AUTHORITY: Sec. 108(a), 12 U.S.C. 2707, 89 Stat. 252, Pub. L. 94-50.

SOURCE: 40 FR 59867, Dec. 30, 1975, unless otherwise noted.

Subpart A-General

§ 2700.1 Purpose.

The purpose of this chapter is to describe and establish a standby program, authorized by the Emergency Homeowners' Relief Act, to prevent widespread mortgage foreclosures and distress sales of homes resulting from the temporary loss of employment and income. If it becomes necessary to implement the program, HUD would provide emergency relief under the standby program by coinsuring loans made by private lenders or by making direct loans to homeowners to assist them in making their mortgage payments. In the event that this emergency program is needed, coinsurance under Subpart D is intended to be the primary method of assistance.

§ 2700.5 Definitions.

For purposes of this chapter:

(a) "Act" means the Emergency Homeowners' Relief Act.

(b) "Delinquent mortgage" means a mortgage which is at least 3 months delinquent at the time of the application for assistance under this chapter and with respect to which such assistance is to be used or has been used to make payments.

(c) "Department" and "HUD" means the Department of Housing and Urban Development.

(d) "Direct loan" means an emergency loan made pursuant to Subpart E with funds of the United States of America, evidenced by a note payable to the United States of America.

(e) "Emergency loan" means an emergency mortgage relief loan made pursuant to this chapter.

(f) "Family" means one or more persons related by blood, marriage, or operation of law, who occupy the same dwelling unit.

(g) "Finance charge" means the cost of credit as determined in 12 CFR 226.4, a section in "Regulation Z" of the Federal Reserve System's regulations on Truth in Lending.

(h) "Financially unable to make full mortgage payments" means that a homeowner is unable to make his monthly mortgage payment with 25 percent of his gross monthly income and that his assets (excluding the equity in his principal residence, household furniture, equipment used in his trade, clothing and automobiles) have a current value not in excess of $5,000.

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(i) "Gross monthly income" means the total monthly income, taxes and other deductions, received by all members of the homeowner's family. There shall be included in this total income all wages, social security payments, retirement benefits, military and veteran's disability payments, unemployment benefits, welfare benefits, food stamp benefits, and interest and dividend payments.

(j) "Homeowner” means a mortgagor or mortgagors who are in need of mortgage assistance pursuant to this chapter.

(k) "Investor" means a lending institution which owns a delinquent mortgage. The investor may also be the lender or servicer.

(1) “Involuntary unemployment or underemployment due to adverse economic conditions" means the status of a homeowner who is able to work fulltime in work which is suitable for the homeowner on the basis of experience and training, who is available for and actively secking such suitable work, and who is either totally unemployed or working part-time in any job, suitable or unsuitable, or working fulltime in work which is unsuitable, but who has suffered a substantial reduction in income. (Registration with the local office of the state employment service will be considered one form of evidence of active search for work.)

(m) "Lender" means a lending institution which makes an emergency loan pursuant to Subpart D, or its assignee or successor in interest.

(n) "Mortgage" means any mortgage, deed of trust, executory land sales contract, conditional sales contract, or other form of security and the obligation secured thereby on a one- to four-family dwelling which is either real estate or a mobile home. It

includes a mortgage on a condominium unit and a security interest in stock in a housing cooperative.

(o) "Monthly mortgage payment" means the monthly amount of principal, interest, taxes, ground rents, hazard insurance and mortgage insurance premiums due to be paid under a homeowner's mortgage(s).

(p) "Secretary” means the Secretary of Housing and Urban Development.

(q) "Servicer" means a lending institution which services an emergency loan made by the Secretary pursuant to Subpart E.

(r) "Servicing institution” means the lending institution that services the delinquent mortgage. The servicing institution may also be the lender or servicer.

§ 2700.10 Determination of emergency.

(a) The Department has constructed a nationwide composite index of delinquencies of 60 days or more (including loans in the process of foreclosure) for mortgage loans on one-to four-family dwellings. It is a quarterly index which is based on a weighted average of delinquency rates published by: the Veterans Administration, the National Association of Mutual Savings Banks, the Mortgage Bankers Association of America, the American Life Insurance Association, and the U.S. League of Savings Associations. The rates are weighted according to the percentage of the long-term mortgage loans, held by the respective lender group represented by the data in each individual series at the end of each quarter.

