[Federal Register Volume 61, Number 179 (Friday, September 13, 1996)]
[Rules and Regulations]
[Pages 48546-48562]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-23258]



[[Page 48545]]


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Part III





Department of Housing and Urban Development





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24 CFR Parts 27 and 29



Streamlining Multifamily and Single Family Nonjudicial Foreclosure 
Procedures; Final Rule

  Federal Register / Vol. 61, No. 179 / Friday, September 13, 1996 / 
Rules and Regulations  

[[Page 48546]]



DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Parts 27 and 29

[Docket No. FR-4110-F-01]
RIN 2501-AC29


Office of the Secretary; Multifamily and Single Family 
Nonjudicial Foreclosure Procedures Streamlining

AGENCY: Office of the Secretary, HUD.

ACTION: Final rule.

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SUMMARY: This final rule is a part of HUD's regulatory reinvention 
initiative. It combines the current rules for multifamily and single 
family nonjudicial foreclosure at 24 CFR parts 27 and 29, respectively, 
into separate subparts of part 27, thereby eliminating a CFR part. In 
addition, this rule streamlines the multifamily requirements in the 
current part 27, which repeats substantial portions of the authorizing 
statute, and removes certain single family requirements in the current 
part 29 that are more restrictive than the authorizing statute.

EFFECTIVE DATE: October 15, 1996.

FOR FURTHER INFORMATION CONTACT: With respect to Single Family Housing: 
Bruce S. Albright, Office of General Counsel, U.S. Department of 
Housing and Urban Development, Room 9240, Washington, DC 20410, (202) 
708-0080. A telecommunications device for the hearing impaired (TTY) is 
available at (202) 708-3259. (These are not toll-free numbers.)
    With respect to Multifamily Housing: Herbert Goldblatt, Office of 
General Counsel, U.S. Department of Housing and Urban Development, Room 
10184, Washington, DC 20410, (202) 708-3200. A telecommunications 
device for the hearing impaired (TTY) is available at (202) 708-3259. 
(These are not toll-free numbers.)

SUPPLEMENTARY INFORMATION:

I. General Background

    On March 4, 1995, President Clinton issued a memorandum to all 
Federal departments and agencies regarding regulatory reinvention. In 
response to this memorandum, the Department of Housing and Urban 
Development conducted a page-by-page review of its regulations to 
determine which can be eliminated, consolidated, or otherwise improved. 
HUD has determined that the regulations for the Nonjudicial Foreclosure 
of Multifamily Mortgages at 24 CFR part 27 can be improved and 
streamlined by eliminating unnecessary provisions. The regulations for 
Nonjudicial Foreclosure of Single Family Mortgages at 24 CFR part 29 
were already issued in streamlined form in a final rule published on 
November 15, 1995 (60 FR 57489). The Department has determined that 
these single family provisions may appropriately be consolidated with 
the multifamily provisions as a separate subpart in 24 CFR part 27. 
This rule also removes certain single family requirements, as explained 
below in this preamble, that are more restrictive than the authorizing 
statute.
    The combined statutory and regulatory procedures for conducting 
nonjudicial foreclosures have been placed in appendices to this final 
rule. Appendix A provides a Guide for the multifamily procedures; 
Appendix B provides a Guide for the Single Family provisions. The final 
rule will be codified in the Code of Federal Regulations; the 
appendices will not be codified. However, the appropriate appendix will 
be included in information to be provided to foreclosure commissioners, 
and which will be available to the public. HUD is striving to keep 
communications about requirements as clear, simple and timely as 
possible, and the Guides in the appendices present such a format.

II. Multifamily Rule Changes

    Several provisions in the multifamily nonjudicial foreclosure 
regulations repeat statutory language from the Multifamily Mortgage 
Foreclosure Act of 1981 (the Act) (12 U.S.C. 3701 et seq.). It is 
unnecessary to maintain statutory requirements in the Code of Federal 
Regulations (CFR), since those requirements are otherwise fully 
accessible and binding. Furthermore, if regulations contain statutory 
language, HUD must amend the regulations whenever Congress amends the 
statute. Therefore, this rule will remove repetitious statutory 
language and, where appropriate, replace it with a citation to the 
specific statutory section.
    Also being deleted from the regulatory text of part 27 is language 
that is only advisory, such as the list of examples of terms which the 
Secretary may require the purchaser to agree to in the current 
Sec. 27.20(c).

III. Single Family Rule Changes

    The single family requirements in the current part 29 have already 
been streamlined in a final rule published on November 15, 1995 (60 FR 
57484). These requirements are moved in this final rule to become 
subpart B of part 27, and part 29 is removed.
    As a result of the initial use of this new authority to foreclose 
mortgages by nonjudicial procedures, the Department has noted three 
areas where the regulations at 24 CFR Secs. 29.103(b)(2), 29.109(b) and 
29.111(a) are more restrictive than the authorizing statute, the Single 
Family Mortgage Foreclosure Act of 1994 (the Statute), 12 U.S.C. 3751-
3768. Because these restrictions present problems for efficient and 
cost-effective implementation of the Statute, they are being removed. 
The regulatory provisions in question, discussed below, require 
inclusion of the description of the property as contained in the 
security instrument in the Notice of Default and Foreclosure Sale; the 
presence of the designated foreclosure commissioner at the foreclosure 
sale; and the service by publication of the Notice of Default and 
Foreclosure Sale prior to the revised date of an adjourned foreclosure 
sale.

Property Description in the Notice of Default and Foreclosure Sale

    In 12 U.S.C. 3757(4), the Notice of Default and Foreclosure Sale is 
to include, among other items, ``* * * the street address or a 
description of the location of the property, and a description of the 
security property sufficient to identify the property to be sold.'' 
[Underlining provided.] The provisions of the existing regulation on 
this point, at 24 CFR 29.103(b)(2), are more restrictive than the 
Statute. The regulatory provisions state that the Notice of Default and 
Foreclosure Sale must contain, among other things, ``[t]he legal 
description of the security property as contained in the mortgage 
agreement.'' [Underlining provided.] HUD has found that in some 
jurisdictions, the description contained in the security instrument can 
be very lengthy, in fact, much longer than would be necessary to 
sufficiently identify the property to be sold at the foreclosure sale. 
Requiring an unnecessarily lengthy legal description can, in some 
instances, result in additional expense in publishing the Notice of 
Default and Foreclosure Sale, resulting in increased costs to the 
insurance funds.
    In order to correct this situation, Sec. 29.103(b)(2) of the 
existing rule is revised at Sec. 27.103(b)(2) of this rule to conform 
the regulation to the less restrictive language in the statute.

Presence of the Foreclosure Commissioner at the Sale

    While section 369B(b) of the Multifamily Housing Mortgage 
Foreclosure Act of 1981 (12 U.S.C. 3710), pertaining to the conduct of 
the sale, specifically requires the attendance of the foreclosure 
commissioner at the foreclosure sale, the provisions of the

[[Page 48547]]

Single Family Mortgage Foreclosure Act of 1994 governing the conduct of 
the sale are silent on attendance by the commissioner at the sale, see 
12 U.S.C. 3760. Furthermore, Section 3760(b)(1)(C) of 12 U.S.C. 
specifically provides that ``The foreclosure commissioner may serve as 
auctioneer, or, in accordance with regulations of the Secretary, may 
employ an auctioneer to be paid from the commission provided for in 
section 3761(5).'' At section 3761(2) of 12 U.S.C., the statutory 
authority governing foreclosure costs provides for the payment of costs 
arising from ``[m]ileage * * * for posting notices and for the 
foreclosure commissioner's or auctioneer's attendance at the sale * * 
*.'' [Underlining provided.]
    The regulations at 24 CFR 29.109(b) presently provide that the 
foreclosure commissioner or, an employee of the commissioner, if the 
commissioner is not a natural person, must attend the foreclosure sale. 
This has been found to be restrictive in situations where a sole single 
family property is a great distance from a foreclosure commissioner's 
location. This results in the commissioner having to spend an 
inordinate amount of time and travel expense in order to personally 
attend the sale or, in the alternative, it results in the 
unavailability of foreclosure commissioners to accept such case 
referrals. The regulation is therefore amended in this rule by not 
including the language of Sec. 29.109(b).

Service by Publication of Notice of an Adjourned Foreclosure Sale

    The Statute at 12 U.S.C. 3760(c)(2) requires service by publication 
and mailing of the revised Notice of Default and Foreclosure Sale when 
a sale is adjourned to a later date, and permits publication to be made 
on any of three separate days before the revised date of foreclosure 
sale. The current section Sec. 29.111(a) requires publication of the 
Notice of Default and Foreclosure Sale to be made on any of three 
consecutive days prior to the revised date of foreclosure sale so long 
as the first publication is made at least seven days before the date to 
which the sale has been adjourned. This requirement could in some 
circumstances be impossible to comply with, because it does not take 
into account cases in which there are no daily newspapers of general 
circulation that would permit publication on three consecutive days. 
The requirement in Sec. 29.111(a) for the first publication to be made 
at least seven days before the sale is also not part of the Statute, 
which only makes service by mail subject to the seven days requirement.
    This rule, at Sec. 27.111(a), returns to the statutory language 
permitting publication to be made on any of three separate days before 
the revised date of foreclosure sale. In addition, to give full 
implementation to the Statute, which allows adjournment of the 
foreclosure sale for ``not less than 9 and not more than 31 days,'' 
this rule takes into account cases in which the frequency of 
publication of newspapers of general circulation would not permit 
publication on three separate days before the date to which the sale 
has been adjourned. To avoid the frustration of the statutory provision 
that permits adjournments of not less than 9 days, this rule provides 
that if there is no newspaper of general circulation that would permit 
publication on any of three separate days before the revised date of 
foreclosure sale, the Notice of Default and Foreclosure Sale must be 
posted, not less than nine days before the date to which the sale has 
been adjourned, at the courthouse of any county or counties in which 
the property is located, and at the place where the sale is to be held. 
This provision is modeled on the exception to publication by posting 
provision in the Statute at 12 U.S.C. 3758(3)(B), and avoids such a 
Statute-frustrating result as not being able to adjourn a foreclosure 
sale for less than 21 days in an area where a newspaper is published 
only weekly.

IV. Findings and Certifications

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 unnecessary regulatory provisions and 
does not establish or affect substantive policy. Therefore, prior 
public comment is unnecessary.

Unfunded Mandates Reform Act

     Title II of the Unfunded Mandates Reform Act of 1995 establishes 
requirements for Federal agencies to assess the effects of their 
regulatory actions on State, local, local and tribal governments and 
the private sector. This rule does not impose any Federal mandates on 
any State, local or tribal governments or the private sector within the 
meaning of the Unfunded Mandates Reform Act of 1995.

Regulatory Flexibility Act

     The Secretary, in accordance with the Regulatory Flexibility Act 
(5 U.S.C. 605(b)), has reviewed and approved this 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 removing unnecessary provisions. The rule will have no 
adverse or disproportionate economic impact on small businesses.

Environmental Impact

    This rulemaking does not have an environmental impact. This 
rulemaking simply amends an existing regulation by consolidating and 
streamlining provisions. It does not change the environmental review 
procedures or the physical impact of the program or the projects 
assisted under the regulations being amended.

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 
that would affect the relationship between the Federal Government and 
State and local governments will result from this rule.

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 27

    Administrative practice and procedure, Loan programs--housing and 
community development.

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24 CFR Part 29

    Administrative practice and procedure, Loan programs--housing and 
community development.

