[Federal Register Volume 61, Number 234 (Wednesday, December 4, 1996)]
[Proposed Rules]
[Pages 64414-64422]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-30764]


      

[[Page 64413]]

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Part II





Department of Housing and Urban Development





_______________________________________________________________________



24 CFR Part 242



Multifamily Mortgage Insurance--Risk-Sharing for Hospitals; Proposed 
Rule

  Federal Register / Vol. 61, No. 234 / Wednesday, December 4, 1996 / 
Proposed Rules  

[[Page 64414]]



DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 242

[Docket No. FR-3914-P-01]
RIN 2502-AB53


Multifamily Mortgage Insurance--Risk-Sharing for Hospitals

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

ACTION: Proposed rule.

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

SUMMARY: The Department is proposing to expand the concept of risk-
sharing to insuring mortgages to finance the new construction or 
rehabilitation of hospitals or improvement of hospitals. This program 
is structured under existing mortgage insurance authority. The program 
would provide a new form of credit enhancement for constructing and 
rehabilitating hospitals.

DATES: Comments must be submitted on or before February 3, 1997.

ADDRESSES: Interested persons are invited to submit comments regarding 
this proposed rule to the Rules Docket Clerk, Office of General 
Counsel, Room 10276, Department of Housing and Urban Development, 451 
Seventh Street, S.W., Washington, D.C. 20410. Communications should 
refer to the above docket number and title. A copy of each 
communication submitted will be available for public inspection and 
copying between 7:30 a.m. and 5:30 p.m. weekdays at the above address. 
FAXED comments will not be accepted.

FOR FURTHER INFORMATION CONTACT: John U. Sepulveda, Director, Hospital 
Mortgage Insurance Staff, Office of Housing, 451 Seventh Street, S.W., 
Washington, D.C. 20410, telephone (202) 708-0599. The above telephone 
number may be accessed through TTY by calling the Federal Relay Service 
at (202) 708-9300 or 1-800-877-8339). (Except for the ``800'' number, 
these are not toll-free numbers.)

SUPPLEMENTARY INFORMATION:

Background

    HUD is reviewing all its mortgage insurance programs in an effort 
to make them more accessible and responsive to end-users.
    Risk-sharing has already been successfully implemented for 
multifamily mortgage insurance and has been recently proposed for 
single family mortgage insurance. Thus, the proposed rule for hospitals 
represents a continuation of the Department's efforts to ``partner'' 
effectively with State finance agencies and others to improve the 
delivery of credit enhancement.
    HUD recognizes the need for many of the market-driven, cost-saving 
reforms which are sweeping hospitals and the health care industry, such 
as: (1) The shift from inpatient hospital care to outpatient 
(ambulatory) care; (2) the shift from fee-for-service to managed care; 
and (3) the shift from independent stand-alone hospitals to vertically 
and horizontally integrated health care systems. HUD expects to seek 
statutory authority to give FHA greater flexibility to design and 
implement products which will be responsive to these changes. The 
proposed risk-sharing program represents what we can do NOW under 
existing statutory authority. Implementing risk-sharing now for the 
Section 242 program will enable the Department to build a partnering 
infrastructure involving State health care facility financing agencies, 
private mortgage and bond insurers and investment and mortgage bankers, 
which will ensure that hospitals and related health care facilities 
retain access to capital during this period of major structural changes 
in the industry.
    The primary purpose of the Hospital Risk-Sharing program is to 
provide a new form of credit enhancement for constructing and 
rehabilitating hospitals, i.e., using insurance by HUD, pursuant to 
risk-sharing agreements with qualified public and private financing 
agencies, to develop and improve hospitals. Using a risk-shared credit 
enhancement program should leverage access to capital markets and 
thereby result in hospital facilities and services appropriate to local 
needs. By permitting State financing agencies and private sector 
financing firms to risk-share with HUD in the construction and 
rehabilitation of hospitals, HUD expects a more efficient financing 
process which should maximize the hospitals ability to get the lowest 
cost financing available in the market place.
    HUD further expects that by allowing a risk-sharing finance partner 
to underwrite, process and service the loans and to manage and dispose 
of property that goes into unremedied default the hospital program will 
be run very effectively. HUD also expects that the Hospital Risk-
Sharing program will increase the chances of the insured hospital's 
successful operation as the risk-sharing partners have a financial 
incentive to assure cost effective operations and will be in closer 
proximity to the hospital thereby having a better understanding of 
local market conditions. Finally, if a hospital encounters adverse 
economic conditions that force its failure, HUD's risk-sharing partner 
should be in a better position to minimize HUD's losses as it would 
have a more complete understanding as to what disposition alternatives 
are available and which one would maximize HUD's financial position.
    HUD is proposing to use the authority to insure mortgages under the 
Hospital Insurance Program under section 242 pursuant to the 
coinsurance authority under section 244 of the National Housing Act to 
design such a Hospital Risk-Sharing Mortgage Insurance Program. The 
program would be similar to the Multifamily Risk-Sharing Insurance 
Program set out at 24 CFR part 266. As with that program, HUD and the 
mortgagee would share the risk of loss as specified in the risk-sharing 
agreement. The risk-sharing agreement is a contract setting out the 
rights and obligations of HUD and the mortgagee. (See Sec. 242.304 for 
a summary of its contents.) The Department would issue the insurance 
commitments and would endorse mortgage notes for insurance. Mortgages 
would have to meet HUD's normal underwriting requirements for the 
hospital full insurance program.
    The Commissioner's endorsement of the mortgage note for insurance 
would specify whether the Department, upon a mortgage default, would 
pay a full initial claim or would pay an initial claim based upon the 
full initial claim amount multiplied by HUD's percentage of the risk. 
The latter formula is new to this program.
    In the event of a mortgage default, HUD would pay an insurance 
claim shortly after the default and would receive a debenture or note 
in like amount from the mortgagee (Sec. 242.428). The mortgagee would 
retain the mortgage. At the end of five years or upon sale of the 
hospital after foreclosure or acquisition by the mortgagee, HUD would 
determine the total loss and the parties would make the necessary 
payments for each to have its respective share of the loss.
    HUD is also proposing a cap on its share of the loss equal to the 
unpaid principal balance of the mortgage note as of the date of default 
multiplied by HUD's percentage of the risk (Sec. 242.450). Operating 
deficits after default constitute a liability over which HUD would have 
no control. Since the mortgagee will retain the mortgage after default, 
the Department believes that a cap will provide a stronger economic 
incentive to service the mortgage in a manner that will minimize 
accrual of operating deficits than would a straight risk-sharing 
formula.
    Section 242.430 contains a partial payment of claims procedure 
similar to

