24 C.F.R. Subpart C—Contract Rights and Obligations
Title 24 - Housing and Urban Development
The provisions of §§203.430 through 203.435 of this chapter shall be applicable to mortgages eligible for insurance under this part. Mortgages insured under this part shall be obligations of the General Insurance Fund. [60 FR 42761, Aug. 16, 1995]
Title 24: Housing and Urban Development
PART 206—HOME EQUITY CONVERSION MORTGAGE INSURANCE
Subpart C—Contract Rights and Obligations
Sale, Assignment and Pledge
§ 206.101 Sale, assignment and pledge of insured mortgages.
§ 206.102 General Insurance Fund.
Mortgage Insurance Premiums
§ 206.103 Payment of MIP.
The payment of any MIP under this subpart shall be made to the Secretary by the mortgagee in cash, until the contract of insurance is terminated.
§ 206.105 Amount of MIP.
(a) Initial MIP. The mortgagee shall pay to the Secretary an initial MIP of two percent of the maximum claim amount.
(b) Monthly MIP. Monthly MIP will accrue daily on the mortgage balance at a rate equivalent to one-half of one percent per annum and shall be added to the mortgage balance when paid to the Secretary.
(Approved by the Office of Management and Budget under control number 2528–0133)§ 206.107 Mortgagee election of assignment or shared premium option.
(a) Election of option. Before the mortgage is submitted for insurance endorsement, the mortgagee shall elect either the assignment option or the shared premium option.
(1) Under the assignment option, the mortgagee shall have the option of assigning the mortgage to the Secretary if the mortgage balance is equal to or greater than 98 percent of the maximum claim amount, or the mortgagor has requested a payment which exceeds the difference between the maximum claim amount and the mortgage balance and:
(i) The mortgagee is current in making the required payments under the mortgage to the mortgagor;
(ii) The mortgagee is current in its payment of the MIP (and late charges and interest on the MIP, if any) to the Secretary;
(iii) The mortgage is not due and payable under §206.27(c)(1); and
(iv) The mortgagee has not informed the Secretary of an event described in §206.27(c)(2), or the Secretary has been so informed but has denied approval for the mortgage to be due and payable. At the mortgagee's option, the mortgagee may forgo assignment of the mortgage and file a claim under any of the circumstances described in §206.123(a)(2)–(5).
(v) The mortgage is a first lien of record and title to the property securing the mortgage is good and marketable. The provisions of §203.353 of this chapter pertaining to mortgagee certifications, §203.387 of this chapter pertaining to title evidence, and §203.389 of this chapter pertaining to waived title objections also apply.
(2) Under the shared premium option, the mortgagee may not assign a mortgage to the Secretary unless the mortgagee fails to make payments and the Secretary demands assignment (§206.123(a)(2)), but the mortgagee shall only be required to remit a reduced monthly MIP to the Secretary. The mortgagee shall collect from the mortgagor the full amount of the monthly MIP provided in §206.105(b) but shall retain a portion of the monthly MIP paid by the mortgagor as compensation for the default risk assumed by the mortgagee. The portion of the MIP to be retained by a mortgagee shall be determined by the Secretary as calculated in §206.109. For a particular mortgage, the applicable portion shall be determined as of the date of the commitment. The mortgagee retains the right to file a claim under any of the circumstances described in §206.123(a)(2)–(5).
(b) No election for shared appreciation. Shared appreciation mortgages shall be insured by the Secretary only under the shared premium option.
[54 FR 24833, June 9, 1989, as amended at 60 FR 42761, Aug. 16, 1995]
§ 206.109 Amount of mortgagee share of premium.
Using the factors provided by the Secretary, the amount of the mortgagee share of the premium shall be determined for each mortgage based upon the age of the youngest mortgagor and the expected average mortgage interest rate.
§ 206.111 Due date of MIP.
