Nonjudicial Foreclosure of Single Family Mortgages

SUMMARY: This rule makes final, with changes, the proposed amendments

to title 24 CFR by the addition of a new part 29 that concerns

nonjudicial foreclosure of single family mortgages. A proposed rule was

published on April 7, 1995 (60 FR 17968). The rule implements the

Single Family Mortgage Foreclosure Act of 1994 (the Act), codified at

12 U.S.C. 3751-3768, which authorizes the Secretary of Housing and

Urban Development, as a matter of Federal law, to exercise a statutory

nonjudicial power of sale with respect to any defaulted single family

mortgage held by the Secretary under title I or II of the National

Housing Act or under section 312 of the Housing Act of 1964.

It is important to note that the section numbers that are provided

in this final rule differ from the section numbers that appeared in the

proposed rule due to the abbreviation of the final rule so as not to

duplicate provisions already set forth in the Act.

EFFECTIVE DATE: December 15, 1995.

FOR FURTHER INFORMATION CONTACT: Bruce S. Albright, Office of the

General Counsel, Room 9258, Department of Housing and Urban

Development, Washington, DC 20410, (202) 708-0303. A telecommunications

device for the hearing impaired (TDD) is available at (202) 708-3259.

SUPPLEMENTARY INFORMATION: In the preamble to the proposed rule, the

Department stated that it would give consideration to issuing a much

briefer final rule to implement the Act. The Department has decided to

publish an abbreviated final rule. Rather than repeat the provisions of

the statute, the final rule contains only those provisions that are

necessary for clarification of the statutory procedures, or provisions

that address those areas that give the Secretary discretion to act. Of

course, the statutory requirements apply whether they are repeated in

the rule or not, and removal of the statutory requirements from the

regulation does not affect their applicability. In addition to

resulting in a more streamlined regulation, the removal of statutory

requirements makes rulemaking to update the language of the regulation

whenever there is a change in the statutory language unnecessary.

The combined statutory and regulatory procedures for conducting

nonjudicial foreclosures, which were contained in the proposed rule,

have been placed in an appendix to this final rule and incorporate

changes made in response to the comments received. The final rule will

be codified in the Code of Federal Regulations; the appendix will not

be codified. However, the 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 guide in

the appendix presents such a format.

By a delegation of authority published elsewhere in this issue of

the Federal Register, the authority under the Act to appoint a

foreclosure commissioner or commissioners and to fix the compensation

of commissioners has been delegated to the General Counsel of HUD. This

delegation of authority has been redelegated to the Field Assistant

General Counsel.

By a ``Notice of Application--Foreclosure Commissioners,'' which

will be published at the same time as this rule or as soon thereafter

as possible, the Department requests applications from parties who seek

approval for designation to act as foreclosure commissioners under the

Single Family Mortgage Foreclosure Act of 1994. The Department will

also perform additional outreach in order to encourage interested

parties to apply.

I. Changes Made at Final Rule Stage

In addition to removing text of the proposed rule that only

repeated statutory language, a number of changes are made in this final

rule. The definitions of ``record'' and ``recorded'' are clarified to

include within their meaning the terms ``file'' and ``filed.'' The

requirement in Sec. 29.101(d) of the proposed rule, that a copy of the

designation of the foreclosure commissioner must be mailed with the

Notice of Default and Foreclosure Sale, is removed. One item added by

this final rule at Sec. 29.103 to the information required to be

provided in the notice is the recordation date of the mortgage. The

presale reinstatement provisions of this rule, at Sec. 29.107, are

revised for consistency to use the term ``adjourned'' instead of

``postponed.'' The date of the recording of the mortgage that was

foreclosed is added to the required recitals in the record of

foreclosure and sale (Sec. 29.121).

II. Public Comments

The Department received nine public comments on the proposed rule

during the 60 day comment period that ended on June 7, 1995. The

comments were from two law firms, two financial institutions, two bar

associations, one legal services organization, one title insurers'

trade association, and one foreclosure trustees' association. The

following discussion summarizes the comments and provides HUD's

responses to those comments.

Comment: Support for the Act/Favoring the rule. One commenter

stated that the proposal to create a uniform foreclosure remedy

appeared to be in the best interest of all concerned parties. Another

commenter supported the concepts outlined in the proposed rule, but

felt that the rule could benefit from some ``fine tuning.''

Response: No response is necessary.

Comment: Scope of the final rule. One commenter commented that the

final rule that is published should be a complete and final rule,

rather than an abbreviated one. The commenter stated that there has

been considerable confusion in the legal community about the

codification of the nonjudicial foreclosure statute, given its

enactment in an appropriations bill. The commenter said that while a

HUD guidebook with the procedures for foreclosure commissioners to

follow would be useful, the commenter believed that a complete and

substantial final rule is justified because of the magnitude of changes

embodied in this new procedure, the pre-emption of State law, and the

national basis on which the statute is to be implemented.

