[Federal Register Volume 76, Number 43 (Friday, March 4, 2011)]
[Rules and Regulations]
[Pages 11946-11956]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-4816]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Chapter XV

[Docket No. FR-5470-I-01]
RIN 2502-AI97


Emergency Homeowners' Loan Program

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

ACTION: Interim rule.

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SUMMARY: This interim rule reinstates, with certain modifications, 
regulations that HUD formerly published to serve as the framework by 
which emergency relief may be provided to homeowners experiencing 
temporary involuntary loss of employment or underemployment resulting 
in a substantial reduction in income due to adverse economic 
conditions, and who consequently are financially unable to make full 
mortgage payments. These regulations were promulgated following 
enactment of the Emergency Homeowners' Relief Act of 1975. This 1975 
statute provided standby authority to the Secretary to insure or make 
loans to homeowners to defray mortgage expenses, so as to prevent 
widespread mortgage foreclosures and distress sales of homes resulting 
from a homeowner's substantial reduction income. Although the 1975 
regulations were quickly put in place, they were not utilized, and HUD 
eventually removed the regulations from the Code of Federal Regulations 
(CFR) in 1995.
    The Dodd-Frank Wall Street Reform and Consumer Protection Act, 
recently enacted into law, reauthorized the 1975 statute, with certain 
amendments, and made $1 billion available for this 1975 program during 
Fiscal Year (FY) 2011. Accordingly, HUD is reinstating the

[[Page 11947]]

regulations for the program, under the title of ``Emergency Homeowners' 
Loan Program,'' with such modifications as necessary to mirror the 
statutory changes to the Emergency Homeowners' Relief Act of 1975 made 
by the Dodd-Frank Wall Street Reform and Consumer Protection Act.

DATES: Effective Date: April 4, 2011.
    Comment Due Date. May 3, 2011.

ADDRESSES: Interested persons are invited to submit comments regarding 
this rule to the Regulations Division, Office of General Counsel, 451 
7th Street, SW., Room 10276, Department of Housing and Urban 
Development, Washington, DC 20410-0500. Communications must refer to 
the above docket number and title. There are two methods for submitting 
public comments. All submissions must refer to the above docket number 
and title.
    1. Submission of Comments by Mail. Comments may be submitted by 
mail to the Regulations Division, Office of General Counsel, Department 
of Housing and Urban Development, 451 7th Street, SW., Room 10276, 
Washington, DC 20410-0500.
    2. Electronic Submission of Comments. Interested persons may submit 
comments electronically through the Federal eRulemaking Portal at  
http://www.regulations.gov. HUD strongly encourages commenters to 
submit comments electronically. Electronic submission of comments 
allows the commenter maximum time to prepare and submit a comment, 
ensures timely receipt by HUD, and enables HUD to make them immediately 
available to the public. Comments submitted electronically through the 
http://www.regulations.gov Web site can be viewed by other commenters 
and interested members of the public. Commenters should follow the 
instructions provided on that site to submit comments electronically.

    Note: To receive consideration as public comments, comments must 
be submitted through one of the two methods specified above. Again, 
all submissions must refer to the docket number and title of the 
rule.

    No Facsimile Comments. Facsimile (FAX) comments are not acceptable.
    Public Inspection of Public Comments. All properly submitted 
comments and communications submitted to HUD will be available for 
public inspection and copying between 8 a.m. and 5 p.m. weekdays at the 
above address. Due to security measures at the HUD Headquarters 
building, an advance appointment to review the public comments must be 
scheduled by calling the Regulations Division at 202-708-3055 (this is 
not a toll-free number). Individuals with speech or hearing impairments 
may access this number through TTY by calling the Federal Information 
Relay Service at 800-877-8339. Copies of all comments submitted are 
available for inspection and downloading at http://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Ruth Roman, Director, Program Support 
Division, Office of Single Family Housing, Office of Housing, 
Department of Housing and Urban Development, 451 7th Street SW., 
Washington, DC 20410; telephone number 202-708-0317 (this is not a 
toll-free number). Persons with hearing or speech impairments may 
access this number through TTY by calling the toll-free Federal 
Information Relay Service at 800-877-8339.

SUPPLEMENTARY INFORMATION:

I. Background

    On July 2, 1975, the Emergency Housing Act of 1975 (Pub. L. 94-50, 
approved July 2, 1975) (12 U.S.C. 2701 et seq.) was signed into law. 
Title I of this statute is the Emergency Homeowners' Relief Act (1975 
Act). The 1975 Act conferred on HUD standby authority to insure or make 
loans to, or make emergency mortgage relief payments on behalf of, 
homeowners to defray their mortgage expenses (collectively emergency 
assistance), so as to prevent widespread mortgage foreclosures and 
distress sales of homes due to a substantial reduction of income 
resulting from the temporary involuntary loss of employment or 
underemployment due to adverse economic conditions. Following enactment 
of the Emergency Homeowners' Relief Act, HUD promulgated final 
regulations on December 30, 1975 (See 40 FR 59866) and codified these 
regulations in 24 CFR part 2700. In the preamble to the December 30, 
1975, final rule, HUD stated as follows: ``If it becomes necessary to 
implement the program, HUD would provide emergency relief under the 
standby program by coinsuring loans made by private lenders or by 
making direct loans to homeowners to assist them in making their 
mortgage payments.'' (See 40 FR 59866.) This emergency assistance 
program, quickly put in place by HUD in 1975, was not utilized and, in 
1995, as part of HUD's effort to remove outdated, obsolete, or 
unutilized regulations, HUD removed the regulations in 24 CFR part 2700 
from the CFR. (See 60 FR 47263.)
    The Dodd-Frank Wall Street Reform and Consumer Protection Act (Pub. 
L.111-203) (the Dodd-Frank Act), signed into law on July 21, 2010, 
makes available $1,000,000,000 for HUD to establish the Emergency 
Homeowners' Relief Fund for this reauthorized 1975 program, commencing 
in FY 2011, for the purpose of providing emergency mortgage assistance 
in accordance with the 1975 Act, as amended. HUD will administer the 
authority provided by the Dodd-Frank Act as the Emergency Homeowners' 
Loan Program (EHLP). In addition to making funding available, section 
1496 of the Dodd-Frank Act also amends several provisions of the 1975 
Act. The amendments to the 1975 Act include the following:
     Certification by the homeowner and the holder of the 
homeowner's delinquent mortgage that circumstances make it probable 
that there will be a foreclosure and the homeowner is in need of 
emergency mortgage relief;
     Establishment of a ceiling of $50,000 as the aggregate 
amount of emergency assistance that can be provided to any homeowner;
     Inclusion of ``medical conditions'' as the cause of the 
homeowner's involuntary unemployment or underemployment;
     Prohibition on the charging of interest on interest that 
is deferred on an emergency mortgage relief loan or advance of credit 
provided under the EHLP;
     Prohibition on the charging of interest on any emergency 
loan or advance of credit insured under the EHLP program at a rate that 
exceeds the rate of interest that is generally charged for single-
family housing mortgages insured by the Federal Housing Administration; 
and
     Prohibition on imposition of any penalty on a homeowner 
who receives emergency assistance under the EHLP and repays the 
emergency assistance loan in full before the loan becomes due and 
payable.
    In addition to these amendments, the 1975 Act, as amended by the 
Dodd-Frank Act, authorizes HUD to allow funds under the EHLP to be 
administered by a State that has an existing program that is determined 
by the Secretary to provide substantially similar assistance to 
homeowners.\1\ Unchanged in the 1975 Act is the authority provided to 
the Secretary to make such delegations and accept such certifications, 
with respect to the processing of emergency mortgage relief payments, 
as the Secretary determines appropriate to facilitate the prompt and

[[Page 11948]]

efficient implementation of this type of emergency assistance 
authorized under the program.
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    \1\ On November 12, 2010 (75 FR 69454), HUD published a notice 
that solicited applications from States that have existing programs 
that are substantially similar to HUD's, and announced the 
allocation of assistance by State.
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    Underscoring the need to make this funding immediately available to 
eligible homeowners are two dates: The effective date of October 1, 
2010, the first date by which funding may be allocated; and the date of 
September 30, 2011, the last date on which HUD can enter into binding 
agreements with individual mortgagors approved for participation in the 
program. Note that a binding agreement occurs only when a borrower has 
been approved for participation in this program and funds have been 
allocated to that borrower, all of which must occur on or before 
September 30, 2011.

