an interlocutory ruling shall file a motion with the hearing officer within ten days of the ruling requesting certification of the ruling for review by the Secretary. Certification may be granted if the hearing officer believes that (1) it involves an important issue of law or policy as to which there is substantial ground for difference of opinion and (2) an immediate appeal from the order may materially advance the ultimate termination of the litigation.

(b) Petition for review. Any party may file a petition for review of an interlocutory ruling within ten days of the hearing officer's determination regarding certification.

(c) Secretarial review. The Secretary, or designee, shall review a certified ruling. The Secretary, or designee, has the discretion to grant or deny a petition for review from an uncertified ruling.

(d) Continuation of hearing. Unless otherwise ordered by the hearing officer or the Secretary, or designee, the hearing shall proceed pending the determination

of any interlocutory appeal and the order or ruling of the hearing officer shall be effective pending review.

AUTHORITY: Secs. 369C(5) and 3691, Multifamily Mortgage Foreclosure Act of 1981 (12 U.S.C. 3711(5) and 3717); sec. 7(d), Department of Housing and Urban Development Act (42 U.S.C. 3535(d)).

SOURCE: 49 FR 7074, Feb. 24, 1984, unless otherwise noted.

Subpart A-General

§ 27.1 Purpose.

The purpose of this part is to implement the Multifamily Mortgage Foreclosure Act of 1981 (the Act) (12 U.S.C. 3701-3717). The Act creates a uniform Federal remedy for foreclosure of mortgages covering multiunit residential and nonresidential project mortgages held by the Secretary of Housing and Urban Developmemt under title II of the National Housing Act, 12 U.S.C. 1707-17152-11, or under section 312 of the Housing Act of 1964, 42 U.S.C. 1452b. Under a delegation of authority published on February 5, 1982 (47 FR 5468), the Secretary has delegated to the HUD General Counsel his powers under the Act to appoint a foreclosure commissioner or commissioners and to substitute therefor, to fix the compensation of commissioners, and to promulgate implementing regulations.

§ 27.2 Scope and applicability.

(a) Under this part, the Secretary may foreclose on any defaulted Secretary-held multifamily mortgage encumbering real estate in any State. The Secretary may use the provisions of these regulations to foreclose on any multifamily mortgage regardless of when the mortgage was executed.

(b) The Secretary may, at the Secretary's option, use other procedures to foreclose defaulted multifamily mortgages, including judicial foreclosure in Federal court and nonjudicial foreclosure under State law. This part applies only to foreclosure procedures authorized by the Act and not to any other foreclosure procedures the Secretary may use.

§ 27.3 Definitions.

As used in this part:

County means county as defined in section 2 of title I, United States Code;

General Counsel means the General Counsel of the Department of Housing and Urban Development;

Mortgage means a deed of trust, mortgage, deed to secure debt, security agreement, or any other form of instrument under which any interest in property, real, personal or mixed, or any interest in property including leaseholds, life estates, reversionary interests, and any other estates under applicable State law, is conveyed in trust, mortgaged, encumbered, pledged, or otherwise rendered subject to a lien, for the purpose of securing the payment of money or the performance of an obligation;

Mortgage agreement means the note or debt instrument and the mortgage instrument, deed of trust instrument, trust deed, or instrument or instruments creating the mortgage, including any instruments incorporated by reference therein (including any applicable regulatory agreement), and any instrument or agreement amending or modifying any of the foregoing;

Mortgagor means the obligor, grantor, or trustor named in the mortgage agreement and, unless the context otherwise indicates, includes the current owner of record of the security property whether or not personally liable on the mortgage debt;

Multifamily mortgage means a mortgage held by the Secretary pursuant to title II of the National Housing Act, 12 U.S.C. 1707-1715z-11, including a mortgage taken by the Secretary in connection with the previous sale of the project by the Secretary (purchase money mortgage), or section 312 of the Housing Act of 1964, 42 U.S.C. 1452b, covering any property, except a property on which there is located a one- to four-family residence;