Response: The Department is sensitive to the need for clear

instructions in a format that is easily accessible. At the same time,

the Department is concerned about excessive and unnecessary

regulations, and is taking steps to contain the growth of regulations

and reduce the number of regulations. The proposed rule repeated, for

the most part, the authority granted to the Secretary in the statute.

The Department has decided to publish an abbreviated final rule, which

will be codified in the Code of Federal Regulations. However, to ensure

adequate guidance to the public, an appendix to this final rule is also

being published. The appendix will reflect the proposed rule, revised

to incorporate comments.

Regarding concerns over the method of the statute's promulgation,

the effectiveness and the codification of this

[[Page 57485]]

nonjudicial foreclosure statute in the United States Code are not

affected because of the statute's promulgation in an appropriations

act.

Comment: Title insurance. One commenter stated that requests to

provide title insurance will be denied for properties where mortgages

had been foreclosed under the provisions of the Act if, in reliance

upon the statute, the State-imposed redemption period was ignored.

Because of this, the commenter advised against implementation of this

statutory authority.

Response: It is well settled that the Congress has the power to

enact such pre-emptive statutes. Section 814(e) of the Act (12 U.S.C.

3763(e)) specifically provides that there shall be no right of

redemption or right of possession based upon a right of redemption, in

the mortgagor or others subsequent to a foreclosure completed under the

provisions of the Act. Pre-emption of the right of redemption is not

new to foreclosures of Secretary-held mortgages. For example, section

204(l) of the National Housing Act, as amended, already pre-empts the

right of redemption for those situations where a Secretary-held

mortgage is foreclosed by the Secretary. The Department notes that

title insurance is available under the Multifamily Mortgage Foreclosure

Act (MMFA), which also pre-empts redemption rights.

Comment: Borrower protection/Process time. Three commenters noted

that the period of time after sending the Notice of Default and

Foreclosure Sale prior to the date of foreclosure was not sufficient

time for a response from the mortgagor and for the default to be

corrected. One commenter thought that what he found to be a brief

period of time seemed to conflict with the preamble statement that

``foreclosure will be commenced only after extensive attempts to

correct the default.'' One commenter raised concerns that the rule had

very few safeguards to protect affected borrowers, and recommended

distinguishing between occupied and abandoned properties, which have

differing degrees of deterioration. One commenter stated that there was

no opportunity to dispute the claimed amount owed.

Response: The time from the sending of the Notice until the

foreclosure is not unfair to the mortgagor, and does not preclude the

mortgagor from correcting a default. In each case with a Title I, Title

II or section 312 mortgage, the mortgagor has had ample opportunity to

correct the default and avoid foreclosure. Prior notice has been sent

to the mortgagor, a payment plan may have been entered into, and the

mortgagor has had the opportunity to contest the amount owed and been

given the opportunity to convey the property to HUD without proceeding

with foreclosure. The Notice of Default and Foreclosure Sale is only

the culmination of a process whereby HUD has attempted to work with the

debtor to resolve the default and to work out arrangements whereby

foreclosure could be avoided.

A more detailed discussion, which follows, of the acquisition and

servicing of Secretary-held mortgages illustrates the effort that the

Department undertakes to assist homeowners avoid foreclosure.

Most Title II mortgages are acquired pursuant to section 230 of the

National Housing Act. Under this section, a mortgagor who has defaulted

on his mortgage due to circumstances outside his control may seek to

have his mortgagee assign the mortgage to HUD to avoid foreclosure and

attempt to save his home. If HUD finds that certain criteria are met,

the mortgagee assigns the mortgage to HUD and collects the mortgage

insurance benefits. Among the criteria is the requirement that the

mortgagor be able to resume full monthly mortgage payments no later

than the 37th month after the assignment, and must be able to pay the

mortgage in full at the end of the mortgage term, which may be extended

up to ten years to cover the arrearage. If the mortgagor cannot resume

and continue making full monthly payments after 36 months, or fails to

perform under the terms of a forbearance agreement, the Department

initiates foreclosure. A mortgagor under this program who faces

foreclosure has not just recently defaulted on his mortgage. Rather, he

may have been in default for more than three years. The Department has

been in contact with each such mortgagor to work out a solution to the

default. When no resolution is worked out, it will be no surprise to

the mortgagor that HUD is foreclosing.

A Title I home improvement loan that is secured by a security

interest in the secured property is assigned to the Department for the

payment of insurance benefits after default by the borrower. After a

default, the lender attempts to work with the borrower to collect the

delinquent payments. If the loan cannot be brought current, the loan

balance is accelerated and the note and mortgage are assigned to HUD.

