[Federal Register Volume 60, Number 220 (Wednesday, November 15, 1995)]
[Rules and Regulations]
[Pages 57484-57496]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-28129]




[[Page 57483]]

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Part II





Department of Housing and Urban Development





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24 CFR Part 29



Nonjudicial Foreclosure of Single Family Mortgages; Final Rule

  Federal Register / Vol. 60, No. 220 / Wednesday, November 15, 1995 / 
Rules and Regulations  

[[Page 57484]]


DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Office of the Secretary

24 CFR Part 29

[Docket No. FR-3799-F-02]
RIN 2501-AB86


Nonjudicial Foreclosure of Single Family Mortgages

AGENCY: Office of the Secretary, HUD.

ACTION: Final rule.

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SUMMARY: This rule makes final, with changes, the proposed amendments 
to title 24 CFR by the addition of a new part 29 that concerns 
nonjudicial foreclosure of single family mortgages. A proposed rule was 
published on April 7, 1995 (60 FR 17968). The rule implements the 
Single Family Mortgage Foreclosure Act of 1994 (the Act), codified at 
12 U.S.C. 3751-3768, 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 title I or II of the National 
Housing Act or under section 312 of the Housing Act of 1964.
    It is important to note that the section numbers that are provided 
in this final rule differ from the section numbers that appeared in the 
proposed rule due to the abbreviation of the final rule so as not to 
duplicate provisions already set forth in the Act.

EFFECTIVE DATE: December 15, 1995.

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: In the preamble to the proposed rule, the 
Department stated that it would give consideration to issuing a much 
briefer final rule to implement the Act. The Department has decided to 
publish an abbreviated final rule. Rather than repeat the provisions of 
the statute, the final rule contains only those provisions that are 
necessary for clarification of the statutory procedures, or provisions 
that address those areas that give the Secretary discretion to act. Of 
course, the statutory requirements apply whether they are repeated in 
the rule or not, and removal of the statutory requirements from the 
regulation does not affect their applicability. In addition to 
resulting in a more streamlined regulation, the removal of statutory 
requirements makes rulemaking to update the language of the regulation 
whenever there is a change in the statutory language unnecessary.
    The combined statutory and regulatory procedures for conducting 
nonjudicial foreclosures, which were contained in the proposed rule, 
have been placed in an appendix to this final rule and incorporate 
changes made in response to the comments received. The final rule will 
be codified in the Code of Federal Regulations; the appendix will not 
be codified. However, the appendix will be included in information to 
be provided to foreclosure commissioners, and which will be available 
to the public. HUD is striving to keep communications about 
requirements as clear, simple and timely as possible, and the guide in 
the appendix presents such a format.
    By a delegation of authority published elsewhere in this issue of 
the Federal Register, the authority under the Act to appoint a 
foreclosure commissioner or commissioners and to fix the compensation 
of commissioners has been delegated to the General Counsel of HUD. This 
delegation of authority has been redelegated to the Field Assistant 
General Counsel.
    By a ``Notice of Application--Foreclosure Commissioners,'' which 
will be published at the same time as this rule or as soon thereafter 
as possible, the Department requests applications from parties who seek 
approval for designation to act as foreclosure commissioners under the 
Single Family Mortgage Foreclosure Act of 1994. The Department will 
also perform additional outreach in order to encourage interested 
parties to apply.

I. Changes Made at Final Rule Stage

    In addition to removing text of the proposed rule that only 
repeated statutory language, a number of changes are made in this final 
rule. The definitions of ``record'' and ``recorded'' are clarified to 
include within their meaning the terms ``file'' and ``filed.'' The 
requirement in Sec. 29.101(d) of the proposed rule, that a copy of the 
designation of the foreclosure commissioner must be mailed with the 
Notice of Default and Foreclosure Sale, is removed. One item added by 
this final rule at Sec. 29.103 to the information required to be 
provided in the notice is the recordation date of the mortgage. The 
presale reinstatement provisions of this rule, at Sec. 29.107, are 
revised for consistency to use the term ``adjourned'' instead of 
``postponed.'' The date of the recording of the mortgage that was 
foreclosed is added to the required recitals in the record of 
foreclosure and sale (Sec. 29.121).

II. Public Comments

    The Department received nine public comments on the proposed rule 
during the 60 day comment period that ended on June 7, 1995. The 
comments were from two law firms, two financial institutions, two bar 
associations, one legal services organization, one title insurers' 
trade association, and one foreclosure trustees' association. The 
following discussion summarizes the comments and provides HUD's 
responses to those comments.
    Comment: Support for the Act/Favoring the rule. One commenter 
stated that the proposal to create a uniform foreclosure remedy 
appeared to be in the best interest of all concerned parties. Another 
commenter supported the concepts outlined in the proposed rule, but 
felt that the rule could benefit from some ``fine tuning.''
    Response: No response is necessary.
    Comment: Scope of the final rule. One commenter commented that the 
final rule that is published should be a complete and final rule, 
rather than an abbreviated one. The commenter stated that there has 
been considerable confusion in the legal community about the 
codification of the nonjudicial foreclosure statute, given its 
enactment in an appropriations bill. The commenter said that while a 
HUD guidebook with the procedures for foreclosure commissioners to 
follow would be useful, the commenter believed that a complete and 
substantial final rule is justified because of the magnitude of changes 
embodied in this new procedure, the pre-emption of State law, and the 
national basis on which the statute is to be implemented.
    Response: The Department is sensitive to the need for clear 
instructions in a format that is easily accessible. At the same time, 
the Department is concerned about excessive and unnecessary 
regulations, and is taking steps to contain the growth of regulations 
and reduce the number of regulations. The proposed rule repeated, for 
the most part, the authority granted to the Secretary in the statute. 
The Department has decided to publish an abbreviated final rule, which 
will be codified in the Code of Federal Regulations. However, to ensure 
adequate guidance to the public, an appendix to this final rule is also 
being published. The appendix will reflect the proposed rule, revised 
to incorporate comments.
    Regarding concerns over the method of the statute's promulgation, 
the effectiveness and the codification of this 

[[Page 57485]]
nonjudicial foreclosure statute in the United States Code are not 
affected because of the statute's promulgation in an appropriations 
act.
    Comment: Title insurance. One commenter stated that requests to 
provide title insurance will be denied for properties where mortgages 
had been foreclosed under the provisions of the Act if, in reliance 
upon the statute, the State-imposed redemption period was ignored. 
Because of this, the commenter advised against implementation of this 
statutory authority.
    Response: It is well settled that the Congress has the power to 
enact such pre-emptive statutes. Section 814(e) of the Act (12 U.S.C. 
3763(e)) specifically provides that 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 under the 
provisions of the Act. Pre-emption of the right of redemption is not 
new to foreclosures of Secretary-held mortgages. For example, section 
204(l) of the National Housing Act, as amended, already pre-empts the 
right of redemption for those situations where a Secretary-held 
mortgage is foreclosed by the Secretary. The Department notes that 
title insurance is available under the Multifamily Mortgage Foreclosure 
Act (MMFA), which also pre-empts redemption rights.
    Comment: Borrower protection/Process time. Three commenters noted 
that the period of time after sending the Notice of Default and 
Foreclosure Sale prior to the date of foreclosure was not sufficient 
time for a response from the mortgagor and for the default to be 
corrected. One commenter thought that what he found to be a brief 
period of time seemed to conflict with the preamble statement that 
``foreclosure will be commenced only after extensive attempts to 
correct the default.'' One commenter raised concerns that the rule had 
very few safeguards to protect affected borrowers, and recommended 
distinguishing between occupied and abandoned properties, which have 
differing degrees of deterioration. One commenter stated that there was 
no opportunity to dispute the claimed amount owed.
    Response: The time from the sending of the Notice until the 
foreclosure is not unfair to the mortgagor, and does not preclude the 
mortgagor from correcting a default. In each case with a Title I, Title 
II or section 312 mortgage, the mortgagor has had ample opportunity to 
correct the default and avoid foreclosure. Prior notice has been sent 
to the mortgagor, a payment plan may have been entered into, and the 
mortgagor has had the opportunity to contest the amount owed and been 
given the opportunity to convey the property to HUD without proceeding 
with foreclosure. The Notice of Default and Foreclosure Sale is only 
the culmination of a process whereby HUD has attempted to work with the 
debtor to resolve the default and to work out arrangements whereby 
foreclosure could be avoided.
    A more detailed discussion, which follows, of the acquisition and 
servicing of Secretary-held mortgages illustrates the effort that the 
Department undertakes to assist homeowners avoid foreclosure.
    Most Title II mortgages are acquired pursuant to section 230 of the 
National Housing Act. Under this section, a mortgagor who has defaulted 
on his mortgage due to circumstances outside his control may seek to 
have his mortgagee assign the mortgage to HUD to avoid foreclosure and 
attempt to save his home. If HUD finds that certain criteria are met, 
the mortgagee assigns the mortgage to HUD and collects the mortgage 
insurance benefits. Among the criteria is the requirement that the 
mortgagor be able to resume full monthly mortgage payments no later 
than the 37th month after the assignment, and must be able to pay the 
mortgage in full at the end of the mortgage term, which may be extended 
up to ten years to cover the arrearage. If the mortgagor cannot resume 
and continue making full monthly payments after 36 months, or fails to 
perform under the terms of a forbearance agreement, the Department 
initiates foreclosure. A mortgagor under this program who faces 
foreclosure has not just recently defaulted on his mortgage. Rather, he 
may have been in default for more than three years. The Department has 
been in contact with each such mortgagor to work out a solution to the 
default. When no resolution is worked out, it will be no surprise to 
the mortgagor that HUD is foreclosing.
    A Title I home improvement loan that is secured by a security 
interest in the secured property is assigned to the Department for the 
payment of insurance benefits after default by the borrower. After a 
default, the lender attempts to work with the borrower to collect the 
delinquent payments. If the loan cannot be brought current, the loan 
balance is accelerated and the note and mortgage are assigned to HUD. 
It is important to note that the lender has a choice--it can proceed 
against the security and forego submitting a claim to HUD, or it can 
assign the loan to HUD and receive insurance benefits. Once HUD 
acquires the loan, it is sent to a HUD Debt Management Center for 
collection activities. The Department attempts to work out payment 
plans with all Title I debtors, including those where HUD has a junior 
lien interest securing the Title I loans. Prior to issuing a Notice of 
Intent to Foreclose to a Title I debtor, the Debt Management Center has 
taken numerous steps to attempt to collect the delinquent debt. A 
series of demand letters is sent to the debtor requesting payment. The 
Debt Management Center reviews the account to see if a realistic 
payment plan can be implemented, or if assets are available that could 
liquidate the debt. Based on its review, the Debt Management Center may 
accept a compromise offer from the debtor. Again, because there have 
been numerous contacts with the mortgagor, it cannot be said that 
attempts at collection culminating with foreclosure surprise the Title 
I mortgagor and deprive him of the means to work out the problem.
    Section 312 mortgage loans are serviced by a contract servicer, who 
also maintains close contact with the mortgagors. As with the Title I 
and Title II mortgagors, there are opportunities to work out default 
problems, and it is not until four official notices have been issued to 
the borrower over a 90-day period and all attempts to work with the 
borrower have failed, that the process begins for referral to the 
foreclosure commissioner. A delay of 30 to 60 days will occur before 
the section 312 loan reaches the foreclosure commissioner, during which 
time the borrower may have an opportunity to reinstate. Therefore, the 
borrower may have up to 150 days prior to the 21 day notice in which to 
bring the loan current or negotiate a forbearance agreement.
    In short, internal procedures that the Department has in place 
which are used prior to initiating foreclosure provide that the 
mortgagor will have had numerous attempts to address the default under 
the mortgage, both with HUD staff and with the prior mortgagee. In 
addition, under the Title I, Title II and Section 312 servicing 
procedures, there are continuing opportunities to raise and resolve 
disputed amounts.
    Comment: Time of notice. One commenter recommended that the mailing 
date of the notice should be closer to the date of the search of the 
records rather than the 45 days before the scheduled sale date, as 
provided in the proposed rule, to allow for adequate notice of 
lienholders who may file a lien between the 45 days (maximum time for 
search) and the 21 days (minimum time for notice to be sent).
    Response: If the lienholder of such a lien does not receive notice, 
the lien 

