Rule2024-28706
Federal Housing Administration (FHA): Single Family Sale Program
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
December 11, 2024
Effective
January 10, 2025
Issuing agencies
Housing and Urban Development Department
Abstract
This rule amends the requirements for the sale of eligible single family mortgage loans insured by the Federal Housing Administration (FHA) that have been assigned to the Secretary of the Department of Housing and Urban Development (HUD) in exchange for claim payments. The mortgage notes are sold, without FHA insurance, to qualified purchasers in a manner that seeks to maximize recoveries and strengthen HUD's Mutual Mortgage Insurance Fund (MMIF) and to achieve HUD's operational goals for the MMIF. This rule transitions the pilot Single Family Sale Program from a demonstration to a permanent program and removes existing Disposition of HUD-Acquired and -Owned Single Family Property regulations, which provided for a retired program that handled the sale of HUD-held single family mortgage loans.
Full Text
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<title>Federal Register, Volume 89 Issue 238 (Wednesday, December 11, 2024)</title>
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[Federal Register Volume 89, Number 238 (Wednesday, December 11, 2024)]
[Rules and Regulations]
[Pages 99705-99719]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-28706]
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Parts 203, 206 and 291
[Docket No. FR-6051-F-03]
RIN 2502-AJ47
Federal Housing Administration (FHA): Single Family Sale Program
AGENCY: Office of the Assistant Secretary for Housing--Federal Housing
Commissioner, HUD.
ACTION: Final rule.
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SUMMARY: This rule amends the requirements for the sale of eligible
single family mortgage loans insured by the Federal Housing
Administration (FHA) that have been assigned to the Secretary of the
Department of Housing and Urban Development (HUD) in exchange for claim
payments. The mortgage notes are sold, without FHA insurance, to
qualified purchasers in a manner that seeks to maximize recoveries and
strengthen HUD's Mutual Mortgage Insurance Fund (MMIF) and to achieve
HUD's operational goals for the MMIF. This rule transitions the pilot
Single Family Sale Program from a demonstration to a permanent program
and removes existing Disposition of HUD-Acquired and -Owned Single
Family Property regulations, which provided for a retired program that
handled the sale of HUD-held single family mortgage loans.
DATES: Effective: January 10, 2025.
FOR FURTHER INFORMATION CONTACT: John Lucey, Director, FHA Office of
Asset Sales, Office of Housing, Department of Housing and Urban
Development, 451 7th Street SW, Washington, DC 20410-8000; telephone:
(202) 708-2625 (this is not a toll-free number), or toll-free: (800)
481-9895. HUD welcomes and is prepared to receive calls from
individuals who are deaf or hard of hearing, as well as from
individuals with speech or communication disabilities. To learn more
about how to make an accessible telephone call, please visit <a href="https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs">https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs</a>.
SUPPLEMENTARY INFORMATION:
I. Background
Under section 204 of the National Housing Act,\1\ HUD has general
authority to pay insurance claims and dispose of mortgages and
properties acquired under the FHA single family mortgage insurance
programs. Section 204(g) specifically grants HUD broad discretion to
implement a range of disposition alternatives. The National Housing Act
also requires that HUD ensure the MMIF remains financially sound. HUD
must effectively manage HUD's defaulted assets and minimize losses to
the MMIF to carry out its fiduciary responsibility to ensure the
financial soundness of the MMIF.
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\1\ See 12 U.S.C. 1710 (2010), as amended by section 601 of the
Fiscal Year 1999 Departments of Veterans Affairs and Housing and
Urban Development and Independent Agencies Appropriations Act (Pub.
L. 105-276, approved October 21, 1998) (``FY 1999 Appropriations
Act'').
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Since 2002, HUD has operated a demonstration program to implement
its broad disposition authority with respect to mortgages and
properties acquired under the FHA single family mortgage insurance
programs. By notice published in the Federal Register on February 5,
2002, HUD announced the establishment of the Accelerated Claim and
Asset Disposition (ACD) Demonstration to ``address any programmatic
concerns'' and ``assess its success and determine whether to implement
the ACD process on a permanent basis, throughout the country.'' \2\ On
October 29, 2002, HUD responded to public comments and conducted its
first sale of defaulted mortgages through the ACD Demonstration.\3\ HUD
has continuously operated the ACD Demonstration for the purpose of
paying insurance claims and disposing of mortgages and related
properties acquired under the FHA single family mortgage insurance
programs.
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\2\ See Notice of FHA Accelerated Claim Disposition
Demonstration, 67 FR 5418 (February 5, 2002).
\3\ See Notice of FHA Accelerated Claim Disposition
Demonstration, 67 FR 66038 (October 29, 2002).
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HUD has used various names to refer to the demonstration program,
including the ACD Demonstration, the Single Family Loan Sales (SFLS)
Program, and the Distressed Asset Stabilization Program (DASP). For
purposes of this rule, HUD will refer to the demonstration as the
``Single Family Sale Program,'' which encompasses all of the iterations
of Single Family Loan Sales, including any sales HUD designates as part
of this program. The final rule applies to all Single Family Loan Sales
by HUD.
Absent the Single Family Sale Program, if a borrower is unable to
resume their mortgage payments after loss mitigation, the mortgagee in
most cases would be required to foreclose the defaulted loan to perfect
an insurance claim. If the property cannot be sold to a third party at
foreclosure or a second-chance auction, the mortgagee may file a
conveyance claim, which gives the property to HUD in exchange for
receiving the FHA mortgage insurance claim payment. Prior to filing the
conveyance claim, the mortgagee will incur legal and holding costs for
which the mortgagee may seek reimbursement from HUD through claim
payment. A property conveyed to HUD increases HUD's Real Estate Owned
(REO) inventory, posing an additional financial burden on the MMIF for
asset management costs. As an alternative to filing a conveyance claim,
for a forward loan that has been foreclosed, HUD will pay a claim
without conveyance of title claim from the MMIF to the mortgagee if the
borrower defaults and the mortgagee loses money after selling the house
in a foreclosure or post-foreclosure sale. Disposing of delinquent
forward mortgage loans shortens the period between default and claim
payment, reducing the financial exposure to these insurance funds for
costs incurred after default.
For a Home Equity Conversion Mortgage (HECM) that has been
foreclosed, the mortgagee cannot file a conveyance claim but can sell
the foreclosed property to a third party and receive claim payment if
the mortgagee is owed more than it receives from such sale. For HECMs
endorsed before 2009, HUD pays claims from the General Insurance (GI)
Fund. For HECMs endorsed in 2009 or after, HUD pays claims from the
MMIF.
HUD's sale of defaulted loans through the Program is generally
intended to yield a recovery to the MMIF that meets or exceeds the
recovery obtained as a result of a foreclosure-based claim.
When a borrower passes away after assignment of a HECM, HUD incurs
costs associated with real property when it is vacant or abandoned.
HUD's servicing tenure and attempts to foreclose can be delayed by
title or jurisdictional issues and backlogs resulting from high volume.
These issues result in higher servicing costs along with additional
inspection and property preservation costs while the HECMs remain in
HUD's portfolio. After foreclosure, HECMs that converted to REO are
added to HUD's inventories, increasing asset management costs to
protect and dispose of the properties. Disposition of eligible assigned
HECMs,
[[Page 99706]]
such as HECMs secured by vacant and abandoned properties, can result in
significant cost savings to the MMIF and GI Fund, as applicable, and
enable better and more timely resolution of these assets.
On June 5, 2006, HUD issued an Advance Notice of Proposed
Rulemaking (ANPR) soliciting public comment on HUD's Program.\4\ The
ANPR solicited public comments to make ``possible improvements to the
program,'' including the most efficient way to ``maximize the return to
the FHA insurance fund'' by ``minimiz[ing] the time an asset is held.''
\5\
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\4\ See Accelerated Claim and Asset Disposition (ACD) Program;
Advanced Notice of Proposed Rulemaking, 71 FR 32392 (June 5, 2006).
\5\ Id.
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On April 30, 2007, HUD published a regulatory agenda providing
public notice that FHA had withdrawn the ANPR effective March 1,
2007.\6\ After this action, HUD adopted additional modifications to the
Program, including changing the disposition method from joint venture
to whole loan sales.
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\6\ See HUD Semiannual Regulatory Agenda, 72 FR 22694 (April 30,
2007).
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II. The Proposed Rule
On July 16, 2024, HUD published for public comment a proposed rule
(89 FR 57798) to amend 24 CFR parts 203, 206, and 291. The proposed
rule sought to transition the Single Family Sale Program from a
demonstration to a permanent program by revising HUD's Single Family
Mortgage Insurance, Home Equity Conversion Mortgages, and Disposition
of HUD-Acquired and -Owned Single Family Property regulations to
provide for the sale of HUD-held single family forward mortgages and
Home Equity Conversion Mortgages through competitive sale and direct
sale of single family loans. In addition, HUD proposed to remove the
existing Disposition of HUD-Acquired and -Owned Single Family Property
regulations, which provided for a retired program that handled the sale
of HUD-held single family mortgage loans.
HUD sought public comment on all aspects of the rule and sought
public feedback on ten (10) specific issues regarding the operation of
the Program.
III. This Final Rule
This final rule adopts the proposed rule with no changes. The next
section outlines how various issues raised through public comments may
be addressed through guidance or by future updates to sale documents,
including but not limited to Conveyance, Assignment, and Assumption
Agreements (CAAs), Federal Register Notices (FRNs), and Bidder
Information Package (BIP) forms.
IV. Public Comments
The public comment period closed on September 16, 2024. HUD
received 11 distinct responsive comments from individuals,
associations, advocacy organizations and a variety of interested
parties. The following presents the significant issues and questions
related to the proposed rule raised by the commenters, and HUD's
responses to these issues and questions. HUD would like to thank all
the commenters for their thoughtful responses
Specific Questions for Comment From the Proposed Rule
In section IV of the proposed rule, HUD included several specific
questions for public comment. Those specific questions from the
proposed rule and public comments received in response to those
specific questions are summarized here, along with HUD's responses to
the public comments received.
A. Question #1: What Additional Actions HUD Can Take To Provide Greater
Bidding Opportunities for Nonprofit Organizations and Governmental
Entities
1. Recommendation To Modify Capital Requirements
One commenter stated that HUD should reduce the capital requirement
to participate in the program. The commenter said that the general
$5,000,000 net worth requirement is extremely high, out of scope with
the requirements of various localities, and is a mismatch for the
relatively low average sale prices in some states. The commenter stated
this requirement precludes the participation of entities that know
their communities best, including many mission-driven nonprofits and
smaller entities, such as smaller minority-led developers.
The commenter stated that while HUD permits nonprofits to
participate if they have a net worth of $3,000,000 or provide an
irrevocable letter of credit or performance bond, those are still
barriers to participation and should be revisited. The commenter stated
that the net worth requirement is arbitrarily high and prevents
participation by many nonprofits and community development
organizations and recommended that HUD allow nonprofits to jointly
participate and bid with a financial partner to meet the net worth
requirement, such as a locally situated and active community
redevelopment entity.
