[Federal Register: May 24, 2006 (Volume 71, Number 100)]
[Notices]
[Page 29912-29914]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24my06-37]
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DEPARTMENT OF AGRICULTURE
Rural Housing Service
Notice of Availability of Hurricane Disaster Assistance--Section
502 Guaranteed Loan Program
AGENCY: Rural Housing Service, USDA.
ACTION: Notice of funding availability.
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SUMMARY: The Rural Housing Service, an agency within the USDA Rural
Development mission area, provides housing loan guarantees to rural
residents through its Section 502 Guaranteed Loan Program. The
Department of Defense, Emergency Supplemental Appropriations to Address
Hurricanes in the Gulf of Mexico and Pandemic Influenza Act, 2006
(Act), Pub. L. 109-148 (12/30/05) provides USDA Rural Development with
additional authorities and resources to address the damage caused by
hurricanes that occurred during the 2005 calendar year. The intent of
this NOFA is to introduce a temporary Mortgage Recovery Advance Program
for existing Section 502 Guaranteed Loan Program borrowers impacted by
certain 2005 hurricanes.
DATES: Effective Date: May 24, 2006 to April 30, 2007.
FOR FURTHER INFORMATION CONTACT: Stuart Walden, Senior Loan Specialist,
Section 502 Guaranteed Loan Program--STOP 0784 (Room 2250), U.S.
Department of Agriculture, Rural Housing Service, 1400 Independence
Ave. SW., Washington, DC 20250-0784.
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The paperwork burden has been cleared by the Office of Management
and Budget (OMB) under OMB Control Number 0575-0078.
Overview
Based upon the extensiveness and the magnitude of the damage to
housing in the Gulf Coast Region, USDA Rural
[[Page 29913]]
Development's Section 502 Guaranteed Loan Program is making $500,000
available for assistance for Mortgage Recovery Advances. These funds
will be made available on a first-come, first-served basis. Additional
funding for this initiative is not expected. Funding for this
initiative will be derived from funds made available through the Act.
A Notice of Funds Availability (NOFA) related to the Act (71 FR
12671-74, March 13, 2006) provided access to the following funding
levels for USDA Rural Development single family housing programs in
designated disaster areas:
$1,293,103,000 in deliverable Section 502 guaranteed
homeownership funds;
$175,593,000 in deliverable Section 502 direct
homeownership funds;
$34,188,000 in deliverable Section 504 direct repair/
rehabilitation loans; and
$20,000,000 in deliverable Section 504 direct repair/
rehabilitation grants.
Expanding the assistance made available under the Act to cover
Mortgage Recovery Advances will reduce, slightly, the amount of funds
made available for new Section 502 Guaranteed Loans provided for
through the Act's provisions. It is anticipated that there will be
ample funding for new loan Section 502 Guaranteed Loan activity.
USDA Rural Development intends to expand the single family housing
program options made available by the Act and the March 13, 2006, NOFA
through the availability of a Mortgage Recovery Advance program for
existing Section 502 Guaranteed Loan Program borrowers ( herein
referred to as ``borrowers'') who are in default on their housing loans
due to 2005 hurricane-related impacts. Mortgage Recovery Advances will
reduce foreclosure rates and overall guaranteed loan losses for USDA
Rural Development in affected areas. As a home retention and loss
mitigation option, eligible delinquent borrowers may receive a one-time
advance from their loan servicer in an amount equal to not more than 12
months past due mortgage payments, to include past due principal,
interest, taxes, and insurance. Mortgage Recovery Advances are designed
to assist borrowers who do not currently have the ability to support
their normal monthly mortgage obligation due to a verifiable loss of
income, increase in living expenses attributable to the hurricanes, and
who have exhausted other home retention loss mitigation options. The
advance would be applied directly to the eligible borrowers' delinquent
mortgage installments in order to bring the loan into a current and
performing status.
