HFA as
to form and amount.
(6) Latent defects escrow. The mortgagor must furnish an escrow or other
form of assurance required by the HFA
to ensure that latent defects can be

§ 266.410

remedied within the time period required by the HFA.
(e) Mortgagee of record. The HFA must
remain the mortgagee of record as long
as mortgage insurance is in force.
§ 266.315

Recordkeeping requirements.

The mortgagor and the builder, if
there is an identity of interest with the
mortgagor, shall keep and maintain
records of all costs of any construction
or other cost items not representing
work under the general contract and to
make available such records for review
by the HFA or HUD, if requested.

Subpart E—Mortgage and Closing
Requirements; HUD Endorsement
§ 266.400 Property requirements—real
estate.
The mortgage must be on real estate
held:
(a) In fee simple;
(b) Under a renewable lease of not
less than 99 years; or
(c) Under a lease executed by a governmental agency, or other lessor approved by the HFA, that has a term at
least 10 years beyond the end of the
mortgage term.
§ 266.402

Recordation.

At the time of initial endorsement in
the case of insurance of advances or at
the time of final endorsement in the
case of insurance upon completion, the
HFA shall make certain that the mortgage and the regulatory agreement are
recorded.
§ 266.405

Title.

(a) Eligibility of title. Marketable title
to the mortgaged property must be
vested in the mortgagor on the date
the mortgage is filed for record.
(b) Title evidence. The HFA must receive a title insurance policy that ensures that marketable title is vested in
the mortgagor, that a survey acceptable to the HFA has been performed,
and that no existing impediments to
title concern, or exist on, the property.
§ 266.410

Mortgage provisions.

(a) Form. The mortgage and note
must be executed on a form approved

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§ 266.415

24 CFR Ch. II (4–1–19 Edition)

by the HFA for use in the jurisdiction
in which the property is located.
(b) Mortgagor. The mortgage must be
executed by a mortgagor determined
eligible by the HFA.
(c) First lien. The mortgage must be a
single first lien on property that has
first priority for payment and that
conforms with property standards prescribed by the HFA.
(d) Single asset mortgagor. The mortgage must require that the mortgagor
is a single asset mortgagor.
(e) Amortization. The mortgage must
provide for complete amortization (i.e.,
regularly amortizing) over the term of
the mortgage.
(f) Use restrictions. The mortgage
must contain a covenant prohibiting
the use of the property for any purpose
other than the purpose intended on the
day the mortgage was executed. The
conversion of a project from rental to
cooperative is not a ‘‘change in use’’ as
that term is employed in the mortgage
since the property will continue to
have a residential use both before and
after conversion.
(g) Hazard insurance. The mortgage
must contain a covenant, acceptable to
the HFA, that binds the mortgagor to
keep the property insured by one or
more standard policies for fire and
other hazards stipulated by the HFA. A
standard mortgagee clause making loss
payable to the HFA must be included
in the mortgage. The HFA is responsible for assuring that insurance is
maintained in force and in the amount
required by this paragraph and the
mortgage. The HFA must ensure that
the insurance coverage is in an amount
that will comply with the coinsurance
clause applicable to the location and
character of the property, but not less
than 80 percent of the actual cash
value of the insurable improvements
and equipment. If the mortgagor does
not obtain the required insurance, the
HFA must do so and assess the mortgagor for such costs. These insurance
requirements apply as long as the HFA
retains an interest in the project and
final claim settlement has not been
completed or the contract of insurance
has not been otherwise terminated.
(h) Modification of terms. The mortgage must contain a covenant requiring that, in the event that the HFA and

owner agree to a modification of the
terms of the mortgage (e.g., to reflect a
reduction of the interest rate if reductions are realized in the underlying
bond rates for the project), Section 8
rents would be reduced in accordance
with HUD guidelines.
(i) Regulatory Agreement. The mortgage must contain a provision incorporating the Regulatory Agreement by
reference.
§ 266.415 Mortgage lien and other obligations.
(a) Liens. At the initial and final closing of the loan, the mortgagor and the
HFA must certify, and the HFA must
determine, that the property covered
by the mortgage is free from all liens
other than the lien of the insured
mortgage, except that the property
may be subject to such inferior lien or
liens as approved by the HFA as long
as the insured mortgage has first priority for payment.
(b) Contractual obligations. At the
final closing of the loan, the mortgagor
and the HFA must certify, and the
HFA must determine, that all contractual obligations in connection with the
mortgage transaction, including the
purchase of the property and the improvements to the property, are paid.
An exception is made for obligations
that are approved by the HFA and determined by the HFA to be of a lesser
priority for payment than the obligation of the insured mortgage.
§ 266.417 Authority to adjust mortgage
insurance amount.
In order to protect the mortgage insurance funds, the Commissioner has
authority in his or her sole discretion,
at any time prior to and including final
endorsement, to adjust the amount of
the mortgage insurance.
§ 266.420 Closing and endorsement by
the Commissioner.
(a) Closing. Before disbursement of
loan advances in periodic advances
cases, and in all cases after completion
of construction, repair or substantial
rehabilitation, the HFA must hold a
closing and submit a closing docket
with required documentation to the
Commissioner or the Commissioner’s

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Office of Assistant Secretary for Housing, HUD
authorized Departmental representative for insurance of the mortgage by
endorsement of the mortgage note. The
note must provide that the mortgage is
insured under section 542(c) of the
Housing and Community Development
Act of 1992 and the regulations set
forth at 24 CFR part 266 in effect on the
date of endorsement. The note must
also specify the date of endorsement,
i.e., the date of HUD endorsement of
the project mortgage, and the risk of
loss assumed by the HFA and by HUD.
(b) Closing docket. The HFA’s submission must include a certification that
it has obtained written HUD approval
of compliance with the requirements
referred to in § 266.210, and certifications and information as follows:
(1) Information concerning the mortgage amount and term, location, number and type of units, income and expenses, rents, projects and market occupancy percentages, value/replacement cost, interest rate, and similar
statistical information in accordance
with the Commissioner’s administrative procedures.
(2) Copies of the amortization schedule, Note and Risk-Sharing Agreement.
(3) Certification that the loan has
been processed, prudently underwritten
(including a determination that a market exists for the project), cost certified (if the project is being submitted
for final endorsement) and closed in
full compliance with the HFA’s standards and requirements (or where the
mortgage is insured under Level II, in
full compliance with the underwriting
standards and loan terms and conditions as approved by HUD).
(4) At the time of final endorsement,
a certification for periodic advances
cases, if submitted for final endorsement, that advances were made proportionate to construction progress.
(5) A copy of the HFA-approved cost
certification if the project is submitted
for final endorsement.
(6) A certification that equal employment requirements are followed.
(7) A certification that the HFA has
reviewed and approved the Affirmative
Fair Housing Marketing Plan and
found it acceptable.
(8) A certification that a dedicated
account, if required, has been increased
in accordance with § 266.110(b).

§ 266.505

(9) Certifications required under
§ 266.415 concerning liens and contractual obligations.
(10) Copies of the Hazard Insurance
Policy with a clause making the loss
payable to the HFA.
(11) For projects subject to DavisBacon prevailing requirements under
§ 266.225, the certification and information concerning payment of prevailing
wage rates required by § 266.225(d).
(12) Certified copies of mortgage
(deed of trust) with attached regulatory agreement, and note for HUD
files.

Subpart F—Project Management
and Servicing
§ 266.500

General.

The HFA will have full responsibility
for the administration of the provisions of this subpart and for managing
and servicing projects insured under
this part. The HFA is responsible for
monitoring and determining the compliance of the project owner in accordance with the provisions of this subpart. HUD will monitor the performance of the HFA, not the project
owner, to determine its compliance
with the provisions covered under this
subpart.
§ 266.505 Regulatory
quirements.

agreement

(a) General. (1) The HFA must execute a Regulatory Agreement, in recordable form, between the mortgagor
and the HFA to be in force for the duration of the insured mortgage and
note or bond. The Regulatory Agreement must include a description of the
property. The Regulatory Agreement
must be incorporated by reference into
the mortgage and recorded with the
mortgage.
(2) The Regulatory Agreement executed between the HFA and the mortgagor must be binding upon the mortgagor and any of its successors and assigns and upon the HFA and any of its
successors for so long as the mortgage
is insured by HUD or HUD holds an
HFA debenture issued in connection
with a claim arising from the insured
mortgage. The HFA may not assign the
Regulatory Agreement.

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§ 266.507

24 CFR Ch. II (4–1–19 Edition)

(3) The HFA will enforce the Regulatory Agreement and take actions
against any mortgagors who violate its
provisions. Such actions may involve a
declaration of default and application
to any court for specific performance
of the agreement.
(b) Requirements. The Regulatory
Agreement must require the mortgagor
to comply with the provisions of this
part and obligate the mortgagor,
among other things, to:
(1) Make all payments due under the
mortgage and note/bond.
(2) Where necessary, establish a sinking fund for future capital needs.
(3) Maintain the project as affordable
housing, as defined in § 266.5.
(4) Continue to use dwelling units for
their original purposes.
(5) Comply with such other requirements as may be established by the
HFA and set forth in the Regulatory
Agreement.
(6) [Reserved]
(7) Maintain complete books and
records established solely for the
project.
(8) Comply with the Affirmative Fair
Housing Marketing Plan and all other
fair housing and equal opportunity requirements.
(9) Operate as a single asset mortgagor.
(10) Make books and records available for HUD or General Accounting
Office (GAO) review with appropriate
notification.
(11) Permit HUD officials or employees to inspect the project upon request
by the Commissioner.
(c) Enforcement. The Regulatory
Agreement shall be enforced by the
HFA.
[59 FR 62524, Dec. 5, 1994, as amended at 63
FR 46578, 46593, Sept. 1, 1998; 65 FR 16296,
Mar. 27, 2000]

§ 266.507 Maintenance requirements.
The mortgagor must maintain the
project in accordance with the physical
condition standards in 24 CFR part 5,
subpart G.
[63 FR 46578, Sept. 1, 1998]

§ 266.510 HFA responsibilities.
(a) Inspections. The HFA must perform inspections in accordance with

the physical inspection procedures in
24 CFR part 5, subpart G.
(b) Annual audits of projects. The HFA
must analyze projects’ annual audits
and provide a copy to HUD along with
a summary of unresolved findings and
actions planned, with target dates, to
correct unresolved findings.
(c) HFA’s annual financial statement.
The HFA must provide HUD with annual audited financial statement in accordance with the requirements of 2
CFR part 200, subpart F.
[59 FR 62524, Dec. 5, 1994, as amended at 63
FR 46578, Sept. 1, 1998; 65 FR 16296, Mar. 27,
2000; 80 FR 75936, Dec. 7, 2015]

§ 266.515 Record retention.
(a) Loan origination and servicing.
Records pertaining to the mortgage
loan origination and servicing of the
loan must be maintained for as long as
the insurance remains in force.
(b) Defaults and claims. Records pertaining to a mortgage default and
claim must be retained from the date
of default through final settlement of
the claim for a period of no less than
three years after final settlement.
§ 266.520 Program
monitoring
and
compliance.
HUD will monitor the performance of
the HFA in accordance with the provisions covered under this subpart.

Subpart G—Contract Rights and
Obligations
MORTGAGE INSURANCE PREMIUMS
§ 266.600 Mortgage
insurance
premium: Insurance upon completion.
(a) Initial premium. For projects insured upon completion, on the date of
the final closing, the HFA shall pay to
the Commissioner an initial premium
equal to the prescribed percentage, in
the sliding scale chart that is shown in
§ 266.604(b), of the face amount of the
mortgage.
(b) Premium payable with first payment
of principal. On the date of the first
payment of principal the HFA shall
pay a second premium (calculated on a
per annum basis) equal to the prescribed percentage of the average outstanding principal obligation of the
mortgage from the final closing date to

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Office of Assistant Secretary for Housing, HUD
the year following the date of the first
principal payment, less the amount
paid on the date of the final closing.
(c) Subsequent premiums. Until one of
the conditions is met under § 266.606(a),
the HFA on each anniversary of the
date of the first principal payment
shall pay to the Commissioner an annual mortgage insurance premium
equal to the prescribed percentage of
the average outstanding principal obligation of the mortgage, without taking
into account delinquent payments, or
partial claim payment under § 266.630,
or prepayments, for the year following
the date on which the premium becomes payable.
§ 266.602 Mortgage
insurance
premium: Insured advances.
(a) Initial premium. For projects involving insured advances, on the date
of the initial closing, the HFA shall
pay to the Commissioner an initial premium equal to the prescribed percentage, in the sliding scale chart that is
shown in § 266.604(b), of the face amount
of the mortgage.
(b) Interim premium. On each anniversary of the initial closing, the HFA
shall pay an interim mortgage insurance premium equal to the prescribed
percentage of the face amount of the
mortgage. The HFA shall continue to
pay the interim mortgage insurance
premiums until the date of the first
principal payment.
(c) Premium payable with first payment
of principal. On the date of the first
principal payment, the HFA shall pay a
mortgage insurance premium equal to
the prescribed percentage of the average outstanding principal obligation of
the mortgage for the year following the
date of the first principal payment.
The HFA shall adjust this payment by
deducting an amount equal to the portion of the last premium paid that is
attributable to the months after the
date of the first payment to principal.
Any partial month is to be counted as
a whole month. The HFA shall remit
the net adjusted mortgage premium to
the Commissioner and refund the
amount of the adjustment (overpayment) to the mortgagor.
(d) Subsequent premiums. Until one of
the conditions is met under § 266.606(a),
the HFA on each anniversary of the

§ 266.604

date of the first principal payment
shall pay to the Commissioner an annual mortgage insurance premium
equal to the prescribed percentage of
the average outstanding principal obligation of the mortgage, without taking
into account delinquent payments, prepayments, or a partial claim payment
under § 266.630, for the year following
the date on which the premium becomes payable.
§ 266.604 Mortgage
insurance
premium: Other requirements.
(a) Premium calculations on or after
first principal payment. The premiums
payable to the Commissioner on and
after the first principal payment shall
be calculated in accordance with the
amortization schedule prepared by the
HFA for final closing and the prescribed percentage as set forth in the
sliding scale chart in paragraph (b) of
this section without taking into account delinquent payments or prepayments.
(b) Prescribed percentages. The following sliding scale chart provides the
prescribed percentage, based upon the
respective share of risk, that is to be
used in calculating mortgage insurance
premiums under this section:
Percentage share of risk
HUD

Prescribed percentage for calculating
HFA’s annual MIP

HFA
90
75
50
40
30
20
10

10
25
50
60
70
80
90

(c) Closing information. The HFA shall
provide final closing information to
the Commissioner within 15 days of the
final closing in a format prescribed by
the Commissioner. In addition, the
HFA shall submit a copy of the amortization schedule. This amortization
shall be used to compute and collect all
future mortgage insurance premiums
subject to § 266.600(c) or § 266.602(d). If
the mortgage is modified, the HFA
shall submit to the Commissioner a
copy of the revised amortization schedule, which shall be used to compute
and collect all future mortgage insurance premiums subject to § 266.600(c) or
§ 266.602(d).

