Office of the Assistant Secretary for Public and Indian Housing; Loan Guarantees for Indian Housing

[[Page 9052]]

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 955

[Docket No. FR-3614-F-04]

RIN 2577-AB40

Office of the Assistant Secretary for Public and Indian Housing;

Loan Guarantees for Indian Housing

AGENCY: Office of the Assistant Secretary for Public and Indian

Housing, HUD.

ACTION: Final rule.

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SUMMARY: This final rule sets forth regulations to implement the Indian

Loan Guarantee Program authorized by section 184 of the Housing and

Community Development Act of 1992. The purpose of the program is to

provide loan guarantees that will make private financing available to

Native Americans on restricted lands where no source of financing is

currently available.

EFFECTIVE DATE: April 5, 1996.

FOR FURTHER INFORMATION CONTACT: Dominic Nessi, Deputy Assistant

Secretary for Native American Programs, Room B-133, Department of

Housing and Urban Development, Washington, DC 20410; telephone (202)

755-0032 (voice) or (202) 708-0850 (TDD for speech or hearing impaired

individuals). These are not toll-free numbers.

SUPPLEMENTARY INFORMATION:

I. Paperwork Reduction Act Statement

The information collection requirements contained in Sec. 955.101

of this rule have been approved by the Office of Management and Budget

in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-

3520), and assigned OMB control number 2577-0200. An agency may not

conduct or sponsor, and a person is not required to respond to, a

collection of information unless the collection displays a valid

control number.

II. Background

Section 184 of the Housing and Community Development Act of 1992

(HCDA 1992) (Pub. L. 102-550, approved October 28, 1992) authorized the

establishment of the Indian Housing Loan Guarantee Fund (the Fund) to

provide access to sources of private financing to Indian families and

Indian housing authorities who otherwise could not acquire housing

financing because of the unique legal status of Indian trust land. In

general, these lands, held in trust by the United States for the

benefit of an Indian or Indian tribe, are inalienable. Trust lands

under this program also include lands to which the title is held by an

Indian tribe subject to a restriction against alienation imposed by the

United States. Because titles to individual plots do not convey, and

liens do not attach, conventional mortgage lending practices do not

operate in this forum.

The Fund addresses these obstacles to mortgage financing by

guaranteeing loans made to Indian families or Indian housing

authorities to construct, acquire, or rehabilitate 1- to 4-family

dwellings that are standard housing and are located on trust land or

land located in an Indian or Alaska Native area. Loans may be made by

any lender approved by the Secretary of Housing and Urban Development,

the Secretary of Agriculture, or the Secretary of Veterans' Affairs;

or, any lender which is supervised, approved, regulated or insured by

any agency of the Federal Government.

The Department implemented the section 184 Loan Guarantees for

Indian Housing program at 24 CFR part 955 by an interim rule published

on August 18, 1994 (59 FR 42732). Six public comments, which are

discussed in section IV. of this preamble, below, were received in

response to the interim rule.

III. Changes Made in the Final Rule

In keeping with the President's mandate to reinvent and reform

regulations, part 955 is substantially streamlined in this rule. One of

the methods by which the Department is streamlining and reducing its

regulations is to remove rule text that only repeats statutory

language. Rules will only contain legally binding requirements that are

in addition to those contained in a statute. Besides reducing the sheer

bulk of rules, this practice will remove the problems that result when

a rule that echoes the language of a statute becomes inconsistent with

new statutory amendments. The period before such a rule is amended to

conform to new statutory language is often one of confusion and

uncertainty as to which law applies: the old provisions in the

regulations or the new provisions in the statute. The new part 955

promulgated here does not, therefore, repeat any statutory language,

but only implements requirements that are in addition to those in

Section 184.

The combined statutory and regulatory requirements that apply with

respect to Section 184 loan guarantees have been placed in an appendix

to this final rule. The final rule will be codified in the Code of

Federal Regulations; the appendix will not be codified. However, the

appendix is available to the public as a single document which provides

a unified overview of the general requirements under Section 184.

This final rule also adds a definition of Section 184, referring to

the loan guarantee program, that makes citing the program in the rule

more convenient.

IV. Comments on the Interim Rule

HUD solicited public comments on the interim rule. During the

comment period HUD received 6 comments from IHAs, Tribal leaders, and

financial institutions. This final rule summarizes below the comments

according to their relevant subparts and provides HUD's responses to

those comments.

Section 955.101 Applicability

Three commentors objected to the interim rule's definition of

eligible areas as ``restricted Indian lands.'' These commentors stated

that eligible areas should be defined as all lands in Indian country,

regardless of title status (including fee lands).

HUD response: Section 184 can be used only with respect to

properties which are located on trust/restricted lands or which are

located within an Indian area. Some tribes are currently expanding

their service area by purchasing fee simple land and placing that land

into trust status. These areas are eligible for section 184 assistance

because they are restricted lands within an Indian area.

Section 955.103 Definitions

One commentor noted that the Interim Rule refers to ``Native

Americans'' while the statute refers to ``Indian families'' and

``Indian Housing Authorities.'' The commentor recommended that

references to ``Native Americans'' be removed from the rule.

