[Federal Register Volume 60, Number 67 (Friday, April 7, 1995)]
[Proposed Rules]
[Pages 17968-17975]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-8547]
[[Page 17967]]
_______________________________________________________________________
Part VI
Department of Housing and Urban Development
_______________________________________________________________________
24 CFR Part 29
Nonjudicial Foreclosure of Single Family Mortgages; Proposed Rule
Federal Register / Vol. 60, No. 67 / Friday, April 7, 1995 / Proposed
Rules
[[Page 17968]]
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Office of the Secretary; Nonjudicial Foreclosure of Single Family
Mortgages
24 CFR Part 29
[Docket No. R-95-1776; FR-3799-P-01]
RIN 2501-AB86
AGENCY: Office of the Secretary, HUD.
ACTION: Proposed rule.
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SUMMARY: HUD proposes to implement recent legislation which authorizes
the Secretary of Housing and Urban Development, as a matter of Federal
law, to exercise a statutory nonjudicial power of sale with respect to
any defaulted single family mortgage held by the Secretary under titles
I or II of the National Housing Act or under section 312 of the Housing
Act of 1964.
DATES: Comments due date: Comments on this proposed rule must be
submitted on or before June 6, 1995.
ADDRESSES: Interested persons are invited to submit comments regarding
this proposed rule to the Rules Docket Clerk, Office of General
Counsel, Room 10276, Department of Housing and Urban Development, 451
7th 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 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: Bruce S. Albright, Office of the
General Counsel, Room 9258, Department of Housing and Urban
Development, Washington, DC 20410, (202) 708-0303. A telecommunications
device for the hearing impaired (TDD) is available at (202) 708-3259.
SUPPLEMENTARY INFORMATION:
Authority
HUD's Fiscal Year 1995 Appropriations Act (Pub. L. 103-327,
approved September 28, 1994) incorporated by reference, through
conference amendment 54 of H.R. 4624, the Single Family Mortgage
Foreclosure Act of 1994 (the Act), which appeared in title VIII of S.
2281, as reported on July 13, 1994. This statute, codified at 12 U.S.C.
3751-3768, establishes a nonjudicial procedure which HUD may follow to
foreclose, as a matter of Federal law, any defaulted single family
mortgage HUD holds under titles I or II of the National Housing Act, 12
U.S.C. 1701 et seq., or section 312 of the Housing Act of 1964, 42
U.S.C. 1452b. The procedure is similar to that used in those States
whose laws authorize nonjudicial foreclosures. The new authority is
patterned after the Multifamily Mortgage Foreclosure Act of 1981
(Multifamily Act), 12 U.S.C. 3701-3717, which was implemented in 1984.
The Department intends to publish a delegation of authority to
delegate to the General Counsel of HUD the authority under the Act to
appoint a foreclosure commissioner or commissioners, to fix the
compensation of commissioners, and to promulgate implementing
regulations.
Need for Nonjudicial Foreclosure
Various factors precipitated the need for this statute and its
implementation. First, the multiplicity of State laws under which HUD
forecloses defaulted mortgages presents a burden to the programs
involved which can be detrimental to the properties and to the
communities in which they are located. Second, long periods of time to
complete foreclosures under certain State laws lead to deterioration in
the condition of the properties involved. This delay necessitates
substantial Federal management and holding expenditures, increases the
risk of vandalism, fire loss, depreciation, damage and waste, which
adversely affects the neighborhoods in which the properties are
located. Third, these conditions seriously impair HUD's ability to
protect the Federal financial interest in the affected properties and
frustrates attainment of the objectives of the underlying program
authorities. Fourth, the availability and the use of a uniform and more
expeditious nonjudicial foreclosure procedure will help to alleviate
these conditions. Fifth, providing HUD with a nonjudicial foreclosure
procedure will reduce unnecessary litigation by removing judicial
foreclosures from court calendars. Sixth, use of this new nonjudicial
procedure will further the objectives of the HUD Reform Act and the
National Affordable Housing Act by ensuring that the Department
administers its programs in a businesslike and financially sound
manner.
