Federal Register / Vol. 89, No. 238 / Wednesday, December 11, 2024 / Rules and Regulations 99705 

1See 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’’). 

2See Notice of FHA Accelerated Claim 

Disposition Demonstration, 67 FR 5418 (February 5, 

2002). 

3See Notice of FHA Accelerated Claim 

Disposition Demonstration, 67 FR 66038 (October 

29, 2002). 

* * * * * 

Matthew S. Borman, 

Principal Deputy Assistant Secretary for 

Strategic Trade and Technology Security. 

[FR Doc. 2024–29136 Filed 12–10–24; 8:45 am] 

BILLING CODE 3510–33–P 

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. 

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/telecommunicationsrelay-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. 

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. 

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 secondchance 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 postforeclosure 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, 


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4See Accelerated Claim and Asset Disposition 

(ACD) Program; Advanced Notice of Proposed 

Rulemaking, 71 FR 32392 (June 5, 2006). 

5 Id. 

6See HUD Semiannual Regulatory Agenda, 72 FR 

22694 (April 30, 2007). 

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

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. 

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 HUDheld 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 missiondriven 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 


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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 thirdparty 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 lowvalue mortgages secured by vacant 

properties’’ from § 203.413(b) as loan 

sales may offer a fast path to reoccupancy 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 

§ 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 reoccupancy 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 

§ 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 


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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 § 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. 


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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 

§ 291.619(a) of the final rule. HUD is 

currently considering allowing direct 

sales to nonprofits as permitted by 

§ 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 HUDapproved 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 § 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 


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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 longterm 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 fouryear 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 


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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 incomequalified 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 § 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 

§ 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 communitybased 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 


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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 FHAinsured 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, profitmotivated 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, § 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 


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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 

§ 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 § 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 § 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 § 291.615(b) 

and requested that HUD clarify that 

subsection. The commenter stated that 

§ 291.615(b) refers to the obligation of 

the ‘‘purchaser’’, while § 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 § 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 

§ 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 

§ 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 

§ 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 


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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 

§ 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 


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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-forprofit 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 

■ 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). 

■ 2. Add § 203.413 to read as follows: 

§ 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 § 291.609 or § 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 

§ 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 lowVerDate Sep<11>2014 16:09 Dec 10, 2024 Jkt 265001 PO 00000 Frm 00021 Fmt 4700 Sfmt 4700 E:\FR\FM\11DER1.SGM 11DER1

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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 § 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 

■ 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). 

■ 4. Add § 206.130, under the 

undesignated center heading ‘‘Claim 

Procedure,’’ to read as follows: 

§ 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 § 291.609 or § 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 

§ 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 

§ 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 HUDACQUIRED AND -OWNED SINGLE 

FAMILY PROPERTY 

■ 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] 

■ 6. Remove and reserve subpart D, 

consisting of §§ 291.301 through 

291.307. 

■ 7. Add subpart G, consisting of 

§§ 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. 

§ 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. 


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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 

§ 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 cutoff 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 § 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 

§ 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 § 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 PServicer 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 HUDselected 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. 1715z20) 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. 

§ 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, § 291.609, 

or as a Direct Sale of Single Family 

Loans, § 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 HUDheld mortgages subordinate to the 

respective assets. The procedures set out 

in this subpart, including any crossreferenced regulations, documentation, 

and published notices detailed in this 

subpart, govern the Single Family Sales. 

§ 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 §§ 203.413 and 206.130, as 

applicable. 


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99718 Federal Register / Vol. 89, No. 238 / Wednesday, December 11, 2024 / Rules and Regulations 

(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. 

§ 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. 

§ 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. 

§ 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. 

§ 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. 

§ 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 


lotter on DSK11XQN23PROD with RULES1
Federal Register / Vol. 89, No. 238 / Wednesday, December 11, 2024 / Rules and Regulations 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. 

§ 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 §§ 291.609 and 

291.611. The Secretary will publish in 

the Sale Notice, sale specific Single 

Family Loan eligibility criteria. 

§ 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 § 291.613. 

§ 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 postsale 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 


lotter on DSK11XQN23PROD with RULES1