`[Federal Register Volume 89, Number 238 (Wednesday, December 11, 2024)]
[Rules and Regulations]
[Pages 99705-99719]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-28706]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Parts 203, 206 and 291

[Docket No. FR-6051-F-03]
RIN 2502-AJ47


Federal Housing Administration (FHA): Single Family Sale Program

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

ACTION: Final rule.

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SUMMARY: This rule amends the requirements for the sale of eligible 
single family mortgage loans insured by the Federal Housing 
Administration (FHA) that have been assigned to the Secretary of the 
Department of Housing and Urban Development (HUD) in exchange for claim 
payments. The mortgage notes are sold, without FHA insurance, to 
qualified purchasers in a manner that seeks to maximize recoveries and 
strengthen HUD's Mutual Mortgage Insurance Fund (MMIF) and to achieve 
HUD's operational goals for the MMIF. This rule transitions the pilot 
Single Family Sale Program from a demonstration to a permanent program 
and removes existing Disposition of HUD-Acquired and -Owned Single 
Family Property regulations, which provided for a retired program that 
handled the sale of HUD-held single family mortgage loans.

DATES: Effective: January 10, 2025.

FOR FURTHER INFORMATION CONTACT: John Lucey, Director, FHA Office of 
Asset Sales, Office of Housing, Department of Housing and Urban 
Development, 451 7th Street SW, Washington, DC 20410-8000; telephone: 
(202) 708-2625 (this is not a toll-free number), or toll-free: (800) 
481-9895. HUD welcomes and is prepared to receive calls from 
individuals who are deaf or hard of hearing, as well as from 
individuals with speech or communication disabilities. To learn more 
about how to make an accessible telephone call, please visit https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs.

SUPPLEMENTARY INFORMATION:

I. Background

    Under section 204 of the National Housing Act,\1\ HUD has general 
authority to pay insurance claims and dispose of mortgages and 
properties acquired under the FHA single family mortgage insurance 
programs. Section 204(g) specifically grants HUD broad discretion to 
implement a range of disposition alternatives. The National Housing Act 
also requires that HUD ensure the MMIF remains financially sound. HUD 
must effectively manage HUD's defaulted assets and minimize losses to 
the MMIF to carry out its fiduciary responsibility to ensure the 
financial soundness of the MMIF.
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    \1\ See 12 U.S.C. 1710 (2010), as amended by section 601 of the 
Fiscal Year 1999 Departments of Veterans Affairs and Housing and 
Urban Development and Independent Agencies Appropriations Act (Pub. 
L. 105-276, approved October 21, 1998) (``FY 1999 Appropriations 
Act'').
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    Since 2002, HUD has operated a demonstration program to implement 
its broad disposition authority with respect to mortgages and 
properties acquired under the FHA single family mortgage insurance 
programs. By notice published in the Federal Register on February 5, 
2002, HUD announced the establishment of the Accelerated Claim and 
Asset Disposition (ACD) Demonstration to ``address any programmatic 
concerns'' and ``assess its success and determine whether to implement 
the ACD process on a permanent basis, throughout the country.'' \2\ On 
October 29, 2002, HUD responded to public comments and conducted its 
first sale of defaulted mortgages through the ACD Demonstration.\3\ HUD 
has continuously operated the ACD Demonstration for the purpose of 
paying insurance claims and disposing of mortgages and related 
properties acquired under the FHA single family mortgage insurance 
programs.
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    \2\ See Notice of FHA Accelerated Claim Disposition 
Demonstration, 67 FR 5418 (February 5, 2002).
    \3\ See Notice of FHA Accelerated Claim Disposition 
Demonstration, 67 FR 66038 (October 29, 2002).
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    HUD has used various names to refer to the demonstration program, 
including the ACD Demonstration, the Single Family Loan Sales (SFLS) 
Program, and the Distressed Asset Stabilization Program (DASP). For 
purposes of this rule, HUD will refer to the demonstration as the 
``Single Family Sale Program,'' which encompasses all of the iterations 
of Single Family Loan Sales, including any sales HUD designates as part 
of this program. The final rule applies to all Single Family Loan Sales 
by HUD.
    Absent the Single Family Sale Program, if a borrower is unable to 
resume their mortgage payments after loss mitigation, the mortgagee in 
most cases would be required to foreclose the defaulted loan to perfect 
an insurance claim. If the property cannot be sold to a third party at 
foreclosure or a second-chance auction, the mortgagee may file a 
conveyance claim, which gives the property to HUD in exchange for 
receiving the FHA mortgage insurance claim payment. Prior to filing the 
conveyance claim, the mortgagee will incur legal and holding costs for 
which the mortgagee may seek reimbursement from HUD through claim 
payment. A property conveyed to HUD increases HUD's Real Estate Owned 
(REO) inventory, posing an additional financial burden on the MMIF for 
asset management costs. As an alternative to filing a conveyance claim, 
for a forward loan that has been foreclosed, HUD will pay a claim 
without conveyance of title claim from the MMIF to the mortgagee if the 
borrower defaults and the mortgagee loses money after selling the house 
in a foreclosure or post-foreclosure sale. Disposing of delinquent 
forward mortgage loans shortens the period between default and claim 
payment, reducing the financial exposure to these insurance funds for 
costs incurred after default.
    For a Home Equity Conversion Mortgage (HECM) that has been 
foreclosed, the mortgagee cannot file a conveyance claim but can sell 
the foreclosed property to a third party and receive claim payment if 
the mortgagee is owed more than it receives from such sale. For HECMs 
endorsed before 2009, HUD pays claims from the General Insurance (GI) 
Fund. For HECMs endorsed in 2009 or after, HUD pays claims from the 
MMIF.
    HUD's sale of defaulted loans through the Program is generally 
intended to yield a recovery to the MMIF that meets or exceeds the 
recovery obtained as a result of a foreclosure-based claim.
    When a borrower passes away after assignment of a HECM, HUD incurs 
costs associated with real property when it is vacant or abandoned. 
HUD's servicing tenure and attempts to foreclose can be delayed by 
title or jurisdictional issues and backlogs resulting from high volume. 
These issues result in higher servicing costs along with additional 
inspection and property preservation costs while the HECMs remain in 
HUD's portfolio. After foreclosure, HECMs that converted to REO are 
added to HUD's inventories, increasing asset management costs to 
protect and dispose of the properties. Disposition of eligible assigned 
HECMs,

[[Page 99706]]

such as HECMs secured by vacant and abandoned properties, can result in 
significant cost savings to the MMIF and GI Fund, as applicable, and 
enable better and more timely resolution of these assets.
    On June 5, 2006, HUD issued an Advance Notice of Proposed 
Rulemaking (ANPR) soliciting public comment on HUD's Program.\4\ The 
ANPR solicited public comments to make ``possible improvements to the 
program,'' including the most efficient way to ``maximize the return to 
the FHA insurance fund'' by ``minimiz[ing] the time an asset is held.'' 
\5\
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    \4\ See Accelerated Claim and Asset Disposition (ACD) Program; 
Advanced Notice of Proposed Rulemaking, 71 FR 32392 (June 5, 2006).
    \5\ Id.
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    On April 30, 2007, HUD published a regulatory agenda providing 
public notice that FHA had withdrawn the ANPR effective March 1, 
2007.\6\ After this action, HUD adopted additional modifications to the 
Program, including changing the disposition method from joint venture 
to whole loan sales.
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    \6\ See HUD Semiannual Regulatory Agenda, 72 FR 22694 (April 30, 
2007).
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II. The Proposed Rule

    On July 16, 2024, HUD published for public comment a proposed rule 
(89 FR 57798) to amend 24 CFR parts 203, 206, and 291. The proposed 
rule sought to transition the Single Family Sale Program from a 
demonstration to a permanent program by revising HUD's Single Family 
Mortgage Insurance, Home Equity Conversion Mortgages, and Disposition 
of HUD-Acquired and -Owned Single Family Property regulations to 
provide for the sale of HUD-held single family forward mortgages and 
Home Equity Conversion Mortgages through competitive sale and direct 
sale of single family loans. In addition, HUD proposed to remove the 
existing Disposition of HUD-Acquired and -Owned Single Family Property 
regulations, which provided for a retired program that handled the sale 
of HUD-held single family mortgage loans.
    HUD sought public comment on all aspects of the rule and sought 
public feedback on ten (10) specific issues regarding the operation of 
the Program.

III. This Final Rule

    This final rule adopts the proposed rule with no changes. The next 
section outlines how various issues raised through public comments may 
be addressed through guidance or by future updates to sale documents, 
including but not limited to Conveyance, Assignment, and Assumption 
Agreements (CAAs), Federal Register Notices (FRNs), and Bidder 
Information Package (BIP) forms.

IV. Public Comments

    The public comment period closed on September 16, 2024. HUD 
received 11 distinct responsive comments from individuals, 
associations, advocacy organizations and a variety of interested 
parties. The following presents the significant issues and questions 
related to the proposed rule raised by the commenters, and HUD's 
responses to these issues and questions. HUD would like to thank all 
the commenters for their thoughtful responses

Specific Questions for Comment From the Proposed Rule

    In section IV of the proposed rule, HUD included several specific 
questions for public comment. Those specific questions from the 
proposed rule and public comments received in response to those 
specific questions are summarized here, along with HUD's responses to 
the public comments received.

A. Question #1: What Additional Actions HUD Can Take To Provide Greater 
Bidding Opportunities for Nonprofit Organizations and Governmental 
Entities

1. Recommendation To Modify Capital Requirements
    One commenter stated that HUD should reduce the capital requirement 
to participate in the program. The commenter said that the general 
$5,000,000 net worth requirement is extremely high, out of scope with 
the requirements of various localities, and is a mismatch for the 
relatively low average sale prices in some states. The commenter stated 
this requirement precludes the participation of entities that know 
their communities best, including many mission-driven nonprofits and 
smaller entities, such as smaller minority-led developers.
    The commenter stated that while HUD permits nonprofits to 
participate if they have a net worth of $3,000,000 or provide an 
irrevocable letter of credit or performance bond, those are still 
barriers to participation and should be revisited. The commenter stated 
that the net worth requirement is arbitrarily high and prevents 
participation by many nonprofits and community development 
organizations and recommended that HUD allow nonprofits to jointly 
participate and bid with a financial partner to meet the net worth 
requirement, such as a locally situated and active community 
redevelopment entity.
    The commenter recommended that HUD replace the requirement of an 
irrevocable letter of credit with a lower dollar amount line of credit. 
The commenter stated that irrevocable letters of credit and performance 
bonds are expensive and difficult to obtain and maintain and may have 
impacts on the balance sheets of nonprofit entities, while many 
nonprofits have access to revolving lines of credit. The commenter also 
stated that both the irrevocable line of credit and performance bond 
would likely be unnecessary if HUD implemented a meaningful 
prioritization and ``first look'' program so nonprofits could know the 
capital they would need to bid at the loan sale.
    HUD Response: HUD appreciates the stakeholder feedback. To maximize 
the usefulness and applicability of the Program, any capital 
requirement changes and what documentation may be used to demonstrate 
financially viability would be addressed not in the rule itself, but 
via notice or sale documents, such as the Bidder Information Package.
    One commenter recommended the establishment of a fund for use by 
qualified non-profit bidders.
    HUD Response: HUD appreciates the stakeholder feedback; however, 
HUD is unable to establish a capital fund absent congressional 
appropriations that would provide for such a fund.
2. Request To Revisit a 95 Percent Value Requirement
    Two commenters recommended that HUD revisit a perceived 95 percent 
value requirement. The commenters stated that the requirement, based on 
market rate data, poses a challenge amid rising home prices and limits 
nonprofit competition. One commenter stated that the Claims Without 
Conveyance of Title program imposes a similar requirement, which 
results in very few mission-driven nonprofits participating in the 
program. The commenters recommended basing the 95 percent requirement 
on census tract or other methodology that takes into consideration the 
income of the local area, as opposed to market or asset value. 
Alternatively, the commenters suggested that the formula take into 
account rehabilitation costs and holding cost and legal fees for 
eviction of occupied assets.
    HUD Response: The Single Family Sale Program does not impose such a 
requirement on purchasers. The National Housing Act imposes a statutory 
fiduciary obligation on HUD to ensure the MMIF remains financially 
sound (12 U.S.C. 1708(a)(3)) while also

