Subpart B-Procedures

§ 27.5 Prerequisites to foreclosure.

(a) The Secretary may commence foreclosure under this part upon the breach of a convenant or condition in the mortgage agreement for which foreclosure is authorized under the mortgage. No such foreclosure may be commenced

unless any previously pending proceeding, judicial or nonjudicial, separately instituted by the Secretary to foreclose the mortgage in a manner other than under this part, has been withdrawn, dismissed or otherwise terminated. The Secretary shall not instutute any separate foreclosure proceedings, judicial or nonjudicial, during the pendency of a foreclosure pursuant to this part. Nothing in this part shall preclude the Secretary from enforcing any right, other than foreclosure, under applicable State law, including any right to obtain a monetary judgment. Nothing in this part shall preclude the Secretary from foreclosing under this part where the Secretary has obtained or is seeking any other remedy available pursuant to Federal or State law or under the mortgage agreement, including, but not limited to, the appointment of a receiver, mortgagee-in-possession status or relief under an assignment of rents.

(b) Before commencement of a foreclosure under this part, HUD will provide to the mortgagor an opportunity informally to present reasons why the mortgage should not be foreclosed. Such opportunity may be provided before or after the designation of the foreclosure commissioner but before service of the notice of default and foreclosure.

§ 27.10 Designation of a foreclosure com

missioner.

(a) When the Secretary determines that a multifamily mortgage should be foreclosed under this part, the General Counsel will select and designate a foreclosure commissioner to conduct the foreclosure and sale. In order to conduct the foreclosure, the foreclosure commissioner has a nonjudicial power of sale. The commissioner, if a natural person, shall be a resident of the State in which the security prop

erty is located. If a natural person is designated as commissioner, he or she shall be designated by name, except if the commissioner is designated in his or her capacity as an official or employee of the State or local government where the security property is located, the designation may be made by title or position instead of by name. If not a natural person, the commissioner must be duly authorized to transact business under the laws of the State in which the security property is located. The commissioner shall be a person who is determined by the General Counsel to be responsible, financially sound, and competent to conduct the foreclosure. The foreclosure commissioner may be an individual, group of individuals, association, partnership, corporation or organization. The method of selection and determination of the qualifications of the foreclosure commissioner shall be at the discretion of the General Counsel, and the execution of a designation pursuant to paragraph (b) of this section shall be conclusive evidence that the commissioner selected has been determined to be qualified by the General Counsel.

(b) After selection of a foreclosure commissioner, the General Counsel shall designate the commissioner in writing to conduct the foreclosure and sale of the particular multifamily mortgage. The written designation shall be duly acknowledged and shall state the name and business or residential address of the commissioner and any other information the General Counsel deems necessary. The designation shall be effective upon execution by the General Counsel or his designate. Upon receipt of the designation, the commissioner shall demonstrate acceptance by signing the designation and returning a signed copy to the General Counsel.

(c) The General Counsel may designate more than one commissioner to foreclose a multifamily mortgage.

(d) The General Counsel may at any time, with or without cause, designate a substitute commissioner to replace a previously designated commissioner. Designation of a substitute commissioner shall be in writing and shall contain the same information and be

made effective in the same manner as the designation of the original commissioner. Upon designation of a substitute commissioner, the substitute commissioner shall serve a copy of the written notice of designation upon the persons shown in § 27.15 (c)(1) through (3) either by mail, in accordance with § 27.15(c) except that the time limitations in that section will not apply, or by any other manner which in the substitute commissioner's discretion is conducive to giving timely notice of substitution.

(e) The Secretary shall be the guarantor of payment of any judgment against the foreclosure commissioner for damages based on the commissioner's failure properly to perform the commissioner's duties. As between the Secretary and the mortgagor, the Secretary shall bear the risk of any financial default by the foreclosure commissioner. In the event that the Secretary makes any payment pursuant to this paragraph, the Secretary shall be fully subrogated to the rights satisfied by such payment.

§ 27.15 Notice of default and foreclosure sale.

