Last updated on October 18th, 2024 at 03:55 am
Title 24—Housing and Urban Development–Volume 2
Subtitle B—Regulations Relating to Housing and Urban Development (Continued)
CHAPTER II—OFFICE OF ASSISTANT SECRETARY FOR HOUSING—FEDERAL HOUSING COMMISSIONER, DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
SUBCHAPTER A—GENERAL
PART 200—INTRODUCTION TO FHA PROGRAMS
§ 200.1 Purpose.
This part sets forth requirements that are applicable to several of the programs of the Federal Housing Administration, an organizational unit within the Department of Housing and Urban Development. Program requirements applicable to FHA programs and other HUD programs also can be found in 24 CFR part 5. The specific program regulations should be consulted to determine which requirements in this part 200 or 24 CFR part 5 are applicable.
Subpart A—Requirements for Application, Commitment, and Endorsement Generally Applicable to Multifamily and Health Care Facility Mortgage Insurance Programs; and Continuing Eligibility Requirements for Existing Projects
§ 200.3 Definitions.
(a) The definitions “department”, “elderly person”, “family”, “HUD”, and “Secretary”, as used in this subpart A, shall have the meanings given these terms in 24 CFR part 5.
(b) The terms “first mortgage”, “hospital”, “maturity date”, “mortgage”, “mortgagee”, and “state”, as used in this subpart A shall have the meaning given in the section of the National Housing Act (12 U.S.C. 1701), as amended, under which the project mortgage is insured.
(c) As used in this subpart A:
Act means the National Housing Act, (12 U.S.C. 1701) as amended.
Commissioner means the Federal Housing Commissioner.
FHA means the Federal Housing Administration.
Insured mortgage means a mortgage which has been insured by the endorsement of the credit instrument by the Commissioner, or the Commissioner’s duly authorized representative.
Project means a property consisting of site, improvements and, where permitted, equipment meeting the provisions of the applicable section of the Act, other applicable statutes and regulations, and terms, conditions and standards established by the Commissioner.
Eligible Mortgagor
§ 200.5 Eligible mortgagor.
(a) Except as provided in paragraph (b) of this section, the mortgagor:
(1) Shall be a single asset mortgagor entity acceptable to the Commissioner, as limited by the applicable section of the Act, and shall possess the powers necessary and incidental to operating the project, except that the Commissioner may approve a non-single asset mortgagor entity under such circumstances, terms and conditions determined and specified as acceptable to the Commissioner; and
(2) Shall not be a natural person or tenant in common.
(b)(1) For multifamily project mortgages for which HUD issued a firm commitment for mortgage insurance before September 1, 2011, and for multifamily project mortgages insured under section 232 of the Act (12 U.S.C. 1715w), the mortgagor shall be a natural person or entity acceptable to the Commissioner, as limited by the applicable section of the Act, and shall possess the powers necessary and incidental to operating the project.
(2) For multifamily project mortgages for which HUD issued a firm commitment for mortgage insurance on or after September 1, 2011, the regulations of paragraph (a) of this section shall apply, unless the mortgagor demonstrates to the satisfaction of the Commissioner that financial hardship to the mortgagor would result from application of the regulations in paragraph (a) of this section due to the reasonable expectations of the mortgagor that the transaction would close under the regulations in effect prior to September 1, 2011, in which case, the regulations of paragraph (b)(1) shall apply.
The requirements set forth in 24 CFR part 5, regarding the disclosure and verification of social security numbers and employer identification numbers by applicants and participants in assisted mortgage and loan insurance and related programs, apply to these programs.
Eligible Mortgagee
§ 200.10 Lender requirements.
The requirements set forth in part 202 of this chapter regarding approval, recertification, withdrawal of approval, approval for servicing, report requirements and conditions for supervised mortgagees, nonsupervised mortgagees, investing mortgagees, and governmental and similar institutions, apply to these programs.
§ 200.11 Audit requirements for State and local governments as mortgagees.
Requirements set forth in 2 CFR part 200, subpart F, apply to State and local governments (as defined at 2 CFR 200.90 and 200.64, respectively) that receive mortgage insurance as mortgagees.
Eligible Mortgage
§ 200.15 Maximum mortgage.
Mortgages must not exceed either the statutory dollar amount or loan ratio limitations established by the section of the Act under which the mortgage is insured, except that the Commissioner may increase the dollar amount limitations:
(a) By not to exceed 170 percent, in any geographical area, in which the Commissioner finds that cost levels so require; and
(b) By not to exceed 170 percent, or 215 percent in high-cost areas, where the Commissioner determines it necessary on a project-by-project basis.
§ 200.16 Project mortgage adjustments and reductions.
The principal amount computed in accordance with the applicable section of the Act for the insured mortgage shall be subject to additional adjustments and reductions in accordance with terms and conditions established by the Commissioner.
§ 200.17 Mortgage coverage.
The mortgage shall cover the entire property included in the project.
§ 200.18 Minimum loan prohibition.
A mortgagee may not require that the mortgage exceed a minimum amount established by the mortgagee, as a condition of providing a loan secured by a mortgage insured under this part.
Miscellaneous Project Mortgage Insurance
§ 200.20 Refinancing insured mortgages.
An existing mortgage insured under the Act, or an existing mortgage held by the Secretary that is subject to a mortgage restructuring and rental assistance sufficiency plan under the Multifamily Assisted Housing Reform and Affordability Act, 42 U.S.C. 1437f note (MAHRA), may be refinanced pursuant to section 223(a)(7) of the Act and such terms and conditions as may be established by the Commissioner. The term of such refinancing in connection with the implementation of an approved restructuring plan under section 401, subpart C of this title, may be up to, but not more than, 30 years.
§ 200.21 Reinsurance of Commissioner held mortgages.
Any mortgage assigned to the Commissioner in connection with payment under a contract of mortgage insurance, or executed in connection with a sale by the Commissioner of any property acquired under any section or title of the Act, may be insured pursuant to provisions of section 223(c) of the Act and such terms and conditions established by the Commissioner.
§ 200.22 Operating loss loans.
An insured loan to cover the operating losses of a project with an existing Commissioner insured mortgage may be made in accordance with provisions of section 223(d) of the Act and such terms and conditions established by the Commissioner.
§ 200.23 Projects in declining neighborhoods.
A Mortgage financing the repair, rehabilitation or construction of a project located in an older declining urban area shall be eligible for insurance pursuant to provisions of section 223(e) of the Act and such terms and conditions established by the Commissioner.
§ 200.24 Existing projects.
A mortgage financing the purchase or refinance of an existing rental housing project or refinance of the existing debt of an existing cooperative project under section 207 of the Act, or for refinancing the existing debt of an existing nursing home, intermediate care facility, assisted living facility, or board and care home, or any combination thereof, under section 232 of the Act, may be insured pursuant to provisions of section 223(f) of the Act and such terms and conditions established by HUD.
§ 200.25 Supplemental loans.
A loan, advance of credit or purchase of an obligation representing a loan or advance of credit made for the purpose of financing improvements or additions to a project covered by a mortgage insured under any section of the Act or Commissioner-held mortgage, or equipment for a nursing home, intermediate care facility, board and care home, assisted living facility, or group practices facility, may be insured pursuant to the provisions of section 241 of the Act and such terms and conditions established by HUD.
Miscellaneous Cross Cutting Regulations
§ 200.30 Nondiscrimination and equal opportunity.
The requirements set forth in 24 CFR part 5, and subparts I, J, and M of this part pertaining to nondiscrimination and equal opportunity, apply to these programs.
§ 200.31 Debarment and suspension.
The requirements set forth in 2 CFR part 2424 apply to these programs.
§ 200.32 Participation and compliance requirements.
The requirements set forth in 24 CFR part 200, subpart H, apply to these programs.
§ 200.33 Labor standards.
(a) The requirements set forth in 29 CFR parts 1, 3 and 5 for compliance with labor standards laws apply to projects under these programs to the extent that labor standards apply as provided in section 212 of the Act, provided that:
(1) The labor standards provisions do not apply to projects insured under sections 207 or 232 pursuant to section 223(f) of the Act; and
(2) Supplemental loans under section 241 of the Act are subject to the provisions of section 212 applicable to the section or title pursuant to which the mortgage covering the project is insured or pursuant to which the original mortgage was insured.
(b) The requirements set forth in 24 CFR part 70 apply to those programs with respect to which there is a statutory provision allowing HUD waiver of Davis-Bacon prevailing wage rates for volunteers.
(c) Project commitments, contracts and agreements, as determined by the Commissioner, and construction contracts and subcontracts, shall include terms, conditions and standards for compliance with applicable requirements set forth in 29 CFR parts 1, 3 and 5 and section 212 of the Act.
(d) No advance under a loan or mortgage that is subject to the requirements of section 212 shall be eligible for insurance unless there is filed with the application for the advance a certificate as required by the Commissioner certifying that the laborers and mechanics employed in construction of the project have been paid not less than the wage rates required under section 212.
§ 200.34 Property and mortgage assessment.
The requirements set forth in 24 CFR part 200, subpart E, regarding the mortgagor’s responsibility for making those investigations, analysis and inspections it deems necessary for protecting its interests in the property apply to these programs.
§ 200.35 Appraisal standards—nondiscrimination requirements.
(a) Nondiscrimination in the selection of appraiser. In the selection of an appraiser, there shall be no discrimination on the basis of race, color, religion, national origin, sex, age, or disability.
(b) Nondiscrimination in appraisal determination. The certification required by the Uniform Standards of Professional Appraisal Practice must include a statement that the racial/ethnic composition of the neighborhood surrounding the property in no way affected the appraisal determination.
§ 200.36 Financial reporting requirements.
The mortgagor must comply with the financial reporting requirements in 24 CFR part 5, subpart H.
§ 200.37 Preventing crime in federally assisted housing.
See part 5, subparts I and J of this title, for provisions concerning preventing crime in federally assisted housing, including programs administered under section 236 and under sections 221(d)(3) and 221(d)(5) of the National Housing Act.
§ 200.38 Protections for victims of domestic violence.
(a) The requirements for protection for victims of domestic violence, dating violence, sexual assault, or stalking in 24 CFR part 5, subpart L (Protection for Victims of Domestic Violence, Dating Violence, Sexual Assault, or Stalking) apply to programs administered under section 236 and under sections 221(d)(3) and (d)(5) of the National Housing Act, as follows:
(1) Multifamily rental housing under section 221(d)(3) of the National Housing Act (12 U.S.C. 17151(d)) with a below-market interest rate (BMIR) pursuant to section 221(d)(5), with implementing regulations at 24 CFR part 221. The Section 221(d)(3) BMIR program insured and subsidized mortgage loans to facilitate new construction or substantial rehabilitation of multifamily rental cooperative housing for low- and moderate-income families. The program is no longer active, but Section 221(d)(3) BMIR properties that remain in existence are covered by VAWA. Coverage of section 221(d)(3) and (d)(5) BMIR housing does not include section 221(d)(3) and (d)(5) BMIR projects that refinance under section 223(a)(7) or 223(f) of the National Housing Act where the interest rate is no longer determined under section 221(d)(5).
(2) Multifamily rental housing under section 236 of the National Housing Act (12 U.S.C. 1715z-1), with implementing regulations at 24 CFR part 236. Coverage of the section 236 program includes not only those projects with FHA-insured project mortgages under section 236(j), but also non-FHA-insured projects that receive interest reduction payments (“IRP”) under section 236(b) and formerly insured section 236 projects that continue to receive interest reduction payments through a “decoupled” IRP contract under section 236(e)(2). Coverage also includes projects that receive rental assistance payments authorized under section 236(f)(2).
(b) For the programs administered under paragraph (a) of this section, “covered housing provider” as such term is used in 24 CFR part 5, subpart L, refers to the mortgagor, or owner, as applicable.
Fees and Charges
§ 200.40 HUD fees.
The following fees apply to mortgages to be insured under this part.
(a) Application fee—SAMA letter (for new construction). An application fee of $1 per thousand dollars of the requested mortgage shall accompany the application for a SAMA letter. An additional fee of $1 per thousand dollars of the requested mortgage amount shall be charged for the review of plans and specifications.
(b) Application fee—feasibility letter (for substantial rehabilitation). An application fee of $3 per thousand dollars of the requested mortgage amount shall accompany the application for a feasibility letter.
(c) Application fee—conditional commitment. For a mortgage being insured under section 223(f) of the Act (12 U.S.C. 1715n), an application-commitment fee of $3 per thousand dollars of the requested mortgage amount shall accompany an application for conditional commitment.
(d)(1) Application fee—firm commitment: General. An application for firm commitment shall be accompanied by an application-commitment fee in an amount determined by the Secretary, which when added to any prior fees received in connection with the same application, shall not exceed $5.00 per thousand dollars of the requested mortgage amount to be insured. The payment of an application-commitment fee shall not be required in connection with an insured mortgage involving the sale by the government of housing or property acquired, held, or contracted pursuant to the Atomic Energy Community Act of 1955 (42 U.S.C. 2301 et seq.).
(2) Application fee—Section 232 Programs. For purposes of mortgages insured under HUD’s regulations in 24 CFR part 232, subpart C, an application for firm commitment shall be accompanied by an application fee in an amount determined by the Secretary, which shall not exceed $5.00 per thousand dollars of the requested mortgage amount to be insured.
(e) Inspection fee—(1) In general. The firm commitment may provide for the payment of an inspection fee in an amount not to exceed $5 per thousand dollars of the commitment. If an inspection fee is required, it shall be paid as follows:
(i) If the case involves insurance of advances, at the time of initial endorsement; or
(ii) If the case involves insurance upon completion, before the date construction is begun.
(2) Existing projects. For a mortgage being insured under section 223(f) of the Act, if the application provides for the completion of repairs, replacements and/or improvements (repairs), the Commissioner will charge an inspection fee equal to one percent (1%) of the cost of the repairs. However, where the Commissioner determines the cost of repairs is minimal, the Commissioner may establish a minimum inspection fee that exceeds one percent of the cost of repairs and can periodically increase or decrease this minimum fee.
(f) Fees on increases—in general. This section applies to all applications except applications involving hospitals, which are covered in 24 CFR part 242.
(1) Increase in firm commitment before endorsement. An application, filed before initial endorsement (or before endorsement in a case involving insurance upon completion), for an increase in the amount of an outstanding firm commitment, shall be accompanied by a combined additional application and commitment fee. This combined additional fee shall be in an amount that will aggregate $5 per thousand dollars of the amount of the requested increase. If an inspection fee was required in the original commitment, an additional inspection fee shall be paid in an amount computed at the same dollar rate per thousand dollars of the amount of increase in commitment as was used for the inspection fee required in the original commitment. When insurance of advances is involved, the additional inspection fee shall be paid at the time of initial endorsement. When insurance upon completion is involved, the additional inspection fee shall be paid before the date construction is begun; or, if construction has begun, it shall be paid with the application for increase.
(2) Increase in mortgage between initial and final endorsement. Upon the filing of an application between initial and final endorsement, for an increase in the amount of the mortgage, either by amendment or by substitution of a new mortgage, a combined additional application and commitment fee shall accompany the application. This combined additional fee shall be in an amount that will aggregate $5 per thousand dollars of the amount of the increase requested. If an inspection fee was required in the original commitment, an additional inspection fee shall accompany the application in an amount not to exceed the $5 per thousand dollars of the amount of the increase requested.
(3) Loan to cover operating losses. In connection with a loan to cover operating losses (see Sec. 200.22), a combined application and commitment fee of $5 per thousand dollars of the amount of the loan applied for shall be submitted with the application for a firm commitment. No inspection fee shall be required.
(g) Reopening of expired commitments. An expired commitment may be reopened if a request for reopening is received by the Commissioner within 90 days of the expiration of the commitment. The reopening request shall be accompanied by a fee of 50 cents per thousand dollars of the amount of the expired commitment. If the reopening request is not received by the Commissioner within the required 90-day period, a new application, accompanied by the required application and commitment fee, must be submitted.
(h) Transfer fee. Upon application for the approval of a transfer of physical assets or the substitution of mortgagors, a transfer fee of 50 cents per thousand dollars shall be paid on the original face amount of the mortgage in all cases, except that a transfer fee shall not be paid where both parties to the transfer transaction are nonprofit purchasers, or when the transfer of physical assets or the substitution of mortgagors occurs contemporaneously with the restructuring of a mortgage pursuant to a restructuring plan under part 401, subpart C of this title.
(i) Refund of fees. If the amount of the commitment issued or increase in mortgage granted is less than the amount applied for, the Commissioner shall refund the excess amount of the application and commitment fees submitted by the applicant. If an application is rejected before it is assigned for processing, or in such other instances as the Commissioner may determine, the entire application and commitment fee or any portion thereof may be returned to the applicant. Commitment, inspection and reopening fees may be refunded, in whole or in part, if it is determined by the Commissioner that there is a lack of need for the housing or that the construction or financing of the project has been prevented because of condemnation proceedings or other legal action taken by a governmental body or public agency, or in such other instances as the Commissioner may determine. A transfer fee may be refunded only in such instances as the Commissioner may determine.
(j) Fees not required. (1) The payment of an application, commitment, inspection, or reopening fee shall not be required in connection with the insurance of a mortgage involving the sale by the Secretary of any property acquired under any section or title of the Act.
(2) The payment of an application or commitment fee shall not be required in connection with the insurance of a mortgage used to facilitate a restructuring plan under part 401, subpart C of this title.
§ 200.41 Maximum mortgagee fees and charges.
(a) Mortgagee fees and charges included in the mortgage must be for actual required services provided to the mortgagor by the mortgagee, and shall not exceed common market rates for such services as determined by the Commissioner.
(b) Mortgagee charges for prepayment of the mortgage and late mortgage payments shall not exceed that determined appropriate by the Commissioner.
Commitment Applications
§ 200.45 Processing of applications.
(a) Preapplication conference. Except for mortgages insured under section 241(f) or 242 of the Act, the local HUD Office will determine whether participation in such a conference is required as a condition to submission of an initial application for either a site appraisal and market analysis (SAMA) letter (for new construction), a feasibility letter (for substantial rehabilitation), or for a firm commitment. The project sponsor may elect (after the preapplication conference if required) to submit an application for a SAMA or a feasibility letter (as appropriate), or for a firm commitment for insurance depending upon the completeness of the drawings, specifications and other required exhibits. An application for a SAMA or feasibility letter may be submitted by the project sponsor. An application for a firm commitment for insurance must be submitted by both the project sponsor and an approved mortgagee. Applications shall be submitted to the local HUD Office on HUD-approved forms. No application will be considered unless accompanied by all exhibits required by the form and program handbooks. At the option of the local HUD Office, the SAMA/Feasibility letter stage of processing can be combined with the firm commitment stage of processing.
(b) Firm commitment requirement. An application for a firm commitment must be made by an approved mortgagee for any project for which a mortgagor seeks mortgage insurance under the Act.
(c) Staged applications. Staged applications leading to an application for firm commitment shall be made as determined appropriate by the Commissioner, and in accordance with such terms and conditions established by the Commissioner. The intermediate stages to firm commitment may include a site appraisal and market analysis (SAMA) letter stage or a feasibility letter stage and a conditional commitment. The conditional commitment stage applies only to mortgages to be insured pursuant to section 223(f) of the Act.
(d) Effect of SAMA letter, feasibility letter, and firm commitment—(1) SAMA letter. (i) The issuance of a SAMA letter indicates completion of the site appraisal and market analysis stage to determine initial acceptability of the site and recognition of a specific market need. The SAMA letter is not a commitment to insure a mortgage for the proposed project and does not bind the Commissioner to issue a firm commitment to insure. The SAMA letter precedes the later submission of acceptable plans and specifications for the proposed project and is limited to advising the applicant as to the following determinations of the Commissioner, which shall not be changed to the detriment of an applicant, if the application for a firm commitment is received before expiration of the SAMA letter:
(A) The land value fully improved (with off-site improvements installed);
(B) The acceptability of the proposed project site, the proposed composition, number and size of the units and the market for the number of proposed units. Where the application is not acceptable as submitted, but can be made acceptable by a change in the number, size, or composition of the units, the SAMA letter may establish the specific lesser number of units which would be acceptable and any acceptable alternative plan for the composition and size of units; and
(C) The acceptability of the unit rents proposed. Where rent levels are unacceptable, the SAMA letter may establish specific rents which are acceptable.
(ii) After receiving a SAMA letter, the sponsor shall submit design drawings and specifications in a timeframe prescribed by the Commissioner. The Commissioner will review and comment on design development and the drawings and specifications. The comments will be provided to the sponsor for use in preparing a firm commitment application.
(2) Feasibility letter. The issuance of a feasibility letter indicates approval of the preliminary work write-up and outline specifications and completion of technical processing involving the estimated rehabilitation cost of the project, the “as is” value of the site, the detailed estimates of operating expenses and taxes, the specific unit rents, the vacancy allowance, and the estimated mortgage amount. The issuance of a feasibility letter is not a commitment to insure a mortgage for the proposed project and does not bind the Commissioner to issue a firm commitment to insure. Determinations found in a feasibility letter are not to be binding upon the Department and may be changed in whole or in part at any later point in time. The letter may even be unilaterally terminated by the Commissioner if found necessary.
(3) Conditional commitment. The issuance of a Section 223(f) conditional commitment indicates completion of technical processing involving the estimated value of the property, the detailed estimates of rents, operating expenses and taxes and an estimated mortgage amount.
(e) Term of SAMA letter, feasibility letter, and conditional commitment. A SAMA letter, a feasibility letter, and a conditional commitment shall be effective for whatever term is specified in the respective letter or commitment.
(f) Rejection of an application. A significant deviation in an application from the Commissioner’s terms or conditions in an earlier stage application commitment or agreement shall be grounds for rejection. The fees paid to such date shall be considered as having been earned notwithstanding such rejection.
§ 200.46 Commitment issuance.
Upon approval of an application for insurance, a commitment shall be issued by the Commissioner setting forth the terms and conditions upon which the mortgage will be insured. The commitment term and any extension or reopening of an expired commitment shall be in accordance with standards established by the Commissioner.
§ 200.47 Firm commitments.
A valid firm commitment must be in effect at the time the mortgage instrument is endorsed.
(a) Insurance upon completion. The commitment shall provide the terms and conditions for the insurance of the mortgage:
(1) After completion of construction or substantial rehabilitation of the project; or
(2) Upon completion of required work, except as deferred by the Commissioner in accordance with terms, conditions and standards established by the Commissioner, for an existing project without substantial rehabilitation.
(b) Insured advances. The commitment shall provide for insurance of the mortgage as provided in paragraph (a) of this section, and for the insurance of mortgage money advanced in accordance with terms and conditions established by the Commissioner during: construction; substantial rehabilitation; or other work acceptable to the Commissioner.
Requirements Incident to Insured Advances
§ 200.50 Building loan agreement.
The mortgagor and mortgagee must execute a building loan agreement approved by the Commissioner, that sets forth the terms and conditions under which progress payments may be advanced during construction, before initial endorsement of the mortgage for insurance.
§ 200.51 Mortgagee certificate.
The mortgagee shall certify to the Commissioner that it will conform with terms and conditions established by the Commissioner for the mortgagee’s control of project funds, and other incidental requirements established by the Commissioner.
§ 200.52 Construction contract.
The form of contract between the mortgagor and builder shall be as prescribed by the Commissioner in accordance with terms and conditions established by the Commissioner.
§ 200.53 Initial operating funds.
The mortgagor shall deposit cash with the mortgagee, or in a depository satisfactory to the mortgagee and under control of the mortgagee, in accordance with terms, conditions and standards established by the Commissioner for:
(a) Accruals for taxes, ground rates, mortgage insurance premiums, and property insurance premiums, during the course of construction;
(b) Meeting the cost of equipping and renting the project subsequent to its completion in whole or part; and
(c) Allocation by the mortgagee for assessments required by the terms of the mortgage in an amount acceptable to the Commissioner.
§ 200.54 Project completion funding.
(a) Except as provided in paragraph (d) of this section, the mortgagor shall deposit with the mortgagee cash deemed by the Commissioner to be sufficient, when added to the proceeds of the insured mortgage, to assure completion of the project and to pay the initial service charge, carrying charges, and legal and organizational expenses incident to the construction of the project. The Commissioner may accept a lesser cash deposit or an alternative to a cash deposit in accordance with terms and conditions established by the Commissioner, where the required funding is to be provided by a grant or loan from a Federal, State, or local government agency or instrumentality.
(b) An agreement acceptable to the Commissioner shall require that funds provided by the mortgagor under requirements of this section must be disbursed in full for project work, material, and incidental charges and expenses before disbursement of any mortgage proceeds, except:
(c) Low-income housing tax credit syndication proceeds, historic tax-credit syndication proceeds, New Markets Tax Credits proceeds, or funds provided by a grant or loan from a Federal, State, or local governmental agency or instrumentality under requirements of this section need not be fully disbursed before the disbursement of mortgage proceeds, where approved by the Commissioner in accordance with terms, conditions, and standards established by the Commissioner;
(d) In the case of a mortgage insured under any provision of this title executed in connection with the purchase, construction, rehabilitation, or refinancing of a multifamily tax credit project, the Commissioner may not require:
(1) The escrowing of equity provided by Low-Income Housing Tax Credits for the project pursuant to Title 26, section 42 of the Internal Revenue Code of 1986;
(2) The escrowing of equity provided by historic rehabilitation tax credits, New Markets Tax Credits, or any other form of security, such as a letter of credit.
§ 200.55 Financing fees and charges.
Fees and charges approved by the Commissioner in excess of the initial service charge shall be deposited with the mortgagee in cash before initial endorsement, except as otherwise preapproved by the Commissioner.
§ 200.56 Assurance of completion for on-site improvements.
The mortgagor shall furnish assurance of completion of the project in the form and amount provided by terms, conditions and standards established by the Commissioner.
General Requirements
§ 200.60 Assurance of completion for offsite facilities.
An assurance of completion for offsite utilities, streets, and other facilities required for a buildable site shall be provided in an amount and form acceptable to the Commissioner, except where a municipality or other public body has, in a manner acceptable to the Commissioner, agreed to install such improvements without cost to the mortgagor.
§ 200.61 Title.
(a) Marketable title to the project must be vested in the mortgagor as of the date the mortgage is filed for record.
(b) Title evidence for the Commissioner’s examination shall include a lender’s title insurance policy, which title policy provides survey coverage based on a survey acceptable to the title company and the Commissioner; or as the Commissioner may otherwise require, in accordance with terms, conditions and standards established by the Commissioner.
(c) Endorsement of the credit instrument for insurance shall evidence the acceptability of title evidence.
§ 200.62 Certifications.
Any agreement, undertaking, statement or certification required by the Commissioner shall specifically state that it has been made, presented, and delivered for the purpose of influencing an official action of the FHA, and of the Commissioner, and may be relied upon by the Commissioner as a true statement of the facts contained therein.
§ 200.63 Required deposits and letters of credit.
(a) Deposits. Where the Commissioner requires the mortgagor to make a deposit of cash or securities, such deposit shall be with the mortgagee or a depository acceptable to the mortgagee. The deposit shall be held by the mortgagee in a special account or by the depository under an appropriate agreement approved by the Commissioner.
(b) Letter of credit. Where the use of a letter of credit is acceptable to the Commissioner in lieu of a deposit of cash or securities, the letter of credit shall be issued to the mortgagee by a banking institution and shall be unconditional and irrevocable:
(1) The mortgagee of record may not be the issuer of any letter of credit without the prior written consent of the Commissioner.
(2) The mortgagee shall be responsible to the Commissioner for collection under the letter of credit. In the event a demand for payment thereunder is not immediately met, the mortgagee shall immediately provide a cash deposit equivalent to the undrawn balance of the letter of credit.
Property Requirements
§ 200.70 Location and fee interest.
The property must be held by an eligible mortgagor, and must conform with requirements pertaining to property location and fee or lease interests of the section of the Act under which the mortgage is insured.
§ 200.71 Liens.
The project must be free and clear of all liens other than the insured mortgage, except that the property may be subject to an inferior lien as provided by terms and conditions established by the Commissioner for an inferior lien:
(a) Made or held by a Federal, State or local government instrumentality;
(b) Required in connection with: an operating loss loan insured pursuant to a section 223(d) of the Act; a supplemental loan insured pursuant to section 241 of the Act; or a mortgage to purchase or refinance an existing project pursuant to section 223(f) of the Act; or
(c) As otherwise provided by the Commissioner.
§ 200.72 Zoning, deed and building restrictions.
The project when completed shall not violate any material zoning or deed restrictions applicable to the project site, and shall comply with all applicable building and other governmental codes, ordinances, regulations and requirements.
§ 200.73 Property development.
(a) The property shall be suitable and principally designed for the intended use, as provided by the applicable section of the Act under which the mortgage is insured, and have long-term marketability. Design, construction, substantial rehabilitation and repairs shall be in accordance with standards established by the Commissioner.
(b) A project may include such commercial and community facilities as the Commissioner deems acceptable.
(c) The improvements shall constitute a single project. Not less than five rental dwelling units or personal care units, 20 medical care beds, or 50 manufactured home pads, shall be on one site, except that such limitations do not apply to group practice facilities.
§ 200.74 Minimum property standards.
The requirements set forth in subpart S of this part apply to these programs, except for hospitals insured under section 242 of the Act and group practice facilities insured under title XI of the Act.
§ 200.75 Environmental quality determinations and standards.
Requirements set forth in 24 CFR part 50, Protection and Enhancement of Environmental Quality, 24 CFR part 51, Environmental Criteria and Standards, 24 CFR part 55, Implementation of Executive Order 11988, Flood Plain Management, and as otherwise required by the Commissioner apply to these programs.
§ 200.76 Smoke detectors.
Smoke detectors and alarm devices must be installed in accordance with standards and criteria acceptable to the Commissioner for the protection of occupants in any dwelling or facility bedroom or other primary sleeping area.
§ 200.77 Lead-based paint poisoning prevention.
Requirements set forth in 24 CFR part 35 apply to these programs.
§ 200.78 Energy conservation.
Construction, mechanical equipment, and energy and metering selections shall provide cost effective energy conservation in accordance with standards established by the Commissioner.
Mortgage Provisions
§ 200.80 Mortgage form.
The mortgage shall be:
(a) Executed on a form approved by the Commissioner for use in the jurisdiction in which the property securing the mortgage is situated, which form shall not be changed without the prior written approval of the Commissioner.
(b) Executed by an eligible mortgagor.
(c) A first lien on the property securing the mortgage, which property conforms with the property standards prescribed by the Commissioner.
§ 200.81 Disbursement of mortgage proceeds.
The mortgagee shall be obligated, as a part of the mortgage transaction, to disburse the principal amount of the mortgage to the:
(a) Mortgagor or mortgagor’s account;
(b) Mortgagor’s creditors for the mortgagor’s account, subject to the mortgagor’s consent.
§ 200.82 Maturity.
The mortgage shall have a maturity satisfactory to the Commissioner, and shall contain complete amortization or sinking-fund provisions satisfactory to the Commissioner.
(a) The maximum mortgage term may not exceed the lesser of:
(1) Any limits included under the applicable section of the Act.
(2) Thirty-five years for existing projects, except that the mortgage term may be up to 40 years under terms and conditions established by the Commissioner, and 40 years for proposed construction and substantial rehabilitation projects.
(3) Seventy-five percent of the estimated remaining economic life of the physical improvements.
(b) The minimum mortgage term shall not be less than 10 years.
§ 200.83 Interest rate.
(a) The mortgage shall bear interest at the rate agreed upon by the mortgagee and the mortgagor.
(b) Interest shall be payable in monthly installments on the principal amount of the mortgage outstanding on the due date of each installment.
(c) The amount of any increase approved by the Commissioner in the mortgage amount between initial and final endorsement in excess of the amount that the Commissioner had committed to insure at initial endorsement shall bear interest at the rate agreed upon by the mortgagee and the mortgagor.
§ 200.84 Payment requirements.
The mortgage shall provide for:
(a) A single aggregate payment each month for all payments to be made by the mortgagor to the mortgagee.
(b) The mortgagor to pay to the mortgagee:
(1) Interest and principal on the first day of each month in accordance with an amortization plan agreed upon by the mortgagor, the mortgagee and the Commissioner.
(i) Date of first payment to interest shall be the endorsement date or, where there are insured advances, the initial endorsement date.
(ii) Date of first payment to principal. The Commissioner shall estimate the time necessary to complete the project and shall establish the date of the first payment to principal so that the lapse of time between completion of the project and commencement of amortization will not be longer than necessary to obtain sustaining occupancy.
(2) An amount on each interest payment date sufficient to accumulate in the hands of the mortgagee one payment period prior to its due date, the next annual mortgage insurance premium payable by the mortgagee to the Commissioner. Such payments shall continue only so long as the contract of insurance shall remain in effect.
(3) Equal monthly payments as will amortize the ground rents, if any, and the estimated amount of all taxes, water charges, special assessments, and fire and other hazard insurance premiums, within a period ending one month prior to the dates on which the same become delinquent.
(4) The mortgage shall further provide:
(i) That such payments shall be held by the mortgagee, for the purpose of paying such items before they become delinquent.
(ii) For adjustments in case such estimated amounts shall prove to be more, or less, than the actual amounts so paid therefor by the mortgagor.
(c) The mortgagee to apply each mortgagor payment received to the following items in the order set forth:
(1) Premium charges under the contract of mortgage insurance.
(2) Ground rents, taxes, special assessments, and fire and other hazard insurance premiums.
(3) Interest on the mortgage.
(4) Amortization of the principal of the mortgage.
§ 200.85 Covenant against liens.
(a) The mortgage shall contain a covenant against the creation by the mortgagor of liens against the property superior or inferior to the lien of the mortgage except for such inferior lien as may be approved by the Commissioner in accordance with provisions of § 200.71; and
(b) A covenant against repayment of a Commissioner approved inferior lien from mortgage proceeds other than surplus cash or residual receipts, except in the case of an inferior lien created by an operating loss loan insured pursuant to section 223(d) of the Act, or a supplemental loan insured pursuant to section 241 of the Act.
§ 200.86 Covenant for fire and other hazard insurance.
The mortgage shall contain a covenant binding the mortgagor to maintain fire and extended coverage insurance on the property in accordance with terms and conditions established by the Commissioner.
§ 200.87 Mortgage prepayment.
(a) Prepayment privilege. Except as provided in paragraph (c) of this section or otherwise established by the Commissioner, the mortgage shall contain a provision permitting the mortgagor to prepay the mortgage in whole or in part upon any interest payment date, after giving the mortgagee 30 days’ notice in writing in advance of its intention to so prepay.
(b) Prepayment charge. The mortgage may contain a provision for such charge, in the event of prepayment of principal, as may be agreed upon between the mortgagor and the mortgagee, subject to the following:
(1) The mortgagor shall be permitted to prepay up to 15 percent of the original principal amount of the mortgage in any one calendar year without any such charge.
(2) Any reduction in the original principal amount of the mortgage resulting from the certification of cost which the Commissioner may require shall not be construed as a prepayment of the mortgage.
(c) Prepayment of bond-financed or GNMA securitized mortgages. Where the mortgage is given to secure GNMA mortgage-backed securities or a loan made by a lender that has obtained the funds for the loan by the issuance and sale of bonds or bond anticipation notes, or both, the mortgage may contain a prepayment restriction and prepayment penalty charge acceptable to the Commissioner as to term, amount, and conditions.
(d) HUD override of prepayment restrictions. In the event of a default, the Commissioner may override any lockout, prepayment penalty or combination thereof in order to facilitate a partial or full refinancing of the mortgaged property and avoid a claim.
§ 200.88 Late charge.
(a) The mortgage may provide for the collection by the mortgagee of a late charge in accordance with terms, conditions, and standards of the Commissioner for each dollar of each payment to interest or principal:
(1) More than 10 days in arrears to cover the expense involved in handling delinquent payments;
(2) For multifamily project mortgages for which HUD issued a firm commitment for mortgage insurance before September 1, 2011, and for multifamily project mortgages insured under section 232 of the Act (12 U.S.C. 1715w), more than 15 days in arrears to cover the expense involved in handling delinquent payments.
(b) Late charges shall be separately charged to and collected from the mortgagor and shall not be deducted from any aggregate monthly payment.
Cost Certification
§ 200.95 Certification of cost requirements.
(a) Before initial endorsement of the mortgage for insurance, the mortgagor, the mortgagee, and the Commissioner shall enter into an agreement in form and content satisfactory to the Commissioner for the purpose of precluding any excess of mortgage proceeds over statutory limitations. Under this agreement, the mortgagor shall disclose its relationship with the builder, including any collateral agreement, and shall agree:
(1) To enter into a construction contract, the terms of which shall depend on whether or not there exists an identity of interest between the mortgagor and the builder.
(2) To execute a Certificate of Actual Costs, upon completion of all physical improvements on the mortgaged property.
(3) To apply in reduction of the outstanding balance of the principal of the mortgage any excess of mortgage proceeds over statutory limitations based on actual cost.
(b) The provisions of paragraph (a) of this section relating to disclosure and the requirement for a construction contract shall not apply where the mortgagor is the general contractor.
§ 200.96 Certificates of actual cost.
(a) The mortgagor’s certificate of actual cost, in a form prescribed by the Commissioner, shall be submitted upon completion of the physical improvements to the satisfaction of the Commissioner and before final endorsement, except that in the case of an existing project that does not require substantial rehabilitation and where the commitment provides for completion of specified repairs after endorsement, a supplemental certificate of actual cost will be submitted covering the completed costs of any such repairs. The certificate shall show the actual cost to the mortgagor, after deduction of any kickbacks, rebates, trade discounts, or other similar payments to the mortgagor, or to any of its officers, directors, stockholders, partners or other entity member ownership, of construction and other costs, as prescribed by the Commissioner.
(b) The Certificate of Actual Cost shall be verified by an independent Certified Public Accountant or independent public accountant in a manner acceptable to the Commissioner.
(c) Upon the Commissioner’s approval of the mortgagor’s certification of actual cost such certification shall be final and incontestable except for fraud or material misrepresentation on the part of the mortgagor.
§ 200.97 Adjustments resulting from cost certification.
(a) Fee simple site. Upon receipt of the mortgagor’s certification of actual cost there shall be added to the total amount thereof the Commissioner’s estimate of the fair market value of any land included in the mortgage security and owned by the mortgagor in fee, such value being prior to the construction of the improvements.
(b) Leasehold site. In the event the land is held under a leasehold or other interest less than a fee, the cost, if any, of acquiring the leasehold or other interest is considered an allowable expense which may be added to actual cost provided that in no event shall such amount be in excess of the fair market value of such leasehold or other interest exclusive of proposed improvements.
(c) Adjustment. If the amount calculated in accordance with paragraphs (a) or (b) of this section exceeds the statutory dollar amount limits or loan ratio limits permitted by the section of Act under which the mortgage is to be insured, or program loan ratio limits established by the Commissioner in the absence of statutory limits, the amount must be reduced to the applicable limits before final endorsement.
Endorsement
§ 200.100 Insurance endorsement.
The credit instrument shall be initially and finally endorsed simultaneously for insurance pursuant to a commitment to insure upon completion. Where the advances of construction funds are to be insured pursuant to a commitment for insured advances, initial endorsement of the credit instrument shall occur before any mortgage proceeds are insured and the time of final endorsement shall be as set forth in paragraph (b) of this section.
(a) Initial endorsement. The Commissioner shall indicate the insurance of the mortgage by endorsing the original credit instrument and identifying the section of the Act and the regulations under which the mortgage is insured and the date of insurance.
(b) Final endorsement. When all advances of mortgage proceeds have been made and all the terms and conditions of the commitment have been met to the Commissioner’s satisfaction the Commissioner shall indicate on the original credit instrument the total of all advances approved for insurance and again endorse such instrument.
(c) Contract rights and obligations. The Commissioner and the mortgagee or lender shall be bound from the date of initial endorsement, whether the initial and final endorsement occur simultaneously or are split, by the provisions of the Contract Rights and Obligations set forth in the respective regulations for each section of the Act, as follows: Section 207 of the Act (24 CFR part 207); Section 213 of the Act (24 CFR part 213); Section 220 of the Act (24 CFR part 220); Section 221 of the Act (24 CFR part 221); Section 231 of the Act (24 CFR part 231); Section 232 of the Act (24 CFR part 232); Section 234 of the Act (24 CFR part 234); Section 241 of the Act (24 CFR part 241); Section 242 of the Act (24 CFR part 242); title XI of the Act (24 CFR part 244).
§ 200.101 Mortgagor lien certificate.
The mortgagor shall certify at the final endorsement of the mortgage for insurance as to each of the following:
(a) That the mortgage is the first lien upon and covers the entire project, including any equipment financed with mortgage proceeds.
(b) That the property upon which the improvements have been made or constructed and the equipment financed with mortgage proceeds are free and clear of all liens other than the insured mortgage and such other liens as may be approved by the Commissioner.
(c) That the certificate sets forth all unpaid obligations in connection with the mortgage transaction, the purchase of the mortgaged property, the construction or rehabilitation of the project or the purchase of the equipment financed with mortgage proceeds.
Regulation of Mortgagors
§ 200.105 Mortgagor supervision.
(a) As long as the Commissioner is the insurer or holder of the mortgage, the Commissioner shall regulate the mortgagor by means of a regulatory agreement providing terms, conditions and standards established by the Commissioner, or by such other means as the Commissioner may prescribe.
(b) The Commissioner may delegate to the mortgagee or other party the Commissioner’s authority, in whole or in part, in accordance with the terms, conditions and standards established by the Commissioner in any executed Regulatory Agreement or other instrument granting the Commissioner supervision of the mortgagor.
§ 200.106 Projects with limited distribution mortgagors and program assistance.
(a) Regulation as limited distribution mortgagors. In addition to regulation under § 200.105, limited distribution mortgagors for projects receiving “assistance within the jurisdiction of the Department” (as defined in § 4.3 of this title) may be regulated by the Commissioner as to additional matters, by regulation or otherwise, including as to the amount of the permissible distribution to the mortgagor.
(b) Increased distributions. The Commissioner may permit increased distributions of surplus cash, in excess of the amounts the Commissioner otherwise permits for limited distribution mortgagors, to a limited distribution mortgagor who participates in a HUD-approved initiative or program to preserve housing stock with below-market rents as affordable housing. The increased distribution will be limited to a maximum amount based on market rents and calculated according to HUD instructions. Funds that the mortgagor is authorized to retain under section 236(g)(2) of the National Housing Act are not considered distributions to the mortgagor.
(c) Pre-emption. Any State or local law or regulation that restricts distributions to an amount lower than permitted by the Commissioner under authority of this section is preempted to the extent provided in section 524(f) of the Multifamily Assisted Housing Reform and Affordability Act of 1997.
Subpart B—Electronic Submission of Required Data for Mortgage Defaults and Mortgage Insurance Claims for Insured Multifamily Mortgages
§ 200.120 Purpose and applicability.
(a) Purpose. The purpose of this subpart B is to require mortgagees of all multifamily projects whose mortgages are insured or coinsured by HUD to submit electronically information regarding mortgage delinquencies, defaults, reinstatements, elections to assign, and withdrawals of assignment elections, and related information, as that information is required by 24 CFR part 207 and Form HUD-92426 (which is available at the Department of Housing and Urban Development, HUD Customer Service Center, 451 7th Street, SW, Room B-100, Washington, DC 20410; telephone (800) 767-7468).
(b) Applicability. This subpart applies to all HUD multifamily mortgage insurance and coinsurance programs.
§ 200.121 Requirements and effectiveness.
(a) Multifamily mortgagees, which are required by 24 CFR part 207 to report mortgage delinquencies, defaults, reinstatements, assignment elections, withdrawals of assignment elections, and related information, must submit this information electronically, over the Internet, in accordance with the following schedule of effectiveness:
(1) Mortgagees having 70 or more insured mortgage loans must comply with this section by no later than March 1, 1999;
(2) Mortgagees having from 26 to 69 insured mortgage loans must comply with this section by no later than January 1, 2000;
(3) Mortgagees having from 11 to 25 insured mortgage loans must comply with this section by no later than January 1, 2001;
(4) Mortgagees having 10 or fewer insured mortgage loans must comply with this section by no later than January 1, 2002.
(b) Exception. On or after January 1, 2002, mortgagees that hold or service fewer than 10 multifamily mortgages may continue to report mortgage delinquencies, defaults, reinstatements, assignment elections, withdrawals of assignment elections, and related information in writing on Form HUD-92426 only with specific HUD approval. HUD will grant such approval, upon application by the mortgagee, for reasons of hardship due to insufficient financial resources to purchase the required hardware and Internet access.
(c) HUD will not accept reports of information regarding defaults, reinstatements, assignment elections, and related information in a manner that is not in accordance with this section. Failure on the part of mortgagees to report this information as required by 24 CFR part 207 and this section may result in HUD’s application of the sanctions and surcharges specified in 24 CFR part 207.
Subparts C-D [Reserved]
Subpart E—Mortgage Insurance Procedures and Processing
Application for Insurance
§ 200.145 Property and mortgage assessment.
(a) The mortgagor is responsible for making those investigations, analyses and inspections it deems necessary for protecting its interests in the property.
(b) Any appraisals, inspections, environmental assessments, and technical or financial evaluations conducted by or for the Commissioner are performed to determine the maximum insurable mortgage, and to protect the Commissioner and the FHA insurance funds. Such appraisals, inspections, assessments and evaluations neither create nor imply a duty or obligation from HUD to the mortgagor, or to any other party, and are not to be regarded as a warranty by HUD to the mortgagor, or any other party, of the value or condition of the property.
(c) For all new construction as well as structural repairs and/or renovations of existing properties, to the extent that an inspection is required to determine if construction quality of a one- to four-unit property is acceptable as security for an FHA-insured loan, the following requirements apply:
(1)(i) In areas where local jurisdictions provide building code enforcement and the requisite documentation, the lender shall provide a copy of:
(A) The building permit, or its equivalent, and a copy of the certificate of occupancy, or its equivalent; or
(B) A satisfactory inspection notice for work completed, or its equivalent.
(ii) The documentation provided under paragraph (c)(1)(i) of this section shall be considered satisfactory evidence of completion of the work.
(2) In jurisdictions that do not provide building code enforcement and requisite documentation, three inspections are required for new construction. For existing construction, only one inspection and certification of work completed for structural repairs and renovations is required. For both new and existing construction, the lender shall, in order to ensure compliance with FHA requirements:
(i) Select a Residential Combination Inspector (or its successor designation) or a Combination Inspector (or its successor designation) certified by the International Code Council (or its successor organization) who is licensed or certified as a home inspector in accordance with the applicable State and local requirements governing the licensing or certification of those jurisdictions that license or certify such inspectors in the respective jurisdiction. The lender shall provide a certification from such inspector that the new construction and/or structural repair or renovation work is completed satisfactorily and in compliance with any applicable building code.
(ii) In the absence of such Residential Combination Inspector and Combination Inspector, the lender shall obtain an inspection performed by a third party, who is a registered architect, a professional engineer, or a trades person or contractor, and who has met the licensing and bonding requirements of the State in which the property is located. The lender shall provide a certification from such inspector that the inspector is licensed and bonded under applicable State law, and that the new construction and/or structural repair or renovation work is completed satisfactorily and in compliance with any applicable building code.
Claims for Losses
§ 200.153 Presentation of claim.
In the event the insured lender is entitled under the contract of mortgage insurance to receive a claim settlement, the mortgagee presents a claim for insurance benefits in accordance with the Secretary’s instructions.
§ 200.156 Settlement of claims.
Upon the Secretary’s approval of a claim, the claim will be settled by issuance of cash, debentures or both, and, in certain cases, by issuance of a certificate of claim. However, in the event a final claim is in a negative amount, the claim will be settled by the mortgagee’s payment of cash or surrender of debentures at par plus accrued interest to the Secretary.
§ 200.157 Provisions and characteristics of debentures.
(a) Series and fund. Debentures are issued in appropriate series and are the obligation of and issued in the name of the particular mortgage insurance fund under which the mortgage is insured.
(b) Registration and denominations. Debentures in certificated form are issued in denominations of $50, $100, $500, $1,000 and $10,000 with the name of the owner inscribed on the face of the certificate. Debentures in book entry form are issued in a minimum amount of one dollar and in increments of one cent with the name of the owner recorded in an account master record on the books of the Treasury.
(c) Rate of interest and interchangeability. Debentures carry a rate of interest prescribed by the Commissioner but not in excess of an annual rate determined by the Secretary of the Treasury in accordance with prescribed statutory formula involving yields or prices of outstanding marketable obligations of the United States. Debentures in certificated form of the same series bearing the same interest rate and having the same maturity date shall be freely interchangeable between the various authorized denominations and may be exchanged for similar debentures in book entry form. Debentures in book entry form cannot be exchanged for debentures in certificated form.
(d) Negotiability and Redemption. Debentures in certificated form are negotiable and, if in book entry form, are transferable in the manner described in applicable Treasury regulations. Debentures are fully guaranteed as to principal and interest by the United States. Debentures are redeemable on call issued by the Commissioner.
(e) Payment of principal and interest. Principal and interest on debentures shall be payable when due at the Department of the Treasury, Washington, DC, or any Government agency or agencies in the United States which the Secretary of the Treasury may from time to time designate for that purpose. The principal and interest shall be payable to the owner whose name shall be inscribed on the debenture in certificated form, to the owner designated as assignee as shown by executed assignments for maturing or called certificated debentures, or to the owner whose name shall be recorded in the account master record of the book entry debentures.
(f) Transfer and use—(1) In general. Debentures in certificated form are negotiable and, if in book entry form, are transferable in the manner described in applicable Treasury regulations. They may be used by approved mortgagees in lieu of cash for payment of FHA mortgage insurance premiums.
(2) Mutual Mortgage Insurance Fund debentures. Debentures of the Mutual Mortgage Insurance Fund may be used to pay mortgage insurance premiums on mortgages insured under sections 203(b), 203(h), and 203(i), of the National Housing Act.
(3) Cooperative Management Housing Insurance Fund debentures. Debentures which are the obligation of the Cooperative Management Housing Insurance Fund may be used to pay premiums on mortgages and loans which are insured under that Fund. Where the insurance of a mortgage or loan is transferred from the General Insurance Fund to the Cooperative Management Housing Insurance Fund, or where a mortgage or loan is endorsed for insurance pursuant to a commitment transferred to the Cooperative Management Housing Insurance Fund, debentures issued in connection with such mortgage or loan may be used to pay insurance premiums of either the Cooperative Management Housing Insurance Fund or the General Insurance Fund.
(4) General Insurance Fund and debentures of other funds. Debentures of the General Insurance Fund and those debentures issued as obligations of mortgage insurance funds and accounts in existence prior to the enactment of the Housing and Urban Development Act of 1965 (other than the Mutual Mortgage Insurance Fund) which are transferred by the 1965 Act to the General Insurance Fund may be used to pay mortgage insurance premiums only on the following mortgages and loans:
(i) Those which are the obligation of the General Insurance Fund.
(ii) Those transferred from the General Insurance Fund to the Cooperative Management Housing Insurance Fund.
(iii) Those endorsed for insurance pursuant to commitments transferred to the Cooperative Management Housing Insurance Fund.
§ 200.158 Applicability of Treasury regulations to debenture transactions.
The Department of the Treasury acts as fiscal agent for the Commissioner in connection with transactions and operations relating to debentures. Treasury’s General Regulations Governing U.S. Securities (31 CFR part 306) and its Supplemental Regulations Governing Federal Housing Administration Debentures (31 CFR part 337) have been and are adopted as revised and amended, to the extent applicable, as the regulations of the Commissioner governing the issuance of, transactions in and redemption of debentures, including the payment of interest thereon with the following exceptions:
(a) Payment of final interest on maturing or called debentures. If the notice of maturity or call for redemption shall so provide, the final installment of interest payable on any debentures at maturity or earlier redemption date may be paid with the principal in accordance with the assignments on the debentures instead of by separate check drawn to the order of the registered payee and forwarded to him at his address of record.
(b) Closing of transfer books. If the call for redemption shall so provide, the books maintained by the Treasury Department may be closed against transfers and denominational exchanges in debentures for three full months preceding any interest payment date with respect to any debentures called for redemption on such interest payment date.
§ 200.159 Relief on account of lost, stolen, destroyed, mutilated or defaced debentures.
The statutes of the United States and the regulations of the Treasury Department governing relief on account of the loss, theft, destruction, mutilation or defacement of United States securities, so far as applicable and as necessarily modified to relate to debentures, are adopted as the regulations of the Commissioner for the issuance of substitute debentures or the payment of lost, stolen, destroyed, mutilated or defaced debentures.
§ 200.160 Redemption of debentures prior to maturity.
