80 FR 61980 - Federal Housing Administration (FHA): Court of Competent Jurisdiction To Foreclose Liens on FHA-Owned Properties

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Federal Register Volume 80, Issue 199 (October 15, 2015)

Page Range		61980-61981
FR Document		2015-26160

The Federal Housing Administration (FHA) generally acquires title to single family properties when it pays mortgage insurance benefits to approved mortgagees. FHA's activities in managing and marketing the properties it acquires include paying real estate taxes referred to as ad valorem taxes (a tax based on the value of the property) and special assessments. For properties in condominiums or planned unit developments, FHA also pays homeowners' association or condominium association fees. During the period over which an insured lender forecloses and FHA becomes the owner of the property, taxes or other fees may become due and payable. With lenders conveying close to 100,000 properties annually to FHA, bills for taxes and fees may be past due and payable at the time of FHA's acquisition and suits are brought for payment of taxes and fees. This rule provides HUD's interpretation of the ``sue and be sued'' clause contained in section 1, Title I of the National Housing Act. This rule provides that, in the case of an action brought against HUD to foreclose on a lien arising out of unpaid taxes or fees, the term ``court of competent jurisdiction'' as used in section 1 of the National Housing Act refers to a United States District Court. In conjunction with this interpretive rule, HUD is providing, by separate notices published in today's Federal Register, direction to taxing authorities and other entities owed money as to the proper Point of Contact (POC) at HUD for seeking payment. In the unlikely event that payment is not timely made, the entity can bring an action under the Quiet Title Act in the appropriate United States District Court to foreclose on its lien interest in the property.

Federal Register, Volume 80 Issue 199 (Thursday, October 15, 2015)

[Federal Register Volume 80, Number 199 (Thursday, October 15, 2015)]
[Rules and Regulations]
[Pages 61980-61981]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-26160]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 203

[Docket No. FR-5823-IA-01]


Federal Housing Administration (FHA): Court of Competent 
Jurisdiction To Foreclose Liens on FHA-Owned Properties

AGENCY: Office of the General Counsel, HUD.

ACTION: Interpretive rule.

-----------------------------------------------------------------------

SUMMARY: The Federal Housing Administration (FHA) generally acquires 
title to single family properties when it pays mortgage insurance 
benefits to approved mortgagees. FHA's activities in managing and 
marketing the properties it acquires include paying real estate taxes 
referred to as ad valorem taxes (a tax based on the value of the 
property) and special assessments. For properties in condominiums or 
planned unit developments, FHA also pays homeowners' association or 
condominium association fees. During the period over which an insured 
lender forecloses and FHA becomes the owner of the property, taxes or 
other fees may become due and payable. With lenders conveying close to 
100,000 properties annually to FHA, bills for taxes and fees may be 
past due and payable at the time of FHA's acquisition and suits are 
brought for payment of taxes and fees. This rule provides HUD's 
interpretation of the ``sue and be sued'' clause contained in section 
1, Title I of the National Housing Act. This rule provides that, in the 
case of an action brought against HUD to foreclose on a lien arising 
out of unpaid taxes or fees, the term ``court of competent 
jurisdiction'' as used in section 1 of the National Housing Act refers 
to a United States District Court. In conjunction with this 
interpretive rule, HUD is providing, by separate notices published in 
today's Federal Register, direction to taxing authorities and other 
entities owed money as to the proper Point of Contact (POC) at HUD for 
seeking payment. In the unlikely event that payment is not timely made, 
the entity can bring an action under the Quiet Title Act in the 
appropriate United States District Court to foreclose on its lien 
interest in the property.

DATES: Effective Date: October 15, 2015.

FOR FURTHER INFORMATION CONTACT: Bruce S. Albright, Senior Trial 
Attorney and Litigation Risk Advisor, Office of Litigation, Office of 
General Counsel, Department of Housing and Urban Development, 451 7th 
Street SW., Room 10258, Washington, DC 20410-8000; telephone number 
202-708-0300 (this is not a toll-free number). Persons with hearing or 
speech challenges may access this number through TTY by calling the 
toll-free Federal Relay Service at 800-877-8339.

