Title 24:
Housing and Urban Development
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PART 207—MULTIFAMILY HOUSING MORTGAGE INSURANCE
Section Contents
Subpart
A—Eligibility Requirements
§ 207.1 Eligibility
requirements.
Subpart
B—Contract Rights and Obligations
§ 207.251 Definitions.
Premiums
§ 207.252 First,
second and third premiums.
§ 207.252a Premiums—operating
loss loans.
§ 207.252b Premiums—mortgages
insured pursuant to section 223(f) of the Act.
§ 207.252c Premiums—mortgages
insured pursuant to section 238(c) of the Act.
§ 207.252d Mortgagee's
late charge.
§ 207.252e Method
of payment of mortgage insurance premiums.
§ 207.253 Termination
by prepayment and voluntary termination.
§ 207.253a Termination
of insurance contract.
§ 207.254 Changes
in premiums; manner of publication.
Rights
and Duties of Mortgagee Under the Contract of
Insurance
§ 207.255 Defaults.
§ 207.256 Notice.
§ 207.256a Reinstatement
of defaulted mortgage.
§ 207.256b Modification
of mortgage terms.
§ 207.257 Commissioner's
right to require acceleration.
§ 207.258 Insurance
claim requirements.
§ 207.258a Title
requirements.
§ 207.258b Partial
payment of claim.
§ 207.259 Insurance
benefits.
§ 207.259a Waiver
of title objection; mortgages formerly
Commissioner-held.
§ 207.260 Maintenance
and inspection of property.
Rights
in Housing Fund
§ 207.263 Responsibility
for servicing.
Amendments
§ 207.499 Effect
of amendments.
Authority: 12 U.S.C. 1701z-11(e),
1709(c)(1), 1713 and 1715b; 42 U.S.C. 3535(d).
Source: 36 FR 24537, Dec. 22, 1971,
unless otherwise noted.
Subpart A—Eligibility Requirements
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§ 207.1 Eligibility requirements.
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The eligibility requirements set forth in 24 CFR part 200, subpart A,
apply to multifamily project mortgages insured under section 207 of the
National Housing Act (12 U.S.C. 1713), as amended.
[61 FR 14405, Apr. 1, 1996]
Subpart B—Contract Rights and Obligations
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§ 207.251 Definitions.
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As used in this subpart:
(a) The term Commissioner means the Federal Housing
Commissioner.
(b) The term act means the National Housing Act, as amended.
(c) The term mortgage means such a first lien upon real estate
and other property as is commonly given to secure advances on, or the
unpaid purchase price of, real estate under the laws of the State,
district or territory in which the real estate is located, together with
the credit instrument or instruments, if any, secured thereby. In any
instance where an operating loss loan is involved, the term shall include
both the original mortgage and the instrument securing the operating loss
loan.
(d) The term insured mortgage means a mortgage which has been
insured by the endorsement of the credit instrument by the Commissioner,
or his duly authorized representative.
(e) The term contract of insurance means the agreement evidenced
by such endorsement and includes the terms, conditions and provisions of
this part and of the National Housing Act.
(f) The term mortgagor means the original borrower under a
mortgage and its successors and such of its assigns as are approved by the
Commissioner.
(g) The term mortgagee means the original lender under a
mortgage its successors and such of its assigns as are approved by the
Commissioner, and includes the holders of the credit instruments issued
under a trust indenture, mortgage or deed of trust pursuant to which such
holders act by and through a trustee therein named.
Premiums
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§ 207.252 First, second and third
premiums.
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The mortgagee, upon the initial endorsement of the mortgage for
insurance, shall pay to the Commissioner a first mortgage insurance
premium equal to not less than one-fourth of one percent nor more than one
percent as the Secretary shall determine of the original face amount of
the mortgage. The specific premium to be charged will be set forth inFederal Registernotice.
(a) If the date of the first principal payment is more than one year
following the date of such initial insurance endorsement, the mortgagee,
upon the anniversary of such insurance date, shall pay a second premium
equal to not less than one-fourth of one percent nor more than one percent
as the Secretary shall determine of the original face amount of the
mortgage. On the date of the first principal payment, the mortgagee shall
pay a third premium equal to not less than one-fourth of one percent nor
more than one percent of the average outstanding principal obligation of
the mortgage for the following year which shall be adjusted so as to
accord with such date and so that the aggregate of the said three premiums
shall equal the sum of:
(1) One percent of the average outstanding principal obligation of the
mortgage for the year following the date of initial insurance endorsement;
and
(2) Not less than one-fourth of one percent nor more than one percent
per annum as the Secretary shall determine of the average outstanding
principal obligation of the mortgage for the period from the first
anniversary of the date of initial insurance endorsement to one year
following the date of the first principal payment.
