[Federal Register Volume 59, Number 159 (Thursday, August 18, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-20250]
[[Page Unknown]]
[Federal Register: August 18, 1994]
_______________________________________________________________________
Part VII
Department of Housing and Urban Development
_______________________________________________________________________
Office of the Assistant Secretary for Public and Indian Housing
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24 CFR part 955
Public and Indian Housing: Indian Loan Guarantee Program; Housing
Financing on Restricted Lands; Final Rule
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Office of the Assistant Secretary for Public and Indian Housing
24 CFR Part 955
[Docket No. R-94-1730; FR-3614-I-01]
RIN 2577-AB40
Loan Guarantees for Indian Housing
AGENCY: Office of the Assistant Secretary for Public and Indian
Housing, HUD.
ACTION: Interim rule.
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SUMMARY: This interim 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 in restricted lands where no source of financing is
currently available.
DATES: Effective date: September 19, 1994.
Comments due date: October 17, 1994.
ADDRESSES: Interested persons are invited to submit comments regarding
this interim rule to the Rules Docket Clerk, Office of General Counsel,
Room 10276, Department of Housing and Urban Development, 451 Seventh
Street, SW., Washington, DC 20410-0500. Communications should refer to
the above docket number and title. Facsimile (FAX) comments are not
acceptable. A copy of each communication submitted will be available
for public inspection and copying between 7:30 a.m. and 5:30 p.m.
weekdays at the above address.
FOR FURTHER INFORMATION CONTACT: Dominic Nessi, Director, Office of
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 this interim
rule have been submitted to the Office of Management and Budget (OMB)
for review under the Paperwork Reduction Act of 1980 (44 U.S.C. 3501-
3520). No person may be subjected to a penalty for failure to comply
with these information collection requirements until they have been
approved and assigned an OMB control number. The OMB control number,
when assigned, will be announced by separate notice in the Federal
Register.
The public reporting burden for each of these collections of
information is estimated to include the time for reviewing and
instructions, searching existing data sources, gathering and
maintaining the data needed, and completing and reviewing the
collection of information. Information on the estimated public
reporting burden is provided under the preamble heading, Other Matters.
Send comments regarding this burden estimate or any other aspect of
this collection of information, including suggestions for reducing this
burden, to the Department of Housing and Urban Development, Rules
Docket Clerk, 451 Seventh Street, SW, Room 10276, Washington, DC 20410;
and to the Office of Information and Regulatory Affairs, Office of
Management and Budget, Attention Desk Officer for HUD, Washington, DC
20503.
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.
Although HCDA 1992 authorized the establishment of the Loan
Guarantee Fund for fiscal years 1993 and 1994, no funds were
appropriated until 1994. One million dollars was appropriated in FY
1994 to capitalize the guarantee fund allowing the Department to extend
$7 million in loan guarantees.
The traditional Indian Housing program targets and serves the
neediest among the Native American population--the low- and very low-
income families. While a large number of Native Americans fall into
these income groups, there are families who live on reservations, or
who wish to return to their Native land, whose incomes would allow them
to afford a home loan, but who cannot construct a home in Indian
country because of the unique legal status of Indian land. The Indian
Loan Guarantee program will assist these persons in attaining
homeownership on their native land.
Notwithstanding the availability of mortgage insurance under the
Federal Housing Administration's Section 248 program, the private
lending market has been reluctant to provide mortgage money in Indian
country. The limited use of that program has been due in large part to
the lack of awareness of the availability of mortgage insurance by both
borrowers and lenders. In addition, until very recently the program was
limited in applicability because it did not allow insurance of the
construction loan, and it adheres to the underwriting, mortgage credit,
and appraisal standards of the non-Indian, single-family mortgage
insurance program. These standards may not be appropriate in Indian
country. A real deterrent of Section 248 for Indian tribes is the
potential for transfer of the home to a non-Indian in the event of
default and foreclosure. The new program under this interim rule has
features that are more appropriate for the Native American culture, and
the potential for a unit to be transferred to a non-Indian is avoided.
Perhaps the most significant feature of the statute authorizing
this new program is that it permits loans to be secured by any
collateral authorized under Federal, State, or local law. This
innovative approach addresses the basic difference in providing housing
loans for Indian trust lands, the fact that interests in these land are
encumbered in ways that land interests in conventional mortgage markets
are not. This element of uncertainty has certainly played a role in the
failure of private lenders to provide mortgage services for Indian
trust lands. This interim rule, in addition to making loan guarantees
available, makes clear, at Sec. 955.111, that the collateral for loans
to construct, acquire, or rehabilitate one- to four- family dwellings
on trust land need not consist of real property and the improvements
upon it, but may consist of anything of value 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 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; a first or second
mortgage on property other than trust land; personal property; or cash,
notes, an interest in securities, royalties, annuities, or any other
property that is transferable and whose present value may be
determined. This use of various forms of collateral is consistent with
the targeting of moderate income families, as discussed above, as the
primary beneficiaries of this program.