[[Page 99707]]

directing the Secretary to ensure that it continues to meet the housing 
needs of the borrowers that the single family mortgage program is 
designed to serve (12 U.S.C. 1708(a)(7)(B)). Consistent with those 
obligations, HUD seeks to obtain the maximum recoveries for the agency 
while also encouraging as many participants in the Single Family Sale 
Program as practical. HUD believes the current method for valuating 
loans offered for sale under the Single Family Sale Program 
appropriately balances those two obligations, but the method used by 
the Program does not impose the 95 percent requirement referenced by 
the commenters.
3. Participation by Wholly Owned Special-Purpose Entities
    Two commenters asked HUD to allow wholly owned special purpose 
entities, classified as disregarded entities by the Internal Revenue 
Service (IRS), to participate in the program. A commenter identified 
the inability of disregarded entities to participate as a barrier faced 
by nonprofits when seeking HUD recognition as a qualifying nonprofit. 
The commenters stated that without the requested change, a significant 
portion of mission-driven organizations that are considered disregarded 
entities cannot benefit from the incentives HUD is proposing that would 
benefit nonprofit participation in the program. The commenters 
recommended that HUD recognize disregarded entities under the 
definition of a nonprofit and adopt standards that are similar to those 
used by the IRS.
    HUD Response: HUD appreciates the stakeholder feedback. HUD may 
allow a Purchaser to endorse and assign Single Family Loans from HUD to 
Purchaser's special purpose entity acquisition vehicle on terms 
permitted in the CAA. HUD can establish eligibility criteria through 
sale documentation, such as the CAA, and will consider doing in a way 
that addresses this concern in future loan sales. HUD is not making the 
requested change through the rule as that method would limit the 
flexibility that HUD requires to run the Program.
4. Third-Party Capital Partners
    Two commenters stated that FHA should incorporate flexibility in 
the use of third-party capital partners by nonprofit entities in both 
the bidding process and the deployment of equity from upside revenues, 
with safeguards to prevent abuse. The commenters stated that many 
nonprofit entities are working with capital partners to unlock 
additional resources and create more affordable supply. One commenter 
stated that if FHA's stance on third-party capital partners remains 
unchanged, then the commenter suggests creating a fund accessible to 
qualified nonprofits to allow them to bid more competitively.
    HUD Response: HUD appreciates the stakeholder feedback. HUD is 
unable to establish a capital fund absent congressional appropriations 
that would provide for such a fund. The ability to use third-party 
capital partners could potentially be addressed through future sale 
documentation such as the Sale Notice to maintain flexibility for 
future sales and future market environments.

B. Question # 2: Whether a Competitive Sale of Single Family Loans 
Should Disallow Low-Value Mortgages and Properties That Are Vacant

    One commenter stated that low-value mortgages and properties that 
are vacant should not be disallowed and that more of these assets 
should be made available only to non-profit organizations and at a 
greater discount. The commenter also stated there should be a mandate 
to sell these assets to very-low-income buyers and the prices should be 
low enough to be viable for a non-profit.
    Another commenter said that HUD should include low-value mortgages 
as they may still be valuable to specialty servicers who can offer 
modifications not available under FHA's waterfall to borrowers with low 
cash flow but substantial equity, to enable impacted borrowers to keep 
their homes.
    The same commenter stated that HUD should remove the ``exclusion of 
low-value mortgages secured by vacant properties'' from Sec.  
203.413(b) as loan sales may offer a fast path to re-occupancy by a new 
owner and result in cost savings and more timely resolution of those 
assets.
    HUD Response: HUD appreciates the stakeholder feedback. HUD is 
retaining the exclusion of low-value mortgages secured by vacant 
properties in the Sec.  203.413(b) of the final rule. HUD believes that 
selling low-value, vacant, forward loans in bulk note sales is 
detrimental for neighborhoods because investors have few to no 
incentives to invest in these properties, and, without investor 
interest, they will blight neighborhoods which is contrary to the 
purposes of the Single Family Sale Program. Instead, HUD will address 
the sale of low-value mortgages secured by vacant properties through 
other means.

C. Question # 3: Should All Single Family Sales Require a ``First 
Look'' Program for Loans That Convert to Real Estate Owned Property

    Three commenters supported the inclusion of a ``first look'' 
program, with various recommended changes.
    One commenter stated that a ``first look'' program geared towards 
nonprofit entities would be impactful and allow for participation by 
the local community and local organizations. The commenter stated a 
recurring and regularly scheduled ``first look'' would add 
predictability and enable nonprofit organizations to assemble the 
required team, paperwork, and financing. The commenter also stated that 
stakeholders with proven community development experience, including 
community-based organizations and national nonprofits, should have 
priority to bid over investors and ``unknown nonprofits''.
    One commenter recommended that the language be revised to ``may'', 
rather than ``will'', include a ``first look'' program. The commenter 
stated that applying the requirement to every Participating Service 
Agreement (PSA) may lengthen rehabilitation and re-occupancy timelines, 
increase holding costs, and reduce the purchase price of the loans and 
the corollary benefit to the Insurance Fund. The commenter stated that 
the PSA should set the first-look requirements and enable the 
evaluation of a nonprofit's capital and capacity to support a 
nationwide first look program in specific non-performing loan sale 
localities on a sale-by-sale basis.
    HUD Response: HUD appreciates the stakeholder feedback. This final 
rule will maintain the ``first look'' program for every sale and will 
not make it optional. In addition to minimizing losses to the MMIF, the 
purpose of the Single Family Sale Program is to further HUD's historic 
mission of providing housing opportunities for low- and moderate-income 
families. The ``first look'' requirement serves that important purpose 
by providing owner-occupant buyers, governmental entities, and eligible 
nonprofit organizations the first opportunity to purchase property that 
converts to real estate owned (REO) property by foreclosure or deed-in-
lieu of foreclosure following the sale of a mortgage loan under the 
Single Family Sale Program.
    HUD believes every sale should have this requirement and the final 
rule retains the proposed language in Sec.  291.615(a) that post-sale 
requirements for Single Family Loans that convert to real estate owned 
property through foreclosure or deed-in-lieu of foreclosure will 
include a ``first look

[[Page 99708]]

program, providing an exclusive listing period for owner occupant, 
nonprofit organization, governmental entities, and other prospective 
buyers as permitted by HUD.''

D. Question #4: Whether Post-Sale Servicing Requirements Should Include 
Loss Mitigation Requirements That Match or Exceed FHA Loss Mitigation 
Requirements for Insured Mortgage Loans, What Loss Mitigation Options 
Have Been Successful, and What Loss Mitigation Standard and Waterfall 
Should Be Utilized

1. Comments on Loss Mitigation Options and Scope
    Several commenters were supportive of the importance of loss 
mitigation options and the proposal to require buyers under the Single 
Family Sale Program to offer loss mitigation options that are as or 
more generous than the FHA loss mitigation options.
    Two commenters stated that the requirement to provide FHA loss 
mitigation options should be a floor and that the waterfall of 
allowable outcomes should be broader. One commenter suggested that 
servicers should be encouraged to consider options such as principal 
forgiveness and payment deferral. One commenter stated that the first 
priority should be foreclosure prevention, and all buyers should offer 
borrowers options to reinstate, enter a trial, or permanent 
modification and, if that's not possible, to assist the buyer with a 
short sale, deed in lieu of foreclosure or short payoff.
    One commenter said required loss mitigation would not place a 
significant burden on servicers as the options are set out in the FHA 
Single Family Housing Policy Handbook and there is increased 
standardization of streamlined loss mitigation reviews in the industry.
    Two commenters noted the importance of loss-mitigation options that 
take into account the needs of specific borrowers. One commenter stated 
that the National Housing Act and the obligation to affirmatively 
further fair housing require HUD to take into account the needs of 
specific borrowers and design systems to promote the success of those 
borrowers. The commenter said that the obligation to affirmatively 
further fair housing is particularly relevant to FHA's insured loan 
program because Black and Latino borrowers rely heavily on it to 
purchase homes.
    One commenter stated that requiring the loss-mitigation options 
would mitigate the risk of investors purchasing notes for the purpose 
of foreclosing and avoid the unfairness of stripping away the benefits 
of FHA servicing options when there is a default. The commenter also 
noted that a borrower's circumstances may have changed and another 
opportunity to receive an affordable workout option is essential.
    One commenter stated that post-sale loss mitigation options should 
not be ``as or more generous'' as the FHA waterfall as the requirement 
is undefined and may force purchasers to offer the same options as 
those in the FHA waterfall to avoid allegations that the loss 
mitigation terms were less generous.
    One commenter stated that if foreclosure is unavoidable the buyer 
should be required to assume HUD's responsibility to create affordable 
homeownership for new owner/occupants, a requirement that benefits very 
low-, low-, and moderate-income buyers should be in place, and 
purchasers should be required to provide a percentage of outcomes in 
all categories. The commenter also stated that exceptions should be 
made only after a written request to HUD and HUD approval should be 
required before a sale to investors.
    One commenter raised concerns that loss-mitigation practices by 
private equity firms may not comply with FHA servicing requirements. 
The commenter provided an example of an entity that uses data to assess 
borrowers' ``job security'' to determine when to pursue loan 
modification or foreclosure, which does not consider other important 
factors or involve interactions with the borrower.
    One commenter stated that loss mitigation is extremely important, 
the foreclosure process is detrimental to families and communities, and 
it is important to allow families who are traditionally ostracized by 
mortgage lenders an opportunity at homeownership and second chances 
during hard economic times.
    HUD Response: HUD acknowledges the importance of loss mitigation in 
providing stability for families and communities, especially those 
traditionally marginalized by mortgage lenders. The final rule retains 
language in Sec.  291.615(a) requiring Purchasers to offer loss 
mitigation options ``that are as or more generous than FHA loss 
mitigation options,'' as outlined in the FHA Single Family Housing 
Policy Handbook. This standard ensures that borrowers receive robust 
support, with the flexibility for Purchasers to offer additional, 
tailored assistance as needed.
    HUD values the commenters' concerns and encourages Purchasers not 
to be deterred from providing expanded or customized loss mitigation 
options that exceed FHA standards. While the final rule specifies 
baseline requirements, HUD will address further enforcement of these 
requirements and any necessary future adjustments in sale notifications 
and legal documentation, allowing for adaptability as needs evolve.
2. Loss Mitigation Standards Should Be Publicly Available
    Two commenters stated that HUD should require Purchasers to make 
loss mitigation standards public. The commenters cited examples where a 
lack of transparency harmed borrowers and stated that without access to 
the guidelines and loss mitigation standards, borrowers and their 
advocates will be unable to effectively challenge denials and other 
errors, leading to avoidable foreclosures.
    A commenter considered it a major omission that the requirement to 
make loss mitigation standards public was not in the proposed rule. The 
commenter urged HUD to make the obligation to make loss mitigation 
guidelines accessible to the public clear in the final rule and in the 
FHA Single Family Housing Policy Handbook.
    HUD Response: HUD appreciates the stakeholder feedback. Due to the 
specificity and the potential for needed changes in the future, HUD's 
decisions to publish the Purchaser's loss mitigation requirements would 
be captured in future sale legal documentation (the CAA) and/or sale 
notifications such as a Federal Register Notice if this is desired, and 
not in the rule.
3. Importance of an Enforcement Mechanism
    One commenter stated it is essential that FHA develop proactive 
enforcement mechanisms to ensure that note purchasers are complying 
with their loss mitigation obligations. The commenter also stated that 
HUD should not rely on self-certification by purchasers, and purchasers 
that violate these loss mitigation obligations must face serious 
consequences, including bans from future note sales and civil 
prosecution.
    HUD Response: HUD appreciates the stakeholder feedback. Due to the 
specificity and the potential for needed changes in the future, HUD's 
decisions to enforce loss mitigation requirements would be captured in 
future sale legal documentation and/or sale notifications if this is 
desired, and not in the rule.

