Office of the Secretary; Multifamily and Single Family Nonjudicial Foreclosure Procedures Streamlining

SUMMARY: This final rule is a part of HUD's regulatory reinvention

initiative. It combines the current rules for multifamily and single

family nonjudicial foreclosure at 24 CFR parts 27 and 29, respectively,

into separate subparts of part 27, thereby eliminating a CFR part. In

addition, this rule streamlines the multifamily requirements in the

current part 27, which repeats substantial portions of the authorizing

statute, and removes certain single family requirements in the current

part 29 that are more restrictive than the authorizing statute.

EFFECTIVE DATE: October 15, 1996.

FOR FURTHER INFORMATION CONTACT: With respect to Single Family Housing:

Bruce S. Albright, Office of General Counsel, U.S. Department of

Housing and Urban Development, Room 9240, Washington, DC 20410, (202)

708-0080. A telecommunications device for the hearing impaired (TTY) is

available at (202) 708-3259. (These are not toll-free numbers.)

With respect to Multifamily Housing: Herbert Goldblatt, Office of

General Counsel, U.S. Department of Housing and Urban Development, Room

10184, Washington, DC 20410, (202) 708-3200. A telecommunications

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

(These are not toll-free numbers.)

SUPPLEMENTARY INFORMATION:

I. General Background

On March 4, 1995, President Clinton issued a memorandum to all

Federal departments and agencies regarding regulatory reinvention. In

response to this memorandum, the Department of Housing and Urban

Development conducted a page-by-page review of its regulations to

determine which can be eliminated, consolidated, or otherwise improved.

HUD has determined that the regulations for the Nonjudicial Foreclosure

of Multifamily Mortgages at 24 CFR part 27 can be improved and

streamlined by eliminating unnecessary provisions. The regulations for

Nonjudicial Foreclosure of Single Family Mortgages at 24 CFR part 29

were already issued in streamlined form in a final rule published on

November 15, 1995 (60 FR 57489). The Department has determined that

these single family provisions may appropriately be consolidated with

the multifamily provisions as a separate subpart in 24 CFR part 27.

This rule also removes certain single family requirements, as explained

below in this preamble, that are more restrictive than the authorizing

statute.

The combined statutory and regulatory procedures for conducting

nonjudicial foreclosures have been placed in appendices to this final

rule. Appendix A provides a Guide for the multifamily procedures;

Appendix B provides a Guide for the Single Family provisions. The final

rule will be codified in the Code of Federal Regulations; the

appendices will not be codified. However, the appropriate appendix will

be included in information to be provided to foreclosure commissioners,

and which will be available to the public. HUD is striving to keep

communications about requirements as clear, simple and timely as

possible, and the Guides in the appendices present such a format.

II. Multifamily Rule Changes

Several provisions in the multifamily nonjudicial foreclosure

regulations repeat statutory language from the Multifamily Mortgage

Foreclosure Act of 1981 (the Act) (12 U.S.C. 3701 et seq.). It is

unnecessary to maintain statutory requirements in the Code of Federal

Regulations (CFR), since those requirements are otherwise fully

accessible and binding. Furthermore, if regulations contain statutory

language, HUD must amend the regulations whenever Congress amends the

statute. Therefore, this rule will remove repetitious statutory

language and, where appropriate, replace it with a citation to the

specific statutory section.

Also being deleted from the regulatory text of part 27 is language

that is only advisory, such as the list of examples of terms which the

Secretary may require the purchaser to agree to in the current

Sec. 27.20(c).

III. Single Family Rule Changes

The single family requirements in the current part 29 have already

been streamlined in a final rule published on November 15, 1995 (60 FR

57484). These requirements are moved in this final rule to become

subpart B of part 27, and part 29 is removed.

As a result of the initial use of this new authority to foreclose

mortgages by nonjudicial procedures, the Department has noted three

areas where the regulations at 24 CFR Secs. 29.103(b)(2), 29.109(b) and

29.111(a) are more restrictive than the authorizing statute, the Single

Family Mortgage Foreclosure Act of 1994 (the Statute), 12 U.S.C. 3751-

3768. Because these restrictions present problems for efficient and

cost-effective implementation of the Statute, they are being removed.

The regulatory provisions in question, discussed below, require

inclusion of the description of the property as contained in the

security instrument in the Notice of Default and Foreclosure Sale; the

presence of the designated foreclosure commissioner at the foreclosure

sale; and the service by publication of the Notice of Default and

Foreclosure Sale prior to the revised date of an adjourned foreclosure

sale.

Property Description in the Notice of Default and Foreclosure Sale

In 12 U.S.C. 3757(4), the Notice of Default and Foreclosure Sale is

to include, among other items, ``* * * the street address or a

description of the location of the property, and a description of the

security property sufficient to identify the property to be sold.''

[Underlining provided.] The provisions of the existing regulation on

this point, at 24 CFR 29.103(b)(2), are more restrictive than the

Statute. The regulatory provisions state that the Notice of Default and

Foreclosure Sale must contain, among other things, ``[t]he legal

description of the security property as contained in the mortgage

agreement.'' [Underlining provided.] HUD has found that in some

jurisdictions, the description contained in the security instrument can

be very lengthy, in fact, much longer than would be necessary to

sufficiently identify the property to be sold at the foreclosure sale.

Requiring an unnecessarily lengthy legal description can, in some

instances, result in additional expense in publishing the Notice of

Default and Foreclosure Sale, resulting in increased costs to the

insurance funds.

In order to correct this situation, Sec. 29.103(b)(2) of the

existing rule is revised at Sec. 27.103(b)(2) of this rule to conform

the regulation to the less restrictive language in the statute.

Presence of the Foreclosure Commissioner at the Sale

While section 369B(b) of the Multifamily Housing Mortgage

Foreclosure Act of 1981 (12 U.S.C. 3710), pertaining to the conduct of

the sale, specifically requires the attendance of the foreclosure

commissioner at the foreclosure sale, the provisions of the

[[Page 48547]]

Single Family Mortgage Foreclosure Act of 1994 governing the conduct of

the sale are silent on attendance by the commissioner at the sale, see

12 U.S.C. 3760. Furthermore, Section 3760(b)(1)(C) of 12 U.S.C.

specifically provides that ``The foreclosure commissioner may serve as

auctioneer, or, in accordance with regulations of the Secretary, may

employ an auctioneer to be paid from the commission provided for in

section 3761(5).'' At section 3761(2) of 12 U.S.C., the statutory

authority governing foreclosure costs provides for the payment of costs

arising from ``[m]ileage * * * for posting notices and for the

foreclosure commissioner's or auctioneer's attendance at the sale * *

*.'' [Underlining provided.]

The regulations at 24 CFR 29.109(b) presently provide that the

foreclosure commissioner or, an employee of the commissioner, if the

commissioner is not a natural person, must attend the foreclosure sale.

This has been found to be restrictive in situations where a sole single

family property is a great distance from a foreclosure commissioner's

location. This results in the commissioner having to spend an

inordinate amount of time and travel expense in order to personally

attend the sale or, in the alternative, it results in the

unavailability of foreclosure commissioners to accept such case

referrals. The regulation is therefore amended in this rule by not

including the language of Sec. 29.109(b).

Service by Publication of Notice of an Adjourned Foreclosure Sale

The Statute at 12 U.S.C. 3760(c)(2) requires service by publication

and mailing of the revised Notice of Default and Foreclosure Sale when

a sale is adjourned to a later date, and permits publication to be made

on any of three separate days before the revised date of foreclosure

sale. The current section Sec. 29.111(a) requires publication of the

Notice of Default and Foreclosure Sale to be made on any of three

consecutive days prior to the revised date of foreclosure sale so long

as the first publication is made at least seven days before the date to

which the sale has been adjourned. This requirement could in some

circumstances be impossible to comply with, because it does not take

into account cases in which there are no daily newspapers of general

circulation that would permit publication on three consecutive days.

The requirement in Sec. 29.111(a) for the first publication to be made

at least seven days before the sale is also not part of the Statute,

which only makes service by mail subject to the seven days requirement.

This rule, at Sec. 27.111(a), returns to the statutory language

permitting publication to be made on any of three separate days before

the revised date of foreclosure sale. In addition, to give full

implementation to the Statute, which allows adjournment of the

foreclosure sale for ``not less than 9 and not more than 31 days,''

this rule takes into account cases in which the frequency of

publication of newspapers of general circulation would not permit

publication on three separate days before the date to which the sale

has been adjourned. To avoid the frustration of the statutory provision

that permits adjournments of not less than 9 days, this rule provides

that if there is no newspaper of general circulation that would permit

publication on any of three separate days before the revised date of

foreclosure sale, the Notice of Default and Foreclosure Sale must be

posted, not less than nine days before the date to which the sale has

been adjourned, at the courthouse of any county or counties in which

the property is located, and at the place where the sale is to be held.

This provision is modeled on the exception to publication by posting

provision in the Statute at 12 U.S.C. 3758(3)(B), and avoids such a

Statute-frustrating result as not being able to adjourn a foreclosure

sale for less than 21 days in an area where a newspaper is published

only weekly.

IV. Findings and Certifications

Justification for Final Rulemaking

HUD generally publishes a rule for public comment before issuing a

rule for effect, in accordance with its own regulations on rulemaking

in 24 CFR part 10. However, part 10 provides for exceptions to the

general rule if the agency finds good cause to omit advance notice and

public participation. The good cause requirement is satisfied when

prior public procedure is ``impracticable, unnecessary, or contrary to

the public interest'' (24 CFR 10.1). HUD finds that good cause exists

to publish this rule for effect without first soliciting public

comment. This rule merely removes unnecessary regulatory provisions and

does not establish or affect substantive policy. Therefore, prior

public comment is unnecessary.

Unfunded Mandates Reform Act

Title II of the Unfunded Mandates Reform Act of 1995 establishes

requirements for Federal agencies to assess the effects of their

regulatory actions on State, local, local and tribal governments and

the private sector. This rule does not impose any Federal mandates on

any State, local or tribal governments or the private sector within the

meaning of the Unfunded Mandates Reform Act of 1995.

Regulatory Flexibility Act

The Secretary, in accordance with the Regulatory Flexibility Act

(5 U.S.C. 605(b)), has reviewed and approved this rule, and in so doing

certifies that this rule will not have a significant economic impact on

a substantial number of small entities. This rule merely streamlines

regulations by removing unnecessary provisions. The rule will have no

adverse or disproportionate economic impact on small businesses.

Environmental Impact

This rulemaking does not have an environmental impact. This

rulemaking simply amends an existing regulation by consolidating and

streamlining provisions. It does not change the environmental review

procedures or the physical impact of the program or the projects

assisted under the regulations being amended.

Executive Order 12612, Federalism

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

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

will not have substantial direct effects on States or their political

subdivisions, or the relationship between the Federal government and

the States, or on the distribution of power and responsibilities among

the various levels of government. No programmatic or policy changes

that would affect the relationship between the Federal Government and

State and local governments will result from this rule.

Executive Order 12606, The Family

The General Counsel, as the Designated Official under Executive

Order 12606, The Family, has determined that this rule will not have

the potential for significant impact on family formation, maintenance,

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

Order. No significant change in existing HUD policies or programs will

result from promulgation of this rule.

List of Subjects

24 CFR Part 27

Administrative practice and procedure, Loan programs--housing and

community development.

[[Page 48548]]

24 CFR Part 29

Administrative practice and procedure, Loan programs--housing and

community development.

Accordingly, under the authority 420 U.S.C. 3535(d) subtitle A of

title 24 of the Code of Federal Regulations is amended as follows:

1. Part 27 is revised to read as follows:

PART 27--NONJUDICIAL FORECLOSURE OF MULTIFAMILY AND SINGLE FAMILY

MORTGAGES

Subpart A--Nonjudicial Foreclosure of Multifamily Mortgages

Sec.

27.1 Purpose.

27.2 Scope and applicability.

27.3 Definitions.

27.5 Prerequisites to foreclosure.

27.10 Designation of a foreclosure commissioner.

27.15 Notice of default and foreclosure sale.

27.20 Conditions of foreclosure sale.

27.25 Termination or adjournment of foreclosure sale.

27.30 Conduct of the sale.

27.35 Foreclosure costs.

27.40 Disposition of sale proceeds.

27.45 Transfer of title and possession.

27.50 Management and disposition by the Secretary.

Subpart B--Nonjudicial Foreclosure of Single Family Mortgages

27.100 Purpose, Scope and Applicability.

27.101 Definitions.

27.102 Designation of foreclosure commissioner and substitute

commissioner.

27.103 Notice of default and foreclosure sale.

27.105 Service of Notice of Default and Foreclosure Sale.

27.107 Presale reinstatement.

27.109 Conduct of sale.

27.111 Adjournment or cancellation of sale.

27.113 Foreclosure costs.

27.115 Disposition of sales proceeds.

27.117 Transfer of title and possession.

27.119 Redemption rights.

27.121 Record of foreclosure and sale.

27.123 Deficiency judgment.

Authority: 12 U.S.C. 1715b, 3701-3717, 3751-3768; 42 U.S.C.

1452b, 3535(d).

Subpart A--Nonjudicial Foreclosure of Multifamily Mortgages

Sec. 27.1 Purpose.

The purpose of this subpart is to implement requirements for the

administration of the Multifamily Mortgage Foreclosure Act of 1981 (the

Act) (12 U.S.C. 3701-3717), that clarify, or are in addition to, the

requirements contained in the Act, which are not republished here and

must be consulted in conjunction with the requirements of this subpart.

