[Federal Register Volume 77, Number 51 (Thursday, March 15, 2012)]
[Notices]
[Pages 15379-15382]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-6297]
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
[Docket Number FR-5427-N-02]
Protecting Tenants at Foreclosure Act: Additional Guidance on
Notification Responsibilities Under the Act With Respect to Occupied
Conveyance
AGENCY: Office of the Assistant Secretary for Housing--Federal Housing
Commissioner, HUD.
ACTION: Notice.
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SUMMARY: This notice provides additional guidance on the notice,
entitled ``Protecting Tenants at Foreclosure: Notice of
Responsibilities Placed on Immediate Successors in Interest Pursuant to
Foreclosure of Residential Property,'' published in the Federal
Register on June 24, 2009, and supplemented by further information
published on October 28, 2010. The October 2010 notice provided
guidance on the relationship between the Federal Housing
Administration's (FHA's) current regulations on occupied conveyance and
the protections for existing tenants under the Protecting Tenants at
Foreclosure Act of 2009 (PTFA). This notice provides further guidance
on the relationship between FHA regulations and the protections for
existing tenants under the PTFA.
FOR FURTHER INFORMATION CONTACT: James Hass, Housing Program
Specialist, Office of Single Family Asset Management, Office of
Housing, Department of Housing and Urban Development, 451 7th Street
SW., Room 9172, Washington, DC 20410-8000; telephone number 202-708-
1672 (this is not a toll-free number). Persons with hearing or speech
challenges may access this number through TTY by calling the toll-free
Federal Information Relay Service at 800-877-8339.
SUPPLEMENTARY INFORMATION:
I. Background of PTFA and HUD's June 2009 Notice
The Protecting Tenants at Foreclosure Act of 2009, Title VII of the
Helping Families Save Their Homes Act of 2009 (Pub. L. 111-22, approved
May 20, 2009) (codified at 12 U.S.C. 5220 note), requires that any
immediate successor in interest take a foreclosed residential property
subject to the existing lease and provide tenants residing in the
property with notice to vacate at least 90 days in advance of the date
by which the successor, generally, the purchaser, seeks to have the
tenants vacate the property. Except where the purchaser will occupy the
property as the primary residence, the term of any bona fide lease
entered into before the notice of foreclosure and extending beyond 90
days also remains in effect. The PTFA was enacted during a period when
unprecedented numbers of foreclosures were occurring across the
country. Often, tenants residing as leaseholders in residential
properties become collateral victims in addition to homeowners when
foreclosures occur, and are forced to vacate their leaseholds, often
with minimal notice. The PTFA ensures that tenants receive appropriate
notice of foreclosure and are not abruptly displaced.
Sections 702 and 703 of PTFA define the scope of PTFA's coverage
over residential properties. The Section 702 requirements provide
tenants with at least 90 days' advance notice to vacate and to preserve
the term of any bona fide lease apply to foreclosures on all Federally
related mortgage loans or on any dwelling or residential real property.
Section 703 makes conforming changes consistent with the Section 702
requirements to the Section 8 rental voucher assistance provisions of
the United States Housing Act of 1937 (1937 Act). The protections
provided by PTFA sunset on December 31, 2014.
Section 1484 of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (Pub. L. 111-203, approved July 21, 2010) amended PTFA,
and extended the PTFA protections to December 31, 2014. Section 1484 of
the Dodd-Frank Wall Street Reform and Consumer Protection Act also
defined when ``date of notice of foreclosure'' occurs. Section 1484
provides in relevant part as follows: ``the date of a notice of
foreclosure shall be deemed to be the date on which complete title to a
property is transferred to a successor entity or person as a result of
an order of a court or pursuant to provisions in a mortgage, deed of
trust, or security deed.''
To fall under the Act, a bona fide lease must be entered into prior
to the date of the notice of foreclosure, which is defined as ``the
date on which complete title to a property has been transferred to a
successor entity or person as a result of an order of a court or
pursuant to the provisions in a mortgage, deed of trust, or security
deed.'' A bona fide lease is one in which: (1) The mortgagor or the
child, spouse, or parent of the mortgagor under the contract is not the
tenant; (2) the lease or tenancy was the result of an arms-length
transaction; and (3) the lease or tenancy requires the receipt of rent
that is not substantially less than fair market rent for the property
or the unit's rent is reduced or subsidized due to a federal, state, or
local subsidy. The requirements of the PTFA apply with respect to
properties secured by FHA-insured mortgages as well as those in the
Section 8 program.