    Accordingly, under the authority 420 U.S.C. 3535(d) subtitle A of 
title 24 of the Code of Federal Regulations is amended as follows:
    1. Part 27 is revised to read as follows:

PART 27--NONJUDICIAL FORECLOSURE OF MULTIFAMILY AND SINGLE FAMILY 
MORTGAGES

Subpart A--Nonjudicial Foreclosure of Multifamily Mortgages
Sec.
27.1  Purpose.
27.2  Scope and applicability.
27.3  Definitions.
27.5  Prerequisites to foreclosure.
27.10  Designation of a foreclosure commissioner.
27.15  Notice of default and foreclosure sale.
27.20  Conditions of foreclosure sale.
27.25  Termination or adjournment of foreclosure sale.
27.30  Conduct of the sale.
27.35  Foreclosure costs.
27.40  Disposition of sale proceeds.
27.45  Transfer of title and possession.
27.50  Management and disposition by the Secretary.
Subpart B--Nonjudicial Foreclosure of Single Family Mortgages
27.100  Purpose, Scope and Applicability.
27.101  Definitions.
27.102  Designation of foreclosure commissioner and substitute 
commissioner.
27.103  Notice of default and foreclosure sale.
27.105  Service of Notice of Default and Foreclosure Sale.
27.107  Presale reinstatement.
27.109  Conduct of sale.
27.111  Adjournment or cancellation of sale.
27.113  Foreclosure costs.
27.115  Disposition of sales proceeds.
27.117  Transfer of title and possession.
27.119  Redemption rights.
27.121  Record of foreclosure and sale.
27.123  Deficiency judgment.

    Authority: 12 U.S.C. 1715b, 3701-3717, 3751-3768; 42 U.S.C. 
1452b, 3535(d).

Subpart A--Nonjudicial Foreclosure of Multifamily Mortgages


Sec. 27.1  Purpose.

    The purpose of this subpart is to implement requirements for the 
administration of the Multifamily Mortgage Foreclosure Act of 1981 (the 
Act) (12 U.S.C. 3701-3717), that clarify, or are in addition to, the 
requirements contained in the Act, which are not republished here and 
must be consulted in conjunction with the requirements of this subpart. 
The Act creates a uniform Federal remedy for foreclosure of multifamily 
mortgages. Under a delegation of authority published on February 5, 
1982 (47 FR 5468), the Secretary has delegated to the HUD General 
Counsel his powers under the Act to appoint a foreclosure commissioner 
or commissioners and to substitute therefor, to fix the compensation of 
commissioners, and to promulgate implementing regulations.


Sec. 27.2  Scope and applicability.

    (a) Under the Act and this subpart, the Secretary may foreclose on 
any defaulted Secretary-held multifamily mortgage encumbering real 
estate in any State. The Secretary may use the provisions of these 
regulations to foreclose on any multifamily mortgage regardless of when 
the mortgage was executed.
    (b) The Secretary may, at the Secretary's option, use other 
procedures to foreclose defaulted multifamily mortgages, including 
judicial foreclosure in Federal court and nonjudicial foreclosure under 
State law. This subpart applies only to foreclosure procedures 
authorized by the Act and not to any other foreclosure procedures the 
Secretary may use.


Sec. 27.3  Definitions.

    The definitions contained in the Act (at 12 U.S.C. 3702) shall 
apply to this subpart, in addition to and as further clarified by the 
following definitions. As used in this subpart:
    General Counsel means the General Counsel of the Department of 
Housing and Urban Development;
    Multifamily mortgage does not include a mortgage covering a 
property on which there is located a one- to four-family residence, 
except when the one- to four-family residence is subject to a mortgage 
pursuant to section 202 of the Housing Act of 1959 (12 U.S.C. 1701q), 
or section 811 (42 U.S.C. 8013) of the National Affordable Housing Act. 
The definition of multifamily mortgage also includes a mortgage taken 
by the Secretary in connection with the previous sale of the project by 
the Secretary (purchase money mortgage).


Sec. 27.5  Prerequisites to foreclosure.

    Before commencement of a foreclosure under the Act and this 
subpart, HUD will provide to the mortgagor an opportunity informally to 
present reasons why the mortgage should not be foreclosed. Such 
opportunity may be provided before or after the designation of the 
foreclosure commissioner but before service of the notice of default 
and foreclosure.


Sec. 27.10  Designation of a foreclosure commissioner.

    (a) When the Secretary determines that a multifamily mortgage 
should be foreclosed under the Act and this subpart, the General 
Counsel will select and designate one or more foreclosure commissioners 
to conduct the foreclosure and sale. The method of selection and 
determination of the qualifications of the foreclosure commissioner 
shall be at the discretion of the General Counsel, and the execution of 
a designation pursuant to paragraph (b) of this section shall be 
conclusive evidence that the commissioner selected has been determined 
to be qualified by the General Counsel.
    (b) After selection of a foreclosure commissioner, the General 
Counsel shall designate the commissioner in writing to conduct the 
foreclosure and sale of the particular multifamily mortgage. The 
written designation shall be duly acknowledged and shall state the name 
and business or residential address of the commissioner and any other 
information the General Counsel deems necessary. The designation shall 
be effective upon execution by the General Counsel or his designate. 
Upon receipt of the designation, the commissioner shall demonstrate 
acceptance by signing the designation and returning a signed copy to 
the General Counsel.
    (c) The General Counsel may at any time, with or without cause, 
designate a substitute commissioner to replace a previously designated 
commissioner. Designation of a substitute commissioner shall be in 
writing and shall contain the same information and be made effective in 
the same manner as the designation of the original commissioner. Upon 
designation of a substitute commissioner, the substitute commissioner 
shall serve a copy of the written notice of designation upon the 
persons listed at sections 369(1) (A) through (C) of the Act (12 U.S.C. 
3708(1) (A) through (C)) either by mail, in accordance with section 
369(1) of the Act (12 U.S.C. 3708(1)), except that the time limitations 
in that section will not apply, or by any other manner which in the 
substitute commissioner's discretion is conducive to giving timely 
notice of substitution.


Sec. 27.15  Notice of default and foreclosure sale.

    (a) Within 45 days after accepting his or her designation to act as 
commissioner, the commissioner shall commence the foreclosure by 
serving a Notice of Default and Foreclosure Sale.

[[Page 48549]]

    (b) The Notice of Default and Foreclosure Sale shall contain the 
following information:
    (1) The Notice shall state that all deposits and the balance of the 
purchase price shall be paid by certified or cashier's check. The 
Notice shall state that no deposit will be required of the Secretary 
when the Secretary bids at the foreclosure sale.
    (2) Any terms and conditions to which the purchaser at the 
foreclosure sale must agree under Sec. 27.20. The Notice need not 
describe at length each and every pertinent term and condition, 
including any required use agreements and deed covenants, if it 
describes these terms and conditions in a general way and if it states 
that the precise terms will be available from the commissioner upon 
request.
    (c) The Notice need not be mailed to mortgagors who have been 
released from all obligations under the mortgage.
    (d) In deciding which newspaper or newspapers to select as general 
circulation newspapers for purposes of publication of the required 
notice, the commissioner need not select the newspaper with the largest 
circulation.
    (e) In addition to Notice posting requirements included in the Act, 
the Notice shall also be posted in the project office and in such other 
appropriate conspicuous places as the commissioner deems appropriate 
for providing notice to all tenants. Posting shall not be required if 
the commissioner in his or her discretion finds that the act of posting 
is likely to lead to a breach of the peace or may result in the 
increased risk of vandalism or damage to the property. Any such finding 
will be made in writing. Entry on the premises by the commissioner for 
the purpose of posting shall be privileged as against all other 
persons.
    (f) When service of the Notice of Default and Foreclosure Sale is 
made by mail, the commissioner shall at the same time and in the same 
manner serve a copy of the instrument by which the General Counsel, 
under Sec. 27.10(b), has designated him or her to act as commissioner.
    (g) At least 7 days before the foreclosure sale, the commissioner 
will record both the instrument designating him or her to act as 
commissioner and the Notice of Default and Foreclosure Sale in the same 
office or offices in which the mortgage was recorded.


Sec. 27.20  Conditions of foreclosure sale.

    (a) The requirements of section 367(b)(2)(A) of the Act (12 U.S.C. 
3706(b)(2)(A)) apply if a majority of the residential units in a 
property subject to foreclosure sale pursuant to the Act and this 
subpart are occupied by residential tenants either on the date of the 
foreclosure sale or on the date on which the General Counsel designates 
the foreclosure commissioner.
    (b) Terms which the Secretary may find appropriate to require 
pursuant to section 367(b) of the Act (12 U.S.C. 3706(b)), and such 
other provisions of law as may be applicable, may include provisions 
relating to use and ownership of the project property, tenant admission 
standards and procedures, rent schedules and increases, and project 
operation and maintenance. In determining terms which may be 
appropriate to require, the Secretary shall consider:
    (1) The history of the project, including the purposes of the 
program under which the mortgage insurance or assistance was provided, 
and any other program of HUD under which the project was developed or 
otherwise assisted and the probable causes of project failure resulting 
in its default;
    (2) A financial analysis of the project, including an appraisal of 
the fair market value of the property for its highest and best use;
    (3) A physical analysis of the project, including the condition of 
the structure and grounds, the need for rehabilitation or repairs, and 
the estimated costs of any such rehabilitation or repairs;
    (4) The income levels of the occupants of the project;
    (5) Characteristics, including rental levels, of comparable housing 
in the area, with particular reference to whether current conditions 
and discernible trends in the area fairly indicate a likelihood that, 
for the foreseeable future after foreclosure and sale, the project will 
continue to provide rental or cooperative housing and market rentals 
obtainable in the project will be affordable by low- or moderate-income 
persons;
    (6) The availability of or need for rental housing for low- and 
moderate-income persons in the area, including actions being taken or 
projected to be taken to address such needs and the impact of such 
actions on the project;
    (7) An assessment of the number of occupants who might be displaced 
as a result of the manner of disposition;
    (8) The eligibility of the occupants of the property for rental 
assistance under any program administered by HUD and the availability 
of funding for such assistance if necessary in order that the units 
occupied by such occupants will remain available to and affordable by 
such persons, or if necessary in order to assure the financial 
feasibility of the project after foreclosure and sale subject to the 
terms to be required by the Secretary; and
    (9) Such other factors relating to the project as the Secretary 
shall consider appropriate.
    (c) Terms which the Secretary may require to be agreed to by the 
purchaser pursuant to section 367(b) of the Act (12 U.S.C. 3706(b)) 
shall generally not be more restrictive, or binding for a longer 
duration, than the terms by which the mortgagor was bound prior to the 
foreclosure. For example: If the mortgage being foreclosed was held by 
the Secretary under section 312 of the Housing Act of 1964 (42 U.S.C. 
1452b), any terms required by the Secretary pursuant to this section 
shall be in effect no longer than five years after the completion of 
the rehabilitation work funded by the section 312 loan. No terms shall 
be required pursuant to this section if the foreclosure sale occurs 
more than five years after the completion of such rehabilitation work 
(signified by the due date for commencement of amortization payments in 
the section 312 loan note).
    (d) The limitation contained in paragraph (c) of this section 
applies only to such terms as the Secretary may require the purchaser 
to agree to, as a condition and term of the sale, under paragraph (a) 
of this section. Nothing contained in paragraph (c) of this section 
shall prevent the Secretary and the purchaser from entering into a 
subsidy agreement under any program administered by the Secretary 
containing terms binding upon either party which are longer in duration 
than would be permitted to be required by paragraph (c) of this 
section.
    (e) Any terms required by the Secretary to be agreed to by the 
purchaser as a condition and term of sale under this section and 
section 367(b) of the Act (12 U.S.C. 3706(b)) shall be embodied in a 
use agreement to be executed by the Secretary and the purchaser. Such 
terms also may be included, or referred to, in appropriate covenants 
contained in the deed to be delivered by the foreclosure commissioner 
under Sec. 27.45. Terms required by the Secretary pursuant to this 
section shall be stated or described in the Notice of Default and 
Foreclosure Sale under Sec. 27.15.


