[Federal Register Volume 61, Number 132 (Tuesday, July 9, 1996)]
[Rules and Regulations]
[Pages 36260-36268]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-17305]



[[Page 36259]]


_______________________________________________________________________

Part VII





Department of Housing and Urban Development





_______________________________________________________________________



24 CFR Part 200, et al.



Single Family Miscellaneous Amendments, Clarifications, and 
Corrections; Final Rule

  Federal Register / Vol. 61, No. 132 / Tuesday, July 9, 1996 / Rules 
and Regulations  

[[Page 36260]]



DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Parts 200, 201, 202, 203, 206, 221, 233, 234, 280 and 291

[Docket No. FR-3977-F-01]
RIN 2501-AG61


Office of the Assistant Secretary for Housing-Federal Housing 
Commissioner; Single Family Miscellaneous Amendments, Clarifications, 
and Corrections

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

ACTION: Final rule.

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

SUMMARY: This final rule makes a variety of technical amendments, 
clarifications and corrections to regulations for the single family 
mortgage insurance programs. None of the amendments or clarifications 
add to the regulatory burden for mortgagors or mortgagees.

EFFECTIVE DATE: August 8, 1996.

FOR FURTHER INFORMATION CONTACT: John J. Coonts, Director, Office of 
Insured Single Family Housing, Department of Housing and Urban 
Development, Room 9266, 451 Seventh Street, SW, Washington, DC 20410. 
Telephone: (202) 708-3046; TTY: (202) 4594. (These are not toll-free 
telephone numbers.)

SUPPLEMENTARY INFORMATION: This rule is designed to make a large number 
of technical improvements to the regulations for single family 
programs. The changes will not add to the regulatory burden for 
mortgagors or mortgagees. Some of the changes are corrections of small 
errors in the current regulations that will have no substantive change 
on the way the rules have been applied in practice. Other changes will 
offer relief from unnecessary requirements.
    Following is an explanation of changes made by the rule.

Part 200

    A technical change is made to part 200 to remove a reference to 
part 267 which has been removed from the Code of Federal Regulations.

Part 201

    The rule makes a typographical correction to the table of contents 
and to Sec. 201.18.

Part 202

    Section 202.3 is amended to revise paragraph (j) to provide that 
the Secretary may identify classes or groups of lenders that are exempt 
from one or more of these fees. This provides more flexibility to the 
program by allowing additional groups to be exempted.
    ``Origination approval agreement'' is included in the heading of 
Sec. 202.11.
    The rule deletes Sec. 202.12(d). That paragraph indicates that 
approval of a supervised mortgagee that is a banking institution or a 
trust company included approval of the mortgagee when acting in a 
fiduciary capacity. The Department considers that the paragraph may be 
misleading by implying that only supervised mortgagees that are banking 
institutions or trust companies may hold mortgages in a trust or other 
fiduciary capacity. Subject to any limitations that may appear in 
regulations for particular programs, such as Sec. 203.434, regarding a 
declaration of trust for a pool of single family mortgages, the 
Department does not restrict mortgagees from holding mortgages in a 
trust or other fiduciary capacity. The Department eliminated trusts as 
eligible mortgagees through a 1992 revision of part 202 but there was 
no intent to prevent FHA-insured mortgages from being held as trust 
assets by an approved mortgagee. The Department will deal only with the 
mortgagee, rather than others who may have interests in the mortgages, 
and will hold the mortgagee solely responsible for complying with 
obligations imposed on mortgagees.
    The provisions regarding approval and recertification fees for 
Title I lenders and Title II mortgagees are amended by adding a new 
sentence permitting the Secretary to identify classes or groups of 
lenders or mortgagees that are exempt from one or more of the fees. The 
current exemption for governmental lenders and mortgagees is left 
intact.

Part 203

    The rule eliminates the requirement in Sec. 203.17(b) (and 
corresponding requirements in Secs. 221.45 and 234.25(b)) that 
mortgages involve a principal obligation in multiples of $50 if the 
mortgage does not include financing of a one-time mortgage insurance 
premium (MIP) payable pursuant to Sec. 203.280. One time MIP has been 
replaced by the up-front segment of risk-based mortgage insurance 
premiums under Secs. 203.284 and 203.285. Rather than substitute the 
up-front segment of risk-based MIP for the one time MIP, however, the 
Department has determined that there is no longer any reason for the 
general requirement that other mortgages without a financed premium be 
in multiples of $50. All mortgages may now be in multiples of $1. 
Corresponding changes are made to Secs. 221.45 and 234.52.
    Two changes are made to Sec. 203.18 which explain how the maximum 
mortgage amount is calculated. A parenthetical phrase is removed from 
Sec. 203.18(a)(1)(ii) to reflect the 1994 legislative change that set 
the maximum dollar amount for an area at 75% of the current Freddie Mac 
limit, instead of 75% of the 1992 Freddie Mac limit. A new 
Sec. 203.18(i) is added to recognize that the maximum mortgage amount 
for an energy efficient mortgage may exceed the area dollar limit that 
would otherwise apply, under conditions prescribed by the Secretary in 
accordance with section 106 of the Energy Policy Act of 1992.
    Section 203.19(c) which applied to the now-repealed section 203(m) 
program for mortgage insurance for seasonal homes is deleted as 
obsolete.
    Language is added in Sec. 203.22(a) to clarify that the mortgage 
provision providing for payment of mortgage insurance premium 
installments by the mortgagor does not require payment for any longer 
than the period during which mortgage insurance premiums are payable by 
the mortgagee to HUD. Obsolete language regarding payment of annual 
charges on ``open-end'' advances is deleted.
    Sections 203.24(a)(i) and 203.44, and related provisions in other 
parts such as 234.70, are amended by deleting references to open-end 
advances.
    Section 203.30 is amended to add a new paragraph (d) regarding 
compliance, for buildings having four (4) or more units which were 
built for first occupancy after March 13, 1991, with the Fair Housing 
Act new contruction requirements at 24 CFR 100.205.
    Sections 203.36 and 234.67 are deleted as unnecessary. See sections 
203.16 and 234.15 regarding the use of a dwelling for transient or 
hotel purposes.
    The language in section 203.38 is amended by changing the two 
references to ``unit'' to ``one or more dwellings.''
    In Secs. 203.40, 203.251(s), and 234.1(n), ``Commonwealth of the 
Northern Mariana Islands'' is substituted for the ``Trust Territory of 
the Pacific Islands'' because the Commonwealth of the Northern Mariana 
Islands is the only portion of the former Trust Territory of the 
Pacific Islands in which FHA single family programs are currently 
authorized.
    The ``rule of seven'' in Sec. 203.42 currently prohibits mortgage 
insurance when a mortgagor is purchasing a property to be rented that 
is ``part of, or adjacent or contiguous to, a project, subdivision or 
group of similar rental