It is important to note that the lender has a choice--it can proceed

against the security and forego submitting a claim to HUD, or it can

assign the loan to HUD and receive insurance benefits. Once HUD

acquires the loan, it is sent to a HUD Debt Management Center for

collection activities. The Department attempts to work out payment

plans with all Title I debtors, including those where HUD has a junior

lien interest securing the Title I loans. Prior to issuing a Notice of

Intent to Foreclose to a Title I debtor, the Debt Management Center has

taken numerous steps to attempt to collect the delinquent debt. A

series of demand letters is sent to the debtor requesting payment. The

Debt Management Center reviews the account to see if a realistic

payment plan can be implemented, or if assets are available that could

liquidate the debt. Based on its review, the Debt Management Center may

accept a compromise offer from the debtor. Again, because there have

been numerous contacts with the mortgagor, it cannot be said that

attempts at collection culminating with foreclosure surprise the Title

I mortgagor and deprive him of the means to work out the problem.

Section 312 mortgage loans are serviced by a contract servicer, who

also maintains close contact with the mortgagors. As with the Title I

and Title II mortgagors, there are opportunities to work out default

problems, and it is not until four official notices have been issued to

the borrower over a 90-day period and all attempts to work with the

borrower have failed, that the process begins for referral to the

foreclosure commissioner. A delay of 30 to 60 days will occur before

the section 312 loan reaches the foreclosure commissioner, during which

time the borrower may have an opportunity to reinstate. Therefore, the

borrower may have up to 150 days prior to the 21 day notice in which to

bring the loan current or negotiate a forbearance agreement.

In short, internal procedures that the Department has in place

which are used prior to initiating foreclosure provide that the

mortgagor will have had numerous attempts to address the default under

the mortgage, both with HUD staff and with the prior mortgagee. In

addition, under the Title I, Title II and Section 312 servicing

procedures, there are continuing opportunities to raise and resolve

disputed amounts.

Comment: Time of notice. One commenter recommended that the mailing

date of the notice should be closer to the date of the search of the

records rather than the 45 days before the scheduled sale date, as

provided in the proposed rule, to allow for adequate notice of

lienholders who may file a lien between the 45 days (maximum time for

search) and the 21 days (minimum time for notice to be sent).

Response: If the lienholder of such a lien does not receive notice,

the lien

[[Page 57486]]

would remain and would have to be cleared. The Department believes that

the occurrences of such liens during this time frame would be rare.

Should experience show that this becomes a recurrent issue, the

Department can request the foreclosure commissioners to make additional

searches of the records prior to the 21 day mailing of the notices. The

Department also notes that searches actually may be conducted less than

45 days before the sale and the notice may be sent further in advance

than 21 days. HUD may also adjust the number of days in the

Instructions to be issued to foreclosure commissioners.

Comment: Due process/Retroactive effect of statute. One commenter

attached a memorandum from a Title Insurance Company that expressed

concerns about the applicability of the Act to mortgages executed prior

to the Act's enactment as well as to the absence of a requirement for a

hearing before an impartial tribunal prior to foreclosure.

Another commenter raised questions about the retroactive

application of the statute. The commenter felt that retroactive

application would hurt mortgagors who relied on the availability of

their State's foreclosure procedures when entering into their

mortgages, and that failure to honor those procedures could raise due

process concerns. In addition, the commenter said that persons most

adversely affected are those who requested HUD assignments of their

mortgage before the new regulation, relying on HUD foreclosure

procedures identical to those in their State.

Response: Regarding the retroactive application of the statute, the

Department notes that similar questions were raised with regard to

multifamily mortgages foreclosed pursuant to the Multifamily Mortgage

Foreclosure Act of 1981 (MMFA). The MMFA's retroactive effect has been

upheld in court. In addition, the Department emphasizes that it is

clear that Congress intended that the Act have retroactive effect. For

example, the Act covers the foreclosure of section 312 loans made by

the Secretary, although the authority to make such loans was repealed

by section 289 of the Cranston-Gonzalez National Affordable Housing Act

in 1990.

With regard to the comment about mortgagors relying on certain

foreclosure procedures, the Department questions whether mortgagors,

upon entering into mortgage contracts, actually consider what

foreclosure procedures will be used in the event of default.

Furthermore, the Department emphasizes that mortgagors whose mortgages

are in default and that are assigned to the Department under section

230 of the National Housing Act (and it is these mortgages that

constitute almost all of the mortgages that will be foreclosed under

this Act and regulation) generally receive forbearance relief for a

number of years that greatly exceeds the amount of time that would be

expended if the mortgages had not been assigned and had been foreclosed

earlier by mortgagees using the State foreclosure procedures.

Regarding the comment that the mortgagor should have an informal

hearing before a foreclosure is initiated under these procedures, the

Department is not insensitive to the need to deal with mortgagors

fairly and to give them opportunities to correct deficiencies and to

question the amount owed. As discussed previously, foreclosure of a

Secretary-held mortgage does not come as a surprise to any mortgagor. A

mortgagor whose mortgage is held by HUD has been in contact with the

Department in regard to forbearance, reduced payment plans and other

assistance before foreclosure is initiated. A foreclosure occurs only

as a last resort when the mortgagor is unable or unwilling to make

mortgage payments.

