[Federal Register Volume 60, Number 67 (Friday, April 7, 1995)]
[Proposed Rules]
[Pages 17968-17975]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-8547]




[[Page 17967]]

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Part VI





Department of Housing and Urban Development





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24 CFR Part 29



Nonjudicial Foreclosure of Single Family Mortgages; Proposed Rule

Federal Register / Vol. 60, No. 67 / Friday, April 7, 1995 / Proposed 
Rules 
[[Page 17968]] 

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT


Office of the Secretary; Nonjudicial Foreclosure of Single Family 
Mortgages

24 CFR Part 29

[Docket No. R-95-1776; FR-3799-P-01]
RIN 2501-AB86
AGENCY: Office of the Secretary, HUD.

ACTION: Proposed rule.

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SUMMARY: HUD proposes to implement recent legislation which authorizes 
the Secretary of Housing and Urban Development, as a matter of Federal 
law, to exercise a statutory nonjudicial power of sale with respect to 
any defaulted single family mortgage held by the Secretary under titles 
I or II of the National Housing Act or under section 312 of the Housing 
Act of 1964.

DATES: Comments due date: Comments on this proposed rule must be 
submitted on or before June 6, 1995.
ADDRESSES: Interested persons are invited to submit comments regarding 
this proposed rule to the Rules Docket Clerk, Office of General 
Counsel, Room 10276, Department of Housing and Urban Development, 451 
7th Street SW., Washington, DC 20410-0500. Communications should refer 
to the above docket number and title. Facsimile (FAX) comments are not 
acceptable. A copy of each communication will be available for public 
inspection and copying between 7:30 a.m. and 5:30 p.m. weekdays at the 
above address.

FOR FURTHER INFORMATION CONTACT: Bruce S. Albright, Office of the 
General Counsel, Room 9258, Department of Housing and Urban 
Development, Washington, DC 20410, (202) 708-0303. A telecommunications 
device for the hearing impaired (TDD) is available at (202) 708-3259.

SUPPLEMENTARY INFORMATION:

Authority

    HUD's Fiscal Year 1995 Appropriations Act (Pub. L. 103-327, 
approved September 28, 1994) incorporated by reference, through 
conference amendment 54 of H.R. 4624, the Single Family Mortgage 
Foreclosure Act of 1994 (the Act), which appeared in title VIII of S. 
2281, as reported on July 13, 1994. This statute, codified at 12 U.S.C. 
3751-3768, establishes a nonjudicial procedure which HUD may follow to 
foreclose, as a matter of Federal law, any defaulted single family 
mortgage HUD holds under titles I or II of the National Housing Act, 12 
U.S.C. 1701 et seq., or section 312 of the Housing Act of 1964, 42 
U.S.C. 1452b. The procedure is similar to that used in those States 
whose laws authorize nonjudicial foreclosures. The new authority is 
patterned after the Multifamily Mortgage Foreclosure Act of 1981 
(Multifamily Act), 12 U.S.C. 3701-3717, which was implemented in 1984.
    The Department intends to publish a delegation of authority to 
delegate to the General Counsel of HUD the authority under the Act to 
appoint a foreclosure commissioner or commissioners, to fix the 
compensation of commissioners, and to promulgate implementing 
regulations.

Need for Nonjudicial Foreclosure

    Various factors precipitated the need for this statute and its 
implementation. First, the multiplicity of State laws under which HUD 
forecloses defaulted mortgages presents a burden to the programs 
involved which can be detrimental to the properties and to the 
communities in which they are located. Second, long periods of time to 
complete foreclosures under certain State laws lead to deterioration in 
the condition of the properties involved. This delay necessitates 
substantial Federal management and holding expenditures, increases the 
risk of vandalism, fire loss, depreciation, damage and waste, which 
adversely affects the neighborhoods in which the properties are 
located. Third, these conditions seriously impair HUD's ability to 
protect the Federal financial interest in the affected properties and 
frustrates attainment of the objectives of the underlying program 
authorities. Fourth, the availability and the use of a uniform and more 
expeditious nonjudicial foreclosure procedure will help to alleviate 
these conditions. Fifth, providing HUD with a nonjudicial foreclosure 
procedure will reduce unnecessary litigation by removing judicial 
foreclosures from court calendars. Sixth, use of this new nonjudicial 
procedure will further the objectives of the HUD Reform Act and the 
National Affordable Housing Act by ensuring that the Department 
administers its programs in a businesslike and financially sound 
manner.
    The procedures proposed by this rule would streamline and expedite 
the foreclosure process. However, foreclosure itself is a last step 
taken only after extensive efforts to bring a delinquent mortgage 
current have been unsuccessful. Before a foreclosure is commenced, the 
Department has already provided the delinquent mortgagor with notice 
and the opportunity to enter into workout agreements in order to 
provide alternatives to, and avoid, foreclosure. The Secretary has a 
dual responsibility--a responsibility to the insurance funds and a 
responsibility to the home ownership needs of persons assisted by the 
Department. In drafting this rule, the Department has taken into 
consideration that foreclosure will be commenced only after extensive 
attempts to correct the default. The Department believes that the rule 
balances these two responsibilities, and public comment is invited on 
this point.

Scope

    The proposed rule applies to any mortgage that:

--Is security for a one- to four-family dwelling, was previously 
insured under title I or title II of the National Housing Act, and is 
held by HUD by reason of assignment or otherwise, or that HUD holds 
following acquisition and subsequent sale of the property pursuant to a 
purchase money mortgage agreement; or
--Is security for a one- to four-family dwelling on which HUD made a 
rehabilitation loan pursuant to section 312 of the Housing Act of 1964, 
as it existed before the repeal of that section by section 289 of the 
National Affordable Housing Act (except that when a one-to four-family 
dwelling is combined with non-residential space in a ``mixed use'' 
project, the mortgage is not covered by this Act and this part).

    The nonjudicial foreclosure procedures proposed under this rule 
will be available for use by HUD in connection with any such mortgage, 
irrespective of the date of execution. The procedure is similar to the 
deed of trust foreclosure procedure used in approximately one-half of 
the States. To the extent that a mortgagor has legal or equitable 
defenses, the mortgagor would be free to seek injunctive relief in the 
courts.

