Fund, or where a mortgage or loan is endorsed for insurance pursuant to a commitment transferred to the Cooperative Management Housing Insurance Fund, debentures issued in connection with such mortgage or loan may be used to pay insurance premiums of either the Cooperative Management Housing Insurance Fund or the General Insurance Fund.

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(4) General Insurance Fund and debentures of other funds. Debentures of the General Insurance Fund and those debentures issued as obligations of mortgage insurance funds and counts in existence prior to the enactment of the Housing and Urban Development Act of 1965 (other than the Mutual Mortgage Insurance Fund) which are transferred by the 1965 Act to the General Insurance Fund may be used to pay mortgage insurance premiums only on the following mortgages and loans:

(i) Those which are the obligation of the General Insurance Fund.

(ii) Those transferred from the General Insurance Fund to the Cooperative Management Housing Insurance Fund.

(iii) Those endorsed for insurance pursuant to commitments transferred to the Cooperative Management Housing Insurance Fund.

§ 200.158 Applicability of Treasury regulations to debenture transactions.

The United States Treasury Department is the agent for the Commissioner in connection with transactions and operations relating to debentures. The general regulations of the United States Treasury Department governing transactions and operations in United States registered bonds, and the payment of interest thereon, are adopted, so far as applicable, as the regulations of the Commissioner for similar transactions and operations in debentures, including the payment of interest on, with the following exceptions:

(a) Payment of final interest on maturing or called debentures. If the notice of maturity or call for redemption shall so provide, the final installment of interest payable on any debentures at maturity or earlier redemption date may be paid with the

principal in accordance with the assignments on the debentures instead of by separate check drawn to the order of the registered payee and forwarded to him at his address of record.

(b) Closing of transfer books. If the call for redemption shall so provide, the books maintained by the Treasury Department may be closed against transfers and denominational exchanges in debentures for three full months preceding any interest payment date with respect to any debentures called for redemption on such interest payment date.

(c) Detached assignments. Detached assignments shall be recognized and accepted in any particular case in which the use of detached assignments is specifically authorized by the Treasury Department. Any assignment not made upon the debentures is considered a detached assignment.

(d) Assignments by corporations for redemption for their own account. A debenture registered in the name of, or assigned to, a corporation will be paid to such corporation, at maturity or earlier redemption date, upon an appropriate assignment for that purpose executed on behalf of the corporation by a duly authorized officer thereof. An assignment so executed and duly attested to in accordance with Treasury Department regulations will ordinarily be accepted without proof of the officer's authority. In all cases within this exception, payment will be made only by check drawn to the order of the corporation.

$ 200.159 Relief on account of lost, stolen, destroyed, mutilated or defaced debentures.

The statutes of the United States and the regulations of the Treasury Department governing relief on account of the loss, theft, destruction, mutilation or defacement of United States securities, so far as applicable and as necessarily modified to relate to debentures, are adopted as the regulations of the Commissioner for the issuance of substitute debentures or the payment of lost, stolen, destroyed, mutilated or defaced debentures.

$ 200.160 Redemption of debentures prior to maturity.

Debentures shall, at the option of the Commissioner and with the approval of the Secretary of the Treasury, be redeemable at par plus accrued interest on any semiannual interest payment date on 3 months' notice of redemption given in such manner as the Commissioner shall prescribe. The debenture interest on the debentures called for redemption shall cease on the semiannual interest payment date designated in the call notice. The Commissioner may include with the notice of redemption an offer to purchase the debentures at par plus accrued interest at any time during the period between the notice of redemption and the redemption date. If the debentures are purchased by the Commissioner after such call and prior to the named redemption date, the debenture interest shall cease on the date of purchase.

§ 200.161 Administration

transactions.

of debenture

on

The Secretary of the Treasury or the Acting Secretary of the Treasury is authorized and empowered, behalf of the Commissioner, to administer the regulations governing any transactions and operations in debentures, to do all things necessary to conduct such transactions and operations, and to delegate such authority at his discretion to other officers, employees, and agents of the United States Treasury Department. At his discretion the Secretary, the Under Secretary, or any Assistant Secretary of the Treasury acting by direction of the Secretary, is authorized to waive any such regulation on behalf of the Commissioner in any particular case where a similar regulation of the Treasury Department with respect to United States bonds or interest thereon would be waived.

certificate of claim. Certificates of claim bear interest at the rate of 3 percent per annum.