(b) If the date of the first principal payment is one year, or less
than one year following the date of such initial insurance endorsement,
the mortgagee, upon such first principal payment date, shall pay a second
premium equal to not less than one-fourth of one percent nor more than one
percent as the Secretary shall determine of the average outstanding
principal obligation of the mortgage for the following year which shall be
adjusted so as to accord with such date and so that the aggregate of the
said two premiums shall equal the sum of:
(1) One percent per annum of the average outstanding principal
obligation of the mortgage for the period from the date of initial
insurance endorsement to the date of first principal payment; and
(2) Not less than one-fourth of one percent nor more than one percent
as the Secretary shall determine of the average outstanding principal
obligation of the mortgage for the year following the date of the first
principal payment.
(c) Where the credit instrument is initially and finally endorsed for
insurance pursuant to a Commitment to Insure Upon Completion, the
mortgagee on the date of the first principal payment shall pay a second
premium equal to not less than one-fourth of one percent nor more than one
percent as the Secretary shall determine of the average outstanding
principal obligation of the mortgage for the year following such first
principal payment date which shall be adjusted so as to accord with such
date and so that the aggregate of the said two premiums shall equal the
sum of not less than one-fourth of one percent nor more than one percent
per annum as the Secretary shall determine of the average outstanding
principal obligation of the mortgage for the period from the date of the
insurance endorsement to one year following the date of the first
principal payment.
(d) Until the mortgage is paid in full, or until receipt by the
Commissioner of an application for insurance benefits, or until the
contract of insurance is otherwise terminated with the consent of the
Commissioner, the mortgagee, on each anniversary of the date of the first
principal payment, shall pay an annual mortgage insurance premium equal to
not less than one-fourth of one percent nor more than one percent as the
Secretary shall determine of the average outstanding principal obligation
of the mortgage for the year following the date on which such premium
becomes payable.
(e) The premiums payable on and after the date of the first principal
payment shall be calculated in accordance with the amortization provisions
without taking into account delinquent payments or prepayments.
(f) Premiums shall be payable in cash or in debentures at par plus
accrued interest. All premiums are payable in advance and no refund can he
made of any portion thereof except as hereinafter provided in this
subpart.
(g) Any change in mortgage insurance premiums pursuant to this section
will apply to new commitments issued or reissued on or after August 1,
2001 and any notice setting mortgage insurance premiums issued pursuant to
this section.
[66 FR 35072, July 2, 2001]
§ 207.252a Premiums—operating loss
loans.
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(a) The mortgagee, upon the insurance endorsement of the increase loan
credit instrument covering the operating loss loan, shall pay to the
Commissioner a first mortgage insurance premium of not less than
one-fourth of one percent nor more than one percent as the Secretary shall
determine of the original amount of the loan.
(b) The provisions of paragraphs (d), (e), (f) and (g) of Sec. 207.252
shall apply to operating loss loans.
[66 FR 35073, July 2, 2001]
§ 207.252b Premiums—mortgages insured pursuant
to section 223(f) of the Act.
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(a) The mortgagee, upon the initial-final endorsement of the mortgage
for insurance pursuant to a Commitment to Insure Upon Completion issued in
accordance with §207.32a, shall pay to the Commissioner a first mortgage
insurance premium equal to one percent of the original face amount of the
mortgage.
(b) The mortgagee, on the date of the first principal payment, shall
pay a second premium equal to one percent of the average outstanding
principal obligation of the mortgage for the year following such first
principal payment date which shall be adjusted as of that date so that the
aggregate of the first and second premiums shall equal the sum of one
percent per annum of the average outstanding principal obligation of the
mortgage for the period from the date of the insurance endorsement to one
year following the date of the first principal payment.
(c) The provisions of paragraphs (d), (e) and (f) of §207.252 shall
apply to mortgages insured pursuant to section 223(f) of the Act.
[40 FR 10177, Mar. 5, 1975]
§ 207.252c Premiums—mortgages insured pursuant
to section 238(c) of the Act.
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All of the provisions of §§207.252 and 207.252a governing mortgage
insurance premiums shall apply to mortgages insured under this subpart
pursuant to section 238(c) of the Act except that all mortgage insurance
premiums due on such mortgages in accordance with §§207.252 and 207.252a
shall be calculated on the basis of one percent.
[42 FR 59674, Nov. 18, 1977]
§ 207.252d Mortgagee's late charge.