The commenter recommended that HUD replace the requirement of an
irrevocable letter of credit with a lower dollar amount line of credit.
The commenter stated that irrevocable letters of credit and performance
bonds are expensive and difficult to obtain and maintain and may have
impacts on the balance sheets of nonprofit entities, while many
nonprofits have access to revolving lines of credit. The commenter also
stated that both the irrevocable line of credit and performance bond
would likely be unnecessary if HUD implemented a meaningful
prioritization and ``first look'' program so nonprofits could know the
capital they would need to bid at the loan sale.
HUD Response: HUD appreciates the stakeholder feedback. To maximize
the usefulness and applicability of the Program, any capital
requirement changes and what documentation may be used to demonstrate
financially viability would be addressed not in the rule itself, but
via notice or sale documents, such as the Bidder Information Package.
One commenter recommended the establishment of a fund for use by
qualified non-profit bidders.
HUD Response: HUD appreciates the stakeholder feedback; however,
HUD is unable to establish a capital fund absent congressional
appropriations that would provide for such a fund.
2. Request To Revisit a 95 Percent Value Requirement
Two commenters recommended that HUD revisit a perceived 95 percent
value requirement. The commenters stated that the requirement, based on
market rate data, poses a challenge amid rising home prices and limits
nonprofit competition. One commenter stated that the Claims Without
Conveyance of Title program imposes a similar requirement, which
results in very few mission-driven nonprofits participating in the
program. The commenters recommended basing the 95 percent requirement
on census tract or other methodology that takes into consideration the
income of the local area, as opposed to market or asset value.
Alternatively, the commenters suggested that the formula take into
account rehabilitation costs and holding cost and legal fees for
eviction of occupied assets.
HUD Response: The Single Family Sale Program does not impose such a
requirement on purchasers. The National Housing Act imposes a statutory
fiduciary obligation on HUD to ensure the MMIF remains financially
sound (12 U.S.C. 1708(a)(3)) while also
[[Page 99707]]
directing the Secretary to ensure that it continues to meet the housing
needs of the borrowers that the single family mortgage program is
designed to serve (12 U.S.C. 1708(a)(7)(B)). Consistent with those
obligations, HUD seeks to obtain the maximum recoveries for the agency
while also encouraging as many participants in the Single Family Sale
Program as practical. HUD believes the current method for valuating
loans offered for sale under the Single Family Sale Program
appropriately balances those two obligations, but the method used by
the Program does not impose the 95 percent requirement referenced by
the commenters.
3. Participation by Wholly Owned Special-Purpose Entities
Two commenters asked HUD to allow wholly owned special purpose
entities, classified as disregarded entities by the Internal Revenue
Service (IRS), to participate in the program. A commenter identified
the inability of disregarded entities to participate as a barrier faced
by nonprofits when seeking HUD recognition as a qualifying nonprofit.
The commenters stated that without the requested change, a significant
portion of mission-driven organizations that are considered disregarded
entities cannot benefit from the incentives HUD is proposing that would
benefit nonprofit participation in the program. The commenters
recommended that HUD recognize disregarded entities under the
definition of a nonprofit and adopt standards that are similar to those
used by the IRS.
HUD Response: HUD appreciates the stakeholder feedback. HUD may
allow a Purchaser to endorse and assign Single Family Loans from HUD to
Purchaser's special purpose entity acquisition vehicle on terms
permitted in the CAA. HUD can establish eligibility criteria through
sale documentation, such as the CAA, and will consider doing in a way
that addresses this concern in future loan sales. HUD is not making the
requested change through the rule as that method would limit the
flexibility that HUD requires to run the Program.
4. Third-Party Capital Partners
Two commenters stated that FHA should incorporate flexibility in
the use of third-party capital partners by nonprofit entities in both
the bidding process and the deployment of equity from upside revenues,
with safeguards to prevent abuse. The commenters stated that many
nonprofit entities are working with capital partners to unlock
additional resources and create more affordable supply. One commenter
stated that if FHA's stance on third-party capital partners remains
unchanged, then the commenter suggests creating a fund accessible to
qualified nonprofits to allow them to bid more competitively.
HUD Response: HUD appreciates the stakeholder feedback. HUD is
unable to establish a capital fund absent congressional appropriations
that would provide for such a fund. The ability to use third-party
capital partners could potentially be addressed through future sale
documentation such as the Sale Notice to maintain flexibility for
future sales and future market environments.
B. Question # 2: Whether a Competitive Sale of Single Family Loans
Should Disallow Low-Value Mortgages and Properties That Are Vacant
One commenter stated that low-value mortgages and properties that
are vacant should not be disallowed and that more of these assets
should be made available only to non-profit organizations and at a
greater discount. The commenter also stated there should be a mandate
to sell these assets to very-low-income buyers and the prices should be
low enough to be viable for a non-profit.
Another commenter said that HUD should include low-value mortgages
as they may still be valuable to specialty servicers who can offer
modifications not available under FHA's waterfall to borrowers with low
cash flow but substantial equity, to enable impacted borrowers to keep
their homes.
The same commenter stated that HUD should remove the ``exclusion of
low-value mortgages secured by vacant properties'' from Sec.
203.413(b) as loan sales may offer a fast path to re-occupancy by a new
owner and result in cost savings and more timely resolution of those
assets.
HUD Response: HUD appreciates the stakeholder feedback. HUD is
retaining the exclusion of low-value mortgages secured by vacant
properties in the Sec. 203.413(b) of the final rule. HUD believes that
selling low-value, vacant, forward loans in bulk note sales is
detrimental for neighborhoods because investors have few to no
incentives to invest in these properties, and, without investor
interest, they will blight neighborhoods which is contrary to the
purposes of the Single Family Sale Program. Instead, HUD will address
the sale of low-value mortgages secured by vacant properties through
other means.
C. Question # 3: Should All Single Family Sales Require a ``First
Look'' Program for Loans That Convert to Real Estate Owned Property
Three commenters supported the inclusion of a ``first look''
program, with various recommended changes.
One commenter stated that a ``first look'' program geared towards
nonprofit entities would be impactful and allow for participation by
the local community and local organizations. The commenter stated a
recurring and regularly scheduled ``first look'' would add
predictability and enable nonprofit organizations to assemble the
required team, paperwork, and financing. The commenter also stated that
stakeholders with proven community development experience, including
community-based organizations and national nonprofits, should have
priority to bid over investors and ``unknown nonprofits''.
One commenter recommended that the language be revised to ``may'',
rather than ``will'', include a ``first look'' program. The commenter
stated that applying the requirement to every Participating Service
Agreement (PSA) may lengthen rehabilitation and re-occupancy timelines,
increase holding costs, and reduce the purchase price of the loans and
the corollary benefit to the Insurance Fund. The commenter stated that
the PSA should set the first-look requirements and enable the
evaluation of a nonprofit's capital and capacity to support a
nationwide first look program in specific non-performing loan sale
localities on a sale-by-sale basis.
HUD Response: HUD appreciates the stakeholder feedback. This final
rule will maintain the ``first look'' program for every sale and will
not make it optional. In addition to minimizing losses to the MMIF, the
purpose of the Single Family Sale Program is to further HUD's historic
mission of providing housing opportunities for low- and moderate-income
families. The ``first look'' requirement serves that important purpose
by providing owner-occupant buyers, governmental entities, and eligible
nonprofit organizations the first opportunity to purchase property that
converts to real estate owned (REO) property by foreclosure or deed-in-
lieu of foreclosure following the sale of a mortgage loan under the
Single Family Sale Program.
HUD believes every sale should have this requirement and the final
rule retains the proposed language in Sec. 291.615(a) that post-sale
requirements for Single Family Loans that convert to real estate owned
property through foreclosure or deed-in-lieu of foreclosure will
include a ``first look
[[Page 99708]]
program, providing an exclusive listing period for owner occupant,
nonprofit organization, governmental entities, and other prospective
buyers as permitted by HUD.''
D. Question #4: Whether Post-Sale Servicing Requirements Should Include
Loss Mitigation Requirements That Match or Exceed FHA Loss Mitigation
Requirements for Insured Mortgage Loans, What Loss Mitigation Options
Have Been Successful, and What Loss Mitigation Standard and Waterfall
Should Be Utilized
1. Comments on Loss Mitigation Options and Scope
Several commenters were supportive of the importance of loss
mitigation options and the proposal to require buyers under the Single
Family Sale Program to offer loss mitigation options that are as or
more generous than the FHA loss mitigation options.
Two commenters stated that the requirement to provide FHA loss
mitigation options should be a floor and that the waterfall of
allowable outcomes should be broader. One commenter suggested that
servicers should be encouraged to consider options such as principal
forgiveness and payment deferral. One commenter stated that the first
priority should be foreclosure prevention, and all buyers should offer
borrowers options to reinstate, enter a trial, or permanent
modification and, if that's not possible, to assist the buyer with a
short sale, deed in lieu of foreclosure or short payoff.
One commenter said required loss mitigation would not place a
significant burden on servicers as the options are set out in the FHA
Single Family Housing Policy Handbook and there is increased
standardization of streamlined loss mitigation reviews in the industry.
Two commenters noted the importance of loss-mitigation options that
take into account the needs of specific borrowers. One commenter stated
that the National Housing Act and the obligation to affirmatively
further fair housing require HUD to take into account the needs of
specific borrowers and design systems to promote the success of those
borrowers. The commenter said that the obligation to affirmatively
further fair housing is particularly relevant to FHA's insured loan
program because Black and Latino borrowers rely heavily on it to
purchase homes.
One commenter stated that requiring the loss-mitigation options
would mitigate the risk of investors purchasing notes for the purpose
of foreclosing and avoid the unfairness of stripping away the benefits
of FHA servicing options when there is a default. The commenter also
noted that a borrower's circumstances may have changed and another
opportunity to receive an affordable workout option is essential.
One commenter stated that post-sale loss mitigation options should
not be ``as or more generous'' as the FHA waterfall as the requirement
is undefined and may force purchasers to offer the same options as
those in the FHA waterfall to avoid allegations that the loss
mitigation terms were less generous.
One commenter stated that if foreclosure is unavoidable the buyer
should be required to assume HUD's responsibility to create affordable
homeownership for new owner/occupants, a requirement that benefits very
low-, low-, and moderate-income buyers should be in place, and
purchasers should be required to provide a percentage of outcomes in
all categories. The commenter also stated that exceptions should be
made only after a written request to HUD and HUD approval should be
required before a sale to investors.
One commenter raised concerns that loss-mitigation practices by
private equity firms may not comply with FHA servicing requirements.
The commenter provided an example of an entity that uses data to assess
borrowers' ``job security'' to determine when to pursue loan
modification or foreclosure, which does not consider other important
factors or involve interactions with the borrower.
One commenter stated that loss mitigation is extremely important,
the foreclosure process is detrimental to families and communities, and
it is important to allow families who are traditionally ostracized by
mortgage lenders an opportunity at homeownership and second chances
during hard economic times.