[[Page 57486]]
would remain and would have to be cleared. The Department believes that 
the occurrences of such liens during this time frame would be rare. 
Should experience show that this becomes a recurrent issue, the 
Department can request the foreclosure commissioners to make additional 
searches of the records prior to the 21 day mailing of the notices. The 
Department also notes that searches actually may be conducted less than 
45 days before the sale and the notice may be sent further in advance 
than 21 days. HUD may also adjust the number of days in the 
Instructions to be issued to foreclosure commissioners.
    Comment: Due process/Retroactive effect of statute. One commenter 
attached a memorandum from a Title Insurance Company that expressed 
concerns about the applicability of the Act to mortgages executed prior 
to the Act's enactment as well as to the absence of a requirement for a 
hearing before an impartial tribunal prior to foreclosure.
    Another commenter raised questions about the retroactive 
application of the statute. The commenter felt that retroactive 
application would hurt mortgagors who relied on the availability of 
their State's foreclosure procedures when entering into their 
mortgages, and that failure to honor those procedures could raise due 
process concerns. In addition, the commenter said that persons most 
adversely affected are those who requested HUD assignments of their 
mortgage before the new regulation, relying on HUD foreclosure 
procedures identical to those in their State.
    Response: Regarding the retroactive application of the statute, the 
Department notes that similar questions were raised with regard to 
multifamily mortgages foreclosed pursuant to the Multifamily Mortgage 
Foreclosure Act of 1981 (MMFA). The MMFA's retroactive effect has been 
upheld in court. In addition, the Department emphasizes that it is 
clear that Congress intended that the Act have retroactive effect. For 
example, the Act covers the foreclosure of section 312 loans made by 
the Secretary, although the authority to make such loans was repealed 
by section 289 of the Cranston-Gonzalez National Affordable Housing Act 
in 1990.
    With regard to the comment about mortgagors relying on certain 
foreclosure procedures, the Department questions whether mortgagors, 
upon entering into mortgage contracts, actually consider what 
foreclosure procedures will be used in the event of default. 
Furthermore, the Department emphasizes that mortgagors whose mortgages 
are in default and that are assigned to the Department under section 
230 of the National Housing Act (and it is these mortgages that 
constitute almost all of the mortgages that will be foreclosed under 
this Act and regulation) generally receive forbearance relief for a 
number of years that greatly exceeds the amount of time that would be 
expended if the mortgages had not been assigned and had been foreclosed 
earlier by mortgagees using the State foreclosure procedures.
    Regarding the comment that the mortgagor should have an informal 
hearing before a foreclosure is initiated under these procedures, the 
Department is not insensitive to the need to deal with mortgagors 
fairly and to give them opportunities to correct deficiencies and to 
question the amount owed. As discussed previously, foreclosure of a 
Secretary-held mortgage does not come as a surprise to any mortgagor. A 
mortgagor whose mortgage is held by HUD has been in contact with the 
Department in regard to forbearance, reduced payment plans and other 
assistance before foreclosure is initiated. A foreclosure occurs only 
as a last resort when the mortgagor is unable or unwilling to make 
mortgage payments.
    Comment: Notice of new procedures. One commenter urged that if the 
statute and rule are to be applied retroactively, mortgagors who have 
HUD-insured mortgages should be given actual notice of the new 
procedure immediately and again, if there is a default, at the time 
information about the assignment program is provided. The commenter 
urged that HUD wage an aggressive public information campaign, 
including a bilingual information booklet.
    Response: The Department plans to give notice of the new 
foreclosure procedures to all single-family mortgagors whose mortgages 
are held by the Secretary. The Department also intends to inform each 
mortgagor accepted into the Title II Assignment program that this new 
procedure may be used to foreclose the HUD-held mortgage if foreclosure 
becomes necessary. The Department also intends to require new language 
to be added to the Title II security instruments used by mortgagees to 
provide that if the Department acquires the mortgage, the nonjudicial 
foreclosure procedures may be used. The Department will not separately 
notify all Title II mortgagors whose existing mortgages are insured 
(rather than held) by HUD-FHA of the new procedures, but those 
mortgagors will be informed if they default on their insured mortgage 
loans and are accepted into the assignment program.
    Comment: Other foreclosure procedures. One commenter asserted that 
the rule would increase the amount of time, add requirements, and 
increase the costs associated with a foreclosure in the commenter's 
State, where a nonjudicial procedure for foreclosure is already in 
place under State law. The commenter stated that the rule would 
adversely affect lending practices in his State. The commenter urged 
that the new procedures should be limited to judicial foreclosure 
States, and should only apply to HUD-held loans, and not insured loans.
    Response: The commenter has expressed a common misconception about 
this rule. The Act, and hence the rule, applies to mortgage loans that 
were previously insured, and are held by HUD as a result of an 
assignment in exchange for the payment of insurance benefits. The rule 
also applies to secured Title I loans, Section 312 mortgage loans and 
some Title II loans that were made with the Secretary as mortgagee. It 
does not apply to mortgages presently insured by HUD. In addition, the 
statute gives the Secretary the option of using this new procedure or 
using any other procedures available under State or Federal law.
    Comment: Reinstatement. One commenter stated that the pre-sale 
reinstatement as a matter of right should not be limited to a single 
instance, but should be permitted at any time before the sale.
    Response: The authority for this regulatory provision is contained 
in the statute, see 12 U.S.C. 3759(a)(2). As previously noted, the 
mortgages in question are in default, and have been in default for long 
periods of time. The mortgagors in such instances have been informed 
previously by the Department that HUD would foreclose unless their 
accounts were brought current, or their accounts had been brought 
current and then fell behind again repeatedly. The statute seeks to 
curb such abuses.
    Comment: Deficiency judgment. A commenter raised the concern that a 
borrower would have to take action to set aside an unfair deficiency 
judgment.
    Response: The deficiency judgment provisions in the statute and the 
regulations are not automatic. The Secretary has discretion about 
referring a case for a deficiency judgment action.
    Comment: Fees. The Department was urged to conduct a study to 
determine what would be a reasonable fee for outside services in 
conducting foreclosures of HUD-held mortgages. The commenter noted that 
on two previous occasions, the Department had contracted for management 
of its foreclosure processes and had accepted 

