TABLE OF CONTENTS

PART 201 - TITLE I PROPERTY IMPROVEMENT

AND MANUFACTURED HOME LOANS

[SUBPART A - GENERAL 4](#subpart-a---general)

[201.1 Purpose 4](#__RefHeading___Toc167872308)

[201.3 Applicability of the regulations
12](#__RefHeading___Toc167872309)

[201.4 Rules of construction 13](#__RefHeading___Toc167872310)

[201.5 Waivers 13](#__RefHeading___Toc167872311)

[201.6 Disclosure and verification of Social Security and Employer
13](#disclosure-and-verification-of-social-security-and-employer)

[Identification Numbers 13](#identification-numbers)

[SUBPART B - LOAN AND NOTE PROVISIONS
13](#subpart-b---loan-and-note-provisions)

[201.10 Loan amounts 13](#__RefHeading___Toc167872315)

[201.11 Loan maturities 17](#__RefHeading___Toc167872316)

[201.12 Requirements for the note 18](#__RefHeading___Toc167872317)

[201.13 Interest and discount points 19](#__RefHeading___Toc167872318)

[201.14 Payments on the loan 19](#__RefHeading___Toc167872319)

[201.15 Late charges to borrowers 19](#__RefHeading___Toc167872320)

[201.16 Default provision 20](#__RefHeading___Toc167872321)

[201.17 Prepayment provision 20](#__RefHeading___Toc167872322)

[201.18 Modification agreement or repayment plan
20](#__RefHeading___Toc167872323)

[201.19 Refinanced and assumed loans 20](#__RefHeading___Toc167872324)

[SUBPART C - ELIGIBILITY AND DISBURSEMENT REQUIREMENTS
23](#subpart-c---eligibility-and-disbursement-requirements)

[201.20 Property improvement loan eligibility
23](#__RefHeading___Toc167872326)

[201.21 Manufactured home loan eligibility
24](#__RefHeading___Toc167872327)

[201.22 Credit requirements for borrowers
28](#__RefHeading___Toc167872328)

[201.23 Borrower\'s initial payment 30](#__RefHeading___Toc167872329)

[201.24 Security requirements 31](#__RefHeading___Toc167872330)

[201.25 Charges to borrower to obtain loan
32](#__RefHeading___Toc167872331)

[201.26 Conditions for loan disbursement
33](#__RefHeading___Toc167872332)

[201.27 Requirements for dealer loans 37](#__RefHeading___Toc167872333)

[201.28 Flood and hazard insurance, and Coastal Barriers properties
39](#__RefHeading___Toc167872334)

[201.29 Ineligible participants 39](#__RefHeading___Toc167872335)

[SUBPART D - INSURANCE OF FUNDS 40](#subpart-d---insurance-of-funds)

[201.30 Reporting of loans for insurance
40](#__RefHeading___Toc167872337)

[201.31 Insurance charge 40](#__RefHeading___Toc167872338)

[201.32 Insurance coverage reserve account
42](#__RefHeading___Toc167872339)

[SUBPART E - LOAN ADMINISTRATION 43](#subpart-e---loan-administration)

[201.40 Post-disbursement loan requirements
43](#__RefHeading___Toc167872341)

[201.41 Loan servicing 45](#__RefHeading___Toc167872342)

[201.42 Bankruptcy, insolvency or death of borrower
45](#__RefHeading___Toc167872343)

[201.43 Administrative reports and examinations
46](#__RefHeading___Toc167872344)

[SUBPART F - DEFAULT UNDER THE LOAN OBLIGATION
46](#subpart-f---default-under-the-loan-obligation)

[201.50 Lender efforts to cure the default
46](#__RefHeading___Toc167872346)

[201.51 Proceeding against the loan security
47](#__RefHeading___Toc167872347)

[201.52 Acquisition by voluntary conveyance or surrender
48](#__RefHeading___Toc167872348)

[201.53 Disposition of manufactured home loan property
49](#__RefHeading___Toc167872349)

[201.54 Insurance claim procedure 49](#__RefHeading___Toc167872350)

[201.55 Calculation of insurance claim payment
52](#__RefHeading___Toc167872351)

[SUBPART G - DEBTS OWED TO THE UNITED STATES UNDER TITLE I
54](#subpart-g---debts-owed-to-the-united-states-under-title-i)

[201.60 General 54](#__RefHeading___Toc167872353)

[201.61 Claims against debtors - principal amount of debt
54](#__RefHeading___Toc167872354)

[201.62 Claims against debtors - interest, penalties, and administrative
55](#claims-against-debtors---interest-penalties-and-administrative)

[costs. 55](#costs.)

[201.63 Claims against lenders 55](#__RefHeading___Toc167872357)

[SUBPART A - APPROVAL OF TITLE I LENDING INSTITUTIONS
55](#subpart-a---approval-of-title-i-lending-institutions)

[202.1 Approval of financial institutions
55](#__RefHeading___Toc167872359)

[202.2 Definitions 56](#__RefHeading___Toc167872360)

[202.3 General approval requirements 57](#__RefHeading___Toc167872361)

[202.4 Requirements for supervised lenders
59](#__RefHeading___Toc167872362)

[202.5 Requirements for nonsupervised lenders
59](#__RefHeading___Toc167872363)

[202.6 Requirements for loan correspondents
59](#__RefHeading___Toc167872364)

[202.7 Requirements for investing lenders
60](#__RefHeading___Toc167872365)

[202.8 Termination of insurance contract
61](#__RefHeading___Toc167872366)

[202.9 Administrative actions 61](#__RefHeading___Toc167872367)

[APPENDIX. SUBJECT INDEX FOR REGULATIONS
63](#appendix.-subject-index-for-regulations)

U.S. Department of Housing and Urban Development

Office of Housing - Federal Housing Commissioner

Special Attention Of:

All Title I Lending Institutions Transmittal

Handbook: 1060.2 REV-6

Issued: June 3,1996

1\. This Transmits:

Revisions to HUD Handbook 1060.2, Title I Property Improvement and

Manufactured Home Loan Regulations, 24 CFR Parts 201 and 202.

2\. Explanation of Changes:

This revision provides lenders, loan correspondents, and HUD staff

with a readable and \"user friendly\" compilation of the Title I program

regulations in 24 CFR Part 201 and the Title I lender approval
regulations in

24 CFR Part 202. It includes all amendments and corrections to the

regulations that have been published in the Federal Register since the
last

Handbook revision in November 1992.

The Appendix provides a detailed subject index for the regulations, to

assist the reader in quickly locating the section number and page where
a

particular topic is covered.

3\. Effective Date:

This revision includes all amendments and corrections to 24 CFR Parts

201 and 202 with effective dates up to and including June 3, 1996.

4\. Filing Instructions:

Remove: Insert:

Handbook 1060.2 REV-5 Handbook 1060.2 REV-6

dated November 16, 1992. dated June 3, 1996.

Assistant Secretary for Housing-

Federal Housing Commissioner

HSIHH: Distribution: W-3-1, R-1, R-2, R-3-1(H)(RC), R-3-2, R-3-3, R-6,
R-6-2,

R-7, R-7-2, R-8

HANDBOOK 1060.2 REV-6

U.S. Department of Housing and Urban Development

Office of Housing - Federal Housing Commissioner

Program Participants and

Departmental Staff

June 1996 Title I Property

Improvement and

Manufactured Home

Loan Regulations,

24 CFR Parts 201

and 202

U.S. Department of Housing and Urban Development

H O U S I N G

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Special Attention of: Transmittal for Handbook No.:

1060.2 REV-5

ALL TITLE I LENDING INSTITUTIONS

Attn: Installment Loan Department Issued: November 16, 1992

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

1\. This Transmits:

Revisions to HUD Handbook 1060.2, which has been retitled Title I

Property Improvement and Manufactured Home Loan Regulations, 24 CFR

Parts 201 and 202.

2\. Explanation of Changes:

This revision provides lenders, loan correspondents, and HUD staff

with a readable and \"user friendly\" compilation of the Title I

program regulations in 24 CFR Part 201 and the Title I lender

approval regulations in 24 CFR Part 202. It includes all

amendments and corrections to the regulations that have been

published in the Federal Register since the last Handbook revision

in March 1989. In addition, Appendices A through C provide the

text of Notices that have been published in the Federal Register on

the following subjects:

o Eligible use of loan proceeds;

o Income requirements for borrowers; and

o Equity requirements for certain property improvement

loans.

Appendix D provides a detailed subject index for the regulations,

to assist the reader in quickly locating the section number and

page where a particular topic is covered.

3\. Effective Date:

This revision includes all amendments and corrections to 24 CFR

Parts 201 and 202 with effective dates on or before September 30,

1992\.

4\. Filing Instructions.

Remove: Insert:

Handbook 1060.2 REV-4 Handbook 1060.2 REV-5

dated March 15, 1989. dated November 16, 1992

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Assistant Secretary for Housing

-Federal Housing Commissioner

#  SUBPART A - GENERAL

[]{#__RefHeading___Toc167872308 .anchor}**201.1 Purpose**.

These regulations implement the provisions of section 2 of Title I

of the National Housing Act (12 [U.S.C.
1703](http://www.hudclips.org/sub_nonhud/cgi/nph-brs.cgi?d=UC12&s1=1703%5Bno%5D&SECT1=TXT_HITS&SECT5=UC12&u=./hudclips.cgi&p=1&r=1&f=G)
). They contain the

requirements under which an approved financial institution may

obtain insurance on loans made for the alteration, repair or

improvement of property, for the purchase of a manufactured home

and/or the lot on which to place such home, for the purchase and

installation of fire safety equipment in existing health care

facilities, and for the preservation of historic structures. The

insurance granted by the Secretary of Housing and Urban Development

shall be available only for loans involving property located within

a State, as that term is defined in § 201.2. The insurance can

cover up to 10 percent of the amount of all insured Title I loans

in the financial institution\'s portfolio, as reflected in the total

amount of insurance coverage contained at any time in an insurance

coverage reserve account established by the Secretary, less amounts

for insurance claims paid. As limited by the amount of insurance

coverage in such a reserve account, the insurance can cover up to

90 percent of the loss on any individual loan.

201.2 Definitions.

As used in the regulations in this part, the term:

Act means the National Housing Act, [12 U.S.C.
1703](http://www.hudclips.org/sub_nonhud/cgi/nph-brs.cgi?d=UC12&s1=1703%5Bno%5D&SECT1=TXT_HITS&SECT5=UC12&u=./hudclips.cgi&p=1&r=1&f=G)
.

Actuarial method means the method of allocating payments made

on a loan between the outstanding balance of the principal

amount borrowed and the interest due on a loan obligation,

under which a payment is applied first to the accrued

interest, and any remainder is subtracted from, or any

deficiency is added to, the unpaid balance of the obligation.

Borrower means one who applies for and receives a loan insured

under this part. The term may also include any co-maker or

co-signer or any assumptor who is obligated for the repayment

of a loan obligation insured under this part.

Combination loan means a loan made for the purchase or

refinancing in a single transaction of a manufactured home and

a manufactured home lot, and may also include a garage, patio,

carport, or other comparable appurtenance.

Dealer means, in the case of property improvement loans, a

seller, contractor, or supplier of goods or services. In the

case of manufactured home loans, \"dealer\" means one who

engages in the business of manufactured home retail sales.

Dealer loan means a loan where a dealer, having a direct or

indirect financial interest in the transaction between the

borrower and the lender, assists the borrower in preparing the

credit application or otherwise assists the borrower in

obtaining the loan from the lender. The lender may disburse

the loan proceeds solely to the dealer or the borrower, or

jointly to the borrower and the dealer or other parties to the

transaction.

Debtor means the borrower, any co-maker or co-signer, and any

assumptor who is liable for the repayment of a defaulted loan

obligation insured under this part.

Default means a failure by the borrower to make any payment

due under the note, when such failure continues for a period

of 30 days. For the purpose of these regulations, the \"date

of default\" shall be considered as 30 days after the first

failure to make an installment payment on the note which is

not covered by subsequent payments, when applied to the

overdue installments in the order in which they became due.

Direct loan means a loan for which a borrower makes

application directly to a lender without any assistance from

a dealer. The credit application, signed by the borrower, may

be filled out by the borrower or by a person acting at the

direction of the borrower who does not have a financial

interest in the loan transaction. The lender may disburse the

loan proceeds solely to the borrower or jointly to the

borrower and other parties to the transaction. If a dealer

takes legal action required by State law in order for the

lender to obtain a valid and enforceable lien against the

property, such action by the dealer will not convert an

otherwise direct loan to a dealer loan.

Discount points means a fee charged by the lender, separate

from interest but part of the total finance charges on the

loan, that is part of the lender\'s total yield on the loan

needed to maintain a competitive position with other types of

investments. One discount point equals one percent of the

principal amount of the loan. As discount points increase,

the interest rate can be expected to decrease in a fairly

consistent relationship.

Existing structure means a dwelling, including a manufactured

home, that was completed and occupied at least 90 days prior

to an application for a Title I loan, or a nonresidential

structure that was a completed building with a distinctive

functional use prior to an application for a Title I loan.

However, these occupancy and completion requirements shall

not apply to:

\(1\) loans having a principal obligation of \$1,000 or less; or

\(2\) Residential structures which have been damaged by

conditions determined by the President to warrant relief

under the provisions of Title 42, Chapter 68, of the

United States Code.

Fire safety equipment loan means a loan made to finance the

purchase and installation of any device or construction

feature which is recognized in the latest edition of the

Department of Housing and Urban Development\'s Minimum Property

Standards for Care Type Housing (HUD Handbook 4920.1) or the

Fire Safety Code of the National Fire Protection Association,

and which is designed to reduce the risk of death, personal

injury, or property damage resulting from a fire in a health

care facility.

Furniture means movable articles of personal property relating

to a home or dwelling, such as beds, chairs, sofas, lamps,

tables, rugs, etc.; however, furniture does not include:

\(1\) Items built into the home or dwelling such as wall-to-

wall carpeting or heating or cooling equipment; or

\(2\) large appliances such as refrigerators, ovens, ranges,

dishwashers, clothes washers or clothes dryers.

Health care facility means a proprietary facility or facility

of a private nonprofit corporation or association, licensed or

regulated by the State or by the municipality or other

political subdivision in which the facility is located, and

operated as one or more of the following:

\(1\) A nursing home for the accommodation of convalescents or

other persons who are not acutely ill and not in need of

hospital care, but who require skilled nursing care and

related medical services performed under the genes

direction of persons licensed by the law of the State

where the facility is located to provide such care or

services;

\(2\) An intermediate health care facility for the

accommodation of persons who, because of incapacitating

infirmities, require minimum but continuous care, but not

continuous medical care or nursing services;

\(3\) An extended health care facility for inpatient care for

convalescents or chronic disease patients who require

skilled nursing care and related medical services; or

\(4\) Other comparable health care facility.

Historic preservation loan means a loan to finance the

preservation (restoration or rehabilitation) of an historic

residential structure which is listed on the National Register

of Historic Places or which is certified by the Secretary of

the Interior as conforming with National Register criteria.

Lender means a financial institution that:

\(1\) Holds a valid Title I contract of insurance and is

approved by the Secretary under 24 CFR Part 202 to

originate, purchase, hold, service, and/or sell loans

insured under this part; or

\(2\) Is under suspension or holds a Title I contract of

insurance that has been terminated, but that remains

responsible for servicing or selling Title I loans that

it holds and is authorized to file insurance claims on

such loans.

For purposes of loan origination under subparts A, B and C of

this part, the term \"lender\" also includes a \"loan

correspondent\" as defined in this section.

Loan means a disbursement of proceeds (funds) or an advance of

credit to or for the benefit of a borrower who promises to

repay the principal amount of such disbursement or advance,

plus interest, if any, at a stated annual rate over time, with

the borrower\'s obligation evidenced by the borrower\'s

execution of a note. \"Loan\" also means a purchase by a lender

of a note evidencing such obligation, or a refinancing of an

existing obligation with or without an additional disbursement

of proceeds or advance of credit.

Loan correspondent means a financial institution approved by

the Secretary to originate Title I direct loans for sale or

transfer to a sponsoring lending institution which holds a

valid Title I contract of insurance and is not under

suspension.

Manufacturer\'s invoice means a document issued by a

manufacturer and provided with a manufactured home to a retail

dealer which separately details the wholesale (base) prices at

the factory for specific models or series of manufactured

homes and itemized options (large appliances, built-in items

and equipment), plus actual itemized charges for freight

from the factory to the dealer\'s lot or the homesite

(including any rental of wheels and axles) and for any sales

taxes to be paid by the dealer. The invoice may recite such

prices and charges on an itemized basis or by stating an

aggregate price or charge, as appropriate, for each category.

The manufacturer shall certify on the invoice, or on a

supplement which is attached to and made a part of the

invoice, as follows:

The undersigned certifies under applicable criminal and

civil penalties for fraud and misrepresentation that: (1)

the wholesale (base) prices for the manufactured home and

itemized options, the charges for freight and dealer-paid

sales taxes, and all other statements in this invoice are

true and accurate; (2) all such prices reflect the actual

dealer costs at the factory, as quoted in the applicable

current manufacturer\'s wholesale (base) price list; (3)

except for any payments of volume incentives or special

benefits related to this transaction, all such prices and

charges exclude any costs of trade association fees or

charges, discounts, bonuses, refunds, rebates, prizes,

loan discount points or other financing charges, or

anything else of more than nominal value which will inure

to the benefit of the dealer and/or home purchaser at any

date; and (4) the manufacturer has not made and will not

make any payments to or for the benefit of the dealer

and/or home purchaser that are not disclosed on this

invoice or invoice supplement.

Manufactured home means a transportable structure, comprised

of one or more modules, each built on a permanent chassis,

with or without a permanent foundation, designed for occupancy

as a principal residence by a single family. A new

manufactured home shall comply with the minimum property

standards prescribed by the Secretary to assure its livability

and durability that are published as the Manufactured Home

Construction and Safety Standards implementing the National

Manufactured Housing Construction and Safety Standards Act of

1974, 42 U.S.C. 5401-5426, at [24 CFR Part
3280](http://www.hudclips.org/sub_nonhud/cgi/nph-brs.cgi?d=C24D&l=20&s1=3280.$%5Bno%5D&SECT1=TXTHLB&SECT5=C24D&u=../cgi/legis.cgi&p=1&r=0&f=S).
To qualify for

a manufactured home loan insured under this part, an existing

manufactured home must have been constructed in accordance

with standards published at 24 CFR Part 3280 and must meet

standards similar to the minimum property standards applicable

to existing homes insured under Title II of the Act, as

prescribed by the Secretary.

Manufactured home improvement loan means a loan made to

finance the alteration, repair or improvement of an existing

manufactured home which is classified as personalty by the

State or locality in which the property is located. The

proceeds of a manufactured home improvement loan may also be

used for improvements to the homesite, as long as the borrower

is the owner of the home and the underlying real estate.

Manufactured home loan means a loan for the purchase or

refinancing of a manufactured home and/or the lot on which to

place such home. Unless otherwise indicated, the term includes

manufactured home purchase loans, manufactured home lot loans,

and combination loans.

Manufactured home lot loan means a loan for the purchase or

refinancing of a portion of land acceptable to the Secretary

as a manufactured home lot. A manufactured home lot may

consist of platted or unplatted land, a lot in a recorded or

unrecorded subdivision or in an improved area of such

subdivision, or a lot in a planned unit development. A

manufactured home lot may also consist of an interest in a

manufactured home condominium project (including any interest

in the common areas) or a share in a cooperative association

which owns and operates a manufactured home park.

Manufactured home purchase loan means a loan for the purchase

or refinancing of a manufactured home exclusive of any lot or

site, and may also include a garage, patio, carport, or other

comparable appurtenance.

Multifamily property improvement loan means a loan to finance

the alteration, repair, improvement, or conversion of an

existing structure used or to be used as an apartment house or

a dwelling for two or more families. The multifamily structure

may not be owned by a corporation, partnership, or trust,

unless the prior approval of the Secretary is obtained for an

exception to this requirement.

Nonresidential property improvement loan means a loan made to

finance the construction of a new exclusively nonresidential

structure or the alteration, repair or improvement of an

existing structure that is nonresidential. Such a structure

may be temporarily used for residential purposes while the

borrower constructs a new dwelling to replace a dwelling

previously occupied by the borrower that was destroyed or

damaged by conditions determined by the President to warrant

relief under the provisions of Title 42, Chapter 68, of the

United States Code, provided that the credit application is

filed within one year from the date of such a determination.

