[Federal Register Volume 60, Number 85 (Wednesday, May 3, 1995)]
[Rules and Regulations]
[Pages 21936-21937]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-10803]
[[Page 21935]]
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Part III
Department of Housing and Urban Development
_______________________________________________________________________
Office of the Assistant Secretary for Housing-Federal Housing
Commissioner
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24 CFR Parts 200 and 203
Nationwide Pre-Foreclosure Sale Procedure; Final Rule
Federal Register / Vol. 60, No. 85 / Wednesday, May 3, 1995 / Rules
and Regulations
[[Page 21936]]
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Office of the Assistant Secretary for Housing-Federal Housing
Commissioner
24 CFR Parts 200 and 203
[Docket No. R-95-1749; FR-2682-F-02]
RIN 2502-AE72
Nationwide Pre-Foreclosure Sale Procedure
AGENCY: Office of the Assistant Secretary for Housing-Federal Housing
Commissioner, HUD.
ACTION: Final rule.
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SUMMARY: This rule adopts as final the interim rule that set forth the
requirements and procedures that govern the Department's Pre-
foreclosure Sale (PFS) Procedure. The interim rule was published in the
Federal Register on September 30, 1994, at 59 FR 50136. The
requirements and procedures contained in the interim rule are based on
the Pre-foreclosure Sale Demonstration Program established by a notice
published in the Federal Register on May 29, 1991, at 56 FR 24324.
EFFECTIVE DATE: June 2, 1995.
FOR FURTHER INFORMATION CONTACT: Joseph Bates, Director, Single Family
Servicing Division, Office of Insured Single Family Housing, Department
of Housing and Urban Development, 451 Seventh Street, S.W., Washington,
D.C. 20410. Telephone (202) 708-3680. A telecommunications device for
deaf persons (TDD) is available at (202) 708-1112. (These are not toll-
free telephone numbers.)
SUPPLEMENTARY INFORMATION: The information collection requirements
contained in this rule have been submitted to the Office of Management
and Budget for review under the provisions of the Paperwork Reduction
Act of 1980 (44 U.S.C. 3501-3520) and have been assigned approval
number 2502-0464.
Background
Sometimes, a mortgagor must confront the twin realities of not
being able to meet his or her mortgage obligation and static or
declining property values. Such a situation makes it virtually
impossible for a financially distressed mortgagor to sell the home and,
using the proceeds, to fully discharge the mortgage debt. Foreclosure
of the mortgage is often the method by which these difficulties are
resolved.
Over the past few years, much interest has been expressed by
mortgagors and real estate agents in a transaction known as the ``pre-
foreclosure sale.'' This loss mitigation technique has grown
significantly in use by the private sector and is also now commonly
used by Government-sponsored enterprises, such as Fannie Mae (Federal
National Mortgage Association), to ameliorate their losses from
defaulted loans. In a successful pre-foreclosure sale involving a
property subject to an FHA-insured mortgage loan, neither foreclosure
nor conveyance of the property to the Department occur. A third party
buys the home from a defaulting mortgagor at its approximate fair
market value (with certain adjustments, as approved by the Secretary),
which is less than the owner's outstanding indebtedness at the time of
sale.
Section 1064 of the McKinney Homeless Assistance Amendments Act of
1988 (Pub. L. 100-628) amended section 204(a) of the National Housing
Act (12 U.S.C. 1710(a)) to authorize HUD to pay a claim to a lender
equal to the difference between the fair market sale price and the
outstanding indebtedness (with certain adjustments). A successfully
completed pre-foreclosure sale benefits the mortgagor, who avoids the
stigma of foreclosure on his or her credit record, and also benefits
HUD, which can expect to save by not paying foreclosure-related costs.
HUD also saves on maintenance costs and marketing expenses for
properties which would otherwise be conveyed to the Department
following foreclosure. Finally, mortgagees also benefit through
incorporating this loss-mitigation technique into their overall loan
servicing, by frequently being able to file their claim for insurance
benefits sooner, following a successful pre-foreclosure sale, than they
would following a post-foreclosure conveyance claim.
