(b) The survey required by paragraph (a) of this section need not be furnished in connection with a project involving rehabilitation where the mortgage does not exceed $200,000.

[26 F.R. 7430, Aug. 12, 1961, as amended at 29 F.R. 6279, May 13, 1964]

EXTENSION OF TIME AND PROTECTION OF WORK IN PROCESS

§ 207.36a Actions by Commissioner.

Where the mortgagee or lender has failed to take action within the period of time required in order to prevent the expiration of a commitment or in order to reopen an expired commitment, the Commissioner may extend such period and may retroactively reinstate or reopen such commitment.

[29 F.R. 4088, Mar. 28, 1964]

§ 207.36b Protection of work in process. The mortgage limitations in effect prior to the enactment of the Housing Act of 1964 shall apply to any project which was under consideration by the Commissioner prior to such enactment if the Commissioner determines that it would be inequitable to apply mortgage limitations prescribed by the Housing Act of 1964.

[29 F.R. 12630, Sept. 5, 1964]

As used in this subpart:

(a) The term "Commissioner" means the Federal Housing Commissioner.

(b) The term "act" means the National Housing Act, as amended.

(c) The term "mortgage" means such a first lien upon real estate and other property as is commonly given to secure advances on, or the unpaid purchase price of, real estate under the laws of the State, district or territory in which the real estate is located, together with the credit instrument or instruments, if any, secured thereby.

(d) The term "insured mortgage" means a mortgage which has been insured by the endorsement of the credit instrument by the Commissioner, or his duly authorized representative.

(e) The term "contract of insurance" means the agreement evidenced by such endorsement and includes the terms, conditions and provisions of this part and of the National Housing Act.

(f) The term "mortgagor" means the original borrower under a mortgage and its successors and such of its assigns as are approved by the Commissioner.

(g) The term "mortgagee" means the original lender under a mortgage its successors and such of its assigns as are approved by the Commissioner, and includes the holders of the credit instruments issued under a trust indenture, mortgage or deed of trust pursuant to which such holders act by and through a trustee therein named.

PREMIUMS

§ 207.252 First, second and third premi

ums.

The mortgagee, upon the initial endorsement of the mortgage for insurance, shall pay to the Commissioner a first mortgage insurance premium equal to one-half of one percent of the original face amount of the mortgage.

(a) If the date of the first principal payment is more than one year following the date of such initial insurance endorsement, the mortgagee, upon the anniversary of such insurance date, shall pay a second premium equal to one-half of one percent of the original face amount of the mortgage. On the date of the first principal payment, the mortgagee shall pay a third premium equal to one-half of one percent of the average outstanding principal obligation of the mortgage for the following year which shall be adjusted so as to accord with such date and so that the aggregate of the said three premiums shall equal the sum of (1) one percent of the average outstanding principal obligation of the mortgage for the year following the date of initial insurance endorsement and (2) one-half of one percent per annum of the average outstanding principal obligation of the mortgage for the period from the first anniversary of the date of initial insurance endorsement to one year following the date of the first principal payment.

(b) If the date of the first principal payment is one year, or less than one year following the date of such initial insurance endorsement, the mortgagee, upon such first principal payment date, shall pay a second premium equal to one-half of one percent of the average outstanding principal obligation of the

mortgage for the following year which shall be adjusted so as to accord with such date and so that the aggregate of the said two premiums shall equal the sum of (1) one percent per annum of the average outstanding principal obligation of the mortgage for the period from the date of initial insurance endorsement to the date of first principal payment and (2) one-half of one percent of the average outstanding principal obligation of the mortgage for the year following the date of the first principal payment.

(c) Where the credit instrument is initially and finally endorsed for insurance pursuant to a Commitment to Insure Upon Completion, the mortgagee on the date of the first principal payment shall pay a second premium equal to onehalf of one percent of the average outstanding principal obligation of the mortgage for the year following such first principal payment date which shall be adjusted so as to accord with such date and so that the aggregate of the said two premiums shall equal the sum of one-half of one percent per annum of the average outstanding principal obligation of the mortgage for the period from the date of the insurance endorsement to one year following the date of the first principal payment.