(a) Within 45 days after accepting his or her designation to act as commissioner, the commissioner shall commence the foreclosure by serving a Notice of Default and Foreclosure Sale.

(b) The Notice of Default and Foreclosure Sale shall contain the following information which, except for paragraphs (b) (2) and (9) of this section will be supplied to the commissioner by the Secretary.

(1) Name and address of the foreclosure commissioner.

(2) Date of the Notice.

(3) Names of the Secretary, the original mortgagor and the original mortgagee.

(4) A description of the location of the security property, or portion thereof to be sold, which is sufficient to identify it including, if appropriate, the street address.

(5) The date of the mortgage.

(6) The name of the office or offices in which the mortgage is recorded.

(7) The book and page in which the mortgage was recorded or, if appropri

ate, the mortgage's document or accession number.

(8) A description of the mortgagor's failure to make payment, including the due date of the earliest installment payment remaining wholly unpaid as of the date of the Notice or, if appropriate, of the other default or defaults upon which foreclosure is based; and a statement that the secured indebtness has been accelerated.

(9) The date, exact time and place of the foreclosure sale. The sale shall not be scheduled for a date less than 30 days after the due date of the earliest unpaid installment or the earliest occurrence of a nonmonetary default. The sale must be scheduled to begin at a time between the hours of 9:00 a.m. and 4:00 p.m. local time on a day other than Sunday or a public holiday as defined by 5 U.S.C. 6103(a) or State law. The sale must be scheduled for (i) a place where real estate foreclosure auctions are customarily held in the county or one of the counties in which the property to be sold is located, or (ii) a courthouse in such a county, or (iii) a site at or on the property to be sold. Sale of property located in more than one county may be held in any one of the counties in which any part of the security property is situated.

(10) A statement that the foreclosure is being conducted in accordance with the Act and this part.

(11) The costs, if any, to be paid by the purchaser upon transfer of title.

(12) The bidding and payment requirements for the foreclosure sale, including the required deposit, the method of deposit, and the time and method of payment for the balance of the purchase price. The Notice shall state that all deposits and the balance of the purchase price shall be paid by certified or cashier's check. The Notice shall state that no deposit will be required of the Secretary when the Secretary bids at the foreclosure sale.

(13) Any terms and conditions to which the purchaser at the foreclosure sale must agree under § 27.20. The Notice need not describe at length each and every pertinent term and condition, including any required use agreements and deed covenants, if it describes these terms and conditions in a general way and if it states that

the precise terms will be available from the commissioner upon request.

(c) The commissioner shall serve the Notice of Default and Foreclosure Sale upon the following persons in the following manner, and no additional notice shall be required to be served notwithstanding any notice requirements of State or local law:

(1) By certified or registered mail, return receipt requested, sent, at least 21 days before the original scheduled date of the foreclosure sale, to the owner of record of the security property as of 45 days before the original scheduled date of the foreclosure sale. The Notice shall be mailed to the owner at the address shown in the mortgage or to the address of the security property, or, in the commissioner's discretion, to any address believed to be that of the owner; and

(2) By certified or registered mail, return receipt requested, sent, at least 21 days before the original scheduled date of the foreclosure sale, to the original mortgagor and all subsequent mortgagors of record and all other persons who appear on the public record or in the mortgage agreement to be liable for all or part of the mortgage debt. The Notice need not be mailed to mortgagors who have been released from all obligations under the mortgage. The Notice shall be mailed to the mortgagor at the address shown in the mortgage, or to the address of the property, or, in the commissioner's discretion, to any address believed to be that of the mortgagor or mortgagors; and

(3) By certified or registered mail, return receipt requested, sent, at least 10 days before the original scheduled date of the foreclosure sale, to all persons having liens of record on the security property which were placed on record at least 45 days before the scheduled foreclosure sale. The Notice shall be mailed to lien holders at their address of record, or to any address the commissioner believes to be that of the lien holder; and