Note means the written instrument evidencing the borrower\'s

signature to a promise to repay the principal indebtedness and

to pay any interest due on a loan, whether the instrument is

separate from or included within another document, and unless

otherwise specified means also any security instrument with

respect to that loan obligation.

Owner means a person, including a borrower, who has title in

whole or in part to the property which is the subject of a

loan transaction.

Principal residence means a home where the borrower expects to

live at least nine months of the year.

Property improvement loan means a loan made to finance actions

or items that substantially protect or improve the basic

livability or utility of a property. Unless otherwise

indicated, the term includes single family, multifamily and

nonresidential property improvement loans; manufactured home

improvement loans where the home is classified as personalty;

historic preservation loans; and fire safety equipment loans

in existing health care facilities.

Rehabilitation means the process of returning an historic

residential structure to a state of utility, through repair or

alteration, which makes possible an efficient contemporary

use. In rehabilitation, those portions of the property

important in illustrating historic, architectural and cultural

values are preserved or restored.

Restoration means the process of accurately recovering the

form and details of an historic residential structure as it

appeared at a particular period of time by removing later work

and by replacing missing original work.

Security instrument means a properly recorded chattel

mortgage, real estate mortgage or deed of trust, or

conditional sales contract.

Single family property improvement loan means a loan to

finance alterations, repairs and improvements to or in

connection with an existing structure, including an existing

one-family manufactured home classified as real property by

the State or locality in which the property is located, for

use as a single family residence.

Solar energy system means any addition, alteration or

improvement to an existing structure for single family or

multifamily residential use which is designed to utilize wind

or solar energy to reduce the energy requirements of that

structure from other energy sources, and which complies with

standards prescribed by the Secretary.

Special benefits means benefits other than volume incentives

for dealers which a home manufacturer funds from general

corporate revenues by charging them against corporate overhead

and profit without changing the wholesale (base) price of a

manufactured home (or series of homes), as reflected in the

manufacturer\'s published wholesale (base) price list, and

which are limited to payments by the manufacturer directly to:

\(1\) A financial institution to \"buy down\" or reduce the

interest rate, discount points, or other fees or charges

related to a lending agreement for a dealer\'s

manufactured home inventory or \"floor plan\" financing

needs; or

\(2\) One or more advertising media for all or part of the

costs of advertising the manufacturer\'s homes, one or

more dealer\'s services, and related manufactured home

materials and products in such media.

State means any State of the United States, Puerto Rico, the

District of Columbia, Guam, American Samoa, the Commonwealth

of the Northern Mariana Islands, or the United States Virgin

Islands.

Volume incentives means specified dollar benefits to dealers

under a published marketing and promotional plan, payable by

a home manufacturer in cash or in kind in amounts or levels

relating to the volume of sales of manufactured homes to

dealers, other than benefits of a nominal value of less than

\$10 per home, which:

\(1\) The manufacturer funds from general corporate revenues by

including them in the prices quoted in the manufacturer\'s

wholesale (base) price list and charging them against

corporate overhead and profit;

\(2\) Whether or not available on an optional basis, do not

increase or decrease the wholesale (base) prices for the

sale of a specific home or options or the charges for

freight and dealer-paid sales taxes as detailed in the

manufacturer\'s invoice, for a specific sale to a retail

dealer;

\(3\) The manufacturer provides without creating a special

product line where the cost of the benefits is the only

substantive difference between the special product line

and other essentially similar homes;

\(4\) Whether or not also of benefit to the ultimate purchaser,

do not increase or decrease the retail price of the home;

\(5\) Are available to any dealer in a particular market area

doing business with the manufacturer;

\(6\) The manufacturer provides only for volume sales of

manufactured homes to dealers over a specified period of

time;

\(7\) The plan provides in escalating and different amounts or

levels related to either the number of homes (or modules)

sold or the dollar value of such sales to a dealer, or

some combination of such elements, in a specified period

of time;

\(8\) Are structured so that only some of the dealer

participants are expected to be paid the maximum benefits

under the program with substantial numbers of

participants expected to receive less than the maximum

amount or level of benefits; and

\(9\) Accrue for volume sales to a dealer over a specified

period of time which is at least quarterly in length, and

are paid not more frequently than quarterly.

Wholesale (base) price list means the price list or lists, as

periodically amended, which are published and distributed by

a home manufacturer to all retail dealers in a given marketing

area, quoting the actual wholesale (base) prices at the

factory for specific models or series of manufactured homes

and itemized options offered for sale to such dealers during

a specified period of time. The wholesale (base) prices may

include the manufacturer\'s projected costs of providing volume

incentives and special benefits related to sales to dealers

during the period. All such wholesale (base) prices shall

exclude any costs of trade association fees or charges,

discounts, bonuses, refunds, rebates, prizes, loan discount

points or other financing charges, or anything else of more

than nominal value which will inure to the benefit of a dealer

and/or home purchaser at any date. Each price list and

amendment shall be retained by the manufacturer for a minimum

period of six years from the date of publication so as to be

available to HUD and other Federal agencies upon request.

[]{#__RefHeading___Toc167872309 .anchor}**201.3 Applicability of the
regulations**. \<[TOP](#_top)\>

The regulations in this part may be amended by the Secretary at any

time. Such amendment shall not adversely affect the insurance

privileges of a lender on any loan that has been made or for which

a loan application has been approved before the effective date of

the amendment.

[]{#__RefHeading___Toc167872310 .anchor}**201.4 Rules of construction**.
\<[TOP](#_top)\>

As used in this part, and unless the context indicates otherwise,

words in the singular include the plural, and words in the plural

include the singular.

[]{#__RefHeading___Toc167872311 .anchor}**201.5 Waivers**.
\<[TOP](#_top)\>

The Secretary may waive a lender\'s noncompliance with any provision

of this part, subject to statutory limitations, when it is

determined that enforcement of the regulations would impose an

injustice upon a lender which has substantially complied with the

regulations in good faith and refunded or credited any excess

charge made, and when such waiver does not involve an increase in

the Secretary\'s obligation beyond that which would have been

involved if the lender was in full compliance with the regulations.

## 201.6 Disclosure and verification of Social Security and Employer

## Identification Numbers

To be eligible for loan insurance under this part, the borrower

must meet the requirements for the disclosure and verification of

Social Security and Employer Identification Numbers, as provided by

Part 200, subpart U, of this chapter.

# 

#  SUBPART B - LOAN AND NOTE PROVISIONS

[]{#__RefHeading___Toc167872315 .anchor}**201.10 Loan amounts**.
\<[TOP](#_top)\>

\(a\) Property improvement loans.

\(1\) The total principal obligation for a property improvement loan

shall not exceed the actual cost of the project plus any applicable

fees and charges authorized at \' 201.25(b), up to the following

maximum loan amounts:

\(i\) Single family property improvement loans - \$25,000, except

that a loan for a manufactured home that qualifies as real

property shall be limited to \$17,500.

\(ii\) Multifamily property improvement loans - \$60,000 or an average

of \$12,000 per dwelling unit, whichever is less.

\(iii\) Nonresidential property improvement loans - \$25,000.

\(iv\) Manufactured home improvement loans - \$7,500.

\(v\) Historic preservation loans - the lesser of \$15,000 per

dwelling unit in a residential structure or \$45,000 per

residential structure.

\(vi\) Fire safety equipment loans - \$50,000.

\(2\) No property improvement loan shall be approved where the total

outstanding balance of all Title I property improvement loans on

the same property exceeds the maximum loan amount prescribed for

that type of loan. If more than one type of property improvement

loan is involved, the total outstanding balance of such loans on a

particular property shall not exceed the maximum loan amount

prescribed for the larger type of loan.

\(b\) Manufactured home purchase loans.

\(1\) The total principal obligation for a loan to purchase a new

manufactured home shall not exceed the sum of the following

itemized amounts, up to a maximum of \$48,600:

\(i\) 130 percent of the sum of the wholesale (base) prices of the

home and any itemized options and the charge for freight, as

detailed in the manufacturer\'s invoice;

\(ii\) The charge for any sales taxes to be paid by the dealer, as

detailed in the manufacturer\'s invoice;

\(iii\) The actual dealer\'s cost of transportation to the homesite,

set-up and anchoring, including the rental of wheels and axles

(if not included in the freight charges);

\(iv\) The actual dealer\'s cost of skirting;

\(v\) The actual dealer\'s cost of a garage, carport, patio or other

comparable appurtenance to the manufactured home, as approved

by the Secretary;

\(vi\) The actual dealer\'s cost of purchasing and installing a

central air conditioning system or heat pump, if not installed

by the manufacturer; and

\(vii\) Any applicable charges authorized at § 201.25(b).

\(2\) The total principal obligation for a loan to purchase an existing

manufactured home shall not exceed the lesser of the following

amounts, up to a maximum of \$48,600:

\(i\) 95 percent of the appraised value of the home as equipped and

furnished (as determined by a HUD-approved appraisal) and 95

percent of any itemized amounts allowed under paragraphs

(b)(1)(ii) through (vii) of this section, if incurred; or

\(ii\) 95 percent of the purchase price of the home.

\(3\) The purchase price of a manufactured home financed with a

manufactured home purchase loan shall include the retail cost to

the borrower of all items set forth in the purchase contract,

including any applicable charges authorized under \' 201.25(b).

\(c\) Manufactured home lot loans. The total principal obligation for a
loan

to purchase and, if necessary, develop a lot suitable for a manufactured

home, including on-site water and utility connections, sanitary

facilities, site improvements and landscaping, shall not exceed 95

percent of either the appraised value of the developed lot (as

determined by a HUD-approved appraisal) or the total of the purchase

price and development costs, whichever is less, up to a maximum of

\$16,200.

\(d\) Combination loans.

\(1\) The total principal obligation for a loan to purchase a new

manufactured home and a lot on which to place the home shall not

exceed the sum of the following itemized amounts, up to a maximum

of \$64,800:

\(i\) 130 percent of the sum of the wholesale (base) prices of the

home and any itemized options and the charge for freight, as

detailed in the manufacturer\'s invoice;

\(ii\) The charge for any sales taxes to be paid by the dealer, as

detailed in the manufacturer\'s invoice;

\(iii\) The actual dealer\'s cost of transportation to the homesite,

set-up and anchoring, including the rental of wheels and axles

(if not included in the freight charge);

\(iv\) The actual dealer\'s cost of purchasing and installing a

central air conditioning system or heat pump, if not installed

by the manufacturer;

\(v\) The appraised value of the developed manufactured home lot (as

determined by a HUD-approved appraisal, including on-site

water and utility connections, sanitary facilities, site

improvements and landscaping) or the purchase price, whichever

is less;

\(vi\) The actual dealer\'s cost of appurtenances to the home such as

a permanent foundation, garage, carport or patio; and

\(vii\) Any applicable charges authorized at § 201.25(b).

\(2\) The total principal obligation for a loan to purchase an existing

manufactured home and lot shall not exceed the lesser of the

following amounts, up to a maximum of \$64,800:

\(i\) 95 percent of the total appraised value of the home, the lot,

and any appurtenances (as determined by a HUD-approved

appraisal), plus 95 percent of any applicable charges

authorized at § 201.25(b); or

\(ii\) 95 percent of the purchase price of the home, the lot, and any

appurtenances.

\(3\) The purchase price of a manufactured home and a lot financed with

a combination loan shall include the retail cost to the borrower of

all items set forth in the purchase contract or contracts,

including any applicable charges authorized under \' 201.25(b).

\(e\) Manufactured home loan limits in high-cost areas.

\(1\) The maximum loan amounts otherwise applicable under paragraphs
(b),

\(c\) and (d) of this section may be increased by an amount not to

exceed 40 percent where the manufactured home and/or lot is

purchased and located in Alaska, Guam or Hawaii.

\(2\) The maximum loan amounts otherwise applicable under paragraphs (c)

and (d) of this section may be increased for any geographical area

except Alaska, Guam or Hawaii to the extent deemed necessary by the

Secretary; however, any increased loan amount may not exceed the

lesser of:

\(i\) 185 percent of the dollar amounts specified in paragraphs (c)

and (d) of this section; or

\(ii\) The dollar amounts specified in paragraphs (c) and (d) of this

section, as increased by the same percentage by which 95

percent of the median one-family house price in the area (as

determined by the Secretary for purposes of \' 203.18) exceeds

\$67,500.

\(f\) Loan refinancing.

\(1\) The total principal obligation of a loan made to refinance a

borrower\'s existing insured property improvement loan shall not

exceed the maximum loan amount permitted under this section for the

particular type of loan, provided that any amount in excess of the

cost to the borrower of prepaying the existing loan shall be made

available only to finance additional property improvements meeting

the requirements of this part.

\(2\) The total principal obligation of a loan made to refinance a

borrower\'s existing insured manufactured home loan shall not exceed

the lesser of the cost to the borrower of prepaying the existing

loan or the maximum loan amount permitted under this section for

\(3\) The total principal obligation of a loan made to refinance a

borrower\'s existing uninsured manufactured home loan shall not

exceed the cost to the borrower of prepaying the existing loan or

the appraised value of the property (as determined by a HUD-

approved appraisal), whichever is less, up to the maximum loan

amount permitted under this section for the particular type of

loan.

\(4\) When a borrower\'s existing manufactured home lot is being

refinanced in connection with the purchase of a manufactured home,

the total principal obligation of the combination loan shall be

determined in accordance with paragraph (d)(1) or (d)(2) of this

section.

\(5\) When a borrower\'s existing manufactured home is being refinanced
in

connection with the purchase of a manufactured home lot, the total

principal obligation of the combination loan shall not exceed the

lesser of the following amounts, up to a maximum of \$64,800:

\(i\) The cost to the borrower of prepaying any existing loan on the

home, plus the purchase price of the lot; or

\(ii\) The appraised value of the home and lot (as determined by a

HUD-approved appraisal).

\(g\) Minimum loan amount. A lender may not require, as a condition of

providing a loan insured under this part, that the principal amount of

the loan exceed a minimum amount established by the lender. A person may

request the Secretary to determine compliance of a lender with this

section as provided in \' 202.20(i) of this chapter.

[]{#__RefHeading___Toc167872316 .anchor}**201.11 Loan maturities**.
\<[TOP](#_top)\>

\(a\) Property improvement loans. The term of a property improvement
loan

shall be not less than six months and not more than 20 years and 32 days

from the date of the loan, except that:

\(1\) The maximum term for a single family property improvement loan on

a manufactured home that qualifies as real property shall not

exceed 15 years and 32 days from the date of the loan;

\(2\) The maximum term for a manufactured home improvement loan shall
not

exceed 12 years and 32 days from the date of the loan; and

\(3\) The maximum term for an historic preservation loan shall not
exceed

15 years and 32 days from the date of the loan.

\(b\) Manufactured home loans. The term of a manufactured home loan
shall be

not less than six months and not more than 20 years and 32 days from the

date of the loan, except that:

\(1\) The maximum term for a manufactured home lot loan shall not exceed

15 years and 32 days from the date of the loan; and

\(2\) The maximum term for a multi-module manufactured home and lot in

combination shall not exceed 25 years and 32 days from the date of

the loan.

\(c\) Loan refinancing. A loan to be refinanced under this part may be

refinanced for an extended period.

\(1\) The term of a loan made to refinance a borrower\'s existing
insured

property improvement loan or existing insured manufactured home

loan shall not exceed the maximum term permitted under paragraph

\(a\) or (b) of this section for the particular type of loan. In

addition, the total time period from the date of the original loan

to the final maturity of the refinanced loan shall not exceed:

\(i\) In the case of a property improvement loan, the maximum term

permitted under paragraph (a) of this section plus 9 years and

11 months; and

\(ii\) In the case of a manufactured home loan, the maximum term

permitted under paragraph (b) of this section plus 4 years and

11 months.

\(2\) The term of a loan made to refinance a borrower\'s existing

uninsured manufactured home loan shall not exceed the maximum term

permitted under paragraph (0) of this section for the particular

type of loan.

\(3\) When a borrower\'s existing manufactured home lot is being

refinanced in connection with the purchase of a manufactured home,

the term of the combination loan shall not exceed the maximum term

permitted under paragraph (0) of this section for the particular

type of loan.

\(4\) When a borrower\'s existing manufactured home is being refinanced
in

connection with the purchase of a manufactured home lot, the term

of the combination loan shall not exceed the maximum term permitted

under paragraph (b) for the particular type of loan.

[]{#__RefHeading___Toc167872317 .anchor}**201.12 Requirements for the
note**. \<[TOP](#_top)\>

The note shall bear the genuine signature of each borrower and of any
co-

maker or co-signer, be valid and enforceable against the borrower and
any co-

maker or co-signer, and be complete and regular on its face. The
borrower and

any co-maker or co-signer shall execute the note for the full amount of
the

loan obligation. Although the note may be executed by the borrower on an

earlier date, the date of the loan shall be the date that the loan
proceeds

are disbursed by the lender. Such date shall be entered on the note when

disbursement occurs. The note shall separately recite the principal
amount

and any interest at an agreed annual rate that comprises the borrower\'s

payment obligation. The lender shall assure that the note and all other

documents evidencing the loan transaction are in compliance with
applicable

Federal, State and local laws. If the note is executed on behalf of a

corporation, partnership, or trust by an authorized representative, it
shall

create a binding obligation on such entity.

[]{#__RefHeading___Toc167872318 .anchor}**201.13 Interest and discount
points**. \<[TOP](#_top)\>

The interest rate for any loan shall be negotiated and agreed to by the

borrower and the lender, and such interest rate shall be fixed for the
full

term of the loan and recited in the note. Interest on the loan shall
accrue

from the date of the loan, and shall be calculated on a simple interest

basis. The lender and the borrower may negotiate the amount of discount

points, if any, to be paid by the borrower as part of the borrower\'s
initial

payment. The lender shall not require or allow any party other than the

borrower to pay any discount points or other financing charges in
connection

with the loan transaction.

[]{#__RefHeading___Toc167872319 .anchor}**201.14 Payments on the loan**.
\<[TOP](#_top)\>

The note normally shall provide for equal installment payments due
weekly,

biweekly, semi-monthly or monthly. The note may provide for either or
both of

the first and final payments to vary in amount but not to exceed 1-1/2
times

the regular installment. Where the borrower has an irregular flow of
income,

the note may be payable at quarterly or semi-annual intervals
corresponding

with the borrower\'s flow of income. The first scheduled payment after
the

borrower\'s initial payment shall be due no later than two months from
the

date of the loan. Multiple payment schedules may not be used in
connection

with any loan.

[]{#__RefHeading___Toc167872320 .anchor}**201.15 Late charges to
borrowers**. \<[TOP](#_top)\>

\(a\) Imposition of late charge. The note may provide for imposition of
a late

charge unless precluded by State law. The late charge may be imposed

only for installments of principal and interest which are in arrears for

the greater of 15 calendar days or the number of days required by

applicable State law before such charges may be imposed. Late charges

must be billed to the borrower or reflected in the payment coupon, and

evidence of any late charges that have been paid must be in the loan

file if an insurance claim is made.

\(b\) Amount of late charge. The late charge shall not exceed the lesser
of

five percent of each installment of principal and interest, up to a

maximum of \$10 per installment for any property improvement loan and
\$15

per installment for any manufactured home loan, or the maximum amount

permitted by applicable State law.

\(c\) Method of payment. Payment of any late charge cannot be deducted
from

the monthly payment for principal and interest, but must be an

additional charge to the borrower.

\(d\) Daily interest in lieu of late charges. In lieu of late charges,
the

note may provide for interest to accrue on installments in arrears on a

daily basis at the interest rate in the note.

[]{#__RefHeading___Toc167872321 .anchor}**201.16 Default provision**.
\<[TOP](#_top)\>

The loan note shall contain a provision for acceleration of maturity, at
the

option of the holder, upon a default by the borrower.

[]{#__RefHeading___Toc167872322 .anchor}**201.17 Prepayment provision**.
\<[TOP](#_top)\>

The note shall contain a provision permitting full or partial prepayment
of

the loan without penalty, except that the borrower may be assessed
reasonable

and customary charges for recording a release of the lender\'s security

interest in the loan, if permitted by State law.