II. This Interim Rule

    Given the statutory deadline of September 30, 2011, described above 
for HUD to enter into binding agreements with individual mortgagors 
approved for EHLP participation, HUD is reinstating the 1975 program 
regulations, substantially as promulgated in 1975, which largely 
adopted the complete statutory framework for emergency assistance 
provided for the program, with modifications to mirror the statutory 
changes of the Dodd-Frank Act, reflect the housing and mortgage markets 
of today, and make such other changes that HUD determined necessary to 
meet the statutory objectives of the Dodd-Frank Act.
    In addition to revising the 1975 regulations to reflect the 
statutory changes made by the Dodd-Frank Act, this rule amends the 1975 
regulations to include certain provisions of the 1975 Act that were not 
included in the regulations promulgated in 1975. HUD is conforming the 
1975 regulations to reflect these statutory provisions, such as direct 
payments to mortgagees, so that the regulations reflect the full 
emergency assistance authority provided to HUD by the 1975 Act. 
Finally, HUD is using this rule to reflect terminology that is used in 
the mortgage market of today and to make other changes to achieve the 
statutory direction to make funding immediately available for emergency 
mortgage assistance. The following highlights the additional changes 
made to the 1975 regulations:
     The rule clarifies that the principal residence of the 
homeowner for which the homeowner seeks relief to prevent foreclosure 
may be a condominium, a cooperative, or a manufactured home.
     The rule includes the list of eligible institutions for 
which HUD is authorized to provide insurance for emergency mortgage 
relief loans and advances of credit as provided in section 105 of the 
Emergency Homeowners' Relief Act. The list of these institutions was 
not revised by the Dodd-Frank Act but was omitted from the 1975 
regulations.
     The rule provides that an eligible homeowner must have a 
total annual income (as defined in these regulations, and hereafter 
referred to as ``income'') that is equal to, or less than, 120 percent 
the area median income (AMI), as determined by HUD and adjusted for 
household size. HUD defines AMI in Sec.  2700.5 of the rule.
     The rule provides that an eligible homeowner must have 
incurred a substantial reduction of income, as a result of involuntary 
loss of employment or underemployment, that is at least 15 percent 
lower than the income the homeowner had prior to loss of employment or 
underemployment.
     The rule requires, consistent with the statute, that the 
aggregate amount of assistance to an eligible homeowner cannot exceed 
$50,000.
     The rule provides that eligible homeowners may receive 
assistance for up to 12 months, and in accordance with criteria 
established by HUD, and that such assistance may be extended once for 
up to 12 additional months, or may receive assistance in an amount up 
to the statutory ceiling of $50,000, whichever occurs first. However, 
please note that the Federal Register document, which reactivates the 
program for FY 2011, provides for eligible homeowners to receive 
assistance for up to 24 months, or up to the statutory ceiling amount 
of $50,000. Given the duration of high unemployment, HUD has determined 
that so long as eligibility requirements are maintained, HUD will 
provide the maximum period of 24 months of homeowner assistance at the 
outset.
     The rule provides, as did the 1975 regulations, that 
emergency assistance may be provided only if the homeowner has a back-
end ratio or debt-to-income (DTI) below 55 percent (principal, 
interest, taxes, insurance, revolving and fixed installment debt 
divided by total monthly income). For this calculation, the homeowner's 
income will be measured at the pre-Event level. Homeowners with second 
mortgage debt or equity lines of credit may qualify for emergency 
assistance if the homeowner's DTI is within the program's 55 percent 
limit.
     The rule includes monitoring requirements to ensure that 
the homeowner remains eligible for the emergency assistance after such 
assistance has commenced, and also specifies the conditions under which 
emergency assistance to the homeowner will be terminated.
     The rule adds a declining balance, nonrecourse, zero 
interest, subordinate secured loan, with a term of up to 7 years, as a 
type of repayment mechanism for emergency mortgage relief payments.
     The rule codifies the provision of the 1975 Act that 
authorizes the Secretary to delegate and accept certifications with 
respect to the processing of emergency mortgage relief payments as may 
be appropriate to facilitate the prompt and efficient implementation of 
this type of emergency assistance.
     The 1975 regulations made reference to the Soldier's and 
Sailor's Civil Relief Act of 1940, and the rule updates the reference 
to this statute to reflect its successor statute, which is the 
Servicemembers Civil Relief Act of 2003.

III. Notice of Program Activation and Fund Availability

    Elsewhere in today's Federal Register, HUD is publishing a notice 
consistent with Sec.  2700.10, which formally announces that EHLP has 
been activated, and describes the emergency assistance being made 
available in this FY 2011 reactivation of the program. While the 
regulations allow for the Secretary to choose among several tools to 
provide emergency homeowners' relief, only those tools that are 
provided in the notice are being used to provide emergency homeowner 
relief in FY 2011. HUD's position is that, given funding for EHLP is 
available for one fiscal year, the requirements for the emergency 
assistance to be provided must be firmly established at the outset of 
the commencement of the program; that is, with the issuance of the 
Federal Register notice. HUD believes the program, as reactivated for 
FY 2011, through the Federal Register notice, provides the relief 
contemplated by the Dodd-Frank Act.

IV. Findings and Certifications

Justification for Interim Rule

    Consistent with its regulations on rulemaking at 24 CFR part 10, 
HUD ordinarily publishes its rules for advance public comment. Advance 
notice and public procedure are omitted, however, if HUD determines 
that, in a particular case or class of cases, notice and public 
procedure are ``impracticable, unnecessary, or contrary to the public 
interest.'' (See 24 CFR 10.1.) In this case, HUD finds that to wait for 
public comment before making

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emergency assistance available under the Emergency Homeowners' Relief 
Act would be contrary to the public interest, and inconsistent with the 
statutory objective, which is for the program to be a source of 
authority by which the Secretary of HUD can immediately act.
    Funds became available for this program on October 1, 2010, and, as 
noted earlier in this preamble, HUD must enter into binding agreements 
with approved homeowners no later than by September 30, 2011. Given 
this statutory deadline, HUD believes homeowners who HUD could help 
under this program may be victims of foreclosure if the program is not 
commenced as quickly as possible. Accordingly, HUD finds that it is 
important that interested lenders and homeowners know that the program 
requirements are set for this first year and will not be changed.
    While HUD is issuing this rule for effect, HUD is also soliciting 
public comment. Although HUD is soliciting public comment on the 1975 
regulations, reinstated with modifications, and the reactivated program 
overall, HUD is not anticipating making significant changes to the 
requirements governing the type of emergency assistance provided under 
EHLP for FY 2011. As noted earlier, HUD's position is that, given 
funding for EHLP is available for one fiscal year, the requirements for 
the emergency assistance to be provided must be firmly established at 
the outset of the commencement of the program; that is, with the 
issuance of the companion Federal Register notice. HUD believes the 
program, as reactivated for FY 2011, through the Federal Register 
notice, provides the relief contemplated by the Dodd-Frank Act. 
However, if a commenter, participating lender, eligible borrower, or 
potential eligible borrower identifies an aspect of the program for 
which a change would help facilitate assistance to eligible homeowners 
or provide further protections against waste, fraud, and abuse, HUD 
will make the necessary change. Further, if funding is provided for 
EHLP beyond FY 2011, HUD will consider the comments received in its 
reevaluation of the program, following this first year of reactivation, 
and make such changes based on public comment and the experience of 
administering EHLP emergency assistance in FY 2011.

