[Federal Register Volume 61, Number 179 (Friday, September 13, 1996)]
[Rules and Regulations]
[Pages 48546-48562]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-23258]
[[Page 48545]]
_______________________________________________________________________
Part III
Department of Housing and Urban Development
_______________________________________________________________________
24 CFR Parts 27 and 29
Streamlining Multifamily and Single Family Nonjudicial Foreclosure
Procedures; Final Rule
Federal Register / Vol. 61, No. 179 / Friday, September 13, 1996 /
Rules and Regulations
[[Page 48546]]
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Parts 27 and 29
[Docket No. FR-4110-F-01]
RIN 2501-AC29
Office of the Secretary; Multifamily and Single Family
Nonjudicial Foreclosure Procedures Streamlining
AGENCY: Office of the Secretary, HUD.
ACTION: Final rule.
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SUMMARY: This final rule is a part of HUD's regulatory reinvention
initiative. It combines the current rules for multifamily and single
family nonjudicial foreclosure at 24 CFR parts 27 and 29, respectively,
into separate subparts of part 27, thereby eliminating a CFR part. In
addition, this rule streamlines the multifamily requirements in the
current part 27, which repeats substantial portions of the authorizing
statute, and removes certain single family requirements in the current
part 29 that are more restrictive than the authorizing statute.
EFFECTIVE DATE: October 15, 1996.
FOR FURTHER INFORMATION CONTACT: With respect to Single Family Housing:
Bruce S. Albright, Office of General Counsel, U.S. Department of
Housing and Urban Development, Room 9240, Washington, DC 20410, (202)
708-0080. A telecommunications device for the hearing impaired (TTY) is
available at (202) 708-3259. (These are not toll-free numbers.)
With respect to Multifamily Housing: Herbert Goldblatt, Office of
General Counsel, U.S. Department of Housing and Urban Development, Room
10184, Washington, DC 20410, (202) 708-3200. A telecommunications
device for the hearing impaired (TTY) is available at (202) 708-3259.
(These are not toll-free numbers.)
SUPPLEMENTARY INFORMATION:
I. General Background
On March 4, 1995, President Clinton issued a memorandum to all
Federal departments and agencies regarding regulatory reinvention. In
response to this memorandum, the Department of Housing and Urban
Development conducted a page-by-page review of its regulations to
determine which can be eliminated, consolidated, or otherwise improved.
HUD has determined that the regulations for the Nonjudicial Foreclosure
of Multifamily Mortgages at 24 CFR part 27 can be improved and
streamlined by eliminating unnecessary provisions. The regulations for
Nonjudicial Foreclosure of Single Family Mortgages at 24 CFR part 29
were already issued in streamlined form in a final rule published on
November 15, 1995 (60 FR 57489). The Department has determined that
these single family provisions may appropriately be consolidated with
the multifamily provisions as a separate subpart in 24 CFR part 27.
This rule also removes certain single family requirements, as explained
below in this preamble, that are more restrictive than the authorizing
statute.
The combined statutory and regulatory procedures for conducting
nonjudicial foreclosures have been placed in appendices to this final
rule. Appendix A provides a Guide for the multifamily procedures;
Appendix B provides a Guide for the Single Family provisions. The final
rule will be codified in the Code of Federal Regulations; the
appendices will not be codified. However, the appropriate appendix will
be included in information to be provided to foreclosure commissioners,
and which will be available to the public. HUD is striving to keep
communications about requirements as clear, simple and timely as
possible, and the Guides in the appendices present such a format.
II. Multifamily Rule Changes
Several provisions in the multifamily nonjudicial foreclosure
regulations repeat statutory language from the Multifamily Mortgage
Foreclosure Act of 1981 (the Act) (12 U.S.C. 3701 et seq.). It is
unnecessary to maintain statutory requirements in the Code of Federal
Regulations (CFR), since those requirements are otherwise fully
accessible and binding. Furthermore, if regulations contain statutory
language, HUD must amend the regulations whenever Congress amends the
statute. Therefore, this rule will remove repetitious statutory
language and, where appropriate, replace it with a citation to the
specific statutory section.
Also being deleted from the regulatory text of part 27 is language
that is only advisory, such as the list of examples of terms which the
Secretary may require the purchaser to agree to in the current
Sec. 27.20(c).
III. Single Family Rule Changes
The single family requirements in the current part 29 have already
been streamlined in a final rule published on November 15, 1995 (60 FR
57484). These requirements are moved in this final rule to become
subpart B of part 27, and part 29 is removed.
As a result of the initial use of this new authority to foreclose
mortgages by nonjudicial procedures, the Department has noted three
areas where the regulations at 24 CFR Secs. 29.103(b)(2), 29.109(b) and
29.111(a) are more restrictive than the authorizing statute, the Single
Family Mortgage Foreclosure Act of 1994 (the Statute), 12 U.S.C. 3751-
3768. Because these restrictions present problems for efficient and
cost-effective implementation of the Statute, they are being removed.
The regulatory provisions in question, discussed below, require
inclusion of the description of the property as contained in the
security instrument in the Notice of Default and Foreclosure Sale; the
presence of the designated foreclosure commissioner at the foreclosure
sale; and the service by publication of the Notice of Default and
Foreclosure Sale prior to the revised date of an adjourned foreclosure
sale.
Property Description in the Notice of Default and Foreclosure Sale
In 12 U.S.C. 3757(4), the Notice of Default and Foreclosure Sale is
to include, among other items, ``* * * the street address or a
description of the location of the property, and a description of the
security property sufficient to identify the property to be sold.''
[Underlining provided.] The provisions of the existing regulation on
this point, at 24 CFR 29.103(b)(2), are more restrictive than the
Statute. The regulatory provisions state that the Notice of Default and
Foreclosure Sale must contain, among other things, ``[t]he legal
description of the security property as contained in the mortgage
agreement.'' [Underlining provided.] HUD has found that in some
jurisdictions, the description contained in the security instrument can
be very lengthy, in fact, much longer than would be necessary to
sufficiently identify the property to be sold at the foreclosure sale.
Requiring an unnecessarily lengthy legal description can, in some
instances, result in additional expense in publishing the Notice of
Default and Foreclosure Sale, resulting in increased costs to the
insurance funds.
In order to correct this situation, Sec. 29.103(b)(2) of the
existing rule is revised at Sec. 27.103(b)(2) of this rule to conform
the regulation to the less restrictive language in the statute.
Presence of the Foreclosure Commissioner at the Sale
While section 369B(b) of the Multifamily Housing Mortgage
Foreclosure Act of 1981 (12 U.S.C. 3710), pertaining to the conduct of
the sale, specifically requires the attendance of the foreclosure
commissioner at the foreclosure sale, the provisions of the
[[Page 48547]]
Single Family Mortgage Foreclosure Act of 1994 governing the conduct of
the sale are silent on attendance by the commissioner at the sale, see
12 U.S.C. 3760. Furthermore, Section 3760(b)(1)(C) of 12 U.S.C.
specifically provides that ``The foreclosure commissioner may serve as
auctioneer, or, in accordance with regulations of the Secretary, may
employ an auctioneer to be paid from the commission provided for in
section 3761(5).'' At section 3761(2) of 12 U.S.C., the statutory
authority governing foreclosure costs provides for the payment of costs
arising from ``[m]ileage * * * for posting notices and for the
foreclosure commissioner's or auctioneer's attendance at the sale * *
*.'' [Underlining provided.]
The regulations at 24 CFR 29.109(b) presently provide that the
foreclosure commissioner or, an employee of the commissioner, if the
commissioner is not a natural person, must attend the foreclosure sale.
This has been found to be restrictive in situations where a sole single
family property is a great distance from a foreclosure commissioner's
location. This results in the commissioner having to spend an
inordinate amount of time and travel expense in order to personally
attend the sale or, in the alternative, it results in the
unavailability of foreclosure commissioners to accept such case
referrals. The regulation is therefore amended in this rule by not
including the language of Sec. 29.109(b).
Service by Publication of Notice of an Adjourned Foreclosure Sale
The Statute at 12 U.S.C. 3760(c)(2) requires service by publication
and mailing of the revised Notice of Default and Foreclosure Sale when
a sale is adjourned to a later date, and permits publication to be made
on any of three separate days before the revised date of foreclosure
sale. The current section Sec. 29.111(a) requires publication of the
Notice of Default and Foreclosure Sale to be made on any of three
consecutive days prior to the revised date of foreclosure sale so long
as the first publication is made at least seven days before the date to
which the sale has been adjourned. This requirement could in some
circumstances be impossible to comply with, because it does not take
into account cases in which there are no daily newspapers of general
circulation that would permit publication on three consecutive days.
The requirement in Sec. 29.111(a) for the first publication to be made
at least seven days before the sale is also not part of the Statute,
which only makes service by mail subject to the seven days requirement.
This rule, at Sec. 27.111(a), returns to the statutory language
permitting publication to be made on any of three separate days before
the revised date of foreclosure sale. In addition, to give full
implementation to the Statute, which allows adjournment of the
foreclosure sale for ``not less than 9 and not more than 31 days,''
this rule takes into account cases in which the frequency of
publication of newspapers of general circulation would not permit
publication on three separate days before the date to which the sale
has been adjourned. To avoid the frustration of the statutory provision
that permits adjournments of not less than 9 days, this rule provides
that if there is no newspaper of general circulation that would permit
publication on any of three separate days before the revised date of
foreclosure sale, the Notice of Default and Foreclosure Sale must be
posted, not less than nine days before the date to which the sale has
been adjourned, at the courthouse of any county or counties in which
the property is located, and at the place where the sale is to be held.
This provision is modeled on the exception to publication by posting
provision in the Statute at 12 U.S.C. 3758(3)(B), and avoids such a
Statute-frustrating result as not being able to adjourn a foreclosure
sale for less than 21 days in an area where a newspaper is published
only weekly.
IV. Findings and Certifications
Justification for Final Rulemaking
HUD generally publishes a rule for public comment before issuing a
rule for effect, in accordance with its own regulations on rulemaking
in 24 CFR part 10. However, part 10 provides for exceptions to the
general rule if the agency finds good cause to omit advance notice and
public participation. The good cause requirement is satisfied when
prior public procedure is ``impracticable, unnecessary, or contrary to
the public interest'' (24 CFR 10.1). HUD finds that good cause exists
to publish this rule for effect without first soliciting public
comment. This rule merely removes unnecessary regulatory provisions and
does not establish or affect substantive policy. Therefore, prior
public comment is unnecessary.
Unfunded Mandates Reform Act
Title II of the Unfunded Mandates Reform Act of 1995 establishes
requirements for Federal agencies to assess the effects of their
regulatory actions on State, local, local and tribal governments and
the private sector. This rule does not impose any Federal mandates on
any State, local or tribal governments or the private sector within the
meaning of the Unfunded Mandates Reform Act of 1995.
Regulatory Flexibility Act
The Secretary, in accordance with the Regulatory Flexibility Act
(5 U.S.C. 605(b)), has reviewed and approved this rule, and in so doing
certifies that this rule will not have a significant economic impact on
a substantial number of small entities. This rule merely streamlines
regulations by removing unnecessary provisions. The rule will have no
adverse or disproportionate economic impact on small businesses.
Environmental Impact
This rulemaking does not have an environmental impact. This
rulemaking simply amends an existing regulation by consolidating and
streamlining provisions. It does not change the environmental review
procedures or the physical impact of the program or the projects
assisted under the regulations being amended.
Executive Order 12612, Federalism
The General Counsel, as the Designated Official under section 6(a)
of Executive Order 12612, Federalism, has determined that this rule
will not have substantial direct effects on States or their political
subdivisions, or the relationship between the Federal government and
the States, or on the distribution of power and responsibilities among
the various levels of government. No programmatic or policy changes
that would affect the relationship between the Federal Government and
State and local governments will result from this rule.
Executive Order 12606, The Family
The General Counsel, as the Designated Official under Executive
Order 12606, The Family, has determined that this rule will not have
the potential for significant impact on family formation, maintenance,
or general well-being, and thus is not subject to review under the
Order. No significant change in existing HUD policies or programs will
result from promulgation of this rule.
List of Subjects
24 CFR Part 27
Administrative practice and procedure, Loan programs--housing and
community development.
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24 CFR Part 29
Administrative practice and procedure, Loan programs--housing and
community development.
Accordingly, under the authority 420 U.S.C. 3535(d) subtitle A of
title 24 of the Code of Federal Regulations is amended as follows:
1. Part 27 is revised to read as follows:
PART 27--NONJUDICIAL FORECLOSURE OF MULTIFAMILY AND SINGLE FAMILY
MORTGAGES
Subpart A--Nonjudicial Foreclosure of Multifamily Mortgages
Sec.
27.1 Purpose.
27.2 Scope and applicability.
27.3 Definitions.
27.5 Prerequisites to foreclosure.
27.10 Designation of a foreclosure commissioner.
27.15 Notice of default and foreclosure sale.
27.20 Conditions of foreclosure sale.
27.25 Termination or adjournment of foreclosure sale.
27.30 Conduct of the sale.
27.35 Foreclosure costs.
27.40 Disposition of sale proceeds.
27.45 Transfer of title and possession.
27.50 Management and disposition by the Secretary.
Subpart B--Nonjudicial Foreclosure of Single Family Mortgages
27.100 Purpose, Scope and Applicability.
27.101 Definitions.
27.102 Designation of foreclosure commissioner and substitute
commissioner.
27.103 Notice of default and foreclosure sale.
27.105 Service of Notice of Default and Foreclosure Sale.
27.107 Presale reinstatement.
27.109 Conduct of sale.
27.111 Adjournment or cancellation of sale.
27.113 Foreclosure costs.
27.115 Disposition of sales proceeds.
27.117 Transfer of title and possession.
27.119 Redemption rights.
27.121 Record of foreclosure and sale.
27.123 Deficiency judgment.
Authority: 12 U.S.C. 1715b, 3701-3717, 3751-3768; 42 U.S.C.