[]{#__RefHeading___Toc167872323 .anchor}**201.18 Modification agreement
or repayment plan**. \<[TOP](#_top)\>

\(a\) Modification agreement. A written but unrecorded modification
agreement

acceptable to the lender and executed by the borrower may be used in

lieu of refinancing of a delinquent or defaulted loan to reduce or

increase the monthly payment, but not to increase the term or the

interest rate, so as to assure that the delinquent or defaulted

loan is brought current before or by the end of the loan term. A

modification agreement may also be used in lieu of refinancing in

connection with a loan that is current to effect a reduction in the

interest rate, and in the monthly payment, for the remainder of the loan

term. When a modification agreement is used, no insurance reporting is

required under \' 201.30.

\(b\) Repayment plan. The lender may elect to negotiate an informal
repayment

plan with the borrower to enable a temporary delinquency to be cured

within a short period of time. The lender may document the terms of the

repayment plan by sending a letter to the borrower reciting the terms of

their agreement. When a repayment plan is used, no insurance reporting

is required under \' 201.30.

[]{#__RefHeading___Toc167872324 .anchor}**201.19 Refinanced and assumed
loans**. \<[TOP](#_top)\>

\(a\) Conditions on refinancing.

\(1\) An existing insured property improvement loan or manufactured home

loan may be refinanced without an advance of funds only under the

following conditions:

\(i\) A loan that is in default may not be refinanced for an amount

greater than the original principal balance of the loan;

\(ii\) The refinancing of a loan for the original borrower shall be

subject to all of the requirements of this part, except \'\'

201.20(b) and (c), 201.21(b) through (e), 201.22, 201.23, and

201.26;

\(iii\) If there are co-makers or co-signers on the original note, the

lender shall require the same co-makers or co-signers on the

refinanced note, unless the lender obtains the Secretary\'s

approval to release a co-maker or co-signer from liability

under the note in accordance with \' 201.24(e); and

\(iv\) A loan that was assumed in accordance with paragraph (c) of

this section may be refinanced, subject to all of the

requirements of this part except \'\' 201.20(b) and (c),

201.21(b) through (e), 201.22, 201.23, and 201.26, as long as

the original borrower and any intervening assumptors were

released from liability for repayment of the loan at the time

the loan was assumed. A lender may not refinance a previously

assumed loan under any other circumstances, unless the

requirements of \' 201.22 are also met and the Secretary has

approved a release of the original borrower and any

intervening assumptors in accordance with \' 201.24(e).

\(2\) An existing insured property improvement loan may be

refinanced with an advance of funds for additional

improvements only under the following conditions:

\(i\) The existing insured loan must not be in default; and

\(ii\) The refinancing shall be subject to all of the

requirements of this part applicable to the particular

type of loan and to the additional improvements being

financed.

\(3\) An existing uninsured manufactured home loan may be refinanced

only for the original borrower and only under the following

conditions:

\(i\) The existing uninsured loan must not be in default;

\(ii\) Refinancing of an existing uninsured manufactured home

purchase loan or combination loan shall be subject to all

the requirements of this part applicable to the

particular type of loan except \'\' 201.23 and

201.26(b)(4);

\(iii\) Refinancing of an existing uninsured manufactured home

lot loan in connection with the purchase of a

manufactured home shall be subject to all of the

requirements of this part; and

\(iv\) Refinancing of an existing uninsured manufactured home

purchase loan in connection with the purchase of a

manufactured home lot shall be subject to all of the

requirements of this part except \' 201.26(b)(4).

\(b\) Note and security requirements for refinanced loans.

\(1\) Refinancing of a loan requires the execution of a new note and

cancellation of the old note.

\(2\) Refinancing of a loan that was secured when originated, regardless

of the principal balance of the note at the time of refinancing, is

required to be secured.

\(3\) Refinancing of a loan that was not secured when originated is not

required to be secured if no additional funds are advanced.

\(4\) When a refinanced loan is secured, the lender shall obtain and

record a new security instrument in accordance with \' 201.24 and

shall release the original lien, unless State law permits a renewal

and extension of the original lien.

\(5\) Copies of all documents pertaining to the original loan must be

retained in the loan file for the refinanced loan.

\(c\) Assumed loans.

\(1\) At the option of the lender, an existing insured property

improvement loan or manufactured home loan may be assumed, subject

to the following conditions:

\(i\) A determination by the lender that the assumptor is eligible

under \' 201.20(a) or 201.21(a) and meets the requirements of

\' 201.22; and

\(ii\) The execution of an assumption agreement that is satisfactory

to the lender and is signed by the assumptor and the original

borrower or previous assumptor at the time of assumption.

\(2\) The lender shall not permit an assumption under any circumstances

other than those contained in this section, and shall include

appropriate provisions in any note or security agreement to enforce

this requirement.

\(3\) Prior to the execution of the assumption agreement, the lender

shall provide the assumptor with a written notice, to be signed by

the assumptor and retained in the loan file, that:

\(i\) States that the loan being assumed is insured by HUD, and

describes the actions the Secretary may take to recover the

debt if the assumptor defaults on the loan and an insurance

claim is paid; and

\(ii\) Constitutes the assumptor\'s agreement to pay penalties and

administrative costs imposed by HUD as authorized by 31 U.S.C.

3717\.

\(4\) If the other requirements of paragraph (c) of this section are
met,

the lender at its option may release the original borrower and any

intervening assumptors from liability for the repayment of a loan

obligation insured under this part. The prior approval of the

Secretary under \' 201.24(e) is not required. The lender shall

retain documentation of the release in the loan file.

# SUBPART C - ELIGIBILITY AND DISBURSEMENT REQUIREMENTS

[]{#__RefHeading___Toc167872326 .anchor}**201.20 Property improvement
loan eligibility**. \<[TOP](#_top)\>

\(a\) Borrower eligibility.

\(1\) To be eligible for a property improvement loan (other than a

manufactured home improvement loan), the borrower shall have at

least a one-half interest in one of the following:

\(i\) Fee simple title to the real property;

\(ii\) Lease of the real property for a fixed term which expires not

less than six calendar months after the final maturity of the

loan; or

\(iii\) A properly recorded land installment contract for the purchase

of the real property.

\(2\) To be eligible for a manufactured home improvement loan, the

borrower shall have at least a one-half interest in the

manufactured home, and the home must be the principal residence of

the borrower.

\(b\) Eligible use of loan proceeds.

\(1\) The loan proceeds shall be used only for the purposes disclosed in

the loan application. If the borrower plans to use a dealer or

contractor to carry out the improvement work, the lender shall

obtain a copy of a proposal or contract that describes in detail

the work to be performed and the estimated or actual cost. If the

borrower plans to carry out the improvement work without the

services of a dealer or contractor, the borrower shall be required

to furnish a detailed written description of the work to be

performed, the materials to be furnished, and their estimated cost.

\(2\) The loan proceeds shall be used only to finance property

improvements that substantially protect or improve the basic

livability or utility of the property. The Secretary will establish

a list of items and activities that may not be financed with the

proceeds of any property improvement loan. If a lender has any

doubt as to the eligibility of any item or activity, it shall guest

a specific ruling by the Secretary before making a loan.

\(3\) The loan proceeds shall only be used to finance property

improvements that are started after loan approval, unless:

\(i\) The prior approval of the Secretary is obtained for an

exception to this requirement; or

\(ii\) The property is located in a major disaster area declared by

the President, and the lender determines that emergency action

is needed to repair damage resulting from the disaster.

\(c\) Special pre-application requirements.

\(1\) Where the proceeds are to be used for an historic preservation

loan, the proposed improvements shall be reviewed and approved by

the State Historic Preservation Officer (or other person authorized

by the Secretary of the Interior to make such reviews) prior to

making application for a loan. The purpose of the review is to

determine that (i) the structure is an historic residential

structure listed on the National Register of Historic Places or

certified by the Secretary of the Interior as conforming with

National Register criteria, and (ii) the proposed improvements

comply with criteria set by the Secretary of the Interior for the

preservation of historic structures.

\(2\) Where the proceeds are to be used for a fire safety equipment
loan,

the proposed improvements shall be reviewed and approved by the

State or local agency having primary jurisdiction over the fire

safety requirements of health care facilities prior to making

application for a loan.

[]{#__RefHeading___Toc167872327 .anchor}**201.21 Manufactured home loan
eligibility**. \<[TOP](#_top)\>

\(a\) Borrower eligibility. To be eligible for a manufactured home loan

(whether a manufactured home purchase loan, a manufactured home lot

loan, or a combination loan), the borrower must become the owner of the

particular property which is to be financed with such a loan. Where the

loan involves a manufactured home which is classified as realty,

ownership of the home must be in fee simple. Where the loan involves a

manufactured home lot, ownership of the lot must be in fee simple,

except where the lot consists of a share in a cooperative association

which owns and operates a manufactured home park.

1060.2 REV-6

\(b\) Eligible use of loan proceeds.

\(1\) The loan proceeds may be used for the purchase or refinancing of a

manufactured home, a suitably developed lot on which to place a

manufactured home already owned by the borrower, or a manufactured

home and a suitably developed lot for the home in combination. The

loan proceeds may also be used to refinance an existing

manufactured home already owned by the borrower in connection with

the purchase of a manufactured home lot, or to refinance a lot

already owned by the borrower in connection with the purchase of a

manufactured home. Where the proceeds are for a manufactured home

purchase loan or combination loan, the home must be the borrower\'s

principal residence. Where the proceeds are for a manufactured home

lot loan, the borrower\'s manufactured home must be placed on the

lot and occupied as the borrower\'s principal residence within six

months after the date of the loan.

\(2\) A manufactured home financed with an insured loan under this part

may be either:

\(i\) A new home, which is one that is purchased by the borrower

within 18 months after the date of manufacture and has not

been previously occupied; or

\(ii\) An existing home, which is one that does not meet the criteria

for a new home.

In order to be eligible for financing with an insured loan under

this part, the manufactured home, its warranty and the site on

which the home is placed must meet the requirements of paragraphs

\(c\) through (e) of this section.

\(3\) The proceeds of a loan to purchase a new manufactured home or a
new

manufactured home and lot shall not be used to purchase furniture

or wheels and axles, and the cost of these items shall not be

included in the total principal obligation calculated under §

201.10(b)(1) or (d)(1).

\(4\) The proceeds of a manufactured home purchase loan may be used for

the purchase, construction or installation of a garage, carport,

patio or other comparable appurtenance to the manufactured home, as

stated in the retail purchase contract and as approved by the

Secretary. The proceeds of a combination loan may be used for the

purchase, construction or installation of a permanent foundation,

garage, carport, patio or other comparable appurtenance to the

manufactured home.

\(5\) The Secretary will establish a list of items and activities that

may not be financed with the proceeds of any manufactured home

loan. If a lender has any doubt as to the eligibility of any item

or activity, it shall request a specific ruling by the Secretary

before making a loan.

\(c\) Construction, transportation and installation requirements.

\(1\) The manufactured home shall be certified by the manufacturer under

applicable criminal and civil penalties for fraud and

misrepresentation to have been constructed in compliance with the

National Manufactured Housing Construction and Safety Standards Act

of 1974, 42 U.S.C. 5401-5426, so as to conform to all applicable

Federal construction and safety standards, as evidenced by a label

or tag affixed to the manufactured home in accordance with 24 CFR

[3280.8](http://www.hudclips.org/sub_nonhud/cgi/nph-brs.cgi?d=C24D&l=20&s1=3280.8$%5Bno%5D&SECT1=TXTHLB&SECT5=C24D&u=../cgi/legis.cgi&p=1&r=0&f=S).

\(2\) During any period of transportation from the factory to the

borrower\'s homesite, the structural integrity of the manufactured

home shall be maintained so that it will be livable and durable.

\(3\) The installation or erection of the manufactured home on the

homesite shall comply with the manufacturer\'s requirements for

anchoring, support, stability and maintenance. Any permanent

foundation shall be constructed in accordance with the current

edition of HUD\'s Permanent Foundations Guide for Manufactured

Housing (HUD Handbook 4930.3).

\(4\) For any manufactured home purchase loan or combination loan

involving a sale of the manufactured home by a dealer, the dealer

shall inspect the manufactured home, as installed or erected on the

homesite, for structural damage or other defects resulting from the

transportation and installation of the home. The dealer shall also

test the performance of the home\'s plumbing, mechanical and

electrical systems to assure that they are fully operational.

\(d\) Manufacturer\'s warranty requirements.

\(1\) To induce the Secretary to insure a Title I loan under this part

for the purchase of a new manufactured home and to induce a

borrower to purchase such a home, the home manufacturer shall

furnish the borrower with a written warranty, duly executed by an

author representative of the manufacturer on a HUD-approved form.

The warranty shall be provided without cost to the borrower. The

effective date of the warranty shall be the date of delivery of

the manufactured home to the borrower, regardless of when the

warranty was executed by the manufacturer or was delivered to the

borrower.

\(2\) The warranty shall obligate the home manufacturer to take

appropriate action to correct any nonconformity with the standards

prescribed in paragraph (c)(1) of this section or any defects in

materials or workmanship which become evident within one year after

the date of delivery. This warranty shall be in addition to, and

not in derogation of, all other rights and privileges which the

borrower may have under any other law or instrument during such

period or thereafter. A copy of the warranty shall be retained in

the lender\'s loan file.

\(3\) Prior to making a loan involving a new manufactured home, the

lender shall investigate whether the home manufacturer is

substantially complying with its warranty obligations on other

homes financed by the lender under any program. If the lender

knows, because of consumer complaints, dealer comments or other

information concerning the manufacturer received in the course of

business, that consumers have complained about warranty

performance, the lender shall ascertain whether such complaints

have been resolved. The lender\'s findings shall be documented in

the loan file. Such documentation may reference information or

materials contained in other files of the lender, provided that the

file contains a written certification signed by a responsible loan

officer under applicable criminal and civil penalties for fraud and

misrepresentation that the lender\'s findings are supported by such

other information or materials.

\(4\) If the lender concludes under paragraph (d)(3) of this section
that

a manufacturer may not be honoring its warranties, the lender shall

immediately notify the Secretary in writing, with documentation of

the facts and circumstances.

\(e\) Manufactured homesite standards.

\(1\) To assure the suitability of the homesite, the manufactured home

shall be placed on a leased site in a manufactured home park or on

an individual manufactured home lot or other site owned or leased

by the borrower that meets the following standards. A manufactured

home may be placed on a site within Indian trust or otherwise

restricted lands if the borrower owns or leases the site, or if the

borrower obtains written permission acceptable to the Secretary

from the trustee or the tribal authority who controls the use of

the site.

\(2\) The manufactured homesite shall be served by adequate public or

community water and sewerage systems, unless appropriate local

officials certify that either or both such systems are unavailable

to provide an adequate level of service to the manufactured

homesite. If either or both such systems are not available, the

manufactured homesite shall comply with local or State minimum lot

area requirements for the provision of on-site water supply and/or

sewage disposal.

\(3\) When the manufactured home is to be placed on a leased site in a

manufactured home park, the lender shall obtain certifications from

the appropriate State or local government officials that the park

complies with minimum standards relating to vehicular access, water

supply, sewage disposal, utility connections, and other aspects of

park development. Where minimum State and local standards for park

development are not established or enforced, the lender shall

obtain a certification from a registered civil engineer that the

park meets minimum standards for park development prescribed by the

Secretary.

\(4\) When the manufactured home is to be placed on an individual

manufactured home lot or other site owned or leased by the borrower

(or on an Indian land site under paragraph (e)(1) of this section),

the lender shall obtain certifications from the appropriate local

government officials that:

\(i\) The site complies with local zoning ordinances and

regulations, if any;

\(ii\) Adequate vehicular access from a public right-of-way is

available to the site;

\(iii\) Adequate water supply and sewage disposal facilities are

available to or on the site; and

\(iv\) Any other minimum local standards and requirements for site

suitability are met.

Where minimum local standards for water supply and sewage disposal

are not established or enforced, the lender shall obtain a

certification from a registered civil engineer that the site meets

minimum standards for water supply and sewage disposal prescribed

by the Secretary.

[]{#__RefHeading___Toc167872328 .anchor}**201.22 Credit requirements for
borrowers**. \<[TOP](#_top)\>

\(a\) Credit application and review.

\(1\) Before making a loan insured under this part, the lender shall

exercise prudence and diligence to determine whether the borrower

and any co-maker or co-signer is solvent and an acceptable credit

risk, with a reasonable ability to make payments on the loan

obligation. All documentation supporting this determination and

relating to the lender\'s review of the credit of the borrower and

of any co-maker or co-signer shall be retained in the loan file.

\(2\) The lender shall obtain a separate dated credit application on a

HUD-approved form, executed by the borrower and any co-maker or co-

signer under applicable criminal and civil penalties for fraud and

misrepresentation, for each loan made. The lender shall verify that

the borrower\'s Social Security Number is valid, through such

documentation as may be prescribed by the Secretary.

\(3\) The lender shall conduct a credit investigation based on the
credit

application, and shall obtain written verification of or otherwise

document the current employment and current income of the borrower

and any co-maker or co-signer. If the borrower or any co-maker or

co-signer has changed employment within the past two years, the

lender shall obtain written verification of or otherwise document

the person\'s prior employment and prior income during the two-year

period. If the borrower or any co-maker or co-signer was self-

employed during any period of the previous two years, the lender

shall obtain documentation of the person\'s income during such

period of self-employment.

\(4\) The lender shall also determine the total amount of the
borrower\'s

existing and proposed Title I loans to ensure that the loan amounts

in § 201.10 are not exceeded.

\(5\) As part of its credit investigation, the lender shall obtain a

consumer credit report stating the credit accounts and payment

history of the borrower and of any co-maker or co-signer. Subject

to State or local law, the lender shall check with the inquirers

concerning all credit inquiries reported within the previous 90

days to determine whether the borrower or the co-maker or co-signer

has incurred debts not listed on the credit application. If a

consumer credit report is not available or is incomplete, the loan

file shall contain other documentation of the lender\'s diligent

investigation of the credit of the borrower or of the co-maker or

co-signer.

\(6\) If the consumer credit report does not contain the necessary

information, the lender shall obtain written verification that the

borrower is not over 30 days delinquent on any senior mortgages or

deeds of trust on the property being improved with a property

improvement loan.

\(7\) The lender shall verify, in such manner as the Secretary may

prescribe, whether the borrower is in default or a claim has been

paid in connection with any loan obligation owed to or insured or

guaranteed by the Federal government.

\(8\) For any loan with a total principal balance in excess of \$5,000,

the lender shall obtain written verification of the source of all

funds of the borrower required for the borrower\'s initial payment,

if such payment will be in excess of five percent of the loan.

\(9\) Before making a final determination on the creditworthiness of the

borrower, the lender shall conduct a face-to-face or telephone

interview with the borrower and any co-maker or co-signer to

resolve any discrepancies in the information on the credit

application and to assure that the information is accurate and

complete.

\(10\) After a thorough credit investigation and in the absence of

information to the contrary, the lender may rely upon all

statements of fact made by the borrower or any co-maker or co-

signer in the credit application.

\(b\) Income requirements.

\(1\) For any Title I loan, the credit application and review must

establish that the borrower\'s income will be adequate to meet the

periodic payments required by the loan, as well as the borrower\'s

other housing expenses and recurring charges. For a borrower\'s

income to be considered adequate, housing expenses and total fixed

expenses generally may not exceed maximum percentages of effective

gross income established by the Secretary. If these expense-to-

income ratios are exceeded, the borrower\'s income may be considered

adequate only if the lender determines and documents in the loan

file the existence of compensating factors concerning the

borrower\'s creditworthiness which support approval of the loan.

\(2\) In determining whether the borrower\'s income is adequate, the

following definitions are applicable:

1060.2 REV-6

\(i\) Effective gross income is defined as continuing income from

all sources that is reasonably be expected to be available

during the first two years of the loan obligation, without any

deduction for income taxes or other items.

\(ii\) Total fixed expenses is the sum of the borrower\'s housing

expenses and other recurring charges.

\(iii\) Housing expenses includes all payments for principal,

interest, loan or mortgage insurance charges, ground rent or

leasehold charges, real estate taxes, hazard insurance, and

homeowners association or condominium fees, but does not

include utility costs.

\(iv\) Other recurring charges includes all payments on automobile

loans, furniture loans, student loans, installment loans,

revolving charge accounts, alimony or child support, and any

other debt where the obligation is expected to continue for

six months or more.