Executive Order 12866, Regulatory Planning and Review

    The Office of Management and Budget (OMB) reviewed this rule under 
Executive Order 12866 (entitled ``Regulatory Planning and Review''). 
This rule was determined to be an economically significant regulatory 
act under Executive Order 12866.
    The program that is reactivated under the regulations established 
by this rule is intended to assist a segment of delinquent homeowners 
who face a high probability of foreclosure and have become delinquent 
due to a temporary loss of income. It is expected that the assisted 
households can recover financially within 24 months. The benefits of 
this program include the avoidance of costs associated with foreclosure 
by lenders, homeowners facing foreclosure, neighbors of the foreclosed 
property, and local governments. Overall, the benefits are estimated to 
be between $1.7 billion and $3.4 billion, offset by the costs of 
administration, namely selecting participants ($87.3 million) and 
servicing the EHLP loans ($7.4 million to $11.3 million), and up to 
$23.96 million of incremental costs of foreclosure to lenders caused by 
borrowers assisted by EHLP who subsequently default anyway. In 
addition, participants in this program receive a transfer ranging from 
$28.32 million to $43.3 million, which is equal to the government's 
cost of borrowing the funds.
    Participation in the EHLP program requires households to be at 
least 3 months delinquent. Assuming that participating homeowners are 
on average 5 months delinquent, this would add $8,778 to the total loan 
amount, for an overall total of $26,148. With a program limit of 
approximately $901 million available for loans to homeowners, after 
subtracting administrative costs, this would assist a maximum of 34,474 
homeowners. This assessment calculates the benefits, costs, and 
transfers assuming that a range of 22,546 and 34,474 homeowners receive 
EHLP loans.
    The full Regulatory Impact Analysis can be found at http://www.hud.gov/offices/adm/hudclips/ia/ and is also contained in the 
docket file for this rule, which is available for public inspection in 
the Regulations Division, Office of General Counsel, Department of 
Housing and Urban Development, 451 7th Street, SW., Room 10276, 
Washington, DC 20410-0500. Due to security measures at the HUD 
Headquarters building, please schedule an appointment to review the 
docket file by calling the Regulations Division at 202-402-3055 (this 
is not a toll-free number). Individuals with speech or hearing 
impairments may access this number via TTY by calling the Federal 
Information Relay Service at 800-877-8339.

Regulatory Flexibility Act

    Because no notice of proposed rulemaking is required pursuant to 5 
U.S.C. 553(b) for this rule, the provisions of the Regulatory 
Flexibility Act (5 U.S.C. 601 et seq.) do not apply.

Executive Order 13132, Federalism

    Executive Order 13132 (entitled ``Federalism'') prohibits an agency 
from publishing any rule that has federalism implications if the rule 
either, on the one hand, imposes substantial direct compliance costs on 
State and local governments and is not required by statute, or, on the 
other hand, the rule preempts State law, unless the agency meets the 
consultation and funding requirements of section 6 of the Order. This 
rule does not have federalism implications and would not impose 
substantial direct compliance costs on State and local governments nor 
preempt State law within the meaning of the Order.

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, and Tribal governments and the 
private sector. This rule will 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.

Environmental Review

    This rule does not direct, provide for assistance or loan and 
mortgage insurance for, or otherwise govern, or regulate, real property 
acquisition, disposition, leasing, rehabilitation, alteration, 
demolition, or new construction, or establish, revise or provide for 
standards for construction or construction materials, manufactured 
housing, or occupancy. Accordingly, under 24 CFR 50.19(c)(1), this rule 
is categorically excluded from environmental review under the National 
Environmental Policy Act of 1969 (42 U.S.C. 4321).

Congressional Review Act

    This rule constitutes a ``major rule'' as defined in the 
Congressional Review Act (5 U.S.C. Chapter 8). The Congressional Review 
Act provides for major rules to have a 60-day delayed effective date. 
However, section 808 of the Congressional Review Act provides that the 
60-day delayed effective date can be waived for good cause, and the 
agency issuing the major rule is to incorporate the good cause finding 
and provide a brief statement of reasons that

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notice and public procedure thereon are impracticable, unnecessary, or 
contrary to the public interest. The reasons provided in the section of 
the preamble pertaining to Justification for Interim Rule serve as the 
justification for abbreviating the delayed effective date from 60 days 
to 30 days. As provided in that section, this rule provides for 
emergency relief to unemployed and underemployed homeowners, but 
further provides that such emergency relief is available only through 
September 30, 2011. For these reasons, HUD believes it is contrary to 
the public interest to delay the availability of emergency relief for a 
period of 60 days. HUD also notes that, although this rule is issued 
for effect, HUD is soliciting public comment.

List of Subjects in 24 CFR Part 2700

    Administrative procedures, Mortgage insurance, Practice and 
procedure, Reporting and recordkeeping requirements.

    Accordingly, for the reasons stated in the preamble, HUD is 
establishing a new chapter XV in title 24 of the Code of Federal 
Regulations, consisting of part 2700 to read as follows:

Title 24--Housing and Urban Development

Chapter XV--Emergency Mortgage Insurance and Loan Programs, Department 
of Housing and Urban Development

PART 2700--EMERGENCY HOMEOWNERS' LOAN PROGRAM

Subpart A--General
2700.1 Purpose.
2700.5 Definitions.
2700.10 Determination of emergency.
Subpart B--Eligibility
2700.101 Eligible properties.
2700.105 Eligible institutions.
2700.110 Eligible homeowners.
Subpart C--Emergency Assistance
2700.201 Types and terms of emergency assistance.
2700.205 Emergency assistance amount.
2700.210 Finance charges.
Subpart D--Mortgage Insurance
2700.301 Loan applications.
2700.305 Conditions of insurance.
2700.310 Fees.
2700.315 Insurance premium.
2700.320 Servicing.
2700.325 Termination of mortgage insurance.
2700.330 Default.
2700.335 Claims.
2700.340 Payment of insurance benefits.
2700.345 Administrative reports and examinations.
2700.350 Sale, assignment, and pledge of insured loan.
Subpart E--Direct Loans
2700.401 Participation by lending institutions.
2700.405 Application for loans.
2700.410 Transmittal of Funds.
2700.415 Fees.
2700.420 Servicing.
2700.425 Default.
2700.430 Collection.
2700.435 Payment to HUD.
2700.440 Administrative report and examinations.

    Authority: 12 U.S.C. 2707; 42 U.S.C. 3535(d)

Subpart A--General


Sec.  2700.1  Purpose.

    This part establishes the Emergency Homeowners' Loan Program, a 
standby program authorized by the Emergency Homeowners Relief Act of 
1975, as amended, to prevent widespread mortgage foreclosures and 
distress sales of homes resulting from a homeowner's substantial 
reduction in income due to temporary involuntary loss of employment or 
underemployment resulting from adverse economic conditions or medical 
condition. Under this program, HUD is authorized to provide relief in 
the forms of emergency mortgage relief loans, advances of credit, or 
emergency mortgage relief payments to struggling unemployed or 
underemployed homeowners to help them avoid foreclosure, provided the 
homeowner meets certain specific conditions. HUD may provide such 
relief through approved institutions, including lending institutions, 
or intermediaries designated by HUD. HUD is also authorized to allow 
assistance under this program to be administered by a State that has an 
existing program that is determined by HUD to provide substantially 
similar assistance to homeowners.


