www.hudclips.org U. S. Department of Housing and Urban Development Washington, D.C. 20410-8000 July 24, 1991 OFFICE OF THE ASSISTANT SECRETARY FOR HOUSING-FEDERAL HOUSING COMMISSIONER MORTGAGEE LETTER 91-33 TO: ALL APPROVED MORTGAGEES ATTENTION: Single Family Servicing Managers SUBJECT: Extension of Time Requirements for Single Family Claims for Insurance Benefits Mortgagee Letter 91-3, dated January 14, 1991, identified HUD's time requirements and emphasized the serious consequences of failing to meet HUD's time requirements. When a time requirement cannot be met, mortgagees may, under certain circumstances, request an extension of time. This Mortgagee Letter sets forth HUD's policy on extensions of single family claim time requirements. Lenders should refer to Mortgagee Letter 91-3 in conjunction with this Mortgagee Letter. In an effort to improve the extension process, the Department is introducing a new Form, HUD-50012, Mortgagee's Request for Extensions of Time (attached). Mortgagees should begin using this form effective with the date of this mortgagee letter. Until this form is available for purchase from the Government Printing Office, mortgagees may reproduce and use the attached copy. Effective September 1, 1991, this form will be the only mechanism that may be used for requesting and approving extensions of HUD's single family claim time requirements. All requests for extensions must be submitted in accordance with the requirements provided for in this Mortgagee Letter. 1-1 Mortgagee's Request For Extensions Of Time, Form HUD-50012. A. Effective September 1, 1991, all extension requests must be submitted on Form HUD-50012. B. Verbal requests for extensions will not be accepted. C. Mortgagees may submit their requests via facsimile in emergency situations. D. The following are considered as separate actions and are not considered as requests for extensions of time: 1. Requests to take specific protection and preservation actions (such as boarding), _____________________________________________________________________ 2 2. Requests to exceed preservation and protection cost limits, or 3. Requests to convey damaged property. HUD's approval of these actions does not extend the time to convey title, and any requests for extensions of time must be submitted and approved separately. (See Mortgagee Letter 90-34 for guidance.) 1-2 Extension Requests Must Be Submitted To The Local HUD Office Having Jurisdiction Over The Mortgaged Property. A. For conveyance claims, (unless directed otherwise by the local HUD Office) requests to extend the time limit for conveying title to HUD, submission of title evidence, submission of fiscal data, or submission of supplemental claims must be submitted to the local HUD Office, Attention: Single Family Property Disposition Branch. B. All other extension requests must be submitted to the local HUD Office, Attention: Single Family Loan Management Branch. 1-3 Time Requirements For The Submission Of Extension Requests. A. Mortgagees must submit all extension requests prior to the expiration of the time limit. 1. In order to ensure timely receipt by the local HUD Office, avoid potential disputes and allow adequate response time, mortgagees should submit their requests as early as possible. 2. Extension requests submitted after expiration of the time limit will be denied. HUD will allow ten days for receipt of requests sent via first class mail through the United States Postal Service and will verify the date submitted by the date of the postmark. The date of submission will also be verified for all courier delivered requests. Internal controls have been established in each of HUD's local Offices to ensure that all extension requests received are properly logged in and _____________________________________________________________________ 3 responded to in a timely manner. In the event a dispute arises concerning the actual date of the mortgagee's submission or the date of HUD's receipt of an extension request, the dispute will be resolved on a case-by-case basis by the local Office. If the mortgagee can demonstrate to the local Office's satisfaction that the extension request was submitted timely, the local Office will review the request for extension. NOTE: HUD recognizes that unforeseen natural disasters may result in special circumstances which affect the ability of mortgagees to submit extension requests within the required time limits. Each Field Office will be responsible for determining if special allowances should be made on a case-by-case basis. B. Mortgagees are prohibited from setting time limits for HUD to respond or interpreting such limits as an automatic extension approval. 1-4 Basis For The Extension Request. A. All extension requests must provide a valid reason to support the need for an extension of time. Mortgagees must clearly define the circumstances and reason(s) for the request. Vague or unclear requests will be denied. B. Extension requests based on the following reasons will result in denial. 1. Investor or holder delay in obtaining required documents. 2. Staffing constraints. 3. Errors of the servicer, holder and/or of any of the previous holders or servicers. 4. Delays caused by the mortgagee's staff, agent or contractor. 