[Federal Register Volume 61, Number 63 (Monday, April 1, 1996)]
[Rules and Regulations]
[Pages 14396-14407]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-7488]



      

[[Page 14395]]

_______________________________________________________________________

Part V





Department of Housing and Urban Development





_______________________________________________________________________



24 CFR Part 200, et al.



Streamlining of the FHA Single Family Housing, and Multifamily Housing 
and Health Care Facility Mortgage Insurance Programs Regulations; Final 
Rule

  Federal Register / Vol. 61, No. 63 / Monday, April 1, 1996 / Rules 
and Regulations  

[[Page 14396]]


DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Parts 200, 207, 213, 215, 219, 220, 221, 222, 231, 232, 233, 
234, 236, 237, 241, 242, 244, 248, 265, and 267

[Docket No. FR-3966-F-01]
RIN 2502-AG58


Office of the Assistant Secretary for Housing--Federal Housing 
Commissioner; Streamlining of the FHA Single Family Housing, and 
Multifamily Housing and Health Care Facility Mortgage Insurance 
Programs Regulations

AGENCY: Office of the Assistant Secretary for Housing, HUD.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: This final rule amends HUD's regulations for certain of the 
FHA Single Family Housing, Multifamily Housing, and Health Care 
Facility Mortgage Insurance Programs. In an effort to comply with the 
President's regulatory reform initiatives, this rule will streamline 
certain Single Family Housing, and Multifamily Mortgage Insurance 
Program regulations by eliminating regulatory provisions that are 
redundant of statutes, are obsolete, or are otherwise unnecessary.

EFFECTIVE DATE: May 1, 1996.

FOR FURTHER INFORMATION CONTACT: Eliot Horowitz, Office of Housing, 
Development of Housing and Urban Development, Room 9110, 451 Seventh 
Street SW., Washington, DC 20410, telephone number (202) 708-0579 (this 
not a toll-free number). A telecommunications device for hearing- and 
speech-impaired persons (TTY) is available at 1-800-877-8339 (Federal 
Information Relay Service).

SUPPLEMENTARY INFORMATION: On March 4, 1995, President Clinton issued a 
memorandum to all Federal departments and agencies regarding regulatory 
reinvention. In response to this memorandum, HUD conducted a page-by-
page review of its regulations to determine which regulations could be 
eliminated, consolidated, or otherwise improved. HUD has determined 
that the regulations for certain of the FHA programs can be improved 
and streamlined by eliminating obsolete and unnecessary provisions, and 
by consolidating provisions that are repeated throughout several of the 
FHA program regulations.
    Several provisions in the regulations repeat statutory language 
from the National Housing Act, as amended. It is unnecessary to 
maintain statutory requirements in the Code of Federal Regulations 
(CFR), since those requirements are otherwise fully binding. 
Furthermore, if regulations merely repeat statutory language, HUD must 
amend the regulations whenever Congress amends the statute. Therefore, 
this final rule will remove repetitious statutory language and replace 
it with a citation to the specific statutory section for easy 
reference.
    Several other provisions in the regulations apply to more than one 
program, and therefore HUD repeated these provisions in different 
subparts. This repetition is unnecessary, and updating these scattered 
provisions is cumbersome and often creates confusion. Therefore, this 
final rule will consolidate these duplicative provisions, maintaining 
appropriate cross-references for the reader's convenience.
    Some provisions in the regulations are now obsolete and these will 
be removed.
    Lastly, some provisions in the regulations are not regulatory 
requirements. For example, several sections in the regulations contain 
nonbinding guidance or explanations. While this information is very 
helpful to recipients, HUD will more appropriately provide this 
information through handbook guidance or other materials rather than 
maintain it in the CFR.
    Specifically, the following changes are made by this rulemaking:
    Part 200, Subpart A. Part 200 is amended to include a new subpart A 
that will consolidate those requirements that are common to all of 
HUD's Multifamily and Hospital Mortgage Insurance Programs.
    Part 200, Regulatory Provisions Concerning Multifamily Processing 
Fees. Certain provisions pertaining to multifamily processing fees, 
Sec. 200.40 (HUD fees) and Sec. 200.45 (Processing of applications), 
are set forth in a final rule published elsewhere in today's Federal 
Register.
    Part 200, Subpart E. Part 200 is also amended to make the following 
changes to subpart E.
    Sections 200.140-200.152 concerning underwriting requirements are 
not needed in this general part, except for Sec. 200.145(c)(1). The 
provisions being removed are either obsolete or better addressed in 
program-specific regulations. Section 200.145(c)(1) is retained in 
modified form. Section 200.145 provides that HUD's underwriting 
requirement for an appraisal and inspection, including environmental, 
in no way constitutes a guarantee by HUD as to the value or condition 
of the property.
    Section 200.153 pertaining to presentation of claim is revised to 
remove obsolete reference to location of claim application forms and to 
update the reference to what may occasion a claim, since certain types 
of claims are occasioned by events other than the borrower's default.
    Section 200.154 pertaining to notice of default is removed because 
requirements for notifying HUD of a default are more appropriately 
covered in the program-specific parts; for example, see Secs. 203.332 
and 207.256.
    Section 200.155 pertaining to claim requirements is removed because 
there is no one general rule; program-specific parts cover these 
requirements. (See Secs. 203.350 and following of the Single Family 
Mortgage Insurance Program regulations and Secs. 207.258 and 207.259 
for Multifamily Mortgage Insurance Program regulations.)
    Section 200.156 pertaining to settlement of claims is revised to 
remove unnecessary detail and to retain only the appropriate general 
language. In addition, a provision is added to address the infrequent 
claims in negative amounts and to provide that the mortgagee may settle 
a claim in a negative amount by payment of cash or surrender of 
debentures, just as mortgagees may pay mortgage insurance premiums in 
cash or debentures (see Secs. 203.259 and 207.252(f)).
    Sections 200.157-200.162 are retained without revision because they 
contain necessary general information not contained elsewhere.
    Part 200, Subpart K. Part 200 is also amended to remove subpart K. 
Subpart K, which pertains to Correction of Structural Defects, contains 
provisions that are outdated and no longer in use. Subpart K also 
contains non-binding guidance that is more appropriately provided 
through means other than codification in the CFR, which would allow HUD 
to more easily update and keep this information current.
    Part 207 is amended by revising subpart A to remove the existing 
regulatory provisions and to provide for cross-referencing to new 
subpart A in part 200. New subpart A now contains the eligibility 
provisions for HUD's Multifamily and Health Care Facility Mortgage 
Insurance Program. Part 207 is also amended by revising subpart B to 
remove Sec. 207.51 which contains definitions. The definitions are now 
in new subpart A of part 200. Additionally, subpart B of part 207 is 
amended to remove the following sections: Sec. 207.254 (Insurance 
Endorsement), now incorporated in Sec. 200.1; and Secs. 207.260 
(Protection of Mortgage Security), 207.261 (Assignment of Insured