Outline of Foreclosure Procedures

    The procedures authorized by this statute are as follows. Upon 
determining that a mortgage should be foreclosed, HUD or its designee 
names a foreclosure commissioner to conduct the foreclosure and sale in 
accordance with the requirements of the statute. The foreclosure 
commissioner will have previously been found eligible by the Department 
to serve as a foreclosure commissioner for HUD's cases. The 
commissioner commences the foreclosure by serving a Notice of 
[[Page 17969]] Default and Foreclosure Sale. The contents of this 
notice and the manner in which it is to be served are set forth in the 
statute and the regulations.
    If a substitute foreclosure commissioner is designated, foreclosure 
would continue unless the substitute commissioner finds that 
continuation would unfairly affect the interests of the mortgagor. If a 
sale is adjourned to another day, a new Notice of Default and 
Foreclosure Sale must be served.
    After the service requirements are met, the commissioner or his 
designee conducts the foreclosure sale at the date and time specified 
in the Notice of Default and Foreclosure Sale and disposes of the sale 
proceeds as provided by the statute. No other proceeding to foreclose 
the mortgage can be continued or initiated during the pendency of a 
foreclosure under these regulations. The statute authorizes the 
commissioner to convey title to the purchaser and requires the 
commissioner to establish a record of the foreclosure and sale.
    From the proceeds of the foreclosure sale, or from other available 
sources if funds are insufficient, the commissioner is reimbursed for 
reasonable costs of the foreclosure sale and is paid a fee for his or 
her services in an amount to be established by HUD.

Notice Requirements

    The statute and regulations set forth extensive and thorough 
requirements for service of the Notice of Default and Foreclosure Sale 
on the current owner, all mortgagors of record and other interested 
parties. The Notice of Default and Foreclosure Sale must set forth 
information on the foreclosure commissioner, identification of the 
property covered by the mortgage, and specific information about the 
failure to pay or other default.

Mortgagor Protections

    Since a foreclosure extinguishes property rights, the statute and 
the proposed rule contain numerous provisions to protect the interests 
of the mortgagor of the property subject to foreclosure sale, tenants 
and other interested parties. The foreclosure commissioner must be 
responsible, financially sound, and competent to conduct the 
foreclosure. The commissioner is specifically authorized to adjourn or 
cancel the sale if conditions are not conducive to a sale that is fair 
to the mortgagor. The mortgagor and other interested parties are 
notified in writing about the designation of the foreclosure 
commissioner and about the designation of any substitute commissioner. 
Even if not so provided in the mortgage instrument, under the Act and 
these regulations, the mortgagor has the right to have the mortgage 
reinstated one time by bringing the mortgage current or curing a 
nonmonetary default with respect only to foreclosures being carried out 
under this part. Subsequent reinstatements can be made only at the 
discretion of the Department.

Effect on State Law

    The statute provides that its purpose is to create a uniform 
Federal foreclosure remedy for single family mortgages within its 
scope. The intent of the Secretary with respect to the enforcement of 
these regulations is that they will be governed by Federal law and will 
not be subject to conflicting or varying State laws unless otherwise 
expressly noted.
    The statute and the regulations also provide that there will be no 
right of redemption, or right of possession based on a right of 
redemption, in the mortgagor or others subsequent to a foreclosure of a 
mortgage completed pursuant to this statute. If redemption periods 
provided under State law--up to 18 months or longer in some States--
were applied to these mortgages, salability of the properties involved 
would be seriously impaired and their rehabilitation and improvement 
discouraged. Such a result would increase the Federal financial 
exposure and frustrate achievement of the program's objectives and the 
national housing goals. State redemption laws have previously been 
preempted in connection with the foreclosure of HUD-held title II 
mortgages under section 204(l) of the National Housing Act, 12 U.S.C. 
1710(l), and with respect to section 312 mortgages under section 701 of 
the HUD Reform Act of 1989, 42 U.S.C. 1452c.

Scope of Final Rule

    In conjunction with its efforts to streamline and reduce 
regulations, the Department is considering the option of issuing a much 
briefer final rule for Nonjudicial Foreclosure of Single Family 
Mortgages after considering comments on this proposed rule. The 
procedures that are in the statute would not be repeated in the final 
rule as they are in this proposed rule. The final rule would instead 
consist of provisions that address only those areas where the statute 
gives the Secretary discretion to act or for which clarification and 
additional detail are necessary. Nonjudicial foreclosures would be 
conducted with reference to the statute and the abbreviated final rule, 
or through the use of a guidebook with instructions for foreclosure 
commissioners which the Department would make available to the public. 
The Department specifically requests comment on this point.

Other Matters

Environmental impact

    In accordance with 40 CFR 1508.4 of the CEQ regulations and 24 CFR 
50.20 of the HUD regulations, the policies and actions proposed in this 
document are determined not to have the potential of having a 
significant impact on the quality of the human environment and 
therefore further environmental review under the National Environmental 
Policy Act is not necessary.

Regulatory Flexibility Act

    The Secretary, in accordance with the Regulatory Flexibility Act (5 
U.S.C. 605(b)), has reviewed this proposed rule before publication and, 
by approving it, certifies that this proposed rule would not have a 
significant economic impact on a substantial number of small entities. 
The proposed rule is limited to implementation of statutory authority 
for the nonjudicial foreclosure of HUD-held single family mortgages, 
and there are no unusual procedures that would need to be complied with 
by small entities.

Executive Order 12606, the Family

    The General Counsel, as the Designated Official under Executive 
Order 12606, the Family, has determined that this proposed rule would 
not have potential significant impact on family formation, maintenance, 
and general well-being, and thus is not subject to review under the 
Order. The proposed rule implements procedures for the nonjudicial 
foreclosure of HUD-held single family mortgages. These procedures would 
impact those families who would be required to vacate more quickly than 
under other procedures. However, this impact is expected to be small, 
and would be offset by the benefit to families to the extent that these 
procedures decrease the risk to single-family housing of vandalism, 
fire loss, depreciation, and damage and waste, and the attendant 
adverse effects on the neighborhoods in which the properties are 
located.