Comment: Notice of new procedures. One commenter urged that if the

statute and rule are to be applied retroactively, mortgagors who have

HUD-insured mortgages should be given actual notice of the new

procedure immediately and again, if there is a default, at the time

information about the assignment program is provided. The commenter

urged that HUD wage an aggressive public information campaign,

including a bilingual information booklet.

Response: The Department plans to give notice of the new

foreclosure procedures to all single-family mortgagors whose mortgages

are held by the Secretary. The Department also intends to inform each

mortgagor accepted into the Title II Assignment program that this new

procedure may be used to foreclose the HUD-held mortgage if foreclosure

becomes necessary. The Department also intends to require new language

to be added to the Title II security instruments used by mortgagees to

provide that if the Department acquires the mortgage, the nonjudicial

foreclosure procedures may be used. The Department will not separately

notify all Title II mortgagors whose existing mortgages are insured

(rather than held) by HUD-FHA of the new procedures, but those

mortgagors will be informed if they default on their insured mortgage

loans and are accepted into the assignment program.

Comment: Other foreclosure procedures. One commenter asserted that

the rule would increase the amount of time, add requirements, and

increase the costs associated with a foreclosure in the commenter's

State, where a nonjudicial procedure for foreclosure is already in

place under State law. The commenter stated that the rule would

adversely affect lending practices in his State. The commenter urged

that the new procedures should be limited to judicial foreclosure

States, and should only apply to HUD-held loans, and not insured loans.

Response: The commenter has expressed a common misconception about

this rule. The Act, and hence the rule, applies to mortgage loans that

were previously insured, and are held by HUD as a result of an

assignment in exchange for the payment of insurance benefits. The rule

also applies to secured Title I loans, Section 312 mortgage loans and

some Title II loans that were made with the Secretary as mortgagee. It

does not apply to mortgages presently insured by HUD. In addition, the

statute gives the Secretary the option of using this new procedure or

using any other procedures available under State or Federal law.

Comment: Reinstatement. One commenter stated that the pre-sale

reinstatement as a matter of right should not be limited to a single

instance, but should be permitted at any time before the sale.

Response: The authority for this regulatory provision is contained

in the statute, see 12 U.S.C. 3759(a)(2). As previously noted, the

mortgages in question are in default, and have been in default for long

periods of time. The mortgagors in such instances have been informed

previously by the Department that HUD would foreclose unless their

accounts were brought current, or their accounts had been brought

current and then fell behind again repeatedly. The statute seeks to

curb such abuses.

Comment: Deficiency judgment. A commenter raised the concern that a

borrower would have to take action to set aside an unfair deficiency

judgment.

Response: The deficiency judgment provisions in the statute and the

regulations are not automatic. The Secretary has discretion about

referring a case for a deficiency judgment action.

Comment: Fees. The Department was urged to conduct a study to

determine what would be a reasonable fee for outside services in

conducting foreclosures of HUD-held mortgages. The commenter noted that

on two previous occasions, the Department had contracted for management

of its foreclosure processes and had accepted

[[Page 57487]]

bids that were unreasonably low, with unsatisfactory results.

Response: Under a Delegation and Redelegation of Authority

published elsewhere in this issue of the Federal Register, HUD's Field

Assistant General Counsel will have authority to designate foreclosure

commissioners under the Act and to determine compensation. It is

anticipated that the foreclosure commissioners will generally be local

law firms or other entities. Compensation will be determined by each

Field Assistant General Counsel based upon information received and

recommendations made to them about what constitutes reasonable

compensation for handling foreclosures in particular geographic areas.

In these and other ways, procedures under the Act are considerably

different from procedures referred to by the commenter that were

previously used for HUD's single family mortgage foreclosures.

Comment: Guidebook availability. One commenter stated that making a

guidebook available to the public would be invaluable inasmuch as

questions would arise concerning why the foreclosure was not being done

in conformity with State law, and would serve as the only viable

resource of information for anyone who wished to learn about the HUD

nonjudicial foreclosure process.

Response: The Department believes that such a guidebook is not

necessary because the guidelines are contained in the appendix to this

final rule.

Comment: Definitions. One commenter felt that the definition of

``owner'' was too broad, and suggested that the term should be limited

to a recorded interest in the property.

Response: The definition in the proposed rule is derived from the

statute.

Comment: Designation of foreclosure commissioner. One commenter

recommended selecting foreclosure commissioners from the U.S.

Foreclosure Network, an organization whose members must meet certain

criteria of professionalism.

Response: Members of this organization may apply pursuant to the

procedures established under the Notice of Application that is being

published in the Federal Register.