(a) Initial MIP. The mortgagee shall pay the initial MIP to the Secretary within fifteen days of closing and as a condition to the endorsement of the mortgage for insurance.
(b) Monthly MIP. Each monthly MIP shall be due to the Secretary on the first business day of each month except the month in which the mortgage is closed.
§ 206.113 Late charge and interest.
(a) Late charge. Initial MIP remitted to the Secretary after the payment date in §206.111(a) and monthly MIP remitted to the Secretary 10 days after the payment date in §206.111(b) shall include a late charge of four percent of the amount paid.
(b) Interest. In addition to any late charge provided in paragraph (a) of this section, the mortgagee shall pay interest on any initial MIP remitted to the Secretary more than 30 days after closing, and interest on any monthly MIP remitted to the Secretary more than 30 days after the payment date prescribed in §206.111(b). Such interest rate shall be paid at a rate set in conformity with the Treasury Financial Manual.
(c) Paid by mortgagee. Any late charge owed by the mortgagee shall be paid from the mortgagee's funds and shall not be added to the mortgage balance of the mortgagor.
[54 FR 24833, June 9, 1989; 54 FR 32060, Aug. 4, 1989, as amended at 60 FR 42761, Aug. 16, 1995]
§ 206.115 [Reserved]
§ 206.116 Refunds.
No amount of the initial MIP shall be refundable.
[60 FR 42761, Aug. 16, 1995]
HUD Responsibility to Mortgagors
§ 206.117 General.
The Secretary is required by statute to take any action necessary to provide a mortgagor with funds to which the mortgagor is entitled under the mortgage and which the mortgagor does not receive because of the default of the mortgagee. The Secretary may hold a second mortgage to secure repayment by the mortgagor under §206.27(d) or may accept assignment of the first mortgage.
[61 FR 49033, Sept. 17, 1996]
§ 206.119 [Reserved]
§ 206.121 Secretary authorized to make payments.
(a) Investigation. The Secretary will investigate all complaints by a mortgagor concerning late payments. If the Secretary determines that the mortgagee is unable or unwilling to make all payments required under the mortgage, including late charges, the Secretary shall pay such payments and late charges to the mortgagor.
(b) Reimbursement or assignment. The Secretary may demand that within 30 days from the demand, the mortgagee reimburse the Secretary, with interest from the date of payment by the Secretary, or assign the insured mortgage to the Secretary. Interest shall be paid at a rate set in conformity with the Treasury Financial Manual. If the mortgagee complies with the reimbursement demand, then the contract of insurance shall not be affected. If the mortgagee complies by assigning the mortgage for record within 30 days of the demand, then the Secretary shall pay an insurance claim as provided in §206.129(e)(3) and assume all responsibilities of the mortgagee under the first mortgage. If the mortgagee fails to comply with the demand within 30 days, the contract of insurance will terminate as provided in §206.133(c).
(c) Second mortgage. If the contract of insurance is terminated as provided in §206.133(c), all payments to the mortgagor by the Secretary will be secured by the second mortgage, if any. Payments will be due and payable in the same manner as under the insured first mortgage. The liability of the mortgagor under the first mortgage shall be limited to payments actually made by the mortgagee to or on behalf of the mortgagor (including MIP), and shall exclude accrued interest, whether or not it has been included in the mortgage balance, and shared appreciation, if any. Interest will stop accruing on the first mortgage when the Secretary begins to make payments under the second mortgage. The first mortgage will not be due and payable until the second mortgage is due and payable.
[54 FR 24833, June 9, 1989; 54 FR 32060, Aug. 4, 1989, as amended at 60 FR 42761, Aug. 16, 1995; 61 FR 49034, Sept. 17, 1996; 61 FR 67931, Dec. 26, 1996]
Claim Procedure
§ 206.123 Claim procedures in general.