Debentures shall, at the option of the Commissioner and with the approval of the Secretary of the Treasury, be redeemable at par plus accrued interest on any semiannual interest payment date on 3 months’ notice of redemption given in such manner as the Commissioner shall prescribe. The debenture interest on the debentures called for redemption shall cease on the semiannual interest payment date designated in the call notice. The Commissioner may include with the notice of redemption an offer to purchase the debentures at par plus accrued interest at any time during the period between the notice of redemption and the redemption date. If the debentures are purchased by the Commissioner after such call and prior to the named redemption date, the debenture interest shall cease on the date of purchase.
§ 200.161 Administration of debenture transactions.
The Secretary of the Treasury or the Acting Secretary of the Treasury is authorized and empowered, on behalf of the Commissioner, to administer the regulations governing any transactions and operations in debentures, to do all things necessary to conduct such transactions and operations, and to delegate such authority at his discretion to other officers, employees, and agents of the U.S. Treasury Department. At his discretion the Secretary, the Under Secretary, or any Assistant Secretary of the Treasury acting by direction of the Secretary, is authorized to waive any such regulation on behalf of the Commissioner in any particular case where a similar regulation of the Treasury Department with respect to United States bonds or interest thereon would be waived.
§ 200.162 Certificates of claim.
The certificate of claim issued to the mortgagee at the time debentures are issued constitutes an agreement by the FHA that after the FHA has recovered its investment in a particular property any excess over and above such investment is available for payment on the certificate of claim. Certificates of claim bear interest at the rate of 3 percent per annum.
Subpart F—Placement and Removal Procedures for Participation in FHA Programs
Section 203(k ) Rehabilitation Loan Consultants
§ 200.190 HUD list of qualified 203(k) consultants.
(a) Qualified consultant list. HUD maintains a list of qualified consultants for use in the rehabilitation loan insurance program authorized by section 203(k) of the National Housing Act (12 U.S.C. 1709(k)) (referred to as the “203(k) Program”).
(b) Consultant functions. Only a consultant included on the list may be selected by the lender to conduct any consultant function under the 203(k) Program (see § 203.50(l) of this title).
(c) Disclaimer. The inclusion of a consultant on the list means only that the consultant has met the qualifications and conditions prescribed by the Secretary for placement on the list of consultants qualified for the 203(k) Program. The inclusion of a consultant on the list does not create or imply a warranty or endorsement by HUD of the consultant, nor does it represent a warranty of any work performed by the consultant.
§ 200.191 Placement of 203(k) consultant.
(a) Application. To be considered for placement on the list, a consultant must apply to HUD using an application (or materials) in a form prescribed by HUD.
(b) Eligibility. To be eligible for placement on the list:
(1) The consultant must demonstrate to HUD that it either:
(i) Has at least three years’ experience as a remodeling contractor, general contractor or home inspector; or
(ii) Is a state-licensed architect or state-licensed engineer;
(2) If located in a state that requires the licensing of home inspectors, the consultant must submit proof of such licensing;
(3) The consultant must submit a narrative description of the consultant’s ability to perform home inspections, prepare architectural drawings, use proper methods of cost estimating and complete draw inspections.
(4) The consultant must certify that it has read and fully understands the requirements of the HUD handbook on the 203(k) Program (4240.4) and all HUD Mortgagee Letters and other instructions relating to the 203(k) Program.
(5) The consultant must not be listed on:
(i) The General Services Administration’s Suspension and Debarment List;
(ii) HUD’s Limited Denial of Participation List; or
(iii) HUD’s Credit Alert Interactive Voice Response System.
(6) The consultant must have passed a comprehensive examination on the 203(k) Program, if HUD has developed such an exam.
(c) Delayed effective date of examination requirement for consultants currently on the list. Consultants who are included on the list on the date when the requirement for the examination described in paragraph (b)(6) of this section becomes effective have until 6 months following this date to pass the comprehensive exam. Failure to pass the examination by the deadline date constitutes cause for removal under § 200.192.
§ 200.192 Removal of 203(k) consultant.
(a) Cause for removal. HUD may remove a consultant from the list for any cause that HUD determines to be detrimental to HUD or its programs. Cause for removal includes, but is not limited to:
(1) Poor performance on a HUD quality control field review;
(2) Failure to comply with applicable regulations or other written instructions or standards issued by HUD;
(3) Failure to comply with applicable Civil Rights requirements;
(4) Being debarred or suspended, or subject to a limited denial of participation;
(5) Misrepresentation or fraudulent statements;
(6) Failure to retain standing as a state licensed architect or state-licensed engineer (unless the consultant can demonstrate the required three years experience as a home inspector or remodeling contractor);
(7) Failure to retain standing as a state licensed home inspector, if the consultant is located in a state that requires such licensing; or
(8) Failure to respond within a reasonable time to HUD inquiries or requests for documentation.
(b) Procedure for removal. A consultant that is debarred or suspended, or subject to a limited denial of participation will be automatically removed from the list. In all other cases, the following procedure for removal will be followed:
(1) HUD will give the consultant written notice of the proposed removal. The notice will state the reasons for, and the duration of, the proposed removal.
(2) The consultant will have 20 days from the date of the notice (or longer, if provided in the notice) to submit a written response appealing the proposed removal and to request a conference. A request for a conference must be in writing and must be submitted along with the written response.
(3) A HUD official will review the appeal and send a response either affirming, modifying, or canceling the removal. The HUD official will not be someone who was involved in HUD’s initial removal decision. HUD will respond with a decision within 30 days of receiving the appeal or, if the consultant has requested a conference, within 30 days after the completion of the conference. HUD may extend the 30-day period by providing written notice to the consultant.
(4) If the consultant does not submit a timely written response, the removal will be effective 20 days after the date of HUD’s initial removal notice (or after a longer period provided in the notice). If a written response is submitted, and the removal decision is affirmed or modified, the removal will be effective on the date of HUD’s notice affirming or modifying the initial removal decision.
(c) Placement on the list after removal. A consultant that has been removed from the list may apply for placement on the list (in accordance with § 200.191) after the period of the consultant’s removal from the list has expired. An application will be rejected if the period for the consultant’s removal from the list has not expired.
(d) Other action. Nothing in this section prohibits HUD from taking such other action against a consultant, as provided in 2 CFR part 2424, or from seeking any other remedy against a consultant, available to HUD by statute or otherwise.
§ 200.193 Responsibilities of 203(k) consultants on the list.
All consultants included on the list are responsible for:
(a) Obtaining and reading the HUD handbook on the 203(k) Program (4240.4) and any updates to the handbook.
(b) Complying with the HUD handbook on the 203(k) Program (4240.4), and any updates to the handbook, when performing any consultant function under the 203(k) Program.
(c) Obtaining and reading all Mortgagee Letters and other instructions issued by HUD relating to the 203(k) Program.
(d) Complying with all Mortgagee Letters and other instructions issued by HUD relating to the 203(k) Program, when undertaking any consultant function under the 203(k) Program.
(e) Complying with HUD’s request for documentation relating to any 203(k) project on which the consultant has worked.
(f) Complying with HUD’s monitoring requirements relating to the 203(k) Program.
Nonprofit Organization
§ 200.194 Placement of nonprofit organization on Nonprofit Organization Roster.
(a) Nonprofit Organization Roster. HUD maintains a roster of nonprofit organizations that are qualified to participate in certain specified FHA activities. In order to be recognized as a nonprofit organization for purposes of single family regulations in this chapter, an organization must:
(1) Be included in the Roster; and
(2) Comply with any requirements stated in a specific applicable provision of the single family regulations in this chapter.
(b) Application. To be included in the Roster, a nonprofit organization must apply to HUD using an application (or materials) in a form prescribed by HUD (which may require an affordable housing program narrative for the activities the nonprofit organization proposes to carry out). The nonprofit organization must specify in its application the FHA activities it proposes to carry out.
(c) HUD response to application. HUD’s review of the application will result in one of the following:
(1) Approval of the nonprofit organization to participate in all, or some, of the FHA activities specified in its application and the addition of the nonprofit organization to the Roster.
(2) Rejection due to deficiencies in the application. HUD will provide the nonprofit organization with a period to correct these deficiencies.
(3) Rejection due to the nonprofit organization’s failure to submit a program that complies with applicable single family regulations in this chapter, Mortgagee Letters, or other standards or instructions issued by HUD.
(d) Reapplication after two years. The placement of a nonprofit organization on the Roster expires after two years. The nonprofit organization must reapply for placement on the Roster, in accordance with paragraph (b) of this section, before expiration of the two-year period.
§ 200.195 Removal of nonprofit organization from Nonprofit Organization Roster.
(a) Cause for removal. HUD may remove a nonprofit organization from the FHA Nonprofit Organization Roster established under § 200.194. Removal may be for any cause that HUD determines to be detrimental to FHA or any of its programs, including but not limited to:
(1) Failure to comply with applicable single family regulations in this chapter, Mortgagee Letters or other written instructions or standards issued by HUD;
(2) Failure to comply with applicable Civil Rights requirements;
(3) Holding a significant number of FHA-insured mortgages that are in default, foreclosure, or claim status (in determining the number considered “significant,” HUD may compare the number of insured mortgages held by the nonprofit organization against the similar holdings of other nonprofit organizations);
(4) Being debarred or suspended, subject to a limited denial of participation, or otherwise sanctioned by HUD;
(5) Failure to further all objectives described in the affordable housing program narrative;
(6) Misrepresentation or fraudulent statements; or
(7) Failure to respond within a reasonable time to HUD inquiries, including recertification requests or other requests for further documentation.
(b) Procedure for removal. A nonprofit organization that is debarred or suspended or subject to a limited denial of participation will be automatically removed from the FHA Nonprofit Organization Roster. In all other cases, the following procedure for removal applies:
(1) HUD will give the nonprofit organization written notice of the proposed removal. The notice will include the reasons for the proposed removal and the duration of the proposed removal.
(2) The nonprofit organization will have 20 days from the date of the notice (or longer, if provided in the notice) to submit a written response appealing the proposed removal and to request a conference. A request for a conference must be in writing and must be submitted along with the written response.
(3) A HUD official will review the appeal and provide an informal conference if requested. The HUD official will send a response either affirming, modifying, or canceling the removal. The HUD official will not be someone who was involved in HUD’s initial removal decision. HUD will respond with a decision within 30 days of receiving the response, or, if the nonprofit organization has requested a conference, within 30 days after the completion of the conference. HUD may extend the 30-day period by providing written notice to the nonprofit organization.
(4) If the nonprofit organization does not submit a timely written response, the removal will be effective 20 days after the date of HUD’s initial removal notice (or after a longer period provided in the notice). If a written response is submitted, and the initial removal decision is affirmed or modified, the removal will be effective on the date of HUD’s notice affirming or modifying the initial removal decision.
(c) Placement on the Roster after removal. A nonprofit organization that has been removed from the FHA Nonprofit Organization Roster may apply for placement on the Roster (in accordance with § 200.194) after the nonprofit organization’s removal from the Roster has expired. An application will be rejected if the period for the nonprofit organization’s removal from the Roster has not expired.
(d) Other action. Nothing in this section prohibits HUD from taking such other action against a nonprofit organization, as provided in 2 CFR part 2424, or from seeking any other remedy against a nonprofit organization, available to HUD by statute or otherwise.
Subpart G—Appraiser Roster
§ 200.200 What is the Appraiser Roster?
(a) Appraiser Roster. HUD maintains a list of appraisers. A mortgagee must select only an appraiser from this list for the appraisal of a property that is to be the security for an FHA-insured single family mortgage.
(b) Disclaimer. Since an appraisal is performed to determine the maximum insurable mortgage and to also protect the FHA insurance funds, the inclusion of an appraiser on the Appraiser Roster does not create or imply a warranty or endorsement to a prospective homebuyer or to any other organization or individual by HUD of the listed appraiser nor does it represent a warranty of any appraisal performed by the listed appraiser. The inclusion of an appraiser on the Appraiser Roster means only that a listed appraiser has met the qualifications and conditions, prescribed by the Secretary, for inclusion on the Appraiser Roster.
§ 200.202 How do I apply for placement on the Appraiser Roster?
(a) Application. To apply for placement on the Appraiser Roster, you must submit an application to HUD.
(b) Eligibility. To be eligible for placement on the Appraiser Roster:
(1) You must be a state-certified appraiser with credentials that complied with the applicable certification criteria established by the Appraiser Qualification Board (AQB) of the Appraisal Foundation and in effect at the time the certification was awarded by the issuing jurisdiction; and
(2) You must not be listed on:
(i) The General Services Administration’s Suspension and Debarment List;
(ii) HUD’s Limited Denial of Participation List; or
(iii) HUD’s Credit Alert Verification Reporting System.
§ 200.204 What actions may HUD take against unsatisfactory appraisers on the Appraiser Roster?
An unsatisfactory appraiser may be subject to removal, education requirements, or other actions, as follows:
(a) Removal from the Appraiser Roster. HUD officials, as designated by the Secretary, may at any time remove a listed appraiser from the Appraiser Roster for cause, in accordance with paragraphs (a)(1) through (a)(3) of this section. The provisions of paragraphs (a)(1) through (a)(3) of this section do not apply to removal actions taken under any section in 2 CFR part 2424 or to any other remedy against an appraiser, available to HUD by statute or otherwise.
(1) Cause for removal. Cause for removal includes, but is not limited to:
(i) Significant deficiencies in appraisals, including non-compliance with Civil Rights requirements regarding appraisals;
(ii) Losing standing as a state-certified appraiser due to disciplinary action in any state in which the appraiser is certified;
(iii) Prosecution for committing, attempting to commit, or conspiring to commit fraud, misrepresentation, or any other offense that may reflect on the appraiser’s character or integrity;
(iv) Failure to perform appraisal functions in accordance with instructions and standards issued by HUD;
(v) Failure to comply with any agreement made between the appraiser and HUD or with any certification made by the appraiser;
(vi) Being issued a final debarment, suspension, or limited denial of participation;
(vii) Failure to maintain eligibility requirements for placement on the Appraiser Roster as set forth under this subpart or any other instructions or standards issued by HUD; or,
(viii) Failure to comply with HUD-imposed education requirements under paragraph (d) of this section within the specified period for complying with such education requirements.
(2) Procedure for removal. If you are a listed appraiser and HUD decides to remove you for cause from the Appraiser Roster, the following procedure applies to you unless you have been issued a final debarment, suspension, or limited denial of participation, in which case you are subject to paragraph (a)(3) of this section:
(i) You will be given written notice of your proposed removal. The notice will include the reasons for your proposed removal and the duration of your proposed removal.
(ii) You will have 20 days from the date of your notice of proposed removal to submit a written response appealing the proposed removal and to request a conference. A request for a conference must be in writing and must be submitted along with a written response.
(iii) Within 30 days of receiving your written response, or if you have requested a conference, within 30 days after the completion of your conference, a HUD official, designated by the Secretary, will review your appeal and will send you a final decision either affirming, modifying, or canceling your removal from the Appraiser Roster. HUD may extend this time upon giving you notice. The HUD official designated by the Secretary to review your appeal will not be someone involved in HUD’s initial removal decision nor will it be someone who reports to a person involved in that initial decision.
(iv) If you do not submit a written response, your removal will be effective 20 days after the date of HUD’s initial removal notice. If you submit a written response, and the removal decision is affirmed or modified, your removal or modification will be effective on the date of HUD’s notice affirming or modifying the initial removal decision.
(3) Automatic removal for issuance of final debarment, suspension, or limited denial of participation. If you are a listed appraiser and you have been issued a final debarment, a suspension, or a limited denial of participation, the provisions of paragraph (a)(2) of this section do not apply to you, and you will be automatically removed from the Appraiser Roster.
(b) Reinstatement. If an appraiser who has been removed from the Roster wants to be reinstated on the Roster, the appraiser must follow the procedures and requirements contained in this subpart for placement on the Roster. Before an appraiser is eligible to reapply for placement on the Roster, the appraiser shall comply with the terms of any applicable remedial training education requirements, and the time period for the appraiser’s removal from the Roster shall have expired.
(c) Automatic suspension from Appraiser Roster—(1) Appraisers subject to state disciplinary action. An appraiser whose state certification in any state has been revoked, suspended, or surrendered as a result of a state disciplinary action is automatically suspended from the Appraiser Roster and prohibited from conducting FHA appraisals in any state until HUD receives evidence demonstrating that the state-imposed sanction has been lifted.
(2) Expirations not due to state disciplinary action. An appraiser whose certification in a state has expired is automatically suspended from the Appraiser Roster in that state and may not conduct FHA appraisals in that state until HUD receives evidence that demonstrates renewal, but may continue to perform FHA appraisals in other states in which the appraiser is certified.
(d) Education requirements. Where there is evidence that an appraiser is deficient in FHA appraisal requirements, HUD may require an appraiser to undergo professional training.
(e) Other action. Nothing in this section prohibits HUD from taking any other action against an appraiser, as provided under 2 CFR part 2424, or from seeking any other remedy against an appraiser, available to HUD by statute or otherwise.
§ 200.206 What are my responsibilities as an appraiser listed on the Appraiser Roster?
All appraisers listed on the Appraiser Roster are responsible for:
(a) Obtaining and reading the HUD Appraiser Handbook (4150.2) and any updates to the Handbook;
(b) Complying with the HUD Appraiser Handbook (4150.2), and any updates to the Handbook, when performing all appraisals of properties for HUD single family mortgage insurance purposes; and
(c) Complying with all other instructions and standards issued by HUD when performing all appraisals of properties for HUD single family mortgage insurance purposes.
Subpart H—Participation and Compliance Requirements
§ 200.210 Policy.
(a) Regulations. It is HUD’s policy that, in accordance with the intent of the National Housing Act (12 U.S.C. 1701 et seq.), and with other applicable federal statutes, participants in HUD’s housing and healthcare programs be responsible individuals and organizations who will honor their legal, financial and contractual obligations. Accordingly, as provided in this subpart, HUD will review the prior participation of Controlling Participants, as defined in § 200.212 and § 200.216, as a prerequisite to participation in HUD’s multifamily housing and healthcare programs listed in § 200.214.
(b) Processing Guide. The regulations in this subpart are supplemented by the Processing Guide for Previous Participation Reviews of Prospective Multifamily Housing and Healthcare Programs’ Participants (Guide), which is found on HUD’s Web site at www.hud.gov. This Guide elaborates on the basic procedures involved in the previous participation review process. For any significant changes made to this Guide, HUD will provide advance notice and the opportunity to comment, providing a comment period of no less than 30 days.
§ 200.212 Definitions.
As used in this subpart:
Commissioner means the Assistant Secretary for Housing-Federal Housing Commissioner, or the Commissioner’s delegates and designees.
Controlling Participant means an individual or entity serving in a capacity for a Covered Project that makes the individual or entity subject to Previous Participation review under this subpart, as further described in § 200.216.
Covered Project means a project in which the participation of a Controlling Participant is conditioned on Previous Participation review under this subpart, as further described in § 200.214.
Previous Participation means a Controlling Participant’s previous participation in Covered Projects, and, if applicable, other federal, state and local housing programs, in accordance with the definition of Risk.
Risk. In order to determine whether a Controlling Participant’s participation in a project would constitute an unacceptable risk, the Commissioner must determine whether the Controlling Participant could be expected to participate in the Covered Project in a manner consistent with furthering the Department’s purposes. The Commissioner’s review of Previous Participation shall consider compliance with applicable statutes, regulations and program requirements. The Commissioner must consider the Controlling Participant’s previous financial and operational performance in Covered Projects that may indicate a financial or operating risk in approving the Controlling Participant’s participation in the subject Triggering Event. At the Commissioner’s discretion, as necessary to determine financial or operating risk and to the extent the Commissioner determines such information to be reliably available, the Commissioner may consider the Controlling Participant’s participation and performance in any federal, state or local government program. The Commissioner may exclude any Previous Participation the Commissioner determines to be of limited value, unreliable or irrelevant in evaluating risk and/or any Previous Participation in which the Controlling Participant did not exercise, actually or constructively, control. Any information collection in connection with review of Previous Participation must follow all applicable requirements for information collection.
Triggering Event means an occurrence in connection with a Covered Project that subjects a Controlling Participant to Previous Participation review under this subpart, as further described in § 200.218.
§ 200.214 Covered Projects.
The following types of multifamily and healthcare projects are Covered Projects subject to the requirements of this subpart, provided however that single family projects are excluded from the definition of Covered Projects:
(a) FHA insured projects. A project financed or which is proposed to be financed with a mortgage insured under the National Housing Act, a project subject to a mortgage held by the Secretary under the National Housing Act, or a project acquired by the Secretary under the National Housing Act.
(b) Housing for the elderly or persons with disabilities. Housing for the elderly financed or to be financed with direct loans or capital advances under section 202 of the Housing Act of 1959, as amended; and housing for persons with disabilities under section 811 of the Cranston-Gonzalez National Affordable Housing Act.
(c) Risk Share projects. A project that is insured under section 542(b) or 542(c) of the Housing and Community Development Act of 1992(12 U.S.C. 17107 note).
(d) Projects subject to continuing HUD requirements. A project that is subject to a use agreement or any other affordability restrictions pursuant to a program administered by HUD’s Office of Housing.
(e) Subsidized Projects. Any project in which 20 percent or more of the units now receive or will receive a subsidy in the form of:
(1) Interest reduction payments under section 236 of the National Housing Act (12 U.S.C. 1715z-1);
(2) Rental Assistance Payments under section 236 of the National Housing Act (12 U.S.C. 1715z-1);
(3) Rent Supplement payments under section 101 of the Housing and Urban Development Act of 1965 (12 U.S.C. 1701s); or
(4) Project-based housing assistance payment contracts under section 8 of the United States Housing Act of 1937 (42 U.S.C. 1437f) administered by HUD’s Office of Housing.
§ 200.216 Controlling Participants.
(a) Definition. Controlling Participants are those entities and individuals (i) serving as a Specified Capacity with respect to a Covered Project and (ii) the entities and individuals in control of the Specified Capacities. Each of the following capacities for a Covered Project is a “Specified Capacity:”
(1) An owner of a Covered Project;
(2) A borrower of a loan financing a Covered Project;
(3) A management agent;
(4) An operator (in connection with healthcare projects insured under the following section of the National Housing Act: Section 232 (12 U.S.C. 1715w) and section 242 (12 U.S.C. 1715z-7));
(5) A master tenant (in connection with any multifamily housing project insured under the National Housing Act (12 U.S.C. 1701 et seq.) and in connection with certain healthcare projects insured under sections 232 or section 242 of the National Housing Act);
(6) A general contractor; and
(7) In connection with a hospital project insured under section 242 of the National Housing Act (12 U.S.C. 1715z-7), a construction manager;
(b) Control of entities. To the extent any Specified Capacity listed in paragraph (a) of this section is an entity, any individual(s) or entities determined by HUD to control the financial or operational decisions of such Specified Capacity shall also be considered Controlling Participants. Without limiting the foregoing and unless otherwise determined by HUD, the following individuals or entities shall be considered Controlling Participants:
(1) Individuals or entities with the ability to direct the day-to-day operations of a Specified Capacity or a Covered Project;
(2) Individuals or entities that own at least 25 percent of an entity that is a Specified Capacity;
(3) Individuals or entities with the ability to direct the entity to enter into agreements relating to the Triggering Event that necessitates review of Previous Participation, including without limitation individuals or entities that own at least 25 percent of entities determined to control an entity that is a Specified Capacity; and
(4) In connection with a hospital project insured under section 242 of the National Housing Act (12 U.S.C. 1715z-7), members of a hospital Board of Directors (or similar body) and executive management (such as the Chief Executive Officer and Chief Financial Officer) that HUD determines to have control over the finances or operation of a Covered Project.
(c) Exclusions from definition. The following individuals or entities are not Controlling Participants for purposes of this subpart:
(1) Passive investors and investor entities with limited liability in Covered Projects benefiting from tax credits, including but not limited to low-income housing tax credits pursuant to section 42 of title 26 of the United States Code, whether such investors are syndicators, direct investors or investors in such syndicators and/or investors;
(2) Individuals or entities that do not exercise financial or operational control over the Covered Project, a Specified Capacity or another Controlling Participant;
(3) Unless determined by HUD to exercise day-to-day control over the operations or finances of a Specified Capacity or Covered Project, board members of a non-profit corporation who are not officers or otherwise part of the executive management teams of the non-profit;
(4) Mortgagees acting in their capacity as such; and
(5) Public housing agencies (PHAs).
§ 200.218 Triggering Events.
(a) Each of the following is a Triggering Event that may subject a Controlling Participant to Previous Participation review under § 200.220:
(1) An application for FHA mortgage insurance;
(2) An application for funds provided by HUD pursuant to a program administered by HUD’s Office of Housing, such as but not limited to supplemental loans;
(3) A request to change any Controlling Participant for which HUD consent is required with respect to a Covered Project; or
(4) A request for consent to an assignment of a housing assistance payment contract under section 8 of the United States Housing Act of 1937 or of another contract pursuant to which a Controlling Participant will receive funds in connection with a Covered Project.
(b) The Commissioner may also require a review of a potential owner’s Previous Participation in connection with a loan sale or other form of property disposition, including foreclosure sale. Notwithstanding anything contained in the regulations in this subpart to the contrary, any such review shall be in accordance with the terms, conditions, provisions and other requirements set forth by the Commissioner in connection with such loan sale or property disposition which may differ, in whole or in part, from the regulations in this subpart.
§ 200.220 Previous Participation review.
(a) Scope of review. (1) Upon the occurrence of a Triggering Event, as provided in § 200.218, the Commissioner shall review the Previous Participation of the relevant Controlling Participants in considering whether to approve the participation of the Controlling Participants in connection with the Triggering Event in accordance with the definition of Risk in § 200.212.
(2) The Commissioner will not review Previous Participation for interests acquired by inheritance or by court decree.
(3) In connection with the submittal of an application for any Triggering Event, applicants shall identify the Controlling Participants and, to the extent requested by HUD, make available to HUD the Controlling Participant’s Previous Participation in Covered Projects.
(b) Results of review. (1) Based upon the review under paragraph (a) of this section, the Commissioner will approve, disapprove, limit, or otherwise condition the continued participation of the Controlling Participant in the Triggering Event, in accordance with paragraphs (c) and (d) of this section.
(2) The Commissioner shall provide notice of the determination to the Controlling Participant including the reasons for disapproval or limitation. The Commissioner may provide notice of the determination to other parties as well, such the FHA-approved lender in the transaction.
(c) Basis for disapproval. (1) The Commissioner must disapprove a Controlling Participant if the Commissioner determines that the Controlling Participant is suspended, debarred or subject to other restriction pursuant to 2 CFR part 180 or 2 CFR part 2424;
(2) The Commissioner may disapprove a Controlling Participant if the Commissioner determines:
(i) The Controlling Participant is materially restricted, including voluntarily, from doing business with HUD (other than the restrictions listed in paragraph (c)(1) of this section) or any other governmental department or agency if the Commissioner determines that such restriction demonstrates a significant risk to proceeding with the Triggering Event; or
(ii) The Controlling Participant’s record of Previous Participation reveals significant risk to proceeding with the Triggering Event.
(d) Alternatives to disapproval. In lieu of disapproval, the Commissioner may:
(1) Condition or limit the Controlling Participant’s participation;
(2) Temporarily withhold issuing a determination in order to gather more necessary information; or
(3) Require the Controlling Participant to remedy or mitigate outstanding violations of HUD requirements to the Commissioner’s satisfaction in order to participate in the Triggering Event.
§ 200.222 Request for reconsideration.
(a) Where participation in a Triggering Event has been disapproved, otherwise limited or conditioned because of Previous Participation review, the Controlling Participant may request reconsideration of such determination by a review committee or reviewing officer as established by the Commissioner. Reconsideration decisions shall not be rendered by the same individual who rendered the initial review.
(b) The Controlling Participant shall submit requests for such reconsideration in writing within 30 days of receipt of the Commissioner’s notice of the determination under § 200.220.
(c) The review committee or reviewing officer shall schedule a review of such requests for reconsideration. The Controlling Participant shall be provided written notification of such a review; such notice shall provide at least 7 business days advanced notice of the reconsideration. The Controlling Participant shall be provided the opportunity to submit such supporting materials as the Controlling Participant desires or as the review committee or reviewing officer requests.
(d) Before making its decision, the review committee or reviewing officer will analyze the reasons for the decision(s) for which reconsideration is being requested, as well as the documents and arguments presented by the Controlling Participant. The review committee or reviewing officer may affirm, modify, or reverse the initial decision. Upon making its decision, the review committee or reviewing officer will provide written notice of its determination to the Controlling Participant setting forth the reasons for the determination(s).
Subpart I—Nondiscrimination and Fair Housing
§ 200.300 Nondiscrimination and fair housing policy.
Federal Housing Administration programs shall be administered in accordance with:
(a) The nondiscrimination and fair housing requirements set forth in 24 CFR part 5, including the prohibition on inquiries regarding sexual orientation or gender identity set forth in 24 CFR 5.105(a)(2); and
(b) The affirmative fair housing marketing requirements in 24 CFR part 200, subpart M and 24 CFR part 108.
Subpart J—Equal Employment Opportunity
§ 200.400 Purpose.
The purpose of this subpart is to assist in achieving the aims of part III of Executive Order 11246 and the relevant regulations of the Secretary of Labor and the Secretary of Housing and Urban Development.
§ 200.405 Notice to public.
Participants in insurance programs under the National Housing Act shall be informed, as early as possible upon indicating their interest in any such program, of the established policy of nondiscrimination in employment in construction, repair or rehabilitation work financed with assistance under the Act.
§ 200.410 Definition of term “applicant”.
(a) In any mortgage or loan insurance transaction under this chapter where the Commissioner will control the mortgagor either through the ownership of corporate stock or under the provisions of a regulatory agreement, the term applicant as used in § 200.415 shall mean the mortgagor.
(b) In any transaction other than one specified in paragraph (a) of this section, the term applicant as used in § 200.415 shall mean the developer, or the builder, dealer or contractor performing the construction, repair or rehabilitation work for the property owner.
§ 200.415 Agreement of applicant.
An applicant, prior to the Commissioner’s issuance of any commitment or other loan approval, shall agree (in a form prescribed by the Commissioner) that there shall be no discrimination against anyone who is employed in carrying out work receiving assistance pursuant to this chapter, or against an applicant for such employment, because of race, color, religion, sex, handicap, age, or national origin.
§ 200.420 Equal opportunity clause to be included in contracts and subcontracts.
(a) The equal opportunity clause prescribed by the Commissioner pursuant to the regulations of the Secretary of Labor (41 CFR chapter 60) shall be included in each nonexempt contract and subcontract for work receiving FHA assistance.
(b) Subcontracts less than $50,000 may incorporate by reference the equal opportunity clause.
(c) The equal opportunity clause shall be deemed to be a part of each nonexempt contract or subcontract whether or not it is physically incorporated in such contract.
§ 200.425 Exemptions.
(a) Transactions of $10,000 or under. Contracts and subcontracts not exceeding $10,000 are exempt from the requirements of the equal opportunity clause. No contractor or subcontractor shall procure supplies or services in less than usual quantities to avoid applicability of the equal opportunity clause.
(b) Contracts and subcontracts for indefinite quantities. Contracts and subcontracts for indefinite quantities are exempt from the requirements of the equal opportunity clause if the amount to be ordered in a single year under any such contract will not exceed $10,000.
(c) Work outside the United States. Contracts and subcontracts with regard to work performed outside the United States by employees who were not recruited within the United States are exempt from the requirements of the equal opportunity clause.
(d) Others. Other exemptions set forth in the regulations of the Secretary of Labor at 41 CFR 60-1.5 apply to transactions under this subpart.
§ 200.430 Sanctions.
Failure or refusal to comply and give satisfactory assurances of future compliance with the requirements of this subpart shall be proper basis for applying sanctions. The sanctions shall be applied in accordance with the provisions of Executive Order 11246 and the relevant regulations of the Secretary of Labor.
Subparts K-L [Reserved]
Subpart M—Affirmative Fair Housing Marketing Regulations
§ 200.600 Purpose.
The purpose of this subpart is to set forth the Department’s equal opportunity regulations for affirmative fair housing marketing under FHA subsidized and unsubsidized housing programs.
§ 200.605 Authority.
The regulations in this subpart are issued pursuant to the authority to issue regulations granted to the Secretary by section 7(d) of the Department of Housing and Urban Development Act of 1965, 42 U.S.C. 3535(d), and implement the functions, powers, and duties imposed on the Secretary by Executive Order 11063, 27 FR 11527, and title VIII of the Civil Rights Act of 1968, as amended, 42 U.S.C. 3608.
§ 200.610 Policy.
It is the policy of the Department to administer its FHA housing programs affirmatively, as to achieve a condition in which individuals of similar income levels in the same housing market area have a like range of housing choices available to them regardless of their race, color, religion, sex, handicap, familial status or national origin. Each applicant for participation in FHA subsidized and unsubsidized housing programs shall pursue affirmative fair housing marketing policies in soliciting buyers and tenants, in determining their eligibility, and in concluding sales and rental transactions.
§ 200.615 Applicability.
The affirmative fair housing marketing requirements, as set forth in paragraphs (a) through (f) of § 200.620, shall apply to all applicants for participation in FHA subsidized and unsubsidized housing programs whose application is hereafter approved for development or rehabilitation of:
(a) Multifamily projects and manufactured home parks of five or more lots, units or spaces, and initial submissions by a lender for an application for mortgage insurance on a single family property, where the property is located in a subdivision and the builder or developer intends to sell five or more properties in the subdivision; or
(b) Dwelling units, when the applicant’s participation in FHA housing programs had exceeded or would thereby exceed development of five or more such dwelling units during the year preceding the application, except that there shall not be included in a determination of the number of dwelling units developed by an applicant those in which a single family dwelling is constructed or rehabilitated for occupancy by a mortgagor on property owned by the mortgagor and in which the applicant had no interest prior to entering into the contract for construction or rehabilitation.
§ 200.620 Requirements.
With respect to all FHA subsidized or unsubsidized programs in which the applicant hereafter participates (except for housing for which a conditional commitment has been issued prior to the effective date of these regulations), the applicant shall meet the following requirements or, if he contracts marketing responsibility to another party, be responsible for that party’s carrying out the requirements:
(a) Carry out an affirmative program to attract buyers or tenants, regardless of sex, handicap or familial status, of all minority and majority groups to the housing for initial sale or rental. An affirmative marketing program shall be in effect for each multifamily project throughout the life of the mortgage. Such a program shall typically involve publicizing to minority persons the availability of housing opportunities regardless of race, color, religion, sex, handicap or familial status or national origin, through the type of media customarily utilized by the applicant, including minority publications or other minority outlets which are available in the housing market area. All advertising shall include either the Department-approved Equal Housing Opportunity logo or slogan or statement and all advertising depicting persons shall depict persons of majority and minority groups, including both sexes.
(b) Maintain a nondiscriminatory hiring policy in recruiting from both minority and majority groups, including both sexes and the handicapped, for staff engaged in the sale or rental of properties.
(c) Instruct all employees and agents in writing and orally in the policy of nondiscrimination and fair housing.
(d) Specifically solicit eligible buyers or tenants reported to the applicant by the Area or Insuring Office.
(e) Prominently display in all offices in which sale or rental activity pertaining to the project or subdivision takes place the Department-approved Fair Housing Poster and include in any printed material used in connection with sales or rentals, the Department-approved Equal Housing Opportunity logo or slogan or statement.
(f) Post in a conspicuous position on all FHA project sites a sign displaying prominently either the Department-approved Equal Housing Opportunity logo or slogan or statement.
§ 200.625 Affirmative fair housing marketing plan.
Each applicant for participation in FHA housing programs to which these regulations apply shall provide on a form to be supplied by the Department information indicating his affirmative fair housing marketing plan to comply with the requirements set forth in § 200.620. This form, once approved by HUD, will be available for public inspection at the sales or rental offices of the applicant.
§ 200.630 Notice of housing opportunities.
The Director of each Field Office shall prepare monthly a list of all projects covered by this subpart, and of all initial submissions by lenders for single family mortgage insurance where the property is located in a subdivision and the builder or developer intends to sell five or more properties in the subdivision, on which commitments have been issued during the preceding 30 days. The Director shall maintain a roster of interested organizations and individuals (including public agencies responsible for providing relocation assistance and local housing authorities) who have expressed a wish to receive the monthly list, and shall provide the list to these organizations and individuals.
§ 200.635 Compliance.
Applicants failing to comply with the requirements of this subpart will make themselves liable to sanctions authorized by regulations, rules or policies governing the program pursuant to which the application was made, including but not limited to denial of further participation in departmental programs and referral to the Department of Justice for suit by the United States for injunctive or other appropriate relief. The Department will enforce compliance through the procedures outlined in 24 CFR part 108.
§ 200.640 Effect on other requirements.
The requirement for compliance with this part is in addition to, and not in substitution for, any other requirements imposed by or under Executive Order 11063 or the Fair Housing Act.
Appendix to Subpart M of Part 200—Equal Housing Opportunity Insignia
The Equal Housing Opportunity insignia are as follows:
Equal Housing Opportunity logo:
Equal Housing Opportunity statement: “We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. We encourage and support an affirmative advertising and marketing program in which there are no barriers to obtaining housing because of race, color, religion, sex, or national origin.”
Equal Housing Opportunity slogan: “Equal Housing Opportunity.”
Subpart N [Reserved]
Subpart O—Lead-Based Paint Poisoning Prevention
§ 200.800 Lead-based paint.
The Lead-Based Paint Poisoning Prevention Act (42 U.S.C. 4821-4846), the Residential Lead-Based Paint Hazard Reduction Act of 1992 (42 U.S.C. 4851-4856), and implementing regulations at part 35, subparts A, B, F, G, I, and R of this title, apply to activities under these programs, except for single family mortgage insurance and guarantee programs. Sections 200.805 and 200.810 apply to single family mortgage insurance and guarantee programs administered by HUD.
§ 200.805 Definitions.
Applicable surface. All intact and nonintact interior and exterior painted surfaces of a residential structure.
Defective paint surface. Paint on applicable surfaces that is cracking, scaling, chipping, peeling or loose.
Lead-based paint surface. A paint surface, whether or not defective, identified as having a lead content greater than or equal to 1 mg/cm
§ 200.810 Single family insurance and coinsurance.
(a) General. (1) The requirements of this section apply to any one-to four-family dwelling which was constructed before 1978 and is the subject of an application for mortgage insurance under section 203(b) or other sections of the National Housing Act relating to the insurance or coinsurance of mortgages on one-to-four-family dwellings. Such other sections include:
(i) Section 244 (coinsurance);
(ii) Section 213 (cooperative housing insurance);
(iii) Section 220 (rehabilitation and neighborhood conservation housing insurance);
(iv) Section 221 (housing for moderate income and displaced families);
(v) Section 222 (mortgagor insurance for servicemen);
(vi) Section 809 (armed services housing for civilian employees);
(vii) Section 810 (armed services housing in impacted areas);
(viii) Section 234 (mortgage insurance for condominiums);
(ix) Section 235 (mortgage assistance payments for home ownership and project rehabilitation);
(x) Section 237 (special mortgage insurance for low and moderate income families); and
(xi) Section 240 (mortgage insurance on loans for purchase of fee simple title from lessors).
(2) [Reserved]
(3) Applications for insurance in connection with a refinancing transaction where an appraisal is not required under the applicable procedures established by the Commissioner are excluded from the coverage of this section. Any housing assisted under the programs set out in this section for which no new activity is applied for or required is not covered by this section.
(b) Appraisal. The appraiser shall, when appraising a dwelling constructed prior to 1978, inspect the dwelling for defective paint surfaces.
(c) Treatment of defective paint surfaces. For defective paint surfaces, treatment shall be provided to defective areas. Treatment of hazards shall consist of covering or removing defective paint surfaces. Covering may be accomplished by such means as adding a layer of wallboard to the wall surface. Depending on the wall condition, wallcoverings which are permanently attached may be used. Covering or replacing trim surfaces is also permitted. Paint removal may be accomplished by such methods as scraping, heat treatment (infra-red or coil type heat guns) or chemicals. Machine sanding and use of propane or gasoline torches (open-flame methods) are not permitted. Washing and repainting without thorough removal or covering does not constitute adequate treatment. In the case of defective paint spots, scraping and repainting the defective area is considered adequate treatment. Treatment of a defective paint surface is not required if such a surface is found to not be a lead-based paint surface by a lead-based paint inspector certified pursuant to procedures of the U.S. Environmental Protection Agency at 40 CFR part 745.
(d) Home equity conversion mortgage insurance. The requirements of this section, as modified by the following sentence, apply to a dwelling which is the subject of an application for mortgage insurance under section 255 of the National Housing Act (home equity conversion insurance) unless the mortgagor provides the certification described in § 206.45(d) of this title. The defective paint surface may be treated after the mortgage is endorsed for insurance, provided that the defective paint surface is treated as expeditiously as possible in accordance with the repair work provisions contained in § 206.47 of this title.
Subpart P—Physical Condition of Multifamily Properties
§ 200.850 Physical condition standards and physical inspection requirements.
The requirements in 24 CFR part 5, subpart G, are applicable to the multifamily properties assisted or insured that are listed in 24 CFR 5.701.
§ 200.853 [Reserved]
§ 200.855 [Reserved]
§ 200.857 [Reserved]
Subpart R [Reserved]
Subpart S—Minimum Property Standards
§ 200.925 Applicability of minimum property standards.
All housing constructed under HUD mortgage insurance and low-rent public housing programs shall meet or exceed HUD Minimum Property Standards, except that this requirement shall be applicable to manufactured homes eligible for insurance pursuant to § 203.43f of this chapter only to the extent provided therein. The Minimum Property Standards may be waived to the same extent as the other regulatory requirements for eligibility for insurance under the specific mortgage insurance program involved.
§ 200.925a Multifamily and care-type minimum property standards.
(a) Construction standards. Multifamily or care-type properties shall comply with the minimum property standards contained in the handbook identified in § 200.929(b)(2). In addition, each such property shall, for the Department’s purposes, comply with:
(1) The applicable State of local building code, if the property is located within a jurisdiction which has a building code accepted by the Secretary under § 200.925a(d); or
(2)(i) The applicable State or local building code, and
(ii) Those portions of the codes identified in § 200.295c which are designated by the HUD Field Office serving the jurisdiction in which the property is to be located, if the property is located in a jurisdiction which has a building code partially accepted by the Secretary; or
(3) The appropriate codes, as identified in § 200.925c(c), if the property is not located within a jurisdiction which has a building code accepted by the Secretary.
(b) Conflicting standards. The minimum property standards contained in the handbook identified in § 200.929(b)(2) do not preempt state or local standards, nor do they alter or affect a builder’s obligation to comply with any state or local requirements. However, a property shall be eligible for benefits only if it complies with all applicable minimum property standards, including referenced standards.
(c) Standard for evaluating local building codes. The Secretary shall compare the portions of a local or State building code applicable to residential or institutional occupancy, as appropriate, submitted under § 200.925a(d) to the list of construction related areas contained in § 200.925b.
(1) A State or local code will be accepted if it regulates each area on the list.
(2) A State or local building code will be partially accepted if it regulates most of the areas on the list. However, no code may be partially accepted if it fails to regulate the subarea for seismic design (see § 200.925b(c)(5)), or if it fails to regulate subareas in more than one of the following major areas listed in § 200.925b: fire safety, light and ventilation, structural loads and seismic design, foundation systems, materials standards, construction components, glass, mechanical, plumbing, electrical, and elevators.
(3) For purposes of this paragraph, a state or local code regulates an area if it establishes a standard concerning that area. However, for earthquake loads (see § 200.925b(c)(5)), ASCE 7-88 is mandatory.
(d) Review process and acceptance—(1) Jurisdictions without previously accepted building codes. The following submission requirements apply to developers and other interested parties in jurisdictions without building codes, jurisdictions with building codes which have never been submitted for acceptance, and jurisdictions with building codes which have been submitted for acceptance and neither accepted nor partially accepted by the Secretary.
(i) Developers or other interested parties must comply with one of the following by the time of application for insurance or other benefits:
(A) The developer or other interested party may choose to comply with the appropriate codes as identified in § 200.925c. If the developer or other interested party so chooses, then the multifamily or care-type property shall be constructed in accordance with one of the model codes designated in paragraph (c)(1), (2) or (3) of § 200.925c and with any other code or codes identified in the same paragraph. In such instances, the developer or other interested party shall notify the Department of the code or group of codes with which it intends to comply by the time of application for insurance or other benefits; or
(B) The developer or other interested party may choose to comply with the State or local building code, if such code is acceptable to the Secretary. To obtain the Secretary’s acceptance, the developer or other interested party shall submit the material specified in paragraph (d)(1)(ii) of this section to the HUD Field Office serving the jurisdiction in which the property is to be constructed. Such material may be submitted at any time; provided, however, that it must be submitted no later than the time of application for mortgage insurance or other benefits.
(ii) If, under paragraph (d)(1)(i)(B) of this section, the developer or other interested party chooses to comply with the State or local building code as prescribed in paragraph (a)(1) of this section, it shall submit the following material to the HUD field Office serving the jurisdiction in which the property is to be constructed:
(A) A copy of the jurisdiction’s building code, including all applicable service codes, appendices and referenced standards; and
(B) A copy of the statute, ordinance, regulation, or order establishing the code, if such statute, ordinance, regulation or order is not contained in the building code itself.
(2) Jurisdictions with previously accepted or partially accepted building codes. The following submission requirements apply to developers and other interested parties in any jurisdiction with a building code which has been accepted or partially accepted by the Secretary:
(i) At the time of application for mortgage insurance or other benefits, the developer or other interested party shall submit to the HUD Field Office serving the jurisdiction in which the property is to be constructed.
(A) A certificate stating that, since its acceptance by the Secretary, the jurisdiction’s building code has not been changed; or
(B)(1) A copy of all changes to the jurisdiction’s building code, including all applicable service codes and appendices, which have been made since the date of the code’s acceptance by the Secretary. However, the developer or other interested party need not submit any part already in the possession of the Field Office; and
(2) A copy of the statute, ordinance regulation, or order making such changes in the code.
(3) Notification of decision. The Secretary shall review the material submitted under paragraphs (d) (1)(ii) and (2)(i). Following that review, the Secretary shall issue a written notice (except in the case of a previously accepted code which hasn’t been changed) to the submitting party stating whether the State or local building code has been accepted, partially accepted, or whether the Secretary’s previous acceptance or partial acceptance has been continued; the basis for the Secretary’s decision; and a notification of the submitting party’s right to present its views concerning the denial of acceptance if the code is neither accepted nor partially accepted. The Secretary may, in his discretion, permit either an oral or written presentation of views.
(i) If a developer or other interested party is notified that a State or local building code has not been accepted, then the multifamily or care-type properties eligible for HUD benefits in that jurisdiction shall be constructed in accordance with the appropriate codes indicated in § 200.925c(c). In such instances, the developer or other interested party shall notify the HUD Field Office of the code or codes with which it chooses to comply, in accordance with § 200.925a(d)(1)(i)(A).
(ii) If a developer or other interested party is notified that a State or local building code has been partially accepted, then the multifamily or care-type properties eligible for HUD benefits in that jurisdiction shall be constructed in accordance with the applicable State or local building code, plus those additional requirements identified in the written notice issued by the Secretary under § 200.925a(d)(3). The written notice shall identify, in accordance with appendix J of the Handbook identified in § 200.929(b)(2), those portions of the codes listed at § 200.925c(a) with which the property must comply.
(iii) Each Regional Office will maintain a current list of jurisdictions with accepted building codes and a current list of jurisdictions with partially accepted building codes. The lists will state the most recent date of each code’s acceptance or partial acceptance and will be available to any interested party upon request. In addition, the list of jurisdictions whose codes have been partially accepted shall identify those portions of the codes listed at § 200.925c(a) with which the property must comply.
§ 200.925b Residential and institutional building code comparison items.
HUD will review each local code submitted under this chapter to determine whether it regulates all of the following areas and subareas:
(a) Fire safety. (1) Construction types permitted;
(2) Allowable height and area;
(3) Fire separations;
(4) Fire resistance requirements;
(5) Means of egress (number and distance);
(6) Individual unit smoke detectors;
(7) Building alarm systems;
(8) Highrise criteria;
(b) Light and ventilation. (1) Habitable rooms;
(2) Bath and toilet rooms.
(c) Structural loads and seismic design. (1) Design live loads;
(2) Design dead loads;
(3) Snow loads;
(4) Wind loads.
(5) Earthquake loads (in localities identified by ASCE 7-88 (formerly ANSI A58.1-82) as being in seismic zones 1, 2, 3, or 4, and Guam).
(6) Special loads, i.e., soil pressure, railings, interior walls etc.
(d) Foundation systems. (1) Soil tests;
(2) Foundation depths;
(3) Footings;
(4) Foundation materials criteria;
(5) Piles, i.e., materials, allowable stresses, design;
(6) Excavation;
(e) Materials standards.
(f) Construction components. (1) Steel;
(2) Masonry;
(3) Concrete;
(4) Gypsum;
(5) Lumber;
(6) Roof construction and covering;
(7) Chimneys and fireplaces.
(g) Glass. (1) Thickness/area requirements;
(2) Safety glazing.
(h) Mechanical. (1) Heating, cooling and ventilation systems;
(2) Boilers and pressure vessels;
(3) Gas, liquid and solid fuel piping and equipment;
(4) Chimneys and vents;
(5) Ventilation (air changes).
(i) Plumbing. (1) Materials standards;
(2) Sizing and installing drainage systems;
(3) Vents and venting;
(4) Traps;
(5) Cleanouts;
(6) Plumbing fixtures;
(7) Water supply and distribution;
(8) Storm drain systems.
(j) Electrical. (1) Wiring design and protection;
(2) Wiring methods and materials;
(3) Equipment for general use;
(4) Special equipment;
(5) Special conditions;
(6) Communication systems.
(k) Elevators. (1) Reference ASME/ANSI Standard A 17.1-1987; and the ASME/ANSI A17.1b-1989 Addenda.
(2) Acceptance tests and periodic tests.
§ 200.925c Model codes.
(a) Incorporation by reference. The following publications are incorporated by reference under 5 U.S.C. 552(a) and 1 CFR part 51. The incorporation by reference of these publications has been approved by the Director of the Federal Register. The locations where copies of these publications are available are set forth below.
(1) Model Building Codes—(i) The BOCA National Building Code, 1993 Edition, The BOCA National Plumbing Code, 1993 Edition, and the BOCA National Mechanical Code, 1993 Edition, excluding Chapter I, Administration, for the Building, Plumbing and Mechanical Codes and the references to fire retardant treated wood and a distance of 4 feet (1219 mm) from the wall in exception number 1 of paragraph 705.6 and 707.5.2 number 2 (Chapter 7) of the Building Code, but including the Appendices of the Code. Available from Building Officials and Code Administrators International, Inc., 4051 West Flossmoor Road, Country Club Hills, Illinois 60478.
(ii) Standard Building Code, 1991 Edition, including 1992/1993 revisions. Standard Plumbing Code, 1991 Edition, Standard Mechanical Code, 1991 Edition, including 1992 revisions, and Standard Gas Code, 1991 Edition, including the 1992 revisions, but excluding Chapter I—Administration from each standard code and the phrase “or fire retardant treated wood” in reference note (a) of table 600 (Chapter 6) of the Standard Building Code, but including Appendices A, C, E, J, K, M, and R. Available from the Southern Building Code Congress International, Inc., 900 Montclair Road, Birmingham, Alabama 35213.
(iii) Uniform Building Code, 1991 Edition, including the 1993 Accumulative Supplement, but excluding Part I—Administrative, and the reference to fire retardant treated plywood in section 2504(c)3 and to fire retardant treated wood in 1-HR type III and V construction referenced in paragraph 4203.2., but including the Appendix of the Code. Uniform Plumbing Code, 1991 Edition, including the 1992 Code Changes but excluding Part I—Administration, but including the Appendices of the Code. Uniform Mechanical Code, 1991 Edition, including the 1993 Accumulative Supplement but excluding Part I—Administrative, but including the Appendices of the Code. All available from the International Conference of Building Officials, 5360 South Workman Mill Road, Whittier, California 90601.
(2) National Electrical Code, NFPA 70, 1993 Edition, including appendices. Available from the National Fire Protection Association, Batterymarch Park, Quincy, Massachusetts 02269.
(3) National Standard Plumbing Code, 1993 Edition. Available from the National Association of Plumbing-Heating-Cooling Contractors, P.O. Box 6808, Falls Church, Virginia 22046.
(b) Model Code Compliance Requirements. (1) When a multifamily or care-type property is to comply with one of the model building codes set forth in paragraph (a)(1) of this section, the following requirements of those model codes shall not apply to those properties:
(i) Those provisions of the model codes that do not pertain to residential or institutional buildings;
(ii) Those provisions of the model codes that establish energy requirements for multifamily or care-type structures; and
(iii) Those provisions of the model codes that require or allow the issuance of permits of any sort.