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§ 266.606

24 CFR Ch. II (4–1–19 Edition)

(d) Due date for premium payments.
Mortgage insurance premiums are due
on the first day of the month of the anniversary of the first payment to principal. Any premium received by the
Commissioner more than 15 days after
the due date shall be assessed a late
charge of 4 percent of the amount of
the premium payment due. Mortgage
insurance premiums that are paid to
the Commissioner more than 30 days
after the due date shall begin to accrue
interest at the rate prescribed by the
Treasury Fiscal Requirements Manual.

fore the date of the first payment to
principal.

§ 266.606 Mortgage
insurance
premium: Duration and method of paying.

§ 266.612

(a) Duration of payments. Mortgage
insurance premium payments must
continue annually until one of the following occurs:
(1) The mortgage is paid in full;
(2) A deed to the HFA is filed for
record;
(3) An application for initial claim
payment is received by the Commissioner; or
(4) The Contract of Insurance is otherwise terminated.
(b) Method of payment. The HFA shall
pay any mortgage insurance premium
required by this part in cash.
§ 266.608 Mortgage
insurance
mium: Pro rata refund.

pre-

If the Contract of Insurance is terminated by payment in full or is terminated by the HFA on a form prescribed
by the Commissioner, after the date of
the first payment to principal, the
Commissioner shall refund any mortgage insurance premium for the period
after the effective date of the termination of insurance. The refund shall
be mailed to the HFA for credit to the
mortgagor’s account. In computing the
pro rata portion of the annual mortgage insurance premium, the date of
termination of insurance shall be the
last day of the month in which the
mortgage is prepaid or the Commissioner receives a notification of termination, whichever is later. No refund
shall be made if the insurance was terminated because of the submission of
an application for initial claim payment or if the termination occurs be-

§ 266.610 Method of payment of mortgage insurance premiums.
In the cases that the Commissioner
deems appropriate, the Commissioner
may require, by means of instructions
communicated to all affected mortgagees, that mortgage insurance premiums be remitted electronically.
[63 FR 1303, Jan. 8, 1998]

INSURANCE ENDORSEMENT
Insurance endorsement.

(a) Initial endorsement. The Commissioner shall indicate his or her insurance of the mortgage by endorsing the
original credit instrument.
(b) Final endorsement. When all advances of mortgage proceeds have been
made and all other applicable terms
and conditions have been complied
with to the satisfaction of the Commissioner, the Commissioner shall indicate on the original credit instrument
the total of all advances that have been
approved for insurance and again endorse such instrument.
(c) Effect of endorsement. From the
date of initial endorsement, the Commissioner and the HFA shall be bound
by the provisions of this subpart to the
same extent as if they had executed a
contract including the provisions of
this subpart and the applicable sections of the Act.
ASSIGNMENTS
§ 266.616 Transfer of partial interest
under participation agreement.
The HFA may not assign the mortgage. However, a partial interest in an
insured mortgage or pool of insured
mortgages may be transferred under a
participation agreement or arrangement (such as a declaration of trust or
the issuance of pass-through certificates), without obtaining the approval
of the Commissioner, if the following
conditions are met:
(a) Legal title to the insured mortgage or mortgages shall be held by the
HFA; and
(b) The participation agreement, declaration of trust or other instrument

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Office of Assistant Secretary for Housing, HUD
under which the partial interest is
transferred shall provide that:
(1) The HFA shall remain mortgagee
of record under the contract of mortgage insurance;
(2) The Commissioner shall have no
obligation to recognize or deal with
anyone other than the HFA with respect to the rights, benefits, and obligations of the mortgagee under the
contract of insurance; and
(3) The mortgagor shall have no obligation to recognize or do business with
any one other than the HFA or, if applicable, its servicing agent with respect to rights, benefits, and obligations of the mortgagor or the mortgagee under the mortgage.
TERMINATION
§ 266.620 Termination of Contract of
Insurance.
The Contract of Insurance shall terminate if any of the following occurs:
(a) The mortgage is paid in full;
(b) The HFA acquires the mortgaged
property and notifies the Commissioner that it will not file an insurance
claim;
(c) A party other than HFA acquires
the property at a foreclosure sale;
(d) The HFA notifies the Commissioner of Termination of Insurance
(voluntary termination);
(e) The HFA or its successors commit
fraud or make a material misrepresentation to the Commissioner with respect to information culminating in
the Contract of Insurance on the mortgage or while the Contract of Insurance
is in existence;
(f) The receipt by the Commissioner
of an Application for Final Claims Settlement;
(g) If the HFA acquires the mortgaged property and fails to make an
initial claim.
§ 266.622 Notice and date of termination by the Commissioner.
The Commissioner shall notify the
HFA that the Contract of Insurance
has been terminated and shall establish
the effective date of termination. The
termination shall be the last day of the
month in which one of the events specified in § 266.620 occurs.

§ 266.626
CLAIM PROCEDURES

§ 266.626 Notice of default and filing
an insurance claim.
(a) Definition of default. (1) A monetary default exists when the mortgagor
fails to make any payment due under
the mortgage.
(2) A covenant default exists when
the mortgagor fails to perform any
other covenant under the provision of
the mortgage or the regulatory agreement, which is incorporated by reference in the mortgage. An HFA becomes eligible for insurance benefits on
the basis of a covenant default only
after the HFA has accelerated the debt
and the owner has failed to pay the full
amount due, thus converting a covenant default into a monetary default.
(b) Date of default. For purposes of
this subpart, the date of default is:
(1) The date of the first uncorrected
failure to perform a mortgage covenant
or obligation; or
(2) The date of the first failure to
make a monthly payment that is not
covered by subsequent payments, when
such subsequent payments are applied
to the overdue monthly payments in
the order in which they were due.
(c) Notice of default. If a default (as
defined in paragraph (a) of this section)
continues for a period of 30 days, the
HFA must notify the Commissioner
within 10 days thereafter, unless the
default is cured within the 30-day period. Unless waived by the Commissioner, the HFA must submit this notice monthly, on a form prescribed by
the Commissioner, until the default
has been cured or the HFA has filed an
application for an initial claim payment. In cases of mortgage acceleration, the mortgagee must first give notice of the default.
(d) Timing of claim filing. Unless a
written extension is granted by HUD,
the HFA must file an application for
initial claim payment (or, if appropriate, for partial claim payment)
within 75 days from the date of default
and may do so as early as the first day
of the month following the month for
which a payment was missed. Upon request of the HFA, HUD may extend, up
to 180 days from the date of default,
the deadline for filing a claim. In those
cases where the HFA certifies that the

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§ 266.628

24 CFR Ch. II (4–1–19 Edition)

project owner is in the process of
transacting a bond refunder, refinancing the mortgage, or changing the
ownership for the purpose of curing the
default and bringing the mortgage current, HUD may extend the deadline for
filing a claim beyond 180 days, not to
exceed 360 days from the date of default.
§ 266.628 Initial claim payments.
(a) Determination of initial claim
amount. (1) The initial claim amount is
based on the unpaid principal balance
of the mortgage note as of the date of
default, plus interest at the mortgage
note rate from date of default to date
of initial claim payment. The mortgage note interest component of the
initial claim amount is subject to curtailment as provided in paragraph (b)
of this section.
(2) HUD shall make an initial claim
payment to the HFA that is equal to
the initial claim amount, less any delinquent mortgage insurance premiums, late charges and interest, assessed under § 266.604(d).
(3) The HFA must use the proceeds of
the initial claim payment to retire any
bonds or any other financing mechanisms securing the mortgage within 30
days of the initial claim payment. Any
excess funds resulting from such retirement or repayment shall be returned to
HUD within 30 days of the retirement.
(b) Curtailment of interest for late filings. In determining the mortgage note
interest component of the initial claim
amount, if the HFA fails to meet any
of the requirements of this section
within the specified time (including
any granted extension of time), HUD
shall curtail the accrual of mortgage
note interest by the number of days by
which the required action was late.
(c) Method of payment. HUD shall pay
the claim in cash.
§ 266.630 Partial payment of claims.
(a) General. When the Commissioner
receives a claim for a partial payment
under § 266.626(d), the Commissioner
may make a partial payment of claim
in accordance with the requirements of
this section. If the HFA has not previously received a partial claim payment, the HFA may file a claim for a
partial claim payment under § 266.630.

Otherwise, the HFA must file for an
initial claim payment under § 266.628.
(b) HFA submission. In addition to any
other requirements set forth in administration instructions, the HFA must
provide the following information with
its application for a partial claim payment:
(1) The amount by which the HFA
will reduce the principal on the insured
mortgage and the amount of delinquent interest on the insured mortgage
that the HFA will defer based on the
anticipated closing date; and
(2) A certification that:
(i) The amount of the principal reduction of the insured first mortgage
does not exceed 50 percent of the unpaid principal balance;
(ii) The relief resulting from the partial claim payment when considered
with other resources available to the
project are sufficient to restore the financial viability of the project;
(iii) The project is or can (at reasonable cost) be made structurally sound;
(iv) The management of the project
is satisfactory;
(v) The default under the insured
mortgage was beyond the control of
the mortgagor.
(c) Claim processing—(1) Acceptable application. If the HFA’s application is acceptable, the Commissioner shall notify the HFA to process the partial
payment, which will include the modification of the existing mortgage and
the execution by the mortgagor of a
second mortgage payable to the HFA.
When the second mortgage is closed,
the HFA shall notify the Commissioner, in a form and manner prescribed in administrative instructions.
Upon receipt of notice from the HFA,
the Commissioner shall make the partial claim payment.
(2) Unacceptable application. If the application is unacceptable, the Commissioner shall either advise the HFA of
the information needed to make the
application acceptable or return the
application for further action. The
HFA is granted an extension of 30 days
from the date of any notification for
further action.
(d) Requirements—(1) One partial claim
payment. Only one partial claim payment may be made under a contract of
insurance.

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Office of Assistant Secretary for Housing, HUD
(2) Partial claim payment amount. The
amount of the partial claim payment is
equal to the amount of relief provided
by the HFA in the form of a reduction
in principal and a reduction of delinquent interest due on the insured mortgage times the lesser of HUD’s percentage of the risk of loss or 50 percent.
(3) HFA second mortgage. Repayment
of the relief provided by the HFA must
be secured by a second mortgage to the
HFA. This second mortgage may provide for postponed amortization and
may not be assigned by the HFA. This
second mortgage is not insured under
this part and may not be insured under
any other HUD-related insurance program.
(4) Partial claim repayment by HFA.
The HFA must remit to HUD a percentage of all amounts collected on the
HFA’s second mortgage within 15 days
of receipt by the HFA. The applicable
percentage is equal to the percentage
used in paragraph (d)(2) of this section
to determine the partial claim payment amount. Payments made after
the 15th day must include a 5 percent
late charge plus accrued interest at the
debenture rate.
(5) Certified statements of amounts collected. As long as the second mortgage
remains of record, the HFA must submit to the Commissioner an annual
certified statement of the amounts collected by the HFA. The HFA must submit a final certified statement within
30 days after the second mortgage is
paid in full, foreclosed, or otherwise
terminated.
§ 266.632

Withdrawal of claim.

In case of a default and subsequent
filing of claim, the HFA shall determine the form of workout or modification and will inform HUD of the type of
mortgage relief determined to be appropriate. If the default is cured after
the claim is made but before the initial
claim payment is paid by HUD, the
HFA may, in writing, withdraw the
claim, and insurance will continue as if
the default had not occurred.
§ 266.634 Reinstatement
tract of insurance.

of

the

con-

(a) Conditions for reinstatement. After
the initial claim payment, HUD may

§ 266.638

reinstate the contract of insurance on
the following conditions:
(1) The HFA has not acquired the
project;
(2) The mortgagor has cured the default; and
(3) The HFA requests that HUD reinstate the contract of insurance.
(b) Notification of reinstatement. If reinstatement is acceptable to HUD,
HUD shall notify the HFA of the date
the contract of insurance will be reinstated and shall advise the HFA of the
payment needed to reinstate the contract of insurance.
(c) Payment. Within 30 days of the
date of the notice under paragraph (b)
of this section, the HFA shall pay HUD
an amount equal to the initial claim
amount,
as
determined
under
§ 266.628(a)(1), plus an amount equal to
the accrued and unpaid interest on the
HFA Debenture through the reinstatement date, plus an amount equal to the
mortgage insurance premium for the
period from the date of reinstatement
of the contract of insurance to the next
anniversary date for payment of the
mortgage insurance premium.
(d) Cancellation of debenture. Upon receipt from the HFA of the amount
specified in paragraph (c) of this section, HUD shall return the HFA debenture for cancellation.
(e) Continuation of contract of insurance. Upon reinstatement, the contract
of insurance shall continue as if the default had not occurred.
§ 266.636 Insuring new loans for defaulted projects.
The HFA may not make another loan
that is insured under this part to the
same owner in the same project if HUD
has paid a claim under this part.
§ 266.638 Issuance of HFA Debenture.
(a) Condition to initial claim payment.
The HFA must issue an instrument in
the form of a debenture to HUD within
30 days of receiving the initial claim
payment. The HFA Debenture shall
meet the following requirements and
shall be in a form that has been approved by HUD as part of the application approval process.
(b) Term of HFA Debenture. The HFA
Debenture shall be dated the same date
that the initial claim payment is

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§ 266.640

24 CFR Ch. II (4–1–19 Edition)

issued. The HFA Debenture shall have
a term of five years in order to afford
the mortgagor ample time to cure the
default or the HFA time to foreclose
and/or resell the project. HUD may provide a written extension of the five
year term if the HFA certifies and provides documentation that the project
owner has filed bankruptcy and the
HFA is taking action to have the
project discharged from the bankruptcy. The HFA Debenture shall, during this extended period, continue to
bear interest as described below at
HUD’s published debenture rate at the
earlier of initial endorsement or final
endorsement. Interest shall be due and
payable annually on the anniversary
date of the initial claim payment. Interest is due on the full face amount of
the HFA Debenture through the term
of the HFA Debenture or through the
date an application for final claim payment is received by the Commissioner.
(c) HFA Debenture amount. (1) The
HFA Debenture shall be for the full initial claim amount as determined under
§ 266.628(a)(1) (minus any excess funds
returned to HUD under § 266.628(a)(3)).
(2) The full amount of the HFA Debenture shall be payable to HUD upon
maturity, unless the HFA Debenture is
canceled because of:
(i) A reinstatement of the contract of
insurance under § 266.634; or
(ii) Final claim settlement under
§ 266.654.
(d) HFA Debenture interest rate. The
HFA Debenture shall bear interest at
HUD’s published debenture rate at the
earlier of initial endorsement or final
endorsement. Interest shall be due and
payable annually on the anniversary
date of the initial claim payment and
on the date of redemption when redeemed or canceled before an anniversary date. Interest shall be computed
on the full face amount of the HFA Debenture through the term of the HFA
Debenture.
(e) Form of HFA Debenture. The HFA
Debenture should follow the standard
form of a State/Municipal Debenture
issued under the Uniform Commercial
Code, where applicable, and shall be
supported by the full faith and credit of
the HFA. For HFAs that operate as departments or divisions of States or
units of local government and where

such HFAs cannot pledge the full faith
and credit of the HFA, such HFAs may
collateralize their obligation through a
letter of credit, reinsurance, or other
forms of credit acceptable to the Commissioner.
(f) Debenture registration. Unless otherwise required by law, including State
or local laws, or other governing bodies, HUD will not require the HFA Debenture to be ‘‘Registered’’ (with the
Securities and Exchange Commission)
as it is a direct, or private, placement,
and not a public offering, that is supported by the full faith and credit of
the HFA.
§ 266.640 Foreclosure and acquisition.
The HFA is not required to foreclose
the insured mortgage. It may accept a
deed-in-lieu of foreclosure.
§ 266.642 Appraisals.
Where actions taken or caused to be
taken by the HFA have the effect of
the recovery of less than the face
amount of the HFA Debenture held by
HUD, an appraisal should be made to
determine the value of the project. The
appraisal should assume a willing
buyer and a willing seller. The appraisal must be done within the 45-day
period immediately preceding the date
when the HFA files an application for
final claim settlement. If at the time
of final claim settlement the HFA has
not sold the project, an appraisal
should be made to determine the value
of the project at its highest and best
use.
§ 266.644 Application for final claim
settlement.
The HFA shall file an application for
final settlement in accordance with the
Commissioner’s administrative procedures not later than 30 days after any
of the following:
(a) Sale of the property after foreclosure or after acquisition by deed-inlieu of foreclosure; or
(b) Expiration of the term of the HFA
debenture.
§ 266.646 Determining the amount of
loss.
The amount of the total loss to be
shared by HUD and the HFA is equal
to:

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Office of Assistant Secretary for Housing, HUD
(a) The amount of the initial claim
payment;
(b) Plus all items set forth in
§ 266.648; and
(c) Less all items set forth in § 266.650.
§ 266.648

Items included in total loss.