(4) By publication of a copy of the Notice of Default and Foreclosure Sale once a week during three successive calendar weeks in a newspaper of general circulation in the county or counties in which the security property is

located. To the extent practicable, the newspaper or newspapers chosen shall have circulation which is conducive to achieving notice of foreclosure by publication. In deciding which newspaper or newspapers have such circulation, the commissioner need not select the newspaper with the largest circulation. The date of the last publication shall be not less than four nor more than twelve days before the sale date. If there is no newspaper of general circulation in the county or counties in which the security property is located, service shall be made by posting the Notice of Default and Foreclosure Sale in at least three public places in each such county at least 21 days prior to the date of sale. The Notice of Default and Foreclosure Sale which is published pursuant to this paragraph may omit a description of the default, as otherwise required by paragraph (b)(8) of this section, if the commissioner, in his or her discretion, so determines; and

(5) By posting a copy of the Notice of Default and Foreclosure Sale in a prominent place at or near the security property for at least 15 consecutive days before the foreclosure sale. If the property to be sold consists of two or more noncontiguous parcels of land, a copy of the Notice shall be posted in a prominent place on each such parcel. If the property consists of two or more separate buildings, a copy of the Notice shall be posted in a prominent place on each such building. The Notice shall also be posted in the project office and in such other appropriate conspicuous places as the commissioner deems appropriate for providing notice to all tenants. Posting shall not be required if the commissioner in his or her discretion finds that the act of posting is likely to lead to a breach of the peace or may result in the increased risk of vandalism or damage to the property. Any such finding will be made in writing. Entry on the premises by the commissioner for the purpose of posting shall be privileged as against all other persons.

(d) Service made under paragraphs (c) (1), (2) and (3) of this section is deemed to have been made upon mailing, whether or not the Notice was received and whether or not a return re

ceipt is received or the letter containing the Notice is returned.

(e) When service of the Notice of Default and Foreclosure Sale is made pursuant to paragraph (c) (1), (2) or (3) of this section, the commissioner shall at the same time and in the same manner serve a copy of the instrument by which the General Counsel, under § 27.10(b), has designated him or her to act as commissioner.

(f) At least 7 days before the foreclosure sale, the commissioner will record both the instrument designating him or her to act as commissioner and the Notice of Default and Foreclosure Sale in the same office or offices in which the mortgage was recorded.

[49 FR 7074, Feb. 24, 1984, as amended at 50 FR 41345, Oct. 10, 1985]

§ 27.20 Conditions of foreclosure sale.

(a) If a majority of the residential units in a property subject to foreclosure sale pursuant to this part are occupied by residential tenants either on the date of the foreclosure sale or on the date on which the General Counsel designates the foreclosure commissioner, the Secretary shall require, as a condition and term of the sale, that the purchaser at a foreclosure sale (other than the Secretary) agree to continue to operate the property in accordance with such terms of the loan program under section 312 of the Housing Act of 1964, the program under which insurance under Title II of the National Housing Act was originally provided with respect to such property, or of any applicable regulatory or other agreement in effect with respect to such property immediately prior to the time of foreclosure sale as the Secretary shall find appropriate. If a majority of the residential units are not so occupied at either such time, the Secretary, in his or her discretion, may require, as a condition and term of the sale, that the purchaser (other than the Secretary) agree to continue to operate the property in accordance with such terms described above as the Secretary shall find appropriate.

(b) Terms which the Secretary may find appropriate to require pursuant to this section may include provisions relating to use and ownership of the

project property, tenant admission standards and procedures, rent schedules and increases, and project operation and maintenance. In determining terms which may be appropriate to require, the Secretary shall consider:

(1) The history of the project, including the purposes of the loan program or program of insurance and any other program of HUD assistance under which the project was developed or otherwise assisted and the probable causes of project failure resulting in its default;

(2) A financial analysis of the project, including an appraisal of the fair market value of the property for its highest and best use;

(3) A physical analysis of the project, including the condition of the structure and grounds, the need for rehabilitation or repairs, and the estimated costs of any such rehabilitation or repairs;

