Federal Register, Volume 76 Issue 43 (Friday, March 4, 2011)

[Federal Register Volume 76, Number 43 (Friday, March 4, 2011)]
[Rules and Regulations]
[Pages 11946-11956]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-4816]

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Chapter XV

[Docket No. FR-5470-I-01]
RIN 2502-AI97

Emergency Homeowners' Loan Program

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

ACTION: Interim rule.

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SUMMARY: This interim rule reinstates, with certain modifications,
regulations that HUD formerly published to serve as the framework by
which emergency relief may be provided to homeowners experiencing
temporary involuntary loss of employment or underemployment resulting
in a substantial reduction in income due to adverse economic
conditions, and who consequently are financially unable to make full
mortgage payments. These regulations were promulgated following
enactment of the Emergency Homeowners' Relief Act of 1975. This 1975
statute provided standby authority to the Secretary to insure or make
loans to homeowners to defray mortgage expenses, so as to prevent
widespread mortgage foreclosures and distress sales of homes resulting
from a homeowner's substantial reduction income. Although the 1975
regulations were quickly put in place, they were not utilized, and HUD
eventually removed the regulations from the Code of Federal Regulations
(CFR) in 1995.
The Dodd-Frank Wall Street Reform and Consumer Protection Act,
recently enacted into law, reauthorized the 1975 statute, with certain
amendments, and made $1 billion available for this 1975 program during
Fiscal Year (FY) 2011. Accordingly, HUD is reinstating the

[[Page 11947]]

regulations for the program, under the title of ``Emergency Homeowners'
Loan Program,'' with such modifications as necessary to mirror the
statutory changes to the Emergency Homeowners' Relief Act of 1975 made
by the Dodd-Frank Wall Street Reform and Consumer Protection Act.

DATES: Effective Date: April 4, 2011.
Comment Due Date. May 3, 2011.

ADDRESSES: Interested persons are invited to submit comments regarding
this rule to the Regulations Division, Office of General Counsel, 451
7th Street, SW., Room 10276, Department of Housing and Urban
Development, Washington, DC 20410-0500. Communications must refer to
the above docket number and title. There are two methods for submitting
public comments. All submissions must refer to the above docket number
and title.
1. Submission of Comments by Mail. Comments may be submitted by
mail to the Regulations Division, Office of General Counsel, Department
of Housing and Urban Development, 451 7th Street, SW., Room 10276,
Washington, DC 20410-0500.
2. Electronic Submission of Comments. Interested persons may submit
comments electronically through the Federal eRulemaking Portal at
http://www.regulations.gov. HUD strongly encourages commenters to
submit comments electronically. Electronic submission of comments
allows the commenter maximum time to prepare and submit a comment,
ensures timely receipt by HUD, and enables HUD to make them immediately
available to the public. Comments submitted electronically through the
http://www.regulations.gov Web site can be viewed by other commenters
and interested members of the public. Commenters should follow the
instructions provided on that site to submit comments electronically.

Note: To receive consideration as public comments, comments must
be submitted through one of the two methods specified above. Again,
all submissions must refer to the docket number and title of the
rule.

No Facsimile Comments. Facsimile (FAX) comments are not acceptable.
Public Inspection of Public Comments. All properly submitted
comments and communications submitted to HUD will be available for
public inspection and copying between 8 a.m. and 5 p.m. weekdays at the
above address. Due to security measures at the HUD Headquarters
building, an advance appointment to review the public comments must be
scheduled by calling the Regulations Division at 202-708-3055 (this is
not a toll-free number). Individuals with speech or hearing impairments
may access this number through TTY by calling the Federal Information
Relay Service at 800-877-8339. Copies of all comments submitted are
available for inspection and downloading at http://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Ruth Roman, Director, Program Support
Division, Office of Single Family Housing, Office of Housing,
Department of Housing and Urban Development, 451 7th Street SW.,
Washington, DC 20410; telephone number 202-708-0317 (this is not a
toll-free number). Persons with hearing or speech impairments may
access this number through TTY by calling the toll-free Federal
Information Relay Service at 800-877-8339.

SUPPLEMENTARY INFORMATION:

I. Background

On July 2, 1975, the Emergency Housing Act of 1975 (Pub. L. 94-50,
approved July 2, 1975) (12 U.S.C. 2701 et seq.) was signed into law.
Title I of this statute is the Emergency Homeowners' Relief Act (1975
Act). The 1975 Act conferred on HUD standby authority to insure or make
loans to, or make emergency mortgage relief payments on behalf of,
homeowners to defray their mortgage expenses (collectively emergency
assistance), so as to prevent widespread mortgage foreclosures and
distress sales of homes due to a substantial reduction of income
resulting from the temporary involuntary loss of employment or
underemployment due to adverse economic conditions. Following enactment
of the Emergency Homeowners' Relief Act, HUD promulgated final
regulations on December 30, 1975 (See 40 FR 59866) and codified these
regulations in 24 CFR part 2700. In the preamble to the December 30,
1975, final rule, HUD stated as follows: ``If it becomes necessary to
implement the program, HUD would provide emergency relief under the
standby program by coinsuring loans made by private lenders or by
making direct loans to homeowners to assist them in making their
mortgage payments.'' (See 40 FR 59866.) This emergency assistance
program, quickly put in place by HUD in 1975, was not utilized and, in
1995, as part of HUD's effort to remove outdated, obsolete, or
unutilized regulations, HUD removed the regulations in 24 CFR part 2700
from the CFR. (See 60 FR 47263.)
The Dodd-Frank Wall Street Reform and Consumer Protection Act (Pub.
L.111-203) (the Dodd-Frank Act), signed into law on July 21, 2010,
makes available $1,000,000,000 for HUD to establish the Emergency
Homeowners' Relief Fund for this reauthorized 1975 program, commencing
in FY 2011, for the purpose of providing emergency mortgage assistance
in accordance with the 1975 Act, as amended. HUD will administer the
authority provided by the Dodd-Frank Act as the Emergency Homeowners'
Loan Program (EHLP). In addition to making funding available, section
1496 of the Dodd-Frank Act also amends several provisions of the 1975
Act. The amendments to the 1975 Act include the following:
Certification by the homeowner and the holder of the
homeowner's delinquent mortgage that circumstances make it probable
that there will be a foreclosure and the homeowner is in need of
emergency mortgage relief;
Establishment of a ceiling of $50,000 as the aggregate
amount of emergency assistance that can be provided to any homeowner;
Inclusion of ``medical conditions'' as the cause of the
homeowner's involuntary unemployment or underemployment;
Prohibition on the charging of interest on interest that
is deferred on an emergency mortgage relief loan or advance of credit
provided under the EHLP;
Prohibition on the charging of interest on any emergency
loan or advance of credit insured under the EHLP program at a rate that
exceeds the rate of interest that is generally charged for single-
family housing mortgages insured by the Federal Housing Administration;
and
Prohibition on imposition of any penalty on a homeowner
who receives emergency assistance under the EHLP and repays the
emergency assistance loan in full before the loan becomes due and
payable.
In addition to these amendments, the 1975 Act, as amended by the
Dodd-Frank Act, authorizes HUD to allow funds under the EHLP to be
administered by a State that has an existing program that is determined
by the Secretary to provide substantially similar assistance to
homeowners.\1\ Unchanged in the 1975 Act is the authority provided to
the Secretary to make such delegations and accept such certifications,
with respect to the processing of emergency mortgage relief payments,
as the Secretary determines appropriate to facilitate the prompt and

[[Page 11948]]

efficient implementation of this type of emergency assistance
authorized under the program.
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\1\ On November 12, 2010 (75 FR 69454), HUD published a notice
that solicited applications from States that have existing programs
that are substantially similar to HUD's, and announced the
allocation of assistance by State.
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Underscoring the need to make this funding immediately available to
eligible homeowners are two dates: The effective date of October 1,
2010, the first date by which funding may be allocated; and the date of
September 30, 2011, the last date on which HUD can enter into binding
agreements with individual mortgagors approved for participation in the
program. Note that a binding agreement occurs only when a borrower has
been approved for participation in this program and funds have been
allocated to that borrower, all of which must occur on or before
September 30, 2011.