The procedures proposed by this rule would streamline and expedite
the foreclosure process. However, foreclosure itself is a last step
taken only after extensive efforts to bring a delinquent mortgage
current have been unsuccessful. Before a foreclosure is commenced, the
Department has already provided the delinquent mortgagor with notice
and the opportunity to enter into workout agreements in order to
provide alternatives to, and avoid, foreclosure. The Secretary has a
dual responsibility--a responsibility to the insurance funds and a
responsibility to the home ownership needs of persons assisted by the
Department. In drafting this rule, the Department has taken into
consideration that foreclosure will be commenced only after extensive
attempts to correct the default. The Department believes that the rule
balances these two responsibilities, and public comment is invited on
this point.
Scope
The proposed rule applies to any mortgage that:
--Is security for a one- to four-family dwelling, was previously
insured under title I or title II of the National Housing Act, and is
held by HUD by reason of assignment or otherwise, or that HUD holds
following acquisition and subsequent sale of the property pursuant to a
purchase money mortgage agreement; or
--Is security for a one- to four-family dwelling on which HUD made a
rehabilitation loan pursuant to section 312 of the Housing Act of 1964,
as it existed before the repeal of that section by section 289 of the
National Affordable Housing Act (except that when a one-to four-family
dwelling is combined with non-residential space in a ``mixed use''
project, the mortgage is not covered by this Act and this part).
The nonjudicial foreclosure procedures proposed under this rule
will be available for use by HUD in connection with any such mortgage,
irrespective of the date of execution. The procedure is similar to the
deed of trust foreclosure procedure used in approximately one-half of
the States. To the extent that a mortgagor has legal or equitable
defenses, the mortgagor would be free to seek injunctive relief in the
courts.
Outline of Foreclosure Procedures
The procedures authorized by this statute are as follows. Upon
determining that a mortgage should be foreclosed, HUD or its designee
names a foreclosure commissioner to conduct the foreclosure and sale in
accordance with the requirements of the statute. The foreclosure
commissioner will have previously been found eligible by the Department
to serve as a foreclosure commissioner for HUD's cases. The
commissioner commences the foreclosure by serving a Notice of
[[Page 17969]] Default and Foreclosure Sale. The contents of this
notice and the manner in which it is to be served are set forth in the
statute and the regulations.
If a substitute foreclosure commissioner is designated, foreclosure
would continue unless the substitute commissioner finds that
continuation would unfairly affect the interests of the mortgagor. If a
sale is adjourned to another day, a new Notice of Default and
Foreclosure Sale must be served.
After the service requirements are met, the commissioner or his
designee conducts the foreclosure sale at the date and time specified
in the Notice of Default and Foreclosure Sale and disposes of the sale
proceeds as provided by the statute. No other proceeding to foreclose
the mortgage can be continued or initiated during the pendency of a
foreclosure under these regulations. The statute authorizes the
commissioner to convey title to the purchaser and requires the
commissioner to establish a record of the foreclosure and sale.
From the proceeds of the foreclosure sale, or from other available
sources if funds are insufficient, the commissioner is reimbursed for
reasonable costs of the foreclosure sale and is paid a fee for his or
her services in an amount to be established by HUD.
Notice Requirements
The statute and regulations set forth extensive and thorough
requirements for service of the Notice of Default and Foreclosure Sale
on the current owner, all mortgagors of record and other interested
parties. The Notice of Default and Foreclosure Sale must set forth
information on the foreclosure commissioner, identification of the
property covered by the mortgage, and specific information about the
failure to pay or other default.
Mortgagor Protections
Since a foreclosure extinguishes property rights, the statute and
the proposed rule contain numerous provisions to protect the interests
of the mortgagor of the property subject to foreclosure sale, tenants
and other interested parties. The foreclosure commissioner must be
responsible, financially sound, and competent to conduct the
foreclosure. The commissioner is specifically authorized to adjourn or
cancel the sale if conditions are not conducive to a sale that is fair
to the mortgagor. The mortgagor and other interested parties are
notified in writing about the designation of the foreclosure
commissioner and about the designation of any substitute commissioner.
Even if not so provided in the mortgage instrument, under the Act and
these regulations, the mortgagor has the right to have the mortgage
reinstated one time by bringing the mortgage current or curing a
nonmonetary default with respect only to foreclosures being carried out
under this part. Subsequent reinstatements can be made only at the
discretion of the Department.