The Act creates a uniform Federal remedy for foreclosure of multifamily

mortgages. Under a delegation of authority published on February 5,

1982 (47 FR 5468), the Secretary has delegated to the HUD General

Counsel his powers under the Act to appoint a foreclosure commissioner

or commissioners and to substitute therefor, to fix the compensation of

commissioners, and to promulgate implementing regulations.

Sec. 27.2 Scope and applicability.

(a) Under the Act and this subpart, the Secretary may foreclose on

any defaulted Secretary-held multifamily mortgage encumbering real

estate in any State. The Secretary may use the provisions of these

regulations to foreclose on any multifamily mortgage regardless of when

the mortgage was executed.

(b) The Secretary may, at the Secretary's option, use other

procedures to foreclose defaulted multifamily mortgages, including

judicial foreclosure in Federal court and nonjudicial foreclosure under

State law. This subpart applies only to foreclosure procedures

authorized by the Act and not to any other foreclosure procedures the

Secretary may use.

Sec. 27.3 Definitions.

The definitions contained in the Act (at 12 U.S.C. 3702) shall

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

following definitions. As used in this subpart:

General Counsel means the General Counsel of the Department of

Housing and Urban Development;

Multifamily mortgage does not include a mortgage covering a

property on which there is located a one- to four-family residence,

except when the one- to four-family residence is subject to a mortgage

pursuant to section 202 of the Housing Act of 1959 (12 U.S.C. 1701q),

or section 811 (42 U.S.C. 8013) of the National Affordable Housing Act.

The definition of multifamily mortgage also includes a mortgage taken

by the Secretary in connection with the previous sale of the project by

the Secretary (purchase money mortgage).

Sec. 27.5 Prerequisites to foreclosure.

Before commencement of a foreclosure under the Act and this

subpart, HUD will provide to the mortgagor an opportunity informally to

present reasons why the mortgage should not be foreclosed. Such

opportunity may be provided before or after the designation of the

foreclosure commissioner but before service of the notice of default

and foreclosure.

Sec. 27.10 Designation of a foreclosure commissioner.

(a) When the Secretary determines that a multifamily mortgage

should be foreclosed under the Act and this subpart, the General

Counsel will select and designate one or more foreclosure commissioners

to conduct the foreclosure and sale. The method of selection and

determination of the qualifications of the foreclosure commissioner

shall be at the discretion of the General Counsel, and the execution of

a designation pursuant to paragraph (b) of this section shall be

conclusive evidence that the commissioner selected has been determined

to be qualified by the General Counsel.

(b) After selection of a foreclosure commissioner, the General

Counsel shall designate the commissioner in writing to conduct the

foreclosure and sale of the particular multifamily mortgage. The

written designation shall be duly acknowledged and shall state the name

and business or residential address of the commissioner and any other

information the General Counsel deems necessary. The designation shall

be effective upon execution by the General Counsel or his designate.

Upon receipt of the designation, the commissioner shall demonstrate

acceptance by signing the designation and returning a signed copy to

the General Counsel.

(c) The General Counsel may at any time, with or without cause,

designate a substitute commissioner to replace a previously designated

commissioner. Designation of a substitute commissioner shall be in

writing and shall contain the same information and be made effective in

the same manner as the designation of the original commissioner. Upon

designation of a substitute commissioner, the substitute commissioner

shall serve a copy of the written notice of designation upon the

persons listed at sections 369(1) (A) through (C) of the Act (12 U.S.C.

3708(1) (A) through (C)) either by mail, in accordance with section

369(1) of the Act (12 U.S.C. 3708(1)), except that the time limitations

in that section will not apply, or by any other manner which in the

substitute commissioner's discretion is conducive to giving timely

notice of substitution.

Sec. 27.15 Notice of default and foreclosure sale.

(a) Within 45 days after accepting his or her designation to act as

commissioner, the commissioner shall commence the foreclosure by

serving a Notice of Default and Foreclosure Sale.

[[Page 48549]]

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

following information:

(1) The Notice shall state that all deposits and the balance of the

purchase price shall be paid by certified or cashier's check. The

Notice shall state that no deposit will be required of the Secretary

when the Secretary bids at the foreclosure sale.

(2) Any terms and conditions to which the purchaser at the

foreclosure sale must agree under Sec. 27.20. The Notice need not

describe at length each and every pertinent term and condition,

including any required use agreements and deed covenants, if it

describes these terms and conditions in a general way and if it states

that the precise terms will be available from the commissioner upon

request.

(c) The Notice need not be mailed to mortgagors who have been

released from all obligations under the mortgage.

(d) In deciding which newspaper or newspapers to select as general

circulation newspapers for purposes of publication of the required

notice, the commissioner need not select the newspaper with the largest

circulation.

(e) In addition to Notice posting requirements included in the Act,

the Notice shall also be posted in the project office and in such other

appropriate conspicuous places as the commissioner deems appropriate

for providing notice to all tenants. Posting shall not be required if

the commissioner in his or her discretion finds that the act of posting

is likely to lead to a breach of the peace or may result in the

increased risk of vandalism or damage to the property. Any such finding

will be made in writing. Entry on the premises by the commissioner for

the purpose of posting shall be privileged as against all other

persons.

(f) When service of the Notice of Default and Foreclosure Sale is

made by mail, the commissioner shall at the same time and in the same

manner serve a copy of the instrument by which the General Counsel,

under Sec. 27.10(b), has designated him or her to act as commissioner.

(g) At least 7 days before the foreclosure sale, the commissioner

will record both the instrument designating him or her to act as

commissioner and the Notice of Default and Foreclosure Sale in the same

office or offices in which the mortgage was recorded.

Sec. 27.20 Conditions of foreclosure sale.

(a) The requirements of section 367(b)(2)(A) of the Act (12 U.S.C.

3706(b)(2)(A)) apply if a majority of the residential units in a

property subject to foreclosure sale pursuant to the Act and this

subpart are occupied by residential tenants either on the date of the

foreclosure sale or on the date on which the General Counsel designates

the foreclosure commissioner.

(b) Terms which the Secretary may find appropriate to require

pursuant to section 367(b) of the Act (12 U.S.C. 3706(b)), and such

other provisions of law as may be applicable, may include provisions

relating to use and ownership of the project property, tenant admission

standards and procedures, rent schedules and increases, and project

operation and maintenance. In determining terms which may be

appropriate to require, the Secretary shall consider:

(1) The history of the project, including the purposes of the

program under which the mortgage insurance or assistance was provided,

and any other program of HUD under which the project was developed or

otherwise assisted and the probable causes of project failure resulting

in its default;

(2) A financial analysis of the project, including an appraisal of

the fair market value of the property for its highest and best use;

(3) A physical analysis of the project, including the condition of

the structure and grounds, the need for rehabilitation or repairs, and

the estimated costs of any such rehabilitation or repairs;

(4) The income levels of the occupants of the project;

(5) Characteristics, including rental levels, of comparable housing

in the area, with particular reference to whether current conditions

and discernible trends in the area fairly indicate a likelihood that,

for the foreseeable future after foreclosure and sale, the project will

continue to provide rental or cooperative housing and market rentals

obtainable in the project will be affordable by low- or moderate-income

persons;

(6) The availability of or need for rental housing for low- and

moderate-income persons in the area, including actions being taken or

projected to be taken to address such needs and the impact of such

actions on the project;

(7) An assessment of the number of occupants who might be displaced

as a result of the manner of disposition;

(8) The eligibility of the occupants of the property for rental

assistance under any program administered by HUD and the availability

of funding for such assistance if necessary in order that the units

occupied by such occupants will remain available to and affordable by

such persons, or if necessary in order to assure the financial

feasibility of the project after foreclosure and sale subject to the

terms to be required by the Secretary; and

(9) Such other factors relating to the project as the Secretary

shall consider appropriate.

(c) Terms which the Secretary may require to be agreed to by the

purchaser pursuant to section 367(b) of the Act (12 U.S.C. 3706(b))

shall generally not be more restrictive, or binding for a longer

duration, than the terms by which the mortgagor was bound prior to the

foreclosure. For example: If the mortgage being foreclosed was held by

the Secretary under section 312 of the Housing Act of 1964 (42 U.S.C.

1452b), any terms required by the Secretary pursuant to this section

shall be in effect no longer than five years after the completion of

the rehabilitation work funded by the section 312 loan. No terms shall

be required pursuant to this section if the foreclosure sale occurs

more than five years after the completion of such rehabilitation work

(signified by the due date for commencement of amortization payments in

the section 312 loan note).

(d) The limitation contained in paragraph (c) of this section

applies only to such terms as the Secretary may require the purchaser

to agree to, as a condition and term of the sale, under paragraph (a)

of this section. Nothing contained in paragraph (c) of this section

shall prevent the Secretary and the purchaser from entering into a

subsidy agreement under any program administered by the Secretary

containing terms binding upon either party which are longer in duration

than would be permitted to be required by paragraph (c) of this

section.

(e) Any terms required by the Secretary to be agreed to by the

purchaser as a condition and term of sale under this section and

section 367(b) of the Act (12 U.S.C. 3706(b)) shall be embodied in a

use agreement to be executed by the Secretary and the purchaser. Such

terms also may be included, or referred to, in appropriate covenants

contained in the deed to be delivered by the foreclosure commissioner

under Sec. 27.45. Terms required by the Secretary pursuant to this

section shall be stated or described in the Notice of Default and

Foreclosure Sale under Sec. 27.15.

Sec. 27.25 Termination or adjournment of foreclosure sale.

(a) Before withdrawing the security property from foreclosure under

section 369A(a) of the Act (12 U.S.C. 3709(a)), the commissioner shall

notify the Secretary of the proposed withdrawal by telephone or

telegram and shall provide the Secretary with a written statement of

[[Page 48550]]

the reasons for the proposed withdrawal along with all documents

submitted by the mortgagor in support of the proposed withdrawal. Upon

receipt of this statement, the Secretary shall have 10 days within

which to demonstrate orally or in writing why the security property

should not be withdrawn from foreclosure. The Secretary shall provide

the mortgagor with a copy of any statement prepared by the Secretary in

opposition to the proposed withdrawal at the same time the statement is

submitted to the commissioner. If the Secretary receives the

commissioner's written statement less than 10 days before the scheduled

foreclosure sale, the sale shall automatically be postponed for 14

days. Under these circumstances, notice of the rescheduled sale shall

be served as described in section 369B(c) of the Act (12 U.S.C.

3710(c)).

(b) The commissioner may not withdraw the security property from

foreclosure under section 369A(a) of the Act (12 U.S.C. 3709(a)) more

than once unless the Secretary consents in writing to such withdrawal.

(c) The commissioner shall, in the case of a sale adjourned to a

later date, mail a copy of the revised Notice of Default and

Foreclosure Sale to the Secretary at least seven days before the date

to which the sale has been adjourned.

(d) If upon application by the mortgagor, the commissioner refuses

to withdraw the property from foreclosure under section 369A(a) of the

Act (12 U.S.C. 3709(a)), the commissioner shall provide the mortgagor

and the Secretary with a written statement of the reasons for the

refusal.

Sec. 27.30 Conduct of the sale.

(a) The commissioner shall accept written one-price sealed bids

from any party including the Secretary so long as those bids conform to

the requirements described in the Notice of Default and Foreclosure

Sale. The commissioner shall announce the name of each such bidder and

the amount of the bid. The commissioner shall accept oral bids from any

party, including parties who submitted one-price sealed bids, if those

oral bids conform to the requirements described in the Notice of

Default and Foreclosure Sale. The commissioner will announce the amount

of the high bid and the name of the successful bidder before the close

of the sale.

(b) Relatives of the commissioner who may not bid at the

foreclosure sale include parents, siblings, spouses and children.

Related business entities which may not bid include entities or

concerns whose relationship with the commissioner at the time the

commissioner is designated is such that, directly or indirectly, one

concern or individual formulates, directs, or controls the other

concern; or has the power to formulate, direct, or control the other

concern; or has the responsibility and authority either to prevent in

the first instance, or promptly to correct, the offensive conduct of

the other concern. Business concerns are also affiliates of each other

when a third party is similarly situated with respect to both concerns.

(c) If the commissioner employs an auctioneer to conduct the

foreclosure sale, the auctioneer must be a licensed auctioneer, an

officer of State or local government, or any other person who commonly

conducts foreclosure sales in the area in which the security property

is located.

Sec. 27.35 Foreclosure costs.

Pursuant to section 369C(5) of the Act (12 U.S.C. 3711(5)), a

commission to the foreclosure commissioner for the conduct of the

foreclosure will be paid in an amount to be determined by the General

Counsel. A commission may be allowed to the commissioner

notwithstanding termination of the sale or appointment of a substitute

commissioner before the sale takes place.

Sec. 27.40 Disposition of sale proceeds.

(a) The priority of the Secretary's lien shall be determined by the

Federal first-in-time first-in-right rule. State laws affording

priority to liens recorded after the mortgage are preempted.

(b) If there is more than one party holding a lien or assessment

payable from sales proceeds, the claim of each party holding the same

kind of lien or assessment will be given the relative priority to which

it would be entitled under the law of the State in which the security

property is located.

(c) The commissioner will keep such records as will permit the

Secretary to verify the costs claimed under section 369C of the Act (12

U.S.C. 3711), and otherwise to audit the commissioner's disposition of

the sale proceeds.

Sec. 27.45 Transfer of title and possession.

(a) If the Secretary is the successful bidder, the foreclosure

commissioner shall issue a deed to the Secretary upon receipt of the

amount needed to pay the costs listed in sections 369D (1) through (3)

of the Act (12 U.S.C. 3712(1) through (3)). If the Secretary is not the

successful bidder, the foreclosure commissioner shall issue a deed to

the purchaser upon receipt of the entire purchase price and execution

by the Secretary and the purchaser of any use agreement referred to in

Sec. 27.20(e). Any covenants reflecting terms required by Sec. 27.20

shall be contained in the commissioner's deed.

