www.hudclips.org 


U. S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
WASHINGTON, D. C. 20410-8000

February 2, 1989
  OFFICE OF THE ASSISTANT SECRETARY FOR HOUSING-
  FEDERAL HOUSING COMMISSIONER
Mortgagee Letter 89-11
TO:  ALL APPROVED MORTGAGEES
SUBJECT:  HUD Initiatives to Counter Mortgagor Abuse
 
     The Department is continuing to pursue initiatives recommended
by the Task Force on fraud and abuse.  Effective in 1989, HUD will
have mortgagees pursue deficiency judgments against certain types of
defaulting mortgagors.  Mortgagees will be receiving instructions
implementing these requirements during the upcoming months.  HUD's
efforts will concentrate on non-occupant mortgagors (investors);
repeat defaulters; and "walkaways," (mortgagors who abandon their
properties despite their apparent continued ability to meet their
mortgage obligations).  Although some local HUD Offices have been
pursuing deficiency judgments, this new initiative will be
Department-wide, commencing with a pilot program early in 1989.
 
     The Department intends to pursue aggressively the collection
of deficiency judgments after they are assigned to HUD by the
mortgagees, and expects other Federal agencies to perform a salary
or administrative offset when the mortgagor/debtor is an active
or retired Federal civil or military employee.  The IRS tax
refund offset is another means that will be utilized to collect
money owed to HUD.  Some of these measures may result in additional
fees chargeable to the debtor.  If all or part of the deficiency
is determined to be uncollectible, if the debt is compromised,
or if the applicable Statute of Limitations has run, the Department
will report the uncollectible or compromised amount to the Internal
Revenue Service, using the 1O99-G information return form ("Certain
Government Payments").  This information may result in a tax
liability for the mortgagor.
 
     The Department will be widely publicizing its efforts to
counter abuse of the FHA Single Family insurance programs through
the prosecution of deficiency judgments and by the reporting of
uncollectible and/or compromised amounts to the IRS on form 1O99-G.
It is hoped that these initiatives, directed toward investors, repeat
defaulters and "walkaways" will act as a deterrent against abuse.
 
                                                              2
 
The cooperation of participating mortgagees is crucial to our
success, and the Department appreciates your commitment to help us
accomplish this objective. Please feel free to call the Single Family
Servicing Division at Headquarters if you have any questions on this
matter, at (202) 755-7330.
 
                          Sincerely yours,
                          James E. Schoenberger
                          General Deputy Assistant Secretary
                             for Housing