[[Page 64415]]

that provided in Sec. 266.630 of the Multifamily Risk-Sharing Insurance 
Program rule. HUD has implemented this procedure under the authority 
provided in section 244(a) of the National Housing Act for HUD to 
determine the method of calculating insurance benefits. It is not based 
on section 541 of the National Housing Act, which authorizes partial 
payments of claim for certain full insurance programs.
    This proposed rule follows the Multifamily Risk-Sharing Insurance 
Program rule on sharing of mortgage insurance premiums, namely, they 
are shared in direct proportion to share of risk (Sec. 242.404). The 
Department specifically invites public comment on this structure, 
particularly in view of the proposed sharing of the initial claim 
payment and of HUD's cap on liability. It should be noted that, under 
section 244(a) of the National Housing Act, the total premium charged 
may not exceed the premium applicable under the full insurance program, 
which is, in general, 0.5 percent of unpaid principal balance. (See 24 
CFR 207.252 to 207.252c and 242.251.)
    As part of its effort at streamlining its regulations, the 
Department has chosen to leave much of the detailed procedures to be 
established contractually through the risk-sharing agreement rather 
than in this rule. This proposed rule does contain, in detail, the 
claims payment requirements. This is consistent with the Department's 
historic practice in both its single family and multifamily mortgage 
insurance programs of having the contract of insurance evidenced by 
issuance of a mortgage insurance certificate or by endorsement of the 
note, with an incorporation by reference of the appropriate 
regulations. That method has proved highly efficient for those high-
volume programs where the contract of insurance must follow readily-
assignable mortgages. The Hospital Risk-Sharing Program should be a 
much smaller volume program in terms of numbers of mortgages. The 
mortgages themselves would not be assignable (Sec. 242.416). The 
Department seeks comment on the feasibility and desirability of 
establishing these requirements contractually through the risk-sharing 
agreement or addenda to the risk-sharing agreement.

Findings and Certifications

Paperwork Reduction Act Statement

    The proposed information collection requirements contained at 
Secs. 242.304, 242.426, 242.430, 242.430, 242.432, 242.440, and 242.442 
of this rule have been submitted to the Office of Management and Budget 
(OMB) for review, under section 3507(d) of the Paperwork Reduction Act 
of 1995 (44 U.S.C. Chapter 35).
    (a) In accordance with 5 CFR 1320.5(a)(1)(iv), the Department is 
setting forth the following concerning the proposed collection of 
information:
    (1) Title of the information collection proposal: Risk-Sharing for 
Hospitals
    (2) Summary of the collection of information:
    The information collection requirements identified in the proposed 
rule consist of: (i) the application for hospital mortgage insurance; 
and (ii) documents relating to the filing of a claim for mortgage 
insurance benefits pursuant to a risk-sharing agreement.
    (3) Description of the need for the information and its proposed 
use:
    (A) The application for hospital mortgage insurance consists of a 
Form HUD-92013 (OMB No. 2502-0029) and series of supporting documents, 
including, for example: a Certificate of Need (in States that require a 
Certificate of Need) or a State-sponsored study demonstrating need (in 
States that do not require Certificates of Need); a project narrative; 
organizational documents; accreditation reports; audited financial 
statements and operating statistics for the last five years; a five-
year business plan; a detailed feasibility study; architectural/
engineering documentation; and assurances of compliance with applicable 
Federal statutes and Executive Orders. This information is used to: (i) 
verify the hospital's eligibility for FHA mortgage insurance; (ii) 
ascertain the need for a proposed hospital construction project and 
define its scope, design and cost; (iii) assess the applicant 
hospital's financial strength and project feasibility; and (iv) provide 
a basis for thorough evaluation and underwriting of the proposed 
project.
    (B) Documents relating to the claim for mortgage insurance benefits 
include the following standard HUD forms: Notice of Default, Form HUD-
92426 (OMB No. 2502-0041); Application for Initial Claim Payment, Form 
HUD-92747 (OMB No. 2502-0419); and Form HUD-92742, Application for 
Final Claim Payment and Fiscal Data in Support of Claim for Insurance 
Benefits (OMB No. 2502-0415); and non-standard forms including an 
appraisal of the defaulted hospital and annual certified statement of 
amounts due. This information is used to compute the amount of the 
insurance benefits which the risk-sharing lender is entitled to receive 
in the event of a claim.
    (4) Description of the likely respondents, including the estimated 
number of likely respondents, and proposed frequency of response to the 
collection of information:
    The application for hospital mortgage insurance is prepared jointly 
by the applicant hospital and its investment banker (mortgagee). 
Documents relating to claims for mortgage insurance benefits are 
prepared by the mortgagee. The estimated number of respondents and 
proposed frequency of responses are included in paragraph (5), 
immediately below.
    (5) Estimate of the total reporting and recordkeeping burden that 
will result from the collection of information:

----------------------------------------------------------------------------------------------------------------
                                                             Responses      Total                               
 Description of annual information collection   Number of       per         annual      Hours per   Total burden
                                               respondents   respondent   responses     response                
----------------------------------------------------------------------------------------------------------------
Sec.  242.304 HUD 92013, Hospital--Section                                                                      
 242, Application for Project Mortgage                                                                          
 Insurance, OMB No. 2502-0029 \1\............            3            1            3        750         2,250   
Sec.  242.426(c) HUD 92426, Notice of Default                                                                   
 Status on Multifamily Housing Projects OMB                                                                     
 No. 2502-0041 \1\...........................            1            1            1          1             1   
Sec.  242.426(d) Application for Initial                                                                        
 Claim Payment: HUD 92747, Application for                                                                      
 Insurance Benefits, OMB No. 2502-0419 \1\...            1            1            1          0.08          0.08
Sec.  242.426(d) Application for Partial                                                                        
 Claim Payment...............................            1            1            1          1             1   
Sec.  242.430(b) Partial Claim Payment                                                                          
 Mortgagee Submission........................            1            1            1         20            20   
Sec.  242.430(d)(5) Annual Certified                                                                            
 Statement of Amounts Due....................            1            1            1          5             5   
Sec.  242.432 Withdrawal of Claim: HUD 92426,                                                                   
 Notice of Default Status on Multifamily                                                                        
 Housing Projects, OMB No. 2502-0041 \1\.....            1            1            1          1             1   
Sec.  242.440 Appraisal......................            1            1            1        100           100   

