On the date of the Seller's offer to enter into an immediate purchase contract with the Association, the Seller must be the owner of the mortgage. § 1635.7 Original mortgagee. The Seller must be the original mortgagee, and must not have made any prior sale of the mortgage offered to the Association. § 1635.9 Mortgage interest rate. Except for those below market interest rate mortgages insured under sections 221(d) (3) and 221(h), each mortgage must bear interest at the highest rate permitted by FHA or VA Regulations for that type of mortgage at the time of issuance of the FHA insurance commitment or the VA Certificate of Reasonable Value. § 1635.11 Offering periods. (a) Immediate purchase contract. Mortgages may not be offered to the Association for immediate purchase prior to the date of the related FHA insurance commitment or VA Certificate of Reasonable Value, nor prior to the date of final disbursement of the loan proceeds; nor may they be offered later than 4 months after the date of the insurance or guaranty thereof. (b) Commitment contract. An offer of a commitment contract may not be delivered to the Association prior to the issuance of the FHA insurance commitment or the VA Certificate of Reasonable Value. Subject to specific contractual treatment otherwise, an offer of a commitment contract covering a multifamily housing mortgage may not be delivered to the Association subsequent to the commencement of construction or rehabilitation. § 1635.13 Maximum purchase price. The Association may not purchase any mortgage at a price in excess of par. § 1635.15 Maximum mortgage amount. In general, the original principal obligation of mortgages purchased under the Special Assistance Functions must not exceed $17,500 for each dwelling unit, or $20,000 for each dwelling unit having four or more bedrooms. These limitations do not apply to mortgages covering property located in Alaska, Guam, or Hawaii; to mortgages insured under section 220 or title VIII of the National Housing Act; to mortgages insured under section 213 of such Act and covering property located in urban renewal areas; to mortgages insured under title X of such Act with respect to new communities approved under section 1004 thereof; or, in certain circumstances of local tax abatement, to below-market interest rate mortgages insured under section 221(d)(3) of such Act. § 1635.17 Advances by seller. On the date of submission to the Association, each mortgage must be current with respect to matured installments of principal, interest, and deposits. The Seller, within the immediately preceding 3 months must not have advanced funds, nor have induced or solicited any advances of funds by another, directly or indirectly, for the payment of any amount required by the note or mortgage, except for interest accruing from the date of the note or the date of disbursement of the loan proceeds, whichever is later, to the day which precedes by 1 month the due date of the first full installment of principal and interest. § 1635.19 Credit. Except in the case of certain FHAinsured home improvement loans, each mortgage must be a first and paramount lien on the security of real property, and on the related personal property if any is required to secure the loan, subject only to liens for taxes not due and payable, acceptable special assessments not in arrears, and conditions, restrictions, and encumbrances deemed by the Association not be be material. 1635.27 Title evidence. With respect to each mortgage, the title evidence to be delivered by the Seller must meet requirements prescribed by law or the applicable FHA or VA Regulations, and must be in such form and substance as to meet the Association's title evidence requirements. § 1635.29 Hazard insurance. Property securing each mortgage must be covered by kinds and amounts of hazard insurance that meet all of the hazard insurance requirements of the Association. § 1635.31 Eligibility of VA mortgages. To be eligible for purchase by the Association, a VA-guaranteed mortgage must in all cases meet current requirements set forth in the Sellers Guide. PART 1640-SERVICING AND SALES Sec. AUTHORITY: The provisions of this Part 1640 issued under sec. 309, National Housing Act; 12 U.S.C. 1723a. SOURCE: The provisions of this Part 1640, appear at 33 F.R. 17905, Dec. 3, 1968, unless otherwise noted. § 1640.1 Servicing requirements. A seller may not service mortgages of the Association unless it has qualified as an eligible Servicer and has executed a Servicing Agreement. The Servicer must establish that it has an office with servicing facilities satisfactory to the Association located within approximately 100 miles of the mortgaged property. When the mortgage is submitted for purchase, the Servicer (whether the Seller, or another Servicer that the Seller has previously ascertained is satisfactory to the Association) must have consented to service the mortgage, and must have executed documentary evidence of such consent. This requirement does not apply to multifamily housing mortgages. § 1640.3 Servicers' compensation. The compensation of Servicers is at a contractual rate or rates, as agreed to by the Association and the Servicers. § 1640.5 Sales. Mortgages owned by the Association are available for sale to qualified investors. Information concerning possible sales can be obtained from the regional offices listed in § 1600.9 of this chapter. Funds required for the Management and Liquidating Functions are obtained principally through borrowings from the Secretary of the Treasury. Additional sources of funds are liquidations of the portfolio, sales of certificates of beneficial interests or participations in mortgages, net earnings, and appropriations. The Association is also expressly authorized to sell its obligations to private investors. The aggregate amount of such obligations issued to private investors, the proceeds of which are paid to the Secretary of the Treasury in reduction of the Association's related indebtedness, may not exceed the Association's ownership under such functions, free from any liens or encumbrances, of cash, mortgages, and other approved securities. Such obligations are not guaranteed by the United States and do not constitute a debt or obligation of the United States. All of the benefits and burdens incident to the Management and Liquidating Functions inure solely to the Secretary of the Treasury. AUTHORITY: The provisions of this Part 1660 issued under sec. 309, National Housing Act; 12 U.S.C. 1723a. SOURCE: The provisions of this Part 1660 appear at 33 F.R. 17906, Dec. 3, 1968, unless otherwise noted. § 1660.1 General. The Association is authorized by section 302(c) of the National Housing Act to create, accept, execute, and administer trusts and other fiduciary undertakings appropriate for financing purposes. In relation thereto, it is authorized to acquire and otherwise deal in any mortgages or other types of obligations in which any department or agency of the United States listed in section 302(c) (2) of such Act may have a financial interest. Under its fiduciary powers, accounted for under the Management and Liquidating Functions, the Association creates, accepts, and administers trusts consisting of interests in mortgages and obligations, sells to private investors certificates of