1452b, 3535(d).
Subpart A--Nonjudicial Foreclosure of Multifamily Mortgages
Sec. 27.1 Purpose.
The purpose of this subpart is to implement requirements for the
administration of the Multifamily Mortgage Foreclosure Act of 1981 (the
Act) (12 U.S.C. 3701-3717), that clarify, or are in addition to, the
requirements contained in the Act, which are not republished here and
must be consulted in conjunction with the requirements of this subpart.
The Act creates a uniform Federal remedy for foreclosure of multifamily
mortgages. Under a delegation of authority published on February 5,
1982 (47 FR 5468), the Secretary has delegated to the HUD General
Counsel his powers under the Act to appoint a foreclosure commissioner
or commissioners and to substitute therefor, to fix the compensation of
commissioners, and to promulgate implementing regulations.
Sec. 27.2 Scope and applicability.
(a) Under the Act and this subpart, the Secretary may foreclose on
any defaulted Secretary-held multifamily mortgage encumbering real
estate in any State. The Secretary may use the provisions of these
regulations to foreclose on any multifamily mortgage regardless of when
the mortgage was executed.
(b) The Secretary may, at the Secretary's option, use other
procedures to foreclose defaulted multifamily mortgages, including
judicial foreclosure in Federal court and nonjudicial foreclosure under
State law. This subpart applies only to foreclosure procedures
authorized by the Act and not to any other foreclosure procedures the
Secretary may use.
Sec. 27.3 Definitions.
The definitions contained in the Act (at 12 U.S.C. 3702) shall
apply to this subpart, in addition to and as further clarified by the
following definitions. As used in this subpart:
General Counsel means the General Counsel of the Department of
Housing and Urban Development;
Multifamily mortgage does not include a mortgage covering a
property on which there is located a one- to four-family residence,
except when the one- to four-family residence is subject to a mortgage
pursuant to section 202 of the Housing Act of 1959 (12 U.S.C. 1701q),
or section 811 (42 U.S.C. 8013) of the National Affordable Housing Act.
The definition of multifamily mortgage also includes a mortgage taken
by the Secretary in connection with the previous sale of the project by
the Secretary (purchase money mortgage).
Sec. 27.5 Prerequisites to foreclosure.
Before commencement of a foreclosure under the Act and this
subpart, HUD will provide to the mortgagor an opportunity informally to
present reasons why the mortgage should not be foreclosed. Such
opportunity may be provided before or after the designation of the
foreclosure commissioner but before service of the notice of default
and foreclosure.
Sec. 27.10 Designation of a foreclosure commissioner.
(a) When the Secretary determines that a multifamily mortgage
should be foreclosed under the Act and this subpart, the General
Counsel will select and designate one or more foreclosure commissioners
to conduct the foreclosure and sale. The method of selection and
determination of the qualifications of the foreclosure commissioner
shall be at the discretion of the General Counsel, and the execution of
a designation pursuant to paragraph (b) of this section shall be
conclusive evidence that the commissioner selected has been determined
to be qualified by the General Counsel.
(b) After selection of a foreclosure commissioner, the General
Counsel shall designate the commissioner in writing to conduct the
foreclosure and sale of the particular multifamily mortgage. The
written designation shall be duly acknowledged and shall state the name
and business or residential address of the commissioner and any other
information the General Counsel deems necessary. The designation shall
be effective upon execution by the General Counsel or his designate.
Upon receipt of the designation, the commissioner shall demonstrate
acceptance by signing the designation and returning a signed copy to
the General Counsel.
(c) The General Counsel may at any time, with or without cause,
designate a substitute commissioner to replace a previously designated
commissioner. Designation of a substitute commissioner shall be in
writing and shall contain the same information and be made effective in
the same manner as the designation of the original commissioner. Upon
designation of a substitute commissioner, the substitute commissioner
shall serve a copy of the written notice of designation upon the
persons listed at sections 369(1) (A) through (C) of the Act (12 U.S.C.
3708(1) (A) through (C)) either by mail, in accordance with section
369(1) of the Act (12 U.S.C. 3708(1)), except that the time limitations
in that section will not apply, or by any other manner which in the
substitute commissioner's discretion is conducive to giving timely
notice of substitution.
Sec. 27.15 Notice of default and foreclosure sale.
(a) Within 45 days after accepting his or her designation to act as
commissioner, the commissioner shall commence the foreclosure by
serving a Notice of Default and Foreclosure Sale.
[[Page 48549]]
(b) The Notice of Default and Foreclosure Sale shall contain the
following information:
(1) The Notice shall state that all deposits and the balance of the
purchase price shall be paid by certified or cashier's check. The
Notice shall state that no deposit will be required of the Secretary
when the Secretary bids at the foreclosure sale.
(2) Any terms and conditions to which the purchaser at the
foreclosure sale must agree under Sec. 27.20. The Notice need not
describe at length each and every pertinent term and condition,
including any required use agreements and deed covenants, if it
describes these terms and conditions in a general way and if it states
that the precise terms will be available from the commissioner upon
request.
(c) The Notice need not be mailed to mortgagors who have been
released from all obligations under the mortgage.
(d) In deciding which newspaper or newspapers to select as general
circulation newspapers for purposes of publication of the required
notice, the commissioner need not select the newspaper with the largest
circulation.
(e) In addition to Notice posting requirements included in the Act,
the Notice shall also be posted in the project office and in such other
appropriate conspicuous places as the commissioner deems appropriate
for providing notice to all tenants. Posting shall not be required if
the commissioner in his or her discretion finds that the act of posting
is likely to lead to a breach of the peace or may result in the
increased risk of vandalism or damage to the property. Any such finding
will be made in writing. Entry on the premises by the commissioner for
the purpose of posting shall be privileged as against all other
persons.
(f) When service of the Notice of Default and Foreclosure Sale is
made by mail, the commissioner shall at the same time and in the same
manner serve a copy of the instrument by which the General Counsel,
under Sec. 27.10(b), has designated him or her to act as commissioner.
(g) At least 7 days before the foreclosure sale, the commissioner
will record both the instrument designating him or her to act as
commissioner and the Notice of Default and Foreclosure Sale in the same
office or offices in which the mortgage was recorded.
Sec. 27.20 Conditions of foreclosure sale.
(a) The requirements of section 367(b)(2)(A) of the Act (12 U.S.C.
3706(b)(2)(A)) apply if a majority of the residential units in a
property subject to foreclosure sale pursuant to the Act and this
subpart are occupied by residential tenants either on the date of the
foreclosure sale or on the date on which the General Counsel designates
the foreclosure commissioner.
(b) Terms which the Secretary may find appropriate to require
pursuant to section 367(b) of the Act (12 U.S.C. 3706(b)), and such
other provisions of law as may be applicable, may include provisions
relating to use and ownership of the project property, tenant admission
standards and procedures, rent schedules and increases, and project
operation and maintenance. In determining terms which may be
appropriate to require, the Secretary shall consider:
(1) The history of the project, including the purposes of the
program under which the mortgage insurance or assistance was provided,
and any other program of HUD under which the project was developed or
otherwise assisted and the probable causes of project failure resulting
in its default;
(2) A financial analysis of the project, including an appraisal of
the fair market value of the property for its highest and best use;
(3) A physical analysis of the project, including the condition of
the structure and grounds, the need for rehabilitation or repairs, and
the estimated costs of any such rehabilitation or repairs;
(4) The income levels of the occupants of the project;
(5) Characteristics, including rental levels, of comparable housing
in the area, with particular reference to whether current conditions
and discernible trends in the area fairly indicate a likelihood that,
for the foreseeable future after foreclosure and sale, the project will
continue to provide rental or cooperative housing and market rentals
obtainable in the project will be affordable by low- or moderate-income
persons;
(6) The availability of or need for rental housing for low- and
moderate-income persons in the area, including actions being taken or
projected to be taken to address such needs and the impact of such
actions on the project;
(7) An assessment of the number of occupants who might be displaced
as a result of the manner of disposition;
(8) The eligibility of the occupants of the property for rental
assistance under any program administered by HUD and the availability
of funding for such assistance if necessary in order that the units
occupied by such occupants will remain available to and affordable by
such persons, or if necessary in order to assure the financial
feasibility of the project after foreclosure and sale subject to the
terms to be required by the Secretary; and
(9) Such other factors relating to the project as the Secretary
shall consider appropriate.
(c) Terms which the Secretary may require to be agreed to by the
purchaser pursuant to section 367(b) of the Act (12 U.S.C. 3706(b))
shall generally not be more restrictive, or binding for a longer
duration, than the terms by which the mortgagor was bound prior to the
foreclosure. For example: If the mortgage being foreclosed was held by
the Secretary under section 312 of the Housing Act of 1964 (42 U.S.C.
1452b), any terms required by the Secretary pursuant to this section
shall be in effect no longer than five years after the completion of
the rehabilitation work funded by the section 312 loan. No terms shall
be required pursuant to this section if the foreclosure sale occurs
more than five years after the completion of such rehabilitation work
(signified by the due date for commencement of amortization payments in
the section 312 loan note).
(d) The limitation contained in paragraph (c) of this section
applies only to such terms as the Secretary may require the purchaser
to agree to, as a condition and term of the sale, under paragraph (a)
of this section. Nothing contained in paragraph (c) of this section
shall prevent the Secretary and the purchaser from entering into a
subsidy agreement under any program administered by the Secretary
containing terms binding upon either party which are longer in duration
than would be permitted to be required by paragraph (c) of this
section.
(e) Any terms required by the Secretary to be agreed to by the
purchaser as a condition and term of sale under this section and
section 367(b) of the Act (12 U.S.C. 3706(b)) shall be embodied in a
use agreement to be executed by the Secretary and the purchaser. Such
terms also may be included, or referred to, in appropriate covenants
contained in the deed to be delivered by the foreclosure commissioner
under Sec. 27.45. Terms required by the Secretary pursuant to this
section shall be stated or described in the Notice of Default and
Foreclosure Sale under Sec. 27.15.
Sec. 27.25 Termination or adjournment of foreclosure sale.
(a) Before withdrawing the security property from foreclosure under
section 369A(a) of the Act (12 U.S.C. 3709(a)), the commissioner shall
notify the Secretary of the proposed withdrawal by telephone or
telegram and shall provide the Secretary with a written statement of
[[Page 48550]]
the reasons for the proposed withdrawal along with all documents
submitted by the mortgagor in support of the proposed withdrawal. Upon
receipt of this statement, the Secretary shall have 10 days within
which to demonstrate orally or in writing why the security property
should not be withdrawn from foreclosure. The Secretary shall provide
the mortgagor with a copy of any statement prepared by the Secretary in
opposition to the proposed withdrawal at the same time the statement is
submitted to the commissioner. If the Secretary receives the
commissioner's written statement less than 10 days before the scheduled
foreclosure sale, the sale shall automatically be postponed for 14
days. Under these circumstances, notice of the rescheduled sale shall
be served as described in section 369B(c) of the Act (12 U.S.C.
3710(c)).
(b) The commissioner may not withdraw the security property from
foreclosure under section 369A(a) of the Act (12 U.S.C. 3709(a)) more
than once unless the Secretary consents in writing to such withdrawal.
(c) The commissioner shall, in the case of a sale adjourned to a
later date, mail a copy of the revised Notice of Default and
Foreclosure Sale to the Secretary at least seven days before the date
to which the sale has been adjourned.
(d) If upon application by the mortgagor, the commissioner refuses
to withdraw the property from foreclosure under section 369A(a) of the
Act (12 U.S.C. 3709(a)), the commissioner shall provide the mortgagor
and the Secretary with a written statement of the reasons for the
refusal.
Sec. 27.30 Conduct of the sale.
(a) The commissioner shall accept written one-price sealed bids
from any party including the Secretary so long as those bids conform to
the requirements described in the Notice of Default and Foreclosure
Sale. The commissioner shall announce the name of each such bidder and
the amount of the bid. The commissioner shall accept oral bids from any
party, including parties who submitted one-price sealed bids, if those
oral bids conform to the requirements described in the Notice of
Default and Foreclosure Sale. The commissioner will announce the amount
of the high bid and the name of the successful bidder before the close
of the sale.
(b) Relatives of the commissioner who may not bid at the
foreclosure sale include parents, siblings, spouses and children.
Related business entities which may not bid include entities or
concerns whose relationship with the commissioner at the time the
commissioner is designated is such that, directly or indirectly, one
concern or individual formulates, directs, or controls the other
concern; or has the power to formulate, direct, or control the other
concern; or has the responsibility and authority either to prevent in
the first instance, or promptly to correct, the offensive conduct of
the other concern. Business concerns are also affiliates of each other
when a third party is similarly situated with respect to both concerns.
(c) If the commissioner employs an auctioneer to conduct the
foreclosure sale, the auctioneer must be a licensed auctioneer, an
officer of State or local government, or any other person who commonly
conducts foreclosure sales in the area in which the security property
is located.
Sec. 27.35 Foreclosure costs.
Pursuant to section 369C(5) of the Act (12 U.S.C. 3711(5)), a
commission to the foreclosure commissioner for the conduct of the
foreclosure will be paid in an amount to be determined by the General
Counsel. A commission may be allowed to the commissioner
notwithstanding termination of the sale or appointment of a substitute
commissioner before the sale takes place.
Sec. 27.40 Disposition of sale proceeds.
(a) The priority of the Secretary's lien shall be determined by the
Federal first-in-time first-in-right rule. State laws affording
priority to liens recorded after the mortgage are preempted.
(b) If there is more than one party holding a lien or assessment
payable from sales proceeds, the claim of each party holding the same
kind of lien or assessment will be given the relative priority to which
it would be entitled under the law of the State in which the security
property is located.
(c) The commissioner will keep such records as will permit the
Secretary to verify the costs claimed under section 369C of the Act (12
U.S.C. 3711), and otherwise to audit the commissioner's disposition of
the sale proceeds.