This interim rule follows the statutory language very closely, and
imposes additional regulatory requirements only where necessary to
implement the program. The statute provides that a loan may be
guaranteed for approval under this program only where ``there is a
reasonable prospect of repayment of the loan.'' The interim rule,
therefore, adds a number of requirements taken from the Department's
conventional mortgage programs to address this issue.
One requirement that is added, at Sec. 955.111(b)(3), is to tie
loan eligibility, where trust land is the collateral for the loan, to
the presence of eviction procedures. Before HUD will issue any
commitment to guarantee such a loan on Indian land, the tribe having
jurisdiction over such property must certify to the Department that it
has adopted and will enforce procedures for eviction of defaulted
mortgagors where the guaranteed loan has been foreclosed.
In other instances where the statute has placed the interpretation
of a provision within the Department's discretion, the Department has
attempted to provide the broadest interpretation, as discussed below.
The law allows the guarantee to cover ``up to'' 100 percent of the
unpaid principal and interest. The regulation provides, at
Sec. 955.113(a), for 100 percent coverage. This position is based on
the FHA mortgage insurance programs which insure 100 percent of the
principal and interest and provide for payment of other allowable
expenses in the event of a claim.
A loan term of ``up to'' 30 years is allowed at Sec. 955.105(b)(1),
as permitted by the statute, but is not required, because there may be
instances where terms less than 30 years will be desirable to both the
borrower and lender. The Department has determined that this program
should have the flexibility to guarantee most standard loan products,
with the exception of adjustable rate mortgages. In a totally new
lending environment, the uncertainty of an adjustable rate would create
an unnecessary risk to the borrower, the lender and the Department.
Section 184 requires the Department to set forth requirements for
standard housing. These requirements are established at
Sec. 955.107(b)(1), and conform with those established for the FHA
single family mortgage insurance programs.
Other Matters
Justification for Interim Rulemaking
The Department has determined that this interim rule should be
adopted without the delay occasioned by requiring prior notice and
comment. This interim rule simply constitutes the implementation of
statutory language with the exercise of little or no discretion on the
part of the Department. As such, prior notice and comment are
unnecessary under 24 CFR Part 10. Section 955.125 is added to implement
a Department-wide policy that provides for the expiration of interim
rules within a set period of time if they are not issued in final form
before the end of the period. The expiration period may be extended by
notice published in the Federal Register. The expiration date for this
interim rule is July 31, 1995.
Impact on Small Entities
The Department, in accordance with the Regulatory Flexibility Act
(5 U.S.C. 605(b)), has reviewed this interim rule before publication
and by approving it certifies that this interim rule does not have a
significant economic impact on a substantial number of small entities.
Specifically, this interim rule implements a loan guarantee program
targeted to a very specific population, and is not expected to affect a
substantial number of small entities.
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 interim 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 interim rule is not subject to review under the order.
Specifically, the requirements of this interim 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 interim 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.
Regulatory Agenda
This interim rule was listed as item 1682 in the Department's
Semiannual Agenda of Regulations published on April 25, 1994 (59 FR
20424, 20469) in accordance with Executive Order 12866 and the
Regulatory Flexibility Act.
Public Reporting Burden
The information collection requirements contained in this interim
rule have been submitted to the Office of Management and Budget under
the Paperwork Reduction Act of 1980 (44 U.S.C. 3501-3520). The
Department has determined that the following provisions contain
information collection requirements:
------------------------------------------------------------------------
Estimated
No. of Frequency average Estimated
Sections respondents respondents response annual
time (in burden (in
hours) hours)
------------------------------------------------------------------------
Reporting burden:
Individuals
955.105........ 150 1 2 300
Lending
Institutions
955.113,
955.115,
955.119,
955.123........ 15 10 8 1,200
Tribes 955.105.. 15 1 1 15
---------------------------------------------------
Total
reporting
burden....... ........... ........... ........... 1,515
Recordkeeping
burden: 955.105,
955.115, 955.119,
955.123 15 12 .24 43.2
---------------------------------------------------
Total
recordkeeping
burden....... ........... ........... ........... 43.2
------------------------------------------------------------------------
List of Subjects in 24 CFR Part 955
Indians, Loan programs--Indians, Reporting and recordkeeping
requirements.
Accordingly, chapter IX of title 24 of the Code of Federal
Regulations is amended by adding a new part 955, consisting of
Secs. 955.101 through 955.125, 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 housing.