In computing the total loss, the following items are added to the amount
described in § 266.646(a):
(a) The amount of all payments that
the HFA made from its own funds and
not from project income for:
(1) Taxes, special assessments, and
water bills that are liens before the
Mortgage; and
(2) Fire and hazard insurance on the
property.
(b) A reasonable amount of acquisition costs actually paid by the HFA.
These costs may not include loss or
damage resulting from the invalidity
or unenforceability of the Mortgage
lien or the unmarketability of the
Mortgagor’s title.
(c) Reasonable payments that the
HFA made from its own funds and not
from project income for:
(1) Preservation, operation and maintenance of the property;
(2) Repairs necessary to meet the requirements of local laws;
(3) Expenses in connection with the
sale of property; and
(4) Bankruptcy expenses approved by
the Office of General Counsel.
(d) The amount of HFA Debenture interest paid by the HFA to HUD.
§ 266.650
loss.

Items deducted from total

In computing insurance benefits, the
following items are deducted from the
amounts described in § 266.646(a) and
(b):
(a) All amounts received by the HFA
on account of the mortgage after the
date of default;
(b) All cash, and/or funds related to
the mortgaged property, including deposits and escrows made for the account of the mortgagor that the HFA
holds (or to which it is entitled);
(c) The amount of any undrawn balance under a letter of credit that the
HFA accepted in lieu of a cash deposit
for an escrow agreement;

§ 266.654

(d) Any net income from the mortgaged property/project that the HFA
received after the date of default.
(e) The proceeds from the sale of the
project or the appraised value of the
project as provided in § 266.642 as follows:
(1) If the HFA disposes of the project
through a negotiated sale, the amount
deducted shall be the higher of the
sales price or the appraised value.
(2) If the HFA disposes of the project
through a competitive bid procedure
approved by the Commissioner, the
amount deducted shall be the sales
price, even if it is lower than the appraised value.
(3) If the HFA has not disposed of the
project within 5 years from the date of
issuance of the HFA Debentures (unless
an extension has been granted pursuant to § 266.638), the amount deducted
shall be the appraised value.
(f) Any and all claims that the HFA
has acquired in connection with the acquisition and sale of the property.
Claims include but are not limited to
returned premiums from canceled insurance policies, interest on investments of reserve for replacement funds,
tax refunds, refunds of deposits left
with utility companies, and amounts
received as proceeds of a receivership.
(g) The amount of daily HFA Debenture interest accrued but not paid from
the anniversary date of the last HFA
Debenture interest payment to the
date an application for final claim payment is received by the Commissioner.
§ 266.652 Determining share of loss.
The total loss computed in § 266.646
shall be shared by HUD and the HFA in
accordance with their respective percentage of risk as specified in the note
and the addendum to the Risk-Sharing
Agreement between HUD and the HFA.
§ 266.654 Final claim settlement and
HFA Debenture redemption.
(a) Final claim payment. If the initial
claim amount, as determined under
§ 266.628(a)(1), is less than HUD’s share
of the loss, HUD shall make a final
claim payment to the HFA that is
equal to the difference between HUD’s
share of the loss and the initial claim
amount and shall return the HFA Debenture to the HFA for cancellation.

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§ 266.656

24 CFR Ch. II (4–1–19 Edition)

(b) HFA reimbursement payment. If the
initial claim amount, as determined
under § 266.628(a)(1), is more than HUD’s
share of the loss, the HFA shall, within
30 days of notification by HUD of the
amount due, remit to HUD an amount
that is equal to the difference between
the initial claim amount and HUD’s
share of the loss. The funds must be remitted in a manner prescribed in the
Commissioner’s administrative procedures. The HFA Debenture will be considered redeemed upon receipt of the
cash payment. A 5 percent penalty will
be charged and interest at the debenture rate will begin to accrue if the
cash payment is not received within
the prescribed period. If an HFA is in
default under an existing debenture
and files a claim on another project
under this part, HUD will charge the
HFA’s Dedicated Account for the
amount owed the Department. In cases
of top-tier or A-rated HFA’s which are
not required to maintain a Dedicated
Account, HUD will inform the rating
agencies of the HFA’s failure to pay on
their debt obligation and of its violation of the Risk-Sharing Agreement.
(c) Losses. Losses sustained as a consequence of the (sole) negligence of an
HFA (e.g., failure to acquire adequate
hazard insurance where such insurance
is available) shall be the sole obligation of the HFA, notwithstanding the
risk apportionment otherwise agreed
to by HUD and the HFA.
(d) Supplemental claim. Any supplemental claim must be filed within one
year from date of final claim settlement.
§ 266.656 Recovery of costs after final
claim settlement.
If, after final claim settlement, the
HFA recovers additional sums as the
result of the sale of the project or otherwise, the total amount of such recovery shall be shared by HUD and the
HFA in accordance with the prescribed
percentage of shared risk.
§ 266.658 Program
compliance.

monitoring

and

HUD will monitor the performance of
the HFA for compliance with the provisions of this subpart.

PART 267—CREDIT RISK RETENTION
Subpart A—Authority, Purpose, Scope and
Definitions
Sec.
267.1 Credit risk retention exceptions and
exemptions for HUD programs.
267.2 Definitions.

Subpart B—Credit Risk Retention
267.3 Base risk retention requirement.
267.4 Standard risk retention.
267.5 Revolving pool securitizations.
267.6 Eligible ABCP conduits.
267.7 Commercial mortgage-backed securities.
267.8 Federal National Mortgage Association and Federal Home Loan Mortgage
Corporation ABS.
267.9 Open market CLOs.
267.10 Qualified tender option bonds.

Subpart C—Transfer of Risk Retention
267.11 Allocation of risk retention to an
originator.
267.12 Hedging, transfer and financing prohibitions.

Subpart D—Exceptions and Exemptions
267.13 Exemption for qualified residential
mortgages.
267.14 Definitions applicable to qualifying
commercial loans, commercial real estate loans, and automobile loans.
267.15 Qualifying commercial loans, commercial real estate loans, and automobile loans.
267.16 Underwriting standards for qualifying
commercial loans.
267.17 Underwriting standards for qualifying
CRE loans.
267.18 Underwriting standards for qualifying
automobile loans.
267.19 General exemptions.
267.20 Safe harbor for certain foreign-related transactions.
267.21 Additional exemptions.
267.22 Periodic review of the QRM definition, exempted three-to-four unit residential mortgage loans, and communityfocused residential mortgage exemption.
AUTHORITY: 15 U.S.C. 78–o–11; 42 U.S.C.
3535(d).
SOURCE: 79 FR 77740, Dec. 24, 2014, unless
otherwise noted.

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§ 201.63

24 CFR Ch. II (4–1–19 Edition)

States Treasury’s current value of
funds rate in effect on the date the
Title I insurance claim was paid.
(b) Penalties and administrative costs.
The Secretary shall assess reasonable
administrative costs and penalties as
authorized in 31 U.S.C. 3717, unless
there is no provision in the note providing for such charges and the debtor
has not otherwise consented to liability for such charges.
§ 201.63 Claims against lenders.
Claims against lenders for money
owed to the Department, including unpaid insurance charges and unpaid repurchase demands, shall be collected in
accordance with 24 CFR part 17, subpart C.

PART 202—APPROVAL OF LENDING
INSTITUTIONS AND MORTGAGEES
Subpart A—General Requirements
Sec.
202.1 Purpose.
202.2 Definitions
202.3 Approval status for lenders and mortgagees.
202.4 Request for determination of compliance.
202.5 General approval standards.

Subpart B—Classes of Lenders and
Mortgagees
202.6 Supervised lenders and mortgagees.
202.7 Nonsupervised lenders and mortgagees.
202.8 Sponsored third-party originators.
202.9 Investing lenders and mortgagees.
202.10 Governmental institutions, Government-sponsored enterprises, public housing agencies and State housing agencies.

Subpart C—Title I and Title II Specific
Requirements
202.11
202.12

Title I.
Title II.

AUTHORITY: 12 U.S.C. 1703, 1709 and 1715b; 42
U.S.C. 3535(d).
SOURCE: 62 FR 20082, Apr. 24, 1997, unless
otherwise noted.

Subpart A—General Requirements
§ 202.1 Purpose.
This part establishes minimum
standards and requirements for approval by the Secretary of lenders and

mortgagees to participate in the Title I
and Title II programs.
§ 202.2

Definitions.

Act means the National Housing Act
(12 U.S.C. 1702 et seq.).
Claim means a single family insured
mortgage for which the Secretary pays
an insurance claim within 24 months
after the mortgage is insured.
Default means a single family insured
mortgage in default for 90 or more days
within 24 months after the mortgage is
insured.
Lender or Title I lender means a financial institution that:
(a) Holds a valid Title I Contract of
Insurance and is approved by the Secretary under this part as a supervised
lender under § 202.6, a nonsupervised
lender under § 202.7, an investing lender
under § 202.9, or a governmental or
similar institution under § 202.10; or
(b) Is under suspension or held a Title
I contract that has been terminated
but remains responsible for servicing
or selling Title I loans that it holds
and is authorized to file insurance
claims on such loans.
Loan or Title I loan means a loan authorized for insurance under Title I of
the Act.
Mortgage, Title II mortgage or insured
mortgage means a mortgage or loan insured under Title II or Title XI of the
Act.
Mortgagee or Title II mortgagee means
a mortgage lender that is approved to
participate in the Title II programs as
a supervised mortgagee under § 202.6, a
nonsupervised mortgagee under § 202.7,
an investing mortgagee under § 202.9, or
a governmental or similar institution
under 202.10.
Multifamily mortgagee means a mortgagee approved to participate only in
multifamily Title II programs, except
that for purposes of § 202.8(b)(1) the
term also means a mortgagee approved
to participate in both single family and
multifamily Title II programs.
Normal rate means the rate of defaults and claims on insured mortgages
for the geographic area served by a
HUD field office, or other area designated by the Secretary, in which a
mortgagee originates mortgages.

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Office of Assistant Secretary for Housing, HUD
Origination approval agreement means
the Secretary’s agreement that a mortgagee is approved to originate single
family insured mortgages.
Title I program(s) means an insurance
program or programs authorized by
Title I of the Act.
Title II program(s) means an insurance
program or programs authorized by
Title II or Title XI of the Act.
[62 FR 20082, Apr. 24, 1997, as amended at 62
FR 65181, Dec. 10, 1997; 75 FR 20731, Apr. 20,
2010]

§ 202.3 Approval status for lenders and
mortgagees.
(a) Initial approval. A lender or mortgagee may be approved for participation in the Title I or Title II programs
upon filing a request for approval on a
form prescribed by the Secretary and
signed by the applicant. The approval
form shall be accompanied by such documentation as may be prescribed by
the Secretary.
(1) Approval is signified by:
(i) The Secretary’s agreement that
the lender or mortgagee is considered
approved under the Title I or Title II
programs, except as otherwise ordered
by the Mortgagee Review Board or an
officer or subdivision of the Department to which the Mortgagee Review
Board has delegated its power, unless
the lender or mortgagee voluntarily relinquishes its approval;
(ii) Consent by the lender or mortgagee to comply at all times with the
general approval requirements of
§ 202.5, and with additional requirements governing the particular class of
lender or mortgagee for which it was
approved as described under subpart B
at §§ 202.6 through 202.10; and
(iii) Under the Title I program, the
issuance of a Contract of Insurance
constitutes an agreement between the
Secretary and the lender and which
governs participation in the Title I
program.
(2) Limitations on approval:
(i) Separate approval as lender or
mortgagee is required for participation
in the Title I or Title II programs, respectively. Application must be made,
and approval will be granted, on the
basis of one or both categories of programs, as is appropriate.

§ 202.3

(ii) Separate approval as mortgagee
is required for the Single Family Mortgage Insurance Programs and for the
Multifamily Mortgage Insurance Programs. Application must be made, and
approval will be granted, on the basis
of either or both categories, as is appropriate.
(iii) In addition to the requirements
for approval as a Title II mortgagee,
the Secretary may from time to time
issue eligibility requirements for participation in specific programs, such as
the Direct Endorsement program.
(iv) A Title II mortgagee may be approved to operate either on a nationwide basis or on a geographically restricted basis in only those areas designated by the Secretary.
(v) A Title I lender may originate
loans or purchase advances of credit
only within a geographic lending area
approved by the Secretary. Expansion
of this lending area shall be subject to
a determination by the Secretary that
the lender is able to originate loans in
compliance with part 201 of this chapter within such expanded area.
(3) Authorized agents. A mortgagee approved under §§ 202.6, 202.7, or 202.10 as a
nonsupervised mortgagee, supervised
mortgagee, or governmental or similar
institution approved as a Direct Endorsement mortgagee under 24 CFR
203.3 may, with the approval of the Secretary, designate a nonsupervised or
supervised mortgagee with Direct Endorsement approval under 24 CFR 203.3
as authorized agent for the purpose of
underwriting loans. The application for
mortgage insurance may be submitted
in the name of the FHA-approved mortgagee or its designated authorized
agent under this paragraph.
(b) Recertification. On each anniversary of the approval of a lender or
mortgagee, the Secretary will determine whether recertification, i.e., continued approval, is appropriate. The
Secretary will review the yearly
verification
report
required
by
§ 202.5(m) and other pertinent documents, ascertain that all application
and annual fees have been paid, and request any further information needed
to decide upon recertification.
(c) Termination—(1) Termination of the
Title I Contract of Insurance—(i) Notice.