[[Page 99709]]

E. Question # 5: Should HUD Allow Nonprofit Organizations and 
Governmental Entities To Qualify for Priority Bidding Status in Single 
Family Sales

    Several commenters supported priority bidding status to allow 
nonprofit entities to be awarded up to 50 percent of the loans in a 
sale. One commenter recommended a priority bidding status for up to 75 
percent of the loan pool for nonprofit entities. One commenter stated 
HUD should offer priority bidding for nonprofit entities and proven 
community investment and community redevelopment organizations and 
create a preferred order of qualifications and priority to purchase 
homes (owner-occupant, nonprofits, and government).
    Two commenters recommended that a portion of assets in a sale 
should be set aside for nonprofit organizations with priority bidding 
status. One commenter recommended a 50 percent set aside and one 
commenter recommended a 75 percent set aside for both Single Family 
Sale Program and HECM loan sales. The commenters recommended that if 
the set aside has not been reached and a nonprofit is bidding on an 
asset, the nonprofit should win even if it is below the reserve. The 
commenters also recommended that if there are no nonprofit bids for 
assets in the set-aside, nonprofits should be offered a last look on 
the assets in an effort to obtain nonprofit bids. One commenter 
recommended that the last look include pricing of the available assets 
in the pool to obtain more nonprofit bids and a reserve disclosure to 
allow nonprofits to better target their bid strategy.
    Two commenters stated that acquisition by private investors leads 
to the conversion to high priced rental units that drive up housing 
costs and private investors tend to bid over reserve and win properties 
in locations where the need for affordable homeownership is great and 
impact potential is high. The commenters stated that nonprofits should 
be awarded properties that are closer to transit, have access to 
favorable jobs, and where homeownership equity is hardest to achieve.
    One commenter stated that the priority status for nonprofits must 
have adequate and enforceable safeguards to protect against fraud and 
sham nonprofit organizations.
    One commenter supported HUD's efforts to enforce mechanisms that 
allow owner occupants, nonprofit organizations, and government entities 
to acquire loans through the Program and recommended that HUD offer 
loan pools for sale through auctions limited to single family buyers, 
similar to the prior Neighborhood Stabilization Program.
    HUD Response: HUD appreciates the stakeholder feedback. If HUD 
decides to revise the carve-out percentage and how it will be applied 
to various sale types, it will be captured in future sale legal 
documentation and/or sale notifications and not in the rule itself. 
Such a change would also need to be reviewed by the Office of 
Management and Budget under the A-11 Circular. Maintaining this 
potential change as part of the sale documents and/or sale notification 
creates greater opportunities for HUD to retain some flexibility for 
future sales.

F. Question #6: Whether HUD Has Proposed a Workable and Efficient 
Process for Direct Sales of Single Family Loans

    Several commenters stated that nonprofits should be able to request 
a direct sale without a unit of government involved. One commenter 
suggested HUD consider extending the opportunity to qualified, 
capitalized non-profit organizations with proven track records. Two 
commenters suggested that nonprofit organizations that often partner 
with government should be able to request a direct sale without a unit 
of government involved, so long as HUD ensures the nonprofit is 
controlling the management and disposition of the assets.
    HUD Response: HUD appreciates the stakeholder feedback. HUD's 
implementation of the specifics of the direct sales will be established 
via Sale Notice pursuant to the Secretary's authority to ``prescribe 
requirements for a Direct Sale of Single Family Loans through Sale 
Notice'' as set out in Sec.  291.619(a) of the final rule. HUD is 
currently considering allowing direct sales to nonprofits as permitted 
by Sec.  291.617 of the final rule.

G. Question #7: Should a Borrower Loan Sale Notification Be Required 
and What Information Should Be Included

1. General Comments Regarding Borrower Loan Sale Notification
    One commenter strongly supported a requirement for pre-sale notice 
as an essential due process protection for borrowers that would enhance 
compliance with FHA's loss mitigation guidelines and protect the 
insurance fund from unnecessary losses. The commenter recommended that 
all servicers be required to provide the form to borrowers when a loan 
is referred to HUD for inclusion in a future loan sale.
    The same commenter stated that the notice should be a HUD form or 
HUD-approved template and include: (1) a description of the Single 
Family Loan Sale Program; (2) a summary of the FHA loss mitigation 
options; (3) a chronology of the servicer's review of the borrower for 
the FHA loss mitigation options, including dates for waterfall reviews 
and outcomes or, if a waterfall review was not conducted, the reasons 
it did not occur, including dates of outreach and reference to specific 
communications; (4) notification that the borrower can still seek a 
loss mitigation review from the servicer under FHA guidelines if the 
borrowers' circumstances have changed since a prior review; (5) 
information about how the borrower can dispute the servicer's 
representations about past loss mitigation reviews; (6) notification 
that the loan will not be placed in a loan sale pool as long as a 
dispute over past loss mitigation conduct is pending or a new loss 
mitigation review based on changed circumstances is underway; and (7) 
information about referrals to housing counselors and legal aid offices 
in the borrower's vicinity.
    One commenter questioned whether an advance notice is helpful or 
detrimental to the distressed borrower's wellbeing and suggested adding 
information to the default/delinquency notice instead.
    One commenter stated that FHA should allow servicers to comply with 
the requirement by adding elements to the servicing transfer 
notification already required under 12 CFR 1024.33(b). The commenter 
suggested this approach would reduce the borrower's confusion, the 
cost, and the environmental impact of sending two separate interrelated 
letters.
    HUD Response: HUD appreciates the stakeholder feedback. The final 
rule retains language in Sec.  291.605(a)(5) that requires the 
Participating Servicer to ensure that the Loan Sale Notification is 
provided to each borrower and any other parties required by the 
Secretary. The details around how the Loan Sale Notification to the 
borrower is structured and what information must be included in such 
notification will be set out in more detail by HUD in the Sale Notice 
or Mortgagee Letter.
2. Post-Notice Loss Mitigation Reviews
    One commenter stated that if the borrower informs the servicer that 
they had a change in financial circumstances before the sale occurs, 
the servicer should reconsider the borrower's eligibility under the HUD 
waterfall. The commenter stated that the presale notice will prompt 
those discussions with

[[Page 99710]]

borrowers who have improved their financial circumstances and HUD 
should clearly state the expectation that servicers will re-review 
before the sale.
    HUD Response: HUD appreciates the stakeholder feedback. Due to the 
specificity and the potential for needed changes in the future, HUD's 
decisions around post-notice loss mitigation reviews would be captured 
in future sale legal documentation, such as the Participating Servicer 
Agreement, and/or sale notifications if this is desired, and not in the 
rule.
3. Recommended Dispute Resolution System
    One commenter stated that HUD should provide a more comprehensive 
dispute resolution system through its National Servicing Center (NSC), 
with the capacity to directly address borrower disputes regarding loss 
mitigation. The commenter stated that the NSC should review complaints, 
maintain written records of the reviews, and produce a memorandum of 
findings and conclusions. The commenter further stated that HUD should 
conduct a final review of the NSC's determination at the request of the 
borrower and HUD decisions should be subject to review under the 
Administrative Procedures Act. The commenter further stated that the 
presale notice should give details about a dispute resolution process 
for borrowers and direct the borrower or their representative to 
address the complaint to the NSC and the servicer.
    HUD Response: HUD appreciates the stakeholder feedback regarding 
the importance of a comprehensive dispute resolution system through the 
HUD National Servicing Center (NSC). The NSC will be consulted to 
develop a framework to address borrower disputes related to loss 
mitigation, including the maintenance of written records and the 
provision for final review requests. Specific details about a dispute 
resolution process will be included in future sale legal documentation 
and notifications rather than in the rule itself, ensuring that 
borrowers are informed about how to address their complaints 
effectively. HUD remains committed to enhancing transparency and 
responsiveness in the resolution of borrower disputes.

H. Question #8: What Information Should HUD Include in Periodic Reports 
on Single Family Sales Loan and Property Outcomes