[[Page 57487]]
bids that were unreasonably low, with unsatisfactory results.
    Response: Under a Delegation and Redelegation of Authority 
published elsewhere in this issue of the Federal Register, HUD's Field 
Assistant General Counsel will have authority to designate foreclosure 
commissioners under the Act and to determine compensation. It is 
anticipated that the foreclosure commissioners will generally be local 
law firms or other entities. Compensation will be determined by each 
Field Assistant General Counsel based upon information received and 
recommendations made to them about what constitutes reasonable 
compensation for handling foreclosures in particular geographic areas. 
In these and other ways, procedures under the Act are considerably 
different from procedures referred to by the commenter that were 
previously used for HUD's single family mortgage foreclosures.
    Comment: Guidebook availability. One commenter stated that making a 
guidebook available to the public would be invaluable inasmuch as 
questions would arise concerning why the foreclosure was not being done 
in conformity with State law, and would serve as the only viable 
resource of information for anyone who wished to learn about the HUD 
nonjudicial foreclosure process.
    Response: The Department believes that such a guidebook is not 
necessary because the guidelines are contained in the appendix to this 
final rule.
    Comment: Definitions. One commenter felt that the definition of 
``owner'' was too broad, and suggested that the term should be limited 
to a recorded interest in the property.
    Response: The definition in the proposed rule is derived from the 
statute.
    Comment: Designation of foreclosure commissioner. One commenter 
recommended selecting foreclosure commissioners from the U.S. 
Foreclosure Network, an organization whose members must meet certain 
criteria of professionalism.
    Response: Members of this organization may apply pursuant to the 
procedures established under the Notice of Application that is being 
published in the Federal Register.
    Comment: Natural person as foreclosure commissioner. Concern was 
expressed by one commenter about having a natural person act as a 
foreclosure commissioner and potential problems arising, such as death 
or illness. The commenter recommended using a natural person only if 
another type of qualified legal entity was not available.
    Response: The statute authorizes the designation of a natural 
person or an entity that is not a natural person, and the Department 
will proceed accordingly in designating foreclosure commissioners. 
Other statutory provisions set forth procedures for designating 
substitute foreclosure commissioners, if necessary. Should a 
foreclosure commissioner who is a natural person die, become ill, or 
should another problem arise, the Field Assistant General Counsel may 
always designate a substitute foreclosure commissioner.
    Comment: Copy of designation. Two commenters observed that 
attaching a copy of the designation of the foreclosure commissioner to 
the Notice of Default and Foreclosure Sale does not seem necessary and 
involves additional costs.
    Response: Attachment of a copy of the designation is not a 
statutory requirement. Because the Notice of Default and Foreclosure 
Sale must include the name, address and telephone number of the 
foreclosure commissioner, HUD will not require attachment of the 
designation with each notice.
    Comment: Notice of Default and Foreclosure Sale. One commenter 
asked if the notice should set forth the name of the trustee if the 
security instrument being foreclosed is a deed of trust.
    Response: The foreclosure commissioner named by HUD will function 
as a substitute trustee in the place of any previously named trustee.
    Comment: One commenter recommended that the notice should indicate 
that the sale is made without covenant or warranty.
    Response: This will be included in the Instructions to the 
foreclosure commissioner.
    Comment: A commenter suggested that the notice should state the 
recording date of the mortgage rather than the ``date of the 
mortgage.''
    Response: The statute provides at 12 U.S.C. 3757(5) that the Notice 
of Default and Foreclosure shall contain ``the date of the mortgage * * 
*.'' Providing the recordation date as well as the execution date may 
be useful, and this requirement has been added to the abbreviated rule 
(Secs. 29.103 and 29.121) and appendix (Secs. 7 and 17).
    Comment: A commenter suggested that there should be clarification 
of the words ``earliest principal installment remaining wholly 
unpaid,'' noting that most installments are principal and interest, and 
it would seem that even a partially unpaid installment should be 
reflected.
    Response: Statutory language provides for ``the due date of the 
earliest installment payment remaining wholly unpaid * * *.'' (emphasis 
added).
    Comment: A commenter suggested that the amount or percentage of the 
deposit that would be required, and the time that the winning bidder 
has to pay the balance of the purchase price, should be specified in 
the final rule.
    Response: These points will be covered in other guidance that is to 
be given to the foreclosure commissioners and to HUD Field Offices. It 
is not covered in the final rule, which is an abbreviated rule.
    Comment: Service of Notice of Default and Foreclosure. One 
commenter noted that in paragraph (a) of Sec. 29.109 of the proposed 
rule, the term ``filing'' appears to refer to recording. Since the term 
``recording'' is used later, it should be used consistently. The 
commenter also pointed out that there may be a question whether the 
Notice of Default would be filed ``in the manner authorized for filing 
a notice of an action.''
    Response: The statute uses the terms ``filed'' and ``filing'' and 
in this context, they are used interchangeably with ``record'' and 
``recorded.'' Nevertheless, to avoid confusion, the terms ``record'' 
and ``recorded'' are used in the Appendix.
    Comment: A commenter noted that in paragraph (b)(1)(i) of 
Sec. 29.109 of the proposed rule, the ``last known address'' should be 
defined as the last address known to the Secretary or the foreclosure 
commissioner.
    Response: ``Last known address'' is statutory language. The meaning 
has been clarified, as suggested, in the appendix which follows this 
final rule.
    Comment: A commenter noted in subparagraph (b)(1)(ii) of 
Sec. 29.109 of the proposed rule, that sending notice to ``all 
subsequent mortgagors of record'' would be unnecessary since they would 
no longer have an interest and a current address would not be 
available.
    Response: The statute at 12 U.S.C. 3758(2)(A)(ii) requires notice 
to ``[a]ll 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 * 
* *.'' This provision is contained in the appendix, and HUD will 
request foreclosure commissioners to attempt to effectuate service of 
notice by mail to the original mortgagor and subsequent mortgagors of 
record, unless HUD has released them from any obligation under the note 
and mortgage.
    Comment: A commenter stated that notice to senior lienholders would 
seem unnecessary. 

[[Page 57488]]

    Response: The statute at 12 U.S.C. 3758(2)(A)(iv) provides that 
service of notice of the foreclosure sale shall be served upon all 
persons holding liens of record upon the secured property as the record 
existed 45 days before that date originally set for the foreclosure 
sale.
    Comment: The commenter suggested that consistently posting a notice 
of the foreclosure sale on the property would avoid questions of proper 
notice, rather than the limited posting required if the property 
contains multiple dwelling units or the occupants of the security 
property are unknown.
    Response: HUD is concerned that posting notice on the property for 
every foreclosure might lead to vandalism and increased deterioration 
of the property. The posting provisions are contained in the statute to 
ensure additional notice under limited circumstances. This same issue 
arose when this statutory language was drafted and it was noted that 
posting of notice is not a universal requirement.
    Comment: A commenter raised concerns about the proof of mailing 
date. The commenter stated that proof of mailing would be difficult to 
establish if the commissioner used a postage meter. It was suggested 
that the commissioner could be required to prepare an affidavit of 
mailing.
    Response: Under 12 U.S.C. 3758(2)(A), ``[t]he notice of foreclosure 
sale shall be sent by certified or registered mail, postage prepaid and 
return receipt requested * * * .'' The post office stamped receipt of 
the mailing, with the postal date stamp, is adequate proof of the 
mailing of the notice.
    Comment: One commenter raised concerns about the cost of publishing 
the Notice of Default and Foreclosure Sale, and questioned whether 
publication accomplished any purpose.
    Response: This is a statutory requirement.
    Comment: Presale reinstatement. One commenter observed that 
paragraph (b) of Sec. 29.111 of the proposed rule refers to a sale 
postponement of 14 days and says that notice of the rescheduled sale 
shall be served as described in Sec. 29.109 of the proposed rule. 
However, Sec. 29.109 requires three weeks of publication. The commenter 
suggested that Sec. 29.115 of the proposed rule, which deals with 
adjournment or cancellation of a sale, should be referenced rather than 
Sec. 29.109, which deals with service of the Notice of Default and 
Foreclosure Sale.
    Response: The commenter is correct and an appropriate change has 
been made to Sec. 29.107(d) of this final rule, which also specifies 
that the sale may be cancelled in addition to being postponed. 
Conforming changes have been made to the appropriate provisions 
contained in the appendix.
    Comment: Adjournment or Cancellation of Sale. One commenter 
suggested eliminating the cost of publication required by paragraph (c) 
of proposed Sec. 29.115 by providing for an oral postponement as well 
as mail notification to bidders who had submitted sealed bids.
    Response: This is a statutory requirement.
    Comment: One commenter noted that paragraph Sec. 29.115(c) of the 
proposed rule uses the word ``adjourned,'' instead of ``postponed,'' 
which is the term used in Sec. 29.111(b) of the proposed rule.
    Response: This provision is now contained in both Sec. 29.107(d) 
and the appendix, and ``adjourned'' has been substituted for 
``postponed''.
    Comment: Disposition of Sale Proceeds. One commenter questioned the 
use of surplus funds from the sale in paragraph (a)(3) of Sec. 29.121 
of the proposed rule for payments of liens that are prior to the 
mortgage being foreclosed. The commenter stated that this would seem to 
conflict with the provisions of many security documents and probably is 
not what would be considered to be normal practice.
    Response: This is a statutory requirement. In many cases, these 
prior liens will be in the nature of taxes, water and sewer liens, and 
the like. For Title I loans that are foreclosed, the liens may be 
senior mortgages.
    Comment: A commenter suggested that a period of time for which 
records of the sale should be kept should be specified.
    Response: The department's instructions to the foreclosure 
commissioners may specify the period of time for record retention.
    Comment: Record of Foreclosure and Sale. One commenter noted that 
in subparagraph (a)(3) of Sec. 29.127 of the proposed rule, the date 
the mortgage was recorded should be used rather than the date of the 
mortgage.
    Response: This requirement is statutory; see 12 U.S.C. 3764(a)(2). 
However, the Department agrees that this additional information would 
be useful, and this is included in this final rule at Sec. 29.121 and 
in the appendix.
    Comment: One commenter suggested that it seems to be unnecessary to 
attach the names and addresses of the parties to whom notice was 
mailed, as set forth in subparagraph (a)(4) of Sec. 29.127 of the 
proposed rule, as long as a recital relative to the proper mailing of 
notices is included in the other recitals.
    Response: This is a statutory requirement. See 12 U.S.C. 
3764(a)(3).
    Comment: Recordation of affidavit and addendum. One commenter 
stated that the recitations contained in Sec. 29.127(a) of the proposed 
rule should be recorded in the public records. The current language of 
the proposed rule may be interpreted to read that the commissioner can 
make the recitations in an affidavit or addendum, which need not be 
recorded with the deed. The commenter recommended that this language 
should be clarified to make it clear that the information should be 
recorded in the public records, in the deed or an affidavit or addendum 
to the deed.
    Response: It is the Department's intent that this information be 
recorded, whether contained in the deed itself, or an affidavit or 
addendum. This will be clarified in the instructions to the 
commissioners.
    Comment: Effect of sale. Section 29.127(c) of the proposed rule 
provides that a sale made and conducted under the provisions of the Act 
shall bar the interest of any person whose interest was not docketed or 
recorded before the date on which the notice of the foreclosure sale 
``was first served by publication.'' One commenter suggested that for 
consistency, this wording might be replaced with the wording set forth 
in Sec. 29.109(b)(1).
    Response: This is a statutory requirement. See section 816(3) of 
this Act.