[[Page 14397]]
Mortgages), 207.261a (Actions To Be Taken by Mortgagee), 207.262 (No 
Vested Right in Fund), and 207.270 (Special Reinsurance Provisions), 
all of which are now obsolete or provide non-binding guidance that can 
be provided through more accessible means, such as mortgagee letters.
    Part 213. Part 213, which pertains to Cooperative Housing Mortgage 
Insurance, is amended by revising subpart A to remove the regulatory 
provisions pertaining to eligibility requirements and to provide a 
cross-reference to new subpart A in part 200.
    Part 215. Part 215 which pertains to the Rent Supplement Payments 
Program will be removed. New rent supplement contracts are no longer 
authorized under this program. Reference to the regulations of part 215 
and a savings clause will be included in new Sec. 200.1301 of subpart W 
in part 200. This new section was added by HUD's final rule published 
on September 11, 1995 (60 FR 47260, see 47262). All of the existing 
projects and rent supplement contracts will remain subject to the part 
215 regulations that were in existence immediately prior to the 
effective date of this final rule.
    Part 219. Part 219 which pertains to HUD's Flexible Subsidy Program 
will be removed. HUD's Flexible Subsidy is an expiring program. Funding 
formerly available under the Flexible Subsidy Program is gradually 
being replaced by comprehensive needs assessment funding. The current 
regulations merely repeat the statutory requirements and the guidance 
which is contained in HUD's Handbook applicable to the Flexible Subsidy 
Program. The existing regulatory provisions in part 219 will be removed 
and replaced with a savings clause.
    Part 220. Part 220, which pertains to Mortgage Insurance and 
Insured Improvement Loans for Urban Renewal and Concentrated 
Development Areas, is amended by revising subpart C to remove the 
regulatory provisions pertaining to eligibility requirements and to 
provide a cross-reference to new subpart A in part 200.
    Part 221. Part 221, which pertains to Low Cost and Moderate Income 
Mortgage Insurance, is amended by revising subpart C to remove the 
regulatory provisions pertaining to eligibility requirements for 
multifamily projects and to provide a cross-reference to new subpart A 
in part 200.
    Part 222. Part 222 which pertains to Servicepersons Mortgage 
Insurance Program is an expired program. No more mortgages are insured 
under this program. The part will be removed and a savings clause will 
be retained.
    Part 231. Part 231, which pertains to Housing Mortgage Insurance 
for the Elderly, is amended by revising subpart A to remove the 
regulatory provisions pertaining to eligibility requirements and to 
provide a cross-reference to new subpart A in part 200.
    Part 232. Part 232, which pertains to Mortgage Insurance for 
Nursing Homes, Intermediate Care Facilities and Board and Care Homes, 
is amended by revising subpart A to remove the regulatory provisions 
concerning eligibility requirements and to provide a cross-reference to 
new subpart A in part 200.
    Part 233. Part 233 which pertains to Experimental Housing Mortgage 
Insurance is being amended to remove the outdated cross-references 
provided in certain of the regulatory sections.
    Part 234. Part 234, which pertains to Condominium Ownership 
Mortgage Insurance, is amended by revising subpart C to remove the 
regulatory provisions pertaining to eligibility requirements for 
project blanket mortgages and to provide a cross-reference to new 
subpart A in part 200. In addition, the reservation of Secs. 234.11, 
234.12, and 234.13 is removed.
    Part 236. Part 236, which pertains to Mortgage Insurance and 
Interest Reduction Payments for Rental Projects, is amended by revising 
subpart A to advise that a moratorium against issuance of commitments 
to insure new mortgages under section 236 was imposed January 5, 1973. 
Accordingly, the eligibility requirements in subpart A will be removed 
and replaced by a savings clause.
    Part 237. Part 237 which pertains to Special Mortgage Insurance for 
Low and Moderate Income Families is removed. Reference to the 
regulations of part 237 and a savings clause will be included in new 
Sec. 200.1301 of subpart W in part 200.
    Part 241. Part 241, which pertains to Supplemental Financing for 
Insured Project Mortgages, is amended by revising subpart A to remove 
the regulatory provisions pertaining to eligibility requirements and to 
provide a cross-reference to new subpart A in part 200.
    Part 242. Part 242, which pertains to Mortgage Insurance for 
Hospitals, is amended by revising subpart A to remove the regulatory 
provisions pertaining to eligibility requirements and to provide a 
cross-reference to new subpart A in part 200.
    Part 244. Part 244, which pertains to Mortgage Insurance for Group 
Practice facilities (Title XI), is amended by revising subpart A to 
remove the regulatory provisions pertaining to eligibility requirements 
and to provide a cross-reference to new subpart A in part 200.
    Part 248. Part 248 pertaining to Prepayment of Low Income Housing 
Mortgage is amended by removing Sec. 248.7. This section contains 
waiver authority which authority for all programs is contained in new 
part 5.
    Part 265. Part 265, which pertains to ``Transfer from Nonprofit to 
Profit-Motivated Ownership for Multifamily Housing Projects with HUD-
Insured or HUD-Held Mortgages'' is removed. Part 265 does not involve a 
loan or insurance program. This part merely sets out in the regulation 
administrative guidelines for the transfer of physical assets from a 
nonprofit owner to a for-profit owner. These guidelines, which are not 
regulations, will be made available through means other than the CFR.
    Part 267. Part 267, which pertains to Appraisal and Property 
Valuation, will be removed. The standards and requirements that are 
applicable to HUD insured single family and multifamily properties are 
set forth in contracts or handbooks, and need not be repeated in the 
CFR. However, the nondiscrimination provisions in part 267 which 
pertain to the selection of the appraiser, and the appraisal of the 
property will be retained in Sec. 200.35 of part 200.

Justification for Final Rulemaking

    HUD generally publishes a rule for public comment before issuing a 
rule for effect, in accordance with its own regulations on rulemaking 
in 24 CFR part 10. However, part 10 provides for exceptions to the 
general rule if the agency finds good cause to omit advance notice and 
public participation. The good cause requirement is satisfied when 
prior public procedure is ``impracticable, unnecessary, or contrary to 
the public interest'' (24 CFR 10.1). HUD finds that good cause exists 
to publish this rule for effect without first soliciting public 
comment. This rule merely removes obsolete and unnecessary regulatory 
provisions, and consolidates repetitive requirements, and does not 
establish or affect substantive policy. Therefore, prior public comment 
is unnecessary.

Other Matters

Regulatory Flexibility Act

    The Secretary, in accordance with the Regulatory Flexibility Act (5 
U.S.C. 605(b)), has reviewed and approved this final rule, and in so 
doing certifies that this rule will not have a significant economic 
impact on a substantial number of small entities. This rule merely 
streamlines regulations by

[[Page 14398]]
removing unnecessary provisions. The rule will have no adverse or 
disproportionate economic impact on small businesses.

Environmental Impact

    A Finding of No Significant Impact with respect to the environment 
has been made in accordance with HUD regulations at 24 CFR part 50, 
which implements section 102(2)(C) of the National Environmental Policy 
Act of 1969 (NEPA). This Finding of No Significant Impact is available 
for public inspection between 7:30 a.m. and 5:30 p.m. weekdays in the 
Office of the Rules Docket Clerk, Office of the General Counsel, 
Department of Housing and Urban Development Room 10276, 451 Seventh 
Street, SW, Washington, DC 20410.

Executive Order 12612, Federalism

    The General Counsel, as the Designated Official under section 6(a) 
of Executive Order 12612, Federalism, has determined that this rule 
will not have substantial direct effects on States or their political 
subdivisions, or the relationship between the Federal government and 
the States, or on the distribution of power and responsibilities among 
the various levels of government. No programmatic or policy changes 
will result from this rule that would affect the relationship between 
the Federal Government and State and local governments.

Executive Order 12606, The Family

    The General Counsel, as the Designated Official under Executive 
Order 12606, The Family, has determined that this rule will not have 
the potential for significant impact on family formation, maintenance, 
or general well-being, and thus is not subject to review under the 
Order. No significant change in existing HUD policies or programs will 
result from promulgation of this rule.

List of Subjects

24 CFR Part 200

    Administrative practice and procedure, Claims, Equal employment 
opportunity, Fair housing, Home improvement, Housing standards, 
Incorporation by reference, Lead poisoning, Loan programs--housing and 
community development, Minimum property standards, Mortgage insurance, 
Organization and functions (Government agencies), Penalties, Reporting 
and recordkeeping requirements, Social security, Unemployment 
compensation, Wages.

24 CFR Part 207

    Manufactured homes, Mortgage insurance, Reporting and recordkeeping 
requirements, Solar energy.

24 CFR Part 213

    Cooperatives, Mortgage insurance, Reporting and recordkeeping 
requirements.

24 CFR Part 215

    Grant programs--housing and community development, Rent subsidies, 
Reporting and recordkeeping requirements.

24 CFR Part 219

    Loan programs--housing and community development, Low and moderate 
income housing, Reporting and recordkeeping requirements.

24 CFR Part 220

    Home improvement, Loan programs--housing and community development, 
Mortgage insurance, Reporting and recordkeeping requirements, Urban 
renewal.

24 CFR Part 221

    Low and moderate income housing, Mortgage insurance, Reporting and 
recordkeeping requirements.

24 CFR Part 222

    Condominiums, Military personnel, Mortgage insurance.

24 CFR Part 231

    Aged, Mortgage insurance, Reporting and recordkeeping requirements.

24 CFR Part 232

    Fire prevention, Health facilities, Loan programs--health, Loan 
programs--housing and community development, Mortgage insurance, 
Nursing homes, Reporting and recordkeeping requirements.

24 CFR Part 233

    Home improvement, Loan programs--housing and community development, 
Mortgage insurance, Reporting and recordkeeping requirements.

24 CFR Part 234

    Condominiums, Mortgage insurance, Reporting and recordkeeping 
requirements.

24 CFR Part 236

    Grant programs--housing and community development, Low and moderate 
income housing, Mortgage insurance, Rent subsidies, Reporting and 
recordkeeping requirements.

24 CFR Part 237

    Grant programs--housing and community development, Low and moderate 
income housing, Mortgage insurance.

24 CFR Part 241

    Energy conservation, Home improvement, Loan programs--housing and 
community development, Mortgage insurance, Reporting and recordkeeping 
requirements, Solar energy.

24 CFR Part 242

    Hospitals, Mortgage insurance, Reporting and recordkeeping 
requirements.

24 CFR Part 244

    Health facilities, Mortgage insurance, Reporting and recordkeeping 
requirements.

24 CFR Part 248

    Intergovernmental relations, Loan programs--housing and community 
development, Low and moderate income housing, Mortgage insurance, 
Reporting and recordkeeping requirements.

24 CFR Part 265

    Mortgage insurance.