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Mortgage insurance premiums which are paid to the Commissioner more
than 15 days after the billing date or due date, whichever is later, shall
include a late charge of 4 percent of the amount of the payment due,
except that no late charge shall be required with respect to any case for
which HUD fails to render a proper billing to the mortgagee.
[43 FR 60154, Dec. 26, 1978. Correctly designated at 44 FR 23067, Apr.
18, 1979]
§ 207.252e Method of payment of mortgage
insurance premiums.
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In the cases that the Commissioner deems appropriate, the Commissioner
may require, by means of instructions communicated to all affected
mortgagees, that mortgage insurance premiums be remitted
electronically.
[63 FR 1303, Jan. 8, 1998]
§ 207.253 Termination by prepayment and
voluntary termination.
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All rights under the insurance contract and all obligations to pay
future insurance premiums shall terminate on the following conditions:
(a) Termination by prepayment. Notice of the prepayment in full
of the mortgage or loan shall be given to the Commissioner, on a form
prescribed by the Commissioner, within 30 days from the date of
prepayment. The insurance contract shall terminate, effective as of the
date of prepayment. No adjusted premium charge shall be due the
Commissioner on account of such termination by prepayment.
(b) Termination by voluntary agreement. Receipt by the
Commissioner of a written request, by the mortgagor and mortgagee or
lender for termination of the insurance on the mortgage or loan, on a form
prescribed by the Commissioner, accompanied by the original credit
instrument for cancellation of the insurance endorsement and the
remittance of all sums to which the Commissioner is entitled. The
termination shall become effective as of the date these requirements are
met. No voluntary termination charge shall be due the Commissioner on
account of such termination by voluntary agreement.
(c) Upon termination of the mortgage or loan insurance contract by a
payment in full or by a voluntary termination, the Commissioner shall
refund to the mortgagee or lender for the account of the mortgagor or
borrower an amount equal to the pro rata portion of the current annual
mortgage insurance premium theretofore paid, which is applicable to the
portion of the year subsequent to (1) the date of the prepayment or (2)
the effective date of the voluntary termination of the contract of
insurance.
(d) Notwithstanding any provision in the mortgage instrument, this
section shall apply to all mortgage or loan insurance contracts terminated
by either prepayment or voluntary termination where: (1) The mortgage is
prepaid in full or (2) the Commissioner receives a request for voluntary
termination, on or after May 1, 1972.
[37 FR 8662, Apr. 29, 1972]
§ 207.253a Termination of insurance
contract.
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(a) Reason for termination. The happening of any of the
following events shall constitute an additional reason for terminating the
contract of insurance in cases where the mortga- gee has elected to convey
the property to the Commissioner:
(1) The acquisition by the mortgagee of the mortgaged property without
conveying it to the Commissioner.
(2) The acquisition of the property at the foreclosure sale by a party
other than the mortgagee.
(3) The redemption of the property after foreclosure.
(4) Notice given by the mortgagee after the foreclosure and during the
redemption period that it will not tender the property to the
Commissioner.
(b) Notice of termination. No contract of insurance shall be
terminated until the mortgagee has given written notice thereof to the
Commissioner within 30 days from the happening of any one of the events
set forth in paragraph (a) of this section.
(c) Effective termination date. The Commissioner shall notify
the mortgagee that the contract of insurance has been terminated and the
effective termination date. The termination shall be effective as of the
date any one of the events set forth in paragraph (a) of this section
occur.
(d) Effect of termination. Upon termination of the contract of
insurance the obligation to pay any subsequent MIP shall cease and all
rights of the mortgagor and mortgagee shall be terminated.
[36 FR 24537, Dec. 22, 1971, as amended at 37 FR 8662, Apr. 29,
1972]
§ 207.254 Changes in premiums; manner of
publication.
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Notice of future premium changes will be published in theFederal Register.The Department will propose MIP changes for
multifamily mortgage insurance programs and provide a 30-day public
comment period for the purpose of accepting comments on whether the
proposed changes are appropriate. After the comments have been considered,
the Department will publish a final notice announcing the premiums for
each program and their effective date. The provisions of paragraph (g) of
24 CFR 207.252 shall apply to any notice of future premium changes
published pursuant to this section.
[66 FR 35073, July 2, 2001]
Rights and Duties of Mortgagee Under the Contract of
Insurance
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§ 207.255 Defaults.
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(a) The following shall be considered a default under the terms of a
mortgage insured under this subpart:
(1) Failure of the mortgagor to make any payment due under the
mortgage; or
(2) Failure to perform any other covenant under the provisions of the
mortgage, if the mortgagee, because of such failure, has accelerated the
debt.
(b) In the case of an operating loss loan, the failure of the mortgagor
to make any payment due under such loan or under the original mortgage
shall be considered a default under both the loan and original
mortgage.