(2) Where the model codes set forth in paragraph (a)(1) of this section designate a building, fire, mechanical, plumbing or other official, the Secretary’s designee in the HUD Field Office serving the jurisdiction in which the property is to be constructed shall act as such official.
(c) Designation of Model Codes. When a multifamily or care-type property is to comply with a model code, it shall comply with one of the model codes designated in paragraphs (c)(1), (2), or (3) of this section, and with any other code or codes identified in the same paragraph. However, seismic design is a mandatory requirement. In addition, the property shall comply with all of the standards that are incorporated into the code or codes by reference. By the time of application for insurance or other benefits, the developer or other interested party shall notify the Department of the code or group of codes to which the developer intends to comply.
(1) The BOCA National Building Code, The BOCA National Plumbing and The BOCA National Mechanical Code, 1993 Editions.
(2) Standard Building Code, Standard Plumbing Code, Standard Mechanical Code and Standard Gas Code, 1991 Editions, including the revisions specified in paragraph (a)(1)(ii) of this section, and the National Electrical Code, 1993 Edition.
(3) Uniform Building Code, Uniform Plumbing Code and Uniform Mechanical Code, 1991 Editions, including the 1993 Accumulative Supplements to the Building and Mechanical Codes, and the 1992 Code Changes to the Uniform Plumbing Code, and the National Electrical Code, NFPA 70, 1993 Edition.
(4) The National Electrical Code, NFPA 70, 1993 Edition.
§ 200.926 Minimum property standards for one and two family dwellings.
(a) Construction standards—(1) Applicable structures. The standards identified or contained in this section, and in §§ 200.926a-200.926e, apply to single family detached homes, duplexes, three-unit homes, and to living units in a structure where the units are located side-by-side in town house fashion. Section 200.926d(c)(4) also applies to four-unit homes.
(2) Applicability of standards to new construction. The standards referenced in paragraph (a)(1) of this section are applicable to structures which are:
(i) Approved for insurance or other benefits prior to the start of construction, including approval under the Direct Endorsement process described in § 203.5 of this chapter, or under the Lender Insurance process described in § 203.6 of this chapter;
(ii) Approved for insurance or other benefits based upon participation in an insured warranty program; or
(iii) Insured as new construction based upon a Certificate of Reasonable Value issued by the Department of Veterans Affairs.
(b) Conflicting standards. The requirements contained in § 200.926d do not preempt local or State standards, nor do they alter or affect a builder’s obligation to comply with any local or State requirements. However, a property shall be eligible for benefits only if it complies with the requirements of this subpart, including any referenced standards. When any of the requirements identified in § 200.926c are in conflict with a partially accepted local or state code, the conflict will be resolved by the HUD Field Office servicing the jurisdiction in which the property is to be located.
(c) Standard for evaluating local or state building codes. The Secretary shall compare a local building code submitted under paragraph (d) of this section or a State code to the list of construction related areas contained in § 200.926a.
(1) A local or State code will be accepted if it regulates each area and subarea on the list.
(2) A State or local building code will be partially accepted if it regulates most of the areas on the list. However, no code may be partially accepted if it fails to regulate the subarea for seismic design (see § 200.926a(c)(5)), or if it fails to regulate subareas in more than one of the following major areas listed in § 200.926a: fire safety, light and ventilation, structural loads and seismic design, foundation systems, materials standards, construction components, glass, mechanical, plumbing, and electrical.
(3) For purposes of this paragraph, a local or State code regulates an area or subarea if it establishes a standard concerning that area or subarea. However, for earthquake loads (see § 200.926a(c)(5)), ASCE 7-88 is mandatory.
(d) Code selection. Any materials required to be submitted under this section must be submitted by the time the lender or other interested party applies for mortgage insurance or other benefits.
(1) Jurisdictions without previously accepted building codes. The following submission requirements apply to lenders and other interested parties in jurisdictions without building codes, jurisdictions with building codes which have never been submitted for acceptance, and jurisdictions with building codes which previously have been submitted for acceptance and have not been accepted or partially accepted by the Secretary.
(i) In jurisdictions without local building codes:
(A) If the State building code is acceptable, the lender or other interested party must comply with the State building code and the requirements of § 200.926d;
(B) If the State building code is partially acceptable, the lender or other interested party must comply with:
(1) The acceptable portions of the partially acceptable code; and
(2) Those portions of the CABO One and Two Family Dwelling Code designated by the HUD Field Office in accordance with § 200.926c; and
(3) The requirements of § 200.926d.
(C) If there is no State building code or if the State building code is unacceptable, the lender or other interested party must comply with:
(1) The CABO One and Two Family Dwelling Code as identified in § 200.926b(a); and
(2) The requirements of § 200.926d.
(ii) In jurisdictions with local building codes which have never been submitted for review, lenders or other interested parties must:
(A) Comply with the requirements of paragraph (d)(1)(i) (A), (B) or (C) of this section, as appropriate; or
(B) Request the Secretary’s acceptance of the local building code in accordance with paragraph (d)(1)(iv) of this section.
(1) If the Secretary determines that the local building code is unacceptable, then the lender or other interested party must comply with the requirements of paragraph (d)(1)(i) (A), (B) or (C) of this section as appropriate.
(2) If the Secretary determines that the local code is partially acceptable, then the lender or other interested party must comply with:
(i) The acceptable portions of the partially acceptable local code; and
(ii) Those portions of the CABO One and Two Family Dwelling Code designated by the HUD Field Office in accordance with § 200.926c; and
(iii) The requirements of § 200.926d.
(3) If the Secretary determines that the local code is acceptable, then the lender or other interested party must comply with the local building code and the requirements of § 200.926d.
(iii) In jurisdictions with local building codes which previously have been submitted for review and which have been found unacceptable by the Secretary:
(A) If the local code has not been changed since the date the code or changes thereto were submitted to the Secretary, the lender or other interested party must comply with the requirements of paragraph (d)(1)(i) (A), (B) or (C) of this section, as appropriate; or
(B) If the local code has been changed since the date when the code or changes thereto were submitted to the Secretary, the lender or other interested party must submit a copy of all changes to the local building code, including all applicable service codes and appendices and a copy of the statute, ordinance, regulation or order making such changes in the code, which have been made since the date when the code or other changes thereto were last submitted to the Secretary. However, the lender or other interested party need not submit any part already in the possession of the HUD Field Office. Based upon the Secretary’s determination concerning the acceptability of the local code as changed, the lender or other interested party must comply with the requirements of paragraph (d)(1)(ii)(B) (1), (2) or (3) of this section, as appropriate.
(iv) In order to obtain the Department’s approval of a local code, the lender or other interested party must submit the following material to the HUD Field Office serving the jurisdiction in which the property is to be constructed:
(A) A copy of the jurisdiction’s local building code, including all applicable service codes and appendices; and
(B) A copy of the statute, ordinance, regulation, or order establishing the code, if such statute, ordinance, regulation or order is not contained in the building code itself.
(2) Jurisdictions with previously accepted or partially accepted building codes. The following submission requirements apply to lenders or other interested parties in any jurisdiction with a building code which has been accepted or partially accepted by the Secretary:
(i) The lender or other interested party shall submit to the HUD Field Office serving the jurisdiction in which the property is to be constructed:
(A) A certificate stating that, since the date when the code or any changes thereto were last submitted to the Secretary, the jurisdiction’s local building code has not been changed; or
(B)(1) A copy of all changes to the jurisdiction’s building code, including all applicable service codes and appendices, which have been made since the date when the code or other changes thereto were last submitted to the Secretary. However, the lender or other interested party need not submit any part already in the possession of the HUD Field Office; and
(2) A copy of the statute, ordinance, regulation, or order making such changes in the code.
(ii) If, based upon changes to the local building code, the Secretary determines that it is unacceptable, the lender or other interested party must comply with the requirements of paragraph (d)(1) (i)(A), (B) or (C) of this section, as appropriate.
(iii) If the local building code was previously found by the Secretary to be partially acceptable and there have been no changes to it or if the local building code was previously found by the Secretary to be partially acceptable and if, based upon changes to it, the Secretary determines that it is still partially acceptable or if the local building code was previously found by the Secretary to be acceptable and if, based upon changes to it, the Secretary determines that it is partially acceptable, then the lender or other interested party must comply with paragraphs (d)(1)(ii)(B)(2) (i), (ii) and (iii) of this section.
(iv) If the local building code was previously found by the Secretary to be partially acceptable and if, based upon changes to it, the Secretary determines that it is acceptable, or if the local building code was previously found by the Secretary to be acceptable and there have been no changes to the code, or if the local building code was previously found by the Secretary to be acceptable and if, based upon changes to it, the Secretary determines that it is still acceptable, then the lender or other interested party must comply with the local building code and the requirements of § 200.926d.
(3) Notification of decision. (i) Fire retardant treated plywood, where approved by a State or local building code, shall not be permitted for use in roof construction unless a HUD technical suitability bulletin has been issued by the Department for that product.
(ii) The Secretary shall review the material submitted under § 200.926(d). Following that review, the Secretary shall issue a written notice (except where there is a previously accepted or partially accepted code which has not been changed) to the submitting party stating whether the local building code is acceptable, partially acceptable, or not acceptable. Where the local building code is not acceptable, the notice shall also state whether the State code is acceptable, partially acceptable or not acceptable. The notice shall also contain the basis for the Secretary’s decision and a notification of the submitting party’s right to present its views concerning the denial of acceptance if the code is neither accepted nor partially accepted. The Secretary may, in his or her discretion, permit either an oral or written presentation of views.
(4) Department’s responsibilities. (i) Each Regional and Field Office will maintain a current list of jurisdictions with accepted local or State building codes, a current list of jurisdictions with partially accepted local or State building codes and a current list of jurisdictions with local or State building codes which have not been accepted. For local codes, the lists will state the most recent date when the code or changes thereto were submitted to the Secretary. The lists, which shall be prepared by the Field Offices and submitted to the Regional Offices, will be available to any interested party upon request. In addition, the list of jurisdictions whose codes have been partially accepted shall identify in accordance with § 200.926c those portions of the codes listed at § 200.926b(a) with which the property must comply.
(ii) The Department is responsible for obtaining copies of the State codes and any changes thereto.
§ 200.926a Residential building code comparison items.
HUD will review each local and State code submitted under this subpart to determine whether it regulates all of the following areas and subareas:
(a) Fire Safety. (1) Allowable height;
(2) Fire separations;
(3) Fire resistance requirements;
(4) Egress doors and windows;
(5) Unit smoke detectors;
(6) Flame spread.
(b) Light and ventilation. (1) Habitable rooms;
(2) Bath and toilet rooms.
(c) Structural loads and seismic design. (1) Design live loads;
(2) Design dead loads;
(3) Snow loads (for jurisdictions with snow loading conditions identified in Section 7 of ASCE-7-88 (formerly ANSI A58.1-82);
(4) Wind loads;
(5) Earthquake loads (for jurisdictions in seismic zones 3 or 4, as identified in Section 9 of ASCE-7-88 (formerly ANSI A58.1-82)).
(d) Foundation systems. (1) Foundation depths;
(2) Footings;
(3) Foundation materials criteria.
(e) Materials standards. (1) Materials standards.
(f) Construction components. (1) Steel;
(2) Masonry;
(3) Concrete;
(4) Lumber;
(5) Roof construction and covering;
(6) Chimneys and fireplaces.
(g) Glass. (1) Thickness/area requirements;
(2) Safety glazing.
(h) Mechanical. (1) Heating, cooling and ventilation systems;
(2) Gas, liquid and solid fuel piping and equipment;
(3) Chimneys and vents;
(4) Ventilation (air changes).
(i) Plumbing. (1) Materials standards;
(2) Sizing and installing drainage systems;
(3) Vents and venting;
(4) Traps;
(5) Cleanouts;
(6) Plumbing fixtures;
(7) Water supply and distribution;
(8) Sewage disposal systems.
(j) Electrical. (1) Branch circuits;
(2) Services;
(3) Grounding;
(4) Wiring methods;
(5) Cable;
(6) Conduit;
(7) Outlets, switches and junction boxes;
(8) Panelboards.
§ 200.926b Model codes.
(a) Incorporation by reference. The following model code publications are incorporated by reference in accordance with 5 U.S.C. 552(a) and 1 CFR part 51. The incorporation by reference of these publications has been approved by the Director of the Federal Register. The locations where copies of these publications are available are set forth below.
(1) CABO One and Two Family Dwelling Code, 1992 Edition, including the 1993 amendments, but excluding Chapter I—Administrative, and the phrase “or approved fire retardant wood” contained in the exception of paragraph R-218.2.2(2), but including the Appendices A, B, D, and E of the Code. (Available from the Council of American Building Officials, Suite 708, 5203 Leesburg Pike, Falls Church, VA 22041.)
(2) Electrical Code for One and Two Family Dwellings, NFPA 70A, 1990 Edition, including Tables and Examples. Available from the National Fire Protection Association, Batterymarch Park, Quincy, MA 02269.
(b) Model code compliance requirements. (1) When a one or two family dwelling is to comply with the model codes set forth in § 200.926b(a), the following requirements of those model codes shall not apply to those properties:
(i) Those provisions of the model codes that establish energy requirements for one and two family dwellings; and
(ii) Those provisions of the model codes that require or allow the issuance of permits of any sort.
(2) Where the model codes set forth in paragraph (a) of this section designate a building, fire, mechanical, plumbing or other official, the Secretary’s designee in the HUD Field Office serving the jurisdiction in which the dwelling is to be constructed shall act as such official.
(c) Designation of Model Codes. When a one or two family dwelling or townhouse is to comply with portions of the model code or the entire model code, the dwelling shall comply with the CABO One and Two Family Dwelling Code 1992 Edition, including the 1993 amendments, or portion thereof as modified by § 200.926e of this part and designated by the HUD Field Office serving a jurisdiction in which a property is located. In addition, the property shall comply with all of the standards which are referenced for any designated portions of the model code, and with the Electrical Code for One and Two Family Dwellings, NFPA 70A/1990.
§ 200.926c Model code provisions for use in partially accepted code jurisdictions.
If a lender or other interested party is notified that a State or local building code has been partially accepted, then the properties eligible for HUD benefits in that jurisdiction shall be constructed in accordance with the applicable State or local building code, plus those additional requirements identified below. Depending upon the major area identified in § 200.926a which is not adequately regulated by the State or local code, the HUD Field Office will designate, in accordance with the schedule below, those portions of one of the model codes with which the property must comply.
Schedule for Model Code Supplements to Local or State Codes
| Deficient major items from § 200.926a as determined by field office review | Portions of the CABO One and Two Family Dwelling Code, 1992 Edition, including the 1993 amendments, with which a property must comply |
|---|---|
| (a) Fire safety | Chapters 2, 9; Section R-402. |
| (b) Light and ventilation | Chapter 2; Section R-309. |
| (c) Structural loads and seismic design | Chapter 2. |
| (d) Foundation systems | Chapter 3. |
| (e) Materials standards | Chapter 26. |
| (f) Construction components | Part III. |
| (g) Glass | Chapter 2. |
| (h) Mechanical | Part IV. |
| (i) Plumbing | Part V. |
| (j) Electrical | Electrical code for 1- and 2-family dwellings (NFPA 70A-1990). |
§ 200.926d Construction requirements.
(a) Application—(1) General. These standards cover the agency requirements for accessibility to physically handicapped people, variations to standards, real estate entity, trespass and utilities, site conditions, access, site design, streets, dedication of utilities, drainage and flood hazard exposure, special construction and product acceptance, thermal requirements, and water supply systems.
(2) Requirements for accessibility to physically handicapped people. The HUD Field Office will advise project sponsors as to the extent accessibility will be required for new construction of one- and two-family dwellings on a project-by-project basis.
(i) Technical standards. See HUD Handbook, 4910.1, Sections 100-1.3b and 100-1.3c.
(3) Variations to standards—(i) New materials and technologies. See paragraph (d) of this section. Alternatives, nonconventional or innovative methods and materials shall be equivalent to these standards in the areas of structural soundness, durability, economy of maintenance or operation and usability.
(ii) Variation procedures. Variations from the requirements of any standard with which the Department requires compliance shall be made in the following ways:
(A) For a particular design or construction method to be used on a single case or project, the decision is the responsibility of the Field Office. Headquarters concurrence is not required.
(B) Where a variation is intended to be on a repetitive basis, a recommendation for a Local Acceptable Standard, substantiating data, and background information shall be submitted by the Field Office to the Director, Office of Manufactured Housing and Regulatory Functions.
(iii) Variances which require individual analysis and decision in each instance are not considered as repetitive variances even though one particular standard is repeatedly the subject of variation. Such variances are covered by paragraph (a)(3)(ii)(A) of this section.
(b) General acceptability criteria—(1) Real estate entity. The property shall comprise a single plot except that a primary plot with a secondary plot for an appurtenant garage or for other use contributing to the marketability of the property will be acceptable provided the two plots are in such proximity as to comprise a readily marketable real estate entity.
(2) Service and facilities—(i) Trespass. Each living unit shall be one that can be used and maintained individually without trespass upon adjoining properties, except when the windowless wall of a detached dwelling is located on a side lot line. A detached dwelling may be located on a side lot line if:
(A) legal provision is made for permanent access for the maintenance of the exterior portion of the lot line wall, and
(B) the minimum distances from the dwelling to the dwellings on the abutting properties are not less than the sum of the side yard distances computed as appropriate for the type of opposing walls. (minimum distance 10 ft).
(ii) Utilities. Utility services shall be independent for each living unit, except that common services such as water, sewer, gas and electricity may be provided for living units under a single mortgage or ownership. Separate utility service shut-off for each unit shall be provided. For living units under separate ownership, common utility services may be provided from the main to the building line when protected by an easement or covenant and maintenance agreement acceptable to HUD, but shall not pass over, under or through any other living unit. Individual utilities serving a living unit may not pass over, under or through another living unit under the same mortgage unless provision is made for repair and maintenance of utilities without trespass or when protected by an easement or covenant providing permanent access for maintenance and repair of the utilities. Building drain cleanouts shall be accessible from the exterior where a single drain line within the building serves more than one unit.
(3) Site conditions. (i) The property shall be free of those foreseeable hazards and adverse conditions which may affect the health and safety of occupants or the structural soundness of the improvements, or which may impair the customary use and enjoyment of the property. The hazards include toxic chemicals, radioactive materials, other pollution, hazardous activities, potential damage from soil or other differential ground movements, ground water, inadequate surface drainage, flood, erosion, or other hazards located on or off site. The site must meet the standards set forth in 24 CFR part 51, and HUD Handbook 4910.1, section 606 for termite and decay protection.
(ii) When special conditions exist or arise during construction which were unforeseen and which necessitate precautionary or hazard mitigation measures, the HUD Field Office shall require corrective work to mitigate potential adverse effects from the special conditions as necessary. Special conditions include rock formations, unstable soils or slopes, high ground water levels, springs, or other conditions which may adversely affect a property. It shall be the builder’s responsibility to ensure proper design, construction and satisfactory performance where these conditions are present.
(4) Access. (i) Each property shall be provided with vehicular or pedestrian access by a public or private street. Private streets shall be protected by permanent easement.
(ii) Each living unit shall have a means of access such that it is unnecessary to pass through any other living unit.
(iii) The rear yard shall be accessible without passing through any other living unit.
(iv) For a townhouse type dwelling, access to the rear yard may be by means of alley, easement, passage through the dwelling, or other means acceptable to the HUD Field Office.
(c) Site design—(1) General. (i) A site design shall be provided which includes an arrangement of all site facilities necessary to create a safe, functional, healthful, durable and energy efficient living environment.
(ii) With the exception of paragraph (c)(4) of this section, these site design standards apply only in communities that have not adopted criteria for site development applicable to one and two family dwellings.
(iii) Single family detached houses situated on individual lots located on existing streets with utilities need not comply with the requirements of paragraphs (c)(2) and (c)(3) of this section.
(2) Streets. (i) Existing or proposed streets on the site shall connect to private or public streets and shall provide all-weather access to all buildings for essential and emergency use, including access needed for deliveries, service, maintenance and fire equipment.
(ii) Streets shall be designed for dedication for public use and maintenance or, when approved by the HUD Field Office, may be retained as private streets where protected by permanent easements.
(3) Dedication. Utilities shall be located to permit dedication to the local government or appropriate public body.
(4) Drainage and flood hazard exposure—(i) Residential structures located in Special Flood Hazard Areas. The elevation of the lowest floor (including basements and other permanent enclosures) shall be at least two feet above the base flood elevation (see 24 CFR 55.8(b) for appropriate data sources).
(ii) Residential structures located in FEMA-designated “coastal high hazard areas.” Where FEMA has determined the base flood level without establishing stillwater elevations, the bottom of the lowest structural member of the lowest floor (excluding pilings and columns) and its horizontal supports shall be at least two feet above the base flood elevation.
(iii) New construction. (A) In all cases in which a Direct Endorsement (DE) mortgagee or a Lender Insurance (LI) mortgagee seeks to insure a mortgage on a one- to four-family dwelling that is newly constructed (including a newly erected manufactured home) that was processed by the DE or LI mortgagee, the DE or LI mortgagee must determine whether the property improvements (dwelling and related structures/equipment essential to the value of the property and subject to flood damage) are located on a site that is within a Special Flood Hazard Area, as designated on maps of the Federal Emergency Management Agency. If so, the DE mortgagee, before submitting the application for insurance to HUD, or the LI mortgagee, before submitting all the required data regarding the mortgage to HUD, must obtain:
(1) A final Letter of Map Amendment (LOMA);
(2) A final Letter of Map Revision (LOMR); or
(3) A signed Elevation Certificate documenting that the lowest floor (including basements and other permanent enclosures) of the property improvements is at least two feet above the base flood elevation as determined by FEMA’s best available information (or documenting that the lowest floor meets HUD’s elevation standard for newly erected manufactured housing in 24 CFR 203.43f or 24 CFR part 3285, as applicable).
(B) Under the DE program, these mortgages are not eligible for insurance unless the DE mortgagee submits the LOMA, LOMR, or Elevation Certificate to HUD with the mortgagee’s request for endorsement.
(iv) Streets. Streets must be usable during runoff equivalent to a 10-year return frequency. Where drainage outfall is inadequate to prevent runoff equivalent to a 10-year return frequency from ponding over 6 inches deep, streets must be made passable for commonly used emergency vehicles during runoff equivalent to a 25-year return frequency, except where an alternative access street not subject to such ponding is available.
(v) Crawl spaces. Crawl spaces must not pond water or be subject to prolonged dampness.
(d) Special construction and product acceptance—(1) Structural features of factory produced (modular or panelized) housing or components.
(i) For factory fabricated systems or components, HUD Handbook 4950.1, “Technical Suitability of Products Program Technical and Processing Procedures” shall apply.
(ii) The requirements of this part shall apply to structural features, consisting of factory fabricated systems or components assembled either at the factory or at the construction site, if the total construction is covered by these standards and can be inspected on-site for determination of compliance.
(2) Non-structural or non-standard features. These features include methods of construction, systems, sub-systems, components, materials and processes which are not covered by these requirements. See HUD Handbook 4950.1 for procedures to be followed in order to obtain acceptance of non-structural components or materials. See HUD Handbook 4910.1, appendix F for a list of Use of Materials Bulletins. Products and methods shall conform to the appropriate Use of Materials Bulletin.
(3) Standard Features. These features include methods of construction, systems, sub-systems, components, materials and processes which are covered by national society or industry standards. For a list of standards and practices to which compliance is required, see HUD Handbook 4910.1, Appendix C and Appendices E and F, available from HUD, 451 Seventh Street, SW., Attention: Mailroom B-133, Washington, DC 20410.
(e) Energy efficiency. All detached one- and two-family dwellings and one-family townhouses not more than three stories in height shall comply with the CABO Model Energy Code, 1992 Edition, Residential Buildings, except for Sections 101.3.1, 101.3.2, 104, and 105, but Section 101.3.2.2, Historic Buildings, shall remain, and including the Appendix, and HUD intermediate MPS Supplement 4930.2 Solar Heating and Domestic Hot Water Systems, 1989 edition.
(f) Water supply systems—(1) General. (i) Each living unit shall be provided with a continuing and sufficient supply of safe water under adequate pressure and of appropriate quality for all household uses. Newly constructed residential property for which a building permit has been applied for on or after June 19, 1988 from the competent authority with jurisdiction in this matter shall have lead-free water piping. For purposes of these standards, water piping is “lead free” if it uses solders and flux containing not more than 0.2 percent lead and pipes and pipe fittings containing not more than 8.0 percent lead. This system shall not impair the function or durability of the plumbing system or attachments.
(ii) The chemical and bacteriological standards of the local health authority shall apply. In the absence of such standards, those of the appropriate State agency shall apply. A water analysis may be required by either the health authority or the HUD Field Office.
(iii) Whenever feasible, connection shall be made to a public water system. When a public system is not available, connection shall be made to a community system which complies with HUD Handbook 4940.2, if feasible.
(2) Individual water systems. (i) The system should be capable of delivering a flow of 5 gpm over at least a 4 hour period.
(ii) The chemical and bacteriological standards of the local health authority shall apply. In the absence of such standards, those of the appropriate State agency shall apply. A water analysis may be required by either the health authority or the HUD Field Office.
(iii) After installation, the system shall be disinfected in accordance with the recommendations or requirements of the local health authority. In the absence of a health authority, system cleaning and disinfection shall conform to the current EPA Manual of Individual Water Supply Systems.
(iv) Bacteriological or chemical examination of a water sample collected by a representative of the local or state health authority shall be made when required by that authority or the HUD Field Office.
(3) Location of wells. (i) A well located within the foundation walls of a dwelling is not acceptable except in arctic or subarctic regions.
(ii) Water which comes from any soil formation which may be polluted, contaminated, fissured, creviced or less than 20 ft. below the natural ground surface is not acceptable, unless acceptable to the local health authority.
(iii) Individual water supply systems are not acceptable for individual lots in areas where chemical soil poisoning has been or is practiced if the overburden of soil between the ground surface and the water bearing strata is coarse grained sand, gravel, or porous rock, or is creviced in a manner which will permit the recharge water to carry the toxicants into the zone of saturation.
(iv) The following table shall be used in establishing the minimum acceptable distances between wells and sources of pollution located on either the same or adjoining lots. These distances may be increased by either the health authority having jurisdiction or the HUD Field Office.
Distance From Source of Pollution
| Source of pollution | Minimum horizontal distance (feet) |
|---|---|
| Property Line | 10 |
| Septic Tank | 50 |
| Absorption Field | 1 100 |
| Seepage Pit | 1 100 |
| Absorption Bed | 1 100 |
| Sewer Lines w/Permanent Watertight Joints | 10 |
| Other Sewer Lines | 50 |
| Chemically Poisoned Soil | 3 25 |
| Dry Well | 50 |
| Other | ( 2) |
1 This clearance may be increased or decreased depending upon soil and rock penetrated by the well and aquifer conditions. The clearance may be increased in creviced limestone and permeable strata of gravel and sand. The clearance may be reduced to 50 ft. only where the ground surface is effectively separated from the water bearing formation by an extensive, continuous and impervious strata of clay, hardpan, or rock. The well shall be constructed so as to prevent the entrance of surface water and contaminants.
2 The recommendations or requirements of the local health authority shall apply.
3 This clearance may be reduced to 15 feet only where the ground surface is effectively separated from the water bearing formation by an extensive, continuous and impervious strata of clay, hardpan, or rock.
(4) Well construction. (i) The well shall be constructed so as to allow the pump to be easily placed and to function properly.
(ii)(A) All drilled wells shall be provided with a sound, durable and watertight casing capable of sustaining the loads imposed.
(B) The casing shall extend from a point several feet below the water level at drawdown or from an impervious strata above the water level to 12 in. above either the ground surface or the pump room floor. The casing shall be sealed at the upper opening to a depth of at least 15 feet.
(iii) Bored wells shall be lined with concrete, vitrified clay or equivalent materials.
(iv) The space between the casing or liner and the wall of the well hole shall be sealed with cement grout.
(v) The well casing shall not be used to convey water except under positive pressure. A separate drop pipe shall be used for the suction line.
(vi) When sand or silt is encountered in the water-bearing formation, the well shall either be compacted and gravel packed, or a removable strainer or screen shall be installed.
(vii) The surface of the ground above and around the well shall be compacted and graded to drain surface water away from the well.
(viii) Openings in the casing, cap, or concrete cover for the entrance of pipes, pumps or manholes shall be watertight.
(ix) If a breather is provided, it shall extend above the highest level to which surface water may rise. The breather shall be watertight, and the open end shall be screened and positioned to prevent entry of dust, insects and foreign objects.
(5) Pump and equipment. (i) Pumps shall be capable of delivering the volume of water required under normal operating pressure within the living unit. Pump capacity shall not exceed the output of the well.
(ii) Pumps and equipment shall be mounted to be free of objectionable noises, vibrations, flooding, pollution, and freezing.
(iii) Suction lines shall terminate below maximum drawdown of the water level in the well.
(iv) Horizontal segments of suction line shall be placed below the frost line in a sealed casing pipe or in at least 4 in. of concrete. The distance from suction line to sources of pollution shall be not less than shown in the table at paragraph (f)(3)(iv) of this section.
(6) Storage tanks. (i) A pressure tank having a minimum capacity of 42 gallons shall be provided. However, prepressured tanks and other pressurizing devices are acceptable provided that delivery between pump cycles equals or exceeds that of a 42 gallon tank.
(ii) Tanks shall be equipped with a clean-out plug at the lowest point, and a suitable pressure relief valve.
§ 200.926e Supplemental information for use with the CABO One and Two Family Dwelling Code.
The following shall be used in Table No. R-202, Climatic and Geographic Design Criteria of the CABO One and Two Family Dwelling Code.
(a) Roof live loads.
(b) Roof snow load. The roof snow load shall be in accordance with section 7 of ASCE 7-88.
(c) Wind pressures. The minimum Design Wind Pressures (net pressures) set forth below apply to areas designated as experiencing basic wind speeds up to and including 80 mph, as shown in ASCE 7-88, Figure 1, Basic Wind Speed Map. These pressures also apply to buildings not over 30 ft. in height above finish grade, assuming exposure C or defined in ASCE 7-88.
(1) Minimum design wind pressure criteria. (i) Buildings (for overturning racking or sliding); p = 20 psf.
(ii) Chimneys, p = 30 psf.
(iii) Exterior walls, p = 15 psf inward or outward. Local pressure at corners of walls shall be not less than p = 30 psf outward. These local pressures shall not be included with the design pressure when computing overall loads. The pressures shall be applied perpendicularly outward on strips of width equal to 10 percent of the least width of building.
(iv) Partitions, p = 10 psf.
(v) Windows, p = 20 psf inward or outward.
(vi) Roof, p = 20 psf inward or outward.
(2) Severe wind design pressures. If the construction is higher than 30 ft., or if it is located in an area experiencing wind speeds greater than 80 mph, higher design wind pressures than shown above are required. Use Section 6 of ASCE 7-88 for higher criteria and for determining where wind speeds greater than 80 mph occur. Pressures are assumed to act horizontally on the gross area of the vertical projection of the structure except as noted for roof design.
(d) Seismic conditions shall be in accordance with Section 9 of ASCE 7-88.
(e) Subject to damage from: weathering. A jurisdiction’s weathering region shall be as established by the map in ASTM C 62-83.
(f) Subject to damage from: frost line depth. Exterior wall footings or foundation walls including those of accessory buildings shall extend a minimum of 6 in. below the finished grade and, where applicable, the prevailing frost line.
(g) Subject to damage from: termites. “Yes” shall be used in locations designated as Regions I, II or III. “No” shall be used in locations designated as Region IV. The map for Termite Infestation Probability in appendix A of CABO, One and Two Family Dwelling Code shall be used to determine the jurisdiction’s region.
(h) Subject to damage from: decay. “Yes” shall be used in locations designated as moderate to severe and slight to moderate. “No” shall be used in locations designated as none to slight. The Decay Probability map in appendix A of CABO, One and Two Family Dwelling Code shall be used to determine the jurisdiction’s decay designation.
§ 200.927 Incorporation by reference of minimum property standards.
The Minimum Property Standards as contained in the handbooks identified in § 200.929(b) are incorporated by reference into this section as though set forth in full in accordance with 5 U.S.C. 552(a) and 1 CFR part 51.
§ 200.929 Description and identification of minimum property standards.
(a) Description. The Minimum Property Standards describe physical standards for housing. They are intended to provide a sound basis for determining the acceptability of housing built under the HUD mortgage insurance and low-rent public housing programs. The Minimum Property Standards refer to material standards developed by industry and accepted by HUD. In addition, under Section 521 of the National Housing Act, HUD adopts its own technical suitability standards for materials and products for which there are no industry standards acceptable to HUD. These standards are contained in Use of Materials Bulletins that apply to products and methods and Materials Releases that apply to specific materials. Use of Materials Bulletins and Materials Releases are addenda to the Minimum Property Standards. Unless otherwise stated, the current edition, issue, or version of each of these documents, as available from its source, is applicable to this subpart S. A list of the Use of Materials Bulletins, Materials Releases, and MPS Appendix listing the applicable referenced Standards may be obtained from the Construction Standards Division, Office of Manufactured Housing and Construction Standards, room 6170 Department of Housing and Urban Development, 451 7th Street, SW, Washington, DC 20410.
(b) Identification. The Minimum Property Standards have been published as described below:
(1) MPS for One and Two Family Dwellings. See §§ 200.926, 200.926 (a) through (e).
(2) MPS for Housing 4910.1, 1994 edition. This volume applies to buildings and sites designed and used for normal multifamily occupancy, including both unsubsidized and subsidized insured housing, and to care-type housing insured under the National Housing Act. It also includes, in Appendix K, a reprint of the MPS for One and Two Family Dwellings identified in paragraph (b)(1) of this section.
§ 200.929a Fair Housing Accessibility Guidelines.
Builders and developers may use the Department’s Fair Housing Accessibility Guideline when designing or constructing covered multifamily dwelling units in order to comply with the Fair Housing Act. The Guidelines may be found in the 24 CFR Chapter I, Subchapter A, Appendix II, titled Fair Housing Accessibility Guidelines—Design Guidelines for Accessible/Adaptable Dwellings.
§ 200.931 Statement of availability.
(a) Updated copies of the Minimum Property Standards and Use of Materials Bulletins are available for public examination in the Office of Consumer and Regulatory Affairs, Department of Housing and Urban Development, room 9156, 451 Seventh St. SW., Washington, D.C. 20410-8000. In addition, copies of volumes 1, 2, and 3 of the Minimum Property Standards may be purchased from the U.S. Government Printing Office, Washington, D.C. 20402.
(b) Publications approved by the Director of the Federal Register for incorporation by reference in accordance with 5 U.S.C. 552(a) and 1 CFR part 51 are available for inspection at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, call 202-741-6030, or go to: http://www.archives.gov/federal_register/code_of_federal_regulations/ibr_locations.html.
§ 200.933 Changes in minimum property standards.
Changes in the Minimum Property Standards will generally be made every three years. Changes will be made in accordance with HUD policy for the adoption of rules and regulations set forth in part 10 of this title. Notice of such changes will be published in the
§ 200.934 User fee system for the technical suitability of products program.
(a) General. This section establishes fee requirements for the issuance of Structural Engineering Bulletins (SEBs), Mechanical Engineering Bulletins (MEBs), Truss Connector Bulletins (TCBs), Area Letters of Acceptance (ALAs), Materials Releases (MRs), and review of program administrator applications submitted pursuant to § 200.935 of this title.
(b) Filing address—(1) Applications containing payment. When applications for or correspondence concerning SEBs, MEBs, TCBs, MRs, or program administrator approval contain payment, such applications or correspondence shall be sent to the following address:
(2) Other correspondence. All other correspondence concerning SEBs, MEBs, TCBs, MRs, and program administrator acceptance shall be sent to the following address:
(3) Application for ALAs. Applications for or correspondence concerning ALAs shall be submitted to the Housing Division of the field office having jurisdiction over the area in which the production facility of the system is located, except that applications containing payment shall be addressed to the attention of the Collection Officer for deposit to Account No. 86-09-0300.
(c) Fees. Applicants for renewal and applicants for acceptance as program administrators under § 200.935 of this title shall include the entire processing fee with the application. All other applicants shall submit one half of the required processing fee with each application. The applicant shall pay the balance when the draft issuance is returned to HUD with the applicant’s concurrence signature. The Department will not prepare a final document for printing and distribution until it has received the full processing fee. From time to time, as may be necessary, the Department will establish and amend the fee schedule by publication of a Notice in the
(d) Initial application and review—(1) Content of applications. Each application shall include only one item. All applications will be promptly processed on receipt by the Department.
(i) With respect to Mechanical Engineering Bulletins (MEBs), Structural Engineering Bulletins (SEBs), Truss Connector Bulletins (TCBs), and Area Letters of Acceptance (ALAs), each structural design shall constitute a different item.
(ii) With respect to Materials Releases (MRs), each product or system shall constitute a different item.
(2) Revisions. A recipient of a technical suitability document issued by the Department may apply for revision of that document at any time. The revision may be in the form of an amendment of or supplement to the document, for which the recipient will be charged the applicable revision fee. However, where the Department determines that a proposed revision constitutes a different item, the schedule of fees for initial applications shall apply.
(3) Renewals. Each issuance shall be valid for a period of three years from the date of initial issuance or most recent renewal, whichever is later. An applicant shall submit an application for renewal with the entire required fee three months before the expiration of the three-year period. Failure to submit a timely renewal application along with the required fee shall constitute a basis for cancellation of the issuance.
(4) Initial and revision applications requiring further study or additional data. In its discretion, the Department may request an applicant to submit additional data or to conduct further study to supplement or clarify an initial application or an application for revision of a previously issued technical suitability document. If the applicant fails to comply with the Department’s request within ninety days of the date of that request or within such longer time as may be specified by the Secretary, the Department will return the application to the applicant. The Department will not refund any fees paid toward an application returned under this paragraph. The application will be considered further only if it is resubmitted along with payment of the full fee as required by these regulations.
(5) Ineligible applications. If the Secretary determines that an application or request will not be considered because it is not eligible for issuance of a technical suitability document, the Department will promptly return the application or request, refund any fees paid, and explain why the application or request is ineligible.
(6) Cancellation of a technical suitability document. If the Department determines that (i) the conditions under which a technical suitability document was issued have so changed as to affect the production of, or to compromise the integrity of, the material, product, or system approved thereby, or (ii) that the producer has changed its organizational form without notifying HUD, or (iii) that the producer is not complying with the responsibilities it assumed as a condition of HUD’s acceptance of its material, product or system, the Department will notify the producer or manufacturer that the technical suitability document may be cancelled. However, before cancelling a technical suitability document, the Department will give the manufacturer reasonable notice in writing of the specific reasons therefore and an opportunity to present its views on why the technical suitability document should not be cancelled. No refund of fees will be made on a cancelled document.
(e) Identification. (1) Applications for issuance of a MEB, SEB, TCB, or MR submitted to HUD Headquarters will be identified with a case number. The applicant will be notified of the case number when receipt of the application is acknowledged. Thereafter, the case number will be used on all correspondence relating to the application. When a final draft of a new document is prepared for publication and distribution, a bulletin or release number will be assigned to the new issuance.
(2) In the case of an application for an ALA submitted to a field office, the application will be processed in accordance with the identification and processing procedures established by the responsible field office. The field office will notify the applicant of receipt of the application and inform the applicant of the procedures that will be followed with respect to the issuance of an ALA.
§ 200.935 Administrator qualifications and procedures for HUD building products certification programs.
(a) General. This section establishes administrator qualifications and procedures for the HUD Building Products Certification Programs under section 521 of the National Housing Act and the HUD Minimum Property Standards. Under these programs organizations acceptable to HUD validate manufacturers’ certifications that certain building products or materials meet applicable standards. HUD may decide to implement a certification program for a particular building product or material for a variety of reasons, such as when deemed necessary by HUD to facilitate the introduction of new and innovative products or materials; or in response to reports of fraud or misrepresentation by manufacturers in advertising that their product or materials comply with a standard.
(b) Definitions—(1) Certification program (“program”). The procedure under which accepted administrators validate manufacturers’ certifications that particular building products or materials meet applicable HUD standards. A separate program is used to validate certifications for each particular product or material for which HUD requires certifications.
(2) Program administrator (“administrator”). An organization which conducts the program validating the manufacturer’s certification that a particular building product or material meets applicable HUD standards.
(c) Administrator qualifications and application procedures—(1) Qualifications. Each program administrator shall be capable of conducting a certification program with respect to organization, staff and facilities, and have a reputation for adhering to high ethical standards. To be considered acceptable for conducting a certification program, each administrator shall:
(i) Be a technically qualified organization with past experience in the administration of certification programs. The certification program(s) shall be under the supervision of a qualified professional with six years of experience in interpreting testing standards, test methods, evaluating test reports and quality control programs. Each administrator is responsible for staffing the program with qualified professional personnel with experience in interpreting testing standards, test methods, evaluating test reports and quality control programs. The staff shall be adequate to service all aspects of the program.
(ii) Have field inspectors trained to make selections of materials for testing from manufacturer’s stock or from distributors’ establishments and to conduct product compliance inspections. Such inspectors must be trained and experienced in evaluating manufacturer’s quality control records to ascertain with a reasonable degree of assurance that continuing production remains in compliance with the applicable standard set forth in the Use of Materials (UM) Bulletin. When inspectors are used to evaluate laboratory operations, they shall be qualified and under the supervision of the administrator. They shall be knowledgeable in such areas as test methods, quality control, testing techniques, and instrument calibration.
(iii) Have facilities and capabilities for communications with manufacturers, laboratories, and HUD, including publication of a directory of certified products and a list of accredited laboratories, if required by the program.
(iv) Have adequate policies and practices for preserving information entrusted to its care. HUD reserves the right to review all technical records related to the program for the purpose of monitoring.
(v) Have a copy of all applicable standards, test methods and related information necessary to carry out the program.
(vi) Have a registered or pending certification mark at the United States Patent Office and be willing to license, on a uniform basis, the use of that mark by manufacturers as a validation of the manufacturer’s certification that the product complies with the applicable standard.
(2) Applications procedures. Any organization desiring HUD acceptance as a qualified administrator to conduct a certification program shall make application in writing to the Director, Office of Architecture and Engineering Standards. The application shall state the particular certification program for which acceptance is requested and include information indicating compliance with each of the qualification requirements by number and subsection. Attached to the application shall be:
(i) A list of certification programs in which the organization is participating or has participated and the types of participation (sponsor, administrator, testing laboratory, etc.).
(ii) A procedural guide used in one of these programs.
(iii) A directory or listing used in one of these programs.
(iv) A reproduction or facsimile of the organization’s registered or pending mark.
(v) A proposed procedural guide for the particular certification program. HUD certification program procedures described in paragraph (d) of this section shall be followed.
(3) Acceptance. HUD shall review each submission and notify the applicant whether or not they are accepted or rejected. HUD shall be notified immediately of any change(s) in the administrator’s submission regarding program procedures and/or major personnel associated with the program. HUD reserves the right to suspend or debar an administrator in accordance with 2 CFR part 2424.
(d) HUD building products certification procedures—(1) Certification program development. Certification program development by an administrator shall be based upon the procedures and standards for the specific building product described in a Use of Materials Bulletin or a Materials Release.
(2) License agreement. Each administrator shall have a written license agreement with each participating manufacturer binding each to the provisions of the specific program and authorizing the manufacturer to use the administrator’s mark, seal, or label on its products. The administrator shall have the right to terminate any agreement prior to an expiration date, for example, if there has been a breach of the requirement of the certification program by the manufacturer.
(3) Laboratory approval. The administrator shall review laboratories that apply for participation in this program on the basis of the procedures described in paragraph (e) of this section. A list of approved laboratories shall be maintained by the administrator. When the certification program allows the use of the administrator’s testing laboratories, the laboratories shall be reviewed by a qualified party acceptable to HUD. As accreditation procedures are made available through the National Voluntary Laboratory Accreditation Program (NVLAP) for specific products, HUD may require such accreditation.
(4) Initial testing and quality control review—(i) Initial testing. Each participating manufacturer shall submit to the appropriate administrator, the product(s) specification and statement(s) that the product complies with the applicable standard. The administrator shall select samples of the product(s), or when HUD specifies as acceptable, a prototype. The particular method of sample selection shall be determined by HUD for each specific product certification program. Other methods of initial sample selection may be used if deemed necessary. If a failure occurs on the initial tests, additional sampling and testing may be done at the manufacturer’s request. The administrator’s validation of the manufacturer’s declaration of certification shall be withheld until a finding of compliance is achieved.
(ii) Quality assurance system review. (A) Each administrator shall examine a participating manufacturer’s facilities and quality assurance system procedures to determine that they are adequate to assure continuing production of the product that complies with the applicable standard. These quality assurance system procedures shall be documented in the administrator’s and the manufacturer’s files. If a manufacturer’s quality assurance system is not satisfactory to the administrator, validation of the manufacturer’s declaration of certification shall be withheld. The following American Society for Quality Control (ASQC) standards, which are incorporated by reference, may be used as guidelines in any quality assurance review:
(1) ASQC Q9000-1-1994 Quality Management and Quality Assurance Standards Guidelines for Selection and Use;
(2) ASQC Q9001-1994 Quality Systems—Model for Quality Assurance in Design, Development, Production, Installation, and Servicing;
(3) ASQC Q9002-1994 Quality Systems—Model for Quality Assurance in Production, Installation, and Servicing;
(4) ASQC Q9003-1994 Quality Systems—Model for Quality Assurance in Final Inspection and Test;
(5) ASQC Q9004-1-1994 Quality Management and Quality System Elements-Guidelines.
(B) These standards have been approved by the Director of the Federal Register for incorporation by reference in accordance with 5 U.S.C. 552(a) and 1 CFR part 51. They are available from the American Society for Quality Control (ASQC), 611 East Wisconsin Avenue, Milwaukee, WI 53202.
(5) Notice of validation. When initial testing, quality control review, and evaluation of other technical data are satisfactory to the administrator, a Notice of Validation or Certification shall be issued to the manufacturer. This allows the use of the administrator’s registered mark on the product label.
(6) Labeling. Each administrator shall issue to the manufacturer labels, tags, marks containing the administrator’s validation mark, and the manufacturer’s certification of compliance with the applicable standard. The registered administrator’s (validator’s) mark shall be on the label. A sponsor’s (association, testing agencies, society or others) mark may be used in addition to the administrator’s mark. The manufacturer’s certification of compliance to the standard may be coded. Additional information such as type, grade, class, etc., may also be coded. When coding is used, the code shall be described in the directory or listing.
(7) Directory or listing. When required by the program, the administrator shall publish a directory or listing for all certified products. The directory shall list the items described in paragraph (d)(6) of this section. The directly shall also carry a complete list of approved laboratories and shall be updated to reflect additions or deletions of certified products and laboratories. Directories or listings shall be published periodically as described in the specific program. Each administrator shall make a complimentary distribution of the directory or listing to the HUD Field Offices and other government agencies designated by HUD. A subscription fee may be charged to others requesting copies.
(8) Periodic tests and quality control inspections. Samples of the certified product or prototype shall be selected periodically from the plant, warehouse inventory or sales points. The samples shall be sent to an administrator-approved laboratory and tested in accordance with the applicable standard. The frequency of testing shall be described in the specific building product program. The administrator shall periodically visit the manufacturer’s facility to assure that the initially accepted quality control procedures are being followed.
(9) Product decertification. If a failure should occur in any test, the laboratory shall notify the administrator and the manufacturer. The manufacturer shall notify the administrator if a retest if requested. If a retest is not requested, validation shall be withdrawn. If the manufacturer requests a retest, the administrator shall select new samples and submit them to the same or another laboratory at the manufacturer’s expense, for retest of only the test requirement(s) in which the failure(s) occurred. If the specified number of specimens pass the retest, the product can continue to be validated and listed. If the designated number of specimens described in the UM Bulletin fail, the administrator shall decertify the product. The manufacturer may request that a new selection be made of the product after correction or modifications and be subjected to the initial acceptance testing procedure or to a program of retesting established by the administrator. The administrator may decertify the product on the basis of inadequate quality control by the manufacturer. The administrator shall notify the manufacturer, HUD headquarters and the HUD Field Offices of any decertification within 7 days. When the product is decertified the manufacturer shall remove labels, tags or marks from all production and inventory in his/her control determined to be in noncompliance.
(10) Challenge response. Any person or organization may submit a sample of a manufacturer’s certified product to the administrator in substantiation of a claim of noncompliance. Submission shall be made to the administrator that validated the manufacturer’s product. The administrator shall notify the manufacturer that its product has been challenged and shall make arrangements to obtain test samples of the challenged product. An estimate of the cost of the special sample selection and testing shall be made to the complainant. The complainant shall pay the estimated cost of the investigation in advance of any testing of the challenged product, unless HUD believes the complaint to be in the public’s interest. HUD may conduct its own investigation when deemed necessary based upon a complaint or a product failure. The administrator shall submit the sample of the challenged product to an approved laboratory of the administrator’s choice with the request to test compliance of only the challenged requirement(s). If the samples tested prove that the product failed to meet the standard, the product shall be decertified immediately. The manufacturer whose product is decertified shall reimburse the administrator for all costs of the investigation and the administrator shall refund the complainant’s advance payment. If the tests prove that the product does comply with the standard, the complainant shall be notified that the tests do not support the complaint and that the advance fee has been used for the cost of testing and investigating the claim.
(11) Maintenance of the program. Each administrator shall maintain the program in conformance with administrative letters issued by HUD for the purpose of clarifying procedures and interpreting the applicable standard. These letters may also be used to revise and amend the procedures used in specific programs. Significant changes in any program shall be published in the
(e) Laboratory qualifications. The following laboratory qualifications apply to all testing laboratories participating in the program including manufacturer’s laboratories and the administrator’s own laboratories when designated in the specific program.
(1) Organization and personnel. Laboratories wishing to participate in a certification program shall apply to the administrator and shall furnish the following information:
(i) Name of laboratory, address, telephone number, name and title of official to be contacted for this program.
(ii) Name and qualifications of person assigned by the laboratory to supervise testing under a specific certification program.
(iii) Name and qualifications of engineers and other key personnel who shall conduct the testing.
(iv) Brief review of training program for personnel associated with program to assure the operational efficiency and uniformity of the testing and quality control procedures.
(2) Equipment and facilities. Each laboratory shall:
(i) Describe the test instruments and testing facilities to be used in making the test(s) required by the applicable standard. Information shall include: Item of equipment, manufacturer, type or model, serial number, range, precision, frequency of calibration and dates of calibration.
(ii) Provide photographs of the listed equipment.
(iii) Provide a description of the applicable standards and calibration equipment being used and the calibration procedures followed, including National Bureau of Standards traceability, when applicable. List outside organizations providing calibration services, if used.
(iv) Demonstrate that measurements can be made with existing equipment and repeated precision within the limits established by the applicable standards. Administrator may periodically require laboratories to conduct collaborative testing on standard reference materials.
(v) Provide evidence, when regulated temperatures and humidity are required, that charts are maintained from a continuous recorder registering both wet and dry bulb temperature or relative humidity. The charts are to be properly dated, retained and available for inspection.
(vi) Provide a list of standards, test methods and other information necessary to carry out the program.
(3) Testing methodology. (i) Describe concisely the procedures for conducting the tests required and the specific equipment to be used.
(ii) Attach a sample test report showing representative test results and accompanied by test data forms for each test required. When approved for program participation, testing laboratories may be required by administrator to report test results on standard summary report forms.
(4) Subcontractors. If a testing laboratory plans to subcontract any of its testing to other laboratories, only approved laboratories acceptable to the administrator shall be used.
(5) Laboratory quality control. The laboratory shall develop operating quality control procedures acceptable to the administrator. The procedures of the American Council of Independent Laboratories
(6) Approval of laboratories. Administrators shall develop detailed laboratory approval requirements and conduct periodic inspections to assure each test laboratory’s capability. Laboratory approval may be granted for 2 years. Reapproval of the laboratory shall be necessary every 2 years. When a program allows the use of an administrator’s own laboratories, these laboratories shall be reviewed by a qualified third party acceptable to HUD. Documentation of acceptance for administrator laboratories shall be maintained by the administrator and HUD. Administrator laboratories shall be subject to reapproval every two years.
(7) Withdrawal of approval. Laboratory approval shall be withdrawn or temporarily suspended if it is determined that the laboratory is not complying with the approved requirements. Causes for suspension include, but are not limited to, the following:
(i) Incompetence.
(ii) Failure to test in accordance with the test methods described in the standard.
(iii) Issuance of test reports which fail to comply with the requirements described in the specific product certification program.
(iv) Falsification of the information reported.