Effect on State Law
The statute provides that its purpose is to create a uniform
Federal foreclosure remedy for single family mortgages within its
scope. The intent of the Secretary with respect to the enforcement of
these regulations is that they will be governed by Federal law and will
not be subject to conflicting or varying State laws unless otherwise
expressly noted.
The statute and the regulations also provide that there will be no
right of redemption, or right of possession based on a right of
redemption, in the mortgagor or others subsequent to a foreclosure of a
mortgage completed pursuant to this statute. If redemption periods
provided under State law--up to 18 months or longer in some States--
were applied to these mortgages, salability of the properties involved
would be seriously impaired and their rehabilitation and improvement
discouraged. Such a result would increase the Federal financial
exposure and frustrate achievement of the program's objectives and the
national housing goals. State redemption laws have previously been
preempted in connection with the foreclosure of HUD-held title II
mortgages under section 204(l) of the National Housing Act, 12 U.S.C.
1710(l), and with respect to section 312 mortgages under section 701 of
the HUD Reform Act of 1989, 42 U.S.C. 1452c.
Scope of Final Rule
In conjunction with its efforts to streamline and reduce
regulations, the Department is considering the option of issuing a much
briefer final rule for Nonjudicial Foreclosure of Single Family
Mortgages after considering comments on this proposed rule. The
procedures that are in the statute would not be repeated in the final
rule as they are in this proposed rule. The final rule would instead
consist of provisions that address only those areas where the statute
gives the Secretary discretion to act or for which clarification and
additional detail are necessary. Nonjudicial foreclosures would be
conducted with reference to the statute and the abbreviated final rule,
or through the use of a guidebook with instructions for foreclosure
commissioners which the Department would make available to the public.
The Department specifically requests comment on this point.
Other Matters
Environmental impact
In accordance with 40 CFR 1508.4 of the CEQ regulations and 24 CFR
50.20 of the HUD regulations, the policies and actions proposed in this
document are determined not to have the potential of having a
significant impact on the quality of the human environment and
therefore further environmental review under the National Environmental
Policy Act is not necessary.
Regulatory Flexibility Act
The Secretary, in accordance with the Regulatory Flexibility Act (5
U.S.C. 605(b)), has reviewed this proposed rule before publication and,
by approving it, certifies that this proposed rule would not have a
significant economic impact on a substantial number of small entities.
The proposed rule is limited to implementation of statutory authority
for the nonjudicial foreclosure of HUD-held single family mortgages,
and there are no unusual procedures that would need to be complied with
by small entities.
Executive Order 12606, the Family
The General Counsel, as the Designated Official under Executive
Order 12606, the Family, has determined that this proposed rule would
not have potential significant impact on family formation, maintenance,
and general well-being, and thus is not subject to review under the
Order. The proposed rule implements procedures for the nonjudicial
foreclosure of HUD-held single family mortgages. These procedures would
impact those families who would be required to vacate more quickly than
under other procedures. However, this impact is expected to be small,
and would be offset by the benefit to families to the extent that these
procedures decrease the risk to single-family housing of vandalism,
fire loss, depreciation, and damage and waste, and the attendant
adverse effects on the neighborhoods in which the properties are
located.
Executive Order 12512, Federalism
The General Counsel, as the Designated Official under section 6(a)
of Executive Order 12612, Federalism, has determined that although this
proposed rule would have an effect on States or their political
subdivisions, and the relationship between the Federal
[[Page 17970]] government and the States, the provisions of this
proposed rule do not have ``federalism implications'' within the
meaning of the Order because the authorizing statute provides for the
preemption of State law.
Semiannual Agenda of Regulations
This proposed rule was not listed in the Department's Semiannual
Agenda of Regulations published on November 14, 1994 (59 FR 57632)
under Executive Order 12866 and the Regulatory Flexibility Act.
List of Subjects in 24 CFR Part 29
Mortgages, Foreclosures.
Accordingly, title 24 CFR is proposed to be amended by adding a new
part 29, to read as follows:
PART 29--NONJUDICIAL FORECLOSURE OF SINGLE FAMILY MORTGAGES
Subpart A--General
Sec.