SUPPLEMENTARY INFORMATION: 

I. Background

    Under FHA's single family mortgage insurance program, FHA took 
title to approximately 94,500 properties in Fiscal Year (FY) 2012 by 
paying insurance claims to approved mortgagees. In recouping its losses 
to the Mutual Mortgage Insurance Fund (MMIF), FHA manages and markets 
these properties through contractors.
    There is a time lag between a mortgagee initiating and completing 
the foreclosure of a defaulted insured mortgage and FHA acquiring and 
managing the property. Taxes or Homeowners Association (HOA) or 
Condominium Association (CA) fees, or fees for special assessments may 
come due and payable at the time when the property is being conveyed to 
FHA (or shortly thereafter) for the insurance benefits. HUD issued 
Mortgagee Letter 2013-18 on May 31, 2013, addressing unpaid tax and 
association fees.\1\ This Mortgagee Letter may reduce, but not entirely 
eliminate, problems FHA has faced with unpaid taxes and fees when FHA 
takes title to single family properties. Correspondence regarding tax 
and other property charges and assessments are presently sent to a 
myriad of addresses--either to FHA's headquarters and field offices 
across the nation, or to the contractors handling the management of the 
FHA properties.
---------------------------------------------------------------------------

    \1\ See http://portal.hud.gov/hudportal/documents/huddoc?id=13-18ml.pdf.
---------------------------------------------------------------------------

    If a taxing authority, HOA, CA, or special assessment entity is 
unable to obtain payment of the amounts due after sending out notices 
and contacting FHA offices and contractors, its alternative has been to 
perfect a lien under applicable local law and then attempt to enforce 
the lien against the HUD owned property by foreclosing the lien on the 
property. Normally, absent the involvement of a Federal agency, this is 
accomplished under a state court procedure, which varies greatly from 
jurisdiction to jurisdiction as to the time period in which to respond 
to the summons and complaint, as well as upon who service is required 
to be made. HUD's involvement as a Federal government agency, however, 
means that the proper venue should be in Federal District Court. On 
occasion, when actions are brought in state court, the government's 
interest cannot be determined quickly enough for a U.S. Attorney's 
Office to timely respond to a complaint that seeks to foreclose FHA's 
ownership interest in a property. If the property is taken by the 
taxing authority or other entity, FHA must expend time and resources to 
recover the property, and may even lose its ability to recoup its 
insurance losses to the Mutual Mortgage Insurance Fund (MMIF).

II. This Interpretive Rule

A. Introduction

    This interpretive rule clarifies HUD's longstanding position on the 
question of what is meant by the term ``court of competent 
jurisdiction'' in the ``sue and be sued'' clause contained in section 
1, Title I of the National Housing Act (NHA) (12 U.S.C. 1702). The 
purpose of this clarification is to assist FHA to efficiently manage 
its real estate owned (REO) inventory and ensure prompt payment for 
taxes and other fees and assessments. The purpose is also to protect 
FHA's MMIF assets, which include acquired single family properties.\2\ 
By accompanying notices in

[[Page 61981]]

today's Federal Register, HUD provides specific POCs at HUD's Home 
Ownership Centers (HOCs) that holders of liens on HUD single family 
property may use to present requests for payment. The publication and 
use of these POCs by the public should help obviate the need for 
litigation to enforce non-payment of liens against FHA properties. This 
interpretive rule provides the process for initiating suit against FHA 
if for some reason payment is not made and the taxing authority or 
other entity has a lien that it seeks to foreclose.
---------------------------------------------------------------------------

    \2\ Section 202(a)(3) of the National Housing Act (12 U.S.C. 
1708(a)(3)) imposes a fiduciary duty on the Secretary to protect the 
Mutual Mortgage Insurance Fund. Section 4(b) of the Department of 
HUD Act (42 U.S.C. 3533(b)) requires the Secretary to hold FHA 
managers responsible for protecting federal assets and performing 
risk management. This interpretive rule is issued pursuant to these 
statutory mandates.
---------------------------------------------------------------------------

B. HOC POCs

    Ancillary to the interpretive rule, HUD is providing POCs in each 
of its four HOCs to receive tax bills and similar billings. Each HOC 
oversees on average 13 states/jurisdictions for FHA activities and has 
an REO division that handles the day-to-day oversight of FHA's acquired 
properties. In most cases, having a known POC to send billings should 
obviate the need to have to bring suit against HUD to levy on a 
property.