Comment: Natural person as foreclosure commissioner. Concern was

expressed by one commenter about having a natural person act as a

foreclosure commissioner and potential problems arising, such as death

or illness. The commenter recommended using a natural person only if

another type of qualified legal entity was not available.

Response: The statute authorizes the designation of a natural

person or an entity that is not a natural person, and the Department

will proceed accordingly in designating foreclosure commissioners.

Other statutory provisions set forth procedures for designating

substitute foreclosure commissioners, if necessary. Should a

foreclosure commissioner who is a natural person die, become ill, or

should another problem arise, the Field Assistant General Counsel may

always designate a substitute foreclosure commissioner.

Comment: Copy of designation. Two commenters observed that

attaching a copy of the designation of the foreclosure commissioner to

the Notice of Default and Foreclosure Sale does not seem necessary and

involves additional costs.

Response: Attachment of a copy of the designation is not a

statutory requirement. Because the Notice of Default and Foreclosure

Sale must include the name, address and telephone number of the

foreclosure commissioner, HUD will not require attachment of the

designation with each notice.

Comment: Notice of Default and Foreclosure Sale. One commenter

asked if the notice should set forth the name of the trustee if the

security instrument being foreclosed is a deed of trust.

Response: The foreclosure commissioner named by HUD will function

as a substitute trustee in the place of any previously named trustee.

Comment: One commenter recommended that the notice should indicate

that the sale is made without covenant or warranty.

Response: This will be included in the Instructions to the

foreclosure commissioner.

Comment: A commenter suggested that the notice should state the

recording date of the mortgage rather than the ``date of the

mortgage.''

Response: The statute provides at 12 U.S.C. 3757(5) that the Notice

of Default and Foreclosure shall contain ``the date of the mortgage * *

*.'' Providing the recordation date as well as the execution date may

be useful, and this requirement has been added to the abbreviated rule

(Secs. 29.103 and 29.121) and appendix (Secs. 7 and 17).

Comment: A commenter suggested that there should be clarification

of the words ``earliest principal installment remaining wholly

unpaid,'' noting that most installments are principal and interest, and

it would seem that even a partially unpaid installment should be

reflected.

Response: Statutory language provides for ``the due date of the

earliest installment payment remaining wholly unpaid * * *.'' (emphasis

added).

Comment: A commenter suggested that the amount or percentage of the

deposit that would be required, and the time that the winning bidder

has to pay the balance of the purchase price, should be specified in

the final rule.

Response: These points will be covered in other guidance that is to

be given to the foreclosure commissioners and to HUD Field Offices. It

is not covered in the final rule, which is an abbreviated rule.

Comment: Service of Notice of Default and Foreclosure. One

commenter noted that in paragraph (a) of Sec. 29.109 of the proposed

rule, the term ``filing'' appears to refer to recording. Since the term

``recording'' is used later, it should be used consistently. The

commenter also pointed out that there may be a question whether the

Notice of Default would be filed ``in the manner authorized for filing

a notice of an action.''

Response: The statute uses the terms ``filed'' and ``filing'' and

in this context, they are used interchangeably with ``record'' and

``recorded.'' Nevertheless, to avoid confusion, the terms ``record''

and ``recorded'' are used in the Appendix.

Comment: A commenter noted that in paragraph (b)(1)(i) of

Sec. 29.109 of the proposed rule, the ``last known address'' should be

defined as the last address known to the Secretary or the foreclosure

commissioner.

Response: ``Last known address'' is statutory language. The meaning

has been clarified, as suggested, in the appendix which follows this

final rule.

Comment: A commenter noted in subparagraph (b)(1)(ii) of

Sec. 29.109 of the proposed rule, that sending notice to ``all

subsequent mortgagors of record'' would be unnecessary since they would

no longer have an interest and a current address would not be

available.

Response: The statute at 12 U.S.C. 3758(2)(A)(ii) requires notice

to ``[a]ll 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 *

* *.'' This provision is contained in the appendix, and HUD will

request foreclosure commissioners to attempt to effectuate service of

notice by mail to the original mortgagor and subsequent mortgagors of

record, unless HUD has released them from any obligation under the note

and mortgage.

Comment: A commenter stated that notice to senior lienholders would

seem unnecessary.

[[Page 57488]]

Response: The statute at 12 U.S.C. 3758(2)(A)(iv) provides that

service of notice of the foreclosure sale shall be served upon all

persons holding liens of record upon the secured property as the record

existed 45 days before that date originally set for the foreclosure

sale.

Comment: The commenter suggested that consistently posting a notice

of the foreclosure sale on the property would avoid questions of proper

notice, rather than the limited posting required if the property

contains multiple dwelling units or the occupants of the security

property are unknown.

Response: HUD is concerned that posting notice on the property for

every foreclosure might lead to vandalism and increased deterioration

of the property. The posting provisions are contained in the statute to

ensure additional notice under limited circumstances. This same issue

arose when this statutory language was drafted and it was noted that

posting of notice is not a universal requirement.