1. Content of Data Collection and Reports
    One commenter stated that reporting the post-sale status of loans 
sold through the Single Family Sale Program is important to fully 
assess the impact of the program on communities and borrowers. The 
commenter recommended that the data be publicly available, updated at 
least annually, and include: (1) post-sale loss mitigation activities, 
including approvals and denials of options, including the levels and 
nature of payment changes, and (when available) old and new borrower 
debt-to-income ratios; (2) demographic and geographic data about 
homeowners and loss mitigation; (3) data on the long-term performance 
of loans after loss mitigation, including rates of redefault; and (4) 
data on subsequent sales and rentals involving the properties. The 
commenter stated that reports with this type of data were produced by 
government entities, including during and after the 2008 foreclosure 
crisis.
    Two commenters stated that racial and other demographic data about 
homeowners is important to ensure the program is affirmatively 
furthering fair housing.
    A commenter stated that buyers should include the number of loss 
mitigation approvals and denials and the outcomes of all loans or 
properties that they or related entities control and that information 
should be made public and regularly updated.
    A commenter stated that HUD should provide performance outcomes for 
each buyer at least once annually. The commenter stated HUD should also 
provide qualified bidders with defaulted buyer information and should 
consider allowing performing buyers with the opportunity to acquire 
assets from those buyers in default.
    One commenter stated that the proposed rules maintain the current 
standard of four years of outcome data and that is an insufficient 
period of time to properly assess program outcomes.
    One commenter requested that FHA publish more information broken 
down by note pools, including information on vacancy rates and a 
breakdown by pool of unpaid loan balances. The commenter also requested 
that FHA provide more data broken down by note purchaser, including 
unpaid loan balances and sales prices.
    HUD Response: HUD appreciates the stakeholder feedback regarding 
data transparency and reporting on Single Family Sales outcomes. HUD 
recognizes the value of detailed reporting, including post-sale loss 
mitigation activity, demographic and geographic data, and long-term 
loan performance metrics. The final rule continues to provide that 
outcome data and the timeline for reporting will be set out in the CAA, 
which will generally continue to provide for outcome data over a four-
year period, while sale notification and sale documentation may address 
updates to reporting requirements and additional data presentation as 
deemed necessary to support program goals.
2. Requested Clarity on Reporting Obligations
    A commenter stated that the proposed rule appears to direct 
subsequent transferees from initial buyers to comply with post-sale 
reporting obligations. The commenter recommended that the language be 
edited to make that point clear as the post-sale reporting obligation 
would have little value if it did not apply to transferees.
    HUD Response: HUD appreciates the stakeholder feedback and will 
review the current reporting requirements and the information gathered. 
Any changes to the reporting requirements and how HUD presents the 
information will be captured through sale notifications like the 
Federal Register Notice and/or sale legal documents, including the BIP 
and the CAA. This will provide flexibility for the Department and the 
ability to improve and enhance reporting based on program experience.
3. Oversight and Enforcement of Reporting Obligations
    One commenter identified concerns about reliance on self-reporting 
to assess servicers' post-sale performance and recommended that loan 
purchase agreements authorize limited direct HUD oversight of servicers 
before and after the four-year mandatory post-sale reporting period. 
The commenter stated that such oversight would help determine whether a 
property remains owner-occupied or was converted to a rental investment 
property and would allow assessment of the long-term efficacy of loss-
mitigation options offered by post-sale servicers. The commenter also 
stated that HUD should assess meaningful sanctions, including 
disqualification from future sales and financial penalties, for 
substantial noncompliance with reporting requirements.
    HUD Response: HUD appreciates the stakeholder feedback and will 
review the current reporting requirements, and the information 
gathered. Any changes to the reporting requirements and how

[[Page 99711]]

HUD presents the information will be captured through sale notification 
and/or sale legal documents.

I. Question #9: Should Eligibility Criteria for a Single Family Sale 
Include Satisfaction of HUD's Loss Mitigation Requirements

    One commenter strongly supported the language in the proposed rule 
that requires satisfaction of HUD's loss mitigation requirements as a 
condition for sale eligibility. The commenter stated that HUD has long 
represented that compliance with HUD's loss mitigation requirements is 
a condition to a loan's eligibility for a sale, which is consistent 
with HUD's requirement that mortgagees certify comply with HUD's 
regulations as a condition to payment on an insurance claim.
    The commenter stated that HUD should develop a system to ensure 
compliance by servicers and that servicer check-box self-certification 
is insufficient. The commenter provided examples of improper self-
certifications and stated that HUD Office of the Inspector General 
reports have found problems with self-certification by servicers and 
failures by servicers to provide correct loss mitigation assistance.
    The commenter stated that HUD should require documentation of the 
servicer's loss mitigation review as a condition to a loan's 
eligibility for early claim payment and a sale of the loan. The 
commenter stated the loss mitigation waterfall in the FHA Single Family 
Housing Policy Handbook requires servicers to have a record of how the 
HUD waterfall was applied and if a servicer cannot produce that 
documentation, it must be required to establish compliance with the HUD 
outreach requirements as set out in the Handbook.
    One commenter stated that a loss mitigation addendum should be 
signed with every application approval and a report indicating each 
outcome should be provided on a quarterly basis, including whether it 
is a reinstatement, trial or permanent modification, short sale or 
payoff, deed in lieu, or if after foreclosure than evidence of sale to 
an owner/occupant, lease to an income-qualified tenant, and evidence of 
sale to a community of color or marginalized individual if available.
    HUD Response: HUD appreciates the stakeholder feedback on ensuring 
servicers' compliance with loss mitigation requirements for loan sale 
eligibility. HUD reaffirms that satisfying these requirements is 
essential for sale eligibility and is a post sale requirement under 
Sec.  291.615(a) of the final rule. HUD acknowledges that flexibility 
may be needed for certain scenarios, such as disaster-related sales. 
The final rule sets out actions HUD may take in the event there is a 
failure to meet post-sale requirements or any submission of false 
information or misrepresentation Sec.  291.621. Any related criteria 
will be detailed in the sale notification or sale documents, rather 
than the rule, to allow for adaptable policy implementation.

J. Question #10: Should HUD Offer Favorable Sale Terms to Governmental 
or Nonprofit Entities

1. Potential Favorable Sale Terms
    Several commenters directly supported providing favorable sale 
terms to nonprofit entities. A commenter stated that a government or 
non-profit operator is more likely to utilize the program for community 
benefit and sell or lease the home to an income qualified person or 
person of color. A commenter said that more favorable sale terms and 
conditions for nonprofit organizations and community-based entities, 
such as allowing a first look, will help organizations know what 
properties are coming into the sale and how they can be poised to 
obtain a property and return it to a useful purpose.
    One commenter recommended reducing the reserve price to better 
facilitate transitions of the property to nonprofit organizations at a 
price that is closer to fair market value. The commenter recommended 
additional favorable terms such as bulk bidding to allow for greater 
flexibility and faster disposition and allow a financial incentive to 
nonprofit organizations in the form of a reduced price for a larger 
purchase.
    One commenter stated HUD should allow a waiver of certain reporting 
criteria, such as proof of ethnicity, familial status or income as most 
purchasers cannot ask those questions and it is not always possible to 
get a HUD-approved non-profit organization to engage in the process. 
The commenter recommended that HUD use census tract information to help 
the buyer with this situation.
    HUD Response: HUD appreciates the feedback supporting favorable 
sale terms for nonprofit entities and community-based organizations. 
Adjustments such as reduced reserve prices, first-look provisions, bulk 
bidding, and streamlined reporting requirements could enhance 
nonprofits' participation and community impact. HUD will consider 
making modifications to sale terms in sale notifications and sale 
documentation to address this concern.
2. Safeguards on Benefits to Nonprofit Organizations
    One commenter stated that any system created for the benefit of 
nonprofit organizations must have appropriate safeguards to prevent 
abuse of the system by straw buyers and there should be adequate 
enforcement and oversight.
    HUD Response: HUD appreciates the feedback regarding safeguards to 
prevent misuse of systems established for nonprofit organizations. The 
Department is committed to preventing bid abuse and ensuring fair 
qualification processes. Any adjustments to the bidding or 
qualification criteria will be implemented through sale notifications 
including the Federal Register and sale documents like the BIP and the 
CAA rather than in the rule, allowing for greater flexibility in 
enforcement and oversight.
3. Recommended Deadline Extensions for Nonprofits
    Two commenters recommended that nonprofits be allowed 60 days to 
perform pre-bid due diligence and 90 days to close. The commenters 
stated that nonprofits often request extensions from HUD because they 
rely on debt to finance the sales and do not have immediate access to 
substantial cash reserves and providing the additional time up front 
would alleviate pressure on both nonprofits and HUD. One commenter 
stated an extended pre-bid due diligence period would allow more time 
to assess the interest of affiliate networks in the properties.
    HUD Response: HUD appreciates the feedback regarding extended 
timelines for nonprofits to conduct pre-bid due diligence and close 
sales. HUD acknowledges the unique challenges nonprofits face in 
securing financing and recognizes that additional time could alleviate 
pressures on both nonprofits and HUD. Any timeline extensions would 
likely apply to all bidder types to ensure equity. Such changes would 
be implemented through sale notifications (such as the Federal Register 
Notice) and sale documentation (the Qualification Statement, the BIP 
and CAA) rather than in the rule itself, providing the Department 
greater flexibility.

Public Comments and Recommendations

A. General Support

    A number of commenters expressed overall support for the rulemaking 
and appreciated that the proposed rule

[[Page 99712]]

incorporated prior stakeholder input. Several commenters expressed 
support for converting the Single Family Sale Program from a pilot to a 
permanent program.
    HUD Response: HUD appreciates the stakeholder feedback in support 
of the Single Family Sale Program and this rule.

B. Racial Homeownership Disparities

    Several commenters discussed racial homeownership disparities, the 
racial wealth gap, and the importance of homeownership to individuals 
and communities. One commenter stated that Black and Latino homeowners 
are disproportionately impacted by HUD note sales and the related 
impacts to communities that are targeted by institutional investors. 
One commenter said that the obligation to affirmatively further fair 
housing is particularly relevant to FHA's insured loan program because 
Black and Latine borrowers rely heavily on it to purchase homes.
    HUD Response: HUD appreciates the comments on racial disparities in 
homeownership, the racial wealth gap, and the vital role of 
homeownership in supporting communities. The Department understands 
concerns that Black and Latine homeowners may be disproportionately 
affected by note sales and institutional investor involvement. 
Recognizing the importance of affirmatively furthering fair housing, 
HUD is aware of the critical role FHA-insured loans play for many Black 
and Latine borrowers. HUD remains committed to promoting equitable 
outcomes and strengthening protections for communities impacted by 
systemic inequities. These insights support HUD's ongoing efforts to 
foster fair housing access and reduce disparities across all 
communities.

C. Support for Nonprofit Organizations and Concerns Regarding Private 
Investors

    Several comments were submitted that provide general support for 
nonprofit and community-based organizations and raise concerns 
regarding the role of private investors. Commenters noted the 
importance of nonprofit and community-based organizations in single 
family loan sales, and said these organizations have the experience and 
expertise to meaningfully invest in communities, navigate public and 
private funding, and foster homeownership.
    A number of commenters raised concerns regarding the impacts of 
private investors in loan sales. One commenter provided data on the 
impact of purchases by institutional investors and stated HUD's goal 
should be to end the practice of selling FHA notes to private 
investors. Two commenters stated that market forces alone cannot 
address the cost constraints placed on low- and moderate-income 
families. A commenter noted that if private investors continue to 
purchase loans, strong enforcement of borrower protections and public 
reporting data regarding the program and outcomes will be important. 
One commenter stated that given the capacity limits of nonprofit 
organizations, profit-motivated investors will likely remain a major 
part of the program and stated it is important for HUD to mitigate the 
harm that profit-motivated investors could impose on FHA borrowers if 
those investors are left with largely unfettered discretion.
    HUD Response: HUD appreciates the strong support expressed by 
commenters for nonprofit and community-based organizations and 
acknowledges the valuable role these organizations play in single 
family loan sales. HUD recognizes that nonprofits have a unique 
capacity to positively impact communities through their extensive 
expertise, commitment to fostering homeownership, and ability to 
navigate public-private funding sources effectively.
    HUD also notes the concerns raised by commenters regarding the role 
of private investors in loan sales, including the potential challenges 
market-driven entities may pose for low- and moderate-income families. 
While HUD anticipates that private investors will continue to 
participate alongside nonprofits due to capacity constraints within the 
nonprofit sector, HUD is committed to exploring avenues to balance 
investor involvement with strong borrower protections and community-
focused objectives. To this end, HUD will continue to enforce borrower 
protections and enhance transparency by providing public reporting on 
program outcomes.
    HUD remains dedicated to reviewing feedback on how best to support 
nonprofit organizations while ensuring private investor participation 
aligns with HUD's mission of promoting sustainable, affordable 
homeownership opportunities. The Department will carefully consider all 
suggestions as part of its ongoing commitment to improve the Single 
Family Sales Program.