29.1 Purpose.
29.3 Scope and applicability.
29.5 Definitions.
Subpart B--Procedures
29.101 Designation of foreclosure commissioner.
29.103 Prerequisites to foreclosure.
29.105 Commencement of foreclosure.
29.107 Notice of default and foreclosure sale.
29.109 Service of Notice of Default and Foreclosure Sale.
29.111 Presale reinstatement.
29.113 Conduct of sale.
29.115 Adjournment or cancellation of sale.
29.117 Validity of sale.
29.119 Foreclosure costs.
29.121 Disposition of sales proceeds.
29.123 Transfer of title and possession.
29.125 Redemption rights.
29.127 Record of foreclosure and sale.
29.129 Effect of sale.
29.131 Computation of time.
29.133 Deficiency judgment.
Authority: 12 U.S.C. 1715b, 3751-3768; 42 U.S.C. 1452b, 3535(d).
Subpart A--General
Sec. 29.1 Purpose.
(a) The purpose of this part is to implement the Single Family
Mortgage Foreclosure Act of 1994 (the Act), 12 U.S.C. 3751-3768. This
Act creates a uniform Federal remedy for foreclosure of mortgages
covering single family properties which are held by the Secretary of
Housing and Urban Development pursuant to Title I of the National
Housing Act, 12 U.S.C. 1702 et seq., Title II of the National Housing
Act, 12 U.S.C. 1707 et seq., or Section 312 of the Housing Act of 1964,
42 U.S.C. 1452b (as it existed before repeal). The Secretary's powers
under the Act to appoint a foreclosure commissioner or commissioners
and substitutes therefor, to fix the compensation of commissioners, and
to promulgate implementing regulations, have been delegated to the HUD
General Counsel.
(b) 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.
Sec. 29.3 Scope and applicability.
(a) Scope. Under this part, the Secretary may foreclose on any
defaulted single family mortgage (as defined in Sec. 29.5) encumbering
real estate in any State regardless of when the mortgage was executed.
(b) Applicability. The Secretary may, at the Secretary's option,
use other procedures to foreclose defaulted single family mortgages,
including judicial foreclosure in State or Federal Court, and
nonjudicial foreclosures under State law or any other Federal law. This
part applies only to foreclosure procedures authorized by the Act and
not to any other foreclosure procedures the Secretary may use.
Sec. 29.5 Definitions.
As used in this part--
Act means the Single Family Mortgage Foreclosure Act of 1994 (12
U.S.C. 3751 et seq.).
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.
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 [[Page 17971]] 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 (42 U.S.C. 1452b), as it existed before the
repeal of that section by section 289 of the Cranston-Gonzalez National
Affordable Housing Act (42 U.S.C. 12839). A mortgage securing such a
loan that covers property containing nonresidential space and a 1- to
4-family dwelling shall not be subject to this part.
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.
Subpart B--Procedures
Sec. 29.101 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. A foreclosure commissioner designated pursuant to this part
shall have a nonjudicial power of sale as provided in this part.
(b) The foreclosure commissioner, if a natural person, shall 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 shall be at the
discretion of the Secretary, and 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.
(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 person may be designated by his or
her unique title or position instead of by name. The designation shall
be effective upon execution.
(d) A copy of the designation of the foreclosure commissioner shall
be mailed with each copy of the Notice of Default and Foreclosure Sale
served by mail in accordance with Sec. 29.109.
(e) 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.
(1) Such substitution 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 shall
be in writing. If the substitute commissioner makes such a finding, the
substitute commissioner shall cancel the foreclosure sale, or adjourn
such sale in accordance with the provisions of Sec. 29.115.
(2) If a substitute commissioner is designated, a copy of the
written notice of such designation referred to in paragraph (c) of this
section shall be served:
(i) By mail, as provided by Sec. 29.109 (except that the minimum
time periods between mailing and the date of the foreclosure sale shall
not apply); or
(ii) In any other manner which, in the substitute foreclosure
commissioner's sole discretion, is conducive to achieving timely notice
of such substitution.