HUD response: The definition of Indian used in the rule means any

person recognized as being Indian or Alaska Native by an Indian tribe,

the Federal Government, or any State, and includes the term ``Native

American'', which has been added to the regulatory language at the

discretion of the Department.

One commentor requested clarification regarding whether Native

Hawaiians are eligible borrowers under the section 184 program.

HUD response: The statutory purpose of the section 184 program is

given at HCDA 1992 section 184(a) as: ``To provide access to sources of

private financing to Indian families and Indian housing authorities who

otherwise could not acquire housing financing

[[Page 9053]]

because of the unique legal status of Indian trust land * * *''. Native

Hawaiians, who are not included within the definition of the term

``Indian,'' do not qualify under this statutory purpose.

Section 955.105 Eligible Loans

Two commentors noted that the restriction on eligible loans should

be expanded to include adjustable rate mortgages and balloon payment

mortgages.

HUD response: The Department has determined that the section 184

program will be operating in a totally new lending environment and the

uncertainty of a balloon payment mortgage or an adjustable rate

mortgage of any type would create an unnecessary risk to the borrower,

the lender and the Department. This rule clarifies, at Sec. 955.105,

that only fixed rate, fixed term loans with even monthly payments are

eligible.

Two commentors noted that acquisition and rehabilitation is an

eligible activity and requested clarification whether a single

guaranteed loan can be made to cover both of these activities for one

structure.

HUD response: Yes, a single guaranteed loan can be made to cover

both acquisition and rehabilitation for one structure. A section 184

guaranteed loan may be used to ``pay off'' a Mutual Help home so that

the property may be conveyed to the homeowner. A guaranteed loan could

be used to pay off and rehabilitate a Mutual Help home.

Section 955.107 Eligible Housing

One commenter stated that fee lands within Indian country should be

eligible sites. HUD will allow fee simple lands in limited

circumstances. Fee simple lands within a designated Indian area are

eligible sites under section 184.

One commentor recommended that the term ``modest in size and

design'' be defined in specific terms.

HUD response: In order to determine ``modest'' the section 184

program loan may not exceed 150% of the FHA mortgage limits, as

adjusted for the area. These mortgage limits are published by the

Federal Housing Administration (FHA) by area of the country on a

periodic basis. Thus, the mortgage limit in Anchorage may differ

greatly from the mortgage limit in Oklahoma City.

One commentor criticized the lack of specificity in the

construction standards at Sec. 955.107(2). The commentor recommended

that structures be required to conform to the Uniform Building Code

(UBC) and other locally adopted Tribal building ordinances.

HUD response: The section 184 statute provides requirements

relating to size; heating, plumbing, and electrical requirements; and

energy efficiency. However, the Department emphasizes that the

standards represent a minimum level of requirements. The tribe,

individual owner, or IHA may design and construct a property that meets

a higher standard.

Section 955.109 Eligible Lenders

In addressing this section, one commentor stated that the rule

should cross reference prohibitions against housing discrimination. The

same commentor then stated that lenders should not be able to withhold

loans where the fund is fully obligated.

HUD response: The commentor appears to be asking HUD to prohibit

lenders from refusing to make loans to eligible borrowers as long as

there is section 184 guarantee authority available. Notwithstanding any

housing discrimination laws, HUD does not have the authority to compel

lenders to participate in this program.

Section 955.111 Eligible Collateral

One commentor suggested that the term ``leasehold'' be deleted from

section Sec. 955.111(b)(3).

HUD response: HUD agrees, and has removed the term ``leasehold''

from section Sec. 955.111(b)(3) of the final rule.

One commentor stated that there is no time period specified for

when the Notice of Default (NOD) is filed or for when it ends, or when

the 60 day period starts for the eviction action. Another commentor

stated that tribal eviction procedures under Sec. 955.111(4) should be

standardized and/or reviewed by OGC and ONAP for approval as a

precondition for participation in the section 184 program.

HUD response: Tribes are required to adopt foreclosure, eviction,

and priority of lien procedures to be eligible for participation in the

section 184 program. HUD does not approve or review the text of each

procedure. This function is left to Tribal discretion. The Department

will simply ensure that such procedures do exist. In order to provide

maximum flexibility and Tribal discretion in the matter of establishing

foreclosure and eviction policies HUD has determined to only recognize

the existence of such procedures and not a line by line technical

review of each tribe's policies.

One commentor stated that the 60-day time period for appealing

decisions under Sec. 955.111(b)(4)(ii) should be reduced to 30 days.

HUD response: HUD agrees with the commentor and will change the 60-

day time period for appealing decisions under Sec. 955.111(b)(4)(ii) to

30 days.

One commentor stated that Indian nation public policy allows for a

wide range of collateral arrangements.

HUD response: The rule takes this into account by specifying that

collateral may include, but is not limited to, the categories

specified.

One commentor objected to the priority of loan obligation

provision, asserting that it gives HUD oversight regarding the

substantive content of Indian nation law.

HUD response: This is a critical step to ensure the financial

stability of this new loan program and will provide the tribes and the

Department with the assurance of prompt action and protection of the

guaranteed loan.

One commentor objected to the requirement that tribes must certify

that they have in place and will enforce procedures for eviction. The

commentor stated that it is not required by the Statute.