[[Page 36261]]

properties'' in which the mortgagor will have a financial interest in 
more than seven dwelling units. This rule removes ``subdivision'' from 
the quoted language. Denial of mortgage insurance simply because a 
mortgagor has a financial interest in eight units in a very large 
subdivision does not further the purpose of the ``rule of seven,'' 
which is to avoid insuring single family mortgages on rental units that 
are in such close geographical proximity with other similar rental 
units that they could logically be considered part of one multifamily 
project rather than unrelated single family units. In practice, current 
departmental policy in applying the ``rule of seven'' has been directed 
to properties within a two-block radius from one another. Continued 
reference to a subdivision would cause confusion regarding the intent 
of Sec. 203.42.
    Section 203.43(c)(3) and the corresponding Sec. 234.52(c) are 
amended to permit a $50 increase in the monthly payment for refinancing 
to a shorter term, to reflect the prevailing policy that has been 
applied to date on a waiver basis.
    Section 203.43b regarding mortgage insurance on seasonal occupancy 
homes under now-repealed section 203(m) is deleted as obsolete.
    Section 203.43f(b) is amended by deleting the last sentence which 
refers to section 203.17(e). Section 203.17(e) was completely revised 
and the current cross-reference is not meaningful.
    The introductory paragraph of Sec. 203.43h is revised to clarify 
that a mortgage covering a one- to four-family residence located on 
Indian land is eligible for insurance pursuant to section 248 of the 
National Housing Act, if the mortgage is made (1) by an Indian Tribe or 
(2) on a leasehold estate, by an Indian who will occupy it as a 
principal residence. Tribes are already recognized as eligible non-
occupant mortgagors under Sec. 203.18(f)(3). This amendment to 
Sec. 203.43h reconciles the two sections. In addition, a statement has 
been added to the definition of an ``Indian tribe,'' in 
Sec. 203.43h(g), to note that, for purposes of engaging in section 248 
insured mortgage transactions, an Indian tribe may act through its duly 
authorized representative.
    The reference to Sec. 203.50 contained in Sec. 203.43i is deleted 
to allow rehabilitation loan mortgages under section 203(k) on section 
247 Hawaiian home lands. This would have been permitted by a proposed 
rule published on July 23, 1986, but the provision was omitted from a 
final rule on the Hawaiian home lands program published on March 16, 
1987, because of the difficulty of operating the Hawaiian home lands 
program for the General Insurance Fund (as required for section 203(k) 
loans) in addition to the Mutual Mortgage Fund. This difficulty no 
longer exists as a result of a subsequent statutory change that 
provides for all Hawaiian home land mortgages to be in the General 
Insurance Fund.
    Section 225 of the National Housing Act authorizes FHA insurance 
for open-end mortgages under which the mortgagee could advance 
additional funds under the mortgage to finance later improvements or 
repairs that would substantially protect or improve the basic 
livability or utility of the property. Although mentioned in the 
regulations, FHA does not have administrative procedures for the 
processing of open-end mortgages; they are not provided for in HUD's 
instructions for mortgage forms, and GNMA has no programs for the 
pooling of open-end mortgages. Various provisions in parts 203 and 234, 
including Secs. 203.44 and 234.70, are amended to make clear that FHA 
is not insuring open-end mortgages.
    The introductory paragraph of Sec. 203.49 is amended by including a 
reference to section 203(h) in the second sentence to permit adjustable 
rate mortgages (ARMs) in disaster situations. Section 203(h) mortgages 
generally meet all requirements of section 203(b) mortgages except that 
a higher loan-to-value ratio is permitted. The Department has 
determined that ARMs should be available on the same terms as for 
section 203(b) mortgages.
    Some issuers of 10-year warranty plans that have been approved by 
HUD and used to support high-ratio mortgages for new construction have 
read HUD's warranty plan requirements as permitting plans that impose 
the requirement that homeowners submit warranty claims to arbitration. 
This has never been HUD's intention under the warranty plan final rule. 
Although arbitration must be available to a dissatisfied homeowner, 
judicial resolution of disputes must also be available to homeowners. 
HUD has modified the wording of Sec. 203.204(g) to make this clear.
    Section 203.255(b)(2) is amended by replacing ``upon a form'' with 
``in a form'' since application information may now be collected 
electronically through CHUMS.
    Section 203.281(b)(1) is amended by deleting the language following 
the first comma to simplify the procedures for calculating the MIP 
amount for the small number of cases for which one-time MIP is still 
used.
    Sections 203.356 and 203.402 regarding the notice of foreclosure 
are amended to provide a more consistent application of the rules for 
curtailment of debenture interest included in insurance benefits paid 
to mortgagees. Section 203.356 is divided into subsection (a) for the 
requirements to provide the notice of foreclosure, and subsection (b) 
for exercising reasonable diligence in prosecuting the foreclosure. 
Section 203.402(k)(1) is also subdivided. New subsection 
203.402(k)(1)(ii) limits the amount of debenture interest that the 
Secretary may curtail if the mortgagee does not provide the Secretary 
the notice of foreclosure. This change will reduce the debenture 
interest curtailment when the mortgagee proceeded to foreclose with 
reasonable diligence, despite its failure to forward the initial notice 
of foreclosure. The specific cap on debenture interest curtailment will 
be set by administrative issuances, but the curtailment will not exceed 
what is currently being assessed.
    Sections 203.378, 203.379, and 203.380 regarding property condition 
and adjustments for damage are amended to clarify that tornado damage 
includes damage by hurricanes. Both storm systems are defined as 
violent whirlwinds and historically have been treated the same by the 
Department in this regard.
    Section 203.502(b) regarding notification of transfer of servicing 
is amended to change the responsibility for notifying the Secretary 
from the transferor mortgagee to the transferee. This change will 
enhance HUD's ability to coordinate the change in servicer with the 
collection of mortgage insurance premiums from the new servicer.
    Section 203.670 addresses conveyance of occupied property. 
Paragraph (a) states HUD's property disposition policy, which is also 
stated in Sec. 291.1 in part 291, Disposition of HUD-Acquired Single 
Family Property. However, Sec. 291.1 was amended to reflect a revised 
policy in a September 20, 1993 Interim Rule, made final on September 
22, 1994. Therefore, Sec. 203.670(a) is being amended to reflect the 
revised policy.
    Section 203.685 is removed. It authorized waivers of single family 
servicing regulations, but such waivers are now authorized by the 
Department-wide waiver authority in 24 CFR 5.100.