III. 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 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 final 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 final 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.

[[Page 57489]]


Executive Order 12606, the Family

    The General Counsel, as the Designated Official under Executive 
Order 12606, the Family, has determined that this final 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 final 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 
final rule would have an effect on States or their political 
subdivisions, and the relationship between the Federal government and 
the States, the provisions of this final rule do not have ``federalism 
implications'' within the meaning of the Order because the authorizing 
statute provides for the preemption of State law.

List of Subjects in 24 CFR Part 29

    Foreclosures, Mortgages.

    Accordingly, title 24 CFR is amended by adding a new part 29, 
consisting of subparts A and B, to read as follows:

PART 29--NONJUDICIAL FORECLOSURE OF SINGLE FAMILY MORTGAGES

Subpart A--General

Sec.
29.1  Purpose, scope and applicability.
29.3  Definitions.

Subpart B--Procedures

29.101  Designation of foreclosure commissioner and substitute 
commissioner.
29.103  Notice of default and foreclosure sale.
29.105  Service of Notice of Default and Foreclosure Sale.
29.107  Presale reinstatement.
29.109  Conduct of sale.
29.111  Adjournment or cancellation of sale.
29.113  Foreclosure costs.
29.115  Disposition of sales proceeds.
29.117  Transfer of title and possession.
29.119  Redemption rights.
29.121  Record of foreclosure and sale.
29.123  Deficiency judgment.

    Authority: 12 U.S.C. 1715b, 3751-3768; 42 U.S.C. 1452b, 3535(d).

Subpart A--General


Sec. 29.1  Purpose, scope and applicability.

    (a) Purpose. The purpose of this part is to implement requirements 
for the administration of the Single Family Mortgage Foreclosure Act of 
1994 (the Act), 12 U.S.C. 3751-3768, that clarify, or are in addition 
to, the requirements contained in the Act.
    (b) Scope. The Secretary may foreclose on any defaulted single 
family mortgage described in the Act regardless of when the mortgage 
was executed.
    (c) Applicability. The Secretary may, at the Secretary's option, 
use other procedures to foreclose defaulted single family mortgages, 
including judicial foreclosure in State or Federal Court, and 
nonjudicial foreclosures under State law or any other Federal law. This 
part applies only to foreclosure procedures authorized by the Act and 
not to any other foreclosure procedures the Secretary may use.


Sec. 29.3  Definitions.

    The definitions contained in the Act (at 12 U.S.C. 3752) shall 
apply to this part, in addition to and as further clarified by the 
following definitions. As used in this part--
    Act means the Single Family Mortgage Foreclosure Act of 1994.
    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 is as defined in the Act except that the reference to 
property as ``(real, personal or mixed)'' means ``any property (real or 
mixed real and personal).''
    Mortgage Agreement is as defined in the Act, and also means any 
other similar instrument or instruments creating the security interest 
in the real estate for the repayment of the note or debt instrument.
    Mortgagor is a defined in the Act, except that the reference to 
``trustee'' mean ``trustor.''
    Record; Recorded means to enter or entered in public land record 
systems established under State statutes for the purpose of imparting 
constructive notice to purchasers of real property for value and 
without knowledge, and includes ``register'' and ``registered'' in the 
instance of registered land, and ``file'' and its variants in the 
context of entering documents in public land records.
    Secretary means the Secretary of Housing and Urban Development, 
acting by and through any authorized designee exclusive of the 
foreclosure commissioner.
    Security Property is as defined in the statute except that the 
reference to property as ``(real, personal or mixed)'' means ``any 
property (real or mixed real and personal).''

Subpart B--Procedures


Sec. 29.101  Designation of foreclosure commissioner and substitute 
commissioner.

    (a) The Secretary may designate foreclosure commissioners, 
including substitute commissioners, as set forth in the Act.
    (b) The method of selection and determination of the qualifications 
of the foreclosure commissioner shall be at the discretion of the 
Secretary. The execution of a designation pursuant to this section 
shall be conclusive evidence that the commissioner selected has been 
determined to be qualified by the Secretary. The designation is 
effective upon execution.


Sec. 29.103  Notice of default and foreclosure sale.

    (a) The foreclosure commissioner shall commence the foreclosure 
under the procedures set forth in the Act.
    (b) The Notice of Default and Foreclosure Sale (Notice) shall 
include, in addition to the provisions as required by the Act:
    (1) The foreclosure commissioner's telephone number;
    (2) The legal description of the security property as contained in 
the mortgage instrument;
    (3) The date the mortgage was recorded;
    (4) Identification of the failure to make payment, including the 
entire amount delinquent as of a date specified, a statement generally 
describing the other costs that must be paid if the mortgage is to be 
reinstated, the due date of the earliest principal installment payment 
remaining wholly unpaid as of the date on which the notice is issued 
upon which the foreclosure is based, or a description of any other 
default or defaults upon which foreclosure is based, and the 
acceleration of the secured indebtedness; and
    (5) The bidding and payment requirements for the foreclosure sale, 
including the time and method of payment of the balance of the 
foreclosure purchase price, that all deposits and the balance of the 
purchase 

[[Page 57490]]
price shall be paid by certified or cashier's check, and that no 
deposit will be required of the Secretary when the Secretary bids at 
the foreclosure sale.


Sec. 29.105  Service of Notice of Default and Foreclosure Sale.

    (a) The Notice of Default and Foreclosure Sale shall be served in 
accordance with the provisions of the Act. When notice is sent by mail, 
multiple mailings are not required to be sent to any party with 
multiple capacities, e.g., an original mortgagor who is the security 
property owner and lives in one of the units. The date of the receipt 
for the postage paid for the mailing may serve as proof of the date of 
mailing of the notice.
    (b) Notice need not be mailed to any mortgagors who have been 
released from all obligations under the mortgage.


Sec. 29.107  Presale reinstatement.

    (a) The foreclosure commissioner shall withdraw the security 
property from foreclosure and cancel the foreclosure sale only in 
accordance with the provisions of the Act and as more fully provided in 
this section, in regard to presale reinstatements.
    (b) To obtain a presale reinstatement in cases involving a monetary 
default, there must be tendered to the foreclosure commissioner before 
public auction is completed all amounts which would be due under the 
mortgage agreement if payments under the mortgage had not been 
accelerated and all costs of foreclosure incurred for which payment 
from the proceeds of foreclosure is provided in the Act, and the 
foreclosure commissioner must find that there are no nonmonetary 
defaults; provided, however, that the Secretary may refuse to cancel a 
foreclosure sale pursuant to this paragraph 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.
    (c) To obtain a presale reinstatement in cases involving a 
nonmonetary default:
    (1) The foreclosure commissioner, upon application of the mortgagor 
before the date of foreclosure sale, must find that all nonmonetary 
defaults are cured and that there are no monetary defaults; and
    (2) There must be tendered to the foreclosure commissioner before 
public auction is completed all amounts due under the mortgage 
agreement (excluding all amounts which would be due under the mortgage 
agreement if the mortgage payments had been accelerated), including all 
amounts of expenditures secured by the mortgage and all costs of 
foreclosure incurred for which payment would be made from the proceeds 
of foreclosure as provided in the Act.
    (d) Before withdrawing the security property from foreclosure, the 
foreclosure commissioner shall notify the Secretary of the proposed 
withdrawal by telephone or other telecommunication device and shall 
also provide the Secretary with a written statement of the reasons for 
the proposed withdrawal along with all documents submitted by the 
mortgagor in support of the proposed withdrawal. Upon receipt of this 
statement, the Secretary shall have ten (10) days in which to 
demonstrate why the security property should not be withdrawn from 
foreclosure, and if the Secretary makes this demonstration, the 
property shall not be withdrawn from foreclosure. The Secretary shall 
provide the mortgagor with a copy of any statement prepared by the 
Secretary in opposition to the proposed withdrawal at the same time the 
statement is submitted to the foreclosure commissioner. If the 
Secretary receives the foreclosure commissioner's written statement 
less than 10 days before the scheduled foreclosure sale, the sale shall 
automatically be adjourned for 14 days, during which time it may be 
cancelled. Notice of the re-scheduled sale, if any, shall be served as 
described in Sec. 29.111.


Sec. 29.109  Conduct of sale.

