it may deem appropriate, to guarantee the timely payment of principal of and interest on securities of the "bond-type" which are based on and backed by a trust or pool composed of mortgages which are insured by the Federal Housing Administration or the Farmers' Home Administration, or insured or guaranteed by the Veterans' Administration. The Association's guaranty of mortgagebacked securities is backed by the full faith and credit of the United States.

(b) Sections 390.21 through 390.35 deal with such "bond-type" securities and do not purport to set forth all the procedures and requirements that apply to the issuance and guaranty of such securities. All such transactions are governed by the specific terms and provisions of the contracts entered into by the parties. Further information may be obtained from the Government National Mortgage Association, 451 Seventh

Street SW., Washington, D.C. 20414. § 390.23 Eligible issuers.

Any corporation, trust, partnership, or other entity with a net worth in assets acceptable to the Association of $50 million or more, and which has the capability to assemble acceptable and eligible mortgages in sufficient quantity to support required minimum issuances of securities, may be approved for a guaranty by the Association. Further, the Association reserves the right to limit the number of issuers in the interest of conducting an orderly market of securities of this type.

§ 390.25 Securities.

(a) Instruments. Securities to be issued pursuant to the provisions of this subpart may be in registered or bearer form. Each security shall have terms acceptable to the Association and shall specify its principal amount, the interest rate, and the maturity date, and the securities may include call provisions and other characteristics depending on current market conditions.

(b) Issue amount. Until further authorization is given, each issue of guaranteed securities must be in a minimum face amount of $100 million, and no single maturity of an issue may be in face amount less than $100 million unless the total issue exceeds $200 million. The total of the outstanding

principal balances of the mortgages upon which any issue is originally based and backed must be at least equal to 100 percent of the face amount of the issue of guaranteed securities. Such ratio as may be required by the governing trust arrangements, between mortgages and other pooled assets and securities outstanding at any one time, shall be maintained, subject to adjustment with the approval of the Association in accord with such trust arrangements.

(c) Face amount of securities. The face amount of any security cannot be less than $25,000.

(d) Transferability. Securities are transferable but, if registered, are transferable, as to the Association and the issuer, only on the books of a fiscal agent as shall be agreed upon by the Association and the issuer.

(e) Treasury approval. Issues of $100 million or larger will be subject to approval of the Secretary of the Treasury.

§ 390.27 Mortgages.

Guaranteed securities issued under these provisions must be based on and backed by mortgages pooled under trust arrangements satisfactory to the Association. Such mortgages must:

(a) Be insured under the National Housing Act or title V of the Housing Act of 1949, or insured or guaranteed under the Servicemen's Readjustment Act of 1944 or chapter 37 of title 38, United States Code.

(b) Have been insured or guaranteed no longer than 12 months prior to the date on which the Association issues its commitment to guarantee the securities;

and

(c) Meet such other standards of acceptability and eligibility as may be prescribed by the Association from time to time for the issue of mortgage-backed securities of the bond type. But with respect to any particular issue of securities, the related mortgages shall meet only such standards as may be in effect or imposed at the time of the issuance of the related commitment to guarantee. § 390.29 Trust arrangements.

(a) The pool of mortgages, together with all proceeds thereof and all other assets backing each issue of "bond-type" securities, shall be held and administered

by a corporate trustee which is subject to Federal or State regulation and which is acceptable to the Association. The issuer of the securities may qualify as trustee;

(b) The trust agreement which will be executed by the issuer, the trustee and the Association and which may be reopened subject to the approval of the Association, will provide for:

(1) The issuance of the securities, including the size or other ceilings of the issuance or issuances, the nature and provisions of the securities, the principles and methods of sale and distribution, and other material matters pertaining to issuance;

(2) Conveyance of the pooled mortgages to the trustee, in trust, to provide the base and backing for the securities and otherwise for purposes of the trust arrangements, and custody of mortgage documents;