Part 206

    Section 206.13 is removed because it addresses the terminated 
single family co-insurance program. Section 206.17 is amended to 
recognize that the basic payment term and tenure payment

[[Page 36262]]

options for HECMs can be combined with lines of credit.

Part 234

    Sections 234.11 and 234.54 are added to conform to corresponding 
provisions in part 203.
    Section 234.16 is amended to add a new paragraph (d) regarding 
compliance, for buildings having four (4) or more units which were 
built for first occupancy after March 13, 1991, with the Fair Housing 
Act new construction requirements at 24 CFR 100.205.

Part 280

    Section 280.330(c)(2) is amended by adding the following language: 
``. . . remaining balance of the . . .''. The way this section is 
currently written, it appears that the entire original mortgage amount 
is cancelled. In addition, the spelling of ``cancelled'' is corrected.

Part 291

    Section 291.105(h)(2) is amended to give the Secretary more 
flexibility in determining what form of cash equivalents will be 
acceptable for earnest money deposits in the sale of HUD-acquired 
single family properties, given rapidly changing banking industry 
practices. For example, the amendment permits HUD to accept teller's 
checks that are currently excluded.
    Section 291.115(b)(2) of the regulations on HUD property 
disposition is amended to clarify that section 203(k) insured financing 
for investors is available for eligible properties without increased 
down-payment requirements. Section 291.110(e) already provides for 
section 203(k) financing in property disposition sales. As a general 
rule, investors are precluded from obtaining FHA-insured mortgage 
financing. HUD-acquired properties may be sold to investors with FHA-
insured financing but, in order to protect the insurance funds, based 
upon past experiences, the property disposition regulations were 
drafted to require higher down-payments for investors. A 25 percent 
down-payment is required for investors who purchase a one-unit single 
family dwelling with insured mortgage financing.
    The section 203(k) program specifically makes investors eligible to 
obtain mortgage financing with a 15 percent down-payment based upon the 
lesser of the estimated value of the property plus the cost of 
rehabilitation, or 110 percent of the estimate of value after 
rehabilitation. The availability of the section 203(k) program for 
property disposition sales, as provided by Sec. 291.110(e), 
incorporates the 15 percent down-payment requirement for investors 
through the regulations that implement section 203(k). In order to make 
it clear that the 25 percent down-payment provision of 
Sec. 291.115(b)(2) does not apply to section 203(k) investor mortgages, 
a technical amendment is being made to that section.

Typographical and Technical Errors, and Cross Reference Corrections

    This rule corrects several typographical and technical errors and 
also corrects and adds cross references and removes cross references 
that are no longer applicable. Also, Sec. 203.390 is amended to insert 
language inadvertently omitted when that section was last amended on 
July 1, 1993, at 58 FR 35369.

Other Matters

Justification for Final Rulemaking

    In general, the Department publishes a rule for public comment 
before issuing a rule for effect, in accordance with its own 
regulations on rulemaking, 24 CFR part 10. However, part 10 does 
provide for exceptions from that general rule where 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) The Department finds that good cause exists to publish this 
rule for effect without first soliciting public comment, in that prior 
public procedure is unnecessary and contrary to public interest because 
the amendments made by this rule give greater clarity and accuracy to 
the provisions. They do not substantively affect the rights and duties 
of participants in the programs.

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.

Regulatory Flexibility Act

    The Secretary, in accordance with the Regulatory Flexibility Act (5 
U.S.C. 605(b)), has reviewed this rule before publication and by 
approving it certifies that this rule does not have a significant 
economic impact on a substantial number of small entities. This final 
rule makes a variety of technical amendments, clarifications and 
corrections to regulations for the single family mortgage insurance 
programs. None of the amendments or clarifications add to the 
regulatory burden for mortgagors or mortgagees.

Executive Order 12612, Federalism

    The General Counsel, as the Designated Official under section 6(a) 
of Executive Order 12612, Federalism, has determined that the policies 
contained in 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. As a result, 
the rule is not subject to review under the order.

Executive Order 12606, The Family

    The General Counsel, as the Designated Official under Executive 
Order 12606, The Family, has determined that this rule does not have 
potential for significant impact on family formation, maintenance, and 
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, as those policies and programs 
relate to family concerns.

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 201

    Health facilities, Historic preservation, Home improvement, Loan 
programs--housing and community development, Manufactured homes, 
Mortgage insurance, Reporting and recordkeeping requirements.

24 CFR Part 202

    Administrative practice and procedure, Home improvement, 
Manufactured homes, Mortgage

[[Page 36263]]

insurance, Reporting and recordkeeping requirements.

24 CFR Part 203

    Hawaiian Natives, Home improvement, Indians--lands, Loan programs--
housing and community development, Mortgage insurance, Reporting and 
recordkeeping requirements, Solar energy.

24 CFR Part 206

    Aged, Condominiums, Loan programs--housing and community 
development, Mortgage insurance, Reporting and recordkeeping 
requirements.

24 CFR Part 221

    Low and moderate income housing, Mortgage insurance, 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 280

    Community development, Grant programs--housing and community 
development, Loan programs--housing and community development, Low and 
moderate income housing, Nonprofit organizations, Reporting and 
recordkeeping requirements.