HUD Response: HUD acknowledges the importance of loss mitigation in
providing stability for families and communities, especially those
traditionally marginalized by mortgage lenders. The final rule retains
language in Sec. 291.615(a) requiring Purchasers to offer loss
mitigation options ``that are as or more generous than FHA loss
mitigation options,'' as outlined in the FHA Single Family Housing
Policy Handbook. This standard ensures that borrowers receive robust
support, with the flexibility for Purchasers to offer additional,
tailored assistance as needed.
HUD values the commenters' concerns and encourages Purchasers not
to be deterred from providing expanded or customized loss mitigation
options that exceed FHA standards. While the final rule specifies
baseline requirements, HUD will address further enforcement of these
requirements and any necessary future adjustments in sale notifications
and legal documentation, allowing for adaptability as needs evolve.
2. Loss Mitigation Standards Should Be Publicly Available
Two commenters stated that HUD should require Purchasers to make
loss mitigation standards public. The commenters cited examples where a
lack of transparency harmed borrowers and stated that without access to
the guidelines and loss mitigation standards, borrowers and their
advocates will be unable to effectively challenge denials and other
errors, leading to avoidable foreclosures.
A commenter considered it a major omission that the requirement to
make loss mitigation standards public was not in the proposed rule. The
commenter urged HUD to make the obligation to make loss mitigation
guidelines accessible to the public clear in the final rule and in the
FHA Single Family Housing Policy Handbook.
HUD Response: HUD appreciates the stakeholder feedback. Due to the
specificity and the potential for needed changes in the future, HUD's
decisions to publish the Purchaser's loss mitigation requirements would
be captured in future sale legal documentation (the CAA) and/or sale
notifications such as a Federal Register Notice if this is desired, and
not in the rule.
3. Importance of an Enforcement Mechanism
One commenter stated it is essential that FHA develop proactive
enforcement mechanisms to ensure that note purchasers are complying
with their loss mitigation obligations. The commenter also stated that
HUD should not rely on self-certification by purchasers, and purchasers
that violate these loss mitigation obligations must face serious
consequences, including bans from future note sales and civil
prosecution.
HUD Response: HUD appreciates the stakeholder feedback. Due to the
specificity and the potential for needed changes in the future, HUD's
decisions to enforce loss mitigation requirements would be captured in
future sale legal documentation and/or sale notifications if this is
desired, and not in the rule.
[[Page 99709]]
E. Question # 5: Should HUD Allow Nonprofit Organizations and
Governmental Entities To Qualify for Priority Bidding Status in Single
Family Sales
Several commenters supported priority bidding status to allow
nonprofit entities to be awarded up to 50 percent of the loans in a
sale. One commenter recommended a priority bidding status for up to 75
percent of the loan pool for nonprofit entities. One commenter stated
HUD should offer priority bidding for nonprofit entities and proven
community investment and community redevelopment organizations and
create a preferred order of qualifications and priority to purchase
homes (owner-occupant, nonprofits, and government).
Two commenters recommended that a portion of assets in a sale
should be set aside for nonprofit organizations with priority bidding
status. One commenter recommended a 50 percent set aside and one
commenter recommended a 75 percent set aside for both Single Family
Sale Program and HECM loan sales. The commenters recommended that if
the set aside has not been reached and a nonprofit is bidding on an
asset, the nonprofit should win even if it is below the reserve. The
commenters also recommended that if there are no nonprofit bids for
assets in the set-aside, nonprofits should be offered a last look on
the assets in an effort to obtain nonprofit bids. One commenter
recommended that the last look include pricing of the available assets
in the pool to obtain more nonprofit bids and a reserve disclosure to
allow nonprofits to better target their bid strategy.
Two commenters stated that acquisition by private investors leads
to the conversion to high priced rental units that drive up housing
costs and private investors tend to bid over reserve and win properties
in locations where the need for affordable homeownership is great and
impact potential is high. The commenters stated that nonprofits should
be awarded properties that are closer to transit, have access to
favorable jobs, and where homeownership equity is hardest to achieve.
One commenter stated that the priority status for nonprofits must
have adequate and enforceable safeguards to protect against fraud and
sham nonprofit organizations.
One commenter supported HUD's efforts to enforce mechanisms that
allow owner occupants, nonprofit organizations, and government entities
to acquire loans through the Program and recommended that HUD offer
loan pools for sale through auctions limited to single family buyers,
similar to the prior Neighborhood Stabilization Program.
HUD Response: HUD appreciates the stakeholder feedback. If HUD
decides to revise the carve-out percentage and how it will be applied
to various sale types, it will be captured in future sale legal
documentation and/or sale notifications and not in the rule itself.
Such a change would also need to be reviewed by the Office of
Management and Budget under the A-11 Circular. Maintaining this
potential change as part of the sale documents and/or sale notification
creates greater opportunities for HUD to retain some flexibility for
future sales.
F. Question #6: Whether HUD Has Proposed a Workable and Efficient
Process for Direct Sales of Single Family Loans
Several commenters stated that nonprofits should be able to request
a direct sale without a unit of government involved. One commenter
suggested HUD consider extending the opportunity to qualified,
capitalized non-profit organizations with proven track records. Two
commenters suggested that nonprofit organizations that often partner
with government should be able to request a direct sale without a unit
of government involved, so long as HUD ensures the nonprofit is
controlling the management and disposition of the assets.
HUD Response: HUD appreciates the stakeholder feedback. HUD's
implementation of the specifics of the direct sales will be established
via Sale Notice pursuant to the Secretary's authority to ``prescribe
requirements for a Direct Sale of Single Family Loans through Sale
Notice'' as set out in Sec. 291.619(a) of the final rule. HUD is
currently considering allowing direct sales to nonprofits as permitted
by Sec. 291.617 of the final rule.
G. Question #7: Should a Borrower Loan Sale Notification Be Required
and What Information Should Be Included
1. General Comments Regarding Borrower Loan Sale Notification
One commenter strongly supported a requirement for pre-sale notice
as an essential due process protection for borrowers that would enhance
compliance with FHA's loss mitigation guidelines and protect the
insurance fund from unnecessary losses. The commenter recommended that
all servicers be required to provide the form to borrowers when a loan
is referred to HUD for inclusion in a future loan sale.
The same commenter stated that the notice should be a HUD form or
HUD-approved template and include: (1) a description of the Single
Family Loan Sale Program; (2) a summary of the FHA loss mitigation
options; (3) a chronology of the servicer's review of the borrower for
the FHA loss mitigation options, including dates for waterfall reviews
and outcomes or, if a waterfall review was not conducted, the reasons
it did not occur, including dates of outreach and reference to specific
communications; (4) notification that the borrower can still seek a
loss mitigation review from the servicer under FHA guidelines if the
borrowers' circumstances have changed since a prior review; (5)
information about how the borrower can dispute the servicer's
representations about past loss mitigation reviews; (6) notification
that the loan will not be placed in a loan sale pool as long as a
dispute over past loss mitigation conduct is pending or a new loss
mitigation review based on changed circumstances is underway; and (7)
information about referrals to housing counselors and legal aid offices
in the borrower's vicinity.
One commenter questioned whether an advance notice is helpful or
detrimental to the distressed borrower's wellbeing and suggested adding
information to the default/delinquency notice instead.
One commenter stated that FHA should allow servicers to comply with
the requirement by adding elements to the servicing transfer
notification already required under 12 CFR 1024.33(b). The commenter
suggested this approach would reduce the borrower's confusion, the
cost, and the environmental impact of sending two separate interrelated
letters.
HUD Response: HUD appreciates the stakeholder feedback. The final
rule retains language in Sec. 291.605(a)(5) that requires the
Participating Servicer to ensure that the Loan Sale Notification is
provided to each borrower and any other parties required by the
Secretary. The details around how the Loan Sale Notification to the
borrower is structured and what information must be included in such
notification will be set out in more detail by HUD in the Sale Notice
or Mortgagee Letter.
2. Post-Notice Loss Mitigation Reviews
One commenter stated that if the borrower informs the servicer that
they had a change in financial circumstances before the sale occurs,
the servicer should reconsider the borrower's eligibility under the HUD
waterfall. The commenter stated that the presale notice will prompt
those discussions with
[[Page 99710]]
borrowers who have improved their financial circumstances and HUD
should clearly state the expectation that servicers will re-review
before the sale.
HUD Response: HUD appreciates the stakeholder feedback. Due to the
specificity and the potential for needed changes in the future, HUD's
decisions around post-notice loss mitigation reviews would be captured
in future sale legal documentation, such as the Participating Servicer
Agreement, and/or sale notifications if this is desired, and not in the
rule.
3. Recommended Dispute Resolution System
One commenter stated that HUD should provide a more comprehensive
dispute resolution system through its National Servicing Center (NSC),
with the capacity to directly address borrower disputes regarding loss
mitigation. The commenter stated that the NSC should review complaints,
maintain written records of the reviews, and produce a memorandum of
findings and conclusions. The commenter further stated that HUD should
conduct a final review of the NSC's determination at the request of the
borrower and HUD decisions should be subject to review under the
Administrative Procedures Act. The commenter further stated that the
presale notice should give details about a dispute resolution process
for borrowers and direct the borrower or their representative to
address the complaint to the NSC and the servicer.
HUD Response: HUD appreciates the stakeholder feedback regarding
the importance of a comprehensive dispute resolution system through the
HUD National Servicing Center (NSC). The NSC will be consulted to
develop a framework to address borrower disputes related to loss
mitigation, including the maintenance of written records and the
provision for final review requests. Specific details about a dispute
resolution process will be included in future sale legal documentation
and notifications rather than in the rule itself, ensuring that
borrowers are informed about how to address their complaints
effectively. HUD remains committed to enhancing transparency and
responsiveness in the resolution of borrower disputes.
H. Question #8: What Information Should HUD Include in Periodic Reports
on Single Family Sales Loan and Property Outcomes
1. Content of Data Collection and Reports
One commenter stated that reporting the post-sale status of loans
sold through the Single Family Sale Program is important to fully
assess the impact of the program on communities and borrowers. The
commenter recommended that the data be publicly available, updated at
least annually, and include: (1) post-sale loss mitigation activities,
including approvals and denials of options, including the levels and
nature of payment changes, and (when available) old and new borrower
debt-to-income ratios; (2) demographic and geographic data about
homeowners and loss mitigation; (3) data on the long-term performance
of loans after loss mitigation, including rates of redefault; and (4)
data on subsequent sales and rentals involving the properties. The
commenter stated that reports with this type of data were produced by
government entities, including during and after the 2008 foreclosure
crisis.
Two commenters stated that racial and other demographic data about
homeowners is important to ensure the program is affirmatively
furthering fair housing.
A commenter stated that buyers should include the number of loss
mitigation approvals and denials and the outcomes of all loans or
properties that they or related entities control and that information
should be made public and regularly updated.
A commenter stated that HUD should provide performance outcomes for
each buyer at least once annually. The commenter stated HUD should also
provide qualified bidders with defaulted buyer information and should
consider allowing performing buyers with the opportunity to acquire
assets from those buyers in default.