Sec. 27.25  Termination or adjournment of foreclosure sale.

    (a) Before withdrawing the security property from foreclosure under 
section 369A(a) of the Act (12 U.S.C. 3709(a)), the commissioner shall 
notify the Secretary of the proposed withdrawal by telephone or 
telegram and shall provide the Secretary with a written statement of

[[Page 48550]]

the reasons for the proposed withdrawal along with all documents 
submitted by the mortgagor in support of the proposed withdrawal. Upon 
receipt of this statement, the Secretary shall have 10 days within 
which to demonstrate orally or in writing why the security property 
should not be withdrawn from foreclosure. The Secretary shall provide 
the mortgagor with a copy of any statement prepared by the Secretary in 
opposition to the proposed withdrawal at the same time the statement is 
submitted to the commissioner. If the Secretary receives the 
commissioner's written statement less than 10 days before the scheduled 
foreclosure sale, the sale shall automatically be postponed for 14 
days. Under these circumstances, notice of the rescheduled sale shall 
be served as described in section 369B(c) of the Act (12 U.S.C. 
3710(c)).
    (b) The commissioner may not withdraw the security property from 
foreclosure under section 369A(a) of the Act (12 U.S.C. 3709(a)) more 
than once unless the Secretary consents in writing to such withdrawal.
    (c) The commissioner shall, in the case of a sale adjourned to a 
later date, mail a copy of the revised Notice of Default and 
Foreclosure Sale to the Secretary at least seven days before the date 
to which the sale has been adjourned.
    (d) If upon application by the mortgagor, the commissioner refuses 
to withdraw the property from foreclosure under section 369A(a) of the 
Act (12 U.S.C. 3709(a)), the commissioner shall provide the mortgagor 
and the Secretary with a written statement of the reasons for the 
refusal.


Sec. 27.30   Conduct of the sale.

    (a) The commissioner shall accept written one-price sealed bids 
from any party including the Secretary so long as those bids conform to 
the requirements described in the Notice of Default and Foreclosure 
Sale. The commissioner shall announce the name of each such bidder and 
the amount of the bid. The commissioner shall accept oral bids from any 
party, including parties who submitted one-price sealed bids, if those 
oral bids conform to the requirements described in the Notice of 
Default and Foreclosure Sale. The commissioner will announce the amount 
of the high bid and the name of the successful bidder before the close 
of the sale.
    (b) Relatives of the commissioner who may not bid at the 
foreclosure sale include parents, siblings, spouses and children. 
Related business entities which may not bid include entities or 
concerns whose relationship with the commissioner at the time the 
commissioner is designated is such that, directly or indirectly, one 
concern or individual formulates, directs, or controls the other 
concern; or has the power to formulate, direct, or control the other 
concern; or has the responsibility and authority either to prevent in 
the first instance, or promptly to correct, the offensive conduct of 
the other concern. Business concerns are also affiliates of each other 
when a third party is similarly situated with respect to both concerns.
    (c) If the commissioner employs an auctioneer to conduct the 
foreclosure sale, the auctioneer must be a licensed auctioneer, an 
officer of State or local government, or any other person who commonly 
conducts foreclosure sales in the area in which the security property 
is located.


Sec. 27.35   Foreclosure costs.

    Pursuant to section 369C(5) of the Act (12 U.S.C. 3711(5)), a 
commission to the foreclosure commissioner for the conduct of the 
foreclosure will be paid in an amount to be determined by the General 
Counsel. A commission may be allowed to the commissioner 
notwithstanding termination of the sale or appointment of a substitute 
commissioner before the sale takes place.


Sec. 27.40   Disposition of sale proceeds.

    (a) The priority of the Secretary's lien shall be determined by the 
Federal first-in-time first-in-right rule. State laws affording 
priority to liens recorded after the mortgage are preempted.
    (b) If there is more than one party holding a lien or assessment 
payable from sales proceeds, the claim of each party holding the same 
kind of lien or assessment will be given the relative priority to which 
it would be entitled under the law of the State in which the security 
property is located.
    (c) The commissioner will keep such records as will permit the 
Secretary to verify the costs claimed under section 369C of the Act (12 
U.S.C. 3711), and otherwise to audit the commissioner's disposition of 
the sale proceeds.


Sec. 27.45   Transfer of title and possession.

    (a) If the Secretary is the successful bidder, the foreclosure 
commissioner shall issue a deed to the Secretary upon receipt of the 
amount needed to pay the costs listed in sections 369D (1) through (3) 
of the Act (12 U.S.C. 3712(1) through (3)). If the Secretary is not the 
successful bidder, the foreclosure commissioner shall issue a deed to 
the purchaser upon receipt of the entire purchase price and execution 
by the Secretary and the purchaser of any use agreement referred to in 
Sec. 27.20(e). Any covenants reflecting terms required by Sec. 27.20 
shall be contained in the commissioner's deed.
    (b) Subject to any terms required to be agreed to by Sec. 27.20, 
any commercial tenant and any residential tenant remaining in 
possession after the expiration of his or her lease or after the 
passage of one year, whichever event occurs first, shall be deemed a 
tenant at sufferance and may be evicted in accordance with applicable 
State or local law.


Sec. 27.50   Management and disposition by the Secretary.

    When the Secretary is the purchaser of the security property, the 
Secretary shall manage and dispose of it in accordance with section 203 
of the Housing and Community Development Amendments of 1978, as 
amended, 12 U.S.C. 1701z-11, and in accordance with 24 CFR part 290.

Subpart B--Nonjudicial Foreclosure of Single Family Mortgages


Sec. 27.100   Purpose, Scope and Applicability.

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


Sec. 27.101   Definitions.

    The definitions contained in the Statute (at 12 U.S.C. 3752) shall 
apply to this subpart, in addition to and as further clarified by the 
following definitions. As used in this subpart:
    County means a political subdivision of a State or Territory of the 
United States, created to aid in the administration of State law for 
the purpose of local self government, and

[[Page 48551]]

includes a parish or any other equivalent subdivision.
    Mortgage is as defined in the Statute except that the reference to 
property as ``(real, personal or mixed)'' means ``any property (real or 
mixed real and personal).''
    Mortgage agreement is as defined in the Statute, and also means any 
other similar instrument or instruments creating the security interest 
in the real estate for the repayment of the note or debt instrument.
    Mortgagor is as defined in the Statute, except that the reference 
to ``trustee'' means ``trustor.''
    Record; Recorded means to enter or entered in public land record 
systems established under State statutes for the purpose of imparting 
constructive notice to purchasers of real property for value and 
without knowledge, and includes ``register'' and ``registered'' in the 
instance of registered land, and ``file'' and its variants in the 
context of entering documents in public land records.
    Secretary means the Secretary of Housing and Urban Development, 
acting by and through any authorized designee exclusive of the 
foreclosure commissioner.
    Security Property is as defined in the statute except that the 
reference to property as ``(real, personal or mixed)'' means ``any 
property (real or mixed real and personal).''


Sec. 29.102  Designation of foreclosure commissioner and substitute 
commissioner.

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


Sec. 27.103  Notice of default and foreclosure sale.

    (a) The foreclosure commissioner shall commence the foreclosure 
under the procedures set forth in the Statute.
    (b) The Notice of Default and Foreclosure Sale (Notice) shall 
include, in addition to the provisions as required by the Statute:
    (1) The foreclosure commissioner's telephone number;
    (2) A description of the security property sufficient to identify 
the property to be sold;
    (3) The date the mortgage was recorded;
    (4) Identification of the failure to make payment, including the 
entire amount delinquent as of a date specified, a statement generally 
describing the other costs that must be paid if the mortgage is to be 
reinstated, the due date of the earliest principal installment payment 
remaining wholly unpaid as of the date on which the notice is issued 
upon which the foreclosure is based, or a description of any other 
default or defaults upon which foreclosure is based, and the 
acceleration of the secured indebtedness; and
    (5) The bidding and payment requirements for the foreclosure sale, 
including the time and method of payment of the balance of the 
foreclosure purchase price, that all deposits and the balance of the 
purchase price shall be paid by certified or cashier's check, and that 
no deposit will be required of the Secretary when the Secretary bids at 
the foreclosure sale.


Sec. 27.105  Service of Notice of Default and Foreclosure Sale.

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


Sec. 27.107  Presale reinstatement.

    (a) The foreclosure commissioner shall withdraw the security 
property from foreclosure and cancel the foreclosure sale only in 
accordance with the provisions of the Statute and as more fully 
provided in paragraphs (b) and (c) of this section in regard to presale 
reinstatements.
    (b) To obtain a presale reinstatement in cases involving a monetary 
default, there must be tendered to the foreclosure commissioner before 
public auction is completed all amounts which would be due under the 
mortgage agreement if payments under the mortgage had not been 
accelerated and all costs of foreclosure incurred for which payment 
from the proceeds of foreclosure is provided in the Statute, and the 
foreclosure commissioner must find that there are no nonmonetary 
defaults; provided, however, that the Secretary may refuse to cancel a 
foreclosure sale pursuant to this subparagraph if the current mortgagor 
or owner of record has, on one or more previous occasions, caused a 
foreclosure of the mortgage, commenced pursuant to the Statute and this 
subpart or otherwise, to be canceled by curing a default.
    (c) To obtain a presale reinstatement in cases involving a 
nonmonetary default:
    (1) The foreclosure commissioner, upon application of the mortgagor 
before the date of foreclosure sale, must find that all nonmonetary 
defaults are cured and that there are no monetary defaults; and
    (2) There must be tendered to the foreclosure commissioner before 
public auction is completed all amounts due under the mortgage 
agreement (excluding all amounts which would be due under the mortgage 
agreement if the mortgage payments had been accelerated), including all 
amounts of expenditures secured by the mortgage and all costs of 
foreclosure incurred for which payment would be made from the proceeds 
of foreclosure as provided in the Statute.
    (d) Before withdrawing the security property from foreclosure, the 
foreclosure commissioner shall notify the Secretary of the proposed 
withdrawal by telephone or other telecommunication device and shall 
also provide the Secretary with a written statement of the reasons for 
the proposed withdrawal along with all documents submitted by the 
mortgagor in support of the proposed withdrawal. Upon receipt of this 
statement, the Secretary shall have ten (10) days in which to 
demonstrate why the security property should not be withdrawn from 
foreclosure, and if the Secretary makes this demonstration, the 
property shall not be withdrawn from foreclosure. The Secretary shall 
provide the mortgagor with a copy of any statement prepared by the 
Secretary in opposition to the proposed withdrawal at the same time the 
statement is submitted to the foreclosure commissioner. If the 
Secretary receives the foreclosure commissioner's written statement 
less than 10 days before the scheduled foreclosure sale, the sale shall 
automatically be adjourned for 14 days, during which time it may be 
cancelled. Notice of the re-scheduled sale, if any, shall be served as 
described in Sec. 27.111.


Sec. 27.109  Conduct of sale.

    (a) The foreclosure sale shall be conducted in a manner and at a 
time and place as identified in the Notice of Default and Foreclosure 
Sale and in

[[Page 48552]]

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


Sec. 27.111  Adjournment or cancellation of sale.

    (a) The foreclosure commissioner may, before or at the time of the 
foreclosure sale, adjourn or cancel the foreclosure sale in accordance 
with the provisions of the Statute. The publication of the Notice of 
Default and Foreclosure Sale, revised pursuant to the Statute, may be 
made on any of three separate days before the revised date of 
foreclosure sale. If there is no newspaper of general circulation that 
would permit publication on any of three separate days before the 
revised date of foreclosure sale, the Notice of Default and Foreclosure 
Sale must be posted, not less than nine days before the date to which 
the sale has been adjourned, at the courthouse of any county or 
counties in which the property is located, and at the place where the 
sale is to be held. The commissioner must also, in the case of a sale 
adjourned to a later date, mail a copy of the revised Notice of Default 
and Foreclosure Sale to the Secretary at least seven days before the 
date to which the sale has been adjourned.
    (b) When a substitute commissioner is designated by the Secretary 
to replace a previously designated foreclosure commissioner, the sale 
shall continue without prejudice unless the substitute commissioner 
finds, in that commissioner's sole discretion, that continuation of the 
foreclosure sale will unfairly affect the interests of the mortgagor. 
Any such finding shall be in writing. If the substitute commissioner 
makes such a finding, the substitute commissioner shall cancel or 
adjourn the sale.