Sec. 29.103 Prerequisites to foreclosure.
(a) The Secretary may commence foreclosure of a single family
mortgage under this part upon the breach of a covenant or condition in
the mortgage agreement.
(b) No foreclosure under this part 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 this part has been withdrawn, dismissed, or
otherwise terminated.
(c) The Secretary shall not institute any separate foreclosure
proceeding during the pendency of foreclosure pursuant to this part.
(d) Nothing in this part shall 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 this part if the Secretary has obtained or is seeking
any other remedy available pursuant to Federal or State law, or under
the mortgage agreement.
Sec. 29.105 Commencement of foreclosure.
If the Secretary determines that the prerequisites to foreclosure
set forth in Sec. 29.103 are satisfied, the Secretary may direct the
foreclosure commissioner to commence foreclosure of the mortgage. Upon
such request, the foreclosure commissioner shall commence foreclosure
of the mortgage in accordance with Sec. 29.107.
Sec. 29.107 Notice of default and foreclosure sale.
The commissioner shall commence the foreclosure by serving a Notice
of Default and Foreclosure Sale. The Notice shall set forth the name,
address and telephone number of the foreclosure commissioner and the
date on which the Notice was issued, along with the following
information:
(a) The current mortgagee (that is, the Secretary), the original
mortgagee (if other than the Secretary), and the original mortgagor.
(b) The street address or a description of the location of the
security property and the legal description of the security property as
contained in the mortgage instrument.
(c) The date of the mortgage, the 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 [[Page 17972]] 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 Act and this part.
(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 shall state that all
deposits and the balance of the purchase price shall be paid by
certified or cashier's check. The Notice also shall 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.
Sec. 29.109 Service of Notice of Default and Foreclosure Sale.
The foreclosure commissioner shall serve the Notice of Default and
Foreclosure Sale described in Sec. 29.107 upon the following persons
and in the following manner, and no additional notice shall 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
shall 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 of foreclosure sale shall 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 as adjourned as
provided in this part. Notice under this part shall be mailed not less
than 21 days before the date of the foreclosure sale and shall be
mailed to the last known address of the current owner 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 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 this part, except that
the notice need not be mailed to any such mortgagors who have been
released from all obligations under the mortgage. Notice under this
section shall be mailed not less than 21 days before the date of the
foreclosure sale and shall be mailed 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 section 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 shall 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 this part. Notice under this section shall be
mailed not less than 21 days before the date of the foreclosure sale
and shall be mailed 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 pursuant to this section shall be 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 certified or
registered mail serves as proof of the date of mailing.
(3) The Notice of Default and Foreclosure Sale made pursuant to
paragraph (b) of this section shall include a copy of the instrument by
which the Secretary has designated him or her to act as commissioner.
(c) Publication. (1) A copy of the notice of default and
foreclosure sale shall be published once a week during three successive
calendar weeks before the date of the foreclosure sale. Such
publication shall 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 shall be considered a newspaper
having general circulation for the purposes of paragraph (c)(1) of this
section.
(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 shall 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.
Sec. 29.111 Presale reinstatement.
(a) Except as provided in Sec. 29.101(b), paragraph (b) of this
section, and Sec. 29.115, the foreclosure commissioner shall withdraw
the security property from foreclosure and cancel the foreclosure sale
only if:
(1) The Secretary directs the foreclosure commissioner to do so
before or at the time of the sale; or
(2) The foreclosure commissioner finds, upon application of the
mortgagor not less than three business days before the date of the
sale, that the default or defaults upon which the foreclosure is based
did not exist at the time of service of the Notice of Default and
Foreclosure Sale; or
(3) In the case of a foreclosure involving a monetary default,
there is tendered to the foreclosure commissioner before public auction
is completed all amounts which 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 Sec. 29.119, 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 [[Page 17973]] paragraph (a)(3) of this section if the
current mortgagor or owner of record has, on one or more previous
occasions, caused a foreclosure of the mortgage, commenced pursuant to
this part or otherwise, to be canceled by curing a default.
(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 amounts due only as a result of acceleration),
including all amounts of expenditures secured by the mortgage and all
incurred costs of foreclosure for which payment is provided in
Sec. 29.119.