    (a) The foreclosure sale shall be conducted in a manner and at a 
time and place as identified in the Notice of Default and Foreclosure 
Sale and in accordance with the provisions of the Act.
    (b) 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.
    (c) In addition to bids made in person at the sale, the foreclosure 
commissioner shall accept written one-price sealed bids from any party, 
including the Secretary, for entry by announcement at the sale so long 
as those bids conform to the requirements described in the Notice of 
Default and Foreclosure Sale. The foreclosure commissioner shall 
announce the name of each such bidder and the amount of the bid. The 
commissioner shall accept oral bids from any party, including parties 
who submitted one-price sealed bids, if those oral bids conform to the 
requirements in the Notice of Default and Foreclosure Sale. Before the 
close of the sale the commissioner shall announce the amount of the 
high bid and the name of the successful bidder. If the successful 
bidder fails to comply with the terms of the sale, the HUD Field Office 
representative will provide instructions to the commissioner about 
offering the property to the second highest bidder, or having a new 
sale, or other instruction at the discretion of the HUD representative.
    (d) Prohibited participants. Relatives of the foreclosure 
commissioner who may not bid include parents, siblings, spouses and 
children. A related business entity that may not bid or whose employees 
may not bid is one whose relationship (at the time the foreclosure 
commissioner is designated and during the term of service as 
foreclosure commissioner) with the entity of the foreclosure 
commissioner is such that, directly or indirectly, one entity 
formulates, directs, or controls the other entity; or has the power to 
formulate, direct, or control the other entity; or has the 
responsibility and authority to prevent or promptly to correct, the 
offensive conduct of the other entity.
    (e) Auctioneers. If the commissioner employs an auctioneer to 
conduct the foreclosure sale, the auctioneer must be a licensed 
auctioneer, an officer of State or local government, or any other 
person who commonly conducts foreclosure sales in the area in which the 
security property is located.


Sec. 29.111  Adjournment or cancellation of sale.

    (a) The foreclosure commissioner may, before or at the time of the 
foreclosure sale, adjourn or cancel the foreclosure sale in accordance 
with the provisions of the Act. The publication of Notice of Default 
and Foreclosure Sale, revised pursuant to the Act, 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 
date to which the sale has been adjourned. The commissioner shall, in 
the case of a sale adjourned to a later date, mail a copy of the 
revised Notice of Default and Foreclosure Sale to the Secretary at 
least seven days before the date to which the sale has been adjourned.
    (b) When a substitute commissioner is designated by the Secretary 
to replace a previously designated foreclosure commissioner, the sale 
shall continue without prejudice unless the substitute commissioner 
finds, in that commissioner's sole discretion, that continuation of the 
foreclosure sale will unfairly affect the interests of the 

[[Page 57491]]
mortgagor. Any such finding shall be in writing. If the substitute 
commissioner makes such a finding, the substitute commissioner shall 
cancel or adjourn the sale.


Sec. 29.113  Foreclosure costs.

    A commission may be allowed to the foreclosure commissioner 
notwithstanding termination of the sale or appointment of a substitute 
commissioner before the sale takes place.


Sec. 29.115  Disposition of sales proceeds.

    The foreclosure commissioner will keep such records as will permit 
the Secretary to verify the costs claimed, and otherwise to enable the 
Secretary to audit the foreclosure commissioner's disposition of the 
sale proceeds.


Sec. 29.117  Transfer of title and possession.

    (a) If the Secretary is the successful bidder, the foreclosure 
commissioner shall issue a deed to the Secretary upon receipt of the 
amount needed to pay the costs of tax liens and prior liens, as set 
forth in 12 U.S.C. 3762 (a)(2) and (a)(3). If the Secretary is not the 
successful bidder, the foreclosure commissioner shall issue a deed to 
the purchaser or purchasers upon receipt of the entire purchase price 
in accordance with the terms of the sale as provided in the Notice of 
Default and Foreclosure Sale.
    (b) The register of deeds or other appropriate official in the 
county where the property is located shall, upon tendering of the 
customary recording fees, accept all instruments pertaining to the 
foreclosure which are submitted by the foreclosure commissioner for 
recordation. The instruments to be accepted shall include, but not be 
limited to, the foreclosure commissioner's deed. If the foreclosure 
commissioner elects to include the recitations required under the Act 
(12 U.S.C. 3764) in an affidavit or an addendum to the deed, the 
affidavit or addendum shall be accepted along with the deed for 
recordation. The Clerk of the Court or other appropriate official shall 
cancel all liens as requested by the foreclosure commissioner.


Sec. 29.119  Redemption rights.

    Only for purposes of redemption rights under the Act, a foreclosure 
shall be considered completed upon the date and at the time of the 
foreclosure sale.


Sec. 29.121  Record of foreclosure and sale.

    The statements regarding the foreclosed mortgage required to 
establish a sufficient record shall include the date the mortgage was 
recorded. The statements regarding the service of the Notice of Default 
and Foreclosure Sale shall include the names and addresses of the 
persons to whom the Notice was mailed and the date on which the Notice 
was mailed, the name of the newspaper in which the Notice was published 
and the dates of publication, and the date on which service by posting, 
if required, was accomplished.


Sec. 29.123  Deficiency judgment.

    If the price at which the security property is sold at the 
foreclosure sale is less than the unpaid balance of the debt secured by 
such property after disposition of sale proceeds in accordance with the 
order of priority provided under the Act, the Secretary may refer the 
matter to the Attorney General who may commence an action or actions 
against any and all debtors to recover the deficiency, unless such an 
action is specifically prohibited by the mortgage.

    Dated: October 20, 1995.
Henry G. Cisneros,
Secretary.
[The following appendix to part 29 will not be codified in title 24 
of the Code of Federal Regulations.]

Appendix to Part 29: Nonjudicial Foreclosure of Single Family 
Mortgages--Guide

Item

1. Purpose.
2. Scope and applicability.
3. Definitions.
4. Designation of foreclosure commissioner.
5. Prerequisites to foreclosure.
6. Commencement of foreclosure.
7. Notice of default and foreclosure sale.
8. Service of notice of default and foreclosure sale.
9. Presale reinstatement.
10. Conduct of sale.
11. Adjournment or cancellation of sale.
12. Validity of sale.
13. Foreclosure costs.
14. Disposition of sale proceeds.
15. Transfer of title and possession.
16. Redemption rights.
17. Record of foreclosure and sale.
18. Effect of sale.
19. Computation of time.
20. Deficiency judgment.

1. Purpose

    The purpose of this guide is to present, in a single document, 
the statutory and regulatory requirements of the Single Family 
Mortgage Foreclosure Act of 1994 (the Act), 12 U.S.C. 3751-3768. 
Although it presents the regulatory and statutory requirements in a 
combined format, this guide is a secondary source for these 
requirements. The Code of Federal Regulations (CFR), at 24 CFR part 
29, is the primary, governing source for regulatory requirements, 
and the Act is the primary, governing source for statutory 
requirements.
    The Act creates a uniform Federal remedy for foreclosure of 
certain single family mortgages 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 substitute commissioners, and to 
fix the compensation of commissioners have been delegated to the HUD 
General Counsel.
    The availability of uniform and more expeditious procedures, 
with no right of redemption in the mortgagor or others, for the 
foreclosure of these mortgages by the Department, will ameliorate 
the negative consequences of the disparate State laws under which 
mortgages covering one- to four-family residential properties are 
foreclosed on behalf of HUD. The long periods of time that are 
required under State law to complete foreclosure of such mortgages 
lead to deterioration in the condition of the properties involved, 
necessitate substantial Federal holding expenditures, increase the 
risk of vandalism, fire loss, depreciation, damage, and waste with 
respect to the properties, and adversely affect the neighborhoods in 
which the properties are located. These consequences seriously 
impair the ability of HUD to protect Federal financial interests in 
the properties and frustrate attaining the objectives of the 
underlying Federal program authority. Use of this nonjudicial 
foreclosure procedure will also reduce unnecessary litigation, which 
contributes to already overcrowded court calendars, by removing many 
foreclosures from the courts.

2. Scope and Applicability

    (a) Scope. Under the Act, HUD may foreclose on any defaulted 
single family mortgage (as defined in section 3 of this appendix), 
encumbering real estate in any State regardless of when the mortgage 
was executed.
    (b) Applicability. HUD, at its discretion, may use other 
procedures to foreclose defaulted single family mortgages, including 
judicial foreclosure in State or Federal Court, and nonjudicial 
foreclosures under State law or any other Federal law.

3. Definitions

    As used in this guide--
    Act means the Single Family Mortgage Foreclosure Act of 1994.
    Bona fide purchaser means a purchaser for value in good faith 
and without notice of any adverse claim, and who acquires the 
security property free of any adverse claim.
    County means a political subdivision of a State or Territory of 
the United States, created to aid in the administration of state law 
for the purpose of local self-government, and includes a parish or 
any other equivalent subdivision.
    Mortgage means a deed of trust, mortgage, deed to secure debt, 
security agreement, or any other form of instrument under which any 
property (real or mixed real and personal), or any interest in 
property 