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§ 202.3

24 CFR Ch. II (4–1–19 Edition)

A Contract of Insurance may be terminated in accordance with its terms by
the Secretary or by the Secretary’s
designee upon giving the lender at
least 5 days prior written notice.
(ii) Informal meeting. If requested, and
before expiration of the 5-day notice
period, a lender shall be entitled to an
informal meeting with the Department
official taking action to terminate the
Contract of Insurance.
(iii) Effect of termination. Termination
of a Contract of Insurance shall not affect:
(A) The Department’s obligation to
provide insurance coverage with respect to eligible loans originated before
the termination, unless there was fraud
or misrepresentation;
(B) A lender’s obligation to continue
to pay insurance charges or premiums
and meet all other obligations, including servicing, associated with eligible
loans originated before termination; or
(C) A lender’s right to apply for and
be granted a new Title I Contract of Insurance, provided that the requirements for approval under this part are
met.
(2) Credit Watch Termination. (i) Scope
and frequency of review. The Secretary
will review, on an ongoing basis, the
number of defaults and claims on mortgages originated, underwritten, or
both, by each mortgagee in the geographic area served by a HUD field office. HUD will make this rate information available to mortgagees and the
public through electronic means and
will issue instructions for accessing
this information through a Mortgagee
Letter. For this purpose, and for all
purposes under paragraph (c) of this
section, a mortgage is considered to be
originated in the same federal fiscal
year in which its amortization commences. The Secretary may also review
the insured mortgage performance of a
mortgagee’s branch offices individually
and may terminate the authority of
the branch or the authority of the
mortgagee’s overall operation.
(ii) Credit Watch Status. Mortgagees
are responsible for monitoring their default and claim rate performance. A
mortgagee is considered to be on Credit
Watch Status if, at any time, the mortgagee has a rate of defaults and claims
on insured mortgages originated, un-

derwritten, or both, in an area which
exceeds 150 percent of the normal rate
and its origination approval agreement
has not been terminated.
(iii) Notice of termination. (A) Notice of
termination of origination approval agreement. The Secretary may notify a
mortgagee that its origination approval agreement will terminate 60
days after notice is given, if the mortgagee had a rate of defaults and claims
on insured mortgages originated in an
area which exceeded 200 percent of the
normal rate and exceeded the national
default and claim rate for insured
mortgages.
(B) Notice of termination of direct endorsement approval. The Secretary may
notify a mortgagee that its direct endorsement approval under 24 CFR part
203 will terminate 60 days after notice
is given, if the mortgagee had a rate of
defaults and claims on insured mortgages underwritten in an area which
exceeded 200 percent of the normal rate
and exceeded the national default and
claim rate for insured mortgages. The
termination of a mortgagee’s direct endorsement approval pursuant to this
section is separate and apart from the
termination of a mortgagee’s direct endorsement approval under 24 CFR part
203.
(C) No need for prior action by Mortgagee Review Board. The termination
notices
described
in
paragraphs
(c)(2)(ii)(A) and (B) of this section may
be given without prior action by the
Mortgagee Review Board.
(D) Underserved areas. Before the Secretary sends the termination notice,
the Secretary shall review the Census
tract concentrations of the defaults
and claims. If the Secretary determines that the excessive rate is the result of mortgage lending in underserved areas, as defined in 24 CFR 81.2,
the Secretary may determine not to
terminate the mortgagee’s origination
approval agreement and/or direct endorsement approval.
(iv) Request for informal conference.
Prior to termination the mortgagee
may submit a written request for an
informal conference with the Deputy
Assistant Secretary for Single Family
Housing or that official’s designee.
HUD must receive the written request
no later than 30 calendar days after the

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Office of Assistant Secretary for Housing, HUD
date of the proposed termination notice. Unless HUD grants an extension,
the informal conference must be held
no later than 60 calendar days after the
date of the proposed termination notice. After considering relevant reasons
and factors beyond the mortgagee’s
control that contributed to the excessive default and claim rates, the Deputy Assistant Secretary for Single
Family Housing or designee may withdraw the termination notice.
(v) Limitation on the establishment of
new branches. Upon receipt of a proposed termination notice of its origination approval agreement, the mortgagee shall not establish a new branch
or new branches for the origination of
FHA-insured mortgages in the area or
areas that are covered by the proposed
termination notice. As of January 18,
2005, a mortgagee that is in receipt of a
notice of proposed termination may
not establish any new branch in the location or locations cited in the proposed termination notice until either:
(A) The proposed termination notice
is withdrawn or
(B) The Secretary reinstates the
mortgagee’s
origination
approval
agreement, in accordance with paragraph (e) of this section.
(vi) Effects of termination. (A) Termination of origination approval agreement.
If a mortgagee’s origination approval
agreement is terminated, it may not
originate single family insured mortgages unless the origination approval
agreement is reinstated by the Secretary in accordance with paragraph
(e) of this section, notwithstanding any
other provision of this part except
§ 202.3(c)(2)(vii)(A).
(B) Termination of direct endorsement
approval. If a mortgagee’s direct endorsement approval is terminated, it
may not underwrite single family insured mortgages for the area(s) identified in the termination notice, unless
the direct endorsement approval is reinstated by the Secretary in accordance with paragraph (e) of this section,
notwithstanding any other provision of
this part except § 202.3(c)(2)(vii)(A).
(vii) Rights and obligations in the event
of termination. Termination of the
origination approval agreement and/or
direct endorsement approval shall not
affect:

§ 202.3

(A) The eligibility of the mortgage
for insurance, absent fraud or misrepresentation, if the mortgagor and
all terms and conditions of the mortgage had been approved before the termination by the Direct Endorsement or
Lender Insurance mortgagee or were
covered by a firm commitment issued
by the Secretary; however, no other
mortgages originated or underwritten
after the date of termination by the
mortgagee shall be insured unless the
mortgagee’s
origination
approval
agreement and/or direct endorsement
approval is reinstated by the Secretary;
(B) The right of a mortgagee whose
direct endorsement approval has been
terminated to transfer cases to another
mortgagee with direct endorsement approval for the area covered by the termination.
(C) A mortgagee’s obligation to continue to pay insurance premiums and
meet all other obligations, including
servicing, associated with insured
mortgages;
(D) A mortgagee’s right to apply for
reinstatement of the origination approval agreement and/or direct endorsement approval in accordance with
paragraph (e) of this section; or
(E) A mortgagee’s right to purchase
insured mortgages or to service its own
portfolio or the portfolios of other
mortgagees with which it has a servicing contract.
(d) Withdrawal and suspension of approval. Lender or mortgagee approval
may be suspended or withdrawn by the
Mortgagee Review Board as provided in
part 25 of this title.
(e) Reinstatement—(1) General. A
mortgagee whose origination approval
agreement and/or direct endorsement
approval has been terminated under
paragraph (c) of this section may apply
for reinstatement if:
(i) The origination approval agreement and/or direct endorsement approval for the affected branch or
branches has been terminated for at
least six months; and
(ii) The mortgagee continues to be an
approved mortgagee meeting the general standards of § 202.5 and the specific
requirements of §§ 202.6, 202.7, 202.8 or
202.10, and 202.12.

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§ 202.4

24 CFR Ch. II (4–1–19 Edition)

(2) Application for reinstatement. The
mortgagee’s application for reinstatement must:
(i) Be in a format prescribed by the
Secretary and signed by the mortgagee;
(ii) Be accompanied by an independent analysis of the terminated office’s operations and identifying the
underlying cause of the mortgagee’s
unacceptable default and claim rate.
The independent analysis must be prepared by an independent Certified Public Accountant (CPA) qualified to perform audits under the government auditing standards issued by the General
Accounting Office; and
(iii) Be accompanied by a corrective
action plan addressing each of the
issues identified in the independent
analysis
described
in
paragraph
(e)(2)(ii) of this section, along with evidence demonstrating that the mortgagee has implemented the corrective
action plan.
(3) HUD action on reinstatement application. The Secretary will grant the
mortgagee’s application for reinstatement if the mortgagee’s application is
complete and the Secretary determines
that the underlying causes for the termination have been satisfactorily remedied.
[62 FR 20082, Apr. 24, 1997, as amended at 62
FR 30225, June 2, 1997; 62 FR 65181, Dec. 10,
1997; 69 FR 75807, Dec. 17, 2004; 75 FR 20731,
Apr. 20, 2010; 78 FR 57060, Sept. 17, 2013]

§ 202.4 Request for determination of
compliance.
Pursuant to section 539(a) of the Act,
any person may file a request that the
Secretary determine whether a lender
or mortgagee is in compliance with
§ 202.12(a) or with provisions of this
chapter implementing sections 223(a)(7)
and 535 of the Act such as §§ 201.10(g),
203.18d and 203.43(c)(5) of this chapter
(only section 535 applies to lenders).
The request for determination shall be
made to the following address: Department of Housing and Urban Development, Office of Lender Activities and
Program Compliance, 451 Seventh
Street SW., Washington, DC, 20410. The
Secretary shall inform the requestor of
the disposition of the request. The Secretary shall publish in the FEDERAL
REGISTER the disposition of any case

referred by the Secretary to the Mortgagee Review Board.
§ 202.5

General approval standards.

To be approved for participation in
the Title I or Title II programs, and to
maintain approval, a lender or mortgagee shall meet and continue to meet
the general requirements of paragraphs
(a) through (n) of this section (except
as provided in § 202.10(b)) and the requirements for one of the eligible classes of lenders or mortgagees in §§ 202.6
through 202.10.
(a) Business form. (1) The lender or
mortgagee shall be a corporation or
other chartered institution, a permanent organization having succession, or
a partnership. A partnership must
meet the requirements of paragraphs
(a)(1)(i) through (iv) of this section.
(i) Each general partner must be a
corporation or other chartered institution consisting of two or more persons.
(ii) One general partner must be designated as the managing general partner. The managing general partner
shall comply with the requirements of
paragraphs (b), (c), and (f) of this section. The managing general partner
must have as its principal activity the
management of one or more partnerships, all of which are mortgage lenders or property improvement or manufactured home lenders, and must have
exclusive authority to deal directly
with the Secretary on behalf of each
partnership. Newly admitted partners
must agree to the management of the
partnership by the designated managing general partner. If the managing
general partner withdraws or is removed from the partnership for any
reason, a new managing general partner shall be substituted, and the Secretary shall be immediately notified of
the substitution.
(iii) The partnership agreement shall
specify that the partnership shall exist
for the minimum term of years required by the Secretary. All insured
mortgages and Title I loans held by the
partnership shall be transferred to a
lender or mortgagee approved under
this part prior to the termination of
the partnership. The partnership shall
be specifically authorized to continue
its existence if a partner withdraws.

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Office of Assistant Secretary for Housing, HUD
(iv) The Secretary must be notified
immediately of any amendments to the
partnership agreement that would affect the partnership’s actions under the
Title I or Title II programs.
(2) Use of business name. The lender or
mortgagee must use its HUD-registered
business name in all advertisements
and promotional materials related to
FHA programs. HUD-registered business names include any alias or ‘‘doing
business as’’ (DBA) on file with FHA.
The lender or mortgagee must keep
copies of all print and electronic advertisements and promotional materials
for a period of 2 years from the date
that the materials are circulated or
used to advertise.
(3) Non-FHA-approved entities. A lender or mortgagee that accepts a loan application from a non-FHA-approved entity must confirm that the entity’s
legal name and Tax ID number are included in the FHA loan origination system record for the subject loan. The
loan to be insured by FHA must be underwritten by the FHA-approved lender
or mortgagee.
(b) Employees. The lender or mortgagee shall employ competent personnel trained to perform their assigned responsibilities in consumer or
mortgage lending, including origination, servicing, and collection activities, and shall maintain adequate staff
and facilities to originate and service
mortgages or Title I loans, in accordance with applicable regulations, to
the extent the mortgagee or lender engages in such activities.
(c) Officers. All employees who will
sign applications for mortgage insurance on behalf of the mortgagee or report loans for insurance shall be corporate officers or shall otherwise be authorized to bind the lender or mortgagee in the origination transaction.
The lender or mortgagee shall ensure
that an authorized person reports all
originations, purchases, and sales of
Title I loans or Title II mortgages to
the Secretary for the purpose of obtaining or transferring insurance coverage.
(d) Escrows. The lender or mortgagee
shall not use escrow funds for any purpose other than that for which they
were received. It shall segregate escrow
commitment deposits, work comple-

§ 202.5

tion deposits, and all periodic payments received under loans or insured
mortgages on account of ground rents,
taxes, assessments, and insurance
charges or premiums, and shall deposit
such funds with one or more financial
institutions in a special account or accounts that are fully insured by the
Federal Deposit Insurance Corporation
or the National Credit Union Administration, except as otherwise provided
in writing by the Secretary.
(e) Servicing. A lender shall service or
arrange for servicing of the loan in accordance with the requirements of 24
CFR part 201. A mortgagee shall service or arrange for servicing of the
mortgage in accordance with the servicing responsibilities contained in subpart C of 24 CFR part 203 and in 24 CFR
part 207, with all other applicable regulations contained in this title, and with
such additional conditions and requirements as the Secretary may impose.
(f) Business changes. The lender or
mortgagee shall provide prompt notification to the Secretary, in such form
as prescribed by the Secretary, of:
(1) All changes in its legal structure,
including, but not limited to, mergers,
terminations, name, location, control
of ownership, and character of business; and
(2) Any officer, partner, director,
principal, manager, supervisor, loan
processor, loan underwriter, loan originator, of the lender or mortgagee, or
the lender or mortgagee itself, that is
subject to one or more of the sanctions
in paragraph (j) of this section.
(g) Financial statements. The lender or
mortgagee shall:
(1) Furnish to the Secretary a copy of
its audited financial statements within
90 days of its fiscal year end, except as
provided in § 202.6(c);
(2) Furnish such other information as
the Secretary may request; and
(3) Submit to an examination of that
portion of its records that relates to its
Title I and/or Title II program activities.
(h) Quality control plan. The lender or
mortgagee shall implement a written
quality control plan, acceptable to the
Secretary, that assures compliance
with
the
regulations
and
other
issuances of the Secretary regarding

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§ 202.5

24 CFR Ch. II (4–1–19 Edition)

loan or mortgage origination and servicing.
(i) Fees. The lender or mortgagee, unless approved under § 202.10, shall pay
an application fee and annual fees, including additional fees for each branch
office authorized to originate Title I
loans or submit applications for mortgage insurance, at such times and in
such amounts as the Secretary may require. The Secretary may identify additional classes or groups of lenders or
mortgagees that may be exempt from
one or more of these fees.
(j) Ineligibility. For a lender or mortgagee to be eligible for FHA approval,
neither the lender or mortgagee, nor
any officer, partner, director, principal,
manager, supervisor, loan processor,
loan underwriter, or loan originator of
the lender or mortgagee shall:
(1) Be suspended, debarred, under a
limited denial of participation (LDP),
or otherwise restricted under 2 CFR
part 2424 or 24 CFR part 25, or under
similar procedures of any other federal
agency;
(2) Be indicted for, or have been convicted of, an offense that reflects adversely upon the integrity, competency, or fitness to meet the responsibilities of the lender or mortgagee to
participate in the Title I or Title II
programs;
(3) Be subject to unresolved findings
as a result of HUD or other governmental audit, investigation, or review;
(4) Be engaged in business practices
that do not conform to generally accepted practices of prudent mortgagees
or that demonstrate irresponsibility;
(5) Be convicted of, or have pled
guilty or nolo contendere to, a felony related to participation in the real estate
or mortgage loan industry:
(i) During the 7-year period preceding
the date of the application for licensing and registration; or
(ii) At any time preceding such date
of application, if such felony involved
an act of fraud, dishonesty, or a breach
of trust or money laundering;
(6) Be in violation of provisions of the
Secure and Fair Enforcement (SAFE)
Mortgage Licensing Act of 2008 (12
U.S.C. 5101 et seq.) or any applicable
provision of state law; or