\(c\) Evidence of delinquency, default or misrepresentation. Except with
the

prior approval of the Secretary, the lender shall not approve a loan if

the lender has knowledge of any of the following circumstances:

\(1\) The borrower is past due more than 30 days as to the payment of

principal or interest under the original terms of a loan obligation

owed to or insured or guaranteed by the Federal government, unless

the debt has since been discharged or satisfied; or

\(2\) The borrower has previously made material misstatements of fact on

applications for loans or other assistance.

[]{#__RefHeading___Toc167872329 .anchor}**201.23 Borrower\'s initial
payment**. \<[TOP](#_top)\>

\(a\) General requirement. The borrower shall be responsible for the
payment

in cash of any costs that will not be paid, or are not eligible to be

paid, from the proceeds of the loan. Such costs payable by the borrower

may include any required downpayment, any discount points to be paid by

the borrower to the lender, any other fees and charges that may not be

financed, and any other costs in excess of the loan amount. No part of

such costs payable by the borrower may be loaned, advanced, or paid to

or for the benefit of the borrower by the dealer, the manufacturer, or

any other party to the loan transaction. If the borrower obtains all or

any part of such costs through a gift or a loan from some other source,

the borrower must disclose the source of such gift or loan on the credit

application. Any such loan must be secured by property or collateral

owned by the borrower independently of the property securing repayment

of the Title I loan, unless the prior approval of the Secretary is

obtained for an exception to this requirement. The lender shall consider

any such loan obligation in performing the credit investigation.

Documentation of any initial payment shall be retained by the lender in

the loan file.

\(b\) Manufactured home purchase loans. In the case of a manufactured
home

purchase loan, the borrower shall make a minimum cash downpayment of at

least five percent of the purchase price of the home. The borrower\'s

equity in an existing manufactured home and any movable appurtenances

may be traded-in on a new home and accepted in lieu of full or partial

cash downpayment, but without any cash payment to the borrower. The

existing manufactured home being traded-in shall be clearly identified,

and the borrower\'s equity in the home shall be based upon the retail

value of the home and appurtenances (as determined by a HUD-approved

appraisal), less the total of all loans outstanding on the home and

appurtenances.

\(c\) Manufactured home lot loans. In the case of a manufactured home
lot

loan, the borrower shall make a minimum cash downpayment of at least

five percent of the total of the purchase price and development costs

for the lot.

\(d\) Combination loans. In the case of a combination loan, the borrower
shall

make a minimum cash downpayment of at least five percent of the purchase

price of the manufactured home and lot. If the borrower already owns a

manufactured home or a lot on which a manufactured home is to be placed,

the borrower\'s equity in such home or lot may be accepted in lieu of

full or partial cash downpayment on a combination loan, but without any

cash payment to the borrower.

[]{#__RefHeading___Toc167872330 .anchor}**201.24 Security
requirements**. \<[TOP](#_top)\>

\(a\) Property improvement loans.

\(1\) Any property improvement loan in excess of \$7,500 shall be
secured

by a recorded lien on the improved property. The lien shall be

evidenced by a mortgage or deed of trust, executed by the borrower

and all other owners in fee simple. If the borrower is a lessee,

the borrower and all owners in fee simple must execute the mortgage

or deed of trust. If the borrower is purchasing the property under

a land installment contract, the borrower, all owners in fee

simple, and all intervening contract sellers must execute the

mortgage or deed of trust. The lien need not be a first lien on the

property; however, the lien securing the Title I loan must have

priority over any lien securing an uninsured loan made at the same

time and in connection with the same property, unless the uninsured

loan is a first mortgage loan for the purchase or refinancing of

the property.

\(2\) Any property improvement loan for \$7,500 or less (other than a

manufactured home improvement loan) shall be similarly secured if,

including such loan, the total amount of all Title I loans on the

improved property is more than \$7,500.

\(3\) Manufactured home improvement loans need not be secured.

\(b\) Manufactured home loans. Any manufactured home loan shall be
secured by

a recorded lien on the home (or lot or home and lot, as appropriate),

its furnishings, equipment, accessories, and appurtenances. The lien

shall be a first lien, superior to any other lien on that property; and

shall be evidenced by a properly recorded financing statement, a

properly recorded security instrument executed by the borrower and any

other owner of the property, or another acceptable instrument, such as

a certificate of title issued by the State and containing a recitation

of the lender\'s lien interest in the manufactured home.

\(c\) Recording and perfection of security. The lender shall assure that
the

legal description of the property as recited in the security instrument

is accurate, and that the security instrument creates a valid and

enforceable lien on the property in the jurisdiction in which the

property is located. The security instrument shall be recorded and

perfected in the manner specified by applicable State law in the State

where the property is located.

\(d\) Substitution or subordination of security. The Secretary may
approve

substitution or subordination of security where the security value will

not be impaired or reduced.

\(e\) Release of liability or lien. The lender shall not release the
borrower

or any co-maker or co-signer from any liability under a note or from any

lien securing a loan insured under this part without the prior approval

of the Secretary.

[]{#__RefHeading___Toc167872331 .anchor}**201.25 Charges to borrower to
obtain loan**. \<[TOP](#_top)\>

\(a\) Fees and charges that may be financed in a property improvement
loan.

The Secretary will establish a list of fees and charges that may be

included in a property improvement loan. Such fees and charges shall

have been incurred in connection with the origination of the loan,

3-11 6/96

1060.2 REV-6

and their inclusion shall not increase the total principal obligation

beyond the maximum loan amounts in \' 201.10.

\(b\) Fees and charges that may be financed in a manufactured home loan.
The

Secretary will establish a list of fees and charges that may be included

in a manufactured home loan. Such fees and charges shall have been

incurred in connection with the origination of the loan, and their

inclusion shall not increase the total principal obligation beyond the

maximum loan amounts in \' 201.10.

\(c\) Fees and charges that may not be financed. The Secretary will
establish

a list of fees and charges incurred by the lender that may be collected

from the borrower in the initial payment, but may not be included in the

loan amount or otherwise financed or advanced by the dealer, the

manufacturer, or any other party to the loan transaction.

\(d\) Fees and charges that may not be paid. Neither the lender nor the

borrower may pay a referral fee to any dealer, home manufacturer,

contractor, supplier, real estate broker, loan broker, or any other

party in connection with the origination of a loan insured under this

part.

[]{#__RefHeading___Toc167872332 .anchor}**201.26 Conditions for loan
disbursement**. \<[TOP](#_top)\>

\(a\) Property improvement loans. The lender shall comply with the
following

applicable requirements before disbursing the proceeds of a property

improvement loan.

\(1\) The lender shall ensure that the following conditions are met:

\(i\) The borrower is eligible for a property improvement loan in

accordance with \' 201.20(a)(1) or (2); and

\(ii\) The interest of the borrower in the property is valid, through

such title or other evidence as is generally acceptable to

prudent lending institutions and leading attorneys in the

community in which the property is situated.

\(2\) The proposed use of the loan proceeds shall be documented in

accordance with the requirements of \' 201.20(b)(1).

\(3\) Where the proceeds are to be used for an historic preservation

loan, the lender shall ensure that the proposed improvements have

been approved by the State Historic Preservation Officer in

accordance with \' 201.20(c).

\(4\) Where the proceeds are to be used for a fire safety equipment
loan,

the lender shall ensure that the proposed improvements have been

approved by the State or local agency having jurisdiction over the

fire safety requirements of health care facilities in accordance

with 201.20(c).

\(5\) In the case of a dealer loan, the lender shall obtain a completion

certificate, on a HUD-approved form and signed by the borrower and

the dealer under applicable criminal and civil penalties for fraud

and misrepresentation, certifying that:

\(i\) The improvements are eligible and have been completed in

general accordance with the contract or cost estimate

furnished to the lender; and

\(ii\) The borrower has not obtained the benefit of and will not

receive any cash payment, rebate, cash bonus, sales

commission, or anything of more than nominal value from the

dealer as an inducement for the consummation of the

transaction.

\(6\) For any property improvement loan, the lender shall provide the

borrower with a written notice, to be signed by the borrower and

retained in the loan file, that:

\(i\) States that the loan will be insured by HUD and describes the

actions the Secretary may take to recover the debt if the

borrower defaults on the loan and an insurance claim is paid;

\(ii\) Constitutes the borrower\'s agreement to pay penalties and

administrative costs imposed by HUD as authorized by 31 U.S.C.

3717; and

\(iii\) In the case of a direct loan, constitutes an acknowledgement

of the borrower\'s post-disbursement obligation to furnish a

completion certificate and to permit an on-site inspection by

the lender or its agent in accordance with \'\' 201.40(o) and

(c).

\(b\) Manufactured home loans. The lender shall comply with the
following

applicable requirements before disbursing the proceeds of a manufactured

home loan.

\(1\) The lender shall ensure that the borrower is eligible for a

manufactured home loan in accordance with \' 201.21(a).

\(2\) The lender shall assure that the loan file is complete, and shall

obtain the following documents for retention in the loan file:

\(i\) A signed copy of the purchase contract between the borrower

and the dealer or seller;

\(ii\) A copy of the manufacturer\'s invoice, where the loan involves

the purchase of a new manufactured home;

\(iii\) Copies of itemized statements of other costs, fees and

charges, whether paid by the borrower or financed with the

loan proceeds; and

\(iv\) The note and security instrument and copies of all other

documents relating to the loan transaction.

\(3\) The lender shall obtain certifications from the borrower under

applicable criminal and civil penalties for fraud and

misrepresentation that:

\(i\) The manufactured home being financed with a manufactured home

purchase loan or combination loan will be occupied as the

borrower\'s principal residence;

\(ii\) Where the proceeds are for a manufactured home lot loan, the

borrower\'s manufactured home will be placed on the lot and

will be occupied as the borrower\'s principal residence within

six months after the date of the loan;

\(iii\) The initial payment required under \' 201.23 was made, and no

part of the initial payment was borrowed from or otherwise

advanced or paid to or for the benefit of the borrower by the

dealer or seller, the manufacturer, or any other party to the

transaction, and if any part of the initial payment was

obtained through a gift or loan, the source of the gift or

loan and the security for any such loan was disclosed on the

credit application;

\(iv\) While any portion of the loan obligation on a manufactured

home purchase loan is unpaid, the manufactured home may be

moved only to a new site in compliance with \'\' 201.21(c) and

(e), and only with the lender\'s prior approval;

\(v\) While any portion of the loan obligation on a combination loan

is unpaid, the manufactured home will not be moved to a new

site;

\(vi\) The borrower has paid the remaining unpaid balance on any

other manufactured home loan secured by a different property,

unless the prior approval of the Secretary is obtained for an

exception to this requirement; and

\(vii\) The borrower has not obtained the benefit of and will not

receive any cash payment, rebate, cash bonus, or anything of

more than nominal value from the manufacturer or dealer as an

inducement for the consummation of the transaction.

\(4\) For any manufactured home purchase loan or combination loan

involving the sale of a manufactured home by a dealer, the lender

shall obtain a placement certificate, on a HUD-approved form and

signed by the dealer under applicable criminal and civil penalties

for fraud and misrepresentation, certifying that:

\(i\) The manufactured homesite meets the requirements of \'

201.21(e);

\(ii\) The structural integrity of the manufactured home was

maintained during the process of transporting the home to the

borrower\'s homesite;

\(iii\) The manufactured home has been installed or erected on the

homesite in accordance with the manufacturer\'s requirements

for anchoring, support, stability and maintenance;

\(iv\) If the manufactured home is placed on a permanent foundation,

such foundation has been constructed in accordance with the

requirements of \'201.21(c)(3);

\(v\) The dealer has performed the inspection and tests required

under \' 201.21(c)(4) and has determined that the manufactured

home has sustained no structural damage or other defects

resulting from its transportation or installation, and all

plumbing, mechanical and electrical systems are fully

operational;

\(vi\) Any initial payment required under \' 201.23 was made by the

borrower, and no part of the initial payment was loaned,

advanced, or paid to or for the benefit of the borrower by

the manufacturer, dealer, or any other party to the loan

transaction; and

\(vii\) The borrower has not obtained the benefit of and will not

receive any cash payment, rebate, cash bonus, or anything of

more than nominal value from the manufacturer or dealer as an

inducement for the consummation of the transaction.

\(5\) The lender shall obtain and file the certifications by local

officials or a civil engineer which are required under \' 201.21(e)

to document the suitability of the manufactured homesite.

\(6\) For any direct manufactured home purchase loan or combination loan

involving the relocation of the manufactured home to a new homesite

owned or leased by the borrower, the lender (or an agent of the

lender that is not a manufactured home dealer) shall conduct a

site-of-placement inspection to verify that:

\(i\) The terms and conditions of the purchase contract have been

met;

\(ii\) The manufactured home and any itemized options and

appurtenances included in the purchase price of the home or to

be financed with the loan proceeds have been delivered and

installed; and

\(iii\) The manufactured home has been properly erected or installed

on the homesite without any apparent structural damage or

other serious defects resulting from its transportation or

installation, and all plumbing, mechanical and electrical

systems are fully operational.

\(7\) The lender shall provide the borrower with a written notice, to be

signed by the borrower and retained in the loan file, that:

\(i\) States that the loan will be insured by the HUD and describes

the actions the Secretary may take to recover the debt if the

borrower defaults on the loan and an insurance claim is paid;

and

\(ii\) Constitutes the borrower\'s agreement to pay penalties and

administrative costs imposed by HUD as authorized by 31 U.S.C.

3717\.

\(8\) Where a manufactured home purchase loan involves a manufactured

home which is to be located on Indian trust or otherwise restricted

lands, the lender shall obtain written permission from the trustee

or the tribal authority who controls the site for the lender to

repossess the home in the event of default by the borrower and

acceleration of the loan.

[]{#__RefHeading___Toc167872333 .anchor}**201.27 Requirements for dealer
loans**. \<[TOP](#_top)\>

\(a\) Dealer approval and supervision.

\(1\) The lender shall approve only those dealers which, on the basis of

experience and information, the lender considers to be reliable,

financially responsible, and qualified to satisfactorily perform

their contractual obligations to borrowers and to comply with the

requirements of this part. However, in no case shall the lender

approve a dealer that is unable to meet the following minimum

qualifications:

\(i\) A property improvement dealer shall have and maintain a net

worth of not less than \$25,000 in assets acceptable to the

Secretary, and shall have demonstrated business experience as

a property improvement contractor or supplier; and

\(ii\) A manufactured home dealer shall have and maintain a net worth

of not less than \$50,000 in assets acceptable to the

Secretary, and shall have demonstrated business experience in

manufactured home retail sales.

\(2\) The lender\'s approval of a dealer shall be documented on a MUD-

approved form, signed and dated by the dealer and the lender under

applicable criminal and civil penalties for fraud and

misrepresentation, and containing information supplied by the

dealer on its trade name, places of business, type of ownership,

type of business, and names and employment history of the owners,

principals, officers, and salespersons. The dealer shall furnish a

current financial statement prepared by someone who is independent

of the dealer and is qualified by education and experience to

prepare such statements, together with such other documentation as

the lender deems necessary to support its approval of the dealer.

The lender shall obtain a commercial credit report on the dealer

and consumer credit reports on the owners, principals, and officers

of the dealership.

\(3\) The lender shall require each dealer to apply annually for

Re-approval. The dealer shall furnish the same documentation as is

required under paragraph (a)(2) of this section to support its

application for re-approvaI. In no case shall the lender re-approve

a dealer that is unable to meet the minimum net worth requirements

in paragraph (a)(1).

\(4\) The lender shall supervise and monitor each approved dealer\'s

activities with respect to loans insured under this part. The

lender shall visit each approved dealer\'s places of business at

least once in every six months to review its Title I performance

and compliance. The lender shall maintain a file on each approved

dealer which contains the executed dealer approval form and

supporting documentation required under paragraph (a)(2) of this

section, together with information on the lender\'s experience with

Title I loans involving the dealer. Each dealer file shall contain

information about borrower defaults on Title I loans over time,

records of completion or site-of-placement inspections conducted by

the lender or its agent, copies of letters concerning borrower

complaints and their resolution, and records of the lender\'s

periodic review visits to the dealer\'s premises. The lender may

also require that the dealer furnish records on individual loan

transactions, if needed to enable the lender to review the dealer\'s

Title I performance and compliance.

\(5\) If a dealer does not satisfactorily perform its contractual

obligations to borrowers, does not comply with Title I program

requirements, or is unresponsive to the lender\'s supervision and

monitoring requirements, the lender shall terminate the dealer\'s

approval and immediately notify the Secretary with written

documentation of the facts. A dealer whose approval is terminated

under these circumstances shall not be re-approved without prior

written approval from the Secretary. The lender may in its

discretion terminate the approval of a dealer for other reasons at

any time.

\(6\) The lender shall require each approved (or re-approved) dealer to

provide written notification of any material change in its trade

name, places of business, type of ownership, type of business, or

principal individuals who control or manage the business. The

dealer shall furnish such notification to the lender within 30 days

after the date of any material change.

\(7\) As a condition of manufactured home dealer approval (or

Re-approval), the lender may require a manufactured home dealer to

execute a written agreement that, if requested by the lender, the

dealer will resell any manufactured home repossessed by the lender

under a Title I insured manufactured home purchase loan approved by

the lender as a dealer loan involving that dealer.

\(b\) Provision for full or partial recourse. In the case of a dealer-

originated manufactured home purchase loan or combination loan, the

lender and the dealer may agree to a provision in the loan

documents for partial or full recourse against the dealer, to

reduce or eliminate the lender\'s loss in the event of foreclosure

or repossession. Such recourse provision shall specify that, for a

default occurring within a period of not more than three years from

the date of the loan, the dealer shall reimburse the lender for a

fixed percentage of the unpaid amount of the loan obligation, after

deducting the proceeds from the sale of the property and any

amounts received or retained by the lender after the date of

default. However, the extent of the dealer\'s liability may not

exceed 100 percent of the unpaid amount of the loan obligation

prior to such deductions. When a claim is filed, the lender shall

notify the Secretary if the loan was subject to a recourse

agreement and whether the recourse agreement has been honored. If

without the lender\'s approval a dealer has failed to honor its

recourse obligation, the lender shall notify the Secretary and

shall assign the recourse obligation to the Secretary in filing an

insurance claim.

[]{#__RefHeading___Toc167872334 .anchor}**201.28 Flood and hazard
insurance, and Coastal Barriers properties**. \<[TOP](#_top)\>

\(a\) Flood insurance. No property improvement loan or manufactured home
loan

shall be eligible for insurance under this part if the property securing

repayment of the loan is located in a special flood hazard area

identified by the Federal Emergency Management Agency (FEMA), unless

flood insurance on the property is obtained by the borrower in

compliance with section 102 of the Flood Disaster Protection Act of 1973

(42 U.S.C. 4012a). Such insurance shall be obtained at any time during

the term of the loan that the lender determines that the secured

property is located in a special flood hazard area identified by FEMA,

and shall be maintained by the borrower for the remaining term of the

loan, or until the lender determines that the property is no longer in

a special flood hazard area, or until the property is repossessed or

foreclosed upon by the lender. The amount of such insurance shall be at

least equal to the unpaid balance of the Title I loan, and the lender

shall be named as the loss payee for flood insurance benefits.

\(b\) Hazard insurance. No manufactured home purchase loan or
combination

loan shall be eligible for insurance under this part unless hazard

insurance on the manufactured home is obtained by the borrower and the

lender is named as a loss payee of insurance benefits. Such insurance

shall be maintained by the borrower for the full term of the loan or

until the property is repossessed or foreclosed by the lender, and in an

amount at least equal to the unpaid balance of the loan, except that the

amount of insurance coverage shall be not less than the actual cash

value of the home where State law precludes a higher amount. If the

borrower fails to maintain such insurance, the lender shall obtain it at

the borrower\'s expense. If the home is not insured against hazards and

sustains damage which would normally be covered by such insurance during

the borrower\'s ownership, the appraised value of the home for claim

purposes will be adjusted in accordance with \' 201.51(b)(3). Upon

acquiring title to the property through repossession or foreclosure, the

lender shall maintain hazard insurance upon the property in the amount

prescribed above until its disposition and sale.

\(c\) Coastal barriers properties. No Title I insurance shall be made

available under this part for any property improvement loan or

manufactured home loan except pursuant to a loan application approved

before October 18, 1982, with respect to any property within the Coastal

Barriers Resources System established by the Coastal Barriers Resources

Act (16 U.S.C. 3501).