Sec. 27.45 Transfer of title and possession.
(a) If the Secretary is the successful bidder, the foreclosure
commissioner shall issue a deed to the Secretary upon receipt of the
amount needed to pay the costs listed in sections 369D (1) through (3)
of the Act (12 U.S.C. 3712(1) through (3)). If the Secretary is not the
successful bidder, the foreclosure commissioner shall issue a deed to
the purchaser upon receipt of the entire purchase price and execution
by the Secretary and the purchaser of any use agreement referred to in
Sec. 27.20(e). Any covenants reflecting terms required by Sec. 27.20
shall be contained in the commissioner's deed.
(b) Subject to any terms required to be agreed to by Sec. 27.20,
any commercial tenant and any residential tenant remaining in
possession after the expiration of his or her lease or after the
passage of one year, whichever event occurs first, shall be deemed a
tenant at sufferance and may be evicted in accordance with applicable
State or local law.
Sec. 27.50 Management and disposition by the Secretary.
When the Secretary is the purchaser of the security property, the
Secretary shall manage and dispose of it in accordance with section 203
of the Housing and Community Development Amendments of 1978, as
amended, 12 U.S.C. 1701z-11, and in accordance with 24 CFR part 290.
Subpart B--Nonjudicial Foreclosure of Single Family Mortgages
Sec. 27.100 Purpose, Scope and Applicability.
(a) Purpose. The purpose of this subpart is to implement
requirements for the administration of the Single Family Mortgage
Foreclosure Act of 1994 (the Statute), 12 U.S.C. 3751-3768, that
clarify, or are in addition to, the requirements contained in the
Statute, which are not republished here and must be consulted in
conjunction with the requirements of this subpart.
(b) Scope. The Secretary may foreclose on any defaulted single
family mortgage described in the Statute regardless of when the
mortgage was executed.
(c) Applicability. The Secretary may, at the Secretary's option,
use other procedures to foreclose defaulted single family mortgages,
including judicial foreclosure in State or Federal Court, and
nonjudicial foreclosures under State law or any other Federal law. This
subpart applies only to foreclosure procedures authorized by the
Statute and not to any other foreclosure procedures the Secretary may
use.
Sec. 27.101 Definitions.
The definitions contained in the Statute (at 12 U.S.C. 3752) shall
apply to this subpart, in addition to and as further clarified by the
following definitions. As used in this subpart:
County means a political subdivision of a State or Territory of the
United States, created to aid in the administration of State law for
the purpose of local self government, and
[[Page 48551]]
includes a parish or any other equivalent subdivision.
Mortgage is as defined in the Statute except that the reference to
property as ``(real, personal or mixed)'' means ``any property (real or
mixed real and personal).''
Mortgage agreement is as defined in the Statute, and also means any
other similar instrument or instruments creating the security interest
in the real estate for the repayment of the note or debt instrument.
Mortgagor is as defined in the Statute, except that the reference
to ``trustee'' means ``trustor.''
Record; Recorded means to enter or entered in public land record
systems established under State statutes for the purpose of imparting
constructive notice to purchasers of real property for value and
without knowledge, and includes ``register'' and ``registered'' in the
instance of registered land, and ``file'' and its variants in the
context of entering documents in public land records.
Secretary means the Secretary of Housing and Urban Development,
acting by and through any authorized designee exclusive of the
foreclosure commissioner.
Security Property is as defined in the statute except that the
reference to property as ``(real, personal or mixed)'' means ``any
property (real or mixed real and personal).''
Sec. 29.102 Designation of foreclosure commissioner and substitute
commissioner.
(a) The Secretary may designate foreclosure commissioners,
including substitute commissioners, as set forth in the Statute.
(b) The method of selection and determination of the qualifications
of the foreclosure commissioner shall be at the discretion of the
Secretary. The execution of a designation pursuant to this section
shall be conclusive evidence that the commissioner selected has been
determined to be qualified by the Secretary. The designation is
effective upon execution.
Sec. 27.103 Notice of default and foreclosure sale.
(a) The foreclosure commissioner shall commence the foreclosure
under the procedures set forth in the Statute.
(b) The Notice of Default and Foreclosure Sale (Notice) shall
include, in addition to the provisions as required by the Statute:
(1) The foreclosure commissioner's telephone number;
(2) A description of the security property sufficient to identify
the property to be sold;
(3) The date the mortgage was recorded;
(4) Identification of the failure to make payment, including the
entire amount delinquent as of a date specified, a statement generally
describing the other costs that must be paid if the mortgage is to be
reinstated, the due date of the earliest principal installment payment
remaining wholly unpaid as of the date on which the notice is issued
upon which the foreclosure is based, or a description of any other
default or defaults upon which foreclosure is based, and the
acceleration of the secured indebtedness; and
(5) The bidding and payment requirements for the foreclosure sale,
including the time and method of payment of the balance of the
foreclosure purchase price, that all deposits and the balance of the
purchase price shall be paid by certified or cashier's check, and that
no deposit will be required of the Secretary when the Secretary bids at
the foreclosure sale.
Sec. 27.105 Service of Notice of Default and Foreclosure Sale.
(a) The Notice of Default and Foreclosure Sale shall be served in
accordance with the provisions of the Statute. When notice is sent by
mail, multiple mailings are not required to be sent to any party with
multiple capacities, e.g., an original mortgagor who is the security
property owner and lives in one of the units. The date of the receipt
for the postage paid for the mailing may serve as proof of the date of
mailing of the notice.
(b) Notice need not be mailed to any mortgagors who have been
released from all obligations under the mortgage.
Sec. 27.107 Presale reinstatement.
(a) The foreclosure commissioner shall withdraw the security
property from foreclosure and cancel the foreclosure sale only in
accordance with the provisions of the Statute and as more fully
provided in paragraphs (b) and (c) of this section in regard to presale
reinstatements.
(b) To obtain a presale reinstatement in cases involving a monetary
default, there must be tendered to the foreclosure commissioner before
public auction is completed all amounts which would be due under the
mortgage agreement if payments under the mortgage had not been
accelerated and all costs of foreclosure incurred for which payment
from the proceeds of foreclosure is provided in the Statute, and the
foreclosure commissioner must find that there are no nonmonetary
defaults; provided, however, that the Secretary may refuse to cancel a
foreclosure sale pursuant to this subparagraph if the current mortgagor
or owner of record has, on one or more previous occasions, caused a
foreclosure of the mortgage, commenced pursuant to the Statute and this
subpart or otherwise, to be canceled by curing a default.
(c) To obtain a presale reinstatement in cases involving a
nonmonetary default:
(1) The foreclosure commissioner, upon application of the mortgagor
before the date of foreclosure sale, must find that all nonmonetary
defaults are cured and that there are no monetary defaults; and
(2) There must be tendered to the foreclosure commissioner before
public auction is completed all amounts due under the mortgage
agreement (excluding all amounts which would be due under the mortgage
agreement if the mortgage payments had been accelerated), including all
amounts of expenditures secured by the mortgage and all costs of
foreclosure incurred for which payment would be made from the proceeds
of foreclosure as provided in the Statute.
(d) Before withdrawing the security property from foreclosure, the
foreclosure commissioner shall notify the Secretary of the proposed
withdrawal by telephone or other telecommunication device and shall
also provide the Secretary with a written statement of the reasons for
the proposed withdrawal along with all documents submitted by the
mortgagor in support of the proposed withdrawal. Upon receipt of this
statement, the Secretary shall have ten (10) days in which to
demonstrate why the security property should not be withdrawn from
foreclosure, and if the Secretary makes this demonstration, the
property shall not be withdrawn from foreclosure. The Secretary shall
provide the mortgagor with a copy of any statement prepared by the
Secretary in opposition to the proposed withdrawal at the same time the
statement is submitted to the foreclosure commissioner. If the
Secretary receives the foreclosure commissioner's written statement
less than 10 days before the scheduled foreclosure sale, the sale shall
automatically be adjourned for 14 days, during which time it may be
cancelled. Notice of the re-scheduled sale, if any, shall be served as
described in Sec. 27.111.
Sec. 27.109 Conduct of sale.
(a) The foreclosure sale shall be conducted in a manner and at a
time and place as identified in the Notice of Default and Foreclosure
Sale and in
[[Page 48552]]
accordance with the provisions of the Statute.
(b) In addition to bids made in person at the sale, the foreclosure
commissioner shall accept written one-price sealed bids from any party,
including the Secretary, for entry by announcement at the sale so long
as those bids conform to the requirements described in the Notice of
Default and Foreclosure Sale. The foreclosure commissioner shall
announce the name of each such bidder and the amount of the bid. The
commissioner shall accept oral bids from any party, including parties
who submitted one-price sealed bids, if those oral bids conform to the
requirements in the Notice of Default and Foreclosure Sale. Before the
close of the sale the commissioner shall announce the amount of the
high bid and the name of the successful bidder. If the successful
bidder fails to comply with the terms of the sale, the HUD Field Office
representative will provide instructions to the commissioner about
offering the property to the second highest bidder, or having a new
sale, or other instruction at the discretion of the HUD representative.
(c) Prohibited participants. Relatives of the foreclosure
commissioner who may not bid include parents, siblings, spouses and
children. A related business entity that may not bid or whose employees
may not bid is one whose relationship (at the time the foreclosure
commissioner is designated and during the term of service as
foreclosure commissioner) with the entity of the foreclosure
commissioner is such that, directly or indirectly, one entity
formulates, directs, or controls the other entity; or has the power to
formulate, direct, or control the other entity; or has the
responsibility and authority to prevent, or promptly to correct, the
offensive conduct of the other entity.
(d) Auctioneers. If the commissioner employs an auctioneer to
conduct the foreclosure sale, the auctioneer must be a licensed
auctioneer, an officer of State or local government, or any other
person who commonly conducts foreclosure sales in the area in which the
security property is located.
Sec. 27.111 Adjournment or cancellation of sale.
(a) The foreclosure commissioner may, before or at the time of the
foreclosure sale, adjourn or cancel the foreclosure sale in accordance
with the provisions of the Statute. The publication of the Notice of
Default and Foreclosure Sale, revised pursuant to the Statute, may be
made on any of three separate days before the revised date of
foreclosure sale. If there is no newspaper of general circulation that
would permit publication on any of three separate days before the
revised date of foreclosure sale, the Notice of Default and Foreclosure
Sale must be posted, not less than nine days before the date to which
the sale has been adjourned, at the courthouse of any county or
counties in which the property is located, and at the place where the
sale is to be held. The commissioner must also, in the case of a sale
adjourned to a later date, mail a copy of the revised Notice of Default
and Foreclosure Sale to the Secretary at least seven days before the
date to which the sale has been adjourned.
(b) When a substitute commissioner is designated by the Secretary
to replace a previously designated foreclosure commissioner, the sale
shall continue without prejudice unless the substitute commissioner
finds, in that commissioner's sole discretion, that continuation of the
foreclosure sale will unfairly affect the interests of the mortgagor.
Any such finding shall be in writing. If the substitute commissioner
makes such a finding, the substitute commissioner shall cancel or
adjourn the sale.
Sec. 27.113 Foreclosure costs.
A commission may be allowed to the foreclosure commissioner
notwithstanding termination of the sale or appointment of a substitute
commissioner before the sale takes place.
Sec. 27.115 Disposition of sales proceeds.
The foreclosure commissioner will keep such records as will permit
the Secretary to verify the costs claimed, and otherwise to enable the
Secretary to audit the foreclosure commissioner's disposition of the
sale proceeds.
Sec. 27.117 Transfer of title and possession.
(a) If the Secretary is the successful bidder, the foreclosure
commissioner shall issue a deed to the Secretary upon receipt of the
amount needed to pay the costs of tax liens and prior liens, as set
forth in 12 U.S.C. 3762(a)(2) and (a)(3). If the Secretary is not the
successful bidder, the foreclosure commissioner shall issue a deed to
the purchaser or purchasers upon receipt of the entire purchase price
in accordance with the terms of the sale as provided in the Notice of
Default and Foreclosure Sale.
(b) The register of deeds or other appropriate official in the
county where the property is located shall, upon tendering of the
customary recording fees, accept all instruments pertaining to the
foreclosure which are submitted by the foreclosure commissioner for
recordation. The instruments to be accepted shall include, but not be
limited to, the foreclosure commissioner's deed. If the foreclosure
commissioner elects to include the recitations required under the
Statute (12 U.S.C. 3764) in an affidavit or an addendum to the deed,
the affidavit or addendum shall be accepted along with the deed for
recordation. The Clerk of the Court or other appropriate official shall
cancel all liens as requested by the foreclosure commissioner.
Sec. 27.119 Redemption rights.
Only for purposes of redemption rights under the Statute, a
foreclosure shall be considered completed upon the date and at the time
of the foreclosure sale.
Sec. 27.121 Record of foreclosure and sale.
The statements regarding the foreclosed mortgage required to
establish a sufficient record shall include the date the mortgage was
recorded. The statements regarding the service of the Notice of Default
and Foreclosure Sale shall include the names and addresses of the
persons to whom the Notice was mailed and the date on which the Notice
was mailed, the name of the newspaper in which the Notice was published
and the dates of publication, and the date on which service by posting,
if required, was accomplished.
Sec. 27.123 Deficiency judgment.
If the price at which the security property is sold at the
foreclosure sale is less than the unpaid balance of the debt secured by
such property after disposition of sale proceeds in accordance with the
order of priority provided under the Statute, the Secretary may refer
the matter to the Attorney General who may commence an action or
actions against any and all debtors to recover the deficiency, unless
such an action is specifically prohibited by the mortgage.
PART 29--[REMOVED]
2. Part 29 is removed.
Dated: August 28, 1996.
Henry G. Cisneros,
Secretary.
Note: The following appendices A and B will not be codified in
title 24 of the Code of Federal Regulations.
