11.8.3 Conditions for Including Lockouts and/or Penalties

A. Compliance with the following conditions is required when prepayment lockouts and/or penalties are permitted.

1. Lender’s Certificate and Request for Endorsement. The Lender’s Certificate, form HUD-92434M and the Request for Endorsement, form HUD-92455M, requires the Lender to certify that in the event of a default during the term of the prepayment lockout and/or penalty (i.e., prior to the date on which prepayment may be made with a penalty of one percent or less), it will comply with Program Obligations. The Lender, in order to comply, must:

   • Request a 90-day extension of the deadline prescribed by 24 C.F.R. Section 207.258(a)(2) for filing a notice of its intention to file an insurance claim and its election to assign the mortgage.

• Assist the Borrower to arrange refinancing to cure the default and avert an insurance claim if HUD grants the requested (or shorter) extension of the notice filing deadline.

• Report to HUD at least monthly on any progress in arranging a refinancing.

• Otherwise cooperate with HUD in taking reasonable steps to avoid an insurance claim.

• Require any successors or assigns to certify in writing that they agree to be bound by these conditions for the remainder of the term of the prepayment lockout and/or penalty period; and

• Notify HUD of the delinquency where a payment is not received by the 16th day of the month in which it is due.