www.hudclips.org U. S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT WASHINGTON, D. C. 20410-8000 February 29, 1988 OFFICE OF THE ASSISTANT SECRETARY FOR HOUSING-FEDERAL HOUSING COMMISSIONER Mortgagee Letter 88-6 TO: ALL APPROVED MORTGAGEES SUBJECT: Claims Without Conveyance of Title (CWCOT) Implementation Corrections, Additions and Clarifications Mortgagee Letter 87-20 dated June 23, 1987, provided the procedures for bidding and payment of claims under the CWCOT rule. This Mortgagee Letter addresses concerns which have surfaced during this implementation period and clarifies some of the issues raised. I. Applicable Mortgages A. The criteria remains the same as written in Mortgagee Letter 87-20 . There is a statement in the Mortgagee Letter which states ". . . the mortgagee may elect to file a claim under . . ." which means that mortgagees have the option to use the CWCOT procedure in regard to FHA-insured mortgages for which a conditional commitment to insure was issued, or under the Direct Endorsement program where the property appraisal report was signed by the mortgagee's underwriter, prior to November 30, 1983. These properties must also be vacant or non-owner occupied as required during this implementation period. B. Some mortgagees had advised their foreclosure attorneys to routinely send documents on all FHA-insured mortgage foreclosures to the Field Office. This has caused an unnecessary bombardment of paperwork. Mortgagees must advise their staff to submit only those items required in Mortgagee Letter 87-20 and to label all submissions "CWCOT." II. Form HUD-91022 Mortgagees are required to submit the HUD-91022 45 days prior to the estimated foreclosure sale date or on or before the date of publication, posting, or other standard legal notice, whichever of the two dates occurs first. Also, mortgagees are required to submit to the local HUD Office the standard legal notice of the actual foreclosure sale date upon publication of same. Foreclosure attorneys are aware of the foreclosure sale date and in most instances even schedule the date. All time requirements are critical to allow adequate time to process and provide the Commissioner's Adjusted Fair Market Value (CAFMV) on time. Submission of the HUD-91022 for any time less than this would create problems in accommodating such a request. A. If the mortgagee cannot meet the minimum time requirement, it cannot follow the CWCOT procedure and should not request an appraisal or submit the HUD-91022. Such mortgagee must be prepared to provide detailed comments/documentation as to why it was unable to comply. NOTE: However, should a mortgagee be able to expedite this process through coordination with a Field Office, HUD will make every effort, within reason, to provide the CAFMV to the mortgagee in time for the foreclosure sale. B. Mortgagees who have requested an appraisal and have not submitted the HUD-91022 to initiate the CWCOT process shall not be reimbursed for such appraisal expenses should a claim be filed. Mortgagees must submit the HUD-91022 to the local HUD Office the same day the appraisal is requested. C. The CWCOT process cannot be followed in jurisdictions which require mortgagees to furnish the total outstanding indebtedness which they intend to bid when they initiate foreclosure action. The mortgagee shall not submit a HUD- 91022 nor request an appraisal. The provisions of CFR 203.355-367 are applicable instead. D. There was an error on the HUD-91022 which has been corrected for the next printing distribution. Refer to Part A, Block 10d., the language in parenthesis should read "Enter the total of Blocks 10a., 10b. and 10c." Continue to use the present forms until depleted and copy the form until the corrected form is distributed. E. Mortgagees are not completely filling in Part A of the HUD- 91022. The form must contain all required data and all costs incurred up to the date the form is completed and submitted to HUD. The 27011 claim form will cover all allowable costs as outlined in CFR 203.402. Frequently missed items are: Block 8, original mortgage amount; Block 13, conditional commitment or property appraisal date; and, Block 20, list other costs incurred to date -- all of which should be found in and are a part of the mortgagee's file. III. Appraisal As noted under section II, B. of this mortgagee letter, mortgagees have been requesting appraisals without submitting the HUD-91022 form to HUD. Mortgagees are reminded that the cost for such appraisals shall not be considered an allowable cost if the HUD-91022 has not been submitted to the local HUD Office. A. Local HUD Offices have received appraisals which have not been completed due to the inability of appraisers to gain access. HUD is aware that entry into tenant-occupied properties may not be possible. The appraisers have been instructed that they are to provide the best estimate of value possible based upon an exterior review, tax records, a comparison of comparable properties and other available information. The estimate of value should reflect the property in its "As Is" condition and so indicate in the report that the property could not be entered. Also, mortgagees must stamp the HUD-92800 which is forwarded to the appraiser, "PROPERTY IN FORECLOSURE." B. If a mortgagee is assured of acquiring a Sheriff's appraisal, but cannot obtain same until 30 days prior to the foreclosure sale, it shall submit same to the local HUD Office immediately. Thus, the HUD Office will have all the documents needed to determine the CAFMV. C. Mortgagee Letter 87-20, page 7, Section VI, D, paragraph 2, informed mortgagees that no further notification to HUD was necessary if a foreclosure sale was cancelled and rescheduled within six months after receipt of the CAFMV. However, we must change this position. The mortgagee must notify HUD of a rescheduled foreclosure sale date to enable the local HUD Office to advertise the sale of the property. The mortgagee shall notify the HUD Office of the date by submitting a copy of the Notice of Sale on or before the date of publication, posting, etc. Please indicate on the Notice that this is a "rescheduled" foreclosure sale date; also, include the mortgagee loan number, mortgagor name, and FHA case number. However, if the Mortgagee is not assured of acquiring a Sheriff's appraisal at least 30 days prior to the foreclosure sale, the mortgagee must follow the time requirement to submit the HUD-91022 45 days prior to the estimated foreclosure sale date. IV. Post-Foreclosure Sale Outcome A. In order to evaluate the effectiveness of the CWCOT procedure, HUD needs to know the outcome of the foreclosure sale. Mortgagees shall notify the local HUD Single Family Loan Management Office, in writing, of the final disposition of such properties, (i.e. property sold to a third party, retained by mortgagee, etc.) within 15 days after the foreclosure sale. B. HUD is aware that in some States third party buyers may be discouraged because of redemption periods. This is an element which shall be monitored to assess the effectiveness of the CWCOT program. Therefore, we shall expect to receive your immediate response in advising of the post-foreclosure sale outcome. If you have any questions regarding this letter, contact your local HUD Office. Sincerely, Thomas T. Demery Assistant Secretary