(v) A statement implying validation of the product using a test report which constitutes only part of the total standard.
(vi) Deceptively utilizing references in advertising or other promotional activities.
(vii) Submission of incomplete or inadequate information and documentation called for herein.
§ 200.936 Supplementary specific procedural requirements under HUD building products certification program for solid fuel type room heaters and fireplace stoves.
(a) Applicable standards. Solid fuel type room heaters and fireplace stoves certified under the HUD Building Products Certification Program shall be designed, assembled and tested in conformance with the following standards, which are incorporated by reference:
(1) ANSI/UL 737 (1978), for fireplace stoves;
(2) ANSI/UL 1482 (1979), for solid fuel type room heaters with coal amendments.
(b) Labelling. (1) Under the procedures set forth in paragraph (d)(6) of § 200.935, concerning labelling of a product, the administrator’s validation mark and the manufacturer’s certification of compliance with the applicable standards are required to be on the certification label issued by the administrator to the manufacturer. In the case of solid fuel type room heaters and fireplace stoves, the following additional information must be included on the certification label:
(i) The manufacturer’s statement of conformance to the HUD Building Products Certification Program;
(ii) The manufacturer’s name and the identity and location of manufacturing plant;
(iii) The specification designation and manufacturer series or model number; and
(iv) The type of fuel to be used.
(2) The certification label must be permanently affixed to the heater or stove and be readily visible after the heater or stove is installed.
(c) Periodic tests and quality control inspections. Under the procedures set forth in paragraph (d)(8) of § 200.935, concerning periodic tests and quality control inspections, the frequency of testing for a product must be described in the specific building product certification program. In the case of solid fuel type room heaters and fireplace stoves, testing and inspection shall be conducted as follows:
(1) Once every four years, beginning with the initial administrator visit, a sample of each certified product shall be selected by the administrator for testing for compliance with the applicable standards in a laboratory which has been accredited under the National Voluntary Laboratory Accreditation Program.
(2) The administrator shall visit the manufacturer’s facility two times a year to assure that the initially accepted quality control procedures are being followed.
§ 200.937 Supplementary specific procedural requirements under HUD building product standards and certification program for plastic bathtub units, plastic shower receptors and stalls, plastic lavatories, plastic water closet bowls and tanks.
(a) Applicable standards. (1) Plastic bathtub units, plastic shower receptors and stalls, plastic lavatories, and plastic water closet bowls and tanks shall be designed, assembled and tested in compliance with the following standards, which are incorporated by reference:
(2) These standards have been approved by the Director of the Federal Register for incorporation by reference. They are available from the American National Standards Institute, Inc., 11 West 42nd Street, New York, NY 10036. The standards are also available for inspection at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, call 202-741-6030, or go to: http://www.archives.gov/federal_register/code_of_federal_regulations/ibr_locations.html.
(b) Labeling. (1) Under the procedures set forth in paragraph (d)(6) of § 200.935, concerning labeling of a product, the administrator’s validation mark and the manufacturer’s certification of compliance with the applicable standards are required to be on the certification label issued by the administrator to the manufacturer. In the case of plastic bathtub units, plastic shower receptors and stalls, plastic lavatories, and plastic water closet bowls and tanks, the following additional information shall be included on the certification label:
(i) Manufacturer’s statement of conformance to UM 73a;
(ii) Manufacturer’s name and code identifying the plant location.
(2) The certification label shall be affixed to each plastic bathroom fixture.
(c) Periodic tests and quality control inspections. Under the procedures set forth in paragraph (d)(8) of § 200.935, concerning periodic tests and quality control inspections, the frequency of testing for a product shall be described in the specific building product certification program. In the case of plastic bathroom fixtures, testing and inspection shall be conducted as follows:
(1) At least every six months, the administrator shall visit the manufacturer’s facility to select a sample of each certified plastic bathtub unit, plastic shower receptor and stall, plastic water closet bowl and tank for testing in an approved laboratory, in accordance with applicable standards.
(2) At least every twelve months, the administrator shall visit the manufacturer’s facility to select a sample of each certified plastic lavatory for testing in accordance with applicable standards.
(3) The administrator shall also review quality control procedures at each visit to determine that they continue to be followed.
§ 200.940 Supplementary specific requirements under the HUD building product standards and certification program for sealed insulating glass units.
(a) Applicable standards. (1) All sealed insulating glass units shall be designed, manufactured, and tested in compliance with the American Society for Testing and Materials standard: ASTM E-774-92 Standard Specification for Sealed Insulating Glass Units.
(2) This standard has been approved by the Director of the Federal Register for incorporation by reference. The standard is available from the American Society for Testing and Materials, 1916 Race Street, Philadelphia, PA 19103. This standard is also available for inspection at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, call 202-741-6030, or go to: http://www.archives.gov/federal_register/code_of_federal_regulations/ibr_locations.html.
(b) Labeling. Under the procedures set forth in § 200.935(d)(6) concerning labeling of a product, the administrator’s validation mark and the manufacturer’s certification of compliance with the applicable standards are issued by the administrator to the manufacturer. Each sealed insulating glass unit shall be marked as conforming to UM 82a. The label shall be located on each sealed insulating unit so that it is available for inspection. The label shall include the manufacturer’s name and plant location.
(c) Periodic tests and quality assurance inspections. Under the procedures set forth in § 200.935(d)(8) concerning periodic tests and quality assurance inspections, the frequency of testing for a product shall be described in the specific building product certification program. In the case of sealed insulating glass units, testing and inspection shall be conducted as follows:
(1) At least once a year, the administrator shall visit the manufacturer’s facility to select a sample, of the maximum size commercially available, for testing in a laboratory approved by the administrator.
(2) The administrator shall also review the quality assurance procedures twice a year to assure that they are being followed by the manufacturer.
§ 200.942 Supplementary specific procedural requirements under HUD building product standards and certification program for carpet and carpet with attached cushion.
(a) Applicable standards. (1) Carpet and carpet with attached cushion certified for this program shall be designed, manufactured and tested in accordance with the following standards:
(i) AATCC 20A-81—Fiber Analysis: Quantitative;
(ii) AATCC 16E-82—Colorfastness to Light: Water-Cooled Xenon-Arc Lamp, Continuous Light;
(iii) AATCC 8-85—Colorfastness to Crocking: AATCC Crockmeter Method;
(iv) AATCC 24-85—Insect, Resistance to Textiles to;
(v) ASTM D1335-67 (Reapproved 1972)—Standard Test Method for Tuft Bind of Pile Floor Coverings;
(vi) ASTM D3676-78 (Reapproved 1983)—Standard Specification for Rubber Cellular Cushion Used for Carpet or Rug Underlay;
(vii) ASTM E648-78—Standard Test Method for Critical Radiant Flux of Floor-Covering Systems Using a Radiant Heat Energy Source;
(viii) ASTM D2646-79—Standard Methods of Testing Backing Fabrics;
(ix) ASTM D3936-80—Standard Test Method for Delamination Strength of Secondary Backing of Pile Floor Coverings;
(x) ASTM D297-81—Standard Methods for Rubber Products—Chemical Analysis;
(xi) ASTM D418-82—Standard Methods of Testing Pile Yarn Floor Covering Construction; and
(xii) National Bureau of Standards DOC FF 1-70. (ASTM D2859-76)—Standard Test Method for Flammability of Finished Textile Floor Covering Materials.
(2) These standards have been approved by the Director of the Federal Register for incorporation by reference. They are available from the (i) American Association of Textile Chemists and Colorists (AATCC), P.O. Box 12215, Research Triangle Park, NC 27709;
(ii) American Society for Testing and Materials (ASTM), 1916 Race Street, Philadelphia, PA 19103; and
(iii) U.S. Department of Commerce, National Bureau of Standards, Washington, DC 20234.
(b) Labeling. (1) Under the procedures set forth in § 202.935(d)(6), concerning labeling of a product, the administrator’s validation mark and the manufacturer’s certification of compliance with the applied standard is required to be on the certification label issued by the administrator to the manufacturer. In the case of carpet and carpet with attached cushion, the following additional information shall be included on the certification label, mark or stamp:
(i) Manufacturer’s name or code identifying the manufacturing plant location; and
(ii) Manufacturer’s statement of compliance with UM 44d.
(2) The certification mark shall be applied to each carpet at intervals of at least every six feet, not less than one foot from the edge.
(c) Periodic tests and quality control inspections. (1) Five samples of carpet and carpet with attached cushion shall be tested annually by the administrator or by an administrator-approved laboratory. Three samples of each certified quality shall be taken from the plant annually. Of these, two shall be interim samples (taken every six months) and one an annual sample. In addition, two samples of each certified quality shall be taken annually from sources other than the manufacturer, i.e., brought in the market place from distributors or stores, not from the factory. The administrator shall select samples for testing, and testing shall be conducted, in accordance with the applicable standards in a laboratory accredited by the National Voluntary Laboratory Accreditation Program (NVLAP) of the National Bureau of Standards, U.S. Department of Commerce.
(2) The administrator shall visit the manufacturer’s facility at least once every six months to assure that the initially accepted quality control procedures continue to be followed.
§ 200.943 Supplementary specific requirements under the HUD building product standards and certification program for the grademarking of lumber.
(a) Applicable standard. (1) In accordance with UM 38j, lumber shall be grademarked in compliance with the U.S. Department of Commerce Voluntary Product Standard PS 20-94 American Softwood Lumber Standard.
(2) This standard has been approved by the Director of the Federal Register for incorporation by reference in accordance with 5 U.S.C. 552(a) and 1 CFR part 51. It is available from the U.S. Department of Commerce, NIST, Office of Voluntary Product Standards, Gaithersburg, MD 20899.
(b) Labeling. Under the procedures set forth in § 200.935(d)(6) concerning labeling of a product, the administrator’s validation mark and the manufacturer’s certification of compliance with the applicable standard are required on the certification label issued by the administrator to the manufacturer. However, in the case of grademarking of lumber, the following information shall be included on the certification label or mark:
(1) The registered symbol which identifies the grading agency;
(2) Species or species combination;
(3) Grade;
(4) Identification of the applicable grading rules when not indicated by the species identification or agency symbol;
(5) Mill or grader;
(6) For members which are less than 5 inches in nominal thickness, indication that the lumber was green or dry at the time of dressing;
(7) Indication that the lumber was finger jointed; and
(8) The certification mark shall be affixed to each piece of lumber.
(c) Periodic tests and quality assurance. Periodic tests and quality assurance inspections shall be carried out by the American Lumber Standard Committee as defined in PS 20-94.
§ 200.944 Supplementary specific requirements under the HUD building product standards and certification program for plywood and other performance rated wood-based structural-use panels.
(a)(1) All plywood made to specifications of Voluntary Product Standard, PS 1-83, “Construction and Industrial Plywood” (published by the U.S. Department of Commerce, National Bureau of Standards (May 1984)) and grade marked as PS 1-83 shall conform to the requirements of PS 1-83, except that all veneers may be D-grade. A copy of PS 1-83 may be obtained from the U.S. Department of Commerce, National Institute for Standards and Technology, Office of Product Standards, Gaithersburg, MD 20899.
(2) All plywood panels not meeting the veneer grade requirements of PS 1-83, and all performance rated composite and nonveneer structural-use panels shall comply with the requirements described in the APA PRP-108, “Performance Standards and Policies for Structural-Use panels” (published by the American Plywood Association, June 1988). However, in ASTM D-3043-87, “Standard Methods of Testing Structural Panels in Flexure” (published by the American Society for Testing and Materials, August 28, 1987), Method B may be used in lieu of Method C for measuring the mechanical properties of the panel, provided that the test specimen has a width of at least 12 inches. The impact load shall be 150 ft. lbs. for single-layer floor panels excluding any floor finishes. Copies of the APA Standard may be obtained from the American Plywood Association, P.O. Box 11700, Tacoma, WA 98411-0770. Copies of the ASTM Standard may be obtained from the American Society of Testing and Materials, 1916 Race Street, Philadelphia, PA 19103.
(3) Structural-use panels shall be installed in accordance with the manufacturer’s installation instructions and Form No. E30K, “APA Design/Construction Guide-Residential and Commercial” (published by the American Plywood Association, January 1989).
(4) These standards have been approved by the Director of the Federal Register for incorporation by reference in accordance with 5 U.S.C. 552(a) and 1 CFR part 51. Copies of the standards are available for inspection at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, call 202-741-6030, or go to: http://www.archives.gov/federal_register/code_of_federal_regulations/ibr_locations.html.
(b) Labeling. Under the procedures set forth in § 200.935(d)(6) concerning labeling of a product, the administrator’s validation mark and the manufacturer’s certification of compliance with the applicable standards are required to be on the certification label issued by the administrator to the manufacturer. Panels that conform to the Performance Standards and Policy for Structural-Use Panels shall be marked as conforming to UM 40c. All panels complying with APA PRP-108 shall be marked with a label formatted in the manner similar to the trademark examples shown in APA PRP-108. All panels will be marked with the mill number. The certification mark shall be stamped on each panel and be located so that it is available for inspection.
(c) Periodic tests and qualify control inspections. Under the procedures set forth in § 200.935(d)(8) concerning periodic tests and quality control inspections, the frequency of testing for a product shall be described in the specific building product certification program. In the case of plywood and wood-based structural-use panels, testing and inspection shall be conducted as follows:
(1) Testing shall be done in an Administrator’s laboratory or an Administrator-approved laboratory every three months. All plywood qualified for conformance with PS 1-83 shall be tested in accordance with PS 1-83.
(2) All thickness and lay-ups of structural-use panels in production made in conformance with the Performance Standards shall be tested in accordance with procedures set forth in APA PRP-108 Performance Standards and Policies for Structural-Use Panels (published by the American Plywood Association Standard June 1988).
(3) The Administrator shall examine each manufacturer’s quality control procedures to assure they are the same as or equivalent to those set forth under the Quality Assurance Policy section 4.2.3 of the publication referenced in paragraph (2) above or PS 1-83 section 3.8.6.6, Reexamination.
(4) The Administrator shall inspect the manufacturer’s procedures at the plant at least every three months to assure that the initially accepted quality control procedures are being followed.
§ 200.945 Supplementary specific requirements under the HUD building product standards and certification program for carpet.
(a) Applicable standards. (1) All carpet shall be designed, manufactured, and tested in compliance with the following standards from the American Society for Testing and Materials and the American Association of Textile Chemists and Colorists:
(i) ASTM D418-92—Standard Test Methods for Tuft and Yarn Length of Uncoated Floor Coverings;
(ii) ASTM D1335-67—(Reapproved 1972) Standard Test Method for Tuft Bind of Pile Floor Coverings;
(iii) ASTM D 2646-87—Standard Test Methods for Backing Fabrics;
(iv) ASTM D 3936-80—Standard Test Method for Delamination Strength of Secondary Backing of Pile Floor Coverings;
(v) AATCC Test Method 16e-82—Colorfastness to Light: Water-Cooled Xenon-Arc Lamp, Continuous Light;
(vi) AATCC Test Method 165-86—Colorfastness to Crocking: Carpets—AATCC Crock Meter Method;
(vii) ASTM D 3676-78—(Reapproved 1989) Standard Specification for Rubber Cellular Cushion Used for Carpet or Rug Underlay;
(viii) ASTM D 3574-91—Standard Test Methods for Flexible Cellular Materials—Slab, Bonded and Molded Urethane Foams.
(2) These standards have been approved by the Director of the Federal Register for incorporation by reference. The standards are available from the American Society for Testing and Materials, 1916 Race Street, Philadelphia, PA 19103 and the American Association of Textile Chemists and Colorists, P.O. Box 12215, Research Triangle Park, NC 27709. These standards are also available for inspection at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, call 202-741-6030, or go to: http://www.archives.gov/federal_register/code_of_federal_regulations/ibr_locations.html.
(b) Labeling. Under the procedures set forth in § 200.935(d)(6) concerning labeling of a product, the administrator’s validation mark and the manufacturer’s certification of compliance with UM 44d are required to be on the certification label issued by the Administrator to the manufacturer. The label shall be placed on each carpet every six feet not less than one foot from the edge.
(c) Periodic tests and quality assurance inspection. Under the procedure set forth in § 200.935(d)(8), testing and inspection shall be conducted as follows:
(1) Every six months, three samples and one annual field sample of carpet shall be submitted to the Administrator for testing in a laboratory accredited by the National Voluntary Laboratory Accreditation Program of the U.S. Department of Commerce.
(2) The administrator also shall review the quality assurance procedures every six months to assure that they are being followed by the manufacturer.
§ 200.946 Building product standards and certification program for exterior finish and insulation systems, use of Materials Bulletin UM 101.
(a) Applicable standards: (1) All Exterior Finish and Insulation Systems shall be designed, manufactured, and tested in compliance with the following standards:
(i) ASCE 7-93, American Society of Civil Engineers—Minimum Design Loads for Buildings and Other Structures.
(ii) ASTM C 150-94 Standard Specification for Portland Cement.
(iii) ASTM C 920-87 Standard Specification for Elastomeric Joint Sealants.
(iv) ASTM C-1186-91 Standard Specification for Flat Non-Asbestos Fiber-Cement Sheets.
(v) ASTM D 579-90 Standard Specification for Greige Woven Glass Fabrics.
(vi) ASTM D 3273-86—(Reapproved 1991) Standard Test Method for Resistance to Growth of Mold on the Surface of Interior Coatings in an Environmental Chamber.
(vii) ASTM E 330-90 Standard Test Method for Structural Performance of Exterior Windows, Curtain Walls, and Doors by Uniform Static Air Pressure Difference.
(viii) ASTM E 695-79 (Reapproved 1991), Standard Method of Measuring Relative Resistance of Wall, Floor, and Roof Construction to Impact Loading.
(ix) ASTM G 26-93 Standard Practice for Operating Light-Exposure Apparatus (Xenon-Arc Type) With and Without Water for Exposure of Nonmetallic Materials.
(x) Council of American Building Officials, Model Energy Code, 1993 Edition.
(xi) EIMA Test Method 101.01-95 (modified ASTM C67-91) Standard Test Method for Freeze/Thaw Resistance of Exterior Insulation and Finish Systems (EIFS), Class PB.
(xii) EIMA Test Method 101.02-95 (modified ASTM E331-91)—Standard Test Method for Resistance to Water Penetration of Exterior Insulation and Finish Systems (EIFS), Class PB.
(xiii) EIMA Test Method 101.03-95 (modified ASTM C297-91)—Standard Test Method for Determining the Tensile Adhesion Strength of an Exterior Insulation and Finish System (EIFS), Class PB.
(xiv) EIMA Test Method 105.01-95—Standard Test Method for Alkali Resistance of Glass Fiber Reinforcing Mesh for Use in Exterior Insulation and Finish Systems (EIFS), Class PB.
(xv) European Agreement Union Technical Committee—June 88—UEAtc Directives for the Assessment of External Insulation System for Walls (Expanded Polystyrene Insulation Faced with a Thin Rendering) Section 3.3.3.3.
(2) These standards have been approved by the Director of the Federal Register for incorporation by reference in accordance with 5 U.S.C. 552(a) and 1 CFR part 51. They are available from:
(i) American Society Civil Engineers (ASCE) 345 East 47th Street, New York, NY 10017.
(ii) American Society for Testing and Materials (ASTM), 1916 Race Street, Philadelphia, Pennsylvania 19103;
(iii) Council of American Building Officials, 5203 Leesburg Pike, Falls Church, Virginia 22041;
(iv) EAUTC Centre Scientifique ET Technique Du Batiment (CSTB), 84 Avenue Jesu Jaures, B.P. 02-77421 Marne-LA-Valee Cedex 2, Paris, France.
(v) Exterior Insulation Manufacturers Association (EIMA), 2759 State Road 580, Suite 112, Clearwater, Florida 34621-3350.
(3) The standards are available also for inspection at the Office of Manufactured Housing and Regulatory Functions, Standards and Products Branch, Department of Housing and Urban Development, room 3214, L’Enfant Plaza, 490E, Mail Room B-133, Washington, DC 20410-8000, and at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, call 202-741-6030, or go to: http://www.archives.gov/federal_register/code_of_federal_regulations/ibr_locations.html.
(b) Labeling. Under the procedures as set forth in § 200.935(d)(6), concerning labeling of a product, the administrator’s validation mark and the manufacturer’s certification of compliance with the applied standard is required to be on the certification label issued by the administrator to the manufacturers. In the case of exterior wall insulation and finish systems, the certification label containing the administrator’s mark shall be permanently affixed on the package or container of base and finish coating materials. Further, additional information shall be included on the certification label or mark:
(1) Manufacturer’s name.
(2) Manufacturer’s statement of conformance with UM 101.
(c) The Administrator shall visit the manufacturer’s or sponsor’s facility every 6 months, to assure that the initially accepted quality assurance procedures are being followed. At least every four years, the Administrator also shall have the exterior wall insulation and finish systems tested in an approved laboratory to assure that the original performance is maintained.
(d) The administrator’s (or administration-accepted inspection agency) inspection of EFIS system installation of 5000 sq. ft. or more, shall be made during and upon completion of the construction. Reports of the inspection shall be made to the owner. These reports shall state:
(1) The coverage of the finish coat per square foot for a given volume of finish.
(2) The minimum thickness of the base and finish coatings.
(3) The fiberglass mesh is installed properly around joints and insulation. All penetrations, including windows, flashing, etc., are sealed; and there is a caulk and sealant continuity evaluation; and
(4) There is a caulk and sealant continuity evaluation with special concerns on maintenance.
(e) The manufacturer shall warrant their exterior wall insulation and finish system, including any caulks and sealants, for twenty years against faulty performance. The warranty shall include correction of delamination, chipping, denting, peeling, blistering, flaking, bulging, unsightly discoloration, or other serious deterioration of the system such as the intrusion of water through the wall or structural failure of the system’s surface materials. Should any of these defects occur, the manufacturer shall make a pro-rata allowance for replacement or pay the owner the amount of the allowance. The manufacturer shall not be liable for damages or defects resulting from misuse, natural catastrophes, or other causes beyond the control of the manufacturer. The contractor shall provide a statement to the owner that the product has been installed in compliance with HUD requirements and that the manufacturer’s warranty does not relieve the builder, in any way, of responsibility under the terms of the Builder’s Warranty required by the National Housing Act, or under any other housing program.
§ 200.947 Building product standards and certification program for polystyrene foam insulation board.
(a) Applicable standards. (1) All polystyrene foam insulation board shall be designed, manufactured, and tested in compliance with the American Society for Testing and Materials (ASTM) standard C-578-92, Standard Specification for Rigid, Cellular Polystyrene Thermal Insulation.
(2) This standard has been approved by the Director of the Federal Register for incorporation by reference. The standard is available from the American Society for Testing and Materials, 1916 Race Street, Philadelphia, PA 19103. This standard is also available for inspection at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, call 202-741-6030, or go to: http://www.archives.gov/federal_register/code_of_federal_regulations/ibr_locations.html.
(b) Labeling. Under the procedures set forth in § 200.935(d)(6) concerning labeling of a product, the administrator’s certification of compliance with the applicable standards and the type of board are required to be on the certification label issued by the administrator to the manufacturer.
(c) Periodic tests and quality assurance inspection. Under the procedure set forth in § 200.935(d)(8), testing and inspection shall be conducted as follows:
(1) At least every six months, the administrator shall visit the manufacturer’s facility to select a sample of each certified polystyrene foam insulation board for testing by a laboratory approved by the administrator.
(2) The administrator also shall review the quality assurance procedures every six months to assure that they are being followed by the manufacturer.
§ 200.948 Building product standards and certification program for carpet cushion.
(a) Applicable standards. (1) All carpet cushion shall be designed, manufactured, and tested in compliance with the following standards from the American Society for Testing and Materials:
(i) ASTM D 1667-76—(Reapproved 1990) Standard Specification for Flexible Cellular Materials—Vinyl Chloride Polymers and Copolymers (Closed-Cell Foam);
(ii) ASTM D2646-87—Standard Test Methods for Backing Fabrics;
(iii) ASTM D629-88—Standard Test Methods for Quantitative Analysis of Textiles;
(iv) ASTM D3574-91—Standard Test Methods for Flexible Cellular Materials—Slab, Bonded, and Molded Urethane Foams;
(v) ASTM D3676-78—Standard Specification for Rubber Cellular Cushion Used for Carpet or Rug Underlay.
(2) These standards have been approved by the Director of the Federal Register for incorporation by reference. The standards are available from the American Society for Testing Materials, 1916 Race Street, Philadelphia, PA 19103. These standards are also available for inspection at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, call 202-741-6030, or go to: http://www.archives.gov/federal_register/code_of_federal_regulations/ibr_locations.html.
(b) Labeling. Under the procedures set forth in § 200.935(d)(6) concerning labeling of a product, the administrator’s validation mark, the manufacturer’s certification of compliance with the applicable standards, and the type and class all are required to be on the certification label issued by the administrator to the manufacturer.
(c) Periodic tests and quality assurance inspection. Under the procedure set forth in § 200.935(d)(8), testing and inspection shall be conducted as follows:
(1) At least every six months, the administrator shall visit the manufacturer’s facility to select a sample of each certified carpet cushion for testing by a laboratory approved by the administrator.
(2) The administrator also shall review the quality assurance procedures every six months to assure that they are being followed by the manufacturer.
§ 200.949 Building product standards and certification program for exterior insulated steel door systems.
(a) Applicable standards. (1) All Exterior Insulated Steel Door Systems shall be designed, manufactured, and tested in compliance with the following standards from the American Society for Testing and Materials and Insulated Steel Door Systems Institute:
(i) ASTM A591/A591M-89—Standard Specification for Steel Sheet, Electrolytic-Zinc Coated, for Light Coating Mass Applications;
(ii) ISDSI-100-90—Door Size Dimensional Standard and Assembly Tolerances for Insulated Steel Door Systems;
(iii) ISDSI-101-83—(Reapproved 1989) Air Infiltration Performance Standard for Insulated Steel Door Systems;
(iv) ISDSI-102-84—Installation Standard for Insulated Steel Door Systems;
(v) ISDSI-104-86—Water Penetration Performance Standard for Insulated Steel Door Systems;
(vi) ISDSI-105-80—Test Procedure and Acceptance Criteria for Physical Endurance for Steel Doors and Hardware Reinforcings;
(vii) ISDSI-106-80—Test Procedure and Acceptance Criteria for Prime Painted Steel Surfaces for Steel Doors and Frames;
(viii) ISDSI-107-80—Thermal Performance Standard for Insulated Steel Door Systems;
(ix) ASTM F476-84—(Reapproved 1991) Standard Test Methods for Security of Swinging Door Assemblies.
(2) These standards have been approved by the Director of the Federal Register for incorporation by reference. These standards are available from the American Society for Testing and Materials, 1916 Race Street, Philadelphia, PA 19103 or the Insulated Steel Door Institute, 712 Lakewood Center North, 14600 Detroit Avenue, Cleveland, OH 44107. These standards are also available for inspection at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, call 202-741-6030, or go to: http://www.archives.gov/federal_register/code_of_federal_regulations/ibr_locations.html.
(b) Labeling. Under the procedures set forth in § 200.935(d)(6) concerning labeling of a product, the administrator’s certification of compliance with the applicable standards is required to be on the certification label issued by the administrator to the manufacturer.
(c) Periodic tests and quality assurance inspection. Under the procedure set forth in § 200.935(d)(8), testing and inspection shall be conducted as follows:
(1) At least every four years, the administrator shall visit the manufacturer’s facility to select a sample of each certified exterior insulated steel door system for testing by an approved laboratory in accordance with the applicable standard.
(2) The administrator also shall review the quality assurance procedures every year to assure that they are being followed by the manufacturer.
§ 200.950 Building product standards and certification program for solar water heating system.
(a) Applicable standards. (1) All solar water heating systems shall be designed, manufactured, and tested in compliance with Solar Rating and Certification Corporation (SRCC) Document OG-300-93, Operating Guidelines and Minimum Standards for Certifying Solar Water Heating Systems: An Optional SWH System Certification and Rating Program. Section 10 of the SRCC standard has been omitted because it was considered proprietary, since it describes an administrative program specifically carried out by SRCC.
(2) This standard has been approved by the Director of the Federal Register for incorporation by reference. The standard is available from the Solar Rating and Certification Corporation, 777 North Capitol Street, NE., suite 805, Washington, DC 20002. This standard is also available for inspection at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, call 202-741-6030, or go to: http://www.archives.gov/federal_register/code_of_federal_regulations/ibr_locations.html.
(b) Labeling. Under the procedures set forth in § 200.935(d)(6) concerning labeling of a product, the administrator’s validation mark and the manufacturer’s certification of compliance with the applicable standards are required to be on the certification label issued by the administrator to the manufacturer. Each solar water heating system shall be marked as conforming to UM 100. The label shall include the manufacturer’s name and plant location.
(c) Periodic tests and quality assurance inspection. Under the procedure set forth in § 200.935(d)(8), testing and inspection shall be conducted as follows:
(1) The Administrator shall visit the manufacturer’s factory every two years to assure that the initially accepted quality assurance procedures are being followed.
(2) At least every four years, the administrator shall visit the manufacturer’s facility to select a sample of each certified solar water heating system for testing by a laboratory approved by the administrator.
(d) Warranty. The manufacturer shall provide, at no cost, a full five-year warranty against defects in material or workmanship, on the absorber plate, cooling passages, and the collector (excluding any glass), running from the date of installation of the solar water heating system. The warranty also shall include the full costs of field inspection, parts, and labor required to remedy the defects, and will include the cost of replacement at the site if required. This warranty is not required to cover defects resulting from exposure to harmful materials, fire, flood, lightning, hurricane, tornado, hailstorms, earthquakes, or other acts of God, vandalism, explosions, harmful chemicals or other fluids, fumes or vapors. This exclusion will apply to the operation of the collector under excessive pressures or excessive flow rates, misuse, abuse, negligence, accidents, alterations, falling objects or other causes beyond the control of the manufacturer. Following the initial five years, the manufacturer shall provide a limited no-cost five-year warranty for collector parts on a prorata allowance basis.
§ 200.952 Supplementary specific requirements under the HUD building product standards and certification program for particleboard interior stair treads.
(a) Applicable standards. (1) All interior particleboard stair treads shall be designed, manufactured, and tested in compliance with ANSI A208.1-1993 Particleboard, Grade M-3.
(2) This standard has been approved by the Director of the Federal Register for incorporation by reference in accordance with 5 U.S.C. 552(a) and 1 CFR part 51, and is available from the American National Standards Institute, Inc., 11 West 42nd Street, New York, NY 10036.
(b) Labeling. Under the procedures set forth in § 200.935(d)(6) concerning labeling of a product, the administrator’s validation mark and the manufacturer’s certification of compliance with the applicable standard are required to be on the certification label issued by the administrator to the manufacturer. Each interior particleboard stair tread shall include the manufacturer’s statement of conformance to UM 70b, a statement that this product is for interior use only, and the manufacturer’s name and plant location.
(c) Periodic tests and quality assurance. Under the procedures set forth in § 200.935(d)(8) concerning periodic tests and quality assurance inspections, the frequency of testing for a product shall be described in the specific building product certification program. In the case of interior particleboard stair treads, testing and inspection shall be conducted as follows:
(1) At least once every three months, the administrator shall visit the manufacturer’s facility to select a sample for testing in a laboratory approved by the administrator.
(2) The administrator shall also review the quality assurance procedures twice a year to assure that they are being followed by the manufacturer.
§ 200.954 Supplementary specific requirements under the HUD building product standard and certification program for construction adhesives for wood floor systems.
(a) Applicable standards. (1) All construction adhesives for field glued wood floor systems shall be designed, manufactured, and tested in compliance with the following American Society for Testing and Materials (ASTM) standard: D 3498-93 Standard Specification for Adhesives for Field-Gluing Plywood to Lumber Framing for Floor Systems except that the mold and bacteria resistance tests shall not be included.
(2) This standard has been approved by the Director of the Federal Register for incorporation by reference in accordance with 5 U.S.C. 552(a) and 1 CFR part 51, and is available from the American Society for Testing & Materials Inc., 100 Barr Harbor Drive, West Conshohocken, PA. 19428.
(b) Labeling. Under the procedures set forth in § 200.935(d)(6) concerning labeling of a product, the administrator’s validation mark and the manufacturer’s certification of compliance with the applicable standard are required to be on the certification label issued by the administrator to the manufacturer. Each container shall be marked as being in compliance with UM 60a. The label shall also include the manufacturer’s name, plant location, and shelf life.
(c) Periodic tests and quality assurance. Under the procedures set forth in § 200.935(d)(8) concerning periodic tests and quality assurance inspections, the frequency of testing for a product shall be described in the specific building product certification program. In the case of construction adhesives for field glued wood floor systems, testing and inspection shall be conducted as follows:
(1) At least every six months, the administrator shall visit the manufacturer’s facility to select a sample for testing in a laboratory approved by the administrator.
(2) The administrator shall also review the quality assurance procedures twice a year to assure that they are being followed by the manufacturer.
§ 200.955 Supplementary specific requirements under the HUD building product standard and certification program for fenestration products (windows and doors).
(a) Applicable standards. (1) All windows and doors shall be designed, manufactured, and tested in compliance with American Architectural Manufacturers Association (AAMA) standard, AAMA/NWWDA 101/I.S.2-97 Voluntary Specifications for Aluminum, Vinyl (PVC) and Wood Windows and Glass Doors.
(2) This standard has been approved by the Director of the Federal Register for incorporation by reference in accordance with 5 U.S.C. 552(a) and 1 CFR part 51, and is available from the American Architectural Manufacturers Association, 1827 Walden Office Square, Suite 104, Schaumburg, IL 60173.
(b) Labeling. Under the procedures set forth in § 200.935(d)(6) concerning labeling of a product, the administrator’s validation mark and the manufacturer’s certification of compliance with the applicable standards are required to be on the certification label issued by the administrator to the manufacturer. Each window or glass door shall include the manufacturer’s name, plant location, and statement of compliance with UM 111.
(c) Periodic tests and quality assurance inspections. Under the procedures set forth in § 200.935(d)(8) concerning periodic tests and quality assurance inspections, the frequency of testing for a product shall be described in the specific building product certification program. In the case of windows and glass doors, testing and inspection shall be conducted as follows:
(1) At least once every four years, the administrator shall visit the manufacturer’s facility to select a commercial sample for testing in a laboratory approved by the administrator.
(2) The administrator shall also review the quality assurance procedures twice a year to assure that they are being followed by the manufacturer.
Subpart T—Social Security Numbers and Employer Identification Numbers; Assistance Applicants and Participants
§ 200.1001 Cross-reference.
The provisions in subpart B of part 5 of this title apply to Social Security Numbers and Employer Identification Numbers for assistance applicants and participants.
Subpart U—Social Security Numbers and Employer Identification Numbers; Applicants in Unassisted Programs
§ 200.1101 Cross-reference.
The provisions in subpart B of part 5 of this title apply to Social Security Numbers and Employer Identification Numbers for applicants in unassisted programs.
Subpart V—Income Information; Assistance Applicants and Participants
§ 200.1201 Cross-reference.
The provisions in subpart B of part 5 of this title apply to income information for assistance applicants and participants.
Subpart W—Administrative Matters
§ 200.1301 Expiring programs—Savings clause.
(a) No new loan assistance, additional participation, or new loans are being insured under the programs listed in this section. Existing loan assistance, ongoing participation, or insured loans under the programs shall continue to be governed by regulations in effect as described in this section.
(b) Any existing loan assistance, ongoing participation, or insured loans under the programs listed in this paragraph will continue to be governed by the regulations in effect as they existed immediately before October 11, 1995 (24 CFR parts 205, 209, 224-228, 240, 277, 278, 1994 edition):
(1) Part 205, Mortgage Insurance for Land Development (Title X of the National Housing Act, repealed by section 133(a) of the Department of Housing and Urban Development Reform Act of 1989 (Public Law 101-235, approved December 15, 1989).
(2) Part 209, Individual Homes; War Housing Mortgage Insurance (12 U.S.C. 1736-1743).
(3) Part 224, Armed Services Housing-Military Personnel (12 U.S.C. 1736-1746a).
(4) Part 225, Military Housing Insurance (12 U.S.C. 1748b).
(5) Part 226, Armed Services Housing-Civilian Employees (12 U.S.C. 1748h-1).
(6) Part 227, Armed Services Housing-Impacted Areas (12 U.S.C. 1478h-2).
(7) Part 228, Individual Residences; National Defense Housing Mortgage Insurance (12 U.S.C. 1750 as amended by 42 U.S.C. 1591c).
(8) Part 240, Mortgage Insurance on Loans for Fee Title Purchase (12 U.S.C. 1715z-5).
(9) Part 277, Loans for Housing for the Elderly or Handicapped (12 U.S.C. 1701q).
(10) Part 278, Mandatory Meals Program in Multifamily Rental or Cooperative Projects for the Elderly or Handicapped (12 U.S.C. 1701q).
(c) Any existing loan assistance, ongoing participation, or insured loans under the programs listed in this paragraph will continue to be governed by the regulations in effect as they existed immediately before May 11, 1996 (24 CFR parts 215, 222, and 237, 1995 edition):
(1) Part 215, Rent Supplement Payments Program (12 U.S.C. 1715f).
(2) Part 222, Service Person’s Mortgage Insurance Program (12 U.S.C. 1715m).
(3) Part 237, Special Mortgage Insurance for Low and Moderate Income Families (12 U.S.C. 1715z-2).
(d) Any existing loan assistance, ongoing participation, or insured loans under the program listed in this paragraph will continue to be governed by the regulations in effect as they existed immediately before December 26, 1996 (24 CFR part 233, 1995 edition):
(1) Part 233, Experimental Housing Mortgage Insurance Program (12 U.S.C. 1715x).
(2) [Reserved]
(e) Any existing loan assistance, ongoing participation, or insured loans under the program listed in this paragraph will continue to be governed by the regulations in effect as they existed immediately before August 15, 2014 (24 CFR part 257):
(1) Part 257, HOPE for Homeowners Program (12 U.S.C. 1701z-22).
(2) [Reserved]
(f) No new emergency mortgage assistance, emergency mortgage relief loans, advances of credit or emergency mortgage relief payments, or any other type of assistance permitted under the Emergency Housing Act of 1975, title I of the Emergency Homeowners’ Relief Act (12 U.S.C. 2701), as amended by section 1496 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Pub. L. 111-203) is being provided under the programs listed below. Any existing emergency assistance, emergency mortgage relief loans, advances of credit or emergency mortgage relief payments under these programs will continue to be governed by the regulations in effect as they existed immediately before September 8, 2014 (24 CFR part 2700):
(1) Part 2700, Emergency Homeowners’ Loan Program (12 U.S.C. 2701 et seq.)
(2) [Reserved]
(g) Any existing loan assistance (including recapture of loan assistance), ongoing participation, or insured loans under the program listed in this paragraph will continue to be governed by the regulations in effect as they existed immediately before May 4, 2015 (24 CFR part 235, 2014 Edition):
(1) Part 235, Mortgage Insurance and Assistance Payments for Home Ownership and Project Rehabilitation (12 U.S.C. 1715z).
(2) [Reserved]
(h) Any existing loan assistance (including recapture of loan assistance), ongoing participation, or insured loans under the program listed in this paragraph will continue to be governed by the regulations in effect as they existed immediately before February 10, 2016 (24 CFR part 280, 2015 Edition):
(1) Part 280, Mortgage Insurance and Assistance Payments for Home Ownership and Project Rehabilitation (12 U.S.C. 17151).
(2) [Reserved]
§ 200.1303 Annual income exclusions for the Rent Supplement Program.
(a) The exclusions to annual income described in 24 CFR 5.609(c) apply to those rent supplement contracts governed by the regulations at 24 CFR part 215 in effect immediately before May 1, 1996 (contained in the April 1, 1995 edition of 24 CFR, parts 200 to 219), in lieu of the annual income exclusions described in 24 CFR 215.21(c) (contained in the April 1, 1995 edition of 24 CFR, parts 200 to 219).
(b) The mandatory deductions described in 24 CFR 5.611(a) also apply to the rent supplement contracts described in paragraph (a) of this section in lieu of the deductions provided in the definition of “adjusted income” in 24 CFR 215.1 (as contained in the April 1, 1995 edition of 24 CFR, parts 200 to 219).
(c) The definition of “persons with disabilities” in paragraph (c) of this section replaces the terms “disabled person” and “handicapped person” used in the regulations in 24 CFR part 215, subpart A (as contained in the April 1, 1995 edition of 24 CFR, parts 200 to 219). Person with disabilities, as used in this part, has the same meaning as provided in 24 CFR 891.305.
Subpart Y—Multifamily Accelerated Processing (MAP): MAP Lender Quality Assurance Enforcement
§ 200.1500 Sanctions against a MAP lender.
(a) In addition to any other legal remedy available to HUD, HUD may take the following actions with respect to a MAP lender:
(1) Warning letter;
(2) Probation;
(3) Suspension;
(4) Termination;
(5) Limited Denial of Participation (LDP);
(6) Referral to the Mortgagee Review Board; and
(7) Referral to the Office of Inspector General.
(b) The actions listed in paragraphs (a)(1) through (a)(4) of this section are carried out in accordance with the requirements of this subpart. An LDP is a sanction applied in accordance with subpart J of 2 CFR part 2424 to participants in loan transactions other than FHA-insured lenders. The Mortgagee Review Board procedures are found at 24 CFR part 25.
§ 200.1505 Warning letter.
(a) In general. HUD may issue a warning letter, which specifies problems or violations identified by HUD, to a MAP lender.
(b) Effect of warning letter. The warning letter:
(1) Does not suspend a lender’s MAP privileges;
(2) May impose a higher level of review of the lender’s underwriting by HUD;
(3) May direct the taking of a corrective action; and
(4) May require a meeting in a designated HUD office with the principal owners or officers, or both, of the MAP lender to discuss the specified problems and violations, and possible corrective actions.
(c) Relationship to other sanctions. The issuance of a warning letter is not subject to the MAP Lender Review Board procedures in accordance with § 200.1535, and is not a prerequisite to the probation, or suspension, or termination of MAP privileges.
§ 200.1510 Probation.
(a) In general. Only the MAP Lender Review Board (or Board) may place a lender on probation, in accordance with the procedures of § 200.1535.
(b) Effect of probation. (1) Probation is intended to be corrective in nature and not punitive. As a result, release from probation is conditioned upon the lender meeting a specific requirement or requirements, such as replacement of a staff member. A lender’s failure to take prompt corrective action after being placed on probation may be the basis for a recommendation of either suspension or termination. Any such recommendation shall, when possible, go to a MAP Lender Review Board composed of the same members who issued the original probation.
(2) During the probation period, a MAP lender:
(i) Shall be removed from the MAP-Approved Lender list posted on HUD’s website;
(ii) May not submit, and HUD may not accept, materials after the close of business of the date of the probation letter for a new application under MAP for multifamily mortgage insurance from HUD; and
(iii) May continue to process any existing application for multifamily mortgage insurance submitted to a Multifamily Hub or Program Center before the date of the probation letter.
(3) The MAP Lender Review Board may impose a higher level of review of the lender’s underwriting by HUD;
(4) Probation is nationwide in effect.
(c) Duration of probation. (1) Probation continues until all specific corrective actions required by the MAP Lender Review Board (for example, exclusion of a specific staff member from work on MAP loans) are taken by the MAP lender. When all corrective actions have been taken, the MAP lender shall notify the Board. Once the Board is satisfied that the corrective actions have occurred, the probation period shall end.
(2) A false statement that corrective action has been taken constitutes a false certification and may constitute a violation of 18 US.C. 1001.
(3) When probation is lifted, the lender’s name shall be promptly reinstated on the MAP-Approved Lender list posted on HUD’s Web site.
§ 200.1515 Suspension of MAP privileges.
(a) In general. Only the MAP Lender Review Board may suspend a lender’s eligibility for MAP, in accordance with the procedures of § 200.1535.
(b) Effect of suspension. (1) A suspension may impose any conditions that may be imposed by probation.
(2) During the suspension period a MAP lender:
(i) Shall be removed from the MAP-approved lender list posted on HUD’s Web site;
(ii) May not submit, and the HUD field office may not accept, materials after the close of business of the date of the suspension letter for a new application for multifamily mortgage insurance from HUD; and
(iii) May continue to process any existing application for multifamily mortgage insurance submitted to a Multifamily Hub or Program Center before the date of the suspension letter.
(3) The MAP Lender Review Board may impose a higher level of review of the lender’s underwriting by HUD;
(4) Suspension is nationwide in effect.
(c) Duration of suspension. (1) Suspension may not exceed 12 months, except where conditions are imposed. If both a time period and conditions are imposed, a suspension shall terminate only when:
(i) The time period of the suspension has expired;
(ii) The MAP lender has submitted a certification of compliance with those conditions to the Board; and
(iii) The Board has notified the MAP lender it has received the certification of compliance and is satisfied that the corrective actions have occurred.
(2) When suspension is lifted, the lender’s name shall be promptly reinstated on the MAP-Approved Lender list posted on HUD’s Web site.
§ 200.1520 Termination of MAP privileges.
(a) In general. Except as provided in paragraph (b) of this section, only the MAP Lender Review Board may terminate a lender’s MAP privileges, in accordance with the procedures of § 200.1535.
(b) Administrative termination. HUD will notify a lender of immediate termination of MAP privileges when either of the following circumstances is present:
(1) Failure by the MAP lender to maintain its status as an FHA-approved lender; or
(2) Failure by the MAP lender to maintain a minimum level of MAP lender activity, as evidenced by failure to submit either a pre-application package or firm commitment application at least once every 12 months.
(c) Effect of termination. (1) The terminated lender shall be removed from the MAP-Approved Lender list on HUD’s Web site.
(2) A terminated lender may not submit, and the HUD field office may not accept, materials after the close of business of the date of the termination letter for new multifamily mortgage insurance from HUD.
(3) Any MAP pre-application or MAP application in process may no longer be processed under MAP by the terminated lender. The lender will either:
(i) Immediately transfer the transaction to the traditional application processing (TAP) procedure. HUD will completely reprocess all stages of the transaction; or
(ii) Immediately transfer the project to a new MAP lender. The new MAP lender must completely reprocess all stages of the transaction. At no time can the new MAP lender assign the pre-application, the firm application, the mortgage insurance commitment, or the insured construction loan back to the original MAP lender.
(4) HUD will not endorse any MAP loan processed by the terminated lender unless a firm commitment was issued before the date of termination.
(i) Firm commitments involving new construction or substantial rehabilitation must be immediately transferred to a new MAP lender. At no time can the new MAP lender assign the firm mortgage insurance commitment, or the insured construction loan, back to the original MAP lender.
(ii) Firm commitments issued for Section 223(f) projects may be transferred before final endorsement to any approved FHA lender or kept in the lender’s portfolio.
(iii) For those construction loans that have been initially endorsed, the MAP lender will lose its MAP privileges for construction loan administration. HUD will assume all the construction loan administration duties it normally performs for TAP processing.
(iv) The original lender may service a transferred loan once it is finally endorsed.
(5) Termination is nationwide in effect.
(6) When a MAP lender loses its MAP lender status as a result of termination, the lender’s status to process transactions using TAP is unaffected, provided that the lender has maintained its status as an FHA-approved multifamily lender.
(d) Reinstatement. An application for reinstatement of MAP authority may not be made until at least 12 months after the date of termination. The requirements for reinstatement shall be the same as for initial qualification, and the applicant must show that the problems that led to termination have been resolved.
§ 200.1525 Settlement agreements.
(a) HUD staff, as authorized, may negotiate a settlement agreement with a MAP lender before or after the issuance of a warning letter or referral to the MAP Lender Review Board. Once a matter has been referred to the MAP Lender Review Board, only the Board may approve a settlement agreement.
(b) Settlement agreements may provide for:
(1) Cessation of any violation;
(2) Correction or mitigation of the effects of any violation;
(3) Removal of lender staff from positions involving origination, underwriting, and/or construction loan administration;
(4) Actions to collect sums of money wrongfully or incorrectly paid by the MAP lender to a third party;
(5) Implementation or revision of a quality control plan or other corrective measure acceptable to HUD; and
(6) Modification of the duration or provisions of any administrative sanction deemed to be appropriate by HUD.
(c) A MAP lender’s compliance with a settlement agreement is evidenced by the lender certifying its compliance with the conditions of the agreement, and HUD’s determination that the lender is in compliance with the conditions of the agreement.
(d) Failure by a MAP lender to comply with a settlement agreement may result in a probation, or suspension, or termination of MAP privileges, or referral to the Mortgagee Review Board.
§ 200.1530 Bases for sanctioning a MAP lender.
It is HUD policy that approved MAP lenders are expected to comply at all times with HUD’s underwriting and construction loan administration requirements and not to take any action that presents a risk to HUD’s insurance funds. A MAP lender’s improper underwriting and construction loan administration activities may lead to a warning letter or other sanction from HUD. Examples of such activities include, but are not limited to, the following:
(a) Minor offenses that may be the basis for a warning letter include:
(1) Failure to provide required exhibits or the submission of incomplete or inaccurate exhibits. Although the MAP lender will be permitted to correct minor errors or provide additional information, substantial inaccuracies or lack of significant information will result in a return of the application and retention of any fee collected;
(2) Repeated failure to complete processing to firm commitment unrelated to an underwriting analysis that demonstrates that the process should not proceed to firm commitment;
(3) Preparation of an underwriting summary that is not supported by the appropriate documentation and analysis;
(4) Failure to notify the HUD processing office promptly of changes in the mortgage loan application for a firm commitment submitted, such as changes in rents, numbers of units, or gross project area;
(5) Failure to meet MAP closing requirements or construction loan administration requirements;
(6) Business practices that do not conform to those generally accepted by prudent lenders or that show irresponsibility; and
(7) Failure to cooperate with a Lender Qualifications and Monitoring Division review by HUD.
(b) Serious offenses that might be a basis for a warning letter or probation, suspension, or termination include:
(1) Receipt of multiple warning letters over any one-year period. In determining which sanction to pursue as a result of prior warning letters, HUD will consider the facts and circumstances surrounding those warning letters and the corrective actions, if any, undertaken by the lender;
(2) Fraud or material misrepresentation in the lender’s participation in FHA multifamily programs;
(3) Lender collusion with, or influence upon, third party contractors to modify reports affecting the contractor’s independent evaluation;
(4) A violation of MAP procedures by a third party contractor, which the MAP lender knew, or should have known, was occurring and which, if performed by the MAP lender itself, would constitute a ground for a sanction under this chapter;
(5) Evidence that a lender’s inadequate or inaccurate underwriting was a cause for assignment of an FHA-insured mortgage and claim for insurance benefits to HUD;
(6) Identity-of-interest violations as defined by Chapter 2 of the MAP Guide;
(7) Payment by, or receipt of a payment by, a MAP lender of any kickback or other consideration, directly or indirectly, which would affect the lender’s independent evaluation, or represent a conflict of interest, in connection with any FHA-insured mortgage transaction;
(8) Failure to comply with any agreement, certification, undertaking, or condition of approval listed in a MAP lender’s application for approval;
(9) Noncompliance with any requirement or directive of the MAP Lender Review Board;
(10) Violation of the requirements of any contract with HUD, or violation of the requirements in any statute or regulation;
(11) Submission of false information, or a false certification, to HUD in connection with any MAP mortgage transaction;
(12) Failure of a MAP lender to respond in a timely manner to inquiries from the MAP Lender Review Board in accordance with this subpart;
(13) Indictment or conviction of a MAP lender or any of its officers, directors, principals, or employees for an offense that reflects on the responsibility, integrity, or ability of the lender to participate in the MAP initiative;
(14) Employing or retaining an officer, partner, director, or principal at the time when the person was suspended, debarred, ineligible, or subject to an LDP under 2 CFR part 2424, or otherwise prohibited from participation in HUD programs, when the MAP lender knew or should have known of the prohibition;
(15) Employing or retaining an employee who is not an officer, partner, director, or principal, and who is or will be working on HUD-FHA program matters, at a time when that person was suspended, debarred, ineligible, or subject to an LDP under 2 CFR part 2424, or otherwise prohibited from participation in HUD programs, when the MAP lender knew or should have known of the prohibition;
(16) Failure to cooperate with an audit or investigation by the HUD Office of Inspector General or an inquiry by HUD into the conduct of the MAP lender’s FHA-insured loans; and
(17) Failure to fund MAP mortgage loans or any misuse of mortgage loan proceeds.
§ 200.1535 MAP Lender Review Board.
(a) Authority—(1) Sanctions. The MAP Lender Review Board (or Board) is authorized to impose appropriate sanctions on a MAP lender after:
(i) Conducting an impartial review of all information and documentation submitted to the Board; and
(ii) Making factual determinations that there has been a violation of MAP requirements.
(2) Settlement agreements. The Board is authorized to approve settlement agreements in accordance with § 200.1525 of any matter pending before the Board.