DIRECT ENDORSEMENT

§ 200.163 Direct endorsement.

(a) Definition and Applicability. Single family mortgage insurance applications, eligible for processing under this section, are underwritten and closed by eligible mortgagees and the documentation required by paragraphs (b) and (c) of this section are submitted to HUD/FHA for mortgage insurance endorsement in accordance with paragraph (d) of this section. HUD/FHA does not review applications for mortgage insurance or issue commitments except as provided by paragraph (b) of this section and § 200.164(g) before the mortgage is executed and submitted to be considered for endorsement.

(1) Single family mortgage insurance loans defined under sections 203(b), 203(i), 221(d)(2), 234(c) and 245 of the National Housing Act are eligible for processing under this section.

(2) Single family mortgages insured under any of the programs listed in paragraph (a)(1) of this section pursuant to sections 223, 225, 238(c), 244, 247, or 248 of the National Housing Act are not eligible for processing under this section. The provision contained in 24 CFR 221.55 which permits a builder-mortgagor to sell a property to a displaced family on a deferred basis is not available in the Direct Endorsement program.

(3) The Secretary shall publish in the Mortgagees' Guide to the Direct Endorsement program a list of the mortgage loans by type which are eligible for Direct Endorsement processing under this section. Such listing shall set forth with particularity the required certifications applicable to each mortgage type.

(b) Mortgagee Underwriting and Submission for Endorsement-(1) Underwriting/due diligence. A mortgagee, authorized to submit mortgages under this section, shall exercise due diligence when underwriting mortgages processed under this section. Due diligence means that care which a mortgagee would exercise in obtaining

and verifying information for a loan in which the mortgagee would be entirely dependent on the property as security to protect its investment. Mortgagee procedures that evidence such due diligence shall be incorporated as part of the Quality Control Plan required under § 200.164(e).

(2) Guidelines for underwriting procedures. The Secretary shall publish guidelines for underwriting procedures in the Mortgagees' Guide to the Direct Endorsement Program. Compliance with these guidelines is deemed to be the minimum exercise of due diligence in underwriting mortgage loans.

(3) Appraisal. An approved mortgagee shall appraise the property, using an appraiser assigned by HUD from its current fee panel or a staff appraiser approved by HUD. In those cases where the mortgagee has a financial interest in, is owned by or is affiliated with a building or selling entity, the mortgagee shall use an appraiser and inspector assigned by HUD from its fee panel. In lieu of appraising the property, an approved mortgagee may, for those properties which HUD accepts as proposed construction, utilize a HUD conditional commitment or master conditional commitment, or a Veterans Administration certificate of reasonable value or master certificate of reasonable value.

(4) Mortgagor's income. The mortgagee shall determine whether the mortgagor's income is and will be adequate to meet the periodic payments under the mortgage, and shall review the eligibility of the property and prospective mortgagor under 24 CFR Part 203, 221, or 234.

(5) Submission for endorsement. Upon a determination by the mortgagee that the proposed mortgage is eligible for insurance under 24 CFR Part 203, 221, or 234 the mortgage is executed. Within 30 days, or such other time as is approved by the Secretary, after the date of closing of the loan, the mortgagee shall submit the following documents, as are appropriate, and which are properly executed, to HUD/ FHA at which point the loan is considered for endorsement in accordance with paragraph (d) of this section:

(i) Property appraisal upon a form prescribed by the Secretary (or HUD

or

master

conditional commitment conditional commitment, or Veterans Administration certificate of reasonable value or master certificate of reasonable value) and all accompanying documents required by the Secretary;

(ii) An application for insurance of the mortgage upon a form prescribed by the Secretary and all accompany. ing documents required by the Secretary;

(iii) A certified copy of the mortgage and note executed upon forms approved by the Secretary for use in the jurisdiction in which the property covered by the mortgage is situated;

(iv) A warranty of completion, on a form prescribed by the Secretary, (for proposed construction cases);

(v) An Underwriter Certification that the requirements of paragraph (c) of this section have been satisfied;