(a) Claims. Mortgagees may submit claims for the payment of the mortgage insurance benefits if:
(1) The conditions of §206.107(a)(1) pertaining to the optional assignment of the mortgage by the mortgagee have been met and the mortgagee assigns the mortgage to the Secretary;
(2) The mortgagee is unable or unwilling to make the payments under the mortgage and assigns the mortgage to the Secretary pursuant to the Secretary's demand, as provided in §206.121(b);
(3) The mortgagor sells the property for less than the mortgage balance and the mortgagee releases the mortgage of record to facilitate the sale, as provided in §206.125(c);
(4) The mortgagee acquires title to the property by foreclosure or a deed in lieu of foreclosure and sells the property as provided in §206.125(g) for an amount which does not satisfy the mortgage balance or fails to sell the property as provided in §206.127(a)(2); or
(5) The mortgagee forecloses and a bidder other than the mortgagee purchases the property for an amount that is not sufficient to satisfy the mortgage balance, as provided in §206.125(e).
(b) Expanded definition of mortgagor. The term mortgagor as used in this subpart shall have the same meaning as stated in §206.3, except that in reference to a sale by the mortgagor, the term shall also mean the mortgagor's estate or personal representative.
(Approved by the Office of Management and Budget under control number 2528–0133)[54 FR 24833, June 9, 1989, as amended at 60 FR 42761, Aug. 16, 1995]
§ 206.125 Acquisition and sale of the property.
(a) Initial action by the mortgagee. (1) The mortgagee shall notify the Secretary whenever the mortgage is due and payable under the conditions stated in §206.27(c)(1), or one of the conditions stated in §206.27(c)(2) has occurred.
(2) After notifying the Secretary, and receiving approval of the Secretary when needed, the mortgagee shall notify the mortgagor that the mortgage is due and payable, unless the mortgage is due and payable by reason of the mortgagor's death. The mortgagee shall require the mortgagor to (i) pay the mortgage balance, including any accrued interest and MIP, in full; (ii) sell the property for at least 95% of the appraised value as determined under §206.125(b), with the net proceeds of the sale to be applied towards the mortgage balance; or (iii) provide the mortgagee with a deed in lieu of foreclosure. The mortgagor shall have 30 days in which to comply with the preceding sentence, or correct the matter which resulted in the mortgage coming due and payable, before a foreclosure proceeding is begun.
(3) Even after a foreclosure proceeding is begun, the mortgagee shall permit the mortgagor to correct the condition which resulted in the mortgage coming due and payable and to reinstate the mortgage, and the mortgage insurance shall continue in effect. The mortgagee may require the mortgagor to pay any costs that the mortgagee incurred to reinstate the mortgagor, including forclosure costs and reasonable attorney's fees. Such costs shall be paid by adding them to the mortgage balance. The mortgagee may refuse reinstatement by the mortgagor if:
(i) The mortgagee has accepted reinstatement of the mortgage within the past two years immediately preceeding the current notification to the mortgagor that the mortgage is due and payable;
(ii) Reinstatement will preclude foreclosure if the mortgage becomes due and payable at a later date; or
(iii) Reinstatement will adversely affect the priority of the mortgage lien.
(b) Appraisal. The mortgagee shall obtain an appraisal of the property no later than 30 days after the mortgagor is notified that the mortgage is due and payable, or no later than 30 days after the mortgagee becomes aware of the mortgagor's death, or upon the mortgagor's request in connection with a pending sale. The property shall be appraised no later than 15 days before a foreclosure sale. The appraisal shall be at the mortgagor's expense unless the mortgage is due and payable. If the mortgage is due and payable, the appraisal shall be at the mortgagee's expense but the mortgagee shall have a right to be reimbursed out of the proceeds of any sale by the mortgagor.
(c) Sale by mortgagor. Whether or not the mortgage is due and payable, the mortgagor may sell the property for at least the lesser of the mortgage balance or the appraised value (determined under §206.125(b)). If the mortgage is due and payable at the time the contract for sale is executed, the mortgagor may sell the property for at least the lesser of the mortgage balance or five percent under the appraised value. The mortgagee shall satisfy the mortgage of record (and the Secretary will satisfy the second mortgage required under §206.27(e) of record) in order to facilitate the sale, provided that there are no junior liens (except the mortgage to secure payments by the Secretary under §206.27(e)) and all the net proceeds from the sale are paid to the mortgagee.