Sec.  2700.5  Definitions.

    For purposes of this part, the following terms are defined as 
follows:
    Act means the Emergency Homeowners' Relief Act, title I of the 
Emergency Housing Act of 1975 (12 U.S.C. 2701), as amended by the Dodd-
Frank Wall Street Reform and Consumer Protection Act (Pub. L. 111-203, 
approved July 21, 2010).
    Area Median Income (AMI) means the median family income for the 
metropolitan statistical area (MSA) or statewide nonmetropolitan area, 
as most recently determined and published by HUD, where the property 
meeting the eligibility requirements in Sec.  2700.1 is located.
    Delinquent mortgage means a first-lien mortgage secured by property 
meeting the eligibility requirements in Sec.  2700.101, where the 
homeowner and holder of the delinquent mortgage have certified that 
circumstances, including delinquent payments of at least 3 months, make 
it probable there will be a foreclosure and that the homeowner is in 
need of emergency mortgage relief.
    Emergency assistance includes, but is not limited to, an emergency 
mortgage relief loan, advance of credit, or emergency mortgage relief 
payment provided to an eligible homeowner, as authorized by the Act, 
and in accordance with the requirements of this part.
    Event refers to the involuntary unemployment or underemployment 
status of the homeowner due to adverse economic conditions or medical 
condition. See definition of involuntary unemployment or 
underemployment due to adverse economic conditions or adverse medical 
condition.
    Finance charge means the cost of credit as determined in 12 CFR 
226.4, a section in Regulation Z of the Federal Reserve System's 
regulations on Truth in Lending.
    Homeowner means an individual with a mortgage on the individual's 
principal residence, in which the individual resides, and who meets the 
requirements of Sec.  2700.10 and who is in need of emergency 
assistance pursuant to this part.
    HUD means the Department of Housing and Urban Development.
    Income means the cumulative annual adjusted gross income of the 
homeowner, co-makers, and co-signers on the note secured by the 
delinquent mortgage and the other mortgagors on the delinquent 
mortgage.
    Involuntary unemployment or underemployment due to adverse economic 
conditions or adverse medical condition means the status of a homeowner 
who was working, either as a wage or salaried worker or through self-
employment, is currently involuntarily unemployed or underemployed due 
to adverse economic conditions or medical condition, and is unable to 
meet the homeowner's monthly mortgage payments.
    Lender means a lending institution that provides an emergency 
mortgage relief loan or advance of credit insured under this part.
    Monthly income means one-twelfth of the income, as income is 
defined in this section.
    Monthly mortgage payment means the monthly amount of principal, 
interest, taxes, ground rents, hazard insurance, and mortgage insurance 
premiums due to be paid under a homeowner's delinquent mortgage.

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    Mortgage means any mortgage, deed of trust, executor land sales 
contract, conditional sales contract, or other form of security and the 
obligation secured by a one- to four-family dwelling that is either 
real estate or a manufactured home. Mortgage includes a mortgage on a 
condominium unit and a security interest in stock in a housing 
cooperative.
    Mortgagee means a lending institution that is the holder of the 
delinquent mortgage. The mortgagee may be the same entity as the 
Lender.
    Secretary means the Secretary of Housing and Urban Development.
    Servicer means any entity which services an emergency loan made by 
HUD under this part.
    Servicing institution means any entity that services the delinquent 
mortgage. The servicing institution may also be the same entity as the 
Lender or Servicer.
    Term of monthly payments means a period of monthly payments 
provided under this part not to exceed 24 months. Eligible homeowners 
may receive assistance for up to 12 months, and in accordance with 
criteria established by HUD, and such assistance may be extended once 
for up to 12 additional months, but in no case may monthly payments 
under this part exceed 24 months. The eligible homeowner may also 
receive assistance in an amount up to the statutory ceiling of $50,000, 
whichever occurs first.


Sec.  2700.10  Determination of emergency.

    (a) The Secretary is authorized to provide emergency assistance 
under the Emergency Homeowners' Loan Program when:
    (1) Funds have been explicitly appropriated or made available for 
this program and the statute making funding available directs the 
Secretary to commence making emergency assistance available to 
homeowners; or
    (2) The Secretary has announced that this program has been 
activated and provides the reasons for activation of this program in a 
document published in the Federal Register.
    (b) If the Emergency Homeowners' Loan Program is activated pursuant 
to paragraph (a) of this section, HUD shall publish a document in the 
Federal Register announcing the activation of the program and inviting 
one or more categories of eligible institutions, as defined in Sec.  
2700.105, to participate in the Emergency Homeowners' Loan Program, to 
provide such emergency assistance as HUD may designate from among the 
eligible types of emergency relief provided in Sec.  2700.201, and 
provide such other information regarding participation in the program, 
as necessary and appropriate.

Subpart B--Eligibility


Sec.  2700.101  Eligible properties.

    (a) In order to qualify for an emergency assistance under this 
part, the property of the homeowner seeking assistance must:
    (1) Be a single-family residence in a one-to-four unit building, or 
a condominium or a housing cooperative or a manufactured home;
    (2) Be the principal residence of the homeowner, which means it is 
the residence where the homeowner resides;
    (3) Be subject to a delinquent mortgage, as defined in Sec.  
2700.5, but not, unless otherwise specified by HUD, subject to liens 
having a total outstanding principal balance, as specified by HUD;
    (4) Have flood insurance, pursuant to the National Flood Insurance 
Program, in an amount equal to at least the initial principal amount of 
the emergency loan, if the property is located in an area that has been 
identified by HUD at least one year before the origination of the 
emergency loan as an area having special flood hazards; and
    (5) Meet such other requirements as may be prescribed by HUD for 
reasons including, but not limited to, the particular economic 
circumstances in which emergency assistance is being made available, or 
the type of emergency assistance being made available.
    (b) A property that meets the requirements of paragraph (a) of this 
section is referred to as the mortgaged property.


Sec.  2700.105  Eligible institutions.

    (a) Eligible lending institutions. (1) In order to participate in 
the Emergency Homeowners' Loan Program as a lender or servicer, a 
lending institution must be approved as a mortgagee by the Federal 
Housing Administration in accordance with the applicable requirements 
in 24 CFR part 203, and meet such other requirements as may be 
prescribed by HUD as necessary or appropriate for participation in the 
Emergency Homeowners' Loan Program.
    (2) Approval of a lending institution pursuant to paragraph (a)(1) 
of this section may be withdrawn at any time by notice from HUD for the 
following reasons:
    (i) The transfer of an insured emergency mortgage relief loan or 
advance of credit to a nonapproved entity;
    (ii) The failure of a lending institution to submit the required 
annual audit report of its financial condition within 75 days of the 
close of its fiscal year, or within such other period as may be 
specified by HUD; or
    (iii) The failure of a lending institution to comply with the 
regulations of this part, or such additional program policies or 
requirements as specified by HUD. Withdrawal of a lending institution's 
approval shall not affect the insurance on the emergency mortgage 
relief loans or advances of credit accepted for insurance.
    (3) All approved lending institutions are responsible for servicing 
of emergency mortgage relief loans and advances of credit in accordance 
with acceptable mortgage practices of prudent lending institutions and 
pursuant to 24 CFR part 203.
    (b) Eligible participating organizations. HUD may delegate 
authority with respect to the processing of emergency mortgage relief 
payments as may be appropriate to facilitate the prompt and efficient 
implementation of assistance under the Emergency Homeowners' Loan 
Program.
    (c) States with comparable programs. HUD is authorized to allow 
funding for the Emergency Homeowners' Loan Program to be administered 
by a State that has an existing program that is determined by HUD to 
provide substantially similar assistance to homeowners. After such 
determination is made, any State that HUD authorizes to administer 
funding under this program shall not be required to modify its own 
program to comply with the provisions of this part.