24 CFR Part 267

    Appraisals, Mortgage insurance, Property valuation, Reporting and 
recordkeeping requirements.

    Accordingly, chapter II of title 24 of the Code of Federal 
Regulations is amended as follows:

PART 200--INTRODUCTION TO FHA PROGRAMS

    1. The authority citation for part 200 continues to read as 
follows:

    Authority: 12 U.S.C. 1701--1715z-18; 42 U.S.C. 3535(d).

    2. The part heading for part 200 is revised to read as set forth 
above.


Sec. 200.1  [Redesignated]

    3. Undesignated introductory text is added to part 200 to read as 
follows:
    This part sets forth requirements that are applicable to several of 
the programs of the Federal Housing Administration, an organizational 
unit within the Department of Housing and Urban Development. Program 
requirements applicable to FHA programs and other HUD programs also can 
be found in 24 CFR part 5. The specific program regulations should be 
consulted to determine which requirements in this part 200 or 24 CFR 
part 5 are applicable.
    4. Subpart A is added to read as follows:
    
[[Page 14399]]

Subpart A--Requirements For Application, Commitment and Endorsement 
Generally Applicable to Multifamily and Health Care Facility Mortgage 
Insurance Programs
Sec.
200.3  Definitions.

Eligible Mortgagor

200.5  Eligible mortgagor.
200.6  Employer identification and social security numbers.

Eligible Mortgagee

200.10  Lender requirements.
200.11  Audit requirements for State and local governments as 
mortgagees.

Eligible Mortgage

200.15  Maximum mortgage.
200.16  Project mortgage adjustments and reduction.
200.17  Mortgage coverage.
200.18  Minimum loan prohibition.

Miscellaneous Project Mortgage Insurance

200.20  Refinancing insured mortgages.
200.21  Reinsurance of Commissioner held mortgages.
200.22  Operating loss loans.
200.23  Projects in declining neighborhoods.
200.24  Existing projects.
200.25  Supplemental loans.

Miscellaneous Cross Cutting Regulations

200.30  Nondiscrimination and equal opportunity.
200.31  Debarment and suspension.
200.32  Participation and compliance requirements.
200.33  Labor standards.
200.34  Property and mortgage assessment.
200.35  Appraisal standards--nondiscrimination requirements.

Fees and Charges

200.40  HUD fees. [Reserved]
200.41  Maximum mortgagee fees and charges.

Commitment Applications

200.45  Processing of applications. [Reserved]
200.46  Commitment issuance.
200.47  Firm commitments.

Requirements Incident to Insured Advances

200.50  Building loan agreement.
200.51  Mortgagee certificate.
200.52  Construction contract.
200.53  Initial operating funds.
200.54  Project completion funding.
200.55  Financing fees and charges.
200.56  Assurance of completion for on-site improvements.

General Requirements

200.60  Assurance of completion for offsite facilities.
200.61  Title.
200.62  Certifications.
200.63  Required deposits and letters of credit.

Property Requirements

200.70  Location and fee interest.
200.71  Liens.
200.72  Zoning, deed and building restrictions.
200.73  Property development.
200.74  Minimum property standards.
200.75  Environmental quality determinations and standards.
200.76  Smoke detectors.
200.77  Lead-based paint poisoning prevention.
200.78  Energy conservation.

Mortgage Provisions

200.80  Mortgage form.
200.81  Disbursement of mortgage proceeds.
200.82  Maturity.
200.83  Interest rate.
200.84  Payment requirements.
200.85  Covenant against liens.
200.86  Covenant for fire and other hazard insurance.
200.87  Mortgage prepayment.
200.88  Late charge.

Cost Certification

200.95  Certification of cost requirements.
200.96  Certificates of actual cost.
200.97  Adjustments resulting from cost certification.

Endorsement

200.100  Insurance endorsement.
200.101  Mortgagor lien certificate.

Regulation of Mortgagors

200.105  Mortgagor supervision.
200.106  Low-income housing tax credits and other program 
assistance.

Subpart A--Requirements For Application, Commitment and Endorsement 
Generally Applicable to Multifamily and Health Care Facility 
Mortgage Insurance Programs


Sec. 200.3  Definitions.

    (a) The definitions ``Department'', ``Elderly person'', ``HUD'', 
and ``Secretary'', as used in this subpart A shall have the meanings 
given these definitions in 24 CFR part 5.
    (b) The terms ``first mortgage'', ``hospital'', ``maturity date'', 
``mortgage'', ``mortgagee'', and ``state'', as used in this subpart A 
shall have the meaning given in the section of the National Housing Act 
(12 U.S.C. 1701), as amended, under which the project mortgage is 
insured.
    (c) As used in this subpart A:
    Act means the National Housing Act, (12 U.S.C. 1701) as amended.
    Commissioner means the Federal Housing Commissioner.
    FHA means the Federal Housing Administration.
    Insured mortgage means a mortgage which has been insured by the 
endorsement of the credit instrument by the Commissioner, or the 
Commissioner's duly authorized representative.
    Project means a property consisting of site, improvements and, 
where permitted, equipment meeting the provisions of the applicable 
section of the Act, other applicable statutes and regulations, and 
terms, conditions and standards established by the Commissioner.

Eligible Mortgagor


Sec. 200.5  Eligible mortgagor.

    The mortgagor shall be a natural person or entity acceptable to the 
Commissioner, as limited by the applicable section of the Act, and 
shall possess the powers necessary and incidental to operating the 
project.


Sec. 200.6  Employer identification and social security numbers.

    The requirements set forth in 24 CFR part 5, regarding the 
disclosure and verification of social security numbers and employer 
identification numbers by applicants and participants in assisted 
mortgage and loan insurance and related programs, apply to these 
programs.

Eligible Mortgagee


Sec. 200.10  Lender requirements.

    The requirements set forth in 24 CFR part 202 regarding approval, 
recertification, withdrawal of approval, termination of approval 
agreement, approval for servicing, report requirements and conditions 
for supervised mortgagees, nonsupervised mortgagees, investing 
mortgagees, governmental institutions, national mortgage associations, 
public housing agencies and State housing agencies, apply to these 
programs.


Sec. 200.11  Audit requirements for State and local governments as 
mortgagees.

    Requirements set forth in 24 CFR part 44, Non-Federal Governmental 
Audit Requirements, apply to State and local governments (as defined in 
24 CFR part 44) that receive mortgage insurance as mortgagees.

Eligible Mortgage


Sec. 200.15  Maximum mortgage.

    Mortgages must not exceed either the statutory dollar amount or 
loan ratio limitations established by the section of the Act under 
which the mortgage is insured, except that the Commissioner may 
increase the dollar amount limitations:
    (a) By not to exceed 110 percent in any geographical area in which 
the Commissioner finds that cost levels so require; and
    (b) By not to exceed 140 percent where the Commissioner determines 
it necessary on a project-by-project basis.

[[Page 14400]]



Sec. 200.16  Project mortgage adjustments and reductions.

    The principal amount computed in accordance with the applicable 
section of the Act for the insured mortgage shall be subject to 
additional adjustments and reductions in accordance with terms and 
conditions established by the Commissioner.


Sec. 200.17  Mortgage coverage.

    The mortgage shall cover the entire property included in the 
project.


Sec. 200.18  Minimum loan prohibition.

    A mortgagee may not require that the mortgage exceed a minimum 
amount established by the mortgagee, as a condition of providing a loan 
secured by a mortgage insured under this part.

Miscellaneous Project Mortgage Insurance


Sec. 200.20  Refinancing insured mortgages.

    An existing insured mortgage may be refinanced pursuant to 
provisions of section 223(a)(7) of the Act and such terms and 
conditions established by the Commissioner.


Sec. 200.21  Reinsurance of Commissioner held mortgages.

    Any mortgage assigned to the Commissioner in connection with 
payment under a contract of mortgage insurance, or executed in 
connection with a sale by the Commissioner of any property acquired 
under any section or title of the Act, may be insured pursuant to 
provisions of section 223(c) of the Act and such terms and conditions 
established by the Commissioner.


Sec. 200.22  Operating loss loans.

    An insured loan to cover the operating losses of a project with an 
existing Commissioner insured mortgage may be made in accordance with 
provisions of section 223(d) of the Act and such terms and conditions 
established by the Commissioner.


Sec. 200.23  Projects in declining neighborhoods.

    A Mortgage financing the repair, rehabilitation or construction of 
a project located in an older declining urban area shall be eligible 
for insurance pursuant to provisions of section 223(e) of the Act and 
such terms and conditions established by the Commissioner.


Sec. 200.24  Existing projects.

    A mortgage financing the purchase or refinance of an existing 
rental housing project under section 207 of the Act, or for refinancing 
the existing debt of an existing nursing home, intermediate care 
facility, assisted living facility or board and care home, or any 
combination thereof, under section 232 of the Act, or hospital under 
section 242 of the Act may be insured pursuant to provisions of section 
223(f) of the Act and such terms and conditions established by the 
Commissioner.