[[Page 64416]]

                                                                                                                
Sec.  242.442 HUD 92742, Application For                                                                        
 Final Claim Fiscal Data in Support of Claim                                                                    
 for Insurance Benefits, OMB No. 2502-0415                                                                      
 \1\.........................................            1            1            1          0.5           0.5 
----------------------------------------------------------------------------------------------------------------
\1\ These items involve existing information collection requirements for which HUD is adjusting burden hour     
  estimates or is seeking reinstatement of an OMB control number.                                               

    (b) In accordance with 5 CFR 1320.8(d)(1), the Department is 
soliciting comments from members of the public and affected agencies 
concerning the proposed collection of information to:
    (1) Evaluate whether the proposed collection of information is 
necessary for the proper performance of the functions of the agency, 
including whether the information will have practical utility;
    (2) Evaluate the accuracy of the agency's estimate of the burden of 
the proposed collection of information;
    (3) Enhance the quality, utility, and clarity of the information to 
be collected; and
    (4) Minimize the burden of the collection of information on those 
who are to respond; including through the use of appropriate automated 
collection techniques or other forms of information technology, e.g., 
permitting electronic submission of responses.
    Interested persons are invited to submit comments regarding the 
information collection requirements in this proposal. Comments must be 
received within sixty (60) days from the date of this proposal. 
Comments must refer to the proposal by name and docket number (FR-3447) 
and must be sent to: Joseph F. Lackey, Jr., HUD Desk Officer, Office of 
Management and Budget, New Executive Office Building, Washington, DC 
20503.

Executive Order 12866

    This proposed rule was reviewed by the Office of Management and 
Budget (OMB) under Executive Order 12866, Regulatory Planning and 
Review. Any changes made to the proposed rule as a result of that 
review are clearly identified in the docket file, which is available 
for public inspection in the office of the Department's Rules Docket 
Clerk, room 10276, 451 Seventh Street, SW, Washington, DC 20410.

Environmental Impact

    A Finding of No Significant Impact with respect to the environment 
has been made in accordance with HUD regulations at 24 CFR part 50 
implementing section 102(2)(C) of the National Environmental Policy Act 
of 1969, 42 U.S.C. 4332. The Finding of No Significant Impact is 
available for public inspection and copying between 7:30 a.m. and 5:30 
p.m. weekdays at the Office of the Rules Docket Clerk, 451 Seventh 
Street, SW, Room 10276, Washington, DC 20410-0500.

Unfunded Mandates Reform Act

    The Secretary has reviewed this proposed rule before publication 
and by approving it certifies, in accordance with the Unfunded Mandates 
Reform Act of 1995 (2 U.S.C. 1532), that this proposed rule does not 
impose a Federal mandate that will result in the expenditure by State, 
local, and tribal governments, in the aggregate, or by the private 
sector, of $100 million or more in any one year.

Executive Order 12612, Federalism

    The General Counsel, as the Designated Official under section 6(a) 
of Executive Order 12612, Federalism, has determined that the policies 
contained in this proposed rule would not have substantial direct 
effects on States or their political subdivisions, or the relationship 
between the Federal government and the States, or on the distribution 
of power and responsibilities among the various levels of government. 
As a result, the proposed rule is not subject to review under the 
Order. Specifically, the requirements of this proposed rule are 
directed to lenders and do not impinge upon the relationship between 
the Federal government and State and local governments.

Executive Order 12606, the Family

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

Impact on Small Entities

    The Secretary, in accordance with the Regulatory Flexibility Act (5 
U.S.C. 605(b)), has reviewed and approved this proposed rule, and in so 
doing certifies that this proposed rule would not have a significant 
economic impact on a substantial number of small entities. The proposed 
rule would provide a risk-sharing alternative to full mortgage 
insurance and should be beneficial to both small and large entities.
    The Catalog of Federal Domestic Assistance program number is 
14.128.

List of Subjects in 24 CFR Part 242

    Hospitals, Mortgage insurance, Reporting and recordkeeping 
requirements.

    Accordingly, part 242 of title 24 of the Code of Federal 
Regulations is proposed to be amended as follows:

PART 242--MORTGAGE INSURANCE FOR HOSPITALS

    1. The authority citation for part 242 is revised to read as 
follows:

    Authority: 12 U.S.C. 1715b, 1715n(t), and 1715z-7; 42 U.S.C. 
3535(d). Subparts C and D are also issued under 12 U.S.C. 1715z-9.

    2. The heading for subpart A is revised to read as follows:

Subpart A--Eligibility Requirements--Full Insurance Program

    3. The heading for subpart B is revised to read as follows:

Subpart B--Contract Rights and Obligations--Full Insurance Program

    4. New subparts C and D are added, to read as follows:
Subpart C--Eligibility Requirements--Risk-Shared Insurance Program
242.301  Purpose and scope.
242.302  Definitions.
242.303  Eligibility to enter into risk-sharing agreement.
242.304  Risk-sharing agreement.
242.305  Cross-cutting regulations.
Subpart D--Contract Rights and Obligations--Risk-Shared Insurance 
Program

Mortgage Insurance Premiums

242.400  Mortgage insurance premium: Insurance upon completion.
242.402  Mortgage insurance premium: Insured advances.
242.404  Mortgage insurance premium: Other requirements.
242.406  Mortgage insurance premium: Duration and method of paying.

[[Page 64417]]

242.408  Mortgage insurance premium: Pro rata refund.

Insurance Endorsement

242.412  Insurance endorsement.

Assignments

242.416  Transfer of partial interest under participation agreement.

Termination

242.420  Termination of contract of insurance.
242.422  Notice and date of termination by the Commissioner.

Claim Procedures

242.426  Notice of default and filing an insurance claim.
242.428  Initial claim payments.
242.430  Partial payment of claims.
242.432  Withdrawal of claim.
242.434  Reinstatement of the contract of insurance.
242.436  Issuance of mortgagee Debenture.
242.438  Foreclosure and acquisition.
242.440  Appraisals.
242.442  Application for final claim settlement.
242.444  Determining the amount of loss.
242.446  Items included in total loss.
242.448  Items deducted from total loss.
242.450  Determining share of loss.
242.452  Final claim settlement and mortgagee Debenture redemption.
242.454  Recovery of costs after final claim settlement.
242.456  Program monitoring and compliance.