(c) If such defaults as defined in paragraphs (a) and (b) of this
section continue for a period of 30 days the mortgagee shall be entitled
to receive the benefits of the insurance hereinafter provided.
(d) For the purposes of this section the date of default shall be
considered as:
(1) The date of the first uncorrected failure to perform a covenant or
obligation; or
(2) The date of the first failure to make a monthly payment which
subsequent payments by the mortgagor are insufficient to cover when
applied to the overdue monthly payments in the order in which they became
due.
§ 207.256 Notice.
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(a) If the default as defined in §207.255 is not cured within the 30
days grace period, the mortgagee must, within 30 days thereafter, notify
the Commissioner of such default, in the manner prescribed in 24 CFR part
200, subpart B.
(b) Notwithstanding §207.255(a)(2), the mortgagee must give notice to
the Commissioner, in the manner prescribed in 24 CFR part 200, subpart B,
of the failure of the mortgagor to comply with such covenant, regardless
of the fact the mortgagee may not have elected to accelerate the debt.
[64 FR 4769, Jan. 29, 1999]
§ 207.256a Reinstatement of defaulted
mortgage.
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If, after default and prior to the completion of foreclosure
proceedings, the mortgagor cures the default, the insurance shall continue
as if a default had not occurred, provided the mortgagee gives notice of
reinstatement to the Commissioner, in the manner prescribed in 24 CFR part
200, subpart B.
[64 FR 4770, Jan. 29, 1999]
§ 207.256b Modification of mortgage
terms.
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(a) The mortgagor and the mortgagee may, with the approval of the
Commissioner, enter into an agreement which extends the time for curing a
default under the mortgage or modifies the payment terms of the
mortgage.
(b) The Commissioner's approval of the type of agreement specified in
paragraph (a) of this section shall not be given unless the mortgagor
agrees in writing that, during such period as payments to the mortgagee
are less than the amounts required under the terms of the original
mortgage, it will hold in trust for disposition as directed by the
Commissioner all rents or other funds derived from the property which are
not required to meet actual and necessary expenses arising in connection
with the operation of such property, including amortization charges under
the mortgage.
(c) The Commissioner may exempt a mortgagor from the requirement of
paragraph (b) of this section in any case where the Commissioner
determines that such exemption does not jeopardize the interests of the
United States.
§ 207.257 Commissioner's right to require
acceleration.
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Upon receipt of notice of violation of a convenant, as provided for in
§207.256(b), or otherwise being appraised thereof, the Commissioner
reserves the right to require the mortgagee to accelerate payment of the
outstanding principal balance due in order to protect the interests of the
Federal Housing Commissioner.
§ 207.258 Insurance claim
requirements.
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(a) Alternative election by mortgagee. When the mortgagee
becomes eligible to receive mortgage insurance benefits pursuant to
§207.255(c), it must, within 45 days thereafter, give the Commissioner
notice, in the manner prescribed in 24 CFR part 200, subpart B, of its
intention to file an insurance claim and of its election either to assign
the mortgage to the Commissioner, as provided in paragraph (b) of this
section, or to acquire and convey title to the Commissioner, as provided
in paragraph (c) of this section.
(b) Assignment of mortgage to Commissioner. If the mortgagee
elects to assign the mortgage to the Commissioner, it shall, at any time
within 30 days after the date of the notice of the election, file its
application for insurance benefits and assign to the Commissioner, in such
manner as the Commissioner may require, the credit instrument(s) and the
realty and chattel security instruments. The Commissioner may extend this
30-day period by written notice that a partial payment of insurance claim
under §207.258b is being considered. The extension shall be for such term,
not to exceed 60 days, as the Commissioner prescribes; however, the
Commissioner's consideration of a partial payment of claim, or the
Commissioner's request that a mortgagee accept partial payment of a claim
in accordance with §207.258b, shall in no way prejudice the morgagee's
right to file its application for full insurance benefits within either
the 30-day period or any extension prescribed by the Commissioner. The
following requirements shall also be met by the morgagee:
(1) Notice of assignment. On the date the assignment of the
mortgage is filed for record, the mortgagee must notify the Commissioner,
in the manner prescribed in 24 CFR part 200, subpart B, of such
assignment, and must also notify the FHA Comptroller by telegram of such
recordation.
(2) Warranty of mortgagee. The assignment shall be made without
recourse or warranty, except that the mortgagee shall warrant that:
(i) No act or omission of the mortgagee has impaired the validity and
priority of the mortgage.