[]{#__RefHeading___Toc167872335 .anchor}**201.29 Ineligible
participants**. \<[TOP](#_top)\>

No loan may be insured under this part where the lender has been advised
in

writing by HUD or otherwise knows that any participant in the
transaction as

a dealer, home manufacturer, contractor, supplier, or broker, or as its
agent

or representative, has been suspended or debarred, or has otherwise been

determined by HUD to be ineligible to participate in the Title I
program.

#  SUBPART D - INSURANCE OF FUNDS

[]{#__RefHeading___Toc167872337 .anchor}**201.30 Reporting of loans for
insurance**. \<[TOP](#_top)\>

\(a\) Date of reports. The lender shall transmit a loan report on the

prescribed form to the Secretary within 31 days from the date of the

loan\'s origination or purchase from a dealer or loan correspondent. Any

loan refinanced under this part shall similarly be reported on the

prescribed form within 31 days from the date of refinancing. When a loan

insured under this part is transferred to another lender without

recourse, guaranty, guarantee, or repurchase agreement, a report on the

prescribed form shall be transmitted to the Secretary within 31 days

from the date of the transfer. No report is required when a loan insured

under this part is transferred with recourse or under a guaranty,

guarantee, or repurchase agreement.

\(b\) Late reports. The Secretary may accept a late report on a loan
where the

lender certifies that the obligation is not in default.

\(c\) Electronic loan reporting. With the prior approval of the
Secretary, the

lender may use electronic transmission to report loans for insurance in

accordance with paragraph (a) of this section.

[]{#__RefHeading___Toc167872338 .anchor}**201.31 Insurance charge**.
\<[TOP](#_top)\>

\(a\) Insurance charge. For each eligible property improvement loan and

manufactured home loan reported and acknowledged for insurance, the

lender shall pay to the Secretary an insurance charge equal to 0.50

percent of the loan amount, multiplied by the number of years of the

loan term. The insurance charge shall be paid in the manner prescribed

in paragraph (b) of this section; however, no charge shall be made for

a period of 14 days or less, and a charge for a full month shall be made

for a period of more than 14 days. There shall be no abatement or refund

of an insurance charge except as provided in paragraph (e) of this

section.

\(b\) Payment of insurance charge.

\(1\) For any loan having a maturity of 25 months or less, payment of
the

entire insurance charge prescribed in paragraph (a) of this section

is due on the 25th calendar day after the date the Secretary

acknowledges the loan report.

\(2\) For any loan having a maturity in excess of 25 months, payment of

the insurance charge shall be made in annual installments, with the

first installment due on the 25th calendar day after the date the

Secretary acknowledges the loan report, and the second and

succeeding installments due on the 25th calendar day after the date

of billing by the Secretary. Annual installments shall be paid

according to the following schedule:

\(i\) For any property improvement loan having a maturity in excess

of 25 months, payment shall be made in annual installments of

0.50 percent of the loan amount until the insurance charge is

paid.

\(ii\) For any manufactured home loan having a maturity in excess of

25 months but not more than 144 months, payment shall be made

in annual installments of 1.00 percent of the loan amount for

the first three years of the loan term, 0.75 percent of the

loan amount for the next two years, and 0.50 percent of the

loan amount for all succeeding years until the insurance

charge is paid.

\(iii\) For any manufactured home loan having a maturity in excess of

144 months but not more than 192 months, payment shall be made

in annual installments of 1.00 percent of the loan amount for

the first four years of the loan term, 0.75 percent of the

loan amount for the next three years, and 0.50 percent of the

loan amount for all succeeding years until the insurance

charge is paid.

\(iv\) For any manufactured home loan having a maturity in excess of

192 months, payment shall be made in annual installments of

1.00 percent of the loan amount for the first five years of

the loan term, 0.75 percent of the loan amount for the next

four years, and 0.50 percent of the loan amount for all

succeeding years until the insurance charge is paid.

\(3\) All insurance charges are considered earned when paid.

\(4\) The Secretary may require that loan insurance charges be remitted

electronically. Instructions implementing this requirement shall be

communicated to all affected lenders.

\(c\) Penalty charge and interest. Insurance charges not received from
the

lender by the due date specified in paragraph (b) of this section shall

be assessed a penalty charge of four percent of the amount of the

payment. Insurance charges received from the lender more than 30 days

after the due date specified in paragraph (b) of this section shall also

be assessed daily interest the current United States Treasury value of

funds rate, as published periodically in the Federal Register. However,

no penalty charge or daily interest shall be assessed if the Secretary

fails to acknowledge receipt of the loan report or fails to issue a

proper billing to the lender for the insurance charges.

\(d\) Adjustment on notes transferred. Where there is a transfer of loan

obligations between lenders and the insurance charges on such

obligations have already been paid, any adjustment of such charges shall

be made by the lenders involved. Any unpaid installments of the

insurance charge shall be paid by the purchasing lender.

\(e\) Refund or abatement of insurance charges. A lender shall be
entitled to

a refund or abatement of insurance charges only in the following

instances:

\(1\) Where the loan obligation has been refinanced, the unearned
portion

of the charge on the original obligation shall be credited to the

charge on the refinanced loan.

\(2\) Where the loan obligation is prepaid in full or an insurance claim

is filed, charges falling due after such prepayment or claim shall

be abated.

\(3\) When a loan (or portion thereof) is found to be ineligible for

insurance, charges paid on the ineligible portion shall be

refunded, except where the Secretary determines that there was

fraud or misrepresentation by the lender in the loan transaction.

Such refund shall be made only if a claim is denied by the

Secretary or the ineligibility is reported by the lender promptly

upon discovery and confirmed by the Secretary. In no event shall a

charge be refunded on the basis of loan ineligibility where the

application for refund is made after the loan is paid in full. If

a loan or claim has been denied and is subsequently resubmitted,

the refunded amount of the insurance charge plus any accrued

insurance charge shall be repaid.

\(f\) Lender passing insurance charge on to borrower. The insurance
charge may

be passed on to the borrower, provided that such charge is fully

disclosed to the borrower.

[]{#__RefHeading___Toc167872339 .anchor}**201.32 Insurance coverage
reserve account**. \<[TOP](#_top)\>

\(a\) Establishment. The Secretary shall establish an insurance coverage

reserve account for each lender. The amount of insurance coverage in

each reserve account shall equal 10 percent of the amount disbursed,

advanced, or expended by the lender in originating or purchasing

eligible loans registered for insurance under this part, less the amount

of all insurance claims approved for payment in connection with losses

on such loans.

\(b\) Transfer of insured loans. The lender shall not sell, assign or

otherwise transfer any insured loan or loan reported for insurance to a

transferee lender not approved to originate and purchase Title I loans

under a valid Title I contract of insurance. Nothing contained herein

shall be construed to prevent the pledging of such a loan as collateral

security under a trust agreement, or otherwise, in connection with a

bona fide loan transaction.

\(c\) Transfer of insurance coverage. Not more than \$5,000 in insurance

coverage shall be transferred to or from a lender\'s reserve account

during any fiscal year (October 1 through September 30) without the

prior approval of the Secretary. Except in cases involving the sale,

assignment or transfer of loans sold with recourse or under a guaranty,

guarantee or repurchase agreement, the Secretary shall transfer

insurance coverage to or from a lender\'s reserve account to accompany

the loan transfers reported by lenders under § 201.30.

\(1\) In all cases involving the sale, assignment or transfer of loans

sold without recourse, guaranty, guarantee, or repurchase

agreement, the Secretary shall transfer insurance coverage to the

reserve account established for the transferee lender in an amount

equal to 10 percent of the actual purchase price or the net unpaid

principal balance, whichever is lesser, but not to exceed the

amount of insurance coverage in the transferor lender\'s reserve

account prior to the transfer. Insurance coverage shall be added to

the existing amount of insurance coverage in the transferee

lender\'s reserve account. The Secretary may transfer insurance

coverage with earmarking when a determination is made that it is in

the Secretary\'s interest to do so.

\(2\) In cases involving the transfer of loans sold with recourse or

under a guaranty, guarantee or repurchase agreement, no insurance

coverage will be transferred and no reports will be required.

\(3\) An existing insured property improvement loan or manufactured home

loan may not be refinanced by a lender different from the

originating or purchasing lender of record, unless the loan has

been sold, assigned, or transferred to the new lender under

paragraph (c) of this section and the Secretary has transferred

insurance coverage for the loan under the applicable requirements

of this paragraph.

\(d\) Recovery shall not affect insurance coverage reserve account.
Amounts

which may be recovered by the Secretary after payment of an insurance

claim shall not be added to the amount of insurance coverage remaining

in a lender\'s reserve account.

# SUBPART E - LOAN ADMINISTRATION

[]{#__RefHeading___Toc167872341 .anchor}**201.40 Post-disbursement loan
requirements**. \<[TOP](#_top)\>

\(a\) Discovery of misstatements of fact. If, after a loan has been
made,

the lender discovers any material misstatement of fact or that the

loan proceeds have been misused by the borrower, dealer or any other

party, it shall promptly report this to the Secretary. In such case,

the insurance of the loan shall not be affected unless such material

misstatement of fact or misuse of loan proceeds was caused by or was

knowingly sanctioned by the lender or its employees (see §

201.31(e)(3)), provided that the validity of any lien on the property

has not been impaired.

\(b\) Requirements on direct property improvement loans.

\(1\) After receiving the proceeds of a direct property improvement

loan, and after the work is completed to the borrower\'s

satisfaction, the borrower shall submit a completion certificate

to the lender, on a HUD-approved form and signed by the borrower

under applicable criminal and civil penalties for fraud and

misrepresentation, certifying that:

\(i\) The improvements have been completed;

\(ii\) The amount borrowed has been spent on improvements eligible

under § 201.20(b) and in accordance with the contract or

cost estimate furnished to the lender prior to disbursement

of the loan proceeds; and

\(iii\) The borrower has not obtained the benefit of and will not

receive any cash payment, rebate, cash bonus, sales

commission, or anything of more than nominal value from any

contractor or supplier as an inducement for the consummation

of the loan transaction.

\(2\) The borrower shall submit the completion certificate promptly

upon the work\'s completion, but not later than six months after

the disbursement of the loan proceeds, with one six-month

extension if necessary. If the borrower fails to submit the

completion certificate within these time limits, an on-site

inspection shall be conducted in accordance with paragraph (c) of

this section.

\(3\) The borrower is not required to submit a completion certificate

when the property improvement loan is made by or on behalf of a

State or local government agency or a nonprofit organization,

the loan proceeds are held in an escrow account pending

completion of the improvements, and the loan proceeds are

disbursed from the escrow account in stages, with the written

approval of the borrower and based upon the percentage of work

completed.

\(c\) Inspection requirement on property improvement loans. The lender
or

its agent shall conduct an on-site inspection on any property

improvement loan where the principal obligation is \$7,500 or more, and

on any direct property improvement loan where the borrower fails to

submit a completion certificate as required under paragraph (b) of

this section. On a dealer loan, the inspection shall be completed

within 60 days after the date of disbursement. On a direct loan, the

inspection shall be completed within 60 days after receipt of the

completion certificate, or as soon as the lender determines that the

borrower is unwilling to cooperate in submitting the completion

certificate. The purpose of the inspection is to verify the

eligibility of the improvements and whether the work has been

completed. If the borrower will not cooperate in permitting an on-site

inspection, the lender shall report this fact to the Secretary.

\(d\) Inspection requirement on dealer manufactured home loans. For any

manufactured home purchase loan or combination loan involving the sale

of a manufactured home by a dealer, the lender (or an agent of the

lender that is not a manufactured home dealer) shall conduct a site-

of-placement inspection within 60 days after the date of disbursement

to verify that:

\(1\) The terms and conditions of the purchase contract have been met;

\(2\) The manufactured home and any itemized options and appurtenances

included in the purchase price of the home or financed with the

loan proceeds have been delivered and installed; and

\(3\) The placement certificate executed by the borrower and the dealer

is in order.

[]{#__RefHeading___Toc167872342 .anchor}**201.41 Loan servicing**.
\<[TOP](#_top)\>

\(a\) Generally. The lender shall service loans in accordance with
accepted

practices of prudent lending institutions. It shall have adequate

facilities for contacting the borrower in the event of default, and

shall otherwise exercise diligence in collecting the amount due. The

lender shall remain responsible to the Secretary for proper collection

efforts, even though actual loan servicing and collection may be

performed by an agent of the lender. The lender shall have an

organized means of identifying, on a periodic basis, the payment

status of delinquent loans to enable collection personnel to initiate

and follow-up on collection activities, and shall document its records

to reflect its collection activities on delinquent loans.

\(b\) Partial payments. The lender shall accept any partial payment

(inclusive of late charges) under an executed modification agreement

or an acceptable repayment plan, and either apply it to the borrower\'s

account or hold it in a trust account pending disposition. When

partial payments held for disposition aggregate a full monthly

installment, they shall be applied to the borrower\'s account, thus

advancing the date of the oldest unpaid installment. If a partial

payment is received more than 60 days after the date of default and

was not submitted under a repayment plan or a modification agreement,

the partial payment may be returned to the borrower, with a letter of

explanation.

[]{#__RefHeading___Toc167872343 .anchor}**201.42 Bankruptcy, insolvency
or death of borrower**. \<[TOP](#_top)\>

\(a\) Bankruptcy or insolvency. The lender shall file a proof of claim
with

the court having jurisdiction when the lender has timely information

that a borrower is involved in bankruptcy or insolvency proceedings,

except that a proof of claim need not be filed if the court notifies

the lender that the borrower has no assets and a proof of claim should

not be filed. The notice of bankruptcy and a copy of the proof of

claim (or the notice from the court that a proof of claim is not

required) shall be retained in the loan file.

\(b\) Death of a borrower. The lender shall file a proof of claim with
the

court having jurisdiction when the lender has timely information that

a borrower is deceased, unless the lender determines that there will

not be a probate proceeding. A copy of the proof of claim (or

documentation as to why a proof of claim was not filed) shall be

retained in the loan file.

\(c\) Responsibility of the lender after insurance claim is filed. After
the

Secretary pays an insurance claim, the Secretary will notify the

bankruptcy or probate court, as appropriate, that the loan has been

assigned to the United States and will request substitution as the

party to whom the claim is owed. Until the insurance claim is paid,

the lender shall take all steps necessary to protect the interest of

the holder of the note in any bankruptcy or probate proceeding.

[]{#__RefHeading___Toc167872344 .anchor}**201.43 Administrative reports
and examinations**. \<[TOP](#_top)\>

The Secretary may call upon a lender for any reports deemed necessary in

connection with the regulations in this part and may inspect the loan

files, records, books and accounts of the lender as they pertain to the

loans reported for insurance.

# SUBPART F - DEFAULT UNDER THE LOAN OBLIGATION

[]{#__RefHeading___Toc167872346 .anchor}**201.50 Lender efforts to cure
the default**.

\(a\) Personal contact with the borrower before acceleration and
foreclosure

or repossession. The lender shall undertake foreclosure or repossession

of the property securing a Title I loan that is in default only after

the lender has serviced the loan in a timely manner and with diligence

in accordance with the requirements of this part, and has taken all

reasonable and prudent measures to induce the borrower to bring the loan

account current. Before taking action to accelerate the maturity of the

loan, the lender or its agent shall contact the borrower and any co-

maker or co-signer, either in a face-to-face meeting or by telephone, to

discuss the reasons for the default and to seek its cure. If the

borrower and the co-makers or co-signers cannot be located, will not

discuss the default, or will not agree to its cure, the lender may

proceed to take action under paragraph (b) of this section. The lender

shall document the results of its efforts to contact the borrower and

any co-maker or co-signer, and shall place in the loan file a copy of

any modification agreement or repayment plan that has been offered.

\(b\) Notice of default and acceleration. Unless the borrower cures the

default or agrees to a modification agreement or repayment plan, the

lender shall provide the borrower with written notice that the loan is

in default and that the loan maturity is to be accelerated. In addition

to complying with applicable State or local notice requirements, the

notice shall be sent by certified mail and shall contain:

\(1\) A description of the obligation or security interest held by the

lender;

\(2\) A statement of the nature of the default and of the amount due to

the lender as unpaid principal and earned interest on the note as

of the date 30 days from the date of the notice;

\(3\) A demand upon the borrower either to cure the default (by bringing

the loan current or by refinancing the loan) or to agree to a

modification agreement or a repayment plan, by not later than the

date 30 days from the date of the notice;

\(4\) A statement that if the borrower fails either to cure the default

or to agree to a modification agreement or a repayment plan by the

date 30 days from the date of the notice, then, as of the date 30

days from the date of the notice, the maturity of the loan is

accelerated and full payment of all amounts due under the loan is

required;

\(5\) A statement that if the default persists the lender will report
the

default to an appropriate credit reporting agency; and

\(6\) Any other requirements prescribed by the Secretary.

\(c\) Reinstatement of the loan. The lender may rescind the acceleration
of

maturity after full payment is due and reinstate the loan only if the

borrower brings the loan current, executes a modification agreement, or

agrees to an acceptable repayment plan.

\(d\) Notice to credit reporting agency. If the loan maturity is
accelerated

and the loan is not reinstated, the lender shall report the default to

an appropriate credit reporting agency.

[]{#__RefHeading___Toc167872347 .anchor}**201.51 Proceeding against the
loan security**. \<[TOP](#_top)\>

\(a\) Property improvement loans.

\(1\) After acceleration of maturity on a secured property improvement

loan, the lender may either proceed against the loan security under

its Title I security instrument or make claim under its contract of

insurance. If the lender proceeds against the loan security, it may

submit an insurance claim only if it complies with the requirements

of paragraph (a)(2) of this section.

\(2\) The lender may proceed against the secured property under its
Title

I security instrument and later submit a claim under its contract

of insurance only with the prior approval of the Secretary. The

Secretary\'s decision will be based upon all relevant factors,

including but not limited to the appraised value and the amount of

all outstanding loan obligations on the property, the estimated

costs of foreclosure and disposition, and the anticipated time to

dispose of the property. In proceeding against the secured

property, the lender shall comply with all applicable State and

local laws, and shall take all actions necessary to preserve its

rights, if any, to obtain a valid and enforceable deficiency

judgment against the borrower.

\(3\) After acceleration of maturity on a defaulted unsecured property

improvement loan, the lender may submit a claim under its contract

of insurance.

\(b\) Manufactured home loans.

\(1\) After acceleration of maturity on a defaulted manufactured home

loan, the lender shall proceed against the loan security by

foreclosure or repossession, as appropriate, in compliance with all

applicable State and local laws, and shall acquire good, marketable

title to the property securing the loan. The lender shall also take

all actions necessary under State and local law to preserve its

rights, if any, to obtain a valid and enforceable deficiency

judgment against the borrower.

\(2\) Prior to foreclosure or repossession, the lender or its agent
shall

make a visual inspection of the property and prepare a report on

its condition for placement in the loan file. If the lender

determines that the property has been abandoned, the lender may

take such steps as are permitted under State or local law to

repossess or foreclose upon the property, without waiting for the

notice period under § 201.50(b) to run.

\(3\) The lender shall obtain a HUD-approved appraisal of the property
as

soon after repossession as possible, or earlier with the permission

of the borrower. This appraisal shall be performed on the homesite,

unless the site owner requires that the home be removed before the

appraisal can be performed, and it should reflect the retail value

of comparable manufactured homes in similar condition and in the

same geographic area where the repossession occurred. When the

manufactured home is without hazard insurance and has sustained, at

any time prior to the sale or disposition of the home, damage which

would normally be covered by such insurance, the lender shall

report this situation in submitting an insurance claim, and the

appraised value shall be based upon the retail value of comparable

homes in good condition and in the same geographic area, without

any deduction for such damage.

[]{#__RefHeading___Toc167872348 .anchor}**201.52 Acquisition by
voluntary conveyance or surrender**. \<[TOP](#_top)\>

The lender may accept a voluntary conveyance of title to or ownership of
the

property securing a manufactured home loan which is in default, provided
that

\(a\) the lender accepts the conveyance in full satisfaction of the
borrower\'s

obligation, and (b) no claim is submitted under its contract of
insurance.