Only approved lenders, as prescribed in 7 CFR section 1980.308 may
hold Section 502 Guaranteed loans. Loan servicers processing Mortgage
Recovery Advances described in the Notice may not always be approved
holding lenders. Approved holding lenders are responsible for the
actions of any loan servicer they may employ for servicing section 502
guaranteed loans.
Upon application, loan servicers will be reimbursed by USDA Rural
Development for eligible advances made under the Mortgage Recovery
Advance program. The advance amount will be recorded as a junior lien
on the property, and the borrower is required to repay Rural
Development at the earlier of when the Section 502 Guaranteed Loan is
paid off or when the borrower no longer owns the property. This debt
will be evidenced by a promissory note and mortgage or deed of trust.
Designated Disaster Area
The designated disaster area shall be those Presidentially-declared
areas eligible for individual assistance in the states of Alabama,
Florida, Louisiana, Mississippi, and Texas in accordance with the
Robert T. Stafford Disaster Relief and Emergency Assistance Act, 42
U.S.C. 5121 et seq.
Description of Assistance
Under the Section 502 Guaranteed Loan Program's Mortgage Recovery
Advance program, a loan servicer may, as provided in this NOFA, advance
funds on behalf of a borrower in an amount necessary to reinstate a
defaulted loan, and file a request to USDA Rural Development to be
reimbursed for the amount of the advance.
All Mortgage Recovery Advances will require Agency approval prior
to settlement. Each eligible advance that is executed by a loan
servicer will entitle them to a one-time compensation payment of
$500.00 from Rural Development to defray expenses associated with the
action.
Borrower Qualifications
Borrowers must meet the following requirements to be eligible for a
Mortgage Recovery Advance:
(1) The borrower's loan default must have resulted from one or more
of the 2005 hurricanes, such as water or wind damage to the dwelling,
increase in expenses, or loss of income as a result of the disaster.
(2) The borrower must have lived or worked in a designated disaster
area at the time of the disaster.
(3) The borrower must have been current on their Section 502
Guaranteed Loan, including those accounts performing under a repayment
plan or forbearance agreement, prior to the disaster.
(4) The borrower's account must be in arrears at least four but not
more than twelve installments. The loan servicer's Mortgage Recovery
Advance will include, in addition to the initial four delinquent
installments, only the amount necessary to meet the borrower's
arrearages, not to exceed the equivalent of 12 months of past due
principal, interest, taxes, and hazard insurance. The lender or holder
is requested to perform an escrow analysis prior to filing the claim to
ensure that the partial claim payment made on behalf of the mortgagor
represents, as accurately as possible, the escrow amounts required for
taxes and insurance.
(5) The borrower must not be eligible for other home retention loss
mitigation options, such a repayment plan, loan forbearance
arrangement, or loan modification. Accounts that are fewer than four
installments past due should be serviced using these traditional loss
mitigation workout tools.
(6) The account must not have been referred for foreclosure.
(7) The borrower must not currently have the ability to support
their normal monthly mortgage obligation due to the verifiable loss of
income or increase in living expenses or costs from property damage to
their principal residence attributable to the disaster.
(8) The borrower must continue occupying the property as a primary
residence or intend to resume occupancy on a permanent basis when the
residence becomes habitable. The impacted property must be habitable or
capable of being repaired to be habitable.
(9) The borrower must have the demonstrated ability to resume
making their regularly scheduled mortgage payment once the Mortgage
Recovery Advance has been applied to their account.
Loan Servicer Requirements
General liquidation requirements for Section 502 Guaranteed Loans
are found in 7 CFR section 1980.374. This provision requires that loan
servicers submit a plan to USDA Rural Development when an account is 90
days or greater delinquent, and a method other than foreclosure will be
used to resolve the delinquency.
[[Page 29914]]
Loan servicers must demonstrate that borrowers eligible for the
Mortgage Recovery Advance program have homes that are in a habitable
condition or will be repaired to a habitable condition, and that they
can resume making their regularly scheduled mortgage loan payments
after the Mortgage Recovery Advance is paid, using the following
standards:
(a) Estimate the borrower's anticipated monthly net income for the
same period, making necessary adjustments for income fluctuations.