The notice that HUD published on June 24, 2009 (74 FR 3-1-6),
addressed the general applicability of PTFA protections to HUD
programs, provided basic guidance, and advised where HUD program
participants and other interested parties may find more detailed
guidance directed to HUD programs. Following issuance of the June 24,
2009, notice, HUD began receiving questions about the interplay of the
PTFA notice requirements with the notice requirements of FHA's occupied
conveyance regulations. HUD therefore issued a second notice on PTFA to
specifically address how the PTFA tenant protections work in the
context of FHA regulations.
II. FHA's Occupied Conveyance Regulations--October 28, 2010 Notice
The Federal Register notice, published by HUD on October 28, 2010
(75 FR 66385), provided the following guidance on compliance with the
FHA's occupied conveyance regulations, and the tenant protections
provided by the PTFA.
Upon default of an FHA-insured mortgage, and under FHA's existing
regulations, the mortgagee must engage in loss mitigation for the
purpose of providing an alternative to foreclosure. Should such loss
mitigation efforts be unsuccessful, the mortgagee will generally
foreclose and convey the property to FHA in exchange for an FHA
mortgage insurance claim. FHA generally requires the mortgagee to
convey the property unoccupied, but in certain circumstances, as
described in FHA's occupied conveyance regulations at 24 CFR 203.670-
203.681, FHA will accept the property occupied. In cases where the
regulations would not permit the occupied conveyance of the property,
the mortgagee must acquire possession before conveying the property to
FHA. Various laws, usually state or local, but now also PTFA, affect
possessory action and the length of time
[[Page 15380]]
it takes to acquire possession of the property.
FHA's claims regulations at 24 CFR 203.356(b) provide that the
mortgagee must exercise ``reasonable diligence'' in prosecuting the
foreclosure proceedings to completion and in acquiring title to and
possession of the property. (Failure to foreclose and evict acquire
possession in accordance with this reasonable diligence time frame
could lead to curtailment of debenture interest on the mortgagee's FHA
insurance claim as described in section 203.402(k) of the regulations.)
FHA publishes state-by-state reasonable diligence timeframes by
mortgagee letter. At the time of publication of the October 28, 2010,
notice, HUD noted that FHA Mortgagee Letter 2005-30 provided that an
automatic extension of the reasonable diligence timeframe will be
allowed for the actual time necessary to complete the possessory action
provided that the mortgagee begins such action promptly. Therefore, FHA
regulations and Mortgagee Letters already provide mortgagees the
additional time they may need to acquire possession under the PTFA,
i.e., in many cases at least an additional 90 days. As mortgagees may
have been confused about the interaction between the PTFA and the
occupied conveyance regulations, the October 28, 2010, notice served to
confirm that: (1) FHA expects mortgagees to comply with the PTFA; and
(2) the additional time needed to acquire possession pursuant to the
PTFA is automatically included in the reasonable diligence timeframe.
III. FHA Occupied Conveyance Regulations and PTFA Protections--
Additional Guidance
Since issuance of the October 28, 2010, notice, mortgagees have
sought additional guidance on this subject. This notice provides
additional guidance regarding compliance with FHA's occupied conveyance
procedures and the tenant protections of PTFA in light of recent
changes in state and local laws relating to tenant protection. This
guidance is also being provided directly to FHA-approved mortgagees
through an FHA mortgagee letter.
Tenant Protections Prior to PTFA. FHA historically required
mortgagees to provide all property occupants (including former
mortgagors) a Notice of Pending Acquisition (NOPA), within 60 to 90
days prior to the date the mortgagee expected to acquire title to the
occupied property. For many tenants, this may have been their first
notification that ownership of a property was changing and that they
would likely need to relocate in the near future. The NOPA also advised
the occupants that there was a possibility of remaining in the property
when ownership was conveyed to FHA if the occupants met certain
criteria. However, the NOPA also cautioned that any continued occupancy
after conveyance to FHA would be temporary.
Prior to enactment of the PTFA on May 20, 2009, leases that did not
pre-date the mortgage could usually be terminated by the new owner
following completion of foreclosure. Additionally, although there were
variations due to state or local law, most eviction actions required
that advance notice to vacate be provided to occupants 60 days or less
before the effective date of the eviction. The passage of the PTFA
changes both of those situations.