(b) Subject to any terms required to be agreed to by Sec. 27.20,

any commercial tenant and any residential tenant remaining in

possession after the expiration of his or her lease or after the

passage of one year, whichever event occurs first, shall be deemed a

tenant at sufferance and may be evicted in accordance with applicable

State or local law.

Sec. 27.50 Management and disposition by the Secretary.

When the Secretary is the purchaser of the security property, the

Secretary shall manage and dispose of it in accordance with section 203

of the Housing and Community Development Amendments of 1978, as

amended, 12 U.S.C. 1701z-11, and in accordance with 24 CFR part 290.

Subpart B--Nonjudicial Foreclosure of Single Family Mortgages

Sec. 27.100 Purpose, Scope and Applicability.

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

requirements for the administration of the Single Family Mortgage

Foreclosure Act of 1994 (the Statute), 12 U.S.C. 3751-3768, that

clarify, or are in addition to, the requirements contained in the

Statute, which are not republished here and must be consulted in

conjunction with the requirements of this subpart.

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

family mortgage described in the Statute regardless of when the

mortgage was executed.

(c) Applicability. The Secretary may, at the Secretary's option,

use other procedures to foreclose defaulted single family mortgages,

including judicial foreclosure in State or Federal Court, and

nonjudicial foreclosures under State law or any other Federal law. This

subpart applies only to foreclosure procedures authorized by the

Statute and not to any other foreclosure procedures the Secretary may

use.

Sec. 27.101 Definitions.

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

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

following definitions. As used in this subpart:

County means a political subdivision of a State or Territory of the

United States, created to aid in the administration of State law for

the purpose of local self government, and

[[Page 48551]]

includes a parish or any other equivalent subdivision.

Mortgage is as defined in the Statute except that the reference to

property as ``(real, personal or mixed)'' means ``any property (real or

mixed real and personal).''

Mortgage agreement is as defined in the Statute, and also means any

other similar instrument or instruments creating the security interest

in the real estate for the repayment of the note or debt instrument.

Mortgagor is as defined in the Statute, except that the reference

to ``trustee'' means ``trustor.''

Record; Recorded means to enter or entered in public land record

systems established under State statutes for the purpose of imparting

constructive notice to purchasers of real property for value and

without knowledge, and includes ``register'' and ``registered'' in the

instance of registered land, and ``file'' and its variants in the

context of entering documents in public land records.

Secretary means the Secretary of Housing and Urban Development,

acting by and through any authorized designee exclusive of the

foreclosure commissioner.

Security Property is as defined in the statute except that the

reference to property as ``(real, personal or mixed)'' means ``any

property (real or mixed real and personal).''

Sec. 29.102 Designation of foreclosure commissioner and substitute

commissioner.

(a) The Secretary may designate foreclosure commissioners,

including substitute commissioners, as set forth in the Statute.

(b) The method of selection and determination of the qualifications

of the foreclosure commissioner shall be at the discretion of the

Secretary. The execution of a designation pursuant to this section

shall be conclusive evidence that the commissioner selected has been

determined to be qualified by the Secretary. The designation is

effective upon execution.

Sec. 27.103 Notice of default and foreclosure sale.

(a) The foreclosure commissioner shall commence the foreclosure

under the procedures set forth in the Statute.

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

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

(1) The foreclosure commissioner's telephone number;

(2) A description of the security property sufficient to identify

the property to be sold;

(3) The date the mortgage was recorded;

(4) Identification of the failure to make payment, including the

entire amount delinquent as of a date specified, a statement generally

describing the other costs that must be paid if the mortgage is to be

reinstated, the due date of the earliest principal installment payment

remaining wholly unpaid as of the date on which the notice is issued

upon which the foreclosure is based, or a description of any other

default or defaults upon which foreclosure is based, and the

acceleration of the secured indebtedness; and

(5) The bidding and payment requirements for the foreclosure sale,

including the time and method of payment of the balance of the

foreclosure purchase price, that all deposits and the balance of the

purchase price shall be paid by certified or cashier's check, and that

no deposit will be required of the Secretary when the Secretary bids at

the foreclosure sale.

Sec. 27.105 Service of Notice of Default and Foreclosure Sale.

(a) The Notice of Default and Foreclosure Sale shall be served in

accordance with the provisions of the Statute. When notice is sent by

mail, multiple mailings are not required to be sent to any party with

multiple capacities, e.g., an original mortgagor who is the security

property owner and lives in one of the units. The date of the receipt

for the postage paid for the mailing may serve as proof of the date of

mailing of the notice.

(b) Notice need not be mailed to any mortgagors who have been

released from all obligations under the mortgage.

Sec. 27.107 Presale reinstatement.

(a) The foreclosure commissioner shall withdraw the security

property from foreclosure and cancel the foreclosure sale only in

accordance with the provisions of the Statute and as more fully

provided in paragraphs (b) and (c) of this section in regard to presale

reinstatements.

(b) To obtain a presale reinstatement in cases involving a monetary

default, there must be tendered to the foreclosure commissioner before

public auction is completed all amounts which would be due under the

mortgage agreement if payments under the mortgage had not been

accelerated and all costs of foreclosure incurred for which payment

from the proceeds of foreclosure is provided in the Statute, and the

foreclosure commissioner must find that there are no nonmonetary

defaults; provided, however, that the Secretary may refuse to cancel a

foreclosure sale pursuant to this subparagraph if the current mortgagor

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

foreclosure of the mortgage, commenced pursuant to the Statute and this

subpart or otherwise, to be canceled by curing a default.

(c) To obtain a presale reinstatement in cases involving a

nonmonetary default:

(1) The foreclosure commissioner, upon application of the mortgagor

before the date of foreclosure sale, must find that all nonmonetary

defaults are cured and that there are no monetary defaults; and

(2) There must be tendered to the foreclosure commissioner before

public auction is completed all amounts due under the mortgage

agreement (excluding all amounts which would be due under the mortgage

agreement if the mortgage payments had been accelerated), including all

amounts of expenditures secured by the mortgage and all costs of

foreclosure incurred for which payment would be made from the proceeds

of foreclosure as provided in the Statute.

(d) Before withdrawing the security property from foreclosure, the

foreclosure commissioner shall notify the Secretary of the proposed

withdrawal by telephone or other telecommunication device and shall

also provide the Secretary with a written statement of the reasons for

the proposed withdrawal along with all documents submitted by the

mortgagor in support of the proposed withdrawal. Upon receipt of this

statement, the Secretary shall have ten (10) days in which to

demonstrate why the security property should not be withdrawn from

foreclosure, and if the Secretary makes this demonstration, the

property shall not be withdrawn from foreclosure. The Secretary shall

provide the mortgagor with a copy of any statement prepared by the

Secretary in opposition to the proposed withdrawal at the same time the

statement is submitted to the foreclosure commissioner. If the

Secretary receives the foreclosure commissioner's written statement

less than 10 days before the scheduled foreclosure sale, the sale shall

automatically be adjourned for 14 days, during which time it may be

cancelled. Notice of the re-scheduled sale, if any, shall be served as

described in Sec. 27.111.

Sec. 27.109 Conduct of sale.

(a) The foreclosure sale shall be conducted in a manner and at a

time and place as identified in the Notice of Default and Foreclosure

Sale and in

[[Page 48552]]

accordance with the provisions of the Statute.

(b) In addition to bids made in person at the sale, the foreclosure

commissioner shall accept written one-price sealed bids from any party,

including the Secretary, for entry by announcement at the sale so long

as those bids conform to the requirements described in the Notice of

Default and Foreclosure Sale. The foreclosure commissioner shall

announce the name of each such bidder and the amount of the bid. The

commissioner shall accept oral bids from any party, including parties

who submitted one-price sealed bids, if those oral bids conform to the

requirements in the Notice of Default and Foreclosure Sale. Before the

close of the sale the commissioner shall announce the amount of the

high bid and the name of the successful bidder. If the successful

bidder fails to comply with the terms of the sale, the HUD Field Office

representative will provide instructions to the commissioner about

offering the property to the second highest bidder, or having a new

sale, or other instruction at the discretion of the HUD representative.

(c) Prohibited participants. Relatives of the foreclosure

commissioner who may not bid include parents, siblings, spouses and

children. A related business entity that may not bid or whose employees

may not bid is one whose relationship (at the time the foreclosure

commissioner is designated and during the term of service as

foreclosure commissioner) with the entity of the foreclosure

commissioner is such that, directly or indirectly, one entity

formulates, directs, or controls the other entity; or has the power to

formulate, direct, or control the other entity; or has the

responsibility and authority to prevent, or promptly to correct, the

offensive conduct of the other entity.

(d) Auctioneers. If the commissioner employs an auctioneer to

conduct the foreclosure sale, the auctioneer must be a licensed

auctioneer, an officer of State or local government, or any other

person who commonly conducts foreclosure sales in the area in which the

security property is located.

Sec. 27.111 Adjournment or cancellation of sale.

(a) The foreclosure commissioner may, before or at the time of the

foreclosure sale, adjourn or cancel the foreclosure sale in accordance

with the provisions of the Statute. The publication of the Notice of

Default and Foreclosure Sale, revised pursuant to the Statute, may be

made on any of three separate days before the revised date of

foreclosure sale. If there is no newspaper of general circulation that

would permit publication on any of three separate days before the

revised date of foreclosure sale, the Notice of Default and Foreclosure

Sale must be posted, not less than nine days before the date to which

the sale has been adjourned, at the courthouse of any county or

counties in which the property is located, and at the place where the

sale is to be held. The commissioner must also, in the case of a sale

adjourned to a later date, mail a copy of the revised Notice of Default

and Foreclosure Sale to the Secretary at least seven days before the

date to which the sale has been adjourned.

(b) When a substitute commissioner is designated by the Secretary

to replace a previously designated foreclosure commissioner, the sale

shall continue without prejudice unless the substitute commissioner

finds, in that commissioner's sole discretion, that continuation of the

foreclosure sale will unfairly affect the interests of the mortgagor.

Any such finding shall be in writing. If the substitute commissioner

makes such a finding, the substitute commissioner shall cancel or

adjourn the sale.

Sec. 27.113 Foreclosure costs.

A commission may be allowed to the foreclosure commissioner

notwithstanding termination of the sale or appointment of a substitute

commissioner before the sale takes place.

Sec. 27.115 Disposition of sales proceeds.

The foreclosure commissioner will keep such records as will permit

the Secretary to verify the costs claimed, and otherwise to enable the

Secretary to audit the foreclosure commissioner's disposition of the

sale proceeds.

Sec. 27.117 Transfer of title and possession.

(a) If the Secretary is the successful bidder, the foreclosure

commissioner shall issue a deed to the Secretary upon receipt of the

amount needed to pay the costs of tax liens and prior liens, as set

forth in 12 U.S.C. 3762(a)(2) and (a)(3). If the Secretary is not the

successful bidder, the foreclosure commissioner shall issue a deed to

the purchaser or purchasers upon receipt of the entire purchase price

in accordance with the terms of the sale as provided in the Notice of

Default and Foreclosure Sale.

(b) The register of deeds or other appropriate official in the

county where the property is located shall, upon tendering of the

customary recording fees, accept all instruments pertaining to the

foreclosure which are submitted by the foreclosure commissioner for

recordation. The instruments to be accepted shall include, but not be

limited to, the foreclosure commissioner's deed. If the foreclosure

commissioner elects to include the recitations required under the

Statute (12 U.S.C. 3764) in an affidavit or an addendum to the deed,

the affidavit or addendum shall be accepted along with the deed for

recordation. The Clerk of the Court or other appropriate official shall

cancel all liens as requested by the foreclosure commissioner.

Sec. 27.119 Redemption rights.

Only for purposes of redemption rights under the Statute, a

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

of the foreclosure sale.

Sec. 27.121 Record of foreclosure and sale.

The statements regarding the foreclosed mortgage required to

establish a sufficient record shall include the date the mortgage was

recorded. The statements regarding the service of the Notice of Default

and Foreclosure Sale shall include the names and addresses of the

persons to whom the Notice was mailed and the date on which the Notice

was mailed, the name of the newspaper in which the Notice was published

and the dates of publication, and the date on which service by posting,

if required, was accomplished.

Sec. 27.123 Deficiency judgment.

If the price at which the security property is sold at the

foreclosure sale is less than the unpaid balance of the debt secured by

such property after disposition of sale proceeds in accordance with the

order of priority provided under the Statute, the Secretary may refer

the matter to the Attorney General who may commence an action or

actions against any and all debtors to recover the deficiency, unless

such an action is specifically prohibited by the mortgage.

PART 29--[REMOVED]

2. Part 29 is removed.

Dated: August 28, 1996.

Henry G. Cisneros,

Secretary.

Note: The following appendices A and B will not be codified in

title 24 of the Code of Federal Regulations.

Appendix A: Nonjudicial Foreclosure of Multifamily Mortgages--Guide

Sec.

1. Purpose.

2. Scope and applicability.

3. Definitions.

[[Page 48553]]

4. Prerequisites to foreclosure.

5. Designation of a foreclosure commissioner.

6. Notice of default and foreclosure sale.

7. Conditions of foreclosure sale.

8. Termination or adjournment of foreclosure sale.

9. Conduct of the sale.

10. Foreclosure costs.

11. Disposition of sale proceeds.

12. Transfer of title and possession.

13. Redemption rights.

14. Record of foreclosure and sale.

15. Management and disposition by the Secretary.

16. Computation of time.

1. Purpose

The purpose of this guide is to present, in a single document,

the statutory and regulatory requirements of the Multifamily

Mortgage Foreclosure Act of 1981 (the Act) (12 U.S.C. 3701-3717).

