(a)
The agency shall establish procedures to be followed by approved lending institutions in the event of default on a loan insured under this part. The agency may require that, prior to submitting a claim, an approved lending institution shall foreclose or exercise a power of sale and take possession of the property or otherwise acquire title and possession of the property within the time specified by the agency. The agency may, upon submission of the claim, pursue one of the following alternatives:
(1)
Pay the approved lending institution the benefit of the insurance.
(2)
Upon conveyance to the agency of all the right, title, and interest of the approved lending institution in the foreclosed property and the assignment of all claims of the approved lending institution against the defaulting borrower to the agency, pay to the qualified mortgage lender the sum of the unpaid principal balance of the loan, foreclosure costs, accrued interest, and other costs defined by contract.
(3)
Pay a partial claim prior to foreclosure by agreement with the insured.
(b)
In any case in which the agency has insured only a portion of the outstanding principal indebtedness of a loan, it may further provide that not more than an equivalent percentage of the total accrued interest and costs shall be payable by the agency pursuant to this section in the event of a default.