PTFA Tenant Protections. The PTFA generally provides, after the
date of its enactment, that in the case of any foreclosure on a
federally-related mortgage loan or on any dwelling or residential real
property, any immediate successor in interest in such property pursuant
to the foreclosure shall assume such interest subject to: (1) A notice
to vacate to any bona fide tenant at least 90 days before the effective
date of such notice; and (2) the rights of any bona fide tenant under a
bona fide lease to occupy the premises until the end of the remaining
term of the lease, except that a successor in interest may terminate a
lease effective on the date of sale of the unit to a purchaser who will
occupy the unit as a primary residence. FHA expects mortgagees to
comply with the terms of the PTFA. As provided in section 702(a) of the
PTFA, nothing in the PTFA shall affect any state or local law that
provides longer time periods or additional protections for tenants.
Mortgagee Compliance under PTFA. Before completion of foreclosure,
the mortgagee must confirm the identity of all occupants, determine
each occupant's possible rights for continued occupancy under the PTFA
and state or local law, and attempt to obtain documentation of existing
leases and tenancies.
1. Revised Notice to Occupants of Pending Acquisition (NOPA). At
least 60 days, but not more than 90 days before the mortgagee
reasonably expects to acquire title, the FHA mortgagee shall notify the
mortgagor and each head of household who is occupying a unit of the
property of its potential conveyance to FHA following foreclosure. The
notice(s) shall provide a summary of the conditions under which
continued occupancy is permissible and other information specified in
24 CFR 203.675(b). A sample Notice to Occupant of Pending Acquisition
and related documents to be used for this purpose accompany this
notice. Mortgagees should make any additional changes to the NOPA that
are required to be in compliance with PTFA, state, or local laws. If
the occupant responds to the NOPA and FHA approves occupied conveyance,
the mortgagee shall convey the property occupied under FHA's existing
occupied conveyance procedures.
Mortgagees must begin using the revised NOPA and related documents,
with additional changes that are required to be in compliance with
PTFA, state, or local law, no later than July 1, 2012.
2. Occupancy rights under PTFA and state and local law. If FHA
denies occupied conveyance, the mortgagee must confirm if PTFA is
applicable (i.e., whether there is a bona fide lease or tenancy, etc.)
or if there is some other occupancy protection under state or local law
that would require the mortgagee to delay action to obtain possession
of the property. Mortgagees shall fully comply with applicable PTFA and
state and local law and provide required notices to occupants.
The additional time needed under the PTFA (or specific state or
local laws) to obtain possession of the property is taken into
consideration when evaluating compliance with FHA's reasonable
diligence timeframe. The mortgagee must retain documentation in the
claim file to support the additional time needed to comply with PTFA
(or other state or local occupancy requirements). Upon expiration of
the tenancy protection, mortgagees are expected to proceed promptly
with possessory actions.
3. Rent Collections. FHA expects mortgagees to attempt to collect
rents payable under bona fide leases and tenancies and, in the event of
default, to take possessory action pursuant to the contract terms and
applicable law. Any rents received by a mortgagee during the term of
the bona fide lease or tenancy must be reflected as a credit on line
115 of Form HUD-27011, Single-Family Application for Insurance
Benefits. This form can be accessed at http://portal.hud.gov/hudportal/documents/huddoc?id=DOC_14619.pdf.
4. Preservation and Protection Costs. Additional routine
preservation and protection costs, including lawn maintenance and
inspections, that are incurred as a result of an extended lease or
tenancy will be reimbursed pursuant to the schedule in Mortgagee Letter
2010-18, Update of Property and Preservation (P&P) Requirements and
Cost Reimbursement Procedures. This mortgagee letter can be accessed at
[[Page 15381]]
http://portal.hud.gov/hudportal/documents/huddoc?id=DOC_14634.pdf.
Paperwork Reduction Act. The information collection requirements
contained in this document have been approved by the Office of
Management and Budget (OMB) under the Paperwork Reduction Act of 1995
(44 U.S.C. 3501-3520) and assigned OMB control number, 2502-0429. In
accordance with the Paperwork Reduction Act, HUD may not conduct or
sponsor, and a person is not required to respond to, a collection of
information unless the collection displays a currently valid OMB
Control Number.
