www.hudclips.org U. S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT WASHINGTON, D. C. 20410-8000 January 14, 1991 OFFICE OF THE ASSISTANT SECRETARY FOR HOUSING-FEDERAL HOUSING COMMISSIONER MORTGAGEE LETTER 91-3 TO: ALL APPROVED MORTGAGEES ATTENTION: Servicing Managers (Single Family) SUBJECT: Reduction of Insurance Benefits for Failure to Meet HUD Claim Time Requirements (Single Family) 1-1 COMPLIANCE WITH TIME REQUIREMENTS The purpose of this mortgagee letter is to emphasize the serious consequences of failing to meet HUD's time requirements. The regulations provide for a curtailment of debenture interest if the time frames are not met (24 CFR 203.402 (k) (1) and (2) and 203.404 (a) (4). Mortgagees can lose a significant amount of money as a result of debenture interest curtailments. The Department is taking steps to increase enforcement of all applicable time requirements which will significantly increase mortgagees' exposure to loss due to noncompliance with the time frames. These losses can be avoided if mortgagees initiate and complete foreclosure and file their claims for insurance benefits in an expeditious manner. 1-2 QUALITY CONTROL PLAN A. Mortgagee Letter 89-32, dated December 26, 1989, at page 9, required mortgagees to include in their Quality Control Plan procedures which will: 1. Determine that foreclosure proceedings are initiated and completed on a timely basis and in accordance with HUD-FHA requirements, and 2. Determine that there are sufficient controls to assure that all aspects of the claims for insurance benefits are accurately and timely prepared. B. Adherence to the Quality Control Plan, including assurance of meeting time requirements, will not only aid mortgagees in meeting the requirements of HUD regulations but will aid in avoiding substantial monetary loss. _____________________________________________________________________ 2 1-3 SUMMARY OF TIME REQUIREMENTS The following is a summary of the time limitations (for the two major claim submission types) which may result in curtailment of debenture interest. Review outstanding claim instructions for time limits applicable to other claim-type submissions. A. Conveyance Claims 1. Within one year from the date of default, initiate foreclosure (the first legal action to foreclose). Initiation of foreclosure for HUD's purposes is defined as the first public action required by law, such as filing a complaint or petition, recording a notice of sale, or publication. HUD does not consider the notice that is posted on the premises as the first public action to foreclose. In addition, HUD does not consider the notice of default that is sent to the mortgagor to be the first legal action to foreclose. The notice of default is usually more of a servicing activity and does not require that any subsequent step in the foreclosure process be taken within any specific prescribed time limit. For HUD monitoring purposes, HUD considers the first legal action to foreclose to be the first legal step taken that starts the foreclosure proceeding which is conducted within prescribed time limits. 2. Within 30 days after the institution of foreclosure, provide written notice to HUD (24 CFR 203.356). This requirement is satisfied by proper submission of the Single Family Default Monitoring Report (Form HUD-92068A). 3. Prosecute foreclosure with reasonable diligence (24 CFR 203.356). See Mortgagee Letter 90-30, dated August 14, 1990. 4. Within 30 days after acquiring possession of and good marketable title to the property, convey the property to the Secretary (24 CFR 203.359). 5. On the date the deed to the Secretary is filed for record, notify the Secretary of the filing by submitting Part A of Form HUD-27011 to HUD Headquarters and a copy to the local HUD Office (24 CFR 203.360). _____________________________________________________________________ 3 NOTE: This time frame is important because the local HUD Office is not aware that a property has been conveyed to the Secretary until receipt of a claim. 6. As soon as possible, but no later than 45 days of the date the deed is filed for record, send the title evidence reflecting ownership vested in the Secretary to the local HUD office (24 CFR 203.365). HUD allows lenders 45 days plus a ten day mailing time for the local HUD Office to receive title evidence. However, if the courier receipt shows that the mortgagor did not mail the title evidence by the 45th day, without an approved extension, HUD will consider it late. 7. Within 45 days after the date the deed is filed for record or within such time that it will be received in HUD Headquarters within 15 days after the date of the title approval letter, whichever is later, submit the original of Part B to HUD Headquarters and a copy of Part B with the originals of Parts C, D and E to the local HUD Office (24 CFR 203.365). B. Assignment Claims 1. Within 30 days after the date of HUD's written agreement to accept the assignment, file the mortgage assignment for record (24 CFR 203.350 (e)). 2. On the date the assignment is filed for record, a. Submit the title evidence to the local HUD Office, ATTN: Field Counsel (24 CFR 203.351). b. Notify the Secretary of the filing by submitting the originals of Parts A and B of Form HUD-27011 to HUD Headquarters and a copy of Part A and B and the original of Part D to the local HUD Office, ATTN: Single Family Loan Management Branch (24 CFR 203.351). Sincerely yours, Arthur J. Hill Acting Assistant Secretary for Housing-Federal Housing Commissioner