(d) Initiation of foreclosure. (1) The mortgagee shall commence foreclosure of the mortgage within six months of giving notice to the mortgagor that the mortgage is due and payable, or six months from the date of the mortgagor's death if applicable, or within such additional time as may be approved by the Secretary.
(2) If the laws of the State in which the mortgaged property is located or if Federal bankruptcy law does not permit the commencement of the foreclosure within six months from the date of the notice to the mortgagor that the mortgage is due and payable, the mortgagee shall commence foreclosure within six months after the expiration of the time during which such foreclosure is prohibited by such laws.
(3) The mortgagee must give written notice to the Secretary within 30 days after the initiation of foreclosure proceedings, and must exercise reasonable diligence in prosecuting the foreclosure proceedings to completion and in acquiring title to and possession of the property. A time frame that is determined by the Secretary to constitute “reasonable diligence” for each State is made available to mortgagees.
(4) The mortgagee shall bid at the foreclosure sale an amount equal to the appraised value of the property.
(e) Other bidders at foreclosure sale. If a party other than the mortgagee is the successful bidder at the foreclosure sale, the net proceeds of sale shall be applied to the mortgage balance.
(f) Deed in lieu of foreclosure. (1) In order to avoid delays and additional expense as a result of instituting and completing a foreclosure action, the mortgagee shall accept a deed in lieu of foreclosure from the mortgagor if the mortgagee is able to obtain good and marketable title from the mortgagor.
(2) In exchange for the executed and delivered deed, the mortgagee shall cancel the credit instrument and deliver it to the mortgagor and satisfy the mortgage of record.
(g) Sale of the acquired property. (1) Upon acquisition of the property by foreclosure or deed in lieu of foreclosure, the mortgagee shall take possession of, preserve and repair the property and shall make diligent efforts to sell the property within six months from the date the mortgagee acquired the property. Repairs shall not exceed those required by local law and, in cases where the sale is made with a mortgage insured by the Secretary or guaranteed by the Secretary of Veterans Affairs, those necessary to meet the objectives of the property standards required for mortgages insured by the Secretary. No other repairs shall be made without the specific advance approval of the Secretary. The mortgagee shall sell the property for an amount not less than the appraised value (as provided under paragraph (b) of this section) unless written permission is obtained from the Secretary authorizing a sale at a lower price.
(2) Repairs shall not exceed those required by local law or the requirements of the Secretary of HUD or the Secretary of Veterans Affairs if the sale of the property is financed with a mortgage insured by the Secretary of HUD or guaranteed, insured or taken by the Secretary of Veterans Affairs.
(3) The mortgagee shall not enter into a contract for the preservation, repair or sale of the property with any officer, employee, owner of ten percent or more interest in the mortgagee or with any other person or organization having an identity of interest with the mortgagee or with any relative of such officer, employee, owner or person.
(Approved by the Office of Management and Budget under control number 2528–0133)[54 FR 24833, June 9, 1989; 54 FR 32060, Aug. 4, 1989, as amended at 60 FR 42761, Aug. 16, 1995; 61 FR 49034, Sept. 17, 1996]
§ 206.127 Application for insurance benefits.
(a) Mortgagee acquires title. (1) The mortgagee shall apply for the payment of the insurance benefits within 15 days after the sale of the property by the mortgagee. Application shall be made by notifying the Secretary of the sale of the property, the sale price, and income and expenses incurred in connection with the acquisition, repair and sale of the property.