C. Jurisdiction

    In the unlikely event it becomes necessary for a taxing authority 
or HOA, CA or special assessment entity to proceed against HUD's 
property, this interpretive rule explains the exclusive federal 
jurisdiction for such an action. Section 1 title I, of the NHA provides 
a limited waiver of sovereign immunity. Under that provision: ``[T]he 
Secretary shall, in carrying out the functions of this title and titles 
II, III . . . be authorized, in his official capacity, to sue and be 
sued in any court of competent jurisdiction, State or Federal.'' 
(Underlining is provided for emphasis). This section was added to the 
NHA by the Banking Act of 1935, sec. 334, Title III, Public Law 74-305, 
49 Stat. 684, approved August 23, 1935). In 1972, Congress passed the 
Quiet Title Act (QTA) (Pub. L. 92-562, 86 Stat. 1176). The QTA made two 
changes to Title 28 of the United States Code, which title of the code 
governs the federal judicial system and judiciary procedures. First, 
the QTA created a new 28 U.S.C. 2409a, entitled ``Real Property Quiet 
Title Actions.'' Paragraph (a) of section 2409a states, ``The United 
States may be named as a party defendant in a civil action under this 
section to adjudicate a disputed title to real property in which the 
United States claims an interest.'' Second, QTA amended 28 U.S.C. 1346, 
entitled ``United States as defendant'' by adding a new paragraph (f), 
which states, ``The district courts shall have exclusive original 
jurisdiction of civil actions under section 2409a to quiet title to an 
estate or interest in property in which an interest is claimed by the 
United States.''
    The Supreme Court succinctly explained the lack of jurisdiction in 
state courts and the exclusivity of federal court jurisdiction in QTA 
actions in California v. Arizona, 440 U.S. 59 (1979):

    [T]he intent of Congress seems reasonably clear. The 
congressional purpose was simply to confine jurisdiction to the 
federal courts and to exclude the courts of the States, which 
otherwise might be presumed to have jurisdiction over quiet-title 
suits against the United States, once its sovereign immunity had 
been waived. . . . We find, therefore, that section 1346(f), by 
vesting `exclusive original jurisdiction' of quiet title actions 
against the United States in the federal district courts did no more 
than assure that such jurisdiction was not conferred upon the courts 
of any State.

    Federal courts have consistently held that 28 U.S.C. 2409a 
authorizes owners of an interest in real property in which an agency 
such as HUD holds an interest, including an ownership interest, to 
bring suit to foreclose the government's interest in the property. The 
QTA applies to lawsuits involving interests that could cloud title, not 
just traditional quiet title actions, as the terminology of the QTA by 
its terms includes any adjudication of a ``disputed title'' to real 
property. See, United States v. Bedford Associates, 657 F. 2d 1300, 
1316 (2d Cir. 1981), cert. den. 456 U.S. 914 (1982); Robinson v. United 
States, 586 F. 3d 683, 687 (9th Cir. 2009); Delta Sav. & Loan Ass'n. v. 
I.R.S., 847 F. 2d 248, 249 n. 1 (5th Cir. 1988); George v. United 
States, 672 F. 3d 942 (10th Cir. 2012), cert. den. 133 S. Ct. 432, __ 
U.S. __, 2012 U.S. LEXIS 7933 (2012).

III. This Interpretive Rule

    In order to have a uniform process that both the public and HUD can 
use, and which will ensure that HUD can act in a timely, accurate, and 
consistent manner to protect properties that are assets of the MMIF, it 
is HUD's interpretation that the sue and be sued clause in 12 U.S.C. 
1702, specifically the words ``court of competent jurisdiction'' means, 
for purposes of foreclosing tax, HOA, CA, special assessment (i.e., for 
sidewalks, septic or water systems and the like), or similar fees and 
assessments that result in liens on HUD properties, the United States 
District Court in the jurisdiction where the HUD property that is to be 
the subject of the lien foreclosure is situated or in Washington, DC. 
This interpretation is based on the provisions of the QTA, and the 
Supreme Court's analysis of the same in California v. Arizona and 
similar cases.
    As the exclusive venue for foreclosing a lien on HUD-owned property 
is a United States District Court, the Federal Rules of Civil Procedure 
(FRCP) must be followed. Rule 4(i) sets out the procedures to serve 
Federal agencies. Under that rule, the head of the agency or his or her 
designee must be served, as well as the United States Attorney General 
and the United States Attorney in the applicable district. HUD, by 
separate notice in today's Federal Register, pursuant to previously 
published delegations of authority, authorizes Regional Counsel in each 
of HUD's 10 Regional Counsel Offices to redelegate to staff within 
their operational jurisdictions the authority to accept service of 
process in those cases where FHA owns a property, a taxing authority, 
HOA, CA, or other entity purports to bring suit due to a nonpayment of 
taxes or other fees and assessments, and the entity seeks to foreclose 
its lien in order to obtain title to the property.