The lender may accept voluntary surrender of the property without

satisfaction of the borrower\'s obligation, provided that if the lender

intends thereafter to submit a claim under its contract of insurance,
the

lender shall acquire title to or ownership of the property and then
dispose

of and sell the property in compliance with State and local law, so as
to

assure that it can assign a valid and enforceable obligation, including
any

deficiency against the borrower, to the Secretary when submitting its
claim.

If the tender accepts a voluntary conveyance of title or a voluntary

surrender of the property, the notice of default and acceleration under

§ 201.50(b) shall not be required.

[]{#__RefHeading___Toc167872349 .anchor}**201.53 Disposition of
manufactured home loan property**. \<[TOP](#_top)\>

Where the lender obtains title to property securing a manufactured home
loan

by repossession or foreclosure, the property shall be sold for the best
price

obtainable before making an insurance claim. In the case of a
combination

loan, the manufactured home and lot shall be sold in a single
transaction and

the manufactured home may not be removed from the lot, unless the prior

approval of the Secretary is obtained for a different procedure. The
best

price obtainable shall be the greater of:

\(a\) The actual sales price of the property, after deducting the cost
of

repairs, furnishings, and equipment needed to make the property

marketable, and after deducting the cost of transportation, set-up, and

anchoring if the manufactured home is moved to a new homesite; or

\(b\) The appraised value of the property before repairs (as determined
by a

HUD-approved appraisal obtained in accordance with \' 201.51(b)(3)).

[]{#__RefHeading___Toc167872350 .anchor}**201.54 Insurance claim
procedure**. \<[TOP](#_top)\>

\(a\) Claim application. A claim for reimbursement for loss on any
eligible

loan shall be made on a HUD-approved form, executed by a duly qualified

officer of the lender under applicable criminal and civil penalties for

fraud and misrepresentation. The insurance claim shall be fully

documented and itemized, and shall be accompanied by all documents and

materials required by the Secretary for claim review. The claim

submission shall contain original copies of all notes, security

instruments, assumption agreements, releases of liability for repayment

of the loan, judgments obtained by the lender against the borrower, and

any related documents and forms, except where State or local law

requires their retention by the tender or a governmental body such as a

court. As appropriate, the claim application shall be supported by the

following:

\(1\) Documentation of the lender\'s efforts to effect recourse against

any dealer in accordance with any recourse agreement under \'

201.27(b) between the lender and the dealer and contained in the

loan documents;

\(2\) Certification under applicable criminal and civil penalties for

fraud and misrepresentation that the lender has complied with all

applicable State and local laws in carrying out any foreclosure or

repossession, including copies of all notices served upon the

borrower or published in connection with such foreclosure or

repossession; and

\(3\) Where a borrower has declared bankruptcy or insolvency or is

deceased, copies of the documentation required to be retained in

the loan file under \' 201.42.

\(b\) Maximum claim period.

\(1\) An insurance claim shall be filed not later than the following

dates:

\(i\) For property improvement loans - nine months after the date of

default.

\(ii\) For manufactured home loans - three months after the date of

sale of the property securing the loan, but not to exceed 18

months after the date of default.

\(2\) The Secretary may extend the claim filing period in a particular

case, but only where the lender shows clear evidence that the delay

in claim filing was in the interest of the Secretary or was caused

by one of the following:

\(i\) Litigation related to the loan;

\(ii\) Management control of the lender or the Title I loan portfolio

having been assumed by a Federal or State agency; or

\(iii\) The borrower had experienced a loss of income or other

financial difficulties directly attributable to a major

disaster declared by the President, and additional time was

needed to provide forbearance on a property improvement loan.

\(3\) If a borrower is a \"person in military service\" as that term is

defined in the Soldiers\' and Sailors\' Civil Relief Act of 1940 and

is in default on a loan insured under this part, any period of

military service after the date of default shall be excluded in

computing the maximum time period for filing an insurance claim.

\(c\) Resubmitted and supplemental claims.

\(1\) Any insurance claim which is resubmitted with an appeal of a claim

denial or a request for a waiver of the regulations in accordance

with \' 201.5(a) shall be filed within six months after the date of

the claim denial.

\(2\) Any supplemental insurance claim shall be filed within six months

after the date of payment on the initial claim. A reprocessing fee,

in an amount prescribed by the Secretary, will be charged for any

supplemental claim.

\(d\) Assignment of lender\'s rights to the United States. Upon the
filing of

the insurance claim, the lender shall assign its entire interest in the

loan note (or in a judgment in lieu of the note), in any security held,

and in any claim filed in probate, bankruptcy or insolvency proceedings,

to the United States of America. The assignment shall be made in the

form provided in paragraph (f) of this section, provided that if this

form is not valid or generally acceptable in the jurisdiction involved,

a form which is valid and generally acceptable in the jurisdiction where

the judgment or security was taken shall be used. If the security

interest has been assigned to the United States, the assignment shall be

recorded in that jurisdiction prior to filing the insurance claim,

unless the Secretary determines that recordation by the lender in that

jurisdiction is impractical.

\(e\) Valid and enforceable obligation when assigned. The loan
obligation

evidenced by the note must be both valid and enforceable against the

debtor at the time the note is assigned to the United States of America.

If the Secretary has reason to believe that the obligation may not be

either valid or enforceable against the borrower, the Secretary may

either deny the claim and reassign the loan note to the lender, or

require the lender to repurchase the paid claim and accept reassignment

of the note. The lender will be notified of the reasons for the claim

denial or repurchase. If the lender subsequently obtains a valid and

enforceable judgment against the borrower for the unpaid balance of the

loan, the lender may resubmit the claim with an assignment of the

judgment.

\(f\) Form of assignment. A lender shall use the following form of
assignment,

or one generally acceptable in the jurisdiction involved, properly

dated, to assign the lender\'s entire interest in a loan note, judgment,

real estate mortgage, deed of trust, conditional sales contract, chattel

mortgage, mechanic\'s lien, or any security, in making an insurance

claim:

All right, title, and interest of the undersigned is hereby

assigned (without warranty, except that the loan qualifies for

insurance) to the United States of America (HUD).

(Financial Institution)\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

By:
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Title:
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Date:
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

If the assignment does not appear on the note or other instrument that

is assigned, it shall be duly executed on an allonge which is attached

to such note or other instrument.

\(g\) Denial of insurance claim. The Secretary may deny a claim for
insurance

in whole or in part based upon a violation of these regulations, unless

a waiver of compliance with the regulations is granted under \' 201.5.

\(h\) Incontestability of insurance claim payment. Any insurance claim
payment

on a Title I loan shall be final and incontestable after two years from

the date the claim was certified for payment by the Secretary, in the

absence of fraud or misrepresentation on the part of the lender, unless

a demand for repurchase of the loan obligation is made on behalf of the

United States prior to the expiration of the two-year period.

[]{#__RefHeading___Toc167872351 .anchor}**201.55 Calculation of
insurance claim payment**. \<[TOP](#_top)\>

The lender will be reimbursed in an amount not to exceed 90 percent of
its

loss on any eligible loan up to the amount of insurance coverage in the

lender\'s insurance coverage reserve account established by the
Secretary

under \' 201.32, if the insurance claim is made in accordance with the

requirements of this part. The amount of the insurance claim payment
shall be

computed as follows:

\(a\) Property improvement loans. For property improvement loans, the

insurance claim payment shall be 90 percent of the following amounts:

\(1\) The unpaid amount of the loan obligation (net unpaid principal and

the uncollected interest earned to the date of default, calculated

according to the terms of the note executed for any

loan application that is approved prior to the effective date of

these regulations, and calculated according to the actuarial method

for all loans for which loan applications are approved on or after

the effective date of these regulations). Where the lender has

proceeded against the secured property under \' 201.5 1(a)(2), the

unpaid amount of the loan obligation shall be reduced by the

proceeds received from the property\'s sale or disposition, after

deducting the following:

\(i\) The balances due on any obligations senior to the Title I loan

obligation; and

\(ii\) Customary and reasonable expenses for foreclosure and

disposition, as determined by the Secretary.

\(2\) Interest on the unpaid amount of the loan obligation from the date

of default to the date of the claim\'s initial submission for

payment plus 15 calendar days, calculated at the rate of seven

percent per annum. However, interest shall not be paid for any

period greater than nine months from the date of default.

\(3\) The amount of uncollected court costs, including fees paid for

issuing, serving, and filing a summons.

\(4\) The amount of attorney\'s fees on an hourly or other basis for
time

actually expended and billed, not to exceed \$500.

\(5\) The amount of expenses for recording the assignment of the
security

to the United States.

\(b\) Manufactured home loans. For manufactured home loans, the
insurance

claim payment shall be 90 percent of the sum of the following amounts:

\(1\) The unpaid amount of the loan obligation (net unpaid principal and

the uncollected interest earned to the date of default, calculated

according to the actuarial method), after deducting the following

amounts:

\(i\) The best price obtainable for the property after lawful

repossession or foreclosure, as determined in accordance with

\' 201.53;

\(ii\) All amounts to which the lender is entitled after the date of

default from any source relating to the property, including

but not limited to such items as rent, other

income, recourse recovery against the dealer, hazard insurance

benefits, secured interest protection insurance benefits, and

rebates on prepaid insurance premiums; and

\(iii\) Amounts retained by the lender after the date of default,

including amounts held or deposited to the account of the

borrower or to which the lender is entitled under the loan

transaction, and which have not been applied in reduction of

the borrower\'s indebtedness.

\(2\) Interest on the unpaid amount of the loan obligation from the date

of default to the date of the claim\'s initial submission for

payment plus 15 calendar days, calculated at the rate of seven

percent per annum. However, interest shall not be paid for any

period greater than nine months from the date of default.

\(3\) For manufactured home purchase loans, the amount of costs paid to

a dealer or other third party to repossess and preserve the

manufactured home and other property securing repayment of the loan

(including the costs of site inspection, property appraisal, hazard

insurance premiums, personal property taxes, and site rental, as

appropriate), plus actual costs not to exceed \$1,000 per module for

removing and transporting the home to a dealer\'s lot or other off-

site location.

\(4\) The amount of a sales commission paid to a dealer, real estate

agent or other third party for the resale of the repossessed or

foreclosed manufactured home and/or lot. Where the home is resold

on-site, the commission shall not exceed 10 percent of the sales

price. Where the home is resold off-site, the commission shall not

exceed seven percent of the sales price.

\(5\) For manufactured home lot loans, and for combination loans where

both the foreclosed manufactured home and lot are classified as

realty, the amount of:

\(i\) State or local real estate taxes, ground rents, and municipal

water and sewer fees or liens, prorated to the date of

disposition of the property;

\(ii\) Special assessments which are noted on the loan application or

which become liens after the insurance is issued, prorated to

the date of disposition of the property;

\(iii\) Premiums for hazard insurance on the manufactured home,

prorated to the date of disposition of the property; and

\(iv\) Transfer taxes imposed upon any deeds or other instruments by

which the property was acquired by the lender.

\(6\) The amount of uncollected court costs, including fees paid for

issuing, serving, and filing a summons.

\(7\) The amount of attorney\'s fees on an hourly or other basis for
time

actually expended and billed, not to exceed \$1,000.

\(8\) The amount of expenses for recording the assignment of the
security

to the United States, and for costs of repossession or foreclosure

other than attorney\'s fees and those incurred under paragraph

(b)(3), but not to exceed costs which are customary and reasonable

in the jurisdiction where the repossession or foreclosure takes

place, as determined by the Secretary.

# SUBPART G - DEBTS OWED TO THE UNITED STATES UNDER TITLE I

[]{#__RefHeading___Toc167872353 .anchor}**201.60 General**.
\<[TOP](#_top)\>

\(a\) Applicability. The provisions in this subpart apply to the
collection of

debts owed to the United States arising out of the Title I program.

These debts include, but are not limited to:

\(1\) Amounts owed on loans assigned to the United States by insured

lenders as the result of defaults by borrowers;

\(2\) Unpaid insurance charges owed by lenders; and

\(3\) Unpaid obligations of lenders arising from repurchase demands.

\(b\) Departmental debt collection regulations. Except as modified by
this

subpart, collection of debts arising out of the Title I program is

subject to the Department\'s debt collection regulations in subpart C of

Part 17.

[]{#__RefHeading___Toc167872354 .anchor}**201.61 Claims against
debtors - principal amount of debt**. \<[TOP](#_top)\>

\(a\) Liability. A debtor is liable to the Secretary for the principal
amount

of the debt, as described in paragraph (b), (c), or (d), as appropriate.

\(b\) Property improvement notes. In the case of an assigned note for a

property improvement loan, the principal amount of the debt is the

unpaid amount of the loan obligation, as defined in § 201.55(a)(1) of

this part, plus amounts described in §§ 201.55(a)(3), (4), and (5).

\(c\) Manufactured home notes. In the case of an assigned note for a

manufactured home loan, the principal amount of the debt is the unpaid

amount of the loan obligation, as defined in § 201.55(b)(1) of this

part, plus amounts described in \'\' 201.55(b)(3) through (8).

\(d\) Assigned judgments. In the case of a judgment obtained by the
lender on

a property improvement loan or a manufactured home loan and assigned to

the Secretary, the principal amount of the debt is the amount of the

judgment.

## 201.62 Claims against debtors - interest, penalties, and administrative

## costs. 

\(a\) Interest. In addition to the principal amount of the debt, the
debtor is

liable for the payment of interest. Interest accrues on the principal

amount of the debt as of the date of default, as defined in § 201.2(h)

of this part, as follows:

\(1\) In the case of a debt based upon the assignment of a defaulted

note, interest is assessed at the lesser of the rate specified in

the note or the United States Treasury\'s current value of funds

rate in effect on the date the Title I insurance claim was paid.

\(2\) In the case of a debt based upon the assignment of a judgment,

interest is assessed at the lesser of the rate specified in the

judgment or the United States Treasury\'s current value of funds

rate in effect on the date the Title I insurance claim was paid.

\(b\) Penalties and administrative costs. The Secretary shall assess

reasonable administrative costs and penalties as authorized in 31 U.S.C.

3717, unless there is no provision in the note providing for such

charges and the debtor has not otherwise consented to liability for such

charges.

[]{#__RefHeading___Toc167872357 .anchor}**201.63 Claims against
lenders**. \<[TOP](#_top)\>

Claims against lenders for money owed to the Department, including
unpaid

insurance charges and unpaid repurchase demands, shall be collected in

accordance with [24 CFR Part
17](http://www.hudclips.org/sub_nonhud/cgi/nph-brs.cgi?d=CF98&l=20&s1=17.$%5Bno%5D&SECT1=TXTHLB&SECT5=CF98&u=../cgi/legis.cgi&p=1&r=0&f=S),
subpart C.

PART 202

APPROVAL OF LENDING INSTITUTIONS

AND MORTGAGEES

1060.2 REV-6

## SUBPART A - APPROVAL OF TITLE I LENDING INSTITUTIONS

[]{#__RefHeading___Toc167872359 .anchor}**202.1 Approval of financial
institutions**. \<[TOP](#_top)\>

\(a\) Purpose. This part establishes minimum standards and requirements
for the

approval of financial institutions to participate in the property

improvement and manufactured home loan insurance programs under Title 1,

section 2 of the National Housing Act [(12 U.S.C.
1703)](http://www.hudclips.org/sub_nonhud/cgi/nph-brs.cgi?d=UC12&s1=1703%5Bno%5D&SECT1=TXT_HITS&SECT5=UC12&u=./hudclips.cgi&p=1&r=1&f=G)
.

\(b\) Approval as a lender or loan correspondent. A request for approval
to

become a Title I lender or loan correspondent shall be made on a form

prescribed by the Secretary and signed by the applicant. The approval

form shall be accompanied by such documentation as may be prescribed by

the Secretary to support the request for approval. The issuance of a

Title I contract of insurance or approval as a loan correspondent shall

constitute an agreement between the financial institution and the

Secretary which shall govern participation in the Title I loan insurance

program.

\(c\) Approved lending area. A Title I lender or loan correspondent may

originate loans or purchase advances of credit only within a geographic

lending area approved by the Secretary. Expansion of the lending area of

the lender or loan correspondent shall be subject to a determination by

the Secretary that the lender or loan correspondent has the capability
to

carry out proper loan origination in compliance with [24 CFR Part
201](http://www.hudclips.org/sub_nonhud/cgi/nph-brs.cgi?d=C24D&l=20&s1=201.$%5Bno%5D&SECT1=TXTHLB&SECT5=C24D&u=../cgi/legis.cgi&p=1&r=0&f=S)

within the expanded area.

[]{#__RefHeading___Toc167872360 .anchor}**202.2 Definitions**.
\<[TOP](#_top)\>

As used in this part, the term:

\(a\) Lender means a financial institution that:

\(1\) Holds a valid Title I contract of insurance and is approved by the

Secretary under this part to originate, purchase, hold, service,

and/or sell loans insured under 24 CFR Part 201; or

\(2\) Is under suspension or holds a Title I contract of insurance that

has been terminated, but that remains responsible for servicing or

selling Title I loans that it holds and is authorized to file

insurance claims on such loans.

\(b\) Loan correspondent means a financial institution approved by the
Secretary

to originate Title I direct loans for sale or transfer to a sponsoring

financial institution which holds a valid Title I contract of insurance

and is not under suspension.

\(c\) Supervised institution means a financial institution which is a
member of

the Federal Reserve System or whose accounts are insured by the Federal

Deposit Insurance Corporation or the National Credit Union
Administration.

\(d\) Nonsupervised institution means a financial institution which has
as its

principal activity the lending or investment of funds in mortgages,

consumer installment notes, or similar advances of credit, or the
purchase

of consumer installment contracts, and which is not a supervised

institution under paragraph (c) of this section or a governmental

institution under paragraph (e) of this section.

\(e\) Governmental institution means a Federal, State or municipal
agency, a

Federal Reserve Bank, a Federal Home Loan Bank, the Federal National

Mortgage Association, or the Federal Home Loan Mortgage Corporation.

\(f\) Investing lender means a financial institution, including a
charitable or

nonprofit organization or pension fund, that is approved under this part

to purchase, hold, and sell loans that have been originated and insured

under 24 CFR Part 201. An investing lender may not originate Title I

loans in its own name, and it may not service such loans except with the

prior approval of the Secretary.

[]{#__RefHeading___Toc167872361 .anchor}**202.3 General approval
requirements**. \<[TOP](#_top)\>

To be approved for participation in the Title I property improvement and

manufactured home loan programs as either a lender or a loan
correspondent, the

financial institution shall establish to the satisfaction of the
Secretary that

it meets, and will continue to meet, the following general requirements:

\(a\) It shall be a corporation or other chartered institution, a
permanent

organization having succession, or a partnership meeting the
requirements

of paragraphs (a)(1) through (a)(4) of this section. It shall be

authorized under Federal or State law or regulation to originate or

purchase consumer and mortgage loans, or shall be a Federal, State or

municipal agency.

\(1\) Each general partner must be a corporation or other chartered

institution consisting of two or more persons.

\(2\) One general partner must be designated as the managing general

partner. The managing general partner shall comply with the

requirements of paragraphs (b), (c) and (i) of this section.

The managing general partner must have as its principal

activity the management of one or more partnerships, all of

which are property improvement or manufactured home lenders,

and must have exclusive authority to deal directly with the

Secretary on behalf of each partnership. Newly admitted

partners must agree to the management of the partnership by

the designated managing general partner. If the managing

general partner withdraws or is removed from the partnership

for any reason, a new managing general partner shall be

substituted, and the Secretary shall be immediately notified

of the substitution.

\(3\) The partnership agreement shall specify that the partnership

shall exist for the minimum term of years required by the

Secretary. All Title I loans held by the partnership shall be

transferred to an approved Title I lender prior to the

termination of the partnership. The partnership shall

specifically be authorized to continue its existence if a

partner withdraws.

\(4\) The Secretary must be notified immediately of any amendments

to the partnership agreement which would affect the

partnership\'s actions under any mortgage insurance program

administered by the Secretary.

\(b\) It shall employ trained personnel competent to perform their

assigned responsibilities in consumer and mortgage lending

activities, and shall have adequate staff and facilities to

originate and/or service Tide I loans.

\(c\) It shall ensure that a corporate officer or other person
authorized

to bind the lender shall be responsible for reporting all

originations, purchases, and sales of Title I loans to the Secretary

for the purpose of obtaining or transferring insurance coverage.