(3) Extensions. The Board is authorized to extend, on its own initiative or for good cause at the written request of a MAP lender, any time limit otherwise applicable under this section. Notice of any such extension shall be timely provided to a MAP lender.
(b) Notice of violation. Before the Board reviews a matter for consideration of a sanction, the Board’s Chairman will issue written notice of violation to the MAP lender’s contact person as listed on the Multifamily MAP Web site. The notice is sent by overnight delivery and must be signed for by an employee of the MAP lender upon receipt. The notice:
(1) Informs the lender that the Board is considering a specific violation;
(2) States the specific facts alleged concerning the violation, with citation to the HUD requirements that have been violated;
(3) Includes as attachments copies of all documents evidencing the violation and upon which the Board will rely in reaching a decision;
(4) Provides the lender with the opportunity to request in writing, within 15 business days after the date of the issuance of the notice, to:
(i) Meet for an informal conference with the Board in person or by video conference using HUD facilities at Headquarters or one of HUD’s field offices; and
(ii) Present written evidence and any other relevant information at the conference;
(5) Requires a written response to be submitted to the Board by a date specified within the notice;
(6) Provides the street address, email address, or facsimile (FAX) number for purposes of receiving the lender’s request for an informal conference and written response; and
(7) Is made part of the administrative record of the Board’s decision of the matter.
(c) Response to notice. (1) The MAP lender’s written response required by the notice of violation may not exceed 15 double-spaced typewritten pages and must include an executive summary, a statement of the facts, an argument, and a conclusion. The response and supporting documentation must be submitted in triplicate.
(2) Failure to respond by the dates specified within the notice may result in a determination by the Board without conducting an informal conference with the MAP lender and without consideration of any written response submitted by the MAP lender.
(d) Informal conference. (1) The Board will schedule an informal conference and notify the lender of the time and place of the conference, if one is requested.
(2) At the conference, the Board will meet with the lender or its designees and HUD staff to review documentary evidence and presentations by both sides.
(3) Oral statements made at the informal meeting will not be considered as part of the administrative record of the Board’s determination, except:
(i) The Board may note for the record and consider voluntary admissions, made by the lender or a representative of the lender, of any element of the violation charged;
(ii) Statements substantiated by any additional documents or evidence submitted in accordance with paragraphs (e)(1) or (e)(3) of this section; and
(iii) Transcripts prepared and submitted in accordance with paragraph (e)(2) of this section.
(e) Post-conference submissions. (1) Any additional documents, evidence, or written arguments relevant to the notice of violation and the informal conference that the lender or HUD staff wish to present to the Board, must be presented within five business days after date of the informal conference.
(2) No transcript of the informal conference will be made, unless the lender elects to have a transcript made by a certified court reporter at its own expense. If the lender elects to have a transcript made, the lender must provide three copies of the transcript to HUD within five business days after the date of the informal conference. The transcript will not become a part of the administrative record of the Board’s decision unless it is submitted within the required five-day period frame.
(3) Following the receipt of any post-conference submissions, the Board may request or permit additional documents or evidence to be submitted within a period set by the Board for inclusion in the administrative record.
(f) Board action. (1) The Board will confer to consider the evidence included in the administrative record and make a final decision concerning the matter. Any record of confidential communications between and among Board members at this stage of the proceedings is privileged from disclosure and will not be regarded as a part of the administrative record of any matter.
(2) In determining what action is appropriate concerning the matter, the Board considers, among other factors:
(i) The seriousness and the extent of the violation;
(ii) Any history of prior offenses;
(iii) Deterrence of future violations;
(iv) Any inappropriate benefits received by the MAP lender;
(v) Potential inappropriate benefit to other persons; and
(vi) Any mitigating factors.
(3) Board decisions will be determined by majority vote.
(g) Notice of action. (1) The Board will issue its final decision within 10 business days after the date of the informal conference or the expiration of any period allowed for the submission of documents and evidence, whichever is later.
(2) The Board will notify the MAP lender of its final decision by overnight delivery of a written notice of the final decision to the MAP lender’s contact person as listed on the Multifamily MAP Web site. The Board will also notify HUD field offices of its final decision.
(3) The final decision finds that a violation either does, or does not, exist. If a violation is found to exist, the final decision:
(i) States the violation and any factual findings of the Board;
(ii) States the nature and duration of the sanction;
(iii) Informs the MAP lender of its right to an appeal conference and identifies the appeals official to be contacted; and
(iv) May add to or modify the violation as stated in the initial notice of violation.
§ 200.1540 Imminent harm notice of action.
The Board may issue an imminent harm notice of action to terminate a MAP lender, or to place a MAP lender on probation or suspension without advance notice to the MAP lender in those instances where the Board determines there exists a need to protect the financial interest of HUD from imminent harm. In all such instances, the Board shall notify the lender of the Board’s decision promptly and give the reasons for the decision in accordance with § 200.1535(g)(2) and (3). The lender shall have the right to submit materials to the Board and to appear before the Board to seek prompt reconsideration of the Board’s decision in accordance with the procedures of § 200.1535.
§ 200.1545 Appeals of MAP Lender Review Board decisions.
(a) Request for appeal. Whenever the Board imposes a sanction of probation, suspension, or termination against a MAP lender, the lender may request, in writing, an appeal conference before the appeals official. The MAP lender must deliver the written request for an appeal to the appeals official within 10 business days after the date noted on the notice of action or the right to an appeal is deemed waived. Participation in the appeal process under this section is not a prerequisite to filing an action for judicial review under the Administrative Procedure Act.
(b) Appeals Official. The appeals official must be an individual who has not been previously involved with the proceedings or settlement discussions at issue.
(c) Notice of action in effect. The notice of action issued by the Board remains in effect while the appeal is pending.
(d) Scheduling of appeal. (1) Upon receipt of the request for an appeal, the appeals official will promptly notify the MAP lender of the time and place of the appeal conference. The appeal conference will be held within 10 business days after receipt of the MAP lender’s appeal request, except as provided in paragraph (d)(2) of this section.
(2) A MAP lender may request, and the appeals official may agree, to have an appeal conference held more than 10, but not more than 30 business days after the date of the lender’s request for an appeal.
(e) Scope of appeal. The appeals official may consider information included in the administrative record and any new information presented at the appeal conference that is substantiated in accordance with paragraph (f) of this section. In addition, the appeals official may consider voluntary admissions by the lender or a representative of the lender of any element of the violation charged.
(f) Additional documents—(1) Transcript. No transcript of the appeal conference will be made, unless the MAP lender elects to have a transcript made by a certified court reporter at its own expense. If the lender elects to have a transcript made, it must provide three copies of the transcript to the appeals official within five business days after the date of the appeal conference.
(2) Other documents. Any additional, relevant documents or written arguments that the MAP lender wishes to present to the appeals official must be presented within five business days after the date of the appeal conference.
(g) Determination of appeal. Within 10 business days after the date of the appeal conference or the expiration of the period allowed for the submission of documents and written arguments, whichever is later, the appeals official will make a written determination to confirm, modify, or overturn the Board’s decision and notice of action. If the appeals official overturns the Board’s decision, the lender shall immediately return to an active status as a MAP lender and the written determination to overturn will be posted on HUD’s MAP Web site.
Appendix A to Part 200—Standards Incorporated by Reference in the Minimum Property Standards for Housing (HUD Handbook 4910.1)
The following publications are incorporated by reference in the HUD Minimum Property Standards (MPS) in 24 CFR part 200. The MPS are available for public inspection and can be obtained for appropriate use at 490 L’Enfant Plaza East, Suite 3214, or at each HUD Regional, Area, and Service Office. Copies are available for inspection at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, call 202-741-6030, or go to: http://www.archives.gov/federal_register/code_of_federal_regulations/ibr_locations.html. The individual standards referenced in the MPS are available at the address contained in the following table. They are also available for public inspection at the HUD, Manufactured Housing and Construction Standards Division, Suite 3214, 490 L’Enfant Plaza East, Washington, DC 20024.
Commercial Standards:
Federal Specifications:
Handbooks:
Use of Materials Bulletins:
SUBCHAPTER B—MORTGAGE AND LOAN INSURANCE PROGRAMS UNDER NATIONAL HOUSING ACT AND OTHER AUTHORITIES
PART 201—TITLE I PROPERTY IMPROVEMENT AND MANUFACTURED HOME LOANS
Subpart A—General
§ 201.1 Purpose.
These regulations implement the provisions of section 2 of title I of the National Housing Act (12 U.S.C. 1703). They contain the requirements under which an approved financial institution may obtain insurance on loans made for the alteration, repair or improvement of property, for the purchase of a manufactured home and/or the lot on which to place such home, for the purchase and installation of fire safety equipment in existing health care facilities, and for the preservation of historic structures. The insurance granted by the Secretary of Housing and Urban Development shall be available only for loans involving property located within a State, as that term is defined in § 201.2. The insurance can cover up to 10 percent of the amount of all insured Title I loans in the financial institution’s portfolio, as reflected in the total amount of insurance coverage contained at any time in an insurance coverage reserve account established by the Secretary, less amounts for insurance claims paid. As limited by the amount of insurance coverage in such a reserve account, the insurance can cover up to 90 percent of the loss of any individual loan.
§ 201.2 Definitions.
As used in the regulations in this part the term:
Act means the National Housing Act, 12 U.S.C. 1703.
Actuarial method means the method of allocating payments made on a loan between the outstanding balance of the principal amount borrowed and the interest due on a loan obligation, under which a payment is applied first to the accrued interest, and any remainder is subtracted from, or any deficiency is added to, the unpaid balance of the obligation.
Borrower means one who applies for and receives a loan insured under this part. The term may also include any co-maker or co-signer or any assumptor who is obligated for the repayment of a loan obligation insured under this part.
Combination loan means a loan made for the purchase or refinancing in a single transaction of a manufactured home and a manufactured home lot, and may also include a garage, patio, carport, or other comparable appurtenance.
Dealer means, in the case of property improvement loans, a seller, contractor, or supplier of goods or services. In the case of manufactured home loans, dealer means one who engages in the business of manufactured home retail sales.
Dealer loan means a loan where a dealer, having a direct or indirect financial interest in the transaction between the borrower and the lender, assists the borrower in preparing the credit application or otherwise assists the borrower in obtaining the loan from the lender. In the case of a property improvement loan, the lender may disburse the loan proceeds solely to the borrower, or jointly to the borrower and the dealer or other parties to the transaction. In the case of a manufactured home loan, the lender may disburse the loan proceeds solely to the dealer or the borrower, or jointly to the borrower and the dealer or other parties to the transaction.
Debtor means the borrower, any co-maker or co-signer, and any assumptor who is liable for the repayment of a defaulted loan obligation insured under this part.
Default means a failure by the borrower to make any payment due under the note, when such failure continues for a period of 30 days. For the purpose of these regulations, the “date of default” shall be considered as 30 days after the first failure to make an installment payment on the note which is not covered by subsequent payments, when applied to the overdue installments in the order in which they became due.
Direct loan means a loan for which a borrower makes application directly to a lender without any assistance from a dealer. The credit application, signed by the borrower, may be filled out by the borrower or by a person acting at the direction of the borrower who does not have a financial interest in the loan transaction. The lender may disburse the loan proceeds solely to the borrower or jointly to the borrower and other parties to the transaction. If a dealer takes legal action required by State law in order for the lender to obtain a valid and enforceable lien against the property, such action by the dealer will not convert an otherwise direct loan to a dealer loan.
Discount points means a fee charged by the lender, separate from interest but part of the total finance charges on the loan, that is part of the lender’s total yield on the loan needed to maintain a competitive position with other types of investments. One discount point equals one percent of the principal amount of the loan. As discount points on the loan increase, the interest rate can be expected to decrease in a fairly consistent relationship.
Existing structure means a dwelling, including a manufactured home, that was completed and occupied at least 90 days prior to an application for a Title I loan, or a nonresidential structure that was a completed building with a distinctive functional use prior to an application for a Title I loan. However, these occupancy and completion requirements shall not apply to:
(1) Loans having a principal obligation of $1000 or less; or
(2) Residential structures which have been damaged by conditions determined by the President to warrant relief under the provisions of title 42, chapter 68, of the United States Code.
Fire safety equipment loan means a loan made to finance the purchase and installation of any device or construction feature which is recognized in the latest edition of the Department of Housing and Urban Development’s Minimum Property Standards for Care Type Housing (HUD Handbook 4920.1) or the Fire Safety Code of the National Fire Protection Association, and which is designed to reduce the risk of death, personal injury, or property damage resulting from a fire in a health care facility.
Furniture means movable articles of personal property relating to a home or dwelling, such as beds, chairs, sofas, lamps, tables, rugs, etc.; however, furniture does not include:
(1) Items built into the home or dwelling such as wall-to-wall carpeting or heating or cooling equipment; or
(2) Large appliances such as refrigerators, ovens, ranges, dishwashers, clothes washers or clothes dryers.
Health care facility means a proprietary facility or facility of a private nonprofit corporation or association, licensed or regulated by the State or by the municipality or other political subdivision in which the facility is located, and operated as one or more of the following:
(1) A nursing home for the accommodation of convalescents or other persons who are not acutely ill and not in need of hospital care, but who require skilled nursing care and related medical services performed under the general direction of persons licensed by the law of the State where the facility is located to provide such care or services;
(2) An intermediate health care facility for the accommodation of persons who, because of incapacitating infirmities, require minimum but continuous care, but not continuous medical care or nursing services;
(3) An extended health care facility for inpatient care for convalescents or chronic disease patients who require skilled nursing care and related medical services; or
(4) Other comparable health care facility.
Historic preservation loan means a loan to finance the preservation (restoration or rehabilitation) of an historic residential structure which is listed on the National Register of Historic Places or which is certified by the Secretary of the Interior as conforming with National Register criteria.
Lender means a financial institution that:
(1) Holds a valid Title I contract of insurance and is approved by the Secretary under 24 CFR part 202 to originate, purchase, hold, service, and/or sell loans insured under this part; or
(2) Is under suspension or holds a Title I contract of insurance that has been terminated, but that remains responsible for servicing or selling Title I loans that it holds and is authorized to file insurance claims on such loans.
Loan means a disbursement of proceeds (funds) or an advance of credit to or for the benefit of a borrower who promises to repay the principal amount of such disbursement or advance, plus interest, if any, at a stated annual rate over time, with the borrower’s obligation evidenced by the borrower’s execution of a note. Loan also means a purchase by a lender of a note evidencing such obligation, or a refinancing of an existing obligation with or without an additional disbursement of proceeds or advance of credit.
Manufactured home means a transportable structure, comprised of one or more modules, each built on a permanent chassis, with or without a permanent foundation, designed for occupancy as a principal residence by a single family. For purposes of the annual adjustments to loan limits under this part, a manufactured home may be a single-section home comprised of one module or a multi-section home comprised of two or more modules. A new manufactured home shall comply with the minimum property standards prescribed by the Secretary to assure its livability and durability that are published as the Manufactured Home Construction and Safety Standards implementing the National Manufactured Housing Construction and Safety Standards Act of 1974, 42 U.S.C. 5401-5426, at 24 CFR part 3280. To qualify for a manufactured home loan insured under this part, an existing manufactured home must have been constructed in accordance with standards published at 24 CFR part 3280 and must meet standards similar to the minimum property standards applicable to existing homes insured under title II of the Act, as prescribed by the Secretary.
Manufactured home improvement loan means a loan made to finance the alteration, repair or improvement of an existing manufactured home which is classified as personalty by the State or locality in which the property is located. The proceeds of a manufactured home improvement loan may also be used for improvements to the homesite, as long as the borrower is the owner of the home and the underlying real estate.
Manufactured home loan means a loan for the purchase or refinancing of a manufactured home and/or the lot on which to place such home. Unless otherwise indicated, the term includes manufactured home purchase loans, manufactured home lot loans, and combination loans.
Manufactured home lot loan means a loan for the purchase or refinancing of a portion of land acceptable to the Secretary as a manufactured home lot. A manufactured home lot may consist of platted or unplatted land, a lot in a recorded or unrecorded subdivision or in an improved area of such subdivision, or a lot in a planned unit development. A manufactured home lot may also consist of an interest in a manufactured home condominium project (including any interest in the common areas) or a share in a cooperative association which owns and operates a manufactured home park.
Manufactured home purchase loan means a loan for the purchase or refinancing of a manufactured home exclusive of any lot or site, and may also include a garage, patio, carport, or other comparable appurtenance.
Manufacturer’s invoice means a document issued by a manufacturer and provided with a manufactured home to a retail dealer which separately details the wholesale (base) prices at the factory for specific models or series of manufactured homes and itemized options (large appliances, built-in items and equipment), plus actual itemized charges for freight from the factory to the dealer’s lot or the homesite (including any rental of wheels and axles) and for any sales taxes to be paid by the dealer. The invoice may recite such prices and charges on an itemized basis or by stating an aggregate price or charge, as appropriate, for each category. The manufacturer shall certify on the invoice, or on a supplement which is attached to and made a part of the invoice, as follows:
The undersigned certifies under applicable criminal and civil penalties for fraud and misrepresentation that: (1) The wholesale (base) prices for the manufactured home and itemized options, the charges for freight and dealer-paid sales taxes, and all other statements in this invoice are true and accurate; (2) all such prices reflect the actual dealer costs at the factory, as quoted in the applicable current manufacturer’s wholesale (base) price list; (3) except for any payments of volume incentives or special benefits related to this transaction, all such prices and charges exclude any costs of trade association fees or charges, discounts, bonuses, refunds, rebates, prizes, loan discount points or other financing charges, or anything else of more than nominal value which will inure to the benefit of the dealer and/or home purchaser at any date; and (4) the manufacturer has not made and will not make any payments to or for the benefit of the dealer and/or home purchaser that are not disclosed on this invoice or invoice supplement.
Multifamily property improvement loan means a loan to finance the alteration, repair, improvement, or conversion of an existing structure used or to be used as an apartment house or a dwelling for two or more families. The multifamily structure may not be owned by a corporation, partnership, or trust, unless the prior approval of the Secretary is obtained for an exception to this requirement.
Nonresidential property improvement loan means a loan made to finance the construction of a new exclusively nonresidential structure or the alteration, repair or improvement of an existing structure that is nonresidential. Such a structure may be temporarily used for residential purposes while the borrower constructs a new dwelling to replace a dwelling previously occupied by the borrower that was destroyed or damaged by conditions determined by the President to warrant relief under the provisions of title 42, chapter 68, of the U.S.C., provided that the credit application is filed within one year from the date of such a determination.
Note means the written instrument evidencing the borrower’s signature to a promise to repay the principal indebtedness and to pay any interest due on a loan, whether the instrument is separate from or included within another document, and unless otherwise specified means also any security instrument with respect to that loan obligation.
Owner means a person, including a borrower, who has title in whole or in part to the property which is the subject of a loan transaction.
Principal residence means a home where the borrower expects to live at least nine months of the year.
Property improvement loan means a loan made to finance actions or items that substantially protect or improve the basic livability or utility of a property. Unless otherwise indicated, the term includes single family, multifamily and nonresidential property improvement loans; manufactured home improvement loans where the home is classified as personalty; historic preservation loans; and fire safety equipment loans in existing health care facilities.
Rehabilitation means the process of returning an historic residential structure to a state of utility, through repair or alteration, which makes possible an efficient contemporary use. In rehabilitation, those portions of the property important in illustrating historic, architectural and cultural values are preserved or restored.
Restoration means the process of accurately recovering the form and details of an historic residential structure as it appeared at a particular period of time by removing later work and by replacing missing original work.
Security instrument means a properly recorded chattel mortgage, real estate mortgage or deed of trust, or conditional sales contract.
Single family property improvement loan means a loan to finance alterations, repairs and improvements to or in connection with an existing structure used or to be used as a single family residence, including an existing one-family manufactured home that qualifies as real property in that the home is placed on a permanent foundation, the home and lot are classified as realty by the State or locality in which the property is located, and any loans on the property are secured by mortgages or deeds of trust covering the home and lot.
Solar energy system means any addition, alteration or improvement to an existing structure for single family or multifamily residential use which is designed to utilize wind or solar energy to reduce the energy requirements of that structure from other energy sources, and which complies with standards prescribed by the Secretary.
Special benefits means benefits other than volume incentives for dealers which a home manufacturer funds from general corporate revenues by charging them against corporate overhead and profit without changing the wholesale (base) price of a manufactured home (or series of homes), as reflected in the manufacturer’s published wholesale (base) price list, and which are limited to payments by the manufacturer directly to:
(1) A financial institution to buy down or reduce the interest rate, discount points, or other fees or charges related to a lending agreement for a dealer’s manufactured home inventory or floor plan financing needs; or
(2) One or more advertising media for all or part of the costs of advertising the manufacturer’s homes, one or more dealer’s services, and related manufactured home materials and products in such media.
State means any State of the United States, Puerto Rico, the District of Columbia, Guam, American Samoa, the Commonwealth of the Northern Mariana Islands, or the United States Virgin Islands.
Volume incentives means specified dollar benefits to dealers under a published marketing and promotional plan, payable by a home manufacturer in cash or in kind in amounts or levels relating to the volume of sales of manufactured homes to dealers, other than benefits of a nominal value of less than $10 per home, which:
(1) The manufacturer funds from general corporate revenues by including them in the prices quoted in the manufacturer’s wholesale (base) price list and charging them against corporate overhead and profit;
(2) Whether or not available on an optional basis, do not increase or decrease the wholesale (base) prices for the sale of a specific home or options or the charges for freight and dealer-paid sales taxes as detailed in the manufacturer’s invoice, for a specific sale to a retail dealer;
(3) The manufacturer provides without creating a special product line where the cost of the benefits is the only substantive difference between the special product line and other essentially similar homes;
(4) Whether or not also of benefit to the ultimate purchaser, do not increase or decrease the retail price of the home;
(5) Are available to any dealer in a particular market area doing business with the manufacturer;
(6) The manufacturer provides only for volume sales of manufactured homes to dealers over a specified period of time;
(7) The plan provides in escalating and different amounts or levels related to either the number of homes (or modules) sold or the dollar value of such sales to a dealer, or some combination of such elements, in a specified period of time;
(8) Are structured so that only some of the dealer participants are expected to be paid the maximum benefits under the program, with substantial numbers of participants expected to receive less than the maximum amount or level of benefits; and
(9) Accrue for volume sales to a dealer over a specified period of time which is at least quarterly in length, and are paid not more frequently than quarterly.
Wholesale (base) price list means the price list or lists, as periodically amended, which are published and distributed by a home manufacturer to all retail dealers in a given marketing area, quoting the actual wholesale (base) prices at the factory for specific models or series of manufactured homes and itemized options offered for sale to such dealers during a specified period of time. The wholesale (base) prices may include the manufacturer’s projected costs of providing volume incentives and special benefits related to sales to dealers during the period. All such wholesale (base) prices shall exclude any costs of trade association fees or charges, discounts, bonuses, refunds, rebates, prizes, loan discount points or other financing charges, or anything else of more than nominal value which will inure to the benefit of a dealer and/or home purchaser at any date. Each price list and amendment shall be retained by the manufacturer for a minimum period of six years from the date of publication so as to be available to HUD and other Federal agencies upon request.
§ 201.3 Applicability of the regulations.
The regulations in this part may be amended by the Secretary at any time. Such amendment shall not adversely affect the insurance privileges of a lender on any loan that has been made or for which a loan application has been approved before the effective date of the amendment.
§ 201.4 Rules of construction.
As used in this part, and unless the context indicates otherwise, words in the singular include the plural, and words in the plural include the singular.
§ 201.5 Waivers.
Waiver of lender’s noncompliance. The Secretary may waive a lender’s noncompliance with any provision of this part, subject to statutory limitations, when it is determined that enforcement of the regulations would impose an injustice upon a lender which has substantially complied with the regulations in good faith and refunded or credited any excess charge made, and when such waiver does not involve an increase in the Secretary’s obligation beyond that which would have been involved if the lender was in full compliance with the regulations.
§ 201.6 Disclosure and verification of Social Security and Employer Identification Numbers.
To be eligible for loan insurance under this part, the borrower must meet the requirements for the disclosure and verification of Social Security and Employer Identification Numbers, as provided by part 200, subpart U, of this chapter.
§ 201.7 Qualified mortgage.
(a) Qualified mortgage. A mortgage insured under section 2 of title I of the National Housing Act (12 U.S.C. 1703), except for mortgage transactions exempted under § 203.19(c)(2), is a safe harbor qualified mortgage that meets the ability to repay requirements in 15 U.S.C. 1639c(a).
(b) Effect of indemnification on qualified mortgage status. An indemnification demand or resolution of a demand that relates to whether the loan satisfied relevant eligibility and underwriting requirements at the time of consummation may result from facts that could allow a change to qualified mortgage status, but the existence of an indemnification does not per se remove qualified mortgage status.
Subpart B—Loan and Note Provisions
§ 201.10 Loan amounts.
(a) Property improvement loans. (1) The total principal obligation for a property improvement loan shall not exceed the actual cost of the project plus any applicable fees and charges authorized at § 201.25(b), up to the following maximum loan amounts:
(i) Single family property improvement loans—$25,000, except that a loan for a manufactured home that qualifies as real property shall be limited to $17,500.
(ii) Multifamily property improvement loans—$60,000 or an average of $12,000 per dwelling unit, whichever is less.
(iii) Nonresidential property improvement loans—$25,000.
(iv) Manufactured home improvement loans—$7,500.
(v) Historic preservation loans—the lesser of $15,000 per dwelling unit in a residential structure or $45,000 per residential structure.
(vi) Fire safety equipment loans—$50,000.
(2) No property improvement loan shall be approved where the total outstanding balance of all title I property improvement loans on the same property exceeds the maximum loan amount prescribed for that type of loan. If more than one type of property improvement loan is involved, the total outstanding balance of such loans on a particular property shall not exceed the maximum loan amount prescribed for the larger type of loan.
(b) Manufactured home purchase loans. (1) The total principal obligation for a loan to purchase a new manufactured home shall not exceed the sum of the following itemized amounts, up to a maximum set according to an index established by HUD in paragraph (h)(1) of this section and updated through notice which shall establish separate loan limits for single-section homes and multi-section homes:
(i) 130 percent of the sum of the wholesale (base) prices of the home and any itemized options and the charge for freight, as detailed in the manufacturer’s invoice;
(ii) The charge for any sales taxes to be paid by the dealer, as detailed in the manufacturer’s invoice;
(iii) The actual dealer’s cost of transportation to the homesite, set-up and anchoring, including the rental of wheels and axles (if not included in the freight charges);
(iv) The actual dealer’s cost of skirting;
(v) The actual dealer’s cost of a garage, carport, patio or other comparable appurtenance to the manufactured home, as approved by the Secretary;
(vi) The actual dealer’s cost of purchasing and installing a central air conditioning system or heat pump, if not installed by the manufacturer; and
(vii) Any applicable charges authorized at § 201.25(b).
(2) The total principal obligation for a loan to purchase an existing manufactured home shall not exceed the lesser of the following amounts, up to a maximum set according to an index established by HUD in paragraph (h)(1) of this section and updated through notice which shall establish separate loan limits for single-section homes and multi-section homes:
(i) 95 percent of the appraised value of the home as equipped and furnished (as determined by a HUD-approved appraisal) and 95 percent of any itemized amounts allowed under paragraphs (b)(1)(iii) through (vii) of this section, if incurred; or
(ii) 95 percent of the purchase price of the home.
(3) The purchase price of a manufactured home financed with a manufactured home purchase loan shall include the retail cost to the borrower of all items set forth in the purchase contract, including any applicable charges authorized under § 201.25(b).
(c) Manufactured home lot loans. The total principal obligation for a loan to purchase and, if necessary, develop a lot suitable for a manufactured home, including on-site water and utility connections, sanitary facilities, site improvements and landscaping, shall not exceed 95 percent of either the appraised value of the developed lot (as determined by a HUD-approved appraisal) or the total of the purchase price and development costs, whichever is less, up to a maximum of $16,200.
(d) Combination loans.
(1) The total principal obligation for a loan to purchase a new manufactured home and a lot on which to place the home shall not exceed the sum of the following itemized amounts, up to a maximum set according to an index established by HUD in paragraph (h)(3) of this section and updated through notice which shall establish separate loan limits for single-section homes and multi-section homes:
(i) 130 percent of the sum of the wholesale (base) prices of the home and any itemized options and the charge for freight, as detailed in the manufacturer’s invoice;
(ii) The charge for any sales taxes to be paid by the dealer, as detailed in the manufacturer’s invoice;
(iii) The actual dealer’s cost of transportation to the homesite, set-up and anchoring, including the rental of wheels and axles (if not included in the freight charge);
(iv) The actual dealer’s cost of purchasing and installing a central air conditioning system or heat pump, if not installed by the manufacturer;
(v) The appraised value of the developed manufactured home lot (as determined by a HUD-approved appraisal, including on-site water and utility connections, sanitary facilities, site improvements and landscaping) or the purchase price, whichever is less;
(vi) The actual dealer’s cost of appurtenances to the home such as a permanent foundation, garage, carport or patio; and
(vii) Any applicable charges authorized at § 201.25(b).
(2) The total principal obligation for a Combination Loan, to purchase an existing manufactured home and lot, shall not exceed the lesser of the following amounts, up to a maximum set according to an index established by HUD in paragraph (h)(3) of this section and updated through notice which shall establish separate loan limits for single-section homes and multi-section homes:
(i) 95 percent of the total appraised value of the home, the lot, and any appurtenances (as determined by a HUD-approved appraisal), plus 95 percent of any applicable charges authorized at § 201.25(b); or
(ii) 95 percent of the purchase price of the home, the lot, and any appurtenances.
(3) The purchase price of a manufactured home and a lot financed with a combination loan shall include the retail cost to the borrower of all items set forth in the purchase contract or contracts, including any applicable charges authorized under § 201.25(b).
(e) Manufactured home loan limits in high-cost areas. (1) The maximum loan amounts otherwise applicable under paragraphs (b), (c) and (d) of this section may be increased by an amount not to exceed 40 percent where the manufactured home and/or lot is purchased and located in Alaska, Guam or Hawaii.
(2) The maximum loan amounts otherwise applicable under paragraphs (c) and (d) of this section may be increased for any geographical area except Alaska, Guam or Hawaii to the extent deemed necessary by the Secretary; however, any increased loan amount may not exceed the lesser of (i) 185 percent of the dollar amounts specified in paragraphs (c) and (d) of this section; or (ii) the dollar amounts specified in paragraphs (c) and (d) of this section, as increased by the same percentage by which 95 percent of the median 1-family house price in the area (as determined by the Secretary for purposes of § 203.18) exceeds $67,500.
(f) Loan refinancing. (1) The total principal obligation of a loan made to refinance a borrower’s existing insured property improvement loan shall not exceed the maximum loan amount permitted under this section for the particular type of loan, provided that any amount in excess of the cost to the borrower of prepaying the existing loan shall be made available only to finance additional property improvements meeting the requirements of this part.
(2) The total principal obligation of a loan made to refinance a borrower’s existing insured manufactured home loan shall not exceed the lesser of the cost to the borrower of prepaying the existing loan or the maximum loan amount permitted under this section for the particular type of loan.
(3) The total principal obligation of a loan made to refinance a borrower’s existing uninsured manufactured home loan shall not exceed the cost to the borrower of prepaying the existing loan or the appraised value of the property (as determined by a HUD-approved appraisal), whichever is less, up to the maximum loan amount permitted under this section for the particular type of loan.
(4) When a borrower’s existing manufactured home lot is being refinanced in connection with the purchase of a manufactured home, the total principal obligation of the combination loan shall be determined in accordance with paragraph (d)(1) or (d)(2) of this section.
(5) When a borrower’s existing manufactured home is being refinanced in connection with the purchase of a manufactured home lot, the total principal obligation of the combination loan shall not exceed the lesser of the following amounts, up to a maximum of $64,800:
(i) The cost to the borrower of prepaying any existing loan on the home, plus the purchase price of the lot; or
(ii) The appraised value of the home and lot (as determined by a HUD-approved appraisal).
(g) Minimum loan amount. A lender may not require, as a condition of providing a loan insured under this part, that the principal amount of the loan exceed a minimum amount established by the lender.
(h) Annual Adjustments. HUD shall adjust the following loan limits annually through notice:
(1) In paragraphs (b)(1) and (2) of this section, the single-section manufactured home loan limit shall be adjusted to reflect changes in single-section manufactured home sales prices and the multi-section manufactured home loan limit shall be increased to reflect changes in double-section manufactured home sales prices, according to data published by the Census Bureau, except that the loan limits shall not be lowered.
(2) In paragraph (c) of this section, the manufactured home lot loan limit shall be increased to reflect changes in single-family home sales prices according to data published by the Census Bureau, except that the loan limit shall not be lowered.
(3) In paragraphs (d)(1) and (2) of this section, the combination manufactured home and lot loan limits shall be increased to be the sum of the applicable loan limit for the manufactured home loan in paragraph (b)(1) and the lot loan limit in paragraph (c) of this section, except that the loan limit shall not be lowered.
§ 201.11 Loan maturities.
(a) Property improvement loans. The term of a property improvement loan shall be not less than six months and not more than 20 years and 32 days from the date of the loan, except that:
(1) The maximum term for a single family property improvement loan on a manufactured home that qualifies as real property shall not exceed 15 years and 32 days from the date of the loan;
(2) The maximum term for a manufactured home improvement loan shall not exceed 12 years and 32 days from the date of the loan; and
(3) The maximum term for an historic preservation loan shall not exceed 15 years and 32 days from the date of the loan.
(b) Manufactured home loans. The term of a manufactured home loan shall be not less than six months and not more than 20 years and 32 days from the date of the loan, except that:
(1) The maximum term for a manufactured home lot loan shall not exceed 15 years and 32 days from the date of the loan; and
(2) The maximum term for a multi-module manufactured home and lot in combination shall not exceed 25 years and 32 days from the date of the loan.
(c) Loan refinancing. A loan to be refinanced under this part may be refinanced for an extended period.
(1) The term of a loan to refinance a borrower’s existing insured property improvement or manufactured home loan shall not exceed the maximum term permitted under paragraph (a) or (b) of this section for the particular type of loan. In addition, the total time period from the date of the original loan to the final maturity of the refinanced loan shall not exceed:
(i) In the case of a property improvement loan, the maximum term permitted under paragraph (a) of this section plus 9 years and 11 months; and
(ii) In the case of manufactured home loan, the maximum term permitted under paragraph (b) of this section plus 4 years and 11 months.
(2) The term of a loan made to refinance a borrower’s existing uninsured manufactured home loan shall not exceed the maximum term permitted under paragraph (b) of this section for the particular type of loan.
(3) When a borrower’s existing manufactured home lot is being refinanced in connection with the purchase of a manufactured home, the term of the combination loan shall not exceed the maximum term permitted under paragraph (b) of this section for the particular type of loan.
(4) When a borrower’s existing manufactured home is being refinanced in connection with the purchase of a manufactured home lot, the term of the combination loan shall not exceed the maximum term permitted under paragraph (b) of this section for the particular type of loan.
§ 201.12 Requirements for the note.
The note shall bear the genuine signature of each borrower and of any co-maker or co-signer, be valid and enforceable against the borrower and any co-maker or co-signer, and be complete and regular on its face. The borrower and any co-maker or co-signer shall execute the note for the full amount of the loan obligation. Although the note may be executed by the borrower on an earlier date, the date of the loan shall be the date that the loan proceeds are disbursed by the lender. Such date shall be entered on the note when disbursement occurs. The note shall separately recite the principal amount and any interest at an agreed annual rate that comprises the borrower’s payment obligation. The lender shall assure that the note and all other documents evidencing the loan transaction are in compliance with applicable Federal, State, and local laws. If the note is executed on behalf of a corporation, partnership, or trust by an authorized representative, it shall create a binding obligation on such entity.
§ 201.13 Interest and discount points.
The interest rate for any loan shall be negotiated and agreed to by the borrower and the lender, and such interest rate shall be fixed for the full term of the loan and recited in the note. Interest on the loan shall accrue from the date of the loan, and shall be calculated on a simple interest basis. The lender and the borrower may negotiate the amount of discount points, if any, to be paid by the borrower as part of the borrower’s initial payment. The lender shall not require or allow any party other than the borrower to pay any discount points or other financing charges in connection with the loan transaction.
§ 201.14 Payments on the loan.
The note normally shall provide for equal installment payments due weekly, biweekly, semi-monthly or monthly. The note may provide for either or both of the first and final payments to vary in amount but not to exceed 1
§ 201.15 Late charges to borrowers.
(a) Imposition of late charge. The note may provide for imposition of a late charge unless precluded by State law. The late charge may be imposed only for installments of principal and interest which are in arrears for the greater of 15 calendar days or the number of days required by applicable State law before such a charge may be imposed. Late charges must be billed to the borrower or reflected in the payment coupon, and evidence of any late charges that have been paid must be in the loan file if an insurance claim is made.
(b) Amount of late charge. The late charge shall not exceed the lesser of five percent of each installment of principal and interest, up to a maximum of $10 per installment for any property improvement loan and $15 per installment for any manufactured home loan, or the maximum amount permitted by applicable State law.
(c) Method of payment. Payment of any late charge cannot be deducted from the monthly payment for principal and interest, but must be an additional charge to the borrower.
(d) Daily interest in lieu of late charges. In lieu of late charges, the note may provide for interest to accrue on installments in arrears on a daily basis at the interest rate in the note.
§ 201.16 Default provision.
The loan note shall contain a provision for acceleration of maturity, at the option of the holder, upon a default by the borrower.
§ 201.17 Prepayment provision.
The note shall contain a provision permitting full or partial prepayment of the loan without penalty, except that the borrower may be assessed reasonable and customary charges for recording a release of the lender’s security interest in the property, if permitted by State law.
§ 201.18 Modification agreement or repayment plan.
(a) Modification agreement or repayment plan. A written but unrecorded modification agreement acceptable to the lender and executed by the borrower may be used in lieu of refinancing of a delinquent or defaulted loan to reduce or increase the monthly payment, but not to increase the term or the interest rate, so as to assure that the delinquent or defaulted loan is brought current before or by the end of the loan term. A modification agreement may also be used in lieu of refinancing in connection with a loan that is current to effect a reduction in the interest rate, and in the monthly payment, for the remainder of the loan term. When a modification agreement is used, no insurance reporting is required under § 201.30.
(b) Repayment plan. The lender may elect to negotiate an informal repayment plan with the borrower to enable a temporary delinquency to be cured within a short period of time. The lender may document the terms of the repayment plan by sending a letter to the borrower reciting the terms of their agreement. When a repayment plan is used, no insurance reporting is required under § 201.30.
§ 201.19 Refinanced and assumed loans.
(a) Conditions on refinancing. (1) An existing insured property improvement loan or manufactured home loan may be refinanced without an advance of funds only under the following conditions:
(i) A loan that is in default may not be refinanced for an amount greater than the original principal balance of the loan;
(ii) The refinancing of a loan for the original borrower shall be subject to all of the requirements of this part, except §§ 201.20(b) and (c), 201.21(b) through (e), 201.22, 201.23, and 201.26;
(iii) If there are co-makers or co-signers on the original note, the lender shall require the same co-makers or co-signers on the refinanced note, unless the lender obtains the Secretary’s approval to release a co-maker or co-signer from liability under the note in accordance with § 201.24(e); and
(iv) A loan that was assumed in accordance with paragraph (c) of this section may be refinanced, subject to all of the requirements of this part except §§ 201.20(b) and (c), 201.21(b) through (e), 201.22, 201.23, and 201.26, as long as the original borrower and any intervening assumptors were released from liability for repayment of the loan at the time the loan was assumed. A lender may not refinance a previously assumed loan under any other circumstances, unless the requirements of § 201.22 are also met and the Secretary has approved a release of the original borrower and any intervening assumptors in accordance with § 201.24(e).
(2) An existing insured property improvement loan may be refinanced with an advance of funds for additional improvements only under the following conditions:
(i) The existing insured loan must not be in default; and
(ii) The refinancing shall be subject to all of the requirements of this part applicable to the particular type of loan and to the additional improvements being financed.
(3) An existing uninsured manufactured home loan may be refinanced only for the original borrower and only under the following conditions:
(i) The existing uninsured loan must not be in default;
(ii) Refinancing of an existing uninsured manufactured home purchase loan or combination loan shall be subject to all the requirements of this part applicable to the particular type of loan except §§ 201.23 and 201.26(b)(4);
(iii) Refinancing of an existing uninsured manufactured home lot loan in connection with the purchase of a manufactured home shall be subject to all of the requirements of this part; and
(iv) Refinancing of an existing uninsured manufactured home purchase loan in connection with the purchase of a manufactured home lot shall be subject to all of the requirements of this part except § 201.26(b)(4).
(b) Note and security requirements for refinanced loans. (1) Refinancing of a loan requires the execution of a new note and cancellation of the old note.
(2) Refinancing of a loan that was secured when originated, regardless of the principal balance of the note at the time of refinancing, is required to be secured.
(3) Refinancing of a loan that was not secured when originated is not required to be secured if no additional funds are advanced.
(4) When a refinanced loan is secured, the lender shall obtain and record a new security instrument in accordance with § 201.24 and shall release the original lien, unless State law permits a renewal and extension of the original lien.
(5) Copies of all documents pertaining to the original loan must be retained in the loan file for the refinanced loan.
(c) Assumed loans. (1) At the option of the lender, an existing insured property improvement loan or manufactured home loan may be assumed, subject to the following conditions:
(i) A determination by the lender that the assumptor is eligible under § 201.20(a) or 201.21(a) and meets the requirements of § 201.22; and
(ii) The execution of an assumption agreement that is satisfactory to the lender and is signed by the assumptor and the original borrower or previous assumptor at the time of assumption.
(2) The lender shall not permit an assumption under any circumstances other than those contained in this section, and shall include appropriate provisions in any note or security agreement to enforce this requirement.
(3) Prior to the execution of the assumption agreement, the lender shall provide the assumptor with a written notice, to be signed by the assumptor and retained in the loan file, that:
(i) States that the loan being assumed is insured by HUD, and describes the actions the Secretary may take to recover the debt if the assumptor defaults on the loan and an insurance claim is paid; and
(ii) Constitutes the assumptor’s agreement to pay penalties and administrative costs imposed by HUD as authorized by 31 U.S.C. 3717.
(4) If the other requirements of paragraph (c) of this section are met, the lender at its option may release the original borrower and any intervening assumptors from liability for the repayment of a loan obligation insured under this part. The prior approval of the Secretary under § 201.24(e) is not required. The lender shall retain documentation of the release in the loan file.
Subpart C—Eligibility and Disbursement Requirements
§ 201.20 Property improvement loan eligibility.
(a) Borrower eligibility. (1) To be eligible for a property improvement loan (other than a manufactured home improvement loan), the borrower shall have at least a one-half interest in one of the following:
(i) Fee simple title to the real property;
(ii) Lease of the real property for a fixed term which expires not less than six calendar months after the final maturity of the loan; or
(iii) A properly recorded land installment contract for the purchase of the real property.
(2) To be eligible for a manufactured home improvement loan, the borrower shall have at least a one-half interest in the manufactured home, and the home must be the principal residence of the borrower.
(b) Eligible use of the loan proceeds. (1) The loan proceeds shall be used only for the purposes disclosed in the loan application. If the borrower plans to use a dealer or contractor to carry out the improvement work, the lender shall obtain a copy of a proposal or contract that describes in detail the work to be performed and the estimated or actual cost. If the borrower plans to carry out the improvement work without the services of a dealer or contractor, the borrower shall be required to furnish a detailed written description of the work to be performed, the materials to be furnished, and their estimated cost.
(2) The loan proceeds shall be used only to finance property improvements that substantially protect or improve the basic livability or utility of the property. The Secretary will establish a list of items and activities that may not be financed with the proceeds of any property improvement loan. If a lender has any doubt as to the eligibility of any item or activity, it shall request a specific ruling by the Secretary before making a loan.
(3) The loan proceeds shall only be used to finance property improvements that are started after loan approval, unless:
(i) The prior approval of the Secretary is obtained for an exception to this requirement; or
(ii) The property is located in a major disaster area declared by the President, and the lender determines that emergency action is needed to repair damage resulting from the disaster.
(c) Special pre-application requirements. (1) Where the proceeds are to be used for an historic preservation loan, the proposed improvements shall be reviewed and approved by the State Historic Preservation Officer (or other person authorized by the Secretary of the Interior to make such reviews) prior to making application for a loan. The purpose of the review is to determine that (i) the structure is an historic residential structure listed on the National Register of Historic Places or certified by the Secretary of the Interior as conforming with National Register criteria, and (ii) the proposed improvements comply with criteria set by the Secretary of the Interior for the preservation of historic structures.
(2) Where the proceeds are to be used for a fire safety equipment loan, the proposed improvements shall be reviewed and approved by the State or local agency having primary jurisdiction over the fire safety requirements of health care facilities prior to making application for a loan.
§ 201.21 Manufactured home loan eligibility.
(a) Borrower eligibility. To be eligible for a manufactured home loan (whether a manufactured home purchase loan, a manufactured home lot loan, or a combination loan), the borrower must become the owner of the particular property which is to be financed with such a loan. Where the loan involves a manufactured home which is classified as realty, ownership of the home must be in fee simple. Where the loan involves a manufactured home lot, ownership of the lot must be in fee simple, except where the lot consists of a share in a cooperative association which owns and operates a manufactured home park.
(b) Eligible use of loan proceeds. (1) The loan proceeds may be used for the purchase or refinancing of a manufactured home, a suitably developed lot on which to place a manufactured home already owned by the borrower, or a manufactured home and a suitably developed lot for the home in combination. The loan proceeds may also be used to refinance an existing manufactured home already owned by the borrower in connection with the purchase of a manufactured home lot, or to refinance a lot already owned by the borrower in connection with the purchase of a manufactured home. Where the proceeds are for a manufactured home purchase loan or combination loan, the home must be the borrower’s principal residence. Where the proceeds are for a manufactured home lot loan, the borrower’s manufactured home must be placed on the lot and occupied as the borrower’s principal residence within six months after the date of the loan.
(2) A manufactured home financed with an insured loan under this part may be either:
(i) A new home, which is one that is purchased by the borrower within 18 months after the date of manufacture and has not been previously occupied; or
(ii) An existing home, which is one that does not meet the criteria for a new home. In order to be eligible for financing with an insured loan under this part, the manufactured home, its warranty and the site on which the home is placed must meet the requirements of paragraphs (c) through (e) of this section.
(3) The proceeds of a loan to purchase a new manufactured home or a new manufactured home and lot shall not be used to purchase furniture or wheels and axles, and the cost of these items shall not be included in the total principal obligation calculated under § 201.10 (b)(1) or (d)(1).
(4) The proceeds of a manufactured home purchase loan may be used for the purchase, construction or installation of a garage, carport, patio or other comparable appurtenance to the manufactured home, as stated in the retail purchase contract and as approved by the Secretary. The proceeds of a combination loan may be used for the purchase, construction or installation of a permanent foundation, garage, carport, patio or other comparable appurtenance to the manufactured home.
(5) The Secretary will establish a list of items and activities that may not be financed with the proceeds of any manufactured home loan. If a lender has any doubt as to the eligibility of any item or activity, it shall request a specific ruling by the Secretary before making a loan.
(c) Construction, transportation and installation requirements. (1) The manufactured home shall be certified by the manufacturer under applicable criminal and civil penalties for fraud and misrepresentation to have been constructed in compliance with the National Manufactured Housing Construction and Safety Standards Act of 1974, 42 U.S.C. 5401-5426, so as to conform to all applicable Federal construction and safety standards, as evidenced by a label or tag affixed to the manufactured home in accordance with 24 CFR 3280.8.
(2) During any period of transportation from the factory to the borrower’s homesite, the structural integrity of the manufactured home shall be maintained so that it will be livable and durable.
(3) The installation or erection of the manufactured home on the homesite shall comply with the manufacturer’s requirements for anchoring, support, stability and maintenance. Any permanent foundation shall be constructed in accordance with the current edition of HUD’s Permanent Foundations Guide for Manufactured Housing (HUD Handbook 4930.3).
(4) For any manufactured home purchase loan or combination loan involving a sale of the manufactured home by a dealer, the dealer shall inspect the manufactured home, as installed or erected on the homesite, for structural damage or other defects resulting from the transportation and installation of the home. The dealer shall also test the performance of the home’s plumbing, mechanical and electrical systems to assure that they are fully operational.
(d) Manufacturer’s warranty requirements. (1) To induce the Secretary to insure a title I loan under this part for the purchase of a new manufactured home and to induce a borrower to purchase such a home, the home manufacturer shall furnish the borrower with a written warranty, duly executed by an authorized representative of the manufacturer on a HUD-approved form. The warranty shall be provided without cost to the borrower. The effective date of the warranty shall be the date of delivery of the manufactured home to the borrower, regardless of when the warranty was executed by the manufacturer or was delivered to the borrower.
(2) The warranty shall obligate the home manufacturer to take appropriate action to correct any nonconformity with the standards prescribed in paragraph (c)(1) of this section or any defects in materials or workmanship which become evident within one year after the date of delivery. This warranty shall be in addition to, and not in derogation of, all other rights and privileges which the borrower may have under any other law or instrument during such period or thereafter. A copy of the warranty shall be retained in the lender’s loan file.
(3) Prior to making a loan involving a new manufactured home, the lender shall investigate whether the home manufacturer is substantially complying with its warranty obligations on other homes financed by the lender under any program. If the lender knows, because of consumer complaints, dealer comments or other information concerning the manufacturer received in the course of business, that consumers have complained about warranty performance, the lender shall ascertain whether such complaints have been resolved. The lender’s findings shall be documented in the loan file. Such documentation may reference information or materials contained in other files of the lender, provided that the file contains a written certification signed by a responsible loan officer under applicable criminal and civil penalties for fraud and misrepresentation that the lender’s findings are supported by such other information or materials.
(4) If the lender concludes under paragraph (d)(3) of this section that a manufacturer may not be honoring its warranties, the lender shall immediately notify the Secretary in writing, with documentation of the facts and circumstances.
(e) Manufactured homesite standards. (1) To assure the suitability of the homesite, the manufactured home shall be placed on a leased site in a manufactured home park or on an individual manufactured home lot or other site owned or leased by the borrower that meets the following standards. A manufactured home may be placed on a site within Indian trust or otherwise restricted lands if the borrower owns or leases the site, or if the borrower obtains written permission acceptable to the Secretary from the trustee or the tribal authority who controls the use of the site.
(2) The manufactured homesite shall be served by adequate public or community water and sewerage systems, unless appropriate local officials certify that either or both such systems are unavailable to provide an adequate level of service to the manufactured homesite. If either or both such systems are not available, the manufactured homesite shall comply with local or State minimum lot area requirements for the provision of onsite water supply and/or sewage disposal.
(3) When the manufactured home is to be placed on a leased site in a manufactured home park, the lender shall obtain certifications from the appropriate State or local government officials that the park complies with minimum standards relating to vehicular access, water supply, sewage disposal, utility connections, and other aspects of park development. Where minimum State and local standards for park development are not established or enforced, the lender shall obtain a certification from a registered civil engineer that the park meets minimum standards for park development prescribed by the Secretary.
(4) When the manufactured home is to be placed on an individual manufactured home lot or other site owned or leased by the borrower (or on an Indian land site under paragraph (e)(1) of this section), the lender shall obtain certifications from the appropriate local government officials that:
(i) The site complies with local zoning ordinances and regulations, if any;
(ii) Adequate vehicular access from a public right-of-way is available to the site;
(iii) Adequate water supply and sewage disposal facilities are available to or on the site; and
(iv) Any other minimum local standards and requirements for site suitability are met. Where minimum local standards for water supply and sewage disposal are not established or enforced, the lender shall obtain a certification from a registered civil engineer that the site meets minimum standards for water supply and sewage disposal prescribed by the Secretary.
§ 201.22 Credit requirements for borrowers.
(a) Credit application and review. (1) Before making a loan insured under this part, the lender shall exercise prudence and diligence to determine whether the borrower and any co-maker or co-signer is solvent and an acceptable credit risk, with a reasonable ability to make payments on the loan obligation. All documentation supporting this determination and relating to the lender’s review of the credit of the borrower and of any co-maker or co-signer shall be retained in the loan file.
(2) The lender shall obtain a separate dated credit application on a HUD-approved form, executed by the borrower and any co-maker or co-signer under applicable criminal and civil penalties for fraud and misrepresentation, for each loan made. The lender shall verify that the borrower’s Social Security Number is valid, through such documentation as may be prescribed by the Secretary.