(b) If the composite rate of delinquencies should reach 1.20 percent the Secretary will, after consultation with the Federal agencies that regulate institutions which make home mortgage loans, make a finding and determination as to whether the Act should be

implemented. If the determination of the Secretary is not to implement the Act, and if the composite rate of delinquencies should continue at a level of 1.20 percent or above, the Secretary shall continue to consult with such agencies and shall issue such a finding and determination at the end of each 30 days period during which the rate is at or above the 1.20 percent level.

(c) If the Emergency Homeowners' Relief Program is activated pursuant to paragraph (b) of this section, the Secretary shall publish a notice thereof in the Federal Register, inviting lending institutions qualified under § 2700.105 that are interested in participating in the program to submit a request for an insurance or direct loan authority allocation in the form specified in Appendix 1. Such request shall also serve as an application for a contract of insurance pursuant to Subpart D, or for a contract to act as the Secretary's servicer pursuant to Subpart E, depending on the type of allocation requested. The allocation request may be based upon anticipated applications with respect to mortgages held by other institutions. In such a case, the requesting institution should indicate the basis for its estimate of the number of such mortgages and the amount of assistance which will be sought pursuant thereto. An allocation of insurance authority shall constitute acceptance by the Secretary of the lending institution's application for a contract of insurance, the terms of which are embodied in this chapter. Similarly, an allocation of direct loan authority shall constitute acceptance by the Secretary of the institution's application for a contract to act as the Secretary's servicer, the terms of which are embodied in this chapter.

(d) If, after the program is activated, the Secretary determines that the emergency conditions which led to the activation of the program have abated, no new emergency loans may be made. Furthermore, if an allocation is not used as the applicant represented that it would be used, all or part of the unused allocation may be rescinded by the Secretary. Moreover, no emergency loans may be made after June 30, 1976.

Subpart B-Eligibility

§ 2700.101 Eligible properties.

In order to qualify for an emergency loan under Subpart D or Subpart E of this part, the mortgaged property must:

(a) Be the principal residence of the homeowner;

(b) Be subject to a delinquent mortgage, as defined in § 2700.5, but not subject to liens having a total outstanding principal balance at the time of filing of the application for an emergency loan under this chapter in excess of $55,000, or such other amount as approved by the Secretary; and

(c) Have flood insurance, pursuant to the National Flood Insurance Program, in an amount equal to at least the initial principal amount of the emergency loan, if the property is located in an area that has been identified by the Secretary at least one year before the origination of the emergency loan as an area having special flood hazards.

§ 2700.105 Eligible lending institutions.

(a) In order to participate in the Emergency Homeowners' Relief Program as a lender or servicer, a lending institution must be approved as a mortgagee pursuant to §§ 203.1 through 203.4 (except § 203.4(e)) of this title.

(b) Approval of a lending institution pursuant to paragraph (a) of this section may be withdrawn at any time by notice from the Secretary by reason of:

(1) The transfer of an insured loan to a nonapproved entity;

(2) The failure of a lending institution to submit the required annual audit report of its financial condition within 75 days of the close of its fiscal year; or

(3) The failure of a lending institution to comply with the regulations of this chapter.

Withdrawal of a lending institution's approval shall not affect the insurance on the loans accepted for insurance.

(c) All approved lending institutions are responsible for servicing of emer

gency loans in accordance with acceptable mortgage practices of prudent lending institutions.

§ 2700.110 Eligible homeowners.

In order to qualify for an emergency loan under Subpart D or Subpart E the homeowner must:

(a) Be at least 3 months in arrears in his payments on the delinquent mortgage;

(b) Have incurred a substantial reduction in income as a result of involur.tary unemployment or underemployment due to adverse economic conditions;

(c) Be financially unable to make full mortgage payments on his principal residence;

(d) Have a reasonable prospect of being able to make the adjustments necessary for a full resumption of mortgage payments on the delinquent mortgage the month after the last advance under the emergency loan and for the repayment of the emergency loan pursuant to the terms of the note taken in connection with that loan (a favorable employment and credit history prior to the beginning of his current unemployment or underemployment will be considered one form of evidence of the homeowner having such a prospect);

(e) Have not received another emergency loan pursuant to this chapter;

(f) Have been notified that the investor intends to foreclose; and

(g) Sign the application to be sent to the Secretary, as specified in Appendices 2 and 5 of this Part, which certifies that to the best of his knowledge the information in the application which the homeowner provided is accurate, that circumstances make it probable that there would be a foreclosure if emergency mortgage relief were not given, and that he is in need of such relief.

Subpart C-Terms of Emergency Loans

§ 2700.201 Eligible notes and mortgages. (a) The note, mortgage and lending agreement, if any, in connection with an emergency loan pursuant to Subpart D or E of this part shall be in a

form, approved by the Regional Administrator of the HUD Regional Office, for the State in which the mortgaged property is located.

