[Federal Register Volume 65, Number 129 (Wednesday, July 5, 2000)]
[Proposed Rules]
[Pages 41538-41539]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-16804]



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Part IV





Department of Housing and Urban Development





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24 CFR Parts 27 and 290



Prohibited Purchasers in Foreclosure Sales of Multifamily Projects With 
HUD-Held Mortgages and Sales of Multifamily HUD-Owned Projects; 
Proposed Rules

  Federal Register / Vol. 65, No. 129 / Wednesday, July 5, 2000 / 
Proposed Rules  

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Parts 27 and 290

[Docket No. FR-4583-P-01]
RIN 2501-AC69


Prohibited Purchasers in Foreclosure Sales of Multifamily 
Projects With HUD-Held Mortgages and Sales of Multifamily HUD-Owned 
Projects

AGENCY: Office of the Secretary, HUD.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would prohibit a defaulting mortgagor or 
related parties to the mortgagor from bidding on or acquiring the 
multifamily property that was the subject of the mortgagor's default. 
The purpose of this rule is to prevent a mortgagor from benefitting 
from its default and failure to meet its obligations.

DATES: Comment Due Date: September 5, 2000.

ADDRESSES: Interested persons are invited to submit comments regarding 
this rule to the Rules Docket Clerk, Regulations Division, Office of 
General Counsel, Room 10278, Department of Housing and Urban 
Development, 451 Seventh Street, SW, Washington, DC 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: Marc Harris, Director, Field Asset 
Management Division, Office of Asset Management, Department of Housing 
and Urban Development, Room 6164, 451 Seventh Street SW, Washington, DC 
20410, telephone (202) 708-2654. Hearing or speech-impaired individuals 
may call 1-800-877-8339 (Federal Information Relay Service TTY). (Other 
than the ``800'' number, these are not toll-free numbers.)

SUPPLEMENTARY INFORMATION: This rule proposes to codify HUD's policy of 
preventing a defaulting mortgagor on a multifamily project, and the 
defaulting mortgagor's related parties, from purchasing the property 
that was the subject of the default. This situation may arise in the 
foreclosure sale of a multifamily project with a HUD-held mortgage 
(addressed in 24 CFR part 27), or in the disposition of a HUD-owned 
multifamily project (addressed under 24 CFR part 290). HUD's policy is 
intended to prevent a party from benefiting from its default and 
failure to meet obligations. For example, an owner could avoid 
prepayment restrictions by defaulting and then buying at the 
foreclosure, or an owner could default and then buy back the project at 
foreclosure for less than the amount of the debt on which the default 
occurred.
    The regulations governing nonjudicial foreclosure and the 
disposition of multifamily projects would be amended by adding, 
respectively, a new paragraph to Sec. 27.20(f) and a new Sec. 290.18. 
The new paragraph and section would specifically prohibit the 
defaulting mortgagor or any principal, successor, affiliate, or any 
assignee of any of the listed parties from bidding on or otherwise 
acquiring the defaulted property.
    In codifying this general policy in HUD's regulations, the 
Assistant Secretary for Housing still retains the authority to waive 
these restrictions, since there may be instances in which it would be 
in HUD's interest to permit the defaulting mortgagor or the mortgagor's 
related parties to acquire the defaulted property. For example, it 
would be in HUD's interest to permit the defaulting mortgagor to bid or 
purchase at a price that covers the default, or where it could be 
clearly shown that the default did not occur as a result of the action 
or inaction of the mortgagor.

Findings and Certifications

Regulatory Flexibility Act

    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 rule will not have a significant economic 
impact on a substantial number of small entities. This rule only 
addresses circumstances in which a party may benefit at the public 
expense by defaulting on its obligations, and does not impose any 
additional costs or burdens. Notwithstanding HUD's determination that 
this rule would not have a significant economic effect on a substantial 
number of small entities, HUD specifically invites comments regarding 
any less burdensome alternatives to this rule that will meet HUD's 
objectives as described in this preamble.

Environmental Impact

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

Executive Order 13132, Federalism

    This rule does not have Federalism implications and does not impose 
substantial direct compliance costs on State and local governments or 
preempt State law within the meaning of Executive Order 13132.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-
4; approved March 22, 1995) (UMRA) establishes requirements for Federal 
agencies to assess the effects of their regulatory actions on State, 
local, and tribal governments, and on the private sector. This proposed 
rule does not impose any Federal mandates on any State, local, or 
tribal governments, or on the private sector, within the meaning of the 
UMRA.

List of Subjects

24 CFR Part 27

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

24 CFR Part 290

    Mortgage insurance, Low and moderate-income housing.

    Accordingly, parts 27 and 290 of title 24 of the Code of Federal 
Regulations are amended as follows:

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

    1. The authority citation for 24 CFR part 27 continues to read as 
follows:

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

    2. In Sec. 27.20, a new paragraph (f) is added to read as follows:


Sec. 27.20  Conditions of foreclosure sale.

* * * * *
    (f) The defaulting mortgagor, or any principal, successor, 
affiliate, or assignee thereof, on the multifamily mortgage being 
foreclosed, shall not be eligible to bid on, or otherwise acquire, the 
property being foreclosed by the Department under this subpart or any 
other provision of law. A ``principal'' and an ``affiliate'' are 
defined as provided at 24 CFR 24.105 or successor regulation.

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PART 290--DISPOSITION OF MULTIFAMILY PROJECTS AND SALE OF HUD-HELD 
MULTIFAMILY MORTGAGES

    3. The authority citation for 24 CFR part 290 continues to read as 
follows:

    Authority: 12 U.S.C. 1701z-11, 1701z-12, 1713, 1715b, 1715z-1b, 
1715z-11a; 42 U.S.C. 3535(d) and 3535(i).

    4. In subpart A, a new Sec. 290.18 is added, to read as follows:


Sec. 290.18  Restrictions on sale to former mortgagors.

    The defaulting mortgagor, or any principal, successor, affiliate, 
or assignee thereof, on the mortgage on the property at the time of the 
default resulting in acquisition of the property by HUD shall not be 
eligible to purchase the property. A ``principal'' and an ``affiliate'' 
are defined as provided at 24 CFR 24.105 or successor regulation.

    Dated: May 25, 2000.
Andrew Cuomo,
Secretary.
[FR Doc. 00-16804 Filed 7-3-00; 8:45 am]
BILLING CODE 4210-32-P