On May 29, 1991, the Department published in the Federal Register,
at 56 FR 24324, a notice which announced a limited demonstration
program to gauge the demand for, and the efficacy of, pre-foreclosure
sales as a means of assisting qualified mortgagors in avoiding
foreclosure of their FHA-insured mortgages and of saving the Department
money.
The Demonstration was successful in that the demand for this
alternative to foreclosure was found to be very substantial; the
efficacy of the pre-foreclosure sale transaction was found to be cost-
beneficial to HUD; and feedback obtained from participating local HUD
offices, program coordinators, mortgagees, homeowners and the general
public was quite favorable. By expanding the options available to
financially distressed mortgagors and not adversely affecting any
mortgagor rights or interests under existing FHA-insured loan servicing
regulations, the Department has not only acted responsibly toward the
homeowners with FHA-insured mortgages, but also has operated with an
eye to the cost-effectiveness of its own policies and procedures.
The Department then decided to implement the pre-foreclosure sale
procedure nationwide by incorporating it into the overall approach of
servicing FHA-insured loans by FHA-approved lender/servicers.
Therefore, the Department issued an interim rule on September 30, 1994,
at 59 FR 50136. The September 30, 1994 interim rule made pre-
foreclosure sales an even more efficient servicing tool by streamlining
procedures and, in some respects, reducing the Department's cost of
following this course of action.
Public Comments
The public was given 60 days to comment on the requirements and
procedures set forth in the September 30, 1994 interim rule. Comments
were received from one commenter (a national trade association), and
that comment was totally favorable to the interim rule.
This Final Rule
This final rule adopts without change the interim rule published on
September 30, 1994, at 59 FR 50136.
Other Matters
Environmental Finding
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, Office of the General Counsel,
Department of Housing and Urban Development, Room 10276, 451 Seventh
Street, S.W., Washington, D.C. 20410.
Regulatory Flexibility Act
The Secretary, in accordance with the Regulatory Flexibility Act (5
U.S.C. 605(b)), has reviewed this rule before publication and by
approving it certifies that this rule does not have a significant
economic impact on a substantial number of small entities because this
rule pertains to a limited number of single-family mortgage situations.
It expands the options available to [[Page 21937]] financially
distressed mortgagors and does not adversely affect any mortgagor
rights or interests under existing FHA-insured loan servicing
regulations.
Executive Order 12612, Federalism
The General Counsel, as the Designated Official under section 6(a)
of Executive Order 12612, Federalism, has determined that this rule
does not have ``federalism implications'' because it does not have
substantial direct effects on the States (including their political
subdivisions), or on the distribution of power and responsibilities
among the various levels of government. The purpose of this rule is to
implement the requirements and methods of pre-foreclosure sales as a
means of assisting qualified mortgagors in avoiding foreclosure of
their FHA-insured mortgages and of saving the Department money.
Executive Order 12606, the Family
The General Counsel, as the Designated Official under Executive
Order 12606, the Family, has determined that this rule does not have
potential significant impact on family formation, maintenance, and
general well-being.
Semiannual Agenda
This rule was listed as item 1784 in the Department's Semiannual
Agenda of Regulations published on November 14, 1994 (59 FR 57632,
57652), pursuant to Executive Order 12866 and the Regulatory
Flexibility Act.
List of Subjects
24 CFR Part 200
Administrative practice and procedure, Claims, Equal employment
opportunity, Fair housing, Housing standards, Incorporation by
reference, Lead poisoning, Loan programs--housing and community
development, Minimum property standards, mortgage insurance,
Organization and functions (Government agencies), Penalties, Reporting
and recordkeeping requirements, Social Security, Unemployment
compensation, Wages.
24 CFR Part 203
Hawaiian Natives, Home improvement, Indians--lands, Loan programs--
housing and community development, Mortgage insurance, Reporting and
recordkeeping requirements, Solar energy.
Accordingly, the Department adopts as final without change the
interim rule amending 24 CFR parts 200 and 203 published on September
30, 1994, at 59 FR 50136.
Dated: April 26, 1995.
Nicolas P. Retsinas,
Assistant Secretary for Housing-Federal Housing Commissioner.
[FR Doc. 95-10803 Filed 5-2-95; 8:45 am]
BILLING CODE 4210-27-P