D. Recommendation That HUD Impose and Enforce Income Limits

    Two commenters recommended that HUD bolster the objective of 
selling to households earning less than 120 percent AMI and renting to 
households at or below 80 percent AMI by requiring that both non-profit 
and for-profit comply with those AMI limits and barring entities that 
do not comply with those objectives from future sales.
    HUD Response: HUD appreciates the stakeholder feedback. Any 
requirements related to income limits, eligibility, or restrictions on 
future participation for non-compliance will be outlined within the 
sale notifications (such as the Federal Register Notice) and associated 
legal documents like the Qualification Statement, the CAA and the BIP) 
rather than in the rule itself. Addressing these criteria through sale 
documentation provides HUD with the flexibility needed to adjust and 
strengthen program requirements in response to changing market 
conditions and program goals. HUD remains committed to transparency and 
will ensure stakeholders have clear guidance through publicly 
accessible sale documents.

E. Clarify That the Participating Servicer Agreement (PSA) Controls 
Eligibility Criteria

    One commenter stated that in order to set proper expectations with 
Participating Servicers, Sec.  203.413(b) should expressly state that 
the ``acceptability criteria include to the satisfaction of the Single-
Family Sale loss mitigation eligibility requirements as defined in the 
PSA''.
    HUD Response: HUD appreciates the stakeholder feedback. HUD 
acknowledges the importance of clearly setting expectations for 
Participating Servicers. This clarification will be addressed through 
the PSA and associated sale documentation rather than in the rule 
itself. This approach allows HUD the flexibility to update and refine 
the criteria as necessary in response to evolving program needs, while 
ensuring that servicers understand their obligations under the PSA. 
These documents will be publicly posted for each sale, ensuring 
transparency for all stakeholders.

F. Repurchase Protocol When Participating Servicer Is Engaged in 
Significant Misconduct

    One commenter recommended that HUD implement a protocol for the 
repurchase of loans in cases where a participating servicer engaged in 
significant misconduct and identified ambiguity in the current 
requirements. The commenter stated that the rules provide that HUD can 
withdraw a loan from a sale for any reason, including noncompliance 
with the Conveyance, Assignment and Assumption Agreement (CAA), at any 
time prior to the

[[Page 99713]]

settlement date and the definitions of CAA and Sale Notice state that 
the documents will include certain ``repurchase requirements''. The 
commenter stated that the comments to Sec.  291.605 mentions 
``repurchase criteria'' applicable to servicers, although it is not 
clear whether the ``repurchase'' mechanism is distinct from the 
``withdrawal'' of a loan before the settlement.
    The commenter also stated that HUD should not terminate repurchase 
obligations at the post-sale settlement date. The commenter recommended 
that the Sale Notice and CAA inform purchasers that the loans are 
subject to repurchase as long as they are held by the initial 
purchaser. The commenter recommended that if it becomes apparent after 
a sale that the Participating Servicer misrepresented its compliance 
with FHA loss mitigation guidelines, the purchaser should not be 
permitted to foreclose. Instead, the commenter stated that HUD should 
require the noncomplying Participating Servicer to repurchase the loan, 
comply with FHA loss mitigation guidelines and provide other remedies 
available under FHA guidance. The commenter stated this would deter 
routine misrepresentations of compliance with FHA guidelines.
    HUD Response: HUD appreciates the stakeholder feedback. The 
Department acknowledges the importance of ensuring transparency and 
accountability in the sale process, particularly when there are 
potential compliance issues with FHA loss mitigation guidelines. HUD 
will review the possibility of more clearly distinguishing between the 
``withdrawal'' of a loan prior to settlement and the ``repurchase'' 
mechanism applicable post-settlement. This may include ensuring that 
the definitions of the CAA and Sale Notice reflect these distinctions 
more explicitly.
    The commenter's suggestion that repurchase obligations extend 
beyond the post-sale settlement date in cases of noncompliance with FHA 
guidelines will also be carefully considered. HUD agrees that robust 
mechanisms should be in place to deter misrepresentations of compliance 
and ensure that loans are managed in accordance with FHA's loss 
mitigation guidelines.
    As stated in the rule, the repurchase criteria and related terms 
will be more clearly defined in the Sale Notice, which will be publicly 
posted for each sale. Any adjustments to these terms will be addressed 
through the legal documents rather than in the rule itself, as this 
provides the flexibility needed to adapt to evolving concerns and 
ensure compliance with FHA's standards.

G. Clarification Making the Purchaser Bound by the Terms of the CAA and 
Notice of Sale

    A commenter supported the requirement that ``any subsequent 
transferee of or servicer'' of the initial loan purchaser comply with 
the terms of the CAA and Notice of Sale. The commenter stated that the 
proposed rule specifies that subsequent transferees and their servicers 
must offer loas mitigation options that meet the same standard as those 
of the original purchaser.
    The commenter stated that the term ``transferee'' in Sec.  
291.615(a) is not defined in the regulations and could be open to 
interpretation. The commenter stated that further Handbook or Mortgagee 
Letter of clarification would be appropriate to clarify it if means 
transferees of the note, assignees of the mortgage, or transferees of 
title to the real property. The definition is relevant because 
transferees of the promissory note may not have knowledge of the terms 
of the CAA and Sale Notice. To avoid later enforcement issues, HUD 
could require information about the CAA and Sale Notice obligations to 
be included in the recorded assignment of the mortgage to the initial 
purchaser and recording the CAA in property records would also provide 
notice to subsequent purchasers.
    HUD Response: HUD appreciates the stakeholder feedback. The 
Department acknowledges the commenter's concern regarding the 
interpretation of the term ``transferee'' in Sec.  291.615(a) and its 
potential ambiguity in the absence of a defined meaning within the 
regulations.
    HUD agrees that further clarification--potentially through a 
Handbook or Mortgagee Letter--could be useful to specify whether 
``transferee'' refers to transferees of the note, assignees of the 
mortgage, or transferees of title to the real property. Additionally, 
HUD recognizes the concern that transferees of the promissory note may 
not be aware of the terms of the CAA and Sale Notice, which could lead 
to enforcement challenges.
    HUD will consider incorporating information about the CAA and Sale 
Notice obligations into the recorded assignment of the mortgage to the 
initial purchaser and may review the potential for recording the CAA in 
property records to provide notice to subsequent purchasers. Any 
changes to the recorded assignment requirements or sale terms will be 
addressed within the sale agreements and related legal documents. As 
noted in the rule, these documents will be publicly posted for each 
sale, and making changes through these legal documents allows HUD the 
flexibility to adapt to evolving needs and stakeholder feedback.

H. Clarify That Reporting Requirements in 24 CFR 291.615(b) Apply to 
Transferees and Their Servicers

    A commenter stated it is unclear who must comply with the purchaser 
reporting requirements in Sec.  291.615(b) and requested that HUD 
clarify that subsection. The commenter stated that Sec.  291.615(b) 
refers to the obligation of the ``purchaser'', while Sec.  291.615(a) 
specifically extends the obligations to subsequent transferees and 
their servicers. The commenter suggested the absence of a reference to 
transferees and their servicers in Sec.  291.615(b) may be an oversight 
and requested that HUD clarify by specifically designating the 
reporting obligations as applicable to transferees and their servicers.
    HUD Response: HUD appreciates the stakeholder feedback. While Sec.  
291.615(a) specifically extends obligations to subsequent transferees 
and their servicers, HUD acknowledges that the absence of a reference 
to transferees and their servicers in Sec.  291.615(b) may cause some 
confusion.
    To clarify, the reporting obligations do extend to transferees and 
their servicers, as detailed in the sale agreements and related 
documentation. These requirements are more fully defined within the 
legal agreements governing each sale. As stated in the rule, HUD will 
publicly post these documents for each sale, providing greater 
transparency on the obligations of purchasers, transferees, and 
servicers. Any future changes to sale terms or definitions will be 
reflected through these legal agreements to maintain flexibility in 
adapting to evolving program needs.

I. Transactional Documents Should Be Made Available to the Public

    One commenter stated that the rule should make clear that all key 
transactional documents described in Sec.  291.601, and adapted for the 
specific sale, will be accessible to the public on HUD's website. The 
commenter stated that documents such as the Participating Servicer 
Agreement, Bidder Information Package, the Conveyance, Assignment and 
Assumption Agreement, the Interim Servicing Agreement, and the Desk 
Guide are referenced and defined by the proposed rule. The commenter 
also stated that the rule provides that an ``Addendum'' to each of the 
documents will be published on HUD's website for

[[Page 99714]]

each Single Family Sale. The commenter is unclear whether ``Addendum'' 
means the form as adapted to the specific loan sale, but strongly 
support the provision if that is the intended meaning.
    The commenter stated that transparency is important so borrowers 
can know the post-sale servicing obligations that are binding on a loan 
purchaser and its assignees, including the Convenance, Assignment and 
Assumption Agreement and the Sale Notice. The commenter said that 
without easy access to those documents, borrowers and their advocates 
will not know the eligibility requirements for loss-mitigation options 
and that will prevent borrower's from effectively challenging errors in 
servicing and will lead to unnecessary foreclosures.
    HUD's Response: HUD appreciates the stakeholder feedback. HUD is 
committed to ensuring transparency in the single family sale program 
process. As stated in the rule, key documents--including the 
Participating Servicer Agreement (PSA), Conveyance, Assignment and 
Assumption Agreement (CAA), Interim Servicing Agreement (ISA), and Desk 
Guide--will be made available to the public on HUD's website.
    The Bidder Information Package (BIP), however, will only be made 
available to qualified bidders to protect the integrity of the bidding 
process. Regarding the commenter's question about the ``Addendum,'' HUD 
clarifies that the term refers to the document as adapted for each 
specific loan sale, and this will also be made available as part of the 
public documentation for each sale.
    HUD recognizes the importance of transparency so that borrowers and 
their advocates are informed about post-sale servicing obligations and 
loss-mitigation options. By providing public access to these documents, 
HUD aims to ensure borrowers have the information they need to 
challenge servicing errors and avoid unnecessary foreclosures.

J. Recommended Flexibility to Curtailment Provisions

    One commenter advocated for reform to FHA's claims curtailment 
rules for all claim types. The commenter was concerned by the provision 
that ``HUD will curtail Debenture Interest'' in Sec.  203.413(d), even 
if a claim remains suspended for reasons beyond the servicer's control. 
The commenter was also concerned that HUD's definition of ``Debenture 
Interest'' included ``approved reimbursable expenses'' subject to 
curtailment.
    The commenter recommended that the final rule: (a) limit 
curtailment to deadlines missed due to factors within the servicer's 
control and (b) clarifying that servicers may file supplemental claims 
under FHA Single Family Housing Policy Handbook if necessary. The 
commenter stated that addressing curtailment provisions would encourage 
participation in the Single Family Sales Program as servicers will not 
be penalized when making every effort to comply with claims filing 
deadlines. The commenter suggested that without this change the 
prospect of losing interest and out of pocket costs may chill 
participation.
    HUD's Response: HUD appreciates the stakeholder feedback; however, 
the curtailment of claims, including debenture interest and 
reimbursable expenses, is outside the scope of this current rulemaking. 
HUD acknowledges the importance of addressing these issues and 
encourages continued engagement on how to improve the claims process. 
HUD will consider this feedback for future policy updates and 
administrative guidance.