[[Page 57492]]
(including leaseholds, reversionary interests, and any other estates 
under applicable State law), is conveyed in trust, mortgaged, 
encumbered, pledged, or otherwise rendered subject to a lien for the 
purpose of securing the payment of money or the performance of an 
obligation.
    Mortgage agreement means the note or debt instrument and the 
mortgage instrument, deed of trust instrument, trust deed, or any 
other similar instrument or instruments creating the security 
interest in the real estate for the repayment of the note or debt 
instrument, including any instrument incorporated by reference 
therein and any instrument or agreement amending or modifying any of 
the foregoing.
    Mortgagor means the debtor, obligor, grantor, or trustor named 
in the mortgage agreement and, unless the context otherwise 
indicates, includes the current owner of record of the security 
property whether or not such owner is personally liable on the 
mortgage debt.
    Owner means any person who has an ownership interest in the 
property and includes heirs, devisees, executors, administrators, 
and other personal representatives, and trustees of testamentary 
trusts if the owner of record is deceased.
    Person includes any individual, group of individuals, 
association, partnership, corporation, or organization.
    Record; Recorded means to enter or entered in public land record 
systems established under State statutes for the purpose of 
imparting constructive notice to purchasers of real property for 
value and without actual knowledge, and includes ``register'' and 
``registered'' in the instance of registered land, and ``file'' and 
its variants in the context of entering documents in public land 
records.
    Secretary means the Secretary of Housing and Urban Development, 
acting by and through any authorized designee exclusive of the 
foreclosure commissioner.
    Security property means the property (real or mixed real and 
personal) or an interest in property (including leaseholds, life 
estates, reversionary interests, and any other estates under 
applicable law), together with fixtures and other interests subject 
to the lien of the mortgage under applicable law.
    Single family mortgage means a mortgage that covers property on 
which there is located a 1- to 4-family residence, and that:
    (1) Is held by the Secretary pursuant to title I or title II of 
the National Housing Act (12 U.S.C. 1701 et seq.); or
    (2) Secures a loan obligated by the Secretary under section 312 
of the Housing Act of 1964 as it existed before the repeal of that 
section by section 289 of the Cranston-Gonzalez National Affordable 
Housing Act. A mortgage securing such a loan that covers property 
containing nonresidential space and a 1- to 4-family dwelling is not 
subject to foreclosure under the Act.
    State means:
    (1) The several States;
    (2) The District of Columbia;
    (3) The Commonwealth of Puerto Rico;
    (4) The United States Virgin Islands;
    (5) Guam;
    (6) American Samoa;
    (7) The Northern Mariana Islands; and
    (8) Indian tribes, meaning any Tribe, band, group or nation, 
including Alaskan Indians, Aleuts, and Eskimos, and any Alaskan 
Native Village of the United States that is considered an eligible 
recipient under Title I of the Indian Self-Determination and 
Education Assistance Act (25 U.S.C. 450) or was considered an 
eligible recipient under the State and Local Fiscal Assistance Act 
of 1972 (31 U.S.C. 1221) before repeal of that Act. Eligible 
recipients under the Indian Self-Determination and Education 
Assistance Act are determined by the Bureau of Indian Affairs.

4. Designation of Foreclosure Commissioner

    (a) The Secretary may designate a person or persons to serve as 
a foreclosure commissioner for the purpose of foreclosing single 
family mortgages, and such a foreclosure commissioner has a 
nonjudicial power of sale as provided under the Act.
    (b) The foreclosure commissioner, if a natural person, must be a 
resident of the State in which the security property is located and, 
if not a natural person, the foreclosure commissioner must be duly 
authorized to transact business under laws of the State in which the 
security property is located. No person shall be designated as a 
foreclosure commissioner unless that person is determined by the 
Secretary to be responsible, financially sound, and competent to 
conduct a foreclosure. The method of selection and determination of 
the qualifications of the foreclosure commissioner are at the 
discretion of the Secretary, and the execution of a designation 
pursuant to the Act is conclusive evidence that the commissioner 
selected has been determined to be qualified by the Secretary.
    (c) The Secretary designates a foreclosure commissioner by 
executing a written designation stating the name and business or 
residential address of the commissioner, except that if a person is 
designated in his or her capacity as an official or employee of a 
government or corporate entity, such a person may be designated by 
his or her unique title or position instead of by name. The 
designation is effective upon execution.
    (d) The Secretary may designate, with or without cause, a 
substitute foreclosure commissioner to replace a previously 
designated foreclosure commissioner, by the procedure contained in 
paragraph (c) of this item.
    (1) A substitution of the foreclosure commissioner may be made 
at any time prior to the time of the foreclosure sale, and the 
foreclosure shall continue without prejudice, unless the substitute 
commissioner, in that commissioner's sole discretion, finds that 
continuation of the foreclosure sale will unfairly affect the 
interests of the mortgagor. Any such finding must be in writing. If 
the substitute commissioner makes such a finding, the substitute 
commissioner will cancel the foreclosure sale, or adjourn the sale 
as explained in item 11 of this appendix.
    (2) If a substitute commissioner is designated, a copy of the 
written notice of the designation referred to in paragraph (c) of 
this item must be served:
    (i) By mail, as described in item 8 of this appendix, (except 
that the minimum time periods between mailing and the date of the 
foreclosure sale do 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.

5. Prerequisites to Foreclosure

    (a) The Secretary may commence foreclosure of a single family 
mortgage under the Act upon the breach of a covenant or condition in 
the mortgage agreement.
    (b) No foreclosure under the Act may be commenced unless any 
previously pending judicial or nonjudicial proceeding that has been 
separately instituted by the Secretary to foreclose the mortgage in 
a manner other than under the Act has been withdrawn, dismissed, or 
otherwise terminated.
    (c) The Secretary will not institute any separate foreclosure 
proceeding concerning a property while it is the subject of a 
foreclosure pursuant to the Act.
    (d) The Act does not preclude the Secretary from enforcing any 
right, other than foreclosure, under applicable Federal or State 
law, including any right to obtain a monetary judgment, or 
foreclosing under the Act if the Secretary has obtained or is 
seeking any other remedy available pursuant to Federal or State law, 
or under the mortgage agreement.

6. Commencement of Foreclosure

    If the Secretary determines that the prerequisites to 
foreclosure set forth in item 5 of this appendix are satisfied, the 
Secretary may direct the foreclosure commissioner to commence 
foreclosure of the mortgage. Upon such request, the foreclosure 
commissioner will commence foreclosure of the mortgage in accordance 
with item 7 of this appendix.

7. Notice of Default and Foreclosure Sale

    The commissioner commences the foreclosure by serving a Notice 
of Default and Foreclosure Sale. The Notice sets forth the name, 
address and telephone number of the foreclosure commissioner and the 
date on which the Notice was issued, along with the following 
information:
    (a) The current mortgagee (that is, the Secretary), the original 
mortgagee (if other than the Secretary), and the original mortgagor.
    (b) 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 date the mortgage was 
recorded, the office in which the mortgage is recorded, and the 
liber and folio numbers or other appropriate description of the 
location of recordation of the mortgage.
    (d) Identification of the failure to make payment, including the 
entire amount delinquent as of a date specified, a statement 
generally describing the other costs that must be paid if the 
mortgage is to be reinstated, the due date of the earliest principal 
installment payment remaining wholly unpaid as of the date on which 
the Notice is issued upon which the foreclosure is based, or a 
description of any other default or defaults upon which foreclosure 
is based, and the acceleration of the secured indebtedness.

[[Page 57493]]

    (e) The date, time, and location of the foreclosure sale.
    (f) A statement that the foreclosure is being conducted in 
accordance with the Act.
    (g) A description of the types of costs, if any, to be paid by 
the purchaser upon transfer of title.
    (h) The bidding and payment requirements for the foreclosure 
sale, including the amount and method of deposit to be required at 
the foreclosure sale, and the time and method of payment of the 
balance of the foreclosure purchase price. The Notice must state 
that all deposits and the balance of the purchase price must be paid 
by certified or cashier's check. The Notice must also state that no 
deposit will be required of the Secretary when the Secretary bids at 
the foreclosure sale.
    (i) Any other appropriate terms of sale or information as the 
Secretary may determine.

8. Service of Notice of Default and Foreclosure Sale

    The foreclosure commissioner will serve the Notice of Default 
and Foreclosure Sale upon the following persons and in the following 
manner, and no additional notice will be required to be served, 
notwithstanding any notice requirements of any State or local law:
    (a) Filing the notice. The Notice of Default and Foreclosure 
Sale must be filed not less than 21 days before the date of the 
foreclosure sale in the manner authorized for filing a notice of an 
action concerning real property according to the law of the State in 
which the security property is located, or if none, in the manner 
authorized by Section 3201 of title 28, United States Code.
    (b) Notice by mail. (1) The Notice must be sent by certified or 
registered mail, postage prepaid, return receipt requested, to the 
following (except that multiple mailings are not required to be sent 
to any party with multiple capacities, e.g., an original mortgagor 
who is the security property owner and lives in one of the units):
    (i) The current security property owner of record, as the record 
existed 45 days before the date originally set for the foreclosure 
sale, whether or not the notice describes a sale adjourned as 
provided in the Act. The Notice must be mailed not less than 21 days 
before the date of the foreclosure sale to the current owner at the 
last address known to the Secretary or the foreclosure commissioner 
or, if none, to address of the security property, or, at the 
discretion of the foreclosure commissioner, to any other address 
believed to be that of the current owner.
    (ii) The original mortgagor and all subsequent mortgagors of 
record or other persons who appear on the basis of the record to be 
liable for part or all of the mortgage debt, as the record existed 
45 days before the date originally set for the foreclosure sale, 
whether or not the Notice describes a sale adjourned as provided in 
the Act, except that the Notice need not be mailed to any mortgagors 
who have been released from all obligations under the mortgage. 
Notice under paragraph (b) of this item must be mailed not less than 
21 days before the date of the foreclosure sale to the last known 
address of the mortgagors or, if none, to the address of the 
security property, or, at the discretion of the foreclosure 
commissioner, to any other address believed to be that of such 
mortgagors.
    (iii) All dwelling units in the security property, whether or 
not the Notice describes a sale adjourned as provided in this part. 
Notice under paragraph (b) of this item shall be mailed not less 
than 21 days before the date of the foreclosure sale. If the names 
of the occupants of the security property are not known to the 
Secretary, or if the security property has more than one dwelling, 
the Notice must be posted at the security property not less than 21 
days before the foreclosure sale.
    (iv) All persons holding liens of record upon the security 
property, as the record existed 45 days before the date originally 
set for the foreclosure sale, whether or not the notice describes a 
sale adjourned as provided in the Act. Notice under this paragraph 
(b) of this item must be mailed not less than 21 days before the 
date of the foreclosure sale to each such lienholder's address of 
record, or, at the discretion of the foreclosure commissioner, to 
any other address believed to be that of such lienholder.
    (2) Notice by mail is deemed duly given upon mailing, whether or 
not received by the addressee and whether or not a return receipt is 
received or the notice is returned. The date of the receipt for the 
postage paid for the mailing may serve as proof of the date of 
mailing of the notice.
    (c) Publication. (1) A copy of the Notice of Default and 
Foreclosure Sale must be published once a week during three 
successive calendar weeks before the date of the foreclosure sale. 
Such publication must be in a newspaper or newspapers having general 
circulation in the county or counties in which the security property 
being sold is located. A legal newspaper that is accepted as a 
newspaper of legal record in the county or counties in which the 
security property being sold is located is a newspaper having 
general circulation for the purposes of this paragraph.
    (2) If there is no newspaper of general circulation published at 
least weekly in the county or counties in which the security 
property being sold is located, copies of the Notice of Default and 
Foreclosure Sale must be posted, not less than 21 days before the 
date of the foreclosure sale, at the courthouse of any county or 
counties in which the security property is located and at the place 
where the sale is to be held.