Executive Order 12512, Federalism

    The General Counsel, as the Designated Official under section 6(a) 
of Executive Order 12612, Federalism, has determined that although this 
proposed rule would have an effect on States or their political 
subdivisions, and the relationship between the Federal 
[[Page 17970]] government and the States, the provisions of this 
proposed rule do not have ``federalism implications'' within the 
meaning of the Order because the authorizing statute provides for the 
preemption of State law.

Semiannual Agenda of Regulations
    This proposed rule was not listed in the Department's Semiannual 
Agenda of Regulations published on November 14, 1994 (59 FR 57632) 
under Executive Order 12866 and the Regulatory Flexibility Act.

List of Subjects in 24 CFR Part 29

    Mortgages, Foreclosures.

    Accordingly, title 24 CFR is proposed to be amended by adding a new 
part 29, to read as follows:

PART 29--NONJUDICIAL FORECLOSURE OF SINGLE FAMILY MORTGAGES

Subpart A--General

Sec.
29.1  Purpose.
29.3  Scope and applicability.
29.5  Definitions.

Subpart B--Procedures

29.101  Designation of foreclosure commissioner.
29.103  Prerequisites to foreclosure.
29.105  Commencement of foreclosure.
29.107  Notice of default and foreclosure sale.
29.109  Service of Notice of Default and Foreclosure Sale.
29.111  Presale reinstatement.
29.113  Conduct of sale.
29.115  Adjournment or cancellation of sale.
29.117  Validity of sale.
29.119  Foreclosure costs.
29.121  Disposition of sales proceeds.
29.123  Transfer of title and possession.
29.125  Redemption rights.
29.127  Record of foreclosure and sale.
29.129  Effect of sale.
29.131  Computation of time.
29.133  Deficiency judgment.

    Authority: 12 U.S.C. 1715b, 3751-3768; 42 U.S.C. 1452b, 3535(d).

Subpart A--General


Sec. 29.1  Purpose.

    (a) The purpose of this part is to implement the Single Family 
Mortgage Foreclosure Act of 1994 (the Act), 12 U.S.C. 3751-3768. This 
Act creates a uniform Federal remedy for foreclosure of mortgages 
covering single family properties which are held by the Secretary of 
Housing and Urban Development pursuant to Title I of the National 
Housing Act, 12 U.S.C. 1702 et seq., Title II of the National Housing 
Act, 12 U.S.C. 1707 et seq., or Section 312 of the Housing Act of 1964, 
42 U.S.C. 1452b (as it existed before repeal). The Secretary's powers 
under the Act to appoint a foreclosure commissioner or commissioners 
and substitutes therefor, to fix the compensation of commissioners, and 
to promulgate implementing regulations, have been delegated to the HUD 
General Counsel.
    (b) The availability of uniform and more expeditious procedures, 
with no right of redemption in the mortgagor or others, for the 
foreclosure of these mortgages by the Department, will ameliorate the 
negative consequences of the disparate State laws under which mortgages 
covering one- to four-family residential properties are foreclosed on 
behalf of HUD. The long periods of time that are required under State 
law to complete foreclosure of such mortgages lead to deterioration in 
the condition of the properties involved, necessitate substantial 
Federal holding expenditures, increase the risk of vandalism, fire 
loss, depreciation, damage, and waste with respect to the properties, 
and adversely affect the neighborhoods in which the properties are 
located. These consequences seriously impair the ability of HUD to 
protect Federal financial interests in the properties and frustrate 
attaining the objectives of the underlying Federal program authority. 
Use of this nonjudicial foreclosure procedure will also reduce 
unnecessary litigation, which contributes to already overcrowded court 
calendars, by removing many foreclosures from the courts.


Sec. 29.3  Scope and applicability.

    (a) Scope. Under this part, the Secretary may foreclose on any 
defaulted single family mortgage (as defined in Sec. 29.5) encumbering 
real estate in any State regardless of when the mortgage was executed.
    (b) Applicability. The Secretary may, at the Secretary's option, 
use other procedures to foreclose defaulted single family mortgages, 
including judicial foreclosure in State or Federal Court, and 
nonjudicial foreclosures under State law or any other Federal law. This 
part applies only to foreclosure procedures authorized by the Act and 
not to any other foreclosure procedures the Secretary may use.


Sec. 29.5  Definitions.

    As used in this part--
    Act means the Single Family Mortgage Foreclosure Act of 1994 (12 
U.S.C. 3751 et seq.).
    Bona fide purchaser means a purchaser for value in good faith and 
without notice of any adverse claim, and who acquires the security 
property free of any adverse claim.
    County means a political subdivision of a State or Territory of the 
United States, created to aid in the administration of state law for 
the purpose of local self-government, and includes a parish or any 
other equivalent subdivision.
    Mortgage means a deed of trust, mortgage, deed to secure debt, 
security agreement, or any other form of instrument under which any 
property (real or mixed real and personal), or any interest in property 
(including leaseholds, reversionary interests, and any other estates 
under applicable State law), is conveyed in trust, mortgaged, 
encumbered, pledged, or otherwise rendered subject to a lien for the 
purpose of securing the payment of money or the performance of an 
obligation.
    Mortgage agreement means the note or debt instrument and the 
mortgage instrument, deed of trust instrument, trust deed, or any other 
similar instrument or instruments creating the security interest in the 
real estate for the repayment of the note or debt instrument, including 
any instrument incorporated by reference therein and any instrument or 
agreement amending or modifying any of the foregoing.
    Mortgagor means the debtor, obligor, grantor, or trustor named in 
the mortgage agreement and, unless the context otherwise indicates, 
includes the current owner of record of the security property whether 
or not such owner is personally liable on the mortgage debt.
    Owner means any person who has an ownership interest in the 
property and includes heirs, devisees, executors, administrators, and 
other personal representatives, and trustees of testamentary trusts if 
the owner of record is deceased.
    Person includes any individual, group of individuals, association, 
partnership, corporation, or organization.
    Record; recorded means to enter or entered in public land record 
systems established under State statutes for the purpose of imparting 
constructive notice to purchasers of real property for value and 
without actual knowledge, and includes ``register'' and ``registered'' 
in the instance of registered land.
    Secretary means the Secretary of Housing and Urban Development, 
acting by and through any authorized designee exclusive of the 
foreclosure commissioner.
    Security property means the property (real or mixed real and 
personal) or an interest in property (including leaseholds, life 
estates, reversionary [[Page 17971]] interests, and any other estates 
under applicable law), together with fixtures and other interests 
subject to the lien of the mortgage under applicable law.
    Single family mortgage means a mortgage that covers property on 
which there is located a 1- to 4-family residence, and that:
    (1) Is held by the Secretary pursuant to title I or title II of the 
National Housing Act (12 U.S.C. 1701 et seq.) ; or
    (2) Secures a loan obligated by the Secretary under section 312 of 
the Housing Act of 1964 (42 U.S.C. 1452b), as it existed before the 
repeal of that section by section 289 of the Cranston-Gonzalez National 
Affordable Housing Act (42 U.S.C. 12839). A mortgage securing such a 
loan that covers property containing nonresidential space and a 1- to 
4-family dwelling shall not be subject to this part.
    State means:
    (1) The several States;
    (2) The District of Columbia;
    (3) The Commonwealth of Puerto Rico;
    (4) The United States Virgin Islands;
    (5) Guam;
    (6) American Samoa;
    (7) The Northern Mariana Islands; and
    (8) Indian tribes, meaning any Tribe, band, group or nation, 
including Alaskan Indians, Aleuts, and Eskimos, and any Alaskan Native 
Village of the United States that is considered an eligible recipient 
under Title I of the Indian Self-Determination and Education Assistance 
Act (25 U.S.C. 450) or was considered an eligible recipient under the 
State and Local Fiscal Assistance Act of 1972 (31 U.S.C. 1221) before 
repeal of that Act. Eligible recipients under the Indian Self-
Determination and Education Assistance Act are determined by the Bureau 
of Indian Affairs.