Subpart C--Eligibility Requirements--Risk-Shared Insurance Program


Sec. 242.301  Purpose and scope.

    This subpart C and subpart D of this part provide for the sharing 
of the risk of loss, by the Commissioner and mortgagees that enter into 
risk-sharing agreements, through insurance under section 242 of the 
National Housing Act pursuant to section 244 of the National Housing 
Act of mortgages securing loans to hospitals.


Sec. 242.302  Definitions.

    (a) For purposes of this subpart C and subpart D of this part, the 
term:
    Contract of insurance means the agreement evidenced by the 
endorsement of the Commissioner upon the credit instrument given in 
connection with an insured mortgage, incorporating by reference the 
regulations in this subpart and subpart D of this part and the 
applicable provisions of the National Housing Act. The endorsement 
shall indicate whether the initial claim amount under Sec. 242.428 will 
be based on the Commissioner's percentage of the risk.
    (b) See Sec. 200.3 of this chapter for other applicable 
definitions.


Sec. 242.303  Eligibility to enter into risk-sharing agreement.

    To be eligible to enter into a risk-sharing agreement, a mortgagee 
must be approved for participation under the National Housing Act in 
accordance with Secs. 202.11 through 202.14 and Secs. 202.17 through 
202.19, of this chapter. The mortgagee must also meet such additional 
net worth and capital requirements as the Commissioner may prescribe 
and must have experience in originating and servicing mortgages in 
connection with hospitals, health care facilities, or both, that is 
acceptable to the Commissioner.


Sec. 242.304  Risk-sharing agreement.

    The risk-sharing agreement shall include provisions relating, but 
not necessarily limited, to the following:
    (a) The risk sharing level or levels at which the mortgagee shall 
participate in the program, subject to the Commissioner's maximum 
liability. The mortgagee's share of the loss may not be less than 10 
percent of the loss;
    (b) Capital, loss reserves, and escrow requirements for the 
mortgagee;
    (c) The particular functions to be performed by each party with 
respect to mortgage origination, underwriting, mortgage servicing and 
claims settlement. The risk-sharing agreement shall provide for the 
Commissioner to issue mortgage insurance commitments and to endorse 
mortgage notes for insurance;
    (d) Fees;
    (e) Required certifications;
    (f) Reports; and
    (g) Audits.


Sec. 242.305  Cross-cutting regulations.

    (a) General. Sections 200.31 (debarment and suspension), 200.32 
(participation and compliance requirements), and 200.33 (labor 
standards) of this chapter and part 200, subpart J, of this chapter 
(equal employment opportunity) apply to this program.
    (b) Environmental review requirements. To comply with the National 
Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.) and related 
laws and authorities, HUD will ensure that each hospital site proposed 
for insurance under this subpart is visited and will prepare the 
applicable environmental reviews as set forth in part 50 of this title 
and for the related environmental criteria and standards in part 51 of 
this title and other applicable regulations. These requirements must be 
completed before HUD may issue a mortgage insurance commitment.

Subpart D--Contract Rights and Obligations--Risk-Shared Insurance 
Program

Mortgage Insurance Premiums


Sec. 242.400  Mortgage insurance premium: Insurance upon completion.

    (a) Initial premium. For mortgages insured upon completion, on the 
date of the final closing, the mortgagee shall pay to the Commissioner 
an initial premium equal to the prescribed percentage, as indicated in 
Sec. 242.404(b), of the face amount of the mortgage.
    (b) Premium payable with first payment of principal. On the date of 
the first payment of principal the mortgagee shall pay a second premium 
(calculated on a per annum basis) equal to the prescribed percentage of 
the average outstanding principal obligation of the mortgage from the 
final closing date to the year following the date of the first 
principal payment, less the amount paid on the date of the final 
closing.
    (c) Subsequent premiums. Until one of the conditions is met under 
Sec. 242.406(a), the mortgagee on each anniversary of the date of the 
first principal payment shall pay to the Commissioner an annual 
mortgage insurance premium equal to the prescribed percentage of the 
average outstanding principal obligation of the mortgage, without 
taking into account delinquent payments, or partial claim payment under 
Sec. 242.430, or prepayments, for the year following the date on which 
the premium becomes payable.


Sec. 242.402  Mortgage insurance premium: Insured advances.

    (a) Initial premium. For mortgages involving insured advances, on 
the date of the initial closing, the mortgagee shall pay to the 
Commissioner an initial premium equal to the prescribed percentage, as 
indicated in Sec. 242.404(b), of the face amount of the mortgage.
    (b) Interim premium. On each anniversary of the initial closing, 
the mortgagee shall pay an interim mortgage insurance premium equal to 
the prescribed percentage of the face amount of the mortgage. The 
mortgagee shall continue to pay the interim mortgage insurance premiums 
until the date of the first principal payment.
    (c) Premium payable with first payment of principal. On the date of 
the first principal payment, the mortgagee shall pay a mortgage 
insurance premium equal to the prescribed percentage of the average 
outstanding principal obligation of the mortgage for the year following 
the date of the first principal payment. The mortgagee shall adjust 
this payment by deducting an amount equal to the

[[Page 64418]]

portion of the last premium paid that is attributable to the months 
after the date of the first payment to principal. Any partial month is 
to be counted as a whole month. The mortgagee shall remit the net 
adjusted mortgage premium to the Commissioner and refund the amount of 
the adjustment (over-payment) to the mortgagor.
    (d) Subsequent premiums. Until one of the conditions is met under 
Sec. 242.406(a), the mortgagee on each anniversary of the date of the 
first principal payment shall pay to the Commissioner an annual 
mortgage insurance premium equal to the prescribed percentage of the 
average outstanding principal obligation of the mortgage, without 
taking into account delinquent payments, prepayments, or a partial 
claim payment under Sec. 242.430, for the year following the date on 
which the premium becomes payable.


Sec. 242.404  Mortgage insurance premium: Other requirements.