9. Presale Reinstatement

    (a) Except as provided in paragraph (d) of item 4 of this 
appendix, paragraph (b) of this item, and item 11 of this appendix, 
the foreclosure commissioner will withdraw the security property 
from foreclosure and cancel the foreclosure sale only if:
    (1) The Secretary directs the foreclosure commissioner to do so 
before or at the time of the sale; or
    (2) The foreclosure commissioner finds, upon application of the 
mortgagor not less than three business days before the date of the 
sale, that the default or defaults upon which the foreclosure is 
based did not exist at the time of service of the Notice of Default 
and Foreclosure Sale; or
    (3) In the case of a foreclosure involving a monetary default, 
there is tendered to the foreclosure commissioner before public 
auction is completed all amounts that would be due under the 
mortgage agreement if payments under the mortgage had not been 
accelerated, all costs of foreclosure incurred for which payment 
from the proceeds of foreclosure is provided in item 13 of this 
appendix, and the foreclosure commissioner finds that there are no 
nonmonetary defaults; provided, however, that the Secretary may 
refuse to cancel a foreclosure sale pursuant to this subparagraph if 
the current mortgagor or owner of record has, on one or more 
previous occasions, caused a foreclosure of the mortgage, commenced 
pursuant to the Act or otherwise, to be canceled by curing a 
default; or
    (4) In the case of a foreclosure involving a nonmonetary 
default:
    (i) The foreclosure commissioner, upon application of the 
mortgagor before the date of foreclosure sale, finds that all 
nonmonetary defaults are cured and that there are no monetary 
defaults; and
    (ii) There is tendered to the foreclosure commissioner before 
public auction is completed all amounts due under the mortgage 
agreement (excluding all amounts which would be due under the 
mortgage agreement if the mortgage payments had been accelerated), 
including all amounts of expenditures secured by the mortgage and 
all costs of foreclosure incurred for which payment would be made 
from the proceeds of foreclosure.
    (b) Before withdrawing the security property from foreclosure 
under paragraphs (a)(2), (a)(3), or (a)(4) of this item, the 
foreclosure commissioner must notify the Secretary of the proposed 
withdrawal by telephone or other telecommunication device and must 
also provide the Secretary with a written statement of the reasons 
for the proposed withdrawal along with all documents submitted by 
the mortgagor in support of the proposed withdrawal. Upon receipt of 
this statement, the Secretary has ten (10) days in which to 
demonstrate why the security property should not be withdrawn from 
foreclosure, and if the Secretary makes this demonstration, the 
property will not be withdrawn from foreclosure. The Secretary will 
provide the mortgagor with a copy of any statement prepared by the 
Secretary in opposition to the proposed withdrawal at the same time 
the statement is submitted to the foreclosure commissioner. If the 
Secretary receives the foreclosure commissioner's written statement 
less than 10 days before the scheduled foreclosure sale, the sale 
will automatically be adjourned for 14 days, during which time it 
may also be canceled. Under these circumstances, notice of the 
rescheduled sale, if any, will be served as described in item 11(c) 
of this appendix.
    (c) If the foreclosure commissioner cancels the foreclosure, the 
mortgage will continue in effect as though acceleration had not 
occurred.
    (d) Cancellation of a foreclosure sale will have no effect on 
the commencement of a subsequent foreclosure proceeding.
    (e) The foreclosure commissioner must file a notice of 
cancellation in the same place and 

[[Page 57494]]
manner provided for filing the Notice of Default and Foreclosure Sale 
as provided in item 8 of this appendix.

10. Conduct of Sale

    (a) The foreclosure sale will be conducted in a manner and at a 
time and place as identified in the Notice of Foreclosure and Sale 
and more fully described in this item. The sale will be scheduled 
for a date 30 or more days after the due date of the earliest unpaid 
installment as described in item 7(d) of this appendix, or the 
earliest occurrence of a nonmentary default. The sale will be held 
at public auction and must be scheduled to being 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 in located, or at a courthouse therein, or at or on the 
property to be sold. If the security property is situated in two 
counties, the sale may be held in any one of the counties in which 
any part of the security property is situated.
    (b) The foreclosure commissioner will conduct the foreclosure 
sale in a manner that is fair to both the mortgagor and the 
Secretary (see item 12 of this appendix), and consistent with the 
provisions of the Act.
    (c) The foreclosure commissioner will 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 must attend the sale.
    (d) In addition to bids made in person at the sale, the 
foreclosure commissioner will accept written one-price sealed bids 
from any party, including the Secretary, for entry by announcement 
at the sale so long as those bids conform to the requirements 
described in the Notice of Default and Foreclosure Sale. The 
foreclosure commissioner will announce the name of each bidder and 
the amount of the bid. The commissioner will accept oral bids from 
any party, including parties who submitted one-price sealed bids, if 
those oral bids conform to the requirements in the Notice of Default 
and Foreclosure Sale. Before the close of the sale, the commissioner 
will announce the amount of the high bid and the name of the 
successful bidder.
    (e) Notwithstanding the provisions of paragraph (d) of this 
item, neither the foreclosure commissioner nor any relative, related 
business entity, or employee is permitted to bid in any manner on 
the security property subject to the foreclosure sale, except that 
the foreclosure commissioner or an auctioneer may be directed by the 
Secretary to enter a bid on the Secretary's behalf. Relatives of the 
foreclosure commissioner who may not bid include parents, siblings, 
spouses and children. A related business entity that may not bid or 
whose employees may not bid is one whose relationship (at the time 
the foreclosure commissioner is designated and during the term of 
service as foreclosure commissioner) with the entity of the 
foreclosure commissioner is such that, directly or indirectly, one 
entity formulates, directs, or controls the other entity; or has the 
power to formulate, direct, or control the other entity; or has the 
responsibility and authority to prevent, or promptly to correct, the 
offensive conduct of the other entity.
    (f) The commissioner may serve as an auctioneer, or the 
commissioner may employ an auctioneer to conduct the sale. If the 
commissioner employs an auctioneer to conduct the foreclosure sale, 
the auctioneer must be a licensed auctioneer, an officer of State or 
local government, or any other person who commonly conducts 
foreclosure sales in the area in which the security property is 
located. The commissioner will compensate an auctioneer from the 
proceeds of the commission described in item 13(e) of this appendix.
    (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 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, will be liable to the 
Secretary for any costs incurred as a result of such failure. If the 
successful bidder fails to comply with the terms of the sale, the 
HUD Field Office representative will provide instructions to the 
commissioner about offering the property to the second highest 
bidder, or having a new sale, or other instruction at the discretion 
of the HUD representative.

11. Adjournment or Cancellation of Sale

    (a) The foreclosure commissioner may, before or at the time of 
the foreclosure sale, adjourn or cancel the foreclosure sale if the 
foreclosure commissioner determines, in the foreclosure 
commissioner's discretion, that:
    (1) Circumstances are not conducive to a sale which is fair to 
the mortgagor and the Secretary, or
    (2) Additional time is necessary to determine whether the 
security property should be withdrawn from foreclosure, as provided 
in item 9 of this appendix.
    (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 item, the 
foreclosure commissioner may adjourn a foreclosure sale for not less 
than 9 and not more than 31 days, in which case the foreclosure 
commissioner must serve a Notice of Default and Foreclosure Sale 
that is revised to state that the foreclosure sale has been 
adjourned to a specified date between the hours of 9:00 a.m. and 
4:00 p.m. The revised Notice may include any other information the 
foreclosure commissioner deems appropriate. Such Notice must be 
served by publication and mailing as provided in item 8 of this 
appendix, except that publication may be made on any of three 
consecutive days prior to the revised date of foreclosure sale, as 
long as the first publication is made at least seven days before the 
revised sale date. Mailing may be made at any time at least seven 
days before the date to which the foreclosure sale has been 
adjourned. The commissioner must also, in the case of a sale 
adjourned to a later date, mail a copy of the revised Notice of 
Default and Foreclosure Sale to the Secretary at least seven days 
before the date to which the sale has been adjourned.

12. Validity of Sale

    Any foreclosure sale held in accordance with the Act and its 
regulations is conclusively presumed to have been conducted in a 
fair, legal, and reasonable manner. The sale price is conclusively 
presumed to be reasonable and equal to the fair market value of the 
property.