HUD response: The Department has attempted to provide the broadest

interpretation possible in all instances; however, in a totally new

lending environment it is necessary to have in place at least minimal

safeguards to the financial integrity of the loan guarantee fund.

One commentor objected to the enforcement requirement under

Sec. 955.111(b)(4)(i), stating that it infringes on Indian nation

sovereignty.

HUD response: Once again the Department has determined that, in

this entirely new lending environment, it is critical to have in place

minimal standards that will ensure the financial integrity of the loan

guarantee fund.

One commentor requested further clarification on the review of HUD

decisions to cease issuing guarantees to specific tribes, saying that

it is important to ensure due process rights.

HUD response: The Department has determined that due process rights

of appeal have been developed to ensure maximum protection to both the

Department and the tribes with several levels of appeal available and a

final option to resubmit the appeal based upon new evidence following

the exhaustion of all appeal levels.

Section 955.113 Certificate of Guarantee

No comments received concerning this section.

Section 955.115 Guarantee Fee

One commentor requested clarification on what happens to the one

percent guarantee fee.

HUD response: Funds received as a result of the one percent

guarantee fee are returned to the loan guarantee fund

[[Page 9054]]

to provide additional resources for additional loans.

Section 955.117 Liability Under Guarantee

No comments received concerning this section.

Section 955.119 Transfer and Assumptions

One commentor questioned whether HUD will require that all of the

loans under the section 184 program be assumable, stating that many

lenders are reluctant to underwrite assumable loans.

HUD response: There is no requirement that all of the loans under

the section 184 program be assumable.

One commentor requested clarification regarding whether sales and

assignments to financial institutions will be subject to the law of the

Indian nations where the loans are made, in addition to being subject

to agency supervision under state regulators.

HUD response: Transactions may be subject to tribal laws in

addition to agency supervision under state regulations.

Section 955.121 Disqualification of Lenders and Civil Money Penalties

No comments received concerning this section.

Section 955.123 Payment Under Guarantee

Three commentors recommended that consideration be given to the

issue of whether the loan guarantee program will allow nonjudicial

remedies such as deeds of trust and escrow agents to be utilized as an

alternative to judicial foreclosure, as referred to under

Sec. 955.123(a)(1)(i) of the interim rule.

HUD response: Any method that promotes collection is encouraged,

because the statute requires the holder of the guarantee to exhaust all

reasonable possibilities of collection before any payment under a

guarantee is made.

Section 955.125 Expiration of Interim Rule

No comments received concerning this section.

V. Other Matters

Impact on Small Entities

The Department, in accordance with the Regulatory Flexibility Act

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

approving it certifies that this rule does not have a significant

economic impact on a substantial number of small entities.

Specifically, the requirements of this interim rule are directed to

individual borrowers, Indian Housing Authorities, Tribal governments

and financial institutions.

Environmental Review

A Finding of No Significant Impact with respect to the environment

has been made in accordance with HUD regulations at 24 CFR Part 50,

which implement section 102(2)(C) of the National Environmental Policy

Act of 1969. The Finding of No Significant Impact is available for

public inspection between 7:30 a.m. and 5:30 p.m. weekdays in the

Office of the Rules Docket Clerk.

Federalism Impact

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

of Executive Order 12612, Federalism, has determined that the policies

contained in 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. As a result,

the rule is not subject to review under this order. Specifically, the

requirements of this rule are directed to individual borrowers and

financial institutions.

Impact on the Family

The General Counsel, as the Designated Official under Executive

Order 12606, The Family, has determined that this rule has potential

for significant impact on family formation, maintenance, and general

well-being. The Indian Loan Guarantee Program will make it possible for

Native American families to build or acquire homes on their Native

lands where homeownership opportunities have been very limited in the

past. Accordingly, since the impact on the family is beneficial, no

further review is considered necessary.

List of Subjects in 24 CFR Part 955

Indians, Loan programs--Indians, Reporting and recordkeeping

requirements.

Accordingly, 24 CFR part 955 is revised to read as follows:

PART 955--LOAN GUARANTEES FOR INDIAN HOUSING

Sec.

955.101 Applicability and scope.

955.103 Definitions.

955.105 Eligible loans.

955.107 Eligible collateral.

955.109 Guarantee fee.

955.111 Safety and quality standards.

Authority: 42 U.S.C. 1715z-13a and 3535(d).

Sec. 955.101 Applicability and scope.

Under the provisions of section 184 of the Housing and Community

Development Act of 1992 (12 U.S.C. 1515z-13a), the Department of

Housing and Urban Development (the Department) has the authority to

guarantee loans for the construction, acquisition, or rehabilitation of

1- to 4-family homes to be owned by Native Americans on restricted

Indian lands. This part provides requirements that are in addition to

those in section 184.

(Approved by the Office of Management and Budget under control

number 2577-0200.)

Sec. 955.103 Definitions.

In addition to the definitions that appear in Section 184 of the

Housing and Community Development Act of 1992, the following

definitions are applicable to loan guarantees under Section 184--

Default means the failure by a borrower to make any payment or to

perform any other obligation under the terms of a loan, and such

failure continues for a period of more than 30 days.