Appendix A: Nonjudicial Foreclosure of Multifamily Mortgages--Guide
Sec.
1. Purpose.
2. Scope and applicability.
3. Definitions.
[[Page 48553]]
4. Prerequisites to foreclosure.
5. Designation of a foreclosure commissioner.
6. Notice of default and foreclosure sale.
7. Conditions of foreclosure sale.
8. Termination or adjournment of foreclosure sale.
9. Conduct of the sale.
10. Foreclosure costs.
11. Disposition of sale proceeds.
12. Transfer of title and possession.
13. Redemption rights.
14. Record of foreclosure and sale.
15. Management and disposition by the Secretary.
16. Computation of time.
1. Purpose
The purpose of this guide is to present, in a single document,
the statutory and regulatory requirements of the Multifamily
Mortgage Foreclosure Act of 1981 (the Act) (12 U.S.C. 3701-3717).
Although it presents the regulatory and statutory requirements in a
combined format, this guide is a secondary source for these
requirements. The Code of Federal Regulations (CFR), at 24 CFR part
27, subpart A, is the primary, governing source for regulatory
requirements, and the Act is the primary, governing source for
statutory requirements. Any reference in this Guide to the
provisions of the Act includes the requirements of 24 CFR part 27,
subpart A.
The Act creates a uniform Federal remedy for foreclosure of
multifamily mortgages. Under a delegation of authority published on
February 5, 1982 (47 FR 5468), the Secretary has delegated to the
HUD General Counsel his powers under the Act to appoint a
foreclosure commissioner or commissioners and to substitute
therefor, to fix the compensation of commissioners, and to
promulgate implementing regulations.
2. Scope and Applicability
(a) Under the Act, the Secretary may foreclose on any defaulted
Secretary-held multifamily mortgage encumbering real estate in any
State, regardless of when the mortgage was executed.
(b) The Secretary may, at the Secretary's option, use other
procedures to foreclose defaulted multifamily mortgages, including
judicial foreclosure in Federal court and nonjudicial foreclosure
under State law. The requirements described in this Guide apply only
to foreclosure procedures authorized by the Act and not to any other
foreclosure procedures the Secretary may use.
3. Definitions
As used in this Guide:
County means county as defined in section 2 of title I, United
States Code.
General Counsel means the General Counsel of the Department of
Housing and Urban Development.
Mortgage means a deed of trust, mortgage, deed to secure debt,
security agreement, or any other form of instrument under which any
interest in property, real, personal or mixed, or any interest in
property including leaseholds, life estates, reversionary interests,
and any other estates under applicable State law, is conveyed in
trust, mortgaged, encumbered, pledged, or otherwise rendered subject
to a lien, for the purpose of securing the payment of money or the
performance of an obligation.
Mortgage agreement means the note or debt instrument and the
mortgage instrument, deed of trust instrument, trust deed, or
instrument or instruments creating the mortgage, including any
instruments incorporated by reference therein (including any
applicable regulatory agreement), and any instrument or agreement
amending or modifying any of the foregoing.
Mortgagor means the obligor, grantor, or trustor named in the
mortgage agreement and, unless the context otherwise indicates,
includes the current owner of record of the security property
whether or not personally liable on the mortgage debt.
Multifamily mortgage means a mortgage held by the Secretary,
covering any property pursuant to:
(1) Section 608 of the National Housing Act (12 U.S.C. 1743);
(2) Section 801 of the National Housing Act (12 U.S.C. 1748);
(3) Title II of the National Housing Act (12 U.S.C. 1707-1715z-
20);
(4) Title X of the National Housing Act (12 U.S.C. 1749aa);
(5) Section 312 of the Housing Act of 1964, as it existed
immediately before its repeal by section 289 of the Cranston-
Gonzalez National Affordable Housing Act (42 U.S.C. 1452b);
(6) Section 202 of the Housing Act of 1959, as it existed
immediately before its amendment by section 801 of the Cranston-
Gonzalez National Affordable Housing Act (12 U.S.C. 1701q);
(7) Section 202 of the Housing Act of 1959, as amended by
section 801 of the Cranston-Gonzalez National Affordable Housing Act
(12 U.S.C. 1701q); and
(8) Section 811 of the Cranston-Gonzalez National Affordable
Housing Act (42 U.S.C. 8013).
Multifamily mortgage does not include a property on which there
is located a one- to four-family residence, except when the one- to
four-family residence is subject to a mortgage pursuant to section
202 of the Housing Act of 1959, or section 811 of the National
Affordable Housing Act. The definition of multifamily mortgage also
includes a mortgage taken by the Secretary in connection with the
previous sale of the project by the Secretary (purchase money
mortgage).
Person includes any individual, group of individuals,
association, partnership, corporation, or organization.
Record and recorded include register and registered in the
instance of registered land.
Secretary means the Secretary of Housing and Urban Development.
Security property means the property, real, personal or mixed,
or an interest in property, including leaseholds, life estates,
reversionary interest and any other estates under applicable State
law, together with fixtures and other interests subject to the lien
of the mortgage under applicable State law.
State means the several States, the District of Columbia, the
Commonwealth of Puerto Rico, the territories and possessions of the
United States, and the Trust Territory of the Pacific Islands, and
Indian tribes as defined by the Secretary.
4. Prerequisites to Foreclosure
(a) The Secretary may commence foreclosure under the Act upon
the breach of a covenant or condition in the mortgage agreement for
which foreclosure is authorized under the mortgage. No such
foreclosure may be commenced unless any previously pending
proceeding, judicial or nonjudicial, separately instituted by the
Secretary to foreclose the mortgage in a manner other than under the
Act, has been withdrawn, dismissed or otherwise terminated. The
Secretary shall not institute any separate foreclosure proceedings,
judicial or nonjudicial, during the pendency of a foreclosure
pursuant to the Act. Nothing in the Act shall preclude the Secretary
from enforcing any right, other than foreclosure, under applicable
State law, including any right to obtain a monetary judgment.
Nothing in the Act shall preclude the Secretary from foreclosing
under the Act where the Secretary has obtained or is seeking any
other remedy available pursuant to Federal or State Law or under the
mortgage agreement, including, but not limited to the appointment of
a receiver; mortgagee-in-possession status; relief under an
assignment of rents; or transfer to a nonprofit entity in accordance
with section 202 of the Housing Act of 1959 (as amended by section
801 of the Cranston-Gonzalez National Affordable Housing Act), or
section 811 of the Cranston-Gonzalez National Affordable Housing
Act.
(b) Before commencement of a foreclosure under the Act, HUD will
provide to the mortgagor an opportunity informally to present
reasons why the mortgage should not be foreclosed. Such opportunity
may be provided before or after the designation of the foreclosure
commissioner but before service of the notice of default and
foreclosure.
5. Designation of a Foreclosure Commissioner
(a) When the Secretary determines that a multifamily mortgage
should be foreclosed under the Act, the General Counsel will select
and designate a foreclosure commissioner to conduct the foreclosure
and sale. In order to conduct the foreclosure, the foreclosure
commissioner has a nonjudicial power of sale. The commissioner, if a
natural person, shall be a resident of the State in which the
security property is located. If a natural person is designated as
commissioner, he or she shall be designated by name, except if the
commissioner is designated in his or her capacity as an official or
employee of the State or local government where the security
property is located, the designation may be made by title or
position instead of by name. If not a natural person, the
commissioner must be duly authorized to transact business under the
laws of the State in which the security property is located. The
commissioner shall be a person who is determined by the General
Counsel to be responsible, financially sound, and competent to
conduct the foreclosure. The foreclosure commissioner may be an
individual, group of individuals, association, partnership,
corporation or organization. The method of selection and
determination of the
[[Page 48554]]
qualifications of the foreclosure commissioner shall be at the
discretion of the General Counsel, and the execution of a
designation pursuant to paragraph (b) of this section shall be
conclusive evidence that the commissioner selected has been
determined to be qualified by the General Counsel.
(b) After selection of a foreclosure commissioner, the General
Counsel shall designate the commissioner in writing to conduct the
foreclosure and sale of the particular multifamily mortgage. The
written designation shall be duly acknowledged and shall state the
name and business or residential address of the commissioner and any
other information the General Counsel deems necessary. The
designation shall be effective upon execution by the General Counsel
or his designate. Upon receipt of the designation, the commissioner
shall demonstrate acceptance by signing the designation and
returning a signed copy to the General Counsel.
(c) The General Counsel may designate more than one commissioner
to foreclose a multifamily mortgage.
(d) The General Counsel may at any time, with or without cause,
designate a substitute commissioner to replace a previously
designated commissioner. Designation of a substitute commissioner
shall be in writing and shall contain the same information and be
made effective in the same manner as the designation of the original
commissioner. Upon designation of a substitute commissioner, the
substitute commissioner shall serve a copy of the written notice of
designation upon the persons listed at sections 6.(c) (1) through
(3) of this Guide either by mail, in accordance with section 6.(c)
of this Guide, except that the time limitations in that section will
not apply, or by any other manner which in the substitute
commissioner's discretion is conducive to giving timely notice of
substitution.
(e) The Secretary shall be the guarantor of payment of any
judgment against the foreclosure commissioner for damages based on
the commissioner's failure properly to perform the commissioner's
duties. As between the Secretary and the mortgagor, the Secretary
shall bear the risk of any financial default by the foreclosure
commissioner. In the event that the Secretary makes any payment
pursuant to this paragraph, the Secretary shall be fully subrogated
to the rights satisfied by such payment.
6. Notice of Default and Foreclosure Sale
(a) Within 45 days after accepting his or her designation to act
as commissioner, the commissioner shall commence the foreclosure by
serving a Notice of Default and Foreclosure Sale.
(b) The Notice of Default and Foreclosure Sale shall contain the
following information which, except for paragraphs (b) (2) and (9)
of this section, will be supplied to the commissioner by the
Secretary.
(1) Name and address of the foreclosure commissioner.
(2) Date of the Notice.
(3) Names of the Secretary, the original mortgagor and the
original mortgagee.
(4) A description of the location of the security property, or
portion thereof to be sold, which is sufficient to identify it
including, if appropriate, the street address.
(5) The date of the mortgage.
(6) The name of the office or offices in which the mortgage is
recorded.
(7) The book and page in which the mortgage was recorded or, if
appropriate, the mortgage's document or accession number.
(8) A description of the mortgagor's failure to make payment,
including the due date of the earliest installment payment remaining
wholly unpaid as of the date of the Notice or, if appropriate, of
the other default or defaults upon which foreclosure is based; and a
statement that the secured debt has been accelerated.
(9) The date, exact time and place of the foreclosure sale. The
sale shall not be scheduled for a date less than 30 days after the
due date of the earliest unpaid installment or the earliest
occurrence of a nonmonetary default. The sale must be scheduled to
begin at a time between the hours of 9:00 a.m. and 4:00 p.m. local
time on a day other than Sunday or a public holiday as defined by 5
U.S.C. 6103(a) or State law. The sale must be scheduled for (i) a
place where real estate foreclosure auctions are customarily held in
the county or one of the counties in which the property to be sold
is located, or (ii) a courthouse in such a county, or (iii) a site
at or on the property to be sold. Sale of property located in more
than one county may be held in any one of the counties in which any
part of the security property is situated.
(10) A statement that the foreclosure is being conducted in
accordance with the Act.
(11) The costs, if any, to be paid by the purchaser upon
transfer of title.
(12) The bidding and payment requirements for the foreclosure
sale, including the required deposit, the method of deposit, and the
time and method of payment for the balance of the purchase price.
The Notice shall state that all deposits and the balance of the
purchase price shall be paid by certified or cashier's check. The
Notice shall state that no deposit will be required of the Secretary
when the Secretary bids at the foreclosure sale.
(13) Any terms and conditions to which the purchaser at the
foreclosure sale must agree, as listed in section 7 of this Guide.
The Notice need not describe at length each and every pertinent term
and condition, including any required use agreements and deed
covenants, if it describes these terms and conditions in a general
way and if it states that the precise terms will be available from
the commissioner upon request.
(c) The commissioner shall serve the Notice of Default and
Foreclosure Sale upon the following persons in the following manner,
and no additional notice shall be required to be served
notwithstanding any notice requirements of State or local law:
(1) By certified or registered mail, return receipt requested,
sent, at least 21 days before the original scheduled date of the
foreclosure sale, to the owner of record of the security property as
of 45 days before the original scheduled date of the foreclosure
sale. The Notice shall be mailed to the owner at the address shown
in the mortgage or to the address of the security property, or, in
the commissioner's discretion, to any address believed to be that of
the owner; and
(2) By certified or registered mail, return receipt requested,
sent, at least 21 days before the original scheduled date of the
foreclosure sale, to the original mortgagor and all subsequent
mortgagors of record and all other persons who appear on the public
record or in the mortgage agreement to be liable for all or part of
the mortgage debt. The Notice need not be mailed to mortgagors who
have been released from all obligations under the mortgage. The
Notice shall be mailed to the mortgagor at the address shown in the
mortgage, or to the address of the property, or, in the
commissioner's discretion, to any address believed to be that of the
mortgagor or mortgagors; and
(3) By certified or registered mail, return receipt requested,
sent, at least 10 days before the original scheduled date of the
foreclosure sale, to all persons having liens of record on the
security property which were placed on record at least 45 days
before the scheduled foreclosure sale. The Notice shall be mailed to
lien holders at their address of record, or to any address the
commissioner believes to be that of the lien holder; and
(4) By publication of a copy of the Notice of Default and
Foreclosure Sale once a week during three successive calendar weeks
in a newspaper of general circulation in the county or counties in
which the security property is located. To the extent practicable,
the newspaper or newspapers chosen shall have circulation which is
conducive to achieving notice of foreclosure by publication. In
deciding which newspaper or newspapers have such circulation, the
commissioner need not select the newspaper with the largest
circulation. The date of the last publication shall be not less than
four nor more than twelve days before the sale date. If there is no
newspaper of general circulation in the county or counties in which
the security property is located, service shall be made by posting
the Notice of Default and Foreclosure Sale in at least three public
places in each such county at least 21 days prior to the date of
sale. The Notice of Default and Foreclosure Sale which is published
pursuant to this paragraph may omit a description of the default, as
otherwise required by paragraph (b)(8) of this section, if the
commissioner, in his or her discretion, so determines; and
(5) By posting a copy of the Notice of Default and Foreclosure
Sale in a prominent place at or near the security property for at
least 15 consecutive days before the foreclosure sale. If the
property to be sold consists of two or more noncontiguous parcels of
land, a copy of the Notice shall be posted in a prominent place on
each such parcel. If the property consists of two or more separate
buildings, a copy of the Notice shall be posted in a prominent place
on each such building. The Notice shall also be posted in the
project office and in such other appropriate conspicuous places as
the commissioner deems appropriate for providing notice to all
tenants. Posting shall not be required if the commissioner in his or
her discretion finds that the act of posting is likely to lead to a
breach of the peace or may result in the increased risk of vandalism
or
[[Page 48555]]
damage to the property. Any such finding will be made in writing.