(3) The lender shall conduct a credit investigation based on the credit application, and shall obtain written verification of or otherwise document the current employment and current income of the borrower and any co-maker or co-signer. If the borrower or any co-maker or co-signer has changed employment within the past two years, the lender shall obtain written verification of or otherwise document the person’s prior employment and prior income during the two-year period. If the borrower or any co-maker or co-signer was self-employed during any period of the previous two years, the lender shall obtain documentation of the person’s income during such period of self-employment.
(4) The lender shall also determine the total amount of the borrower’s existing and proposed title I loans to ensure that the loan amounts in § 201.10 are not exceeded.
(5) As part of its credit investigation, the lender shall obtain a consumer credit report stating the credit accounts and payment history of the borrower and of any co-maker or co-signer. Subject to state or local law, the lender shall check with the inquirers concerning all credit inquiries reported within the previous 90 days to determine whether the borrower or the co-maker or co-signer has incurred debts not listed on the credit application. If a consumer credit report is not available or is incomplete, the loan file shall contain other documentation of the lender’s diligent investigation of the credit of the borrower or of the co-maker or co-signer.
(6) If the consumer credit report does not contain the necessary information, the lender shall obtain written verification that the borrower is not over 30 days delinquent on any senior mortgages or deeds of trust on the property being improved with a property improvement loan.
(7) The lender shall verify, in such manner as the Secretary may prescribe, whether the borrower is in default or a claim has been paid in connection with any loan obligation owed to or insured or guaranteed by the Federal Government.
(8) For any loan with a total principal balance in excess of $5,000, the lender shall obtain written verification of the source of all funds of the borrower required for the borrower’s initial payment, if such payment will be in excess of five percent of the loan.
(9) Before making a final determination on the creditworthiness of the borrower, the lender shall conduct a face-to-face or telephone interview with the borrower and any co-maker or co-signer to resolve any discrepancies in the information on the credit application and to assure that the information is accurate and complete.
(10) After a thorough credit investigation and in the absence of information to the contrary, the lender may rely upon all statements of fact made by the borrower or any co-maker or co-signer in a credit application.
(b) Income requirements. (1) For any Title I loan, the credit application and review must establish that the borrower’s income will be adequate to meet the periodic payments required by the loan, as well as the borrower’s other housing expenses and recurring charges. For a borrower’s income to be considered adequate, housing expenses and total fixed expenses generally may not exceed maximum percentages of effective gross income established by the Secretary. If these expense-to-income ratios are exceeded, the borrower’s income may be considered adequate only if the lender determines and documents in the loan file the existence of compensating factors concerning the borrower’s creditworthiness that support approval of the loan.
(2) In determining whether the borrower’s income is adequate, the following definitions are applicable:
(i) Effective gross income is defined as continuing income from all sources that is reasonably expected to be available during the first two years of the loan obligation, without any deduction for income taxes or other items.
(ii) Total fixed expenses is the sum of the borrower’s housing expenses and other recurring charges.
(iii) Housing expenses includes all payments for principal, interest, loan or mortgage insurance charges, ground rent or leasehold charges, real estate taxes, hazard insurance, and homeowners association or condominium fees, but does not include utility costs.
(iv) Other recurring charges include all payments on automobile loans, furniture loans, student loans, installment loans, revolving charge accounts, alimony or child support, and any other debt for which the obligation is expected to continue for six months or more.
(c) Evidence of delinquency, default or misrepresentation. Except with the prior approval of the Secretary the lender shall not approve a loan if the lender has knowledge of any of the following circumstances:
(1) The borrower is past due more than 30 days as to the payment of principal or interest under the original terms of a loan obligation owed to or insured or guaranteed by the Federal Government, unless the debt has since been discharged or satisfied; or
(2) The borrower has previously made material misstatements of fact on applications for loans or other assistance.
§ 201.23 Borrower’s initial payment.
(a) General requirement. The borrower shall be responsible for the payment in cash of any costs that will not be paid, or are not eligible to be paid, from the proceeds of the loan. Such costs payable by the borrower may include any required downpayment, any discount points to be paid by the borrower to the lender, any other fees and charges that may not be financed, and any other costs in excess of the loan amount. No part of such costs payable by the borrower may be loaned, advanced, or paid to or for the benefit of the borrower by the dealer, the manufacturer, or any other party to the loan transaction. If the borrower obtains all or any part of such costs through a gift or a loan from some other source, the borrower must disclose the source of such gift or loan on the credit application. Any such loan must be secured by property or collateral owned by the borrower independently of the property securing repayment of the Title I loan, unless the prior approval of the Secretary is obtained for an exception to this requirement. The lender shall consider any such loan obligation in performing the credit investigation. Documentation of any initial payment shall be retained by the lender in the loan file.
(b) Manufactured home purchase loans. In the case of a manufactured home purchase loan, the borrower shall make a minimum cash downpayment of at least five percent of the purchase price of the home. The borrower’s equity in an existing manufactured home and any movable appurtenances may be traded-in on a new home and accepted in lieu of full or partial cash downpayment, but without any cash payment to the borrower. The existing manufactured home being traded-in shall be clearly identified, and the borrower’s equity in the home shall be based upon the retail value of the home and appurtenances (as determined by a HUD-approved appraisal), less the total of all loans outstanding on the home and appurtenances.
(c) Manufactured home lot loans. In the case of a manufactured home lot loan, the borrower shall make a minimum cash downpayment of at least five percent of the total of the purchase price and development costs for the lot.
(d) Combination loans. In the case of a combination loan, the borrower shall make a minimum cash downpayment of at least five percent of the purchase price of the manufactured home and lot. If the borrower already owns a manufactured home or a lot on which a manufactured home is to be placed, the borrower’s equity in such home or lot may be accepted in lieu of full or partial cash downpayment on a combination loan, but without any cash payment to the borrower.
§ 201.24 Security requirements.
(a) Property improvement loans—(1) Property improvement loans in excess of $7,500. (i) Any property improvement loan in excess of $7,500 shall be secured by a recorded lien on the improved property. The lien shall be evidenced by a mortgage or deed of trust, executed by the borrower and all other owners in fee simple.
(ii) If the borrower is a lessee, the borrower and all owners in fee simple must execute the mortgage or deed of trust. If the borrower is purchasing the property under a land installment contract, the borrower, all owners in fee simple, and all intervening contract sellers must execute the mortgage or deed of trust.
(iii) The lien need not be a first lien on the property; however, the lien securing the Title I loan must hold no less than the second lien position. This requirement shall not apply where the first and second mortgages were made at the same time or the second mortgage was provided by a state or local government agency in conjunction with a downpayment assistance program.
(2) Property improvement loans of $7,500 or less. Any property improvement loan for $7,500 or less (other than a manufactured home improvement loan) shall be similarly secured if, including any such additional loans, the total amount of all Title I loans on the improved property is more than $7,500.
(3) Manufactured home improvement loans. Manufactured home improvement loans need not be secured.
(b) Manufactured home loans. Any manufactured home loan shall be secured by a recorded lien on the home (or lot or home and lot, as appropriate), its furnishings, equipment, accessories, and appurtenances. The lien shall be a first lien, superior to any other lien on that property, and shall be evidenced by a properly recorded financing statement, a properly recorded security instrument executed by the borrower and any other owner of the property, or another acceptable instrument, such as a certificate of title issued by the State and containing a recitation of the lender’s lien interest in the manufactured home.
(c) Recording and perfection of security. The lender shall assure that the legal description of the property as recited in the security instrument is accurate, and that the security instrument creates a valid and enforceable lien on the property in the jurisdiction in which the property is located. The security instrument shall be recorded and perfected in the manner specified by applicable State law in the State where the property is located.
(d) Substitution or subordination of security. The Secretary may approve substitution or subordination of security where the security value will not be impaired or reduced.
(e) Release of liability or lien. The lender shall not release the borrower or any co-maker or co-signer from any liability under a note or from any lien securing a loan insured under this part without the prior approval of the Secretary.
§ 201.25 Charges to borrower to obtain loan.
(a) Fees and charges that may be financed in a property improvement loan. The Secretary will establish a list of fees and charges that may be included in a property improvement loan. Such fees and charges shall have been incurred in connection with the origination of the loan, and their inclusion shall not increase the total principal obligation beyond the maximum loan amounts in § 201.10.
(b) Fees and charges that may be financed in a manufactured home loan. The Secretary will establish a list of fees and charges that may be included in a manufactured home loan. Such fees and charges shall have been incurred in connection with the origination of the loan, and their inclusion shall not increase the total principal obligation beyond the maximum loan amounts in § 201.10.
(c) Fees and charges that may not be financed. The Secretary will establish a list of fees and charges incurred by the lender that may be collected from the borrower in the initial payment, but may not be included in the loan amount or otherwise financed or advanced by the dealer, the manufacturer, or any other party to the loan transaction.
(d) Fees and charges that may not be paid. Neither the lender nor the borrower may pay a referral fee to any dealer, home manufacturer, contractor, supplier, real estate broker, loan broker, or any other party in connection with the origination of a loan insured under this part.
§ 201.26 Conditions for loan disbursement.
(a) Property improvement loans. The lender shall comply with the following applicable requirements before disbursing the proceeds of a property improvement loan.
(1) The lender shall ensure that the following conditions are met:
(i) The borrower is eligible for a property improvement loan in accordance with § 201.20(a) (1) or (2); and
(ii) The interest of the borrower in the property is valid, through such title or other evidence as are generally acceptable to prudent lending institutions and leading attorneys in the community in which the property is situated.
(2) The proposed use of the loan proceeds shall be documented in accordance with the requirements of § 201.20(b)(1).
(3) Where the proceeds are to be used for an historic preservation loan, the lender shall ensure that the proposed improvements have been approved by the State Historic Preservation Officer in accordance with § 201.20(c).
(4) Where the proceeds are to be used for a fire safety equipment loan, the lender shall ensure that the proposed improvements have been approved by the State or local agency having jurisdiction over the fire safety requirements of health care facilities in accordance with § 201.20(c).
(5) In the case of a dealer loan, the lender shall obtain a completion certificate, on a HUD-approved form and signed by the borrower and the dealer under applicable criminal and civil penalties for fraud and misrepresentation, certifying that
(i) the improvements are eligible and have been completed in general accordance with the contract or cost estimate furnished to the lender, and
(ii) The borrower has not obtained the benefit of and will not receive any cash payment, rebate, cash bonus, sales commission, or anything of more than nominal value from the dealer as an inducement for the consummation of the transaction.
(6) In the case of a dealer loan made on or after December 7, 2001, the lender may disburse the loan proceeds solely to the borrower, or jointly to the borrower and the dealer or other parties to the transaction.
(7) In the case of a dealer loan, the lender must conduct a telephone interview with the borrower before the disbursement of the loan proceeds. The lender, at minimum, must obtain an oral affirmation from the borrower to release funds to the dealer. The lender shall document the borrower’s oral affirmation.
(8) For any property improvement loan, the lender shall provide the borrower with a written notice, to be signed by the borrower and retained in the loan file, that:
(i) States that the loan will be insured by HUD and describes the actions the Secretary may take to recover the debt if the borrower defaults on the loan and an insurance claim is paid;
(ii) Constitutes the borrower’s agreement to pay penalties and administrative costs imposed by HUD as authorized by 31 U.S.C. 3717; and
(iii) In the case of a direct loan, constitutes an acknowledgement of the borrower’s postdisbursement obligation to furnish a completion certificate and to permit an on-site inspection by the lender or its agent in accordance with §§ 201.40(b) and (c).
(9) The lender shall assure that the loan file is complete and contains the note, security instrument, and copies of all other documents relating to the property improvement loan transaction.
(b) Manufactured home loans. The lender shall comply with the following applicable requirements before disbursing the proceeds of a manufactured home loan.
(1) The lender shall ensure that the borrower is eligible for a manufactured home loan in accordance with § 201.21(a).
(2) The lender shall assure that the loan file is complete, and shall obtain the following documents for retention in the loan file:
(i) A signed copy of the purchase contract between the borrower and the dealer or seller;
(ii) A copy of the manufacturer’s invoice, where the loan involves the purchase of a new manufactured home;
(iii) Copies of itemized statements of other costs, fees and charges, whether paid by the borrower or financed with the loan proceeds; and
(iv) The note and security instrument and copies of all other documents relating to the loan transaction.
(v) The note, security instrument and copies of all other documents relating to the loan transaction.
(3) The lender shall obtain certifications from the borrower under applicable criminal and civil penalties for fraud and misrepresentation that:
(i) The manufactured home being financed with a manufactured home purchase loan or combination loan will be occupied as the borrower’s principal residence;
(ii) Where the proceeds are for a manufactured home lot loan, the borrower’s manufactured home will be placed on the lot and will be occupied as the borrower’s principal residence within six months after the date of the loan;
(iii) The initial payment required under § 201.23 was made, and no part of the initial payment was borrowed from or otherwise advanced or paid to or for the benefit of the borrower by the dealer or seller, the manufacturer, or any other party to the transaction, and if any part of the initial payment was obtained through a gift or loan, the source of the gift or loan and the security for any such loan was disclosed on the credit application;
(iv) While any portion of the loan obligation on a manufactured home purchase loan is unpaid, the manufactured home may be moved only to a new site in compliance with § 201.21 (c) and (e), and only with the lender’s prior approval;
(v) While any portion of the loan obligation on a combination loan is unpaid, the manufactured home will not be moved to a new site;
(vi) The borrower has paid the remaining unpaid balance on any other manufactured home loan secured by a different property, unless the prior approval of the Secretary is obtained for an exception to this requirement; and
(vii) The borrower has not obtained the benefit of and will not receive any cash payment, rebate, cash bonus, or anything of more than nominal value from the manufacturer or dealer as an inducement for the consummation of the transaction.
(4) For any manufactured home purchase loan or combination loan involving the sale of a manufactured home by a dealer, the lender shall obtain a placement certificate, on a HUD-approved form and signed by the dealer under applicable criminal and civil penalties for fraud and misrepresentation, certifying that:
(i) The manufactured homesite meets the requirements of § 201.21(e);
(ii) The structural integrity of the manufactured home was maintained during the process of transporting the home to the borrower’s homesite;
(iii) The manufactured home has been installed or erected on the homesite in accordance with the manufacturer’s requirements for anchoring, support, stability and maintenance;
(iv) If the manufactured home is placed on a permanent foundation, such foundation has been constructed in accordance with the requirements of § 201.21(c)(3);
(v) The dealer has performed the inspection and tests required under § 201.21(c)(4) and has determined that the manufactured home has sustained no structural damage or other defects resulting from its transportation or installation, and all plumbing, mechanical and electrical systems are fully operational;
(vi) Any initial payment required under § 201.23 was made by the borrower, and no part of the initial payment was loaned, advanced, or paid to or for the benefit of the borrower by the manufacturer, dealer, or any other party to the loan transaction; and
(vii) The borrower has not obtained the benefit of and will not receive any cash payment, rebate, cash bonus, or anything of more than nominal value from the manufacturer or dealer as an inducement for the consummation of the transaction.
(5) The lender shall obtain and file the certifications by local officials or a civil engineer which are required under § 201.21(e) to document the suitability of the manufactured homesite.
(6) For any direct manufactured home purchase loan or combination loan involving the relocation of the manufactured home to a new homesite owned or leased by the borrower, the lender (or an agent of the lender that is not a manufactured home dealer) shall conduct a site-of-placement inspection to verify that:
(i) States that the loan will be insured by HUD and describes the actions the Secretary may take to recover the debt if the borrower defaults on the loan and an insurance claim is paid;
(ii) The manufactured home and any itemized options and appurtenances included in the purchase price of the home or to be financed with the loan proceeds have been delivered and installed; and
(iii) The manufactured home has been properly erected or installed on the homesite without any apparent structural damage or other serious defects resulting from its transportation or installation, and all plumbing, mechanical and electrical systems are fully operational.
(7) The lender shall provide the borrower with a written notice, to be signed by the borrower and retained in the loan file, that:
(i) States that the loan will be insured by the HUD and describes the actions the Secretary may take to recover the debt if the borrower defaults on the loan and an insurance claim is paid; and
(ii) Constitutes the borrower’s agreement to pay penalties and administrative costs imposed by HUD as authorized by 31 U.S.C. 3717.
(8) Where a manufactured home purchase loan involves a manufactured home which is to be located on Indian trust or otherwise restricted lands, the lender shall obtain written permission from the trustee or the tribal authority who controls the site for the lender to repossess the home in the event of default by the borrower and acceleration of the loan.
§ 201.27 Requirements for dealer loans.
(a) Dealer approval and supervision. (1) The lender shall approve only those dealers which, on the basis of experience and information, the lender considers to be reliable, financially responsible, and qualified to satisfactorily perform their contractual obligations to borrowers and to comply with the requirements of this part. However, in no case shall the lender approve a dealer that is unable to meet the following minimum qualifications:
(i) Net worth. All property improvement and manufactured home dealers shall have and maintain a net worth of not less than $32,000 and $63,000, respectively. The required net worth must be maintained in assets acceptable to the Secretary.
(ii) Business experience. All property improvement loan and manufactured home dealers must have demonstrated business experience as a property improvement contractor or supplier, or in manufactured home retail sales, as applicable.
(2) The lender’s approval of a dealer shall be documented on a HUD-approved form, signed and dated by the dealer and the lender under applicable criminal and civil penalties for fraud and misrepresentation, and containing information supplied by the dealer on its trade name, places of business, type of ownership, type of business, and names and employment history of the owners, principals, officers, and salespersons. The dealer shall furnish a current financial statement prepared by someone who is independent of the dealer and is qualified by education and experience to prepare such statements, together with such other documentation as the lender deems necessary to support its approval of the dealer. The lender shall obtain a commercial credit report on the dealer and consumer credit reports on the owners, principals, and officers of the dealership.
(3) The lender shall require each dealer to apply annually for reapproval. The dealer shall furnish the same documentation as is required under paragraph (a)(2) of this section to support its application for reapproval. In no case shall the lender reapprove a dealer that is unable to meet the minimum net worth requirements in paragraph (a)(1) of this section.
(4) The lender shall supervise and monitor each approved dealer’s activities with respect to loans insured under this part. The lender shall visit each approved dealer’s places of business at least once in every six months to review its Title I performance and compliance. The lender shall maintain a file on each approved dealer which contains the executed dealer approval form and supporting documentation required under paragraph (a)(2) of this section, together with information on the lender’s experience with Title I loans involving the dealer. Each dealer file shall contain information about borrower defaults on Title I loans over time, records of completion or site-of-placement inspections conducted by the lender or its agent, copies of letters concerning borrower complaints and their resolution, and records of the lender’s periodic review visits to the dealer’s premises. The lender may also require that the dealer furnish records on individual loan transactions, if needed to enable the lender to review the dealer’s Title I performance and compliance.
(5) If a dealer does not satisfactorily perform its contractual obligations to borrowers, does not comply with Title I program requirements, or is unresponsive to the lender’s supervision and monitoring requirements, the lender shall terminate the dealer’s approval and immediately notify the Secretary with written documentation of the facts. A dealer whose approval is terminated under these circumstances shall not be reapproved without prior written approval from the Secretary. The lender may in its discretion terminate the approval of a dealer for other reasons at any time.
(6) The lender shall require each approved (or reapproved) dealer to provide written notification of any material change in its trade name(s), place(s) of business, type of ownership, type of business, or principal individuals who control or manage the business. The dealer shall furnish such notification to the lender within 30 days after the date of any material change.
(7) As a condition of manufactured home dealer approval (or reapproval), the lender may require a manufactured home dealer to execute a written agreement that, if requested by the lender, the dealer will resell any manufactured home repossessed by the lender under a title I insured manufactured home purchase loan approved by the lender as a dealer loan involving that dealer.
(b) Provision for full or partial recourse. In the case of a dealer-originated manufactured home purchase loan or combination loan, the lender and the dealer may agree to a provision in the loan documents for partial or full recourse against the dealer, to reduce or eliminate the lender’s loss in the event of foreclosure or repossession. Such recourse provision shall specify that, for a default occurring within a period of not more than three years from the date of the loan, the dealer shall reimburse the lender for a fixed percentage of the unpaid amount of the loan obligation, after deducting the proceeds from the sale of the property and any amounts received or retained by the lender after the date of default. However, the extent of the dealer’s liability may not exceed 100 percent of the unpaid amount of the loan obligation prior to such deductions. When a claim is filed, the lender shall notify the Secretary if the loan was subject to a recourse agreement and whether the recourse agreement has been honored. If without the lender’s approval a dealer has failed to honor its recourse obligation, the lender shall notify the Secretary and shall assign the recourse obligation to the Secretary in filing an insurance claim.
§ 201.28 Flood and hazard insurance, and Coastal Barriers properties.
(a) Flood insurance. No property improvement loan or manufactured home loan shall be eligible for insurance under this part if the property securing repayment of the loan is located in a special flood hazard area identified by the Federal Emergency Management Agency (FEMA), unless the community in which the area is situated is participating in the National Flood Insurance Program, flood insurance under the National Flood Insurance Program (NFIP) is available with respect to such property improvements, and flood insurance on the property is obtained by the borrower in compliance with section 102 of the Flood Disaster Protection Act of 1973 (42 U.S.C. 4012a). Such insurance shall be in the form of the standard policy issued under the National Flood Insurance Program (NFIP) or private flood insurance, as defined in 24 CFR 203.16a. Such insurance shall be obtained at any time during the term of the loan that the lender determines that the secured property is located in a special flood hazard area identified by FEMA and shall be maintained by the borrower for the remaining term of the loan, or until the lender determines that the property is no longer in a special flood hazard area, or until the property is repossessed or foreclosed upon by the lender. The amount of such insurance shall be at least equal to the unpaid balance of the Title I loan, and the lender shall be named as the loss payee for flood insurance benefits. A lender may determine that a private flood insurance policy meets the definition of private flood insurance, as defined in 24 CFR 203.16a, without further review of the policy, if the compliance aid statement provided in 24 CFR 203.16a(c) is included within the policy or as an endorsement to the policy.
(b) Hazard insurance. No manufactured home purchase loan or combination loan shall be eligible for insurance under this part unless hazard insurance on the manufactured home is obtained by the borrower and the lender is named as a loss payee of insurance benefits. Such insurance shall be maintained by the borrower for the full term of the loan or until the property is repossessed or foreclosed by the lender, and in an amount at least equal to the unpaid balance of the loan, except that the amount of insurance coverage shall be not less than the actual cash value of the home where State law precludes a higher amount. If the borrower fails to maintain such insurance, the lender shall obtain it at the borrower’s expense. If the home is not insured against hazards and sustains damage which would normally be covered by such insurance during the borrower’s ownership, the appraised value of the home for claim purposes will be adjusted in accordance with § 201.51(b)(3). Upon acquiring title to the property through repossession or foreclosure, the lender shall maintain hazard insurance upon the property in the amount prescribed above until its disposition and sale.
(c) Coastal barriers properties. No title I insurance shall be made available under this part for any property improvement loan or manufactured home loan except pursuant to a loan application approved before October 18, 1982, with respect to any property within the Coastal Barriers Resources System established by the Coastal Barriers Resources Act (16 U.S.C. 3501).
§ 201.29 Ineligible participants.
No loan may be insured under this part where the lender has been advised in writing by HUD or otherwise knows that any participant in the transaction as a dealer, home manufacturer, contractor, supplier, or broker, or as its agent or representative, has been suspended or debarred, or has otherwise been determined by HUD to be ineligible to participate in the title I program.
Subpart D—Insurance of Loans
§ 201.30 Reporting of loans for insurance.
(a) Date of reports. The lender shall transmit a loan report on each loan reported for insurance within 31 days from the date of the loan’s origination or purchase from a dealer or another lender. The loan report must be submitted on the form prescribed by the Secretary, and must contain the data prescribed by HUD. Any loan refinanced under this part shall similarly be reported on the prescribed form within 31 days from the date of refinancing. When a loan insured under this part is transferred to another lender without recourse, guaranty, guarantee, or repurchase agreement, a report on the prescribed form shall be transmitted to the Secretary within 31 days from the date of the transfer. No transfer of loan report is required when a loan insured under this part is transferred with recourse or under a guaranty, guarantee, or repurchase agreement.
(b) Late reports. The Secretary may accept a late report on a loan where the lender certifies that the obligation is not in default.
(c) Electronic loan reporting. With the prior approval of the Secretary, the lender may use electronic transmission to report loans for insurance in accordance with paragraph (a) of this section.
§ 201.31 Insurance charge.
(a) Insurance charge. For each eligible property improvement loan and manufactured home loan reported and acknowledged for insurance, the lender shall pay to the Secretary an insurance charge equal to 1.00 percent of the loan amount, multiplied by the number of years of the loan term. The insurance charge shall be paid in the manner prescribed in paragraph (b) of this section; however, no charge shall be made for a period of 14 days or less, and a charge for a full month shall be made for a period of more than 14 days. There shall be no abatement or refund of an insurance charge except as provided in paragraph (e) of this section.
(b) Payment of insurance charge. (1) For any loan having a maturity of 25 months or less, payment of the entire insurance charge prescribed in paragraph (a) of this section is due on the 25th calendar day after the date the Secretary acknowledges the loan report.
(2)(i) For any loan having a maturity in excess of 25 months, payment of the insurance charge shall be made in annual installments, with the first installment due on the 25th calendar day after the date the Secretary acknowledges the loan report, and the second and successive installments due on the 25th calendar day after the date of billing by the Secretary.
(ii) For any loan having a maturity in excess of 25 months, payment shall be made in annual installments of 1.00 percent of the loan amount until the insurance charge is paid.
(3) All insurance charges are considered earned when paid.
(4) The Secretary may require that loan insurance charges be remitted electronically. Instructions implementing this requirement shall be communicated to all affected lenders.
(c) Penalty charge and interest. Insurance charges not received from the lender by the due date specified in paragraph (b) of this section shall be assessed a penalty charge of four percent of the amount of the payment. Insurance charges received from the lender more than 30 days after the due date specified in paragraph (b) of this section shall also be assessed daily interest at the current United States Treasury value of funds rate, as published periodically in the
(d) Adjustment on notes transferred. Where there is a transfer of loan obligations between lenders and the insurance charges on such obligations have already been paid, any adjustment of such charges shall be made by the lenders involved. Any unpaid installments of the insurance charge shall be paid by the purchasing lender.
(e) Refund or abatement of insurance charges. A lender shall be entitled to a refund or abatement of insurance charges only in the following instances:
(1) Where the loan obligation has been refinanced, the unearned portion of the charge on the original obligation shall be credited to the charge on the refinanced loan.
(2) Where the loan obligation is prepaid in full or an insurance claim is filed, charges falling due after such prepayment or claim shall be abated.
(3) When a loan (or portion thereof) is found to be ineligible for insurance, charges paid on the ineligible portion shall be refunded, except where the Secretary determines that there was fraud or misrepresentation by the lender in the loan transaction. Such refund shall be made only if a claim is denied by the Secretary or the ineligibility is reported by the lender promptly upon discovery and confirmed by the Secretary. In no event shall a charge be refunded on the basis of loan ineligibility where the application for refund is made after the loan is paid in full. If a loan or claim has been denied and is subsequently resubmitted, the refunded amount of the insurance charge plus any accrued insurance charge shall be repaid.
(f) Lender passing insurance charge on to borrower. The insurance charge may be passed on to the borrower, provided that such charge is fully disclosed to the borrower.
§ 201.32 Insurance coverage reserve account.
(a) Establishment. The Secretary shall establish an insurance coverage reserve account for each lender. The amount of insurance coverage in each reserve account shall equal 10 percent of the amount disbursed, advanced, or expended by the lender in originating or purchasing eligible loans registered for insurance under this part, less the amount of all insurance claims approved for payment in connection with losses on such loans.
(b) Transfer of insured loans. The lender shall not sell, assign or otherwise transfer any insured loan or loan reported for insurance to a transferee lender not approved to originate and purchase title I loans under a valid title I contract of insurance. Nothing contained herein shall be construed to prevent the pledging of such a loan as collateral security under a trust agreement, or otherwise, in connection with a bona fide loan transaction.
(c) Transfer of insurance coverage. Not more than $5,000 in insurance coverage shall be transferred to or from a lender’s reserve account during any fiscal year (October 1 through September 30) without the prior approval of the Secretary. Except in cases involving the sale, assignment or transfer of loans sold with recourse or under a guaranty, guarantee or repurchase agreement, the Secretary shall transfer insurance coverage to or from a lender’s reserve account to accompany the loan transfers reported by lenders under § 201.30.
(1) In all cases involving the sale, assignment or transfer of loans sold without recourse, guaranty, guarantee, or repurchase agreement, the Secretary shall transfer insurance coverage to the reserve account established for the transferee lender in an amount equal to 10 percent of the actual purchase price or the net unpaid principal balance, whichever is lesser, but not to exceed the amount of insurance coverage in the transferor lender’s reserve account prior to the transfer. Insurance coverage shall be added to the existing amount of insurance coverage in the transferee lender’s reserve account. The Secretary may transfer insurance coverage with earmarking when a determination is made that it is in the Secretary’s interest to do so.
(2) In cases involving the transfer of loans sold with recourse or under a guaranty, guarantee or repurchase agreement, no insurance coverage will be transferred and no reports will be required.
(3) An existing insured property improvement loan or manufactured home loan may not be refinanced by a lender different from the originating or purchasing lender of record, unless the loan has been sold, assigned, or transferred to the new lender under paragraph (c) of this section and the Secretary has transferred insurance coverage for the loan under the applicable requirements of this paragraph.
(d) Recovery shall not affect insurance coverage reserve account. Amounts which may be recovered by the Secretary after payment of an insurance claim shall not be added to the amount of insurance coverage remaining in a lender’s reserve account.
Subpart E—Loan Administration
§ 201.40 Post-disbursement loan requirements.
(a) Discovery of misstatements of fact. If, after a loan has been made, the lender discovers any material misstatement of fact or that the loan proceeds have been misused by the borrower, dealer or any other party, it shall promptly report this to the Secretary. In such case, the insurance of the loan shall not be affected unless such material misstatement of fact or misuse of loan proceeds was caused by or was knowingly sanctioned by the lender or its employees (see § 201.31(e)(3)), provided that the validity of any lien on the property has not been impaired.
(b) Requirements on property improvement loans. (1) After receiving the proceeds of a direct property improvement loan, and after the work is completed to the borrower’s satisfaction, the borrower shall submit a completion certificate to the lender, on a HUD-approved form and signed by the borrower under applicable criminal and civil penalties for fraud and misrepresentation, certifying that:
(i) The improvements have been completed,
(ii) the amount borrowed has been spent on improvements eligible under § 201.20(b) and in accordance with the contract or cost estimate furnished to the lender prior to disbursement of the loan proceeds, and
(iii) The borrower has not obtained the benefit of and will not receive any cash payment, rebate, cash bonus, sales commission, or anything of more than nominal value from any contractor or supplier as an inducement for the consummation of the loan transaction.
(2) The borrower shall submit the completion certificate promptly upon the work’s completion, but not later than six months after the disbursement of the loan proceeds, with one six-month extension if necessary. If the borrower fails to submit the completion certificate within these time limits, an on-site inspection shall be conducted in accordance with paragraph (c) of this section.
(3) The borrower is not required to submit a completion certificate when the property improvement loan is made by or on behalf of a State or local government agency or a nonprofit organization, the loan proceeds are held in an escrow account pending completion of the improvements, and the loan proceeds are disbursed from the escrow account in stages, with the written approval of the borrower and based upon the percentage of work completed.
(c) Inspection requirement on property improvement loans. The lender or its agent shall conduct an on-site inspection on any property improvement loan where the principal obligation is $7,500 or more, and on any direct property improvement loan where the borrower fails to submit a completion certificate as required under paragraph (b) of this section. On a dealer loan, the inspection shall be completed within 60 days after the date of disbursement. On a direct loan, the inspection shall be completed within 60 days after receipt of the completion certificate, or as soon as the lender determines that the borrower is unwilling to cooperate in submitting the completion certificate. The purpose of the inspection is to verify the eligibility of the improvements and whether the work has been completed. If the borrower will not cooperate in permitting an on-site inspection, the lender shall report this fact to the Secretary.
(d) Inspection requirement on dealer manufactured home loans. For any manufactured home purchase loan or combination loan involving the sale of a manufactured home by a dealer, the lender (or an agent of the lender that is not a manufactured home dealer) shall conduct a site-of-placement inspection within 60 days after the date of disbursement to verify that:
(1) The terms and conditions of the purchase contract have been met;
(2) The manufactured home and any itemized options and appurtenances included in the purchase price of the home or financed with the loan proceeds have been delivered and installed; and
(3) The placement certificate executed by the borrower and the dealer is in order.
§ 201.41 Loan servicing.
(a) Generally. The lender shall service loans in accordance with accepted practices of prudent lending institutions. It shall have adequate facilities for contacting the borrower in the event of default, and shall otherwise exercise diligence in collecting the amount due. The lender shall remain responsible to the Secretary for proper collection efforts, even though actual loan servicing and collection may be performed by an agent of the lender. The lender shall have an organized means of identifying, on a periodic basis, the payment status of delinquent loans to enable collection personnel to initiate and follow-up on collection activities, and shall document its records to reflect its collection activities on delinquent loans.
(b) Partial payments. The lender shall accept any partial payment (inclusive of late charges) under an executed modification agreement or an acceptable repayment plan, and either apply it to the borrower’s account or hold it in a trust account pending disposition. When partial payments held for disposition aggregate a full monthly installment, they shall be applied to the borrower’s account, thus advancing the date of the oldest unpaid installment. If a partial payment is received more than 60 days after the date of default and was not submitted under a repayment plan or a modification agreement, the partial payment may be returned to the borrower, with a letter of explanation.
§ 201.42 Bankruptcy, insolvency or death of borrower.
(a) Bankruptcy or insolvency. The lender shall file a proof of claim with the court having jurisdiction when the lender has timely information that a borrower is involved in bankruptcy or insolvency proceedings, except that a proof of claim need not be filed if the court notifies the lender that the borrower has no assets and a proof of claim should not be filed. The notice of bankruptcy and a copy of the proof of claim (or the notice from the court that a proof of claim is not required) shall be retained in the loan file.
(b) Death of a borrower. The lender shall file a proof of claim with the court having jurisdiction when the lender has timely information that a borrower is deceased, unless the lender determines that there will not be a probate proceeding. A copy of the proof of claim (or documentation as to why a proof of claim was not filed) shall be retained in the loan file.
(c) Responsibility of the lender after insurance claim is filed. After the Secretary pays an insurance claim, the Secretary will notify the bankruptcy or probate court, as appropriate, that the loan has been assigned to the United States and will request substitution as the party to whom the claim is owed. Until the insurance claim is paid, the lender shall take all steps necessary to protect the interests of the holder of the note in any bankruptcy or probate proceeding.
§ 201.43 Administrative reports and examinations.
The Secretary may call upon a lender for any reports deemed necessary in connection with the regulations in this part and may inspect the loan files, records, books and accounts of the lender as they pertain to the loans reported for insurance.
Subpart F—Default Under the Loan Obligation
§ 201.50 Lender efforts to cure the default.
(a) Personal contact with the borrower before acceleration and foreclosure or repossession. The lender shall undertake foreclosure or repossession of the property securing a Title I loan that is in default only after the lender has serviced the loan in a timely manner and with diligence in accordance with the requirements of this part, and has taken all reasonable and prudent measures to induce the borrower to bring the loan account current. Before taking action to accelerate the maturity of the loan, the lender or its agent shall contact the borrower and any co-maker or co-signer, either in a face-to-face meeting or by telephone, to discuss the reasons for the default and to seek its cure. If the borrower and the co-makers or co-signers cannot be located, will not discuss the default, or will not agree to its cure, the lender may proceed to take action under paragraph (b) of this section. The lender shall document the results of its efforts to contact the borrower and any co-maker or co-signer, and shall place in the loan file a copy of any modification agreement or repayment plan that has been offered.
(b) Notice of default and acceleration. Unless the borrower cures the default or agrees to a modification agreement or repayment plan, the lender shall provide the borrower with written notice that the loan is in default and that the loan maturity is to be accelerated. In addition to complying with applicable State or local notice requirements, the notice shall be sent by certified mail and shall contain:
(1) A description of the obligation or security interest held by the lender;
(2) A statement of the nature of the default and of the amount due to the lender as unpaid principal and earned interest on the note as of the date 30 days from the date of the notice;
(3) A demand upon the borrower either to cure the default (by bringing the loan current or by refinancing the loan) or to agree to a modification agreement or a repayment plan, by not later than the date 30 days from the date of the notice;
(4) A statement that if the borrower fails either to cure the default or to agree to a modification agreement or a repayment plan by the date 30 days from the date of the notice, then, as of the date 30 days from the date of the notice, the maturity of the loan is accelerated and full payment of all amounts due under the loan is required;
(5) A statement that if the default persists the lender will report the default to an appropriate credit reporting agency; and
(6) Any other requirements prescribed by the Secretary.
(c) Reinstatement of the loan. The lender may rescind the acceleration of maturity after full payment is due and reinstate the loan only if the borrower brings the loan current, executes a modification agreement, or agrees to an acceptable repayment plan.
(d) Notice to credit reporting agency. If the loan maturity is accelerated and the loan is not reinstated, the lender shall report the default to an appropriate credit reporting agency.
§ 201.51 Proceeding against the loan security.
(a) Property improvement loans. (1) After acceleration of maturity on a secured property improvement loan, the lender may either proceed against the loan security under its title I security instrument or make claim under its contract of insurance. If the lender proceeds against the loan security, it may submit an insurance claim only if it complies with the requirements of paragraph (a)(2) of this section.
(2) The lender may proceed against the secured property under its Title I security instrument and later submit a claim under its contract of insurance only with the prior approval of the Secretary. The Secretary’s decision will be based upon all relevant factors, including but not limited to the appraised value and the amount of all outstanding loan obligations on the property, the estimated costs of foreclosure and disposition, and the anticipated time to dispose of the property. In proceeding against the secured property, the lender shall comply with all applicable State and local laws, and shall take all actions necessary to preserve its rights, if any, to obtain a valid and enforceable deficiency judgment against the borrower.
(3) After acceleration of maturity on a defaulted unsecured property improvement loan, the lender may submit a claim under its contract of insurance.
(b) Manufactured home loans. (1) After acceleration of maturity on a defaulted manufactured home loan, the lender shall proceed against the loan security by foreclosure or repossession, as appropriate, in compliance with all applicable State and local laws, and shall acquire good, marketable title to the property securing the loan. The lender shall also take all actions necessary under State and local law to preserve its rights, if any, to obtain a valid and enforceable deficiency judgment against the borrower.
(2) Prior to foreclosure or repossession, the lender or its agent shall make a visual inspection of the property and prepare a report on its condition for placement in the loan file. If the lender determines that the property has been abandoned, the lender shall take such steps as are permitted under State or local law to repossess or foreclose upon the property, without waiting for the notice period under § 201.50(b) to run.
(3) The lender shall obtain a HUD-approved appraisal of the property as soon after repossession as possible, or earlier with the permission of the borrower. This appraisal shall be performed on the homesite, unless the site owner requires that the home be removed before the appraisal can be performed, and it should reflect the retail value of comparable manufactured homes in similar condition and in the same geographic area where the repossession occurred. When the manufactured home is without hazard insurance and has sustained, at any time prior to the sale or disposition of the home, damage which would normally be covered by such insurance, the lender shall report this situation in submitting an insurance claim, and the appraised value shall be based upon the retail value of comparable homes in good condition and in the same geographic area, without any deduction for such damage.
§ 201.52 Acquisition by voluntary conveyance or surrender.
The lender may accept a voluntary conveyance of title to or ownership of the property securing a manufactured home loan which is in default, provided that (a) the lender accepts the conveyance in full satisfaction of the borrower’s obligation, and (b) no claim is submitted under its contract of insurance. The lender may accept voluntary surrender of the property without satisfaction of the borrower’s obligation, provided that if the lender intends thereafter to submit a claim under its contract of insurance, the lender shall acquire title to or ownership of the property and then dispose of and sell the property in compliance with State and local law, so as to assure that it can assign a valid and enforceable obligation, including any deficiency against the borrower, to the Secretary when submitting its claim. If the lender accepts a voluntary conveyance of title or a voluntary surrender of the property, the notice of default and acceleration under § 201.50(b) shall not be required.
§ 201.53 Disposition of manufactured home loan property.
Where the lender obtains title to property securing a manufactured home loan by repossession or foreclosure, the property shall be sold for the best price obtainable before making an insurance claim. In the case of a combination loan, the manufactured home and lot shall be sold in a single transaction and the manufactured home may not be removed from the lot, unless the prior approval of the Secretary is obtained for a different procedure. The best price obtainable shall be the greater of:
(a) The actual sales price of the property, after deducting the cost of repairs, furnishings, and equipment needed to make the property marketable, and after deducting the cost of transportation, set-up, and anchoring if the manufactured home is moved to a new homesite; or
(b) The appraised value of the property before repairs (as determined by a HUD-approved appraisal obtained in accordance with § 201.51(b)(3)).
§ 201.54 Insurance claim procedure.
(a) Claim application. A claim for reimbursement for loss on any eligible loan shall be made on a HUD-approved form, executed by a duly qualified officer of the lender under applicable criminal and civil penalties for fraud and misrepresentation. The insurance claim shall be fully documented and itemized, and shall be accompanied by all documents and materials required by the Secretary for claim review. The claim submission shall contain original copies of all notes, security instruments, assumption agreements, releases of liability for repayment of the loan, judgments obtained by the lender against the borrower, and any related documents and forms, except where State or local law requires their retention by the lender or a governmental body such as a court. As appropriate, the claim application shall be supported by the following:
(1) Documentation of the lender’s efforts to effect recourse against any dealer in accordance with any recourse agreement under § 201.27(b) between the lender and the dealer and contained in the loan documents;
(2) Certification under applicable criminal and civil penalties for fraud and misrepresentation that the lender has complied with all applicable State and local laws in carrying out any foreclosure or repossession, including copies of all notices served upon the borrower or published in connection with such foreclosure or repossession; and
(3) Where a borrower has declared bankruptcy or insolvency or is deceased, copies of the documentation required to be retained in the loan file under § 201.42.
(b) Maximum claim period. (1) An insurance claim shall be filed not later than the following dates:
(i) For property improvement loans—nine months after the date of default.
(ii) For manufactured home loans—three months after the date of sale of the property securing the loan, but not to exceed 18 months after the date of default.
(2) The Secretary may extend the claim filing period in a particular case, but only if the lender shows clear evidence that the delay in claim filing was in the interest of the Secretary or was caused by one of the following:
(i) Litigation related to the loan;
(ii) Management control of the lender or the Title I loan portfolio was assumed by a Federal or State agency; or
(iii) The borrower had experienced a loss of income or other financial difficulties directly attributable to a major disaster declared by the President, and additional time was needed to provide forbearance on a property improvement loan.
(3) If a borrower is a “person in military service” as that term is defined in the Soldiers’ and Sailors’ Civil Relief Act of 1940 and is in default on a loan insured under this part, any period of military service after the date of default shall be excluded in computing the maximum time period for filing an insurance claim.
(c) Resubmitted and supplemental claims. (1) Any insurance claim which is resubmitted with an appeal of a claim denial or a request for a waiver of the regulations in accordance with § 201.5(b) shall be filed within six months after the date of the claim denial.
(2) Any supplemental insurance claim shall be filed within six months after the date of payment on the initial claim. A reprocessing fee, in an amount prescribed by the Secretary, will be charged for any supplemental claim.
(d) Assignment of lender’s rights to the United States. Upon the filing of the insurance claim, the lender shall assign its entire interest in the loan note (or in a judgment in lieu of the note), in any security held, and in any claim filed in probate, bankruptcy or insolvency proceedings, to the United States of America. The assignment shall be made in the form provided in paragraph (f) of this section, provided that if this form is not valid or generally acceptable in the jurisdiction involved, a form which is valid and generally acceptable in the jurisdiction where the judgment or security was taken shall be used. If the security interest has been assigned to the United States, the assignment shall be recorded in that jurisdiction prior to filing the insurance claim, unless the Secretary determines that recordation by the lender in that jurisdiction is impractical.
(e) Valid and enforceable obligation when assigned. The loan obligation evidenced by the note must be both valid and enforceable against the debtor at the time the note is assigned to the United States of America. If the Secretary has reason to believe that the obligation may not be either valid or enforceable against the borrower, the Secretary may either deny the claim and reassign the loan note to the lender, or require the lender to repurchase the paid claim and accept reassignment of the note. The lender will be notified of the reasons for the claim denial or repurchase. If the lender subsequently obtains a valid and enforceable judgment against the borrower for the unpaid balance of the loan, the lender may resubmit the claim with an assignment of the judgment.
(f) Form of assignment. A lender shall use the following form of assignment, or one generally acceptable in the jurisdiction involved, properly dated, to assign the lender’s entire interest in a loan note, judgment, real estate mortgage, deed of trust, conditional sales contract, chattel mortgage, mechanic’s lien, or any security, in making an insurance claim:
All right, title, and interest of the undersigned is hereby assigned (without warranty, except that the loan qualifies for insurance) to the United States of America (HUD).
(g) Denial of insurance claim. The Secretary may deny a claim for insurance in whole or in part based upon a violation of these regulations, unless a waiver of compliance with the regulations is granted under § 201.5.
(h) Incontestability of insurance claim payment. Any insurance claim payment on a title I loan shall be final and incontestable after two years from the date the claim was certified for payment by the Secretary, in the absence of fraud or misrepresentation on the part of the lender, unless a demand for repurchase of the loan obligation is made on behalf of the United States prior to the expiration of the two-year period.
§ 201.55 Calculation of insurance claim payment.
The lender will be reimbursed in an amount not to exceed 90 percent of its loss on any eligible loan up to the amount of insurance coverage in the lender’s insurance coverage reserve account established by the Secretary under § 201.32, if the insurance claim is made in accordance with the requirements of this part. The amount of the insurance claim payment shall be computed as follows:
(a) Property improvement loans. For property improvement loans, the insurance claim payment shall be 90 percent of the following amounts:
(1) The unpaid amount of the loan obligation (net unpaid principal and the uncollected interest earned to the date of default, calculated according to the terms of the note executed for any loan application that is approved prior to the effective date of these regulations, and calculated according to the actuarial method for all loans for which loan applications are approved on or after the effective date of these regulations). Where the lender has proceeded against the secured property under § 201.51(a)(2), the unpaid amount of the loan obligation shall be reduced by the proceeds received from the property’s sale or disposition, after deducting the following:
(i) The balances due on any obligations senior to the Title I loan obligation; and
(ii) Customary and reasonable expenses for foreclosure and disposition, as determined by the Secretary.
(2) Interest on the unpaid amount of the loan obligation from the date of default to the date of the claim’s initial submission for payment plus 15 calendar days, calculated at the rate of seven percent per annum. However, interest shall not be paid for any period greater than nine months from the date of default.
(3) The amount of uncollected court costs, including fees paid for issuing, serving, and filing a summons.
(4) The amount of attorney’s fees on an hourly or other basis for time actually expended and billed, not to exceed $500.
(5) The amount of expenses for recording the assignment of the security to the United States.
(b) Manufactured home loans. For manufactured home loans, the insurance claim payment shall be 90 percent of the sum of the following amounts:
(1) The unpaid amount of the loan obligation (net unpaid principal and the uncollected interest earned to the date of default, calculated according to the actuarial method), after deducting the following amounts:
(i) The best price obtainable for the property after lawful repossession or foreclosure, as determined in accordance with § 201.53;
(ii) All amounts to which the lender is entitled after the date of default from any source relating to the property, including but not limited to such items as rent, other income, recourse recovery against the dealer, hazard insurance benefits, secured interest protection insurance benefits, and rebates on prepaid insurance premiums; and
(iii) Amounts retained by the lender after the date of default, including amounts held or deposited to the account of the borrower or to which the lender is entitled under the loan transaction, and which have not been applied in reduction of the borrower’s indebtedness.
(2) Interest on the unpaid amount of the loan obligation from the date of default to the date of the claim’s initial submission for payment plus 15 calendar days, calculated at the rate of seven percent per annum. However, interest shall not be paid for any period greater than nine months from the date of default.
(3) For manufactured home purchase loans, the amount of costs paid to a dealer or other third party to repossess and preserve the manufactured home and other property securing repayment of the loan (including the costs of site inspection, property appraisal, hazard insurance premiums, personal property taxes, and site rental, as appropriate), plus actual costs not to exceed $1,000 per module for removing and transporting the home to a dealer’s lot or other off-site location.
(4) The amount of a sales commission paid to a dealer, real estate agent or other third party for the resale of the repossessed or foreclosed manufactured home and/or lot. Where the home is resold on-site, the commission shall not exceed 10 percent of the sales price. Where the home is resold off-site, the commission shall not exceed seven percent of the sales price.
(5) For manufactured home lot loans, and for combination loans where both the foreclosed manufactured home and lot are classified as realty, the amount of:
(i) State or local real estate taxes, ground rents, and municipal water and sewer fees or liens, prorated to the date of disposition of the property;
(ii) Special assessments which are noted on the loan application or which become liens after the insurance is issued, prorated to the date of disposition of the property;
(iii) Premiums for hazard insurance on the manufactured home, prorated to the date of disposition of the property; and
(iv) Transfer taxes imposed upon any deeds or other instruments by which the property was acquired by the lender.
(6) The amount of uncollected court costs, including fees paid for issuing, serving, and filing a summons.
(7) The amount of attorney’s fees on an hourly or other basis for time actually expended and billed, not to exceed $1,000.
(8) The amount of expenses for recording the assignment of the security to the United States, and for costs of repossession or foreclosure other than attorney’s fees and those incurred under paragraph (b)(3), but not to exceed costs which are customary and reasonable in the jurisdiction where the repossession or foreclosure takes place, as determined by the Secretary.
Subpart G—Debts Owed to the United States Under Title I
§ 201.60 General.
(a) Applicability. The provisions in this subpart apply to the collection of debts owed to the United States arising out of the Title I program. These debts include, but are not limited to:
(1) Amounts owed on loans assigned to the United States by insured lenders as the result of defaults by borrowers;
(2) Unpaid insurance charges owed by lenders; and
(3) Unpaid obligations of lenders arising from repurchase demands.
(b) Departmental debt collection regulations. Except as modified by this subpart, collection of debts arising out of the Title I program is subject to the Department’s debt collection regulations in subpart C of 24 CFR part 17.
§ 201.61 Claims against debtors—principal amount of debt.
(a) Liability. A debtor is liable to the Secretary for the principal amount of the debt, as described in paragraphs (b), (c), or (d) of this section, as appropriate.
(b) Property improvement notes. In the case of an assigned note for a property improvement loan, the principal amount of the debt is the unpaid amount of the loan obligation, as defined in § 201.55(a)(1) of this part, plus amounts described in §§ 201.55(a) (3), (4), (5).
(c) Manufactured home notes. In the case of an assigned note for a manufactured home loan, the principal amount of the debt is the unpaid amount of the loan obligation, as defined in § 201.55(b)(1) of this part, plus amounts described in §§ 201.55(b) (3) through (8).
(d) Assigned judgments. In the case of a judgment obtained by the lender on a property improvement loan or a manufactured home loan and assigned to the Secretary, the principal amount of the debt is the amount of the judgment.
§ 201.62 Claims against debtors—interest, penalties, and administrative costs.
(a) Interest. In addition to the principal amount of the debt, the debtor is liable for the payment of interest. Interest accrues on the principal amount of the debt as of the date of default, as defined in § 201.2(h) of this part, as follows:
(1) In the case of a debt based upon the assignment of a defaulted note, interest is assessed at the lesser of the rate specified in the note or the United States Treasury’s current value of funds rate in effect on the date the Title I insurance claim was paid.
(2) In the case of a debt based upon the assignment of a judgment, interest is assessed at the lesser of the rate specified in the judgment or the United States Treasury’s current value of funds rate in effect on the date the Title I insurance claim was paid.
(b) Penalties and administrative costs. The Secretary shall assess reasonable administrative costs and penalties as authorized in 31 U.S.C. 3717, unless there is no provision in the note providing for such charges and the debtor has not otherwise consented to liability for such charges.
§ 201.63 Claims against lenders.
Claims against lenders for money owed to the Department, including unpaid insurance charges and unpaid repurchase demands, shall be collected in accordance with 24 CFR part 17, subpart C.
PART 202—APPROVAL OF LENDING INSTITUTIONS AND MORTGAGEES
Subpart A—General Requirements
§ 202.1 Purpose.
This part establishes minimum standards and requirements for approval by the Secretary of lenders and mortgagees to participate in the Title I and Title II programs.
§ 202.2 Definitions.
Act means the National Housing Act (12 U.S.C. 1702 et seq.).
Claim means a single family insured mortgage for which the Secretary pays an insurance claim within 24 months after the mortgage is insured.
Default means a single family insured mortgage in default for 90 or more days within 24 months after the mortgage is insured.