II. This Interim Rule

Given the statutory deadline of September 30, 2011, described above
for HUD to enter into binding agreements with individual mortgagors
approved for EHLP participation, HUD is reinstating the 1975 program
regulations, substantially as promulgated in 1975, which largely
adopted the complete statutory framework for emergency assistance
provided for the program, with modifications to mirror the statutory
changes of the Dodd-Frank Act, reflect the housing and mortgage markets
of today, and make such other changes that HUD determined necessary to
meet the statutory objectives of the Dodd-Frank Act.
In addition to revising the 1975 regulations to reflect the
statutory changes made by the Dodd-Frank Act, this rule amends the 1975
regulations to include certain provisions of the 1975 Act that were not
included in the regulations promulgated in 1975. HUD is conforming the
1975 regulations to reflect these statutory provisions, such as direct
payments to mortgagees, so that the regulations reflect the full
emergency assistance authority provided to HUD by the 1975 Act.
Finally, HUD is using this rule to reflect terminology that is used in
the mortgage market of today and to make other changes to achieve the
statutory direction to make funding immediately available for emergency
mortgage assistance. The following highlights the additional changes
made to the 1975 regulations:
The rule clarifies that the principal residence of the
homeowner for which the homeowner seeks relief to prevent foreclosure
may be a condominium, a cooperative, or a manufactured home.
The rule includes the list of eligible institutions for
which HUD is authorized to provide insurance for emergency mortgage
relief loans and advances of credit as provided in section 105 of the
Emergency Homeowners' Relief Act. The list of these institutions was
not revised by the Dodd-Frank Act but was omitted from the 1975
regulations.
The rule provides that an eligible homeowner must have a
total annual income (as defined in these regulations, and hereafter
referred to as ``income'') that is equal to, or less than, 120 percent
the area median income (AMI), as determined by HUD and adjusted for
household size. HUD defines AMI in Sec. 2700.5 of the rule.
The rule provides that an eligible homeowner must have
incurred a substantial reduction of income, as a result of involuntary
loss of employment or underemployment, that is at least 15 percent
lower than the income the homeowner had prior to loss of employment or
underemployment.
The rule requires, consistent with the statute, that the
aggregate amount of assistance to an eligible homeowner cannot exceed
$50,000.
The rule provides that eligible homeowners may receive
assistance for up to 12 months, and in accordance with criteria
established by HUD, and that such assistance may be extended once for
up to 12 additional months, or may receive assistance in an amount up
to the statutory ceiling of $50,000, whichever occurs first. However,
please note that the Federal Register document, which reactivates the
program for FY 2011, provides for eligible homeowners to receive
assistance for up to 24 months, or up to the statutory ceiling amount
of $50,000. Given the duration of high unemployment, HUD has determined
that so long as eligibility requirements are maintained, HUD will
provide the maximum period of 24 months of homeowner assistance at the
outset.
The rule provides, as did the 1975 regulations, that
emergency assistance may be provided only if the homeowner has a back-
end ratio or debt-to-income (DTI) below 55 percent (principal,
interest, taxes, insurance, revolving and fixed installment debt
divided by total monthly income). For this calculation, the homeowner's
income will be measured at the pre-Event level. Homeowners with second
mortgage debt or equity lines of credit may qualify for emergency
assistance if the homeowner's DTI is within the program's 55 percent
limit.
The rule includes monitoring requirements to ensure that
the homeowner remains eligible for the emergency assistance after such
assistance has commenced, and also specifies the conditions under which
emergency assistance to the homeowner will be terminated.
The rule adds a declining balance, nonrecourse, zero
interest, subordinate secured loan, with a term of up to 7 years, as a
type of repayment mechanism for emergency mortgage relief payments.
The rule codifies the provision of the 1975 Act that
authorizes the Secretary to delegate and accept certifications with
respect to the processing of emergency mortgage relief payments as may
be appropriate to facilitate the prompt and efficient implementation of
this type of emergency assistance.
The 1975 regulations made reference to the Soldier's and
Sailor's Civil Relief Act of 1940, and the rule updates the reference
to this statute to reflect its successor statute, which is the
Servicemembers Civil Relief Act of 2003.

III. Notice of Program Activation and Fund Availability

Elsewhere in today's Federal Register, HUD is publishing a notice
consistent with Sec. 2700.10, which formally announces that EHLP has
been activated, and describes the emergency assistance being made
available in this FY 2011 reactivation of the program. While the
regulations allow for the Secretary to choose among several tools to
provide emergency homeowners' relief, only those tools that are
provided in the notice are being used to provide emergency homeowner
relief in FY 2011. HUD's position is that, given funding for EHLP is
available for one fiscal year, the requirements for the emergency
assistance to be provided must be firmly established at the outset of
the commencement of the program; that is, with the issuance of the
Federal Register notice. HUD believes the program, as reactivated for
FY 2011, through the Federal Register notice, provides the relief
contemplated by the Dodd-Frank Act.

IV. Findings and Certifications

Justification for Interim Rule

Consistent with its regulations on rulemaking at 24 CFR part 10,
HUD ordinarily publishes its rules for advance public comment. Advance
notice and public procedure are omitted, however, if HUD determines
that, in a particular case or class of cases, notice and public
procedure are ``impracticable, unnecessary, or contrary to the public
interest.'' (See 24 CFR 10.1.) In this case, HUD finds that to wait for
public comment before making

[[Page 11949]]

emergency assistance available under the Emergency Homeowners' Relief
Act would be contrary to the public interest, and inconsistent with the
statutory objective, which is for the program to be a source of
authority by which the Secretary of HUD can immediately act.
Funds became available for this program on October 1, 2010, and, as
noted earlier in this preamble, HUD must enter into binding agreements
with approved homeowners no later than by September 30, 2011. Given
this statutory deadline, HUD believes homeowners who HUD could help
under this program may be victims of foreclosure if the program is not
commenced as quickly as possible. Accordingly, HUD finds that it is
important that interested lenders and homeowners know that the program
requirements are set for this first year and will not be changed.
While HUD is issuing this rule for effect, HUD is also soliciting
public comment. Although HUD is soliciting public comment on the 1975
regulations, reinstated with modifications, and the reactivated program
overall, HUD is not anticipating making significant changes to the
requirements governing the type of emergency assistance provided under
EHLP for FY 2011. As noted earlier, HUD's position is that, given
funding for EHLP is available for one fiscal year, the requirements for
the emergency assistance to be provided must be firmly established at
the outset of the commencement of the program; that is, with the
issuance of the companion Federal Register notice. HUD believes the
program, as reactivated for FY 2011, through the Federal Register
notice, provides the relief contemplated by the Dodd-Frank Act.
However, if a commenter, participating lender, eligible borrower, or
potential eligible borrower identifies an aspect of the program for
which a change would help facilitate assistance to eligible homeowners
or provide further protections against waste, fraud, and abuse, HUD
will make the necessary change. Further, if funding is provided for
EHLP beyond FY 2011, HUD will consider the comments received in its
reevaluation of the program, following this first year of reactivation,
and make such changes based on public comment and the experience of
administering EHLP emergency assistance in FY 2011.