(vi) Where applicable, a certificate under oath and contract regarding use of the dwelling for transient or hotel purposes in accordance with §§ 203.16 and 203.36, or §§ 203.16 and 203.36 as incorporated by reference in § 221.1, or §§ 234.15 and 234.67;

(vii) Where applicable, a certificate of intent to occupy by military personnel, in accordance with § 203.31, or § 203.31 as incorporated by reference in § 221.1, or § 234.51;

(viii) Where a mortgage for an existing property is to be insured under section 221(d)(2) of the National Housing Act, a letter from the local government official that the property meets applicable code requirements if appropriate;

(ix) For proposed construction, where an individual water or sewer system is being used, approval letter from local health authority indicating approval of the water supply and/or sewage disposal installation; and

(x) For proposed construction, where the mortgagee does not obtain a VA CRV, VA MCRV, HUD conditional commitment, HUD master conditional commitment or a consumer protection or warranty plan, or submit the plans and specifications for HUD's prior approval, a certification by a HUD-approved architect, engineer or construction analyst that the plans and specifications comply with the applicable property standards.

(c) Underwriter Certification. The underwriter shall personally review the mortgage documents and applications for insurance endorsement processed under this section, and shall execute an Underwriter Certification for and on behalf of such mortgagee on a form prescribed by the Secretary evidencing this review. For each mortgage reviewed, this Underwriter Certification shall include an identification of the mortgage by type, as identified pursuant to § 200.163(a)(3), a statement that the underwriter has personally reviewed the mortgage documents and insurance endorsement application, and a statement that the mortgage complies with the requirements of this subsection. The Underwriter Certification shall include, in addition to such supplemental certification items published pursuant to paragraph (f) of this section, each of the below listed certification items which apply to the mortgage loan submitted for endorsement. The Underwriter Certification is in addition to certifications presently required of the mortgagee and/or mortgagor on current HUD Forms 92800 and 92900.

(1) That the mortgage satisfies the requirements of 24 CFR 203.17, or 221.5, 221.25, 221.30, 221.32, 221.40, 221.35, and 221.45 or 234.25;

(2) That the mortgage shall be on real estate held in fee simple, or on a leasehold under a lease for not less than 99 years which is renewable, or under a lease which otherwise meets the requirements of 24 CFR 203.37, or 203.37 as incorporated by reference in § 221.1, or § 234.65;

(3) That the mortgaged property is located in a community where the housing standards meet the requirements of the Secretary as required by 24 CFR 203.40;

(4) That the graduated payment mortgage meets the requirements of the Secretary as established under 24 CFR 203.45 or 234.75;

(5) That the modified graduated payment mortgage meets the requirements of the Secretary as established under 24 CFR 203.46 or 234.76;

(6) That the growing equity mortgage meets the requirements of the Secretary as established under 24 CFR 203.47 or 234.77.

(7) That the adjustable rate mortgage meets the requirements of the Secretary as established under 24 CFR 203.49 or 234.79.

(8) That the property covered by the mortgagee meets the flood plain requirements set forth in § 203.16a, or § 203.16a as incorporated by reference in § 221.1, or § 234.17;

(9) That there is located on the mortgaged property a dwelling unit designed principally for residential use for not more than four families, as required by 24 CFR 203.38, or 203.38 as incorporated by reference in § 221.1;

(10) That the stated mortgage amount (i) satisfies the requirements of 24 CFR 203.18, 203.18a, 203.18b, 203.29, or § 203.29 as incorporated by reference in §§ 221.1, 221.10, 221.11, 221.20, 221.50, 234.27, or 234.49, as applicable; and (ii) for a mortgage given to refinance a mortgage, the stated amount satisfies the limitations set forth in paragraph (c)(8)(i) of this section, and such further limitations as prescribed by the Secretary.