(7) Be in violation of any other requirement established by the Secretary.
(k) Branch offices. A lender may, upon
approval by the Secretary, maintain
branch offices for the origination of
Title I or Title II loans. A branch office
of a mortgagee must be registered with
the Department in order to originate
mortgages or submit applications for
mortgage insurance. The lender or
mortgagee shall remain fully responsible to the Secretary for the actions of
its branch offices.
(l) Conflict of interest and responsibility. A mortgagee may not pay anything of value, directly or indirectly, in
connection with any insured mortgage
transaction or transactions to any person or entity if such person or entity
has received any other consideration
from the mortgagor, seller, builder, or
any other person for services related to
such transactions or related to the purchase or sale of the mortgaged property, except that consideration, approved by the Secretary, may be paid
for services actually performed. The
mortgagee shall not pay a referral fee
to any person or organization.
(m) Reports. Each lender and mortgagee must submit an annual certification on a form prescribed by the Secretary. Upon application for approval
and with each annual recertification,
each lender and mortgagee must submit a certification that it has not been
refused a license and has not been sanctioned by any state or states in which
it will originate insured mortgages or
Title I loans. In addition, each mortgagee shall file the following:
(1) An audited or unaudited financial
statement, within 30 days of the end of
each fiscal quarter in which the mortgagee experiences an operating loss of
20 percent of its net worth, and until
the mortgagee demonstrates an operating profit for 2 consecutive quarters
or until the next recertification,
whichever is the longer period; and
(2) A statement of net worth within
30 days of the commencement of voluntary or involuntary bankruptcy,
conservatorship, receivership, or any
transfer of control to a federal or state
supervisory agency.
(n) Net worth—(1) Applicability. The
requirements of this section apply to

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Office of Assistant Secretary for Housing, HUD
approved supervised and nonsupervised
lenders and mortgagees under § 202.6
and § 202.7, and approved investing
lenders and mortgagees under § 202.9.
For ease of reference, these institutions are referred to as ‘‘approved lenders and mortgagees’’ for purposes of
this section. The requirements of this
section also apply to applicants for
FHA approval under §§ 202.6, 202.7, and
202.9. For ease of reference, these entities are referred to as ‘‘applicants’’ for
purposes of this section.
(2) Phased-in net worth requirements
for 2010 and 2011—(i) Applicants. Effective on May 20, 2010, applicants shall
comply with the net worth requirements set forth in paragraph (n)(2)(iii)
of this section.
(ii) Approved mortgagees. Effective on
May 20, 2011, each approved lender or
mortgagee with FHA approval as of
May 20, 2010 shall comply with the net
worth requirements set forth in paragraphs (n)(2)(iii) or (n)(2)(iv) of this section, as applicable.
(iii) Net worth requirements for nonsmall businesses. Each approved lender
or mortgagee that exceeds the size
standard for its industry classification
established by the Small Business Administration at 13 CFR 121.201 Sector 52
(Finance and Insurance), Subsector 522
(Credit Intermediation and Related Activities) shall have a required minimum net worth of not less than
$1,000,000. No less than 20 percent of the
approved lender or mortgagee’s required minimum net worth must be liquid assets consisting of cash or its
equivalent acceptable to the Secretary.
(iv) Net worth requirements for small
businesses. Each approved lender or
mortgagee that meets the size standard
for its industry classification established by the Small Business Administration at 13 CFR 121.201 Sector 52 (Finance and Insurance), Subsector 522
(Credit Intermediation and Related Activities) shall have a required minimum net worth of not less than
$500,000. No less than 20 percent of the
approved lender or mortgagee’s required minimum net worth must be liquid assets consisting of cash or its
equivalent acceptable to the Secretary.
If, based on the audited financial statement or other financial report that is
required to be prepared at the end of

§ 202.5

its fiscal year and provided to HUD at
the commencement of the new fiscal
year, an approved lender or mortgagee
no longer meets the Small Business
Administration size standard for its industry classification, the approved
lender or mortgagee shall meet the net
worth requirements set forth in paragraph (n)(2)(iii) of this section for a
non-small business approved lender or
mortgagee by the last day of the fiscal
year in which the audited financial
statement or other financial report, as
applicable, was submitted.
(3) Net worth requirements for 2013 and
subsequent years. Effective May 20, 2013:
(i) Irrespective of size, each applicant
and each approved lender or mortgagee, for participation solely under
the FHA single family programs, shall
have a net worth of not less than $1
million, plus an additional net worth of
one percent of the total volume in excess of $25 million of FHA single family
insured mortgages originated, underwritten, purchased, or serviced during
the prior fiscal year, up to a maximum
required net worth of $2.5 million. No
less than 20 percent of the applicant’s
or approved lender or mortgagee’s required net worth must be liquid assets
consisting of cash or its equivalent acceptable to the Secretary.
(ii) Multifamily net worth requirements.
Irrespective of size, each applicant for
approval and each approved lender or
mortgagee for participation solely
under the FHA multifamily programs
shall have a minimum net worth of not
less than $1 million. For those multifamily approved lenders or mortgagees
that also engage in mortgage servicing,
an additional net worth of one percent
of the total volume in excess of $25 million of FHA multifamily mortgages
originated, purchased, or serviced during the prior fiscal year, up to a maximum required net worth of $2.5 million, is required. For multifamily approved lenders or mortgagees that do
not perform mortgage servicing, an additional net worth of one half of one
percent of the total volume in excess of
$25 million of FHA multifamily mortgages originated during the prior fiscal
year, up to a maximum required net
worth of $2.5 million, is required. No
less than 20 percent of the applicant’s

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§ 202.6

24 CFR Ch. II (4–1–19 Edition)

or approved lender’s or mortgagee’s required net worth must be liquid assets
consisting of cash or its equivalent acceptable to the Secretary.
(iii) Dual participation net worth requirements. Irrespective of size, each applicant for approval and each approved
lender or mortgagee that is a participant in both FHA single-family and
multifamily programs must meet the
net worth requirements as set forth in
paragraph (n)(3)(i) of this section.
[75 FR 20732, Apr. 20, 2010; 75 FR 23582, May 4,
2010; 77 FR 51468, Aug. 24, 2012; 78 FR 57060,
Sept. 17, 2013]

Subpart B—Classes of Lenders
and Mortgagees
§ 202.6 Supervised lenders and mortgagees.
(a) Definition. A supervised lender or
mortgagee is a financial institution
that is a member of the Federal Reserve System or an institution whose
accounts are insured by the Federal
Deposit Insurance Corporation or the
National Credit Union Administration.
A supervised mortgagee may submit
applications for mortgage insurance. A
supervised lender or mortgagee may
originate, purchase, hold, service or
sell loans or insured mortgages, respectively.
(b) Additional requirements. In addition to the general approval requirements in § 202.5, a supervised lender or
mortgagee shall meet the following requirements:
(1) Net worth. The net worth requirements appear in § 202.5(n).
(2) Notification. A lender or mortgagee
shall promptly notify the Secretary in
the event of termination of its supervision by its supervising agency.
(3) Fidelity bond. A Title II mortgagee
shall have fidelity bond coverage and
errors and omissions insurance acceptable to the Secretary and in an amount
required by the Secretary, or have alternative insurance coverage, approved
by the Secretary, that assures the
faithful performance of the responsibilities of the mortgagee.
(4) Audit report. Except as provided in
paragraph (c) of this section, a lender
or mortgagee must:
(i) Comply with the financial reporting requirements in 24 CFR part 5, sub-

part H. Audit reports shall be based on
audits performed by a certified public
accountant, or by an independent public accountant licensed by a regulatory
authority of a State or other political
subdivision of the United States on or
before December 31, 1970, and shall include:
(A) Financial statements in a form
acceptable to the Secretary, including
a balance sheet and a statement of operations and retained earnings, a statement of cash flows, an analysis of the
lender’s or mortgagee’s net worth adjusted to reflect only assets acceptable
to the Secretary, and an analysis of escrow funds; and
(B) Such other financial information
as the Secretary may require to determine the accuracy and validity of the
audit report.
(ii) Submit a report on compliance
tests prescribed by the Secretary.
(c) Financial statement requirements for
small supervised lenders and mortgagees—
(1) Definitions. For the purposes of this
section, the following definitions
apply:
(i) Federal banking agency means the
Board of Governors of the Federal Reserve System; the Federal Deposit Insurance Corporation; and the National
Credit Union Administration; or any
successor agency thereof.
(ii) Small supervised lender or mortgagee means a supervised lender or
mortgagee possessing consolidated assets below the threshold for required
audited financial reporting as established by the federal banking agency
that is responsible for the oversight of
that supervised lender or mortgagee.
(2) Financial statement requirements.
Small supervised lenders and mortgagees shall not be subject to the requirement to submit a copy of an audited financial statement under § 202.5(g) and
the audit report requirements under
paragraph (b)(4) of this section. Small
supervised lenders and mortgagees are
required, within 90 days of their fiscal
year end, to furnish to the Secretary
the unaudited financial regulatory report—a consolidated or fourth quarter
Report of Condition and Income (Federal Financial Institutions Examination Council forms 031 and 041, also

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§ 206.308

24 CFR Ch. II (4–1–19 Edition)

(e) Maximum time period of removal.
The maximum time period for removal
from the Roster is 12 months from the
effective date of removal for all removed counselors. A counselor who has
been removed must apply for reinstatement on the Roster.
(f) Placement on the Roster after removal. A counselor who has been removed from the Roster must apply for
reinstatement on the Roster (in accordance with § 206.304) after the period
of the counselor’s removal from the
Roster has expired. FHA may require
the counselor to retake and pass the
HECM exam for reinstatement when
the reason for removal from the Roster
was particularly egregious. Typically,
the counselor will not be required to
take and pass the HECM exam; however, FHA must be ensured by the
counselor that the HECM counseling
requirements are understood and will
be followed. An application from a
counselor for reinstatement on the
Roster will be rejected if the period of
the counselor’s removal from the Roster has not expired.
(g) Voluntary removal. A HECM counselor will be removed from the Roster
upon FHA’s receipt of a written request from the counselor.
(h) Other action. Nothing in this section prohibits HUD from taking such
other action against a HECM counselor
or from seeking any other remedy
against a counselor available to HUD
by statute or other authority.
§ 206.308 Continuing
education
requirements of counselors listed on
the HECM Counselor Roster.
A HECM counselor listed on the Roster must receive, on a continuing basis,
training, education, and technical assistance related to HECMs. The HECM
counselor must maintain evidence of
the successful completion of such continuing education, and such evidence
must be made available to FHA upon
request. FHA will consider a HECM
counselor’s successful completion of a
HECM course no less than once every 2
years as satisfying the requirements of
this section.

PART 207—MULTIFAMILY HOUSING
MORTGAGE INSURANCE
Subpart A—Eligibility Requirements
Sec.
207.1

Eligibility requirements.

Subpart B—Contract Rights and
Obligations
207.251

Definitions.
PREMIUMS

207.252 First, second and third premiums.
207.252a Premiums—operating loss loans.
207.252b Premiums—mortgages insured pursuant to section 223(f) of the Act.
207.252c Premiums—mortgages insured pursuant to Section 238(c) of the Act.
207.252d Mortgagee’s late charge.
207.252e Method of payment of mortgage insurance premiums.
207.253 Termination by prepayment and voluntary termination.
207.253a Termination of insurance contract
207.254 Changes in premiums; manner of
publication.
RIGHTS AND DUTIES OF MORTGAGEE UNDER
THE CONTRACT OF INSURANCE
207.255 Defaults for purposes of insurance
claim.
207.256 Notice to the Commissioner of default.
207.256a Reinstatement of defaulted mortgage.
207.256b Modification of mortgage terms.
207.257 Commissioner’s right to require acceleration.
207.258 Insurance claim requirements.
207.258a Title requirements.
207.258b Partial payment of claim.
207.259 Insurance benefits.
207.259a Waiver of title objection; mortgages formerly Commissioner-held.
207.260 Maintenance and inspection of property.
207.261 Capturing excess bond proceeds.
RIGHTS IN HOUSING FUND
207.263

Responsibility for servicing.

207.499

Effect of amendments.

AMENDMENTS

AUTHORITY: 12 U.S.C. 1701z–11(e), 1709(c)(1),
1713, 1715(b), and 1735d; 42 U.S.C. 3535(d).
SOURCE: 36 FR 24537, Dec. 22, 1971, unless
otherwise noted.

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Office of Assistant Secretary for Housing, HUD

§ 207.252
PREMIUMS

Subpart A—Eligibility
Requirements
§ 207.1 Eligibility requirements.
The eligibility requirements set forth
in 24 CFR part 200, subpart A, apply to
multifamily project mortgages insured
under section 207 of the National Housing Act (12 U.S.C. 1713), as amended.
[61 FR 14405, Apr. 1, 1996]

Subpart B—Contract Rights and
Obligations
§ 207.251 Definitions.
As used in this subpart:
(a) The term Commissioner means the
Federal Housing Commissioner.
(b) The term act means the National
Housing Act, as amended.
(c) The term mortgage means such a
first lien upon real estate and other
property as is commonly given to secure advances on, or the unpaid purchase price of, real estate under the
laws of the State, district or territory
in which the real estate is located, together with the credit instrument or
instruments, if any, secured thereby.
In any instance where an operating
loss loan is involved, the term shall include both the original mortgage and
the instrument securing the operating
loss loan.
(d) The term insured mortgage means
a mortgage which has been insured by
the endorsement of the credit instrument by the Commissioner, or his duly
authorized representative.
(e) The term contract of insurance
means the agreement evidenced by
such endorsement and includes the
terms, conditions and provisions of this
part and of the National Housing Act.
(f) The term mortgagor means the
original borrower under a mortgage
and its successors and such of its assigns as are approved by the Commissioner.
(g) The term mortgagee means the
original lender under a mortgage its
successors and such of its assigns as
are approved by the Commissioner, and
includes the holders of the credit instruments issued under a trust indenture, mortgage or deed of trust pursuant to which such holders act by and
through a trustee therein named.

