www.hudclips.org U. S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT WASHINGTON, D. C. 20410-8000 April 27, 1988 OFFICE OF THE ASSISTANT SECRETARY FOR HOUSING-FEDERAL HOUSING COMMISSIONER Mortgagee Letter 88-12 TO: ALL APPROVED MORTGAGEES SUBJECT: Occupied Conveyance of One-to Four-Family Properties: Final Rule On January 14, 1988, a final rule was published in the Federal Register under the title Mutual Mortgage Insurance and Rehabilitation Loans; Conveyance of One-to Four-Family Properties Occupied by Tenants or Former Mortgagors. This final rule sets forth, in addition to revised criteria pertaining to occupied conveyance, certain procedural changes that affect mortgagees. Below is a brief discussion of those changes. Section 203.675 of the final rule requires that at least 60 days, but not more than 90 days prior to the date on which the mortgagee reasonably expects to acquire title to the property, the mortgagee shall notify the mortgagor and each head of household who is actually occupying a unit of the property of its pending acquisition by HUD. Formerly, HUD notified the occupants of pending acquisition. The enclosed notice, along with its attachments, must be used by mortgagees for this notification. The wording of the notice and attachments must not be changed, but the notice and attachments may be reformatted, with the exception of the forms HUD-9539 and HUD- 92004-G, to suit the mortgagee's internal requirements. The notice must be sent to the occupants by regular mail. Mortgagees may simultaneously send the notice both regular mail and certified mail, Return Receipt Requested. Mortgagees must also send a copy of the notice to the HUD Field Office which has jurisdiction over the area where the property is located as well as the date of the foreclosure sale and the redemption period expiration date (if any). If, after notifying HUD of pending acquisition, a mortgagee finds that conveyance will not occur (such as when title is not received because of the Claims Without Conveyance of Title requirements), then the mortgagee should immediately notify both the occupants and Field Office. When an occupant responds to the notice by contacting the Field Office within the allotted time, the Field Office will inform the mortgagee that it is considering a request for continued occupancy. The mortgagee must not convey the property while the request for continued occupancy is being considered, but only when the Field Office has informed the mortgagee of the final decision. There is one exception to this. Section 203.670(c) permits mortgagees to convey properties subject to occupancy where 90 days have elapsed since the mortgagee notified the Field Office of pending acquisition, the Field Office has notified the mortgagee that it was considering a request for continued occupancy, and no subsequent notification from the Field Office has been received by the mortgagee. Normally, the Field Office will notify the Mortgagee if an occupant has not responded to the notice within the allotted time frame and will instruct the Mortgagee to convey the property vacant. However, if the mortgagee does not have any communication with HUD within 45 days of the date of the notice informing the occupant of pending acquisition, the mortgagee shall assume the occupant has not requested continued occupancy and shall convey the property vacant, unless otherwise directed by the Field Office (such as when there is good cause to consider a late response from the occupant). If the HUD Field Office approves occupied conveyance, the mortgagee must note the date of HUD's approval letter in Item 23 of Form HUD-27011, Single Family Application for Insurance Benefits. If the property is being conveyed occupied without HUD's approval, subject to 24 CFR 203.670(c), enter in Item 23 the 90th calendar day after the date of the mortgagee's notification to the occupant, and advise the Field Office of the occupied conveyance by separate letter. It should be noted that these regulations now apply to situations where a mortgagee accepts a deed in lieu of foreclosure. Before a mortgagee may convey a property where a deed in lieu of foreclosure has been accepted, the normal procedures described herein (notification of pending acquisition by the mortgagee and consideration of request by the Field Office) must be completed. This procedure revises the previous requirements for the handling of deed in lieu of foreclosure situations. The final rule went into effect on April 1, 1988, and mortgagees should be prepared to implement these procedural changes immediately. Enclosed is a copy of the final rule for your ready reference. Any questions regarding these procedures should be directed to the local HUD Field Office having jurisdiction over the property being considered for occupied conveyance. Sincerely yours, Thomas T. Demery Assistant Secretary Enclosures (SAMPLE MORTGAGEE NOTICE TO OCCUPANT OF PENDING ACQUISITION) (Name) (Date) ________________________________ (Street Address) AVISO IMPORTANTE PARA PERSONAS DE ________________________________ HABLA HISPANA. ESTE ES UN AVISO MUY IMPORTANTE. SI NO ENTIENDE EL CONTENIDO, OBTENGA UN TRADUCCION INMEDIATAMENTE. SI USTED NO RESPONSE DENTRO DE VEINTE (20) DIAS PUEDE SER QUE LO HAGAN MUDAR ________________________________ DE LA CASA O APARTAMENTO EN DONDE (State) (Zip) VIVE. ________________________________ (HUD/FHA Case No.) Dear _____________________________: The mortgage for the property in which you are living is about to be foreclosed (sometimes referred to as repossessed). We expect that ownership of the property will be transferred to (name of mortgagee) probably within the next 60 to 90 days. Shortly