Sec. 200.25  Supplemental loans.

    A loan, advance of credit or purchase of an obligation representing 
a loan or advance of credit made for the purpose of financing 
improvements or additions to a project covered by a mortgage insured 
under any section of the Act or Commissioner held mortgage, or 
equipment for a nursing home, intermediate care facility, board and 
care home, assisted living facility, hospital or group practices 
facility, may be insured pursuant to the provisions of section 241 of 
the Act and such terms and conditions established by the Commissioner.

Miscellaneous Cross Cutting Regulations


Sec. 200.30  Nondiscrimination and equal opportunity.

    The requirements set forth in 24 CFR part 5, and subparts I, J, and 
M of this part pertaining to nondiscrimination and equal opportunity, 
apply to these programs.


Sec. 200.31  Debarment and suspension.

    The requirements set forth in 24 CFR part 24, except subpart F, 
apply to these programs.


Sec. 200.32  Participation and compliance requirements.

    The requirements set forth in 24 CFR part 200, subpart H, apply to 
these programs.


Sec. 200.33  Labor standards

    (a) The requirements set forth in 29 CFR parts 1, 3 and 5 for 
compliance with labor standards laws apply to projects under these 
programs to the extent that labor standards apply as provided in 
section 212 of the Act, provided that:
    (1) The labor standards provisions do not apply to projects insured 
under sections 207 or 232 pursuant to section 223(f) of the Act; and
    (2) Supplemental loans under section 241 of the Act are subject to 
the provisions of section 212 applicable to the section or title 
pursuant to which the mortgage covering the project is insured or 
pursuant to which the original mortgage was insured.
    (b) The requirements set forth in 24 CFR part 70 apply to those 
programs with respect to which there is a statutory provision allowing 
HUD waiver of Davis-Bacon prevailing wage rates for volunteers.
    (c) Project commitments, contracts and agreements, as determined by 
the Commissioner, and construction contracts and subcontracts, shall 
include terms, conditions and standards for compliance with applicable 
requirements set forth in 29 CFR parts 1, 3 and 5 and section 212 of 
the Act.
    (d) No advance under a loan or mortgage that is subject to the 
requirements of section 212 shall be eligible for insurance unless 
there is filed with the application for the advance a certificate as 
required by the Commissioner certifying that the laborers and mechanics 
employed in construction of the project have been paid not less than 
the wage rates required under section 212.


Sec. 200.34  Property and mortgage assessment.

    The requirements set forth in 24 CFR part 200, subpart E, regarding 
the mortgagor's responsibility for making those investigations, 
analysis and inspections it deems necessary for protecting its 
interests in the property apply to these programs.


Sec. 200.35  Appraisal standards--nondiscrimination requirements.

    (a) Nondiscrimination in the selection of appraiser. In the 
selection of an appraiser, there shall be no discrimination on the 
basis of race, color, religion, national origin, sex, age, or 
disability.
    (b) Nondiscrimination in appraisal determination. The certification 
required by the Uniform Standards of Professional Appraisal Practice 
must include a statement that the racial/ethnic composition of the 
neighborhood surrounding the property in no way affected the appraisal 
determination.

Fees and Charges


Sec. 200.40  HUD fees. [Reserved]


Sec. 200.41  Maximum mortgagee fees and charges.

    (a) Mortgagee fees and charges included in the mortgage must be for 
actual required services provided to the mortgagor by the mortgagee, 
and shall not exceed common market rates for such services as 
determined by the Commissioner.
    (b) Mortgagee charges for prepayment of the mortgage and late 
mortgage payments shall not exceed that determined appropriate by the 
Commissioner.

[[Page 14401]]


Commitment Applications


Sec. 200.45  Processing of applications. [Reserved]


Sec. 200.46  Commitment issuance.

    Upon approval of an application for insurance, a commitment shall 
be issued by the Commissioner setting forth the terms and conditions 
upon which the mortgage will be insured. The commitment term and any 
extension or reopening of an expired commitment shall be in accordance 
with standards established by the Commissioner.


Sec. 200.47  Firm commitments.

    A valid firm commitment must be in effect at the time the mortgage 
instrument is endorsed.
    (a) Insurance upon completion. The commitment shall provide the 
terms and conditions for the insurance of the mortgage:
    (1) After completion of construction or substantial rehabilitation 
of the project; or
    (2) Upon completion of required work, except as deferred by the 
Commissioner in accordance with terms, conditions and standards 
established by the Commissioner, for an existing project without 
substantial rehabilitation.
    (b) Insured advances. The commitment shall provide for insurance of 
the mortgage as provided in paragraph (a) of this section, and for the 
insurance of mortgage money advanced in accordance with terms and 
conditions established by the Commissioner during: construction; 
substantial rehabilitation; or other work acceptable to the 
Commissioner.

Requirements Incident to Insured Advances


Sec. 200.50  Building loan agreement.

    The mortgagor and mortgagee must execute a building loan agreement 
approved by the Commissioner, that sets forth the terms and conditions 
under which progress payments may be advanced during construction, 
before initial endorsement of the mortgage for insurance.


Sec. 200.51  Mortgagee certificate.

    The mortgagee shall certify to the Commissioner that it will 
conform with terms and conditions established by the Commissioner for 
the mortgagee's control of project funds, and other incidental 
requirements established by the Commissioner.


Sec. 200.52  Construction contract.

    The form of contract between the mortgagor and builder shall be as 
prescribed by the Commissioner in accordance with terms and conditions 
established by the Commissioner.


Sec. 200.53  Initial operating funds.

    The mortgagor shall deposit cash with the mortgagee, or in a 
depository satisfactory to the mortgagee and under control of the 
mortgagee, in accordance with terms, conditions and standards 
established by the Commissioner for:
    (a) Accruals for taxes, ground rates, mortgage insurance premiums, 
and property insurance premiums, during the course of construction;
    (b) Meeting the cost of equipping and renting the project 
subsequent to its completion in whole or part; and
    (c) Allocation by the mortgagee for assessments required by the 
terms of the mortgage in an amount acceptable to the Commissioner.


Sec. 200.54  Project completion funding.

    The mortgagor shall deposit with the mortgagee cash deemed by the 
Commissioner to be sufficient, when added to the proceeds of the 
insured mortgage, to assure completion of the project and to pay the 
initial service charge, carrying charges, and legal and organizational 
expenses incident to the construction of the project. The Commissioner 
may accept a lesser cash deposit or an alternative to a cash deposit in 
accordance with terms and conditions established by the Commissioner, 
where the required funding is to be provided by a grant or loan from a 
Federal, State, or local government agency or instrumentality.
    (a) An agreement acceptable to the Commissioner shall require that 
funds provided by the mortgagor under requirements of this section must 
be disbursed in full for project work, material and incidental charges 
and expenses before disbursement of any mortgage proceeds, except;
    (b) Funds provided by a grant or loan from a Federal, State or 
local governmental agency or instrumentality under requirements of this 
section need not be fully disbursed before the disbursement of mortgage 
proceeds, where approved by the Commissioner in accordance with terms, 
conditions and standards established by the Commissioner.


Sec. 200.55  Financing fees and charges.

    Fees and charges approved by the Commissioner in excess of the 
initial service charge shall be deposited with the mortgagee in cash 
before initial endorsement, except as otherwise preapproved by the 
Commissioner.


Sec. 200.56  Assurance of completion for on-site improvements.

    The mortgagor shall furnish assurance of completion of the project 
in the form and amount provided by terms, conditions and standards 
established by the Commissioner.

General Requirements


Sec. 200.60  Assurance of completion for offsite facilities.

    An assurance of completion for offsite utilities, streets, and 
other facilities required for a buildable site shall be provided in an 
amount and form acceptable to the Commissioner, except where a 
municipality or other public body has, in a manner acceptable to the 
Commissioner, agreed to install such improvements without cost to the 
mortgagor.


Sec. 200.61  Title.

    (a) Marketable title to the project must be vested in the mortgagor 
as of the date the mortgage is filed for record.
    (b) Title evidence for the Commissioner's examination shall include 
a lender's title insurance policy, which title policy provides survey 
coverage based on a survey acceptable to the title company and the 
Commissioner; or as the Commissioner may otherwise require, in 
accordance with terms, conditions and standards established by the 
Commissioner.
    (c) Endorsement of the credit instrument for insurance shall 
evidence the acceptability of title evidence.


Sec. 200.62  Certifications.

    Any agreement, undertaking, statement or certification required by 
the Commissioner shall specifically state that it has been made, 
presented, and delivered for the purpose of influencing an official 
action of the FHA, and of the Commissioner, and may be relied upon by 
the Commissioner as a true statement of the facts contained therein.


Sec. 200.63  Required deposits and letters of credit.