    (a) Premium calculations on or after first principal payment. The 
premiums payable to the Commissioner on and after the first principal 
payment shall be calculated in accordance with the amortization 
schedule prepared by the mortgagee for final closing and the prescribed 
percentage as set forth in the sliding scale chart in paragraph (b) of 
this section without taking into account delinquent payments or 
prepayments.
    (b) Prescribed percentages. The following sliding scale chart 
provides the prescribed percentage, based upon the respective share of 
risk, that is to be used in calculating mortgage insurance premiums 
under this section:

------------------------------------------------------------------------
            Percentage share of risk              Prescribed percentage 
------------------------------------------------     for calculating    
          HUD                   Mortgagee         mortgagee's annual MIP
------------------------------------------------------------------------
90.....................                 10                     .45      
75.....................                 25                     .375     
50.....................                 50                     .25      
40.....................                 60                     .2       
30.....................                 70                     .15      
20.....................                 80                     .1       
10.....................                 90                     .05      
------------------------------------------------------------------------

    (c) Closing information. The mortgagee shall provide final closing 
information to the Commissioner within 15 days of the final closing in 
a format prescribed by the Commissioner. In addition, the mortgagee 
shall submit a copy of the amortization schedule. This amortization 
shall be used to compute and collect all future mortgage insurance 
premiums subject to Sec. 242.400(c) or Sec. 242.402(d). If the mortgage 
is modified, the mortgagee shall submit to the Commissioner a copy of 
the revised amortization schedule, which shall be used to compute and 
collect all future mortgage insurance premiums subject to 
Sec. 242.400(c) or Sec. 242.402(d).
    (d) Due date for premium payments. Mortgage insurance premiums are 
due on the first day of the month of the anniversary of the first 
payment to principal. Any premium received by the Commissioner more 
than 15 days after the due date, shall be assessed a late charge of 4 
percent of the amount of the premium payment due. Mortgage insurance 
premiums that are paid to the Commissioner more than 30 days after the 
due date shall begin to accrue interest at the rate prescribed by the 
Treasury Fiscal Requirements Manual.


Sec. 242.406  Mortgage insurance premium: Duration and method of 
paying.

    (a) Duration of payments. Mortgage insurance premium payments must 
continue annually until one of the following occurs:
    (1) The mortgage is paid in full;
    (2) A deed to mortgagee is filed for record;
    (3) An application for initial claim payment is received by the 
Commissioner; or
    (4) The contract of insurance is otherwise terminated.
    (b) Method of payment. The mortgagee shall pay any mortgage 
insurance premium required by this part in cash.


Sec. 242.408  Mortgage insurance premium: Pro rata refund.

    If the contract of insurance is terminated by payment in full or is 
terminated by the mortgagee on a form prescribed by the Commissioner, 
after the date of the first payment to principal, the Commissioner 
shall refund any mortgage insurance premium for the period after the 
effective date of the termination of insurance. The refund shall be 
mailed to the mortgagee for credit to the mortgagor's account. In 
computing the pro rata portion of the annual mortgage insurance 
premium, the date of termination of insurance shall be the last day of 
the month in which the mortgage is prepaid or the Commissioner receives 
a notification of termination, whichever is later. No refund shall be 
made if the insurance was terminated because of the submission of an 
application for initial claim payment or if the termination occurs 
before the date of the first payment to principal.

Insurance Endorsement


Sec. 242.412  Insurance endorsement.

    (a) Initial endorsement. The Commissioner shall indicate his or her 
insurance of the mortgage by endorsing the original credit instrument.
    (b) Final endorsement. When all advances of mortgage proceeds have 
been made and all other applicable terms and conditions have been 
complied with to the satisfaction of the Commissioner, the Commissioner 
shall indicate on the original credit instrument the total of all 
advances that have been approved for insurance and again endorse such 
instrument.
    (c) Effect of endorsement. From the date of initial endorsement, 
the Commissioner and the mortgagee shall be bound by the provisions of 
this subpart to the same extent as if they had executed a contract 
including the provisions of this subpart and the applicable sections of 
the Act.

Assignments


Sec. 242.416  Transfer of partial interest under participation 
agreement.

    The mortgagee may not assign the mortgage. However, a partial 
interest in an insured mortgage or pool of insured mortgages may be 
transferred under a participation agreement or arrangement (such as a 
declaration of trust or the issuance of pass-through certificates), 
without obtaining the approval of the Commissioner, if the following 
conditions are met:
    (a) Legal title to the insured mortgage or mortgages shall be held 
by the mortgagee; and
    (b) The participation agreement, declaration of trust or other 
instrument under which the partial interest is transferred shall 
provide that:
    (1) The mortgagee shall remain mortgagee of record under the 
contract of insurance;
    (2) The Commissioner shall have no obligation to recognize or deal 
with anyone other than the mortgagee with respect to the rights, 
benefits, and obligations of the mortgagee under the contract of 
insurance; and
    (3) The mortgagor shall have no obligation to recognize or do 
business with any one other than the mortgagee or, if applicable, its 
servicing agent with respect to rights, benefits, and obligations of 
the mortgagor or the mortgagee under the mortgage.

Termination


Sec. 242.420  Termination of contract of insurance.

    The contract of insurance shall terminate if any of the following 
occurs:

[[Page 64419]]

    (a) The mortgage is paid in full;
    (b) The mortgagee acquires the mortgaged property and notifies the 
Commissioner that it will not file an insurance claim;
    (c) A party other than the mortgagee acquires the property at a 
foreclosure sale;
    (d) The mortgagee notifies the Commissioner of termination of 
insurance (voluntary termination);
    (e) The mortgagee or its successors commit fraud or make a material 
misrepresentation to the Commissioner with respect to information 
furnished in connection with the contract of insurance on the mortgage 
or while the contract of insurance is in existence;
    (f) The receipt by the Commissioner of an Application for Final 
Claims Settlement; or
    (g) If the mortgagee acquires the mortgaged property and fails to 
make an initial claim.


Sec. 242.422  Notice and date of termination by the Commissioner.

    The Commissioner shall notify the mortgagee that the contract of 
insurance has been terminated and shall establish the effective date of 
termination. The termination shall be the last day of the month in 
which one of the events specified in Sec. 242.420 occurs.

Claim Procedures


Sec. 242.426  Notice of default and filing an insurance claim.