Although it presents the regulatory and statutory requirements in a

combined format, this guide is a secondary source for these

requirements. The Code of Federal Regulations (CFR), at 24 CFR part

27, subpart A, is the primary, governing source for regulatory

requirements, and the Act is the primary, governing source for

statutory requirements. Any reference in this Guide to the

provisions of the Act includes the requirements of 24 CFR part 27,

subpart A.

The Act creates a uniform Federal remedy for foreclosure of

multifamily mortgages. Under a delegation of authority published on

February 5, 1982 (47 FR 5468), the Secretary has delegated to the

HUD General Counsel his powers under the Act to appoint a

foreclosure commissioner or commissioners and to substitute

therefor, to fix the compensation of commissioners, and to

promulgate implementing regulations.

2. Scope and Applicability

(a) Under the Act, the Secretary may foreclose on any defaulted

Secretary-held multifamily mortgage encumbering real estate in any

State, regardless of when the mortgage was executed.

(b) The Secretary may, at the Secretary's option, use other

procedures to foreclose defaulted multifamily mortgages, including

judicial foreclosure in Federal court and nonjudicial foreclosure

under State law. The requirements described in this Guide apply only

to foreclosure procedures authorized by the Act and not to any other

foreclosure procedures the Secretary may use.

3. Definitions

As used in this Guide:

County means county as defined in section 2 of title I, United

States Code.

General Counsel means the General Counsel of the Department of

Housing and Urban Development.

Mortgage means a deed of trust, mortgage, deed to secure debt,

security agreement, or any other form of instrument under which any

interest in property, real, personal or mixed, or any interest in

property including leaseholds, life estates, reversionary interests,

and any other estates under applicable State law, is conveyed in

trust, mortgaged, encumbered, pledged, or otherwise rendered subject

to a lien, for the purpose of securing the payment of money or the

performance of an obligation.

Mortgage agreement means the note or debt instrument and the

mortgage instrument, deed of trust instrument, trust deed, or

instrument or instruments creating the mortgage, including any

instruments incorporated by reference therein (including any

applicable regulatory agreement), and any instrument or agreement

amending or modifying any of the foregoing.

Mortgagor means the obligor, grantor, or trustor named in the

mortgage agreement and, unless the context otherwise indicates,

includes the current owner of record of the security property

whether or not personally liable on the mortgage debt.

Multifamily mortgage means a mortgage held by the Secretary,

covering any property pursuant to:

(1) Section 608 of the National Housing Act (12 U.S.C. 1743);

(2) Section 801 of the National Housing Act (12 U.S.C. 1748);

(3) Title II of the National Housing Act (12 U.S.C. 1707-1715z-

20);

(4) Title X of the National Housing Act (12 U.S.C. 1749aa);

(5) Section 312 of the Housing Act of 1964, as it existed

immediately before its repeal by section 289 of the Cranston-

Gonzalez National Affordable Housing Act (42 U.S.C. 1452b);

(6) Section 202 of the Housing Act of 1959, as it existed

immediately before its amendment by section 801 of the Cranston-

Gonzalez National Affordable Housing Act (12 U.S.C. 1701q);

(7) Section 202 of the Housing Act of 1959, as amended by

section 801 of the Cranston-Gonzalez National Affordable Housing Act

(12 U.S.C. 1701q); and

(8) Section 811 of the Cranston-Gonzalez National Affordable

Housing Act (42 U.S.C. 8013).

Multifamily mortgage does not include a property on which there

is located a one- to four-family residence, except when the one- to

four-family residence is subject to a mortgage pursuant to section

202 of the Housing Act of 1959, or section 811 of the National

Affordable Housing Act. The definition of multifamily mortgage also

includes a mortgage taken by the Secretary in connection with the

previous sale of the project by the Secretary (purchase money

mortgage).

Person includes any individual, group of individuals,

association, partnership, corporation, or organization.

Record and recorded include register and registered in the

instance of registered land.

Secretary means the Secretary of Housing and Urban Development.

Security property means the property, real, personal or mixed,

or an interest in property, including leaseholds, life estates,

reversionary interest and any other estates under applicable State

law, together with fixtures and other interests subject to the lien

of the mortgage under applicable State law.

State means the several States, the District of Columbia, the

Commonwealth of Puerto Rico, the territories and possessions of the

United States, and the Trust Territory of the Pacific Islands, and

Indian tribes as defined by the Secretary.

4. Prerequisites to Foreclosure

(a) The Secretary may commence foreclosure under the Act upon

the breach of a covenant or condition in the mortgage agreement for

which foreclosure is authorized under the mortgage. No such

foreclosure may be commenced unless any previously pending

proceeding, judicial or nonjudicial, separately instituted by the

Secretary to foreclose the mortgage in a manner other than under the

Act, has been withdrawn, dismissed or otherwise terminated. The

Secretary shall not institute any separate foreclosure proceedings,

judicial or nonjudicial, during the pendency of a foreclosure

pursuant to the Act. Nothing in the Act shall preclude the Secretary

from enforcing any right, other than foreclosure, under applicable

State law, including any right to obtain a monetary judgment.

Nothing in the Act shall preclude the Secretary from foreclosing

under the Act where the Secretary has obtained or is seeking any

other remedy available pursuant to Federal or State Law or under the

mortgage agreement, including, but not limited to the appointment of

a receiver; mortgagee-in-possession status; relief under an

assignment of rents; or transfer to a nonprofit entity in accordance

with section 202 of the Housing Act of 1959 (as amended by section

801 of the Cranston-Gonzalez National Affordable Housing Act), or

section 811 of the Cranston-Gonzalez National Affordable Housing

Act.

(b) Before commencement of a foreclosure under the Act, HUD will

provide to the mortgagor an opportunity informally to present

reasons why the mortgage should not be foreclosed. Such opportunity

may be provided before or after the designation of the foreclosure

commissioner but before service of the notice of default and

foreclosure.

5. Designation of a Foreclosure Commissioner

(a) When the Secretary determines that a multifamily mortgage

should be foreclosed under the Act, the General Counsel will select

and designate a foreclosure commissioner to conduct the foreclosure

and sale. In order to conduct the foreclosure, the foreclosure

commissioner has a nonjudicial power of sale. The commissioner, if a

natural person, shall be a resident of the State in which the

security property is located. If a natural person is designated as

commissioner, he or she shall be designated by name, except if the

commissioner is designated in his or her capacity as an official or

employee of the State or local government where the security

property is located, the designation may be made by title or

position instead of by name. If not a natural person, the

commissioner must be duly authorized to transact business under the

laws of the State in which the security property is located. The

commissioner shall be a person who is determined by the General

Counsel to be responsible, financially sound, and competent to

conduct the foreclosure. The foreclosure commissioner may be an

individual, group of individuals, association, partnership,

corporation or organization. The method of selection and

determination of the

[[Page 48554]]

qualifications of the foreclosure commissioner shall be at the

discretion of the General Counsel, and the execution of a

designation pursuant to paragraph (b) of this section shall be

conclusive evidence that the commissioner selected has been

determined to be qualified by the General Counsel.

(b) After selection of a foreclosure commissioner, the General

Counsel shall designate the commissioner in writing to conduct the

foreclosure and sale of the particular multifamily mortgage. The

written designation shall be duly acknowledged and shall state the

name and business or residential address of the commissioner and any

other information the General Counsel deems necessary. The

designation shall be effective upon execution by the General Counsel

or his designate. Upon receipt of the designation, the commissioner

shall demonstrate acceptance by signing the designation and

returning a signed copy to the General Counsel.

(c) The General Counsel may designate more than one commissioner

to foreclose a multifamily mortgage.

(d) The General Counsel may at any time, with or without cause,

designate a substitute commissioner to replace a previously

designated commissioner. Designation of a substitute commissioner

shall be in writing and shall contain the same information and be

made effective in the same manner as the designation of the original

commissioner. Upon designation of a substitute commissioner, the

substitute commissioner shall serve a copy of the written notice of

designation upon the persons listed at sections 6.(c) (1) through

(3) of this Guide either by mail, in accordance with section 6.(c)

of this Guide, except that the time limitations in that section will

not apply, or by any other manner which in the substitute

commissioner's discretion is conducive to giving timely notice of

substitution.

(e) The Secretary shall be the guarantor of payment of any

judgment against the foreclosure commissioner for damages based on

the commissioner's failure properly to perform the commissioner's

duties. As between the Secretary and the mortgagor, the Secretary

shall bear the risk of any financial default by the foreclosure

commissioner. In the event that the Secretary makes any payment

pursuant to this paragraph, the Secretary shall be fully subrogated

to the rights satisfied by such payment.

6. Notice of Default and Foreclosure Sale

(a) Within 45 days after accepting his or her designation to act

as commissioner, the commissioner shall commence the foreclosure by

serving a Notice of Default and Foreclosure Sale.

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

following information which, except for paragraphs (b) (2) and (9)

of this section, will be supplied to the commissioner by the

Secretary.

(1) Name and address of the foreclosure commissioner.

(2) Date of the Notice.

(3) Names of the Secretary, the original mortgagor and the

original mortgagee.

(4) A description of the location of the security property, or

portion thereof to be sold, which is sufficient to identify it

including, if appropriate, the street address.

(5) The date of the mortgage.

(6) The name of the office or offices in which the mortgage is

recorded.

(7) The book and page in which the mortgage was recorded or, if

appropriate, the mortgage's document or accession number.

(8) A description of the mortgagor's failure to make payment,

including the due date of the earliest installment payment remaining

wholly unpaid as of the date of the Notice or, if appropriate, of

the other default or defaults upon which foreclosure is based; and a

statement that the secured debt has been accelerated.

(9) The date, exact time and place of the foreclosure sale. The

sale shall not be scheduled for a date less than 30 days after the

due date of the earliest unpaid installment or the earliest

occurrence of a nonmonetary default. The sale must be scheduled to

begin at a time between the hours of 9:00 a.m. and 4:00 p.m. local

time on a day other than Sunday or a public holiday as defined by 5

U.S.C. 6103(a) or State law. The sale must be scheduled for (i) a

place where real estate foreclosure auctions are customarily held in

the county or one of the counties in which the property to be sold

is located, or (ii) a courthouse in such a county, or (iii) a site

at or on the property to be sold. Sale of property located in more

than one county may be held in any one of the counties in which any

part of the security property is situated.

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

accordance with the Act.

(11) The costs, if any, to be paid by the purchaser upon

transfer of title.

(12) The bidding and payment requirements for the foreclosure

sale, including the required deposit, the method of deposit, and the

time and method of payment for the balance of the purchase price.

The Notice shall state that all deposits and the balance of the

purchase price shall be paid by certified or cashier's check. The

Notice shall state that no deposit will be required of the Secretary

when the Secretary bids at the foreclosure sale.

(13) Any terms and conditions to which the purchaser at the

foreclosure sale must agree, as listed in section 7 of this Guide.

The Notice need not describe at length each and every pertinent term

and condition, including any required use agreements and deed

covenants, if it describes these terms and conditions in a general

way and if it states that the precise terms will be available from

the commissioner upon request.

(c) The commissioner shall serve the Notice of Default and

Foreclosure Sale upon the following persons in the following manner,

and no additional notice shall be required to be served

notwithstanding any notice requirements of State or local law:

(1) By certified or registered mail, return receipt requested,

sent, at least 21 days before the original scheduled date of the

foreclosure sale, to the owner of record of the security property as

of 45 days before the original scheduled date of the foreclosure

sale. The Notice shall be mailed to the owner at the address shown

in the mortgage or to the address of the security property, or, in

the commissioner's discretion, to any address believed to be that of

the owner; and

(2) By certified or registered mail, return receipt requested,

sent, at least 21 days before the original scheduled date of the

foreclosure sale, to the original mortgagor and all subsequent

mortgagors of record and all other persons who appear on the public

record or in the mortgage agreement to be liable for all or part of

the mortgage debt. The Notice need not be mailed to mortgagors who

have been released from all obligations under the mortgage. The

Notice shall be mailed to the mortgagor at the address shown in the

mortgage, or to the address of the property, or, in the

commissioner's discretion, to any address believed to be that of the

mortgagor or mortgagors; and

(3) By certified or registered mail, return receipt requested,

sent, at least 10 days before the original scheduled date of the

foreclosure sale, to all persons having liens of record on the

security property which were placed on record at least 45 days

before the scheduled foreclosure sale. The Notice shall be mailed to

lien holders at their address of record, or to any address the

commissioner believes to be that of the lien holder; and

(4) By publication of a copy of the Notice of Default and

Foreclosure Sale once a week during three successive calendar weeks

in a newspaper of general circulation in the county or counties in

which the security property is located. To the extent practicable,

the newspaper or newspapers chosen shall have circulation which is

conducive to achieving notice of foreclosure by publication. In

deciding which newspaper or newspapers have such circulation, the

commissioner need not select the newspaper with the largest

circulation. The date of the last publication shall be not less than

four nor more than twelve days before the sale date. If there is no

newspaper of general circulation in the county or counties in which

the security property is located, service shall be made by posting

the Notice of Default and Foreclosure Sale in at least three public

places in each such county at least 21 days prior to the date of

sale. The Notice of Default and Foreclosure Sale which is published

pursuant to this paragraph may omit a description of the default, as

otherwise required by paragraph (b)(8) of this section, if the

commissioner, in his or her discretion, so determines; and

(5) By posting a copy of the Notice of Default and Foreclosure

Sale in a prominent place at or near the security property for at

least 15 consecutive days before the foreclosure sale. If the

property to be sold consists of two or more noncontiguous parcels of

land, a copy of the Notice shall be posted in a prominent place on

each such parcel. If the property consists of two or more separate

buildings, a copy of the Notice shall be posted in a prominent place

on each such building. The Notice shall also be posted in the

project office and in such other appropriate conspicuous places as

the commissioner deems appropriate for providing notice to all

tenants. Posting shall not be required if the commissioner in his or

her discretion finds that the act of posting is likely to lead to a

breach of the peace or may result in the increased risk of vandalism

or

[[Page 48555]]

damage to the property. Any such finding will be made in writing.