One commenter stated that the proposed rules maintain the current
standard of four years of outcome data and that is an insufficient
period of time to properly assess program outcomes.
One commenter requested that FHA publish more information broken
down by note pools, including information on vacancy rates and a
breakdown by pool of unpaid loan balances. The commenter also requested
that FHA provide more data broken down by note purchaser, including
unpaid loan balances and sales prices.
HUD Response: HUD appreciates the stakeholder feedback regarding
data transparency and reporting on Single Family Sales outcomes. HUD
recognizes the value of detailed reporting, including post-sale loss
mitigation activity, demographic and geographic data, and long-term
loan performance metrics. The final rule continues to provide that
outcome data and the timeline for reporting will be set out in the CAA,
which will generally continue to provide for outcome data over a four-
year period, while sale notification and sale documentation may address
updates to reporting requirements and additional data presentation as
deemed necessary to support program goals.
2. Requested Clarity on Reporting Obligations
A commenter stated that the proposed rule appears to direct
subsequent transferees from initial buyers to comply with post-sale
reporting obligations. The commenter recommended that the language be
edited to make that point clear as the post-sale reporting obligation
would have little value if it did not apply to transferees.
HUD Response: HUD appreciates the stakeholder feedback and will
review the current reporting requirements and the information gathered.
Any changes to the reporting requirements and how HUD presents the
information will be captured through sale notifications like the
Federal Register Notice and/or sale legal documents, including the BIP
and the CAA. This will provide flexibility for the Department and the
ability to improve and enhance reporting based on program experience.
3. Oversight and Enforcement of Reporting Obligations
One commenter identified concerns about reliance on self-reporting
to assess servicers' post-sale performance and recommended that loan
purchase agreements authorize limited direct HUD oversight of servicers
before and after the four-year mandatory post-sale reporting period.
The commenter stated that such oversight would help determine whether a
property remains owner-occupied or was converted to a rental investment
property and would allow assessment of the long-term efficacy of loss-
mitigation options offered by post-sale servicers. The commenter also
stated that HUD should assess meaningful sanctions, including
disqualification from future sales and financial penalties, for
substantial noncompliance with reporting requirements.
HUD Response: HUD appreciates the stakeholder feedback and will
review the current reporting requirements, and the information
gathered. Any changes to the reporting requirements and how
[[Page 99711]]
HUD presents the information will be captured through sale notification
and/or sale legal documents.
I. Question #9: Should Eligibility Criteria for a Single Family Sale
Include Satisfaction of HUD's Loss Mitigation Requirements
One commenter strongly supported the language in the proposed rule
that requires satisfaction of HUD's loss mitigation requirements as a
condition for sale eligibility. The commenter stated that HUD has long
represented that compliance with HUD's loss mitigation requirements is
a condition to a loan's eligibility for a sale, which is consistent
with HUD's requirement that mortgagees certify comply with HUD's
regulations as a condition to payment on an insurance claim.
The commenter stated that HUD should develop a system to ensure
compliance by servicers and that servicer check-box self-certification
is insufficient. The commenter provided examples of improper self-
certifications and stated that HUD Office of the Inspector General
reports have found problems with self-certification by servicers and
failures by servicers to provide correct loss mitigation assistance.
The commenter stated that HUD should require documentation of the
servicer's loss mitigation review as a condition to a loan's
eligibility for early claim payment and a sale of the loan. The
commenter stated the loss mitigation waterfall in the FHA Single Family
Housing Policy Handbook requires servicers to have a record of how the
HUD waterfall was applied and if a servicer cannot produce that
documentation, it must be required to establish compliance with the HUD
outreach requirements as set out in the Handbook.
One commenter stated that a loss mitigation addendum should be
signed with every application approval and a report indicating each
outcome should be provided on a quarterly basis, including whether it
is a reinstatement, trial or permanent modification, short sale or
payoff, deed in lieu, or if after foreclosure than evidence of sale to
an owner/occupant, lease to an income-qualified tenant, and evidence of
sale to a community of color or marginalized individual if available.
HUD Response: HUD appreciates the stakeholder feedback on ensuring
servicers' compliance with loss mitigation requirements for loan sale
eligibility. HUD reaffirms that satisfying these requirements is
essential for sale eligibility and is a post sale requirement under
Sec. 291.615(a) of the final rule. HUD acknowledges that flexibility
may be needed for certain scenarios, such as disaster-related sales.
The final rule sets out actions HUD may take in the event there is a
failure to meet post-sale requirements or any submission of false
information or misrepresentation Sec. 291.621. Any related criteria
will be detailed in the sale notification or sale documents, rather
than the rule, to allow for adaptable policy implementation.
J. Question #10: Should HUD Offer Favorable Sale Terms to Governmental
or Nonprofit Entities
1. Potential Favorable Sale Terms
Several commenters directly supported providing favorable sale
terms to nonprofit entities. A commenter stated that a government or
non-profit operator is more likely to utilize the program for community
benefit and sell or lease the home to an income qualified person or
person of color. A commenter said that more favorable sale terms and
conditions for nonprofit organizations and community-based entities,
such as allowing a first look, will help organizations know what
properties are coming into the sale and how they can be poised to
obtain a property and return it to a useful purpose.
One commenter recommended reducing the reserve price to better
facilitate transitions of the property to nonprofit organizations at a
price that is closer to fair market value. The commenter recommended
additional favorable terms such as bulk bidding to allow for greater
flexibility and faster disposition and allow a financial incentive to
nonprofit organizations in the form of a reduced price for a larger
purchase.
One commenter stated HUD should allow a waiver of certain reporting
criteria, such as proof of ethnicity, familial status or income as most
purchasers cannot ask those questions and it is not always possible to
get a HUD-approved non-profit organization to engage in the process.
The commenter recommended that HUD use census tract information to help
the buyer with this situation.
HUD Response: HUD appreciates the feedback supporting favorable
sale terms for nonprofit entities and community-based organizations.
Adjustments such as reduced reserve prices, first-look provisions, bulk
bidding, and streamlined reporting requirements could enhance
nonprofits' participation and community impact. HUD will consider
making modifications to sale terms in sale notifications and sale
documentation to address this concern.
2. Safeguards on Benefits to Nonprofit Organizations
One commenter stated that any system created for the benefit of
nonprofit organizations must have appropriate safeguards to prevent
abuse of the system by straw buyers and there should be adequate
enforcement and oversight.
HUD Response: HUD appreciates the feedback regarding safeguards to
prevent misuse of systems established for nonprofit organizations. The
Department is committed to preventing bid abuse and ensuring fair
qualification processes. Any adjustments to the bidding or
qualification criteria will be implemented through sale notifications
including the Federal Register and sale documents like the BIP and the
CAA rather than in the rule, allowing for greater flexibility in
enforcement and oversight.
3. Recommended Deadline Extensions for Nonprofits
Two commenters recommended that nonprofits be allowed 60 days to
perform pre-bid due diligence and 90 days to close. The commenters
stated that nonprofits often request extensions from HUD because they
rely on debt to finance the sales and do not have immediate access to
substantial cash reserves and providing the additional time up front
would alleviate pressure on both nonprofits and HUD. One commenter
stated an extended pre-bid due diligence period would allow more time
to assess the interest of affiliate networks in the properties.
HUD Response: HUD appreciates the feedback regarding extended
timelines for nonprofits to conduct pre-bid due diligence and close
sales. HUD acknowledges the unique challenges nonprofits face in
securing financing and recognizes that additional time could alleviate
pressures on both nonprofits and HUD. Any timeline extensions would
likely apply to all bidder types to ensure equity. Such changes would
be implemented through sale notifications (such as the Federal Register
Notice) and sale documentation (the Qualification Statement, the BIP
and CAA) rather than in the rule itself, providing the Department
greater flexibility.
Public Comments and Recommendations
A. General Support
A number of commenters expressed overall support for the rulemaking
and appreciated that the proposed rule
[[Page 99712]]
incorporated prior stakeholder input. Several commenters expressed
support for converting the Single Family Sale Program from a pilot to a
permanent program.
HUD Response: HUD appreciates the stakeholder feedback in support
of the Single Family Sale Program and this rule.
B. Racial Homeownership Disparities
Several commenters discussed racial homeownership disparities, the
racial wealth gap, and the importance of homeownership to individuals
and communities. One commenter stated that Black and Latino homeowners
are disproportionately impacted by HUD note sales and the related
impacts to communities that are targeted by institutional investors.
One commenter said that the obligation to affirmatively further fair
housing is particularly relevant to FHA's insured loan program because
Black and Latine borrowers rely heavily on it to purchase homes.
HUD Response: HUD appreciates the comments on racial disparities in
homeownership, the racial wealth gap, and the vital role of
homeownership in supporting communities. The Department understands
concerns that Black and Latine homeowners may be disproportionately
affected by note sales and institutional investor involvement.
Recognizing the importance of affirmatively furthering fair housing,
HUD is aware of the critical role FHA-insured loans play for many Black
and Latine borrowers. HUD remains committed to promoting equitable
outcomes and strengthening protections for communities impacted by
systemic inequities. These insights support HUD's ongoing efforts to
foster fair housing access and reduce disparities across all
communities.
C. Support for Nonprofit Organizations and Concerns Regarding Private
Investors
Several comments were submitted that provide general support for
nonprofit and community-based organizations and raise concerns
regarding the role of private investors. Commenters noted the
importance of nonprofit and community-based organizations in single
family loan sales, and said these organizations have the experience and
expertise to meaningfully invest in communities, navigate public and
private funding, and foster homeownership.
A number of commenters raised concerns regarding the impacts of
private investors in loan sales. One commenter provided data on the
impact of purchases by institutional investors and stated HUD's goal
should be to end the practice of selling FHA notes to private
investors. Two commenters stated that market forces alone cannot
address the cost constraints placed on low- and moderate-income
families. A commenter noted that if private investors continue to
purchase loans, strong enforcement of borrower protections and public
reporting data regarding the program and outcomes will be important.
One commenter stated that given the capacity limits of nonprofit
organizations, profit-motivated investors will likely remain a major
part of the program and stated it is important for HUD to mitigate the
harm that profit-motivated investors could impose on FHA borrowers if
those investors are left with largely unfettered discretion.
HUD Response: HUD appreciates the strong support expressed by
commenters for nonprofit and community-based organizations and
acknowledges the valuable role these organizations play in single
family loan sales. HUD recognizes that nonprofits have a unique
capacity to positively impact communities through their extensive
expertise, commitment to fostering homeownership, and ability to
navigate public-private funding sources effectively.
HUD also notes the concerns raised by commenters regarding the role
of private investors in loan sales, including the potential challenges
market-driven entities may pose for low- and moderate-income families.
While HUD anticipates that private investors will continue to
participate alongside nonprofits due to capacity constraints within the
nonprofit sector, HUD is committed to exploring avenues to balance
investor involvement with strong borrower protections and community-
focused objectives. To this end, HUD will continue to enforce borrower
protections and enhance transparency by providing public reporting on
program outcomes.