Sec. 27.113  Foreclosure costs.

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


Sec. 27.115  Disposition of sales proceeds.

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


Sec. 27.117  Transfer of title and possession.

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


Sec. 27.119  Redemption rights.

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


Sec. 27.121  Record of foreclosure and sale.

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


Sec. 27.123  Deficiency judgment.

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

PART 29--[REMOVED]

    2. Part 29 is removed.

    Dated: August 28, 1996.
Henry G. Cisneros,
Secretary.

    Note: The following appendices A and B will not be codified in 
title 24 of the Code of Federal Regulations.

Appendix A: Nonjudicial Foreclosure of Multifamily Mortgages--Guide

Sec.
1. Purpose.
2. Scope and applicability.
3. Definitions.

[[Page 48553]]

4. Prerequisites to foreclosure.
5. Designation of a foreclosure commissioner.
6. Notice of default and foreclosure sale.
7. Conditions of foreclosure sale.
8. Termination or adjournment of foreclosure sale.
9. Conduct of the sale.
10. Foreclosure costs.
11. Disposition of sale proceeds.
12. Transfer of title and possession.
13. Redemption rights.
14. Record of foreclosure and sale.
15. Management and disposition by the Secretary.
16. Computation of time.

1. Purpose

    The purpose of this guide is to present, in a single document, 
the statutory and regulatory requirements of the Multifamily 
Mortgage Foreclosure Act of 1981 (the Act) (12 U.S.C. 3701-3717). 
Although it presents the regulatory and statutory requirements in a 
combined format, this guide is a secondary source for these 
requirements. The Code of Federal Regulations (CFR), at 24 CFR part 
27, subpart A, is the primary, governing source for regulatory 
requirements, and the Act is the primary, governing source for 
statutory requirements. Any reference in this Guide to the 
provisions of the Act includes the requirements of 24 CFR part 27, 
subpart A.
    The Act creates a uniform Federal remedy for foreclosure of 
multifamily mortgages. Under a delegation of authority published on 
February 5, 1982 (47 FR 5468), the Secretary has delegated to the 
HUD General Counsel his powers under the Act to appoint a 
foreclosure commissioner or commissioners and to substitute 
therefor, to fix the compensation of commissioners, and to 
promulgate implementing regulations.

2. Scope and Applicability

    (a) Under the Act, the Secretary may foreclose on any defaulted 
Secretary-held multifamily mortgage encumbering real estate in any 
State, regardless of when the mortgage was executed.
    (b) The Secretary may, at the Secretary's option, use other 
procedures to foreclose defaulted multifamily mortgages, including 
judicial foreclosure in Federal court and nonjudicial foreclosure 
under State law. The requirements described in this Guide apply only 
to foreclosure procedures authorized by the Act and not to any other 
foreclosure procedures the Secretary may use.

3. Definitions

    As used in this Guide:
    County means county as defined in section 2 of title I, United 
States Code.
    General Counsel means the General Counsel of the Department of 
Housing and Urban Development.
    Mortgage means a deed of trust, mortgage, deed to secure debt, 
security agreement, or any other form of instrument under which any 
interest in property, real, personal or mixed, or any interest in 
property including leaseholds, life estates, reversionary interests, 
and any other estates under applicable State law, is conveyed in 
trust, mortgaged, encumbered, pledged, or otherwise rendered subject 
to a lien, for the purpose of securing the payment of money or the 
performance of an obligation.
    Mortgage agreement means the note or debt instrument and the 
mortgage instrument, deed of trust instrument, trust deed, or 
instrument or instruments creating the mortgage, including any 
instruments incorporated by reference therein (including any 
applicable regulatory agreement), and any instrument or agreement 
amending or modifying any of the foregoing.
    Mortgagor means the obligor, grantor, or trustor named in the 
mortgage agreement and, unless the context otherwise indicates, 
includes the current owner of record of the security property 
whether or not personally liable on the mortgage debt.
    Multifamily mortgage means a mortgage held by the Secretary, 
covering any property pursuant to:
    (1) Section 608 of the National Housing Act (12 U.S.C. 1743);
    (2) Section 801 of the National Housing Act (12 U.S.C. 1748);
    (3) Title II of the National Housing Act (12 U.S.C. 1707-1715z-
20);
    (4) Title X of the National Housing Act (12 U.S.C. 1749aa);
    (5) Section 312 of the Housing Act of 1964, as it existed 
immediately before its repeal by section 289 of the Cranston-
Gonzalez National Affordable Housing Act (42 U.S.C. 1452b);
    (6) Section 202 of the Housing Act of 1959, as it existed 
immediately before its amendment by section 801 of the Cranston-
Gonzalez National Affordable Housing Act (12 U.S.C. 1701q);
    (7) Section 202 of the Housing Act of 1959, as amended by 
section 801 of the Cranston-Gonzalez National Affordable Housing Act 
(12 U.S.C. 1701q); and
    (8) Section 811 of the Cranston-Gonzalez National Affordable 
Housing Act (42 U.S.C. 8013).
    Multifamily mortgage does not include a property on which there 
is located a one- to four-family residence, except when the one- to 
four-family residence is subject to a mortgage pursuant to section 
202 of the Housing Act of 1959, or section 811 of the National 
Affordable Housing Act. The definition of multifamily mortgage also 
includes a mortgage taken by the Secretary in connection with the 
previous sale of the project by the Secretary (purchase money 
mortgage).
    Person includes any individual, group of individuals, 
association, partnership, corporation, or organization.
    Record and recorded include register and registered in the 
instance of registered land.
    Secretary means the Secretary of Housing and Urban Development.
    Security property means the property, real, personal or mixed, 
or an interest in property, including leaseholds, life estates, 
reversionary interest and any other estates under applicable State 
law, together with fixtures and other interests subject to the lien 
of the mortgage under applicable State law.
    State means the several States, the District of Columbia, the 
Commonwealth of Puerto Rico, the territories and possessions of the 
United States, and the Trust Territory of the Pacific Islands, and 
Indian tribes as defined by the Secretary.

4. Prerequisites to Foreclosure

    (a) The Secretary may commence foreclosure under the Act upon 
the breach of a covenant or condition in the mortgage agreement for 
which foreclosure is authorized under the mortgage. No such 
foreclosure may be commenced unless any previously pending 
proceeding, judicial or nonjudicial, separately instituted by the 
Secretary to foreclose the mortgage in a manner other than under the 
Act, has been withdrawn, dismissed or otherwise terminated. The 
Secretary shall not institute any separate foreclosure proceedings, 
judicial or nonjudicial, during the pendency of a foreclosure 
pursuant to the Act. Nothing in the Act shall preclude the Secretary 
from enforcing any right, other than foreclosure, under applicable 
State law, including any right to obtain a monetary judgment. 
Nothing in the Act shall preclude the Secretary from foreclosing 
under the Act where the Secretary has obtained or is seeking any 
other remedy available pursuant to Federal or State Law or under the 
mortgage agreement, including, but not limited to the appointment of 
a receiver; mortgagee-in-possession status; relief under an 
assignment of rents; or transfer to a nonprofit entity in accordance 
with section 202 of the Housing Act of 1959 (as amended by section 
801 of the Cranston-Gonzalez National Affordable Housing Act), or 
section 811 of the Cranston-Gonzalez National Affordable Housing 
Act.
    (b) Before commencement of a foreclosure under the Act, HUD will 
provide to the mortgagor an opportunity informally to present 
reasons why the mortgage should not be foreclosed. Such opportunity 
may be provided before or after the designation of the foreclosure 
commissioner but before service of the notice of default and 
foreclosure.

5. Designation of a Foreclosure Commissioner

    (a) When the Secretary determines that a multifamily mortgage 
should be foreclosed under the Act, the General Counsel will select 
and designate a foreclosure commissioner to conduct the foreclosure 
and sale. In order to conduct the foreclosure, the foreclosure 
commissioner has a nonjudicial power of sale. The commissioner, if a 
natural person, shall be a resident of the State in which the 
security property is located. If a natural person is designated as 
commissioner, he or she shall be designated by name, except if the 
commissioner is designated in his or her capacity as an official or 
employee of the State or local government where the security 
property is located, the designation may be made by title or 
position instead of by name. If not a natural person, the 
commissioner must be duly authorized to transact business under the 
laws of the State in which the security property is located. The 
commissioner shall be a person who is determined by the General 
Counsel to be responsible, financially sound, and competent to 
conduct the foreclosure. The foreclosure commissioner may be an 
individual, group of individuals, association, partnership, 
corporation or organization. The method of selection and 
determination of the

[[Page 48554]]

qualifications of the foreclosure commissioner shall be at the 
discretion of the General Counsel, and the execution of a 
designation pursuant to paragraph (b) of this section shall be 
conclusive evidence that the commissioner selected has been 
determined to be qualified by the General Counsel.
    (b) After selection of a foreclosure commissioner, the General 
Counsel shall designate the commissioner in writing to conduct the 
foreclosure and sale of the particular multifamily mortgage. The 
written designation shall be duly acknowledged and shall state the 
name and business or residential address of the commissioner and any 
other information the General Counsel deems necessary. The 
designation shall be effective upon execution by the General Counsel 
or his designate. Upon receipt of the designation, the commissioner 
shall demonstrate acceptance by signing the designation and 
returning a signed copy to the General Counsel.
    (c) The General Counsel may designate more than one commissioner 
to foreclose a multifamily mortgage.
    (d) The General Counsel may at any time, with or without cause, 
designate a substitute commissioner to replace a previously 
designated commissioner. Designation of a substitute commissioner 
shall be in writing and shall contain the same information and be 
made effective in the same manner as the designation of the original 
commissioner. Upon designation of a substitute commissioner, the 
substitute commissioner shall serve a copy of the written notice of 
designation upon the persons listed at sections 6.(c) (1) through 
(3) of this Guide either by mail, in accordance with section 6.(c) 
of this Guide, except that the time limitations in that section will 
not apply, or by any other manner which in the substitute 
commissioner's discretion is conducive to giving timely notice of 
substitution.
    (e) The Secretary shall be the guarantor of payment of any 
judgment against the foreclosure commissioner for damages based on 
the commissioner's failure properly to perform the commissioner's 
duties. As between the Secretary and the mortgagor, the Secretary 
shall bear the risk of any financial default by the foreclosure 
commissioner. In the event that the Secretary makes any payment 
pursuant to this paragraph, the Secretary shall be fully subrogated 
to the rights satisfied by such payment.

