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

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.

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
Federal Register / Vol. 60, No. 67 / Friday, April 7, 1995 / Proposed Rules 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 HUDheld 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 HUDheld 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 singlefamily 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
17970 Federal Register / Vol. 60, No. 67 / Friday, April 7, 1995 / Proposed Rules

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

§ 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.

§ 29.3 Scope and applicability.

(a) Scope. Under this part, the

Secretary may foreclose on any

defaulted single family mortgage (as

defined in § 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.

§ 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
Federal Register / Vol. 60, No. 67 / Friday, April 7, 1995 / Proposed Rules 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 CranstonGonzalez 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 SelfDetermination and Education

Assistance Act are determined by the

Bureau of Indian Affairs.

Subpart B—Procedures

§ 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 § 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

§ 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 § 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.

§ 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.

§ 29.105 Commencement of foreclosure.

If the Secretary determines that the

prerequisites to foreclosure set forth in

§ 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 § 29.107.

§ 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
17972 Federal Register / Vol. 60, No. 67 / Friday, April 7, 1995 / Proposed Rules

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.

§ 29.109 Service of Notice of Default and

Foreclosure Sale.

The foreclosure commissioner shall

serve the Notice of Default and

Foreclosure Sale described in § 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.

§ 29.111 Presale reinstatement.

(a) Except as provided in § 29.101(b),

paragraph (b) of this section, and

§ 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

§ 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
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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 § 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 § 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

§ 29.109.

§ 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 § 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 § 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 § 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 § 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 § 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 § 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.

§ 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
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(2) Additional time is necessary to

determine whether the security property

should be withdrawn from foreclosure,

as provided in § 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 § 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.

§ 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.

§ 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 § 29.109 and § 29.115.

(b) Mileage by the most reasonable

road distance for posting Notices under

§ 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.

§ 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 § 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 § 29.119, and otherwise to audit

the foreclosure commissioner’s

disposition of the sale proceeds.

§ 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 § 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 § 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
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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 § 29.127(a) in an

affidavit or an addendum to the deed as

provided in § 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.

§ 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.

§ 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 § 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.

§ 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 § 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.

§ 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.

§ 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

§ 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