(2) If the property will not be sold within six months from the date the mortagee acquired title, the mortgagee shall, at least 15 days prior to the expiration of the six month period, request the Secretary to cause another appraisal of the property to be made. Within 15 days of receipt of the appraisal, the mortgagee shall apply for the insurance benefits as provided in paragraph (a) of this section, substituting the appraised value for the sale price. The mortgagee shall bear the cost of the appraisal.
(b) Party other than the mortgagee acquires title. The mortgagee shall apply for the payment of the insurance benefits within 15 days after a party other than the mortgagee acquires title to the property. Application shall be made by notifying the Secretary of the sale of the property and the sale price.
(c) Mortgagee assigns the mortgage. The mortgagee shall file its claim for the payment of the insurance benefits within 15 days after the date the mortgage is assigned for record to the Secretary. The application for the payment of the insurance benefits shall include the items listed in §203.351(a) of this chapter and the certification required under §203.353 of this chapter.
(Approved by the Office of Management and Budget under control number 2528–0133)§ 206.129 Payment of claim.
(a) General. If the claim for the payment of the insurance benefits is acceptable to the Secretary, payment shall be made in cash in the amount determined under this section.
(b) Limit on claim amount. In no case may the claim paid under this subpart exceed the maximum claim amount. The interest allowance provided in paragraphs (d)(2)(iii), (e)(2) and (f)(2) of this section shall not be included in determining the limit on the claim amount.
(c) Shared appreciation mortgages. The terms mortgage balance and accrued interest as used in this section do not include interest attributable to the mortgagee's share of the appreciated value of the property.
(d) Amount of payment—mortgagee acquires title or is unsuccessful bidder. This paragraph describes the amount of payment if the mortgagee acquires title by purchase, foreclosure, or deed in lieu of foreclosure, or when a party other than the mortgagee is the successful bidder at the foreclosure sale.
(1) The amount of the claim shall be computed by (i) totalling the mortgage balance, (including any accrued interest and MIP which have been added to the mortgage balance) and any accrued interest which has not been added to the mortgage balance as of the due date (defined in the following sentence), and allowances for items set forth in paragraph (d)(2) of this section, and (ii) subtracting from that total the amount for which the property was sold (or the appraised value determined under §206.127(a)) and the items set forth in paragraph (d)(3) of this section. Due date means the date when the mortgagee notifies the Secretary under §206.27(c)(1) that the mortgage became due and payable, or, if applicable, the date the Secretary granted approval under §206.27(c)(2) for the mortgage to become due and payable.
(2) The claim shall include the following items:
(i) Items listed in §203.402 (a), (b), (c), (d), (e), (g), (j), and (s), and §204.322(l) of this chapter.
(ii) Foreclosure costs or costs of acquiring the property actually paid by the mortgagee and approved by HUD, in an amount not in excess of two-thirds of such costs or $75, whichever is the greater. For mortgages insured after March 1, 1997, HUD may reimburse a percentage of foreclosure costs or costs of acquiring the property, which percentage shall be determined in accordance with such conditions as HUD shall prescribe.
(iii) An amount equal to the interest allowance which would have been earned, from the due date to the date when payment of the claim is made, if the claim had been paid in debentures, except that when the mortgagee fails to meet any one of the applicable requirements of §§206.125 and 206.127 of this subpart within the specified time, and in a manner satisfactory to the Secretary (or within such further time as the Secretary may approve in writing), the interest allowance in such cash payment shall be computed only to the date on which the particular required action should have been taken or to which it was extended. The provisions of §§203.405 through 203.411 of this chapter pertaining to debentures are incorporated by reference.
(iv) Costs of any appraisal obtained under §§206.125 or 206.127, provided that the appraisal was obtained after the mortgage became due and payable and that the mortgagee is not otherwise reimbursed for such costs.