13. Foreclosure Costs

    The following foreclosure costs are paid from the sale proceeds, 
or from other available sources if sales proceeds are insufficient, 
before satisfaction of any other claim to the sale proceeds:
    (a) Advertising costs and postage expenses incurred in giving 
notice described in items 8 and 11 of this appendix.
    (b) Mileage by the most reasonable road distance for posting 
notices described in item 8 of this appendix, and for the 
foreclosure commissioner's or auctioneer's attendance at the sale. 
The mileage is paid at the rate provided in 28 U.S.C. 1821.
    (c) Reasonable and customary costs incurred for title and lien 
record searches.
    (d) The necessary out-of-pocket costs incurred by the 
foreclosure commissioner for recording documents.
    (e) A commission for the foreclosure commissioner (if the 
foreclosure commissioner is not an employee of the United States) 
for the conduct of the foreclosure in an amount to be determined by 
the Secretary. A commission may be allowed to the foreclosure 
commissioner notwithstanding termination of the sale or appointment 
of a substitute commissioner before the sale takes place.

14. Disposition of Sale Proceeds

    (a) The proceeds of the foreclosure sale are paid out in the 
following order:
    (1) To cover the costs of foreclosure described in item 13 of 
this appendix.
    (2) To pay valid tax liens or assessments on the security 
property as provided in the Notice of Default and Foreclosure Sale.
    (3) To pay any liens recorded before the recording of the 
foreclosed mortgage which are required to be paid in conformity with 
the Notice of Default and Foreclosure Sale.
    (4) To pay service charges and advances for taxes, assessments, 
and property insurance premiums which were made under the terms of 
the foreclosed mortgage.
    (5) To pay the interest due under the mortgage debt.
    (6) To pay the unpaid principal balance secured by the mortgage 
(including expenditures for the necessary protection, preservation, 
and repair of the security property as authorized under the mortgage 
agreement and interest thereon if provided in the mortgage 
agreement).
    (7) To pay any late charges or fees.
    (b) Any surplus proceeds from a foreclosure sale will be 
applied, after 

[[Page 57495]]
payment of the items described in paragraph (a) of this item, in the 
order as follows:
    (1) To pay any liens recorded after the foreclosed mortgage in 
the order of priority under the law of the State in which the 
security property is located.
    (2) To pay the surplus to the mortgagor.
    (c) If the person to whom surplus proceeds are to be paid cannot 
be located, or if the surplus available is insufficient to pay all 
claimants and the claimants cannot agree on the allocation of the 
surplus, or if any person claiming an interest in the mortgage 
proceeds disagrees with the foreclosure commissioner's proposed 
disposition of the disputed proceeds, the foreclosure commissioner 
may deposit the disputed funds with a legally authorized official or 
court. If a procedure for the deposit of disputed funds is not 
available, and the foreclosure commissioner files a bill of 
interpleader or is sued as a stakeholder to determine entitlement to 
such funds, the foreclosure commissioner's necessary costs in taking 
or defending such action are deductible from the disputed funds.
    (d) The foreclosure commissioner will keep such records as will 
permit the Secretary to verify the costs claimed, and otherwise to 
enable the Secretary to audit the foreclosure commissioner's 
disposition of the sale proceeds.

15. Transfer of Title and Possession

    (a) If the Secretary is the successful bidder, the foreclosure 
commissioner will issue a deed to the Secretary upon receipt of the 
amount needed to pay the costs of tax liens and prior liens. See 
items 14(a)(2) and (a)(3) of this appendix.
    (b) If the Secretary is not the successful bidder, the 
foreclosure commissioner will issue a deed to the purchaser or 
purchasers upon receipt of the entire purchase price in accordance 
with the terms of the sale as provided in the Notice of Default and 
Foreclosure Sale.
    (c) The deed or deeds issued by the foreclosure commissioner 
shall be without warranty or covenants to the purchaser or 
purchasers. Notwithstanding any State law to the contrary, delivery 
of a deed by the foreclosure commissioner is a conveyance of the 
property and constitutes passage of good and marketable title to the 
mortgaged property. No judicial proceedings are required ancillary 
or supplementary to the procedures provided under the Act and its 
regulations to assure the validity of the conveyance or confirmation 
of such conveyance. The purchaser of property under the Act is 
presumed to be a bona fide purchaser.
    (d) A purchaser at a foreclosure sale held pursuant to the Act 
is entitled to possession upon passage of title under paragraph (c) 
of this item, subject to any interest or interests that are not 
barred, as described in item 18, below. Any person remaining in 
possession of the property after the passage of title is deemed a 
tenant at sufferance subject to eviction under applicable law.
    (e) If a purchaser dies before execution and delivery of the 
deed conveying the property to the purchaser, the foreclosure 
commissioner will execute and deliver the deed to a legal 
representative of the decedent purchaser's estate upon payment of 
the purchase price in accordance with the terms of sale. Such 
delivery to the representative of the purchaser's estate will have 
the same effect as if accomplished during the lifetime of the 
purchaser.
    (f) When the foreclosure commissioner conveys the property to 
the Secretary, no tax may be imposed or collected with respect to 
the foreclosure commissioner's deed, including any tax customarily 
imposed upon the deed instrument or upon the conveyance or transfer 
of title to the property.
    (g) The register of deeds or other appropriate official in the 
county where the property is located must, upon tendering of the 
customary recording fees, accept all instruments pertaining to the 
foreclosure which are submitted by the foreclosure commissioner for 
recordation. The instruments to be accepted include, but are not 
limited to, the foreclosure commissioner's deed. If the foreclosure 
commissioner elects to include the recitations described in item 
17(a) of this appendix, in an affidavit or an addendum to the deed 
as described in item 17(b) of this appendix, the affidavit or 
addendum must be accepted for recordation. Failure to collect or pay 
a tax as described in paragraph (f) of this item are not grounds for 
refusing to record such instruments, for failing to recognize such 
recordation as imparting notice, or for denying the enforcement of 
such instruments and their provisions in any State or Federal Court.
    (h) The Clerk of the Court or other appropriate official must 
cancel all liens as requested by the foreclosure commissioner.

16. Redemption Rights

    (a) There is no right of redemption, or right of possession 
based upon a right of redemption, in the mortgagor or others 
subsequent to a foreclosure completed pursuant to the Act. In regard 
to the pre-emption of State laws regarding rights of redemption, a 
foreclosure is considered completed upon the date and at the time of 
the foreclosure sale.
    (b) Section 204(l) of the National Housing Act, 42 U.S.C. 
1710(l), and section 701 of the Department of Housing and Urban 
Development Reform Act of 1989, 42 U.S.C. 1452c, do not apply to 
mortgages foreclosed under the Act.

17. Record of Foreclosure and Sale

    (a) The foreclosure commissioner must include in the recitals of 
the deed to the purchaser, or in an affidavit or addendum to the 
deed, the following items:
    (1) The date, time, and place of the foreclosure sale.
    (2) A statement that the foreclosed mortgage was held by the 
Secretary.
    (3) The date of the foreclosed mortgage, the date of the 
recording of the mortgage that was foreclosed, the office in which 
the mortgage was recorded, and the liber and folio numbers or other 
appropriate description of the recordation of the mortgage.
    (4) The details of the service of the Notice of Default and 
Foreclosure Sale, including the names and addresses of the persons 
to whom the Notice was mailed and the date on which the Notice was 
mailed, the name of the newspaper in which the Notice was published 
and the dates of publication, and the date on which service by 
posting, if required, was accomplished.
    (5) The date and place of filing the Notice of Default and 
Foreclosure Sale.
    (6) A statement that the foreclosure was conducted in accordance 
with the provisions of the Act 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 item in the deed or in 
an affidavit or addendum to the deed, either of which is to be 
recorded with the deed as provided in the Act.
    (c) The items set forth in paragraph (a) of this item are prima 
facie evidence of the truth of such facts in any Federal or State 
court and evidence a conclusive presumption in favor of bona fide 
purchasers and encumbrancers for value without notice. Encumbrancers 
for value include liens placed by lenders who provide the purchaser 
with purchase money in exchange for a security interest in the 
newly-conveyed property.

18. Effect of Sale

    A sale made and conducted as prescribed in the Act to a bona 
fide purchaser bars all claims upon, or with respect to, the 
property sold for the following persons:
    (a) Any person to whom the Notice of Default and Foreclosure 
Sale was mailed as provided under the Act, and the heir, devisee, 
executor, administrator, successor or assignee claiming under any 
such person.
    (b) Any person claiming any interest in the property subordinate 
to that of the mortgage if such person had actual knowledge of the 
foreclosure sale.
    (c) Any person claiming any interest in the property whose 
assignment, mortgage, or other conveyance was not duly recorded or 
filed in the proper place for recording or filing, or whose judgment 
or decree was not duly docketed or filed in the proper place for 
docketing or filing, before the date on which the notice of the 
foreclosure sale was first served by publication, as described in 
item 8(c) of this appendix, and the executor, administrator, or 
assignee of such a person.
    (d) Any person claiming an interest in the property under a 
statutory lien or encumbrance created subsequent to the recording or 
filing of the mortgage being foreclosed, and attaching to the title 
or interest of any person designated in any of the foregoing 
paragraphs.

19. Computation of Time

    Periods of time provided for in the Act are calculated in 
consecutive calendar days including the day or days on which the 
actions or events occur, or are to occur. Any such period of time 
includes the day on which an event occurs or is to occur.

20. Deficiency Judgment

    If the price at which the security property is sold at the 
foreclosure sale is less than the unpaid balance of the debt secured 
by such 

[[Page 57496]]
property after deducting payments in the order described in item 14 of 
this appendix, the Secretary may refer the matter to the Attorney 
General who may commence an action or actions against any and all 
debtors to recover the deficiency, the only limitation on such 
action being a prohibition against pursuit of a deficiency that is 
specifically set forth in the mortgage.

[FR Doc. 95-28129 Filed 11-14-95; 8:45 am]
BILLING CODE 4210-32-M