(b) Before withdrawing the security property from foreclosure under
paragraphs (a)(2), (a)(3), or (a)(4) of this section, the foreclosure
commissioner shall notify the Secretary of the proposed withdrawal by
telephone or other telecommunication device 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 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 postponed for 14
days. Under these circumstances, notice of the rescheduled sale, if
any, shall be served as described in Sec. 29.109.
(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 under this part shall have
no effect on the commencement of a subsequent foreclosure proceeding.
(e) The foreclosure commissioner shall file a notice of
cancellation in the same place and manner provided for filing the
Notice of Default and Foreclosure Sale as provided in Sec. 29.109.
Sec. 29.113 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 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 Sec. 29.107 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 shall conduct the foreclosure sale
in a manner that is fair to both the mortgagor and the Secretary (see
Sec. 29.117) and consistent with the provisions of this part.
(c) The foreclosure commissioner shall attend the foreclosure sale
in person or, if the commissioner is not a natural person, through a
duly authorized employee. If more than one commissioner has been
designated, at least one shall attend the sale.
(d) 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
which are contained in Sec. 29.107(h). The foreclosure commissioner
will announce the name of each such 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 in
Sec. 29.107(h). Before the close of the sale the commissioner will
announce the amount of the high bid and the name of the successful
bidder.
(e) Notwithstanding the provisions of paragraph (d) of this
section, neither the foreclosure commissioner nor any relative, related
business entity, or employee shall be permitted to bid in any manner on
the security property subject to the foreclosure sale, except that the
foreclosure commissioner or an auctioneer may be directed by the
Secretary to enter a bid on the Secretary's behalf. Relatives of the
foreclosure commissioner who may not bid include parents, siblings,
spouses and children. A related business entity that may not bid or
whose employees may not bid is one whose relationship (at the time the
foreclosure commissioner is designated and during the term of service
as foreclosure commissioner) with the entity of the foreclosure
commissioner is such that, directly or indirectly, one entity
formulates, directs, or controls the other entity; or has the power to
formulate, direct, or control the other entity; or has the
responsibility and authority to prevent, or promptly to correct, the
offensive conduct of the other entity.
(f) The commissioner may serve as an auctioneer, or the
commissioner may, at the commissioner's discretion, 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 commission he
or she collects under Sec. 29.119(e).
(g) The foreclosure commissioner may require a bidder to make a
deposit in an amount or percentage set by the foreclosure commissioner
and stated in the Notice of Default and Foreclosure Sale as set forth
in Sec. 29.107(h) before the bid is accepted.
(h) A successful bidder at the foreclosure sale who fails to comply
with the terms of the sale may be required to forfeit the cash deposit
or, at the election of the foreclosure commissioner after consultation
with the Secretary, shall 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 a new notice will be sent and a new
sale will be held consistent with the requirements of this part.
Sec. 29.115 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 [[Page 17974]]
(2) Additional time is necessary to determine whether the security
property should be withdrawn from foreclosure, as provided in
Sec. 29.111.
(b) The foreclosure commissioner may adjourn a foreclosure sale to
a later hour the same day by announcing or posting, at the original
place of sale, the new time and place of the foreclosure sale, which
must be held between 9 a.m. and 4 p.m. at the original place of sale.
(c) Except as provided in paragraph (b) of this 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 shall serve a Notice of Default and Foreclosure Sale
revised to state that the foreclosure sale has been adjourned to a
specified date between the hours of 9 a.m. and 4 p.m. The revised
Notice also shall include any other information the foreclosure
commissioner deems appropriate. Such Notice shall be served by
publication and mailing as provided in Sec. 29.109, except that
publication may be made on any of three consecutive days prior to the
revised date of foreclosure sale so long as the first publication is
made at least seven days before the revised sale date, and mailing 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.
Sec. 29.117 Validity of sale.
Any foreclosure sale held in accordance with the Act and this part
shall be conclusively presumed to have been conducted in a fair, legal,
and reasonable manner. The sale price shall be conclusively presumed to
be reasonable and equal to the fair market value of the property.
Sec. 29.119 Foreclosure costs.