Person includes individual, any group of individuals, association, partnership, corporation, or organization; Record and recorded include register and registered in the instance of registered land;

Secretary means the Secretary of Housing and Urban Development;

Security property means the property, real, personal or mixed, or an interest in property, including leaseholds, life estates, reversionary interest and any other estates under applicable

State law, together with fixtures and other interests subject to the lien of the mortgage under applicable State law; and

State means the several States, the District of Columbia, the Commonwealth of Puerto Rico, the territories and possessions of the United States, and the Trust Territory of the Pacific Islands, and Indian tribes as defined by the Secretary.

Subpart B-Procedures

§ 27.5 Prerequisites to foreclosure.

(a) The Secretary may commence foreclosure under this part upon the breach of a convenant or condition in the mortgage agreement for which foreclosure is authorized under the mortgage. No such foreclosure may be commenced unless any previously pending proceeding, judicial or nonjudicial, separately instituted by the Secretary to foreclose the mortgage in a manner other than under this part, has been withdrawn, dismissed or otherwise terminated. The Secretary shall not instutute any separate foreclosure proceedings, judicial or nonjudicial, during the pendency of a foreclosure pursuant to this part. Nothing in this part shall preclude the Secretary from enforcing any right, other than foreclosure, under applicable State law, including any right to obtain a monetary judgment. Nothing in this part shall preclude the Secretary from foreclosing under this part where the Secretary has obtained or is seeking any other remedy available pursuant to Federal or State law or under the mortgage agreement, including, but not limited to, the appointment of a receiver, mortgagee-in-possession status or relief under an assignment of rents.

(b) Before commencement of a foreclosure under this part, HUD will provide to the mortgagor an opportunity informally to present reasons why the mortgage should not be foreclosed. Such opportunity may be provided before or after the designation of the foreclosure commissioner but before service of the notice of default and foreclosure.

§ 27.10 Designation of a foreclosure com

missioner.

(a) When the Secretary determines that a multifamily mortgage should be foreclosed under this part, the General Counsel will select and designate a foreclosure commissioner to conduct the foreclosure and sale. In order to conduct the foreclosure, the foreclosure commissioner has a nonjudicial power of sale. The commissioner, if a natural person, shall be a resident of the State in which the security property is located. If a natural person is designated as commissioner, he or she shall be designated by name, except if the commissioner is designated in his or her capacity as an official or employee of the State or local government where the security property is located, the designation may be made by title or position instead of by name. If not a natural person, the commissioner must be duly authorized to transact business under the laws of the State in which the security property is located. The commissioner shall be a person who is determined by the General Counsel to be responsible, financially sound, and competent to conduct the foreclosure. The foreclosure commissioner may be an individual, group of individuals, association, partnership, corporation or organization. The method of selection and determination of the qualifications of the foreclosure commissioner shall be at the discretion of the General Counsel, and the execution of a designation pursuant to paragraph (b) of this section shall be conclusive evidence that the commissioner selected has been determined to be qualified by the General Counsel.

(b) After selection of a foreclosure commissioner, the General Counsel shall designate the commissioner in writing to conduct the foreclosure and sale of the particular multifamily mortgage. The written designation shall be duly acknowledged and shall state the name and business or residential address of the commissioner and any other information the General Counsel deems necessary. The designation shall be effective upon execution by the General Counsel or his designate. Upon receipt of the designation, the commissioner shall demon

strate acceptance by signing the designation and returning a signed copy to the General Counsel.

(c) The General Counsel may designate more than one commissioner to foreclose a multifamily mortgage.

(d) The General Counsel may at any time, with or without cause, designate a substitute commissioner to replace a previously designated commissioner. Designation of a substitute commissioner shall be in writing and shall contain the same information and be made effective in the same manner as the designation of the original commissioner. Upon designation of a substitute commissioner, the substitute commissioner shall serve a copy of the written notice of designation upon the persons shown in § 27.15 (c)(1) through (3) either by mail, in accordance with § 27.15(c) except that the time limitations in that section will not apply, or by any other manner which in the substitute commissioner's discretion is conducive to giving timely notice of substitution.