IV. Conclusion

    Accordingly, HUD interprets the ``sue and be sued'' clause of 
section 1 of title 1 of the NHA as requiring suit to be brought 
exclusively in the Federal District Court where the property is located 
(or in the Federal District Court for the District of Columbia) if a 
lienholder wishes to enforce a lien against a single family property 
owned by HUD as the result of the payment of a mortgage insurance 
claim.

    Dated: October 7, 2015.
Helen R. Kanovsky,
General Counsel.
[FR Doc. 2015-26160 Filed 10-14-15; 8:45 am]
BILLING CODE 4210-67-P

Federal Register / Vol. 80, No. 199 / Thursday, October 15, 2015 / Rules and Regulations 61981

today’s Federal Register, HUD provides entitled ‘‘United States as defendant’’ by the HUD property that is to be the
specific POCs at HUD’s Home adding a new paragraph (f), which subject of the lien foreclosure is situated
Ownership Centers (HOCs) that holders states, ‘‘The district courts shall have or in Washington, DC. This
of liens on HUD single family property exclusive original jurisdiction of civil interpretation is based on the provisions
may use to present requests for actions under section 2409a to quiet of the QTA, and the Supreme Court’s
payment. The publication and use of title to an estate or interest in property analysis of the same in California v.
these POCs by the public should help in which an interest is claimed by the Arizona and similar cases.
obviate the need for litigation to enforce United States.’’ As the exclusive venue for foreclosing
non-payment of liens against FHA The Supreme Court succinctly a lien on HUD-owned property is a
properties. This interpretive rule explained the lack of jurisdiction in United States District Court, the Federal
provides the process for initiating suit state courts and the exclusivity of Rules of Civil Procedure (FRCP) must be
against FHA if for some reason payment federal court jurisdiction in QTA followed. Rule 4(i) sets out the
is not made and the taxing authority or actions in California v. Arizona, 440 procedures to serve Federal agencies.
other entity has a lien that it seeks to U.S. 59 (1979): Under that rule, the head of the agency
foreclose. [T]he intent of Congress seems reasonably or his or her designee must be served,
clear. The congressional purpose was simply as well as the United States Attorney
B. HOC POCs
to confine jurisdiction to the federal courts General and the United States Attorney
Ancillary to the interpretive rule, and to exclude the courts of the States, which in the applicable district. HUD, by
HUD is providing POCs in each of its otherwise might be presumed to have separate notice in today’s Federal
four HOCs to receive tax bills and jurisdiction over quiet-title suits against the Register, pursuant to previously
similar billings. Each HOC oversees on United States, once its sovereign immunity published delegations of authority,
average 13 states/jurisdictions for FHA had been waived. . . . We find, therefore, authorizes Regional Counsel in each of
activities and has an REO division that that section 1346(f), by vesting ‘exclusive
HUD’s 10 Regional Counsel Offices to
handles the day-to-day oversight of original jurisdiction’ of quiet title actions
against the United States in the federal redelegate to staff within their
FHA’s acquired properties. In most operational jurisdictions the authority to
district courts did no more than assure that
cases, having a known POC to send such jurisdiction was not conferred upon the accept service of process in those cases
billings should obviate the need to have courts of any State. where FHA owns a property, a taxing
to bring suit against HUD to levy on a authority, HOA, CA, or other entity
property. Federal courts have consistently held
purports to bring suit due to a
that 28 U.S.C. 2409a authorizes owners
C. Jurisdiction nonpayment of taxes or other fees and
of an interest in real property in which
assessments, and the entity seeks to
In the unlikely event it becomes an agency such as HUD holds an
foreclose its lien in order to obtain title
necessary for a taxing authority or HOA, interest, including an ownership
to the property.
CA or special assessment entity to interest, to bring suit to foreclose the
proceed against HUD’s property, this government’s interest in the property. IV. Conclusion
interpretive rule explains the exclusive The QTA applies to lawsuits involving Accordingly, HUD interprets the ‘‘sue
federal jurisdiction for such an action. interests that could cloud title, not just and be sued’’ clause of section 1 of title
Section 1 title I, of the NHA provides a traditional quiet title actions, as the 1 of the NHA as requiring suit to be
limited waiver of sovereign immunity. terminology of the QTA by its terms brought exclusively in the Federal
Under that provision: ‘‘[T]he Secretary includes any adjudication of a District Court where the property is
shall, in carrying out the functions of ‘‘disputed title’’ to real property. See, located (or in the Federal District Court
this title and titles II, III . . . be United States v. Bedford Associates, 657 for the District of Columbia) if a
authorized, in his official capacity, to F. 2d 1300, 1316 (2d Cir. 1981), cert. lienholder wishes to enforce a lien
sue and be sued in any court of den. 456 U.S. 914 (1982); Robinson v. against a single family property owned
competent jurisdiction, State or United States, 586 F. 3d 683, 687 (9th by HUD as the result of the payment of
Federal.’’ (Underlining is provided for Cir. 2009); Delta Sav. & Loan Ass’n. v. a mortgage insurance claim.
emphasis). This section was added to I.R.S., 847 F. 2d 248, 249 n. 1 (5th Cir.
1988); George v. United States, 672 F. Dated: October 7, 2015.
the NHA by the Banking Act of 1935,
3d 942 (10th Cir. 2012), cert. den. 133 Helen R. Kanovsky,
sec. 334, Title III, Public Law 74–305, 49
Stat. 684, approved August 23, 1935). In S. Ct. 432, __ U.S. __, 2012 U.S. LEXIS General Counsel.
1972, Congress passed the Quiet Title 7933 (2012). [FR Doc. 2015–26160 Filed 10–14–15; 8:45 am]
Act (QTA) (Pub. L. 92–562, 86 Stat. III. This Interpretive Rule
BILLING CODE 4210–67–P
1176). The QTA made two changes to
Title 28 of the United States Code, In order to have a uniform process
which title of the code governs the that both the public and HUD can use, PENSION BENEFIT GUARANTY
federal judicial system and judiciary and which will ensure that HUD can act CORPORATION
procedures. First, the QTA created a in a timely, accurate, and consistent
new 28 U.S.C. 2409a, entitled ‘‘Real manner to protect properties that are 29 CFR Part 4022
Property Quiet Title Actions.’’ assets of the MMIF, it is HUD’s
interpretation that the sue and be sued Benefits Payable in Terminated Single-
Paragraph (a) of section 2409a states,
clause in 12 U.S.C. 1702, specifically Employer Plans; Interest Assumptions
‘‘The United States may be named as a
the words ‘‘court of competent for Paying Benefits
party defendant in a civil action under
jurisdiction’’ means, for purposes of
rmajette on DSK7SPTVN1PROD with RULES