(v) Reasonable payments made by the mortgagee for:
(A) Preservation and maintenance of the property;
(B) Repairs necessary to meet the objectives of the property standards required for mortgages insured by the Secretary, those required by local law, and such additional repairs as may be specifically approved in advance by the Commissioner; and
(C) Expenses in connection with the sale of the property including a sales commission at the rate customarily paid in the community and, if the sale to the buyer involves a mortgage insured by the Secretary or guaranteed by the Secretary of Veterans Affairs, a discount at a rate not to exceed the maximum allowable by the Commissioner, as of the date of execution of the discounted loan, on sales of properties acquired by the Commissioner pursuant to §§203.295 through 203.426 of this chapter.
(vi) A certification that the property is undamaged in accordance with §203.380 of this chapter.
(3) There shall be deducted from the amount computed in paragraph (d)(1)(i) of this section:
(i) The items listed in §203.403 of this chapter; and
(ii) Any adjustment for damage or neglect to the property pursuant to §§203.377, 203.378, and 203.379 of this chapter.
(e) Amount of payment—assigned mortgages. This paragraph describes the amount of payment if the mortgagee assigns a mortgage to the Secretary under §206.107(a)(1) or §206.121(b).
(1) When a mortgagee assigns a mortgage which is eligible for assignment under §206.107(a)(1), the amount of payment shall be computed by subtracting from the mortgage balance on the date of assignment the items set forth in §203.404(b) of this chapter and any adjustments for damage or neglect to the property pursuant to §§203.377, 203.378 and 203.379 of this chapter.
(2) The claim shall also include:
(i) Reimbursement for such costs and attorney's fees as the Secretary finds were properly incurred in connection with the assignment of the mortgage to the Secretary, and
(ii) An amount equivalent to the interest allowance which will have been earned from the date the mortgage was assigned to the Secretary to the date the claim is paid, if the claim had been paid in debentures, except that if the mortgagee fails to meet any of the requirements of §206.127(c), or §206.131 if applicable, within the specified time and in a manner satisfactory to the Secretary (or within such further time as the secretary may approve in writing), the interest allowance in the payment of the claim shall be computed only to the date on which the particular required action should have been taken or to which it was extended. The provisions of §§203.405 through 203.411 of this chapter pertaining to debentures are incorporated by reference.
(3) When a mortgagee assigns a mortgage under §206.121(b) after demand by the Secretary, the mortgagee will not receive the entire claim payment as contained in paragraphs (e)(1) and (2) of this section. The amount of the claim shall be computed by (i) totalling the payments made by the mortgagee to the mortgagor or for the benefit of the mortgagor (including MIP), and subtracting from the total (ii) the items set forth in §203.404(b) of this chapter and any adjustments for damage or neglect to the property pursuant to §§203.378 and 203.379 of this chapter. The claim shall also be reduced by an amount determined by the Secretary to reimburse the Secretary for administrative expenses incurred in assuming the mortgagee's responsibility under the mortgage, which may include expenses for staff time. If more than one mortgage is assigned to the Secretary, the administrative expenses incurred for all the mortgages assigned shall be allocated among the mortgages as determined by the Secretary. The claim shall not include accrued interest whether or not it has been included in the mortgage balance.
(f) Amount of payment-mortgagor sells the property. This paragraph describes the amount of payment if the mortgagor sells the property to one other than the mortgagee for less than the mortgage balance, and the mortgagee releases the mortgage to facilitate the sale.
(1) The amount of the claim shall be computed by (i) totalling the mortgage balance (including any accrued interest and MIP which have been added to the mortgage balance) and any accrued interest which has not been added to the mortgage balance on the date the deed is recorded, and allowances for items set forth in paragraphs (d)(2)(i) and (iv) of this section as applicable, and subtracting from the total (ii) the net proceeds of the sale paid to the mortgagee and the items set forth in paragraph (d)(3) of this section.