Subpart B--Procedures


Sec. 29.101  Designation of foreclosure commissioner.

    (a) The Secretary may designate a person or persons to serve as a 
foreclosure commissioner for the purpose of foreclosing single family 
mortgages. A foreclosure commissioner designated pursuant to this part 
shall have a nonjudicial power of sale as provided in this part.
    (b) The foreclosure commissioner, if a natural person, shall be a 
resident of the State in which the security property is located and, if 
not a natural person, the foreclosure commissioner must be duly 
authorized to transact business under laws of the State in which the 
security property is located. No person shall be designated as a 
foreclosure commissioner unless that person is determined by the 
Secretary to be responsible, financially sound, and competent to 
conduct a foreclosure. The method of selection and determination of the 
qualifications of the foreclosure commissioner shall be at the 
discretion of the Secretary, and the execution of a designation 
pursuant to this section shall be conclusive evidence that the 
commissioner selected has been determined to be qualified by the 
Secretary.
    (c) The Secretary designates a foreclosure commissioner by 
executing a written designation stating the name and business or 
residential address of the commissioner, except that if a person is 
designated in his or her capacity as an official or employee of a 
government or corporate entity, such person may be designated by his or 
her unique title or position instead of by name. The designation shall 
be effective upon execution.
    (d) A copy of the designation of the foreclosure commissioner shall 
be mailed with each copy of the Notice of Default and Foreclosure Sale 
served by mail in accordance with Sec. 29.109.
    (e) The Secretary may designate, with or without cause, a 
substitute foreclosure commissioner to replace a previously designated 
foreclosure commissioner, by the procedure contained in paragraph (c) 
of this section.
    (1) Such substitution may be made at any time prior to the time of 
the foreclosure sale, and the foreclosure shall continue without 
prejudice, unless the substitute commissioner, in that commissioner's 
sole discretion, finds that continuation of the foreclosure sale will 
unfairly affect the interests of the mortgagor. Any such finding shall 
be in writing. If the substitute commissioner makes such a finding, the 
substitute commissioner shall cancel the foreclosure sale, or adjourn 
such sale in accordance with the provisions of Sec. 29.115.
    (2) If a substitute commissioner is designated, a copy of the 
written notice of such designation referred to in paragraph (c) of this 
section shall be served:
    (i) By mail, as provided by Sec. 29.109 (except that the minimum 
time periods between mailing and the date of the foreclosure sale shall 
not apply); or
    (ii) In any other manner which, in the substitute foreclosure 
commissioner's sole discretion, is conducive to achieving timely notice 
of such substitution.


Sec. 29.103  Prerequisites to foreclosure.

    (a) The Secretary may commence foreclosure of a single family 
mortgage under this part upon the breach of a covenant or condition in 
the mortgage agreement.
    (b) No foreclosure under this part may be commenced unless any 
previously pending judicial or nonjudicial proceeding that has been 
separately instituted by the Secretary to foreclose the mortgage in a 
manner other than under this part has been withdrawn, dismissed, or 
otherwise terminated.
    (c) The Secretary shall not institute any separate foreclosure 
proceeding during the pendency of foreclosure pursuant to this part.
    (d) Nothing in this part shall preclude the Secretary from 
enforcing any right, other than foreclosure under applicable Federal or 
State law, including any right to obtain a monetary judgment, or 
foreclosing under this part if the Secretary has obtained or is seeking 
any other remedy available pursuant to Federal or State law, or under 
the mortgage agreement.


Sec. 29.105   Commencement of foreclosure.

    If the Secretary determines that the prerequisites to foreclosure 
set forth in Sec. 29.103 are satisfied, the Secretary may direct the 
foreclosure commissioner to commence foreclosure of the mortgage. Upon 
such request, the foreclosure commissioner shall commence foreclosure 
of the mortgage in accordance with Sec. 29.107.


Sec. 29.107  Notice of default and foreclosure sale.