    (a) Definition of default. (1) A monetary default exists when the 
mortgagor fails to make any payment due under the mortgage.
    (2) A covenant default exists when the mortgagor fails to perform 
any other covenant under the provision of the mortgage or the 
regulatory agreement, which is incorporated by reference in the 
mortgage. A mortgagee becomes eligible for insurance benefits on the 
basis of a covenant default only after the mortgagee has accelerated 
the debt and the owner has failed to pay the full amount due, thus 
converting a covenant default into a monetary default.
    (b) Date of default. For purposes of this subpart, the date of 
default is:
    (1) The date of the first uncorrected failure to perform a mortgage 
covenant or obligation; or
    (2) The date of the first failure to make a monthly payment that is 
not covered by subsequent payments, when such subsequent payments are 
applied to the overdue monthly payments in the order in which they were 
due.
    (c) Notice of default. If a default (as defined in paragraph (a) of 
this section) continues for a period of 30 days, the mortgagee must 
notify the Commissioner within 10 days thereafter. Unless waived by the 
Commissioner, the mortgagee must submit this notice monthly, on a form 
prescribed by the Commissioner, until the default has been cured or the 
mortgagee has filed an application for an initial claim payment. In 
cases of mortgage acceleration, the mortgagee must first give notice of 
the default to HUD and the mortgagor.
    (d) Timing of claim filing. Unless a written extension is granted 
by the Commissioner, the mortgagee must file an application for initial 
claim payment (or, if appropriate, for partial claim payment) within 75 
days from the date of default, but not earlier than the first day of 
the month following the month for which a payment was missed. Upon 
request of the mortgagee, the Commissioner may extend, up to 180 days 
from the date of default, the deadline for filing a claim. In those 
cases where the mortgagee certifies that the hospital owner is in the 
process of transacting a bond refunder, refinancing the mortgage, or 
changing the ownership for the purpose of curing the default and 
bringing the mortgage current, the Commissioner may extend the deadline 
for filing a claim beyond 180 days, not to exceed 360 days from the 
date of default.


Sec. 242.428  Initial claim payments.

    (a) Determination of initial claim amount. (1) The initial claim 
amount is based on the unpaid principal balance of the mortgage note as 
of the date of default, plus interest at the mortgage note rate from 
date of default to date of initial claim payment. The mortgage note 
interest component of the initial claim amount is subject to 
curtailment as provided in paragraph (b) of this section. The resulting 
amount is the initial claim amount, unless the Commissioner's 
endorsement of the note for insurance provided that the initial claim 
amount shall be based on the Commissioner's percentage of risk. If the 
endorsement so provided, the resulting amount is multiplied by the 
Commissioner's percentage of the risk to obtain the initial claim 
amount.
    (2) The Commissioner shall make an initial claim payment to the 
mortgagee that is equal to the initial claim amount, less any 
delinquent mortgage insurance premiums, late charges and interest, 
assessed under Sec. 242.404(d).
    (3) The mortgagee must use the proceeds of the initial claim 
payment to retire any bonds or any other financing mechanisms securing 
the mortgage within 30 days of the initial claim payment. Any excess 
funds resulting from such retirement or repayment shall be returned to 
the Commissioner within 30 days of the retirement.
    (b) Curtailment of interest for late filings. In determining the 
mortgage note interest component of the initial claim amount, if the 
mortgagee fails to meet any of the requirements of this section within 
the specified time (including any granted extension of time), the 
Commissioner shall curtail the accrual of mortgage note interest by the 
number of days by which the required action was late.
    (c) Method of payment. The Commissioner shall pay the claim in 
cash, unless the mortgagee requests payment in debentures.


Sec. 242.430  Partial payment of claims.

    (a) General. When the Commissioner receives a claim for a partial 
payment under Sec. 242.426(d), the Commissioner may make a partial 
payment of claim in accordance with the requirements of this section. 
If the mortgagee has not previously received a partial claim payment, 
the mortgagee may file a claim for a partial claim payment under 
Sec. 242.430. Otherwise, the mortgagee must file for an initial claim 
payment under Sec. 242.428.
    (b) Mortgagee submission. In addition to any other requirements set 
forth in administration instructions, the mortgagee must provide the 
following information with its application for a partial claim payment:
    (1) The amount by which the mortgagee will reduce the principal on 
the insured mortgage and the amount of delinquent interest on the 
insured mortgage that the mortgagee will defer based on the anticipated 
closing date; and
    (2) A certification that:
    (i) The amount of the principal reduction of the insured first 
mortgage does not exceed 50 percent of the unpaid principal balance;
    (ii) The relief resulting from the partial claim payment when 
considered with other resources available to the hospital are 
sufficient to restore the financial viability of the hospital;
    (iii) The hospital is or can (at reasonable cost) be made 
structurally sound;
    (iv) The management of the hospital is satisfactory; and
    (v) The default under the insured mortgage was beyond the control 
of the mortgagor.
    (c) Claim processing.--(1) Acceptable application. If the 
mortgagee's application is acceptable, the Commissioner shall notify 
the mortgagee to process the partial payment, which will include the 
modification of the existing mortgage

[[Page 64420]]

and the execution by the mortgagor of a second mortgage payable to the 
mortgagee. When the second mortgage is closed, the mortgagee shall 
notify the Commissioner, in a form and manner prescribed in 
administrative instructions. Upon receipt of notice from the mortgagee, 
the Commissioner shall make the partial claim payment.
    (2) Unacceptable application. If the application is unacceptable, 
the Commissioner shall either advise the mortgagee of the information 
needed to make the application acceptable or return the application for 
further action. The mortgagee is granted an extension of 30 days from 
the date of any notification for further action. If the Commissioner 
determines that a partial payment of claim is not feasible, the 
application will be processed as an application for an initial claim 
payment.
    (d) Requirements.--(1) One partial claim payment. Only one partial 
claim payment may be made under a contract of insurance.
    (2) Partial claim payment amount. The amount of the partial claim 
payment is equal to the amount of relief provided by the mortgagee in 
the form of a reduction in principal and a reduction of delinquent 
interest due on the insured mortgage times the lesser of the 
Commissioner's percentage of the risk of loss or 50 percent.
    (3) Second mortgage. Repayment of the relief provided by the 
mortgagee must be secured by a second mortgage to the mortgagee. This 
second mortgage may provide for postponed amortization and may not be 
assigned by the mortgagee. This second mortgage is not insured under 
this part and may not be insured under any other HUD-related insurance 
program.
    (4) Partial claim repayment by mortgagee. The mortgagee must remit 
to the Commissioner a percentage of all amounts collected on the 
mortgagee's second mortgage within 15 days of receipt by the mortgagee. 
The applicable percentage is equal to the percentage used in paragraph 
(d)(2) of this section to determine the partial claim payment amount. 
Payments made after the 15th day must include a 5 percent late charge 
plus accrued interest at the debenture rate.
    (5) Certified statements of amounts collected. As long as the 
second mortgage remains of record, the mortgagee must submit to the 
Commissioner an annual certified statement of the amounts collected by 
the mortgagee. The mortgagee must submit a final certified statement 
within 30 days after the second mortgage is paid in full, foreclosed, 
or otherwise terminated.