§ 207.252 First, second and third premiums.
The mortgagee, upon the initial endorsement of the mortgage for insurance, shall pay to the Commissioner a
first mortgage insurance premium
equal to not less than one-fourth of one
percent nor more than one percent as
the Secretary shall determine of the
original face amount of the mortgage.
The specific premium to be charged
will be set forth in FEDERAL REGISTER
notice.
(a) If the date of the first principal
payment is more than one year following the date of such initial insurance endorsement, the mortgagee,
upon the anniversary of such insurance
date, shall pay a second premium equal
to not less than one-fourth of one percent nor more than one percent as the
Secretary shall determine of the original face amount of the mortgage. On
the date of the first principal payment,
the mortgagee shall pay a third premium equal to not less than one-fourth
of one percent nor more than one percent of the average outstanding principal obligation of the mortgage for
the following year which shall be adjusted so as to accord with such date
and so that the aggregate of the said
three premiums shall equal the sum of:
(1) One percent of the average outstanding principal obligation of the
mortgage for the year following the
date of initial insurance endorsement;
and
(2) Not less than one-fourth of one
percent nor more than one percent per
annum as the Secretary shall determine of the average outstanding principal obligation of the mortgage for
the period from the first anniversary of
the date of initial insurance endorsement to one year following the date of
the first principal payment.
(b) If the date of the first principal
payment is one year, or less than one
year following the date of such initial
insurance endorsement, the mortgagee,
upon such first principal payment date,
shall pay a second premium equal to
not less than one-fourth of one percent
nor more than one percent as the Secretary shall determine of the average
outstanding principal obligation of the

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§ 207.252a

24 CFR Ch. II (4–1–19 Edition)

mortgage for the following year which
shall be adjusted so as to accord with
such date and so that the aggregate of
the said two premiums shall equal the
sum of:
(1) One percent per annum of the average outstanding principal obligation
of the mortgage for the period from the
date of initial insurance endorsement
to the date of first principal payment;
and
(2) Not less than one-fourth of one
percent nor more than one percent as
the Secretary shall determine of the
average outstanding principal obligation of the mortgage for the year following the date of the first principal
payment.
(c) Where the credit instrument is
initially and finally endorsed for insurance pursuant to a Commitment to Insure Upon Completion, the mortgagee
on the date of the first principal payment shall pay a second premium equal
to not less than one-fourth of one percent nor more than one percent as the
Secretary shall determine of the average outstanding principal obligation of
the mortgage for the year following
such first principal payment date
which shall be adjusted so as to accord
with such date and so that the aggregate of the said two premiums shall
equal the sum of not less than onefourth of one percent nor more than
one percent per annum as the Secretary shall determine of the average
outstanding principal obligation of the
mortgage for the period from the date
of the insurance endorsement to one
year following the date of the first
principal payment.
(d) Until the mortgage is paid in full,
or until receipt by the Commissioner of
an application for insurance benefits,
or until the contract of insurance is
otherwise terminated with the consent
of the Commissioner, the mortgagee,
on each anniversary of the date of the
first principal payment, shall pay an
annual mortgage insurance premium
equal to not less than one-fourth of one
percent nor more than one percent as
the Secretary shall determine of the
average outstanding principal obligation of the mortgage for the year following the date on which such premium becomes payable.

(e) The premiums payable on and
after the date of the first principal payment shall be calculated in accordance
with the amortization provisions without taking into account delinquent
payments or prepayments.
(f) Premiums shall be payable in cash
or in debentures at par plus accrued interest. All premiums are payable in advance and no refund can he made of
any portion thereof except as hereinafter provided in this subpart.
(g) Any change in mortgage insurance premiums pursuant to this section will apply to new commitments
issued or reissued on or after August 1,
2001 and any notice setting mortgage
insurance premiums issued pursuant to
this section.
[66 FR 35072, July 2, 2001]

§ 207.252a Premiums—operating
loans.

(a) The mortgagee, upon the insurance endorsement of the increase loan
credit instrument covering the operating loss loan, shall pay to the Commissioner a first mortgage insurance
premium of not less than one-fourth of
one percent nor more than one percent
as the Secretary shall determine of the
original amount of the loan.
(b) The provisions of paragraphs (d),
(e), (f) and (g) of Sec. 207.252 shall apply
to operating loss loans.
[66 FR 35073, July 2, 2001]

§ 207.252b Premiums—mortgages
insured pursuant to section 223(f) of
the Act.
(a) The mortgagee, upon the initialfinal endorsement of the mortgage for
insurance pursuant to a Commitment
to Insure Upon Completion issued in
accordance with § 207.32a, shall pay to
the Commissioner a first mortgage insurance premium equal to one percent
of the original face amount of the
mortgage.
(b) The mortgagee, on the date of the
first principal payment, shall pay a
second premium equal to one percent
of the average outstanding principal
obligation of the mortgage for the year
following such first principal payment
date which shall be adjusted as of that
date so that the aggregate of the first
and second premiums shall equal the

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Office of Assistant Secretary for Housing, HUD
sum of one percent per annum of the
average outstanding principal obligation of the mortgage for the period
from the date of the insurance endorsement to one year following the date of
the first principal payment.
(c) The provisions of paragraphs (d),
(e) and (f) of § 207.252 shall apply to
mortgages insured pursuant to section
223(f) of the Act.
[40 FR 10177, Mar. 5, 1975]

§ 207.252c Premiums—mortgages
insured pursuant to section 238(c) of
the Act.
All of the provisions of §§ 207.252 and
207.252a governing mortgage insurance
premiums shall apply to mortgages insured under this subpart pursuant to
section 238(c) of the Act except that all
mortgage insurance premiums due on
such mortgages in accordance with
§§ 207.252 and 207.252a shall be calculated on the basis of one percent.
[42 FR 59674, Nov. 18, 1977]

§ 207.252d Mortgagee’s late charge.
Mortgage insurance premiums which
are paid to the Commissioner more
than 15 days after the billing date or
due date, whichever is later, shall include a late charge of 4 percent of the
amount of the payment due, except
that no late charge shall be required
with respect to any case for which HUD
fails to render a proper billing to the
mortgagee.
[43 FR 60154, Dec. 26, 1978, as amended at 44
FR 23067, Apr. 18, 1979]

§ 207.252e Method of payment of mortgage insurance premiums.
In the cases that the Commissioner
deems appropriate, the Commissioner
may require, by means of instructions
communicated to all affected mortgagees, that mortgage insurance premiums be remitted electronically.
[63 FR 1303, Jan. 8, 1998]

§ 207.253 Termination by prepayment
and voluntary termination.
All rights under the insurance contract and all obligations to pay future
insurance premiums shall terminate on
the following conditions:
(a) Termination by prepayment. Notice
of the prepayment in full of the mort-

§ 207.253a

gage or loan shall be given to the Commissioner, on a form prescribed by the
Commissioner, within 30 days from the
date of prepayment. The insurance contract shall terminate, effective as of
the date of prepayment. No adjusted
premium charge shall be due the Commissioner on account of such termination by prepayment.
(b) Termination by voluntary agreement. Receipt by the Commissioner of a
written request, by the mortgagor and
mortgagee or lender for termination of
the insurance on the mortgage or loan,
on a form prescribed by the Commissioner, accompanied by the original
credit instrument for cancellation of
the insurance endorsement and the remittance of all sums to which the Commissioner is entitled. The termination
shall become effective as of the date
these requirements are met. No voluntary termination charge shall be due
the Commissioner on account of such
termination by voluntary agreement.
(c) Upon termination of the mortgage
or loan insurance contract by a payment in full or by a voluntary termination, the Commissioner shall refund
to the mortgagee or lender for the account of the mortgagor or borrower an
amount equal to the pro rata portion of
the current annual mortgage insurance
premium theretofore paid, which is applicable to the portion of the year subsequent to (1) the date of the prepayment or (2) the effective date of the
voluntary termination of the contract
of insurance.
(d) Notwithstanding any provision in
the mortgage instrument, this section
shall apply to all mortgage or loan insurance contracts terminated by either
prepayment or voluntary termination
where: (1) The mortgage is prepaid in
full or (2) the Commissioner receives a
request for voluntary termination, on
or after May 1, 1972.
[37 FR 8662, Apr. 29, 1972]

§ 207.253a Termination of insurance
contract.
(a) Reason for termination. The happening of any of the following events
shall constitute an additional reason
for terminating the contract of insurance in cases where the mortga- gee
has elected to convey the property to
the Commissioner:

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§ 207.254

24 CFR Ch. II (4–1–19 Edition)

(1) The acquisition by the mortgagee
of the mortgaged property without
conveying it to the Commissioner.
(2) The acquisition of the property at
the foreclosure sale by a party other
than the mortgagee.
(3) The redemption of the property
after foreclosure.
(4) Notice given by the mortgagee
after the foreclosure and during the redemption period that it will not tender
the property to the Commissioner.
(b) Notice of termination. No contract
of insurance shall be terminated until
the mortgagee has given written notice
thereof to the Commissioner within 30
days from the happening of any one of
the events set forth in paragraph (a) of
this section.
(c) Effective termination date. The
Commissioner shall notify the mortgagee that the contract of insurance
has been terminated and the effective
termination date. The termination
shall be effective as of the date any one
of the events set forth in paragraph (a)
of this section occur.
(d) Effect of termination. Upon termination of the contract of insurance the
obligation to pay any subsequent MIP
shall cease and all rights of the mortgagor and mortgagee shall be terminated.
[36 FR 24537, Dec. 22, 1971, as amended at 37
FR 8662, Apr. 29, 1972]

§ 207.254 Changes in premiums; manner of publication.
Notice of future premium changes
will be published in the FEDERAL REGISTER. The Department will propose
MIP changes for multifamily mortgage
insurance programs and provide a 30day public comment period for the purpose of accepting comments on whether the proposed changes are appropriate. After the comments have been
considered, the Department will publish a final notice announcing the premiums for each program and their effective date. The provisions of paragraph (g) of 24 CFR 207.252 shall apply
to any notice of future premium
changes published pursuant to this section.
[66 FR 35073, July 2, 2001]

RIGHTS AND DUTIES OF MORTGAGEE
UNDER THE CONTRACT OF INSURANCE
§ 207.255 Defaults for purposes of insurance claim.
(a)(1) Except as provided in paragraph (b) of this section, the following
shall be considered a default under the
terms of a mortgage insured under this
subpart:
(i) Failure of the mortgagor to make
any payment due under the mortgage
(also referred to as a ‘‘Monetary Event
of Default’’ in certain mortgage security instruments); or
(ii) A material violation of any other
covenant under the provisions of the
mortgage, if because of such violation,
the mortgagee has accelerated the
debt, subject to any necessary HUD approval (also referred to as a ‘‘Covenant
Event of Default’’ in certain mortgage
security instruments).
(2) For purposes of a mortgagee filing
an insurance claim with the Commissioner, the failure of the mortgagor to
make any payment due under an operating loss loan or under the original
mortgage shall be considered a default
under both the operating loss loan and
original mortgage.
(3) If a default as defined in paragraphs (a)(1) and (a)(2) of this section
continues for a minimum period of 30
days, the mortgagee shall be entitled
to receive the benefits of the insurance
provided for the mortgage, subject to
the procedures in this subpart.
(4) For the purposes of paragraph (a)
of this section, the date of default shall
be:
(i) The date of the first failure to
make a monthly payment that subsequent payments by the mortgagor are
insufficient to cover when those subsequent payments are applied by the
mortgagee to the overdue monthly
payments in the order in which they
became due; or
(ii) The date of the first uncorrected
violation of a covenant or obligation
for which the mortgagee has accelerated the debt.
(5) For multifamily project mortgages for which HUD issued a firm
commitment for mortgage insurance
on or after September 1, 2011, the regulations of paragraph (a) of this section

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Office of Assistant Secretary for Housing, HUD
shall apply, unless the mortgagor demonstrates to the satisfaction of the
Commissioner that financial hardship
to the mortgagor would result from application of the regulations in paragraph (a) of this section due to the reasonable expectations of the mortgagor
that the transaction would close under
the regulations in effect prior to September 1, 2011, in which case, the regulations of paragraph (b) shall apply.
(b)(1) For multifamily project mortgages for which HUD issued a firm
commitment for mortgage insurance
before September 1, 2011, and for multifamily project mortgages insured under
section 232 of the Act (12 U.S.C. 1715w),
and section 242 of the Act (12 U.S.C.
1715z–7), the following shall be considered a default under the terms of a
mortgage insured under this subpart:
(i) Failure of the mortgagor to make
any payment due under the mortgage;
or
(ii) Failure to perform any other covenant under the provisions of the mortgage, if the mortgagee, because of such
failure, has accelerated the debt.
(2) In the case of an operating loss
loan, the failure of the mortgagor to
make any payment due under such
loan or under the original mortgage
shall be considered a default under
both the loan and original mortgage.
(3) If such defaults, as defined in
paragraph (b) of this section, continue
for a period of 30 days the mortgagee
shall be entitled to receive the benefits
of the insurance hereinafter provided.
(4) Except for mortgages insured
under section 232 of the Act, for the
purposes of paragraph (b) of this section, the date of default shall be considered as:
(i) The date of the first uncorrected
failure to perform a covenant or obligation; or
(ii) The date of the first failure to
make a monthly payment which subsequent payments by the mortgagor are
insufficient to cover when applied to
the overdue monthly payments in the
order in which they became due.
(5) For mortgages insured under section 232 of the Act, for purposes of this
section, the date of default shall be
considered as:
(i) The first date on which the borrower has failed to pay the debt when

§ 207.256b

due as a result of the lender’s acceleration of the debt because of the borrower’s uncorrected failure to perform
a covenant or obligation under the regulatory agreement or security instrument; or
(ii) The date of the first failure to
make a monthly payment that subsequent payments by the borrower are
insufficient to cover when applied to
the overdue monthly payments in the
order in which they become due.
[76 FR 24370, May 2, 2011, as amended at 77
FR 55135, Sept. 7, 2012]

§ 207.256 Notice to the Commissioner
of default.
(a) If a default as defined in
§ 207.255(a) or (b) is not cured within the
grace period of 30 days provided under
§ 207.255(a)(3) or (b)(3), the mortgagee
must, within 30 days after the date of
the end of the grace period, notify the
Commissioner of the default, in the
manner prescribed in 24 CFR part 200,
subpart B.
(b) The mortgagee must give notice
to the Commissioner, in the manner
prescribed in 24 CFR part 200, subpart
B, of the mortgagor’s violation of any
covenant, whether or not the mortgagee has accelerated the debt.
[76 FR 24370, May 2, 2011]

§ 207.256a Reinstatement of defaulted
mortgage.
If, after default and prior to the completion of foreclosure proceedings, the
mortgagor cures the default, the insurance shall continue on the mortgage as
if a default had not occurred, provided
the mortgagee gives notice of reinstatement to the Commissioner, in the
manner prescribed in 24 CFR part 200,
subpart B.
[76 FR 24370, May 2, 2011]

§ 207.256b Modification
terms.

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(a) The mortgagor and the mortgagee
may, with the approval of the Commissioner, enter into an agreement that
extends the time for curing a default
under the mortgage or modifies the
payment terms of the mortgage.

