[Federal Register Volume 71, Number 100 (Wednesday, May 24, 2006)]
[Notices]
[Pages 29912-29914]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-7901]


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

DEPARTMENT OF AGRICULTURE

Rural Housing Service


Notice of Availability of Hurricane Disaster Assistance--Section 
502 Guaranteed Loan Program

AGENCY: Rural Housing Service, USDA.

ACTION: Notice of funding availability.

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

SUMMARY: The Rural Housing Service, an agency within the USDA Rural 
Development mission area, provides housing loan guarantees to rural 
residents through its Section 502 Guaranteed Loan Program. The 
Department of Defense, Emergency Supplemental Appropriations to Address 
Hurricanes in the Gulf of Mexico and Pandemic Influenza Act, 2006 
(Act), Pub. L. 109-148 (12/30/05) provides USDA Rural Development with 
additional authorities and resources to address the damage caused by 
hurricanes that occurred during the 2005 calendar year. The intent of 
this NOFA is to introduce a temporary Mortgage Recovery Advance Program 
for existing Section 502 Guaranteed Loan Program borrowers impacted by 
certain 2005 hurricanes.

DATES: Effective Date: May 24, 2006 to April 30, 2007.

FOR FURTHER INFORMATION CONTACT: Stuart Walden, Senior Loan Specialist, 
Section 502 Guaranteed Loan Program--STOP 0784 (Room 2250), U.S. 
Department of Agriculture, Rural Housing Service, 1400 Independence 
Ave. SW., Washington, DC 20250-0784.

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

    The paperwork burden has been cleared by the Office of Management 
and Budget (OMB) under OMB Control Number 0575-0078.

Overview

    Based upon the extensiveness and the magnitude of the damage to 
housing in the Gulf Coast Region, USDA Rural

[[Page 29913]]

Development's Section 502 Guaranteed Loan Program is making $500,000 
available for assistance for Mortgage Recovery Advances. These funds 
will be made available on a first-come, first-served basis. Additional 
funding for this initiative is not expected. Funding for this 
initiative will be derived from funds made available through the Act.
    A Notice of Funds Availability (NOFA) related to the Act (71 FR 
12671-74, March 13, 2006) provided access to the following funding 
levels for USDA Rural Development single family housing programs in 
designated disaster areas:
     $1,293,103,000 in deliverable Section 502 guaranteed 
homeownership funds;
     $175,593,000 in deliverable Section 502 direct 
homeownership funds;
     $34,188,000 in deliverable Section 504 direct repair/
rehabilitation loans; and
     $20,000,000 in deliverable Section 504 direct repair/
rehabilitation grants.
    Expanding the assistance made available under the Act to cover 
Mortgage Recovery Advances will reduce, slightly, the amount of funds 
made available for new Section 502 Guaranteed Loans provided for 
through the Act's provisions. It is anticipated that there will be 
ample funding for new loan Section 502 Guaranteed Loan activity.
    USDA Rural Development intends to expand the single family housing 
program options made available by the Act and the March 13, 2006, NOFA 
through the availability of a Mortgage Recovery Advance program for 
existing Section 502 Guaranteed Loan Program borrowers ( herein 
referred to as ``borrowers'') who are in default on their housing loans 
due to 2005 hurricane-related impacts. Mortgage Recovery Advances will 
reduce foreclosure rates and overall guaranteed loan losses for USDA 
Rural Development in affected areas. As a home retention and loss 
mitigation option, eligible delinquent borrowers may receive a one-time 
advance from their loan servicer in an amount equal to not more than 12 
months past due mortgage payments, to include past due principal, 
interest, taxes, and insurance. Mortgage Recovery Advances are designed 
to assist borrowers who do not currently have the ability to support 
their normal monthly mortgage obligation due to a verifiable loss of 
income, increase in living expenses attributable to the hurricanes, and 
who have exhausted other home retention loss mitigation options. The 
advance would be applied directly to the eligible borrowers' delinquent 
mortgage installments in order to bring the loan into a current and 
performing status.
    Only approved lenders, as prescribed in 7 CFR section 1980.308 may 
hold Section 502 Guaranteed loans. Loan servicers processing Mortgage 
Recovery Advances described in the Notice may not always be approved 
holding lenders. Approved holding lenders are responsible for the 
actions of any loan servicer they may employ for servicing section 502 
guaranteed loans.
    Upon application, loan servicers will be reimbursed by USDA Rural 
Development for eligible advances made under the Mortgage Recovery 
Advance program. The advance amount will be recorded as a junior lien 
on the property, and the borrower is required to repay Rural 
Development at the earlier of when the Section 502 Guaranteed Loan is 
paid off or when the borrower no longer owns the property. This debt 
will be evidenced by a promissory note and mortgage or deed of trust.