6. Notice of Default and Foreclosure Sale

    (a) Within 45 days after accepting his or her designation to act 
as commissioner, the commissioner shall commence the foreclosure by 
serving a Notice of Default and Foreclosure Sale.
    (b) The Notice of Default and Foreclosure Sale shall contain the 
following information which, except for paragraphs (b) (2) and (9) 
of this section, will be supplied to the commissioner by the 
Secretary.
    (1) Name and address of the foreclosure commissioner.
    (2) Date of the Notice.
    (3) Names of the Secretary, the original mortgagor and the 
original mortgagee.
    (4) A description of the location of the security property, or 
portion thereof to be sold, which is sufficient to identify it 
including, if appropriate, the street address.
    (5) The date of the mortgage.
    (6) The name of the office or offices in which the mortgage is 
recorded.
    (7) The book and page in which the mortgage was recorded or, if 
appropriate, the mortgage's document or accession number.
    (8) A description of the mortgagor's failure to make payment, 
including the due date of the earliest installment payment remaining 
wholly unpaid as of the date of the Notice or, if appropriate, of 
the other default or defaults upon which foreclosure is based; and a 
statement that the secured debt has been accelerated.
    (9) The date, exact time and place of the foreclosure sale. The 
sale shall not be scheduled for a date less than 30 days after the 
due date of the earliest unpaid installment or the earliest 
occurrence of a nonmonetary default. The sale must be scheduled to 
begin at a time between the hours of 9:00 a.m. and 4:00 p.m. local 
time on a day other than Sunday or a public holiday as defined by 5 
U.S.C. 6103(a) or State law. The sale must be scheduled for (i) a 
place where real estate foreclosure auctions are customarily held in 
the county or one of the counties in which the property to be sold 
is located, or (ii) a courthouse in such a county, or (iii) a site 
at or on the property to be sold. Sale of property located in more 
than one county may be held in any one of the counties in which any 
part of the security property is situated.
    (10) A statement that the foreclosure is being conducted in 
accordance with the Act.
    (11) The costs, if any, to be paid by the purchaser upon 
transfer of title.
    (12) The bidding and payment requirements for the foreclosure 
sale, including the required deposit, the method of deposit, and the 
time and method of payment for the balance of the purchase price. 
The Notice shall state that all deposits and the balance of the 
purchase price shall be paid by certified or cashier's check. The 
Notice shall state that no deposit will be required of the Secretary 
when the Secretary bids at the foreclosure sale.
    (13) Any terms and conditions to which the purchaser at the 
foreclosure sale must agree, as listed in section 7 of this Guide. 
The Notice need not describe at length each and every pertinent term 
and condition, including any required use agreements and deed 
covenants, if it describes these terms and conditions in a general 
way and if it states that the precise terms will be available from 
the commissioner upon request.
    (c) The commissioner shall serve the Notice of Default and 
Foreclosure Sale upon the following persons in the following manner, 
and no additional notice shall be required to be served 
notwithstanding any notice requirements of State or local law:
    (1) By certified or registered mail, return receipt requested, 
sent, at least 21 days before the original scheduled date of the 
foreclosure sale, to the owner of record of the security property as 
of 45 days before the original scheduled date of the foreclosure 
sale. The Notice shall be mailed to the owner at the address shown 
in the mortgage or to the address of the security property, or, in 
the commissioner's discretion, to any address believed to be that of 
the owner; and
    (2) By certified or registered mail, return receipt requested, 
sent, at least 21 days before the original scheduled date of the 
foreclosure sale, to the original mortgagor and all subsequent 
mortgagors of record and all other persons who appear on the public 
record or in the mortgage agreement to be liable for all or part of 
the mortgage debt. The Notice need not be mailed to mortgagors who 
have been released from all obligations under the mortgage. The 
Notice shall be mailed to the mortgagor at the address shown in the 
mortgage, or to the address of the property, or, in the 
commissioner's discretion, to any address believed to be that of the 
mortgagor or mortgagors; and
    (3) By certified or registered mail, return receipt requested, 
sent, at least 10 days before the original scheduled date of the 
foreclosure sale, to all persons having liens of record on the 
security property which were placed on record at least 45 days 
before the scheduled foreclosure sale. The Notice shall be mailed to 
lien holders at their address of record, or to any address the 
commissioner believes to be that of the lien holder; and
    (4) By publication of a copy of the Notice of Default and 
Foreclosure Sale once a week during three successive calendar weeks 
in a newspaper of general circulation in the county or counties in 
which the security property is located. To the extent practicable, 
the newspaper or newspapers chosen shall have circulation which is 
conducive to achieving notice of foreclosure by publication. In 
deciding which newspaper or newspapers have such circulation, the 
commissioner need not select the newspaper with the largest 
circulation. The date of the last publication shall be not less than 
four nor more than twelve days before the sale date. If there is no 
newspaper of general circulation in the county or counties in which 
the security property is located, service shall be made by posting 
the Notice of Default and Foreclosure Sale in at least three public 
places in each such county at least 21 days prior to the date of 
sale. The Notice of Default and Foreclosure Sale which is published 
pursuant to this paragraph may omit a description of the default, as 
otherwise required by paragraph (b)(8) of this section, if the 
commissioner, in his or her discretion, so determines; and
    (5) By posting a copy of the Notice of Default and Foreclosure 
Sale in a prominent place at or near the security property for at 
least 15 consecutive days before the foreclosure sale. If the 
property to be sold consists of two or more noncontiguous parcels of 
land, a copy of the Notice shall be posted in a prominent place on 
each such parcel. If the property consists of two or more separate 
buildings, a copy of the Notice shall be posted in a prominent place 
on each such building. The Notice shall also be posted in the 
project office and in such other appropriate conspicuous places as 
the commissioner deems appropriate for providing notice to all 
tenants. Posting shall not be required if the commissioner in his or 
her discretion finds that the act of posting is likely to lead to a 
breach of the peace or may result in the increased risk of vandalism 
or

[[Page 48555]]

damage to the property. Any such finding will be made in writing. 
Entry on the premises by the commissioner for the purpose of posting 
shall be privileged as against all other persons.
    (d) Service made under paragraphs (c) (1), (2), and (3) of this 
section is deemed to have been made upon mailing, whether or not the 
Notice was received and whether or not a return receipt is received 
or the letter containing the Notice is returned.
    (e) When service of the Notice of Default and Foreclosure Sale 
is made pursuant to paragraph (c) (1), (2), or (3) of this section, 
the commissioner shall at the same time and in the same manner serve 
a copy of the instrument by which the General Counsel, under section 
5(b) of this Guide, has designated him or her to act as 
commissioner.
    (f) At least 7 days before the foreclosure sale, the 
commissioner will record both the instrument designating him or her 
to act as commissioner and the Notice of Default and Foreclosure 
Sale in the same office or offices in which the mortgage was 
recorded.

7. Conditions of Foreclosure Sale

    (a) If a majority of the residential units in a property subject 
to foreclosure sale pursuant to the Act are occupied by residential 
tenants either on the date of the foreclosure sale or on the date on 
which the General Counsel designates the foreclosure commissioner, 
the Secretary shall require, as a condition and term of the sale, 
that the purchaser at a foreclosure sale (other than the Secretary) 
agree to continue to operate the project in accordance with the 
terms of the program under which the mortgage insurance or 
assistance was provided, or any applicable regulatory or other 
agreement in effect with respect to such property immediately prior 
to the time of foreclosure sale as the Secretary shall find 
appropriate. If a majority of the residential units are not so 
occupied, at either such time, the Secretary, in his or her 
discretion, may require as a condition and term of the sale, that 
the purchaser (other than the Secretary) agree to continue to 
operate the property in accordance with such terms described above 
as the Secretary shall find appropriate.
    (b) Terms which the Secretary may find appropriate to require 
pursuant to the Act and such other provisions of law as may be 
applicable may include provisions relating to use and ownership of 
the project property, tenant admission standards and procedures, 
rent schedules and increases, and project operation and maintenance. 
In determining terms which may be appropriate to require, the 
Secretary shall consider:
    (1) The history of the project, including the purposes of the 
program under which the mortgage insurance or assistance was 
provided, and any other program of HUD under which the project was 
developed or otherwise assisted and the probable causes of project 
failure resulting in its default;
    (2) A financial analysis of the project, including an appraisal 
of the fair market value of the property for its highest and best 
use;
    (3) A physical analysis of the project, including the condition 
of the structure and grounds, the need for rehabilitation or 
repairs, and the estimated costs of any such rehabilitation or 
repairs;
    (4) The income levels of the occupants of the project;
    (5) Characteristics, including rental levels, of comparable 
housing in the area, with particular reference to whether current 
conditions and discernible trends in the area fairly indicate a 
likelihood that, for the foreseeable future after foreclosure and 
sale, the project will continue to provide rental or cooperative 
housing and market rentals obtainable in the project will be 
affordable by low- or moderate-income persons;
    (6) The availability of or need for rental housing for low- and 
moderate-income persons in the area, including actions being taken 
or projected to be taken to address such needs and the impact of 
such actions on the project;
    (7) An assessment of the number of occupants who might be 
displaced as a result of the manner of disposition;
    (8) The eligibility of the occupants of the property for rental 
assistance under any program administered by HUD and the 
availability of funding for such assistance if necessary in order 
that the units occupied by such occupants will remain available to 
and affordable by such persons, or if necessary in order to assure 
the financial feasibility of the project after foreclosure and sale 
subject to the terms to be required by the Secretary; and
    (9) Such other factors relating to the project as the Secretary 
shall consider appropriate.
    (c) Terms which the Secretary may require to be agreed to by the 
purchaser pursuant to the Act shall generally not be more 
restrictive, or binding for a longer duration, than the terms by 
which the mortgagor was bound prior to the foreclosure. For example:
    (1) If the mortgage being foreclosed was previously insured by 
the Secretary under section 608, or 801, or title II or X of the 
National Housing Act; or assisted under section 202 of the Housing 
Act of 1959, as it existed before its amendment by section 801 of 
the Cranston-Gonzalez National Affordable Housing Act, any terms 
required by the Secretary pursuant to the Act shall be in effect no 
longer than the earliest date on which the mortgagor could have 
prepaid the mortgage debt without the Secretary's consent, or the 
maturity date of the mortgage, whichever is earlier. No terms shall 
be required pursuant to the Act if, under the terms of the mortgage, 
the mortgagor could have prepaid the mortgage debt in full without 
the Secretary's consent on or before the date of the foreclosure 
sale.
    (2) If the mortgage being foreclosed was taken by the Secretary 
in conjunction with the previous sale of the project by the 
Secretary (purchase money mortgage), any terms required by the 
Secretary pursuant to the Act shall be in effect no longer than the 
earliest date on which the mortgagor under the Purchase Money 
Mortgage could have prepaid the mortgage debt in full without the 
Secretary's consent, or the maturity date of the mortgage, whichever 
is earlier. No terms shall be required pursuant to the Act if the 
mortgagor could have prepaid the mortgage debt in full without the 
Secretary's consent on or before the date of the foreclosure sale.
    (3) If the mortgage being foreclosed covers a project which is 
governed by a use agreement executed under section 1(d)(1) of the 
Housing and Community Development Amendments of 1978, as amended (12 
U.S.C. 1715z-1a); section 202 of the Housing Act of 1959, as amended 
by section 801 of the Cranston-Gonzalez National Affordable Housing 
Act (12 U.S.C. 1701q); section 811 of the Cranston-Gonzalez National 
Affordable Housing Act (42 U.S.C. 8013); or section 225(b) of the 
Emergency Low Income Housing Preservation Act of 1987 (12 U.S.C. 
17151), any terms required by the Secretary under the Act shall be 
in effect no longer than the maturity date of the mortgage.
    (4) If the mortgage being foreclosed was held by the Secretary 
under section 312 of the Housing Act of 1964, any terms required by 
the Secretary pursuant to the Act shall be in effect no longer than 
five years after the completion of the rehabilitation work funded by 
the section 312 loan. No terms shall be required pursuant to the Act 
if the foreclosure sale occurs more than five years after the 
completion of such rehabilitation work.
    (5) If the mortgage being foreclosed covers a project which is 
governed by a use agreement executed under section 222(b) of the 
Low-Income Housing Preservation and Resident Homeownership Act of 
1990 (12 U.S.C. 4112), any terms required by the Secretary under the 
Act shall be in effect for the remaining useful life of the project. 
Remaining useful life has the same meaning given the term in Sec. 24 
CFR 248.101.
    (d) The limitations contained in paragraph (c) of this section 
apply only to such terms as the Secretary may require the purchaser 
to agree to, as a condition and term of the sale, under paragraph 
(a) of this section. Nothing contained in paragraph (c) of this 
section shall prevent the Secretary and the purchaser from entering 
into a subsidy agreement under any program administered by the 
Secretary containing terms binding upon either party which are 
longer in duration than would be permitted to be required by 
paragraph (c) of this section.
    (e) Any terms required by the Secretary to be agreed to by the 
purchaser as a condition and term of sale under the Act shall be 
embodied in a use agreement to be executed by the Secretary and the 
purchaser. Such terms also may be included, or referred to, in 
appropriate covenants contained in the deed to be delivered by the 
foreclosure commissioner as described in section 12 of this Guide. 
Terms required by the Secretary shall be stated or described in the 
Notice of Default and Foreclosure Sale served, published and posted 
in accordance with section 6 of this Guide.