Indian means any person recognized as being Indian or Alaska Native

by an Indian tribe, the Federal Government, or any State, and includes

the term ``Native American''.

Mortgage as used in this part, means a first lien as is commonly

given to secure advances on, or the unpaid purchase price of, real

estate under the laws of the jurisdiction where the property is located

and may refer both to a security instrument creating a lien, whether

called a mortgage, deed of trust, security deed, or another term used

in a particular jurisdiction, as well as the credit instrument, or

note, secured thereby.

Principal residence means the dwelling where the mortgagor

maintains (or will maintain) his or her permanent place of abode, and

typically spends (or will spend) the majority of the calendar year. A

person may have only one principal residence at any one time.

Section 184 means section 184 (entitled, ``Loan Guarantees for

Indian Housing'') of the Housing and Community Development Act of 1992

(12 U.S.C. 1515z-13a).

Sec. 955.105 Eligible loans.

(a) In general. Only fixed rate, fixed term loans with even monthly

payments are eligible under the Section 184 program.

(b) Eligible borrowers. A loan guaranteed under Section 184 may be

made to a borrower that is:

(1) An Indian who will occupy it as a principal residence and who

is

[[Page 9055]]

otherwise qualified under Section 184; or

(2) An Indian Housing Authority.

(c) Appraisal of labor value. The value of any improvements to the

property made through the skilled or unskilled labor of the borrower,

which may be used to make a payment on account of the balance of the

purchase price, must be appraised in accordance with generally

acceptable practices and procedures.

(d) Construction advances. The Department may guarantee loans from

which advances will be made during construction. The Department will

provide guarantees for advances made by the mortgagee during

construction if all of the following conditions are satisfied:

(1) The mortgagor and the mortgagee execute a building loan

agreement, approved by HUD, setting forth the terms and conditions

under which advances will be made;

(2) The advances are made only as provided in the commitment;

(3) The principal amount of the mortgage is held by the mortgagee

in an interest bearing account, trust, or escrow for the benefit of the

mortgagor, pending advancement to the mortgagor or to his or her

creditors as provided in the loan agreement; and

(4) The mortgage shall bear interest on the amount advanced to the

mortgagor or to his or her creditors and on the amount held in an

account or trust for the benefit of the mortgagor.

(e) Environmental compliance. Prior to the guarantee of any loan,

there must be compliance with the environmental rules as stated in 24

CFR part 50.

Sec. 955.107 Eligible collateral.

(a) In general. A loan guaranteed under Section 184 may be secured

by any collateral authorized under Federal, State, or tribal law and

determined by the lender and approved by the Department to be

sufficient to cover the amount of the loan, and may include, but is not

limited to, the following:

(1) The property and/or improvements to be acquired, constructed,

or rehabilitated, to the extent that an interest in such property is

not subject to the restrictions of trust lands against alienation;

(2) A first or second mortgage on property other than trust land;

(3) Personal property; or

(4) Cash, notes, an interest in securities, royalties, annuities,

or any other property that is transferable and whose present value may

be determined.

(b) Trust land as collateral. If trust land is used as collateral

for the loan, the following additional provisions apply:

(1) Approved Lease. Any land lease for a unit financed under

Section 184 must be on a form approved by both HUD and the Bureau of

Indian Affairs, U.S. Department of Interior.

(2) Assumption or sale of leasehold. If a leasehold is used as

security for the loan, the loan form must contain a provision requiring

tribal consent before any assumption of an existing lease, except where

title to the leasehold interest is obtained by the Department through

foreclosure of the guaranteed mortgage. A mortgagee other than the

Department must obtain tribal consent before obtaining title through a

foreclosure sale. Tribal consent must be obtained on any subsequent

transfer from the purchaser, including the Department, at foreclosure

sale. The lease may not be terminated by the lessor without HUD's

approval while the mortgage is guaranteed or held by the Department.

(3) Priority of loan obligation. Any tribal government whose courts

have jurisdiction to hear foreclosures must enact a law providing for

the satisfaction of a loan guaranteed or held by the Department before

other obligations (other than tribal leasehold taxes against the

property assessed after the property is mortgaged) are satisfied.

(4) Eviction procedures. Before HUD will guarantee a loan secured

by trust land, the tribe having jurisdiction over such property must

notify the Department that it has adopted and will enforce procedures

for eviction of defaulted mortgagors where the guaranteed loan has been

foreclosed.

(i) Enforcement. If the Department determines that the tribe has

failed to enforce adequately its eviction procedures, HUD will cease

issuing guarantees for loans for tribal members except pursuant to

existing commitments. Adequate enforcement is demonstrated where prior

evictions have been completed within 60 days after the date of the

notice by HUD that foreclosure was completed.