Entry on the premises by the commissioner for the purpose of posting

shall be privileged as against all other persons.

(d) Service made under paragraphs (c) (1), (2), and (3) of this

section is deemed to have been made upon mailing, whether or not the

Notice was received and whether or not a return receipt is received

or the letter containing the Notice is returned.

(e) When service of the Notice of Default and Foreclosure Sale

is made pursuant to paragraph (c) (1), (2), or (3) of this section,

the commissioner shall at the same time and in the same manner serve

a copy of the instrument by which the General Counsel, under section

5(b) of this Guide, has designated him or her to act as

commissioner.

(f) At least 7 days before the foreclosure sale, the

commissioner will record both the instrument designating him or her

to act as commissioner and the Notice of Default and Foreclosure

Sale in the same office or offices in which the mortgage was

recorded.

7. Conditions of Foreclosure Sale

(a) If a majority of the residential units in a property subject

to foreclosure sale pursuant to the Act are occupied by residential

tenants either on the date of the foreclosure sale or on the date on

which the General Counsel designates the foreclosure commissioner,

the Secretary shall require, as a condition and term of the sale,

that the purchaser at a foreclosure sale (other than the Secretary)

agree to continue to operate the project in accordance with the

terms of the program under which the mortgage insurance or

assistance was provided, or any applicable regulatory or other

agreement in effect with respect to such property immediately prior

to the time of foreclosure sale as the Secretary shall find

appropriate. If a majority of the residential units are not so

occupied, at either such time, the Secretary, in his or her

discretion, may require as a condition and term of the sale, that

the purchaser (other than the Secretary) agree to continue to

operate the property in accordance with such terms described above

as the Secretary shall find appropriate.

(b) Terms which the Secretary may find appropriate to require

pursuant to the Act and such other provisions of law as may be

applicable may include provisions relating to use and ownership of

the project property, tenant admission standards and procedures,

rent schedules and increases, and project operation and maintenance.

In determining terms which may be appropriate to require, the

Secretary shall consider:

(1) The history of the project, including the purposes of the

program under which the mortgage insurance or assistance was

provided, and any other program of HUD under which the project was

developed or otherwise assisted and the probable causes of project

failure resulting in its default;

(2) A financial analysis of the project, including an appraisal

of the fair market value of the property for its highest and best

use;

(3) A physical analysis of the project, including the condition

of the structure and grounds, the need for rehabilitation or

repairs, and the estimated costs of any such rehabilitation or

repairs;

(4) The income levels of the occupants of the project;

(5) Characteristics, including rental levels, of comparable

housing in the area, with particular reference to whether current

conditions and discernible trends in the area fairly indicate a

likelihood that, for the foreseeable future after foreclosure and

sale, the project will continue to provide rental or cooperative

housing and market rentals obtainable in the project will be

affordable by low- or moderate-income persons;

(6) The availability of or need for rental housing for low- and

moderate-income persons in the area, including actions being taken

or projected to be taken to address such needs and the impact of

such actions on the project;

(7) An assessment of the number of occupants who might be

displaced as a result of the manner of disposition;

(8) The eligibility of the occupants of the property for rental

assistance under any program administered by HUD and the

availability of funding for such assistance if necessary in order

that the units occupied by such occupants will remain available to

and affordable by such persons, or if necessary in order to assure

the financial feasibility of the project after foreclosure and sale

subject to the terms to be required by the Secretary; and

(9) Such other factors relating to the project as the Secretary

shall consider appropriate.

(c) Terms which the Secretary may require to be agreed to by the

purchaser pursuant to the Act shall generally not be more

restrictive, or binding for a longer duration, than the terms by

which the mortgagor was bound prior to the foreclosure. For example:

(1) If the mortgage being foreclosed was previously insured by

the Secretary under section 608, or 801, or title II or X of the

National Housing Act; or assisted under section 202 of the Housing

Act of 1959, as it existed before its amendment by section 801 of

the Cranston-Gonzalez National Affordable Housing Act, any terms

required by the Secretary pursuant to the Act shall be in effect no

longer than the earliest date on which the mortgagor could have

prepaid the mortgage debt without the Secretary's consent, or the

maturity date of the mortgage, whichever is earlier. No terms shall

be required pursuant to the Act if, under the terms of the mortgage,

the mortgagor could have prepaid the mortgage debt in full without

the Secretary's consent on or before the date of the foreclosure

sale.

(2) If the mortgage being foreclosed was taken by the Secretary

in conjunction with the previous sale of the project by the

Secretary (purchase money mortgage), any terms required by the

Secretary pursuant to the Act shall be in effect no longer than the

earliest date on which the mortgagor under the Purchase Money

Mortgage could have prepaid the mortgage debt in full without the

Secretary's consent, or the maturity date of the mortgage, whichever

is earlier. No terms shall be required pursuant to the Act if the

mortgagor could have prepaid the mortgage debt in full without the

Secretary's consent on or before the date of the foreclosure sale.

(3) If the mortgage being foreclosed covers a project which is

governed by a use agreement executed under section 1(d)(1) of the

Housing and Community Development Amendments of 1978, as amended (12

U.S.C. 1715z-1a); section 202 of the Housing Act of 1959, as amended

by section 801 of the Cranston-Gonzalez National Affordable Housing

Act (12 U.S.C. 1701q); section 811 of the Cranston-Gonzalez National

Affordable Housing Act (42 U.S.C. 8013); or section 225(b) of the

Emergency Low Income Housing Preservation Act of 1987 (12 U.S.C.

17151), any terms required by the Secretary under the Act shall be

in effect no longer than the maturity date of the mortgage.

(4) If the mortgage being foreclosed was held by the Secretary

under section 312 of the Housing Act of 1964, any terms required by

the Secretary pursuant to the Act shall be in effect no longer than

five years after the completion of the rehabilitation work funded by

the section 312 loan. No terms shall be required pursuant to the Act

if the foreclosure sale occurs more than five years after the

completion of such rehabilitation work.

(5) If the mortgage being foreclosed covers a project which is

governed by a use agreement executed under section 222(b) of the

Low-Income Housing Preservation and Resident Homeownership Act of

1990 (12 U.S.C. 4112), any terms required by the Secretary under the

Act shall be in effect for the remaining useful life of the project.

Remaining useful life has the same meaning given the term in Sec. 24

CFR 248.101.

(d) The limitations contained in paragraph (c) of this section

apply only to such terms as the Secretary may require the purchaser

to agree to, as a condition and term of the sale, under paragraph

(a) of this section. Nothing contained in paragraph (c) of this

section shall prevent the Secretary and the purchaser from entering

into a subsidy agreement under any program administered by the

Secretary containing terms binding upon either party which are

longer in duration than would be permitted to be required by

paragraph (c) of this section.

(e) Any terms required by the Secretary to be agreed to by the

purchaser as a condition and term of sale under the Act shall be

embodied in a use agreement to be executed by the Secretary and the

purchaser. Such terms also may be included, or referred to, in

appropriate covenants contained in the deed to be delivered by the

foreclosure commissioner as described in section 12 of this Guide.

Terms required by the Secretary shall be stated or described in the

Notice of Default and Foreclosure Sale served, published and posted

in accordance with section 6 of this Guide.

8. Termination or Adjournment of Foreclosure Sale

(a) Except as provided in paragraphs (d), (e), and (f) of this

section, the commissioner shall withdraw the security property from

foreclosure and cancel the foreclosure sale only if:

(1) The Secretary so directs the commissioner; or

(2) The commissioner finds, upon application of the mortgagor at

least three

[[Page 48556]]

business days prior to the scheduled sale, that the default or

defaults upon which the foreclosure is based did not exist when the

Notice of Default and Foreclosure Sale was served; or

(3) (i) In the case of a monetary default, the entire amount of

principal and interest which would be due if payments under the

mortgage had not been accelerated is tendered to the commissioner

before the public auction is completed, and the commissioner finds

that there are no nonmonetary defaults;

(ii) In the case of a nonmonetary default, the commissioner,

upon application of the mortgagor before the date of foreclosure

sale, finds that all nonmonetary defaults have been cured and that

there are no monetary defaults; and

(iii) There is tendered to the commissioner before public

auction is completed, all amounts due under the mortgage agreement

excluding additional amounts which would have been due if mortgage

payments had been accelerated, all expenditures secured by the

mortgage, and all foreclosure costs incurred for which payment from

foreclosure proceeds is authorized, as described in section 10 of

this Guide.

(b) Before withdrawing the security property from foreclosure as

described in paragraph (a) (2) or (3) of this section, the

commissioner shall notify the Secretary of the proposed withdrawal

by telephone or telegram and shall provide the Secretary with a

written statement of the reasons for the proposed withdrawal along

with all documents submitted by the mortgagor in support of the

proposed withdrawal. Upon receipt of this statement, the Secretary

shall have 10 days within which to demonstrate orally or in writing

why the security property should not be withdrawn from foreclosure.

The Secretary shall provide the mortgagor with a copy of any

statement prepared by the Secretary in opposition to the proposed

withdrawal at the same time the statement is submitted to the

commissioner. If the Secretary receives the commissioner's written

statement less than 10 days before the scheduled foreclosure sale,

the sale shall automatically be postponed for 14 days. Under these

circumstances, notice of the rescheduled sale shall be served as

described in paragraph (d) of this section.

(c) The commissioner may not withdraw the security property from

foreclosure as described in paragraph (a)(3) of this section more

than once unless the Secretary consents in writing to such

withdrawal.

(d) Before or at the time of sale, the foreclosure commissioner

may, in his or her discretion, determine that circumstances are not

conducive to a sale which is fair to the mortgagor and the

Secretary, or that additional time is necessary to determine if the

sale should be terminated as described in paragraph (a) (2) or (3)

of this section. If the commissioner makes such a determination, he

or she may adjourn the foreclosure to a later time on the scheduled

sale date or to a date not less than nine nor more than 24 days

later than the scheduled sale date. If the sale is adjourned to a

later hour on the scheduled sale date, no additional notice of the

sale is required. If the sale is adjourned to a later date, a

revised Notice of Default and Foreclosure Sale reciting that the

sale has been adjourned to a specific new date and containing any

other corrections the commissioner deems appropriate shall be served

in accordance with the provisions of section 6.(c) of this Guide,

except that publication under section 6(c)(4) may be made on any of

three separate days prior to the revised date of foreclosure sale so

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

revised sale date, and mailing under section 6(c) (1) through (3)

may be made at any time at least seven days before the date to which

the foreclosure sale has been adjourned. The commissioner shall

also, in the case of a sale adjourned to a later date, mail a copy

of the revised Notice of Default and Foreclosure Sale to the

Secretary at least seven days before the date to which the sale has

been adjourned.

(e) If the General Counsel designates a substitute commissioner

less than 48 hours before the foreclosure sale, the sale shall be

terminated and a new foreclosure commenced by serving a new Notice

of Default and Foreclosure Sale, in accordance with section 6.(c) of

this Guide.

(f) If the General Counsel designates a substitute commissioner

48 hours or more before the foreclosure sale, the foreclosure will

continue without prejudice unless the substitute commissioner in his

or her sole discretion finds that continuation of the foreclosure

sale will unfairly affect the interests of the mortgagor. If the

substitute commissioner makes such a finding, the substitute

commissioner shall cancel the sale or adjourn it according to the

provisions of paragraph (d) of this section.

(g) If the commissioner cancels the foreclosure, the mortgage

will continue in effect as if the mortgage debt had not been

accelerated.

(h) If the commissioner cancels the foreclosure sale, a new

foreclosure may be subsequently commenced as provided under the Act.

(i) If upon application by the mortgagor, the commissioner

refuses to withdraw the property from foreclosure as described in

paragraphs (a)(2) and (a)(3)(ii) of this section, the commissioner

shall provide the mortgagor and the Secretary with a written

statement of the reasons for the refusal.

9. Conduct of the Sale

(a) The foreclosure commissioner shall conduct the foreclosure

sale at public auction in a manner fair to both the mortgagor and

the Secretary and consistent with the provisions of the Act. The

commissioner shall attend the foreclosure sale in person or, if the

Commissioner is not a natural person, through a duly authorized

employee. If more than one commissioner has been designated, at

least one shall attend the sale. The commissioner shall accept

written one-price sealed bids from any party including the Secretary

so long as those bids conform to the requirements described in the

Notice of Default and Foreclosure Sale which are contained in

section 6.(b)(12) of this Guide. The commissioner shall announce the

name of each such bidder and the amount of the bid. The commissioner

shall accept oral bids from any party, including parties who

submitted one-price sealed bids, if those oral bids conform to the

requirements described in the Notice of Default and Foreclosure Sale

which are contained in section 6.(b)(12) of this Guide. The

commissioner will announce the amount of the high bid and the name

of the successful bidder before the close of the sale.