(ii) The mortgage is prior to all mechanics' and materialmen's liens
filed on record subsequent to the recording of the mortgage, regardless of
whether such liens attached prior to the recording date.
(iii) The mortgage is prior to all liens and encumbrances which may
have attached or defects which may have arisen subsequent to the recording
of the mortgage, except such liens or other matters as may be approved by
the Commissioner.
(iv) The amount stated in the instrument of assignment is actually due
under the mortgage and there are no offsets or counterclaims against such
amount.
(v) The mortgagee has a good right to assign the mortgage.
(3) Chattel lien warranty. In assigning its security interest in
chattels, including materials, located on the premises covered by the
mortgage, or its security interest in building components stored either
on-site or off-site at the time of the assignment, the mortgagee shall
warrant that:
(i) No act or omission of the mortgagee has impaired the validity or
priority of the lien created by the chattel security instruments; and
(ii) The mortgagee has a good right to assign the security instruments;
and
(iii) The chattel security instruments are a first lien on the items
covered by the instruments except for such other liens or encumbrances as
may be approved by the Commissioner.
(4) Items delivered by mortgagee. The mortgagee shall deliver to
the Commissioner, within 45 days after the assignment is filed for record,
the items enumerated below:
(i) An assignment of all claims of the mortgagee against the mortgagor
or others arising out of the mortgage transaction.
(ii) All policies of title or other insurance or surety bonds or other
guaranties, and any and all claims thereunder, including evidence
satisfactory to the Commissioner that the effective date of the original
title coverage has been extended to include the assignment of the mortgage
to the Commissioner.
(iii) All records, ledger cards, documents, books, papers, and accounts
relating to the mortgage transaction.
(iv) All property of the mortgagor held by the mortgagee or to which it
is entitled (other than the cash items which are to be retained by the
mortgagee) pursuant to paragraph (b)(5) of this section.
(v) Any additional information or data which the Commissioner may
require.
(5) Disposition of cash items. The following cash items shall
either be retained by the mortgagee or delivered to the Commissioner in
accordance with instructions to be issued by the Commissioner at the time
the insurance claim is filed:
(i) Any balance of the mortgage loan not advanced to the mortgagor.
(ii) Any cash held by the mortgagee or its agents or to which it is
entitled, including deposits made for the account of the mortgagor, and
which have not been applied in reduction of the principal of the mortgage
indebtedness.
(iii) All funds held by the mortgagee for the account of the mortgagor
received pursuant to any other agreement.
(iv) The amount of any undrawn balance under a letter of credit used in
lieu of a cash deposit.
(c) Conveyance of title to Commissioner. If the mortgagee elects
to acquire and convey title to the Commissioner, the following
requirements shall be met:
(1) Alternative actions by mortgagee. At any time within a
period of 30 days after the date of the notice of such election, the
mortgagee shall take one of the alternative actions in paragraph (c) (2)
or (3) of this section.
(2) Foreclosure of mortgage. The mortgagee may elect to commence
foreclosure proceedings. If the laws of the State where the property is
located do not permit institution of foreclosure within such 30-day
period, foreclosure shall be commenced not less than 30 days after such
action can be taken. Under such proceedings, the mortgagee shall take one
of the following actions:
(i) Obtain possession of the mortgaged property and the income
therefrom through the voluntary surrender thereof by the mortgagor.
(ii) Institute and prosecute with reasonable diligence, proceedings for
the appointment of a receiver to manage the mortgaged property and collect
income therefrom.
(iii) Proceed to exercise such other rights and remedies as may be
available to it for the protection and preservation of the mortgaged
property and to obtain the income therefrom under the mortgage and the law
of the particular jurisdiction.
(iv) With the prior approval of the Commissioner, exercise the power of
sale under a deed of trust.
(3) Acquisition of title and possession. The mortgagee, with the
approval of the Commissioner, may elect to acquire possession of, and
title to, the mortgaged property by means other than foreclosure. With the
prior approval of the Commissioner, title may be transferred directly to
the Commissioner.
(4) Notice of foreclosure. The mortgagee shall given written
notice to the Commissioner within 30 days after the institution of
foreclosure proceedings and shall exercise reasonable diligence in
prosecuting such proceedings to completion. Any developments which might
delay the consummation of such proceedings shall be promptly reported to
the Commissioner.
(5) Transfer by mortgagee. After acquiring title to and
possession of the property, the mortgagee shall (within 30 days of such
acquisition) transfer title and possession of the property to the
Commissioner. The transfer shall be made in such manner as the
Commissioner may require. On the date the deed is filed for record, the
mortgagee shall notify the Commissioner on a form prescribed by him of the
filing of such conveyance, and shall also notify the FHA Assistant
Commissioner-Comptroller by telegram of such recordation.