Comment: A commenter raised concerns about the proof of mailing

date. The commenter stated that proof of mailing would be difficult to

establish if the commissioner used a postage meter. It was suggested

that the commissioner could be required to prepare an affidavit of

mailing.

Response: Under 12 U.S.C. 3758(2)(A), ``[t]he notice of foreclosure

sale shall be sent by certified or registered mail, postage prepaid and

return receipt requested * * * .'' The post office stamped receipt of

the mailing, with the postal date stamp, is adequate proof of the

mailing of the notice.

Comment: One commenter raised concerns about the cost of publishing

the Notice of Default and Foreclosure Sale, and questioned whether

publication accomplished any purpose.

Response: This is a statutory requirement.

Comment: Presale reinstatement. One commenter observed that

paragraph (b) of Sec. 29.111 of the proposed rule refers to a sale

postponement of 14 days and says that notice of the rescheduled sale

shall be served as described in Sec. 29.109 of the proposed rule.

However, Sec. 29.109 requires three weeks of publication. The commenter

suggested that Sec. 29.115 of the proposed rule, which deals with

adjournment or cancellation of a sale, should be referenced rather than

Sec. 29.109, which deals with service of the Notice of Default and

Foreclosure Sale.

Response: The commenter is correct and an appropriate change has

been made to Sec. 29.107(d) of this final rule, which also specifies

that the sale may be cancelled in addition to being postponed.

Conforming changes have been made to the appropriate provisions

contained in the appendix.

Comment: Adjournment or Cancellation of Sale. One commenter

suggested eliminating the cost of publication required by paragraph (c)

of proposed Sec. 29.115 by providing for an oral postponement as well

as mail notification to bidders who had submitted sealed bids.

Response: This is a statutory requirement.

Comment: One commenter noted that paragraph Sec. 29.115(c) of the

proposed rule uses the word ``adjourned,'' instead of ``postponed,''

which is the term used in Sec. 29.111(b) of the proposed rule.

Response: This provision is now contained in both Sec. 29.107(d)

and the appendix, and ``adjourned'' has been substituted for

``postponed''.

Comment: Disposition of Sale Proceeds. One commenter questioned the

use of surplus funds from the sale in paragraph (a)(3) of Sec. 29.121

of the proposed rule for payments of liens that are prior to the

mortgage being foreclosed. The commenter stated that this would seem to

conflict with the provisions of many security documents and probably is

not what would be considered to be normal practice.

Response: This is a statutory requirement. In many cases, these

prior liens will be in the nature of taxes, water and sewer liens, and

the like. For Title I loans that are foreclosed, the liens may be

senior mortgages.

Comment: A commenter suggested that a period of time for which

records of the sale should be kept should be specified.

Response: The department's instructions to the foreclosure

commissioners may specify the period of time for record retention.

Comment: Record of Foreclosure and Sale. One commenter noted that

in subparagraph (a)(3) of Sec. 29.127 of the proposed rule, the date

the mortgage was recorded should be used rather than the date of the

mortgage.

Response: This requirement is statutory; see 12 U.S.C. 3764(a)(2).

However, the Department agrees that this additional information would

be useful, and this is included in this final rule at Sec. 29.121 and

in the appendix.

Comment: One commenter suggested that it seems to be unnecessary to

attach the names and addresses of the parties to whom notice was

mailed, as set forth in subparagraph (a)(4) of Sec. 29.127 of the

proposed rule, as long as a recital relative to the proper mailing of

notices is included in the other recitals.

Response: This is a statutory requirement. See 12 U.S.C.

3764(a)(3).

Comment: Recordation of affidavit and addendum. One commenter

stated that the recitations contained in Sec. 29.127(a) of the proposed

rule should be recorded in the public records. The current language of

the proposed rule may be interpreted to read that the commissioner can

make the recitations in an affidavit or addendum, which need not be

recorded with the deed. The commenter recommended that this language

should be clarified to make it clear that the information should be

recorded in the public records, in the deed or an affidavit or addendum

to the deed.

Response: It is the Department's intent that this information be

recorded, whether contained in the deed itself, or an affidavit or

addendum. This will be clarified in the instructions to the

commissioners.

Comment: Effect of sale. Section 29.127(c) of the proposed rule

provides that a sale made and conducted under the provisions of the Act

shall bar the interest of any person whose interest was not docketed or

recorded before the date on which the notice of the foreclosure sale

``was first served by publication.'' One commenter suggested that for

consistency, this wording might be replaced with the wording set forth

in Sec. 29.109(b)(1).

Response: This is a statutory requirement. See section 816(3) of

this Act.

III. Other Matters

Environmental Impact

In accordance with 40 CFR 1508.4 of the CEQ regulations and 24 CFR

50.20 of the HUD regulations, the policies and actions in this document

are determined not to have the potential of having a significant impact

on the quality of the human environment and therefore further

environmental review under the National Environmental Policy Act is not

necessary.