(2) The claim shall also include an amount equivalent to the interest allowance which would have been earned from the date the deed is recorded to the date when payment of the claim is made, if the claim had been paid in debentures, except that when the mortgagee fails to meet any of the applicable requirements of §§206.125 and 206.127 of this subpart within the specified time (or within such further time as the Secretary may approve in writing), and in a manner satisfactory to the Secretary, the interest allowance in such cash payment shall be computed only to the date on which the particular action should have been taken or to which it was extended. The provisions of §§203.405 through 203.411 of this chapter pertaining to debentures are incorporated by reference.
[54 FR 24833, June 9, 1989; 54 FR 32060, Aug. 4. 1989, as amended at 60 FR 42761, Aug. 16, 1995; 61 FR 35020, July 3, 1996]
Condominiums
§ 206.131 Contract rights and obligations for mortgages on individual dwelling units in a condominium.
(a) Additional requirements. The requirements of this subpart shall be applicable to mortgages on individual dwelling units in a condominium, except as modified by this section.
(b) References. The term property as used in this subpart shall be construed to include the individual dwelling unit and the undivided interest in the common areas and facilities as may be designated.
(c) Assignment of the mortgage. If the mortgagee assigns the mortgage on the individual dwelling unit to the Secretary, the mortgagee shall certify:
(1) To any changes in the plan of apartment ownership including the administration of the property;
(2) That as of the date the assignment is filed for record, the family unit is assessed and subject to assessment for taxes pertaining only to that unit; and
(3) To the condition of the property as of the date the assignment is filed for record. Section 234.275 of this chapter concerning the certification of condition is incorporated by reference.
(d) Condition of the multifamily structure. The provisions of §234.270 (a) and (b) of this chapter concerning the condition of the multifamily structure in which the property is located shall be applicable to mortgages insured under this part which are assigned to the Secretary.
(Approved by the Office of Management and Budget under control number 2528–0133)[54 FR 24833, June 9, 1989; 54 FR 32060, Aug. 4, 1989]
Termination of Insurance Contract
§ 206.133 Termination of insurance contract.
(a) Payment of the mortgage. The contract of insurance shall be terminated if the mortgage is paid in full.
(b) Acquisition of title. If the mortgagee or a party other than the mortgagee acquires title at a foreclosure sale, or the mortgagee acquires title by a deed in lieu of foreclosure, and the mortgagee notifies the Secretary that a claim for the payment of the insurance benefits will not be presented, the contract of insurance shall be terminated.
(c) Mortgagee fails to make payments. If the mortgagee fails to make the payments to the mortgagor as required under the mortgage, and does not reimburse the Secretary or assign the mortgage to the Secretary within 30 days from the demand by the Secretary for reimbursement or assignment, the contract of insurance shall automatically terminate. The Secretary may later reinstate the contract of insurance, which shall continue in force as if no termination had occurred, upon reimbursement with interest as provided in §206.121. Upon reinstatement, the mortgagee shall be liable for all MIP which would have been due if no termination had occurred, including late charge and interest as provided in §206.113.
(d) Notice of termination. The mortgagee shall give written notice to the Secretary within 15 days of the occurrence of an event under paragraphs (a) and (b) of this section. No contract of insurance shall be terminated under paragraphs (a) or (b) of this section unless such notice is given.
(e) Voluntary termination. The mortgagor and the mortgagee may jointly request the Secretary to approve the voluntary termination of the mortgage insurance contract. Prior to approval, the Secretary shall make certain that the mortgagor is aware of the consequences which could arise out of the voluntary termination of the contract of insurance. The provisions of §203.295 of this chapter concerning voluntary termination shall apply when a contract of insurance under this part is voluntarily terminated.
(f) Effect of termination. When the insurance contract is terminated, the mortgagee shall pay the monthly MIP which has accrued for the current month and which has not yet been paid to the Secretary, but the obligation to pay any subsequent MIP shall cease and all rights of the mortgagor and mortgagee shall be terminated except as otherwise provided in this part.
(Approved by the Office of Management and Budget under control number 2528–0133)[54 FR 24833, June 9, 1989, as amended at 61 FR 49034, Sept. 17, 1996]
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