(b) Estimate the borrower's normal monthly living expenses (food,
utilities, etc.) including debt service on the mortgage and other
scheduled and anticipated obligations.
(c) Subtract expenses from income to determine the amount of
surplus income available each month.
Loan Servicers must receive prior approval from USDA Rural
Development before they make a Mortgage Recovery Advance with a
defaulted borrower.
Loan servicers will be required to have the borrowers execute a
Mortgage Recovery Advance promissory note and mortgage or deed-of-trust
perfecting a lien for USDA Rural Development for the amount of the
Mortgage Recovery Advance. These RD forms are available by contacting
the USDA Rural Development, Single Family Housing Guaranteed Loan
Division, at (202) 690-4507, or by e-mail at:
SFHGLD@wdc.usda.gov. Loan
servicers will file the mortgage or deed of trust in the appropriate
local real estate records.
Repayment Terms
(a) The Mortgage Recovery Advance note and subordinate mortgage or
deed-of-trust must be recorded in favor of USDA Rural Development and
will be interest free.
(b) No monthly or periodic payments are required; however,
borrowers may voluntarily submit partial payments without incurring any
prepayment penalty.
(c) The note is due at the earlier of:
(1) The payoff of the first lien mortgage and the guaranteed note;
or
(2) When the borrower transfers title to the property by voluntary
or involuntary means.
(d) USDA Rural Development will collect this Federal debt from the
borrower by any available means if the advance is not repaid based on
the terms outlined in the promissory note and mortgage or deed-of-
trust.
(e) Repayments of all or parts of Mortgage Recovery Advances must
be collected and remitted to Rural Development by the loan servicer, or
they may be remitted directly to USDA Rural Development by the
borrower. To remit a payment via check, payable to USDA Rural
Development, include the check and along with the borrower's name and
taxpayer identification (ID) number to: USDA Rural Development, Cash
Management Branch, FC-363, Attention: Mortgage Recovery Advance, P.O.
Box 200011, St. Louis, Missouri 63120-0011.
To remit a payment electronically, contact USDA Rural Development's
Cash Management Branch at (314) 457-4023 and ask for instructions for
Remittance Express.
Filing a Claim for Reimbursement
A claim for reimbursement of the Mortgage Recovery Advance program
must be submitted to the Agency within 60 days of the advance being
executed by the borrower through their signature on the promissory
note, but no later than April 30, 2007.
When filing the claim for reimbursement to USDA Rural Development,
the loan servicer must:
(1) Submit a copy of the promissory note and filed mortgage or deed
of trust;
(2) Include a summary of the amount of the funds advanced,
including the monthly principal, interest, taxes, and insurance amount,
and other account information indicating the borrower's arrearage
before the advance as well as the present status of the account as of
the date of the advance;
(3) Provide the name, address, and tax ID number for the loan
servicer; and
(4) Provide the name, address, and phone number of a contact person
for the loan servicer that can answer questions about the reimbursement
request.
The Agency will pay the one-time $500 payment to the servicer with
the reimbursement.
Subsequent Borrower Default
(1) Borrowers will be eligible for only one Mortgage Recovery
Advance.
(2) If a borrower defaults on their loan after receiving a Mortgage
Recovery Advance and a loss claim is filed by the loan servicer due to
the default, any reimbursement issued for the Mortgage Recovery Advance
to the servicer on behalf of the borrower will be credited toward the
maximum loan guarantee amount payable by USDA Rural Development under
the guarantee.
Emergency Declaration
Consistent with Proclamation 7925 issued by President Bush, the
USDA Rural Development Mission Area has determined that it would be
impracticable, unnecessary, and contrary to public interest to delay
the effective date of this Notice for any reason.
Dated: May 18, 2006.
David J. Villano,
Acting Administrator, Rural Housing Service.
[FR Doc. E6-7901 Filed 5-23-06; 8:45 am]
BILLING CODE 3410-XV-P