24 CFR Part 291

    Community facilities, Conflict of interests, Homeless, Lead 
poisoning, Low and moderate income housing, Mortgages, Reporting and 
recordkeeping requirements, Surplus government property.

    Accordingly, in title 24 of the Code of Federal Regulations, parts 
200, 201, 202, 203, 206, 221, 233, 234, 280, and 291 are amended as 
follows:

PART 200--INTRODUCTION

    1. The authority citation for 24 CFR part 200 continues to read as 
follows:

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


Sec. 200.810  [Amended]

    2. Section 200.810(b) is amended to remove the phrase ``, who shall 
be listed on the HUD Appraiser Roster under Sec. 267.8(d)(2) of the 
chapter,''.

PART 201--TITLE I PROPERTY IMPROVEMENT AND MANUFACTURED HOME LOANS

    3. The authority citation for 24 CFR part 201 continues to read as 
follows:

    Authority: 12 U.S.C. 1703; 42 U.S.C. 1436a and 3535(d).


Sec. 201.18  [Amended]

    4. Section 201.18 is amended by revising the section heading to 
read, ``Modification agreement or repayment plan.''

PART 202--APPROVAL OF LENDING INSTITUTIONS AND MORTGAGEES

    5. The authority citation for 24 CFR part 202 continues to read as 
follows:

    Authority: 12 U.S.C. 1703, 1709, and 1715b; 42 U.S.C. 3535(d).

    6. Section 202.3(j) is amended to add at the end the following 
sentence:


Sec. 202.3  General approval requirements.

* * * * *
    (j) * * * The Secretary may identify classes or groups of lenders 
that are exempt from one or more of these fees.
* * * * *
    7. Section 202.11 is amended by revising the section heading to 
read as follows:


Sec. 202.11  Approval, origination approval agreement, recertification, 
withdrawal of approval and termination of approval agreement.

* * * * *
    8. Section 202.12(k) is amended to add at the end the following 
sentence:


Sec. 202.12  General approval requirements.

* * * * *
    (k) * * * The Secretary may identify classes or groups of 
mortgagees that are exempt from one or more of these fees.
* * * * *


Sec. 202.13  [Amended]

    9. Section 202.13 is amended by removing paragraph (d) and 
redesignating paragraph (e) as paragraph (d).

PART 203--SINGLE FAMILY MORTGAGE INSURANCE

    10. The authority citation for 24 CFR part 203 continues to read as 
follows:

    Authority: 12 U.S.C. 1709, 1710, 1715b, and 1715u; 42 U.S.C. 
3535(d).

    11. Section 203.5 is amended by revising paragraph (e) to read as 
follows:


Sec. 203.5  Direct Endorsement process.

* * * * *
    (e) Appraisal. (1) A mortgagee shall have the property appraised in 
accordance with such standards and requirements as the Secretary may 
prescribe.
    (2) The mortgagee shall not discriminate on the basis of race, 
color, religion, national origin, sex, age, or disability in the 
selection of an appraiser.
    12. Section 203.17 is amended by revising paragraph (b) to read as 
follows:


Sec. 203.17  Mortgage provisions.

* * * * *
    (b) Mortgage multiples. A mortgage shall involve a principal 
obligation in a multiple of $1.
* * * * *
    13. Section 203.18 is amended to remove the parenthetical phrase 
``(as in effect on September 30, 1992)'' in paragraph (a)(1)(ii) and to 
add a new paragraph (i) to read as follows:


Sec. 203.18  Maximum mortgage amounts.

* * * * *
    (i) Energy efficient mortgages. The principal amount of energy 
efficient mortgages may exceed the maximum amounts determined under 
paragraph (a)(1) of this section under conditions prescribed by the 
Secretary in accordance with section 106 of the Energy Policy Act of 
1992.


Sec. 203.19  [Amended]


Sec. 203.19  [Amended]

    14. Section 203.19 is amended by removing paragraph (c).
    15. Section 203.22 is amended by revising paragraph (a) to read as 
follows:


Sec. 203.22  Payment of insurance premiums or charges; prepayment 
privileges.

    (a) Payment of periodic insurance premiums or charges. Except with 
respect to mortgages for which a one-time mortgage insurance premium is 
paid pursuant to Sec. 203.280, the mortgage may provide for monthly 
payments by the mortgagor to the mortgagee of an amount equal to one-
twelfth of the annual mortgage insurance premium payable by the 
mortgagee to the Commissioner. Such payments continue only so long as 
the contract of insurance shall remain in effect or for such shorter 
period as mortgage insurance premiums are payable by the mortgagee to 
the Commissioner.
* * * * *
    16. Section 203.24 is amended by revising paragraph (a)(1) to read 
as follows:


Sec. 203.24  Application of payments.

    (a) * * *
    (1) Premium charges under the contract of insurance (other than a 
one-time or up-front mortgage insurance

[[Page 36264]]

premium paid in accordance with Secs. 203.280, 203.284 and 203.285), 
charges for ground rents, taxes, special assessments, flood insurance 
premiums, if required, and fire and other hazard insurance premiums;
* * * * *
    17. Section 203.30 is amended by adding a new paragraph (d) to read 
as follows:


Sec. 203.30  Certificate of nondiscrimination by the mortgagor.

* * * * *
    (d) That buildings having four (4) or more units, which were built 
for first occupancy after March 13, 1991, were constructed in 
compliance with the Fair Housing Act new construction requirements in 
24 CFR 100.205.


Sec. 203.36  [Removed and reserved]

    18. Section 203.36 is removed and reserved.
    19. Section 203.38 is revised to read as follows:


Sec. 203.38  Location of dwelling.

    At the time a mortgage is insured there must be located on the 
mortgaged property one or more dwellings designed principally for 
residential use for not more than four families.
    20. Section 203.40 is amended by revising the first sentence to 
read as follows:


Sec. 203.40  Location of property.

    The mortgaged property shall be located within the United States, 
Puerto Rico, Guam, the Virgin Islands, the Commonwealth of the Northern 
Mariana Islands, and American Samoa. * * *
    21. Section 203.42 is amended by revising paragraph (a) to read as 
follows:


Sec. 203.42  Rental properties.