Executive Order 12866, Regulatory Planning and Review

The Office of Management and Budget (OMB) reviewed this rule under
Executive Order 12866 (entitled ``Regulatory Planning and Review'').
This rule was determined to be an economically significant regulatory
act under Executive Order 12866.
The program that is reactivated under the regulations established
by this rule is intended to assist a segment of delinquent homeowners
who face a high probability of foreclosure and have become delinquent
due to a temporary loss of income. It is expected that the assisted
households can recover financially within 24 months. The benefits of
this program include the avoidance of costs associated with foreclosure
by lenders, homeowners facing foreclosure, neighbors of the foreclosed
property, and local governments. Overall, the benefits are estimated to
be between $1.7 billion and $3.4 billion, offset by the costs of
administration, namely selecting participants ($87.3 million) and
servicing the EHLP loans ($7.4 million to $11.3 million), and up to
$23.96 million of incremental costs of foreclosure to lenders caused by
borrowers assisted by EHLP who subsequently default anyway. In
addition, participants in this program receive a transfer ranging from
$28.32 million to $43.3 million, which is equal to the government's
cost of borrowing the funds.
Participation in the EHLP program requires households to be at
least 3 months delinquent. Assuming that participating homeowners are
on average 5 months delinquent, this would add $8,778 to the total loan
amount, for an overall total of $26,148. With a program limit of
approximately $901 million available for loans to homeowners, after
subtracting administrative costs, this would assist a maximum of 34,474
homeowners. This assessment calculates the benefits, costs, and
transfers assuming that a range of 22,546 and 34,474 homeowners receive
EHLP loans.
The full Regulatory Impact Analysis can be found at http://www.hud.gov/offices/adm/hudclips/ia/ and is also contained in the
docket file for this rule, which is available for public inspection in
the Regulations Division, Office of General Counsel, Department of
Housing and Urban Development, 451 7th Street, SW., Room 10276,
Washington, DC 20410-0500. Due to security measures at the HUD
Headquarters building, please schedule an appointment to review the
docket file by calling the Regulations Division at 202-402-3055 (this
is not a toll-free number). Individuals with speech or hearing
impairments may access this number via TTY by calling the Federal
Information Relay Service at 800-877-8339.

Regulatory Flexibility Act

Because no notice of proposed rulemaking is required pursuant to 5
U.S.C. 553(b) for this rule, the provisions of the Regulatory
Flexibility Act (5 U.S.C. 601 et seq.) do not apply.

Executive Order 13132, Federalism

Executive Order 13132 (entitled ``Federalism'') prohibits an agency
from publishing any rule that has federalism implications if the rule
either, on the one hand, imposes substantial direct compliance costs on
State and local governments and is not required by statute, or, on the
other hand, the rule preempts State law, unless the agency meets the
consultation and funding requirements of section 6 of the Order. This
rule does not have federalism implications and would not impose
substantial direct compliance costs on State and local governments nor
preempt State law within the meaning of the Order.

Unfunded Mandates Reform Act

Title II of the Unfunded Mandates Reform Act of 1995 establishes
requirements for Federal agencies to assess the effects of their
regulatory actions on State, local, and Tribal governments and the
private sector. This rule will not impose any Federal mandates on any
State, local, or Tribal governments or the private sector within the
meaning of the Unfunded Mandates Reform Act of 1995.

Environmental Review

This rule does not direct, provide for assistance or loan and
mortgage insurance for, or otherwise govern, or regulate, real property
acquisition, disposition, leasing, rehabilitation, alteration,
demolition, or new construction, or establish, revise or provide for
standards for construction or construction materials, manufactured
housing, or occupancy. Accordingly, under 24 CFR 50.19(c)(1), this rule
is categorically excluded from environmental review under the National
Environmental Policy Act of 1969 (42 U.S.C. 4321).

Congressional Review Act

This rule constitutes a ``major rule'' as defined in the
Congressional Review Act (5 U.S.C. Chapter 8). The Congressional Review
Act provides for major rules to have a 60-day delayed effective date.
However, section 808 of the Congressional Review Act provides that the
60-day delayed effective date can be waived for good cause, and the
agency issuing the major rule is to incorporate the good cause finding
and provide a brief statement of reasons that

[[Page 11950]]

notice and public procedure thereon are impracticable, unnecessary, or
contrary to the public interest. The reasons provided in the section of
the preamble pertaining to Justification for Interim Rule serve as the
justification for abbreviating the delayed effective date from 60 days
to 30 days. As provided in that section, this rule provides for
emergency relief to unemployed and underemployed homeowners, but
further provides that such emergency relief is available only through
September 30, 2011. For these reasons, HUD believes it is contrary to
the public interest to delay the availability of emergency relief for a
period of 60 days. HUD also notes that, although this rule is issued
for effect, HUD is soliciting public comment.

List of Subjects in 24 CFR Part 2700

Administrative procedures, Mortgage insurance, Practice and
procedure, Reporting and recordkeeping requirements.

Accordingly, for the reasons stated in the preamble, HUD is
establishing a new chapter XV in title 24 of the Code of Federal
Regulations, consisting of part 2700 to read as follows:

Title 24--Housing and Urban Development

Chapter XV--Emergency Mortgage Insurance and Loan Programs, Department
of Housing and Urban Development

PART 2700--EMERGENCY HOMEOWNERS' LOAN PROGRAM

Subpart A--General
2700.1 Purpose.
2700.5 Definitions.
2700.10 Determination of emergency.
Subpart B--Eligibility
2700.101 Eligible properties.
2700.105 Eligible institutions.
2700.110 Eligible homeowners.
Subpart C--Emergency Assistance
2700.201 Types and terms of emergency assistance.
2700.205 Emergency assistance amount.
2700.210 Finance charges.
Subpart D--Mortgage Insurance
2700.301 Loan applications.
2700.305 Conditions of insurance.
2700.310 Fees.
2700.315 Insurance premium.
2700.320 Servicing.
2700.325 Termination of mortgage insurance.
2700.330 Default.
2700.335 Claims.
2700.340 Payment of insurance benefits.
2700.345 Administrative reports and examinations.
2700.350 Sale, assignment, and pledge of insured loan.
Subpart E--Direct Loans
2700.401 Participation by lending institutions.
2700.405 Application for loans.
2700.410 Transmittal of Funds.
2700.415 Fees.
2700.420 Servicing.
2700.425 Default.
2700.430 Collection.
2700.435 Payment to HUD.
2700.440 Administrative report and examinations.

Authority: 12 U.S.C. 2707; 42 U.S.C. 3535(d)

Subpart A--General

Sec. 2700.1 Purpose.