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§ 207.257

24 CFR Ch. II (4–1–19 Edition)

(b)(1) Except as provided in paragraph (b)(2), the Commissioner’s approval of the type of agreement specified in paragraph (a) of this section
shall not be given, unless the mortgagor agrees in writing that, during
such period as the mortgage continues
to be in default, and payments by the
mortgagor to the mortgagee are less
than the amounts required under the
terms of the original mortgage, the
mortgagor or mortgagee, as may be appropriate in the particular situation,
will hold in trust for disposition, as directed by the Commissioner, all rents
or other funds derived from the secured
property that are not required to meet
actual and necessary expenses arising
in connection with the operation of
such property, including amortization
charges, under the mortgage.
(2) For multifamily project mortgages for which HUD issued a firm
commitment for mortgage insurance
before September 1, 2011, and for multifamily project mortgages insured under
section 232 of the Act (12 U.S.C. 1715w),
and section 242 (12 U.S.C. 1715z–7), the
Commissioner’s approval of the type of
agreement specified in paragraph (a) of
this section shall not be given unless
the mortgagor agrees in writing that,
during such period as payments to the
mortgagee are less than the amounts
required under the terms of the original mortgage, the mortgagor will hold
in trust for disposition as directed by
the Commissioner all rents or other
funds derived from the property which
are not required to meet actual and
necessary expenses arising in connection with the operation of such property, including amortization charges,
under the mortgage.
(3) For multifamily project mortgages for which HUD issued a firm
commitment for mortgage insurance
on or after September 1, 2011, the regulations of paragraph (b)(1) of this section shall apply, unless the mortgagor
demonstrates to the satisfaction of the
Commissioner that financial hardship
to the mortgagor would result from application of the regulations in paragraph (b)(1) of this section due to the
reasonable expectations of the mortgagor that the transaction would close
under the regulations in effect prior to
September 1, 2011, in which case, the

regulations of paragraph (b)(2) shall
apply.
(c) The Commissioner may exempt a
mortgagor from the requirement of
paragraph (b) of this section in any
case where the Commissioner determines that such exemption does not
jeopardize the interests of the United
States.
[76 FR 24370, May 2, 2011]

§ 207.257 Commissioner’s right to require acceleration.
Upon receipt of notice of violation of
a covenant, as provided for in
§ 207.256(b), or otherwise being apprised
of the violation of a covenant, the
Commissioner reserves the right to require the mortgagee to accelerate payment of the outstanding principal balance due in order to protect the interests of the Commissioner.
[76 FR 24371, May 2, 2011]

§ 207.258 Insurance
ments.

claim

(a) Alternative election by mortgagee.
(1) When the mortgagee becomes eligible to receive mortgage insurance benefits pursuant to § 207.255(a)(3) or (b)(3),
the mortgagee must, within 45 calendar
days after the date of eligibility, such
period is referred to as the ‘‘Eligibility
Notice Period’’ for purposes of this section, give the Commissioner notice of
its intention to file an insurance claim
and of its election either to assign the
mortgage to the Commissioner, as provided in paragraph (b) of this section,
or to acquire and convey title to the
Commissioner, as provided in paragraph (c) of this section. Notice of this
election must be provided to the Commissioner in the manner prescribed in
24 CFR part 200, subpart B. HUD may
extend the Eligibility Notice Period at
the request of the mortgagee under the
following conditions:
(i) The request must be made to and
approved by HUD prior to the 45th day
after the date of eligibility; and
(ii) The approval of an extension
shall in no way prejudice the mortgagee’s right to file its notice of its intention to file an insurance claim and
of its election either to assign the
mortgage to the Commissioner or to

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Office of Assistant Secretary for Housing, HUD
acquire and convey title to the Commissioner within the 45-day period or
any extension prescribed by the Commissioner.
(2) For mortgages funded with the
proceeds of state or local bonds, Ginnie
Mae mortgage-backed securities, participation certificates, or other bond
obligations specified by the Commissioner (such as an agreement under
which the insured mortgagee has obtained the mortgage funds from thirdparty investors and has agreed in writing to repay such investors at a stated
interest rate and in accordance with a
fixed repayment schedule), any of
which contains a lock-out or prepayment premium, in the event of a default during the term of the prepayment lock-out or prepayment premium, and for any mortgage insured
under section 232 of the Act, the mortgagee must:
(i) Request a 90-day extension of the
deadline for filing the notice of the
mortgagee’s intention to file an insurance claim and the mortgagee’s election to assign the mortgage or acquire
and convey title in accordance with the
mortgagee certificate, which HUD may
further extend at the written request
of the mortgagee;
(ii) Assist the mortgagor in arranging refinancing to cure the default and
avert an insurance claim, if the Commissioner grants the requested (or a
shorter) extension of notice filing deadline;
(iii) Report to the Commissioner at
least monthly on any progress in arranging refinancing;
(iv) Cooperate with the Commissioner in taking reasonable steps in accordance with prudent business practices to avoid an insurance claim;
(v) Require successors or assigns to
certify in writing that they agree to be
bound by these conditions for the remainder of the term of the prepayment
lock-out or prepayment premium; and
(vi) After commencement of amortization of the refinanced mortgage, notify HUD of a delinquency when a payment is not received by the 10th day
after the date the payment is due.
(3) For multifamily project mortgages for which HUD issued a firm
commitment for mortgage insurance
on or after September 1, 2011, the regu-

§ 207.258

lations of paragraph (a)(2) of this section shall apply, unless the mortgagor
demonstrates to the satisfaction of the
Commissioner that financial hardship
to the mortgagor would result from application of the regulations in paragraph (a)(2) of this section due to the
reasonable expectations of the mortgagor that the transaction would close
under the regulations in effect prior to
September 1, 2011, in which case, the
regulations of paragraph (a)(2) shall
not apply.
(4) Acknowledgment of election. For
mortgages insured pursuant to section
232 of the Act, if the lender provides
notice to the Commissioner of its election either to assign the mortgage to
the Commissioner or to acquire and
convey title to the Commissioner, the
Commissioner shall, not later than 90
calendar days after the expiration of
the Eligibility Notice Period, as defined in paragraph (a)(1) of this section,
as the same may have been extended,
acknowledge and accept, or reject for
cause, pursuant to program requirements, the lender’s election, provided
that the Commissioner may, in the
Commissioner’s discretion, extend such
90-day period by no more than an additional 90 calendar days if the Commissioner determines that such an extension is in HUD’s interest.
(b) Assignment of mortgage to Commissioner— (1) Timeframe; request for extension. (i) If the mortgagee elects to assign the mortgage to the Commissioner, the mortgagee shall, at any
time within 30 calendar days after the
date HUD acknowledges the notice of
election, file its application for insurance benefits and assign to the Commissioner, in such manner as the Commissioner may require, any applicable
credit instrument and the realty and
chattel security instruments.
(ii) The Commissioner may extend
this 30-day period by written notice
that a partial payment of insurance
claim under § 207.258b is being considered. A mortgagee may consider failure
to receive a notice of an extension approval by the end of the 30-day time period a denial of the request for an extension.
(iii) The extension shall be for such
term, not to exceed 60 days, as the
Commissioner prescribes; however, the

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§ 207.258

24 CFR Ch. II (4–1–19 Edition)

Commissioner’s consideration of a partial payment of claim, or the Commissioner’s request that a mortgagee accept partial payment of a claim in accordance with § 207.258b, shall in no way
prejudice the mortgagee’s right to file
its application for full insurance benefits within either the 30-day period or
any extension prescribed by the Commissioner.
(iv) The requirements of paragraphs
(b)(2) through (b)(6) of this section
shall also be met by the mortgagee.
(2) Notice of assignment. On the date
the assignment of the mortgage is filed
for record, the mortgagee must notify
the Commissioner, in the manner prescribed in 24 CFR part 200, subpart B, of
such assignment, and must also notify
the FHA Comptroller by telegram of
such recordation.
(3) Warranty of mortgagee. The assignment shall be made without recourse
or warranty, except that the mortgagee shall warrant that:
(i) No act or omission of the mortgagee has impaired the validity and
priority of the mortgage.
(ii) The mortgage is prior to all mechanics’ and materialmen’s liens filed
on record subsequent to the recording
of the mortgage, regardless of whether
such liens attached prior to the recording date.
(iii) The mortgage is prior to all liens
and encumbrances which may have attached or defects which may have arisen subsequent to the recording of the
mortgage, except such liens or other
matters as may be approved by the
Commissioner.
(iv) The amount stated in the instrument of assignment is actually due
under the mortgage and there are no
offsets or counterclaims against such
amount.
(v) The mortgagee has a good right to
assign the mortgage.
(4) Chattel lien warranty. In assigning
its security interest in chattels, including materials, located on the premises
covered by the mortgage, or its security interest in building components
stored either on-site or off-site at the
time of the assignment, the mortgagee
shall warrant that:
(i) No act or omission of the mortgagee has impaired the validity or pri-

ority of the lien created by the chattel
security instruments; and
(ii) The mortgagee has a good right
to assign the security instruments; and
(iii) The chattel security instruments
are a first lien on the items covered by
the instruments except for such other
liens or encumbrances as may be approved by the Commissioner.
(5) Items delivered by mortgagee. The
mortgagee shall deliver to the Commissioner, within 45 days after the assignment is filed for record, the items enumerated below:
(i) An assignment of all claims of the
mortgagee against the mortgagor or
others arising out of the mortgage
transaction.
(ii) All policies of title or other insurance or surety bonds or other guaranties, and any and all claims thereunder, including evidence satisfactory
to the Commissioner that the effective
date of the original title coverage has
been extended to include the assignment of the mortgage to the Commissioner.
(iii) All records, ledger cards, documents, books, papers, and accounts relating to the mortgage transaction.
(iv) All property of the mortgagor
held by the mortgagee or to which it is
entitled (other than the cash items
which are to be retained by the mortgagee) pursuant to paragraph (b)(5) of
this section.
(v) Any additional information or
data which the Commissioner may require.
(6) Disposition of cash items. The following cash items shall either be retained by the mortgagee or delivered to
the Commissioner in accordance with
instructions to be issued by the Commissioner at the time the insurance
claim is filed:
(i) Any balance of the mortgage loan
not advanced to the mortgagor.
(ii) Any cash held by the mortgagee
or its agents or to which it is entitled,
including deposits made for the account of the mortgagor, and which
have not been applied in reduction of
the principal of the mortgage indebtedness.
(iii) All funds held by the mortgagee
for the account of the mortgagor received pursuant to any other agreement.

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Office of Assistant Secretary for Housing, HUD
(iv) The amount of any undrawn balance under a letter of credit used in
lieu of a cash deposit.
(c) Conveyance of title to Commissioner.
If the mortgagee elects to acquire and
convey title to the Commissioner, the
following requirements shall be met:
(1) Alternative actions by mortgagee. At
any time within a period of 30 days
after the date of the notice of such
election, the mortgagee shall take one
of the alternative actions in paragraph
(c) (2) or (3) of this section.
(2) Foreclosure of mortgage. The mortgagee may elect to commence foreclosure proceedings. If the laws of the
State where the property is located do
not permit institution of foreclosure
within such 30-day period, foreclosure
shall be commenced not less than 30
days after such action can be taken.
Under such proceedings, the mortgagee
shall take one of the following actions:
(i) Obtain possession of the mortgaged property and the income therefrom through the voluntary surrender
thereof by the mortgagor.
(ii) Institute and prosecute with reasonable diligence, proceedings for the
appointment of a receiver to manage
the mortgaged property and collect income therefrom.
(iii) Proceed to exercise such other
rights and remedies as may be available to it for the protection and preservation of the mortgaged property and
to obtain the income therefrom under
the mortgage and the law of the particular jurisdiction.
(iv) With the prior approval of the
Commissioner, exercise the power of
sale under a deed of trust.
(3) Acquisition of title and possession.
The mortgagee, with the approval of
the Commissioner, may elect to acquire possession of, and title to, the
mortgaged property by means other
than foreclosure. With the prior approval of the Commissioner, title may
be transferred directly to the Commissioner.
(4) Notice of foreclosure. The mortgagee shall given written notice to the
Commissioner within 30 days after the
institution of foreclosure proceedings
and shall exercise reasonable diligence
in prosecuting such proceedings to
completion. Any developments which
might delay the consummation of such

§ 207.258

proceedings shall be promptly reported
to the Commissioner.
(5) Transfer by mortgagee. After acquiring title to and possession of the
property, the mortgagee shall (within
30 days of such acquisition) transfer
title and possession of the property to
the Commissioner. The transfer shall
be made in such manner as the Commissioner may require. 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 also notify
the FHA Assistant CommissionerComptroller by telegram of such recordation.
(6) Filing of deed and application. The
mortgagee shall file its application for
insurance benefits at the time of filing
for record of the deed conveying the
property to the Commissioner.
(7) Deed covenants and documents. The
deed conveying the property to the
Commissioner shall contain covenants
satisfactory to the Commissioner. The
original deed shall be forwarded to the
Commissioner as soon as received from
the recording authority. The following
documents shall be forwarded with the
deed:
(i) A bill of sale covering any personal property to which the mortgagee
is entitled by reason of the mortgage
transaction or by the acceptance of a
deed in lieu of foreclosure.
(ii) An assignment of all claims of
the mortgagee against the mortgagor
or others arising out of the mortgage
transaction and out of the foreclosure
proceedings or other means by which
the property was acquired.
(iii) An assignment of any claims on
account of title insurance and fire or
other hazard insurance, except claims
which have been released with the
prior approval of the Commissioner.
(8) Title evidence. Evidence of title,
satisfactory to the Commissioner and
meeting the requirements of § 207.258a
shall be furnished to the Commissioner
(without expense to him) within 45
days of the filing for record of the deed
conveying the property to him.
(9) Disposition of cash items. The provisions of paragraph (b)(4) of this section,
relating to the retention or delivery of
cash items, shall be applicable to cases

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§ 207.258a

24 CFR Ch. II (4–1–19 Edition)

involving the conveyance of property
to the Commissioner.
(Information collection requirements in
paragraph (b) were approved by the Office of
Management and Budget under control number 2535–0061)
[36 FR 24537, Dec. 22, 1971, as amended at 44
FR 8195, Feb. 8, 1979; 50 FR 38786, Sept. 25,
1985; 51 FR 27838, Aug. 4, 1986; 64 FR 4770, Jan.
29, 1999; 76 FR 24371, May 2, 2011; 77 FR 55135,
Sept. 7, 2012]

§ 207.258a Title requirements.
(a) Form of title evidence. The title
evidence submitted with a conveyance
of the property to the Commissioner
shall be in the form of an owner’s policy of title insurance, except that, if an
abstract and attorney’s opinion were
accepted by the Commissioner at the
time of insurance, the title evidence
may be in such form. The title evidence
shall be effective on or after the date of
the recording of the conveyance to the
Commissioner.
(b) Content of title evidence. To be satisfactory to the Commissioner, the
title evidence covering the property
conveyed to him shall show the same
title vested in the Commissioner as
was vested in the mortgagor as of the
date of the mortgage was filed for
record, with the exception of such liens
or other matters affecting the title as
may be approved by the Commissioner.
§ 207.258b Partial payment of claim.
(a) Whenever the Commissioner receives notice under § 207.258 of a mortgagee’s intention to file an insurance
claim and to assign the mortgage to
the Commissioner, the Commissioner
may request the mortgagee, in lieu of
assignment, to accept partial payment
of the claim under the mortgage insurance contract and to recast the mortgage, under such terms and conditions
as the Commissioner may determine.
(b) The Commissioner may request
the mortgagee to participate in a partial payment of claim in lieu of assignment only after a determination that
partial payment would be less costy to
the Federal government than other
reasonable alternatives for maintaining the low- and moderate-income
character of the project. This determination shall be based upon the findings listed below and such other find-

ings as the Commissioner deems appropriate:
(1) The mortgagee is entitled, under
§ 207.255, to assign the mortgage in exchange for the payment of insurance
benefits;
(2) The relief resulting from partial
payment, when considered with other
resources available to the project,
would be sufficient to restore the financial viability of the project;
(3) The project is, or can at reasonable cost be made, structurally sound;
(4) The management of the project is
satisfactory to the Commissioner; and
(5) The default under the insured
mortgage was beyond the control of
the mortgagor.
(c) Partial payment of a claim under
this section shall be made only when:
(1) The project is, or potentially
could serve as, a low- and moderate-income housing resource;
(2) The property covered by the mortgage is free and clear of all liens other
than the insured first mortgage and
such other liens as the Commissioner
may have approved;
(3) The mortgagee has voluntarily
agreed to accept partial payment of the
insurance claim under the mortgage insurance contract and to recast the remaining mortgage amount under terms
and conditions prescribed by the Commissioner; and
(4) The mortgagor has agreed to
repay to the Commissioner an amount
equal to the partial payment, with the
obligation secured by a second mortgage on the project containing terms
and conditions prescribed by the Commissioner. The terms of the second
mortgage will be determined on a caseby-case basis to assure that the estimated project income will be sufficient
to cover estimated operating expenses
and debt service on the recast insured
mortgage. The Commissioner may provide for postponed amortization of the
second mortgage.
(d) Payment of insurance benefits
under this section shall be in cash. The
Commissioner shall waive the deduction of one percent of the mortgage
funds advanced to the mortgagor, provided for in § 207.259(b)(2)(iv), with respect to a partial payment of a claim
under this section. The items referred