Sec. 242.432  Withdrawal of claim.

    In case of a default and subsequent filing of claim, the mortgagee 
shall determine the form of workout or modification and will inform the 
Commissioner of the type of mortgage relief determined to be 
appropriate. If the default is cured after the claim is made but before 
the initial claim payment is paid by the Commissioner, the mortgagee 
may, in writing, withdraw the claim, and insurance will continue as if 
the default had not occurred.


Sec. 242.434  Reinstatement of the contract of insurance.

    (a) Conditions for reinstatement. After the initial claim payment, 
the Commissioner may reinstate the contract of insurance on the 
following conditions:
    (1) The mortgagee has not acquired the hospital;
    (2) The mortgagor has cured the default; and
    (3) The mortgagee requests that the Commissioner reinstate the 
contract of insurance.
    (b) Notification of reinstatement. If reinstatement is acceptable 
to the Commissioner, the Commissioner shall notify the mortgagee of the 
date the contract of insurance will be reinstated and shall advise the 
mortgagee of the payment needed to reinstate the contract of insurance.
    (c) Payment. Within 30 days of the date of the notice under 
paragraph (b) of this section, the mortgagee shall pay the Commissioner 
an amount equal to the initial claim amount, as determined under 
Sec. 242.428(a)(1), plus an amount equal to the accrued and unpaid 
interest on the mortgagee Debenture through the reinstatement date, 
plus an amount equal to the mortgage insurance premium for the period 
from the date of reinstatement of the contract of insurance to the next 
anniversary date for payment of the mortgage insurance premium.
    (d) Cancellation of debenture. Upon receipt from the mortgagee of 
the amount specified in paragraph (c) of this section, the Commissioner 
shall return the mortgagee debenture for cancellation.
    (e) Continuation of contract of insurance. Upon reinstatement, the 
contract of insurance shall continue as if the default had not 
occurred.


Sec. 242.436  Issuance of mortgagee Debenture.

    (a) Condition to initial claim payment. The mortgagee must issue an 
instrument in the form of a debenture to the Commissioner within 30 
days of receiving the initial claim payment. The mortgagee Debenture 
shall meet the following requirements and shall be in a form that has 
been approved by the Commissioner as part of the application approval 
process.
    (b) Term of mortgagee Debenture. The mortgagee Debenture shall be 
dated the same date that the initial claim payment is issued. The 
mortgagee Debenture shall have a term of five years in order to afford 
the mortgagor ample time to cure the default or the mortgagee time to 
foreclose and/or resell the hospital. The Commissioner may provide a 
written extension of the five year term if the mortgagee certifies and 
provides documentation that the hospital owner has filed bankruptcy and 
the mortgagee is taking action to have the hospital discharged from the 
bankruptcy. The mortgagee Debenture shall, during this extended period, 
continue to bear interest as described below at HUD's published 
debenture rate at the earlier of initial endorsement or final 
endorsement. Interest shall be due and payable annually on the 
anniversary date of the initial claim payment. Interest is due on the 
full face amount of the mortgagee Debenture through the term of the 
mortgagee Debenture or through the date an application for final claim 
payment is received by the Commissioner.
    (c) Mortgagee Debenture amount. (1) The mortgagee Debenture shall 
be for the full initial claim amount as determined under 
Sec. 242.428(a)(1) (minus any excess funds returned to HUD under 
Sec. 242.428(a)(3)).
    (2) The full amount of the mortgagee Debenture shall be payable to 
HUD upon maturity, unless the mortgagee Debenture is canceled because 
of:
    (i) A reinstatement of the contract of insurance under 
Sec. 242.434; or
    (ii) Final claim settlement under Sec. 242.452.
    (d) Mortgagee Debenture interest rate. The mortgagee Debenture 
shall bear interest at HUD's published debenture rate at the earlier of 
initial endorsement or final endorsement. Interest shall be due and 
payable annually on the anniversary date of the initial claim payment 
and on the date of redemption when redeemed or canceled before an 
anniversary date. Interest shall be computed on the full face amount of 
the mortgagee Debenture through the term of the mortgagee Debenture.
    (e) Form of mortgagee Debenture. The mortgagee Debenture should 
follow the standard form of a State/Municipal Debenture issued under 
the Uniform Commercial Code, where applicable, and shall be supported 
by the full faith and credit of the mortgagee. For

[[Page 64421]]

mortgagees that operate as departments or divisions of States or units 
of local government and where such mortgagees cannot pledge the full 
faith and credit of the mortgagee, such mortgagees may collateralize 
their obligation through a letter of credit, reinsurance, or other 
forms of credit acceptable to the Commissioner.
    (f) Debenture registration. Unless otherwise required by law, 
including State or local laws, or other governing bodies, the 
Commissioner will not require the mortgagee Debenture to be 
``Registered'' (with the Securities and Exchange Commission) as it is a 
direct, or private, placement that is supported by the full faith and 
credit of the mortgagee and is not a public offering.


Sec. 242.438  Foreclosure and acquisition.

    The mortgagee is not required to foreclose the insured mortgage. It 
may accept a deed-in-lieu of foreclosure.


Sec. 242.440  Appraisals.

    Where actions taken or caused to be taken by the mortgagee have the 
effect of the recovery of less than the face amount of the mortgagee 
Debenture held by the Commissioner, an appraisal should be made to 
determine the value of the hospital. The appraisal should assume a 
willing buyer and a willing seller. The appraisal must be done within 
the 45 day period immediately preceding the date when the mortgagee 
files an application for final claim settlement. If at the time of 
final claim settlement the mortgagee has not sold the hospital, an 
appraisal should be made to determine the value of the hospital at its 
highest and best use.


Sec. 242.442  Application for final claim settlement.