    The commissioner shall commence the foreclosure by serving a Notice 
of Default and Foreclosure Sale. The Notice shall set forth the name, 
address and telephone number of the foreclosure commissioner and the 
date on which the Notice was issued, along with the following 
information:
    (a) The current mortgagee (that is, the Secretary), the original 
mortgagee (if other than the Secretary), and the original mortgagor.
    (b) The street address or a description of the location of the 
security property and the legal description of the security property as 
contained in the mortgage instrument.
    (c) The date of the mortgage, the office in which the mortgage is 
recorded, and the liber and folio numbers or other appropriate 
description of the location of recordation of the mortgage.
    (d) Identification of the failure to make payment, including the 
entire amount delinquent as of a date specified, a statement generally 
describing the other costs that must be [[Page 17972]] paid if the 
mortgage is to be reinstated, the due date of the earliest principal 
installment payment remaining wholly unpaid as of the date on which the 
notice is issued upon which the foreclosure is based, or a description 
of any other default or defaults upon which foreclosure is based, and 
the acceleration of the secured indebtedness.
    (e) The date, time, and location of the foreclosure sale.
    (f) A statement that the foreclosure is being conducted in 
accordance with the Act and this part.
    (g) A description of the types of costs, if any, to be paid by the 
purchaser upon transfer of title.
    (h) The bidding and payment requirements for the foreclosure sale, 
including the amount and method of deposit to be required at the 
foreclosure sale, and the time and method of payment of the balance of 
the foreclosure purchase price. The Notice shall state that all 
deposits and the balance of the purchase price shall be paid by 
certified or cashier's check. The Notice also shall state that no 
deposit will be required of the Secretary when the Secretary bids at 
the foreclosure sale.
    (i) Any other appropriate terms of sale or information as the 
Secretary may determine.


Sec. 29.109  Service of Notice of Default and Foreclosure Sale.

    The foreclosure commissioner shall serve the Notice of Default and 
Foreclosure Sale described in Sec. 29.107 upon the following persons 
and in the following manner, and no additional notice shall be required 
to be served, notwithstanding any notice requirements of any State or 
local law:
    (a) Filing the notice. The Notice of Default and Foreclosure Sale 
shall be filed not less than 21 days before the date of the foreclosure 
sale in the manner authorized for filing a notice of an action 
concerning real property according to the law of the State in which the 
security property is located, or if none, in the manner authorized by 
Section 3201 of title 28, United States Code.
    (b) Notice by mail. (1) The notice of foreclosure sale shall be 
sent by certified or registered mail, postage prepaid, return receipt 
requested, to the following (except that multiple mailings are not 
required to be sent to any party with multiple capacities, e.g., an 
original mortgagor who is the security property owner and lives in one 
of the units):
    (i) The current security property owner of record, as the record 
existed 45 days before the date originally set for the foreclosure 
sale, whether or not the notice describes a sale as adjourned as 
provided in this part. Notice under this part shall be mailed not less 
than 21 days before the date of the foreclosure sale and shall be 
mailed to the last known address of the current owner or, if none, to 
the address of the security property, or, at the discretion of the 
foreclosure commissioner, to any other address believed to be that of 
such current owner.
    (ii) The original mortgagor and all subsequent mortgagors of record 
or other persons who appear on the basis of the record to be liable for 
part or all of the mortgage debt, as the record existed 45 days before 
the date originally set for the foreclosure sale, whether or not the 
notice describes a sale adjourned as provided in this part, except that 
the notice need not be mailed to any such mortgagors who have been 
released from all obligations under the mortgage. Notice under this 
section shall be mailed not less than 21 days before the date of the 
foreclosure sale and shall be mailed to the last known address of the 
mortgagors or, if none, to the address of the security property, or, at 
the discretion of the foreclosure commissioner, to any other address 
believed to be that of such mortgagors.
    (iii) All dwelling units in the security property, whether or not 
the notice describes a sale adjourned as provided in this part. Notice 
under this section shall be mailed not less than 21 days before the 
date of the foreclosure sale. If the names of the occupants of the 
security property are not known to the Secretary, or if the security 
property has more than one dwelling, the notice shall be posted at the 
security property not less than 21 days before the foreclosure sale.
    (iv) All persons holding liens of record upon the security 
property, as the record existed 45 days before the date originally set 
for the foreclosure sale, whether or not the notice describes a sale 
adjourned as provided in this part. Notice under this section shall be 
mailed not less than 21 days before the date of the foreclosure sale 
and shall be mailed to each such lienholder's address of record, or, at 
the discretion of the foreclosure commissioner, to any other address 
believed to be that of such lienholder.
    (2) Notice by mail pursuant to this section shall be deemed duly 
given upon mailing, whether or not received by the addressee and 
whether or not a return receipt is received or the notice is returned. 
The date of the receipt for the postage paid for the certified or 
registered mail serves as proof of the date of mailing.
    (3) The Notice of Default and Foreclosure Sale made pursuant to 
paragraph (b) of this section shall include a copy of the instrument by 
which the Secretary has designated him or her to act as commissioner.
    (c) Publication. (1) A copy of the notice of default and 
foreclosure sale shall be published once a week during three successive 
calendar weeks before the date of the foreclosure sale. Such 
publication shall be in a newspaper or newspapers having general 
circulation in the county or counties in which the security property 
being sold is located. A legal newspaper that is accepted as a 
newspaper of legal record in the county or counties in which the 
security property being sold is located shall be considered a newspaper 
having general circulation for the purposes of paragraph (c)(1) of this 
section.
    (2) If there is no newspaper of general circulation published at 
least weekly in the county or counties in which the security property 
being sold is located, copies of the Notice of Default and Foreclosure 
Sale shall be posted, not less than 21 days before the date of the 
foreclosure sale, at the courthouse of any county or counties in which 
the security property is located and at the place where the sale is to 
be held.


Sec. 29.111  Presale reinstatement.