Entry on the premises by the commissioner for the purpose of posting
shall be privileged as against all other persons.
(d) Service made under paragraphs (c) (1), (2), and (3) of this
section is deemed to have been made upon mailing, whether or not the
Notice was received and whether or not a return receipt is received
or the letter containing the Notice is returned.
(e) When service of the Notice of Default and Foreclosure Sale
is made pursuant to paragraph (c) (1), (2), or (3) of this section,
the commissioner shall at the same time and in the same manner serve
a copy of the instrument by which the General Counsel, under section
5(b) of this Guide, has designated him or her to act as
commissioner.
(f) At least 7 days before the foreclosure sale, the
commissioner will record both the instrument designating him or her
to act as commissioner and the Notice of Default and Foreclosure
Sale in the same office or offices in which the mortgage was
recorded.
7. Conditions of Foreclosure Sale
(a) If a majority of the residential units in a property subject
to foreclosure sale pursuant to the Act are occupied by residential
tenants either on the date of the foreclosure sale or on the date on
which the General Counsel designates the foreclosure commissioner,
the Secretary shall require, as a condition and term of the sale,
that the purchaser at a foreclosure sale (other than the Secretary)
agree to continue to operate the project in accordance with the
terms of the program under which the mortgage insurance or
assistance was provided, or any applicable regulatory or other
agreement in effect with respect to such property immediately prior
to the time of foreclosure sale as the Secretary shall find
appropriate. If a majority of the residential units are not so
occupied, at either such time, the Secretary, in his or her
discretion, may require as a condition and term of the sale, that
the purchaser (other than the Secretary) agree to continue to
operate the property in accordance with such terms described above
as the Secretary shall find appropriate.
(b) Terms which the Secretary may find appropriate to require
pursuant to the Act and such other provisions of law as may be
applicable may include provisions relating to use and ownership of
the project property, tenant admission standards and procedures,
rent schedules and increases, and project operation and maintenance.
In determining terms which may be appropriate to require, the
Secretary shall consider:
(1) The history of the project, including the purposes of the
program under which the mortgage insurance or assistance was
provided, and any other program of HUD under which the project was
developed or otherwise assisted and the probable causes of project
failure resulting in its default;
(2) A financial analysis of the project, including an appraisal
of the fair market value of the property for its highest and best
use;
(3) A physical analysis of the project, including the condition
of the structure and grounds, the need for rehabilitation or
repairs, and the estimated costs of any such rehabilitation or
repairs;
(4) The income levels of the occupants of the project;
(5) Characteristics, including rental levels, of comparable
housing in the area, with particular reference to whether current
conditions and discernible trends in the area fairly indicate a
likelihood that, for the foreseeable future after foreclosure and
sale, the project will continue to provide rental or cooperative
housing and market rentals obtainable in the project will be
affordable by low- or moderate-income persons;
(6) The availability of or need for rental housing for low- and
moderate-income persons in the area, including actions being taken
or projected to be taken to address such needs and the impact of
such actions on the project;
(7) An assessment of the number of occupants who might be
displaced as a result of the manner of disposition;
(8) The eligibility of the occupants of the property for rental
assistance under any program administered by HUD and the
availability of funding for such assistance if necessary in order
that the units occupied by such occupants will remain available to
and affordable by such persons, or if necessary in order to assure
the financial feasibility of the project after foreclosure and sale
subject to the terms to be required by the Secretary; and
(9) Such other factors relating to the project as the Secretary
shall consider appropriate.
(c) Terms which the Secretary may require to be agreed to by the
purchaser pursuant to the Act shall generally not be more
restrictive, or binding for a longer duration, than the terms by
which the mortgagor was bound prior to the foreclosure. For example:
(1) If the mortgage being foreclosed was previously insured by
the Secretary under section 608, or 801, or title II or X of the
National Housing Act; or assisted under section 202 of the Housing
Act of 1959, as it existed before its amendment by section 801 of
the Cranston-Gonzalez National Affordable Housing Act, any terms
required by the Secretary pursuant to the Act shall be in effect no
longer than the earliest date on which the mortgagor could have
prepaid the mortgage debt without the Secretary's consent, or the
maturity date of the mortgage, whichever is earlier. No terms shall
be required pursuant to the Act if, under the terms of the mortgage,
the mortgagor could have prepaid the mortgage debt in full without
the Secretary's consent on or before the date of the foreclosure
sale.
(2) If the mortgage being foreclosed was taken by the Secretary
in conjunction with the previous sale of the project by the
Secretary (purchase money mortgage), any terms required by the
Secretary pursuant to the Act shall be in effect no longer than the
earliest date on which the mortgagor under the Purchase Money
Mortgage could have prepaid the mortgage debt in full without the
Secretary's consent, or the maturity date of the mortgage, whichever
is earlier. No terms shall be required pursuant to the Act if the
mortgagor could have prepaid the mortgage debt in full without the
Secretary's consent on or before the date of the foreclosure sale.
(3) If the mortgage being foreclosed covers a project which is
governed by a use agreement executed under section 1(d)(1) of the
Housing and Community Development Amendments of 1978, as amended (12
U.S.C. 1715z-1a); section 202 of the Housing Act of 1959, as amended
by section 801 of the Cranston-Gonzalez National Affordable Housing
Act (12 U.S.C. 1701q); section 811 of the Cranston-Gonzalez National
Affordable Housing Act (42 U.S.C. 8013); or section 225(b) of the
Emergency Low Income Housing Preservation Act of 1987 (12 U.S.C.
17151), any terms required by the Secretary under the Act shall be
in effect no longer than the maturity date of the mortgage.
(4) If the mortgage being foreclosed was held by the Secretary
under section 312 of the Housing Act of 1964, any terms required by
the Secretary pursuant to the Act shall be in effect no longer than
five years after the completion of the rehabilitation work funded by
the section 312 loan. No terms shall be required pursuant to the Act
if the foreclosure sale occurs more than five years after the
completion of such rehabilitation work.
(5) If the mortgage being foreclosed covers a project which is
governed by a use agreement executed under section 222(b) of the
Low-Income Housing Preservation and Resident Homeownership Act of
1990 (12 U.S.C. 4112), any terms required by the Secretary under the
Act shall be in effect for the remaining useful life of the project.
Remaining useful life has the same meaning given the term in Sec. 24
CFR 248.101.
(d) The limitations contained in paragraph (c) of this section
apply only to such terms as the Secretary may require the purchaser
to agree to, as a condition and term of the sale, under paragraph
(a) of this section. Nothing contained in paragraph (c) of this
section shall prevent the Secretary and the purchaser from entering
into a subsidy agreement under any program administered by the
Secretary containing terms binding upon either party which are
longer in duration than would be permitted to be required by
paragraph (c) of this section.
(e) Any terms required by the Secretary to be agreed to by the
purchaser as a condition and term of sale under the Act shall be
embodied in a use agreement to be executed by the Secretary and the
purchaser. Such terms also may be included, or referred to, in
appropriate covenants contained in the deed to be delivered by the
foreclosure commissioner as described in section 12 of this Guide.
Terms required by the Secretary shall be stated or described in the
Notice of Default and Foreclosure Sale served, published and posted
in accordance with section 6 of this Guide.
8. Termination or Adjournment of Foreclosure Sale
(a) Except as provided in paragraphs (d), (e), and (f) of this
section, the commissioner shall withdraw the security property from
foreclosure and cancel the foreclosure sale only if:
(1) The Secretary so directs the commissioner; or
(2) The commissioner finds, upon application of the mortgagor at
least three
[[Page 48556]]
business days prior to the scheduled sale, that the default or
defaults upon which the foreclosure is based did not exist when the
Notice of Default and Foreclosure Sale was served; or
(3) (i) In the case of a monetary default, the entire amount of
principal and interest which would be due if payments under the
mortgage had not been accelerated is tendered to the commissioner
before the public auction is completed, and the commissioner finds
that there are no nonmonetary defaults;
(ii) In the case of a nonmonetary default, the commissioner,
upon application of the mortgagor before the date of foreclosure
sale, finds that all nonmonetary defaults have been cured and that
there are no monetary defaults; and
(iii) There is tendered to the commissioner before public
auction is completed, all amounts due under the mortgage agreement
excluding additional amounts which would have been due if mortgage
payments had been accelerated, all expenditures secured by the
mortgage, and all foreclosure costs incurred for which payment from
foreclosure proceeds is authorized, as described in section 10 of
this Guide.
(b) Before withdrawing the security property from foreclosure as
described in paragraph (a) (2) or (3) of this section, the
commissioner shall notify the Secretary of the proposed withdrawal
by telephone or telegram and shall provide the Secretary with a
written statement of the reasons for the proposed withdrawal along
with all documents submitted by the mortgagor in support of the
proposed withdrawal. Upon receipt of this statement, the Secretary
shall have 10 days within which to demonstrate orally or in writing
why the security property should not be withdrawn from foreclosure.
The Secretary shall provide the mortgagor with a copy of any
statement prepared by the Secretary in opposition to the proposed
withdrawal at the same time the statement is submitted to the
commissioner. If the Secretary receives the commissioner's written
statement less than 10 days before the scheduled foreclosure sale,
the sale shall automatically be postponed for 14 days. Under these
circumstances, notice of the rescheduled sale shall be served as
described in paragraph (d) of this section.
(c) The commissioner may not withdraw the security property from
foreclosure as described in paragraph (a)(3) of this section more
than once unless the Secretary consents in writing to such
withdrawal.
(d) Before or at the time of sale, the foreclosure commissioner
may, in his or her discretion, determine that circumstances are not
conducive to a sale which is fair to the mortgagor and the
Secretary, or that additional time is necessary to determine if the
sale should be terminated as described in paragraph (a) (2) or (3)
of this section. If the commissioner makes such a determination, he
or she may adjourn the foreclosure to a later time on the scheduled
sale date or to a date not less than nine nor more than 24 days
later than the scheduled sale date. If the sale is adjourned to a
later hour on the scheduled sale date, no additional notice of the
sale is required. If the sale is adjourned to a later date, a
revised Notice of Default and Foreclosure Sale reciting that the
sale has been adjourned to a specific new date and containing any
other corrections the commissioner deems appropriate shall be served
in accordance with the provisions of section 6.(c) of this Guide,
except that publication under section 6(c)(4) may be made on any of
three separate days prior to the revised date of foreclosure sale so
long as the first publication is made at least seven days before the
revised sale date, and mailing under section 6(c) (1) through (3)
may be made at any time at least seven days before the date to which
the foreclosure sale has been adjourned. The commissioner shall
also, in the case of a sale adjourned to a later date, mail a copy
of the revised Notice of Default and Foreclosure Sale to the
Secretary at least seven days before the date to which the sale has
been adjourned.
(e) If the General Counsel designates a substitute commissioner
less than 48 hours before the foreclosure sale, the sale shall be
terminated and a new foreclosure commenced by serving a new Notice
of Default and Foreclosure Sale, in accordance with section 6.(c) of
this Guide.
(f) If the General Counsel designates a substitute commissioner
48 hours or more before the foreclosure sale, the foreclosure will
continue without prejudice unless the substitute commissioner in his
or her sole discretion finds that continuation of the foreclosure
sale will unfairly affect the interests of the mortgagor. If the
substitute commissioner makes such a finding, the substitute
commissioner shall cancel the sale or adjourn it according to the
provisions of paragraph (d) of this section.
(g) If the commissioner cancels the foreclosure, the mortgage
will continue in effect as if the mortgage debt had not been
accelerated.
(h) If the commissioner cancels the foreclosure sale, a new
foreclosure may be subsequently commenced as provided under the Act.
(i) If upon application by the mortgagor, the commissioner
refuses to withdraw the property from foreclosure as described in
paragraphs (a)(2) and (a)(3)(ii) of this section, the commissioner
shall provide the mortgagor and the Secretary with a written
statement of the reasons for the refusal.
9. Conduct of the Sale
(a) The foreclosure commissioner shall conduct the foreclosure
sale at public auction in a manner fair to both the mortgagor and
the Secretary and consistent with the provisions of the Act. The
commissioner shall attend the foreclosure sale in person or, if the
Commissioner is not a natural person, through a duly authorized
employee. If more than one commissioner has been designated, at
least one shall attend the sale. The commissioner shall accept
written one-price sealed bids from any party including the Secretary
so long as those bids conform to the requirements described in the
Notice of Default and Foreclosure Sale which are contained in
section 6.(b)(12) of this Guide. The commissioner shall announce the
name of each such bidder and the amount of the bid. The commissioner
shall accept oral bids from any party, including parties who
submitted one-price sealed bids, if those oral bids conform to the
requirements described in the Notice of Default and Foreclosure Sale
which are contained in section 6.(b)(12) of this Guide. The
commissioner will announce the amount of the high bid and the name
of the successful bidder before the close of the sale.