8. Termination or Adjournment of Foreclosure Sale

    (a) Except as provided in paragraphs (d), (e), and (f) of this 
section, the commissioner shall withdraw the security property from 
foreclosure and cancel the foreclosure sale only if:
    (1) The Secretary so directs the commissioner; or
    (2) The commissioner finds, upon application of the mortgagor at 
least three

[[Page 48556]]

business days prior to the scheduled sale, that the default or 
defaults upon which the foreclosure is based did not exist when the 
Notice of Default and Foreclosure Sale was served; or
    (3) (i) In the case of a monetary default, the entire amount of 
principal and interest which would be due if payments under the 
mortgage had not been accelerated is tendered to the commissioner 
before the public auction is completed, and the commissioner finds 
that there are no nonmonetary defaults;
    (ii) In the case of a nonmonetary default, the commissioner, 
upon application of the mortgagor before the date of foreclosure 
sale, finds that all nonmonetary defaults have been cured and that 
there are no monetary defaults; and
    (iii) There is tendered to the commissioner before public 
auction is completed, all amounts due under the mortgage agreement 
excluding additional amounts which would have been due if mortgage 
payments had been accelerated, all expenditures secured by the 
mortgage, and all foreclosure costs incurred for which payment from 
foreclosure proceeds is authorized, as described in section 10 of 
this Guide.
    (b) Before withdrawing the security property from foreclosure as 
described in paragraph (a) (2) or (3) of this section, the 
commissioner shall notify the Secretary of the proposed withdrawal 
by telephone or telegram and shall provide the Secretary with a 
written statement of the reasons for the proposed withdrawal along 
with all documents submitted by the mortgagor in support of the 
proposed withdrawal. Upon receipt of this statement, the Secretary 
shall have 10 days within which to demonstrate orally or in writing 
why the security property should not be withdrawn from foreclosure. 
The Secretary shall provide the mortgagor with a copy of any 
statement prepared by the Secretary in opposition to the proposed 
withdrawal at the same time the statement is submitted to the 
commissioner. If the Secretary receives the commissioner's written 
statement less than 10 days before the scheduled foreclosure sale, 
the sale shall automatically be postponed for 14 days. Under these 
circumstances, notice of the rescheduled sale shall be served as 
described in paragraph (d) of this section.
    (c) The commissioner may not withdraw the security property from 
foreclosure as described in paragraph (a)(3) of this section more 
than once unless the Secretary consents in writing to such 
withdrawal.
    (d) Before or at the time of sale, the foreclosure commissioner 
may, in his or her discretion, determine that circumstances are not 
conducive to a sale which is fair to the mortgagor and the 
Secretary, or that additional time is necessary to determine if the 
sale should be terminated as described in paragraph (a) (2) or (3) 
of this section. If the commissioner makes such a determination, he 
or she may adjourn the foreclosure to a later time on the scheduled 
sale date or to a date not less than nine nor more than 24 days 
later than the scheduled sale date. If the sale is adjourned to a 
later hour on the scheduled sale date, no additional notice of the 
sale is required. If the sale is adjourned to a later date, a 
revised Notice of Default and Foreclosure Sale reciting that the 
sale has been adjourned to a specific new date and containing any 
other corrections the commissioner deems appropriate shall be served 
in accordance with the provisions of section 6.(c) of this Guide, 
except that publication under section 6(c)(4) may be made on any of 
three separate days prior to the revised date of foreclosure sale so 
long as the first publication is made at least seven days before the 
revised sale date, and mailing under section 6(c) (1) through (3) 
may be made at any time at least seven days before the date to which 
the foreclosure sale has been adjourned. The commissioner shall 
also, in the case of a sale adjourned to a later date, mail a copy 
of the revised Notice of Default and Foreclosure Sale to the 
Secretary at least seven days before the date to which the sale has 
been adjourned.
    (e) If the General Counsel designates a substitute commissioner 
less than 48 hours before the foreclosure sale, the sale shall be 
terminated and a new foreclosure commenced by serving a new Notice 
of Default and Foreclosure Sale, in accordance with section 6.(c) of 
this Guide.
    (f) If the General Counsel designates a substitute commissioner 
48 hours or more before the foreclosure sale, the foreclosure will 
continue without prejudice unless the substitute commissioner in his 
or her sole discretion finds that continuation of the foreclosure 
sale will unfairly affect the interests of the mortgagor. If the 
substitute commissioner makes such a finding, the substitute 
commissioner shall cancel the sale or adjourn it according to the 
provisions of paragraph (d) of this section.
    (g) If the commissioner cancels the foreclosure, the mortgage 
will continue in effect as if the mortgage debt had not been 
accelerated.
    (h) If the commissioner cancels the foreclosure sale, a new 
foreclosure may be subsequently commenced as provided under the Act.
    (i) If upon application by the mortgagor, the commissioner 
refuses to withdraw the property from foreclosure as described in 
paragraphs (a)(2) and (a)(3)(ii) of this section, the commissioner 
shall provide the mortgagor and the Secretary with a written 
statement of the reasons for the refusal.

9. Conduct of the Sale

    (a) The foreclosure commissioner shall conduct the foreclosure 
sale at public auction in a manner fair to both the mortgagor and 
the Secretary and consistent with the provisions of the Act. The 
commissioner shall attend the foreclosure sale in person or, if the 
Commissioner is not a natural person, through a duly authorized 
employee. If more than one commissioner has been designated, at 
least one shall attend the sale. The commissioner shall accept 
written one-price sealed bids from any party including the Secretary 
so long as those bids conform to the requirements described in the 
Notice of Default and Foreclosure Sale which are contained in 
section 6.(b)(12) of this Guide. The commissioner shall announce the 
name of each such bidder and the amount of the bid. The commissioner 
shall accept oral bids from any party, including parties who 
submitted one-price sealed bids, if those oral bids conform to the 
requirements described in the Notice of Default and Foreclosure Sale 
which are contained in section 6.(b)(12) of this Guide. The 
commissioner will announce the amount of the high bid and the name 
of the successful bidder before the close of the sale.
    (b) Notwithstanding the provisions of paragraph (a) of this 
section, neither the commissioner nor any relative, related business 
entity or employee shall be permitted to bid at the foreclosure 
sale. Relatives of the commissioner who may not bid include parents, 
siblings, spouses and children. Related business entities which may 
not bid include entities or concerns whose relationship with the 
commissioner at the time the commissioner is designated is such 
that, directly or indirectly, one concern or individual formulates, 
directs, or controls the other concern; or has the power to 
formulate, direct, or control the other concern; or has the 
responsibility and authority either to prevent in the first 
instance, or promptly to correct, the offensive conduct of the other 
concern. Business concerns are also affiliates of each other when a 
third party is similarly situated with respect to both concerns.
    (c) If a natural person, the commissioner may serve as 
auctioneer or, in the commissioner's discretion, may employ an 
auctioneer to conduct the sale. If the commissioner employs an 
auctioneer to conduct the foreclosure sale, the auctioneer must be a 
licensed auctioneer, an officer of State or local government, or any 
other person who commonly conducts foreclosure sales in the area in 
which the security property is located. The commissioner will 
compensate any such auctioneer from the proceeds of the fee he or 
she collects as described in section 10(e) of this Guide.

10. Foreclosure Costs

    Before any claim may be satisfied from the sale proceeds, those 
proceeds shall be used to pay the following costs:
    (a) Advertising and postage expenses incurred in serving the 
Notice of Default and Foreclosure Sale under section 6.(c) (1) 
through (4) of this Guide;
    (b) Mileage by the most reasonable road distance for posting the 
Notice of Default and Foreclosure Sale under section 6.(c)(5) of 
this Guide and for the foreclosure commissioner's attendance at the 
sale. The mileage shall be paid at a rate provided in 28 U.S.C. 
1921;
    (c) Reasonable and necessary costs incurred for title and lien 
record searches;
    (d) The necessary out-of-pocket costs incurred by the 
commissioner for recording documents; and
    (e) A commission to the foreclosure commissioner for the conduct 
of the foreclosure in an amount to be determined by the General 
Counsel. A commission may be allowed to the commissioner 
notwithstanding termination of the sale or appointment of a 
substitute commissioner before the sale takes place.

11. Disposition of Sale Proceeds

    (a) The proceeds of the foreclosure sale shall be used in the 
following order:

[[Page 48557]]

    (1) To pay the costs listed in section 10 of this Guide;
    (2) To pay valid tax liens or assessments on the security 
property which have priority over the foreclosed mortgage;
    (3) To pay liens recorded prior to the recording of the 
foreclosed mortgage which are required to be paid in conformity with 
the Notice of Default and Foreclosure Sale;
    (4) To pay service charges and advancements for taxes, 
assessments and property insurance premiums which were made under 
the terms of the foreclosed mortgage;
    (5) To pay the interest due under the mortgage debt;
    (6) To pay the unpaid principal balance secured by the mortgage 
(including expenditures for the necessary protection, preservation 
and repair of the security property as authorized under the mortgage 
agreement and interest thereon if provided in the mortgage 
agreement);
    (7) To pay any late charges;
    (8) To pay any liens recorded after the foreclosed mortgage; and
    (9) To pay the surplus to the mortgagor.
    (b) The priority of the Secretary's lien shall be determined by 
the Federal first-in-time first-in-right rule. State laws affording 
priority to liens recorded after the mortgage are preempted.
    (c) If the mortgagor entitled to the surplus cannot be located, 
or if the surplus available is insufficient to pay all claimants and 
the claimants to the surplus cannot agree on its disposition, or if 
a claimant to the proceeds of the sale disagrees with the 
commissioner's proposed disposition of the proceeds, the 
commissioner may deposit the disputed funds with a legally 
authorized official or court. If such a procedure for the deposit of 
disputed funds is not available, and the foreclosure commissioner 
files a bill of interpleader or is sued as a stakeholder to 
determine entitlement to such funds, the foreclosure commissioner's 
necessary costs in taking or defending such action shall be 
deductible from the disputed funds.
    (d) If there is more than one party holding a lien or assessment 
described in paragraph (a) (2), (3) or (8) of this section, the 
claim of each party holding the same kind of lien or assessment will 
be given the relative priority to which it would be entitled under 
the law of the State in which the security property is located.
    (e) The commissioner will keep such records as will permit the 
Secretary to verify the costs claimed under section 10 of this 
Guide, and otherwise to audit the commissioner's disposition of the 
sale proceeds.