    (a) Except as provided in Sec. 29.101(b), paragraph (b) of this 
section, and Sec. 29.115, the foreclosure commissioner shall withdraw 
the security property from foreclosure and cancel the foreclosure sale 
only if:
    (1) The Secretary directs the foreclosure commissioner to do so 
before or at the time of the sale; or
    (2) The foreclosure commissioner finds, upon application of the 
mortgagor not less than three business days before the date of the 
sale, that the default or defaults upon which the foreclosure is based 
did not exist at the time of service of the Notice of Default and 
Foreclosure Sale; or
    (3) In the case of a foreclosure involving a monetary default, 
there is tendered to the foreclosure commissioner before public auction 
is completed all amounts which would be due under the mortgage 
agreement if payments under the mortgage had not been accelerated, all 
costs of foreclosure incurred for which payment from the proceeds of 
foreclosure is provided in Sec. 29.119, and the foreclosure 
commissioner finds that there are no nonmonetary defaults; provided, 
however, that the Secretary may refuse to cancel a foreclosure sale 
pursuant to [[Page 17973]] paragraph (a)(3) of this section if the 
current mortgagor or owner of record has, on one or more previous 
occasions, caused a foreclosure of the mortgage, commenced pursuant to 
this part or otherwise, to be canceled by curing a default.
    (4) In the case of a foreclosure involving a nonmonetary default:
    (i) The foreclosure commissioner, upon application of the mortgagor 
before the date of foreclosure sale, finds that all nonmonetary 
defaults are cured and that there are no monetary defaults; and
    (ii) There is tendered to the foreclosure commissioner before 
public auction is completed all amounts due under the mortgage 
agreement (excluding amounts due only as a result of acceleration), 
including all amounts of expenditures secured by the mortgage and all 
incurred costs of foreclosure for which payment is provided in 
Sec. 29.119.
    (b) Before withdrawing the security property from foreclosure under 
paragraphs (a)(2), (a)(3), or (a)(4) of this section, the foreclosure 
commissioner shall notify the Secretary of the proposed withdrawal by 
telephone or other telecommunication device and shall provide the 
Secretary with a written statement of the reasons for the proposed 
withdrawal along with all documents submitted by the mortgagor in 
support of the proposed withdrawal. Upon receipt of this statement, the 
Secretary shall have ten (10) days in which to demonstrate why the 
security property should not be withdrawn from foreclosure, and if the 
Secretary makes this demonstration, the property shall not be withdrawn 
from foreclosure. The Secretary shall provide the mortgagor with a copy 
of any statement prepared by the Secretary in opposition to the 
proposed withdrawal at the same time the statement is submitted to the 
foreclosure commissioner. If the Secretary receives the foreclosure 
commissioner's written statement less than 10 days before the scheduled 
foreclosure sale, the sale shall automatically be postponed for 14 
days. Under these circumstances, notice of the rescheduled sale, if 
any, shall be served as described in Sec. 29.109.
    (c) If the foreclosure commissioner cancels the foreclosure, the 
mortgage will continue in effect as though acceleration had not 
occurred.
    (d) Cancellation of a foreclosure sale under this part shall have 
no effect on the commencement of a subsequent foreclosure proceeding.
    (e) The foreclosure commissioner shall file a notice of 
cancellation in the same place and manner provided for filing the 
Notice of Default and Foreclosure Sale as provided in Sec. 29.109.


Sec. 29.113  Conduct of sale.

    (a) The foreclosure sale shall be conducted in a manner and at a 
time and place as identified in the Notice of Foreclosure and Sale and 
more fully described in this section. The sale will be scheduled for a 
date 30 or more days after the due date of the earliest unpaid 
installment as described in Sec. 29.107 or the earliest occurrence of a 
nonmonetary default. The sale will be held at public auction and must 
be scheduled to begin at a time between the hours of 9:00 a.m. and 4:00 
p.m. local time. The sale will be scheduled for a place where 
foreclosure real estate auctions are customarily held in the county or 
counties in which the property to be sold is located, or at a 
courthouse therein, or at or on the property to be sold. If the 
security property is situated in two counties, the sale may be held in 
any one of the counties in which any part of the security property is 
situated.
    (b) The foreclosure commissioner shall conduct the foreclosure sale 
in a manner that is fair to both the mortgagor and the Secretary (see 
Sec. 29.117) and consistent with the provisions of this part.
    (c) The foreclosure commissioner shall attend the foreclosure sale 
in person or, if the commissioner is not a natural person, through a 
duly authorized employee. If more than one commissioner has been 
designated, at least one shall attend the sale.
    (d) The foreclosure commissioner shall accept written one-price 
sealed bids from any party, including the Secretary, for entry by 
announcement at the sale so long as those bids conform to the 
requirements described in the Notice of Default and Foreclosure sale 
which are contained in Sec. 29.107(h). The foreclosure commissioner 
will announce the name of each such bidder and the amount of the bid. 
The commissioner will accept oral bids from any party, including 
parties who submitted one-price sealed bids, if those oral bids conform 
to the requirements in the Notice of Default and Foreclosure Sale in 
Sec. 29.107(h). Before the close of the sale the commissioner will 
announce the amount of the high bid and the name of the successful 
bidder.
    (e) Notwithstanding the provisions of paragraph (d) of this 
section, neither the foreclosure commissioner nor any relative, related 
business entity, or employee shall be permitted to bid in any manner on 
the security property subject to the foreclosure sale, except that the 
foreclosure commissioner or an auctioneer may be directed by the 
Secretary to enter a bid on the Secretary's behalf. Relatives of the 
foreclosure commissioner who may not bid include parents, siblings, 
spouses and children. A related business entity that may not bid or 
whose employees may not bid is one whose relationship (at the time the 
foreclosure commissioner is designated and during the term of service 
as foreclosure commissioner) with the entity of the foreclosure 
commissioner is such that, directly or indirectly, one entity 
formulates, directs, or controls the other entity; or has the power to 
formulate, direct, or control the other entity; or has the 
responsibility and authority to prevent, or promptly to correct, the 
offensive conduct of the other entity.
    (f) The commissioner may serve as an auctioneer, or the 
commissioner may, at the commissioner's discretion, employ an 
auctioneer to conduct the sale. If the commissioner employs an 
auctioneer to conduct the foreclosure sale, the auctioneer must be a 
licensed auctioneer, an officer of State or local government, or any 
other person who commonly conducts foreclosure sales in the area in 
which the security property is located. The commissioner will 
compensate any such auctioneer from the proceeds of the commission he 
or she collects under Sec. 29.119(e).
    (g) The foreclosure commissioner may require a bidder to make a 
deposit in an amount or percentage set by the foreclosure commissioner 
and stated in the Notice of Default and Foreclosure Sale as set forth 
in Sec. 29.107(h) before the bid is accepted.
    (h) A successful bidder at the foreclosure sale who fails to comply 
with the terms of the sale may be required to forfeit the cash deposit 
or, at the election of the foreclosure commissioner after consultation 
with the Secretary, shall be liable to the Secretary for any costs 
incurred as a result of such failure. If the successful bidder fails to 
comply with the terms of the sale a new notice will be sent and a new 
sale will be held consistent with the requirements of this part.


Sec. 29.115  Adjournment or cancellation of sale.