This part establishes the Emergency Homeowners' Loan Program, a
standby program authorized by the Emergency Homeowners Relief Act of
1975, as amended, to prevent widespread mortgage foreclosures and
distress sales of homes resulting from a homeowner's substantial
reduction in income due to temporary involuntary loss of employment or
underemployment resulting from adverse economic conditions or medical
condition. Under this program, HUD is authorized to provide relief in
the forms of emergency mortgage relief loans, advances of credit, or
emergency mortgage relief payments to struggling unemployed or
underemployed homeowners to help them avoid foreclosure, provided the
homeowner meets certain specific conditions. HUD may provide such
relief through approved institutions, including lending institutions,
or intermediaries designated by HUD. HUD is also authorized to allow
assistance under this program to be administered by a State that has an
existing program that is determined by HUD to provide substantially
similar assistance to homeowners.

Sec. 2700.5 Definitions.

For purposes of this part, the following terms are defined as
follows:
Act means the Emergency Homeowners' Relief Act, title I of the
Emergency Housing Act of 1975 (12 U.S.C. 2701), as amended by the Dodd-
Frank Wall Street Reform and Consumer Protection Act (Pub. L. 111-203,
approved July 21, 2010).
Area Median Income (AMI) means the median family income for the
metropolitan statistical area (MSA) or statewide nonmetropolitan area,
as most recently determined and published by HUD, where the property
meeting the eligibility requirements in Sec. 2700.1 is located.
Delinquent mortgage means a first-lien mortgage secured by property
meeting the eligibility requirements in Sec. 2700.101, where the
homeowner and holder of the delinquent mortgage have certified that
circumstances, including delinquent payments of at least 3 months, make
it probable there will be a foreclosure and that the homeowner is in
need of emergency mortgage relief.
Emergency assistance includes, but is not limited to, an emergency
mortgage relief loan, advance of credit, or emergency mortgage relief
payment provided to an eligible homeowner, as authorized by the Act,
and in accordance with the requirements of this part.
Event refers to the involuntary unemployment or underemployment
status of the homeowner due to adverse economic conditions or medical
condition. See definition of involuntary unemployment or
underemployment due to adverse economic conditions or adverse medical
condition.
Finance charge means the cost of credit as determined in 12 CFR
226.4, a section in Regulation Z of the Federal Reserve System's
regulations on Truth in Lending.
Homeowner means an individual with a mortgage on the individual's
principal residence, in which the individual resides, and who meets the
requirements of Sec. 2700.10 and who is in need of emergency
assistance pursuant to this part.
HUD means the Department of Housing and Urban Development.
Income means the cumulative annual adjusted gross income of the
homeowner, co-makers, and co-signers on the note secured by the
delinquent mortgage and the other mortgagors on the delinquent
mortgage.
Involuntary unemployment or underemployment due to adverse economic
conditions or adverse medical condition means the status of a homeowner
who was working, either as a wage or salaried worker or through self-
employment, is currently involuntarily unemployed or underemployed due
to adverse economic conditions or medical condition, and is unable to
meet the homeowner's monthly mortgage payments.
Lender means a lending institution that provides an emergency
mortgage relief loan or advance of credit insured under this part.
Monthly income means one-twelfth of the income, as income is
defined in this section.
Monthly mortgage payment means the monthly amount of principal,
interest, taxes, ground rents, hazard insurance, and mortgage insurance
premiums due to be paid under a homeowner's delinquent mortgage.

[[Page 11951]]

Mortgage means any mortgage, deed of trust, executor land sales
contract, conditional sales contract, or other form of security and the
obligation secured by a one- to four-family dwelling that is either
real estate or a manufactured home. Mortgage includes a mortgage on a
condominium unit and a security interest in stock in a housing
cooperative.
Mortgagee means a lending institution that is the holder of the
delinquent mortgage. The mortgagee may be the same entity as the
Lender.
Secretary means the Secretary of Housing and Urban Development.
Servicer means any entity which services an emergency loan made by
HUD under this part.
Servicing institution means any entity that services the delinquent
mortgage. The servicing institution may also be the same entity as the
Lender or Servicer.
Term of monthly payments means a period of monthly payments
provided under this part not to exceed 24 months. Eligible homeowners
may receive assistance for up to 12 months, and in accordance with
criteria established by HUD, and such assistance may be extended once
for up to 12 additional months, but in no case may monthly payments
under this part exceed 24 months. The eligible homeowner may also
receive assistance in an amount up to the statutory ceiling of $50,000,
whichever occurs first.

Sec. 2700.10 Determination of emergency.

(a) The Secretary is authorized to provide emergency assistance
under the Emergency Homeowners' Loan Program when:
(1) Funds have been explicitly appropriated or made available for
this program and the statute making funding available directs the
Secretary to commence making emergency assistance available to
homeowners; or
(2) The Secretary has announced that this program has been
activated and provides the reasons for activation of this program in a
document published in the Federal Register.
(b) If the Emergency Homeowners' Loan Program is activated pursuant
to paragraph (a) of this section, HUD shall publish a document in the
Federal Register announcing the activation of the program and inviting
one or more categories of eligible institutions, as defined in Sec.
2700.105, to participate in the Emergency Homeowners' Loan Program, to
provide such emergency assistance as HUD may designate from among the
eligible types of emergency relief provided in Sec. 2700.201, and
provide such other information regarding participation in the program,
as necessary and appropriate.

Subpart B--Eligibility

Sec. 2700.101 Eligible properties.

(a) In order to qualify for an emergency assistance under this
part, the property of the homeowner seeking assistance must:
(1) Be a single-family residence in a one-to-four unit building, or
a condominium or a housing cooperative or a manufactured home;
(2) Be the principal residence of the homeowner, which means it is
the residence where the homeowner resides;
(3) Be subject to a delinquent mortgage, as defined in Sec.
2700.5, but not, unless otherwise specified by HUD, subject to liens
having a total outstanding principal balance, as specified by HUD;
(4) Have flood insurance, pursuant to the National Flood Insurance
Program, in an amount equal to at least the initial principal amount of
the emergency loan, if the property is located in an area that has been
identified by HUD at least one year before the origination of the
emergency loan as an area having special flood hazards; and
(5) Meet such other requirements as may be prescribed by HUD for
reasons including, but not limited to, the particular economic
circumstances in which emergency assistance is being made available, or
the type of emergency assistance being made available.
(b) A property that meets the requirements of paragraph (a) of this
section is referred to as the mortgaged property.

Sec. 2700.105 Eligible institutions.

(a) Eligible lending institutions. (1) In order to participate in
the Emergency Homeowners' Loan Program as a lender or servicer, a
lending institution must be approved as a mortgagee by the Federal
Housing Administration in accordance with the applicable requirements
in 24 CFR part 203, and meet such other requirements as may be
prescribed by HUD as necessary or appropriate for participation in the
Emergency Homeowners' Loan Program.
(2) Approval of a lending institution pursuant to paragraph (a)(1)
of this section may be withdrawn at any time by notice from HUD for the
following reasons:
(i) The transfer of an insured emergency mortgage relief loan or
advance of credit to a nonapproved entity;
(ii) The failure of a lending institution to submit the required
annual audit report of its financial condition within 75 days of the
close of its fiscal year, or within such other period as may be
specified by HUD; or
(iii) The failure of a lending institution to comply with the
regulations of this part, or such additional program policies or
requirements as specified by HUD. Withdrawal of a lending institution's
approval shall not affect the insurance on the emergency mortgage
relief loans or advances of credit accepted for insurance.
(3) All approved lending institutions are responsible for servicing
of emergency mortgage relief loans and advances of credit in accordance
with acceptable mortgage practices of prudent lending institutions and
pursuant to 24 CFR part 203.
(b) Eligible participating organizations. HUD may delegate
authority with respect to the processing of emergency mortgage relief
payments as may be appropriate to facilitate the prompt and efficient
implementation of assistance under the Emergency Homeowners' Loan
Program.
(c) States with comparable programs. HUD is authorized to allow
funding for the Emergency Homeowners' Loan Program to be administered
by a State that has an existing program that is determined by HUD to
provide substantially similar assistance to homeowners. After such
determination is made, any State that HUD authorizes to administer
funding under this program shall not be required to modify its own
program to comply with the provisions of this part.