(e) The Secretary shall be the guarantor of payment of any judgment against the foreclosure commissioner for damages based on the commissioner's failure properly to perform the commissioner's duties. As between the Secretary and the mortgagor, the Secretary shall bear the risk of any financial default by the foreclosure commissioner. In the event that the Secretary makes any payment pursuant to this paragraph, the Secretary shall be fully subrogated to the rights satisfied by such payment.

§ 27.15 Notice of default and foreclosure sale.

(a) Within 45 days after accepting his or her designation to act as commissioner, the commissioner shall commence the foreclosure by serving a Notice of Default and Foreclosure

Sale.

(b) The Notice of Default and Foreclosure Sale shall contain the following information which, except for paragraphs (b) (2) and (9) of this section will be supplied to the commissioner by the Secretary.

(1) Name and address of the foreclosure commissioner.

(2) Date of the Notice.

(3) Names of the Secretary, the original mortgagor and the original mortgagee.

(4) A description of the location of the security property, or portion thereof to be sold, which is sufficient to identify it including, if appropriate, the street address.

(5) The date of the mortgage.

(6) The name of the office or offices in which the mortgage is recorded.

(7) The book and page in which the mortgage was recorded or, if appropriate, the mortgage's document or accession number.

(8) A description of the mortgagor's failure to make payment, including the due date of the earliest installment payment remaining wholly unpaid as of the date of the Notice or, if appropriate, of the other default or defaults upon which foreclosure is based; and a statement that the secured indebtness has been accelerated.

(9) The date, exact time and place of the foreclosure sale. The sale shall not be scheduled for a date less than 30 days after the due date of the earliest unpaid installment or the earliest occurrence of a nonmonetary default. The sale must be scheduled to begin at a time between the hours of 9:00 a.m. and 4:00 p.m. local time on a day other than Sunday or a public holiday as defined by 5 U.S.C. 6103(a) or State law. The sale must be scheduled for (i) a place where real estate foreclosure auctions are customarily held in the county or one of the counties in which the property to be sold is located, or (ii) a courthouse in such a county, or (iii) a site at or on the property to be sold. Sale of property located in more than one county may be held in any one of the counties in which any part of the security property is situated.

(10) A statement that the foreclosure is being conducted in accordance with the Act and this part.

(11) The costs, if any, to be paid by the purchaser upon transfer of title.

(12) The bidding and payment requirements for the foreclosure sale, including the required deposit, the method of deposit, and the time and method of payment for the balance of the purchase price. The Notice shall state that all deposits and the balance

of the purchase price shall be paid by certified or cashier's check. The Notice shall state that no deposit will be required of the Secretary when the Secretary bids at the foreclosure sale.

(13) Any terms and conditions to which the purchaser at the foreclosure sale must agree under § 27.20. The Notice need not describe at length each and every pertinent term and condition, including any required use agreements and deed covenants, if it describes these terms and conditions in a general way and if it states that the precise terms will be available from the commissioner upon request.

(c) The commissioner shall serve the Notice of Default and Foreclosure Sale upon the following persons in the following manner, and no additional notice shall be required to be served notwithstanding any notice requirements of State or local law:

(1) By certified or registered mail, return receipt requested, sent, at least 21 days before the original scheduled date of the foreclosure sale, to the owner of record of the security property as of 45 days before the original scheduled date of the foreclosure sale. The Notice shall be mailed to the owner at the address shown in the mortgage or to the address of the security property, or, in the commissioner's discretion, to any address believed to be that of the owner; and