(6) Filing of deed and application. The mortgagee shall file its
application for insurance benefits at the time of filing for record of the
deed conveying the property to the Commissioner.
(7) Deed covenants and documents. The deed conveying the
property to the Commissioner shall contain covenants satisfactory to the
Commissioner. The original deed shall be forwarded to the Commissioner as
soon as received from the recording authority. The following documents
shall be forwarded with the deed:
(i) A bill of sale covering any personal property to which the
mortgagee is entitled by reason of the mortgage transaction or by the
acceptance of a deed in lieu of foreclosure.
(ii) An assignment of all claims of the mortgagee against the mortgagor
or others arising out of the mortgage transaction and out of the
foreclosure proceedings or other means by which the property was
acquired.
(iii) An assignment of any claims on account of title insurance and
fire or other hazard insurance, except claims which have been released
with the prior approval of the Commissioner.
(8) Title evidence. Evidence of title, satisfactory to the
Commissioner and meeting the requirements of §207.258a shall be furnished
to the Commissioner (without expense to him) within 45 days of the filing
for record of the deed conveying the property to him.
(9) Disposition of cash items. The provisions of paragraph
(b)(4) of this section, relating to the retention or delivery of cash
items, shall be applicable to cases involving the conveyance of property
to the Commissioner.
(Information collection requirements in paragraph
(b) were approved by the Office of Management and Budget under control
number 2535–0061)
[36 FR 24537, Dec. 22, 1971, as amended at 44 FR 8195, Feb. 8, 1979; 50
FR 38786, Sept. 25, 1985; 51 FR 27838, Aug. 4, 1986; 64 FR 4770, Jan. 29,
1999]
§ 207.258a Title requirements.
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(a) Form of title evidence. The title evidence submitted with a
conveyance of the property to the Commissioner shall be in the form of an
owner's policy of title insurance, except that, if an abstract and
attorney's opinion were accepted by the Commissioner at the time of
insurance, the title evidence may be in such form. The title evidence
shall be effective on or after the date of the recording of the conveyance
to the Commissioner.
(b) Content of title evidence. To be satisfactory to the
Commissioner, the title evidence covering the property conveyed to him
shall show the same title vested in the Commissioner as was vested in the
mortgagor as of the date of the mortgage was filed for record, with the
exception of such liens or other matters affecting the title as may be
approved by the Commissioner.
§ 207.258b Partial payment of claim.
top
(a) Whenever the Commissioner receives notice under §207.258 of a
mortgagee's intention to file an insurance claim and to assign the
mortgage to the Commissioner, the Commissioner may request the mortgagee,
in lieu of assignment, to accept partial payment of the claim under the
mortgage insurance contract and to recast the mortgage, under such terms
and conditions as the Commissioner may determine.
(b) The Commissioner may request the mortgagee to participate in a
partial payment of claim in lieu of assignment only after a determination
that partial payment would be less costy to the Federal government than
other reasonable alternatives for maintaining the low- and moderate-income
character of the project. This determination shall be based upon the
findings listed below and such other findings as the Commissioner deems
appropriate:
(1) The mortgagee is entitled, under §207.255, to assign the mortgage
in exchange for the payment of insurance benefits;
(2) The relief resulting from partial payment, when considered with
other resources available to the project, would be sufficient to restore
the financial viability of the project;
(3) The project is, or can at reasonable cost be made, structurally
sound;
(4) The management of the project is satisfactory to the Commissioner;
and
(5) The default under the insured mortgage was beyond the control of
the mortgagor.
(c) Partial payment of a claim under this section shall be made only
when:
(1) The project is, or potentially could serve as, a low- and
moderate-income housing resource;
(2) The property covered by the mortgage is free and clear of all liens
other than the insured first mortgage and such other liens as the
Commissioner may have approved;
(3) The mortgagee has voluntarily agreed to accept partial payment of
the insurance claim under the mortgage insurance contract and to recast
the remaining mortgage amount under terms and conditions prescribed by the
Commissioner; and
(4) The mortgagor has agreed to repay to the Commissioner an amount
equal to the partial payment, with the obligation secured by a second
mortgage on the project containing terms and conditions prescribed by the
Commissioner. The terms of the second mortgage will be determined on a
case-by-case basis to assure that the estimated project income will be
sufficient to cover estimated operating expenses and debt service on the
recast insured mortgage. The Commissioner may provide for postponed
amortization of the second mortgage.
(d) Payment of insurance benefits under this section shall be in cash.