    (a) A mortgage on property upon which there is a dwelling to be 
rented by the mortgagor shall not be eligible for insurance if the 
property is a part of, or adjacent or contiguous to, a project, or 
group of similar rental properties, in which the mortgagor has a 
financial interest in eight or more dwelling units.
* * * * *
    22. Section 203.43 is amended by revising paragraph (c)(3) to read 
as follows:


Sec. 203.43  Eligibility of miscellaneous type mortgages.

* * * * *
    (c) * * *
    (3) The mortgage must result in a reduction in regular monthly 
payments by the mortgagor, except:
    (i) When a fixed rate mortgage is given to refinance an adjustable 
rate mortgage held by a mortgagor who is to occupy the dwelling as a 
principal residence or secondary residence, as these terms are defined 
in Sec. 203.18(f); or
    (ii) When refinancing a mortgage for a shorter term will result in 
an increase in the mortgagor's regular monthly payments of no more than 
$50. In the case of a graduated payment mortgage, the reduction in 
regular monthly payments means a reduction from the payment due under 
the existing mortgage for the month in which the refinancing mortgage 
is executed.
* * * * *


Sec. 203.43b  [Removed and reserved]

    23. Section 203.43b is removed and reserved.


Sec. 203.43f  [Amended]

    24. Section 203.43f(b) is amended to remove the last sentence.
    25. Section 203.43h is amended by revising the introductory text, 
revising paragraph (b), and revising paragraph (g)(3), to read as 
follows:


Sec. 203.43h  Eligibility of mortgages on Indian land insured pursuant 
to section 248 of the National Housing Act.

    A mortgage covering a one- to four-family residence located on 
Indian land shall be eligible for insurance pursuant to section 248 of 
the National Housing Act (12 U.S.C. 1715z-13), notwithstanding 
otherwise applicable requirements related to marketability of title, if 
the mortgage meets the requirements of this subpart as modified by this 
section and is made by an Indian Tribe or on a leasehold estate, by an 
Indian who will occupy it as a principal residence. Mortgage insurance 
on cooperative shares is not authorized under this section.
* * * * *
    (b) Eviction procedures. Before HUD will insure a mortgage on 
Indian land, the tribe having jurisdiction over such property must 
certify to the HUD Field Office that it has adopted and will enforce 
procedures for eviction of defaulted mortgagors where the insured 
mortgage has been foreclosed.
* * * * *
    (g) * * *
    (3) ``Indian tribe'' means any Indian or Alaska native tribe, band, 
nation, or other organized group or community of Indians or Alaskan 
natives recognized as eligible for the services provided to Indians or 
Alaska natives by the Secretary of the Interior because of its status 
as such an entity, or that is an eligible recipient under chapter 67 of 
title 31, United States Code. For purposes of engaging in section 248 
insured mortgage transactions under this section, an Indian tribe may 
act through its duly authorized representative.
* * * * *
    26. Section 203.43i is amended by revising paragraph (a) to read as 
follows:


Sec. 203.43i  Eligibility of mortgages on Hawaiian Home Lands insured 
pursuant to section 247 of the National Housing Act.

    (a) Eligibility. A mortgage on a homestead lease granted by the 
Department of Hawaiian Home Lands covering a one- to four-family 
residence located on Hawaiian home lands is eligible for insurance 
pursuant to section 247 of the National Housing Act (12 U.S.C. 1715z-
12) if the mortgagor is a native Hawaiian who will occupy it as a 
principal residence, and if the mortgage meets the requirements of this 
subpart as modified by this section. Mortgage insurance on cooperative 
shares under Sec. 203.43c on homes in federally impacted areas under 
Sec. 203.43e is not authorized under this section.
* * * * *
    27. Section 203.44 is revised to read as follows:


Sec. 203.44  Eligibility of advances.

    Mortgagees may not make open-end advances under section 225 of the 
National Housing Act (12 U.S.C. 1715p) in connection with the mortgages 
insured under this chapter.
    28. Section 203.49 is amended by revising the second sentence of 
the introductory text and by removing the second sentence of paragraph 
(a) beginning with ``The weekly average * * *'', to read as follows:


Sec. 203.49  Eligibility of adjustable rate mortgages.

    * * * This section shall apply only to mortgage loans described 
under sections 203(b), 203(h) and 203(k) of the National Housing Act.
* * * * *
    29. Section 203.204 is amended by revising paragraph (a) and by 
revising the third sentence of paragraph (g), to read as follows:


Sec. 203.204  Requirements and limitations of a plan.

    (a) A Plan must assure timely resolution of homeowners' complaints 
or claims covered under Sec. 203.205. Warranties set forth in a Plan 
must comply with section 2301(a)(1)-(13) of the Magnuson-Mass Warranty-
Federal Trade Commission Improvement Act (15 U.S.C. 2301-2312) along 
with the requirements and criteria set out in this section.
* * * * *

[[Page 36265]]

    (g) * * *  A Plan must contain pre-arbitration conciliation 
provisions at no cost to the homeowner, and provision for judicial 
resolution of disputes, but arbitration, which must be available to a 
homeowner during the entire term of the coverage contract, must be an 
assured recourse for a dissatisfied homeowner.
* * * * *
    30. Section 203.251 is amended by revising paragraph (s) to read as 
follows:


Sec. 203.251  Definitions.

* * * * *
    (s) State includes the several States, Puerto Rico, the District of 
Columbia, Guam, the Commonwealth of the Northern Mariana Islands, 
American Samoa, and the Virgin Islands.
* * * * *
    31. Section 203.255 is amended by revising paragraph (b)(2) to read 
as follows:


Sec. 203.255  Insurance of mortgage.

    (b) * * *
    (2) An application for insurance of the mortgage in a form 
prescribed by the Secretary;
* * * * *


Sec. 203.265  [Amended]

    32. Section 203.265(b) is amended in the last sentence to remove 
the phrase ``Treasury Fiscal Requirements Manual'' and add in its place 
the phrase ``Treasury Financial Manual.''
    33. Section 203.281 is amended by revising paragraph (b)(1) to read 
as follows:


Sec. 203.281  Calculation of one-time MIP.