5. Failure by the mortgagee's staff, agent or contractor to take appropriate, necessary or required action. _____________________________________________________________________ 4 1-5 Extensions Will Not Be Approved For The Following. A. Time requirement for the submission of Part A, Form HUD-27011, Single Family Application for Insurance Benefits Part A (any claim type). Mortgagees must submit their Claim for Insurance Benefits on the date the deed is filed for record (24 CFR 203.360, 203.351). B. Time requirement for recordation and submission of automatic assignment claims. The mortgagee must exercise its option under Section 221(g)(4) by filing the assignment for record within one year following the twentieth anniversary of the date the mortgage was endorsed for insurance. The claim must be submitted on the date the assignment is filed for record (24 CFR 221.251, 221.255). 1-6 Mortgagees Are Not Required To Request Prior Written Approval From The Local HUD Office For Extensions Of Time Under The Following Circumstances. A. Bankruptcy. HUD Regulations 24 CFR 203.355 provide that if a mortgagee was prohibited by State law from instituting foreclosure within a year from the date of default, the mortgagee has 60 days from the date such prohibition was lifted to institute foreclosure. The Department considers the requirements of 24 CFR 203.355 to include bankruptcy actions. When foreclosure cannot be initiated as a result of a bankruptcy action, the Department allows mortgagees 60 days from the date bankruptcy is released to institute foreclosure. The date of the "bankruptcy release" must be entered in block 21 of Form HUD-27011, Part A and a date 60 days after that date must be entered in block 19, in order to receive this extension. NOTE: This instruction is applicable only if the bankruptcy action, or local law prohibition, actually prevented the initiation of foreclosure action within the one year requirement. If the bankruptcy did not preclude the institution of foreclosure within the one year time frame, do not enter an extension date in Item 19, unless approved by the local HUD Office. If more than 60 days are needed to initiate foreclosure, mortgagees must request an extension from the local HUD Office on Form HUD-50012. _____________________________________________________________________ 5 B. Assignment Rejection. Local HUD Offices will provide mortgagees (attached to the final assignment rejection letter) Form HUD-50012 which will grant a 60 day extension from the date of the final assignment rejection letter under the following circumstances: 1. The mortgagee sent either the HUD #2 or the HUD #3 Letter a minimum of twenty days prior to the expiration of the one year time limitation, unless the mortgagee was prohibited from doing so by State Law (or bankruptcy); and 2. The mortgagee had been prevented from initiating foreclosure within one year from the date of default because the local HUD Office was reviewing the case for Assignment. NOTE: If the only reason the mortgagee did not meet the time limit to institute foreclosure was due to the mortgagee's failure to begin the assignment process in a timely manner (issue HUD #2 or HUD #3 letter at least twenty days prior to the expiration of the time limit), no extension will be given by the local HUD Office. C. Time Frames for Completion of Foreclosure. (Reasonable Diligence). (Mortgagee Letter 90-30, dated 8/14/90) (24 CFR 203.356) At the present time, the Department is not requiring that mortgagees obtain prior written approval to exceed the state by state time limits for the completion of foreclosure. However, an extension of time to complete foreclosure is not automatic. Supporting documentation such as attorney's correspondence or copies of court records must be retained in the Claim Review File. In areas where recording delays are excessive, mortgagees must document efforts to follow-up with the recording authority. Compliance with the foreclosure time limits will be monitored through the Department's on-site claims review process and Headquarters claim processing staff, as appropriate. D. Certain Supplemental Claims. Mortgagees now have a six month limitation to file supplemental claims. (See Mortgagee Letter 91-13.) Supplemental claims filed _____________________________________________________________________ 6 after the six month limitation will not be honored, except under the following circumstances. 1. Hazard Insurance Refund Adjustments. A supplemental claim for a hazard insurance refund adjustment (beyond the six month time limit), will automatically be honored up to one year from the date of final settlement of the initial Part B, Single Family Claim Form, HUD-27011, under the following conditions: a. All hazard insurance costs when known, were included in the initial submission of Form HUD-27011, Part B, or to the extent possible, are claimed, within six months from the date of final settlement of Part B. b. The mortgagee diligently followed up with the hazard insurance carrier to confirm any necessary adjustment. c. The supplemental claim is submitted within fourteen calendar days from the date of the insurance carrier's notification of an adjustment. NOTE: The supplemental claim must be received within 24 calendar days from the date of the carrier's notification. d. A copy of the carrier's notification is attached to the mortgagee's supplemental claim. e. The mortgagee has adequately indicated in the mortgagee's comment section that the supplemental claim is being filed to recover an adjustment to the hazard insurance premium refund. If more than one year is needed to make HIP adjustments, mortgagees must request an extension from the local HUD Office on Form HUD-50012. Only hazard insurance adjustments will be honored with this type of approved