Designated Disaster Area

    The designated disaster area shall be those Presidentially-declared 
areas eligible for individual assistance in the states of Alabama, 
Florida, Louisiana, Mississippi, and Texas in accordance with the 
Robert T. Stafford Disaster Relief and Emergency Assistance Act, 42 
U.S.C. 5121 et seq.

Description of Assistance

    Under the Section 502 Guaranteed Loan Program's Mortgage Recovery 
Advance program, a loan servicer may, as provided in this NOFA, advance 
funds on behalf of a borrower in an amount necessary to reinstate a 
defaulted loan, and file a request to USDA Rural Development to be 
reimbursed for the amount of the advance.
    All Mortgage Recovery Advances will require Agency approval prior 
to settlement. Each eligible advance that is executed by a loan 
servicer will entitle them to a one-time compensation payment of 
$500.00 from Rural Development to defray expenses associated with the 
action.

Borrower Qualifications

    Borrowers must meet the following requirements to be eligible for a 
Mortgage Recovery Advance:
    (1) The borrower's loan default must have resulted from one or more 
of the 2005 hurricanes, such as water or wind damage to the dwelling, 
increase in expenses, or loss of income as a result of the disaster.
    (2) The borrower must have lived or worked in a designated disaster 
area at the time of the disaster.
    (3) The borrower must have been current on their Section 502 
Guaranteed Loan, including those accounts performing under a repayment 
plan or forbearance agreement, prior to the disaster.
    (4) The borrower's account must be in arrears at least four but not 
more than twelve installments. The loan servicer's Mortgage Recovery 
Advance will include, in addition to the initial four delinquent 
installments, only the amount necessary to meet the borrower's 
arrearages, not to exceed the equivalent of 12 months of past due 
principal, interest, taxes, and hazard insurance. The lender or holder 
is requested to perform an escrow analysis prior to filing the claim to 
ensure that the partial claim payment made on behalf of the mortgagor 
represents, as accurately as possible, the escrow amounts required for 
taxes and insurance.
    (5) The borrower must not be eligible for other home retention loss 
mitigation options, such a repayment plan, loan forbearance 
arrangement, or loan modification. Accounts that are fewer than four 
installments past due should be serviced using these traditional loss 
mitigation workout tools.
    (6) The account must not have been referred for foreclosure.
    (7) The borrower must not currently have the ability to support 
their normal monthly mortgage obligation due to the verifiable loss of 
income or increase in living expenses or costs from property damage to 
their principal residence attributable to the disaster.
    (8) The borrower must continue occupying the property as a primary 
residence or intend to resume occupancy on a permanent basis when the 
residence becomes habitable. The impacted property must be habitable or 
capable of being repaired to be habitable.
    (9) The borrower must have the demonstrated ability to resume 
making their regularly scheduled mortgage payment once the Mortgage 
Recovery Advance has been applied to their account.

Loan Servicer Requirements

    General liquidation requirements for Section 502 Guaranteed Loans 
are found in 7 CFR section 1980.374. This provision requires that loan 
servicers submit a plan to USDA Rural Development when an account is 90 
days or greater delinquent, and a method other than foreclosure will be 
used to resolve the delinquency.