K. Required Sales to Owner-Occupants

    One commenter stated that given the negative effects market 
speculation on the single-family home market, there should be a 
requirement that 100 percent of the properties sold end up in the hands 
of owner occupants. The commenter criticized the HVLS program for not 
doing enough to ensure a broader market effort to maintain affordable 
homes for first time buyers and younger generations.
    HUD's Response: HUD appreciates the thoughtful feedback regarding 
the impact of market speculation on the single-family home market and 
the suggestion to ensure that 100 percent of properties sold end up in 
the hands of owner-occupants. HUD is committed to supporting affordable 
homeownership opportunities, particularly for first-time homebuyers and 
younger generations.
    HUD will carefully consider this proposal as part of our ongoing 
efforts to enhance the Home Equity Conversion Mortgage Loan Sales 
(HVLS) program and other Single Family Sale Program initiatives. 
However, any modifications to the percentage of properties designated 
for owner-occupants would be implemented through the sale notifications 
and legal documents, rather than the rule itself. This approach allows 
the Department the flexibility to adapt sale requirements as needed in 
response to evolving market conditions and program goals.
    HUD remains committed to exploring all options to increase 
affordable homeownership and reduce market pressures on low- and 
moderate-income buyers.

L. Recommended Convening of Practitioners

    Two commentors recommended that FHA convene practitioners with 
experience using the program to allow HUD to better understand the 
concerns of nonprofits working to expand their single-family housing 
footprint. The commenters suggested that providing an opportunity for 
mission-driven stakeholders to share best practices would expand the 
reach and effectiveness of the program and continue to inform necessary 
reforms.
    HUD Response: HUD appreciates the insightful comments regarding the 
value of convening practitioners with experience in the Single Family 
Sale Program. HUD recognizes the importance of engaging mission-driven 
stakeholders to better understand the challenges nonprofits face as 
they work to expand their single-family housing footprint. HUD agrees 
that providing a forum for practitioners to share best practices would 
not only strengthen program effectiveness but also support broader 
affordable housing goals.
    HUD is committed to expanding collaboration with the nonprofit 
community and will explore opportunities to convene experienced 
practitioners. Such a platform could enhance stakeholder engagement, 
facilitate knowledge sharing, and inform ongoing program reforms, 
ensuring that the needs and expertise of nonprofits are integrated into 
future improvements of the program. HUD welcomes continued dialogue on 
this important initiative.

M. Credit Scores for First-Time Homeowners

    One commenter stated that credit scores should not be a 
consideration for first-time homeowners, who can build credit through 
homeownership.
    HUD Response: HUD appreciates the comment regarding the 
consideration of credit scores for first-time homebuyers. HUD 
understands the viewpoint that homeownership itself can serve as a 
pathway to building credit. However, credit scores play an important 
role in assessing a borrower's ability to repay a loan and managing 
overall risk within the housing market.
    At the same time, HUD remains committed to expanding homeownership 
opportunities and continues to explore ways to responsibly assist 
first-time homebuyers, including offering programs with more flexible 
credit requirements. HUD values input on this

[[Page 99715]]

issue and will take it into account as we seek to balance financial 
accessibility with sustainable homeownership outcomes.

V. Findings and Certifications

Regulatory Review--Executive Orders 12866, 13563, and 14094

    Pursuant to Executive Order 12866 (Regulatory Planning and Review), 
a determination must be made whether a regulatory action is 
significant, and therefore, subject to review by the Office of 
Management and Budget (OMB) in accordance with the requirements of the 
order. Executive Order 13563 (Improving Regulations and Regulatory 
Review) emphasizes the importance of quantifying both costs and 
benefits, reducing costs, harmonizing rules, and promoting flexibility. 
The order also directs executive agencies to analyze regulations that 
are ``outmoded, ineffective, insufficient, or excessively burdensome, 
and to modify, streamline, expand or repeal them in accordance with 
that was been learned.'' Executive Order 13563 further directs that, 
where relevant, feasible, and consistent with regulatory objectives, 
and to the extent permitted by law, agencies are to identify and 
consider regulatory approaches that reduce burdens and maintain 
flexibility and freedom of choice for the public. Executive Order 14094 
entitled ``Modernizing Regulatory Review'' (hereinafter referred to as 
the ``Modernizing E.O.'') amends section 3(f) of Executive Order 12866 
(Regulatory Planning and Review), among other things.
    As previously discussed, this rule would provide flexibility for 
the management of defaulted loans, more efficiently accept assignment, 
and dispose of assigned mortgages through loan sales and reduce the 
overall financial exposure of the MMIF. This final rule was determined 
not to be a ``significant regulatory action'' as defined in section 
3(f) of Executive Order 12866 as amended by Executive Order 14094.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.) 
generally requires an agency to conduct a regulatory flexibility 
analysis of any rule subject to notice and comment rulemaking 
requirements, unless the agency certifies that the rule will not have a 
significant economic impact on a substantial number of small entities. 
Small entities include small businesses, small not-for-profit 
organizations, and small governmental jurisdictions.
    This rule makes the Single Family Sales Program permanent and makes 
changes to HUD's regulations to implement parts 203, 206, respectively 
referring to Single Family Forward loans and HECM, and part 291 to 
efficiently manage HUD's defaulted single family assets and minimize 
losses to the MMIF. While small entities such as mortgage service 
providers may be affected by this Program, these entities would not 
incur a significant economic impact because the Program would provide 
servicers with the chance to assign burdensome and problematic loans to 
HUD. Therefore, the undersigned certifies this proposed rule will not 
have a significant economic impact on a substantial number of small 
entities.

Environmental Impact

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

Executive Order 13132, Federalism

    Executive Order 13132 (Federalism) prohibits an agency from 
publishing any rule that has federalism implications if the rule either 
(i) imposes substantial direct compliance costs on State and local 
governments and is not required by statute, or (ii) preempts State law, 
unless the agency meets the consultation and funding requirements of 
section 6 of the Executive order. This rule does not have federalism 
implications and does not impose substantial direct compliance costs on 
State and local governments or preempt State law within the meaning of 
the Executive order.

Paperwork Reduction Act

    The information collection requirements contained in this final 
rule have not been revised from those provided in the proposed rule and 
have been submitted to the Office of Management and Budget (OMB) under 
the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) for review 
and approval.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 
1531-1538) (UMRA) establishes requirements for Federal agencies to 
assess the effects of their regulatory actions on State, local, and 
Tribal governments, and on the private sector. This rule does not 
impose any Federal mandates on any State, local, or Tribal government, 
or on the private sector, within the meaning of the UMRA.

List of Subjects

24 CFR Part 203

    Hawaiian Natives, Home improvement, Indians--lands, Loan programs--
housing and community development, Mortgage insurance, Reporting and 
recordkeeping requirements, and Solar energy.

24 CFR Part 206

    Aged, Condominiums, Loan programs--housing and community 
development, Mortgage insurance, and Reporting and recordkeeping 
requirements.

24 CFR Part 291

    Community facilities, Conflicts of interest, Homeless, Lead 
poisoning, Low- and moderate-income housing, Mortgages, Reporting and 
recordkeeping requirements, and Surplus government property.

    Accordingly, for the reasons described in the preamble, HUD amends 
24 CFR parts 203, 206, and 291 as follows:

PART 203--SINGLE FAMILY MORTGAGE INSURANCE

0
1. The authority citation for part 203 continues to read as follows:

    Authority: 12 U.S.C. 1707, 1709, 1710, 1715b, 1715z-16, 1715u, 
and 1715z-21; 15 U.S.C. 1639c; 42 U.S.C. 3535(d).

0
2. Add Sec.  203.413 to read as follows:


Sec.  203.413  Amount of payment--Single Family Sale assignments.

    (a) Time of payment. Upon an assignment of a mortgage insured under 
this part that is acceptable to the Commissioner, made pursuant to a 
Single Family Sale and in accordance with Sec.  291.609 or Sec.  
291.619 of this chapter, the Commissioner shall pay to the mortgagee 
the unpaid principal balance of the loan at the time of assignment and 
an amount calculated in accordance with the Participating Servicer 
Agreement (PSA), as defined in Sec.  291.601 of this chapter.
    (b) Acceptability criteria. For assignment, the mortgagee must 
determine and certify the mortgage satisfies the Commissioner's 
acceptability criteria for the Single Family Sale. Acceptability 
criteria includes satisfaction of the Single Family Sale loss 
mitigation eligibility requirements and exclusion of low-

[[Page 99716]]

value mortgages secured by vacant properties.
    (c) Reduction in claim. The mortgagee's claim for insurance will be 
reduced for failure to take the required actions within the specified 
schedule of dates for the Single Family Sale, as specified in the PSA.
    (d) Curtailment of Debenture Interest. HUD will curtail Debenture 
Interest at the thirtieth (30th) day following the earliest anticipated 
claim submission date, as identified on the schedule of dates in the 
PSA, if:
    (1) The mortgagee's claim for insurance is not submitted to HUD; or
    (2) The claim for insurance is in a suspended status.
    (e) Debenture Interest. For purposes of this section, Debenture 
Interest means interest at the debenture rate as computed by HUD in 
accordance with its rules and requirements for such calculations, on 
the unpaid principal balance as of the claim payment date, plus the 
approved reimbursable expenses identified in the PSA, minus any amount 
of such interest or expenses that would have been curtailed or for 
which the Participating Servicer would have been denied reimbursement 
pursuant to HUD's requirements for servicing defaulted notes and 
processing claims, including Sec.  203.402(k)(1)(i) and (ii), had the 
Participating Servicer conveyed title to the property securing the 
Single Family Loan to the Secretary rather than assigned the Single 
Family Loan in connection with an insurance claim.
    (f) Rejection of claim. HUD may reject the mortgagee's claim for 
insurance and exclude the related mortgage from settlement if within 
the thirty (30)-day period prior to the claim's submission cut-off 
date, as identified on the schedule of dates in the PSA:
    (1) Any insurance claim is not submitted; or
    (2) Any suspended insurance claim is not resolved.

PART 206--HOME EQUITY CONVERSION MORTGAGE INSURANCE

0
3. The authority citation for part 206 continues to read as follows:

    Authority:  12 U.S.C. 1715b, 1715z-20; 42 U.S.C. 3535(d).

0
4. Add Sec.  206.130, under the undesignated center heading ``Claim 
Procedure,'' to read as follows:


Sec.  206.130   Amount of payment--HECM Single Family Sale assignments.