(b) Notwithstanding the provisions of paragraph (a) of this
section, neither the commissioner nor any relative, related business
entity or employee shall be permitted to bid at the foreclosure
sale. Relatives of the commissioner who may not bid include parents,
siblings, spouses and children. Related business entities which may
not bid include entities or concerns whose relationship with the
commissioner at the time the commissioner is designated is such
that, directly or indirectly, one concern or individual formulates,
directs, or controls the other concern; or has the power to
formulate, direct, or control the other concern; or has the
responsibility and authority either to prevent in the first
instance, or promptly to correct, the offensive conduct of the other
concern. Business concerns are also affiliates of each other when a
third party is similarly situated with respect to both concerns.
(c) If a natural person, the commissioner may serve as
auctioneer or, in the commissioner's discretion, may employ an
auctioneer to conduct the sale. If the commissioner employs an
auctioneer to conduct the foreclosure sale, the auctioneer must be a
licensed auctioneer, an officer of State or local government, or any
other person who commonly conducts foreclosure sales in the area in
which the security property is located. The commissioner will
compensate any such auctioneer from the proceeds of the fee he or
she collects as described in section 10(e) of this Guide.
10. Foreclosure Costs
Before any claim may be satisfied from the sale proceeds, those
proceeds shall be used to pay the following costs:
(a) Advertising and postage expenses incurred in serving the
Notice of Default and Foreclosure Sale under section 6.(c) (1)
through (4) of this Guide;
(b) Mileage by the most reasonable road distance for posting the
Notice of Default and Foreclosure Sale under section 6.(c)(5) of
this Guide and for the foreclosure commissioner's attendance at the
sale. The mileage shall be paid at a rate provided in 28 U.S.C.
1921;
(c) Reasonable and necessary costs incurred for title and lien
record searches;
(d) The necessary out-of-pocket costs incurred by the
commissioner for recording documents; and
(e) A commission to the foreclosure commissioner for the conduct
of the foreclosure in an amount to be determined by the General
Counsel. A commission may be allowed to the commissioner
notwithstanding termination of the sale or appointment of a
substitute commissioner before the sale takes place.
11. Disposition of Sale Proceeds
(a) The proceeds of the foreclosure sale shall be used in the
following order:
[[Page 48557]]
(1) To pay the costs listed in section 10 of this Guide;
(2) To pay valid tax liens or assessments on the security
property which have priority over the foreclosed mortgage;
(3) To pay liens recorded prior to the recording of the
foreclosed mortgage which are required to be paid in conformity with
the Notice of Default and Foreclosure Sale;
(4) To pay service charges and advancements for taxes,
assessments and property insurance premiums which were made under
the terms of the foreclosed mortgage;
(5) To pay the interest due under the mortgage debt;
(6) To pay the unpaid principal balance secured by the mortgage
(including expenditures for the necessary protection, preservation
and repair of the security property as authorized under the mortgage
agreement and interest thereon if provided in the mortgage
agreement);
(7) To pay any late charges;
(8) To pay any liens recorded after the foreclosed mortgage; and
(9) To pay the surplus to the mortgagor.
(b) The priority of the Secretary's lien shall be determined by
the Federal first-in-time first-in-right rule. State laws affording
priority to liens recorded after the mortgage are preempted.
(c) If the mortgagor entitled to the surplus cannot be located,
or if the surplus available is insufficient to pay all claimants and
the claimants to the surplus cannot agree on its disposition, or if
a claimant to the proceeds of the sale disagrees with the
commissioner's proposed disposition of the proceeds, the
commissioner may deposit the disputed funds with a legally
authorized official or court. If such a procedure for the deposit of
disputed funds is not available, and the foreclosure commissioner
files a bill of interpleader or is sued as a stakeholder to
determine entitlement to such funds, the foreclosure commissioner's
necessary costs in taking or defending such action shall be
deductible from the disputed funds.
(d) If there is more than one party holding a lien or assessment
described in paragraph (a) (2), (3) or (8) of this section, the
claim of each party holding the same kind of lien or assessment will
be given the relative priority to which it would be entitled under
the law of the State in which the security property is located.
(e) The commissioner will keep such records as will permit the
Secretary to verify the costs claimed under section 10 of this
Guide, and otherwise to audit the commissioner's disposition of the
sale proceeds.
12. Transfer of Title and Possession
(a) If the Secretary is the successful bidder, the foreclosure
commissioner shall issue a deed to the Secretary upon receipt of the
amount needed to pay the costs listed in section 11.(a) (1) through
(3) of this Guide. If the Secretary is not the successful bidder,
the foreclosure commissioner shall issue a deed to the purchaser
upon receipt of the entire purchase price and execution by the
Secretary and the purchaser of any use agreement referred to in
section 7(e) of this Guide. The deed shall convey all of the
Secretary's rights, title and interest in the security property as
well as the rights of the commissioner, the mortgagor, and any other
person claiming by, through, or under them. Any required covenants
reflecting terms described in section 7 of this Guide shall be
contained in the commissioner's deed. No judicial proceeding shall
be required ancillary or supplementary to the procedures provided in
this part to assure the validity of the conveyance or confirmation
of such conveyance.
(b) The commissioner shall deliver possession of the security
property to the purchaser at the same time he or she delivers the
deed. The purchaser's possession of the security property shall be
subject to any interests senior to that of the mortgage and to the
terms of any existing residential lease for the remaining term of
the lease or for one year, whichever is shorter. Subject to any
required terms described in section 7 of this Guide, any commercial
tenant and any residential tenant remaining in possession after the
expiration of his or her lease or after the passage of one year,
whichever event occurs first, shall be deemed a tenant at sufferance
and may be evicted in accordance with applicable State or local law.
(c) When the commissioner conveys the property to the Secretary,
no tax shall be imposed or collected with respect to the
commissioner's deed, whether as a tax upon the instrument itself or
upon the privilege of conveying or transferring title to the
property.
(d) The registrar of deeds or other appropriate official in the
county where the property is located shall, upon tendering of the
customary recording fees, accept all instruments pertaining to the
foreclosure which are submitted by the commissioner for recordation.
The instruments to be accepted shall include, but not be limited to,
the commissioner's deed and the commissioner's affidavit, both of
which are described in section 14 of this Guide.
(e) Failure to collect or pay a tax described in paragraph (c)
of this section shall not be grounds for refusing to record the
commissioner's deed, for failing to recognize such recordation or
for denying enforcement of the deed in any State or Federal court.
13. Redemption Rights
The mortgagor or others will have no right to redeem the
mortgage after the foreclosure sale. The mortgagor or others will
have no right to possession of the security property after the
foreclosure sale based on a right of redemption.
14. Record of Foreclosure and Sale
(a) The deed to the purchaser shall contain the following
recitals:
(1) A statement that the foreclosed mortgage was held by the
Secretary;
(2) The details of the service of the Notice of Default and
Foreclosure Sale described in section 6(c) of this Guide, including
the names and addresses of persons to whom the Notice was mailed and
the dates on which the Notice was mailed, names of newspapers in
which and dates on which the Notice was published, and the date on
which service by posting was accomplished;
(3) A statement that the foreclosure was conducted in accordance
with the Act and with the terms of the Notice of Default and
Foreclosure Sale;
(4) The costs of the foreclosure as described in section 10 of
this Guide; and
(5) The name of the successful bidder and the amount of the
successful bid.
(b) The commissioner may, in his or her discretion, make these
recitations in an affidavit or addendum to the deed rather than in
the body of the deed.
15. Management and Disposition by the Secretary
When the Secretary is the purchaser of the security property,
the Secretary shall manage and dispose of it in accordance with
section Sec. 203 of the Housing and Community Development Amendments
of 1978, 12 U.S.C. 1701z-11, and in accordance with 24 CFR part 290.
16. Computation of Time
Periods of time provided for in this Guide shall be calculated
in consecutive calendar days including the day or days on which the
actions or events occur or are to occur. Any such period of time
includes the day on which an event occurs or is to occur.
Appendix B: Nonjudicial Foreclosure of Single Family Mortgages--
Guide
Sec.
1. Purpose.
2. Scope and applicability.
3. Definitions.
4. Designation of foreclosure commissioner.
5. Prerequisites to foreclosure.
6. Commencement of foreclosure.
7. Notice of default and foreclosure sale.
8. Service of notice of default and foreclosure sale.
9. Presale reinstatement.
10. Conduct of sale.
11. Adjournment or cancellation of sale.
12. Validity of sale.
13. Foreclosure costs.
14. Disposition of sale proceeds.
15. Transfer of title and possession.
16. Redemption rights.
17. Record of foreclosure and sale.
18. Effect of sale.
19. Computation of time.
20. Deficiency judgment.
1. Purpose
The purpose of this guide is to present, in a single document,
the statutory and regulatory requirements of the Single Family
Mortgage Foreclosure Act of 1994 (the Statute), 12 U.S.C.
Secs. 3751-3768. Although it presents the regulatory and statutory
requirements in a combined format, this guide is a secondary source
for these requirements. The Code of Federal Regulations (CFR), at 24
CFR part 27, subpart B, is the primary, governing source for
regulatory requirements, and the Statute is the primary, governing
source for statutory requirements. Any reference in this Guide to
the provisions of the Statute includes the requirements of 24 CFR
part 27, subpart B.
The Statute creates a uniform Federal remedy for foreclosure of
certain single family mortgages which are held by the
[[Page 48558]]
Secretary of Housing and Urban Development pursuant to Title I of
the National Housing Act, 12 U.S.C. 1702 et seq., Title II of the
National Housing Act, 12 U.S.C. 1707 et seq., or Section 312 of the
Housing Act of 1964, 42 U.S.C. 1452b (as it existed before repeal).
The Secretary's powers under the Statute to appoint a foreclosure
commissioner or commissioners and substitute commissioners, and to
fix the compensation of commissioners have been delegated to the HUD
General Counsel.
The availability of uniform and more expeditious procedures,
with no right of redemption in the mortgagor or others, for the
foreclosure of these mortgages by the Department, will ameliorate
the negative consequences of the disparate State laws under which
mortgages covering one- to four-family residential properties are
foreclosed on behalf of HUD. The long periods of time that are
required under State law to complete foreclosure of such mortgages
lead to deterioration in the condition of the properties involved,
necessitate substantial Federal holding expenditures, increase the
risk of vandalism, fire loss, depreciation, damage, and waste with
respect to the properties, and adversely affect the neighborhoods in
which the properties are located. These consequences seriously
impair the ability of HUD to protect Federal financial interests in
the properties and frustrate attaining the objectives of the
underlying Federal program authority. Use of this nonjudicial
foreclosure procedure will also reduce unnecessary litigation, which
contributes to already overcrowded court calendars, by removing many
foreclosures from the courts.
2. Scope and Applicability
(a) Scope. Under the Statute, HUD may foreclose on any defaulted
single family mortgage (as defined in section 3, below) encumbering
real estate in any State regardless of when the mortgage was
executed.
(b) Applicability. HUD, at its discretion, may use other
procedures to foreclose defaulted single family mortgages, including
judicial foreclosure in State or Federal Court, and nonjudicial
foreclosures under State law or any other Federal law.
3. Definitions
As used in this guide--
Statute means the Single Family Mortgage Foreclosure Act of
1994.
Bona fide purchaser means a purchaser for value in good faith
and without notice of any adverse claim, and who acquires the
security property free of any adverse claim.
County means a political subdivision of a State or Territory of
the United States, created to aid in the administration of state law
for the purpose of local self-government, and includes a parish or
any other equivalent subdivision.
Mortgage means a deed of trust, mortgage, deed to secure debt,
security agreement, or any other form of instrument under which any
property (real or mixed real and personal), or any interest in
property (including leaseholds, reversionary interests, and any
other estates under applicable State law), is conveyed in trust,
mortgaged, encumbered, pledged, or otherwise rendered subject to a
lien for the purpose of securing the payment of money or the
performance of an obligation.
Mortgage agreement means the note or debt instrument and the
mortgage instrument, deed of trust instrument, trust deed, or any
other similar instrument or instruments creating the security
interest in the real estate for the repayment of the note or debt
instrument, including any instrument incorporated by reference
therein and any instrument or agreement amending or modifying any of
the foregoing.
Mortgagor means the debtor, obligor, grantor, or trustor named
in the mortgage agreement and, unless the context otherwise
indicates, includes the current owner of record of the security
property whether or not such owner is personally liable on the
mortgage debt.
Owner means any person who has an ownership interest in the
property and includes heirs, devisees, executors, administrators,
and other personal representatives, and trustees of testamentary
trusts if the owner of record is deceased.
Person includes any individual, group of individuals,
association, partnership, corporation, or organization.
Record; Recorded means to enter or entered in public land record
systems established under State statutes for the purpose of
imparting constructive notice to purchasers of real property for
value and without actual knowledge, and includes ``register'' and
``registered'' in the instance of registered land, and ``file'' and
its variants in the context of entering documents in public land
records.
Secretary means the Secretary of Housing and Urban Development,
acting by and through any authorized designee exclusive of the
foreclosure commissioner.
Security property means the property (real or mixed real and
personal) or an interest in property (including leaseholds, life
estates, reversionary interests, and any other estates under
applicable law), together with fixtures and other interests subject
to the lien of the mortgage under applicable law.
Single family mortgage means a mortgage that covers property on
which there is located a 1- to 4- family residence, and that:
(1) Is held by the Secretary pursuant to title I or title II of
the National Housing Act (12 U.S.C. 1701 et seq.); or
(2) Secures a loan obligated by the Secretary under section 312
of the Housing Act of 1964 as it existed before the repeal of that
section by section 289 of the Cranston-Gonzalez National Affordable
Housing Act. A mortgage securing such a loan that covers property
containing nonresidential space and a 1- to 4-family dwelling is not
subject to foreclosure under the Statute.