HUD remains dedicated to reviewing feedback on how best to support
nonprofit organizations while ensuring private investor participation
aligns with HUD's mission of promoting sustainable, affordable
homeownership opportunities. The Department will carefully consider all
suggestions as part of its ongoing commitment to improve the Single
Family Sales Program.
D. Recommendation That HUD Impose and Enforce Income Limits
Two commenters recommended that HUD bolster the objective of
selling to households earning less than 120 percent AMI and renting to
households at or below 80 percent AMI by requiring that both non-profit
and for-profit comply with those AMI limits and barring entities that
do not comply with those objectives from future sales.
HUD Response: HUD appreciates the stakeholder feedback. Any
requirements related to income limits, eligibility, or restrictions on
future participation for non-compliance will be outlined within the
sale notifications (such as the Federal Register Notice) and associated
legal documents like the Qualification Statement, the CAA and the BIP)
rather than in the rule itself. Addressing these criteria through sale
documentation provides HUD with the flexibility needed to adjust and
strengthen program requirements in response to changing market
conditions and program goals. HUD remains committed to transparency and
will ensure stakeholders have clear guidance through publicly
accessible sale documents.
E. Clarify That the Participating Servicer Agreement (PSA) Controls
Eligibility Criteria
One commenter stated that in order to set proper expectations with
Participating Servicers, Sec. 203.413(b) should expressly state that
the ``acceptability criteria include to the satisfaction of the Single-
Family Sale loss mitigation eligibility requirements as defined in the
PSA''.
HUD Response: HUD appreciates the stakeholder feedback. HUD
acknowledges the importance of clearly setting expectations for
Participating Servicers. This clarification will be addressed through
the PSA and associated sale documentation rather than in the rule
itself. This approach allows HUD the flexibility to update and refine
the criteria as necessary in response to evolving program needs, while
ensuring that servicers understand their obligations under the PSA.
These documents will be publicly posted for each sale, ensuring
transparency for all stakeholders.
F. Repurchase Protocol When Participating Servicer Is Engaged in
Significant Misconduct
One commenter recommended that HUD implement a protocol for the
repurchase of loans in cases where a participating servicer engaged in
significant misconduct and identified ambiguity in the current
requirements. The commenter stated that the rules provide that HUD can
withdraw a loan from a sale for any reason, including noncompliance
with the Conveyance, Assignment and Assumption Agreement (CAA), at any
time prior to the
[[Page 99713]]
settlement date and the definitions of CAA and Sale Notice state that
the documents will include certain ``repurchase requirements''. The
commenter stated that the comments to Sec. 291.605 mentions
``repurchase criteria'' applicable to servicers, although it is not
clear whether the ``repurchase'' mechanism is distinct from the
``withdrawal'' of a loan before the settlement.
The commenter also stated that HUD should not terminate repurchase
obligations at the post-sale settlement date. The commenter recommended
that the Sale Notice and CAA inform purchasers that the loans are
subject to repurchase as long as they are held by the initial
purchaser. The commenter recommended that if it becomes apparent after
a sale that the Participating Servicer misrepresented its compliance
with FHA loss mitigation guidelines, the purchaser should not be
permitted to foreclose. Instead, the commenter stated that HUD should
require the noncomplying Participating Servicer to repurchase the loan,
comply with FHA loss mitigation guidelines and provide other remedies
available under FHA guidance. The commenter stated this would deter
routine misrepresentations of compliance with FHA guidelines.
HUD Response: HUD appreciates the stakeholder feedback. The
Department acknowledges the importance of ensuring transparency and
accountability in the sale process, particularly when there are
potential compliance issues with FHA loss mitigation guidelines. HUD
will review the possibility of more clearly distinguishing between the
``withdrawal'' of a loan prior to settlement and the ``repurchase''
mechanism applicable post-settlement. This may include ensuring that
the definitions of the CAA and Sale Notice reflect these distinctions
more explicitly.
The commenter's suggestion that repurchase obligations extend
beyond the post-sale settlement date in cases of noncompliance with FHA
guidelines will also be carefully considered. HUD agrees that robust
mechanisms should be in place to deter misrepresentations of compliance
and ensure that loans are managed in accordance with FHA's loss
mitigation guidelines.
As stated in the rule, the repurchase criteria and related terms
will be more clearly defined in the Sale Notice, which will be publicly
posted for each sale. Any adjustments to these terms will be addressed
through the legal documents rather than in the rule itself, as this
provides the flexibility needed to adapt to evolving concerns and
ensure compliance with FHA's standards.
G. Clarification Making the Purchaser Bound by the Terms of the CAA and
Notice of Sale
A commenter supported the requirement that ``any subsequent
transferee of or servicer'' of the initial loan purchaser comply with
the terms of the CAA and Notice of Sale. The commenter stated that the
proposed rule specifies that subsequent transferees and their servicers
must offer loas mitigation options that meet the same standard as those
of the original purchaser.
The commenter stated that the term ``transferee'' in Sec.
291.615(a) is not defined in the regulations and could be open to
interpretation. The commenter stated that further Handbook or Mortgagee
Letter of clarification would be appropriate to clarify it if means
transferees of the note, assignees of the mortgage, or transferees of
title to the real property. The definition is relevant because
transferees of the promissory note may not have knowledge of the terms
of the CAA and Sale Notice. To avoid later enforcement issues, HUD
could require information about the CAA and Sale Notice obligations to
be included in the recorded assignment of the mortgage to the initial
purchaser and recording the CAA in property records would also provide
notice to subsequent purchasers.
HUD Response: HUD appreciates the stakeholder feedback. The
Department acknowledges the commenter's concern regarding the
interpretation of the term ``transferee'' in Sec. 291.615(a) and its
potential ambiguity in the absence of a defined meaning within the
regulations.
HUD agrees that further clarification--potentially through a
Handbook or Mortgagee Letter--could be useful to specify whether
``transferee'' refers to transferees of the note, assignees of the
mortgage, or transferees of title to the real property. Additionally,
HUD recognizes the concern that transferees of the promissory note may
not be aware of the terms of the CAA and Sale Notice, which could lead
to enforcement challenges.
HUD will consider incorporating information about the CAA and Sale
Notice obligations into the recorded assignment of the mortgage to the
initial purchaser and may review the potential for recording the CAA in
property records to provide notice to subsequent purchasers. Any
changes to the recorded assignment requirements or sale terms will be
addressed within the sale agreements and related legal documents. As
noted in the rule, these documents will be publicly posted for each
sale, and making changes through these legal documents allows HUD the
flexibility to adapt to evolving needs and stakeholder feedback.
H. Clarify That Reporting Requirements in 24 CFR 291.615(b) Apply to
Transferees and Their Servicers
A commenter stated it is unclear who must comply with the purchaser
reporting requirements in Sec. 291.615(b) and requested that HUD
clarify that subsection. The commenter stated that Sec. 291.615(b)
refers to the obligation of the ``purchaser'', while Sec. 291.615(a)
specifically extends the obligations to subsequent transferees and
their servicers. The commenter suggested the absence of a reference to
transferees and their servicers in Sec. 291.615(b) may be an oversight
and requested that HUD clarify by specifically designating the
reporting obligations as applicable to transferees and their servicers.
HUD Response: HUD appreciates the stakeholder feedback. While Sec.
291.615(a) specifically extends obligations to subsequent transferees
and their servicers, HUD acknowledges that the absence of a reference
to transferees and their servicers in Sec. 291.615(b) may cause some
confusion.
To clarify, the reporting obligations do extend to transferees and
their servicers, as detailed in the sale agreements and related
documentation. These requirements are more fully defined within the
legal agreements governing each sale. As stated in the rule, HUD will
publicly post these documents for each sale, providing greater
transparency on the obligations of purchasers, transferees, and
servicers. Any future changes to sale terms or definitions will be
reflected through these legal agreements to maintain flexibility in
adapting to evolving program needs.
I. Transactional Documents Should Be Made Available to the Public
One commenter stated that the rule should make clear that all key
transactional documents described in Sec. 291.601, and adapted for the
specific sale, will be accessible to the public on HUD's website. The
commenter stated that documents such as the Participating Servicer
Agreement, Bidder Information Package, the Conveyance, Assignment and
Assumption Agreement, the Interim Servicing Agreement, and the Desk
Guide are referenced and defined by the proposed rule. The commenter
also stated that the rule provides that an ``Addendum'' to each of the
documents will be published on HUD's website for
[[Page 99714]]
each Single Family Sale. The commenter is unclear whether ``Addendum''
means the form as adapted to the specific loan sale, but strongly
support the provision if that is the intended meaning.
The commenter stated that transparency is important so borrowers
can know the post-sale servicing obligations that are binding on a loan
purchaser and its assignees, including the Convenance, Assignment and
Assumption Agreement and the Sale Notice. The commenter said that
without easy access to those documents, borrowers and their advocates
will not know the eligibility requirements for loss-mitigation options
and that will prevent borrower's from effectively challenging errors in
servicing and will lead to unnecessary foreclosures.
HUD's Response: HUD appreciates the stakeholder feedback. HUD is
committed to ensuring transparency in the single family sale program
process. As stated in the rule, key documents--including the
Participating Servicer Agreement (PSA), Conveyance, Assignment and
Assumption Agreement (CAA), Interim Servicing Agreement (ISA), and Desk
Guide--will be made available to the public on HUD's website.
The Bidder Information Package (BIP), however, will only be made
available to qualified bidders to protect the integrity of the bidding
process. Regarding the commenter's question about the ``Addendum,'' HUD
clarifies that the term refers to the document as adapted for each
specific loan sale, and this will also be made available as part of the
public documentation for each sale.
HUD recognizes the importance of transparency so that borrowers and
their advocates are informed about post-sale servicing obligations and
loss-mitigation options. By providing public access to these documents,
HUD aims to ensure borrowers have the information they need to
challenge servicing errors and avoid unnecessary foreclosures.
J. Recommended Flexibility to Curtailment Provisions
One commenter advocated for reform to FHA's claims curtailment
rules for all claim types. The commenter was concerned by the provision
that ``HUD will curtail Debenture Interest'' in Sec. 203.413(d), even
if a claim remains suspended for reasons beyond the servicer's control.
The commenter was also concerned that HUD's definition of ``Debenture
Interest'' included ``approved reimbursable expenses'' subject to
curtailment.
The commenter recommended that the final rule: (a) limit
curtailment to deadlines missed due to factors within the servicer's
control and (b) clarifying that servicers may file supplemental claims
under FHA Single Family Housing Policy Handbook if necessary. The
commenter stated that addressing curtailment provisions would encourage
participation in the Single Family Sales Program as servicers will not
be penalized when making every effort to comply with claims filing
deadlines. The commenter suggested that without this change the
prospect of losing interest and out of pocket costs may chill
participation.
HUD's Response: HUD appreciates the stakeholder feedback; however,
the curtailment of claims, including debenture interest and
reimbursable expenses, is outside the scope of this current rulemaking.
HUD acknowledges the importance of addressing these issues and
encourages continued engagement on how to improve the claims process.
