Bulletin: NL000049

Dear Associates:

HUD Multi-Family Mortgage Foreclosure

On August 13, 1981 the Multi-family Mortgage Foreclosure Act became law. It allows HUD to conduct nonjudicial foreclosures of multi-family mortgages. This law applies even in those states that do not recognize nonjudicial foreclosures. The sale is conducted by a foreclosure commissioner who is a resident in the state where the land is located. If the foreclosure occurs under this act, there is no right of redemption. The sale occurs at the customary place for foreclosure, at the courthouse in the county, or land site. If state law allows nonjudicial foreclosures, HUD may use state or federal foreclosure procedures. If HUD uses state nonjudicial foreclosure procedure, verify compliance with state procedures and law.

Requirements: To insure a third party purchaser at foreclosure or purchaser after foreclosure on the basis of a HUD Multi-family nonjudicial foreclosure under federal law, the Company requires the following:

The Foreclosure (quitclaim) Deed (see referenced forms at the end of this bulletin) or separate affidavit must include the following information:

• The mortgage was held by the Secretary of HUD.
  
  
• Notice of Default and Foreclosure Sale were sent by certified or registered mail to the original mortgagor at least 21 days before the sale, to all subsequent record title holders at least 21 days before the sale, and to all persons holding subordinate liens of record at least 10 days before the sale. You must determine that the owner and subordinate lienholders actually received the notice. If you insure the sale at foreclosure, review the return receipt. If you insure a later transaction, review the recitals in the deed.
  
  
• Publication of the Notice of Default and Foreclosure Sale occurred once a week for three consecutive weeks in a paper of general circulation in the county where the land is located.
  
  
• Posting of the Notice of Default and Foreclosure Sale occurred at or near the land and at the apartment project office for 15 consecutive days before the sale.
  
  
• The Notice of Default and Foreclosure Sale provided that the foreclosure sale (all or part of) would occur between 9 a.m. and 4 p.m. on a day other than a Sunday or a holiday at a stated location in the county where the land is located.
  
  
• The name of the successful bidder and amount of bid.

You must except to or require a release of all superior liens.

You must require a release of a subordinate lien if the lienholder did not receive notice of the sale.

You must require proof of the standard 25 day notice to the IRS to foreclose a subordinate federal tax lien. You must include an exception concerning the right of redemption of the U.S. for 120 days if the U.S. was properly notified.

You must add an exception to any outstanding HUD regulatory agreement, any use covenants in the foreclosure deed, and any separate use agreement between HUD and the new purchaser. The Notice of Default and Foreclosure Sale should disclose any use limitation (e.g. lower income tenancy). If there is no such agreement, call Stewart Underwriting personnel.

The designation of the foreclosure commissioner by the General Counsel of HUD must have been recorded at least 7 days before the sale

The Notice of Default and Foreclosure Sale must have been recorded at least 7 days before the sale.

You must add an exception relative to rights of tenants in possession.

You may insure this foreclosure procedure even if the mortgage was executed before August 13, 1981.

HUD Single Family Mortgage Foreclosure Act Of 1994

This legislation was enacted September 28, 1994. It provides for nonjudicial foreclosures of mortgages held by HUD on single family (one-to-four family property) mortgages. The law supersedes state laws that require judicial foreclosures and that create rights of redemption. Proposed regulations were published on April 7, 1995. We will provide underwriting guidelines on HUD single family mortgage foreclosures after the regulations become effective. Do not issue under this act until we provide underwriting guidelines.