State means:
(1) The several States;
(2) The District of Columbia;
(3) The Commonwealth of Puerto Rico;
(4) The United States Virgin Islands;
(5) Guam;
(6) American Samoa;
(7) The Northern Mariana Islands; and
(8) Indian tribes, meaning any Tribe, band, group or nation,
including Alaskan Indians, Aleuts, and Eskimos, and any Alaskan
Native Village of the United States that is considered an eligible
recipient under Title I of the Indian Self-Determination and
Education Assistance Act (25 U.S.C. 450) or was considered an
eligible recipient under the State and Local Fiscal Assistance Act
of 1972 (31 U.S.C. 1221) before repeal of that Act. Eligible
recipients under the Indian Self-Determination and Education
Assistance Act are determined by the Bureau of Indian Affairs.
4. Designation of Foreclosure Commissioner
(a) The Secretary may designate a person or persons to serve as
a foreclosure commissioner for the purpose of foreclosing single
family mortgages, and such a foreclosure commissioner has a
nonjudicial power of sale as provided under the Statute.
(b) The foreclosure commissioner, if a natural person, must be a
resident of the State in which the security property is located and,
if not a natural person, the foreclosure commissioner must be duly
authorized to transact business under laws of the State in which the
security property is located. No person shall be designated as a
foreclosure commissioner unless that person is determined by the
Secretary to be responsible, financially sound, and competent to
conduct a foreclosure. The method of selection and determination of
the qualifications of the foreclosure commissioner are at the
discretion of the Secretary, and the execution of a designation
pursuant to the Statute is conclusive evidence that the commissioner
selected has been determined to be qualified by the Secretary.
(c) The Secretary designates a foreclosure commissioner by
executing a written designation stating the name and business or
residential address of the commissioner, except that if a person is
designated in his or her capacity as an official or employee of a
government or corporate entity, such a person may be designated by
his or her unique title or position instead of by name. The
designation is effective upon execution.
(d) The Secretary may designate, with or without cause, a
substitute foreclosure commissioner to replace a previously
designated foreclosure commissioner, by the procedure contained in
paragraph (c) of this section, above.
(1) A substitution of the foreclosure commissioner may be made
at any time prior to the time of the foreclosure sale, and the
foreclosure shall continue without prejudice, unless the substitute
commissioner, in that commissioner's sole discretion, finds that
continuation of the foreclosure sale will unfairly affect the
interests of the mortgagor. Any such finding must be in writing. If
the substitute commissioner makes such a finding, the substitute
commissioner will cancel the foreclosure sale, or adjourn the sale
as explained in section 11, below.
(2) If a substitute commissioner is designated, a copy of the
written notice of the designation referred to in paragraph (c) of
this section must be served:
(i) By mail, as described in section 8, below (except that the
minimum time periods between mailing and the date of the foreclosure
sale do not apply); or
[[Page 48559]]
(ii) In any other manner which, in the substitute foreclosure
commissioner's sole discretion, is conducive to achieving timely
notice of such substitution.
5. Prerequisites to Foreclosure
(a) The Secretary may commence foreclosure of a single family
mortgage under the Statute upon the breach of a covenant or
condition in the mortgage agreement.
(b) No foreclosure under the Statute may be commenced unless any
previously pending judicial or nonjudicial proceeding that has been
separately instituted by the Secretary to foreclose the mortgage in
a manner other than under the Statute has been withdrawn, dismissed,
or otherwise terminated.
(c) The Secretary will not institute any separate foreclosure
proceeding concerning a property while it is the subject of a
foreclosure pursuant to the Statute.
(d) The Statute does not preclude the Secretary from enforcing
any right, other than foreclosure, under applicable Federal or State
law, including any right to obtain a monetary judgment, or
foreclosing under the Statute if the Secretary has obtained or is
seeking any other remedy available pursuant to Federal or State law,
or under the mortgage agreement.
6. Commencement of Foreclosure
If the Secretary determines that the prerequisites to
foreclosure set forth in section 5 are satisfied, the Secretary may
direct the foreclosure commissioner to commence foreclosure of the
mortgage. Upon such request, the foreclosure commissioner will
commence foreclosure of the mortgage in accordance with section 7,
below.
7. Notice of Default and Foreclosure Sale
The commissioner commences the foreclosure by serving a Notice
of Default and Foreclosure Sale. The Notice sets forth the name,
address and telephone number of the foreclosure commissioner and the
date on which the Notice was issued, along with the following
information:
(a) The current mortgagee (that is, the Secretary), the original
mortgagee (if other than the Secretary), and the original mortgagor.
(b) A description of the security property sufficient to
identify the property to be sold.
(c) The date of the mortgage, the date the mortgage was
recorded, the office in which the mortgage is recorded, and the
liber and folio numbers or other appropriate description of the
location of recordation of the mortgage.
(d) Identification of the failure to make payment, including the
entire amount delinquent as of a date specified, a statement
generally describing the other costs that must be paid if the
mortgage is to be reinstated, the due date of the earliest principal
installment payment remaining wholly unpaid as of the date on which
the Notice is issued upon which the foreclosure is based, or a
description of any other default or defaults upon which foreclosure
is based, and the acceleration of the secured indebtedness.
(e) The date, time, and location of the foreclosure sale.
(f) A statement that the foreclosure is being conducted in
accordance with the Statute.
(g) A description of the types of costs, if any, to be paid by
the purchaser upon transfer of title.
(h) The bidding and payment requirements for the foreclosure
sale, including the amount and method of deposit to be required at
the foreclosure sale, and the time and method of payment of the
balance of the foreclosure purchase price. The Notice must state
that all deposits and the balance of the purchase price must be paid
by certified or cashier's check. The Notice must also state that no
deposit will be required of the Secretary when the Secretary bids at
the foreclosure sale.
(i) Any other appropriate terms of sale or information as the
Secretary may determine.
8. Service of Notice of Default and Foreclosure Sale
The foreclosure commissioner will serve the Notice of Default
and Foreclosure Sale upon the following persons and in the following
manner, and no additional notice will be required to be served,
notwithstanding any notice requirements of any State or local law:
(a) Filing the notice. The Notice of Default and Foreclosure
Sale must be filed not less than 21 days before the date of the
foreclosure sale in the manner authorized for filing a notice of an
action concerning real property according to the law of the State in
which the security property is located, or if none, in the manner
authorized by Section 3201 of title 28, United States Code.
(b) Notice by mail.
(1) The Notice must be sent by certified or registered mail,
postage prepaid, return receipt requested, to the following (except
that multiple mailings are not required to be sent to any party with
multiple capacities, e.g., an original mortgagor who is the security
property owner and lives in one of the units):
(i) The current security property owner of record, as the record
existed 45 days before the date originally set for the foreclosure
sale, whether or not the notice describes a sale adjourned as
provided in the Statute. The Notice must be mailed not less than 21
days before the date of the foreclosure sale to the current owner at
the last address known to the Secretary or the foreclosure
commissioner or, if none, to the address of the security property,
or, at the discretion of the foreclosure commissioner, to any other
address believed to be that of the current owner.
(ii) The original mortgagor and all subsequent mortgagors of
record or other persons who appear on the basis of the record to be
liable for part or all of the mortgage debt, as the record existed
45 days before the date originally set for the foreclosure sale,
whether or not the notice describes a sale adjourned as provided in
the Statute, except that the Notice need not be mailed to any
mortgagors who have been released from all obligations under the
mortgage. Notice under this subsection must be mailed not less than
21 days before the date of the foreclosure sale to the last known
address of the mortgagors or, if none, to the address of the
security property, or, at the discretion of the foreclosure
commissioner, to any other address believed to be that of such
mortgagors.
(iii) All dwelling units in the security property, whether or
not the Notice describes a sale adjourned as provided in this part.
Notice under this subsection shall be mailed not less than 21 days
before the date of the foreclosure sale. If the names of the
occupants of the security property are not known to the Secretary,
or if the security property has more than one dwelling, the Notice
must be posted at the security property not less than 21 days before
the foreclosure sale.
(iv) All persons holding liens of record upon the security
property, as the record existed 45 days before the date originally
set for the foreclosure sale, whether or not the notice describes a
sale adjourned as provided in the Statute. Notice under this
subsection must be mailed not less than 21 days before the date of
the foreclosure sale to each such lienholder's address of record,
or, at the discretion of the foreclosure commissioner, to any other
address believed to be that of such lienholder.
(2) Notice by mail is deemed duly given upon mailing, whether or
not received by the addressee and whether or not a return receipt is
received or the notice is returned. The date of the receipt for the
postage paid for the mailing may serve as proof of the date of
mailing of the notice.
(c) Publication.
(1) A copy of the Notice of Default and Foreclosure Sale must be
published once a week during three successive calendar weeks before
the date of the foreclosure sale. Such publication must be in a
newspaper or newspapers having general circulation in the county or
counties in which the security property being sold is located. A
legal newspaper that is accepted as a newspaper of legal record in
the county or counties in which the security property being sold is
located is a newspaper having general circulation for the purposes
of this paragraph.
(2) If there is no newspaper of general circulation published at
least weekly in the county or counties in which the security
property being sold is located, copies of the Notice of Default and
Foreclosure Sale must be posted, not less than 21 days before the
date of the foreclosure sale, at the courthouse of any county or
counties in which the security property is located and at the place
where the sale is to be held.
9. Presale Reinstatement
(a) Except as provided in paragraph (d) of section 4 (above),
paragraph (b) of this section, and section 11 (below), the
foreclosure commissioner will withdraw the security property from
foreclosure and cancel the foreclosure sale only if:
(1) The Secretary directs the foreclosure commissioner to do so
before or at the time of the sale; or
(2) The foreclosure commissioner finds, upon application of the
mortgagor not less than three business days before the date of the
sale, that the default or defaults upon which the foreclosure is
based did not exist at the time of service of the Notice of Default
and Foreclosure Sale; or
(3) In the case of a foreclosure involving a monetary default,
there is tendered to the
[[Page 48560]]
foreclosure commissioner before public auction is completed all
amounts that would be due under the mortgage agreement if payments
under the mortgage had not been accelerated, all costs of
foreclosure incurred for which payment from the proceeds of
foreclosure is provided in section 13 (below), and the foreclosure
commissioner finds that there are no nonmonetary defaults; provided,
however, that the Secretary may refuse to cancel a foreclosure sale
pursuant to this subparagraph if the current mortgagor or owner of
record has, on one or more previous occasions, caused a foreclosure
of the mortgage, commenced pursuant to the Statute or otherwise, to
be canceled by curing a default; or
(4) In the case of a foreclosure involving a nonmonetary
default:
(i) The foreclosure commissioner, upon application of the
mortgagor before the date of foreclosure sale, finds that all
nonmonetary defaults are cured and that there are no monetary
defaults; and
(ii) There is tendered to the foreclosure commissioner before
public auction is completed all amounts due under the mortgage
agreement (excluding all amounts which would be due under the
mortgage agreement if the mortgage payments had been accelerated),
including all amounts of expenditures secured by the mortgage and
all costs of foreclosure incurred for which payment would be made
from the proceeds of foreclosure.
(b) Before withdrawing the security property from foreclosure
under subparagraphs (a)(2), (a)(3), or (a)(4) of this section, the
foreclosure commissioner must notify the Secretary of the proposed
withdrawal by telephone or other telecommunication device and must
also provide the Secretary with a written statement of the reasons
for the proposed withdrawal along with all documents submitted by
the mortgagor in support of the proposed withdrawal. Upon receipt of
this statement, the Secretary has ten (10) days in which to
demonstrate why the security property should not be withdrawn from
foreclosure, and if the Secretary makes this demonstration, the
property will not be withdrawn from foreclosure. The Secretary will
provide the mortgagor with a copy of any statement prepared by the
Secretary in opposition to the proposed withdrawal at the same time
the statement is submitted to the foreclosure commissioner. If the
Secretary receives the foreclosure commissioner's written statement
less than 10 days before the scheduled foreclosure sale, the sale
will automatically be adjourned for 14 days, during which time it
may also be cancelled. Under these circumstances, notice of the
rescheduled sale, if any, will be served as described in section
11(c), below.
(c) If the foreclosure commissioner cancels the foreclosure, the
mortgage will continue in effect as though acceleration had not
occurred.
(d) Cancellation of a foreclosure sale will have no effect on
the commencement of a subsequent foreclosure proceeding.
(e) The foreclosure commissioner must file a notice of
cancellation in the same place and manner provided for filing the
Notice of Default and Foreclosure Sale as provided in section 8.
10. Conduct of Sale
(a) The foreclosure sale will be conducted in a manner and at a
time and place as identified in the Notice of Foreclosure and Sale
and more fully described in this section. The sale will be scheduled
for a date 30 or more days after the due date of the earliest unpaid
installment as described in section 7(d), above, or the earliest
occurrence of a nonmonetary default. The sale will be held at public
auction and must be scheduled to begin at a time between the hours
of 9:00 a.m. and 4:00 p.m. local time. The sale will be scheduled
for a place where foreclosure real estate auctions are customarily
held in the county or counties in which the property to be sold is
located, or at a courthouse therein, or at or on the property to be
sold. If the security property is situated in two counties, the sale
may be held in any one of the counties in which any part of the
security property is situated.
(b) The foreclosure commissioner will conduct the foreclosure
sale in a manner that is fair to both the mortgagor and the
Secretary (see section 12, below) and consistent with the provisions
of the Statute.
(c) In addition to bids made in person at the sale, the
foreclosure commissioner will accept written one-price sealed bids
from any party, including the Secretary, for entry by announcement
at the sale so long as those bids conform to the requirements
described in the Notice of Default and Foreclosure Sale. The
foreclosure commissioner will announce the name of each bidder and
the amount of the bid. The commissioner will accept oral bids from
any party, including parties who submitted one-price sealed bids, if
those oral bids conform to the requirements in the Notice of Default
and Foreclosure Sale. Before the close of the sale, the commissioner
will announce the amount of the high bid and the name of the
successful bidder.