    (a) Deposits. Where the Commissioner requires the mortgagor to make 
a deposit of cash or securities, such deposit shall be with the 
mortgagee or a depository acceptable to the mortgagee. The deposit 
shall be held by the mortgagee in a special account or by the 
depository under an appropriate agreement approved by the Commissioner.
    (b) Letter of credit. Where the use of a letter of credit is 
acceptable to the Commissioner in lieu of a deposit of cash or 
securities, the letter of credit shall be issued to the mortgagee by a

[[Page 14402]]
banking institution and shall be unconditional and irrevocable:
    (1) The mortgagee of record may not be the issuer of any letter of 
credit without the prior written consent of the Commissioner.
    (2) The mortgagee shall be responsible to the Commissioner for 
collection under the letter of credit. In the event a demand for 
payment thereunder is not immediately met, the mortgagee shall 
immediately provide a cash deposit equivalent to the undrawn balance of 
the letter of credit.

Property Requirements


Sec. 200.70  Location and fee interest.

    The property must be held by an eligible mortgagor, and must 
conform with requirements pertaining to property location and fee or 
lease interests of the section of the Act under which the mortgage is 
insured.


Sec. 200.71  Liens.

    The project must be free and clear of all liens other than the 
insured mortgage, except that the property may be subject to an 
inferior lien as provided by terms and conditions established by the 
Commissioner for an inferior lien:
    (a) Made or held by a Federal, State or local government 
instrumentality;
    (b) Required in connection with: an operating loss loan insured 
pursuant to a section 223(d) of the Act; a supplemental loan insured 
pursuant to section 241 of the Act; or a mortgage to purchase or 
refinance an existing project pursuant to section 223(f) of the Act; or
    (c) As otherwise provided by the Commissioner.


Sec. 200.72  Zoning, deed and building restrictions.

    The project when completed shall not violate any material zoning or 
deed restrictions applicable to the project site, and shall comply with 
all applicable building and other governmental codes, ordinances, 
regulations and requirements.


Sec. 200.73  Property development.

    (a) The property shall be suitable and principally designed for the 
intended use, as provided by the applicable section of the Act under 
which the mortgage is insured, and have long-term marketability. 
Design, construction, substantial rehabilitation and repairs shall be 
in accordance with standards established by the Commissioner.
    (b) A project may include such commercial and community facilities 
as the Commissioner deems acceptable.
    (c) The improvements shall constitute a single project. Not less 
than five rental dwelling units or personal care units, 20 medical care 
beds, or 50 manufactured home pads, shall be on one site, except that 
such limitations do not apply to group practice facilities.


Sec. 200.74  Minimum property standards.

    The requirements set forth in subpart S of this part apply to these 
programs, except for hospitals insured under section 242 of the Act and 
group practice facilities insured under title XI of the Act.


Sec. 200.75  Environmental quality determinations and standards.

    Requirements set forth in 24 CFR part 50, Protection and 
Enhancement of Environmental Quality, 24 CFR part 51, Environmental 
Criteria and Standards, 24 CFR part 55, Implementation of Executive 
Order 11988, Flood Plain Management, and as otherwise required by the 
Commissioner apply to these programs.


Sec. 200.76  Smoke detectors.

    Smoke detectors and alarm devices must be installed in accordance 
with standards and criteria acceptable to the Commissioner for the 
protection of occupants in any dwelling or facility bedroom or other 
primary sleeping area.


Sec. 200.77  Lead-based paint poisoning prevention.

    Requirements set forth in 24 CFR part 35 apply to these programs.


Sec. 200.78  Energy Conservation.

    Construction, mechanical equipment, and energy and metering 
selections shall provide cost effective energy conservation in 
accordance with standards established by the Commissioner.

Mortgage Provisions


Sec. 200.80  Mortgage form.

    The mortgage shall be:
    (a) Executed on a form approved by the Commissioner for use in the 
jurisdiction in which the property securing the mortgage is situated, 
which form shall not be changed without the prior written approval of 
the Commissioner.
    (b) Executed by an eligible mortgagor.
    (c) A first lien on the property securing the mortgage, which 
property conforms with the property standards prescribed by the 
Commissioner.


Sec. 200.81  Disbursement of mortgage proceeds.

    The mortgagee shall be obligated, as a part of the mortgage 
transaction, to disburse the principal amount of the mortgage to the:
    (a) Mortgagor or mortgagor's account;
    (b) Mortgagor's creditors for the mortgagor's account, subject to 
the mortgagor's consent.


Sec. 200.82  Maturity.

    The mortgage shall have a maturity satisfactory to the 
Commissioner, and shall contain complete amortization or sinking-fund 
provisions satisfactory to the Commissioner.
    (a) The maximum mortgage term may not exceed the lesser of:
    (1) Any limits included under the applicable section of the Act.
    (2) Thirty-five years for existing projects, except that the 
mortgage term may be up to 40 years under terms and conditions 
established by the Commissioner, and 40 years for proposed construction 
and substantial rehabilitation projects.
    (3) Seventy-five percent of the estimated remaining economic life 
of the physical improvements.
    (b) The minimum mortgage term shall not be less than 10 years.


Sec. 200.83  Interest rate.

    (a) The mortgage shall bear interest at the rate agreed upon by the 
mortgagee and the mortgagor.
    (b) Interest shall be payable in monthly installments on the 
principal amount of the mortgage outstanding on the due date of each 
installment.
    (c) The amount of any increase approved by the Commissioner in the 
mortgage amount between initial and final endorsement in excess of the 
amount that the Commissioner had committed to insure at initial 
endorsement shall bear interest at the rate agreed upon by the 
mortgagee and the mortgagor.


Sec. 200.84  Payment requirements.

    The mortgage shall provide for:
    (a) A single aggregate payment each month for all payments to be 
made by the mortgagor to the mortgagee.
    (b) The mortgagor to pay to the mortgagee:
    (1) Interest and principal on the first day of each month in 
accordance with an amortization plan agreed upon by the mortgagor, the 
mortgagee and the Commissioner.
    (i) Date of first payment to interest shall be the endorsement date 
or, where there are insured advances, the initial endorsement date.
    (ii) Date of first payment to principal. The Commissioner shall 
estimate the time necessary to complete the project and shall establish 
the date of the first payment to principal so that the lapse of time 
between completion of the project and commencement of amortization will 
not be longer than

[[Page 14403]]
necessary to obtain sustaining occupancy.
    (2) An amount on each interest payment date sufficient to 
accumulate in the hands of the mortgagee one payment period prior to 
its due date, the next annual mortgage insurance premium payable by the 
mortgagee to the Commissioner. Such payments shall continue only so 
long as the contract of insurance shall remain in effect.
    (3) Equal monthly payments as will amortize the ground rents, if 
any, and the estimated amount of all taxes, water charges, special 
assessments, and fire and other hazard insurance premiums, within a 
period ending one month prior to the dates on which the same become 
delinquent.
    (4) The mortgage shall further provide:
    (i) That such payments shall be held by the mortgagee, for the 
purpose of paying such items before they become delinquent.
    (ii) For adjustments in case such estimated amounts shall prove to 
be more, or less, than the actual amounts so paid therefor by the 
mortgagor.
    (c) The mortgagee to apply each mortgagor payment received to the 
following items in the order set forth:
    (1) Premium charges under the contract of mortgage insurance.
    (2) Ground rents, taxes, special assessments, and fire and other 
hazard insurance premiums.
    (3) Interest on the mortgage.
    (4) Amortization of the principal of the mortgage.


Sec. 200.85  Covenant against liens.

    (a) The mortgage shall contain a covenant against the creation by 
the mortgagor of liens against the property superior or inferior to the 
lien of the mortgage except for such inferior lien as may be approved 
by the Commissioner in accordance with provisions of Sec. 200.71; and
    (b) A covenant against repayment of a Commissioner approved 
inferior lien from mortgage proceeds other than surplus cash or 
residual receipts, except in the case of an inferior lien created by an 
operating loss loan insured pursuant to section 223(d) of the Act, or a 
supplemental loan insured pursuant to section 241 of the Act.


Sec. 200.86  Covenant for fire and other hazard insurance.

    The mortgage shall contain a covenant binding the mortgagor to 
maintain fire and extended coverage insurance on the property in 
accordance with terms and conditions established by the Commissioner.


Sec. 200.87  Mortgage prepayment.