Sec.  2700.110  Eligible homeowners.

    In order to qualify for an emergency assistance under this part, 
the homeowner must:
    (a) Have a total pre-Event income that is equal to, or less than, 
120 percent of the area median income (AMI).
    (b) Have incurred a substantial reduction of income as evidenced by 
current monthly income that is at least 15 percent lower than the pre-
Event income, as a result of involuntary unemployment or 
underemployment due to adverse economic or medical conditions, or such 
other reduction in income as may be specified by HUD.
    (c) Have a delinquent mortgage, as defined in Sec.  2700.5;
    (d) Be financially unable at the time of application for emergency 
relief under this part to make full monthly mortgage payments;
    (e) Have a reasonable likelihood to resume full monthly mortgage 
payments, and repay the emergency assistance pursuant to the terms and

[[Page 11952]]

conditions under which the emergency assistance was made available to 
the homeowner. The standard for meeting this requirement is debt-to-
income (DTI) ratio. The homeowner must have a back-end ratio of below 
55 percent (principal, interest, taxes, insurance, revolving and fixed 
installment debt divided by total monthly income), or such other DTI as 
may be specified by HUD. For this DTI calculation, income will be 
measured at the pre-Event level.
    (f) Have not received other emergency assistance pursuant to this 
part;
    (g) Have been notified that the mortgagee intends to foreclose;
    (h) Produce a certification from the mortgagee in which the 
homeowner also certifies that circumstances make it probable that the 
mortgagee will foreclose on the homeowner's delinquent mortgage; and
    (i) Meet such other requirements as may be prescribed by HUD for 
reasons including, but not limited to, the particular economic 
circumstances in which emergency assistance is being made available, or 
the type of emergency assistance being made available.

Subpart C--Emergency Assistance


Sec.  2700.201  Types and terms of emergency assistance.

    (a) Types of emergency assistance. Emergency assistance may be 
provided to an eligible homeowner in the form of emergency mortgage 
relief loans and advances of credit, or in the form of emergency 
mortgage relief payments. In accordance with Sec.  2700.205, the 
aggregate amount of assistance provided for any eligible homeowner 
shall not exceed $50,000 or extend beyond the term of monthly payments, 
as defined in Sec.  2700.5.
    (1) Emergency mortgage loans and advances. HUD is authorized, upon 
such terms and conditions as specified by HUD, to insure financial 
institutions, which HUD finds to be qualified by experience and 
facilities and approves as eligible for insurance, against losses that 
they may sustain as a result of providing emergency mortgage relief 
loans or advances of credit made under this part.
    (2) Emergency mortgage relief payments. (i) HUD is authorized to 
make emergency relief payments under such terms and conditions as HUD 
may prescribe. Emergency mortgage relief payments may be provided:
    (A) As payment of 100 percent of an eligible homeowner's delinquent 
mortgage arrearages, which may include mortgage principal, interest, 
insurance, taxes, hazard insurance, ground rent, homeowners' assessment 
fees or condominium fees, and foreclosure-related legal fees and late 
payments, in accordance with such terms and conditions as prescribed by 
HUD; and
    (B) As monthly payments due on such delinquent mortgage, for up to 
a period not to exceed the term of monthly payments, as provided in 
Sec.  2700.5.
    (ii) Such emergency mortgage relief payments may be repayable in 
the form of a declining balance, non-recourse, zero-interest, 
subordinate loan secured by the same property securing the delinquent 
mortgage, for a term of up to 7 years.
    (3) Direct payments to mortgagees. HUD is authorized to make direct 
emergency mortgage relief payments to a mortgagee that elects not to 
participate in the Emergency Homeowners' Loan program as an approved 
mortgagee on behalf of homeowners:
    (i) Whose mortgages are held by such mortgagee; and
    (ii) Who meet the requirements of Sec.  2700.110.
    (b) Terms and conditions of assistance. Emergency mortgage relief 
loans and advances of credit made and insured under this part, and 
emergency mortgage relief payments made under this part, shall be 
repayable by the homeowner upon such terms and conditions prescribed by 
HUD, except that:
    (1) The rate of interest on any emergency mortgage relief loan or 
advance of credit insured shall be fixed for the life of the emergency 
mortgage relief loan or advance of credit and shall not exceed the rate 
of interest that is generally charged for mortgages on single-family 
housing insured by the Federal Housing Administration under title II of 
the National Housing Act at the time such emergency mortgage relief 
loan or advance of credit is made;
    (2) No interest shall be charged on interest that is deferred on an 
emergency mortgage relief loan or advance of credit made under this 
part. In establishing rates, terms, and conditions for emergency 
mortgage relief loans or advances of credit, HUD shall take into 
account a homeowner's ability to repay such emergency mortgage relief 
loan or advance of credit;
    (3) Any mortgage insurance premium charge or charges for any 
emergency mortgage relief loan or advance of credit made under this 
part shall not exceed an amount equivalent to one-half of one percent 
per annum of the principal obligation of such emergency mortgage relief 
loan or advance of credit outstanding at any one time;
    (4) Unless otherwise specified by HUD for a given fiscal year, the 
homeowner's contribution to the monthly mortgage payment will be set at 
31 percent of monthly income at the time of the application for 
assistance, but in no instance will such contribution to the monthly 
mortgage payment be less than $25 per month;
    (5) The homeowner may repay the emergency mortgage relief loan or 
advance of credit in full, without penalty, by lump sum or by 
installment payments at any time before the emergency mortgage relief 
loan or advance of credit becomes due and payable; and
    (6) With respect to the emergency mortgage relief payments 
repayable in the form of a declining balance, non-recourse, zero-
interest, subordinate loan as described Sec.  2700.201(a)(2), no 
payment shall be due by the homeowner during the term of the loan so 
long as the homeowner remains current in his or her monthly homeowner 
contribution payments on the delinquent mortgage. If the homeowner 
meets this requirement, the balance due shall decline by such 
percentage as may be designated by HUD, until the loan is fully 
satisfied.
    (c) Termination of emergency assistance. Emergency assistance 
provided to a homeowner shall be terminated and the homeowner shall 
resume full responsibility for meeting the first mortgage payments if 
any of the following occur:
    (1) The maximum loan amount ($50,000) has been provided to the 
homeowner;
    (2) The homeowner fails to report changes in employment status or 
income within 15 days of the change;
    (3) The homeowner's income increases to 85 percent or more of its 
pre-Event income level, or such other percentage as may be prescribed 
by HUD;
    (4) The homeowner sells the mortgaged property or refinances the 
mortgaged property for cash-out;
    (5) The homeowner defaults on the monthly homeowner's contribution 
payment on the delinquent mortgage;
    (6) The homeowner has exhausted the full term of monthly payments, 
as defined in Sec.  2700.5; or
    (7) Such other event as may be specified by HUD.
    (d) Deferral of commencement of repayment. HUD may authorize the 
deferral of the commencement of the repayment of an emergency mortgage 
relief loan or advance of credit or emergency mortgage relief payments 
made under this part until one year following the date of the last 
disbursement of the proceeds of the

[[Page 11953]]

emergency mortgage relief loan or advance of credit or emergency 
mortgage relief payments, or for such longer period as HUD determines 
would further the purpose of the Emergency Homeowners' Loan Program.


Sec.  2700.205  Emergency assistance amount.