Sec. 2700.110 Eligible homeowners.

In order to qualify for an emergency assistance under this part,
the homeowner must:
(a) Have a total pre-Event income that is equal to, or less than,
120 percent of the area median income (AMI).
(b) Have incurred a substantial reduction of income as evidenced by
current monthly income that is at least 15 percent lower than the pre-
Event income, as a result of involuntary unemployment or
underemployment due to adverse economic or medical conditions, or such
other reduction in income as may be specified by HUD.
(c) Have a delinquent mortgage, as defined in Sec. 2700.5;
(d) Be financially unable at the time of application for emergency
relief under this part to make full monthly mortgage payments;
(e) Have a reasonable likelihood to resume full monthly mortgage
payments, and repay the emergency assistance pursuant to the terms and

[[Page 11952]]

conditions under which the emergency assistance was made available to
the homeowner. The standard for meeting this requirement is debt-to-
income (DTI) ratio. The homeowner must have a back-end ratio of below
55 percent (principal, interest, taxes, insurance, revolving and fixed
installment debt divided by total monthly income), or such other DTI as
may be specified by HUD. For this DTI calculation, income will be
measured at the pre-Event level.
(f) Have not received other emergency assistance pursuant to this
part;
(g) Have been notified that the mortgagee intends to foreclose;
(h) Produce a certification from the mortgagee in which the
homeowner also certifies that circumstances make it probable that the
mortgagee will foreclose on the homeowner's delinquent mortgage; and
(i) Meet such other requirements as may be prescribed by HUD for
reasons including, but not limited to, the particular economic
circumstances in which emergency assistance is being made available, or
the type of emergency assistance being made available.

Subpart C--Emergency Assistance

Sec. 2700.201 Types and terms of emergency assistance.

(a) Types of emergency assistance. Emergency assistance may be
provided to an eligible homeowner in the form of emergency mortgage
relief loans and advances of credit, or in the form of emergency
mortgage relief payments. In accordance with Sec. 2700.205, the
aggregate amount of assistance provided for any eligible homeowner
shall not exceed $50,000 or extend beyond the term of monthly payments,
as defined in Sec. 2700.5.
(1) Emergency mortgage loans and advances. HUD is authorized, upon
such terms and conditions as specified by HUD, to insure financial
institutions, which HUD finds to be qualified by experience and
facilities and approves as eligible for insurance, against losses that
they may sustain as a result of providing emergency mortgage relief
loans or advances of credit made under this part.
(2) Emergency mortgage relief payments. (i) HUD is authorized to
make emergency relief payments under such terms and conditions as HUD
may prescribe. Emergency mortgage relief payments may be provided:
(A) As payment of 100 percent of an eligible homeowner's delinquent
mortgage arrearages, which may include mortgage principal, interest,
insurance, taxes, hazard insurance, ground rent, homeowners' assessment
fees or condominium fees, and foreclosure-related legal fees and late
payments, in accordance with such terms and conditions as prescribed by
HUD; and
(B) As monthly payments due on such delinquent mortgage, for up to
a period not to exceed the term of monthly payments, as provided in
Sec. 2700.5.
(ii) Such emergency mortgage relief payments may be repayable in
the form of a declining balance, non-recourse, zero-interest,
subordinate loan secured by the same property securing the delinquent
mortgage, for a term of up to 7 years.
(3) Direct payments to mortgagees. HUD is authorized to make direct
emergency mortgage relief payments to a mortgagee that elects not to
participate in the Emergency Homeowners' Loan program as an approved
mortgagee on behalf of homeowners:
(i) Whose mortgages are held by such mortgagee; and
(ii) Who meet the requirements of Sec. 2700.110.
(b) Terms and conditions of assistance. Emergency mortgage relief
loans and advances of credit made and insured under this part, and
emergency mortgage relief payments made under this part, shall be
repayable by the homeowner upon such terms and conditions prescribed by
HUD, except that:
(1) The rate of interest on any emergency mortgage relief loan or
advance of credit insured shall be fixed for the life of the emergency
mortgage relief loan or advance of credit and shall not exceed the rate
of interest that is generally charged for mortgages on single-family
housing insured by the Federal Housing Administration under title II of
the National Housing Act at the time such emergency mortgage relief
loan or advance of credit is made;
(2) No interest shall be charged on interest that is deferred on an
emergency mortgage relief loan or advance of credit made under this
part. In establishing rates, terms, and conditions for emergency
mortgage relief loans or advances of credit, HUD shall take into
account a homeowner's ability to repay such emergency mortgage relief
loan or advance of credit;
(3) Any mortgage insurance premium charge or charges for any
emergency mortgage relief loan or advance of credit made under this
part shall not exceed an amount equivalent to one-half of one percent
per annum of the principal obligation of such emergency mortgage relief
loan or advance of credit outstanding at any one time;
(4) Unless otherwise specified by HUD for a given fiscal year, the
homeowner's contribution to the monthly mortgage payment will be set at
31 percent of monthly income at the time of the application for
assistance, but in no instance will such contribution to the monthly
mortgage payment be less than $25 per month;
(5) The homeowner may repay the emergency mortgage relief loan or
advance of credit in full, without penalty, by lump sum or by
installment payments at any time before the emergency mortgage relief
loan or advance of credit becomes due and payable; and
(6) With respect to the emergency mortgage relief payments
repayable in the form of a declining balance, non-recourse, zero-
interest, subordinate loan as described Sec. 2700.201(a)(2), no
payment shall be due by the homeowner during the term of the loan so
long as the homeowner remains current in his or her monthly homeowner
contribution payments on the delinquent mortgage. If the homeowner
meets this requirement, the balance due shall decline by such
percentage as may be designated by HUD, until the loan is fully
satisfied.
(c) Termination of emergency assistance. Emergency assistance
provided to a homeowner shall be terminated and the homeowner shall
resume full responsibility for meeting the first mortgage payments if
any of the following occur:
(1) The maximum loan amount ($50,000) has been provided to the
homeowner;
(2) The homeowner fails to report changes in employment status or
income within 15 days of the change;
(3) The homeowner's income increases to 85 percent or more of its
pre-Event income level, or such other percentage as may be prescribed
by HUD;
(4) The homeowner sells the mortgaged property or refinances the
mortgaged property for cash-out;
(5) The homeowner defaults on the monthly homeowner's contribution
payment on the delinquent mortgage;
(6) The homeowner has exhausted the full term of monthly payments,
as defined in Sec. 2700.5; or
(7) Such other event as may be specified by HUD.
(d) Deferral of commencement of repayment. HUD may authorize the
deferral of the commencement of the repayment of an emergency mortgage
relief loan or advance of credit or emergency mortgage relief payments
made under this part until one year following the date of the last
disbursement of the proceeds of the

[[Page 11953]]

emergency mortgage relief loan or advance of credit or emergency
mortgage relief payments, or for such longer period as HUD determines
would further the purpose of the Emergency Homeowners' Loan Program.