    (a) The foreclosure commissioner may, before or at the time of the 
foreclosure sale, adjourn or cancel the foreclosure sale if the 
foreclosure commissioner determines, in the foreclosure commissioner's 
discretion, that:
    (1) Circumstances are not conducive to a sale which is fair to the 
mortgagor and the Secretary; or [[Page 17974]] 
    (2) Additional time is necessary to determine whether the security 
property should be withdrawn from foreclosure, as provided in 
Sec. 29.111.
    (b) The foreclosure commissioner may adjourn a foreclosure sale to 
a later hour the same day by announcing or posting, at the original 
place of sale, the new time and place of the foreclosure sale, which 
must be held between 9 a.m. and 4 p.m. at the original place of sale.
    (c) Except as provided in paragraph (b) of this section, the 
foreclosure commissioner may adjourn a foreclosure sale for not less 
than 9 and not more than 31 days, in which case the foreclosure 
commissioner shall serve a Notice of Default and Foreclosure Sale 
revised to state that the foreclosure sale has been adjourned to a 
specified date between the hours of 9 a.m. and 4 p.m. The revised 
Notice also shall include any other information the foreclosure 
commissioner deems appropriate. Such Notice shall be served by 
publication and mailing as provided in Sec. 29.109, except that 
publication may be made on any of three consecutive days prior to the 
revised date of foreclosure sale so long as the first publication is 
made at least seven days before the revised sale date, and mailing may 
be made at any time at least seven days before the date to which the 
foreclosure sale has been adjourned. The commissioner shall also, in 
the case of a sale adjourned to a later date, mail a copy of the 
revised Notice of Default and Foreclosure Sale to the Secretary at 
least seven days before the date to which the sale has been adjourned.


Sec. 29.117  Validity of sale.

    Any foreclosure sale held in accordance with the Act and this part 
shall be conclusively presumed to have been conducted in a fair, legal, 
and reasonable manner. The sale price shall be conclusively presumed to 
be reasonable and equal to the fair market value of the property.


Sec. 29.119  Foreclosure costs.
    The following foreclosure costs shall be paid from the sale 
proceeds, or from other available sources if sales proceeds are 
insufficient, before satisfaction of any other claim to such sale 
proceeds:
    (a) Advertising costs and postage expenses incurred in giving 
notice pursuant to Sec. 29.109 and Sec. 29.115.
    (b) Mileage by the most reasonable road distance for posting 
Notices under Sec. 29.109(a)(2)(iii) and (b), and for the foreclosure 
commissioner's or auctioneer's attendance at the sale. The mileage 
shall be paid at a rate provided in 28 U.S.C. 1821.
    (c) Reasonable and customary costs incurred for title and lien 
record searches.
    (d) The necessary out-of-pocket costs incurred by the foreclosure 
commissioner for recording documents.
    (e) A commission for the foreclosure commissioner (if the 
foreclosure commissioner is not an employee of the United States) for 
the conduct of the foreclosure in an amount to be determined by the 
Secretary. A commission may be allowed to the foreclosure commissioner 
notwithstanding termination of the sale or appointment of a substitute 
commissioner before the sale takes place.


Sec. 29.121  Disposition of sales proceeds.

    (a) The proceeds of the foreclosure sale shall be used in the 
following order:
    (1) To cover the costs of foreclosure listed in Sec. 29.119.
    (2) To pay valid tax liens or assessments on the security property 
as provided in the Notice of Default and Foreclosure Sale.
    (3) To pay any liens recorded before the recording of the 
foreclosed mortgage which are required to be paid in conformity with 
the Notice of Default and Foreclosure Sale.
    (4) To pay service charges and advances for taxes, assessments, and 
property insurance premiums which were made under the terms of the 
foreclosed mortgage.
    (5) To pay the interest due under the mortgage debt.
    (6) To pay the unpaid principal balance secured by the mortgage 
(including expenditures for the necessary protection, preservation, and 
repair of the security property as authorized under the mortgage 
agreement and interest thereon if provided in the mortgage agreement).
    (7) To pay any late charges or fees.
    (b) Any surplus proceeds from a foreclosure sale shall be applied, 
after payment of the items described in paragraph (a) of this section, 
in the order as follows:
    (1) To pay any liens recorded after the foreclosed mortgage in the 
order of priority under the law of the State in which the security 
property is located.
    (2) To pay the surplus to the mortgagor.
    (c) If the person to whom surplus proceeds are to be paid cannot be 
located, or if the surplus available is insufficient to pay all 
claimants and the claimants cannot agree on the allocation of the 
surplus, or if any person claiming an interest in the mortgage proceeds 
disagrees with the foreclosure commissioner's proposed disposition of 
the disputed proceeds, the foreclosure commissioner may deposit the 
disputed funds with a legally authorized official or court. If a 
procedure for the deposit of disputed funds is not available, and the 
foreclosure commissioner files a bill of interpleader or is sued as a 
stakeholder to determine entitlement to such funds, the foreclosure 
commissioner's necessary costs in taking or defending such action shall 
be deductible from the disputed funds.
    (d) The foreclosure commissioner will keep such records as will 
permit the Secretary to verify the costs claimed under Sec. 29.119, and 
otherwise to audit the foreclosure commissioner's disposition of the 
sale proceeds.


Sec. 29.123  Transfer of title and possession.