* * * * *
    (b)(1) The Commissioner shall determine the applicable premium 
percentage in accordance with sound financial and actuarial practice.
* * * * *


Sec. 203.284  [Amended]

    34. Section 203.284 is amended by:
    a. Removing the second sentence in paragraph (a)(1);
    b. Removing the phrase ``pursuant to paragraph (b)(1)(i) or 
(b)(2)(i) of this section,'' in paragraph (c); and
    c. Removing the phrase ``Treasury Fiscal Requirements Manual'' in 
the last sentence of paragaph (e), and adding in its place the phrase 
``Treasury Financial Manual.''
    35. Section 203.285 is amended by revising the second sentence of 
paragraph (c) to read as follows:


Sec. 203.285  Fifteen-year mortgages: Calculation of up-front and 
annual MIP on or after December 26, 1992.

* * * * *
    (c) Applicability of certain provisions. * * * The provisions of 
paragraphs (c), (d), (e), and (g) of Sec. 203.284 also shall be 
applicable to mortgages subject to premiums under this section.
* * * * *
    36. Section 203.346 is amended by revising the first sentence to 
read as follows:


Sec. 203.346  Postponement of foreclosure--mortgagors in military 
service.

    If at any time during default the mortgagor is a ``Person in 
military service,'' as such term is defined in the Soldiers' and 
Sailors' Civil Relief Act of 1940, the period during which the 
mortgagor is in such service shall be excluded in computing the period 
within which the mortgagee shall commence foreclosure or acquire the 
property by other means as provided in Sec. 203.355 of this subpart. * 
* *
    37. Section 203.356 is revised to read as follows:


Sec. 203.356  Notice of foreclosure and pre-foreclosure sale; 
reasonable diligence requirements.

    (a) Notice of foreclosure and pre-foreclosure sale. The mortgagee 
must give notice to the Secretary, in a format prescribed by the 
Secretary, within 30 days after the institution of foreclosure 
proceedings. The mortgagee must give notice to the Secretary, in a 
format prescribed by the Secretary, within the time-frame prescribed by 
the Secretary, of the acceptance of any mortgagor into the pre-
foreclosure sale procedure.
    (b) Reasonable diligence. The mortgagee must exercise reasonable 
diligence in prosecuting the foreclosure proceedings to completion and 
in acquiring title to and possession of the property. A time frame that 
is determined by the Secretary to constitute ``reasonable diligence'' 
for each State is made available to mortgagees.
    38. Section 203.378 is amended by revising paragraph (c)(1) to read 
as follows:


Sec. 203.378  Property condition.

* * * * *
    (c) * * *
    (1) Damage by fire, flood, earthquake, hurricane, or tornado;
* * * * *
    39. Section 203.379 is amended by revising paragraph (a), 
introductory text, and paragraph (b), introductory text, to read as 
follows:


Sec. 203.379  Adjustment for damage or neglect.

    (a) If the property has been damaged by fire, flood, earthquake, 
hurricane, or tornado, or, for mortgages insured on or after January 1, 
1977, the property has suffered damage because of the mortgagee's 
failure to take action as required by Sec. 203.377, the damage must be 
repaired before conveyance of the property or assignment of the 
mortgage to the Secretary, except under the following conditions:
* * * * *
    (b) For mortgages insured under firm commitments issued on or after 
November 19, 1992, or under direct endorsement processing where the 
credit worksheet was signed by the mortgagee's underwriter on or after 
November 19, 1992, the provisions of paragraph (a) of this section 
apply and, in addition, if the property has been damaged during the 
time of the mortgagee's possession by events other than fire, flood, 
earthquake, hurricane, or tornado, or if it was damaged notwithstanding 
reasonable action by the mortgagee as required by Sec. 203.377 of this 
part, the mortgagee must provide notice of such damage to the Secretary 
and may not convey until directed to do so by the Secretary. The 
Secretary will either:
* * * * *
    40. Section 203.380 is amended by revising paragraph (a)(1)(i) to 
read as follows:


Sec. 203.380  Certificate of property condition.

    (a) * * *
    (1) * * *
    (i) Undamaged by fire, flood, earthquake, hurricane or tornado; and
* * * * *
    41. Section 203.390 is amended by revising paragraph (b)(1) to read 
as follows:


Sec. 203.390  Waiver of title--mortgages or property formerly held by 
the Secretary.

* * * * *
    (b) * * *
    (1) If a property held by the Secretary is sold by the Secretary 
who also insures a mortgage financing the sale, and the mortgage is 
later reassigned to the Secretary or the property covered by the 
mortgage is later conveyed to the Secretary, the Secretary will not 
object to title by reason of any lien or other adverse interest that 
was senior to the mortgage on the date the mortgage was filed for 
record, except where the lien or other adverse interest arose from a 
lien or interest that had already been recorded against the mortgagor.
* * * * *
    42. Section 203.402 is amended by revising paragraphs (b), (c) and 
(k)(1) to read as follows:

[[Page 36266]]

Sec. 203.402  Items included in payment--conveyed and non-conveyed 
properties.

* * * * *
    (b) Special assessments, which are noted on the application for 
insurance or which become liens after the insurance of the mortgage.
    (c) Hazard insurance premiums on the mortgaged property not in 
excess of a reasonable rate as defined in Sec. 203.379(a)(4).
* * * * *
    (k)(1) For properties conveyed to the Secretary, an amount 
equivalent to the debenture interest which would have been earned, as 
of the date such payment is made, on the portion of the insurance 
benefits paid in cash, if such portion had been paid in debentures, 
except that:
    (i) When the mortgagee fails to meet any one of the applicable 
requirements of Secs. 203.355, 203.356(b), 203.359, 203.360, 203.365, 
203.606(b)(1), or 203.366 within the specified time and in a manner 
satisfactory to the Secretary (or within such further time as the 
Secretary may approve in writing), the interest allowance in such cash 
payment shall be computed only to the date on which the particular 
required action should have been taken or to which it was extended;
    (ii) When the mortgagee fails to meet the requirements of 
Sec. 203.356(a) of this part within the specified time and in a manner 
satisfactory to the Secretary (or within such further time as the 
Secretary may approve in writing), the interest allowance in such cash 
payment shall be computed to a date set administratively by the 
Secretary.
* * * * *
    43. An undesignated center heading ``GRADUATED PAYMENT MORTGAGES'' 
is added after Sec. 203.435 and before Sec. 203.436.
    44. Section 203.502 is amended to revise the first sentence of 
paragraph (a) and all of paragraph (b) to read as follows:


Sec. 203.502  Responsibility for servicing.