HUD will consider this feedback for future policy updates and
administrative guidance.
K. Required Sales to Owner-Occupants
One commenter stated that given the negative effects market
speculation on the single-family home market, there should be a
requirement that 100 percent of the properties sold end up in the hands
of owner occupants. The commenter criticized the HVLS program for not
doing enough to ensure a broader market effort to maintain affordable
homes for first time buyers and younger generations.
HUD's Response: HUD appreciates the thoughtful feedback regarding
the impact of market speculation on the single-family home market and
the suggestion to ensure that 100 percent of properties sold end up in
the hands of owner-occupants. HUD is committed to supporting affordable
homeownership opportunities, particularly for first-time homebuyers and
younger generations.
HUD will carefully consider this proposal as part of our ongoing
efforts to enhance the Home Equity Conversion Mortgage Loan Sales
(HVLS) program and other Single Family Sale Program initiatives.
However, any modifications to the percentage of properties designated
for owner-occupants would be implemented through the sale notifications
and legal documents, rather than the rule itself. This approach allows
the Department the flexibility to adapt sale requirements as needed in
response to evolving market conditions and program goals.
HUD remains committed to exploring all options to increase
affordable homeownership and reduce market pressures on low- and
moderate-income buyers.
L. Recommended Convening of Practitioners
Two commentors recommended that FHA convene practitioners with
experience using the program to allow HUD to better understand the
concerns of nonprofits working to expand their single-family housing
footprint. The commenters suggested that providing an opportunity for
mission-driven stakeholders to share best practices would expand the
reach and effectiveness of the program and continue to inform necessary
reforms.
HUD Response: HUD appreciates the insightful comments regarding the
value of convening practitioners with experience in the Single Family
Sale Program. HUD recognizes the importance of engaging mission-driven
stakeholders to better understand the challenges nonprofits face as
they work to expand their single-family housing footprint. HUD agrees
that providing a forum for practitioners to share best practices would
not only strengthen program effectiveness but also support broader
affordable housing goals.
HUD is committed to expanding collaboration with the nonprofit
community and will explore opportunities to convene experienced
practitioners. Such a platform could enhance stakeholder engagement,
facilitate knowledge sharing, and inform ongoing program reforms,
ensuring that the needs and expertise of nonprofits are integrated into
future improvements of the program. HUD welcomes continued dialogue on
this important initiative.
M. Credit Scores for First-Time Homeowners
One commenter stated that credit scores should not be a
consideration for first-time homeowners, who can build credit through
homeownership.
HUD Response: HUD appreciates the comment regarding the
consideration of credit scores for first-time homebuyers. HUD
understands the viewpoint that homeownership itself can serve as a
pathway to building credit. However, credit scores play an important
role in assessing a borrower's ability to repay a loan and managing
overall risk within the housing market.
At the same time, HUD remains committed to expanding homeownership
opportunities and continues to explore ways to responsibly assist
first-time homebuyers, including offering programs with more flexible
credit requirements. HUD values input on this
[[Page 99715]]
issue and will take it into account as we seek to balance financial
accessibility with sustainable homeownership outcomes.
V. Findings and Certifications
Regulatory Review--Executive Orders 12866, 13563, and 14094
Pursuant to Executive Order 12866 (Regulatory Planning and Review),
a determination must be made whether a regulatory action is
significant, and therefore, subject to review by the Office of
Management and Budget (OMB) in accordance with the requirements of the
order. Executive Order 13563 (Improving Regulations and Regulatory
Review) emphasizes the importance of quantifying both costs and
benefits, reducing costs, harmonizing rules, and promoting flexibility.
The order also directs executive agencies to analyze regulations that
are ``outmoded, ineffective, insufficient, or excessively burdensome,
and to modify, streamline, expand or repeal them in accordance with
that was been learned.'' Executive Order 13563 further directs that,
where relevant, feasible, and consistent with regulatory objectives,
and to the extent permitted by law, agencies are to identify and
consider regulatory approaches that reduce burdens and maintain
flexibility and freedom of choice for the public. Executive Order 14094
entitled ``Modernizing Regulatory Review'' (hereinafter referred to as
the ``Modernizing E.O.'') amends section 3(f) of Executive Order 12866
(Regulatory Planning and Review), among other things.
As previously discussed, this rule would provide flexibility for
the management of defaulted loans, more efficiently accept assignment,
and dispose of assigned mortgages through loan sales and reduce the
overall financial exposure of the MMIF. This final rule was determined
not to be a ``significant regulatory action'' as defined in section
3(f) of Executive Order 12866 as amended by Executive Order 14094.
Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.)
generally requires an agency to conduct a regulatory flexibility
analysis of any rule subject to notice and comment rulemaking
requirements, unless the agency certifies that the rule will not have a
significant economic impact on a substantial number of small entities.
Small entities include small businesses, small not-for-profit
organizations, and small governmental jurisdictions.
This rule makes the Single Family Sales Program permanent and makes
changes to HUD's regulations to implement parts 203, 206, respectively
referring to Single Family Forward loans and HECM, and part 291 to
efficiently manage HUD's defaulted single family assets and minimize
losses to the MMIF. While small entities such as mortgage service
providers may be affected by this Program, these entities would not
incur a significant economic impact because the Program would provide
servicers with the chance to assign burdensome and problematic loans to
HUD. Therefore, the undersigned certifies this proposed rule will not
have a significant economic impact on a substantial number of small
entities.
Environmental Impact
This rule is categorically excluded from environmental review under
the National Environmental Policy Act of 1969 under 24 CFR 50.19(c)(1)
because it does not direct, provide assistance or loan and mortgage
insurance for, or otherwise govern or regulate, real property
acquisition, disposition, rehabilitation, alteration, demolition, or
new construction, or establish, revise or provide for standards for
construction or construction materials, manufactured housing, or
occupancy.
Executive Order 13132, Federalism
Executive Order 13132 (Federalism) prohibits an agency from
publishing any rule that has federalism implications if the rule either
(i) imposes substantial direct compliance costs on State and local
governments and is not required by statute, or (ii) preempts State law,
unless the agency meets the consultation and funding requirements of
section 6 of the Executive order. This rule does not have federalism
implications and does not impose substantial direct compliance costs on
State and local governments or preempt State law within the meaning of
the Executive order.
Paperwork Reduction Act
The information collection requirements contained in this final
rule have not been revised from those provided in the proposed rule and
have been submitted to the Office of Management and Budget (OMB) under
the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) for review
and approval.
Unfunded Mandates Reform Act
Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C.
1531-1538) (UMRA) establishes requirements for Federal agencies to
assess the effects of their regulatory actions on State, local, and
Tribal governments, and on the private sector. This rule does not
impose any Federal mandates on any State, local, or Tribal government,
or on the private sector, within the meaning of the UMRA.
List of Subjects
24 CFR Part 203
Hawaiian Natives, Home improvement, Indians--lands, Loan programs--
housing and community development, Mortgage insurance, Reporting and
recordkeeping requirements, and Solar energy.
24 CFR Part 206
Aged, Condominiums, Loan programs--housing and community
development, Mortgage insurance, and Reporting and recordkeeping
requirements.
24 CFR Part 291
Community facilities, Conflicts of interest, Homeless, Lead
poisoning, Low- and moderate-income housing, Mortgages, Reporting and
recordkeeping requirements, and Surplus government property.
Accordingly, for the reasons described in the preamble, HUD amends
24 CFR parts 203, 206, and 291 as follows:
PART 203--SINGLE FAMILY MORTGAGE INSURANCE
0
1. The authority citation for part 203 continues to read as follows:
Authority: 12 U.S.C. 1707, 1709, 1710, 1715b, 1715z-16, 1715u,
and 1715z-21; 15 U.S.C. 1639c; 42 U.S.C. 3535(d).
0
2. Add Sec. 203.413 to read as follows:
Sec. 203.413 Amount of payment--Single Family Sale assignments.
(a) Time of payment. Upon an assignment of a mortgage insured under
this part that is acceptable to the Commissioner, made pursuant to a
Single Family Sale and in accordance with Sec. 291.609 or Sec.
291.619 of this chapter, the Commissioner shall pay to the mortgagee
the unpaid principal balance of the loan at the time of assignment and
an amount calculated in accordance with the Participating Servicer
Agreement (PSA), as defined in Sec. 291.601 of this chapter.
(b) Acceptability criteria. For assignment, the mortgagee must
determine and certify the mortgage satisfies the Commissioner's
acceptability criteria for the Single Family Sale. Acceptability
criteria includes satisfaction of the Single Family Sale loss
mitigation eligibility requirements and exclusion of low-
[[Page 99716]]
value mortgages secured by vacant properties.
(c) Reduction in claim. The mortgagee's claim for insurance will be
reduced for failure to take the required actions within the specified
schedule of dates for the Single Family Sale, as specified in the PSA.
(d) Curtailment of Debenture Interest. HUD will curtail Debenture
Interest at the thirtieth (30th) day following the earliest anticipated
claim submission date, as identified on the schedule of dates in the
PSA, if:
(1) The mortgagee's claim for insurance is not submitted to HUD; or
(2) The claim for insurance is in a suspended status.
(e) Debenture Interest. For purposes of this section, Debenture
Interest means interest at the debenture rate as computed by HUD in
accordance with its rules and requirements for such calculations, on
the unpaid principal balance as of the claim payment date, plus the
approved reimbursable expenses identified in the PSA, minus any amount
of such interest or expenses that would have been curtailed or for
which the Participating Servicer would have been denied reimbursement
pursuant to HUD's requirements for servicing defaulted notes and
processing claims, including Sec. 203.402(k)(1)(i) and (ii), had the
Participating Servicer conveyed title to the property securing the
Single Family Loan to the Secretary rather than assigned the Single
Family Loan in connection with an insurance claim.
(f) Rejection of claim. HUD may reject the mortgagee's claim for
insurance and exclude the related mortgage from settlement if within
the thirty (30)-day period prior to the claim's submission cut-off
date, as identified on the schedule of dates in the PSA:
(1) Any insurance claim is not submitted; or
(2) Any suspended insurance claim is not resolved.
PART 206--HOME EQUITY CONVERSION MORTGAGE INSURANCE
0
3. The authority citation for part 206 continues to read as follows:
Authority: 12 U.S.C. 1715b, 1715z-20; 42 U.S.C. 3535(d).
0
4. Add Sec. 206.130, under the undesignated center heading ``Claim
Procedure,'' to read as follows:
Sec. 206.130 Amount of payment--HECM Single Family Sale assignments.
(a) Time of payment. Upon an assignment of a mortgage insured under
this part that is acceptable to the Commissioner, made pursuant to a
HECM Single Family Sale and in accordance with Sec. 291.609 or Sec.
291.619 of this chapter, the Commissioner shall pay to the mortgagee
the unpaid principal balance of the loan at the time of assignment and
an amount calculated in accordance with the Participating Servicer
Agreement (PSA), as defined in Sec. 291.601 of this chapter.