\(d\) It shall comply with Title VIII of the Civil Rights Act of 1968,

Executive Order 11063, the Equal Credit Opportunity Act, and other

Federal laws relating to consumer lending activities.

\(e\) It shall not use escrow funds collected from borrowers for any

purpose other than that for which they were received.

\(f\) It shall originate Title I loans from branch offices only with the

prior approval of the Secretary, and it shall be responsible to the

Secretary for all actions taken by its lending and servicing

branches.

\(g\) It shall file a yearly verification report on a form prescribed by

the Secretary.

\(h\) It shall submit a copy of its latest financial statement and such

other information as the Secretary may request, and shall submit to

an examination of that portion of its. records which relates to its

Title I lending activities.

\(i\) It shall provide prompt notification, on a form prescribed by the

Secretary, of all corporate changes, including but not limited to

mergers, terminations, changes in name or location, control of

ownership, and character of business.

\(j\) Except for governmental institutions as defined in 202.2, it shall

pay an application fee and an annual fee, including an additional

fee for each branch office authorized by the Secretary to originate

Title I loans. These fees shall be in such amount as the Secretary

may require to assist in defraying the cost of approving and

supervising lenders and loan correspondents for participation in the

Title I program.

\(k\) No lender or loan correspondent, nor any officer, director,

principal or employee of a lender or loan correspondent, shall:

\(1\) Be under suspension, debarment, or other restrictions under 24

CFR Part 24 or 25 or under similar procedures of any other

Federal agency; or

\(2\) Be indicted for or convicted of an offense which reflects

adversely upon the lender or loan correspondent\'s integrity or

its ability to participate in the Title I program.

[]{#__RefHeading___Toc167872362 .anchor}**202.4 Requirements for
supervised lenders**. \<[TOP](#_top)\>

In addition to the general approval requirements in §202.3, a supervised

institution shall meet the following requirements to qualify as a
lender:

\(a\) A supervised institution shall have and maintain a net worth of
not less

than \$250,000 in assets acceptable to the Secretary.

\(b\) Supervised institutions which were approved prior to November 18,
1991

shall have until November 18, 1994 to meet the net worth requirements of

paragraph (a) of this section.

\(c\) A supervised institution shall provide prompt notification to the

Secretary in the event of termination of its supervision by its

supervisory agency.

[]{#__RefHeading___Toc167872363 .anchor}**202.5 Requirements for
nonsupervised lenders**. \<[TOP](#_top)\>

In addition to the general approval requirements in 202.3, a
nonsupervised

institution shall meet the following requirements to qualify as a
lender:

\(a\) A nonsupervised institution shall have and maintain a net worth of
not

less than \$250,000 in assets acceptable to the Secretary, and shall
have

and maintain a reliable warehouse line of credit or other funding
program

acceptable to the Secretary of not less than \$500,000 for use in

originating or purchasing Title I loans.

\(b\) Nonsupervised institutions which were approved prior to November
18, 1991

shall have until November 18, 1994 to meet the net worth and warehouse

line of credit requirements of paragraph (4) of this section.

\(c\) Within 90 days of the close of its fiscal year and at such other
times as

may be requested by the Secretary, a nonsupervised institution shall
file

with the Secretary an audit report and financial statements in a form

acceptable to the Secretary, consisting of a balance sheet, a statement
of

operations and retained earnings, an analysis of net worth adjusted to

reflect only assets acceptable to the Secretary, and an analysis of
escrow

funds. The audit report and financial statements shall be based upon an

audit performed by a Certified Public Accountant or by a qualified

Independent Public Accountant (as defined by the Comptroller General of

the United States) licensed by a State or other political subdivision of

the United States.

[]{#__RefHeading___Toc167872364 .anchor}**202.6 Requirements for loan
correspondents**. \<[TOP](#_top)\>

In addition to the general approval requirements in 202.3, a financial

institution shall meet the following requirements to qualify as a loan

correspondent:

\(a\) A loan correspondent shall have and maintain a net worth of not
less than

\$50,000 in assets acceptable to the Secretary, plus an additional
\$25,000

for each branch office authorized by the Secretary, up to a maximum

requirement of \$250,000.

\(b\) A loan correspondent may sell or transfer Title I loans only to
its

sponsoring lenders. There is no limitation on the number of sponsoring

lenders that a loan correspondent may have, and no limitation on the

number of loan correspondents that a lender may sponsor.

\(c\) Each sponsoring lender shall request approval of its loan
correspondents

from the Secretary, and shall be responsible to the Secretary for the

actions of its loan correspondents in originating Title I loans.

\(d\) All Title I loans shall be funded by and closed in the name of the
loan

correspondent, prior to their sale or transfer to a sponsoring lender.

\(e\) Within 90 days of the close of its fiscal year and at such other
times as

may be requested by the Secretary, a loan correspondent which is a

nonsupervised institution shall file with the Secretary an audit report

and financial statements in a form acceptable to the Secretary,
consisting

of a balance sheet, a statement of operations and retained earnings, an

analysis of net worth adjusted to reflect only assets acceptable to the

Secretary, and an analysis of escrow funds. \'ne audit report and

financial statements shall be based upon an audit performed by a
Certified

Public Accountant or by a qualified Independent Public Accountant (as

defined by the Comptroller General of the United States) licensed by a

State or other political subdivision of the United States.

\(f\) A loan correspondent and its sponsoring lender shall provide
prompt

notification to the Secretary if their loan correspondent agreement is

terminated.

[]{#__RefHeading___Toc167872365 .anchor}**202.7 Requirements for
investing lenders**. \<[TOP](#_top)\>

In addition to the general approval requirements in 202.3, a financial

institution shall meet the following requirements to qualify as an
investing

lender:

\(a\) An investing lender shall have lawful authority to purchase, hold,
and

sell Title I property improvement and manufactured home loans in its own

name.

\(b\) An investing lender shall have, or have made arrangements for,
funds

sufficient to support a projected investment of at least \$1,000,000 in

property improvement and manufactured home loans.

\(c\) In lieu of the staffing and facilities requirements in 202.3(b),
an

investing lender shall have officers or employees who are capable of

managing its activities in purchasing, holding, and selling Title I
loans.

\(d\) An investing lender shall be responsible for the servicing of the
Title I

loans that it holds, through contractual or other arrangements with

another lender holding a valid Title I

contract of insurance, but it may not directly service such loans except

with the prior approval of the Secretary.

[]{#__RefHeading___Toc167872366 .anchor}**202.8 Termination of insurance
contract**. \<[TOP](#_top)\>

\(a\) Notice. A contract of insurance may be terminated in accordance
with its

terms by the Secretary or by the Secretary\'s designee upon giving the

lender at least five days\' prior written notice.

\(b\) Informal meeting. If requested, a lender shall be entitled to an
informal

meeting with the Department official taking the action to terminate its

contract of insurance before the expiration of the five-day notice
period.

\(c\) Effects of termination. Termination of a contract of insurance
shall not

affect:

\(1\) The Department\'s obligation to provide insurance coverage with

respect to eligible loans originated before the termination, absent

fraud or misrepresentation;

\(2\) A lender\'s obligation to continue to pay insurance premiums and
meet

all other obligations associated with eligible loans originated

before termination; or

\(3\) A lender\'s right to apply for and be granted a new Title I
contract

of insurance, provided that the requirements for approval under this

subpart are met.

[]{#__RefHeading___Toc167872367 .anchor}**202.9 Administrative
actions**. \<[TOP](#_top)\>

\(a\) General. Administrative actions that may be taken against Title I
lenders

are set forth in 24 CFR 25.5 and paragraph (a) of this section. Civil

money penalties may also be imposed against Title I lenders in
accordance

with 24 CFR 25.13 and 24 CFR Part 30. For purposes of this section, the

term \"lender\" shall also include loan correspondents as defined in

202.2(b) of this subpart.

\(1\) A letter of reprimand informing the lender of the existence or

occurrence of a violation of any requirement of this part or Part

201 of this Title and directing the lender to bring and maintain its

activities into conformity with all HUD requirements. Failure to

comply with a directive in a letter of reprimand may result in other

actions as set forth in this section.

\(2\) Probation for a specified period of time, for the purpose of

evaluating the lender\'s compliance with HUD requirements. During a

period of probation, additional requirements may be imposed on the

lender as an aid in evaluating the lender. Such additional

requirements may include supervision of the lender\'s activities by

HUD, periodic reporting to HUD, or submission to HUD of internal

audits, audits by an Independent Public Accountant, or other

reviews.

\(3\) Suspension, which is based on adequate evidence that:

\(i\) One of the grounds for an administrative action contained in

paragraph (b) of this section exists; and

\(ii\) Continuation of approval pending completion of any audit,

investigation, or other review, or pending such administrative

or legal proceedings as may ensue, would not be in the public

interest or in the best interest of the Department. During

the period of suspension, a lender may not originate new Title

I loans under its Title I contract of insurance or apply for

a new contract of insurance.

\(4\) Withdrawal of approval of a lender to enter into a contract of

insurance. Such withdrawal shall be for a specified period of time

or, in cases involving egregious circumstances, for an indefinite

period.

\(b\) Grounds for administrative actions. Administrative actions shall
be based

upon one or more of the following grounds:

\(1\) Failure to remain in compliance with the requirements for approval

of lenders under this part;

\(2\) Submission of false information to HUD in connection with a loan;

\(3\) Failure properly to supervise and monitor dealers under the

provisions of 24 CFR Part 201;

\(4\) Exhaustion of the general insurance reserve established under 24
CFR

Part 201;

\(5\) Maintenance of a claims/loan ratio representing an unacceptable
risk

to the Department;

\(6\) Failure to cooperate with an audit, investigation or request by
the

Department\'s Office of Inspector General or with an inquiry by HUD

into the conduct of the lender\'s HUD-insured business or any other

failure to provide required information to HUD concerning the

conduct of the lender\'s HUD-insured business;

\(7\) Transfer of a Title I loan to a party who does not have a valid

contract of insurance; or

\(8\) Such other reason as the Mortgagee Review Board, Secretary, Deputy

Secretary, or Hearing Officer, as appropriate, determines to be

justified. Such reasons include, but are not limited to, failure to

exercise prudent credit judgment; failure to observe proper business

practices; failure to observe proper loan origination or servicing

procedures; or failure to comply with HUD requirements of other

requirements of law or regulation.

\(c\) Notice, hearings and hearing requests. In the case of a probation,

suspension or withdrawal action, a lender is entitled to notice and to

request a hearing before a Hearing Officer to challenge the action, in

accordance with the procedures in 24 CFR 25.5(d)(4), 25.7 and 25.8.

Hearings to challenge a probation, suspension or withdrawal action shall

be conducted in accordance with the applicable rules of Part 26 of this

Title.

\(d\) Settlement agreements. The Department may at any time enter into a

settlement agreement with a lender to resolve any outstanding grounds
for

any action provided for by this section. Such agreements may provide,

among other requirements, for cessation of any violation; correction or

mitigation of the effects of any violation; repayment of sums of money

wrongfully or incorrectly paid to the lender by a borrower or by HUD;

actions to collect sums of money wrongfully or incorrectly paid by the

lender to a third party; indemnification of HUD for insurance claims on

Title I loans originated in violation of HUD requirements; or

implementation of a Quality Control Plan or other corrective measures

acceptable to HUD. Failure of a lender to comply with a settlement

agreement may result in suspension or withdrawal of HUD approval.

#  

#  APPENDIX. SUBJECT INDEX FOR REGULATIONS

\<[TOP](#_top)\>

Subject Section Page

Abatement of insurance charges 201.31(e) 4-3

Acceleration of loan maturity

Provision for acceleration in note 201.16 2-8

Notice of default and acceleration 201.50(b) 6-1

Acquisition by voluntary conveyance or surrender201.52 6-3

Act, Definition of 201.2 1-1

Actuarial method, Definition of 201.2 1-1

Administrative actions against lenders 202.9 8-7

Letter of reprimand 202.9(a)(1) 8-7

Probation 202.9(a)(2) 8-8

Suspension 202.9(a)(3) 8-8

Withdrawal of lender approval 202.9(a)(4) 8-8

Grounds for administrative actions 202.9(b) 8-8

Notice, hearings and hearing requests 202.9(c) 8-9

Settlement agreements 202.9(d) 8-9

Administrative reports to the Secretary 201.43 5-4

Agent for the lender to

Inspect the manufactured home (direct loan) 201.26(b)(6) 3-16

Inspect the property improvements 201.40(c) 5-2

Inspect the manufactured home (dealer loan) 201.40(d) 5-2

Service loans 201.41(a) 5-2

Discuss reasons for default 201.50(a) 6-1

Make visual inspection of manufactured home 201.51(b)(2) 6-3

Air conditioning system, Financing of 201.10(b),(d) 2-1

Applicability of the regulations 201.3 1-9

Subject Section Page

Appraisal, HUD-approved

Existing manufactured home 201.10(b)(2) 2-2

Manufactured home lot 201.10(c) 2-2

New manufactured home and lot 201.10(d)(1) 2-3

Existing manufactured home and lot 201.10(d)(2) 2-3

Refinanced manufactured home 201.10(f) 2-4

Manufactured home being traded-in 201.23(b) 3-10

After repossession of manufactured home 201.51(b)(3) 6-3

Approval of lending area, Procedure for 202.1(c) 8-1

Approval requirements for lenders

General requirements 202.3 8-2

Requirements for supervised lenders 202.4 8-4

Requirements for nonsupervised lenders 202.5 8-5

Requirements for loan correspondents 202.6 8-5

Requirements for investing lenders 202.7 8-6

Approval requirements for loan correspondents 202.6 8-5

Appurtenances to manufactured home

New manufactured home 201.10(b)(1) 2-1

New manufactured home and lot 201.10(d)(1) 2-3

Existing manufactured home and lot 201.10(d)(2) 2-3

Assignment of note to HUD 201.54(d) 6-6

Assignment of security interest to HUD 201.54(d) 6-6

Assumption of loans

Conditions for approval 201.19(c)(1) 2-9

Notice of HUD\'s role in loan 201.19(c)(3) 2-11

Release of liability 201.19(c)(4) 2-12

Attorney\'s fees, Reimbursement for

Property improvement loans 201.55(a)(4) 6-8

Manufactured home loans 201.55(b)(7) 6-10

Subject Section Page

Bankruptcy or insolvency of borrower

Filing of proof of claim 201.42(a) 5-3

Responsibility after claim is filed 201.42(c) 5-3

Evidence required with claim application 201.54(a)(3) 6-5

Best price obtainable

Determination of 201.53 6-4

Used in claim calculation 201.55(b)(1) 6-8

Borrower certifications on manufactured home loans201.26(b)(3) 3-14

Borrower, Definition of 201.2 1-1

Borrower\'s initial payment

(see: Initial payment requirements)

Cash payments or rebates prohibited

Certification by manufacturer 201.2 1-4

Certification on completion certificate

(dealer property improvement loan) 201.26(a)(5) 3-13

Certification on placement certificate

(manufactured home loan) 201.26(b)(4) 3-15

Certification on completion certificate

(direct property improvement loan) 201.40(b)(1) 5-1

Civil engineer\'s certification

Manufactured home park site 201.21(e)(3) 3-6

Individual lot or other site 201.21(e)(4) 3-6

Claim application 201.54(a) 6-4

(see also: Insurance claim procedure)

Claims against debtors

Principal amount of debt 201.61 7-1

Interest on debt 201.62(a) 7-2

Penalties and administrative costs 201.62(b) 7-2

Claims against lenders 201.63 7-2

Subject Section Page

Coastal barriers properties 201.28(c) 3-20

Co-maker or co-signer

Included in definition of borrower 201.2 1-1

Note requirements 201.12 2-7

Conditions on refinancing 201.19(a)(1) 2-9

Credit application and review 201.22(a) 3-7

Contact by lender to cure default 201.50(a) 6-1

Combination loan

Definition of 201.2 1-1

Maximum loan amounts 201.10(d),(e) 2-3

Maximum loan terms 201.11(b) 2-6

Eligibility of the borrower 201.21(a) 3-2

Eligible use of loan proceeds 201.21(b) 3-3

Initial payment from borrower 201.23(d) 3-10

(see also: Manufactured home loan)

Completion certificate

Dealer property improvement loan 201.26(a)(5) 3-13

Direct property improvement loan 201.40(b) 5-1

Construction standards for manufactured homes 201.21(c)(1) 3-4

Contract for deed

(see: Land installment contract)

Contractor or supplier

(see: Dealer, Definition of)

Cooperative, Share in a

Manufactured home lot loan 201.2 1-6

Eligibility of the borrower 201.21(a) 3-2

Credit inquiries 201.22(a)(5) 3-7

Credit report, Requirement for 201.22(a)(5) 3-7

Subject Section Page

Credit reporting agency, Notice to 201.50(d) 6-2

Credit underwriting requirements

Credit application and review 201.22(a) 3-7

Verification of Social Security Number 201.22(a)(2) 3-7

Verification of employment 201.22(a)(3) 3-7

Consumer credit report 201.22(a)(5) 3-7

Credit inquiries 201.22(a)(5) 3-7

Verification of senior mortgages 201.22(a)(6) 3-8

Verification of Federal loan obligations 201.22(a)(7) 3-8

Verification of source of initial payment 201.22(a)(8) 3-8

Interview with borrower 201.22(a)(9) 3-8

Income requirements 201.22(b) 3-8

Daily interest in lieu of late charges 201.15(d) 2-8

Date of default 201.2 1-2

Date of the loan 201.12 2-7

Dealer, Definition of 201.2 1-2

Dealer approval and supervision 201.27(a) 3-17

Dealer certifications on manufactured

home placement 201.26(b)(4) 3-15

Dealer inspection requirements on manufactured

home loans 201.21(c)(4) 3-4

Dealer loan, Definition of 201.2 1-2

Dealer recourse agreements 201.27(b) 3-19

Death of the borrower

Filing a proof of claim 201.42(b) 5-3

Responsibility after claim is filed 201.42(c) 5-3

Evidence required with claim application 201 54(a)(3) 6-5

Subject Section Page

Debarred or suspended participants 201.29 3-20

Debt collection requirements 201.60 7-1

Debtor, Definition of 201.2 1-2

Default

Definition of 201.2 1-2

Default provision in note 201.16 2-8

Lender efforts to cure default 201.50(a) 6-1

Notice of default and acceleration 201.50(b) 6-1

Deficiency judgment, Preserving right to

When foreclosing on a property

improvement loan 201.51(a)(2) 6-2

When foreclosing on or repossessing

a manufactured home 201.51(b)(1) 6-3

When accepting voluntary surrender of a

manufactured home 201.52 6-3

Deficiency judgment, Requirement for 201.54(e) 6-6

Delinq. on Federally insured or guaranteed loan 201.22(c)(1) 3-9

Direct loan, Definition of 201.2 1-2

Disbursement requirements

Property improvement loans 201.26(a) 3-12

Manufactured home loans 201.26(b) 3-13

Discharge of debt

(see: Bankptcy or insolvency of borrower)

Discount points

Definition of 201.2 1-2

Cannot be paid by the manufacturer 201.2 1-4

May be paid by borrower 201.13 2-7

May be part of initial payment by borrower 201.23(a) 3-9

1060.2 REV-6

Subject Section Page

Discovery of misstatements of fact 201.40(a) 5-1

Disposition of the manufactured home 201.53 6-4

Downpayment requirements

(see: Initial payment requirements)

Efforts by lender to cure default 201.50(a) 6-1

Electronic loan reporting 201.30(c) 4-1

Eligibility of the borrower

Property improvement loans 201.20(a) 3-1

Manufactured home loans 201.21(a) 3-2

Eligible fees and charges

Property improvement loans 201.25(a) 3-11

Manufactured home loans 201.25(b) 3-12

Charges that may not be financed 201.25(c) 3-12

Referral fee may not be paid 201.25(d) 3-12

Eligible use of loan proceeds

Property improvement loans 201.20(b) 3-1

Manufactured home loans 201.21(b) 3-3

Exclusion for time period in military service 201.54(b)(3) 6-5

Existing manufactured home, Definition of 201.21(b)(2) 3-3

Existing structure, Definition of 201.2 1-2

Expansion of approved lending area 202.1(c) 8-1

Expenses of recording assignment of security to HUD

Property improvement loans 201.55(a)(5) 6-8

Manufactured home loans 201.55(b)(8) 6-10

Extension of claim filing period 201.54(b)(2) 6-5

Subject Section Page

Fee simple title to real property

Eligibility of the borrower 201.20(a)(1) 3-1

Security requirements 201.24(a) 3-10

Financial institutions, Approval of 202.1 8-1

(see also: Approval requirements for lenders)