12. Transfer of Title and Possession

    (a) If the Secretary is the successful bidder, the foreclosure 
commissioner shall issue a deed to the Secretary upon receipt of the 
amount needed to pay the costs listed in section 11.(a) (1) through 
(3) of this Guide. If the Secretary is not the successful bidder, 
the foreclosure commissioner shall issue a deed to the purchaser 
upon receipt of the entire purchase price and execution by the 
Secretary and the purchaser of any use agreement referred to in 
section 7(e) of this Guide. The deed shall convey all of the 
Secretary's rights, title and interest in the security property as 
well as the rights of the commissioner, the mortgagor, and any other 
person claiming by, through, or under them. Any required covenants 
reflecting terms described in section 7 of this Guide shall be 
contained in the commissioner's deed. No judicial proceeding shall 
be required ancillary or supplementary to the procedures provided in 
this part to assure the validity of the conveyance or confirmation 
of such conveyance.
    (b) The commissioner shall deliver possession of the security 
property to the purchaser at the same time he or she delivers the 
deed. The purchaser's possession of the security property shall be 
subject to any interests senior to that of the mortgage and to the 
terms of any existing residential lease for the remaining term of 
the lease or for one year, whichever is shorter. Subject to any 
required terms described in section 7 of this Guide, any commercial 
tenant and any residential tenant remaining in possession after the 
expiration of his or her lease or after the passage of one year, 
whichever event occurs first, shall be deemed a tenant at sufferance 
and may be evicted in accordance with applicable State or local law.
    (c) When the commissioner conveys the property to the Secretary, 
no tax shall be imposed or collected with respect to the 
commissioner's deed, whether as a tax upon the instrument itself or 
upon the privilege of conveying or transferring title to the 
property.
    (d) The registrar of deeds or other appropriate official in the 
county where the property is located shall, upon tendering of the 
customary recording fees, accept all instruments pertaining to the 
foreclosure which are submitted by the commissioner for recordation. 
The instruments to be accepted shall include, but not be limited to, 
the commissioner's deed and the commissioner's affidavit, both of 
which are described in section 14 of this Guide.
    (e) Failure to collect or pay a tax described in paragraph (c) 
of this section shall not be grounds for refusing to record the 
commissioner's deed, for failing to recognize such recordation or 
for denying enforcement of the deed in any State or Federal court.

13. Redemption Rights

    The mortgagor or others will have no right to redeem the 
mortgage after the foreclosure sale. The mortgagor or others will 
have no right to possession of the security property after the 
foreclosure sale based on a right of redemption.

14. Record of Foreclosure and Sale

    (a) The deed to the purchaser shall contain the following 
recitals:
    (1) A statement that the foreclosed mortgage was held by the 
Secretary;
    (2) The details of the service of the Notice of Default and 
Foreclosure Sale described in section 6(c) of this Guide, including 
the names and addresses of persons to whom the Notice was mailed and 
the dates on which the Notice was mailed, names of newspapers in 
which and dates on which the Notice was published, and the date on 
which service by posting was accomplished;
    (3) A statement that the foreclosure was conducted in accordance 
with the Act and with the terms of the Notice of Default and 
Foreclosure Sale;
    (4) The costs of the foreclosure as described in section 10 of 
this Guide; and
    (5) The name of the successful bidder and the amount of the 
successful bid.
    (b) The commissioner may, in his or her discretion, make these 
recitations in an affidavit or addendum to the deed rather than in 
the body of the deed.

15. Management and Disposition by the Secretary

    When the Secretary is the purchaser of the security property, 
the Secretary shall manage and dispose of it in accordance with 
section Sec. 203 of the Housing and Community Development Amendments 
of 1978, 12 U.S.C. 1701z-11, and in accordance with 24 CFR part 290.

16. Computation of Time

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

Appendix B: Nonjudicial Foreclosure of Single Family Mortgages--
Guide

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

1. Purpose

    The purpose of this guide is to present, in a single document, 
the statutory and regulatory requirements of the Single Family 
Mortgage Foreclosure Act of 1994 (the Statute), 12 U.S.C. 
Secs. 3751-3768. Although it presents the regulatory and statutory 
requirements in a combined format, this guide is a secondary source 
for these requirements. The Code of Federal Regulations (CFR), at 24 
CFR part 27, subpart B, is the primary, governing source for 
regulatory requirements, and the Statute is the primary, governing 
source for statutory requirements. Any reference in this Guide to 
the provisions of the Statute includes the requirements of 24 CFR 
part 27, subpart B.
    The Statute creates a uniform Federal remedy for foreclosure of 
certain single family mortgages which are held by the

[[Page 48558]]

Secretary of Housing and Urban Development pursuant to Title I of 
the National Housing Act, 12 U.S.C. 1702 et seq., Title II of the 
National Housing Act, 12 U.S.C. 1707 et seq., or Section 312 of the 
Housing Act of 1964, 42 U.S.C. 1452b (as it existed before repeal). 
The Secretary's powers under the Statute to appoint a foreclosure 
commissioner or commissioners and substitute commissioners, and to 
fix the compensation of commissioners have been delegated to the HUD 
General Counsel.
    The availability of uniform and more expeditious procedures, 
with no right of redemption in the mortgagor or others, for the 
foreclosure of these mortgages by the Department, will ameliorate 
the negative consequences of the disparate State laws under which 
mortgages covering one- to four-family residential properties are 
foreclosed on behalf of HUD. The long periods of time that are 
required under State law to complete foreclosure of such mortgages 
lead to deterioration in the condition of the properties involved, 
necessitate substantial Federal holding expenditures, increase the 
risk of vandalism, fire loss, depreciation, damage, and waste with 
respect to the properties, and adversely affect the neighborhoods in 
which the properties are located. These consequences seriously 
impair the ability of HUD to protect Federal financial interests in 
the properties and frustrate attaining the objectives of the 
underlying Federal program authority. Use of this nonjudicial 
foreclosure procedure will also reduce unnecessary litigation, which 
contributes to already overcrowded court calendars, by removing many 
foreclosures from the courts.

2. Scope and Applicability

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

3. Definitions

    As used in this guide--
    Statute means the Single Family Mortgage Foreclosure Act of 
1994.
    Bona fide purchaser means a purchaser for value in good faith 
and without notice of any adverse claim, and who acquires the 
security property free of any adverse claim.
    County means a political subdivision of a State or Territory of 
the United States, created to aid in the administration of state law 
for the purpose of local self-government, and includes a parish or 
any other equivalent subdivision.
    Mortgage means a deed of trust, mortgage, deed to secure debt, 
security agreement, or any other form of instrument under which any 
property (real or mixed real and personal), or any interest in 
property (including leaseholds, reversionary interests, and any 
other estates under applicable State law), is conveyed in trust, 
mortgaged, encumbered, pledged, or otherwise rendered subject to a 
lien for the purpose of securing the payment of money or the 
performance of an obligation.
    Mortgage agreement means the note or debt instrument and the 
mortgage instrument, deed of trust instrument, trust deed, or any 
other similar instrument or instruments creating the security 
interest in the real estate for the repayment of the note or debt 
instrument, including any instrument incorporated by reference 
therein and any instrument or agreement amending or modifying any of 
the foregoing.
    Mortgagor means the debtor, obligor, grantor, or trustor named 
in the mortgage agreement and, unless the context otherwise 
indicates, includes the current owner of record of the security 
property whether or not such owner is personally liable on the 
mortgage debt.
    Owner means any person who has an ownership interest in the 
property and includes heirs, devisees, executors, administrators, 
and other personal representatives, and trustees of testamentary 
trusts if the owner of record is deceased.
    Person includes any individual, group of individuals, 
association, partnership, corporation, or organization.
    Record; Recorded means to enter or entered in public land record 
systems established under State statutes for the purpose of 
imparting constructive notice to purchasers of real property for 
value and without actual knowledge, and includes ``register'' and 
``registered'' in the instance of registered land, and ``file'' and 
its variants in the context of entering documents in public land 
records.
    Secretary means the Secretary of Housing and Urban Development, 
acting by and through any authorized designee exclusive of the 
foreclosure commissioner.
    Security property means the property (real or mixed real and 
personal) or an interest in property (including leaseholds, life 
estates, reversionary interests, and any other estates under 
applicable law), together with fixtures and other interests subject 
to the lien of the mortgage under applicable law.
    Single family mortgage means a mortgage that covers property on 
which there is located a 1- to 4- family residence, and that:
    (1) Is held by the Secretary pursuant to title I or title II of 
the National Housing Act (12 U.S.C. 1701 et seq.); or
    (2) Secures a loan obligated by the Secretary under section 312 
of the Housing Act of 1964 as it existed before the repeal of that 
section by section 289 of the Cranston-Gonzalez National Affordable 
Housing Act. A mortgage securing such a loan that covers property 
containing nonresidential space and a 1- to 4-family dwelling is not 
subject to foreclosure under the Statute.
    State means:
    (1) The several States;
    (2) The District of Columbia;
    (3) The Commonwealth of Puerto Rico;
    (4) The United States Virgin Islands;
    (5) Guam;
    (6) American Samoa;
    (7) The Northern Mariana Islands; and
    (8) Indian tribes, meaning any Tribe, band, group or nation, 
including Alaskan Indians, Aleuts, and Eskimos, and any Alaskan 
Native Village of the United States that is considered an eligible 
recipient under Title I of the Indian Self-Determination and 
Education Assistance Act (25 U.S.C. 450) or was considered an 
eligible recipient under the State and Local Fiscal Assistance Act 
of 1972 (31 U.S.C. 1221) before repeal of that Act. Eligible 
recipients under the Indian Self-Determination and Education 
Assistance Act are determined by the Bureau of Indian Affairs.

4. Designation of Foreclosure Commissioner

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

[[Page 48559]]

    (ii) In any other manner which, in the substitute foreclosure 
commissioner's sole discretion, is conducive to achieving timely 
notice of such substitution.

5. Prerequisites to Foreclosure

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

6. Commencement of Foreclosure

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

7. Notice of Default and Foreclosure Sale

    The commissioner commences the foreclosure by serving a Notice 
of Default and Foreclosure Sale. The Notice sets forth the name, 
address and telephone number of the foreclosure commissioner and the 
date on which the Notice was issued, along with the following 
information:
    (a) The current mortgagee (that is, the Secretary), the original 
mortgagee (if other than the Secretary), and the original mortgagor.
    (b) A description of the security property sufficient to 
identify the property to be sold.
    (c) The date of the mortgage, the date the mortgage was 
recorded, the office in which the mortgage is recorded, and the 
liber and folio numbers or other appropriate description of the 
location of recordation of the mortgage.
    (d) Identification of the failure to make payment, including the 
entire amount delinquent as of a date specified, a statement 
generally describing the other costs that must be paid if the 
mortgage is to be reinstated, the due date of the earliest principal 
installment payment remaining wholly unpaid as of the date on which 
the Notice is issued upon which the foreclosure is based, or a 
description of any other default or defaults upon which foreclosure 
is based, and the acceleration of the secured indebtedness.
    (e) The date, time, and location of the foreclosure sale.
    (f) A statement that the foreclosure is being conducted in 
accordance with the Statute.
    (g) A description of the types of costs, if any, to be paid by 
the purchaser upon transfer of title.
    (h) The bidding and payment requirements for the foreclosure 
sale, including the amount and method of deposit to be required at 
the foreclosure sale, and the time and method of payment of the 
balance of the foreclosure purchase price. The Notice must state 
that all deposits and the balance of the purchase price must be paid 
by certified or cashier's check. The Notice must also state that no 
deposit will be required of the Secretary when the Secretary bids at 
the foreclosure sale.
    (i) Any other appropriate terms of sale or information as the 
Secretary may determine.