(ii) Review. If the Department ceases issuing guarantees in

accordance with the first sentence of paragraph (c)(1) of this section,

HUD shall notify the tribe of the reasons for such action and that the

tribe may, within 30 days after notification of HUD's action, file a

written appeal with the Field Office of Native American Programs

(FONAP) Administrator. Within 30 days after notification of an adverse

decision of the appeal by the FONAP Administrator, the tribe may file a

written request for review with the Deputy Assistant Secretary, Office

of Native American Programs (ONAP). Upon notification of an adverse

decision by the Deputy Assistant Secretary, the tribe has 30 additional

days to file an appeal with the Assistant Secretary for Public and

Indian Housing. The determination of the Assistant Secretary shall be

final, but the tribe may resubmit the issue to the Assistant Secretary

for review at any subsequent time if new evidence or changed

circumstances warrant reconsideration. (Any other administrative

actions determined to be necessary to debar a tribe from participating

in this program will be subject to the formal debarment procedures

contained in 24 CFR part 24.)

Sec. 955.109 Guarantee fee.

The lender shall pay to the Department, at the time of issuance of

the guarantee, a fee for the guarantee of loans under Section 184, in

an amount equal to 1 percent of the principal obligation of the loan.

This amount is payable by the borrower at closing.

Sec. 955.111 Safety and quality standards.

Loans guaranteed under Section 184 shall be made only on dwelling

units which meet safety and quality standards set forth herein. Each

unit must:

(a) Be decent, safe, sanitary, and modest in size and design;

(b) Conform with applicable general construction standards for the

region;

(c) Contain a heating system that:

(1) Has the capacity to maintain a minimum temperature in the

dwelling of 65 degrees Fahrenheit during the coldest weather in the

area;

(2) Is safe to operate and maintain;

(3) Delivers a uniform distribution of heat; and

(4) Conforms to any applicable tribal heating code or, if there is

no applicable tribal code, an appropriate county, State, or National

code;

(d) Contain a plumbing system that:

(1) Uses a properly installed system of piping;

(2) Includes a kitchen sink and a partitional bathroom with

lavatory, toilet, and bath or shower; and

(3) Uses water supply, plumbing and sewage disposal systems that

conform to any applicable tribal code or, if there is no applicable

tribal code, the minimum standards established by the applicable county

or State;

(e) Contain an electrical system using wiring and equipment

properly installed to safely supply electrical energy for adequate

lighting and for operation of appliances that conforms to any

applicable tribal code or, if there is no applicable tribal code, an

appropriate county, State, or National code;

[[Page 9056]]

(f) Be not less than:

(1) 570 square feet in size, if designed for a family of not more

than 4 persons;

(2) 850 square feet in size, if designed for a family of not less

than 5 and more than 7 persons; and

(3) 1020 square feet in size, if designed for a family of not less

than 8 persons; or

(4) The size provided under the applicable locally adopted

standards for size of dwelling units; except that the Department, upon

the request of a tribe or Indian housing authority, may waive the size

requirements under this paragraph; and

(g) Conform with the energy performance requirements for new

construction established by the Department under section 526(a) of the

National Housing Act (12 U.S.C. 1735f-4).

Dated: February 26, 1996.

Michael B. Janis,

General Deputy Assistant Secretary for Public and Indian Housing.

[Note: The following appendix will not be codified in the Code of

Federal Regulations.]

Appendix--Guide to Loan Guarantees for Indian Housing

Section 1. Purpose, applicability and scope.

Section 2. Definitions.

Section 3. Eligible loans.

Section 4. Eligible housing.

Section 5. Eligible lenders.

Section 6. Eligible collateral.

Section 7. Certificate of Guarantee.

Section 8. Guarantee fee.

Section 9. Liability under guarantee.

Section 10. Transfer and assumptions.

Section 11. Disqualification of lenders and civil money penalties.

Section 12. Payment under guarantee.

Section 1. Purpose, Applicability and Scope

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

the statutory and regulatory requirements that apply to the Loan

Guarantees for Indian Housing Program under section 184 of the

Housing and Community Development Act of 1992 (P.L. 102-550,

approved October 28, 1992). 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, is the primary, governing source for

regulatory requirements, and section 184 of the Housing and

Community Development Act of 1992 is the primary, governing source

for statutory requirements.

Under the provisions of Section 184, the Department of Housing

and Urban Development (the Department) has the authority to

guarantee loans for the construction, acquisition, or rehabilitation

of 1- to 4-family homes to be owned by Native Americans on

restricted Indian lands. This guide describes the eligibility of

borrowers, lenders and property, as well as the benefits of the

Indian Loan Guarantee Program.

Section 2. Definitions

Default means the failure by a borrower to make any payment or

to perform any other obligation under the terms of a loan, and such

failure continues for a period of more than 30 days.

Department means the U. S. Department of Housing and Urban

Development (HUD).

Guarantee Fund means the Indian Housing Loan Guarantee Fund

established under section 184(i) of the Housing and Community

Development Act of 1992.

Indian means any person recognized as being Indian or Alaska

Native by an Indian tribe, the Federal Government, or any State, and

includes the term ``Native American''.

Indian area means the area within which an Indian housing

authority is authorized to provide housing.

Indian Housing Authority (IHA) means any entity that is

authorized to engage in or assist in the development or operation of

low-income housing for Indians and that is established either (1) by

exercise of the power of self-government of an Indian tribe

independent of State law; or (2) by operation of State law providing

specifically for housing authorities for Indians, including regional

housing authorities in the State of Alaska.