    (a) After January 10, 1994, servicing of insured mortgages must be 
performed by a mortgagee that is approved by HUD to service insured 
mortgages. * * *
* * * * *
    (b) Whenever servicing of any mortgage is transferred from one 
mortgagee or servicer to another, notice of the transfer of service 
shall be delivered:
    (1) By the transferor mortgagee or servicer to the mortgagor. The 
notification shall be delivered not less than 15 days before the 
effective date of the transfer and shall contain the information 
required in Sec. 3500.21(e)(2) of this title; and
    (2) By the transferee mortgagee or servicer:
    (i) To the mortgagor. The notification shall be delivered not less 
than 15 days before the effective date of the transfer and shall 
contain the information required in Sec. 3500.21(e)(2) of this title; 
and
    (ii) To the Secretary. This notification shall be delivered within 
15 days of the transfer, in a format prescribed by the Secretary.
* * * * *
    45. Section 203.604 is amended by revising the second sentence of 
paragraph (b) to read as follows:


Sec. 203.604   Contact with the mortgagor.

* * * * *
    (b) * * * If default occurs in a repayment plan arranged other than 
during a personal interview, the mortgagee must have a face-to-face 
meeting with the mortgagor, or make a reasonable attempt to arrange 
such a meeting within 30 days after such default and at least 30 days 
before foreclosure is commenced, or at least 30 days before assignment 
is requested if the mortgage is insured on Hawaiian home land pursuant 
to section 247 or Indian land pursuant to section 248 or if assignment 
is requested under Sec. 203.350(d) for mortgages authorized by section 
203(q) of the National Housing Act.
* * * * *
    46. Section 203.670 is amended by revising paragraph (a) to read as 
follows:


Sec. 203.670   Conveyance of occupied property.

    (a) It is HUD's policy to reduce the inventory of acquired 
properties in a manner that expands homeownership opportunities, 
strengthens neighborhoods and communities, and ensures a maximum return 
to the mortgage insurance fund.
* * * * *
    47. Section 203.679 is amended by revising paragraph (b)(4) to read 
as follows:


Sec. 203.679   Continued occupancy after conveyance.

* * * * *
    (b) * * *
    (4) Assignment of the property by the Secretary to a different use 
or program.


Sec. 203.685   [Removed]

    48. Section 203.685 is removed.

PART 206--HOME EQUITY CONVERSION MORTGAGE INSURANCE

    49. The authority citation for 24 CFR part 206 continues to read as 
follows:

    Authority: 12 U.S.C. 1715b, 1715z-1720; 42 U.S.C. 3535(d).


Sec. 206.3   [Amended]

    50. Section 206.3 is amended by removing the last sentence of the 
definition of ``Maximum claim amount''.
    51. Section 206.9 is amended by revising the paragraph heading of 
paragraph (b) to read as follows:


Sec. 206.9   Eligible mortgagees.

* * * * *
    (b) HUD approved mortgagees.


Sec. 206.13   [Removed and reserved]

    52. Section 206.13 is removed and reserved.
    53. Section 206.17 is amended by revising paragraph (a) to read as 
follows:


Sec. 206.17   General.

    (a) Payment options. A mortgage shall initially provide for the 
tenure payment option (Sec. 206.19(a)), the term payment option 
(Sec. 206.19(b)), or the line of credit payment option 
(Sec. 206.19(c)), or a combination as provided in Sec. 206.25(d), 
subject to later change in accordance with Sec. 206.26.
* * * * *


Sec. 206.45   [Amended]

    54. Section 206.45(b) is amended to remove the second sentence.


Sec. 206.121   [Amended]

    55. Section 206.121(c) is amended to remove the citation 
``Sec. 206.27(e)'' and to add in its place the citation 
``Sec. 206.27(d).''

PART 221--LOW COST AND MODERATE INCOME MORTGAGE INSURANCE

    56. 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).

    57. Section 221.45 is revised to read as follows:


Sec. 221.45   Mortgage obligation in multiples.

    The mortgage shall involve a principal obligation in multiples of 
$1.

PART 233--EXPERIMENTAL HOUSING MORTGAGE INSURANCE

    58. The authority citation for part 233 is revised to read as 
follows:

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


[[Page 36267]]


    59. Section 233.5 is amended by revising paragraph (a) introductory 
text and paragraph (b) 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 Sec. 203.1 et seq. (part 203, subpart A); Sec. 213.501 
et seq. (part 213, subpart C); Sec. 220.1 et seq. (part 220, subpart 
A); Sec. 221.1 et seq. (part 221, subpart A); Sec. 226.1 et seq. (part 
226, subpart A); Sec. 234.1 et seq. (part 234, subpart A); Sec. 235.1 
et seq. (part 235, subpart A); or Sec. 237.1 et seq. (part 237, subpart 
A) of this chapter, except that:
* * * * *
    (b) For the purposes of this subpart, all references in parts 203, 
213, 220, 221, 226, 234, 235, and 237 of this chapter to sections 203, 
213, 220, 221, 809, 234, 235, and 237 of the National Housing Act shall 
be construed to refer to section 233 of the Act.

PART 234--CONDOMINIUM OWNERSHIP MORTGAGE INSURANCE

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

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

    61. Section 234.1 is amended by revising paragraph (n) to read as 
follows:


Sec. 234.1   Definitions used in this subpart.

* * * * *
    (n) State includes the several States, Puerto Rico, the District of 
Columbia, Guam, the Commonwealth of the Northern Mariana Islands, 
American Samoa, and the Virgin Islands.
* * * * *
    62. Section 234.11 is added to read as follows:


Sec. 234.11   Disclosure regarding interest due upon mortgage 
prepayment.

    Each mortgagee with respect to a mortgage under this part shall, at 
or before closing with respect to any such mortgage, provide the 
mortgagor with written notice in a form prescribed by the Commissioner 
describing any requirements the mortgagor must fulfill upon prepayment 
of the principal amount of the mortgage to prevent the accrual of any 
interest on the principal amount after the date of such prepayment.
    63. Section 234.16 is amended by adding a new paragraph (d) to read 
as follows:


Sec. 234.16   Certificate of nondiscrimination by mortgagor.