(b) Notwithstanding the provisions of paragraph (a) of this

section, neither the commissioner nor any relative, related business

entity or employee shall be permitted to bid at the foreclosure

sale. Relatives of the commissioner who may not bid include parents,

siblings, spouses and children. Related business entities which may

not bid include entities or concerns whose relationship with the

commissioner at the time the commissioner is designated is such

that, directly or indirectly, one concern or individual formulates,

directs, or controls the other concern; or has the power to

formulate, direct, or control the other concern; or has the

responsibility and authority either to prevent in the first

instance, or promptly to correct, the offensive conduct of the other

concern. Business concerns are also affiliates of each other when a

third party is similarly situated with respect to both concerns.

(c) If a natural person, the commissioner may serve as

auctioneer or, in the commissioner's discretion, may employ an

auctioneer to conduct the sale. If the commissioner employs an

auctioneer to conduct the foreclosure sale, the auctioneer must be a

licensed auctioneer, an officer of State or local government, or any

other person who commonly conducts foreclosure sales in the area in

which the security property is located. The commissioner will

compensate any such auctioneer from the proceeds of the fee he or

she collects as described in section 10(e) of this Guide.

10. Foreclosure Costs

Before any claim may be satisfied from the sale proceeds, those

proceeds shall be used to pay the following costs:

(a) Advertising and postage expenses incurred in serving the

Notice of Default and Foreclosure Sale under section 6.(c) (1)

through (4) of this Guide;

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

Notice of Default and Foreclosure Sale under section 6.(c)(5) of

this Guide and for the foreclosure commissioner's attendance at the

sale. The mileage shall be paid at a rate provided in 28 U.S.C.

1921;

(c) Reasonable and necessary costs incurred for title and lien

record searches;

(d) The necessary out-of-pocket costs incurred by the

commissioner for recording documents; and

(e) A commission to the foreclosure commissioner for the conduct

of the foreclosure in an amount to be determined by the General

Counsel. A commission may be allowed to the commissioner

notwithstanding termination of the sale or appointment of a

substitute commissioner before the sale takes place.

11. Disposition of Sale Proceeds

(a) The proceeds of the foreclosure sale shall be used in the

following order:

[[Page 48557]]

(1) To pay the costs listed in section 10 of this Guide;

(2) To pay valid tax liens or assessments on the security

property which have priority over the foreclosed mortgage;

(3) To pay liens recorded prior to the recording of the

foreclosed mortgage which are required to be paid in conformity with

the Notice of Default and Foreclosure Sale;

(4) To pay service charges and advancements for taxes,

assessments and property insurance premiums which were made under

the terms of the foreclosed mortgage;

(5) To pay the interest due under the mortgage debt;

(6) To pay the unpaid principal balance secured by the mortgage

(including expenditures for the necessary protection, preservation

and repair of the security property as authorized under the mortgage

agreement and interest thereon if provided in the mortgage

agreement);

(7) To pay any late charges;

(8) To pay any liens recorded after the foreclosed mortgage; and

(9) To pay the surplus to the mortgagor.

(b) The priority of the Secretary's lien shall be determined by

the Federal first-in-time first-in-right rule. State laws affording

priority to liens recorded after the mortgage are preempted.

(c) If the mortgagor entitled to the surplus cannot be located,

or if the surplus available is insufficient to pay all claimants and

the claimants to the surplus cannot agree on its disposition, or if

a claimant to the proceeds of the sale disagrees with the

commissioner's proposed disposition of the proceeds, the

commissioner may deposit the disputed funds with a legally

authorized official or court. If such a procedure for the deposit of

disputed funds is not available, and the foreclosure commissioner

files a bill of interpleader or is sued as a stakeholder to

determine entitlement to such funds, the foreclosure commissioner's

necessary costs in taking or defending such action shall be

deductible from the disputed funds.

(d) If there is more than one party holding a lien or assessment

described in paragraph (a) (2), (3) or (8) of this section, the

claim of each party holding the same kind of lien or assessment will

be given the relative priority to which it would be entitled under

the law of the State in which the security property is located.

(e) The commissioner will keep such records as will permit the

Secretary to verify the costs claimed under section 10 of this

Guide, and otherwise to audit the commissioner's disposition of the

sale proceeds.

12. Transfer of Title and Possession

(a) If the Secretary is the successful bidder, the foreclosure

commissioner shall issue a deed to the Secretary upon receipt of the

amount needed to pay the costs listed in section 11.(a) (1) through

(3) of this Guide. If the Secretary is not the successful bidder,

the foreclosure commissioner shall issue a deed to the purchaser

upon receipt of the entire purchase price and execution by the

Secretary and the purchaser of any use agreement referred to in

section 7(e) of this Guide. The deed shall convey all of the

Secretary's rights, title and interest in the security property as

well as the rights of the commissioner, the mortgagor, and any other

person claiming by, through, or under them. Any required covenants

reflecting terms described in section 7 of this Guide shall be

contained in the commissioner's deed. No judicial proceeding shall

be required ancillary or supplementary to the procedures provided in

this part to assure the validity of the conveyance or confirmation

of such conveyance.

(b) The commissioner shall deliver possession of the security

property to the purchaser at the same time he or she delivers the

deed. The purchaser's possession of the security property shall be

subject to any interests senior to that of the mortgage and to the

terms of any existing residential lease for the remaining term of

the lease or for one year, whichever is shorter. Subject to any

required terms described in section 7 of this Guide, any commercial

tenant and any residential tenant remaining in possession after the

expiration of his or her lease or after the passage of one year,

whichever event occurs first, shall be deemed a tenant at sufferance

and may be evicted in accordance with applicable State or local law.

(c) When the commissioner conveys the property to the Secretary,

no tax shall be imposed or collected with respect to the

commissioner's deed, whether as a tax upon the instrument itself or

upon the privilege of conveying or transferring title to the

property.

(d) The registrar of deeds or other appropriate official in the

county where the property is located shall, upon tendering of the

customary recording fees, accept all instruments pertaining to the

foreclosure which are submitted by the commissioner for recordation.

The instruments to be accepted shall include, but not be limited to,

the commissioner's deed and the commissioner's affidavit, both of

which are described in section 14 of this Guide.

(e) Failure to collect or pay a tax described in paragraph (c)

of this section shall not be grounds for refusing to record the

commissioner's deed, for failing to recognize such recordation or

for denying enforcement of the deed in any State or Federal court.

13. Redemption Rights

The mortgagor or others will have no right to redeem the

mortgage after the foreclosure sale. The mortgagor or others will

have no right to possession of the security property after the

foreclosure sale based on a right of redemption.

14. Record of Foreclosure and Sale

(a) The deed to the purchaser shall contain the following

recitals:

(1) A statement that the foreclosed mortgage was held by the

Secretary;

(2) The details of the service of the Notice of Default and

Foreclosure Sale described in section 6(c) of this Guide, including

the names and addresses of persons to whom the Notice was mailed and

the dates on which the Notice was mailed, names of newspapers in

which and dates on which the Notice was published, and the date on

which service by posting was accomplished;

(3) A statement that the foreclosure was conducted in accordance

with the Act and with the terms of the Notice of Default and

Foreclosure Sale;

(4) The costs of the foreclosure as described in section 10 of

this Guide; and

(5) The name of the successful bidder and the amount of the

successful bid.

(b) The commissioner may, in his or her discretion, make these

recitations in an affidavit or addendum to the deed rather than in

the body of the deed.

15. Management and Disposition by the Secretary

When the Secretary is the purchaser of the security property,

the Secretary shall manage and dispose of it in accordance with

section Sec. 203 of the Housing and Community Development Amendments

of 1978, 12 U.S.C. 1701z-11, and in accordance with 24 CFR part 290.

16. Computation of Time

Periods of time provided for in this Guide shall be calculated

in consecutive calendar days including the day or days on which the

actions or events occur or are to occur. Any such period of time

includes the day on which an event occurs or is to occur.

Appendix B: Nonjudicial Foreclosure of Single Family Mortgages--

Guide

Sec.

1. Purpose.

2. Scope and applicability.

3. Definitions.

4. Designation of foreclosure commissioner.

5. Prerequisites to foreclosure.

6. Commencement of foreclosure.

7. Notice of default and foreclosure sale.

8. Service of notice of default and foreclosure sale.

9. Presale reinstatement.

10. Conduct of sale.

11. Adjournment or cancellation of sale.

12. Validity of sale.

13. Foreclosure costs.

14. Disposition of sale proceeds.

15. Transfer of title and possession.

16. Redemption rights.

17. Record of foreclosure and sale.

18. Effect of sale.

19. Computation of time.

20. Deficiency judgment.

1. Purpose

The purpose of this guide is to present, in a single document,

the statutory and regulatory requirements of the Single Family

Mortgage Foreclosure Act of 1994 (the Statute), 12 U.S.C.

Secs. 3751-3768. Although it presents the regulatory and statutory

requirements in a combined format, this guide is a secondary source

for these requirements. The Code of Federal Regulations (CFR), at 24

CFR part 27, subpart B, is the primary, governing source for

regulatory requirements, and the Statute is the primary, governing

source for statutory requirements. Any reference in this Guide to

the provisions of the Statute includes the requirements of 24 CFR

part 27, subpart B.

The Statute creates a uniform Federal remedy for foreclosure of

certain single family mortgages which are held by the

[[Page 48558]]

Secretary of Housing and Urban Development pursuant to Title I of

the National Housing Act, 12 U.S.C. 1702 et seq., Title II of the

National Housing Act, 12 U.S.C. 1707 et seq., or Section 312 of the

Housing Act of 1964, 42 U.S.C. 1452b (as it existed before repeal).

The Secretary's powers under the Statute to appoint a foreclosure

commissioner or commissioners and substitute commissioners, and to

fix the compensation of commissioners have been delegated to the HUD

General Counsel.

The availability of uniform and more expeditious procedures,

with no right of redemption in the mortgagor or others, for the

foreclosure of these mortgages by the Department, will ameliorate

the negative consequences of the disparate State laws under which

mortgages covering one- to four-family residential properties are

foreclosed on behalf of HUD. The long periods of time that are

required under State law to complete foreclosure of such mortgages

lead to deterioration in the condition of the properties involved,

necessitate substantial Federal holding expenditures, increase the

risk of vandalism, fire loss, depreciation, damage, and waste with

respect to the properties, and adversely affect the neighborhoods in

which the properties are located. These consequences seriously

impair the ability of HUD to protect Federal financial interests in

the properties and frustrate attaining the objectives of the

underlying Federal program authority. Use of this nonjudicial

foreclosure procedure will also reduce unnecessary litigation, which

contributes to already overcrowded court calendars, by removing many

foreclosures from the courts.

2. Scope and Applicability

(a) Scope. Under the Statute, HUD may foreclose on any defaulted

single family mortgage (as defined in section 3, below) encumbering

real estate in any State regardless of when the mortgage was

executed.

(b) Applicability. HUD, at its discretion, may use other

procedures to foreclose defaulted single family mortgages, including

judicial foreclosure in State or Federal Court, and nonjudicial

foreclosures under State law or any other Federal law.

3. Definitions

As used in this guide--

Statute means the Single Family Mortgage Foreclosure Act of

1994.

Bona fide purchaser means a purchaser for value in good faith

and without notice of any adverse claim, and who acquires the

security property free of any adverse claim.

County means a political subdivision of a State or Territory of

the United States, created to aid in the administration of state law

for the purpose of local self-government, and includes a parish or

any other equivalent subdivision.

Mortgage means a deed of trust, mortgage, deed to secure debt,

security agreement, or any other form of instrument under which any

property (real or mixed real and personal), or any interest in

property (including leaseholds, reversionary interests, and any

other estates under applicable State law), is conveyed in trust,

mortgaged, encumbered, pledged, or otherwise rendered subject to a

lien for the purpose of securing the payment of money or the

performance of an obligation.

Mortgage agreement means the note or debt instrument and the

mortgage instrument, deed of trust instrument, trust deed, or any

other similar instrument or instruments creating the security

interest in the real estate for the repayment of the note or debt

instrument, including any instrument incorporated by reference

therein and any instrument or agreement amending or modifying any of

the foregoing.

Mortgagor means the debtor, obligor, grantor, or trustor named

in the mortgage agreement and, unless the context otherwise

indicates, includes the current owner of record of the security

property whether or not such owner is personally liable on the

mortgage debt.

Owner means any person who has an ownership interest in the

property and includes heirs, devisees, executors, administrators,

and other personal representatives, and trustees of testamentary

trusts if the owner of record is deceased.

Person includes any individual, group of individuals,

association, partnership, corporation, or organization.

Record; Recorded means to enter or entered in public land record

systems established under State statutes for the purpose of

imparting constructive notice to purchasers of real property for

value and without actual knowledge, and includes ``register'' and

``registered'' in the instance of registered land, and ``file'' and

its variants in the context of entering documents in public land

records.

Secretary means the Secretary of Housing and Urban Development,

acting by and through any authorized designee exclusive of the

foreclosure commissioner.

Security property means the property (real or mixed real and

personal) or an interest in property (including leaseholds, life

estates, reversionary interests, and any other estates under

applicable law), together with fixtures and other interests subject

to the lien of the mortgage under applicable law.

Single family mortgage means a mortgage that covers property on

which there is located a 1- to 4- family residence, and that:

(1) Is held by the Secretary pursuant to title I or title II of

the National Housing Act (12 U.S.C. 1701 et seq.); or

(2) Secures a loan obligated by the Secretary under section 312

of the Housing Act of 1964 as it existed before the repeal of that

section by section 289 of the Cranston-Gonzalez National Affordable

Housing Act. A mortgage securing such a loan that covers property

containing nonresidential space and a 1- to 4-family dwelling is not

subject to foreclosure under the Statute.