    (a) Emergency assistance to an eligible homeowner may be made 
available in an amount up to the amount of the principal, interest, 
taxes, ground rents, hazard insurance, and mortgage insurance premiums 
due under the homeowner's mortgage and such other costs as may be 
specified by HUD. The amount of emergency assistance provided to the 
homeowner shall be an amount that is determined by HUD to be reasonably 
necessary to supplement such amount as the homeowner is capable of 
contributing toward the homeowner's delinquent first mortgage payments, 
except that the aggregate amount of emergency relief provided to any 
homeowner shall not exceed $50,000, including any fees allowed under 
Sec. Sec.  2700.310(a) and 2700.415(a).
    (b) Arrearage payments and monthly assistance payments may be made 
either with the proceeds of an insured emergency mortgage relief loan 
or advance of credit or with emergency mortgage relief payments for up 
to full term of the monthly payments, as defined in Sec.  2700.5.
    (c) Unless otherwise authorized by HUD, the lender or servicer 
shall not approve an emergency mortgage loan or advance of credit when 
the outstanding balance, including delinquent interest, of the 
delinquent mortgage when added to the other liens against the mortgaged 
property, plus the maximum emergency mortgage relief loan that may be 
advanced to the homeowner under this part, exceeds the value of the 
mortgaged property. (In determining the value of the property, the 
lender or servicer may rely upon previously obtained appraisals or 
other determinations of value of the property and need not obtain a 
current appraisal.)


Sec.  2700.210  Finance charges.

    The maximum permissible finance charge, exclusive of fees and 
charges as provided in Sec. Sec.  2700.310, and 2700.415, which may 
directly or indirectly be paid to or collected by the lender or the 
servicer in connection with an emergency mortgage relief loan or 
advance-of-credit transaction, shall not exceed simple interest on the 
outstanding principal balance at the annual interest rate for FHA-
insured home mortgages at such time the emergency mortgage relief loan 
or advance of credit is originated. Additionally, no points or 
discounts of any kind may be assessed or collected in connection with 
an emergency mortgage relief loan or advance-of-credit transaction.

Subpart D--Mortgage Insurance


Sec.  2700.301  Loan applications.

    (a) Lending institutions approved by HUD for participation in the 
Emergency Homeowners' Loan Program are authorized to accept, process, 
and approve applications for emergency mortgage relief loans or 
advances of credit under this part under such terms and conditions as 
HUD may prescribe.
    (b) An approved lender may make an emergency mortgage relief loan 
or advances of credit on the terms specified in this part if the lender 
is satisfied that the application meets all of the relevant 
requirements of this part. The lender shall prepare a note, loan 
agreement, if any, and mortgage as required by HUD, which the lender 
shall record against the property securing the delinquent mortgage upon 
the execution of those documents.
    (c) Except as may be otherwise specified by HUD, on the last 
working day of the month during which an emergency mortgage relief loan 
or advance of credit is closed, the lender shall submit to HUD an 
application for an insured emergency mortgage relief loan or advance of 
credit on such form as prescribed by HUD, signed by the mortgagor and 
holder of the mortgage and that certifies that:
    (1) The lender, homeowner, and property meet the eligibility 
requirements of this part;
    (2) Circumstances (such as the volume of delinquent loans in the 
investor's portfolio likely to remain uncured) make it probable that 
there would be a foreclosure of the delinquent mortgage if the 
emergency mortgage relief were not provided to the homeowner;
    (3) The homeowner is in need of such emergency assistance and the 
mortgagee has indicated to the homeowner its intention to foreclose on 
the delinquent mortgage; and
    (4) The first disbursement of the principal amount of the emergency 
mortgage relief loan or advance of credit has been paid or credited to 
the homeowner's account with the servicing institution.


Sec.  2700.305  Conditions of insurance.

    (a) When the requirements of this part have been met, the lender's 
mortgage insurance coverage under its mortgage insurance contract will 
apply to a particular loan as of the date of closing, if the lender has 
not exceeded the mortgage insurance authority allocation which HUD has 
given the lender.
    (b) From the effective date of the emergency mortgage relief loan 
or advance of credit until the termination of the insurance with 
respect to that loan, the lender shall be bound by the provisions of 
this part as such provisions relate to the emergency mortgage relief 
loan or advance of credit.


Sec.  2700.310  Fees.

    (a) The lender may collect from the homeowner during the year 
following the origination of the emergency mortgage relief loan or 
advance of credit the following fees or charges in conjunction with 
providing the emergency mortgage relief loan or advance of credit:
    (l) A charge to compensate the lender for expenses incurred in 
originating and closing the emergency relief loan, including 
preparation of a note, loan agreement, if any, and a mortgage in a form 
satisfactory for recordation, the total charge not to exceed such 
amount as specified by HUD;
    (2) Actual amounts charged by State or local governments or 
government officials for recording fees and recording taxes or other 
charges incident to making the emergency relief loan or advance of 
credit;
    (3) An amount equal to the annual premium for flood insurance 
required by Sec.  2700.101(a)(4) (the lender shall pay the homeowner's 
flood insurance premium for that year to the extent it collects such an 
amount); and
    (4) An amount equal to the annual mortgage insurance premium 
required under Sec.  2700.315.
    (b) Subsequent to the year following the origination of the 
emergency mortgage relief loan or advance of credit and up to the 
termination of mortgage insurance under Sec.  2700.325, the lender may 
collect from the homeowner the following fees and charges in connection 
with the emergency relief loan: An amount equal to the mortgage 
insurance premium required under Sec.  2700.315.


Sec.  2700.315  Insurance premium.

    (a) At such times as may be prescribed by HUD, the participating 
lender shall pay to HUD a mortgage insurance premium equal to one-half 
of one percent of the average outstanding balance of the emergency 
mortgage relief loan or advance of credit, during the previous calendar 
year, of all emergency mortgage relief loans or advances of credit that 
the lender held or serviced during that period pursuant to this part.

[[Page 11954]]

    (b) With respect to the payment provided for in paragraph (a) of 
this section, the lender shall submit a breakdown of the mortgage 
insurance premium in the form prescribed by HUD.
    (c) If a mortgage securing an emergency mortgage relief loan or 
advance of credit is sold, assigned, or pledged pursuant to Sec.  
2700.350, any adjustments of the mortgage insurance premium already 
paid in connection with a mortgage securing an emergency mortgage 
relief loan or advance of credit shall be made by and between the 
lenders, except that any unpaid installments of the mortgage insurance 
premium shall be paid to HUD by the purchasing lender.
    (d) There shall be no refund or abatement of any portion of the 
insurance premium except when the mortgage insurance premium relates to 
an emergency mortgage relief loan or advance of credit found to be 
ineligible. However, no refund shall be made unless a claim is denied 
by HUD or the ineligibility is reported by the lender promptly upon 
discovery and an application for refund is made. In no event shall 
charges be refunded when the application for refund is not made until 
after the emergency mortgage relief loan or advance of credit is paid 
in full.


Sec.  2700.320  Servicing.

    Servicing functions for the emergency mortgage relief loan or 
advance of credit during the period that the emergency loan or advance 
is insured shall be performed by the lender or the servicing 
institution acting for the lender. The lender is responsible for proper 
servicing, even though the actual servicing is not performed by the 
lender.


Sec.  2700.325  Termination of mortgage insurance.

    The mortgage insurance coverage and the insured lender's obligation 
to remit mortgage insurance premiums to HUD with respect to an 
emergency mortgage relief loan or advance of credit shall be terminated 
upon whichever of the following first occurs:
    (a) The emergency mortgage relief loan or advance of credit is paid 
in full;
    (b) The lender acquires the mortgaged property securing the 
emergency mortgage relief loan or advance of credit and notifies HUD 
that no claim for insurance benefits has been or will be made;
    (c) The homeowner and the lender jointly request termination; or
    (d) The lender files an insurance claim pursuant to Sec.  2700.335.