extension. Mortgagees may not include other types of costs they may have failed to include in earlier claim submissions. _____________________________________________________________________ 7 2. Deficiency Judgment Costs. For cases where a deficiency judgment was pursued, a supplemental claim for the additional costs related to the pursuit of the deficiency judgment may be submitted up to one year from the date of final settlement (of the initial Part B) subject to the following conditions. a. All such costs when known, were included in the initial submission of Form HUD-27011, Single Family Application for Insurance Benefits, Part B, or, to the extent possible, are claimed within six months from the date of final settlement of the initial Part B. b. The mortgagee has adequately indicated in the mortgagee's comment section that the supplemental claim is being filed to recover deficiency judgment costs. NOTE: Mortgagees must request an extension from the local HUD Office on Form HUD-50012 if it will be necessary to request reimbursement for any costs related to the pursuit of a deficiency judgment after the year time limit. Only deficiency judgment costs will be honored with this type of approved extension. Mortgagees may not include other types of costs they may have failed to include in earlier claim submissions. Only one supplemental claim should be filed for deficiency judgment costs on any one FHA case. Mortgagees should use care in ensuring that all deficiency judgment costs are known and claimed at the time the supplemental is filed. 3. Overpayments. Mortgagees must promptly remit any amounts overpaid on the claim and must promptly remit any other funds received, within thirty calendar days from the date of receipt. The six month limitation for supplemental claims does not apply to supplemental remittances. Prior written approval is never required to file a supplemental for remittance of funds. Mortgagees will be monitored as to the promptness of their submission. _____________________________________________________________________ 8 Compliance with all portions of Paragraph 1-6 will be monitored through the on-site claims review process (IBA) and Headquarters claim processing staff, as appropriate. 1-7 Special Circumstances Which May Require The Mortgagee To Request An Extension Of Time To Initiate Foreclosure. A. Drug seizure related cases. Mortgagees will be prohibited from initiating foreclosure in situations where the U. S. Marshal/Department of Justice (DOJ) seized the property in a drug related action. HUD will not become involved if the U. S. Marshall/DOJ chooses to retain the mortgaged property. Mortgagees need not request an extension until the property is released by the U. S. Marshall/DOJ and foreclosure action becomes necessary to acquire the property. For cases where the mortgagee needs an extension of time to initiate foreclosure, a request should be made promptly to the local HUD Office. Because of the complexity of these cases, they will be dealt with on a case-by-case basis. Please contact the local HUD Office for guidance as to the documentation required to be submitted with your extension request. B. Soldiers and Sailors Civil Relief Act of 1940. (24 CFR 203.346) The activation of certain reservists to the Persian Gulf may require mortgagees to delay the initiation of foreclosure because of the requirements of this Act. If an extension to initiate foreclosure is needed because of the requirements of the Act, an extension request must be made to the local HUD Office. An appropriate extension will be approved based upon the specifics of the individual case. Please contact the local HUD Office for guidance as to the documentation required to be submitted with your extension request. 1-8 Local HUD Office Responsibilities (General). A. Local HUD Offices will review and respond promptly to all extension requests. B. Local HUD Offices will use Form HUD-50012 in responding to all mortgagee's extension requests. _____________________________________________________________________ 9 C. Local HUD Offices will automatically provide an approved 60 day extension on Form HUD-50012 when the time frame to initiate foreclosure was missed solely because of HUD's assignment review. D. In emergency situations only, local HUD Offices will respond using facsimile, if so requested by the mortgagee. 1-9 Claim Review File. A. A copy of HUD's written response to each extension request must be maintained in the mortgagee's claim review file. In addition, appropriate documentation to support extensions not requiring prior written approval as explained in Paragraph 1-6 must be a part of the Claim Review File. B. If a subsequent claim review finds that an extension was granted based upon a misrepresentation of the facts, the claim will be considered paid in error. If you have any questions, please contact your local HUD Office. Sincerely yours, Arthur J. Hill Assistant Secretary for Housing-Federal Housing Commissioner Attachment _____________________________________________________________________ Mortgagee's Request for Extension of Time __________________________________________________________________________ ******************************************************************** * * * * * * * * * * * GRAPHICS MATERIAL IN ORIGINAL DOCUMENT OMITTED * * * * * * * * * * * ******************************************************************** __________________________________________________________________________ form HUD-50012 (6/91) ref. Handbook 4330.1