Lender or Title I lender means a financial institution that:
(a) Holds a valid Title I Contract of Insurance and is approved by the Secretary under this part as a supervised lender under § 202.6, a nonsupervised lender under § 202.7, an investing lender under § 202.9, or a governmental or similar institution under § 202.10; or
(b) Is under suspension or held a Title I contract that has been terminated but remains responsible for servicing or selling Title I loans that it holds and is authorized to file insurance claims on such loans.
Loan or Title I loan means a loan authorized for insurance under Title I of the Act.
Mortgage, Title II mortgage or insured mortgage means a mortgage or loan insured under Title II or Title XI of the Act.
Mortgagee or Title II mortgagee means a mortgage lender that is approved to participate in the Title II programs as a supervised mortgagee under § 202.6, a nonsupervised mortgagee under § 202.7, an investing mortgagee under § 202.9, or a governmental or similar institution under 202.10.
Multifamily mortgagee means a mortgagee approved to participate only in multifamily Title II programs, except that for purposes of § 202.8(b)(1) the term also means a mortgagee approved to participate in both single family and multifamily Title II programs.
Normal rate means the rate of defaults and claims on insured mortgages for the geographic area served by a HUD field office, or other area designated by the Secretary, in which a mortgagee originates mortgages.
Origination approval agreement means the Secretary’s agreement that a mortgagee is approved to originate single family insured mortgages.
Title I program(s) means an insurance program or programs authorized by Title I of the Act.
Title II program(s) means an insurance program or programs authorized by Title II or Title XI of the Act.
§ 202.3 Approval status for lenders and mortgagees.
(a) Initial approval. A lender or mortgagee may be approved for participation in the Title I or Title II programs upon filing a request for approval on a form prescribed by the Secretary and signed by the applicant. The approval form shall be accompanied by such documentation as may be prescribed by the Secretary.
(1) Approval is signified by:
(i) The Secretary’s agreement that the lender or mortgagee is considered approved under the Title I or Title II programs, except as otherwise ordered by the Mortgagee Review Board or an officer or subdivision of the Department to which the Mortgagee Review Board has delegated its power, unless the lender or mortgagee voluntarily relinquishes its approval;
(ii) Consent by the lender or mortgagee to comply at all times with the general approval requirements of § 202.5, and with additional requirements governing the particular class of lender or mortgagee for which it was approved as described under subpart B at §§ 202.6 through 202.10; and
(iii) Under the Title I program, the issuance of a Contract of Insurance constitutes an agreement between the Secretary and the lender and which governs participation in the Title I program.
(2) Limitations on approval:
(i) Separate approval as lender or mortgagee is required for participation in the Title I or Title II programs, respectively. Application must be made, and approval will be granted, on the basis of one or both categories of programs, as is appropriate.
(ii) Separate approval as mortgagee is required for the Single Family Mortgage Insurance Programs and for the Multifamily Mortgage Insurance Programs. Application must be made, and approval will be granted, on the basis of either or both categories, as is appropriate.
(iii) In addition to the requirements for approval as a Title II mortgagee, the Secretary may from time to time issue eligibility requirements for participation in specific programs, such as the Direct Endorsement program.
(iv) A Title II mortgagee may be approved to operate either on a nationwide basis or on a geographically restricted basis in only those areas designated by the Secretary.
(v) A Title I lender may originate loans or purchase advances of credit only within a geographic lending area approved by the Secretary. Expansion of this lending area shall be subject to a determination by the Secretary that the lender is able to originate loans in compliance with part 201 of this chapter within such expanded area.
(3) Authorized agents. A mortgagee approved under §§ 202.6, 202.7, or 202.10 as a nonsupervised mortgagee, supervised mortgagee, or governmental or similar institution approved as a Direct Endorsement mortgagee under 24 CFR 203.3 may, with the approval of the Secretary, designate a nonsupervised or supervised mortgagee with Direct Endorsement approval under 24 CFR 203.3 as authorized agent for the purpose of underwriting loans. The application for mortgage insurance may be submitted in the name of the FHA-approved mortgagee or its designated authorized agent under this paragraph.
(b) Recertification. On each anniversary of the approval of a lender or mortgagee, the Secretary will determine whether recertification, i.e., continued approval, is appropriate. The Secretary will review the yearly verification report required by § 202.5(m) and other pertinent documents, ascertain that all application and annual fees have been paid, and request any further information needed to decide upon recertification.
(c) Termination—(1) Termination of the Title I Contract of Insurance—(i) Notice. A Contract of Insurance may be terminated in accordance with its terms by the Secretary or by the Secretary’s designee upon giving the lender at least 5 days prior written notice.
(ii) Informal meeting. If requested, and before expiration of the 5-day notice period, a lender shall be entitled to an informal meeting with the Department official taking action to terminate the Contract of Insurance.
(iii) Effect of termination. Termination of a Contract of Insurance shall not affect:
(A) The Department’s obligation to provide insurance coverage with respect to eligible loans originated before the termination, unless there was fraud or misrepresentation;
(B) A lender’s obligation to continue to pay insurance charges or premiums and meet all other obligations, including servicing, associated with eligible loans originated before termination; or
(C) A lender’s right to apply for and be granted a new Title I Contract of Insurance, provided that the requirements for approval under this part are met.
(2) Credit Watch Termination—(i) Scope and frequency of review. The Secretary will review, on an ongoing basis, the number of defaults and claims on mortgages originated, underwritten, or both, by each mortgagee in the geographic area served by a HUD field office. HUD will make this rate information available to mortgagees and the public through electronic means and will issue instructions for accessing this information through a Mortgagee Letter. For this purpose, and for all purposes under paragraph (c) of this section, a mortgage is considered to be originated in the same federal fiscal year in which its amortization commences. The Secretary may also review the insured mortgage performance of a mortgagee’s branch offices individually and may terminate the authority of the branch or the authority of the mortgagee’s overall operation.
(ii) Credit Watch Status. Mortgagees are responsible for monitoring their default and claim rate performance. A mortgagee is considered to be on Credit Watch Status if, at any time, the mortgagee has a rate of defaults and claims on insured mortgages originated, underwritten, or both, in an area which exceeds 150 percent of the normal rate and its origination approval agreement has not been terminated.
(iii) Notice of termination—(A) Notice of termination of origination approval agreement. The Secretary may notify a mortgagee that its origination approval agreement will terminate 60 days after notice is given, if the mortgagee had a rate of defaults and claims on insured mortgages originated in an area which exceeded 200 percent of the normal rate and exceeded the national default and claim rate for insured mortgages.
(B) Notice of termination of direct endorsement approval. The Secretary may notify a mortgagee that its direct endorsement approval under 24 CFR part 203 will terminate 60 days after notice is given, if the mortgagee had a rate of defaults and claims on insured mortgages underwritten in an area which exceeded 200 percent of the normal rate and exceeded the national default and claim rate for insured mortgages. The termination of a mortgagee’s direct endorsement approval pursuant to this section is separate and apart from the termination of a mortgagee’s direct endorsement approval under 24 CFR part 203.
(C) No need for prior action by Mortgagee Review Board. The termination notices described in paragraphs (c)(2)(ii)(A) and (B) of this section may be given without prior action by the Mortgagee Review Board.
(D) Underserved areas. Before the Secretary sends the termination notice, the Secretary shall review the Census tract concentrations of the defaults and claims. If the Secretary determines that the excessive rate is the result of mortgage lending in underserved areas, as defined in 24 CFR 81.2, the Secretary may determine not to terminate the mortgagee’s origination approval agreement and/or direct endorsement approval.
(iv) Request for informal conference. Prior to termination the mortgagee may submit a written request for an informal conference with the Deputy Assistant Secretary for Single Family Housing or that official’s designee. HUD must receive the written request no later than 30 calendar days after the date of the proposed termination notice. Unless HUD grants an extension, the informal conference must be held no later than 60 calendar days after the date of the proposed termination notice. After considering relevant reasons and factors beyond the mortgagee’s control that contributed to the excessive default and claim rates, the Deputy Assistant Secretary for Single Family Housing or designee may withdraw the termination notice.
(v) Limitation on the establishment of new branches. Upon receipt of a proposed termination notice of its origination approval agreement, the mortgagee shall not establish a new branch or new branches for the origination of FHA-insured mortgages in the area or areas that are covered by the proposed termination notice. As of January 18, 2005, a mortgagee that is in receipt of a notice of proposed termination may not establish any new branch in the location or locations cited in the proposed termination notice until either:
(A) The proposed termination notice is withdrawn or
(B) The Secretary reinstates the mortgagee’s origination approval agreement, in accordance with paragraph (e) of this section.
(vi) Effects of termination—(A) Termination of origination approval agreement. If a mortgagee’s origination approval agreement is terminated, it may not originate single family insured mortgages unless the origination approval agreement is reinstated by the Secretary in accordance with paragraph (e) of this section, notwithstanding any other provision of this part except § 202.3(c)(2)(vii)(A).
(B) Termination of direct endorsement approval. If a mortgagee’s direct endorsement approval is terminated, it may not underwrite single family insured mortgages for the area(s) identified in the termination notice, unless the direct endorsement approval is reinstated by the Secretary in accordance with paragraph (e) of this section, notwithstanding any other provision of this part except § 202.3(c)(2)(vii)(A).
(vii) Rights and obligations in the event of termination. Termination of the origination approval agreement and/or direct endorsement approval shall not affect:
(A) The eligibility of the mortgage for insurance, absent fraud or misrepresentation, if the mortgagor and all terms and conditions of the mortgage had been approved before the termination by the Direct Endorsement or Lender Insurance mortgagee or were covered by a firm commitment issued by the Secretary; however, no other mortgages originated or underwritten after the date of termination by the mortgagee shall be insured unless the mortgagee’s origination approval agreement and/or direct endorsement approval is reinstated by the Secretary;
(B) The right of a mortgagee whose direct endorsement approval has been terminated to transfer cases to another mortgagee with direct endorsement approval for the area covered by the termination.
(C) A mortgagee’s obligation to continue to pay insurance premiums and meet all other obligations, including servicing, associated with insured mortgages;
(D) A mortgagee’s right to apply for reinstatement of the origination approval agreement and/or direct endorsement approval in accordance with paragraph (e) of this section; or
(E) A mortgagee’s right to purchase insured mortgages or to service its own portfolio or the portfolios of other mortgagees with which it has a servicing contract.
(d) Withdrawal and suspension of approval. Lender or mortgagee approval may be suspended or withdrawn by the Mortgagee Review Board as provided in part 25 of this title.
(e) Reinstatement—(1) General. A mortgagee whose origination approval agreement and/or direct endorsement approval has been terminated under paragraph (c) of this section may apply for reinstatement if:
(i) The origination approval agreement and/or direct endorsement approval for the affected branch or branches has been terminated for at least six months; and
(ii) The mortgagee continues to be an approved mortgagee meeting the general standards of § 202.5 and the specific requirements of §§ 202.6, 202.7, 202.8 or 202.10, and 202.12.
(2) Application for reinstatement. The mortgagee’s application for reinstatement must:
(i) Be in a format prescribed by the Secretary and signed by the mortgagee;
(ii) Be accompanied by an independent analysis of the terminated office’s operations and identifying the underlying cause of the mortgagee’s unacceptable default and claim rate. The independent analysis must be prepared by an independent Certified Public Accountant (CPA) qualified to perform audits under the government auditing standards issued by the General Accounting Office; and
(iii) Be accompanied by a corrective action plan addressing each of the issues identified in the independent analysis described in paragraph (e)(2)(ii) of this section, along with evidence demonstrating that the mortgagee has implemented the corrective action plan.
(3) HUD action on reinstatement application. The Secretary will grant the mortgagee’s application for reinstatement if the mortgagee’s application is complete and the Secretary determines that the underlying causes for the termination have been satisfactorily remedied.
§ 202.4 Request for determination of compliance.
Pursuant to section 539(a) of the Act, any person may file a request that the Secretary determine whether a lender or mortgagee is in compliance with § 202.12(a) or with provisions of this chapter implementing sections 223(a)(7) and 535 of the Act such as §§ 201.10(g), 203.18d and 203.43(c)(5) of this chapter (only section 535 applies to lenders). The request for determination shall be made to the following address: Department of Housing and Urban Development, Office of Lender Activities and Program Compliance, 451 Seventh Street SW., Washington, DC, 20410. The Secretary shall inform the requestor of the disposition of the request. The Secretary shall publish in the
§ 202.5 General approval standards.
To be approved for participation in the Title I or Title II programs, and to maintain approval, a lender or mortgagee shall meet and continue to meet the general requirements of paragraphs (a) through (n) of this section (except as provided in § 202.10(b)) and the requirements for one of the eligible classes of lenders or mortgagees in §§ 202.6 through 202.10.
(a) Business form. (1) The lender or mortgagee shall be a corporation or other chartered institution, a permanent organization having succession, or a partnership. A partnership must meet the requirements of paragraphs (a)(1)(i) through (iv) of this section.
(i) Each general partner must be a corporation or other chartered institution consisting of two or more persons.
(ii) One general partner must be designated as the managing general partner. The managing general partner shall comply with the requirements of paragraphs (b), (c), and (f) of this section. The managing general partner must have as its principal activity the management of one or more partnerships, all of which are mortgage lenders or property improvement or manufactured home lenders, and must have exclusive authority to deal directly with the Secretary on behalf of each partnership. Newly admitted partners must agree to the management of the partnership by the designated managing general partner. If the managing general partner withdraws or is removed from the partnership for any reason, a new managing general partner shall be substituted, and the Secretary shall be immediately notified of the substitution.
(iii) The partnership agreement shall specify that the partnership shall exist for the minimum term of years required by the Secretary. All insured mortgages and Title I loans held by the partnership shall be transferred to a lender or mortgagee approved under this part prior to the termination of the partnership. The partnership shall be specifically authorized to continue its existence if a partner withdraws.
(iv) The Secretary must be notified immediately of any amendments to the partnership agreement that would affect the partnership’s actions under the Title I or Title II programs.
(2) Use of business name. The lender or mortgagee must use its HUD-registered business name in all advertisements and promotional materials related to FHA programs. HUD-registered business names include any alias or “doing business as” (DBA) on file with FHA. The lender or mortgagee must keep copies of all print and electronic advertisements and promotional materials for a period of 2 years from the date that the materials are circulated or used to advertise.
(3) Non-FHA-approved entities. A lender or mortgagee that accepts a loan application from a non-FHA-approved entity must confirm that the entity’s legal name and Tax ID number are included in the FHA loan origination system record for the subject loan. The loan to be insured by FHA must be underwritten by the FHA-approved lender or mortgagee.
(b) Employees. The lender or mortgagee shall employ competent personnel trained to perform their assigned responsibilities in consumer or mortgage lending, including origination, servicing, and collection activities, and shall maintain adequate staff and facilities to originate and service mortgages or Title I loans, in accordance with applicable regulations, to the extent the mortgagee or lender engages in such activities.
(c) Officers. All employees who will sign applications for mortgage insurance on behalf of the mortgagee or report loans for insurance shall be corporate officers or shall otherwise be authorized to bind the lender or mortgagee in the origination transaction. The lender or mortgagee shall ensure that an authorized person reports all originations, purchases, and sales of Title I loans or Title II mortgages to the Secretary for the purpose of obtaining or transferring insurance coverage.
(d) Escrows. The lender or mortgagee shall not use escrow funds for any purpose other than that for which they were received. It shall segregate escrow commitment deposits, work completion deposits, and all periodic payments received under loans or insured mortgages on account of ground rents, taxes, assessments, and insurance charges or premiums, and shall deposit such funds with one or more financial institutions in a special account or accounts that are fully insured by the Federal Deposit Insurance Corporation or the National Credit Union Administration, except as otherwise provided in writing by the Secretary.
(e) Servicing. A lender shall service or arrange for servicing of the loan in accordance with the requirements of 24 CFR part 201. A mortgagee shall service or arrange for servicing of the mortgage in accordance with the servicing responsibilities contained in subpart C of 24 CFR part 203 and in 24 CFR part 207, with all other applicable regulations contained in this title, and with such additional conditions and requirements as the Secretary may impose.
(f) Business changes. The lender or mortgagee shall provide prompt notification to the Secretary, in such form as prescribed by the Secretary, of:
(1) All changes in its legal structure, including, but not limited to, mergers, terminations, name, location, control of ownership, and character of business; and
(2) Any officer, partner, director, principal, manager, supervisor, loan processor, loan underwriter, loan originator, of the lender or mortgagee, or the lender or mortgagee itself, that is subject to one or more of the sanctions in paragraph (j) of this section.
(g) Financial statements. The lender or mortgagee shall:
(1) Furnish to the Secretary a copy of its audited financial statements within 90 days of its fiscal year end, except as provided in § 202.6(c);
(2) Furnish such other information as the Secretary may request; and
(3) Submit to an examination of that portion of its records that relates to its Title I and/or Title II program activities.
(h) Quality control plan. Lenders or mortgagees shall implement a written quality control plan, acceptable to the Secretary, that assures compliance with the regulations of this chapter and other issuances of the Secretary regarding loan or mortgage origination and servicing unless the lenders or mortgagees were approved under § 202.9 without servicing authority.
(i) Fees. The lender or mortgagee, unless approved under § 202.10, shall pay an application fee and annual fees, including additional fees for each branch office that the lender or mortgagee registers with the Department, at such times and in such amounts as the Secretary may require. The Secretary may identify additional classes or groups of lenders or mortgagees that may be exempt from one or more of these fees.
(j) Ineligibility. For a lender or mortgagee to be eligible for FHA approval, neither the lender or mortgagee, nor any officer, partner, director, principal, manager, supervisor, loan processor, loan underwriter, or loan originator of the lender or mortgagee shall:
(1) Be suspended, debarred, under a limited denial of participation (LDP), or otherwise restricted under 2 CFR part 2424 or 24 CFR part 25, or under similar procedures of any other federal agency;
(2) Be indicted for, or have been convicted of, an offense that reflects adversely upon the integrity, competency, or fitness to meet the responsibilities of the lender or mortgagee to participate in the Title I or Title II programs;
(3) Be subject to unresolved findings as a result of HUD or other governmental audit, investigation, or review;
(4) Be engaged in business practices that do not conform to generally accepted practices of prudent mortgagees or that demonstrate irresponsibility;
(5) Be convicted of, or have pled guilty or nolo contendere to, a felony related to participation in the real estate or mortgage loan industry:
(i) During the 7-year period preceding the date of the application for licensing and registration; or
(ii) At any time preceding such date of application, if such felony involved an act of fraud, dishonesty, or a breach of trust or money laundering;
(6) Be in violation of provisions of the Secure and Fair Enforcement (SAFE) Mortgage Licensing Act of 2008 (12 U.S.C. 5101 et seq.) or any applicable provision of state law; or
(7) Be in violation of any other requirement established by the Secretary.
(k) Branch offices. A lender or mortgagee may, upon approval by the Secretary, maintain branch offices for the origination of Title I or Title II loans. The lender or mortgagee shall remain fully responsible to the Secretary for the actions of its branch offices.
(l) Conflict of interest and responsibility. A mortgagee may not pay anything of value, directly or indirectly, in connection with any insured mortgage transaction or transactions to any person or entity if such person or entity has received any other consideration from the mortgagor, seller, builder, or any other person for services related to such transactions or related to the purchase or sale of the mortgaged property, except that consideration, approved by the Secretary, may be paid for services actually performed. The mortgagee shall not pay a referral fee to any person or organization.
(m) Reports. Each lender and mortgagee must submit an annual certification on a form prescribed by the Secretary. Upon application for approval and with each annual recertification, each lender and mortgagee must submit a certification that it has not been refused a license and has not been sanctioned by any State or States in which it will originate, purchase, hold, sell, or service insured mortgages or Title I loans. In addition, each mortgagee shall file the following:
(1) An audited or unaudited financial statement, within 30 days of the end of each fiscal quarter in which the mortgagee experiences an operating loss of 20 percent of its net worth, and until the mortgagee demonstrates an operating profit for 2 consecutive quarters or until the next recertification, whichever is the longer period; and
(2) A statement of net worth within 30 days of the commencement of voluntary or involuntary bankruptcy, conservatorship, receivership, or any transfer of control to a federal or state supervisory agency.
(n) Net worth—(1) Applicability. The requirements of paragraph (n) of this section apply to approved supervised and nonsupervised lenders and mortgagees under §§ 202.6 and 202.7, and approved investing lenders and investing mortgagees under § 202.9. For ease of reference, these institutions are referred to as “approved lenders or mortgagees” for purposes of paragraph (n) of this section. These requirements also apply to applicants for FHA approval under §§ 202.6, 202.7, and 202.9. For ease of reference, these institutions are referred to as “applicants” for purposes of paragraph (n) of this section.
(2) Requirements—(i) Single family net worth requirements. Irrespective of size, each applicant and each approved lender or mortgagee for participation solely under the FHA single family programs shall have a net worth of not less than $1 million, plus an additional net worth of one percent of the total volume, in excess of $25 million, of FHA single family insured mortgages originated, underwritten, purchased, or serviced during the prior fiscal year, up to a maximum required net worth of $2.5 million. No less than 20 percent of the applicant’s or approved lender’s or mortgagee’s required net worth must be liquid assets consisting of cash or its equivalent acceptable to the Secretary.
(ii) Multifamily net worth requirements. Irrespective of size, each applicant for approval and each approved lender or mortgagee for participation solely under the FHA multifamily programs shall have a net worth of not less than $1 million. For those multifamily approved lenders or mortgagees that also engage in mortgage servicing, an additional net worth of one percent of the total volume, in excess of $25 million, of FHA multifamily mortgages originated, purchased, or serviced during the prior fiscal year, up to a maximum required net worth of $2.5 million. For multifamily approved lenders or mortgagees that do not perform mortgage servicing, an additional net worth of one half of one percent of the total volume, in excess of $25 million, of FHA multifamily mortgages originated during the prior fiscal year, up to a maximum required net worth of $2.5 million. No less than 20 percent of the applicant’s or approved lender’s or mortgagee’s required net worth must be liquid assets consisting of cash or its equivalent acceptable to the Secretary.
(iii) Dual participation net worth requirements. Irrespective of size, each applicant for approval and each approved lender or mortgagee that is a participant in both FHA single family and multifamily programs must meet the net worth requirements as set forth in paragraph (n)(2)(i) of this section.
Subpart B—Classes of Lenders and Mortgagees
§ 202.6 Supervised lenders and mortgagees.
(a) Definition. A supervised lender or mortgagee is a financial institution that is a member of the Federal Reserve System or an institution whose accounts are insured by the Federal Deposit Insurance Corporation or the National Credit Union Administration. A supervised mortgagee may submit applications for mortgage insurance. A supervised lender or mortgagee may originate, purchase, hold, service or sell loans or insured mortgages, respectively.
(b) Additional requirements. In addition to the general approval requirements in § 202.5, a supervised lender or mortgagee shall meet the following requirements:
(1) Net worth. The net worth requirements appear in § 202.5(n).
(2) Notification. A lender or mortgagee shall promptly notify the Secretary in the event of termination of its supervision by its supervising agency.
(3) Fidelity bond. A Title II mortgagee shall have fidelity bond coverage and errors and omissions insurance acceptable to the Secretary and in an amount required by the Secretary, or have alternative insurance coverage, approved by the Secretary, that assures the faithful performance of the responsibilities of the mortgagee.
(4) Audit report. Except as provided in paragraph (c) of this section, a lender or mortgagee must:
(i) Comply with the financial reporting requirements in 24 CFR part 5, subpart H. Audit reports shall be based on audits performed by a certified public accountant, or by an independent public accountant licensed by a regulatory authority of a State or other political subdivision of the United States on or before December 31, 1970, and shall include:
(A) Financial statements in a form acceptable to the Secretary, including a balance sheet and a statement of operations and retained earnings, a statement of cash flows, an analysis of the lender’s or mortgagee’s net worth adjusted to reflect only assets acceptable to the Secretary, and an analysis of escrow funds; and
(B) Such other financial information as the Secretary may require to determine the accuracy and validity of the audit report.
(ii) Submit a report on compliance tests prescribed by the Secretary.
(c) Financial statement requirements for small supervised lenders and mortgagees—(1) Definitions. For the purposes of this section, the following definitions apply:
(i) Federal banking agency means the Board of Governors of the Federal Reserve System; the Federal Deposit Insurance Corporation; and the National Credit Union Administration; or any successor agency thereof.
(ii) Small supervised lender or mortgagee means a supervised lender or mortgagee possessing consolidated assets below the threshold for required audited financial reporting as established by the federal banking agency that is responsible for the oversight of that supervised lender or mortgagee.
(2) Financial statement requirements. Small supervised lenders and mortgagees shall not be subject to the requirement to submit a copy of an audited financial statement under § 202.5(g) and the audit report requirements under paragraph (b)(4) of this section. Small supervised lenders and mortgagees are required, within 90 days of their fiscal year end, to furnish to the Secretary the unaudited financial regulatory report—a consolidated or fourth quarter Report of Condition and Income (Federal Financial Institutions Examination Council forms 031 and 041, also known as the “Call Report”), a consolidated or fourth quarter Thrift Financial Report, or a consolidated or fourth quarter NCUA Call Report (NCUA Form 5300 or 5310), or such other financial regulatory report as may be required—that aligns with the small supervised lender’s or mortgagee’s fiscal year end and that the small supervised lender or mortgagee is required to submit to their respective federal banking agency.
(3) Requirement for audited financial statement and other information based on determination of heightened risk to the FHA insurance fund. If the Secretary determines that a small supervised lender or mortgagee poses a heightened risk to the FHA insurance fund, the lender or mortgagee must provide, upon request, additional financial documentation, up to and including an audited financial statement, and other information as the Secretary determines necessary. The Secretary may determine that a small supervised lender or mortgagee poses a heightened risk to the FHA insurance fund based upon, but not limited to, one or more of the following factors:
(i) Failing to provide required financial submissions under § 202.6(c)(2) within the required 90-day period following the lender’s or mortgagee’s fiscal year end;
(ii) Maintaining insufficient adjusted net worth or unrestricted liquid assets as required by § 202.5(n);
(iii) Reporting opening cash and equity balances that do not agree with the prior year’s reported cash and equity balances;
(iv) Experiencing an operating loss of 20 percent or greater of the lender’s or mortgagee’s net worth for the annual reporting period as governed by § 202.5(m)(1);
(v) Experiencing an increase in loan volume over the prior 12-month period, determined by the Secretary to be significant;
(vi) Undertaking significant changes to business operations, such as a merger or acquisition; and
(vii) Other factors that the Secretary considers appropriate in indicating a heightened risk to the FHA insurance fund.
§ 202.7 Nonsupervised lenders and mortgagees.
(a) Definition. A nonsupervised lender or mortgagee is a lending institution which has as its principal activity the lending or investing of funds in real estate mortgages, consumer installment notes, or similar advances of credit, or the purchase of consumer installment contracts, and which is not approved under any other section of this part. A nonsupervised mortgagee may submit applications for mortgage insurance. A nonsupervised lender or mortgagee may originate, purchase, hold, service or sell insured loans or mortgages, respectively.
(b) Additional requirements. In addition to the general approval requirements in § 202.5, a nonsupervised lender or mortgagee shall meet the following requirements:
(1) Net worth and liquid assets. The net worth and liquidity requirements appear in § 202.5(n).
(2) Credit source—(i) Title I. A lender shall have and maintain a reliable warehouse line of credit or other funding program acceptable to the Secretary of not less than $500,000 for use in originating or purchasing Title I loans.
(ii) Title II. Except for multifamily mortgagees, a mortgagee shall have a warehouse line of credit or other mortgage funding program acceptable to the Secretary which is adequate to fund the mortgagee’s average 60 day origination operations, but in no event shall the warehouse line of credit or funding program be less than $1,000,000.
(3) Audit report. (i) A lender or mortgagee must comply with the financial reporting requirements in 24 CFR part 5, subpart H. Audit reports shall be based on audits performed by a certified public accountant, or by an independent public accountant licensed by a regulatory authority of a State or other political subdivision of the United States on or before December 31, 1970, and shall include:
(A) A financial statement in a form acceptable to the Secretary, including a balance sheet and a statement of operations and retained earnings, a statement of cash flows, an analysis of the mortgagee’s net worth adjusted to reflect only assets acceptable to the Secretary, and an analysis of escrow funds; and
(B) Such other financial information as the Secretary may require to determine the accuracy and validity of the audit report.
(ii) A mortgagee must submit a report on compliance tests prescribed by the Secretary.
(4) Fidelity bond. A Title II mortgagee shall have fidelity bond coverage and errors and omissions insurance acceptable to the Secretary and in an amount required by the Secretary, or alternative insurance coverage approved by the Secretary, that assures the faithful performance of the responsibilities of the mortgagee.
§ 202.8 Sponsored third-party originators.
(a) Definitions—Sponsor. (1) With respect to Title I programs, a sponsor is a lender that holds a valid Title I Contract of Insurance and meets the net worth requirement for the class of lender to which it belongs.
(2) With respect to Title II programs, a sponsor is a mortgagee that holds a valid origination approval agreement, is approved to participate in the Direct Endorsement program, and meets the net worth requirement for the class of mortgagee to which it belongs.
(3) Each sponsor shall be responsible to the Secretary for the actions of its sponsored third-party originators or mortgagees in originating loans or mortgages, unless applicable law or regulation requires specific knowledge on the part of the party to be held responsible. If specific knowledge is required, the Secretary will presume that a sponsor has knowledge of the actions of its sponsored third-party originators or mortgagees in originating loans or mortgages and the sponsor is responsible for those actions unless it can rebut the presumption with affirmative evidence.
Sponsored third-party originator. A sponsored third-party originator may hold a Title I Contract of Insurance or Title II Origination Approval Agreement if it is an FHA-approved lender or mortgagee. If the sponsored third-party originator is not an FHA-approved lender or mortgagee, then the sponsored third-party originator may not hold a Title I Contract of Insurance or Title II Origination Approval Agreement. A sponsored third-party originator is authorized to originate Title I direct loans or Title II mortgage loans for sale or transfer to a sponsor or sponsors, as defined in this section, that holds a valid Title I Contract of Insurance or Title II Origination Approval Agreement and is not under suspension, subject to the sponsor determining that the third-party originator has met the eligibility criteria of paragraph (b) of this section.
(b) Eligibility to originate loans to be insured by FHA. A sponsored third-party originator may originate loans to be insured by FHA, provided that:
(1) The sponsored third-party originator is working with and through an FHA-approved lender or mortgagee; and
(2) The sponsored third-party originator or an officer, partner, director, principal, manager, supervisor, loan processor, or loan originator of the sponsored third-party originator has not been subject to the sanctions or administrative actions listed in § 202.5(j), as determined and verified by the FHA-approved lender or mortgagee.
§ 202.9 Investing lenders and investing mortgagees.
(a) Definition. An investing lender or investing mortgagee is an organization that is not approved as a supervised lender or mortgagee under § 202.6, a nonsupervised lender or mortgagee under § 202.7, or a governmental or similar institution under § 202.10. An investing lender or investing mortgagee may purchase, hold, or sell Title I loans or Title II mortgages, respectively, but may not originate Title I loans or Title II mortgages in its own name or submit applications for the insurance of mortgages. An investing lender or investing mortgagee may not service Title I loans or Title II mortgages without prior approval of the Secretary.
(b) Additional requirements. In addition to the general approval requirements in § 202.5, an investing lender or investing mortgagee shall meet the following requirements:
(1) Funding arrangements. An investing lender or investing mortgagee shall have, or have made arrangements for, funds sufficient to support a projected investment of at least $1,000,000 in property improvement, manufactured home or real estate loans or mortgages.
(2) Officers and staff. In lieu of the staffing and facilities requirements in § 202.5(b), an investing lender or investing mortgagee shall have officers or employees who are capable of managing its activities in purchasing, holding, and selling Title I loans or Title II mortgages.
(3) Fidelity bond. An investing lender or investing mortgagee shall maintain fidelity bond coverage and errors and omissions insurance acceptable to the Secretary and in an amount required by the Secretary, or alternative insurance coverage approved by the Secretary, that assures the faithful performance of the responsibilities of the mortgagee.
(4) Audit report. An investing lender or mortgagee must comply with the financial reporting requirements in24 CFR part 5, subpart H. Audit reports shall be based on audits performed by a certified public accountant, or by an independent public accountant licensed by a regulatory authority of a State or other political subdivision of the United States on or before December 31, 1970. Audit reports shall include:
(i) A financial statement in a form acceptable to the Secretary, including a balance sheet and a statement of operations and retained earnings, a statement of cash flows, an analysis of the investing lender’s or mortgagee’s net worth adjusted to reflect only assets acceptable to the Secretary, and an analysis of escrow funds; and
(ii) Such other financial information as the Secretary may require to determine the accuracy and validity of the audit report.
§ 202.10 Governmental institutions, Government-sponsored enterprises, public housing agencies and State housing agencies.
(a) Federal, state, and municipal governmental agencies and Federal Reserve Banks. A Federal, State, or municipal government agency or a Federal Reserve Bank may be an approved lender or mortgagee. A mortgagee approved under this paragraph (a) may submit applications for Title II mortgage insurance. A lender or mortgagee approved under this paragraph (a) may originate, purchase, service, or sell Title I loans and insured mortgages, respectively. A mortgagee or lender approved under this paragraph (a) is not required to meet a net worth requirement. A lender or mortgagee shall maintain fidelity bond coverage and errors and omissions insurance acceptable to the Secretary and in an amount required by the Secretary, or alternative insurance coverage approved by the Secretary, that assures the faithful performance of the responsibilities of the mortgagee. There are no additional requirements beyond the general approval requirements in § 202.5 or as provided under paragraph (c) of this section.
(b) Government-Sponsored Enterprises. The Government-Sponsored Enterprises are the Federal Home Loan Banks, Federal Home Loan Mortgage Corporation, and Federal National Mortgage Association. A Government-Sponsored Enterprise may be an approved lender or mortgagee. A lender or mortgagee approved under this paragraph (b) may purchase, service, or sell Title I loans and insured mortgages, respectively. A mortgagee or lender approved under this paragraph (b) is not required to meet a net worth requirement. There are no additional requirements beyond the general approval requirements in § 202.5.
(c) Public housing agencies and State housing agencies. Under such terms and conditions as the Secretary may prescribe and notwithstanding the general requirements of § 202.5 or the requirements of paragraph (a) of this section, a public housing agency or its instrumentality or a State housing agency may be approved as a mortgagee for the purpose of originating and holding multifamily mortgages funded by issuance of tax exempt obligations by the agency.
(d) Audit requirements. The insuring of loans and mortgages under the Act constitutes “Federal financial assistance” (as defined in 2 CFR 200.1) for purposes of audit requirements set out in 2 CFR part 200, subpart F. Non-Federal entities (as defined in 2 CFR 200.1) that receive insurance as lenders and mortgagees shall conduct audits in accordance with 2 CFR part 200, subpart F.
Subpart C—Title I and Title II Specific Requirements
§ 202.11 Title I.
(a) Types of administrative action. In addition to termination of the Contract of Insurance, certain sanctions may be imposed under the Title I program. The administrative actions that may be applied are set forth in 24 CFR part 25. Civil money penalties may be imposed against Title I lenders and mortgagees pursuant to 24 CFR part 30.
(b) Grounds for action. Administrative actions shall be based upon both the grounds set forth in 24 CFR part 25 and as follows:
(1) Failure to properly supervise and monitor dealers under the provisions of part 201 of this title;
(2) Exhaustion of the general insurance reserve established under part 201 of this title;
(3) Maintenance of a Title I claims/loan ratio representing an unacceptable risk to the Department; or
(4) Transfer of a Title I loan to a party that does not have a valid Title I Contract of Insurance.
§ 202.12 Title II.
(a) Tiered pricing—(1) General requirements—(i) Prohibition against excess variation. The customary lending practices of a mortgagee for its single family insured mortgages shall not provide for a variation in mortgage charge rates that exceed 2 percentage points. A variation is determined as provided in paragraph (a)(6) of this section.
(ii) Customary lending practices. The customary lending practices of a mortgagee include all single family insured mortgages originated by the mortgagee, including mortgages that were originated by the mortgagee’s sponsored third-party originator(s).
(iii) Basis for permissible variations. Any variations in the mortgage charge rate up to two percentage points under the mortgagee’s customary lending practices must be based on actual variations in fees or cost to the mortgagee to make the mortgage loan, which shall be determined after accounting for the value of servicing rights generated by making the loan and other income to the mortgagee related to the loan. Fees or costs must be fully documented for each specific loan.
(2) Area. For purposes of this section, an area is:
(i) An area used by HUD for purposes of § 203.18(a) of this chapter to determine the median 1-family house price for an area; or
(ii) The area served by a HUD field office but excluding any area included in paragraph (a)(2)(i) of this section.
(3) Mortgage charges. Mortgage charges include any charges under the mortgagee’s control and not collected for the benefit of third parties. Examples are interest, discount points and origination fees.
(4) Interest rate. Whenever a mortgagee offers a particular interest rate for a mortgage type in an area, it may not restrict the availability of the rate in the area on the basis of the principal amount of the mortgage. A mortgagee may not direct mortgage applicants to any specific interest rate category on the basis of mortgage size.
(5) Mortgage charge rate. The mortgage charge rate is defined as the amount of mortgage charges for a mortgage expressed as a percentage of the initial principal amount of the mortgage.
(6) Determining excess variations. Variation in mortgage charge rates for a mortgage type is determined by comparing all mortgage charge rates offered by the mortgagee within an area for the mortgage type for a designated day or other time period, including mortgage charge rates for all actual mortgage applications.
(7) Mortgage type. A mortgage type for purposes of paragraph (a)(6) of this section will include those mortgages that are closely parallel in important characteristics affecting pricing and charges, such as level of risk or processing expenses. The Secretary may develop standards and definitions regarding mortgage types.
(8) Recordkeeping. Mortgagees are required to maintain records on pricing information, satisfactory to the Secretary, that would allow for reasonable inspection by HUD for a period of at least 2 years. Additionally, many mortgagees are required to maintain racial, ethnic, and gender data under the regulations implementing the Home Mortgage Disclosure Act (12 U.S.C. 2801-2810).
(b) Servicing. Any mortgagee that services mortgages must be approved by the Secretary under § 202.6, § 202.7 or § 202.10, or be specifically approved for servicing under § 202.9(a).
(c) Report and corrective plan requirements. If a mortgagee approved for participation in Title II programs is notified by the Secretary that it had a rate of defaults and claims on HUD-insured mortgages during the preceding year, or during recent years, which was higher than the normal rate, it shall submit a report, within 60 days, containing an explanation for the above-normal rate of defaults and claims, and, if required by the Secretary, a plan for corrective action with regard to mortgages in default and its mortgage processing system in general.
PART 203—SINGLE FAMILY MORTGAGE INSURANCE
Subpart A—Eligibility Requirements and Underwriting Procedures
Direct Endorsement, Lender Insurance, and Commitments
§ 203.1 Underwriting procedures.
The three underwriting procedures for single family mortgages are:
(a) Direct Endorsement. This procedure, which is described in § 203.5, is available for mortgagees that are eligible under § 203.3.
(b) Lender insurance. This procedure, which is described in § 203.6, is available for mortgagees that are eligible for the Direct Endorsement program under § 203.5, and that are also approved according to § 203.4.
(c) Issuing of commitments through HUD offices. Processing through HUD offices as described in § 203.7, with issuance of commitments, is available only for mortgages that are not eligible for Direct Endorsement processing under § 203.5(b) or to the extent required in § 203.3(b)(4), § 203.3(d)(1), or as determined by the Secretary.
§ 203.3 Approval of mortgagees for Direct Endorsement.
(a) Direct Endorsement approval. To be approved for the Direct Endorsement program set forth in § 203.5, a mortgagee must be an approved mortgagee meeting the requirements of §§ 202.13, 202.14 or 202.17 and this section.
(b) Special requirements. The mortgagee must establish that it meets the following qualifications.
(1) The mortgagee has five years of experience in the origination of single family mortgages. The Secretary will approve a mortgagee with less than five years experience in the origination of single family mortgages if a principal officer has had a minimum of five years of managerial experience in the origination of single family mortgages.
(2) The mortgagee has on its permanent staff an underwriter that is authorized by the mortgagee to bind the mortgagee on matters involving the origination of mortgages through the Direct Endorsement procedure and that is registered with the Secretary and such registration is maintained with the Secretary. The technical staff may be employees of the mortgagee or may be hired on a fee basis from a roster maintained by the Secretary. The mortgagee shall use appraisers permitted by § 203.5(e).
(3) [Reserved]
(4) The mortgagee must submit initially 15 mortgages processed in accordance with §§ 203.5 and 203.255. Separate approval is required to originate mortgages under part 206 of this chapter through the Direct Endorsement program unless at least 50 mortgages closed by the mortgagee have been insured under part 206 of this chapter prior to September 15, 1995. Other mortgagees who have not closed at least 50 mortgages under part 206 of this chapter must submit five (5) Home Equity Conversion Mortgages, processed in accordance with §§ 203.3 and 203.255. The documents required by § 203.255 will be reviewed by the Secretary and, if acceptable, commitments will be issued prior to endorsement of the mortgages for insurance. If the underwriting and processing of these 15 mortgages (or the 5 Home Equity Conversion Mortgages) is satisfactory, then the mortgagee may be approved to close subsequent mortgages and submit them directly for endorsement for insurance in accordance with the process set forth in § 203.255. Unsatisfactory performance by the mortgagee at this stage constitutes grounds for denial of participation in the program, or for continued pre-endorsement review of a mortgagee’s submissions. If participation in the program is denied, such denial is effective immediately and may be appealed in accordance with the procedures set forth in paragraph (d)(2) of this section. Unsatisfactory performance solely with respect to mortgages under 24 CFR part 206 may, at the option of the Secretary, be grounds for denial of participation or for continued pre-endorsement review for 24 CFR part 206 mortgages without affecting the mortgagee’s processing of mortgages under other parts.
(5) The mortgagee shall promptly notify those HUD offices which have granted approval under this section of any changes that affect qualifications under this section.
(c) [Reserved]
(d) Mortgagee sanctions. Depending upon the nature and extent of the noncompliance with the requirements applicable to the Direct Endorsement process, as determined by the Secretary, the Secretary may take any of the following actions:
(1) Probation. The Secretary may place a mortgagee on Direct Endorsement probation for a specified period of time for the purpose of evaluating the mortgagee’s compliance with the requirements of the Direct Endorsement procedure. Such probation is distinct from probation imposed by the Mortgagee Review Board under part 25 of this chapter. During the probation period specified by this section, the mortgagee may continue to process Direct Endorsement mortgages, subject to conditions required by the Secretary. The Secretary may require the mortgagee to:
(i) Process mortgages in accordance with paragraph (b)(4) of this section;
(ii) Submit to additional training;
(iii) Make changes in the quality control plan required by § 202.5(h) of this chapter; and
(iv) Take other actions, which may include, but are not limited to, periodic reporting to the Secretary, and submission to the Secretary of internal audits.
(2) Termination of Direct Endorsement approval. (i) A mortgagee’s approval to participate in the Direct Endorsement program may be terminated in a particular jurisdiction by the local HUD office or on a nationwide basis by HUD Central Office. The HUD office instituting the termination action shall provide the mortgagee with written notice of the grounds for the action and of the right to an informal hearing before the office initiating the termination action. Such hearing shall be expeditiously arranged, and the mortgagee may be represented by counsel. Any termination instituted under this section is distinct from withdrawal of mortgagee approval by the Mortgagee Review Board under part 25 of this title.
(ii) After consideration of the materials presented, the decision maker shall advise the mortgagee in writing whether the termination is rescinded, modified or affirmed.
(iii) The mortgagee may appeal such decision to the Deputy Assistant Secretary for Single Family Housing or his or her designee. A decision by the Deputy Assistant Secretary or designee shall constitute final agency action.
(iv) Termination of an origination approval agreement under part 202 of this chapter for a mortgagee or one or more branch offices automatically terminates Direct Endorsement approval for the mortgagee or the branch office or offices without any further requirement to comply with this paragraph.
§ 203.4 Approval of mortgagees for Lender Insurance.
Each mortgagee that chooses to participate in the Lender Insurance program must use the Lender Insurance process to insure all of the mortgages that it underwrites, unless the mortgages are ineligible for the Direct Endorsement program as provided in § 203.5(b), or unless HUD determines that the mortgages are ineligible for the Lender Insurance program.
(a) Direct Endorsement approval. To be approved for the Lender Insurance program described in § 203.6, a mortgagee must be unconditionally approved for the Direct Endorsement program as provided in § 203.3.
(b) Performance: Claim and default rate. (1) In addition to being unconditionally approved for the Direct Endorsement program, a mortgagee must have had an acceptable claim and default rate (as described in paragraph (b)(3) of this section) for at least 2 years prior to its application for participation in the Lender Insurance program, and must maintain such a claim and default rate in order to retain Lender Insurance approval.
(2) HUD may approve a mortgagee that is otherwise eligible for Lender Insurance approval, but has an acceptable claim and default record of less than 2 years, if:
(i) The mortgagee is an entity created by a merger, acquisition, or reorganization completed less than 2 years prior to the date of the mortgagee’s application for Lender Insurance approval;
(ii) One or more of the entities participating in the merger, acquisition, or reorganization had Lender Insurance approval at the time of the merger, acquisition, or reorganization;
(iii) All of the lending institutions participating in the merger, acquisition, or reorganization that had Lender Insurance approval at the time of the merger, acquisition, or reorganization had an acceptable claim and default record for the 2 years preceding the mortgagee’s application for Lender Insurance approval; and
(iv) The claim and default record of the mortgagee derived by aggregating the claims and defaults of the entities participating in the merger, acquisition, or reorganization, for the 2-year period prior to the mortgagee’s application for Lender Insurance approval, constitutes an acceptable rate of claims and defaults, as defined by this section.
(3) A mortgagee has an acceptable claim and default rate if its rate of claims and defaults is at or below 150 percent of the average rate for insured mortgages in the state(s) in which the mortgagee operates.
(c) Reviews. HUD will monitor a mortgagee’s eligibility to participate in the Lender Insurance program on an ongoing basis.
(d) Termination of approval. (1) HUD may immediately terminate the mortgagee’s approval to participate in the Lender Insurance program, in accordance with section 256(d) of the National Housing Act (12 U.S.C. 1715z-21(d)), if the mortgagee:
(i) Violates any of the requirements and procedures established by the Secretary for mortgagees approved to participate in HUD’s Lender Insurance program, Direct Endorsement program, or the Title II Single Family mortgage insurance program; or
(ii) If HUD determines that other good cause exists.
(2) Such termination will be effective upon receipt of HUD’s notice advising of the termination. Within 30 days after receiving HUD’s notice of termination, a mortgagee may request an informal conference with the Deputy Assistant Secretary for Single Family Housing or designee. The conference will be conducted within 30 days after HUD receives a timely request for the conference. After the conference, the Deputy Assistant Secretary (or designee) may decide to affirm the termination action or to reinstate the mortgagee’s Lender Insurance program approval. The decision will be communicated to the mortgagee in writing, will be deemed a final agency action, and, pursuant to section 256(d) of the National Housing Act (12 U.S.C. 1715z-21(d)), is not subject to judicial review.
(3) Lender Insurance authority is automatically terminated for a mortgagee whose nationwide Direct Endorsement approval under § 203.3(d)(2) is terminated, without imposing any further requirement on the mortgagee to comply with this paragraph.
(4) Any termination instituted under this section is distinct from withdrawal of mortgagee approval by the Mortgagee Review Board under 24 CFR part 25.
(e) Reinstatement. A mortgagee whose Lender Insurance authority is terminated under this section may apply for reinstatement if the Lender Insurance authority for the mortgagee has been terminated for at least 6 months. In addition to addressing the criteria for Lender Insurance approval specified in paragraphs (a) and (b) of this section, the application for reinstatement must be accompanied by a corrective action plan addressing the issues resulting in the termination of the mortgagee’s Lender Insurance authority, along with evidence that the mortgagee has implemented the corrective action plan. HUD may grant the mortgagee’s application for reinstatement if the mortgagee’s application is complete and HUD determines that the underlying causes for the termination have been satisfactorily remedied.
§ 203.5 Direct Endorsement process.
(a) General. Under the Direct Endorsement program, the Secretary does not review applications for mortgage insurance before the mortgage is executed or issue conditional or firm commitments, except to the extent required by § 203.3(b)(4), § 203.3(d)(1), or as determined by the Secretary. Under this program, the mortgagee determines that the proposed mortgage is eligible for insurance under the applicable program regulations, and submits the required documents to the Secretary in accordance with the procedures set forth in § 203.255. This subpart provides that certain functions shall be performed by the Secretary (or Commissioner), but the Secretary may specify that a Direct Endorsement mortgagee shall perform such an action without specific involvement or approval by the Secretary, subject to statutory limitations. In each case, the Direct Endorsement mortgagee’s performance is subject to pre-endorsement and post-endorsement review by the Secretary under § 203.255 (c) and (e).
(b) Eligible programs. (1) All single family mortgages authorized for insurance under the National Housing Act must be originated through the Direct Endorsement program, except the following:
(i) Mortgages underwritten for insurance by mortgagees that have applied for participation in, and have been approved for, the Lender Insurance program;
(ii) Mortgages authorized under sections 203(n), 203(p), 213(d), 221(h), 221(i), 225, 233, 237, 809, or 810 of the National Housing Act, or any other insurance programs announced by
(iii) As provided in § 203.1.
(2) The provision contained in § 221.55 of this chapter regarding deferred sales to displaced families is not available in the Direct Endorsement program.
(c) Underwriter due diligence. A Direct Endorsement mortgagee shall exercise the same level of care which it would exercise in obtaining and verifying information for a loan in which the mortgagee would be entirely dependent on the property as security to protect its investment. Mortgagee procedures that evidence such due diligence shall be incorporated as part of the quality control plan required under § 202.5(h) of this chapter. The Secretary shall publish guidelines for Direct Endorsement underwriting procedures in a handbook, which shall be provided to all mortgagees approved for the Direct Endorsement procedure. Compliance with these guidelines is deemed to be the minimum standard of due diligence in underwriting mortgages.
(d) Mortgagor’s income. The mortgagee shall evaluate the mortgagor’s credit characteristics, adequacy and stability of income to meet the periodic payments under the mortgage and all other obligations, and the adequacy of the mortgagor’s available assets to close the transaction, and render an underwriting decision in accordance with applicable regulations, policies and procedures.
(e) Appraisal. (1) A mortgagee shall have the property appraised in accordance with such standards and requirements as the Secretary may prescribe. A mortgagee must select an appraiser whose name is on the FHA Appraiser Roster, in accordance with 24 CFR part 200, subpart G.
(2) The mortgagee shall not discriminate on the basis of race, color, religion, national origin, sex, age, or disability in the selection of an appraiser.
(3) A mortgagee and an appraiser must ensure that an appraisal and related documentation satisfy FHA appraisal requirements, and both bear responsibility for the quality of the appraisal in satisfying such requirements. A Direct Endorsement Mortgagee that submits, or causes to be submitted, an appraisal or related documentation that does not satisfy FHA requirements is subject to administrative sanction by the Mortgagee Review Board pursuant to parts 25 and 30 of this title.
§ 203.6 Lender Insurance process.
Under the Lender Insurance program, a mortgagee approved for the program conducts its own pre-insurance review, insures the mortgage, and agrees to indemnify HUD in accordance with § 203.255(f).
§ 203.7 Commitment process.
For single family mortgage programs that are not eligible for Direct Endorsement processing under § 203.5, or for Lender Insurance processing under § 203.6, the mortgagee must submit an application for mortgage insurance in a form prescribed by the Secretary prior to making the mortgage loan. If:
(a) A mortgage for a specified property has been accepted for insurance through issuance of a conditional commitment by the Secretary or a certificate of reasonable value by the Department of Veterans Affairs, and
(b) A specified mortgagor and all other proposed terms and conditions of the mortgage meet the eligibility requirements for insurance as determined by the Secretary, the Secretary shall approve the application for insurance by issuing a firm commitment setting forth the terms and conditions of insurance.
§ 203.8 Approval of mortgagees for Direct Endorsement Lender Review and Approval Process (DELRAP).
(a) General. Each mortgagee that chooses to participate in the review and approval of Condominium Projects, as set forth in § 203.43b, must be granted authority to participate in the Direct Endorsement Lender Review and Approval Process (DELRAP).
(b) DELRAP Authority—(1) Eligibility. To be granted DELRAP authority, as described in § 203.43b, a mortgagee must be unconditionally approved for the Direct Endorsement program as provided in § 203.3 and meet the following requirements:
(i) Have staff with at least one year of experience in underwriting mortgages on condominiums and/or Condominium Project approval;
(ii) Have originated no fewer than 10 condominium loans in projects approved by the Commissioner;
(iii) Have an acceptable quality control plan that includes specific provisions related to DELRAP; and
(iv) Ensure that staff members that participate in the approval of a Condominium Project using DELRAP authority meet the above requirements in paragraph (b)(1)(i) of this section or are supervised by staff that meet such requirements.