(d) Notwithstanding the provisions of paragraph (d) of this
section, neither the foreclosure commissioner nor any relative,
related business entity, or employee is permitted to bid in any
manner on the security property subject to the foreclosure sale,
except that the foreclosure commissioner or an auctioneer may be
directed by the Secretary to enter a bid on the Secretary's behalf.
Relatives of the foreclosure commissioner who may not bid include
parents, siblings, spouses and children. A related business entity
that may not bid or whose employees may not bid is one whose
relationship (at the time the foreclosure commissioner is designated
and during the term of service as foreclosure commissioner) with the
entity of the foreclosure commissioner is such that, directly or
indirectly, one entity formulates, directs, or controls the other
entity; or has the power to formulate, direct, or control the other
entity; or has the responsibility and authority to prevent, or
promptly to correct, the offensive conduct of the other entity.
(e) The commissioner may serve as an auctioneer, or the
commissioner may employ an auctioneer to conduct the sale. If the
commissioner employs an auctioneer to conduct the foreclosure sale,
the auctioneer must be a licensed auctioneer, an officer of State or
local government, or any other person who commonly conducts
foreclosure sales in the area in which the security property is
located. The commissioner will compensate an auctioneer from the
proceeds of the commission described in section 13(e), below.
(f) The foreclosure commissioner may require a bidder to make a
deposit in an amount or percentage set by the foreclosure
commissioner and stated in the Notice of Default and Foreclosure
Sale before the bid is accepted.
(g) A successful bidder at the foreclosure sale who fails to
comply with the terms of the sale may be required to forfeit the
cash deposit or, at the election of the foreclosure commissioner
after consultation with the Secretary, will be liable to the
Secretary for any costs incurred as a result of such failure. If the
successful bidder fails to comply with the terms of the sale, the
HUD Field Office representative will provide instructions to the
commissioner about offering the property to the second highest
bidder, or having a new sale, or other instruction at the discretion
of the HUD representative.
11. Adjournment or Cancellation of Sale
(a) The foreclosure commissioner may, before or at the time of
the foreclosure sale, adjourn or cancel the foreclosure sale if the
foreclosure commissioner determines, in the foreclosure
commissioner's discretion, that:
(1) Circumstances are not conducive to a sale which is fair to
the mortgagor and the Secretary, or
(2) Additional time is necessary to determine whether the
security property should be withdrawn from foreclosure, as provided
in section 9, above.
(b) The foreclosure commissioner may adjourn a foreclosure sale
to a later hour the same day by announcing or posting, at the
original place of sale, the new time and place of the foreclosure
sale, which must be held between 9:00 a.m. and 4:00 p.m. at the
original place of sale.
(c) Except as provided in paragraph (b) of this section, the
foreclosure commissioner may adjourn a foreclosure sale for not less
than 9 and not more than 31 days, in which case the foreclosure
commissioner must serve a Notice of Default and Foreclosure Sale
that is revised to state that the foreclosure sale has been
adjourned to a specified date between the hours of 9:00 a.m. and
4:00 p.m. The revised Notice may include any other information the
foreclosure commissioner deems appropriate. Such Notice must be
served by publication and mailing as provided in section 8, above,
except that publication may be made on any of three separate days
before the revised date of foreclosure sale. If there is no
newspaper of general circulation that would permit publication on
any of three separate days before the revised date of foreclosure
sale, the Notice of Default and Foreclosure Sale must be posted, not
less than nine days before the date to which the sale has been
adjourned, at the courthouse of any county or counties in which the
property is located, and at the place where the sale is to be held.
The
[[Page 48561]]
commissioner must also, in the case of a sale adjourned to a later
date, mail a copy of the revised Notice of Default and Foreclosure
Sale to the Secretary at least seven days before the date to which
the sale has been adjourned.
(d) When a substitute commissioner is designated by the
Secretary to replace a previously designated foreclosure
commissioner, the sale shall continue without prejudice unless the
substitute commissioner finds, in that commissioner's sole
discretion, that continuation of the foreclosure sale will unfairly
affect the interests of the mortgagor. Any such finding shall be in
writing. If the substitute commissioner makes such a finding, the
substitute commissioner shall cancel or adjourn the sale.
12. Validity of Sale
Any foreclosure sale held in accordance with the Statute and its
regulations is conclusively presumed to have been conducted in a
fair, legal, and reasonable manner. The sale price is conclusively
presumed to be reasonable and equal to the fair market value of the
property.
13. Foreclosure Costs
The following foreclosure costs are paid from the sale proceeds,
or from other available sources if sales proceeds are insufficient,
before satisfaction of any other claim to the sale proceeds:
(a) Advertising costs and postage expenses incurred in giving
notice described in sections 8 and 11, above.
(b) Mileage by the most reasonable road distance for posting
notices described in section 8, above, and for the foreclosure
commissioner's or auctioneer's attendance at the sale. The mileage
is paid at the rate provided in 28 U.S.C. 1821.
(c) Reasonable and customary costs incurred for title and lien
record searches.
(d) The necessary out-of-pocket costs incurred by the
foreclosure commissioner for recording documents.
(e) A commission for the foreclosure commissioner (if the
foreclosure commissioner is not an employee of the United States)
for the conduct of the foreclosure in an amount to be determined by
the Secretary. A commission may be allowed to the foreclosure
commissioner notwithstanding termination of the sale or appointment
of a substitute commissioner before the sale takes place.
14. Disposition of Sale Proceeds
(a) The proceeds of the foreclosure sale are paid out in the
following order:
(1) To cover the costs of foreclosure described in section 13,
above.
(2) To pay valid tax liens or assessments on the security
property as provided in the Notice of Default and Foreclosure Sale.
(3) To pay any liens recorded before the recording of the
foreclosed mortgage which are required to be paid in conformity with
the Notice of Default and Foreclosure Sale.
(4) To pay service charges and advances for taxes, assessments,
and property insurance premiums which were made under the terms of
the foreclosed mortgage.
(5) To pay the interest due under the mortgage debt.
(6) To pay the unpaid principal balance secured by the mortgage
(including expenditures for the necessary protection, preservation,
and repair of the security property as authorized under the mortgage
agreement and interest thereon if provided in the mortgage
agreement).
(7) To pay any late charges or fees.
(b) Any surplus proceeds from a foreclosure sale will be
applied, after payment of the items described in paragraph (a) of
this section, in the order as follows:
(1) To pay any liens recorded after the foreclosed mortgage in
the order of priority under the law of the State in which the
security property is located.
(2) To pay the surplus to the mortgagor.
(c) If the person to whom surplus proceeds are to be paid cannot
be located, or if the surplus available is insufficient to pay all
claimants and the claimants cannot agree on the allocation of the
surplus, or if any person claiming an interest in the mortgage
proceeds disagrees with the foreclosure commissioner's proposed
disposition of the disputed proceeds, the foreclosure commissioner
may deposit the disputed funds with a legally authorized official or
court. If a procedure for the deposit of disputed funds is not
available, and the foreclosure commissioner files a bill of
interpleader or is sued as a stakeholder to determine entitlement to
such funds, the foreclosure commissioner's necessary costs in taking
or defending such action are deductible from the disputed funds.
(d) The foreclosure commissioner will keep such records as will
permit the Secretary to verify the costs claimed, and otherwise to
enable the Secretary to audit the foreclosure commissioner's
disposition of the sale proceeds.
15. Transfer of Title and Possession
(a) If the Secretary is the successful bidder, the foreclosure
commissioner will issue a deed to the Secretary upon receipt of the
amount needed to pay the costs of tax liens and prior liens. See
sections 14(a)(2) and (a)(3), above.
(b) If the Secretary is not the successful bidder, the
foreclosure commissioner will issue a deed to the purchaser or
purchasers upon receipt of the entire purchase price in accordance
with the terms of the sale as provided in the Notice of Default and
Foreclosure Sale.
(c) The deed or deeds issued by the foreclosure commissioner
shall be without warranty or covenants to the purchaser or
purchasers. Notwithstanding any State law to the contrary, delivery
of a deed by the foreclosure commissioner is a conveyance of the
property and constitutes passage of good and marketable title to the
mortgaged property. No judicial proceedings are required ancillary
or supplementary to the procedures provided under the Statute and
its regulations to assure the validity of the conveyance or
confirmation of such conveyance. The purchaser of property under the
Statute is presumed to be a bona fide purchaser.
(d) A purchaser at a foreclosure sale held pursuant to the
Statute is entitled to possession upon passage of title under
paragraph (c) of this section, subject to any interest or interests
that are not barred, as described in section 18, below. Any person
remaining in possession of the property after the passage of title
is deemed a tenant at sufferance subject to eviction under
applicable law.
(e) If a purchaser dies before execution and delivery of the
deed conveying the property to the purchaser, the foreclosure
commissioner will execute and deliver the deed to a legal
representative of the decedent purchaser's estate upon payment of
the purchase price in accordance with the terms of sale. Such
delivery to the representative of the purchaser's estate will have
the same effect as if accomplished during the lifetime of the
purchaser.
(f) When the foreclosure commissioner conveys the property to
the Secretary, no tax may be imposed or collected with respect to
the foreclosure commissioner's deed, including any tax customarily
imposed upon the deed instrument or upon the conveyance or transfer
of title to the property.
(g) The register of deeds or other appropriate official in the
county where the property is located must, upon tendering of the
customary recording fees, accept all instruments pertaining to the
foreclosure which are submitted by the foreclosure commissioner for
recordation. The instruments to be accepted include, but are not
limited to, the foreclosure commissioner's deed. If the foreclosure
commissioner elects to include the recitations described in section
17(a), below, in an affidavit or an addendum to the deed as
described in section 17(b), below, the affidavit or addendum must be
accepted for recordation. Failure to collect or pay a tax as
described in paragraph (f) of this section are not grounds for
refusing to record such instruments, for failing to recognize such
recordation as imparting notice, or for denying the enforcement of
such instruments and their provisions in any State or Federal Court.
(h) The Clerk of the Court or other appropriate official must
cancel all liens as requested by the foreclosure commissioner.
16. Redemption Rights
(a) There is no right of redemption, or right of possession
based upon a right of redemption, in the mortgagor or others
subsequent to a foreclosure completed pursuant to the Statute. In
regard to the pre-emption of State laws regarding rights of
redemption, a foreclosure is considered completed upon the date and
at the time of the foreclosure sale.
(b) Section 204(l) of the National Housing Act, 42 U.S.C.
1710(l), and section 701 of the Department of Housing and Urban
Development Reform Act of 1989, 42 U.S.C. 1452c, do not apply to
mortgages foreclosed under the Statute.
17. Record of Foreclosure and Sale
(a) The foreclosure commissioner must include in the recitals of
the deed to the purchaser, or in an affidavit or addendum to the
deed, the following items:
(1) The date, time, and place of the foreclosure sale.
[[Page 48562]]
(2) A statement that the foreclosed mortgage was held by the
Secretary.
(3) The date of the foreclosed mortgage, the date of the
recording of the mortgage that was foreclosed, the office in which
the mortgage was recorded, and the liber and folio numbers or other
appropriate description of the recordation of the mortgage.
(4) The details of the service of the Notice of Default and
Foreclosure Sale, including the names and addresses of the persons
to whom the Notice was mailed and the date on which the Notice was
mailed, the name of the newspaper in which the Notice was published
and the dates of publication, and the date on which service by
posting, if required, was accomplished.
(5) The date and place of filing the Notice of Default and
Foreclosure Sale.
(6) A statement that the foreclosure was conducted in accordance
with the provisions of the Statute and with the terms of the Notice
of Default and Foreclosure Sale.
(7) The name of the successful bidder and the amount of the
successful bid.
(b) The foreclosure commissioner may, in his or her discretion,
make the recitations in paragraph (a) of this section in the deed or
in an affidavit or addendum to the deed, either of which is to be
recorded with the deed as provided in the Statute.
(c) The items set forth in paragraph (a) of this section are
prima facie evidence of the truth of such facts in any Federal or
State court and evidence a conclusive presumption in favor of bona
fide purchasers and encumbrancers for value without notice.
Encumbrancers for value include liens placed by lenders who provide
the purchaser with purchase money in exchange for a security
interest in the newly-conveyed property.
18. Effect of Sale
A sale made and conducted as prescribed in the Statute to a bona
fide purchaser bars all claims upon, or with respect to, the
property sold for the following persons:
(a) Any person to whom the Notice of Default and Foreclosure
Sale was mailed as provided under the Statute, and the heir,
devisee, executor, administrator, successor or assignee claiming
under any such person.
(b) Any person claiming any interest in the property subordinate
to that of the mortgage if such person had actual knowledge of the
foreclosure sale.
(c) Any person claiming any interest in the property whose
assignment, mortgage, or other conveyance was not duly recorded or
filed in the proper place for recording or filing, or whose judgment
or decree was not duly docketed or filed in the proper place for
docketing or filing, before the date on which the notice of the
foreclosure sale was first served by publication, as described in
section 8(c), above, and the executor, administrator, or assignee of
such a person.
(d) Any person claiming an interest in the property under a
statutory lien or encumbrance created subsequent to the recording or
filing of the mortgage being foreclosed, and attaching to the title
or interest of any person designated in any of the foregoing
paragraphs.
19. Computation of Time
Periods of time provided for in the Statute are calculated in
consecutive calendar days including the day or days on which the
actions or events occur, or are to occur. Any such period of time
includes the day on which an event occurs or is to occur.
20. Deficiency Judgment
If the price at which the security property is sold at the
foreclosure sale is less than the unpaid balance of the debt secured
by such property after deducting payments in the order described in
section 14, above, the Secretary may refer the matter to the
Attorney General who may commence an action or actions against any
and all debtors to recover the deficiency, the only limitation on
such action being a prohibition against pursuit of a deficiency that
is specifically set forth in the mortgage.
[FR Doc. 96-23258 Filed 9-12-96; 8:45 am]
BILLING CODE 4210-32-P
