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CHAPTER XV-MORTGAGE INSURANCE
LOAN PROGRAMS UNDER THE
EMERGENCY HOMEOWNERS' RELIEF ACT, DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Emergency homeowners' relief program ....
PART 2700 EMERGENCY HOMEOWNERS' RELIEF PROGRAM
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.
Sec. 2700.1 Purpose. 2700.5 Definitions. 2700.10 Determination of emergency.
Subpart B-Eligibility 2700.101 Eligible properties. 2700.105 Eligible lending institutions. 2700.110 Eligible homeowners.
Subpart C-Terms of Emergency Loans
2700.201 Eligible notes and mortgages. 2700.205 Loan amount. 2700.210 Finance charges.
8 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.
2700.301 Loan applications. 2700.305 Conditions of insurance. 2700.310 Fees. 2700.315 Insurance premiums. 2700.320 Servicing. 2700.325 Termination. 2700.330 Default. 2700.335 Claims. 2700.340 Payment of insurance benefits. 2700.345 Administrative reports and exami.
nations. 2700.350 Sale, assignment, and pledge of
Subpart E-Direct Loans
2700.401 Participation by lending institu
tions. 2700.405 Application for loans. 2700.410 Transmittal of funds. 2700.415 Fees. 2700.420 Servicing. 2700.425 Default. 2700.430 Collection. 2700.435 Payment to Secretary. 2700.440 Administrative reports and exami
$ 2700.5 Definitions.
For purposes of this chapter: (a) “Act"
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 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.
Subpart F-Appendices Appendix 1-Application for insurance or
direct loan authority allocation-appli
cation for contract. Appendix 2-Application for insured loan. Appendix 3-Premium form. Appendix 4–Insurance claim form. Appendix 5–Application for direct loan. Appendix 6-Monthly accounting of direct
loans. Appendix 7-Direct loan final accounting. Appendix 8-Income computation form.
(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.
(i) “Gross monthly income" means the total monthly income, before 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 insti. tution 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.
(0) “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 insti. tution which services an emergency loan made by the Secretary pursuant to Subpart E.
(r) "Servicing institution" means the lending instituticn that services the delinquent mortgage. The servicing institution may also be the lender or servicer.
(s) “Substantial reduction in income" means that the homeowner's average gross monthly income during the period the homecwner is in arrears on the delinquent mortgage is less than 80 percent of his average gross monthly income during the 24 month period preceding the beginning of his involuntary unemployment or underemployment.
$ 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
$ 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 10cated 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.
implemented. If the determination of the Secretary is not to implement the Act, and if the composite rate of deliriquencies 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.
§ 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 88 203.1 through 203.4 (except 8 203.4(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 emergency 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.
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
Subpart C-Terms of Emergency
$ 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