(2) Conditional DELRAP Authority. Mortgagees will be granted conditional DELRAP authority upon provision of notice to the Commissioner of the intent to use DELRAP. Mortgagees with conditional DELRAP authority must submit all recommended Condominium Project approvals, denials, and recertifications to FHA for review. If FHA agrees with the mortgagee’s recommendation, it will advise the mortgagee that it may proceed with the recommended decision on the Condominium Project.
(3) Unconditional DELRAP Authority. Mortgagees will be granted unconditional DELRAP authority after completing at least five (5) DELRAP reviews, or such lower number of DELRAP reviews as HUD may specify, to the satisfaction of HUD, and may then exercise DELRAP authority to approve projects in accordance with requirements of HUD.
(c) Reviews. HUD will monitor a mortgagee’s performance in DELRAP on an ongoing basis.
(1) If the review shows that there are no material deficiencies, subsequent project approvals, denials, or recertifications may be selected for post-action review based on a percentage as determined by the Commissioner.
(2) If the review shows that there are material deficiencies in the mortgagee’s DELRAP performance, the mortgagee may be returned to conditional DELRAP status.
(3) If additional reviews continue to show material deficiencies in the mortgagee’s DELRAP performance, the mortgagee’s authority to participate in DELRAP may be terminated or other action taken against the mortgagee or responsible staff reviewer.
(d) Termination of DELRAP Authority. (1) HUD may immediately terminate the mortgagee’s authority to participate in DELRAP or take any action listed in 24 CFR 203.3(d) if:
(i) The mortgagee violates any of the requirements and procedures established by the Secretary for mortgagees approved to participate in DELRAP, the Direct Endorsement program, or the Title II Single Family mortgage insurance program; or
(ii) HUD determines that other good cause exists.
(2) Such termination will be effective upon the date of receipt of HUD’s notice advising of the termination.
(3) Notwithstanding any provisions of this section, the Commissioner reserves the right to take administrative action, including revocation of DELRAP authority, against any mortgagee and staff reviewer because of unacceptable performance. Any termination instituted under this section is distinct from withdrawal of mortgagee approval by the Mortgagee Review Board under 24 CFR part 25.
(e) Reinstatement. A mortgagee whose DELRAP authority is terminated under this section may request reinstatement if the mortgagee’s DELRAP authority has been terminated for at least 6 months. In addition to addressing the eligibility criteria specified in paragraph (b)(1) of this section, the application for reinstatement must be accompanied by a corrective action plan addressing the issues that led to the termination of the mortgagee’s DELRAP authority, along with evidence that the mortgagee has implemented the corrective action plan. The Commissioner may grant conditional DELRAP authority if the mortgagee’s application is complete and the Commissioner determines that the underlying causes for the termination have been satisfactorily remedied. The mortgagee will be required to complete successfully at least five DELRAP reviews in accordance with paragraph (b)(2) of this section in order to receive unconditional DELRAP authority as provided in paragraph (b)(3) of this section.
Miscellaneous Regulations
§ 203.9 Disclosure regarding interest due upon mortgage prepayment.
Each mortgagee with respect to a mortgage under this part shall at or before closing with respect to any such mortgage, provide the mortgagor with written notice in a form prescribed by the Commissioner describing any requirements the mortgagor must fulfill upon prepayment of the principal amount of the mortgage to prevent the accrual of any interest on the principal amount after the date of such prepayment. This paragraph shall apply to any mortgage executed after August 22, 1991, and before January 21, 2015.
§ 203.10 Informed consumer choice for prospective FHA mortgagors.
(a) Mortgagee to provide disclosure notice. A mortgagee must provide a prospective FHA mortgagor with an informed consumer choice disclosure notice if, in the mortgagees’s judgment, the prospective FHA mortgagor may qualify for similar conventional mortgage products offered by the mortgagee. The mortgagee should base this judgment on the mortgagee’s initial assessment of the prospective FHA mortgagor’s eligibility for a conventional mortgage product. If a mortgagee is unsure about a prospective FHA mortgagor’s eligibility for a conventional mortgage product, the mortgagee should provide the prospective FHA mortgagor with an informed consumer choice disclosure notice.
(b) Informed consumer choice disclosure notice—(1) Contents of notice. The informed consumer choice disclosure notice must:
(i) Provide a one page generic analysis comparing the mortgage costs of an FHA-insured mortgage with the mortgage costs of similar conventional mortgage products offered by the mortgagee that the prospective FHA mortgagor may qualify for;
(ii) Provide information about when the requirement to pay FHA mortgage insurance premiums terminates; and
(iii) Meet the requirements of section 203(b)(2) of the National Housing Act (12 U.S.C. 1709(b)(2)).
(2) Format of disclosure notice. The informed consumer choice disclosure notice must be provided in a format prescribed by the Commissioner. HUD has prepared a model informed consumer choice disclosure notice that represents this format and that meets the requirements of section 203(b)(2) of the National Housing Act (12 U.S.C. 1709(b)(2)). The model informed consumer choice disclosure notice contains the minimum elements of an informed consumer choice disclosure notice. These elements must be included in a mortgagee’s informed consumer choice disclosure notice. A mortgagee, however, may include additional elements in an informed consumer choice disclosure notice to better reflect the mortgagee’s products or to provide information that the mortgagee believes is meaningful and helpful to the mortgagee’s customers.
(3) Availability of model disclosure notice. HUD’s model informed consumer choice disclosure notice is made available to FHA-approved mortgagees through Mortgagee Letter and is available to the public through the internet at HUD’s web site at http://www.hud.gov or by contacting: Home Mortgage Insurance Division, Office of Insured Single Family Housing, U.S. Department of Housing and Urban Development, 451 Seventh Street, SW, Washington, DC 20410-8000; telephone (202) 708-2700 (this is not a toll-free number), or the nearest HUD Homeownership Center (Atlanta, GA (888) 696-4687; Denver, CO (800) 543-9378; Philadelphia, PA (800) 440-8647; or Santa Ana, CA (888) 827-5605). Hearing- or speech-impaired individuals may access these numbers via TTY by calling the toll-free Federal Information Relay Service at (800) 877-8339.
(c) Timing. When required under paragraph (a) of this section, a mortgagee must provide an informed consumer choice disclosure notice to a prospective FHA mortgagor not later than three business days after the mortgagee receives the prospective FHA mortgagor’s application.
(d) Revision of notice. A mortgagee should revise its informed consumer choice disclosure notice periodically to reflect prevailing market conditions. To ensure that the informed consumer choice disclosure notice reflects prevailing market conditions, a mortgagee must revise its informed consumer choice disclosure notice at least once annually.
(e) Applicability. This section applies to any application for mortgage insurance authorized under section 203(b) of the National Housing Act (12 U.S.C. 1709) that the mortgagee receives on or after September 2, 1999.
(f) Definitions. As used in this section:
Application means the submission of financial information in anticipation of a credit decision.
Conventional mortgage means conventional mortgage as used in section 305(a)(2) of the Federal Home Loan Mortgage Corporation Act (12 U.S.C. 1454(a)(2)) or section 302(b)(2) of the Federal National Mortgage Association Charter Act (12 U.S.C. 1717(b)(2)), as applicable.
Mortgagee means mortgagee as defined in § 202.2 of this chapter.
Prospective FHA mortgagor means a person who submits an application to a mortgagee to obtain mortgage insurance authorized under section 203(b) of the National Housing Act (12 U.S.C. 1709).
§ 203.12 Mortgage insurance on proposed or new construction.
(a) Applicability. This section applies to an application for insurance of a mortgage on a one-to four-family dwelling, unless the mortgage will be secured by a dwelling that:
(1) Was completed more than one year before the date of the application for insurance or, under the Direct Endorsement Program, was completed more than one year before the date of the appraisal; or
(2) Is being sold to a second or subsequent purchaser.
(b) Procedures. (1) Applications for insurance to which this section applies will be processed in accordance with procedures prescribed by the Secretary. These procedures may only provide for endorsement for insurance of a mortgage covering a dwelling that is:
(i) Approved under the Direct Endorsement Program or the Lender Insurance Program; or
(ii) Located in a subdivision approved by the Rural Housing Service.
(2) The mortgagee must submit a signed Builder’s Certification of Plans, Specifications and Site (Builder’s Certification). The Builder’s Certification must be in a form prescribed by the Secretary and must cover:
(i) Flood hazards;
(ii) Noise;
(iii) Explosive and flammable materials storage hazards;
(iv) Runway clear zones/clear zones;
(v) Toxic waste hazards;
(vi) Other foreseeable hazards or adverse conditions (i.e., rock formations, unstable soils or slopes, high ground water levels, inadequate surface drainage, springs, etc.) that may affect the health and safety of the occupants or the structural soundness of the improvements. The Builder’s Certification must be provided to the appraiser for reference before the performance of an appraisal on the property.
(3) If a builder (or developer) intends to sell five or more properties in a subdivision, an Affirmative Fair Housing Marketing Plan (AFHMP) that meets the requirements of 24 CFR part 200, subpart M must be submitted and approved by HUD no later than the date of the first application for mortgage insurance in that subdivision. Thereafter, applications for insurance on other properties sold by the same builder (or developer) in the same subdivision may make reference to the existing previously approved AFHMP.
§ 203.14 Builders’ warranty.
Applications relating to proposed construction must be accompanied by an agreement in form satisfactory to the Secretary, executed by the seller or builder or such other person as the Secretary may require, and agreeing that in the event of any sale or conveyance of the dwelling, within a period of one year beginning with the date of initial occupancy, the seller, builder, or such other person will at the time of such sale or conveyance deliver to the purchaser or owner of such property a warranty in form satisfactory to the Secretary warranting that the dwelling is constructed in substantial conformity with the plans and specifications (including amendments thereof or changes and variations therein which have been approved in writing by the Secretary) on which the Secretary has based on the valuation of the dwelling. Such agreement must provide that upon the sale or conveyance of the dwelling and delivery of the warranty, the seller, builder or such other person will promptly furnish the Secretary with a conformed copy of the warranty establishing by the purchaser’s receipt thereon that the original warranty has been delivered to the purchaser in accordance with this section.
§ 203.15 Certification of appraisal amount.
An application with respect to insurance of mortgages must be accompanied by an agreement satisfactory to the Commissioner, executed by the seller, builder or such other person as may be required by the Commissioner, whereby the person agrees that before any sale of the dwelling, the person will deliver to the purchaser of the property a written statement, in a form satisfactory to the Commissioner, setting forth the amount of the appraised value of the property as determined by the Commissioner.
§ 203.16 Certificate and contract regarding use of dwelling for transient or hotel purposes.
Every application filed with respect to insurance of mortgages on a two-, three-, or four-family dwelling, or a single-family dwelling which is one of a group of 5 or more single-family dwellings held by the same mortgagor, must be accompanied by a contract in form satisfactory to the Commissioner, signed by the proposed mortgagor covenanting and agreeing that so long as the proposed mortgage is insured by the Commissioner the mortgagor will not rent the housing or any part thereof covered by the mortgage for transient or hotel purposes, together with the mortgagor’s certification under oath that the housing or any part thereof covered by the proposed mortgage will not be rented for transient or hotel purposes. For the purpose of this subchapter rental for transient or hotel purposes shall mean (a) rental for any period less than 30 days or (b) any rental if the occupants of the housing accommodations are provided customary hotel services such as room service for food and beverages, maid service, furnishing and laundering of linen, and bellboy service.
§ 203.16a Mortgagor and mortgagee requirement for maintaining flood insurance coverage.
(a) In general. (1) The requirements of this section apply if a mortgage is to cover property improvements that:
(i) Are located in an area designated by the Federal Emergency Management Agency (FEMA) as a floodplain area having special flood hazards;
(ii) Are otherwise determined by the Commissioner to be subject to flood hazard; or
(iii) Are not otherwise covered by the flood insurance standard for condominium projects established under § 203.43b(d)(6)(iii) or (i)(1).
(2) No mortgage may be insured that covers property improvements located in an area that has been identified by FEMA as an area having special flood hazards unless the community in which the area is situated is participating in the National Flood Insurance Program and flood insurance under the National Flood Insurance Program (NFIP) is available with respect to such property improvements. Such requirement for flood insurance shall be effective one year after the date of notification by FEMA to the chief executive officer of a flood prone community that such community has been identified as having special flood hazards.
(3) For purposes of this section, property improvement means a dwelling and related structures/equipment essential to the value of the property and subject to flood damage.
(b) Flood insurance obligation. The mortgagor and mortgagee shall be obligated, by a special condition to be included in the mortgage commitment, to obtain and maintain either NFIP flood insurance or private flood insurance coverage on the property improvements.
(c) Insurance policy. A mortgagee may accept a flood insurance policy in the form of the standard policy issued under the NFIP or a private flood insurance policy as defined in this section, and the mortgagee shall be named as the loss payee for flood insurance benefits. A mortgagee may determine that a private flood insurance policy meets the definition of private flood insurance in this section, without further review of the policy, if the following statement is included within the policy or as an endorsement to the policy: “This policy meets the definition of private flood insurance contained in 24 CFR 203.16a(e) for FHA-insured mortgages.”
(d) Duration and amount of coverage. The flood insurance must be maintained during such time as the mortgage is insured in an amount at least equal to the lowest of the following:
(1) 100 percent replacement cost of the insurable value of the improvements, which consists of the development or project cost less estimated land cost; or
(2) The maximum amount of NFIP insurance available with respect to the particular type of property; or
(3) The outstanding principal balance of the loan.
(e) Private flood insurance defined. The term “private flood insurance” means an insurance policy that:
(1) Is issued by an insurance company that is:
(i) Licensed, admitted, or otherwise approved to engage in the business of insurance in the State or jurisdiction in which the insured building is located, by the insurance regulator of that State or jurisdiction; or
(ii) In the case of a policy of difference in conditions, multiple peril, all risk, or other blanket coverage insuring nonresidential commercial property, is recognized, or not disapproved, as a surplus lines insurer by the insurance regulator of the State or jurisdiction where the property to be insured is located;
(2) Provides flood insurance coverage that is at least as broad as the coverage provided under a standard flood insurance policy under the National Flood Insurance Program for the same type of property, including when considering deductibles, exclusions, and conditions offered by the insurer. To be at least as broad as the coverage provided under a standard flood insurance policy under the National Flood Insurance Program, the policy must, at a minimum:
(i) Define the term “flood” to include the events defined as a “flood” in a standard flood insurance policy under the National Flood Insurance Program;
(ii) Contain the coverage specified in a standard flood insurance policy under the National Flood Insurance Program, including that relating to building property coverage; personal property coverage, if purchased by the insured mortgagor(s); other coverages; and increased cost of compliance coverage;
(iii) Contain deductibles no higher than the specified maximum, and include similar non-applicability provisions, as under a standard flood insurance policy under the National Flood Insurance Program, for any total policy coverage amount up to the maximum available under the NFIP at the time the policy is provided to the lender;
(iv) Provide coverage for direct physical loss caused by a flood and may only exclude other causes of loss that are excluded in a standard flood insurance policy under the National Flood Insurance Program. Any exclusions other than those in a standard flood insurance policy under the National Flood Insurance Program may pertain only to coverage that is in addition to the amount and type of coverage that could be provided by a standard flood insurance policy under the National Flood Insurance Program or have the effect of providing broader coverage to the policyholder; and
(v) Not contain conditions that narrow the coverage provided in a standard flood insurance policy under the National Flood Insurance Program;
(3) Includes all of the following:
(i) A requirement for the insurer to give 45 days’ written notice of cancellation or non-renewal of flood insurance coverage to:
(A) The insured;
(B) The mortgagee, if any; and
(C) Federal Housing Administration (FHA), in cases where the mortgagee has assigned the loan to FHA in exchange for claim payment;
(ii) Information about the availability of flood insurance coverage under the National Flood Insurance Program;
(iii) A mortgage interest clause similar to the clause contained in a standard flood insurance policy under the National Flood Insurance Program; and
(iv) A provision requiring an insured to file suit not later than 1 year after the date of a written denial of all or part of a claim under the policy; and
(4) Contains cancellation provisions that are as restrictive as the provisions contained in a standard flood insurance policy under the National Flood Insurance Program.
Eligible Mortgages
§ 203.17 Mortgage provisions.
(a) Mortgage form. (1) The term “mortgage” as used in this part, except § 203.43c, shall have the meaning given in Section 201 of the National Housing Act, as amended (12 U.S.C. 1707).
(2)(i) The mortgage shall be in a form meeting the requirements of the Commissioner. The Commissioner may prescribe complete mortgage instruments. For each case in which the Commissioner does not prescribe complete mortgage instruments, the Commissioner
(A) Shall require specific language in the mortgage which shall be uniform for every mortgage, and
(B) May also prescribe the language or substance of additional provisions for all mortgages as well as the language or substance of additional provisions for use only in particular jurisdictions or for particular programs.
(ii) Each mortgage shall also contain any provisions necessary to create a valid and enforceable secured debt under the laws of the jurisdiction in which the property is located.
(b) Mortgage multiples. A mortgage shall involve a principal obligation in a multiple of $1.
(c) Payments. The mortgage shall:
(1) Come due on the first of the month.
(2) Contain complete amortization provisions satisfactory to the Secretary and an amortization period not in excess of the term of the mortgage.
(3) Provide for payments to principal and interest to begin not later than the first day of the month following 60 days from the date the mortgage is executed (or the date a construction mortgage is converted to a permanent mortgage, if applicable).
(d) Maturity. The mortgage shall have a term of not more than 30 years from the date of the beginning of amortization.
(e) Property Standards. The mortgage must be a first lien upon the property that conforms with property standards prescribed by the Commissioner.
(f) Disbursement. The entire principal amount of the mortgage must have been disbursed to the mortgagor or to his or her creditors for his or her account and with his or her consent.
§ 203.18 Maximum mortgage amounts.
(a) Mortgagors of principal or secondary residences. The principal amount of the mortgage must not exceed the lesser of the following amounts that apply:
(1) The dollar amount limitation that applies for the area under section 203(b)(2)(A) of the National Housing Act including any increase in the dollar limitation under § 203.29, as announced in accordance with § 203.18(h);
(2)(i) The amount based on appraised value that is permitted by section 203(b)(10) of the National Housing Act, if that provision is in effect and applies to the mortgage; or
(ii) If section 203(b)(10) is not in effect or otherwise does not apply to the mortgage, the lesser of the amounts based on appraised value that are permitted by section 203(b)(2)(B) of the National Housing Act and paragraph (g) of this section;
(3) An amount equal to 85 percent of the appraised value if the mortgage covers a dwelling that is to be occupied as a secondary residence (as defined in paragraph (f)(2) of this section).
(b) Veteran qualifications. The special veteran terms provided in section 203(b)(2) of the National Housing Act shall apply only if the mortgagor submits one of the following certifications:
(1) A certification issued by the Secretary of Defense establishing that the veteran performed extra hazardous service while serving in the armed forces for a period of less than 90 days; or
(2) A Certificate of Eligibility from the Department of Veterans Affairs establishing that the person served 90 days or more on active duty in the armed forces (U.S. Army, Navy, Marine Corps, Air Force, Coast Guard, the Army Reserve, the Naval Reserve, the Marine Corps Reserve, the Air Force Reserve, the Coast Guard Reserve, the National Guard of the United States, or the Air National Guard of the United States); that he or she enlisted before September 8, 1980; and that he or she was discharged or released under conditions other than dishonorable (a copy of the veteran’s discharge papers or Form DD-214 shall be submitted with the certificate); or
(3) A Certificate of Eligibility from the Department of Veterans Affairs establishing that the person:
(i)(A) Originally enlisted in a regular component of the armed forces after September 7, 1980; or entered on active duty after October 16, 1981, and he or she had not previously completed a period of active duty of at least 24 months or been discharged or released from active duty under 10 U.S.C. 1171; and
(B) Has completed, since enlistment or entering on active duty, either:
(1) Twenty-four months of continuous active duty, or the full period for which he or she was called or ordered to active duty, whichever is shorter; or
(2) Any other period of active duty if he or she was discharged or released from duty under 10 U.S.C. 1171 or 1173; was discharged or released from duty for disability incurred or aggravated in the line of duty; or has a disability which the Department of Veterans Affairs has determined to be compensable under 38 U.S.C. chap. 11; and
(ii) Was discharged or released under conditions other than dishonorable (a copy of the veteran’s discharge papers or Form DD-214 shall be submitted with the certification).
(c) Eligible non-occupant mortgagors. A mortgage may be executed by an eligible non-occupant mortgagor (as that term is defined in paragraph (f)(3) of this section) for up to an amount authorized for the appropriate loan type in paragraph (a) of this section except where a lesser amount is expressly provided for in this part.
(d) Outlying area properties. A mortgage covering a single family residence located in an area in which the Commissioner finds that it is not practicable to obtain conformity with many of the requirements essential to the insurance of mortgages in built-up, urban areas; or a mortgage covering a single family dwelling that is to be used as a farm home on a plot of land that is two and one-half or more acres in size and adjacent to an all-weather public road, may not exceed:
(1) In the case of a mortgagor who is to occupy the dwelling as a principal residence (as defined in paragraph (f)(1) of this section):
(i) 75 percent of the dollar limitation under (a)(1).
(ii) 97 percent of the appraised value of the property as of the date the mortgage is accepted for insurance, if:
(A) The Commissioner approved the dwelling for insurance before the beginning of construction; or
(B) Construction was completed more than one year before the date of the application for insurance; or
(C) The Secretary of Veterans Affairs approved the dwelling for guaranty, insurance, or direct loan before the beginning of construction.
(iii) If the property does not meet the requirements of paragraph (d)(1)(ii) of this section, 90 percent of the appraised value of the property as of the date the mortgage is accepted for insurance.
(2) In the case of a mortgagor who is to occupy the dwelling as a secondary residence (as defined in paragraph (f)(2) of this section):
(i) The amount permitted in paragraph (d)(1)(i) of this section, or
(ii) 85 percent of the appraised value of the property as of the date the mortgage is accepted for insurance.
(e) Disaster victims. A mortgage covering a single family dwelling, in an amount not in excess of the maximum dollar limitation specified in paragraph (a)(1) of this section (unless a higher maximum mortgage amount is authorized under § 203.29), and not in excess of the lesser of 100 percent of the appraised value of the property or the cost of acquisition as of the date the mortgage is accepted for insurance, shall be eligible for insurance if:
(1) The mortgage is executed by a mortgagor who is to occupy the dwelling as a principal residence (as defined in paragraph (f)(1) of this section);
(2) The mortgagor establishes that the home which he or she previously occupied as owner or tenant was destroyed or damaged to such an extent that reconstruction or replacement is required as a result of a flood, fire, hurricane, earthquake, storm, riot or civil disorder or other catastrophe which the President has determined to be a major disaster; and
(3) The application for insurance is filed within one year from the date of such presidential determination, or within such additional period of time as the period of federal assistance with respect to such disaster may be extended.
(f) Definitions. As used in this section:
(1) Principal residence means the dwelling where the mortgagor maintains (or will maintain) his or her permanent place of abode, and typically spends (or will spend) the majority of the calendar year. A person may have only one principal residence at any one time.
(2) Secondary residence means a dwelling: (i) Where the mortgagor maintains or will maintain a part-time place of abode and typically spends (or will spend) less than a majority of the calendar year; (ii) which is not a vacation home; and (iii) which the Commissioner has determined to be eligible for insurance in order to avoid undue hardship to the mortgagor. A person may have only one secondary residence at a time.
(3) Eligible non-occupant mortgagor means a mortgagor (or co-mortgagor, as appropriate) who is not to occupy the dwelling as a principal residence or a secondary residence and who is—
(i) A public entity, as provided in section 214 or 247 of the National Housing Act, or any other State or local government or agency thereof;
(ii) A private nonprofit or public entity, as provided in section 221(h) or 235(j) of the National Housing Act, or other private nonprofit organization that is exempt from taxation under section 501(c)(3) of the Internal Revenue Code of 1986 and intends to sell or lease the mortgaged property to low or moderate income persons, as determined by the Secretary;
(iii) An Indian tribe, as provided in section 248 of the National Housing Act;
(iv) A serviceperson who is unable to meet the occupancy requirement because of his or her duty assignment, as provided in section 216 of the National Housing Act or subsection (b)(4) or (f) of section 222 of the National Housing Act;
(v) A mortgagor or co-mortgagor under subsection 203(k) of the National Housing Act; or
(vi) A mortgagor who, pursuant to § 203.43(c) of this part, is refinancing an existing mortgage insured under the National Housing Act for not more than the outstanding balance of the existing mortgage, if the amount of the monthly payment due under the refinancing mortgage is less than the amount due under the existing mortgage for the month in which the refinancing mortgage is executed.
(4) Appraised value means the sum of:
(i) The lesser of sales price (with any adjustments required by the Secretary) or the amount set forth in the written statement required under § 203.15; and
(ii) Borrower-paid closing costs allowed under § 203.27(a)(1)-(3), except that closing costs do not apply if section 203(b)(10) of the National Housing Act is in effect and neither sales price nor closing costs apply for purposes of paragraph (g) of this section.
(5) Undue hardship means that affordable housing which meets the needs of the mortgagor is not available for lease, or within reasonable commuting distance from the mortgagor’s home to his or her work place.
(6) Vacation home means a dwelling that is used primarily for recreational purposes and enjoyment, and that is not a primary or secondary residence.
(g) Maximum principal obligation. Except for mortgages meeting the requirements of § 203.18(b), § 203.18(e) or § 203.50(f), and notwithstanding any other provision of this section, a mortgage may not involve a principal obligation in excess of 98.75 percent of the appraised value of the property (97.75 percent, in the case of a mortgage with an appraised value in excess of $50,000), plus the amount of the mortgage insurance premium paid at the time the mortgage is insured.
(h) Notice of maximum mortgage amount. A maximum mortgage amount based on the 1-family median house price for an area under paragraph (a)(1) of this section may be made effective by:
(1) Providing direct notice to affected mortgagees through an administrative issuance; or
(2) Publishing a notice in the
(i) Energy efficient mortgages. The principal amount of energy efficient mortgages may exceed the maximum amounts determined under paragraph (a)(1) of this section under conditions prescribed by the Secretary in accordance with section 106 of the Energy Policy Act of 1992.
§ 203.18a Solar energy system.
(a) The dollar limitation provided in § 203.18(a) may be increased by up to 20 percent if such an increase is necessary to account for the increased cost of the residence due to the installation of a solar energy system.
(b) Solar energy system is defined as any addition, alteration, or improvement to an existing or new structure which is designed to utilize wind energy or solar energy either of the active type based on mechanically forced energy transfer or of the passive type based on convective, conductive, or radiant energy transfer or some combination of these types to reduce the energy requirements of that structure from other energy sources and which is in conformity with such criteria and standards as shall be prescribed by the Secretary in consultation with the Secretary of Energy.
§ 203.18b Increased mortgage amount.
(a) If any party believes that a mortgage limit established by the Secretary under § 203.18(a)(1) does not accurately reflect the median house prices in an area, the party may submit documentation in support of an alternative mortgage limit. For purposes of this section, an area (1) must be at least the size of a county, whether or not the area is located within a metropolitan statistical area, as established by the Office of Management and Budget; and (2) may be an area for which the mortgage limits established under § 203.18(b)(1) apply.
(b)(1) The documentation referred to in paragraph (a) of this section must consist of sufficient housing sales price data for the entire geographic area for which the request is made to justify an alternative mortgage limit. The documentation should include a listing of actual sales prices in the area for all or nearly all new and existing 1-family homes and condominiums, over a period of time varies with sales volume, as follows:
(i) For 500 or more sales per month, a one-month reporting period;
(ii) For 250 through 499 sales per month, a two-month reporting period.
(iii) For less than 250 sales per month, a three-month reporting period.
(2) Requests for an increased mortgage limit based upon documentation of median house prices for the area should be sent to the appropriate HUD field office.
(c) In the case of an area where the Commissioner determines that the median one-family house price does not reasonably reflect the sales prices of newly constructed homes because of an existing stock whose value is static or declining, the Commissioner may give greater weight to the sales prices of new homes in determining median house price in such area. Without limiting the discretion of the Commissioner in fashioning appropriate methods of implementing the foregoing authority in particular circumstances based upon a demonstration of good cause satisfactory to the Commissioner, in areas where evidence satisfactory to the Commissioner indicates that existing home sales outnumber new home sales by three-to-one or better, the median sales price will be calculated as the greater of (1) the average of the median sales price for new and existing homes, and (2) the composite median price of all sales.
After determining any maximum insurable mortgage amount under the provisions of this subpart, the maximum insurable amount of any mortgage may be increased by the amount of any one-time or up-front mortgage insurance premium that will be financed as part of the mortgage.
§ 203.18d Minimum principal loan amount.
A mortgagee may not require, as a condition of providing a loan secured by a mortgage insured under this part, that the principal amount of the mortgage exceed a minimum amount established by the mortgagee.
§ 203.19 Qualified mortgage.
(a) Definitions. As used in this section:
(1) Average prime offer rate means an annual percentage rate that is derived from average interest rates, points, and other loan pricing terms currently offered to mortgagors by a representative sample of mortgagees for mortgage transactions that have low-risk pricing characteristics as published by the Consumer Financial Protection Bureau (CFPB) from time to time in accordance with the CFPB’s regulations at 12 CFR 1026.35, pertaining to prohibited acts or practices in connection with higher-priced mortgage loans.
(2) Annual percentage rate is the measure of the cost of credit, expressed as a yearly rate, that relates the amount and timing of value received by the mortgagor to the amount and timing of payments made and is the rate required to be disclosed by the mortgagee under 12 CFR 1026.18, pertaining to disclosure of finance charges for mortgages.
(3) Points and fees has the meaning given to “points and fees” in 12 CFR 1026.32(b)(1) as of January 10, 2014. Any changes made by the CFPB to the points and fees definition may be adopted by HUD through publication of a notice and after providing FHA-approved mortgagees with time, as may be determined necessary, to implement.
(b) Qualified mortgage—(1) Limit. For a single family mortgage to be insured under title II of the National Housing Act (12 U.S.C. 1701 et seq.), except for mortgages for manufactured housing and mortgages under paragraph (c) of this section, the total points and fees payable in connection with a loan used to secure a dwelling shall not exceed the CFPB’s limit on points and fees for qualified mortgage in its regulations at 12 CFR 1026.43(e)(3) as of January 10, 2014. Any changes made by the CFPB to the limit on points and fees may be adopted by HUD through publication of a notice and after providing FHA-approved mortgagees with time, as may be determined necessary, to implement.
(2) Rebuttable presumption qualified mortgage. (i) A single family mortgage insured under title II of the National Housing Act (12 U.S.C. 1701 et seq.), except for mortgages for manufactured housing and mortgages under paragraph (c) of this section, that has an annual percentage rate that exceeds the average prime offer rate for a comparable mortgage, as of the date the interest rate is set, by more than the combined annual mortgage insurance premium and 1.15 percentage points for a first-lien mortgage is a rebuttable presumption qualified mortgage that is presumed to comply with the ability to repay requirements in 15 U.S.C. 1639c(a).
(ii) To rebut the presumption of compliance, it must be proven that the mortgage exceeded the points and fees limit in paragraph (b)(1) of this section or that, despite the mortgage having been endorsed for insurance under the National Housing Act, the mortgagee did not make a reasonable and good-faith determination of the mortgagor’s repayment ability at the time of consummation, by failing to evaluate the mortgagor’s income, credit, and assets in accordance with HUD underwriting requirements.
(3) Safe harbor qualified mortgage. (i) A mortgage for manufactured housing that is insured under Title II of the National Housing Act (12 U.S.C. 1701 et seq.) is a safe harbor qualified mortgage that meets the ability to repay requirements in 15 U.S.C. 1639c(a); and
(ii) A single family mortgage insured under title II of the National Housing Act (12 U.S.C. 1701 et seq.), except for mortgages under paragraph (c) of this section, that has an annual percentage rate that does not exceed the average prime offer rate for a comparable mortgage, as of the date the interest rate is set, by more than the combined annual mortgage insurance premium and 1.15 percentage points for a first-lien mortgage is a safe harbor qualified mortgage that meets the ability to repay requirements in 15 U.S.C. 1639c(a).
(4) Effect of indemnification on qualified mortgage status. An indemnification demand or resolution of a demand that relates to whether the loan satisfied relevant eligibility and underwriting requirements at the time of consummation may result from facts that could allow a change to qualified mortgage status, but the existence of an indemnification does not per se remove qualified mortgage status.
(c) Exempted transactions. The following transactions are exempted from the requirements in paragraph (b) of this section:
(1) Home Equity Conversion Mortgages under section 255 of the National Housing Act (12 U.S.C. 1715z-20); and
(2) Mortgage transactions exempted by the CFPB in its regulations at 12 CFR 1026.43(a)(3) as of January 10, 2014. Any changes made by CFPB to the list of exempted transactions may be adopted by HUD through publication of a notice and after providing FHA-approved mortgagees with time, as may be determined necessary, to implement.
(d) Ability to make adjustments to this section by notice. The FHA Commissioner may make adjustments to this section, including the calculations of fees or the list of transactions excluded from compliance with the requirements of this section as the Commissioner determines necessary for purposes of meeting FHA’s mission, after solicitation and consideration of public comments.
§ 203.20 Agreed interest rate.
(a) The mortgage shall bear interest at the rate agreed upon by the mortgagee and the mortgagor.
(b) Interest shall be payable in monthly installments on the principal amount of the mortgage outstanding on the due date of each installment.
§ 203.21 Amortization provisions.
The mortgage must contain complete amortization provisions satisfactory to the Commissioner, requiring monthly payments by the mortgagor not in excess of his reasonable ability to pay as determined by the Commissioner. The sum of the principal and interest payments in each month shall be substantially the same.
(a) Payment of periodic insurance premiums or charges. Except with respect to mortgages for which a one-time mortgage insurance premium is paid pursuant to § 203.280, the mortgage may provide for monthly payments by the mortgagor to the mortgagee of an amount equal to one-twelfth of the annual mortgage insurance premium payable by the mortgagee to the Commissioner. Such payments continue only so long as the contract of insurance shall remain in effect or for such shorter period as mortgage insurance premiums are payable by the mortgagee to the Commissioner.
(b) Prepayment privilege. The mortgage shall contain a provision permitting the mortgagor to prepay the mortgage in whole or in part at any time and in any amount. The mortgage shall not provide for the payment of any charge on account of such prepayment.
§ 203.23 Mortgagor’s payments to include other charges.
(a) The mortgage shall provide for such equal monthly payments by the mortgagor to the mortgagee as will amortize:
(1) The ground rents, if any;
(2) The estimated amount of all taxes;
(3) Special assessments, if any;
(4) Flood insurance premiums, if flood insurance is required by the Commissioner; and
(5) Fire and other hazard insurance premiums, if any. The mortgage shall further provide that such payments shall be held by the mortgagee in a manner satisfactory to the Commissioner for the purpose of paying such ground rents, taxes, assessments, and insurance premiums before the same become delinquent, for the benefit and account of the mortgagor. The mortgage must also make provisions for adjustments in case the estimated amount of such taxes, assessments, and insurance premiums shall prove to be more, or less, than the actual amount thereof so paid by the mortgagor. Such payments shall be held in an escrow subject to § 203.550.
(b) The mortgagor shall not be required to pay premiums for fire or other hazard insurance which protects only the interests of the mortgagee, or for life or disability income insurance, or fees charged for obtaining information necessary for the payment of property taxes. The foregoing does not apply to charges made or penalties exacted by the taxing authority, except that a penalty assessed or interest charged by a taxing authority for failure to timely pay taxes or assessments shall not be charged by the mortgagee to the mortgagor if the mortgagee had sufficient funds in escrow for the account of the mortgagor to pay such taxes or assessments prior to the date on which penalty or interest charges are imposed.
(c) Mortgages involving a principal obligation not in excess of $9,000 may contain a provision requiring the mortgagor to pay to the mortgagee an annual service charge at such rate as may be agreed upon between the mortgagee and the mortgagor, but in no case shall such service charge exceed one-half of one percent per annum. Any such service charge shall be payable in monthly installments on the principal then outstanding. The provisions of this paragraph shall not apply to mortgages endorsed for insurance pursuant to applications received by the Commissioner on or after July 17, 1961.
§ 203.24 Application of payments.
(a) All monthly payments to be made by the mortgagor to the mortgagee shall be added together and the aggregate amount thereof shall be paid by the mortgagor each month in a single payment. The mortgagee shall apply the same to the following items in the order set forth:
(1) Premium charges under the contract of insurance (other than a one-time or up-front mortgage insurance premium paid in accordance with §§ 203.280, 203.284 and 203.285), charges for ground rents, taxes, special assessments, flood insurance premiums, if required, and fire and other hazard insurance premiums;
(2) Interest on the mortgage;
(3) Amortization of the principal of the mortgage; and
(4) Late charges, if permitted under the terms of the mortgage and subject to such conditions as the Commissioner may prescribe.
(b) Any deficiency in the amount of any such aggregate monthly payment shall, unless made good by the mortgagor prior to, or on, the due date of the next such payment, constitute an event of default under the mortgage.
§ 203.25 Late charge.
The mortgage may provide for the collection by the mortgagee of a late charge, not to exceed four per cent of the amount of each payment more than 15 days in arrears, to cover servicing and other costs attributable to the receipt of payments from mortgagors after the date upon which payment is due.
§ 203.26 Mortgagor’s payments when mortgage is executed.
(a) The mortgagor must pay to the mortgagee, upon execution of the mortgage, a sum that will be sufficient to pay the ground rents, if any, the estimated taxes, special assessments, flood insurance premiums, if required, and fire and other hazard insurance premiums for the period beginning on the last date on which each such charge would have been paid under the normal lending practices of the lender and local custom (if each such date constitutes prudent lending practice), and ending on the due date of the first full installment payment under the mortgage, plus an amount sufficient to pay the mortgage insurance premium from the date of closing the loan to the date of the first monthly payment under the mortgage or, where applicable, the one-time mortgage insurance premium payable pursuant to § 203.280.
(b) The mortgagee may also collect from the mortgagor a sum not exceeding one-sixth of the estimated total amount of such taxes, special assessments, insurance premiums and other charges to be paid during the ensuing 12-month period.
§ 203.27 Charges, fees or discounts.
(a) The mortgagee may collect from the mortgagor the following charges, fees or discounts:
(1) [Reserved]
(2) A charge to compensate the mortgagee for expenses incurred in originating and closing the loan, provided that the Commissioner may establish limitations on the amount of any such charge.
(3) Reasonable and customary amounts, but not more than the amount actually paid by the mortgagee, for any of the following items:
(i) Recording fees and recording taxes or other charges incident to recordation;
(ii) Credit Report;
(iii) Survey, if required by mortgagee or mortgagor;
(iv) Title examination; title insurance, if any;
(v) Fees paid to an appraiser or inspector approved by the Commissioner for the appraisal and inspection, if required, of the property. Notwithstanding any limitations in this paragraph (a)(3) if the mortgagee is permitted by applicable regulations to use the services of staff appraisers and inspectors for processing mortgages, and does so, the mortgagee may collect from the mortgagor the reasonable and customary amounts for such appraisals and inspections.
(vi) Such other reasonable and customary charges as may be authorized by the Commissioner.
(4) Reasonable and customary charges in the nature of discounts.
(5) Interest from the date of closing or the date on which the mortgagee disburses the mortgage proceeds to the account of the mortgagor or the mortgagor’s creditors, whichever is later, to the date of the beginning of amortization.
(b)-(c) [Reserved]
(d) Before the insurance of any mortgage, the mortgagee shall furnish to the Secretary a signed statement in a form satisfactory to the Secretary listing any charge, fee or discount collected by the mortgagee from the mortgagor. All charges, fees or discounts are subject to review by the Secretary both before and after endorsement under § 203.255.
(e) Nothing in this section will be construed as prohibiting the mortgagor from dealing through a broker who does not represent the mortgagee, if he prefers to do so, and paying such compensation as is satisfactory to the mortgagor in order to obtain mortgage financing.
§ 203.28 Economic soundness of projects.
The mortgage must be executed with respect to a project which, in the opinion of the Commissioner, is economically sound, except that this section shall not apply in each of the following instances:
(a) To a mortgage of the character described in § 203.18(d) and with respect to such a mortgage, the Commissioner shall determine that the mortgage is an acceptable risk giving consideration to the need for providing adequate housing for families of low and moderate income, particularly in suburban and outlying areas or small communities.
(b) To a mortgage of the character described in § 203.18 (e).
(c) To a mortgage of the character described in § 203.43a.
(d) To a mortgage in a federally impacted area described in § 203.43e.
(e) To a rehabilitation loan of the character described in § 203.50.
§ 203.29 Eligible mortgages in Alaska, Guam, Hawaii, or the Virgin Islands.
(a) When is an increased mortgage limit permitted for these areas? For Alaska, Guam, Hawaii or the Virgin Islands, the Commissioner may increase the maximum mortgage amount permitted by section 203(b)(2)(A) of the National Housing Act when authorized by section 214 of that Act, through the procedures described in § 203.18(h).
(b) If a party believes that the otherwise applicable mortgage limit needs to be increased to reflect the extent to which high costs make it infeasible to construct dwellings without sacrificing sound standards of construction, design or livability, the party may submit documentation in support of an alternative mortgage limit. This documentation should include actual or estimated costs of such items as design, construction, materials, and labor. In addition, actual sales prices of new homes may be submitted, together with any other documentation requested by the Commissioner. Requests for alternative mortgage limits, together with supporting documentation should be sent to the appropriate HUD field office. The field office will forward the request and supporting material, with the field office’s recommendation, to the Commissioner for determination.
(c) If the Alaska Housing Authority, or the Government of Guam, Hawaii, or the Virgin Islands or any agency or instrumentality of those entities, is the mortgagor or the mortgagee, or the mortgagor is regulated or restricted as to rents or sales, charges, capital structure, rate of return, and methods of operation to such an extent and in such manner as the Commissioner determines advisable to provide reasonable rental and sales prices and a reasonable return on the investment, any mortgage otherwise eligible for insurance under this subpart may be insured:
(1) In any case where the Alaska Housing Authority, or the government of Guam, Hawaii, the Virgin Islands, or any agency or instrumentality of those entities, is the mortgagor, without regard to any requirement that the mortgagor occupy the dwelling as a principal residence or a secondary residence (as these terms are defined in § 203.18(f)), or meet loan-to-value or comparable limitations based on the failure of the mortgagor to meet this occupancy requirement;
(2) Without regard to any requirement that the mortgagor has paid on account of the property a prescribed percentage of the appraised value of the property; or
(3) Without regard to any requirement that the mortgagor certify that the mortgaged property is free and clear of all liens other than the mortgage offered for insurance and that there will not be any unpaid obligations contracted in connection with the mortgage transaction or the purchase of the mortgaged property.
(d) The provisions of § 203.28 requiring economic soundness shall not be applicable to mortgages covering property located in Alaska, in Guam, in Hawaii, or in the Virgin Islands, but the Commissioner shall find that the property or project is an acceptable risk, giving consideration to the acute housing shortage in Alaska, Guam, Hawaii, or the Virgin Islands.
§ 203.30 Certificate of nondiscrimination by the mortgagor.
The mortgagor shall certify to the Commissioner as to each of the following points:
(a) That neither he, nor anyone authorized to act for him, will refuse to sell or rent, after the making of a bonafide offer, or refuse to negotiate for the sale or rental of, or otherwise make unavailable or deny the dwelling or property covered by the mortgage to any person because of race, color, religion, national origin, familial status (except as provided by law), or handicap.
(b) That any restrictive covenant on such property relating to race, color, religion, or national origin is recognized as being illegal and void and is hereby specifically disclaimed.
(c) That civil action for preventative relief may be brought by the Attorney General in any appropriate U.S. District Court against any person responsible for a violation of this certification.
(d) That buildings having four (4) or more units, which were built for first occupancy after March 13, 1991, were constructed in compliance with the Fair Housing Act new construction requirements in 24 CFR 100.205.
§ 203.31 Mortgagor of a principal residence in military service cases.
(a) A mortgage that is otherwise eligible for insurance under any of the provisions of this part may be insured without regard to any requirement contained in this part that the mortgagor occupy the dwelling as a principal residence (as defined in § 203.18(f)(1)) at the time of insurance, or that the mortgagor meet loan-to-value or comparable limitations based on the failure of the mortgagor to meet an occupancy requirement, if:
(1) The Commissioner is satisfied that the inability of the mortgagor to meet the occupancy requirement is by reason of his or her entry into military service after the filing of an application for insurance; and
(2) The mortgagor expresses an intent (in such form as the Commissioner may prescribe), to meet the occupancy requirement upon his or her discharge from the service.
(b) A serviceperson will also be considered to meet the occupancy requirement referred to in paragraph (a) of this section for mortgage insurance purposes, if the following conditions are satisfied:
(1) The serviceperson and his or her family expect to meet the occupancy requirement referred to in paragraph (a) of this section for two or more years. The Commissioner may shorten this period to one year, if (i) the serviceperson’s family will occupy the property for at least one year and (ii) the serviceperson is assigned to a combat zone or other hazardous duty area where the family cannot accompany him or her; and
(2) The property is located in an area in which the prospects of resale are reasonable.
Eligible Mortgagors
§ 203.32 Mortgage lien.
(a) Except as otherwise provided in this section, a mortgagor must establish that, after the mortgage offered for insurance has been recorded, the mortgaged property will be free and clear of all liens other than such mortgage, and that there will not be outstanding any other unpaid obligations contracted in connection with the mortgage transaction or the purchase of the mortgaged property, except obligations that are secured by property or collateral owned by the mortgagor independently of the mortgaged property.
(b) With prior approval of the Secretary, the mortgaged property may be subject to a secondary mortgage or loan made or insured, or other secondary lien held, by a Federal, State, or local government agency or instrumentality, or an entity designated in the homeownership plan submitted by an applicant for an implementation grant under the Homeownership and Opportunity for People Everywhere (HOPE) program, or an eligible nonprofit organization as defined in § 203.41(a)(5) of this part, provided that the required monthly payments under the insured mortgage and the secondary mortgage or lien shall not exceed the mortgagor’s reasonable ability to pay as determined by the Secretary.
(c) With the prior approval of the Secretary, the mortgaged property may be subject to a second mortgage held by a mortgagee not described in paragraph (b) of this section. Unless the mortgage is for the purpose described in paragraph (d) of this section, it shall meet the following requirements:
(1) The required monthly payments under the insured mortgage and the second mortgage shall not exceed the mortgagor’s reasonable ability to pay, as determined by the Commissioner;
(2) Periodic payments, if any, shall be collected monthly and be substantially the same;
(3) The sum of the principal amount of the insured mortgage and the second mortgage shall not exceed the loan-to-value limitation applicable to the insured mortgage, and shall not exceed the maximum mortgage limit for the area;
(4) The repayment terms shall not provide for a balloon payment before ten years, or for such other term as the Commissioner may approve, except that the mortgage may become due and payable on sale or refinancing of the secured property covered by the insured mortgage; and
(5) The mortgage shall contain a provision permitting the mortgagor to prepay the mortgage in whole or in part at any time, and shall not provide for the payment of any charge on account of such prepayment.
(d)(1) With the prior approval of the Commissioner, the mortgaged property may be subject to a junior (second or third) mortgage securing the repayment of funds advanced to reduce the mortgagor’s monthly payments on the insured mortgage following the date it is insured, if the junior mortgage meets the following requirements:
(i) The junior mortgage shall not provide for any payment of principal or interest until the property securing the junior mortgage is sold or the insured mortgage is refinanced, at which time the junior mortgage shall become due and payable;
(ii) The total amount of repayments under the junior mortgage shall not exceed the least of:
(A) One-half of the mortgagor’s equity interest in the property at the time of sale or refinancing;
(B) Three times the amount of funds advanced to effect the interest rate buy-down; or
(C) The sum of the original loan amount plus the total accrued interest on the junior mortgage at the time of repayment; and
(iii) The junior mortgage shall contain a provision permitting the mortgagor to prepay the mortgage in whole or in part at any time, and shall not provide for the payment of any charge on account of such prepayment. Any full or partial prepayment will not be recoverable by the mortgagor if, by application of paragraph (d)(1)(ii) on sale or refinancing of the property, a lesser amount than the amount prepaid would have been due.
(2) The sum of the principal amount of the insured mortgage, any second mortgage made under paragraph (b) or (c) of this section, and the mortgage securing the repayment of funds advanced to reduce the borrower’s monthly payments (whether a second or third mortgage) may exceed the loan-to-value limitation applicable to the insured mortgage, but such sum may not exceed the maximum mortgage limit for the area.
§ 203.33 Relationship of income to mortgage payments.
(a) Adequacy of mortgagor’s gross income. A mortgagor must establish, to the satisfaction of the Secretary, that his or her gross income is and will be adequate to meet (1) the periodic payments required by the mortgage submitted for insurance and (2) other long-term obligations.
(b) Determinations of adequacy of mortgagor income under this section shall be made in a uniform manner without regard to race, color, religion, sex, national origin, familial status, handicap, marital status, actual or perceived sexual orientation, gender identity, source of income of the mortgagor, or location of the property.
§ 203.34 Credit standing.
A mortgagor must have a general credit standing satisfactory to the Commissioner.
§ 203.35 Disclosure and verification of Social Security and Employer Identification Numbers.
To be eligible for mortgage insurance under this part, the mortgagor must meet the requirements for the disclosure and verification of Social Security and Employer Identification Numbers, as provided by part 200, subpart U, of this chapter.
§ 203.36 [Reserved]
Eligible Properties
§ 203.37 Nature of title to realty.
A mortgage, to be eligible for insurance, must be on real estate held in fee simple, or on leasehold under a lease for not less than 99 years which is renewable, or under a lease having a period of not less than 10 years to run beyond the maturity date of the mortgage.
§ 203.37a Sale of property.
(a) Sale by owner of record—(1) Owner of record requirement. To be eligible for a mortgage insured by FHA, the property must be purchased from the owner of record and the transaction may not involve any sale or assignment of the sales contract.
(2) Supporting documentation. The mortgagee shall obtain documentation verifying that the seller is the owner of record and must submit this documentation to HUD as part of the application for mortgage insurance, in accordance with § 203.255(b)(12). This documentation may include, but is not limited to, a property sales history report, a copy of the recorded deed from the seller, or other documentation (such as a copy of a property tax bill, title commitment, or binder) demonstrating the seller’s ownership.
(b) Time restrictions on re-sales—(1) General. The eligibility of a property for a mortgage insured by FHA is dependent on the time that has elapsed between the date the seller acquired the property (based upon the date of settlement) and the date of execution of the sales contract that will result in the FHA mortgage insurance (the re-sale date). The mortgagee shall obtain documentation verifying compliance with the time restrictions described in this paragraph and must submit this documentation to HUD as part of the application for mortgage insurance, in accordance with § 203.255(b).
(2) Re-sales occurring 90 days or less following acquisition. If the re-sale date is 90 days or less following the date of acquisition by the seller, the property is not eligible for a mortgage to be insured by FHA.
(3) Re-sales occurring between 91 days and 180 days following acquisition. (i) If the re-sale date is between 91 days and 180 days following acquisition by the seller, the property is generally eligible for a mortgage insured by FHA.
(ii) However, HUD will require that the mortgagee obtain additional documentation if the re-sale price is 100 percent over the purchase price. Such documentation must include an appraisal from another appraiser. The mortgagee may also document its loan file to support the increased value by establishing that the increased value results from the rehabilitation of the property.
(iii) HUD may revise the level at which additional documentation is required under § 203.37a(b)(3) at 50 to 150 percent over the original purchase price. HUD will revise this level by
(4) Authority to address property flipping for re-sales occurring between 91 days and 12 months following acquisition. (i) If the re-sale date is more than 90 days after the date of acquisition by the seller, but before the end of the twelfth month after the date of acquisition, the property is eligible for a mortgage to be insured by FHA.
(ii) However, HUD may require that the lender provide additional documentation to support the re-sale value of the property if the re-sale price is 5 percent or greater than the lowest sales price of the property during the preceding 12 months (as evidenced by the contract of sale). At HUD’s discretion, such documentation must include, but is not limited to, an appraisal from another appraiser. HUD may exclude re-sales of less than a specific dollar amount from the additional value documentation requirements.
(iii) If the additional value documentation supports a value of the property that is more than 5 percent lower than the value supported by the first appraisal, the lower value will be used to calculate the maximum mortgage amount under § 203.18. Otherwise, the value supported by the first appraisal will be used to calculate the maximum mortgage amount.
(iv) HUD will announce its determination to require additional value documentation through issuance of a