beneficial interest, or participations, in the mortgages or obligations or in the interest and principal payments derived therefrom, and provides for payment of interest and principal and for retirement of the participations. The Association under the Management and Liquidating Functions, in its ordinary corporate capacity as contrasted to its fiduciary capacity, is expressly authorized to guarantee the participations. § 1660.3 Appropriations. There is authority for Congress to appropriate such sums as may be necessary to enable the trustor of any trust (as described in § 1660.1) to pay to the Association, as trustee, any insufficiency in aggregate receipts from the obligations The Association is authorized by section 306(g) of the National Housing Act. upon such terms and conditions as it may deem appropriate, to guarantee the timely payment of principal of and interest on securities 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 mortgage-backed securities is backed by the full faith and credit of the United States. This subpart is limited to "pass-through" securities, including (a) "straight pass-through" and (b) "modified pass-through" types, and does 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 Association's Mortgage-Backed Securities Guide and 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. § 1665.3 Eligible issuers of securities. Any mortgagee, including a State or local governmental instrumentality, which has been approved by the Federal Housing Administration and which has adequate experience and facilities to issue mortgage-backed securities may be approved for a guaranty by the Association, except that no guaranty shall be made of any security which is tax exempt under the Internal Revenue Code of 1954. No issue of securities will be approved for guaranty unless the issuer has net worth, in assets acceptable to the Association, in a ratio of (a) not less than 3 percent on the first $5 million of guaranteed securities outstanding after such issue, (b) not less than 2 percent on the succeeding $5 million, and (c) not less than 1 percent on all over $10 million, but in no case need such net worth exceed $500,000. (a) Instruments. Securities to be issued pursuant to the provisions of this subpart may, at the option of the issuer, be of one of the following types, but only one of such types may be issued against any single pool of mortgages: (1) Straight pass-through securities, which provide for the payment by the issuer to the holders of a proportionate share of the proceeds of principal and interest, as collected, on account of a pool of mortgages, less servicing fees and other specified costs approved by the Association; and (2) modified pass-through securities, which provide for such payment, whether or not collected, of both specified principal installments and a fixed rate of interest on the unpaid principal balance, with all prepayments being passed through to the holder. In the case of delinquent mortgages in a pool backing modified pass-through securities, the issuer is required to make advances if necessary to maintain the specified schedule of interest and principal payments to the holders, or at its option, at any time 90 days or more after default of any such mortgage, the issuer may repurchase such mortgage. Both straight pass-through and modified pass-through securities must specify the dates by which payments are to be made to the holders thereof, and must indicate the accounting period for collections on the pool's mortgages relating to each such payment, and the securities must also specify a date on which the entire principal to be collected will have been paid or will be payable. (b) Issue amount. Each issue of guaranteed securities must be in a minimum face amount of $2 million. The total face amount of any issue of securities cannot exceed the aggregate unpaid principal balances of the mortgages in the pool. (c) Face amount of securities. The face amount of any security cannot be less than $25,000. (d) Transferability. Securities are transferable, but the share of the proceeds collected on account of the pool of mortgages may not be payable to more than one holder with respect to any security. (e) Disclosure. The issurer must disclose both the average and the total costs to the issuer of the mortgages in the pool, whether the issuer acquired the mortgages by origination or purchase. § 1665.7 Mortgages. Each issue of guaranteed securities must be backed by a separate pool of mortgages which: (a) Are 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; (c) Will be replaced by the issuer if found defective by the Association at any time prior to 4 months after the date on which the Association issues its guaranty of the securities; and (d) Meet such other standards of acceptability as may be prescribed by the Association. § 1665.9 Pool administration. The Association will not guarantee securities if the pool arrangement proposed by the issuer does not satisfactorily provide for: (a) Servicing of the mortgages in the pool; (b) Segregation of the cash flow from mortgages in the pool from the other assets of the issuer; (c) Timely payment of principal and interest, in accordance with the terms of the guaranteed securities; (d) Notification to the Association of an impending default, on the part of the issuer, in adequate time for the Association to make timely payments on the securities; and (e) Delivery to a designated custodial agent satisfactory to the Association of the mortgage notes or other evidences of indebtedness secured by the mortgages in the pool and protection of the Association's interest in all assets in the pool as collateral for its guaranty. § 1665.11 Excess collateral. The issuer shall maintain, for the benefit of the Association, excess collateral in assets acceptable to the Association of percent of the amount of guaranteed securities outstanding. In lieu of such excess collateral the Association may accept a bond or other assurance of the faithful performance of the fiduciary responsibilities of the issuer. § 1665.13 Guaranty. With respect to straight pass-through securities, the Association guarantees the timely payment to the security holder of the proceeds of principal and interest, as collected, as undertaken in the Association's guaranty appearing on the face of the security. With respect to modified pass-through securities, the Association guarantees the timely payment, whether or not collected, of the fixed rate of interest on the outstanding balance and the specified principal installments, as undertaken in the Association's guaranty appearing on the face of the security. As to straight pass-through type securities, any failure or inability of the issuer to make payment as due, to the holders of the securities, from the proceeds from the pool of mortgages which have been collected, or because of failure to make collections, under reasonable and accepted standards of mortgage servicing, shall constitute a default of the issuer. As to modified pass-through securities, any failure or inability of the issuer to make fixed or other payments as due shall be deemed such a default. Upon any default by the issuer and payment under its guaranty by the Association, or any failure of the issuer to comply with the terms of the guaranty |