Mortgage as used in this part, means a first lien as is commonly

given to secure advances on, or the unpaid purchase price of, real

estate under the laws of the jurisdiction where the property is

located and may refer both to a security instrument creating a lien,

whether called a mortgage, deed of trust, security deed, or another

term used in a particular jurisdiction, as well as the credit

instrument, or note, secured thereby.

Principal residence means the dwelling where the mortgagor

maintains (or will maintain) his or her permanent place of abode,

and typically spends (or will spend) the majority of the calendar

year. A person may have only one principal residence at any one

time.

Secretary means the Secretary of Housing and Urban Development.

Section 184 means section 184 (entitled, ``Loan Guarantees for

Indian Housing'') of the Housing and Community Development Act of

1992 (Pub. L. 102-550, approved October 28, 1992).

Standard housing means a dwelling unit or housing that complies

with the requirements established in this part.

Tribe means any tribe, band, pueblo, group, community, or nation

of Indians or Alaska Natives.

Trust land means land, title to which is held by the United

States for the benefit of an Indian or Indian tribe; or, land, title

to which is held by an Indian tribe, subject to a restriction

against alienation imposed by the United States.

Section 3. Eligible Loans

(a) In general. Only fixed rate, fixed term loans with even

monthly payments are eligible under the Section 184 program.

(b) Eligible borrowers. A loan guaranteed under Section 184 may

be made to a borrower that is:

(1) An Indian who will occupy it as a principal residence and

who is otherwise qualified under this part; or

(2) An Indian Housing Authority

(c) Terms of loan. The loan shall:

(1) Be made for a term not exceeding 30 years;

(2) Bear interest (exclusive of the guarantee fee and service

charges, if any) at a fixed rate agreed upon by the borrower and the

lender and determined by the Department to be reasonable, which may

not exceed the rate generally charged in the area (as determined by

the Department) for home mortgage loans not guaranteed or insured by

any agency or instrumentality of the Federal Government.

(d) Maximum mortgage amounts.

(1) A principal obligation may not exceed:

(i) An amount equal to the sum of:

(A) 97 percent of the first $25,000 of the appraised value of

the property, as of the date the loan is accepted for guarantee, and

(B) 95 percent of such value in excess of $25,000; and

(ii) Amounts approved otherwise by the Department.

(2) The balance of the purchase price must involve a payment on

account of the property that may be:

(i) In cash or other property of equivalent value acceptable to

the lender and the Department, or

(ii) The value of any improvements to the property made through

the skilled or unskilled labor of the borrower, appraised in

accordance with generally acceptable practices and procedures.

(e) Construction advances. The Department may guarantee loans

from which advances will be made during construction. The Department

will provide guarantees for advances made by the mortgagee during

construction if all of the following conditions are satisfied:

(1) The mortgagor and the mortgagee execute a building loan

agreement, approved by HUD, setting forth the terms and conditions

under which advances will be made;

(2) The advances are made only as provided in the commitment;

(3) The principal amount of the mortgage is held by the

mortgagee in an interest bearing account, trust, or escrow for the

benefit of the mortgagor, pending advancement to the mortgagor or to

his or her creditors as provided in the loan agreement; and

(4) The mortgage shall bear interest on the amount advanced to

the mortgagor or to his or her creditors and on the amount held in

an account or trust for the benefit of the mortgagor.

(f) Environmental compliance. Prior to the guarantee of any

loan, there must be compliance with the environmental rules as

stated in 24 CFR part 50.

Section 4. Eligible Housing

(a) In general. A loan guaranteed under Section 184 may be used

for the construction, acquisition, or rehabilitation of a 1- to 4-

family dwelling unit located on trust land or land located in an

Indian area.

(b) Safety and quality standards. Loans guaranteed under Section

184 shall be made only on dwelling units which meet safety and

quality standards set forth herein. Each unit must:

[[Page 9057]]

(1) Be decent, safe, sanitary, and modest in size and design;

(2) Conform with applicable general construction standards for

the region;

(3) Contain a heating system that:

(i) Has the capacity to maintain a minimum temperature in the

dwelling of 65 degrees Fahrenheit during the coldest weather in the

area;

(ii) Is safe to operate and maintain;

(iii) Delivers a uniform distribution of heat; and

(iv) Conforms to any applicable tribal heating code or, if there

is no applicable tribal code, an appropriate county, State, or

National code;

(4) Contain a plumbing system that:

(i) Uses a properly installed system of piping;

(ii) Includes a kitchen sink and a partitional bathroom with

lavatory, toilet, and bath or shower; and

(iii) Uses water supply, plumbing and sewage disposal systems

that conform to any applicable tribal code or, if there is no

applicable tribal code, the minimum standards established by the

applicable county or State;

(5) Contain an electrical system using wiring and equipment

properly installed to safely supply electrical energy for adequate

lighting and for operation of appliances that conforms to any

applicable tribal code or, if there is no applicable tribal code, an

appropriate county, State, or National code;

(6) Be not less than:

(i) 570 square feet in size, if designed for a family of not

more than 4 persons;

(ii) 850 square feet in size, if designed for a family of not

less than 5 and more than 7 persons; and

(iii) 1020 square feet in size, if designed for a family of not

less than 8 persons, or

(iv) The size provided under the applicable locally adopted

standards for size of dwelling units; except that the Department,

upon the request of a tribe or Indian housing authority, may waive

the size requirements under this paragraph; and

(7) Conform with the energy performance requirements for new

construction established by the Department under section 526(a) of

the National Housing Act.