(d) Until the mortgage is paid in full, or until receipt by the Commissioner of an application for insurance benefits, or until the contract of insurance is otherwise terminated with the consent of the Commissioner, the mortgagee, on each anniversary of the date of the first principal payment, shall pay an annual mortgage insurance premium equal to onehalf of one percent of the average outstanding principal obligation of the mortgage for the year following the date on which such premium becomes payable.

(e) The premiums payable on and after the date of the first principal payment shall be calculated in accordance with the amortization provisions without taking into account delinquent payments or prepayments.

(f) Premiums shall be payable in cash or in debentures at par plus accrued interest. All premiums are payable in advance and no refund can be made of any portion thereof except as hereinafter provided in this subpart.

[26 F.R. 7430, Aug. 12, 1961, as amended at 29 F.R. 12630, Sept. 5, 1964; 30 F.R. 10031, Aug. 12, 1965]

86-045-68-14

§ 207.253 Adjusted premium and termination charges.

(a) All rights under the insurance contract and all obligations to pay future insurance premiums shall terminate on the following conditions:

(1) Payment to the Commissioner of an adjusted premium or termination charge computed as follows:

(i) Two percent of the original face amount of the mortgage when the mortgage is prepaid in full or the contract of insurance is voluntarily terminated within five years from the date of the initial endorsement for insurance; or

(ii) One percent of the original face amount of the mortgage when the mortgage is prepaid in full or the contract of insurance is voluntarily terminated after five years from the date of initial endorsement for insurance; or

(iii) If at the time of prepayment in full or voluntary termination a new insured mortgage is placed on the same property and the new mortgage is less than the face amount of the original mortgage, the adjusted premium or termination charge shall be computed at the relevant percentage prescribed in subdivision (i) or (ii) of this subparagraph of the difference between the face amount of the new mortgage and the original mortgage. The provision of this subdivision (iii) shall also apply to instances where there are a series of new individually insured mortgages placed on the same property.

(iv) If new insured mortgages are placed on the same property within 1 year from the date of prepayment in full or voluntary termination, the Commissioner shall refund to the mortgagee for the account of the mortgagor any overpayment determined by recomputing the adjusted premium or termination charge using the formula prescribed in subdivision (iii) of this subparagraph. The provision of this subdivision (iv) shall also apply to instances where there are a series of new individually insured mortgages placed on the same property.

(2) Payment in full of the mortgage prior to maturity. Notice of the prepayment shall be given to the Commissioner, on a form prescribed by the Commissioner, within 30 days from the date of the prepayment. The insurance termination shall become effective as of the date of the prepayment.

(3) Receipt by the Commissioner of a written request, on a form prescribed by

the Commissioner, by the mortgagor and the mortgagee for such termination, accompanied by a submission of the original credit instrument for cancellation of the insurance endorsement and the remittance of all sums to which the Commissioner is entitled. The termination shall become effective as of the date these requirements are met.

(b) In no event shall the adjusted premium charge or termination charge exceed the aggregate amount of premium charges which would have been payable if the mortgage had continued to be insured until maturity.

(c) No adjusted premium charge shall be due the Commissioner in the following cases:

(1) Where, at the time of such prepayment, there is placed on the mortgaged property a new insured mortgage or mortgages for an amount equal to or greater than the original principal amount of the prepaid mortgage; or

(2) Where the final maturity specified in the mortgage is accelerated solely by reason of partial prepayments made by the mortgagor which do not exceed in any one calendar year 15 percent of the original face amount of the mortgage; or

(3) Where the final maturity specified in the mortgage is accelerated solely by reason of payments to principal to compensate for damage to the mortgaged property, including loss by condemnation or conveyance in lieu of condemnation, or a release of a part of such property, if approved by the Commissioner; or (4) Where payment in full is made of a delinquent mortgage:

(i) On which foreclosure proceedings have been commenced; or

(ii) For the purpose of avoiding foreclosure, if the transaction is approved by the Commissioner; or

(5) Where, at the time of such prepayment, there is placed on the property a new insured mortgage or mortgages less than the original principal amount of the prepaid mortgage: Provided, That the Commissioner finds that the collection of such charge would be inequitable under the particular circumstances of the transaction.