Sec. 2700.205 Emergency assistance amount.

(a) Emergency assistance to an eligible homeowner may be made
available in an amount up to the amount of the principal, interest,
taxes, ground rents, hazard insurance, and mortgage insurance premiums
due under the homeowner's mortgage and such other costs as may be
specified by HUD. The amount of emergency assistance provided to the
homeowner shall be an amount that is determined by HUD to be reasonably
necessary to supplement such amount as the homeowner is capable of
contributing toward the homeowner's delinquent first mortgage payments,
except that the aggregate amount of emergency relief provided to any
homeowner shall not exceed $50,000, including any fees allowed under
Sec. Sec. 2700.310(a) and 2700.415(a).
(b) Arrearage payments and monthly assistance payments may be made
either with the proceeds of an insured emergency mortgage relief loan
or advance of credit or with emergency mortgage relief payments for up
to full term of the monthly payments, as defined in Sec. 2700.5.
(c) Unless otherwise authorized by HUD, the lender or servicer
shall not approve an emergency mortgage loan or advance of credit when
the outstanding balance, including delinquent interest, of the
delinquent mortgage when added to the other liens against the mortgaged
property, plus the maximum emergency mortgage relief loan that may be
advanced to the homeowner under this part, exceeds the value of the
mortgaged property. (In determining the value of the property, the
lender or servicer may rely upon previously obtained appraisals or
other determinations of value of the property and need not obtain a
current appraisal.)

Sec. 2700.210 Finance charges.

The maximum permissible finance charge, exclusive of fees and
charges as provided in Sec. Sec. 2700.310, and 2700.415, which may
directly or indirectly be paid to or collected by the lender or the
servicer in connection with an emergency mortgage relief loan or
advance-of-credit transaction, shall not exceed simple interest on the
outstanding principal balance at the annual interest rate for FHA-
insured home mortgages at such time the emergency mortgage relief loan
or advance of credit is originated. Additionally, no points or
discounts of any kind may be assessed or collected in connection with
an emergency mortgage relief loan or advance-of-credit transaction.

Subpart D--Mortgage Insurance

Sec. 2700.301 Loan applications.

(a) Lending institutions approved by HUD for participation in the
Emergency Homeowners' Loan Program are authorized to accept, process,
and approve applications for emergency mortgage relief loans or
advances of credit under this part under such terms and conditions as
HUD may prescribe.
(b) An approved lender may make an emergency mortgage relief loan
or advances of credit on the terms specified in this part if the lender
is satisfied that the application meets all of the relevant
requirements of this part. The lender shall prepare a note, loan
agreement, if any, and mortgage as required by HUD, which the lender
shall record against the property securing the delinquent mortgage upon
the execution of those documents.
(c) Except as may be otherwise specified by HUD, on the last
working day of the month during which an emergency mortgage relief loan
or advance of credit is closed, the lender shall submit to HUD an
application for an insured emergency mortgage relief loan or advance of
credit on such form as prescribed by HUD, signed by the mortgagor and
holder of the mortgage and that certifies that:
(1) The lender, homeowner, and property meet the eligibility
requirements of this part;
(2) Circumstances (such as the volume of delinquent loans in the
investor's portfolio likely to remain uncured) make it probable that
there would be a foreclosure of the delinquent mortgage if the
emergency mortgage relief were not provided to the homeowner;
(3) The homeowner is in need of such emergency assistance and the
mortgagee has indicated to the homeowner its intention to foreclose on
the delinquent mortgage; and
(4) The first disbursement of the principal amount of the emergency
mortgage relief loan or advance of credit has been paid or credited to
the homeowner's account with the servicing institution.

Sec. 2700.305 Conditions of insurance.

(a) When the requirements of this part have been met, the lender's
mortgage insurance coverage under its mortgage insurance contract will
apply to a particular loan as of the date of closing, if the lender has
not exceeded the mortgage insurance authority allocation which HUD has
given the lender.
(b) From the effective date of the emergency mortgage relief loan
or advance of credit until the termination of the insurance with
respect to that loan, the lender shall be bound by the provisions of
this part as such provisions relate to the emergency mortgage relief
loan or advance of credit.

Sec. 2700.310 Fees.

(a) The lender may collect from the homeowner during the year
following the origination of the emergency mortgage relief loan or
advance of credit the following fees or charges in conjunction with
providing the emergency mortgage relief loan or advance of credit:
(l) A charge to compensate the lender for expenses incurred in
originating and closing the emergency relief loan, including
preparation of a note, loan agreement, if any, and a mortgage in a form
satisfactory for recordation, the total charge not to exceed such
amount as specified by HUD;
(2) Actual amounts charged by State or local governments or
government officials for recording fees and recording taxes or other
charges incident to making the emergency relief loan or advance of
credit;
(3) An amount equal to the annual premium for flood insurance
required by Sec. 2700.101(a)(4) (the lender shall pay the homeowner's
flood insurance premium for that year to the extent it collects such an
amount); and
(4) An amount equal to the annual mortgage insurance premium
required under Sec. 2700.315.
(b) Subsequent to the year following the origination of the
emergency mortgage relief loan or advance of credit and up to the
termination of mortgage insurance under Sec. 2700.325, the lender may
collect from the homeowner the following fees and charges in connection
with the emergency relief loan: An amount equal to the mortgage
insurance premium required under Sec. 2700.315.

Sec. 2700.315 Insurance premium.

(a) At such times as may be prescribed by HUD, the participating
lender shall pay to HUD a mortgage insurance premium equal to one-half
of one percent of the average outstanding balance of the emergency
mortgage relief loan or advance of credit, during the previous calendar
year, of all emergency mortgage relief loans or advances of credit that
the lender held or serviced during that period pursuant to this part.

[[Page 11954]]

(b) With respect to the payment provided for in paragraph (a) of
this section, the lender shall submit a breakdown of the mortgage
insurance premium in the form prescribed by HUD.
(c) If a mortgage securing an emergency mortgage relief loan or
advance of credit is sold, assigned, or pledged pursuant to Sec.
2700.350, any adjustments of the mortgage insurance premium already
paid in connection with a mortgage securing an emergency mortgage
relief loan or advance of credit shall be made by and between the
lenders, except that any unpaid installments of the mortgage insurance
premium shall be paid to HUD by the purchasing lender.
(d) There shall be no refund or abatement of any portion of the
insurance premium except when the mortgage insurance premium relates to
an emergency mortgage relief loan or advance of credit found to be
ineligible. However, no refund shall be made unless a claim is denied
by HUD or the ineligibility is reported by the lender promptly upon
discovery and an application for refund is made. In no event shall
charges be refunded when the application for refund is not made until
after the emergency mortgage relief loan or advance of credit is paid
in full.

Sec. 2700.320 Servicing.

Servicing functions for the emergency mortgage relief loan or
advance of credit during the period that the emergency loan or advance
is insured shall be performed by the lender or the servicing
institution acting for the lender. The lender is responsible for proper
servicing, even though the actual servicing is not performed by the
lender.

Sec. 2700.325 Termination of mortgage insurance.