8. Service of Notice of Default and Foreclosure Sale

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

9. Presale Reinstatement

    (a) Except as provided in paragraph (d) of section 4 (above), 
paragraph (b) of this section, and section 11 (below), the 
foreclosure commissioner will withdraw the security property from 
foreclosure and cancel the foreclosure sale only if:
    (1) The Secretary directs the foreclosure commissioner to do so 
before or at the time of the sale; or
    (2) The foreclosure commissioner finds, upon application of the 
mortgagor not less than three business days before the date of the 
sale, that the default or defaults upon which the foreclosure is 
based did not exist at the time of service of the Notice of Default 
and Foreclosure Sale; or
    (3) In the case of a foreclosure involving a monetary default, 
there is tendered to the

[[Page 48560]]

foreclosure commissioner before public auction is completed all 
amounts that would be due under the mortgage agreement if payments 
under the mortgage had not been accelerated, all costs of 
foreclosure incurred for which payment from the proceeds of 
foreclosure is provided in section 13 (below), and the foreclosure 
commissioner finds that there are no nonmonetary defaults; provided, 
however, that the Secretary may refuse to cancel a foreclosure sale 
pursuant to this subparagraph if the current mortgagor or owner of 
record has, on one or more previous occasions, caused a foreclosure 
of the mortgage, commenced pursuant to the Statute or otherwise, to 
be canceled by curing a default; or
    (4) In the case of a foreclosure involving a nonmonetary 
default:
    (i) The foreclosure commissioner, upon application of the 
mortgagor before the date of foreclosure sale, finds that all 
nonmonetary defaults are cured and that there are no monetary 
defaults; and
    (ii) There is tendered to the foreclosure commissioner before 
public auction is completed all amounts due under the mortgage 
agreement (excluding all amounts which would be due under the 
mortgage agreement if the mortgage payments had been accelerated), 
including all amounts of expenditures secured by the mortgage and 
all costs of foreclosure incurred for which payment would be made 
from the proceeds of foreclosure.
    (b) Before withdrawing the security property from foreclosure 
under subparagraphs (a)(2), (a)(3), or (a)(4) of this section, the 
foreclosure commissioner must notify the Secretary of the proposed 
withdrawal by telephone or other telecommunication device and must 
also provide the Secretary with a written statement of the reasons 
for the proposed withdrawal along with all documents submitted by 
the mortgagor in support of the proposed withdrawal. Upon receipt of 
this statement, the Secretary has ten (10) days in which to 
demonstrate why the security property should not be withdrawn from 
foreclosure, and if the Secretary makes this demonstration, the 
property will not be withdrawn from foreclosure. The Secretary will 
provide the mortgagor with a copy of any statement prepared by the 
Secretary in opposition to the proposed withdrawal at the same time 
the statement is submitted to the foreclosure commissioner. If the 
Secretary receives the foreclosure commissioner's written statement 
less than 10 days before the scheduled foreclosure sale, the sale 
will automatically be adjourned for 14 days, during which time it 
may also be cancelled. Under these circumstances, notice of the 
rescheduled sale, if any, will be served as described in section 
11(c), below.
    (c) If the foreclosure commissioner cancels the foreclosure, the 
mortgage will continue in effect as though acceleration had not 
occurred.
    (d) Cancellation of a foreclosure sale will have no effect on 
the commencement of a subsequent foreclosure proceeding.
    (e) The foreclosure commissioner must file a notice of 
cancellation in the same place and manner provided for filing the 
Notice of Default and Foreclosure Sale as provided in section 8.

10. Conduct of Sale

    (a) The foreclosure sale will be conducted in a manner and at a 
time and place as identified in the Notice of Foreclosure and Sale 
and more fully described in this section. The sale will be scheduled 
for a date 30 or more days after the due date of the earliest unpaid 
installment as described in section 7(d), above, or the earliest 
occurrence of a nonmonetary default. The sale will be held at public 
auction and must be scheduled to begin at a time between the hours 
of 9:00 a.m. and 4:00 p.m. local time. The sale will be scheduled 
for a place where foreclosure real estate auctions are customarily 
held in the county or counties in which the property to be sold is 
located, or at a courthouse therein, or at or on the property to be 
sold. If the security property is situated in two counties, the sale 
may be held in any one of the counties in which any part of the 
security property is situated.
    (b) The foreclosure commissioner will conduct the foreclosure 
sale in a manner that is fair to both the mortgagor and the 
Secretary (see section 12, below) and consistent with the provisions 
of the Statute.
    (c) In addition to bids made in person at the sale, the 
foreclosure commissioner will accept written one-price sealed bids 
from any party, including the Secretary, for entry by announcement 
at the sale so long as those bids conform to the requirements 
described in the Notice of Default and Foreclosure Sale. The 
foreclosure commissioner will announce the name of each bidder and 
the amount of the bid. The commissioner will accept oral bids from 
any party, including parties who submitted one-price sealed bids, if 
those oral bids conform to the requirements in the Notice of Default 
and Foreclosure Sale. Before the close of the sale, the commissioner 
will announce the amount of the high bid and the name of the 
successful bidder.
    (d) Notwithstanding the provisions of paragraph (d) of this 
section, neither the foreclosure commissioner nor any relative, 
related business entity, or employee is permitted to bid in any 
manner on the security property subject to the foreclosure sale, 
except that the foreclosure commissioner or an auctioneer may be 
directed by the Secretary to enter a bid on the Secretary's behalf. 
Relatives of the foreclosure commissioner who may not bid include 
parents, siblings, spouses and children. A related business entity 
that may not bid or whose employees may not bid is one whose 
relationship (at the time the foreclosure commissioner is designated 
and during the term of service as foreclosure commissioner) with the 
entity of the foreclosure commissioner is such that, directly or 
indirectly, one entity formulates, directs, or controls the other 
entity; or has the power to formulate, direct, or control the other 
entity; or has the responsibility and authority to prevent, or 
promptly to correct, the offensive conduct of the other entity.
    (e) The commissioner may serve as an auctioneer, or the 
commissioner may employ an auctioneer to conduct the sale. If the 
commissioner employs an auctioneer to conduct the foreclosure sale, 
the auctioneer must be a licensed auctioneer, an officer of State or 
local government, or any other person who commonly conducts 
foreclosure sales in the area in which the security property is 
located. The commissioner will compensate an auctioneer from the 
proceeds of the commission described in section 13(e), below.
    (f) The foreclosure commissioner may require a bidder to make a 
deposit in an amount or percentage set by the foreclosure 
commissioner and stated in the Notice of Default and Foreclosure 
Sale before the bid is accepted.
    (g) A successful bidder at the foreclosure sale who fails to 
comply with the terms of the sale may be required to forfeit the 
cash deposit or, at the election of the foreclosure commissioner 
after consultation with the Secretary, will be liable to the 
Secretary for any costs incurred as a result of such failure. If the 
successful bidder fails to comply with the terms of the sale, the 
HUD Field Office representative will provide instructions to the 
commissioner about offering the property to the second highest 
bidder, or having a new sale, or other instruction at the discretion 
of the HUD representative.

11. Adjournment or Cancellation of Sale

    (a) The foreclosure commissioner may, before or at the time of 
the foreclosure sale, adjourn or cancel the foreclosure sale if the 
foreclosure commissioner determines, in the foreclosure 
commissioner's discretion, that:
    (1) Circumstances are not conducive to a sale which is fair to 
the mortgagor and the Secretary, or
    (2) Additional time is necessary to determine whether the 
security property should be withdrawn from foreclosure, as provided 
in section 9, above.
    (b) The foreclosure commissioner may adjourn a foreclosure sale 
to a later hour the same day by announcing or posting, at the 
original place of sale, the new time and place of the foreclosure 
sale, which must be held between 9:00 a.m. and 4:00 p.m. at the 
original place of sale.
    (c) Except as provided in paragraph (b) of this section, the 
foreclosure commissioner may adjourn a foreclosure sale for not less 
than 9 and not more than 31 days, in which case the foreclosure 
commissioner must serve a Notice of Default and Foreclosure Sale 
that is revised to state that the foreclosure sale has been 
adjourned to a specified date between the hours of 9:00 a.m. and 
4:00 p.m. The revised Notice may include any other information the 
foreclosure commissioner deems appropriate. Such Notice must be 
served by publication and mailing as provided in section 8, above, 
except that publication may be made on any of three separate days 
before the revised date of foreclosure sale. If there is no 
newspaper of general circulation that would permit publication on 
any of three separate days before the revised date of foreclosure 
sale, the Notice of Default and Foreclosure Sale must be posted, not 
less than nine days before the date to which the sale has been 
adjourned, at the courthouse of any county or counties in which the 
property is located, and at the place where the sale is to be held. 
The

[[Page 48561]]

commissioner must also, in the case of a sale adjourned to a later 
date, mail a copy of the revised Notice of Default and Foreclosure 
Sale to the Secretary at least seven days before the date to which 
the sale has been adjourned.
    (d) When a substitute commissioner is designated by the 
Secretary to replace a previously designated foreclosure 
commissioner, the sale shall continue without prejudice unless the 
substitute commissioner finds, in that commissioner's sole 
discretion, that continuation of the foreclosure sale will unfairly 
affect the interests of the mortgagor. Any such finding shall be in 
writing. If the substitute commissioner makes such a finding, the 
substitute commissioner shall cancel or adjourn the sale.

12. Validity of Sale

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

13. Foreclosure Costs

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

14. Disposition of Sale Proceeds

    (a) The proceeds of the foreclosure sale are paid out in the 
following order:
    (1) To cover the costs of foreclosure described in section 13, 
above.
    (2) To pay valid tax liens or assessments on the security 
property as provided in the Notice of Default and Foreclosure Sale.
    (3) To pay any liens recorded before the recording of the 
foreclosed mortgage which are required to be paid in conformity with 
the Notice of Default and Foreclosure Sale.
    (4) To pay service charges and advances for taxes, assessments, 
and property insurance premiums which were made under the terms of 
the foreclosed mortgage.
    (5) To pay the interest due under the mortgage debt.
    (6) To pay the unpaid principal balance secured by the mortgage 
(including expenditures for the necessary protection, preservation, 
and repair of the security property as authorized under the mortgage 
agreement and interest thereon if provided in the mortgage 
agreement).
    (7) To pay any late charges or fees.
    (b) Any surplus proceeds from a foreclosure sale will be 
applied, after payment of the items described in paragraph (a) of 
this section, in the order as follows:
    (1) To pay any liens recorded after the foreclosed mortgage in 
the order of priority under the law of the State in which the 
security property is located.
    (2) To pay the surplus to the mortgagor.
    (c) If the person to whom surplus proceeds are to be paid cannot 
be located, or if the surplus available is insufficient to pay all 
claimants and the claimants cannot agree on the allocation of the 
surplus, or if any person claiming an interest in the mortgage 
proceeds disagrees with the foreclosure commissioner's proposed 
disposition of the disputed proceeds, the foreclosure commissioner 
may deposit the disputed funds with a legally authorized official or 
court. If a procedure for the deposit of disputed funds is not 
available, and the foreclosure commissioner files a bill of 
interpleader or is sued as a stakeholder to determine entitlement to 
such funds, the foreclosure commissioner's necessary costs in taking 
or defending such action are deductible from the disputed funds.
    (d) The foreclosure commissioner will keep such records as will 
permit the Secretary to verify the costs claimed, and otherwise to 
enable the Secretary to audit the foreclosure commissioner's 
disposition of the sale proceeds.

15. Transfer of Title and Possession

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

16. Redemption Rights

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

17. Record of Foreclosure and Sale

    (a) The foreclosure commissioner must include in the recitals of 
the deed to the purchaser, or in an affidavit or addendum to the 
deed, the following items:
    (1) The date, time, and place of the foreclosure sale.

[[Page 48562]]

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

18. Effect of Sale

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

19. Computation of Time

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

20. Deficiency Judgment

    If the price at which the security property is sold at the 
foreclosure sale is less than the unpaid balance of the debt secured 
by such property after deducting payments in the order described in 
section 14, above, the Secretary may refer the matter to the 
Attorney General who may commence an action or actions against any 
and all debtors to recover the deficiency, the only limitation on 
such action being a prohibition against pursuit of a deficiency that 
is specifically set forth in the mortgage.

[FR Doc. 96-23258 Filed 9-12-96; 8:45 am]
BILLING CODE 4210-32-P