(6) Where prepayment in full is made for the purpose of converting all of the individual units of a project to family units under section 234 of the Act.

(7) Where the mortgage is paid in full from the proceeds of a direct loan

granted under a program administered by the Department of Housing and Urban Development.

(8) Where the mortgage is paid in full by a mortgagor which is a federal, state or other governmental agency or instrumentality.

(9) Where the mortgage is paid in full after July 1, 1962 and the mortgagor certifies to the Commissioner, in a manner satisfactory to him, that the payment was made by or on behalf of a nonprofit educational institution which intends to use the property for educational purposes.

(10) Where the mortgage has been insured for 10 or more years and the Commissioner determines the following:

(i) The mortgaged property has been operated at a deficit over a substantial period and major rehabilitation will help to remedy this condition.

(ii) FHA financing for rehabilitation is not feasible.

(iii) Financing obtained to prepay the insured mortgage will also finance the necessary rehabilitation and make the project competitive with other available rentals.

(d) No termination charge shall be due the Commissioner where the termination of insurance is:

(1) In connection with a delinquent mortgage on which foreclosure proceedings have been commenced; or

(2) For the purpose of avoiding foreclosure, if the transaction is approved by the Commissioner.

(3) Where the voluntary termination occurs for the purpose of converting all of the individual units of a project to family units under section 234 of the Act.

(4) Pursuant to a request for termination in a case where the mortgagor is a nonprofit educational institution which certifies to the Commissioner, in a manner satisfactory to him, that the property will be used for educational purposes.

(e) Upon termination of the mortgage insurance contract by a payment in full or by a voluntary termination, the Commissioner shall refund to the mortgagee for the account of the mortgagor an amount equal to the pro rata portion of the current annual mortgage insurance premium theretofore paid, which is applicable to the portion of the year subsequent to (1) the date of the prepayment or (2) the effective date of the

The

(a) Reasons for termination. happening of any of the following events shall constitute an additional reason for terminating the contract of insurance without the payment of any adjusted premium or termination charge, in cases where the mortgagee has elected to convey the property to the Commissioner:

(1) The acquisition by the mortgagee of the mortgaged property without conveying it to the Commissioner.

(2) The acquisition of the property at the foreclosure sale by a party other than the mortgagee.

(3) The redemption of the property after foreclosure.

(4) Notice given by the mortgagee after the foreclosure and during the redemption period that it will not tender the property to the Commissioner.

(b) Notice of termination. No contract of insurance shall be terminated until the mortgagee has given written notice thereof to the Commissioner within 30 days from the happening of any one of the events set forth in paragraph (a) of this section.

placed on the original credit instrument which will identify the section of the Act and the regulations under which the mortgage is insured and the date of insurance.

(b) Final endorsement. After all advances under the mortgage have been made, the Commissioner shall, upon presentation of the original credit instrument, make a final endorsement of the original credit instrument which shall state the total of all advances approved for insurance by the Commissioner and show the date of such approval.

(c) Effect of endorsement. From the date of initial endorsement the Commissioner and mortgagee shall be bound by the provisions of this subpart with the same force and effect as if a separate contract had been executed including the provisions of this subpart and the Act. RIGHTS AND DUTIES OF MORTGAGEE UNDER THE CONTRACT OF INSURANCE

(a) The failure of the mortgagor to make any payments due under or provided to be paid by the terms of a mortgage insured under this subpart shall be considered a default under such mortgage.

(b) The failure to perform any other covenant under the provisions of a mortgage insured under this subpart shall be considered a default, provided the mortgagee, because of such default, has exercised its right under the mortgage and accelerated the debt.

(c) If such defaults as defined in paragraphs (a) and (b) of this section continue for a period of 30 days the mortgagee shall be entitled to receive the benefits of the insurance hereinafter provided.