The Commissioner shall waive the deduction of one percent of the mortgage
funds advanced to the mortgagor, provided for in §207.259(b)(2)(iv), with
respect to a partial payment of a claim under this section. The items
referred to in §207.258(b)(4) shall either be retained by the mortgagee or
delivered to the Commissioner in accordance with instructions to be issued
by the Commissioner with respect to a partial payment of claim under this
section.
(e) Lenders receiving a partial payment of claim following the
Commissioner's endorsement of the Mortgage for full insurance under parts
251, 252, or 255 of this chapter, will pay HUD a fee in an amount set
forth throughFederal Registernotice. HUD, in its discretion,
may collect this fee or deduct the fee from any payment it makes in the
claim process.
[50 FR 38786, Sept. 25, 1985, as amended at 61 FR 49037, Sept. 17,
1996]
§ 207.259 Insurance benefits.
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(a) Method of payment. Upon either an assignment of the mortgage
to the Commissioner or a conveyance of the property to him in accordance
with requirements in §207.258, payment of an insurance claim shall be made
in cash, in debentures, or in a combination of both, as determined by the
Commissioner either at, or prior to, the time of payment, except where the
mortgage is insured pursuant to:
(1) Section 223(e) of the National Housing Act, or
(2) Section 223(f) of the Act and at the time of the insurance
endorsement, (i) the mortgage met the special eligibility requirements
contained in §207.32a(k) or (ii) the mortgage covered a property to be
rehabilitated under part 511 or part 850 of this title, such claim shall
be paid in cash, unless the mortgagee files a written request, with the
application, for payment in debentures. A claim paid in cash on a mortgage
insured under section 223(e) shall be paid from the Special Risk Insurance
Fund. If the mortgagee files an application for payment in debentures on a
claim on a mortgage insured under section 223(e) or 223(f), the claim
shall be paid by issuing debentures and by paying any balance in cash.
(b) Amount of payment; assignment of mortgage. If the mortgage
is assigned to the Commissioner, the insurance benefits shall be paid in
an amount determined as follows:
(1) By adding to the unpaid principal amount of the mortgage, computed
as of the date of default, the following items:
(i) The amount of all payments made by the mortgagee for taxes, special
assessments and water rates which are liens prior to the mortgage; for
insurance on the property; and for any mortgage insurance premiums paid
after default.
(ii) An allowance for reasonable payments made by the mortgagee, with
the approval of the Commissioner, for the completion and preservation of
the property.
(iii) An amount equivalent to the debenture interest which would have
been earned on the portion of the insurance benefits paid in cash, as of
the date such cash payment is made, except that when the mortgagee fails
to meet any one of the applicable requirements of §§207.256 and 207.258
within the specified time and in a manner satisfactory to the Commissioner
(or within such further time as the Commissioner may approve in writing),
the interest allowance in such cash payment shall be computed only to the
date on which the particular required action should have been taken or to
which it was extended.
(2) By deducting from the total of the items computed under paragraph
(b)(1) of this section, the following items:
(i) Any amount received by the mortgagee on account of the mortgage
after the date of default.
(ii) Any net income received by the mortgagee from the property covered
by the mortgage after the date of default.
(iii) The sum of the cash items retained by the mortgagee pursuant to
§207.258(b)(5), except the balance of the mortgage loan not advanced to
the mortgagor.
(iv) An amount equivalent to 1 percent of the mortgage funds advanced
to the mortgagor and not repaid as of the date of default, except that all
or part of the 1 percent may be waived by the Commissioner if, at his
request and in lieu of foreclosure, the mortgage is assigned to the
Secretary.
(v) In the case of a lender receiving insurance benefits for the full
Mortgage amount upon the Commissioner's endorsement of the Mortgage for
full insurance pursuant to 24 CFR parts 251, 252, or 255, the amount of
the fee set forth throughFederal Registernotice. HUD may, in
its discretion, collect this fee rather than deducting the fee from the
total of the items computed under paragraph (b)(1) of this section.
(c) Amount of payment; conveyance of property. If the property
is conveyed to the Commissioner, the insurance benefits shall be paid in
an amount determined in accordance with paragraph (b) of this section,
except that the item set forth in paragraph (b)(2)(iv) of this section
shall not be deducted.
(d) Issuance of certificate of claim. In addition to the
insurance benefits paid under paragraph (b) or (c) of this section, a
certificate of claim shall be issued to the mortgagee.
(1) In the case of an assignment of the mortgage, the certificate shall
be for an amount which the Commissioner determines to be sufficient, when
added to the amount of the insurance benefits to equal the amount the
mortgagee would have received if, on the date of assignment to the
Commissioner, the mortgagor had paid in full all obligations under the
mortgage. Where a conveyance is involved, there shall also be included in
the certificate an allowance in a reasonable amount for any necessary
expenses incurred by the mortgagee in connection with the foreclosure
proceedings or the acquisition of the mortgaged property otherwise and in
connection with the conveyance of the property to the Commissioner.