Section 5. Eligible Lenders

The loan shall be made only by a lender approved by and meeting

qualifications established in this part, except that loans otherwise

insured or guaranteed by any agency of the Federal Government, or

made by an organization of Indians from amounts borrowed from the

United States shall not be eligible for guarantee under this part.

The following lenders are deemed to be approved under this part:

(a) Any mortgagee approved by the Department of Housing and

Urban Development for participation in the single family mortgage

insurance program under title II of the National Housing Act.

(b) Any lender whose housing loans under chapter 37 of title 38,

United States Code are automatically guaranteed pursuant to section

1802(d) of such title.

(c) Any lender approved by the Department of Agriculture to make

guaranteed loans for single family housing under the Housing Act of

1949.

(d) Any other lender that is supervised, approved, regulated, or

insured by any agency of the Federal Government.

Section 6. Eligible Collateral

(a) In general. A loan guaranteed under Section 184 may be

secured by any collateral authorized under Federal, State, or tribal

law and determined by the lender and approved by the Department to

be sufficient to cover the amount of the loan, and may include, but

is not limited to, the following:

(1) The property and/or improvements to be acquired,

constructed, or rehabilitated, to the extent that an interest in

such property is not subject to the restrictions of trust lands

against alienation;

(2) A first or second mortgage on property other than trust

land;

(3) Personal property; or

(4) Cash, notes, an interest in securities, royalties,

annuities, or any other property that is transferable and whose

present value may be determined.

(b) Trust land as collateral. If trust land is used as

collateral for the loan, the following additional provisions apply:

(1) Approved Lease. Any land lease for a unit financed under

Section 184 must be on a form approved by both HUD and the Bureau of

Indian Affairs, U.S. Department of Interior.

(2) Assumption or sale of leasehold. If a leasehold is used as

security for the loan, the loan form must contain a provision

requiring tribal consent before any assumption of an existing lease,

except where title to the leasehold interest is obtained by the

Department through foreclosure of the guaranteed mortgage. A

mortgagee other than the Department must obtain tribal consent

before obtaining title through a foreclosure sale. Tribal consent

must be obtained on any subsequent transfer from the purchaser,

including the Department, at foreclosure sale. The lease may not be

terminated by the lessor without HUD's approval while the mortgage

is guaranteed or held by the Department.

(3) Eviction procedures. Before HUD will guarantee a loan

secured by trust land, the tribe having jurisdiction over such

property must notify the Department that it has adopted and will

enforce procedures for eviction of defaulted mortgagors where the

guaranteed loan has been foreclosed.

(i) Enforcement. If the Department determines that the tribe has

failed to enforce adequately its eviction procedures, HUD will cease

issuing guarantees for loans for tribal members except pursuant to

existing commitments. Adequate enforcement is demonstrated where

prior evictions have been completed within 60 days after the date of

the notice by HUD that foreclosure was completed.

(ii) Review. If the Department ceases issuing guarantees in

accordance with the first sentence of paragraph (c)(1) of this

section, HUD shall notify the tribe of the reasons for such action

and that the tribe may, within 30 days after notification of HUD's

action, file a written appeal with the Field Office of Native

American Programs (FONAP) Administrator. Within 30 days after

notification of an adverse decision of the appeal by the FONAP

Administrator, the tribe may file a written request for review with

the Deputy Assistant Secretary, Office of Native American Programs

(ONAP). Upon notification of an adverse decision by the Deputy

Assistant Secretary, the tribe has 30 additional days to file an

appeal with the Assistant Secretary for Public and Indian Housing.

The determination of the Assistant Secretary shall be final, but the

tribe may resubmit the issue to the Assistant Secretary for review

at any subsequent time if new evidence or changed circumstances

warrant reconsideration. (Any other administrative actions

determined to be necessary to debar a tribe from participating in

this program will be subject to the formal debarment procedures

contained in 24 CFR part 24).

Section 7. Certificate of Guarantee

(a) Extent of guarantee. A certificate issued in accordance with

Section 184 guarantees 100 percent of the unpaid principal and

interest of the underlying loan.

(b) Approval process. Before the Department approves any loan

for guarantee under this part, the lender shall submit the

application or the loan to the Department for examination. If the

Department approves the loan for guarantee, the Department will

issue a certificate under Section 184 as evidence of the guarantee.

(c) Standard for approval. The Department may approve a loan for

guarantee under Section 184 and issue a certificate only if the

Department determines there is a reasonable prospect of repayment of

the loan.

(d) Effect. A certificate of guarantee issued under Section 184

by the Department shall be conclusive evidence of the eligibility of

the loan for guarantee under the provisions of Section 184 and the

amount of such guarantee. Such evidence shall be incontestable in

the hands of the bearer and the full faith and credit of the United

States is pledged to the payment of all amounts agreed to be paid by

the Department as security for such obligations.

(e) Fraud and misrepresentation. Nothing in Section 184 may

preclude the Department from establishing:

(1) Defenses against the original lender based on fraud or

material misrepresentation; and

(2) Establishing partial defenses, based upon regulations in

effect on the date of issuance or disbursement (whichever is

earlier), to the amount payable on the guarantee.