(d) For the purposes of this section the date of default shall be considered as:

(1) The date of the first uncorrected failure to perform a covenant or obligation; or

(2) The date of the first failure to make a monthly payment which subsequent payments by the mortgagor are insufficient to cover when applied to the overdue monthly payments in the order in which they became due.

§ 207.256 Notice.

(a) If the default as defined in § 207.255 is not cured within the 30 day grace period, the mortagee shall within

30 days thereafter notify the Commissioner in writing of such default.

(b) Notwithstanding the provision of § 207.255 (b), the mortagee will be required to give notice in writing to the Commissioner of the failure of the mortagor to comply with such covenant regardless of the fact the mortgagee may not have elected to accelerate the debt. § 207.256a Reinstatement of defaulted mortgage.

If after default and prior to the completion of foreclosure proceedings the mortgagor shall cure the default, the insurance shall continue as if a default had not occurred, provided the mortgagee gives written notice of reinstatement to the Commissioner.

[30 F.R. 10031, Aug. 12, 1965] § 207.257

Commissioner's right to require acceleration.

Upon receipt of notice of violation of a covenant, as provided for in § 207.256 (b), or otherwise being apprised thereof, the Commissioner reserves the right to require the mortgagee to accelerate payment of the outstanding principal balance due in order to protect the interests of the Federal Housing Commissioner. § 207.258 Insurance claim requirements.

(a) Alternative election by mortgagee. When the mortgagee becomes eligible to receive mortgage insurance benefits pursuant to § 207.255 (c), it shall, within 45 days thereafter, give the Commissioner written notice of its intention to file an insurance claim and of its election either to assign the mortgage to the Commissioner, as provided in paragraph (b) of this section, or to acquire and convey title to the Commissioner, as provided in paragraph (c) of this section.

(b) Assignment of mortgage to Commissioner. If the mortgagee elects to assign the mortgage to the Commissioner, it shall, at any time within 30 days after the date of the notice of such election, file its application for insurance benefits and assign, in such manner as the Commissioner may require, the original credit and security instruments to the Commissioner. In addition, the following requirements shall be met:

(1) Notice of assignment. On the date the assignment of the mortgage is filed for record, the mortgagee shall notify the Commissioner on a form prescribed by him of such assignment.

(2) Warranty of mortgagee. The assignment shall be made without recourse

or warranty, except that the mortgagee shall warrant that:

(i) No act or omission of the mortgagee has impaired the validity and priority of the mortgage.

(ii) The mortgage is prior to all mechanics' and materialmen's liens filed of record subsequent to the recording of the mortgage, regardless of whether such liens attached prior to the recording date.

(iii) The mortgage is prior to all liens and encumbrances which may have attached or defects which may have arisen subsequent to the recording of the mortgage, except such liens or other matters as may be approved by the Commissioner.

(iv) The amount stated in the instrument of assignment is actually due under the mortgage and there are no offsets or counterclaims against such amount. (v) The mortgagee has a good right to assign the mortgage.

(3) Items delivered by mortgagee. The mortgagee shall deliver to the Commissioner, within 45 days after the assignment is filed for record, the items enumerated below:

(1) An assignment of all claims of the mortgagee against the mortgagor or others arising out of the mortgage transaction.

(ii) All policies of title or other insurance or surety bonds or other guaranties, and any and all claims thereunder, including evidence satisfactory to the Commissioner that the effective date of the original title coverage has been extended to include the assignment of the mortgage to the Commissioner.

(iii) All records, ledger cards, documents, books, papers, and accounts relating to the mortgage transaction.

(iv) All property of the mortgagor held by the mortgagee or to which it is entitled (other than the cash items which are to be retained by the mortgagee) pursuant to subparagraph (4) of this paragraph.

(v) Any additional information or data which the Commissioner may require.

(4) Disposition of cash items. The following cash items shall either be retained by the mortgagee or delivered to the Commissioner in accordance with instructions to be issued by the Commissioner at the time the insurance claim is filed:

(i) Any balance of the mortgage loan not advanced to the mortgagor.