[[Page 29914]]

    Loan servicers must demonstrate that borrowers eligible for the 
Mortgage Recovery Advance program have homes that are in a habitable 
condition or will be repaired to a habitable condition, and that they 
can resume making their regularly scheduled mortgage loan payments 
after the Mortgage Recovery Advance is paid, using the following 
standards:
    (a) Estimate the borrower's anticipated monthly net income for the 
same period, making necessary adjustments for income fluctuations.
    (b) Estimate the borrower's normal monthly living expenses (food, 
utilities, etc.) including debt service on the mortgage and other 
scheduled and anticipated obligations.
    (c) Subtract expenses from income to determine the amount of 
surplus income available each month.
    Loan Servicers must receive prior approval from USDA Rural 
Development before they make a Mortgage Recovery Advance with a 
defaulted borrower.
    Loan servicers will be required to have the borrowers execute a 
Mortgage Recovery Advance promissory note and mortgage or deed-of-trust 
perfecting a lien for USDA Rural Development for the amount of the 
Mortgage Recovery Advance. These RD forms are available by contacting 
the USDA Rural Development, Single Family Housing Guaranteed Loan 
Division, at (202) 690-4507, or by e-mail at: [email protected]. Loan 
servicers will file the mortgage or deed of trust in the appropriate 
local real estate records.

Repayment Terms

    (a) The Mortgage Recovery Advance note and subordinate mortgage or 
deed-of-trust must be recorded in favor of USDA Rural Development and 
will be interest free.
    (b) No monthly or periodic payments are required; however, 
borrowers may voluntarily submit partial payments without incurring any 
prepayment penalty.
    (c) The note is due at the earlier of:
    (1) The payoff of the first lien mortgage and the guaranteed note; 
or
    (2) When the borrower transfers title to the property by voluntary 
or involuntary means.
    (d) USDA Rural Development will collect this Federal debt from the 
borrower by any available means if the advance is not repaid based on 
the terms outlined in the promissory note and mortgage or deed-of-
trust.
    (e) Repayments of all or parts of Mortgage Recovery Advances must 
be collected and remitted to Rural Development by the loan servicer, or 
they may be remitted directly to USDA Rural Development by the 
borrower. To remit a payment via check, payable to USDA Rural 
Development, include the check and along with the borrower's name and 
taxpayer identification (ID) number to: USDA Rural Development, Cash 
Management Branch, FC-363, Attention: Mortgage Recovery Advance, P.O. 
Box 200011, St. Louis, Missouri 63120-0011.
    To remit a payment electronically, contact USDA Rural Development's 
Cash Management Branch at (314) 457-4023 and ask for instructions for 
Remittance Express.

Filing a Claim for Reimbursement

    A claim for reimbursement of the Mortgage Recovery Advance program 
must be submitted to the Agency within 60 days of the advance being 
executed by the borrower through their signature on the promissory 
note, but no later than April 30, 2007.
    When filing the claim for reimbursement to USDA Rural Development, 
the loan servicer must:
    (1) Submit a copy of the promissory note and filed mortgage or deed 
of trust;
    (2) Include a summary of the amount of the funds advanced, 
including the monthly principal, interest, taxes, and insurance amount, 
and other account information indicating the borrower's arrearage 
before the advance as well as the present status of the account as of 
the date of the advance;
    (3) Provide the name, address, and tax ID number for the loan 
servicer; and
    (4) Provide the name, address, and phone number of a contact person 
for the loan servicer that can answer questions about the reimbursement 
request.
    The Agency will pay the one-time $500 payment to the servicer with 
the reimbursement.

Subsequent Borrower Default

    (1) Borrowers will be eligible for only one Mortgage Recovery 
Advance.
    (2) If a borrower defaults on their loan after receiving a Mortgage 
Recovery Advance and a loss claim is filed by the loan servicer due to 
the default, any reimbursement issued for the Mortgage Recovery Advance 
to the servicer on behalf of the borrower will be credited toward the 
maximum loan guarantee amount payable by USDA Rural Development under 
the guarantee.

Emergency Declaration

    Consistent with Proclamation 7925 issued by President Bush, the 
USDA Rural Development Mission Area has determined that it would be 
impracticable, unnecessary, and contrary to public interest to delay 
the effective date of this Notice for any reason.

    Dated: May 18, 2006.
David J. Villano,
Acting Administrator, Rural Housing Service.
[FR Doc. E6-7901 Filed 5-23-06; 8:45 am]
BILLING CODE 3410-XV-P