(3) Administration of the trust, to include servicing and retirement of the securities, and servicing of the mortgages through their payment or other liquidation;

(4) Principles and methods with respect to reporting requirements, the handling of losses realized from the pooled mortgages, defaults by the issuer, and other appropriate matters;

(5) Timely payment of principal and interest in accord with the terms of securities issued;

(6) Segregation of the cash and other assets flowing or resulting from the pooled mortgages;

(7) Reinvestment of accumulations of proceeds from the pooled mortgages and other assets to the extent necessary to provide adequately for the payment of securities;

(8) Notification to the Association of any impending default of any payment of the securities, in order that the Association may make timely payments thereon;

With respect to bond-type securities, the Association will guarantee the timely payment of principal of and interest on such securities, subject to the terms and conditions thereof. The agreements and contracts among the parties will provide upon default of the issuer for the right of the Association, pursuant to section 306(g) of the National Housing Act, to take title to the mortgages and other assets that are subject to the trust arrangements, and to proceed against other assets of the issuer to the extent necessary to satisfy its own claims and the right of the holders of securities then outstanding. Such action by the Association shall be taken subject to an accounting to the issuer. § 390.33

Fees.

The Association may impose application and guaranty fees, which may vary with relation to the size or risk of the guaranty transaction undertaken. Subpart C-Miscellaneous Provisions § 390.35 Audits and reports.

The Association may at any time audit the books and examine the records of any issuer, mortgage servicer, trustee, or agent or other person bearing on its guaranty of mortgage-backed securities, and may require periodic reports from such persons.

$390.37 Applications.

Applications for guaranty should be submitted to the Association's home office located at 451 Seventh Street SW, Washington, D.C. 20414.

owner's or cooperative member's monthly mortgage payment which HUD becomes obligated to pay under an assistance payment contract.

§ 420.2 Mortgagor's required recertifica. tion.

The mortgagee shall obtain from the homeowner (or from the cooperative association on behalf of the cooperative member), on a form prescribed by the Assistant Secretary for Housing Management (hereinafter referred to as the Assistant Secretary), a recertification as to occupancy, employment, income, and family composition whenever one of the following events takes place:

(a) Annually, no earlier than 60 days before and no later than 30 days after the anniversary date of the mortgage or at such other anniversary date as set by the Assistant Secretary;

(b) No more than 30 days after the mortgagee is notified by the mortgagor or learns from any source, that the mortgagor or any adult (21 years or older) member of the family residing in the household changes or begins employment which results in an increase in the family income reported in the original application for assistance or the most recent recertification;

(c) At such other times as the Assistant Secretary may require.

§ 420.3 Mortgagor's optional recertification.

Upon request of the mortgagor or cooperative member, the mortgagee shall accept recertification whenever the mortgagor, his or her spouse or an adult (21 years or older) member of the family changes or loses employment which results in a decrease in the family income reported in the most recent certification or recertification. This recertification shall be on a form prescribed by the Assistant Secretary.

§ 420.4 Adjustment in assistance pay

ments.

The mortgagee shall make appropriate adjustments in the amount of the requested assistance payments to reflect changes in family income reported in any required or optional recertification of the homeowner or cooperative member. The adjustment shall not be retroactive except at the discretion of the Assistant Secretary. The adjustment shall apply only to assistance payments beginning

with the payment due no earlier than the first day of the month following and no later than the first day of the second month following the date the mortgagor's recertification is received by the mort

gagee.

§ 420.5 Mortgagee records.

The mortgagee shall maintain such records as the Assistant Secretary may require with respect to the mortgagor's payments, the mortgage assistance payments received from the Assistant Secretary, and the annual recertifications of financial status from the homeowner or mortgagor. Such records shall be kept on file for a period of time and in a manner prescribed by the Assistant Secretary and shall be available, when requested, for review and inspection by the Assistant Secretary or the Comptroller General of the United States.

§ 420.6 Effect of assignment of mortgage with an assistance payments

contract.