(b) The note evidencing the emergency loan shall bear the signature of the homeowner as maker, shall be valid and enforceable against him, and shall be complete and regular on its face.

(c) Loans shall be secured by an additional mortgage upon the property which shall be recorded at the time of the closing of the loan.

(d) The note, or a separate lending agreement which may be incorporated by reference in the note, shall provide for the disbursement of the loan proceeds within 12 months. However, the note or lending agreement shall provide that if at any time before the last disbursement under the emergency loan is made, the homeowner's average gross monthly income during the preceding 3 months has increased or decreased by 20 percent or more in relation to the gross monthly income of the homeowner at the time the loan amount was established, the homeowner must notify the lender or servicer within 30 days. In such a case, the emergency loan shall be recast with respect to the amount of principal and interest on the basis of the homeowner's new income in such a way as to satisfy the requirements of § 2700.205(a).

(e) The maximum first disbursement of the loan proceeds may be in an amount equal to the loan amount as determined under § 2700.205 divided by 12, times the number of months, not exceeding 12, that the delinquent mortgage is in arrears.

(f) The note shall provide for payments to principal in equal installments falling due monthly beginning no later than 12 months following the date of the last disbursement of loan proceeds.

(g) The note shall provide for payments of interest earned during the disbursement period and interest earned thereafter beginning no later than 6 months following the date of the last disbursement under the loan.

(h) The note shall contain a provision for acceleration of maturity, at

the option of the holder, in the event of default on the emergency loan, as defined in § 2700.330(b) and § 2700.425(b).

(i) The maximum permissible maturity of the note is 10 years from the date of the note.

§ 2700.205 Loan amount.

(a) Subject to the limitation specified in paragraph (b) of this section, the principal amount of the loan, exclusive of finance charges, made under Subparts D and E of this part shall be equal to the lesser of:

(1) 12 times $250; or

(2) The sum of (i) 12 times the homeowner's monthly mortgage payment after 25 percent of his monthly income has been subtracted therefrom, and (ii) the fees allowed under §§ 2700.310(a) and 2700.415(a).

(b) The lender or servicer shall not approve an emergency loan when the outstanding balance, including delinquent interest, of the delinquent mortgage when added to the other liens against the mortgaged property, plus the maximum loan which may be advanced to the homeowner pursuant to this chapter, exceeds the value of the mortgaged property. (In determining the value of the property, the lender or servicer may rely upon previously obtained appraisals or other determinations of value of the property and need not obtain a current appraisal.)

§ 2700.210 Finance charges.

The maximum permissible finance charge, exclusive of fees and charges as provided in §§ 2700.310, and 2700.415, which may directly or indirectly be paid to or collected by the lender or the servicer, in connection with an emergency loan transaction shall not exceed simple interest on the outstanding principal balance at the annual interest rate for FHA-insured home mortgages as specified in § 203.20 of this title at the time of the closing of the loan. No points or discounts of any kind may be assessed or collected in connection with an emergency loan transaction.

Subpart D-Coinsurance

§ 2700.301 Loan applications.

(a) Lending institutions which have contracts of insurance pursuant to § 2700.10(c) and this subpart are authorized to accept, process, and approve applications for emergency loans under this subpart. That authority includes making determinations relating to eligibility of the emergency loan, the homeowner, and the property under the provisions of this chapter.

(b) A lender may make an emergency loan on the terms specified in Subpart C if it is satisfied that the application meets all of the relevant requirements of this chapter. The lender shall prepare a note, loan agreement, if any, and mortgage as required by Subpart C of this part which it shall record upon the execution of those documents.

(c) On the last working day of the month during which a loan is closed, the lender shall submit to the Secretary an application for an insured loan in the form specified in Appendix 2 of this part, signed by the lender and homeowner, which certifies that: the lender, homeowner, and property meet the eligibility requirements of Subpart B of this part, that circumstances (such as the volume of delinquent loans in the investor's portfolio likely to remain uncured) make it probable that there would be a foreclosure if emergency mortgage relief were not given; that the homeowner is in need of such relief; that the investor has indicated to the homeowner its intention to foreclose; and that the first disbursement of the principal amount of the emergency loan has been paid or credited to the homeowner's account with the servicing institution.

§ 2700.305 Conditions of insurance.

When the requirements of this subpart have been complied with, the lender's insurance coverage under its insurance contract will apply to a particular loan as of the date of closing, if the lender has not exceeded the insurance authority allocation which the Secretary has given the lender pursuant to § 2700.10(c). When the investor