(b) Acceptability criteria. For assignment, the mortgagee must
determine and certify the mortgage satisfies the Commissioner's
acceptability criteria for the Single Family Sale.
(c) Reduction in claim. The mortgagee's claim for insurance will be
reduced for failure to take the required actions within the specified
schedule of dates for the Single Family Sale, as specified in the PSA.
(d) Curtailment of debenture interest. HUD will curtail debenture
interest at the thirtieth (30th) day following the earliest anticipated
claim submission date, as identified on the schedule of dates in the
PSA, if:
(1) The mortgagee's claim for insurance is not submitted to HUD; or
(2) The claim for insurance is in a suspended status.
(e) Debenture Interest. For purposes of this section, Debenture
Interest means interest at the debenture rate as computed by HUD in
accordance with its rules and requirements for such calculations, on
the unpaid principal balance as of the claim payment date, plus the
approved reimbursable expenses identified in the PSA, minus any amount
of such interest or expenses that would have been curtailed or for
which the Participating Servicer would have been denied reimbursement
pursuant to HUD's requirements for servicing due and payable notes and
processing claims, including Sec. 206.129(d)(3)(x), had the
Participating Servicer foreclosed or the borrower sold the property in
connection with an insurance claim.
(f) Rejection of the claim. HUD may reject the mortgagee's claim
for insurance and exclude the related mortgage from settlement if,
within the thirty (30)-day period prior to the claim's submission cut-
off date, as identified on the schedule of dates in the PSA:
(1) An insurance claim is not submitted; or
(2) Any suspended insurance claim is not yet resolved.
PART 291--DISPOSITION OF HUD-ACQUIRED AND -OWNED SINGLE FAMILY
PROPERTY
0
5. The authority citation for part 291 continues to read as follows:
Authority: 12 U.S.C. 1701 et seq.; 42 U.S.C. 1441, 1441a, 1551a,
and 3535(d).
SUBPART D--[Removed and Reserved]
0
6. Remove and reserve subpart D, consisting of Sec. Sec. 291.301
through 291.307.
0
7. Add subpart G, consisting of Sec. Sec. 291.601 through 291.621, to
read as follows:
Subpart G--Sale of HUD-Held Single Family Mortgage Loans
Sec.
291.601 Definitions.
291.603 Purpose, scope, and applicability.
291.605 Participating Servicers.
291.607 Qualified participants.
291.609 Bidding process.
291.611 Post-bid process and HUD's execution of the CAA.
291.613 Settlement requirements.
291.615 Purchaser servicing requirements.
291.617 General policy--Direct Sales of Single Family Loans.
291.619 Direct Sale of Single Family Loans process.
291.621 Disqualifications.
Sec. 291.601 Definitions.
For purposes of this subpart, the following definitions apply:
Aggregate Loan Database (ALD) means the electronic data file
containing Single Family Loan information available for Qualified
Participants to review before a Single Family Sale.
Bidder Information Package (BIP) means the documents prepared for
participants in a Single Family Sale, which may include, but are not
limited to, the following: an executive summary of the Programs; the
Single Family Sale post-sale servicing and reporting requirements
published by HUD; due diligence information and reports; Single Family
Loan information; the Conveyance, Assignment and Assumption Agreement
(CAA); bidding and settlement information; and necessary information
and requirements as determined by the Secretary.
Bidder Qualification Statement means HUD Forms 9611 and 9612, or
any form approved for similar purpose in the future as prescribed by
the Secretary. (OMB number 2502-0576)
Claim Date means, with respect to each Single Family Loan, the date
on which the Single Family Sale assignment claim is paid by HUD to the
P-Servicer.
[[Page 99717]]
Competitive Sale of Single Family Loans means a sale of an
individual or group of Single Family Loans to Qualified Participants
through a bid process prescribed by the Secretary in competition with
other Qualified Participants in accordance with Sec. 291.609.
Confidentiality Agreement means a nondisclosure agreement under
which the individual or entity seeking to participate in Single Family
Sales agrees that Single Family Loan data and documentation shared with
the individual or entity as due diligence will remain confidential in
accordance with the terms of the agreement as determined by the
Secretary.
Conveyance, Assignment and Assumption Agreement (CAA) means the
contract between HUD and a Purchaser, along with all applicable
exhibits and riders, that governs the terms of the Single Family Sale
as prescribed by the Secretary. The CAA will include any sale-specific
post-sale servicing and outcome requirements, representations,
repurchase requirements, schedule of dates, and reporting requirements
published by the Secretary for the Single Family Sale through a Sale
Notice.
Cut-off date or claim submission cut-off date means the last date
specified by the Secretary on which the P-Servicer is permitted to
submit to HUD a Single Family Sale insurance claim for payment under 24
CFR 203.413 and 206.130.
Desk Guide means the technical manual included in the PSA detailing
the P-Servicer's steps for submitting Single Family Loans related to a
Single Family Sale, including but not limited to the process for
identifying eligible Single Family Loans, uploading due diligence
files, and submitting insurance claims.
Direct Sale of Single Family Loans means a sale of an individual or
group of Single Family Loans to a Qualified Participant through the
process described in Sec. 291.619.
Home Equity Conversion Mortgage (HECM) means reverse mortgages
insured in accordance with 24 CFR part 206 under the FHA Home Equity
Conversion Mortgage insurance program.
Interim Servicing Agreement (ISA) means the agreement between a
Purchaser and P-Servicer that governs the servicing and administration
of the purchased loans, including but not limited to transfer of
mortgage information and loss mitigation evaluations, during the
Interim Servicing Period in accordance with the terms prescribed by the
Secretary.
Interim Servicing Period means the period commencing with Claim
Date and ending with the Servicing Transfer Date.
Low-value means, in reference to a Mortgage, the value minimum
stated in the Participating Servicer Agreement (PSA).
Nonprofit organization means an entity that is tax-exempt under
section 501(c)(3) of the Internal Revenue Code of 1954 (26 U.S.C.A.
501(c)(3)) and meets the qualification requirements prescribed by the
Secretary for participation in a Single Family Sale.
Participating Servicer (P-Servicer) means a mortgagee that complies
with Sec. 291.605 and submits Single Family Loans for a Single Family
Sale.
Participating Servicer Agreement (PSA) means the agreement between
HUD and a P-Servicer that governs the P-Servicers submission of Single
Family Loans to be sold in a Single Family Sale on terms as prescribed
by the Secretary.
Purchaser means a Qualified Participant to which HUD has awarded
one or more Single Family Loans through a Single Family Sale, as of the
date of notification of the award.
Qualified Participant means an individual or entity that satisfies
the requirements in Sec. 291.607 for participation in Single Family
Sales.
Sale Notice means an announcement published by HUD for an upcoming
Single Family Sale and includes any stated mission objectives and
additional sale, participant qualification, and loan eligibility
requirements; representations; post-sale servicing, outcomes, and
reporting requirements; and repurchase requirements for inclusion in
the Qualification Statement, PSA, ISA, and CAA as applicable.
Servicing Transfer Date means, with respect to any Single Family
Loan, the date on which the actual servicing duties for such Single
Family Loan has been or will be transferred from the P-Servicer to the
Purchaser's servicer. The latest Servicing Transfer Date will be set
forth in a schedule of dates prescribed by the Secretary and included
in the PSA, ISA, and CAA.
Single Family Loan means any HUD-selected eligible forward mortgage
loan insured under Section 203 of the National Housing Act (12 U.S.C.
1709) that has or will be assigned to HUD and any HUD-selected eligible
HECM insured under section 255 of the National Housing Act (12 U.S.C.
1715z-20) that has or will be assigned to HUD, or any other eligible
single family mortgage loans owned by the Secretary that will be sold
in a Single Family Sale.
Single Family Sale means a Competitive Sale of Single Family Loans
or Direct Sale of Single Family Loans conducted by HUD in accordance
with this subpart.
Vacant means a mortgaged property is determined to be vacant or
abandoned in accordance with the requirements of 24 CFR part 203 and
FHA policy.
Sec. 291.603 Purpose, scope, and applicability.
The sale of Single Family Loans is at the discretion of the
Secretary. All Single Family Loans will be sold without recourse to HUD
and without FHA insurance. HUD may sell individual Single Family Loans
or groups of Single Family Loans to Qualified Participants as a
Competitive Sale of Single Family Loans, Sec. 291.609, or as a Direct
Sale of Single Family Loans, Sec. 291.619. Nothing in this section
shall be construed to prevent HUD from grouping Single Family Loans
with other types of HUD assets for sale, including grouping any
associated HUD-held mortgages subordinate to the respective assets. The
procedures set out in this subpart, including any cross-referenced
regulations, documentation, and published notices detailed in this
subpart, govern the Single Family Sales.
Sec. 291.605 Participating Servicers.
(a) Participation. To participate in a Single Family Sale, a
Participating Servicer must:
(1) Be an FHA-approved Mortgagee contributing eligible Single
Family Loans and assigning loans to HUD; and
(2) Execute a PSA and agree to execute an ISA, as needed.
(b) Sale. For each Single Family Sale, the Participating Servicer
must:
(1) Identify mortgages that meet the eligibility criteria in
accordance with terms of the PSA;
(2) Conduct all sale activities in accordance with the PSA and ISA;
(3) Comply with any Single Family Sale and Loan Sale Notification
requirements as prescribed by the Secretary through notice; and
(4) Comply with the terms of the Sale Notice.
(5) Ensure the Loan Sale Notification is provided to each borrower
and any other parties as required by the Secretary and the Loan Sale
Notification complies with all applicable law. Loan Sale notification
requirements will be announced to the Participating Servicer through
notice.
(c) Claim payment requirements. The Participating Servicer must
comply with the claim payment process and requirements for Single
Family Sales in accordance with the PSA and processes outlined in
Sec. Sec. 203.413 and 206.130, as applicable.
[[Page 99718]]
(d) Interim servicing. During the Interim Servicing Period, the
Participating Servicer must service the purchased Single Family Loans
on behalf of the Purchaser in accordance with the ISA.
(e) Transfer documents and servicing. The Participating Servicer
must conduct the servicing transfer of the Single Family Loans in
accordance with the requirements of the PSA and ISA and must service
the purchased Single Family Loans in accordance with all applicable
state and Federal law requirements, including applicable Consumer
Finance Protection Bureau (CFPB) requirements.
Sec. 291.607 Qualified participants.
(a) Confidentiality Agreement and Bidder Qualification Statement.
Individuals or entities must become a Qualified Participant before they
may bid or purchase Single Family Loans in a Single Family Sale. An
individual or entity seeking to participate in a Single Family Sale
must sign a Confidentiality Agreement and complete a Bidder
Qualification Statement. The Secretary will specify which Bidder
Qualification Statement form(s) are applicable to a particular Single
Family Sale and any additional sale specific qualification criteria
through notice. HUD will only provide access to sensitive Single Family
Sale materials to Qualified Participants.
(b) Process for determining Qualified Participant. HUD will qualify
any individual or entity seeking to participate in a Single Family Sale
if they have met the qualification requirements and executed the
applicable Bidder Qualification Statement for the Single Family Sale.