Section 8. Guarantee Fee

The lender shall pay to the Department, at the time of issuance

of the guarantee, a fee for the guarantee of loans under Section

184, in an amount equal to 1 percent of the principal obligation of

the loan. This amount is payable by the borrower at closing.

Section 9. Liability Under Guarantee

The liability under a guarantee provided in accordance with

Section 184 shall decrease or increase on a pro rata basis according

to any decrease or increase in the amount of the unpaid obligation

under the provisions of the loan agreement.

[[Page 9058]]

Section 10. Transfer and Assumptions

Notwithstanding any other provision of law, any loan guaranteed

under this part, including the security given for the loan, may be

sold or assigned by the lender to any financial institution subject

to examination and supervision by an agency of the Federal

Government or of any State or the District of Columbia.

Section 11. Disqualification of Lenders and Civil Money Penalties

(a) General. If the Department determines that a lender or

holder of a guarantee certificate under Section 184 has failed to

maintain adequate accounting records, to adequately service loans

guaranteed under Section 184, to exercise proper credit or

underwriting judgement, or has engaged in practices otherwise

detrimental to the interest of a borrower or the United States, the

Department may:

(1) Refuse, either temporarily or permanently, to guarantee any

further loans made by such lender or holder;

(2) Bar such lender or holder from acquiring additional loans

guaranteed under Section 184; and

(3) Require that such lender or holder assume not less than 10

percent of any loss on further loans made or held by the lender or

holder that are guaranteed under Section 184.

(b) Civil money penalties for intentional violations. If the

Department determines that any lender or holder of a guarantee

certificate under Section 184 has intentionally failed to maintain

adequate accounting records, to adequately service loans guaranteed

under Section 184, or to exercise proper credit or underwriting

judgement, the Department may impose a civil money penalty on such

lender or holder in the manner and amount provided under section 536

of the National Housing Act with respect to mortgagees and lenders

under such Act.

(c) Payment of loans made in good faith. Notwithstanding

paragraphs (a) and (b), the Department may not refuse to pay

pursuant to a valid guarantee on loans of a lender or holder barred

under Section 184, if the loans were previously made in good faith.

Section 12. Payment Under Guarantee

(a) Lender options.

(1) General. In the event of default by the borrower on a loan

guaranteed under this part, the holder of the guarantee certificate

shall provide written notice of the default to the Department. Upon

providing this notice, the holder of the guarantee certificate will

be entitled to payment under the guarantee (subject to the

provisions of this part) and may proceed to obtain payment in one of

the following manners:

(i) Foreclosure. The holder of the certificate may initiate

foreclosure proceedings in a court of competent jurisdiction (after

providing written notice of such action to the Department) and upon

a final order by the court authorizing foreclosure and submission to

the Department of a claim for payment under the guarantee, the

Department will pay to the holder of the certificate the pro rata

portion of the amount guaranteed (as determined in accordance with

Section 9 of this guide) plus reasonable fees and expenses as

approved by the Department. The Department will be subrogated to the

rights of the holder of the guarantee and the holder shall assign

the obligation and security to the Department.

(ii) No foreclosure. Without seeking a judicial foreclosure (or

in any case in which a foreclosure proceeding initiated under

paragraph (i) of this section continues for a period in excess of 1

year), the holder of the guarantee may submit to the Department a

claim for payment under the guarantee and the Department will only

pay to such holder for a loss on any single loan an amount equal to

90 percent of the pro rata portion of the amount guaranteed (as

determined in accordance with Section 9 of this guide). The

Department will be subrogated to the rights of the holder of the

guarantee and the holder shall assign the obligation and security to

the Department.

(2) Requirements. Before any payment under a guarantee is made

under paragraph (1) of this section, the holder of the guarantee

shall exhaust all reasonable possibilities of collection. Upon

payment, in whole or in part, to the holder, the note of judgement

evidencing the debt shall be assigned to the United States and the

holder shall have no further claim against the borrower or the

United States.

(b) Assignment by the Department. Notwithstanding paragraph (a)

of this section, upon receiving notice of default on a loan

guaranteed under Section 184 from the holder of the guarantee, the

Department may accept assignment of the loan if the Department

determines that the assignment is in the best interests of the

United States. Upon assignment the Department will pay to the holder

of the guarantee the pro rata portion of the amount guaranteed (as

determined in accordance with Section 9 of this guide). The

Department will be subrogated to the rights of the holder of the

guarantee and the holder shall assign the obligation and security to

the Department.

(c) Limitations on liquidation. In the event of default by the

borrower on a loan guaranteed under Section 184 involving a security

interest in tribal allotted or trust land, the Department will only

pursue liquidation after offering to transfer the account to an

eligible tribal member, the tribe, or the Indian housing authority

serving the tribe or tribes. If the Department subsequently proceeds

to liquidate the account, the Department will not sell, transfer,

otherwise dispose of or alienate the property except to one of the

entities described in the preceding sentence.

[FR Doc. 96-5050 Filed 3-5-96; 8:45 am]

BILLING CODE 4210-33-P