(a) The mortgage agreement, or security
agreement in the case of a modular unit which is proposed to be purchased
under a chattel mortgage, shall provide in the case of default by the grantee
or the withdrawal or termination of the grantee from the Head Start program
that ACF may intervene. In the case of a default, the mortgage agreement or
security agreement must provide that ACF may intervene to ensure that the
default is cured by the grantee or another agency designated by ACF and that
the lender shall accept the payment of money or performance of any other
obligation by ACF's designee, for the grantee, as if such payment of money of
performance had been made by the grantee. The agreement shall also provide
that ACF will have a period of 60 days after notification by the grantee of
default in which to intervene to attempt to cure the default. The agreement
shall further provide that in the event of a default, or the withdrawal or
termination of the grantee the mortgage may be assumed by an organization
designated by ACF. The mortgage or creditor will have the right to approve the
organization designated to assume the mortgage, but such approval will not be
withheld except for good reason. The required provisions must be included in
the mortgages of facilities funded as continuing purchases pursuant to Sec.
1309.2 unless a convincing justification for not doing so is shown by the Head
Start grantee.
(b) The grantee
must immediately provide the responsible HHS official with both telephonic and
written notification of a default of any description on the part of the
grantee under a real property or chattel mortgage.
(c) In the event
that a default is not cured and foreclosure takes place, the mortgagee or
creditor shall pay ACF that percentage of the proceeds from the foreclosure
sale of the property attributable to the Federal share as defined in 45 CFR
74.2, or, if part 92 is applicable, to ACF's share as defined in 45 CFR 92.3.
If ACF and the mortgagee or creditor have agreed that ACF's Federal interest
will be subordinated to the mortgagee's or creditor's interest in the
property, that agreement must be set forth in a written subordination
agreement that is signed by the responsible HHS official and that complies
with Sec. 1309.21 and any other applicable Federal law.
[64 FR 5945, Feb. 8,
1999, as amended at 68 FR 23222, May 1, 2003]