955.109 Eligible lenders.
955.111 Eligible collateral.
955.113 Certificate of guarantee.
955.115 Guarantee fee.
955.117 Liability under guarantee.
955.119 Transfer and assumptions.
955.121 Disqualification of lenders and civil money penalties.
955.123 Payment under guarantee.
955.125 Expiration of interim rule.
Authority: 42 U.S.C. 1715z-13a and 3535(d).
Sec. 955.101 Applicability and scope.
(a) General. Under the provisions of section 184 of the Housing and
Community Development Act of 1992 (Pub. L. 102-550, approved October
28, 1992), the Department of Housing and Urban Development 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 describes the eligibility of
borrowers, lenders and property, as well as the benefits of the Indian
Loan Guarantee Program.
(b) Other HUD regulations and requirements. The provisions of this
part are supplemented by parts in other chapters of title 24 of the
Code of Federal Regulations, as applicable.
Sec. 955.103 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.
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.
Sec. 955.105 Eligible loans.
(a) Eligible borrowers. A loan guaranteed under this part 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.
(b) 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.
(c) 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 under this
section.
(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.
(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) Prohibited loans. Adjustable rate mortgages are not permitted
under this program.
Sec. 955.107 Eligible housing.
(a) In general. A loan guaranteed under this part may be used for
the construction, acquisition, or rehabilitation of 1- to 4-family
dwellings located on trust land or land located in an Indian area.
(b) Safety and quality standards. Loans guaranteed under this part
shall be made only on dwelling units which meet safety and quality
standards set forth herein. Each unit must:
(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
not 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 (12 U.S.C. 1735f-4).
Sec. 955.109 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 (12 U.S.C. 1707).
(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 (42 U.S.C. 1441).
(d) Any other lender that is supervised, approved, regulated, or
insured by any agency of the Federal Government.
Sec. 955.111 Eligible collateral.
(a) In general. A loan guaranteed under this part 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 this
part 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
certify to 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 60 days after notification of HUD's action, file a
written appeal with the Field Office of Native American Programs
(FONAP) Administrator. Within 60 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 headquarters Director, Office of
Native American Programs (ONAP). Upon notification of an adverse
decision by the ONAP Director, the tribe has 60 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. 955.113 Certificate of guarantee.
(a) Extent of guarantee. A certificate issued in accordance with
this section 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
this part as evidence of the guarantee.
(c) Standard for approval. (1) The Department may approve a loan
for guarantee under this part and issue a certificate under this
section only if the Department determines there is a reasonable
prospect of repayment of the loan based on criteria established
pursuant to this part.
(2) The Department will assure that the value of the property has
been established in accordance with current regulatory and
administrative requirements.
(3) Before approval of a loan for guarantee, the Department will
assure that all required environmental reviews pursuant to 24 CFR Part
50 have been performed and, if necessary, all findings have been
successfully resolved.
(d) Effect. A certificate of guarantee issued under this section by
the Department shall be conclusive evidence of the eligibility of the
loan for guarantee under the provisions of this part 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 this part 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.
Sec. 955.115 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 this section, in
an amount equal to 1 percent of the principal obligation of the loan.
This amount is payable by the borrower at closing.
Sec. 955.117 Liability under guarantee.
The liability under a guarantee provided in accordance with this
part 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.
Sec. 955.119 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.
Sec. 955.121 Disqualification of lenders and civil money penalties.
(a) General. If the Department determines that any lender or holder
of a guarantee certificate under Sec. 955.113 has failed to maintain
adequate accounting records, to adequately service loans guaranteed
under this section 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 this section; 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 this section.
(b) Civil money penalties for intentional violations. If the
Department determines that any lender or holder of a guarantee
certificate under Sec. 955.113 has intentionally failed to maintain
adequate accounting records, to adequately service loans guaranteed
under this section, 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 (12 U.S.C. 1735f-14) with respect to
mortgagees and lenders under such Act.
(c) Payment of loans made in good faith. Notwithstanding paragraphs
(a) and (b) of this section, the Department may not refuse to pay
pursuant to a valid guarantee on loans of a lender or holder barred
under this section if the loans were previously made in good faith.
Sec. 955.123 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 Sec. 955.117) 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 lender 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
(a)(1)(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 Sec. 955.117). 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 (a)(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 this section 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 Sec. 955.117). 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 a default by the
borrower on a loan guaranteed under this section 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.
Sec. 955.125 Expiration of interim rule.
This part shall expire and shall not be in effect after July 31,
1995, unless it is published as a final rule or the Department
publishes a notice in the Federal Register to extend the effective
date.
Dated: August 10, 1994.
Joseph Shuldiner,
Assistant Secretary for Public and Indian Housing.
[FR Doc. 94-20250 Filed 8-17-94; 8:45 am]
BILLING CODE 4210-33-P