State means:

(1) The several States;

(2) The District of Columbia;

(3) The Commonwealth of Puerto Rico;

(4) The United States Virgin Islands;

(5) Guam;

(6) American Samoa;

(7) The Northern Mariana Islands; and

(8) Indian tribes, meaning any Tribe, band, group or nation,

including Alaskan Indians, Aleuts, and Eskimos, and any Alaskan

Native Village of the United States that is considered an eligible

recipient under Title I of the Indian Self-Determination and

Education Assistance Act (25 U.S.C. 450) or was considered an

eligible recipient under the State and Local Fiscal Assistance Act

of 1972 (31 U.S.C. 1221) before repeal of that Act. Eligible

recipients under the Indian Self-Determination and Education

Assistance Act are determined by the Bureau of Indian Affairs.

4. Designation of Foreclosure Commissioner

(a) The Secretary may designate a person or persons to serve as

a foreclosure commissioner for the purpose of foreclosing single

family mortgages, and such a foreclosure commissioner has a

nonjudicial power of sale as provided under the Statute.

(b) The foreclosure commissioner, if a natural person, must be a

resident of the State in which the security property is located and,

if not a natural person, the foreclosure commissioner must be duly

authorized to transact business under laws of the State in which the

security property is located. No person shall be designated as a

foreclosure commissioner unless that person is determined by the

Secretary to be responsible, financially sound, and competent to

conduct a foreclosure. The method of selection and determination of

the qualifications of the foreclosure commissioner are at the

discretion of the Secretary, and the execution of a designation

pursuant to the Statute is conclusive evidence that the commissioner

selected has been determined to be qualified by the Secretary.

(c) The Secretary designates a foreclosure commissioner by

executing a written designation stating the name and business or

residential address of the commissioner, except that if a person is

designated in his or her capacity as an official or employee of a

government or corporate entity, such a person may be designated by

his or her unique title or position instead of by name. The

designation is effective upon execution.

(d) The Secretary may designate, with or without cause, a

substitute foreclosure commissioner to replace a previously

designated foreclosure commissioner, by the procedure contained in

paragraph (c) of this section, above.

(1) A substitution of the foreclosure commissioner may be made

at any time prior to the time of the foreclosure sale, and the

foreclosure shall continue without prejudice, unless the substitute

commissioner, in that commissioner's sole discretion, finds that

continuation of the foreclosure sale will unfairly affect the

interests of the mortgagor. Any such finding must be in writing. If

the substitute commissioner makes such a finding, the substitute

commissioner will cancel the foreclosure sale, or adjourn the sale

as explained in section 11, below.

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

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

this section must be served:

(i) By mail, as described in section 8, below (except that the

minimum time periods between mailing and the date of the foreclosure

sale do not apply); or

[[Page 48559]]

(ii) In any other manner which, in the substitute foreclosure

commissioner's sole discretion, is conducive to achieving timely

notice of such substitution.

5. Prerequisites to Foreclosure

(a) The Secretary may commence foreclosure of a single family

mortgage under the Statute upon the breach of a covenant or

condition in the mortgage agreement.

(b) No foreclosure under the Statute may be commenced unless any

previously pending judicial or nonjudicial proceeding that has been

separately instituted by the Secretary to foreclose the mortgage in

a manner other than under the Statute has been withdrawn, dismissed,

or otherwise terminated.

(c) The Secretary will not institute any separate foreclosure

proceeding concerning a property while it is the subject of a

foreclosure pursuant to the Statute.

(d) The Statute does not preclude the Secretary from enforcing

any right, other than foreclosure, under applicable Federal or State

law, including any right to obtain a monetary judgment, or

foreclosing under the Statute if the Secretary has obtained or is

seeking any other remedy available pursuant to Federal or State law,

or under the mortgage agreement.

6. Commencement of Foreclosure

If the Secretary determines that the prerequisites to

foreclosure set forth in section 5 are satisfied, the Secretary may

direct the foreclosure commissioner to commence foreclosure of the

mortgage. Upon such request, the foreclosure commissioner will

commence foreclosure of the mortgage in accordance with section 7,

below.

7. Notice of Default and Foreclosure Sale

The commissioner commences the foreclosure by serving a Notice

of Default and Foreclosure Sale. The Notice sets forth the name,

address and telephone number of the foreclosure commissioner and the

date on which the Notice was issued, along with the following

information:

(a) The current mortgagee (that is, the Secretary), the original

mortgagee (if other than the Secretary), and the original mortgagor.

(b) A description of the security property sufficient to

identify the property to be sold.

(c) The date of the mortgage, the date the mortgage was

recorded, the office in which the mortgage is recorded, and the

liber and folio numbers or other appropriate description of the

location of recordation of the mortgage.

(d) Identification of the failure to make payment, including the

entire amount delinquent as of a date specified, a statement

generally describing the other costs that must be paid if the

mortgage is to be reinstated, the due date of the earliest principal

installment payment remaining wholly unpaid as of the date on which

the Notice is issued upon which the foreclosure is based, or a

description of any other default or defaults upon which foreclosure

is based, and the acceleration of the secured indebtedness.

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

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

accordance with the Statute.

(g) A description of the types of costs, if any, to be paid by

the purchaser upon transfer of title.

(h) The bidding and payment requirements for the foreclosure

sale, including the amount and method of deposit to be required at

the foreclosure sale, and the time and method of payment of the

balance of the foreclosure purchase price. The Notice must state

that all deposits and the balance of the purchase price must be paid

by certified or cashier's check. The Notice must also state that no

deposit will be required of the Secretary when the Secretary bids at

the foreclosure sale.

(i) Any other appropriate terms of sale or information as the

Secretary may determine.

8. Service of Notice of Default and Foreclosure Sale

The foreclosure commissioner will serve the Notice of Default

and Foreclosure Sale upon the following persons and in the following

manner, and no additional notice will be required to be served,

notwithstanding any notice requirements of any State or local law:

(a) Filing the notice. The Notice of Default and Foreclosure

Sale must be filed not less than 21 days before the date of the

foreclosure sale in the manner authorized for filing a notice of an

action concerning real property according to the law of the State in

which the security property is located, or if none, in the manner

authorized by Section 3201 of title 28, United States Code.

(b) Notice by mail.

(1) The Notice must be sent by certified or registered mail,

postage prepaid, return receipt requested, to the following (except

that multiple mailings are not required to be sent to any party with

multiple capacities, e.g., an original mortgagor who is the security

property owner and lives in one of the units):

(i) The current security property owner of record, as the record

existed 45 days before the date originally set for the foreclosure

sale, whether or not the notice describes a sale adjourned as

provided in the Statute. The Notice must be mailed not less than 21

days before the date of the foreclosure sale to the current owner at

the last address known to the Secretary or the foreclosure

commissioner or, if none, to the address of the security property,

or, at the discretion of the foreclosure commissioner, to any other

address believed to be that of the current owner.

(ii) The original mortgagor and all subsequent mortgagors of

record or other persons who appear on the basis of the record to be

liable for part or all of the mortgage debt, as the record existed

45 days before the date originally set for the foreclosure sale,

whether or not the notice describes a sale adjourned as provided in

the Statute, except that the Notice need not be mailed to any

mortgagors who have been released from all obligations under the

mortgage. Notice under this subsection must be mailed not less than

21 days before the date of the foreclosure sale to the last known

address of the mortgagors or, if none, to the address of the

security property, or, at the discretion of the foreclosure

commissioner, to any other address believed to be that of such

mortgagors.

(iii) All dwelling units in the security property, whether or

not the Notice describes a sale adjourned as provided in this part.

Notice under this subsection shall be mailed not less than 21 days

before the date of the foreclosure sale. If the names of the

occupants of the security property are not known to the Secretary,

or if the security property has more than one dwelling, the Notice

must be posted at the security property not less than 21 days before

the foreclosure sale.

(iv) All persons holding liens of record upon the security

property, as the record existed 45 days before the date originally

set for the foreclosure sale, whether or not the notice describes a

sale adjourned as provided in the Statute. Notice under this

subsection must be mailed not less than 21 days before the date of

the foreclosure sale to each such lienholder's address of record,

or, at the discretion of the foreclosure commissioner, to any other

address believed to be that of such lienholder.

(2) Notice by mail is deemed duly given upon mailing, whether or

not received by the addressee and whether or not a return receipt is

received or the notice is returned. The date of the receipt for the

postage paid for the mailing may serve as proof of the date of

mailing of the notice.

(c) Publication.

(1) A copy of the Notice of Default and Foreclosure Sale must be

published once a week during three successive calendar weeks before

the date of the foreclosure sale. Such publication must be in a

newspaper or newspapers having general circulation in the county or

counties in which the security property being sold is located. A

legal newspaper that is accepted as a newspaper of legal record in

the county or counties in which the security property being sold is

located is a newspaper having general circulation for the purposes

of this paragraph.

(2) If there is no newspaper of general circulation published at

least weekly in the county or counties in which the security

property being sold is located, copies of the Notice of Default and

Foreclosure Sale must be posted, not less than 21 days before the

date of the foreclosure sale, at the courthouse of any county or

counties in which the security property is located and at the place

where the sale is to be held.

9. Presale Reinstatement

(a) Except as provided in paragraph (d) of section 4 (above),

paragraph (b) of this section, and section 11 (below), the

foreclosure commissioner will withdraw the security property from

foreclosure and cancel the foreclosure sale only if:

(1) The Secretary directs the foreclosure commissioner to do so

before or at the time of the sale; or

(2) The foreclosure commissioner finds, upon application of the

mortgagor not less than three business days before the date of the

sale, that the default or defaults upon which the foreclosure is

based did not exist at the time of service of the Notice of Default

and Foreclosure Sale; or

(3) In the case of a foreclosure involving a monetary default,

there is tendered to the

[[Page 48560]]

foreclosure commissioner before public auction is completed all

amounts that would be due under the mortgage agreement if payments

under the mortgage had not been accelerated, all costs of

foreclosure incurred for which payment from the proceeds of

foreclosure is provided in section 13 (below), and the foreclosure

commissioner finds that there are no nonmonetary defaults; provided,

however, that the Secretary may refuse to cancel a foreclosure sale

pursuant to this subparagraph if the current mortgagor or owner of

record has, on one or more previous occasions, caused a foreclosure

of the mortgage, commenced pursuant to the Statute or otherwise, to

be canceled by curing a default; or

(4) In the case of a foreclosure involving a nonmonetary

default:

(i) The foreclosure commissioner, upon application of the

mortgagor before the date of foreclosure sale, finds that all

nonmonetary defaults are cured and that there are no monetary

defaults; and

(ii) There is tendered to the foreclosure commissioner before

public auction is completed all amounts due under the mortgage

agreement (excluding all amounts which would be due under the

mortgage agreement if the mortgage payments had been accelerated),

including all amounts of expenditures secured by the mortgage and

all costs of foreclosure incurred for which payment would be made

from the proceeds of foreclosure.

(b) Before withdrawing the security property from foreclosure

under subparagraphs (a)(2), (a)(3), or (a)(4) of this section, the

foreclosure commissioner must notify the Secretary of the proposed

withdrawal by telephone or other telecommunication device and must

also provide the Secretary with a written statement of the reasons

for the proposed withdrawal along with all documents submitted by

the mortgagor in support of the proposed withdrawal. Upon receipt of

this statement, the Secretary has ten (10) days in which to

demonstrate why the security property should not be withdrawn from

foreclosure, and if the Secretary makes this demonstration, the

property will not be withdrawn from foreclosure. The Secretary will

provide the mortgagor with a copy of any statement prepared by the

Secretary in opposition to the proposed withdrawal at the same time

the statement is submitted to the foreclosure commissioner. If the

Secretary receives the foreclosure commissioner's written statement

less than 10 days before the scheduled foreclosure sale, the sale

will automatically be adjourned for 14 days, during which time it

may also be cancelled. Under these circumstances, notice of the

rescheduled sale, if any, will be served as described in section

11(c), below.

(c) If the foreclosure commissioner cancels the foreclosure, the

mortgage will continue in effect as though acceleration had not

occurred.

(d) Cancellation of a foreclosure sale will have no effect on

the commencement of a subsequent foreclosure proceeding.

(e) The foreclosure commissioner must file a notice of

cancellation in the same place and manner provided for filing the

Notice of Default and Foreclosure Sale as provided in section 8.

10. Conduct of Sale

(a) The foreclosure sale will be conducted in a manner and at a

time and place as identified in the Notice of Foreclosure and Sale

and more fully described in this section. The sale will be scheduled

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

installment as described in section 7(d), above, or the earliest

occurrence of a nonmonetary default. The sale will be held at public

auction and must be scheduled to begin at a time between the hours

of 9:00 a.m. and 4:00 p.m. local time. The sale will be scheduled

for a place where foreclosure real estate auctions are customarily

held in the county or counties in which the property to be sold is

located, or at a courthouse therein, or at or on the property to be

sold. If the security property is situated in two counties, the sale

may be held in any one of the counties in which any part of the

security property is situated.

(b) The foreclosure commissioner will conduct the foreclosure

sale in a manner that is fair to both the mortgagor and the

Secretary (see section 12, below) and consistent with the provisions

of the Statute.

(c) In addition to bids made in person at the sale, the

foreclosure commissioner will accept written one-price sealed bids

from any party, including the Secretary, for entry by announcement

at the sale so long as those bids conform to the requirements

described in the Notice of Default and Foreclosure Sale. The

foreclosure commissioner will announce the name of each bidder and

the amount of the bid. The commissioner will accept oral bids from

any party, including parties who submitted one-price sealed bids, if

those oral bids conform to the requirements in the Notice of Default

and Foreclosure Sale. Before the close of the sale, the commissioner

will announce the amount of the high bid and the name of the

successful bidder.