Sec.  2700.330  Default.

    (a) If the homeowner fails to make a scheduled payment or perform 
any other obligation required for the type of emergency assistance 
provided under this part, the homeowner shall be deemed to be in 
default.
    (b) For purposes of this subpart, the date of default shall be the 
earliest of:
    (1) 30 days after the first day the homeowner is delinquent on the 
mortgage securing the emergency mortgage relief loan or advance of 
credit, if the delinquency remains uncorrected;
    (2) The date the property securing the emergency mortgage relief 
loan or advance of credit is sold before full repayment of the 
emergency loan or advance of credit; and
    (3) The date a lien superior to that securing the emergency 
mortgage relief loan or advance of credit is foreclosed.
    (c) If, after default and prior to the foreclosure of the mortgage 
securing the emergency mortgage relief loan or advance of credit, the 
homeowner cures the default, the emergency loan or advance of credit 
shall be treated as if a default had not occurred, provided the 
homeowner pays the lender for any expenses the lender incurred in 
connection with the lender's attempt to collect on the emergency 
mortgage relief loan or advance of credit.


Sec.  2700.335  Claims.

    (a) Claims for mortgage insurance for reimbursement for loss on an 
emergency mortgage relief loan or advance of credit shall be made in 
such form and provide such information as specified by HUD.
    (b) Claims may be filed upon the homeowner's default on the 
emergency mortgage relief loan or advance of credit.
    (c) When the homeowner defaults on the emergency mortgage relief 
loan or advance of credit, the lender may elect to:
    (1) Proceed against the mortgage securing the emergency mortgage 
relief loan or advance of credit or attempt to collect on the note and 
then make a claim under its insurance contract if there is any net 
loss, or
    (2) Make a claim under its mortgage insurance contract without 
proceeding against the security or the note.
    (d) Except as may be otherwise specified by HUD, mortgage insurance 
claims shall be filed on the last working day of the month, no later 
than 90 days after the date of default, unless the lender proceeds 
against the mortgage securing the emergency relief loan or advance of 
credit, in which case the filing shall be no later than one year after 
the date of default, or such other time period as approved by HUD. If 
at the time of default or at any time subsequent to the default, a 
person primarily or secondarily liable for the repayment of a loan is a 
person in ``military service'', as such term is defined in the 
Servicemembers Civil Relief Act of 2003 (Pub. L. 108-189, approved 
December 19, 2003) (formerly known as Soldier's and Sailor's Civil 
Relief Act of 1940) (50 U.S.C. app. 501-594), the lender shall refrain 
from instituting foreclosure proceedings during the period in which the 
servicemember is in military service and 3 months thereafter and that 
period shall be excluded in computing the time within which a claim for 
insurance benefits under this subpart may be made.
    (e) An insured lender will be reimbursed for its losses on 
emergency mortgage relief loans and advances of credit made in 
accordance with this part, in an amount equal to 90 percent of the sum 
of the following:
    (1) The unpaid principal amount of the emergency mortgage relief 
loan or advance of credit less the amount recovered;
    (2) The uncollected interest earned up to the date of claim;
    (3) Uncollected court costs, including fees paid for issuing, 
serving, and filing summonses;
    (4) Attorney's fees actually paid, not exceeding the lesser of:
    (i) 25 percent of the amount collected by the attorney on the 
defaulted note, or
    (ii) 15 percent of the balance due on the note; and
    (5) Expenses actually incurred in recording assignments of 
mortgages to the United States of America, up to such amount as 
specified by HUD.
    (f) The note and any mortgage held or judgment taken by the 
claimant must be assigned in its entirety and if any claim has been 
filed in bankruptcy, insolvency, or probate proceedings, such claim 
shall be likewise assigned to the United States of America. The 
assignment shall be in the form approved by HUD.


Sec.  2700.340  Payment of insurance benefits.

    Upon receipt of a claim for insurance benefits that meets the 
requirements of Sec.  2700.335 and the other provisions of this part, 
HUD shall make a payment of insurance benefits in cash to the claimant 
in an amount equal to the amount specified in Sec.  2700.335(e).


Sec.  2700.345  Administrative reports and examinations.

    At any time, HUD may call upon an insured lender for such reports 
as are deemed to be necessary in connection

[[Page 11955]]

with the regulations of this part and may inspect the books or accounts 
of the lender as they pertain to the emergency mortgage relief loans or 
advances of credit that are insured pursuant to this subpart.


Sec.  2700.350  Sale, assignment, and pledge of insured loan.

    (a) No lender may sell or otherwise dispose of any insured 
emergency mortgage relief loan or advance of credit except pursuant to 
this section.
    (b) An insured emergency mortgage relief loan or advance of credit 
may be sold to a lending institution eligible under Sec.  2700.105. 
Upon such sale, both the seller and the buyer shall notify HUD within 
30 days of the date of sale.
    (c) When an insured emergency mortgage relief loan or advance of 
credit is sold to another lending institution eligible under Sec.  
2700.105, the buyer shall thereupon succeed to all the rights and 
become bound by all the obligations of the seller under the contract of 
insurance under this part, and the seller shall be released from its 
obligations under the contract of insurance.
    (d) An assignment, pledge, or transfer of an insured emergency 
mortgage relief loan or advance of credit not constituting an actual 
transfer of legal title may be made by the lender to another eligible 
lending institution, subject to the following conditions:
    (1) The assignor, pledgor, or transferor shall remain the lender 
for purposes of the contract of insurance under this part.
    (2) HUD shall have no obligation to recognize or deal with any 
party other than that lender with respect to the rights, benefits, and 
obligations of the lender under the contract of insurance. Notice to or 
approval of HUD is not required in connection with assignments, 
pledges, or transfers pursuant to this subpart.

Subpart E--Direct Loans


Sec.  2700.401  Participation by lending institutions.

    A lending institution eligible under Sec.  2700.105 is authorized, 
except as may be otherwise prescribed by HUD, to accept, process, and 
approve applications for direct loans under this subpart in the form 
specified. That authority includes making determinations relating to 
the eligibility of the direct loan, homeowner, and property, pursuant 
to the provisions of this part. Direct loans, however, may be made 
pursuant to this part only when the investor cannot make an emergency 
loan under subpart D of this part for good cause, as determined by HUD.


Sec.  2700.405  Application for loans.

    (a) The agreement to process an application for a direct loan shall 
constitute an acceptance of the lending institution of the 
responsibility to act as the servicer of HUD with respect to that 
particular application. The servicer shall make a loan on behalf of HUD 
on the terms specified in subpart C of this part if the lending 
institution is satisfied that the application meets all of the 
requirements of this part.
    (b) The servicer shall prepare a note, loan agreement, if any, and 
mortgage in the form specified in Sec.  2700.201. The servicer shall 
record the mortgage upon the closing of the loan. The servicer shall 
make the first advance of the loan, as provided for in Sec.  
2700.201(d), using its own funds.
    (c) On the last working day of the month during which the loan is 
closed, the servicer shall submit to HUD a copy of the application 
signed by the agent and the homeowner certifying that: The agent, 
homeowner, and property qualify under subpart B of this part; 
circumstances (such as the volume of delinquent loans in the investor's 
portfolio likely to remain uncured) make it probable that there would 
be a foreclosure if emergency mortgage relief were not given; the 
homeowner is in need of such relief; the investor has indicated to the 
homeowner its intention to foreclose; and the first advance of the 
emergency loan has been paid or credited to the homeowner's account 
with the servicing institution.


Sec.  2700.410  Transmittal of funds.