(2) By certified or registered mail, return receipt requested, sent, at least 21 days before the original scheduled date of the foreclosure sale, to the original mortgagor and all subsequent mortgagors of record and all other persons who appear on the public record or in the mortgage agreement to be liable for all or part of the mortgage debt. The Notice need not be mailed to mortgagors who have been released from all obligations under the mortgage. The Notice shall be mailed to the mortgagor at the address shown in the mortgage, or to the address of the property, or, in the commissioner's discretion, to any address believed to be that of the mortgagor or mortgagors; and

(3) By certified or registered mail, return receipt requested, sent, at least 10 days before the original scheduled date of the foreclosure sale, to all per

§ 27.20

sons having liens of record on the security property which were placed on record at least 45 days before the scheduled foreclosure sale. The Notice shall be mailed to lien holders at their address of record, or to any address the commissioner believes to be that of the lien holder; and

(4) By publication of a copy of the Notice of Default and Foreclosure Sale once a week during three successive calendar weeks in a newspaper of general circulation in the county or counties in which the security property is located. To the extent practicable, the newspaper or newspapers chosen shall have circulation which is conducive to achieving notice of foreclosure by publication. In deciding which newspaper or newspapers have such circulation, the commissioner need not select the newspaper with the largest circulation. The date of the last publication shall be not less than four nor more than twelve days before the sale date. If there is no newspaper of general circulation in the county or counties in which the security property is located, service shall be made by posting the Notice of Default and Foreclosure Sale in at least three public places in each such county at least 21 days prior to the date of sale. The Notice of Default and Foreclosure Sale which is published pursuant to this paragraph may omit a description of the default, as otherwise required by paragraph (b)(8) of this section, if the commissioner, in his or her discretion, so determines; and

(5) By posting a copy of the Notice of Default and Foreclosure Sale in a prominent place at or near the security property for at least 15 consecutive days before the foreclosure sale. If the property to be sold consists of two or more noncontiguous parcels of land, a copy of the Notice shall be posted in a prominent place on each such parcel. If the property consists of two or more separate buildings, a copy of the Notice shall be posted in a prominent place on each such building. The Notice shall also be posted in the project office and in such other appropriate conspicuous places as the commissioner deems appropriate for providing notice to all tenants. Posting shall not be required if the commis

24 CFR Subtitle A (4-1-93 Edition)

sioner in his or her discretion finds that the act of posting is likely to lead to a breach of the peace or may result in the increased risk of vandalism or damage to the property. Any such finding will be made in writing. Entry on the premises by the commissioner for the purpose of posting shall be privileged as against all other persons.

(d) Service made under paragraphs (c) (1), (2) and (3) of this section is deemed to have been made upon mailing, whether or not the Notice was received and whether or not a return receipt is received or the letter containing the Notice is returned.

(e) When service of the Notice of Default and Foreclosure Sale is made pursuant to paragraph (c) (1), (2) or (3) of this section, the commissioner shall at the same time and in the same manner serve a copy of the instrument by which the General Counsel, under § 27.10(b), has designated him or her to act as commissioner.

(f) At least 7 days before the foreclosure sale, the commissioner will record both the instrument designating him or her to act as commissioner and the Notice of Default and Foreclosure Sale in the same office or offices in which the mortgage was recorded.

[49 FR 7074, Feb. 24, 1984, as amended at 50 FR 41345, Oct. 10, 1985]

§ 27.20 Conditions of foreclosure sale.

(a) If a majority of the residential units in a property subject to foreclosure sale pursuant to this part are occupied by residential tenants either on the date of the foreclosure sale or on the date on which the General Counsel designates the foreclosure commissioner, the Secretary shall require, as a condition and term of the sale, that the purchaser at a foreclosure sale (other than the Secretary) agree to continue to operate the property in accordance with such terms of the loan program under section 312 of the Housing Act of 1964, the program under which insurance under title II of the National Housing Act was originally provided with respect to such property, or of any applicable regulatory or other agreement in effect with respect to such property immediately prior to the time of foreclosure sale as