thereafter, it is probable that ownership will be transferred to the Secretary of Housing and Urban Development (HUD). HUD generally requires that there be no one living in properties for which is accepts ownership unless certain conditions are met. We have enclosed a copy of those conditions in Attachment 1. These conditions should be read carefully to help you decide whether you wish to apply to continue living in the house. If you wish to submit a request to continue to live in this property, after HUD becomes owner, your written request must be received by HUD within 20 days of the date at the top of this letter. Oral requests are not permitted. We recommend that you use the enclosed Attachment 2, "Request for Occupied Conveyance", in making your request as it gives HUD information it needs to make its decision. If you have additional information which you wish to include with your request, you may write it on the second page of the form or on additional pages which can be attached to the form. Also, please fill out boxes 1, 7 and 8 of the enclosed Attachment 3, "Request for Verification of Employment", and send it to HUD with your request. Your request must be sent to the Chief Property Officer at the following address:___________________________________ ____________________________________________________________________ If you believe that you can meet the condition for a temporary illness or injury (See Item 1(d) in Attachment 1, conditions for Continued Occupancy), you should say so in your request and include documentation supporting your claim. This documentation must include an estimate of the time you could be moved without severely aggravating the illness or injury, and a statement by a State- certified physician establishing the validity of your claim. If HUD approves your request to remain in the property, it will only be for a temporary period. See Attachment 4, Temporary Nature of Continued Occupancy. If HUD denies your request, you will be given an opportunity to ask that the denial be reconsidered and to furnish information relating to the reasons for the request being denied. If HUD does not in fact become owner of this property, any decision it may make with respect to your continued occupancy will no longer apply. If you have any questions concerning this notice, please contact the Chief Property Officer at the HUD Field Office shown above. IMPORTANT NOTICE YOU MUST REPLY TO THE HUD FIELD OFFICE IN WRITING WITHIN THE 20 DAYS OF THE DATE ON THIS LETTER OR YOU WILL BE REQUIRED TO MOVE FROM THE PROPERTY BEFORE HUD BECOMES OWNER OF THE PROPERTY. Sincerely, (Name & Title) Attachments * Insert the address of the HUD Field Office which has jurisdiction over the property. (Attachment #1 to Mortgagee's Notice of Pending Acquisition) CONDITIONS FOR CONTINUED OCCUPANCY The following conditions must be met before HUD can approve the occupied conveyance of an acquired property. 1. One or more of the following must be met: (a) Your occupancy is necessary to protect it from vandalism. (b) The number of HUD-owned vacant houses in the residential area exceeds the number of properties acquired by HUD in that area during the past six months. (c) With respect to two-to-four-unit properties, the marketability of the property would be improved by your continuing in occupancy. (d) You or a member of your family suffer from a temporary injury or illness which would be aggravated by the process of moving from the property. A long term illness does not meet this criterion. 2. The house must be habitable (except for approval under condition 1(d)). 3. You must have been living in the house at least 90 days prior to the date the lender acquires title to the house (except for approval under condition 1(d)). 4. You must agree to sign a month-to-month lease at fair market rental on a form prescribed by HUD at the time HUD acquires the house. 5. You must have the financial ability to make the monthly rental payments under the terms of the lease. 6. You must agree to pay one month's advance rent when you sign the lease (except for approval under condition 1(d)). 7. You must allow access to the property during normal business hours. (a) by HUD representatives for a physical inspection of the property, with two days notice. (b) by HUD contractors doing repairs, with two days notice. (c) by real estate brokers and their clients. (Attachment #4 to Mortgagee's Notice of Pending Acquisition) TEMPORARY NATURE OF CONTINUED OCCUPANCY This is to advise you that occupancy of HUD-owned property is not permanent but is only temporary in all cases and is subject to termination to facilitate preparing the property for sale and completing its sale. Temporary means that your lease arrangement with HUD is subject to termination at the convenience of the government upon 30 days' notice. If HUD has agreed to your continued occupancy due to a temporary illness or injury of a member of your family, your occupancy is limited to three months. You should not view your living in this property as a permanent or long-term arrangement. It is HUD's policy to ask you to vacate the property and, if necessary, take appropriate eviction action for the following causes: 1. Failure to execute the lease. 2. Failure to pay the required rent, including the initial payment at the time of execution of the lease. 3. Failure to comply with the terms of the lease. 4. Failure to allow access to the property to accomplish necessary repairs, inspect the property, or allow real estate brokers to show the property to a prospective purchaser. 5. Preparation of the property for sale. 6. Assignment of the property by the Field Office to a different use or program.