    (a) Prepayment privilege. Except as provided in paragraph (c) of 
this section or otherwise established by the Commissioner, the mortgage 
shall contain a provision permitting the mortgagor to prepay the 
mortgage in whole or in part upon any interest payment date, after 
giving the mortgagee 30 days' notice in writing in advance of its 
intention to so prepay.
    (b) Prepayment charge. The mortgage may contain a provision for 
such charge, in the event of prepayment of principal, as may be agreed 
upon between the mortgagor and the mortgagee, subject to the following:
    (1) The mortgagor shall be permitted to prepay up to 15 percent of 
the original principal amount of the mortgage in any one calendar year 
without any such charge.
    (2) Any reduction in the original principal amount of the mortgage 
resulting from the certification of cost which the Commissioner may 
require shall not be construed as a prepayment of the mortgage.
    (c) Prepayment of bond-financed or GNMA securitized mortgages. 
Where the mortgage is given to secure GNMA mortgage-backed securities 
or a loan made by a lender that has obtained the funds for the loan by 
the issuance and sale of bonds or bond anticipation notes, or both, the 
mortgage may contain a prepayment restriction and prepayment penalty 
charge acceptable to the Commissioner as to term, amount, and 
conditions.
    (d) HUD override of prepayment restrictions. In the event of a 
default, the Commissioner may override any lockout, prepayment penalty 
or combination thereof in order to facilitate a partial or full 
refinancing of the mortgaged property and avoid a claim.


Sec. 200.88  Late charge.

    The mortgage may provide for the collection by the mortgagee of a 
late charge in accordance with terms, conditions and standards of the 
Commissioner for each dollar of each payment to interest or principal 
more than 15 days in arrears to cover the expense involved in handling 
delinquent payments. Late charges shall be separately charged to and 
collected from the mortgagor and shall not be deducted from any 
aggregate monthly payment.

Cost Certification


Sec. 200.95  Certification of cost requirements.

    (a) Before initial endorsement of the mortgage for insurance, the 
mortgagor, the mortgagee, and the Commissioner shall enter into an 
agreement in form and content satisfactory to the Commissioner for the 
purpose of precluding any excess of mortgage proceeds over statutory 
limitations. Under this agreement, the mortgagor shall disclose its 
relationship with the builder, including any collateral agreement, and 
shall agree:
    (1) To enter into a construction contract, the terms of which shall 
depend on whether or not there exists an identity of interest between 
the mortgagor and the builder.
    (2) To execute a Certificate of Actual Costs, upon completion of 
all physical improvements on the mortgaged property.
    (3) To apply in reduction of the outstanding balance of the 
principal of the mortgage any excess of mortgage proceeds over 
statutory limitations based on actual cost.
    (b) The provisions of paragraph (a) of this section relating to 
disclosure and the requirement for a construction contract shall not 
apply where the mortgagor is the general contractor.


Sec. 200.96  Certificates of actual cost.

    (a) The mortgagor's certificate of actual cost, in a form 
prescribed by the Commissioner, shall be submitted upon completion of 
the physical improvements to the satisfaction of the Commissioner and 
before final endorsement, except that in the case of an existing 
project that does not require substantial rehabilitation and where the 
commitment provides for completion of specified repairs after 
endorsement, a supplemental certificate of actual cost will be 
submitted covering the completed costs of any such repairs. The 
certificate shall show the actual cost to the mortgagor, after 
deduction of any kickbacks, rebates, trade discounts, or other similar 
payments to the mortgagor, or to any of its officers, directors, 
stockholders, partners or other entity member ownership, of 
construction and other costs, as prescribed by the Commissioner.
    (b) The Certificate of Actual Cost shall be verified by an 
independent Certified Public Accountant or independent public 
accountant in a manner acceptable to the Commissioner.
    (c) Upon the Commissioner's approval of the mortgagor's 
certification of actual cost such certification shall be final and 
incontestable except for fraud or material misrepresentation on the 
part of the mortgagor.


Sec. 200.97  Adjustments resulting from cost certification.

    (a) Fee simple site. Upon receipt of the mortgagor's certification 
of actual cost

[[Page 14404]]
there shall be added to the total amount thereof the Commissioner's 
estimate of the fair market value of any land included in the mortgage 
security and owned by the mortgagor in fee, such value being prior to 
the construction of the improvements.
    (b) Leasehold site. In the event the land is held under a leasehold 
or other interest less than a fee, the cost, if any, of acquiring the 
leasehold or other interest is considered an allowable expense which 
may be added to actual cost provided that in no event shall such amount 
be in excess of the fair market value of such leasehold or other 
interest exclusive of proposed improvements.
    (c) Adjustment. If the amount calculated in accordance with 
paragraphs (a) or (b) of this section exceeds the statutory dollar 
amount limits or loan ratio limits permitted by the section of Act 
under which the mortgage is to be insured, or program loan ratio limits 
established by the Commissioner in the absence of statutory limits, the 
amount must be reduced to the applicable limits before final 
endorsement.

Endorsement


Sec. 200.100  Insurance endorsement.

    The credit instrument shall be initially and finally endorsed 
simultaneously for insurance pursuant to a commitment to insure upon 
completion. Where the advances of construction funds are to be insured 
pursuant to a commitment for insured advances, initial endorsement of 
the credit instrument shall occur before any mortgage proceeds are 
insured and the time of final endorsement shall be as set forth in 
paragraph (b) of this section.
    (a) Initial endorsement. The Commissioner shall indicate the 
insurance of the mortgage by endorsing the original credit instrument 
and identifying the section of the Act and the regulations under which 
the mortgage is insured and the date of insurance.
    (b) Final endorsement. When all advances of mortgage proceeds have 
been made and all the terms and conditions of the commitment have been 
met to the Commissioner's satisfaction the Commissioner shall indicate 
on the original credit instrument the total of all advances approved 
for insurance and again endorse such instrument.
    (c) Contract rights and obligations. The Commissioner and the 
mortgagee or lender shall be bound from the date of initial 
endorsement, whether the initial and final endorsement occur 
simultaneously or are split, by the provisions of the Contract Rights 
and Obligations set forth in the respective regulations for each 
section of the Act, as follows: Section 207 of the Act (24 CFR part 
207); Section 213 of the Act (24 CFR part 213); Section 220 of the Act 
(24 CFR part 220); Section 221 of the Act (24 CFR part 221); Section 
231 of the Act (24 CFR part 231); Section 232 of the Act (24 CFR part 
232); Section 234 of the Act (24 CFR part 234); Section 241 of the Act 
(24 CFR part 241); Section 242 of the Act (24 CFR part 242); title XI 
of the Act (24 CFR part 244).


Sec. 200.101  Mortgagor lien certificate.

    The mortgagor shall certify at the final endorsement of the 
mortgage for insurance as to each of the following:
    (a) That the mortgage is the first lien upon and covers the entire 
project, including any equipment financed with mortgage proceeds.
    (b) That the property upon which the improvements have been made or 
constructed and the equipment financed with mortgage proceeds are free 
and clear of all liens other than the insured mortgage and such other 
liens as may be approved by the Commissioner.
    (c) That the certificate sets forth all unpaid obligations in 
connection with the mortgage transaction, the purchase of the mortgaged 
property, the construction or rehabilitation of the project or the 
purchase of the equipment financed with mortgage proceeds.

Regulation of Mortgagors


Sec. 200.105  Mortgagor supervision.

    (a) As long as the Commissioner is the insurer or holder of the 
mortgage, the Commissioner shall regulate the mortgagor by means of a 
regulatory agreement providing terms, conditions and standards 
established by the Commissioner, or by such other means as the 
Commissioner may prescribe.
    (b) The Commissioner may delegate to the mortgagee, or other party, 
in accordance with terms, conditions and standards established by the 
Commissioner in any executed Regulatory Agreement or other 
instrumentality granting the Commissioner supervision of the mortgagor.


Sec. 200.106  Low-income housing tax credits and other program 
assistance.

    Mortgagors with projects assisted through the Low-Income Housing 
Tax Credit program or receiving other government assistance (as defined 
in HUD's regulations implementing the HUD Reform Act) may be regulated 
by the Commissioner as limited distribution mortgagors.

Subpart E--Mortgage Insurance Procedures and Processing


Secs. 200.140 through 200.144, 200.146 through 200.152, 200.154, and 
200.155  [Removed]

    5. Sections 200.140 through 200.144, 200.146 through 200.152, 
200.154, and 200.155, are removed.
    5a. Sections 200.145, 200.153, and 200.156, are revised to read as 
follows:


Sec. 200.145  Property and mortgage assessment.

    (a) The mortgagor is responsible for making those investigations, 
analyses and inspections it deems necessary for protecting its 
interests in the property.
    (b) Any appraisals, inspections, environmental assessments, and 
technical or financial evaluations conducted by or for the Commissioner 
are performed to determine the maximum insurable mortgage, and to 
protect the Commissioner and the FHA insurance funds. Such appraisals, 
inspections, assessments and evaluations neither create nor imply a 
duty or obligation from HUD to the mortgagor, or to any other party, 
and are not to be regarded as a warranty by HUD to the mortgagor, or 
any other party, of the value or condition of the property.


Sec. 200.153  Presentation of claim.

    In the event the insured lender is entitled under the contract of 
mortgage insurance to receive a claim settlement, the mortgagee 
presents a claim for insurance benefits in accordance with the 
Secretary's instructions.


Sec. 200.156  Settlement of claims.