(2) The certificate of claim shall provide for an uncompounded annual
interest increment of 3 percent to begin as of the date of either
assignment or conveyance.
(e) Issuance of debentures. Where debentures are issued, they
shall meet the following requirements:
(1) Be issued as of the date of default.
(2) Be registered as to principal and interest.
(3) At the option of the Commissioner and with the approval of the
Secretary of the Treasury, be redeemable at par plus accrued interest on
any semiannual interest payment date on 3 months' notice of redemption
given in such manner as the Commissioner shall prescribe. The debenture
interest on the debentures called for redemption shall cease on the
semiannual interest payment date designated in the call notice. The
Commissioner may include with the notice of redemption an offer to
purchase the debentures at par plus accrued interest at any time during
the period between the notice of redemption and the redemption date. If
the debentures are purchased by the Commissioner after such call and prior
to the named redemption date, the debenture interest shall cease on the
date of purchase.
(4) Mature 20 years from the date thereof.
(5) Be issued in such forms and amounts; and be subject to such terms
and conditions; and include such provisions for redemption, if any, as may
be prescribed by the Secretary, with the approval of the Secretary of the
Treasury; and may be in book entry or certificated registered form, or
such other form as the Secretary by regulation may prescribe.
(6) Bear interest from the date of issue, payable semiannually on the
first day of January and the first day of July of each year at the rate in
effect as of the date the commitment was issued, or as of the date of
initial insurance endorsement of the mortgage, whichever rate is higher.
The applicable rates of interest will be published twice each year as a
notice in theFederal Register.
(7) Debentures representing the portion of the claim applicable to an
operating loss loan shall bear interest at the rate in effect as of the
date the commitment to insure such loan was issued, or as of the date of
endorsement for insurance of such loan, whichever rate is the higher,
although debentures representing the portion of the claim applicable to
the original mortgage may bear interest at a different rate.
(f) Mortgagee Time Limits for Supplemental Claims for Additional
Insurance Benefits. A mortgagee may not file for any additional
payments of its mortgage insurance claim more than six months after the
date of final settlement of the insurance claim by the Commissioner. For
the purpose of this section, the term final settlement shall mean the
payment of the insurance claim (in cash or debentures) or billing for any
overpayment of a partial claim that is made by the Commissioner. Final
settlement is based upon the submission by the mortgagee of all required
documents and information pursuant to part 207 of this chapter.
[36 FR 24537, Dec. 22, 1971, as amended at 41 FR 45829, Oct. 18, 1976;
47 FR 26125, June 17, 1982; 49 FR 24654, June 14, 1984; 51 FR 13142, Apr.
17, 1986; 51 FR 27838, Aug. 4, 1986; 57 FR 55112, Nov. 24, 1992; 59 FR
49816, Sept. 30, 1994; 61 FR 49038, Sept. 17, 1996; 71 FR 18153, Apr. 10,
2006]
§ 207.259a Waiver of title objection; mortgages
formerly Commissioner-held.
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If the Commissioner sells a mortgage and such mortgage is later
reassigned to him in exchange for debentures or the property covered by
such mortgage is later conveyed to him in exchange for debentures, the
Commissioner will not object to title by reason of any lien or other
adverse interest that was senior to the mortgage on the date of the
original sale of such mortgage by the Commissioner.
§ 207.260 Maintenance and inspection of
property.
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As long as the mortgage is insured or held by the Commissioner, the
mortgagor must maintain the insured project in accordance with the
physical condition requirements in 24 CFR part 5, subpart G; and the
mortgagee must inspect the project in accordance with the physical
inspection requirements in 24 CFR part 5, subpart G.
[63 FR 46578, Sept. 1, 1998]
Rights in Housing Fund
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§ 207.263 Responsibility for
servicing.
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After January 10, 1994, servicing of insured mortgages must be
performed by a mortgagee which is approved by HUD to service insured
mortgages.
[57 FR 58350, Dec. 9, 1992]
Amendments
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§ 207.499 Effect of amendments.
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The regulations in this subpart may be amended by the Commissioner at
any time and from time to time, in whole or in part, but such amendment
shall not adversely affect the interests of a mortgagee or lender under
the contract of insurance on any mortgage or loan already insured and
shall not adversely affect the interests of a mortgagee or lender on any
mortgage or loan to be insured on which the Commissioner has made a
commitment to insure.
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