* * * * *
    (d) That buildings having four (4) or more units, which were built 
for first occupancy after March 13, 1991, were constructed in 
compliance with the Fair Housing Act new construction requirements in 
24 CFR 100.205.
    64. Section 234.25 is amended by revising paragraph (b) to read as 
follows:


Sec. 234.25   Mortgage provisions.

* * * * *
    (b) Mortgage multiples. The mortgage shall involve a principal 
obligation in a multiple of $1.
* * * * *
    65. Section 234.52 is amended by revising paragraph (c) to read as 
follows:


Sec. 234.52   Refinancing of existing mortgages.

* * * * *
    (c) The mortgage must result in a reduction in regular monthly 
payments by the mortgagor, except:
    (1) When a fixed rate mortgage is given to refinance an adjustable 
rate mortgage held by a mortgagor who is to occupy the dwelling as a 
principal residence or secondary residence, as these terms are defined 
in Sec. 237.27(e); or
    (2) When refinancing a mortgage for a shorter term will result in 
an increase in the mortgagor's regular monthly payments of no more than 
$50. In the case of a graduated payment mortgage, the reduction in 
regular monthly payments means a reduction from the payment due under 
the existing mortgage for the month in which the refinancing mortgage 
is executed;
* * * * *
    66. Section 234.54 is added, under the undesignated center heading 
``ELIGIBLE MORTGAGES,'' to read as follows:


Sec. 234.54  Eligibility of assigned mortgages and mortgages covering 
acquired property.

    The Commissioner may insure under this part, without regard to any 
limitation upon eligibility contained in this subpart, 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 in the settlement of an 
insurance claim under any section or title of the National Housing Act.


Sec. 234.67  [Removed and reserved]

    67. Section 234.67 is removed and reserved.
    68. The undesignated center heading ``OPEN-END ADVANCES'' 
immediately preceding Sec. 234.70 is removed.
    69. Section 234.70 is revised to read as follows:


Sec. 234.70  Eligibility of open-end advances.

    Mortgagees may not make open-end advances under section 255 of the 
National Housing Act in connection with mortgages insured under this 
chapter.

PART 280--NEHEMIAH HOUSING OPPORTUNITY GRANTS PROGRAM

    70. The authority citation for 24 CFR part 280 continues to read as 
follows:

    Authority: 12 U.S.C. 1715l note; 42 U.S.C. 3535(d).

    71. Section 280.330 is amended by revising the section heading and 
paragraph (c)(2) to read as follows:


Sec. 280.330  Loan and Profit.

* * * * *
    (c) * * *
    (2) Loan and Profit--Any amounts remaining after distribution of 
the down payment shall be shared equally between the Secretary and the 
family, but only to the extent that the Secretary recovers an amount 
equal to the amount of the loan originally made to the family under 
this section. If such remaining amounts are insufficient for the 
Secretary to recover the full amount of the loan made under this 
section, the remaining balance of the second mortgage shall be 
cancelled and shall not be transferred to a subsequent purchaser.
* * * * *

PART 291--DISPOSITION OF HUD-ACQUIRED SINGLE FAMILY PROPERTY

    72. The authority for 24 CFR part 291 continues to read as follows:

    Authority: 12 U.S.C. 1790 and 1715(b); 42 U.S.C. 1441, 1441a, 
1551a, and 3535(d).

    73. Section 291.100 is amended by revising the first sentence of 
paragraph (a)(3) and the introductory text in paragraph (a)(4) to read 
as follows:


Sec. 291.100  General policy.

    (a) * * *
    (3) Except as provided in paragraph (a)(4) of this section, tenants 
in occupancy will not be offered the right of first refusal to purchase 
the property. * * *
    (4) HUD tenants in occupancy will be offered the right of first 
refusal to purchase property where:
* * * * *
    74. Section 291.105 is amended by revising the first sentence of 
paragraph (e) and the first sentence of paragraph (h)(2), to read as 
follows:


Sec. 291.105  Competitive sales procedure.

* * * * *

[[Page 36268]]

    (e) Full price offers. HUD field offices that operate under a 
``full price offer'' program open offers at specified times during the 
10-day bidding period. * * *
* * * * *
    (h) * * *
    (2) All bids must be accompanied by earnest money deposits in the 
form of a cash equivalent as prescribed by the Secretary, or a 
certification from the real estate broker that the earnest money has 
been deposited in the broker's escrow account. * * *
* * * * *
    75. Section 291.110 is amended by revising the first sentence of 
paragraph (b)(1) to read as follows:


Sec. 291.110  Other sales procedures.

* * * * *
    (b) Direct sales to displaced persons. (1) At the discretion of the 
Field Office, properties eligible for insured financing are offered for 
direct sale, at a discount of 10 percent off the list price, to 
displaced persons who will occupy the properties. * * *
* * * * *
    76. Section 291.115 is amended by revising paragraph (b)(2) to read 
as follows:


Sec. 291.115  Insured sales.

* * * * *
    (b) * * *
    (2) For an owner-occupant purchaser, the mortgage amount is based 
on the bid price plus any allowable pre-paids (e.g., taxes) and 
financing or closing costs, up to local maximum mortgage amounts. For 
investor purchasers without rehabilitation loans insured under 
Sec. 203.50 of this chapter, the mortgage amount is limited to 75 
percent of the bid price for one-unit properties, and 85 percent for 
two- to four-unit properties, up to local maximum mortgage amounts. 
Pre-paids, financing or closing costs may not be included in the 
mortgage amount for such investor purchasers. For investor purchasers 
with rehabilitation loans insured under Sec. 203.50 of this chapter, 
the mortgage amount is calculated as provided in Sec. 203.50(f) of this 
chapter and the bid price is used as the Commissioner's estimate of the 
value of the property before rehabilitation.

    Dated: June 13, 1996.
Nicolas P. Retsinas,
Assistant Secretary for Housing-Federal Housing Commissioner.
[FR Doc. 96-17305 Filed 7-8-96; 8:45 am]
BILLING CODE 4210-27-P