(a) The eligibility of the proposed loan under the statute, i.e., term, interest rate, mortgage amount, and ratios of loan to value or replacement cost.

(b) The eligibility of the property with respect to compliance with FHA statutory and regulatory requirements.

(c) (1) The eligibility of the mortgagor with regard to the mortgagor's ability to carry and pay the proposed mortgage debt.

(2) Applications are designed to meet the requisites of the several programs. Accordingly, the applications will call for certain supplemental information, such as drawings and specifications, financial statements, exhibits and other information appropriate to enable the FHA to make the necessary determinations concerning eligibility.

§ 200.144 Fees.

Each application must be accompanied by a fee for examination in an amount in effect on the date the application is filed as indicated by the regulations covering the particular insurance program.

$ 200.145 Technical analysis and underwriting processing.

(a) When an application for mortgage insurance is received in the Field Office it is recorded and a receipt issued therefor. The proposed transaction is then analyzed to determine whether the application and supporting information is in proper form for underwriting processing.

(b) Underwriting processing involves consideration of the elements having to do with eligibility for insurance including review of the planning, construction, and specifications, cost estimation and valuation, and credit analysis. The findings are included in a report and recommendation which is the basis for the commitment.

§ 200.146 Acceptance, rejection and reconsideration.

(a) If an application for mortgage insurance meets the eligibility requirements a commitment for insurance is issued.

(b) If the application for mortgage insurance is not eligible for processing

or does not qualify, this fact is reported to the applicant together with the reason for the rejection.

(c) A rejected application for mortgage insurance may be reconsidered upon written request to the Field Office which rejected the application.

COMMITMENT FOR INSURANCE

§ 200.147 Issuance of commitment.

After a determination that the mortgagor and the property offered for security meets the standards and requirements as to eligibility, a commitment is prepared and forwarded over the signature of the Authorized Agent to the approved mortgagee setting forth the terms and conditions under which the mortgage transaction will be insured. The commitment is a binding contract between the FHA and the mortgagee presenting the application.

§ 200.148 Types of commitments.

(a) Home mortgages. In connection with home mortgages the commitment issued may be conditional or firm.

(1) Conditional commitment. A conditional commitment is requested in a case where the mortgagor is unknown and therefore cannot be specified in the application. The Commissioner agrees to insure a mortgage on specified property in an amount and under the terms specified, provided the property is sold to a purchaser who is satisfactory to the FHA as a borrower.

(2) Firm commitment. A firm commitment is requested where the mortgagee desires insurance of a mortgage on specified property with a named mortgagor in an amount and on terms set forth in the commitment.

(b) Project mortgages. In connection with project mortgages the mortgagee may specify which of two types of commitments he desires.

(1) Commitment for insurance of advances. A commitment for insurance of advances specifies that the FHA will insure construction advances, subject to compliance with the commitment terms.

(2) Commitment to insure upon completion. A commitment to insure upon completion does not include construction advances, but provides that the FHA will insure the mortgage upon

completion of the project subject to compliance with the commitment terms.

§ 200.149

Terms and conditions.

(a) The commitment sets forth the exact conditions under which the FHA will insure the mortgage loan. It indicates the maximum eligible term of years, the amount of such loan, the interest rate and the amount of the monthly installment, including principal and interest. In addition, in connection with proposed construction there may be provision for structural requirements and the number and type of inspections necessary. In the case of project mortgages, the commitment may indicate a schedule of advances which will be insured upon a finding that such advances are made in accordance with the commitment.

(b) A commitment is for a definite period of time and contains cancellation conditions which permit FHA to cancel the commitment in case of noncompliance with its terms. Upon full compliance with the terms of the commitment instrument, the FHA is legally bound to endorse the mortgage for insurance.

§ 200.155 Claim requirements.

To perfect its claim for payment the mortgagee is required either to assign the mortgage to the Commissioner or tender to him a good merchantable title to the property covered by the insured mortgage. In the home mortgage programs the mortgagee is required to foreclose the insured mortgage and obtain title to the property under a deed conveying good merchantable title. In project mortgage programs the foregoing procedure may be followed or the mortgagee has an alternative option to assign the project mortgage to the Commissioner. If the latter option is exercised the claim for insurance is reduced by one percent of the amount of the mortgage.