Where a mortgage covered by an assistance payment contract is sold to another approved mortgagee, the buyer shall succeed to all the rights and become bound by all the obligations of the seller under such a contract.

§ 420.7 Termination, suspension, or reinstatement of the assistance pay. ments contract.

(a) Termination. The assistance payments contract shall be terminated when any of the following events occur:

(1) The contract of mortgage insurance is terminated, except when the mortgage has been assigned to the Secretary.

(2) The property is purchased by a homeowner not qualified to receive assistance payments.

(3) The cooperative member transfers his membership and occupancy rights to a new cooperative member not qualified to receive assistance payments.

(4) When the assistance payments contract has been suspended for a period of 3 years without reinstatement.

(b) Suspension. The assistance payments contract shall be suspended when any one of the following events occurs:

(1) The homeowner, or cooperative member ceases to occupy the property, except in the following instances:

(i) The property is purchased by a homeowner who immediately assumes

the mortgage obligation with respect to which assistance payments have been made on behalf of the previous owner, and who meets the income and asset requirements prescribed by the Secretary.

(ii) The cooperative member transfers his membership and occupancy rights to a new member who meets the income and asset requirements prescribed by the Secretary.

(2) The mortgagee determines that the mortgagor or cooperative member ceases to qualify for the benefits of assistance payments by reason of his income increasing to an amount enabling him to pay the full monthly mortgage payment by using 20 percent of the family income.

(3) Foreclosure is instituted.

(4) The mortgage is unable to obtain from the homeowner (or from the cooperative association on behalf of the cooperative member) a required recertification of occupancy, employment, income, and family composition prescribed in § 420.2.

as

(5) At such other times as the Assistant Secretary may require.

(c) Effect of termination or suspension. Upon termination or suspension of the assistance payments contract, the payment due on the first day of the month in which the termination or suspension occurs shall be the last payment to which the mortgagee shall be entitled; except that, in the case of a suspended contract, payment may be resumed after the contract is reinstated pursuant to paragraph (e) of this section.

(d) Noneffect on mortgage insurance contract. The termination or suspension of the assistance payments contract, where the mortgage insurance contract is not simultaneously terminated, shall have no effect on the mortgage insurance contract.

(e) Reinstatement. Where the assistance payments contract is suspended, it may be reinstated by the Assistant Secretary at his discretion and on such conditions as he may prescribe.

§ 420.8 Effect of amendments.

The regulations in this part may be amended by the Assistant Secretary at any time from time to time, in whole or in part, but such amendment shall not adversely affect the interests of a mortgagee under an existing contract for assistance payments.

425.25 425.27 425.29

Required recertification of income.

Form of lease and occupancy agree

ment.

Optional recertification of income.
Effect of amendments.

AUTHORITY: The provisions of this Part 425 issued under sec. 211, 52 Stat. 23, as amended, sec. 236, 82 Stat. 498, as amended; 12 U.S.C. 1715b, 1715z-1.

SOURCE: The provisions of this Part 425 appear at 37 F.R. 20327, Sept. 29, 1972, unless otherwise noted.

Subpart A-Mortgage Insurance
Requirements

§ 425.1 Purpose and definitions.

(a) It is the purpose of this part to set forth those provisions contained in Part 236, Subpart A of this title which are generally applicable, after final endorsement, to housing projects receiving interest reduction payments pursuant to section 236 of the National Housing Act, and to set forth the requirements for recertification of family income by each tenant or cooperative member who is not paying the fair market rental in such a housing project.

(b) The definitions contained in § 236.2 of this title shall apply to this part. In addition, the term "Secretary" means the Secretary of the Department of Housing and Urban Development and includes such other official or officials of the Department to whom the Secretary has delegated authority to act.

§ 425.3 Operation of the project.

(a) Nonprofit mortgagors. The nonprofit mortgagor approved in accordance with the provisions of § 236.10 of this title shall be subject to such regulation or supervision as to rents, charges, and methods of operation as the Secre