    (a) Time of payment. Upon an assignment of a mortgage insured under 
this part that is acceptable to the Commissioner, made pursuant to a 
HECM Single Family Sale and in accordance with Sec.  291.609 or Sec.  
291.619 of this chapter, the Commissioner shall pay to the mortgagee 
the unpaid principal balance of the loan at the time of assignment and 
an amount calculated in accordance with the Participating Servicer 
Agreement (PSA), as defined in Sec.  291.601 of this chapter.
    (b) Acceptability criteria. For assignment, the mortgagee must 
determine and certify the mortgage satisfies the Commissioner's 
acceptability criteria for the Single Family Sale.
    (c) Reduction in claim. The mortgagee's claim for insurance will be 
reduced for failure to take the required actions within the specified 
schedule of dates for the Single Family Sale, as specified in the PSA.
    (d) Curtailment of debenture interest. HUD will curtail debenture 
interest at the thirtieth (30th) day following the earliest anticipated 
claim submission date, as identified on the schedule of dates in the 
PSA, if:
    (1) The mortgagee's claim for insurance is not submitted to HUD; or
    (2) The claim for insurance is in a suspended status.
    (e) Debenture Interest. For purposes of this section, Debenture 
Interest means interest at the debenture rate as computed by HUD in 
accordance with its rules and requirements for such calculations, on 
the unpaid principal balance as of the claim payment date, plus the 
approved reimbursable expenses identified in the PSA, minus any amount 
of such interest or expenses that would have been curtailed or for 
which the Participating Servicer would have been denied reimbursement 
pursuant to HUD's requirements for servicing due and payable notes and 
processing claims, including Sec.  206.129(d)(3)(x), had the 
Participating Servicer foreclosed or the borrower sold the property in 
connection with an insurance claim.
    (f) Rejection of the claim. HUD may reject the mortgagee's claim 
for insurance and exclude the related mortgage from settlement if, 
within the thirty (30)-day period prior to the claim's submission cut-
off date, as identified on the schedule of dates in the PSA:
    (1) An insurance claim is not submitted; or
    (2) Any suspended insurance claim is not yet resolved.

PART 291--DISPOSITION OF HUD-ACQUIRED AND -OWNED SINGLE FAMILY 
PROPERTY

0
5. The authority citation for part 291 continues to read as follows:

    Authority: 12 U.S.C. 1701 et seq.; 42 U.S.C. 1441, 1441a, 1551a, 
and 3535(d).

SUBPART D--[Removed and Reserved]

0
6. Remove and reserve subpart D, consisting of Sec. Sec.  291.301 
through 291.307.

0
7. Add subpart G, consisting of Sec. Sec.  291.601 through 291.621, to 
read as follows:

Subpart G--Sale of HUD-Held Single Family Mortgage Loans

Sec.
291.601 Definitions.
291.603 Purpose, scope, and applicability.
291.605 Participating Servicers.
291.607 Qualified participants.
291.609 Bidding process.
291.611 Post-bid process and HUD's execution of the CAA.
291.613 Settlement requirements.
291.615 Purchaser servicing requirements.
291.617 General policy--Direct Sales of Single Family Loans.
291.619 Direct Sale of Single Family Loans process.
291.621 Disqualifications.


Sec.  291.601   Definitions.

    For purposes of this subpart, the following definitions apply:
    Aggregate Loan Database (ALD) means the electronic data file 
containing Single Family Loan information available for Qualified 
Participants to review before a Single Family Sale.
    Bidder Information Package (BIP) means the documents prepared for 
participants in a Single Family Sale, which may include, but are not 
limited to, the following: an executive summary of the Programs; the 
Single Family Sale post-sale servicing and reporting requirements 
published by HUD; due diligence information and reports; Single Family 
Loan information; the Conveyance, Assignment and Assumption Agreement 
(CAA); bidding and settlement information; and necessary information 
and requirements as determined by the Secretary.
    Bidder Qualification Statement means HUD Forms 9611 and 9612, or 
any form approved for similar purpose in the future as prescribed by 
the Secretary. (OMB number 2502-0576)
    Claim Date means, with respect to each Single Family Loan, the date 
on which the Single Family Sale assignment claim is paid by HUD to the 
P-Servicer.

[[Page 99717]]

    Competitive Sale of Single Family Loans means a sale of an 
individual or group of Single Family Loans to Qualified Participants 
through a bid process prescribed by the Secretary in competition with 
other Qualified Participants in accordance with Sec.  291.609.
    Confidentiality Agreement means a nondisclosure agreement under 
which the individual or entity seeking to participate in Single Family 
Sales agrees that Single Family Loan data and documentation shared with 
the individual or entity as due diligence will remain confidential in 
accordance with the terms of the agreement as determined by the 
Secretary.
    Conveyance, Assignment and Assumption Agreement (CAA) means the 
contract between HUD and a Purchaser, along with all applicable 
exhibits and riders, that governs the terms of the Single Family Sale 
as prescribed by the Secretary. The CAA will include any sale-specific 
post-sale servicing and outcome requirements, representations, 
repurchase requirements, schedule of dates, and reporting requirements 
published by the Secretary for the Single Family Sale through a Sale 
Notice.
    Cut-off date or claim submission cut-off date means the last date 
specified by the Secretary on which the P-Servicer is permitted to 
submit to HUD a Single Family Sale insurance claim for payment under 24 
CFR 203.413 and 206.130.
    Desk Guide means the technical manual included in the PSA detailing 
the P-Servicer's steps for submitting Single Family Loans related to a 
Single Family Sale, including but not limited to the process for 
identifying eligible Single Family Loans, uploading due diligence 
files, and submitting insurance claims.
    Direct Sale of Single Family Loans means a sale of an individual or 
group of Single Family Loans to a Qualified Participant through the 
process described in Sec.  291.619.
    Home Equity Conversion Mortgage (HECM) means reverse mortgages 
insured in accordance with 24 CFR part 206 under the FHA Home Equity 
Conversion Mortgage insurance program.
    Interim Servicing Agreement (ISA) means the agreement between a 
Purchaser and P-Servicer that governs the servicing and administration 
of the purchased loans, including but not limited to transfer of 
mortgage information and loss mitigation evaluations, during the 
Interim Servicing Period in accordance with the terms prescribed by the 
Secretary.
    Interim Servicing Period means the period commencing with Claim 
Date and ending with the Servicing Transfer Date.
    Low-value means, in reference to a Mortgage, the value minimum 
stated in the Participating Servicer Agreement (PSA).
    Nonprofit organization means an entity that is tax-exempt under 
section 501(c)(3) of the Internal Revenue Code of 1954 (26 U.S.C.A. 
501(c)(3)) and meets the qualification requirements prescribed by the 
Secretary for participation in a Single Family Sale.
    Participating Servicer (P-Servicer) means a mortgagee that complies 
with Sec.  291.605 and submits Single Family Loans for a Single Family 
Sale.
    Participating Servicer Agreement (PSA) means the agreement between 
HUD and a P-Servicer that governs the P-Servicers submission of Single 
Family Loans to be sold in a Single Family Sale on terms as prescribed 
by the Secretary.
    Purchaser means a Qualified Participant to which HUD has awarded 
one or more Single Family Loans through a Single Family Sale, as of the 
date of notification of the award.
    Qualified Participant means an individual or entity that satisfies 
the requirements in Sec.  291.607 for participation in Single Family 
Sales.
    Sale Notice means an announcement published by HUD for an upcoming 
Single Family Sale and includes any stated mission objectives and 
additional sale, participant qualification, and loan eligibility 
requirements; representations; post-sale servicing, outcomes, and 
reporting requirements; and repurchase requirements for inclusion in 
the Qualification Statement, PSA, ISA, and CAA as applicable.
    Servicing Transfer Date means, with respect to any Single Family 
Loan, the date on which the actual servicing duties for such Single 
Family Loan has been or will be transferred from the P-Servicer to the 
Purchaser's servicer. The latest Servicing Transfer Date will be set 
forth in a schedule of dates prescribed by the Secretary and included 
in the PSA, ISA, and CAA.
    Single Family Loan means any HUD-selected eligible forward mortgage 
loan insured under Section 203 of the National Housing Act (12 U.S.C. 
1709) that has or will be assigned to HUD and any HUD-selected eligible 
HECM insured under section 255 of the National Housing Act (12 U.S.C. 
1715z-20) that has or will be assigned to HUD, or any other eligible 
single family mortgage loans owned by the Secretary that will be sold 
in a Single Family Sale.
    Single Family Sale means a Competitive Sale of Single Family Loans 
or Direct Sale of Single Family Loans conducted by HUD in accordance 
with this subpart.
    Vacant means a mortgaged property is determined to be vacant or 
abandoned in accordance with the requirements of 24 CFR part 203 and 
FHA policy.


Sec.  291.603   Purpose, scope, and applicability.

    The sale of Single Family Loans is at the discretion of the 
Secretary. All Single Family Loans will be sold without recourse to HUD 
and without FHA insurance. HUD may sell individual Single Family Loans 
or groups of Single Family Loans to Qualified Participants as a 
Competitive Sale of Single Family Loans, Sec.  291.609, or as a Direct 
Sale of Single Family Loans, Sec.  291.619. Nothing in this section 
shall be construed to prevent HUD from grouping Single Family Loans 
with other types of HUD assets for sale, including grouping any 
associated HUD-held mortgages subordinate to the respective assets. The 
procedures set out in this subpart, including any cross-referenced 
regulations, documentation, and published notices detailed in this 
subpart, govern the Single Family Sales.


Sec.  291.605   Participating Servicers.

    (a) Participation. To participate in a Single Family Sale, a 
Participating Servicer must:
    (1) Be an FHA-approved Mortgagee contributing eligible Single 
Family Loans and assigning loans to HUD; and
    (2) Execute a PSA and agree to execute an ISA, as needed.
    (b) Sale. For each Single Family Sale, the Participating Servicer 
must:
    (1) Identify mortgages that meet the eligibility criteria in 
accordance with terms of the PSA;
    (2) Conduct all sale activities in accordance with the PSA and ISA;
    (3) Comply with any Single Family Sale and Loan Sale Notification 
requirements as prescribed by the Secretary through notice; and
    (4) Comply with the terms of the Sale Notice.
    (5) Ensure the Loan Sale Notification is provided to each borrower 
and any other parties as required by the Secretary and the Loan Sale 
Notification complies with all applicable law. Loan Sale notification 
requirements will be announced to the Participating Servicer through 
notice.
    (c) Claim payment requirements. The Participating Servicer must 
comply with the claim payment process and requirements for Single 
Family Sales in accordance with the PSA and processes outlined in 
Sec. Sec.  203.413 and 206.130, as applicable.

[[Page 99718]]

    (d) Interim servicing. During the Interim Servicing Period, the 
Participating Servicer must service the purchased Single Family Loans 
on behalf of the Purchaser in accordance with the ISA.
    (e) Transfer documents and servicing. The Participating Servicer 
must conduct the servicing transfer of the Single Family Loans in 
accordance with the requirements of the PSA and ISA and must service 
the purchased Single Family Loans in accordance with all applicable 
state and Federal law requirements, including applicable Consumer 
Finance Protection Bureau (CFPB) requirements.


Sec.  291.607   Qualified participants.

    (a) Confidentiality Agreement and Bidder Qualification Statement. 
Individuals or entities must become a Qualified Participant before they 
may bid or purchase Single Family Loans in a Single Family Sale. An 
individual or entity seeking to participate in a Single Family Sale 
must sign a Confidentiality Agreement and complete a Bidder 
Qualification Statement. The Secretary will specify which Bidder 
Qualification Statement form(s) are applicable to a particular Single 
Family Sale and any additional sale specific qualification criteria 
through notice. HUD will only provide access to sensitive Single Family 
Sale materials to Qualified Participants.
    (b) Process for determining Qualified Participant. HUD will qualify 
any individual or entity seeking to participate in a Single Family Sale 
if they have met the qualification requirements and executed the 
applicable Bidder Qualification Statement for the Single Family Sale.


Sec.  291.609   Bidding process.