IV. Additional Questions About PTFA and FHA Occupied Conveyance
Regulations
Any questions regarding this subject may be directed to HUD's
National Servicing Center (NSC). The NSC's toll free number is 877-622-
8525; its email address is [email protected]. Persons with hearing or
speech impairments may reach NSC's number via TDD/TTY by calling 1-877-
TDD-2HUD (1-877-833-2483).
Dated: March 9, 2012.
Carol J. Galante,
Acting Assistant Secretary for Housing--Federal Housing Commissioner.
Sample Notice to Occupant of Pending Acquisition (To be prepared and
submitted by the mortgagee to all occupants)
NOTICE TO OCCUPANT OF PENDING ACQUISITION
(Name) (Date)
(Street Address)
(Town or City)
(HUD/FHA Case No.)
AVISO IMPORTANTE PARA PERSONAS DE HABLA HISPANA. ESTO ES UN AVISO MUY
IMPORTANTE. SI NO ENTIENDE EL CONTENIDO, OBTENGA UNA TRADUCCI[Oacute]N
INMEDIATAMENTE. SI USTED NO RESPONDE DENTRO DE VEINTE (20) D[Iacute]AS,
PUEDE QUE TENGA QUE MUDARSE DE LA CASA O APARTAMENTO EN QUE VIVE.
Dear:------------------------------------------------------------------
The mortgage for the property in which you are living is in
foreclosure as a result of the property owner's default. Within the
next 60 to 90 days, title to the property is expected to be transferred
to [NAME OF MORTGAGEE]. Some time thereafter, ownership of the property
will probably be transferred to the Secretary of Housing and Urban
Development (HUD).
HUD generally requires that there be no one living in properties
conveyed to the Secretary as a result of a foreclosure. As the Federal
Housing Administration's (FHA) single family program is a mortgage
insurance program, it must sell all acquired properties and use the
proceeds of sale to help replenish the FHA Mortgage Insurance Fund. It
is not a rental program. There are other programs within HUD that
assist in making rental housing available.
However, before [NAME OF MORTGAGEE] conveys the property to HUD,
you may be entitled to remain in the property for some period of time,
pursuant to the Protecting Tenants at Foreclosure Act of 2009 (PTFA) or
state or local law. If you are a bona fide tenant (someone other than
the mortgagor, or the child spouse or parent of the mortgagor occupying
the property pursuant to a bona fide lease or tenancy), a separate
notice regarding your occupancy rights under PTFA will be provided to
you when complete title to the property is transferred to (name of
mortgagee) as a result of an order of a court or pursuant to provisions
in the mortgage, deed of trust or security deed.
Instructions: Mortgagees may insert here any language they deem
necessary to inform occupants of the conditions under which they might
be eligible to remain in the property pursuant to the PTFA or state or
local law, and/or for the mortgagee to request information from the
occupant that would be needed for the mortgagee to determine whether
the occupant qualifies.
If you are not entitled to remain in the property pursuant to the
PTFA or state or local law, you may nevertheless be eligible to remain
in the property upon conveyance to HUD, if certain conditions are met,
as described in Attachment 3, Conditions for Continued Occupancy. To be
considered for continued occupancy upon conveyance to HUD, you must
submit a written request to HUD within 20 days of the date at the top
of this letter. Oral requests are not permitted.
Please use the enclosed Attachment 1, ``Request for Occupied
Conveyance'' (form HUD-9539), in making your request as it gives HUD
information it needs to make its decision. You must send your request
and the enclosed Attachment 2 ``Request for Verification of
Employment'' authorization to HUD's Mortgagee Compliance Manager (MCM)
at the following address: [MORTGAGEE'S ADDRESS].
If an individual residing in the property suffers from a permanent,
temporary, or long-term illness or injury that would be aggravated by
the process of moving from the property, please also provide supporting
documentation of the illness or injury. This documentation must include
a projection of the date that the individual could be moved without
aggravating the illness or injury and a statement by a state-certified
physician establishing the validity of your claim.
Additional information that you wish to include with your request
may be written on additional pages that you attach to the ``Request for
Occupied Conveyance'' form.
If HUD approves your request to remain in the property, you will be
required to sign a month-to-month lease and pay rent at the prevailing
fair market rate. If HUD does not in fact become owner of this
property, any decision it may make with respect to your continued
occupancy will no longer apply.