Sec. 291.609 Bidding process.
(a) Sale notice. The Secretary will prescribe requirements for a
Single Family Sale through the Sale Notice. For each Single Family
Sale, HUD will publish the PSA Addendum, Desk Guide, ISA Addendum, CAA
Addendum, and Sale Notices on HUD's public website.
(b) Submission of bids. All bids by a Qualified Participant must be
submitted to HUD in accordance with the Sale Notice and the
instructions in the BIP. By submitting a bid, the Qualified Participant
is considered to have made an offer to purchase Single Family Loans as
presented in the BIP. Submission of a bid constitutes acceptance of the
terms and conditions set forth in the BIP. Along with the bid, the
Qualified Participant must submit an executed copy of the CAA and ISA,
as applicable.
(c) Bids by brokers or agents. Any bid submitted by a broker or
agent for a Qualified Participant must be made in the name of the
Qualified Participant and signed by the broker or agent as the
attorney-in-fact for the Qualified Participant. All such bid documents
must bind the Qualified Participant. Each bid must also include a power
of attorney satisfactory to HUD as to form and content.
(d) Earnest money deposits. The Qualified Participant must submit
to HUD, along with its bid, an earnest money deposit, as required in
the CAA or Sale Notice. The earnest money deposit is nonrefundable for
a Qualified Participant whose bid is selected for award and will be
credited toward the purchase price. If a Qualified Participant's bid is
not selected for any award, their earnest money will be returned.
(e) Timing for withdrawal of bids. A Qualified Participant may
withdraw a submitted bid in accordance with the instructions in the BIP
for a Single Family Sale. However, a previously submitted bid may not
be withdrawn once the bidding has closed.
(f) Termination of Single Family Sale. HUD reserves the right to
terminate a Single Family Sale in whole or in part at any time before
the bid date.
(g) Withdrawal of Single Family Loans. HUD reserves the right to
withdraw Single Family Loans from a Single Family Sale prior to the
settlement date. Any earnest money deposits made by a Purchaser
relating to withdrawn Single Family Loans will be retained by the
Secretary and credited toward the total purchase price of the remaining
Single Family Loans in the pool, in accordance with the CAA and BIP.
After the bid date, HUD can withdraw Single Family Loans or not deliver
all the Single Family Loans for settlement for any reason, including
those set forth in the BIP and CAA.
(h) Rejection of bids. At HUD's discretion, any bid may be rejected
under the following circumstances:
(1) The bid does not conform with the instructions in the BIP;
(2) HUD determines that an award based on the bid would not be in
the best interests of the Secretary because the award would not further
HUD's fiduciary responsibility to the mutual mortgage insurance fund
(MMIF) or any stated mission objectives in the Sale Notice; or
(3) HUD can also issue a conditional rejection that would provide
the opportunity for the bid to be amended and resubmitted for
acceptance upon fulfillment of HUD's requests.
Sec. 291.611 Post-bid process and HUD's execution of the CAA.
After HUD evaluates conforming bids, HUD may request an adjustment
to a bid in accordance with the BIP. After any bid adjustments, HUD
will select bids for award and provide notice of award in a manner set
forth in the BIP. After selection of a Purchaser, HUD will execute the
CAA.
Sec. 291.613 Settlement requirements.
(a) Settlement payment. On the settlement date of a Single Family
Sale, the Purchaser must pay to HUD the settlement payment, consisting
of the balance of the amount due on the bid price, as adjusted in
accordance with the CAA.
(b) Settlement statement. When the Purchaser delivers to HUD the
documents required at settlement and the settlement payment in
paragraph (a) of this section, HUD will execute and deliver to the
Purchaser a settlement statement and updated Single Family Loan
schedule for the CAA to document the Single Family Loans sold to the
Purchaser in the Single Family Sale.
(c) Endorsement and assignment. HUD may grant a temporary Limited
Power of Attorney to the Purchaser to effect endorsement and assignment
of the Single Family Loans to the Purchaser.
(d) Purchaser's special purpose entity. HUD may allow a Purchaser
to endorse and assign Single Family Loans from HUD to Purchaser's
special purpose entity acquisition vehicle on terms permitted in the
CAA.
Sec. 291.615 Purchaser servicing requirements.
(a) Purchaser post-sale servicing. The Purchaser and its servicer,
and any subsequent transferee of or servicer for the Single Family
Loan, must comply with the terms of the CAA and the Sale Notice post-
sale loss mitigation and outcome requirements. Post-sale requirements
will include a requirement that any Single Family Loan that converts to
real estate owned property via foreclosure or deed-in-lieu of
foreclosure be offered for sale through a first look program, providing
an exclusive listing period for owner occupant, nonprofit organization,
governmental entities, and other prospective buyers as permitted by
HUD. Post-sale requirements will also include requirements that
Purchasers offer borrowers loss mitigation options that are as or more
generous than the FHA loss mitigation options, a prohibition on
reselling real estate owned property through a contract for deed or
similar financing mechanism, a
[[Page 99719]]
requirement that the Purchaser obtain prior approval from HUD before
entering into a lease-purchase agreement with a prospective purchaser,
and a prohibition on releasing liens on particular categories of
properties, including vacant properties. Purchasers must take all
lawful steps to service the Single Family Loans and collect amounts due
in accordance with requirements as set forth by the CAA and all state
and Federal law requirements, including applicable CFPB requirements.
(b) Purchaser reporting requirements. Purchasers must report on the
post-sale servicing actions and outcomes obtained for each Single
Family Loan purchased as prescribed by the CAA. HUD will publish
reports for the public on loan and property outcomes and will include a
breakdown of outcomes in different geographies. HUD will prescribe the
reporting period as a specified period after settlement in the CAA.
(c) Remedy for performance failures. HUD may pursue appropriate
remedies, including, but not limited to, the ability to deny future
participation in loan sales, for a Purchaser's failure to comply with
Single Family Sale requirements, including CAA obligations.
Sec. 291.617 General policy--Direct Sale of Single Family Loans.
The Secretary may pursue a Direct Sale of Single Family Loans to
individuals or entity type the Secretary determines may be eligible to
qualify as set forth in the Sale Notice. The Direct Sale of Single
Family Loans will be subject to the requirements of this subpart,
excluding Sec. Sec. 291.609 and 291.611. The Secretary will publish in
the Sale Notice, sale specific Single Family Loan eligibility criteria.
Sec. 291.619 Direct Sale of Single Family Loans process.
(a) Sale Notice. The Secretary will prescribe requirements for a
Direct Sale of Single Family Loans through a Sale Notice.
(b) Sale feasibility. In all stages of the Direct Sale of Single
Family Loans process, HUD may determine whether continuation with the
Direct Sale of Single Family Loans is feasible and in HUD's interest,
consistent with HUD's fiduciary responsibility to the MMIF and any
stated mission objectives.
(c) Direct Sale of Single Family Loans process. An individual or
entity interested in purchasing Single Family Loans through a Direct
Sale of Single Family Loans must:
(1) Meet the Secretary's prescribed requirements for the Direct
Sale of Single Family Loans in the Sale Notice;
(2) Submit a letter of interest to the Secretary that includes, at
a minimum:
(i) The description of the individual or entity and a statement
about how it would be able to satisfy the participant eligibility
requirements and mission objectives, if any;
(ii) The geographic area of interest where the party wishes to
purchase the loans;
(iii) The individual or entity's goals and how this purchase would
assist in achieving these goals through post-sale outcomes;
(iv) The approximate timeframe for the purchase;
(v) The approximate number of loans or, alternatively, the
approximate gross sale amount desired; and
(vi) The organizational documents for an entity including, but not
limited to organizational documents, any required authorizing
resolutions, and disclosure of all nonprofit organization or private
entity partnership interests in the Direct Sale of Single Family Loans
transaction.
(d) HUD determination. Upon receipt of a letter in paragraph (c)(2)
of this section, HUD will respond in writing to the submitter to
confirm receipt of the letter and, if necessary, request additional
information needed for a final determination.
(e) Secretary's determination to proceed. (1) If the Secretary
makes a final determination to proceed, the Secretary will request from
the individual or entity, a business plan proposal from the individual
or entity that details its ability to meet any stated mission
objectives in the Sale Notice along with its goals and how these goals
will be achieved with post-sale outcomes. Business plans must be
received by HUD within 30 business days of request.
(2) Upon receipt and review of business plan proposal, HUD will:
(i) Reject the business plan proposal;
(ii) Issue a conditional rejection that would provide the
opportunity for a business plan proposal to be amended and resubmitted
for approval upon fulfillment of HUD's request; or
(iii) Approve the business plan proposal.
(3) Upon approval of such business plan proposal, HUD and the
individual or entity will begin the Direct Sale of Single Family Loans
process that includes:
(i) An executed Confidentiality Agreement;
(ii) An executed Bidder Qualification Statement;
(iii) A P-Servicer executed PSA; and
(iv) Review of Single Family Loans from P-Servicer(s) or HUD.
(4) HUD and the individual or entity reviews the ALD and will agree
on the Single Family Loan Sale List for the Direct Sale of Single
Family Loans.
(f) Direct Sale of Single Family Loans. After satisfaction of the
requirements in paragraph (d) of this section, HUD will conduct its
valuation review, and issue a final price determination and a CAA,
containing an estimated settlement date, to the individual or entity.
If accepted, a final Settlement date is scheduled, and the Single
Family Loan List is appended to the CAA.
(g) Settlement. HUD and the Purchaser will execute the CAA for
settlement. The remaining settlement and transfer requirements will
follow those in Sec. 291.613.
Sec. 291.621 Disqualifications.
(a) Fraudulent information. If HUD determines there is any
information indicating any certification or required document provided
by any party participating in a Single Family Sale, including but not
limited to P-Servicer, Purchaser, Qualified Participant, or a
Purchaser's servicer, is false, misleading, or constitutes fraud or
misrepresentation, HUD will not approve that party's participation in
the Single Family Sale and will revoke any prior approval. The
submission of false information or misrepresentation by an approved
lender or mortgagee may result in the referral of the mortgagee to the
Mortgagee Review Board.
(b) Participant ineligibility. An individual or entity is
ineligible to participate in a Single Family Sale if, at the time of
the Single Family Sale, that individual or entity is suspended,
debarred, under a limited denial of participation (LDP), or otherwise
restricted under 2 CFR part 180 or 2424, 24 CFR part 25, 48 CFR part 9,
subpart 9.4, or under similar procedures of any other Federal agency.
(c) Future participation. Purchasers that made misrepresentations
in the qualification process or failed to meet their contractual
obligations under CAAs, including failing to meet post-sale
requirements, for previous Single Family Sales in which they
participated may be disqualified from participation in one or more
future Single Family Sales or for a set period of time at the
discretion of the Secretary.
Julia R. Gordon,
Assistant Secretary for the Office of Housing--Federal Housing
Commissioner.
[FR Doc. 2024-28706 Filed 12-10-24; 8:45 am]
BILLING CODE 4210-67-P
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</html>Indexed from Federal Register on December 11, 2024.
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