this section to adjudicate a disputed AGENCY: Pension Benefit Guaranty
title to real property in which the foreclosing tax, HOA, CA, special Corporation.
United States claims an interest.’’ assessment (i.e., for sidewalks, septic or ACTION: Final rule.
Second, QTA amended 28 U.S.C. 1346, water systems and the like), or similar
fees and assessments that result in liens SUMMARY: This final rule amends the
This interpretive rule is issued pursuant to these on HUD properties, the United States Pension Benefit Guaranty Corporation’s
statutory mandates. District Court in the jurisdiction where regulation on Benefits Payable in

VerDate Sep<11>2014 14:29 Oct 14, 2015 Jkt 238001 PO 00000 Frm 00007 Fmt 4700 Sfmt 4700 E:\FR\FM\15OCR1.SGM 15OCR1

Document Created: 2018-02-27 08:52:33
Document Modified: 2018-02-27 08:52:33

Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Rules and Regulations
Action		Interpretive rule.
Dates		Effective Date: October 15, 2015.
Contact		Bruce S. Albright, Senior Trial Attorney and Litigation Risk Advisor, Office of Litigation, Office of General Counsel, Department of Housing and Urban Development, 451 7th Street SW., Room 10258, Washington, DC 20410-8000; telephone number 202-708-0300 (this is not a toll-free number). Persons with hearing or speech challenges may access this number through TTY by calling the toll-free Federal Relay Service at 800-877-8339.
FR Citation		80 FR 61980