§ 200.156 Settlement of claims.

Upon approval of title conveyance thereof and delivery of possession of the property to the Commissioner, debentures and a certificate of claim are issued to the mortgagee in accordance with a computation provided by stat

ute for the particular program. The debentures include an amount equal to the unpaid principal of the mortgage plus certain other items such as advances made for hazard insurance, payment of taxes, FHA mortgage insurance premium and a portion of foreclosure expenses. The terms of the statute strictly control the amounts which may be allowed in debentures. Certain expenditures made by the mortgagee, not allowed in the debentures, are included in the certificate of claim.

§ 200.157 Provisions and characteristics of

debentures.

(a) Series and fund. Debentures are issued in appropriate series and are the obligation of and issued in the name of the particular mortgage insurance fund under which the mortgage is insured.

(b) Registration, denomination and execution. Debentures are issued in registered form and in denominations of $50, $100, $500, $1,000, $5,000 and $10,000. Debentures are signed by the Federal Housing Commissioner by facsimile signature and imprinted with the seal of the Federal Housing Administration.

(c) Rate of interest and interchangeability. Debentures carry a rate of interest prescribed by the Commissioner but not in excess of an annual rate determined by the Secretary of the Treasury in accordance with a prescribed statutory formula involving yields or prices of outstanding marketable obligations of the United States. Debentures of the same series bearing the same interest rate and having the same maturity date shall be freely interchangeable between the various authorized denominations.

(d) Negotiability and redemption. Debentures are negotiable and are fully guaranteed as to principal and interest by the United States. Debentures are redeemable on call issued by the Commissioner.

(e) Payment of principal and interest. Principal and interest of debentures shall be payable when due at the Treasury Department, Washington, D.C., or at any Government agency or agencies in the United States which the Secretary of the Treasury may

from time to time designate for that purpose. The principal and interest shall be payable to the registered owner whose name shall be inscribed on the debentures or to the assignee as shown by executed assignments.

(f) Transfer and use-(1) In general. Debentures are fully transferable and may be freely sold or assigned. They may be used by approved mortgagees in lieu of cash for payment of FHA mortgage insurance premiums.

(2) Mutual Mortgage Insurance Fund debentures. Debentures of the Mutual Mortgage Insurance Fund may be used to pay mortgage insurance premiums on mortgages insured under sections 203(b), 203(h), and 203(i), of the National Housing Act.

(3) Cooperative Management Housing Insurance Fund debentures. Debentures which are the obligation of the Cooperative Management Housing Insurance Fund may be used to pay premiums on mortgages and loans which are insured under that Fund. Where the insurance of a mortgage or loan is transferred from the General Insurance Fund to the Cooperative Management Housing Insurance 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.

(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 accounts 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 Coopera

tive 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 of debenture

transactions.

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.

of such loans is set forth in section 2, Title I of the National Housing Act.

§ 200.166 Lending area.

(a) The Federal Housing Administration expects a qualified lender to confine its Property Improvement loan business to the trading area usually served by the institution in its normal operations. The lender must be in a position to investigate credits, make spot checks of the improvements being financed, and have its own employee or qualified representative make personal contact with delinquent borrow

ers.

(b) Prospective borrowers may obtain a list of qualified lenders in the particular area by writing to the Federal Housing Administration field office in the locality or to the Headquarters Office in Washington, D.C. Prescribed forms for use in connection with Property Improvement loans are made available by lenders.

§ 200.167 Credit investigation of borrower. Property Improvement loans are primarily character loans, and the credit standing and credit instrument of the borrower are of primary importance. In accepting a contract of insurance the lender assumes the responsibility of applying sound principles in the evaluation of credit. The borrower applicant must furnish the lender with an executed credit application on a form approved by the Commissioner and disclosing information sufficient to satisfy the lender that the applicant represents an acceptable credit risk, including information that the loan is for the alteration, repair or improvement of property in which the borrower has an eligible interest as owner or lessee. The determination as to the eligibility of a loan for insurance and the approval of borrower's credit and all other details of the transaction are handled by the lender, without prior examination or approval of the transaction by the Federal Housing Administration, except as specifically required by the regulations.