    The mortgagee shall file an application for final settlement in 
accordance with the Commissioner's administrative procedures not later 
than 30 days after any of the following:
    (a) Sale of the property after foreclosure or after acquisition by 
deed-in-lieu of foreclosure; or
    (b) Expiration of the term of the mortgagee debenture.


Sec. 242.444  Determining the amount of loss.

    The amount of the total loss to be shared by the Commissioner and 
the mortgagee is equal to:
    (a) The amount of the initial claim payment;
    (b) Plus all items set forth in Sec. 242.446; and
    (c) Less all items set forth in Sec. 242.448.


Sec. 242.446  Items included in total loss.

    In computing the total loss, the following items are added to the 
amount described in Sec. 242.444(a):
    (a) The amount of all payments that the mortgagee made from its own 
funds and not from hospital income for:
    (1) Taxes, special assessments, and water bills that are liens 
before the Mortgage; and
    (2) Fire and hazard insurance on the property.
    (b) A reasonable amount of acquisition costs actually paid by the 
mortgagee. These costs may not include loss or damage resulting from 
the invalidity or unenforceability of the Mortgage lien or the 
unmarketability of the Mortgagor's title.
    (c) Reasonable payments that the mortgagee made from its own funds 
and not from hospital income for:
    (1) Preservation, operation and maintenance of the property;
    (2) Repairs necessary to meet the requirements of local laws;
    (3) Expenses in connection with the sale of property; and
    (4) Bankruptcy expenses approved by the Office of General Counsel.
    (d) The amount of mortgagee Debenture interest paid by the 
mortgagee to the Commissioner.


Sec. 242.448  Items deducted from total loss.

    In computing insurance benefits, the following items are deducted 
from the amounts described in Sec. 242.446(a) and (b):
    (a) All amounts received by the mortgagee on account of the 
mortgage after the date of default;
    (b) All cash, and/or funds related to the mortgaged property, 
including deposits and escrows made for the account of the mortgagor 
that the mortgagee holds (or to which it is entitled);
    (c) The amount of any undrawn balance under a letter of credit that 
the mortgagee accepted in lieu of a cash deposit for an escrow 
agreement;
    (d) Any net income from the mortgaged property/hospital that the 
mortgagee received after the date of default;
    (e) The proceeds from the sale of the hospital or the appraised 
value of the hospital as provided in Sec. 242.442 as follows:
    (1) If the mortgagee disposes of the hospital through a negotiated 
sale, the amount deducted shall be the higher of the sales price or the 
appraised value.
    (2) If the mortgagee disposes of the hospital through a competitive 
bid procedure approved by the Commissioner, the amount deducted shall 
be the sales price, even if it is lower than the appraised value.
    (3) If the mortgagee has not disposed of the hospital within 5 
years from the date of issuance of the mortgagee Debentures (unless an 
extension has been granted pursuant to Sec. 242.436), the amount 
deducted shall be the appraised value;
    (f) Any and all claims that the mortgagee has acquired in 
connection with the acquisition and sale of the property. Claims 
include but are not limited to returned premiums from canceled 
insurance policies, interest on investments of reserve for replacement 
funds, tax refunds, refunds of deposits left with utility companies, 
and amounts received as proceeds of a receivership; and
    (g) The amount of daily mortgagee Debenture interest accrued but 
not paid from the anniversary date of the last mortgagee Debenture 
interest payment to the date an application for final claim payment is 
received by the Commissioner.


Sec. 242.450  Determining share of loss.

    The total loss computed in Sec. 242.444 shall be shared by the 
Commissioner and the mortgagee in accordance with their respective 
percentage of risk subject to the maximum cap on the Commissioner's 
liability, as specified in the note and the addendum to the risk-
sharing agreement between the Commissioner and the mortgagee. The 
Commissioner's maximum loss on any risk-shared insurance claim shall 
not exceed the unpaid principal balance of the mortgage note as of the 
date of default.


Sec. 242.452  Final claim settlement and mortgagee Debenture 
redemption.

    (a) Final claim payment. If the initial claim amount, as determined 
under Sec. 242.428(a)(1), is less than the Commissioner's share of the 
loss, the Commissioner shall make a final claim payment to the 
mortgagee that is equal to the difference between the Commissioner's 
share of the loss and the initial claim amount and shall return the 
mortgagee Debenture to the mortgagee for cancellation.
    (b) Mortgagee reimbursement payment. If the initial claim amount, 
as determined under Sec. 242.428(a)(1), is more than the Commissioner's 
share of the loss, the mortgagee shall, within 30 days of notification 
by the Commissioner of the amount due, remit to the Commissioner an 
amount that is equal to the difference between the initial claim amount 
and the Commissioner's share of the loss. The funds must be remitted in 
a manner prescribed in the Commissioner's administrative procedures. 
The

[[Page 64422]]

mortgagee Debenture will be considered redeemed upon receipt of the 
cash payment. A 5 percent penalty will be charged and interest at the 
debenture rate will begin to accrue if the cash payment is not received 
within the prescribed period. If a mortgagee is in default under an 
existing debenture and files a claim on another hospital under this 
part, the Commissioner will charge the mortgagee's Dedicated Account 
for the amount owed the Department if such an account was required by 
the risk-sharing agreement. The Commissioner may inform the rating 
agencies of the mortgagee's failure to pay on their debt obligation and 
of its violation of the risk-sharing agreement.
    (c) Losses. Losses sustained as a consequence of the (sole) 
negligence of a mortgagee (e.g., failure to acquire adequate hazard 
insurance where such insurance is available) shall be the sole 
obligation of the mortgagee, notwithstanding the risk apportionment 
otherwise agreed to by the Commissioner and the mortgagee.
    (d) Supplemental claim. Any supplemental claim must be filed within 
one year from date of final claim settlement.


Sec. 242.454  Recovery of costs after final claim settlement.

    If, after final claim settlement, the mortgagee recovers additional 
sums as the result of the sale of the hospital or otherwise, the total 
amount of such recovery shall be shared by The Commissioner and the 
mortgagee in accordance with the prescribed percentage of shared risk.


Sec. 242.456  Program monitoring and compliance.

    The Commissioner will monitor the performance of the mortgagee for 
compliance with the provisions of this subpart.

    Dated: September 3, 1996.
Nicolas P. Retsinas,
Assistant Secretary for Housing-Federal Housing Commissioner.
[FR Doc. 96-30764 Filed 12-3-96; 8:45 am]
BILLING CODE 4210-27-P