The mortgage insurance coverage and the insured lender's obligation
to remit mortgage insurance premiums to HUD with respect to an
emergency mortgage relief loan or advance of credit shall be terminated
upon whichever of the following first occurs:
(a) The emergency mortgage relief loan or advance of credit is paid
in full;
(b) The lender acquires the mortgaged property securing the
emergency mortgage relief loan or advance of credit and notifies HUD
that no claim for insurance benefits has been or will be made;
(c) The homeowner and the lender jointly request termination; or
(d) The lender files an insurance claim pursuant to Sec. 2700.335.

Sec. 2700.330 Default.

(a) If the homeowner fails to make a scheduled payment or perform
any other obligation required for the type of emergency assistance
provided under this part, the homeowner shall be deemed to be in
default.
(b) For purposes of this subpart, the date of default shall be the
earliest of:
(1) 30 days after the first day the homeowner is delinquent on the
mortgage securing the emergency mortgage relief loan or advance of
credit, if the delinquency remains uncorrected;
(2) The date the property securing the emergency mortgage relief
loan or advance of credit is sold before full repayment of the
emergency loan or advance of credit; and
(3) The date a lien superior to that securing the emergency
mortgage relief loan or advance of credit is foreclosed.
(c) If, after default and prior to the foreclosure of the mortgage
securing the emergency mortgage relief loan or advance of credit, the
homeowner cures the default, the emergency loan or advance of credit
shall be treated as if a default had not occurred, provided the
homeowner pays the lender for any expenses the lender incurred in
connection with the lender's attempt to collect on the emergency
mortgage relief loan or advance of credit.

Sec. 2700.335 Claims.

(a) Claims for mortgage insurance for reimbursement for loss on an
emergency mortgage relief loan or advance of credit shall be made in
such form and provide such information as specified by HUD.
(b) Claims may be filed upon the homeowner's default on the
emergency mortgage relief loan or advance of credit.
(c) When the homeowner defaults on the emergency mortgage relief
loan or advance of credit, the lender may elect to:
(1) Proceed against the mortgage securing the emergency mortgage
relief loan or advance of credit or attempt to collect on the note and
then make a claim under its insurance contract if there is any net
loss, or
(2) Make a claim under its mortgage insurance contract without
proceeding against the security or the note.
(d) Except as may be otherwise specified by HUD, mortgage insurance
claims shall be filed on the last working day of the month, no later
than 90 days after the date of default, unless the lender proceeds
against the mortgage securing the emergency relief loan or advance of
credit, in which case the filing shall be no later than one year after
the date of default, or such other time period as approved by HUD. If
at the time of default or at any time subsequent to the default, a
person primarily or secondarily liable for the repayment of a loan is a
person in ``military service'', as such term is defined in the
Servicemembers Civil Relief Act of 2003 (Pub. L. 108-189, approved
December 19, 2003) (formerly known as Soldier's and Sailor's Civil
Relief Act of 1940) (50 U.S.C. app. 501-594), the lender shall refrain
from instituting foreclosure proceedings during the period in which the
servicemember is in military service and 3 months thereafter and that
period shall be excluded in computing the time within which a claim for
insurance benefits under this subpart may be made.
(e) An insured lender will be reimbursed for its losses on
emergency mortgage relief loans and advances of credit made in
accordance with this part, in an amount equal to 90 percent of the sum
of the following:
(1) The unpaid principal amount of the emergency mortgage relief
loan or advance of credit less the amount recovered;
(2) The uncollected interest earned up to the date of claim;
(3) Uncollected court costs, including fees paid for issuing,
serving, and filing summonses;
(4) Attorney's fees actually paid, not exceeding the lesser of:
(i) 25 percent of the amount collected by the attorney on the
defaulted note, or
(ii) 15 percent of the balance due on the note; and
(5) Expenses actually incurred in recording assignments of
mortgages to the United States of America, up to such amount as
specified by HUD.
(f) The note and any mortgage held or judgment taken by the
claimant must be assigned in its entirety and if any claim has been
filed in bankruptcy, insolvency, or probate proceedings, such claim
shall be likewise assigned to the United States of America. The
assignment shall be in the form approved by HUD.

Sec. 2700.340 Payment of insurance benefits.

Upon receipt of a claim for insurance benefits that meets the
requirements of Sec. 2700.335 and the other provisions of this part,
HUD shall make a payment of insurance benefits in cash to the claimant
in an amount equal to the amount specified in Sec. 2700.335(e).

Sec. 2700.345 Administrative reports and examinations.

At any time, HUD may call upon an insured lender for such reports
as are deemed to be necessary in connection

[[Page 11955]]

with the regulations of this part and may inspect the books or accounts
of the lender as they pertain to the emergency mortgage relief loans or
advances of credit that are insured pursuant to this subpart.

Sec. 2700.350 Sale, assignment, and pledge of insured loan.

(a) No lender may sell or otherwise dispose of any insured
emergency mortgage relief loan or advance of credit except pursuant to
this section.
(b) An insured emergency mortgage relief loan or advance of credit
may be sold to a lending institution eligible under Sec. 2700.105.
Upon such sale, both the seller and the buyer shall notify HUD within
30 days of the date of sale.
(c) When an insured emergency mortgage relief loan or advance of
credit is sold to another lending institution eligible under Sec.
2700.105, the buyer shall thereupon succeed to all the rights and
become bound by all the obligations of the seller under the contract of
insurance under this part, and the seller shall be released from its
obligations under the contract of insurance.
(d) An assignment, pledge, or transfer of an insured emergency
mortgage relief loan or advance of credit not constituting an actual
transfer of legal title may be made by the lender to another eligible
lending institution, subject to the following conditions:
(1) The assignor, pledgor, or transferor shall remain the lender
for purposes of the contract of insurance under this part.
(2) HUD shall have no obligation to recognize or deal with any
party other than that lender with respect to the rights, benefits, and
obligations of the lender under the contract of insurance. Notice to or
approval of HUD is not required in connection with assignments,
pledges, or transfers pursuant to this subpart.

Subpart E--Direct Loans

Sec. 2700.401 Participation by lending institutions.

A lending institution eligible under Sec. 2700.105 is authorized,
except as may be otherwise prescribed by HUD, to accept, process, and
approve applications for direct loans under this subpart in the form
specified. That authority includes making determinations relating to
the eligibility of the direct loan, homeowner, and property, pursuant
to the provisions of this part. Direct loans, however, may be made
pursuant to this part only when the investor cannot make an emergency
loan under subpart D of this part for good cause, as determined by HUD.

Sec. 2700.405 Application for loans.

(a) The agreement to process an application for a direct loan shall
constitute an acceptance of the lending institution of the
responsibility to act as the servicer of HUD with respect to that
particular application. The servicer shall make a loan on behalf of HUD
on the terms specified in subpart C of this part if the lending
institution is satisfied that the application meets all of the
requirements of this part.
(b) The servicer shall prepare a note, loan agreement, if any, and
mortgage in the form specified in Sec. 2700.201. The servicer shall
record the mortgage upon the closing of the loan. The servicer shall
make the first advance of the loan, as provided for in Sec.
2700.201(d), using its own funds.
(c) On the last working day of the month during which the loan is
closed, the servicer shall submit to HUD a copy of the application
signed by the agent and the homeowner certifying that: The agent,
homeowner, and property qualify under subpart B of this part;
circumstances (such as the volume of delinquent loans in the investor's
portfolio likely to remain uncured) make it probable that there would
be a foreclosure if emergency mortgage relief were not given; the
homeowner is in need of such relief; the investor has indicated to the
homeowner its intention to foreclose; and the first advance of the
emergency loan has been paid or credited to the homeowner's account
with the servicing institution.