Financing charges

(see: Interest rate; Discount points)

Fire safety equipment loan

Definition of 201.2 1-3

Maximum loan amount 201.10(a)(1) 2-1

Maximum loan term 201.11(a) 2-5

Eligibility of the borrower 201.20(a) 3-1

Eligible use of loan proceeds 201.20(b) 3-1

Special pre-application requirements 201.20(c)(2) 3-2

Approval by fire safety officials 201.26(a)(4) 3-13

(see also: Property improvement loan)

Flood insurance, Requirement for 201.28(a) 3-19

Form of assignment to HUD 201.54(f) 6-6

Foundation requirements for manufactured homes 201.21(c)(3) 3-4

Freight charges

Detailed on manufacturer\'s invoice 201.2 1-4

Financing of freight charges 201.10(b),(d) 2-1

Full or partial recourse by dealer 201.27(b) 3-19

Furniture

Definition of 201.2 1-3

Prohibition against financing 201.21(b)(3) 3-3

Gift letter as verification of downpayment 201.23(a) 3-9

Governmental institution, Definition of 202.2(e) 8-2

Subject Section Page

Gross income, Definition of 201.22(b)(2) 3-9

Hazard insurance

Requirement for insurance 201.28(b) 3-19

Appraised value if damaged manufactured

home is not insured 201.51(b)(3) 6-3

Reimbursement for premiums following

repossession of manufactured home 201.55(b)(3) 6-9

Health care facility, Definition of 201.2 1-3

Heat pump, Financing of 201.10(b),(d) 2-1

High-cost area limits for manufactured home loans201.10(e) 2-4

Historic preservation loan

Definition of 201.2 1-4

Maximum loan amounts 201.10(a)(1) 2-1

Maximum loan term 201.11(a) 2-5

Eligibility of the borrower 201.20(a) 3-1

Eligible use of loan proceeds 201.20(b) 3-1

Special pre-application requirements 201.20(c)(1) 3-2

Approval by State Historic

Preservation Officer 201.26(a)(3) 3-12

(see also: Property improvement loan)

Home improvement loan

(see: Property improvement loan)

Housing expenses, Definition of 201.22(b)(2) 3-9

Income requirements for Title I loans 201.22(b) 3-8

Indian trust or tribal lands

Site standards for manufactured homes 201.21(e)(1) 3-5

Written permission to repossess home 201.26(b)(8) 3-17

Ineligible participants 201.29 3-20

Subject Section Page

Initial payment requirements

Written verification of the source 201.22(a)(8) 3-8

Cannot be obtained from dealer

or manufacturer 201.23(a) 3-9

Disclosure of loans or gifts as source 201.23(a) 3-9

Manufactured home purchase loan 201.23(b) 3-10

Use of equity in traded-in home 201.23(b) 3-10

Manufactured home lot loan 201.23(c) 3-10

Combination loan 201.23(d) 3-10

Inspection of the property

Direct manufactured home loan 201.26(b)(6) 3-16

Property improvement loan 201.40(c) 5-2

Dealer manufactured home loan 201.40(d) 5-2

Installation requirements for manufactured homes201.21(c)(3) 3-4

Installment payments on note 201.14 2-7

Insurance charges

Computation of total charge 201.31(a) 4-1

Due date for payment 201.31(b) 4-1

Payments in annual installments 201.31(b)(2) 4-2

Payments to be remitted electronically 201.31(b)(4) 4-2

Penalty charge and interest 201.31(c) 4-2

Refund or abatement of insurance charges 201.31(e) 4-3

Passing insurance charges on to the borrower 201.31(f) 4-3

Insurance claim procedure

Submission requirements 201.54(a) 6-4

Maximum claim filing period 201.54(b)(1) 6-5

Extension of claim filing period 201.54(b)(2) 6-5

Resubmitted and supplemental claims 201.54(c) 6-6

Assignment of lender\'s interest to HUD 201.54(d) 6-6

Form of assignment to HUD 201.54(f) 6-6

Basis for claim denial 201.54(g) 6-7

Incontestability of claim payment 201.54(h) 6-7

Subject Section Page

Insurance claim calculation

Property improvement loans 201.55(a) 6-7

Manufactured home loans 201.55(b) 6-8

Insurance coverage reserve account

Establishment of reserve account 201.32(a) 4-3

Transfer of loans to another lender 201.32(b) 4-4

Transfer of insurance coverage 201.32(c) 4-4

Reserve account not affected by HUD\'s

debt recovery 201.32(d) 4-5

Insurance reporting

Reporting requirements and due date 201.30(a) 4-1

Procedure for late reporting 201.30(b) 4-1

Electronic loan reporting 201.30(c) 4-1

Insurance reserves

(see: Insurance coverage reserve account)

Interest in the property

(see: Eligibility of the borrower)

Interest rate 201.13 2-7

(see also: Discount points)

Invoice on the manufactured home

(see: Manufacturer\'s invoice)

Land installment contract

Eligibility of the borrower 201.20(a)(1) 3-1

Security requirements 201.24(a) 3-10

Late charges on the loan 201.15 2-8

Lease of real property

Eligibility of the borrower 201.20(a)(1) 3-1

Security requirements 201.24(a) 3-10

Subject Section Page

Lender approval requirements

General requirements 202.3 8-2

Requirements for supervised lenders 202.4 8-4

Requirements for nonsupervised lenders 202.5 8-5

Requirements for loan correspondents 202.6 8-5

Requirements for investing lenders 202.7 8-6

Lender, Definition of 201.2 1-4

202.2(a) 8-1

Loan correspondent approval requirements 202.6 8-5

Loan correspondent, Definition of 201.2 1-4

202.2(b) 8-2

Loan, Definition of 201.2 1-4

Loan disbursement requirements

Property improvement loans 201.26(a) 3-12

Manufactured home loans 201.26(b) 3-13

Loan insurance premiums

(see: Insurance charges)

Loan prepayment provision 201.17 2-8

Loan refinancing

(see: Refinancing of loans)

Loan servicing

General requirements 201.41(a) 5-2

Acceptance of partial payments 201.41(b) 5-3

Manufactured home, Definition of 201.2 1-5

Manufactured home construction standards 201.21(c)(1) 3-4

Subject Section Page

Manufactured home improvement loan

Definition of 201.2 1-5

Maximum loan amount 201.10(a)(1) 2-1

Maximum loan term 201.11(a)(2) 2-6

Eligibility of the borrower 201.20(a)(2) 3-1

Eligible use of loan proceeds 201.20(b) 3-1

Security requirements 201.24(a)(3) 3-11

(see also: Property improvement loan)

Manufactured home loan

Definition of 201.2 1-6

Maximum loan amounts 201.10(b),(d) 2-1

Maximum loan terms 201.11(b) 2-6

Eligibility of the borrower 201.21(a) 3-2

Eligible use of loan proceeds 201.21(b) 3-3

Construction requirements 201.21(c)(1) 3-4

Transportation requirements 201.21(c)(2) 3-4

Installation requirements 201 .2 1(c)(3) 3-4

Dealer inspection requirements 201.21(c)(4) 3-4

Warranty requirements 201.21(d) 3-4

Homesite standards 201.21(e) 3-5

Income requirements 201.22(b) 3-8

Initial payment from borrower 201.23 3-9

Security requirements 201.24(b) 3-11

Eligible fees and charges 201.25(b) 3-12

Conditions for loan disbursement 201.26(b) 3-13

Manufactured home lot loan

Definition of 201.2 1-6

Maximum loan amount 201.10(c) 2-2

Maximum loan term 201.11(b) 2-6

Eligibility of the borrower 201.21(a) 3-2

Eligible use of loan proceeds 201.21(b) 3-3

Initial payment from borrower 201.23(c) 3-10

(see also: Manufactured home loan)

Subject Section Page

Manufactured home purchase loan

Definition of 201.2 1-6

Maximum loan amounts 201.10(b) 2-1

Maximum loan term 201.11(b) 2-6

Eligibility of the borrower 201.21(a) 3-2

Eligible use of loan proceeds 201.21(b) 3-3

Initial payment from borrower 201.23(b) 3-10

(see also: Manufactured home loan)

Manufactured homesite requirements

(see: Site requirements)

Manufacturer\'s invoice, Definition of 201.2 1-4

Manufacturer\'s warranty requirements 201.21(d) 3-4

Maturity of the loan

(see: Maximum loan term)

Maximum loan amounts

Property improvement loans 201.10(a) 2-1

Manufactured home purchase loans 201.10(b) 2-1

Manufactured home lot loans 201.10(c) 2-2

Combination loans 201.10(d) 2-3

High-cost area limits 201.10(e) 2-4

Refinanced loans 201.10(f) 2-4

Maximum loan terms

Property improvement loans 201.11(a) 2-5

Manufactured home loans 201.11(b) 2-6

Refinanced loans 201.11(c) 2-6

Minimum loan amount, Prohibition against 201.10(g) 2-5

Misstatements of fact, Obligation to report 201.40(a) 5-1

Mobile home

(see: Manufactured home)

Subject Section Page

Modification agreement

Definition of 201.18(a) 2-8

Use in bringing the loan current 201.50(a) 6-1

(see also: Repayment plan)

Multifamily property improvement loan

Definition of 201.2 1-6

Maximum loan amounts 201.10(a)(1) 2-1

Maximum loan term 201.11(a) 2-5

Eligibility of the borrower 201.20(a) 3-1

Eligible use of loan proceeds 201.20(b) 3-1

Security requirements 201.24(a) 3-10

(see also: Property improvement loan)

National Housing Act, Title I of 201.1 1-1

National Manufactured Housing Construction and

Safety Standards Act of 1974

Manufactured home defined 201.2 1-5

Construction requirements 201.21(c)(1) 3-4

National Register of Historic Places

(see: Historic preservation loan)

Net proceeds of loan

(see: Maximum loan amount)

New manufactured home, Definition of 201.21(b)(2) 3-3

Nonresidential property improvement loan

Definition of 201.2 1-6

Maximum loan amount 201.10(a)(1) 2-1

Maximum loan term 201.11(a) 2-5

Eligibility of the borrower 201.20(a) 3-1

Eligible use of loan proceeds 201.20(b) 3-1

Security requirements 201.24(a) 3-10

(see also: Property improvement loan)

Subject Section Page

Nonsupervised institution, Definition of 202.2(d) 8-2

Nonsupervised lenders, Requirements for 202.5 8-5

Note

Definition of 201.2 1-6

General requirements for 201.12 2-7

Date of note is date of disbursement 201.12 2-7

Interest rate and discount points 201.13 2-7

Installment payments on note 201.14 2-7

Late charges in note 201.15 2-8

Provision for full or partial prepayment 201.17 2-8

Refinancing requires new note 201.19(b)(1) 2-10

Claim filing requires original note 201.54(a) 6-4

Must be valid and enforceable when

assigned to HUD 201.54(e) 6-6

Notice of default and acceleration

Required before proceeding against

borrower\'s property or filing claim 201.50(b) 6-1

Not required with voluntary conveyance or

surrender 201.52 6-3

Notice of HUD\'s role in loan

Assumed loans 201.19(c)(3) 2-11

Property improvement loans 201.26(a)(6) 3-13

Manufactured home loans 201.26(b)(7) 3-16

Notice to credit reporting agency 201.50(d) 6-2

On-site inspection

(see: Inspection of the property)

Other recurring charges, Definition of 201.22(b) 3-9

Owner, Definition of 201.2 1-6

Subject Section Page

Partial payments, Acceptance of 201.41(b) 5-3

Payments on the loan 201.14 2-7

Payoff of existing loan

(see: Prepayment of loan)

Placement certificate 201.26(b)(4) 3-15

Prepayment of the loan 201.17 2-8

Principal residence

Definition of 201.2 1-7

Required for manufactured home loans 201.21(b)(1) 3-3

Prior approval of the Secretary

Multifamily structure owned by corporation,

partnership or trust 201.2 1-6

Refinancing an assumed loan 201.19(a)(1) 2-9

Starting improvements prior to loan approval 201.20(b)(3) 3-2

Loan for downpayment secured by same

property as insured loan 201.23(a) 3-9

Substitution or subordination of security 201.24(d) 3-11

Release of liability or lien 201.24(e) 3-11

Borrower still liable on another manufactured

home loan 201.26(b)(3) 3-14

Reinstatement of terminated dealer 201.27(a)(5) 3-18

Priority of lien over uninsured loan 201.24(a)(1) 3-10

Proceeding against the loan security

Alternative to filing claim 201.51(a)(1) 6-2

Foreclosure on a property improvement loan 201.51(a)(2) 6-2

Foreclosure or repossession of a

manufactured home and/or lot 201.51(b)(1) 6-3

Subject Section Page

Property improvement loan

Definition of 201.2 1-7

Maximum loan amounts 201.10(a) 2-1

Maximum loan term 201.11(a) 2-5

Eligibility of the borrower 201.20(a) 3-1

Eligible use of loan proceeds 201.20(b) 3-1

Income requirements 201.22(b) 3-8

Initial payment from borrower 201.23(a) 3-9

Security requirements 201.24(a) 3-10

Eligible fees and charges 201.25(a) 3-11

Conditions for loan disbursement 201.26(a) 3-12

Purchase price of manufactured home 201.10(b)(3) 2-2

Purchase price of manufactured home and lot 201.10(d)(3) 2-4

Rebates

(see: Cash payments or rebates prohibited)

Recording and perfection of security 201.24(c) 3-11

Recording the assignment of security to HUD 201.54(d) 6-6

Recourse agreements

Types of dealer recourse permitted 201.27(b) 3-19

Assignment of obligation to HUD 201.27(b) 3-19

Documentation of efforts to effect recourse 201.54(a)(1) 6-4

Referral fees, Prohibition against being paid 201.25(d) 3-12

Refinancing of loans

Maximum loan amounts 201.10(f) 2-4

Maximum loan terms 201.11(c) 2-6

Conditions on refinancing 201.19(a) 2-9

Note and security requirements 201.19(b) 2-10

Refund of insurance charges 201.31(e) 4-3

6/96 A-18

1060.2 REV-6

Subject Section Page

Rehabilitation, Definition of 201.2 1-7

Reinstatement of accelerated loan 201.50(c) 6-2

Release of liability

When refinancing an assumed loan 201.19(a)(1) 2-9

When a qualified assumptor is approved 201.19(c)(4) 2-12

Requires prior approval of Secretary 201.24(e) 3-11

Release of lien interest 201.24(e) 3-11

Rental of wheels and axles

Detailed on manufacturer\'s invoice 201.2 1-4

Financed with new manufactured home 201.10(b)(1) 2-1

Financed with new manufactured home

and lot 201.10(d)(1) 2-3

Repairs to make manufactured home marketable 201.53 6-4

Repayment plan

Definition of 201.18(b) 2-9

Use in bringing the loan current 201.50(a) 6-1

(see also: Modification agreement)

Reporting loans for insurance

(see: Insurance reporting)

Repossession and preservation costs,

Reimbursement for 201.55(b)(3) 6-9

Repossession and sale of manufactured home

Proceeding against the loan security 201.51(b)(1) 6-3

Visual inspection and condition report 201.51(b)(2) 6-3

Obtaining appraisal after repossession 201.51(b)(3) 6-3

Sale of repossessed home 201.53 6-4

Restoration, Definition of 201.2 1-7

Subject Section Page

Resubmitted or supplemental claims 201.54(c) 6-6

Sale of repossessed manufactured home 201.53 6-4

Sales commission on resale of manufactured home,

Reimbursement for 201.55(b)(4) 6-9

Sales taxes paid by dealer

Detailed on manufacturer\'s invoice 201.2 1-4

Financing of sales taxes 201.10(b),(d) 2-1

Security instrument, Definition of 201.2 1-7

Security requirements

Security instrument defined 201.2 1-7

Refinanced loans 201.19(b) 2-10

Property improvement loans 201.24(a) 3-10

Manufactured home loans 201.24(b) 3-11

Recording and perfection of security 201.24(c) 3-11

Substitution or subordination of security 201.24(d) 3-11

Release of liability or lien 201.24(e) 3-11

Proceeding against the loan security 201.51 6-2

Claim filing requires original instrument 201.54(a) 6-4

Assignment of security interest to HUD 201.54(d) 6-6

Form of assignment to HUD 201.54(f) 6-6

Self-employed borrowers 201.22(a)(3) 3-7

Servicing of loans

(see: Loan servicing)

Single family property improvement loan

Definition of 201.2 1-7

Maximum loan limits 201.10(a)(1) 2-1

Maximum loan term 201.11(a) 2-5

Eligibility of the borrower 201.20(a) 3-1

Eligible use of loan proceeds 201.20(b) 3-1

Security requirements 201.24(a) 3-10

(see also: Property improvement loan)

Subject Section Page

Site requirements

Site must meet suitability standards 201.21(e)(1) 3-5

Public water and sewerage required 201.21(e)(2) 3-6

Manufactured home park site 201.21(e)(3) 3-6

Individual lot or other site 201.21(e)(4) 3-6

Skirting costs, Financing of 201.10(b)(1) 2-1

Social Security Numbers, Verification of 201.22(a)(2) 3-7

Solar energy system, Definition of 201.2 1-7

Soldier\'s and Sailor\'s Civil Relief Act of 1940 201.54(b)(3) 6-5

Special benefits, Definition of 201.2 1-7

(see also: Manufacturer\'s invoice)

State, Definition of 201.2 1-8

State Historic Preservation Officer 201.20(c)(1) 3-2

(see also: Historic preservation loan)

State law requirements for

Form of note 201.12 2-7

Late charges on the loan 201.15 2-8

Renewal and extension of lien 201.19(b)(4) 2-11

Checking inquiries on credit report 201.22(a)(5) 3-7

Recording and perfection of security 201.24(c) 3-11

Notice of default and acceleration 201.50(b) 6-1

Proceeding against the improved property 201.51(a)(2) 6-2

Proceeding against the manufactured home 201.51(b)(1) 6-3

Voluntary surrender of manufactured home 201.52 6-3

Subordination or substitution of security 201.24(d) 3-11

Supervised institution, Definition of 202.2(c) 8-2

Supervised lenders, Requirements for 202.4 8-4

Subject Section Page

Termination of dealer approval 201.27(a)(5) 3-18

(see also: Dealer approval and supervision)

Termination of insurance contract 202.8 8-7

Title evidence, Requirement for 201.26(a)(1) 3-12

Title I of National Housing Act 201.1 1-1

Total fixed expenses, Definition of 201.22(b)(2) 3-9

Transfer of insured loans 201.32(b) 4-4

Transfer of insurance reserves 201.32(c) 4-4

(see also: Insurance coverage reserve account)

Transportation requirements for manufactured homes201.21(c)(2) 3-4

Transportation, set-up and anchoring, Financing of201.10(b),(d) 2-1

Uncollected court costs, Reimbursement for

Property improvement loans 201.55(a)(3) 6-8

Manufactured home loans 201.55(b)(6) 6-10

Underwriting requirements

(see: Credit underwriting requirements)

Used manufactured home

(see: Existing manufactured home)

Valid and enforceable obligation

When note is originated 201.12 2-7

When note is assigned to HUD 201.54(e) 6-6

Validity of borrower\'s property interest 201.26(a)(1) 3- 12

Verification of employment 201.22(a)(3) 3-7

Subject Section Page

Verification of Federal loan obligations 201.22(a)(7) 3-8

Verification of senior mortgages 201.22(a)(6) 3-8

Verification of source of initial payment 201.22(a)(8) 3-8

Volume incentives, Definition of 201.2 1-8

(see also: Manufacturer\'s invoice)

Voluntary conveyance of manufactured home 201.52 6-3

Voluntary surrender of manufactured home 201.52 6-3

Waiver of the regulations 201.5 1-10

Warranty requirements

(see: Manufacturer\'s warranty requirements)

Wheels and axles

Prohibition against financing purchase of 201.21(b)(3) 3-3

Financing rental of 201.10(b),(d) 2-1

(see also: Rental of wheels and axles)

Wholesale (base) price list, Definition of 201.2 1-9

(see also: Manufacturer\'s invoice)

Written description of improvement work 201.20(b)(1)