    (a) When the requirements of this part have been met, HUD will 
transmit to the servicer, pursuant to the monthly accounting prescribed 
in Sec.  2700.420, the emergency loan proceeds, as long as the agent 
has not exceeded the lending authority allocation that HUD has given 
the servicer pursuant to Sec.  2700.10(c).
    (b) When the investor is the servicer, the transmittal of funds 
under this section shall be conditioned upon the investor's agreement, 
for a period up to one month after the last advance under the emergency 
mortgage relief loan, to refrain from instituting foreclosure 
proceedings against the homeowner, as long as the amount delinquent at 
the time of the origination of the emergency mortgage relief loan, 
excluding interest thereon, does not increase, unless HUD's prior 
approval is obtained.
    (c) From the processing of the application until the satisfaction 
of the debt or the final accounting pursuant to Sec.  2700.435, the 
servicer shall be bound by the provisions of this part with respect to 
a particular direct loan.


Sec.  2700.415  Fees.

    (a) The servicer may collect from the homeowner during the year 
following the origination of the emergency loan the following fees or 
charges in conjunction with providing the emergency loan:
    (1) A charge to compensate the servicer for expenses incurred in 
originating and closing the emergency mortgage relief loan, including 
preparation of a note, loan agreement, if any, and a mortgage in a form 
satisfactory for recordation, the total charge not to exceed such 
amount as may be specified by HUD;
    (2) Actual amounts charged by State or local governments or 
government officials for recording fees and recording taxes or other 
charges incident to making the emergency loan;
    (3) An amount equal to the annual premium for flood insurance 
required by Sec.  2700.101(c) (the servicer shall pay the homeowner's 
flood insurance premium for that year to the extent it collects such an 
amount); and
    (4) An amount equal to the annual premium required under Sec.  
2700.420(d).
    (b) Subsequent to the year following the origination of the 
emergency mortgage relief loan and up to the final accounting on the 
emergency mortgage relief loan under Sec.  2700.435, the servicer may 
collect from the homeowner the fees and charges as provided in this 
section.


Sec.  2700.420  Servicing.

    (a) Servicing functions during the period that the emergency 
mortgage relief loan is outstanding shall be performed by the servicer.
    (b) On the same day each month while the servicer is servicing 
emergency mortgage relief loans for HUD, the servicer shall submit a 
monthly accounting, in the form prescribed by HUD, for all of the 
emergency mortgage relief loans that it services. The accounting shall 
list the amount of funds that it advanced under emergency mortgage 
relief loans during the previous calendar month. In addition, the 
accounting shall list the amount paid to the servicer under the 
emergency mortgage relief loans serviced by the servicer during the 
previous calendar month.
    (c) If, pursuant to the monthly accounting, the amount HUD owes the 
servicer exceeds the amount the servicer owes HUD, HUD shall remit the 
difference to the servicers, as long as HUD finds the accounting in 
order. If, pursuant to the monthly accounting, the amount the servicer 
owes HUD exceeds the amount HUD owes the servicer, the servicer shall 
remit the difference when

[[Page 11956]]

the servicer submits the monthly accounting to HUD.
    (d) At such times as may be prescribed by HUD, the servicer, in 
addition to making its monthly accounting, shall pay to HUD a premium 
equal to one-half of one percent of the average outstanding balance 
during the previous calendar year of all the emergency mortgage relief 
loans it serviced during that period. That payment shall be accompanied 
by a breakdown of the premium in the form prescribed by HUD.


Sec.  2700.425  Default.

    (a) If the homeowner fails to make any payment or to perform any 
other obligation under the mortgage securing the emergency mortgage 
relief loan, the homeowner shall be deemed to be delinquent on such 
loan.
    (b) For purposes of this subpart, the date of default shall be the 
earliest of:
    (1) 30 days after the first day the homeowner is delinquent on the 
emergency mortgage relief loan, if the delinquency remains uncorrected:
    (2) The date the mortgaged property is sold before full repayment 
of the emergency mortgage relief loan; and
    (3) The date a lien superior to that securing the emergency 
mortgage relief loan is foreclosed.
    (c) If, after default and prior to the foreclosure of the mortgage 
securing the emergency mortgage relief loan, the homeowner cures the 
default, the emergency mortgage relief loan shall be treated as if the 
default had not occurred, provided the homeowner pays the servicer for 
any expenses the servicer incurred in connection with the servicer's 
attempt to collect on the loan.


Sec.  2700.430  Collection.

    (a) If a homeowner defaults on an emergency mortgage loan, the 
servicer shall elect:
    (1) To wait while the Department of Justice proceeds against the 
mortgage securing the emergency mortgage relief loan or attempts to 
collect on the note, and then to make an accounting and payment to HUD, 
as provided in Sec.  2700.435, or
    (2) To make an accounting and payment, as provided in Sec.  
2700.435, without waiting while the Department of Justice proceeds 
against the mortgage or note.
    (b) If pursuant to paragraph (a) of this section, the servicer 
elects to make an accounting without waiting while the Department of 
Justice proceeds against the mortgage or note, the servicer at the time 
of that accounting will have the option of purchasing the emergency 
loan and underlying mortgage for a price equal to 0.5 times the unpaid 
principal balance.


Sec.  2700.435  Payment to HUD.

    (a) Before the expiration of the period of 90 days after the date 
of default, or such other time period as HUD approves, the servicer 
shall transmit to HUD on the last working day of the month the complete 
credit and collection file pertaining to the emergency mortgage relief 
loan.
    (b) At the same time the servicer makes the transmittal as provided 
in paragraph (a) of this section, it shall share the loss on the 
emergency mortgage relief loan by making a payment to HUD in an amount 
equal to 10 percent of the sum of:
    (1) The unpaid principal amount of the emergency mortgage relief 
loan, less the amount recovered; and
    (2) The uncollected interest earned up to the date of the final 
accounting. Accompanying that payment shall be a final accounting of 
the emergency mortgage relief loan, in the form specified by HUD, and 
the note and mortgage executed in connection with the emergency 
mortgage relief loan.
    (c) Notwithstanding the provisions of paragraph (b) of this 
section, in the event that the aggregate loss borne by HUD reaches such 
percent, as specified in the Federal Register document activating the 
Emergency Homeowners' Loan Program, of the aggregate amount advanced by 
the servicer on behalf of HUD under this subpart, the servicer shall 
bear the burden of any loss in excess of that such percent by making an 
appropriate payment to HUD within the time period specified in 
paragraph (a) of this section.
    (d) If at the time of default or at any time subsequent to default, 
a person primarily or secondarily liable for the repayment of an 
emergency loan is a person in ``military service'', as such term is 
defined in the Servicemembers Civil Relief Act of 2003 (Pub. L. 108-
189, approved December 19, 2003) (formerly known as Soldier's and 
Sailor's Civil Relief Act of 1940) (50 U.S.C. app. 501-594), the period 
the servicemember is in military service and 3 months thereafter and 
that period shall be excluded in computing the time within which an 
accounting and payment are to be made pursuant to paragraph (a) of this 
section.


Sec.  2700.440  Administrative report and examinations.

    HUD may at any time call for a report from any servicer on the 
delinquency status of the emergency mortgage relief loans serviced by 
the servicer on behalf of HUD or call for such reports as may be deemed 
to be necessary in connection with the provisions of this part, or HUD 
may inspect the books or accounts of the servicer as they pertain to 
those emergency mortgage relief loans.

    Dated: February 28, 2011.
David H. Stevens,
Assistant Secretary for Housing--Federal Housing Commissioner.
[FR Doc. 2011-4816 Filed 3-3-11; 8:45 am]
BILLING CODE 4210-67-P