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Office of Assistant Secretary for Housing, HUD
to in § 207.258(b)(4) shall either be retained by the mortgagee or delivered to
the Commissioner in accordance with
instructions to be issued by the Commissioner with respect to a partial payment of claim under this section.
(e) Lenders receiving a partial payment of claim following the Commissioner’s endorsement of the Mortgage
for full insurance under parts 251, 252,
or 255 of this chapter, will pay HUD a
fee in an amount set forth through
FEDERAL REGISTER notice. HUD, in its
discretion, may collect this fee or deduct the fee from any payment it
makes in the claim process.
[50 FR 38786, Sept. 25, 1985, as amended at 61
FR 49037, Sept. 17, 1996]

§ 207.259 Insurance benefits.
(a) Method of payment. (1) Upon either
an assignment of the mortgage to the
Commissioner or a conveyance of the
property to the Commissioner in accordance with requirements in § 207.258,
payment of an insurance claim shall be
made in cash, in debentures, or in a
combination of both, as determined by
the Commissioner either at, or prior
to, the time of payment.
(2) An insurance claim paid on a
mortgage insured under section 223(e)
of the National Housing Act shall be
paid in cash from the Special Risk Insurance Fund.
(b) Amount of payment; assignment of
mortgage. If the mortgage is assigned to
the Commissioner, the insurance benefits shall be paid in an amount determined as follows:
(1) By adding to the unpaid principal
amount of the mortgage, computed as
of the date of default, the following
items:
(i) The amount of all payments made
by the mortgagee for taxes, special assessments and water rates which are
liens prior to the mortgage; for insurance on the property; and for any
mortgage insurance premiums paid
after default.
(ii) An allowance for reasonable payments made by the mortgagee, with
the approval of the Commissioner, for
the completion and preservation of the
property.
(iii) An amount equivalent to the debenture interest which would have
been earned on the portion of the in-

§ 207.259

surance benefits paid in cash, as of the
date such cash payment is made, except that when the mortgagee fails to
meet any one of the applicable requirements of §§ 207.256 and 207.258 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.
(2) By deducting from the total of the
items computed under paragraph (b)(1)
of this section, the following items:
(i) Any amount received by the mortgagee on account of the mortgage after
the date of default.
(ii) Any net income received by the
mortgagee from the property covered
by the mortgage after the date of default.
(iii) The sum of the cash items retained by the mortgagee pursuant to
§ 207.258(b)(6), except the balance of the
mortgage loan not advanced to the
mortgagor.
(iv) An amount equivalent to 1 percent of the mortgage funds advanced to
the mortgagor and not repaid as of the
date of default, except that all or part
of the 1 percent may be waived by the
Commissioner if, at his request and in
lieu of foreclosure, the mortgage is assigned to the Secretary.
(v) In the case of a lender receiving
insurance benefits for the full Mortgage amount upon the Commissioner’s
endorsement of the Mortgage for full
insurance pursuant to 24 CFR parts 251,
252, or 255, the amount of the fee set
forth through FEDERAL REGISTER notice. HUD may, in its discretion, collect this fee rather than deducting the
fee from the total of the items computed under paragraph (b)(1) of this
section.
(vi) Except for multifamily project
mortgages for which HUD issued a firm
commitment for mortgage insurance
before September 1, 2011, and for multifamily project mortgages insured under
section 232 of the Act (12 U.S.C. 1715w)
and under section 242 of the Act (12
U.S.C. 1715z–7), when there is a covenant
default
as
defined
in

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§ 207.259

24 CFR Ch. II (4–1–19 Edition)

§ 207.255(a)(1)(ii) and a mortgagee refuses to comply promptly with the
Commissioner’s request to accelerate
payment pursuant to § 207.257, an
amount equal to the difference between
the project’s market value as of the
date of the Commissioner’s request and
the project’s market value as of the
date the mortgagee makes an election
to assign the mortgage, or convey title
to the project, as determined by appraisal procedures established by the
Commissioner.
(vii) For multifamily project mortgages for which HUD issued a firm
commitment for mortgage insurance
on or after September 1, 2011, the regulations of paragraph (b)(2)(vi) of this
section shall apply, unless the mortgagor demonstrates to the satisfaction
of the Commissioner that financial
hardship to the mortgagor would result
from application of the regulations in
paragraph (b)(2)(vi) of this section due
to the reasonable expectations of the
mortgagor that the transaction would
close under the regulations in effect
prior to September 1, 2011, in which
case, the regulations of paragraph
(b)(2)(vi) shall not apply.
(c) Amount of payment; conveyance of
property. If the property is conveyed to
the Commissioner, the insurance benefits shall be paid in an amount determined in accordance with paragraph (b)
of this section, except that the item set
forth in paragraph (b)(2)(iv) of this section shall not be deducted.
(d) Issuance of certificate of claim. In
addition to the insurance benefits paid
under paragraph (b) or (c) of this section, a certificate of claim shall be
issued to the mortgagee.
(1) In the case of an assignment of
the mortgage, the certificate shall be
for an amount which the Commissioner
determines to be sufficient, when added
to the amount of the insurance benefits
to equal the amount the mortgagee
would have received if, on the date of
assignment to the Commissioner, the
mortgagor had paid in full all obligations under the mortgage. Where a conveyance is involved, there shall also be
included in the certificate an allowance in a reasonable amount for any
necessary expenses incurred by the
mortgagee in connection with the foreclosure proceedings or the acquisition

of the mortgaged property otherwise
and in connection with the conveyance
of the property to the Commissioner.
(2) The certificate of claim shall provide for an uncompounded annual interest increment of 3 percent to begin
as of the date of either assignment or
conveyance.
(e) Issuance of debentures. Where debentures are issued, they shall meet
the following requirements:
(1) Be issued as of the date of default.
(2) Be registered as to principal and
interest.
(3) At the option of the Commissioner
and with the approval of the Secretary
of the Treasury, be redeemable at par
plus accrued interest on any semiannual interest payment date on 3
months’ notice of redemption given in
such manner as the 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.
(4) Mature 20 years from the date
thereof.
(5) Be issued in such forms and
amounts; and be subject to such terms
and conditions; and include such provisions for redemption, if any, as may be
prescribed by the Secretary, with the
approval of the Secretary of the Treasury; and may be in book entry or certificated registered form, or such other
form as the Secretary by regulation
may prescribe.
(6) Bear interest from the date of
issue, payable semiannually on the
first day of January and the first day
of July of each year at the rate in effect as of the date the commitment was
issued, or as of the date of initial insurance endorsement of the mortgage,
whichever rate is higher. The applicable rates of interest will be published
twice each year as a notice in the FEDERAL REGISTER.

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Office of Assistant Secretary for Housing, HUD
(7) Debentures representing the portion of the claim applicable to an operating loss loan shall bear interest at
the rate in effect as of the date the
commitment to insure such loan was
issued, or as of the date of endorsement
for insurance of such loan, whichever
rate is the higher, although debentures
representing the portion of the claim
applicable to the original mortgage
may bear interest at a different rate.
(f) Mortgagee Time Limits for Supplemental Claims for Additional Insurance
Benefits. A mortgagee may not file for
any additional payments of its mortgage insurance claim more than six
months after the date of final settlement of the insurance claim by the
Commissioner. For the purpose of this
section, the term final settlement shall
mean the payment of the insurance
claim (in cash or debentures) or billing
for any overpayment of a partial claim
that is made by the Commissioner.
Final settlement is based upon the submission by the mortgagee of all required documents and information pursuant to part 207 of this chapter.
[36 FR 24537, Dec. 22, 1971, as amended at 41
FR 45829, Oct. 18, 1976; 47 FR 26125, June 17,
1982; 49 FR 24654, June 14, 1984; 51 FR 13142,
Apr. 17, 1986; 51 FR 27838, Aug. 4, 1986; 57 FR
55112, Nov. 24, 1992; 59 FR 49816, Sept. 30, 1994;
61 FR 49038, Sept. 17, 1996; 71 FR 18153, Apr.
10, 2006; 76 FR 24371, May 2, 2011; 80 FR 51468,
Aug. 25, 2015]

§ 207.259a Waiver of title objection;
mortgages formerly Commissionerheld.
If the Commissioner sells a mortgage
and such mortgage is later reassigned
to him in exchange for debentures or
the property covered by such mortgage
is later conveyed to him in exchange
for debentures, the Commissioner 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 by the
Commissioner.
§ 207.260 Maintenance and inspection
of property.
As long as the mortgage is insured or
held by the Commissioner, the mortgagor must maintain the insured
project in accordance with the physical
condition requirements in 24 CFR part
5, subpart G; and the mortgagee must

§ 207.261

inspect the project in accordance with
the physical inspection requirements
in 24 CFR part 5, subpart G.
[63 FR 46578, Sept. 1, 1998]

§ 207.261 Capturing excess bond proceeds.
(a) A mortgagee that finances multifamily housing or healthcare facilities
insured under Title II of the National
Housing Act through the issuance and
sale of bonds or bond anticipation
notes and uses a project-specific trust
indenture agreement, that clearly outlines the project and identifies by
project the trust funds established by
and administered in accordance with
the terms of the trust indenture, shall:
(1) Include the following clause in the
trust indenture: In the event of an assignment or conveyance of the mortgage to the Commissioner, subsequent
to the issuance of the bonds, all money
remaining in all funds and accounts
other than the rebate fund, and any
other funds remaining under the trust
indenture after payment or provision
for payment of debt service on the
bonds and the fees and expenses of the
credit enhancer, issuer, trustee, and
other such parties unrelated to the
mortgagor (other than funds originally
deposited by the mortgagor or related
parties on or before the date of
issuance of the bonds) shall be returned
to the mortgagee.
(2) Upon the Commissioner’s payment of an FHA mortgage insurance
claim under § 207.259, the mortgagee
shall take all legally-entitled actions
to enforce the clause required by paragraph (a)(1) of this section and pay the
Commissioner any trust funds remaining after discharge by the trustee of all
obligations of the trust indenture, no
later than 6 months after the date of
the Commissioner’s final settlement of
the FHA mortgage insurance claim.
(b) For purposes of paragraph (a) of
this section, the term ‘‘rebate fund’’
means a separate fund established
under a contract or agreement for taxexempt bonds in which amounts (excess
interest earnings from the tax-exempt
bonds) must be deposited to make rebate payments to the federal government under the Internal Revenue Code.
[79 FR 43933, July 29, 2014]

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§ 207.263

24 CFR Ch. II (4–1–19 Edition)

RIGHTS IN HOUSING FUND
§ 207.263 Responsibility for servicing.
After January 10, 1994, servicing of
insured mortgages must be performed
by a mortgagee which is approved by
HUD to service insured mortgages.

§ 208.104

[57 FR 58350, Dec. 9, 1992]

AMENDMENTS
§ 207.499 Effect of amendments.
The regulations in this subpart may
be amended by the Commissioner at
any time and from time to time, in
whole or in part, but such amendment
shall not adversely affect the interests
of a mortgagee or lender under the contract of insurance on any mortgage or
loan already insured and shall not adversely affect the interests of a mortgagee or lender on any mortgage or
loan to be insured on which the Commissioner has made a commitment to
insure.

PART 208—ELECTRONIC TRANSMISSION OF REQUIRED DATA
FOR CERTIFICATION AND RECERTIFICATION AND SUBSIDY BILLING PROCEDURES FOR MULTIFAMILY SUBSIDIZED PROJECTS
Sec.
208.101
208.104
208.108
208.112

52670), Schedule of Tenant Assistance
Payments Due (HUD–52670A, Part 1),
Schedule of section 8 Special Claims
(HUD–52670A, Part 2), and Special
Claims
Worksheets,
HUD–52671
A
through D), as applicable.

Purpose.
Applicability.
Requirements.
Cost.

AUTHORITY: 12 U.S.C. 1701s, 1715l, 1715z–1; 42
U.S.C. 1437f and 3535(d).
SOURCE: 58 FR 61022, Nov. 19, 1993, unless
otherwise noted.

§ 208.101 Purpose.
The purpose of this part is to require
owners
of
subsidized
multifamily
projects to electronically submit certain data to HUD for the programs listed in § 208.104. This electronically submitted data is required by HUD Forms,
Owner’s Certification of Compliance
with Tenant’s Eligibility and Rent Procedure, Worksheets to Compute Tenant
Payment/Rent (Form HUD–50059 and
50059 Worksheets), and the Monthly
Subsidy Billing Forms, Housing Owner’s Certification and Application for
Housing Assistance Payments (HUD–

Applicability.

(a) This part applies to HUD administered subsidized multifamily projects,
either insured or non-insured, under:
(1) The section 236 Interest Reduction
and Rental Assistance Payments program;
(2) The section 8 Housing Assistance
Payments Programs, including, but not
limited to, section 8 Housing Assistance Payments Programs for New Construction (24 CFR part 880), section 8
Housing Assistance Payments Program
for Substantial Rehabilitation (24 CFR
part 881), section 8 Housing Assistance
Payments Program, New Construction
Set-Aside for section 515 Rural Rental
Housing Projects (24 CFR part 884);
Loans for Housing for the Elderly or
Handicapped (24 CFR part 885) and section 8 Loan Management and Property
Disposition Set-aside program (24 CFR
part 886);
(3) The section 221(d)(3) Below Market Interest Rate Housing for Low and
Moderate Income Mortgage Insurance
program (24 CFR part 221); and
(4) The section 101 Rent Supplement
program (24 CFR part 215).
(b) This part applies to those multifamily projects having subsidy contracts, either insured or non-insured,
where State housing finance and development agencies and other Public
Housing Agencies are the subsidy contract administrator under:
(1) The section 236 Interest Reduction
and Rental Assistance Payments program (24 CFR part 236);
(2) The section 8 Housing Assistance
Payments Programs, including, but not
limited to, section 8 Housing Assistance Payments Program for New Construction (24 CFR part 880), section 8
Housing Assistance Payments Program
for Substantial Rehabilitation (24 CFR
part 881), and section 8 Housing Assistance Payments Program, New Construction Set-Aside for section 515
Rural Rental Housing Projects (24 CFR
part 884);

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