(4) The income levels of the occupants of the project;

(5) Characteristics, including rental levels, of comparable housing in the area, with particular reference to whether current conditions and discernible trends in the area fairly indicate a likelihood that, for the foreseeable future after foreclosure and sale, the project will continue to provide rental or cooperative housing and market rentals obtainable in the project will be affordable by low- or moderate-income persons;

(6) The availability of or need for rental housing for low- and moderateincome persons in the area, including actions being taken or projected to be taken to address such needs and the impact of such actions on the project;

(7) An assessment of the number of occupants who might be displaced as a result of the manner of disposition;

(8) The eligibility of the occupants of the property for rental assistance under any program administered by HUD and the availability of funding for such assistance if necessary in order that the units occupied by such occupants will remain available to and affordable by such persons, or if necessary in order to assure the financial feasibility of the project after foreclosure and sale subject to the terms to be required by the Secretary; and

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except as permitted by the hearing officer.

(d) Oral argument. The hearing officer may order oral argument on any motion.

(e) Motions for extensions. The hearing officer may waive the requirements of this section as to motions for extensions of time.

(f) Rulings on motions for dismissal. When a motion to dismiss the proceeding is granted, the hearing officer shall make and file a determination and order in accordance with the provisions of § 26.24.

§ 26.14 Form and filing requirements.

(a) Filing. An original and two copies of a request for a hearing shall be filed with the Docket Clerk, Department of Housing and Urban Development, 451 Seventh Street, SW., Washington, D.C. 20410, on official business days between 8:45 a.m. and 5:15 p.m. The Clerk shall assign the docket number and designate a hearing officer. An original and two copies of all other pleadings, submissions and documents should be filed directly with the appropriate hearing officer. A document is considered timely filed if postmarked on or before the date due or delivered to the appropriate person by close of business on the date due.

(b) Title. Documents shall show clearly the title of the action and the docket number.

(c) Form. Except as otherwise permitted, all documents shall be printed or typewritten in clear, legible form.

(a) Method of service. Pleadings, motions, and other documents required or permitted under these rules shall be served upon all parties. Whenever these rules require or permit service to be made upon a party represented by an attorney, the service shall be made upon the attorney unless service upon the party is ordered by the hearing officer. Service shall be made by delivering a copy to the person to be served or by mailing it to that person at the last known address. Delivery of a copy within this rule means: handing it to the person to be served; or leaving it at that person's office with a clerk or other person in charge; or, if there is

no one in charge, leaving it in a conspicuous place in the office; or, if the office is closed or the person to be served has no office, leaving it at tha person's residence of usual place c abode with some person of suitable age and discretion who resides there Service by mail is complete upon de posit in a mail box or upon posting.

(b) Proof of service. Proof of service shall not be required unless the fact of service is put in issue by appropriate motion or objection on the part of the person allegedly served. In these cases. service may be established by written receipt signed by or on behalf of the person to be served, or may be estab lished prima facie by affidavit or cer tificate of service of mailing.

§ 26.16 Time computation.

(a) Generally. Computation of any period of time prescribed or allowed by this part shall begin with the firs business day following the day on which the act, event, development or default initiating the period of time occurred. When the last day of the period computed is a Saturday Sunday, or national holiday, or other day on which the Department of Housing and Urban Development closed, the period shall run until the end of the next following business day Except when any prescribed or allowed period of time is seven days or less, each of the Saturdays, Sundays, and national holidays shall be includ ed in the computation of the prescribed or allowed period.

(b) Extensions of time periods. The hearing officer (or in the case of a review under § 26.25, the Secretary or designee) may upon motion enlarge the time within which any act required by these rules must be performed where necessary to avoid prejudicing the public interest or the rights of the parties.

Subpart E-Discovery

§ 26.17 Discovery.

The parties are encouraged to engage in voluntary discovery proce dures. Parties may seek an order compelling discovery only upon good cause shown. Discovery shall not be permit