Sec. 2700.410 Transmittal of funds.

(a) When the requirements of this part have been met, HUD will
transmit to the servicer, pursuant to the monthly accounting prescribed
in Sec. 2700.420, the emergency loan proceeds, as long as the agent
has not exceeded the lending authority allocation that HUD has given
the servicer pursuant to Sec. 2700.10(c).
(b) When the investor is the servicer, the transmittal of funds
under this section shall be conditioned upon the investor's agreement,
for a period up to one month after the last advance under the emergency
mortgage relief loan, to refrain from instituting foreclosure
proceedings against the homeowner, as long as the amount delinquent at
the time of the origination of the emergency mortgage relief loan,
excluding interest thereon, does not increase, unless HUD's prior
approval is obtained.
(c) From the processing of the application until the satisfaction
of the debt or the final accounting pursuant to Sec. 2700.435, the
servicer shall be bound by the provisions of this part with respect to
a particular direct loan.

Sec. 2700.415 Fees.

(a) The servicer may collect from the homeowner during the year
following the origination of the emergency loan the following fees or
charges in conjunction with providing the emergency loan:
(1) A charge to compensate the servicer for expenses incurred in
originating and closing the emergency mortgage relief loan, including
preparation of a note, loan agreement, if any, and a mortgage in a form
satisfactory for recordation, the total charge not to exceed such
amount as may be specified by HUD;
(2) Actual amounts charged by State or local governments or
government officials for recording fees and recording taxes or other
charges incident to making the emergency loan;
(3) An amount equal to the annual premium for flood insurance
required by Sec. 2700.101(c) (the servicer shall pay the homeowner's
flood insurance premium for that year to the extent it collects such an
amount); and
(4) An amount equal to the annual premium required under Sec.
2700.420(d).
(b) Subsequent to the year following the origination of the
emergency mortgage relief loan and up to the final accounting on the
emergency mortgage relief loan under Sec. 2700.435, the servicer may
collect from the homeowner the fees and charges as provided in this
section.

Sec. 2700.420 Servicing.

(a) Servicing functions during the period that the emergency
mortgage relief loan is outstanding shall be performed by the servicer.
(b) On the same day each month while the servicer is servicing
emergency mortgage relief loans for HUD, the servicer shall submit a
monthly accounting, in the form prescribed by HUD, for all of the
emergency mortgage relief loans that it services. The accounting shall
list the amount of funds that it advanced under emergency mortgage
relief loans during the previous calendar month. In addition, the
accounting shall list the amount paid to the servicer under the
emergency mortgage relief loans serviced by the servicer during the
previous calendar month.
(c) If, pursuant to the monthly accounting, the amount HUD owes the
servicer exceeds the amount the servicer owes HUD, HUD shall remit the
difference to the servicers, as long as HUD finds the accounting in
order. If, pursuant to the monthly accounting, the amount the servicer
owes HUD exceeds the amount HUD owes the servicer, the servicer shall
remit the difference when

[[Page 11956]]

the servicer submits the monthly accounting to HUD.
(d) At such times as may be prescribed by HUD, the servicer, in
addition to making its monthly accounting, shall pay to HUD a premium
equal to one-half of one percent of the average outstanding balance
during the previous calendar year of all the emergency mortgage relief
loans it serviced during that period. That payment shall be accompanied
by a breakdown of the premium in the form prescribed by HUD.

Sec. 2700.425 Default.

(a) If the homeowner fails to make any payment or to perform any
other obligation under the mortgage securing the emergency mortgage
relief loan, the homeowner shall be deemed to be delinquent on such
loan.
(b) For purposes of this subpart, the date of default shall be the
earliest of:
(1) 30 days after the first day the homeowner is delinquent on the
emergency mortgage relief loan, if the delinquency remains uncorrected:
(2) The date the mortgaged property is sold before full repayment
of the emergency mortgage relief loan; and
(3) The date a lien superior to that securing the emergency
mortgage relief loan is foreclosed.
(c) If, after default and prior to the foreclosure of the mortgage
securing the emergency mortgage relief loan, the homeowner cures the
default, the emergency mortgage relief loan shall be treated as if the
default had not occurred, provided the homeowner pays the servicer for
any expenses the servicer incurred in connection with the servicer's
attempt to collect on the loan.

Sec. 2700.430 Collection.

(a) If a homeowner defaults on an emergency mortgage loan, the
servicer shall elect:
(1) To wait while the Department of Justice proceeds against the
mortgage securing the emergency mortgage relief loan or attempts to
collect on the note, and then to make an accounting and payment to HUD,
as provided in Sec. 2700.435, or
(2) To make an accounting and payment, as provided in Sec.
2700.435, without waiting while the Department of Justice proceeds
against the mortgage or note.
(b) If pursuant to paragraph (a) of this section, the servicer
elects to make an accounting without waiting while the Department of
Justice proceeds against the mortgage or note, the servicer at the time
of that accounting will have the option of purchasing the emergency
loan and underlying mortgage for a price equal to 0.5 times the unpaid
principal balance.

Sec. 2700.435 Payment to HUD.

(a) Before the expiration of the period of 90 days after the date
of default, or such other time period as HUD approves, the servicer
shall transmit to HUD on the last working day of the month the complete
credit and collection file pertaining to the emergency mortgage relief
loan.
(b) At the same time the servicer makes the transmittal as provided
in paragraph (a) of this section, it shall share the loss on the
emergency mortgage relief loan by making a payment to HUD in an amount
equal to 10 percent of the sum of:
(1) The unpaid principal amount of the emergency mortgage relief
loan, less the amount recovered; and
(2) The uncollected interest earned up to the date of the final
accounting. Accompanying that payment shall be a final accounting of
the emergency mortgage relief loan, in the form specified by HUD, and
the note and mortgage executed in connection with the emergency
mortgage relief loan.
(c) Notwithstanding the provisions of paragraph (b) of this
section, in the event that the aggregate loss borne by HUD reaches such
percent, as specified in the Federal Register document activating the
Emergency Homeowners' Loan Program, of the aggregate amount advanced by
the servicer on behalf of HUD under this subpart, the servicer shall
bear the burden of any loss in excess of that such percent by making an
appropriate payment to HUD within the time period specified in
paragraph (a) of this section.
(d) If at the time of default or at any time subsequent to default,
a person primarily or secondarily liable for the repayment of an
emergency loan is a person in ``military service'', as such term is
defined in the Servicemembers Civil Relief Act of 2003 (Pub. L. 108-
189, approved December 19, 2003) (formerly known as Soldier's and
Sailor's Civil Relief Act of 1940) (50 U.S.C. app. 501-594), the period
the servicemember is in military service and 3 months thereafter and
that period shall be excluded in computing the time within which an
accounting and payment are to be made pursuant to paragraph (a) of this
section.

Sec. 2700.440 Administrative report and examinations.

HUD may at any time call for a report from any servicer on the
delinquency status of the emergency mortgage relief loans serviced by
the servicer on behalf of HUD or call for such reports as may be deemed
to be necessary in connection with the provisions of this part, or HUD
may inspect the books or accounts of the servicer as they pertain to
those emergency mortgage relief loans.

Dated: February 28, 2011.
David H. Stevens,
Assistant Secretary for Housing--Federal Housing Commissioner.
[FR Doc. 2011-4816 Filed 3-3-11; 8:45 am]
BILLING CODE 4210-67-P