Regulatory Flexibility Act

The Secretary, in accordance with the Regulatory Flexibility Act (5

U.S.C. 605(b)), has reviewed this final rule before publication and, by

approving it, certifies that this proposed rule would not have a

significant economic impact on a substantial number of small entities.

The final rule is limited to implementation of statutory authority for

the nonjudicial foreclosure of HUD-held single family mortgages, and

there are no unusual procedures that would need to be complied with by

small entities.

[[Page 57489]]

Executive Order 12606, the Family

The General Counsel, as the Designated Official under Executive

Order 12606, the Family, has determined that this final rule would not

have potential significant impact on family formation, maintenance, and

general well-being, and thus is not subject to review under the Order.

The final rule implements procedures for the nonjudicial foreclosure of

HUD-held single family mortgages. These procedures would impact those

families who would be required to vacate more quickly than under other

procedures. However, this impact is expected to be small, and would be

offset by the benefit to families to the extent that these procedures

decrease the risk to single-family housing of vandalism, fire loss,

depreciation, and damage and waste, and the attendant adverse effects

on the neighborhoods in which the properties are located.

Executive Order 12512, Federalism

The General Counsel, as the Designated Official under section 6(a)

of Executive Order 12612, Federalism, has determined that although this

final rule would have an effect on States or their political

subdivisions, and the relationship between the Federal government and

the States, the provisions of this final rule do not have ``federalism

implications'' within the meaning of the Order because the authorizing

statute provides for the preemption of State law.

List of Subjects in 24 CFR Part 29

Foreclosures, Mortgages.

Accordingly, title 24 CFR is amended by adding a new part 29,

consisting of subparts A and B, to read as follows:

PART 29--NONJUDICIAL FORECLOSURE OF SINGLE FAMILY MORTGAGES

Subpart A--General

Sec.

29.1 Purpose, scope and applicability.

29.3 Definitions.

Subpart B--Procedures

29.101 Designation of foreclosure commissioner and substitute

commissioner.

29.103 Notice of default and foreclosure sale.

29.105 Service of Notice of Default and Foreclosure Sale.

29.107 Presale reinstatement.

29.109 Conduct of sale.

29.111 Adjournment or cancellation of sale.

29.113 Foreclosure costs.

29.115 Disposition of sales proceeds.

29.117 Transfer of title and possession.

29.119 Redemption rights.

29.121 Record of foreclosure and sale.

29.123 Deficiency judgment.

Authority: 12 U.S.C. 1715b, 3751-3768; 42 U.S.C. 1452b, 3535(d).

Subpart A--General

Sec. 29.1 Purpose, scope and applicability.

(a) Purpose. The purpose of this part is to implement requirements

for the administration of the Single Family Mortgage Foreclosure Act of

1994 (the Act), 12 U.S.C. 3751-3768, that clarify, or are in addition

to, the requirements contained in the Act.

(b) Scope. The Secretary may foreclose on any defaulted single

family mortgage described in the Act 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

part applies only to foreclosure procedures authorized by the Act and

not to any other foreclosure procedures the Secretary may use.

Sec. 29.3 Definitions.

The definitions contained in the Act (at 12 U.S.C. 3752) shall

apply to this part, in addition to and as further clarified by the

following definitions. As used in this part--

Act means the Single Family Mortgage Foreclosure Act of 1994.

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 is as defined in the Act 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 Act, 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 a defined in the Act, except that the reference to

``trustee'' mean ``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).''

Subpart B--Procedures

Sec. 29.101 Designation of foreclosure commissioner and substitute

commissioner.

(a) The Secretary may designate foreclosure commissioners,

including substitute commissioners, as set forth in the Act.

(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. 29.103 Notice of default and foreclosure sale.

(a) The foreclosure commissioner shall commence the foreclosure

under the procedures set forth in the Act.

(b) The Notice of Default and Foreclosure Sale (Notice) shall

include, in addition to the provisions as required by the Act:

(1) The foreclosure commissioner's telephone number;

(2) The legal description of the security property as contained in

the mortgage instrument;

(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

[[Page 57490]]

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. 29.105 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 Act. 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. 29.107 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 Act and as more fully provided in

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 Act, 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 paragraph if the current mortgagor or

owner of record has, on one or more previous occasions, caused a

foreclosure of the mortgage, commenced pursuant to this part 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 Act.

(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. 29.111.

Sec. 29.109 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 accordance with the provisions of the Act.

(b) The foreclosure 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.

(c) 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.

(d) 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.

(e) 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. 29.111 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 Act. The publication of Notice of Default

and Foreclosure Sale, revised pursuant to the Act, may 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. 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.

(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

[[Page 57491]]

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. 29.113 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. 29.115 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. 29.117 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 Act

(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. 29.119 Redemption rights.