    Upon the Secretary's approval of a claim, the claim will be settled 
by issuance of cash, debentures or both, and, in certain cases, by 
issuance of a certificate of claim. However, in the event a final claim 
is in a negative amount, the claim will be settled by the mortgagee's 
payment of cash or surrender of debentures at par plus accrued interest 
to the Secretary.

Subpart K  [Removed and Reserved]

    6. Subpart K is removed and reserved.
    7. In subpart W, Sec. 200.1301 is revised to read as follows:

Subpart W--Administrative Matters


Sec. 200.1301  Additional Expiring Programs--Savings Clause.

    No new loan assistance, additional participation, or new loans are 
being insured under the programs listed in this section. Any existing 
loan

[[Page 14405]]
assistance, ongoing participation, or insured loans under these 
programs will continue to be governed by the regulations in effect as 
they existed immediately before May 1, 1996 (contained in the April 1, 
1995 edition of 24 CFR, parts 200 to 219, and parts 220 to 400). A list 
of any amendments to these parts published after the CFR revision date 
is available from the Office of the Rules Docket Clerk, Department of 
Housing and Urban Development, 451 Seventh Street SW., Washington, DC. 
20410.

Part 215  Rent Supplement Payments Program
Part 222  Servicepersons Mortgage Insurance Program
Part 237  Special Mortgage Insurance for Low and Moderate Income 
Families

PART 207--MULTIFAMILY HOUSING MORTGAGE INSURANCE

    8. The authority citation for part 207 continues to read as 
follows:

    Authority: 12 U.S.C. 1701z-11(e), 1713, and 1715b; 42 U.S.C. 
3535(d).

    9. Subpart A is revised to read as follows:

Subpart A--Eligibility Requirements

Sec.
207.1  Eligibility requirements.

Subpart A--Eligibility Requirements


Sec. 207.1  Eligibility requirements.

    The eligibility requirements set forth in 24 CFR part 200, subpart 
A, apply to multifamily project mortgages insured under section 207 of 
the National Housing Act (12 U.S.C. 1713), as amended.

Subpart B--Contract Rights and Obligations


Secs. 207.254, 207.260, 207.261, 207.261a, 207.262, and 
207.270  [Removed]

    9a. Sections 207.254, 207.260, 207.261, 207.261a, 207.262, and 
207.270 are removed.

PART 213--COOPERATIVE HOUSING MORTGAGE INSURANCE

    10. The authority citation for part 213 continues to read as 
follows:

    Authority: 12 U.S.C. 1715b, 1715e; 42 U.S.C. 3535(d).

    10a. Subpart A is revised to read as follows:

Subpart A--Eligibility Requirements--Projects

Sec.
213.1  Eligibility requirements.

Subpart A--Eligibility Requirements--Projects


Sec. 213.1  Eligibility requirements.

    The eligibility requirements set forth in 24 CFR part 200, subpart 
A, apply to multifamily project mortgages insured under section 213 of 
the National Housing Act (12 U.S.C. 1715e), as amended.

PART 215--[REMOVED]

    11. Part 215 is removed.

PART 219--FLEXIBLE SUBSIDY PROGRAM FOR TROUBLED PROJECTS

    12. The authority citation for part 219 continues to read as 
follows:

    Authority: 12 U.S.C. 1715z-1a; 42 U.S.C. 3535(d).

    13. Part 219 is revised to read as follows:

PART 219--FLEXIBLE SUBSIDY PROGRAM FOR TROUBLED PROJECTS

Sec.
219.1  Program operations.
219.2  Savings provision.


Sec. 219.1  Program operations.

    Effective May 1, 1996, the Flexible Subsidy Program for Troubled 
Projects will be governed and operate under the statutory provisions 
codified at 12 U.S.C. 1715z-1a, under the administrative policies and 
procedures contained in any applicable HUD Handbooks, and other 
administrative bulletins and notices as the Department may issue from 
time to time.


Sec. 219.2  Savings provision.

    Part 219, as it existed immediately before May 1, 1996, (contained 
in the April 1, 1995 edition of 24 CFR, parts 200 to 219) will continue 
to govern the rights and obligations of housing owners, tenants, and 
the Department of Housing and Urban Development with respect to units 
and projects assisted under the Flexible Subsidy Program for Troubled 
Projects prior to May 1, 1996. A list of any amendments to this part 
published after the CFR revision date is available from the Office of 
the Rules Docket Clerk, Department of Housing and Urban Development, 
451 Seventh Street, S.W., Washington, DC 20410.

PART 220--MORTGAGE INSURANCE AND INSURED IMPROVEMENT LOANS FOR 
URBAN RENEWAL AND CONCENTRATED DEVELOPMENT AREAS

    14. The authority citation for part 220 continues to read as 
follows:

    Authority: 12 U.S.C. 1713, 1715b, and 1715k; 42 U.S.C. 3535(d).

    15. Subpart C is revised to read as follows:

Subpart C--Eligibility Requirements--Projects

Sec.
220.501  Eligibility requirements.

Subpart C--Eligibility Requirements--Projects


Sec. 220.501  Eligibility requirements.

    The requirements set forth in 24 CFR part 200, subpart A, apply to 
multifamily project mortgages insured under section 220 of the National 
Housing Act (12 U.S.C. 1715k), as amended.

PART 221--LOW COST AND MODERATE INCOME MORTGAGE INSURANCE

    16. The authority citation for part 221 continues to read as 
follows:

    Authority: 12 U.S.C. 1707(a), 1715b and 1715l; 42 U.S.C. 
3535(d).

    17. Subpart C is revised to read as follows:

Subpart C--Eligibility Requirements--Moderate Income Projects

Sec.
221.501  Eligibility requirements.

Subpart C--Eligibility Requirements--Moderate Income Projects


Sec. 221.501  Eligibility requirements.

    The requirements set forth in 24 CFR part 200, subpart A, apply to 
multifamily project mortgages insured under section 221 of the National 
Housing Act (12 U.S.C. 1715l), as amended.

PART 222--[REMOVED]

    18. Part 222 is removed.

PART 231--HOUSING MORTGAGE INSURANCE FOR THE ELDERLY

    19. The authority citation for part 231 continues to read as 
follows:

    Authority: 12 U.S.C. 1715b and 1715v; 42 U.S.C. 3535(d).

    20. Subpart A is revised to read as follows:
    
[[Page 14406]]


Subpart A--Eligibility Requirements

Sec.
231.1  Eligibility requirements.

Subpart A--Eligibility Requirements


Sec. 231.1  Eligibility requirements.

    The requirements set forth in 24 CFR part 200, subpart A, apply to 
multifamily project mortgages insured under section 231 of the National 
Housing Act (12 U.S.C. 1715v), as amended.

PART 232--MORTGAGE INSURANCE FOR NURSING HOMES, INTERMEDIATE CARE 
FACILITIES, BOARD AND CARE HOMES, AND ASSISTED LIVING FACILITIES

    21. The authority citation for part 232 continues to read as 
follows:

    Authority: 12 U.S.C. 1715b, 1715w, and 1715z(9); 42 U.S.C. 
3535(d).

    22. Subpart A is revised to read as follows:

Subpart A--Eligibility Requirements

Sec.
232.1  Eligibility requirements.
232.2  License.
232.3  Bathroom.

Subpart A--Eligibility Requirements


Sec. 232.1  Eligibility requirements.

    The requirements set forth in 24 CFR part 200, subpart A, apply to 
multifamily project mortgages insured under section 232 of the National 
Housing Act (12 U.S.C. 1715w), as amended.


Sec. 232.2  License.

    The Commissioner shall not insure any mortgage under this part 
unless the facility is regulated by the State, municipality or other 
political subdivision in which the facility is or is to be located, and 
the appropriate agency for such jurisdiction provides a license, 
certificate or other assurances the Commissioner considers necessary, 
that the facility complies with any applicable State or local standards 
and requirements for such facility.


Sec. 232.3  Bathroom.

    Not less than one full bathroom must be provided for every four 
residents of a board and care home or assisted living facility, and 
bathroom access from any bedroom or sleeping area must not pass through 
a public corridor or area.

PART 233--EXPERIMENTAL HOUSING MORTGAGE INSURANCE

    23. The authority citation for part 233 continues to read as 
follows:

    Authority: 12 U.S.C. 1715b, 1715x; 42 U.S.C. 3535(d).

    24. In Sec. 233.5, paragraph (a) introductory text is revised to 
read as follows:


Sec. 233.5  Cross-reference.

    (a) To be eligible for insurance under this subpart, a mortgage or 
home improvement loan shall meet the eligibility requirements for 
insurance under parts 203, 213, 220, 221, 234, 235, and 237 of this 
chapter.
* * * * *
    25. In Sec. 233.251, paragraph (b) introductory text is revised to 
read as follows:


Sec. 233.251  Cross-reference.