The following foreclosure costs shall be paid from the sale
proceeds, or from other available sources if sales proceeds are
insufficient, before satisfaction of any other claim to such sale
proceeds:
(a) Advertising costs and postage expenses incurred in giving
notice pursuant to Sec. 29.109 and Sec. 29.115.
(b) Mileage by the most reasonable road distance for posting
Notices under Sec. 29.109(a)(2)(iii) and (b), and for the foreclosure
commissioner's or auctioneer's attendance at the sale. The mileage
shall be paid at a 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.
Sec. 29.121 Disposition of sales proceeds.
(a) The proceeds of the foreclosure sale shall be used in the
following order:
(1) To cover the costs of foreclosure listed in Sec. 29.119.
(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 shall 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 shall
be deductible from the disputed funds.
(d) The foreclosure commissioner will keep such records as will
permit the Secretary to verify the costs claimed under Sec. 29.119, and
otherwise to audit the foreclosure commissioner's disposition of the
sale proceeds.
Sec. 29.123 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 Sec. 29.121(a)(2) and (a)(3).
(b) 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.
(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 shall be a conveyance of the property and
constitute passage of good and marketable title to the mortgaged
property. No judicial proceedings shall be required ancillary or
supplementary to the procedures provided under the Act and under this
part to assure the validity of the conveyance or confirmation of such
conveyance. The purchaser of property under the Act and this part shall
be presumed to be a bona fide purchaser.
(d) A purchaser at a foreclosure sale held pursuant to the Act and
this part shall be entitled to possession upon passage of title under
paragraph (c) of this section, subject to any interest or interests not
barred under Sec. 29.129. Any person remaining in possession of the
property after the passage of title shall be 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
shall execute and deliver the deed to a legal representative of the
decedent purchaser's estate upon payment of the [[Page 17975]] purchase
price in accordance with the terms of sale. Such delivery to the
representative of the purchaser's estate shall 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 shall 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 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 in
Sec. 29.127(a) in an affidavit or an addendum to the deed as provided
in Sec. 29.127(b), the affidavit or addendum shall be accepted for
recordation. Failure to collect or pay a tax as described in paragraph
(f) of this section shall not be 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 shall
cancel all liens as requested by the foreclosure commissioner.
Sec. 29.125 Redemption rights.
(a) There shall be no right of redemption, or right of possession
based upon a right of redemption, in the mortgagor or others subsequent
to a foreclosure completed pursuant to this Act and this part. For
purposes of this section only, a foreclosure shall be considered
completed upon the date 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, shall not apply to mortgages
foreclosed under this Act and this part.
Sec. 29.127 Record of foreclosure and sale.
(a) The foreclosure commissioner shall include in the recitals of
the deed to the purchaser the following items:
(1) The date, time, and place of the foreclosure sale.
(2) A statement that the foreclosed mortgage was held by the
Secretary.
(3) The date of the foreclosed mortgage, the 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 under Sec. 29.109, including the names and addresses
of the persons to whom the Notice was mailed and the date on which the
Notice was mailed, names of the newspaper in which the Notice was
published and the dates of publication, and the date on which service
by posting, if required, was accomplished.
(5) The date and place of filing the Notice of Default and
Foreclosure Sale.
(6) A statement that the foreclosure was conducted in accordance
with the provisions of the Act and this part 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 an affidavit
or addendum to the deed, either of which is to be recorded with the
deed as provided in the Act and this part.
(c) The items set forth in paragraph (a) of this section shall be
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.
Sec. 29.129 Effect of sale.
A sale made and conducted as prescribed in the Act and this part to
a bona fide purchaser shall bar all claims upon, or with respect to,
the property sold for the following persons:
(a) Any person to whom the Notice of Default and Foreclosure Sale
was mailed as provided under the Act and in this part, 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 required by Sec. 29.109(c), 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 paragraphs (a) through (d)
of this section.
Sec. 29.131 Computation of time.
Periods of time provided for in this part 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.
Sec. 29.133 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 the payments provided for in Sec. 29.121,
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.
Dated: March 7, 1995.
Henry G. Cisneros,
Secretary.
[FR Doc. 95-8547 Filed 4-6-95; 8:45 am]
BILLING CODE 4210-32-P