Only for purposes of redemption rights under the Act, a foreclosure

shall be considered completed upon the date and at the time of the

foreclosure sale.

Sec. 29.121 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. 29.123 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 Act, 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.

Dated: October 20, 1995.

Henry G. Cisneros,

Secretary.

[The following appendix to part 29 will not be codified in title 24

of the Code of Federal Regulations.]

Appendix to Part 29: Nonjudicial Foreclosure of Single Family

Mortgages--Guide

Item

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 Act), 12 U.S.C. 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

29, is the primary, governing source for regulatory requirements,

and the Act is the primary, governing source for statutory

requirements.

The Act creates a uniform Federal remedy for foreclosure of

certain single family mortgages which are held by the 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 Act 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 Act, HUD may foreclose on any defaulted

single family mortgage (as defined in section 3 of this appendix),

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--

Act 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

[[Page 57492]]

(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 Act.

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 Act.

(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 Act 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 item.

(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 item 11 of this appendix.

(2) If a substitute commissioner is designated, a copy of the

written notice of the designation referred to in paragraph (c) of

this item must be served:

(i) By mail, as described in item 8 of this appendix, (except

that the minimum time periods between mailing and the date of the

foreclosure sale do not apply); or

(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 Act upon the breach of a covenant or condition in

the mortgage agreement.

(b) No foreclosure under the Act 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 Act 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 Act.

(d) The Act 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 Act 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 item 5 of this appendix 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 item 7 of this appendix.

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) The street address or a description of the location of the

security property and the legal description of the security property

as contained in the mortgage instrument.

(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.

[[Page 57493]]

(e) The date, time, and location of the foreclosure sale.

(f) A statement that the foreclosure is being conducted in

accordance with the Act.

(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 Act. 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 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 Act, except that the Notice need not be mailed to any mortgagors

who have been released from all obligations under the mortgage.

Notice under paragraph (b) of this item 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 paragraph (b) of this item 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 Act. Notice under this paragraph

(b) of this item 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 item 4 of this

appendix, paragraph (b) of this item, and item 11 of this appendix,

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 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 item 13 of this

appendix, 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 Act 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 paragraphs (a)(2), (a)(3), or (a)(4) of this item, 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 canceled. Under these circumstances, notice of the

rescheduled sale, if any, will be served as described in item 11(c)

of this appendix.

(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

[[Page 57494]]

manner provided for filing the Notice of Default and Foreclosure Sale

as provided in item 8 of this appendix.

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 item. The sale will be scheduled

for a date 30 or more days after the due date of the earliest unpaid

installment as described in item 7(d) of this appendix, or the

earliest occurrence of a nonmentary default. The sale will be held

at public auction and must be scheduled to being 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 in 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 item 12 of this appendix), and consistent with the

provisions of the Act.

(c) The foreclosure commissioner will 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 must attend the sale.

(d) 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.

(e) Notwithstanding the provisions of paragraph (d) of this

item, 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.

(f) 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 item 13(e) of this appendix.

(g) 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.

(h) 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 item 9 of this appendix.

(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 a.m. and 4 p.m. at the original

place of sale.

(c) Except as provided in paragraph (b) of this item, 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 item 8 of this

appendix, except that publication may be made on any of three

consecutive days prior to the revised date of foreclosure sale, as

long as the first publication is made at least seven days before the

revised sale date. Mailing may be made at any time at least seven

days before the date to which the foreclosure sale has been

adjourned. 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.

12. Validity of Sale

Any foreclosure sale held in accordance with the Act 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 items 8 and 11 of this appendix.

(b) Mileage by the most reasonable road distance for posting

notices described in item 8 of this appendix, 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 item 13 of

this appendix.

(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

[[Page 57495]]

payment of the items described in paragraph (a) of this item, 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

items 14(a)(2) and (a)(3) of this appendix.

(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 Act and its

regulations to assure the validity of the conveyance or confirmation

of such conveyance. The purchaser of property under the Act is

presumed to be a bona fide purchaser.

(d) A purchaser at a foreclosure sale held pursuant to the Act

is entitled to possession upon passage of title under paragraph (c)

of this item, subject to any interest or interests that are not

barred, as described in item 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 item

17(a) of this appendix, in an affidavit or an addendum to the deed

as described in item 17(b) of this appendix, the affidavit or

addendum must be accepted for recordation. Failure to collect or pay

a tax as described in paragraph (f) of this item 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 Act. 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 Act.

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.

(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 Act 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 item 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 Act.

(c) The items set forth in paragraph (a) of this item 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 Act 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 Act, 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

item 8(c) of this appendix, 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 Act 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

[[Page 57496]]

property after deducting payments in the order described in item 14 of

this appendix, 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. 95-28129 Filed 11-14-95; 8:45 am]

BILLING CODE 4210-32-M