* * * * *
    (b) For purposes of this subpart, all the references in parts 203, 
213, 220, 221, 234, 235 and 237 of this chapter to:
* * * * *
    26. Section 233.401 is revised to read as follows:


Sec. 233.401  Cross-reference.

    (a) Section 235 type home mortgages. All of the provisions of 24 
CFR part 235 concerning assistance payments pursuant to section 235 of 
the Act (12 U.S.C. 1715y), apply with full force and effect to a 
mortgage insured under subparts A and B of this part, if the mortgage 
is insured as meeting the eligibility requirements of 24 CFR part 235.
    (b) Section 237 type home mortgages. All of the provisions of 24 
CFR part 237 concerning assistance payments in connection with a 
mortgage insured under section 237, apply with full force and effect to 
a mortgage insured under subparts A and B of this part, if the mortgage 
is insured as meeting the eligibility requirements of 24 CFR part 237.
    27. In Sec. 233.505, paragraph (a) introductory text is revised to 
read as follows:


Sec. 233.505  Cross-reference.

    (a) To be eligible for insurance under this subpart, a mortgage or 
project improvement loan shall meet the eligibility requirements for 
insurance under parts 207, 213, 220, 221, 231, 234, 235, or 241 of this 
chapter except that:
* * * * *
    28. In Sec. 233.751, paragraph (b) introductory text is revised to 
read as follows:


Sec. 233.751  Cross-reference.

* * * * *
    (b) For purposes of this subpart, all the references in parts 207, 
213, 220, 221, 231, 232, 234, 235, 236 and 241 of this chapter to:
* * * * *
    29. Section 233.900 is revised to read as follows:


Sec. 233.900  Cross-reference.

    (a) Section 235(j) type home mortgages. All of the provisions of 24 
CFR part 235 concerning assistance payments pursuant to section 235(j) 
of the Act (12 U.S.C. 1701), apply with full force and effect to a 
mortgage insured under subparts D and E of this part, if the mortgage 
is insured as meeting the eligibility requirements of 24 CFR part 235.
    (b) Section 236 type home mortgages. All of the provisions of 24 
CFR part 236 concerning interest reduction payments pursuant to section 
236 of the Act (12 U.S.C. 1701), apply with full force and effect to a 
mortgage insured under subparts D and E of this part, if the mortgage 
is insured as meeting the eligibility requirements of 24 CFR part 236.

PART 234--CONDOMINIUM OWNERSHIP MORTGAGE INSURANCE

    30. The authority citation for part 234 continues to read as 
follows:

    Authority: 12 U.S.C. 1715b and 1715y; 42 U.S.C. 3535(d). Section 
234.520(a)(2)(ii) is also issued under 12 U.S.C. 1707(a).

    31. Subpart C is revised to read as follows:
Subpart C--Eligibility Requirements--Projects--Conversion Individual 
Sales Units
Sec.
234.501  Eligibility requirements.

Subpart C--Eligibility Requirements--Projects--Conversion 
Individual Sales Units


Sec. 234.501  Eligibility requirements.

    The requirements set forth in 24 CFR part 200, subpart A, apply to 
blanket mortgages on condominium projects insured under section 234 of 
the National Housing Act (12 U.S.C. 1715y), as amended.

PART 236--MORTGAGE INSURANCE AND INTEREST REDUCTION PAYMENT FOR 
RENTAL PROJECTS

    32. The authority citation for part 236 continues to read as 
follows:

    Authority: 12 U.S.C. 1715b and 1715z-1; 42 U.S.C. 3535(d).

    33. Subpart A is revised to read as follows:
Subpart A--Eligibility Requirements for Mortgage Insurance
Sec.
236.1  Applicability and savings clause.

[[Page 14407]]


Subpart A--Eligibility Requirements for Mortgage Insurance


Sec. 236.1  Applicability and savings clause.

    (a) Applicability. This section implements the eligibility 
requirements for mortgage insurance under the Rental and Cooperative 
Housing For Lower Income Families Program contained in section 236 of 
the National Housing Act (12 U.S.C. 1701), as amended. The program 
authorized the Secretary to insure mortgages to support new 
construction or rehabilitation of real property to be used primarily 
for residential rental purposes. A moratorium against issuance of 
commitments to insure new mortgages under section 236 was imposed 
January 5, 1973. Section 236(n) prohibits the insurance of mortgages 
under section 236 after November 30, 1983, except to permit the 
refinance of a mortgage insured under section 236, or to finance 
pursuant to section 236(j)(3), the purchase, by a cooperative or 
nonprofit corporation or association, of a project assisted under 
section 236.
    (b) Savings clause. Any mortgage approved by the Commissioner for 
insurance pursuant to sections 236(n) and 236(j)(3) of the National 
Housing Act, as amended, will be governed by subpart A of this part in 
effect immediately before May 1, 1996 contained in the April 1, 1995 
edition of 24 CFR, parts 220 to 499 and by subparts B through E of this 
part. A list of any amendments to this part published after the April 
1, 1995 CFR revision date is available from the Office of the Rules 
Docket Clerk, Department of Housing and Urban Development, 451 Seventh 
Street, SW, Washington, DC 20410.

PART 237--[REMOVED]

    35. Part 237 is removed.

PART 241--SUPPLEMENTARY FINANCING FOR INSURED PROJECT MORTGAGES

    36. The authority citation for part 241 continues to read as 
follows:

    Authority: 12 U.S.C. 1715b, 1715z-6; 42 U.S.C. 3535(d).

    37. Subpart A is revised to read as follows:

Subpart A--Eligibility Requirements

Sec.
241.1  Eligibility requirements.

Subpart A--Eligibility Requirements


Sec. 241.1  Eligibility requirements.

    The requirements set forth in 24 CFR part 200, subpart A, apply to 
multifamily project mortgages insured under section 241 of the National 
Housing Act (12 U.S.C. 1715z-6), as amended.

PART 242--MORTGAGE INSURANCE FOR HOSPITALS

    37a. The authority citation for part 242 continues to read as 
follows:

    Authority: 12 U.S.C. 1715b, 1715n(t), and 1715z-7; 42 U.S.C. 
3535(d).

    38. Subpart A is revised to read as follows:

Subpart A--Eligibility Requirements

Sec.
242.1  Eligibility requirements.
242.2  License.
242.3  Eligible hospital.

Subpart A--Eligibility Requirements


Sec. 242.1  Eligibility requirements.

    The requirements set forth in 24 CFR part 200, subpart A, apply to 
multifamily project mortgages insured under section 242 of the National 
Housing Act (12 U.S.C. 1715z-7), as amended.


Sec. 242.2  License.

    The Commissioner shall not insure any mortgage under this part 
unless the facility is regulated by the State, municipality or other 
political subdivision in which the facility is or is to be located, and 
the appropriate agency for such jurisdiction provides a license, 
certificate or other assurances the Commissioner considers necessary, 
that the facility complies with any applicable State or local standards 
and requirements for such facility.


Sec. 242.3  Eligible hospital.

    The hospital to be financed with a mortgage insured under this part 
shall involve one of the following: the construction and equipping of a 
new hospital, rehabilitation of a hospital, the addition of new 
facilities or equipment, or the rehabilitation or replacement of a 
portion of an existing hospital structure.

PART 244--MORTGAGE INSURANCE FOR GROUP PRACTICE FACILITIES (TITLE 
XI)

    39. The authority citation for part 244 continues to read as 
follows:

    Authority: 12 U.S.C. 1715b, 1749aaa-5; 42 U.S.C. 3535(d).

    40. Subpart A is revised to read as follows:

Subpart A--Eligibility Requirements

Sec.
244.1  Eligibility requirements.
244.2  License.

Subpart A--Eligibility Requirements


Sec. 244.1  Eligibility requirements.

    The requirements set forth in 24 CFR part 200, subpart A, apply to 
group practice facilities (title XI) of the National Housing Act (12 
U.S.C. 1749aaa), as amended.


Sec. 244.2  License.

    The Commissioner shall not insure any mortgage under this part 
unless the appropriate licensing agency for the State, municipality or 
other political subdivision in which a project is or is to be located 
provides such assurances as the Commissioner considers necessary that 
the facility will comply with any applicable State or local standards 
and requirements for such facilities.

PART 248--PREPAYMENT OF LOW INCOME HOUSING MORTGAGES

    41. The authority citation for part 248 continues to read as 
follows:

    Authority: 12 U.S.C. 1715l note, 4101 note, and 4101-4124; 42 
U.S.C. 3535(d).


Sec. 248.7  [Removed]

    42. Section 248.7 is removed.

PART 265--[REMOVED]

    43. Part 265 is removed.

PART 267--[REMOVED]

    44. Part 267 is removed.

    Dated: March 15, 1996.
Nicolas P. Retsinas,
Assistant Secretary for Housing--Federal Housing Commissioner.
[FR Doc. 96-7488 Filed 3-29-96; 8:45 am]
BILLING CODE 4210-27-P