    (a) Sale notice. The Secretary will prescribe requirements for a 
Single Family Sale through the Sale Notice. For each Single Family 
Sale, HUD will publish the PSA Addendum, Desk Guide, ISA Addendum, CAA 
Addendum, and Sale Notices on HUD's public website.
    (b) Submission of bids. All bids by a Qualified Participant must be 
submitted to HUD in accordance with the Sale Notice and the 
instructions in the BIP. By submitting a bid, the Qualified Participant 
is considered to have made an offer to purchase Single Family Loans as 
presented in the BIP. Submission of a bid constitutes acceptance of the 
terms and conditions set forth in the BIP. Along with the bid, the 
Qualified Participant must submit an executed copy of the CAA and ISA, 
as applicable.
    (c) Bids by brokers or agents. Any bid submitted by a broker or 
agent for a Qualified Participant must be made in the name of the 
Qualified Participant and signed by the broker or agent as the 
attorney-in-fact for the Qualified Participant. All such bid documents 
must bind the Qualified Participant. Each bid must also include a power 
of attorney satisfactory to HUD as to form and content.
    (d) Earnest money deposits. The Qualified Participant must submit 
to HUD, along with its bid, an earnest money deposit, as required in 
the CAA or Sale Notice. The earnest money deposit is nonrefundable for 
a Qualified Participant whose bid is selected for award and will be 
credited toward the purchase price. If a Qualified Participant's bid is 
not selected for any award, their earnest money will be returned.
    (e) Timing for withdrawal of bids. A Qualified Participant may 
withdraw a submitted bid in accordance with the instructions in the BIP 
for a Single Family Sale. However, a previously submitted bid may not 
be withdrawn once the bidding has closed.
    (f) Termination of Single Family Sale. HUD reserves the right to 
terminate a Single Family Sale in whole or in part at any time before 
the bid date.
    (g) Withdrawal of Single Family Loans. HUD reserves the right to 
withdraw Single Family Loans from a Single Family Sale prior to the 
settlement date. Any earnest money deposits made by a Purchaser 
relating to withdrawn Single Family Loans will be retained by the 
Secretary and credited toward the total purchase price of the remaining 
Single Family Loans in the pool, in accordance with the CAA and BIP. 
After the bid date, HUD can withdraw Single Family Loans or not deliver 
all the Single Family Loans for settlement for any reason, including 
those set forth in the BIP and CAA.
    (h) Rejection of bids. At HUD's discretion, any bid may be rejected 
under the following circumstances:
    (1) The bid does not conform with the instructions in the BIP;
    (2) HUD determines that an award based on the bid would not be in 
the best interests of the Secretary because the award would not further 
HUD's fiduciary responsibility to the mutual mortgage insurance fund 
(MMIF) or any stated mission objectives in the Sale Notice; or
    (3) HUD can also issue a conditional rejection that would provide 
the opportunity for the bid to be amended and resubmitted for 
acceptance upon fulfillment of HUD's requests.


Sec.  291.611   Post-bid process and HUD's execution of the CAA.

    After HUD evaluates conforming bids, HUD may request an adjustment 
to a bid in accordance with the BIP. After any bid adjustments, HUD 
will select bids for award and provide notice of award in a manner set 
forth in the BIP. After selection of a Purchaser, HUD will execute the 
CAA.


Sec.  291.613   Settlement requirements.

    (a) Settlement payment. On the settlement date of a Single Family 
Sale, the Purchaser must pay to HUD the settlement payment, consisting 
of the balance of the amount due on the bid price, as adjusted in 
accordance with the CAA.
    (b) Settlement statement. When the Purchaser delivers to HUD the 
documents required at settlement and the settlement payment in 
paragraph (a) of this section, HUD will execute and deliver to the 
Purchaser a settlement statement and updated Single Family Loan 
schedule for the CAA to document the Single Family Loans sold to the 
Purchaser in the Single Family Sale.
    (c) Endorsement and assignment. HUD may grant a temporary Limited 
Power of Attorney to the Purchaser to effect endorsement and assignment 
of the Single Family Loans to the Purchaser.
    (d) Purchaser's special purpose entity. HUD may allow a Purchaser 
to endorse and assign Single Family Loans from HUD to Purchaser's 
special purpose entity acquisition vehicle on terms permitted in the 
CAA.


Sec.  291.615   Purchaser servicing requirements.

    (a) Purchaser post-sale servicing. The Purchaser and its servicer, 
and any subsequent transferee of or servicer for the Single Family 
Loan, must comply with the terms of the CAA and the Sale Notice post-
sale loss mitigation and outcome requirements. Post-sale requirements 
will include a requirement that any Single Family Loan that converts to 
real estate owned property via foreclosure or deed-in-lieu of 
foreclosure be offered for sale through a first look program, providing 
an exclusive listing period for owner occupant, nonprofit organization, 
governmental entities, and other prospective buyers as permitted by 
HUD. Post-sale requirements will also include requirements that 
Purchasers offer borrowers loss mitigation options that are as or more 
generous than the FHA loss mitigation options, a prohibition on 
reselling real estate owned property through a contract for deed or 
similar financing mechanism, a

[[Page 99719]]

requirement that the Purchaser obtain prior approval from HUD before 
entering into a lease-purchase agreement with a prospective purchaser, 
and a prohibition on releasing liens on particular categories of 
properties, including vacant properties. Purchasers must take all 
lawful steps to service the Single Family Loans and collect amounts due 
in accordance with requirements as set forth by the CAA and all state 
and Federal law requirements, including applicable CFPB requirements.
    (b) Purchaser reporting requirements. Purchasers must report on the 
post-sale servicing actions and outcomes obtained for each Single 
Family Loan purchased as prescribed by the CAA. HUD will publish 
reports for the public on loan and property outcomes and will include a 
breakdown of outcomes in different geographies. HUD will prescribe the 
reporting period as a specified period after settlement in the CAA.
    (c) Remedy for performance failures. HUD may pursue appropriate 
remedies, including, but not limited to, the ability to deny future 
participation in loan sales, for a Purchaser's failure to comply with 
Single Family Sale requirements, including CAA obligations.


Sec.  291.617   General policy--Direct Sale of Single Family Loans.

    The Secretary may pursue a Direct Sale of Single Family Loans to 
individuals or entity type the Secretary determines may be eligible to 
qualify as set forth in the Sale Notice. The Direct Sale of Single 
Family Loans will be subject to the requirements of this subpart, 
excluding Sec. Sec.  291.609 and 291.611. The Secretary will publish in 
the Sale Notice, sale specific Single Family Loan eligibility criteria.


Sec.  291.619   Direct Sale of Single Family Loans process.

    (a) Sale Notice. The Secretary will prescribe requirements for a 
Direct Sale of Single Family Loans through a Sale Notice.
    (b) Sale feasibility. In all stages of the Direct Sale of Single 
Family Loans process, HUD may determine whether continuation with the 
Direct Sale of Single Family Loans is feasible and in HUD's interest, 
consistent with HUD's fiduciary responsibility to the MMIF and any 
stated mission objectives.
    (c) Direct Sale of Single Family Loans process. An individual or 
entity interested in purchasing Single Family Loans through a Direct 
Sale of Single Family Loans must:
    (1) Meet the Secretary's prescribed requirements for the Direct 
Sale of Single Family Loans in the Sale Notice;
    (2) Submit a letter of interest to the Secretary that includes, at 
a minimum:
    (i) The description of the individual or entity and a statement 
about how it would be able to satisfy the participant eligibility 
requirements and mission objectives, if any;
    (ii) The geographic area of interest where the party wishes to 
purchase the loans;
    (iii) The individual or entity's goals and how this purchase would 
assist in achieving these goals through post-sale outcomes;
    (iv) The approximate timeframe for the purchase;
    (v) The approximate number of loans or, alternatively, the 
approximate gross sale amount desired; and
    (vi) The organizational documents for an entity including, but not 
limited to organizational documents, any required authorizing 
resolutions, and disclosure of all nonprofit organization or private 
entity partnership interests in the Direct Sale of Single Family Loans 
transaction.
    (d) HUD determination. Upon receipt of a letter in paragraph (c)(2) 
of this section, HUD will respond in writing to the submitter to 
confirm receipt of the letter and, if necessary, request additional 
information needed for a final determination.
    (e) Secretary's determination to proceed. (1) If the Secretary 
makes a final determination to proceed, the Secretary will request from 
the individual or entity, a business plan proposal from the individual 
or entity that details its ability to meet any stated mission 
objectives in the Sale Notice along with its goals and how these goals 
will be achieved with post-sale outcomes. Business plans must be 
received by HUD within 30 business days of request.
    (2) Upon receipt and review of business plan proposal, HUD will:
    (i) Reject the business plan proposal;
    (ii) Issue a conditional rejection that would provide the 
opportunity for a business plan proposal to be amended and resubmitted 
for approval upon fulfillment of HUD's request; or
    (iii) Approve the business plan proposal.
    (3) Upon approval of such business plan proposal, HUD and the 
individual or entity will begin the Direct Sale of Single Family Loans 
process that includes:
    (i) An executed Confidentiality Agreement;
    (ii) An executed Bidder Qualification Statement;
    (iii) A P-Servicer executed PSA; and
    (iv) Review of Single Family Loans from P-Servicer(s) or HUD.
    (4) HUD and the individual or entity reviews the ALD and will agree 
on the Single Family Loan Sale List for the Direct Sale of Single 
Family Loans.
    (f) Direct Sale of Single Family Loans. After satisfaction of the 
requirements in paragraph (d) of this section, HUD will conduct its 
valuation review, and issue a final price determination and a CAA, 
containing an estimated settlement date, to the individual or entity. 
If accepted, a final Settlement date is scheduled, and the Single 
Family Loan List is appended to the CAA.
    (g) Settlement. HUD and the Purchaser will execute the CAA for 
settlement. The remaining settlement and transfer requirements will 
follow those in Sec.  291.613.


Sec.  291.621   Disqualifications.

    (a) Fraudulent information. If HUD determines there is any 
information indicating any certification or required document provided 
by any party participating in a Single Family Sale, including but not 
limited to P-Servicer, Purchaser, Qualified Participant, or a 
Purchaser's servicer, is false, misleading, or constitutes fraud or 
misrepresentation, HUD will not approve that party's participation in 
the Single Family Sale and will revoke any prior approval. The 
submission of false information or misrepresentation by an approved 
lender or mortgagee may result in the referral of the mortgagee to the 
Mortgagee Review Board.
    (b) Participant ineligibility. An individual or entity is 
ineligible to participate in a Single Family Sale if, at the time of 
the Single Family Sale, that individual or entity is suspended, 
debarred, under a limited denial of participation (LDP), or otherwise 
restricted under 2 CFR part 180 or 2424, 24 CFR part 25, 48 CFR part 9, 
subpart 9.4, or under similar procedures of any other Federal agency.
    (c) Future participation. Purchasers that made misrepresentations 
in the qualification process or failed to meet their contractual 
obligations under CAAs, including failing to meet post-sale 
requirements, for previous Single Family Sales in which they 
participated may be disqualified from participation in one or more 
future Single Family Sales or for a set period of time at the 
discretion of the Secretary.

Julia R. Gordon,
Assistant Secretary for the Office of Housing--Federal Housing 
Commissioner.
[FR Doc. 2024-28706 Filed 12-10-24; 8:45 am]
BILLING CODE 4210-67-P`