Your right to continued occupancy of the property under HUD's
Occupied Conveyance policies will only be temporary, depending on the
circumstances, as described in Attachment 4, Temporary Nature of
Continued Occupancy.
For assistance in finding affordable housing, you may wish to
contact one or more of HUD's approved housing counseling agencies.
These agencies usually provide services at little or no cost. A
counselor may be able to recommend other organizations that can also be
of assistance. If you have access to the Internet, you may locate a
local housing counseling agency by visiting the following Web page:
www.hud.gov/offices/hsg/sfh/hcc/hccprof14.cfm. Alternatively, you may
call the HUD Housing Counseling and Referral Line, weekdays between 9
a.m. and 5 p.m. EST. The Referral Line telephone number is (800) 569-
4287.
If you have any questions concerning this notice, please contact
[NAME AND CONTACT INFORMATION OF MORTGAGEE].
Sincerely,
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Signature
Title
Attachments
Attachment 1 (Request for Occupied Conveyance--Form HUD-9539)
Attachment 2 (Request for Verification of Employment) NOTE: Mortgagees
may use their own standard employment verification forms.
Attachment 3 (Conditions for Continued Occupancy)
Attachment 4 (Temporary Nature of Continued Occupancy)
[[Page 15382]]
Attachment 3 (Conditions for Continued Occupancy) (to Mortgagee's
Notice of Pending Acquisition)
HUD's Occupied Conveyance Program
CONDITIONS FOR CONTINUED OCCUPANCY
The following conditions must be met before HUD can approve the
occupied conveyance of an acquired property.
1. One or more of the following must be met, as determined by HUD
in HUD's sole and absolute discretion pursuant to authority provided in
FHA occupied conveyance regulations 24 CFR Sec. 203.670 through Sec.
203.681 and additional guidance provided by the Department:
a. Your occupancy is necessary to protect the property from
vandalism;
b. The average time in inventory for HUD's unsold inventory in the
residential area in which the property is located exceeds six months;
c. With respect to two-to-four-unit properties, the marketability
of the property would be improved by your continuing occupancy.
d. The high cost of eviction or relocation expenses makes eviction
impractical; or
e. An individual residing in the property suffers from a permanent,
temporary, or long-term illness or injury that would be aggravated by
the process of moving from the property.
2. The house must be habitable (except for approval under condition
1(e)).
3. You must have been living in the house at least 90 days prior to
the date the lender acquires title to the house (except for approval
under condition 1(e)).
4. You must agree to sign a month-to-month lease at fair market
rent on a form prescribed by HUD at the time HUD acquires the property.
5. You must have the financial ability to make the monthly rental
payments under the terms of the lease.
6. You must agree to pay one month's advance rent when you sign the
lease (except for approval under condition 1(e)).
7. You must allow access to the property during normal business
hours:
(a) By HUD representatives for a physical inspection of the
property, with two days advance notice.
(b) By HUD contractors doing repairs, with two days advance notice.
(c) By real estate brokers and their clients with two days advance
notice.
8. You must disclose the complete and accurate social security
number (SSN) assigned to you and to each member of your household.
Attachment 4 (Temporary Nature of Continued Occupancy) (to Mortgagee's
Notice of Pending Acquisition)
TEMPORARY NATURE OF CONTINUED OCCUPANCY
This is to advise you that occupancy of HUD-owned property is
temporary in all cases and is subject to termination to facilitate
preparing the property for sale and completing the sale. Temporary
means that your lease arrangement with HUD is subject to termination at
the convenience of the government upon 30 day's notice, or otherwise in
accordance with applicable law. You should not view your occupancy of
the property as a permanent or long-term arrangement. It is HUD's
policy to ask you to vacate the property and, if necessary, take
appropriate eviction action for the following causes:
1. Your failure to execute the lease.
2. Your failure to pay the required rent, including the initial
payment at the time of execution of the lease.
3. Your failure to comply with the terms of the lease.
4. Your failure to allow access to the property upon request to
accomplish necessary repairs, inspect the property, or allow real
estate brokers to show the property to a prospective purchaser.
5. Necessity to facilitate preparing the property for sale and
completing the sale.
6. Assignment of the property by HUD to a different use or program.
[FR Doc. 2012-6297 Filed 3-14-12; 8:45 am]
BILLING CODE 4210-67-P