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

section, neither the foreclosure commissioner nor any relative,

related business entity, or employee is permitted to bid in any

manner on the security property subject to the foreclosure sale,

except that the foreclosure commissioner or an auctioneer may be

directed by the Secretary to enter a bid on the Secretary's behalf.

Relatives of the foreclosure commissioner who may not bid include

parents, siblings, spouses and children. A related business entity

that may not bid or whose employees may not bid is one whose

relationship (at the time the foreclosure commissioner is designated

and during the term of service as foreclosure commissioner) with the

entity of the foreclosure commissioner is such that, directly or

indirectly, one entity formulates, directs, or controls the other

entity; or has the power to formulate, direct, or control the other

entity; or has the responsibility and authority to prevent, or

promptly to correct, the offensive conduct of the other entity.

(e) The commissioner may serve as an auctioneer, or the

commissioner may employ an auctioneer to conduct the sale. If the

commissioner employs an auctioneer to conduct the foreclosure sale,

the auctioneer must be a licensed auctioneer, an officer of State or

local government, or any other person who commonly conducts

foreclosure sales in the area in which the security property is

located. The commissioner will compensate an auctioneer from the

proceeds of the commission described in section 13(e), below.

(f) The foreclosure commissioner may require a bidder to make a

deposit in an amount or percentage set by the foreclosure

commissioner and stated in the Notice of Default and Foreclosure

Sale before the bid is accepted.

(g) A successful bidder at the foreclosure sale who fails to

comply with the terms of the sale may be required to forfeit the

cash deposit or, at the election of the foreclosure commissioner

after consultation with the Secretary, will be liable to the

Secretary for any costs incurred as a result of such failure. If the

successful bidder fails to comply with the terms of the sale, the

HUD Field Office representative will provide instructions to the

commissioner about offering the property to the second highest

bidder, or having a new sale, or other instruction at the discretion

of the HUD representative.

11. Adjournment or Cancellation of Sale

(a) The foreclosure commissioner may, before or at the time of

the foreclosure sale, adjourn or cancel the foreclosure sale if the

foreclosure commissioner determines, in the foreclosure

commissioner's discretion, that:

(1) Circumstances are not conducive to a sale which is fair to

the mortgagor and the Secretary, or

(2) Additional time is necessary to determine whether the

security property should be withdrawn from foreclosure, as provided

in section 9, above.

(b) The foreclosure commissioner may adjourn a foreclosure sale

to a later hour the same day by announcing or posting, at the

original place of sale, the new time and place of the foreclosure

sale, which must be held between 9:00 a.m. and 4:00 p.m. at the

original place of sale.

(c) Except as provided in paragraph (b) of this section, the

foreclosure commissioner may adjourn a foreclosure sale for not less

than 9 and not more than 31 days, in which case the foreclosure

commissioner must serve a Notice of Default and Foreclosure Sale

that is revised to state that the foreclosure sale has been

adjourned to a specified date between the hours of 9:00 a.m. and

4:00 p.m. The revised Notice may include any other information the

foreclosure commissioner deems appropriate. Such Notice must be

served by publication and mailing as provided in section 8, above,

except that publication may be made on any of three separate days

before the revised date of foreclosure sale. If there is no

newspaper of general circulation that would permit publication on

any of three separate days before the revised date of foreclosure

sale, the Notice of Default and Foreclosure Sale must be posted, not

less than nine days before the date to which the sale has been

adjourned, at the courthouse of any county or counties in which the

property is located, and at the place where the sale is to be held.

The

[[Page 48561]]

commissioner must also, in the case of a sale adjourned to a later

date, mail a copy of the revised Notice of Default and Foreclosure

Sale to the Secretary at least seven days before the date to which

the sale has been adjourned.

(d) When a substitute commissioner is designated by the

Secretary to replace a previously designated foreclosure

commissioner, the sale shall continue without prejudice unless the

substitute commissioner finds, in that commissioner's sole

discretion, that continuation of the foreclosure sale will unfairly

affect the interests of the mortgagor. Any such finding shall be in

writing. If the substitute commissioner makes such a finding, the

substitute commissioner shall cancel or adjourn the sale.

12. Validity of Sale

Any foreclosure sale held in accordance with the Statute and its

regulations is conclusively presumed to have been conducted in a

fair, legal, and reasonable manner. The sale price is conclusively

presumed to be reasonable and equal to the fair market value of the

property.

13. Foreclosure Costs

The following foreclosure costs are paid from the sale proceeds,

or from other available sources if sales proceeds are insufficient,

before satisfaction of any other claim to the sale proceeds:

(a) Advertising costs and postage expenses incurred in giving

notice described in sections 8 and 11, above.

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

notices described in section 8, above, and for the foreclosure

commissioner's or auctioneer's attendance at the sale. The mileage

is paid at the rate provided in 28 U.S.C. 1821.

(c) Reasonable and customary costs incurred for title and lien

record searches.

(d) The necessary out-of-pocket costs incurred by the

foreclosure commissioner for recording documents.

(e) A commission for the foreclosure commissioner (if the

foreclosure commissioner is not an employee of the United States)

for the conduct of the foreclosure in an amount to be determined by

the Secretary. A commission may be allowed to the foreclosure

commissioner notwithstanding termination of the sale or appointment

of a substitute commissioner before the sale takes place.

14. Disposition of Sale Proceeds

(a) The proceeds of the foreclosure sale are paid out in the

following order:

(1) To cover the costs of foreclosure described in section 13,

above.

(2) To pay valid tax liens or assessments on the security

property as provided in the Notice of Default and Foreclosure Sale.

(3) To pay any liens recorded before the recording of the

foreclosed mortgage which are required to be paid in conformity with

the Notice of Default and Foreclosure Sale.

(4) To pay service charges and advances for taxes, assessments,

and property insurance premiums which were made under the terms of

the foreclosed mortgage.

(5) To pay the interest due under the mortgage debt.

(6) To pay the unpaid principal balance secured by the mortgage

(including expenditures for the necessary protection, preservation,

and repair of the security property as authorized under the mortgage

agreement and interest thereon if provided in the mortgage

agreement).

(7) To pay any late charges or fees.

(b) Any surplus proceeds from a foreclosure sale will be

applied, after payment of the items described in paragraph (a) of

this section, in the order as follows:

(1) To pay any liens recorded after the foreclosed mortgage in

the order of priority under the law of the State in which the

security property is located.

(2) To pay the surplus to the mortgagor.

(c) If the person to whom surplus proceeds are to be paid cannot

be located, or if the surplus available is insufficient to pay all

claimants and the claimants cannot agree on the allocation of the

surplus, or if any person claiming an interest in the mortgage

proceeds disagrees with the foreclosure commissioner's proposed

disposition of the disputed proceeds, the foreclosure commissioner

may deposit the disputed funds with a legally authorized official or

court. If a procedure for the deposit of disputed funds is not

available, and the foreclosure commissioner files a bill of

interpleader or is sued as a stakeholder to determine entitlement to

such funds, the foreclosure commissioner's necessary costs in taking

or defending such action are deductible from the disputed funds.

(d) The foreclosure commissioner will keep such records as will

permit the Secretary to verify the costs claimed, and otherwise to

enable the Secretary to audit the foreclosure commissioner's

disposition of the sale proceeds.

15. Transfer of Title and Possession

(a) If the Secretary is the successful bidder, the foreclosure

commissioner will issue a deed to the Secretary upon receipt of the

amount needed to pay the costs of tax liens and prior liens. See

sections 14(a)(2) and (a)(3), above.

(b) If the Secretary is not the successful bidder, the

foreclosure commissioner will issue a deed to the purchaser or

purchasers upon receipt of the entire purchase price in accordance

with the terms of the sale as provided in the Notice of Default and

Foreclosure Sale.

(c) The deed or deeds issued by the foreclosure commissioner

shall be without warranty or covenants to the purchaser or

purchasers. Notwithstanding any State law to the contrary, delivery

of a deed by the foreclosure commissioner is a conveyance of the

property and constitutes passage of good and marketable title to the

mortgaged property. No judicial proceedings are required ancillary

or supplementary to the procedures provided under the Statute and

its regulations to assure the validity of the conveyance or

confirmation of such conveyance. The purchaser of property under the

Statute is presumed to be a bona fide purchaser.

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

Statute is entitled to possession upon passage of title under

paragraph (c) of this section, subject to any interest or interests

that are not barred, as described in section 18, below. Any person

remaining in possession of the property after the passage of title

is deemed a tenant at sufferance subject to eviction under

applicable law.

(e) If a purchaser dies before execution and delivery of the

deed conveying the property to the purchaser, the foreclosure

commissioner will execute and deliver the deed to a legal

representative of the decedent purchaser's estate upon payment of

the purchase price in accordance with the terms of sale. Such

delivery to the representative of the purchaser's estate will have

the same effect as if accomplished during the lifetime of the

purchaser.

(f) When the foreclosure commissioner conveys the property to

the Secretary, no tax may be imposed or collected with respect to

the foreclosure commissioner's deed, including any tax customarily

imposed upon the deed instrument or upon the conveyance or transfer

of title to the property.

(g) The register of deeds or other appropriate official in the

county where the property is located must, upon tendering of the

customary recording fees, accept all instruments pertaining to the

foreclosure which are submitted by the foreclosure commissioner for

recordation. The instruments to be accepted include, but are not

limited to, the foreclosure commissioner's deed. If the foreclosure

commissioner elects to include the recitations described in section

17(a), below, in an affidavit or an addendum to the deed as

described in section 17(b), below, the affidavit or addendum must be

accepted for recordation. Failure to collect or pay a tax as

described in paragraph (f) of this section are not grounds for

refusing to record such instruments, for failing to recognize such

recordation as imparting notice, or for denying the enforcement of

such instruments and their provisions in any State or Federal Court.

(h) The Clerk of the Court or other appropriate official must

cancel all liens as requested by the foreclosure commissioner.

16. Redemption Rights

(a) There is no right of redemption, or right of possession

based upon a right of redemption, in the mortgagor or others

subsequent to a foreclosure completed pursuant to the Statute. In

regard to the pre-emption of State laws regarding rights of

redemption, a foreclosure is considered completed upon the date and

at the time of the foreclosure sale.

(b) Section 204(l) of the National Housing Act, 42 U.S.C.

1710(l), and section 701 of the Department of Housing and Urban

Development Reform Act of 1989, 42 U.S.C. 1452c, do not apply to

mortgages foreclosed under the Statute.

17. Record of Foreclosure and Sale

(a) The foreclosure commissioner must include in the recitals of

the deed to the purchaser, or in an affidavit or addendum to the

deed, the following items:

(1) The date, time, and place of the foreclosure sale.

[[Page 48562]]

(2) A statement that the foreclosed mortgage was held by the

Secretary.

(3) The date of the foreclosed mortgage, the date of the

recording of the mortgage that was foreclosed, the office in which

the mortgage was recorded, and the liber and folio numbers or other

appropriate description of the recordation of the mortgage.

(4) The details of the service of the Notice of Default and

Foreclosure Sale, including the names and addresses of the persons

to whom the Notice was mailed and the date on which the Notice was

mailed, the name of the newspaper in which the Notice was published

and the dates of publication, and the date on which service by

posting, if required, was accomplished.

(5) The date and place of filing the Notice of Default and

Foreclosure Sale.

(6) A statement that the foreclosure was conducted in accordance

with the provisions of the Statute and with the terms of the Notice

of Default and Foreclosure Sale.

(7) The name of the successful bidder and the amount of the

successful bid.

(b) The foreclosure commissioner may, in his or her discretion,

make the recitations in paragraph (a) of this section in the deed or

in an affidavit or addendum to the deed, either of which is to be

recorded with the deed as provided in the Statute.

(c) The items set forth in paragraph (a) of this section are

prima facie evidence of the truth of such facts in any Federal or

State court and evidence a conclusive presumption in favor of bona

fide purchasers and encumbrancers for value without notice.

Encumbrancers for value include liens placed by lenders who provide

the purchaser with purchase money in exchange for a security

interest in the newly-conveyed property.

18. Effect of Sale

A sale made and conducted as prescribed in the Statute to a bona

fide purchaser bars all claims upon, or with respect to, the

property sold for the following persons:

(a) Any person to whom the Notice of Default and Foreclosure

Sale was mailed as provided under the Statute, and the heir,

devisee, executor, administrator, successor or assignee claiming

under any such person.

(b) Any person claiming any interest in the property subordinate

to that of the mortgage if such person had actual knowledge of the

foreclosure sale.

(c) Any person claiming any interest in the property whose

assignment, mortgage, or other conveyance was not duly recorded or

filed in the proper place for recording or filing, or whose judgment

or decree was not duly docketed or filed in the proper place for

docketing or filing, before the date on which the notice of the

foreclosure sale was first served by publication, as described in

section 8(c), above, and the executor, administrator, or assignee of

such a person.

(d) Any person claiming an interest in the property under a

statutory lien or encumbrance created subsequent to the recording or

filing of the mortgage being foreclosed, and attaching to the title

or interest of any person designated in any of the foregoing

paragraphs.

19. Computation of Time

Periods of time provided for in the Statute are calculated in

consecutive calendar days including the day or days on which the

actions or events occur, or are to occur. Any such period of time

includes the day on which an event occurs or is to occur.

20. Deficiency Judgment

If the price at which the security property is sold at the

foreclosure sale is less than the unpaid balance of the debt secured

by such property after deducting payments in the order described in

section 14, above, the Secretary may refer the matter to the

Attorney General who may commence an action or actions against any

and all debtors to recover the deficiency, the only limitation on

such action being a prohibition against pursuit of a deficiency that

is specifically set forth in the mortgage.

[FR Doc. 96-23258 Filed 9-12-96; 8:45 am]

BILLING CODE 4210-32-P