(11) That the mortgagor's monthly mortgage payments will not be in excess of his or her reasonable ability to pay, as required under 24 CFR 203.21, or 203.21 as incorporated by reference in § 221.1, or as required under § 234.36;

(12) That the mortgagor's income is and will be adequate to meet the periodic payments required for the mortgage submitted for insurance, as required by 24 CFR 203.33, or 203.33 as incorporated by reference in § 221.1, or § 234.56;

(13) That the mortgagor's general credit standing is satisfactory, as required under 24 CFR 203.34, or 203.34 as incorporated by reference in § 221.1, or § 234.57;

(14) That the buildings are the property secured by the mortgage comply with the applicable property standards issued by HUD as required by 24 CFR 200.925 et seq., for proposed construction, and the standards set forth in HUD Handbooks 4905.1, for existing construction, and 4940.4, for rehabilitation construction.

(15) In cases where the mortgaged property is subject to a secondary loan or mortgage made or insured, or other secondary lien, held by a Federal,

State or local government agency or instrumentality, that the required monthly payments under the insured mortgage and the secondary mortgage or lien do not exceed the mortgagor's reasonable ability to pay, as required under 24 CFR 203.32, or 203.32 as incorporated by reference in § 221.1, or § 234.55.

(16) That the mortgagor has made the minimum investment as required by 24 CFR 203.19, 221.50 or 234.28;

(17) That no prepaid expenses other than those listed in 24 CFR 221.54 and those specifically approved by the Secretary were included in determining the mortgagor's minimum investment; (18) That for a mortgage involving refinancing to be insured under 24 CFR 221.21, that the mortgage, in addition to the limitations contained in §§ 221.10, 221.11 and 221.20, does not exceed the estimated cost of repair and rehabilitation and the amount required to refinance the existing indebtedness secured by the property;

(19) That a property designed for a two, three or four family residence has one of the dwelling units occupied by the mortgagor, as required by 24 CFR 221.12;

(20) For a condominium, that the mortgaged property is in a project which has been approved by HUD pursuant to 24 CFR 234.26;

(21) For a mortgage involving a negotiated interest rate, that the mortgage meets the requirements of 24 CFR 203.51;

(22) For a property located in an outlying area that the mortgage meets the requirements of 24 CFR 203.18(d); and

(23) For a mortgage to be insured under section 234(c) of the National Housing Act that the mortgage meets the requirements of 24 CFR 234.59.

(24) In the case of proposed or new construction to which 24 CFR 203.12 is applicable, that the property covered by the application for insurance meets the requirements of 24 CFR 203.12(c).

(25) That the property covered by the mortgage is not located in an area that is precluded from receiving Federal financial assistance pursuant to the Coastal Barrier Resources Act (Pub. L. No. 97-349).

(d) HUD/FHA Pre-Endorsement Review. Upon submission by an approved mortgagee of the documents required by paragraphs (b) and (c) of this section, HUD/FHA will review the loan documents to determine:

(1) That the mortgage is executed on a form approved by the Secretary for use in the jurisdiction in which the property covered by the mortgage is situated;

(2) That the mortgage maturity meets the requirements of §§ 203.17, 221.30 or § 234.25 as applicable;

(3) That the stated mortgage amount does not exceed the maximum dollar limitation permissible under §§ 203.18, 203.18a, 203.18b, 203.29, or § 203.29 as incorporated by reference in §§ 221.1, 203.45, 203.46, 221.10, 221.11, 234.27, 234.49, 234.75, or § 234.76 as applicable.

(4) That the mortgage interest rate meets the requirements, as applicable, of §§ 203.20, 203.51, 203.20 and 203.51 as incorporated by reference in § 221.1, or § 234.29;

(5) That all documents required by paragraph (b) of this section are submitted; and

(6) That all necessary certifications are made in accordance with paragraph (c) of this section.

If, following this review, the mortgage is determined to be eligible, it is endorsed for insurance. If the mortgage is determined to be ineligible, HUD will inform the mortgagee in writing of this fact, and include the reasons thereof and any corrective actions that may be taken.

(e) Post-Endorsement Review. Following endorsement, HUD/FHA will review all documents required by paragraphs (b) and (c) of this section. If following this review HUD/FHA determines that the mortgage does not satisfy the requirements of the single family Direct Endorsement program, the Department may place the mortgagee on probation, withdraw the authority of the mortgagee to participate in the Direct Endorsement program pursuant to § 200.164(h) or withdraw the mortgagee's HUD/FHA approval pursuant to the provisions of 24 CFR Part 25.