    (a) If the Secretary is the successful bidder, the foreclosure 
commissioner shall issue a deed to the Secretary upon receipt of the 
amount needed to pay the costs listed in Sec. 29.121(a)(2) and (a)(3).
    (b) If the Secretary is not the successful bidder, the foreclosure 
commissioner shall issue a deed to the purchaser or purchasers upon 
receipt of the entire purchase price in accordance with the terms of 
the sale as provided in the Notice of Default and Foreclosure Sale.
    (c) The deed or deeds issued by the foreclosure commissioner shall 
be without warranty or covenants to the purchaser or purchasers. 
Notwithstanding any State law to the contrary, delivery of a deed by 
the foreclosure commissioner shall be a conveyance of the property and 
constitute passage of good and marketable title to the mortgaged 
property. No judicial proceedings shall be required ancillary or 
supplementary to the procedures provided under the Act and under this 
part to assure the validity of the conveyance or confirmation of such 
conveyance. The purchaser of property under the Act and this part shall 
be presumed to be a bona fide purchaser.
    (d) A purchaser at a foreclosure sale held pursuant to the Act and 
this part shall be entitled to possession upon passage of title under 
paragraph (c) of this section, subject to any interest or interests not 
barred under Sec. 29.129. Any person remaining in possession of the 
property after the passage of title shall be deemed a tenant at 
sufferance subject to eviction under applicable law.
    (e) If a purchaser dies before execution and delivery of the deed 
conveying the property to the purchaser, the foreclosure commissioner 
shall execute and deliver the deed to a legal representative of the 
decedent purchaser's estate upon payment of the [[Page 17975]] purchase 
price in accordance with the terms of sale. Such delivery to the 
representative of the purchaser's estate shall have the same effect as 
if accomplished during the lifetime of the purchaser.
    (f) When the foreclosure commissioner conveys the property to the 
Secretary, no tax shall be imposed or collected with respect to the 
foreclosure commissioner's deed, including any tax customarily imposed 
upon the deed instrument or upon the conveyance or transfer of title to 
the property.
    (g) The register of deeds or other appropriate official in the 
county where the property is located shall, upon tendering of the 
customary recording fees, accept all instruments pertaining to the 
foreclosure which are submitted by the foreclosure commissioner for 
recordation. The instruments to be accepted shall include, but not be 
limited to, the foreclosure commissioner's deed. If the foreclosure 
commissioner elects to include the recitations required in 
Sec. 29.127(a) in an affidavit or an addendum to the deed as provided 
in Sec. 29.127(b), the affidavit or addendum shall be accepted for 
recordation. Failure to collect or pay a tax as described in paragraph 
(f) of this section shall not be grounds for refusing to record such 
instruments, for failing to recognize such recordation as imparting 
notice, or for denying the enforcement of such instruments and their 
provisions in any State or Federal Court.
    (h) The Clerk of the Court or other appropriate official shall 
cancel all liens as requested by the foreclosure commissioner.


Sec. 29.125  Redemption rights.

    (a) There shall be no right of redemption, or right of possession 
based upon a right of redemption, in the mortgagor or others subsequent 
to a foreclosure completed pursuant to this Act and this part. For 
purposes of this section only, a foreclosure shall be considered 
completed upon the date of the foreclosure sale.
    (b) Section 204(l) of the National Housing Act, 42 U.S.C. 1710(l), 
and section 701 of the Department of Housing and Urban Development 
Reform Act of 1989, 42 U.S.C. 1452c, shall not apply to mortgages 
foreclosed under this Act and this part.


Sec. 29.127  Record of foreclosure and sale.

    (a) The foreclosure commissioner shall include in the recitals of 
the deed to the purchaser the following items:
    (1) The date, time, and place of the foreclosure sale.
    (2) A statement that the foreclosed mortgage was held by the 
Secretary.
    (3) The date of the foreclosed mortgage, the office in which the 
mortgage was recorded, and the liber and folio numbers or other 
appropriate description of the recordation of the mortgage.
    (4) The details of the service of the Notice of Default and 
Foreclosure Sale under Sec. 29.109, including the names and addresses 
of the persons to whom the Notice was mailed and the date on which the 
Notice was mailed, names of the newspaper in which the Notice was 
published and the dates of publication, and the date on which service 
by posting, if required, was accomplished.
    (5) The date and place of filing the Notice of Default and 
Foreclosure Sale.
    (6) A statement that the foreclosure was conducted in accordance 
with the provisions of the Act and this part and with the terms of the 
Notice of Default and Foreclosure Sale.
    (7) The name of the successful bidder and the amount of the 
successful bid.
    (b) The foreclosure commissioner may, in his or her discretion, 
make the recitations in paragraph (a) of this section in an affidavit 
or addendum to the deed, either of which is to be recorded with the 
deed as provided in the Act and this part.
    (c) The items set forth in paragraph (a) of this section shall be 
prima facie evidence of the truth of such facts in any Federal or State 
court and evidence a conclusive presumption in favor of bona fide 
purchasers and encumbrancers for value without notice. Encumbrancers 
for value include liens placed by lenders who provide the purchaser 
with purchase money in exchange for a security interest in the newly-
conveyed property.


Sec. 29.129  Effect of sale.

    A sale made and conducted as prescribed in the Act and this part to 
a bona fide purchaser shall bar all claims upon, or with respect to, 
the property sold for the following persons:
    (a) Any person to whom the Notice of Default and Foreclosure Sale 
was mailed as provided under the Act and in this part, and the heir, 
devisee, executor, administrator, successor or assignee claiming under 
any such person.
    (b) Any person claiming any interest in the property subordinate to 
that of the mortgage if such person had actual knowledge of the 
foreclosure sale.
    (c) Any person claiming any interest in the property whose 
assignment, mortgage, or other conveyance was not duly recorded or 
filed in the proper place for recording or filing, or whose judgment or 
decree was not duly docketed or filed in the proper place for docketing 
or filing, before the date on which the notice of the foreclosure sale 
was first served by publication, as required by Sec. 29.109(c), and the 
executor, administrator, or assignee of such a person.
    (d) Any person claiming an interest in the property under a 
statutory lien or encumbrance created subsequent to the recording or 
filing of the mortgage being foreclosed, and attaching to the title or 
interest of any person designated in any of paragraphs (a) through (d) 
of this section.


Sec. 29.131  Computation of time.

    Periods of time provided for in this part shall be calculated in 
consecutive calendar days including the day or days on which the 
actions or events occur, or are to occur. Any such period of time 
includes the day on which an event occurs or is to occur.


Sec. 29.133  Deficiency judgment.

    If the price at which the security property is sold at the 
foreclosure sale is less than the unpaid balance of the debt secured by 
such property after deducting the payments provided for in Sec. 29.121, 
the Secretary may refer the matter to the Attorney General who may 
commence an action or actions against any and all debtors to recover 
the deficiency, the only limitation on such action being a prohibition 
against pursuit of a deficiency that is specifically set forth in the 
mortgage.

    Dated: March 7, 1995.
Henry G. Cisneros,
Secretary.
[FR Doc. 95-8547 Filed 4-6-95; 8:45 am]
BILLING CODE 4210-32-P